เง นแผนด นน น ค อเง นของปผะชาชนท งชาต... AUDITOR S REPORT พระราชด าร สในพระบาทสมเด จพระปรม นทรมหาภ ม พลอด ลยเดช (TRANSLATION)

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3 เง นแผนด นน น ค อเง นของปผะชาชนท งชาต... พระราชด าร สในพระบาทสมเด จพระปรม นทรมหาภ ม พลอด ลยเดช AUDITOR S REPORT To: THE SHAREHOLDERS OF KRUNG THAI BANK PUBLIC COMPANY LIMITED Opinion The Office of the Auditor General of Thailand has audited the accompanying consolidated financial statements of Krung Thai Bank Public Company Limited and its subsidiaries (the Group), and the Bank"s financial statements of Krung Thai Bank Public Company Limited (the Bank), which comprise the consolidated and the Bank"s statements of financial position as at, and the consolidated and the Bank"s statements of profit or loss and other comprehensive income, the consolidated and the Bank"s statements of changes in equity and the consolidated and the Bank"s statements of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies. In the Office of the Auditor General of Thailand"s opinion, the accompanying consolidated and the Bank"s financial statements present fairly, in all material respects, the consolidated financial position of the consolidated financial position of Krung Thai Bank Public Company Limited and its subsidiaries and of the Bank as at, and its consolidated and the Bank"s financial performance and its consolidated and the Bank"s cash flows for the year then ended in accordance with Thai Financial Reporting Standards. Basis for Opinion The Office of the Auditor General of Thailand conducted the audit in accordance with Thai Standards on Auditing. The Office of the Auditor General of Thailand"s responsibilities under those standards are further described in the Auditor"s Responsibilities for the Audit of the consolidated and the Bank"s financial statements section of the report. The Office of the Auditor General of Thailand is independent of the Group and the Bank in accordance with the State Audit Standards issued by the State Audit Commission and the Federation of Accounting Professions under the Royal Patronage of his Majesty the King"s Code of Ethics for Professional Accountants that are relevant to the audit of the consolidated and the Bank, and the Office of the Auditor General of Thailand has fulfilled other ethical responsibilities in accordance with these requirements. The Office of the Auditor General of Thailand believes that the audit evidence the Office of the Auditor General of Thailand has obtained is sufficient and appropriate to provide a basis for the Office of the Auditor General of Thailand opinion. Office of the Auditor General of Thailand

4 2 Key Audit Matters Key audit matters are those matters that, in the Office of the Auditor General of Thailand professional judgment, were of most significance in the audit of the consolidated and the Bank"s financial statements of the current period. The Office of the Auditor General of Thailand has considered these matters addressed in the context of the audit of the consolidated and the Bank"s financial statements as a whole, and in forming the Office of the Auditor General of Thailand"s opinion thereon, and the Office of the Auditor General of Thailand does not provide a separate opinion on these matters. The Office of the Auditor General determines key audit matter communicated in the auditor"s report as follows: Allowance for Doubtful Accounts The allowance for doubtful accounts for loans to customers requires the application of judgment and use of subjective assumptions and related factors applied by management in the estimates. Bank and its subsidiaries which engaged in the business of lending business recorded allowance for doubtful accounts in compliance with the Bank of Thailand"s notifications and policy regulations on assets classification, determining provisions and the application of value of collateral in determining provisions. In addition, management considered determining additional allowances to cover any loss that may occur in the future by using more strict criteria than the requirements of the Bank of Thailand. Additional allowances consist of specific allowance for an individual that is likely to be nonperforming loans or is likely to have loss more than allowance determined under normal regulations, and general allowance, including an individual that is not nonperforming loans but there are any indicators of impairment. Loans to customers and accrued interest receivables, net contributed as at to % of the Group"s total assets and 66.51% of the Bank"s total assets. The loan portfolio comprises the borrowers from the 5 sectors, i.e. Private Corporate, Government and State Enterprise, SMEs, Retail, and others. The significant customers in the Bank"s loan portfolio consist of the borrowers from Private Corporate (37.62% of Loans to customers and accrued interest receivables, net), SMEs (20.63% of Loans to customers and accrued interest receivables, net), and Retail (40.15% of Loans to customers and accrued interest receivables, net). In addition, loan portfolio of each sector has different size and credit process. The Office of the Auditor General focuses on allowance for doubtful accounts for Private Corporate, SMEs, and Retail portfolios. Due to the adoption of regulations on allowance for doubtful accounts, management shall determine the quantitative and qualitative factors used for assets classification, assumptions and methods of calculating the allowances, such as present value of future Office of the Auditor General of Thailand

5 3 cash flows expected to be received by the borrowers, present value of future cash flows expected to be received from the sale of collateral, previous loss experience, which is a process related to uncertainty. The use of different models, assumptions used in the calculation and the quality of the data may result in significantly different allowances for doubtful accounts. The Office of the Auditor General"s key audit procedures include understanding and assessing the effectiveness of the key controls, and test of controls as follows: The identification of circumstances which indicate that the borrower is likely to be nonperforming loans, and may affect ability to repay; The governance over the determining allowances processes, including the continuous reassessment by management that models, assumptions used in the calculation are still calibrated in a way which is appropriate for the impairment risks in the Bank"s loan portfolios, including comparing models, assumptions used in the calculation with external sources; The review and approval process that management have in place for the models, assumptions used in the calculation, outputs from such models, and the adjustments that are applied to modelled outputs; The accuracy, completeness and quality of data input to the system; The data interface between systems from the approval to recording and monitoring of loans; and The transfer of data between underlying source systems and models used in the calculation. For the selected borrowers, the Office of the Auditor General reviewed credit process, tested the accuracy, completeness and quality of data input to the system, assessed reasonableness of assumptions applied to identify circumstances which indicate that the borrower is likely to be nonperforming loans and recomputed the calculation of allowances, assessed reasonableness of assumptions applied to forecast of future cash flows, valuation of collaterals and loss given default, and tested the accuracy of data transfer from credit systems to data captured in the accounting records. Other Information Management is responsible for the other information. The other information comprises information in the annual report, but does not include the consolidated and the Bank"s financial statements and the auditor"s report in the annual report. The Bank expects that the annual report is made available to the Office of the Auditor General of Thailand after the date of this auditor"s report. Office of the Auditor General of Thailand

