KK : Annual Report 2008 by ar.kiatnakin ar.kiatnakin

Content 10 12 14 18 22 24 33 41 54 66 69

Financial Highlights Message from the Chairperson Board of Directors Management Team 38 years of Kiatnakin Group Business Risk Management and Risk Factors Management Discussion and Analysis Corporate Governance Report of the Audit Committee Report from the Nomination and Remuneration Committee 70 Corporate Social Responsibilities

74 77 87 88 89 90 161 164 165 169

Shareholding Structure Management Structure Dividend Policy Report of the Board of Directors没 Responsibilities for Financial Statement Report of the Independent Certified Public Accountants Financial Statements General Information Capital Structure Branch Offices Kiatnakin Bank Public Company Limited List of Information required by the Office of the Securities and Exchange Commission

Let your successÇ.begin here

Kiatnakin BankÇthe bank for your business and investment We are determined to provide the best financial products and services for our customers. We will assist and enhance our customerûs capabilities in all areas to realize their fullest potential. Our team of professionals will develop deep understanding about our customerûs needs and businesses. Our fast service, fexible terms and excellent customer care will ensure the each customer receives the most appropriate solution. We will stand by our customerûs side and succeed together while maintaining a long-term relationship based on trust.

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

ExpertiseÇby your side We have genuine expertise for every service that we offer. We have the knowledge and experience with every question and problem from our customers. We will help find the best answer and solution for you. We will be a good advisor staying securely beside our customers. And we will provide our maximum support. Because we place our customerûs success as our number 1 priority

Personalized Care

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

Service from our Heart

You are our Special Guests From the first day our customers walk into our bank, We will pay attention to every detail and be ready to listen to every request We will develop customized products and services for each customer In order for the customer to receive the most desirable service Because our Customers are our Special Guests

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

Ă§An organization can sustain itself because society continues to exist; thus, when business succeeds, it must be generous to others.ĂŠ It is the aspiration of the founders of Kiatnakin Group to emphasize providing education opportunities and increasing the quality of life for everyone involved in our business and for the public as well.

People Development for Nation Development

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

VISION çTo be specialized bank of customersû first choiceé

MISSION çTo provide financial services and support to enhance the competitiveness of customers/business partners while maintaining social responsibilitiesé

VALUE Discipline Integrity Expertise Teamwork Entrepreneurship Dynamic

determined to perform our job in an orderly manner honest and adhering to the code of ethics determined to acquire more knowledge and skills determined to work as a team determined to drive business and contribute to the bottom line of the Bank committed to continuous development

Successes During the Year Level

Excellent

Level

Excellent

Level

ë Received çExcellenté appraisal

ë The Bank maintained its çA-é

çExcellent AGM of the Yearé from the Annual General Shareholders Meeting Assessment Project by the Securities and Exchange Commission (SEC) in collaboration with Thai Investors Association (TIA) and Listed Companies Association (LCA) for two consecutive years. The Bank was 1 of 74 companies that reveiced over 100 points.

rating on supervision and good governance in 2008 for Annual Shareholder Meeting Quality Assessment in 2008 conducted by Thai Institute of Directors Association (IOD). The Bank was 1 of 22 companies that received "Excellent" from 448 listed companies that were assessed.

credit rating from TRIS Company Limited which reflected our stable credit position.

Best Bank of the Year

Ranked

ë Ranked 4 th for Bank of the Year in 2008 ranking by Money and Banking Magazine for two consecutive years.

Exhibition Booth SET in the City

2008 2008 ë çBest Exhibition Boothé at SET in the City 2008 event organized by Stock Exchange of Thailand. The award was based on consolidation of satisfaction survey scores from event attendees.

1 of 6

best Securities compay

SET in the City

2008 ë Kiatnakin Securities Company Limited was nominated to be 1 of 6 best securities company in 2008 at the SET in the City 2008 event.

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

Financial Highlights

80,563

16,932

100,000

60,000

65,650

80,000 51,538

80,000

Lending grew continously

15,000

75,361

100,000

20,000 16,102

114,733 87,227

120,000

17,167

Capital grew robustly

Assets grew steadily

10,000 40,000

40,000 5,000 20,000

20,000

2,179 1,896

2,000

40,000

1,500

1,488

41,354

30 42,103

50,000

2,500

70,000 60,000

Increased personnel to provide better services

More branches to expand the business 37

71,156

80,000

08 20

07 20

06 20

Deposits grew sufficiently

million Baht

1,000

30,000 10

20,000

500 10,000

08 20

07 20

51 25

50 25

49 25

08 20

07 20

06 20

employees

branches

million Baht

Financial Highlights Baht : Million

Balance Sheet ASSETS Investment in loans, net Total loans Allowance for doubtful accounts & troubled debt restructuring Total assets Total deposits Total borrowings Total liabilities Shareholders没 equity Operating Results Total interest and dividend income Total interest expenses Net interest and dividend income Bad debts & doubtful accounts & loss on debt restructuring Non-interest income Non-interest expenses Income before income tax Income tax Net income Financial Ratios Return on average equity Return on average assets Dividend pay out Loans to deposit and borrowing ratio NPL to Total Loans (BoT regulation) Net NPL to total loans (BoT regulation) Capital adequacy ratio (BoT regulation) KK Share Information Share price - High (baht) - Low (baht) - Close (baht) - Average (baht) Share outstanding (Thousand shares) Market capitalization (million bath) EPS - Basic (baht) - Diluted (baht) Book value per share (baht) Book value per share (baht) Credit ratings by TRIS Rating Co., Ltd. Company rating Rating outlook

2006 (restated)

2007 (restated)

2008

9,082 51,538 (3,383) 75,361 42,103 12,534 59,259 16,102

6,876 65,650 (3,064) 87,227 41,354 22,607 70,295 16,932

5,113 80,563 (3,553 114,733 71,156 19,949 97,565 17,167

6,017 2,228 3,789 (292) 1,313 2,567 2,243 285 1,955

6,515 2,607 3,908 (644) 1,865 2,571 2,558 445 2,111

12.5 2.7 57.9 94.3 14.5 10.1 22.2

12.8 2.6 56.7 102.6 12.4 9.2 16.4

7,792 3,120 4,672 (990) 1,538 3,174 2,046 175 1,867 (%) 11.0 1.8 49.0* 88.4 7.1 4.5 15.4

38.00 24.00 27.25 32.03 514,748 14,027 3.83 3.49 31.28 2.20

36.00 25.25 28.25 29.89 521,687 14,738 4.07 3.77 32.46 2.30

31.00 8.55 10.20 20.77 523,152 5,336 3.57 3.46 32.82 1.75*

AStable

* The payment of dividend for the year 2008 at the rate of Baht 1.75 per ordinary share, a part of which had been paid as interim dividend at the rate of Baht 1.00 per share on August 22, 2008, The remaining amount Baht 0.75 per ordinary share will be proposed to the meeting of the ordinary shareholders on April 21, 2009. Annual Report 2008 毛 Kiatnakin Bank Public Company Limited

Message from the Chairperson

Ms. Nawaaporn Ryanskul Chairperson

During the past year, Thai economy continuously expanded even with impact from domestic and external factors. The major factors were a rapid rise is oil prices during the 2nd Quarter which triggered a global inflation and the United States subprime mortgage crisis which created a ripple effect of adverse consequences for large financial institutions in the region and around the globe. This crisis caused the U.S. economy to slow down significantly and had an impact on the expansion of the global economy, including Thailand, as we rely on U.S. export. However, the expansion of export to other regions enabled Thailand to have some overall export growth. With the unstable Thai political situation due to high level of conflicting opinions and other economical issues, such as low agricultural yields and decline in tourists, the stock market investment was so hard hit, that the SET index dropped to 449.9 Points The average daily trade was Baht 15,870 million, representing a drop of 7.2 %. At the end of 2008, the Baht remained strong while consumer and investor confidence plummeted which resulted in only a 11.2% overall growth of loan volume in the Commercial banking system. Total deposits grew by 10.1% with high liquidity despite many unfavorable factors. The Bank was able to maintain good operating performance by focusing its operations on the Bankûs area

of expertise. The Bankûs performance as at year end 2008 are summarized below: ë The Bank continued to grow with an increase in total asset of 31.5% to Baht 114,733 million, while the entire commercial banking system grew at 11.5%. ë The Bank successfully increased the hire purchase loans by 33.5% over last year, Which contributed to a total net loan increased by 22.7% to Baht 80,563 million, while the entire banking system had a total loan growth of 11.2% ë The consolidated net profit for the year 2008 was Baht 1,867 million, decreased Baht 224 million or 11.6% from 2,111 million baht in the year 2007. This is attributable to higher provisioning of baht 990 million, up 53.7% from the previous year. Despite having set aside higher provisions in view of the local economic situation the Bank was impacted by the global recession following the U.S. financial crisis, as well as the local political unrest, and with intention to improve its allowance for doubtful of loss to NPLs ratio to be in line with Thai banking industry. ë The Bank made continuous progress in restructuring the debts from investment in financial claims during 2008. Year end outstanding amount was Baht 5,113 million, a reduction of Baht 1,763 million. ë Foreclosed assets for sale increased by Baht 41 million to Baht 7,724 million due to debt restructuring and

legal processes. The Bank must accelerate the sale of such assets in the future. ë The Bank mobilized funds to use in its operations by accepting deposits and issuing debentures in an amount consistent with its lending; thus, total for the Bank was Baht 97,565 million, an increase of 38.8%. With respect to shareholders management, the Bank is delighted to announce that we received çExcellenté appraisal for Annual General Shareholders Meeting Assessment Program in 2008. The event was conducted by the Securities Exchange Commission (SEC) in collaboration with the Thai Investors Association (TIA) and Listed Companies Associations (LCA). The Bank was 1 of 74 companies that received over 100 points. In addition, the Bank received çExcellenté rating from Thai Institute of Directors (IOD) in 2008 for having good corporate governance. The Bank was one of 22 companies from the 448 listed companies that were assessed. Kiatnakin Bank was awarded 4th place for Bank of the Year in 2008 by Money and Banking Magazine for two consecutive years. To enhance the quality of customer service, the Bank engaged a research firm to survey the satisfaction of the Bankûs customers; this is in accordance with the Bankûs policy of examining the needs of customers in each of the Bankûs major business area. This year, the Bank began the survey with the hirepurchase business, deposits, and services of a subsidiary company, Kiatnakin Securities Company Limited. In 2009, it is expected that the world economy will slow down, while oil prices dropped sharply and then to stabilized a moderate level and U.S. dollar remained weak when compared to Thai Baht there are no violent situations in world politics; and Thailand political conditions remained uncertain. Thai economy is expected to slow down noticeably depending mainly on exports, tourism, and government investment and private consumption expenditure. Lending by financial institutions should continue to expand under intensified competition, especially for personal and hire- purchase loans because large

commercial banks have fully entered into the market. Domestic interest rate is likely to drop following a decrease in foreign interest rate. New automobile purchases and residential development projects are expected to continually decline in direct correlation with the foreign interest rate. Nevertheless, the market demand is still present. Kiatnakinûs plan for 2009 is to continue to expanding the business in which the Bank has expertise, add service channel for customers, and open more branches as required in order to increase our competitive position and provide better service. The Bankûs plan is not focused on expansion, but rather on increase precaution on loan quality to be consistent with the economic situation that is slowing down as well as expediting debt restructuring process from investment in financial claims and foreclosed assets for sale in order to maintain the growth in assets and profitability. Nevertheless, in this sluggish and volatile environment, the Bank will proceed cautiously by not focusing on expansion; maintaining liquidity by effectively managing assets and liabilities; and reserve sufficient capital requirement to support the risk of asset devaluation as a result of economic instability. The Bank will continue to develop new technology to provide more efficient customer service; become more specialize in the Bankûs area of expertise in order to create more value for the customers; and reinforce higher level of good corporate governance in order to ensure compliance by all related parties. Overall, this strategy is certain to ensure long-term profitability and growth for Kiatnakin Bank. On behalf of the Bankûs Board of Directors, I would like to take this opportunity to thank each one of our shareholder in entrusting Kiatnakin Bank with your investments and in supporting our operations during 2008.

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

Board of Directors 1. Ms. Nawaaporn Ryanskul

4. Mr. Chet Pattrakornkul

Independent Director/ Chairperson of the Board of Directors

Member of Audit Committee

2. Mr. Pichai Dachanapirom

5. Mr. Tarnin Chirasoonton

Independent Director/ Chairperson of the Audit Committee

Independent Director

3. Mr. Manop Bongsadadt Independent Director/ Chairperson of the Nomination and Remuneration/ Member of the Audit Committee

6. Mr.Pravit Varutbangkul

9. Mr. Tawatchai Sudtikitpisan

Director

Presiden

7. Mr. Suraphol Kulsiri

10. Mr. Pracha Chumnarnkitkosol

Director/ Member of the Nomination and Remuneration Committee

Director

8. Mr. Supol Wattanavekin Chairperson of the Risk Management Committee/ Chairman of the Executive Board

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

Board of Directors 1. Ms. Nawaaporn Ryanskul Age 65 years Position Independent Director / Chairperson of the Board of Directors Education ë Master of Arts (ECON), University of California at Los Agneles (UCLA), U.S.A. ë Bachelor of Arts (Economics) Goucher College

Maryland, U.S.A. ë Directors Certification Program (DCP 1/2000) Thai Institute of Directors (IOD) ë Audit Committee Program (ACP 11/2005) Thai Institute of Directors (IOD) ë The Role of the Chairman Program (Aug 2007) Thai Institute of Directors (IOD) Work Experience ë Apr.2007-Present, Independent Director and Chairperson of the Board of Directors, Kiatnakin Bank Public Company Limited ë 2007-Present, Member of the Audit Committee, National Health Security Office ë 2006-Present, Member of the Risk Management Committee, TMB Asset Management Company Limited ë 2005-Present, Chulalongkorn University Council, Chulalongkorn University ë 2001-Present, Member of Council of Trustees and Board of Directors, Thailand Development Research Institute (TDRI) ë 1989-Present, Director, P.A. Lynn Industrial Company Limited ë 1987-Present, Director, Thai Property Appraisal Company Limited Number of shareholding 0% Family Relationship with the Executive (none)

2. Mr. Pichai Dachanapirom Age 63 years Position Independent Director / Chairperson of the Board of Directors Education ë Bachelor of Accountancy, Thammasat University ë Directors Certification Program (DCP 32/2003) Thai Institute of Directors (IOD) ë

Certified Public Accountant ë Audit Committee Program (ACP 9/2005) Thai Institute of Directors (IOD) ë Monitoring the system of Internal Control & Risk Management (MIR 1/2007) Thai Institute of Directors (IOD) Work Experience ë Apr. 2007-Present, Independent Director and Chairperson of the Audit Committee, Kiatnakin Bank Public Company Limited ë 2001Present, Director, Dharmaniti Press Company Limited ë 1998-Present, Director, Dharmaniti Office of Management Company Limited ë 1998-Present, Director, Dharmaniti Seminar and Training Company Limited ë 1993-Present, Director, Dharmaniti Foundation ë 1990-Present, Director, Grand Success Company Limited ë 1989-Present, Managing Director, Dharmaniti Public Company Limited ë 1986-Present, Director, Dharmaniti Auditing Company Limited Number of shareholding 50,000 (0.01%) Family Relationship with the Executive (none)

3. Mr. Manop Bongsadadt Age 68 years Position Independent Director / Chairperson of the Nomination and Remuneration / Member of the Audit Committee Education ë Master of Regional Planning, Institute of Social Studies, The Netherlands ë Master of Architecture, Kansas State University, U.S.A. ë

Bachelor of Architecture, Chulalongkorn University ë Directors Accreditation Program (DAP 8/2004) Thai Institute of Directors (IOD) ë Audit Committee Program (ACP 10/2005) Thai Institute of Directors (IOD) Work Experience ë Oct. 2006-Present, Independent Director, Chairperson of the Nomination and Remuneration and Member of the Audit Committee, Kiatnakin Bank Public Company Limited ë 2004-2007, Chairperson of the Audit Committee, N.C Housing Public Company Limited ë 2004-Present, Member of the Audit Committee, The Erawan Group Public Company Limited ë 2002-Present, Associate Present Professor, Architecture Faculty, Chulalongkorn University Number of shareholding 0% Family Relationship with the Executive (none)

4. Mr. Chet Pattrakornkul Age 61 years Position Member of Audit Committee Education ë Master of Marketing (Certificate Program), Thammasat University ë Bachelor of Political Science, Ramkhamhaeng University ë Directors Certification

Program (DCP 9/2001) Thai Institute of Directors (IOD) ë Role of The Compensation Committee-Motivating Excellence in Performance (1/2006) Thai Institute of Directors (IOD) ë DCP Refresher Course (3/2006) Thai Institute of Directors (IOD) ë Audit Committee Program (ACP 17/2007) Thai Institute of Directors (IOD) ë Seminar : Corporate Governance Report of Thai Listed Companies Association ë Monitoring the Internal Audit Function (MIA 1/2007) Thai Institute of Directors (IOD) Work Experience ë Apr. 2007-Present, Member of Audit Committee, Kiatnakin Bank Public Company Limited ë Oct. 2006-Present, Member of Nomination and Remuneration, Kiatnakin Bank Public Company Limited ë 2005-Present, Member of Nomination and Remuneration, Kiatnakin Bank Public Company Limited ë 2004-2005, Head of Consumer Lending, Kiatnakin Bank Public Company Limited ë 2002-2004, Managing Director, Consumer Lending Kiatnakin Finance Public Company Limited Number of shareholding 0% Family Relationship with the Executive (none)

5. Mr. Tarnin Chirasoonton Age 57 years Position Director Education ë Bachelor of Law, Ramkamhaeng University ë Directors Certification Program (DCP 10/2001) Thai Institute of Directors (IOD) ë Public Administration

1997, Political Science Faculty, Thammasat University ë Accounting & Finance System Tools for Executive ABM EXEC (III) The Continuing Education Center Chulalongkorn University ë DCP Refresher Course (5/2007) Thai Institute of Directors (IOD) Work Experience ë 2006-Mar. 2009, Director, Kiatnakin Bank Public Company Limited ë Mar. 2009-Present, The Erawan Law Office Company Limited ë 2006Mar. 2009, Independent Director, Kiatnakin Bank Public Company Limited ë 2005-2006, Independent Director and Chairperson of the Nomination and Remuneration Committee, Kiatnakin Bank Public Company Limited ë 2004-2005, Independent Director and Chairperson of the Nomination and Remuneration Committee, Kiatnakin Finance Public Company Limited ë 2003-2004, Independent Director and Member of the Nomination and Remuneration Committee, Kiatnakin Finance Public Company Limited ë 2001-2004, Independent Director and Member of the Audit Committee, Kiatnakin Finance Public Company Limited Number of shareholding 0% Family Relationship with the Executive (none) 16

6. Mr.Pravit Varutbangkul Age 62 years Position Authorized Director Education ë Master of Business Administration (Operations Research & General), University of Santa Clara, California, U.S.A. ë Bachelor of

Science (Operations Research & Finance), Brigham Young University, Provo, Utah, U.S.A. ë Directors Certification Program (DCP 5/2001) Thai Institute of Directors (IOD) ë DCP Refresher Course (3/2006) Thai Institute of Directors (IOD) ë Audit Committee Program (ACP 16/2007) Thai Institute of Directors (IOD) Experience ë 1996-Present, Director, Kiatnakin Bank Public Company Limited ë 2007-Present, Director, Kiatnakin Securities Company Limited ë 2005-2006, Director and Vice Chairman, Kiatnakin Bank Public Company Limited ë 2004-2005, Director and Head of Central Support, Kiatnakin Finance Public Company Limited Number of shareholding 300,000 (0.06%) Family Relationship with the Executive (none)

7. Mr.Suraphol Kulsiri Age 57 years(2) Position Director / Member of the Nomination and Remuneration Committee Education ë Bachelor of Marketing, Bangkok University ë Directors Certification Program (DCP 13/2001) Thai Institute of Directors (IOD) ë Role

of the Compensation Committee: Motivating Excellence in Performance 2007 Thai Institute of Directors (IOD) Work Experience ë 2005-Present, Director and Member of the Nomination and Remuneration Committee, Kiatnakin Bank Public Company Limited ë Mar. 2007-Present, Chairman of the Information Technology Association, Association of Securities Companies ë 2005-2007, Director, The Stock Exchange of Thailand ë 2005-2007, Director, Settrade Company Limited ë 2005-2006, Chairman of the Information Technology, The Stock Exchange of Thailand ë 2003-Present, Chief Executive Officer, Kiatnakin Securities Company Limited Number of shareholding 0% Family Relationship with the Executive (none)

8. Mr.Supol Wattanavekin Age 54 years(1) Position Chairperson of the Risk Management Committee / Chairman of the Executive Board Education ë Master of Business Administration (Executive) Sasin Graduate Institute of Business Administration of Chulalongkorn University ë Bachelor

of Law, Ramkhamhaeng University ë Orchestrating Winning Performance 2005 IMD International, Switzerland ë Board & CEO Assessment, Thai Institute of Directors (IOD) ë The Role of the Chairman Program, Thai Institute of Directors (IOD) ë Director Accreditation Program (DAP 56/2006) Thai Institute of Directors (IOD) ë Director Certification Program (DCP 76/2006) Thai Institute of Directors (IOD) ë Organizing and Managing Strategic Alliances for Success and Profit, Sasin Graduate Institute of Business Adminstration of Chulalongkorn University ë Leadership, Strategic, Growth and Change, Sasin Graduate Institute of Business Adminstration of Chulalongkorn University ë Corporate Governance Report of Thai Listed Companies, Listed Companies Association Work Experience ë 2005-Present, Chairman of the Executive Board, Kiatnakin Bank Public Company Limited ë 2005-Apr. 2007, Chairman of the Board of Directors, Kiatnakin Bank Public Company Limited ë 2004-Present, Director, The Erawan Group Public Company Limited ë 1999-Present, Director, Kiatnakin Securities Company Limited ë 2000-2005, Chairman, Kiatnakin Bank Finance Company Limited ë 1999-2005, Chairman of the Executive Board, Kiatnakin Bank Finance Company Limited Number of shareholding 10,293,276 (1.97%) Family Relationship with the Executive Head of Deposit and Marketingûs brother

9. Mr.Tawatchai Sudtikitpisan Age 49 years(1) Position President Education ë Master of Business Administration, University of Texas at Austin, U.S.A. ë Master of Science in Electrical Engineering, University of

Texas at Austin, U.S.A. ë Bachelor of Science in Electrical Engineering, University of Texas at Austin, U.S.A. ë Directors Certification Program (DCP 31/2003) Thai Institute of Directors (IOD) ë Senior Executive Program, Sasin Graduate Institute of Business Administration of Chulalongkorn University ë The Job of The Chief Executive, Singapore Institute of Management (SIM) Work Experience ë June 2006-Present, Director, Kiatnakin Securities Company Limited ë 2005-Present, President, Kiatnakin Bank Public Company Limited ë 2005-Present, Head of Residential Project Lending, Commercial Lending and Retail Lending, Kiatnakin Bank Public Company Limited ë 2005, Head of Commercial Lending, Kiatnakin Finance Public Company Limited ë 2002-2007, Head of Residential Project Lending, Kiatnakin Finance Public Company Limited Number of shareholding 0% Family Relationship with the Executive (none)

10. Mr.Pracha Chumnarnkitkosol Age 47 years Position Director Education ë Master of Business Administration (Finance) University of Texas Arlington, U.S.A. ë Bachelor of Engineering, Chulalongkorn University ë

Risk Management of Banking & Finance, Thai Institute of Directors (IOD) ë Directors Certification Program (DCP 75/2006) Thai Institute of Directors (IOD) ë EVA : Managing for Value Creation, Sasin Graduate Institute of Business Administration of Chulalongkorn University ë Blue Ocean Strategy, (STRATEGIC) Business Development Center ë Senior Executive Program (SEP-22), Sasin Graduate Institute of Business Administration of Chulalongkorn University Work Experience ë 2006-Present, Director, Kiatnakin Bank Public Company Limited ë 2005-Present, Head of Risk Management, Kiatnakin Bank Public Company Limited ë 1999-2004, Managing Director, Asia Recovery Management Company Limited Number of shareholding 0% Family Relationship with the Executive (none) (1) Do not have authority in Subsidiary, Kiatnakin Securities Company Limited, as Directors (2) Have authority in subsidiary Company, Kiatnakin Securities Company Limited, as the Chief Executive Officer

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

Management Team 1. Mr. Supol Wattanavekin Chairman of the Executive Board

2. Mr. Tawatchai Sudtikitpisan President

3 Mr. Sarawut Charuchinda Head of Debt Restructuring

4. Miss Thitinan Wattanavekin Head of Deposit and Marketing

5. Mr. Patom Amorndechawat Head of Operations

6. Mr. Pracha Chumnarnkitkosol Head of Risk Management

7. Mr. Chavalit Chindavanig Head of Finance & Budgeting

8. Ms. Sineenath Tejagupta Senior Executive Vice President

7 8

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

Management Team 1. Mr.Supol Wattanavekin Age 54 years Position Chairman of the Executive Board Education ë Master of Business Administration (Executive) Sasin Graduate Institute of Business Administration of Chulalongkorn University ë Bachelor of Law, Ramkhamhaeng University ë Orchestrating Winning Performance 2005 IMD International, Switzerland ë Board & CEO Assessment, Thai Institute of Directors (IOD) ë The Role of the Chairman Program, Thai Institute of Directors (IOD) ë Director Accreditation Program (DAP 56/2006) Thai Institute of Directors (IOD) ë Director Certification Program (DCP 76/2006) Thai Institute of Directors (IOD) ë Organizing and Managing Strategic Alliances for Success and Profit, Sasin Graduate Institute of Business Adminstration of Chulalongkorn University ë Leadership, Strategic, Growth and Change, Sasin Graduate Institute of Business Adminstration of Chulalongkorn University ë Corporate Governance Report of Thai Listed Companies, Listed Companies Association Work Experience ë 2005-Present, Chairman of the Executive Board, Kiatnakin Bank Public Company Limited ë 2005-Apr. 2007, Chairman of the Board of Directors, Kiatnakin Bank Public Company Limited ë 2004-Present, Director, The Erawan Group Public Company Limited ë 1999-Present, Director, Kiatnakin Securities Company Limited ë 2000-2005, Chairman, Kiatnakin Bank Finance Company Limited ë 19992005, Chairman of the Executive Board, Kiatnakin Bank Finance Company Limited Number of shareholding 10,293,276 (1.97%) Family Relationship with the Executive Head of Deposit and Marketingûs brother 2. Mr.Tawatchai Sudtikitpisan Age 49 years Position President Education ë Master of Business Administration, University of Texas at Austin, U.S.A. ë Master of Science in Electrical Engineering, University of Texas at Austin, U.S.A. ë Bachelor of Science in Electrical Engineering, University of Texas at Austin, U.S.A. ë Directors Certification Program (DCP 31/2003) Thai Institute of Directors (IOD) ë Senior Executive Program, Sasin Graduate Institute of Business Administration of Chulalongkorn University ë The Job of The Chief Executive, Singapore Institute of Management (SIM) Work Experience ë June 2006-Present, Director, Kiatnakin Securities Company Limited ë 2005-Present, President, Kiatnakin Bank Public Company Limited ë 2005-Present, Head of Residential Project Lending, Commercial Lending and Retail Lending Kiatnakin Bank Public Company Limited ë 2005, Head of Commercial Lending, Kiatnakin Finance Public Company Limited ë 2002-2007, Head of Residential Project Lending, Kiatnakin Finance Public Company Limited Number of shareholding 0% Family Relationship with the Executive (none) 3. Mr.Sarawut Charuchinda Age 51 years Position Head of Debt Restructuring Education ë Master of Business, University of Mississippi, U.S.A. ë Directors Certification Program (DCP 31/2003) Thai Institute of Directors (IOD) Work Experience ë 2005-Present, Head of Debt Restructuring, Kiatnakin Bank Public Company Limited ë 2545-2548, Head of Asset Management, Kiatnakin Finance Public Company Limited Number of shareholding 0% Family Relationship with the Executive (none) 4. Miss Thitinan Wattanavekin Age 52 years (1) Position Head of Deposit and Marketing Education ë Master of Management, Sasin Graduate Institute of Business Administration of Chulalongkorn University ë Bachelor of Public Affairs, University of Southern California, U.S.A. ë Directors Certification Program (DCP 1/2000) Thai Institute of Directors (IOD) ë Board Performance Evaluation, Thai Institute of Directors (IOD) ë Corporate Social Responsibility (CSR 1/2007), Thai Institute of Directors (IOD) ë Politics and Governance (KPI 8), The King Prajadhipokûs Institute ë Capital Market for Executives (CMA 2), Capital Market Academy ë The Joint State-Private Course (NDC 19/2006), Thailand National Defence College Work Experience ë 2005-Present, Head of Deposit and Marketing, Kiatnakin Bank Public Company Limited ë 2002-2005, Head of Treasury and Funding, Kiatnakin Finance Public Company Limited ë 1999-Present, Director, Kiatnakin Securities Company Limited Number of shareholding 25,979,861 (4.97%) Family Relationship with the Executive Chairman of the Executive Board's sister

5. Mr. Patom Amorndechawat Age 52 years Position Head of Operations Education ë Master of Accountancy, Thammasat University ë Bachelor of Law, Thammasat University ë Bachelor of Account, Chulalongkorn University Work Experience ë Nov. 2007-Present, Head of Operations, Kiatnakin Bank Public Company Limited ë 2000-2007, Executive Vice President of Operation and Retail, Bank Thai Public Company Limited Number of shareholding 0% Family Relationship with the Executive (none) 6. Mr. Pracha Chumnarnkitkosol Age 47 years Position Director Education ë Master of Business Administration (Finance) University of Texas Arlington, U.S.A. ë Bachelor of Engineering, Chulalongkorn University ë Risk Management of Banking & Finance, Thai Institute of Directors (IOD) ë Directors Certification Program (DCP 75/2006) Thai Institute of Directors (IOD) ë EVA : Managing for Value Creation, Sasin Graduate Institute of Business Administration of Chulalongkorn University ë Blue Ocean Strategy, (STRATEGIC) Business Development Center ë Senior Executive Program (SEP-22), Sasin Graduate Institute of Business Administration of Chulalongkorn University Work Experience ë 2006-Present, Director, Kiatnakin Bank Public Company Limited ë 2005-Present, Head of Risk Management, Kiatnakin Bank Public Company Limited ë 1999-2004, Managing Director, Asia Recovery Management Company Limited Number of shareholding 0% Family Relationship with the Executive (none) 7. Mr. Chavalit Chindavanig Age 46 years Position Head of Finance & Budgeting Education ë MBA, Eastern Michigan University, U.S.A. ë Director Accreditation Program (DAP 21/2004) Thai Institute of Directors (IOD) ë Director Certification Program (DCP 76/2006) Thai Institute of Directors (IOD) ë TLCA Executive Development Program (EDP 2/2008), Listed Companies Assocation Work Experience ë July 2007-Present, Head of Finance & Budgeting, Kiatnakin Bank Public Company Limited ë 1998-2006, Acting Managing Director, Tisco Securities Company Limited Number of shareholding 0% Family Relationship with the Executive (none) 8. Ms. Sineenath Tejagupta Age 56 years Position Senior Executive Vice President Education ë Master of Science in Business, Mississippi University for Women, U.S.A. ë Bachelor of Economic (Honor No.2), Thammmasat University ë Company Secretary Program #16, Thai Institute of Directors (IOD) ë Understanding The Fundamental of Financial Statement, Thai Institute of Directors (IOD) Work Experience ë 2005-Present, Senior Executive Vice President, Kiatnakin Bank Public Company Limited ë 2002-2005, Senior Executive Vice President, Kiatnakin Finance Public Company Limited Number of shareholding 0% Family Relationship with the Executive (none) 9. Ms. Suree Harnpinijsak Age 50 years Position Senior Vice President Education ë Master of Accounting, Chulalongkorn University ë Bachelor of Accounting, The University of the Thai Chamber of commerce ë Certifited Public Accountant ë Chief Financial Officer Certificate Program (CFO), Federation of Accounting professions under the royal patronage of his majesty the king ë Certificate COSO for CFO, Federation of Accounting professions under the royal patronage of his majesty the king Work Experience ë 2005-Present, Senior Vice President, Kiatnakin Bank Public Company Limited ë 2002-2005, Senior Vice President, Kiatnakin Finance Public Company Limited Number of shareholding 37,500 (0.01%) Family Relationship with the Executive (none)

(1) Do not have authority in Subsidiary, Kiatnakin Securities Company Limited, as Directors * Including with shareholding of spouse and child who is not become legal age as of Dec. 31, 2008

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

38 Years of Kiatnakin

Kiatnakin Bank Public Company Limited Kiatnakin Finance and Securities Company Limited was founded in 1971 and has experienced magnificent periods of successes as well as the numerous economic crises, particularly that of 1997 which resulted in the suspension of many financial institutions. Nevertheless, we operated with caution and support from strong partnerships, such as shareholders, customers, executives, and employees, whose dedication ensured that Kiatnakin survived the crises and continued to grow progressively until we were upgraded to a full commercial bank in 2005 under the new name çKiatnakin Bank Public Company Limitedé 1971 Kiatnakin Finance and Securities Company Limited was established by Mr. Kiat and Mrs. Chansamorn Wattanavekin with a registered capital of 10 million Baht. 1973 Awarded license to operate in finance and securities 22

1982 Became Broker No. 19 on the Stock Exchange of Thailand 1988 Listed on the Stock Exchange of Thailand 1991 Expanded business into other regions by opening branch offices in major cities throughout Thailand 1993 Became a public limited company 1997 Temporarily suspended operations due to economic crisis (together with 57 other financial institutions) 1998 Was one of two companies that Ministry of Finance granted permission to resume business 1999 Separated the finance and securities business 2003 Assessed by Institute of Directors Association (IOD) as one of 50 companies with good corporate governance 2004 Received an upgrade in credit rating from çBBB+é to çA-ç by TRIS Co.,Ltd.

Total Asset 1,000,000

1997 : The third financial crisis, caused by the floating of the Baht.

,0 19

1999 : Kiatnakin separated its finance and securities business

2005 : Kiatnakin was upgraded to a full commercial bank

100

1,4

1979 : The first financial crisis initiated by Raja finance company Limited

,7 14

,3 13

1984 : The second financial crisis occurred due to the compounded effects from the previous crisis.

10,000 1,000

,5 20

100,000

1982 : Kiatnakin became member number 19 in the Stock Exchange of Thailand

1993 : Kiatnakin converted to a public company limited.

1988 : Kiatnakin became listed in the Stock Exchange of Thailand

2005 2006

2007

2008

Granted permission by the Ministry of Finance to establish a commercial bank Upgraded to a full service commercial bank and officially started providing services on October 3, 2005 One of the of 61 companies from 402 listed companies that received a çvery goodé rating for corporate governance from the Thai Institute of Directors (IOD) for the year 2006. TRIS Co.,Ltd. confirmed the Bankûs credit rating of çA-ç One of 10 companies from 460 listed companies in the Stock Exchange of Thailand that received Best Shareholder Treatment Award from Thailand Securities Depository Company Limited (TSD) in collaboration with Thai Investors Association (TIA), Listed Companies Association (LCA), and Thai Investor Relations Club (TIRC). One of 22 companies from 448 listed companies that received a çExcellenté rating for corporate governance from the Thai Institute of Directors (IOD) for the year 2008

20 0 20 7 08

05 20

99 19

97 19

93 19

88 19

82 19 84

79 19

19 71 19 72

million baht

Kiatnakin Bank is a commercial bank that provides full range of depository services, such as savings, fixed, checking, bill of exchange, funds, and various lending services in which the Bank has expertise in, such as hire-purchase loans, residential project loans, and corporate loans. The Bank currently has 37 branches. Kiatnakin group comprises of Kiatnakin Bank Public Company Limited and Kiatnakin Securities Company Limited in which the Bank holds 99.99% of the shares. Kiatnakin Securities Company Limited (KKS) KKS was founded in 1999 from the separated of Kiatnakin Finance and Securities Public Company Limited, to provide all types of securities services as follows: securities brokerage, internet trading, securities borrowing and lending, securities analysis to assist investors in making decisions, and investment banking. KKS has a team of knowledgeable and experienced securities analysis that has been widely accepted. At present, KKS has 10 branches. Annual Report 2008 ë Kiatnakin Bank Public Company Limited

Group Business

Securities Business

Banking Business

Retail lending

Debt restructuring*

Residential project lending

Commercial lending

Deposit

* Debt restructuring operate by the Bank and the subsidiaries which the bank owned. 1. Asia Recovery 1 Fund (99.95%) 2. Asia Recovery 2 Fund (99.59%) 3. Asia Recovery 3 Fund (99.97) 4. Thai Restructuring Fund ( 98.91%) 5. Asia Recovery Property Fund 1 (99.50%) 6. Asia Recovery Property Fund 3 (98.77%)

Kiatnakin Group Kiatnakin Group comprised of Kiatnakin Bank Public Company Limited, which is a full service commercial bank with 37 branches and provides services for customers in significant locations throughout Thailand. The Bank没s subsidiar namely Kiatnakin Securities Company Limited (KKS) provided comprehensive securities services to customers at its location throughout the regions and in Bangkok metropolitan area in order to provide better service. 24

KKS had gained the credibility and trust from the customers for a long period of time. The service of the Bank and its subsidiaries were as follows: Commercial Bank Business 1. Retail Lending provided the following services 1) Hire Purchase Loan; The Bank offered hire-purchase loans for all types of automobiles, both new and second-hand, with a rapid credit approval processing. Customers were able to manage their cash flow properly at a suitable interest rate and repayment period. 2) Personal Loan; The bank offered personal loans to increase liquidity for customers of auto hirepurchase loans with good repayment record. 3) KK Speed Car Cash; The Bank offered KK Speed Car Cash loans to increase liquidity for automobile owners. Customers can use their car as normal. 4) Auction of Second-Hand Automobile; The Bank organizes a weekly auctions of second-hand automobiles from the Bank没s customers. The auctions

are held at the Kiatnakin Car Center (Bangna-Trad Km. 8) and other branches. The Bank also prepared large quantity of automobiles to offer a large variety of selection. The Bank offered automobile related services such as annual registration and licensing service. 5) Insurance Service; The Bank provided insurance against fire or any other damages and life insurance in the form of automobile loan protection. The current plan is to offer more insurance products such as personal accident insurance and personal loan protection. 2. Residential Project Lending The Bank offered comprehensive residential project loans for developers of all types of residential projects. Customers received rapid credit approval processing, desirable credit limits and repayment schedules that corresponded to their project revenue. The Bank没s team of professionals provided advice on finance. Annual Report 2008 毛 Kiatnakin Bank Public Company Limited

3. Corporate Lending The Bank offered a full range of corporate loans for qualified businesses. Customers received rapid credit approval processing, prompt response of their credit request, highest possible short term credit limit, and a repayment schedule that corresponded to their business revenue. The main businesses in which the Bank focused on supporting were automobile business such as new automobile dealers, secondhand automobile dealers, and other businesses such as apartment business, transportation business, packaging business, and printing business. 4. Deposit Service The Bank offered a variety of ways to save money. Depositors can choose from several types of account including savings and current account with step up interest rates. Moreover, the two accounts can be joined with automatic fund transfer services between 26

accounts (Sweep In-Out). Depositors can choose a short or long-term fixed deposits, savings that uses a passbook or a certificate of deposit, or a scheme with higher yield, such as a bill of exchange. In addition, the Bank offers life insurance products that help create financial stability with the benefits of a life insurance coverage, savings plan, and tax exemption. 5. Asset Management Business The Bank had a variety of assets for sale, such as houses, townhouses, vacant land, commercial buildings, and office buildings for people seeking a place of residence or investment. Interested individuals can contact our Call Center 0-2680-3420 to 1 or visit our website www.kkasset.com to search for the available assets based on desired type, location, size, or price range. In addition, the Bank can estimate the loan amount and automatically compute the monthly payment to increase convenience or customers who wanted to obtain preliminary figures.

Securities Brokerage Services 1. Securities Brokerage Kiatnakin Securities Company Limited (KKS), a member of the Stock Exchange of Thailand (Broker Number 19), offered a securities brokerage services to individuals, institutions and foreign investors. Securities trading can be done via our marketing personnel (execute buy and sell order through the securities trading room) using cash or credit balance account or via their internet trading account. 2. Financial Advisory KKS offered financial advisory service which comprises of consultation in issuing equity, such as Initial Public Offering in the Stock Exchange of Thailand, and other types of offerings as well as in finding potential joint venture partners and mergers & acquisitions.

3. Underwriting KKS provided guarantee to issuing companies for sale of securities (e.g., common shares, preferred shares, debenture, warrant, mutual funds) in order to disperse the securities to general investors. 4. Investment Unit KKS offered investors the choice of investing in investment unit / mutual funds by being the selling agent various mutual funds along with providing professional investment advisory service by an investment planner (IP). 5. Futures Contract Brokerage KKS was granted the derivatives agent license to from the Securities and Exchange Commission (SEC) and became a broker member of Thailand Future Exchange (TFEX) and Thailand Clearing House Company Limited (TCH). KKS began the brokerage service with TFEX since September 4, 2006.

