Table of contents MESSAGE FROM THE CHAIRMAN GENERAL INFORMATION HISTORY OF THE BANK REPORT OF THE BOARD OF DIRECTORS REPORT OF THE BOARD OF MANAGEMENT

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2 Table of contents MESSAGE FROM THE CHAIRMAN GENERAL INFORMATION HISTORY OF THE BANK REPORT OF THE BOARD OF DIRECTORS REPORT OF THE BOARD OF MANAGEMENT ORGANIZATION STRUCTURE, HUMAN RESOURCES AND CORPORATE GOVERNANCE ASSOCIATED COMPANIES FINANCIAL STATEMENTS FOR

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5 Message from the Chairman To our valued customers, partners, and shareholders, In 2012, due to the global economic crisis, all the major economies of the world struggled in the face of slow growth, difficult challenges, widespread unemployment, low purchasing power, and growing public debt. On the domestic front, businesses experienced great difficulty in running their operations, leftover inventories were at alarmingly high levels, the real estate market became increasingly stagnant, and tens of thousands of enterprises went bankrupt. The banking industry, which has been undergoing a restructuring process, was affected as well. Credit growth was low in comparison to the target set by the State Bank of Vietnam, and non-performing loans were on the rise. Despite having to brave such tremendous hardships, VietinBank prevailed and carried out our duties with flying colors. VietinBank s performance results were all favorable and indicative of stellar quality, safety, and effectiveness. We continued to revamp our organizational structure, improve upon our corporate governance and risk management practices, recruit new talents, and invest in our information technology infrastructure. The year 2012 was a significant one for VietinBank and marked a series of reforms. In line with our tradition, VietinBank confirmed our position as a leading commercial bank of Vietnam that follows the mandates of the Party and the State, adheres to national monetary policies, contributes to the stabilization of the macro economy, and strives to integrate into the global economy. VietinBank was able to maintain secure and effective growth throughout The following achievements could be observed: total assets reached VND trillion (an increase of 9.4% from the previous year); loans increased by 13.6%; mobilized funds increased by 9.3%; profit before tax was over VND 8,168 billion; ROE and ROA were 19.9% and 1.7%, respectively. These figures are indicative of VietinBank s leading position and truly remarkable given the adverse conditions seen throughout the entire banking industry over the past year was a successful year for VietinBank. In May 2012, VietinBank became the first Vietnamese bank to issue USD 250 million international bonds and was chosen by FinanceAsia as Best Borrower in Vietnam. In addition, by the end 2012 Annual Report 5

6 Message from the Chairman of the year, VietinBank had opened branches in Vientiane, Laos, and Berlin, Germany. These achievements constitute the pride of not only VietinBank, but also of Vietnam s entire financial and banking sector. They also mark VietinBank s effort to soar into the international banking arena. Despite the fact that foreign investors have been wary of engagements in Vietnam s market, at year end 2012 VietinBank managed to sign a strategic cooperation agreement with the Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU), the largest bank in Japan and a subsidiary of the Mitsubishi UFJ Financial Group, the world s third largest financial group. The agreement, which saw 20% of VietinBank s stake, equivalent to USD 750 million, sold to BTMU, is up until now the single largest and most successful transaction of its kind in Vietnam. It is a testament to VietinBank s thriving reputation and position as perceived by investors all around the globe. It was also in 2012 that VietinBank made positive changes and had breakthroughs in modernizing and restructuring our organization. We kicked off two major projects, the Core Banking Replacement (CBR) Project and the Organizational Restructuring and Development of Human Resources Strategies (ORP) Project. The CBR project serves to vastly modernize our information technology system, satisfy customer demands, expand our operations, and fulfill our long-term growth strategies. The ORP project is aimed at completely revamping our organizational structure and business model, thus allowing us to gain a competitive edge and to adhere to the latest and most accepted international standards and practices. Further, to continuously undergo sustainable development with the help of a solid workforce, VietinBank put into operation VietinBank Human Resource Development and Training School in Van Canh, situated on a 10 hectare plot of land. The school is equipped with state of the art technology and facilities. It is meant to facilitate training and produce a body of staff that is on par with international standards. We anticipate that 2013 will be yet another challenging year for the Vietnam s financial and banking sector. Hence, as members of the Boards of Directors and Management, we cautiously set the following targets: increase total assets by 10%; increase mobilized funds by 8%; increase loans and investment by 12%; restrain non-performing loans ratio under 3%; increase profit before tax by 5%; keep capital adequacy ratio above 10%. We also make it our mission to lead the way in carrying out national monetary policies, to modernize the bank, as well as to enhance our financial strength and competitive capacity. Finally, it is imperative that we provide better staff training, improve upon our service and product quality, manage Annual Report

7 risk in compliance with Basel II, and curb nonperforming loans. In so doing, VietinBank will have what it takes to undergo secure, effective, and sustainable growth. The coming year is sure to bring about many challenges and opportunities alike. In anticipation of VietinBank s 25 th anniversary, the entire bank is committed to building on our achievements, exerting yet more effort, performing duties with steadfast determination, and contributing to the growth of the banking industry as well as that of the whole economy. Chairman Dr. Pham Huy Hung 2012 Annual Report 7

8 General information Registered name in Vietnamese: Registered name in English: Trade name: Headquarter: Charter capital: Establishment license: Business registration license: Tax code: SWIFT code: Network: NGÂN HÀNG THƯƠNG MẠI CỔ PHẦN CÔNG THƯƠNG VIỆT NAM VIETNAM JOINT STOCK COMMERCIAL BANK FOR INDUSTRY AND TRADE VietinBank 108 Tran Hung Dao street, Hoan Kiem district, Hanoi, Vietnam VND 26,218 billion (as at December 31, 2012) No. 142/GP-NHNN dated July 3, 2009 by the State Bank of Vietnam (first issuance dated July 3, 2009 by the Hanoi Department of Planning and Investment, registered for the 7th amendment on July 6, 2012) ICBVVNVX Domestic branches: 147 branches across 63 provinces and cities nationwide Foreign branches: 1 branch in Frankfurt, Germany 1 branch in Berlin, Germany 1 branch in Vientiane, Lao PDR Number of employees: Foreign shareholder: Independent auditor: 19,840 (as at December 31, 2012) International Finance Corporation (IFC) Deloitte Vietnam Annual Report

9 Mission Be the leading financial and banking group in Vietnam with versatile operation, providing products and services according to international standards to improve the values of life. Vision To become a leading modern and efficient financial and banking group both at home and abroad. Core Values - Customer-oriented; - Dynamic, innovative, professional, devoted, transparent, modern; - Employees are entitled to make their best efforts, to be justly compensated for the effectiveness and results of their contributions, and to pay homage to outstanding employees, best performers. Business Philosophy - Secure, effective, sustainable, and in compliance with international standards; - United, cooperative, sharing, and socially responsible; - Client prosperity is VietinBank s success Annual Report 9

10 History of the Bank Establishment VietinBank was established on March 26, 1988, upon separation from the State Bank of Vietnam under Decree No.53/HDBT of the Council of Ministers Scope of business VietinBank offers a wide range of retail and wholesale banking products and services both at home and abroad. VietinBank also operates in the following areas: lending, investment, trade finance, guarantee, re-guarantee, forex trading, deposit, payment, money transfer, card services, local and international credit cards, traveler s cheques, securities trading, insurance, financial leasing, and many others. Listing Ho Chi Minh City Stock Exchange (HOSE) since July 16, Stock type: Common Stock symbol: CTG Par value: VND 10,000 Shares Outstanding: 2,621,754,537 shares (as at December 31, 2012) Important Milestones April 15, 2008 Change of name from IncomBank to VietinBank. July 31, 2008 VietinBank was granted the ISO certification for credit, guarantee and payment activities. June 04, 2009 First VietinBank General Shareholders Meeting. July 08, 2009 Pursuant to the Establishment and Operation License No.142/ GP-NHNN issued on July 3, 2009 by the Governor of the State Bank of Vietnam, VietinBank became officially known as a joint stock commercial bank, as reflected by its new name, Vietnam Joint Stock Commercial Bank for Industry and Trade. October 10, 2010 VietinBank and IFC signed investment and cooperation agreements. July 6, 2012 VietinBank was re-granted the enterprise certificate (code ) with charter capital totaling VND 26,218 billion by Hanoi s Department of Planning and Investment, replacing the certificate issued on July 3, December 27, 2012 VietinBank signed an agreement selling 20% of its stake to the Bank of Tokyo-Mitsubishi UFJ, Ltd. - the largest bank of Japan Annual Report

11 2012 Annual Report 11

12 History of the Bank Key financial indicators Indicator Unit 12/31/2012 (*) 12/31// /31// /31// /31//2008 Total assets VND Billion 503, , , , ,590 Total loans and investments VND Billion 467, , , , ,689 Of which: Loans VND Billion 333, , , , ,752 Mobilized funds VND Billion 460, , , , ,905 Owners equity (1) VND Billion 33,625 28,491 18,201 12,572 12,336 Of which: Charter capital VND Billion 26,218 20,230 15,172 11,252 7,717 Profit before tax VND Billion 8,168 8,392 4,638 3,373 2,436 Profit after tax VND Billion 6,169 6,259 3,444 2,583 1,804 ROA (2) % 1.7% 2.03% 1.5% 1.54% 1.35% ROE (3) % 19.9% 26.74% 22.1% 20.6% 15.7% NPL ratio % 1.46% 0.75% 0.66% 0.61% 1.58% CAR % 10.33% 10.57% 8.02% 8.06% 12.02% Dividend payout ratio % 16% 20% 13.47% 6.83% (H2 2009) - Remarks: (*) From 2012 audited consolidated financial statements. (1) Excluding portion of equity belonging to minority shareholders (2) ROAA (3) ROAE 2012 HIGHLIGHTS Feb 9, Opening of Vientiane Branch Feb 25 - Feb 26, Over 11,000 VietinBank staff across 10 cities and provinces signed up for blood donation Feb 28, VietinBank s 2012 General Shareholders Meeting May Issuance of USD 250 million international bonds May 28, Opening of Berlin Branch Sep 25, Inauguration of VietinBank Human Resource Development and Training School in Van Canh, Hoai Duc, Hanoi Dec 27, VietinBank and the Bank of Tokyo-Mitsubishi UFJ, Ltd. signed an agreement in Hanoi for the sale of 20% of VietinBank s stake to the Bank of Tokyo-Mitsubishi UFJ, Ltd Annual Report

13 2012 Annual Report 13

14 History of the bank AWARDS RECEIVED IN 2012 No. Award received Granted by 1 Top 2000 global enterprises Forbes Magazine 2 Top 500 banking brands The Banker 3 Best Borrower in Vietnam FinanceAsia 4 Bank Receiving Best Assessment from the Media Media Tenor (Switzerland), a partner of Vietnam Report 5 Leader in POS and initiatives about card payment Visa National Brands The Prime Minister of Vietnam 7 Top 3 tax payers among Vietnamese enterprises and the number one in banking in the list of top 1000 tax payers among Vietnamese enterprises in Vietnam Report, Tax Magazine General Department of Taxation, and VietnamNet 8 Top 20 Vietnamese largest enterprises Vietnam Report and VietnamNet 9 Top 50 most effective Vietnamese enterprises in Top 100 Vietnamese companies in terms of products and services in 2012 Investment Bridge Magazine and Thien Viet Securities Company Vietnam Economic Times Consumers Magazine 11 Outstanding Retail Bank Award and Outstanding Banking IT system Award for 2012 Vietnam Banking Association and IDG 12 Top 30 annual reports in 2012 Ho Chi Minh Stock Exchange in association with Securities Investment Magazine and Dragon Capital Records: The first Vietnam bank in the list of Top 2000 enterprises in the world as ranked by Forbes, and the single enterprise with the most number of blood donors Vietnam Records Association Annual Report

15 2012 FINANCIAL RESULTS Indicators Unit 12/31/ /31/ Capital base Charter capital VND Billion 20,230 26,218 Total assets VND Billion 460, ,530 CAR % 10.57% 10.33% 2. Business results Deposits VND Billion 2,031,725 1,748,979 Loans disbursement VND Billion 887,577 1,088,403 Loans collection VND Billion 829,684 1,016,999 Special mentioned loans VND Billion 6,017 1,412 Non-performing loans VND Billion 2,204 4,890 Funds utilization ratio + Total loans/ deposits (LDR) % 69.71% 82.99% + Total loans/ total assets (LAR) % 63.73% 66.2% Overdue guarantees/total guarantees % 0.01% 0.13% Special mentioned loans/total loans % 2.05% 0.42% Non-performing loans/total loans % 0.75% 1.46% 3. Liquidity Immediate liquidity ratio % 15.94% 15.76% Liquidity ratio % 26% 24% 2012 Annual Report 15

16 History of the bank Development outlook for 2013 Assets and Funds Increase total assets; Expedite equitization process to increase owners equity, as well as to ensure growth demands and CAR requirements are met Diversify ownership structure while maintaining State ownership at 51% or above. Credit and investment Credit is a critical part of the Bank s operations, in which competition is based on market principles, Make necessary adjustments to credit structure to match VietinBank s strengths Minimize credit risks and keep NPL ratio under 3% Diversify credit and investment activities in the financial market, maintain a leading role in the market, enhance the effectiveness of fund utilization and liquidity management Services Develop fee-based banking services, identify key service groups to focus on Make use of a modern IT infrastructure to develop services, with the ultimate goal being to satisfy customers Annual Report

17 In 2013, VietinBank makes it a priority to strengthen growth, maintain its dominance in the market, reinforce its key role in the implementation of the Government and the Party s policies. The Bank will spare no effort in comprehensive reform towards a more modern and competitive structure. Moreover, VietinBank will further invest in information technology, standardize operational procedures, enhance products and services, and manage risk in conformance to Basel II. VietinBank will curb non-performing loans and focus on collecting off-balance sheet debts. It is the Bank s ongoing quest to ensure sound and sustainable growth and promote VietinBank image domestically and internationally. At VietinBank, we aspire to become an even more modern, effective financial and banking group that plays a key role in the region. Human resources Standardize and further invest in training of human resources Revamp and improve upon mechanism of utilizing employees and compensation Build a competent and professional workforce Implement thoroughly internal work regulations and abide by corporate culture. Technology Recognize IT as a crucial component that supports all facets of business Build a consistent IT system that is modern, secure, and stable. Organization and Governance Develop a clear, appropriate organizational structure Establish subsidiaries to provide a wide array of financial products and services Expand network, open new branches and representative offices Strengthen retail banking operations 2012 Annual Report 17

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19 Report OF THE BOARD OF DIRECTORS P.20 Report OF THE BOARD OF ManAgement P.26

20 Report of the Board of Directors In 2012, adverse economic conditions could be observed in Europe, the United States, Japan, and China. Vietnam too fell victim to the crisis: foreign direct investment was on the decline, the real estate market was stagnant, and GDP growth did not exceed 5.03%, the lowest it had been in 13 years. The banking industry faced challenges as well, given intense competition and growing bad debt figures. In response to such unfavorable conditions, VietinBank s Board of Directors closely followed the directions of the Government and the State Bank of Vietnam, as well as setting guidelines that require VietinBank personnel to adhere to international standards and to take the initiatives in coping with market changes. VietinBank managed to overcome challenges and achieved remarkable results: total assets amounted to VND trillion (an increase of 9.4% from 2011), reinforcing VietinBank s position as the second largest bank in Vietnam in terms of total assets; mobilized funds increased by 9.3%; loans by 13.6%. VietinBank is at the forefront of the banking industry in relation to agricultural lending, exporting, and granting loans to manufacturing enterprises at reasonable interest rates in compliance with the directives of the Party and the Government. Over 2012, asset quality was preserved, and the non-performing loans ratio was kept at 1.46% or lower, which was below the industry average. Profit before tax was at VND trillion, equivalent to 109% of the target set forth by the 2012 General Shareholders Meeting. It was thanks to our joint efforts and determination, especially the comprehensive leadership from the Board of Directors that VietinBank was able to achieve the above results Annual Report

21 Mobilized funds increased by 9.3 % Total assets Total loans increased by 13.6% VND Trillion KEY TARGETS SET BY GENERAL SHAREHOLDERS MEETING AND PERFORMANCE RESULTS Indicators Plan 1 Actual result 12/31/2012 Result vs. Plan Total assets (VND Billion) 475, ,530 Surpassed Charter capital (VND Billion) 26,218 26,218 Met Mobilized funds (VND Billion) 430, ,082 Surpassed Total loans and investments (VND Billion) 440, ,879 Surpassed NPL ratio <3% 1.46% Met CAR 10% 10.33% Surpassed ROA 1.5-2% 1.7% Met ROE 18% 19.9% Surpassed Profit before tax (VND Billion) 7,500 8,168 Surpassed Dividend payout ratio 2 13%-15% 16% Surpassed Compensation for the Board and Supervisory board members (% of profit after tax) 1: Resolution no. 05/NQ-DHCD dated 2/28/2012 and no. 06/NQ-DHDCD dated 12/28/2012 2: Based on year-end charter capital 0.30% 0.234% Lower 2012 Annual Report 21

22 Report of the Board of Directors ÜÜ Charter Capital Increase and Equitization To bolster its financial strength, VietinBank increased charter capital from VND 20.2 trillion to VND 26.2 trillion through stock dividends and bonus shares to existing shareholders. At year-end, consolidated CAR was 10.33%, well over the State Bank s regulated level of 9%. On December 27, 2012, with the approval of the Government and the General Shareholders Meeting, VietinBank and the Bank of Tokyo-Mitsubishi UFJ, Ltd. (BTMU), the largest bank in Japan and a subsidiary of the Mitsubishi UFJ Financial Group, the world s third largest financial group, signed an agreement for the sale of 20% of VietinBank s stake to BTMU through private placement of 644,389,811 common shares). It is estimated that by the time the deal is finished, VietinBank s charter capital will amount to VND trillion. VietinBank s ownership structure will be such that the Government will own 64.46% of the stake, BTMU will own 19.73%, IFC will own 8.03% (previously 10%), and other shareholders will own an aggregate of 7.78% (previously 9.69%), making VietinBank the number one bank in Vietnam by charter capital. At the close of a rather uneventful year for Vietnam s securities market, VietinBank managed to sign a significant agreement with BTMU, the likes of which had never before been seen in Vietnam. It also marked yet another step in VietinBank s integration into the international banking scene, at the wake of which S&P rated VietinBank s outlook as positive. ÜÜ Investor Relations In light of favorable business performance throughout 2012, VietinBank scheduled a high dividend payouts to investors. Not only keeping an attractive dividend payout ratio, as a premier commercial bank in Vietnam, VietinBank deems it important to keep shareholders well informed. VietinBank continually improves upon its hosting of big events, for it is through such events that the Bank promptly communicates official information to investors and analysts in and outside the country. VietinBank is regarded as having excellent relations with stock market investors. Sound business strategies and solid performance had positive impact upon the value of VietinBank s shares (ticker symbol: CTG). Over the course of 2012, CTG shares rose 51.1% in value, which was the highest growth rate among bank shares on the stock market and 3 times higher than VN-Index s growth of 17.7%. Trading volume Annual Report

23 of CTG shares also tripled from Additionally, CTG shares have been garnering more attention from foreign investors. ÜÜ Entrance into International Financial Markets Two significant events in 2012 further established VietinBank s growing presence in foreign markets. They were the issuance of USD 250 million international bonds in May and the sale of shares to BTMU in December. With the global financial market in a state of stagnancy, these two events showed VietinBank s strength and perseverance in times of hardship. Chosen by FinanceAsia as the Best Borrower in Vietnam, VietinBank indeed appears to be a highly promising organization in the eyes of investors. In addition, VietinBank kept on pursuing its international expansion strategy. Two new branches were opened, one in Vientiane, Laos and the other in Berlin, Germany. In total, VietinBank has three foreign branches, with the first one having been opened in Frankfurt in Admitting that difficulties still lay ahead, VietinBank s oversea branches have achieved encouraging results, promoting VietinBank s brand in the international market. The Bank is also looking to open representative offices and branches in other countries such as England, Poland, and the Czech Republic. Owing to our joint efforts, VietinBank garnered recognition from Brand Finance. The world renowned brand assessment company announced VietinBank s position as the 328th most valuable brand in the world, making VietinBank the only Vietnamese bank among the top 500 global banking brands and the No.1 brand in Vietnam valued USD 271 million and rated A+. ÜÜ Bank Governance VietinBank always strives to establish itself as the leading commercial bank in Vietnam and a key player in the greater region. The Board of Directors places focus on the following issues: Improvement of risk management and bank governance processes: In 2012, VietinBank undertook radical steps to change its organization and business model for the better. The Board recognized that operating in compliance with international standards and practices requires having solid risk management mechanisms, striking a delicate balance between profits and risk, and minimizing risk. Hence, in January 2013, the risk management Division was born. Its purpose is to manage risk in three independent lines of defense, as required by Basel II, and to usher in a new credit granting model that (i) centralizes appraisal as well as collateral evaluation and management, and (ii) affords greater specialization of departments and better management of risk across the board. From April 2013, the Treasury and Capital Market Division will be formally established to promote sale and become the only contact of the Bank in the market to generate more profit given the challenges in credit activities. In addition, the three dedicated departments with separated functions are designed to better manage investment activities, strengthen risk management and improve performance. The Treasury and Capital Market Division will oversee all investment and treasury activities in the capital market, sell investment banking and treasury products to customers. This is one of two main business pillars and an important premise to promote investment banking in VietinBank to increase the scale and effectiveness of investment banking activities, gradually approaching model of investment banking of the leading banks in the region and the world. VietinBank has formulated sets of procedures, processes, and regulations for its foreign branches. In particular, for German branches, VietinBank follows Germany s MaRisk standards (Basel II), which the Bank plans to apply in Vietnam some time in Consolidation of senior management team In the past year, the composition of the Board of Directors and Management were further consolidated. Two new members were added to the Board of Directors, Mr. Cat Quang Duong and Ms. Nguyen Thi Bac, replacing Mr. Tran Xuan Chau and Ms. Tran Thi Hong Hanh. Mr. Nguyen Viet Manh, Mr. Nghiem Xuan Thanh, and Mr. Nguyen Van Thanh were replaced by Mr. Pham Huy Thong, Mr. Tran Kien Cuong, and Mr. Nguyen Duc Thanh as Deputy General Directors. VietinBank s top management team were united in carrying out their duties and responsibilities throughout the year, contributed extensively to the business performance of Annual Report 23

24 Report of the Board of Directors VietinBank Human Resource Development and Training School Upgrades to Information Technology System To pave a foundation for a more modern IT system that conforms to international standards in an effort to better facilitate the management and governance of the Bank, VietinBank implemented the IT strategies for the period from 2011 to 2015 in partnership with IBM. In 2012, the Board commissioned the Core Banking Replacement Project, aimed at allowing VietinBank to expand and to better satisfy the ever changing needs of the clients and the Bank s long-term development strategy. The Organizational Restructuring Project was sanctioned in 2012 and officially kicked off in early The project of applying MX3 system by Murex for the Treasury division which has been implemented since 2011 was officially put into operation from February In addition, such projects as LOS, credit risk management, enterprise data warehouse, SOA middleware system, etc., continue to be implemented in accordance with the schedules. IT systems continue to be upgraded to support the development of products and services, increase the application of technology, enhance productivity, reduce business costs, thereby enhance competitiveness and control of operations. Enhancement of infrastructure and customer service: In order to better serve the customers and to enhance the quality of its products and services, VietinBank inaugurated a Contact Center in January From the very onset, the Contact Center provided professional and high quality services to customers, addressing their concerns and responding to their inquiries. In September of the same year, construction of VietinBank Human Resource Development and Training School came to completion and it officially commenced operations. It is aimed at training new and seasoned VietinBank staff alike, enabling them to acquire new skills and knowledge so as to better serve customers Annual Report

25 ASSESSMENT OF THE BOARD OF DIRECTORS PERFORMANCE By overcoming economic challenges that have been plaguing the entire globe as well as those that are unique to Vietnam, VietinBank successfully fulfilled the objectives assigned by the General Shareholders Meeting. Not only did the Bank manage to grow its operations in a safe and effective manner, VietinBank also took remarkable steps toward gaining a stronger foothold in the global economy. As a leading commercial bank in Vietnam, VietinBank also carried out the policies set forth by the Party, the Government, and the State Bank pertaining to cost and interest rate reduction. VietinBank also held on successfully to the position as the leading bank in lending, investment, payment, trade finance, remittance, card services, etc. The above results, along with the hard work done by all of VietinBank staff, are a testament to the sound direction of the Board of Directors. The Board members took part in monitoring and guiding all of the bank s activities. They worked with foreign experts and capitalized on their strengths and knowledge, which benefited the entire bank on all fronts. The challenges faced by the Bank were dealt with swiftly and flexibly in the best interests of shareholders. VietinBank s Board of Directors fulfilled its role, seized opportunities, and completed the duties to which it had expressed its commitment before the General Shareholders Meeting is anticipated to be yet another difficult year for VietinBank in particular and for Vietnamese banks in general. The Board has extensive experience in guiding the bank and is committed to continually finding new ways and scouring for new opportunities to undergo sustainable growth, gain reputation, and become more effective. In so doing, VietinBank believes that it will make it evident to investors that the Bank is worthy of the confidence they place in. To have the best chance of carrying out the Bank s plans, VietinBank s Board of Directors hopes to continue benefiting from the guidance of the Party, the State, the Government, and the State Bank, the support of Government agencies, the confidence of the partners, as well as the contributions of the staff. Indicators Units Targets % Growth of 2013 targets vs results Total assets VND Billion 555,000 10% Mobilized funds VND Billion 495,000 8% Total loans and investments VND Billion 524,000 12% Outstanding loans (*) VND Billion 450,000 12% Profit before tax VND Billion 8,600 5% Owners equity VND Billion 52,000 55% Of which: Charter capital VND Billion 37,234 42% Dividend payout ratio % 12 Some financial ratios ROAE 15-18% ROAA % CAR >10% NPL ratio <3% (*): In accordance with the State Bank of Vietnam s regulations 2012 Annual Report 25

26 Report of the Board of Management 2012 in review In 2012, the global financial crisis triggered the deterioration of economies around the world, including Vietnam. Faced with those adverse conditions, VietinBank made great efforts to persevere, all the while closely following the guidance of the Government and the State Bank of Vietnam. By the end of the year, VietinBank had gained great accomplishments, reflected by such indices as follow: ÜÜ Growth: Over 2012, total assets grew by 9.4%, mobilized funds by 9.3%, and total loans by 13.6% Growth in size (VND billion) Total Assets Total Loans Mobilized funds Annual Report

