TBANK: Annual Report 2007 ENG by Shareinvestor Thailand

FINANCIAL HIGHLIGHTS

Financial Statements of the Bank Only 2007

2006

Loans

224,940

200,652

Total Assets

291,098

257,436

Deposits

191,546

198,981

Total Liabilities

270,402

242,237

Paid-up Capital

17,346

14,584

Shareholders’ Equity

20,695

15,199

7,737

6,010

19,128

16,838

991

225

Total Assets

13.08

31.66

Net Interest and Dividend Income

28.75

143.11

Shareholders’ Equity

36.17

(0.67)

340.11

(37.77)

Financial Highlights (Million Baht)

Net Interest and Dividend Income Total Income Net Profit

Growth (Percent)

Net Profit (Loss)

Financial Ratios (Percent) Return on Average Equity

5.52

1.48

Return on Average Assets

0.36

0.10

NPLs to Total Loans

2.31

1.87

12.00

11.13

11.93

10.42

0.63

0.15

BIS Ratio

Per Share (Baht) Book Value per Share Earnings per Share (EPS)

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

As of December 31

Loans and Deposits

158,697

200,000

149,015

2003

198,981

2004

200,652

2005

191,546

250,000

224,940

(Million Baht)

100,000

195,525

72,944

58,305

50,000

149,015

45,019

41,706

0 2007

64,044

49,539

14,584

8,102

15,300

8,901

8,766

2,472

1,115

1,137

6,177

2,580

3,148

362

551

420

2005

Loans

2004

2003 (year)

Deposits

BIS Ratio (Percent) 26.35

26.86

180,225

2006

41,706

32,903

31,023

158,697

45,019

150,000

17.26

168.05

25.11

13.66

121.74

(1.93)

12.48

71.90

1.54

0.09

(34.35)

31.05

7.07

11.13

12.00

0 2007

2006

2005

2004

2003 (year)

Net Profit (Million Baht)

2.99

6.24

4.80

0.27

0.84

0.77

1,000

2.26

5.75

5.83

800

17.26

26.35

26.86

600 362

420

551

991

1,200

225

400 200

10.49

10.99

10.82

0.42

0.68

0.52

0 2007

2006

2005

2004

2003 (year)

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

MESSAGE FROM CHAIRMAN OF THE BOARD OF DIRECTORS

MR. BANTERNG TANTIVIT

Chairman of the Board of Directors Thanachart Bank Public Company Limited

The Thai economy in 2007 was faced with the same risk factors as in 2006. These included political instability, unrest in the three southernmost provinces, as well as rising crude oil prices and the rising cost of living. As a result, the public were careful in their spending and postponed their investments. Both consumer confidence and business confidence had steadily declined since the beginning of the year but recovered in the fourth quarter after the political climate became clearer and the general election was set down to be held on 23 December 2007. The economic situation had a significant impact on the business operations of the commercial banks and the finance business. However, the Bank and its subsidiaries managed to record satisfactory operating results in their businesses.

The year 2007 was another one in which the Bank and member companies in Thanachart financial business group went through a number of key changes which had a considerable impact on the foundation and the development of their business operations and services. The key changes and the performance of Thanachart Group could be summarized as follows :

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Key Changes Shareholding Restructuring of Companies in Finance Business Sector

Reaching the Agreement to Allow The Bank of Nova Scotia to Become an Equity Partner and Participate in the Management of the Bank

In the middle of 2007, the Bank acquired the transfer of shares of the subsidiary companies in the finance business from Thanachart Capital Public Company Limited (“Thanachart Capital”). These include securities business, fund management business, life and non-life insurance business, leasing business and support businesses. After the shares acquisition, Thanachart Capital maintained its position as a holding company of Thanachart financial business conglomerate with a majority shareholding in the Bank and in the companies engaging in the asset management business. The shareholding restructuring was in line with Thanachart Group’s business policy which aimed at fully integrated financial services of Thanachart Group through an absolute success of the Bank’s marketing and service networks.

Thanachart Group succeeded in making an arrangement to the effect that The Bank of Nova Scotia (BNS) acquired a stake in the Bank with the Thanachart Capital selling some of its ordinary shares in the Bank to BNS. In addition, the Bank issued additional shares and offer to sale its additional shares to BNS. As a result, the Bank currently has two major shareholders including Thanachart Capital which holds 74.92 percent of the issued and paid-up share capital, and BNS which holds 24.98 percent. It is expected that in 2008, Thanachart Capital will sell a number of its shares in the Bank to BNS which consequently will hold 49 percent of the Bank’s issued and paid-up share capital. Such a move is subjected to an approval by the Bank of Thailand in line with the Financial Institutions Business Act (FIBA) which will come into force in

After the completion of such shareholding restructuring,

the third quarter of 2008.

the Bank and its subsidiary companies in the finance business have to formulate the consolidated reports and financial statements. The Bank re-engineered the structures of control and management of the subsidiary companies where the subsidiary companies have to monthly report their important performance result to the Bank. As well, the subsidiary companies are required to submit their business plans and budgets to the Bank’s Board of Directors for an assessment and approval. They are also required to manage its business in compliance with consolidated supervision specified in the Financial Institutions Business Act (FIBA) and the Bank of Thailand (BOT).

Having BNS as its major shareholder gives the Bank several advantages since BNS is a world-class financial institution with a business network covering over 50 countries worldwide. As one of many primary advantages, the proceeds from the capital increase not only enlarge the shareholders’ equity to support the business expansion in line with the established plan but also strengthen the financial position of the Bank in long term. As in the regard of management, representatives of BNS participating in both the Board of Directors and the Executive Committee help facilitate the transfers of knowledge and expertise in business operations, risk management, as well as information and technology in various areas. As well, the Bank can expand its business internationally through the advanced network of BNS. These advantages enable the Bank to have a jump leap in the development of business operation and in the delivery of financial services to both domestic and international markets.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Delisting shares of the Bank from the Stock Exchange of Thailand

help manage and enhance the potential and skills of the

Since the Bank has two major shareholders with the

foundation for human resource development which would play

combined shareholdings of the retail shareholders accounting

staff. Implementation of the policy acted as an important

a crucial role in Thanachart Group’s future operations.

for only 0.54 percent of the paid-up share capital, the

With its business operations management which built on

company did not meet the requirements of being a listed

the three key fundamentals paralleling with development in

company. As well, it is not the policy of the two major

various aspects and expansion of branches and service

shareholders to reduce their shareholdings. As a result, the shares of the Bank were voluntarily delisted from the Stock Exchange of Thailand. The delisting process was completed on 15 January 2008.

Business Operations and Performance

distribution channels, the Bank’s business expanded considerably in 2007. In particular, the number of branches increased by 33 to 166 branches and the number of ATMs increased by 38 to 280 outlets. Under a declining market rate, the Bank continued to efficiently manage its cost. The

In 2007, the business operations were managed in line

direction of full-service branch management achieved greater

with Thanachart Group’s main goal of becoming the leading

precision and clarity while the infrastructure development

medium-sized financial institution in Thailand. This is part of a

projects had progressed substantially. As a result, the Bank

vision to become an integrated financial service group,

and its subsidiaries had a significant growth. As at the end of

a universal banking, with the focus on a customer-centric

2007, the consolidated financial statements demonstrated the

business strategy and synergy achieved by uniting the

total assets worth 300,787 million baht as at the end of 2007

efforts of Thanachart Group’s staff. In 2007, Thanachart

and a net income worth 1,327 million baht. This was mainly

Group continues on its path of development based on these

due to the expansion of commercial banking business,

fundamentals. To enable Thanachart Group to fully cater to

securities business, fund management business, and life and

the diverse needs of target customers, the Group continued to

non-life insurance business, of which the Bank’s continuous

place an emphasis on innovating a wide range of products

expansion accounted for 62 percent. The Bank’s business

and acquiring service excellence by applying the service

growth was mainly contributed by the accelerated income

quality standard. Moreover, Thanachart Group succeeded in

generation and the increase of loan spread from 2.7 percent

promoting cooperation among member companies of

to 3.3 percent. Also, the rate of return was carefully

Thanachart Group as well as building a corporate culture which focused on teamwork among the staff throughout the organization. The objective was to enhance the efficiency of cooperation among the member companies of the Group and to provide customers with more than one financial product throughout 2007. Moreover, to enhance the quality of the staff,

maintained and the deposits proportion was properly managed. The cost to income ratio decreased from 78.4 percent to 60.9 percent although the non-performing loans increased from the loan expansion and economic slowdown affecting the Bank’s operating result. Moreover, the other business experienced growth in 2007 as follows

Thanachart Group stimulated to its organization to be a learning organization. The change was a continuation of its

•

As at the end of 2007, securities business’ total

policy in 2006, which focused on the development of

assets amounted to 3,695 million baht. The market share

knowledge and the quality of its staff, promotion of knowledge

increased from 3.31 percent in the previous year to 3.49

exchange as well as acquisition of knowledge. To support the

percent while the net income of the business accounted for

policy, BNS appointed a number of high-level executives to

16 percent of the consolidated financial statements.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The fund management business had 78,907 million

conveyed the policy to the executives and the staff across all

baht in assets under management, an increase of 62.6

networks nationwide, making them more conscious about the

percent mainly due to the increase of mutual funds

importance of morals and ethical conducts. This will serve as

management. The net income of the business accounted for

a firm foundation to achieve sustainable good corporate

7 percent of the consolidated financial statements.

governance. As well, to make the staff more conscious about

•

As at the end of 2007, the non-life and life insurance

business’ total assets amounted to 2,842 million baht and 7,033 million baht respectively. In the consolidated financial statements, the net income from non-life and life insurance business accounted for 15 percent of the Bank and subsidiaries’ net income. This was mainly due to the cooperation and utilization of the Bank’s sale channels which covered Bangkok and major provincial areas.

the importance of corporate social responsibility, the Bank and subsidiary companies of Thanachart Group have jointly organized regular activities, aimed at making contributions to the communities and protecting the environment. Moreover, since 2007, Thanachart Bank’s regional network has been encouraged to join forces with Thanachart Group’s regional network in organizing activities aimed at making contributions to the communities and environment perseverance in their respective service areas.

In relation to its business development in 2008, the Bank and subsidiary companies will continue to place emphasis on the development promoted in 2007. The development will be supported by BNS in several areas such as exchange of financial innovation, knowledge and various skills on a par with the international standards as well as adjusting to the changes of rules and regulations which impact on the business operations. These changes include the Basel II requirements, The International Accounting Standard 39 (IAS39), the Financial Institution Business Act (FIBA), the Depository Insurance Act, as well as the Securities and Exchange Act.

On the behalf of the Board of Directors, I wish to express my gratitude to the customers and the shareholders for the confidence given to the Board and the staff. I also would like to give my deep appreciation to all the executives and staff members for doing their best in performing their duties and responsibilities towards all the stakeholders concerned. As a result, the Bank’s financial performance is very satisfactory and is very well-received by the customers, shareholders and all the stakeholders concerned. I also wish to thank other stakeholders who helped contribute to the success of the Bank’s business operations

Corporate Governance and Corporate Social Responsibility The Bank’s Board of Directors has always paid great attention to corporate governance. In particular, it is the Bank’s policy to encourage its directors, executives and every staff member to recognize their respective roles, duties and

Banterng Tantivit Chairman of the Board of Directors Thanachart Bank Public Company Limited

responsibilities and to behave in line with the principles of good corporate governance and the announcements made by the Bank. The objective is to look after all the stakeholders in an appropriate manner as well as disclose of financial reports and major event reports in a complete, accurate and adequate manner. Moreover, in 2007, the Chief Executive Officer directly

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

THAI ECONOMIC CONDITION IN 2007 AND OUTLOOK FOR 2008 By Dr. Porametee Vimonsiri, Advisor on Policy and Planning, National Economic and Social Development Board (NESDB).

Thai Economic Condition in 2007 Political instability, unrest in the three southernmost provinces, rising crude oil prices as well as the rapid appreciation of the Thai baht towards the latter part of 2006 continued to impact on both consumer confidence and business confidence. As a result, domestic demand in the first half of 2007 slowed down considerably both in terms of consumption and investment by the private sector. This had a significant impact on the business sector which had to depend on domestic purchasing power. The affected businesses included, among others, construction, real estate, retail and wholesale businesses as well as the selling of other durables. However, net exports were still the main driver of economic growth. On the other hand, imports slowed down drastically in line with the slowdown in domestic demand. Exports in terms of US dollars grew 18.1 percent, with significant growth in products such as computers and accessories, cars, electronic integrated circuits, and rubber. Growth in new markets also helped offset the slowdown in the U.S. economy. As a result, the overall growth of the Thai economy slowed down slightly while the country’s overall employment increased 1.7 percent. Production capacity utilization also began to increase to a high level. However, the export sector’s revenues in terms of baht grew only 7.7 percent while the average export prices in terms of baht decreased by 3.7 percent. This was mainly due to the

continuous appreciation of the baht, which had a drastic impact on those exporters who were already faced with the problem of declining competitiveness. These exporters included, among others, some manufacturers in the shoe sector as well as the textile and garment sector. During the period under review, one of the other main drivers of the economy was the public sector’s Budget disbursement. After the B.E. 2550 (A.D. 2007) Budget Act came into force in January 2007, the state agencies started disbursing their respective budgets in order to help stimulate the economy. Towards the latter part of 2007, the political climate became clearer with 23 December 2007 set as the date for the general election. As a result, domestic demand rose slightly in terms of both consumption and investment. However, the global economy was hard hit by crude oil prices which rose to record levels and the U.S. sub-prime mortgage crisis. The problems resulted in volatility in the global financial system which included the Stock Exchange of Thailand. The U.S. started seeing clear signs of economic slowdown with US dollars depreciating significantly. As a result, the baht was expected to appreciate further. In 2007, the baht averaged 34.5 baht per US dollar. The baht appreciated by about 8.79 percent from the previous year.

Real GDP

Percent

8 2005 = 4.5

2006 = 5.0

2007 = 4.8

2008f = 4.5 - 6.0

2009f = 4.5 - 6.0

1.25%

2.00%

6 5 4 3 2

BOT Forecast 1 0 Q1-2005

Q1-2006

Q1-2007

Actual Source : NESDB and The BOT's Inflation report ; January 2008 22

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Q1-2008

Q1-2009

The overall growth of the Thai economy in 2007 was 4.8 percent. In the last quarter of 2007, the economy grew a remarkable 5.7 percent, while the private sectorâ&#x20AC;&#x2122;s investment

Gross Domestic Product (GDP) decreased while the countryâ&#x20AC;&#x2122;s foreign reserves increased steadily. The unemployment rate remained low. However, inflation which averaged 2.3 percent

started recovering with growth of 3.9 percent. The stability with respect to the overall economic situations, both local and overseas, remained strong. The ratio of the public debt to the

in 2007 increased in the latter part of the year. At the end of the year, the non-performing loans of financial institutions stood at 3.95 percent of the total loans, a slight decrease from the end of 2006.

Table 1 : Key Economic Indicators 2005

2006

Whole Year Whole Year

2007 Q3

Whole Year

1. GDP Growth (%)

4.5

5.1

6.3

5.3

4.5

4.3

4.8

4.2

4.3

4.8

5.7

2. Headline Inflation (%)

4.5

4.7

5.7

6.0

3.6

3.3

2.3

2.4

1.9

1.6

2.9

- Core Inflation (%)

1.6

2.3

2.6

2.8

1.9

1.7

1.1

1.4

0.9

0.8

1.1

3. Private Consumption (%) Sales of Automobiles (%) Sales of Motorcycles (%)

4.5 (11.2) 4.5

3.2

4.0

3.1

2.8

2.7

1.4

0.9

1.8

3.0

6.0

4.3

11.0

(6.0)

(11.4)

1.4

(16.2)

(7.7)

2.1

(22.4)

(6.4)

(1.3)

0.6

0.0

(23.0)

(18.9)

(23.3)

(20.9)

(23.3)

(6.3)

20.8

1.6

Imported Consumer Products (Prices in 2000, %) 4. Production Capacity Utilization Rate (%) 5. Industrial Production Index Growth (%) 6. Private Sector's Investment (%) - Imported Capital Goods (Prices in 2000, %) 7. Export Growth (%, $) - Value - Volume 8. Import Growth (%, $) - Value - Volume

10.0

15.2

13.2

15.1

19.2

13.2

9.7

5.6

6.9

4.9

72.1

73.9

75.0

73.6

73.8

73.2

76.1

76.0

75.1

75.7

77.7

9.1

7.4

9.7

6.6

6.7

8.2

6.0

5.6

9.0

12.1

10.6

3.7

6.8

3.1

3.2

1.9

0.5

(2.3)

(0.7)

1.1

3.9

21.0

5.4

7.0

8.4

3.4

2.8

4.1

(4.2)

0.2

4.9

15.9

15.2

17.0

15.4

15.7

19.8

18.1

17.9

18.0

12.6

24.0

7.2

5.2

5.5

6.4

5.3

3.8

5.7

4.7

5.1

4.5

8.5

7.4

11.2

10.9

8.6

9.8

15.4

11.8

12.7

12.2

7.8

14.3

25.8

7.9

4.9

3.3

12.2

11.5

9.6

5.9

7.3

8.4

16.6 10.5

6.3

6.5

6.3

7.9

6.8

4.9

5.4

3.4

4.1

18.4

1.4

(1.3)

(4.3)

5.1

6.3

4.1

2.4

3.8

4.1

5.5

(162.2)

(1,858.9)

1,360.3

1,655.3

11,972.9

3,317.8

1,240.0

2,942.2

4,472.9

(2,308.4)

9. Balance of Trade (US$ Million)

(8,253.7)

994.5

10. Current Account (US$ Million)

(7,641.8)

11. Number of Foreign Tourists (Million) Growth (%)

2,174.2

717.7

1,205.2

2,559.6

14,922.6

4,689.3

1,121.1

2,928.4

6,183.8

11.5

13.8

3.6

3.1

3.4

3.7

14.3

3.8

3.2

3.4

4.0

(1.2)

20.0

35.5

24.1

11.8

12.0

3.6

5.8

1.7

2.3

3.0

0.50

0.59

0.44

0.43

1.2

1.3

1.4

1.6

1.2

8.54

8.79

8.67

8.70

8.79

5.00

3.25

4.50

3.50

3.25

7.75

6.99

7.63

7.13

6.99

4.63

4.50

2.38

3.75

2.50

2.38

1.4

0.0

0.6

1.2

1.4

4.18

4.40

4.43

3.95

0.67

1.8

1.5

1.9

1.7

8.23

8.54

8.35

8.41

Policy Interest Rate (End of Period)

4.0

5.0

4.50

5.00

MLR (End of Period)

6.6

7.8

7.38

7.63

(End of Period)

3.0

4.5

4.00

4.38

- Commercial Banks' Loans (% End of Period)

6.7

3.8

9.4

9.0

6.2

3.8

- NPL to Total Loans (% End of Period)

8.16

4.12

7.97

8.22

8.18

4.12

Unemployment Rate (%) 13. Number of the Insured (Million)

0.66

0.48

0.55

12. Number of the unemployed (Million) 1/

0.61

0.45

14. Financial/Capital Markets

Interest Rate for 12-Month Fixed Deposit

- SET Index (Average)

713.7

- Average Daily Trading Turnover on the SET 16,454

679.8 16,281

733.3 20,916

678.1 15,438

686.1 12,997

679.8 15,615

n.a. 858.1 17,097

673.7 11,800

776.8 15,113

845.5 21,917

858.1 19,422...

40.2

37.9

39.3

38.1

37.7

36.6

34.6

35.6

34.7

34.0

33.9

- Consumer Confidence Index (consolidated)

87.7

82.5

85.3

81.7

80.4

83.0

77.1

79.1

77.1

75.8

76.3

- Business Confidence Index

45.8

44.2

45.0

43.7

43.2

45.1

43.5

42.1

42.9

45.7

- Industrial Confidence Index

93.2

93.8

104.4

92.2

87.9

90.7

80.9

84.4

81.3

76.6

81.9

- Exchange Rate (Average) 15. Confidence Indices

Sources :

National Economic and Social Development Board (NESDB), the Bank of Thailand, the Ministry of Commerce, the Ministry of Labor, the Stock Exchange of Thailand, Tourism Authority of Thailand, and University of the Thai Chamber of Commerce.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Economic Outlook for 2008 Economic expansion The economic recovery is expected to be more sustained in 2008. Supporting factors are a clearer political climate, budget disbursement for various specified projects including mega-infrastructure projects as well as economic stimulus measures aimed at the grassroots level, supported by the allocation of 15,000 million baht in the 2008 Budget. Importantly, the current government is also planning to implement its grassroots economic stimulus policies such as the Small, Medium and Large (SML) Village Fund scheme, People Bank, SME Loans, and Education Loan Funds. These policies will play an important role in stimulating consumption and investment by the private sector, after the slowdown in private investment in the previous year. Moreover, many members of the private sector are planning to expand their investment in 2008 in areas such as the production of hard disk drives, eco-cars, petrochemicals, and alternative energy. In 2007, the Board of Investment (BOI) approved new investments worth 744.5 million baht, an increase of 99.5 percent from the previous year. When the new government took power and started working, it confirmed its intention to accelerate investment in electric-train projects in Bangkok and its vicinities. It would also approve fiscal measures to stimulate the economy, such as an allowance for calculating the depreciating expenses for investment in machines and equipment used in production at 40 percent of the related costs, tax deductibles for personal income tax for investment in long-term savings instruments, tax cuts for companies gaining a listing on the SET or MAI, tax incentives for small- and medium-sized enterprises (SMEs), and cuts in property ownership transfer fees and mortgage registration fees.

The key risk factors in 2008 include (1) the US sub-prime mortgage problems and rising crude oil prices. Apart from adversely affecting the country’s trade counterparts, the sub-prime problems will give rise to high volatility in the international financial and capital markets. As a result, Asian currencies are expected to fluctuate and appreciate against the US dollar. The global economy in 2008 is expected to grow 4.1 percent while the U.S. economy is expected to grow 1.2 percent. However, the economies in Asia are expected to grow satisfactorily with the Chinese economy growing about 10 percent. (2) On the other hand, the rising crude oil prices will result in higher costs of production and a higher cost of living, which will erode both consumer confidence and investor confidence. The sub-prime problems will not have a direct or significant impact on the Thai economy. This is mainly due to the fact that the financial institutions in Thailand do not have many investments related to the sub-prime mortgage loans in the U.S. However, as the sub-prime problems will cause the U.S. economy and the global economy to slow down, Thailand’s export sector will be indirectly affected. In January 2008, the value of the country’s exports still grew 33.6 percent. The sub-prime problems serve as a reminder that the good corporate governance of financial institutions is of great importance, particularly the loans given to large corporations and to low-income retail customers. State agencies and research houses share the opinion that the Thai economy in 2008 will grow at a higher rate than in 2007. This is mainly because in 2008 there will be a number of economic drivers including the state's budget disbursement, recovery of domestic demand, the fact that the country’s real interest rate is at a low level, and the greater stability of the Thai baht. On the other hand, the export sector will play a less important role. According to the various research houses, the average growth of the Thai economy in 2008 will be 4.0 - 6.0 percent.

Table 2 : The Comparison of the economic growth projection Research Houses Capital Nomura Phatra Securities Kasikorn Research Goldman Sachs SCB DBS Bank Stanchart Lehman Brothers JP Morgan Average NESDB Bank of Thailand References :

GDP Growth (Percent) 2007

2008

4.6 4.5 4.5 4.5 4.5 4.3 4.2 4.2 4.2 4.4 4.5 4.3 - 4.8

4.8 4.7 4.5 4.5 4.7 5.6 4.7 4.5 5.1 4.8 4.5 - 5.5 4.5 - 6.0

Inflation Trend Report by the Bank of Thailand (January 2008) and Report on Thai Economy (4th quarter and 2007) and Outlook for 2008 by NESDB.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Inflation The average inflation rate in 2007 declined to 2.3 percent from 4.7 percent in the previous year, mainly due to domestic demand which had not fully recovered, and the

continuous appreciation of the baht during the beginning of the year, which caused a moderate rise in imported crude oil prices in terms of the baht.

Headline & Core Inflation Percent

8 2005

2006

2008

2007

2008f

2009f

Headline Inflation

4.5

4.7

2.3

4.3

5.4

Headline Inflation

2.3

2.8-4.0

1.8-3.3

Core Inflation

1.6

2.3

1.1

1.2

1.5

Core Inflation

1.1

1.3-2.3

1.5-2.5

Jan

Feb

6 5 4 Headline Inflation

3 2 Core Inflation

1 BOT Forecast

0 Q1-2005

Q1-2006

Q1-2007

Q1-2008

Q1-2009

Actual Source : Ministry of Commerce and The BOTâ&#x20AC;&#x2122;s Inflation report ; January 2008

However, as crude oil prices rose sharply in the fourth quarter of 2007, inflation in the last quarter of the year increased rapidly. The inflation rate in the fourth quarter of 2007 rose to 2.9 percent and was expected to rise continuously in 2008. Dubai crude oil prices which serve as the price reference source for Thailandâ&#x20AC;&#x2122;s imported oil are expected to rise from an average of US$ 68.83 a barrel in 2007 to an average of US$ 80 - US$ 85 a barrel in 2008. At the beginning of 2008, Dubai crude oil prices were at US$ 85 - US$ 87 a barrel. As a result, the inflation rate in February 2008 rose to 5.4 percent. However, both the crude oil price and inflation rate are expected to slow down in the second half of the year. The Bank of Thailand expects that the inflation rate in 2008 will be 2.8 - 4.0 percent while NESDB expects that it will be 3.2 - 3.7 percent.

Interest Rates and Foreign Exchange Rates In 2007, the Bank of Thailand cut its policy interest rate by 175 basis points to 3.25 percent. This was mainly due to the fact that, during the first half of the year, the inflation pressure was still at a low level while the pressure on the economic slowdown of the country remained high. As a

result, the Bank of Thailand had to cut its policy interest rate in order to encourage commercial banks to cut their rates. The move also served as a tool to help stimulate the economy. During the second half of the year, the crude oil prices rose sharply. As a result, the inflation pressure became high. On the other hand, the risk of an economic slowdown was lower as a result of the clearer political climate and the recovery of domestic demand. Since the Bank of Thailand expected that the future inflation rate would remain at a level which could be controlled by the authority, the Monetary Policy Committee (MPC) in the fourth quarter of 2007 and the beginning of 2008 decided to keep the policy interest rate at 3.25 percent. In addition to the decrease in the policy interest rate, the excess liquidity in the commercial banking system remained relatively high at 822.2 billion baht as at the end of 2007, compared to 702.7 billion baht as at the end of 2006. Moreover, the commercial banks shifted their focus to fund mobilization through issuance of bills of exchange, in order to alleviate the burden of having to make contributions to the Financial Institutions Development Fund (FIDF). As a result, the commercial banks cut the interest rates for one-year fixed deposits by 175 - 263 basis points to 6.875 percent as at the ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

end of 2007. As a result, the spread between deposit and

than US$ 700 billion, compared to about US$ 780 billion in

loan rates increased from 375 basis points to about 450-463

2007. As a result, currencies in the region and the baht are

basis points.

expected to appreciate further in 2008.

In 2007, the baht averaged 34.5 baht per US dollar,

In the first quarter of 2008, the sub-prime problems

appreciating from the average of 37.9 baht per US dollar in

caused the Federal Reserve to cut the federal funds rate by

2006. The baht continued to steadily appreciate after the Bank

200 basis points to 2.25 percent, which was lower than the

of Thailand decided to lift the 30 percent reserve requirement

Bank of Thailand’s policy interest rate which stood at 3.25

on short-term capital inflows at the end of February 2008. As

percent. As a result, it is difficult to implement the financial

a result, the baht in the off-shore and on-shore markets

policy in 2008 since both the advantages and disadvantages

converged to 31.5 baht per US dollar. It is expected that the

of the policies need to be taken into consideration. For

sub-prime mortgage crisis will continue to weaken the US

example, while the strong baht helps ease the pressure from

dollar in the future. Moreover, the private capital flows to

the rising crude oil prices and inflation, it weakens the

developing countries in 2008 are expected to amount to more

competitiveness of the country’s export sector.

Policy Interest Rate

Percent per Year 6.0

Fed Fund Rate 5.0

BOT policy interest rate 4.0

3.25 3.0

2.25 2.0

1.0

Jan-08

Jul-07

Jan-07

Jul-06

Jan-06

Jul-05

Jan-05

Jul-04

Jan-04

Jul-03

Jan-03

0.0

Source : The Bank of Thailand

Interest Rate Trend Under the first scenario, if inflation rises sharply, the real interest rate such as the deposit rates will be negative. (The real interest rate for 12-month fixed deposits became (0.89) percent in the latter part of 2007.) The economy, particularly investment, will recover rapidly. As well, lending activities will increase while the public sector will accelerate investment in mega-construction projects. As a result, the policy interest rate and the interest rates of the financial institutions are expected to rise in the second half of the year.

Under the second scenario, if the U.S. economy remains weak, the Federal Reserve will cut its federal funds rate further in order to stimulate the economy. As a result, the difference between the federal funds rate and the Bank of Thailand’s policy interest rate will become wider. The US dollar will weaken rapidly and more funds will flow into Thailand, causing the baht to appreciate rapidly. The development will have an impact on inflationary pressure and adversely affect the country's export sector. As a result, the Bank of Thailand will be forced to cut its policy interest rate. In view of the above scenarios, the interest rate trend for 2008 is one factor which needs to be monitored closely.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND PERFORMANCE Management Discussion and Analysis of Financial Position and Performance (Consolidated Financial Statements)

In July 2007, Thanachart Group had restructured its

With such shareholding, the Bank is able to

shareholding in the companies in the group. The details of

acknowledge the operating results of 2007 of the subsidiaries

shareholding in all the related businesses are shown in

in which it invested in. However, the subsidiaries’ results were

section 2 Nature of Business Operation under the subject of

shown in the consolidated financial statements from the date

major changes and developments. Thus now, the Bank holds

of investment (1 July 2007: Under the agreement made

shares in the following :

between the Bank and the Parent Company (Thanachart Capital) on 12 July 2007, the Parent Company agreed to

•

Companies that operate financial business are

1) Thanachart Securities Public Company Limited; 2) Thanachart Fund Management Company Limited; 3) Thanachart Insurance Company Limited; 4) Thanachart Life Assurance Company Limited; 5) Thanachart Group Leasing Company Limited; 6) National Leasing Company Limited; 7) Thanachart Leasing 2000 Company Limited; and 8) Thanachart Broker Company Limited.

transfer all of their benefits in those subsidiaries to the Bank since 1 July 2007). The Bank did not prepare the consolidated financial statements from the latest date for which financial statements were presented, but prepared the consolidated financial statements only from the date of investment. To provide additional information to the Bank’s financial position and its operations for comparison purposes, the pro forma condensed consolidated balance sheets and

Companies that operate supporting businesses are

consolidated income statements have been prepared and

1) Thanachart Legal and Appraisal Company Limited and

presented as though the merger between the Bank and its

2) Thanachart Management and Service Company Limited.

subsidiaries took place since prior year, as follows :

•

(Unit: Million Baht)

Items

2007

2006

3,275

Change from 2006 Million Baht

Percent

2,466

809

32.8

40,057

26,408

13,649

51.7

2,500

6,300

(3,800)

(60.3)

Condensed Balance Sheets (Under Business Combination) Assets Cash Interbank and Money Market Items-Net Securities Purchased under Resale Agreements Investments-Net

22,791

26,142

(3,351)

(12.8)

223,953

200,836

23,117

11.5

Property Foreclosed-Net

1,424

1,041

383

36.8

Land, Premises and Equipment-Net

2,087

1,412

675

47.8

Other Assets

4,334

3,681

653

17.7

300,421

268,286

32,135

12.0

191,120

198,807

(7,687)

(3.9)

Interbank and Money Market Items

4,769

4,507

262

5.8

Securities Business Payable

1,244

658

586

89.1

Liability Payable on Demand

1,329

1,462

(133)

(9.1)

Loans and Accrued Interest Receivables-Net

Total Assets Liabilities and Shareholders’ Equity Deposits

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

(Unit: Million Baht)

Change from 2006 Items

2007

2006

68,683

33,408

Accrued Interest Payable

1,429

1,771

Life Premium Reserve

5,593

3,550

2,043

57.6

Other Liabilities

5,639

9,688

(4,049)

(41.8)

279,806

253,851

25,955

10.2

20,558

14,344

6,214

43.3

minority shareholders of subsidiaries

Total Liabilities and Shareholders’ Equity

300,421

268,286

Borrowings

Total Liabilities Shareholders’ Equity of the Bank

Million Baht

Percent

35,275

105.6

(342)

(19.3)

Minority Interest-equity attributable to (34)

(37.4)

32,135

12.0

1,833

11.5

Condensed Income Statements (Under Business Combination) Interest and Dividend Income

17,788

15,955

Interest Expenses

(9,425)

(9,519)

Bad Debt and Doubtful Accounts

(2,744)

(829)

(1.0)

(1,915)

(231.0)

8,768

5,624

3,144

55.9

(12,278)

(10,179)

(2,099)

20.6

(423)

(328)

(95)

29.0

(28)

(19)

(9)

47.4

Non-Interest Income Non-Interest Expenses

Corporate Income Tax Net Income Attributable to Minority Interest Net Income for the Year

1,658

705

953

135.2

0.96

0.41

134.2

1,735

1,458

277

19.0

Earnings per share, under business combination (Baht) Weighted Average Number of Ordinary Shares as at the End of the Year (Million Shares)

(Management discussion and analysis from Management

In 2007, the non-interest income amounted to 8,768

Division in this part was done based on the condensed

million baht, an increase of 3,144 million baht or 55.9

financial statements as if the group was restructured)

percent. This was mainly due to the constant growth of commercial bank business, life insurance business, insurance

The group restructuring resulted in a significant

business, and the securities business.

improvement in the Bank’s performance and financial

position when compared with 2006. The better performance

In 2007, the Bank and its subsidiaries’ interest

was partly due to the investments in subsidiaries and the

expenses amounted to 9,425 million baht, a decrease of 94

Bank’s hire purchase business growth. In 2007, the Bank and

million baht or 1.0 percent from 2006. This was mainly due to

its subsidiaries’ net income amounted to 1,658 million baht,

the decrease of the Bank’s deposits; the decrease in

an increase of 953 million baht or 135.2 percent from the

deposit interest expense, following the declining market

previous year. The major components of the net income

interest rate in 2007 from 2006; together with an overall

increase were as follows :

image and stability in financial position.

In 2007, the interest and dividend income amounted to

The non-interest expenses amounted to 12,278

17,788 million baht, an increase of 1,833 million baht or 11.5

million baht, an increase of 2,099 million baht, or 20.6

percent from 2006. This was mainly due to the increase of the

percent from 2006. This was due to the Bank’s business

interest income from hire purchase loans.

growth as well as its subsidiaries’ business growth.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

In 2007, the Bank and its subsidiaries set aside the

of a financial group in compliance with consolidated

allowance worth 2,744 million baht, an increase of 1,915

supervision regulation which has already been approved in

million baht or 231.0 percent from 2006. This allowance was

December 2006. The parent company purchased or held

set in preparation for the expansion of loan portfolio and

shares in 13 financial companies (excluding a parent

changing economic condition, which would result in the

company). For the non-financial companies, the parent

increase of non-performing loans.

company was allowed to continue holding the shares of one non-financial related company. Two of such are required to

FINANCIAL POSITION OF THE BANK AND ITS SUBSIDIARIES

reduce its holding to no more than 10 percent within three

As at 31 December 2007, the Bank and its subsidiaries’

years from the date it received approval for the establishment

assets amounted to 300,421 million baht, an increase of

of the financial group. In this respect, the parent company is

32,135 million baht or 12.0 percent from 2006. The increase

required to deduct from the capital funds of the financial group

was mainly due to the increase of 23,117 million baht or 11.5

those amounts directly and indirectly invested by the parent

percent in loans and accrued interest receivables as a result

company and other subsidiary companies in the financial group

of the hire purchase business growth. In addition, the

in which the parent company and its subsidiaries hold less

interbank and money market items increased by 13,649

than 50 percent of share, investments in companies in the

million baht or 51.7 percent.

non-financial group, and investments in non-life insurance and life insurance companies.

As at 31 December 2007, the Bank and its subsidiaries’ total liabilities amounted to 279,806 million baht, an increase of 25,955 million baht or 10.2 percent from 2006. The shareholders’ equity amounted to 20,558 million baht, an increase of 6,214 million baht or 43.3 percent from

With regards to the service channels, the Bank had continuously expanded branches in order to enhance the accessibility and the service to the customers. As at the end of 2007, the Bank’s branches were of 166 branches (excluding the head office) both in Bangkok metropolitan and provincial

2006. This was a result of selling ordinary shares, in order to raise capital, to The Bank of Nova Scotia Asia Limited and the increase of accumulated profit.

area. The branches had been renovated to reinforce the exceptional image and identity. Moreover, the Bank provides in total 64 exchange booths, and at the same time, has been continuously developing the electronic service channels. The

Management Discussion and Analysis of Financial Position and Performance (Financial Statements of the Bank Only)

FINANCIAL PERFORMANCE AS A RESULT OF BUSINESS PLAN

ATM increased to 280 machines. The service channels such as Thanachart Smartphone and Internet Banking have been provided as mentioned in the Business Operations section.

PERFORMANCE OVERVIEW In 2007, the Bank’s net income amounted to 991

During 2006, Thanachart Group has followed the plan

million baht, an increase of 766 million baht or 340.1 percent

for reorganizing its structure in accordance with One

from the previous year. This was mainly due to the increase of

Presence policy which was approved by the Bank of Thailand

1,728 million baht in the net interest and dividend income and

(“BOT”) in 2005. National Finance Public Company Limited

the increase of 686 million baht in non-interest income. At the

returned the “Financial Company License” and changed its

same time, expenses related to interest and bad debt and

name to Thanachart Capital Public Company Limited (“TCAP”)

doubtful accounts increased along with the business

on 3 April 2006. Moreover, in order to comply with the

expansion. As a result, the loan spread has been improving

regulation of the BOT who announced the consolidated

continuously from 2.7 percent in 2006 to 3.3 in 2007. The cost

supervision in 2006 and elevated the supervision standard to

to income ratio decreased from 78.4 percent in 2006 to 60.9

the international practice. Thanachart Group, which has TCAP

percent in 2007. The key factors affecting the operation were

as the parent company, has sought approval for establishment

as follows : ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

1. The loan expansion, especially in hire purchase loans

With the factors mentioned above, the operating result of

which increased from 113,238 million baht to 162,205

the Bank in 2007 significantly improved. The income before

million baht or 43.2 percent increase, resulted in the increase

bad debt and income tax amounted to 3,637 million baht, an

of 2,371 million baht in interest income from loans. Even though the revenue recognition of hire purchase in 2007 was changed and made the income and yield in such business to decrease,

increase of 2,054 million baht . The net income amounted to 991 million baht, an increase of 766 million baht, although the economy had slowed down and affected the Bank’s business operation. The non-performing loans increased from

the Bank was able to maintain the overall yield by expanding the business continuously.

3,753 million baht in 2006 to 5,213 million baht. This would affect the Bank’s provision for bad debt and doubtful accounts.

2. The deposit base expanded under the condition of

Also, from 1 January 2007, the Bank and its subsidiaries

declining market rate. This was mainly due to the proper

changed their revenue recognition method for interest on

management in deposit proportions and the products launching

hire purchase from the sum-of-the-year-digits method to the

to increase options for customers. As a result, the customer

effective rate method, whereby the direct cost recognized

base expanded and the market shares increased making the

immediately at the beginning was changed to be recognized

Bank’s cost of fund to decrease from 4.2 percent in 2006 to

only partially as part of debtor’s financial lease. As a result, the interest income would decrease.

3.8 percent in 2007.

INTEREST AND DIVIDEND INCOME

3. In 2007, the Bank increased the income by launching products, restructuring the infrastructure and restructuring other working systems. As a result, the non-interest income

In 2007, the Bank’s interest and dividend income amounted to 17,123 million baht, an increase of 1,604

ratio increased from 18.0 percent in 2006 to 20.6 percent in

million baht or 10.3 percent. This was mainly due to the

2007. The cost to income ratio decreased from 78.4 percent

increase of interest income which came from hire purchase

in 2006 to 60.9 percent in 2007.

loans and from investment interest income.

(Unit: Million Baht)

Change from 2006 Interest and Dividend Income

2007

2006

1. Loans

4,528

6,691

(2,163)

(32.3)

2. Interbank and Money Market Items

1,183

2,121

(938)

(44.2)

10,370

5,836

4,534

77.7

1,042

871

171

19.7

17,123

15,520

1,604

10.3

3. Hire Purchase 4. Investment Total Interest and Dividend Income

INTEREST EXPENSES

Million Baht

Percent

baht from 2006. This was mainly due to the loan expansion and the economic condition which caused an impact on the

The interest expenses amounted to 9,386 million baht, a decrease of 124 million baht or 1.3 percent. This was mainly due to the cost management and deposit proportion management. BAD DEBT AND DOUBTFUL ACCOUNTS In 2007, the Bank’s bad debt and doubtful accounts amounted to 2,606 million baht, an increase of 1,352 million

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

increase of non-performing loans. For non-performing loans, the provision was increased to 100 percent according to the guidelines in the allowance for bad debt and the loans balance net of collateral value of the BOT which became effective in December 2006.

from the previous year. This was mainly due to the increase of

NON-INTEREST INCOME

450 million baht in fees and service income in line with both In 2007, the non-interest income amounted to 2,005

domestic and international transaction volume.

million baht, an increase of 686 million baht or 52.1 percent (Unit: Million Baht)

2007

Non-Interest Income

2006 Change from

2006

Million Baht

Percent

125

(54)

(43.1)

31.4

• Insurance commission

760

665

14.3

• Others

581

231

350

151.5

28.2

4. Income on supporting services

321

183

137

74.8

5. Other income

200

142

242.4

2,005

1,318

686

52.1

1. Gains on investments 2. Fees and service income • Acceptances, aval and guarantees

3. Gain (loss) on exchange

Total non-interest income

NON-INTEREST EXPENSES

•

The expenses related to personnel, premises and

equipment increased in line with the branch and business In 2007, the Bank’s non-interest expenses amounted to

expansion.

6,105 million baht, an increase of 360 million baht or 6.3 percent from the previous year. The details of the important changes were as follows :

•

The other expenses decreased due to the efficient

management and control.

Summary of Income Statements (Unit: Million Baht)

2006 Change from Items of Income Statements

2007

2006

17,123

15,520

Interest expense

9,386

9,510

Net Interest and dividend income

7,737

6,010

1,728

28.7

2,606

1,254

1,352

107.9

5,131

4,756

375

7.9

Non-interest income

2,005

1,318

686

52.1

Non-interest expenses

6,105

5,744

360

6.3

Income before corporate income tax

1,032

330

702

212.5

105

Net Income for the year

991

225

Basic earnings per share (baht)

0.63

0.15

1,583,999,082

1,458,356,092

Interest and dividend income

Million Baht

Percent

1,604

10.3

(124)

(1.3)

Bad debt and doubtful accounts and loss (gain) on debt restructuring Net interest dividend income after bad debt and others

Corporate income tax

(64) 766

61.0 340.1

Weighted average number of ordinary shares (shares)

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Financial Position

domestic automobile industry which slowed down and the intensive competition. As at the end of 2007, the hire

1) ASSETS

purchase loans amounted to 162,205 million baht, an increase

As at 31 December 2007, the Bank’s total assets

of 43.2 percent. Moreover, the Bank still maintained the

amounted to 291,098 million baht, an increase of 33,662

market leader position in the new car and used car hire

million baht or 13.1 percent from 2006. This was mainly

purchase business.

due to the increase of 24,289 million baht in loans and the increase of 8,456 million baht in short-term liquidity.

The Bank’s short - term liquidity amounted to 58,071 million baht, an increase of 8,456 million baht or 17.0 percent

The Bank’s loans amounted to 224,940 million baht,

in line with the increase of the Bank’s deposits and

an increase of 24,289 million baht or 12.1 percent from the

short-term borrowings. Nevertheless, the Bank efficiently

previous year. This was mainly due to the continuous

managed the excess liquidity in order to maintain the overall

expansion of hire purchase loans despite the condition of the

yield level.

Total Asset (Unit: Million Baht)

Change from 2006 Items of Assets

2007

2006

35,603

Million Baht

Percent

21,421

14,183

66.2

2,500

6,300

(3,800)

(60.3)

19,968

21,894

(1,926)

(8.8)

224,940

200,652

24,289

12.1

283,011

250,267

32,745

13.1

Other Assets

8,086

7,169

917

12.8

Total Assets

291,098

257,436

33,662

13.1

Interest-bearing Interbank and Money Market Items Securities Purchased under Resale Agreements Net Investments Loans Total Performing Assets

2) ASSET QUALITY

1. Loans, Receivables and Accrued Interest Receivables

During 2007, the Bank entered into debt restructuring agreements with 63 debtors in total, which has been reconditioning in terms of repayment, transferring assets and/ or equity and/or reconditioning the terms of repayments. The

As at 31 December 2007, the Bank’s loans and

outstanding balances before debt restructuring amounted to

accrued interest receivables classification according to the

308 million baht. Of these, 19 debtors, with debt balance of

BOT’s guidelines amounted to 225,284 million baht, an

118 million baht approximately, had already entered into debt

increase of 24,598 million baht or 12.3 percent. As at

restructuring agreements before but failed to make payment,

31 December 2007, the Bank set aside allowance worth

and in turn, were forced to enter into a new debt restructuring

4,175 million baht for doubtful accounts and the additional

agreements. As at the end of 2007, the Bank had 292 debtors

allowance worth 350 million baht. As a result the total

out of the 537,955 debtors who entered into the debt

allowance of doubtful accounts amounted to 4,525 million baht,

restructuring agreement with the outstanding balance of

an increase of 1,463 million baht from the previous year. The

principal and accrued interest receivable of restructured debt

ratio of the Bank’s total allowance for doubtful accounts to

worth 2,698 million baht, a decrease from 2,978 million baht

loans and accrued interest receivables was 2.0 percent.

in the previous year. The ratio of restructured loans’ principal and accrued interest receivable decreased from 1.5 in the previous year to 1.2 percent.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Loans and Accrued Interest Receivables Classified by Types of Debtors (Unit: Million Baht)

Items of Loans and Accrued Interest

31 December 2007

Receivables

31 December 2006

No. of Debtors

Amount

No. of Debtors

Amount

537,955

225,284

346,117

200,686

• Outstanding Balance before Debt Restructuring

308

682

• Outstanding Balance after Debt Restructuring

308

677

292

2,698

293

2,978

0.1

1.2

0.1

1.5

Total Loans and Accrued Interest Receivables Debt Restructuring During the Year

Debt Restructuring at the End of the Year Percentage of Debt Restructuring to Total Loans and Accrued Interest Receivables

Concentration of Loans

company and related company with 25.4 percent and others with 5.4 percent.

As at the end of 2007, the Bank’s loans mostly concentrated in hire purchase, which have been started since

The expansion of hire purchase loans showed to most

May 2005, with the ratio of 72.0 percent of the total loans and

tangible growth amount, which increased from the previous

accrued interest receivables in 2007. Next in order were loans

year by 43.2 percent. The loans to parent company and

to parent company and related company with 9.6 percent and

related company decreased from the previous year both in

others with 5.8 percent. In comparison to loan structure in

volume and ratio. This was mainly due to the parent company’s

2006, the Bank’s loans concentrated in hire purchase the most

repayment of its borrowings to be in accordance with the

with 56.4 percent of the loans and accrued interest

business restructuring plan of Thanachart Group which was

receivables in 2006, while next in order were loans to parent

approved by the BOT.

Loans Classified by Types of Business in 2006

Loans Classified by Types of Business in 2007

Public Utilities and Services 3.3%

Public Utilities and Services 2.7% Real Estate and Construction 2.7%

Real Estate and Construction 3.1% Housing Loans 4.6%

Manufacturing and Commerce 2.4%

Manufacturing and Commerce 3.1% Hire Purchase 72.0%

Housing Loans 3.4%

Hire Purchase 56.4%

Others 5.4%

Parent Subsidiaries and Related Companies 25.4%

Others 5.8%

Parent Subsidiaries and Related Companies 9.6%

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

with remaining maturity of less than one year, and 10.6

Maturity of Debts

percent were call loans (including already matured loans). All When the loans and accrued interest receivables in

the loans were Thai Baht-denominated for local debtors.

2007 classified by the remaining period of loans, 84.3 percent

In comparison with 2006, the percentage of loans with

of the loans and accrued interest receivables were loans with

remaining maturity over one year increased while that of call

remaining maturity of over one year, 5.1 percent were loans

loans decreased in 2007.

Loans Classified by the Remaining Period of the Contracts 2006

2007

25.9%

10.6%

4.6%

69.5%

5.1%

10%

84.3%

20%

30%

At call

40%

50%

60%

Not Over 1 Year

2. Loans Classification under the Bank of Thailand’s Guidlines

70%

80%

90%

100%

Over 1 Year

million baht for doubtful accounts and the Bank also set aside an additional allowance worth 350 million baht for doubtful

As at 31 December 2007, the Bank’s loans and

accounts. As a result, the total allowance for doubtful accounts

accrued interest receivables classified under the Bank of

amounted to 4,525 million baht, an increase of 1,463 million

Thailand’s guidelines amounted to 225,284 million baht, an

baht from the end of previous year. The ratio of the Bank’s

increase of 24,598 million baht or 12.3 percent. As at

total allowance for doubtful accounts to the outstanding loans

31 December 2007, the Bank set aside allowance worth 4,175

and accrued interest receivables was 2.0 percent.