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

Revenue Structure Most of the Kiatnakin Groupรปs revenue were from the banking business, while the revenue from the 2006 Fund Management Banking Business 15% 80% Baht 1,108 mill Baht 5,641 mill Sicurities Business 5% Baht 343 mill

2007

2008

Fund Management Banking Business 13% 84% Baht 1,076 mill Baht 7,134 mill Sicurities Business 3% Baht 297 mill

Business Situations and Competitions Commercial Bank Business Total Assets At the end of 2008, there were 18 Thai commercial banks, of which 4 were retail banks with total assets of Baht 8.8 trillion, reflecting an increase of 11.5% over the previous year. The four large-scale commercial banks (proportion of assets is more than10%) had total assets of Baht 5.5 trillion, representing 63.0% of total commercial bankรปs assets and an increase of 11.7% from previous year. There were 5 medium-scale commercial banks (proportion of assets is more than 3% but less than 10%) and their combined assets equaled Baht 2.4 trillion, an increase of 10.6% from the year before and is 27.5% of total commercial bankรปs assets. The remaining 9 small-scale commercial banks (proportion of assets is less than 3%) have a total asset of Baht 0.8 trillion, which made up 9.6% of total commercial bankรปs assets and represented an increase of 14.6% from 2007. At the end of 2008, Kiatnakin Bank, which is a 28

investment business which were funds created to manage the assets obtained from Financial Restructuring Agency and Legal Execution Department.

Fund Management Banking Business 13% 84% Baht 1,218 mill Baht 7,865 mill Sicurities Business 3% Baht 248 mill

Total Assets Medium Banks 27.5% Small Banks 8.2% KK 1.3%

Large Banks 63.0%

small-scale commercial bank, had a total asset of Baht 114,733 million, reflecting a 31.5% increase over the previous year. The Bank was ranked as number 13 in terms of asset size, equivalent to 1.3% of total commercial bankรปs assets.

the highest percentage of loans at 23% of total loans, reflecting a slight decline from previous year figure of 24%. Due to the expansion of the commercial bank personal consumption loans, was mainly attributed to the auto hire-purchase loans. At the end of 2008, the Bank没s total loans amounted to Baht 80,563 million or a 22.7% increase, which was higher than the commercial banking industry. Total amount of loans for the Bank represented 1.3% of the total amount of all commercial banks.

1 5 12 33 15 1,6 47 1,4 56 2 42 2

4,000

1,2 13 45 14 0 0

6,000

1 1 4 7 ,413 21 48

5,893

6,229

8,000

7 65 1

1,0

51 17

08 20

1,5

billion baht

Production Wholesale, Retial Sale Hotels and Restaurants, Transport Financial Intermediation

1,6

2,000

1,0

Loans Large Banks 65.1% KK 1.3% Banks Small Banks Medium 26% 7.6%

7,549

Loans Structure

4 7 11 47 20

Total Loans At the end of 2008, Total loans of Thai commercial banks were Baht 6.2 trillion, reflecting an increase of 11.2% form previous year. Total loans of large-scale commercial banks were Baht 4.0 trillion, representing 65.1% of total loans and an 11.5% increase over the year before. This is the largest percentage increase in all categories. Loans of medium-scale commercial banks were Baht 1.6 trillion, reflecting an increase of 10.4% and made up 26.0% of total loans. Loans of small-scale commercial banks were Baht 0.5 trillion, representing 8.9% of total loans and an 11.4% increase. Manufacturing sector received

Real Estate Activities Personal Consumption Agriculture, Hunting and Forestry, Mining and Quarrying Other

Annual Report 2008 毛 Kiatnakin Bank Public Company Limited

Total Deposits At the end of 2008, total deposits for Thai commercial banks amounted to Baht 6.5 trillion, reflecting an increase of 10.1% from the previous year. Total deposits for large-scale commercial banks were Baht 4.3 trillion, representing a 9.0% increase and 65.1% of total deposits. Total deposits for mediumscale commercial banks were Baht 1.7 trillion, representing a 9.5% increase and 26.4% of total deposits. Total deposits for medium-scale commercial banks were Baht 0.5 trillion. This was an increase of 21.7% and made up 8.4% of total deposits. In 2008, interest rates were volatile and commercial banks intensely competed for deposits. Banks offered a variety of deposits with high interest rates in order to attract depositors. Thailandûs liquidity issue was the result of the financial crisis that originated from other countries. At the end of 2008, the bank had a total deposit of Baht 71,156 million, reflecting a 72% increase. This rise was higher than the commercial banks sector due to increased in deposits in order to fund the rapid expansion of loans. Shareholdersû Equity At the end of 2008, Thai commercial banks had total shareholdersû equity of Baht 0.8 trillion, representing a 9.8% increase from the previous year. Large-scale commercial banks had total shareholdersû equity of Baht 0.5 trillion, reflecting a 9.9% increase and 63.2% of total shareholdersû equity. Medium-scale commercial banks had total shareholdersû equity of Baht 0.2 trillion, representing a 8.2% increase and 26.3% of total shareholdersû equity. Small-scale commercial banks had total shareholdersû equity of Baht 0.1 trillion, representing a 13.7% increase and 10.4% of total shareholdersû equity. The increase was partly attributed to better performance and rise in accumulated profits. At the end of 2008, the Bankûs total shareholdersû equity amounted to Baht 17,167 million, reflecting a 1.4% increase but was below the commercial banks sector. the Bankûs total shareholdersû equity represented 2.1% of the commercial banks sector. Competitive outlook for all commercial banks is expected to be very challenging. Reduction in liquidity is expected as foreign deposits and foreign investments are returned to the countries that faces problems with 30

Total Deposits Large Banks 65.1% KK 1.1% Small Banks Medium Banks 26.4% 7.3%

Shareholders' Equity Medium Banks 26.3% Small Banks 8.3% KK 2.1%

Large Banks 63.2%

their financial institutions; however, domestic liquidity is still present. Banks slowed down their lending while monitoring the political and economical instability situation; thus making it very challenging to manage the situation. Moreover, commercial banks must have higher provision for doubtful accounts along with more rigorous risk management as a result of the new international accounting standard IAS39 that will begin to go into effect in 2010.

Hire-Purchase Business In 2008, automobile sales volume was directly impacted by the rapid rise in oil prices during the 2nd quarter. Diesel fuel retail price increased to almost Baht 50 per liter causing sales of automobile using diesel to drop significantly. Regardless of the improved oil price situation in the 4th quarter, there were still some uncertain political situation that impacted the consumer confidence in their future income. These factors caused the decline in the sales of durable goods as well as automobile sales. Total automobile sales volume in 2008 was 616,480 vehicles, representing a 2.5% reduction from previous year figures of 632,042 vehicles. Personal automobile sales volume increased by 32% and finished at 226,691 vehicles. Commercial automobile sales volume were 389,789 vehicles, a decreased of 15.2% from the year before. The combined value of the top 8 outstanding hire-purchase loan amount from commercial banks that offered hire-purchase loans equaled Baht 556,222 million, representing an increase of 29%. Thanachart Bank had the biggest market share of 35.7%, which was a slight decrease from the previous year market share of

44.2%. Kiatnakin Bank had a 33.5% increase in hirepurchase loans and ranked 5th in terms of market share at 10.3%, compared with 9.9% the year before. In 2008, the potential outlook for hirepurchase loans is expected to continue to expand because management of large-scale commercial banks want to stay in the business due to desirable return on investment and risk level. Moreover, they already have existing customer base, making it easy to expand the market.

Hire-Purchase Business 250,000 191,025 198,344

2007

TCAP

BAY

SCB Leasing

TISCO

K leasing

KTB

3,645

million Baht

3,640

7,048 12,338

57,139

22,137 33,874

50,000

42,794

26,585

74,848

100,000

64,684 77,287

103,177

150,000

70,418

200,000

2008

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

Outlook for Securities Business in 2009 In 2009, we are expecting that the economy will continue to slow down from the existing financial crisis, and negatively impact securities trading. The forecast indicated that the total volume will drop from Baht 16,118 million per day to Baht 14,000 million per day with less participation from foreign investors; thus, securities firm with large domestic customer base will likely to increase their market share this year. Investment banking business will continue to be depressed this year, especially from IPO shares. Most of the investment banking business will be focused primarily on financial advisory, especially in consolidating and restructuring companies. TFEX is expected to have increased growth from previous year because TFEX is a channel to diversify the risk from stock market investment that is expected to be extremely volatile this year. In addition, TFEX will have a new product, namely Gold Futures, which is likely to stimulate the trading volume.

100% 90% 80% 70% 60% 50% 40% 30% 20%

Local Institution Investor Foreign Investor Local Individual Investor

08 4Q

08 1Q

07 4Q

10% million Bath

Securities Business The US financial crisis, political conflicts and the closing of the Suvarnabhumi airport caused the Thai economy in 2008 to further decline from 2007. The SET index closed in 2008 at 449.96 points, peaked at 884.19 points and reached the lowest point at 384.15 points. In 2007, SET index closed 858.10 points; during the year, the market peaked 915.03 points and reached the lowest point at 616.75 points. As a result of the U.S. financial crisis, foreign trading drop to 29% from 32% in 2007. In 2008, institution investors increased the importance and their trading volume increased to 17% from 14% in 2007, while domestic investors showed a slight increase to 54% from 53% in 2007. In 2008, MAI index closed at 162.93 points, peaked at 293.12 points and reached the lowest point at 150.53 points. In 2007, MAI index closed at 272.37 points, peaked at 306.64 points and reached the lowest point at 175.61 points. Average combined trading volume for SET and MAI was Baht 16,118 million per day, representing a 7.6% decrease from 2007 figure of Baht 17,436 million per day. TFEX market for 2008 continued to grow from 2007 and has total trading volume of 2.1 million contracts, a 74% increase from the 2007 which had 1.2 million. In addition, TFEX had a new product for trading called Single Stock Future (SSF). Even though there was the same number of companies, which was 17, that raised capital through the SET in 2008 as well as in 2007, the value of total capital raised decreased as much as 35%. In 2007, total value of capital raised was Baht 41 million, which was mainly attributed to PTTAR, formed by merging ATC and RRC which had total combined value of Baht 30 million. In 2008, the combined value from all 17 companies that participated in raising capital through SET was Baht 27 million.

Risk Management and Risk Factors

Banking operations is directly related to the dynamic changes in business and the environment, such as economic situations, and various changes in industries and organizations. The Bank is aware that these changes create a variety of risks. The Bank consistently and continuously places great emphasis on risk management by establishing an independent Risk Management Unit, which reports directly to the Risk Management Committee. The unit manages the Bank没s risks. The Risk Management Committee played a significant role in determining risk management policies; examining the sufficiency of such policies and risk management system; and controlling and monitoring the Bank没s risk level to ensure that it remains consistent with the Bank没s policy. The goals of risk management were to manage various risks to

be within a specified range and operate the business to achieve appropriate returns. The main risk management policy for the Bank is to manage overall risks of the Bank and its subsidiaries and consolidate all the risks in order to manage them effectively and sufficiently. Each business unit was internal department is responsible for understanding and managing risk suitably to ensure that it covers all operations within their respective area of responsibility while complying to risk management policy and framework set forth by the Bank. The Risk Management Unit provide and supplemental managerial review and verification to ensure that each business unit and department has set up sufficient managerial and control procedures to handle risks. Annual Report 2008 毛 Kiatnakin Bank Public Company Limited

Each line of business had set aside capital appropriate to their revenue. Business risks were measured by various risks inherent in each transaction along with overall business risks which impact future strategy and policy in generating revenue. In conformity with Risk Management Policies of Bank of Thailand, five major risk classifications were identified and are described as follows: ë Strategic Risks ë Credit Risks ë Market Risks ë Liquidity Risks ë Operational Risks The Bankûs risk management in the past year had expanded to include the Bankûs subsidiary Kiatnakin Securities Company Limited. Risk Factors from the Crisis with Financial Institutions Abroad in 2008 and its Continuing Impact in 2009 In 2008, there was a turmoil both domestically and internationally which impacted Kiatnakin Bank, such as domestic political unrest, instability of oil prices, and financial crisis abroad. The Bank assessed the potential impact and proceeded to implement risk management measures. The summary of these measures are as follows: ë Risk Factors - Crisis with Financial Institutions abroad - Fluctuating oil prices - Domestic political unrest ë Impact to Thailand - Capital outflow - Declined in export and economy slowed down - Reduction in consumer spending ë Impact to Thai Banks - Citizens are anxious - Liquidity crunch - Banks become more cautious in lending 34

- NPLs likely to rise ë Impact to Kiatnakin Bank - Liquidity crunch - Reduction in ability to generate profit - Quality of assets declined and NPLs is likely to rise Based on the overall preliminary risk profile, Kiatnakin Bank has set the following strategies and important risk management initiatives as follows: 1. Strategy for maintaining high liquidity - Initiatives to increase the level of reserve - Initiatives to reduce foreign transactions - Initiatives to reduce trading port 2. Strategy for maintaining the Bankûs rating 3. Strategy for maintaining high capital 4. Strategy for communicating with public and investor 5. Strategy for seeking new opportunities amidst the economic and financial turmoil. 6. Strategy for allocating appropriate capital investment in accordance with the potential returns. 7. Strategy for preserving asset quality - Initiatives to improve the credit policy to correspond to the changing problems and situations - Initiatives to rapidly reduce NPA and NPLs Kiatnakin Bank expects that the crisis with financial institutions abroad will continue to impact the global and domestic economy in 2009 and thus, the Bank will closely monitor the situation. During 2008, the Bank was affected by the economic crisis twice, the oil crisis during the 2nd quarter and the crisis with the U.S. financial institutions in the 3rd quarter. Subsequently, the Bank adjusted the business strategy to correspond to the crises by maintaining high level of liquidity and capital fund, preserving quality of the loan portfolio and becoming more stringent in granting new loans.

Strategic Risks Strategic risk arises from the process of developing strategic plans and improperly implementing it. This could be attributed to inconsistencies between strategies, policies, goals, organization structure, competition and resources. In the end, these internal and external factors will impact the Bankûs revenue and capital. Kiatnakin Bankûs strategy is to operate in specialized areas of expertise. The Bank focuses primarily on hire purchase loans, residential project loans and investments in financial claims in order to increase proficiency and competitiveness. With aforementioned business strategies, the Bank implemented basic level of risk control by

1) Maintaining a high capital/assets ratio in order to protect the business from the impact of future income fluctuations. The Bank maintained a capital/ assets ratio that is higher than the average of all financial institutions. As of December 31, 2008, the Bank maintained a consolidated capital/assets ratio at 15.42%, which was higher than the 8.5% guideline established by the Bank of Thailand or equivalent to Baht 14,498 million by law. 2) Minimizing market and liquidity risks and only leave credit risks that can be mitigated by the Bankûs own expertise 3) Controlling the diversification of the Bankûs core business to be at appropriate level along with searching for potential new business areas as specified in the Credit Risk section

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

Credit Risks Credit risk is a risk in which a partner or debtor is unable to adhere to the terms and agreements of the contract in which the person is unable to or unwilling to repay the Bankûs loan when itûs due. If the credit risk arises with out any collateral, it will cause the Bank to set higher provision for doubtful accounts and impact the Bankûs net profit and capital fund. At present, the Bankûs loans comprised of 70.7% hire purchase loans, 17.1% residential project loans, and 8.8% commercial loans (of which 3.1%were investments in financial claims and 0.3% were others). Non-performing loans amounted to Baht 7,059 million or 7.1% of total loans. Hire purchase loan is a low fluctuation and high growth business with highly competitive service and interest rates; itûs the type of business in which the risk is automatically distributed. Major impact of risks will arise from significant changes in the economy, legislation and automobile industry as they affect customer loan repayment ability as well as the Bankûs own policy and business processes. The rapid rise in oil prices and problems with the financial institutions abroad drastically impacted the automobile market, including consumer purchasing power and customer loan repayment ability which

Loans Structure Hire-purchase Loans 70.7 % Other 3.4 % Residential Project Loans 17.1% General Loans 8.8 %

subsequently impacted the Bankûs loan expansion, return on investment, and loan quality. The Bank assessed and managed risks by segments based on level of impact and increased reserve / provision for potential loss of investment appropriately. It is expected that the above-mentioned situations will continue to impact the Bank in 2009 and the Bank will continue to monitor the situation closely and adjust the loan policy accordingly.

At the end of 2008, the Bank had a total nonperforming hire-purchase loans of Baht 1,412 million or 2.5% of total purchase loans, of which 1.4% was for new automobiles and 3.4% was for second-hand automobiles. At the end of 2008, the Bank had a total nonperforming residential project loans of Baht 4,470 million or 32.3% of total residential project loans. This represented a reduction of Baht 941 million or 17.4% from 2007. In managing risks involved in residential project financing, the Bank emphasized having sufficient level of capital fund that is much higher than the standard level; diversifying project locations and types of properties; and selecting projects of good standing and likely to succeed in current and future market conditions. Rate of return was set according to loan risks in order to minimize the impact from changes in real estate market, competitors and consumers. Loan quality was verified according to the size of loans in each group, and loans that are below standards were followed up more closely. Moreover, the Bank improved its lending policy for commercial loans and residential projects loans to be more stringent. We believe that it will improve the quality of new loans and disperse the location of residential projects appropriately and in consistent with the market

condition. Since the collateral of most residential project loans are properties, if the real estates market is sluggish and properties value dropped, it will impact the Bank没s collateral value. This situation could further cause losses for the Bank if the non-performing loans rise. However, as of the end of December 2008, the Bank had a relatively high level of residential project collateral which was 170% of total residential project loans. Commercial loan is a loan for businesses that is related with the Bank没s main loan portfolio and is undergoing development to improve expertise; it comprises of loans for apartment, floor plan, transportation/logistics, printing and packaging. The Bank believed that these were quality loans that will enable the Bank to have good operating results and long term growth. As of the end of 2008, the Bank had an outstanding commercial loan balance of Baht 7,135 million, an increase of 54.9% from 2007 balance of Baht 2,529 million, of which 2.4% or Baht 173 million were non-performing loans. Managing investment in financial claims is a fluctuating business in terms of revenue, duration of the restructuring processes and collateral value. The success depends on the capability and efficiency of restructuring processes that suits the customers没

Annual Report 2008 毛 Kiatnakin Bank Public Company Limited

repayment ability, collateral as well as internal and external legal processes. The Bank realized the fluctuations in business performance, including projectûs remaining time to completion; thus, the Bank imposed a high level of loan allowances, closely followed up on management of the loan along with all legal procedures. In addition, the Bank allocated higher than standard allowance for depreciations and devaluations of assets for sale to ensure that they are sufficient to support the variations in the market conditions that affect the business. Market Risks Market risk is risk that arises from the fluctuation in interest rates, exchange rates and price of debt instruments in money and capital market that has an effect on the Bankûs financial performance. Interest rates, market value of assets and exchange rates are market risk factors that have direct effect on the Bankûs status and performance. Nevertheless, the Bank had a policy to operate by 38

reducing the effect of the above-mentioned risk factors to a very low level. The Bank recognized the importance of interest rate variations, which directly impact net interest income, and therefore, has assigned the Assets and Liabilities Management Committee (ALCO) to monitor and minimize the impact by adjusting the terms and types of liabilities to be in line with the assets. ALCO used monitoring instruments to measure the impact on net interest income based on various simulated scenarios to be within an acceptable range. As a result, the Bank was able to achieve low market risk (e.g., if the internet rate rise by 1%, the Bankûs net income will be reduced by only Baht 60.55 million baht or 1.31% of net interest income in 2008. Because the Bank had a high proportion of foreclosed assets for sale when compared to overall Bankûs assets, real estate market price affected the Bankûs status and performance even when past sales were close to appraisal value. However, the Bank still strictly adhered to the accounting policy of progressive

asset value reduction model for the specified holding period. As at December 31, 2008, the Bank had Baht 7.7 billion of foreclosed assets for sale, where by the appraisal value was at Baht 13.6 billion or 177% of book value. At present, the Bank has no significant related transactions and impact from exchange rate as well as no investment in securities for trading as stated in the books. The Bank reported asset values based on daily market rate for securities for sales and has specified a threshold to stop losses. Liquidity Risks Liquidity risk is the risk in which the Bank may not be able to pay according to the obligations within the specified duration. The purpose of managing liquidity risk is to have appropriate and sufficient amount of capital to pay all the creditors currently and in the future, while using the capital to generate benefits in accordance with market conditions. Being a small bank, our loan portfolio and cash flow are in clusters of industries, such as residential project financing and asset management businesses, which are characterized by high fluctuations and unpredictability. This limited the Bankûs ability to accurately forecast cash flow. In addition, future changes in legislations regarding Deposit Insurance Agency will greatly impact the future of financial instruments.

The Bank had a policy of maintaining low liquidity risks and thus placed great importance in maintaining high level of liquidity by assigning the Assets and Liabilities Management Committee (ALCO) to strictly and regularly maintained and managed the Bankûs liquidity in order to keep the Bankûs liquidity risks at an appropriate level. The Bankûs policies for liquidity risks were as follows: - Continuously maintain high level of liquidity while setting the average due date of all liabilities as of December 31, 2008 at 276 days - Adjust the terms of liabilities to be in line with the terms of assets - Maintain high proportions of long-term liability - Disburse types of liabilities - Expand the deposit base from major depositors and disburse the due dates - Have liquidity contingency plan to handle liquidity crisis Operational Risks Operational risk is risk that may occur based on system defects and flaws in the internal operating processes; human errors by employees or executives; or operation breakdown due to external incidents. In operating a commercial bank, it is possible to have operational risks in any operation which can result in damages to the Bank; thus, the Bank believes that it is important to have effective

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

operational risk management in order to achieve the following objectives: reduce operational losses, improve efficiency of operating procedures, and increasing efficiency of internal audit process by assessing the impact of each operational risk. Managing operational risk is essential for the Bank in order to create more value for our shareholders and enhance our competitive advantage. During the past year, the Bank has improved operational risk management in the following ways: - Focused on development of internal operations to increase efficiency in the Bank没s operation by setting up a special unit to work with a consultant to study, analyze and improve the operations. - Developed a control plan and monitor the risks. This is the next step after the completion of the risk database system (specify and assess risk) in which every department at the Bank specify and assess risks in order to rectify and prevent the cause of the risk. The Bank communicates this information to prevent similar situations from occurring in another department. - Assessed and considered the risks for new products, financial services, and new processes work

system to ensure that we have appropriate work procedures and control measures prior to offering the new service to our customers. - Regarding the on-going management of business, the Bank set policies and operations support plan to continually manage risks to ensure that in an emergency, the Bank can still provide core business services or can resume normal operations within an appropriate time. The Bank will test and review the risk management plan regularly in order to ensure its effectiveness and practicality. - Protected against risk of fraud from outside. The Bank set up a unit to monitor and inspect risk factors in consumer loans to help protect and lessen the impact of the damage that could occur. - Communicated information on operational risk management by internal and external lecturers on a regular basis in order for the people involved to consider the risks hidden in their operations. In 2008, the Bank maintained capital requirement for operational risks as per Basic Indicator Approach (BIA) within the Basel II Framework. As at December 31, 2008, the amount was Baht 738.8 million.

Management Discussion and Analysis

1. Operating results for the year 2008 The consolidated net profit for the year 2008 was Baht 1,867 million, decreased 11.6% from 2,111 million baht in the year 2007. This is attributable to higher provisioning of Baht 990 million, up 53.7% from the previous year. Despite the success in NPLs reduction to Baht 7,059 million or 7.1% of total loans compared with Baht 8,202 million or 12.4% in 2007, the Bank set aside higher provisions in view of the local economic situation impacted by the global recession following the U.S. financial crisis, as well as the local political unrest, and with intention to improve its allowance for doubtful of loss to NPLs ratio to be in line with Thai banking industry. Net interest and dividend income increased by 19.6% year over year (yoy) and loan spread stood at 4.6%, declined from 5.2% last year, as a result of lower yield from hire-purchase caused by the change of accounting method of amortized recognition of direct expenses in hire purchase contracts from the straight-line basis method to the effective interest method. Interest and dividend income increased by 19.6% yoy and interest expenses rose 19.7% yoy, boosted by 33.5% hire-purchase loan growth and 42.4% deposits and borrowings expansion. However, the hire-purchase loan growth began to slowdown in 3rdQuarter (3Q08) following lower industry car sales coupled with the Bank没s tightening credit policy.

Meanwhile, deposits grew strongly to support business growth as well as to prepare for possible tightening liquidity in the banking system resulting from the U.S.led financial crisis. The loan-to-deposits and borrowing ratio stood at 88.4%, down from 102.6% in 2007. Non-interest income increased 17.6% yoy mainly due to lower gain on disposal of investment in securities, lower gain on revaluation of investment, and impairment loss on investment in loans. However, fee and services income increased by 36.5% yoy contributed largely from bancassurance business and gain from sale of foreclosed assets also rose 56.8% as a result of success in investment in loans and foreclosed assets business to sale substantial foreclosed asset. Operating expenses increased 23.5% yoy from higher number of staff and branch expansion. In 2008, the bank opened 10 new branches adding to 37 branched nationwide and the total number of staff of the Banks and its subsidiaries were 2,179 people at the end of 2008. Basic and diluted earnings per share for the year 2008 were Baht 3.57 and Baht 3.46, compared to Baht 4.07 and Baht 3.77 respectively in 2007. The average return on equity (ROAE) was 11.0%, down from 12.8% in the year before.

Annual Report 2008 毛 Kiatnakin Bank Public Company Limited

Revenue Structure (for the year ended December 31st) 2007 (restated) Interest and dividend income Interest on loans Interest on interbank and money market items Hire purchase and financial lease income Interest and dividend on securities Interest on investment in loans Total interest and dividend income Interest expenses Net interest and dividend income Non-interest income Gain (Loss) on disposal investment in securities Gain on revaluation of investment Impairment loss on investment in loans Impairment loss on investment in Properties Brokerage fees Fees and services income Acceptance, avals and guarantees Others Gain on exchanges Gain from sale of foreclosed assets Other income Total non-interest income Net interest and dividend income before bad debts Bad debts and doubtful accounts (reversal) Loss on debt restructuring Net interest and dividend income after bad debts Non-interest expenses Income before income tax Income tax Minority interest Net income Basic earnings per share Diluted earnings per share

1,969,587,124 53,551,048 3,027,555,227 252,800,371 1,211,211,928 6,514,705,698 2,606,976,892 3,907,728,806 348,026,173 316,868,917 (84,888,912) (5,074,726) 274,997,595 13,939,067 396,918,109 1,354,894 482,232,828 120,570,526 1,864,944,471 5,772,673,277 639,722,132 4,248,271 5,128,702,874 2,570,890,387 2,557,812,487 444,936,389 1,836,562 2,111,039,536 4.07 3.77

2008

Change (%)

34.1 0.9 52.4 4.4 21.0 112.9 (45.2) 67.7

2,029,382,381 187,482,748 4,030,494,427 178,891,320 1,365,979,486 7,792,230,362 3,120,198,862 4,672,031,500

32.7 3.0 64.9 2.9 22.0 125.5 (50.2) 75.2

3.0 250.1 33.1 (29.2) 12.8 19.6 19.7 19.6

6.0 83,501,242 5.5 206,877,334 (1.5) (454,189,771) (0.1) (16,461,518) 4.8 249,277,698

1.3 3.3 (7.3) (0.3) 4.0

(76.0) (34.7) 435.0 224.4 (9.4)

0.3 8.8 0.0 12.2 2.4 24.8 100.0

22.2 37.0 (91.8) 56.8 25.4 (17.6) 7.6 54.5 (70.5) 1.8 23.5 (20.0) (60.6) 100.5 (11.6)

0.2 6.9 0.0 8.4 2.1 32.3 100.0

17,027,284 543,968,645 111,610 756,158,754 151,241,113 1,537,512,391 6,209,543,891 988,285,852 1,255,237 5,220,002,802 3,174,115,782 2,045,887,020 175,212,180 3,681,865 1,866,992,975 3.57 3.46

ë Interest and dividend income Interest and dividend income for the year 2008 was Baht 7,792 million, rose 19.6% yoy, attributable to an increase in hire purchase and financial lease income of 33.1% yoy amounting to Baht 4,030 million, driven mainly by 33.5% growth of hire purchase lending. Interest on interbank and money market was Baht 187 million, up 250.1% yoy as the Bank reserved liquidity for possible tightening liquidity and the policy rate was in the upward trend during the first nine month of 2008, rose from 3.25% at the end of 2007 to 3.75% during 3Q08 before declining to 2.75% in December 2008. Meanwhile, interest and dividend on securities was down 29.2% yoy to Baht 179 million.

ë Interest expenses Interest expenses were Baht 3,120 million, increased by 19.7% yoy, in line with the expansion of deposits and borrowings at 42.4% yoy in order to support business growth in the future and strengthen liquidity.

ë Net interest and dividend income Net interest and dividend income was Baht 4,672 million, up 19.6% yoy. Yield on loans stood at 8.5%, down from last year at 9.6% due to the change of method of amortized recognition of direct expenses in hire purchase contracts from the straight-line basis method to the effective interest method. Cost of fund was 3.9%, dropped from 4.3% in 2007, therefore interest spread was 4.6%, down from 5.3% in 2007.

Loan spread Yield on loans Cost of fund Loan spread

2007* 9.6 4.3 5.3

2008 8.5 3.9 4.6

* not restated from the straight-line basis method to the effective rate method for recognition of direct expenses in hire-purchase.

ë Bad debt and doubtful accounts and loss on debt restructuring Bad debt and doubtful accounts and loss on debt restructuring totaled Baht 990 million, increased by 53.7% yoy. This is because the Bank was well aware of local economic slowdown as a result of slugging global economy and financial crisis coupled with the political unrest. Additionally, the Bank intended to improve the allowance for doubtful of loss to total NPLs to be in line with the industry average. The coverage ratio at the end of 2008 surged to 50.2%, from 36.9% in 2007.

ë Non-interest income Non-interest income equaled to Baht 1,538 million, declined by 17.6% yoy, resulting from the appraisal of asset value causing lower gain on revaluation of investment and higher impairment loss on investment in loans. Additionally, brokerage fee income of Kiatnakin Securities Co., Ltd., totaled Baht 249 million, down 9.4% yoy, following plummet stock market. However, gain from sale of foreclosed assets was Baht 756 million, up 56.8%, following the plan to manage NPA down over the next 5 years and success of selling significant foreclosed asset in 3Q08. Fee and

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

2. Financial Status

services income totaled Baht 561 million, increased by 36.5% yoy, largely from bancassurance business.

ë Operating expense Operating expenses were Baht 3,174 million, rose 23.5% yoy, mainly from personnel and bank branches expansion. In addition, fee and services expenses increased from higher business volumes. Cost-to-income ratio rose to 51.1% from 44.5% in 2007.

ë Corporate income tax Corporate Income Tax was Baht 175 million, equivalent to the effective tax rate of 8.6%, as the Bank recorded tax benefits.

ë Assets Assets, as at December 31, 2008, was totally Baht 114,733 million, up Baht 27,506 million or 31.5% yoy, mainly from an increase of hire-purchase lending, and interbank and money market item. Total loans were Baht 80,563 million, up Baht 14,913 million or 22.7% yoy, contributed mainly from hire purchase. Interbank and money market items was Baht 19,225 million, increased by 986.4% from fund raising for future business growth and liquidity improvement. Meanwhile, total investment in securities was Baht 2,774 million, down 35.5% yoy. Due to the progress of the Bank and subsidiariesû debt restructuring, net investment in loans dropped 25.6% yoy or 1,763 million baht to Baht 5,113 million and net foreclose assets were Baht 7,724 million, up 0.5% yoy.

Assets Assets Cash Interbank and money market items Securities purchase under resale agreements investments Investment in securities - net Investment in loans - net Investment in properties - net Loans Allowance for doubtful accounts Allowance for troubled debt restructuring Properties foreclosed - net Other assets Total assets

December 31, 2007

December 31, 2008

(million Baht) 140 1,770

% 0.2 2.0

(million Baht) 211 19,225

% 0.2 16.8

Change (%) 50.4 986.4

980 4,300 6,876 172 65,650 (2,989) (74) 7,683 2,720 87,227

1.1 4.9 7.9 0.2 75.3 (3.4) (0.1) 8.8 3.1 100.0

2,774 5,113 107 80,563 (3,499) (54) 7,724 2,569 114,733

2.4 4.5 0.1 70.2 (3.0) (0.0) 6.7 2.2 100.0

(100.0) (35.5) (25.6) (37.8) 22.7 17.1 (27.5) 0.5 (5.5) 31.5

ë Loans and receivables Total loans and receivables were Baht 80,813 million, rose by Baht 14,557 million or 22.0%, mainly following 33.5% hire-purchase loan growth and 54.9% growth of general loans including SME

loans and personal loans. The composition of total loans and receivables was 70.7% of hire-purchase, 17.1% of residential project loans, 8.8% of general loans, 3.1% of financial claims and old loans, and 0.3% of other loans.

Type of loans loans

Hire-purchase Residential project loans General loans Financial claims and old loans Other loans Total loans and receivables

December 31, 2007 (million Baht) 42,794 15,184 4,606 2,485 1,186 66,255

ë Asset quality The Bank has continually emphasized on asset quality management and improvement with the aim to reduce non-performing loan (NPLs) to the appropriate level therefore the percentage of NPL dropped significantly in 2008. The Bankûs gross non-performing loans (gross NPLs) to total loans declined to 7.1% at the end of 2008 from 12.4% at

December 31, 2008

% 64.6 22.9 7.0 3.8 1.8 100.0

(million Baht) 57,139 13,826 7,135 2,471 242 80,813

% 70.7 17.1 8.8 3.1 0.3 100.0

Change (%) 33.5 (8.9) 54.9 (0.6) (79.6) 22.0

the end of 2007, while the ratio of NPLs net of provision (net NPLs) to total loans declined from 9.2% to 4.5%. Allowance for bad debt and doubtful accounts amounted to Baht 3,499 million, and allowance for debt restructuring was Baht 54 million resulting to 50.3% of total NPLs of Baht 7,059 million at the end of 2008 compared with 36.9% at the end of 2007.

NPLs breakdown (bank only) Type of loans

Hire-purchase Residential project loans General loans Financial claims and old loans Total NPLs

December 31, 2007 (million Baht) 1,139 5,411 118 1,533 8,202

December 31, 2008

% 13.9 66.0 1.4 18.7 100.0

(million Baht) 1,412 4,470 173 1,004 7,059

% 20.1 63.2 2.5 14.3 100.0

Change (%) 24.0 (17.4) 46.4 (34.5) (13.9)

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

ë Investment in loans Investment in loans are loans bought from the auctions by the Financial Restructuring Authority (FRA), the Legal Execution Department (LED), receivables purchased from other companies, or bad loans of other financial institutions both collateralized and non-collateralized. Debt restructuring methods included full settlement, installment over a period of time, surrender collateral in place of cash payment, or the combination of different methods. The Bankûs investment in loans, which was restructured, will be

transferred to loans account, while the restructured loans under the mutual funds will remain in investment in loans account. Moreover, if debtors agreed to surrender collateral, such collateral will be recorded as foreclosed assets. Investment in loans at the end of 2008 was Baht 5,113 million, declined Baht 1,763 million or 25.6%, in which Baht 2,637 million were belonged to the Bank, dropped from Baht 3,989 million or 33.9%, while the rest of Baht 2,476 million was managed by the mutual funds, down 14.4% or Baht 2,897 million. Details are as follows;

Investment in Loans

(Fair Value) Auctioned from FRA - booked in Funds Auctioned from FRA - booked in the Bank Auctioned from LED - booked in the Bank Total

ë Foreclosed assets Foreclosed assets stood at Baht 7,724 million, up 0.5% yoy, reflecting the success in debt restructuring process through litigation process as well as negotiation. The Bank took possession of foreclosed assets in different forms such as surrender collaterals, asset auctions, and taking by force. Meanwhile, the Bank was able to sell non-performing assets (NPAs) totaling Baht 2,973 million, with Baht 756 million gain from sale of foreclosed assets, up 56.8% yoy. The Bank targets to manage down the portfolio within the next 5 years. To sell our foreclosed assets, the Bank organizes auctions to sell distress assets so called çKK Surely Asset Fairé and joins several NPAs

(million Baht) 2006 4,070 739 4,272 9,082

2007 2,894 671 3,312 6,876

2008 2,476 451 2,186 5,113

sales events such as NPAs Grand Sales and Second-hand Homes Sales, etc. In addition to that, the Bank also developed the website (www.kkasset.com) to provide information of assets for sale and channel for customers and people who are interested to browse and search for. Foreclosed assets for auction include single houses, townhouses, condominium, commercial buildings, and lands nationwide.

ë Investment in properties Investment in properties stood at Baht 106 million, which is the investment of the properties mutual funds, subsidiaries of the Bank, totaled Baht 35 million, down Baht 119 million or 77%.

ĂŤ

Liabilities

Liabilities were totally Baht 97,565 million, increased by Baht 27,270 million or 38.8% yoy. This is attributable to 42.4% growth of deposits Liabilities

Deposits Interbank and money market items Short term borrowings Long term borrowings Other liabilities Total liabilities

and borrowing amounting to Baht 91,104 million in order to support business expansion in the future as well as to reserve liquidity for tightening liquidity that may occur.

December 31, 2007 (million Baht) 41,354 3,066 17,801 4,806 3,269 70,295

December 31, 2008

% 58.8 4.4 25.3 6.8 4.7 100.0

(million Baht) 71,156 3,762 11,553 8,396 2,699 97,565

Change (%) 72.1 22.7 (35.1) 74.7 (17.4) 38.8

% 72.9 3.9 11.8 8.6 2.8 100.0

Deposits and Barrowings. 120

70.2

5 13.

2 71. 41.

42.

3.8

3.2 07 20

Bond B/E Other Liability

3.0

2.5

31. 20

million Baht

3.2

40.

6.4

9.1

0.1 12. 4

6.4

43.0

51.8

59.3

80 60

10. 9.4 6

100

In 2008, the Bank continually launched new promotion for deposits, bill of exchanges and shortterm debentures. The Bank issued long-term debentures in 2Q08 with total value of Baht 3,420 million, the first tranche was Baht 2,131 million, 2 year tenors, 4.25% interest rate, and the second tranche was worth Baht 1,289 million, 3 years tenors, 4.54% interest rate. In 3Q08, the Bank also issued longterm debenture, total value Baht 1,450 million with 3-year tenors and 5.0% interest rate to replace the existing debentures due during the year.

97.5

Deposits and Borrowings

ĂŤ

Public deposits Interbank with Interest

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

Type of deposits

December 31, 2007

(million Baht) 558 358 29,661 10,734 42 41,354

Current accounts Saving accounts Term deposits Promissory notes Certificates of deposit Total deposits

% 1.4 0.9 71.7 26.0 0.1 100.0

December 31, 2008

(million Baht) 248 516 70,380 0.4 11 71,156

% 0.3 0.7 98.9 0.0 0.0 100.0

Change (%) (55.7) 44.1 137.3 (100.0) (73.1) 72.1

毛 Shareholder没s equity Current Maturity profile 13-36 month 19%

1 month 11%

1-12 month 70%

Shareholders没equity was Baht 17,167 million, up Baht 236 million or 1.4% yoy. This is attributable to an increase of 10.7% or Baht 666 million of unappropriated retained earnings. Meanwhile, fair value reserves on investment in loans and fair value reserves on available-for-sale securities declined. The Bank paid the interim dividend for 1H08 at 1.00 baht per share on August 22, 2008, totaled Baht 523 million. Book value per share as of December 31, 2008 was 32.8 baht. Total paid-up capitals of the Bank was Baht 5,231 million as a result of the exercise of warrants buying 1,464,776 common shares in December 2007, March 2008, June 2008, and September 2008.

毛 Capital Adequacy Ratio The capital adequacy ratio of the Bank as of December 31, 2008 based on Basel II equaled 15.42%, declined from 16.4% in 2007 following loan growth, with Tier-1 capital totaling 14.93%. The Bank has policy to maintain higher capital funds for business expansion and for distressed assets business.

3. Business segment performance The Bank and subsidiaries operated 5 main businesses, which are hire-purchase, residential project lending, general lending, distressed assets management, and securities business. The performance of each business area were as follows:

ë Hire-Purchase Lending

Hire-Purchase Loans 88,027 116,656

New Car 56%

23.6

Used Cars 44%

08 20

07 20

06 20

18.1

By New/Second-hand Cars Other 3%

29.7

20 One ton pick-up vans 57%

172,590 208,874 units

Total hire-purchase lending totaled Baht 57,139 million, up Baht 14,345 million or 33.5% 30 yoy. New hire-purchase business volume approved in 2008 equaled to Baht 29,878 million. The 20 domestic car sales in 2008 was 614,084 units, 10 down by 2.7% compared with 631,251 units in the million Baht same period of last year. The penetration rate of

By Type

138,126

57.1

The Bankûs contingent liabilities totaled Baht 2,982 million, compared with Baht 978 million in 2007, mostly increase from interest rate swap and other contingencies and commitments.

KK new hire-purchase cars to the domestic car sales for the first 11 months stood at 5.4%. The proportion of new car and secend-hand car was 56 : 44 and the NPLs of hire-purchase loan stood at 2.5%, down from 2.7% in 2007.

42.8

ë Off-Balance Sheet Items

By Location Non-BKK 77%

BKK 23%

Sedans 40%

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

13.8

15.2

16.6

Total residential project loans equaled Baht 13,826 million, declined from Baht 15,184 million or 8.9% yoy. The Bank was still focusing on providing financial assistance and solving problems for our clients aiming to reduce NPLs. The NPLs stood at 32.3%, declined from 35.6% in 2007, following the Bankûs strategy to focus on NPLs reduction.