27 Profit before tax (VND billion) ÜÜ Profitability: Despite 2012 s challenges, including fluctuating interest rates and exchange rates, VietinBank s profitability remained intact. Profit before tax was at VND trillion, equivalent to 109% of the target set ROE (%) ROA (%) ÜÜ CAR and NPL: In 2012, VietinBank kept on taking measures to improve credit quality, diversify risks and investment portfolio, enforce credit authority, control and monitor closely each and every step during credit granting process aiming at detecting imminent risks, giving warnings and mitigating risks as well as minimizing non-performing loans. As at December 31, 2012, the NPL ratio was 1.46%, well under the industry average. The Bank s CAR was 10.33%, markedly higher than the State Bank s regulated level of 9%. NPL (%) CAR (%) Annual Report 27

28 Report of the Board of Management Annual Report

29 Business Activities ÜÜ Mobilized Funds Size and Growth of Mobilized Funds In 2012, the State Bank of Vietnam repeatedly decreased the cap for deposit interest rate from 14% p.a. at the beginning of the year to 8% p.a. at year-end. On top of that, unfavorable economic conditions and difficulties in banking sector were the challenges facing VietinBank throughout the year. Through relentless determination, VietinBank continued to pool funds from domestic and international sources, thus ensuring liquidity and compliance with the State Bank of Vietnam s regulations. As at December 31, 2012, mobilized funds were at VND 460 trillion, an increase of 9.3% and equivalent to 107% of the target set by the General Shareholders Meeting. The growth of funds has now reached a state of stability, with the improvement of long and medium term funding. Eighty-one percent of funds are composed of VND. The market share of VietinBank s fund mobilization is around 12 percent. VietinBank is the leading bank in obtaining funds from foreign sources. The Bank was chosen by FinanceAsia, the leading magazine in Asia on finance and banking, as the Best Borrower in Vietnam. Their assessment was partly based on the May 2012 issuance of VietinBank USD 250 million international bonds (clean, unsecured), an event that is reflective of the confidence investors place in the Bank. 23.9% 339, % 420, , Growth (%) Total funds (VND Billion) ÜÜ Utilization of funds: At year end 2012, total loans and investments reached VND 468 trillion, an increase of 9% from Credit activities: Every bank encountered challenges in its credit activities over the past year due to adverse economic conditions. Credit growth for the entire banking industry was negative throughout the first six months of In the third Quarter of 2012, the economy was picking up. By simultaneously taking a number of remedial measures such as assisting enterprises in difficulty, offering preferential packages and interest rates, and focusing on granting loans to manufacturing enterprises, VietinBank was able to achieve a total loans figure of VND 333 trillion by December 31, 2012, an increase of 13.6% from the start of the year. This is a remarkable achievement contributing to the fulfillment of the target of credit and economic growth stimulation of the banking sector. VietinBank followed closely the guidelines on credit policy of the State Bank of Vietnam and put forward strict internal regulations to control credit quality. Non-performing loans were controlled at 1.46% of total loans. In 2012, VietinBank successfully completed phase 1 of the credit model change process toward centralization of risk management, aimed at making its operations more conformant to international practices. Size and Growth of Loans 25.3% 234, % 293, , Growth (%) Outstanding loans (VND Billion) 2012 Annual Report 29

30 Report of the Board of Management Loan Composition (by types of enterprises) 3% 4% 15% 1% 10% 15% 18% States-owned enterprises 100% State-own one-member limited company Other limited companies Joint-stock companies with over 50% state ownership Other Joint-stock companies Private companies Foreign invested enterprises Business households and individuals Others 25% 9% Loan Composition (by industry) 2% 8% 3% 5% 31% Manufacturing and processing Wholesale, retail, automobile and motorcycle repair Construction Electricity, petroleum and water Mining Transport, warehouse Agricultural, forestry and aquaculture Real estate business Other industries 8% 7% 7% 29% Annual Report

31 - Investment Enhancement of profitability was set as the target for investment activities of VietinBank. At year end 2012, investment activities made up VND trillion, equating to 26.7% of total assets. Aside from traditional investment products, VietinBank launched more modern products over the past year, including interest rate option, interest rate swap, currency swap and other commodity derivatives that aim to assist customers and the bank in managing interest rate and exchange rate risks. 0.39% 2012 Investment Portfolio 1.95% 2.09% 17.81% 43.03% 34.73% - Interbank market: As at December 31, 2012, VietinBank s investments in the interbank market amounted to approximately VND 58 trillion, accounting for 43% of the total investment portfolio. VietinBank continually maintains high liquidity and remains profitable. - Bonds, valuable papers (excluding equity securities): At year end 2012, investment in securities was slightly above VND 73 trillion, an increase of 8.6% from the same time of the previous year. Most of VietinBank s securities investments are Government bonds and corporate bonds which are highly liquid with dominant share in Vietnam bond market. - Capital contribution: As at December 31, 2012, VietinBank invested a total of nearly VND 3 trillion into joint-ventures, affiliates and other long-term investments. 0.58% 2011 Investment Portfolio 4.31% 2.14% 16.93% 47.84% 28.20% ÜÜ Foreign Exchange Trading VietinBank s 2012 transactions in the interbank market were about USD 19 billion in value. In terms of foreign exchange trading, VietinBank was the leading bank in the interbank market with a market share of 20%, and was the second ranked bank in the non-interbank market with revenues of over USD 11 billion. The trading volume tripled from 2011 thanks to improvements made to the system and to increasing direct sales. Inter-bank Government bonds Equity securities Debt securities issued by business entities Debt securities issued by credit institutions Capital contribution ÜÜ Fee-based services - Domestic payment services: Owing to the constantly improved quality of payment services, the growth in market share and VietinBank s reputation, total payments reached VND 7,300 trillion and fee revenue were VND 447 billion in total. - International payment services and trade finance: VietinBank s international payment services and trade finance services have been growing steadily in recent years, with its market share growing slightly as well. In 2012, total import-export payments were in excess of USD 32 billion, an increase of 15% from VietinBank s share of the country s import-export market was roughly 14% Annual Report 31

32 Report of the Board of Management - Card services and e-banking Card services: VietinBank resumed the market leader status with a 23% share of the debit card market (11 million cards) and a 9.5% share of the credit card market (nearly 400 thousand cards). VietinBank s POS network is second to none in Vietnam. Electronic banking (e-banking) services: As the Bank further developed its e-banking services, including IPAY, VBH, and SMS banking, to better serve customers, a remarkable surge in customers that registered for e-banking services (about 2.6 million additional registrations for an aggregate of over 5 million) was observed. Accumulated Debit cards issued Accumulated Credit cards issued Millions of cards Thousands of cards Annual Report

33 ÜÜ Risk Management and Internal Auditing - Risk Management Credit risk management: In 2012, VietinBank had the lowest NPL ratio among all commercial banks in Vietnam (1.46%) thanks to the improvement in credit risk management. The Bank followed closely the directives of the Government and the State Bank of Vietnam, and regularly improved upon risk management practices. In adherence to Basel II, VietinBank promulgated regulations on credit risk and completed a credit risk management framework. Research on revamping the credit management mechanism was conducted in tandem with changes to the centralized credit management model. Management of liquidity risk, interest rate risk and market risk: VietinBank has continually enhanced its fund management, liquidity management, and interest rate risk management practices in adherence to international practices by means of advanced software and systems. Operational risk management: VietinBank has made substantial changes to its organizational model and risk management framework so as to further comply with Basel II. The world s leading operational risk management system was implemented in 2011 and continues to run stably to date. It greatly supports the Bank s management of operational risk. - Internal Audit and Control VietinBank has implemented a new internal audit and control model that promotes independence, quality, to ensure the safety, and effectiveness in the Bank s daily business and to fit the new credit appraisal model. Problems that exist at the branch level are quickly dealt with to ensure consistency across the board. ÜÜ Supporting Activities - Human Resources Management and Network Expansion Organizational structure: VietinBank has been implementing the Organizational Restructuring Project. Step by step, VietinBank is revamping its organizational and operational models so as to gain competitive advantage and to further comply with international standards and practices Annual Report 33

34 Report of the Board of Management Network expansion: VietinBank s ever growing network is the second most expansive in Vietnam. It is comprised of over a thousand domestic locations. Aside from Frankfurt branch, VietinBank now has a Berlin branch and a Vientiane branch, both of which were opened in The Bank s network is indicative of its status as the leading Vietnamese bank with regard to international expansion. Human resources: VietinBank has made appointments to all levels of management. Careful selection of highly competent individuals to join VietinBank has been done during VietinBank continues to be seen as an attractive employer to candidates of great skills. Remuneration: Despite adverse economic conditions, VietinBank has gone to great lengths to ensure the stability of the payroll fund. More effort has been put into tying compensation with performance. Project on payroll mechanism and employment of KPIs in accordance with international standards has been completed in material respects by year end Information Technology and Bank Modernization VietinBank has carried out many information technology strategies and projects. In particular, the Core Banking Project was officially kicked off on December 17, Upon completion, the new Core Banking system is expected to allow VietinBank to better meet customer demands, further expand its operations and carry out the long term development strategies with greater ease. - Communication and Brand Promotion: Great effort was put into diversifying VietinBank s promotional campaigns. The messages and communication channels were improved drastically. In anticipation of the 25th anniversary, VietinBank is making preparations for communication programs though a variety of media. - Customer Service: VietinBank officially inaugurated a contact center. It aims to provide customers with modern, professional services and accurate information. Its purpose is also to give advices to customers and take in their feedback, as well as to promote VietinBank s image and reputation. - Investor Relations: In 2012, a new website for investor relations was set up to provide investors with a reservoir of important information. VietinBank is regarded as a leading figure in the securities market. Over the year, CTG shares had a profitability ratio of 51% (triple the growth of the VN-index), which was well above those of other shares on the market. - Capital Construction: VietinBank kicked off many key projects and constructions and completed a number of important projects. Notably, on September 25, 2012, VietinBank Human Resource Development and Training School in Van Canh was opened and began operations. It was instrumental to the fulfillment of VietinBank s training strategies. - Emulation and Awards : At all levels of VietinBank s organization, numerous groups and individuals earned awards: awards for 42 individuals and 41 groups were granted by the Prime Minister; 3rd place labor medal bestowed on 21 individuals; 2nd place labor medal granted to 1 individual and 3 groups. Of particular significance, Annual Report

35 the President of Vietnam signed Decision no. 26/QD-CTN which would see an award for heroic labor conferred upon VietinBank. ÜÜ Charity Work and Social Welfare Pursuant to Resolution 11/CP, Resolution 30a/CP, VietinBank took a number of measures for the greater good of the community and of society, such as reducing operational costs, engaging in charity work, focusing on curbing poverty, and building infrastructure in rural areas. On February 25 and 26, 2012, VietinBank hosted blood donation days. Over 11 thousand staff and union members donated their blood, which led to over 8000 units of blood being accumulated. As such, VietinBank broke Vietnam s record for an enterprise having the largest number of employees donating blood for charity. VietinBank is well regarded not just as a business entity but also as a charitable organization Annual Report 35

36 Report of the Board of Management Development Plan ÜÜ BUSINESS OPERATIONS VietinBank continues to promote all sources of funding to meet the demand for credit growth and ensure the prudential ratios: VietinBank continues to promote mobilization of all sources of funding, in both local and foreign currencies domestically and internationally, with particular emphasis on mobilization from individuals and institutions; Issue timely mechanisms, policies, products, managing interest rates which are appropriate and close to the market; Attract and make use of funds from traditional clients with large deposits, long-term international sources to achieve a balance with lending and investment activities; streamline the capital structure by increasing the proportion of stable long-term capital; Understand the characteristics and movement of markets in each locality of operation to actively implement effectively mobilization products. VietinBank s credit growth is linked to quality, efficiency and sustainability: VietinBank continues to promote the growth of short-term credit to improve credit portfolio, including strengthening of credit growth in key industries and priority areas; regularly follow up with economic forecasts, international and domestic markets, and improve the quality of analysis, evaluation and forecast to have a clear credit orientation for each clientele, each group of industries; diversify credit and banking products services for each Annual Report

37 customer segmentation; improve the quality of customer evaluation, project appraisal and loan schemes, enhance following-up with customers, regularly monitor, classify and evaluate the business operations, financial capacity of customers; further improve corporate governance capacity, tighten credit discipline, focus more on inspection, control and monitoring credit risk, operational risk, minimize new bad debts; Implement three separate lines of defense according to Basel II standards to control and maintain good credit quality. Foreign exchange trading: VietinBank will focus on implementing business goals under a long-term vision to continue to improve its market share of foreign exchange; implement comprehensive marketing plan to sell foreign exchange products; expand cooperation with domestic and foreign financial institutions, as well as with export customers to enhance the exploitation of foreign currency to meet the needs of customers; develop new business of investment banking and currency trading such as currency derivatives, interest rate derivatives and exchange rate derivatives in order to maximize investment opportunities and minimize risks. Fee-based services: - Domestic payment operations: VietinBank continues to implement measures to ensure the safe operation of payment; improve mechanism of management monitoring, inspection of payment transactions at Head office and at branches; improve and upgrade user applications, increase automatic processing, etc., to expand domestic payment and make sure of the quality of centralized payment transactions through Head office (bilateral payment, IBPS payment); promote research and development of new payment products, expand customer base, distribution channels and market share of VietinBank s payment services. - International payment and trade finance: VietinBank will restructure its customer base; focus on low-risk sectors, innovate funding mechanisms for trade finance in the direction of modern banking, based on an assessment of the flow of goods and cash flow, free from traditional mindset of credit. - Card Services: VietinBank continues to maintain leading market position across all card businesses; promote research, plan the deployment of new technological projects, keep up with technology trends in the region and the world; innovate, improve the quality of card products and services to make the difference through quality and value added services. Equitization and increase of charter capital: Equitization and increase of equity are some of the areas of focus under the plan on renovation, restructuring banking operations, expanding business operations and improving risk management in accordance with international standards. The key goal in 2013 of VietinBank is to increase charter capital, thereby enhancing owners equity, through the sale of shares to foreign strategic shareholder and issuance of additional shares to the existing shareholders. In 2013, VietinBank s charter capital is expected to exceed VND 37 trillion and owners equity is expected to be VND 52 trillion, the percentage of ownership of the State, strategic partner BTMU and IFC are expected to be 64.3%, 20% and 8% respectively, bringing VietinBank to be the bank with largest capital base and strongest shareholder structure in Vietnam. ÜÜ RISK MANAGEMENT VietinBank is conducting comprehensive restructuring of the risk management division to strengthen and promote the role of three independent lines of defense according to international practices. VietinBank continues to improve internal audit model, consolidate audit personnel and enhance the provision of consultancy service and recommendations to its branches. At the same time, the Bank keeps strengthening its internal remote monitoring through monitoring programs and system in order to improve the efficiency of the inspection, control and internal audit function. VietinBank continues to comply with the rules, procedures and regulations in its course of business. The development of risk prevention culture, active control and management of risks in all activities are receiving attention and further enhanced, especially for ethical risks and operational risks Annual Report 37

38 Report of the Board of Management ÜÜ SUPPORTING ACTIVITIES VietinBank continues to restructure and improve its organization structure: In 2013, VietinBank will actively carry out the ORP project to gradually restructure the organizational model; standardize and improve its sets of processes and regulations. The transformation of the organization structure of the Bank to strengthen its operations in wholesale banking, retail banking, investment banking, supporting activities, finance management and risk management, etc., according to international practices will be accelerated to enhance its competitiveness and risk management capacity, contributing to the safe and effective business of the Bank. VietinBank continues to standardize personnel management: The Bank will improve the quality of human resources, especially of those who with limited or weak performance; restructure and plan staff for succession, evaluate and monitor the performance and progress of each staff in succession planning on a monthly basis; continue the succession planning for talented staff in 2013; recruit and provide training to staff to well prepare for foreign branches. The assessment of staff s performance will be innovated and made transparent by employing the balanced scorecard method. VietinBank further reforms the payroll, bonus, and emulation mechanisms: In 2013, VietinBank will implement new payroll mechanism and employ key performance indicators (KPIs) to ensure the transparency and fairness of income policy; continue to do research on and apply new welfare policies, especially insurance policies in order to improve and enhance the remuneration, motivating employees to strive and dedicate wholeheartedly to VietinBank. Emulation and staffing need innovation toward standardizing the staff s assessment, commending and rewarding staff promptly at units to arouse their sense of pride and loyalty, promoting innovations, improving labor productivity. VietinBank reviews to improve network efficiency: In 2013, VietinBank will further strengthen and consolidate the operation of its units; consider the merger, dissolution or winding up of the local units with poor performance and no growth potential; speed up the upgrading of foreign branches of the Bank into subsidiaries and promptly implement procedures to open branches in Poland, Czech Republic, England... in Quarter III/2013. VietinBank accelerates the implementation of integrated information technology strategy, particularly the Core banking replacement project. The Bank will continue to take measures to ensure the smooth operation and continuity of the IT system as well as the quality and reliability of information used for decision making. VietinBank continues to accelerate investment in infrastructure development and capital construction: key projects such as headquarter construction project - VietinBank Tower in Ciputra, Training Center in Hue, Representative Office at Ham Nghi in Ho Chi Minh City, Representative Office in Da Nang, etc., shall be put into operation soon. VietinBank continues to enhance its brand value through communication activities, marketing and brand development: VietinBank continues to develop an overall communication strategy with promotion campaigns and programs for products and services, major events to enhance business efficiency and improve brand reputation. Communication programs are being implemented to celebrate 25 years of construction and development of VietinBank. ÜÜ SOCIAL RESPONSIBILITIES In 2013, VietinBank continues to pursue poverty reduction objectives set by the Party and the Government in an effort to improve the lives of people; implement effectively and monitor closely gratitude and social charity programs to ensure that the funds from VietinBank will be efficiently used for right purposes and right persons and in compliance with procedures and regulations on investment, capital construction and financial management Annual Report

39 VietinBank is the first Vietnam bank in the List of Forbes Global 2000 leading companies

40

41 Organization structure, human resources and corporate governance

42 Organization structure, human resources and corporate governance Committees Secretariat to the Board HR and Remuneration Committee Assets and Liabilities Management Committee Risk Management Committee Policy Committee IT Development Strategy Committee Credit Committee Financial Institutions Committee Business Division Treasury & Capital Market Division Finance Division Risk Management Division Corporate Banking Department Sales & Business Development Department Capital Management & Financial Planning Department Market Risk Management Department SMEs Banking Department Retail Banking Department Treasury Dealing Capital Market Department Financial Accounting Management Department Credit Risk Management Department Operational Risk Management Department Financial Institutions Department Legal Department Annual Report

43 General Shareholders Meeting Supervisory Board Board of Directors Compliance and Performance Auditing Department Operational Monitoring and Auditing Department Board of Management Credit Control & Approval Division Banking Services Division Supporting Division Information Technology Division Credit Ratings & Credit Lines Approval Department Credit Control & Approval Department Credit Control & Approval Department in HCMC Non-performing Loan Management Department Non-performing Loan Management Department in HCMC Main Operation Center VND Payment & Accounting Department E-Banking Department Card Center Human Resources Department Labor & Payroll Management Department Back Office ISO Management Department Information & Communication Department Representative Offices VietinBank Party Committee Business Capital Payment Department Cash & Vault Management Department Procurement Department Capital Construction & Purchasing Department Emulation Department Accounting Policy Department VietinBank Trade Union IT Center Command Center & Help Desk IT Project Management Office MIS Department Credit & Investment Policy Department VietinBank Human Resource Development and Training School 43

44 Organization structure, human resources and corporate governance Board of Directors Annual Report

45 Members of the Board of Directors Mr. PHAM HUY HUNG - Chairman of the Board of Directors Appointed in November 2007, Mr. Pham Huy Hung, born in 1954 in Hanoi, is currently a deputy of the 13 th National Assembly, member of the Standing Party Committee of Central Enterprise Division, Secretary of the Party Committee and Chairman of the Board of Directors of Vietnam Joint Stock Commercial Bank for Industry and Trade. He holds a PhD in Economics. He has been with VietinBank since the Bank s early days and has contributed to the development of the Bank for the last 25 years. Before that, he worked at the Ministry of Finance and the State Bank of Vietnam. His former positions include: Deputy Chief of the Secretariat, Deputy Head of Credit Department, Head of Currency Department of VietinBank; Deputy Branch Manager, Branch Manager of VietinBank - Ba Dinh Branch; Deputy General Director, Acting General Director, and Member of the Board of Directors and General Director of VietinBank. In 2011, he was elected to the 13 th National Assembly. Mr. NGUYEN VAN THANG Board Member and General Director Mr. Nguyen Van Thang, was born in 1973 in Hanoi. He holds a PhD in Economics. He started working at VietinBank since 1996 and has contributed to the development of the Bank for 17 years. He has held the following positions: Secretary to General Director and Deputy Chief of Secretariat, Deputy Director of Corporate Banking Department, Director of Corporate Banking Department of VietinBank; Branch Manager of VietinBank - Hanoi Branch; Member of the Board of Directors and Acting General Director of Vietnam Joint Stock Commercial Bank for Industry and Trade. In December 2011, he was appointed as Member of the Board and General Director of VietinBank. In 2012, he was honored with the prestigious awards of the Party and the State: Certificate of Merit by the Prime Minister for individuals actively involved in charitable activities ( ) with the Golden Heart fund; Certificate of Merit by the Minister of Industry and Trade for his contribution in export promotion and import control; etc Ms. PHAM THI HOANG TAM - Board Member Ms. Pham Thi Hoang Tam was born in 1958 in Ben Tre. She graduated from University of Economics (Ho Chi Minh City), and holds a PhD in Economics. She started working at VietinBank from the early days of its establishment. She has held various positions: Head of Credit Department of State Bank in Ben Tre town; Deputy Branch Manager then Branch Manager of VietinBank - Ben Tre province; Deputy General Director of VietinBank; Deputy General Director of Mekong Housing Bank; In September 2006, she was appointed Member of the Board and Head of Supervisory Board of VietinBank. She is currently served as Member of the Board of Directors of VietinBank. Ms. Do Thi Thuy - Board Member Ms. Do Thi Thuy was born in 1960 in Thai Nguyen Province. She holds a PhD of Economics, and was a lecturer of the Banking Institute. She has been working at VietinBank since She has held various positions: Deputy Director, Director of Short-term Credit Department, Director of Corporate Banking Department of VietinBank; Branch Manager of VietinBank - Ba Dinh Branch; In August 2008, she was appointed Member of the Board of VietinBank. She is currently served as Member of the Board of Vietnam Joint Stock Commercial Bank for Industry and Trade Annual Report 45

46 Organization structure, human resources and corporate governance Members of the Board of Directors Ms. NGUYEN HONG VAN - Board Member Ms. Nguyen Hong Van was born in 1969 in Hanoi. She holds a Master of Banking and Finance. She started working at VietinBank since She has held the positions of: Deputy Director of Planning Department, Director of Planning and Investment Department, Director of Planning and ALCO Support Department; In September, 2008, she was appointed Member of the Board of VietinBank. She is currently served as Member of the Board of Vietnam Joint Stock Commercial Bank for Industry and Trade. Mr. Cat Quang Duong - Board Member Mr. Cat Quang Duong was born in 1959 in Hanoi. He holds a Master of Banking and Finance. In February 2012, he was appointed Member of the Board of VietinBank. In his career path, he has held various positions: Deputy Manager of Credit Department, Manager of Credit Department, State Bank of Vietnam. Currently he is the Deputy Head of Credit Department of the State Bank of Vietnam and Member of the Board of VietinBank. Ms. Nguyen Thi Bac - Board Member Ms. Nguyen Thi Bac was born in 1953 in Bac Ninh. She holds a Master of Law. In February 2012, she was appointed Member of the Board of VietinBank. Over the course of her career, she has held various positions such as: Lecturer in Law Faculty of Vietnam National University; Junior Supervisor, Senior Supervisor, Deputy Director, Director, Member of the Standing Committee of the Supreme People s Republic of Vietnam; Deputy Director of Law Committee, Member of the 11th National Assembly; Senior officer of National Assembly Office; She is now a lawyer of Hanoi Bar Association and a Board Member of VietinBank Mr. Michael Knight Ipson - Board Member Appointed in May 2011, Mr. Michael Knight Ipson, born in 1947 in the United States, is currently Member of the Board of VietinBank. He has held various positions such as: Vice President responsible for correspondent banking and PRC companies in Hong Kong, as well as functioning as assistant to the Regional Manager for China, Hong Kong and Taiwan; Chief Representative for the People s Republic of China; General Director of Chemical Bank Hong Kong Branch and Chief Executive, Chemical Asia Limited, the Asia merchant banking arm of Chemical Bank; Member of Chemical Bank - Global Credit Committee; Alternate Chief Executive, Chairman, IBA Credit; Principle Banking Specialist of IFC- Beijing; Country Manager for China and Mongolia (IFC); Consultant on East Asia (IFC - Washington, DC). The number of Independent Board Members: There is one independent member in the Board of Directors of VietinBank who is Ms. Nguyen Thi Bac. Activities of the Board of Directors: The Board of Directors is the governing body of the Vietnam Joint Stock Commercial Bank for Industry and Trade, elected for 5-year term, has full authority to act on behalf of VietinBank to exercise the rights and obligations related to the purpose and benefits of the Bank, except for matters under the jurisdiction of the General Shareholders Meeting. The Board consists of one Chairman and Members responsible to the shareholders for the governance of VietinBank. Activities of Independent Board Member: Accordance with the provisions of the Bank s Charter and the current laws Annual Report

47 Activities of the Committees under the Board of Directors: The Board established and maintains the operation of: Human Resources and Remuneration Committee; Risk Management Committee; Policy Committee; Asset Liability Management Committee IT Development Strategy Committee. The Committees assist the Board of Directors, give advices and make proposal to the Board of Directors on the implementation of the tasks and powers of the Board of Directors and perform a number of tasks assigned by the Board of Directors. The Board of Directors shall specify the working mechanism of its Committees, including, among others, the following issues: The regular meetings of the Committees; The extraordinary meetings of the Committees; The decision making of the Committees; Judgment mechanism of the Board of Directors for the Committee s proposals Annual Report 47