6 4 The Office of the Auditor General of Thailand"s opinion on the consolidated and the Bank"s financial statements does not cover the other information and the Office of the Auditor General of Thailand will not express any form of assurance conclusion thereon. In connection with the audit of the consolidated and the Bank"s financial statements, the Office of the Auditor General of Thailand"s responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or knowledge obtained in the Office of the Auditor General of Thailand"s audit, or otherwise appears to be materially misstated. When the Office of the Auditor General of Thailand reads the annual report, if the Office of the Auditor General of Thailand concludes that there is a material misstatement therein, the Office of the Auditor General of Thailand is required to communicate the matter to those charged with governance and the management of the Group. Responsibilities of Management and Those Charged with Governance for the Consolidated and the Bank#s Financial Statements Management is responsible for the preparation and fair presentation of the consolidated and the Bank"s financial statements in accordance with Thai Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of the consolidated and the Bank"s financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated and the Bank"s financial statements, management is responsible for assessing the Group and the Bank"s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group and the Bank"s or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group"s financial reporting processes. Auditor#s Responsibilities for the Audit of the Consolidated and the Bank#s Financial Statements The Office of the Auditor General of Thailand"s objectives are to obtain reasonable assurance about whether the consolidated and the Bank"s financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor"s report that includes the Office of the Auditor General of Thailand"s opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Thai Standards on Auditing will always detect a Office of the Auditor General of Thailand

7 5 material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated and the Bank"s financial statements. As part of the Office of the Auditor General of Thailand"s audit in accordance with Thai Standards on Auditing, the Office of the Auditor General of Thailand exercises professional judgment and maintains professional skepticism throughout the audit. The Office of the Auditor General of Thailand also: Identifies and assesses the risks of material misstatement of the consolidated and the Bank"s financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence that is sufficient and appropriate to provide a basis for the Office of the Auditor General of Thailand"s opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group and the Bank"s internal controls. Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Concludes on the appropriateness of management"s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group and the Bank"s ability to continue as a going concern. If the Office of the Auditor General of Thailand concludes that a material uncertainty exists, the Office of the Auditor General of Thailand is required to draw attention in the auditor"s report to the related disclosures in the consolidated and the Bank"s financial statements or, if such disclosures are inadequate, to modify the Office of the Auditor General of Thailand"s opinion. The Office of the Auditor General of Thailand"s conclusions are based on the audit evidence obtained up to the date of the auditor"s report. However, future events or conditions may cause the Group and the Bank"s to cease to continue as a going concern. Evaluates the overall presentation, structure and content of the consolidated and the Bank"s financial statements, including the disclosures, and whether the consolidated and the Bank"s financial statements represent the underlying transactions and events in a manner that achieves fair presentation. Office of the Auditor General of Thailand

8 6 Obtains sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. The Office of the Auditor General of Thailand is responsible for the direction, supervision and performance of the Group and the Bank"s audit. The Office of the Auditor General of Thailand remains solely responsible for the Office of the Auditor General of Thailand"s opinion. The Office of the Auditor General of Thailand communicates with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that the Office of the Auditor General of Thailand identifies during the audit. The Office of the Auditor General of Thailand also provides those charged with governance with a statement that the Office of the Auditor General of Thailand has complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on the Office of the Auditor General of Thailand"s independence, and where applicable, related safeguards. From the matters communicated with those charged with governance, the Office of the Auditor General of Thailand determines those matters that were of most significance in the audit of the consolidated and the Bank"s financial statements of the current period and are therefore the key audit matters. The Office of the Auditor General of Thailand describes these matters in the auditor"s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, the Office of the Auditor General of Thailand determines that a matter should not be communicated in the report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. (Signed) Yupin Chalanonniwat (Yupin Chalanonniwat) Deputy Auditor General (Signed) Ratchanee Cholnakijkul (Ratchanee Cholnakijkul) Director of Financial Audit Office No.2 Office of the Auditor General of Thailand February 28, 2017