Residential Project Loans 20 14.2

ë Residential Project Lending

10 5

South 12%

08 20

Outstanding by Type

Outstanding by Location East 11%

billion Baht

Central 7% Northeast 3% North 2%

SDH/TH 99% Res. Condo 1% Greater Bangkok 65%

Personal Loans SMEs Loans

1.8

6 4.6

5 5.3

1.2

08 20

07 20

1.9

1.1 0.2 05

1 billion Baht

1.2

3.4

0.6

2.5

General loans comprised of loans offered to several business sectors including automotive, apartment, transportation, and packaging and printing business etc., and personal loans. The outstanding As of December 31, 2008 the oustanding amount was Baht 7,135 million, rose 54.9% yoy from Baht 4,606 million. The NPLs dropped to 2.4% compared with 2.6% in 2007.

0.6 0.5 0.1

ë General Lending

General Loans 7.1

ë Distressed and foreclosed assets management Due to success in debt restructuring, net investment in loans was Baht 5,113 million, down 25.6% yoy, and general commercial loans prior to financial crisis, and investments in financial claims By Type

restructured and transferred to loans were Baht 2,471 million, declined from Baht 2,485 million, owing to success in the restructuring process of financial claims investment. Meanwhile, net foreclosed assets stood at Baht 7,724 million, up 0.5% yoy. By Location

Resident/Condo 4% Housing 31%

Other 1% Lands 64%

ë Securities Business Securities business is serviced through the Bankû subsidiary, Kiatnakin Securities Co., Ltd. In 2008, total brokerage income was Baht 249 million, down 9.4% following weak sentiment and sluggish stock market. The average market share of Kiatnakin Securities in 2008 was 1.29%, dropped from 1.34% in 2007, while the average daily turnover of Kiatnakin Securities totaled Baht 421 miilion, compared with Baht 476 million, in line with a average daily turnover of the SET of Baht 15,870 million, declined from Baht 17,097 million. The Net Capital Rule (NCR) of Kiatnakin Securities remained strong at 210.59%, above the minimum requirement of the SEC of 7.0%.

Central 13% East 7%

South 8% North 9% Northeast 8% Greater Bangkok 55%

4. Liquidity As of December 31, 2008, the Bank and subsidiariesû cash flows slightly increased with total outstanding of Baht 211 million, compared with Baht 140 million in 2007. Details of net cash flows used in different activities are as follows; ë Net cash receivables from business operations totaled Baht 6,539 million, while cash received totaled Baht 384 million in 2007. The major changes in operating assets and liabilities included inter-bank and money market (assets) increased by Baht 17,428 million, investment in trading and available-for-sales securities declined Baht 2,395 million, foreclosed assets decreased by Baht 4,188 million, while deposits rose by Baht 29,802 million as well as short-term borrowings up Baht 1,452 million.

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

ë Net cash payable in investment transactions were Baht 1,168 million, compared with Baht 331 million spent in 2007 as a result of more investment in long-term debentures. ë Net cash used in financing activities amounted to Baht 5,301 million, mostly used in the redemption of debentures, compared with the use of Baht 21 million in 2007.

ë Liquid assets ratio The Bank maintains liquid assets, on average, of at least 6.0% of deposits and some types of borrowing in compliance with the Bank of Thailand (BoT) regulations. As of December 31, 2009, the Bank had cash in hand, cash at central cash centers, deposits with the BoT and eligible securities totaling Baht 20,270.32 million. 5. Capital Expenditures In 2008, capital expenditures were used primary for IT systems development totaling Baht 48 million and investment in other fix assets amounting Baht 296 million. The objective was to enhance efficiency in our banking services. (Baht) Period Less than 1 year Over 1 year Total

Deposits and Borrowings Loans and Accrued Interest Received 2007 % 2008 % 2007 % 2008 44,327,395,202 69.3 70,374,390,350 77.3 5,585,479,306 8.4 5,231,493,148 19,633,058,064 30.7 20,729,951,906 22.7 61,084,594,381 91.6 76,128,554,117 63,960,453,266 100.0 91,104,342,256 100.0 66,670,073,687 100.0 81,360,047,256

As of December 31, 2008, the Bankûs deposits and borrowings with remaining maturities of less than or equal to 1 year were accounted for 77.3% of total deposits and borrowings, compared with loans and accrued interest received with the same remaining maturities of 6.4% of total loans and accrued interest received. It can been seen that the

6. Sources and used of funds and their relationship Capital structure on the consolidated basis as of December 31, 2008 was composed of liabilities of Baht 97,565 million and total equity of Baht 17,167 million, making total debt to equity ratio at 5.7 times. The major sources of funds on the liabilities side were deposits and borrowings accounted for 62.0% and 17.4% of total funds respectively. The Bank and subsidiariesû uses of funds were loans of Baht 80,563 million or 70.2% of total assets, the loan-to-deposits and borrowings ratio stood at 88.4%, compared with 102.6% at the end of 2007. The remaining liquidity, the Bank diversified to other liquid assets such as interbank and money market items, securities purchased under resale agreements, and investment. Major sources and used of funds classified by maturity as at December 31, 2008 and 2007

% 6.4 93.6 100.0

Bank used short-term liabilities to fund its lending. However, most of deposits were rollover upon maturity and the Bank also offered Bill of Exchange as an alternative investment for our retail clients and issued short-term and long-term debentures for retail investors, wholesale and institutional investors. Additionally, the Bank managed its funding structure

to have greater flexibility and to prepare for the upcoming Deposit Protection Act. 7. Credit Ratings On January 16, 2009, TRIS Rating Co., Ltd. has affirmed the company rating of Kiatnakin Bank Plc., and the ratings of all Kiatnakin Bankûs senior debentures at çA-é with çStableé rating outlook.

The ratings reflect the bankûs experienced management team, acceptable risk management and the consistent profitability. The solid growth in assets reflects the strategy to focus on hire purchase lending, while distressed asset management business is fade out. In addition, the Bankûs adequate cushion of capital should enable it to absorb risks from rises in non-performing assets. The Bank has also continued to improve asset quality.

Credit ratings by TRIS Rating Co., Ltd. Company rating Issue ratings: KK085A : 1,400 million Baht senior debentures due 2008 KK087A : 3,000 million Baht senior debentures due 2008 KK08NA : 1,580 million Baht senior debentures due 2008 KK095A : 600 million Baht senior debentures due 2009 KK09NA : 920 million Baht senior debentures due 2009 KK09NB : 2,034 million Baht senior debentures due 2009 KK105A : 2,131 million Baht senior debentures due 2010 KK10NA : 966 million Baht senior debentures due 2010 KK115A : 1,289 million Baht senior debentures due 2011 KK119A : 1,450 million Baht senior debentures due 2011 Rating Outlook

January 16, 2009 A-

March 12, 2008 A-

AAAAAAAStable

AAAAAAStable

Source: Credit News, Announcement No. 595 dated January 16, 2009 and Announcement No. 6/2007 on March 12, 2008. Credit ratings by Fitch Ratings (Thailand) Co., Ltd. (unsolicited rating)

Long-term National Rating Short-term National Rating Rating Outlook

November 28, 2008 BBB+ (tha) F2 (tha) Stable

May 30, 2008 BBB+ (tha) F2 (tha) Stable

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

Corporate Governance

The Bankûs Board of Directors placed a great deal of importance on having good corporate governance policy issued by the Bankûs regulators. In 2008, the Bank operated using 5 principles of good corporate governance established by the Stock Exchange of Thailand as follows:

1. Good Corporate Governance Policy The Bankûs Board of Directors emphasized on having good corporate governance in order to enhance transparency, raise the ability to conduct businesses, and increase confidence of shareholders, investors, and all related parties. The Board of Directors approved a corporate governance policy in writing at its 2/2549 meeting. The content include details regarding equal rights of shareholders and all stakeholders; structure, responsibilities and independence of the Board of Directors; information disclosure and transparency; risk control and management; and business ethics. All relevant details are posted on the Bankûs website (www.kiatnakin.co.th) along with seminars conducted to circulate information to employees and Bankûs executives. 2. Applying Good Corporate Governance The Bank a applies good corporate governance toward our shareholders, investors, stakeholders and other related parties throughout 2008 in the following ways.

2.1 Shareholders: Equal Rights of Shareholders ë Providing sufficient information for shareholders in advance

The Bankûs policy stipulates that General Shareholders Meeting must be held once a year and within four months from the date of the accounting year end. In 2008, the General Shareholders Meeting will hold on April 18, 2008. Prior to the meeting, letters of invitation and supporting information for various agenda items were posted in advance through the Bankûs website (www.kiatnakin.co.th) at least 30 days prior to the meeting date. Meeting documents will be sent to the shareholders 14 days prior to the meeting date. The meeting invitation contained a list of all the members of the Board of Directors, both new and re-elected directors, and their profile; the auditorûs name and remuneration; dividend payment policy with explanation and the amount paid; meeting agenda together with meeting objectives, rationale and the Board of Directorsû opinion for each agenda item. Prior to the meeting date, the meeting secretary consolidated all the questions the shareholders sent to the Board of Directors through the Bankûs website (www.kiatnakin.co.th). Moreover, the Bank recorded the meeting minutes as well as made video recording of the meeting in VCD format. The Board of Directors also provided previous discussion for each agenda item, including questions, answers, discussion and voting results and guideline information on how shareholders can cast their votes and how votes are counted in order provide shareholders with complete and sufficient information to arrive at their voting decision. The minutes of the 2008 meeting was posted on the Bankûs website (www.kiatnakin.co.th) 14 days after the meeting.

ë Providing convenience for shareholders to fully exercise their rights For the General Shareholders Meeting, the Bank sets a convenient date, time and location for the shareholders. If any shareholders cannot attend the meeting, he/she can authorize a proxy to attend, ask questions, and vote on his/her behalf as well as propose a new agenda and nominate a director before the Bank sends out the meeting invitation via The Stock Exchange of Thailand and share the information on the Bankûs website (www.kiatnakin.co.th) ë Setting appropriate timeline and encourage shareholders to voice their opinion An appropriate amount of time was scheduled and specified in the meeting agenda for questions and answers to provide clarity for the shareholders. ë Having all Directors attend the General Shareholders Meeting The Bank had a policy for the Bankûs Chairperson, Audit Committee Chairperson, Nomination and Remuneration Committee Chairperson, Executive Committee, President, chairpersons of various sub committees and the auditors to attend the General Shareholders Meeting every time in order to provide supplemental information and answer shareholders questions. In 2008, everyone mentioned above attended the Meeting. Furthermore, the Bank attempted to enhance the rights of the shareholders by revealing the Bankûs performance, benefits, or other important activities through the Bankûs website (www.kiatnakin.co.th) so that shareholders can have continuous access to the Bankûs information anytime.

2.2 Rights of the Shareholders The Bank emphasized the rights of shareholders in all aspects. Shareholders received a fair and equitable treatment. In 2008, the Bank has allowed Minority Shareholders to propose the agenda in the General Shareholders Meeting and nominate director in advance through The Stock Exchange of Thailand and the Bankûs website (www.kiatnakin.co.th). Furthermore, the Bank allowed shareholders to take part in the selection of

each director through voting. Shareholders can also take part in considering and deciding the guidelines and policy of the Bank regarding remuneration of directors, in which the Bank must obtain approval from the shareholders annually. ë Criteria for Evaluating Proposed Agenda Item from Minority Shareholders (1) In allowing Minority Shareholders to propose the agenda in the General Shareholders Meeting and nominate a director, the Bank has set forth the criteria which allows shareholders to propose in advance to the Board of Directors 3 months prior to the meeting date. The criteria are as follows Qualifications of shareholders The shareholders who wish to propose the agenda or nominate director for the General Shareholders Meeting and must possess the following qualifications: - Be the Bank shareholders holding a minimum of 200,000 shares (two hundred thousand shares) which can be either owned by one shareholder or combined shareholders. - Own the shares as stipulated above continuously for at least 1 year leading up to the date of the proposal of the agenda or director nomination. - Able to show proof of share ownership, such as certified letter of the securities company or other evidence from The Stock Exchange of Thailand or Thailand Securities Depository Co., Ltd. (2) Qualified shareholders can propose the agenda for the General Shareholders Meeting by filling out the çAgenda Proposal Form for the 2008 Annual General Shareholders Meetingé and send the documents along with appropriate evidence as set forth by the Bank so that the Bank receives it before the deadline. ë Criteria for Evaluating Proposed Agenda Item for the Shareholders Meeting In order to ensure an effective ordinary shareholders meeting, the Bank used the following criteria in evaluating whether the proposed agenda item from the shareholders should be added to the meeting agenda :

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

a) The proposal is not related to normal banking operations and the shareholders have highlighted the suspicious nature of the incident. b) The proposal is within the control of the Bank. c) The proposal complies with the law, rules, regulations of government agencies or other governing agencies, the Articles of Association, the shareholdersû resolution and good corporate governance of the Bank. d) The proposal is beneficial to the shareholders and the public. e) The proposal has been proposed by qualified shareholders and the shareholder has acted according to the criteria set forth by the Bank regarding the proposal of the agenda for the General Shareholders Meeting. f) The shareholders who made the proposal provided information and supporting documents that is complete, sufficient, correct and within the specified duration. g) The proposal is deemed necessary by the Board of Directors to add to the agenda. h) The proposal is an activity the Bank has never engaged in before and the Board of Directors has evaluated and agreed that it is beneficial to the Bankûs operations. i) The proposal is something that the Bank has never considered or made prior decision on. The Board of Directors determines the suitability of the agenda proposed by the shareholders, who must possess the qualifications outlined in the above criteria unless the Board says otherwise. The resolution passed by the Board of Directors shall be deemed final. In the case where the agenda is proposed by several shareholders regarding the same issue or can be collectively considered, the proposal may be consolidated into one agenda item by the Board of Directors. The proposal(s) that are approved by the Board along with the Boardûs opinion will be included in the agenda in the shareholder meeting invitation. Proposal(s) that are disapproved by the Board, the Bank will immediately inform the shareholder(s) after the Board of Directors meeting and prior to the General Shareholders Meeting via the Bankûs 56

website (www.kiatnakin.co.th) other appropriate channel. Furthermore, a shareholder that is an executive is not allowed to add meeting agenda. The meeting will adhere only to the agenda that was distributed to the shareholders. For shareholders that cannot attend the meeting, the Bank recommends the independent directors as proxy. The Bank still promotes the use of voting slips for important agenda items, such as related transactions and purchasing and selling of assets in order to create transparency and to be auditable. ë Policies and Procedures for Monitoring Executives on Usage of Internal Information To prevent the usage of insider information that has not yet been disclosed to general public, the Bank defines that its directors and management prepare holding report of the Bank shares, inclusive of their spouses and minors and their relevant persons, within 3 working days as from the date of trading transaction to the Stock Exchange of Thailand and within the same day to the Bank office of the Directors. Regarding honesty, every director and officer of the Bank is prohibited from using his/her authority or working opportunity to seek any interest contrary to his/her ethics, code of conduct, working cultures, or benefits of the Bank. The Internal Audit Office reviewed the operations regarding the use of insider information and compliance with the requirements concerning the code of conduct. Whoever violates such code of conduct or commit offenses will be reported to the Audit Committee and the Board of Directors of the Bank for judgment.

2.3 Rights for Stakeholders The Bank placed great emphasis on all our stakeholders by putting in place a policy to take care of the various factors that directly impact the Bankûs operations. These policies aimed to increase stakeholder ûs confidence that the Bank has taken into account environment factors to ensure long term development and protection for the stakeholders. Regardless of whether they are internal stakeholders, such as employees and executives of the Bank and its subsidiary, or external stakeholders. All transactions that occured between the Bank and other individuals and related businesses are clear, fair, transparent and

auditable. Moreover, the Bank published the details of such transactions in the Notes to the Financial Statements every quarter as well as in the Annual Report. The Bank realized that strong stakeholdersû support can enhance the Bank competitiveness, which ultimately leads to long term success. The Bank had mechanisms to protect those who reported the wrong doing or conducted related party transactions that was certain to cause damage to the Bank. The Bank had the following guidelines for each group of stakeholders: ë Customers Kiatnakin Bank always cares for and places our customerûs needs as our number one priority. With the determination to develop customized products and services for each customer, the Bank will pay attention to all the details and listen to all your issues closely in order to maintain a long-term, trusting relationship. We will stand by your side to assist as you compete in the market in order for you to succeed. Thus, the Bank continuously develops systems and network of branches and utilizes modern technology in order to increase service efficiency through increasing speed, flexibility and responsiveness to best satisfy customerûs needs. Customers will receive personalized care, including advice on the financial mattes and most appropriate investments to maximize customerûs benefits from a professional who is knowledgeable, proficient with financial products, and has deep understanding of the customerûs business needs. When the customer has a suggestion about our service, want to file a complaint, or report of inappropriate activities, he/she can provide the information through our website (www.kiatnakin.co.th) or immediately contact our internal audit department. The Bank places great value on suggestions, complaints and reports of inappropriate or nontransparent of activities that could create damage for the Bank. We have a watertight measure to protect the people who provided suggestions, opinions, and/or reported inappropriate activities.

ë Employees The Bank considered our employees to be our most important and precious assets; therefore, we are continuously enhancing our personnel management system for management and personnel development to raise the capability of our employee to be at the same standard as other leading companies and to be the driving force in developing our company into a leading financial institution that offers excellent service to our customers. The Bankûs renumeration policy was set to provide appropriate renumeration for executives and employees that is comparable and competitive with other leading companies. The job description is clearly defined and the Bankûs training and development policy provided employees with on-going opportunities to enhance their knowledge and capability in order to advance in their career. The Bank provided many benefits for our employees, such as: - Provident Fund - Social Security Fund - Group Health Insurance - Group Life Insurance - Group Accident Insurance - Annual Health Check-up - Nurse Office inside the Bank - Mother Corner (A room for working mothers to collect breastmilk for her infant) In addition, Kiatnakin Bank implemented many policies that supported the Bankûs operations, such as benefits policy, code of ethics, code of conducts, environmental policy, safety policy, and management system. These policies are clearly defined and are easily accessible by all employees who were able to put them to practice appropriately. Furthermore, the Bank offered various channels to hear employeeûs opinions, concerns related to work, management, and indications of unbecoming work practice. Employees can provide feedback through the Bankûs website (www.kiatnakin.co.th) directly to the internal audit department or directly to the personnel development department. Moreover, the Bank has a watertight measure to protect informant of fraud or Annual Report 2008 ë Kiatnakin Bank Public Company Limited

nontransparent operations that can cause damage to the Bank. ë Creditors The Bank continues to strictly adhere to agreed terms and conditions we had with creditors, while being deeply grateful to our creditors and depositors for their continuous support and trust, especially during the past crisis. ë Business Partners The Bank acknowledges the importance of our business partners because their support made a significant contribution to our success. The Bank continues to strictly adhere to agreed terms and conditions we had with our partners, which are based on the concept of succeeding together as business partners. In 2008, the Bank had no disputes with any its business partners. 2.4 Information Disclosure and Transparency The Board of Directors focuses on correct, complete, transparent and thorough information disclosure, covering reports, financial information, and general information, such as the Annual Disclosure Form (Form 56-1) and the Annual Report, and inclusive of critical information affecting the prices of the Bankûs shares. The Bank disclosed such information to enable investors and related parties via a varietyof information channels and media of the Stock Exchange of Thailand, the Bankùs website, and Investor Relations Unit (IR Unit) to provide the Bankûs data and activities to investors, shareholders, analysts, and general public. The investors can contact us via telephone number 0-2680-3159 to 61 (www.kiatnakin.co.th) or e-mail address: investor_relation@kiatnakin.co.th. Additionally, the Bank has held analyst meetings to distribute information on a continuous basis and has cooperated with the Securities Analysts Association to arrange such meetings on a regular basis. In 2008, the Bank held 4 domestic analyst meetings and directly invited the analysts/investors to meet the management of the Bank 33 times. The Bank also arranged for 2 foreign investors meetings locally and another 2 meetings abroad. Moreover, the Bank arranged press 58

conferences to announce the performance and answer questions for the press every year at the beginning of the year and at mid-year in order to correctly and completely inform the public of the Bankûs performance. Furthermore, the Bankûs Board of Directors provided the financial report together with the Auditorûs report in this Annual Report on pages 88. The Board of Directors ensured the disclosure of information on roles, responsibilities, details of remuneration policy, number of meetings, number of times the directors attend the committee and sub-committee meetings. These details are located on page 62-63 2.5 Responsibilities of the Board of Directors ë Board of Directors Structure Board of Directors comprised 10 directors, of which 3 were executives, 5 were independent directors and 2 were non-executives. In adhering to principles of good corporate governance, the Bank appointed an independent directors to be Chairperson of the Board of Directors. The Bankûs Chief Executive Officer is not an independent director, nor is he the same person as the Bankûs President; therefore, there is clear separation of responsibilities between policy setting and day-to-day operations. If there are any related transactions with the Bankûs Chairperson, a senior independent director will be appointed to take up the duty of the Chairperson on that issue. The Bankûs has defined the meaning of an independent director to be more stringent than the one provided in Securities and Exchange Commission, Thailand guideline. Such director: (1) not hold shares in excess of 0.5% of the total number of voting shares of the Bank or the Bankûs parent company, subsidiary, associated company, major shareholder, or any person having controlling power over the Bank, whilst the number of shares held by any related person of such an in independent director must also be counted; (2) not be and have not been a director participating in management role of the Bank, or an employee or an officer of the Bank, or an advisor of the Bank which receives regular salary from the

Page 58 graph of number of employees from 2006-2008 before ĂŤ Creditors

1,896

2,500

1,500

1,488

2,000

2,179

No. of Employees

1,000 500

08 20

07 20

Employees

Bank, and not be and have not been a person having controlling power over the Bank or the Bankûs parent company, subsidiary, or associated company, or a subsidiary of another company in the same level of the Bank, unless such an independent director has not been a person referred to above for at present and in the past 2 years, provided always that such restriction or prohibition shall not apply to an independent director who has been a governmental officer or an advisor of a government authority, which is the major shareholder of the Bank or the person having controlling power over the Bank; (3) not be a person having relationship either through blood or lineage or legal registration as a father, mother, spouse, sibling or child, including as a spouse of a child of any management person or major shareholder of the Bank or the Bankûs subsidiary, or of any person having power to control the Bank or the Bankûs subsidiary, or of the person being nominated to be a management person of or a person having power to control the Bank or the Bankûs subsidiary; (4) not have and have not had any business relationship with the Bank or the Bankûs parent company, subsidiary, associated company, or major shareholder, or with the person having power to control the Bank that may have conflict of interest, in the manner in which his/her independent discretion might be affected, and not be and have not been a substantial shareholder of or a person having power to control the person that has business relationship with the Bank, or the Bankûs parent company, subsidiary, associated company, or major shareholder, or the person having power to control the Bank unless such an independent director has not been a person referred to above for at present and in the past 2 years. Business relationship referred to in the first paragraph above shall mean to include any ordinary course of business or trade for business engagement purpose, any lease taking or lease out of any property, any transaction relating to asset or service, any financial support or acceptance of financial

support by way of either borrowing, lending, guaranteeing or collateral providing or any other manner similar thereto that could result to an obligation required to be performed by the applicant or the party thereto in an amount of 3% or more of the net tangible asset value of the applicant or Baht 20 million or more, whichever is lesser. In light of this, the method for calculation of the value of connected transaction pursuant to the Capital Market Supervising Committeeûs Notification, Re: Regulations in respect of an Entering into a Connected Transaction shall be applied mutatis mutandis for the purpose of calculation of such amount of debt of the applicant, provided that the amount of debt incurred during the past 1 year prior to the date on which such a business relationship with such person exists; (5) not be and have not been an auditor of the Bank or the Bankûs parent company, subsidiary, associated company, or major shareholder, or of any of the person having power to control the Bank, and not be and have not been a substantial shareholder of, a person having power to control over, or a partner of any auditing firm or office in which the auditor of the Bank, or the Bankûs parent company, subsidiary, or major shareholder, or the person having power to control the Bank is working, unless such an independent director has not been a person referred to above for at present and in the past 2 years; (6) not be and have not been a professional advisor, including legal or financial advisor who obtains fee more than Baht 2 million a year from the Bank or the Bankûs parent company, subsidiary, associated company, or major shareholder, or from the person having power to control the Bank, and not be and have not been a substantial shareholder of, a person having power to control over, or a partner of any of such professional service provider firm or office, unless such an independent director has not been a person referred to above for at present and in the past 2 years. (7) not be a director appointed as a representative of a director of the Bank, a representative of a major shareholder of the Bank, or a representative of a Annual Report 2008 ë Kiatnakin Bank Public Company Limited

shareholder of the Bank which is a related person of the major shareholder of the Bank; (8) not engage in any business the nature of which is the same as that of the Bank or the Bankûs subsidiary and which, in any material respect, is competitive with the business of the Bank or the Bankûs subsidiary, or not be a substantial partner in a partnership, a director participating in any management role, an employee or officer, an advisor obtaining regular salary from, or a shareholder holding more than 1% of the voting shares of a company engaging in any business the nature of which is the same as that of the Bank or the Bankûs subsidiary and which, in any material respect, is competitive with the business of the Bank or the Bankûs subsidiary; (9) not have any characteristics by which his/her independent comment or opinion on the Bankûs operation may be affected. If a person having qualifications stated in (1)-(9) above is appointed as an independent director of the Bank, such appointed independent director may be assigned by the Bankûs Board of Directors to make decision in respect of business operation of the Bank, or the Bankûs parent company, subsidiary or associated company, or a subsidiary of another company in the same level of the Bank, the major shareholder of the Bank, or the person having controlling power over the Bank, provided that such decision making by such appointed independent director must always be made on a collective decision basis. ë Sub-Committees The Board of Directors has set up the Audit Committee, Risk Management Committee, and the Nomination and Remuneration Committee in order to assist in managing the Bank. Details of the committee responsibilities and authorities have been included in the Management structure section. SubCommittee such as Audit Committee and Nomination and Remuneration Committee have an independent director as a Chairperson and almost all of the members are independent directors, to ensure transparency and independence. 60

ë Roles and Responsibilities of the Board of Directors Business Ethics The Bank has definite stance on professional ethics. We made announcements, which served as a guide to good practice, and issued the Code of Professional Ethics for executives to ensure that all related parties used them as guidelines and conduct their duties for the Bank with honesty, integrity and fairness towards the Bank and all other stakeholders. The Bank regularly communicates this message to all employee and followed up to ensure that everyone abides by it. Seminars were conducted regularly to ensure that all staffs and executives are aware of this issue and have the same understanding. Details of our business ethics are summarized as follow. Responsibilities and Conducts toward Shareholders The Bank performs our duties in an honest and equitable manner towards shareholders. We manage our work carefully and with prudence without seeking personal gains by using the Bankûs information, which includes disclosing confidential information to external parties/competitors. Responsibilities and Conducts toward Customers The Bank introduces products that meets the needs of the customers; discloses news, product information, and services completely and accurately; and allows the customers to raise issues or file complaints about the Bankûs services in order for customer to rapidly satisfy the customers, while strictly maintaining the customerûs privacy. Moreover, the Bank will not set policies or regulations that are not equitable for the customers. Responsibilities and Conducts toward Business Partner/Creditors The Bank will not demand, receive or pay any fraudulent benefits while conducting business with business partners or creditors. If any such event occurs, the Bank will demand a disclosure of the

details of business partners or creditors and will work cooperatively to fairly and rapidly resolve situation, including following certain protocols to the officials as appropriate and reasonable. Responsibilities and Conducts toward the Government Sector The Bank operates business responsibly and according to the related policies, laws, and regulations that promote and protect democracy under Constitutional Monarchy. Responsibilities and Conducts toward Employees/ Staffs The Bankûs compensation structure is fair and equitable for all employees, including providing safe work environment for employeeûs life and assets. The Bank set up human resource management system to handle promotions and transfers as well as systematically give rewards and punishments. We emphasize development of employeeûs knowledge and capability as well as avoid engaging in any unfair activities that may impact the stability and workability of the employee. Responsibilities and Conducts toward Competitors The Bank operates within the boundaries of the regulations of good competition. We donût attempt to unlawfully obtain our competitorûs secrets, nor do we try to defame our competitors with accusations. Responsibilities and Conducts toward Society and Community, the Bank does not engage in any activity that is harmful for the natural resources and environment. We regularly promote activities that create something positive for society, including instilling social responsibility in all level of employees on-goingly and intentionally. ë Conflicts of Interest To prevent any conflicts of interest, the Bankûs Board of Directors exercised utmost care in monitoring transactions that may potentially cause conflicts. The Board formally set up policies and procedures for the approval of related transactions. Bank executives must report any changes of their

shareholding in the Bank to the Securities and Exchange Commission (SEC). In addition, any Bank director involved with the related transactions must abstain from voting due to conflicts of interest. The Bank adhered to the guideline stipulated by the Stock Exchange of Thailand which states that the price and terms of transaction which must be carried out as we normally do with any outside parties. All the details including price and contract partners are disclosed in the Annual Report and Form 56-1. ë Internal Control and Internal Audit Systems The Bank placed great emphasis on having efficient internal control system, both at the management and operational levels. Staff and executive authorities and duties were clearly and formally defined in writing. Control was instigated to ensure that all assets are used to create benefits in the most optimal way. The duties of the operational staffs, supervisors and approvers were separated in order to create an appropriate checks and balance system and proper audit capability. Financial reports also had their own control system, and reports were regularly disclosed to the public. The accounting standards used for financial institutions was audited by an external auditor. The Audit Committee met with the external auditor 4 times and met with auditor from the Bank of Thailand once time during the past year to acquire audit results, suggestions, and opinions in order to follow up, make any necessary improvements and changes. Financial reports were also regularly submitted to the responsible executive. The Bank has an Internal Audit Office, an independent unit directly reported to the Audit Committee, to maintain confidence that our major work and key financial activities were carried out effectively and as designated. Our Internal Audit Office conducted their work consistently with legal requirements. To maintain its independence and a system of checks and balance for our Internal Audit Office, the Board of Directors instructed the Internal Audit Office to report their audit findings directly to the Audit Committee and the Board of Directors. Annual Report 2008 ë Kiatnakin Bank Public Company Limited

arranging the meetings and sending meeting invitations along with the agenda, which included the objectives and explanations to each item of the agenda, to members of the Board at least 7 days in advance. These tasks are carried out to allow sufficient time for the directors to consider matters prior to attending each meeting. In 2008, the Bankûs Board of Directors held 8 meetings, for each meeting, minutes was formally prepared, endorsed by the Board, and made available for the Board and other relevant parties to examine. In order to be clear in our communication, the Chairperson invited the Bankûs President to attend the meeting to provide additional information to the Committee and is a way to familiarize each other. The Bank allowed the Committee to request additional information from the President or the Bank Secretary to the Board or other executives within the boundary of the set policy, which includes allowance of director who is not an executive to hold meetings among themselves to discuss certain management issues.

Furthermore, the Bankûs Board of Directors developed and distributed the Internal Control Assessment Form for each director to review and evaluate the Bankûs internal control system and determine whether itûs acceptable and stringent enough. The Internal Audit Office collected the forms, summarized the findings, include it in the Annual Report and disclosed it to the public. ë Risk Management Policy The Board of Directors closely manage risks via the Risk Management Committee. The Bank has a Risk Management Policy that covered the entire Bank and its subsidiaries, including the review and assessment of Risk Managements. The Board still placed great importance on warning signals and abnormal transactions. The Risk Management Committee had a Risk Management Unit who adheres to policy and regularly reports to the Board. ë The Board Meetings The Board of Directors scheduled the Board Meetings in advance with a clearly defined agenda. The office of the Board of Directors is responsible for

Board of Directors Audit Committee Nomination and Remuneration Committee

The Board of Directors Meeting Attendance in 2008 (Attendance No. of meeting held) Mr.Pracha Chumnankitkosol (Executive Director) Mr.Tawatchai Sudtikitpisan (Executive Director)

7/8 8/8

Mr.Supol Wattanavekin (Executive Director)

8/8 2/2

Mr.Suraphol Kulsiri (Non-Executive Director)

8/8

Mr.Pravit Varutbangkul (Non-Executive Director)

8/8

Mr.Tarnin Chirasoontom (Independent Director)

8/8

2/2

Mr.Chet Pattrakornkul (Independent Director) Mr. Manop Bongsadadt (Chairperson of the Nomination and Remuneration Committee) Mr. Pichai Dachanapirom (Chairperson of the Audit Committee) Mr. Nawaaporn Rynaskul (Chairperson of the Board of Directors)

8/8

2/2

9/9

7/9 8/8 8/8

9/9

8/8

Attendance / No. of meeting held

2 62

Attendance of Executive Committees meeting 13/13

Mr. Surawut Charuchinda Mr. Patom Amorndechawat

11/13

Mr. Thitinan Wattanavekin

11/13

Mr. Chavalit Chindavanig

13/13

Mr. Tawatchai Sudtikitpisan (President)

13/13

Mr. Supol Wattanavekin (Chairman)

13/13

Attendance / No. of meeting held

Sub-Committees Meetings Attendance in 2008 100

Dept Restructuring Sub-Committee

Property Valuation & Pricing Sub Committee

Retail Sub-Committee

100

Credit Committee

Development Committee Asset & Laibilities Management Committee

Investment Committee

94 98

Human Resource Management Committee

Executive Board (Lending)

Risk Management Committee

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

100

ë Board of Directors Self-Assessment The Bankûs Board of Directors conducted its own self-assessment every year which includes the assessment of the Chief Executive Officer and the President. The purpose of the assessment is to determine whether during the past year, they performed

their duties completely and appropriately as per their duties and how they adhered to good corporate governance. Internal audit will summarized and report the assessment to Board of Directors. The results of the self-assessment of the Board of Directors for 2008 in overall is 92% (3-4 score) details are as follows: 4 score 3 score 2 score 1 score

Board of Directors Self-Assessment 2008

45 66

100

44 17 al Tot

alif

ica

tion a of nd s the truc Boa ture Rol es rds 37 11 and res of pons the ibi Boa lities rds 53 1 11 The me etin gs 4 37 Du ties of the Boa Rel rds atio nsh 42 13 ip wit hm ana gem ent De 2 32 vel opm en and t of exe direc cut tors ive 3 52 s

ë Remuneration The details of Executiveûs Remuneration is on page 82 ë Development of directors and executives The Board of Directors is the one who sets and takes part in the development of the vision, mission, strategies, goals, business plans and budget. They also ensure at executives operate towards the goals of the business and the budget effectively and productively. The Bank held meetings to disseminate business plans to the management team and staff so that everyone has the same understanding as well as arrange to have good internal control and risk management. All of the Bankûs directors had been through trainings from Thai Institute of Directors Association (IOD). For the directors, the Bank 64

stipulated the duties and provides basic information about the Bank so that they gain better understanding of the Bank. The Board of Directors and the Executive Committee are responsible for the shareholders. Their duties are clearly separated and are described in the Management Structure section. Clearly defined policies and procedures for Bankûs directors and senior executives in type of directorship position they can hold in other companies and in how many companies. The Bank is a commercial bank that operates under the supervision of the Bank of Thailand which has clear regulations on holding directorship in other companies by directors and senior executives of commercial banks as per announcement FPG. 60/2551 issued on August 3, 2008. The announcement prohibits directors and senior

executives of commercial banks from assuming the position of chairman, executive director, or director with full signatory authority in more than three business groups. A group of business is determined based on who has controlling power over the businesses. The Bank has disclose the other directorship positions of each directors including executive director in section çBoard of Directors and Management Teamé on page 14-21. ë Terms of Directorship The Bank specifies in regulation number 18 of the Bank that in each General Shareholders Meeting, remove at least 1 out of 3 directors from the position. If the number of directors cannot be split evenly into three groups then remove the number of directors that is closest to the 1/3 ratio. This means that the directorship term of each director is 3 years. ë Appointing Company Secretary The Bank has a resolution to appoint Mrs. Sineenath Tejagupta to be the company secretary on July 24, 2008 whose duty for the company or Board of Directors is as follows: - Develop and keep the following documents: list of directors, invitation letter for Board of Directors meeting, minutes of the Board of Directors meeting, invitation letter for shareholders' meeting and minutes of the shareholders' meeting. - Keep all related transaction reports by directors or executives. - Carry out other tasks as announced and stipulated by the Capital Market Supervisory Board. Nomination and Remuneration Committee has developed succession plan policy which includes developing a success plan for President and has development plan for approximately 30 senior executives at 3 levels to hone their capabilities and prepare them to

succeed in the position in case the incumbent executive cannot perform his/her duties. The committee regularly reports progress to the Board of Directors. The Bank recognizes the importance in upholding good corporate governance that emphasizes management system that is effective, transparent; creates confidence and assurance for everyone; and will increase the Bankûs value, promote long-lasting growth. The Bank is committed to enhance operations while adhering to good corporate governance. There are some areas that the Bank has not adhered to yet, such as 1. Compensation when stakeholder received damages because the company violated the legal rights of the stakeholder - Bankûs stakeholders are customers, staffs, creditors, business partners, community, society, the environment, etc. In the past, there has never been any conflict that violates the rights of the stakeholders stated above. Thus, the Bank has not specified any measures in how to deal with it. If such violation does occur, the Bank will compensate the stakeholder as stipulated by the law. 2. Monthly reporting of Committeeûs progress when the meeting is not held monthly - The Bank did not hold committee meetings every month, but the committee reported their progress to the Board of Directors every quarter. It was deemed sufficient to do quarterly report because there is no significant progress in the Bankûs operations each month. 3. Performance assessment of individual Directors The Bank assess the directorûs performance in groups because directors to assess by individual may have some inaccuracies.

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

Report of the Audit Committee

Dear shareholders The Board of Directors of Kiatnakin Bank Public Company Limited appointed 3 members of the Audit Committee. They are independent directors who are fully qualified as per company regulations and have good conduct according to Audit Committee of Stock Exchange of Thailand. At present, the Bank没s Audit Committee members are: Mr. Pichai Dachanapirom as Chairperson, Mr. Manop Bongsadadt and Mr. Chet Pattrakornkul as directors, and Mr. Kriangsak Sukkanaporn as secretary. The Audit Committee operated within the boundary, duty and responsibility that had been assigned to them by the Board of Directors and was consistent with the regulations of the Stock Exchange of Thailand and Bank of Thailand. During the accounting year 2008, the Audit Committee held a total of nine meetings. Mr. Pichai and Mr. Chet attended all 9 meetings and Mr. Manop attended 7 meetings. These meetings were held with the Bank没s executives, internal and external auditors as appropriate. Summary of significant activities and findings are as follows: 1. Conducted audits on quarterly financial reports and consolidated annual financial report for 2008 by inquiring and listening to explanations by executives and auditors regarding the accuracy and completeness

of the financial report as well as sufficiency in disclosure of all information. The committee also acknowledged how the auditor examined the 2008 books and agreed with the auditor that the financial statements was accurate and in accordance with the Generally Accepted Accounting Principles (GAAP). 2. Conducted audits on various departments regarding their operation and internal control system to ensure sufficiency, appropriateness and effectiveness of the internal control system in order to help the Bank achieve its intended goals. The committee reviewed the 2008 internal audit report according to the approved work plan which covered the Bank没s major operations and found no significant weak points or deficiencies. In addition, the process revealed appropriate care of assets and accurate, complete and reliable disclosure of information. The committee assessed the internal control system as per guidelines by the Securities and Exchange Commission. Both the auditor and the Audit Committee agreed that the Bank had appropriate internal control system as well as a system to monitor the operations of its subsidiaries. The Bank received suggestions from the auditors who audited the internal control of IT system on how to raise efficiency and better support the Bank没s operation.

3. Conducted audits on the internal audit process by examining the mission, scope, responsibility, independence, headcount, and budget of the internal control department. The committee made improvements and reviewed the departmentûs work plan with respect to how they support the Bankûs goals and overall plan which focused primarily on loan quality. The committee recommended holding regular reviews and approvals of changes to the internal audit officeûs charter as appropriate so that it is up to date and consistent with the Stock Exchange of Thailandûs Internal Audit Manual. The Audit Committee believed the Bank had sufficient, appropriate and effective internal audit system. 4. Conducted audits on how well the Bank adhered to the Securities and Exchange Act, rules of the Stock Exchange of Thailand, Commercial Banking Act (currently is Financial Institution Act) and other legislations related to banking including whether the Bank implemented recommendations made by Bank of Thailand, the auditors, the Bankûs regulations and obligations it had with a third party. 5. Conducted audits on the risk management system to ensure it ties in with the internal control system in order to manage the risk throughout the entire Banking operations. This was done by examining the risk management work plan, risk factors, and the risk management approach. The Audit Committee believed that the Bank had an efficient and effective risk management system and was in consistent with the Bankûs risk management manual, which included specifying an objective; identifying,

assessing, and managing the risks; monitoring progress quarterly; specifying key performance indicators as a preventative measure; developing emergency plan for various situations; specifying what kind of risks were acceptable and unacceptable; and regular reviewing of risks to ensure it is up to date. 6. Conducted audits and provide opinions regarding related transactions and transactions that may be in conflict of interest, including the disclosure of such transactions according to the Stock Exchange of Thailandûs and Securities and Exchange Commissionûs regulations. The auditors believed that significant related transactions had been disclosed and already appeared in the financial statement. The Audit Committee agreed with the opinion of the auditor that these transactions were reasonable and made for the best interests of the Bank and that the information disclosure were accurate and complete. 7. Proposed the name and remuneration of an external auditor for 2009 to the Bankûs Board of Directors in order to obtain approval for an appointment at the Annual General Shareholders Meeting. The Board of Directors considered the nomineeûs operation results, level of independence, and appropriateness of the remuneration and agreed to appoint Dr.Supamit Techamontreekul, CPA license number 3356 or Mr. Permsak Jirajakwattana, CPA license number 3427, or Mr. Nithi Juengnitnirand, CPA license number 3809, from Deloitte and Touche Tohmatsu Chaiyod Audit Company Limited to be the external auditor for the Bank in 2009. The total remuneration was set to be Baht 4.26 million. The Audit Committee has the following opinion of the appointment of the external auditor:

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

ë During the past accounting year, the external auditor operated with knowledge, professional expertise, and provided suggestions on internal control system and various risks including freedom to operate. ë The proposed remuneration for 2008 is appropriate. The 4.9% increase from Baht 4.06 million to Baht 4.26 million was justified due to the increased number of transactions.

