Financial statements for the year ended 31 December 2011
Corporate Information Banking Licence No 04/NHNN-GP 6 February 2002 The banking licence was issued by the State Bank of Vietnam and is valid for 20 years from the date of the banking licence. Business Registration Certificate No. 107058 24 April 2002 The Branch s Business Registration Certificate has been amended several times, the most recent of which is dated 30 December 2010. The Business Registration Certificate was issued by the Department of Planning and Investment of Ho Chi Minh City. Branch Management Ralph Wu General Manager Pai Mei Li Operation Manager (to 11 July 2011) Henry Tseng Operation Manager (from 11 July 2011) Winnie Chen Operation Manager (from 2 February 2012) Vincent Wu Head of Credit Department (to 25 March 2011) Eric Tsai Head of Credit Department (from 25 March 2011) Vu Thi Hoang Ha Head of Accounting Department Registered Office Kumho Asiana Plaza Saigon, Floor 9 39 Le Duan Street, Ben Nghe Ward District 1, Ho Chi Minh City Vietnam Auditors KPMG Limited Vietnam 1
INDEPENDENT AUDITORS REPORT To the Owners Scope We have audited the accompanying balance sheet of Chinatrust Commercial Bank, Ho Chi Minh City Branch (the Branch ) as of 31 December 2011 and the related statements of income and cash flows for the year then ended and the explanatory notes thereto which were authorised for issue by the Branch s management on 15 March 2012. These financial statements are the responsibility of the Branch s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Vietnamese Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Audit opinion In our opinion, the financial statements give a true and fair view of the financial position of as of 31 December 2011 and of its results of operations and its cash flows for the year then ended in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System for Credit Institutions stipulated by the State Bank of Vietnam and the relevant statutory requirements. KPMG Limited Vietnam Investment Certificate No: 011043000345 Audit report No: 11-01-624 Nguyen Thanh Nghi CPA No. 0304/KTV Deputy General Director Ha Vu Dinh CPA No. 0414/KTV Ho Chi Minh City, 15 March 2012 2
Balance sheet as at 31 December 2011 Form B02/TCTD Note A ASSETS I Cash on hand 3 551,780 596,940 11,492 11,301 II Balances with the State Bank of Vietnam 4 13,639,375 4,636,306 284,081 87,775 III Balances with and loans to credit institutions 5 106,579,290 132,422,857 2,219,833 2,507,030 1 Deposits 98,182,799 132,422,857 2,044,951 2,507,030 2 Loans 8,396,491-174,882 - VI Loans and advances to customers 293,459,620 298,700,312 6,112,177 5,654,995 1 Loans and advances to customers 6 295,822,461 300,858,867 6,161,390 5,695,861 2 Allowance for loans and advances to customers 7 (2,362,841) (2,158,555) (49,213) (40,866) VII Investment securities 8 717,284 777,082 14,940 14,712 2 Held-to-maturity securities 717,284 777,082 14,940 14,712 IX Fixed assets 470,570 206,774 9,801 3,915 1 Tangible fixed assets 9 470,570 206,774 9,801 3,915 a. Cost 851,252 696,467 17,730 13,186 b. Accumulated depreciation (380,682) (489,693) (7,929) (9,271) XI Other assets 1,973,345 1,460,518 41,101 27,649 2 Accrued interest and fee receivables 1,676,778 1,342,292 34,924 25,412 4 Other assets 10 296,567 118,226 6,177 2,237 TOTAL ASSETS 417,391,264 438,800,789 8,693,425 8,307,377 The accompanying notes are an integral part of these financial statements 3
Balance sheet as at Form B02/TCTD B Note LIABILITIES AND OWNERS CAPITAL LIABILITIES II Deposits and borrowings from credit institutions 11 153,221,922 192,800,000 3,191,306 3,650,090 1 Deposits 153,221,922 192,800,000 3,191,306 3,650,090 III Deposits from customers 12 179,656,151 170,556,381 3,741,878 3,228,973 VII Other liabilities 4,862,306 4,609,052 101,272 87,258 1 Accrued interest and fee payables 1,491,995 1,436,579 31,075 27,197 3 Other liabilities 13 2,829,784 2,466,490 58,939 46,695 4 Provision for off-balance sheet commitments 14 540,527 705,983 11,258 13,366 TOTAL LIABILITIES 337,740,379 367,965,433 7,034,456 6,966,321 OWNERS CAPITAL VIII Capital and reserves 15 1 Allocated capital 50,000,000 50,000,000 1,041,400 946,600 2 Reserves 4,454,104 3,131,775 92,770 59,291 5 Retained profits 25,196,781 17,703,581 524,799 335,165 TOTAL CAPITAL 79,650,885 70,835,356 1,658,969 1,341,056 TOTAL LIABILITIES AND OWNERS CAPITAL 417,391,264 438,800,789 8,693,425 8,307,377 The accompanying notes are an integral part of these financial statements 4