9 7 KRUNG THAI BANK PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER, 2016 NOTE ASSETS CASH INTERBANK AND MONEY MARKET ITEMS, NET CLAIMS ON SECURITIES DERIVATIVES ASSETS INVESTMENTS, NET INVESTMENTS IN SUBSIDIARIES AND ASSOCIATES, NET LOANS TO CUSTOMERS AND ACCRUED INTEREST RECEIVABLES, NET LOANS TO CUSTOMERS ACCRUED INTEREST RECEIVABLES TOTAL LOANS TO CUSTOMERS AND ACCRUED INTEREST RECEIVABLES LESS DEFERRED REVENUE LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS LESS REVALUATION ALLOWANCE FOR DEBT RESTRUCTURING TOTAL LOANS TO CUSTOMERS AND ACCRUED INTEREST RECEIVABLES, NET CUSTOMERS' LIABILITIES UNDER ACCEPTANCES PROPERTIES FOR SALE, NET PREMISES AND EQUIPMENT, NET OTHER INTANGIBLE ASSETS, NET DEFERRED TAX ASSETS ACCRUED INCOME OTHER ASSETS, NET TOTAL ASSETS CONSOLIDATED FINANCIAL STATEMENTS (Thousand Baht) THE BANK'S FINANCIAL STATEMENTS DECEMBER 31, 2016 DECEMBER 31, 2015 DECEMBER 31, 2016 DECEMBER 31, ,106, ,638,413 21,421,700 30,063, ,954,571 15,310,646 71,470, ,357,971 13,494,400 34,039, ,081,663 14,650,374 71,929, ,350,214 21,421,700 30,084, ,693,145 10,664,593 71,294, ,061,378 13,494,400 34,088, ,811,058 10,664,593 1,907,821,949 5,270,682 1,913,092,631 (3,733,253) (110,719,616) (61,619) 1,798,578,143 45,949 35,743,634 27,312,663 4,210,901 4,496,456 2,853,937 18,709,178 2,689,445,653 2,033,250,476 5,900,902 2,039,151,378 (5,810,002) (85,823,934) (132,627) 1,947,384,815 1,567,806 30,008,144 26,354,526 4,571,604 6,996,109 3,788,212 16,564,767 2,815,329,646 1,837,243,223 4,774,560 1,842,017,783 (122,922) (102,859,894) (61,619) 1,738,973,348 45,949 35,668,551 25,239, ,720 2,321,669 2,589,233 16,945,112 2,614,797,940 1,969,827,420 5,462,813 1,975,290,233 (165,766) (77,221,061) (132,627) 1,897,770,779 1,567,806 29,909,856 21,376, ,367 5,020,583 3,578,869 15,071,377 2,748,607,834 1,972,403, ,166,312 5,082,471 21,421,700 31,516, ,690,859 45,949 11,152,279 44,818,915 2,410,298,710 2,135,498, ,242,842 6,121,116 13,494,400 37,232, ,240,463 1,567,806 14,424,688 46,209,922 2,565,032,320 1,975,157, ,711,003 5,082,471 21,421,700 31,516,693 79,267,859 45,949 10,163,418 37,976,431 2,354,343,199 2,137,446, ,701,199 6,121,116 13,494,400 37,234,793 86,937,975 1,567,806 13,634,737 39,997,788 2,514,136,302 LIABILITIES AND EQUITY DEPOSITS INTERBANK AND MONEY MARKET ITEMS, NET LIABILITIES PAYABLE ON DEMAND LIABILITIES TO DELIVER SECURITIES DERIVATIVES LIABILITIES DEBT ISSUED AND BORROWINGS BANK'S LIABILITIES UNDER ACCEPTANCES PROVISIONS OTHER LIABILITIES TOTAL LIABILITIES NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

10 8 KRUNG THAI BANK PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES STATEMENTS OF FINANCIAL POSITION (CONTINUED) AS AT 31 DECEMBER, 2016 NOTE LIABILITIES AND EQUITY (CONTINUED) EQUITY SHARE CAPITAL AUTHORIZED SHARE CAPITAL 5,500,000 PREFERRED SHARES OF BAHT 5.15 EACH 13,976,061,250 ORDINARY SHARES OF BAHT 5.15 EACH ISSUED AND PAIDUP SHARE CAPITAL 5,500,000 PREFERRED SHARES OF BAHT 5.15 EACH 13,976,061,250 ORDINARY SHARES OF BAHT 5.15 EACH PREMIUM ON SHARE CAPITAL PREMIUM ON ORDINARY SHARE OTHER COMPONENTS OF EQUITY RETAINED EARNINGS APPROPRIATED LEGAL RESERVE UNAPPROPRIATED TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE BANK NONCONTROLLING INTEREST TOTAL EQUITY TOTAL LIABILITIES AND EQUITY (Thousand Baht) THE BANK'S FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2016 DECEMBER 31, 2015 DECEMBER 31, 2016 DECEMBER 31, ,325 71,976,715 28,325 71,976,715 28,325 71,976,715 28,325 71,976,715 28,325 71,976,715 28,325 71,976,715 28,325 71,976,715 28,325 71,976,715 20,833,734 17,748,818 20,833,734 10,643,441 20,833,734 13,729,430 20,833,734 6,407,413 7,200, ,141, ,929,334 5,217, ,146,943 2,689,445,653 7,200, ,200, ,882,752 4,414, ,297,326 2,815,329,646 7,200, ,686, ,454,741 7,200, ,024, ,471, ,454,741 2,614,797, ,471,532 2,748,607, NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. (Signed) Somchai Sujjapongse SOMCHAI SUJJAPONGSE CHAIRMAN OF THE BOARD OF DIRECTORS (Signed) Payong Srivanich PAYONG SRIVANICH PRESIDENT

11 9 KRUNG THAI BANK PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2016 NOTE INTEREST INCOME INTEREST EXPENSES INTEREST INCOME, NET FEES AND SERVICE INCOME FEES AND SERVICE EXPENSES FEES AND SERVICE INCOME, NET GAINS ON TRADINGS AND FOREIGN EXCHANGE TRANSACTIONS, NET GAINS (LOSSES) ON INVESTMENTS, NET SHARE OF PROFIT FROM INVESTMENTS FOR USING EQUITY METHOD DIVIDEND INCOME OTHER OPERATING INCOME TOTAL OPERATING INCOME OTHER OPERATING EXPENSES EMPLOYEES' EXPENSES DIRECTORS' REMUNERATION PREMISES AND EQUIPMENT EXPENSES TAXES AND DUTIES OTHERS TOTAL OTHER OPERATING EXPENSES IMPAIRMENT LOSS OF LOANS AND DEBT SECURITIES 6.32 OPERATING PROFIT BEFORE INCOME TAX EXPENSES INCOME TAX EXPENSES NET PROFIT CONSOLIDATED FINANCIAL STATEMENTS (Thousand Baht) THE BANK'S FINANCIAL STATEMENTS ,229,887 42,264,056 86,965,831 25,931,448 3,889,459 22,041,989 6,827, ,573 3,083, ,744 4,573, ,667, ,525,324 51,657,469 80,867,855 24,223,837 2,880,428 21,343,409 6,700, ,130 3,038, ,648 3,601, ,607, ,257,345 40,784,204 75,473,141 21,260,651 2,482,700 18,777,951 6,802, ,573 3,561,154 1,626, ,935, ,559,061 49,994,241 70,564,820 19,934,377 2,178,256 17,756,121 6,738,334 (150,635) 3,591, ,764 99,358,818 27,946, ,924 8,829,528 4,526,003 9,223,322 50,631,476 33,429,379 40,606,961 7,063,097 33,543,864 27,373, ,938 9,294,196 5,044,995 9,091,991 50,919,653 30,541,508 35,146,212 5,604,746 29,541,466 22,726,102 78,196 5,101,364 4,072,890 11,714,621 43,693,173 26,996,155 36,246,580 6,278,794 29,967,786 22,229,945 82,700 5,244,695 4,642,603 11,693,669 43,893,612 23,999,849 31,465,357 4,991,609 26,473,748 NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