January 19,2009

ë The Bankûs conduct was consistent with the regulations of the Securities and Exchange Commission regarding all listed companies must change their external auditor every 5 accounting years. If this yearûs auditor was reappointed in 2009, it will be the 2nd consecutive years. ë The external auditor did not have any relationships with the Bank and its subsidiaries.

(Mr. Pichai Dachanapirom) Chairperson of the Audit Committee

Report from the Nomination and Remuneration Committee

Dear Shareholders The Board of Directors #5/2549 dated October 26, 2006, Mr. Manop Bongsodadt as Chairperson of the Nomination and Remuneration Committee. The Board also appointed Mr. Chet Pattrakornkul as a member of the Nomination and Remuneration Committee. The Committee comprised of 3 members, of which 2 are independent directors and 1 is a nonexecutive director. The Committee held 2 meetings in 2008, and during the past year, all the Committee members conducted their duties while adhering strictly within the boundary of their responsibilities. The responsibilities of the committee were to - Screen and propose candidates with suitable qualifications for various director没s position. - Ensure that the overall size, level of knowledge and capability, and variety of experience of the Board of Directors are appropriate for the Bank.

- Set the remuneration policy and other benefits for directors and senior executives from the President level upwards. - Set the guidelines on performance appraisal for directors and senior executives from the President level upwards in order to appropriately adjust the annual remuneration package. The performance appraisal takes into consideration the responsibilities, associated risks and ability to increase long-term shareholders没 values. The Nomination and Remuneration Committee disclosed the remuneration in various forms including the preparation of remuneration reports and comments from the Nomination and Remuneration Committee in the 2008 Annual Report.

(Mr. Manop Bongsadadt) Chairperson of the Nomination and Remuneration Committee

Annual Report 2008 毛 Kiatnakin Bank Public Company Limited

Corporate Social Responsibilities

Responsibility for the community, society, and the environment is one of Kiatnakin Bank没s major policies. We stipulate that providing assistance to the society and developing the local community is an important goal in operating our business in order to have sustainable development for the country. This philosophy has been communicated to all the executives and employees. The Bank had been conducting activities for the benefit of the community, society, and the environment throughout the past 38 years through the "People Development for Nation Development with Kiatnakin Project", which included activities that involved education; ethics and social immunity creation; relief support and donations on various occasions. These are on-going projects that aimed to develop youth and Thai people with the belief the human resources are the most crucial and valuable for the country没s development. These social, community, and environmental responsibilities were carried out through the "People Development for Nation Development with Kiatnakin Project" which comprises of 3 major groups of activities as follows:

Educational Activities Kiatnakin Responsibility Scholarships : Joined with Chulalongkorn and Thamasart University in providing scholarships for students pursuing a Bachelor没s Degree and other students (e.g., children of Bank employees and policemen who have good conduct and have a volunteer mind that will perform good deeds for the general society). The Bank did not impose any obligations for the scholarship recipients to return the funds after completing their education.

Kiatnakin Responsibility Awards @ Sasin Provided financial awards for MBA students studying at SASIN, the Graduate Institute of Business Administration of Chulalongkorn University, who cross-registered to a well-known university overseas in order to obtain experience in a foreign country. Development of Knowledge Center to celebrate His Majesty the Kingûs 80th Birthday Anniversary on 5 December 2007 and Kiatkuakoon Building for Nongchokpitayanusorn Secondary School in order to use it as an integrated center for self-education for students, farulty, society and people living nearby. This also served as a knowledge bank that connects into a local and international network and was made possible through the cooperation of Kiatnakin Bank Foundation and Kiat Ruammitr Education Foundation. Development of the 46th model school for çNyguen

Tong Kong Mee Kaaé at Prachasuksa School in Ayutthaya The Bank joined with Thailand Securities Institute, Stock Exchange of Thailand, and Kiat Ruammitr Education Foundation and developed Prachasuksa School to be the model school with revised curriculum to include courses that taught children from elementary to high school how to manage their personal finances on-goingly for 3 years starting in 2008 until 2011. This will be the show case school for the community and other schools in the vicinity in order to expand the concepts. The mai Bangkok Business Challenge Joined with Sasin Institute of Chulalongkorn University in the Bangkok Business Challenge, a business plan competition conducted in English, which offered a stage for the students to learn how to write a business plan to create new entrepreneurs. Kiatnakin had sponsored this initiative from 2002 till today. Scholarships Since 1971, Kiatnakin joined with Kiat Ruammitr Education Foundation in providing scholarships to underprivileged students in elementary school through high school, constructing school buildings, and providing educational supplies in order to disperse the educational opportunities throughout Thailand. Bicycle for Children Project Since 2002, Kiatnakin joined with World Vision Foundation of Thailand in providing bicycles to students that live far from the schools so they can use it to travel to and from school; thus enabling the students to obtain continuous education.

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

Activities related to Ethics and Social Immunity Creation Spiritual Development for Wisdom and Peace Worked in conjunction with the Young Buddhist Association of Thailand since 1994 to provide meditation training by Khun Mae Siri Karinchai and a variety of other courses for executives, employees, customers and general population. Youth Training Joined the Metropolitan Police Bureau and Youth Relations Center in arranging the Youth Collaboration for Drug Suppression Project to enhance understanding about the danger of drugs.

Savings Promotion Project Together with Duang Pratheep Foundation, the Bank supported the activities to spread knowledge and understanding on investments and savings through the cooperatives, which is in correlations with the sufficiency economy philosophy that strengthens the community and enable them to be self-reliant. Moreover, the Bank sponsored awards for excellent member of the cooperatives every year since 2000. Promoted Cooperative Activities in Schools in Bangkok The goal of this project was to embed cooperatives core values and ideology to the youth of our nation that are studying in school so that they can utilize their knowledge and experience to make a better life for themself. This means they have enough to eat and live on according to their circumstances, which will contribute the overall growth in the economy.

Distress Relief Support and Donations on Various Occasions The Bank supported various charities and organizations in both the public sector, such as Bank of Thailand, Stock Exchange of Thailand, and private sector in order to develop people to develop the nation as per the Bankûs policy. These supports included distress relief and public disaster relief activities. Example of activities that had been completed are: ë Donated money to public charity to assist in 37 local municipals where the Bank has branches. ë Supported the Book Corner to Honor the King Project in conjunction with Bank of Thailand. ë Joined in the donation to Princess in Need of (çPaé) Volunteer Foundation Thai Red Cross. ë Sponsored the çYouth as the Developeré Project conducted by the National Council for Child and Youth Development under the Royal Patronage of HRH Princess Mahachakri ë Donated money in restoring peace in the Southern border provinces of Thailand to çThe Peace and Harmony in Southern Provinces Promotion and Support Fundé. ë Donated money to victims of Cyclone Nargis in Burma through the ASEAN Handicraft Promotion And Development Association (AHPADA) and the Thai Handicrafts Trade Association (THTA). ë Sponsored Business and Professional Womenûs Associations of Thailand in organizing çGive Women a

Second Chanceé Project to revive their spirit and provide vocational training to female prisoners at the Thanyaburi Women Correctional Institute in Pathumthani province. ë Supplied second-hand computers in good condition to Department of Electrical Engineering, Electrical Engineering Club, IEEE-CU Student Chapter and SPIE at the Electrical Engineering Department, Chulalongkorn University which were to be donated to the çSecond-Hand Computer for Children in Up-Countryé Project at Pratan Dongrung Vittayakarn School in Kanchanaburi. ë Organized çThis Love is for Youé Project for children in çBaan Kru Nongé orphanage to provide love and care to the children as a celebration on the day of love. ë Sponsored a golf charity event to assist A Beacon of Hope for Senior Citizen Foundation in their project to support elderly people in the community. ë Sponsored the 2007 Exceptional Athleteûs Day for the Confederation of Thai Journalists to honor Thai athletes that brought fame to Thailand through sport competitions in Thailand and abroad. ë Sponsored a Thai athlete who is deaf to compete in the final round of 1st World Football Competition in Greece. In addition, the Bank placed great importance in energy and environmental conservation and encouraged executives and employees to conserve energy and protect the environment through the çKK Unite to Conserve Energyé program. The Bank promoted various measures to conserve energy, such as reducing usage of electricity and telephone, conserve water, etc. The Bank partnered with Mangrove Forest Conservation Society in Tambon Damru, Chonburi province in organizing the çKK Boldly Reforest Mangrove Treesé activity as a way to revive the Mangrove ecosystem in Chonburi province also. It was the wish of the founder of Kiatnakin that where ever Kiatnakin go, we must make that community flourish. This is why the Bank will continue to emphasize involvement in activities that promote community, social and environmental responsibility while operating a sound business as a Thai financial institution with ethics and good governance.

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

Shareholding Structure

List of 10 Largest Shareholders (as of August 8, 2008)

No. 1 2 3 4 5 6 7 8 9 10 11

Name Thai NVDR Company Limited Ms. Panida Thepkanchana The Stock Exchange of Thailand Ms. Thitinan Wattanavekin Chase Nominees Limited 42 Ms. Vansamorn Wannamethee J.P.Morgan Ireland (Nominees) Limited 20 State Street Bank and Trust Company, For London N.C.B.Trust Limited-RBS as Dep For FS Chase Nominees Limited 30 others Total

Number of shares 52,307,491 40,983,006 34,038,300 25,979,861 25,747,400 22,827,518 22,154,020 18,820,016 15,902,166 15,585,822 248,729,312 523,074,912

Percentage 10.00 7.84 6.51 4.97 4.92 4.36 4.24 3.60 3.04 2.98 47.54 100.00

Shareholders-Thai Shareholders-Foriegner

310,515,200 212,559,712

59.36 40.64

* including related shareholders as per Section 258 Source: Top 20 Major Shareholders Report, Thailand Securities Depository Company Limited.

Juristic Persons

Name 1. Thai NVDR

Address 62 The Stock Exchange of Thailand Building, Company Limited 7th Floor, Ratchada Pisek Road, Klongtoey, Bangkok 10110

Shareholders N.A.

2. The Stock Exchange of Thailand

62 The Stock Exchange of Thailand Building, of Thailand Ratchadapisek Road, Klongtoey, Bangkok 10110 Standard Chartered Bank, Custody and Clearing Services Department 90 Sathornnakorn Tower, 14Bth Fl., North Sathorn Road, Bangrak, Bangkok 10500 Standard Chartered Bank, Custody and Clearing Services Department 90 Sathornnakorn Tower, 14Bth Fl., North Sathorn Road, Bangrak, Bangkok 10500 Standard Chartered Bank, Custody and Clearing Services Department 90 Sathornnakorn Tower, 14Bth Fl., North Sathorn Road, Bangrak, Bangkok 10500 Citibank N.A. Securities services 82 North Sathorn Road, Bangrak, Bangkok 10500 Standard Chartered Bank, Custody and Clearing Services Department 90 Sathornnakorn Tower, 14Bth Fl., North Sathorn Road, Bangrak, Bangkok 10500

N.A.

3. Chase Nominees Limited 42*

4. J.P.Morgan Ireland (Nominees) Limited 20 Standard*

5. State Street Bank and Trust Company, For London*

6. N.C.B Trust Limited-RBS as Dep For FS* 7. Chase Nominees Limited 30*

N.A.

N.A. N.A.

* There is no one in the Wattanavekinûs family or in the Bankûs subsidiary, along with stakeholders in the capacity of a shareholderûs nominee in the list of investors of the Bank.

The Bank does not have any major shareholder who has significant influence on management policy or the Bankûs operations.

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

Shareholding and Management structure Executive of Directors Nomination and Remuneration Committee

Audit Committee Internal Audit

Risk Management Committee

Compliance

Risk management

Executive Board Credit Committee

Investment Committee

Debt Restructuring Sub-Committee

Assets and Liabilities Management Committee

Retail Lending Sub-Committee

Development Committee

President Property Valuation and pricing Sub-Committee

Human Resource Management Committee Office of Directors

Residential Project Lending

Banking Products

Debt Restructuring Management

Commercial Lending

Retail Lending

Operations

Information Technology

Deposit and Marketing

Finance and Budgeting

Human Resource Management

Management Structure

1) Management In order to create high level of work efficiency and good customer service, the Bank is organized into the following 5 business units: 1) Hire Purchase Lending 2) Residential Project Lending 3) Consumer Lending 4) Deposits and Marketing 5) Debt Restructuring The other departments, such as Operations, Finance and Budgeting, Information Technology, Directorsû Office are there to support the business units, which extends to include controlling and monitoring, in order to create management efficiency. The Bankûs management structure is made up of five major panels as follows: Board of Directors, Audit Committee, Nomination and Remuneration Committee, Risk Management Committee and Executive Board. Board of Directors As a representative of shareholders, the Boardûs roles, duties and responsibilities is to manage the Bank to achieve stability, giving good returns on investment by having integrity and preventing issues related to conflicts of interest. The authorities and responsibilities of the Board were set and are described as follows: ë Set key policies and strategic goals of the Bank. Review and approve strategic plans recommended by the Executive Committee. Supervise and monitor the Executive Board to manage the Bank according to the

approved plans efficiently and effectively. ë Set up regulations to ensure good corporate governance in matters related to professional ethics of Bankûs directors and staff. Supervision aims to establish guidelines for the organization to follow; to consistently maintain a fair and high level of business ethics as well as responsibilities towards all stakeholders; and to raise awareness and prevent conflicts of interest. ë Set up internal audits and ensure that there are sufficient reports and information for the Board of Directors. ë Supervise the Risk Management Committee to ensure that they set up policies, procedures and control measures on management of major types of risks, namely credit risks, strategic risks, market risks, liquidity risks and operational risks. ë Consider the appointment and set the authority level of executives starting with the Head of Business Unit and upwards, as well as the four major committees in order for them to assist in managing of the Bank according to set policies. These committees include the Audit Committee, the Nomination and Remuneration Committee, the Risk Management Committee and the Executive Committee. ë Endorse the annual financial reports that have been examined by the auditor and reviewed by both

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

the Executive Committee and the Audit Committee in order to seek approval at the Shareholdersû Meeting. Acknowledge the auditorûs opinion through the Management Letter as well as the opinion of the Executive Committee. ë Conduct business in accordance with the governing laws and regulations, Articles of Association and Memorandum of Association of the Bank, including the resolutions passed in the Shareholdersû Annual Meeting. In addition, the Board of Directors may seek further professional opinion from external consultants related to banking operations, on the Bankûs expense. The Board of Directors must meet at least once every 3 months. Each meeting must have at least half of total number of directors present to form a quorum and the meeting resolutions must be based on the majority votes from all attending directors. The Board of Directors consists of 10 directors, 5 of which are independent directors, 3 are executives, 2 are non-executive directors and a company secretary. Their names are as follows: 1. Ms. Nawaaporn Ryanskul

Chairperson/ Independent Director 2. Mr. Pichai Dachanapirom Independent Director 3. Mr. Manop Bongsadadt Independent Director 4. Mr. Chet Pattrakornkul Independent Director 5. Mr. Tarnin Chirasoonton Independent Director 6. Mr. Pravit Varutbangkul* Non-Executive Director 7. Mr. Suraphol Kulsiri* Non-Executive Director 8. Mr. Supol Wattanavekin Executive Director 9. Mr.Tawatchai Sudtikitpisan* Executive Director 10. Mr.Pracha Chumnarnkitkosol* Executive Director Ms. Sineenath Tejagupta Company Secretary * Have authorized to sign for committment of the Bank 78

Audit Committee The Audit Committee had been assigned the following duties by the Board of Directors ë Ensure that the Bank produces accurate and sufficient financial reports. Ensure that the Bank has appropriate and efficient internal control and internal audit system in place. ë Ensure that the Bank conducted its business in accordance with the securities laws, the Stock of Exchange regulations and the relevant laws related to the Bankûs business. ë Consider, select and recommend an auditor for the Bank and the auditorûs remuneration. ë Review all disclosures of the Bankûs information where connected transactions have taken place or where there may be conflicts of interest in order to ensure their accuracy and completeness. ë Report on the Audit Committeeûs operations and make recommendations to the Board of Directors. ë Present a report of the Audit Committee by disclosing the information in the Annual Report, duly signed off by the Chairperson of the Audit Committee. ë The Audit Committee has the authority to inspect or to question any relevant personnel regarding any related issues to the Bank. The Audit Committee is authorized to hire or bring in specialists to assist with the auditing process, as they deemed appropriate. ë The Audit Committee is required to meet at least 4 times per year or more if necessary. The Committee may invite the management team or any connected person(s) to join the meeting to give additional information related to the matter being audited. The Audit Committee must coordinate with the Risk Management Committee to ensure that management adhere to the Bankûs Risk Management Policy approved by the Board of Directors and endorsed by the Audit Committee. Carry out other duties assigned Each meeting held by the Audit

Committee must have at least half of its members present to form a quorum and the meetingûs resolutions must be based on the majority votes from the members present at each meeting. The Chairperson and members of the Audit Committee are all independent directors. The Audit Committee consists of 3 members and a secretary as follows: 1. Mr. Pichai Dachanapirom 2. Mr. Manop Bongsadadt 3. Mr. Chet Pattrakornkul Mr. Kriengsak Sukhanaphorn

Chairperson Member Member Secretary

Nomination and Remuneration Committee had the following authorities and responsibilities: ë Set the policy, principles and procedures for recruiting and selecting qualified candidates for directors and senior executives from the President level upwards. The selected candidates will be proposed to the Board of Directors for approval. ë Screen and propose candidates with suitable qualifications for the following positions in the Bank: - Directors - Member for the committees which would receive authorization and responsibilities directly from the Board of Directors - Senior executives from the President level upwards. ë Ensure that the number of Bank directors is sufficient and appropriate for the Bank, paying special attention to the qualification of members of the Board of Directors who must have diversified knowledge, ability and experience. ë Disclose the recruiting policy as well as detailed procedures in the Annual Report. ë Set the remuneration policy and other benefits for directors and senior executives from the President

level upwards. ë Set the guidelines on performance appraisal for directors and senior executives from the President level upwards in order to appropriately adjust the annual remuneration package. The performance appraisal takes into consideration the responsibilities, associated risks and ability to increase long-term shareholdersû values. ë Disclose the remuneration policy and available options and comments from the Nomination and Remuneration Committee in the Annual Report. ë Propose and search for successor for the President and present it to the Board of Directors. The Nomination and Remuneration Committee must meet at least twice a year. Each meeting must have at least half of its members present to form a quorum and the meetingûs resolutions must be based on the majority votes from the members present at each meeting. The Nomination and Remuneration Committee consists of 3 members, of which the Chairperson and 2 members are independent directors and another is not, as follows: 1. Mr. Manop Bongsadadt

2. Mr. Chet Pattrakornkul 3. Mr. Suraphol Kulsiri Ms. Nujaree Sithasrivong

Chairperson of Nomination and Remuneration Committee Member Member Secretary

Risk Management Committee had the following authorities and responsibilities: ë Set the overall risk management policy which covers important types of risk such as strategic risks, credit risks, market risks, liquidity risks, operational risks, including legal risks and reputation risks.

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

ë Set strategies that are consistent with the Bankûs risk management policies, which enables the Bank to assess, monitor and control risks to be within an acceptable level. ë Review the adequacy, effectiveness and practicality of existing risk policy management and systems. ë Regularly report the results of the operations to the Board of Directors in order to make further improvements and corrections and remain in line with the risk management policies and principles. Periodically inform the Audit Committee of the status. The Risk Management Committee must meet at least once every 3 months. Each meeting must have at least half of its members present to form a quorum and the meetingûs resolutions must be based on the majority votes from the members present at each meeting.The Risk Management Committee consists of 9 members and a secretary as follows: 1. Mr. Supol Wattanavekin Chairman 2. Mr. Tawatchai Sudtikitpisan Member 3. Mr. Chavalit Chindavanig Member 4. Ms. Thitinan Wattanavekin Member 5. Mr. Patom Amorndechawat Member 6. Mr. Pracha Chumnarnkitkosol Member 7. Mr. Sarawut Charuchinda Member 8. Ms. Sineenath Tejagupta Member 9. Mr. Kriengsak Sukhanaphorn Member Mr. Siwaphong Plangthrakul Secretary

Executive Committee The Executive Committee was appointed by the Board of Directors to set strategies, develop business plans and efficiently and effectively supervise the management team accordingly. Thus, the Board of Directors decided to set the following authorities and responsibilities for the Executive Committee: 80

ë Set strategies, business plans, annual budget to be in line with the policy and goals approved by the Board of Directors and comply with the authorityûs rules and regulations. ë Set the organization structure for all business units under its responsibility. Appoint and set limits for the authority and responsibilities for the Bankûs management officers from the position of deputy managing director downwards. ë Set limits on credit line approval, investments, purchasing and expenses to maximize the Bankûs benefits while complying with the respective laws. ë Efficiently set work procedures, rules, operational processes and internal control system. ë Consider and approve credit lines, authorize sales of foreclosed assets, and set prices of foreclosed assets to be auctioned from the Legal Execution Department and raise objections in accordance with the set limits. ë Supervise and manage the Bank to be within the framework set by the Risk Management Committee,which includes: strategic risks, credit risks, market risks, liquidity risks, operational risks, reputation risks and legal risks. ë Conduct as well as supervise the management team and staff members to ensure compliance with the regulations related to the Bankûs code of ethics and code of conduct. ë Appoint one or more committees or subcommittees to scrutinize, consider and approve specialized work on behalf of the Board of Directors. ë Prepare quarterly management and operational reports for the Board of Directors. The Executive Committee may seek further professional opinion from external consultant related to Bankûs business operations with expense incurred to be paid by the Bank. The Executive Committee must meet at least once a month. Each meeting must have at least

half of its members present to form a quorum and the meeting resolutions must be based on majority votes from the members present at each meeting. The Executive Committee consists of 6 members and a secretary as follows: 1. Mr. Supol Wattanavekin 2. Mr. Tawatchai Sudtikitpisan 3. Mr. Chavalit Chindavanig 4. Ms. Thitinan Wattanavekin 5. Mr. Patom Amorndechawat 6. Mr. Sarawut Charuchinda Ms. Porntip Chuprakhun

Chairman Member Member Member Member Member Secretary

2) Director and Executive Recruitment ë The process of selecting directors began with the nomination of names and background of the candidates by shareholders, directors and senior executives. The Nomination and Remuneration Committee evaluated each candidateûs qualifications based on good governance and necessity, determined appropriate remuneration, and then made a proposal at the Board of Directors meeting. The Board of Directors made recommendations and obtained final approval at the General Shareholders Meeting. This procedures must be governed by the following Bankûs rules and regulations: (1) Each shareholderûs total number of votes is based on one vote per share. (2) Each shareholder must exercise all votes granted under rule (1) above he/she can select one or more directors, but cannot determine how the votes are to be divided up. (3) The candidates who receive the most votes, in descending order, are appointed as Directors. Total number of appointment may be based on the existing number of Directors or the number desired at the time. In case of an equal score for the final available

appointment, the chairman cast the deciding vote.

3) Executiveûs Remuneration ë Financial remuneration. Other remunerations (None) In setting the directorûs remuneration, 3 main portions are considered as follows: - Monthly compensation while the director is a chairperson and directors on the Board of Directors. - Meeting allowance paid to the chairperson and directors on attendance basis to each meeting on various boards. - Annual bonus based on the Bankûs overall performance and length of service as a director. The average bonus for a director is equivalent to the average bonus of all the employees. The Bank set a clear and transparent policy for the directorûs remuneration that is in line with the industry. The remuneration is sufficiently high to attract and retain directors with desirable qualities. Shareholdersû approval has been duly sought and granted at the shareholdersû meetings. In 2008, total remuneration for the Bankûs 9 senior executives, which included salaries, bonus and provident fund, amounted to Baht 69.9 Million. The Bank did not offer stock options or opportunity to buy or sell Bankûs assets to the senior executives. The Nomination and Remuneration Committee conduct an annual assessment of the Bankûs president every year and use it as a basis in determining the Presidentûs remuneration. The Chairman of the Nomination and Remuneration Committee, who is an independent director and has high seniority in the Board of Directors, communicated the result of the assessment to the President. The remuneration of other Board members on Executive Board, Audit Committee, and Nomination and Remuneration Committee, will be increased as appropriate. Details are as follows: Annual Report 2008 ë Kiatnakin Bank Public Company Limited

Remuneration Name-Surname

Position

(1) Ms. Nawaaporn Ryanskul Chairperson (2) Mr.Pichai Dachanapirom Independent Director / Chairperson of Audit Committee (3) Mr.Manop Bongsadadt Independent Director / Chairperson of the Nomination and Remuneration (4) Mr.Chet Pattrakornkul Independent Director (5) Mr.Tarnin Chirasoonton Independent Director (6) Mr.Pravit Varutbangkul Non-Executive Director (7) Mr.Suraphol Kulsiri Non-Executive Director (8) Mr.Supol Watanavekin Executive Director (9) Mr. Tawatchai Sudtikitpisan Executive Director (10) Mr.Pracha Chumnamkitkosol Executive Director

Board of director 675, 000 360,000

Nomination and Audit Remuneration Bonus Paid Grand Total committee Committee in 2008 212,625 887,625 220,000 182,700 762,700

360,000

105,000

45,000

160,650

670,650

360,000 360,000 360,000 360,000 360,000 360,000 360,000 3,915,000

135,000 460,000

30,000 30,000 105,000

165,375 113,400 113,400 122,850 113,400 113,400 113,400 1,411,200

690,375 473,400 473,400 512,850 473,400 473,400 473,400 5,891,200

Remarks: 6th Received additional remuneration from subsidiary company Baht 600,000 in 2008

Number of Ordinary Shares held by Executives in 2008 Name 1 Mr. Supol Wattanavekin 2 Mr. Tawatchai Sudtikitpisan 3 Mr. Chavalit Chindavanig 4 Ms. Thitinan Wattanavekin 5 Mr. Pracha Chumnarnkitkosol 6 Mr. Patom Amorndechawat 7 Mr. Sarawut Charuchinda 8 Ms. Suree Harnpinijsak

Position Number of share Chairman 8,668,808 President 0 Head of Finance and Budgeting 0 Head of Deposit and Marketing 25,979,861 Head of Risk Management 0 Head of Operations 0 Head of Debt Restructuring 0 Senior Vice president of Accounting 37,500

Change in 2008 -

4) Auditor没s Remuneration In 2008, the Bank and its subsidiaries engaged Deloitte Touche Tohmatsu Jaiyos Audit Co., Ltd. to conduct audit services and other related services and incurred the following expenses. Audit Fee Total audit fee for the year 2008 of 6,980,000 baht was paid to the audit firm and individuals or other organization related to the auditor and the audit firm. Non-audit fee The Bank and subsidiaries paid nonaudit fees for other services including services for special regulatory reports required by the Bank of Thailand, Collective Impairment Calculation Model, and special training for the audit firms and auditors for the year 2008, amounting to 277,477 baht, and 340,000 baht will be paid in the future upon completion of the services agreed upon.

5) Internal Control The Bank evaluates internal control systems under good corporate governance by taking into account the following 5 factors: (1) Control Environment The Bank promotes all Bank personnel to be aware of the necessity of internal control systems by determining clear and measurable missions and goals. Manuals and checklists are provided to assist with the supervision and control of the operations such that everyone conforms to the rules and regulations. The Bank also emphasizes the importance of honesty and business ethics as well as having appropriate organization the structure. (2) Risk Assessment and Management The Bank has Credit Policy and Risk Management Policy to manage risk in all 5 areas as per the guideline from the Bank of Thailand. The Risk Management Unit report directly to the Risks

Committee in order to manage risks to be within appropriate level for the Bank, clear, transparent and auditable. The Bank has Internal Audit Unit to monitor and ensure compliance with the Risk Management Policy. (3) Control Activities The Bank clearly specified the scope, power, duties of various committees and the levels of authority and transaction approval process. Preventive measures against lost property, dishonesty and recovery procedures have been established along with the culture of having every employee report irregularities and operational errors to the supervisor so that it can be immediately rectified. Other measures include segregation of duties ,review of operations by the chief of each section, and auditing to ensure compliance with relevant laws and regulations. If any irregularities are found, ad hoc committee will be set up to investigate. This committee comprises a central unit who will do fact finding and how to rectify the situation, improve the operation in order to prevent it from happening again and propose to the Human Resources Committee (4) Information and Communication The Bank set up an information technology system to provide up-to-date and relevant information for decision-making which are organized and presented in an easy to understand format. The information is communicated internally within the Bank and distributed to all stakeholders. Moreover, the Bank developed systems that disseminated knowledge and business understandings to enhance staff没s knowledge, business expertise and acumen so that they can provide the most beneficial advice and opinions to the customers and others as per the Bank没s vision and mission.

Annual Report 2008 毛 Kiatnakin Bank Public Company Limited

(5) Monitoring and Evaluation The Bank has procedures and tools to assist executives and supervisors in monitoring and assessing performance by using Balanced Scorecard & Key Performance Indicators (KPIs). Modifications and enhancements are made promptly and as necessary to reflect the changing situations or to correct any insufficiency. Furthermore, the Internal Control System is being evaluated by the Board of Directors every year.

6) Personnel Policy From the Bankûs vision of çbeing the bank that has expertise in specialized area that the customers select as their first choiceé, the Bank followed many strategies to achieve the vision. One of the most important strategies was personnel strategy. The Bank concentrated on developing our employees to be efficient and proficient in their work as well as have the knowledge, capability, and determination to support and participate in creating the best service for our customers. For 2008, Kiatnakin Bank promoted and developed employeeûs knowledge and capability as the means for them to work efficiently and be ready to step forward with the Bank by implementing a Training Roadmap with 52 courses and 163 classes. The course types and sample courses are listed below. 1. Management ë Unlease Your Potential ë KK Certified Trainer Workshop ë Professional Fact Finder ë Crucial Conversation ë Executive Talk ë Negotiation & Win ë Project management 2. Job Function ë Effective Presentation Skill ë Interview Technique Workshop

ë Sales Product Refresh ë Absolute HP Marketing ë Relationship with Dealer ë ATM for Authorizer & Teller ë How to use Sales Order Process ë Business Plan for Real Estate 3. General / Foundation Building ë KK Hand in Hand ë Effective Lotus Notes ë Writing Technique for Knowledge Management Moreover, the Bank also focused on building skills for employees at various levels. For management, we created the KK Leadership Development Program for executives who need to further develop their leadership skills. For other employees, in addition to the previously stated training program, the Bank also encourage everyone to continuously develop themselves by implementing Link & Learn Project, an on-line library where employees can reserve a book via HR On-line system, which is on the Bankûs intranet. For 2009, the Bank will continue to develop our employees according to their core competency and focus on designing an Individual Development Plan (IDP) to customize the development to match the employeeûs capability as much as possible. In addition, the Bank will implement a Career Development Plan to enable the employee to advance in their profession. To promote the Bank to be an organization of learning and development, we created the Knowledge Management (KM) Project to systematically organize the knowledge, exchange information, and transfer the knowledge. The project operated as follows: ë Supported the systematic storage of necessary intellectual knowledge through KM Mapping. ë Supported and promoted having knowledgeable society through Community of Practice (CoP) to exchange and transfer information in various professions.

ë Continuously developed channels and process for managing knowledge. In addition to personnel development policy, the Bank also placed great emphasis in the development of information technology for managing personnel via

an on-line system, such as logging in work time, request for vacation, sick leave, etc. This system was fast, convenient, and accurate and raised the effectiveness of the personnel management.

7) Related Transactions Name and Relationship

Description and amount (Per annum)

Necessity and Reasonableness

Leasing transaction with Chotthanawat Co., Ltd. which has shareholders related to the director or Bankûs executive who is also a shareholder or has controlling power or able to significantly influence decisions. The Bank own 99.96% the shares

The Bank lease storage and parking spaces from Chotthanawat Co., Ltd. Total leasing and service fees are Baht 9.0 million per annum.

Leasing and service fees for the Bank's parking spaces and auction place for repossessed automobiles that have been ongoing since 2004.

Deposit transactions by the Bankûs directors, executives and related persons

ë Conducted by 47 of the Bankûs directors, executives and related persons. Total deposits were Baht 396 million and total interest paid was Baht 5.19 million.

A normal deposit transactions by the Bankûs directors, executives, and related persons.

Securities trading transactions by the Bankûs directors/ executives with the securities company (KKS)

ë Securities trading transactions by the Bankûs directors/ executives with Kiatnakin Securities Co., Ltd. (KKS) totalled Baht 8.2 million which resulted in a total commission of Baht 0.02 million

A normal security brokerage service provided by KKS to directors/executives.

Fairness of Price and Terms ë Leasing and service fees are comparable with market rates.

ë Provided service with the same interest rates as other customers. Provided service with the same commission fee as other customers

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

Name and Relationship

Description and amount (Per annum)

Guaranteed a loan for a person related to the Bankûs directors /executives

ë A loan guaranteed by persons related to the Bankûs directors/ executives total loan amount of Baht 212 million.

Necessity and Reasonableness ë Transaction resolved as per normal procedures for all debts .

See note accompanying Financial Report on Personal and Related Transactions, Note#36

Fairness of Price and Terms ë A guarantee for debted that has been restructured as per normal terms for debts acquired from auctions.

Dividend Policy

The Bank没s policy on dividend payments stated that no more than 60% of net profit as per the financial statements will be allocated to dividend distribution annually. Dividend payout must be approved at the General Shareholders meeting. The Board of Directors may give out the dividend during the year to shareholders when the Bank made sufficient profit and then report at the next General

Shareholders meeting. In setting the amount of dividend, the Bank took into consideration the operations results, return on investment by the long term shareholder, and appropriate amount to keep as capital for the Bank, which is correlated with the Bank没s business plan, and impact before and after the dividend is paid out.

Annual Report 2008 毛 Kiatnakin Bank Public Company Limited

Report of the Board of Directors没s Responsibilities for Financial Statement

Dear Shareholders The Board of Directors is responsible for the consolidated financial statements of the Bank and its subsidiaries as well as the financial information which appear in the Annual Report. The financial information was prepared in accordance with the Generally Accepted Accounting Principles (GAAP). An appropriate accounting policy was chosen and consistently maintained, using the most prudent discretion and best judgment. The financial statements were also prepared based on full disclosure of essential information and are include in the Notes to Financial Statement section. The Board of Directors established an effective internal control system to ensure that all accounting records are accurate, complete and sufficient to facilitate the Bank in maintaining all of its assets. The system helped the Bank to identify any potential weakness and prevent fraudulent or significant

mismanagement of its business operations. The Board of Directors also appointed the Audit Committee, which consisted of independent directors to be responsible for ensuring that the Bank produces accurate and sufficient financial reports, the Bank has appropriate and efficient internal control and internal audit system in place, review all disclosures of the Bank没s information where connected transactions have taken place or where there may be conflicts of interest in order to ensure their accuracy and completeness and others under their duties. The opinion of the Audit Committee related to these matters is in the report from the Audit Committee Section of the Annual Report. In the Board of Directors没 opinion, the Bank没s overall internal control system is satisfactory and able to confidently and reflect the financial statements as of 31 December 2008 for the Bank and its subsidiaries.

(Ms. Nawaaporn Ryanskul) Chairperson

REPORT OF THE INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS TO THE SHAREHOLDERS AND BOARD OF DIRECTORS KIATNAKIN BANK PUBLIC COMPANY LIMITED We have audited the accompanying consolidated balance sheet of Kiatnakin Bank Public Company Limited and subsidiaries and the separate balance sheet of Kiatnakin Bank Public Company Limited as at December 31, 2008 and the related consolidated and the separate statements of income, changes in shareholdersû equity and cash flows for the year ended December 31, 2008. These financial statements are the responsibility of the Bankûs management as to their correctness and completeness of the presentation. Our responsibility is to express an opinion on these financial statements based on our audits. The consolidated and separate financial statements of the Bank for the year ended December 31, 2007 (before restated), presented herein for comparison, were audited by another auditor whose audit report thereon dated February 18, 2008 expressed an unqualified opinion. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the

BANGKOK February 23, 2009

overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the aforementioned consolidated and the separate financial statements present fairly, in all material respects, the financial position of Kiatnakin Bank Public Company Limited and subsidiaries and of Kiatnakin Bank Public Company Limited as at December 31, 2008 and the results of its operations and its cash flows for the year ended December 31, 2008 in conformity with generally accepted accounting principles. As discussed in Note 3.1.3 to the financial statements, for the preparation of the consolidated financial statements for the year ended December 31, 2008, the Bank changed its accounting policy of the subsidiaries, which are mutual funds, for properties foreclosed, investment in properties, investment in loan and investment in securities, to use the same accounting policy as the Bank in order to comply with the Bank of Thailandûs Notification, relating to the Preparation and Announcement of Financial Statements of Commercial Banks and Holding Companies of Financial Industry, and restated the consolidated balance sheet as at December 31, 2007, consolidated statement of income, consolidated statement of changes in shareholdersû equity and cash flows for the year ended December 31, 2007.