48 Organization structure, human resources and corporate governance Supervisory Board Supervisory Board members Ms. Tran Thi Le Nga - Head of the Supervisory Board Appointed in July 2009, Ms. Tran Thi Le Nga, born in 1961 in Hanoi, is currently the Head of the Supervisory Board of Vietnam Joint Stock Commercial Bank for Industry and Trade. She holds a Master of Economics at the National Economic University. She started working at VietinBank from its early years of establishment. She has held various positions: Deputy Head then Head of Business Department, Deputy Branch Manager then Branch Manager of VietinBank - Chuong Duong Branch. Ms. Phan Thi Quy - Member of the Supervisory Board Appointed in July 2009, Ms. Phan Thi Quy, born in 1954 in Bac Giang, is currently a Member of the Supervisory Board of the Vietnam Joint Stock Commercial Bank for Industry and Trade. She was a teacher at the Banking High School in the mountainous Bac Thai, teacher at Banking High School No. 4. She began working at VietinBank since 1994, and served as auditor in the Internal Control and Inspection Board, Member of the Supervisory Board of VietinBank. Ms. Pham Thi Thom - Member of the Supervisory Board Appointed in July 2009, Ms. Pham Thi Thom, born in 1969 in Ninh Binh, holds a Master s degree in Banking and Finance. She is currently the Manager of Policy Division of the Accounting and Finance Department of the State Bank of Vietnam and Member of the Supervisory Board of the Vietnam Joint Stock Commercial Bank for Industry and Trade. She has held the following positions: Deputy Head of Accounting Department, Head of Accounting Department of Bank for Agriculture and Rural Development of Vietnam- Hanoi Branch; Deputy Director of Policy Division of Accounting and Finance Department - State Bank of Vietnam. Activities of the Supervisory Board The activities of the Supervisory Board are subject to its own regulations on organization and operations, ensuring basic principles: Supervisory Board is a competent agency operating independently from the Board of Directors and Board of Management. The Supervisory Board acts on behalf of the General Shareholders Meeting in supervising the activities and the compliance with the provisions of law and the Charter by the Board of Directors and the General Director in managing VietinBank. The Supervisory Board takes responsibilities to the law and the General Shareholders Meeting for the implementation of the rights and duties assigned to them. The Supervisory Board which is elected by the General Shareholders Meeting is operating independently and effectively with many improvements in supervision and warning functions Annual Report

49 Board of Management Members of the Board of Management Mr. Nguyen Van Thang Board Member and General Director Appointed in December 2011, Mr. Nguyen Van Thang, 40 years old, is currently a Member of the Board and General Director of VietinBank. 1 Mr. Nguyen Van Du Deputy General Director Appointed in August 2008, Mr. Nguyen Van Du, 51 years old, holds a Master of Economics. He is currently Deputy General Director of the Vietnam Joint Stock Commercial Bank for Industry and Trade. 2 Ms. Bui Nhu Y Deputy General Director 3 He started working at VietinBank since its establishment and has contributed to the development of the Bank for the past 25 years. He has held the following positions: Deputy Director of Foreign Relations Department, Acting Director of Foreign Capital Raising Department, Director of Correspondent Banking Department, Director of Human Resources Department, VietinBank. Appointed in August 2008, Ms. Bui Nhu Y, 51 years old, holds a Master of Economics. She is currently Deputy General Director of the Vietnam Joint Stock Commercial Bank for Industry and Trade. She has been working at VietinBank since In the past 23 years, she has held the following positions: Deputy Director of Investment Project Management Department, Deputy Director of Project Management and Medium-term Credit Department, Director of Credit Management Department, Director of Credit Policy Department, Director of Corporate Banking Department Annual Report 49

50 Organization structure, human resources and corporate governance Mr. Pham Anh Tuan Deputy General Director 4 Appointed in August 2008, Mr. Pham Anh Tuan, 47 years old, holds a Master of Business Administration. He is currently a Deputy General Director of Vietnam Joint Stock Commercial Bank for Industry and Trade. He has been devoting for the Bank since In the past 23 years, he has held the following positions: Deputy Manager, Manager of IT Department, Director of Main Transaction Center II; Deputy Director of IT Department, Representative Office; Director of VietinBank Information Technology Center Annual Report

51 Members of the Board of Management Mr. Vo Minh Tuan Deputy General Director Mr. Le Duc Tho Deputy General Director Mr. Nguyen Hoang Dung Deputy General Director Appointed in April 2010, Mr. Vo Minh Tuan, 46 years old, holds a Master degree in economic development, is currently Deputy General Director of the Vietnam Joint Stock Commercial Bank for Industry and Trade and co-director of VietinBank - German branch. He has been working at VietinBank since In the past 23 years, he has held the following positions: Deputy Manager of International Settlement Department, Manager of Financial Accounting Department, Deputy Branch Manager of VietinBank - Ho Chi Minh Branch; Branch Manager of VietinBank - Branch No. 1 in Ho Chi Minh City, Deputy General Director of the Vietnam Joint Stock Commercial Bank for Industry and Trade. Mr. Pham Huy Thong - Deputy General Director Appointed in April 2010, Mr. Le Duc Tho, 43 years old, holds a PhD in economics. He is currently the Deputy General Director of the Vietnam Joint Stock Commercial Bank for Industry and Trade. Appointed in March 2011, Mr. Nguyen Hoang Dung, 51 years old, holds a Master of Economics. He is currently Deputy General Director of Vietnam Joint Stock Commercial Bank for Industry and Trade. He has been working at Vietnam Joint He has been devoting for VietinBank Stock Commercial Bank for Industry in the past 22 years. He has held and Trade since the beginning of its the following positions: Head operation and during the last 25 years, he of Evaluation team, Business has held the following positions: Deputy Department of VietinBank - Vinh Manager of Supervisory Department, Phu Branch; Deputy Manager of Assistant to Manager, Manager of Business Department, VietinBank Personnel Department of VietinBank - - Phu Tho Branch; Deputy Director Minh Hai Branch; Manager of Business of Planning Department, Deputy Department, Manager of Ho Chi Minh Director of Planning and Investment City Transaction Office, Deputy Branch Department, Director of Investment Manager, Branch Manager of VietinBank Department of VietinBank. - Ca Mau Branch; Senior Manager of VietinBank Mr. Nguyen Duc Thanh Mr. Hai Hung Nguyen - Deputy General Director - Chief Accountant Appointed in August 2012, Mr. Pham Huy Thong, 34 years old, holds a Master of Business Administration. He is currently Deputy General Director of Vietnam Joint Stock Commercial Bank for Industry and Trade. He has been working at VietinBank since In recent years, he has held the following positions: Manager of Export Payment Department of VietinBank - Que Vo Branch, Deputy Manager of SME Department of VietinBank - Ba Dinh Branch, Deputy Manager, Manager of Customer Department of VietinBank - Hanoi Branch, Deputy Manager, Branch Manager of VietinBank - Hanoi Branch. Appointed in August 2012, Mr. Nguyen Duc Thanh, 43 years old, holds a Master of Economics. He is currently Deputy General Director of Vietnam Joint Stock Commercial Bank for Industry and Trade. He has been working at VietinBank since In his career path, he has held the following positions: Commercial Attaché - Embassy of Vietnam in the Arab Republic of Egypt, Secretary to the Minister of the Ministry of Industry and Trade, Deputy Director of Competition Management Department - Ministry of Industry and Trade, Director of Financial Institution Department of VietinBank. Appointed in June 2011, Mr. Nguyen Hai Hung, 41 years old, holds a Bachelor of Economics. He is currently the Chief Accountant of the Vietnam Joint Stock Commercial Bank for Industry and Trade. He has been working at VietinBank since 1991 and has devoted to the development of the Bank in the past 22 years. He has held the position of Deputy Director, Director of Accounting and Payment Department of Vietnam Joint Stock Commercial Bank for Industry and Trade Annual Report 51

52 Organization structure, human resources and corporate governance Other information related to the Board of Directors, Supervisory Board and Board of Management Changes in members of the Board of Directors, Supervisory Board and Board of Management Members of Board of Directors: Full name Title Date of Appointment / Resignment Ms. Nguyen Thi Bac Member of the Board Date of appointment: February 28, 2012 Mr. Cat Quang Duong Member of the Board Date of appointment: February 28, 2012 Ms. Tran Thi Hong Hanh Member of the Board Date of appointment: July 03, 2009 Resigned since February 28, 2012 for assignment at SBV Mr. Tran Xuan Chau Member of the Board Date of appointment: July 03, 2009 Resigned since February 28, 2012 for assignment at SBV Members of the Board of Management and Chief Accountant Full name Title Date of Appointment / Resignment Mr. Pham Huy Thong Deputy General Director Date of appointment: August 01, 2012 Mr. Nguyen Duc Thanh Deputy General Director Date of appointment: August 01, 2012 Mr. Tran Kien Cuong Mr. Nguyen Viet Manh Deputy General Director Deputy General Director Date of appointment: March 01, 2012 Resigned since March 01, 2013 Date of appointment: April 04, 2010 Resigned since March 01, 2012 for assignment at SBV Mr. Nghiem Xuan Thanh Mr. Nguyen Van Thanh Deputy General Director Deputy General Director Date of appointment: January 15, 2012 Resigned since June 15, 2012 for assignment at SBV Date of appointment: July 03, 2009 Resigned since January 16, 2012 for assignment at SBV Annual Report

53 Income, remuneration, other benefits and reimbursement for members of the Board of Directors, Supervisory Board and Board of Management. The Board of Directors, Supervisory Board, and Board of Management of VietinBank enjoy the benefits, remuneration and other interests under the regulations of VietinBank. Salaries and remuneration paid to members of the Board of Directors, Supervisory Board and Board of Management are performance-based and subject to each undertaken position and role. The Remuneration for the Board of Directors and Supervisory Board which was approved by the General Shareholders Meeting of VietinBank in 2012 is 0.3% of profit after tax. The actual level of remuneration paid to the Board of Directors, Supervisory Board in 2012 was 0.234% of profit after tax. Number of members of the Board of Directors, Supervisory Board, the Board of Management having a certificate of corporate governance. All members have received training in corporate governance Annual Report 53

54 Organization structure, human resources and corporate governance Personnel and personnel policies Number of Employees The number of employees of Vietnam Joint Stock Commercial Bank for Industry and Trade as of December 31, 2012 was 19,840, the average number of employees in 2012 was 19,046 (including employees of subsidiaries, administrative units, representative offices). Average income Average salary in 2012 of the employees of VietinBank was VND million /person /month. Remuneration policy The remuneration and bonus of the employees of VietinBank vary depending on each position, level of completion of assigned tasks and the level of contribution to the business results of the unit. Insurance scheme Full compliance with the insurance scheme of the Government of Vietnam is made to ensure the rights of employees upon retirement, sickness and maternity. Other benefits Employees competence is assessed for promotion, appointment and reward. Costs of training to improve knowledge and professional capabilities are borne by the Bank. Employees are entitled to enjoy other welfare benefits: vacation, Trade union s support when in sickness or family s sickness, funerals, weddings. Retired employees are entitled to enjoy social insurance and 03 month salary before retirement, annual health care and other benefits from VietinBank after retirement Annual Report

55 Shareholders Statistical data on shareholders ÜÜ State shareholder Detailed information about the State shareholder: No. Name of organization / individual ID / Business license/ Transaction Code Date of issue Address Number of shares Percentage of ownership (%) State Bank of Vietnam 2,105,442, % Represented by: 1 - Mr. Pham Huy Hung, Chairman of the Board, representing for 40% of the State ownership - Mr. Nguyen Van Thang, Board member and General Director representing for 30% of the State ownership - Mr. Cat Quang Duong, Board member, representing for 30% of the State ownership 15/SL June 05, Ly Thai To Street, Hoan Kiem District, Hanoi 842,177, % 631,632, % 631,632, % Details of major shareholders No. Name of organization / individual ID / Business license/ Transaction Code Date of issue Address Number of shares Percentage of ownership (%) State Bank of Vietnam 2,105,442, % Represented by: 1 - Mr. Pham Huy Hung, Chairman of the Board, representing 40% of the State ownership - Mr. Nguyen Van Thang, Board member and General Director, representing 30% of the State ownership - Mr. Cat Quang Duong, Board member, representing 30% of the State ownership 15/SL 2 IFC Capitalization (Equity) Fund, L.P CA5074 June 05, 1951 March 04, Ly Thai To Street, Hoan Kiem District, Hanoi 2121 Pennsylvania Avenue, NW, Washington. DC USA 842,177, % 631,632, % 631,632, % 176,196, % 2012 Annual Report 55

56 Organization structure, human resources and corporate governance ÜÜ Founding shareholders: None Foreign shareholders No. Name of organization / individual Address Number of shares Percentage of ownership 1 IFC Capitalization (Equity) Fund, L.P Pennsyl Vania Avenue, NW, Washington, DC USD 176,196, % 2 International Finance Corporation 2121 Pennsyl Vania Avenue, NW, Washington, DC USD 85,980, % 3 Other foreign shareholders 53,869, % Tổng 316,046, % List of shareholders with transfer restricted shares No. Name of individual / organization ID / Business license/ Transaction Code Total number of shares owned Number of shares with restricted transfer Limited transfer time State Bank of Vietnam 2,105,442,944 2,105,442, Represented by: - Mr. Pham Huy Hung, Chairman of the Board, representing 40% of the 842,177, ,177,178 State ownership - Mr. Nguyen Van Thang, Board 15/SL member and General Director, representing 30% of the State 631,632, ,632,883 ownership - Mr. Cat Quang Duong, Board member, representing 30% of the 631,632, ,632,883 State ownership Internal shareholders 296, ,883 Board of Directors 241, ,690 Supervisory Board 55,193 55,193 Under the State provisions During terms of office 3 Trade Union of VietinBank 310/ToC- CDNH 47,418,876 26,800,000 Sale of share is not allowed 4 Strategic shareholders 4.1 International Finance Corporation (IFC) CS ,980,341 85,980, IFC Capitalization (Equity) Fund, L.P. CA ,196, ,196,847 From March 10, 2011 to March 10, 2014 From March 10, 2011 to March 10, Annual Report

57 Shareholders equity ÜÜ Changes in shareholders equity Indicators Percentage Amount (VND) 1. Charter capital as at the beginning of ,229,721,610, Stock dividends in 2011 with a rate of 20% and bonus shares with the rate of 9.6% 29.6% 5,987,823,760, Charter capital as at 31 December ,217,545,370,000 ÜÜ Number of ordinary shares: 2,621,754,537 shares. ÜÜ Number of bonds in circulation by type: Government bonds: VND 19,898,878,200,000 Bonds guaranteed by the Government: VND 25,310,051,000,000 Provincial bonds: VND 918,333,000,000 VEC Bonds: VND 1,848,000,000,000 International bonds: USD 250,000,000 ÜÜ Number of shares outstanding: 2,621,754,537 shares. ÜÜ Number of reserve shares, treasury shares by types: 0 share Annual Report 57

58 Organization structure, human resources and corporate governance Corporate Governance Shareholding and changes in shareholding of members of the Board of Directors No. Full name Total number of shares Percentage of ownership 1 Mr. Pham Huy Hung 842,183, % - Personal ownership 6, % - Representative of State ownership 842,177, % 2 Mr. Nguyen Van Thang 631,822, % - Personal ownership 189, % - Representative of State ownership 631,632, % 3 Mr. Cat Quang Duong 631,632, % - Personal ownership % - Representative of State ownership 631,632, % 4 Ms. Pham Thi Hoang Tam 26, % 5 Ms. Nguyen Hong Van 3, % 6 Ms. Do Thi Thuy 15, % 7 Ms. Nguyen Thi Bac % 8 Mr. Michael Knight Ipson % Total 2,105,684, % Annual Report

59 Information about CTG trading and other transactions by members of the Board of Directors, Supervisory Board, Board of Management and related people. No. Transaction made by Relationships with internal stakeholders Number of shares owned at the beginning of the year Number of shares Percentage (%) Number of shares owned at the end of the year Number of shares Percentage (%) The reason for increase or decrease 1 Nguyen Tran Hoa Binh Younger brother of Deputy General Director Nguyen Hoang Dung 1, % 10 (including 01 from stock dividend and bonus shares) % Sold 1700 shares 2 Bui Nhu Y Deputy General Director 25, % 09 (including 1890 from the stock dividend and bonus shares) % Sold shares and bought 2000 shares 3 Nguyen Thi Ngoc Diep Daughter of Deputy General Director 0 0% 0 0% Bought 1000 shares and sold 1000 shares 4 Nguyen Cao Khanh Elder brother of Deputy General Director Nguyen Van Du % 3, % Bought 2500 shares 2012 Annual Report 59

60

61 Associated Companies

62 Associated Companies VietinBank s Subsidiaries, Affiliates and joint ventures No. Name of company Percentage of ownership by VietinBank Scope of operation 1 VietinBank Leasing Company Ltd. 100% Finance and Banking 2 VietinBank Insurance Company Ltd. 100% Insurance 3 VietinBank Debt Management and Asset Exploitation Company Ltd. 4 VietinBank Fund Management Company Ltd. 100% 5 VietinBank Gold and Jewelry Trading Company Ltd. 100% 100% Asset Management 6 VietinBank Securities Joint Stock Company 75,61% Capital market Securities investment, fund management, securities portfolio management Manufacture, design, and trade in gold and precious metals and gems 7 VietinBank Global Money Transfer Company Ltd. 100% Other monetary intermediation 8 Indovina Bank 50% Finance and Banking 9 VietinBank Aviva Life Insurance Company Ltd. 50% Insurance Investments in related companies As of December 31, 2012, VietinBank had in total 7 subsidiaries: VietinBank Leasing Company Ltd., VietinBank Insurance Company Ltd., VietinBank Debt Management and Asset Exploitation Company Ltd., VietinBank Fund Management Company Ltd., VietinBank Gold and Jewelry Company Ltd., VietinBank Securities Joint Stock Company and VietinBank Global Money Transfer Company Ltd.; and 2 joint-venture companies: Indovina Bank, VietinBank Aviva Life Insurance Company Ltd. Subsidiaries: In 2012, the total capital contribution by the Bank to its subsidiaries was VND 3,227 billion, an increase of VND 500 billion compared with the end of 2011, including the additional investment in VietinBank Fund Management Company Ltd and Global Money Transfer Company Ltd which were VND 450 billion and VND 50 billion respectively. Joint-venture Companies: In 2012, Indovina Bank maintained its charter capital at USD 165 million and each joint-venture partner held 50% of the charter capital. VietinBank Aviva Life Insurance Company Ltd was founded in 2011 and inaugurated in October 2011 with the charter capital of VND 800 billion, each joint venture partner contributed 50% of the capital. The total amount of investment in joint-ventures was VND 1,792 billion Annual Report

63 2012 Annual Report 63

64 Associated Companies Overview of THE performance and financial status of associated companies VietinBank Leasing Company Ltd. Introduction: An independent accounting subsidiary of VietinBank, established under Decision No. 53/1998/ QD-NHNN5 dated January 26, 1998 of the Governor of State Bank of Vietnam; Certificate of Business Registration No dated March 28, 1998 issued by Hanoi Planning and Investment Department. From August 2009, the Company got VietinBank s and the State Bank of Vietnam s approval to switch to a financial leasing one member Ltd. company model. The charter capital of the Company was VND 800 billion as at December 31, Head Office: 16 Phan Dinh Phung, Ba Dinh, Hanoi. Business activities: financial leasing to enterprises established under the law of Vietnam; using the leased assets for legitimate business purposes; providing consultancy service and guarantees to customers on the services related to financial leasing, performing other operations as permitted by the State Bank of Vietnam. ÎÎPerformance: By year end 2012, total funds reached VND 653 billion. Total loans and investments as at December 31, 2012 was VND trillion. In particular, outstanding lease exposure amounted to VND trillion and outstanding investment was VND billion. The Company s main source of income is interest income from financial leasing. The Company has proactively urged the collection of debts and leasing interest on a timely basis to fulfill its targets. At the same time, the Company actively practices thrift, combats wastefulness, procures only assets and tools needed for the operation of the Company. In 2012, the Company s total income reached VND billion, pre-tax profit was 101 billion, an increase of 0.5% from Given the fact that the domestic economy was affected by the global economic crisis, financial leasing companies in Vietnam have been operating inefficiently with deteriorated reputation. The Company, however, continued to promote investment, financial leasing and at the same time improving the efficiency and capital base. In 2012, the Company signed new leasing contracts worth more than VND 561 billion. VietinBank Leasing Company Ltd. is considered one of the best performing companies by Vietnam Financial Leasing Association. ÎÎ Plan for 2013: The goal set by the Company is to promote the growth and development of products and services of financial leasing, winning the market on the basis of safety, sustainability and efficiency, focus on comprehensive restructure toward a modern company, enhance financial strength and competitiveness, improve the quality of human resources, technological innovation as well as products and services quality, consolidate the collection of bad debts and off-balance sheet debt. The Company will continue to improve the governance and management capacity of its management team both at head office and at branch level and at the same time, improve the professional capacity and business culture of the staff to meet in the new business requirements; continue to strengthen the organizational structure, development of the network, the growth of assets and market share as well as improve the competitiveness of the Company Annual Report

65 VietinBank Securities Joint Stock Company Introduction: Established under Decision No. 126/ QD-HDQT-NHCT1 dated September 1, 2000 by the Board of Directors of VietinBank, operating under the Securities Business License No. 107 /UBCK-GP dated July 01, 2009 by the State Securities Commission. Head Office: 306 Ba Trieu, Hai Ba Trung District, Hanoi Key Business Activities: business activities in securities field, including brokerage, proprietary trading, underwriting, investment advisory, financial advisory and securities custody. ÎÎPerformance: By the end of 2012, the Company achieved total revenue of VND billion and pre-tax profit of VND 96 billion. With this profit, the Company was in the top 5 profitable companies on the securities market and achieved % of the plan assigned by the General Shareholders Meeting. Total assets of the company reached VND 1,093 billion. Charter capital remained at VND billion. In 2012, despite of the difficulties of the stock market, the Company made necessary adjustments to its strategy, significantly reduced trading of listed securities and managed to ensure the efficiency of the capital. Brokerage activities are oriented toward risk management, strict compliance with the provisions of law. Brokerage fee reached VND 37.5 billion, increased by 63% from 2011, bringing the Company to the top 10 companies with largest share of brokerage market. Corporate advisory fee reached VND 14 billion. ÎÎ Plan for 2013: The Company s goal for 2013 is a 20% growth in revenue and profit compared to For brokerage activities, the Company focuses on expanding market share in two directions: on one hand, the Company s networks are developed to boost its market share in the potential markets. On the other hand, the Company s information technology system is further invested to better serve the trading of investors. For corporate financial advisory activities, the Company will provide customers with full package of services from financial advisory, corporate restructuring, capital arrangement to bond issuance. Special focus on M&A advisory service is considered an inevitable trend in the context of the current volatile economy. For proprietary trading, the Company continues to restructure its investment assets, increase the size of the total assets by employing appropriate solutions and strive to increase total assets to around VND 1,200 billion to increase the scale of operation of the Company. VietinBank Debt Management and Asset Exploitation Company Ltd. Introduction: The Company originally operated under the Business Registration Certificate No dated January 17, 2007 by the Department of Planning and Investment of Ho Chi Minh City. On July 20, 2010, the Company was renamed to VietinBank Debt and Asset Management One Member Ltd. Company and operating under the Business Registration Certificate No by the Department of Planning and Investment of Ho Chi Minh City with the first registration and second registration on June 22, The Company is a full subsidiary of VietinBank with the charter capital of VND 30 billion. Head Office: 76 Nguyen Van Cu Street, Nguyen Cu Trinh Ward, District I, Ho Chi Minh City Annual Report 65

66 Associated Companies Business Activities: Receipt and management of mortgage, pledged assets and valuation of collateral, etc. ÎÎ Performance: As at December 31, 2012, the Company s total assets reached VND billion and charter capital was VND 30 billion. Profit for the year of 2012 was VND 661 million, half of the profit in In 2012, the Company implemented its organizational restructuring and established its Hanoi Branch. A valuation department was set up in the Company s headquarter responsible for making appraisal and evaluation of Vietinbank s collateral and the Company s projects and investment plans. During the year, the Company has signed contracts with VietinBank s branches on asset valuation with the total valuation amount of VND 18,598 billion. In addition, the Company also supported VietinBank s branches in debt disposal and collateral realization. ÎÎ Plans for 2013: The Company continues to push up all business activities, actively supports VietinBank s branches in handling debts and collaterals. In preparation for the second phase of its restructuring process and in realization of the direction of VietinBank s Chairman on the implementation of the Appraisal and Valuation of Collateral in VietinBank system Project, the Company will expand its network, strengthen its organizational structure and human resources to improve the quality of its valuation services and shorten the operation time. The Company will operate in close collaboration with VietinBank s branches and manage to understand the characteristics of each region for the purpose of better valuation of assets. The auction business of the Company is growing with increasing number of property auction contracts. It is expected that the business of auction will be more profitable in VietinBank Insurance Company Ltd. Introduction: VietinBank Insurance Company Ltd. was formerly known as the Incombank-Asia Insurance Company (IAI), a joint-venture between VietinBank and Asia Insurance Singapore with capital contribution of 50/50. It was established under the License No. 21/GP/ KDBH dated December 21, On December 17, 2008, the Ministry of Finance granted adjusted License No. 21/GPDC5/KDBH to allow the change from Incombank- Asia Insurance Company to VietinBank Insurance Company Ltd. Together with the change in name, VietinBank acquired the paid-in capital of the foreign partner and became the only owner of the Company. On December 31, 2012, the Company s charter capital was VND 500 billion. Head Office: 141 Le Duan Street, Hoan Kiem District, Hanoi Business Activities: offering non-life insurance products as permitted by the applicable law, providing re-insurance services, operating in funds management, making capital contribution and equity investment, etc. ÎÎ Performance: Total assets reached VND 755 billion, increased by 7.4% from Its charter capital is VND 500 billion. Total insurance premium reached VND billion, decreased by 16% from 2011 and pre-tax profit was at VND 63 billion. Business results of some typical types of insurance: motor vehicle insurance premium reached VND 34.9 billion, accounting for 29.2% and property insurance premium accounted for 25% of the total premium. In 2012, the Company promoted the coordination with VietinBank s branches through the deployment of the model of bancassurance specialists. Under that model, more than 500 bank staff were provided with training in insurance. At the same time, the Company strengthened the coordination with VietinBank s Head Office departments and other subsidiaries in VietinBank system to promote Annual Report