Loans Classification under the Bank of Thailand’s Guideline (Unit: Million Baht)

Debt Value / Book Value Loans and Accrued Interest Receivables

Allowance for Doubtful Accounts

(1)

31 December 2007 31December 2006 31December 2007 31 December 2006

Normal

201,017

186,661

629

763

19,019

10,238

123

Special Mention Substandard

1,299

864

964

518

Doubtful

1,614

1,167

901

596

Doubtful of Loss

2,335

1,756

1,558

990

225,284

200,686

4,175

2,926

350

136

4,525

3,062

2.0

1.5

Total Additional Allowance for Doubtful Accounts Total Allowance for Doubtful Accounts

Ratio of Total Allowance for Doubtful Accounts to Loans and Accrued Interest Receivables (Percent) (1)

Debt balance/book value of normal and special mention loans did not include accrued interest receivable

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

3. Non-Performing Loans (NPLs)

increase from 1.9 percent in the previous year. This was mainly due to the increase of loans. The allowance worth 4,525

As at 31 December 2007, the Bank’s non-perform loans classified by the Bank of Thailand’s guideline amounted

million baht in doubtful accounts was accounted for 86.8 percent of non-performing loans.

to 5,213 million baht, an increase of 1,460 million baht or 38.9 percent from 2006. This was mainly due to the increase

According to the BOT’s definition for NPL-net and

of hire purchase, as a result of economic slowdown. The ratio

percent of NPL-net, the NPL-net amounted to 1,790 million

of non-performing loans to total loans was 2.3 percent, an

baht and the percent of NPL-net amounted to 0.8.

Non-Performing Loans (Unit: Million Baht)

31 December 2007

31 December 2006

5,213

3,753

2.3

1.9

4,525

3,062

86.8

81.6

1,790

1,650

0.8

Non-Performing Loans (NPLs) Ratio of NPLs / Total Loans Total Allowance for Doubtful Accounts Ratio of Total Allowance for Doubtful Accounts / NPLs (Percent) NPL-net under BOT’s Guideline (Million Baht) NPL-net

NPLs Classifiled By Type of Business

Real Estate and Construction 16.4%

NPLs Classifications

Doubtful 30.8%

Housing Loans 7.0 %

Manufacturing and Commerce 13.8%

Service 3.9%

Others 15.0%

Hire Purchase Loans 43.9%

Doubtful of loss 44.5%

Substandard 24.8%

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

4. Investment in Securities

for all foreign investments and related interests which amounted

In 2007, the Bank’s total investments in securities amounted to 15,754 million baht. Most of the Bank’s

to 8.6 percent of the Bank’s investment securities. Taking into consideration the revalue surplus (deficit) on investments and

investments were in government and state enterprise

the allowance for impairment, the Bank’s net investments in

securities, which amounted to 68.5 percent. This followed by

2007 amounted to 15,673 million baht, a decrease of 28.4

the investments in held-to-maturity foreign debt securities. The

percent from 21,894 million baht in 2006. The details of the

Bank had forward agreement to fully hedge exchange rate risk

investments were as follows :

Investments Classified by Types of Investments (Unit: Million Baht)

Type of Investment

31 December 2007

Percent

31 December 2006

Percent

Debt Securities Government and State Enterprise Securities • Available-for-sale

583

3.7

6,233

28.3

• Held-to-maturity

10,204

64.8

10,181

46.2

• Available-for-sale

1,304

8.3

1,002

4.5

• Held-to-maturity

0.1

Private Debt Securities

Foreign Debt Securities • Held-to-maturity

1,350

8.6

1,871

8.5

413

2.6

530

2.4

836

5.3

944

4.3

Other Investments

945

6.0

1,101

5.0

Other Securities

119

0.8

183

0.8

15,754

100.0

22,062

100.0

Equity Securities Listed Securities • Available-for-sale Unit Trusts • Available-for-sale

Total Investments in Securities Add (Less) Allowance for Revaluation

(93)

Add (Less) Allowance for Impairment

(111)

(75)

Investments - Net

15,673

When the investments in debt instruments were

classified by the remaining maturity of debt securities, the

classified by type of investments in 2007, those with the

highest amount were debt securities with remaining maturity

highest amount were investments in government and state

of 1 - 5 years which accounted for 76.8 percent, 15.6 percent

enterprise securities at 80.3 percent of total investments in

of those with remaining maturity over five years, and 7.6

securities. The rest were 10.0 percent of foreign debt

percent of those with remaining maturity less than one year.

securities and 9.7 percent of private debt securities. If

21,894

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Debt Securities Classified by Remaining Period of Maturity As at 31 December 2007 (Unit: Million Baht)

Maturity

Type of Debt Securities Not Over 1 Year

1-5 Years

Total Over 5 Years

Million Baht

Percent

Government and State Enterprise Securities

315

8,375

2,097

10,787

80.3

Private Debt Securities

1,272

1,304

9.7

Foreign Debt Securities

675

1,350

10.0

1,022

10,322

2,097

13,441

100.0

7.6

76.8

15.6

100.0

Total Investments in Debt Securities Percent

5. Property Foreclosed As at the end of 2007, the Bank’s net property

selling property foreclosed amounted to 3,722 million baht.

foreclosed increased by 377 million baht or 36.6 percent from

After the allowance for impairment of 91 million baht, the Bank’s

the previous year. This was mainly due to 4,157 million baht

property foreclosed amounted to 1,406 million baht at the end

from debt payment, debt settlement, and auction process while

of 2007.

Details of the Property Foreclosed (Unit: Million Baht)

During 2007 Property Foreclosed

31 December 2006

31 December 2007 Increase

Disposal

Immovable

728

(31)

754

Movable

334

4,100

(3,691)

743

Less Allowance for Impairment

(33)

Property Foreclosed - Net

1,029

3) LIQUIDITY

(63) 4,094

5 (3,717)

(91) 1,406

• The Bank’s cash flows from operating activities

before changes in operating assets and liabilities amounted In 2007, the Bank’s net cash flows from financing

to 3,679 million baht. There were a decrease worth 7,435

activities amounted to 40,110 million baht and from investing

million baht in deposits and a decrease worth 3,800 million

activities amounted to 1,436 million baht. At the same time,

baht in securities purchased under resale agreements. The

the cash flows used in operating activities amounted to

cash flows used in loans amounted to 29,609 million baht

40,738 million baht. As a result, the Bank’s cash and cash

while those used in interbank and money market items

equivalents at the end of 3,274 million baht, a net increase of

amounted to 14,842 million baht.

809 million baht. The important components were as follows : • In the cash flows from investing activities, the • The Bank’s cash flows from financing activities

investments in securities decreased by 6,485 million baht; while

were contributed by cash received from borrowings worth

the cash paid for acquisition of investments in subsidiaries

46,546 million baht and cash received from issued additional

decreased by 4,241 million baht. In addition, cash paid for

share capital worth 4,522 million baht. Also in 2007, the Bank’s

purchase of equipment amounted to 816 million baht.

cash paid for borrowings amounted to 10,739 million baht. Furthermore, the Bank paid 219 million baht in dividends.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

5) SOURCES OF FUNDS

4) CAPITAL EXPENDITURE During 2007, the Bank’s number of branches

As at 31 December 2007, the Bank’s total liabilities

increased to 166 branches, an increase of 33 branches from

amounted to 270,402 million baht, an increase of 28,165

2006. As a result, there were expenses related to rent,

million baht or 11.6 percent from 2006. This was mainly due

premises decoration, information and technology system,

to the increase of short-term borrowings through the Bank’s

and other equipments necessary for operation. In 2007, the

saving channel. The key items in liabilities and shareholders’

Bank’s cash paid in purchase of equipment increased to 816

equity were as follows :

million baht.

Deposits Classified by Remaining Period of Contracts

2006

5.5%

94.5%

2007

98.2%

10%

20%

30%

40%

Not Over 1 Year

50%

1.8%

60%

70%

80%

90%

100%

Over 1 Year

• The total deposits amounted to 191,546 million

The Bank of Nova Scotia Asia Limited (BNSAL) with a price

baht, a decrease of 7,435 million baht or 3.7 percent from the

of 16.37 baht per share on 19 July 2007. In addition, the

previous year. Most of the deposits had remaining maturity of

Bank’s net income had increased in 2007.

not over one year which accounted for 98.2 percent of total

Ratio of Liabilities and Shareholders Equity

deposits, an increase from 94.5 percent in the previous year. The Bank’s ratio of liabilities to shareholders’ equity • The total borrowings amounted to 68,438 million

baht, of which 58,548 million baht was in short-term borrowings and 9,890 million baht was long-term borrowings. The short-term borrowings increased by 43,023 million baht or 277.1 percent from the previous year. This was partly due to the long-term borrowings with less than one year remaining maturity got transferred to short-term borrowings, according to general accounting standard.

Shareholders’ Equity

decreased from 15.9 in 2006 to 13.1 in 2007. This was due to the 5,497 million baht or 36.2 percent increase in the shareholders’ equity of the Bank. This could be attributable to the capital increase from selling ordinary shares to BNSAL as mentioned above. However, the Bank continuously expanded its deposits and short-term borrowings, together with launching variety of products in order to provide more saving option and channel to the customers. As a result, the deposits and short-term borrowings increased by 35,588 million baht or 16.6 percent while the long-term borrowings

As at 31 December 2007, the shareholders’ equity amounted to 20,695 million baht, an increase of 5,497 million baht or 36.2 percent from 2006. This was mainly due to the capital increase from selling 276,263,200 ordinary shares to

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

decreased by 7,189 million baht or 42.1 percent from the previous year.

Liabilities and Shareholders’ Equity (Unit: Million Baht)

Change from 2006 31 December 2007 31 December 2006

Million Baht

Percent

191,546

198,981

(7,435)

(3.7)

4,205

4,341

(136)

(3.1)

Short-Term Borrowings

58,548

15,525

43,023

277.1

Long-Term Borrowings

9,890

17,079

(7,189)

(42.1)

264,189

235,925

Other Liabilities

6,213

6,312

Total Liabilities

270,402

242,237

28,165

11.6

20,695

15,199

5,497

36.2

291,098

257,436

33,662

13.1

Deposits Interbank and Money Market Items (Interest Bearing)

Total Liabilities - Interest Bearing

Shareholders’ Equity Total Liabilities and Shareholders’ Equity

Obligation

28,264 (99)

12.0 (1.6)

When compared the sources and uses of funds based on the financial tools’ maturity date counting from the balance

The Bank’s total obligations increased from 53,734 million baht in 2006 to 75,066 million baht in 2007. The key changes consisted of an increase of 21,050 million baht in other obligations, an increase of 305 million baht in letters of credit, and an increase of 6 million baht in liability under unmatured import bills; while the avals to bills decreased by 30 million baht from the previous year.

sheet date on 31 December 2007, it was evident that most of the sources came from deposits with remaining maturing less than one year which accounted for 49.75 percent of the total sources of funds; followed by 22.63 percent of deposits at call and 22.52 percent of borrowings with remaining maturity less than one year. On the other hand, the uses of funds was mostly concentrated in loans with remaining maturity of over one year

In addition, the Bank was obligated to an estimated

accounted for 76.06 percent of the total uses of funds and

share of losses worth 89 million baht arising from Thai

call loans accounted for 11.08 percent. However, such

Asset Management Corporation’s management of the

mismatch between sources and uses of funds is considered

non- performing assets. This amount was presented as a part

normal practice in the business of commercial banks and

of allowance for impairment of long-term investments in debt

general financial institutions. Since the common behavior of

securities. Furthermore, the Bank is committed to the

deposit customer is to extend the contract once it is expired,

Secondary Mortgage Corporation for losses from uncollected

the deposits’ maturity is actually longer than reflected.

housing loans up to a maximum of 20 percent of the valuation

Furthermore under the purpose of risk management, the

of the said receivables. As at 31 December 2007, the

Bank has a policy aimed on seeking sources most compatible

maximum obligation was 3 million baht.

with the uses of funds through the efficient use of financial tools. This enables the Bank to receive signal of any impact on

6) RELATIONSHIP BETWEEN SOURCES AND USES OF FUNDS

sources and uses of funds in advance. The details of key sources and uses of funds classified by the maturity date of each item counting from the date of balance sheets on

In 2007, the Bank’s main sources of funds consisted

31 December 2007 were as follows :

of deposits worth 191,546 million Baht and borrowings worth 68,438 million baht. In the uses of funds, 224,940 million baht was used in loans while 20,049 million baht was used in investments. ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Type

At Call Million Baht

Not Over 1 Year

Percent Million Baht

Over 1 Year

Percent Million Baht

Not Specified

Percent Million Baht

Total

Percent Million Baht

Percent

Sources of Funds Deposits Borrowings Total Sources of Funds

58,829

22.6

129,340

49.8

3,377

1.3

191,546

73.7

58,548

22.5

9,890

3.8

68,438

26.3

58,829

22.6

187,888

72.3

13,267

5.1

259,984

100.0

27,133

11.1

11,457

4.7

186,350

76.1

224,940

91.9

1,087

0.4

13,318

5.4

5,644

2.3

20,049

8.1

27,133

11.1

12,544

5.1

199,668

81.5

5,644

2.3

244,989

100.0

Uses of Funds Loans (1) Investments Total Uses of Funds (1)

The outstanding balance of loans and debtors at call also included a debtor whose income recognition was put on hold.

7) BIS RATIO (CAPITAL-TO-RISK-ASSET RATIO)

ratio was 12.0 percent, an increase from 11.1 percent in 2006 and was higher than the Bank of Thailand’s minimum

As at 31 December 2007, the Bank’s total capital amounted to 23,661 million baht, of which 20,017 million baht

requirement of 8.5 percent. The details of capital-to-risk asset ratio were as follows :

was Tier I and 3,644 million baht was Tier II. The Bank’s BIS

Capital-to-Risk-Asset Ratio 31 December 2007

31 December 2006

Million Baht

Percent

Million Baht

Percent

Tier I Capital

20,017

10.2

15,488

8.8

Total Capital

23,661

12.0

19,561

11.1

KEY FACTORS THAT MAY AFFECT FUTURE PERFORMANCE AND FINANCIAL POSITION Supporting Business Factors

2. CAPITAL MONITORING REGULATION IN COMPLIANCE WITH BASEL II Overall, Basel II had benefited the commercial bank business. It strengthens the financial aspect of the financial

1. DECLINING INTEREST RATE TREND Under declining interest rate trend, the Bank would decrease the interest cost together with expanding a larger deposits base than loans. These two factors would lead to potential better operating result.

institutions as a preparation for financial liberalization which may happen in the future. This regulation would result in a capital increase in some banks. Since the Bank’s loans are mostly retail, the capital used would then reduce due to a decreasing retail loan transaction.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

3. THE NEW ACCOUNTING STANDARD (IAS 39)

products, thus; better meet the customers’ needs. Consequently, the Bank would have greater potential to

The Bank is a leader in the hire purchase business in both new car and used car market. And since the car can be considered as collateral, the Bank can set aside

compete under an aggressive condition. The branch expansion and investments in IT infrastructure, however, resulted in a higher operating cost as well.

lesser amount of provision than estimated or no increase in

Negative Factors or Limitations of Business

provision.

Operations 4. UNIVERSAL BANKING 1. ECONOMIC GROWTH RATE IN 2007 SLOWED As an integrated financial institution with full

DOWN FROM 2006

financial services whether the services of the bank, securities, fund management, non-life insurance or life insurance, there

As the consumer and business confidence indexes

are many new launched products to effectively meet the needs

are lower than the level of economic recovery, the loans of

of the customers.

commercial banks would grow at a low rate in both retail and corporate.

5. KNOWLEDGE - BASED ORGANIZATION 2. ENTRANCE OF OTHER COMMERCIAL BANKS The management’s strategy aimed at enhancing

IN THE HIRE PURCHASE MARKET

the employees’ knowledge and motivating the organization to be a learning organization. As a result, the employees possess

According the Bank of Thailand’s financial

better efficiency and the services are improved to meet

institution system development master plan, the commercial

customers’ satisfaction. In the long run, this strategy is more

banks are allowed to operate captive finance. This increased

important than the pricing strategy.

the additional service channel for hire purchase customers, thus, more players try to take their shares in the market.

6. MARKET LEADER IN NEW CAR HIRE PURCHASE BUSINESS

3. STATE FINANCIAL INSTITUTIONS AND NONCOMMERCIAL BANKS HAVE MORE ROLES IN ACQUIRING

The Bank had the highest market share in new

DEPOSITS AND CREDIT LENDING.

car hire purchase market. The Bank is very skillful in hire purchase credit lending and has a good relationship with dealers for a long time. As a result, the Bank has the

4. AGGRESSIVE PRICE COMPETITION EVEN UNDER THE DECLINING INTEREST RATE

potentials and is ready to penetrate the used car hire purchase market which would further lead the Bank to an even stronger performance.

Under the pricing or in interest rate competition, the medium-size and small-size banks face limitation in the aspect of branch network and have a burden in high interest

Therefore, the hire purchase customer group is

expenses. Offering a high deposit interest rate in order to

considered good quality customer to the Bank. And the Bank

acquire market shares caused the interest rate gap to decrease.

is attempting to cross-sell other products of the Bank to the customers to meet with the customersí needs.

Analysis of financial position and performance result for year ended 31 December 2007 compared to the

7. BRANCH EXPANSION AND INFORMATION AND TECHNOLOGY (IT) INFRASTRUCTURE DEVELOPMENT

financial position and performance result for year ended 31 December 2006.

This increases the Bank’s accessibility to the customers, and enables the launching of variety financial

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

THANACHART SECURITIES PUBLIC COMPANY LIMITED

Financial Position

NET CAPITAL RATIO (NCR) As at the end of 2007, the company’s Net Capital Ratio (NCR) was 129.9 percent, an increase from 68.7 percent in 2006. This was mainly due to the change in the buying/selling

ASSETS

value in the last 3 business days of the year. However, such

As at the end of 2007, the company’s total assets

ratio was higher than the minimum level of 7 percent required

amounted to 3,695 million baht, increased by 5.5 percent from

by the Office of Securities and Exchange Commission (SEC).

the previous year. This was mainly due to the increase of 19.5 percent in cash and cash equivalents and the increase of 12.2

Performance Result

percent in net securities business receivables and receivables

As at the end of 2007, the company’s net income

from Clearing House while the net investments decreased by

amounted to 257 million baht, an increase of 50 million baht

9.9 percent.

or 24.4 percent from the previous year. The summary of its performance was as follows :

LIABILITIES INCOME As at the end of 2007, the company’s total liabilities amounted to 1,430 million baht. Overall, the change was

In 2007, the company’s total income amounted to 1,057

marginal when compared with the previous year. Most of the

million baht, an increase of 39 million baht or 3.8 percent

liabilities consisted of the securities business payable and

from the previous year. The main components contributing to

derivatives worth 1,244 million baht and other liabilities worth

the increase included securities and derivatives brokerage fees

186 million baht, accounting for 87.0 percent and 13.0

of 734 million baht and gains of 176 million baht from selling

percent of the total liabilities respectively.

securities. These components increased by 12.9 percent and 39.8 percent respectively. In addition, the company’s interest

SHAREHOLDERS’ EQUITY As at the end of 2007, shareholders’ equity amounted to 2,265 million baht, an increase of 185 million baht or 8.9 percent from the previous year. The company’s net income for

and dividend income amounted to 86 million baht, the interest on margin loans amounted to 34 million baht and its fees and service income amounted to 23 million baht. COST AND EXPENDITURE

the year amounted to 257 million baht, an increase of 50 million Baht from the previous year. The revaluation surplus

In 2007, the company’s cost and expenses related to

on investment decreased by 73 million baht ; as a result of,

business operation amounted to 702 million baht, a decrease

the sale of investments in the equity instrument and the

of 31 million baht or 4.2 percent from the previous year. This

market price fluctuation in the investments.

was mainly due to a decrease of 56 million baht in fees and service expenses and a decrease of 5 million baht in

LIQUIDITY In 2007, the company’s net cash and cash equivalents

percent and 27.7 percent respectively. The increase of

amounted to 93 million baht. The net cash from operating

operating expenses was a result of an increase of 25 million

activities amounted to 86 million baht and the net cash flows

baht in personnel, premises and equipment expenses in line

from investing activities amounted to 179 million baht, which

with the increase of income. Also, the corporate income

came from the sale of long-term investments in the amount of

tax increased by 19 million baht, varying with the company’s

346 million baht, additional investments in the amount of 150

increased net profit.

million baht, and net investments in equipment in the amount of 18 million baht.

borrowing expenses. These components decreased by 40.0

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

THANACHART FUND MANGEMENT COMPANY LIMITED

INCOME As at 31 December 2007, the company’s total income

Analysis of financial position and performance result for

amounted to 375 million baht, an increase of 113 million baht

the year ended 31 December 2007 compared to the

or 43.2 percent when compared with the total income as at

financial position and performance result for the year ended

31, December 2006. Its main components consisting of fund

31 December 2006.

management fees, registrar fees and fees for selling and

Financial Position ASSETS

buying back unit trusts amounted to 364 million baht, an increase of 111 million baht or 43.6 percent from the previous year. This was due to the new launched funds and the increase of net asset values.

Most of the company’s assets were in the form of cash and deposits in financial institutions (71.5 percent of the total assets).

COST AND EXPENDITURE The fees and service expenses which included the fees

In 2007, the company’s total assets amounted to 307

paid by the company to supporters for sale and repurchase of

million Baht, an increase of 139 million Baht or 83.0 percent

unit trusts as well as the business license fees amounted to 40

from 2006. This was mainly due to the operating result.

million baht, an increase of 25 million baht or 155.6 percent from the previous year.

LIABILITIES The operating expenses amounted to 188 million baht, The total liabilities were relatively low when compared

an increase of 24 million baht or 14.8 percent. This was a

with the total assets (25.7 percent of the total assets). The

result of expenses related special financial support, sale

components of the liabilities consisted of account payable,

incentive, advertisement, accommodation, and sale support

financial leases payable, corporate tax payable, and accrued

which increased. Furthermore, the company recorded the

expenses.

compensation of the senior executive’s retirement.

In 2007, the company’s total liabilities amounted to 79

The operating profit margin in 2007 amounted to 39.0

million Baht, an increase of 37 million baht or 89.1 percent

percent, an increase from 31.4 percent in 2006. The net profit

from 2006. This was mainly due to corporate tax payable,

margin in 2007 amounted to 27.2 percent, an increase from

financial lease payable, and other accrued expenses in 2007.

21.7 percent in 2006.

SHAREHOLDERS’ EQUITY As at the end of 2007, the shareholders’ equity amounted to 228 million baht, an increase of 102 million baht or 81.0 percent from the previous year. This was due to the increase of net income.

Performance Result In 2007, the company’s net income amounted to 102 million baht, an increase of 45 million baht or 79.6 percent once compared with the net income in 2006. The earning per share amounted to 10.2 baht. The details of the analysis of its operating result were as follows :

THANACHART INSURANCE COMPANY LIMITED Analysis of the financial position and performance result for the year ended 31 December 2007, compared to the financial position and performance result for the year ended 31 December 2006.

Financial Position ASSETS As at the end of 2007, the company’s total assets amounted to 2,842 million baht, an increase of 482 million

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

baht or 20.4 percent from the previous year. This was mainly

INCOME

due to the increase in investments. As at 31 December 2007, the total investments amounted to 1,981 million baht, an increase of 339 million baht or by 20.7 percent from the previous year. The investments consisted of securities investments worth 1,769 million baht as well as cash and deposits with banks worth 212 million baht.

The company’s total income amounted to 2,371 million baht, an increase of 336 million baht or by 16.5 percent once compared with the previous year. The premium written amounted to 2,282 million baht, an increase of 327 million baht or 16.7 percent from the previous year. This was mainly due to the cooperation between Thanachart Insurance and

LIABILITIES

Thanachart Bank Public Company Limited. As a result, it was a success in expanding the retail customer base by leveraging

As at the end of 2007, the company’s total liabilities amounted to 2,129 million baht, an increase of 364 million baht or 20.6 percent from the previous year. This was partly due to the increase of 212 million baht in the unearned premium reserve as a result of the growth in insurance premium income. SHAREHOLDERS’ EQUITY

from the Bank’s customer base. In addition, Thanachart Insurance expanded the channel through Bancassurance product of the Bank. Nevertheless, the company still provided its full attention to the existing customers by improving its service in both before and after the sale in order to create customer’s satisfaction. Consequently in 2007, the company’s earning from underwriting amounted to 326 million baht, an increase of 87 million baht or 36.5 percent

As at the end of 2007, the shareholders’ equity amounted

from the previous year.

to 713 million baht, an increase of 118 million baht or 19.9 percent from the previous year. The return on equity (ROE) in 2007 was 11.1 percent, an increase from 6.3 percent in 2006. CASH FLOWS AND LIQUIDITY

COST AND EXPENDITURE In 2007, the total indemnities amounted to 1,181 million baht, an increase of 258 million baht or 28.0 percent once compared with the previous year. This was mainly due to

In 2007, the company’s cash flows from operating activities amounted to 193 million baht and the cash flows from investing activities amounted to 63 million baht, of which 59 million baht were interest and dividend income and 5 million baht were gains from securities investments.

overall growth of the company’s insurance business. As a result, the loss ratio in 2007 amounted to 60.1 percent in 2007, an increase from 58.5 percent in 2006. The operating expenses amounted to 323 million baht, an increase of 43 million baht or 15.2 percent from the previous year. This was mainly due

On liquidity, in 2007 it was still the company’s

to restructuring of the organizational resources aimed at

investment policy to mitigate the risk arising from the increase

accommodating market growth and enabling the company to

in interest rates. As a result, it gradually reduced its long-term

deliver quality services that cater to the needs of every

investments and increased its short-term investments. As well,

customer, every customer group and business partner.

the focus was given to investments in instruments with high liquidity. As a result, the company’s liquidity in business operation was relatively high.

Performance Result

THANACHART LIFE ASSURANCE COMPANY LIMITED Analysis of the financial position and performance result for the year ended 31 December 2007, compared to the

In 2007, the company’s net income amounted to 66 million baht, an increase of 38 million baht or 132.0 percent when compared with the previous year. The earnings per share amounted to 1.4 baht. The details of the analysis of its operation results were as follows :

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

financial position and performance result for the year ended 31 December 2006.

Financial Position ASSETS

INCOME In 2007, the company’s total premiums written amounted to 3,226 million baht, an increase of 1,861 million baht or

As at the end of 2007, the company’s total assets amounted to 7,033 million baht, an increase of 52.0 percent from the previous year. This was mostly due to securities investments which amounted to 6,271 million baht, an increase

136.0 percent from the previous year. This was due to the increase of 160.0 percent in premium written for the group life insurance and 1,020.0 percent increase in ordinary life insurance.

of 83.0 percent from 2006. The securities investments accounted for 89.0 percent of the total assets and were in

COST AND EXPENDITURE

compliance with the investment regulation stipulated by the Department of Insurance.

In 2007, the company’s underwriting expenses amounted to 2,819 million baht, an increase of 1,714 million baht or

LIABILITIES

155.0 percent from the previous year. The major items of expenses included the following :

As at the end of 2007, the company’s total liabilities amounted to 5,908 million baht, an increase of 56.0 percent.

The life premium reserve, calculated by actuaries in line

This was mostly due to the life premium reserve which

with the Ministry of Commerce promulgation in relation to rules

increased every year. The life premium reserve accounted for

and regulations governing the provisioning of premiums as

95.0 percent of total liabilities. As at 31, December 2007, the

premium reserve, amounted to 1,972 million baht, an increase

company’s life premium reserve amounted to 5,593 million

of 303.3 percent. This was due to the 106.0 percent increase

baht, an increase of 54.0 percent from the previous year.

in group life insurance and the 1,020.0 percent increase in

According to the Department of Insurance’s requirements, the

ordinary life insurance.

life insurance company has to set aside a reserve for the life insurance policies which are still in force, so that the company is able to meet its financial obligations to its policy holders.

The benefit payment for life policy holders amounted to 526 million baht, an increase of 8.0 percent from the previous year. Most of the payments, 75.0 percent, were indemnities

SHAREHOLDERS’ EQUITY

paid for death. In 2007, the claims for death indemnities increased by 27 million baht or 7.0 percent from 2006. Once

As at 31 December 2007, the shareholders’ equity amounted to 1,126 million baht, an increase of 297 million

comparing with the year 2006, the cash surrender value increased by 15 million baht or 13.0 percent.

baht or 36.0 percent from the previous year. The company’s return on equity (ROE) was 18.0 percent in 2007, an increase from 15.1 percent in 2006.

Performance Result The company’s net income for 2007 amounted to 176 million baht, an increase from 103 million baht in 2006. The earnings per share in 2007 amounted to 3.5 baht. The details of the analysis of its performance were as follows :

The commissions and brokerage amounted to 304 million baht, an increase of 177 million baht or 139.0 percent from the previous year. The commissions and brokerage rose in line with the increase in the underwriting revenue. As well, the rate of commissions and brokerage of each policy differed. The operating expenses in 2007 amounted to 404 million baht, an increase of 154 million baht or 61.0 percent. The additional operating expenses increased by 138 million baht which consisted of sale support expenses, the banks’ fees, service support expenses, and etc.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

KEY CHANGES AND DEVELOPMENTS Apart from the key changes and developments in branch

(6) National Leasing Company Limited, (7) Thanachart

network and business operations, the Bank had other

Leasing 2000 Company Limited, and (8) Thanachart Broker

important changes and developments as follows :

Company Limited.

Shareholding Restructuring of Companies in

•

Companies in supporting business : (1) Thanachart

Finance Business Sector under Consolidated Supervision

Legal and Appraisal Company Limited and (2) Thanachart

Regulation

Management and Service Company Limited.

In February 2007, Thanachart Group made an

On 30 April 2007, the Annual General Meeting of

announcement about its plan to restructure shareholdings of

Shareholders of the Company had assessed and approved the

its member companies. According to the plan, Thanachart

purchasing of ordinary shares of eight subsidiaries from

Bank Public Company Limited (“Bank”) would hold shares in the following companies :

Thanachart Capital Public Company Limited (“Thanachart Capital”) at prices equal to their respective book value at the

Companies in financial business : (1) Thanachart

end of the most recent month before the execution of the share

Securities Public Company Limited, (2) Thanachart Fund

transactions, provided that the total transaction value did not

Management Company Limited, (3) Thanachart Insurance

exceed 4,670 million baht. After the execution of the

Company Limited, (4) Thanachart Life Assurance Company

transactions, the purchasing amount and shareholdings of the

Limited, (5) Thanachart Group Leasing Company Limited,

Bank in the eight companies would be as follows :

•

Companies 1. Thanachart Securities Public Company Limited

Number of Shares

Shareholding

Purchased

(Percent)

1,499,999,930

100.00

7,499,993

75.00

3. Thanachart Life Assurance Company Limited

49,999,400

100.00

4. Thanachart Insurance Company Limited

38,999,434

78.00

5. Thanachart Management and Service Company Limited

599,993

100.00

6. Thanachart Legal and Appraisal Company Limited

999,993

100.00

35,999,994

100.00

9,999,000

100.00

2. Thanachart Fund Management Company Limited

7. Thanachart Group Leasing Company Limited 8. Thanachart Broker Company Limited

On 5 July 2007, the Bank of Thailand gave its approval

ordinary shares of Thanachart Insurance Company Limited.

to the Bank to buy shares in the subsidiaries in accordance

As a result, the Bank’s shareholding in Thanachart Insurance

with the resolution adopted by the shareholders at their

Company Limited increased to 100 percent.

annual general meeting. On 12 July 2007, the Bank executed

the related transactions with the combined value worth 4,158

Moreover, on 19 April 2007, Thanachart Training and

million baht. The purchasing prices were based on the book

Development Company Limited was established with the

values of the subsidiaries as of 30 June 2007. Later on 28

Bank and the related party holding 500,000 shares which

September 2007, the Bank purchased an additional 6,000,000

accounted the shareholding of 100 percent.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Offer for Sale of Shares to The Bank of Nova Scotia Asia Limited On 30 April 2007, the shareholders at their Annual General Meeting approved of the capital increase by issuing and offering for sale up to 276,263,200 ordinary shares by private placement in line with the ordinary share sale agreement between Thanachart Bank Public Company Limited and The Bank of Nova Scotia Asia Limited (BNSAL) at 16.37 baht per share.

BNS became a shareholder of Thanachart Bank with a 24.98 percent shareholding.

The Cessation of the Securities from the Stock Exchange of Thailand (SET) On 1 October 2007, the Extraordinary Meeting of Shareholders No.1/2007 had a resolution to delist the Bank’s ordinary shares from being listed in the SET. On 9 October 2007, the SET approved of the delisting of the Bank’s ordinary shares. On 15 October 2007, Thanachart Capital offered to

BNSAL expressed its intention to buy up to 49 percent of

buy all of the ordinary shares from the Bank’s minor

the Bank’s issued and paid-up shares as an equity partner

shareholders at a price of 16.37 baht per share. The offering

which would also participate in the management. The Finance

period was 45 days, from 16 October 2007 until 20 December

Minister made an exception for BNSAL to hold shares up to

2007. The shareholders agreed to sale the Bank’s ordinary

24.99 percent of the Bank’s issued and paid-up share capital.

shares in the amount of 7,694,450 shares or accounted for

As well, the Finance Minister made an exception for the Bank

0.54 percent. As a result, Thanachart Capital’s shareholding

to have up to 49 percent of its issued and paid-up share

of the Bank amounted to 1,299,607,043 shares which

capital held by foreign nationals, and to have foreign nationals

accounted for 74.92 percent.

as members of the Board of Directors in the amount of more than one-fourth but not exceeding one-half of the Board as well as not exceeding the shareholdings held by foreign nationals. On 19 July 2007, the Bank increased its capital by

Moreover, the other important developments in business process and operations were as follows :

Products •

The Bank changed the way in developing products

offering for sale 276,263,200 ordinary shares to BNSAL at

from the “decentralization” approach to “centralization”

16.37 baht per share. BNSAL also purchased an additional

approach which was more beneficial in promoting

157,130,216 shares of the Bank from the Thanachart Capital

cross-selling and product bundling. The centralization

at 16.37 baht per share. As a result, BNSAL’s total shareholding

approach enabled the company to analyze the needs of

in the Bank amounted to 433,393,416 shares or 24.98

each customer group accurately. As a result, it was able to

percent of the issued and paid-up share capital. On the other

develop new products more effectively.

hand, the Thanachart Capital’s shareholding in the Bank amounted to 1,291,912,593 shares or 74.48 percent.

•

The Bank accelerated the development of products

which catered to the customers’ financial needs. As a result, Moreover, the Bank acquired the transfers of both assets and liabilitie of BNSAL. The acquisitions were in compliance

the available number of the company’s products was on par with the industry average.

with the One Presence Policy under the Financial Sector Master Plan. When BNSAL became the shareholder of the Bank, The Bank of Nova Scotia’s Bangkok Branch was required to return its Bangkok branch license to the Finance Ministry and to transfer both its assets and liabilities to the Bank at a price equal to the book value.

Service Channel Expansion •

The Bank increased the number of its branches by

33 to 166 as at the end of 2007. Its branch network covered all areas of economic importance with its services being made available to all regions of the country. The number of its

On 11 January 2007, BNSAL transferred by way of

branches ranked 8th in the commercial banking system. As

changes in the share register all its shares in the Bank to its

a result, the company was able to expand its customer base

parent company The Bank of Nova Scotia (BNS). As a result,

considerably. ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

•

The Bank’s ATMs increased by 38 to 280 machines

•

The development of the Hire Purchase System

at the end of 2007. Of the total machines, 139 were located in

continues from 2007 and is expected to be completed in 2008.

Bangkok and 141 in the provinces and vicinities. In addition,

The system is able to deal with various conditions of the

the Bank and Krung Thai Bank jointly established the “ATM

products which are getting increasingly more complex. It will

Connect” project which allowed customers to use their ATM

also enhance the efficiency in managing the hire purchase

cards to execute specified transactions through Krung Thai

business and services. As a result, the Bank is able to

Bank’s ATMs without having to pay for fee expenses as in the

respond to the needs of the customers accurately and

case of other banks.

efficiently.

•

The number of its foreign exchange booths increased

•

The first part of the development of the General

over the previous year by 21 to 65 at the end of 2007. These

Ledger System was already completed. As a result, the

booths covered all tourist spots.

accounting operations became more efficient. The system

Process and Operations Systems Development

enabled the Bank to deal with changes in recording transactions in line with the new accounting standards which

•

The operations groups were restructured under

will be introduced. As well, the system is able to help

Thanachart Diamond Business Model. The objective is to

preparing the reports for management decision in a more

support the growth of the Bank. The new structure under

efficient manner.

Thanachart Diamond Business Model will make the operations more efficient and flexible. •

KEY CHANGES AND DEVELOPMENT OF THE SUBSIDIARIES

The Bank changes the structure of its district office

and branch management by using the HUB Operation

Thanachart Fund Management Company Limited

Excellence approach which focuses on development of work

Thanachart Fund Management Company Limited made

systems and internal operations requirements as well as

further changes to its organization structure after it grouped

design of new business processes. The approach enables its

its various work units by customer type as well as separating

operations to support the services and business conduct in line with the Bank’s policy and strategies.

the supporting work units from the core business units. To simplify it’s the structure of control; the company has put

The Bank completed its Thanachart Contact Center

its compliance office under the supervision of its Audit

project in 2007. As a result, its customers nationwide can

Committee. As well, it has established the Risk Management

request for details about services offered by Thanachart Group

Office which is responsible for implementing the company’s

through one phone number, i.e. 1770 available 24 hours.

risk management policy in various areas, ensuring that the

•

risks are managed efficiently and in line with the guidelines

Information Technology Development

given by the Office of Securities and Exchange Commission

The first phase of the development of Human

(SEC). The Risk Management Office is, in turn, supervised

Resource Information System (HRIS) was already completed

by the Risk Management Committee. The details of the

on 1 November 2007. It is expected that all the 3 phases will

organization structure are as follows :

•

be completed by the end of 2008. The system will provide the Bank with accurate information for the use in human resource management. It will also help enhance the efficiency

1. Marketing Department which consists of Product Development and Marketing Promotion Division, Distribution Channel Development Division and Marketing (Sales) Division.

of the HR operations in terms of the number of supporting staff and documents related to HR systems which will be reduced considerably.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

2. Operations Department which consists of Service and Registration Division as well as Fund Operations Division.

3. Fund Management Group.

2. Installation of the fund management system (Hilnvest).

4. Business Support Group which consists of Technology and Information System Unit, Human Resource Management Unit, Administration Unit, Accounting and

3. Installation of the customer authentication system (KYC/CDD).

Budgeting Unit, Legal Unit, and President’s Office.

Thanachart Insurance Company Limited 5. Independent Group which consists of Compliance Office and Risk Management Office.

The company used Survey System and Open Claim (GIS) Auto system in managing and processing its claims. The

Thanachart Life Assurance Company Limited and Thanachart Insurance Company Limited Their major shareholder has changed from Thanachart Capital Public Company Limited to Thanachart Bank Public Company Limited.

TECHNOLOGY Thanachart Capital Public Company Limited and Thanachart Bank Public Company Limited The information and technology systems were developed to support the operations of Core Banking.

Thanachart Securities Public Company Limited The company developed its service delivery systems as follows : 1. Development of Online Stock Trading System (Credit Balance Type of Account), and 2. Development of SET50 Index Option Trading System with support from Freewill Solutions Company Limited. The system would be used for placing buy/sell orders through the company’s marketing staff. The company also cooperated with

systems significantly helped enhance the efficiency and accuracy of the claim processing. As a result, its customers as well as trade partners received a better and more efficient auto claim handling service.

BRANCH NETWORK Thanachart Securities Public Company Limited The company opened 5 new branches in 2007, 2 of which were full service branches while the remaining 3 were sub-branches. As a result, as of the end of 2007, the company had 33 branches in total.

Thanachart Insurance Company Limited The company had 16 branches in total. It had 8 branches specially responsible for making indemnities.

SERVICES Thanachart Securities Public Company Limited •

The company was selected by the Stock Exchange of

Thailand to be one of the team members in establishing and managing the first Equity Exchange-Traded Fund (Equity ETF) in Thailand.

SETTRADE Dot Com Company Limited in developing SET50 Index Futures System for placing buy/sell orders on the internet.

•

On 29 October 2007, the company started offering

its brokerage services for trading SET50 Index Options through

Thanachart Fund Management Company Limited The company expanded its scope of services as follows : 1. Installation of Account Book Issuance System. To gain customer confidence in investment, the account books,

its marketing staff and on the internet. •

On 16 October 2007, it started offering its investment

advisory services.

Thanachart Fund Management Company Limited

instead of the right certificates, will be issued for customers. The account books were first issued for holders of Money Market Fund unit trusts.

For regular buy orders whose settlements were made through the Savings Plan accounts, the company expanded

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

this service to cover all mutual funds (with the exception of

greater convenience and could make their claims at the point

foreign investment funds), instead of just 27 mutual funds.

of service which they found most convenient.

Thanachart Insurance Company Limited The company started offering its online claim processing

FINANCIAL PRODUCTS Thanachart Fund Management Company Limited

services. The purpose was to cut waiting time for survey officers and to cut the companyâ&#x20AC;&#x2122;s costs. As the development adopted the one-stop service concept, its customers received

The company offered for sale its 12 mutual funds to the general public, with details as follows :

(Unit : Million Baht)

Nature of Fund

Number of Funds

Sales Proceeds

Roll Over Debt Instrument Fund

4,571

One-Year Fixed Income Fund with Principal Protection

4,947

Mixed Fund

1,645

Foreign Investment Fund

4,084

15,247

Total

Thanachart Life Assurance Company Limited

proceeds are used to pay tuition fees of pilot training courses. Should the policyholder die prematurely or is permanently

The company has developed and sold 2 new types of insurance policies, the details of which are as follows :

incapacitated, the company will pay the benefits in accordance with the table showing the policyâ&#x20AC;&#x2122;s cash value which

1. Thanarat 14/14 - Smart Tax is a type of endowment

decreases monthly. The benefits will be paid first to the

insurance policy with a 14-year protection period. The

beneficiary (lender) to settle the outstanding loan balance,

policyholder is required to pay annual premiums over the

with any remaining benefits to be paid to the beneficiary

14-year contract period. The outstanding feature of this policy

or heir whose name is given by the policyholder in the

is the maximum benefits to be received by the policyholder.

insurance policy. The period covered by this type of policy is

One of the benefits is that, in calculating personal income tax,

10 years with the premium being paid once.

the life insurance premium of up to 50,000 baht which is paid

Thanachart Insurance Company Limited

by the taxpayer is tax deductible. As well, the policyholder receives an annual bonus at the end of each year, starting

1. Automobile Insurance Products

from the end of the third year of the protection period. The bonus is fixed and paid annually until the end of the 14-year contract period. 2. Group Life Insurance Policy for Borrowers who

1.1 Motor (Plus 2) 1.2 Motor (2 & 3 Plus) 2. Non-automobile Insurance Products

Attend Pilot Training Courses - this type of life insurance policy

2.1 SME Package

is designed for protection of the borrowers whose loan

2.2 Happy PA

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

DISTINCTION AND HONORARY AWARDS GRANTED TO THANACHART GROUP Thanachart Securities Public Company Limited

Thanachart Fund Management Company Limited The company won the “Best Fund Group Over Three Years” Award 2007. The award was granted by Post/Lipper Thailand to the debt instrument fund with the best 3-year

The company received the “Best Bond Securities Firm” at the Best Bond Awards 2006 organized by Thai Bond

performance (2004 - 2006), the announcement of which was made in 2007.

Market Association (ThaiBMA). The award honored the debt

Thanachart Life Assurance Company Limited

instrument trading firm which was also an active securities company and played an important role in the debt instrument

Five of its agents received awards at Thailand National

market.

Quality (TNQA) Awards 2007 which was organized by the Thai Life Assurance Association to honor agents for their high quality performance. The agents receiving the awards served as quality models for other life assurance agents.

Mr. Bundit Cheevadhanarak, Senior

Mr. Banterng Tantivit, Chairman of

Executive Vice President of Thanachart Bank, and Mr. Sahas Treetipbut , Senior Executive Vice

Thanachart Capital Public Company Limited, and Mr. Arthur R.A. Scace, Chairman of the

President - Managing Director, Products and Marketing Management Group, Krung Thai

BNS’ Board of Directors, participated in an auspicious ceremony in celebration of the

Bank Public Company Limited, jointly presided over the opening ceremony of the “ATM

agreement, under which BNS acquired a 24.98 stake in Thanachart Bank.

Connect” Services.

The number of Thanachart Bank’s

of Thanachart Securities Public Company Limited, received the “Best Bond Securities

branch network covers all key economic areas and all regions nationwide.

Firm” from Thai Bond Market Association (ThaiBMA) at the Best Bond Awards 2006.

Ms. Suchada Pavananunt, Chairman

Mrs. Asvini Tailanga, Managing Director

branches increased by 33 from the previous year to 166 as at the end of 2007. The Bank’s

Mr. Chatchawan Polachan and Ms.

and Chief Executive Officer of Thanachart Fund Management Company Limited, received the

Sumalee Areehudsen, Executive Agents of Thanachart Life Assurance Company Limited,

“Best Fund Group Over Three Years” (Bond Group) Award 2007 for the debt instrument

received awards for their high quality performance at Thailand National Quality

fund with the best 3-year performance from Mr. Pakorn Malakul Na Ayudhya, Chairman of

(TNQA) Awards 2007.

the Stock Exchange of Thailand. The award was given by Post/Lipper Thailand.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

NATURE OF BUSINESS OPERATION OVERVIEW OF BUSINESS OPERATION Thanachart Bank Public Company Limited (“Bank”) is a

business, life and non-life insurance business, hire purchase

company in the financial business conglomerate which has

and leasing business, and supporting business. Thanachart

Thanachart Capital Public Company Limited acting as a

Group provides fully integrated financial services with each

parent company. The companies in the group operate various

business and operation precisely organized. The key financial

types of business which mainly consist of commercial

distribution service channel of the group is through the Bank’s

banking business, securities business, fund management

network, according to the supporting guideline of the officials.