Dr. Suphamit Techamontrikul Certified Public Accountant (Thailand) Registration No. 3356 DELOITTE TOUCHE TOHMATSU JAIYOS AUDIT CO., LTD. Annual Report 2008 ë Kiatnakin Bank Public Company Limited

FINANCIAL STATEMENTS

BALANCE SHEETS KIATNAKIN BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES

Notes ASSETS CASH INTERBANK AND MONEY MARKET ITEMS Domestic items Interest bearing Non-interest bearing Total interbank and money market items SECURITIES PURCHASED UNDER RESALE AGREEMENTS INVESTMENT IN SECURITIES Short-term investments, net Long-term investments, net Investment in subsidiaries, net Total investment in securities, net INVESTMENT IN LOANS, NET INVESTMENT IN PROPERTIES NET ACCOUNTS RECEIVABLE FROM CLEARING HOUSE LOANS AND ACCRUED INTEREST RECEIVABLES Loans Securities and derivative business receivables Total loans and receivables Accrued interest receivable Total loans and accrued interest receivable Less Allowance for doubtful accounts Allowance for troubled debt restructuring Net loans and accrued interest receivable PROPERTIES FORECLOSED - NET LAND, PREMISES AND EQUIPMENT - NET INTANGIBLE ASSETS - NET OTHER ASSETS TOTAL ASSETS

AS AT DECEMBER 31, 2008 AND 2007

CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 çRestatedé 211,132,097

140,393,812

209,877,097

139,098,812

18,422,725,200 802,305,607 19,225,030,807

1,047,054,876 722,535,724 1,769,590,600

18,250,925,016 667,781,702 18,918,706,718

829,319,800 659,632,176 1,488,951,976

980,000,000

933,990,816 1,840,013,538 2,774,004,354 5,112,999,450 106,643,684

3,266,166,526 1,034,035,245 4,300,201,771 6,876,184,567 171,526,451

35,418,179

153,979,984

7 8

467,247,848 3,035,181,431 1,832,410,314 1,026,432,022 7,342,123,732 7,839,287,865 9,641,781,894 11,900,901,318 2,637,444,196 3,982,689,158 -

65,649,729,056 80,562,842,359 605,411,773 7,504,938 66,255,140,829 80,570,347,297 414,932,858 546,042,093 66,670,073,687 81,116,389,390 (2,989,263,263) (3,469,580,473) (74,281,908) (53,866,276) 63,606,528,516 77,592,942,641 7,682,849,445 6,786,829,316 621,398,268 683,351,788 118,271,749 134,336,165 806,203,331 793,600,649 87,227,128,494 117,398,870,464

65,649,729,056 7,504,938 65,657,233,994 412,420,789 66,069,654,783 (2,961,586,690) (74,281,908) 63,033,786,185 6,380,381,588 562,762,216 106,319,745 678,695,105 89,253,586,103

11 13 14 15 16 17

80,562,842,359 249,750,839 80,812,593,198 547,454,067 81,360,047,265 (3,499,231,622) (53,866,276) 77,806,949,367 7,723,816,407 716,449,456 146,437,592 873,893,896 114,732,775,289

The notes to the financial statements form an integral part of these statements 90

UNIT : BAHT SEPARATE FINANCIAL STATEMENTS 2008 2007

FINANCIAL STATEMENTS

BALANCE SHEETS (CONTINUED) KIATNAKIN BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES

Notes LIABILITIES AND SHAREHOLDERSû EQUITY DEPOSITS Deposits in Baht Total deposits INTERBANK AND MONEY MARKET ITEMS - DOMESTIC ITEMS Interest bearing Non-interest bearing Total interbank and money market items LIABILITIES PAYABLE ON DEMAND SECURITIES AND DERIVATIVE BUSINESS BORROWINGS Short-term borrowings Long-term borrowings Total borrowings ACCRUED INTEREST EXPENSES OTHER ACCOUNTS PAYABLE INCOME TAX AND SPECIFIC BUSINESS TAX PAYABLE OTHER LIABILITIES TOTAL LIABILITIES

AS AT DECEMBER 31, 2008 AND 2007

CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 çRestatedé

UNIT : BAHT SEPARATE FINANCIAL STATEMENTS 2008 2007

18 71,155,762,434 71,155,762,434

41,353,657,835 41,353,657,835

3,760,512,084 1,756,478 3,762,268,562 277,210,000 200,335,122

3,065,527,899 450,900 3,065,978,799 247,396,069 349,884,723

11,552,912,885 8,395,666,937 19,948,579,822 794,448,207 473,725,671

17,801,119,556 4,805,675,875 22,606,795,431 761,398,450 923,938,932

39,453,812

233,971,536

71,155,762,434 41,353,657,835 71,155,762,434 41,353,657,835

19 4,047,899,997 3,848,597 4,051,748,594 277,210,000 -

3,123,945,910 2,325,203 3,126,271,113 247,396,069 -

913,492,884 97,565,276,514

14,432,912,885 21,921,119,556 8,395,666,937 4,805,675,875 22,828,579,822 26,726,795,431 802,534,778 772,991,495 451,974,830 723,228,924 39,392,140

233,677,046

752,394,480 801,363,422 677,796,722 70,295,416,255 100,408,566,020 73,861,814,635

The notes to the financial statements form an integral part of these statements Annual Report 2008 ë Kiatnakin Bank Public Company Limited

FINANCIAL STATEMENTS

BALANCE SHEETS (CONTINUED) KIATNAKIN BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES

AS AT DECEMBER 31, 2008 AND 2007

UNIT : BAHT Notes LIABILITIES AND SHAREHOLDERSû EQUITY (CONTINUED) SHAREHOLDERSû EQUITY SHARE CAPITAL Authorized share capital 722,845,571 ordinary shares of Baht 10 each (December 31, 2007 : 715,460,030 shares ùof Baht 10 each) Issued and fully paid-up share capital 523,151,780 ordinary shares of Baht 10 each (December 31, 2007 : 521,687,004 shares ùof Baht 10 each) WARRANTS SHARE PREMIUM FAIR VALUE RESERVES ON INVESTMENT IN LOANS FAIR VALUE RESERVES ON AVAILABLEFOR-SALE SECURITIES RETAINED EARNINGS Appropriated - Legal reserve - Other reserve Unappropriated TOTAL SHAREHOLDERSû EQUITY OF THE BANK MINORITY INTERESTS TOTAL SHAREHOLDERSû EQUITY TOTAL LIABILITIES AND SHAREHOLDERSû EQUITY OFF-BALANCE SHEET ITEMS - CONTINGENCIES AVALS ON BILLS AND GUARANTEES ON LOANS INTEREST RATE SWAP OTHER CONTINGENCIES AND COMMITMENTS

CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 çRestatedé

SEPARATE FINANCIAL STATEMENTS 2008 2007

7,228,455,710

7,154,600,300

7,228,455,710

7,154,600,300

5,231,517,800 8,483,233 2,647,294,293

5,216,870,040 10,867,643 2,641,305,128

5,231,517,800 8,483,233 2,647,294,293

5,216,870,040 10,867,643 2,641,305,128

1,617,507,040

1,967,789,022

316,112,818

464,293,655

30,915,301

124,702,854

50,381,764

137,526,281

722,845,571 380,000 6,875,215,396 17,134,158,634 33,340,141 17,167,498,775 114,732,775,289

715,460,030 380,000 6,216,954,664 16,894,329,381 37,382,858 16,931,712,239 87,227,128,494

722,845,571 380,000 8,013,288,965 16,990,304,444 16,990,304,444 117,398,870,464

715,460,030 380,000 6,205,068,691 15,391,771,468 15,391,771,468 89,253,586,103

116,799,711 1,912,000,000 953,341,434

122,925,000 855,562,753

116,799,711 1,912,000,000 953,341,434

122,925,000 855,562,753

Mr.Tawatchai Sudtikitpisan Director The notes to the financial statements form an integral part of these statements 92

Mr.Pracha Chumnarnkitkosol Director

FINANCIAL STATEMENTS

STATEMENTS OF INCOME KIATNAKIN BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

UNIT : BAHT

Notes

INTEREST AND DIVIDEND INCOME Interest on loans Interest on interbank and money market items Hire-purchase and fnancial lease income Interest and dividend on securities Interest on investment in loans Total interest and dividend income INTEREST EXPENSES Interest on deposits Interest on interbank and money market items Interest on short-term borrowings Interest on long-term borrowings Fees and charges on borrowings Total interest expenses Net interest and dividend income BAD DEBTS AND DOUBTFUL ACCOUNTS LOSS ON DEBT RESTRUCTURING NET INTEREST AND DIVIDEND INCOME AFTER BAD DEBTS AND DOUBTFUL ACCOUNTS AND LOSS ON DEBT RESTRUCTURING NON-INTEREST INCOME Gain on disposal of investment in securities Gain on revaluation of investment Impairment loss on investment in loans Impairment loss on investment in properties Brokerage fees Fees and services income Acceptance, avals and guarantees Others Gain on exchanges Gain from sale of foreclosed assets Other income Total non-interest income

CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 çRestatedé

SEPARATE FINANCIAL STATEMENTS 2008 2007

2,029,382,381 187,482,748 4,030,494,427 178,891,320 1,365,979,486 7,792,230,362

1,969,587,124 53,551,048 3,027,555,227 252,800,371 1,211,211,928 6,514,705,698

2,013,868,262 177,410,477 4,030,494,427 2,548,452,449 981,152,917 9,751,378,532

1,956,798,063 47,002,917 3,027,555,227 2,173,790,001 440,278,047 7,645,424,255

1,950,620,091 133,374,209 663,174,478 357,992,420 15,037,664 3,120,198,862 4,672,031,500 988,285,852 1,255,237

1,745,761,420 119,108,686 468,570,109 258,229,986 15,306,691 2,606,976,892 3,907,728,806 639,722,132 4,248,271

1,981,174,267 142,576,811 788,423,861 357,992,420 15,037,664 3,285,205,023 6,466,173,509 986,291,687 1,255,237

1,806,785,046 130,702,342 555,127,369 258,229,986 15,306,691 2,766,151,434 4,879,272,821 639,486,967 4,248,271

3,682,490,411

3,263,758,403

5,478,626,585

4,235,537,583

83,501,242 206,877,334 (454,189,771) (16,461,518) 249,277,698

348,026,173 316,868,917 (84,888,912) (5,074,726) 274,997,595

172,058,426 254,194,472 (499,060,851) -

200,872,799 291,697,529 (135,411,958) -

17,027,284 543,968,645 111,610 756,158,754 151,241,113 1,537,512,391

13,939,067 396,918,109 1,354,894 482,232,828 120,570,526 1,864,944,471

17,027,284 549,961,665 110,327 110,306,951 604,598,274

13,939,067 392,570,511 1,353,471 288,462,123 104,776,700 1,158,260,242

The notes to the financial statements form an integral part of these statements Annual Report 2008 ë Kiatnakin Bank Public Company Limited

FINANCIAL STATEMENTS

STATEMENTS OF INCOME (CONTINUED) KIATNAKIN BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

UNIT : BAHT Notes

NON-INTEREST EXPENSES Personnel expenses Premises and equipment expenses Taxes and duties Fee and service expenses Directorsû remuneration Contributions to the Financial Institutions Development Fund Loss from sale of foreclosed assets Loss from revaluation of foreclosed assets Other expenses Total non-interest expenses INCOME BEFORE INCOME TAX LESS INCOME TAX NET INCOME NET INCOME ATTRIBUTABLE TO: EQUITY HOLDERS OF THE BANK MINORITY INTEREST BASIC EARNINGS PER SHARE DILUTED EARNINGS PER SHARE

BAHT BAHT

27 27

CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 çRestatedé

1,209,988,131 463,915,626 153,099,081 334,311,618 8,185,001

960,282,392 348,595,476 154,612,774 274,630,354 8,459,963

1,059,203,291 371,066,402 152,496,509 197,107,829 6,625,001

797,083,621 242,564,070 153,710,947 154,398,446 7,199,963

169,480,392 216,395,376 618,740,557 3,174,115,782 2,045,887,020 175,212,180 1,870,674,840

164,309,616 99,115,589 560,884,223 2,570,890,387 2,557,812,487 444,936,389 2,112,876,098

169,480,392 116,567,129 279,675,625 538,837,984 2,891,060,162 3,192,164,697 175,212,180 3,016,952,517

164,309,616 73,806,309 463,877,268 2,056,950,240 3,336,847,585 444,936,389 2,891,911,196

1,866,992,975 3,681,865 1,870,674,840 3.57 3.46

2,111,039,536 1,836,562 2,112,876,098 4.07 3.77

3,016,952,517 3,016,952,517 5.77 5.59

2,891,911,196 2,891,911,196 5.57 5.17

Mr.Tawatchai Sudtikitpisan Director

The notes to the financial statements form an integral part of these statements 94

SEPARATE FINANCIAL STATEMENTS 2008 2007

Mr.Pracha Chumnarnkitkosol Director

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

24 25 22 23

586,059,743 1,788,060,646 2,374,120,389 (406,331,367) (406,331,367) (406,331,367) 1,967,789,022

5,147,484,160 22,328,773 2,604,587,600 69,385,880 - 36,717,528 - (11,461,130) 5,216,870,040 10,867,643 2,641,305,128

Warrants

Share premium

8,398,630,800

(67,311,868) - (3,120,838,460) (43,808,297) 680,536,971 380,000 5,277,792,340 168,511,151 168,511,151 - 2,111,039,536 168,511,151 - 2,111,039,536 - 34,923,059 - (34,923,059) - (1,136,954,153) 124,702,854 715,460,030 380,000 6,216,954,664

23,503,571 680,536,971 380,000

Total

(2,466,565) 38,364,633 (258,917) (258,917) 1,836,562 1,577,645 (314,200) (2,245,220) 37,382,858

(1,402,556,247) 16,101,786,569 (238,079,133) (238,079,133) 2,112,876,098 1,874,796,965 (1,136,954,153) 106,103,408 (11,461,130) (314,200) (2,245,220) 16,931,712,239

40,831,198 17,504,342,816

Minority interest

UNIT : BAHT

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

CONSOLIDATED FINANCIAL STATEMENTS Fair value reserves Fair value Appropriated reserves on (defcit) on Unappropriated investment in available-for Legal General retained sale securities reserve reserve loans earnings

5,147,484,160 22,328,773 2,604,587,600

Issued and paid-up share capital

The notes to the financial statements form an integral part of these statements

çRestatedé Balance as at January 1, 2007 - as previously reported Adjustment : Cumulative effect of accounting change Balance after adjustment - as restated Fair value reserve increase (decrease) Net gain (loss) recognized in the shareholdersû equity Net income Total net gain (loss) recognized Legal reserve Dividend paid Ordinary shares Warrants Repayments of capital reduction for minority interest Dividend paid for minority interest Closing balances as at December 31, 2007

Notes

KIATNAKIN BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREHOLDERSû EQUITY

96 24 25 22 23

9,380,875,295

(12,314,779) - (3,163,920,631) 124,702,854 715,460,030 380,000 6,216,954,664 (93,787,553) (93,787,553) - 1,866,992,975 (93,787,553) - 1,866,992,975 - 7,385,541 (7,385,541) - (1,201,346,702) 30,915,301 722,845,571 380,000 6,875,215,396

1,503,495,367 1,967,789,022 (350,281,982) (350,281,982) (350,281,982) 1,617,507,040

5,216,870,040 10,867,643 2,641,305,128 14,647,760 5,989,165 - (2,384,410) 5,231,517,800 8,483,233 2,647,294,293

Share premium 464,293,655 137,017,633 715,460,030 380,000

Warrants

CONSOLIDATED FINANCIAL STATEMENTS Fair value reserves Fair value Appropriated reserves on (defcit) on Unappropriated investment in available-for retained Legal General sale securities reserve reserve loans earnings

18,607,626,063

Total

(3,173,781) (1,675,913,824) 37,382,858 16,931,712,239 (108,050) (444,177,585) (108,050) (444,177,585) 3,681,865 1,870,674,840 3,573,815 1,426,497,255 - (1,201,346,702) 20,636,925 (2,384,410) (1,506,607) (1,506,607) (6,109,925) (6,109,925) 33,340,141 17,167,498,775

40,556,639

Minority interest

UNIT : BAHT

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

5,216,870,040 10,867,643 2,641,305,128

The notes to the financial statements form an integral part of these statements

Balance as at January 1, 2008 - as previously reported Adjustment : Cumulative effect of accounting change Balance after adjustment - as restated Fair value reserve decrease Net gain (loss) recognized in the shareholders没 equity Net income Total net gain (loss) recognized Legal reserve Dividend paid Ordinary shares Warrants Repayments of capital reduction for minority interest Dividend paid for minority interest Closing balances as at December 31, 2008

Issued and paid-up share capital Notes

KIATNAKIN BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREHOLDERS没 EQUITY (CONTINUED)

Annual Report 2008 毛 Kiatnakin Bank Public Company Limited

24 25 22 23

Warrants

Share premium

380,000 4,485,034,707 - 2,891,911,196 - 2,891,911,196 (34,923,059) - (1,136,954,153) 380,000 6,205,068,691 380,000 6,205,068,691 - 3,016,952,517 - 3,016,952,517 (7,385,541) - (1,201,346,702) 380,000 8,013,288,965

SEPARATE FINANCIAL STATEMENTS Fair value reserves Fair value Appropriated reserves on (defcit) on Unappropriated investment in available-for retained Legal General sale securities reserve reserve loans earnings

Minority interest

13,549,912,270 (7,740,123) (7,740,123) 2,891,911,196 2,884,171,073 (1,136,954,153) 106,103,408 (11,461,130) 15,391,771,468 15,391,771,468 (235,325,354) (235,325,354) 3,016,952,517 2,781,627,163 (1,201,346,702) 20,636,925 (2,384,410) 16,990,304,444

Total

UNIT : BAHT

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

5,147,484,160 22,328,773 2,604,587,600 586,059,743 23,500,316 680,536,971 - (121,766,088) 114,025,965 - (121,766,088) 114,025,965 - (121,766,088) 114,025,965 - 34,923,059 69,385,880 - 36,717,528 - (11,461,130) 5,216,870,040 10,867,643 2,641,305,128 464,293,655 137,526,281 715,460,030 5,216,870,040 10,867,643 2,641,305,128 464,293,655 137,526,281 715,460,030 - (148,180,837) (87,144,517) - (148,180,837) (87,144,517) - (148,180,837) (87,144,517) - 7,385,541 14,647,760 5,989,165 - (2,384,410) 5,231,517,800 8,483,233 2,647,294,293 316,112,818 50,381,764 722,845,571

The notes to the financial statements form an integral part of these statements

Opening balance as at January 1, 2007 Fair value reserve increase Net gain (loss) recognized in the shareholders没 equity Net income Total net gain (loss) recognized Legal reserve Dividend paid Ordinary shares Warrants Closing balances as at December 31, 2007 Opening balance as at January 1, 2008 Fair value reserve (decrease) Net gain (loss) recognized in the shareholders没 equity Net income Total net gain (loss) recognized Legal reserve Dividend paid Ordinary shares Warrants Closing balances as at December 31, 2008

Issued and paid-up share Notes capital

KIATNAKIN BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES

STATEMENTS OF CHANGES IN SHAREHOLDERS没 EQUITY (CONTINUED)

FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOWS KIATNAKIN BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

UNIT : BAHT CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 çRestatedé CASH FLOWS FROM OPERATING ACTIVITIES Net income before tax Adjustments to reconcile net income to cash provided by (paid in) operating activities: Depreciation and amortization Bad debt and doubtful accounts Loss on troubled debt restructuring transactions Provision for diminution in value of securities (reversal) Provision for diminution in value of properties foreclosed Loss on revaluation of investment in loans and properties Gain from transfering investment in loans to loans Gain on disposal of securities Gain on disposal of equipment Loss on written off of equipment Amortization of deferred income on disposal of leasehold right Provision for retirement benefits Decrease in specific business tax payable Increase (Decrease) in accrued expenses Dividend received from subsidiaries Net income from interest and dividends Proceeds from interest and dividends Interest paid Cash paid for corporate income tax Profit from operations before changes in operating assets and liabilities

2,045,887,020

2,557,812,487

3,192,164,697

3,336,847,585

228,399,112 1,176,216,840 1,255,237 42,005,852 216,395,376

180,007,875 773,476,034 4,248,271 (37,257,181) 99,115,589

191,151,958 1,174,626,384 1,255,237 279,675,625

132,836,101 775,397,814 4,248,271 (9,250,327) 73,806,309

506,705,437 (213,838,199) (176,537,070) (14,283,469) 13,081,942

135,980,055 (280,533,008) (108,579,300) (1,564,373) 2,194,329

535,115,000 (213,838,199) (274,701,204) (11,849,721) 7,720,844

181,428,374 (280,533,008) (125,030,925) (1,426,965) 85,844

(11,150,293) 19,745,764 (815,982) (27,001,699) 3,806,065,868 (4,672,031,500) 7,812,514,704 (3,087,149,106) (400,236,049)

(19,141,524) 24,202,804 (35,487,293) 26,084,483 3,320,559,248 (3,907,728,806) 6,560,488,235 (2,444,117,536) (364,695,718)

(11,150,293) 20,118,322 (583,165) (898,882) (2,524,679,415) 2,364,127,188 (6,466,173,509) 9,770,548,958 (3,255,661,739) (399,760,648)

(19,141,524) 20,339,539 (35,553,299) 54,373,933 (1,772,718,591) 2,335,709,131 (4,879,272,821) 7,538,569,516 (2,601,533,664) (365,866,658)

3,459,163,917

3,164,505,423

2,013,080,250

2,027,605,504

The notes to the financial statements form an integral part of these statements 98

SEPARATE FINANCIAL STATEMENTS 2008 2007

FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOWS (CONTINUED) KIATNAKIN BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

UNIT : BAHT CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 çRestatedé CASH FLOWS FROM OPERATING ACTIVITIES (CONTINUED) (Increase) decrease in operating assets Interbank and money market items (17,428,020,747) Securities purchased under resale agreement 980,000,000 Investment in trading and available-for-sale securities 2,394,908,936 Investment in loans 555,051,135 Investment in properties 48,421,250 Accounts receivable from Clearing House 118,561,805 Loans and receivables (19,122,196,816) Properties foreclosed 4,187,680,700 Other assets (212,309,606) Increase (decrease) in operating liabilities Deposits 29,802,104,599 Interbank and money market items 696,289,763 Liabilities payable on demand 29,813,931 Accounts payable to Clearing House Securities and derivative business payables (149,549,601) Short-term borrowings 1,451,784,391 Other payables (449,540,849) Other liabilities 177,031,245 Net cash provided by (used in) operating activities 6,539,194,053 CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for purchase of long-term (2,557,612,159) investment in securities Proceeds from sales of 1,718,419,301 long-term investment in securities Proceeds from capital reduction of investment in subsidiaries Dividend received from subsidiaries Purchase of premises and equipment (295,996,373) Proceeds from sales of equipment 15,748,131 Purchase of intangible assets (48,303,949) Net cash provided by (used in) investing activities (1,167,745,049)

SEPARATE FINANCIAL STATEMENTS 2008 2007

125,776,111 440,000,000 1,440,212,292 999,405,395 661,312 (123,941,699) (17,971,379,973) 2,859,873,236 (281,953,165)

(17,402,335,283) 980,000,000 2,679,371,839 294,440,433 (19,407,503,183) 3,688,584,707 (260,197,873)

249,166,356 440,000,000 1,130,089,028 102,025,303 (17,871,621,338) 2,730,066,542 (63,717,601)

(749,291,179) 608,895,927 94,166,105 (47,071,604) 52,039,647 9,006,795,431 597,626,253 167,735,328 384,054,840

29,802,104,599 925,477,481 29,813,931 211,784,391 (270,581,682) 114,614,138 3,398,653,748

(749,291,179) 662,491,561 94,166,105 9,226,795,431 402,060,607 131,147,106 (1,489,016,575)

(102,249,317)

(2,557,612,159)

(102,249,317)

108,679,301

1,718,371,820

108,579,301

(259,225,240) 3,529,663 (82,129,448) (331,395,041)

595,328,268 2,524,679,415 (284,176,608) 13,093,458 (44,465,470) 1,965,218,724

79,668,851 1,772,718,591 (243,676,467) 3,336,981 (79,185,986) 1,539,191,954

The notes to the financial statements form an integral part of these statements Annual Report 2008 ë Kiatnakin Bank Public Company Limited

FINANCIAL STATEMENTS

STATEMENTS OF CASH FLOWS (CONTINUED) KIATNAKIN BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

UNIT : BAHT CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 çRestatedé CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from increase in share capital Proceeds from share premium Proceeds from sale of debenture Cash paid for debenture redemption Dividend payment Repayments of share capital to minority interest Dividend paid for minority interest Net cash provided by (used in) financing activities Net increase in cash and cash equivalents Cash and cash equivalents at January 1, Cash and cash equivalents at December 31, Additional cash flows information Non cash transactions Transfer of assets for loan settlement Transfer of investments in loans to be loans Decrease in fair value reserves on investment in loans Increase (decrease) in fair value reserves on available-for-sale securities

12,263,350 5,989,165 10,486,000,000 (14,596,000,000) (1,201,346,702) (6,109,925) (1,506,607) (5,300,710,719) 70,738,285 140,393,812 211,132,097

57,924,750 36,717,528 6,525,000,000 (5,459,200,000) (1,136,954,153) (314,200) (2,245,220) 20,928,705 73,588,504 66,805,308 140,393,812

12,263,350 5,989,165 10,486,000,000 (14,596,000,000) (1,201,346,702) (5,293,094,187) 70,778,285 139,098,812 209,877,097

57,924,750 36,717,528 6,525,000,000 (5,459,200,000) (1,136,954,153) 23,488,125 73,663,504 65,435,308 139,098,812

4,445,043,038 362,783,452

3,752,561,826 617,468,699

4,374,708,061 362,783,452

3,567,559,088 617,468,699

(350,281,982)

(406,331,367)

(148,180,837)

(121,766,088)

(93,787,553)

168,511,151

(87,144,517)

114,025,965

The notes to the financial statements form an integral part of these statements 100

SEPARATE FINANCIAL STATEMENTS 2008 2007

NOTES TO THE FINANCIAL STATEMENTS KIATNAKIN BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES

FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007

1. GENERAL The Bank was incorporated in Thailand. Its head office is located at 500, Amarin Tower, Ploenchit Road, Pathumwan, Bangkok. The Bank provides banking business through its branch network in Thailand.

2. BASIS FOR PREPARATION OF THE FINANCIAL STATEMENTS 2.1 Basis for Preparation of the Financial Statements The consolidated and separate financial statements for the years ended December 31, 2008 and 2007, are presented as prescribed by the Bank of Thailandûs Notification dated August 3, 2008, related to the Preparation and Announcement of Financial Statements of Commercial banks and Holding companies of Financial Industry, issued under the Financial Institution Business Act B.E. 2551 and the Bank changes the format of presentation of the financial statements for the years ended December 31, 2008 and 2007 to comply with the Thai Accounting Standard (TAS) No. 35 (Revised 2007) çPresentation of Financial Statementé which are effective for financial periods beginning on or after January 1, 2008 onward. The Bank maintains its accounting records in Thai Baht and prepares its statutory financial statements in the Thai language in conformity with financial accounting standards used by the banking industry in Thailand. The financial statements are prepared in accordance with accounting principles and practices generally accepted in Thailand and the Bank of Thailandûs guidelines. During the year 2006, Thai Accounting Standard No. 27 çDisclosures in the Financial Statements of Bank and Similar Financial Statementsé was revised and announced by Federation of Accounting Professions and effective for the financial statements of period beginning on or after January 1, 2007 and in 2007, Thai Accounting Standard No. 25 (revised 2007) çCash Flow Statementsé was announced by Federation of Accounting Professions and effective for the financial statements of periods beginning on or after January 1, 2008. The revised standards have affected the financial statement presentation, which are different from the presentation according to the above Notification. However, the consolidated and the separate financial statements for the years ended December 31, 2008 and 2007, are presented in accordance with the BOTûs Notification as mentioned above. The revisions have no material impact on the financial statements of the Bank. The financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below. The Federation of Accounting Professions has issued Notification of Federation of Accounting Professions No. 86/2551 dated November 12, 2008 regarding the accounting standards that have been announced in the Royal Gazette, but are not yet effective in 2008 as follows: TAS 36 (Revised 2007) Impairment of Assets TAS 54 (Revised 2007) Non-current Assets Held for Sale and Discontinued Operations These accounting standards will be effective for financial statements covering periods beginning on or January 1, 2009. The Bank expects that the above accounting standard revisions will have no material impact on the financial statements.

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

101

2.2 Basis for Preparation of the Consolidated Financial Statements The consolidated financial statements include the accounts of the Bank and the subsidiaries where more than 50% of the shares are owned by the Bank. Significant intercompany transactions and balances have been eliminated. The subsidiaries which were incorporated in Thailand are as follows: Ownership Interest (%) Type of Business As at December 31, 2008 As at December 31, 2007 Kiatnakin Securities Co., Ltd. Asia Recovery 1 Fund Asia Recovery 2 Fund Asia Recovery 3 Fund Thai Restructuring Fund Asia Recovery Property Fund 1 Asia Recovery Property Fund 3

Securities Unit trust Unit trust Unit trust Unit trust Unit trust Unit trust

99.99 99.95 99.59 99.97 98.91 99.50 98.77

2.3 Reclassification The financial statements for the year ended December 31, 2007 have been reclassified to conform to the current yearûs classification, with no effect on previously reported net income and shareholdersû equity as follows: 2.3.1 Balance sheet as at December 31, 2007 - Prepaid commission expenses amounting to Baht 555.47 million, previously separately presented as other assets was reclassified to be presented in loan. - Deposit in transit amounting to Baht 64.33 million, previously presented in interbank and money market items (asset) was reclassified to be presented in other liabilities. - Suspense cash received from customer amounting to Baht 135.91 million, previously presented in other payable was reclassified to be presented in other liabilities. - Other payable amounting to Baht 14.33 million, previously presented in other liabilities was reclassified to be presented in other payable. - Prepayment for leasehold of the consolidated financial statements and the separate financial statement amounting to Baht 66.22 million and 64.52 million, respectively, previously presented in intangible assets was reclassified to be presented in other assets. 2.3.2 Income statement for the year ended December 31, 2007 - Commission expenses amounting to Baht 181.22 million previously presented as non-interest expenses, were reclassified to be presented in hire-purchase and financial lease income. - Personnel expenses amounting to Baht 88.93 million, previously presented as other expenses in non - interest expenses, were reclassified to be presented in personnel expenses.

3. CHANGES IN ACCOUNTING POLICIES AND ACCOUNTING ESTIMATION 3.1 Changes in accounting policies 3.1.1 According to the Notification of Federation of Accounting Professions No. 62/2550 dated December 7, 2007 the Accounting Standard No. 29 (Revised 2007) çLeasesé will supersede the Accounting Standards No. 7 çThe Accounting for Hire-Purchase of Lessorsé and No. 29 çLeasesé, which is effective for financial periods beginning on or after January 1, 2008. Consequently, the Bank has changed its accounting policy as follows: 1) Interest income from hire-purchase On January 1, 2008, the Bank has changed its revenue recognition method for interest on hire-purchase from the sum of the installment digits method to the effective interest method as follows: - Income from hire-purchase contracts which are originated on or after January 1, 2008 are recognized based on the effective interest method. 102

- Income from hire-purchase contracts which are originated before January 1, 2008 is recognized based on the effective interest method, using the brought forward balances of hire purchase receivables as of January 1, 2008 as the beginning balances. The method of revenue recognition under the effective interest method will also be used for the remaining period of the hire-purchase contract. 2) Commissions and expenses incurred in hire-purchase business The Bank changed its method of recognition of direct expenses in hire purchase contracts (that is, initial direct costs incurred at the inception of contracts, such as commission expenses), from the straight-line basis method to the effective interest method, in the same manner as for income. Also, such expenses are shown as deducted from interest income throughout the contract period. As for deferred interest income on hire purchase, this is shown net of commission expenses and initial direct cost incurred at the inception of contracts. 3.1.2 TAS 51 çIntangible Assetsé disallows amortization of intangible assets with indefinite useful life but the impairment of intangible assets is required to be tested every financial period which is effective for financial period beginning on or after January 1, 2008. The change in accounting policy is applied prospectively and the subsidiary which is the securities business has not restated the previous yearûs financial statements. The subsidiary which is the securities business ceases amortization of TFEX membership fee and Settade One Click fee from January 1, 2008. The companyûs management will assess the impairment of such assets when there are indications of impairment and cost cannot be recovered. 3.1.3 According to the Notification of the Bank of Thailand No. Sor Nor Sor 70/2551 regarding preparation and disclosure of the consolidated financial statement of banks and holding company, which is a parent company of financial group, dated August 3, 2008, to comply with the Thai Accounting Standard No. 44 çConsolidated financial statements and separate financial statementsé, for the preparation of the consolidated financial statements, the Bank changed the accounting policy of the subsidiaries, which are mutual funds owned more than 50% by the Bank, for properties foreclosed, investment in properties, investment in loan and investment in securities to use the same accounting policy as the Bank as follows: 1. Properties foreclosed and investment in properties are stated at the lower of the outstanding loan principal or fair value, changed from fair value. 2. Unrealized gain or losses resulting from changes in fair value of investment in loans and investment in securities will be recognized as a separate component of shareholdersû equity, not in the statement of income. According to the change of subsidiaryûs accounting policy for the preparation of the consolidated financial statements, the Bank restated the consolidated financial statements for 2007, the results from such changes are as follows: Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS December 31, 2007 Balance sheet Assets Interbank and money market items increase Investment in properties, net decrease Properties foreclosed, net decrease Total assets decrease Liabilities and shareholdersû equity Fair value reserves on investment in loans increase Fair value reserves on available-for-sale securities decrease Retained earnings decrease Minority interests decrease Total liabilities and shareholdersû equity decrease

669,978 (65,734,507) (1,610,849,295) (1,675,913,824) 1,503,495,367 (12,314,779) (3,163,920,631) (3,173,781) (1,675,913,824) Annual Report 2008 ë Kiatnakin Bank Public Company Limited

103

Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2007 Statements of income Gain on revaluation of investment increase Impairment gain on investment in loans increase Impairment loss on investment in properties increase Loss from sale of foreclosed assets increase Minority interest in net income of subsidiaries decrease Net income decrease Earnings per share Basic earnings per share decrease Diluted earnings per share decrease

151,427,621 50,523,045 (5,074,726) (240,406,410) 448,299 (43,082,171) (0.08) (0.08)

3.2 Change in accounting estimation For the year ended December 31, 2008, the Bank changed the accounting estimation of allowance for doubtful account of hirepurchase receivable in order to comply with the Notification of the Bank of Thailand dated August 3, 2008. The Bank provided allowance for doubtful accounts of hire-purchase receivables by using collective Approach method considering historical loss experience of loan which are calculated by the probability of default and the percentage of loss given default. In addition, the Bank also adjusted historical loss experience with the significant factors related to the ability to pay, such as the increasing of loss on sales of assets. For the year ended December 31, 2007, the Bank provided allowance for doubtful account of hire-purchase receivable based on the aging analysis for each class of debts. The Bank calculated allowance for doubtful accounts for normal and special mentioned by using the percentage of the Bank of Thailand没s guidelines. The Bank calculated allowance for doubtful accounts for substandard and doubtful debt based on historical loss experience which were reviewed every 6 months. The change resulted in the increase in allowance for doubtful accounts as at December 31, 2008 in the amount of Baht 257.61 million.

4. SIGNIFICANT ACCOUNTING POLICIES 4.1 Cash and cash equivalents Cash and cash equivalents includes cash on hand and cash on collection. 4.2 Investment in securities 4.2.1 Basis of investment classification Investments other than investments in subsidiaries and interest in joint ventures are classified into the following four categories: trading, held-to-maturity, available-for-sale and general investments. The classification is dependent on the purpose for which the investments were acquired. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis. Investments that are acquired principally for the purpose of generating a profit from short-term fluctuations in price are classified as trading investments and included in short-term investments. Investments with fixed maturity that the management has the intent and ability to hold to maturity are classified as held-to-maturity and are included in long-term investments, except for maturities within 12 months from the balance sheet date, which are classified as short-term investments. Investments intended to be held for an indefinite period of time, which may be sold in response to liquidity needs or changes in interest rates, are classified as available-for-sale; and are included in long-term investments unless management has expressed the intention of holding the investment for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they are included in short-term investments. Investments in non-marketable equity securities are classified as general investments. 104

4.2.2 Trading and available-for-sale investments Trading and available-for-sale investments are stated at fair value. The fair value of debt securities traded in the established market is based on the quoted prices or yields of the debt securities at the balance sheet date, or the latest trading date prior to the balance sheet date if there was no trading on that date. If the debt securities are not traded in the established market, the fair value is calculated by reference to the risk-free yield curve adjusted by an appropriate risk premium. The fair value of equity securities is based on the last bid price quoted by the Stock Exchange of Thailand at the balance sheet date. The fair value of unit trusts is determined from the net assets value (NAV) published by mutual fund management companies as the fund managers. Unrealized gain or loss resulting from changes in fair value of trading investments are recognized in the statements of income. Unrealized gain or loss resulting from changes in fair value of available-for-sale investments are recognized as a net amount in a separate component of shareholders没 equity, except where the securities are sold out, the realized gain or loss will be recognized in the statements of income. 4.2.3 Held-to-maturity investments Held-to-maturity investments are carried at amortized cost using the effective yield method. 4.2.4 General investments General investments are stated at cost less allowance for impairment in value. 4.2.5 Investments in subsidiaries Investments in subsidiaries are stated at cost method in the separate financial statements. Subsidiaries are entities in which Kiatnakin Bank Public Company Limited has an interest of more than one half of the voting rights or otherwise has power to exercise control over the financial and operating policies are consolidated. Subsidiaries are consolidated from the date on which control is transferred to the group and are no longer consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date of acquisition plus costs directly attributable to the acquisition. All intercompany transactions, balances and unrealized gains on transactions between group companies are eliminated; unrealized losses are also eliminated unless cost cannot be recovered. Where necessary, significant accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Bank. Separate disclosure is made for minority interests in the consolidated balance sheet and consolidated statement of income. A list of the subsidiaries is set out in Note 2.2. A test of impairment is carried out when there is a factor indicating that an investment might be impaired. If the carrying amount of the investment is higher than its recoverable amount, impairment loss is charged to the statements of income. 4.2.6 Income recognition relative to investment On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the statement of income. When partly disposing of a particular investment in debt or equity securities, the carrying amount of disposed part is determined by the weight average carrying amount of the total holding of the investment. 4.3 Valuation of investment in loans The investment in loans is the investment in commercial and hire-purchase loans with and without collateral. These commercial and hire-purchase loans have no readily ascertainable market values available and, therefore, are reported at estimated fair value. Unrealized gain or losses resulting from changes in fair value of investment in loans of the bank are reported as a net amount in a separate component of shareholders没 equity, except where the investments are sold out, the realized gain or losses will be recognized in the statements of income. 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 income. Annual Report 2008 毛 Kiatnakin Bank Public Company Limited

105

For the Bank, where there is a change in terms or contracts, the investment in loans will be transferred to loans account to comply with the Bank of Thailand没s Notification No. Thor Por Tor. Sor Nor Sor. (31) Wor. 2775/2545 Re: Accounting procedures regarding purchasing or taking of transfer of loan debtors and supervision guidelines. The fair value was adopted for transfer. The difference between net book value and fair value is recognized as gain on revaluation in the statement of income. 4.4 Valuation of investment in property The investment in property is the investment in real estate business of the subsidiaries, which are mutual funds. These investments generally have no readily ascertainable market values available and, therefore, are reported at the lower of cost or estimated fair value. 4.5 Allowance for doubtful accounts The Bank classifies its loan portfolios into categories and sets allowance for doubtful accounts for loans in accordance with the Bank of Thailand没s Notification dated August 3, 2008 and with the management estimation over the allowance for doubtful accounts from the ending balance of loans. The period of time that a loan is past due and the ability to repay the debt are the principal criteria utilized in classifying a loan. Allowance for doubtful accounts for securities business receivables has been determined on the basis in accordance with the requirements of the Securities and Exchange Commission没s Notification dated February 15, 2001. The increase or decrease in allowance for doubtful accounts is recorded as expenses or decrease in expenses during the accounting period. Bad debts are written off during the year in which they are identified. Bad debts recovery is recorded by credit to bad debts and doubtful accounts expenses in the statements of income. 4.6 Troubled debt restructuring The Bank accounts for troubled debt restructuring in accordance with guidelines approved by the Bank of Thailand. The Bank records the assets or equity securities transferred to the Bank for debt settlements at the lower of fair values of the assets or equity securities, less estimated selling expenses, or the amount of investment in receivables (including non-accrued interest income at the restructuring date). In case that the debt restructuring involves modifications of terms of receivables, the fair value of investment in receivables after restructuring is based on the net present value of the expected future cash flows, using the Minimum Lending Rates (MLR) prevailing at the restructuring date. Losses arising from restructuring by waiver of principal or recorded accrued interest receivable, less recorded allowance, are recognized in the statement of income when incurred. Legal fees and other direct costs incurred to affect the debt restructuring are expensed when incurred. 4.7 Properties foreclosed Properties foreclosed represent land and/or construction, leasehold, condominium and repossessed vehicles. The repossessed land and/or construction, leasehold and condominium are stated at the lower of the outstanding loan principal including accrued interest or fair value. The repossessed vehicles are stated at the lower of the outstanding loan principal including accrued interest and accrued value added tax or fair value. Fair value of the repossessed vehicles is based on the external appraised value less estimated discount according to risk that might incur of each repossessed vehicle. 4.8 Premises and equipment and depreciation Land is stated at historical cost. Buildings and equipment are stated at historical cost less accumulated depreciation. Depreciation is calculated on the straight-line basis to write off the cost of each asset, except for land, to its residual value over its estimated useful life as follows: Buildings Equipments Furnitures and fixtures Vehicles

106

10 - 20 years 3 - 5 years 5 years 5 years

Gains and losses on disposal of fixed assets determined by comparing proceeds with the carrying amount and are included in operating profit. 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 group. Major renovations are depreciated over the remaining useful life of the related asset. 4.9 Intangible assets 4.9.1 Computer software Acquired computer software licenses are capitalized on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortized over their estimated useful lives of 10 years. Expenditure which enhances or extends the performance of computer software programs beyond their original specifications is recognized as a capital improvement and added to the original cost of the software. Computer software development costs are recognized as assets and are amortized using the straight-line method over their estimated useful lives, not exceeding a period of 10 years. 4.9.2 TFEX membership license As at December 31, 2008, the subsidiary with is the securities business recognized TFEX membership license as intangible asset without amortization. As at December 31, 2007, the subsidiary with is the securities business recognized TFEX membership license as intangible assets and amortized using the straight-line method over the useful life of 5 years. 4.10 Foreign currency transactions Foreign currencies transactions are accounted for at the exchange rates prevailing at the date of the transaction. Monetary assets and liabilities at the balance sheet date denominated in foreign currencies are translated into Baht using the reference rates of exchange of the Bank of Thailand ruling as of that date. Gains and losses on exchange resulting from the settlements and the translation of monetary assets and liabilities denominated in foreign currencies, are recognized in the statement of income. 4.11 Commercial papers sold Sales with recourse of commercial papers without bankûs or finance companyûs acceptance or aval are recorded as liabilities under the caption of çLiabilities under commercial papers soldé. Sales with recourse of commercial papers with bankûs or finance companyûs acceptance or aval are presented as off-balance sheet contingencies. 4.12 Accounting for lease Leases of premises or equipment which substantially transfer all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalized at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Each lease payment is allocated to the principal and to the finance charges so as to achieve a constant rate on the finance balance outstanding. The outstanding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the statement of income over the lease period so as to achieve a constant periodic rate of interest on the remaining balance of the liability for each period. The premises or equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset or the lease term. 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 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 recognized as an expense in the period in which termination takes place. 4.13 Interest on loans and deposits Interest on loans and deposits is recognized as income on the accrual basis, except in the case of interest on loans which is over three months past due from the due date where interest is recognized on collection basis. The Bank reverses accrued interest income on loan when its principal or interest payment has become over three months past due to comply with the Bank of Thailandûs Notification dated December 24, 1998. The Bank continues its income recognition on the accrual basis when the entire amount of the principal and overdue interest has been paid.