12 10 KRUNG THAI BANK PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2016 NOTE CONSOLIDATED FINANCIAL STATEMENTS (Thousand Baht) THE BANK'S FINANCIAL STATEMENTS OTHER COMPREHENSIVE INCOME ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS GAINS (LOSSES) ON REMEASURING AVAILABLEFORSALE INVESTMENTS LOSSES ARISING FROM TRANSLATING THE FINANCIAL STATEMENTS OF FOREIGN OPERATIONS SHARE OF OTHER COMPREHENSIVE INCOME OF ASSOCIATES (EQUITY METHOD) FOR ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS RELATED INCOME TAX EXPENSES FOR ITEMS THAT WILL BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS CHANGES IN REVALUATION SURPLUS ON ASSETS ACTUARIAL LOSSES ON DEFINED BENEFIT PLANS RELATED INCOME TAX EXPENSES FOR ITEMS THAT WILL NOT BE RECLASSIFIED SUBSEQUENTLY TO PROFIT OR LOSS OTHER COMPREHENSIVE INCOME, NET TOTAL COMPREHENSIVE INCOME NET PROFIT ATTRIBUTABLE EQUITY HOLDERS OF THE BANK NONCONTROLLING INTEREST TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE EQUITY HOLDERS OF THE BANK NONCONTROLLING INTEREST EARNINGS PER SHARE OF PARENT COMPANY BASIC EARNINGS PER SHARE (BAHT) DILUTED EARNINGS PER SHARE (BAHT) ,724,383 (79,909) (3,447,861) (38,408) (216,640) 999,703 (1,344,876) 689,572 (1,344,876) 689,572 2,528,024 (936,608) (3,403) (214,146) 2,528,024 (849,697) (3,403) (342,100) (318,284) 6,356,090 39,899,954 43,510 (1,971,033) 27,570,433 (335,665) 6,642,260 36,610,046 69,101 (3,073,099) 23,400,649 (3,447,861) (38,408) UNAUDITED UNAUDITED UNAUDITED 32,283,026 1,260,838 28,493,773 1,047,693 29,967,786 26,473,748 38,673,419 1,226,535 26,522,284 1,048,149 36,610,046 23,400, NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. (Signed) Somchai Sujjapongse SOMCHAI SUJJAPONGSE CHAIRMAN OF THE BOARD OF DIRECTORS 6,724,383 (79,909) (Signed) Payong Srivanich PAYONG SRIVANICH PRESIDENT 2.14 UNAUDITED 1.89 UNAUDITED UNAUDITED 2.14 UNAUDITED 1.89 UNAUDITED UNAUDITED

13 11 KRUNG THAI BANK PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2016 CONSOLIDATED FINANCIAL STATEMENTS ATTRIBUTABLE TO EQUITY HOLDERS OF THE BANK NOTE BEGINNING BALANCE AS AT DECEMBER 31, 2014 (BEFORE RESTATED) EFFECT FROM TFRS 10 CONSOLIDATED FINANCIAL STATEMENTS BALANCE AFTER ADJUSTMENT AS AT DECEMBER 31, 2014 EFFECT FROM TFRS 13 FAIR VALUE MEASUREMENT BALANCE AFTER ADJUSTMENT AS AT JANUARY 1, 2015 DIVIDEND PAID TOTAL COMPREHENSIVE INCOME ENDING BALANCE AS AT DECEMBER 31, 2015 BALANCE AFTER ADJUSTMENT AS AT JANUARY 1, 2016 DIVIDEND PAID TOTAL COMPREHENSIVE INCOME ENDING BALANCE AS AT DECEMBER 31, RETAINED EARNINGS TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE BANK NONCONTROLLING INTEREST TOTAL ISSUED AND PAIDUP SHARE CAPITAL PREMIUM ON SHARE CAPITAL 72,005,040 72,005,040 72,005,040 72,005,040 20,833,734 20,833,734 20,833,734 20,833,734 6,347,639 6,347,639 6,347,639 (2,723) 6,344,916 6,062,309 6,062,309 6,062,309 (1,758,586) 4,303,723 33,210 33,210 33,210 (38,408) (5,198) 126,860, ,860,323 (197,533) 126,662,790 (12,584,254) 28,322, ,400, ,142, ,142,255 (197,533) 231,944,722 (12,584,254) 26,522, ,882, ,724,385 3,724,393 3,724,393 (357,968) 1,048,149 4,414, ,142,263 3,724, ,866,648 (197,533) 235,669,115 (12,942,222) 27,570, ,297,326 72,005,040 72,005,040 20,833,734 20,833,734 6,344,916 2,022,419 8,367,335 4,303,723 5,162,867 9,466,590 (5,198) (79,909) (85,107) 142,400,537 (10,626,837) 31,568, ,341, ,882,752 (10,626,837) 38,673, ,929,334 4,414,574 (423,500) 1,226,535 5,217, ,297,326 (11,050,337) 39,899, ,146,943 NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. OTHER COMPONENTS OF EQUITY APPRAISAL REVALUATION GAIN (LOSS) FROM SURPLUS SURPLUS TRANSLATING (DEFICIT) (DEFICIT) THE FINANCIAL ON ASSETS ON INVESTMENTS STATEMENTS (Thousand Baht)