67 cross-selling and support in offering insurance products to customers. In 2012, the Company researched and launched new products for the benefits of retail customers to diversify its range of products offered through retail banking channels at VietinBank s branches, including: multifunctional savingsinsurance product; insurance for private house; accident insurance for S-cards and Visa/ Master card-holders. In addition, the Company launched three other insurance products: satellite insurance, oil and gas insurance and airway insurance to promote sales of insurance. The Company also deployed online distribution channels via ipay: insurance for civil liability of motor vehicle owners, international travel insurance through collaboration with the E-Banking Department and IT Center of VietinBank. In late 2012, the Company issued rubber tree insurance product to target rubber farming and processing companies in the Central and the South of Vietnam. ÎÎ Plan for 2013: Premium revenue is expected to be doubled from 2012 and reach VND 245 billion and profit before tax is expected to reach VND 70.4 billion, an increase of 10.57%. The Company will focus on expanding market share from VietinBank customers and developing new markets; research and develop centralized insurance plans for all assets, people, vehicles, etc of VietinBank system; apply ISO system for quality management; standardize risk management system to control risks and ensure secure operation; enhance training to improve the overall quality of the Company s Head Office staff as well as branches ; VietinBank Fund Management Company Ltd. Introduction: VietinBank Fund Management Company is a wholly owned subsidiary of VietinBank. It was established under the License No /UBCK- GP dated October 26, 2010 of the State Securities Commission. The Company s current charter capital is VND 950 billion. Head Office: 6th Floor, 34 Cua Nam Street, Hoan Kiem District, Hanoi. Business Activities: Establishment and management of securities investment funds and securities investment companies, securities portfolio management, etc. Î Î Performance: The Company s total revenue in 2012 reached VND 93 billion and pre-tax profit was over VND 63 billion. Its charter capital as at December 31, 2012 was VND 950 billion. During 2012, the departments of the Company have improved its business processes and provided primary products and services to customers. Good progress was observed in corporate bond issuance consultancy service and portfolio management: growth in the number of customers and type of customers (individual, organizations, financial institutions, insurance companies, manufacturing companies, foreign customers, etc); diversification in investment assets (stocks, bonds, fixed income structured products, private equity, projects, etc.). ÎÎ Plan for 2013: To expand customer base and increase trusted funds, the Company plans to continue to maintain and exploit the needs of existing customers, develop new customers, attract institutional customers and high net-worth individuals. For mobilization and fund management, the Company will establish and manage such funds as bond investment fund, stock investment fund, real estate investement fund and others Annual Report 67

68 Associated Companies VietinBank Gold and Jewelry Trading Company Ltd. Introduction: VietinBank Gold and Jewelry Trading Company Ltd. is a wholly owned subsidiary of VietinBank. It was established under Decision No. 1521/QD-HDQT- NHCT1 dated September 15, 2010 of VietinBank s Board of Directors and Business Registration No dated November 25, 2011 of the Planning and Investment Department of Hanoi. The Company s current charter capital is VND 300 billion. Head Office: 11th floor, Building No. 34 Cua Nam Street, Hoan Kiem District, Hanoi. Key Business Activities: manufacturing, designing, importing and exporting gold and gems; acting as broker agency; trade promotion; operating in such areas pertaining to e-commerce services, technology transfer, real estate. ÎÎ Performance: The Company s total assets reached VND 341 billion and its charter capital amounted to VND 300 billion. Revenues were nearly VND 667 billion and pre-tax profit was in excess of VND 27 billion. In 2012, the Company continued to carry out the trading of gold bars and the trading of gold and silver jewelry and gems. ÎÎ Plan for 2013: The Company revenue in 2013 is expected to reach VND 4,778 billion and pre-tax profit is expected to be VND 70 billion. The Company will continue to expand business of gold bars; expand the retail sale of RISIS products; continue to promote the sale of diamond jewelry, luxury gemstone in the showrooms in 34 Cua Nam building and in the store at Cho Hom market as well as other locations about to be opened by the Company; continue looking for local and overseas partners to provide high-end diamond and precious stones to diversify the Company s products; Open trading floors of the world s precious and semi-precious gemstones; seek for suppliers offering gold at low price low-cost gold; promote marketing activities. VietinBank Global Money Transfer Company Ltd. Introduction: In order to professionalize and promote money transfer services, the Board of Directors of VietinBank has approved the Plan on establishement of a specialized money transfer company followed by a Decision to establish VietinBank Global Money Transfer Company Ltd.. On March 01, 2012, VietinBank Global Money Transfer Company Ltd. was officially put into operation. Since then, the Company has been the focal point for the development of remittance services and personal money transfer service for VietinBank s nationwide network. The Company is licensed with the Registration Certificate No Head Office: 3rd floor, VietinBank building, 126 Doi Can Street, Ba Dinh District, Hanoi. Key business activities: Monetary intermediation. ÎÎ Performance: In its first year of operation, the Company made great efforts to meet its targets pre-tax profit was nearly VND 17 billion and ROE was at 25.5%. The fee income from money transfer service was over VND 30 billion with the significant contribution from Western Union services (about 50% of total income). Revenue from financial activities totaled over VND 4.3 billion. In addition to the financial investment from the initial capital, the Company continued to make more use of the accumulated profit in order to maximize the Company s income. ÎÎ Plan for 2013: The Company will boost the money transfer volume by actively developing new remittance channels, new products and services. Sales target for remittance of VietinBank in 2013 is USD 1.3 billion. The Company will promote market research, diversify products and services, develop new services, such as: transfer money for overseas study, domestic express money transfer Annual Report

69 Indovina Bank Introduction: Indovina Limited Bank (IVB) is the first joint venture bank in Vietnam which was established on November 21, 1990 under the License No. 135/ GP by the State Committee for Cooperation and Investment and License No. 08/NH-GP dated October 29, 1992 issued by the State Bank of Vietnam. The parties to the joint venture are VietinBank and Cathay United Bank (CUB) in Taiwan (a fully affiliated member of the Cathay Financial Group - the largest financial group in Taiwan). On December 31, 2012, the charter capital of IVB was USD 165 million, in which 50% held by VietinBank. Head Office: Pham Hong Thai, District 1, Ho Chi Minh City. Business Activities: provide banking products and services such as deposits, loans, card services, L/C, remittance, etc. ÎÎPerformance: As at December 31, 2012, IVB s total assets were about VND 23,003 billion. Net interest income reached VND billion, down by 18% compared with Profit after tax in 2012 reached VND billion. NPL ratio as at December 31, 2012 was at 3.3%. VietinBank Aviva Life Insurance Company Ltd. Introduction: VietinBank Aviva Life Insurance Company Ltd. is a joint-venture company between VietinBank and Aviva Group. The purpose for operation of the Company is to exploit the life insurance market in Vietnam. It was established under the License of Establishment and Operation No.64/GP/KDBH by the Ministry of Finance. As at December 31, 2012, the Company s charter capital was VND 800 billion, in which VietinBank held 50%, equivalent to VND 400 billion. Head Office: Level 10 Tower B Hadi Resco Building, 521 Kim Ma Street, Ba Dinh District, Hanoi Key Business Activities: Life Insurance. ÎÎ Performance: Total assets as at December 31, 2012 were at VND billion. Revenue from premium reached VND 7 billion in Profit after tax reached VND 34 billion, up 19% from In 2012, VietinBank Aviva boosted sale channels via VietinBank branch network and VietinBank Leasing Company Ltd. The number of insurance agents increased to 2705 agents. As the result, the number of new insurance policies was ÎÎ Plan for 2013: Expected revenue in 2013 is VND 50 billion in which revenue from bancassurance channel is VND 40 billion and revenue from independent agents is VND 10 billion. About 85% of insurance policies is expected to be maintained. The Company plans to employ and provide training to additional 1000 new independent agents in 2013 and increase the number of VietinBank officers who have insurance certificates to 3000, thereby increase the number of branches doing insurance business to 80 branches out of 149 branches Annual Report 69

70 Annual Report

71 Financial STATEMENTS 2012 Annual Report 71

72 Contents Statement of the Board of Management Independent Auditors report Consolidated Balance sheet Consolidated Income statement Consolidated Cash flow statement Notes to consolidated financial statements Annual Report

73 STATEMENT OF THE BOARD OF MANAGEMENT The Board of Management of Vietnam Joint Stock Commercial Bank for Industry and Trade ( the Bank ) presents this report together with the Bank s consolidated financial statements for the year ended 31 December BOARDS OF DIRECTORS AND MANAGEMENT The members of the Boards of Directors and Management of the Bank who held office during the year and at the date of this report are as follows: Board of Directors Mr. Pham Huy Hung Mr. Nguyen Van Thang Ms. Pham Thi Hoang Tam Ms. Nguyen Hong Van Ms. Do Thi Thuy Mr. Michael Knight Ipson Mr. Cat Quang Duong Ms. Nguyen Thi Bac Mr. Tran Xuan Chau Ms. Tran Thi Hong Hanh Chairman Member Member Member Member Member Member Member (appointed on 28 February 2012) Member (appointed on 28 February 2012) Member (resigned on 28 February 2012) Member (resigned on 28 February 2012) Board of Management Mr. Nguyen Van Thang Mr. Nguyen Van Du Mr. Pham Anh Tuan Ms. Bui Nhu Y Mr. Vo Minh Tuan Mr. Le Duc Tho Mr. Nguyen Hoang Dung Mr. Tran Kien Cuong General Director Deputy General Director Deputy General Director Deputy General Director Deputy General Director Deputy General Director Deputy General Director Deputy General Director (appointed on 01 March 2012, resigned on 01 March 2013) Mr. Pham Huy Thong Mr. Nguyen Duc Thanh Mr. Nghiem Xuan Thanh Deputy General Director (appointed on 01 August 2012) Deputy General Director (appointed on 01 August 2012) Deputy General Director (appointed on 15 January 2012, resigned on 15 June 2012) Mr. Nguyen Viet Manh Mr. Nguyen Van Thanh Mr. Nguyen Hai Hung Deputy General Director (resigned on 01 March 2012) Deputy General Director (resigned on 16 January 2012) Chief Accountant 2012 Annual Report 73

74 STATEMENT OF THE BOARD OF MANAGEMENT (continued) BOARD OF MANAGEMENT S STATEMENT OF RESPONSIBILITY The Board of Management of the Bank is responsible for preparing the consolidated financial statements of each year, which give a true and fair view of the financial position of the Bank and of its results and cash flows for the year. In preparing these consolidated financial statements, the Board of Management is required to: Select appropriate accounting policies and then applying them consistency; Make judgments and estimates that are reasonable and prudent; State whether applicable accounting principles have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; Prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Bank will continue in business; and Design and implement an effective internal control system for the purpose of properly preparing and presenting the consolidated financial statements so as to minimise errors and frauds. The Board of Management of the Bank is responsible for ensuring that proper accounting records are kept, which disclose, with reasonable accuracy at any time, the financial position of the Bank and to ensure that the consolidated financial statements comply with Vietnamese Accounting Standards, Accounting System applicable to credit institutions in Vietnam and prevailing relevant regulations in Vietnam. The Board of Management is also responsible for safeguarding the assets of the Bank and hence for taking reasonable steps for the prevention and detection of frauds and other irregularities. The Board of Management confirms that the Bank has complied with the above requirements in preparing these consolidated financial statements. For and on behalf of the Board of Management, Hanoi, 21 March 2013 General Director Nguyen Van Thang Annual Report

75 INDEPENDENT AUDITORS REPORT No: 728/Deloitte/AUDHN-RE To: The shareholders The Boards of Directors and Management Vietnam Joint Stock Commercial Bank for Industry and Trade We have audited the accompanying consolidated balance sheet as at 31 December 2012, the related statement of consolidated income and statement of consolidated cash flows for the year then ended, and the notes thereto (collectively referred to as the consolidated financial statements ) of Vietnam Joint Stock Commercial Bank for Industry and Trade ( the Bank ) prepared on 21 March 2013, as set out from page 5 to page 72. The accompanying consolidated financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Vietnam. Respective Responsibilities of the Board of Management and Auditors As stated in the Statement of the Board of Management on page 1 and 2, the preparation of these consolidated financial statements is the responsibility of the Bank s Board of Management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The Bank s consolidated financial statements for the year ended 31 December 2011 were audited by another independent auditing company whose auditors report dated 22 February 2012 expressed an unqualified opinion with the emphasis paragraph relating to contingent liabilities. Basis of Opinion We have conducted our audit in accordance with Vietnamese Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance that the consolidated financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. Opinion In our opinion, the accompanying consolidated financial statements give a true and fair view of, in all material respects, the financial position of the Bank as at 31 December 2012 and the results of its operations and its cash flows for the year then ended in accordance with Vietnamese Accounting Standards, Accounting System applicable to credit institutions in Vietnam and prevailing relevant regulations in Vietnam Annual Report 75

76 INDEPENDENT AUDITORS REPORT (continued) Opinion (continued) Without qualifying our opinion, we would like to draw attention to Note 52 - Contingent liabilities of the Notes to the consolidated financial statements. Currently, investigation agencies are prosecuting the Bank s former employees of Ho Chi Minh City branch and Nha Be branch for alleged misappropriation of assets by means of fraudulence. According to the criminal legislation and criminal procedure code, for cases under prosecution and investigation, the legal responsibilities and obligation of related parties will be determined only when the trial has been completed with an effective judgment. However, based on results of internal reconciliation, review and investigation procedures that have been taken up to the date of this report, the Bank s management believes that the Bank neither is jointly liable for nor incurs any financial loss that regards to the illegal action of these individuals. 21 March 2013 Hanoi, S,R,Vietnam Deputy General Director Auditor Truong Anh Hung PA Certificate No. D.0029/KTV Nguyen Tuan Anh CPA Certificate No.N.1291/KTV For and on behalf of DELOITTE VIETNAM COMPANY LIMITED Annual Report

77 CONSOLIDATED BALANCE SHEET As at 31 December 2012 FORM B 02/TCTD-HN Unit: Million VND No. items Notes 31/12/ /12/2011 A. ASSETS I. Cash, gold and gemstones 5 2,511,105 3,713,859 II. Balances with the State Bank of Vietnam ( SBV ) 6 12,234,145 12,101,060 III. Placements with and loans to other credit institutions 7 57,708,302 65,268, Placements with other credit institutions 21,457,717 61,795, Loans to other credit institutions 36,432,503 3,500, Provision for credit losses of loans to other credit institutions (181,918) (27,150) IV. Trading securities , , Trading securities 284, , Provisions for diminution in value of trading securities (9,714) (14,654) V. Derivative financial instruments and other financial assets 8 74,451 20,236 VI. Loans to customers 329,682, ,397, Loans to customers 9 333,356, ,434, Provisions for credit losses of loans to customers 10 (3,673,254) (3,036,502) VII. Investment securities 12 73,417,250 67,448, Available-for-sale investment securities 71,081,582 65,320, Held-to-maturity investment securities 2,450,000 2,400, Provisions for diminution in value of investment securities (114,332) (272,085) VIII. Long-term investments 13 2,816,190 2,924, Investments in joint-ventures 2,444,848 2,601, Investments in associates 45,057 25, Other long-term investments 327, , Provisions for diminution in value of long-term investments (824) - IX. Fixed assets 5,276,653 3,746, Tangible fixed assets 14 2,971,038 2,548,273 a. Cost 6,676,954 5,541,803 b. Accumulated depreciation (3,705,916) (2,993,530) 2. Finance lease assets - - a. Cost b. Accumulated depreciation (49) (587) 3. Intangible fixed assets 15 2,305,615 1,197,944 a. Cost 2,643,702 1,442,639 b. Accumulated amortisation (338,087) (244,695) X. Other assets 19,534,772 14,256, Other receivables 16 9,454,662 5,556, Interest and fee receivables 7,943,559 6,664, çher assets 17 2,146,201 2,044,263 - In which: Goodwill 18 11,798 13, Provisions for diminution in value of other assets 17 (9,650) (8,565) TOTAL ASSETS 503,530, ,420,078 The note set out from pages 10 to 72 are integral part of these consolidated financial statements 2012 Annual Report 77

78 CONSOLIDATED BALANCE SHEET (continued) As at 31 December 2012NO. ITEMS Notes 31/12/ /12/2011 FORM B 02/TCTD-HN Unit: Million VND B. LIABILITIES AND OWNERS EQUITY NOTES 31/12/ /12/2011 I. Borrowings from the Government and the SBV 19 2,785,374 27,293,733 II. Deposits and borrowings from other credit institutions 20 96,814,801 74,407, Deposits from other credit institutions 19,983,410 58,211, Borrowings from other credit institutions 76,831,391 16,195,943 III. Deposits from customers ,105, ,135,945 IV. Grants, trusted funds and borrowings at risk of credit institution 22 33,226,708 36,824,508 V. Valuable papers issued 23 28,669,229 11,089,117 VI. Other liabilities 24 19,088,467 24,969, Accrued fee and interest expenses 3,615,577 4,834, Other payables and liabilities 14,982,079 19,665, Other provisions 490, ,552 TOTAL LIABILITIES 469,689, ,720,686 VII. Capital and reserves 26 33,624,531 28,490, Capital 26,219,755 22,173,891 a. Charter capital 26,217,545 20,229,722 b. Share premium 2,210 1,944, Reserves 2,433,966 1,476, Foreign exchange reserve 302, , Retained earnings 4,668,709 4,540,639 VIII. Minority interests , ,496 TOTAL LIABILITIES AND OWNERS EQUITY 503,530, ,420,078 OFF BALANCE SHEET ITEMS NO. ITEMS NOTES 31/12/ /12/2011 I. Contingent liabilities 42 43,848,065 47,837, Loan guarantees 195, , L/C guarantees 27,284,378 30,125, Other guarantees 16,367,890 17,574,611 II. Commitments (*) 42 11,932,157 4,596, Other commitments 11,932,157 4,596,987 (*) Including conditional commitments Preparer Approver Approver Ha Quang Vu Nguyen Hai Hung Nguyen Van Du Head of Financial Accounting Management Department 21 March 2013 Chief Accountant Deputy General Director Annual Report The note set out from pages 10 to 72 are integral part of these consolidated financial statements

79 CONSOLIDATED INCOME STATEMENT For the year ended 31 December 2012 FORM B 03/TCTD-HN Unit: Million VND no. items NOTES Interest and similar income 27 50,660,762 55,775, Interest and similar expenses 28 (32,240,738) (35,727,190) I. Net interest income 18,420,024 20,048, Income from services 1,855,358 1,923, Expenses on services (577,135) (771,029) II. Net profit from services 29 1,278,223 1,152,331 III. Net gain from trading foreign currencies and gold , ,562 IV. Net gain/(loss) from trading securities 31 34,156 10,930 V. Net gain/(loss) from investment securities ,883 (501,144) 5. Other operating income 1,330,576 1,191, Other operating expenses (144,977) (167,014) VI. Net profit from other activities 33 1,185,599 1,024,103 VII. Income from capital contribution, equity investments , ,345 VIII. Operating expenses 35 (9,435,673) (9,077,909) IX. Net profit from operating activities before credit provision expenses 12,525,854 13,296,272 X. Provision expenses for credit losses 36 (4,357,954) (4,904,251) XI. Profit before tax 8,167,900 8,392, Current corporate income tax expense 37 (1,998,221) (2,132,654) XII. Corporate income tax expense 37 (1,998,221) (2,132,654) XIII. Profit after corporate income tax 6,169,679 6,259,367 XIV. Minority interests 18,134 15,572 XV. Profit attributable to the owners of the Bank 6,151,545 6,243,795 XVI. Earnings per share (VND) 38 2,053 2,830 Preparer Approver Approver Ha Quang Vu Nguyen Hai Hung Nguyen Van Du Head of Financial Accounting Management Department 21 March 2013 Chief Accountant Deputy General Director The note set out from pages 10 to 72 are integral part of these consolidated financial statements 2012 Annual Report 79

80 CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2012 FORM B 04/TCTD-HN Unit: Million VND NO. ITEMS CASH FLOW FROM OPERATING ACTIVITIES 01. Interest and similar income 49,381,834 53,934, Interest and similar expenses (33,460,084) (34,452,245) 03. Income from services 1,278,223 1,141, Net gain from trading foreign currencies, gold and securities 754, , Other income (69,822) (1,350,461) 06. Receipts from debts written-off or paid off by risk fund 1,255,421 1,170, Payments to employees and for operating management (9,922,929) (8,339,552) 08. Corporate income tax paid (2,155,454) (2,164,061) Net cash from operating profit before movements in assets and working capital 7,061,223 10,901,146 Movement in operating assets (54,838,980) (74,211,604) 09. (Increase) in deposit at and loans to other credit institutions (10,233,733) (1,339,250) 10. (Increase) in trading securities (1,809,525) (6,691,466) 11. (Increase) in derivatives and other financial assets (54,215) (994) 12. (Increase) in loans to customers (39,921,780) (59,229,503) 13. (Decrease) in provision for losses (3,597,412) (5,270,760) 14. Decrease/(Increase) in other operating assets 777,685 (1,679,631) Movement in operating liabilities 38,918,514 80,460, (Decrease) in borrowings from the Government and the State Bank of Vietnam (24,508,359) (15,926,945) 16. Increase in deposits and borrowings from other credit institutions 22,198,608 39,311, Increase in deposits from customers (including State Treasury) 27,441,108 51,355, Increase in issued valuable papers (excluding valuable papers charged to financial activities) 17,580, , (Decrease)/Increase in grants, trusted funds and borrowings at risk of credit institution (3,389,520) 12,983, Increase/(Decrease) in other operating liabilities (403,206) (7,619,920) 21. Cash outflows from reserves of the credit institution (229) (3,189) I. Net cash used in operating activities (8,859,243) 17,150,183 CASH FLOWS FROM INVESTING ACTIVITIES 01. Acquisition of fixed assets (6,111,570) (584,033) 02. Proceeds from sales, disposal of fixed assets 6, , Investment in other entities (62,529) (429,780) 04. Proceeds from disposal of investments in other entities 13, Dividends and profit received from 30,502 19,908 long-term investments and capital contribution II. Net cash used in investing activities (6,123,027) (875,461) Annual Report The note set out from pages 10 to 72 are integral part of these consolidated financial statements

81 CONSOLIDATED CASH FLOW STATEMENT (continued) For the year ended 31 December 2012 FORM B 04/TCTD-HN Unit: Million VND NO. ITEMS CASH FLOWS FROM FINANCING ACTIVITIES 01. Increase in share capital from issuing stocks - 6,911, Dividends paid (79) (2,043,709) 03. Payments for buying treasury shares - (8,989) III. Net cash (used in)/from financing activities (79) 4,859,124 IV. Net (decrease)/increase in cash (14,982,349) 21,133,846 V. Cash and cash equivalents at the beginning of the year 74,294,399 53,160,553 VI. Effects of changes in foreign exchange rates 1,938 - VII. Cash and cash equivalents at the end of the year 59,313,988 74,294,399 (Note 39) Preparer Approver Approver Ha Quang Vu Nguyen Hai Hung Nguyen Van Du Head of Financial Accounting Management Department 21 March 2013 Chief Accountant Deputy General Director The note set out from pages 10 to 72 are integral part of these consolidated financial statements 2012 Annual Report 81

82 Notes to the CONSOLIDATED financial statements Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 1. GENERAL INFORMATION Vietnam Joint Stock Commercial Bank for Industry and Trade (herein referred to as the Bank or Vietinbank ) is a joint stock commercial bank incorporated in the Socialist Republic of Vietnam. Establishment and operation The Bank was established from the equitisation of Vietnam Bank for Industry and Trade - a State-owned commercial bank which had been established in accordance with Decision No. 402/CT dated 14 November 1990 by the President of Ministerial Council and subsequently reorganised into state-owned corporation type in accordance with Decision No. 285/QD-NH5 dated 21 September 1996 by the Governor of the State Bank of Vietnam ( the SBV ). On 25 December 2008, the Vietnam Bank for Industry and Trade successfully undertook its Initial Public Offering. The Bank was equitized and renamed as Vietnam Joint Stock Commercial Bank for Industry and Trade on 03 July 2009 under License of Establishment and Operation No. 142/GP-NHNN dated 03 July 2009, issued by the State Bank of Vietnam and Certificate of Business Registration No dated 03 July 2009 issued by Hanoi Planning and Investment Department. The Bank successfully raised capital in 2012 and on 13 April 2012, Hanoi Department of Planning and Investment issued the Bank s Certificate of Business Registration No The Bank s main activities are to provide banking services including mobilizing and receiving short-term, medium-term, and long-term deposits from organisations and individuals; making short-term, medium-term, and long-term loans to organisations and individuals based on the nature and capability of the Bank s sources of capital; conducting foreign exchange transactions, international trade financial services, discounting of commercial papers, bonds and other valuable papers, and providing other banking services allowed by the SBV. Chartered capital The Bank s chartered capital under the License of Establishment and Operation No. 142/GP-NHNN dated 03 July 2009 is VND 11,252,973 million, of which state-owned capital is VND 10,040,855 million and capital raised from the Initial Public Offering is VND 1,212,118 million. The Bank s plan for its first capital increase in 2010 was approved by the SBV under the document No. 3679/NHNN-TTGSNH dated 19 May On 24 August 2010, the State Securities Commission of Vietnam (SSC) granted Certificate No. 651/UBCK-GCN to the Bank for share public offering registration. On 18 October 2010, the Bank completed its share issuance with 391,931,841 shares additionally issued, of which 76,848,603 shares were issued in form of share dividend payment and 315,083,238 shares were sold to the Bank s shareholders. On 10 March 2011, the Bank completed its share issuance to a strategic shareholder with the total number of new issued shares of 168,581,013. On 28 December 2011, the Bank completed its share issuance to existing shareholders with the total number of new issued shares of 337,162,100. On 13 April 2012, the Bank completed its share issuance to existing shareholders with the total number of new issued shares of 598,782,376. Accordingly, as at 31 December 2012, the Bank s chartered capital is VND 26,217,545 million Annual Report

83 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 1. GENERAL INFORMATION (continued) Locations and the Branch network The Head Office of the Bank is located at 108 Tran Hung Dao Street, Hoan Kiem District, Hanoi, Vietnam. As at 31 December 2012, the Bank has one (1) Head Office, one (1) Operation Center, three (3) administrative units, two (2) local representative offices and one hundred and fifty (150) main branches (including three overseas branches - two branches in Germany and one branch in Laos) located in sixty three (63) provinces and cities under central authority all over the country. Subsidiaries As at 31 December 2012, the Bank has seven (7) subsidiaries as follows: NO. Name Established in accordance with Decision No. Business sector % of ownership held by the Bank 1 Vietinbank Leasing Company Ltd /GP dated 10 March 2011 by Hanoi Planning and Investment Department 2 Vietinbank Securities Joint Stock Company 107/UBCK-GP dated 01 July 2009 by State Securities Commission of Vietnam (SSC) Banking and finance 100% Capital market 76% 3 Vietinbank Debt Management and Asset Exploitation Company Ltd /GP dated 20 July 2010 by Department of Planning and Investment of Ho Chi Minh City Asset management 100% 4 Vietinbank Insurance Company Ltd. 21/GPDC6/KDBH dated 21 April 2009 by the Ministry of Finance Non-life insurance 100% 5 Vietinbank Gold and Jewellery Trading Company Ltd /GP dated 25 November 2010 by Hanoi Planning and Investment Department Gold and gemstones manufacturing and trading 100% 6 Vietinbank Fund Management Company Ltd. 50/UBCK-GP dated 26 October 2010 and 05/GPDC-UBCK dated 23 March 2011 by State Securities Commission of Vietnam (SSC) Fund management 100% 7 Vietinbank Global Money Transfer Company Ltd dated 03 January 2012 by Hanoi Planning and Investment Department Money transfer intermediary 100% Employees The total number of employees of the Bank as at 31 December 2012 is 19,840 (as at 31 December 2011: 18,622) Annual Report 83