Balance sheet as at Form B02/TCTD OFF BALANCE SHEET ITEMS I Contingent liabilities 44,224,105 72,710,719 921,100 1,376,559 1 Unutilised letters of credit 38,080,036 66,052,252 793,131 1,250,501 2 Guarantees 6,144,069 6,658,467 127,969 126,058 II Other commitments - 18,042,896-341,588 1 Undrawn loan commitments - 18,042,896-341,588 Prepared by: Approved by: Vu Thi Hoang Ha Head of Accounting Department Ralph Wu General Manager The accompanying notes are an integral part of these financial statements 5
Statement of income for the year ended 31 December 2011 Form B03/TCTD Note 2011 2010 2011 2010 1 Interest and similar income 16 23,038,223 15,107,514 479,840 286,016 2 Interest and similar expenses 16 (8,276,178) (5,371,937) (172,376) (101,702) I Net interest income 16 14,762,045 9,735,577 307,464 184,314 3 Fee and commission income 17 2,077,778 1,899,211 43,276 35,956 4 Fee and commission expenses 17 (186,201) (182,268) (3,878) (3,451) II Net fee and commission income 17 1,891,577 1,716,943 39,398 32,505 III Net gain from trading of foreign currencies 18 1,297,481 1,216,539 27,024 23,032 VI Other (expense)/income - net (48,501) 6,784 (1,010) 128 VIII Operating expense 19 (6,123,244) (4,399,281) (127,535) (83,287) IX Profit before allowance and provision expenses 11,779,358 8,276,562 245,341 156,692 X Allowance and provision expenses (38,829) (380,000) (809) (7,194) XI Profit before tax 11,740,529 7,896,562 244,532 149,498 7 Income tax expense current 20 (2,925,000) (2,033,000) (60,922) (38,489) XII Total income tax expenses 20 (2,925,000) (2,033,000) (60,922) (38,489) XIII Net profit after tax 8,815,529 5,863,562 183,610 111,009 Prepared by: Approved by: Vu Thi Hoang Ha Head of Accounting Department Ralph Wu General Manager The accompanying notes are an integral part of these financial statements 6
Statement of cash flows for the year ended 31 December 2011 Form B04/TCTD 2011 2010 2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES 01 Interest and similar income received 22,694,067 15,945,690 472,672 301,885 02 Interest and similar expenses paid (8,220,762) (4,961,781) (171,222) (93,936) 03 Net fee and commission income received 1,891,577 1,716,943 39,398 32,505 04 Net receipts from foreign exchange and securities trading activities 1,366,949 1,261,791 28,471 23,888 05 Other income received 447 6,784 9 128 07 Salaries and operating expenses paid (5,783,228) (4,883,839) (114,525) (92,461) 08 Income tax paid (3,051,187) (1,567,386) (63,550) (29,674) Changes in operating assets 8,897,863 7,518,202 191,253 142,335 09 Balances with and loans to credit institutions (8,396,491) - (174,882) - 12 Loans and advances to customers 5,036,406 (68,627,917) 104,898 (1,299,264) 14 Other assets (178,341) 54,479 (3,714) 1,031 Changes in operating liabilities 15 Deposits and borrowings from credit institutions (39,578,078) 75,637,643 (824,332) 1,431,972 17 Deposits from customers 9,099,770 48,312,206 189,530 914,647 21 Other liabilities 229,414 (462,990) (1,150) (8,765) I NET CASH FLOWS FROM OPERATING ACTIVITIES (24,889,457) 62,431,623 (518,397) 1,181,956 The accompanying notes are an integral part of these financial statements 7
Statement of cash flows for the year ended Form B04/TCTD 2011 2010 2011 2010 CASH FLOWS FROM INVESTING ACTIVITIES 01 Payment for purchase of fixed assets (392,692) (50,447) (8,179) (955) II NET CASH FLOWS FROM INVESTING ACTIVITIES (392,692) (50,447) (8,179) (955) CASH FLOWS FROM FINANCING ACTIVITIES 01 Proceeds from capital contribution - 35,000,000-662,620 III NET CASH FLOWS FROM FINANCING ACTIVITIES - 35,000,000-662,620 IV V VI NET CASH FLOWS DURING THE YEAR (25,282,149) 97,381,177 (526,577) 1,843,620 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 137,656,103 40,274,926 2,606,106 722,572 FOREIGN EXCHANGE TRANSLATION DIFFERENCE - - 260,995 39,914 VII CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR (NOTE 21) 112,373,954 137,656,103 2,340,524 2,606,106 Prepared by: Approved by: Vu Thi Hoang Ha Head of Accounting Department Ralph Wu General Manager The accompanying notes are an integral part of these financial statements 8
