: (84-8) Hotline : (84-8)

Transcription

1

2 78-80 Cach Mang Thang 8, Ward 6, District 3, Ho Chi Minh City Telephone : (84-8) Fax : (84-8) Hotline : (84-8) Website : info@abbank.vn

3 ANNUAL REPORT 2007

4

5 CONTENT Vision and Mission Statements 02 Chairman s Message 08 CEO s Message 12 Corporate Profile 14 Corporate Structure 16 Board of Management 18 Board of Directors 20 Supervisory Board Business Review 24 Highlights of Future Plan 36 Financial Statements 38 Network 40

6

7 Vision ABBANK strives to be one of the leading commercial banks with the model of multi-functional financial & banking group by applying state-of-the art technology to meet international standards. Mission»» Superior Customer Services»» Higher Investment Returns»» Maximizing shareholder s benefits»» To develop human capital through long term investment

8

9 Chairman s Message Dear Shareholders, The year 2007 marked a new era for Vietnam s economy when it officially became a World Trade Organization (WTO) member. The country s socio-economic accomplishments have been attributed to the reform process in which its WTO s membership played an important role. One year is inadequate to perceive major results in the market but few achievements have already been recognized. Since WTO s accession, the country s Gross Domestic Product (GDP) grew 8.5% and the aggregate investment increased by 15.8% to VND 461,900 billion; an equivalent to GDP of 40.4%. Foreign capital attracted a phenomenal record high of US$ 20.3 billion, exceeding the US$ 12 billion benchmark set in With the increase in foreign capital, many foreign investors have kept a close watch on the local market and are open to entering business opportunities. Vietnamese banks, in their efforts to sharpening their competitive edge, have made thorough preparations such as improving commercial bank system, and increasing financial capacity, among many others. In due course, Vietnam will permit foreign banks to set up wholly foreign-owned banks in the country which will pave way to rigorous competition because foreign financial institutes will eventually enjoy the national treatments.

10 In 2007, ABBANK had strong support from staff and shareholders which made impressive results in the market. Until 31 December 2007, the Bank s chartered capital was VND 2,300 billion while its total assets manifested six-folds to VND 17,500 billion. Total deposits and outstanding loans amounted to around VND 6,800 billion each; pretax taxes received thrice more than previous year which stood at VND 230,76 billion. To-date, ABBANK expanded the number of representative offices from 14 in 2006 to 54 by the end of It is commendable that all the new offices have successfully started operations in a short timeframe. In November 2007, ABBANK enhanced its technology by launching T24 system as its core banking software. The T24 is expected to increase the bank s customer base, introduce new products, improve customer-service and reduce operating costs. Moreover, ABBANK s Banking Card Projects in debit and store card services are expected to make more domestic and international credit card issuances in the future. In addition, following the guideline of the General Shareholder Meeting 2007, the Board of Management and the Board of Directors has spent much effort to research, assess and select strategic foreign partners by various criteria but the first priority is for those who could help ABBANK increase its competitiveness in the financial market. To date, the BOM and the Bank s negotiators has decided to choose Maybank to be the first strategic foreign shareholder of ABBANK. MayBank is one of the leading banks in Malaysia and in the region as well. This Malaysian bank ranks 152 in the list of the world s 1,000 big banks by The Banker s Magazine. Its market capitalization is USD13 billion, total assets are USD82 billion with the biggest network of 450 offices in Malaysia and many others overseas. Maybank has 40 year experience in banking management, high standard of employee discipline, modern business culture and conformity with oriental culture. This consolidates ABBANK s belief that the partnership with Maybank shall be a good opportunity for both sides and these two financial institutions shall certainly build a sound

11 relation to seize the opportunities and face the challenges of Vietnam financial and banking market. Vietnam sets high targets for the economy in However, we are also facing great challenges such as the sign of an over heated economy, high inflation rate, decrease in property prices, and high credit risk, etc.. To overcome the above mentioned difficulties, a series of measures must be taken including the application of flexible financial policies, the control of inflation, the improvement of investment, and strengthen the economic reform. As a bank, we evaluate 2008 as a very challangeable year to service the various economic sectors and the gerneral economy. Based on the growth of 2007, the BOM believe that with the support of shareholders, customers, BOD, and employees, ABBANK should be able to gain considerable achievements in This will further bring ABBAK name to a new heigth and continue to contribute to the society at large. On behalf of the BOM, I wish all shareholders, customers a prosperous and happy new year. Sincerely Vu Van Tien Under such a circumstance, ABBANK s priorities for 2008 are to maintain the existing growth rate, continute to enhance the benefits from hi-tech application, make full use of local and foreign strategic partnership, narrow the gap with leading joint-stock banks in Vietnam.

12 CEO s Message Ladies and Gentlemen, Vietnam is stepping into a new era of development which is marked by the event of joining the WTO. An Binh Commercial Joint Stock Bank (ABBANK) has also made a breakthrough to becoming one of the leading commercial banks in The year of success and growth: By the end of 2007, ABBANK gained its targets earlier to becoming one of the most dynamic commercial banks in Vietnam. ABBANK s total assets at the end of December 2007 were over VND 17,400 billion, up 551% against last year; chartered capital increased by 103%, to VND 2,300 billion; total outstanding loans stood at VND 6,800 billion, up 592%. Deposits from economic organizations and individuals jumped 438% to VND 6,900 billion, meanwhile profit also went up to VND 234 billion, 301% higher than The year 2007 also acknowledged ABBANK s network development in order to exploit market niches and create better conveniences for existing customers. The number of branches and transaction points was widened to 54 from 14 of ABBANK in 2007 also successfully employed senior and middle management team who were trained in foreign countries with aggressive experience from senior positions in reputed local and overseas banks. New personnel rose to 1,200 persons, 288% up from last year among which young workers accounted for a considerable proportion. New

13 interns who had been strictly selected by the Bank were trained on professional and communication skills before being officially employed. The Bank in the mean time introduced competitive salary, bonus and promotion policies to absorb talents ensuring its employees benefits for long-term working. Also in the year 2007, ABBANK shook hand with strategic partners for long-term cooperation such as Power Company No. 1 (PC1), Power Company No. 2 (PC2), Power Company No. 3 (PC3), Hanoi Power Company, Ho Chi Minh City Power Company, Agribank, Bach Viet Information Technology (BTI) etc. Besides, the Bank continually makes alliance with estate companies and other reputed enterprises to diversify and improve quality of the services. In 2007, ABBANK effectively applied the management software Corebanking T24, developed its management system, switched store card and credit card, and connected to the database of Vietnam Electricity and Vietnam Electricity Telecom to collect electricity and water fares at the Bank s transaction points. on high technology, standard progress and its staff professionalism. - Promoting ABBANK trademark, strengthening the recognition and confirming its name. - Completing institutional and organizational structure, making full use of the effectiveness of the vertical management for the business group and supporting centers like marketing, personnel, IT, accounts, network development etc., and the horizontal management for network and customer development by geographic region. On behalf of ABBANK, I would like to faithfully thank you very much for support and direction of the BOM, kind cooperation of shareholders and the best effort of all ABBANK s staff during last year. I believe ABBANK shall strongly develop in the next coming time together with the common development of the financial and banking industry. Best regards, Future strategy: - Strengthening the customer base, focusing on small & medium import-export companies as well as individual customers. - Diversifying competitive package products with high technology content. Luu Duc Khanh CEO - Orienting the business model to customers needs and satisfaction, ensuring the service quality based

14 Corporate Profile 14 ANNUAL REPORT 2007

15 An esteemed establishment since 1993, ABBANK is reputed as one of the leading financial institutions in Vietnam. In 2005, Electricity of Vietnam (EVN) became ABBANK s largest strategic shareholder with an investment of 30% chartered capital. The following year, 2006 marked the success of ABBANK and An Binh Securities Company (ABS) underwriting local-currency bonds valued at VND2,000 billion for EVN. ABBANK s clients range from multi-national corporations, individuals and investors. Corporate banking provides encompass lending, factoring, guaranteeing, export funding, bank account and international payment. The full range of personal banking services consist of saving products and credit products, eg. home mortgage loan, car loan, unsecured loan, business loan, etc. Asia Money Magazine voted ABBANK the best local currency bond issuer in Asia in January At the Banking Expo 2007, ABBANK was awarded The Best Banker for superior hi-tech services and products. ABBANK has a chartered capital of VND2,300 billion. There are 54 offices nationwide to serve thousands of corporate and individual customers. The total assets, revenue and income steadily grew 300% per annum in the last two years. ABBANK provides corporate clients and investors with trustee and investment consulting services for financial, bond issuing, underwriting and clearance for bond issuance. Supported by superior technology, a professional team and high quality customer service, ABBANK is able to provide flexible financial solutions, exceeding and surpassing customers satisfaction time and again. 15

16 Corporate Structure Shareholder s meeting IT Center Board of Controller Board of Management Card Center Executive Secretary Treasury Board of Director Network Development North & Middle Region Main Branch Operation Dir Boad of strategic client Development Hanoi Branch Office Danang Branch Office Internal Audiat Dept International Payment Center Risk Management Law & Compliance Retail banking Can Tho Branch Office A&F Dept Vung Tau Branch Office Network Development Dept Corperate Banking Marketing Binh Duong Branch Office Admin Dept HR Financial Investment 16 ANNUAL REPORT 2007

17 ABBANK Leaders 17

18 Board of Management Mr.Vu Van Tien Chairman Born in 1959 Mr.Vu Van Tien is a Bachelor of Economics from National Economics University of Vietnam, and also graduated from Military Technical Institute as an engineer. Mr.Tien is one of the most successful entrepreneurs in Vietnam and has been granted many decorations by the Vietnamese Government for his contributions to the country s economic development, namely: + The third grade Labor Decoration Category III + For-the-Young Decoration + Merit Certificate of the Prime Minister + Merit Certificate of Hanoi People s Committee + Red-Star Award Besides being the Chairman of ABBANK, Mr.Tien also plays the senior leadership roles as follows: + Chairman & CEO of GELEXIMCO JSC + Chairman of An Binh Securities JSC + Chairman of Thang Long Cement JSC + Chairman of An Hoa JSC 18 ANNUAL REPORT 2007

19 Mr.Nguyen Hung Manh Permanent Vice Chairman Born in 1957 Mr.Nguyen Hung Manh has an MBA from Ohio University (the U.S) and graduated from Hanoi Foreign Language University with a bachelor degree. Mr.Manh used to work in oil & gas, and commercial sectors for many years before he joined Vietnam s financial and banking industry in He became a member of ABBANK in 2001 and is one of the core cadres leading ABBANK to current successes. Mr.Dao Van Hung Vice Chairman Born in 1955 Mr.Dao Van Hung has an MBA Degree from Hanoi University of Technology. He has over 30 years working in electricity industry and has hold many key positions of Vietnam Electricity Group (EVN). Currently he is the Chairman of EVN. Mr.Duong Quang Thanh Member Born in 1962 Mr.Duong Quang Thanh holds a Ph.D in Economics from Hanoi University of Technology and a master from Asian Institute of Technology in Bankok, Thailand. Mr.Thanh has 20 years in the electricity industry and has assumed senior positions in Vietnam Electricity (EVN). Currently he is the Deputy General Director of EVN. 19

