firm foundation, sustained successes

Transcription

1 ANNUAL REPORT 2010 firm foundation, sustained successes

2 Laying STRONG foundation for future GROWTH

3 CONTENTS CONTENTS Message from the Chairman of the Board Message from the Chief Executive Officer Vision - Mission - Core Values DONGA BANK OVERVIEW History and Development Board of Directors Board of Supervisors Board of Management Organizational Chart REPORT 2010 Operations Review 2010 Key Milestones PERFORMANCE ORIENTATION 2011 Mission 2011 Operation Orientation Key Performance Indicators SUBSIDIARIES DongA Money Transfer DongA Securities Company and DongA Capital Vi Na Brilliant Card JSC (VNBC)

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5 Message from the Chairman of the Board Dear Shareholders, The aftermath of the 2008 global financial crisis saw some positive trends in 2009 and a global recovery was expected in 2010, but the reality still has many problems. Vietnam s economy faced several challenges and issues as well, especially in financial and banking industry. As the result, DongA Bank Board of Directors and Board of Management have decided to choose stability as the key goal in The slogan of Progress and Sustainability has continued since Since that time, DongA Bank has made a significant progress in technology application, product development, human resource improvement, branch network expansion, credit operations, and retail and corporate banking service delivery. DongA Bank has fully complied with capital requirements of the State Bank of Vietnam and by end 2010 it has raised the charter capital to VND 4,500 billion. The joint commitment of senior management and staff has resulted in more than VND 858 billion profit. DongA Bank has proven that it has won the trust and support of more than five million shareholders and customers both in times of plenty and of scarcity. In 2010, the bank put a human face to promotion and branding. DongA Bank contributed to community development by sponsoring several educational initiatives, including Net But Tri An (Writing with Gratitude) contest for students to write about their teachers and Honoring top universities graduates ceremony for rewarding top graduates from universities. DongA Bank has continuously created a community-centered image in the market. Combined with the operational stability the bank received deep appreciation from customers and community. Many awards were bestowed, such as Sao Vang Dat Viet (Vietnam Golden Star), Most Famous National Brand, Most Favorite Vietnam Brand, Strong Brand of Vietnam and entered the Vietnam Book of Records for the first gold-dispensing ATM. The Most Innovative Money Transfer Company Award was given to DongA Money Transfer Company by IAMTN. For 2011, it is expected that the global economy, including Vietnam, shall be hampered by economic uncertainties and challenges. The Board of Directors and Board of Management have decided to continue to finetune and improve DongA Bank Strategy. DongA Bank shall re-affirm our leading position among commercial banks in Vietnam. We are set to develop new products for retail and corporate banking. Our target is to become a stable, strong and efficient DongA Financial Group in the near future. CHAIRMAN Pham Van Bu Annual report

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7 MESSAGE FROM CHIEF EXECUTIVE OFFICER Dear customers, partners and shareholders, Firstly, on behalf of the Board of Management DongA Bank, I would like to extend sincere appreciation for your faith, partnership and support over the past years. With your great motivation and encouragement we always do our best continue improving and developing the bank to be your truly trustworthy companion bringing greater value and benefit to our customers and shareholders. Year 2010 was a difficult and challenging year for Vietnam enterprises, especially for the banking sector. Despite facing many difficulties, with the great leadership skill from the Board of Directors and the proficient management skill from the Board of Management, DongA Bank has achieved the growth target and improved its financial performance for In addition, the Bank has matured in its operations and laid important foundational pillars for the coming years. Foreseeing the difficulties in 2010, the Board of Directors and Board of Management set the direction Progress and Sustainability focusing on the sustainable growth in the longer term, taking this opportunity to review the bank operational system and enrich the basic resources to strengthen the foundation for the next phase of growth. With that direction, the Board of Management has mobilized resources, including its human resource, to review the efficiency of branches and transaction offices nationwide in the first nine months of the year. The efficiency review helped to improve the productivity, management capacity and risk management of the Bank. By the same token, we have successfully enhanced the business development capacity of all branches and transaction offices. Customer relationship and partner relationship have been strengthened. The Bank has developed the policy to support customers and partners to overcome difficulties and building up the long-term relationships. These above initiatives provided impetus to achieve a higher level of business result in the 4th quarter of In 2010, DongA Bank enhanced its internal training to improve the skills and capacity of staff for improving customer service quality. The Bank continued to youngerized its management team, recruit new talents, nurture and develop them to be the next generation of leaders who have many new ideas, new thinking and great energy for DongA Bank future growth. A key human resource strategic initiative was to restructure the salary system and re-design the performance assessment to be in line with staff benefits. It is expected that these initiatives will lay the foundation for further progressive restructuring in The end result is to create a breakthrough to the Bank s development. In 2010, DongA Bank brand is futher build upon its strengths in retail banking sector and technology banking. At end of 2010, DongA Bank has gained the trust of more than five million customers who are enjoying our unique products and services such as ebanking and Gold ATM. DongA Bank is still the leading brand in international remittance exceeding its target and is the only bank in Asia Pacific awarded by International Association of Money Transfer Networks (IAMTN)... The achievements of 2010 and preceding years have provided DongA Bank the confidence in the implementation of its sustainable development strategy. In 2011, DongA Bank will continue to accelerate its organization restructuring, reinforcement of its foundations and business expansion. With strong consensus of the Board of Management and Staffs, we strongly believe in achieving the 2011 goals of Progress and Sustainability. Chief Executive Officer Tran Phuong Binh Annual report

8 VISION, mission, Core Values VISION MISSION To become the leading retail bank and develop into one of the most successful and diverse financial conglomerates in Vietnam. To gain the trust of customers, partners and shareholders through breakthrough financial services and solutions and become a modern, friendly and trustworthy bank for everyone in Vietnam. 8 DongA Bank

9 Core Values DongA Bank - Your trustworthy companion Our core values Creditability - Innovation - Professionalism - Openess - Unity - Balancing all profits Annual report

10 10 DongA Bank DONGA BANK OVERVIEW

11 History and Development»» History and Development»» Key milestones LEADERSHIP PROFILE OF DONGA BANK»» Board of Directors»» Board of Supervisors»» Board of Management»» Organizational Chart SOLID ROOTS SUPPORT UNYIELDING TREE Annual report

12 History and Development 4,500BILLION VND OF CHARTER CAPITAL Established on 01 July 1992, DongA Bank is proud of its 18 years of achievements and stable growth. With the development of the Vietnam economy, DongA Bank has always chosen the appropriate direction with right targets for each growth phase. Thus after 18 years DongA Bank has gained many achievements such as: Charter Capital increased by 22,500% from VND 20 billon to VND 4,500 billion Total Assets reached VND 54,868 billion From one brand with 3 departments in 1992 we have expanded to 218 branches nationwide, 4 subsidiaries and one head quarter with 32 different departments Number of staff up 7,596%, from 56 to 4,254 staffs Exceeding 5 million retail banking and corporate banking clients TRANSACTION CHANNELS 218 traditional branches and transaction points covering 50 provinces and cities 1,400 ATMs through out Vietnam DongA ebanking (SMS, Mobile, Phone and Internet) MAJOR SHAREHOLDERS Hochiminh City Committee of Communist Party: 6.87% Phu Nhuan Jewelry Joint Stock Company (PNJ): 7.7% An Binh Capital Joint Stock Company: 6.02% Son Tra Dien Ngoc Joint Stock Company: 3.62% Du Lich Thuong Mai Ky Hoa Sole Proprietorship Limited Company: 3.55% Ninh Thinh Limited Company: 3.4% Nha Phu Nhuan Construction and Trading Sole Proprietorship Limited Company: 2.38% SUBSIDIARIES DongA Money Transfer Company Ltd. DongA Securities Company and DongA Capital Company Vi Na Brilliant Card JSC (V.N.B.C.) 12 DongA Bank

13 VND55,873BILLION TOTAL ASSETS QUALITY MANAGEMENT SYSTEM Key operational procedures of the Bank are standardized in accordance with ISO 9001:2000 SHAREHOLDERS INFORMATION DongA Bank has 100% domestic shareholders Total shares of institutional shareholders: 42% Total shares of individual shareholders: 58% KEY MILESTONES /7/1992: DongA Bank officially started operations at its original Head Office in Nam Ky Khoi Nghia, Phu Nhuan Dist., Ho Chi Minh City (currently Nguyen Van Troi Street) Charter capital: VND 20 billion Total number of employees: 56 with only 3 departments Became the first bank that offered installment loans for proprietors and merchants at local markets 1993 Opened 3 branches in District 1, Hau Giang (Hochiminh City) and Hanoi Launched international payment, express remittance and payroll service 1994 Charter capital: VND 30 billion Established Outpost of Party, Labor Union, and Outpost of the Youth Union 1995 Charter capital: VND 49.6 billion Became the exclusive partner of Swedish International Development Cooperation Agency (SIDA) in financing small and medium sized enterprises (SMEs) in Vietnam 1998 Became one of the two commercial joint stock banks in Vietnam to receive funding support from the Rural Development Fund (RDF) of World Bank 2000 Charter capital: VND 97.4 billion In September, became an official member of the Society for Worldwide Interbank Financial Telecommunication (SWIFT) Annual report

14 History and Development (CONTINUED) 4,254 NUMBER OF EMPLOYEES 2001 Charter capital: VND 120 billion Established DongA Money Transfer Company Successfully developed and implemented the ISO 9001:2000 Quality Management System into the operations of the bank 2002 Charter capital: VND 200 billion Acquired Cong an Hochiminh City Football Team and set up DongA Sports Joint Stock Company (DongA Football Club) Founded DongA Bank Card Center to issue DongA Bank cards Signed strategic partnership with Japan Bank for International Cooperation (JBIC) to be one of the two commercial joint stock banks authorized to process funds to subsidize SMEs 2004 Charter capital: VND 350 billion Officially launched ATM service and introduced automated service for electricity bill payments 2005 Charter capital: VND 500 billion Set up the Vietnam Bankcard System (VNBC) connected to the national bank-wide electronic card systems Connected to China Union Pay Group (CUP) Total number of employees reached 1,053 (including subsidiaries) 2006 Inaugurated the new Head Office Reached 1 million customers for multi-purpose card; became the leading commercial joint stock bank in terms of speed of ATM card service development in Vietnam. Launched 2 new eletronic banking products: DongA Automated Banking and DongA ebanking Operating network reached 69 branches and transaction points nationwide Successfully migrated into core-banking system and integrated online transactions into the whole system Became a member of VISA Card Network DongA Money Transfer Company retained its leading position for 7 consecutive years 14 DongA Bank

15 5,000,000 CUSTOMERS July 2007: Introduced the new logo and the new Corporate Identity Profile on 15th Anniversary of DongA Bank Incorporation Open a series of branches with standardized architecture compatible with DongA Bank Head Office Operating network reached 107 branches and transaction points in 40 cities and provinces ATM TK21 made a record as the first ATM in Vietnam to have the function of direct cash deposit and foreign currencies exchange International payment turnover exceeded USD 2 billion Reached the milestone of 2 million customers Voted the top 200 largest corporations in Vietnam by the United Nations Development Program (UNDP) 2008 Expanded to 50 provinces and cities nationwide with 182 transaction points and more than 800 ATMs 8 August 2008: Officially issued credit cards, connecting the DongA electronic card system globally via VISA Group Customer base increased to 2.5 million First bank in Vietnam to adopt state-of-the-art ATM that accepts 100 currency notes of different denomination for each transaction 2009 Charter capital: VND 3,400 billion Total number of employees: 3,691 Total number of customers: 4 million Officially connected Vietnam card systems including VNBC, Smartlink and Banknet VN Received Vietnam Records Books Certificate for electronic banking products (for mobile ATM, 24-Minute Loan Product, 1km Signal Product, E-salary Payment and Invoice Payment)... Annual report

16 Board of Directors (BOD) Mr. Pham Van Bu Chairman 2. Madam Vu Thi Vang Deputy Vice Chairwoman 3. Mr. Tran Phuong Binh Member, Chief Executive Officer 4. Mr. Dang Phuoc Dua Member 5. Mr. Tran Van Dinh Member 6. Mr. Truong Thanh Suong Member 7. Mr. Nguyen Dinh Truong Member 16 DongA Bank

17 In 2011, it is foreseen that the global economy, including Vietnam s still faces some difficulties. The Board of Directors and Board of Management are determined to build a solid and effective strategy for DongA Bank in Annual report

18 Board of Directors (BOD) Mr. PHAM VAN BU Chairman Mr. Pham Van Bu is the Chairman of DongA Bank. He holds a position as the Deputy Director of Hochiminh City Committee of Communist Party. He is also Chairman of Saigon Petro, Vice Chairman of Suoi Tien Tourist Joint Stock Company He was born in 1953 and graduated with a Bachelor of Economics at Nong Lam University Hochiminh City, Bachelor of Foreign Trade at Trade University and received political administration training at the Hochiminh City Communist Seminars. He has continously contributed to the social - economic development of Hochiminh City. Madam VU THI VANG Deputy Vice Chairwoman Madam Vu Thi Vang was the Deputy CEO of DongA Bank since its incorporation and is now the Deputy Vice Chairwoman. She was born in 1958, graduated from Hochiminh City University of Economics. She has contributed her knowledge, experience and dedication to the development of DongA Bank. Currently, she is Communist Party Secretary of DongA Bank. She is also a member of the Board of Directors of DongA Real Estate Joint Stock Company and Gia Dinh Water Supply Company. She received certificates of commendations from the Prime Minister of Vietnam, Ministry of Labor, Invalid and Social Affairs, the Governor of State Bank of Vietnam (SBV) and an Excellent Staff Award at DongA Bank. Mr. TRAN PHUONG BINH BOD member, Chief Executive Officer Since the early days, Mr. Tran Phuong Binh laid the foundations and led the development of DongA Bank. Currently he is the Chief Executive Officer and is a member of the Board of Directors. He graduated with a Bachelor of Economics and had teaching experience in economics field prior to entering the banking and finance sector. He is a founder and holds important positions at many social organizations and business associations. His outstanding achievements in business and social activities were honored with prestigious awards by the Government of Vietnam and other organizations. 18 DongA Bank

19 Mr. DANG PHUOC DUA Member Mr. Dang Phuoc Dua was born in 1960 and graduated at the University of Foreign Languagues under Vietnam National University Hanoi. Besides being a member of the Board of Directors at DongA Bank, he is also the Chairman of Rexco Company, an associate entity of Phu Nhuan Jewelry Joint Stock Company. Mr. TRAN VAN ÑINH Member He was born in 1954 and graduated with a Bachelor of Law degree at the Hanoi Univeristy of Laws. He is an independent member of Board of Directors at DongA Bank. Mr. TRANG THANH SUONG Member Mr. Trang was born in 1958 and graduated from Construction Engineering at the Hochiminh City Polytechnic University. He attended the Advanced Political Ideology Seminar of the Nguyen Ai Quoc Communist Party School. Currently he is a member of the Board of Directors at DongA Bank and is also the Chief Executive Officer of Phu Nhuan Construction and Housing Enterprise Limited Company. Mr. NGUYEN DINH TRUONG Member Mr. Nguyen Dinh Truong was born in 1948, graduated with a Bachelor of Science at the Hochiminh City University of Social Sciences and Humanities. Besides being a member of the Board of Directors at DongA Bank, he also holds the position of Vice Chairman of Viet Tien Garment Company. Annual report

20 Board of Supervisors (BOS) Madam Nguyen Thi Cuc Chief Supervisor 2. Mr. Nguyen Vinh Son Member 3. Madam Phan Thi To Loan Member 20 DongA Bank

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22 Board of Supervisors (BOS) Madam NGUYEN THI CUC Chief Supervisor Born in 1960, she graduated with a Master of Economics. Currently, she is a member of the Board of Directors and also the Deputy Chief Executive Officer at Phu Nhuan Jewelry Joint Stock Company. She is Chief Supervisor of DongA Bank. Mr. NGUYEN VINH SON Member Born in 1959, Mr. Nguyen Vinh Son graduated from the Hochiminh City University of Economics. At present, he is a member of the Board of Supervisors at DongA Bank Madam PHAN THI TO LOAN Member Madam Phan Thi To Loan is a member of the Board of Supervisors at DongA Bank. She was born in 1970 and graduated from the Hochiminh City University of Economics. 22 DongA Bank