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4.14 Hire-purchase and financial lease income For the year ended December 31, 2008, income from hire-purchase contracts is recognized on the effective interest method. For the year ended December 31, 2007, hire-purchase income is calculated by the 莽sum of the installment digits茅 method and recognized on the accrual basis. Interest on hire-purchase which is over three months past due from the due date is recognized on collection basis. The Bank reverses accrued interest income on hire purchase when its principal or interest payment has become over three months past due to comply with the Bank of Thailand没s Notification dated December 24, 1998. The Bank continues its income recognition on the accrual basis when the entire amount of the principal and overdue interest has been paid. Lease contracts are recorded by financial lease method. Income from financial lease contracts is recognized on the effective interest method over the year of contracts. 4.15 Interest and dividend income Interest on investment is recognized as income on accrual basis except in the case of interest on debt securities which is over three months past due from the due date where interest is recognized on collection basis. Dividend income is recognized when dividend is declared. 4.16 Income from investment in loans Interest on investment in loans is recognized as income on the collection basis based on the outstanding loans multiplied by the effective yield according to contract or new agreement. 4.17 Fees and services income Fees and services are recognized as income when services are rendered. 4.18 Expenses and dividend recognition Expenses are recognized on an accrual basis. Dividends are recorded in the consolidated and separate financial statements in the period in which they are approved by the shareholders. 4.19 Income taxes The group does not recognize income taxes payable or receivable in future periods in respect of temporary differences arising from differences between the tax base of assets and liabilities and their carrying amounts in the financial statements. 4.20 Basic earnings per share Basic earnings per share amount are computed by dividing the net income for period by the weighted-average number of paidup ordinary shares in issue during the period. The diluted earnings per share are therefore computed by dividing the net income for period adjusted by expense (after tax effect) saved from the conversion of dilutive potential ordinary shares, by the weighted-average number of ordinary shares (included potentially dilutive shares). 4.21 Provident fund The group operates a provident fund that is a defined contribution plan, the assets of which are held in a separate trust fund. The provident fund is funded by payments from employees and by the relevant group companies. Contributions to the provident fund are charged to the statement of income in the period to which they relate. 4.22 Post employment benefit The group provides for post employment benefits, payable to employees under Thai Labour Law. The amounts payable in the future depend on the salary and the maximum years of service of the respective employees. The liability arising as a result of such regulation is recorded by the present value of estimated future cash outflows using interest rates of government bond which have terms to maturities approximating the terms of the related liabilities. 4.23 Derivatives The Bank has entered into off-balance sheet transactions involving derivative financial instruments in order to support its customers没 needs and hedge against exchange rate risk and interest rate risk. Financial derivative contracts are recorded as offbalance sheet items. Forward foreign exchange contracts are marked to fair value using the market price as at the balance sheet date. Gains and losses from the translation are included in determining income. 108

For interest rate swap contracts, the Bank recognized the net amount of interest to be received from or paid to the counterparty under the interest rate swap contracts as income or expenses on an accrual basis. Obligations under derivatives business which a subsidiary enter into for trading purpose are regarded as off-balance sheet items. Amounts pledged as security for derivatives trading are recorded as receivable at Thailand Clearing House (TCH) and gain or loss from changes in the value of derivatives are included in the income statements. The fair value of derivatives is based on the daily settlement price quoted by Thailand Futures Exchange Public company Limited.

5. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY Preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions in certain circumstances, affecting reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from these estimates. The significant areas requiring management to make judgments and estimates that affect reported amounts and disclosures are as follows: 5.1 Allowance for doubtful accounts 5.1.1 Loans The Bank classifies its loan portfolios into categories and sets allowance for doubtful accounts for loans in accordance with the Bank of Thailandûs Notification dated August 3, 2008 and with the management estimation over the allowance for doubtful accounts from the ending balance of loans. The period of time that a loan is past due and the ability to repay the debt are the principal criteria utilized in classifying a loan. The collateral value (appraised by an independent valuer or internal valuer every 3 years) used in calculating the required allowance for doubtful accounts is based on the type of collateral according to the Bank of Thailand guideline. The Bank sets loans reserve at the rate 100% for the discrepancies between debts and net present value of estimated future cash flows from selling of collateral or from collection except for the normal and specially mentioned debts where reserve is set at the rates of 1% and 2% per annum, respectively. 5.1.2 Hire - purchase receivables For the year ended December 31, 2008, the Bank provided allowance for doubtful accounts on hire-purchase loans by using Collective Approach method which considers historical loss experience of loan which are calculated by the probability of default and the percentage of loss given default. In addition, the Bank adjusted historical loss experience with the significant factor related to the ability to repay loan in the future such as the increasing of loss on sales of foreclosed assets. In addition, the Bank considered the additional allowance for doubtful accounts for hire-purchase receivables regard to Bank of Thailandûs regulation in order to comply with the Bank of Thailandûs Notification dated August 3, 2008 by considering the valuation of collateral regarding the Bank of Thailandûs guideline. The Bank provided the allowance for doubtful accounts for hire-purchase receivables at the rate of 100% for the discrepancies between debts and net present value of estimated future cash flow from selling of collaterals and discounted for the holding period regarding the Bank of Thailandûs guideline. For the normal and specially mentioned debts, the Bank provided the allowance for doubtful accounts at the rate of 1% and 2%, respectively. For the year ended December 31, 2007, the Bank provided allowance for doubtful accounts on hire-purchase loans based on the aging analysis for each class of debts according to the guidelines of the Bank of Thailand. The Bank calculated reserve for sub-standard and doubtful debts based on historical loss experience which was reviewed every 6 months. 5.1.3 Securities business receivables Allowance for doubtful accounts for securities business receivables has been determined on the basis in accordance with the requirements of the Securities and Exchange Commissionûs Notification dated February 15, 2001.

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5.2 Valuation of investment in loans Fair value of investment in loans is determined by the net present value of estimated future cash flows from selling of collateral, appraised by an external independent valuer or internal valuer according to the Bank of Thailand没s guideline, discounted by interest rate at 7% per annum with the expected selling period of 4-5 years but not exceeding the balance in the original contract. The values assigned to the investment portfolio are based upon available information and assumptions which do not necessarily represent amounts which might ultimately be realized because of the uncertainty of economic没s circumstance which is the significant factor to determine the fair value. The subsidiaries, which are mutual funds, which invest in the investment in loans measured the fair values of the investment in restructured commercial loans based upon net present value of estimated future cash flows (interest rate as identified in restructuring agreements). Fair value of the investment in non-restructured commercial loans is based upon the net present value of estimated future cash flows from selling of collateral, appraised by an external independent valuer or internal valuer according to the Bank of Thailand没s guideline, discounted by interest rate at 7% per annum with the expected selling period of 4-5 years but not exceeding the balance in the original contract. 5.3 Valuation of investment in property Fair value is calculated from the appraisal value, appraised by an external independent valuer or internal valuer according to the Bank of Thailand guideline and discounted by the risk premium according to the holding period. The values assigned to the investment portfolio are based upon available information and assumptions which do not necessarily represent amounts which might ultimately be realized because of the uncertainty of economic没s circumstance which is the significant factor to determine the fair value. 5.4 Valuation of properties foreclosed The repossessed vehicles are stated at the lower of the outstanding loan principal including accrued interest and accrued value added tax or fair value. Fair value of the repossessed vehicles is based on the external appraised value less estimated discount according to risk that might incur of each repossessed vehicle. 5.5 Provision for post - employment benefit The Bank provides the provision for post employment benefits, payable to employees by estimation from the amount to pay to employees in the future depending on the salary and the maximum years of service of the respective employees and discounts the value of future cash outflows by using interest rates of government bond.

6. INTERBANK AND MONEY MARKET ITEMS - DOMESTIC ITEMS (ASSETS) Interbank and money market items (assets) as at December 31, 2008 and 2007 comprised of: Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS On demand

The Bank of Thailand and FIDF Commercial Banks Finance, Securities and Credit froncier companies Total Add : Accrued interest receivables Less : Allowance for doubtful accounts Total

110

2008 Term

Total

449,078,816 16,820,000,000 17,269,078,816 536,530,733 1,400,001,798 1,936,532,531

On demand

2007 Term

Total

443,659,795 - 443,659,795 503,929,046 500,001,759 1,003,930,805

- (330,000,000) - 330,000,000 985,609,549 18,239,421,258 19,225,030,807 1,274,588,841 495,001,759 1,769,590,600 19,419,460 19,419,460 - (3,000,000) (5,000,000) (8,000,000) 985,609,549 18,239,421,258 19,225,030,807 1,274,588,841 495,001,759 1,769,590,600

Unit : Baht SEPARATE FINANCIAL STATEMENTS On demand

The Bank of Thailand and FIDF Commercial Banks Finance, Securities and Credit froncier companies Total Add : Accrued interest receivables Less : Allowance for doubtful accounts Total

2008 Term

Total

2007 Term

On demand

Total

449,078,816 230,206,644

16,820,000,000 1,400,001,798

17,269,078,816 1,630,208,442

443,659,795 253,290,422

500,001,759

443,659,795 753,292,181

679,285,460

18,220,001,798

18,899,287,258

300,000,000 996,950,217

500,001,759

300,000,000 1,496,951,976

19,419,460

679,285,460

18,239,421,258

18,918,706,718

(3,000,000) 993,950,217

(5,000,000) 495,001,759

(8,000,000) 1,488,951,976

As at December 31, 2008, there is no fixed deposit at Bank used as guarantee in the consolidated and separate financial statements (December 31, 2007: nil).

7. SECURITIES PURCHASED UNDER RESALE AGREEMENTS Securities purchased under resale agreements as at December 31, 2008 and 2007 comprised of : Unit : Baht CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2008 2007 980,000,000

Government and Bank of Thailand没s bonds

8. INVESTMENT IN SECURITIES 8.1 Classification of investments in securities As at December 31, 2008 and 2007, the Bank and subsidiaries classify their investments in securities as follows : Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 Cost/ Cost/ Amortized cost Fair value Amortized cost Short-term investment Trading securities Equity securities Listed securities Unit trusts Total Add (Less) Provision for changes in value of investment Net equity securities Net trading securities

Fair value

71,484,941 35,114,022 106,598,963

66,412,600 24,926,029 91,338,629

27,468,819 63,000,000 90,468,819

27,542,000 89,719,818 117,261,818

(15,260,334) 91,338,629 91,338,629

91,338,629 91,338,629

26,792,999 117,261,818 117,261,818

117,261,818 117,261,818

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Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 Cost/ Fair value Cost/ Amortized cost Amortized cost Available-for-sale securities Debt instruments Corporate debt instruments Government and state enterprise securities Total Add (Less) Provision for changes in value of investment Net debt instruments Equity securities Listed securities Unit trusts Total Add (Less) Provision for changes in value of investment Net equity securities Net available-for-sale securities Held to maturity securities Government and state enterprise securities Net short-term investment Long-term investment Available-for-sale securities Debt instruments Corporate debt instruments Government and state enterprise securities Total Add (Less) Provision for changes in value of investment Net debt instruments Net available-for-sale securities Held to maturity securities Government and state enterprise securities General investment Equity securities Unit trust Total general investment Net long-term investment Net investment in securities

112

Fair value

36,000 667,463,818 667,499,818

669,019,392 669,019,392

46,000 978,285,168 978,331,168

978,099,233 978,099,233

1,519,574 669,019,392

669,019,392

(231,935) 978,099,233

978,099,233

205,938,666 50,170,897 256,109,563

135,979,814 37,652,981 173,632,795

388,051,941 50,170,896 438,222,837

488,865,907 60,128,754 548,994,661

(82,476,768) 173,632,795 842,652,187

173,632,795 842,652,187

110,771,824 548,994,661 1,527,093,894

548,994,661 1,527,093,894

933,990,816

1,621,810,814 3,266,166,526

1,642,101,887 3,286,457,599

6,404,404

6,451,886

1,736,516,651 1,742,921,055

1,820,918,187 1,820,918,187

6,451,886

77,997,132 1,820,918,187 1,820,918,187

1,820,918,187 1,820,918,187

(6,451,886) -

1,014,939,893

1,036,574,196

19,075,351 20,000 19,095,351 1,840,013,538 2,774,004,354

58,474,969 17,967 58,492,936 1,879,411,123 2,813,401,939

19,075,352 20,000 19,095,352 1,034,035,245 4,300,201,771

71,950,917 18,889 71,969,806 1,108,544,002 4,395,001,601

Unit : Baht SEPARATE FINANCIAL STATEMENTS 2008

Short-term investment Available-for-sale securities Debt instruments Corporate debt instruments Government and state enterprise securities Total Add (Less) Provision for change in value of investments Total debt instruments-net Equity securities Listed securities Unit trusts Total Add (Less) Provision for changes in value of investments Net equity securities Net available-for-sale securities Held to maturity securities Government and state enterprise securities Net short-term investment Long-term investment Available-for-sale securities Debt instruments Government and state enterprise securities Total Add Provision for changes in value of investments Net debt instruments Net available-for-sale securities Held to maturity securities Government and state enterprise securities General investment Equity securities Unit trusts Total general investment Net long-term investment Investment in subsidiaries Equity securities Unit trusts Total investment in subsidiaries Net investment in securities

2007

Cost/ Amortized cost

Fair value

Cost/ Amortized cost

Fair value

36,000 312,792,035 312,828,035

314,355,106 314,355,106

46,000 893,292,233 893,338,233

893,106,529 893,106,529

1,527,071 314,355,106

314,355,106

(231,704) 893,106,529

893,106,529

165,804,805 50,100,000 215,904,805

115,295,566 37,597,176 152,892,742

346,571,989 50,100,000 396,671,989

460,231,957 60,032,131 520,264,088

(63,012,063) 152,892,742 467,247,848

152,892,742 467,247,848

123,592,099 520,264,088 1,413,370,617

520,264,088 1,413,370,617

467,247,848

1,621,810,814 3,035,181,431

1,642,101,887 3,055,472,504

1,736,516,651 1,736,516,651

1,820,918,187 1,820,918,187

84,401,536 1,820,918,187 1,820,918,187

1,820,918,187 1,820,918,187

1,014,939,893

1,036,574,196

11,482,127 10,000 11,492,127 1,832,410,314

41,826,658 8,983 41,835,641 1,862,753,828

11,482,129 10,000 11,492,129 1,026,432,022

58,875,485 9,445 58,884,930 1,095,459,126

649,999,930 6,692,123,802 7,342,123,732 9,641,781,894

599,841,499 8,408,360,605 9,008,202,104 11,338,203,780

649,999,930 7,189,287,935 7,839,287,865 11,900,901,318

711,150,564 10,302,936,650 11,014,087,214 15,165,018,844

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113

8.2 Time to maturity of debt securities Time to maturity of the Bank and subsidiaries没 investment in debt securities classified as available-for-sale securities and heldto-maturity securities as at December 31, 2008 and 2007 are presented as follows. Unit : Baht

On demand Available-for-sale debt instruments Corporate debt instruments Government and state enterprise securities Total Add (Less) Provision for changes in value of investment Net debt securities

CONSOLIDATED FINANCIAL STATEMENTS 2008 Mature Mature within Mature within within 1 year 2 - 5 years 6 - 10 years

Total

6,404,404

36,000

6,440,404

6,404,404

667,463,818 667,499,818

1,387,181,682 1,387,181,682

349,334,969 349,334,969

2,403,980,469 2,410,420,873

(6,404,404) -

1,519,574 669,019,392

54,878,745 1,442,060,427

29,522,791 378,857,760

79,516,706 2,489,937,579

Unit : Baht

On demand Available-for-sale debt instruments Corporate debt instruments Government and state enterprise securities Total Less Provision for changes in value of investment Held to maturity debt instruments Government and state enterprise securities Net debt securities

CONSOLIDATED FINANCIAL STATEMENTS 2007 Mature Mature within Mature within within 1 year 2 - 5 years 6 - 10 years

Total

6,451,886 6,451,886 (6,451,886) -

46,000 978,285,168 978,331,168 (231,935) 987,099,233

6,497,886 978,285,168 984,783,054 (6,683,821) 978,099,233

1,621,810,814 2,599,910,047

311,226,423 311,226,423

703,713,470 703,713,470

2,636,750,707 3,614,849,940

Unit : Baht Mature within 1 year Available-for-sale debt instruments Corporate debt instruments Government and state enterprise securities Total Add Provision for changes in value of investment Net debt securities

36,000 312,792,035 312,828,035 1,527,071 314,355,106

SEPARATE FINANCIAL STATEMENTS 2008 Mature within Mature within 2 - 5 years 6 - 10 years 1,387,181,682 1,387,181,682 54,878,745 1,442,060,427

349,334,969 349,334,969 29,522,791 378,857,760

Total 36,000 2,049,308,686 2,049,344,686 85,928,607 2,135,273,293

Unit : Baht Mature within 1 year Available-for-sale debt instruments Corporate debt instruments Government and state enterprise securities Total Less Provision for changes in value of investment Held to maturity debt instruments Government and state enterprise securities Net debt securities 114

SEPARATE FINANCIAL STATEMENTS 2007 Mature within Mature within 2 - 5 years 6 - 10 years

Total

46,000 893,292,233 893,338,233 (231,704) 893,106,529

1,621,810,814 2,514,917,343

311,226,423 311,226,423

703,713,470 703,713,470

2,636,750,707 3,529,857,236

As at December 31, 2008, the Bank has no deposit of government and state enterprise securities at Bank of Thailand. As at December 31, 2007, the Bank has deposited government and state enterprise securities at Bank of Thailand for the guarantee of securities with repurchase agreement in Bank of Thailand market amounting to Baht 2,301 million. For the year ended December 31, 2008, the Bank transferred debt instruments of Baht 3,724 million from held to maturity securities to available for sale securities. As a result, a gain of Baht 151 million was recognized in shareholdersû equity. 8.3 Investments in companies with holdings of 10% and upwards As at December 31, 2008 and 2007, investments in companies other than subsidiaries, of which the Bank and subsidiaries hold 10% and upwards of the paid-up capital in each company, classified by industry, are as follows: CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2008 Investment amount Principal activities At cost (Baht) Holding (%) Other companies BTM Leasing Co., Ltd. Attakorn Co., Ltd. CMIC Development Co., Ltd.* Nippon Pack (Thailand) PCL. Fund (which is not a legal juristic entity) Ayudthya Tuntawee Fund 5**

Leasing Hire-purchase Real estate Packaging

3,085,200 1 21,954,436

10.00 10.00 80.58 11.01

Investing in debt and equity securities

50,000,000

33.78

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2007 Investment amount Principal activities At cost (Baht) Holding (%) Other companies BTMU Leasing Co., Ltd. Attakorn Co., Ltd. CMIC Development Co., Ltd.* Nippon Pack (Thailand) PCL. Fund (which is not a legal juristic entity) Kiatnakin Fixed Income Fund Ayudthya Tuntawee Fund 5**

Leasing Hire-purchase Real estate Packaging Investing in bonds and promissory Investing in debt and equity securities

3,085,200 1 21,954,436

10.00 10.00 80.58 11.01

10.33

50,000,000

87.46

* The consolidated financial statements for the year ended December 31, 2008 do not consolidate financial statements of CMIC Development Company Limited which the Bank holds 80.58% of common shares since the shares were received from conversion of debts to equity according to the debt restructuring agreement. This practice is in accordance with the Notification of Federation of Accounting Professions No. 27/2550: Exemption of TAS 44 and TAS 45 for financial institutions. In the unaudited financial statements as at December 31, 2008 of CMIC Development Company Limited, total assets amounted to Baht 1,379.71 million (December 31, 2007: Baht 1,332.11 million) and negative shareholdersû equity amounted to Baht 111.28 million. (December 31, 2007: negative shareholdersû equity amounted to Baht 193.07 million). ** The Bank has no control over the Ayudthaya Tuntawee Fund 5ûs operations therefore the Bank did not consolidate the financial statements of this fund. Annual Report 2008 ë Kiatnakin Bank Public Company Limited

115

116 Securities Unit trust* Unit trust* Unit trust* Unit trust* Unit trust** Unit trust***

Ordinary shareholder Unit holder Unit holder Unit holder Unit holder Unit holder Unit holder

Relationship 650,000,000 980,875,375 1,812,061,257 1,908,328,946 786,984,835 43,817,463 933,405,003

* Investment in commercial loans auction from Financial Restructuring Authority (FRA). ** Investment in loans, which have properties as collateral or properties *** Investment in loans or properties

Kiatnakin Securities Co., Ltd. Asia Recovery 1 Fund Asia Recovery 2 Fund Asia Recovery 3 Fund Thai Restructuring Fund Asia Recovery Property Fund 1 Asia Recovery Property Fund 3

Principal activities

Paid-up capital/ outstanding Capital

8.4 Investment in subsidiaries As at December 31, 2008 and 2007, the Bank has investments in subsidiaries as follows :

649,999,930 1,013,208,945 1,898,724,023 2,014,395,044 778,863,948 45,931,842 941,000,000 7,342,123,732

Cost -

Impairment 649,999,930 1,013,208,945 1,898,724,023 2,014,395,044 778,863,948 45,931,842 941,000,000 7,342,123,732

Net cost

SEPARATE FINANCIAL STATEMENTS 2008 Cost method

99.99 99.95 99.59 99.97 98.91 99.50 98.77

Holding (%)

41,599,996 257,936,628 1,371,465,958 614,307,280 88,554,980 2,373,864,842

Dividend paid by subsidiaries

Unit : Baht

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

117

Securities Unit trust* Unit trust* Unit trust* Unit trust* Unit trust** Unit trust***

Ordinary shareholder Unit holder Unit holder Unit holder Unit holder Unit holder Unit holder

Relationship 650,000,000 980,875,375 1,812,061,257 1,908,328,946 786,984,835 43,817,463 933,405,003

* Investment in commercial loans auction from Financial Restructuring Authority (FRA). ** Investment in loans, which have properties as collateral or properties *** Investment in loans or properties

Kiatnakin Securities Co., Ltd. Asia Recovery 1 Fund Asia Recovery 2 Fund Asia Recovery 3 Fund Thai Restructuring Fund Asia Recovery Property Fund 1 Asia Recovery Property Fund 3

Principal activities

Paid-up capital/ outstanding Capital 649,999,930 1,013,208,945 1,898,724,023 2,014,395,044 778,863,948 45,931,842 941,000,000 7,839,287,865

Cost -

Impairment 649,999,930 1,013,208,945 1,898,724,023 2,014,395,044 778,863,948 45,931,842 941,000,000 7,839,287,865

Net cost

SEPARATE FINANCIAL STATEMENTS 2008 Cost method

99.99 99.95 99.59 99.97 98.91 99.50 98.77

Holding (%)

81,249,991 951,684,191 413,652,336 476,946,646 1,923,533,164

Dividend paid by subsidiaries

Unit : Baht

According to the Notification of the Securities and Exchange Commission No. Kor.Jor. 1/2008 dated January 28, 2008 Re: Rules, Conditions and Procedures Governing the Disclosure of Financial Status and Result of Business Operations of the Securities Issuing Companies, the Bank and subsidiaries没 purchases and sales of investments in securities during the years ended December 31, 2008 and 2007 are as follows: Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS SEPARATE FINANCIAL STATEMENTS

2008 Purchases of investment in securities Sales of investment in securities Net Purchases (sales) of investment in securities

4,175,045,484 (4,341,028,614) (165,983,130)

2007

2008

3,684,192,737 (4,503,729,604) (819,536,867)

165,924,850 (346,692,035) (180,767,185)

2007 516,966,455 (1,041,359,852) (524,393,397)

9. INVESTMENT IN LOANS - NET As at December 31, 2008 and 2007, the details of bidding receivables from the Financial Restructuring Authority (FRA), the Legal Execution Department (LED) and purchasing receivables are as follows: Unit : Baht

Purchase date Kiatnakin Bank Public Company Limited Receivables auctioned from FRA September 30, 1999 December 15, 1999 Receivables purchased Investment in hire-purchase loans transferred from RT-KK Nakornluang Surat Leasing Co., Ltd. Receivables auctioned from LED Total Subsidiaries (unit trust)

118

Number of customers

2008 Outstanding balance per original and renewed agreements

380 226

2,597,661,690 772,697,069

691 521 1,631 3,449

100,290,368 40,630,224 14,501,920,510 18,013,199,861

7,728,708 40,929,452 25,095,260 2,254,349,312 2,186,385,689 2,818,904,502 2,637,444,196

2,127 5,576

8,823,291,496 26,836,491,357

1,316,963,661 2,475,555,254 4,135,868,163 5,112,999,450

Cost

454,860,070 61,036,960

Fair value

363,980,796 61,982,451

Unit : Baht

Purchase date Kiatnakin Bank Public Company Limited Receivables auctioned from FRA September 30, 1999 December 15, 1999 Receivables purchased January 2000 - December 2000 Investment in hire-purchase loans transferred from RT-KK Nakornluang Surat Leasing Co., Ltd. Receivables auctioned from LED Total Subsidiaries (unit trust)

Number of customers

2007 Outstanding balance per original and renewed agreements

398 252

2,725,827,110 955,161,768

570,427,837 104,977,570

463,040,482 115,093,293

44,810,160

35,226,196

10,788,000

696 816 1,756 3,919 2,315 6,234

101,121,186 85,021,342 15,245,818,488 19,157,760,054 9,846,222,273 29,003,982,327

7,783,984 85,764,406 3,314,743,721 4,118,923,714 1,577,574,362 5,696,498,076

81,282,865 3,312,484,518 3,982,689,158 2,893,495,409 6,876,184,567

Cost

Fair value

During the year ended December 31, 2008, the impairment charge of Baht 454.19 million and Baht 499.06 million in consolidated and separate financial statements, respectively for investment in loans was made as a result of the uncertainty in the abilities to repay. (for the year ended December 31, 2007: Baht 84.89 million and Baht 135.41 million, respectively).

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10. LOANS AND ACCRUED INTEREST RECEIVABLE 10.1 Classified by product as at December 31, 2008 and 2007 CONSOLIDATED FINANCIAL STATEMENTS 2008 2007

Unit : Baht

SEPARATE FINANCIAL STATEMENTS 2008 2007

Banking business loans

Loans Hire-purchase receivables* Leasing receivables* Total banking business loans Add : Accrued interest receivable Less : Allowance for doubtful accounts Allowance for troubled debt restructuring Net banking business loans and accrued interest receivable Securities business receivables Cash accounts Margin accounts Total securities business receivables Add : Accrued interest receivable Less : Allowance for doubtful accounts Net securities business receivables and accrued interest receivable Net loans and accrued interest receivable

23,185,496,034 57,138,766,079 238,580,246 80,562,842,359 546,042,093 (3,462,433,719)

22,676,640,518 42,793,647,677 179,440,861 65,649,729,056 412,420,789 (2,954,440,202)

23,185,496,034 57,138,766,079 238,580,246 80,562,842,359 546,042,093 (3,462,433,719)

22,676,640,518 42,793,647,677 179,440,861 65,649,729,056 412,420,789 (2,954,440,202)

(53,866,276)

(74,281,908)

(53,866,276)

(74,281,908)

77,592,584,457

63,033,427,735

77,592,584,457

63,033,427,735

197,500,780 52,250,059 249,750,839 1,411,974 (36,797,903)

245,511,605 359,900,168 605,411,773 2,512,069 (34,823,061)

7,504,938 7,504,938 (7,146,754)

7,504,938 7,504,938 (7,146,488)

214,364,910 77,806,949,367

573,100,781 63,606,528,516

358,184 77,592,942,641

358,450 63,033,786,185

* Hire-purchase and leasing receivables are shown net of unearned income in the consolidated and the separate financial statements of Baht 10,609,745,731 and Baht 36,424,745, respectively (December 31, 2007: Baht 7,732,227,047 and Baht 31,279,181, respectively). Unearned interest income of hire-purchase and finance lease contracts is stated net of commissions and direct expenses incurred at the initiation of hire-purchase. 10.2 Classified by maturity as at December 31, 2008 and 2007

On demand or become due Less than one year Over one year Total loans and accrued interest receivables

CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 1,181,566,388 1,252,425,215 4,049,926,760 4,333,054,091 76,128,554,117 61,084,594,381 81,360,047,265 66,670,073,687

Unit : Baht

SEPARATE FINANCIAL STATEMENTS 2008 2007 1,180,154,414 1,249,432,230 3,833,766,018 3,761,913,920 76,102,468,958 61,058,308,633 81,116,389,390 66,069,654,783

10.3 Classified by currency and residence of customer as at December 31, 2008 and 2007 Unit : Baht

Baht Total loans and accrued interest receivables 120

CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 Domestic Total Domestic Total 81,360,047,265 81,360,047,265 66,670,073,687 66,670,073,687 81,360,047,265 81,360,047,265 66,670,073,687 66,670,073,687

Unit : Baht

2008 Baht Total loans and accrued interest receivables

Domestic 81,116,389,390 81,116,389,390

SEPARATE FINANCIAL STATEMENTS 2007 Total Domestic Total 81,116,389,390 66,069,654,783 66,069,654,783 81,116,389,390 66,069,654,783 66,069,654,783

10.4 Classified by business type and loan classification as at December 31, 2008 and 2007 Unit : Baht

Normal Agriculture and mining 2,054,106 Manufacturing and commerce 1,678,068,251 Property development and construction 12,137,313,366 Public utility and services 633,465,752 Housing loans 707,736,297 Hire-purchase loan 49,090,949,214 Leasing loan 218,818,062 Others 1,922,725,741 Total loans 66,391,130,789 Accrued interest receivables 426,758,923 Total 66,817,889,712

CONSOLIDATED FINANCIAL STATEMENTS 2008 Special Doubtful mentioned Substandard Doubtful loss 473,096 55,539,888 29,152,908 36,893,968 335,893,464 393,518,890 1,371,491,407 428,419,036 3,012,071,026 14,086,208 72,679,677 24,632,160 64,350,107 79,124,312 53,668,543 13,740,399 10,491,130 6,635,519,995 923,761,226 399,537,260 88,998,384 9,857,046 9,905,138 146,032,684 58,251,665 44,989,596 108,383,196 7,333,679,023 2,509,005,426 958,117,557 3,620,660,403 119,745,804 949,340 7,453,424,827 2,509,005,426 958,117,557 3,621,609,743

Total 2,527,202 2,135,548,479 17,342,813,725 809,213,904 864,760,681 57,138,766,079 238,580,246 2,280,382,882 80,812,593,198 547,454,067 81,360,047,265 Unit : Baht

Normal Agriculture and mining 2,938,195 Manufacturing and commerce 1,373,458,356 Property development and construction 8,168,163,485 Public utility and services 606,371,114 Housing loans 492,746,793 Hire-purchase loan 37,054,562,921 Leasing loan 179,440,861 Others 2,310,216,975 Total loans 50,187,898,700 Accrued interest receivables 299,304,599 Total 50,487,203,299

CONSOLIDATED FINANCIAL STATEMENTS 2007 Special Doubtful mentioned Substandard Doubtful loss 1,000,000 473,096 19,582,794 109,288,590 104,655,951 304,261,430 3,102,550,928 1,366,464,236 1,923,512,872 2,619,089,818 14,052,421 107,030,132 32,730,276 88,660,722 44,182,183 25,578,268 14,788,768 13,466,224 4,586,214,269 773,025,995 322,440,480 57,404,012 58,426,112 121,584,366 51,509,288 205,268,898 7,825,008,707 2,503,971,587 2,449,637,635 3,288,624,200 109,442,741 192 6,185,326 7,934,451,448 2,503,971,587 2,449,637,827 3,294,809,526

Total 4,411,291 1,911,247,121 17,179,781,339 848,844,665 590,762,236 42,793,647,677 179,440,861 2,747,005,639 66,255,140,829 414,932,858 66,670,073,687

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

121

Unit : Baht

Normal Agriculture and mining 2,054,106 Manufacturing and commerce 1,678,068,251 Property development and construction 12,137,313,366 Public utility and services 633,465,752 Housing loans 707,736,297 Hire-purchase loan 49,090,949,214 Leasing loan 218,818,062 Others 1,709,181,649 Total loans 66,177,586,697 Accrued interest receivables 426,296,289 Total 66,603,882,986

SEPARATE FINANCIAL STATEMENTS 2008 Special Doubtful mentioned Substandard Doubtful loss Total 473,096 2,527,202 55,539,888 29,152,908 36,893,968 335,893,464 2,135,548,479 393,518,890 1,371,491,407 428,419,036 3,012,071,0261 7,342,813,725 14,086,208 72,679,677 24,632,160 64,350,107 809,213,904 79,124,312 53,668,543 13,740,399 10,491,130 864,760,681 6,635,519,995 923,761,226 399,537,260 88,998,384 57,138,766,079 9,857,046 9,905,138 - 238,580,246 146,032,684 58,251,665 44,989,596 79,681,387 2,038,136,981 7,333,679,023 2,509,005,426 958,117,557 3,591,958,594 80,570,347,297 119,745,804 - 546,042,093 7,453,424,827 2,509,005,426 958,117,557 3,591,958,594 81,116,389,390

Unit : Baht

Normal Agriculture and mining 2,938,195 Manufacturing and commerce 1,373,458,356 Property development and construction 8,168,163,485 Public utility and services 606,371,114 Housing loans 492,746,793 Hire-purchase loan 37,054,562,921 Leasing loan 179,440,861 Others 1,739,037,374 Total loans 49,616,719,099 Accrued interest receivables 297,741,869 Total 49,914,460,968

122

SEPARATE FINANCIAL STATEMENTS 2007 Special Doubtful mentioned Substandard Doubtful loss 1,000,000 473,096 19,582,794 109,288,590 104,655,951 304,261,430 3,102,550,928 1,366,464,236 1,923,512,872 2,619,089,818 14,052,421 107,030,132 32,730,276 88,660,722 44,182,183 25,578,268 14,788,768 13,466,224 4,586,214,269 773,025,995 322,440,480 57,404,012 58,426,112 121,584,366 51,509,288 178,541,664 7,825,008,707 2,503,971,587 2,449,637,635 3,261,896,966 109,442,741 192 5,235,987 7,934,451,448 2,503,971,587 2,449,637,827 3,267,132,953

Total 4,411,291 1,911,247,121 17,179,781,339 848,844,665 590,762,236 42,793,647,677 179,440,861 2,149,098,804 65,657,233,994 412,420,789 66,069,654,783

10.5 Loan classification and allowance as at December 31, 2008 and 2007 by considering from the valuation of future cash flow from the selling of collaterals Unit : Baht

Loan classification Normal Loans Hire-purchase receivables - New car - Used car Special mentioned Loans Hire-purchase receivables - New car - Used car Substandard Loans Hire-purchase receivables - New car - Used car Doubtful Loans Hire-purchase receivables - New car - Used car Doubtful loss Total loans and accrued interest receivable Additional allowance for some doubtful accounts Allowance for troubled debts restructuring Total

Loan outstanding and interest receivable

CONSOLIDATED FINANCIAL STATEMENTS 2008 Allowance Increase Allowance per BOTûs (Decrease) Loan net of Allowance for doubtful guideline allowance collateral % account % per BOT *

17,459,267,490 3,294,984,298

1.00

30,387,077

29,066,437,080 28,954,132,653 20,292,185,143 20,155,055,964

1.00 1.64

289,541,327 330,542,918

161,861,368

2.00

3,076,221

2,631,709,412 2,608,278,054 4,116,889,631 4,055,258,840

6.93 7.57

180,753,669 306,983,094

262,218,527 100.00

262,291,093

100.00

262,291,093

310,560,144 613,201,082

311,917,065 616,047,414

23.46 21.47

73,175,743 132,265,380

100.00 238,741,322 100.00 483,782,034

311,917,065 616,047,414

558,580,296

165,006,285 100.00

165,006,285

100.00

165,006,285

151,016,326 248,520,934 3,621,609,743

151,838,374 23.46 250,106,657 21.47 985,801,821 100.00

35,621,283 53,697,899 971,523,604

100.00 116,217,091 100.00 196,408,758 100.00 -

151,838,374 250,106,657 971,523,604

704,825,783

1,585,244,201

81,360,047,265 61,972,507,320

2,834,865,593 126,788,843 53,866,276 3,015,520,712

1.00

Total allowance per BOTûs guideline

30,387,077

1.00 1.00 (128,992,358)

289,541,327 201,550,560

2.00

3,076,221

2.00 (128,588,108) 2.00 (225,877,917)

52,165,561 81,105,177

551,690,822 3,386,556,415 (14,113,636)

112,675,207

53,866,276 537,577,186 3,553,097,898

* In addition, the Bank considered the additional allowance for doubtful accounts for hire-purchase receivables in order to comply with the Bank of Thailandûs Notification dated August 3, 2008 by considering the valuation of collateral regarding the Bank of Thailandûs guideline. The Bank provided the allowance for doubtful accounts for hire-purchase receivables at the rate of 100% for the discrepancies between debts and net present value of estimated future cash flow from selling of collaterals and discounted for the holding period regarding the Bank of Thailandûs guideline. For the normal and specially mentioned debts, the Bank provided the allowance for doubtful accounts at the rate of 1% and 2%, respectively.

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Unit : Baht

Loan classification Normal Special mentioned Substandard - Loans - Hire-purchase receivables Doubtful - Loans - Hire-purchase receivables Doubtful loss Total loans and accrued interest receivable Additional allowance fo some doubtful accounts Allowance for troubled debts restructuring Total

124

CONSOLIDATED FINANCIAL STATEMENTS 2007 Loan outstanding Allowance per and interest Loan net of BOT没s guideline Allowance fo receivable collateral % doubtful account 50,487,203,299 39,975,119,323 1.00 399,751,193 7,934,451,448 4,797,945,636 2.00 95,958,913 1,730,945,592 773,025,995

462,880,548 770,141,326

100.00 25.73

462,880,548 198,157,363

2,127,197,155 322,440,672 3,294,809,526 66,670,073,687

826,617,398 322,871,898 797,512,304 47,953,088,433

100.00 25.73 100.00

826,617,398 83,074,939 797,512,304 2,863,952,658 125,310,605 74,281,908 3,063,545,171

Unit : Baht

Loan outstanding and interest receivable

Loan net of collateral

SEPARATE FINANCIAL STATEMENTS 2008 Allowance Increase Allowance per BOTûs (Decrease) Allowance for doubtful guideline allowance % account % per BOT *

17,245,260,764 3,294,984,298

1.00

30,387,077

29,066,437,080 28,954,132,653 20,292,185,143 20,155,055,964

1.00 1.64

289,541,327 330,542,918

161,861,368

2.00

3,076,221

2,631,709,412 2,608,278,054 4,116,889,631 4,055,258,840

6.93 7.57

180,753,669 306,983,094

262,218,527 100.00

262,291,093

100.00

262,291,093

310,560,144 613,201,082

311,917,065 616,047,414

23.46 21.47

73,175,743 132,265,380

100.00 238,741,322 100.00 483,782,034

311,917,065 616,047,414

558,580,296

165,006,285 100.00

165,006,285

100.00

165,006,285

151,016,326 248,520,934 3,591,958,594

151,838,374 23.46 250,106,657 21.47 956,150,673 100.00

35,621,283 53,697,899 941,872,455

100.00 116,217,091 100.00 196,408,758 100.00 -

151,838,374 250,106,657 941,872,455

704,825,783

1,585,244,201

81,116,389,390 61,942,856,172

2,805,214,444 126,788,843 53,866,276 2,985,869,563

1.00

Total allowance per BOTûs guideline

30,387,077

1.00 1.00 (128,992,358)

289,541,327 201,550,560

2.00

3,076,221

2.00 (128,588,108) 2.00 (225,877,917)

52,165,561 81,105,177

551,690,822 3,356,905,266 (14,113,636)

112,675,207

53,866,276 537,577,186 3,523,446,749

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125

Unit : Baht

SEPARATE FINANCIAL STATEMENTS 2007 Loan outstanding Allowance per and interest Loan net of BOT没s guideline receivable collateral % 49,914,460,968 39,975,119,323 1.00 7,934,451,448 4,797,945,636 2.00

Allowance fo doubtful account 399,751,193 95,958,913

1,730,945,592 773,025,995

462,880,548 770,141,326

100.00 25.73

462,880,548 198,157,363

2,127,197,155 322,440,672 3,267,132,5953 66,069,654,783

826,617,398 322,871,898 769,835,731 47,9253,411,860

100.00 25.73 100.00

826,617,398 83,074,939 769,835,731 2,836,276,085 125,310,605 74,281,908 3,035,868,598

10.6 Non-performing loans As at December 31, 2008 and 2007, the Bank had non-performing loans, defined according to the Bank of Thailand没s Notification as loans classified as substandard, doubtful, and doubtful loss, including interbank and money market items, but excluding accrued interest receivable, as follows: Unit : Baht

SEPARATE FINANCIAL STATEMENTS 2008 2007 7,059,081,576 8,201,770,225

Non-performing loans (excluded accrued interest) % of Non-performing loans to total loans (included loans toinancial institutions) Non-performing loans net of allowance for doubtful accounts (excluding accrued interest receivable) % of Non-performing loans net of allowance for doubtful accounts to total loans net of allowance for doubtful accounts (included loans to financial institutions) % of Non-performing loans to the total of each type of loans - Loans - Hire-Purchase

7.15

12.45

4,350,919,831

5,822,306,669

4.53

9.17

24.10 2.47

30.89 2.70

Loans and accrued interest receivable from which recognition of income has been discontinued based on accrual basis are as follows: Unit : Baht

Loans and bills receivables Securities business receivables Hire-purchase receivables Total loans from which recognition of income has been discontinued 126

CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 Principal Interest receivable Principal Interest receivable 5,639,279,770 7,055,130,763 5,235,987 33,590,096 949,340 33,790,687 949,340 1,412,296,868 1,139,134,524 191 7,085,166,734

949,340

8,228,055,974

6,185,518

Unit : Baht

SERARATE FINANCIAL STATEMENTS 2008 2007 Principal Interest receivable Principal Interest receivable 5,639,279,770 7,055,130,763 5,235,987 7,504,938 7,504,938 1,412,296,868 1,139,134,524 191

Loans and bills receivables Securities business receivables Hire-purchase receivables Total loans from which recognition of income has been discontinued

7,059,081,576

8,201,770,225

5,236,178

11. ALLOWANCE FOR DOUBTIFUL ACCOUNTS Allowance for doubtful accounts as at December 31, 2008 and 2007 consists of the following: Unit : Baht

CONSOLIDATED FINANCIAL STATEMENTS 2008

At beginning of year Add Allowance for doubtful accounts (reversal) Less Bad debt written-off Allowance for doubtful accounts at end of period

Normal Special mentioned Sub-standard Doubtful Doubtful loss Total 462,610,494 119,512,640 665,287,912 933,398,373 808,453,844 2,989,263,263 158,128,522 620,739,016

21,167,072 -

524,967,660 (365,593,153) 866,346,490 1,205,016,591 - (695,048,232) (695,048,232)

140,679,712 1,190,255,572

567,805,220 979,752,102 3,499,231,622 Unit : Baht

CONSOLIDATED FINANCIAL STATEMENTS 2007

At beginning of year Add Allowance for doubtful accounts (reversal) Less Bad debt written-off Allowance for doubtful accounts at end of period

Normal Special mentioned Sub-standard Doubtful Doubtful loss Total 494,100,476 100,685,038 879,695,815 638,012,969 1,121,926,921 3,234,421,219 (31,489,982) 462,610,494

18,827,602 (214,407,903) 119,512,640

665,287,912

295,385,404 783,033,910 851,349,031 - (1,096,506,987) (1,096,506,987) 933,398,373 808,453,844 2,989,263,263 Unit : Baht

At beginning of period Add Allowance for doubtful accounts (reversal) Less Bad debt written-off Allowance for doubtful accounts at end of period

SEPARATE FINANCIAL STATEMENTS 2008 Normal Special mentioned Sub-standard Doubtful Doubtful loss Total 462,610,494 119,512,640 665,287,912 933,398,373 780,777,271 2,961,586,690 158,128,522 620,739,016

21,167,072 -

524,967,660 (365,593,153) 864,371,914 1,203,042,015 - (695,048,232) (695,048,232)

140,679,712 1,190,255,572

567,805,220 950,100,953 3,469,580,473

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Unit : Baht

At beginning of year Add Allowance for doubtful accounts (reversal) Less Bad debt written-off Allowance for doubtful accounts at end of period

SEPARATE FINANCIAL STATEMENTS 2007 Normal Special mentioned Sub-standard Doubtful Doubtful loss Total 494,100,476 100,685,038 879,695,815 638,012,969 1,092,408,973 3,204,903,271 (31,489,982) 462,610,494

18,827,602 (214,407,903) 119,512,640

665,287,912

295,385,404 784,875,285 853,190,406 - (1,096,506,987) (1,096,506,987) 933,398,373 780,777,271 2,961,586,690

12. TROUBLED DEBTS RESTRUCTURING As at December 31, 2008 and 2007, the Bank has troubled debts restructuring classified by default period as follows : Unit : Baht

0 - 1 month More than 1 month - 3 months More than 3 months - 6 months More than 6 months - 12 months More than 12 months Total

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2008 Loan net of Allowance for Number of customer Principal balance collateral doubtful account 111 3,685.89 300.48 61.57 27 370.53 20.58 5.15 37 1,084.65 161.37 161.45 24 399.21 115.90 115.90 109 1,579.84 557.32 550.87 308 7,120.12 1,155.66 894.94 Unit : Million Baht

0 - 1 month More than 1 month - 3 months More than 3 months - 6 months More than 6 months - 12 months More than 12 months Total

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2007 Loan net of Allowance for Number of customer Principal balance collateral doubtful account 96 1,013.13 74.74 75.11 29 1,703.33 0.83 23.19 61 686.19 196.07 196.07 35 1,195.83 612.69 619.94 111 739.79 355.50 359.50 332 5,338.27 1,239.82 1,273.81

As at December 31, 2008, the Bank has 6 troubled debt restructuring (December 31, 2007 : 7 debts) where the outstanding balance before restructuring amounted to Baht 2.69 million (December 31, 2007 : Baht 17.19 million). The Bank recognized loss on restructuring amounting to Baht 1.26 million (for the year end December 31, 2007 : Baht 4.25 million) in the statement of income under loss on troubled debt restructuring.