84 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 2. ACCOUNTING CONVENTION AND FINANCIAL YEAR Accounting convention The accompanying consolidated financial statements, expressed in Vietnam Dong (VND), are prepared under the historical cost convention and in accordance with Vietnamese Accounting Standards, Accounting System applicable to credit institutions in Vietnam and prevailing relevant regulations in Vietnam. However, due to the Bank s large scale of operations, for the purpose of preparing these consolidated financial statements, the figures are rounded to and presented in millions of Vietnam Dong (million VND). This presentation does not materially impact on the consolidated financial statements in terms of the financial position, results of operations and the cash flows. With regards to the number of shares and earnings per share, the Bank presented the items in unit as shown in Note 26 and Note 38. Financial year The Bank s financial year begins on 01 January and ends on 31 December. These consolidated financial statements are prepared for the year ended 31 December NEW GUIDANCE ON MAKING PROVISION IN ISSUE NOT YET ADOPTED On 21 January 2013, the State Bank of Vietnam ( SBV ) issued Circular No. 02/2013/TT-NHNN stipulating classification of assets, levels and method of setting up of risk provisions, and use of provisions against credit risks in the banking activity of credit institutions and branches of foreign banks. The Circular replaces Directive No. 05/2005/CT-NHNN dated 26 April 2005 of the Governor of State Bank of Vietnam on implementation of classification of debts and setting up of provisions against credit risks according to Decision No. 493/2005/QD-NHNN dated 22 April 2005 of the Governor of State Bank of Vietnam, Decision No. 780/QD-NHNN dated 23 April 2012 of the Governor of State Bank of Vietnam on classification of debts respect to re-structured loans, Decision No. 493/2005/QD- NHNN dated 22 April 2005 of the Governor of State Bank of Vietnam on promulgating regulation on classification of debts, setting up of provisions against credit risks in the banking activity of credit institutions, Decision No. 18/2007/QD-NHNN dated 25 April 2007 of the Governor of State Bank of Vietnam on amending and supplementing a number of articles of regulation on classification of debts, setting up and use of provisions against credit risks in the banking activity of credit institutions promulgated together with the Decision No. 493/2005/QD-NHNN dated 22 April Circular No. 02/2013/TT-NHNN will take effect from 01 June The Board of Management of the Bank is considering the extent of impact of adopting the Circular on the Bank s consolidated financial statements for future accounting periods. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies, which have been adopted by the Bank in the preparation of these consolidated financial statements, are as follows: Estimates The preparation of the consolidated financial statements in conformity with Vietnamese Accounting Standards, Accounting System applicable to credit institutions in Vietnam and prevailing relevant regulations in Vietnam requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the financial year. Although these accounting estimates are based on the management s best knowledge, actual results could differ from those estimates Annual Report

85 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of consolidation The consolidated financial statements incorporate the financial statements of the Bank and enterprises controlled by the Bank (its subsidiaries) up to 31 December Control is achieved where the Bank has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Bank. All internal transactions and balances between group enterprises are eliminated on consolidation. Minority interests in the net assets of consolidated subsidiaries are identified separately from the Bank s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority interests in the subsidiary s equity are allocated against the interests of the Bank except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses. Business combinations The assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired is credited to profit and loss in the period of acquisition. The interest of minority shareholders is initially measured at the minority s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised. Investments in associates An associate is an entity over which the Bank has significant influence and that is neither a subsidiary nor an interest in joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not control or joint control over those policies. The business operations results, assets and liabilities of associates are incorporated in these consolidated financial statements using the equity method of accounting. Interests in associates are carried in the consolidated balance sheet at cost as adjusted by postacquisition changes in the Bank s share of the net assets of the associate. Losses of an associate in excess of the Bank s interest in that associate (which includes any long-term interests that, in substance, form part of the Bank s net investment in the associate) are not recognised. Where a group entity transacts with an associate of the Bank, unrealised profits or losses are eliminated to the extent of the Bank s interest in the relevant associate Annual Report 85

86 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Interests in joint ventures A joint venture is contractual arrangement whereby the Bank and other parties undertake an economic activity that is subject to joint control, i.e., the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control. Joint venture arrangements that involve the establishment of a separate entity in which each venturer has an interest are referred to as jointly controlled entities. The Bank reports its interests in jointly controlled entities using the equity method of accounting. According to equity method of accounting, invesments in joint ventures are initially stated at cost. Subsequently, interests in joint ventures are adjusted by post-acquisition changes in the Bank s share of the net assets of the joint ventures. Goodwill Goodwill represents the excess of the cost of acquisition over the Bank s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is recognised as an asset and is amortised on the straight-line basis over its estimated period of benefit of 10 years. Goodwill arising on the acquisition of associates and jointly controlled entities is included within the carrying amount of the associate and jointly controlled entities. Goodwill arising on the acquisition of subsidiaries is presented separately as an intangible asset in the consolidated balance sheet. On disposal of a subsidiary, associate or jointly controlled entity, the remaining amount of unamortised goodwill is included in the determination of the profit or loss on disposal. Cash and cash equivalents Cash and cash equivalents comprise cash and cash equivalents on hand, demand deposits, highly-liquid term deposits and investments with terms of less than 3 months that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Loans to customers Loans to customers are disclosed at their principal amounts outstanding at the end of the accounting year. Provision for credit losses In accordance with Law on Credit Institutions No. 47/2010/QH12 effective from 01 January 2011, Decision No. 1627/2001/QD-NHNN dated 31 December 2001 of the Governor of State Bank on lending regulations of credit institutions, Decision No. 127/2005/QD- NHNN dated 03 February 2005 amending and supplementing a number of lending regulations under Decision No. 1627/2001/QD- NHNN, Decision No. 493/2005/QD-NHNN ( Decision 493 ) dated 22 April 2005 and Decision No. 18/2007/QD-NHNN dated 25 April 2007 ( Decision 18 ) issued by the State Bank of Vietnam on loan classification and appropriation, setting up and use of reserves for handling credit risks, and Decision No. 780/QD-NHNN dated 23 April 2012 ( Decision 780 ) of the Governor of State Bank of Vietnam on classification of debts respect to re-structured loans, the Bank is required to classify loans and make provisions for credit losses. Accordingly, loans are graded using the following risk classifications: Current, Special-mentioned, Sub-standard, Doubtful and Loss based on the overdue status and other qualitative factors Annual Report

87 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Provision for credit losses (Continued) Credit risk exposure of loans to customers is calculated by subtracting from the loan balance the related determined value of collateral which is subject to certain accepted discount rates in accordance with Decision 493 and Decision 18. Specific provision is established based on the net loan exposure for each individual customer using the prescribed provision rates applicable to that loan classification as follows: Group Category provision rate 1 Current 0% 2 Special-mentioned 5% 3 Sub-standard 20% 4 Doubtful 50% 5 Loss 100% In accordance with Decision 493, loan classification is to be made at the end of each quarter for the first three quarters and on 30 November for the last quarter of each year. In accordance with Decision 493, general provision is made for credit losses which are yet to be identified during the loan classification and specific provision making process as well as in case of the Bank s potential financial difficulty due to deterioration in loan quality. Accordingly, the Bank is required to make and maintain a general provision at 0.75% of total of loans that are classified in groups 1 to 4. These provisions are recorded in the consolidated income statement as an expense that will be used to write off any credit losses incurred. According to Decision 493, the Bank sets up Risk Settlement Committee in order to write off loans if they are classified under Group 5 or if the borrowers are legal entities that are liquidated or go bankrupt, or if borrowers are individuals who pass away or are missing. Provision for off-balance-sheet commitments Pursuant to Decision 493 and Decision 18 issued by the SBV, credit institutions classify guarantees, acceptances of payment and unconditional, irrevocable loan commitments with specific effective date (collectively referred to as off balance sheet commitments ) as stipulated in Articles 6 and 7 of Decision 493. Accordingly, off-balance-sheet commitments are classified into groups from Group 1 to Group 5 with corresponding risk levels as: Current, Special-mentioned, Sub-standard, Doubtful and Loss based on overdue status and other qualitative factors. General provision is made at 0.75% of total of guarantees, acceptances of payment and unconditional, irrevocable loan commitments which are classified in groups from Group 1 to Group 4 on 30 November Specific provision for off balance sheet commitments is calculated using the same method for loans to customers as prescribed above. Provision expense is charged into Provision expense for credit losses in the consolidated income statement and provision balance is recorded as Other liabilities in the consolidated balance sheet. Investments Trading securities Trading securities include debt securities, equity securities and other kinds of securities that the Bank and/or its subsidiaries fully purchased and intended to sell in short term in order to gain profits from price fluctuation. Trading securities are initially recognised at cost and subsequently carried at cost Annual Report 87

88 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments (Continued) Trading securities (Continued) Interest and dividends received while holding trading securities is recorded in the consolidated income statement on cash basis. Trading securities are subsequently subject to impairment review as at the balance sheet date. Provision for impairment is made when carrying value of the securities is higher than their market value determined in accordance with Circular No. 228/2009/TT-BTC dated 07 December If the market value of securities is undeterminable, the Bank obtains other reliable financial information to determine fair value for provision purpose. Provision for decline in value is recorded in Net gain/loss from securities trading in the consolidated income statement. Investment securities Held-to-maturity securities Held-to-maturity investment securities are debt securities that the Bank purchases for investment purpose in order to gain interest and the Bank has intention and ability to hold the securities until maturity. Held-to-maturity securities have fixed or determinable payments and fixed maturities. In case the securities are sold before maturity, the remaining portfolio will be reclassified to trading or available-for-sale securities. Held-to-maturity investment securities are initially recognised at par value as at the transaction date, accumulative interest income before the purchasing date (for debt securities with interest payment in arrears) or interest income received upfront (for debt securities with interest payment in advance) is recorded in a separate account. Any discount or surplus which is the difference between par value and the amount equal to par value plus (+) accumulative interest income before purchasing date (if any) or minus (-) interest income received upfront waiting for amortisation (if any) is also recorded in a separate account. In subsequent period, held-to-maturity investment securities are recognised at par value, any discount or premium (if any) is amortised in the consolidated income statement using straight-line method over the estimated remaining term of securities. Interest payment in arrears is recorded as follows: accumulative interest income before purchasing date is recorded as a decrease in value of such securities and the same amount is credited into accrued interest; accumulative interest income after purchasing date is recognised as the Bank s income, based on the accumulated method. Interest received upfront is recognised and amortised in to consolidated income statement using the straight-line method over investment period. Periodically, held-to-maturity securities are subject to impairment review. Provision for diminution in value is made when carrying value of the securities is higher than their market value determined in accordance with Circular No. 228/2009/TT-BTC dated 07 December 2009 issued by Ministry of Finance. If the market value of securities is undeterminable, the Bank obtains other reliable financial information as reference to determine fair value for provision purpose. Provision for decline in value is recorded in Net gain/ loss from trading investment securities in the consolidated income statement. Available-for-sale securities Available-for-sale investments include debt and equity securities that the Bank holds for investment purpose and that are ready for sale. These securities are not frequently traded but could be sold at any time once they are profitable, and the Bank and/or its subsidiaries is neither founding shareholder/strategic partner nor capable of controlling, to some extent, the process of initiating and approving financial and operational policies of the investee by a written agreement on delegating personnel to take part in the Board of Directors/Board of Management Annual Report

89 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments (Continued) Investment securities (Continued) Available-for-sale securities (Continued) Available-for-sale equity securities are initially recognised at cost as at the transaction date and subsequently carried at cost. Available-for-sale debt securities are initially recognised at par value as at the transaction date. Accrued interest income before the purchasing date (for debt securities with interest payment in arrears) or interest income received upfront (for debt securities with interest payment in advance) is recorded in a separate account. Any discount or premium which is the difference between par value and the amount equal to par value plus (+) accumulative interest income before the purchasing date or minus (-) interest income received upfront awaiting for amortisation is also recorded in a separate account. Subsequently, available-for-sale debt securities are recorded at par value less/plus remaining discount/premium after amortising into the consolidated income statement using the straight-line method over the remaining term of securities. Interest payment in arrears is recorded as follows: accumulative interest income before the purchasing date is recorded as a decrease in the value of such securities and the same amount is credited into the accrued interest income; accumulative interest income after the purchasing date is recognised in the Bank s income on an accrual basis. Interest received upfront is amortised into the consolidated income statement using the straight-line method over the investment period. Periodically, available-for-sale securities are subject to impairment review. Provision for impairment is made when carrying value of the securities is higher than their market value determined in accordance with Circular No. 228/2009/TT-BTC dated 07 December 2009 issued by Ministry of Finance. Accordingly, for listed equity securities, the Bank determined the value of the investments using closing prices at the balance sheet date; for unlisted and liquid equity securities, the Bank collected direct quotations from three securities companies, of which charter capital is VND 300 billion or more each at the end of the accounting year to determine the value of the investments. If the market value of securities is undeterminable, the Bank obtains other reliable financial information as reference to determine fair value for provision purpose. For the bonds of business entities, at the end of the accounting period, the Bank assesses the recoverability of these bonds to determine the level of provision therefor and recognises it in the consolidated income statement. The Bank makes these estimates based on financial ability of the partners and the recoverable value of collateral assets, if any. These estimates are based on assumptions about some factors which have different levels, leading to certain future adjustments in some accounts. The provision for impairment of available-for-sale securities is recorded in the consolidated income statement as Net gain/loss from trading investment securities. When market price increases, profit will be offset against, but not exceeding the provision made previously. The difference is not recorded as income until the securities are sold. General provisions for debt securities issued by local business entities General provisions are made at 0.75% of the total balance of debt securities issued by local business entities (excluding investments for which provisions have been made 100%) at the reporting date accordance with Circular 28/2011/TT-NHNN dated 01 September 2011 by State Bank of Vietnam. Provision expense is charged into Gain/(loss) from trading investment securities in the consolidated income statement and provision balance is recorded as Provisions for diminution in value of trading/investment securities in the consolidated balance sheet Annual Report 89

90 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments (Continued) Other long-term investments Other long-term investments represent the investments into other entities in which the Bank holds less than 20% of the voting right and is the founding shareholder; or strategic partner; or has the power to govern the financial and operating policies of the investee by a written agreement on delegating personnel to take part in the Board of Directors/Board of Management. The long-term investments are recognised at cost less provision (if any). Provision for diminution in value of long-term investments is made when the investees make losses (except that such losses were intended in the entities original business plans) in accordance with Circular No. 228/2009/TT-BTC dated 07 December 2009 issued by the Ministry of Finance. Accordingly, provision to be made is the difference between the Bank s actual contributed capital and Bank s share of the owner s equity of the investee. The provision is recorded as an operating expense in the Bank s consolidated income statement. Recognition The Bank records investment securities and other investments at the date when contracts are signed and effective (transaction-date based policy). Investment securities and other investments are recorded at cost. After initial recording, investment securities and other investments are recorded under the above accounting policies. Derecognition Investments in securities are derecognised when the rights to receive cash flows from the investments are ended or when the Bank has transferred significant risks and benefits attached to the ownership of the investments. Repurchase and Reverse Repurchase Agreements Securities sold under agreements to repurchase at a specific date in the future (repos) are recorded in the consolidated financial statements. The corresponding cash received is recognised in the consolidated balance sheet as a liability. The difference between the sale price and repurchase price is amortised to the consolidated income statement over the agreement validity period using the straight-line method based on the contractual interest rate. Conversely, securities purchased under agreements to resell at a specific date in the future (reverse repos) are not recognised in the consolidated financial statements. The corresponding cash payment is recognised in the consolidated balance sheet as an asset. The difference between the purchasing price and resale price is amortised to the consolidated income statement over the agreement validity period using the straight-line method based on the contractual interest rate. Trust activities and trusted funds The Bank s trust activities include discretionary investment trusts and client-directed investment trusts. The value of investment trust and trusted funds received are recorded when the trust contracts have been signed and trusted funds have been realized. Rights and obligations of the trustor and trustee relating to profit and profit sharing, trust fee, other rights and obligations are in compliance with the terms of the contracts. The assets that are held under custody services are not assets of the Bank and therefore, they are not included in the Bank s consolidated financial statements Annual Report

91 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less accumulated depreciation. The cost of purchased tangible fixed assets comprises their purchase prices and any directly attributable costs of bringing the assets to their working condition and location for their intended use. Expenditure incurred after the tangible fixed assets have been put into operation such as repairs, maintenance and overhaul costs is normally charged to the consolidated income statement as incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of tangible fixed assets beyond its originally assessed standard of performance, the expenditure is capitalised as an additional cost of tangible fixed assets. Tangible fixed assets are depreciated using the straight-line method over the following estimated useful lives: Assets estimated useful lives (Years) Buildings and structures Machinery and equipment Motor vehicles Others 04 Loss or gain resulting from sales and disposals of tangible fixed assets is the difference between proceeds from sales or disposals of assets and their residual values and is recognised in the consolidated income statement. Intangible fixed assets and amortisation Intangible fixed assets comprise of land use rights, computer software and other intangible fixed assets which are stated at cost less accumulated amortisation. Land use rights granted with indefinite term are not amortised; computer software is amortised using the straight-line method over the period of 05 years; other intangible fixed assets are amortised using the straight-line method from 03 years to 05 years. Land use rights granted with definite term are amortised over land use periods. Loss or gain resulting from sales and disposals of intangible fixed assets is the difference between proceeds from sales or disposals of assets and their residual values and is recognised in the consolidated income statement. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Bank as lessor Amounts due from lessees under finance leases are recorded as receivables at the amount of the Bank s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return on the Bank s net investment outstanding in respect of the leases. Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred for obtaining the income from the operating lease are recognised as expenses in the year or allocated to expenses over the lease term in accordance with rental income recognition Annual Report 91

92 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Leasing (Continued) The Bank as lessee Leases where substantially all the rewards and risks of ownership of assets remain with the lessor are accounted for as operating leases. Rentals payable under operating leases are charged to the consolidated income statement on a straight-line basis over the term of the relevant lease. Prepayments Prepayments comprise of prepaid expenses for office rental and other prepaid expenses. Office rental expense represents the amount which has been prepaid to lease the office. Prepaid expense for office rental is amortised in the consolidated income statement using the straight-line method over the rental period. Other long-term prepayments include repair, maintenance cost for assets, tools and supplies issued for consumption, and are considered to bring future economic benefits to the Bank. These expenses are capitalised as prepayments and are charged to the consolidated income statement, using the straight-line method over the period of more than one year but not exceeding three years in accordance with prevailing accounting regulations. Receivables Receivables apart from receivables from credit activities in the Bank s operations are initially recognised at cost and subsequently carried at cost. Other receivables are subject to review for impairment provision which is made based on the overdue status or based on the expected loss for the following cases: institutional debtors which have fallen into bankruptcy or have been in the process of dissolution; or individual debtors who are missing, escaping, prosecuted, on trial or passing away even though loans are not overdue. Provision expense incurred is recorded as Operating expenses in the consolidated income statement during the year. The Bank makes provision for overdue receivables in accordance with Circular No. 228/2009/TT-BTC dated 07 December 2009 by Ministry of Finance. Accordingly, provisions for overdue receivables at year end are made based on the following provision rates applied to receivables as at the closing date of the accounting year after deducting the value of evaluated collaterals. overdue status rate of provision From 6 months to below 1 year 30% From 1 year to below 2 years 50% From 2 years to below 3 years 70% From 3 years and above 100% Capital and reserves Common stocks Common stocks are classified as owners equity. Incurred expenses that directly relate to the issuance of common stocks are recognised as a decrease in owners equity Annual Report

93 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Capital and reserves (Continued) Share premium When capital is received from shareholders, the difference between selling price and par value is recorded as share premium in owners equity. Treasury shares When issued stocks are repurchased, the aggregate amount paid, including expenses that directly relate to the repurchase of stocks, after deducting taxes, is recorded as treasury shares and are stated as a decrease in the owners equity. Reserves Reserves are used for specific purposes and are appropriated from the Bank s profit after tax based on the following regulated ratios: Charter capital supplementary reserves: 5% of profit after tax, not exceeding the Bank s charter capital; Financial reserve fund: 10% of profit after tax but not exceeding 25% of the Bank s charter capital; Bonus fund for the Board of Management, bonus and welfare funds are established in accordance with the Decisions approved in the Annual General Shareholders meetings. These reserves funds are appropriated at the closing date of each financial year.s Revenue and expenses Interest income Income from interest is recorded on the accrual basis for the loans which are identified as being able to claim both principals and interests on time and the Bank shall not appropriate provisions according to prevailing regulations. The interest amounts which have been recorded as income, in the event that the customer could not pay both principal and interest on the maturity date, would be charged to operating expenses and the Bank shall track as off-balance sheet items to urge the collection of those loans. When collected, interests are recorded as income from operating activities. The accrued interest income arising from the loans that are classified from group 2 to group 5 according to the criteria set out in Decision 493, Decision 18 and Decision 780 is not recognised in the consolidated income statement for the year. Accrued interest income of impaired loans is recorded as off-balance sheet item and is only recognised in the consolidated income statement when it is actually received. Borrowing costs Borrowing costs are recorded in the consolidated income statement on the accrual basis. Revenue from sales of goods Revenue from the sale of goods is recognised when all five (5) following conditions are satisfied: (a) the Bank has transferred to the buyer the significant risks and rewards of ownership of the goods; (b) the Bank retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (c) the amount of revenue can be measured reliably; (d) it is probable that the economic benefits associated with the transaction will flow to the Bank; and (e) the costs incurred or to be incurred in respect of the transaction can be measured reliably Annual Report 93

94 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue and expenses(continued) Revenue from insurance services Revenue from insurance services is recognised at the time when both of the following conditions are met: (a) the insurance contract has been entered into by the insurer and the insured; (b) the premium has been paid by the insured or there is an agreement between the insurer and the insured for delayed payment of insurance premium (in gross written premium) or the amount is incurred on the reinsurance notice from the cedants to the Bank/the Bank s subsidiaries (for reinsurance premium) with the followings adjustments: (Increase)/decrease in unearned premium which is made under Circular No, 125/2012/TT- BTC issued by the Ministry of Finance dated 30 July 2012; Deduct the reinsurance premium recorded based on the amount of premium payable to the reinsurer, corresponding to the gross written premium recognised in the year; and Add reinsurance commission recognised in line with the recognition of respective reinsurance premium. Dividend recognition Cash dividends received from investment activities are recorded into the consolidated income statement when the Bank s right to receive dividends has been established. Stock dividends, which are distributed from profits of joint-stock companies, are not recognised in the consolidated financial statements according to Circular No. 244/2009/TT-BTC dated 31 December 2009 issued by the Ministry of Finance. Claim settlements expenses of insurance activities Claim settlements expenses are recorded when claim files are completed and approved by competent people. In case the Bank assures that insurance responsibilities belong to the Bank and the Bank has advanced to client under client s request but the claim amount has not been determined reliably, the settled amount was recorded to claim settlements expenses. Claim expenses which have not been approved at the end of financial year are considered as deferred expense and accounted in claim reserve. Commission expense of insurance activities Commission expenses are recorded when incurred. Commission expenses are calculated by percentage of premium from direct insurance and recorded to the consolidated income statement. Commission of each insurance product is calculated at certain percentage in accordance with Circular No. 124/2012/TT-BTC dated 30 July 2012 issued by the Ministry of Finance. Income and expense from other services Income and expense from other services are recognised on cash basis Annual Report

95 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Foreign currencies According to the Bank s accounting system, all transactions are recorded in original currency. Monetary assets and liabilities denominated in foreign currencies at year-end are translated into VND using exchange rate ruling at balance sheets date (see list of exchange rate of applicable foreign currencies against VND as at 31 December 2012 in Note 53). Income and expense arising in foreign currency during the year are translated into VND at the rates ruling at the transaction dates. Unrealised foreign exchange differences arising from the translation of monetary assets and liabilities nominated in foreign currencies at the balance sheet date are recognised in the consolidated financial statement. For the purpose of preparing consolidated financial statements, assets and liabilities of subsidiaries and associates of which financial statements are prepared in currencies other than VND (including comparative figures) are translated into VND at the exchange rate at the end of accounting year. Income and expenses are translated at the average exchange rate during the year, in circumstances of significant fluctuation; those are translated at the exchange rates at the transaction dates. All resulting exchange differences, if any, are classified as equity and recorded as Foreign exchange reserve. Foreign exchange reserve is recognised into the consolidated income statement when investments in subsidiaries or associates are disposed. Provisions Provisions are recognised when the Bank has a present obligation as a result of a past event, and it is probable that the Bank will be required to settle that obligation. Provisions are measured at the management s best estimate of the expenditure required to settle the obligation at the closing date. Taxation Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other periods (including loss carried forward, if any) and it further excludes items that are never taxable or deductible. Deferred tax is recognised on significant differences between carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all temporary differences except that deferred tax liabilities arise from the initial recognition of an asset or a liability of a transaction which does not affect the accounting profit or taxable profit (or loss) at the transaction date. Deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised. Deferred tax is calculated at the tax rates that are expected to apply in the year when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity Annual Report 95

96 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Taxation (Continued) 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 tax authority and the Bank intends to settle its current tax assets and liabilities on a net basis. The determination of the tax currently payable and deferred tax is based on the current interpretation of tax regulations. However, these regulations are subject to periodic variation and their ultimate determination depends on the results of the tax authorities examinations. Other taxes are paid in accordance with the prevailing tax laws in Vietnam. Employee benefits Post-employment benefits When retiring, employees of the Bank are entitled to receive post-employment benefits from the Social Insurance and a 3-monthcurrent-salary paid by the Bank (allocated from the Bank s provision for salary). Employees who are forced to early retire as a part of employment rearrangement are entitled to receive a half of the basic monthly salary and allowance (if any) for each year of employment and a quarter of the current salary for each month of being forced to retire (maximum of 12 months). The amounts are recorded in the Bank s provision for severance allowance Resignation allowance Resigned employees of the Bank are entitled to receive one-half month s salary and allowances (if any) for each year of employment until 31 December Unemployment allowance In accordance with Circular No. 04/2009/TT-BLDTBXH dated 22 January 2009 providing guidance for implementation of Decree No. 127/2008/ND-CP dated 12 December 2008 on Unemployment Insurance, since 01 January 2009, the Bank has contributed to the Unemployment Insurance Fund an amount equal to 1% of their employees salaries. Moreover, the Bank has to withhold the same amount from their employees salaries to contribute to the fund. Derivatives Forward and swap contracts For currency forward, future and swap contracts, the difference of VND amounts equivalent to the foreign currencies committed for trading between forward exchange rate and spot exchange rate as at effective date of the contract is recognised as Derivative instruments and other financial assets when it is positive, or as Derivatives instruments and other financial liabilities when it is negative. The difference is subsequently amortised in the consolidated income statement as Net gain/(loss) from trading foreign currencies using the straight-line method over the term of the contracts. As at the balance sheet date, commitments of currency forward, future and swap contracts are re-measured using the official inter-bank exchange rate announced by the State Bank of Vietnam. Gain or loss from revaluation is recorded in Net gain/loss from trading foreign currencies Annual Report