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24 Board of Management Mr. Tran Phuong Binh Chief Executive Officer 2. Madam Nguyen Thi Ngoc Van First Deputy CEO 3. Madam Nguyen Thi Kim Xuyen Deputy CEO 4. Mr. Tran Dao Vu Deputy CEO 5. Mr. Nguyen Huu Chinh Deputy CEO 6. Mr. Le Tri Thong Deputy CEO 7. Mr. Nguyen An Deputy CEO 24 DongA Bank

25 With the commitment and dedication of DongA Bank Board of Management and staff, we are confident in achieving DongA Bank s goals in 2011 with the direction of Sustainable Development. Annual report

26 Board of Management Mr. TRAN PHUONG BINH Chief Executive Officer (CEO) Madam NGUYEN THI NGOC VAN First Deputy CEO Madam Nguyen Thi Ngoc Van joined DongA Bank upon graduating with an MBA. She has acquired her banking experience at different positions within DongA Bank. With her skills, commitment and dedication, she has lead the team at DongA Bank to many achievements in international payments, corporate banking and human resources. Born in 1970, she was acknowledged as an excellent member of Vietnam Communist Party and had received Certificate of Merit from the Governor of the State Bank of Vietnam, Outstanding Saigon Entrepreneur Certificate among other accolades. Madam NGUYEN THI KIM XUYEN Deputy CEO Prior to DongA Bank, Madam Nguyen Thi Kim Xuyen has had more than 12 years experience in a state - owned export and import enterprise in Hochiminh City and that provided insights to her work of enterprise management at DongA Bank. The experience is now applied to her approach and negotiation method when doing buisness with corporate customers. Currently, she managed the Business Division of DongA Bank. Born in 1958, she had received a Master degree in Economics. With her past 14 years in DongA Bank, she was appreciated as Excellent Communist Party Member, an Excellent Staff of the banking sector and received a Certificate of Merit from the Governor of State Bank Vietnam and the Hochiminh City People s Committee. 26 DongA Bank

27 Mr. NGUYEN HUU CHINH Deputy CEO Mr. Chinh was born in He graduated with a Bachelor of Economics and has worked in DongA Bank for 18 years. He was a lecturer at Hochiminh City University of Economics. His knowledge is now put to use in managing operations of DongA Bank s branches. As a role model, he has contributed largely to the development of the Labor Union. He received the Certificate of Merit from the Vietnam General Confederation of Labor, Hochiminh City Communist Youth Union and other merit certificates of DongA Bank. Mr. NGUYEN AN Deputy CEO Born in 1969, Mr. Nguyen An joined DongA Bank upon graduation from the Banking and Finance University. Now he has acquired more than 17 years of experience from working at different positions at DongA Bank. He has unique skills in regional business development. Being highly appreciated for his contribution in market expansion, he received many merit certificates from DongA Bank. He is also an active member in several business associations. Mr. TRAN DAO VU Deputy CEO Mr. Tran Dao Vu was born in Upon his graduation with a Bachelor of Economics he joined DongA Bank in Having experienced several senior management roles, he acquired significant experience in branch network expansion. He has a deep understanding of customers from the Northern Region. He is credited with development of DongA Bank brand in the Northern region of Vietnam. He has received a Certificate of Merit from the State Bank of Vietnam and other merit certificates of DongA Bank. He is an active member of the Young Entrepreneur Association and Vietnam Businessmen Club. Mr. LE TRI THONG Deputy CEO Born in 1979, Mr. Le Tri Thong holds an first-class honor MBA from Oxford University, UK and a bachelor degree in Chemical Engineering. He has held several senior positions at local and foreign enteprises. He joined DongA Bank in Besides being Deputy CEO of DongA Bank, he is also the Chairman of DongA Money Transfer Company and Chairman of Vi Na Brilliant Card JSC. He leads in several business organizations and social associations. He has received many awards for his contributions in research and corporate management. Annual report

28 Organizational Chart SHAREHOLDERS GENERAL ASSEMBLY BOARD OF DIRECTORS BOARD OF MANAGEMENT STRATEGY COMMITTEE HUMAN RESOURCE COMMITTEE RISK MANAGEMENT COMMITTEE BOARD OF DIRECTORS OFFICE CONSUMER BANKING DIVISION CORPORATE BANKING DIVISION SALES DIVISION OPERATIONS SUPPORT DIVISION BUSINESS DEVELOPMENT CENTER CUSTOMER POLICY DEPARTMENT TREASURY DEPARTMENT ACCOUNTING DEPARTMENT BUSINESS DEVELOPMENT RISK MANAGEMENT AND COMPLIANCE FOREX TRADING DEPARTMENT INFORMATICS CENTER CUSTOMER RELATION DEPARTMENT INTERNATIONAL SETTLEMENT DEPARTMENT GOLD TRADING DEPARTMENT HUMAN RESOURCE DEPARTMENT SALES ADMIN DEPARTMENT CORPORATE ACCOUNTS DEPARTMENT ADMINISTRATION DEPARTMENT BOARD OF OPERATIONS AND SUPPORT GENERAL AFFAIRS DEPARTMENT CUSTOMER SERVICE CENTER CARD CENTER CREDIT RISK MANAGEMENT DEPARTMENT GENERAL AFFAIRS DEPARTMENT 28 DongA Bank

29 BOARD OF SUPERVISORS INTERNAL AUDIT DEPARTMENT CREDIT COMMITTEE COMMITTEE OF REMUNERATION INVESTMENT COMMITTEE RISK MANAGEMENT COMMITTEE ASSETS AND LIABILITIES COMMITTEE DISCIPLINARY COMMITTEE DEVELOPMENT SUPPORT DIVISION OFFICES DIVISION SUPERVISION DIVISION MARKETING DEPARTMENT RESEARCH AND DEVELOPMENT DEPARTMENT BOARD OF MANAGEMENT S OFFICE LABOUR UNION OFFICE INTERNAL AUDIT DEPARTMENT RISK MANAGEMENT DEPARTMENT LEGAL COMPLIANCE DEPARTMENT QUALITY MANAGEMENT DEPARTMENT TRANSACTION CENTER, BRANCHES, TRANSACTION OFFICES, SAVINGS FUNDS, SUBSIDIARIES Annual report

30 REPORT 2010 ROOTS STRETCH OUT BRINGING ENERGY FOR ETERNITY 30 DongA Bank

31 OPERATIONS REVIEW 2010» Overview of the global economy and Vietnam in 2010»» Operations Review of DongA Bank»» Key financial indicators»» Factors that impact financial performance 2010 KEY MILESTONES 2010»» Brand Recognition»» Technology Innovation»» Personal banking products and services»» Corporate Banking»» Human resource management and development»» Branch Network Expansion»» Social welfare»» Achievements in Year 2010 Annual report

32 Operations Review 2010 OVERVIEW OF THE GLOBAL ECONOMY AND VIETNAM IN 2010 Having escaped from the worst of the global financial crisis, Vietnam still faces economic challenges of inflation, a yawning trade deficit and a weak currency. Inflation jumped to 11.75% per annum and the trade deficit in 2010 stood at USD billion. The domestic gold price exceeded the international price. The Vietnam dong depreciated 9.68% against the US dollar and was sold at a discount from the official market of up to VND 2,000 per US dollar. According to economists, the reasons for the weak Vietnam dong include a loose monetary policy and a widening budget deficit. But the most important factor appears that Vietnam is suffering from an economic development model where investments are poured into projects with low productivity. The national GDP growth, with increasing levels of exports and industrial development, remains positive despite of economic uncertainties in The banking and finance sector suffered low credit growth since start of This was a result of a tight monetary policy regulated by State Bank of Vietnam. Credit growth was 10.52% in the first six months. No doubt these measures, plus the control of interest rates, have somewhat stabilized the economy and banking sector. In the last months of 2010, State Bank of Vietnam narrowed the inter-bank rates, by pushing up the base interest rate to 9% per annum, which in turn increased the cost of funds. The high interest rates raised the cost of borrowing which adversely affected the borrowing enterprises. Circular 13 and 19 of the State Bank of Vietnam were effective from 01 October It called for a higher Capital Adequacy Ratio. This led to banks frantically searching for capital. Banks were under pressure to reduce loans and increase deposits. Meanwhile, gold deposits and lending at end 2010 are limited by the Circular 22 regulation. The measures created a market for deposits taking. At end 2010, there emerged an unofficial interest rate for deposit taking that was higher than the official rate. The intervention of State Bank of Vietnam reduced the deposit rate, but it is still high, leading to one country-two rate situation. These factors burdened the Vietnam enterprises in Further more under the instructions of the State Bank of Vietnam to cease gold trading via an overseas account, many banks lost an important source of revenue. The continuing uncertainty in the Vietnam economy and implementation of restrictive policies of State Bank of Vietnam brought increased burdens to banks. Through it all, DongA Bank has achieved remarkable growth in OPERATIONS REVIEW OF DONGA BANK Total Assets: Total assets stood at VND 55,873 billion, up 31.4% (equivalent to VND 13,353 billion) compared to start of year. Charter Capital in 11 months was VND 3,400 billion. To December 2010, it increased to VND 4,500 billion or up 32.35% after issuing shares for existing shareholders at price of VND 10,000 per share. Total assets structure was well managed with 82.89% in earning assets. Mobilizing Capital: Mobilizing capital reached VND 47,756 billion or up 30% from the early year. Credit operations: From start of 2011, DongA Bank aimed to control its loan growth and increase the deposits. As at year end the total loans increased 10.8% or VND 3,749 billion to reach VND 38,436 billion. During the year, the portfolio management of medium and long term loans, including the credit approval process was transferred to Head Office. The Credit Supervision Division of DongA Bank has successfully reduced the non-performing loans to 1.59%. International payment: International payments can now be made throughout the branch network. Although the international trade was reduced after global economic crisis, DongA Bank sustained an international payment turnover of VND 2.5 billion, similar to the previous year. The revenue from international payments has greatly contributed to the fee income of DongA Bank. Express Money Transfer: Money transfer turnover jumped to VND 8,863 billion representing an increase of 43% yoy. 32 DongA Bank

33 Bill collection and payment: Total revenue reached VND 44,313 billion representing an increase of 27% yoy. The number of customers has jumped from 1,673 in 2009 to 2,338 in Card Service: DongA Bank issued nearly more than 700,000 cards in The cumulative total number is 4.55 million cards and accounted for 11.69% market share. DongA Bank is among the leading banks in card services in term of total cards, active cards, as well as card payment turnover. Income from services: The non-interest income reached VND 405 billion representing an increase of 49% yoy. Network expansion: The Bank opened 45 transaction points in 2010 and currently has 1,320 ATMs (accounting for 11.69% market share) and 986 POS. Pre-tax profit: The Pre-tax profits achieved was VND 858 billion (an equivalent of 78% of target) representing an increase of 8.86% yoy. KEY ACHIEVEMENTS Despite the difficulties remaining in the global and Vietnam s economy, DongA Bank has maintained it stable growth. The key financial indicators of the last 18 years and operational data of the last 5 years provide the evidence: KEY FINANCIAL INDICATORS Unit: VND billion ITEMS Total Assets 12,040 27,376 34,713 42,520 55,873 Charter Capital 880 1,600 2,880 3,400 4,500 Total Deposits 10,097 21,656 29,797 36,714 47,756 Total Loans 8,126 18,059 25,571 34,687 38,436 Unit: VND billion ITEMS Net Interest Income ,107 1,374 Net Non-interest Income Operating Income ,479 1,664 1,930 Annual report

34 Operations Review 2010 (continued) Unit: VND billion ITEMS Total Expenses Net Operating Income before the Provision for credit risks Provision expenses for risks Consolidated Pre-tax profit Corporate Income Tax Consolidated After-tax Profit ITEMS Return on Equity (ROE) 23.50% 20.89% 18.01% 18.06% 18.58% Return on Assets (ROA) 1.55% 2.05% 1.69% 1.49% 1.40% Capital Adequacy Ratio (%) 13.57% 14.36% 11.30% 10.64% 10.84% Loan/Deposit Ratio 80.47% 83.39% 85.82% 94.48% 80.48% Loan/Total Assets Ratio 67.49% 65.97% 73.66% 81.58% 68.79% Overdue loan/total loans Ratio 0.76% 0.44% 2.55% 1.32% 1.59% Non-interest income / Total income 37.04% 40.10% 42.92% 33.47% 28.79% Earnings per share (EPS) Payout Ratio (%) 18.00% 18.00% 21.00% 15.00% 14.00% ITEMS Number of transaction offices Number of employees 1,373 2,228 3,138 3,691 4, DongA Bank

35 CONSOLIDATED PRE-TAX PROFIT TOTAL OUTSTANDING LOANS VND bilion VND bilion 1, ,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 8,126 18,059 25,571 34,687 38, , TOTAL ASSETS VND bilion 60,000 55,873 TOTAL DEPOSITS VND bilion 60,000 50,000 40,000 30,000 27,376 34,713 42,520 50,000 40,000 30,000 21,656 29,797 36,714 47,756 20,000 20,000 10,000 12,040 10,000 10, CHARTER CAPITAL OPERATIONAL NETWORK, TRANSACTION OFFICES VND bilion Points 5,000 4,500 4,000 3,500 3,000 2,880 3,400 4, ,500 2,000 1,500 1, , Annual report

36 Operations Review 2010 (continued) FACTORS THAT IMPACT FINANCIAL PERFORMANCE 2010 The fluctuations of the Vietnam economy and the restrictive policies from the State Bank of Vietnam placed additional burden to the banking sector including DongA Bank in In response to Circular 13 and 19 of the State Bank of Vietnam (stipulating a higher capital adequacy of 9% and a loan to deposit ratio not exceed 80%), DongA Bank focused on garnering deposits with relatively high interest rate and launched many promotion campaigns due to aggressive competitions within the sector which resulted in high funding cost. The beginning of the year saw DongA Bank designate 2010 as the Year of Progress and Sustainability. This includes improving corporate governance at branches, re-engineering the bank processes and procedures, developing human resource capacity, improving credit quality in the hope to lay a strong foundation for the future. In 2010, DongA Bank achieved a lower credit growth but has successfully restructured the loan portfolio and reducing non-performing loans. The credit growth stands at a moderate 10.8% yoy. In 2010, the State Bank of Vietnam regulated a tight monetary policy. It applied a ceiling deposit rate and lending rate as a means to push economic growth. This move reduced net interest margins of the banks and adversely impacted total interest income. Other factors that impacted DongA Bank profit include the depression of Vietnam stock market. The market index went down, reducing the profit of DongA Bank. In 2010, aiming to become the best retail bank in Vietnam, DongA Bank invested in branch network expansion. It opened an additional 25 transaction offices, installed 232 new ATMs and hired 563 additional employees. Although this move increased operating expenses, it is necessary because infrastructure and human resource quality are the foundations for the next growth phase. DongA Bank achieved a pre-tax profit of VND 858 billion for Although this represented only 78% of the profit target, other key financial performance indicators were at an acceptable level. The return on equity (ROE) is 18.58%. The capital adequacy ratio was 10.84%. The non-performing loans ratio was reduced to 1.58%. The earning per share (EPS) was 1,932 higher than previous year. The dividend policy was satisfactory to shareholders and the payout ratio exceeded the market interest rate. DongA Bank paid out the dividends earlier and faster than its peers. Although the non-interest revenues rose, the income from foreign exchange trading and gold trading fell. There are a few reasons for the fall. Firstly, the State Bank of Vietnam ceased gold trading via overseas account. Secondly, the domestic gold price exceeded the global price causing speculative bubbles. Thirdly the gap between official VND/USD rate and market rate widened, and at times reached VND 2,000 per USD. Fourthly, Circular 22 restricted gold deposit and gold lending as well as exchanging gold to VND for lending. The significant reduction in gold trading profit and forex income weighted down the total profit of DongA Bank, achieving only 78% of the profit target. 36 DongA Bank