Shareholding Structure in Thanachart Group as at 29 February 2008 Thanachart Capital Public Company Limited

The Bank of Nova Scotia

24.98%

Non-Financial Business Group

Financial Business Group

Commercial Banking Business

Asset Management Business

74.92%

100%

Thanachart Bank Public Company Limited

NFS Asset Management Company Limited 58.45%

Supporting Business

Financial Business 100%

100%

Thanachart Securities Public Company Limited Securities Business

Thanachart Broker Company Limited 100%

75.00%

Thanachart Management and Service Company Limited

Thanachart Fund Management Company Limited

100%

Thanachart Insurance Company Limited Insurance Business

Thanachart Legal and Appraisal Company Limited 100%

100%

Thanachart Training and Development Company Limited

Thanachart Life Assurance Company Limited 100%

Thanachart Group Leasing Company Limited

Leasing Business 100%

Thanachart Leasing 2000 Company Limited

100%

National Leasing Company Limited

Note : The shareholding percentage includes that of the related party

MAX Asset Management Company Limited

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Thanachart SPV 01 Company Limited

Policy on Division of Operational Functions among Member Companies of Thanachart Group It is Thanachart Groupâ&#x20AC;&#x2122;s policy to offer fully integrated financial services. The operations which provide these services can be divided into two main groups as follows : A) Companies that operate in financial businesses consisted of :

6. Thanachart Life Assurance Company Limited which provides life and health insurance service which can be divided into two categories based on the customerâ&#x20AC;&#x2122;s characteristics i.e. individual insurance and group insurance, 7. Thanachart Group Leasing Company Limited which offers hire purchase service for all types of cars, 8. Thanachart Broker Company Limited which provides a service of monitoring hire purchase customers of

1. Thanachart Capital Public Company Limited

Thanachart Group and non-life insurance brokerage services.

which operates investment business by acting as a holding

In addition, the company acts as an insurance agent for

company of the Thanachart Financial Business Group,

Thanachart Insurance Company Limited,

2. Thanachart Bank Public Company Limited which

9. NFS Asset Management Company Limited which

operates commercial banking business and other business

was granted a license to operate asset management business

that the Bank of Thailand had allowed the Bank to do, such as

by managing the purchased or transferred non-performing

being an insurance broker, life insurance broker, brokerage

assets from the financial institutions in Thanachart Group, and

business, and selling unit trusts, 10. MAX Asset Management Company Limited which 3. Thanachart Securities Public Company Limited

was granted a license to operate asset management business

which was granted a license from the Ministry of Finance

by managing the purchased or transferred non-performing

to operate four types of securities business i.e. securities

assets from the financial institutions ;

brokerage, proprietary trading, securities underwriting, and investment advisory. In addition, the company is engaged in other related businesses that support the securities business. These include, among others, financial advisory services, futures business, unit trust underwriting and repurchasing services as well as securities registrar, 4. Thanachart Fund Management Company Limited which is a joint venture company between Thanachart Bank Public Company Limited (hold 75 percent) and Government

B) Companies that operate in supporting business consisted of : 1. Thanachart Legal and Appraisal Company Limited which provides service of legal consultant, legal contracts, litigation, lawsuits execution and collateral appraisal, 2. Thanachart Management and Services Company Limited which provides personnel services, and

Saving Bank (hold 25 percent). The company operates in

3. Thanachart Training and Development Company

the business of mutual fund management, private fund

Limited which provides training services to the human

management, provident fund management and investment

resources of Thanachart Group.

consultant. As evident, the company offers a full range of investment counseling services,

Income Structure of the Bank and Subsidiaries

5. Thanachart Insurance Company Limited which

The income structure of the Bank and subsidiaries from

provides non-life insurance service i.e. fire insurance,

the consolidated financial statements as at 31 December 2007

motor insurance, marine and transportation insurance,

was as follows :

and miscellaneous insurance,

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The Bankâ&#x20AC;&#x2122;s Shareholding Percentage (Include Related Persons)

2007 Consolidated Financial Statements Million baht

Percent

Interest and Dividend Income Thanachart Bank Public Company Limited Thanachart Securities Public Company Limited Thanachart Fund Management Company Limited Thanachart Insurance Company Limited

17,051

148.14

100.00

0.37

75.00

0.03

100.00

0.25

Thanachart Life Assurance Company Limited

100.00

0.73

Thanachart Group Leasing Company Limited

100.00

238

2.07

Thanachart Broker Company Limited

100.00

0.01

Thanachart Management and Service Company Limited

100.00

Thanachart Legal and Appraisal Company Limited

100.00

Thanachart Training and Development Company Limited

100.00

Thanachart Leasing 2000 Company Limited

100.00

0.17

National Leasing Company Limited

100.00

0.17

17,488

151.94

9,364

81.36

0.01

Total Interest and Dividend Income Interest Expenses Thanachart Bank Public Company Limited Thanachart Securities Public Company Limited Thanachart Fund Management Company Limited

100.00 75.00

Thanachart Insurance Company Limited

100.00

Thanachart Life Assurance Company Limited

100.00

Thanachart Group Leasing Company Limited

100.00

Thanachart Broker Company Limited

100.00

Thanachart Management and Service Company Limited

100.00

Thanachart Legal and Appraisal Company Limited

100.00

0.19

Thanachart Training and Development Company Limited

100.00

Thanachart Leasing 2000 Company Limited

100.00

National Leasing Company Limited

100.00

0.07

Total Interest Expenses

9,396

81.63

Net Interest and Dividend Income

8,092

70.31

2,578

22.40

Bad Debt and Doubtful Accounts Thanachart Bank Public Company Limited Thanachart Securities Public Company Limited Thanachart Fund Management Company Limited

(1)

(0.01)

75.00

Thanachart Insurance Company Limited

100.00

Thanachart Life Assurance Company Limited

100.00

Thanachart Group Leasing Company Limited

100.00

112

Thanachart Broker Company Limited

100.00

Thanachart Management and Service Company Limited

100.00

Thanachart Legal and Appraisal Company Limited

100.00

Thanachart Training and Development Company Limited

100.00

Thanachart Leasing 2000 Company Limited

100.00

0.04

National Leasing Company Limited

100.00

(1)

(0.01)

Total Bad Debt and Doubtful Accounts

100.00

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

2,692

0.97

23.39

The Bankâ&#x20AC;&#x2122;s Shareholding Percentage (Include Related Persons)

2007 Consolidated Financial Statements Million Baht

Percent

Loss on Debt Restructuring Thanachart Bank Public Company Limited Thanachart Securities Public Company Limited

100.00

75.00

100.00

Thanachart Fund Management Company Limited Thanachart Insurance Company Limited Thanachart Life Assurance Company Limited

100.00

Thanachart Group Leasing Company Limited

100.00

Thanachart Broker Company Limited

100.00

Thanachart Management and Service Company Limited

100.00

Thanachart Legal and Appraisal Company Limited

100.00

Thanachart Training and Development Company Limited

100.00

Thanachart Leasing 2000 Company Limited

100.00

National Leasing Company Limited

100.00

Total Loss on Debt Restructuring Interest and Dividend Income after Bad debt and Doubtful Accounts and Loss on Debt Restructuring

5,400

46.92

Non-Interest Income Thanachart Bank Public Company Limited Thanachart Securities Public Company Limited

1,914

16.63

100.00

479

4.16

75.00

215

1.87

Thanachart Fund Management Company Limited Thanachart Insurance Company Limited

100.00

1,088

9.45

Thanachart Life Assurance Company Limited

100.00

2,281

19.82

Thanachart Group Leasing Company Limited

100.00

0.40

Thanachart Broker Company Limited

100.00

0.39

Thanachart Management and Service Company Limited

100.00

0.01

Thanachart Legal and Appraisal Company Limited

100.00

0.25

Thanachart Training and Development Company Limited

100.00

Thanachart Leasing 2000 Company Limited

100.00

0.04

National Leasing Company Limited

100.00

0.06

6,110

53.08

11,510

100.00

Total Non-Interest Income

Net Interest and Dividend Income and Non-Interest Income after Bad Debt and Doubtful Accounts and Loss on Debt Restructuring

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Income structure of the Bank from the financial statements of Bank only as at 31 December 2005, 2006 and 2007 was as follows : 2007

2006

2005

Million baht

Percent

Million baht

Percent

Million baht

17,123

89.52

15,520

92.17

5,309

88.36

Interest Expenses

9,386

49.07

9,510

56.48

2,837

46.51

Net Interest and Dividend Income

7,737

40.45

6,010

35.69

2,472

40.52

Bad Debt and Doubtful Accounts

2,606

13.62

1,220

7.25

543

8.90

0.20

1.03

Debt Restructuring

5,131

26.82

4,756

28.25

1,866

30.59

Non-Interest Income

2,005

10.48

1,318

7.83

791

12.97

7,136

37.31

6,074

36.07

2,657

43.56

Interest and Dividend Income

Loss on Debt Restructuring

Percent

Net Interest and Dividend Income after Bad Debt and Doubtful Accounts and Loss on

Net Interest and Dividend Income and Non-Interest Income after Bad Debt and Doubtful Accounts and Loss on Debt Restructuring

Business Goal

Vision of Thanachart Group

Each year, the Bank defines the underlying assumptions

“Be a business group which gives fully integrated

and key factors which act as the foundation of the

financial services, with focus given to creating service

assessment. Taking into consideration these influential

excellence and developing products that cater to all the

elements to business operation, the Bank set its business goals.

financial needs of the target customer groups, as well as with

The target for each business group is distinctively designed

the cooperation and solidarity of all the members of the group.”

and determined, where the customer base expansion is considered the main target. The performance will be monitored and evaluated on the pre-agreed timeline. The business plan, key factors and underlying assumptions will be evaluated and adjusted, if necessary, at mid-year. It will

To achieve such vision, three major fundamentals are required i.e. Universal Banking, Customer Centric, and Synergy. To succeed in these fundamentals is to lead Thanachart Group to be fully integrated financial services in the future.

be necessary to alter the business goals in adaptation of significant changes or incidents that cause a direct impact on the commercial banking business.

Universal Banking offers full spectrum of financial products and services that match the needs of target customer groups coupled with service channels and net work that

Aside from the business goal of each product, the Bank

are accessible to the target customer groups at every service

continued the target of expanding the service network whether

point covering every areas across the country enabling them

in branches, exchange booths, or ATM in the year 2007.

to conveniently use and receive good services. At present,

Thanachart Group’s Business Policies and Strategies

Thanachart Group is a financial business group that has a

It is Thanachart Group’s policy to jointly consider and

business, life insurance business, and asset management

create vision, missions as well as strategies in the conduct of

business. From this point onward, the focus of the

business affairs of Thanachart Group.

development of Thanachart’s financial products and services

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

full range of financial services, namely banking business, securities business, fund management business, insurance

will be on electronic services, branch expansion, exchange booth, and automatic machines (ATM, ADM) in order to expand the network servicing customers nationwide. Customer Centric is the ability to response to all needs of customers. It is the adjustment of financial service procedures that can response to every need of each target customer group. Importance has been placed on the adjustment, research

•

Society : be a good corporate citizen and comply with

the rules and regulations of the authorities concerned.

Thanachart Group’ Business Strategies •

Thanachart Group works together in formulating

vision, goals, and business directions. The objective is to bring about the synergy of the Group’s business forces and to operate business with common vision and missions.

and study of customers’ behaviors for the development of products and services that best match customers’ needs. This

•

Thanachart Group requires its member companies

also includes the development of data management center, of

to establish annual budgets and formulate annual business

which the information will be used for the design of new

plans as well as 3-5 years plans and propose them for

products and to improve services that fit target customer

consideration on an annual basis.

groups. In addition, Thanachart also places great emphasis on services provided by its employees to the customers. Every

•

Thanachart Group requires its member companies

to give a report of their respective performance to Thanachart

employee will take care of the customers by making inquiries

Capital Public Company Limited, a parent company of the

with eloquent manners, noticing frequently used services and

group, on a monthly basis. A meeting is organized to together

assisting customers with the best services.

review target and budget at every mid-year period.

Synergy is the cooperation of companies and employees

COMMERCIAL BANKING BUSINESS

within the group to proactively operate the business. In so doing, the Bank needs to pool the efforts of every company under

Type of Services

Thanachart Group and employee at all level up to the

The Bank operates commercial banking business in

management to work together in an integrative form. The

compliance with the Commercial Banking Act as well as

proactive business operation is in line with the strategic plan

the related promulgation of the Bank of Thailand (BOT). The

of Thanachart Group. To ensure effectiveness and the highest

Bank acts as an advisor for the investment in unit trust and

efficiency of its operations, Thanachart Group has thus

securities trading account opening, and insurance and life

supported in becoming a learning organization for the benefit

insurance brokerage agent. As at 31 December 2007, the Bank

of human resource development to have knowledge,

had in total 166 branches, 280 ATMs (both in-branch and

know-how and skill covering every business type of the group.

stand-alone), 3 CDMs, and 65 currency exchange service

Mission Statement •

Customer : determine to improve the quality of

points of which 45 located in the branches and another 20 were exchange booths.

The Bank’s Business Directions

products and standardize the financial services The Bank operates its business under the vision of •

Competitors : compete fairly and honestly

•

Trading partners : build good relationship with other

trading partners

Thanachart Group which stated that “Be a business group which gives fully integrated financial services, with focus given to creating service excellence and developing products that cater to all the financial needs of the target customer groups,

•

Employee : become a learning organization to

as well as with the cooperation and solidarity of all the

facilitate the continuous improvement of personnel at all

members of the group.” To achieve this vision, the Chief

levels

Executive Officer has set six key business operation strategies ;

•

Shareholders : protect and place great importance

on shareholders’ interest

know as “CEO’s Six-point Agendas,” which consist of 1. Achieve financial targets that are set in accordance with the long-term strategic plan, ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

2. Quicken growth initiatives, including create new

•

Current Deposits

products, expand the customer base and improve quality of

•

Foreign Currency Deposits

services to the finest level. Focus is given to development of products that fit the needs of target customer segments as well as on expansion of sales channels to the areas that have

Competitive Strategies 1. Product Strategy

potential to fully response to target customer groups’ needs. The Bank places strong emphasis on providing 3. Put in place the basic infrastructure system as well

deposit services that meet the needs of customers. It is also

as the supporting system that is essential to provide

the Bank’s policy to increase the range of deposit services

convenience and thereby enabling greater efficiency in

by adding new features to the existing services as well as

operating business (Operation Improvement). This includes

improving its technology to support new type of deposits, such

the development of Thanachart Group’s basic infrastructure

as establishment of interest rates for savings deposits by

system and operation system to ensure best practices.

taking into account the outstanding balance at the end of the day.

4. Create a proactive working culture and improve employees’ knowledge and skills (People Development) i.e. focusing on building a new corporate culture and creating new DNA for staffs at all levels.

2. Pricing Strategy In determining deposit rates, the Bank has a policy to take into consideration future trends of interest rate,

5. Oversee the operations, ensuring strict compliance

economic condition, including various other internal and

with the official’s measures. Also look after the businesses

external factors. Moreover, the Bank emphasizes on offering

to ensure that they are conducted under good corporate

competitive interest rates to those offered by other

governance, risk management, general supervision, internal

commercial banks.

audit as well as relevant rules and regulations. In addition,

3. Sale Promotional Strategy

establish the employee code of conduct that is applied to the whole organization.

The Bank has continued to organize sales promotional strategy aiming to offer its deposit products to

6. Publicize good corporate image and reputation

target customer groups. In 2007, the marketing activities

to customer groups and investors (Public Relation and

and sales promotional campaigns have been organized for

Communication).

the saving depositors both individual and corporate. The

PRODUCT AND SERVICE GROUP

objective was to expand its client base to attract new target customer groups.

The Bank had improved and developed the products that can better response to various needs of its customers with the following four main groups of products : Group 1 : Deposit Service Group 2 : Lending Service Group 3 : Electronic Products and Services Group 4 : Other Services The details are as follows :

4. Customer Segmentation Strategy The Bank has a policy to segment its customers into different groups and analyze the needs and service usage behavior of each customer group. The Bank has also made available marketing officer who are at service of each customer group in providing advice, counsel and financial planning services ensuring convenience and maximum satisfaction.

GROUP 1 DEPOSIT SERVICE

Target Customer Groups The Bank offers deposit services to both retail and corporate customers through its service channels. Totally, there are four main types of deposit products, which are :

Recognizing the importance of its retail and corporate customers, both large and small, the Bank has adopted the customer-centric approach which places great emphasis on

•

Saving Deposits

understanding the real needs of its customers. This results in

•

Fixed Deposits for 3, 6, 12, 24 and 36 months, as

the development and introduction of products and services

well as, Special Fixed Deposits for 9 and 15 months 58

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

which truly meet the customers’ needs.

The Bank has improved and developed products

• Housing loans : loans under the product

aiming to better response to various needs of customers. The

trademark “Smart Home” for customers with objective to

Bank offers its services through different service channels of

purchase accommodation from housing project to land for

the Bank i.e. the Bank’s channel network, electronic service

building house or common housing. This also includes

channel, marketing team, sale team, and business alliances’

refinancing loans to repay the existing financial institution.

networks.

• Multi-purpose loans : loans for personal consumption

Service Channel

with and without securities as collateral for the customers who use the payroll account service product, “My Cash”, through

1. Branch Network

the Bank.

As at the end of 2007, the Bank had 166 branches, of which 86 branches located in Bangkok and vicinity area and 80 branches located in provincial areas. The Bank’s

• Wish-List loans : additional credit lines for the Bank’s hire purchase customers with good repayment track records.

branches are located in the accessible points and prime area • Educational loans : loans under the product

e.g. in the shopping complexes, community areas and office

trademark “Scholar Loan” for customers who want to pursue

buildings.

their studies at the graduate level or those who want to attend 2. Direct Marketing Team The Bank organized direct marketing teams with

the pilot training “Pilot Loan.”

Policy and Market Characteristics

knowledge of deposit products and experience in customer service. The teams are responsible for providing target

Focus is given to specific marketing. The Bank makes

customer groups with advice on various deposit products or

available direct marketing teams that are able to approach

investments.

specific customers. Such arrangements enhance greater efficiency and flexibility in the operations. In addition, the

3. Automated Teller Machine (ATM) and Cash Deposit Machine (CDM) In 2007, the Bank accelerated the installation of ATM. As a result, the Bank had 280 ATMs and also installed 3 CDM.

Bank has set a policy to use its branch network as sales and service channels to provide more convenience to customers and enhance its competitiveness.

Competitive Strategy

Furthermore, the ATM Pool network allowed the Bank’s deposit customers to withdraw cash, transfer money, inquire

In the previous year, the pricing competition among the

for account balance, and pay utility fee available 24 hours at

commercial banks and non-banks was aggressive. The Bank

any bank’s ATMs nationwide.

had recognized and controlled its risk and return to be in the acceptable level. The focus was given to convenience and

GROUP 2 LENDING SERVICES

efficiency in delivering services. Also, the sales promotion

The Bank’s lending services could be divided into 5 types

was organized accordingly to the circumstance and conditions

i.e. personal loans, loans for Small - and Medium-Sized

of the market. The Retail Loans Product Development

Enterprises (SMEs), corporate loans, hire purchase loans, and

Department is responsible for developing products, conditions,

trade finance.

and other features all the way to interest rate.

2.1 Personal Loans The Bank focused on developing new products and providing a wide range of financial services that cater to every financial need of its customers. The personal loan services can be divided as follows :

Target Customer Group The characteristic of customers and target customer groups can be divided into four groups, which are : 1.

Customers whose objective of the loans is for

personal consumption. The focus is on offering the service in parallel with other products of the Bank and Thanachart Group ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

e.g. salary transfer through the Bank’s account or services of

Competitive Strategy

non-life insurance and life insurance. • 2.

Customers with good payment record including the

employees of the organization with good performance or use

Select target customer groups from its customer base

and capitalizes on the relationship it has established with different group of business operators.

payroll account with the Bank. • 3.

Customers who want to purchase a house.

Customers who need a loan to finance their

graduate-level studies or their participation in specialized training courses such as pilot training courses

Develop good relationship with the customers by

providing them with advice on the formulation of both business and financial plans. The purpose is to retain the existing customer base while hoping to gain new customers recommended by the existing customers who are satisfied with the Bank’s services.

Service Distribution Channels • The Bank provides the following service distribution channels for personal loans : 1.

Direct marketing teams taking care of product sales

to meet the target as specified in the business plan. 2.

Branch network promotes personal loans or new

products to customers.

Provide customers with more convenience in various

service areas as from the step when their credit applications are considered to the step when they already become the Bank’s customers. •

Develop loan products which are combined with other

financial services. The purpose is to provide the customers with both the credit lines and other financial services that meet their needs, ensuring that they are suitable for the financial

2.2 Loans for Small - and Medium-Sized

structure which is appropriate to their business.

Enterprises (SMEs) • This type of lending service is aimed at small - and medium-sized enterprises that need credit lines, including short-term loans which serve as working capital and enhance liquidity of the business as well as long-term loans which help finance business expansion or reduce financial cost. The Bank

Delegate the authority in approving loans, by making

use of the credit scoring tool in screening and approving the applications for standard loan products. The purpose is to streamline the loan approval procedures. •

Develop systems and procedures related to lending

also offers these customer groups other financial services such

services, by making use of the information and technology in

as guarantees/avals and trade finance.

processing the loans and collecting data. The purpose is to

Policy and Market Characteristics

make the systems more efficient and to make its database more systematic.

•

Offer full financial service to meet the customers’ •

needs.

Clearly define the loan approval authority of the

committees or persons, taking into consideration the credit •

Focus on loans for the group of owners in business

related to car. •

Set the policy in credit lending, target customer group

lines and nature of products. The purpose is to make the loan processing more efficient.

Target Customer Groups

and clear strategy in credit lending. •

Set the plan and deliberate together between

product development team and marketing team, as well as constantly review the plan, competition and targets. •

Expand the business and offer other financial

•

New car dealers,

•

Used car dealers,

•

Transportation and car rental services business,

•

Business owners in MBK Center, Siam Paragon and

other leading shopping complexes,

services to customers and related persons of the customers

•

Apartment business, and

both in Bangkok and provincial areas.

•

Entrepreneurs who have strong growth potential.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Service Channels •

4. Trade Finance

The loans for SMEs in Bangkok and vicinities are

The trade finance is suitable for customers who

offered through the marketing outlets and branches located

operate import and export businesses. The Bank has various

in Bangkok and vicinities. Prospective customers may also

trade finance products that completely match customers’ needs

contact Thanachart Bank’s SME marketing department directly.

e.g. letter of credit (LC), shipping guarantee (SG), Packing

•

The loans for SMEs in upcountry are offered through

the marketing outlets for branches located in every region of the country.

Credit (PC), international money-transfers, and etc. Apart from such main corporate lending services, investment banking teams are also available to provide

2.3 Corporate Loans

financial advisory services aiming to assist the customers to operate its business to achieve their specified targets e.g.

The Bank has improved the types of its lending services by focusing on providing services that can better match customers’ needs. Financial advisor team (Investment Banking) has been set up to provide services in conjunction

advise on the capital restructuring to raise proper funding sources and etc.

Lending and Collateral Policies

with corporate lending services. Thus far, this approach is well accepted by its customers.

The Bank not only concentrates on providing corporate loan services but also acting as the financial advisor to

For corporate lending services, the Bank will consider financial services and products that truly meet the financial needs of its customers. Then, the terms, the credit line, the interest rate, and the repayment term will be determined to be in line with cash flow and credit needs of its customers. The Bank’s main corporate lending services include :

potential medium- and large-sized corporate customers that are in the target sectors and are continuously expanding e.g. hotels, hospitals, and etc. Of primary importance are past performance, expertise in the business and ability to repay debt. As regards the collaterals which are of secondary importance, the Bank takes into account the quality and liquidity of the collaterals.

1. Term Loan Facility

Loan Risk Management This type of facility is suitable for customers who have long-term financial needs i.e. for more than one year

To issue loans, the Bank’s credit and credit analysis

with clear financial objective e.g. capital expenditure to build a

departments will together assess credit quality of each

factory plant, business expansion, purchases of machineries/

customer, in terms of business operation and repayment

equipment and etc.

ability through loan rating. At the same time, the Bank applies a tool called RAROC Model in estimating return from

2. Working Capital Facility This type of facility is suitable for customers who have short-term financial needs i.e. for no more than one year which will be used as their working capital or for enhancing their liquidity position e.g. loans for raw material purchase

extending loans, which should be in line with risk profile of each customer.

Policy on Credit Control, Credit Approval and Debtor Monitoring

order, inventory management and etc. Such financial services

To control the operations, the Bank has established

include overdraft line or promissory notes. The customers can

a credit policy and guidelines which the concerned staff has

withdraw loans as they wish but the Bank will review credit

to strictly observe. In addition, the Bank’s determination of

lines and customers’ credit annually. 3. Aval / Guarantee Facility

the level of credit line for each customer is tougher than the guidelines given by the Bank of Thailand.

This type of facility is suitable for customers who

In approving loan applications, the Bank requires that

need it for a guarantee with trade partners e.g. bidding for

the credit extension department and the credit analysis

projects, construction guarantee, utility guarantee and etc.

department consider the applications independently and make

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

use of the knowledge and expertise of their respective staff,

Moreover, the Bank re-engineered its internal work

after which the applications will be submitted to the Credit

systems so that they became more efficient and more flexible

Committee for approval. The consideration of each loan

and that the customers would be given faster services. As

application is supported by a number of tools which facilitate

a result, the improvements greatly impressed the customers.

decision making. These include the RAROC Model, credit scoring and loan rating.

Customer Characteristics and Target Groups

After the credit application has been processed, the

The Bank puts strong emphasis on providing services to

Bank’s credit audit unit will be responsible for monitoring the

medium- to large-sized customers that have good performance

information about the customers and regularly reporting

especially customers that are in the target sectors in Bangkok

on the customers’ contact with the Bank. Moreover, members

and provincial areas. Emphasis is given to the expansion of

of Watch List Committee will meet monthly. The quality of

customer base by approaching the supply chain of the target

debtors will be reviewed annually to monitor the use of the

customer groups as well.

credit line given to the customers, the observance of the agreements, business conditions as well as any event that may have an impact on the customers’ businesses. The purpose is to prevent the debts from becoming non-performing loans.

Policy and Market Characteristics The Bank set the loan policy of the industrial sector by taking into consideration the economic growth and the risk of the Bank’s portfolio. The Bank’s main intention is to balance

Sale and Distribution Channels The Bank provides services to customers through three main channels as follows : 1.

The Bank’s Head Office

Thanachart Group’s cross-selling channels

The Bank’s branch network

2.4 Hire Purchase Loans

the relationship between the risk and return to be in an The Bank offers hire purchase loan service to both

acceptable level for the Bank.

individual and corporate clients. Focus is given to hire In addition, the Bank emphasizes on controlling and improving the quality of the portfolio and on making the team more professional. The investment banking team was organized to provide a full range of financial advice to the customers. The Bank’s focus is to match the customers’ needs. Apart from the policy of lending services to customers, the Bank’s teams also prioritize creating a good relationship with customers and serving as a financial advisor to the customers in all areas to enable the customers to grow with stability.

Competitive Strategies

purchase loans for both new and used cars. Currently, the Bank is a market leader in the new care hire purchase business and manages to gain a larger market share in the used car hire purchase business. Moreover, the Bank has projects for other types of vehicles e.g. loans for NGV project which is a joint project with PTT to provide loans for the modification of car’s engine to preserve the environment.

Policy and Market Characteristics •

The Bank approves loans with consideration of

various factors thoroughly and strictly with all perspectives ; such as setting rate of return and conditions from loans that

In the past year, the competition in the commercial banking system was mainly involved in setting competitive

are suitable with the Bank’s cost and risk and in compliance with the Bank of Thailand’s guidelines.

price, although the excess liquidity in the commercial banking system remained relatively high, the details of which were given

•

The Bank diversifies its business apart from

earlier. The Bank was well aware of the risk and attempted to

lending service at its head office already, and at the same time,

ensure that the rate of return from its lending business was at

expands lending services to regional areas which have

an acceptable level. As a result, the adopted strategy was to

business potential. As a result, the Bank expanded its branch

provide the customers with fully integrated financial services

network in all regions and acts as a business center

which catered to the needs of the customers in all areas.

nationwide.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Competitive Strategy

market penetration strategy. It persuades existing customers to use the Bank’s automobile hire purchase services again in

The Bank implemented the following strategies to promote its automobile hire purchase business. 1.

Pricing Strategy

buying their second cars. Special incentives are given to the existing customers with good repayment track records. As well, it focuses on the customer groups that are currently using other companies’ automobile hire purchase services. It also

It is the Bank’s policy to offer interest rates at a level

approaches customers who never use hire purchase services

that is competitive in the market. The Bank is also flexible in

(buy-with-cash and corporate customers) to use the Bank’s

making changes in the terms and conditions of hire purchase

services.

contracts, taking into consideration the numerous factors that may influence the decision making of consumers. 2.

Service Strategy

Target Customer Groups The target customer groups for both new and used car hire purchase loans include :

The Bank places strong emphasis on an efficient process in relation to consideration and approval of hire purchase loans. The process starts with meeting the

Retail customers in Bangkok and in the provincial

areas,

customers, followed by credit checking and informing the

Car rental operators, and

customers of the results of their loan application within a short

Corporate entities and government agencies.

time. Emphasis is also placed on after-sale services which are

Service Channels

aimed at establishing good relationship with customers. In terms of sales and service channels for hire purchase 3.

Sale Promotion Strategy As part of the Bank’s proactive and reactive

strategies, the Bank and car dealers jointly organized sales promotion activities aimed at maintaining the existing market share and gaining additional market share. The Bank

business, the Bank uses the following : 1.

Sales teams in Bangkok and in other provincial

regions with focus on building good relationship with car dealers, including other companies that are considered target customer groups, to be able to reach them directly.

cooperated with both the new and used car dealers in organizing the promotion campaigns and also put efforts in

Thanachart Financial Agents (TFAs) who are

establishing relationship with the hire purchase providers which

responsible for selling Thanachart Group’s products. This adds

belonged to the automobile companies.

a distribution channel through customer base of Thanachart Group (Cross-Selling) with focus given to potential customers.

Customer Relationship Management Strategy 3. The Bank has initiated a number of projects aimed

at giving additional services to existing customers, such as the

Develop new distribution channels by organizing,

in cooperation with car dealers, special campaigns that are targeted at specific customer groups.

establishment of a Call Center. It also improved its work units in order to handle the greater number of customers making use of its services. The purpose is to provide the customers with complete information about the Bank’s available

2.5 Trade Finance Policy and Market Characteristics

products and services, listen to their comments and find

The Bank offers fully integrated financial services

solutions to the customers’ various problems. As the Bank

to support international trade business, such as import letter

continue paying great attention to customers’ satisfaction,

of credit, trust receipt, packing credit, export bill negotiation,

it conducts a survey at least once a year to assess the

standby letter of credit and letter of guarantee.

satisfaction of its customers and car dealers with its products and services in all area. 5.

Marketing Strategy

Competitive Strategies Service given to the customers must be accurate and efficient. Interest rates and fees also play a crucial role in

In an effort to gain a larger market share of the

attracting customers to use its trade finance services. The Bank

automobile hire purchase business, the Bank has adopted a

will mainly take into consideration the overall income from the ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

customers’ transactions as well as the expansion of the customer base.

3.2 SMART (Credit) : Automatic Transfers between Banks

Target Customer Groups The Bank’s target customer groups include large-, medium - and small-sized corporate clients. Large-sized corporate clients serve as prospect to establish customer base and extend its network to foreign countries worldwide, while the medium - and small-sized corporations serve as a base to generate the Bank’s income.

The service automatically transfers money to several retail receivers who have savings or current account with other banks. The service caters to the need of the customer who wants to transfer money into many accounts by giving only one instruction (one to many), such as payments of salaries, bonus, and dividends. In this connection, the customers can use the SMART service via counter or on the internet.

Service Channels 1.

corporate finance marketing officers. 2.

3.3 Other Funds Transfers

Trade finance officers as well as SMEs and Branch network.

Other money transfer services between the Bank and other commercial banks e.g. normal fund transfer, money transfer to third party, automatic money transfer between

GROUP 3 ELECTRONIC PRODUCTS AND SERVICES The Bank makes available electronics services which are able to efficiently accommodate the customers’ financial transactions. These services consist of fund transfers,

savings and current account (Sweep), small volume money transfer between banks (Online Real-time Fund Transfer - ORFT) and large volume money transfer between banks (BAHTNET).

3.4 Sweep Account Service (Cash Link Account)

Automatic Transfer System (ATS) services, automatic highvolume fund transfers between banks (BAHTNET), automatic transfer between banks (SMART), and bill payment services

This type of service offered by the Bank represents another service channel for its customers for greater

through various channels e.g. counters, ATM, IVR, Internet

convenience in transferring fund between savings and

and Mobile. In this regard, the Bank has set all procedures

current accounts.

according to the rules and regulations of the Bank of

3.5 Inter Bank Transfer (ORFT)

Thailand. At the same time, other external factors, such as inflation rate, world economy, and rate of return and interest rate, are also taken into consideration.

This inter-bank transfer service enables customers to make fund transfer from the Bank’s counter to savings or current accounts of third party with other banks nationwide.

3.1 Automatic Transfer System (ATS) Service 3.6 Bank of Thailand’s Automatic High Volume An automatic transfer service enables the

Transaction Network (BAHTNET)

customers to transfer money to a number of transferees who have savings or current accounts with the Bank nationwide.

This type of service is for customers who want to

The services cater to the need of the customer who wants

transfer their money from the Bank to other banks or financial

to transfer money into many accounts by giving only one

institutions or to take fund transfers from other banks or

instruction (one to many). The available services include the

financial institutions to accounts at the Bank. Such transfers,

following :

effective within that day, are suitable for customers who need an immediate transfer of large amount of money. •

Payroll : for paying salaries, bonus and dividend,

•

ATS Credit : for making payments for goods to a

large number of receivers, and •

ATS Debit : for many automatic bank account

settlements in payment for goods. In this connection, the customers can use the ATS services through diskette, modems or on the internet. 64

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

3.7 Bill Payment Services The bill payment services are for companies that need to accept installment payments for their various products or services in form of “many to one” to facilitated their customers. Payers can also make payments at the Bank’s counter across country or through the Bank’s electronic

channels. Payment acceptance reports are available to the

3.11 Cash Deposit Machines (CDMs)

companies on the next business day.

3.8 Automated Teller Machines (ATMs)

In 2007, the Bank installed three Cash Deposit Machines (CDMs). These CDMs serve as the Bank’s additional channel for electronic services. The services offered through

In 2007, the Bank expanded its network to cover

the CDMs are as follows :

wider service areas by installing more ATMs both in Bangkok 1.

metropolitan and provincial areas. Consequently, as at the end of 2007, the Bank had 280 ATMs. The Bank’s depositors can

With cash, the customers can use the following

two types of service :

use various services, including cash withdrawal balance

1.1 Making cash deposit, and

inquiry, bill payment, via ATMs of the Bank and every bank

1.2 Making payments for utility bills,

that is the member of ATM Pool network available 24 hours. 2. In addition, in order to enhance its services, the Bank

With ATM cards, the customers can use the

following five types of service :

has included cash withdrawal services via Visa International’s

2.1 Making deposit,

credit cards. The Bank’s ATMs are thus able to give services 2.2 Making payments for utility bills, via ATM

to holders of Visa/Plus credit cards and Visa Electron debit cards. Moreover, in 2007, the Bank introduced a new service

cards (within the Bank),

called “ATM Connect” for greater convenience of its customers.

2.3 Making fund transfers (within the Bank)

The service enables the customers with the Bank’s ATM cards • Making fund transfers to the ATM

to use various services via over 4,000 ATMs of Krung Thai Bank nationwide, as if they were the Bank’s ATMs.

3.9

accounts (within the Bank) • Making fund transfers to the accounts

Services via Telephone System

of the third party (within the Bank), Currently, Thanachart SmartPhone can offer 2.4 Checking outstanding balances, using

various services as follows :

ATM cards (within the Bank), and • Checking outstanding balances of deposit 2.5 Changing passwords of ATM card (within

accounts, credit accounts, money transfer between bank accounts, as well as money transfer to third party at the same

the Bank).

Electronic Service Policy and Market Characteristics

bank, • Checking interest rates,

Competitive Strategies

• Making a request to receive statements and information about available products and services via fax, • Changing passwords, and • Giving advice or making comments on the

Strategy of competing in fee price

Increase the sales promotion in order to better

attract customers

provided services. 3.

3.10 Services via Internet Systems Currently Thanachart SmartWeb can offer various services as follows : • Checking the overall balances of deposit accounts and loan accounts with the Bank, • Viewing and printing statements showing details of transactions.

Emphasis on convenience and sufficiency of the

service without complicate process 4.

Larger fund transfer limit than other banks with

receiving date on the same day as the transferred date 5.

Increase service channels and provide convenience

to customers, with the Bank’s branches located in shopping complexes available to provide services to customers in a more secured environment ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Target Customer Groups

Policy and Market Characteristics

Focus is given to retail and corporate customers (both in

The trends show that there are more foreign tourists and

public sector and private sector) that require convenience and

businessmen visiting Thailand to buy goods in the wholesale

efficiency in making payments or fund transfers from the Bank

markets in order to sell the goods in their countries. As a

to other commercial banks, or between accounts within the

result, the demand for various foreign currency exchanges is

Bank. Focus is also given to those customers that require

on the rise.

security and efficiency in processing such transactions.

Competitive Strategies Service Channels Apart from friendly, efficient and accurate services, the The Bank has developed its electronic distribution channels, aiming to provide its customers with convenience in using its services through all service channels. Emphasis is placed on more convenience, security and efficiency. Moreover, the Bank has developed its electronic services, in response to the increase in the number of its customers using

Bank offers more attractive rates in order to create, maintain and expand its customer base. The Bank has selected a number of strategic areas and has taken actions to gain the largest market share possible in the selected strategic area.

Target Customer Groups

mobile phones and the internet. The electronic services enable the customers to process the financial transactions

The Bank’s target customer groups consist of individuals,

themselves. As the customers do not have to travel to the Bank,

including tourists traveling into the country for vacation and

the services help them save time and money.

foreign businessmen working in Thailand, as well as corporate clients in business sectors such as hotels and tourism, whose

The Bank is well prepared to provide its customers with the electronic services. The Bank’s customers, both retail and corporate, can use the services after they open accounts with

businesses use foreign currencies.

Service Channels

the Bank. The services are offered through the following channels :

It is the Bank’s policy to increase the number of service units for greater convenience of its customers. Focus is given

Marketing staff at branches,

to locations that are easily accessible to target customers. These

The branch network,

include the Bank’s branches located in areas with high

Automated Teller Machines (ATM),

Thanachart SmartPhone,

Thanachart Bank’s Website, www.thanachartbank.co.th

Cash Deposit Machines (CDMs)

GROUP 4 OTHER SERVICES

demand for foreign currency exchanges as well as stand-alone foreign exchange booths, which are located in popular tourist spots. The Bank also provides on-site foreign exchange services for organizations that need to use the Bank’s services. As at 31 December 2007, there were total of 65 service points, both stand-alone and in-branch. Of these service points,

The Bank also offers other financial services for retail and corporate clients, aiming to facilitate transactions related to foreign currency exchange, bill of exchange, short-term

32 were located in Bangkok and 33 in other provinces.

4.2 Bills of Exchange and Short-Term Debentures

debentures, including the service of acting as bondholder’s representative.

In 2006, the Bank of Thailand permitted the commercial banks to issue bills of exchange as a mean to

4.1 Currency Exchange Service The Bank’s services include foreign currency

borrow money from the public. This offers a new fund raising alternative for the commercial banks and adds another

exchange service in form of bank notes and traveler cheque,

savings option for the public. As a result, the Bank issued in

money changers ; receipt of foreign currency transfers into

November 2006 bill of exchange products for sales to its

the country for payments of goods or for transfers into

customers, from individual to corporate except financial

personal accounts ; foreign currency transfers out of the country

institutions and foreign residents, via the Bank’s branches. At

for payments of goods or for transfers into personal accounts ;

the beginning, the Bank offered these products at its head

and opening of Foreign Currency Deposit (FCD) accounts and

office and sub-branch at the MBK tower. Later in 2007, the

etc.

Bank made the products available at all its branches. The

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

purpose was to enhance customer’s convenience and provide

transferred from National Finance Public Company Limited,

better service coverage.

whose name had changed to Thanachart Capital Public

Moreover, the issuance of the bills of exchange represents another measure for the Bank to get prepared before the new Deposit Protection Agency (DPA) Act takes effect. The bills of exchange issued by the Bank received good responses and were very well received by the Bank’s customers.

Company Limited (“Thanachart Capital”), to the Bank. Together with the financial advisor, The Bank offers this service directly to the issuers of the bonds. So far, the Bank has reasonably gained trust from customers.

Competitive Strategies

This reflected the Bank’s strong financial health as well as the customer confidence in the Bank.

In view of the prevailing and competitive conditions, the Bank has put great emphasis on providing convenient, quick

Target Customer Groups Target customer groups are depositors, both individual and corporate, who have knowledge, understanding and

service and competitive fees.

Business Constraints and Factors Affecting Business Opportunities

experience in investing in debt instruments and are able to handle certain level of credit risks of the issuing banks.

Both the consumer confidence and the investor confidence were adversely affected by several factors

Competitive Strategies

including political uncertainties, rising crude oil prices, baht

Holders of debt instruments including bills of exchange

appreciation, and volatility in the global financial system. As a

and short-term debentures issued by commercial banks are

result, the Thai economy in 2007 grew at a lower rate than the

considered as creditors. As a result, they receive no guarantee

previous year. The commercial banks’ loans and deposits also

of principal and interest payment from the Financial

grew at a lower rate.

Institutions Development Fund to compensate for risk arising from creditworthiness of the issuing banks. On the other hand, the rate of return on such instruments will be higher than the fixed deposit rate for the same time period. At the same time, the Bank is placing more emphasis on improving not only the efficiency and speed of its services but also the variety of products. The key is to add new features and modernize the supporting technology systems.

4.3 Bondholders’ Representative Services

In 2007, the financial institutions’ loans to the private sectors grew only 4.0 percent, down from 4.2 percent in 2006. This was mainly due to the weaker domestic demand, both in terms of investment and consumption of the private sector. As well, to safeguard against the potential increase in non-performing loans, the financial institutions imposed stricter lending criteria on loan approval. The hire-purchase business in 2007 was also hard hit by the economic slowdown and the rising crude oil prices. As

The main responsibilities and duties of the

a result, the demand for cars and motorcycles slowed down.

bondholders’ representatives are to oversee and protect all

The hire purchase business in 2007 grew 40.7 percent, down

rights of its bondholders in accordance with the terms

from 87.3 percent in 2006.

and conditions of any debenture issuance as well as the notifications issued by the Securities and Exchange

Apart from the economic and political factors, changes

Commission and the Stock Exchange of Thailand. The Bank

initiated by the authorities concerned in some areas

is well-equipped to act as an agent providing this service, which

represented business constraints in the short term but helped

includes following up, ensuring that the performance are

strengthen the financial system and standardize the Thai

in compliance with terms and conditions under the Issuer

commercial banking system in the long term. The changes

Agreement and overseeing the assets that are pledged as

included the implementation of the consolidated supervision,

collateral.

Basel II requirements, compliance with the International

Policy and Market Characteristics The Bank has started to provide a service of bondholders’ representative since the end of 2005. The business was

Accounting Standard No. 39 (IAS 39), and the new Deposit Protection Agency (DPA) Act. The changes affected the business operations of the commercial banks in areas such as the loan-loss provisions. ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

However, the changes in the regulations which were

Allowing the commercial banks to issue bills of

imposed on the commercial banks did not apply to other types

exchange helps the commercial banks cut their financial costs

of financial institutions. This represented a major obstacle to

and provides the savers with an additional investment alternative.

the commercial banks’ business operations, mainly because it reduced their competitiveness in the market. Currently, there

•

Allowing foreign investors to increase their

shareholdings helps strengthen the financial health of the Thai

are many types of financial institutions, such as non-banks,

financial institutions and enhance their competitiveness.

which give financial services similar to those of the commercial

As well, it helps facilitate transfers of technology as well as

banks, but they do not have to register as commercial

development of financial products and services, in

banks. These entities are allowed to execute some financial

preparation for the financial liberalization in the future.

transactions while the commercial banks are not allowed to do, as the latter are subject to a number of regulatory

INDUSTRIAL OUTLOOK AND COMPETITION

requirements. For example, in order to maintain the minimum

In 2007, the number of the commercial banks which

Net Capital Ratio (NCR) required by the authorities, the

were registered in Thailand increased by two. The new banks

commercial banks have less flexibility in issuing loans than

were The Thai Credit Retail Bank Public Company Limited

the factoring companies which are not subjected to the NCR

and AIG Retail Bank Public Company Limited. On the other

requirement. As well, in complying with the capital adequacy

hand, GE Money Retail Bank Public Company Limited returned

ratio (BIS ratio) requirement, the commercial banks have less

its banking license to the authority. As a result, as of the end of

flexibility than the factoring companies in issuing loans.

2007, the total number of the commercial banks registered in Thailand amounted to 18, an increase of one bank from the

However, the new Financial Institution Business Act B.E.

year 2006. On the other hand, the total number of the foreign

2551 covers entities whose business mobilizes funds from the

bank branches in Thailand amounted to 16, a decrease of

public or issues loans or is engaged in any type of financial

one branch from the year 2006 ; since the branch of the Bank

services. If such business has impact on the country’s overall

of Nova Scotia was required to return its business operations

economic system and there is no law specially governing such

license as a result of its acquisition of shares in The Bank.

business, the Bank of Thailand may propose the passing of a law that subjects such business partially or wholly to the jurisdiction under this Act. As a result, the non-banks, to which the conditions apply, may be subjected to the control by the Bank of Thailand. Key positive factors that supported the business operations of the commercial banks in 2007 were as follows : •

The political climate which became clearer towards

the latter part of 2007 helped boost domestic investment. The overall demand for loans by both the business sector and the households in the fourth quarter of 2007 improved.

The total deposits (less deferred expenses) of the commercial banking system amounted to 6,505,148 million baht. The total deposits of the Thai commercial banks registered in Thailand amounted to 5,964,657 million baht, accounting for 91.7 percent, while the total deposits of the foreign bank branches amounted to 540,491 million baht, accounting for the remaining 8.3 percent. The net loans of the commercial banking system amounted to 5,757,837 million baht. The net loans of the commercial banks registered in Thailand amounted to 5,233,926 million baht, accounting for 90.9 percent, while the net loans of the foreign bank branches amounted to

•

Acceleration of disbursement of the government

budget and the rising prices of agricultural products helped stimulate the economic growth but at a lower rate than the previous year. •

The commercial banks were allowed to engage in

more types of financial business e.g.

523,912 million baht, accounting for the remaining 9.1 percent. In considering the competition in the current financial system, it is necessary to take into account the financial institutions that are not commercial banks, financial market, capital market, as well as the state’s specialized financial institutions, which play a more active role in the economic

Relaxing regulations governing the deposit and

system, as a result of the changes in the regulators’ rules and

transfer of foreign currencies enables the commercial banks

regulations. The changes allow for more flexibility and prepare

to accept deposits in form of foreign currencies.

the industry for the financial liberalization in the future.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The keener competition has caused the commercial

to 3.25 percent. On the other hand, the interest rates offered

banks to speed up the development of a more diverse range

for one-year fixed deposits decreased by 1.75 - 2.625 percent

of financial products, increase more distribution channels, and

from the end of 2006 to 2.25 - 2.375 percent at the end of

develop new technology aiming to provide customers

2007. This was due to the fact that the liquidity in the

with greater convenience. These are in addition to price

commercial banking system remained high.

competition in form of interest rate change, which is a common strategy adopted by the commercial banks. Moreover, several commercial banks place strong emphasis on building a positive corporate image e.g. by organizing public relations activities and establishing more activities that demonstrate their corporate social responsibility (CSR). In 2007, the deposits of the Thai financial institutions grew only 1.1 percent from the same period last year. This

The interest rates for loans decreased by only 0.875 percent from the end of 2006 to 6.875 percent at the end of 2007. This was partly due to the economic and business risks which remained relatively high. As a result, the spread between lending and deposit rates increased from 3.75 percent to 4.5 - 4.625 percent. THANACHART BANK’S SIZE COMPARED WITH COMPETITORS

was considered a significantly slow growth, partly due to the economic slowdown. The slow growth was partly due to the

In 2007, the Bank’s total assets amounted to 291,098

bills of exchange issued by the commercial banks, which

million baht, an increase of 33,662 million baht or 13.1

increased substantially. The purpose was to cut The Banks’

percent over the previous year. Its asset size ranked 8th among

financial costs and to increase the number of available

the 18 commercial banks registered in Thailand.

financial products. As well, savers had a better understanding of the financial products. Putting them together, the combined value of the bills of exchange and the deposits of the Thai commercial banks grew 7.2 percent over 2006. As regards the commercial banking system’s competition in issuing loans, focus was given to both interest rates and quality of service. In 2007, the loans issued by the commercial banks to the private sector grew only 4.0 percent from the same period last year. The growth was slightly lower than the previous year. This was mainly due to the decrease of the loans

The Bank commanded a 4.17 percent market share, taking into account the combined value of total deposits and short-term debentures of the commercial banking system. Its total deposits ranked 8th among the commercial banks registered in Thailand. Taking into consideration the commercial banking system’s total loans, the Bank commanded a 4.32 percent. It ranked 8th among the commercial banks registered in Thailand. FUTURE TREND OF COMPETITION

to the business sector for the purpose of investment. On the other hand, the loans to households increased marginally. The development was in line with the economic slowdown. Importantly, many companies with strong potential in issuing debentures stopped mobilizing funds from commercial banks by borrowing. Instead, they mobilized funds directly from the public by issuing debentures. The move helped cut their financial costs.

The political and economic conditions in 2008 are expected to improve. There are many economic stimulus packages of the government sector; such as government disbursement in various mega projects, tax reduction to ease up the burdens of consumers and SMEs business owners, reduction in real estate registration and transfer fees, and a development in energy-efficient cars. Moreover, the government provides incentive for the consumers to use

However, towards the last quarter of 2007, the private

energy-efficient cars.

sector’s investment improved. As a result, the loans issued to the business sector increased.

These factors signal better trend in the financial institution business in 2008, compared to 2007, in both

As regards the interest rates in 2007, the commercial

deposit and loan sides.

banks reduced the interest rates for their deposits and loans in line with the direction of the policy interest rate which was cut during the first half of the year.

The deposit trend in 2008 projects an increase but the forms of deposits or investments of the savers might change. The bills of exchange and mutual funds have low risk, and

The Bank of Thailand cut its overnight repurchase rate by a total of 1.75 percentage points in the first half of the year

thus, a similar characteristic as deposit. These products are expected to gain popularity from the public. ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

As well, the loan trend projects an improvement in 2008 in both public and private sectors. The loans include real

AVAILABILITY OF PRODUCTS AND SERVICES

Sources of Fund

estate loans and hire purchase loans by the state commercial banks. The banks for special purpose will play greater role in credit lending according to the government’s economic

Thanachart Bank’s issued and paid-up share capital as well as its legal reserve and retained earnings are one of its main sources of fund. In 2007, these amounted 17,346

stimulus policy.

million baht. The Bank’s other two main sources of fund

However, the economic and business operation risks still remain from the fluctuation in global money and capital

include the following : 1.

Deposits as of the end of 2007 amounting to 191,546

markets, baht currency appreciation, and increasing inflation.

million baht, a decrease from 198,981 million baht at the end

These factors cause a direct result mainly in the export

of 2006.

manufacturing industry. The commercial banks remain a strict measure in loans approval and try to maintain the interest rate gap between deposit and loan.

Borrowings worth 68,438 million baht, of which the

short-term borrowings amounted to 58,548 million baht. This was mainly due to the increase in short-term bills of

Moreover, the commercial banks concentrate in building customers’ confidence through advertising and public relations in order to support the Depository Insurance Act,

exchange. The Bank provided its customers with an additional alternative for their savings by issuing short-term bills of exchange. On the other hand, The Bank’s long-term borrowings amounted to 9,890 million baht. During the year,

which will be effective in 2008. Also, the focus is given

the maturities of part of The Bank’s long-term borrowings fell

to building confidence of shareholders and society by

below one year. As a result, these borrowings were recorded

emphasizing in good corporate governance and corporate

as short-term borrowings. The change was in line with the

social responsibility.

generally accepted accounting standards.

Key Sources of Funds (Unit: Million baht)

Change from 2006 Sources of Funds

2007

2006 Million baht

Percent

Equity

23,661

19,561

4,100

21.0

Deposit

191,546

198,981

(7,435)

(3.8)

- Short-term borrowings

58,548

15,525

43,023

277.1

- Long-term borrowings

9,890

17,079

(7,189)

(42.1)

68,438

32,603

35,835

109.9

283,646

251,146

32,500

12.9

Borrowings

Total borrowings Total sources of funds

Funding or Borrowings from Parities Related to Executives or Major Shareholders

1. Major Shareholder (Thanachart Capital Public Company Limited (“Company”)

As of the end of 2007, the loans given by The Bank to its

The Company and The Bank jointly made the

parent company, subsidiaries and associated companies only

announcement on their business reorganization plan. It

within Thanachart Group consisted of the following :

became difficult for the Company to find sources of fund as all

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

its deposits were transferred to the Bank since the beginning

loans as of the end of 2007. The loans were given with the

of 2006. However, there were still outstanding hire purchase

approval granted by the Bank of Thailand.

loans remaining at Thanachart Capital Public Company Limited. These hire purchase loans would be gradually repaid

Capital Adequacy

in line with their respective installment plans. The Bank had to

It is Thanachart Bank’s policy to maintain a capital-to-

give loans to Thanachart Capital Public Company Limited, to

risk-asset ratio at the level which is adequate to cope with the

help the latter address the constraints on the sources of fund.

risks arising from its business operations and the volatility as a

In 2007, the Company gradually repaid its loans given

result of various factors. It is also its policy to maintain the

by The Bank. As of the end of 2007, its outstanding loan

capital-to-risk-asset ratio at the level that is higher than the

balance amounted to 12,500 million baht, a decrease from

minimum requirement of 8.5 percent imposed by the Bank

39,600 million baht at the end of 2006.

of Thailand. The Bank of Thailand also requires that the minimum ratio of Tier-1 capital to risk-weighted assets amounts

2. Thanachart Group Leasing Company Limited (A Subsidiary of Thanachart Bank)

to 4.25 percent. As of the end of 2007, Thanachart Bank’s capital-to-risk-

The Bank gave loans to Thanachart Group Leasing Company Limited, the proceeds of which in turn were used to

asset ratio and its ratio of Tier-1 capital to risk-weighted assets amounted to 12.00 percent and 10.15 percent respectively.

give hire purchase loans for all types of cars in line with Thanachart Group’s policy. As of the end of 2007, The Bank’s outstanding balance of the loans given to the company amounted to 4,000 million baht, an increase from 2,000 million baht at the end of 2006.