97 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Derivatives (Continued) Currency option contracts Commitment amount for the currency option contracts is not recognised in the consolidated balance sheet. The option premium paid or received is recorded as receivable or payable from/to derivative transactions, and is amortised to income or expense using the straight-line method over the period of the contracts. As at the balance sheet date, unrealised gain or loss arising from selling/ buying option contracts are determined based on market price, cost of the contract, sales volume and maturity of the contract, and recorded in the consolidated income statement in Net gain/loss from trading foreign currencies. Related parties The parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making decisions on financial and operating policies. A party is considered as a related party with the Bank if: (a) Directly or indirectly through one or more intermediaries, the party: - Has capability to control the Bank or is controlled by the Bank (including the holding company and subsidiaries); - Has contributed capital to the Bank that accordingly, gives it significant influence over the Bank; - Has joint control over the Bank; (b) The party is a joint venture in which the Bank is a venturer; (c) The party is a close member of the Board of Directors, Board of Supervisors and Board of Management of the Bank; (d) The party is a close member of the family of any individual referred to in (a) or (c); (e) The party is a Bank that is controlled, jointly controlled or significantly influenced by, or of which, significant voting power in such Bank resides with, directly or indirectly, any individual referred to in (c) or (d). Off balance sheet commitments and guarantees At any time during the course of business, the Bank always has outstanding commitments. These commitments are in the form of approved loans and overdraft facilities. The Bank also provides financial guarantee services to guarantee the contract performance of customers to third parties. These transactions are recorded in the consolidated financial statements when performed or when related expenses are incurred or received Annual Report 97

98 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December CASH, GOLD AND GEMSTONES Form B 05/TCTD-HN 31/12/ /12/2011 Million VND MILLION VND Cash in VND 1,987,760 2,969,148 Cash in foriegn currencies 516, ,714 Valuable papers in foreign currencies 970 2,129 Other precious metal and gemstones 5,713 17,868 2,511,105 3,713, BALANCES WITH THE STATE BANK OF VIETNAM 31/12/ /12/2011 MILLION VND MILLION VND Current account at the State Bank of Vietnam in VND 10,046,469 9,716,681 Current account at the State Bank of Vietnam in foreign currencies 2,187,676 2,384,379 12,234,145 12,101,060 Deposit at the State Bank of Vietnam consists of compulsory reserves for deposits and current accounts. Pursuant to regulations by the State Bank of Vietnam on compulsory reserve, part of the banks compulsory reserve can be floating balance. In details, according to Decision No. 379/QD-NHNN dated 24 February 2009, Decision No. 1209/QD-NHNN dated 01 June 2011, Decision No. 1925/QD- NHNN dated 26 August 2011 and Decision No. 1972/QD-NHNN dated 31 August 2011: Compulsory reserve balances for VND deposits applicable to credit institutions as at 31 December 2012 are as follows: Compulsory reserve balance is 3% (31 December 2011: 3%) of the preceding month s average balance for demand deposits and term deposits in VND with terms of less than 12 months; Compulsory reserve balance is 1% (31 December 2011: 1%) of the preceding month s average balance for deposits in VND with terms of more than 12 months. Compulsory reserve balances for deposits in foreign currencies applicable to credit institutions as at 31 December 2012 are as follows: Compulsory reserve balance is 8% (31 December 2011: 8%) of the preceding month s average balance for demand deposits and term deposits in foreign currencies with terms of less than 12 months; Compulsory reserve balance is 6% (31 December 2011: 6%) of the preceding month s average balance for deposits in foreign currencies with terms of more than 12 months; Compulsory reserve balance is 1% (31 December 2011: 1%) of the balance for deposits in foreign currencies from overseas credit institutions Annual Report

99 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December PLACEMENTS WITH AND LOANS TO OTHER CREDIT INSTITUTIONS Placement with other credit institutions Form B 05/TCTD-HN 31/12/ /12/2011 MILLION VND MILLION VND Demand deposits 14,475,763 4,754,104 - In VND 4,668,015 41,033 - In foreign currencies 9,807,748 4,713,071 Term deposits 6,981,954 57,041,125 - In VND 4,952,900 44,549,844 - In foreign currencies 2,029,054 12,491,281 Loan to other credit institutions 21,457,717 61,795,229 Loans in VND 36,432,503 3,500,000 Provision for credit losses of loans to credits institutions (181,918) (27,150) 8. DERIVATIVE FINANCIAL INSTRUMENTS AND OTHER FINANCIAL ASSETS As at 31/12/ ,250,585 3,472,850 57,708,302 65,268,079 assets Millon VND LIABILITIES Million VND Currency derivative financial instruments 74,451 - Foward contracts 60,108 - Swap contracts 14,343 - As at 31/12/2011 Net book value ( at the exchange rate as of the reporting date) Currency derivative financial instruments 20,236 - Foward contracts Swap contracts 19, LOANS TO CUSTOMERS 31/12/ /12/2011 Million VND Million VND Loans to local busines entities and individuals 329,440, ,730,503 Discounting promissory notes and valuable papers 310, ,741 Finance leases 1,328,324 1,540,216 Payments made on behalf of customers 55,999 4,701 Loans by grants, investment trusts 1,636,760 1,866,150 Loans to foreign organisations and individuals 584,576 - Frozen loans and loans pending for resolution ,356, ,434, Annual Report 99

100 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 9. LOANS TO CUSTOMERS (Continued) Analysis of loan balances by quality 31/12/ /12/2011 MILLION VND MILLION VND Current loans 327,054, ,213,117 Special-mentioned loans 1,411,738 6,017,024 Sub-standard loans 994,983 1,071,421 Doubtful loans 1,789, ,213 Loss loans 2,105, ,537 Analysis of loan balances by terms 333,356, ,434,312 31/12/ /12/2011 MILLION VND MILLION VND Short-term loans 200,455, ,912,428 Medium-term loans 34,078,369 30,533,167 Long-term loans 98,822,468 85,988, ,356, ,434,312 Short-term, medium-term and long-term loans have initial terms of less than 1 year, from 1 year to 5 years and more than 5 years, respectively. Analysis of loan balances by type of business entity 31/12/ /12/2011 MILLION VND MILLION VND (*) State-owned enterprises 34,376,546 35,255,446 State-owned one-member limited enterprises 49,010,516 26,845,527 Two or more member limited liability enterprises with more than 50% of the State s share holding 2,291,578 1,773,716 Other limited companies 61,496,519 54,833,999 Joint stock companies with more than 50% of the State s share-holding 28,542,233 26,530,323 Other joint stock companies 85,012,500 74,520,924 Partnership companies 8,566 42,490 Private companies 12,163,761 11,346,941 Foreign invested enterprises 8,571,598 6,252,150 Cooperatives, cooperative unions 1,626,349 1,388,656 Household businesses, individuals 49,819,646 52,646,781 Administrative units, Party, unions and associations 369,239 1,856,463 Others 67, , ,356, ,434,312 (*) The figures in the analysis of loan balances by type of business entity presented in the consolidated financial statements for the year ended 31 December 2011 were reclassified to ensure the consistency and comparability of the figures Annual Report

101 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 9. LOANS TO CUSTOMERS (Continued) Analysis of loan balances by industry 31/12/ /12/2011 MILLION VND MILLION VND (*) Agricultural, forestry and aquaculture 8,301,832 7,035,035 Mining and quarrying 25,501,052 15,640,601 Manufacturing and processing 105,156,710 94,149,158 Electricity, petroleum & hot water 22,763,351 12,823,715 Water supplying, garbage and sewage treatment and management 514, ,191 Construction 22,774,338 20,005,680 Wholesale and retail trade; repair of motor vehicles, motor cycles 97,095,238 85,374,331 Transport, warehouse 9,780,579 11,031,572 Hospitality services 2,291,814 3,171,639 Information and communications 1,755,920 2,425,070 Financial, banking and insurance activities 479 1,300 Real estate 26,068,597 21,945,422 Science and technology 109, ,630 Administrative activities and supporting service 318, ,538 Education and training 968, ,639 Health care and social work 2,089,555 2,090,863 Other service activities 4,590,629 10,623,883 Households 3,073,666 5,202,708 International organisations and bodies 32,616 46,490 Others 168, , ,356, ,434,312 (*) During the year, the Bank made analysis of loan balances by industry based on the purpose of loans under Circular No. 21/2010/TT-NHNN dated 08 October 2010 issued by the State Bank of Vietnam. The reclassification is applied for the balances as at 31 December PROVISIONS FOR CREDIT LOSSES OF LOANS TO CUSTOMERS AND OFF-BALANCE SHEET COMMITMENTS 10.1 Details of provision for credit losses of loans to customers and off-balance sheet commitments: 31/12/ /12/2011 MILLION VND MILLION VND Provisions for credit losses of loans to customers 3,673,254 3,036,502 Provision for off-balance sheet commitments (Note 24) 409, ,811 4,083,087 3,472, Annual Report 101

102 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 10. PROVISIONS FOR CREDIT LOSSES OF LOANS TO CUSTOMERS AND OFF-BALANCE SHEET COMMITMENTS (Continued) 10.2 Movement in provision for credit losses of loans to customers during the year: General provision Specific provision Total MILLION VND MILLION VND MILLION VND As at 01/01/2012 2,065, ,222 3,036,502 Provision charged for the year (Note 36) 234,339 3,994,833 4,229,172 Provision utilised for the year - (3,592,420) (3,592,420) As at 31/12/2012 2,299,619 1,373,635 3,673,254 The Bank classifies the loans under Article 6 of Decision 493 and Decision 18 and Decision 780 of the SBV and the Bank s policy on classifying loans and making credit losses provision. Provision for credit losses as at 31 December 2012 is made based on the loan classification result as at 30 November Movement of provision for credit losses for the year ended 31 December 2011: General provision Specific provision TOTAL MILLION VND MILLION VND MILLION VND As at 01/01/2012 1,648,608 1,122,147 2,770,755 Provision charged for the year (Note 36) 416,672 4,624,835 5,041,507 Provision utilised for the year - (4,775,760) (4,775,760) As at 31/12/2012 2,065, ,222 3,036,502 Provision for credit losses of loans at oversea branches is made in accordance with prevailing regulations in their local jurisdictions Movement in provision for off-balance sheet commitments during the year General provision Specific provision Total MILLION VND MILLION VND MILLION VND As at 01/01/ ,512 68, ,811 Provision (reversed)/charged for the year (note 36) (36,069) 10,091 (25,978) As at 31/12/ ,443 78, ,833 The Bank classifies the loans under Article 6 of Decision 493, Decision 18 and Decision 780 of the SBV and the Bank s policy on classifying loans and making credit losses provision. Provision for off-balance-sheet commitments as at 31 December 2012 is made based on the classification of off-balance sheet commitments as at 30 November Annual Report

103 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 10. PROVISIONS FOR CREDIT LOSSES OF LOANS TO CUSTOMERS AND OFF-BALANCE SHEET COMMITMENTS (Continued) 10.3 Movement in provision for off-balance sheet commitments during the year (Continued) Movement of provision for off-balance sheet commitment for the year ended 31 December 2011 as follows: General provision Specific provision Total MILLION VND MILLION VND MILLION VND As at 01/01/ , , ,842 Provision (reversed)/charged for the year (Note 36) 100,292 (255,323) (155,031) As at 31/12/ ,512 68, ,811 Provision for off-balance sheet commitments at oversea branches is made in accordance with prevailing regulations in their local jurisdictions. 11. TRADING SECURITIES 31/12/ /12/2011 MILLION VND MILLION VND Debt securities - 263,195 - Government bonds - 29,611 - Debt securities issued by other local credit institutions - 233,584 Equity securities 284, ,163 - Equity securities issued by other local credit institutions 48 17,901 - Equity securities issued by local business entities 284, , , ,358 Provisions for diminution in value of trading securities (9,714) (14,654) 274, , Annual Report 103

104 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 11. TRADING SECURITIES (continued) Listing status of trading securities Debt securities 31/12/ /12/2011 MILLION VND MILLION VND - Government bonds - Listed - 29,610 - Unlisted - 233,584 Debt securities issued by local business entities - Listed Unlisted - - Equity securities Equity securities issued by other local credit institutions - Listed 48 35,779 - Unlisted - 258,385 Equity securities issued by local business entities - Listed 26, Unlisted 257, , , INVESTMENT SECURITIES Available-for-sale investment securities 31/12/ /12/2011 MILLION VND MILLION VND Debt securities 70,847,671 65,087,055 - Government bonds 44,522,304 36,298,723 - Debt securities issued by other local credit institutions 2,618,287 5,883,658 - Debt securities issued by local business entities 23,707,080 22,904,674 Equity securities 233, ,911 - Equity securities issued by other local credit institutions 16,888 16,888 - Equity securities issued by local business entities 217, ,023 71,081,582 65,320,966 Provisions for diminution in value of available-for-sale investment securities (114,332) (270,585) 70,967,250 65,050, Annual Report

105 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 12. INVESTMENT SECURITIES (Continued) Held-to-maturity investment securities Debt securities 31/12/ /12/2011 MILLION VND MILLION VND Government bonds 2,200,000 2,200,000 Debt securities issued by local business entities 250, ,000 2,450,000 2,400,000 Provisions for diminution in value of held-to-maturity investment securities - (1,500) Listing status of investment securities: Available-for-sale investment securities Debt securities Government bonds 2,450,000 2,398,500 31/12/ /12/2011 MILLION VND MILLION VND - Listed 44,344,034 35,977,403 - Unlisted 178, ,320 Debt securities issued by other local credit institutions - Listed 1,707, ,805 - Unlisted 910,734 5,495,853 Debt securities issued by local business entities Equity securities - Listed 2,011,091 1,448,000 - Unlisted 21,695,989 21,456,674 Equity securities issued by other local credit institutions - Listed Unlisted 16,888 16,888 Equity securities issued by local business entities - Listed 44,023 44,023 - Unlisted 173, ,000 Held-to-maturity investment securities Government bonds - Listed Unlisted 2,200,000 2,200,000 Debt securities issued by local business entities - Listed Unlisted 250, ,000 73,531,582 67,720, Annual Report 105

106 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 12. INVESTMENT SECURITIES (Continued) Movement of provision for diminution of investment securities as follows: Provision for provision for held available for sale securities -to-maturity securities Total MILLION VND MILLION VND MILLION VND As at 01/01/ ,585 1, ,085 Provision (reversed) in the year (151,253) (1,500) (152,753) Utilised for the year (5,000) - (5,000) As at 31/12/ , , LONG-TERM INVESTMENTS 31/12/ /12/2011 MILLION VND MILLION VND Investments in joint ventures 2,444,848 2,601,041 Investments in associates 45,057 25,004 Other long-term investments 327, ,440 Provisions for diminution in value of long-term investments (824) - 2,816,190 2,924, Annual Report

107 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 13. LONG-TERM INVESTMENTS (continued) 13.1 Investments in joint ventures Details of investments in joint ventures as at the reporting date are as follows: 31/12/ /12/2011 Net value of investment using equity method Proportion of ownership interest Cost in original Cost Cost in original Cost currency equivalent Currency equivalent Net value of investment using equity method Proportion of ownership interest USD Million VND Million VND % USD Million VND Million VND % Indovina Bank Ltd. 82,500,000 1,392,058 2,013, ,500,000 1,392,058 2,186, Viettin Bank Aviva Life Insurance Company Limited Non-applicable 400, , Non-applicable 400, , ,792,058 2,444,848 1,792,058 2,601,041 Indovina Bank Ltd. was established in Vietnam with the head office located in Ho Chi Minh City; its principal activity is providing banking services. Indovina Bank Ltd. is a joint venture between the Bank and a Taiwanese bank, Cathay United Bank. Indovina Bank Ltd. received Operation License No. 08/NH-GP dated 29 October 1992 issued by the SBV for the operating period of 20 years with the initial charter capital of USD 10,000,000. Since its establishment, the charter capital of Indovina Bank Ltd. has been increased several times under the approval of the SBV, while the proportions of ownership interest of the joint venture partners remains unchanged. As at 31 December 2012, Indovina Bank Ltd. s charter capital was USD 165,000,000. Vietinbank Aviva Life Insurance Company Limited was established in Vietnam. This company is the joint venture between the Bank and a company incorporated in the United Kingdom - Aviva International Holdings Limited. The joint venture received the Establishment and Operation License No. 64 GP/KDBH dated 29 July 2011 issued by the Ministry of Finance for the operating period of 50 years with the initial charter capital of VND 800 billion Annual Report 107

108 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 13. LONG-TERM INVESTMENTS (Continued) 13.2 Investment in associate Details of investment in associate at the reporting date are as follows: 31/12/ /12/2011 Net value of investment using equity method Proportion of ownership interest Net value of investment using equity method Cost in original Cost Cost in original Cost currency equivalent currency equivalent USD Million VND Million VND % USD Million VND Million VND % Công ty CP Đầu tư và Phát triển Khu đô thị South Quang Ngai Urban Investment and Nam Development Quảng Ngãi JSC. Non-applicable 25,000 25, Non-applicable 25,000 25, Proportion of ownership interest My Dinh Real Estate Investment JSC. Non-applicable 20,000 20, Non-applicable ,000 45,057 25,000 25,004 Investment in South Quang Ngai Urban Investment and Development JSC., and My Dinh Real Estate JSC., are made through the Bank s subsidiary - Vietinbank Fund Management Company Ltd Annual Report

109 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 14. TANGIBLE FIXED ASSETS The movements of tangible fixed assets for the year ended 31 December 2012 are as follows: Buildings, Machinery, Motor structures equipment vehicles Others Total MILLION VND MILLION VND MILLION VND MILLION VND MILLION VND Cost As at 01/01/2012 1,295,577 3,284, , ,556 5,541,803 Acquisitions for the year 495, ,265 71,239 23, ,320 Transfer from construction in progress 192,825 51,756 2, ,720 Other additions 1, ,490 10,518 15, ,223 Disposals (7,773) (56,590) (13,725) (5,206) (83,294) Reclassification (12,773) 168, (166,171) (10,418) Other decreases (14,135) (1,453) (969) (3,843) (20,400) As at 31/12/2012 1,950,223 3,830, , ,316 6,676,954 Accumulated depreciation As at 01/01/ ,199 2,008, , ,848 2,993,530 Charge for the year 103, ,906 91,452 34, ,282 Other additions 21,546 29,942 1, ,435 Disposals (2,332) (18,468) (3,439) (3,513) (27,752) Reclassification ,240 (580) (79,986) (1,959) Other decreases (20,079) (6,783) (23,255) (35,503) (85,620) As at 31/12/ ,974 2,636, ,859 94,737 3,705,916 Net book value As at 31/12/2012 1,381,249 1,193, ,214 63,579 2,971,038 As at 31/12/ ,378 1,275, , ,708 2,548, Annual Report 109

110 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 14. TANGIBLE FIXED ASSETS (continued) The movements of tangible fixed assets for year ended 31 December 2011 are as follows: Buildings, Machinery, Motor structures equipment vehicles Others Total MILLION VND MILLION VND MILLION VND MILLION VND MILLION VND Cost As at 01/01/ ,147 2,823, , ,413 4,596,043 Acquisitions during the period 149, ,511 79,739 32, ,515 Transfer from construction in progress 140,418 2,981-4, ,518 Other additions 83, ,428 54,842 8, ,129 Disposals (12,355) (60,608) (15,319) (7,844) (96,126) Other decreases (695) (457) (1,276) (2,848) (5,276) Reclassification (163) 27,563 (10,217) (17,183) - As at 31/12/2011 1,295,577 3,284, , ,556 5,541,803 Accumulated depreciation As at 01/01/ ,511 1,557, , ,855 2,389,697 Charge for the year 86, ,551 78,668 42, ,211 Disposals (14,159) (47,788) (16,375) (10,781) (89,103) Other decreases (275) (275) Reclassification 27 13,265 (3,169) (10,123) - As at 31/12/ ,199 2,008, , ,848 2,993,530 Net book value As at 31/12/ ,378 1,275, , ,708 2,548,273 As at 31/12/ ,636 1,266, , ,558 2,206, Annual Report

111 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 15. INTANGIBLE FIXED ASSETS The movements of intangible fixed assets for the year ended 31 December 2012 are as follows: Land use rights Computer software Others Total MILLION VND MILLION VND MILLION VND MILLION VND Cost As at 01/01/2012 1,115, ,378 11,219 1,442,639 Acquisitions during the year 1,089,387 84,592 1,230 1,175,209 Other additions 12,695 37,273-49,968 Disposals - (441) - (441) Reclassification 1,456 21,353 (12,391) 10,418 Other decreases (1,412) (32,679) - (34,091) As at 31/12/2012 2,217, , ,643,702 Accumulated amortisation As at 01/01/ , ,736 3, ,695 Charge for the year 28,934 80,983 3, ,177 Other additions ,066-27,684 Disposals - (73) - (73) Reclassification 79 8,662 (6,782) 1,959 Other decreases (28,709) (20,646) - (49,355) As at 31/12/ , , ,087 Net book value As at 31/12/2012 2,153, , ,305,615 As at 31/12/2011 1,052, ,642 7,679 1,197, Annual Report 111

112 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN The movements of intangible fixed assets for the year ended 31 December 2011 are as follows: Cost Total MILLION VND MILLION VND MILLION VND MILLION VND As at 01/01/ , ,939 11,219 1,284,224 Acquisitions during the year 170,559 94, ,038 Disposals (9,994) (96,629) - (106,623) Reclassification 1,411 (1,411) - - As at 31/12/2011 1,115, ,378 11,219 1,442,639 Accumulated amortisation As at 01/01/ , ,551 3, ,224 Charge for the year 12,297 45,223-57,520 Other decreases (467) (582) - (1,049) Reclassification 1,456 (1,456) - - As at 31/12/ , ,736 3, ,695 Net book value Land use rights Computer software Others As at 31/12/2011 1,052, ,642 7,679 1,197,944 As at 31/12/ , ,388 7,679 1,096, Annual Report

113 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 16. OTHER RECEIVABLES 31/12/ /12/2011 MILLION VND MILLION VND Construction in progress 2,265,979 1,531,005 Purchases and major repair of fixed assets 4,547,287 1,745,892 External receivables 2,520,764 2,102,652 Internal receivables 120, ,869 9,454,662 5,556,418 Construction in progress 31/12/ /12/2011 MILLION VND MILLION VND Constructions in the Northern area 1,641,185 1,016,639 Constructions in the Central area 191, ,493 Constructions in the South area 433, ,873 2,265,979 1,531, OTHER ASSETS 31/12/ /12/2011 MILLION VND MILLION VND Investment in finance lease assets 109,252 96,147 Materials and tools 85,724 63,991 Prepaid expenses (*) 1,917,173 1,859,870 Goodwill (Note 18) 11,798 13,612 Other assets 22,254 10,643 2,146,201 2,044,263 (*)Mainly comprises the prepaid expenses of the office rental of the Bank Annual Report 113

114 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 18. GOODWILL Goodwill represents business goodwill resulted from the business valuation for equitisation of a subsidiary of the Bank - Vietinbank Securities Company (currently known as Vietinbank Securities Joint Stock Company) MILLION VND MILLION VND Total goodwill 18,149 18,149 Amortisation year 10 years 10 years Accumulated amortised goodwill as at the beginning of the year (4,537) (2,722) Goodwill not yet amortised as at the beginning of the year 13,612 15,427 Goodwill increased during the year - - Goodwill decreased during the year (1,814) (1,815) - Amortised for the year (1,814) (1,815) Total goodwill not yet amortised as at the end of the year 11,798 13, BORROWINGS FROM THE GOVERNMENT AND THE STATE BANK OF VIETNAM 31/12/ /12/2011 MILLION VND MILLION VND Borrowings for grants to SOEs 12,472 12,518 Discounting and rediscounting valuable papers 2,570,924 2,826,607 Borrowings for re-financing activities - 24,000,000 Other borrowings 34,606 44,493 Current accounts held by the State Treasury 167, ,115 2,785,374 27,293, Annual Report

115 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 20. DEPOSITS AND BORROWINGS FROM OTHER CREDIT INSTITUTIONS 31/12/ /12/2011 MILLION VND MILLION VND Demand deposits, gold from other credit institutions 9,086,345 2,971,022 - In VND 1,089,704 1,380,606 - In gold and foreign currencies 7,996,641 1,590,416 Term deposits, gold from other credit institutions 10,897,065 55,240,948 - In VND 9,261,157 41,701,974 - In gold and foreign currencies 1,635,908 13,538,974 Borrowings from other credit institutions 76,831,391 16,195,943 - In VND 38,865, In gold and foreign currencies 37,966,391 16,195,943 96,814,801 74,407, Annual Report 115

116 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 21. DEPOSITS FROM CUSTOMERS Analysis by type of deposits 31/12/ /12/2011 MILLION VND MILLION VND Demand deposits, gold 53,518,068 46,598,614 - Demand deposits in VND 44,501,999 37,647,847 - Demand deposits in gold, foreign currencies 9,016,069 8,950,767 Term deposits, gold 225,849, ,115,715 - Term deposits in VND 207,093, ,753,190 - Term deposits in gold, foreign currencies 18,756,934 21,362,525 Deposits for specific purpose 2,066,913 1,816,439 - Deposits for specific purpose in VND 719, ,469 - Deposits for specific purpose in foreign currencies 1,347,809 1,364,970 Margin deposits 7,670,390 7,605,177 - Margin deposits in VND 6,278,737 5,124,371 - Margin deposits in gold, foreign currencies 1,391,653 2,480, ,105, ,135, Annual Report