14 12 KRUNG THAI BANK PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES STATEMENTS OF CHANGES IN EQUITY FOR THE YEAR ENDED DECEMBER 31, 2016 THE BANK'S FINANCIAL STATEMENTS NOTE BEGINNING BALANCE AS AT JANUARY 1, 2015 (BEFORE RESTATED) EFFECT FROM TFRS 13 FAIR VALUE MEASUREMENT BALANCE AFTER ADJUSTMENT AS AT JANUARY 1, 2015 DIVIDEND PAID TOTAL COMPREHENSIVE INCOME ENDING BALANCE AS AT DECEMBER 31, 2015 BEGINNING BALANCE AS AT JANUARY 1, 2016 DIVIDEND PAID TOTAL COMPREHENSIVE INCOME ENDING BALANCE AS AT DECEMBER 31, ISSUED AND PAIDUP SHARE CAPITAL PREMIUM ON SHARE CAPITAL APPRAISAL SURPLUS (DEFICIT) ON ASSETS (Thousand Baht) OTHER COMPONENTS OF EQUITY REVALUATION GAIN (LOSS) FROM SURPLUS TRANSLATING (DEFICIT) THE FINANCIAL ON INVESTMENTS STATEMENTS RETAINED EARNINGS TOTAL 72,005,040 72,005,040 72,005,040 20,833,734 20,833,734 20,833,734 6,347,639 6,347,639 (2,723) 6,344,916 2,825,983 2,825,983 (2,758,288) 67,695 33,210 33,210 (38,408) (5,198) 121,807,064 (197,533) 121,609,531 (12,584,254) 26,200, ,225, ,852,670 (197,533) 223,655,137 (12,584,254) 23,400, ,471,532 72,005,040 72,005,040 20,833,734 20,833,734 6,344,916 2,022,419 8,367,335 67,695 5,379,507 5,447,202 (5,198) (79,909) (85,107) 135,225,345 (10,626,837) 29,288, ,886, ,471,532 (10,626,837) 36,610, ,454,741 NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. (Signed) Somchai Sujjapongse SOMCHAI SUJJAPONGSE CHAIRMAN OF THE BOARD OF DIRECTORS (Signed) Payong Srivanich PAYONG SRIVANICH PRESIDENT

15 13 KRUNG THAI BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2016 CONSOLIDATED FINANCIAL STATEMENTS (Thousand Baht) THE BANK'S FINANCIAL STATEMENTS ,606,961 35,146,212 36,246,580 31,465,357 3,339,561 33,429,379 (3,083,147) 2,206, ,358 (670,322) 26, ,466 (24,253) (703,493) 49,101 (211,595) 1,658,724 (4,061,338) (82,995) 1,241,056 74,694,794 (86,965,831) (481,744) 130,943,952 (43,825,712) 481,744 (5,029,927) 3,713,422 30,541,508 (3,038,174) 2,513,552 23,269 (593,939) (1,090,626) (88,400) (54,190) (7,956) 61,421 (3,613,034) (2,025,248) 83, , ,326 62,295,705 (80,867,855) (407,648) 132,297,571 (51,511,662) 407,648 (8,176,525) 1,459,325 26,996,155 (475) (670,322) 26, ,167 (24,251) (703,493) 49,101 (208,338) 1,658,786 (4,294,489) (27,634) 1,019,077 62,372,285 (75,473,141) (3,561,154) 118,029,444 (42,352,644) 3,561,154 (3,933,799) 1,356,470 23,999,849 (508) (593,939) (1,090,626) (16,243) 744,574 (7,956) 61,421 (3,609,268) (2,025,375) (161,367) 450, ,651 50,724,784 (70,564,820) (3,591,414) 120,781,409 (49,879,051) 3,591,414 (7,256,964) 69,817,276 54,037,234 58,642,145 43,805,358 (34,347,017) 8,599, ,586,374 5,616,984 3,546,249 59,280,517 7,925,774 (93,928,829) 3,597,111 (20,772,199) (34,355,411) 8,579, ,952,325 5,575,077 3,844,837 59,292,813 7,925,774 (83,022,737) 3,368,270 (21,531,374) (163,094,979) 8,923,470 (1,038,645) (60,154) (9,048,551) (9,499,901) (15,769,739) 27,027,908 1,013,126 (28,231,373) 24,800,189 18,979,719 (162,288,814) 16,009,805 (1,038,645) (1,174) (8,941,551) 3,978,152 (15,106,957) 16,926,547 1,013,126 (14,805,000) 25,869,533 23,735,353 CASH FLOWS FROM OPERATING ACTIVITIES OPERATING PROFIT BEFORE INCOME TAX EXPENSES ADJUSTMENTS TO RECONCILE OPERATING PROFIT BEFORE INCOME TAX EXPENSES TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES DEPRECIATION AND AMORTIZATION EXPENSES BAD DEBTS, DOUBTFUL ACCOUNTS AND LOSS ON IMPAIRMENT SHARE OF PROFIT FROM INVESTMENTS FOR USING EQUITY METHOD DIVIDEND RECEIVED FROM ASSOCIATES LOSS (GAIN) ON DISPOSAL OF ASSETS GAIN ON DISPOSAL OF INVESTMENTS LOSS (GAIN) ON REVALUATION OF INVESTMENTS LOSS (REVERSAL) ON IMPAIRMENT OF PROPERTIES FOR SALE LOSS (REVERSAL) ON IMPAIRMENT OF INVESTMENTS REVERSAL OF IMPAIRMENT OF PREMISES AND EQUIPMENT REVERSAL OF IMPAIRMENT OF OTHER ASSETS LOSS ON IMPAIRMENT OF OTHER ASSETS AMORTIZATION OF DISCOUNT ON INVESTMENTS LOSS (GAIN) ON FOREIGN CURRENCY TRANSLATION INCREASE (DECREASE) IN PROVISIONS DECREASE (INCREASE) IN OTHER ACCRUED INCOME INCREASE IN OTHER ACCRUED EXPENSES INTEREST INCOME, NET DIVIDEND INCOME PROCEEDS FROM INTEREST INCOME CASH PAID ON INTEREST EXPENSES PROCEEDS FROM DIVIDEND INCOME CASH PAID ON INCOME TAX EXPENSES OPERATING INCOME BEFORE CHANGES IN OPERATING ASSETS AND LIABILITIES (INCREASE) DECREASE IN OPERATING ASSETS INTERBANK AND MONEY MARKET ITEMS INVESTMENTS IN TRADING SECURITIES LOANS TO CUSTOMERS PROPERTIES FOR SALE OTHER ASSETS INCREASE (DECREASE) IN OPERATING LIABILITIES DEPOSITS INTERBANK AND MONEY MARKET ITEMS LIABILITIES PAYABLE ON DEMAND DEBT ISSUED AND SHORTTERM BORROWINGS OTHER LIABILITIES NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.