3. Thanachart Leasing 2000 Company Limited (A Subsidiary of Thanachart Bank)

Liquidity It is Thanachart Bank’s policy to manage its liquidity appropriately. The main objective is to maintain the level of its liquid assets in line with the requirements of the Bank of Thailand and to maintain a good balance between its liquidity and its liabilities. In this connection, Thanachart Bank’s Asset and Liability Management Committee (ALCO) is responsible

The Bank gave loans to Thanachart Leasing 2000 Company Limited, the proceeds of which in turn were used to give hire purchase loans for all types of commercial vehicles and passenger cars with seating for up to seven adults as well as motorcycles. In line with the approval given by the Bank of Thailand on 5 July 2007, the company was allowed to operate motorcycle hire purchase business in replacement of Thanachart Group Leasing Company Limited. As of the end of 2007, the Bank’s outstanding balance of the loans given to the company amounted to 294 million baht.

4. NFS Asset Management Company Limited (A Subsidiary of Thanachart Capital Public Company Limited)

for managing the liquidity and interest rates. The Committee consists of Thanachart Bank’s high-level executives. Its main responsibilities include formulation of the asset and liability management plan as well as setting and reviewing the direction of Thanachart Bank’s investment policy in line with the risk policy approved by Thanachart Bank’s Board of Directors and Executive Committee. ALCO meets every week to consider the liquidity risk, interest income and interest expenses, short-term and long-term structure of its assets and liabilities, impact on Thanachart Bank’s liquidity as a result of changes in the economic conditions, money markets and capital markets, both local and overseas, as well as rules and regulations of the authorities concerned. As part of its responsibilities, ALCO establishes the policy on the structure

The Bank gave loans to NFS Asset Management Company Limited, the proceeds of which in turn were used to purchase non-performing loans from Thanachart Group. As of the end of 2007, Thanachart Bank’s outstanding balance of the loans given to the company amounted to 4,250 million baht, a decrease from 8,300 million baht at the end of 2006.

of both fixed and floating interest rates, ensuring that they are in line with Thanachart Bank’s capital structure. To support ALCO’s work, Thanachart Bank’s Risk Management Committee helps conduct the interest rate gap analysis and the liquidity gap analysis. The objective of the analyses is to measure the impact from the interest rates and the liquidity.

The total loans given by the Bank to the member

Moreover, to protect against possible negative impact from the

companies of Thanachart Group amounted to 21,044 million

business operations, ALCO determines credit limits for each

baht, accounting for 9.4 percent of Thanachart Bank’s total

business sector.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

SECURITIES BUSINESS GROUP The business operations of the Securities Business Group are divided into two types of business which include securities business and fund management business.

1. Securities Business

brokerage services cover three types of account, including cash account, cash balance account and credit balance account. As well, the company offers its brokerage services through internet. In 2007, it ranked 11th with a market share of 3.45 percent. For the online stock trading, it ranked 9th with a market share of 3.52 percent.

NATURE OF PRODUCTS AND SERVICES The securities business is managed by Thanachart Securities Public Company Limited which is authorized by the Ministry of Finance to operate four types of businesses including securities brokerage, proprietary trading, securities underwriting and investment advisory services. As well, the company is engaged in other related businesses that support the securities business. These include, among others, financial advisory services, futures business, unit trust underwriting and repurchasing services as well as securities

To support the customers in their investment decision making, the company’s stock research department and investment strategy department work closely in providing the customers with information and securities analyses. Thanks to the business alliance agreement it entered with BNP Paribas Securities (Singapore) Pte Ltd, the quality of the company’s securities analyses is on a par with the international standards. They are well accepted by retail and institutional investors, both local and overseas. The company’s stock research covers over 60 securities which account for about 70 percent of the Stock Exchange of Thailand’s market capitalization.

registrar.

2. Proprietary Trading Business

As of 31 December 2007, the company’s headquarters were located at 444 MBK Tower, Phayathai Road, Wangmai, Pathumwan, Bangkok 10330. It had 33 branches in total. Of these branches, 15 were full-service branches located in Bangkok and vicinities. The company had 469 employees in total.

In operating the proprietary trading business, the company trades only debt securities with the focus given to transactions that are executed by matching orders only. The company will first survey the needs of both buyers and sellers before initiating the transactions. The objective is to protect

The company’s securities business can be divided into

itself against the risk arising from possible price fluctuations.

two main lines of business including securities brokerage

The company is a dealer member of The Thai Bond Market

services as well as investment banking and investment

Association (ThaiBMA), acting as a debt instrument dealer in

advisory services. The areas covered by each line of business

over-the-counter dealing. The company also participates in the

are as follows :

public auctions of government bonds, debentures issued by

Securities Brokerage Services

state enterprises, and treasury bills, for the purpose of buying and reselling them to investors. In addition, the company is a

Securities Brokerage,

member of the Bond Electronic Exchange (BEX) of the Stock

Proprietary Trading,

Exchange of Thailand, acting as a broker for trading debt

Futures Business,

instruments worth over 100,000 baht on behalf of investors.

Unit Trust Underwriting and Repurchasing Services

In 2007, the company was awarded the Best Bond Securities

Securities Registrar Services

Firm at ThaiBMA Best Bond Award 2006. In granting the

Investment Banking and Investment Advisory Services

Award, ThaiBMA selected from debt instrument brokers which were also securities companies playing an active role in the

Financial Advisory and Underwriting Services, and

debt instrument market, taking into account their trading value,

Investment Advisory Services.

compliance with the regulations, trading volume in the

Securities Brokerage Services

primary market and their offers of buying and selling prices of debt instruments.

1. Securities Brokerage Thanachart Securities Public Company Limited is the member broker #16 of the Stock Exchange of Thailand. Its

According to ThaiBMA, in 2007 the company ranked 14th

with a market share of 1.1 percent of ThaiBMA’s total

turnover. All the first ten rankings still belonged to commercial banks.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

3. Futures Business Being a member of Thailand Futures Exchange Public Company Limited (TFEX), the company has started offering the brokerage services for futures trading since 20 July 2006. During the initial period, its first product for trading was SET50 Index Futures. In October 2007, SET50 Index Options was introduced as a new product, which attracted a lot of interest from its customers and new investors in trading futures contracts through the company. In 2007, the company’s futures contract trading volume grew steadily, with the total turnover amounting to 28,515 million baht, an increase of 21.0 percent from 2006. Its market share amounted to 2.0 percent with the number of its accounts in 2006 increasing by 21.0 percent from 2005. 4. Unit Trust Underwriting and Repurchasing Services

Investment Banking and Investment Advisory Services 1. Financial Advisory and Underwriting Services The company focuses on giving financial advice to public companies on their initial public offerings (IPOs) for the purpose of mobilizing funds from the public in the form of equity and debt instruments. However, the company still recognizes the importance of providing its customers with financial advice in other areas, as part of its efforts to increase non-interest income. This includes financial advice given to various companies on business reorganization, debt restructuring, financial restructuring, company valuation, as well as mergers & acquisitions. Among other services, the company acts as an independent financial advisor, giving its opinions on a number of transactions. During the period from 2003 to 2007, it acted as the financial advisor and underwriter of many debt and equity instrument issues, either in the role of lead underwriter,

The company acts as an agency which offers unit

co-lead underwriter or sub-underwriter. Its customers include,

trust underwriting and repurchasing services to mutual funds.

among others, CS Loxinfo Public Company Limited, Thai

In carrying out its services, it gives information about the

Airways International Public Company Limited, Krungthai Bank

mutual funds which it represents to marketing staff and

Public Company Limited, SC Asset Corporation Public

customers in general. As well, it coordinates work related to

Company Limited, Matching Studio Public Company Limited,

contracts, compensation, promotions as well as seminars about

Areeya Property Public Company Limited, Airports of Thailand

investments in mutual funds. It also develops channels of

Public Company Limited, Workpoint Entertainment Public

distribution for marketing staff and sales teams through online mutual fund systems.

Company Limited, Pongsaap Public Company Limited (formerly Mangpong Public Company Limited), Glow Energy Public Company Limited, Phatra Securities, Metrostar Property

5. Securities Registrar Services The company’s securities registrar division gives two types of service as follows :

Public Company Limited and Thai Plastic Public Company Limited, Industrial & Engineering Service Public Company Limited, Bangkok Metro Public Company Limited, PTT Exploration & Production Public Company Limited, PTT

1. Services for securities issuers, such as registration

Chemical Public Company Limited, Total Access Communication

of transfers, pledge of securities, securities attachment,

Public Company Limited, Citigroup, and MBK Public

securities allocation, notification of the number of securities

Company Limited. On distribution channels, the company

allocated, dividend payments, interest payments to securities

offers its services through the customers of the company’s

holders, calculation of tax, dividend and withholding interest, preparation of other reports as requested by securities

marketing staff as well as through customers who currently use the other financial services of member companies of Thanachart Group.

issuers. 2. Services for securities holders, such as registration

2. Investment Advisory Services

of securities holders, changes of information about securities

The company has established an investment

holders, securities transfers, issuance of new securities

advisory division responsible for providing customers with

certificates, printing and dispatching of documents to

advice and recommendations on all types of investments

securities holders.

including, among others, deposits, debt instruments, equity ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

instruments and derivatives as well as mutual funds, both

country’s overall investment climate. As well, the uncertainties

local and overseas through foreign investment funds. The

had an adverse impact on the investor confidence. On the

objective is to enable the customers to diversify their risks and

other hand, the overseas factors included, among others, the

to have choices of products in line with their investment

crude oil prices which hit a new record high and were

objectives. The investment advisory division is also

expected to rise further, and the U.S. sub-primes crisis which

responsible for finding and conducting studies of new

had a profound impact on global stock markets, including the

investment vehicles that cater to the needs of the customers

Thai bourse. However, the Stock Exchange of Thailand

and for expanding investment channels.

managed to reach an average daily turnover value of 17,097 million baht in 2007, an increase from 16,281 million baht in

MARKETING AND COMPETITION

Securities Brokerage Services

2006. On the part of the company, it generated a total trading value of 297,940 million baht in 2007, which represented 3.5 percent of the market. It was ranked 11 th among 38

1. Securities Brokerage The company’s strategy for 2008 places strong emphasis on growth in terms of a larger market share. It also places emphasis on efficient management of operational costs as well as human resource development aimed at enhancing the skills, knowledge and competence of the staff. This is in preparation for keener competition as a result of the liberalization of the securities brokerage business scheduled for 2012, four years from now. The company focuses on growing its business from its existing customers and from the increase in the number of new customers. For the existing customers, it focuses on strengthening the relationship by using

securities companies. On competition, the securities brokerage industry is going through drastic changes as a result of the liberalization of the securities brokerage business in 2012. As from 1 January 2012, an unlimited number of securities brokerage licenses will be granted to new players. As a result, the securities brokerage industry will be faced with more intense competition. Only those which are well prepared for the competition will survive in the long run. The fiercer competition will bring about more mergers and acquisitions as well as partnerships between local brokerage houses and foreign companies.

the customer relationship management (CRM) strategy. In order to cope with the stronger competition in the securities

The Thai economy and the capital market in 2008 are

brokerage business, it will continue maintaining the current

expected to be better than in 2007. The political situation has

client base. On the other hand, in its efforts to increase the

become clearer after the general election is completed and

number of new customers, it recognizes the importance of the

the democratically elected government is set up to run the

high potential of Thanachart Group. As a result, it has adopted

country. Importantly, the proposed economic stimulus

a strategy aimed at gaining new customers from the client bases

measures in the form of investment in mega-projects will be

of Thanachart Group’s member companies. In particular,

implemented in full steam. As well, the state agencies will be

Thanachart Bank Public Company Limited has considerable

urged to accelerate their spending. The developments will have

potential in terms of high networth depositors and local

a positive psychological impact on the investors, both local

institutional investors. Importantly, thanks to its partnership

and overseas. As a result, the investors will make more

with BNP Paribas Securities (Singapore) Pte Ltd, the

investments in Thailand. However, the anticipation may be

company has a new channel to win new foreign institutional

disrupted by a number of local factors such as government

investors. It has been quite successful so far in this area.

stability, the unrest in the three southernmost provinces, inflation and baht appreciation. Overseas factors will also play

Industry Outlook and Competition

an important role in determining the direction of the economy

The securities brokerage industry in 2007 was hard hit

and the capital market. These factors include, among others,

by high volatility, as witnessed by the sharp rises and falls of

rising crude oil prices, the slowdown of the U.S. economy and

SET index throughout the year. The volatility was due to

the U.S. sub-primes crisis which will have an adverse impact

several factors, both local and overseas. The local one

on the growth of the European Union’s economy and the

was political uncertainties which had a direct impact on the

economies in other regions. In view of both the positive and

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

negative factors, the company expects that the average daily

stock options. The futures exchange is expected to grow

trading value in 2008 will be amount to about 18,000 million

significantly, with a daily average of up to 10,000 contracts.

baht, which is higher than in 2007.

In preparing for the growth, the company has organized training activities and seminars for its marketing personnel,

2. Futures Business

supporting staff and customers. The activities and seminars

The company recognizes the importance of

cover key subjects related to the derivatives trading as well as

developing an operational strategy aimed at enhancing its

the work system related to trading orders, both at its

efficiency and competitiveness. It also recognizes the key

headquarters and branches nationwide. The company has

goal of Thanachart Group which places strong emphasis on

also made available supporting documents. As well it has

catering to the needs of the customers and on promoting the

worked with the media through public relations activities

bundling and cross selling of the products offered by the

in publicizing its derivatives brokerage services to its staff,

members of the Group. In this connection, the company

customers and the general public.

focuses on enhancing the skills and knowledge of marketing and operational staff on derivatives. It also regularly organizes

Investment Banking and Investment Advisory Services

seminars aimed at publicizing and introducing its derivative brokerage services as well as new investment vehicles

1. Financial Advisory and Underwriting Services

available on the Thailand Futures Exchange. As well, it puts efforts to expand its client base to cover institutional investors,

The company has worked out a marketing strategic plan as follows :

both local and overseas. The company also introduces its •

derivative brokerage services and gives investment

Place more emphasis on giving financial

recommendations to other member companies of Thanachart

advisory services on fund mobilization in the form of both debt

Group.

and equity instruments, mergers and acquisitions, financial restructuring and conduct of feasibility studies for projects.

Industry Outlook and Competition The derivatives trading volume of Thailand Futures

The company foresees high potential for growth in these areas.

Exchange (TFEX) in 2007 is much higher than the trading volume in 2006 when TFEX launched SET50 Index Futures as its first product. Taking into consideration the average daily futures contracts traded, the daily average in 2007 increased by 330 percent from the previous year while the total number of accounts increased by 108 percent. Most investors were

•

Maintain and develop a good relationship with

the customers which have used the company’s services. The good relationship gives rise to new opportunities in offering other types of financial services to the customers. As well, it brings about opportunities in selling the services to other member companies in the customers’ groups.

retail investors who captured the majority of the total trading •

volume, followed by foreign investors and institutional

Approach prospective customers with strong

investors respectively. In October 2007, TFEX launched SET50

potential, on the lists of current customers of Thanachart

Index Options. Its second product attracted a number of

Group’s member companies, which use the latter’s financial

investors, with the average daily trading volume in 2007

services.

amounting to 196 contracts.

•

Introduce and offer products and services of

The derivatives trading in 2008 is expected to continue

Thanachart Group’s member companies to the existing

growing steadily as investors become more acquainted with

customers and prospective customers with high potential, with

the trading of derivatives, both futures and options.

more focus given to cross selling.

Importantly, more investors are expected to use derivatives in managing risks, particularly when the stock market is faced

Industry Outlook and Competition

with high volatility. Moreover, the Thailand Futures Exchange

The competition in the financial advisory and

Pcl has come up with a plan to expand its investor base by

underwriting business is rather intense, in view of the great

getting more brokerage members and making available more

number of local players and those with foreign partners. The ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

competition focuses on expertise and quality services in

fund that are in line with its activities and using those funds by

providing the customers with advice and solutions to their

taking into consideration the appropriate ratio of total liabilities

problems. Emphasis is also placed on the offering of new

to shareholders’ equity as well as the appropriate ratio of

products which can add value and be of benefit to the

capital to net liquid assets.

customers. On the future prospects of financial advisory services in 2008, the company will continue its focus on assisting its customers in mobilizing funds through initial public offerings. The listing of companies on the stock exchange also offers attractive tax incentives. However, the success in this area of financial advisory services significantly depends on the economic growth, the performance of the company, and the country’s political situations. On the other hand, the mergers and acquisitions continue to attract both buyers and sellers

The company’s investment policy allows it to invest only in medium and long-term equity securities with two investment objectives. The first objective is concerned with strategic investments in businesses which could support the businesses of the company or member companies of Thanachart Group. The second objective is concerned with investments in securities which offer return both in the form of dividends and gains made from selling the securities.

since they serve as an efficient vehicle for business expansion

The company will not invest in equity securities in

and penetration into new markets. The mergers and

an amount of more than 60 percent of its shareholders’ equity

acquisitions also help enhance the competitiveness in coping

and such investments will not cause the company to violate

with the more intense competition in almost all kinds of

the minimum Net Capital Ratio (NCR) requirement imposed

business.

by the authority. The company may invest in securities which

2. Investment Advisory Services. In view of the numerous investment vehicles available and the fact that domestic investment is closely linked to international investment, it has been the policy of the company’s investment advisory division to gather relevant information of each customer, which will be analyzed together

are listed or not listed on the Stock Exchange of Thailand, provided that the securities must have a high liquidity in trading. It is also required that each investment decision must be based on adequate research. 3. Funding or Borrowings from Parties Related to Executives or Major Shareholders

with their respective investment objectives. The purpose is

The company’s only sources of funds are from its

to enable the company to provide the customers with

major shareholders Thanachart Capital Public Company

appropriate long-term plans and advice. The company will also

Limited and Thanachart Bank Public Company Limited in the

monitor the customers’ investments closely. It will focus on

form of equity and borrowings.

offering the services to the customer groups with strong potential within Thanachart Group as well as new customers

4. The Company’s Net Capital Ratio (NCR)

which are interested in making use of the company’s services.

As at 31 December 2007, the company’s Net

Moreover, the investment advisory division will conduct

Capital Ratio (NCR) was 129.9 percent, well above the

studies and select new investment vehicles so that the

minimum level of 7 percent of the liabilities, which was

customers will have a wide range of investment alternatives to

imposed by the Office of the Securities and Exchange

choose from.

Commission (SEC).

AVAILABILITY OF PRODUCTS AND SERVICES

2. Fund Management Business

1. Sources of Funds

2. Investments

NATURE OF PRODUCTS AND SERVICES

The company operates using its shareholders’

Thanachart Fund Management Company Limited is

equity as its main source of fund, which consists mainly of

a joint venture between Thanachart Capital Public Company

capital and retained earnings. On the policy on future

Limited (holding 75 percent of the total shares) and The

funding, it has adopted a policy aimed at finding sources of

Government Savings Bank (holding 25 percent). Thanachart

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Fund Management Co., Ltd. received a mutual fund license

net for employees in other cases such as resignation, death or

from the Ministry of Finance in March 1992. It also received

if they are incapacitated and unable to work.

licenses to manage private funds and provident funds in 1997 and 2001, respectively. In 2004, the company submitted an application to operate investment advisory services so that it would be able to offer a full range of investment counseling services. It received the related license on 27 July 2004. As at 31 December 2007, Thanachart Fund Management Co., Ltd. had 125 employees in total. Thanachart Fund Management Co., Ltd. has established and managed all types of mutual funds with various investment policies that cater to the needs of every type of investor including retail investors, major investors, as well as institutional investors. The products or services provided by the company include the following : Mutual Fund Mutual fund is a collective investment vehicle for

MARKETING AND COMPETITION

Policy and Market Characteristics Competitive Strategies Both marketing and investment strategies adopted by Thanachart Fund Management Co. are aggressive. It also attempts to create new innovate products and services that place emphasis on quality and cater to the needs of its customers in a timely manner. The products and services are offered through its marketing teams and its major shareholders. These include the country’s leading financial institutions with integrated financial services both in the public and private sectors, as well as through a number of their business alliances which support the sale and repurchasing of the unit trusts.

investors. To establish a large fund, it pools money from the

The company places strong emphasis on selling units of

investors. A fund manager will be appointed to manage

public mutual funds whose investment objectives are well

investment in line with the policy established for each mutual

diversified and which cater to the needs of all customer groups.

fund which is aimed at generating a return or gain from the

The unit trusts are sold through several distribution channels

investment. The advantage of making investments through the

including approaching prospective investors directly, selling

mutual fund is that it enables investors to diversify their

through Thanachart Bank and its branches, selling through

investment risk, regardless of the size of their investment. As

agents that are engaged in underwriting and repurchasing of

well, the related expenses of investing through mutual funds

the unit trusts. The company also develops and promotes

are not very high.

trading of the unit trusts through various electronic media.

Private Fund

Target Customer Groups

Private fund is an investment vehicle suitable for high

The company’s target customer groups include those

networth investors or groups of investors who assign the

living in Bangkok and its environs as well as those in major

company to manage their investment in line with their specific

cities in the country’s important regions. In its efforts to

investment objectives. The private fund manager will manage

enlarge its customer base, it takes into consideration the

the investment within the scope of the investment framework

maintenance of high quality services.

and constraints mutually agreed upon between the customer and the company. Provident Fund The provident fund is established on a voluntary basis by mutual agreement between employees and their employers.

Distribution and Channels of Distribution The sale of the company’s unit trusts is made through two main channels including : 1)

Thanachart Fund Management Co., Ltd.

The fund serves as the employees’ savings vehicle, aimed at

The company is supported by its marketing staff

creating financial security for their retirement. It also serves as

whose main responsibility is to make direct sales. They have

a type of welfare benefit given by the employers to their

received training and passed tests which allow them to

employees. In addition, the fund provides a financial safety

contact investors. ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

2) Agents which support sale and repurchase of unit trusts

funds while 4.1 percent belonged to other types of foreign investment funds. The total number of these foreign investment funds was 120, with a combined value of 265,050

The company has appointed a number of financial institutions including Thanachart Bank and other commercial banks as well as securities companies to support the sale and repurchase of unit trusts of the mutual funds under its management. Industrial Outlook and Competition In 2007, there were altogether 21 asset management companies licensed by the Finance Ministry. The combined

million baht. In comparison, in 2006 the foreign investment funds accounted for only 1.3 percent. Due to the change, in 2007 the total value of the domestic investment funds dropped to 294,276 million baht and accounted for 50.4 percent of the newly established funds. In comparison, in 2006 the domestic investment funds amounted to 448,382 million baht and accounted for 92.6 percent of the newly established funds.

net asset value of the public mutual funds (excluding Vayupak Fund, Country Fund, Real Estate Mutual Fund for the Financial Sector Rehabilitation, Mutual Fund for the Financial Sector Rehabilitation, and Real Estate/Receivables Claim Funds) amounted to 1,279,266 million baht, an increase of 41.9 percent from 2006. The top five largest asset companies

Thanachart Fund Management Company Limited manages all types of funds including mutual fund, private fund and provident fund, with their respective market shares as follows : Mutual Fund Business

included SCB Asset Management Company Limited with a 23.6 percent market share, Kasikorn Asset Management Company limited with a 18.1 percent market share, TMB Asset Management Company Limited with a 10.8 percent market share, BBL Asset Management Company Limited with a 10.6 percent market share, and Thanachart Fund Management Company Limited with a 5.5 percent market share.

As at 28 December 2007, the company had 55 mutual fund under management whose total net asset value amounted to 72,379 million baht. Of the funds, 53 were public mutual funds with a total net asset value of 70,853 million baht, representing an increase of 28,970 million baht or 69.2 percent from 2006. Being ranked 5th among 21 operators, the company commanded 5.5 percent market share.

In view of the overall competition in 2007, the majority of the market share still belonged to the above-mentioned four

The total net asset value of the funds managed by the

asset management companies whose major shareholders were

company increased significantly in 2007, mainly due to the

large commercial banks. Their combined market shares

dramatic increase of 19,406 million baht or 726 percent in

amounted to 63.1 percent, representing an increase from 59.7

the money market mutual funds. Other significant changes

percent in 2006.

included the increase of 4,558 million baht or 422 percent in the foreign investment funds and the increase of 2,614 million

The key types of funds which helped raise the industryâ&#x20AC;&#x2122;s

baht or 38 percent in the flexible funds.

total net asset value to the higher level in 2007 were the short-term foreign investment funds and those funds which had characteristics similar to the money market funds in the terms of high liquidity and whose client base was the same as the depositor base. Noteworthy was the change in establishing new funds since the middle of 2007. The short-term foreign investment funds had replaced the short-term domestic investment funds which were very popular in 2006. The foreign investment funds

Private Fund Business As at 31 December 2007, the company had a total of 28 private funds under management, a decrease from 37 funds in 2006. However, the total net asset value of its private funds in 2007 amounted to 2,913 million baht, an increase of 973 million baht or 50.1 percent from the previous year. Provident Fund Business

grew rapidly. As a result, of the 408 newly established funds in

As at 31 December 2007, the company had a total of 26

2007 whose combined value amounting to 580,756 million

provident funds under management, whose total net asset value

baht, 41.5 percent were the short-term foreign investment

amounted to 3,615 million baht, representing an increase of

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

424 million baht or 13.3 percent from 2006. The provident

2.1 Compulsory Automobile Liability Insurance

funds under its management included 12 single provident

(Compulsory Third-Party Insurance), as required under the

funds, 12 group funds, and 3 general pooled funds. Total

Motor Vehicle Accident Victims Protection Act.

membership of the funds increased from 34,621 to 35,067. 2.2 Voluntary Insurance which consists of 3 Availability of Products and Services

types :

The company’s two main sources of funds consist of its •

equity, those funds received from ordinary share subscriptions, and the retained earnings which accumulated over time from its business operations.

First-class insurance which provides

protection against the motor vehicle of the owner as well as property damage and bodily injury to a third party;

INSURANCE BUSINESS GROUP

•

Second-class insurance which provides

protection against one of the risks related to the motor vehicle The insurance business consists of two types including non-life insurance which is operated by Thanachart Insurance Company Limited with services covering every type of

of the owner as well as property damage and bodily injury to a third party;

insurance, and life assurance which is operated by Thanachart Life Assurance Company Limited with services covering life assurance for corporate clients, organizations and members of the general public.

1. Non-Life Insurance Business Thanachart Insurance Company Limited’s headquarters

•

Third-class insurance which provides

protection only against property damage and bodily injury to a third party. 3. Marine and Transportation Insurance The insurance provides protection against loss

are located in Bangkok with 16 branches nationwide. The

or damages to ships, assets or goods on waterways with

company receives approval from the Ministry of Commerce to

coverage extended to transportation on land and air, which is

operate non-life insurance business in accordance with the

connected to transportation on waterways.

License No. 6/2540. The company offers the following types of insurance products : NATURE OF PRODUCTS AND SERVICES

4. Miscellaneous Insurance The miscellaneous insurance is of many types, depending on the nature of risk and the needs of the insured,

Non-Life Insurance The non-life insurance consists of four types, each of which mostly having a scope of protection coverage and

such as insurance against theft, personal accident insurance, all-purpose insurance, and insurance against machine and equipment breakdown.

exclusion clauses in line with international standards. Their differences lie in protection benefits that cater to the needs of individual policy holders. These four types of non-life insurance include the following : 1. Fire Insurance This type of insurance provides protection against damages caused by fire, lightning, and explosion caused by gas for domestic use. Additional coverage can be bought.

Investment Business Investment is a part of the non-life insurance business. The non-life insurance companies can invest their excess cash in investment vehicles for the purpose of getting a return on their investment. However, they are required to strictly adhere to the types and proportions of investment, as well as terms and conditions prescribed by the law. At present, the law that regulates the investment of non-life insurance companies

2. Motor Insurance

includes the notification issued by the Ministry of Commerce

The motor insurance provides protection against

on the investment in other businesses by non-life insurance

loss or damages caused by the use of a motor vehicle. The

companies. The company pays great attention to the careful

motor insurance can be divided into two parts :

selection of investment vehicles that are in line with the ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

prevailing developments in the financial and capital markets.

In view of the above groups of customers, it could be

Part of the company’s investment includes fixed-term securities

seen that, since the commencement of its non-life insurance

such as deposits at financial institutions, government bonds,

business, there has been no single customer who accounts

debentures issued by state enterprises, corporate debentures,

for more than 30 percent of its total income. Moreover, the

as well as shares listed on the Stock Exchange of Thailand,

company sells its products only to customers living in the

both short term and long term. In making investments, the

country.

company takes into consideration criteria such as liquidity, security and stability of the investment. MARKETING AND COMPETITION

Industrial Outlook and Competition The non-life insurance industry in 2007 continued to grow from 2006. Thai Reinsurance Public Company Limited

Policy and Market Characteristics Competitive Strategy

estimated that direct premiums in 2007 amounted to 101,378 million baht, an increase of 6,287 million baht or 6.6 percent from the previous year. This was mainly due to the increase in

The company has adopted a strategic marketing plan

miscellaneous insurance which grew 12.1 percent, and the

aimed at enhancing its competitiveness and increasing its

increase in motor insurance which grew 5.5 percent.

market share on a continuous basis. Special emphasis is placed

Thanachart Insurance Company’s underwriting income

on rendering high standards of service which include prompt

amounted to 2,557 million baht, representing an increase of

action, efficiency and honesty. The company continues

313 million baht or 13.9 percent from the previous year. Thanks

developing new lines of products and offering new types of

to the cooperation between Thanachart Insurance Company

policies that are in line with social and economic conditions

and Thanachart Bank Public Company Limited, the company

and that cater to the needs of customers, taking into account

was able to sell its products to the Bank’s retail customers.

the rates of premiums that are fair to customers. The company reviews its aggressive marketing plan regularly so that it takes into consideration changing situations. Its goals include increasing distribution channels, gaining new clients to enlarge its customer base, and retaining existing customers. Customer Characteristics

enlarging its customer base by making use of the Bancassurance channel, i.e. through Thanachart Bank. On the other hand, the company continued to focus on its current customer base by adopting a strategy aimed at improving its pre- and after-sales services. The objective was to ensure customer satisfaction.

About 95 percent of the company’s customers are retail

Based on Insurance Commission’s report, the summary

customers whose insured value is less than 5 million baht

of the performance of the non-life insurance industry during

The types of insurance products purchased by the customers

the first nine months of 2007 was as follows :

include motor insurance and fire insurance for their houses. This group of customers comes from Thanachart Bank Public Company Limited and from the company’s own marketing activities as well as brokers, and its marketing representatives.

In 2007, Thanachart Insurance Company succeeded in

The total premium income of the industry in 2007 amounted to 74,266 million baht, representing an increase of 7.4 percent from the same period in 2006. Grouped by type of insurance, the motor insurance premiums accounted for

The customer groups whose insured value is above 5

45,154 million baht or 60.8 percent of the total premium

million baht include institutions or private organizations in

income, the miscellaneous insurance premiums accounted

various lines of business, both in the commercial and

for 20,782 million baht or 28.0 percent, the fire insurance

industrial sectors. The main insurance products purchased

premiums accounted for 5,504 million baht or 7.4 percent,

by these groups include miscellaneous insurance and fire

and the marine and transportation insurance premiums

insurance.

accounted for 2,825 million baht or 3.8 percent respectively.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Number of Insurance Companies in Thailand As at 30 September 2007 Type of Business

Companies in Thailand

Branch of Foreign Companies

Total

Life Insurance

Non-life Insurance

Health Insurance

Life Insurance

Non-life Insurance

100

Re-insurance

Total

Direct-Premium on Non-Life Insurance Business in January - September 2007 (Unit: Thousand Baht)

Fire No.

Company

Insurance

Marine and

Motor

Miscellaneous

Transportation Insurance

Insurance

Insurance Total

Others

Viriya Insurance

146,506

2,324

40,062

1,727,223

8,572,533

268,897

7,328

203,210

10,968,083

Dhipaya Insurance

484,967

55,417

142,816

162,034

1,103,948

351,282

94,668

2,649,333

5,044,465

Bangkok Insurance

655,798

58,836

170,157

127,002

2,306,011

223,595

176,578

1,326,454

5,044,431

Syn Mun Kong Insurance

86,125

5,912

560,819

2,014,699

295,825

1,517

108,642

3,073,539

Safety Insurance

32,381

159

39,727

185,977

1,950,409

22,673

1,803

328,766

2,561,895

1,405,777

116,736

398,674

2,763,055

15,947,600

1,162,272

281,894

52,426

576

3,437

98,638

1,419,904

32,766

180,571

1,788,318

0.9

0.2

0.1

1.2

3.9

0.6

0.00

1.3

2.4

5,504,155

291,063

2,534,399

8,351,293

36,802,866

Total 11

4,616,405 26,692,413

Thanachart Insurance Market Share (percent) Grand Total

5,513,092 1,622,753

13,646,476 74,266,097

Source : Insurance Commission

In 2008, the various problems affecting the countryâ&#x20AC;&#x2122;s

The economic forecasts made by the Bank of Thailand

economy in the past are expected to persist in throughout the

show that the Thai economy will grow 4 - 5 percent. On the

year. As all these problems erode investor confidence, both

non-life insurance business, the direct premiums are expected

local and overseas investors will delay their investment

to grow about 7.5 percent with the miscellaneous insurance

decision. As the problems also represent a threat to the

business registering the highest growth. Noteworthy will be

general public and erode consumer confidence, the economic

the growth of personal accident insurance and health

growth will be adversely affected. As well, the non-life

insurance. This is mainly due to the efforts made by the

insurance business will be directly impacted by the problems.

non-life insurance companies in giving more focus to retail

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

customers. As well, the general public is becoming increasingly

with the requirements stipulated in the notification issued by

aware of the importance of the insurance in protecting life and

the Ministry of Commerce concerning the non-life insurance

property.

companies’ investment in other businesses. The company

The company has set 2008 direct premium growth

invests its excess cash in investment vehicles for the purpose

target of 25 percent, which is higher than the anticipated growth

of earning a return, with strong focus given to the preservation

of the non-life insurance business. This is mainly because of

of the investment capital while taking into consideration the

the efforts to expand its retail customer base through the

cautious trade-offs between investment risk and return. The

bancassurance channel, direct sales, and phone calls. The

company acts prudently in its investment activities and

company plans to launch a wide range of new products through

reviews its investment policy regularly in line with the

all its channels of distribution.

prevailing market conditions. Part of the company’s

AVAILABILITY OF PRODUCTS AND SERVICES

investment is in securities which have high liquidity and could be turned into cash easily. These include short-term financial

Sources of Funds

instruments such as promissory notes and fixed-term

It is the policy of Thanachart Insurance Company

deposits. The other part of the investment is in fixed-income

Limited to obtain funds for its operations from three funding

instruments such as government bonds, state enterprise bonds,

sources :

or debentures. The remaining part of the investment is in shares

The Company’s Operations The company obtains proceeds from selling

protection in the form of various types of insurance policies, collection of insurance premiums from the insured, agents, and brokers. This funding source is important as it enables the company to receive cash on a daily basis. 2.

Proceeds from Investment Activities The company’s excess cash from operations after

meeting obligations is invested in investment vehicles. The

listed on the Stock Exchange of Thailand. Investment Risk Management The company manages the investment risk by diversifying its investments in different types of securities such as government bonds and state enterprise bonds with focus given to those instruments with a short-term maturity. The purpose is to protect against the risk arising from changes in interest rates. The company also diversifies its investments into treasury bills, debentures, unit trusts and ordinary shares. For

investment is made in accordance with the conditions

the ordinary shares, the company invests only in companies

imposed by the Department of Insurance. The company will

with good fundamentals. However, the investment in the

receive payments from the investment activities in the form of

ordinary shares would account for not more than 20 percent

principal amounts of fixed term deposits, bills, treasury bills,

of its total investment portfolio.

debentures, bonds, and unit trusts which reach maturity or proceeds from selling securities. The company also receives interest from fixed term deposits, bills, debentures, and bonds as well as dividends from investment in equity instruments. 3.

Borrowings from Financial Institutions The company has entered into agreements with

commercial banks for overdraft facilities. In case the company wants to make use of the facilities, it can take out money by issuing cheques.

Funding or Borrowings from Parties Related to Executives or Major Shareholders •

The company does not have such transactions.

Ability to Maintain Loss Ratio by Business type The company has established a policy aimed at prudently considering and screening applications for all types of insurance products. Importantly, it has also established a risk management measure through a reinsurance mechanism for

Investment The company’s established policy in relation to securities investment is that the company invests in securities in line 82

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

both group and individual agreements. The goal is to maintain its loss ratio to the level below the average ratio of the industry for every type of insurance product.

Liquidity

several marketing developments in the life assurance business. These included, among others, recruitment of more

For its liquidity policy, the company places emphasis on investments in government bonds and corporate debentures which have high liquidity and could be turned into cash easily. Moreover, it has made arrangements with banks for overdraft facilities and has invested in short-term promissory notes, which serve as a revolving fund reserve for short-term operations.

2. Life Assurance Business

sales representatives, establishment of more new channels of distribution, and continuous sales promotions. On the other hand, the life assurance business came up with more new products which were appropriate for the market conditions and for each group of consumers. As a result, the performance of the life assurance industry in 2007 was much stronger than the previous year, despite the fact that there were several negative factors including political uncertainties, rising crude

Having received approval from the Department of

oil prices and baht appreciation.

Insurance of the Ministry of Commerce to engage in life assurance business, Thanachart Life Assurance Company

Currently, there are 24 life assurance companies in total.

Limited (“Thanachart Life Assurance”) was established on 22

Ranked 10th among these 24 companies, Thanachart Life

October 1997. The company provides service related to life

Assurance Company commanded 1.7 percent market share

assurance and health insurance. The company’s services can

in terms of all types of premiums. As it mainly focused on the

be divided into two main types which include personal life

group life assurance, its first-year premiums for the group life

assurance and group life assurance (for corporate clients and

assurance ranked 1st in the life assurance industry, compared

organizations).

to 3rd in the previous year, while its total premiums for the group life assurance ranked 2nd, compared to 4th in the

MARKETING AND COMPETITION

Policy and Market Characteristics

previous year. On the industry outlook for 2008, it is expected that the

Thanachart Life Assurance Company Limited has adopted

life assurance business will continue to grow but at a lower

a multi-distribution channel strategy, aimed at catering to the

rate than the previous year. In supporting the business growth,

diverse and different needs of its prospective customers by

the players in the industry will continue to use the same

offering products and services that are appropriate to each

marketing strategies as in the previous year. These included

group of the prospective customers. The company’s current

competition in recruiting more new sales representatives,

distribution channels consist of business-to-business (B2B)

advertisements in various media, continuous sales promotions,

sales, brokers, Thanachart Bank (bancassurance) and life

establishment of new channels of distribution, as well as

assurance agents.

introduction of new types of insurance policy which cater to the needs of the customers in each phase of the economic

Industry Outlook and Competition

cycle and in line with the direction of interest rates offered by

The life assurance business in 2007 registered a growth

the commercial banks. The change in the interest rates has a

of 16.1 percent, with total premiums amounting to 201,623

significant impact on the sales promotion of the life assurance

million baht. The growth was substantial when compared with

products through the bancassurance channel.

the same period in 2006 which registered a growth of 4.1

Availability of Products and Services

percent. This was mainly due to several factors. One of them was the fall of deposit interest rates offered by commercial

As all funding sources for the company’s operations are

banks. The fall caused the consumers to search for other

from shareholder’s equity, it is not necessary for the company

deposits or investments which offered higher rates of return.

to obtain loans to finance its future business plans. Moreover,

The life assurance became one of the alternatives for the

during the present period, there is no need for the company to

consumers during the period. On one hand, there were

recapitalize.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

RISK MANAGEMENT AND RISK FACTORS OVERVIEW OF RISK MANAGEMENT Competition in the finance business of the commercial

resolution on the capital increase which allowed the Bank to

banking system in 2007 was highly intense. As excess

issue ordinary shares and offer them for sale to The Bank of

liquidity in the commercial banking system continued to rise,

Nova Scotia Asia Limited (“BNSAL”). The objective was to

commercial banks cut their deposit rates in line with the

strengthen Thanachart Group’s finance business. The shares

decrease in the Bank of Thailand’s policy interest rate. The

were sold to BNSAL on 19 July 2007. As a result, BNSAL held

loans issued to the private sector also declined as the Thai

24.98 percent of the paid-up share capital. However,

economy was faced with several negative factors such as the

Thanachart Capital was still well aware of the rapid change in

continuous appreciation of the Thai baht which had an

the business environment and continued to place an emphasis

adverse impact on export growth, the subprime mortgage

on developing various risk management systems under the

crisis and slowdown in the U.S. economy, the rising price of

supervision of the Bank of Thailand. The regulator introduced

crude oil and commodities in world markets, unrest in the

several measures aimed at enabling financial institutions to

southernmostprovinces of Thailand, as well as economic

develop more efficient risk management systems and to meet

instability. All these factors impacted on both consumers and

international standards and requirements. For example, it

investors.

required the financial institutions to comply with the Basel II requirements which will be enforced towards the latter part

Thanachart Group received an approval from the

of 2008.

Bank of Thailand to establish a financial group under the authority’s new consolidated supervision policy. In line with the policy, Thanachart Capital Public Company Limited (“Thanachart Capital”) became a holding company while Thanachart Bank Public Company belonged to a solo consolidation group.* At the 2007 Annual General Meeting of Shareholders of Thanachart Capital Public Company Limited which was held on 30 April 2007, the shareholders adopted a resolution allowing Thanachart Capital Public Company Limited to sell the shares of its eight subsidiaries at their respective book value to Thanachart Bank Public Company Limited (“Bank”). These subsidiaries included Thanachart

THE BANK’S RISK MANAGEMENT STRUCTURE The Bank recognizes the importance of risk management since its business operations are always faced with various risk factors, both internal and external, which may affect the Bank’s operations. As a result, in order to be able to control and manage the risks efficiently, the Bank has established a structure in which the risk management is placed under the direction and supervision of the following committees.

The Board and Committees on the Policy Side :

Securities Public Company Limited, Thanachart Fund Management Company Limited, Thanachart Insurance Company Limited, Thanachart Life Assurance Company Limited, Thanachart Group Leasing Company Limited, Thanachart Management and Service Company Limited, Thanachart Legal and Appraisal Company Limited and Thanachart Broker Company Limited. In line with the resolution, Thanachart

The Bank’s Board of Directors and the Executive Committee play a role in establishing policies and guidelines. They are also responsible for overseeing the Bank’s enterprisewide risk management, taking into consideration the impact of risks on the Bank’s goals, operations and financial position and ensuring that risk management is efficient and in line with the Bank’s operations.

Capital executed the transactions related to the sale of the shares of the subsidiaries on 12 July 2007. The Bank’s

The Risk Management Committee plays a role in

shareholders at their Annual General Meeting adopted a

establishing strategic plans and developing the risk procedure,

*/ Solo consolidation group means a group of credit institutions which consist of the Bank and the companies that the Bank directly hold shares at least 75 percent of the total paid-up share capital.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

taking into consideration the risk management policy and

The Committees on the Operation Side :

guidelines properly. The committee proposes the plan to the Executive Committee and the Bank’s Board of Directors for its

The Asset and Liability Management Committee plays a role in establishing and supervising the structure of the

consideration and approval.

Bank’s assets and liabilities in the proper way of the business The Audit Committee plays a role in establishing

operations and characters. Furthermore, the committee

guidelines in relation to operations control and supervision,

still manages the business in line with the Bank’s risk

ensuring that business operations comply with the

management policy.

requirements of the authorities concerned. The committee is also responsible for checking the effectiveness and adequacy

The Investment Committee plays a role in establishing

of risk management processes and internal control systems.

the investments in financial instruments of the Bank in line with the market risk management policy of the Bank.

The IT Security Management Committee plays a role in establishing the IT Security System policies, proposing the risk

The Credit Committee plays a role in establishing and

prevention guideline against information and technology risk.

supervising on lending, other business transactions involved

Still, the committee will follow-up, supervise and control the

with the credit lending and the credit risk management policy

operation of the IT Security System in accordance with its plans.

of the Bank.

THE BANK’S RISK MANAGEMENT STRUCTURE The Bank’s Board of Directors Audit Committee

Internal Audit Group

Executive Committee

Risk Management Committee

Compliance Department

Head of Risk Risk Management Department

Credit Committee

Investment Committee

Credit Analysis Department

Asset and Liability Management Committee

IT Security Committee

Chief Executive Officer Chief Operation Officer

Head of Operation Credit Analysis Unit Business Control Department

Note : The information as of 31 December 2007

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The conduct of business affairs is based on a system

of Thailand guarantee, as well as from investment in debt

of check and balance with the middle offices. These include

instruments such as debentures issued by the private sector.

•

the Business Control Department and the back offices which are separated from the front offices.

With its credit risk management policies and guidelines, the Bank has succeeded in establishing a credit

The Bank would put in writing all its established

culture. To start with, the credit risk of the borrowers,

policies and guidelines related to risk management. It also

counter-parties of contracts, or issuers of debt instruments

specifies responsibilities for each unit concerned. The objective

would be assessed by making use of the credit risk models

is to enable the staff concerned to observe those responsibilities

developed for each type of borrower or counter-parties.

correctly. Moreover, the Bank has established four common

The credit analysis unit, which is an independent unit, is

steps for risk management. These include 1) identification

responsible for conducting credit analysis using such models.

of the nature of risk and risk factors, 2) development of

At the same time, credit analysis is also conducted by credit

appropriate tools and models for measuring risks, 3) the

or investment staff. In this regard, the committees and the

control of risks so they stay within acceptable limits, and

sub-committees which are authorized to consider and approve

4) the monitoring of risk status so that they can be properly

credit applications are responsible for considering and

managed in a timely manner when situations change.

deciding on the level of credit risk of the borrowers or

•

counter-parties as well as the appropriate level of credit lines •

The Bank has established different degrees and

levels of risk which will be used either as a ceiling that represents an acceptable level of risk or as an early warning signal before any serious damage occurs.

or investment, terms and conditions related to the loans or obligations, as well as risk status control at the enterprise wide level. This is achieved by appropriately diversifying the credit risk into various groups of borrowers under the established

The aforementioned risk management systems are

credit risk levels. The committees and the sub-committees are

developed based on prudent principles and will be reviewed

also responsible for monitoring the quality of loans, making

regularly to fit the prevailing situation. The systems are

sure that they are properly managed and carefully

designed to be transparent, clear and taking into consideration

implemented, with the main focus given to the borrowers’

the interests of the shareholders, customers and staff.

business potential and ability to repay loans. As well, the business control unit, which is an independent unit, is

KEY TYPES OF RISK FACED BY THE BANK

responsible for monitoring all lending activities, making sure that they comply with the established policies and guidelines

1. Credit Risk Credit risk arises from a situation in which the Bank’s debtors or counter-parties of contracts with the Bank

in relation to credit risk management. There is also an audit unit which is responsible for verifying the credit transactions in line with the Bank of Thailand’s guidelines.

fail to fulfill their agreed obligations. This might be attributable

Moreover, to assure that its returns and the related

to the financial problems faced by the debtors, economic

risk are well-matched, the Bank has made use of a measuring

volatilities which impact on businesses, or the debtors’

tool called RAROC (Risk Adjusted Return on Capital).

mismanagement. The failure may adversely affect the Bank’s

Moreover, the Bank has impairment stress test to forecast any

earnings and shareholders’ equity. The credit risk may arise

damages that may happen in the crisis which impacts to the

from normal finance business transactions such as loans,

decrease of those capable payment-debtors or those incapable

obligations in the form of avals and guarantees or other

payment-debtors according to the condition of the pre-assumed

transactions related to lending. The credit risk may also arise

contract. It was also done based on the risk factors which

from investment in debt instruments issued by state agencies

may have an impact on the industry sector that the debtor’s

or state enterprises, which neither the government nor the Bank

business belongs to.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

IMPORTANT FACTORS IN CREDIT RISK

properly managed, monitored and assessed with the related reports being regularly given to the committees concerned.

1.1 Risk arising from clustering of loans

The purpose is to mitigate the risk arising from uncontrollable

It is the Bank’s goal to appropriately diversify its loans to various groups of customers. The emphasis is placed on

factors which may affect any groups of customers with too much credit lines from the Bank.

groups of customers with good potential. The objective is to

The Bank’s loan portfolios as at 31 December 2007

avoid a concentration on a single group of customers. The

and 31 December 2006 classified by type of business are

Bank ensures that the risk for its overall loan portfolios are

summarized as follows :

2007 Type of Business

2006

Debt Balance

Debt Balance Percent

(Million Baht)

Percent

21,668

9.62

50,977

25.38

Agriculture and Mining

1,274

0.57

1,291

0.64

Manufacturing and Commerce

7,033

3.12

4,830

2.40

Real Estate and Construction

6,115

2.72

6,259

3.12

Public Utilities and Service

7,377

3.28

5,458

2.72

Housing Loans

7,742

3.44

9,310

4.63

162,205

72.04

113,238

56.37

11,735

5.21

9,523

4.74

225,149

100.00

200,886

100.00

Holding Company and Related Company

Hire Purchase Loans Others Total Loans and Accrued Interest Receivables

1.2 Risk arising from deteriorating quality of loans

The information of the Bank’s overall loan portfolios in 2007 revealed that the majority were hire purchase loans which accounted for 56.37 percent of the total loans and accrued interest receivables as at 31 December 2006 and accounted

The non-performing loans include loans classified as substandard, doubtful and doubtful of loss. They are the main problems encountered by each financial institution as

for 72.04 percent as at 31 December 2007. However, most of

the non-performimg loans have an impact on its income and

the hire purchase loans were given to retail customers whose

capital funds. The Bank pays attention to the problems and

credit line was relatively low and the customer base was

attempts to control the quality of loans by regularly establishing

diversified.

policies and procedures in monitoring the quality of loans. Proportions of the non-performing loans as at 31 December 2007, when compared with same period in 2006 are as follows:

2007 Loans Classification

2006

Debt Balance (Million Baht)

Debt Balance Percent

(Million Baht)

Percent

Substandard

1,299

24.75

864

22.81

Doubtful

1,614

30.75

1,167

30.82

Doubtful of Loss

2,335

44.50

1,756

46.37

Total

5,248

100.00

3,787

100.00

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The Bankâ&#x20AC;&#x2122;s non-performing loans increased from

accounted for 2.33 percent of the total loans and interest

3,787 million baht in 2006 to 5,248 million baht in 2007 as a

receivable, an increase from 1.89 percent in the previous year.

result of economic slowdown. In view of the total loans and

The non-performing loans could be classified by type of

interest receivables, the non-performing loans in 2007

business as follows :

Non-Performing Loans Classified by Type of Business 2007 Type of Business

2006

Debt Balance (Million Baht)

Debt Balance Percent

(Million Baht)

Percent

0.00

Manufacturing and Commerce

725

13.81

724

19.12

Real Estate and Construction

863

16.44

890

23.50

Public Utilities and Service

206

3.93

180

4.75

Housing Loans

367

6.99

293

7.74

2,301

43.85

1,241

32.77

786

14.98

459

12.12

5,248

100.00

3,787

100.00

Agriculture and Mining

Hire Purchase Loans Others Total Loans and Accrued Interest Receivables

As at 31 December 2007, the Bank was not faced

that, in line with the International Accounting Standards 39

with any credit risk arising from non-performing loans which

(IAS 39) requirements, the Bank already set aside the provision

collateral did not fully cover the remaining loan amounts (after

of up to 100 percent for the non-performing loans which the

deducting provision for loan loss). This was due to the fact

collateral did not fully cover the remaining loan amounts.