20 Board of Management Mr.Luu Duc Khanh General Director Born in 1960 Bachelor from Lvov University (Ukraina), MBA from New South Wales University (Australia). Mr.Khanh has 15 years experience in Vietnam s Financial and Banking industry, of which he was at HSBC Bank for 12 years. Mr.Nguyen Cong Canh Deputy General Director Accountant and Internal Audit. Born in 1958 Bachelor of Economics Mr.Canh had 20 years working experience for Agricultural Bank of Vietnam. Ms.Tran Thanh Hoa Deputy General Director Credit and Risk Management. Born in 1963 MBA, specialized in Financial and Banking Ms.Hoa worked for Vietcombank for 20 years. 20 ANNUAL REPORT 2007

21 Mr.Bui Trung Kien Deputy General Director Advisor for the Chairman Born in 1973 Bachelor of Economics from National Economics University of Vietnam. Bachelor of Foreign Language from Hanoi Open University Bachelor of Law from Hanoi Open University Master of Public Administration from National University of Singapore. Mr.Kien has worked in fiancial and banking industry for many years. He was at Vietnam s State Bank for 11 years. Ms.Nguyen Ngoc Mai Deputy General Director EVN Business Development Born in 1974 Engineer of Energy Economics from Hanoi University of Technology. Master of Energy Economics from Asian Institute of Technology. Ph.D of Economics from Kwansei Gakuin University, Japan. Ms.Mai spent 12 years working in corporate and project finance for Vietnam Electricity (EVN). Mr.Pham Quoc Thanh Deputy General Director Corporate Banking Born in 1970 Bachelor from Banking University, Bachelor from Foreign Language University, Bachelor from IFS School of Finance (the U.K). Mr.Thanh worked in Financial and Banking for 15 years, of which he was at HSBC for 10 years. 21

22 Supervisory Board Mr.Hoang Kim Thuan Chief Supervisor Born in 1958 Bachelor from Hanoi University of Finance and Accounting. Certificates of Senior Economic Management, and Securities Exchange & Business Reform Mr.Thuan is now the Deputy General Director of Construction JSC No. 14 and the Chairman of Rach Chiec Concrete JSC. Mr.Dao Manh Khang Member Born in 1969 MBA from Commercial University Mr.Khang is currently the Deputy General Director of GELEXIMCO, he is also the Director of Hong Ha Trading JSC. Mr.Vo Hong Linh Member Born in 1968 Bachelor of Economics from Danang Polytechnics University Mr.Linh has ever held important positions in Vietnam Electricity Group (EVN). He is currently the Deputy Chief of EVN s Financial Committee. 22 ANNUAL REPORT 2007

23 2007 Business Review 23

24 2007 Business Review ABBANK made a remarkable growth in 2007 gaining 172% pretax profit increase to VND billion. Its total assets increased 452% to VND ,117 billion. This accomplishment serves as a clear manifestation of ABBANK s extensive development towards ANNUAL REPORT 2007

25 Capital Mobilizing Activities ABBANK s total deposits in 2007 went up by 350% to VND 6,980 billion, 72% or VND 5,021 billion of which were contributed by economic organizations while 18% or VND billion were obtained from the public. The apparent increase was largely due to the Bank s network expansion with 53 offices opened in 2007, adjustment of interest rates to align with market situation and the intensification of promotion and advertising activities. CREDIT The year 2007 made a record of credit growth, contributing a significant part to the Bank s turnover and profit was the third successive year of credit growth with all international standards and practices as well as those of Vietnam State Bank on credit safety and categorization applied. ABBANK selects customers carefully and applies stringent appraisement processes to minimize bad loans. The outstanding credit loans increased by 502% to VND6,810 billion of which corporate customers accounted for 63.3% and individuals 36.7%. Divided by the loan term in 2007, short-term loans accounted for 48.76% of the total credit loans, meanwhile medium- and long-term loans made up 29.74% and 21.5% respectively. Divided by sector, (1) Agriculture, forest and aquatics accounted for 0.68% (2) exploitation and construction 6.6%, (3) production and processing 12.15% (4) trading and service 43.45% (5) investment and stake acquisition of 2.2% (6) other loans to individual and community (consumer, housing, vehicles, overseas study, small vendors ect.) 34.9%. The turnover of international payment reached USD150 million and all international payment transactions were made following SWFIT standards with high accuracy and safety. ABBANK is honored to receive the Excellent International Payment Bank 2007 award granted by Wachoviabank one of the four biggest banks in the U.S. The award has confirmed ABBANK position in Vietnam and in the world as well. FINANCIAL INVESTMENT ACTIVITIES The year 2007 remarked a great effort of ABBANK in its financial investment. The Bank s strategy is based on safety, effectivity, diversity and flexibility. In long-term investment, the Bank has joined to establish financial companies and organizations including: EVN Cambodia Joint Stock Company, Smarklink Card Service Joint Stock Company, EVN Financial Joint Stock Company etc. with total investment of VND70 billion. In order to consolidate the long-term portfolio, ABBANK tends to invest into the key economic sectors such as electricity and infrastructure development. ABBANK also holds stakes of potential and reputed companies like Hanoi Housing Joint Stock Bank (Habubank), Paynet Joint Stock Company, CMC Technology Group. According to the growth plan of the Bank, profit in 2008 was estimated to double that of INTERNATIONAL PAYMENT In 2007, ABBANK s international payment activities gained an impressive growth, launching all international payment services in the whole network with more than 2,000 agent banks in 70 countries. 25

26 Capital growth (VND billion) Capital Structure 14, % 51% 1, % Payment deposit of Economic Organizations Individual savings Deposits of credit organizations OUTSTANDING TOTAL LOAN OUTSTANDING LOAN BY TERM 6, % 50% 29% 1, Short-term Medium-term Long-term 26 ANNUAL REPORT 2007

27 OUTSTANDING LOAN BY BORROWER loan by sector (million VND) 61.4% 38.6% 34.90% 0.68% 6.62% 12.15% 2.20% 43.45% Individual Enterprise Agriculture - Forestry Aquaculture Exploitation and Construction Production and processing Service & Trading Investment and equity contribution Individual and community activities CAR DISSUANCE AND CARD ACCEPTANCE SYSTEM In 2007, ABBANK officially collaborated with Vietnam s card market by launching its debit card YOUcard. YOU card is highly appreciated with the accessibility to the nationwide ATM/POS network. ABBANK has successfully co-operated with the biggest card companies in Vietnam including SmartLink, BanknetVN and Paynet, thus enabling Youcard to be accepted into 5,000 ATM and 10,000 POS throughout the nation. for internet and mobile banking for YOUcard to be accessible throughout the world. ABBANK also plans to increase the number of ATM machines from 16 to 50. We are expecting to issue 100,000 cards in 2008 for EVN Group and its subsidiaries. We hope to make this banking facility available to our shareholders, corporate customers, and other bank customers who already have credit relation and deposit in the ABBANK. In 2008, ABBANK will join international card organizations like VISA, MasterCard. We are continuously researching to enhance technologies 27

28 ABBANK IN THE INTERBANK MARKET In the interbank market, ABBANK is a new entry player. At the end of 2007, ABBANK s loans to other credit organizations increased by 267% at VND5,643 billion. Securities trading and investment leaped to 960% at VND3,296 billion. RISK MANAGEMENT At ABBANK, risk management is pivotal to enhance business system in all branches. Credit Risk Management In 2007, ABBANK developed a high standard credit risk management system for the entire bank network. Credit loan, subjected to the borrowing amount is assessed by the Credit Board, Credit Committee or independent credit experts. Thus, ABBANK can monitor and reduce the ratio of bad loans outstanding to 1.52%. Most overdue debts are recoverable due to the liquidity of their mortgage, mainly real estate. Market Risk Management In 2007, ABBANK continues to apply the latest market risk management model to monitor system liquidity, interest risk and foreign exchange risk. ABBANK s interest rates fluctuate according to the market changes. Despite the increasing interest rates, the Bank keeps an effective margin rate. Periodical liquidity reports enable Bank s management and capital source division to prevent and limit risks effectively. Performance Risk ABBANK strictly controls the performance risks due to the diversification of services and products. The Bank sets up an Internal Supervisory Board in all branch offices to control all activities including credit, accounting, treasury, foreign currency trading and professional ethics. STRATEGIC COOPERATION Cooperation with ABS ABBANK is one of the founders of An Binh Securities Company (ABS). In 2006, ABBANK invested VND5 billion in ABS and provided VND150 billion loan and set up 3 28 ANNUAL REPORT 2007

29 shared transaction offices where ABS s customers can be provided with cash collection and payment services for their securities transactions and others as well. This shared customer service model is highly appreciated by customers for its conveniences and speed. Cooperation with EVN The impressive development of ABBANK in 2007 was partly attributed to the business alliance with strategic partner EVN. EVN s potential has harnessed great success to ABBANK due to initiatives in various areas: Excellent customer service, cash management, loan services and corporate loans to contractors and EVN s service providers. With these beneficial services, ABBANK achieved outstanding loans of VND1,500 billion from EVN customers while deposits and international payment total VND 5,000 billion and USD70 million, respectively. Besides expanding the network of 60 branches and transaction offices nationwide to provide better services to EVN customers, ABBANK also signed a Comprehensive Cooperation Agreement with EVN s member companies in The deals were made with Hanoi Power Company in April 2007, Power Company No. 2 in May 2007, Power Company No. 1 in July 2007, HCM City Power Company and Power Company No. 3 in August ABBANK is expecting more business ventures with other EVN members in the future. ABBANK has taken necessary steps to provide bond underwriting service to EVN Telecom and other members of the Group. In 2007, ABBANK had provided cash collection system for electricity, telecom payment, and disbursement account service to EVN members such as EVN Telecom, Power Company No. 1, Power Company No. 2, Power Company No. 3, Hanoi Power Company and HCM City Power Company. ABBANK has signed an Agreement to develop a payment scheme and issue co-branding banking cards with EVN Telecom. ABBANK has also signed a deal to collect electricity payment issued by Hanoi Power Company and other EVN bills with the support from EVN IT and PC): + To implement a utilities payment system from EVN customers and web clients. + To complete EVN s system to accept EVN bill payments via ATM and POS. + To test the POS payment system in 7 districts of Hanoi Power Company. As a strategic move, ABBANK plans to develop potential customers from EVN Group. The Bank has a specialized team to develop financial & banking products dedicated to EVN s contractors and suppliers. 29

30 Cooperation with Agribank On 15th March 2007, ABBANK signed a comprehensive agreement with Agribank which is one of the leading commercial banks in Vietnam having strong financial capacity, high potential and nationwide network of offices. This extensive cooperation with Agribank shall be an important advantage for ABBANK on the way to develop and to compete with other financial institutes. NETWORK DEVELOPMENT In order to better serve the customers in 2007, ABBANK opened 39 new offices, extending the number of branches and offices to 53 in 20 cities and provinces. HUMAN RESOURCE DEVELOPMENT In order to meet the growth demand and develop awareness of the value of human resource, ABBANK has created standard strategies and processes in recruiting and training management staff and new employees. Recruitment For middle executives and managers, ABBANK recruited candidates who have banking experience and hold postgraduate degrees from overseas. For staff, ABBANK recruited a large number of young graduates majoring in business and economics from universities and colleges. After recruitment, new staff shall be trained in handling transactions and communications during the probation period. As a result in 2007, the workforce has considerably improved in terms of quality and number. As of 31 December 2007, the Bank has 1,068 workers. The education profile of ABBANK personnel is as follows: Education Number Ratio (%) - After University 20 persons 2% - University 805 persons 72% - College 188 persons 17% - High school 110 persons 10% 30 ANNUAL REPORT 2007