37 Annual report

38 Key Milestones 2010 BRAND RECOGNITION ACNielsen Research of Personal Financial Behavior in third quarter 2010 found that in terms of brand recognition, DongA Bank ranked 2nd as Top of Mind brand in Vietnam banking industry in general and 1st in Hochiminh City. DongA Bank is also considered the 2nd favorable bank in Vietnam. With the aim to build a brand of social responsibility since 2008, DongA Bank continued investing in education activities nationwide in Net but tri an ( Writing with Gratitude ) contest organized by DongA Bank, in collaboration with Vietnam Youth Union and Vietnam Ministry of Education and Training received over 45,000 entries within 5 months. The contest is the platform for many generations of Vietnam students to express their heartfelt appreciation towards their teachers. Also, DongA Bank was the main sponsor of Tiep suc nguoi thay ( Supporting Teachers ) reality show. The TV programme was jointly held by Hochiminh City Television (HTV), Saigon Tiep Thi Magazine and Education Development Fund (EDF) and has became popular for its meaningful stories about teacher guidance. Honoring Top University Graduates ceremony was held for the 2nd time to honor the best graduates all over Vietnam, who are living evidences of amazing efforts to overcome difficulties to achieve great things. As the main sponsor and initiator of the above programmes, DongA Bank wishes to contribute to the national education by promoting and encouraging good values of Vietnamese people. In addition, in 2010, DongA Bank decided to focus on funding student activities at universities such as University of Economics, University of Law, University of Foreign Trade, Polytechnic University and Banking University. Beside the aim to support the activities financially, DongA Bank also look forward to finding new talents for the bank s human resource asset was also the year which DongA Bank increased the number of activities in terms of deposit promotions, direct marketing and PR activities for corporate brand and products. Dong A Bank also actively participated in Vietnam High Quality Goods Trade Fair and constantly carried out customer care programs. The business and media intiatives resulted in DongA Bank s brand being valued at VND 28 billion. The Bank also received several awards as voted by customers and prestigious organizations. 38 DongA Bank

39 TECHNOLOGY INNOVATION 2010 laid preparatory steps to restructure the bank data center in This paved way for developing the Bank, especially improving bank technology applications over the next five years ( ). ACHIEVEMENTS To improve the IT service delivery and resolve potential errors efficienctly to ensure user satisfaction, the Informatic Center of DongA Bank successfully revamped the IT service management process by restructuring the information database. In 2010, Informatic Center successfully implemented an early warning system on the daily data file via and sms, so as to detect and repair serious problems as they arise. It cooperated with the ebanking Department to conduct the ihrp application to enhance the human resource management quality and payroll management. It also helped to meet the demands of an expanding branch network by converting an on-line system for 100% of its branches and transaction points and more than 99% of the ATMs. Furthermore, the Center applied the ADSL technology to connect the transaction network and ATMs, resulting in a 33% telco cost reduction. It successfully deployed a virtual host project to prevent resource wastage thereby saving electricity and operations cost by more than 50%. The Informatic Center commissioned the Oracle RMAN back-up and snapshot/mirror view of EMC for all the key data of the Bank to minimize the data errors. It ensured the stable and safe operations of the core banking system, card and transaction channel, as well as other application. It supported VNBC in operating its IT infrastructure thereby improving the efficiency of ATM and POS transactions among VNBC and other card organizations such as CUP, VISA, SMART LINK and other VNBC members. Security plays a key role in data management for DongA Bank. In 2010, the Infomatic Center cooperated with the information security laboratory (ESeLAB), developed by Software Technology Park of Vietnam National University, Hochiminh City to assess the safety level of IT system of DongA Bank. In addition, the Bank developed and applied the User Rights Management (URM) program to control user rights of IT applications. AWARDS With all the IT accomplishments in 2010, DongA Bank is proud to have won awards such as the IT and Media Vietnam 2009, Most Popular Website for Internet Trading, Top 10 Web Hacking Techniques of 2010 and was nominated for the Most Innovative Research 2010 award. Annual report

40 Personal banking products and services NEW PRODUCST AND SERVICES IN 2010 GOLD ATM Encouraged by the DongA Bank senior management, the engineers of Vi Na Brilliant Card JSC (VNBC) launched the first Gold-dispensing ATM in Vietnam and the second Gold-dispensing ATM in the world, after one year of research. From the machine operation methodology to machine structure, the Gold-dispensing ATM is made of 100% Vietnamese intellectual quintessence. In addition to dispensing gold wafers, Gold ATM is fully operated with all functions of a modern ATM. At present, the Gold ATM dispenses Phuong Hoang PNJ gold wafers of one mace unit. Customers can buy one mace in each transaction and there is no limit on the number of transactions per day. VND CERTIFICATE OF DEPOSIT (VCD) AND OTHER PRODUCTS In 2010, DongA Bank issued the VND - dominated Certificate of Deposit (VCD) with 13 maturity dates along with many promotion programs to provide customers with more choices when banking. PHONE BANKING DongA Bank s call centre allows customers to check exchange rates, account balance, transaction history and conduct bank transfer, electronic payments, and buy pre-paid card. Phone Banking has proven that DongA Bank is the pioneer in terms of bank technology and also perfected DongA ebanking, including SMS/Mobile/Internet and Phone Banking channels. DONGA GRATITUDE PROGRAM On 18 January 2010, DongA Bank launched the DongA Gratitude Program by offering loyalty points to customers using DongA Bank products and services. Customers will be awarded points for all transactions which can be converted to gifts. Farming Credits Program DongA Bank launched the Farming Credits product to support projects which relate to planting and animal breeding. With a simple loan procedure, loan amount of 85% of security value, maximum 10-year loan term, interest based on daily rest, DongA Bank supported agriculture development thus contributing to the rural economy. INNOVATIVE MOBILE BANKING - GPRS CONNECTION AND WIFI DongA Bank pioneered Mobile Banking with an interface that is user-friendly, safe and secured, and allowing multi product transactions using all phone-types in Vietnam. Customers can make transactions easily, quickly while on the move. Other applications of Mobile Banking include balance checking, bank transfer, online payment, invoice payment, buying pre-paid card, e-payments, and transaction listing DongA Bank

41 POPULAR PRODUCTS AND SERVICES DongA Bank ATMs have the most advanced functions in Vietnam, such as: ATM TK 21 allows customers to deposit cash directly and immediately credit money amount to customer s customer. ATM TK21 also performs foreign exchange transaction Gold ATM that dispense gold wafers MOBILE BANKING Mobile Banking is a fully secured transaction method and has more advantages than other SMS transaction methods. It does not require the SMS syntax, no risk of a revealed password caused by saving SMS and the data is encoded. Customers can connect via Wifi to conduct transactions such as checking balance, bank transfer, online payment, invoice payment, buying pre-paid card, saving money and transaction listing... INVOICE PAYMENT Customers can make payments to suppliers of electricity, phone, cable television, Internet, tuition... who are partners of DongA Bank through the following channels: PRE-SETTLEMENT LOAN FOR STOCK INVESTORS Investors often have to wait for 3 days to receive sales proceeds from stock sales. DongA Bank launched Pre-settlement Loan allowing investors to receive sales proceeds in less than 3 days. The procedure is simple and can be conducted online. Investors do not need to come to the securities companies or DongA Bank. The Bank examines the loan documents within five minutes and the system shall send a sms automatically to investors to inform the amount that was sent to their account. Automatic payment Payment via DongA ebanking (SMS, Mobile, Internet Banking) Counter Payment at DongA Bank ELECTRONIC PAYROLL SYSTEM DongA Bank is proud to be the first provider of this service in Vietnam. Enterprises can make salary payment to employees actively, without having to come to banks with DongA Bank Electronic Payroll System. The procedure is simple, time-efficient, highly secured and confidential in terms of salary information. As at end December 2010, there were nearly 20,000 customers using the payroll service, including State Bank of Vietnam, military-linked enterprises, post office, administration offices and many large companies. Annual report

42 Corporate Banking In 2010, DongA Bank changed the organization structure for better customer services. One of the changes was restructuring Corporate Banking Division model, Customer Policy Department took the role as connector between DongA Bank and enterprise s demands of financial products. With corporate slogan of Trustworthy Companion, experts in Customer Policy Department - Corporate Banking Division always carefully listen enterprise s feedbacks to design suitable product packages. DongA Bank discusses with customers to choose the most appropriate transaction approach that is compatible with the industry requirements as well as in line with DongA Bank loan and guarantee regulations. Policies and terms were enacted bringing higher customer satisfaction in banking with DongA Bank. The policy from DongA Bank is always clear to enterprises in every year, then they can be active in their business activities. Besides, enterprises can request DongA Bank to change the terms when current policy is no longer suitable or their business conditions has been changed. In using this approach, DongA Bank became a friendly bank to share and meet all enterprise s demands for captipal In 2010, the Customer Policy experts worked with more than 400 enterprises nationwide to develop customized policies and terms. Other departments in corporate banking have had tight-knitted cooperation in working with and providing quick solutions to customers. In 2011, DongA Bank will finalize and apply the internal credit rating system to classify customers. Appropriate terms and policies will be offered to customers based on their classification. 42 DongA Bank

43 Human resource management and development A stable and quality human resource is becoming the vital competitive advantage for enterprise. DongA Bank has followed through the human resource development phases of recruitment, re-training and retaining from the beginning. Up to 31/12/2010, the number of employees increased 15.25% yoy, of which 70% were between 20 to 30 years old, representing the largest segment. This is a result of the Bank s strategy of hiring young talents deploying their dynamism, creativeness and willingness to face challenges. It also created a suitable environment for leadership training, especially for executives and managers at the provincial transaction offices. In 2010, DongA Bank conducted the training to improve the staff professionalism and communication skill for the staffs in collection, cash, teller and consultant services. Especially, it enhanced the training in provincial branches and transaction offices aimed at developing the staff capacity nationwide. HEAD COUNT (2006 TO 2010) In 2010, DongA Bank reviewed the staff salary and bonus policy and adjusted them with the banking industry in Vietnam. Now the salary scale commensurates with the level and the scope of work. The average annual salary in 2010 is VND 75 million per employee. The Bank is continuously creating a congenial working environment with ample opportunities for all. Like honey to bees, this initiative has retained talents whose personal career interest matches with the DongA Bank s development. ITEMS Number (person) 1,373 2,228 3,138 3,691 4,254 Growth Rate YOY (%) 55.14% 62.27% 40.84% 17.62% 15.25% Annual report

44 Branch Network Expansion Aiming to bring banking to the society, and not just developing and selling financial and services, DongA Bank expanded its branch network. In 2000, DongA Bank had 14 branches and transaction offices nationwide and by 2010, it reached 218. Last year, DongA Bank opened 45 new transaction points covering 50 provinces nationwide. NETWORK DEVELOPMENT AFTER YEARS Apart from applying similar building model to all branches in provinces, DongA Bank penetrated the rural areas to bring banking to the farmers. The rural branches combined services such as gasoline station, car wash, news agency and public conveniences, which differentiated DongA Bank from its peers. Regarding ATM system, DongA Bank has now owned a record number with 1,400 ATMs of which 229 were newly developed in DongA Bank

45 COMMUNIST PARTY, UNION AND SOCIAL ACTIVITIES While focusing on business performance, DongA Bank has not neglected our corporate social responsibility. DongA Bank organized communist party activites and union activities to build up a strong and united community. DongA Bank now has 122 communist party members, distributed in 9 sub-clubs nationwide. The Party leaders introduced thought-provoking ideology for employees and members through seminars on anti-corruption, crime-free environment and wastage reduction. It also collaborated with local governments to sanction those who breached disciplinary codes and at the same rewarded those with achievements. The supervision to ensure discipline was conducted carefully and effectively saw rapid progress in the Labor Union and Youth Union. The initiatives were carried out effectively that had a positive business impact. The labor policy was implemented diligently through activities of caring personnel material and spiritual life. DongA Bank carried out its charitable events by caring for the disadvantaged and other acts of gratitude. These events included giving to the poor and need through donations to the Community Fund, Workers Foundation, Hospice Residents Foundation, Truong Sa Island Army Corp, Mercy House, blood donations and the Flood Victims Support Fund. Total budget for social charitable activities in 2010 reached VND billion. THE COMMUNITY EFFORTS IN 2010 OF DONGA BANK WERE HIGHLY APPRECIATED THROUGH: DongA Bank Communist Party Unit was voted as Exemplary Honest and Strong for several consecutive years The Labor Union at DongA Bank received the Certificate of Merit from Hochiminh City Labor Association for its achievement in mobilizing employees to participate For the Poor Programme in the past decade ( ) and is nominated to receive the Certificate of Merit from the Vietnam Labor Federation for the most excellent enterprise in DongA Bank Youth Union was voted as the Best Local Youth Union in It is the leading youth union in HCMC for several consecutive years. It received the Certificate of Merit awarded by the Central Youth Union for its achievements Youth Union activities and youth movements, and received the Role Model Flag from the HCMC Youth Union for five consecutive years. Annual report

46 Achievements in Year 2010 After a year 2010 with difficulties, DongA Bank has re-affirmed its leading position, receiving numerous awards given by pretigious organizations as well as by customers votes. 46 DongA Bank

47 TYPICAL AWARDS Vietnam Golden Enterprise 2010 Vietnam Golden Star 2010 Famous National Brand and Best Vietnam Entrepreneur 2010 Most Liked Vietnam Brand 2010 Vietnam Books Records Certificate Guinness for the first gold-dispensing ATM in Vietnam Vietnam Strong Brand 2010 Top 500 Vietnam Brand 2010 Most liked website and e-commerce service by customers Most Innovative Company Award 2010 for DongA Money Transfer CERTIFICATE OF MERIT AND MEDALS Learning Encouragement Medal by Vietnam Study Encouragement Association Gold Heart Record by the Study and Talent Encouragement Phu Nhuan District Annual report

48 PERFORMANCE ORIENTATION DongA Bank

49 »» PERFORMANCE ORIENTATION 2011»» Mission 2011»» Operation Orientation»» Some key performance indicator 2011 UNYIELDING TRUNK AND BROAD BRANCHES SHELTER LIVES Annual report

50 Mission 2011 PROGRESS AND DEVELOPMENT is the operation orientation of DongA Bank in DongA Bank

51 OPERATION ORIENTATION Some focus activities of DongA Bank in 2011 as follow: High deposit and loan growth, balance of growth, profit and risk management Enhanced efficiency in investment, business operations, and capital application. Applying advance banking technology to fully exploit current products and services and develop new ones. Managing operating expenses at lowest level. Improved corporate governance, performance quality is utilized, organization is restructured, human resource is developed to meet the operational requirements. Improved policies for business promotion for all operating units to meet performance targets. For medium and long term objective, DongA Bank aims to be the best financial group in Vietnam by 2015 where the Bank holds a nucleus position surrounded by subsidiaries utilizing their competitive advantage to lay the foundations of DongA Financial Group.. SOME KEY PERFORMANCE INDICATOR 2011 ITEMS Target 2011 % increase/ decrease 2010 Consolidated Pre-tax Profit VND 1,300 billion 43 % Total Assets VND 70,000 billion 27 % Total outstanding loans VND 47,000 billion 23 % Total Deposit VND 60,000 billion 26 % Dividend in % Capital Adequacy Ratio 10 % Loan/Deposit ratio 78 % Return on Total Assets 1.5 % Return on Total Equity 14 % Total overdue loan ratio 1.5 % Annual report

52 52 DongA Bank SUBSIDIARIES

53 »» DongA Money Transfer»» DongA Securities and DongA Capital»» Vi Na Brilliant Card JSC V.N.B.C. DIVERSIFIED ROOTS FORM GREAT SYNERGY POWER Annual report

54 DongA Money Transfer In 2010, the glocal crisis had faded and the world economy showed signs of recovery, especially in the US. This created an opportunities for an increase in remittances form overseas. DongA Money Transfer played a key role in achieving the financial performance of DongA Bank

55 REMARKABLE GROWTH DongA Money Transfer led the Vietnam market in nine consecutive years with a remittance turnover of USD 1.2 billion, increase 20% yoy. GROWING STRATEGIC PARTNERSHIPS There are now more than 60 partners represented in 150 nations. EXPANDING NETWORK 41 additional points of transactions were opened in 2010, reaching 215 points in total to meet the demand for deposit taking closer to the market. IMPROVING HOME PAYMENT SERVICE Customers can now receive money at home within hours or within hours for remote customers. LISTENING TO CUSTOMERS Almost 100% of customers surveyed were satisfied with the DongA Home Payment product. Tellers are always friendly in conversations and actively building long-term relationships with customers. TECHNOLOGY AND SYSTEMS UPGRADE New hardware has been commissioned, thereby promoting e-money payment nationwide with data transmission speed increasing by 30%. The system is capable of automatically updating data from partners during after-hours. This reduced delays due to the difference in time zone. HUMAN RESOURCE DEVELOPMENT The salary terms were improved, staff training to enhance professionalism and skills were implemented thus providing a positive and dynamic working environment. PARTICIPATION IN CHARITABLE EVENTS Providing for disadvantaged children at city fringe, sacrificing a one-day salary for flood victims and giving Tet hampers for disadvantaged families. With outstanding efforts, DongA Money Transfer became the only money transfer company in Vietnam to receive the Most Innovative Company 2010 award by the International Money Transfer Conference held in London, UK in November To celebrate the anniversary of 10 years operating in the market which is very potential with many developing chances, DongA Money Transfer is confident to set a goal to be continuously a market leader in remittance turnover in Vietnam by 2011, affirming the domestic and international brand of Best Money Transfer Company. This too shall bring benefits to society and customers. Annual report