Non-Performing Loans (Unit: Million Baht)

2007

2006

Change

Non-Performing Loans (NPLs)

5,248

3,787

1,461

Loans not Fully Covered by Collateral

3,423

2,104

1,319

Provision for Loan Loss

3,423

2,104

1,319

2007

2006

292

293

2,698

2,978

777

673

225,149

200,886

1.20

1.48

Loans not Fully Covered by Collateral (after Loan Loss Provision)

Trouble Debt Restructuring

Number of Debtors Outstanding Principal Balance and Accrued Interest Receivables (Million Baht) Loans not Fully Covered by Collateral (Million Baht) Revaluation Allowance for Debt Restructuring (Million Baht) Total Loans and Accrued Interest Receivables (Million Baht) Ratio of Restructured Debts to Total Loans (Percent)

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The risk related to debt restructuring arises from

allowance for impairment, was 1,406 million baht, representing

the re-entry of the debtors which have been previously

0.48 percent of the total assets. The allowance for impairment

restructured. In other words, after debt restructuring, the

accounted for 6.08 percent of the accounting cost value.

debtors default on their payments and become non-performing again. The problem will have an impact on the Bank’s

1.5 Risk arising from guarantees and avals

performance in terms of debt restructuring. As at 31 December 2007, the outstanding principal balance and the accrued interest receivables of the restructured debt amounted to 2,698 million baht, accounting for 1.20 percent of the total loans and accrued interest receivables, decreased from 2,978 million baht as at 31 December 2006. The net restructured debt (less collateral) amounted to approximately 777 million baht.

As part of its services to customers, the Bank has obligations in the form of avals, guarantees for loans and letter of credit. The risk arises when the Bank is held responsible for its customers which are unable to fulfill their obligations. In managing the risk arising from guarantees and avals, the Bank controls the risk by carefully examining the supporting information as well as applying strict approval procedures. As well, the Bank controls and monitors these obligations,

1.3 Risk arising from collateral For loans which are covered by collateral, the Bank

using the same approaches as the ones applied to in the Bank’s normal loans.

carefully analyzed and classified collateral quality by type of

As at 31 December 2007, the Bank’s obligations

collateral, taking into consideration liquidity and the risk level of the collateral. The Bank’s analysis result is used as a factor in determining the loan risk. In this regard, the collateral both in the form of immovable and movable properties whose value could be appraised is subjected to price appraisal or valuation

in the form of avals and guarantees for loans as well as other obligations amounted to 3,382 million baht, accounting for 1.16 percent of the total assets.

2. Market Risk

in line with regulations established by the Bank of Thailand. The market risk arises from changes in interest rates, In the past year, car hire purchase services were the Bank’s key business, which continued to expand. In regard to the announcement of the Bank of Thailand in the subject of the valueless and non-callable asset dated December 2006, the Bank of Thailand has established the reserve regulation in line with IAS 39 where the cars are considered as collateral assets whose ownership belonged to

foreign currency exchange rates, and prices of instruments in the money market and the capital market, which may adversely affect the Bank’s earnings and shareholders’ equity. The market risk consists of three types of risk including price risk, interest rate risk and exchange rate risk. It is the Bank’s policy to control and manage the risks by ensuring that

the Bank. If the hire purchasers were unable to repay their

they are within appropriate levels and in line with the Bank’s

loans, the Bank was able to repossess the assets immediately

established policy on risk management.

for the purpose of reselling them in the used car market. As a

2.1 Price Risk

result, the Bank might be faced with a risk arising from its inability to repossess the assets or from its inability to

The price risk arises when the Bank’s earnings or

compensate for the incurred loss although the assets could be

capital funds are adversely affected by any change in the price

re-sold. However, this depended on risk factors such as the

of debt and equity instruments, which decreases the value

situation of the used car market and the condition of the

of the Bank’s investment in trading and available-for-sales

repossessed cars.

1.4 Risk arising from the impairment of the property foreclosed

securities. The Bank has developed a tool for measuring the risk, the Value-at-Risk (VaR) Model. The tool is used to

As at 31 December 2007, the net amount of

measure the maximum loss at a certain confidence level if

property foreclosed, the accounting cost value after the

the securities are held for a specified period of time. The ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

calculated value obtained from using this tool will serve as

In addition, the Bank has conducted simulation or

a guide in establishing an acceptable level of risk. The

stress tests for analyzing crisis events that may result in a

Investment Committee is responsible for controlling and

sudden, sharp fall in the prices of securities in the capital

monitoring this type of risk. To make sure that such a tool is

market. The objective is to estimate the size of any potential

efficient and gives accurate information, the Bank requires

loss that might affect the Bank’s earnings and capital funds.

that the tool is subjected to backtesting in line with the

As at 31 December 2007, the Bank’s investment in

standard framework established by the Bank for International

trading and available-for-sale securities classified by type of

Settlement (BIS).

investment included the following : (Unit: Million Baht)

Fair Value 2007

2006

Current Investments Trading Investments

101

1,656

342

133

1,998

474

4,568

1,275

655

Listed Securities

407

447

Investment Unit

877

948

Total Long-term Investments

3,033

6,618

Total Investments

3,166

8,616

Available-for-sale Investments Government and State Enterprise Securities Private Debt Securities Total Current Investment Long-term Investment Available-for-sale Investments Government and State Enterprise Securities Private Debt Securities Domestic Marketable Equity Securities

In regard to the volatility and increase in the interest rate in the market, the Bank made a decision to cut

periods are mismatched. The changes may have a negative impact on the Bank’s net interest income.

down the investment in the government and state enterprise securities and the long-term private debt securities. Together with the volatility of the securities price increased from the sub prime crisis, US Dollar depreciation and rising in oil price, the

It is the Bank’s target to run its business operations with an effective interest rate risk management system over a long period of time. The system enables the Bank to

Bank changed its investment to the less volatile securities.

maintain for the different time intervals in an appropriate

Overall, the Bank’s price risk then slightly decreased from the

structural relationship between assets and liabilities which are

previous year.

rate-sensitive. The relationship is kept at a level that is suitable for its current business operations and gives the maximum

2.2 Interest Rate Risk

benefit to the Bank and its shareholders. To achieve this

The interest rate risk is the risk that the Bank’s

target, the Bank has developed a tool called Interest Rate Gap

earnings or capital funds are adversely affected by changes

Analysis Model for measuring interest rate risk and for

in interest rates of its rate-sensitive items including assets,

assessing the impact that may arise from the mismatch of the

liabilities and off-balance sheet items whose re-pricing

re-pricing periods of assets, liabilities and obligations.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The objective is to make sure that the risk for the Bank’s

economic situations, developments in the money and capital

business operations is at an acceptable level. The Bank has

markets, and the direction of interest rates which could

also established an acceptable risk ceiling level and an early

pose an interest rate risk. The information is then used in

warning signal level, taking into account the structure of as-

establishing various measures aimed at accommodating

sets, liabilities and obligations as well as changes in interest

the risk.

rates which are expected to take place in each period of time

The following are details of the Bank’s financial

when the Bank’s business plan is implemented. The

assets and liabilities as at 31 December 2007, classified by

Executive Committee assigned the Asset and Liability

the period when the interest rates would be re-priced in

Management Committee (ALCO) to closely control and

accordance with the Bank’s agreements related to the

monitor the interest rate risk. It also closely monitors the

financial assets and liabilities :

(Unit: Million Baht)

The Period When the Interest Rate Will be Re-priced or the Due Date Items

0-3

3-12

1-5

Over 5

Months

Years

Interest

3,274

34,041

1,350

3,065

38,515

2,500

1,455

793

10,025

2,097

5,679

20,049

49,254

4,374

4,762

134,421

31,627

502

224,940

49,313

42,370

6,905

144,446

33,724

60,658

65,844

61,871

2,591

582

191,546

2,165

787

243

1,010

660

4,865

Payable Liabilities on Call

1,329

Borrowings

49,590

11,808

4,040

3,000

68,438

62,823

116,221

73,922

7,641

3,000

At Call

Total

Financial Assets Cash Interbank and Money Market Items Securities Purchased under Resale Agreement Investment Loans Total Financial Assets

12,520 289,278

Financial Liabilities Deposits Interbank and Money Market Items

Total Financial Liabilities

2,571 266,178

• Transaction Risk, and

Based on the aforementioned changes in the

• Translation Risk

assets and liabilities structure, the Bank’s net interest income would decrease if the market interest rate were to increase.

The Bank has assigned to the Asset and Liability

This was mainly due to the Bank’s hire purchase business

Management Committee the duties of controlling and monitoring

expansion which featured with a fixed rate.

this type of risk by considering the proper matching between the structure and maturity of the assets and liabilities in

2.3 Exchange Rate Risk The exchange rate risk is a risk to the Bank’s earnings or capital funds which can be adversely affected by

foreign currencies. As well, the Bank establishes the policy of risk ceiling in controlling the effect of the currency exchange rate to income and capital fund, using VaR as the risk measurement tools. However, in protecting against the risk

the fluctuations in exchange rates as a result of its foreign

that may arise, the Bank has established a policy of hedging

exchange business or its possession of assets or liabilities in

the risk by making use of financial tools such as forward

foreign currency, which can be divided into :

contracts. ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

As at 31 December 2007, the Bank faced with the

is the financial tool to find out the liquidity ratios. Moreover,

low rate of exchange rate risk, since the Bank has made the

the Bank has created the simulation called “What if” Scenarios

future contracts for the assets in foreign currencies in order to

in order to analyze an impact of liquidity sufficiency. The

prevent the impact of the exchange rate volatility.

sufficiency is based on the cash flows and the customer behavior in extending the contract at maturity date. Moreover,

3. Liquidity Risk Liquidity risk arises from the Bank’s inability to repay its debts or honor its obligations when they become due, as it

the Bank has estimated the liquidity demand on the different assumptions, economic situations and the unordinary civil situation that directly incur to the Bank itself and to the overall financial institutions.

is unable to convert its assets into cash or to mobilize adequate funds or to mobilize funds at an acceptable cost. The failure

Also, the Bank has established and conducted the

will have an adverse impact on the Bank’s earnings and

contingency plan for any kind of liquidity crisis scenarios and

shareholders’ equity both in the present and in the future. The

reviewed the plan in any needed times and events. Therefore

risk management mechanisms will start from an assessment

the Bank has assigned the Asset and Liability Management

of the Bank’s cash flows and the liquidity position for each period in which the Bank might require different levels of funds

Committee to control and monitor the liquidity risk and arrange a weekly meeting to manage such risk.

to accommodate loan repayments upon maturity, to redeem

The structure of the Bank’s source of funds can be

other types of liabilities, or to acquire additional assets. The

classified by different type and maturity of source of funds as

Bank has established the Liquidity Gap Analysis Model, which

follows :

Funds Classified by Sources of Funds (Unit: Million Baht)

Sources of Funds Deposits Domestic Interbank and Money Market Items Foreign Interbank and Money Market Items Borrowing Total

2007

Percent

2006

Percent

191,546

72.32

198,981

84.25

4,858

1.84

4,589

1.95

0.00

68,438

25.84

32,603

13.80

264,849

100.00

236,173

100.00

Funds Classified by Maturity of Sources of Funds (Unit: Million Baht)

Maturity

2007

Percent

2006

Percent

Less than 1 Year

251,582

94.99

207,133

87.70

More than 1 Year

13,267

5.01

29,040

12.30

264,849

100.00

236,173

100.00

Total

As at 31 December 2007, the Bank’s deposits and

Bank issued the bills of exchange and the short-term

borrowings amounted to 264,849 million baht. The Bank’s

debentures in order to increase the saving alternatives for the

sources of funds were mostly from the public deposits with

customers.

the maturity less than one year - it is a common practice for

Therefore, the financial assets and liabilities as at 31

the commercial banks’ sources of funds. Nevertheless, the

December 2007 classified by maturity date were as follows :

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The Maturity Date of Financial Tools Items

At call

Less than

More than

Not

1 year

Specified

Total

Financial Assets Cash

3,274

Interbank and Money Market Items

3,124

35,391

38,515

Securities Purchased under Resale Agreement

2,500

Investments

1,087

13,318

5,644

20,049

27,133

11,457

186,350

224,940

33,531

50,435

199,668

5,644

289,278

58,829

129,340

3,377

191,546

2,825

980

1,060

4,865

1,329

58,548

9,890

68,438

62,983

188,868

14,327

266,178

Avals

Non-maturity P/N for Imported Product

Letter of Credit

391

399

Other Guarantees

2,934

Unpaid Overdraft

2,673

Total Off-Balance Sheets

5,615

440

6,055

Loans Total Financial Assets Financial Liabilities Deposits Interbank and Money Market Items Securities Purchased under Resale Agreement Payable Liabilities on Call Borrowings Total Financial Liabilities Off-Balance Sheet Items

As at 31 December 2007, the Bank’s liquidity increased in comparing with the previous year mainly due to

earnings and capital funds as well as its reputation and credibility.

the branch expansion and customer base expansion. The Bank’s liquidity consists of cash and deposits in the Bank, borrowings in the money market and repurchased market, and

The intensive competitiveness among the commercial banks and other financial institutions, which operate their

investments in the government and state enterprise bonds,

business as well as the commercial banks’ business in the

which accounted for 28.66 percent of the deposits. It is higher

past year, rapidly enlarged in the number of the commercial

than the Bank of Thailand’s minimum liquidity ratio

bank’s branches, and improved the effectiveness of the full

requirement of 6.00 percent of deposits.

financial service with international standard to customers. The

4. Operational Risk

Bank has realized the risk that will happen in the operation side. As a result, the Bank placed an emphasis on this risk as

The operational risk is the risk that arises from the

much as the other risks. The Bank then has established a

lack of appropriate governance of business affairs or lack of

number of measures aimed at making sure that its internal

good corporate governance within the organization. Risk may

control systems are efficient. As well, it has streamlined the

also arise from the fact that the organization’s audit systems

internal work processes to make them more flexible and

and internal control systems are not adequately efficient. The

coherent with its financial service businesses. The purpose is

risk may be related to the internal processes, human resources,

to maintain efficient work processes and operational risk at an

work systems or external events, which affect the Bank’s

acceptable level. These measures include the following : ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

• To develop its organizational structure, the Bank

and a business recovery plan. The purpose was to protect

had clearly specified the roles, the scope of duties and

against business discontinuities. The Bank also ran a

responsibilities for each job. Moreover, in order to have a

simulation exercise designed to test the readiness of the plans

system of check and balance, it separated the front office

and to revise the plans so that they could be efficiently

functions from those units responsible for controlling the

implemented in real practice.

compliance of internal regulations (middle offices) such as the business control unit, and the back offices which are responsible for recording transactions.

In risk measurement, the Bank also calculates the capital funds and uses the Basic Indicator Approach established by the Bank for International Settlements (BIS)

• The Bank established supporting units such as a

to accommodate this risk. Furthermore, the Bank has made

computer and information technology unit, legal office and price

thorough preparation in relevant with the business plan

appraisal unit, all of which have expertise in their respective

and Basel II which would be strictly enforced by the state

fields of work. These units are allowed to work independently,

compliance unit in the future. Also, the Bank has developed

in order to minimize errors.

the damaged information tracking system as the database in order to prevent the operating discontinuity. In developing

• The Bank put in writing procedures and regulations for every type of business transaction, staff manuals as well as the approving authority. The purpose is to make sure that all work within the organization follows common standards. • The Bank established the Audit Committee and the Risk Management Committee. The purpose is to monitor and assess the Bank’s operational risk as well as identifying and correcting errors so that the operations become better controlled and more efficient.

the measurement tools, the Bank uses the methods of Standardized Approach and Advanced Measurement Approach which are more accurate and truly reflect the actual risk of each transaction.

5. Risk from Investments in Subsidiaries and Associated Companies This type of risk arises when the Bank’s earnings and capital funds are adversely affected by recognition of losses from its investments in the subsidiaries and the associated

• The Bank also improved its information and technology management systems and information security systems, aiming to increase the capability to accommodate

companies as a result of their negative performance. The losses were recognized when the Bank’s subsidiaries and associated companies suffered losses or went bankrupt.

the business expansion and to gain credibility from its customers in aspect of technology and information. A particular

As at 31 December 2007, the Bank’s total

focus was given to protection against damage caused by the

investments in its subsidiaries and associated companies

unrelated outsider.

amounted to 4,295 million baht, accounting for 21.51 percent of the Bank’s net investments. Its largest investment

• The Bank established selection procedures for outsourcing services, both operations and information and technology systems. The purpose was to reduce the operational risk in various areas, enhance efficiency and gain operational credibility. However, the arrangements were still subjected to the Bank’s regulations and by-laws as well as the regulations of the authorities concerned. • The Bank formulated business continuity plans which included an emergency plan, a backup system plan

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

was in Thanachart Securities Company Limited, in which amounted to 2,028 million baht, representing 47.22 percent of the total investments in the subsidiaries and the associated companies. Next in order was Thanachart Life Assurance Company Limited, in which amounted to 936 million baht, representing 21.79 percent of its total investments. The details of the Bank’s investments (cost method) in the subsidiaries and the associated companies as at 31 December 2007 were as follows:

Investment Values in Subsidiary and Associated Companies (Cost Method) (Unit: Million Baht)

Investment Value Company’s Name Thanachart Securities Public Company Limited

2007 2,028

Thanachart Insurance Company Limited

627

Thanachart Life Assurance Company Limited

936

Thanachart Fund Management Company Limited

122

Thanachart Group Leasing Company Limited

412

Others

170

Total

4,295

6. Strategic Risk

7.1 The Preparation of BASEL II

This type of risk is the risk that arises from the

The Bank of Thailand has established the capital fund

formulation of strategies, planning and implementation which

policy in according to the Bank for International Settlement

are not suitable for or not in line with internal factors and the

(BIS) or Basel II at the end of 2008 which will have an

external environment that may have an adverse impact on the

impact on the operating cost. The increase of operating cost is

Bank’s earnings, capital funds or position. In managing

contributed by the information collection for risk appraisal,

the strategic risk, the Bank arranges for the formulation of

computer system improvement and human resource training.

strategies for the next three years. The strategies are subjected

The Bank is in the preparation process of the information

to the review at least once a year or whenever there is an

system and training for executives and related employees

external event that may have an impact on the achievement of

to gain understanding and readiness regarding such

its business goals. The Executive Committee is responsible for

regulations in both areas of information and system.

regular monitoring and evaluating the performance of various work units against the established targets in the annual plan.

7. Regulation Risk

7.2 Impact from the Consolidated Supervision The Bank of Thailand recently established the guideline on Consolidated Supervision. The guideline covers

The risk arises from improvements or changes in regulations, laws or requirements of the authorities concerned, especially the Bank of Thailand. Each change in the Bank of Thailand’s policy might affect the Bank’s strategies and business operations. The Bank classified the impact from rules and regulations as follows :

the supervision of financial groups or financial institutions which have a network of businesses or whose businesses are diverse, by applying good supervisory standards which meet international practices. On 12 July 2007, the Bank of Thailand issued a notification approving the Bank’s purchases of shares in Thanachart Capital Public Company Limited’s eight subsidiaries. These subsidiaries included Thanachart

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Securities Public Company Limited, Thanachart Fund

fully insured. This Act will change from the full blanket

Management Company Limited, Thanachart Insurance

guarantee with a support from the FIDF to the guarantee of

Company Limited, Thanachart Life Assurance Company

a specific amount of deposits with the different types of

Limited, Thanachart Group Leasing Company Limited,

guarantees and types of deposits. This will benefit the

Thanachart Management and Service Company Limited,

depositors in the sense that the depositors has the concern

Thanachart Legal and Appraisal Company Limited, and

not only deposit interest rate but also the financial institution’s

Thanachart Broker Company Limited at prices equal to their

performance and financial position. However, the Bank has to

respective book value. On 12 July 2007, the Bank purchased

encounter with the risk that derived from the transportation of

the shares in the subsidiaries. At the Annual General Meeting

the corporate customers’ deposits to other banks in the amount

of Shareholders of the Bank, the shareholders approved of

that is not covered by the Depository Insurance Act. The Bank

the capital increase which was done by issuing and offering

has a plan to expand its branch network in order to acquire

for sale ordinary shares to The Bank of Nova Scotia Asia

the retail depositor base which would reduce the impact from

Limited (BNSAL). The purpose was to strengthen Thanachart

this Act.

Group’s finance business operations. The shares were sold to BNSAL on 19 July 2007. As a result, BNSAL held a 24.98 stake in the Bank. Thanachart Group has always been

As at 31 December 2007, the Bank’s capital funds

growing based on the concept of a financial conglomerate with

amounted 23,661 million baht, of which 20,017 million baht

Thanachart Capital Public Company Limited acting as a

was in Tier I and 3,644 million baht was in Tier II. The BIS ratio

holding company. Without changing the position of a holding

amounted to 12.00 percent which exceeded the Bank of

company, the Bank was prepared for the change of

Thailand’s minimum requirement of 8.50 percent. This amount

shareholding and was not significantly affected.

is sufficient to support potential risks and accommodate for

7.3 Impact from the Depository Insurance Act The Depository Insurance Act will be effective in the year 2008 and will impact both Baht and foreign currency deposits in the financial institutions system, which are now

8. Risk rising from the capital adequacy

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

the business expansion in the future.

CORPORATE SOCIAL RESPONSIBILITY Apart from engaging in business for profits, corporations nowadays

The Bank gave its financial support to buy books and

play an important role in improving their environment and the

book cabinets under the project on “Book Corner in Honor of His

quality of life for their local communities and society at large

Majesty the King on the Auspicious Occasion of His Majesty

through a wide range of activities in line with the Corporate Social

the King’s 80th Birthday on the 5th December 2007.” The project

Responsibility (CSR) concept. This new concept is being widely

is a cooperative effort between the Bank of Thailand and

implemented in the developed countries. On the part of Thanachart

commercial banks in giving books to 1,280 schools nationwide.

Group, in addition to its determination to provide its shareholders, customers, employees as well as trading partners with the highest satisfaction and benefits possible, it recognizes the importance of its responsibility as a good corporate citizen towards society as a whole. It continues to lend its cooperation and support to various organizations and also provides socially beneficial activities. This is because Thanachart Group wishes to help shape Thai society into one in which people live happily, with the citizens having a

The Bank supported the Project of “Send Books, Share

Knowledge, For Libraries” which was jointly promoted by the Stock Exchange of Thailand and Thai Library Association. The project accepted donations of new books or used books in good condition, which were then forwarded to school libraries, public libraries and prison libraries which lacked resources. The objective was to give learning opportunities to the general public and to enable them to develop themselves through reading.

good quality of life so that they can participate in and make a valuable contribution to the development of the country through their respective duties and responsibilities. In the past year, the Group continued to support socially beneficial activities in many areas including education and youth development, maintenance of religion, traffic safety campaigns as well as social contributions and the environment. The details of the activities undertaken by

The Bank gave financial support for the construction of

a library at Wat Pathum Wanaram School which was initiated by Her Royal Highness Princess Maha Chakri Sirindhorn. The school teaches students at the secondary level. Bangkok Metropolitan Administration supported the construction of the school building as well as a library for charity at the discretion of His Majesty the King on the Auspicious Occasion of His Majesty the King’s 80th

the Group are as follows :

Education and Youth Development

Birthday.

Youth education is a basic factor which plays a critical role in developing the country. As a result, Thanachart Group is determined to play an active part in supporting the education and youth development in society at large, some activities of which are as follows :

1 Ms. Maleeratna Plumchitchom, Advisor of Thanachart Group, represented the Bank in receiving a commemorative plaque from Ms.Tarisa Watanagase, the Bank of Thailand Governor, to mark the occasion of the Bank’s support to the Project on “Book Corner in Honor of His Majesty the King on the Auspicious Occasion of His Majesty the King’s 80th Birthday”. 2 The Bank’s representatives namely, Mr. Kunathin Sriakkachan, Assistant Vice President of Corporate Activity Department, and Ms. Napaporn Saengkaew, Senior Manager of Corporate Communication Department, joined Dr. Manoon Leechawengwongs, President of the Anti-Drowsy Fund of Ramathibodi Foundation, in giving the “Get Enough Sleep” brochures to Deputy Education Minister Assoc. Prof. Dr. Varakorn Samakoses.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The Bank supported the “Get Enough Sleep” project of

General Education. The students receiving the awards were

the Anti-Drowsy Fund of the Ramathibodi Foundation under the

needy students in need for financial support with good

Patronage of Her Royal Highness Princess Galyani Vadhana Krom

academic records. The scholarships would pay for the education

Luang Naradhiwas Rajanagarindra in printing 200,000 brochures

of the same students from the secondary education levels

and 45,000 CDs. They were delivered to the Ministry of Education

(Matthayom Levels 1 to 6).

which would distribute them to schools and educational institutions

Maintenance of Religion

under the Ministry’s supervision and to public libraries. The objective was to spearhead campaigns to help Thai youth to recognize the importance of having enough sleep which would in turn, help them to improve their memory. The lack of sleep affected one’s learning, cognition, understanding, concentration, acquisition of new knowledge, problem solving and memory.

Thanachart Group recognizes the importance of the maintenance of religion which plays a significant role in guiding people and training their minds. As a result, the Group places emphasis on the participation in the continuous maintenance of religion. In 2007, it organized a number of religion maintenance activities as follows :

The Bank donated 1 million baht to the Maha Chakri

Sirindhorn Foundation for the Faculty of Arts, Chulalongkorn University, which was under the patronage of Her Royal Highness Princess Maha Chakri Sirindhorn. The purpose was to support the construction of computer laboratory of Geography Program, Faculty of Arts, Chulalongkorn University, to be located at the Maha Chakri Sirindhorn Building, a new building which was being built for students of the Faculty of Arts.

The Bank hosted the presentation of Kathin robes

custom to monks at Wat Muen Ra-gnab Rangsan in Amphoe Cha-uard, Nakorn Sri Thammarat Province with cash donations given to the temple for building a sermon hall and making merits in dedication to His Majesty the King. The Bank also hosted the presentation of Kathin robes at Kwuan Sri Temple, Amphoe Bannasarn, Surat Thani Province with funds to build Mondop (a square structure with four arches and a pyramidal roof) in honor

Thanachart Securities Public Company Limited

of the Reverend Father Kongkaew.

organized a CSR project on “Help Young Ones (4th Year)” by accepting cash donations and textbooks which would be given to

Traffic Safety Campaigns

students of four schools, namely Ban Ta Long School,

As a leader in the country’s automobile hire purchase

Ban Huay Mak Tai School, Ban Don Pan Chad School and

business, Thanachart Group recognizes and fully understands

Ban Coke School in Ubon Ratchathani and Srisaket Province.

traffic problems and their negative impact. As a result, it

Thanachart Life Assurance Company Limited continued

its support for youth education through the 5th Year “Ri Rerm Term Ruk (Initiate and Fulfill Love)” Project which was

continues to organize and support traffic safety campaigns. Over the past year, the Group undertook the following activities :

The Bank supported the construction of 2 police booths

implemented in 2003. 60 scholarships were awarded to students

for Pattaya Police Station. The purpose was to give security to the

studying at the secondary education levels (Matthayom Levels

general public and tourists and to facilitate their travels along

1 to 6) at ten schools under the jurisdiction of the Department of

Sukhumvit Road, Pattaya, Chonburi.

3 Mr. Vicha Kulkobkiat, Senior Vice President of the Bank’s Communications and Brand Management Group, presented a donation worth 1 million baht to the Maha Chakri Sirindhorn Foundation for the Faculty of Arts, Chulalongkorn University. The purpose was to support the construction of laboratory at the Maha Chakri Sirindhorn Building.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The Bank published 10,000 copies of “Life Saving

southern most provinces of the country, as a contribution to a

Manual” and 200,000 brochures to support the “Get Enough

royal charity and as a part of the government’s “Do Good for the

Sleep” project of the Anti-Drowsy Fund of Ramathibodi Foundation

Father of Nation” project.

under the Patronage of Her Royal Highness Princess Galyani Vadhana Krom Luang Naradhiwas Rajanagarindra. The objective of the campaign was to encourage the general public to recognize the importance of adequate sleep and dangers caused by drowsy driving.

The Bank supported the Project on “Savings Accounts

for Self-Sufficiency in line with His Majesty the King’s Royal Idea on Sufficiency Economy.” The Bank cooperated with Bangkok Metropolitan Administration (BMA) and other 16 financial institutions in encouraging Thai people to open savings accounts

Social Contributions

on the Auspicious Occasion of His Majesty the King’s 80th

Thai society is currently faced with many problems. It needs

Birthday. The passbooks for these savings accounts were

help from various organizations. Thanachart Group considers it

specially designed and were the same for every participating

important to play it’s part in giving the help required. In the past

bank. The information on the money saved under this project

year, Thanachart Group has provided assistance and supported

was reported to His Majesty the King.

organizations in many socially beneficial projects which included, among others, the following :

The Bank supported the production of a Travel

Guidebook entitled “Royal Initiative Discovery” on the Auspicious

The Bank helped teachers in the South by giving cash

Occasion of His Majesty the King’s 80 th Birthday. The

donations to them through the “Tossakan Helps Teachers in the

guidebook provides the Thai people and foreigners with

South” project of Workpoint Entertainment Public Company

information about places of various Royal Initiative Projects

Limited. In turn, the money would be given through Sai Jai Thai

which are conceptualized and created by His Majesty the King.

Foundation to the teachers in the southernmost provinces of the

The guidebook promotes tourism with the focus on learning about

country who are suffering as a result of the unrest. The purpose is

sustainable development based on His Majesty the King’s

to boost the morale of the teachers. In addition, the Bank

Economic Self-sufficiency Concept.

encouraged others who also wanted to support the project to make their contributions. Their cash donations were put into the Bank’s savings account under the name of “Workpoint Entertainment for Tossakan to Help Teachers in the South.”

The Bank joined with PTT Public Company Limited

gave tumble dryer to the Foundation for Slum Child Care under the Patronage of Her Royal Highness Princess Galyani Vadhana Krom Luang Naradhiwas Rajanagarindra for use in

The Bank supported activities under the “Savings for

taking care of the Foundation’s young children. The Bank also

Father of the Nation” project. The Bank encouraged members

put in place donation boxes of the Foundation for Slum Child

of the public nationwide to save 80 baht (or multiples of the

Care at all its branches nationwide throughout 2007. It helped

amount) each in a savings account under the name of “Savings

act as a channel for accepting donations from members of the

for Father of the Nation” The money received would be used to

public, the proceeds of which would be forwarded to the

support the education of fellow countrymen in the three

Foundation to help the children.

4 Mr. Bundit Cheevadhanarak, Senior Executive Vice President of The Bank, gave cash donations to support the “Tossakan Helps Teachers in the South” project. The money would be given to teachers in the southernmost provinces. 5 Mr. Vicha Kulkobkiat, Senior Vice President of The Bank’s Communications and Brand Management Group, gave tumble dryer to the Foundation for Slum Child Care under the Patronage of Her Royal Highness Princess Galyani Vadhana Krom Luang Naradhiwas Rajanagarindra.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The Bank joined its PR Bank Clup in supporting the

purpose was for the people to honor His Majesty the King

“Vankaew” project by accepting donations in the form of

and to pledge their allegiance to His Majesty the King. The

spectacles, lenses, and cash from Thanachart Group’s staff

project encouraged members of the public nationwide to show

who wished to help their fellow human beings. The spectacles

their unity and loyalty by taking an oath through postcards that

and cash donations would be delivered to the Maha Chakri

they would behave honestly towards themselves and others.

Sirindhorn Foundation for Spectacle Bank at Metta Pracharak Hospital (Wat Rai Khing), Nakhonprathom Province.

The Bank supported the construction of Auspicious

Model Stupas containing relics of the Lord Buddha and displaying 12 signs of the zodiac. The project was initiated by Thammarak Foundation, Wat Phra Baht Nam Phu, Lopburi Province. The proceeds after expenses from the sales of the Model Stupas with 12 signs of the zodiac would be presented to His Majesty the King for charity at his discretion and also to Wat

Environment At present, it is crucial for all parties to recognize the importance of environment problems. While the environment plays an important role in the way of life of Thai citizens, it has been badly damaged. Being aware of the problems, Thanachart Group organized the following activities aiming to promote environmental protection and preservation.

The Bank organized a project entitled, “Clean Sight and

Phra Baht Nam Phu Temple, Lopburi Province for paying part

Clean Minds in Honor of His Majesty the King.” The project

of the costs in constructing Thammarak Hospital as well as for

aimed to clean community areas and public spaces. The activity

maintaining the Stupa.

was an important annual event for the Bank. It was organized

The Bank supported the printing of oath taking

on the same day at all of its 21 hubs nationwide. Receiving

postcards under the project on “60 Million People Jointly Taking

cooperation and support from the state agencies, the private

an Oath on the Auspicious Occasion of His Majesty the King’s

sector and members of the public at the location where the event

80th Birthday.” The project was jointly initiated by the Center for

was held, the activity was in honor of His Majesty the King on

the Promotion of National Strength on Moral Ethics and Values,

the Auspicious Occasion of His Majesty the King’s 80th Birthday

and organizations from both the private and public sectors. The

on 5 December 2007.

6 Mr. Bundit Cheevadhanarak, Senior Executive Vice President of the Bank, and Mr. Panit Vikitsethi, Deputy Governor of Bangkok Metropolitan Administration (2 nd and 3 rd from left) presided over the opening ceremony of the “Clean Sight and Clean Minds in Honor of His Majesty the King” project which aimed to clean community areas and public spaces. The event was held on the same date at all the Bank’s 21 hubs nationwide. 6 7 Mr. Bundit Cheevadhanarak, Senior Executive Vice President of the Bank, led his team in marching along the road, as part of the campaign under the Bank’s “Clean Sight and Clean Minds in Honor of His Majesty the King” Project which aimed to clean community areas and public spaces. He and his team helped clean public areas at Pathumwan Intersection and from Rama I Road to Ploenchit Road. 8 Mr. Kunathin Sriakkachan, Assistant Vice President of Corporate Activity Department of the Bank’s Communications and Brand Management Group, received a plaque from National Police Chief Pol. Gen. Seripisut Temiyavej on the occasion of the Bank’s support to Pathumwan Police Station’s “Bio-Diesel” Project. 7

100

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The Bank in cooperation with PTT Public Company

The Bank joined forces with Thai Bankers’ Association

Limited organized a project entitled, “NGV Credit from Thanachart

and Rajapruek Institution Foundation in supporting reforestation

at 0% with Repayment Period of up to 36 Months”

in line with the project on “Permanent Reforestation in Honor of

to support members of the public who wanted to use NGV as

His Majesty the King on the 50th Anniversary Celebration of His

an alternative fuel for vehicles and to support the government

Majesty’s Accession to the Throne” which covered 760 rai of land

in promoting its energy conservation and environmental

in a national forest reserve in Ta Pla District, Uttaradit Province.

protection measures.

The reforestation activities had been undertaken for the past

The Bank gave cash donations to support the

establishment of the bio-diesel production station under Pathumwan Police Station’s Bio-diesel Project. The objective of the project was to conserve energy and to promote the police’s use of alternative energy as well as enhancing the efficiency of police surveillance, ensuring compliance with the strategic

three years (2005 - 2007). The project organizers handed over the new forests to the National Park, Wildlife and Plant Conservation Department, which represented the state. The Department would, in turn, continue to maintain the forests as national assets and water sources.

Thanachart Employee Savings and Credit Cooperatives

crime suppression and protection policy. The other purpose was

Company Limited encouraged its members and their families to

to conserve energy in line with His Majesty the King’s Economic

participate in the reforestation activity in honor of His Majesty the

Self-sufficiency Philosophy and to pay respect to His Majesty the

King, at Bangpu, Samut Prakan Province. The purpose was to

80th

jointly organize a campaign aimed at raising the awareness of the

King on the Auspicious Occasion of His Majesty the King’s

staff and their families about the importance of preserving nature

Birthday on 5 December 2007.

and mangrove forests which were the main source of food in an ecosystem.

Corporate Social Responsibility (CSR) Activities of Hubs In addition to various CSR activities mentioned above, in 2007 Thanachart Group led by the Bank with support from member companies of the Group organized a project entitled, “Corporate Social Responsibility by Hubs (CSR : HUB).” The objective was to raise the awareness of the Group’s various hubs which consisted of the Bank’s branch network and the various service outlets of the Group’s member companies about the importance of Corporate Social Responsibility towards the communities and environment in various regions of the country. In 2007, the following activities were undertaken :

ë Tonson Hub supported vocational training by organizing an activity entitled, “Thanachart Creates Jobs to Promote Social Development”, for Suan Lumpini Vocational Training Center. It gave the Center learning materials, training on various types of work, and refurbished its school building as well as improving the surrounding landscape of the center. The purpose was to create opportunities for members of the general public as well as the under privileged to receive training and to enable them to make use of the knowledge gained in making a living.

9 Ms. Napaporn Saengkaew, Senior Manager of Corporate Communication Department of the Bank, handed over forests with a total area of 760 rai under the project on “Permanent Reforestation in Honor of His Majesty the King” from Khunying Kalaya Sophonpanich, Director and Secretary General of the Rajapruek Institute Foundation, to the National Park, Wildlife and Plant Conservation Department which would, in turn, maintain the forests as national assets and water sources. 10 Surat Thani Hub organized Thanachart Football Kids Camp and invited former national striker Piyapong Pew-on to teach the kids in Surat Thani Province how to play football and develop various techniques. 9

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

101

ë Surat Thani Hub organized a program called “Thanachart Fulfills for Society.” The program encouraged the youth in the community to develop good health and raised their awareness about the importance of doing physical exercise. It also gave training equipment to schools in the community. As well, it assisted communities in Surat Thani Province, Chumporn Province and Ranong Province in organizing various special activities. Moreover, it helped organize football tournaments with the aim of promoting good relationships among various communities. It established a football team whose name was “Thanachart Football Kids Camp.” Former national striker Piyapong Pew-on was invited to coach the team by teaching the kids in Surat Thani Province how to play football as well as developing various techniques. ë The Bank joined forces with Thai Red Cross Society in organizing an annual blood donation activity for staff of the Bank and member companies of Thanachart Group, both in the central and other regions. In the region, the Bank’s branch in Khon Kaen and various organizations in the province jointly organized a project on “Celebrating 80th Birthday of Father of the Nation, Khon Kaen People Donate 80 Million Drops of Blood” at the Bank’s branch. The donations would be presented to His Majesty the King for charities at his discretion on the Auspicious Occasion of His Majesty the King’s 80th Birthday.

ë Ngam Wong Wan Hub joined forces with the local community and Nonthaburi Municipality in organizing a project on “Beautiful Canal, Clean Water.” The objective was to develop Bangsue Canal and Raewadee Community, aiming to restore the good local scenery and improve the environment for the community. Staff of the Bank and Nonthaburi Municipality as well as members of the local community jointly cleaned up and removed sewage from Bangsue Canal. Thanks to their joint efforts, they achieved their target of improving the scenery and the environment. In another development, the hub cooperated with Nonthaburi Municipality in organizing a global environment day with the theme, “Earth Not Hot in Nont City.” The objective was to raise the awareness of the children and members of the general public about the benefits to be gained from the conservation of natural resources and environmental protection, as well as ensuring that they know, understand, and have positive attitudes about the environment. As a result, they would change their behavior and help protect the environment. Thanachart Group will continue to organize activities to promote Corporate Social Responsibility, with support from the Bank and member companies of the Group through their various hubs which are located in the central and other regions. The objective is to continue developing and supporting the society as well as looking after the country’s environment.

ë Nakhon Sawan Hub gave 1,000 safety kits to help the flood-hit victims in Nakhon Sawan Province under the project entitled “Safety Kits Ease Sufferings of Flood-hit People.” ë Had Yai Hub organized a campaign entitled “The Bank Cares, Children Wear Safety Helmets.” The campaign encouraged parents to recognize the importance of their children’s safety. The Hub donated 1,200 safety helmets to five schools in Amphoe Had Yai, Songkhla Province. These included Toed Khunnatham Wittaya School, Srinakorn School, Kob-kan Suksa School, Wat Klong Rien School, and Wangdee Kindergarten. The purpose was to raise the awareness of both the motorcycle drivers and their passengers about safe driving to help them reduce motorcycle accidents.

11 Had Yai Hub organized a campaign entitled “The Bank Cares, Children Wear Safety Helmets.” The campaign encouraged parents to recognize the importance of their children’s safety. The hub donated 1,200 safety helmets to five schools in Amphoe Had Yai, in Songkhla Province. 12 Ngam Wong Wan Hub joined forces with Nonthaburi Municipality in organizing a global environment day with the theme “Earth Not Hot in Nont City.” On the global environment day, Mr. Bundit Cheevadhanarak, Senior Executive Vice President of the Bank, led his team in marching along a road to launch a campaign aimed at raising the awareness of the children and members of the general public about the important benefits to be gained from conservation of natural resources and environmental protection

102

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

REPORT ON RESPONSIBILITIES OF THE BOARD OF DIRECTORS FOR FINANCIAL REPORT The Board of Directors in responsible for the financial statements of Thanachart Bank Public Company Limited and for financial information presented in this annual report. The aforementioned financial statements were prepared in accordance with the generally accepted accounting principles, applying appropriate and consistent accounting policies and with careful judgements and best estimates. Important information is adequately and transparently disclosed to the Bank’s shareholders and other investors in the notes to financial statements. The Board of Directors has established and maintained appropriate and effective risk management and internal control system in order to rationally assure that the accounting information is correctly and completely recorded and adequate to sustain the Bank’s assets, as well as to prevent any material irregular operation or fraud. The Board of Directors has appointed an Audit Committee comprising Independent Directors responsible for revision of accounting policies and the quality of financial statements, internal control and risk management system, as well as the disclosure of related party transactions. The Committee’s comments on these issues are included in the Audit Committee Report in this annual report. The Bank’s financial statements were audited by the Certified Public Auditor of Ernst & Young Office Limited. The Board of Directors had provided the auditing team all information and document supports in order that the Auditor would be able to audit and address his/her opinion to the auditing standards. The Auditor’s opinion included in the Report of Independent Auditor in this annual report. The Board of Directors is of the Opinion that the Bank’s overall internal control is at an satisfying level and provides reliability on the Bank’s financial statements for the year ended December 2007 which is in compliance with the generally accepted accounting principles and relevant rules and regulations.

Mr. Banterng Tantivit Chairman

Mr. Suphadej Poonpipat Chairman of the Executive Committee

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

103

REPORT OF THE AUDIT COMMITTEE The Audit Committee of Thanachart Bank Public Company Limited consists of 3 Independent Directors with the Vice President of the General Audit and Credit Review II acting as the Audit Committee’s secretary. The names of the committee’s member are as follows : 1. Mr. Kiettisak

Meecharoen

Chairman of the Audit Committee

2. Mr. Suvit

Arunanondchai

Member of the Audit Committee

3. Mr. Sathaporn

Jinachitra

Member of the Audit Committee

Nuntajitkasem

Secretary of the Audit Committee

Mr. Charnchai

The Audit Committee had performed its duties independently and was able to access all information without any restrictions. Throughout 2007 the Audit Committee had received full cooperation from the management and related staffs, also the committee held a total of 8 meetings with the management as well as the internal and external auditors. In 2007, the Bank has hired an outside consultant company to do the internal audit for the Bank. The Bank has improved the Audit Charter to be more clear. The guidelines to the internal was also adjusted to be coherent with official compliant guideline of the whole group. The Audit Committee carried out the verification of the quarterly and annual financial statements by working closely with the management and the external auditors and the proper disclosure of financial information. Special attention was paid to the transactions between related parties. Apart from the verification, the Audit Committee also selected independent auditors and submitted the list to the Bank’s Board of Directors. To ensure that the Bank maintains its effective internal audit process and proper control system, the Audit Committee worked closely with the internal auditor in planning and approving the annual examination plan. This plan encompasses the operation of general auditing, credit reviewing, information technology auditing, quality and service auditing and the quarterly evaluation of all auditing results. To be harmonized with external rules and regulations, the Audit Committee actively corporated and always stayed up-to-date for any new rules and regulations. The committee inspected the Bank’s overall operations to ensure the conformity with the regulators, i.e. the Banks of Thailand, the Stock Exchange and Commission Committee, and the Stock Exchange of Thailand. In term of the risk management, the Audit Committee paid extra attention to the Bank’s management of credit risk, market risk, liquidity risk and operational risk. The committee is well-aware the effect of social, political and economic changes. Thus, it carefully examined the Bank’s risk management standards in order to ensure the Bank adequate capability of handing the aforementioned risks. The Audit Committee is of the opinion that the Bank has fully disclosed financial information in its financial statements and that the Bank possesses appropriate and efficient internal control, corporate governance and risk management systems. The Bank has also strictly complied with the legal requirements and the rules imposed by authorities concerned.

Kiettisak Meecharoen Chairman of the Audit Committee

104

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

REPORT OF INDEPENDENT AUDITOR

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

105

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106

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

107

Thanachart Bank Public Company Limited and

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108

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

109

Thanachart Bank Public Company Limited and

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110

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

111

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STATEMENTS OF CHANGES IN SHAREHOLDERSÂ´ EQUITY

112

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

113

STATEMENTS OF CASH FLOWS (CONTINUED)

Thanachart Bank Public Company Limited and its subsidiaries As at December 31, 2007 and 2006

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

115

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% ! # " = - > * $? =->*@& ! ": ! ! # %

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

117

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

2. OF PREPARATION OF THE FINANCIAL STATEMENTS BASIS

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

119

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

121

! " # $ % $ " $ ( )* !* % ! + ! % % ! # $ # - . /)) * # % ! + 0 $ *$ 1 2 ! 3 ! ( # 4 5* % 0 " % 5* % !* ! $ % # 0 *! # 3 ! # # 4 5* %

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

6 # # 0 ) $ 7 % # # , ) $! ' '' & ' ' && ' & & , , ' ' ;

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$ - ) 0 ## + # " $- :: 5 + $- :8 5 + $- :! 5 +

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

123

! " # $ $ % & ' ( )) )* + % ! & ' ( ), " # -

& ' %

&' * . &' 1 . &' 3 . &' 33 . &' 3* . &' 31 . &' ) . &' )3 . &' )1 . &' *

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124

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

4. SIGNIFICANT ACCOUNTING POLICIES

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& & !""# & !""# & !""#

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

125

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

! " "

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

127

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

!! " # $

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

129

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

! " " #

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

131

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

! " # $ %& ' " # $ (

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

133

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

! " ! " # $ ! $ ! " ( ) * + "

% & ' % & ' % &

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

135

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

! " # $ %

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

137

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

5. INTERBANK AND MONEY MARKETITEMS (ASSETS)

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

139

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

, " "

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7. INVESTMENTS

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

141

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

( ! .*!

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

143

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

! " ! ! ! ! # ! $ $$ % ! $ & % ! ' ( % ) * + , & % ! -. " % ! % # ! % " ! * / & 0 " , & % # #

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

145

! " #$ % " " &

( $ - . $ ' / 0 / , 3 * ! % ' / 0 / *$ * * ' / 0 / - - $ 5$ ($ - * ! % 5$ - * 5$ - 8! 9 5$ - -$

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

! " # # ! " " " $ ! ! # % & ! !

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

147

8. INVESTMENT IN SUBSIDIARY COMPANIES ! !! " # $ % !

& ' 0 % )! 1 0 4 & 1 5 1 0 5 & 1 5 1 0 8 , # & 1 5 1 0 - 9 & 1 5 1 0 : 5 # & 1 5 1 0 , # % & 1 5 1 0 5 # ! ! & 1 5 1 0 0 # ! & 1 5 1

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

! "# " $ % & ' ( )# # ( # ) ( * # + , " % - % + ' . + ' - % % /% " 0 + , # ( 12 ' , % ( 12 + "

9. INVESTMENT IN AN ASSOCIATED COMPANY

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

149

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150

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

10. LOANS AND ACCRUED INTEREST RECEIVABLES

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

151

# $ ) * + , -* + , . /

* 0

! % & + %!'' +'(% && %' (

! " %' & ( % " ++%( '%+( + '%" ! + '%"&! (%+&' % "

! "

1 2 3

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152

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

% (" '' %' (

&%& '' (%+&'

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% *+% " "% + " "% + % 0 %"

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

153

# # *+ # + + # / #

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+ &

% '(() ,') -()

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/ /

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

155

% ! %

! ! ! "# "$ "$

& )*

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! ! " # $% %

" ! " # & '

) - .

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

157

! " # $ " $ ! % % & ' ! ()* "$ $ ! + #, + - ' / 0 $

. % - $ ! $ $ % " $ #1 '

2 $ 0 # $ " & ' 3 4

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! "

65 6 4 65 55 5

$% $ ! % " ! ! ()* "$ 7

158

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

! " # "# # # " # # " # "$ $ # %# % # # " # # # & $" '

" +#""# +#""# - .