16 14 KRUNG THAI BANK PUBLIC COMPANY LIMITED AND SUBSIDIARIES STATEMENTS OF CASH FLOWS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2016 CONSOLIDATED FINANCIAL STATEMENTS (Thousand Baht) THE BANK'S FINANCIAL STATEMENTS CASH FLOWS FROM INVESTING ACTIVITIES PURCHASES OF AVAILABLE FOR SALE SECURITIES PROCEEDS FROM DISPOSAL OF AVAILABLE FOR SALE SECURITIES PURCHASES OF HELD TO MATURITY DEBT SECURITIES PROCEEDS FROM DISPOSAL OF HELD TO MATURITY DEBT SECURITIES PURCHASES OF GENERAL INVESTMENTS PROCEEDS FROM DISPOSAL OF GENERAL INVESTMENTS PURCHASES OF INTANGIBLE ASSETS PURCHASES OF PREMISES AND EQUIPMENT PROCEEDS FROM DISPOSAL OF PREMISES AND EQUIPMENT NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (114,193,503) 107,902,226 (6,711,625) 28,409,987 (348,458) 288,485 (471,217) (1,514,570) 1,989,913 15,351,238 (181,569,209) 188,681,319 (50,485,141) 35,640,177 (443,983) 542,756 (678,666) (1,199,302) 217,323 (9,294,726) (114,193,503) 107,902,226 (5,890,528) 27,595,987 (348,458) 288,485 (108,779) (1,173,753) ,072,340 (181,569,209) 188,681,319 (49,784,443) 34,946,177 (443,983) 542,756 (101,066) (920,508) 643 (8,648,314) 21,770,000 (16,278,288) (10,621,807) (5,030) (5,135,125) (79,909) 636,303 71,470,113 72,106,416 22,722,400 (23,084,600) (12,578,454) (5,800) (12,946,454) (38,408) (3,299,869) 74,769,982 71,470,113 1,920,000 (8,628,288) (10,621,807) (5,030) (17,335,125) (79,909) 635,458 71,294,408 71,929,866 9,779,400 (15,534,600) (12,578,454) (5,800) (18,339,454) (38,408) (3,290,823) 74,585,231 71,294,408 CASH FLOWS FROM FINANCING ACTIVITIES PROCEEDS FROM DEBT ISSUED AND LONGTERM BORROWINGS REPAYMENTS OF DEBT ISSUED AND LONGTERM BORROWINGS DIVIDEND PAIDORDINARY SHARE DIVIDEND PAIDPREFERRED SHARE NET CASH USED IN FINANCING ACTIVITIES LOSS ARISING FROM TRANSLATING THE FINANCIAL STATEMENTS OF FOREIGN OPERATIONS NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS BEGINNING BALANCE OF CASH AND CASH EQUIVALENTS ENDING BALANCE OF CASH AND CASH EQUIVALENTS NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. (Signed) Somchai Sujjapongse SOMCHAI SUJJAPONGSE CHAIRMAN OF THE BOARD OF DIRECTORS (Signed) Payong Srivanich PAYONG SRIVANICH PRESIDENT

17 15 KRUNG THAI BANK PUBLIC COMPANY LIMITED AND ITS SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, GENERAL INFORMATION Krung Thai Bank Public Company Limited (the Bank) is a public company limited registered in the Kingdom of Thailand with its head office located at 35 Sukhumvit Road, Klongtoey Nua, Wattana, Bangkok. The Bank engages in commercial banking business and conducts its business through a nationwide branch network and in certain major centers of the world. 2. BASIS OF PRESENTATION OF THE FINANCIAL STATEMENTS 2.1 Basis of Preparation of the Consolidated and the Bank's Financial Statements The consolidated and the Bank's financial statements are presented in accordance with the Notification of the Bank of Thailand (BoT) No. SOR NOR SOR.21/2558 dated December 4, 2015, regarding the Preparation and Announcement of Financial Statements of Commercial Banks and Parent Companies of Financial Holding Groups, including any other supplementary BoT s notifications; and with the regulations of the Stock Exchange of Thailand (SET) dated January 22, 2001, regarding the Preparation and Submission of Financial Statements and Report on Financial Position and Results of Business Operations of Listed Companies, B.E (2001). Moreover, these financial statements are prepared in conformity with generally accepted accounting principles, under Accounting Act B.E (2000). The The consolidated financial statements comprise the accounts of the Bank and its subsidiaries in which the Bank is a controlling interest or holds over 50 percent of paidup shares capital after eliminating material intercompany transactions and balances. The 8 consolidated subsidiaries are KTB Law Co., Ltd., KTB General Services and Security Co., Ltd. (previously KTB General Services Co., Ltd.), Krung Thai Asset Management Pcl., KTB Computer Services Co., Ltd., KTB Leasing Co., Ltd., KTB Advisory Co., Ltd., KTB Capital Holding Co., Ltd. (registered as the business dissolution with the Ministry of Commerce on December 18, 2014, in the process of liquidation), and Krungthai Card Pcl. (has entity control). Percentages of shareholdings and investments in the Bank's subsidiaries and associates are shown in Note 6.5. Investments in associates are accounted in the consolidated financial statements using the equity method. Investments in subsidiaries and associates are accounted in the Bank s financial statements using the cost method. The Bank's financial statements for the years ended and 2015 included the accounts of domestic and foreign branches, after eliminating the effects of all interbranch transactions. The English Translation of Financial Statements This English translation of financial statement has been prepared from the statutory financial statements that were issued in Thai language. In case of a conflict or a difference in interpretation between the two languages, the Thai language statutory financial statements shall prevail.