117 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 21. DEPOSITS FROM CUSTOMERS (continued) Analysis by type of customers and type of business entity 31/12/ /12/2011 (*) MILLION VND MILLION VND State-owned enterprises 39,433,699 39,909,650 State-owned one-member limited enterprises 31,902,696 25,375,595 Two or more member limited liability enterprises with more than 50% of the State s share-holding 681, ,209 Other limited companies 9,230,877 7,845,564 Joint stock companies with more than 50% of the State s share-holding 16,169,829 15,089,364 Other joint stock companies 12,387,444 11,029,407 Partnership companies 1,042, ,570 Private companies 928, ,786 Foreign invested enterprises 7,982,250 7,391,148 Cooperatives, cooperative unions 309, ,129 Household businesses, individuals 149,658, ,303,286 Administrative units, Party, unions and associations 5,553,577 2,321,972 Others 13,824,038 14,364, ,105, ,135,945 (*) The Bank made reclassification of the opening balance (see Note 55 - Comparative figures) Annual Report 117

118 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 22.GRANTS, TRUSTED FUNDS AND BORROWINGS AT RISK OF CREDIT INSTITUTION 31/12/ /12/2011 MILLION VND MILLION VND Fund received from other organisations and individuals in VND 26,729,924 29,526,671 Fund received from other organisations and individuals in foreign currencies 1,768,421 2,791,295 Funds received from international organisations in VND 1,121,151 1,391,147 Funds received from international organisations in foreign currencies 3,607,212 3,115,395 33,226,708 36,824, VALUABLE PAPERS 31/12/ /12/2011 MILLION VND MILLION VND Valuable papers in VND 22,586,070 9,525,010 Valuable papers in foreign currencies 6,083,159 1,564,107 28,669,229 11,089,117 During the year, the Bank issued USD 250 million of unsecured bonds with terms of 5 years, fixed interest rate of 8% p.a., interest to be paid twice a year on interest payment dates. Detail of valuable papers by term 31/12/ /12/2011 MILLION VND MILLION VND Certificate of deposit Term under 12 months 9,622,900 1,732,638 Term from 12 months to under 5 years 13,727,281 1,593,589 Term of 5 years and over - 50 Bills Term under 12 months 2, ,567 Bonds Term under 12 months - - Term from 12 months to under 5 years 5,161,280 7,095,250 Term of 5 years and over - - Other valuable papers Term under 12 months 154,800 50,023 28,669,229 11,089, Annual Report

119 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 24. OTHER LIABILITIES 31/12/ /12/2011 (*) MILLION VND MILLION VND Interest and fee payables 3,615,577 4,834,923 Internal payables 3,081,923 3,085,021 External payables 11,900,156 16,580,974 Provision for commitments (Note 10) 409, ,811 Other provisions 80,978 32,741 19,088,467 24,969,470 (*) The Bank made reclassification of the opening balances (see Note 55 - Comparative figures) Details of internal payables 31/12/ /12/2011 (*) MILLION VND MILLION VND Payables to employees 1,810,073 1,194,271 Payables relating to bonus and welfare funds 1,078,347 1,638,501 Others 193, ,249 3,081,923 3,085, Details of external payables 31/12/ /12/2011 (*) MILLION VND MILLION VND Payments/receipts on behalf of other organisations 9,481,078 14,176,726 Amount due to customers and deferred payment 614, ,764 Corporate income tax payables 544, ,916 Other pending payments 754, ,713 Payables to the SBV in clearing settlement - 104,531 Margin deposits of securities investors 138, ,279 Other tax payables 73,229 73,964 Payables for insurance of deposit 58,958 48,933 Payables to the SBV from recovery of written-off bad debts 44,814 35,408 Payables relating to trade finance activities 11,382 - Money transfer payables 32,221 50,327 Other payables 146, ,413 11,900,156 16,580,974 (*) The Bank made reclassification of the opening balance (see Note 55 - Comparative figures) Annual Report 119

120 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 25. THE BANK S OBLIGATIONS TO THE STATE BUDGET Movement during the year Opening balance Payables Paid Closing Balance Million VND Million VND Million VND Million VND Value Added Tax (87,838) 114, ,328 (84,744) Corporate Income Tax 700,916 1,998,842 2,155, ,304 Other taxes 73, , ,161 58, ,042 2,547,198 2,715, , Annual Report

121 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 26. CAPITAL AND RESERVES The movement of major items in owner s capital Difference from Capital financial Financial supple mentary Retained Minority Charter Share statements reserve capital premium translation fund reserve earnings interest Total MILLION VND MILLION VND MILLION VND MILLION VND MILLION VND MILLION VND MILLION VND MILLION VND As at 01/01/ ,229,722 1,944, ,163 1,030, ,782 4,540, ,496 28,699,392 Increase capital from share premium 1,941,959 (1,941,959) Increase capital from dividends distribution 4,045, (4,045,864) - - Profit for the period ,151,545 18,134 6,169,679 Increase from financial statements translation for consolidation purpose - - 1, ,938 Adjustment of appropriation to reserves for previous year ,919 (7,897) (25,545) - (6,523) Dividend payment of (79) (10,788) (10,867) Appropriation to reserves , ,990 (1,938,970) - (1,000,000) Others (229) - (13,017) - (13,246) As at 31/01/ ,217,545 2, ,101 1,683, ,875 4,668, ,842 33,840, Annual Report 121

122 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December CAPITAL AND RESERVES ( continued) Form B 05/TCTD-HN On 21 March 2012, the State Bank of Vietnam issued Document No. 1633/NHNN-TTGSNH approving the Bank to increase its charter capital in 2012 from VND 20,229,721,610,000 to VND 26,217,545,370,000 by stock dividends (20%) and bonus stocks (9.6%) from share premium for existing shareholders. On 13 April 2012, the Bank completed the issuance of shares to existing shareholders with the total number of 598,782,376 shares. In 2011, the Bank temporarily distributed profit based on the Bank s 2011 results of operations. On 28 February 2012, the General Shareholders Meeting approved the appropriation to reserves and profit distribution for the year The appropriated amounts approved by the General Shareholders Meeting were adjusted in the consolidated financial statements for the year ended 31 December In 2012, the Bank temporarily distributed profit based on the operating result in The final approval is under the authority of General Shareholders Meeting. Details of investment capital into the Bank are as follows: 31/12/ /12/2012 Total shares Ordinary shares Total shares Ordinary shares units (MILLION VND) UNITS (MILLION VND) Capital of the Government 2,105,442,944 21,054,429 1,624,570,174 16,245,701 Contributed capital 516,311,593 5,163, ,401,987 3,984,021 (shareholders, members) Share premium non-applicable 2,210 non-applicable 1,944,169 2,621,754,537 26,219,755 2,022,972,161 22,173,891 Details of the Bank s shares are as follows: 31/12/ /12/2011 Unit Unit Number of registered shares for issue 2,621,754,537 2,022,972,161 Number of shares offered to public 598,782, ,581,013 - Ordinary shares 598,782, ,581,013 - Preferred shares - - Number of shares in circulation 2,621,754,537 2,022,972,161 - Ordinary shares 2,621,754,537 2,022,972,161 - Preferred shares - - Par value of shares (VND) 10,000 10, Annual Report

123 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December INTEREST AND SIMILAR INCOME Form B 05/TCTD-HN MILLION VND MILLION VND Interest from deposits 1,974,401 4,181,419 Interest from loans to customers 39,663,003 42,903,387 Interest from debt securities 8,789,448 8,410,196 Interest income from finance leases 229, ,152 Other income from credit activities 4,832 12, INTEREST AND SIMILAR EXPENSES 50,660,762 55,775, MILLION VND MILLION VND Interest expense on deposits 24,717,048 25,735,254 Interest expense on borrowings 5,931,336 7,698,445 Interest expense on valuable papers issued 1,574,784 2,182,815 Expense on other credit activities 17, ,676 32,240,738 35,727, Annual Report 123

124 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 29. NET GAIN FROM SERVICE ACTIVITIES MILLION VND MILLION VND Income from services 1,855,358 1,923,360 - Income from remittance services 860, ,387 - Income from guarantee services 359, ,028 - Income from trust and agency services 15, ,560 - Others 620, ,385 Expense on services 577, ,029 - Expense on remittance services 103,337 69,902 - Expense on treasury 151, ,901 - Others 322, ,226 Net profit from services 1,278,223 1,152, NET GAIN FROM TRADING FOREIGN CURRENCIES AND GOLD MILLION VND MILLION VND Income from trading foreign currencies and gold 1,259, ,690 - Income from spot trading foreign currencies 367, ,202 - Income from trading gold 652,568 44,676 - Income from trading derivative financial instruments 239, ,812 Expense from trading foreign currencies and gold 898, ,128 - Expenses from spot trading foreign currencies 157, ,862 - Expense from trading gold 641, Expense from trading derivative financial instruments 98, ,266 Net gain from trading in foreign currencies and gold 361, , Annual Report

125 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 31. NET PROFIT FROM TRADING SECURITIES HELD FOR TRADING MILLION VND MILLION VND Income from trading securities held for trading 42,453 37,322 Expense from trading securities held for trading (13,237) (18,347) Provision reversed/(charged) for impairment of securities held for trading 4,940 (8,045) Net gain/(loss) from securities held for trading 34,156 10, NET PROFIT FROM TRADING INVESTMENT SECURITIES MILLION VND MILLION VND Income from trading investment securities 363, Expense from trading investment securities (683) (16) Provision reversed/(expense) for impairment of investment securities (Note 12) 152,753 (501,417) Net gain/(loss) from investment securities 515,883 (501,144) 2012 Annual Report 125

126 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 33. NET PROFIT FROM OTHER ACTIVITIES MIllion VND million VND Other operating income 1,330,576 1,191,117 Income from recovery of bad debts 1,255,421 1,170,498 Income from disposals of assets 6,710 5,847 Other income 68,445 14,772 Expenses on other activities 144, ,014 Net profit from other activities 1,185,599 1,024, INCOME FROM CAPITAL CONTRIBUTION, EQUITY INVESTMENTS MIllion VND million VND Dividend in cash from capital contribution, equity investments - from equity securities held for trading 2,494 18,243 - from equity investment securities 8, from other long-term investments 10,820 1,661 Share from net profit / loss under equity method 143, ,441 of investments in joint ventures / associates 165, , Annual Report

127 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 35. OPERATING EXPENSES MIllion VND million VND Taxes, fees and charge 77, ,788 Staff cost - Salaries and allowances 4,501,000 4,501,418 - Salary-based expenses 226, ,828 - Other benefits 43,241 39,511 - Social activities expenses 1,524 1,368 - Other expenses 216, ,962 Expenses for fixed assets - Depreciation and amortisation expenses 887, ,731 - Others 808, ,240 Expenses for operating management - Per diem 135, ,921 - Expense for union activities 10,215 8,958 - Others 1,578,687 1,352,988 Insurance premium for customers deposit 216, ,332 (Reversal of)/provision expense for other assets (17,069) - Other operating expenses 749, ,864 9,435,673 9,077, Annual Report 127

128 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 36. PROVISION EXPENSES FOR CREDIT LOSSES MIllion VND million VND Provision expenses for credit losses of loans to credit institutions 154,760 17,775 Provision expenses for credit losses of loans to customers (Note 10) 4,229,172 5,041,507 Provision expenses for off-balance sheet commitments (Note 10) (25,978) (155,031) 4,357,954 4,904, CORPORATE INCOME TAX EXPENSE MIllion VND million VND Profit before tax 8,167,900 8,392,021 Adjustments for: - Dividend income exempted from current income tax (22,318) (12,461) - Profit before tax of subsidiaries (362,210) (356,735) - Income from increase of interest in joint ventures/associates (143,636) (237,437) - Changes in general provision for loans granted to the Bank s subsidiaries 5,102 (1,280) - (Reversal of )/Provision charge for debt securities (125,124) 394,944 - Others 102,821 - Taxable income of the holding Bank 7,622,535 8,179,052 Local current income expense of the Bank at tax rate 25% 1,905,634 2,044,764 Overseas current income expense of the Bank Current income expense of the subsidiaries 91,995 87,890 CIT expense based on taxable income 1,998,221 2,132, Annual Report

129 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 38. BASIC EARNINGS PER SHARE Profit attributable to the Bank s shareholders (million VND) 6,151,545 6,243,795 Less: Profit distributed to bonus and welfare funds (million VND) 1,000,000 1,001,000 Profit to calculate basic earnings per share (million VND) 5,151,545 5,242,795 Weighted average number of ordinary shares to calculate 2,508,692,014 1,852,294,084 basic earnings per share (share) Basic earnings per share (VND) 2,053 2,830 Retrospective adjustment of the weighted average number of shares and basic earnings per share: Weighted average number of ordinary shares Shares Earning per share VND As per consolidated financial statements for 1,658,098,187 3,162 the financial year ended 31 December 2011 Impacts of share issuance from share premium on 13 April ,195,897 (331) Adjusted figures 1,852,294,084 2, Annual Report 129

130 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 39. CASH AND CASH EQUIVALENTS Cash and cash equivalents presented in the consolidated cash flow statement include the following balance sheet items: 31/12/ /12/2011 MIllion VND million VND Cash, gold and gemstones (*) 2,511,105 3,713,859 Balances with the State Bank of Vietnam (*) 12,234,145 12,101,060 Current deposit at other credit institutions (*) 14,475,763 4,754,104 Deposits at and loans to other credit institutions with term 26,364,975 53,725,376 of less than 3 months Securities which fall due within 3 months from purchasing date 3,728,000-59,313,988 74,294,399 (*) Balance of cash, gold and gemstones, balances with the State Bank of Vietnam and balance of current deposit at other credit institutions are presented in Note 5, Note 6 and Note Annual Report

131 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 40. COLLATERALS AND MORTGAGES 40.1 Type and value of collaterals and mortgages Carrying value (million VND) 31/12/ /12/2011 Real estate 379,347, ,839,088 Movable assets 30,897, ,831,206 Valuable papers 32,691,212 38,090,284 Other assets 154,480,824 18,794, ,416, ,555, Collaterals held by the Bank which are permitted to sell or re-pledge for a third party in the absence of default by the owner of the collateral As at 31 December 2012, the Bank did not hold any collateral which the Bank is permitted to sell or re-pledge for a third party in the absence of default by the owner of the collateral. 41. EMPLOYEES REMUNERATIONS Total number of employees (person) 19,046 18,040 Employees income (million VND) 1.Total salary fund 4,501,000 4,501,418 2.Bonus Other allowances 120, ,727 4.Total income (1+2+3) 4,621,874 4,666, Average monthly salary Average monthly income Annual Report 131

132 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 42. CONTINGENT LIABILITIES AND COMMITMENTS In normal course of business, the Bank uses financial instruments which are related to off-balance sheet items. These financial instruments mainly comprise financial guarantees and commercial letters of credit. These instruments involve elements of credit risk apart from those recognised in the consolidated balance sheet. Credit risk for off-balance sheet financial instruments is defined as the possibility of the Bank s 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, contract performance and bidding, etc. The credit risk associated with issuing guarantees is essentially the same as that associated with extending facilities to customers; other guarantees have risk concentration at lower level. Letter of credit (L/C) transaction is a transaction where the Bank issues a financial guarantee to its customers (buyer or importer) in which the seller or the exporter is the beneficiary. There are 2 types of L/C by term: L/C at sight and usance L/C. Credit risk of L/C is limited if the Bank can manage the receipt of goods. Usance L/C represents higher risk than L/C at sight. If the Bank makes payment to the beneficiary under L/C or financial guarantees but the Bank s customer does not reimburse to the Bank, the Bank has the right to record a loan to the customer under their agreement before issuing L/C or financial guarantees. 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. In addition, the Bank engages conditional commitments, in forms of commitments in interest swap contracts, commitments in valuable paper trading contracts and other commitments. Detail of contingent liabilities and commitments as at 31 December 2012: 31/12/ /12/2011 million VND million VND Contingent liabilities 43,848,065 47,837,808 Financial guarantees 16,563,687 17,712,619 Letter of Credit at sight 19,485,195 20,300,939 Usance Letter of Credit 7,799,183 9,824,250 Commitments 11,932,157 4,596,987 Commitments in currency swap contracts 6,957,407 - Commitments in valuable paper trading contracts 2,570,924 - Other commitments 2,403,826 4,596, Annual Report

133 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 43. RISK-FREE TRUST AND AGENCY ACTIVITIES 31/12/ /12/2011(*) million VND million VND Trusted fund from orgnisations 4,081,891 2,029,742 4,081,891 2,029,742 (*) Including balance of the risk-free trusted fund at Vietinbank Fund Company Ltd. as at 31 December RELATED PARTY TRANSACTIONS AND BALANCES During the course of operations, the Bank had deposits, borrowings and other transactions with its related parties. List of related parties: Related parties relationship The State Bank of Vietnam Direct ownership Indovina Bank Ltd. Joint Venture Vietinbank Aviva Life Insurance Company Limited Joint Venture Southern Quang Ngai Urban Township Investment and Development JSC. Associate My Dinh Real Estate Investment JSC. Subsidiary s associate Significant transactions with related parties during the year: Related parties Transactions 2012 (MILLION VND) The State Bank of Vietnam Decrease in borrowings from the SBV (24,265,616) The State Bank of Vietnam Decrease in deposits with the SBV 133,085 Indovina Bank Ltd Decrease in deposits with related party (800,000) Indovina Bank Ltd Decrease in deposits and loans from related party 616,560 Vietinbank Aviva Life Insurance Company Limited Decrease in deposits from related party (471,367) Significant balances with related parties as at the balance sheet date are as follows: Related parties Transactions Receivables Payables million VND million VND The State Bank of Vietnam Demand deposits 12,234,145 - and compulsory reserves The State Bank of Vietnam Borrowings - 2,618,002 Indovina Bank Ltd. Deposits 2,000,000 4,557,960 Indovina Bank Ltd. Dividend for year 2010 and ,592 - Vietinbank Aviva Life Insurance Company Limited Deposits - 368, Annual Report 133

134 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 45. GEOGRAPHICAL STRUCTURE OF ASSETS, LIABILITIES AND OFF BALANCE SHEET ITEMS As at 31 December 2012: Total Total Securities trading Total loan placements borrowings Derivatives (Total and investment balance and loans and deposits Credit transaction value (Difference between (assets) (liabilities) commitments in contracts) debit - credit) million VND million VND million VND million VND million VND million VND Domestic 332,771,516 61,762, ,949,550 14,630,555 74,451 73,815,849 Overseas 584,576 8,362, ,299 29,217, ,356,092 70,124, ,395,849 43,848,065 74,451 73,815, FINANCIAL INSTRUMENTS On 06 November 2009, the Ministry of Finance issued Circular No. 210/2009/TT-BTC ( Circular 210 ) guiding the application of International Financial Reporting Standards on presentation of financial statements and disclosures of financial instruments, which is effective for the fiscal year began on or after 01 January Circular 210 provides the definition of financial instruments, including financial assets, financial liabilities, derivative financial instruments and equity instruments and requirements on classification, presentation and disclosures of these financial instruments. As Circular 210 only regulates the presentation and disclosure of financial instruments, the following terms under Circular 210 are adopted for Note 46 of the consolidated financial statements. Assets and liabilities of the Bank are recognised in accordance with Vietnamese Accounting Standards and Vietnamese Accounting System applicable to credit institutions and prevailing relevant regulations set forth by the State Bank of Vietnam. Financial assets Under Circular 210, the Bank s financial assets includes cash, gold, gemstones, balances with the State Bank of Vietnam, placements with and loans to other credit institutions, loans to customers, investment securities, other long-term investments, receivables and assets under currency derivative contracts. Financial assets within the scope of Circular 210 are classified, for disclosures in the consolidated financial statements, into either of the followings: Financial assets at fair value through profit and loss: Financial asset at fair value though profit and loss is a financial asset that meets either of the following conditions: a. It is classified as held for trading. A financial asset is classified as held for trading if:»» It is acquired or incurred principally for the purpose of selling or repurchasing in the near term;»» There is evidence of a recent actual pattern of short-term profit-taking; or»» It is a derivative (except for the derivative that is a financial guarantee contract or effective hedging instrument) Annual Report

135 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 46. FINANCIAL INSTRUMENTS (Continued) Financial assets (Continued) b. Upon initial recognition, it is designated by the Bank as at fair value through profit or loss. Held-to-maturity investments: Held-to-maturity investments are non-derivative financial assets with determinable payments and fixed maturity that the Bank has the positive intention and ability to hold to maturity except for: a. Those that the Bank designates at fair value through profit or loss upon initial recognition; b. Those that the Bank designates as available for sale; and c. Those that meet the definition of loans and receivables. Loans and receivables: Loans and receivables are non-derivative financial assets with fixed or determinable payments and not quoted in an active market except for: a. Those that the Bank intends to sell immediately or in the near term, which shall be classified as held for trading, and those that the Bank designates as at fair value through profit and loss upon initial recognition; b. Those that the Bank designates as available for sale upon initial recognition; or c. Those for which the holder may not recover substantially all of its initial investment, other than because of credit deterioration, which shall be classified as available for sale. Available-for-sale financial assets: Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale or are not classified as: a. Loans and receivables; b. Held-to-maturity investments or; c. Financial assets designated as at fair value through profit or loss Annual Report 135

136 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 46. FINANCIAL INSTRUMENTS (Continued) Financial liabilities According to Circular 210, the Bank s financial liabilities include borrowings from the Government and SBV, deposits and borrowings from other credit institutions, customer deposits, bonds, grants, trusted funds and borrowings at risk of credit institution, valuable papers, other payables and payables under currency derivative contracts. Financial liabilities within the scope of Circular 210 are classified, for disclosures in the consolidated financial statements, into either of the followings: Financial liabilities at fair value through profit or loss: a. A financial liability must meet either of the following conditions:»» It is acquired or incurred principally for the purpose of selling or repurchasing in the near term;»» There is evidence of a recent actual pattern of short-term profit-taking; or»» It is a derivative (except for the derivative that is a financial guarantee contract or effective hedging instrument). b. Upon initial recognition, it is designated by the Bank as at fair value through profit or loss. Financial liabilities at amortised cost: Financial liabilities that are not classified as at fair value through profit or loss are classified as at amortised cost. Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are offset and the net amount reported in the consolidated balance sheet if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realize the assets and settle the liabilities simultaneously. The risk management policy related to financial instruments Under the guidance of the State Bank on enhancing the role of risk management in credit institutions, the Bank continues implementing risk management policies for its entire business. Business relating to financial instruments including spot contract, forward contract, loan contract, etc. are diversified and tightly controlled by risk management tools. All businesses are operating under risk assessment in both qualitative and quantitative risk measurement. Model of risk management related to financial instruments is associated with the modern risk management model of the Bank. This model based on the 3 stages of control includes: (i) the business units in Round 1 acts as a unit directly and fully responsible for risk identification, assessment, control and mitigation; (ii) Round 2 is the Risk Management Department with responsibility to establish the policies, principles, rules, control limit and independently supervise the risk management; (iii) Round 3 is the Internal Audit Department with the responsibility to ensure the rationality and effectiveness of the risk management at Round 1 and Round 2. All financial instruments are reviewed, assessed for all related risks before implementation, to ensure that the Bank can effectively control risks related to financial instruments Annual Report

137 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 46. FINANCIAL INSTRUMENTS (Continued) The risk management policy related to financial instruments (Continued) The specialised departments operate under the regulations prescribed by the Board of Directors and comply with the principles and procedures promulgated by the General Director, manage risk at all levels of employees and on the overall business. Details for specific department involved in risk management of financial instruments are as followings: For credit and investment risk: In 2012, the Financial Institution Department is the main division responsible for analysing and recommending credit limits for each financial institution partner. Credit and Investment Risk Management Department reviews the scoring of each financial institution. In the near future, due to changes in the risk management model, Department of Credit ratings and Credit limit Approval will do assessment, rating and approve the credit limit for enterprises and the transaction limit for financial institutions. For the liquidity risk, market risk, operation risk: Market Risk Management Department is responsible for regularly monitoring and evaluating: (i) the differences in maturity term of assets and liabilities management activities to identify, measure, analyse and report about the liquidity and interest risks (ii) market risk (exchange rate, gold price, etc.) of the system. Specific Regulations and procedures related to foreign currency investment and trading are established to manage risks associated with financial instruments, ensuring the principle of decentralization, control and operation risk management during the using of financial instruments at Front Office, Middle Office and Back Office. Since February 2013, the Bank has officially operated the Treasury MX.3 system to ensure strict and timely management of market risk related to the Bank s operations. The Operation Risk Management Department regularly monitors, assesses, analyses and reports operational risk and market risk in the business processes relating to financial instruments. For legal risk: The Legal Department is responsible for the management of legality of all activities to minimise the risks in the activities relating to derivative instruments. The Compliance Audit Department inspects the operations of all departments to ensure compliance with the current regulations of the Bank. Along with setting up the departments in charge of risk management and risk management policies relating to financial instruments, the Bank also coordinates with partners in the information technology and telecommunication sector to build an integrated system of risk management tools to support the risk management operation in protecting customers, suppliers and therefore, to enhance the sustainable development of the Bank. The policies on currency risk, interest rate risk, credit risk and liquidity risk are analysed in details in Notes 47, 48, 49 and 50. Determination of fair value of financial instruments The Bank uses the method and assumptions to estimate fair value as following: Fair value of cash and short-term deposits is measured at book value of the items because these are short-term instruments. The Bank s financial instruments are detailed as follows: 2012 Annual Report 137

138 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 46. FINANCIAL INSTRUMENTS (Continued) Book value(excluding provisions) Fair value 31/12/ /12/ /12/ /12/2011 million VND million VND million VND million VND Financial assets Cash, gold and gemstones 2,511,105 3,713,859 2,511,105 3,713,859 Balances with the State Bank of Vietnam 12,234,145 12,101,060 12,234,145 12,101,060 Placements with and loans to other credit institutions 57,890,220 65,295,229 (*) (*) Trading securities - Equity securities with market price reference 26,504 35,779 16,790 35,779 Trading securities - Equity securities without market price reference 257, ,385 (*) (*) Trading securities - Debt securities - 263,194 (*) (*) Derivative financial instruments and other financial assets 74,451 20,236 (*) (*) Loans to customers 333,356, ,434,312 (*) (*) Investment securities - Equity securities with market price reference 145, ,023 75,511 47,882 Investment securities - Equity securities without market price reference 88,888 16,888 (*) (*) Investment securities - Debt securities 73,297,671 67,487,055 (*) (*) Other long-term investments 327, ,440 (*) (*) Other receivables 621,309 1,110,851 (*) (*) Interest and fee receivables 7,943,559 6,664,631 (*) (*) Other assets 143, ,443 (*) (*) 488,917, ,091,385 Financial liabilities Borrowings from the Government and the SBV 2,785,374 27,293,733 (*) (*) Deposits and borrowing from other credit institution s 96,814,801 74,407,913 (*) (*) Deposits from customers 289,105, ,135,945 (*) (*) Grants, trusted funds and borrowings at risk of credit institution 33,226,708 36,824,508 (*) (*) Valuable papers issued 28,669,229 11,089,117 (*) (*) Accrued fee and interest expenses 3,615,577 4,834,923 (*) (*) Other payables and liabilities 11,223,665 15,757,161 (*) (*) 465,440, ,343,300 (*) The Bank has not determined fair value of financial assets and financial liabilities as at the balance sheet date because Vietnamese Accounting Standards as well as prevailing regulations have not had specific guidance on fair value determination of such items Annual Report