) "# # %# # #" # & $" # # " # # "# # ($" " "# # & /01 , * # % # ( " " " ( $" 2

"" % $ $"

$ (# * "" " ( "$ # $ +#""# +#""# +#""# +#""#

! "

$ # # 2 2 # & # $ # # $ # " # # # $ # # $ # #( " $ # #( " (# " "" % $ $" $ # %# ) # # # 3 # / $ # # 04 & * # # 5/0*6 "" % '

$ $" /$ 1 " : " ( "" % $ $" $ (# # $

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9$# 2 /0*

57 # ' +#""# 6 "" % $ $"

$ (# # $

1 ( $ #( " % $ # & " % # 9$ " " & $ # # ,

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

159

" # ! $ $ ! # % &' % ( ) * - . . ,

- ,,-

+ " , # /" , - # /" # $ 0 ! "

! "#$ %FOR & 'DOUBTFUL ()*%( ## ("*+ 11. ALLOWANCE ACCOUNTS &' % ( ) *

4 ) $ $ #

# ! ! 5 & * $ # & - * 6 " " $ ) " # ) ) #

160

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

2! -,

+ 1 # 2 3 ! " - . -, ,,

- ,-

, -

* ,

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* -

( # +

+ , 1 & + ! 2 ) ) & 3 # & & + # ) # 3

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12. REVALUATION ALLOWANCE FOR DEBT RESTRUCTURING

# +

+ 5 1 & + 6 5 & + * 3 &# & &

! " # 4

$%% $%% $%%, ! ! $. !! !! - -% -% !% ! !%

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

161

13. BAD DEBTS AND DOUBTFUL ACCOUNTS ! " # ( +

- . ! /

$ ' + 0

$% # & ' ) * + + , $ ' +

$,' +

14. CLASSIFICATION OF ASSETS - + 1 ! 2/ ! # $% # & '

6 )* )

162

3 . + + 0+ 0 + + 00 + + + , + , ,+ +

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

) * 4 * 5 .

2 0 , , 0 0 ,

/ + 0+ , + + 0 + ,+ 0

+ + , + +0 , +0

15. PROPERTY FORECLOSED

$ (

(

)

$ + , $ , $ ) * $ $ 1

+ , $ 2 3 ) 4

!" # $ %&&' ) * ( *$ ) #

!" # $ %&&'

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(

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% "0 %

!! "0&%

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/ !0'"'

" "0 &-

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

163

16. LAND, PREMISES AND EQUIPMENT

& !' # ! ! ! ! % ! "

$ !

)* + ! , 2 ! ! !3 2

164

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*./

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,0 /.

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*-* )*4

! # "

) * + ! ,--. 3 ( + * + ! ,--/ 3 * + ! ,--. + + 5 * + ! ,--/ 6 ! ' " * + ! ,--. * + ! ,--/ +

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$ 5 0* 9 : 1 ' ! " 7

" 8 " ! 5 ! 8 1 ! 1

$ 5 2-

4/ 1 " 5 9

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

165

17. INTANGIBLE ASSETS-SOFTWARE

)' * - (

( * )

& "

( '

)' * - (

( * )

& "

( '

! " ##$ ( % & " &

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# 2 # + $ / . .+ $+

( ! " ##$3 4 '" 5 )' * * 5 " ' "' ' * & 3 " ' & ' ' 3 '

& )) 6 .$ )

166

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

18. OTHER ASSETS

# $ % ( ) ) ) * + , ) % - $ $ . + ( )

$ $ % 0 1 # 2 . ( 1

2 4

! "! ! "& / ' " & 3/&' / 3!/

! " &! ' & ! "& &!" ! ! ' " ! &'" / '3"/" '3& & ' '3"&& '3&

! !3// 3&&

! " / & 5 /3'!! 35'' 3&& /3!5

19. DEPOSITS

)

$ + 6 7 - , . "

) ' 7 #$ ' 7 2

&/3!/5 53! & 3!&! '5'3'

&/3/& 53! & 3!! '5'3 &"

/3'/! 5 3&5/ /3' & '5/35/'

! " # $ $% " & $ " &

4 $ ' 7 8 #$ ' 7 2

! '/!3!& 3 !! '5'3'

! " '//3'"5 '//3 !5 3 !! ' 35 '5'3 &" '5/35/'

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

167

! $% & % " ' $%$&$

# ( ) * + # ,

! " $% &%$' $%'&%'$ " ' $%$& " $%'&%'$

20. INTERBANK AND MONEY MARKET ITEMS (LIABILITIES) ! " ! # $% & $! " $' () ! ) '*

! - , , # + , . , ( / * # 0

(* 1 . ( * 3 * + + . / , * + / +

$&% 2 '$" &! 2

$' $& " & 2%

$' & ' & &!"

! !

& 2%

! ! &!"%

&!2

# + , . , ( / * # 0

(* 1 . 3 1 . ( * 3 * + + . / , * + / +

168

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

! ,

$&%"" ' ' &'$'

$& ! &

! ! &'

" ,

$' $ $&2

& !$ & ! &' '

% &$$

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21. BORROWINGS !" # $ % &

*+) (- - - %

% ) % % . $ / $ 1 % 6 +

6 +

, ) - ! & # - +

( )

0 1 2 )

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0 1 4533 )

$ 1 %

0 % 7 #8. 4 / - 5 ) 0 1 5 )

" - - % - 7

2 3 3 43

----------------- ----------------- -----------------

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

169

! " # %! !

% $ % "

, %! !

% % % $$ / # / #

/ #

% &' ( ! )**+ %

)**+

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22. OTHER LIABILITIES

; ! 6 5 % # % < % % 5 %

5 ! $ % % ! % ; !

170

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

)**+ ) ) '+ 1 ) '1 )1 &2' 3

)**+ )** )30 3* 1 *& '1 3& )2))0

'2&&& '3 '&) 3'& )23&)

23. CAPITAL/DIVIDENDS SHARE

! " # # !$ # % &

" # # ' ( )( % " ( * (+ , - . )( + , - . % " ( * /0 +( -+ . , 0 % " ( 1 2 ! # % 0 3 '' # (( 0 1

" # # ' (+ , - . )( + , - . % " ( * ( +- (. . ) ( + -(. . % " ( * /0 - - - % " ( 1 2 ! # # % 0 3 '' # (+ 0 1 2 - - % " /0 " # ' ) ## # % # # ' ' 0 / % ! ! 4 " # 5 ' )6 4 57** (-1 1 2 ! # # (. 8 0 1 2 + % / 9 % : # # ' # '/ / # / # 9 / # ' 0' % # 0 # # 1

0 ! " " 0' 1( ' # ' 0 - (. ' 1

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

171

24. REVALUATION SURPLUS (DEFICIT) ON INVESTMENTS

! !" # $% # !" " # & " # '( #$ % $

& % '

*+' , '

. ' , $

$ % $

' ' / , 0 ' +' , 1 !" ) * + !" " # & " # '( #$ % $

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) !

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25. STATUTORY RESERVE , -

4' '

((" 4'% 5 # 6*6 - 7 8 +' ' , $

' / ' ' % '/ 9 , '

$ (

/ 6 1 ' , $ $ % $ %' 6 # -( & % !7 8 2)7 - 7(-( , ! ' , $ 6

172

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

26. CAPITAL FUNDS ! " # $ % & $ ' $ $ ( # ) $ " # ) "*+* % $ $% , 0 1 1 & 3 ) & $ ! 4 0$ 0 11 & $ 3 4 $ $ $ 5 4 $ $ 6 ! 0$ 0$ 0 1 0 11 7 , 5 4 $ $ 6 ! 0$

-( , . $ " /

' ' 2

' 2'

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" #8 $ % $ "908 ) $ $ $% ,

0$ $ # - / 0$ 0 1 $ # - /

: $ $ " # * *

. 6 ! "90 2* '*

: $ $ " # *

2*2

. 6 ! "90 2* '*

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

173

27. GAIN ON INVESTMENTS !

* ) , " & ! - . / . 2 . . 3 . * ) -

' " & + +

"# ! $

% & ( ) " & "+& 00 +

1 " & 1

* 4. 5 . ) ) 67

$%8 9 6 " ) & 9 ' ) "- ' ) 9 6& : )

) %

" ! % : . % 1

5 .

$ ; < ** ' ) (.)) 5 . . 6 - . )

. % 61

28. NUMBER OF EMPLOYEES AND PERSONNEL EXPENSES

=. ) "9 & 9 >) "$

% &

174

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

' 5 7 5 1

( ) 75 50 + 5+ 1 5 +

29. DIRECTORSÂ´ REMUNERATION

! " # $ % & ' (

' ( ) * & +! % ,!!-& % . / 0 ( 0 ' ,), ) 30. LOSS (GAIN) ON PROPERTY FORECLOSED AND OTHER ASSETS

# 10 2 + ,!!- ,!!

0 3 $ ,!!5 10 2 *

2 8 10 2

14 3 / 2 ,!!,!! 67 9

1+62 1 2 1+ 2

31. CORPORATE INCOME TAX

$ ' & 0 0 ' ' ) 32. EARNINGS PER SHARE

0 ( 0 0 ( 0 0 )

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

175

33. PROVIDENT FUND

! " #$# %&'# $

( % #

# ) *

''+( , %-

. / - 0# 34. RELATED PARTY TRANSACTIONS

) *

''+ '' ( * #

# # .1 / 2 0 !

&3 ) 4 5 ''+ ''+ '' ! "# 5

.* + 0 6

176

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3+'

3 +

6 ,

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; , 9 , ) ; ,

3 7 %' 3+ &

33+ %' 3+ &

%& 3 3 & 777 :

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

* .!

''+0 "

" -#3 % 8 # %

" *

( " %#% #37 " *

" 4 (

)* ! *

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! /6 &, 7 /6, #

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! '6, 6 , 7 .6, #

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2# &( & / 8 2# & &. &' ! "

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

177

" " # ) ! , + ' " , + 1 2 2 $ ( ' " 1 , + 1 2 2 $ ( 1 , + 1 2 2 $ ( ' "

$% # & ' ( * + !

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178

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

! " #$$% & ( ) " * ( " " )

! - / 0 6 / 0

708090 & " ! 03 ' 0 & ( 9 / 0 9 " ! "" ) / 0 9 " ! * ) / 0 + "-

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4 #

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/ 0 ( ! 03 ' 0 ' & ! 03 ' 0 7 ' ! 03 ' 0 ) ! 03 ' 0 ' &-- ! 03 ' 0 , -" ! 03 ' 0 " ! 03 ' 0 8 " ! 03 ' 0 6 / 0 708090 & " ! 03 ' 0 9 " ! "" ) / 0 & ( 9 / 0 9 " ! * ) / 0 + "-

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% $ 25: 3 :

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

179

! " # $ ! % # " &

, - . /

, + & * - /2 #/

7/8/ / * - /2 #/ - " . / - $ " . / ' #

& #

(

! " # $ " ) *

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012

45 45 6

46 9 4 354

620 42 90 9 2190

4 00

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440 440

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04 ( 3 # 2 " $2 & # $ # # ) , + & # 7 4 /6 / 04 ( 32 " # & # % % & * : $ 00 # ) $ # $ * * # #; # 455 / 04 ( 3 # 2 " # & # % ) * # ) : & % $ " # ) , + & # * % & 2 &# * # ) * ) $

(

- # # 3 56 011

3 56 56 011 93

( # * < & (& * $ 32 " # & # # $2 * ) # * & " $ * 2 &# * # 2 * 444 5 /

180

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

35. FINANCIAL INFORMATION BY SEGMENT

! "# ! $ % &

% ' ( - .

( (

( ( ( / )

( ( 3( -

- 5 6

5 $

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1 1 2 0 4

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110 4 0 4

, % ': . . / ( / ' / ( / / / , ; 7 ( . ( /

( /

;

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

181

36. COMMITMENTS AND CONTINGENT LIABILITIES

+ - ) ( ( ( . - 1 $ ' ( ) 2 . # ( $ 3 & ( ) 2 . 3 4 2 . & ( 2% + 1 $ *

182

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

! " # $ % & ' ( ) * # $ , , / /

///

,0,

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# ' ! + ! $% 29 !

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+ ' "

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' + ! 0 '" -, 4 ' 0 5 + / # !

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+ /

! &

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

183

! " # $ % % & ' ( )* + & $ ! # & " ) ' & & , - + % , ! '$ & . # & & ! % ) / )* + &

' ( )* + & $ ! & % " %

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& %

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! " & % < &

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184

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

!" # " $% $% # ! " " ! " ! # & %$ ! # !

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ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

193

39. RECLASSIFICATION

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194

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

REMUNERATION FOR THE AUDITOR The Audit Committee determines the qualification and performance of the auditor and requests the approval for the selection and remuneration of the auditor from the Board of Directors, in order to obtain the further approval in the shareholder meeting. Note that the list of candidate auditors must be approved by the Bank of Thailand. The proposed auditors are required the permission of Bank of Thailand. Thus, the Bank of Thailand officially informed by For. Kor. Tor. (02) 258/2550 on Subject about the permission of the Bank of Thailand on an auditor for the accounting year 2007 on March 22, 2007. The 3 auditors are named as following: 1. Ms. Ratana

Jala

Certified Auditor No.3734; or

2. Ms. Rungnapha Lertsuwankul

Certified Auditor No.3516; or

3. Mr. Narong

Certified Auditor No.3315

Pantawongs

of Ernst & Young Office Limited, being the auditors of the Bank. â&#x20AC;˘ The Relationship of the auditor and the Bank The proposed auditors have no relationship in any fields with the Bank. â&#x20AC;˘ The matter of the auditors of Subsidiaries and associated companies in Thanachart Group Subject to the Bank in one of the companies of Thanachart Capital Public Company Limited, proposes the Ernst & Young Office being an auditor of Thanachart Group. In 2007, the Bank paid Ernst & Young office for the remuneration for the auditor which consists of 1. Audit Fee Thanachart Bank Public Company Limited paid audit fees to Ernst & Young Office Limited with details as follows: 1.1

Audit fee has worth Baht 6,400,000 for auditing the financial statement for the past year, which was signed by

Ms. Ratana Jala, Certified Public Accountant. 1.2

Other expenses has worth Baht 398,703 which related to the auditing of the financial statements for the past

year. The payment was made to the audit house of which for Certified Public Accountant was a member. 2. Non - Audit Fee The Bank made payments for other services including social audits in line with the requirements of the Bank of Thailand to commercial Bank auditors for Baht 350,000 and there was no fee to be paid in the future for the contacted services not yet rendered in the past fiscal year. Apart from the fees mentioned in 1 and 2 above, there was no other fee for the past year that the Bank had to pay to the auditors of the Bank, the audit house, of which the Certified Public Accountant was a member, persons or businesses which were related to the auditor as well as the audit houses, of which the Certified Public Accountant was a member.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

195

CORPORATE GOVERNANCE The Bank fully recognizes the importance of putting in place a

governance principles and the best practices. It covers the

process to bring about good corporate governance since it is a

right to attend the shareholders’ meetings, the right to appoint

basic factor which helps enhance the efficiency of the Bank’s

proxies to attend the meetings and vote on their behalf, the

business operations. Importantly, it enables the Bank to achieve

right to propose a list of person to work as director, the right to

a sustainable growth which is widely acceptable both locally

cast votes on the Bank’s various businesses, the right to

and globally. As a result, it will enable the Bank to achieve an

receive dividend, the right to express opinions and ask

important goal which brings about the maximum benefits for

questions at the shareholders’ meetings, and the right to

all parties concerned. These include shareholders, investors,

receive adequate information in a timely manner.

other stakeholders and society as a whole. In holding the meeting of the shareholders, the Bank will In 2007, the Stock Exchange of Thailand promoted the

send the shareholders information about the date, time and

good corporate governance for all listed companies. The 15

venue of the meeting as well as information supporting the

principles were amended and added by comparing with the principles of Corporate Governance (2004) of the Organization for Economic Co-operation and Development (OECD). It had taken into consideration the opinions and suggestions from the listed companies and representatives from the listed company associations and made changes in order to suit with the listed company nature. The updated version also includes the recommendations made by the World Bank in its Report on the Observance of Standards and Codes related to Thailand Corporate Governance (CG-ROSC) for the listed company in 2006. Based on the updated version, the principles and the recommended best practices are presented in five categories namely: rights of shareholders, equitable treatment of shareholders, roles of stakeholders, disclosure and transparency, and responsibilities of the Board.

meeting agenda as well as the related opinions of the Board of Directors, specifying clearly which agenda item is for information only or for consideration. The information will be sent to the shareholders 14 days before the meeting date, together with details about the various agenda items as well as adequate supporting documents for decision making on various agenda items. As well, the information will be made available through the Bank’s website. In addition, in the notification to the shareholders, details will be given about the documentation and evidence which need to be brought by them on the date of the meeting. The objective is to protect their right to attend the meeting. The proxy statement is also sent with the notification in case the shareholders wish to appoint a proxy to attend the meeting on their behalf. To facilitate this, the Bank makes an arrangement that the

The Bank has adopted into full practice the Stock

Chairman of the Bank’s Audit Committee is one of the

Exchange of Thailand’s principles and the recommended best

persons whom the shareholders may appoint as their proxy

practices under the five categories and the guidelines

to attend the meeting on their behalf. It is also possible for

established by state agencies as well as those of the regulators

the shareholders to appoint as their proxy any person other

which govern the Bank as a listed company on the Stock

than those on the list proposed by the Bank.

Exchange of Thailand and as a public company. The actions undertaken by the Bank can be summarized as follows :

1. Rights and Equitable Treatment of Shareholders

196

The Bank also made an arrangement, through its website before the meeting date, for the shareholders to exercise their right to propose names of persons to be appointed as directors or to propose agenda items or any matters related to

The Bank respects and pays great attention to the rights

the Bank’s business operations to be discussed at the

of the shareholders. As a result, it has specified the rights of

shareholders’ meeting. The Bank continues to pay attention

the shareholders and the practice of equitable treatment of

to disclosure of accurate and adequate information in a timely

the shareholders in Thanachart Group’s good corporate

and transparent manner, both in Thai and English, to the

governance policy. The policy is based on the good corporate

shareholders. The timeframe set by the Bank for making the

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

proposal of the persons to be appointed as directors or the

During the course of the meeting, all the shareholders were

proposal of additional agenda items for the shareholders’

given equitable and appropriate opportunities to express their

meeting was about one month, which was in January 2008.

opinions and ask questions. Votes were cast and counted in a

However, there is no timeframe specified for making

transparent and efficient manner. The Bank counted one share

proposals for other matters. This represents another channel

as one vote. Resolutions were adopted by a majority vote, with

for facilitating communication between the Bank and the

the exception of those resolutions which required at least two-

shareholders. The shareholders’ opinions and suggestions

thirds or three-fourths of the total votes of the shareholders

would be forwarded to the unit concerned.

who attended the meeting and were entitled to vote. In casting

Annual General Meeting of the Shareholders

votes, the shareholders were required to use the ballot papers only when they wished to cast their votes against the

The Bank’s Board of Directors always pays great

resolution or wished to abstain from voting. These ballot

attention to the meetings of shareholders. Apart from

papers would be kept for later verification. The Chairman and

informing all the shareholders of details related to the meeting

the management provided the shareholders with any

well in advance, it makes arrangements to provide the

information requested by the shareholders. As well, the Bank

shareholders with convenience in terms of easily accessible

took minutes of the meeting and recorded the verbal

venue for the meeting, adequate supporting staff at the

discussions for each agenda item in detail. The minutes of the

reception area, register, registration of attendance using a

Annual General Meeting of Shareholders 2007 and the

barcode reader, use of device and equipment to support the

Extraordinary Shareholders Meeting No. 1/2007 were sent

meeting, printing of ballot papers for each agenda item, and

the Stock Exchange of Thailand 14 days after the meeting.

etc. Importantly, the shareholders can make registration for

They were also made available to shareholders through the

attending the meeting over two hours in advance. They are

Bank’s website.

also given ample opportunities to express their opinion and ask questions during the meeting. Their important questions and opinions will be recorded in the meeting’s minutes.

At the Annual General Meeting of Shareholders for 2007, the Chairman of the Board of Directors chaired the meeting. All the following eight members of the Bank’s Board of

The Bank organized the Annual General Meeting of

Directors were able to attend the meeting to answer the

Shareholders for 2007 on 30 April 2007 at the Royal Orchid

questions raised by the meeting. The attended directors were

Sheraton Hotel. The meeting was called to order at 15:00 hours.

as follow :

The shareholders could make registration for attending the meeting since 13:00 hours. There were 73 shareholders and proxies, accounting for 1,451,053,924 shares or 99.49 percent of the issued and paid-up share capital, attending the meeting. The Bank held the Extraordinary Shareholders Meeting No.1/2007 on 1 October 2007 at Pathumwan Princess Hotel at 15:00 hours. The shareholders could make registration for attending the meeting since 13:00 hours on ward. There were 94 shareholders and proxies, accounting for 1,726,522,728 shares or 99.53 percent of the issued and paid-up share capital. To provide the shareholders with greater convenience, the Bank used video presentations at the meeting, in addition

1. Mr. Banterng Tantivit Chairman / Non-Executive Director 2. Mr. Suphadej Poonpipat Vice Chairman / Chairman of the Executive Committee / Chief Executive Officer 3. Mr. Kiettisak Meecharoen Independent Director / Chairman of the Audit Committee 4. Mr. Narong Chivangkur Independent Director / Chairman of the Remuneration Committee / Chairman of the Nomination Committee 5. Mr. Suvit Arunanondchai

to the supporting documents. Before commencing the

Independent Director /

shareholders’ meeting, the Bank also gave the shareholders

Director of the Audit Committee /

clear clarifications on vote casting and counting procedures.

Director of the Nomination Committee ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

197

6. Ms. Suvarnapha Suvarnaprathip Director / Vice Chairman of the Executive Committee 7. Mr. Vichit Yarnamorn

The assessment was carried out with scores given to four parts including the period before AGM, the period during AGM, the period after AGM and bonus points. The total scores were 110

Non-Executive Director /

points. There were altogether 460 companies participating in

Director of the Remuneration Committee /

the assessment project. The Bank received a combined score

Director of the Nomination Committee

of 92.00 points, which was considered a “good” rating. In

8. Mr. Bundit Cheevadhanarak Director / Director of the Executive Committee The Extraordinary Shareholders Meeting No.1/2007, Mrs. Michele Chiu Kwok, Mr. Brendan George John King and Ms. Suvarnapha Suvarnaprathip did not attend the meeting due to their business agenda overseas. The Chairman acted as the Chairman in the meeting. And there were seven directors who could attend to respond to the shareholders inquiries. These seven directors included : 1. Mr. Banterng Tantivit Chairman / Non-Executive Director 2. Mr. Suphadej Poonpipat Vice Chairman / Chairman of the Executive Committee / Chief Executive Officer 3. Mr. Kiettisak Meecharoen Independent Director / Chairman of the Audit Committee 4. Mr. Narong Chivangkur Independent Director / Chairman of the Remuneration Committee / Chairman of the Nomination Committee

comparison, the average score of the companies listed on the Stock Exchange of Thailand was 74 points.

Conflicts of Interest To prevent conflicts of interest, the Bank’s Board of Directors acts prudently when there are any transactions which may have conflicts of interest. The Board has established a policy and approval procedures related to conflicts of interest. The policy and approval procedures are put in writing with all details disclosed to all the parties concerned. The Board has also established a policy and measures aimed at preventing executives and related parties from making use of inside information for personal advantage. •

When there is a transaction which may have a

conflict of interest, a connected transaction or an affiliated transaction of any parties that are related, the matter will be sent to the compliance unit for evaluation in line with the rules and regulations established by the Stock Exchange of Thailand, the Securities and Exchange Commission, and the Bank of Thailand. After receiving the comments, the matter will be submitted to the authority which has the power to consider the matter.

5. Mr. Suvit Arunanondchai Independent Director /

•

In its announcements made to various committees,

Director of the Audit Committee /

the Bank requires that in any transaction from which the

Director of the Nomination Committee

director, executive or related party gets some advantage, the

6. Mr. Vichit Yarnamorn

information on the vested interest in connection with the

Non-Executive Director /

transaction has to be disclosed. The director or the executive

Director of the Remuneration Committee /

with the vested interest is prohibited from attending the

Director of the Nomination Committee

meeting which considers the agenda item related to the

7. Mr. Sathaporn Jinachitra

transaction.

Independent Director / Director of the Audit Committee

•

In approving a loan application or an investment

project from which the Bank’s director or high-level executive

198

The Thai Investors Association, the listed companies

gains some advantage, or in approving a loan application of

and the Securities and Exchange Commission (SEC) jointly

the Bank’s major shareholder or high-level executive, the

organized and launched the Annual General Shareholders

related transaction can be executed only after it receives

Meeting (AGM) Assessment Project for the second year with

unanimous approval from the Board of Directors, with neither

improvements and clearer clarifications made to each part.

the director nor the high-level executive with the vested

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

interest participating in the consideration and approval of the

misunderstandings to the general public or the shareholders.

loan application or the investment project. •

In preventing use of inside information, the parties

When the Board of Directors is aware of any transaction

concerned are prohibited from trading shares of the Bank

which may have a conflict of interest or of any connected

during the period of 45 days, starting from the last day of each

transaction, the Board will consider the transaction in a

quarter, and during the period of 60 days, starting from the

prudent manner and comply with the rules and regulations

end of June and December. In 2008, the related rules and

established by the Stock Exchange of Thailand, the Securities

requirements will be improved, after which they would be

and Exchange Commission and the Bank of Thailand.

announced and be complied with.

•

The information disclosure of the transactions which

•

In an event when there is a use of the inside

may have conflicts of interest or connected transactions or

information for one’s own interest, it will be considered as

affiliated transactions has to comply with the rules and

a violation of the established policy on the use of inside

regulations established by the authorities concerned.

information, the party concerned will be subjected to the judgment of the Disciplinary Committee.

•

All related transactions will be verified in line with the

annual audit plan, the report of which will be presented to the

2. Roles of Stakeholders

Audit Committee. The Bank respects the rights of every group of The Board requires that information about business

stakeholders, regardless of whether they are internal

relationships or businesses in which members of the Board or

stakeholders or not. The stakeholders include shareholders,

the top management are involved has to be disclosed

the Board of Directors, staff of the Bank and its subsidiaries,

quarterly. This information will be used to control transactions

or whether they are external stakeholders including

which may have conflicts of interest. It will also serve as a

customers, trading partners, lenders, the public sector, and

database of names, from which the Bank can obtain lists of

other related agencies. The Bank also places emphasis on

transactions with the related businesses, which will be

corporate responsibility towards the community, the society

disclosed in the notes to the financial statements.

and the environment. To ensure that the stakeholders will

•

Supervision of Use of Inside Information

receive appropriate rights, the Bank has established practice guidelines in writing in the Bank’s Business Ethics and the

The Bank requires all its work units to organize

staff’s Codes of Conduct. The information is publicized through

an appropriate system for keeping the inside information in

the Bank’s website and corporate media, so that the Board of

compliance with good corporate governance principles.

Directors, executives, and staff at every level will strictly

•

adhere to the guidelines in carrying out their duties, and that •

In compliance with Section 59 of the Securities and

Exchange Act B.E. 2535, executives at the level of Executive

the stakeholders are confident their rights are always taken care of. The stakeholders include the following :

Vice President or higher as well as members of the Board of Directors are required to make a report showing changes in their securities holdings to the Office of the Securities and Exchange Commission.

Shareholders The Bank is determined to manage its business operations, with an aim to achieve a strong performance and

The Bank’s Board of Directors, executives and

a sustainable growth as well as being competitive. The

employees are prohibited from disclosing the inside information

objective is to give an appropriate return to shareholders on a

to any third party or from seeking any benefit for their

regular basis. In managing the business operations, the Bank

own interest or for the interest of the related party by taking

takes into consideration risks, efficient internal control systems,

advantage of their position or using the Bank’s inside

and disclosure of information in an accurate, complete, timely

information. As indicated in Thanachart Group’s codes of

and transparent manner. Importantly, the Bank makes

conduct, the employees are required to be cautious in

arrangements to provide the shareholders with convenience

disclosing information and in any act that may cause

in exercising any of the rights they are entitled to.

•

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

199

Employees

Customers

The Bank treats their employees equally and fairly,

The Bank is determined to develop products and

ensuring that they will be compensated appropriately. In

services that cater to all financial needs of the customers. It is

adjusting staff salaries, the Bank conducts surveys and takes

the Bank’s policy to charge appropriate fees to the customers

into consideration the inflation rates as well as the consumer

and to provide the customers with complete information about

price index. As well, the Bank has established Key Performance

the products and services before the customers make their

Indicators (KPIs) which are in accordance with Thanachart

decision. The Bank receives suggestions and complaints about

Group’s key business strategies (or CEO’s Six-Point Agenda).

its products and services through various channels such as

The KPIs will be used to measure staff efficiency and to award

the Bank’s website (www.thanachartbank.co.th), marketing

compensation. The Indicators will also be used to enhance

staff, and Thanachart Contact Center (1770). The Bank has

staff performance and to promote staff to higher level

also established a special unit responsible for following up the

positions in a fair and timely manner. The Bank also provides

customers’ complaints and giving feedback to every customer

its staff with other welfare benefits including medical expenses,

who lodges the complaint. In this connection, a monthly

vacation, provident fund, savings cooperatives for Thanachart

report will be sent to the Board of Directors for information.

Group’s staff, fire drills, upkeep of workplace environment,

The customers’ suggestions and complaints will be used for

security for life and belongings. The Bank also organizes

improving the Bank’s services so that the Bank will be able to

activities with an aim to promote good relationship among staff

satisfy the customers’ needs when they use the Bank’s

of Thanachart Group by publishing and circulating monthly

services next time.

magazines entitled “Tor Saiyai.” Moreover, the Bank also circulates news and information about rules and regulations,

Trading Partners and Lenders

products and services, as well as Thanachart Group’s

The Bank maintains the positive reputation of Thanachart

activities through its Intranet system.

Group in its business dealings with its trading partners

As regards to human resource development, the Bank

and lenders. This starts from the selection process to the

accelerated the development of Thanachart Group’s staff with

fulfillment of obligations as well as the observation of the

an aim to provide the staff with knowledge, ability and skills

conditions which are mutually agreed upon. This includes

necessary for successfully carrying out their duties and

fostering of good relationship with an aim of building

responsibilities as well as giving customers the highest

confidence for long-term cooperation.

satisfaction. The Bank also changed its human resource

Competitors

development strategy in line with the Bank’s business strategy, with focus given to enhancing professionalism of

The Bank conducts its business affairs within rules and

staff in their respective field of work, e.g. selling skills, service

regulations under fair competition. It does not slander its

delivery, credit consideration, risk management, leadership,

competitor. Nor does it hit its competitor when it is down.

and effective management. The focus is also given to

It does not seek confidential information of the competitor in

ensuring that staff is able to adhere to the principles of good

a dishonest or inappropriate manner.

corporate governance and the Bank’s codes of conduct.

Society and Environment

Standard tests would be given to participants of the training

200

courses. The Bank encouraged its staff to acquire investor

The Bank recognizes the importance of good custom

contact licenses from the Office of the Securities and Exchange

and tradition as well as laws and rules for the purpose of

Commission and the Association of Investment Management

maintaining and rehabilitating the society and the environment.

Companies. They are also encouraged to acquire other

It operates its business responsibly. It also participates in

professional licenses in some specialized fields so that their

and organizes activities which benefit the society and the

standards of work will be well acceptable.

environment.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The Public Sector In its conduct of business affairs, the Bank considers it very important to observe the laws and to comply with the rules and regulations established by the authorities. The Bank will not join or do business with organizations or persons violating those laws.

financial and non-financial, in an accurate, complete, timely and transparent manner through channels which are easily accessible, equitable and reliable to all groups of the stakeholders. Moreover, the Bank is also committed to manage its business in a manner that shows its responsibility to the society as a whole and the environment. The Bank and its staff are committed in behaving themselves as a good

3. Information Disclosure and Transparency Corporate Governance Policy, Business Ethics and Codes of Conduct for Directors, Staff and Executives

citizen by using financial capital, human resources and energy wisely. The Bank’s Board of Directors and its staff regularly participate in organizing activities which promote environmental protection as well as social and community

The Bank’s Board of Directors has established a policy

development. The Bank recognizes the importance of its

on corporate governance, which covers key principles about

responsibility towards community development and support

the structure, roles and responsibilities of the Board of Directors,

for local intellect. It encourages its staff to participate in

and the determination to manage business in a transparent,

various social activities related to education, arts, culture and

open and accountable manner. They are distributed through

environment to a certain extent as deemed appropriate. The

the Bank’s website (www.thanachartbank.co.th) and

principles of good corporate governance also encompass the

Thanachart Group’s Intranet system. This will enable all staff

structure of the Bank’s Board of Directors, the composition of

of Thanachart Group at every level to have easy access to the

the Bank’s Board of Directors, roles and responsibilities of the

information and study the related details. The key objective is

Bank’s Board of Directors and various committees. This also

to send a message to the Bank’s staff, shareholders and other

covers risk management and internal control, staff’s codes of

stakeholders about the Board of Directors’ strong determination

conduct, the policy governing the use of inside information,

to comply with the key components of the good corporate

guidelines on course of action in the event of conflict of

governance process, which including the following :

interest, and relationship with shareholders. The policy is made

1.1 Honesty 1.2 Transparency 1.3 Independence 1.4 Fairness

available through Thanachart Group’s Intranet system to enable all staff of Thanachart Group at all levels to have easy access to the information and study the related details. In addition to the distribution and the implementation of

1.5 Accountability

its policy on good corporate governance which was conveyed

1.6 Social Responsibility

to the staff at all levels since 2003, the Bank has included the

The above key components of the good corporate

topic on Thanachart Group’s corporate governance as part of

governance process are included in the Bank’s corporate

the orientation course organized for new staff. The purpose is

governance policy which is communicated to the staff at all

to educate its staff about the corporate governance from the

levels. It integrates missions, the values it expects to have,

beginning when they become the staff of Thanachart Group.

vision and business ethics, as well as the code of conduct of

Moreover, since 2004, the Bank has regularly encouraged its

the Board of Directors and executives together. The policy

staff to acquire more knowledge about corporate governance

reflects the value systems, guidelines and direction of internal

by preparing publications and materials about the corporate

practice, which ensure the Bank’s compliance with the

governance and distributing them to the staff. The purpose is

principles of good corporate governance for listed companies.

to instill the staff with the good corporate governance and

Every member of the Bank’s Board of Directors recognizes the

encourage them to practice it as part of corporate culture. In

importance of their responsibility in managing the business

2007, the Bank also organized a training course on Good

for the maximum benefits. The Bank’s Board of Directors also

Corporate Governance for executives and staff both of the Bank

places strong emphasis on disclosure of information, both

and Thanachart Group, in which 1,635 people participated. ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

201

Furthermore, Thanachart Group moved towards the

different areas with the aim of protecting the benefits of all the

development and improvement of its business operations as

Bank’s stakeholders concerned. The details about the roles of

well as the development of its human resources under the

the Board of Directors and each committee, the number of

framework of good corporate governance. The Group plans to

meetings held by each committee as well as the number of

improve its good corporate governance policy. The policy itself

meetings attended by each director in 2007 were already

is also subjected to the review annually. As well, the Group

disclosed in this annual report.

plans to improve the business ethics and the codes of

Control Systems and Internal Audit

conduct for directors, staff and executives. They serve as a practice framework which Thanachart Group’s personnel are

As the Bank places emphasis on efficient internal

required to adhere to. The Group also plans to organize a

control systems both at the management and frontline levels,

campaign aimed at encouraging its personnel to recognize the

it has defined the duties and responsibilities as well as the

importance of doing business by observing the fair principles,

scope of authority of the operating staff concerned and the

ethical standards, and good corporate governance. As well,

executives clearly in writing. The Bank attempts to ensure that

the Group plans to organize activities with an aim to make

its assets are properly controlled and used. Moreover, in order

contributions to the communities and the environment in

to have a system of check and balance, the Bank separates

areas where the branch network is located.

the duties of staff who work at the frontline level, staff responsible for controlling and for evaluating the performance.

Reports of the Board of Directors

As well, the Bank has put in place the internal control

The Bank’s Board of Directors is directly responsible for

mechanism for financial systems by establishing a system of

the financial statements of the Bank. In this regard, it has

deliver financial reports to heads of the units concerned. It

assigned the Audit Committee to be responsible for making

has also established a unit responsible for monitoring the

sure that the financial statements and internal audit reports

business operations and enforcing the compliance with legal

are reliable and accurately reflect actual performances and

requirements.

that they meet acceptable accounting standards in Thailand.

The Bank’s Internal Audit Group is responsible for

The Board of Directors decides on the appropriate accounting

auditing work, ensuring that the Bank’s key business

policy to be implemented, and ensures that it is complied

operations and the key financial activities are efficient and in

regularly. As well, it ensures disclosure of adequate

line with the established direction. The Internal Audit Group is

information in the notes to the Bank’s financial statements. In

also responsible for ensuring that the Bank’s conduct of

addition to the quarterly and yearly financial statements, the

business affairs comply with the laws and requirements

Board of Directors submitted the management discussion and

related to the Bank. To make the Internal Audit Group

analysis (MD&A) of the business performance, a practice of

independent and enable it to fully carry out the auditing duties

which started from the accounting period for the first half of

as well as serving as part of the check and balance system,

the year ended 30 June 2003. It also disclosed the report of

the Board of Directors requires that the Internal Audit Group

the Audit Committee which was under the topic on the

directly submit its audit reports to the Audit Committee. The

Internal Control.

summary of audit report is to be presented to the Board of

Roles and Responsibilities of the Board of Directors

Directors regularly to acknowledge them with essential information. Written reports in the form of the minutes of the

The Bank’s Board of Directors is responsible for

Internal Audit Group’s meetings are also prepared quarterly.

looking after and managing all the Bank’s business affairs, in

The objective is for the Audit Committee to do the assessment

compliance with the laws, the Bank’s objectives, the Bank’s

and appraisal.

Articles of Association, as well as the resolutions adopted at the meetings of the Bank’s shareholders. In this regard, the

202

Risk Management

Board of Directors has appointed a number of committees

The Bank put great emphasis on risk management,

responsible for management of the business operations in

particularly the key risks of the Bank and the member

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

companies of Thanachart Group, which have a direct impact

The Bank’s Board of Directors has put in place a control

on the target goals. These risks include strategic risk, credit

system as well as an adequate internal audit in compliance

risk, market risk, interest rate and exchange rate risks,

with the rules and regulations of the authorities concerned. It

liquidity risk, and operational risk. As a result, the Board of

has also put in place appropriate risk management measures

Directors has established a special work unit responsible for

which are in accordance with the vision, missions, business

overseeing the risks, giving guidelines on risk management,

ethics as well as the principles of good corporate governance.

as well as controlling and monitoring the risks. As well,

As well, it closely monitors the implementation of these

the Board requires that the risk reports are made regularly.

measures on a regular basis. It holds at least 12 meetings

The related details are given under the subject of Risk

annually.

Management and Risk Factors.

Investor Relations

The Bank’s Board of Directors is responsible for determining and dividing duties and responsibilities among the Bank’s Board of Directors, various committees, and the

The Bank’s Board of Directors recognized that the Bank’s financial and non-financial information are influential factors to the decision making of the investors and

management by putting them in writing. As well, the Bank’s Board of Directors determines the level of authority for approval and decision making, the details of which are also

stakeholders of the Bank. The Investor Relations Unit is mainly

put in writing. In this connection, copies of the power of

responsible for giving accurate, complete, up to date,

attorney are circulated to the parties concerned, both inside

transparent, reliable, and factual information. The unit always

and outside the organization, for information. As well, the Board

pays great attention on all provided information. Even though

of Directors regularly reviews the scope of assigned authority,

the Bank has not officially established the Investor Relations

ensuring that they are appropriate and that it achieves

Unit due to marginal amount of the activities, the Bank has

maximum efficiency in actual practice. The parties concerned

assigned the Managing Director Office to function as investor

can also check the above information through the Intranet

relation and be a contact point with all institutional investors

system any time they need.

and shareholders, including analysts and state agencies. The investors may contact the Bank’s Investor Relations Unit by phoning 0-2613-6107 or through the Bank’s website at www.thanachartbank.co.th.

The Chairman of the Board of Directors shall not be the same person as the Chief Executive Officer. The objective is to separate the duties of developing policies from the duties of managing on the day-to-day business operations

4. Responsibilities of the Board of Directors The Board of Directors The Bank is determined to add value to the business in order to enhance its competitiveness. It also develops the Bank’s businesses, aiming to be able to offer a wide range of financial products which cater to the needs of customers in an integrated manner. Members of the Board of Directors who are well qualified with extensive knowledge and experiences in various fields that support the business operations have jointly established a vision, missions, strategies, and business targets as well as the Bank’s budget in a prudent manner. The

The Bank’s Board of Directors consists of 10 honorable members who possess professionalism, knowledge and experience that are beneficial to the Bank. The name list of Bank’s Board of Directors is as follows : 1. Mr. Banterng Tantivit Chairman / Non-Executive Director 2. Mr. Suphadej Poonpipat Vice Chairman

Bank’s Board of Directors holds its meeting at least twice a

3. Mr. Kiettisak Meecharoen

year to review the established plans and budget, ensuring that

Independent Director

the management has conducted the businesses in line with

4. Mr. Narong Chivangkur

the established business plans and budget in an efficient

Independent Director

manner by taking into consideration the best interest of the

5. Mr. Suvit Arunanondchai

Bank and all the stakeholders concerned.

Independent Director ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

203

6. Mr. Sathaporn Jinachitra

2. Mr. Bundit Cheevadhanarak resigned from the

Independent Director

Director position since 19 July 2007 ;

7. Mr. Vichit Yarnamorn 3. Mrs. Michele Chiu Kwok was positioned as the

Non-Executive Director 8. Mrs. Michele Chiu Kwok

Non-Executive Director since 19 July 2007 ;

Non-Executive Director 4. Mr. Brendan George John King was positioned as the

9. Mr. Brendan George John King

Non-Executive Director since 19 July 2007 and appointed as

Non-Executive Director

the Executive Director since 4 October 2007 ; and

10. Ms. Suvarnapha Suvarnaprathip Director / Executive Director

5. Mr. Sathaporn Jinachitra was positioned as the

Mr. Panupan Tuangthong

Independent Director since 19 July 2007.

Acting as Bank’s Secretary The Board’s constituent is in line with the notification of

Each member of the Bank’s Board of Directors attended

the Bank of Thailand under the subject of the structure of

and certified for at least one of the training courses organized

Good Corporate Governance Committee of commercial bank.

by the Thai Institute of Directors (IOD). In 2007, one director

The Board of Directors consists of 10 members and can be

who attended an additional course organized by IOD was :

divided into : 1. Mr. Narong Chivangkur •

Executive Directors

persons

Indepent Director /

(2 persons representing from the Major Shareholders) ; •

Independent Directors

persons ; and

•

Non-Executive Directors

persons

Chairman of the Nomination Committee / Chairman of the Remuneration Committee The Certification of the Corporate Social Responsibility

In 2007, the changes in director’s position were as follows :

class no. 1/2007 The Certification of the Role of the Compensation

1. Mr. Chaipatr Srivisarvacha resigned from the

Committee class no. 4/2007

position of Independent Director since 23 April 2007 ;

Appointments Approved by the Board of Directors or Shareholders at Their Meetings Date on which approved by the Board of Directors at its meeting

Date on which approved by the shareholders at their meeting

26 April 2006

2. Mr. Suphadej Poonpipat

1 September 2005

3. Mr. Kiettisak Meecharoen

30 April 2007

4. Mr. Narong Chivangkur

30 April 2007

5. Mr. Suvit Arunanondchai

26 April 2006

1 September 2005

7. Ms. Suvarnapha Suvarnaprathip

26 April 2006

8. Mr. Bundit Cheevadhanarak

30 April 2007

9. Mr. Sathaporn Jinachitra

17 July 2007

10. Mrs. Michele Chiu Kwok

17 July 2007

11. Mr. Brendan George John King

17 July 2007

List of Names 1. Mr. Banterng Tantivit

6. Mr. Vichit Yarnamorn

204

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

The Bank’s Articles of Association requires that one third

points in relation to the Bank’s directions and policies. As well,

of the total number of directors must retire from their position

the Board considers and approves business plans, budgets,

at each annual general meeting of the shareholders. If the

and operations goals proposed by the management.

number of the retiring directors cannot be divided into exactly one third, the number closest to the one third shall apply. The directors with the longest tenure shall retire first. If

6. The Board monitors the performance of the Bank’s operations and the progress made in relation to the

there are several directors who have the same tenure and their

established objectives as well as the compliance with the

number exceeds the number of directors who have to retire, a

related laws, regulations and policies.

decision shall be made by drawing lots. In the event that the directorship becomes vacant before the tenure expires, the Board of Directors is authorized to appoint a candidate qualified for the position and not possessing any prohibitive traits prescribed by laws to fill the vacancy and participate in the Board of Directors’ meetings.

7. The Board is also authorized to appoint the Chief Executive Officer and a member of the management to operate the Bank’s business affairs within the approved framework of the capital expenditure budget and operating expense budget through various projects. Moreover, the Board will consider for an approval of the over-authorized loan limits.

The Board of Directors consists of Independent Directors, Executive Directors and Non-Executive Directors who are well qualified with knowledge, expertise, skills and experiences in finance business, accounting, management and other fields. As a result, the Board of Directors is able to manage the business effectively in such a way that provides the best interest. The Bank’s authorized signatories include Mr. Banterng Tantivit, Mr. Suphadej Poonpipat or Ms. Suvarnapha Suvarnaprathip for the Bank. Any two out of three signatories can jointly sign with the Bank’s seal affixed.

Duties and Responsibilities of the Bank’s Board of Directors 1. The Board is responsible for managing the Bank in line with legal requirements, the Bank’s objectives and

8. The Board ensures that the Bank has put in place effective internal control systems and appropriate risk management systems. 9. The Board ensures that both the internal auditor and the external auditor carry out their duties in an effective manner. 10. The Board approves quarterly and annual financial statements and ensures that the financial statements have been prepared in line with generally accepted accounting principles. 11. The Board ensures that the information about various matters is communicated to the Bank’s stakeholders and members of the general public.

Meetings of the Board of Directors

by-laws, as well as the resolutions adopted at the shareholders’ meetings.

The Bank establishes in advance the schedules of the meetings of the Board of Directors throughout the year. The

2. The Board appoints the Executive Committee or the Sub-Committee in order to administrate all assignments from the Board.

meeting will take place every month - on the last Wednesday of each month. In addition, the Board may hold special meetings as it deems necessary. The agenda for the meeting

3. The Board may assign or authorize one or more

will be clearly determined in advance. The list will consist of

directors or other persons to take any action on the behalf of

subjects for acknowledgement, consideration or approval as

the Board.

well as the subject of risk management that needs to be

4. The Board brings the approval aiming at the Bank’s objectives and the codes of conduct through vision, mission and value of the Bank.

considered at the monthly meeting of the Board of Directors. The secretary of the Board of Directors will be responsible for sending all members of the Board notices of the meetings together with supporting documents well in advance of the

5. The Board considers and discusses the strategies

meeting dates so that the directors will have adequate time to

proposed by the management and gives approval to the key

study the information before they attend the meetings. Each ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

205

meeting takes about three hours. In 2007, the Board of

coordinating with the external auditor and internal auditor,

Directors had 14 meetings. There were other two meetings

ensuring the adequacy of the Bank’s internal control systems

which were held under the purpose of assessing the financial

and internal audit functions.

statements of the second and third quarters of the year 2007. Thus, in 2007 there were 16 Board of Directors meetings in total. All details are disclosed in this annual report.

3. To review the adequacy of the Bank’s risk management and to ensure that the risk management complies with the guidelines established by the Bank of

At each meeting, every director independently expresses

Thailand as well as the Bank’s policies.

their opinions and adopts resolutions. The Chairman of the Board of Directors shall give opportunities to all directors to

4. To review evidences from internal investigations when

express their opinions before request for the adoption of the

there is an observation or an inference that there might be

resolution. The observations and the opinions of the directors

fraud, irregularities or substantial loopholes in the Bank’s

at all the meetings are recorded in writing. The minutes of the

internal control systems and to report them to the Board of

meetings adopted by the Board of Directors are properly kept

Directors for further consideration.

and ready for examination by the Board and all parties concerned.

5. To review the Bank’s business operations and ensure that there is no conflict of interest, taking into

Audit Committee The Bank’s Board of Directors approved the establishment

consideration transactions between the Bank and its subsidiaries or related parties.

of the Audit Committee on 3 December 1999 to administrate

6. To review the Bank’s business operations, ensuring

the Bank’s affairs effectively, to foster good corporate

that they comply with the officials which are related to the

governance, to build the creditability of the Bank to the public

business.

and to work in line with the official policy. The committee has a 3-year tenure being the same as that of the Board of Directors.

7. To consider the audit reports and recommendations

The Audit Committee consists of three Independent Directors

presented by the external auditor and internal auditor and to

with at least one director who has knowledge, understanding,

monitor the implementation of the recommendations.

or experience in the field of accounting or finance. The names of the members of the Audit Committee are as follows :

8. To consider and advise the appointment of the external auditor including the auditing fee, taking into account

1. Mr. Kiettisak Meecharoen Chairman of the Audit Committee 2. Mr. Suvit Arunanondchai

the auditor’s creditability, the adequacy of its resources, audit engagements and experience of its staff assigned to audit the Bank’s accounts.

Director of the Audit Committee 3. Mr. Sathaporn Jinachitra Director of the Audit Committee Mr. Chanchai Nantajitkasem Secretary of the Audit Committee

Duties and Responsibilities of the Audit Committee 1. To review the objectivity, sufficiency, and credibility of the financial reporting process by coordinating with the external auditor and the executives responsible for preparing the quarterly and yearly financial reports. 2. To review the appropriateness and efficiency of internal control systems and internal audit functions by 206

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

9. To approve of the appointment, removal, transfer or dismissal of the Head of the Internal Audit Group. 10. To hold the Audit Committee meeting between the companies in Thanachart Group from time to time as necessary. 11. To take care of any other matters assigned by the Board of Directors or any other matters required by the Stock Exchange of Thailand or the state agencies concerned. In the year 2007, the Committee had six meeting and held the meeting with two meetings with Thanachart Capital Public Company Limited. In total, there were eight meetings and all were reported to the Bank’s Board of Directors.