31 December 2011 These notes form an integral part of, and should be read in conjunction with, the accompanying financial statements. 1. Reporting Entity (the Branch ) is a foreign bank branch licensed in Vietnam of Chinatrust Commercial Bank, incorporated in Taiwan. The principal activity of the Branch is to carry out banking activities under Banking Licence No. 04/NHNN-GP issued by the State Bank of Vietnam ( SBV ) on 6 February 2002. The banking licence is valid for 20 years from the banking licence date. As at 31 December 2011, the Branch had 64 employees (: 60 employees). 2. Summary of significant accounting policies The following significant accounting policies have been adopted by the Branch in the preparation of these financial statements. (a) Basis of financial statement preparation The financial statements, expressed in United States Dollars ( ), have been prepared in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System for Credit Institutions stipulated by the State Bank of Vietnam and the relevant statutory requirements. These accounting policies may differ in some material respects from International Financial Reporting Standards and the generally accepted accounting principles and standards of other countries. Accordingly, the accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with generally accepted accounting principles and practices in countries or jurisdictions other than Vietnam. Furthermore, their utilisation is not designed for those who are not informed about Vietnam s accounting principles, procedures and practices. The financial statements, except for the statement of cash flows, are prepared on the accrual basis using the historical cost concept. The statement of cash flows is prepared using the direct method. These accounting policies have been consistently applied by the Branch and are consistent with those used in the previous year. (b) Annual accounting period The annual accounting period of the Branch is from 1 January to 31 December. 9
(c) Adoption of Circular No. 210/2009/TT-BTC of the Ministry of Finance on presentation and disclosures of financial instruments Effective from 1 January 2011, the Branch adopted the requirements of Circular No. 210/2009/TT-BTC of the Ministry of Finance on presentation and disclosures of financial instruments ( Circular 210 ) prospectively. The adoption of Circular 210 did not have a material effect on the measurement or presentation of financial instruments in the Branch s financial statements. The financial statements disclosures specified in Circular 210 are not required for corresponding figures due to the prospective application. (d) Foreign currency transactions Monetary assets and liabilities denominated in currencies other than are translated into at rates of exchange ruling at the reporting date. Transactions in currencies other than during the year have been translated into at rates approximating those ruling on transaction dates. All realised and unrealised foreign exchange differences are recorded in the statement of income in accordance with Vietnamese Accounting Standard No. 10 ( VAS 10 ) The Effects of Changes in Foreign Exchange Rates. For the purposes of preparation of the equivalent financial statements in Vietnam Dong ( VND ), the financial statements are translated at the rate of exchange ruling at the reporting date. Differences arising on this translation are recorded as a movement in the capital and reserves (Note 15). (e) Presentation of financial instruments in accordance with Circular 210 The Branch classifies financial instruments at their initial recognition as financial assets, financial liabilities or equity in accordance with the nature and definition of financial instruments in Circular 210 as follow: (i) Financial assets According to Circular 210, financial assets are classified into one of the following categories: Financial assets at fair value through profit or loss A financial asset at fair value through profit or loss is a financial asset that meets either of the following conditions: It is classified as held for trading. A financial asset is classified as held for trading if: - acquired or incurred principally for the purpose of selling or repurchasing it in the near term; - there is evidence of a recent pattern of short-term profit-taking; or - a derivative (except for a derivative that is financial guarantee contract or a designated and effective hedging instrument). Upon initial recognition, it is designated by the Branch as at fair value through profit or loss. 10
Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and a fixed maturity that the Branch has the positive intention and ability to hold to maturity, other than: those that the Branch on initial recognition designates as at fair value through profit or loss; those that the Branch designates as available-for-sale; and those that meet the definition of loans and receivables. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those: that the Branch intends to sell immediately or in the near term, which are classified as held for trading, and those that the entity on initial recognition designates as at fair value through profit or loss; that the Branch on initial recognition designates as available-for-sale; or for which the Branch may not recover substantially all of its initial investment, other than because of credit deterioration, which are classified as available-for-sale. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale or that are not classified as: loans and receivables; held-to-maturity investments; or financial assets at fair value through profit or loss. As at 31 December 2011, financial assets of the Branch include: Loans and receivables Cash on hand Balances with the State Bank of Vietnam Balances with and loans to other credit institutions Loans and advances to customers Other receivables Held-to-maturity investments Held-to-maturity investment securities 11
(ii) Financial liabilities According to Circular 210, financial liabilities are classified into one of the following categories: Financial liabilities at fair value through profit or loss A financial liability at fair value through profit or loss is a financial liability that meets either of the following conditions: It is classified as held for trading. A financial liability is classified as held for trading if: - acquired or incurred principally for the purpose of selling or repurchasing it in the near term; - there is evidence of a recent pattern of short-term profit-taking; or - a derivative (except for a derivative that is financial guarantee contract or a designated and effective hedging instrument). Upon initial recognition it is designated by the Branch as at fair value through profit or loss. Financial liabilities carried at amortised costs Financial liabilities which are not classified as financial liabilities at fair value through profit or loss are classified as financial liabilities carried at amortised costs. As at 31 December 2011, financial liabilities of the Branch include: Financial liabilities carried at amortised costs Amounts due to the State Bank of Vietnam Deposits and borrowings from credit institutions Deposits from customers Interest and fees payable Other liabilities (f) Cash and cash equivalents Cash and cash equivalents include cash on hand, balances with the State Bank of Vietnam, deposits with credit institutions and valuable papers with original terms to maturity of not exceeding three months. 12
(g) Loans and advances to customers Loans and advances to customers are stated at cost less allowance in the financial statements. Decision No. 493/2005/QD-NHNN dated 22 April 2005 issued by the State Bank of Vietnam, which was amended and supplemented by Decision No. 18/2007/ QD-NHNN dated 25 April 2007 issued by the State Bank of Vietnam, requires specific allowance to be made for loans and advances to customers on a quarterly basis based on loan groups. The specific allowance disclosed at the reporting date (i.e. 31 December) is determined utilising the following allowance rates against principal outstanding as at 30 November less allowed value of collateral as follows: Allowance Group Overdue status rate 1 Current Current loans or overdue loans less than 10 days. 0% 2 3 Special mention Substandard 4 Doubtful 5 Loss Loans being overdue between 10 days to 90 days; or Loans having rescheduled terms of repayments for the first time (if customers are assessed as being capable of repaying both principal and interest according to the first revised terms of repayments for the case of enterprises and organisational customers). Loans being overdue between 91 days and 180 days; Loans having rescheduled terms of repayments for the first time except for the loans with revised terms of repayments classified into the above mentioned Group 2; or Loans having exempt or reduced interest because customers are not able to pay the interest according to contracts. Loans being overdue between 181 days and 360 days; Loans having rescheduled terms of repayments for the first time and being overdue less than 90 days according to the first rescheduled terms of repayments; or Loans having rescheduled terms of repayments for the second time. Loans being overdue more than 360 days; Loans having rescheduled terms of repayments for the first time and being overdue from 90 days or more according to the first rescheduled terms of repayments; Loans having rescheduled terms of repayments for the second time and being overdue according to the second reschedule terms of repayments; Loans having rescheduled terms of repayments for the third time; or Blocked loans, or