31 Workforce Training ABBANK encourages staff to improve their knowledge and professional skills. In 2007, 80% of ABBANK staff participated short-medium and long-term courses related to banking transactions. We deployed cadres to attend seminars, overseas training courses to enrich knowledge and cultural exchange experiences. Working Environment and Rewarding System ABBANK has made known to staff to inculcate company culture requiring all staff to be responsible and serve customers with the highest standards of service Teamwork is encouraged and considered a tool for high quality service. ABBANK understands the important relationship between work productivity and reward policies/schemes. Thus, bonuses are rewarded to staff at all branches whom are able to minimize cost and turnover improvement. Promotion opportunities are given to those who have contributed significantly and effectively to the bank s development. SOCIAL ACTIVITIES To fulfill its community responsibilities, ABBANK has joined many social activities to support victims of natural disasters. In 2007, the Bank incepted a program, Bank Account for The Future for poor children to pursue education. 31

32 32 ANNUAL REPORT 2007

33 Highlights of

34 Highlights of 2007 January - ABBANK has been selected by AsiaMoney as The Best Local Currency Bond Underwriter in Asia February - ABBANK Shareholders Meeting - Opening of Hung Vuong office at 195 Hung Vuong Street, Hai Chau District, Da Nang City March - Opening of Dakao office at 47 Dien Bien Phu Street, District 1, Ho Chi Minh City - Opening of Phu My Hung office at 1441 My Toan 2, District 7, Ho Chi Minh City - On March 15, 2007, ABBANK and Agribank signed the Comprehensive Strategic Cooperation Agreement - On 28 March 28, 2007, ABBANK and Bach - Viet Technology & Investment Corporation (BTI) signed a Comprehensive Strategic Cooperation Deal whereby ABBANK became one of the strategic shareholders taking a 5% stake April - ABBANK issued US dollar bills worth 30 million - Opening of Hau Giang office at 234 Hau Giang Street, District 6, Ho Chih Minh City - Opening of Nguyen Cong Tru office at 194 Nguyen Cong Tru Street, District 1, Ho Chi Minh City - Opening of Lac Long Quan office at 349A Lac Long Quan Street, District 11, Ho Chi Minh City. - Opening of Nguyen Tri Phuong office at 136H Nguyen Tri Phuong Street, District 5, Ho Chi Minh City. - On 20 April 2007, ABBANK and Hanoi Power Company (a subsidiary of Vietnam Electricity), signed a principle agreement for bilateral cooperation May - Opening of Tan Tien office at National Road No. 1, Bien Hoa City - Opening of Long An office at Hung Vuong Street, Tan An Town, Long An Province - Opening of Vinh Long office at 26 Hoang Thai Hieu, Vinh Long Town, Vinh Long Province - Opening of Quang Trung office at A3-1C Quang Trung Street, Go Vap District, Ho Chi Minh City - Opening of Nguyen Van Cu office at 453 Nguyen Van Cu Street, Long Bien District, Hanoi City - On 24 May 2007, ABBANK and Power Company No. 2 signed a Comprehensive Cooperation Deal that will provide banking services and develop ABBANK s office network - ABBANK received The Best Banker award. The award is granted to banks that provide hi-tech products and services June - ABBANK increased its capital from VND 1,131 billion to VND2,300 billion as per the Approval Letter No. 863/ NHNN-HCM02 of Vietnam s State Bank, Ho Chi Minh City Branch - Opening of Tran Hung Dao office at 855 Tran Hung Dao Street, District 5, Ho Chi Minh City. - Opening of Tan Phu office at 22 Truong Vinh Ky, Tan Phu District, Ho Chi Minh City - Opening of Dan Chu office at 115 Dan Chu Street, Thu Duc District, Ho Chi Minh City - Opening of Long Xuyen Office at 904 Hoa Hoang Ho, Long Xuyen Town, An Giang Province - Opening of Cao Lanh office at 42 Doc Binh Kieu Street, Cao Lanh Town, Dong Thap Province - Opening of Tam Ky office at 12 Phan Chu Trinh, Tam Ky Town, Quang Nam Province. - Opening of Ton Duc Thang Office at 141 To Duc Thang, Dong Da District, Hanoi City. - Opening of Tran Van Ninh Office at 109 Tran Dang Ninh Street, Cau Giay District, Hanoi City 34 ANNUAL REPORT 2007

35 July - On 7 July 2007, ABBANK, Power Company No. 1 and Power Company No. 3 signed a Comprehensive Cooperation Deal to provide banking services and develop ABBANK s office network. - ABBANK and Ha Thanh Securities Joint Stock Company signed a deal with EVN Telecom on consulting, advising, clearing and underwriting VND720 billion of bonds - Opening Le Quang Dinh office at 428 Le Quang Dinh, Binh Thanh District Ho Chi Minh City - Opening of Truong Chinh office at 22/15 Truong Chinh Street, District 12, Ho Chi Minh City. - Opening of Quan Thanh office at 188 Quan Thanh Street, Ba Dinh District, Hanoi City. August - On 30 August 2007, ABBANK and Ho Chi Minh City Power Company signed Cooperation Contract to provide banking services. - Opening of Huynh Van Banh office at 224B Huynh Van Banh Street, Phu Nhuan District, Ho Chi Minh City - The seminar ABBANK accompanies Small- and Medium-size Enterprises was held - US Dollar-Deposit Certificate Batch 1 has been Issued - Opening of Tay Ninh office at A3-A4 in Commercial Center of 30/4 Avenue, Tay Ninh Town - Opening of Dong Xoai office in Hung Vuong Street, Dong Xoai Town, Binh Phuoc Province - Opening of Hue office at 100 Nguyen Hue, Hue City - Opening of Le Trong Tan office at 30 Le Trong Tan Street, Hanoi City - Opening of Bac Ninh office at 10 Nguyen Dang Dao, Bac Ninh City, Bac Ninh Province September - ABBANK issued 114,745,720 shares valued at VND1,147,457,200,000 - Opening of Le Van Viet office at 221 Le Van Viet, District 9, Ho Chi Minh City October - Opening of Ky Hoa office at 65A 3/2 Street, District 10, Ho Chi Minh City - Opening of Phan Dang Luu office at 168A Phan Dang Luu, Binh Thanh District, Ho Chi Minh City - Opening of Phan Thiet office at 384 Tran Hung Dao, Phan Thiet City, Binh Thuan Province - Opening of Trung Nu Vuong office, Hai Chau District, Da Nang City - Opening of My Hao Office at 12 Pho Noi, Yen Nhan Town, My Hao District, Hung Yen Province. November - ABBANK started operations with its new chartered capital of VND 2300 billion - Opening of Rach Gia Office at Lac Hong, Rach Gia City, Kien Giang Province - Opening of Ha Dong Office at 01, Tran Phu Street, Ha Dong City, Ha Tay Province. December - ABBANK s total assets exceeded the benchmark of USD 1 million (around VND 16 billion) - US Dollar-Deposit Certificate Batch 2 has been Issued - The program, Golden New Year with ABBANK, was launched - The seminar, Finance Solutions for EVN Constructors to carry out Electricity Projects was held in cooperation with EVN. - Opening of Pho Hue Office at Pho Hue Street, Hoan Kiem District, Hanoi City - Opening of Thai Nguyen Office at 140 Hoang Van Thu, Thai Nguyen City, Thai Nguyen Province. 35

36 Future Plan In 2008, ABBANK envisage to build a firm foundation in their business objective, placing quality in the management systems. These are some goals: Key Business Targets: (compared to 2008) Chartered capital increased by 30% to VND3000 billion Total assets increased by 30% to VND billion Credit activities increased by 47%, residential deposits went up by 60%, and investment raised to 279% in Profits increased by 91% as compared to Network In 2008, ABBANK shall expand its network nationwide especially in the key cities and economic zones. The Bank is expected to open 20 more offices, owning a total of 74 office networks. Personnel In order to build a workforce that meets the demand for personnel development, ABBANK offers preferential policies for talent absorption and internal training. The workforce is expected to increase to 1,800 people at the end of ANNUAL REPORT 2007

37 Services We thrive to provide flexible, quality and security services. In 2008, ABBANK shall continue to expand its market share by taking practical actions: Strengthening credit activities, providing competitive interest rates, enhancing cross-selling activities targeted to corporate customers and EVN customers, focusing on import-export and energy companies, launching new individual products and services to expand the retail sector. The Bank extended account-related services by setting up 3 payment centers in HCM City, Hanoi and Da Nang to increase nonterm deposits and cumulative saving services. In 2008, the Bank targets to issue 100,000 cards to be used for ATM, credit and prepaid transactions. In addition, the Bank will invest in technology for Visa Card, Master Card, chip card and YOUcard. The number of depositors at present is 1,000 enterprises and 10,000 individuals and it is expected to increase by 300% and reach 15,000 households and 5,000 companies... To accelerate investment activities in high liquidity projects, AB- BANK wants to diversify the investment portfolio by providing services such as consultancy, stock underwriting and financial tool issuing. 37

38 2 Báo cáo thường niên 2007

39 Financial Statements An Binh Commercial Joint Stock Bank Audited Financial Statements in accordance with the Vietnamese Accounting Standards and System for Credit Institutions as at and for the year ended 31 December

40 Contents INDEPENDENT AUDITORS REPORT 01 AUDITED FINANCIAL STATEMENTS Balance Sheet Statement of Income 04 Statement of Retained Earnings 05 Stetement of Cash Flows Notes to the Financial Statements 08-42

41 ERNST&YOUNG INDEPENDENT AUDITORS REPORT on the financial statements of An Binh Commercial Joint Stock Bank as at and for the year ended 31 December 2007 Reference: 21222/11107 To: The Board of Management and Board of Directors of An Binh Commercial Joint Stock Bank We have audited the accompanying balance sheet of An Binh Commercial Joint Stock Bank ( the Bank ) as at 31 December 2007, and the related statements of income and retained earnings, and cash flows and the notes thereto ( the financial statements ) for the year then ended as set out on pages 2 to 42. These financial statements are the responsibility of the Bank s management. Our responsibility is to express an opinion on these financial statements based on our audit. Basis of Opinion We conducted our audit in accordance with Vietnamese and International Standards on Auditing applicable in Vietnam. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, the financial statements give a true and fair view of the financial position of the Bank as at 31 December 2007 and the results of its operations and cash flows for the year then ended in accordance with the Vietnamese Accounting Standards and System for credit institutions and relevant regulations stipulated by the State Bank of Vietnam. Vo Tan Hoang Van Deputy General Director Registered Auditor Certificate No. 0264/KTV Nguyen Xuan Dai Auditor In-charge Registered Auditor Certificate No. 0452/KTV Ho Chi Minh City, Vietnam 26 March

42 BALANCE SHEET as at 31 December 2007 Notes ASSETS Cash on hand 3 149,751 33,195 Balances with the State Bank of Vietnam 4 365,006 31,323 Deposits with other credit institutions 5 5,643,866 1,536,087 Trading securities 6 35,519 - Trading securities 48,455 - Provision for impairment (12,936) - Loans and advances to customers 6,800,285 1,116,500 Loans and advances to customers 7 6,858,134 1,130,930 Provision for credit losses 8 (57,849) (14,430) Investment securities 9 3,659, ,436 Securities available for sale 1,098, ,825 Securities held to maturity 2,560, ,611 Fixed assets 10 79,873 6,664 Tangible fixed assets ,984 6,664 Cost 69,225 7,627 Accumulated depreciation (7,241) (963) Intangible fixed assets ,889 - Cost 19,172 - Accumulated amortization (1,283) - Other assets ,486 46,693 Other receivables ,478 24,131 Accrued interest and fees receivable ,985 20,318 Other assets ,023 2,244 TOTAL ASSETS 17,174,117 3,113,898 The attached notes from 1 to 36 form part of these financial statements 2 Báo cáo thường niên 2007