Nomination Committee

2. Mr. Vichit Yarnamorn Director of the Remuneration Committee

The Bank’s Board of Directors approved the establishment of the Nomination Committee on 26 March 2002. The

(Non-Executive Director) 3. Mr. Brendan George John King

Committee consists of the following three members; which

Director of the Remuneration Committee

consist of two Independent Directors and one Non-Executive

(Non-Executive Director)

Director : 1. Mr. Narong Chivangkur Chairman of the Nomination Committee

Mrs. Yuwapa Ngernsawat

Secretary

Duties and Responsibilities of the Remuneration Committee

2. Mr. Vichit Yarnamorn Director of the Nomination Committee

1. Establishing a structure related to remuneration and

(Non-Executive Director)

other compensation for directors and managing director and

3. Mr. Suvit Arunanondchai

presenting the structure to the Bank’s Board of Directors for

Director of the Nomination Committee Mr. Panupan Tuangthong Acting as the secretary

Duties and Responsibilities of the Nomination Committee 1. Establishing guidelines and procedures for selecting Director or Managing Director candidates for when there is a vacancy.

approval. 2. Reviewing the remuneration and other compensation for the Bank’s Directors and Managing Directors, making sure that the remuneration and the compensation are compatible with their respective duties and responsibilities towards the Bank. It proposed the reviewed remuneration and compensation to the Bank’s Board of Directors or shareholders at their meeting for approval, depending on the case. In 2007, there were two meetings held where all

2. Selecting and proposing the candidates with appropriate qualifications to the Board of Directors for consideration. 3. Making sure that the Bank’s Board of Directors

committee members attended. The meeting resolutions were reported to the Bank’s Board of Directors.

Corporate Governance Committee

has an appropriate size and suitable constituents to the

The Bank’s Board of Directors as a whole serves as the

organization as well as making necessary changes to suit the

Corporate Governance Committee, which has duty and

changing environment. Making sure that the Board of

responsibility as follows:

Directors consists of members with appropriate knowledge, competency and experience in different areas.

1. Establishing procedures and guidelines for effective and appropriate corporate governance for the Bank.

In 2007, there were two meetings held where all have attended. And all of the meeting resolutions were reported to the Board of Directors.

2. Promoting ethics in business operation, ethics for executives and employees as guidelines for all related persons.

Remuneration Committee 3. Monitoring and ensuring that the good corporate The Bank’s Board of Directors appointed the Remuneration

governance is practically effective.

Committee on 26 March 2002. In the Bank’s Board of Directors Meeting No.2/2008, Mr. Brendan George John King was appointed with a position as the member of the Remuneration Committee. Currently, the committee members consist of one Independent Director and two Non-Executive

4. Disclosing information about the Bank’s good corporate governance to an applicable official unit and in the Bank’s annual report.

Executive Committee

Directors as follows : The Bank’s Board of Directors appointed the Executive 1. Mr. Narong Chivangkur Chairman of the Remuneration Committee

Committee on 26 March 2002, which currently consists of three directors as follows : ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

207

1. Mr. Suphadej Poonpipat Chairman of the Executive Committee 2. Ms. Suvarnapha Suvarnaprathip Vice Chairman of the Executive Committee

The Executive Committee is responsible for authorizing the Bank’s affairs such as loans, investments, and contingencies as the Bank of Thailand’s requirement. Currently, the Bank set a limit of not exceeding 25 percent of Tier I.

3. Mr. Brendan George John King Executive Director Mr. Anuwat Luengtawekul Acting as the secretary

Duties and Responsibilities of the Executive Committee 1. Authorized to approve lines of credit for the benefit of

In 2007, the Executive Committee held 13 meetings, and had reported all meeting resolutions to the Board of Directors.

Risk Management Committee In regard to the resolution of the Bank’s Board of Directors No.3/2008 on 27 February 2008, the Risk Management Committee was restructured to be directly

the Bank as well as approving debt restructuring in line with

under the Bank’s Board of Directors in order to be in line with

the Commercial Bank Act and the rules established by the

the structure of the good corporate governance according to

Bank of Thailand

the regulation of the Bank of Thailand. Currently, the committee consists of the following :

2. Authorized to approve investments aimed at generating earnings for the Bank in line with the Commercial

1. Mr. Suphadej Poonpipat

Chairman

Bank Act and the rules established by the Bank of Thailand.

2. Mr. Robert W. Erickson

Vice Chairman

3. Mr. Bundit Cheevadhanarak

Director

4. Mrs. Noossara Roonsamrarn

Director

5. Mr. Piyaphong Artmangkorn

Director

6. Dr. Sumas Wongsunopparat

Director

7. Mrs. Sasima Taweeskulchai

Director

3. Managing and taking action in line with the Bank’s business objectives as well as managing liquidity, risks and the interest rate structure. 4. Authorized to make purchases, acquire transfers, disposal of the Bank’s assets in the amount up to 5 percent of

8. Mr. Praphan Anupongongarch Director

the Bank’s capital funds.

9. Mrs. Kjitphan Chunharit

5. Considering and screening matters that are beyond the authority of the Executive Committee, and presenting them to those having higher authority for consideration.

Director and secretary

Duties and Responsibilities of the Risk Management Committee

6. Authorized to restructure and manage the organization,

1. To formulate a risk management policy to be

establish rules and regulations related to work process,

proposed to the Board of Directors for consideration and

appointing and removal the employees, appointing advisers,

approval. The policy must establish standards for monitoring

as well as directing and governing the conducts of the Bank’s

and ascertaining that the risk management policy is being

business affairs.

strictly adhered to.

7. Authorized to approve salaries and other compensations

2. To set the risk management strategies related to the

for the employees in line with the course of normal business

risk management policy. This will be able to assess, follow-up

operations as well as approving remuneration for advisers. 8. Considering and approving appointments of independent appraisers 9. Establishing expense budgets for appraising value of the collateral as well as controlling the related expenses. 10. Authorized to delegate its authority to other staff of the Bank for the purpose of efficiency. 208

10. Mr. Kamtorn Tantisiriwat

Director

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

and control the level of Bank’s risk properly. 3. To review the risk adequacy in the proper level and controlling the effective performance system and follow the set policies. 4. To establish risk management measures aimed at preventing possible damages and finding solutions to problems arising from the risk.

5. To assess both internal and external factors that may significantly affect the Bank’s financial positions. The results of the assessment will be used to review the Bank’s overall risk management policy. 6. To determine areas for improvement and give instructions to the risk management unit to take necessary actions aimed at enhancing the efficiency of the risk management, controlling and monitoring mechanisms. 7. To monitor and control the conduct of the Bank’s business affairs by the Board of Directors and/or other units

Duties and Responsibilities of the Asset and Liability Management Committee 1. Formulating risk management plans related to the Bank’s liquidity, interest rates and foreign exchange rates in line with the policies established by the Executive Committee 2. Managing the Bank’s liquidity and foreign exchange risks in line with trends and prevailing conditions in the money market and the capital market 3. Managing the Bank’s interest rate structure and establishing interest rate - both the floating rate and the fixed

concerned in different areas of risk management, making sure

rates. The aim is to prevent the adverse impacts resulting from

that they comply with the requirements stipulated in the

the volatility of the interest rate in the market.

established risk management policy. 4. Considering for an approval of investments in bonds 8. To report to the Audit Committee regularly about the

within the limits specified by the Bank.

improvement in order to fit with the set risk management 5. Reporting the performance related to management

policies.

of liquidity and interest rates to the Executive Committee for In 2007, the Risk Management Committee held seven

acknowledgment.

meetings in total. In 2007, the Asset and Liability Management Committee

Asset and Liability Management Committee The resolution of the Executive Committee on 18 December

held 51 meetings.

Investment Portfolio Committee

2007 had made an adjustment of the listed directors in the Asset and Liability Management Committee in order to manage the Bank’s asset and liability effectively and to be in line with the organizational structure. Currently, the committee consists of : 1. Mr. Suphadej Poonpipat Chairman 2. Ms. Suvarnapha Suvarnaprathip Vice Chairman 3. Mr. Bundit Cheevadhanarak Director 4. Mrs. Noossara Roonsamrarn Director 5. Mr. Piyaphong Artmangkorn Director 6. Mr. Lalit Dharmaseri

The resolution of the Bank’s Board of Directors on 18 December 2007 was to adjust the name list of the Investment Portfolio Committee in order to invest effectively and manage accordingly to the Bank’s organizational structure. Currently, the committee consists of the following members: 1. Mr. Suphadej Poonpipat Chairman 2. Ms. Suvarnapha Suvarnaprathip Vice Chairman 3. Mr. Piyaphong Artmangkorn Director 4. Mr. Nophadon Ruengchinda Director 5. Mr. Chartchai Parasuk, Ph.d. Director 6. Mr. Lalit Dharmaseri

Director

Representative from the Business Control Department

Secretary

Secretary ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

209

Duties and Responsibilities of the Investment Portfolio Committee 1. Establishing the investment policy as well as considering and approving the investment plan. 2. Considering for an approval of investments within the

Duties and Responsibilities of the Credit Committee 1. Establishing and governing credit approval procedures under the policy approved by the Board of Directors and the Executive Committee.

authority specified by the Bank and in line with the

2. Establishing covenants and conditions of credit

established position limit and VaR limit. Screening the

lines and approving new credit lines as well as changing the

investment proposals that are beyond its authority and

conditions of credit lines according to authorization level set by

proposing them to the Executive Committee which has higher

the Executive Committee and Board of Directors and credit risk

authority, for approval.

evaluation.

3. Reviewing the investment performance and

3. Establishing authorization level of a person or

establishing measures aimed at improving the investment

sub-committee in accordance with product conditions and

performance.

the Credit Committee’s authorities.

4. Managing market risks that may arise from changes in prices of investment vehicles. 5. Establishing and reviewing the rate for making provisions or establishing allowances for the impairment in value of the securities invested. In 2007, the Investment Portfolio Committee held 30 meetings.

4. Approving credit lending which exceeds authorization level of the Trouble Debt Restructuring Committee or other newly appointed committees with an appropriate manner. 5. Considering proposing further to the Board of Directors or the Executive Committee in the cases that exceed the authorization of the Credit Committee. In case of urgency, the Credit Committee can propose such case to the Board of Directors of Executive Committee without prior assessment.

Credit Committee 6. Reporting the loans approval to the Board of The resolution of the Bank’s Board of Directors on 3

Directors or the Executive Committee.

September 2007 approved to adjust the members of the committee in order to effectively approve loans and in line with the Bank’s organization structure. Currently, the Credit Committee consists of : 1. Mr. Suphadej Poonpipat Chairman 2. Ms. Suvarnapha Suvarnaprathip Vice Chairman 3. Mr. Bundit Cheevadhanarak Director 4. Mrs. Noossara Roonsamrarn Director 5. Mr. Robert W. Erickson Director 6. Mr. Noel Singh Director Representative from the Business Control Department Secretary 210

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

In 2007, the Credit Committee held 62 meetings in total. However, the Executive Committee still appointed the sub-committees in order to review and manage various matters within the Bank to ensure accuracy, suitability, effectiveness and efficiency to the Bank. These sub-committees consist of : 1. Management Committee 2. Corporate Credit Committee 3. SMEs and Retails Credit Committee 4. Accounting System Management Committee 5. Asset Foreclosed Management Committee 6. Hire Purchase Management Committee 7. Cash Management Committee 8. Repossessed Car Management Committee 9. Trouble Debt Restructuring Committee 10. Hire Purchase and Consumer Finance Debt Restructuring Committee

11. Product Development Committee 12. IT and Technology Management Committee 13. IT and Technology Security Management Committee 14. Electronic Operation Committee 15. Operation on International Standard Committee of Thanachart Group

5. Mrs. Noossara Roonsamrarn Executive Vice President 6. Dr. Sumas Wongsunopparat Executive Vice President (Chief Operating Officer) 7. Ms. Vilai Tantikun Senior Vice President, Accounting Department

16. The Report on Observance of Standards & Codes : ROSCs Anti-money Laundering and Combating the Financing of Terrariums : AML/CFT

Chief Executive Officer Due to the Bank of Thailand issued Tor.Por.Tor.For.Kor.

17. Integrated Communications Committee

Tor. (21) 434/2549 dated 28 March 2006, the Bank of

18. Regulations and Rules of the Bank and Officer

Thailand permitted the appointment of Mr.Suphadej Poonpipat

Knowledge Promotion Committee 19. Pricing of Used Car Centre Committee 20. Corporate Social Responsibility Committee

in the position of the Chief Executive Director. The Bank’s Board of Directors had delegated the Chief Executive Officer in the following authorities :

21. Appraisal Committee 22. Discipline and Penalty Committee 23. Compensation Committee 24. Human Resource Management Committee 25. Hire Purchase Business Development Committee 26. BASEL II Committee 27. Investment Banking Committee 28. Proxies Consideration Committee

1. Setting directions and plans in the Bank’s operation in order to achieve the Bank’s vision and mission. 2. Administrating the Business Plan and Budget in order to propose to the Bank’s Board of Directors and the Executive Committee. 3. Managing and approving the business transactions,

29. Electronic Channel Development Committee

and monitoring the directors and employees’ performances in

30. Channel Development Committee

their own respective functions according to the Business Plan

31. ATM Location Committee

and Budget that approved by the Bank’s Board of Directors

32. Insurance, Car License Registration and

and the Executive Committee.

Repossessed Car Committee 33. Asset Management for Business Operation Committee

Executives

4. Administrating and approving upon the Bank’s organization structure and human resource management. 5. Reporting the Bank’s activities and performance to the Board of Directors and the Executive Committee.

As 31 December 2007, the Bank’s executives in the level of management and first four below management level

Beside delegating the authority to any implementers on

according to the regulation stipulated by the Stock Exchange

the behalf of the Bank as mentioned earlier, the Bank

of Thailand were as follows :

makes the regulation and structure of authority within the Bank’s operation. The purpose in the authority delegation to

1. Mr. Suphadej Poonpipat Chairman of the Executive Committee / Chief Executive Officer 2. Ms. Suvarnapha Suvarnaprathip

any implementers is to distribute responsibility and decision making accordingly to the positions, roles, and duties. The proper control of the Bank’s operation would create efficiency and agility in the operation.

Director / Vice Chairman of the Executive Committee 3. Mr. Bundit Cheevadhanarak Senior Executive Vice President 4. Mr. Piyaphong Artmangkorn Executive Vice President

The Chief Executive Officer is responsible for authorizing the Bank’s affairs such as loans, investments, and obligation within 300 million baht in case of the collaterals in the forms of bonds, deposits and debt instruments.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

211

Company Secretary

released from his term on every Annual General Meeting of Shareholders, and could be considered for a reelection.

The Bank assigned the Managing Director Office to function as the corporate secretariat. The functions are to regulate the Bank’s good governance and to improve the Bank’s administration more efficiently.

Duties and Responsibilities of the Company Secretary

There are 2 alternative means of appointing directors 1. the appointment of a new director to replace the director whose term expires and the appointment of a new additional director is subjected to an approval at the shareholders’ meeting.

1. Providing prelimenary advice to the directors about

2. the appointment of a new director to replace the

legal, regulation and stipulation of the Bank and following up

director whose position being vacated during the period of

for any operation to possess accuracy and consistency,

tenure. In this regard, the Board of Directors is authorized to

including reporting any significant changes to the directors.

appoint the new director with appropriate qualifications to fill the vacancy. The appointment of Independent Directors shall

2. Organizing the Annual General Shareholders

also comply with the requirements stipulated by the

Meeting and the Board of Directors Meeting accordingly to the

Stock Exchange of Thailand and the Office of the Securities

legal, the Bank’s stipulation and other regulations.

and Exchange Commission.

3. Producing the minutes of the Annual General

In selecting the Independent Director, it has to in line

Shareholders Meeting and the Board of Directors Meeting,

with the regulation of the Bank of Thailand as follows :

including following-up any approvals in both meetings and also monitoring the compliance to the resolutions.

Qualifications : the Independent Directors must not be involved in any business or any benefit of the Bank, which

4. Supervising the disclosure of the information and information and technology reports to the Bank’s compliance

may be influential to the decision-making. The qualified characteristics are as follows :

unit according to the codes of conduct and the regulations of state agencies.

1. No more 0.5 percent of shareholding of the issued and paid-up share capital of the Bank, affiliated and

5. Informing and communicating with the general

subsidiary companies or any related company. The

shareholders to acknowledge them of their rights and the

shareholding will be counted in aggregate with every

Bank’s news.

related persons to the Independent Director.

6. Supervising the activities of the Board of Directors.

2. Being non-executive of the Bank, the affiliated and subsidiary companies or any related company or the major

Nomination of Directors and Executives 1. Selection Procedure for the Bank’s Directors and Manager

shareholders of the Bank. Moreover, the person must not be a consultant who get the monthly personnel fee from the Bank, the affiliated or subsidiary companies, any related company or the major shareholders of the Bank.

In the past, the selection procedure was done in accordance to the guidelines set by the Nomination Committee. The nominated person would be proposed and assessed by the Nomination Committee and then further proposed to the Bank’s Board of Directors or the Shareholders Meeting depending on each case. The Bank does not specify the maximum number of

212

3. No benefit, direct or indirect, or interest in the finance and management of the Bank, the affiliates, subsidiary companies, any related company, and the major shareholders of the Bank. 4. No relation or a relative of the senior executives or major shareholders of the Bank.

members of the directors. However, the Bank’s regulations

5. Not a director appointed as the Bank’s, major

require that there shall be at least five members in the Board.

shareholders’ or general shareholders’ proxy for their own

And one out of three of the total number of directors has to be

benefits

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Nomination Procedure : the procedure must be proposed by the selection process of the Nomination Committee and

shareholders can allocate their votes to each director unequally as they see fit.

the Bank’s Board of Directors. All four Independent Directors (3) According to the ranking of the highest to

were approved by the Bank of Thailand.

lowest votes, the directors - in the amount needed - will be 2. The number of the directors who are proposed by the each major shareholders

elected orderly to the ranking. In the event of a tie, they shall make a raffle draw.

The Bank’s directors from the major shareholders are as follows :

2. At each Annual General Meeting of the Shareholders, the whole Board of Directors needs to be elected

1. Thanachart Capital Public Company Limited holding

all at one time, the existing Board of Directors would maintain

74.92 percent of the total share capital provided three

their position in order to temporarily operate the business until

directors namely :

the new Board of Directors takes position. 3. A director shall be retired upon

1.1 Mr. Banterng Tantivit : positioned as the Chairman of the Bank’s Board of Directors and is not the

(a) death

same person who acts as the Chief Executive Officer. The (b) resignation before the term expires by

functions of setting compliance policy and day-to-day management are separated. 1.2 Mr. Suphadej Poonpipat : positioned as the Vice

submitting a resignation letter to the Bank or the Board of Directors

Chairman, the Chairman of the Executive Committee and the Chief Executive Officer

1.3 Ms. Suvarnapha Suvarnaprathip : positioned as

(d) retirement by a resolution adopted at the

the Director and the Vice Chairman of the Executive Committee

shareholders’ meeting with votes of not less than three-fourth

2. The Bank of Nova Scotia holding 24.98 percent of the total share capital provided two directors namely :

of the number of the shareholders present and entitled to vote and having shares in aggregate not less than a half of the total shareholding in the meeting held by the shareholders present

2.1 Mrs. Michele Chiu Kwok : positioned as the

and entitled to vote

Non-Executive Director (e) Retirement by order of the Court 2.2 Mr. Brendan George John King : positioned as 4. In the event that the directorship becomes

the Non-Executive Director and the Executive Director

vacant before the term expires, the remaining members of the 3. Minority Shareholders’ Right to Appoint Directors The director appointment must acquire the resolutions

Board of Directors are authorized to appoint a candidate qualified for the position and not possessing any prohibitive traits prescribed by laws to fill the vacancy and participate in

from :

the Board of Directors’ next meeting, except the remaining 1. The Shareholders Meeting with the regulation as follows :

tenure of the vacant directorship is less than the minimum law requirement periods. The candidate with the support of at least

(1) A shareholder’s amount of vote is equal to

three-fourth of the remaining directors shall be appointed to

the number of shares which he holds multiplied with the

fill the vacancy for the remaining tenure of the directorship

amount of directors needed to be elected.

only.

(2) The shareholders must use all their rights

5. In the event that the directorship becomes

of shares in the vote according to (1) whether to only one

vacant less than the number of the remaining directors in the

director or multiple directors. In case of multiple directors, the

Board, the remaining directors will act in the authority of the ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

213

Board of Directors only in establishing the Annual General

the remunerations in the sub-committee, it will be set and

Shareholder Meeting in order to select the directors in replace

considered by the Remuneration Committee and propose to

all directorship positions.

the Bank’s Board of Directors. This consideration is based on

6. The directors who are selected in (4) and (5) will be functioned in the remaining tenure only.

the duties and responsibilities in comparing with the level compatible with those offered by other commercial banks in the same industry. The remuneration will be paid in the forms

The Bank has amended the regulations on 19 July 2007

of the meeting stipends or position allowance.

under the subject of the minor shareholders’ right to vote which will be enforced in the Annual General Meeting of Shareholders in 2008.

The remuneration of the executives will follow the policy and regulation which related to the Bank’s performance and individual performance. It will be defined by Key Performance

Performance Evaluation The Board of Directors had arranged for the evaluation of the Board’s performance in 2007 with the Stock Exchange of Thailand’s evaluation form as a guideline in preparing the Bank’s evaluation form. In this regard, the

Indicator (KPI) annually and will be paid in monthly period. Allowance will be on average of the standard level in compatibility with those offered by the other commercial bank in the system.

The Remuneration of the Directors

evaluation focuses on the overall performance of the Board as a group in nine areas: preparedness of the Board; strategy

a) Financial Remuneration

setting and policy making; risk management and internal

The Board of Directors has established a clear and

control; prevention of conflicts of interest; monitoring financial

transparent remuneration policy. The Remuneration Committee

reports and operations; the Board’s meetings; the Board and

is responsible for reviewing the remuneration. The committee

the Bank’s policies; the Board and training & development;

has to make sure that the remuneration is appropriate and in

and others.

line with the duties and responsibilities of the directors and

In addition, the Board of Directors had arranged for the

that it is at a level compatible with those offered by other

performance evaluation of the Chief Executive Officer, making

commercial banks in the system. The director who is assigned

use of the evaluation form which compared performance

to be a member of other committees will receive additional

against the annual targets and plan, as well as taking into

remuneration according to the incremental of workloads. The

consideration the Key Performance Indicators (KPIs) which

guidelines are as follows :

were in line with CEO’s Six-Points Agenda. The Nomination Committee would submit the performance evaluation results

1. the remuneration of directors accordingly to the shareholders’ resolution

to the Board of Directors for consideration. 2. the directors of sub-committees will receive the

The Remuneration Policy for Directors and Executives

remuneration as the approval of the Bank’s Board of Directors and the consent of the shareholders

The Bank has considered the remuneration of the directors and executives by comparing with the benchmark level with those offered by other commercial banks in the industry. It was established as the standard regulation which

3. the executives in the level of managing director and above have the right to receive the remuneration as the executives in the amount which the Bank’s Board of Directors have approved.

would be considered along with duties, scopes, roles and individual responsibilities. The Remuneration Committee would

In 2007, the Bank made the following payments as

propose to the Bank’s Board of Directors to consider before

remuneration to directors and executives with the details as

presenting to the Shareholders’ meeting to consider for

follows :

approval. This remuneration will be paid in forms of meeting stipends, position allowance and performance allowance. For 214

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

1) The remuneration of the Bank’s directors has the following details :

Type of Remuneration (Baht per Year) Name

Position

Meeting

Performance

Allowance

Stipends

Allowance

Mr. Banterng Tantivit

600,000.00

518,000.00

403,852.45

1,521,852.45

Mr. Suphadej Poonpipat

300,000.00

252,000.00

201,926.23

753,926.23

Mr. Kiettisak Meecharoen

300,000.00

234,000.00

201,926.23

735.926.23

Mr. Narong Chivangkur

300,000.00

234,000.00

201,926.23

735.926.23

Mr. Suvit Arunanondchai

300,000.00

252,000.00

201,926.23

753,926.23

Mr. Vichit Yarnamorn

300,000.00

234,000.00

201,926.23

735,926.23

Mr. Sathaporn Jinachitra

150,000.00

108,000.00

258,000.00

Ms. Suvarnapha Suvarnaprathip

300,000.00

216,000.00

201,926.23

717,926.23

25,000.00

18,000.00

43,000.00

Mr. Brendan George John King

Mrs. Oranuj Osatananda

168,271.85

Mr. Chaipatr Srivisarvacha

100,000.00

54,000.00

201,926.23

355,926.23

Mr. Bundit Cheevadhanarak

175,000.00

144,000.00

201,926.23

520,926.23

2,850,000.00

2,264,000.00

2,187,534.14

7,301,534.14

Mrs. Michele Chiu Kwok

Total

Note : 1. Mr. Chaipatr Srivisarvacha resigned from the director position on 23 April 2007 2. Mr. Bundit Cheevadhanarak resigned from being the director on 19 July 2007 3. Mr. Sathaporn Jinachitra, Mrs. Michele Chiu Kwok and Mr. Brendan George John King took the position of the Bank’s directors since 19 July 2007 4. The performance allowance was approved in the Annual General Meeting of Shareholders in 2007 for a payment to the Bank’s directors who held the position in the year 2006. If the director resigns before the performance allowance payment, he still possessed the right to receive the performance allowance

2) Payment to three directors of the Audit Committee in the form of meeting stipends totaled to 490,000 baht.

6) Remuneration for the Bank’s Executive, the Executive in the position of the director and executive, and the first four after the directors in total 8 persons as guidance of

3) Payment to three directors of the Nomination Committee in the form of meeting stipends totaled to 70,000

SEC was paid in the form of salary, bonus, cost of living fee, and living fund, in totaling 34,392,158 baht.

baht. b) Other Remuneration 4) Payment to three directors of the Remuneration Committee in the form of meeting stipends totaled to 40,000

- None

baht. 5) Remuneration for the Executive Committee and the Bank’s Board of Directors has not yet been determined and no remuneration was paid to the members of this committee.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

215

SUPERVISION AND MANAGEMENT STRUCTURES THANACHART BANK PUBLIC COMPANY LIMITED Board of Directors

Risk Management

Credit Analysis

Risk Management Committee

Remuneration Committee

Risk Control

Nomination Committee

Audit Committee

Internal Audit

Executive Committee Asset & Liability Management Committee

Investment Portfolio Committee

Compliance

IT Security Management Committee

Credit Committee

IT Security

Management Committee

Advisors

Managing Director Office

Compensation & Salary

Chief Executive Officer

Business Group

Supporting Group

Branch Network

Operation

Retail

Human Resource Management

SMEs

Communication & Brand Management

Corporate

Business Support

Treasury & Investment

System & Regulatory Development

Product Development

General Administration

Channel Development

Data Management Center

Information System & Technology

Accounting As of February 29, 2008 216

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

BOARD OF DIRECTORS AND EXECUTIVES OF THE COMPANY (AS OF 31 DECEMBER 2007) BOARD OF DIRECTOR

Mr. Banterng Tantivit

Chairman

Education

- Master of Science (Finance), Sloan School of Management, Massachusetts Institute of Technology, USA. - Bachelor of Science (Electrical Engineering), Massachusetts Institute of Technology, USA. - Director Accreditation Program, Class 25/2004 Thai Institute of Directors Association

Experience

- Managing Director, TISCO Finance and Securities Public Company Limited

Position(s) in other organizations Nov 2006 - Present

- Chairman, MBK Public Company Limited

Jun 2006 - Present

- Vice Chairman, Thanachart Insurance Company Limited

Mar 2006 - Present

- Director, Arsom Silp Institution of the Arts Council

Feb 2006 - Present

- Director, Siam Piwat Holding Company Limited

Aug 2005 - Present

- Chairman, Thanachart Life Assurance Company Limited

2003 - Present

- Director, Siam Piwat Company Limited - Director, MBK Resort Public Company Limited - Director, B.V. Holding Company Limited - Director, Plan Estate Company Limited

2001 - Present

- Advisor, Dusit Thani Public Company Limited - Advisor, Pathum Ricemill & Granary Public Company Limited

1994 - Present

- Chairman, Thanachart Capital Public Company Limited

1987 - Present

- Director, Deebuk Company Limited - Director, Thai Farming Company Limited

Family relationship with management

None

No. of TBANK share(s) held

None

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

217

Mr. Suphadej Poonpipat

Vice Chairman, Chairman of the Executive Committee and Chief Executive Officer

Education

- Master of Science (Agricultural Economics), University of Wisconsin, USA. - Bachelor of Business Administration and Accounting, Chulalongkorn University - Director Accreditation Program, Class 8/2004 Thai Institute of Directors Association

Experience

- President and Cheif Executive Officer, Thanachart Finance and Securities Public Company Limited

Position(s) in other organizations 2007 - Present

- Director, Royal Orchid Hotel (Thailand) Public Company Limited - Director, Thai Royal Orchid Real Estate Company Limited

Nov 2006 - Present

- Vice Chairman, MBK Public Company Limited

Feb 2006 - Present

- Director, Siam Piwat Holding Company Limited

2005 - Present

- Director, MBK Resort Public Company Limited - Chairman of the Executive Committee, Thanachart Insurance Company Limited

2003 - Present

- Director, Siam Piwat Company Limited - Chairman of the Executive Committee, Thanachart Life Assurance Company Limited - Director, Plan Estate Company Limited

1992 - Present

- Director, Advance Info Service Public Company Limited

1990 - Present

- Vice Chairman, Chairman of the Executive Committee and President and Chief Executive Officer, Thanachart Capital Public Company Limited

Family relationship with management

None

No. of TBANK share(s) held

None

Mr. Kiettisak Meecharoen

Independent Director and Chairman of the Audit Committee

Education

- Master of Theoretical Economics, Keio University - Bachelor of Science in Finance, Hitotsubashi University - Director Accreditation Program Class 40/2005 Thai Institute of Directors Association - Audit Committee Program Class 10/2005 Thai Institute of Directors Association

Experience

- Assistant Governor, Bank of Thailand

Position(s) in other organizations Present

- Director, Tararom Enterprise Public Company Limited - Director, The Safety Insurance Public Company Limited - Director, Thanachart Life Assurance Company Limited

218

Family relationship with management

None

No. of TBANK share(s) held

None

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Mr. Narong Chivangkur

Independent Director, Chairman of the Nomination Committee and Chairman of the Remuneration Committee

Education

- Management Development Program, Asian Institute of Management - Financial Management Program, Rochester Institute of Technology - Directors Certification Program Class 34/2003 Thai Institute of Directors Association - Corporate Social Responsibility Class 1/2007 Thai Institute of Directors Association - Role of the Compensation Committee Class 4/2007 Thai Institute of Directors Association

Experience

- Regional Business Management in Kodak Asia-Public Region, Eastman Kodak Asia-Public Limited - Chairman and CEO, Momentum Asia Company Limited

Position(s) in other organizations 2005 - Present

- Director, Mom Chailai Development Company Limited

2004 - Present

- Director, Momentum Sale and Distribution Company Limited

2003 - Present

- Director, Momentum IM Company Limited

2002 - Present

- Director, Momentum Consulting Company Limited

2000 - Present

- Director, Momentum BBS Company Limited

Family relationship with management

None

No. of TBANK share(s) held

None

Mr. Suvit Arunanondchai

Independent Director, Member of the Audit Committee and Member of the Nomination Committee

Education

- Bachelor of Arts, Louisiana Tech University - Program for Management Development, Harvard University Graduate School of Business Administration - Directors Certification Program Class 14/2002 Thai Institute of Directors Association - Audit Committee Program Class 4/2005 Thai Institute of Directors Association - Improving the Quality of Financial Reporting Class 2/2006 Thai Institute of Directors Association

Experience

- Director, Union Finance Public Company Limited

Position(s) in other organizations Jul 1978 - Present

- President, Thai ORIX Leasing Company Limited

Present

- President, ORIX Auto Leasing (Thailand) Company Limited - Director, Five Stars Hospitality Company Limited - Director, Ratchaburi Sugar Company Limited - President, Thailand Leasing Association

Family relationship with management

None

No. of TBANK share(s) held

None

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

219

Mr. Sathaporn Jinachitra

Independent Director, Member of the Audit Committee

Education

- Master of Science (Econometrics), The London School of Economics and Political Science (University of London) - Bachelor of Science (Economics), University College London - Bachelor of Art (Law), Sukhothai Thammathiraj University - Directors Certification Program Class 0/2000 Thai Institute of Directors Association - DCP Refresher Course Class 2/2006 Thai Institute of Directors Association

Experience

- President, Export and Import Bank of Thailand - Deputy Director of the financial Institution Supervision and Examination Department, Bank of Thailand - Senior Executive Vice President, Risk Management and Corporate Services Group, Siam Commercial Bank Public Company Limited

Position(s) in other organizations Nov 2006 - Present

- Dispute Resolution Committee under The National Telecommunications Commission

Nov 1999 - Present

- Director, Thai Institute of Directors Association (IOD)

Family relationship with management

None

No. of TBANK share(s) held

None

Mr. Vichit Yarnamorn

Non-Executive Director, Member of the Nomination Committee and Member of the Remuneration Committee

Education

- Master of Science (Computer Science), The University of Iowa - Director Accreditation Program Class 34/2005 Thai Institute of Directors Association

Experience

- Executive Vice President, Technology and Operation Group, Siam Commercial Bank Public Company Limited

Position(s) in other organizations 2003 - Present

- Director, ACERTS Company Limited

2002 - Present

- Independent Director and Member of the Audit Committee, IT City Public Company Limited - Director, New Continent Company Limited

2001 - Present

- Information System and Technology Advisor, Thanachart Capital Public Company Limited - Independent Director, Thai Feed Mills Public Company Limited

220

Family relationship with management

None

No. of TBANK share(s) held

None

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Mrs. Michele Chiu Kwak

Non-Executive Director

Education

- Master of Business Administration (Finance & Marketing), University of British Columbia - Bachelor of Science in Mathematics, University of British Columbia

Experience

- Vice President, Human Resources, Scotiabank, Canada - Vice President, Commercial Banking, Scotiabank, Canada - Asst. General Manager, Scotiabank, Canada - Various positions with Scotiabank, Canada

Position(s) in other organizations Apr 2006 - Present

- Senior Vice President, Asia/Pacific & Middle East, The Bank of Nova Scotia, Hong Kong

Present

- Director, Scotiabank (Hong Kong) Limited, Hong Kong - Director, Boracay Limited, Hong Kong - Director, The Bank of Nova Scotia Asia Limited, Singapore - Director, The Bank of Nova Scotia Berhad, Malaysia - Director, Scotiatrust (Asia) Limited, Hong Kong

Family relationship with management

None

No. of TBANK share(s) held

None

Mr. Brendan George John King Non-Executive Director, Member of the Remuneration Committee and Executive Director Education

- Master of Business Administration (Finance & International Business), York University - Bachelor of Administration (Business & Economics), York University

Experience

- Vice President, Greater China, The Bank of Nova Scotia, Hong Kong - General Manager, International Corporate Finance, Scotiabank (Bahamas) Limited - General Manager, Corporate Banking, Scotiabank Trinidad & Tobago Limited - Commercial Banking Manager, Scotiabank, Cayman Islands - Senior Account Manager, Scotiabank, Cayman Islands - Commercial Banking & Risk Management, Scotiabank, Toronto, Canada

Position(s) in other organizations Apr 2006 - Present

- Vice President, Corporate Development, Asia and Vice President, Greater China, The Bank of Nova Scotia, Hong Kong

Present

- Director, Scotiabank (Hong Kong) Limited, Hong Kong - Director, Scotia Nominees (Hong Kong) Limited, Hong Kong - Director, Xiâ&#x20AC;&#x2122;an City Commercial Bank, China

Family relationship with management

None

No. of TBANK share(s) held

None

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

221

Ms. Suvarnapha Suvarnaprathip Director and Vice Chairman of the Executive Committee Education

- Bachelor of Economics, Monash University Certificate, Executive Commercial Lending Training Program, Banker Trust, USA. - Director Accreditation Program Class 20/2004 Thai Institute of Directors Association

Experience

- Vice President, TISCO Finance Public Company Limited - Chief Volunteer, Technical and Economic Cooperation, Office of the Prime Minister

Position(s) in other organizations 2005 - Present

- Director and Executive Director, Thanahcart Capital Public Company Limited - Director, Thanachart Life Assurance Company Limited

2002 - Present

- Director, Seacon Development Public Company Limited

Family relationship with management

None

No. of TBANK share(s) held

None

Mr. Bundit Cheevadhanarak

Senior Executive Vice President

Education

- Master of Business Administration, NIDA - Bachelor of Science, Chulalongkorn University - Bachelor of Law, Sukhothai Thammathirat University - Director Accreditation Program Class 6/2003 Thai Institute of Directors Association - Directors Certification Program Class 44/2004 Thai Institute of Directors Association

Experience

- Managing Director, Asset Group, National Finance Public Company Limited - Director and Executive Vice President, Thanachart Bank Public Company Limited

Position(s) in other organizations

222

May 2007 - Present

- Chairman, Thanachart Leasing 2000 Company Limited

Apr 2001 - Present

- Chairman, Thanahcart Legal and Appraisal Company Limited

Apr 1999 - Present

- Director, Fuel Pipeline Transportation Company Limited

Jun 1997 - Present

- Director, Thanachart Insurance Company Limited

Feb 1996 - Present

- Chairman, Thanachart Group Leasing Company Limited

Family relationship with management

None

No. of TBANK share(s) held

None

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Mr. Piyaphong Artmangkorn

Executive Vice President

Education

- Master of Public Administration (Taxation), University of Southern California - Bachelor of Economics, Thammasart University - Director Accreditation Program Class 21/2004 Thai Institute of Directors Association

Experience

- Director and Executive Vice President, Thanachart Bank Public Company Limited - Senior Vice President, National Finance Public Company Limited

Position(s) in other organizations Sep 2005 - Present

- Chairman and Chairman of the Executive Committee, Thanachart Securities Public Company Limited

Feb 2001 - Present

- Director, Thai Royal Orchid Real Estate Company Limited

Nov 2000 - Present

- Director, Royal Orchid Hotel (Thailand) Public Company Limited

Jan 1998 - Present

- Director, MBK Public Company Limited

Family relationship with management

None

No. of TBANK share(s) held

None

Mrs. Noossara Roonsamrarn Executive Vice President Education

- Master of Business Administration, NIDA - Bachelor of Political Science, Chulalongkorn University - Directors Certification Program Class 19/2002 Thai Institute of Directors Association - DCP Refresher Course Class 4/2004 Thai Institute of Directors Association - Advanced Management Program (AMP), Harvard Business School

Experience

- Director and Executive Vice President, Thanachart Bank Public Company Limited - Director and Executive Director, Thanachart Capital Public Company Limited - Executive Vice President, Corporate Financial Business Group, Ekachart Finance Public Company Limited

Position(s) in other organizations Aug 2006 - Present

- Member of the Audit Committee, Thanachart Fund Management Company Limited - Member of the Audit Committee, Thanachart Insurance Company Limited

Sep 2005 - Present

- Director, Thanachart Fund Management Company Limited

Jun 1997 - Present

- Director, Thanachart Insurance Company Limited

Family relationship with management

None

No. of TBANK share(s) held

None

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

223

Assistant Professor, Flt. Lt., Dr. Sumas Wongsunopparat, M.D., Ph.,D. Executive Vice President (Chief Operating Officer) Education

- Ph.D. in Strategy & Marketing, Johnson Graduate School of Management, Cornell University - Master of Science, Cornell University - Master of Finance & Marketing, Graduate School of Industrial Administration, Carnegie Mellon University - B.A. in Management, Sukhothai Thammathirat University - M.D., Mahidol University

Experience

- Advisor to CEO, Thanachart Bank Public Company Limited - Strategic and Marketing Consultant, Osotsapa Company Limited - SVP in Strategy, Marketing and Business Development, Bangkok Dusit Vetchakarn Public Company Limited - EVP in Marketing, Strategy, HR and Business Development, Thonburi Hospital and Piyavate Hospital Group - Chief Operating Officer (COO), and Deputy MD, Rangsit Plaza Company Limited - Professor of Marketing, Johnson Graduate School of Management, Cornell University and School of Business Administration, University of Wisconsin, USA. And had been the advisors of Strategy, Marketing, Finance, HR and Business IT in several organizations in USA. since 1993

Position(s) in other organizations 2007 - Present

- Director, Thanachart Training and Development Company Limited - Director, Thanachart Management and Service Company Limited

224

Family relationship with management

None

No. of TBANK share(s) held

None

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Report on Change in Shareholding of the Companyâ&#x20AC;&#x2122;s Executives during the period from 2006 and 2007 (Information as at 31 December 2007)

No.

Name

Position

Number of

Increase

Percentage

Shares Held

(Decrease) in

Shareholding in

as at 31

Number of

the Company

(percent)

December 2007 December 2006 1

Mr. Banterng Tantivit

Chairman

Mr. Suphadej Poonpipat

Vice Chairman

Mr. Kiettisak Meecharoen

Director

Mr. Narong Chivangkur

Director

Mr. Suvit Arunanondchai

Director

Mr. Sathaporn Jinachitra

Director

Mr. Vichit Yarnamorn

Non-Executive Director

Mrs. Michele Chiu Kwak

Non-Executive Director

Mr. Brendan George John King

Non-Executive Director

Ms. Suvarnapha Suvarnaprathip

Director

Mr. Bundit Cheevadhanarak

Senior Executive

Vice President 12

Mr. Piyaphong Artmangkorn

Executive Vice President

Mrs. Noossara Roonsamrarn

Executive Vice President

Assistant Professor, Flt. Lt.,

Executive Vice President

Dr. Sumas Wongsunopparat,

(Chief Operating Officer)

M.D., Ph.,D.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

225

226

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Parent

Chairman

Managing Director

XXX

Mrs. Noossara Roonsamrarn

Dr. Sumas Wongsunopparat

Mr. Piyaphong Artmangkorn

Note :

Mr. Bundit Cheevadhanarak

Mr. Vichit Yarnamorn

X //

Mr. Sathaporn Jinachitra

Ms. Suvarnapha Suvarnaprathip

Mr. Suvit Arunanondchai

Mr. Narong Chivangkur

Mr. Brendan George John King

XX /// A

XX /// E

Mr. Suphadej Poonpipat

Mr. Kiettisak Meecharoen

Mrs. Michele Chiu Kwok

XXX

TBANK Company

XXX

Mr. Banterng Tantivit

Name

XXX ///

///

XXX

Senior Executive Vice President

Vice Chairman

///

XXX

Subsidiary Companies

XXX

X C

X X

16 X

Executive Vice President

Director

14 X

18 X

///

Chief Operating Officer

Chairman of the Executive Committee

// E

Chief Executive Officer

Vice Chairman of the Executive Committee

Related Companies

THE INFORMATION OF THE EXECUTIVES AND AUTHORIZED PERSONSâ&#x20AC;&#x2122; POSITIONS IN SUBSIDIARY, ASSOCIATED AND RELATED COMPANIES (information as at 31 December 2007)

/ F

Have Authority

Executive Director

LIST OF SUBSIDIARIES AND RELATED COMPANIES 1. Thanachart Capital Public Company Limited

26. Mom Chailai Development Company Limited

2. Thanachart Securities Public Company Limited

27. Momentum Consulting Company Limited

3. Thanachart Fund Management Company Limited

28. Momentum BBS Company Limited

4. Thanachart Training and Development Company Limited

29. Momentum IM Company Limited

5. Thanachart Life Assurance Company Limited

30. Thai ORIX Leasing Company Limited

6. Thanachart Insurance Company Limited

31. ORIX Auto Leasing (Thailand) Company Limited

7. Thanachart Leasing 2000 Company Limited

32. Five Stars Hospitality Company Limited

8. Thanachart Regal and Appraisal Company Limited

33. Ratchaburi Sugar Company Limited

9. Thanachart Group Leasing Company Limited

34. IT City Public Company Limited

10. Thanachart Management and Service Company Limited

35. ACERTS Company Limited

11. Siam Piwat Company Limited

36. New Continent Company Limited

12. Siam Piwat Holding Company Limited

37. Thai Feed Mills Public Company Limited

13. MBK Public Company Limited

38. Thai Institute of Directors Association

14. MBK Resort Public Company Limited

39. Scotiabank (Hong Kong) Limited

15. B.V. Holding Company Limited

40. Boracay Limited, Hong Kong

16. Plan Estate Company Limited

41. The Bank of Nova Scotia Asia Limited, Singapore

17. Deebuk Company Limited

42. The Bank of Nova Scotia Berhad, Malaysia

18. Thai Farming Company Limited

43. Scotiatrust (Asia) Limited, Hong Kong

19. Arsom Silp Institution of the Arts Council

44. Asia / Pacific & Middle East,

20. Advance Info Service Public Company Limited

The Bank of Nova Scotia, Hong Kong

21. Royal Orchid Hotel (Thailand) Public Company Limited

45. Scotia Nominees (Hong Kong) Limited, Hong Kong

22. Thai Royal Orchid Real Estate Company Limited

46. Xiâ&#x20AC;&#x2122;an City Commercial Bank, China

23. Tararom Enterprise Public Company Limited

47. The Bank of Nova Scotia, Hong Kong

24. The Safety Insurance Public Company Limited

48. Seacon Development Public Company Limited

25. Momentum Sale and Distribution Company Limited

49. Fuel Pipeline Transportation Company Limited

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

227

EXECUTIVES Chief Executive Officer

Business Development Group 2 Head of Business Development 2

Mr. Suphadej Poonpipat

Ms. Parichat Palahan

Senior Executive Vice President

Deposit and Debt Securities Product Group

Mr. Bundit Cheevadhanarak

Head of Deposit and Debt Security Product

Executive Vice President

Mr. Pongpun Pongdontree

Mr. Piyaphong Artmangkorn

Electronic Product Group

Mrs. Noossara Roonsamrarn

Head of Electronic Product

Chief Operating Officer

Mr. Aniruth Hemwijitr

Dr. Sumas Wongsunopparat

Product Analysis Group

First Executive Vice President

Head of Product Analysis

Mr. Amorn Kitinartintranee

Ms. Wipa Wongpoonsin, Ph.,D.