18 Thai Accounting Standards (TAS) and Thai Financial Reporting Standards (TFRS) Effective in Current Period The Bank has adopted Thai Accounting Standards (TAS), Thai Financial Reporting Standards (TFRS), TSIC Interpretations and TFRIC Interpretations that announced and revised in accordance with the Federation of Accounting Professions, those are effective for the financial statements of the periods beginning on or after January 1, The Bank's managements have already considered that they have no significant impacts on the Bank's accounting policies, and the Bank s and its subsidiaries financial statements. 2.3 The New and Revised Thai Accounting Standards (TAS) and Thai Financial Reporting Standards (TFRS) Announced but not yet Effective The Federation of Accounting Professions has announced Thai Accounting Standards (TAS), Thai Financial Reporting Standards (TFRS), TSIC Interpretations and TFRIC Interpretations, those are effective for the financial statements periods beginning on or after January 1, 2017 as follows: TAS 1 (revised 2016) Presentation of Financial Statements TAS 2 (revised 2016) Inventories TAS 7 (revised 2016) Statement of Cash Flows TAS 8 (revised 2016) Accounting Policies, Changes in Accounting Estimates and Errors TAS 10 (revised 2016) Events after the Reporting Period TAS 11 (revised 2016) Construction Contracts TAS 12 (revised 2016) Income Taxes TAS 16 (revised 2016) Property, Plant and Equipment TAS 17 (revised 2016) Leases TAS 18 (revised 2016) Revenue TAS 19 (revised 2016) Employee Benefits TAS 20 (revised 2016) Accounting for Government Grants and Disclosure of Government Assistance TAS 21 (revised 2016) The Effects of Changes in Foreign Exchange Rates TAS 23 (revised 2016) Borrowing Costs TAS 24 (revised 2016) Related Party Disclosures TAS 26 (revised 2016) Accounting and Reporting by Retirement Benefit Plans TAS 27 (revised 2016) Separate Financial Statements TAS 28 (revised 2016) Investments in Associates and Joint Ventures TAS 29 (revised 2016) Financial Reporting in Hyperinflationary Economies TAS 33 (revised 2016) Earnings per Share TAS 34 (revised 2016) Interim Financial Reporting TAS 36 (revised 2016) Impairment of Assets TAS 37 (revised 2016) Provisions, Contingent Liabilities and Contingent Assets TAS 38 (revised 2016) Intangible Assets TAS 40 (revised 2016) Investment Property TAS 41 (revised 2016) Agriculture TAS 104 (revised 2016) Accounting for Troubled Debt Restructuring TAS 105 (revised 2016) Accounting for Investments in Debt and Equity Securities TAS 107 (revised 2016) Financial Instruments Disclosure and Presentation

19 The New and Revised Thai Accounting Standards (TAS) and Thai Financial Reporting Standards (TFRS) Announced but not yet Effective (Continued) TFRS 2 (revised 2016) Sharebased Payment TFRS 3 (revised 2016) Business Combinations TFRS 4 (revised 2016) Insurance Contracts TFRS 5 (revised 2016) Noncurrent Assets Held for Sale and Discontinued Operations TFRS 6 (revised 2016) Exploration for and Evaluation of Mineral Resources TFRS 8 (revised 2016) Operating Segments TFRS 10 (revised 2016) TFRS 11 (revised 2016) Joint Arrangements TFRS 12 (revised 2016) Disclosure of Interests in Other Entities TFRS 13 (revised 2016) Fair Value Measurement TSIC 10 (revised 2016) Government AssistanceNo Specific Relation to Operating Activities TSIC 15 (revised 2016) Operating LeasesIncentives TSIC 25 (revised 2016) Income TaxesChanges in the Tax Status of an Entity or its Shareholders TSIC 27 (revised 2016) Evaluating the Substance of Transactions Involving the Legal Form of a Lease TSIC 29 (revised 2016) Service Concession Arrangements : Disclosures TSIC 31 (revised 2016) RevenueBarter Transactions Involving Advertising Services TSIC 32 (revised 2016) Intangible AssetsWeb Site Costs TFRIC 1 (revised 2016) Changes in Existing Decommissioning, Restoration and Similar Liabilities TFRIC 4 (revised 2016) Determining whether an Arrangement contains a Lease TFRIC 5 (revised 2016) Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds TFRIC 7 (revised 2016) Applying the Restatement Approach under TAS 29 (revised 2016) Financial Reporting in Hyperinflationary Economies TFRIC 10 (revised 2016) Interim Financial Reporting and Impairment TFRIC 12 (revised 2016) Service Concession Arrangements TFRIC 13 (revised 2016) Customer Loyalty Programmes TFRIC 14 (revised 2016) TAS 19 (revised 2016) The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction TFRIC 15 (revised 2016) Agreements for the Construction of Real Estate TFRIC 17 (revised 2016) Distributions of Noncash Assets to Owners TFRIC 18 (revised 2016) Transfers of Assets from Customers TFRIC 20 (revised 2016) Stripping Costs in the Production Phase of a Surface Mine TFRIC 21 (revised 2016) Levies The Bank has been preparing for adopting related TAS, TFRS, TSIC Interpretations and TFRIC Interpretations mentioned above. The Bank s management has considered that there is no material impact on accounting policies and financial statements of the Bank and subsidiaries.