43 BALANCE SHEET (continued) as at 31 December 2007 Notes LIABILITIES Borrowings from State Bank of Vietnam ,172 22,966 Deposits and borrowings from other credit institutions 13 7,268, ,686 Deposits from other credit institutions 6,773, ,686 Borrowings from other credit institutions 495,255 - Customer deposits and other amounts due to customers 14 6,776,279 1,551,159 Derivative financial instruments Grants, entrusted investments and loans exposed to risks 15 11,164 16,191 Valuable papers issued by the Bank ,949 - Other liabilities 216,000 35,622 Accrued interest and fees payable ,127 9,498 Other liabilities and accruals ,782 26,124 Provision for contingent liabilities and off balance sheet commitments 8 1,091 - TOTAL LIABILITIES 14,694,917 1,923,624 OWNERS EQUITY Capital and reserves Chartered capital 2,300,000 1,131,951 Share premium 115,282 - Treasury shares (115,281) - Reserves 39,187 16,527 Retained earnings 140,012 41,796 TOTAL OWNERS EQUITY ,479,200 1,190,274 TOTAL LIABILITIES AND OWNERS EQUITY 17,174,117 3,113,898 OFF-BALANCE SHEET ITEM Contingent liabilities , ,996 Prepared by: Approved by: Approved by: Mr Bui Quoc Viet Mr Nguyen Cong Canh Mr Luu Duc Khanh Chief Accountant Deputy General Director General Director Ho Chi Minh City, Vietnam 26 March 2008 The attached notes from 1 to 36 form part of these financial statements 3

44 STATEMENT OF INCOME for the year ended 31 December 2007 Notes OPERATING INCOME Interest and similar income 20 1,102, ,271 Interest and similar expenses 21 (777,777) (74,669) NET INTEREST AND SIMILAR INCOME 324,363 75,602 Fees and commission income 15,274 9,758 Fees and commission expenses (9,687) (4,644) Net gain from fees and commission income 22 5,587 5,114 Net gain from dealing in foreign currencies 23 2, Net loss from dealing of trading securities 24 (12,936) - Net gain from dealing of investment securities , Other net operating (loss)/gain (27) 39,474 TOTAL OPERATING INCOME 421, ,647 OPERATING EXPENSES Payroll and other staff costs (49,909) (10,114) Depreciation and amortization charges (7,667) (663) Other operating expenses 26 (88,693) (15,637) TOTAL OPERATING EXPENSES (146,269) (26,414) NET OPERATING INCOME 275,276 94,233 Provision expense for credit losses 8 (44,510) (13,473) PROFIT BEFORE TAX 230,766 80,760 Current enterprise income tax expense 18.1 (69,017) (22,613) Deferred enterprise income tax Enterprise income tax expense (69,017) (22,613) NET PROFIT AFTER TAX 161,749 58,147 Basic earnings per share (VND) (par value of VND 10,000 per share) 27 1, Prepared by: Approved by: Approved by: Mr Bui Quoc Viet Mr Nguyen Cong Canh Mr Luu Duc Khanh Chief Accountant Deputy General Director General Director Ho Chi Minh City, Vietnam 26 March 2008 The attached notes from 1 to 36 form part of these financial statements 4 Báo cáo thường niên 2007

45 STATEMENT OF RETAINED EARNINGS for the year ended 31 December 2007 Notes RETAINED EARNINGS AT BEGINNING OF YEAR ,796 8,598 Net profit for the year 161,749 58,147 RETAINED EARNINGS BEFORE APPROPRIATIONS 203,545 66,745 Less: Transfer to create statutory reserves of prior year - (1,995) Transfer to temporarily create reserves of current year (23,453) (16,775) Dividends paid (19,488) (6,068) Transfer to increase the chartered capital (20,592) - Others - (111) RETAINED EARNINGS AT END OF YEAR ,012 41,796 Prepared by: Approved by: Approved by: Mr Bui Quoc Viet Mr Nguyen Cong Canh Mr Luu Duc Khanh Chief Accountant Deputy General Director General Director Ho Chi Minh City, Vietnam 26 March 2008 The attached notes from 1 to 36 form part of these financial statements 5

46 STATEMENT OF CASH FLOWS for the year ended 31 December 2007 Notes CASH FLOW FROM OPERATING ACTIVITIES Interest and similar receipts 835, ,142 Interest and similar payments (664,148) (68,408) Fees and commission receipts 5,587 5,114 Net gain from dealing in foreign currencies and investment securities 165, Other operating income (27) 39,474 Payments to employees and operating expenses (137,374) (25,500) Enterprise Income Tax paid 18.1 (36,518) (5,906) Net cash flow from operating profit before changes in operating assets and working capital 168,517 78,373 Changes in operating assets Increase in deposits with other credit institutions (2,997,660) (714,575) Increase in trading securities (2,775,316) (267,413) Increase in loans and advances to customers (5,727,204) (724,530) Bad debts written-off - (3) Increase in other operating assets (127,126) (23,453) Changes in operating liabilities Increase in borrowings from the SBV 194,206 (12,034) Increase in deposits and borrowings from other credit institutions 6,971,301 56,462 Increase in customer deposits 5,225,120 1,341,842 Decrease in grants, entrusted funds and loans exposed to risks (5,027) 16,191 Increase in derivative financial assets instruments Increase in other liabilities 236,906 6,284 Payments from reserves 19.1 (793) (2,324) Cash provided by(used in) operating activity 1,163,290 (245,180) CASH FLOW FROM INVESTING ACTIVITY Acquisition of fixed assets 10 (80,902) (5,500) Cash used in investing activities (80,902) (5,500) CASH FLOW FROM FINANCING ACTIVITIES Increase in chartered capital 1,262, ,583 Payment to buy Treasury shares (115,281) - Dividends paid 19.1 (19,488) (6,068) Others - (111) Net cash provided by financing activities 1,127, ,404 Net increase in cash and cash equivalents 2,210, ,724 Cash and cash equivalents at the beginning of the year , ,256 Cash and cash equivalents at the end of the year 28 3,068, ,980 The attached notes from 1 to 36 form part of these financial statements 6 Báo cáo thường niên 2007

47 STATEMENT OF CASH FLOWS for the year ended 31 December 2007 NON-CASH TRASACTIONS Notes Increase chartered capital from stock dividend ,592 - Increase chartered capital from share premium - 13,860 Increase chartered capital from supplementary capital reserve Prepared by: Approved by: Approved by: Mr Bui Quoc Viet Mr Nguyen Cong Canh Mr Luu Duc Khanh Chief Accountant Deputy General Director General Director Ho Chi Minh City, Vietnam 26 March 2008 The attached notes from 1 to 36 form part of these financial statements 7

48 NOTES TO THE FINANCIAL STATEMENTS as at and for the year ended 31 December CORPORATE INFORMATION An Binh Commercial Joint Stock Bank (herein referred to as the Bank ) is a Vietnamese joint stock commercial bank incorporated and registered in the Socialist Republic of Vietnam. Establishment and Operations The Bank operates under Banking License No. 0031/NH-GP dated 15 April 1993 granted by the State Bank of Vietnam, which is effective from 18 September 1997, for a period of 20 years. According to Decision No.1333 dated 07 September 2005 issued by the State Bank of Vietnam, the Bank was approved to transform to a commercial bank. As such, the Bank can carry out full banking activities which include mobilizing and receiving short term, medium term and long term deposits from various organizations and individuals lending short term, medium term and long term loans to various organizations and individuals up to the nature and ability of the Bank s capital resources; conducting foreign currency transactions; international commercial service, discounting of commercial notes, bonds and valued documents; providing settlement services between customers; and other banking services as approved by the State Bank of Vietnam. Chartered Capital Since the establishment, the share capital of the Bank has been increased as follows: Chartered capital has increased to (VNDm) Approval by SBV Date issued 1,200 Decision No 102/QD-NHNN5 21 March ,000 Decision No 986/NHTP October ,804 Decision No 494/NHTP May ,104 Decision No 1338/NHNN-HCM02 26 December ,544 Decision No 967/NHNN-HCM02 22 June ,000 Decision No 1513/NHNN-HCM02 13 July ,000 Decision No 677/NHNN-HCM02 02 June ,000 Decision No 1254/NHNN-HCM02 15 September ,131,951 Decision No 1517/NHNN-HCM02 6 November ,300,000 Decision No 863/NHNN-HCM02 13 June 2007 Board of Management The members of the Board of Management during the financial year 2007 and at the date of this report are as follows: Name Position Date of appointment Mr Vu Van Tien Chairman 22 March 2005 Mr Nguyen Hung Manh Vice Chairman 03 August 2005 Mr Dao Van Hung Vice Chairman 03 August 2005 Mr Duong Quang Thanh Member 03 August Báo cáo thường niên 2007

49 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December CORPORATE INFORMATION (continued) Board of Directors The members of the Board of Directors during the financial year 2007 and at the date of this report are as follows: Name Position Date of Appointment/ Resignation Mr Luu Duc Khanh General Director Appotinted on 19 January 2007 Mr Nguyen Hung Manh General Director Resigned on 19 January 2007 Mr Nguyen Cong Canh Deputy General Director Appointed on 12 April 2002 Ms Nguyen Thi Ngoc Mai Deputy General Director Appointed on 19 March 2007 Ms Tran Thanh Hoa Deputy General Director Appointed on 27 February 2007 Mr Pham Quoc Thanh Deputy General Director Appointed on 01 April 2007 Mr Bui Trung Kien Deputy General Director Appointed on 01 October 2007 Mr Ly Vinh Quang Deputy General Director Resigned on 01 April 2007 Mr Nguyen Hoai Anh Deputy General Director Resigned on 01 July 2007 Location and Networks The Head Office of the Bank is located at Cach Mang Thang Tam, District 3, Ho Chi Minh City, Vietnam. As at 31 December 2007, the Bank had one (1) Head Office, one (1) Main Transaction Center, five (5) branches and forty eight (48) transaction offices located in cities and provinces in Vietnam. Employees Total number of employees of the Bank as at 31 December 2007 was 1,123 (2006: 251). 2. SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis for preparation The financial statements of the Bank, which are expressed in millions of Vietnam Dong ( VNDm ), are prepared in accordance with the Vietnamese Accounting Standards and System for Credit Institutions required under Decision No. 16/2007/QD-NHNN dated 18 April 2007, Decision No. 29/2006/QD-NHNN dated 10 July 2006 and Decision No. 479/2004/QD-NHNN dated 29 April 2004 issued by the Governor of the State Bank of Vietnam and the Vietnamese Accounting Standards and related guidance issued by the Ministry of Finance as per: Decision No. 149/2001/QD-BTC dated 31 December 2001 on the Issuance and Promulgation of Four Vietnamese Standards on Accounting (Series 1); Decision No. 165/2002/QD-BTC dated 31 December 2002 on the Issuance and Promulgation of Six Vietnamese Standards on Accounting (Series 2); Decision No. 234/2003/QD-BTC dated 30 December 2003 on the Issuance and Promulgation of Six Vietnamese Standards on Accounting (Series 3); Decision No. 12/2005/QD-BTC dated 15 February 2005 on the Issuance and Promulgation of Six Vietnamese Standards on Accounting (Series 4); and Decision No. 100/2005/QD-BTC dated 28 December 2005 on the Issuance and Promulgation of Four Vietnamese Standards on Accounting (Series 5). 9