139 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 46. FINANCIAL INSTRUMENTS (Continued) Classification of financial assets as at 31 December 2012: Financial assets Other assets Held-for- Held-to Loans and Available-for- measured at trading -maturity receivables sale amortised cost Total million VND million VND million VND million VND million VND million VND Cash, gold and gemstones ,511,105 2,511,105 Balance with the State Bank of Vietnam ( SBV ) ,234, ,234,145 Placements with and loans to other credit institutions ,890, ,890,220 Trading securities 284, ,267 Derivative financial instruments and other financial assets 74, ,451 Loans to customers ,356, ,356,092 Investment securities - 2,450,000-71,081,582-73,531,582 Other long-term investments , ,109 Other receivables , ,309 Interest and fee receivables - - 7,943, ,943,559 Other assets , ,304 Classification of financial liabilities as at 31 December 2012: 358,718 2,450, ,045,325 71,408,691 2,654, ,917,143 All the financial liabilities of the Bank as at 31 December 2012 are classified as financial liabilities measured at amortised cost Annual Report 139

140 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 47. CURRENCY RISKS Currency risk is the risk that values of financial instruments fluctuate due to changes in foreign exchange rate. The Bank was incorporated and operates in Vietnam and its reporting currency is Vietnam dong (VND), while part of the Bank s assetequity is in foreign currencies (USD, EUR, etc.). Thus, currency risk may arise. The Bank is exposed to the following risks: Currency risks in foreign currency trading Currency risks in fund mobilisation and lending Currency risks in investments The economic situation and macroeconomic policies during the year which had significant effects on the Bank s operations: In 2012, to stabilise the exchange rates, the State Bank of Vietnam took a number of measures such as putting restrictions on the types of entities eligible to borrow in foreign currencies, requesting state-owned corporations to sell USD to banks and regulating the ceiling interest rate of USD deposits at 0.50% per annum for enterprises and 2% per annum for individuals. Thanks to the SBV s positive measures, the foreign exchange market in 2012 was kept stable. In 2012, foreign currency credit growth is not high compared to that at the end of 2011, due to the fact that interest rate increased and the Bank enhanced its control over foreign currency loan balances. In addition, the Bank actively utilised USD foreign currency funds from international markets through international refinancing and capital raising channels. Particularly, in 2012, the Bank succesfully issued USD 250 million of international bonds. The Bank has used these funds to finance many projects/production and business plans in Vietnam, contributing to the economy s growth. To prevent the risk of exchange rate fluctuations, the Bank has applied the following synchronous measures: Based on actual data, the growth demand of affiliates and business orientation, Capital and Financial Planning Management Department analyses and projects cash inflows and outflows and proposes fund planning projection for each currency unit (including VND, USD, and EUR equivalent) to the Bank s Board of Management based on actual cash flows and business orientation to ensure safety and effectiveness of the whole system. All foreign currency loans are financed through mobilised funds in the same currency, thus no currency risk arises in lending and mobilisation activities. For investment activities: The Bank faces currency risk with regards to its investment in Indovina Bank Ltd. and the investment in the establishment of branches in Germany and Laos. Currency risk for these investments is closely monitored by the Bank through analysis and forecast of changes in exchange rates of these currencies against VND. The Bank is currently considering plans to use derivatives to hedge currency risks for the three investments. For foreign currency trading activities: Regulations on currency position for each currency unit are developed by the Market Risk Management Department and approved by the General Director, which are within the Bank s risk tolerance. The currency position limit is controlled and executed by the FX Department at the Head Office and independently supervised by the Market Risk Management Department. The currency position is managed on a daily basis and hedging strategies are used to ensure that the currency position is maintained within established limits Annual Report

141 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 47. CURRENCY RISKS (Continued) Carrying amounts of assets and liabilities denominated in foreign currencies as at 31 December 2012 are as follows: ITEM EUR equivalent USD equivalent Gold equivalent Other currencies equivalent Total million VND million VND million VND million VND million VND Assets Cash, gold and gemstones 105, ,247 1,987,760 39,122 2,511,105 Balance with the State Bank of Vietnam - 2,187,676 10,046,469-12,234,145 Placements with and loans to 178,105 11,492,344 46,053, ,353 57,890,220 other credit institutions (*) Trading securities (*) , ,267 Derivative financial instruments and other financial assets - 74, ,451 Loans to customers (*) 1,943,209 64,669, ,743, ,356,092 Investment securities (*) ,531,582-73,531,582 Long-term investments (*) - 1,392,058 1,424,956-2,817,014 Fixed assets - - 5,276,653-5,276,653 Other assets (*) 715,512 1,418,366 17,410,544-19,544,422 Total assets 2,942,802 81,612, ,759, , ,519,951 Liabilities and owners equity Borrowings from the Government - 34,606 2,750,768-2,785,374 and the SBV Deposits and borrowings from 412,405 47,186,535 49,215,861-96,814,801 other credit institutions Deposits from customers 5,042,983 25,432, ,592,842 37, ,105,307 Grants, trusted funds and borrowings 351,697 5,023,936 27,851,075-33,226,708 at risk of credit institution Valuable papers issued 75,075 6,008,084 22,586,070-28,669,229 Other liabilities (*) 255, ,675 17,539,732-18,597,656 Capital and reserves ,624,531-33,624,531 Total liabilities and owners equity 6,137,409 84,488, ,160,879 37, ,823,606 Balance sheet currency position (3,194,607) (2,875,549) 10,598, ,248 4,696,345 Off-balance sheet currency position 2,200,790 27,539,243 13,973, ,353 43,848,065 Total currency position (993,817) 24,663,694 24,571, ,601 48,544,410 (*) Excluding risk provision 2012 Annual Report 141

142 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 48. INTEREST RATE RISK Interest rate risk is the possibility of the Bank s income or asset value being affected when market interest rate fluctuates. Interest rate risk to the Bank possibly derives from investment activities and fund mobilisation and lending activities. The effective interest rate re-pricing term of the assets and liabilities is the remaining period from the date of consolidated financial statements to the nearest interest rate re-pricing date. The following assumptions and conditions have been adopted in the analysis of effective interest rate re-pricing term of the Bank asset and liabilities: Cash, gold and gemstones long-term investment and other assets (fixed assets, investment properties and other assets) are classified as non interest-bearing items; Balance at the SBV are considered settlement deposit, thus the effective interest rate re-pricing term is assumed to be within one month; The effective interest rate re-pricing term of investment securities and trading securities is determined based on the time to maturity from the balance sheet date of each securities; The effective interest rate re-pricing term of placements with and loans to other credit institutions; loans to customers; borrowings from the Government and the SBV; deposits and borrowing from other credit institutions; deposits from customers are determined as follows:»» Items with fixed interest rate during the contractual period: the effective interest rate re-pricing term is determined based on the time to maturity from the balance sheet date;»» Items with floating interest rate: the effective interest re-pricing term is determined based on the time to the nearest interest rate re-pricing date from the balance sheet date; The effective interest rate re-pricing term of valuable papers is determined based on the time to maturity from the balance sheet date of each valuable paper issued; The effective interest rate re-pricing term of grants, trusted funds and borrowings at risk of credit institution is determined based on their time to maturity from the balance sheet date to the transactions which have fixed interest rates. The Bank s interest rate risk policies are as follows: Inter-bank lending (short-term): investment interest rate is based on the fluctuation of the market and the Bank s funding cost. The inter-bank loans usually have short terms (less than 3 months). The Bank forecasts fluctuation of the market interest rate and its fund balancing ability in order to make appropriate investment decisions. In case that the interest rate is forecasted to decline, the Bank will focus on long-term investments to increase profitability. Conversely, if interest rates are forecast to have increasing trend, the Bank will increase short-term investments. Fund mobilisation: interest rate for fund mobilisation is determined based on market price, business orientation of the Bank management, the Bank s fund balance and regulations of the State Bank of Vietnam. Fund is mobilized mainly with short interest rate re-pricing term Annual Report

143 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 48. INTEREST RATE RISK (Continued) The Bank s interest rate risk policies are as follows (Continued): Lending activities: The Bank determines lending interest rate based on the funding cost, management expenses, risk consideration, collateral value and market interest rate to ensure competitiveness as well as efficiency. The Head Office regulates the floor lending interest rate for each period; branches can themselves decide lending interest rates for each period based on credit risk analysis and assessment provided that the rates are not less than the regulated floor rate and budgeted profit is assured. Besides, due to the fact that capital structure focuses on the funds with short interest rate re-pricing term, the Bank requires that all loans must be at floating interest rate, adjusted every one to three months. Interest rate risk management: The Bank manages interest rate risk at 2 levels: transaction level and portfolio level, of which the former is more focused: Interest rate risk management at portfolio level»» The Bank has been implementing the completed systems of the rules, regulations and procedures of interest rate management in the Bank in accordance with international rules and Basel II regulations; implementing interest rate management under 3 control stages rule.»» In 2012, the Bank has completed the construction of software system of Assets-Liabilities Management (ALM), which runs to the transaction level under international practices, automatically providing reports of term differences, revaluation under nominal term and behaviour, interest rate increase/decrease analysis reports etc. in order to facilitate the Bank s interest rate management activities. ALM system is currently in the test phase and expected to be officially launched in 2013.»» Re-pricing terms of all loans are required to be adjusted based on the re-pricing terms of funds mobilised. The interest rate re-pricing gaps are controlled within established limits. Interest Rate Management at transaction level»» All credit contracts are required to include terms relating to interest rate risk prevention to ensure that the Bank can hold initiative in coping with fluctuations of the market, lending interest rate must reflect the Bank s actual funding cost;»» Management through the Fund Transfer Pricing (FTP) system: Since 02 April 2011, the Bank has implemented the internal fund transfer pricing system - FTP following term-matching principle for every single transaction in line with international practices. Depending on the orientation of the Bank and the market movements, the Head Office can change the fund price for each type of customers or products, etc. to give signals for the business units to determine their lending/fund mobilisation rates. With the experience and sensitivity in managing, the Bank has been cautiously, flexibly in managing the deposit and loan interest rate mechanism to ensure the safety and effectiveness of the business operation. As shown in the interest rate re-pricing gap report, the majority of interest bearing assets of the Bank has re-pricing term within 6 months, which is in line with the re-pricing structure of the mobilised funds that have short interest rate re-pricing term. Interest rate sensitivity Since Circular 210 does not provide specific guidance on implementation of interest rate sensitivity analysis, the Bank has not disclosed such information herein Annual Report 143

144 48. INTEREST RATE RISK (Continued) Notes to the CONSOLIDATED financial statements (continued) Overdue Current Total Over 5 years From 1to 5 years From 6 to 12 months From 3 to 6 months From 1 to 3 months Within 1 month Within 3 months VND Triệu VND Triệu VND Triệu VND Triệ Over 3 months Noninterest bearing Assets Cash, gold and gemstones MILLION 2,511,105 MILLION MILLION - 2,511,105 MILLION MILLION - MILLION - MILLION - MILLION - MILLION - 2,511,105 MILLION VND VND VND VND VND VND VND VND VND VND Balance with the State Bank of Vietnam ,234, ,234,145 Assets Placements with and loans Cash, gold and gemstones Trading securities (*) to other credit institutions (*) ,894,678 3,046,533 13,695, , ,890,220 2,511, ,511, , , ,267 Balance with the State Bank of Vietnam Derivative financial instruments ,234, ,234,145 Placements with and loans to other and other financial assets ,894,678-3,046,533-13,624, ,059 74, ,890,220 74,451 credit institutions (*) Loans to customers (*) - 4,889,996 1,411,738 26,164,349 91,575, ,092,287 45,787,610 29,434, ,356,092 Trading securities (*) Investment securities (*) 284, , ,750 1,003,600-9,593,134 57,840,641-4,457, ,267 73,531,582 Derivative Long-term financial investments instruments (*) and 2,817, , ,817,014-2,817,014 74,451 other financial assets Fixed assets 5,267, ,276,653 5,276,653 Loans Other to assets customers (*) (*) 19,544,422 4,889,996 1,411, ,757,074-1,628,702 55,599,241 3,257,404 35,975,979 14,658,316 3,899,078 3,028, ,895-19,544, ,356,092 Investment Total assets securities (*) 233,911 30,667,372-4,889,996-1,411,738 3,604,333 84,353,996 8,173,735 98,882,757 5,597, ,113,925 7,159, ,881,523 45,193,842 41,986,016 3,568, ,519,951 73,531,582 Long-term investments (*) 2,817, ,817,014 Fixed Liabilities assets 5,276, ,276,653 Other Borrowings assets from (*) the Government and the SBV 19,544, ,785,374-2,785,374 19,544,422 Total Deposits assets and borrowings from other credit 30,667,372 institutions 4,889,996-1,411, ,490,230-50,289,302 66,819,509 26,760,402 55,272,742 10,705,573 11,382,659 3,860,569 48,221,933 4,363,772-96,814, ,519,951 Liabilities Deposits from customers ,681,078 59,654,490 17,346,381 15,512, ,105,307 Borrowings Grants, trusted from the funds Government and borrowings and the SBV ,785,374 2,785,374 Deposits at risk of and credit borrowings institution from other ,289,302-6,250,253 26,760,402 14,133,210 10,705,573 6,592,991 3,860,569 2,822,881 5,198,955 3,307,573-33,226,708 96,814,801 credit Valuable institutions papers issued ,744,448 1,545,938 19,071,613 6,307,230-28,669,229 Deposits Other liabilities from customers (*) ,681,078-2,317,268 59,654,490 4,249,083 17,346,318 9,254,850 15,512,890 2,776,455 28,910, ,597, ,105,307 Total liabilities ,513, ,854, ,701,649 42,032,386 6,097, ,199,075 Grants, trusted funds and borrowings - - 6,250,253 14,133,210 6,592,991 2,822,881 3,427,373-33,226,708 Net liquidity difference 12,069,716 4,889,996 1,411,738 (15,159,357) (25,971,396) (24,587,724) 61,849,137 35,888,482 38,320,876 at risk of credit institution (*) Valuable Excluding papers risk provision. issued - - 2,580,231 2,006, ,484 15,921,349 7,191,319-28,669,229 Other liabilities (*) 18,597, ,597,656 Total liabilities 18,597, ,800, ,554,948 35,614,366 38,117,689 44,728,178 2,785, ,199,075 Balance sheet net interest gap 12,069,716 4,889,996 1,411,738 57,689,366-35,735,439 19,658,376-26,735,030 3,493,755 1,578,398 38,320, Off-balance sheet commitments affecting to sensitivity with assets and liabilities' interest rate Total net interest rate gap 12,069,716 4,889,996 1,411,738 57,689,366 (35,735,439) 19,658,376 (26,735,030) 3,493,755 35,888,482 38,320,876 (*) Excluding risk provision Annual Report

145 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 49. CREDIT RISK Credit risk is the risk that results in the Bank s loss because its customer or counterparties default on their contractual obligations or fail to fulfil their committed obligations. Tools that the Bank uses to manage credit risk include: For credit activities: The Bank manages and controls credit risk by setting limits for each counterparty and geographical and industrial concentration, and by monitoring exposures in relation to such limits. The Bank has established a credit quality review process to provide early identification of possible changes in the financial position as well as solvency of counterparties based on the qualitative and quantitative factors. Credit limits are established for each counterparty based on its risk rating assigned by the credit rating system. Risk rating is subject to regular assessment. For investment activities/interbank lending activities: The Bank controls and manages risks by setting the interbank and investment limit for each specific counterparty based on the analysis and assessment of the counterparty s risks. These limits are set by the Financial Institution Committee and executed by Investment Department. Financial assets overdue but not impaired The Bank s overdue financial assets that are not impaired include overdue loans with no provision required under Vietnamese Accounting Standards, Vietnamese Accounting System and other prevailing regulations applicable to credit institutions in Vietnam ( VAS ). The aging of such financial assets is presented below: Overdue Under 90 days days days Over 360 days million VND million VND million VND MILLION VND Loans to customers 7,485 25,148 12, ,247 The Bank is currently holding collaterals in the forms of real estate, movable assets, valuable papers and others in kind for the above financial assets. However, the Bank has not been able to determine the fair value of such assets due to the lack of specific guidance and necessary market information. For the purpose of determining whether the assets are impaired and any provision is needed, these assets values are measured in accordance with Decision 493 and Decision Annual Report 145

146 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 50. LIQUIDITY RISK Liquidity risk is defined as the risk that results in the Bank s difficulty in meeting obligations associated with its financial liabilities. Liquidity risk arises because the Bank might be unable to meet its payment obligations when they fall due under both normal and stressed circumstances or when the Bank has to mobilize funds at a higher cost. The Bank had issued regulations on the liquidity management which establishes rules of preparing net liquidity gap, designs stress test scenarios and build backup plan to proactively handle measures in facing with the market volatility. To minimise this risk, management plans to diversify its funding sources. The Bank also develops fund management report system to calculate liquidity position on a daily basis as well as prepares analysis and forecast reports on future liquidity position on a regular basis. On a monthly basis, at ALCO Committed meeting, fund balance and liquidity of the Bank is one of the key content to be discussed. Based on analysis and evaluation, ALCO Committee makes recommendations to the Board of Directors and Board of Management to maintain the ability to balance liquidity of the Bank. In addition, the Bank also maintain a list of secondary liquid assets such as government bonds, which may be sold under repurchased contracts with the State Bank in serious liquidity circumstances if any. The maturity of assets and liabilities represents the remaining time to the contractual maturity date from the balance sheet date. The following assumptions and conditions have been adopted in the analysis of the Bank s maturity relating to its assets and liabilities: Balance with the State Bank of Vietnam is considered current including the compulsory reserve, which is determined upon the composition and maturity of the Bank s customer deposits. The maturity of trading securities and investment securities is based on contractual maturity dates. The maturity of amounts due from other credit institutions and loans to customers is based on the contractual maturity date. The actual maturity sometimes varies from contractual term when the contract is extended. In addition, the loans to customers are represented by the residual value after deducting risk provision. The maturity of equity investment is considered to be over five years as equity investments have indefinite maturity. The deposits, loans from other credit institutions and deposits from customers are determined on the nature of these amounts or maturity dates. For demand deposits from business entities and the grants, trusted funds and borrowings at risk of credit institution, there is an assumption that a certain volume is maintained in the next term. Vostro accounts and current accounts paid upon customers demand are considered to be current. The maturity of term borrowings and deposits is based on their contractual maturity dates. In practice, such items may be rolled over and maintained for longer periods. The maturity of fixed assets is determined based on their remaining useful lives. Based on the approved annual business plan of the management, Capital and Financial Planning Management Department does analysis and makes forecasts of cash inflows and outflows of the system according to the approved plans; and also based on the actual daily fluctuations of fund mobilisation and utilisation, the Bank makes decisions on the management of capital adequacy Annual Report

147 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 50. LIQUIDITY RISK (Continued) Based on the projection of capital adequacy, Investment Department creates the Bank s liquidity buffer through purchasing highly liquid valuable papers, which could be converted into cash through secondary market. The Investment Department may decide to sell valuable papers to SBV in open market, or to borrow to replenish working capital s deficiency to ensure liquidity position of the whole system. Based on the SBV s regulations, Capital and Financial Planning Management Department in cooperation with the Investment Department proposes available fund management plan in order to assure the actual average balance of deposits in VND and foreign currencies at the SBV is not less than the required level of compulsory reserve. Besides, the Investment Department also establishes credit limit with other banks for mutual support when needed. The process of capital adequacy of the Bank is performed in the INCAS, the interbank payment program CITAD. On the basis of centralized payment at the Head Office, the Bank actively performs liquidity risk management on a daily basis. Currently, the Bank is promptly implementing and developing software for upgrading and improving the process of risk management in accordance with international standards. The date in the Liquidity Risk Report as at 31 December 2012 shows that the Bank funds are fairly plentiful with ranging from 1 to 12 months, the longer-term funds are quite limited; however, they have been improved significantly compared to This is a common situation of commercial banks in Vietnam. In fact, the Bank still maintains an appropriate rate of short-term funds utilisation for medium and long-term loans within the limit set by the State Bank. The Bank s liquidity risk management activities are monitored closely in compliance with the regulations of the State Bank and the Bank s criteria for internal liquidity management for each of major currency unit (such as VND, USD, EUR) on deposits and loans portfolios Annual Report 147

148 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 50. LIQUIDITY RISK (Continued) Overdue Current over 3 Within 3 Within 1 From 1 to 3 From 3 to 12 From 1 to 5 Over 05 months months month months months years years Total 31/12/2012 million VND million VND million VND million VND million VND million VND million VND million VND Assets Cash, gold and gemstones - - 2,511, ,511,105 Balance with the State Bank of Vietnam ,234, ,234,145 Placements with and loans to other credit institutions (*) ,894,678 3,046,533 13,695, ,272-57,890,220 Trading securities (*) , ,267 Derivative financial instruments and other financial assets , ,451 Loans to customers (*) 4,889,996 1,411,738 26,164,349 91,575, ,092,287 45,787,610 29,434, ,356,092 Investment securities (*) ,750 1,003,600 9,593,134 57,840,641 4,457,457 73,531,582 Long-term investments (*) ,817,014 2,817,014 Fixed assets ,276,653 5,276,653 Other assets (*) - - 1,628,702 3,257,404 14,648, ,544,422 Total assets 4,889,996 1,411,738 84,353,996 98,882, ,113, ,881,523 41,986, ,519,951 Liabilities Borrowings from the Government and the SBV ,785,374 2,785,374 Deposits and borrowings from other credit institutions - - 7,940,158 32,710,702 53,496,465 2,662,889 4,587 96,814,801 Deposits from customers ,949,486 72,276, ,968,964 28,910, ,105,307 Grants, trusted funds and borrowings at risk of credit institution - - 6,561,993 14,072,103 7,909,757 1,375,282 3,307,573 33,226,708 Valuable papers issued - - 1,744,448 1,545,938 19,071,613 6,307,230-28,669,229 Other liabilities (*) - - 2,317,268 4,249,083 9,254,850 2,776,455-18,597,656 Total liabilities ,513, ,854, ,701,649 42,032,386 6,097, ,199,075 Net liquidity difference 4,889,996 1,411,738 (15,159,357) (25,971,396) (24,587,724) 61,849,137 35,888,482 38,320,876 (*) Excluding risk provision Annual Report

149 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December 2012 Form B 05/TCTD-HN 51. CAPITAL AND OPERATING LEASE COMMITMENTS 31/12/ /12/2011 MIllion VND million VND Capital commitments: premises construction, and equipment acquisition 849, ,809 Capital commitments: equity investments - - Irrevocable operating lease commitments 908,051 1,032,519 Of which: Due within one year 191, ,292 Due from two to five years 313, ,007 Due after five years 403, , CONTINGENT LIABILITIES Currently, investigation agencies are prosecuting former employees of Ho Chi Minh City branch and Nha Be branch of the Bank for alleged misappropriation of assets by means of fraudulence. According to the criminal legislation and criminal procedure code, for cases under prosecution and investigation, the legal responsibilities and obligation of related parties will be determined only when the trial has been completed with an effective judgment. However, based on results of internal reconciliation, review and investigation procedures that have been taken up to the date of these consolidated financial statements, the Bank s management believes that the Bank neither is jointly liable for nor incurs any financial loss that regards to the illegal actions of these individuals. 53. EXCHANGE RATES OF SOME FOREIGN CURRENCIES AT THE END OF THE YEAR 31/12/ /12/2011 VND VND USD 20,828 20,828 EUR 26,736 27,374 GBP 33,621 32,813 CHF 22,137 22,536 JPY SGD 16,952 16,304 CAD 21,160 20,693 AUD 21,580 21,578 NZD 17,243 16,414 THB 675,11 670,37 SEK 3,170 3,068 NOK 3,638 3,533 DKK 3,588 3,676 HKD 2,682 2,721 CNY 3,293 3,358 KRW LAK 2.58 Non-applicable 2012 Annual Report 149

150 Notes to the CONSOLIDATED financial statements (continued) Consolidated financial statements for the year ended 31 December SUBSEQUENT EVENT Form B 05/TCTD-HN As at 27 December 2012, the Bank joined in the strategic investment contract and comprehensive cooperation contract with Bank of Tokyo-Mitsubishi ( BTMU ). Accordingly, the Bank shall obtain license to sell 20% of its shares to BTMU through issuing 644,389,811 ordinary shares and increase chartered capital to 32,661 billion VND. As at the date of these consolidated financial statements, the Bank and strategic partner are completing legal procedure for capital increase. On 26 February 2013, shareholders of the Bank passed Resolution No. 06/NQ-DHCD to approve the plan regarding additional shares issuance for BTMU. 55. COMPARATIVE FIGURES Comparative figures in the consolidated financial statements are those in the consolidated financial statements for the year ended 31 December 2011 which were audited by another independent auditing company. Some figures in the consolidated balance sheet have been reclassified as follows: Consolidated Consolidated financial statement financial statement for the year ended for the year ended Items Note 31/12/2011 Difference 31/12/2012 million VND million VND million VND Deposits from customers (i) 257,273,708 (137,763) 257,135,945 Other payables and liabilities (i)&(ii)&(iii) 19,744,820 (78,825) 19,665,995 Other provisions (ii) 435,811 32, ,552 Placements with other credit institutions (iii) 61,979,076 (183,847) 61,795,229 (i) The reclassified amount represents the amount due to customers and deferred payment which are presented as Deposits from customers in the consolidated financial statements for the year ended 31 December In accordance with Decision No. 16/2007/ QD-NHNN issued by the SBV on 18 April 2007, such amounts should be presented in the Other payables and liabilities. (ii) The reclassified amount represents the claim provisions and catastrophe reserves of Vietinbank Insurance Company Ltd. (iii) The reclassified amount on the financial statements of Vietinbank Fund Management Company Ltd. Accordingly, this is the first year that Vietinbank Fund Management Company Ltd prepares financial statements in accordance with Circular No. 125/2011/TT-BTC dated 05 September 2011 issued by the Ministry of Finance, providing guidance on accounting for fund management companies. Figures on the consolidated balance sheet, the consolidated income statement, the consolidated statement of cashflows and related notes are prepared in the new guidance. Preparer Approver Approver Ha Quang Vu Nguyen Hai Hung Nguyen Van Du Head of Financial Accounting Chief Accountant Deputy General Director Management Department 21 March Annual Report