56 DongA Securities and DongA Capital The unstable macroeconomics of 2010 has directly impacted the finance sector in general and the Vietnam stock market in particular. The calamitous situation resulted is losses for many securities companies. However DongA Securities (DAS) was able to take advantage of the situation and achieved higher profitability. 56 DongA Bank

57 Setting its sights on being the leading company in securities brokerage, consulting, IPO service and assets management, and taking human resource ability as a factor, DAS is taking several measures to improve its capacity. It is investing into technology, improving staff skills, enhancing corporate governance, and controlling the risks. Key personnel of DAS are professionally trained and educated with working experience in major local and foreign financial firms. These factors will play key roles to ensure the success of DAS in future. In 2010, DAS overcomed the difficulties and instead obtained high performance in its business and brand image. Profit increased 21% yoy. It is in the top 10 securities companies for brokerage transaction volume. DAS became an authozied government bond transaction member at Hanoi Stock Exchange as per Decision No 581/QÑ-GDCK. This approval signficantly enhanced the volume of bond transactions. DAS is one of 10 securities companies to receive the Certificate of Merit from Hochiminh City People s Committee and one of 2 companies receiving the Certificate of Merit from the State Securities Committee (SSC), honoring its contribution to the development of stock market since its inception. The long-term growth plan of DAS is to strengthen its infrastructure to meet the requirements for rapid expansion. DAS started with two branches in Hanoi and Cho Lon, but by 2010 it has branches in Vung Tau, District 10 and online transaction centers in Hochiminh City, Hue and Danang. It shall increase its market share in online trading resulting in higher brokerage fees. In 2011, the stock market is forecasted to be healthier as the macroeconomy stabilizes. Taking measured steps, DAS set the target of maintaining its position and aim to become a leading securities company in the near future. DAS also re-engineered the systems and processes and re-designed the staff benefits. It participated in the events of DongA Bank and the State Securities Commission, Vietnam Securities Deposit Center, local governments and customer functions. DAS aims to create a friendly office environment for its staff. Annual report

58 Vi Na Brilliant Card JSC - V.N.B.C With a vision to be a leading provider of total card solutions for the finance and banking sector and related fields in Vietnam. Vi Na Brilliant Card JSC (V.N.B.C) has gainfully applied its resources to achieve a high performance in NETWORK EXPANSION Successfully integrated to Smartlink and Banknetvn switch systems, forming payment network of 42 banks, above 8,000 ATMs and representing 90% of total ATMs. V.N.B.C has increased the switch turnover by 200% yoy with transactions up to 300%. OPERATION SYSTEM EXPANSION Integrated ATM MDS to Dai Tin Bank in August 2010 and welcomed ANZ as a new member in the switch system thus re-affirming its network expansion capacity and growth. IMPROVING THE SWITCH SYSTEM From onwards December 2010, the POS machines are integrated to other banks under Smartlink and Banknetvn switch system, thereby allowing 20 million card owners nationwide to make payment through 40,000 POS machines. DEVELOPING YOUNG TALENTS At present, V.N.B.C has 80 employees, increase 20% yoy, in which there are 1 doctor graduate, 5 masters and more than 50 engineers. All senior executives have been trained and educated overseas. LAUNCHED GOLD-DISPENSING ATM In October 2010, V.N.B.C launched the first ATM with function of trading gold in Vietnam and the second gold-dispensing machine in the world, developed by V.N.B.C engineers. Besides cash withdrawal, Gold ATM has gold selling function and also serves as Kiosk banking for those who do not have the ATM card. V.N.B.C. PAYMENT GATEWAY The VNBC Payment Gateway connected internet service providers (ISPs). Internet banking users are now able to enjoy self service banking transaction. VNBC Payment Gateway has helped other peers connect with ISPs thus saving separate connection charges. 58 DongA Bank

59 Annual report

60 DongA Commercial Joint Stock Bank Head Office: 130 Phan Dang Luu, Ward 3, Phu Nhuan District, HCMC, Vietnam Tel: (+84.8) Fax: (+84.8) Hotline: Swift: EACBVNVX

61 FINANCIAL STATEMENTS 2010 for the year ended 31 December 2010 LEAF BY LEAF ARISE TREES THAT GROW INTO A DENSE FOREST

62 CONTENTS REPORT OF THE BOARD OF MANAGEMENT 3-5 AUDITED CONSOLIDATED FINANCIAL STATEMENTS 6-46 Independent auditors report 6 Consolidated balance sheet 7-9 Consolidated income statement 10 Consolidated statement of retained earnings 11 Consolidated cash flow statement Notes to the consolidated financial statements

63 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES REPORT OF THE BOARD OF MANAGEMENT The Board of Management of Dong A Commercial Joint Stock Bank ( the Bank ) presents this report and the consolidated financial statements of the Bank and its subsidiaries as at and for the year ended 31 December THE BANK Dong A Commercial Joint Stock Bank (hereinafter referred to as the Bank ) is a commercial joint stock commercial bank established in the Socialist Republic of Vietnam. The Bank is established and operated in accordance with Banking License No. 0009/NH-GP issued by the State Bank of Vietnam ( SBV ) on 27 March 1992 and Decision No. 135/QD-UB issued by the People s Committee of Ho Chi Minh City on 16 April The Bank s operational duration is 99 years. The Bank s principal activities are to provide banking services throughout Vietnam including receiving short, medium and long-term deposits from organisations and individuals; making short, medium and long-term loans and advances to organisations and individuals based on the nature and capability of the Bank s sources of capital; providing foreign exchange transactions, international trade financial services, discount of commercial papers, bonds and other valuable papers; providing settlement services and other banking services allowed by the State Bank of Vietnam. The Bank s head office is located at 130 Phan Dang Luu Street, Phu Nhuan District, Ho Chi Minh City, Vietnam. As at 31 December 2010, the Bank has one (1) head office, one (1) transaction center, two hundred and seventeen (217) branches, transaction offices, transaction units and saving funds. SUBSIDIARIES As at 31 December 2010, the Bank had two (2) subsidiaries as below: Subsidiaries Establishment decision Principal activities Ownership Dong A Securities Company Limited Dong A Money Transfer Company Limited Decision No. 12/GPHDKD issued by the State Securities Commission on 20 May 2003 Business License No issued by the Department of Planning and Investment of Ho Chi Minh City on 20 August 2001 Securities trading 100% Money transfer 100% Besides, Dong A Securities Company Limited also had one (1) subsidiary, which is Dong A Capital Company Limited. Subsidiaries Establishment decision Principal activities Ownership Dong A Capital Company Limited Decision No. 20/UBCK-GP issued by the State Securities Commission on 24 September 2007 Fund management 100% RESULTS OF CONSOLIDATED OPERATIONS AND DIVIDENDS The summary of consolidated results of operations and dividends of the Bank and its subsidiaries is as follows: Consolidated net profit for the year 659, ,648 Dividends declared and paid during the year 499, ,400 Consolidated retained earnings at the year-end 652, ,832 3

64 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES REPORT OF THE BOARD OF MANAGEMENT (continued) BOARD OF MANAGEMENT The members of the Board of Management during the financial year and at the date of this report are: Full name Title Date of appointment/resignation Mr Pham Van Bu Chairman Appointed on 10 June 2010 Ms Vu Thi Vang Vice chairman Appointed on 10 June 2010 Mr Dang Phuoc Dua Vice chairman Appointed on 10 June 2010 Mr Tran Phuong Binh Member Appointed on 10 June 2010 Mr Trang Thanh Suong Member Appointed on 10 June 2010 Mr Nguyen Dinh Truong Member Appointed on 10 June 2010 Mr Tran Van Dinh Member Appointed on 10 June 2010 Ms Nguyen Thi Ngo Member Resigned on 10 June 2010 BOARD OF SUPERVISORS The members of the Board of Supervisors during the financial year and at the date of this report are: Full name Title Date of appointment Ms Nguyen Thi Cuc Chief Supervisor Appointed on 10 June 2010 Mr Nguyen Vinh Son Member Appointed on 10 June 2010 Ms Phan Thi To Loan Member Appointed on 10 June 2010 EVENTS AFTER THE CONSOLIDATED BALANCE SHEET DATE There have been no significant events occurring after the consolidated balance sheet date which would require adjustments or disclosures to be made in the consolidated financial statements. AUDITORS The auditors, Ernst & Young Vietnam Limited, have expressed their willingness to accept reappointment. STATEMENT OF THE MANAGEMENT S RESPONSIBILITIES IN RESPECT OF THE CONSOLIDATED FINANCIAL STATEMENTS The Management is responsible for preparing the consolidated financial statements for each financial year which give a true and fair view of the state of affairs of the Bank and its subsidiaries and of the consolidated results of their operations and the consolidated cash flows for the year. In preparing the consolidated financial statements, the management is required to: select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Bank and its subsidiaries will continue in business. 4

65 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES REPORT OF THE BOARD OF MANAGEMENT (continued) Management is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the consolidated financial position of the Bank and its subsidiaries and to ensure that the accounting records comply with the registered accounting system. It is also responsible for safeguarding the assets of the Bank and its subsidiaries and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Management has confirmed to the Board of Management that it has complied with the above requirements in preparing the accompanying consolidated financial statements. APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS We hereby approve the accompanying consolidated financial statements which give a true and fair view of the consolidated financial position of the Bank and its subsidiaries as at 31 December 2010, and the consolidated results of their operations and the consolidated cash flows for the year then ended in accordance with the Vietnamese Accounting Standards and System for credit institutions and comply with relevant regulations stipulated by the State Bank of Vietnam. On behalf of the Board of Management: Mr Pham Van Bu Chairman Ho Chi Minh City, Vietnam 22 February

66 Reference: / INDEPENDENT AUDITORS REPORT To the Board of Management of Dong A Commercial Joint Stock Bank We have audited the consolidated balance sheet of Dong A Commercial Joint Stock Bank ( the Bank ) and its subsidiaries as at 31 December 2010, and the consolidated income statement, consolidated statement of retained earnings and consolidated cash flow statement for the year then ended and the notes thereto as set out on pages 7 to 46 (collectively referred to as the consolidated financial statements ). These consolidated financial statements are the responsibility of the Bank s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Basis of Opinion We conducted our audit in accordance with Vietnamese and International Standards on Auditing applicable in Vietnam. These standards require that we plan and perform the audit to obtain reasonable assurance to determine whether the consolidated financial statements are free from 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 consolidated financial statements, in all material aspects, give a true and fair view of the consolidated financial position of the Bank and its subsidiaries as at 31 December 2010 and of the consolidated results of their operations and their consolidated cash flows for the year then ended in accordance with the Vietnamese Accounting Standards and System for credit institutions and comply with relevant regulations stipulated by the State Bank of Vietnam. Vo Tan Hoang Van Deputy General Director Registered Auditor Certificate No. 0264/KTV Nguyen Xuan Dai Auditor-in-charge Registered Auditor Certificate No. 0452/KTV Ho Chi Minh City, Vietnam 22 February

67 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEET as at 31 December 2010 ASSETS Notes 31 December December 2009 Cash, gold and precious stones 3 6,673,308 2,615,111 Balances with the State Bank of Vietnam 4 1,354,420 1,230,380 Due from and loans to other credit institutions 5 3,349, ,034 Due from other credit institutions 3,234, ,097 Loans to other credit institutions 115, ,937 Provision for loans to other credit institutions 8 (864) - Trading securities 1,305, ,730 Trading securities 6 1,323, ,504 Provision for a decline in value of trading securities 11.1 (17,493) (41,774) Derivatives and other financial assets - - Loans and advances to customers 37,874,325 34,010,811 Loans and advances to customers 7 38,320,847 34,355,544 Provision for credit losses 8 (446,522) (344,733) Investment securities 1,827, ,201 Securities - available-for-sale 9 1,839, ,868 Securities - held-to-maturity - 8,333 Provision for a decline in value of investment securities 11.2 (12,375) - Long-term investments 603, ,110 Investments in joint-ventures - - Investments in associates - - Other long-term investments , ,493 Provision for impairment of long-term investments 11.3 (10,946) (29,383) Fixed assets 940, ,784 Tangible fixed assets , ,915 Cost 1,078, ,155 Accumulated depreciation (402,476) (293,240) Financial lease - - Cost - - Accumulated depreciation - - Intangible fixed assets , ,869 Cost 295, ,089 Accumulated amortisation (30,928) (18,220) Investment properties - - Cost - - Accumulated depreciation - - Other assets 1,944,686 1,474,241 Receivables , ,982 Interest and fee receivables , ,133 Deferred tax asset 20 1,668 - Other assets 1,009, ,126 In which: Goodwill - - Provision for doubtful debts - - TOTAL ASSETS 55,873,084 42,520,402 7

68 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEET (continued) as at 31 December 2010 LIABILITIES Notes 31 December December 2009 (as restated) Borrowings from the Government and the State Bank of Vietnam , Due to and borrowings from other credit institutions 15 4,173,835 4,767,739 Deposits to other credit institutions 3,510,681 4,545,991 Borrowings from other credit institutions 663, ,748 Due to customers 16 31,417,279 27,973,540 Derivatives and other financial liabilities - - Grants, entrusted funds and loans exposed to risks , ,047 Valuable papers issued 18 11,154,737 3,682,086 Other liabilities 2,696,662 1,629,582 Interest and fee payables , ,304 Deferred tax liability - 19,131 Other payables ,223,018 1,273,147 Provision for contingent liabilities and off-balance sheet commitments 8 25,832 - TOTAL LIABILITIES 50,452,801 38,344,013 OWNERS EQUITY Capital and reserves Capital 4,500,583 3,400,553 Charter capital ,500,000 3,400,000 Fund for capital expenditure - - Shares premium - - Treasury shares - - Preference shares Other capital Reserve funds 267, ,004 Foreign currency translation reserve - - Asset revaluation reserve - - Retained earnings , ,832 TOTAL OWNERS EQUITY 5,420,283 4,176,389 TOTAL LIABILITIES AND OWNERS EQUITY 55,873,084 42,520,402 8

69 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES CONSOLIDATED BALANCE SHEET (continued) as at 31 December 2010 OFF BALANCE SHEET ITEMS Contingent liabilities Notes 31 December December 2009 Financial guarantees - - Letters of credit 2,261,003 2,275,911 Other guarantees 1,183, ,947 Commitments - - Commitments to customers - - Other commitments - - 3,444,330 3,226,858 Less: Margin deposits (353,682) (402,678) TOTAL 3,090,648 2,824,180 Prepared by: Approved by: Ms Dang Boi Quynh General Accountant Ms Vo Thi Kim Anh Chief Accountant Mr Tran Phuong Binh General Director Ho Chi Minh City, Vietnam 22 February