50 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (continued) 2.1 Basis for preparation (continued) Except that the Bank has not disclosed information and management policies about interest risk and liquidity risk as at 31 December 2007 since Article No 29 of Decision No 16/2007/QD-NHNN permits credit institutions to opt for disclosing such information in their financial statements from The accompanying financial statements have been prepared using accounting principles, procedures and reporting practices generally accepted in Vietnam. Accordingly, the accompanying balance sheet, the related statements of income, retained earnings, cash flows and the accompanying notes and their utilization are not designed for those who are not informed about the Vietnam s accounting principles, procedures and practices and furthermore are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries other than Vietnam. 2.2 Fiscal year The Bank s fiscal year starts on 1 January and ends on 31 December. 2.3 Loans and advances to customers Loans and advances to customers are stated at the outstanding principal amounts at the end of the financial year. 2.4 Provision for credit losses In accordance with the Law on Credit Institutions effective from 1 October 1998, Law on Amendment and Addition to a Number of Articles of the Law on Credit Institutions effective from 1 October 2004, Decision No 127/2005/QD-NHNN dated 3 February 2005, Decision No 493/2005/QD-NHNN dated 22 April 2005 and Decision No 18/2007/QD-NHNN dated 25 April 2007 issued by the State Bank of Vietnam, credit institutions are required to make loan classification and create provision for loan losses and use provisions to resolve credit risk in their operations. Accordingly, loans are graded using the following risk classifications: Current, Special Mention, Substandard, Doubtful and Loss based on the overdue status and other qualitative factors. Net loan and advance exposure for each individual customer is calculated by subtracting from the loan balance the related determined value of collateral assets which is subject to certain accepted discount rates in accordance with Decision No 493/2005/QD-NHNN. Specific provision is established based on the net loan and advance exposure for each individual customer using the prescribed provision rates applicable to that loan classification as follows: Group Category Specific provision rate 1 Current 0% 2 Special Mention 5% 3 Substandard 20% 4 Doubtful 50% 5 Loss 100% Loans classified as Substandard, Doubtful or Loss are considered non-performing. 10 Báo cáo thường niên 2007

51 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (continued) 2.4 Provision for credit losses (continued) According to Decision No 493/2005/QD-NHNN, a general provision is made for credit losses which are yet to be identified during the loan classification process and in making specific provision as well as in case of the Bank s potential financial difficulties due to deterioration in loan quality. Accordingly, within 5 years commencing from May 2005, the Bank is required to fully create and maintain a general provision at 0.75% of total of loans classified in groups 1 to 4 plus guarantees, irrevocable commitments and acceptance for payment. The Bank has made and maintained a general provision of 0.43% of total loan balance from group 1 to 4 plus guarantees, irrevocable commitments and acceptance for payment (equivalent to 57% of total required provision of 0.75%) as at 30 November These provisions are recorded as an expense in the statement of income and will be used to write off any bad loans incurred. According to Decision No 493/2005/QD-NHNN, the Bank shall establish the Risk Settlement Committee to write off bad loans if they are classified in Group 5 or if the corporate borrowers are liquidated or have bankruptcy, or if individual borrowers have deceased or are missing. 2.5 Investments in securities Trading securities Trading securities include securities which have been acquired principally for the purpose of selling or repurchasing in the near term and initially recognized at cost at the date of the transaction. They are subsequently measured at the lower of historical costs and market value, except for the case when the market value cannot be reliably justified then they are measured at cost less impairment, if any. Any impairment losses or decline in marketable value incurred are recognized in the statement of income Held-to-maturity securities Held-to-maturity securities include securities with fixed or determinable amount of repayment and fixed maturity date, and the Bank has intention and ability to hold these securities until maturity. Theses are initially recognized at face value. Differences between the purchase price including related expenses incurred to hold securities and the face value are recorded in the discount or premium accounts of the other assets or other liabilities and amortized to the statement of income over the remaining term of securities. Interest is accrued using straight-line method. Held-to-maturity securities are subject to review for impairment. Provision for impairment is made when the carrying value of the securities is lower than market value. Any impairment losses incurred are recognized in the statement of income Available-for-sale securities Available-for-sale securities include securities other than those classified in the above categories. These are initially recorded at face value. Differences between the purchase price including related expenses incurred to hold securities and the face value are recorded in the discount or premium accounts of other assets or other liabilities and amortized to the statement of income over the remaining term of securities. Available-for-sale securities are subject to review when its carrying value is lower than the market value. When the market cannot be reliably justified, then they are measured at cost less impairment, if any. Any impairment losses or decline in marketable value incurred are recognized as expense in the statement of income. 11

52 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (continued) 2.6 Repurchase and Reverse Repurchase Agreements Securities sold under agreements to repurchase at a specific date in the future (repos) are not derecognized from the balance sheet. The corresponding cash received is recognized in the balance sheet as a repurchase agreements (if any), reflecting its economic substance as a loan to the Bank. The difference between the sale price and repurchase price is treated as interest expense and is accrued over the life of the agreement using the interest rate stipulated in the contract. Conversely, securities purchased under agreements to resell at a specific date in the future (reverse repos) are not recognized in the balance sheet. The corresponding cash paid is recognized in the balance sheet as a reverse repurchase agreements (if any). The difference between the purchase price and resale price is treated as interest income and is accrued over the life of the agreement using the straight-line interest rate method. 2.7 Fixed assets Fixed assets are stated at cost less accumulated depreciation. The cost of an asset comprises of its purchase price plus any directly attributable costs of bringing the asset to working condition for its intended use. Expenditures for additions, improvements and renewals are capitalized and expenditures for maintenance and repairs are charged to the statement of income. When assets are sold or retired, their cost and accumulated depreciation are removed from the balance sheet and any gains or losses resulting from their disposal are posted to the statement of income. 2.8 Depreciation Depreciation of tangible fixed assets and amortization of intangible assets is calculated on a straight-line basis over the estimated useful lives of the assets, which are as follows: Building and structure Machines and equipment Transportation vehicles Office equipment Land use rights Accounting software years 5 years 5 years 5 years based on lease term 3 years 2.9 Revenue and expenditure recognition Interest income and expense are recognized in the statement of income on an accrual basis. Accrued interest is calculated and recorded in the statement of income for loans that their principal and interest are recoverable on due dates and not subject to specific provision. The recognition of interest income is suspended when loans become impaired and are required for specific provision. Accrued interest income of overdue and bad loans is recorded and monitored in the offbalance sheet until actually received. Fees and commissions are recognized on an accrual basis. Dividends received from investments are recognized in the statement of income when the Board of Management of the investees declare dividend. 12 Báo cáo thường niên 2007

53 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (continued) 2.10 Foreign currency transactions According to the chart of accounts for banks, the Bank maintains its accounting system and records all transactions in original currencies. Monetary assets and liabilities denominated in foreign currencies at year-end are re-translated into VND using ruling exchange rates at the balance sheet date (see list of exchange rates of applicable foreign currencies against VND as at 31 December in Note 36). Income and expenses arising in foreign currencies during the year are converted into VND at rates prevailing at the transaction dates. Exchange differences of the re-translation of monetary assets and liabilities at the balance sheet date are recognized in the statement of income Enterprise income tax Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted as at the balance sheet date. Deferred tax Deferred tax is provided using the balance sheet liability method on temporary differences between the tax base of assets and liabilities and their carrying amount for financial reporting purpose at the balance sheet date. Deferred tax liabilities are recognized for all taxable temporary differences, except: where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects neither the accounting profit nor taxable profit or loss. Deferred tax assets are recognized for all deductible temporary differences to the extent that it is probable that future taxable profits will be available against which these differences can be utilized, except: where the deferred tax arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects neither the accounting profit nor taxable profit or loss. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Unrecognized deferred income tax assets are reassessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset realized or the liability is settled based on tax rates and tax laws that have been enacted at the balance sheet date. Deferred tax is charged or credited to the income statement, except when it relates to items recognized directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxable entity and the same taxation authority and the Bank intends to settle its current tax assets and liabilities on a net basis. 13

54 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (continued) 2.12 Cash and cash equivalents Cash and cash equivalents consist of cash on hand, balances with SBV, Treasury notes, and short-term valuable papers which can be rediscounted, short-term investments with maturity of less than 3 months from the purchase date, balances with other credit institutions with maturity of less than 3 months from the transaction date Offsetting Financial assets and financial liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a currently enforceable legal right to offset the recognized amounts and there is an intention to settle on a net basis, or to realize the asset and settle the liability simultaneously Use of estimates The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities. These estimates and assumptions also affect the income and expenses and the resultant provisions. Such estimates are necessarily based on assumptions involving varying degrees of subjectivity and uncertainty and actual results may differ resulting in future changes in such provisions Employee benefits Post employment benefits Post employment benefits are paid to retired employees of the Bank by the Social Insurance Agency which belongs to the Ministry of Labor and Social Affairs. The Bank is required to contribute to these post employment benefits by paying social insurance premium to the Social Insurance Agency at the rate of 15% of employee basic salaries on a monthly basis. The Bank has no further obligation to fund the post employment benefits of its employees. Voluntary resignation and retrenchment benefits Voluntary resignation benefits: The Bank has the obligation, under Section 42 of the Labor Code amended 29 November 2006, to pay allowance to voluntarily resigning employees, equal to half of one-month s wages for each year of employment plus wage allowances (if any). Retrenchment benefits: The Bank has the obligation, under Section 17 of the Labor Code, to pay allowance to employees who are retrenched as a result of organizational restructuring or technological changes. In such case, the Bank shall pay to employees an allowance for loss of work equivalent to the aggregate amount of one month s wages for each year of employment, but no less than two months wages. Although the obligations under Sections 17 and 42 are compulsory, the implementation of these Sections is subject to detailed guidance as issued by the Ministry of Finance in implementing circulars. In accordance with Circular 64/1999/ TT-BTC dated 7 June 1999 and after that Circular 82/2003/TT-BTC dated 14 August 2003 by the Ministry of Finance which superseded Circular 64/1999/TT-BTC, banks are required to calculate retrenchment allowance from 1.00% to 3.00% p.a. on the basis salary of the employees; and the outstanding balance of employee termination reserve which was previously created at 10% from the profit after tax and after appropriation of supplementary capital reserve in accordance with the guidance of Circular 64/1999/TT-BTC should be transferred to retrenchment allowance as allowed under Circular 82/2003/TT-BTC. In 2007, the Bank has recorded a provision for voluntary resignation benefits in compliance with Article 42 of Labor Code. 14 Báo cáo thường niên 2007

55 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December SIGNIFICANT ACCOUNTING POLICIES (continued) 2.16 Operating lease payments Operating lease payments are charged to statement of income on a straight-line method over the lease term. 3. CASH ON HAND Cash on hand in VND 131,584 27,654 Cash on hand in foreign currencies ( FC ) 18,167 5,535 Monetary ,751 33, BALANCES WITH THE STATE BANK OF VIETNAM Current account 365,006 31,323 Blocked account ,006 31,323 Balances with the State Bank of Vietnam include settlement and clearing deposits and compulsory deposits. Only compulsory deposits in VND and settlement deposits in foreign currencies bear interests at a rate of 1.20% p.a. and 1.00% p.a., respectively. Under regulations of the SBV, the Bank is required to maintain certain cash reserves with the SBV in the form of compulsory deposits, which are computed at 10.00% and 4.00% (2006: 5.00% and 2.00%) of customer deposits in VND with original terms of less than 12 months and from 12 months to 24 months, respectively; and 10.00% and 4.00% (2006: 8.00% and 2.00%) of customer deposits in foreign currencies with original maturities of less than 12 months and from 12 months to 24 months, respectively. The Bank has complied with the SBV regulations on compulsory deposits during the year. 15