loans awaiting for settlements. In addition, the Branch is required to make a general allowance of 0.75% of outstanding loans that are classified from Group 1 to Group 4 as at the reporting date. Such general allowance is required to be made in full within 5 years from the effective date of Decision No. 493/2005/QD-NHNN. As at the reporting date, the Branch provided a general allowance of 0.75% of the above balances as at 30 November 2011 (31 December 2010: 0.75% of the above balances as at 30 November 2010). In accordance with the requirements of this Decision, loans and advances to customers are written-off against allowance when loans and advances to customers have been classified to Group 5 or when borrowers have declared bankruptcy or dissolved (for borrowers being organisations, enterprises) or borrowers have been dead or missing (for borrowers being individuals). 5% 20% 50% 100% 13
(h) Provision for off-balance sheet commitments In accordance with Decision No. 18/2007/QD-NHNN, the Branch is also required to classify guarantees, acceptances and loan commitments which are irrevocable and unconditional into relevant groups and make specific provisions accordingly. In addition, the Branch is required to make a general provision of 0.75% of total outstanding guarantees, letters of credit and loan commitments which are irrevocable and unconditional as at the reporting date. Such general provision is required to be made in full within 5 years from the effective date of Decision No. 493/2005/QD-NHNN. As at the reporting date, the Branch provided a general provision of 0.75% of the above balances as at 30 November 2011 (31 December 2010: 0.75% of the above balances as at 30 November 2010). (i) Held-to-maturity investment securities Held-to-maturity investment securities are debt securities with fixed or determinable payment and fixed maturities where the Branch's management has the positive intention and ability to hold until maturity. Held-to-maturity investment securities are stated at cost at acquisition. They are subsequently measured at the lower of cost and market value if there is indication of long-term diminution in value. Premiums and discounts arising from purchases of held-to-maturity securities are amortised to the statement of income using straight-line method over the period from the acquisition dates to maturity dates. (j) (i) Tangible fixed assets Cost Tangible fixed assets are stated at cost less accumulated depreciation. The initial cost of a tangible fixed asset comprises of its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditure incurred after the tangible fixed assets have been put into operation, such as repairs and maintenance and overhaul costs, is charged to the statement of income in the year in which the costs are incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of tangible fixed assets beyond its originally assessed standard of performance, the expenditure is capitalised as an additional cost of tangible fixed assets. (ii) Depreciation Depreciation is computed on a straight-line basis over the estimated useful lives of items of tangible fixed assets. The estimated useful lives are as follows: Leasehold improvements 5 years Office equipment 3-5 years (k) Interest subsidy During the year, having implemented policies of the Prime Minister and the SBV on interest subsidy program in which the qualified customers were subsidised 2% interest rate on medium-term and long-term loans granted by the Branch, the interest income portion representing this 2% per annum was recorded as receivable from the State. 14
(l) Derivative financial instruments Derivatives are recorded in the balance sheet account at contract value on the date when a derivative contract is entered into and revalued subsequently at foreign exchange rates at the reporting date. Gains or losses from realisation of derivatives are recognised in the statement of income. Unrealised gains or losses are recognised in the statement of income at the reporting date. (m) Provisions A provision is recognised if, as a result of a past event, the Branch has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. (n) Other payables Other payables are stated at their cost. (o) Provision for severance allowance Under the Vietnamese Labour Code, when employees who have worked for 12 months or more ( eligible employees ) voluntarily terminates his/her labour contract, the employer is required to pay the eligible employees severance allowance calculated based on years of service and employees compensation at