128

Unit : Million Baht

Restructuring conditions

Modifications of payment terms Total

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2008 Outstanding Outstanding Type of Fair Number of balance balance assets value of transferred assets loans before TDR (1) after TDR (1) 6 2.69 6 2.69 Unit : Million Baht

Restructuring conditions

Modifications of payment terms Transfer of properties and/or transfer of equity and/or modifications of payment terms Total (1)

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2007 Outstanding Outstanding Type of Fair Number of balance balance assets value of transferred assets loans before TDR (1) after TDR (1) 6 15.04 -

1 7

2.15 17.19

Land

2.00

Net book value (principal including accrued interest).

13. ALLOWANCE FOR TROUBLED DEBT RESTRUCTURING Allowance for troubled debt restructuring as at December 31, 2008 and 2007, consists of the following : Unit : Baht

CONSOLIATED AND SEPARATE FINANCIAL STATEMENTS 2008 2007 74,281,908 148,674,501 (20,415,632) (74,392,593) 53,866,276 74,281,908

At beginning of year At beginning of year decrease during year At end of year

14. PROPERTIES FORECLOSED › NET Properties foreclosed as at December 31, 2008 and 2007, consist of the following : Unit : Baht

Properties foreclosed Less Provision for diminution in value of properties foreclosed Net properties foreclosed

CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 9,245,375,670 8,988,013,332 (1,521,559,263) 7,723,816,407

(1,305,163,887) 7,682,849,445

SEPARATE FINANCIAL STATEMENTS 2008 2007 8,241,846,777 7,555,723,423 (1,455,017,461) 6,786,829,316

(1,175,341,835) 6,380,381,588

Annual Report 2008 ë Kiatnakin Bank Public Company Limited

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Properties foreclosed are acquired by assets transferred, by auction and by the repossession for the debt settlement. Unit : Baht

At beginning of year Additions Disposals At end of year Less Provision for diminution in value of properties foreclosed Net properties foreclosed

CONSOLIDATED FINANCIAL STATEMENTS 2008 Immovable assets Movable assets Total 8,814,557,690 173,455,642 8,988,013,332 2,005,191,252 2,439,851,786 4,445,043,038 (1,851,161,432) (2,336,519,268) (4,187,680,700) 8,968,587,510 276,788,160 9,245,375,670 (1,416,333,888) (105,225,375) (1,521,559,263) 7,552,253,622 171,562,785 7,723,816,407 Unit : Baht

At beginning of year Additions Disposals At end of year Less Provision for diminution in value of properties foreclosed Net properties foreclosed

CONSOLIDATED FINANCIAL STATEMENTS 2007 Immovable assets Movable assets Total 7,800,002,143 369,000,089 8,169,002,232 2,212,946,296 1,465,938,040 3,678,884,336 (1,198,390,749) (1,661,482,487) (2,859,873,236) 8,814,557,690 173,455,642 8,988,013,332 (1,235,294,793) (69,869,094) (1,305,163,887) 7,579,262,897 103,586,548 7,682,849,445 Unit : Baht

At beginning of year Additions Disposals At end of year Less Provision for diminution in value of properties foreclosed Net properties foreclosed

SEPARATE FINANCIAL STATEMENTS 2008 Immovable assets Movable assets Total 7,382,267,781 173,455,642 7,555,723,423 1,934,856,275 2,439,851,786 4,374,708,061 (1,352,065,439) (2,336,519,268) (3,688,584,707) 7,965,058,617 276,788,160 8,241,846,777 (1,349,792,086) (105,225,375) (1,455,017,461) 6,615,266,531 171,562,785 6,786,829,316 Unit : Baht

At beginning of year Additions Disposals At end of year Less Provision for diminution in value of properties foreclosed Net properties foreclosed

130

SEPARATE FINANCIAL STATEMENTS 2007 Immovable assets Movable assets Total 6,422,908,278 369,000,089 6,791,908,367 2,027,943,558 1,465,938,040 3,493,881,598 (1,068,584,055) (1,661,482,487) (2,730,066,542) 7,382,267,781 173,455,642 7,555,723,423 (1,105,472,741) (69,869,094) (1,175,341,835) 6,276,795,040 103,586,548 6,380,381,588

The details of assets at fair value where the Bank granted an option to debtors for repurchasing classified by outstanding term of contract are as follows: Unit : Baht

2008 62,125,319 357,537,563 200,898,837 11,267,936 3,687,343 635,516,998

Less than 2 months 2 - 12 months Over 12 months but less than 24 months Over 24 months but less than 36 months Over 36 months but less than 60 months Total

2007 347,955,698 374,173,475 44,501,853 6,541,677 773,172,703

15. PREMISES AND EQUIPMENT - NET Premises and equipment as at December 31, 2008 and 2007 consist of the following : Unit : Baht

CONSOLIDATED FINANCIAL STATEMENTS 2008 Cost Beginning balance Additions Disposals Land 99,548,277 Premises 73,034,325 Equipment 582,276,482 Furniture and fixtures 431,034,338 Vehicles 149,870,782 Total 1,335,764,204

143,530,623 (24,664,006)

Other

Allowance Net Accumulated depreciation for Premises Ending Beginning Ending impairment and balance balance Depreciation Disposals Other balance of assets equipment

- 99,548,277 - 73,034,325 29,745,720 3,359,503 - 701,143,099 370,116,564 87,612,751 (24,047,600)

- 33,105,223 - 433,681,715

- 99,548,277 - 39,929,102 - 267,461,384

97,379,296 (103,599,580) - 424,814,054 219,566,995 70,679,788 (90,907,882) - 199,338,901 57,559,841 (41,573,720) (672,411) 165,184,492 94,936,657 26,547,515 (40,309,075) (26,145) 81,148,952 298,469,760 (169,837,306) (672,411) 1,463,724,247 714,365,936 188,199,557 (155,264,557) (26,145) 747,274,791

- 225,475,153 - 84,035,540 - 716,449,456 Unit : Baht

CONSOLIDATED FINANCIAL STATEMENTS 2007 Cost Beginning Disposals balance Additions Disposals 99,548,277 54,053,334 18,980,990 495,651,613 104,190,989 (17,566,119)

Land Premises Equipment Furniture and fixtures 338,484,400 108,540,297 (15,990,359) Vehicles 132,466,983 24,319,451 (6,915,652) Total 1,120,204,607 256,031,727 (40,472,130)

Accumulated depreciation Ending Beginning Disposals/ Other balance balance DepreciationDisposals Other 99,548,277 - 73,034,325 26,560,489 3,185,230 - 582,276,482 323,841,215 63,605,744 (17,330,394) - 431,034,338 176,465,476 57,015,213 (13,913,694) - 149,870,782 75,753,744 24,251,336 (5,068,423) - 1,335,764,204 602,620,924 148,057,523 (36,312,511)

Allowance for Ending impairment balance of assets 29,745,720 370,116,564 -

- 219,566,995 - 94,936,657 - 714,365,936

Net Premises and equipment 99,548,277 43,288,605 212,159,918

- 211,467,343 - 54,934,125 - 621,398,268

Depreciation for the years ended - December 31, 2008 : Baht 188,199,557 - December 31, 2007 : Baht 148,057,523 Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

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As at December 31, 2008 and December 31, 2007, the Bank and subsidiaries had premises and equipment, fully depreciated but still in use, at the original cost amounting to Baht 319.96 million and Baht 357.16 million, respectively. Unit : Baht SEPARATE FINANCIAL STATEMENTS 2008 Cost

Accumulated amortization

Beginning Ending Beginning Ending balance Additions Disposals Other balance balance Depreciation Disposals Other balance 99,548,277 - 99,548,277 67,052,388 - 67,052,388 23,763,784 3,359,503 - 27,123,287 356,045,049 136,458,377 (7,633,180) - 484,870,246 170,669,448 72,116,956 (7,281,312) - 235,505,092

Land Premises Equipment Furniture and fixtures 303,070,279 94,127,305 (56,801,238) - 340,396,346 116,453,191 57,712,710 (49,427,020) - 124,738,881 Vehicles 115,661,383 54,474,341 (35,855,920) (672,411) 133,607,393 67,728,737 21,644,290 (34,591,280) (26,145) 54,755,602 Total 941,377,376 285,060,023 (100,290,338) (672,411) 1,125,474,650 378,615,160 154,833,459 (91,299,612) (26,145) 442,122,862

Allowance Net for Premises impairment and of assets eequipment - 99,548,277 - 39,929,101 - 249,365,154 - 215,657,465 - 78,851,791 - 683,351,788

Unit : Baht SEPARATE FINANCIAL STATEMENTS 2007 Cost

Accumulated amortization

Beginning Ending Beginning Ending balance Additions Disposals Other balance balance Depreciation Disposals Other balance 99,548,277 - 99,548,277 48,071,398 18,980,990 - 67,052,388 20,578,554 3,185,230 - 23,763,784 257,657,566 103,580,458 (5,192,975) - 356,045,049 131,564,852 44,148,973 (5,044,377) - 170,669,448

Land Premises Equipment Furniture and fixtures 201,386,496 107,564,748 (5,880,965) Vehicles 98,257,583 24,319,452 (6,915,652) Total 704,921,320 254,445,648 (17,989,592)

Depreciation for the years ended

- 303,070,279 82,558,050 39,776,073 (5,880,932) - 115,661,383 54,255,606 18,541,554 (5,068,423) - 941,377,376 288,957,062 105,651,830 (15,993,732)

- 116,453,191 - 67,728,737 - 378,615,160

Allowance Net for Premises impairment and of assets eequipment - 99,548,277 - 43,288,604 - 185,375,601 - 186,617,088 - 47,932,646 - 562,762,216

- December 31, 2008 : Baht 154,833,459 - December 31, 2007 : Baht 105,651,830 As at December 31, 2008 and December 31, 2007, the Bank had equipment, fully depreciated but still in use, at the original cost amounting to Baht 119.56 millon and Baht 153.76 million, respectively.

132

16. INTANGIBLE ASSETS - NET Intangible assets as at December 31, 2008 and 2007 consist of the following: Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS 2008 Accumulated amortization

Cost

Software TFEX Membership Total

Allowance for Net Ending impairment Intangible Other balance of assets assets - 90,129,569 - 142,581,243

Beginning Ending Beginning balance Additions Disposals Other balance balance Depreciation Disposals 184,406,863 48,303,949 - 232,710,812 69,991,463 20,138,106 5,318,500 189,725,363 48,303,949

- 5,318,500 1,462,151 - 238,029,312 71,453,614 20,138,106

- 1,462,151 - 91,591,720

- 3,856,349 - 146,437,592

Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS 2007 Accumulated amortization

Cost Beginning balance Additions Disposals 132,351,552 52,055,311 -

Software TFEX Membership 5,318,500 Total 137,670,052 52,055,311

Amortization for the years ended

Allowance for Net Ending Beginning Ending impairment Intangible Other balance balance Depreciation Disposals Other balance of assets assets - 184,406,863 56,523,487 13,467,976 - 69,991,463 - 114,415,400 - 5,318,500 399,033 1,063,118 - 189,725,363 56,922,520 14,531,094

- 1,462,151 - 71,453,614

- 3,856,349 - 118,271,749

- December 31, 2008 : Baht 20,138,106 - December 31, 2007 : Baht 14,531,094

As at December 31, 2008 and December 31, 2007, the Bank and subsidiaries had software, fully amortized but still in use, at the original cost amounting to Baht 28.17 million. Unit : Baht

Cost

Software Total

SEPARATE FINANCIAL STATEMENTS 2008 Accumulated amortization

Allowance for Net Beginning Ending Beginning Ending impairment Intangible balance Additions Disposals Other balance balance Depreciation Disposals Other balance of assets assets 157,156,646 44,465,470 - 201,622,116 50,836,901 16,449,050 - 67,285,951 - 134,336,165 157,156,646 44,465,470 - 201,622,116 50,836,901 16,449,050 - 67,285,951 - 134,336,165

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

133

Unit : Baht

Cost

Software Total

SEPARATE FINANCIAL STATEMENTS 2007 Accumulated amortization

Allowance for Net Beginning Ending Beginning Ending impairment Intangible balance Additions Disposals Other balance balance Depreciation Disposals Other balance of assets assets 108,044,796 49,111,850 - 157,156,646 40,879,932 9,956,969 - 50,836,901 - 106,319,745 108,044,796 49,111,850 - 157,156,646 40,879,932 9,956,969 - 50,836,901 - 106,319,745

Amortization for the years ended

- December 31, 2008 : Baht 16,449,050 - December 31, 2007 : Baht 9,956,968 As at December 31, 2008 and December 31, 2007, the Bank had software, fully amortized but still in use, at the original cost amounting to Baht 28.17 million.

17. OTHER ASSETS Other assets as at December 31, 2008 and 2007, consist of the following: Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS

Interest and other income receivables Dividend receivables Other income receivables Deferred fee expenses Prepaid output tax for hire-purchase receivables Other receivables, net Refundable deposit Withholding tax Receivables from trading securities Receivables - subsidiary Receivables - Revenue Department Pre payment for leasehold right Others Total other assets

2008 31,619,989 2,483,353 87,291 54,024,270 313,589,306 72,673,882 17,495,529 987 172,601,815 88,920,068 120,397,406 873,893,896

2007 48,332,194 501,833 701,829 49,428,072 193,171,799 52,631,889 12,008,933 88,543,465 166,637,219 66,223,683 128,022,415 806,203,331

SEPARATE FINANCIAL STATEMENTS

2008 31,176,112 1,843,522 87,291 54,024,270 312,072,291 64,408,423 16,438,935 987 627,678 172,601,815 87,408,221 52,911,104 793,600,649

2007 47,847,490 150,814,573 192,210 701,829 49,428,072 57,858,796 45,231,206 11,427,740 305,229 582,891 166,637,219 64,519,836 83,148,014 678,695,105

Interest, other income receivable and other receivables as at December 31, 2008 are shown net of doubtful accounts of Baht 9,193,411 and Baht 449,089 in the consolidated and separate financial statements respectively (December 31, 2007: Baht 9,597,119 and Baht 852,798, respectively).

134

18. DEPOSITS 18.1 Classified by type as at December 31, 2008 and 2007 Unit : Baht CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2008 2007 247,571,955 558,327,695 516,395,988 358,301,702

Current accounts Saving deposits Term deposits - Less than 6 months - 6 months to one year - Over one year Promissory notes Certificates of deposit Total deposits

8,335,303,039 16,677,546,680 45,367,251,178 353,131 11,340,463 71,155,762,434

1,626,199,086 8,727,932,155 19,307,168,845 10,733,646,670 42,081,682 41,353,657,835

18.2 Classified by maturity as at December 31, 2008 and 2007 Unit : Baht CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2008 2007 39,806,107,542 16,495,421,267 19,015,369,923 10,030,854,379 12,334,284,969 14,827,382,189 71,155,762,434 41,353,657,835

Less than 6 months More than 6 months but less than one year Over one year Total deposits

18.3 Classified by currency and territory as at December 31, 2008 and 2007 Unit : Baht

Thai Baht Total deposits

Domestic 71,066,275,379 71,066,275,379

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2008 2007 Foreign Total Domestic Foreign Total 89,487,055 71,155,762,434 41,293,933,762 59,724,073 41,353,657,835 89,487,055 71,155,762,434 41,293,933,762 59,724,073 41,353,657,835

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19. INTERBANK AND MONEY MARKET ITEMS - DOMESTIC ITEMS (LIABILITIES) Interbank and money market items (liabilities) as at December 31, 2008 and 2007, are as follows: Unit : Baht

Commercial Banks Finance, Securities and Credit froncier Other financial institutions Total

On demand 833

CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 Term Total On demand Term 140,000,000 140,000,833 7,768

- 449,311,254 449,311,254 2,735,475 3,170,221,000 3,172,956,475 2,736,308 3,759,532,254 3,762,268,562

Total 7,768

- 279,074,221 279,074,221 876,810 2,786,020,000 2,786,896,810 884,578 3,065,094,221 3,065,978,799 Unit : Baht

SEPARATE FINANCIAL STATEMENTS

Commercial Banks Finance, Securities and Credit froncier Other financial institutions Total

On demand -

2008 Term 140,000,000

Total 140,000,000

On demand -

2007 Term

Total -

284,092,119 454,700,000 738,792,119 26,874,303 312,500,000 339,374,303 2,735,475 3,170,221,000 3,172,956,475 876,810 2,786,020,000 2,786,896,810 286,827,594 3,764,921,000 4,051,748,594 27,751,113 3,098,520,000 3,126,271,113

20. BORROWINGS Borrowings as at December 31, 2008 and 2007, are as follows: Unit : Baht

Short - term borrowings Bills of exchange Debentures Total short - term borrowings Long - term borrowings Bills of exchange Debentures Total long - term borrowings Total borrowings

CONSOLIDATED FINANCIAL STATEMENTS

SEPARATE FINANCIAL STATEMENTS

2008

2007

7,998,912,885 3,554,000,000 11,552,912,885

8,821,119,556 8,980,000,000 17,801,119,556

10,878,912,885 3,554,000,000 14,432,912,885

12,941,119,556 8,980,000,000 21,921,119,556

2,559,666,937 5,836,000,000 8,395,666,937 19,948,579,822

285,675,875 4,520,000,000 4,805,675,875 22,606,795,431

2,559,666,937 5,836,000,000 8,395,666,937 22,828,579,822

285,675,875 4,520,000,000 4,805,675,875 26,726,795,431

The details of unsecured and senior debentures are as follows: Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS

At beginning of year Less Redemption during year Add Issuing during year At end of year 136

2008 13,500,000,000 (14,596,000,000) 10,486,000,000 9,390,000,000

2007 12,434,200,000 (5,459,200,000) 6,525,000,000 13,500,000,000

SEPARATE FINANCIAL STATEMENTS

2008 13,500,000,000 (14,596,000,000) 10,486,000,000 9,390,000,000

2007 12,434,200,000 (5,459,200,000) 6,525,000,000 13,500,000,000

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

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KK087A KK085A KK095A KK08NA KK09NA KK1A28 KK1A18 KK10NA KK09NB KK1C38 KK08417A KK08514B KK08908A KK08925A KK08625A KK08625B KK08625C KK08O20A KK08730A KK105A KK115A KK08814A KK08821B KK08D16A KK08925B KK08926A KK08926B KK08O30A KK119A

Interest rate (percentage) 2.40 per annum 6.10 per annum 6.25 per annum 5.72 per annum 5.84 per annum 3.40 per annum 3.35 per annum 4.70 per annum 4.47 per annum 3.46 per annum 3.47 per annum 3.12 per annum 3.24 per annum 3.24 per annum 3.00 per annum 3.00 per annum 3.00 per annum 3.25 per annum 3.13 per annum 4.25 per annum 4.54 per annum 3.17 per annum 3.20 per annum 3.74 per annum 3.50 per annum 3.50 per annum 3.50 per annum 3.80 per annum 5.00 per annum

Par value (Baht) 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000

December 31, 2007 3,000,000 1,400,000 600,000 1,580,000 920,000 1,000,000 1,000,000 966,000 2,034,000 1,000,000 13,500,000

Redemption during year (3,000,000) (1,400,000) (1,580,000) (1,000,000) (1,000,000) (1,000,000) (1,000,000) (80,000) (500,000) (395,000) (100,000) (50,000) (40,000) (1,026,000) (120,000) (90,000) (140,000) (1,675,000) (100,000) (80,000) (70,000) (150,000) (14,596,000)

Unit : share Issuing during December 31, year 2008 600,000 920,000 966,000 - 2,034,000 1,000,000 80,000 500,000 395,000 100,000 50,000 40,000 1,026,000 120,000 2,131,000 2,131,000 1,289,000 1,289,000 90,000 140,000 1,675,000 100,000 80,000 70,000 150,000 1,450,000 1,450,000 10,486,000 9,390,000

CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS

Term of interest payment 17th of January and July 29th of May and November 29th of May and November 2nd of May and November 2nd of May and November Maturity date Maturity date 15th of May and November 15th of May and November Maturity date Maturity date Maturity date Maturity date Maturity date Maturity date Maturity date Maturity date Maturity date Maturity date 8th of May and November 8th of May and November Maturity date Maturity date Maturity date Maturity date Maturity date Maturity date Maturity date 11th of March and September

Due for redemption July 17, 2008 May 29, 2008 May 29, 2009 November 2, 2008 November 2, 2009 February 25, 2008 January 7, 2008 November 15, 2010 November 15, 2009 March 7, 2008 April 17, 2008 May 14, 2008 September 8, 2008 September 25, 2008 June 25, 2008 June 25, 2008 June 25, 2008 October 20, 2008 July 30, 2008 May 8, 2010 May 8, 2011 August 14, 2008 August 21, 2008 December 16, 2008 September 25, 2008 September 26, 2008 September 26, 2008 October 30, 2008 September 11, 2011

21. OTHER LIABILITIES Other liabilities as at December 31, 2008 and 2007, consist of the following: Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS

Stocks subscription payable Accrued bonus Accrued fee and other expenses Value added tax payable Up-front fee Income received in advance Deposits Provision for liabilities Suspense cash received from customer Others Total other liabilities

2008 178,442,242 168,891,340 1,414,540 149,063,671 53,130,599 72,040,061 81,779,223 149,070,842 59,660,366 913,492,884

2007 1,183,955 209,904,177 107,437,561 1,189,681 138,368,427 25,891,034 72,347,540 62,033,459 69,171,153 64,867,493 752,394,480

SEPARATE FINANCIAL STATEMENTS

2008 162,686,177 96,650,643 149,063,671 53,130,599 70,828,401 74,526,963 149,070,842 45,406,126 801,363,422

2007 1,183,955 190,543,082 68,809,204 138,368,427 25,891,034 71,569,640 54,408,641 69,171,153 57,851,586 677,796,722

22. SHARE CAPITAL The annual Shareholders没 Meeting dated April 18, 2008, passed a resolution to reduce the Bank没s registered capital from the original amount of Baht 7,154,600,300 to Baht 6,978,455,710 by retiring 17,614,459 unissued ordinary shares and increase the registered capital from Baht 6,978,455,710 to Baht 7,228,455,710 by registering additional 25,000,000 ordinary shares with a par value of Baht 10 per share, in order to facilitate the exercise of ESOP warrants. The Bank registered the reduction and increase in share capital with the Ministry of Commerce on July 7, 2008 and July 8, 2008, respectively.

138

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139

10,867,643

169,500 116,646,722

10,867,643 - 150,000 314,923 1,294,728 2,384,410

Cancel Exercise (Unit) (Unit) 314,923 108,028 - 1,036,700 1.00000

150,000 1,464,776

15.62

Exercise rate to purchase Share capital ordinary share issued during per 1 unit of year Exercise Amount warrant (Share) price 1.29217 139,561 10.00 2,384,410 1.13362 1,175,215 12.35 1.00000 19.53

Decrease during the year

2,343,000 19,500 18,252,515 115,037,071

Amount 1,395,610 14,513,905 -

8,483,233

Price per Unit unit Amount 3,688,362 2.30 8,483,233 111,329,209 -

As at December 31, 2008

Unit : Baht

Warrant KK#2 can be exercised on the 30th of every quarters ended starting from December 30, 1998 to September 30, 2008. Warrant KK#3 can be exercised on the 30th of every quarters ended starting from December 31, 1999 to March 30, 2009. Warrant KK#4 can be exercised on the 30th of every quarters ended starting from March 30, 2001 to December 30, 2010. ESOP warrant which are offered to the management, to directors and employees of the Bank and of its subsidiaries can be exercised on the 30th of every quarter ended starting from December 31, 2002 to March 30, 2011.

KK#2 KK#3 KK#4 ESOP Warrant

Amount

Price Unit per unit 422,951 4,725,062 2.30 111,329,209 -

As at December 31, 2007

Warrants as at December 31, 2008 and 2007, consist of the following:

23. WARRANTS

24. LEGAL RESERVE Under the Public Companies Act, the Bank which is public company is required to set aside as legal reserve at least 5% of its net income, net of accumulated deficit brought forward (if any), until the reserve is not less than 10% of the registered capital. Such reserve fund is not available for distribution as dividend. According to the Civil and Commercial Code, subsidiaries which are private companies must appropriate to a reserve fund at each distribution of dividend at least 5% of the profit arising from the business of the company until the reserve fund reaches 10% of the capital of the company. Such reserve fund is not available for distribution as dividend.

25. DIVIDEND On April 19, 2007, the meeting of the ordinary shareholders approved the resolutions regarding the payment of dividend for the year 2006 at the rate of Baht 2.20 per ordinary share a part of which had been paid as interim dividend at the rate of Baht 1.00 per share on August 25, 2006, and the remaining amount was paid on May 2, 2007 at the rate of Baht 1.20 per share, totaling Baht 513,201,089 and Baht 619,176,270, respectively. On August 10, 2007, the meeting of the Board of Directors of the Bank No. 6/2007 approved the resolutions regarding the payment of interim dividend at the rate of Baht 1.00 per ordinary share, totaling Baht 517,777,883. The dividend was paid on September 7, 2007. On April 18, 2008, the meeting of the ordinary shareholders approved the resolutions regarding the payment of dividend for the year 2007 at the rate of Baht 2.30 per ordinary share a part of which had been paid as interim dividend at the rate of Baht 1.00 per share on September 7, 2007, and the remaining amount was paid on May 2, 2008 at the rate of Baht 1.30 per share, totaling Baht 517,777,883 and Baht 678,291,990, respectively. On July 24, 2008, the meeting of the Board of Directors of the Bank No. 5/2008 approved the resolutions regarding the payment of interim dividend at the rate of Baht 1.00 per ordinary share, totaling Baht 523,054,712. The dividend was paid on August 22, 2008.

26. CONTINGENCIES As at December 31, 2008 and 2007, contingencies of the Bank and subsidiaries are as follows:

Aval - bills of exchange Guarantee - others Commitments on interest rate swap contract Unused overdraft credit facilities

Unit : Baht CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2008 2007 116,799,711 122,925,000 898,008,708 820,912,593 1,912,000,000 55,332,726 34,650,160

27. EARNINGS PER SHARE Earnings per share in the consolidated and separate financial statements for the years ended December 31, 2008 and 2007 are calculated as follows: Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2008 Net income Ordinary Earnings per share Baht shares Baht Basic earnings per share Net profit available to ordinary shareholders 1,866,992,975 522,439,364 3.57 Effect of assumed conversion Warrants 16,850,749 Diluted earnings per share Net profit available to ordinary shareholders plus assumed conversions 1,866,992,975 539,290,113 3.46 140

Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2007 Net income Ordinary Earnings per share Baht shares Baht Basic earnings per share Net profit available to ordinary shareholders Effect of assumed conversion Warrants Diluted earnings per share Net profit available to ordinary shareholders plus assumed conversions

2,111,039,536

518,765,024

40,973,238

2,111,039,536

559,738,262

4.07

3.77

Unit : Baht SEPARATE FINANCIAL STATEMENTS For the year ended December 31, 2008 Net income Ordinary Earnings per share Baht shares Baht Basic earnings per share Net profit available to ordinary shareholders Effect of assumed conversion Warrants Diluted earnings per share Net profit available to ordinary shareholders plus assumed conversions

3,016,952,517

522,439,364

16,850,749

3,016,952,517

539,290,113

5.77

5.59

Unit : Baht SEPARATE FINANCIAL STATEMENTS For the year ended December 31, 2007 Net income Ordinary Earnings per share Baht shares Baht Basic earnings per share Net profit available to ordinary shareholders Effect of assumed conversion Warrants Diluted earnings per share Net profit available to ordinary shareholders plus assumed conversions

2,891,911,196

518,765,024

40,973,238

2,891,911,196

559,738,262

5.57

5.17

28. CAPITAL RISK MANAGEMENT According to the Financial Institutions Business Act B.E. 2551 and the related Bank of Thailand没s Notification, the Bank has to maintain capital funds in proportion to asset and contingent liabilities at not less than 8.5% on the condition that the Tier 1 capital funds shall not be less than 4.25% of such assets and contingent liabilities and the maximum amount of the Tier 2 capital funds must not exceed the Tier 1 capital funds.

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Capital fund as at December 31, 2008 and 2007 are as follows : Unit : Baht SEPARATE FINANCIAL STATEMENTS 2008 2007 Tier 1 capital Issued and paid-up capital Warrants 8,483,233 Share premium Legal reserve General reserve Retained earnings after appropriation Total tier 1 capital Tier 2 capital Allowance for normal classification loans Unrealized gain (net) on revaluation of available-for-sale equity securities Total tier 2 capital Less Unrealized loss (net) on revaluation of available-for-sales equity securities Total capital fund

5,231,517,800 10,867,643 2,647,294,293 722,845,571 380,000 5,426,162,798 14,036,683,695

5,216,870,040 2,641,305,128 715,460,030 380,000 4,489,481,488 13,074,364,329

524,041,729 524,041,729

404,780,572 55,616,444 460,397,016

(63,012,063) 14,497,713,361

13,534,761,345

As at December 31, 2008 and 2007, capital adequacy ratios maintained by the Bank in accordance with the notification of the BOT are as follows : Unit : Baht SEPARATE FINANCIAL STATEMENTS

2008

Tier 1 capital to risk weighted assets Capital funds to risk weighted assets

Bank ratio 14.93% 15.42%

2007 Minimum required by BOT 4.25% 8.50%

Bank ratio 15.83% 16.39%

Minimum required by BOT 4.25% 8.50%

As at December 31, 2008, the Bank calculated the proportion of capital to risk weighted assets by using Basel 2 method to comply with the notification of the Bank of Thailand No. Sor Nor Sor 87/2551 regarding Supervisory Guidelines on Capital Funds, dated November 27, 2008. The proportion of capital to risk weighted assets as at December 31, 2008 which were calculated by using Basel 1 are as follows: Tier 1 capital to risk weighted assets 14.71% Capital funds to risk weighted assets 15.19%

142

29. OTHER INCOME Other income for the years ended December 31, 2008 and 2007, are as follows:

Penalty income Profit from sales of fixed assets Amortization of deferred income on disposal of leasehold right Other income Total other income

CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2008 2007 77,415,073 78,032,130 14,283,469 1,564,370

Unit : Baht SEPARATE FINANCIAL STATEMENTS For the years ended December 31, 2008 2007 77,135,355 77,722,467 11,849,721 1,426,965

11,150,293 48,392,278 151,241,113

11,150,293 10,171,582 110,306,951

19,141,524 21,832,502 120,570,526

19,141,524 6,485,744 104,776,700

30. OTHER EXPENSES Other expenses for the years ended December 31, 2008 and 2007, are as follows:

Repossessed cars expenses Properties foreclosed expenses Transportation expenses Advertising and promotion expenses Core banking expenses Other expenses Total other expenses

CONSOLIDATED FINANCIAL STATEMENTS For the years ended December 31, 2008 2007 92,539,629 74,490,325 69,994,101 56,956,432 64,245,341 43,776,761 172,707,865 122,620,134 36,250,116 36,250,116 783,003,505 226,790,455 618,740,557 560,884,223

Unit : Baht SEPARATE FINANCIAL STATEMENTS For the years ended December 31, 2008 2007 92,539,629 74,490,325 69,994,101 56,956,432 61,963,341 41,909,203 168,782,955 119,971,587 36,250,116 36,250,116 109,307,842 134,299,605 538,837,984 463,877,268

31. INCOME TAX Income tax for the years ended December 31, 2008 and 2007 are as follows: Unit : Baht SEPARATE FINANCIAL STATEMENTS For the years ended December 31,

Income before income tax Income not subject to tax or additional deductible expense Expenses not deductible for tax purposes Taxable income Corporate income tax Add Adjustment income tax of last year Total income tax

2008 3,192,164,697 (2,774,463,886) 202,601,076 620,301,887 171,090,566 4,121,614 1) 175,212,180

2007 3,336,847,585 (1,977,073,774) 13,059,977 1,372,833,788 411,850,137 33,086,252 2) 444,936,389

The income tax in consolidated financial statements for the years ended December 31, 2008 and 2007 included the income tax of subsidiaries which is at nil. 1) The adjustment in income tax of last year was due to changes in estimate. 2) The adjustment in income tax of last year was due to adjustment of taxable income for interest income which have been reversed for accounting purpose. Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

143

According to the Royal Decree No. 475 B.E. 2551 issued under the Revenue Code regarding the corporate income tax rate deduction effective on August 7, 2008, the corporate income tax for listed companies in the Stock Exchange of Thailand has been reduced from 30% to 25% of net profit which does not exceed Baht 300 million. This will remain in effect for three consecutive accounting periods beginning on or after January 1, 2008.

32. OPERATING LEASE COMMITMENTS The Bank has operating lease commitments in respect of vehicles, office space, computer software expense, payable from the balance sheet dates as follows: Unit : Baht CONSOLIDATED FINANCIAL STATEMENTS 2008 Car rental Office space Computer software expense expense expense Total Within one year 241,116 83,741,177 36,250,116 120,232,409 Within two years 73,504,686 3,020,843 76,525,529 Over three years 162,602,658 162,602,658 Total 241,116 319,848,521 39,270,959 359,360,596 Unit : Baht

Within one year Within two years Over three years Total

Car rental expense 964,463 241,116 1,205,579

CONSOLIDATED FINANCIAL STATEMENTS 2007 Office space Computer software expense expense Total 46,919,075 36,250,116 84,133,654 23,981,728 36,250,116 60,472,960 89,534,280 3,020,843 92,555,123 160,435,083 75,521,075 237,161,737 Unit : Baht

Within one year Within two years Over three years Total

144

Car rental expense 241,116 241,116

SEPARATE FINANCIAL STATEMENTS 2008 Office space Computer software expense expense Total 68,357,850 36,250,116 104,849,082 60,805,251 3,020,843 63,826,094 145,275,280 145,275,280 274,438,381 39,270,959 313,950,456

Unit : Baht

Within one year Within two years Over three years Total

Car rental expense 964,463 241,116 1,205,579

SEPARATE FINANCIAL STATEMENTS 2007 Office space Computer software expense expense Total 31,593,611 36,250,116 68,808,190 19,581,895 36,250,116 56,073,127 87,894,284 3,020,843 90,915,127 139,069,790 75,521,075 215,796,444

33. SEGMENT INFORMATION 33.1 The results of operations classified into banking and securities businesses for the years ended December 31, 2008 and 2007 are as follows: Unit : Million Baht CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2008 Banking business Securities business Total Net interest and dividend income after bad debts and doubtful accounts 3,660.82 21.67 3,682.49 Non-interest income 1,317.82 219.69 1,537.51 Total income 4,978.64 241.36 5,220.00 Non-interest expenses 2,862.84 311.28 3,174.12 Income tax 175.21 175.21 Total expenses and income tax 3,038.05 311.28 3,349.33 Income (loss) before minority interests 1,940.59 (69.92) 1,870.67 Less Share in net income to minority interests in subsidiaries 3.68 3.68 Net income (loss) for year 1,936.91 (69.92) 1,866.99 Unit : Million Baht CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2007 Banking business Securities business Total Net interest and dividend income after bad debts and doubtful accounts Non-interest income Total income Non-interest expenses Income tax Total expenses and income tax Income before minority interests Less Share in net income to minority interests in subsidiaries Net income for year

3,242.34 1,520.49 4,762.83 2,240.58 444.93 2,685.51 2,077.32 1.84 2,075.48

21.42 344.45 365.87 330.31 330.31 35.56 35.56

3,263.76 1,864.94 5,128.70 2,570.89 444.93 3,015.82 2,112.88 1.84 2,111.04

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33.2 As at December 31, 2008 and 2007, the financial position classified by banking and securities businesses is as follows: Unit : Million Baht CONSOLIDATED FINANCIAL STATEMENTS 2008 Banking business Securities business Total Net investment in securities 2,665.29 108.71 2,774.00 Net loans and accrued interest receivable 77,592.94 214.01 77,806.95 Net investment in loans 5,113.00 5,113.00 Net investment in properties 106.64 106.64 Other assets 28,409.67 522.51 28,932.18 Total assets 113,887.54 845.23 114,732.77 Deposits Interbank and money market items Borrowings Other liabilities Total liabilities

Net investment in securities Net loans and accrued interest receivable Net investment in loans Net investment in properties Other assets Total assets Deposits Interbank and money market items Borrowings Other liabilities Total liabilities

71,155.76 3,762.27 19,948.58 2,453.56 97,320.17

245.10 245.10

Unit : Million Baht CONSOLIDATED FINANCIAL STATEMENTS 2007 Banking business Securities business Total 4,164.56 135.64 4,300.20 63,033.79 572.74 63,606.53 6,876.18 6,876.18 171.53 171.53 11,880.26 392.43 12,272.69 86,126.32 1,100.81 87,227.13 41,353.66 3,065.97 22,606.80 2,879.38 69,905.81

389.61 389.61

The Bank operates only in Thailand and no segment information by geographical area is presented accordingly.