20 18 3. SIGNIFICANT ACCOUNTING POLICIES 3.1 Recognition of Income Interest Income Interest income is recognized on an accrual basis, except for interest on loans classified as delinquent over 3 months and interest on loans under troubled debt restructuring contract which would be reversed. In accordance with the BoT's regulations, interest income on delinquent loans over 3 months from the due date already recognized as an income since January 1, 2000 would be reversed and recognized as income when received Fees and Service Income Fees and Service Income is recognized when the related services are performed Dividend Income Dividend income from investments is recognized when declared Lease Income The lease income of the Bank and its subsidiaries is recognized as follows: Interest income from hirepurchase and financial lease is recognized by using effective interest rate throughout the term of the lease. Interest on defaulted lease over 4 months is ceased to recognize and reversed, except consumer financial defaulted lease over 3 months is ceased to recognize and reversed. Interest income will be recognized when received. Income from operating lease contract is recognized on a straightline basis over the term of lease. 3.2 Recognition of Expenses Interest expenses, fees and service expenses, and other operating expenses, are recognized on an accrual basis. 3.3 Cash and Cash Equivalents Cash and cash equivalents represent cash in hand and cash on collection. 3.4 Derivatives Accounting for derivative transactions depends on their purposes as follows: 1) Trading Derivatives The Bank measures derivatives at fair value and recognizes gains or losses arising from changes in fair value in gains (losses) on tradings and foreign exchange transactions, net in the statements of profit or loss and other comprehensive income along with assets or liabilities in the statements of financial position. 2) Hedging Derivatives The Bank measures derivatives with the same manner of the hedged items.

21 Embedded Derivatives The Bank records accounting for embedded derivatives namely Credit Derivative and Structured Note in line with the IAS 39 Financial Instruments: Recognition and Measurement as follows: 1) For not closely related embedded derivatives, those could be separated from their host contracts; if the Bank is able to measure them separately; their gains (losses) will be recognized at fair value through gains (losses) on tradings and foreign exchange transactions, net in the statements of profit or loss and other comprehensive income. For the host contracts, the Bank will apply to related accounting standards. Conversely, the Bank is unable to measure the embedded derivatives separately, the Bank will revalue the entire combined contract and designate as trading booked at fair value through profit or loss, which also be recognized the gains or losses arising from changes in fair value in the statements of profit or loss and other comprehensive income. 2) For closely related embedded derivatives, the Bank will not separate them from their host contracts and will recognize the entire combined contract in accordance with related accounting standards. 3.6 Investments Basis of Classification of Investments The Bank and its subsidiaries classify their investments in debt securities and equity securities as trading securities, availableforsale securities, heldtomaturity debt securities, or investments in subsidiaries and associates. Nonmarketable equity securities are classified as general investments Basis of Valuation of Investments Investments in marketable debt or equity securities classified as trading securities are stated at fair value. Unrealized gains or losses arising from the revaluation are recorded through gains (losses) on tradings and foreign exchange transactions, net in the statements of profit or loss and other comprehensive income. Investments in marketable debt or equity securities classified as availableforsale securities are stated at fair value, net of allowance for impairment (if any). Unrealized gains or losses arising from the revaluation are separately shown in equity and realized gains or losses after the disposal. Investments in debt securities classified as heldtomaturity are stated at the amortized cost, net of allowance for impairment (if any). Premiums or discounts on heldtomaturity debt securities are adjusted to interest income at the end of each month by using the straightline method which is immaterially different from using the effective interest rate method. General investments are stated at cost, net of allowance for impairment (if any). Losses on impairment are realized through gains (losses) on investments, net in the statements of profit or loss and other comprehensive income. Investments in marketable unit trust classified as trading and availableforsale securities are stated at fair value whereas investments in nonmarketable unit trust are stated at net asset value. Investments in foreign assetbacked debt securities classified as trading securitiescurrent investments are stated at fair value.

22 Investments (Continued) Basis of Valuation of Investments (Continued) Investments in subsidiaries and associates, shown in the Bank's financial statements, are accounted for by the cost method, net of allowance for impairment (if any). Moreover, investments in associates, shown in the consolidated financial statements, are accounted for by the equity method (the Bank uses financial information from unaudited/unreviewed financial statements of the associates). The cost of disposed investments is calculated by the weightedaverage method. Gains or losses on disposal of investments are presented in gains (losses) on investments, net in the statements of profit or loss and other comprehensive income, except for trading securities are presented in gains on tradings and foreign exchange transactions, net. 3.7 Loans Loans represent the outstanding principal amounts, except for overdrafts including accrued interest receivables. Deferred revenue is presented as deduction from the loans. Hirepurchase and financial lease receivables represent the outstanding amounts, less deferred interest receivables, and deferred commission, plus amortized direct expenses. 3.8 Allowance for Doubtful Accounts The Bank and its subsidiaries which operate the loan provider business recognize allowance for doubtful accounts compliance with the BoT's Notification No. SOR NOR SOR.5/2559 dated June 10, 2016, regarding Regulations on Assets Classification and Provision of Financial Institutions based on the BoT's Regulations on Valuation and Appraisal of Collateral and Immovable Properties for Sale acquired through Debt Repayment, Loan Collateral or Public Auction of Financial Institution dated June 10, 2016 summarized as follows: 1) The Bank has set aside provision for normal and special mention categories at 1 percent and 2 percent, respectively, in accordance with the BoT s regulations. The Bank also applies collective approach to set aside provision for each debtor group, grouping by similar credit risk. 2) Provision for impaireddebtors is at 100 percent of the difference between the book value of loans and the present value of expected cash flows from the disposals of collateral as to the practice stipulated by the BoT. 3) Collateral using for calculating the present value of expected cash flows from disposals are such as immovable properties and leasehold rights (e.g. the present value of the expected cash flows from disposals of immovable properties which are collateral of debtors under the litigation process equal to percent of the appraisal value and the present value of the expected cash flows from disposals of immovable properties which are collateral of debtors under the public auction process equal to percent of the appraisal value). Other types of collateral are calculated by using the valuation rate stipulated by the BoT. 4) Collateral valuation has been conducted according to the BoT's regulations relating to types of collateral, valuation methodology, valuation frequency, and values of collateral that could be deductible from loans balances before provisioning as follows: As for normal and special mention categories, the underlying collateral is required to reappraise or revalue on a 3year basis excluding collateral of credit lines of housing loans and other loans in the charge of retail business and network support team, will be reappraised or revalued when changed to substandard, doubtful and doubtful of loss, as well as the collateral which have been reappraised or revalued over the past 3 years.