Mrs. Rambha Bhoocha-oom

Retail Loan Product Group

Audit Division

Head of Retail Loan Product

Senior Vice President

Mr. Korapol Chinpat

Mr. Chatchawal Jantararuangtong

SME Product Group

General Audit Office 3

Head of SMEs Product

Vice President

Mr. Chanan Ruangmookug

Mr. Patana Boonsuk

Operation and Support Division General Audit and Credit Review Office 1 Vice President

Senior Vice President

Mr. Chusak Patcharapongsak

Mr. Chatchai Kaivalkul

General Audit and Credit Review Office 2

Branch Management Department

Vice President

Senior Vice President

Mr. Charnchai Nuntajitkasem

Credit Analysis Division

Branch Management Department

Senior Vice President

First Vice President

Mrs. Sasima Taweeskulchai

Mr. Punnawich Soopunyo

Accounting Division

Business Operation Department

Senior Vice President

Vice President

Ms. Vilai Tantikun

Mr. Surapong Wipulapong

Accounting Department

Electronic Operation Department

First Vice President

Mr. Pichit Pakjamsai

Mr. Naris Saifuk

Bank Product Development Department

228

Mr. Somchai Boonmar

Business Promotion Office

Senior Vice President

Vice President

Mr. Praphan Anupongongarch

Mrs. Suntraporn Kulsutad

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Communication and Brand Management Division

Corporate Investment Banking Division

Senior Vice President

First Vice President

Mr. Vicha Kulkobkiat

Mr. Anawat Leelawatwatana

Human Resources Division

Treasury and Foreign Division

First Vice President

Senior Vice President

Mrs. Ubolrat Busyakanistha

Mr. Lalit Dodampe Gamage Dharmaseri

Staff Development Department

Capital Markets Equity Investment and Derivative Department

Vice President Ms. Raneeporn Chancharoen

Corporate Investment Banking Department 1

First Vice President Mr. Termpong Bunajinda

Management Development First Vice President Mrs. Kanya Supboonrawd

Staff Recruitment Department First Vice President Ms. Areeluxsana Ruangpholronachai

Center Management Division Senior Vice President Mr. Sanong Kumnuch

Center Checker Office

Fixed Income Department First Vice President Mr. Apichat Stiensape

Foreign Exchange Department First Vice President Mr. Thanit Satravaha

Money Markets Department First Vice President Ms. Pornthip Chuenchuphol

Bangkok Branch Network Division

Assistant Vice President

Bangkok Branch Network Department 1

Mrs. Kannikar Patamacom

Senior Vice President

Corporate Banking Division

Mrs. Vilaiwan Viryasiri

Bangkok Branch Network Department 2 Senior Vice President Mr. Noel Singh

Corporate Banking Department 1 First Vice President Mr. Wisoot Tangadunrat

Corporate Banking Department 3

Senior Vice President Mr. Vorachet Cheeva-akrapan

Bangkok Branch Network Department 3 First Vice President Mr. Somkuan Chaicharoen

Bangkok Branch Network Department 4

First Vice President

Mr. Wathanyu Nithyayon

Mr. Ekasith Saktanakorn

Corporate Banking Department 6

Bangkok Branch Network Department 5

First Vice President

Mrs. Wanida Supanantaroek

Mr. Pompet Rasanon

Policy and Planning Office

Bangkok Branch Network Department 6

First Vice President

Mr. Patchra Dolsooklert

Mr. Pichet Charoenjit ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

229

Up-country Network Branch Division Senior Vice President Mr. Songwut Chaowalit

Central Regional Office 1 (Ayutthaya) Assistant Vice President Mr. Chatchawarn Loung-On

Central Regional Office 2 (Saraburi) Senior Manager Mr. Mathis Rukkulcharam

Central Regional Office 3 (Nakhonpathom)

Northern Regional Office 1 (Chiang Mai) Assistant Vice President Mr. Udom Chaiyathep

Northern Regional Office 2 (Phitsanulok) Senior Manager Mr. Vichian Pipatnanun

Northern Regional Office 3 (Nakhon Sawan) Senior Manager Mr. Wikran Puechpanpaisan

Risk Management Department

Senior Manager

Senior Vice President

Mr. Pheerachai Gajasuta

Mr. Robert W. Erickson

Eastern Regional Office 1 (Sriracha)

Senior Vice President

Assistant Vice President

Mr. Kamtorn Tantisirivat

Mr. Chutchawan Uttachart

Compliance Department Eastern Regional Office 2 (Rayong) Assistant Vice President

First Vice President

Mr. Sunan Ammiran

Mr. Sakda Chantrasuriyarat

North Eastern Regional Office 1 (Udonthani)

Wage and Reward Management Department

Assistant Vice President Mr. Mongkol Khonoon

North Eastern Regional Office 2 (Khon Kaen)

First Vice President Mr. Thaneit Khantigaroon

Project Management Department

Senior Manager Mr. Wanchai Karnjanasiri

Senior Vice President Mr. Patipan Manyanondh

North Eastern Regional Office 3 (Nakhonratchasima) Assistant Vice President

Debt Restructure Department

Mr. Pornsin Choowong Vice President

Southern Regional Office 1 (Phuket) Vice President Mr. Phoonsin Sinthanaphat

Southern Regional Office 2 (Surat Thani) Vice President Mr. Nopporn Juntaboon

Southern Regional Office 3 (Nakhon Si Thammarat) Senior Manager

Mr. Krittapol Nontakrew

Information and Technology Department Senior Vice President Mrs. Kjitphan Chunharit

Wage Errand Office Assistant Vice President Mrs. Yuwapa Ngernsawat

Mr. Suthep Nabangtai

Southern Regional Office 4 (Hat Yai)

230

Corporate Funding Group

Vice President

Assistant Vice President

Mr. Sanya Thematma

Mr. Choochat Zaingamsoong

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Business Channel Development Office Vice President Mr. Taveesak Sirithanon

Thanachart Financial Agent Office Vice President Mr. Mongkon Peanpitakkit

Electronic Channel Development Office

Bangkok Collection Office

Vice President

Mr. Somchai Angpromstan

Vice President

Mr. Pornchai Pankitcharoen

Special Project Group Assistant Vice President

Regional Hire Purchase Collection and Personal Loan Office 1 Assistant Vice President

Mr. Saengsoon Saengprasit

Mr. Sanis Hongnoi

Hire Purchase Product Development Department

Regional Hire Purchase Collection and Personal Loan Office 2 Assistant Vice President

Senior Vice President

Mr. Sompon Takarnpanit

Mr. Anuchart Deeprasert

Trade Finance Department Senior Vice President Mrs. Ninna Korprapun

Business Control Department First Vice President

SMEs Marketing Group 2 Manager Mr. Prasai Hormkralob

SMEs Marketing Group 3 Vice President Mr. Anuchai Vitnalakorn

Ms. Smai Makboonprasith

SMEs Marketing Department 1

Hire Purchase Control Office

First Vice President Mr. Thanes Ratanakorn

Vice President Mr. Pongsak Ariyawanwit

Policy and Planning Office First Vice President

Data Management Center Department

Mr. Prapat Suittiroj

First Vice President

Marketing and Funding Department 1

Mr. Gasamand Gaew-im

First Vice President

System and Regulation Development Department

Ms. Chantra Kulkobkiat

Senior Vice President

Mr. Kriangkrai Phurivitvattana

Mrs. Yupin Trangkathumkul

First Vice President

Special Customer Marketing Group

Mr. Pornpichai Worathamrong

Vice President

Marketing and Funding Department 2

Mrs. Soisuda Udomphol

Report to Senior Executive Vice President Corporate Funding Group Senior Vice President

Assistant Vice President

Retail Sale, SMEs and Debt Collection Groups

Mr. Choochat Zaingamsoong

Mr. Seth Cechetto

Consumer Direct Sales Department

Office of COO

First Vice President

Manager

Mr. Wichak Praditavanij

Mrs. Patchara Charoensiri ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

231

232

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

898 Ploenchit Tower,

and

18th

Floor,

Fax 66-2263-0811

Tel. 66-2263-0800

Bangkok 10330, Thailand

Ploenchit Road, Lumpini, Pathumwan,

15th

Thanachart Fund Management Company Limited

Fax 66-2253-8484

Tel. 66-2207-4200

Bangkok 10330, Thailand

Rachadamri Road, Lumpini, Pathumwan,

231 Thanachart Life Assurance Building,

Thanachart Life Assurance Company Limited

Fax 66-2665-7304

Tel. 66-2661-7999

Wattana, Bangkok 10110, Thailand

Sukhumvit 25 Road, North Klongtoey,

Management

Ordinary

Assurance

Mutual Fund

Ordinary

Type of

Life

Non-life Insurance

1 Glas Haus Building, 10th Floor,

Securities

Type of Business

Thanachart Insurance Company Limited

Fax 66-2217-9642

Tel. 66-2217-8888, 66-2611-9222, 66-2217-9595

Bangkok 10330, Thailand

Phayathai Road, Wangmai, Pathumwan,

444 MBK Tower, 14th , 18th and 19th Floor,

Thanachart Securities Public Company Limited

Subsidiaries

Company / Location

100,000,000

500,000,000

1,700,000,000

(Baht)

Capital

Registered

100,000,000

500,000,000

1,500,000,000

(Baht)

Paid-up Capital

10,000,000

50,000,000

1,500,000,000

of Paid-up

Total Number

7,499,993

49,999,400

49,999,434

1,499,999,930

Held

of Shares

Total Number

75.00

100.00

Held (Percent)

Total Shares

Proportion of

The following is a list of companies in which Thanachart Bank made investments, in the form of shareholding of 10 percent or more of the total number of shares issued.

INVESTMENT OF THANACHART BANK PUBLIC COMPANY LIMITED IN OTHER COMPANIES AS OF DECEMBER 31, 2007

GENERAL INFORMATION

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

233

Floor,

Floor, Phayathai Road,

Floor, Phayathai Plaza Office,

Fax 66-2216-9022

Tel. 66-2216-6677

Ratchathewi, Bangkok 10400, Thailand

Phayathai Road, Thung Phayathai,

128/20-21,

3rd

Thanachart Legal and Appraisal Company Limited

Fax 66-2612-1400

Tel. 66-2612-1500

Ratchathewi, Bangkok 10400, Thailand

Phayathai Road, Thung Phayathai,

128/23, 3rd Floor, Phayathai Plaza Office,

Company Limited

Thanachart Management and Service

Fax 66-2611-9488

Tel. 66-2217-8000

Wangmai, Pathumwan, Bangkok 10330, Thailand

444 MBK Tower,

12th

Thanachart Group Leasing Company Limited

Fax 66-2685-0333

Tel. 66-2685-0300

Wattana, Bangkok 10110, Thailand

Soi Sukhumvit 25, North Klongtoey,

1 Glas Haus Building,

4th

Thanachart Broker Company Limited

Company / Location

and Appraisal

Services

Legal Advisory

Services

Leasing

Broker

Insurance

Type of Business

Ordinary

Type of

10,000,000

6,000,000

360,000,000

100,000,000

(Baht)

Capital

Registered

10,000,000

6,000,000

360,000,000

100,000,000

(Baht)

Paid-up Capital

1,000,000

600,000

36,000,000

10,000,000

of Paid-up

Total Number

999,993

599,993

35,999,994

9,999,000

Held

of Shares

Total Number

100.00

Held (Percent)

Total Shares

Proportion of

234

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

5th

Floor,

333 Thanachart Wongsawang Building, Floor,

Remarks

Communication

Leasing

Training

Type of Business

Ordinary

700,000,000

60,000,000

180,000,000

5,000,000

(Baht)

Capital

Registered

700,000,000

60,000,000

180,000,000

5,000,000

(Baht)

Paid-up Capital

7,000,000

600,000

18,000,000

500,000

of Paid-up

Total Number

1,633,800

599,994

17,998,200

499,993

Held

of Shares

Total Number

** Receivership

* Thanachart Bank indirectly holds 100 percent through Thanachart Group Leasing Co., Ltd. which is in line with the definition of subsidiaries announced by the Stock Exchange of Thailand

Bangkok 10900, Thailand

Ratchadaphisek Road, Ladyao, Chatuchak,

18 SCB Park Plaza Tower 2 West, 17th - 22nd Floor,

Company Limited **

Siam Media and Communication

Associated Company

Bangkok 10330, Thailand

Wangmai, Phayathai, Pathumwan,

444 MBK Tower, 12th Floor, Phayathai Road,

National Leasing Company Limited *

Fax 66-2832-2556

Tel. 66-2832-2555

Bangkok 10800, Thailand

Ratchadaphisek Road, Bangsue,

3rd

Thanachart Leasing 2000 Company Limited *

Fax 66-2290-3419

Tel. 66-2290-3410

Bangkok 10400, Thailand

Ratchadapisek Road, Dindang,

207/6 Thanachart Building,

Company Limited

Thanachart Training and Development

Company / Location

Type of

23.34

100.00

Held (Percent)

Total Shares

Proportion of

THE BANK’S REFERENCES Name

Thanachart Bank Public Company Limited “TBANK”

Type of Business

Commercial Bank, according to the “Commercial Banking Act. B.E.2505” and related notifications of the Bank of Thailand

Location of Head office

900 Tonson Tower, Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330, Thailand

Registration No.

0107536001401 (Former No. BOR.MOR.JOR. 214)

Website

www.thanachartbank.co.th

Telephone

66-2655-9000

Fax

66-2655-9001

Thanachart Smartphone

1589 (Contact channel via telephone for business transaction of the Bank)

Thanachart Contact Center

1770

SWIFT BIC

THBKTHBK

TELEX

20323 NBANK TH

Registered Capital

Baht 21,346,192,920 (Baht Twenty one thousand three hundred and forty six million one hundred and ninety two thousand nine hundred twenty only)

Paid-up Capital

Baht 17,346,192,920 (Baht Seventeen thousand three hundred and forty six million one hundred and ninety two thousand nine hundred twenty only) Comprising 1,734,619,292 ordinary shares at per value of Baht 10

Reference Securities Registrar

Thailand Securities Depository Company Limited 62 The Stock Exchange of Thailand Building, Ratchadaphisek Road, Klongtoey, Bangkok 10110, Thailand Tel. 66-2229-2800 Fax 66-2359-1257

Debentures Registrar

BFIT Securities Public Company Limited 191 Silom Complex Tower, 14th and 16th Floor, Silom Road, Bangrak, Bangkok 10500, Thailand Tel. 66-2200-2000 Fax 66-2632-2909, 66-2632-0191

Auditor

Ms. RATANA JALA, Certified Public Accountant No.3734 Ernst & Young Office Limited 193/136-137 Lake Rajada Office Complex, 33rd Floor, Rajadapisek Road, Klongtoey, Bangkok 10110, Thailand Tel. 66-2264-0777 Fax 66-2264-0789-90

Legal Advisor

Thanachart Legal and Appraisal Company Limited 128/20-21 Phayathai Plaza Office, 3rd Floor, Phayathai Road, Thung Phayathai, Ratchathewi, Bangkok 10400, Thailand Tel. 66-2216-6677 Fax 66-2216-9022

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

235

STRUCTURE OF MAJOR SHAREHOLDERS No.

Name of Shareholders

Thanachart Capital Public Company Limited

The Bank of Nova Scotia

Ms. Kittima

Tolieng

Ms. Piengjai

Hanphanit

Ordinary Share

Shareholding (Percent)

1,299,607,043

74.92

433,393,416

24.98

104,200

0.01

96,665

0.01

Thai Finance and Securities Public Company Limited *

90,000

0.01

Mr. Wanchai

Chirathivat

84,809

0.00

Mr. Sujin

Kitkanjanapaiboon

70,000

0.00

Mr. WAYNE

HUANG

40,000

0.00

Mr. Prawit

Jessadaapimuk

36,600

0.00

Mr. Chuan

Tomeechai

36,000

0.00

Other Shareholders

275,794

0.01

Total Paid-up Capital

1,734,619,292

100.00

Thai Shareholders

1,301,182,476

75.013

433,436,816

24.987

Foreign Shareholders

Remark: * Thai Finance and Securities Public Company Limited’s assets were put on restraint by receivership, Legal Execution Department Source:

Report of the Company’s Major Shareholders as at January 21, 2008 which was prepared by Thailand Securities Depository Company Limited

236

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

DIVIDEND POLICY

According to profit allocation during 2005 - 2006, Thanachart Bank paid dividends of 0.25 baht per share in

The Bank may issue dividend payment to its shareholders

2005 and 0.15 baht per share in 2006.

whenever there is sufficient profit taking into consideration capital adequacy to support bank operations and required reserve. Profit remaining after dividend payments will be

Dividend Payment Policy of the Company’s Subsidiaries

used as other provisions as deemed appropriate by Bank Committee. Nevertheless, the Bank Committee may approve dividend payments occasionally depending on whether the Bank has sufficient profitability and when the dividend has been paid out, such transaction will be report at the next shareholders meeting.

The dividend payment of the subsidiaries is subject to a resolution to be adopted by shareholders or by the Board of Directors of the respective subsidiaries (depending on the case). Each time before making the dividend payment, the subsidiaries are required to appropriate at least 5 percent of the net profit as reserve to such an extent that the reserve

Moreover, dividend payments must be in accordance with Notification of the Bank of Thailand Re: Worthless or Irrecoverable Assets and Doubtful Assets that may be Worthless or Irrecoverable of Commercial Banks dated August 23, 2004 which states that as long as the commercial

amounts to 10 percent or more of their capital.

Group of major shareholders which has a significant impact on the formulation of management policies

bank has not written off losses incurred through worthless or

Thanachart Bank has 2 major shareholders that, by

irrecoverable assets or made full provisioning for worthless

behavior have significant influence on the establishment of

or irrecoverable assets, the commercial bank shall not make

its management policies. The 2 major shareholders are

dividend payments not any other such payoffs (which

Thanachart Capital Public Company Limited, which holds

originate from the firm’s profits) to its shareholders and

74.92 percent of Thanachart Bank’s total paid-up shares, and

Circular of the Bank of Thailand No.Tor.Por.Tor.Sor.Nor.Sor. (31)

The Bank of Nova Scotia “BNS”, which holds 24.98 percent

Wor. 1729/2546 RE: Dividend Payments Policy of Commercial

of Thanachart Bank’s total paid-up shares.

Bank date July 28, 2003 which states that commercial bank should not include unrealized payment and moreover, commercial bank should not include, in consideration of dividend payment, revenue generated from asset sale that

Thanachart Capital Public Company Limited did not have any major shareholders that had a significant influence on the establishment of its management policies.

did not come from genuine sale transaction since such figure may cause extraordinary profit or loss.

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

237

COMPANIES IN THANACHART GROUP

Fully Integrated Financial Group Thanachart Capital Public Company Limited 444 MBK Tower, 10 - 11 and 15 - 20 Floor,

Thanachart Fund Management Company Limited

Phayathai Road, Wangmai, Pathumwan,

898 Ploenchit Tower, 15th Floor, Ploenchit Road,

Bangkok 10330, THAILAND

Lumpini, Pathumwan, Bangkok 10330, THAILAND

Tel. 66-2217-8444, 66-2217-8000, 66-2611-9111

Tel. 66-2263-0800

Fax 66-2613-6099

Fax 66-2263-0811

Registration No. 0107536000510

Registration No. 0105535049696

www.thanachart.co.th

www.thanachartfund.com

Thanachart Bank Public Company Limited

Thanachart Insurance Company Limited

900 Tonson Tower, Ploenchit Road, Lumpini,

1 Glas Haus Building, 10th Floor, Sukhumvit 25 Road,

Pathumwan, Bangkok 10330, THAILAND

North Klongtoey, Wattana, Bangkok 10110, THAILAND

Tel. 66-2655-9000

Tel. 66-2661-7999

Fax 66-2655-9001

Fax 66-2665-7304

Registration No. 0107536001401

Registration No. 0105540060091

www.thanachartbank.co.th

www.thanachartinsurance.co.th

Thanachart Securities Public Company Limited

Thanachart Life Assurance Company Limited

444 MBK Tower, 14th, 18th and 19th Floor, Phayathai Road,

231 Thanachart Life Assurance Building

Wangmai, Pathumwan, Bangkok 10330, THAILAND

Ratchadamri Road, Lumpini,

Tel. 66-2217-8888, 66-2611-9222, 66-2217-9595

Pathumwan, Bangkok 10330, THAILAND

Fax 66-2217-9642

Tel. 66-2207-4200

Registration No. 0107547000591

Fax 66-2253-8484

www.tnsitrade.com

Registration No. 0105540057090

www.thanachartsec.co.th

www.thanachartlife.co.th

Thanachart Contact Center 1770

238

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

BRANCHES OF THANACHART BANK PUBLIC COMPANY LIMITED

Information as of 29 February 2008 HAED OFFICE Tonson Office Tel.

66-2655-9000

Fax

66-2655-9585

The Mall Bangkapi Branch Tel.

66-2375-1575

Fax

66-2375-1686

Lat Phrao Soi 85 Branch Tel.

66-2514-2990

BANGKOK AND VICINITIES

Fax

66-2514-3033

Silom Branch

Ratchada Phisek (Glas Haus Building) Branch

Tel.

66-2266-7414

Tel.

66-2693-9811

Fax

66-2266-7416

Fax

66-2693-9820

Central Pin Klao Branch

Phahon Yothin Soi 6 Sub Branch

Tel.

66-2884-9680-3

Tel.

66-2279-9875

Fax

66-2884-9684

Fax

66-2279-9895

Ratchawong Sub Branch

Thanon Nang Linchi Branch

Tel.

66-2622-9050

Tel.

66-2286-1898

Fax

66-2622-9029

Fax

66-2286-1939

Samitivej Hospital Sukhumvit 49 Branch

Bang Na Branch

Tel.

66-2712-7013-5

Tel.

66-2398-0184

Fax

66-2712-7016

Fax

66-2398-0185

Mah Boonkrong Branch

MBK Tower Sub Branch

Tel.

66-2611-5710-5

Tel.

66-2611-9480

Fax

66-2611-5717

Fax

66-2611-9557

RAMA 4 Branch

Thanon Chan Sub Branch

Tel.

66-2661-5534-7

Tel.

66-2285-5360

Fax

66-2661-5539

Fax

66-2285-5361

Central Rama 2 Branch

The Mall 2 Ramkhamhaeng Sub Branch

Tel.

66-2872-4770

Tel.

66-2369-2486

Fax

66-2872-4769

Fax

66-2369-2484

Seacon Square Srinakarin Branch

Silom Complex Sub Branch

Tel.

66-2721-9955

Tel.

66-2235-8832

Fax

66-2721-8321

Fax

66-2235-8833

Central Rama 3 Branch

Thong Lo Branch

Tel.

66-2211-8260

Tel.

66-2381-8422

Fax

66-2211-8190

Fax

66-2381-8423

The Mall Bang Khae Branch

Khlong Thom Sub Branch

Tel.

66-2803-8310

Tel.

66-2221-1677

Fax

66-2803-8305

Fax

66-2221-1679 ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

239

240

BigC Phet Kasem Sub Branch

Siam Discovery Sub Branch

Tel.

66-2444-2927, 66-2444-2904, 66-2444-2906

Tel.

66-2658-0491-3

Fax

66-2444-2909

Fax

66-2658-0488

MBK Center Sub Branch

Money Park Sub Branch

Tel.

66-2611-4752

Tel.

66-2611-4819-21

Fax

66-2611-9557

Fax

66-2611-4829

Yaowarat Branch

Thanon Phatthanakan Branch

Tel.

66-2221-1868

Tel.

66-2369-2814-7

Fax

66-2221-1869

Fax

66-2369-2818

Tesco Lotus Wang Hin Sub Branch

Phet Kasem Branch

Tel.

66-2578-6194-6

Tel.

66-2456-0337-42

Fax

66-2578-6197

Fax

66-2454-4116

Fashion Island Sub Branch

Pratu Num Branch

Tel.

66-2519-5742, 66-2519-5753, 66-2519-5784

Tel.

66-2208-0072-5

Fax

66-2519-5718

Fax

66-2208-0076

Siwara Sub Branch

Major Hollywood Ramkhamhaeng Branch

Tel.

66-2538-8466, 66-2538-8670, 66-2538-8986

Tel.

66-2318-1505, 66-2318-1509

Fax

66-2538-9378

Fax

66-2318-1654

Carrefour Bang Bon Sub Branch

Vichaiyut Hospital Sub Branch

Tel.

66-2416-9969-71

Tel.

66-2278-2194-6

Fax

66-2416-9974

Fax

66-2278-2606

BigC Ekkamai Sub Brach

Udom Suk Branch

Tel.

66-2714-8274-7

Tel.

66-2398-4024-7

Fax

66-2714-8268

Fax

66-2398-4028

Century The Movie Plaza Sub Branch

Union Mall Lat Phrao Branch

Tel.

66-2245-8500-2

Tel.

66-2511-0236, 66-2511-0246

Fax

66-2245-8504

Fax

66-2511-0268

Siam Paragon Sub Branch

Central World Sub Branch

Tel.

66-2129-4374-7

Tel.

66-2646-1025-8

Fax

66-2129-4372

Fax

66-2646-1029

The Mall Tha Phra Sub Branch

Major Ratchayothin Branch

Tel.

66-2477-7321-3

Tel.

66-2511-0335, 66-2511-0348, 66-2511-0352

Fax

66-2477-7324

Fax

66-2511-0535

Siam Square Sub Branch

Thanon Sirinthorn Sub Branch

Tel.

66-2252-7363-6

Tel.

66-2434-5026-9, 66-2434-5947-8

Fax

66-2252-7367

Fax

66-2434-5661

Thanon Petchaburi Tat Mai Sub Branch

Seri Center Sub Branch

Tel.

66-2254-0252-4

Tel.

66-2325-9072-4

Fax

66-2254-0255

Fax

66-2325-9075

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Sukhumwit Soi 25 Sub Branch

Watcharaphon Sub Branch

Tel.

66-2259-4727-9

Tel.

66-2508-2185-7

Fax

66-2259-4730

Fax

66-2508-2207

Bang Lamphu Sub Branch

Silom Soi 15 Sub Branch

Tel.

66-2356-0783-6

Tel.

66-2237-4192-4, 66-2635-0272

Fax

66-2356-0787

Fax

66-2635-0270

Bo Bae Branch

Bang Khun Non Branch

Tel.

66-2356-0755

Tel.

66-2434-6067-8, 66-2434-6078, 66-2882-4595

Fax

66-2356-0759

Fax

66-2882-4581

Tao Pun Sub Branch

Sukhumwit Soi 101/1 (Piyarom Place) Sub Branch

Tel.

66-2520-7292

Tel.

66-2332-7060-2, 66-2741-8016

Fax

66-2520-7379

Fax

66-2741-8017

BigC Bang Na Sub Branch

Bang Rak Sub Branch

Tel.

66-2396-0482, 66-2396-0484-5

Tel.

66-2234-4227-9, 66-2630-9026

Fax

66-2396-0500

Fax

66-2630-9027

Phahon Yothin Soi 9 Branch

Wongwian Yai Sub Branch

Tel.

66-2270-1371-3, 66-2619-6399

Tel.

66-2438-2486, 66-2438-2562, 66-2438-2567

Fax

66-2619-6339

Fax

66-2438-2568

Thanon Mongkon Sub Branch

The Park Place Sub Branch

Tel.

66-2225-3331, 66-2225-3863, 66-2225-4757

Tel.

66-2250-2677-8, 66-2651-9037

Fax

66-2225-8364

Fax

66-2252-2679

Esplanade Ratchada Branch

Wong Sawang Branch

Tel.

66-2354-2052-4 , 66-2660-9252

Tel.

66-2834-9999

Fax

66-2660-9250

Fax

66-2834-9905

Ramkhamheang Soi 122 Branch

Si Worachak Sub Branch

Tel.

66-2372-2377-9, 66-2728-2947

Tel.

66-2222-1912, 66-2222-1917, 66-2222-1965

Fax

66-2728-2950

Fax

66-2622-9338

The Avenue Chaengwattana Branch

Green Place (Soi Wat Phai Ngoen) Sub Branch

Tel.

66-2573-0673-5

Tel.

66-2211-3515, 66-2211-3519-20

Fax

66-2573-0677

Fax

66-2674-9704

Talat Ying Charoen Sub Branch

Chaengwattana Branch

Tel.

66-2552-8043, 66-2552-8045, 66-2552-8047

Tel.

66-2962-0066

Fax

66-2972-3161

Fax

66-2962-0376

Ratchadamnoen Klang Sub Branch

Nakhon Pathom Branch

Tel.

66-2226-3083-5, 66-2621-2185

Tel.

66-3421-9131

Fax

66-2621-2186

Fax

66-3421-9160

Lat Krabang Sub Branch

Rangsit Branch

Tel.

66-2327-2754-6

Tel.

66-2567-1117

Fax

66-2327-2706

Fax

66-2567-6694

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

241

Tesco Lotus Rattana Thibet Sub Branch

Imperial World Samrong Branch

Tel.

66-2950-1160

Tel.

66-2380-2943-5, 66-2756-9023

Fax

66-2950-1157

Fax

66-2756-9024

BigC Bang Pli Sub Branch

Om Yai Branch

Tel.

66-2312-2284, 66-2312-2300

Tel.

66-2420-4920, 66-2420-4930

Fax

66-2312-2321

Fax

66-2811-6538

Bang Yai Branch

Central Rattanathibet Branch

Tel.

66-2594-1158, 66-2594-1152, 66-2594-1143

Tel.

66-2525-4736-8

Fax

66-2594-1161

Fax

66-2969-7537

Talad Thai Sub Branch Tel.

66-2529-6171-3

Fax

66-2529-6175

Future Park Rangsit Sub Branch Tel.

66-2958-5116-9

Fax

66-2958-5121

Samut Sakhon Branch Tel.

66-3482-0359-60, 66-3482-0365-6

Fax

66-3482-0445

BigC Don Mueang Sub Branch Tel.

66-2551-0638-9, 66-2551-0641

Fax

66-2551-0642

BigC Samut Prakan Branch Tel.

66-2702-1792, 66-2702-1859

Fax

66-2702-1982

BigC Suk Sawat Branch Tel.

66-2463-7700, 66-2463-1894

Fax

66-2463-7144

Nonthaburi Branch Tel.

66-2526-3453-6

Fax

66-2526-3457

The Mall Ngamwongwan Branch Tel.

66-2550-1231-4

Fax

66-2550-1235

Suvarnabhumi Airport Sub Branch Tel.

66-2134-4085-8

Fax

66-2134-4089

Phra Pathom Chedi Sub Branch

242

Tel.

66-3425-4203-5, 66-3421-3541

Fax

66-3425-9131

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

CENTRAL REGION Phra Nakhon Si Ayutthaya Branch Tel.

66-3523-5626

Fax

66-3523-5630

Phitsanulok Branch Tel.

66-5521-8650

Fax

66-5521-8648

Nakhon Sawan Branch Tel.

66-5631-3848

Fax

66-5631-3850

Saraburi Branch Tel.

66-3631-7722

Fax

66-3631-8069

Ayutthaya Park Sub Branch Tel.

66-3522-9560-2

Fax

66-3522-9554

HomePro Phitsanulok Sub Branch Tel.

66-5528-9042-4

Fax

66-5528-9044

Thanon Kosi (Nakhon Sawan) Sub Branch Tel.

66-5631-3929-31

Fax

66-5631-3932

Thanon Sut Banthat (Saraburi) Sub Branch Tel.

66-3631-4256-7, 66-3631-4512

Fax

66-3631-5404

Sukhothai Branch Tel.

66-5561-6022, 66-5562-2464-6

Fax

66-5562-2469

Kamphaeng Phet Branch

Na Kluea (Pattaya) Branch

Tel.

66-5572-0575, 66-5571-3325-6

Tel.

66-3822-6058-61

Fax

66-5571-3368

Fax

66-3822-6117

Suphan Buri Branch

Nong Mon (Chon Buri) Branch

Tel.

66-3552-5742, 66-3550-1495

Tel.

66-3874-5233, 66-3874-5739

Fax

66-3552-5743

Fax

66-3874-6349

Phichit Branch

Chanthaburi Branch

Tel.

66-5665-1214-6

Tel.

66-3934-4323-6

Fax

66-5661-5858

Fax

66-3934-4327

Phetchabun Branch

Klaeng Sub Branch

Tel.

66-5674-4076-8

Tel.

66-3888-4503-5

Fax

66-5672-2217

Fax

66-3888-4506

WESTERN REGION Ratchaburi Branch Tel.

66-3231-1203-6

Fax

66-3231-1207

Hua Hin Branch Tel.

66-3251-6663-6

Fax

66-3251-6661

Kanchanaburi Branch Tel.

66-3451-8763, 66-3462-1566

Fax

66-3451-8874

EASTERN REGION Sri Racha Branch Tel.

66-3877-1686

Fax

66-3877-1690

Tesco Lotus Pattaya Nuea Sub Branch Tel.

66-3841-1410

Fax

66-3841-1423

Rayong Branch Tel.

66-3886-4114

Fax

66-3886-4115

Thanon Phraya Satcha (Chon Buri) Sub Branch Tel.

66-3879-2214

Fax

66-3879-2216

Thanon Chet Cham Nong (Chon Buri) Branch Tel.

66-3879-2178, 66-3879-2203-5

Fax

66-3879-2198

HomeWorks Pattaya Tai Sub Branch Tel.

66-3837-4270

Fax

66-3837-4463

Chachoengsao Branch Tel.

66-3853-5336, 66-3881-2856-7

Fax

66-3881-2874

Thanon Sukhumwit (Chon Buri) Branch Tel.

66-3827-7823, 66-3879-5639

Fax

66-3827-7841

The Avenue Pattaya Branch Tel.

66-3872-3933-5, 66-3805-2000

Fax

66-3805-2002

SOUTHERN REGION Phuket Branch Tel.

66-7626-1570-5

Fax

66-7626-1576

Central Festival Phuket Sub Branch Tel.

66-7620-9290

Fax

66-7620-9291

Surat Thani Branch Tel.

66-7721-3551

Fax

66-7721-3560

Had Yai Branch Tel.

66-7435-4690

Fax

66-7435-4691

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

243

Nakhon Si Thammarat Branch

Thanon Ratsada (Phuket) Branch

Tel.

66-7532-2689

Tel.

66-7621-9664, 66-7625-6873-5

Fax

66-7532-2144

Fax

66-7621-9731

Thanon ChutiUthit (Had Yai) Sub Branch

Thanon Ratthakan (Had Yai) Sub Branch

Tel.

66-7434-6396-8

Tel.

66-7434-9070-2, 66-7421-6751

Fax

66-7434-6393

Fax

66-7426-1752

Na Thon (Ko Samui) Sub Branch

Si Yaek Tha Ruea (Phuket) Sub Branch

Tel.

66-7723-6611-3

Tel.

66-7661-7097-8

Fax

66-7723-6616

Fax

66-7661-7095

Krabi Branch

Thanon Si Wichai (Surat Thani) Sub Branch

Tel.

66-7563-2838

Tel.

66-7720-6488, 66-7726-4170

Fax

66-7563-2835

Fax

66-7720-6671

Khok Kloi (Phang Nga) Sub Branch

BigC Pattani Branch

Tel.

66-7643-4821-4

Tel.

66-7333-8004, 66-7331-3982-3

Fax

66-7643-4827

Fax

66-7333-8005

Trang Branch

Tha Wang (Nakhon Si Thammarat) Sub Branch

Tel.

66-7522-3240-3

Tel.

66-7531-3144-6

Fax

66-7522-3244

Fax

66-7535-7067

Songkhla Sub Branch

Ha Yaek Chalong (Phuket) Sub Branch

Tel.

66-7444-1198-9

Tel.

66-7638-3222, 66-7638-3431

Fax

66-7444-1516

Fax

66-7638-3348

Diana Si Phuwanart Sub Branch Tel.

66-7446-5316-8

Fax

66-7446-5319

Thanon Montri (Phuket) Sub Branch Tel.

66-7623-0203-5

Fax

66-7623-0209

Patong Sub Branch Tel.

66-7629-0585-7

Fax

66-7629-0588

Hat Chaweng (Ko Samui) Sub Branch Tel.

66-7723-3267-9

Fax

66-7723-3276

Thung Song Sub Branch Tel.

66-7541-3003-6

Fax

66-7541-3007

Chumphon Branch

244

Tel.

66-7751-2266

Fax

66-7751-5054

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

NORTHERN REGION Tha Phae Branch Tel.

66-5340-5391

Fax

66-5340-5397

Central Airport Chiang Mai Sub Branch Tel.

66-5320-1234

Fax

66-5320-1900

Talad Varorot Sub Branch Tel.

66-5387-4002

Fax

66-5387-4006

Lampang Branch Tel.

66-5431-8927-30

Fax

66-5431-8960

Chiang Rai Branch Tel.

66-5374-5243-6

Fax

66-5374-5247

Thanon Chang Phueak Sub Branch

Surin Branch

Tel.

66-5323-1060, 66-5431-2116-7

Tel.

66-4453-8517-20

Fax

66-5323-1061

Fax

66-4453-8521

Thanon Phahon Yothin (Chiang Rai) Sub Branch

Nong Khai Branch

Tel.

66-5371-6433, 66-5371-6979

Tel.

66-4246-0119-22

Fax

66-5375-2811

Fax

66-4246-0199

Thanon Chang Chlan (Chiang Mai) Branch

Roi Et Branch

Tel.

66-5382-0538-41

Tel.

66-4352-3335-8

Fax

66-5382-0543

Fax

66-4352-3339

Thanon Nimmanhemin Sub Branch

Pak Chong Sub Branch

Tel.

66-5322-5463, 66-5340-0672-4

Tel.

66-4431-6866-9

Fax

66-5340-0675

Fax

66-4431-6859

NORTH EASTERN REGION Khon Kaen Branch Tel.

66-4332-4321

Fax

66-4332-5919

Udon Thani Branch Tel.

66-4234-3818

Fax

66-4234-3727

Ubon Ratchathani Branch Tel.

66-4528-4272

Fax

66-4528-4273

Nakhon Ratchasima Branch Tel.

66-4426-9797

Fax

66-4426-9790

Tesco Lotus Khorat Sub Branch Tel.

66-4426-3567

Fax

66-4426-3565

Thanon Pho Si (Udon Thani) Sub Branch Tel.

66-4234-3727

Fax

66-4234-3818

Thanon Klang Mueang (Khon Kaen) Sub Branch Tel.

66-4332-26366-1

Fax

66-4332-2386

Warin Chamrap Sub Branch Tel.

66-4532-5075, 66-4528-6171-3

Fax

66-4532-5076

Sakon Nakhon Branch Tel.

66-4271-5767, 66-4273-6146-8

Fax

66-4271-5686

Surin Plaza Sub Branch Tel.

66-4453-8517-20

Fax

66-4453-8521

Buri Ram Branch Tel.

66-4460-2573, 66-4462-5471, 66-4462-5476

Fax

66-44460-2575

Nakhon Phanom Branch Tel.

66-4252-0624, 66-4252-0628, 66-4251-4500

Fax

66-4251-4501

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

245

BRANCHES OF THANACHART SECURITIES PUBLIC COMPANY LIMITED

Information as of 29 February 2008 BANGKOK AND VICINITIES Tha Phra Branch

Tel.

66-2286-1997

Fax

66-2286-1096

Tel.

66-2876-5630-48, 66-2876-5106-8, 66-2876-5017-8, 66-2477-7233-7

Century The Movie Plaza Branch

Fax

66-2876-5649

Tel.

66-2248-3488

Fax

66-2248-3489

Ploenchit Branch Tel. Fax

66-2263-0409-26, 66-2263-0428-30,

Siam Square Branch

66-2263-0374-6

Tel.

66-2251-4099

66-2263-0427

Fax

66-2251-4117

Yaowaraj Branch

Samutprakan Branch

Tel.

66-2225-7909-21

Tel.

66-2389-2122

Fax

66-2225-7922

Fax

66-2389-2766

Jaengwattana Branch Tel. Fax

66-2575-4480-86, 66-2575-4489-93,

NORTHERN REGION

66-2575-4489-92

Chiang Mai Branch

66-2575-4495

Tel.

66-5323-5501, 66-5387-4501

Fax

66-5323-5510

Rama 2 Branch Tel.

66-2872-4074-84, 66-2872-4680-91

Nakhonsawan Branch

Fax

66-2872-4081

Tel.

Bangna Branch Tel. Fax

66-5622-0838, 66-5622-0840, 66-5631-3886-7

Fax

66-5622-0855

66-2745-7245-56, 66-2398-5030,32,35,93, 66-2398-5115,22,28, 66-2398-5250 66-2745-7250

Pinklao Branch Tel.

66-2884-8742-3, 66-2884-8753,

Fax

66-2884-8988

66-2884-8756-7, 66-2884-3935, 66-2884-8975

Pahurat Branch Tel.

66-2226-0080-7

Fax

66-2226-0088

Prachachuen Branch Tel.

66-2575-3460

Fax

66-2575-3470

R.C.A. Branch

246

Thanon Chan Branch

Tel.

66-2203-1616, 66-2203-1720-43

Fax

66-2203-1666

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

CENTRAL REGION Saraburi Branch Tel.

66-3631-7062-3, 66-3631-7479, 66-3622-3881-4, 66-3622-1024-5

Fax

66-3622-3885

Ratchaburi Branch Tel.

66-3232-5679-85

Fax

66-3232-5686

Nakhon Pathom Branch Tel.

66-3421-9717, 66-3421-9719, 66-3425-7883-4

Fax

66-3421-9718

Banpong Sub Branch Tel.

66-3222-2957, 66-3222-2967

Fax

66-3222-2907

EASTERN REGION Chonburi Branch Tel. Fax

66-4531-6620

66-3879-2464

Tel.

66-4352-3092, 66-4351-6303-4

Fax

66-4352-3093

66-3841-5170, 66-3837-1255, 66-3841-5171

Tel.

66-3930-1405-8, 66-3934-3815-7

Fax

66-3930-1409

NORTH EASTERN REGION Khon Kaen Branch 66-4332-4577, 66-4332-4563 66-4322-7597-8, 66-4327-1372-3 Fax

Fax

Roi Et Sub Branch

Chantha Buri Branch

Tel.

66-4531-6540, 66-4528-0998

66-3827-7711-2

66-3841-5436-7 Fax

Tel.

66-3879-2422-3, 66-3879-2458-65,

Tesco Lotus Pattaya Nuea Branch Tel.

Ubonratchatani Branch

66-4332-4199

Udon tani Branch Tel.

66-4224-4111, 66-4234-2759, 66-4234-2719

Fax

66-4234-2586

SOUTHERN REGION Phuket Branch Tel.

66-7626-1590-7

Fax

66-7622-1000

Had Yai Branch Tel.

66-7435-5760-9, 66-7424-3666,

Fax

66-7435-5770

66-7424-3854

Surat Thani Branch Tel.

66-7728-8720-3, 66-7720-6044-49

Fax

66-7721-3805

CutiUthit Sub Branch Tel.

66-7424-3666

Fax

66-7424-4756

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

247

BRANCHES OF THANACHART INSURANCE COMPANY LIMITED

Information as of 29 February 2008 BRANCH

Ayuttaya Branch

Phuket Branch Tel.

66-7626-1577-9, 66-7626-1936-7

Fax

66-7626-1581

Had Yai Branch Tel.

66-7435-5044, 66-7435-4606

Fax

66-7435-5045

Surat Thani Branch Tel.

66-7721-2394, 66-7721-3651-3

Fax

66-7721-3457

Nakhon Si Thammarat Branch Tel.

66-7532-2040, 66-7532-2785-7

Fax

66-7532-2041

Nakhon Ratchasima Branch Tel.

66-4426-9670-4

Fax

66-4426-7167

Ubon Ratchathani Branch Tel.

66-4528-4019

Fax

66-4528-4004

Udon Thani Branch Tel.

66-4234-1653, 66-4234-1665

Fax

66-4234-1850

Khon Kaen Branch

248

Tel.

66-4332-5858, 66-4332-5608

Fax

66-4336-5244

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

Tel.

66-3523-5633-5, 66-3523-5637-8

Fax

66-3523-5639

Saraburi Branch Tel.

66-3631-8291-4, 66-3621-3113-7

Fax

66-3621-3121

Rayong Branch Tel.

66-3886-4139-43

Fax

66-3886-4144

Si Racha Branch Tel.

66-3832-8433-6

Fax

66-3877-0478

Nakhon Pathom Branch Tel.

66-3421-9424, 66-3421-9433

Fax

66-3421-9429

Chiangmai Branch Tel.

66-5387-4368, 66-5387-4435

Fax

66-5387-4375, 66-5387-4436

Nakhon Sawan Branch Tel.

66-5631-3819-23, 66-5631-1872

Fax

66-5631-3825

Phitsanulok Branch Tel.

66-5530-4280

Fax

66-5530-4918

RELATED PARTY TRANSACTIONS All of the related party transactions between the Bank

influence on the Bank, including key management, director

and related parties are of normal business transactions,

or employees of the Bank who has the authority in planning or

proceeding according to the business plan under fair price

controlling the Bank’s operation.

and term and condition as to the general public. Those The detail information of related party transactions is

transactions have been approved under transparent procedures in compliance with the relevant regulations.

disclosed in the notes to the Bank’s financial statements item 34.

The related party with the Bank means a person or entity

As of 31 December 2007 and 31 December 2006, the

that the Bank had controlled or was controlled directly or

Bank’s major related party transactions with parent company,

indirectly or under the same control as the Bank. Moreover,

subsidiary companies and other related companies including

a related party also includes the person who has significant

their rationale are shown as follows :

Related companies/

Type of

Relationship with

transaction/

the Bank

Contract terms

Interest rate

Transaction value

Rationale of the

(Outstanding balance)

transaction and

(Million Baht)

pricing policy

Parent company Thanachart Capital PCL.

Promissory note

The Bank’s cost

Shareholding

at Call but not

of fund plus a

executed as a result of

- Thanachart Capital PCL. held

over May 2008

fixed interest

Thanachart Group’s business

rate per annum

restructuring according to

74.92 percent of the Bank’s shares

12,500

The transactions were

Related Directors

“One Presence” Policy.

Mr. Banterng Tantivit

Thanachart Bank would be

Mr. Suphadej Poonpipat

the only one financial

Ms. Suvarnapha Suvarnaprathip

institution of Thanachart

Relationship

Group.

- Director and management of the Bank Loans issued to member

- Have authority in Thanachart Capital PCL.

companies of Thanachart

- Do not hold share in Thanachart Capital PCL.

Group were for normal Subsidiary companies

business operations of each

Thanachart Group Leasing Co.,Ltd.

Promissory note

Money market

Shareholding

at Call but not

interest rate but

- The Bank holds 100 percent stake

over May 2008

not less than

Related Directors

one-year fixed

Mr. Bundit Cheevadhanarak

deposit rate

Mr. Anuchart Deeprasert

plus a fixed

Mr. Yongyuth Asavasuwansutee

interest rate per

Mr. Pichet Charoenjit

annum

Mr. Pompet Rasanon

4,000

member company. The Bank’s Board of Directors was responsible for approving the transactions with support from the Credit Committee and the Executive Committee respectively. Those who have related

Mr. Songwut Chaowalit

interest in the transaction

Mr. Somkuan Chaicharoen

would not participate in the

Mr. Mongkol Peanpitakkit

assessment and approval of

Mr. Sarut Tharathornchanakul

the transaction

Mr. Ekawit Pusuwan

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

249

Related companies/

Type of

Relationship with

transaction/

the Bank

Contract terms

Interest rate

Transaction value

Rationale of the

(Outstanding balance)

transaction and

(Million Baht)

pricing policy Applicable interest rate

Relationship - Director and management of the Bank

and terms are the same as

- Have authority in Thanachart Group

those applied to general customers with prices

Leasing Co., Ltd.

comparable to those offered to

- Do not hold share in Thanachart Group

the general customers with

Leasing Co., Ltd. Promissory note

Money market

Shareholding

at Call but not

interest rate but

approved credit line is within

- The Bank indirectly holds 100 percent

over May 2008

not less than

the limit approved by the

stakes through Thanachart Group

one-year fixed

Bank of Thailand.

Leasing Co., Ltd.

deposit rate

Related Directors

294

the same level risk. The

Thanachart Leasing 2000 Co., Ltd.

plus a fixed

Mr. Bundit Cheevadhanarak

interest rate

Mr. Anuchart Deeprasert

per annum

Mr. Thanes Ratanakorn Mr. Wichak Praditavanij Mr. Chatchai Kaivalkul Mr. Sanong Khumnuch Mr. Mongkol Peanpitakkit Mr. Seth Martin Cechetto Relationship - Director and management of the Bank - Have authority in Thanachart Leasing 2000 Co., Ltd. - Do not hold share in Thanachart Leasing 2000 Co., Ltd. Related company N.F.S. Asset Management Co., Ltd.

Promissory note

The Bankâ&#x20AC;&#x2122;s cost

Shareholding

at Call but not

of fund plus a

- Thanachart Capital PCL. held 100 percent

over May 2008

fixed interest

Related Directors

4,250

rate per annum

- None Relationship - Have the same holding Company

250

â&#x20AC;˘ Transactions related to supporting services among member companies of Thanachart Group

companies of the Group. The purpose is to achieve economies

It is the policy of Thanachart Group to combine all the

benefits from the existing resources. The pricing policy in

supporting services together under one company which

relation to the services is mainly based on the cost-plus

will be responsible for providing services to all member

approach. The available supporting services are as follows :

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

of scale and economies of scope as well as maximizing

Thanachart Bank Public Company Limited

prices of related transactions and preventing conflicts of interest, the Bank uses fair prices which are appropriate

The Bank provides the services related to business operations, business control, debt follow-up and collection, accounting, e-commerce, system and regulatory development,

and in line with the authority’s requirements, taking into consideration mainly the best interest for the Bank and its shareholders.

internal audit, regulations and requirements compliance, human resource management, information and technology

In approving the related party transactions, directors or

systems, hire purchase credit audit, premises maintenance,

employees who have any interest in the deal are prohibited

purchasing and asset administration.

from participating in the approval of loans or investment in the business which the Bank or directors or the Bank’s

Thanachart Management and Service Company Limited The company provides supporting services related to human resources.

Thanachart Legal and Appraisal Company Limited

high-level executives have their share of interest. Those who have any related interest are also prohibited from participating in the assessment of loans to be issued to shareholders or the Bank’s high-ranking executives. The transactions are also subject to unanimous approval by the Bank’s Board of Directors where the Bank’s directors or high-level executives who have any related interest are prohibited from participating

The company provides legal services related to contracts,

in considering and approving the loans. The approval of the

legal advice, litigation, legal execution, and collateral appraisal.

transaction has to be within the authority and the credit line

Thanachart Training and Development Company Limited The company provides services related to training activities for personnel of Thanachart Group’s member companies.

specified by the Bank and also in compliance with the requirements of the authority concerned. In carrying out duties related to loans or investment, payments, transfers of movable or immovable properties, securities trading, related party transactions, transactions in relation to acquisition or disposal of assets, the Bank’s

Loans to and obligations of executives of the Bank

directors, executives or staff are required to act prudently,

and other companies in Thanachart Group from the

aiming to prevent conflicts of interest, and to strictly comply to

level of department president and above

the rules and regulations imposed by the authority concerned.

•

They are also required to disclose the information of the They were in line with normal business transactions.

Procedures and Measures for Approving Related Party Transactions The Bank has put in place a policy and regulations, in

such transaction in compliance with the requirements imposed by the authority, accounting standards as well as the regulations established by the Bank.

Policy and Trends on Related Party Transactions

line with the requirements imposed by the Stock Exchange of

The related party transactions between the Bank and

Thailand (SET), aimed at protecting conflicts of interest and

member companies of Thanachart Group or related parties

related party transactions. It has also made announcements,

will be in a manner of the normal business transactions and

which both its staff and executives are required to comply with

complying with the restructuring plan of the Thanachart

in relation to related transactions with individuals who may

financial group, according to the One Presence policy and

have conflicts of interest, in line with the rules imposed by the

under the consolidated supervision. These include the

Office of the Securities and Exchange Commission (SEC).

supporting services between the companies in Thanachart Group. Furthermore, the Bank has no policy supporting the

In considering of the related party transactions, the Bank

related transactions to the stakeholders. Presence Policy and

uses the same procedures as those applied to general

Consolidated Supervision. The related party transactions also

customers or trade partners and appropriately follows the

cover supporting services given to member companies of

normal processes which are specified. The services of the

Thanachart Group in line with the Group’s policy. The

related party will be used only as necessary for the purpose of

Company has no policy encouraging parties who have

supporting the Bank’s business operations. In determining the

conflicts of interest to engage in the related party transactions. ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

251

SUMMARY OF SPECIFIED ITEMS PER FORM 56-2 IN 2007 ANNUAL REPORT ITEMS Message from Chairman of the Board of Directors

PAGE 10

Report on Responsibilities of the Board of Directors for Financial Report

103

Report of the Audit Committee

104

1. Company References 1.1 Company

235

1.2 Other companies in which the proportion of shares held is 10% or greater

232

1.3 Other References

235

2. Financial Highlights

2-3

3. Nature of Business Operations 3.1 Nature of Business Operations of the Company and subsidiary and Policy on Division of work among Member companies of Thanachart Group 3.2 Income structure 3.3 Key Changes of Business Operations

4. Risk Management and Risk Factors

52-83 54-56 46 84-96

5. Shareholding Structure and Management 5.1 Shareholders

236

5.2 Management 5.2.1 Supervision and Management Structures

216-231

5.2.2 Selection and Appointment of Members of Various Committees

212-214

5.2.3 Remuneration for the Board of Directors and Management

214-215

5.2.4 Corporate Governance

196-215

5.2.5 Supervision of the Use of Insider Information

199

5.2.6 Internal Control

202

5.3 Dividend policy

237

6. Related party transactions

249-251

7. Management Discussion and Analysis of Financial Position and Performance

27-45

8. Financial statements 8.1 Financial Statements and Notes to Financial Statements 8.2 Auditorâ&#x20AC;&#x2122;s Fees

9. Economic Conditions

252

ANNUAL REPORT 2007 THANACHART BANK PUBLIC COMPANY LIMITED

105-194 195 22