70 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2010 Notes Interest and similar income 23 4,508,605 3,325,056 Interest and similar expense 24 (3,134,577) (2,218,224) Net interest income and similar income 1,374,028 1,106,832 Fee and commission income 405, ,570 Fee and commission expenses (66,062) (52,858) Net fee and commission income , ,712 Net gain from foreign currencies and gold trading 26 11, ,492 Net (loss)/gain from dealing of trading securities 27 (17,003) 4,916 Net gain from dealing of investment securities 28 58,687 64,690 Other operating income 154,503 4,013 Other operating expenses (4,656) (226) Net other operating income ,847 3,787 Income from long-term investments 13,306 1,152 TOTAL OPERATING INCOME 1,929,673 1,663,581 Personnel expenses (353,344) (280,770) Depreciation and amortisation charges (124,549) (110,703) Other operating expenses (454,282) (337,504) TOTAL OPERATING EXPENSES 30 (932,175) (728,977) Net operating profit before credit loss expense 997, ,604 Credit loss expense 8 (139,984) (146,848) PROFIT BEFORE TAX 857, ,756 Current corporate income tax expense 20 (218,985) (170,388) Deferred corporate income tax benefit/(expense) 20 20,799 (29,720) Total corporate income tax expense (198,186) (200,108) NET PROFIT FOR THE YEAR 659, ,648 Attributable to: - Equity holders of the parent 659, ,648 - Minority interest Basic earnings per share (VND) 1,932 1,914 Prepared by: Approved by: Ms Dang Boi Quynh General Accountant Ho Chi Minh City, Vietnam 22 February 2011 Ms Vo Thi Kim Anh Chief Accountant Mr Tran Phuong Binh General Director 10

71 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES CONSOLIDATED STATEMENT OF RETAINED EARNINGS for the year ended 31 December 2010 Notes RETAINED EARNINGS AT THE BEGINNING OF THE YEAR , ,585 Net profit for the year , ,648 EARNINGS BEFORE APPROPRIATIONS 1,260,160 1,115,233 - Appropriation to reserves for previous year 21.1 (139,475) (140,627) - Appropriation to reserves by subsidiaries for the current year 21.1 (9,737) (6,472) - Dividends distributed for the previous year 21.1 (458,000) (367,200) - Other increases Other decreases 21.1 (452) (172) RETAINED EARNINGS AT THE END OF THE YEAR 652, ,832 Less: - Dividend advances for current year RETAINED EARNINGS AVAILABLE FOR APPROPRIATION TO RE- SERVES AND FURTHER DIVIDENDS 13.3, 22 (408,000) (366,400) 244, ,432 Prepared by: Approved by: Ms Dang Boi Quynh General Accountant Ho Chi Minh City, Vietnam 22 February 2011 Ms Vo Thi Kim Anh Chief Accountant Mr Tran Phuong Binh General Director 11

72 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENT as at and for the year ended 31 December 2010 Notes CASH FLOWS FROM OPERATING ACTIVITIES Interest and similar income received 4,250,006 3,581,997 Interest and similar expense paid (3,024,069) (2,483,386) Fees and commission income received 339, ,712 Net receipts from foreign currencies, gold and securities trading 94, ,590 Other operating income 85, Recovery from bad debts written-off previously 5,481 3,611 Payments to employees and other operating expenses (806,040) (624,428) Corporate income tax paid during the year 13.1, 20 (140,596) (171,733) Net operating cash flows before changes in net operating assets and liabilities 804, ,533 Changes in operating assets (8,570,753) (9,011,544) Increase in due from and loans to other credit institutions (1,889,477) (153,072) Increase in trading securities (2,375,568) (351,827) (Increase)/decrease in derivatives and other financial assets - - Increase in loans and advances to customers (3,965,303) (8,784,734) Decrease in provision for written-off of loans, securities and long-term investments (11,499) (69,033) (Increase)/decrease in other assets (328,906) 347,122 Changes in operating liabilities 11,850,098 7,343,709 Increase in borrowings from the Government and the State Bank of Vietnam (Decrease)/increase in due to and borrowings from other credit institutions 700,000 - (593,904) 1,156,218 Increase in due to customers 3,443,720 4,963,122 Increase in valuable papers issued 7,472, ,274 Increase in grants, entrusted funds and loans exposed to risks 19,241 87,081 Increase/(decrease) in derivatives and other financial liabilities - - Increase in other liabilities 814, ,775 Reserves utilised during the year (6,000) (56,761) Net cash flows from/(used in) operating activities 4,083,628 (871,302) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of fixed assets (120,558) (353,248) Proceeds from disposal of fixed assets 70,447 6 Expenses of disposal of fixed assets - - Purchase of investment property - - Proceeds from disposal of investment property

73 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES CONSOLIDATED CASH FLOW STATEMENT (continued) as at and for the year ended 31 December 2010 Notes Expenses of disposal of investment property - - Payments for investments in joint ventures, associates and other entities Receipts from investments in joint ventures, associates and other entities ,349 80,265 Dividend receipts from long-term investments 13,306 1,152 Net cash flows used in investing activities 89,544 (271,825) CASH FLOWS FROM FINANCING ACTIVITIES Increase in charter capital ,100, ,000 Proceeds from issuance of long-term convertible valuable papers and other long-term borrowings - - Repayment of long-term convertible valuable papers and other long-term borrowings - - Dividends paid to shareholders (499,600) (366,400) Purchase of treasury shares - - Proceeds from sale of treasury shares - - Net cash flows from financing activities 600, ,600 Net increase/(decrease) in cash and cash equivalents during the year 4,773,572 (989,527) Cash and cash equivalents at the beginning of the year 31 4,330,728 5,320,255 Net foreign exchange difference - - Cash and cash equivalents at the end of the year 31 9,104,300 4,330,728 Prepared by: Approved by: Ms Dang Boi Quynh General Accountant Ho Chi Minh City, Vietnam 22 February 2011 Ms Vo Thi Kim Anh Chief Accountant Mr Tran Phuong Binh General Director 13

74 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS as at and for the year ended 31 December CORPORATE INFORMATION Establishment and Operations Dong A Commercial Joint Stock Bank ( the Bank ) is a commercial joint stock bank established in Vietnam in accordance with Banking License No. 0009/NH-GP issued by the State Bank of Vietnam ( the SBV ) on 27 March 1992 and Decision No. 135/QD-UB issued by the People s Committee of Ho Chi Minh City ( HCMC ) on 16 April The Bank s operational duration is 99 years. Charter Capital Charter capital of the Bank as established was VND 20 billions and also has been increased to VND 4,500 billions at the end of SIGNIFICANT ACCOUNTING POLICIES 2.1 Compliance with the Vietnamese Accounting Standards and System for Vietnamese credit institutions Management confirms that the accompanying consolidated financial statements have been prepared in accordance with the Vietnamese Accounting Standards and System for credit institutions operating in Vietnam. 2.2 Basis of preparation The consolidated financial statements of the Bank and its subsidiaries expressed in millions of Vietnamese dong ( ), are prepared in accordance with Accounting System for Credit Institutions required under Decision No. 479/2004/QD-NHNN issued on 29 April 2004 by the Governor of the State Bank of Vietnam which was enacted from 01 January 2005 and amended, revised decisions on Decision No. 479/2004/QD-NHNN, Decision No. 16/2007/QD-NHNN issued on 18 April 2007 by the Governor of the SBV and Vietnamese Accounting Standards and related regulations issued by the Ministry of Finance. The accompanying consolidated financial statements have been prepared using accounting principles, procedures and reporting practices generally accepted in Vietnam. Accordingly, the accompanying consolidated balance sheet, consolidated income statement, consolidated cash flow statement and the notes thereto and their utilisation are not designed for those who are not informed about the Vietnam s accounting principles, procedures and practices and furthermore are not intended to present its consolidated financial position, consolidated financial performance and consolidated cash flows in accordance with accounting principles and practices generally accepted in countries other than Vietnam. 2.3 Year Fiscal The Bank s fiscal year starts on 1 January and ends on 31 December. 2.4 Consolidated financial statements The consolidated financial statements include the financial statements of the Bank and its subsidiaries as at and for the year ended 31 December each year. The financial statements of the subsidiaries are prepared for the same reporting year as the Bank using consistent accounting policies. All intra-group balances, transactions, income and expenses and unrealised profits resulting from intra-group transactions are eliminated in full. The financial statements of subsidiaries (Note 1) are fully consolidated from the date when the control is transferred to the Bank. The control is achieved when the Bank has the power, directly or indirectly, to govern the financial and operating polices of an entity so as to obtain economic benefits from its activities. The operating results of subsidiaries acquired or disposed during the year are included in the consolidated income statement from the date of acquisition or up to the date of disposal, as appropriate. 2.5 Changes in accounting policies In 2010, the Bank and its subsidiaries applied Circular No. 244/2009/TT-BTC dated 31 December 2009 issued by the Ministry of Finance, which guides the amendments and supplements of accounting regime for enterprises. Accordingly, the following changes of accounting policies have been applied since 1 January 2010: 14

75 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 For stock dividends and bonus shares, only the numbers of shares are updated in the accounting records without recognising dividend income in the consolidated income statement Bonus and welfare funds are reclassified to the payable accounts instead of the equity accounts. The Bank and its subsidiaries have reclassified and presented the balances of bonus and welfare funds as liability in the consolidated balance sheet as at 31 December 2009 in accordance with the requirements of Circular No. 244/2009/TT-BTC Furthermore, in 2010, the Bank and its subsidiaries also applied Circular No. 203/2009/TT-BTC dated 20 October 2009, regarding to the management, use and calculation of depreciation of fixed assets, which is effective from 1 January Cash and cash equivalents Cash and cash equivalents comprise cash, gold, precious stones, current accounts with the SBV, treasury notes and other short-term valuable papers which are eligible for discount with the SBV, and balances and loans due from banks with an original maturity of less than three (3) months. 2.7 Receivables Receivables other than receivables from banking activities of credit institutions are initially recognised at cost and continuously presented at cost in subsequent periods. Provision for doubtful debts is set up based on the aging schedule of overdue debts or expected losses which may occur in case where a debt has not been due for payment but a corporate debtor is bankrupted or liquidated; or individual debtor is missing, run away, being prosecuted, under a trial or serving sentences or dead. Provision expense occurred will be recognised into Other operating expenses in the consolidated income statement for the period. The Bank and its subsidiaries make provision for doubtful debts under the guidance of Circular No. 228/2009/TT-BTC issued by the Ministry of Finance on 7 December 2009 as follows: Overdue period Provision rate From over six (6) months up to one (1) year 30% From one (1) year up to two (2) years 50% From two (2) years up to three (3) years 70% Over three (3) years 100% 2.8 Loans and advances to customers Loans and advances to customers are presented at the outstanding principal balances at the end of the financial year. 2.9 Provision for credit losses Loans and advances to customers are classified and provided for allowance in accordance with the Law on Credit institutions effective from 1 October 1998; Law on Amendment and Supplementation to a number of articles of the Law on Credit Institutions effective from 1 October 2004; Decision No. 1627/2001/QD-NHNN dated 31 December 2001 by the Governor of the State Bank of Vietnam on lending statutory; Decision No. 127/2005/QD-NHNN dated 3 February 2005 amending and supplementing Decision No. 1627/2001/QD- NHNN; Decision No. 493/2005/QD-NHNN dated 22 April 2005 and Decision No. 18/2007/QD-NHNN dated 25 April 2007 by the State Bank of Vietnam on loan classification and provision. Accordingly, loans and advances to customers are classified as Current, Special Mention, Substandard, Doubtful and Loss on the basis of payment arrears status and other qualitative factors. Net loans and advances exposure for each borrower is calculated by subtracting from the loan balance the discounted value of collateral. Specific discount rates for certain accepted collaterals are stipulated in Decision No. 493/2005/QD-NHNN and Decision No. 18/2007/QD-NHNN. 15

76 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 Specific provision is created on the net loans and advances exposure of each borrower using fixed provision rates as follows: Group Name Specific provision rate 1 Current 0% 2 Special Mention 5% 3 Substandard 20% 4 Doubtful 50% 5 Loss 100% Loans in Substandard, Doubtful or Loss group are considered as non-performing loans. In accordance with Decision No. 493/2005/QD-NHNN and Decision No. 18/2007/QD-NHNN, a general provision is made for credit losses which are yet to be identified during the loan classification and provision process and for the Bank s potential financial difficulties due to deterioration in loan quality. As such, the Bank is required to fully create and maintain a general provision at 0.75% of total loans and advances to customers, guarantees, payment acceptances and non-cancellable loan commitments which are classified from groups 1 to 4 within 5 years commencing from May Details of loan classification and provision are presented in Note 8. Provisions are recorded in the consolidated income statement as expenses and will be used to write off any credit losses incurred. According to Decision No. 493/2005/QD-NHNN, the Bank should establish the Bad Debt Resolution Committee which approve the writing-off of loans which are classified in Group 5, or which corporate borrowers are bankrupted or liquidated, or which individual borrowers are dead or missing Trading securities Trading securities are debt, equity and other securities acquired by the Bank and its subsidiaries for resale in the short-term period for benefits from price variable and the Bank and its subsidiaries do not have purposes of control of the investees. Trading securities are initially recorded at the cost on the transaction date and continuously presented at cost in subsequent periods. Interest earned in the period of holding trading securities is recognised in the consolidated financial statements on a cash basis. These securities are reviewed for determination of decline in their values at the financial statement date. Trading securities are provided for provision for a decline in value when the carrying value is higher than the market value. Provisions for a decline in value of investments are recognised as Net gain/loss from dealing of trading securities in the consolidated income statement. Entrusted investment securities of investors are initially recognised at cost. Subsequently, these securities are measured at cost; except for the case the Bank and its subsidiaries bear risks under the agreements with investors, these securities are then measured at cost less provision for a decline in the value of securities in subsequent accounting periods Investment securities Available-for-sale securities 16 Available-for-sale securities include debt and equity securities which are held by the Bank and its subsidiaries for the purpose of investment and sale availability, and are not regularly purchased and sold but can be sold any time when there is benefit and the Bank and its subsidiaries are not the founder shareholder; or strategic partner or have certain dominant in the process of establishing and deciding financial and operating policies of the investees through a written agreement on assignments of its representatives to the Board of Directors/ Board of Management. Available-for-sale equity securities are initially recognised at cost at the purchase date and continuously presented at cost in subsequent periods. Available-for-sale debt securities are initially recognised at par value at the purchase date. The accrued interest income (for debt securities with interest payment in arrears) and unearned interest income (for debt securities with interest payment in advance) are recorded in a separate account. Discount/premium which represents the difference between the cost and the amount being the par value plus (+) accrued interest income (for debt securities with interest payment in arrears) or minus (-) unearned interest income (for debt

77 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 securities with interest payment in advance) is also recorded in a separate account. In subsequent periods, these securities are continuously recorded at par value, and the discount/premium is amortised to the consolidated income statement on a straight-line basis over the remaining term of securities. Interest of these investments is recognised in the consolidated income statement on an accrual basis using the coupon interest rate of the securities. Periodically, available-for-sale securities are reviewed to determine a possible decline in their value. Provision for a decline in value of securities is made when there is a prolonged decline in value. Provision for a decline in value is recognised into Net gain/(loss) from dealing of investment securities in the consolidated income statement Held-to-maturity securities Held-to-maturity investments are debt securities which are bought by the Bank and its subsidiaries with the purpose of earning interest and which the Bank and its subsidiaries have the intention and ability to hold to maturity. Held-to-maturity securities have the determinable value and the specific maturity date. In case these securities are sold before maturity, they will be reclassified to trading securities or available-for-sale securities. They are initially recognised at par value at the purchase date. The accrued interest income (for debt securities with interest payment in arrears) and unearned interest income (for debt securities with interest payment in advance) incurred before the purchase date are recorded in a separate account. Discount/premium which represents the difference between the cost and the amount being the par value plus (+) accrued interest income (for debt securities with interest payment in arrears) or minus (-) unearned interest income (for debt securities with interest payment in advance) is also recorded in a separate account. In subsequent periods, these securities are continuously recorded at par value, and the discount/premium is amortised to the consolidated income statement on a straight-line basis over the remaining term of securities. Interest of these investments is recognised in the consolidated income statement on accrual basis using the coupon interest rate of the securities. Held-to-maturity investments are reviewed for determination of possible decline in their value. Provision for a decline in value of securities is made when there is a prolonged decline in value. Provision for a decline in value is recognised into Net gain/(loss) from dealing of investment securities in the consolidated income statement Other long-term investments Other long-term investments represent capital contributions and investments in other entities which the Bank and its subsidiaries hold less than 20% voting rights and are the founder shareholder; the strategic partner; or have ability to make certain influence on preparing and making the financial and operating policies of the investees through a written agreement on assignment of its representatives to the Board of Management/ Board of Directors. Other long-term investments are initially recognised at cost at the purchase date and continuously presented at cost in subsequent periods. Other long-term investments are reviewed to assess a possible decline in their value. Provision for impairment of long-term investment is recognised in the consolidated income statement when market values are lower than book values, or where there is other objective evidence of prolonged impairment of other long-term investments. Provision for impairment of long-term investment is made if the investees incur net loss (except for the loss is incurred in line with the business plan before the investment) in accordance with Circular No. 228/2009/ TT-BTC issued by Ministry of Finance on 7 December Provision for impairment loss is computed by multiplying the excess of total actual capital contributions of all parties in the investee over the owners equity of the investee by the percentage of investment capital of the Bank and its subsidiaries in total actual capital contributions of all parties in the investee Repurchase and reverse repurchase agreements Securities sold under agreements to repurchase at a specified future date ( repos ) are not derecognised from the consolidated financial statements. The corresponding cash received is recognised as a liability in the consolidated balance sheet. The difference between the sale and repurchase prices is allocated on a 17