146

71,155.76 3,762.27 19,948.58 2,698.66 97,565.27

41,353.66 3,065.97 22,606.80 3,268.99 70,295.42

34. FINANCIAL INSTRUMENTS Significant financial assets carried on the balance sheet include cash, interbank and money market items, investment in securities, investment in loans and loans. Significant financial liabilities carried on the balance sheet include deposits, interbank and money market items, and borrowings. The groupûs activities expose it to a variety of financial risks. The groupûs overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the group. Risk management is carried out by a treasury department and risk management department under policies approved by the Board of Directors. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as interest rate risk, credit risk, use of derivative financial instruments and investing excess liquidity. Risks relating to significant financial instruments held by the Bank are summarized below. 34.1 Credit risk The group has policies in place to ensure that loans are made to customers with an appropriate credit history. Derivative counterparties and cash transactions are limited to high credit quality financial institutions. The group has policies that limit the amount of credit exposure to any client or financial institution. Concentration of credit risk relative to the Bankûs loans summarized by type of industry is as follows: Unit : Bahtû000 CONSOLIDATED SEPARATE FINANCIAL STATEMENTS FINANCIAL STATEMENTS 2008 2007 2008 2007 Agriculture and mining 2,527 4,411 2,527 4,411 Manufacturing and commerce 2,135,548 1,911,247 2,135,548 1,911,247 Real estate and constructions 17,342,814 17,179,781 17,342,814 17,179,781 Utilities and services 809,214 848,845 809,214 848,845 Housing loans 864,761 590,762 864,761 590,762 Hire-purchase - automobile 57,138,766 42,793,647 57,138,766 42,793,647 Leasing 238,580 179,441 238,580 179,441 Others 2,280,383 2,747,007 2,038,137 2,149,100 Total loans and receivables 80,812,593 66,255,141 80,570,347 65,657,234 34.2 Interest rate risk and liquidity risk The matching of the long-term source of funds and investment or long-term loans is the fundamental policy of the Bankûs liquidity risk management policy. In addition, the management over liabilities with the proper maturity and low funding cost is also the Bankûs fundamental policy. It is unusual for the Bank to completely match since business transacted is often of uncertain term and of different types. The Bank has the committee to oversee interest rate risk and liquidity risk by having weekly meeting to balance the two risks to be at an acceptable cost. 34.2.1 Interest rate risk Most of the Bankûs assets are subject to fluctuations in interest rates in the market. Interests on loans and receivables are mainly based on fixed rate. Certain loans and receivables are based on floating rates, linked to, for examples, Minimum Lending Rate (MLR) plus or Minimum Overdraft Rate (MOR) plus. Loans and receivables summarized under fixed and floating interest rate classifications are as follows:

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Loans and receivables with fixed interest rate Loans and receivables with floating interest rate Total loans and receivables

Unit : Baht没000 SEPARATE FINANCIAL STATEMENTS 2008 2007 66,527,857 55,283,715 14,042,490 10,373,519 80,570,347 65,657,234

CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 66,527,857 55,283,715 14,284,736 10,971,426 80,812,593 66,255,141

The Bank and its subsidiaries have summarized financial assets and liabilities classified on maturity of interest repricing period as at December 31, 2008 and 2007, as follows : Unit : Baht没000 CONSOLIDATED FINANCIAL STATEMENTS 2008 Greater than Non-Performing Non-Interest 0-3 Months 3-12 Months 1-5 Years 5 Years Loans Bearing Total Financial assets Interbank and money market items and securities purchased under resale agreement 18,422,725 - 802,306 19,225,031 Investments in securities, net 354,664 314,355 1,442,060 378,858 - 284,067 2,774,004 Investments in loans, net 41,333 129,525 4,778,761 163,380 - 5,112,999 Loans 17,480,567 12,450,075 40,359,093 2,763,836 7,759,022 - 80,812,593 Financial liabilities Deposits 21,489,761 37,084,144 12,334,285 - 247,572 71,155,762 Interbank and money market items 1,497,012 1,268,000 995,500 1,757 3,762,269 Borrowings 6,174,019 5,378,894 8,395,667 - 19,948,580 Unit : Baht没000

0-3 Months Financial assets Interbank and money market items and securities purchased under resale agreement 2,026,385 Investments in securities, net 308,106 Investments in loans, net 176,003 Loans 15,032,207 Financial liabilities Deposits 10,373,066 Interbank and money market items 168,208 Borrowings 8,390,454

148

CONSOLIDATED FINANCIAL STATEMENTS 2007 Greater than Non-Performing Non-Interest 3-12 Months 1-5 Years 5 Years Loans Bearing

2,291,805 311,226 193,213 6,492,841 10,166,886 30,177,351

703,713 14,128 2,663,220

8,215,477

15,594,882 14,827,382

558,328 41,353,658

451 3,065,979 - 22,606,795

695,620 9,410,665

2,201,700 4,805,676

723,206 685,352 -

Total

2,749,591 4,300,202 6,876,185 66,255,141

Unit : Baht没000

Financial assets Interbank and money market items and securities purchased under resale agreement Investments in securities, net Investments in loans, net Loans Financial liabilities Deposits Interbank and money market items Borrowings

0-3 Months

SEPARATE FINANCIAL STATEMENTS 2008 Greater than Non-Performing Non-Interest 3-12 Months 1-5 Years 5 Years Loans Bearing

18,250,925 629 17,267,023

314,355 1,442,060 3,777 2,633,038 12,450,075 40,359,093

378,858 2,763,836

21,489,761

37,084,144 12,334,285

247,572 71,155,762

3,849 4,051,749 - 22,828,580

1,784,400 9,054,019

1,268,000 5,378,894

995,500 8,395,667

Total

- 667,782 18,918,707 - 7,506,509 9,641,782 - 2,637,444 7,730,320 80,570,347

Unit : Baht没000

0-3 Months

SEPARATE FINANCIAL STATEMENTS 2007 Greater than Non-Performing Non-Interest 3-12 Months 1-5 Years 5 Years Loans Bearing

1,809,320 223,113 13,585 14,460,586

2,291,805 311,226 27,026 3,942,078 10,166,886 30,151,065

703,713 2,663,220

10,373,066

15,594,882 14,827,382

558,328 41,353,658

2,325 3,126,271 - 26,726,795

226,626 12,510,454

695,620 9,410,665

2,201,700 4,805,676

Total

- 659,632 2,468,952 - 8,371,044 11,900,901 - 3,982,689 8,215,477 - 65,657,234

The average balances of significant performing financial assets and financial liabilities, including the average interest and dividend income, are summarized as follows:

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Unit : Baht没000 CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2008 Average Interest and Average Rate outstanding balances dividend income % Significant performing financial assets Interbank and money market items Investment in securities, net Investment in loans, net Loans Securities purchased under resale agreements Significant financial liabilities Deposits and Interbank and money market items Borrowings

9,318,063 4,623,728 4,904,242 77,512,028 420,833 96,778,894

179,984 178,891 1,365,979 6,059,877 7,499 7,792,230

1.93 3.87 27.85 7.82 1.78 8.05

58,552,418 25,934,863 84,487,281

328,994 1,021,167 1,350,161

0.56 3.94 1.60

Unit : Baht没000 CONSOLIDATED FINANCIAL STATEMENTS For the year ended December 31, 2007 Average Interest and Average Rate outstanding balances dividend income % Significant performing financial assets Interbank and money market items Investment in securities, net Investment in loans, net Loans Securities purchased under resale agreements Significant financial liabilities Deposits and Interbank and money market items Securities sold under repurchase agreements Borrowings

150

1,583,972 4,778,951 6,684,583 58,899,243 746,667 72,693,416

20,259 252,800 1,211,212 4,997,142 33,292 6,514,705

1.28 5.29 18.12 8.48 4.46 8.96

43,127,486 58,333 17,844,937 61,030,756

1,862,659 2,211 726,800 2,591,670

4.32 3.79 4.07 4.25

Unit : Baht没000 SEPARATE FINANCIAL STATEMENTS For the year ended December 31, 2008 Average Interest and Average Rate outstanding balances dividend income % Significant performing financial assets Interbank and money market items Investment in securities, net Investment in loans, net Loans Securities purchased under resale agreements Significant financial liabilities Deposits and Interbank and money market items Borrowings

6,434,772 12,091,671 3,659,767 75,982,650 420,833 98,589,693

169,912 2,548,452 981,153 6,044,363 7,499 9,751,379

2.64 21.08 26.81 7.95 1.78 9.89

53,406,292 29,117,568 82,523,860

2,123,751 1,146,416 3,270,167

3.98 3.94 3.96

Unit : Baht没000 SEPARATE FINANCIAL STATEMENTS For the year ended December 31, 2007 Average Interest and Average Rate outstanding balances dividend income % Significant performing financial assets Interbank and money market items Investment in securities, net Investment in loans, net Loans Securities purchased under resale agreements Significant financial liabilities Deposits and Interbank and money market items Securities sold under repurchase agreements Borrowings

891,642 12,224,542 4,929,427 57,230,349 746,667 76,022,627

13,711 2,173,790 440,278 4,984,353 33,292 7,645,424

1.54 17.78 8.93 8.71 4.46 10.06

44,802,177 58,333 19,330,038 64,190,548

1,935,276 2,211 813,357 2,750,844

4.32 3.79 4.21 4.29

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34.2.2 Liquidity risk Significant assets and liabilities of the Bank analyzed by relevant maturity groupings are as follows: Unit : Baht没000

On demand Financial assets Cash Interbank and money market items Net investment in securities Net investment in loans Net investment in properties Hire-purchase receivables Leasing receivables Loans and bills receivable Total financial assets Financial liabilities Deposits Interbank and money market items Borrowings Total financial liabilities

CONSOLIDATED FINANCIAL STATEMENTS 2008 Within 1 year 1 - 5 years Over 5 years

211,132 985,610 13,690 1,210,432

18,239,421 933,991 192,287 20,124 712,588 20,098,411

1,840,013 3,402,957 106,644 24,742,175 234,700 5,126,211 35,452,700

764,321 286,828 1,051,149

41,663,332 1,165,241 7,483,008 50,311,581

28,728,109 2,310,200 12,465,572 43,503,881

Total

211,132 - 19,225,031 2,774,004 1,517,755 5,112,999 106,644 32,376,467 57,138,766 3,880 238,580 17,582,758 23,435,247 51,480,860 108,242,403 -

71,155,762 3,762,269 19,948,580 94,866,611 Unit : Baht没000

On demand Financial assets Cash Interbank and money market items Securities purchased under resale agreements Net investment in securities Net investment in loans Net investment in properties Hire-purchase receivables Leasing receivables Loans and bills receivable Total financial assets Financial liabilities Deposits Interbank and money market items Borrowings Total financial liabilities

152

CONSOLIDATED FINANCIAL STATEMENTS 2007 Within 1 year 1 - 5 years Over 5 years

Total

140,394 1,274,589 338,352 1,753,335

495,002 980,000 3,266,167 405,885 19,292 1,218,080 6,384,426

1,034,035 6,238,892 171,526 22,988,764 174,839 5,403,077 36,011,133

231,408 19,785,591 4,602 16,322,544 36,344,145

140,394 1,769,591 980,000 4,300,202 6,876,185 171,526 42,793,647 179,441 23,282,053 80,493,039

916,983 885 917,868

25,609,293 863,394 17,801,119 44,273,806

14,827,382 2,201,700 4,805,676 21,834,758

41,353,658 3,065,979 22,606,795 67,026,432

Unit : Baht没000

On demand Financial assets Cash Interbank and money market items Net investment in securities Net investment in loans Hire-purchase receivables Leasing receivables Loans and bills receivable Total financial assets Financial liabilities Deposits Interbank and money market items Borrowings Total financial liabilities

SEPARATE FINANCIAL STATEMENTS 2008 Within 1 year 1 - 5 years Over 5 years

209,877 679,286 11,073 900,236

18,239,421 467,248 20,124 499,044 19,225,837

9,174,534 2,637,444 24,742,175 234,700 5,100,126 41,888,979

764,321 286,828 1,051,149

41,663,332 1,454,721 10,363,008 53,481,061

28,728,109 2,310,200 12,465,572 43,503,881

Total

209,877 - 18,918,707 9,641,782 2,637,444 32,376,467 57,138,766 3,880 238,580 17,582,758 23,193,001 49,963,105 111,978,157 -

71,155,762 4,051,749 22,828,580 98,036,091 Unit : Baht没000

On demand Financial assets Cash Interbank and money market items Securities purchased under resale agreements Net investment in securities Net investment in loans Hire-purchase receivables Leasing receivables Loans and bills receivable Total financial assets Financial liabilities Deposits Interbank and money market items Borrowings Total financial liabilities

SEPARATE FINANCIAL STATEMENTS 2007 Within 1 year 1 - 5 years Over 5 years

Total

139,099 993,950 335,359 1,468,408

495,002 980,000 3,035,181 19,292 649,452 5,178,927

8,865,720 3,982,689 22,988,764 174,839 5,376,791 41,388,803

19,785,591 4,602 16,322,544 36,112,737

139,099 1,488,952 980,000 11,900,901 3,982,689 42,793,647 179,441 22,684,146 84,148,875

916,983 27,751 944,734

25,609,293 896,820 21,921,119 48,427,232

14,827,382 2,201,700 4,805,676 21,834,758

41,353,658 3,126,271 26,726,795 71,206,724

34.3

Fair values The fair value of financial instruments has been estimated by the Bank using available market information and appropriate valuation methodologies for each type of financial instrument. A summary of carrying amounts and fair value of financial instruments as at December 31, 2008 and 2007, are as follows :

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Unit : Baht没000 CONSOLIDATED FINANCIAL STATEMENTS 2008 2007 Carrying Amount Fair Value Carrying Amount Financial assets Cash Interbank and money market items Securities purchased under resale agreements Investments in securities, net Investments in loans, net Investments in properties, net Loans and accrued interest receivable, net Financial liabilities Deposits Interbank and money market items Liabilities payable on demand Borrowings Accrued interest payable

Fair Value

211,132 19,225,031 2,774,004 5,112,999 106,644 77,806,949

211,132 19,225,031 2,813,402 5,112,999 106,644 77,806,949

140,394 1,768,921 980,000 4,300,202 6,876,185 171,526 63,606,529

140,394 1,768,921 980,000 4,395,002 6,876,185 237,261 63,606,529

71,155,762 3,762,269 277,210 19,948,580 794,448

71,155,762 3,762,269 277,210 20,019,559 794,448

41,353,658 3,065,979 247,396 22,606,795 761,398

41,353,658 3,067,588 247,396 22,650,458 761,398

Unit : Baht没000 SEPARATE FINANCIAL STATEMENTS 2008 2007 Carrying Amount Fair Value Carrying Amount Financial assets Cash Interbank and money market items Securities purchased under resale agreements Investments in securities, net Investments in loans, net Loans and accrued interest receivable, net Financial liabilities Deposits Interbank and money market items Liabilities payable on demand Borrowings Accrued interest payable

154

Fair Value

209,877 18,918,707 9,641,782 2,637,444

209,877 18,918,707 11,338,204 2,637,444

139,099 1,488,952 980,000 11,900,901 3,982,689

139,099 1,488,952 980,000 15,165,019 3,982,689

77,592,943

63,033,786

71,155,762 4,051,749 277,210 22,828,580 802,535

71,155,762 4,051,749 277,210 22,899,559 802,535

41,353,658 3,126,271 247,396 26,726,795 772,991

41,353,658 3,127,880 247,396 26,770,458 772,991

34.4 Interest rate swaps The Bank has set up objectives and policies to manage the foreign exchange risk and interest rate risk from the volatility of foreign exchange rates and interest rates by using the derivatives for serving the client没s need and the Bank没s assets and liability management purpose. The Bank controls the counterparty risks by setting-up the credit limit based on the normal lending procedures. The notional amount and the fair value of derivatives as at December 31, 2008 are as follows : (December 31, 2007 : nil) Unit : Million Baht CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2008 Notional amount Net Fair Less than Within 1- 5 More than 5 Value of 1 year years years Total Derivatives Interest rate swap contracts 1,912 1,912 31

35. INFORMATION ON QUALITY OF ASSETS The quality of assets classified in accordance with the guidelines of the Securities Exchange Commission as at December 31, 2008 and 2007 are as follows: 35.1 Investment in securities The Bank has investment in debt instruments in companies which were ordered to discontinue their operations and defaulted their debts as at December 31, 2008 and 2007 as follows: Unit : Million Baht CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS Type of investment Numbers Cost Market Value Provision Non-listed companies which have Senior defaulted on interest payment debenture 1 The Bank has recognized impairment loss on such debt instruments to the statement of income in the period when incurred. 35.2 Loans and accrued interest receivable The Bank has given loans, receivables and accrued interest receivables to companies which face the financial difficulties and provided related allowance for doubtful accounts in the consolidated and separate financial statements as follows: Unit : Million Baht CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2008 Allowance for doubtful Numbers Total debts Collateral accounts Listed company which is under restructuring plan 1 147 39 122 Company which is under default problem 99 3,644 5,308 830 100 3,791 5,347 952

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Listed company which is under restructuring plan Company which is under default problem

Unit : Million Baht CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS 2007 Allowance for doubtful Numbers Total debts Collateral accounts 4 309 36 280 134 5,948 7,990 1,353 138 6,257 8,026 1,633

36. RELATED PARTIES TRANSACTIONS 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 holding companies, 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 entities 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. The following material transactions were carried out with related parties for the years ended December 31, 2008 and 2007. 36.1 Income Unit : Million Baht SEPARATE FINANCIAL STATEMENTS 2008 2007 Interest and dividend income Kiatnakin Securities Co., Ltd. 41.64 81.66 Asia Recovery Fund 1 257.94 951.68 Asia Recovery Fund 2 1,371.76 413.65 Asia Recovery Fund 3 614.31 476.95 Asia Recovery Property Fund 1 88.60 2,374.25 1,923.94 Gain on repurchasing of unit trust Asia Recovery Fund 1 4.72 Asia Recovery Fund 2 16.45 Asia Recovery Property Fund 1 93.44 98.16 16.45 Fee and services income Kiatnakin Securities Co., Ltd. 3.76 1.46 Asia Recovery Fund 1 1.20 1.20 Asia Recovery Fund 2 1.20 1.20 Asia Recovery Fund 3 1.20 1.20 Thai Restructuring Fund 2.40 2.40 9.76 7.46 Other income Kiatnakin Securities Co., Ltd. 3.38 4.12 3.38 4.12 156

The consolidated financial statements for the year ended December 31, 2008 included the brokerage income received from Kiatnakin Bank Public Company Limited and the directors and management at the position of department head and above amounting to Baht 0.02 million and Baht 0.67 million, respectively (2007: Baht 0.64 million and Baht 1.16 million, respectively). 36.2 Expenses Unit : Million Baht SEPARATE FINANCIAL STATEMENTS 2008 2007 Interest and discounts on borrowings Kiatnakin Securities Co., Ltd. 9.20 11.72 Asia Recovery Fund 1 17.80 29.62 Asia Recovery Fund 2 23.86 26.25 Asia Recovery Fund 3 28.82 26.77 Thai Restructuring Fund 38.66 26.18 Asia Recovery Property Fund 1 12.35 6.18 Asia Recovery Property Fund 3 38.67 37.34 Directors and management at the position of department head including their related person who have control or significant influences 5.19 5.83 174.55 169.89 Rental and services expenses CMIC Development Co., Ltd.(1) 16.88 9.94 Chotitanawan Co., Ltd.(2) 9.00 9.74 25.88 19.68 Other service Amarin Law Office Co., Ltd.(3) 42.20 33.30 42.20 33.30 Other services fee paid by subsidiaries to Amarin Law Office Co., Ltd. amounting to Baht 7.68 Million (2007: Baht 7.66 Million). Relationship details: (1) Shares received from troubled debts restructuring (2) Major shareholder is an authorized director (3) Major incomes come from Kiatnakin Bank Group

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36.3 Outstanding balances as at December 31, 2008 and 2007 are as follows: Unit : Million Baht SEPARATE FINANCIAL STATEMENTS 2008 2007 Loans to financial institutions / Loan CMIC Development Co., Ltd. Directors and management at the position of department head including their related person who have control or significant influences Accounts receivable/Other assets Kiatnakin Securities Co., Ltd. Asia Recovery Fund 2 Asia Recovery Fund 3 CMIC Development Co., Ltd. Amarin Law Office Co., Ltd. Borrowing from financial institutions Kiatnakin Securities Co., Ltd. Other liabilities/Accrued interest expenses Kiatnakin Securities Co., Ltd. Asia Recovery Fund 1 Asia Recovery Fund 2 Asia Recovery Fund 3 Thai Restructuring Fund Asia Recovery Property fund 1 Asia Recovery Property fund 3

158

563.33

1.09 564.42

563.33

0.63 5.76 1.23 7.62

0.89 64.96 85.85 2.22 1.95 155.87

282.00 282.00

25.00 25.00

3.34 0.17 0.61 2.05 1.91 8.08

3.89 1.09 1.60 1.64 1.34 0.53 1.50 11.59

Unit : Million Baht SEPARATE FINANCIAL STATEMENTS Weighted Average Balance 2008 2007 2008 2007 Deposits Kiatnakin Securities Co., Ltd. Asia Recovery Fund 1 Asia Recovery Fund 2 Asia Recovery Fund 3 Thai Restructuring Fund Asia Recovery Property Fund 1 Asia Recovery Property Fund 3 Director and management at the position of department head including their related person have control or significant influences

218.65 159.12 160.09 217.70 254.58 108.32 269.70

255.64 164.37 226.29 220.05 444.35 130.36 609.79

7.48 -

35.30 -

319.92 1,708.08

388.54 2,439.39

511.87 519.35

538.38 573.68

Unit : Million Baht SEPARATE FINANCIAL STATEMENTS Weighted Average Balance 2008 2007 2008 2007 Short term Borrowing Kiatnakin Securities Co., Ltd. Asia Recovery Fund 1 Asia Recovery Fund 2 Asia Recovery Fund 3 Thai Restructuring Fund Asia Recovery Property Fund 1 Asia Recovery Property Fund 3 Director and management at the position of department head including their related person have control or significant influences

353.10 575.36 684.77 890.11 267.86 881.41

705.03 484.86 507.75 320.49 64.56 469.12

100.00 350.00 1,260.00 1,170.00

540.00 590.00 640.00 940.00 370.00 1,040.00

76.41 3,729.02

9.99 2,561.80

91.12 2,971.12

16.38 4,136.38

As at December 31, 2008, closed members of directors are co-guarantors for loans amounting to Baht 212.29 million (2007: Baht 227.89 million). The related company which shares were received from troubled debts restructuring has no borrowings from shareholders/directors including their related person (2007 : Baht 62 million).

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36.4 Pricing policies Transactions between the Bank and related parties have been priced as follows: ë Fee and services income, which the funds paid to the Bank is calculated at the rate specified in service agreement. ë Income under commitment agreement under securities business receivables is calculated based on outstanding balance which the Bank could not claim from securities business receivables. ë Other income is based on actual cost incurred. ë Interest income is based on market price. ë Dividend income is received at the rate declared by the fund. ë Gain on repurchasing of unit trust is calculated from net asset value of unit trust at the repurchased date deducted by the carrying value. ë Brokerage commission is charged at the same rate given to third parties ë Interest and discounts on borrowing are based on market price ë Rental and service income are based rate identified in rental and services contracts

37. BENEFITS PAID TO DIRECTORS AND EXECUTIVES The Bank has no special benefits given to the directors and executives beyond the general benefits made as usual such as directors remuneration, executives salary and bonus (if any) included ESOP warrants as disclosed in Note 23. Monetary remunerations paid to directors are as follows:

Directorsû monetary remunerations

CONSOLIDATED FINANCIAL STATEMENTS 2008 2007

Unit : Baht SEPARATE FINANCIAL STATEMENTS 2008 2007

8,185,001

6,625,001

8,459,963

38. APPROVAL OF FINANCIAL STATEMENTS These financial statements have been approved for issuing by the Bankûs authorized director on February 23, 2009.

160

7,199,963

General Information

Company Nature of Business Registration Number Address

No. of ordinary shares sold

Kiatnakin Bank Public Company Limited Banking 172 500 Amarin Tower, 11th Floor, Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Tel. 0-2680-3333 Fax 0-2256-9933 www.kiatnakin.co.th 523,151,780 shares as of December 31, 2008

Other References Registrar

Thailand Securities Depository Company Limited 62 Stock Exchange of Thailand Building Ratchadapisek Road, Klongtoey, Bangkok 10110 Tel. 0-2229-2800, 0-2654-5599 Fax. 0-2359-1259 Auditor Dr. Suphamit Techamontrikul Delaitte Touche Tohmatsu Jaiyos Audit Co., Ltd. Rajanakarn Bldg. 25th Fl., 183 South Sathorn Road, Yannawa, Sathorn, Bangkok 10120, Thailand Tel. 0-2676-5700 Fax: 0-2676-5757 Legal Adviser None Consultant/Manager under Contract None

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Companies in which Kiatnakin Bank holds 10% or more of the total registered shares (as of December 31, 2008) Name and Address 1. BTMU Leasing (Thailand) Company Limited 54 Harindhorn Tower, 4th Floor, North Sathorn Road, Silom, Bangrak, Bangkok 10500 Tel. 0-2266-3060 Fax. 0-2266-3067 2. Attakorn Company Limited 200 Juldis Haadyai Plaza, 4th Floor, Niphat Uthit 3 Road, Haadyai, Songkhla 90110 Tel. 0-7435-4334-5 Fax. 0-7435-4336 3. Kiatnakin Securities Company Limited 500 Amarin Tower, 7th Floor, Ploenchit Road, Pathumwan, Bangkok 10330 Tel. 0-2680-2222 Fax. 0-2680-2233 4. Asia Recovery Fund 1 Thai Farmers Asset Management Company Limited 252/38-41 Maungthai-Phatra Tower 1, 31st Floor, Rachadaphisek Road, Huaykwang, Bangkok 10320 Tel. 0-2693-2300 Fax. 0-2693-2320 5. Asia Recovery Fund 2 Thai Farmers Asset Management Company Limited 252/38-41 Maungthai-Phatra Tower 1, 30th - 32nd Floor, Rachadaphisek Road, Huaykwang, Bangkok 10320 Tel. 0-2693-2300 Fax. 0-2693-2320 6. Asia Recovery Fund 3 Thai Farmers Asset Management Company Limited 252/38-41 Maungthai-Phatra Tower 1, 31st Floor, Rachadaphisek Road, Huaykwang, Bangkok 10320 Tel. 0-2693-2300 Fax. 0-2693-2320

162

Business Type % Shares Owned by the Bank

No.of ordinary Shares Issued

Leasing/ Hire-purchase

600,000

Car Hire-purchase

800,000

Securities Business

99.99

65,000,000

Fund Management

99.95

98,136,829

Fund Management

99.59

181,206,126

Fund Management

99.97

190,832,895

Name and Address 7. Thai Restructuring Mutual Fund One Asset Management Company Limited 989 Siam Tower Building, 24th Floor, Rama 1 Road, Pathumwan, Bangkok 10330 Tel. 0-2659-8888 Fax. 0-2659-8860-1 8. Asia Recovery Property Fund 1 One Asset Management Company Limited 989 Siam Tower Building, 24th Floor, Rama 1 Road, Pathumwan, Bangkok 10330 Tel. 0-2659-8888 Fax. 0-2659-8860-1 9. Asia Recovery Property Fund 3 One Asset Management Company Limited 989 Siam Tower Building, 24th Floor, Rama 1 Road, Pathumwan, Bangkok 10330 Tel. 0-2659-8888 Fax. 0-2659-8860-1 10. Ayudhya Tuntawee Fund 5 One Asset Management Company Limited 898 Ploenchit Tower Building, 12th Floor, Ploenchit Road, Lumpini, Pathumwan Bangkok 10330 Tel. 0-2657-5757 Fax. 0-2263-0199 11. CMIC Development Company Limited 209 K Tower, 10th Floor Building Rental Sukhumvit 21 Road, Klongtoey Nue, Wattana, Bangkok 10110 Tel. 0-2664-1396-7 Fax. 0-2664-2163 12. Nippon Pack (Thailand) Company Limited 53/34 Petchkasem Road, Nhongkangplu, Nhong Kham, Bangkok 10160 Tel. 0-2421-2060-1 Fax. 0-2421-0496

Business Type % Shares Owned by the Bank

No.of ordinary Shares Issued

Fund Management

98.91

78,698,484

Fund Management

99.5

4,381,746

Fund Management

98.77

93,340,000

Fund Management

33.78

14,802,563

Office

80.58

230,000,002

Packaging

11.01

12,200,000

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Capital Structure

Bankûs Capital (a) As at December 31, 2008, the Bank had a registered capital of Baht 7,228 million, paid up capital of Baht 5,231 million, an a total of 523,151,780 common shares value at Baht 10 per share. (b) Debenture As at December 31, 2008, the Bank had 7 outstanding debentures. The details are in the notes to the financial statement on page 136-137 (c) Warrant ë The third issue of warrants, totaling 150,849,990 units was offered to the current Bank shareholders at the price of Baht 2.30 per unit at the rate of 5 shares per 3 warrant units. One unit of warrant can purchase 1.13362 shares at Baht 12.35 per share and can be redeemed on the 30th of the end of each quarter. The first redemption was on June 30, 1999 and the last redemption will be on June 30, 2009. As at December 31, 2008, the total outstanding warrants from the third issue was 3,688,362 units, a reduction of 1,036,700 units from previous years. ë The fourth issue of warrants, totaling 138,613,188 units was offered to the current Bank shareholders at the price of Baht 0 per unit at the rate

164

of 5 shares per 1 new share and 3 warrant units. One unit of warrant can purchase 1 new share at Baht 19.53 per share. The first redemption was on June 30, 2001 and the last redemption will be on December 30, 2010. As at December 31, 2008, the total outstanding warrants from the fourth issue was 111,329,209 units, a reduction of 0 units from previous years. ë In the General Shareholder meeting, the shareholders approved issuing no more than 10 million units of the Employee Stock Option Program Warrant (ESOP Warrant) for executives in 2000 for distribution to directors and/or employee of the Bank and its subsidiaries at the price of Baht 0 per unit. Can redeem the warrant to buy common shares at a ratio of 1:1 at the price of Baht 5.62 per share. It can be redeemed on the 30th of the end of each quarter. The first redemption was on December 31, 2002 and the last redemption will be on June 30, 2011. As at December 31, 2008, the total outstanding ESOP warrants from was 19,500 units. (d) Arrangement between major shareholders that has impact on new share issuance.(None) (e) Binding obligations for future share issuance. (None)

BRANCH OFFICES KIATNAKIN BANK PUBLIC COMPANY LIMITED

1. Head Office 500 Amarin Tower, 11th Floor, Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Tel. 0-2680-3333 Fax. 0-2256-9933 2. Asoke Branch 209/1 K Tower, Sukhumvit 21 (Asoke), Khlong Toey Nua, Wattana, Bangkok 10110 Tel. 0-2625-5000 Fax. 0-2664-1454 3. Chiang Mai Branch 33 Chiang Mai-Lampang Road, Tambon Chang Phueak, Amphoe Muang, Chiang Mai 50300 Tel. 0-5321-8711-3, 0-5340-9620-4 Fax. 0-5340-9625 4. Phitsanulok Branch 286/10 Pichaisongkram Road, Tambon Nai Muang, Amphoe Muang, Phitsanulok 65000 Tel. 0-5521-1683-6, 0-5521-1773-4 Fax. 0-5521-1687 5. Khon Kaen Branch 9/2 Prachasamosorn Road, Tambon Nai Muang, Amphoe Muang, Khon Kaen 40000 Tel. 0-4333-7725-32 Fax. 0-4333-7734 6. Nakhon Ratchasima Branch 192/1-4, Jomsurangyart Road, Tambon Nai Muang, Amphoe Muang, Nakhon Ratchasima 30000 Tel. 0-4426-0401-8 Fax. 0-4426-0409

7. Ubon Rachathani Branch 466 Suriyat Road, Tambon Nai Muang, Amphoe Muang, Ubon Rachathani 34000 Tel. 0-4520-9260 Fax. 0-4520-9258 8. Ratchaburi Branch 286/25-26 Srisuriyawong Road, Tambon Na Muang, Amphoe Muang, Ratchaburi 70000 Tel. 0-3231-0382-9 Fax. 0-3231-0391 9. Chonburi Branch 7-14 Moo 4, Sukhumvit Road, Tambon Huaykapi, Amphoe Muang, Chonburi 20130 Tel. 0-3838-4946-9 Fax. 0-3838-4950 10. Rayong Branch 375/4-5 Sukhumvit Road, Tambon Noenphra, Amphoe Muang, Rayong 21000 Tel. 0-3880-8090-4 Fax. 0-3880-8095 11. Hat Yai Branch 24, 24/1, Suvarnawong Road, Tambon Hat Yai, Amphoe Hat Yai, Songkhla 90110 Tel. 0-7434-6262 Fax. 0-7434-6260 12. Surathani Branch 22/144-145-146, Raj-Uthit Road, Tambon Talad, Amphoe Muang, Surathani 84000 Tel. 0-7721-7405-7, 0-7720-5454-5 Fax. 0-7721-7408 Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

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13. Nakhon Sawan Branch 795/8 Moo 10, Tambon Nakhonsawan, Amphoe Muang, Nakhon Sawan 60000 Tel. 0-5622-0973-6 Fax. 0-5622-0977 14. Udon Thani Branch 215/25, 215/27 Udon Dudsadee Road Tambon Mark-kang, Amphoe Muang, Udon Thani 41000 Tel. 0-4222-2555 Fax. 0-4222-3242 15. Nakhon Si Thammarat Branch 6/144-145,Patanakarn Khu Khwang Road, Tambon Nai Muang, Amphoe Muang, Nakhon Si Thammarat 80000 Tel. 0-7577-4651-6 Fax. 0-7535-8538 16. Chiang Rai Branch 102, 102/1-3 Moo 13, Tambon Rob Wieng, Amphoe Muang, Chiang Rai 57000 Tel. 0-5371-9433 Fax. 0-5371-9434 17. Phuket Branch 101/2, Bangkok Road, Tambon Ta Lad Nua, Amphoe Muang, Phuket 83000 Tel. 0-7622-3464, 0-7622-3234, 0-7622-3293 Fax. 0-7622-3550 18. Chantaburi Branch 29/1-4 Moo 7, Tambon Chantanimit, Amphoe Muang, Chantaburi 20000 Tel. 0-3934-3616 Fax. 0-3934-3615 19. Chachengsao Branch 508, 510 Chachengsao-Bang Pakong Road, Tambon Na Muang, Amphoe Muang, Chachengsao 24000 Tel. 0-3851-6611 Fax. 0-3851-6106 166

20. Chumphon Branch 67/4-5 Krom Luang Chumphon Road, Tambon Tha Taphao, Amphoe Muang, Chumphon 86000 Tel. 0-7757-0508 Fax. 0-7757-0509 21. Saraburi Branch 568/7-9, Paholyothin Road, Tambon Pak Priao, Amphoe Muang, Saraburi 18000 Tel. 0-3631-8445 Fax. 0-3631-8446 22. Nakhon Pathom Branch 992/2, Petkasem Road, Tambon Huay Jorakae, Amphoe Muang, Nakhon Pathom 73000 Tel. 0-3427-1583 Fax. 0-3427-1584 23. Srinakarin Office 903, 905 Srinakarin Road, Suan Luang, Bangkok 10250 Tel. 0-2320-0622 Fax. 0-2320-0623 24. Petkasem-Kanjanapisek Branch 119/42-43, Petkasem Road, Bang Kae Bang Kae, Bangkok 10160 Tel. 0-2454-8656 Fax. 0-2454-8657 25. Pattaya Branch 120/17-18 Moo 6, Tambon Na Kluea, Amphoe Bang Lamung, Chonburi 20150 Tel. 0-3848-9161 Fax. 0-3848-9162 26. Kanchanaburi Branch 275/1-2, Saeng Chootoh Road, Tambon Baan Nua, Amphoe Muang, Kanchanaburi 71000 Tel. 0-3462-0645 Fax. 0-3462-0646

27. Lampang Branch 142-144, Highway-Lampang-Nguo, Tambon Phra Bat, Amphoe Muang, Lampang 52000 Tel. 0-5431-7799 Fax. 0-5431-7699 28. Krabi Branch 254, 254/1-2, Moo 11 Tambon Krabi Noi, Amphoe Muang, Krabi 81000 Tel. 0-7566-3922 Fax. 0-7566-3923 29. Roi Et Branch 49, 49/1-3 Tawapiban Road, Tambon Nai Muang, Amphoe Muang, Roi Et 45000 Tel. 0-4351-8162 Fax. 0-4351-8163 30. Surin Branch 6/7 Lak Muang Road, Tambon Nai Muang, Amphoe Muang, Surin 32000 Tel. 0-4453-5030 Fax. 0-4453-5031 31. Hua Hin Branch 60/27-28 Moo Ban Bor Fai, Tambon Hua Hin, Amphoe Hua Hin, Prachuab Kirikhun 77110 Tel. 0-3254-7558 Fax. 0-3254-7660 32. Suphan Buri Branch 290/3-6 Moo 4, Tambon Sanamchai, Amphoe Muang, Suphan Buri 72000 Tel. 0-3554-6270 Fax. 0-3554-6277 33. Phetchabun Branch 3-48 Samakkeechai Road, Tambon Nai Muang, Amphoe Muang, Phetchabun 67000 Tel. 0-5671-2272 Fax. 0-5671-2273

34. Trang Branch 59/12-14 Huay Yod Road, Tambon Thap Thieng, Amphoe Muang, Trang 92000 Tel. 0-7522-3292 Fax. 0-7522-3293 35. Prachin Buri Branch 41/18-20 Prachintakarm Road, Tambon Na Muang, Amphoe Muang, Prachin Buri 25000 Tel. 0-3721-7581 Fax. 0-3721-7582 36. Ayutthaya Branch 100 Moo 1, Tambon Pailing, Amphoe Phranakorn Sri Ayutthaya, Ayutthaya 10300 Tel. 0-3523-5641 Fax. 0-3523-5642 37. Pathum Thani Branch 433, 435, 437 Rangsit-Nakhon Nayok Road, Tambon Prachathipat, Amphoe Thanyaburi, PathumThani Tel. 0-2533-0333 Fax. 0-2533-0343 38. Samut Prakarn Branch 89/8-10 Moo 5, Tambon Bang Muang, Amphoe Muang, Samut Prakarn 10270 Tel. 0-2703-2649 Fax. 0-2703-2650 BRANCH OFFICES KIATNAKIN SECURITIES COMPANY LIMITED Bangkok Office 1. Head Office 500 Amarin Tower 7th, Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Tel. 0 2680 2222 Fax. 0 2680 2233

Annual Report 2008 ĂŤ Kiatnakin Bank Public Company Limited

167

2. Asoke Office 159 Sukhumvit 21 Road, Klong Toei Nue, Wattana, Bangkok 10110 Tel. 0 2204 1270-84 Fax. 0 2661 6329 3. Ngamwongwan Office 30/39-50 Office Building, 11st Floor, The Mall Ngam Wong Wan, Ngam Wong Wan Road, Bangkhen, Amphur Muang, Nontaburi 11000 Tel. 0 2550 0353-80 Fax. 0 2550 0354 4. Bangna Office 1093/56-57 Central City Tower, 11st Floor, Bangna-Trad Road, Bangna, Prakanong, Bangkok 10260 Tel. 0 2745 6458-66 Fax. 0 2745 6467 Northeastern 1. Khon Kaen Office 9/2 Prachasamosorn Road, Tambon Nai Muang, Amphur Muang, Khon Kaen 40000 Tel. 0 4333 7700-24 Fax. 0 4333 7721 East 1. Chonburi Office 7/18 Moo 4, Tambon Huaykapi, Amphur Muang, Chonburi 20130 Tel. 0 3838 4931-43 Fax. 0 3838 4794

168

2. Rayong Office 125/1 Janta-udom Road, (Rayong-Baan Khai), Tambon Choeng Noen, Amphur Muang, Rayong 21000 Tel. 0 3861 7476-90 Fax. 0 3861 7490 North 1. Chiangmai Office 33 Chiangmai-Lampang Super High-way, Tambon Chang Phueak, Amphur Muang, Chiangmai 50300 Tel. 0 5322 0753-60 Fax. 0 5322 0763 2. Phitsanulok Office 169/2-3-4, Boromtrailoknat Road, Tambon Nai Muang, Amphur Muang, Phitsanulok 65000 Tel. 0 5523 5000-6 Fax. 0 5523 5006 Central 1.Samutsakorn Office 1400/33 Ekkachai Road, Tambon Mahachai, Amphur Muang, Samutsakorn 74000 Tel. 0 3442 7123-5 Fax. 0 3442 3565

List of Information required by the Office of the Securities and Exchange Commission

Page 1. General Information 1.1 The company 1.2 Juristic entity in which the company holds 10% or more of the total registered shares 1.3 Other References

161 162 161

2. Financial Highlights

3. Nature of Business 3.1 Business Operations 3.2 Revenue Structure 3.3 Significant changes in the previous year

24 24 28 9

4. Risk Factors 5. Shareholding and Management Structure 5.1 Shareholders 5.2 Management ë Management Structure ë Director and Management Selection Process ë Management Remuneration ë Business Administration ë Company Policy and Disclosure ë Internal Control 5.3 Dividend Policy

33 74 74 77 77 80 81 54 56 83 87

6. Related Party Transactions

7. Management Discussion and Analysis

8. Financial Statement 8.1 Financial Statement 8.2 Auditorûs Remuneration

90-160 90-160 83 Annual Report 2008 ë Kiatnakin Bank Public Company Limited

169