56 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December DEPOSITS WITH OTHER CREDIT INSTITUTIONS (restated) Demand deposits at other credit institutions 202,467 84,324 Term deposits at other credit institutions 5,441,399 1,451,763 5,643,866 1,536, Demand deposits at other credit institutions Demand deposits in VND at local credit institutions 169,179 82,487 Demand deposits in FC at local credit institutions 33,288 1, ,467 84, Term deposits at other credit institutions (restated) Term deposits with other credit institutions of less than 3 months Term deposits in VND at local credit institutions 1,685, ,000 Term deposits in FC at local credit institutions 16,114 18,138 Included in cash and cash equivalents (Note 28) 1,701, ,138 Term deposits with other credit institutions of more than 3 months Term deposits in VND at local credit institutions 3,700, ,625 Term deposits in FC at local credit institutions 40,285-3,740, ,625 5,441,399 1,451, Báo cáo thường niên 2007

57 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December TRADING SECURITIES Investments in trading securities as at 31 December include: Equity securities Securities issued by other local credit institutions TCKT 48,455 - Provision for impairment of trading securities (12,936) - 35,519 - Details of trading securities were as follows:: Equity securities Listed 48, LOANS AND ADVANCES TO CUSTOMERS Loans to local economic entities and individuals 6,590, ,826 Loans for discounted commercial notes and valuable papers 92,723 11,145 Loans from grants and entrusted funds 175, ,959 6,858,134 1,130,930 Year-end interest rates of loans and advances to customers were as follows: Interest rate Interest rate per annum (%) per annum (%) Loans denominated in VND 12.24% % 12.00% % Loans denominated in FC 5.69% % 6.60% % 17

58 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December LOANS AND ADVANCES TO CUSTOMERS (continued) 7.1. Analysis of loan portfolio by quality Current 6,696,412 1,072,718 Special mention 58,418 27,645 Substandard 19,888 9,796 Doubtful 30,079 20,621 Loss 53, ,858,134 1,130, Analysis of loan portfolio by original term Short-term loans 3,580, ,939 Medium-term loans 1,763, ,283 Long-term loans 1,514,512 65,708 6,858,134 1,130, Analysis of loan portfolio by type of business entity The details of the Bank s loan portfolio by type of business entity as at year end follow: VNDm % VNDm % Loans to economic entities State-owned enterprises 331, , Other enterprises 3,879, ,129, ,210, ,130, Loans to individuals 2,647, ,858, ,130, Báo cáo thường niên 2007

59 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December LOANS AND ADVANCES TO CUSTOMERS (continued) 7.4. Analysis of loan portfolio by type of industrial sectors VNDm % VNDm % Wholesale and retail trade; repair of motor vehicles, motor cycles and personal goods 2,959, , Community, social and personal service activities 2,376, Manufacturing and processing 827, , Construction 429, , Financial services 197, Agricultural and forestry 46, , Mining and quarrying 21, Transport, storage and communications , Others , ,858, ,130, PROVISION FOR CREDIT LOSSES Provisions for credit losses were as follows: Provisions for credit losses Specific provision 35,277 11,717 General provision 22,572 2,713 57,849 14,430 General provision for off balance sheet commitments 1,091-58,940 14,430 Movements in provision for credit losses in current year were as follows: Specific General provision provision Total VNDm Beginning balance 11,717 2,713 14,430 Provisions made for the year 31,430 23,165 54,595 Reversal of provisions during the year (7,870) (2,215) (10,085) Ending balance 35,277 23,663 58,940 19

60 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December PROVISION FOR CREDIT LOSSES (continued) The Bank has classified its loans and advances to customers in accordance with Decision No 493/2005/QD-NHNN, Decision No 18/2007/QD-NHNN and its Policy on Loan Classification and Loan Loss Provisions. According to Decision No 493/2005/QD-NHNN, provision for credit losses as at 31 December 2007 were made based on the classification of outstanding loan balances and the guarantees in off balance sheet items as at 30 November Status of provision for credit losses as at 30 November 2007 was as follows: Loan classification Loan balance as at 30 November 2007 VNDm Specific provision VNDm General provision VNDm Total VNDm Current 5,185,585-38,892 38,892 Special mention 70,444 1, ,928 Substandard 24,720 1, ,672 Doubtful 26,130 6, ,332 Loss 59,066 26,255-26,255 5,365,945 35,277 39,802 75,079 Off balance sheet commitments 256,398-1,923 1,923 35,277 41,725 77,002 Status of provision for credit losses as at 30 November 2007 was as follows: Provision for credit losses Specific provision VNDm General provision for credit VNDm General provision for off balance sheet commitments VNDm Total VNDm Provision required by SBV Decision No ,277 39,802 1,923 77,002 Provision recorded by the Bank 35,277 22,572 1,091 58,940 Amount under-provided - 17, ,062 In 2007, the Bank has made specific provision for credit losses adequately. General provision was not made adequately by VNDm 18,062 as at 30 November However, Decision No 493 permits the Bank make adequate general provision for credit losses within five (5) years from the effective date of this Decision (May 2005). 20 Báo cáo thường niên 2007

61 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December INVESTMENT SECURITIES Available-for-sale securities 1,098, ,825 Debt securities 650,000 - Securities issued by Government 650,000 - Equity securities 448, ,825 Equity securities issued by other local credit institutions 7,500 - Equity securities issued by local economic entities 441, ,825 Held-to-maturity securities 2,560, ,611 Securities issued by Government 782, Debt securities issued by other local credit institutions 820, ,431 Debt securities issued by local economic entities 957,187 95,130 3,659, , Available-for-sale securities Details of equity securities held by the Bank as at 31 December were as follows: 2007 (VNDm) 2006 (VNDm) Cost % owned by the bank Cost % owned by the bank Investment in credit institutions Hanoi Building Commercial Joint Stock Bank 7, Investment in business entities G.E.L.E.X.I.M.C.O 1 Joint Stock Company 150, CMC Corporation Joint Stock Company 100, Vina Payment Network Joint Stock Company 61, An Hoa Paper Joint Stock Company 60, An Binh Securities Joint Stock Company 37, , EVN-Cambodia Joint Stock Company 28, An Binh Investment Fund Management Joint Stock Company 2, Smartlink Card Joint Stock Company 2, Hai Phong Thermo-Electric Joint Stock Company , , , , ,825 21

62 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December INVESTMENT SECURITIES (continued) 9.2 Held-to-maturity securities 2007 (VNDm) 2006 (VNDm) Face value Carrying value Face value Carrying value Bonds issued by the government Government bonds 642, , Municipal bonds issued by People s Committee of Ho Chi Minh City 142, , , ,926 Bonds for construction of the Capital Debt securities issued by other local credit institutions and economic entities Bonds issued by Vietnam Shipbuilding Industry Corporation (VINASHIN) 520, ,445 95,130 95,130 Bonds issued by Vietnam Technological and Commercial Joint Stock Bank 300, , Bonds issued by Asia Commercial Joint Stock Bank 300, , Vinacomin Bonds 180, , Bonds issued by Electricity of Vietnam Corporation (EVN) 163, , Bonds issued by Housing Bank of Mekong Delta 120, , Bonds issued by Petro Vietnam Finance Company (PVFC) 100, , Vincom Bonds 50,000 50, Bonds issued by Vietnam Steel Corporation 50,000 51, ,569,033 2,560, , ,611 Details of these bonds as at 31 December 2007 are as follows: Carrying value Term (year) Interest rate (% p.a) Interest payment Government bonds 642,800 5 and Annually Municipal bonds issued by People s Committee of Ho Chi Minh City 142,728 5 and Annually Bonds for construction of the Capital Annually Bonds issued by Vietnam Shipbuilding Industry Corporation (VINASHIN) 513, Annually Bonds issued by Vietnam Technological and Commercial Joint Stock Bank 300, Annually Bonds issued by Asia Commercial Joint Stock Bank 300, Annually Vinacomin Bonds 180, Annually Bonds issued by Electricity Corporation of Vietnam (EVN) 162, Annually Bonds issued by Housing Bank of Mekong Delta 119, Annually Bonds issued by Petro Vietnam Finance Company (PVFC) 100, Annually Vincom Bonds 50, Annually Bonds issued by Vietnam Steel Corporation 51, Annually 22 Báo cáo thường niên 2007

63 10. FIXED ASSETS NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December Tangible fixed assets Movements in tangible fixed assets for the year ended 31 December 2007 were as follows: Buildings & structure Machines & equipment Transportation vehicles Other tangible fixed assets Total VNDm Cost Opening balance 1,627 1,214 4, ,627 Newly-purchase during the year 4,454 34,211 21,338 1,611 61,614 Transfered from the CIP Disposals (32) - (100) - (132) Reclassify (180) (107) - Closing balance 6,218 35,659 25,433 1,915 69,225 Accumulated depreciation Opening balance Charge for the year 774 3,478 1, ,365 Disposals (5) - (82) - (87) Reclassify 47 (176) Closing balance 1,019 3,662 2, ,241 Net carrying value Opening balance 1, , ,664 Closing balance 5,199 31,997 23,221 1,567 61, Intangible fixed assets Land use rights VNDm Accounting software VNDm Other intangible fixed assets VNDm Total VNDm Increase during the year 12,053 6, ,172 Charge for the year ,283 Net carrying value 11,914 5, ,889 23

64 11. OTHER ASSETS NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December 2007 (restated ) Construction in progress 6, Other receivables (Note 11.1) 129,355 23, ,478 24,131 Accrued interest and fees receivable (Note 11.2) 286,985 20,318 Other assets (Note 11.3) 18,023 2, ,486 46, Other receivables (restated ) Deposits, mortgage and pledge 98,655 11,753 Advances for operating activities 19,687 5,638 VAT deductible - 53 Other receivables 11,013 6, ,355 23,615 Deposits, mortgage and pledge as at 31 December 2007 include a deposit amount of VNDm 84,000 for purchase of land with total value of VNDm 363,518 as per Contract No. 01/HD.DTBDS.2007 signed on 21 December According to the contract s terms and conditions, all deposit amounts will be refunded to the Bank in the case that the seller cannot complete the procedures of transfer of the land ownership to the Bank. In February 2008, the Bank received a substantial portion of deposit of VNDm 76,000 due to the procedures of transfer of the ownership was not yet completed in the term as mention in the Contract Accrued interest and fees receivable (restated ) Accrued interest from held-to-maturity securities 133,834 5,354 Accrued interest from deposits at credit institutions 116,271 10,572 Accrued interest from loans and advances to customers 36,824 4,392 Fees receivable ,985 20, Báo cáo thường niên 2007