78 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 straight-line basis into the consolidated income statement over the life of the agreement using the contractual interest rate. Securities purchased under agreements to resell at a specified future date ( reverse repos ) are not recognised in the consolidated financial statements. The corresponding cash paid is recognised as an asset in the consolidated balance sheet. The difference between the purchase and resale prices is allocated on a straight-line basis to the consolidated income statement over the life of the agreement using the contractual interest rate Fixed assets Fixed assets are stated at cost less accumulated depreciation and amortisation. The cost of an asset comprises of its purchase price plus any directly attributable costs of bringing the asset to working condition for its intended use. Cost related to additions, improvements and renewals are capitalised while expenditures for maintenance and repairs are charged to the consolidated income statement. When assets are sold or liquidated, their cost and accumulated depreciation and amortisation are deducted from the consolidated balance sheet and any gains or losses resulting from their disposal are recorded to the consolidated income statement Depreciation and amortisation Depreciation and amortisation of tangible fixed assets and intangible assets is calculated on a straight-line basis over the estimated useful lives of the assets as follows: Buildings and structures Machinery and equipment Vehicles Office equipment 5-25 years 3-5 years 6-7 years 5-7 years Accounting software and other applications 3-15 years Land use rights with indefinite useful life are not amortised. Land use rights with definite useful life are amortised on a straight-line basis over the term of land use rights Payable and accrual Payable and accrual are recognised for amount to be paid in the future for goods and services received, whether or not billed to the Bank and its subsidiaries Provision for off-balance-sheet commitments According to Article 6 of Decision No. 493/2005/QD-NHNN and Decision No. 18/2007/QD-NHNN by the State Bank of Vietnam, credit institutions must make a loan classification and provision for guarantees, payment acceptances and non-cancellable loan commitments (generally called off-balance-sheet commitments). Off-balance sheet commitments are classified into groups such as Current, Special Mention, Substandard, Doubtful and Loss based on the overdue status and other qualitative factors. Specific provision and general provision for off-balance-sheet commitments are calculated similarly to provision for credit losses as described in Note 2.8. Provision expense is recorded as Credit loss expense in the consolidated income statement and provision balance is recorded as other liabilities in the consolidated balance sheet Income and expense recognition Interest income and expense are recognised in the consolidated income statement on an accrual basis. The recognition of accrued interest income is suspended when a loan is classified in group 2 to 5 according to Decision No. 493/2005/QD-NHNN and Decision No. 18/2007/QD-NHNN. Suspended interest income is recorded and monitored in the off-balance sheet and recognised in the consolidated income statement upon actual receipt. Income from securities brokerage services is recognised in the consolidated income statement when the transaction has been processed. 18

79 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 Income from securities investment is determined by the difference between the selling price and the average cost of securities sold. Cost of securities is calculated using the moving weighted average method; cost of long-term bond is calculated using the weighted average method. Entrusted investment portfolio management fee is recognised on an accrual basis according to the conditions and terms of contracts. Service fees and commissions are recognised when incurred. Cash dividends from equity investments are recognised in the consolidated income statement when the Bank s right to receive the payment is established. For stock dividends and bonus shares, only number of shares are updated in the accounting records without recognising dividend income in the consolidated income statement at nominal value Foreign currency transactions The Bank and its subsidiaries maintain their accounting systems and record all transactions in original currencies. Monetary assets and liabilities denominated in foreign currencies at year-end are translated into VND using exchange rates ruling at the balance sheet date (see list of exchange rates of applicable foreign currencies against VND as at 31 December in Note 41). Income and expenses arising in foreign currencies during the year are converted into VND at rates ruling at the transaction dates. Unrealised foreign exchange differences arising from the translation of monetary assets and liabilities at the balance sheet date are recognised in the consolidated income statement Corporate income tax Current tax Current tax assets and liabilities for the current and prior years are measured at the amount expected to be paid to (or recovered from) the tax authorities. The tax rates and tax laws are applied and enacted at the balance sheet date. The tax returns of the Bank and its subsidiaries are subject to examination by the tax authorities. Due to the ambiguity associated with the applicability of tax laws and regulations in Vietnam, amounts reported in the consolidated financial statements could be changed at a later date upon final determination by the tax authorities. Deferred tax Deferred tax is provided using the balance sheet liability method on temporary differences between the tax base of assets and liabilities and their carrying amount for financial reporting purpose at the balance sheet date. Deferred tax liabilities are recognised for all taxable temporary differences, except: Where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects neither the accounting profit nor taxable profit or loss. Deferred tax assets are recognised for all deductible temporary differences, carried forward unused tax credit and unused tax losses, to the extent that it is probable that taxable profit will be available against which deductible temporary differences, carried forward unused tax credit and unused tax losses can be utilised, except: Where the deferred tax asset arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects neither the accounting profit nor taxable profit or loss. The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset realised or the liability is settled based on tax rates and tax laws that have been enacted at the balance sheet date. 19

80 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 Deferred tax is charged or credited to the consolidated income statement, except when it relates to items recognised directly to equity, in which case the deferred tax is also dealt with in the equity account. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxable entity and the same taxation authority and the Bank and its subsidiaries intend to settle its current tax assets and liabilities on a net basis Fiduciary assets Assets held in a fiduciary capacity are not reported in the consolidated financial statements since they are not owned by the Bank and its subsidiaries Offsetting Financial assets and financial liabilities are offset and reported at the net amount in the consolidated balance sheet if, and only if, the Bank and its subsidiaries have an enforceable legal right to offset financial assets against financial liabilities and the Bank and its subsidiaries have intention to settle on a net basis, or the realisation of assets and settlement of liabilities is made simultaneously Use of estimates The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities. These estimates and assumptions also affect the income and expenses and the resultant provisions. Such estimates are necessarily based on assumptions involving varying degrees of subjectivity and uncertainty and actual results may differ resulting in future changes in such provisions Employee benefits Post employment benefits 20 Post employment benefits are paid to retired employees of the Bank and its subsidiaries by the Social Insurance Agency which belongs to the Ministry of Labour and Social Affairs. The Bank and its subsidiaries are required to make contributions to these post employment benefits by paying social insurance premium to the Social Insurance Agency at the rate of 16.00% of an employee s basic salary on a monthly basis. The Bank and its subsidiaries have no further obligation to fund the post employment benefits of its employees Voluntary resignation and retrenchment benefits Voluntary resignation benefits: The Bank and its subsidiaries have the obligation, under Section 42 of the Vietnam Labour Code amended on 2 April 2002, to pay allowance arising from voluntarily resignation of employees, equal to one-half month s salary for each year of employment plus salary allowances (if any). The average monthly salary used in this calculation will be the average monthly salary of the six-month period up to the resignation date. Retrenchment benefits: The Bank and its subsidiaries have the obligation, under Section 17 of the Vietnam Labour Code, to pay allowance to employees who are retrenched as a result of organisational restructure or technological changes. In such case, the Bank and its subsidiaries shall pay to the employees an allowance for loss of work equivalent to the aggregate amount of one month s salary for each year of employment, but no less than two months salary. Allowance increase or reverse is recorded in the consolidated income statement. While the obligations under Sections 17 and 42 are compulsory, the implementation of these Sections is subject to detailed guidance issued by the Ministry of Finance in implementing circulars. In accordance with Circular No. 64/1999/TT-BTC dated 7 June 1999 and Circular No. 82/2003/TT-BTC dated 14 August 2003 by the Ministry of Finance which superseded Circular No. 64/1999/TT-BTC, the Bank and its subsidiaries are required to calculate retrenchment allowance from 1.00% to 3.00% per annum on the basic salary of the employees Unemployment benefits According to Circular No. 04/2009/TT-BLDTBXH guiding Decree No. 127/2008/ND-CP on unemployment insurance, from 1 January 2009, the Bank and its subsidiaries are obliged to pay unemployment insurance at 1.00% of their salary fund used for payment of unemployment insurance for insurance participants and deduct 1.00% of salary of each employee to simultaneously pay to the Unemployment Insurance Fund.

81 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December Leased assets The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset and the arrangement coveys a right to use the asset. Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the asset to the lessee. All other lease arrangements are classified as operating leases. Rentals under operating leases are charged to the consolidated income statement on a straight-line basis over the term of the lease Appropriation of net profit Net profit after tax is available for appropriation to shareholders after approval by the shareholders at the Annual General Meeting and after making appropriation to reserve funds in accordance with the Bank s charter and Vietnamese regulatory requirements. Dividend is computed from the retained earning based on shareholders share proportion Earnings per share Basic earnings per share amount is computed by dividing net profit for the year attributable to ordinary shareholders of the Bank before any appropriation of statutory reserves and bonus and welfare fund by the weighted average number of ordinary shares outstanding during the year. 3. CASH, GOLD AND PRECIOUS STONES 31 December December 2009 Cash on hand in VND 1,189, ,070 Cash on hand in foreign currencies 1,021, ,897 Monetary gold 4,461,903 1,007,144 6,673,308 2,615, BALANCES WITH THE STATE BANK OF VIETNAM 31 December December 2009 Demand deposits at the State Bank of Vietnam 1,354,420 1,230,380 Balances with the State Bank of Vietnam ( SBV ) include settlement and clearing deposits and compulsory deposits. According to the SBV s regulations, the interest rates of deposits at the SBV are as follows: - Compulsory deposits in VND and foreign currencies in the compulsory range of deposit bear interest at a rate of 1.20% p.a. and 0.00% p.a., respectively. - Excess of the Bank s deposits over the compulsory range deposits in VND and in foreign currencies which bear interest at a rate of 0.00% p.a. and 0.10% p.a., respectively. Under regulations of the SBV, as at 31 December 2010, the Bank is required to maintain certain cash reserves with the SBV in the form of compulsory deposits as follows: - Customer deposits in VND with term of less than 12 months and more than 12 months have the compulsory rate of 3.00% and 1.00%, respectively. - Customer deposits in foreign currencies with term of less than 12 months and more than 12 months have the compulsory rate of 4.00% and 2.00%, respectively. During the year, the Bank has complied with the SBV s regulations on compulsory deposits. 21

82 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December DUE FROM AND LOANS TO OTHER CREDIT INSTITUTIONS 31 December December 2009 Demand deposits at other credit institutions 722, ,724 Term deposits at and loans to other credit institutions 2,627, ,310 General provision for loans to other credit institutions (Note 8) (864) - 3,349, , TRADING SECURITIES Details of trading securities as at 31 December are as follows: 31 December December 2009 Debt securities Issued by other local credit institutions (*) 1,604 - Equity securities Issued by other local credit institutions 19,793 26,424 Issued by local economic entities 136, , , , , ,035 Entrusted investment securities (Note 19.2) 1,165, ,469 1,323, ,504 Listing status of trading securities which the Bank and its subsidiaries hold and bear risks are as follows: 31 December December 2009 Debt securities Unlisted 1,604 - Equity securities Listed 86, ,180 Unlisted 69,447 37, , , , , LOANS AND ADVANCES TO CUSTOMERS 31 December December 2009 Loans to local economic entities and individuals 37,056,599 33,343,978 Overdraft loans 780, ,729 Loans from grants and entrusted funds 217, ,734 Loans for discounted commercial notes and valuable papers 209, ,148 Credit cards 56,738 57,955 38,320,847 34,355,544 22

83 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December Analysis of loan by quality 31 December December 2009 Current 36,504,384 33,662,974 Special mention 1,203, ,357 Substandard 99,188 59,601 Doubtful 228, ,068 Loss 284, ,544 38,320,847 34,355, Analysis of loans by original terms 31 December December 2009 Short-term loans 24,815,457 22,865,544 Medium-term loans 10,168,791 9,162,088 Long-term loans 3,336,599 2,327,912 38,320,847 34,355, Analysis of loans by ownership type 31 December December 2009 % % Loans to economic entities Central State-owned enterprise 1, , Local State-owned enterprise 158, , State owned limited liability company 212, , Private limited liability company 9,967, ,355, State-owned joint stock company 649, , Other joint stock company 14,126, ,962, Private enterprise 981, ,414, Foreign-invested enterprise 63, , Collective business group 91, , ,253, ,684, Loans to individuals 12,066, ,671, ,320, ,355, Analysis of loans by economic sectors 31 December December 2009 % % Trading, repairing of motor vehicles, motorcycles, personal and household appliances 14,089, ,362, Individuals and public activities 8,947, ,059, Construction 7,668, ,241, Processing industry 2,987, ,544,

84 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December December December 2009 % % Assets trading and consulting services 1,188, ,741, Aquatic product 896, , Agriculture and forestry 586, , Transportation, warehousing and communication 492, , Services with families 438, , Financial services 384, , Hotel and restaurant 341, , Education and training 113, , State governance and national defense: Communist Party, unions, social obligations 77, , Mining exploration 54, , Health care and social relief activities 21, , Electricity, water and gas supply/distribution 11, , Science and technology 10, , Sport and cultural activities 10, , World organisation ,320, ,355, PROVISION FOR CREDIT LOSSES Details of provision for credit losses as at 31 December 2010 are as follows: 31 December December 2009 Loans to other credit institutions Loans to customers 446, ,733 Off-balance sheet commitments 25, , ,733 Movements in provision for credit losses in 2010 are as follows: Specific provision General provision Total Beginning balance 125, , ,733 Provision charged during the year 75,295 93, ,539 Reversal of provision during the year (28,555) - (28,555) Provisions utilised to write off bad loans (11,494) (5) (11,499) Ending balance 160, , ,218 The Bank has classified its loans and advances to customers in accordance with Decision No. 493/2005/ QD-NHNN and Decision No. 18/2007/QD-NHNN issued by the State Bank of Vietnam and its policy on loan classification and loan loss provisions. The provision for credit losses was made based on the classification of outstanding loan balances and guarantees in the off balance sheet as at 31 December 2010, instead of at 30 November 2010, as required by Decision No. 493/2005/QD-NHNN because the Bank believes that 24

85 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 the classification of outstanding loans as at 31 December 2010 represents more precisely the credit result of the Bank at the year end. The breakdown of loan classification and provision as required by Decision No. 493/2005/QD-NHNN, Decision No. 18/2007/QD-NHNN and its own policy as at 31 December 2010 are as follows: Balance Specific provision General provision Loans to other credit institutions Current 115, Loans and advances to customers Current 36,504, , ,626 Special mention 1,203,689 14,000 9,055 23,055 Substandard 99,188 10, ,555 Doubtful 228,938 41,161 1,722 42,883 Loss 284,648 94,403-94,403 38,320, , , ,522 Off-balance sheet commitments Current 3,444,330-25,832 25,832 TOTAL 160, , ,218 Total 9. INVESTMENT SECURITIES 31 December December 2009 Available-for-sale securities Debt securities Government bonds 302,121 - Issued by other local credit institutions 1,000,000 - Issued by local business entities 50,000 50,000 1,352,121 50,000 Equity securities Issued by other local credit institutions 111, ,421 Issued by local business entities 376, , , ,868 1,839, ,868 Held-to-maturity securities Government bonds - 8,333 TOTAL 1,839, ,201 The listing status of available-for-sale securities is as follows: 31 December December 2009 Debt securities Unlisted 1,352,121 50,000 Equity securities Unlisted 487, ,868 1,839, ,868 25

