Chairman's Report

The Lao economy performed well in 2009, despite the negative impact of the global economic recession and serious flooding in the southern province, with a growth rate of 7.6%, the second highest in East Asia after China. The main cause of this impressive growth is that the Lao economy is relatively insulated from the global financial system and its exposure to global trade is still limited, thereby mitigating the direct impact of external shock.

A sustained demand for Lao exports, including copper and gold bought by China, garment products by Europe and electricity by Thailand, combined with the strong tourism industry has also helped cushion the Lao economy compared with to other nations.

Another reason behind the robust economic growth is the increase of expenditure on the construction of infrastructure to facilitate the 25^th SEA Games. The bilateral Kip/US dollar exchange rate has remained broadly stable having depreciated only around 0.04% while Thai bath appreciated around 0.4%.

The average annual inflation rate was 0.03% lower than that of 7.3% in 2008. After rising in the first half of 2008 and having reached a peak in May, inflation showed a steep decline in 2009 and turning negative for the first time from April until October.

The direct and indirect effects of the global financial crisis on the Lao banking system have so far remained negligible, as financial sector assets account for less than 15% of GDP, its exposure to international credit markets is limited, and the Government does not access international commercial credit markets to finance its budget. There is no corporate bond market and government treasury bills are not traded. The banking sector was in a sound financial condition and remained profitable in 2009. Compared with 2008, total credit provided by the commercial banks as of the end September increased by 27%, deposits by 12% and total assets by 21.5%.

Economic outlook 2010

Looking to 2010, there are some hopeful signs that the global downturn may be bottoming out. Growth is expected to remain robust in 2010 and is projected at about 7.5% supported by projects already on stream and strong investment in mining and hydroelectricity.

Achievements in 2009

ACLEDA Bank Lao has opened for just over one year but has achieved a strong performance in deposits, credit and transfers. Our Head Office in Vientiane and all our branches are on-line through the world leading Temenos T24 core IT system.

We are continually evaluating opportunities for expansion of our office network. I will leave it to the Managing Director to provide more details of the bank's performance and the expansion. As I reported last year, for 2009 we have focused on the training of 246 employees (106 employees as at December 31, 2008) both in Laos and at our training centre in Cambodia to improve their skill and competence to respond the needs of customers and community. We have taken steps to formulate and put in place a code of good governance. We believe a strong focus on good governance and transparency makes ACLEDA Bank Lao more attractive to customers, investors and other financial counterparties by creating a more sustainable business.

Shareholders' Meeting

The First Annual General Meeting of Shareholders was held on April 27, 2009 at the Bank's Head Office and in addition eight resolutions were passed by email during the year. Notice of Meeting together with the Annual Report, the Meeting Agenda and the Board's recommendations were delivered to the shareholders in advance according to the bank's Articles of Association and government regulations and other actions was taken by the Shareholders during the year as provided for by Article 19 of Commercial Banks Law and Article 13 of the Memorandum and Articles of Association.

The key matters approved were:

The Annual Report for the year 2008;
The audited Financial Statements for the year 2008;
The Business Plan 2009;
The nomination of Mr. Phon Narin as Managing Director;
The appointment of KPMG as the external auditors for 2009;
The share purchase agreement;
Amendments to the Memorandum and Articles of Association of ACLEDA Bank Lao Ltd., the Accession to the Subscription and the Shareholders Agreement on Investment of Common Equity;
Investment in an ATM network, and;
A new capital injection.

The outlook for ACLEDA Bank is for an improvement in 2010 and a strong 2011 for the reason that we have a strong management team, a robust capital position, adequate liquidity and supportive shareholders.

In conclusion on behalf of the Board and myself I wish to thank our customers, shareholders, investors, regulators, suppliers, the Government and the general public and in particular the Bank of the Lao PDR for their continued trust and support. Special thanks go to the management team and staff for their motivated dedication, loyalty and hard work in carrying out their duties and responsibility during this critical first year.