65 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December OTHER ASSETS (continued) Other assets (restated ) Prepaid and deferred expenses 17,363 2,060 Materials Other assets ,023 2, BORROWINGS FROM THE STATE BANK OF VIETNAM Discounts and rediscounts of valuable papers 217,172 22,966 Borrowings from the State Bank of Vietnam represent borrowings for discounts and rediscounts of valuable papers. These borrowings have a term of less than 365 days and bear the interest rates from 4.5% p.a to 8.00% p.a. As at 31 December 2007, the Government Bonds of VNDm 231,404 were mortgaged at State Bank of Vietnam for these borrowings. 13. DEPOSITS AND BORROWINGS FROM OTHER CREDIT INSTITUTIONS Demand deposits from other credit institutions 6 - Term deposits and borrowings from other credit institutions 6,773, ,686 Borrowings for discounts and rediscounts of valuable papers 495,255-7,268, ,686 25

66 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December DEPOSITS AND BORROWINGS FROM OTHER CREDIT INSTITUTIONS (continued) Details of deposits and borrowings from other credit institutions were as follows: Term deposits of less than 3 months by other credit institutions Term deposits in VND by local credit institutions 1,770, ,967 Term deposits in FC by local credit institutions 188,050 24,719 1,958, ,686 Term deposits of more than 3 months by othercredit institutions Term deposits in VND by local credit institutions 4,685,000 30,000 Term deposits in FC by local credit institutions 130,676-4,815,676 30,000 6,773, ,686 Average interest rates of term deposits as at 31 December were as follows: Interest rate% % per annum per annum Interest rate Term deposits in VND by local credit institutions 8.31% 7.80% Term deposits in FC by local credit institutions 5.14% 5.40% Borrowing in VND by local credit institutions 7.00% CUSTOMER DEPOSITS AND OTHER AMOUNTS DUE TO COSTOMERS Balances by type of deposits (restated ) Demand deposits Demand deposits in VND 2,375, ,356 Demand saving deposits in VND 13,342 12,062 Demand deposits in FC 92,343 2,228 Demand saving deposits in FC 2,043 1,634 Term deposits Term deposits in VND 3,134, ,312 Term saving deposits in VND 913, ,292 Term saving deposits in FC 190,738 28,005 Margin deposits Margin deposits in VND 30,809 2,832 Margin deposits in FC 23,925 - Deposit for specific purpose Deposit for specific purpose in VND Deposit for specific purpose in FC - 2,792 6,776,279 1,551, Báo cáo thường niên 2007

67 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December CUSTOMER DEPOSITS AND OTHER AMOUNTS DUE TO COSTOMERS (continued) Average interest rates as at 31 December 2007 applicable to customer deposits were as follows: Interest rate% % per annum per annum Interest rate Demand deposits in VND 2.40% 3.60% Demand deposits in FC 1.50% 1.20% Demand saving deposits in VND 3.00% 3.60% Demand saving deposits in FC 1.50% 1.50% Term deposits in VND 8.40% 8.28% Term saving deposits in FC 5.23% 5.10% Analysis of customer deposit portfolio by types of customers Deposits from economic entities State-owned enterprises 3,466, ,548 Non-state owned enterprises and others 1,673, ,539 Foreign-invested enterprises 236, ,658 5,376,581 1,298,745 Deposits from individuals 1,384, ,299 Other deposits 15, ,776,279 1,551, GRANTS, ENTRUSTED INVESTMENTS AND LOANS EXPOSED TO RISKS (restated ) Financing capital from local organizations in VND - 4,625 Financing capital from oversea organizations in FC 11,164 11,566 11,164 16,191 Funds received from overseas organizations in VND are trusted funds from Asia Development Bank through the State Bank of Vietnam for the finance of Rural Financial Project Phase II. These borrowings have term of 12, 24, 36 and 48 months and bear the interest rate of 8.28% p.a (2006: 8.28% p.a). 27

68 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December VALUABLE PAPERS ISSUED BY THE BANK Certificates of deposits (a) Bills (b) (a) (b) Certificates of deposits have terms ranging from 3 months to 11 months and bear interest at rates ranging from 5.10% to 5.60% p.a (2006: none). Co câ n ghi ro la bă ng ngoa i tê như ba n tiê ng Viê t hay ko These represent the bills in USD having terms ranging from 6 months to 11 months and bear interest at rates ranging from 5.00% to 5.20% p.a. 17. OTHER LIABILITIES (restated) Accrued interest and fees payable (Note 17.1) 123,127 9,498 Other payables and liabilities (Note 17.2) 91,782 26,124 General provision for off balance sheet commitments (Note 8) 1, ,000 35, Accrued interest and fees payable (restated) Accrued interest payable on deposits in VND 77,310 6,788 Accrued interest payable on deposits in FC 1, Accrued interest payable on saving deposits in VND 27,552 1,696 Accrued interest payable on saving deposits in FC 2, Accrued interest payable on borrowings in VND 12, Accrued interest payable on valuable papers in FC 1,851 - Accrued interest payable on entrusted funds in VND Accrued interest payable on forward contracts ,127 9, Báo cáo thường niên 2007

69 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December OTHER LIABILITIES (continued) 17.2 Other payables and liabilities (restated) Enterprise income tax payable 51,752 19,253 Unearned revenue 24,560 - Payables to employees 1, VAT paybles 305 4,995 Provision for severance allowance Other payables 13,207 1,492 91,782 26, STATUTORY OBLIGATIONS Balance as at 1 January 2007 VNDm Amounts incurred during the period Payable Paid Balance as at 31 December2007 VNDm Value Added Tax 4,995 3,360 8, Enterprise Income Tax 19,253 69,017 36,518 51,752 Other taxes Other payables and fees ,248 72,806 44,997 52,057 Enterprise Income Tax The Bank has the obligation to pay enterprise income tax ( EIT ) at a rate of 28% of taxable profit. The Bank s tax returns are subject to examination by the tax authorities. Because the application of tax laws and regulations to many types of transactions is susceptible to varying interpretations, the amounts reported in the financial statements could be changed at a later date upon final determination by the tax authorities. 29

70 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December STATUTORY OBLIGATIONS (continued) 18.1 Current EIT The current EIT payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of income because it excludes items of income or expense that are taxable or deductible in other years due to the difference between accounting and tax regulations and it further excludes items that are never taxable or deductible. The Bank s liability for current EIT is calculated using tax rates that have been enacted by the balance sheet date. Current EIT expense for the year was calculated as follows: Profit before tax 230,766 80,760 Add: Additional tax and administration fines paid Expenses not related to taxable revenue and income 1,458 - Allowance for the Board of Management 1,630 - Unrealised foreign exchange loss 1,235 - Taxable profit 235,599 80,760 EIT expense at rate of 28% 65,968 22,613 Addtitional tax to be paid as per tax finalisation 3,049 - EIT expense for the year 69,017 22, Deferred tax There was no deferred tax recognized in the financial statements for the year ended 31 December 2007 since there were no temporary differences between the carrying value and the tax base of assets and liabilities. 30 Báo cáo thường niên 2007

71 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December CAPITAL AND RESERVES Statement of changes in owners equity Chartered capital VNDm Share premium VNDm Treasury shares VNDm Bonus and welfare fund VNDm Financial reserve VNDm Supplementary capital reserve VNDm Other reserves VNDm Retained earnings VNDm Total VNDm Opening balance 1,131, ,703 6,912 2,954 3,958 41,796 1,190,274 Increase during the year Capital increase during the year 1,168, , (20,592) 1,262,739 Net profit for the year , ,749 Transfer to temporarily create reserves of current year ,366 8,087 - (23,453) - Decrease during the year Utilization during the year (793) (793) Purchase of treasury shares - - (115,281) (115,281) Dividends paid (19,488) (19,488) Closing balance 2,300, ,282 (115,281) 1,910 22,278 11,041 3, ,012 2,479,200 The Bank has created financial reserve and supplemetal capital reverse from net profit after tax for the year The establishment of other reserves shall be made in accordance with the approval by the shareholders at the Annual General Meeting of Shareholders of the Bank. 31

72 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December CAPITAL AND RESERVES (continued) Statement of changes in owners equity (continued) Details of the increase in Bank s chartered capital during 2007 were as follows: Decision No. VNDm Method of capital contribution Increase chartered capital 863/NHNN-HCM02 1,168,049 Dividend of the year 2006 and issuance of new shares for local shareholders Details of the Bank s chartered capital were as follows: Total 2007 (VNDm) 2006 (VNDm) Ordinary shares Preferred share Total Ordinary shares Preferred shares Charted capital 2,300,000 2,300,000-1,131,951 1,131,951 - Share premium 115, , Treasury shares (115,281) (115,281) ,300,001 2,300,001-1,131,951 1,131,951 - Details of the Bank s shareholders were as follows: No. of shares Value VNDm Owner - ship No. of shares Value VNDm Owner - ship Electricity of Vietnam Corporation 69,687, , % 32,601, , % Hanoi General Import-Export Joint Stock Company (Gllexinuco GELEXIMCO) 26,883, , % 8,265,760 82, % Other shareholders 133,428,216 1,334, % 72,328, , % 230,000,000 2,300, % 113,195,050 1,131, % Details of the Bank s shares were as follows: No.of shares (unit) Value VNDm No.of shares (unit) Number of authorised shares 230,000,000 2,300,000 9,669,505 Number of issued shares 230,000,000 2,415,282 9,669,505 Ordinary shares 230,000,000 2,415,282 9,669,505 Number of treasury shares 2,421, ,281 - Ordinary shares 2,421, ,281 - Number of outstanding shares 227,578,527 2,300,001 11,319,505 Ordinary shares 227,578,527 2,300,001 11,319,505 Face value of outstanding shares (VND) 10, , Báo cáo thường niên 2007

73 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December CAPITAL AND RESERVES (continued) Statement of changes in owners equity (continued) According to Decision No. 2168/QD-NHNN issued by the State Bank of Vietnam on 18 September 2007, the Bank changed its share s face value from VND 100,000 per share to VND 10,000 per share. In 2007, the Bank has used fully its share premium to re-purchase the issued shares of 2,421,473 units at VND 47,608/ share from An Binh Securities Joint Stock Company as treasury shares based on Resolution No. 260/QD-HDQT.07 of the Board of Management dated 14 December 2007 and Contract No. 01/HD.CPQ.07 dated 27 December The Bank has also increased its chartered capital from VNDm 1,131,951 to VNDm 2,300,000 in November 2007 upon receipt of approval from the Department of Planning and Investment of Ho Chi Minh City, State Securities Commission and State Bank of Vietnam Statutory reserves The Government issued Decree 146/2005/ND-CP dated on 23 November 2005 regarding the financial management of credit institutions which is effective from 16 December According to Decree No 146, commercial joint-stock banks should establish their statutory reserves based on percentage of after-tax profits as follows. Annual allocation from net profit after tax Maximum balance Supplementary capital reserve 5% of net profit after tax Chartered capital The following reserves are calculated based on net profit after tax and after making the supplementary capital reserve, i.e. the remaining profit: Annual allocation from net profit after tax Maximum balance Financial risk reserve 10% of remaining profit 25% chartered capital Welfare and bonus fund Other funds Subject to resolution of the Board of Management of the Bank Subject to resolution of the Board of Management of the Bank Not applicable Not applicable The utilization of these reserves is made in accordance with Decree

74 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December INTEREST AND SIMILAR INCOME (restated) Interest income from loans and advances to customers 689,488 99,300 Interest income from deposits at other credit institutions 283,022 40,456 Interest income from investment securities 127,799 10,515 Other fees from credit activities 1,831-1,102, , INTEREST AND SIMILAR EXPENSES (restated) Interest expense from customer deposits 757,879 71,169 Interest expense from borrowings 16,728 1,905 Interest expense from valuable papers issued by the Bank 2,787 - Other expense from credit activities 383 1, ,777 74, NET GAIN FROM FEES AND COMMISSION INCOME (restated) Fees and commission income from: Settlement services 4, Guarantee activities 3, Other fees and commissions 6,557 8,584 15,274 9,758 Fees and commission expense (9,687) (4,644) 5,587 5, Báo cáo thường niên 2007