86 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December LONG-TERM INVESTMENTS 26 Details of the capital contributions and long-term investments in economic entities as at 31 December are as follows: 31 December December 2009 Par value VND million Cost VND million % owned by the Bank Par value VND million Cost VND million % owned by the Bank Saigon M&C Real Estate JSC 31,383 94, ,383 94, Que Huong - Liberty JSC 9,943 47, ,191 57, Kinh Do Land Corporation 40,000 46, ,000 46, Dong A Real Estate JSC 33,000 33, ,000 33, Hung Thinh Phat Metallurgy JSC 10,787 32, ,787 32, Asia Commerce Fisheries Corporation 9,952 29, ,813 62, Phu Nhuan Jewellery JSC 7,499 26, ,406 92, Khai Toan JSC 6,017 24, ,750 39, Nha Be Water Supply JSC 10,900 24, ,847 26, Minh Duong Furniture Corporation 5,697 22, Song Hau Food Processing JSC 6,000 21, Vina Investment JSC 6,662 20, ,676 24, Ben Thanh Water Supply JSC 9,360 19, ,295 21, Song Viet Finance JSC 7,500 18, ,500 18, Vietnam Self-adhesive Materials JSC 16,000 16, Special Aquatic Products JSC 3,900 15, ,200 43, Gia Dinh Water Supply JSC 9,500 13, ,424 15, Viet Hung JSC 3,000 12, ,000 12, Phu Hoa Tan Water Supply JSC 9,000 9, ,000 9, Saigon Building Investment, Construction and Trading JSC 3,034 9, ,034 9, Global Insurance JSC 8,800 8, ,800 8, Thuan Phat Mobile Technology JSC 8,000 8, ,500 9, Vina Printing and Trading JSC 2,873 7, ,928 7, Century Synthetic Fiber Corporation 2,189 6, ,368 7, PETEC Logistics JSC 5,400 5, ,400 5, Viet Tien- Dong A JSC 5,000 5, ,000 5, Saigon Plastic JSC 2,358 4, ,358 4, Vina Smart Card JSC (VNBC) 3,300 3, ,000 3, Binh Dinh Sugar JSC 800 3, PCB Investment JSC 3,182 3, Madagui Saigon Tourist JSC 3,040 3, ,040 3, Cho Lon Water Supply JSC 2,767 2, ,767 2, Vietnam National Financial Switching JSC 2,500 2, ,500 2,

87 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 DIC Real Estate JSC 1,110 2, ,000 2, Concrete Construction Investment JSC 667 2, PETEC Coffee JSC 1,460 1, ,460 1, Saigon Trade and Production Development JSC 390 1, , Saigon Cho Lon Real Estate JSC 250 1, , District 10 Land Housing JSC Real Estate 9 JSC Center for Research and Application of Economic Sciences (Cesais) Nam Ha Pharmaceutical JSC Guarantee Fund for small and medium enterprises Bank Training Consultancy JSC (BTC) Garment and Leather Products JSC Investments in other companies ,116 32, , , PROVISION FOR A DECLINE IN VALUE OF SECURITIES AND LONG-TERM INVESTMENTS Details of provision for a decline in value of securities and long-term investments during this year are as follows: Beginning balance In which: 31 December December 2009 Trading securities 41,774 35,012 Available-for-sale investment securities - 21,131 Other long-term investments 29,383 - Increase/(decrease) during the year In which: 71,157 56,143 Trading securities (24,281) 6,762 Available-for-sale investment securities 12,375 (21,131) Other long-term investments (18,437) 29,383 Ending balance In which: (30,343) 15,014 Trading securities (Note 11.1) 17,493 41,774 Available-for-sale investment securities (Note 11.2) 12,375 - Other long-term investments (Note 11.3) 10,946 29,383 40,814 71,157 27

88 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December Provision for a decline in value of trading securities 31 December December 2009 Cost (Note 6) Provision Provision Trading securities Unlisted bonds 1, Listed shares (i) 86,665 10,329 36,532 Unlisted shares (i) 69,447 7,164 5, ,716 17,493 41,774 Entrusted investment securities (ii) 1,165, ,323,363 17,493 41,774 (i) The Bank has made adequately the provision for listed and unlisted shares according to regulations as at 31 December (ii) This represents the investments delegated by the investors to the Bank and its subsidiaries. Under the contractual agreements, the Bank and its subsidiaries do not bear any risks arising from the decline in value of the investments. Accordingly, provision for a decline in value of these investments has not been assessed and provided for Provision for a decline in value of available-for-sale investment securities 31 December December 2009 Cost (Note 9) Provision Provision Debt securities Unlisted 1,352, Equity securities Unlisted 487,789 12,375-1,839,910 12, Provision for impairment of long-term investments 31 December December 2009 Cost (Note 10) Provision Provision Long-term investments Listed shares 26,514-4,980 Unlisted shares 587,630 10,946 24, ,144 10,946 29,383 28

89 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December FIXED ASSETS 12.1 Tangible fixed assets Buildings & structures Machinery & equipments Vehicles Office equipments Others Cost Beginning balance 308, ,692 58,524 64,210 34, ,155 Additions 124,935 64,639 10,615 18,147 5, ,743 Disposals (9,740) (1,541) (495) (626) (657) (13,059) Ending balance 423, ,790 68,644 81,731 39,073 1,078,839 Accumulated depreciation Beginning balance 37, ,340 25,291 29,846 13, ,240 Additions 12,874 70,830 9,115 12,631 6, ,841 Other increases 4,736 1, ,621 Disposals (2,631) (1,531) (495) (626) (624) (5,907) Other decreases - - (119) (1,743) (1,457) (3,319) Ending balance 52, ,524 33,792 40,108 17, ,476 Net book value Beginning balance 271, ,352 33,233 34,364 20, ,915 Ending balance 371, ,266 34,852 41,623 21, ,363 Total Other information on tangible fixed assets Net book value of tangible fixed assets is not temporarily used in operating activities 52,596 Cost of tangible fixed assets fully depreciated but still in use 91, Intangible assets Land use rights Accounting software and other applications Total Cost Beginning balance 162,862 74, ,089 Additions 39,700 22,459 62,159 Disposals (4,061) - (4,061) Ending balance 198,501 96, ,187 Accumulated amortisation Beginning balance - 18,220 18,220 Amortisation charge ,580 12,708 Ending balance ,800 30,928 Net book value Beginning balance 162,862 56, ,869 Ending balance 198,373 65, ,259 29

90 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 Other information on intangible fixed assets Cost of tangible fixed assets fully depreciated but still in use 4, OTHER ASSETS 31 December December 2009 Receivables 503, ,982 Interest and fee receivables 430, ,133 Deferred tax asset 1,668 - Other assets 1,009, ,126 1,944,686 1,474, Receivables 31 December December 2009 Construction in progress 57, ,082 Other receivables 445, , , , Interest and fee receivables 31 December December 2009 Interest receivable from loans to customers 334, ,380 Interest receivable from deposits at credit institutions 53, Interest receivable from loans to credit institutions 269 1,072 Interest receivable from investments in debt securities 41,652 5, , , BORROWINGS FROM THE GOVERNMENT AND THE STATE BANK OF VIETNAM This represents the re-financing capital loan from the State Bank of Vietnam with term of 2 months and interest rate of 9.00% per annum. 15. DUE TO AND BORROWINGS FORM OTHER CREDIT INSTITUTIONS 31 December December 2009 Demand deposits from other credit institutions 57,185 34,609 Term deposits and loans from other credit institutions 4,116,650 4,733,130 4,173,835 4,767,739 30

91 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December DUE TO CUSTOMERS 16.1 Analysis by products 31 December December 2009 Demand deposits Demand deposits in VND 5,360,721 4,491,106 Demand saving deposits in VND 33,751 67,285 Demand deposits in FC 268, ,886 Demand saving deposits in FC 20,237 32,927 Term deposits Term deposits in VND 1,272,864 1,587,417 Term saving deposits in VND 20,344,659 18,018,622 Term deposits in FC 46,448 58,241 Term saving deposits in FC 3,671,417 2,986,855 Margin deposits Margin deposits in VND 125, ,612 Margin deposits in FC 227, ,065 Deposits for specific purposes 44,574 57,524 31,417,279 27,973, Analysis by type of customer and ownership 31 December December 2009 Deposits by economic entities State-owned enterprises 1,066,682 1,138,098 Private enterprises and others 2,615,274 2,708,419 Foreign-invested enterprises 258, ,208 3,940,335 4,034,725 Deposits by individuals 27,463,253 23,936,600 Deposits by others 13,691 2,215 31,417,279 27,973, GRANTS, ENTRUSTED FUNDS AND LOANS EXPOSED TO RISKS 31 December December 2009 Loans from Bank for Investment and Development of Vietnam 184, ,774 Grants and entrusted funds from Japan Bank for International Cooperation 122, ,494 Grants and entrusted funds from Asian Development Bank 3, , ,047 31

92 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December VALUABLE PAPERS ISSUED 31 December December 2009 Certificates of gold deposit Term under 12 months 6,449,223 2,762,535 Term from 12 months to 5 years 555, ,364 Term over 5 years 1,691 1,007 7,006,763 3,378,906 Promissory notes Term under 12 months 4,097, ,180 Bond Term from 12 months to 5 years (*) 50,000-11,154,737 3,682, OTHER LIABILITIES 31 December December 2009 Interest and fee payables 447, ,304 Deferred tax liability - 19,131 Other payables 2,223,018 1,273,147 Provision for contingent liabilities and off-balance sheet commitments 25,832-2,696,662 1,629, TÌNH HÌNH THỰC HIỆN NGHĨA VỤ VỚI NHÀ NƯỚC Beginning balance Amount incurred during the year Payable Paid Ending balance Value added tax ( VAT ) 3,063 32,762 (25,313) 10,512 VAT on services 2,778 27,609 (18,874) 11,513 VAT on foreign exchange 285 5,153 (6,439) (1,001) Corporate income tax 23, ,985 (139,225) 103,308 Other taxes 1,095 34,627 (27,485) 8,237 27, ,374 (192,023) 122,057 The Bank and its subsidiaries tax returns are subject to examination by the tax authorities. Because the application of tax laws and regulations to many types of transactions is susceptible to varying interpretations, amounts reported in the consolidated financial statements could be changed at a later date upon final determination by the tax authorities. Corporate income tax The Bank and its subsidiaries have obligations to pay Corporate Income Tax ( CIT ) at the rate of 25% of taxable profits, except for Dong A Securities Company Limited which has CIT rate of 20% of taxable profits. The consolidated CIT expense comprises of the CIT expense of the Bank and its subsidiaries. The Bank and its subsidiaries are responsible for preparing and filing their separate CIT returns to the local tax authorities. 32

93 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 The CIT expense of the Bank and its subsidiaries for the year was as follows: 31 December December 2009 Current CIT expense 218, ,388 Deferred CIT (benefit)/expense (20,799) 29, , ,108 Current Corporate Income Tax Current corporate income tax payable is determined based on the taxable income of the current year. Taxable income is different from the one reported in the consolidated income statement since it excludes items of income or expense that are taxable or deductible in other years due to the differences between the Bank s accounting policies and the current tax policies, and also excludes non-taxable and non-deductible items for tax purpose. The current corporate income tax payables of the Bank and its subsidiaries are calculated based on the statutory tax rates applicable at the year-end. Current corporate income tax expense for the year was calculated as follows: 31 December December 2009 Profit before tax 857, ,756 Less: Tax exempt dividend income (13,306) (19,720) Income from Government bonds (37) (884) Unrealised foreign exchange (gains)/losses 72,220 (76,522) Unrealised foreign exchange losses in 2008 which were realised in 2009 (37,819) - Add: Unrealised foreign exchange gains in 2009 which were realised in ,522 - Income from transfer of Nha Be land use rights (65,547) - Other non-deductible expenses Estimated taxable income before tax losses 889, ,356 Tax losses carried forward (6,292) (9,573) Estimated taxable income 883, ,783 CIT expense of the Bank, at 25% 211, ,139 CIT expense of subsidiaries, at 25% 5,431 4,309 CIT expense of subsidiaries, at 20% 2,973 - CIT reduction of a subsidiary according to the Government's Resolution No. 30/2008/NQ-CP - (60) Total estimated CIT for the year 220, ,388 Excess of CIT provision in the prior year (1,135) - Total estimated CIT expense for the year 218, ,388 CIT payable at beginning of year 23,548 25,002 CIT overpaid in the prior year - (109) CIT paid during the year (139,225) (171,733) CIT payable at end of year 103,308 23,548 33

94 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 Deferred Corporate Income Tax Deferred CIT is presented by the Bank as follows: Deferred tax asset 31 December 2010 Consolidated balance sheet 31 December 2009 (Debited)/credited to the consolidated income statement Unrealised foreign exchange losses 18,055-18,055 (10,589) Deferred tax liability Gain from transfer of land use rights (16,387) - (16,387) - Unrealised foreign exchange gains - (19,131) 19,131 (19,131) Deferred income tax benefit/ (expense) 1,668 (19,131) 20,799 (29,720) 34

95 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December OWNERS EQUITY AND RESERVES 21.1 Statement of changes in owners equity Charter capital Capital supplementary fund Financial fund Business & development fund Other reserves Other capital Retained earnings Total Opening balance 3,400,000 33, ,115 1, ,832 4,176,389 - Capital contributions in cash 1,100, ,100,000 - Net profit for the year , ,328 - Appropriation to reserves by the Bank and a subsidiary for previous year - 28,849 56, ,500 - (91,011) - - Appropriation to reserves by subsidiaries for current year - 1,434 2,747 2, (6,989) - - Appropriation to welfare and bonus fund by the Bank and a subsidiary for previous year - Appropriation to welfare and bonus fund by subsidiaries for current year (48,464) (48,464) (2,748) (2,748) - Dividends paid for previous year (458,000) (458,000) - Other increases Reserves utilised during the year (6,000) - - (6,000) - Other decreases (452) (452) Ending balance 4,500,000 64, ,908 4, ,496 5,420,283 During the year, the Bank has increased its charter capital from VND 3,400,000 million to VND 4,500,000 million in accordance with Approval Letter No. 6030/NHNN-TTGSNH issued by the SBV on 11 Aug 2010, Approval Letter No. 737/UBCK-GCN issued by the State Securities Commission on 19 November 2010 and amended Business Registration Certificate issued by the Department of Planning and Investment of Ho Chi Minh City on 28 December The Bank paid the dividends in cash amounting to VND 458,000 million for the financial year 2009 in accordance with the resolution of the shareholders at its Annual General Meeting of shareholders held on 26 March

96 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 Details of shares issued by the Bank are as follows: 2010 Shares 2009 Shares Authorised shares 450,000, ,000,000 Issued and paid-up shares 450,000, ,000,000 Ordinary shares 450,000, ,000,000 Outstanding shares 450,000, ,000,000 Ordinary shares 450,000, ,000,000 Par value (VND/share) 10,000 10, Reserves of the Bank The Bank creates its statutory reserves based on percentage of net profit after tax in accordance with Decree No. 146/2005/ND-CP issued by the Government on 23 November 2005 as follows: Amount Maximum balance Capital supplementary reserve 5% of net profit after tax Charter capital Financial reserve 10% of net profit after tax and after deduction of supplementary capital reserve 25% of charter capital The following reserves are created based on percentage of net profit after tax and after deduction of supplementary capital reserve (remaining profit after tax) in accordance with resolution of the shareholders by the Annual General Meeting. Amount Maximum balance Business and development fund Based on resolution of the Board of Management Not defined Welfare and bonus fund Based on resolution of the Board of Management Not defined Other funds Based on resolution of the Board of Management Not defined The Bank has not yet made statutory reserves from net profit after tax for Such reserves will be made in 2011 after obtaining the resolution of the Annual General Meeting of shareholders. The utilisation of these reserves is made in accordance with Decree No. 146/2005/ND-CP Reserves of subsidiaries Dong A Securities Company Limited In accordance with Decision No. 27/2007/QD-BTC issued by the Ministry of Finance on 24 April 2007, securities companies are required to create statutory reserves based on the percentage of net profit after tax as follows: Amount Maximum balance Capital supplementary reserve 5% of net profit after tax 100% of charter capital Financial reserve 5% of net profit after tax 10% of charter capital Other reserves are created based on this subsidiary s charter as follows: Amount Maximum balance Business and development fund 5% of net profit after tax Not defined Internal training fund 5% of net profit after tax Not defined Bonus fund 5% of net profit after tax Not defined Welfare fund 5% of net profit after tax Not defined 36