75 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December NET GAIN FROM DEALING IN FOREIGN CURRENCIES Gain from foreign exchange dealing Income from spot foreign exchange 26,604 2,039 Income from gold trading 11 - Income from derivatives 90-26,705 2,039 Loss from foreign exchange dealing Expense from spot foreign exchange (23,787) (1,794) Expense from derivatives (403) - (24,190) (1,794) Net gain from forign exchange dealing 2, NET LOSS FROM TRADING SECURITIES Provision for impairment of trading securities (12,936) NET GAIN FROM DEALING IN INVESTMENT SECURITIES Income from dealing in investment securities 102, Net gain from dealing in investment securities included the following significant transactions: - The Bank has sold 1,000,000 shares of An Binh Securities Joint Stock Company ( ABS ), a related party, to Hanoi General Import-Export Joint Stock Company ( Geleximco ), the Bank s key shareholder. The net gain from this transaction was VNDm 69, The Bank has sold all 625,000 shares of Bach Viet Technology and Investment Joint Stock Company to An Binh Securities Joint Stock Company. The net gain from this transaction was VNDm 31,

76 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December OTHER OPERATING EXPENSES (restated) General and administration expenses 44,537 8,046 Publication, marketing and promotion expenses 14,311 2,744 Tool and equipment expenses 11,112 2,185 Materials for banking activities 5, Business trip expenses 3, Repair and maintenance expenses 2, Telecommunication expenses 2, Training expenses 1, Insurance for customer deposits 1, Other taxes and fees expense Insurance for assets of the Bank Office rental ,693 15, BASIC EARNINGS PER SHARE Net profit after tax 161,749 58,147 Weighted average number of outstanding shares during the year 132,709,243 5,988,363 Basic earnings per share (VND), (face value of VND 10,000 per share) 1, Net profit after tax used for calculation of basic earnings per share does not exclude bonus and welfare funds, and other reserves which will be made in accordance with the Bank s policy. 28. CASH AND CASH EQUIVALENTS Cash and cash equivalents included in the statement of cash flows comprise the following amounts on the balance sheet: (restated) Cash and cash equivalents on hand 149,751 33,195 Current account with the SBV 365,006 31,323 Current account with other credit institutions 202,467 84,324 Term deposits with other credit institutions with term of less than 90 days 1,701, ,138 Treasury notes 650,000-3,068, , Báo cáo thường niên 2007

77 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December EMPLOYEE BENEFITS I. TOTAL NUMBER OF EMPLOYEES (persons) 1, II. EMPLOYEES INCOME (VNDm) 1. Total salary fund 35,598 10, Bonus 3,078 1, Total income (1+2) 38,676 11, Average monthly salary 2,64 2,73 5. Average monthly income 2,87 3, TYPE AND VALUE OF COLLATERAL ASSETS Book value (VNDm) Real estates 9,544,507 1,232,215 Movable assets 88,330 75,836 Valuable papers 294,611 41,673 Other secured assets 224, ,152,134 1,350, CONTINGENT LIABILITIES AND COMMITMENTS In the normal course of business, the Bank is a party to financial instruments with items that are recorded off-balance sheet. These financial instruments mainly comprise financial guarantees and commercial letters of credit ( L/C ). These instruments involve elements of credit risk in excess of the amounts recognized in the balance sheet. Credit risk for off-balance sheet financial instruments is defined as the possibility of sustaining a loss because any other party to a financial instrument fails to perform in accordance with the terms of the contract. Financial guarantees are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party including guarantee for borrowings, settlement, performing contracts and bidding. The credit risk involved in issuing guarantees is essentially the same as that involved in extending facilities to other customers. Commercial at sight letters of credit represent a financing transaction by the Bank to its customer where the customer is usually the buyer/importer of goods and the beneficiary is typically the seller/exporter. Credit risk is limited as the merchandise shipped serves as collateral for the transaction. Deferred payment letters of credits represent the amounts at risk should the contract be fully drawn upon and the client defaults in repayment to the beneficiary. Deferred payment letters of credit that were defaulted by clients are recognized by the Bank as granting of a compulsory loan with a corresponding liability representing the financial obligation of the Bank to pay the beneficiaries and to fulfill the guarantor obligation. 37

78 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December CONTINGENT LIABILITIES AND COMMITMENTS (continued) The Bank requires margin deposits to support credit-related financial instruments when it is deemed necessary. The margin deposit required varies from nil to 100% of the value of a commitment granted, depending on the creditworthiness of clients as assessed by the Bank. The outstanding commitments and contingent liabilities as at 31 December were as follows: Payment guarantee 71,004 85,231 Performance guarantee 100,057 82,183 Bidding guarantee 25,299 21,231 Letter of Credit 282, ,090 Other guarantee 41,082 26,878 Other commitments 60,390 10, , ,828 Less margin deposits (54,734) (2,832) Contingent liabilities 526, , RELATED PARTY TRANSACTIONS Related party transactions are the transactions exercised with the Bank s related parties. One party is considered as a related party to the Bank: (a) once that party directly, or indirectly controls via one or more intermediary parties if: The party controls, is controlled, or is subject to the overall control exerted by the Bank, including parent company, subsidiaries; The party has capital contributed to the Bank and, as a result, exerts its significant influence on the Bank; The party jointly controls the Bank; (b) (c) (d) (e) The related party is a joint venture to which the Bank is a party; The related party has members who are key personnel in the Bank s management or in its parent company; The related party is a family member of any individual as mentioned in items (a) or (c); and The related party is bank that that is directly or indirectly subject to the control, joint control, or is subject to significant influence, or has voting right held by any individual as mentioned in items (c) or (d). 38 Báo cáo thường niên 2007

79 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December RELATED PARTY TRANSACTIONS (continued) Significant transactions with related party during the year were as follows: Related party Relationship Transaction 2007 VNDm Electricity of Vietnam Corporation ( EVN ) Key shareholder Capital contribution to the Bank 405,000 Current account 24,857,714 Term deposit 3,512,368 Geleximco Co. Ltd ( Geleximco ) Key shareholder Capital contribution to the Bank 223,288 Sell shares of ABS to Geleximco 84,000 Income from selling shares of ABS 69,909 Current account 1,499,757 G.E.L.E.X.I.M.C.O 1 Joint Stock Company ( Geleximco 1 ) An Binh Securities Joint Stock Company ( ABS ) CMC Corporation Joint Stock Company ( CMC ) An Binh Investment Fund Management Joint Stock Company ( ABF ) Investee Capital contribution to Geleximco 1 150,000 Investee Capital contribution to ABS 46,150 Purchase treasury shares of the Bank from ABS Sell shares of Bach Viet Investment and Techonology Joint Stock Company to ABS 125,000 Income from selling Bach Viet s shares 31,250 Current account 822,721 Investee Capital contribution to CMC 100,080 Current account 750,354 Investee Capital contribution to ABF 2,080 Mr Vu Van Tien Chairman Deposit for land purchase (Note 11.1) Deposit 84, ,252 Mr Dao Manh Khang Ms Nguyen Thi Ngoc Mai Member of the Audit Committee Deputy General Director Deposit 300,138 Deposit 16,973 Mr Dao Van Hung Vice Chairman Deposit 5,911 Mr Duong Quang Thanh Member of BOM Deposit 301 Mr Vo Hong Linh Member of the Audit Committee Deposit

80 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December RELATED PARTY TRANSACTIONS (continued) Details of receivables and payables with the related parties as at 31 December 2007 were as follows: Related party Relationship Transaction Receivable/ (Payable) VNDm Electricity of Vietnam Corporation ( EVN ) Key shareholder Current account (973,273) Deposits with term from 1 to 12 months and interest rate ranging from 6.60% to 8.16% p.a (2,450,300) Geleximco Co. Ltd ( Geleximco ) Thang Long Securities Company, Ltd An Binh Securities Joint Stock Company ( ABS ) CMC Corporation Joint Stock Company ( CMC ) Key shareholder Current account (156,496) Key Shareholder Current account (151) Deposit with term of 15 days (60,000) and interest rate of 8.7% p.a Investee Current account (76,266) Investee Current account (740) Mr Vu Van Tien Chairman Deposit for land purchase (Note 11.1) 84,000 Deposit (4,705) Mr Dao Van Hung Vice Chairman Deposit (159) Mr Duong Quang Thanh Member of BOM Deposit (20) Mr Dao Manh Khang Mr Vo Hong Linh Member of the Audit Committee Member of the Audit Committee Deposit (17) Deposit (9) 33. OPERATING LEASE COMMITMENTS Irrevocable operating leases 1,174,619 35,081 Of which: Due within 1 year 204,330 12,249 Due within 2-5 years 550,758 22,832 Due after 5 years 419, Báo cáo thường niên 2007

81 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December SUBSEQUENT EVENTS There have been no significant events occurring after 31 December 2007 which would require adjustments or disclosures to be made in the financial statements, except that in January 2008 the Bank contributed VNDm 10,000 to acquire 10% interest in the chartered capital of An Binh Land Joint Stock Company ( ABLand ), which was established on 7 December CORRESPONDING FIGURES Certain corresponding items and figures have been reclassified to conform to the current year s presentation of the financial statements according to Decision No. 16/2007/QD-NHNN issued by the State Bank of Vietnam on 18 April Notes VNDm VNDm (restated) (stated previously) BALANCE SHEET Deposits with other credit institutions 1,536,087 1,536,087 Current accounts with other banks - 84,324 Term deposits and borrowings from other credit institutions - 1,451,763 Deposits with other credit institutions 5 1,536,087 - Other assets 11 46,693 46,693 Other receivables ,131 - Accrued interest and fees receivable ,318 20,318 Other assets ,244 25,859 Construction in progress and unused fixed assets Customer deposits and other amounts due to customers 1,567,350 1,567,350 Customer deposits and other amounts due to customers 14 1,551,159 1,567,350 Grants, entrusted investments and loans exposed to risks 15 16,191 - Other liabilities 35,622 35,622 Accrued interest and fees payable ,498 9,498 Other payables and liabilities ,124 6,871 Enterprise Income Tax payable - 19,253 Notes VNDm VNDm (restated) (stated previously) Income Statement Interest and similar income , ,756 Interest and similar expense 21 (74,669) (73,096) Net gain from investment securities - 10,515 Net other operating income 39,474 45,473 Fees and commission expenses 22 (4,644) (150) Operating expenses 26 (26,414) (38,480) Net difference 84,018 84,018 41

82 NOTES TO THE FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December EXCHANGE RATES OF SOME FOREIGN CURRENCIES AGAINST VIETNAMESE DONG AT YEAR-END USD 16,114 16,051 EUR 23,411 21,016 GBP 31,784 - CHF 14,117 - JPY 141,61 - SGD 10,987 - CAD 16,228 - AUD 13,981 - HKD 2,035 - Prepared by: Approved by: Approved by: Mr Bui Quoc Viet Mr Nguyen Cong Canh Mr Luu Duc Khanh Chief Accountant Deputy General Director General Director Ho Chi Minh City, Vietnam 26 March Báo cáo thường niên 2007

83 Network HA NOI DA NANG HO CHI MINH CITY BINH DUONG VUNG TAU CAN THO 40 ANNUAL REPORT 2007