97 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 Dong A Capital Company Limited Reserves are created based on this subsidiary s charter as follows: % of net profit after tax Capital supplementary reserve 10% Financial reserve 10% Business and development fund 10% Internal training fund 5% Bonus fund 5% Welfare fund 5% Dong A Money Transfer Company Limited Reserves are created based on this subsidiary s charter. 22. BASIC EARNINGS PER SHARE Basic earnings per share of the Bank are calculated as follows: Net profit attributable to ordinary shareholders of the Bank () Weighted average number of outstanding ordinary shares during the year (shares) , , ,205, ,090,411 Basic earnings per share (VND/share) 1,932 1,914 Net profit attributable to the Bank s ordinary shareholders used for calculation of basic earnings per share represents net profit after tax which does not exclude amounts to be appropriated to reserves according to the regulations and policies of the Bank and its subsidiaries as described in Note 21.2 and Note During the year, the Bank made and advance of interim dividend for the year 2010 amounting to VND 408,000 million (2009: VND 366,400 million). 23. INTEREST AND SIMILAR INCOME Interest income on loans to customers 4,289,110 3,204,378 Interest income on placements at other banks 165, ,087 Interest income from trading and investing of debt securities: - Interest income on debt securities 43,200 4,420 Other interest income from credit activities 11,159 7,171 4,508,605 3,325,056 37

98 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December INTEREST AND SIMILAR EXPENSES Interest expense on customer deposits 2,757,893 2,118,663 Interest expense on valuable papers 332,007 79,013 Interest expense on borrowings 44,361 20,368 Other expenses from credit activities ,134,577 2,218, NET FEES AND COMMISSION INCOME Fees and commission income Settlement services 221, ,033 Brokerage services 49,203 27,617 Money transfer services 47,576 31,968 Guarantee transactions 32,532 24,109 Guarantee and agency of securities issuance services 12,869 17,308 Entrusted investments and agencies 8,936 5,470 Investment securities and financial advisory services 6,112 14,317 Treasury services Asset maintenance Other income 26,157 3, , ,570 Fees and commission expenses Post office and internet expenses (19,608) (17,110) Settlement services (17,821) (17,307) Expenses of Card center (10,375) (7,193) Brokerage services (10,152) (4,149) Treasury services (2,416) (1,619) Advisory services (1,695) (1,290) Other expenses (3,995) (4,190) (66,062) (52,858) Net fees and commission income 339, , NET GAIN FROM FOREIGN CURRENCIES AND GOLD TRADING Income from foreign currencies and gold trading Income from spot foreign exchange 56, ,687 Income from gold trading 183, ,953 Income from currency derivative financial instruments 1,486 43, , ,620 Expense from foreign currencies and gold trading Expense from spot foreign exchange (194,632) (42,915) 38

99 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December Expense from gold trading (11,811) (78,654) Expense from currency derivative financial instruments (23,609) (52,559) (230,052) (174,128) Net gain from foreign currencies and gold trading 11, , NET (LOSS)/GAIN FROM DEALING OF TRADING SECURITIES Income from trading securities 78,018 78,965 Expenses from trading securities (119,302) (67,287) Provision reversal/(provision expense) for a decline in value of trading securities 24,281 (6,762) (17,003) 4, NET GAIN FROM DEALING OF INVESTMENT SECURITIES Income from investment securities 52,625 72,942 Provision reversal/(provision expense) for a decline in value of investment securities 6,062 (8,252) 58,687 64, NET OTHER OPERATING INCOME Income from transfer of land use rights 72,123 - Income from transfer of right to purchase shares 53,350 - Income from transfer of right to purchase building floor area 19,892 - Recovery of bad loans previously written off 5,481 3,611 Income from other operating activities 3, ,503 4,013 Other operating expenses (4,656) (226) 149,847 3, OTHER OPERATING EXPENSES Other tax expenses and fees 7,669 20,592 Asset expenses Office rental 89,833 54,131 Repair, maintenance and renovation of assets 52,321 35,023 Tools and equipments 21,577 14,122 Insurance expense for the Bank s assets 2,540 1, , ,081 39

100 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December Other operating expenses Advertising, marketing, promotion and entertainment expenses 61,656 26,370 Electricity and water expenses 29,862 21,540 Material and printing expenses 28,913 17,303 Post and telecommunication expenses 19,200 16,463 Business trip expenses 15,852 5,929 Meeting and protocol expenses 9,218 7,446 Training expenses 294 1,372 Other operating expenses 80,724 86, , ,003 Insurance expense for customer deposits 34,623 28, , , CASH AND CASH EQUIVALENTS Cash and cash equivalents represented in the consolidated cash flow statement comprise of the following amounts in the consolidated balance sheet: 31 December December 2009 Cash, gold and precious stones 6,673,308 2,615,111 Demand deposits at the State Bank of Vietnam 1,354,420 1,230,380 Demand deposits at other credit institutions 722, ,724 Term deposits at and loans to other credit institutions with term of less than three (3) months (Note 5.2) 412,623 26,558 Less: Deposit of investors for securities trading (Note 19.2) (58,183) (128,045) 9,104,300 4,330, EMPLOYEES INCOME I. TOTAL NUMBER OF EMPLOYEES (person) 4,750 4,203 II. EMPLOYEES INCOME 1. Total salary fund paid () 307, , Lunch allowance () 17,694 12, Bonus () 36,117 43, Total income (1+2+3) () 361, , Average monthly salary (VND/employee) 5,395,632 4,875, Average monthly income (VND/employee) 6,339,684 5,988,302 40

101 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December TYPE AND VALUE OF COLLATERAL ASSETS 31 December December 2009 Real estates 32,672,602 28,997,062 Inventories 7,298,788 8,012,057 Valuable papers 4,090, ,940 Transportation vehicles 1,705,808 2,065,923 Machinery and equipments 1,148,168 1,159,997 Saving books 1,001, ,463 Others 3,765,035 2,262,006 51,682,392 44,203, CONTINGENT LIABILITIES AND COMMITMENTS In the normal course of business, the Bank is a party to financial instruments that are recorded in the off-balance sheet. These financial instruments mainly comprise financial guarantees and commercial letters of credit ( L/C ). These instruments involve elements of credit risk in excess of the amounts recognised in the consolidated balance sheet. Credit risk for off-balance sheet financial instruments is defined as the possibility of sustaining a loss because any other party to a financial instrument fails to perform in accordance with the terms of the contract. Financial guarantees are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party including guarantee for borrowings, settlement, and performing contracts and bidding. The credit risk involved in issuing guarantees is essentially the same as that involved in extending facilities to other customers. Commercial at sight letters of credit represent financing transactions by the Bank to its customer where the customer is usually the buyer/importer of goods and the beneficiary is typically the seller/exporter. Credit risk is limited as the merchandise shipped serves as collateral for the transaction. Deferred payment letters of credit represent the amounts at risk should the contract be fully drawn upon and the client defaults in repayment to the beneficiary. Deferred payment letters of credit that were default by clients are recognised by the Bank as granting of a compulsory loan with a corresponding liability representing the financial obligation of the Bank to pay the beneficiaries and to fulfil the guarantor obligation. 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 customers as assessed by the Bank. Details of the outstanding commitments and contingent liabilities as at 31 December are as follows: 31 December December 2009 Letters of credit 2,261,003 2,275,911 Financial guarantees 1,183, ,947 3,444,330 3,226,858 Less: Margin deposits (353,682) (402,678) Contingent liabilities 3,090,648 2,824,180 41

102 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December INTEREST RATE RISK The classification of assets and liabilities according to re-pricing period as at 31 December 2010 was as follows: Assets Overdue Non-interest bearing Up to 1 month Subject to re-pricing interest rate in period 1-3 months 3-6 months 6-12 months 1-5 years Over 5 years Total Cash, gold and precious stones - 6,673, ,673,308 Balances with the State Bank of Vietnam ( SBV ) - - 1,354, ,354,420 Due from other credit institutions - - 1,137,898 1,841, ,029 9, ,349,984 Trading securities - 1,323, ,323,363 Loans to customers 1,816,463-3,710,483 26,166,729 6,235, , ,320,847 Investment securities - 1,839, ,839,910 Long-term investments - 614, ,144 Fixed assets - 940, ,622 Other assets - 1,829, , ,944,686 Total assets 1,816,463 13,220,424 6,318,410 28,008,186 6,596, , ,361,284 Liabilities Borrowings from the SBV and due to other credit institutions - - 2,026,361 2,428, , ,873,835 Due to customers - 353,682 20,239,019 8,092,957 1,758,356 95, , ,417,279 Grants, entrusted funds and loans exposed to risks ,436 13,011 21, ,740 19, ,288 Valuable papers issued by the Bank - - 4,235,287 5,925, ,524 16, ,022-11,154,737 Other liabilities - 2,269, , , ,696,662 Total liabilities - 2,623,634 26,707,509 16,684,826 2,891, ,563 1,392,513 19,593 50,452,801 Sensitive difference with interest rate of balance-sheet items 1,816,463 10,596,790 (20,389,099) 11,323,360 3,705, ,342 (1,392,513) (19,593) 5,908,483 Off-balance-sheet commitments affecting sensitive difference with interest rate - 3,444, ,444,330 of assets and liabilities (net) Sensitive difference with interest rate of balance-sheet and off-balance 1,816,463 14,041,120 (20,389,099) 11,323,360 3,705, ,342 (1,392,513) (19,593) 9,352,813 sheet items Note: Total assets represent gross carrying value which does not include provision for credit losses and impairment of investments. 42

103 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December CURRENCY RISK The classification of assets and liabilities denominated in VND as at 31 December 2010 was as follows: EUR equivalent USD equivalent Gold equivalent Other currencies equivalent Total Assets Cash, gold and precious stones 92, ,012 4,461, ,059 5,483,872 Balances with the State Bank of Vietnam ( SBV ) - 150, ,467 Due to other credit institutions 8, ,976-31, ,832 Loans to customers 38,350 4,485,415 3,534,996 3,681 8,062,442 Long-term investments Other assets 1, ,528 9,051 3, ,794 Total assets 140,736 6,051,148 8,005, ,294 14,473,157 Liabilities and owners equity Borrowings from the SBV and due to other credit institutions 1,057 2,134, , ,712,347 Due to customers 147,833 3,946, ,024 4,238,560 Grants, entrusted funds and loans exposed to risks - 2, ,028 Valuable papers issued by the Bank - - 7,006,766-7,006,766 Other liabilities 30, , ,904 5, ,109 Capital and reserves Total liabilities and owners equity 179,662 6,229,234 8,006, ,027 14,565,393 Currency position of balance sheet items (38,926) (178,086) (491) 125,267 (92,236) Currency position of off-balance sheet items (9,587) 23,385 - (26,255) (12,457) Currency position of balance sheet and off-balance sheet items (48,513) (154,701) (491) 99,012 (104,693) Note: Total assets represent gross carrying value which does not include provision for credit losses and impairment of investments. 43

104 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December LIQUIDITY RISK The classification of assets and liabilities converted into VND by liquidity risk as at 31 December 2010 was as follows: Over 3 months Overdue Current Up to 3 months Assets Cash, gold and precious stones - - 6,673, ,673,308 Balances with the State Bank of Vietnam ( SBV ) - - 1,354, ,354,420 Due from other credit institutions - - 1,137,898 1,841, ,029 9,600-3,349,984 Trading securities ,323, ,323,363 Loans to customers 612,774 1,203,689 3,382,243 4,582,998 15,057,928 10,020,384 3,460,831 38,320,847 Investment securities ,000-1,039,910-1,839,910 Long-term investments , ,144 Fixed assets - - 1, , , , ,622 Other assets , , ,517 49, ,879 1,944,686 Total assets 612,774 1,203,689 12,630,157 7,832,233 17,435,683 11,397,953 5,248,795 56,361,284 Liabilities Borrowings from the SBV and due to other credit institutions - - 2,026,361 2,428, , ,873,835 Due to customers ,348,371 8,184,888 1,995, , ,417,279 Grants, entrusted funds and loans exposed to risks ,436 34, ,740 19, ,288 Valuable papers issued by the Bank - - 4,235,287 5,925, , ,022-11,154,737 Other liabilities , ,879 1,884,320 23,608-2,696,662 Total liabilities ,752,887 17,202,755 5,051,266 1,426,300 19,593 50,452,801 Net liquidity 612,774 1,203,689 (14,122,730) (9,370,522) 12,384,417 9,971,653 5,229,202 5,908,483 Up to 1 month 1-3 months 3-12 months 1-5 years Over 5 years Total Note: Total assets represent gross amount which does not include provision for credit losses and impairment of investments. 44

105 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December 2010 Liquidity risk Liquidity risk is when the Bank has difficulties in implementing its obligations for financial liabilities. Liquidity risk arises when the Bank may not afford to settle debt obligation when it is due at normal or difficult periods. In order to reduce liquidity risk exposure, the Bank should diversify the mobilisation of deposits from various sources apart from its basic capital resources. In addition, the Bank should have policies to manage liquidity assets flexibly, monitor future cash flows and daily liquidity. The Bank should also evaluate the estimated cash flows and the availability of current collateral assets in case of obtaining more deposits. The maturity term of assets and liabilities represents the remaining terms of these assets and liabilities as calculated from the balance sheet date to the maturity date in accordance with contractual terms and conditions. The following assumptions and conditions are applied in the analysis of maturity of the Bank s assets and liabilities: Balances with the State Bank of Vietnam are classified as demand deposits, this includes the compulsory reserves. The balance of compulsory deposits depends on the proportion and terms of the Bank s customer deposits. The maturity term of investments in securities is calculated based on the maturity date of each type of securities. The maturity term of placements with and loans to other banks and loans to customers are based on the contractual maturity date. The actual maturity term may differ as loan agreements are often extended. The maturity of equity investments is considered as more than one year since these investments do not have specific maturity date. The maturity term of deposits and borrowings from other banks and customers deposits is determined based on either the nature of these amounts or their maturity in the contract. Vostro accounts and demand deposits are transacted as required by customers, and therefore, being classified as current accounts. The maturity term of borrowings and term deposits is determined based on the maturity date in contracts. In fact, these amounts may be revolved, and therefore, may last beyond the original maturity date. The maturity term of fixed assets is determined on the remaining useful life of assets. 38. CAPITAL AND OPERATING LEASE COMMITMENTS Capital commitments regarding constructions and purchase of office equipments Non-cancellable operating leases 31 December December ,931 2,457 due within 1 year 50,379 46,101 due within 2-5 years 121,963 84,901 due after 5 years 26,405 33, , , EVENTS AFTER THE CONSOLIDATED BALANCE SHEET DATE There have been no significant events occurring after the consolidated balance sheet date which would require adjustments or disclosures in the notes to the consolidated financial statements. 45

106 DONG A COMMERCIAL JOINT STOCK BANK AND ITS SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCAL STATEMENTS (continued) as at and for the year ended 31 December CORRESPONDING FIGURES In 2010, the Bank and its subsidiaries reclassified and presented balance of the bonus and welfare fund as a liability in the consolidated balance sheet as at 31 December 2010 in accordance with Circular No. 244/2009/TT-BTC. Accordingly, the correlated figures are reclassified as follows: Balance as previously stated Reclassification Balance as restated Liabilities 38,319,879 24,134 38,344,013 Other liabilities 1,605,448 24,134 1,629,582 In which: Bonus and welfare fund - 24,134 24,134 Owners equity 4,200,523 (24,134) 4,176,389 Reserve funds 199,138 (24,134) 175,004 In which: Bonus and welfare fund 24,134 (24,134) EXCHANGE RATES OF APPLICABLE FOREIGN CURRENCIES AGAINST VIETNAMESE DONG AT THE YEAR-END Exchange rates of applicable foreign currencies against Vietnam Dong as at 31 December are as follows: 31 December 2010 VND 31 December 2009 VND USD 18,932 18,479 EUR 27,390 26,500 GBP 32,110 29,410 CHF 21,950 17,800 JPY SGD 16,010 13,160 CAD 20,700 17,690 AUD 21,080 16,500 Prepared by: Approved by: Ms Dang Boi Quynh General Accountant Ho Chi Minh City, Vietnam 22 February 2011 Ms Vo Thi Kim Anh Chief Accountant Mr Tran Phuong Binh General Director 46

107

108 DONGA COMMERCIAL JOINT STOCK BANK Head office: 130 Phan Dang Luu St., Ward 3, Phu Nhuan Dist., HCMC, Vietnam Tel: (848) Fax: (848) @dongabank.com.vn Hotline: Swift Code: EACBVNVX