termination. Provision for severance allowance has been provided based on employees years of service and their current salary level. Pursuant to Law on Social Insurance, effective from 1 January 2009 the Company and its employees are required to contribute to an unemployment insurance fund managed by the Vietnam Social Insurance Agency. The contribution to be paid by each party is calculated at 1% of the lower of the employees basic salary and 20 times the general minimum salary level as specified by the Government from time to time. With the implementation of unemployment insurance scheme, the Company is no longer required to provide severance allowance for the service period after 1 January 2009. However, severance allowance to be paid to the existing eligible employees as of 31 December 2008 will be determined based on the eligible employees years of service as of 31 December 2008 and their average salary for the six-month period prior to the termination date. (p) Allocated capital Allocated capital is classified as equity. 15
(q) Reserves According to Decree No. 146/2005/ND-CP dated 23 November 2005 issued by the Government of Vietnam, the Branch is required to make the following allocations before distribution of profits: Annual allocation Maximum balance Reserve to supplement allocated capital : 5% of profit after tax Allocated capital Financial reserve : 10% of remaining profit after tax 25% allocated capital The purpose of the financial reserve is to cover losses incurred during the normal course of business. This reserve and the reserve to supplement allocated capital are required by law and are non-distributable. (r) Revenue recognition Income is recognised in the statement of income on an accruals basis, except for interest on loans classified in Group 2 to Group 5 as defined in Note 2(h) which is recognised upon receipt. Fees and commissions are recognised in the statement of income on an accruals basis. (s) Interest expense Interest expense is recognised in the statement of income on an accruals basis. (t) Operating lease payments Payments made under operating leases are recognised in the statement of income on a straight-line basis over the term of the lease. Lease incentives received are recognised in the statement of income as an integral part of the total lease expense. (u) Taxation Income tax on the profit or loss for the year comprises of current and deferred tax. Income tax is recognised in the statement of income except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted as at the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. 16
(v) Related parties Related parties include the Head Office and its subsidiaries and associates. (w) Off-balance sheet items (i) Foreign Exchange Contracts The Branch enters into foreign exchange forwards and swaps which enable customers to transfer, modify or reduce their foreign exchange or other market risks and also trades these products for its own account. Forward contracts are commitments to either purchase or sell a designated currency at a specific future date for a specific exchange rate and are settled in cash. Swap contracts are commitments to settle in cash at a future date based on differentials between specified exchange rates, as applied to a notional principal amount. Forward and swap contracts are accounted in accordance with the accounting policies as described in Note 2(m). (ii) Commitments and contingent liabilities At any time, the Branch has outstanding commitments to extend credit. These commitments take the form of approved loans and overdraft facilities. The Branch also provides financial guarantees and letters of credit to guarantee the performance of customers to third parties. Many of the contingent liabilities and commitments will expire without being advanced in whole or in part. Therefore the amounts do not represent expected future cash flows. (x) Nil balances Items or balances required by the Decision No. 16/2007/QD-NHNN dated 18 April 2007 issued by the Governor of the State Bank of Vietnam on promulgation of financial statement reporting for credit institutions that are not shown in these financial statements indicate nil balances. 3. Cash on hand Cash on hand in VND 255,891 350,429 5,330 6,634 Cash on hand in foreign currencies 295,889 246,511 6,162 4,667 551,780 596,940 11,492 11,301 17
4. Balances with the State Bank of Vietnam These consist of a compulsory reserve for liquidity and a current account. Under the State Bank of Vietnam s regulations relating to the compulsory reserve, banks are permitted to maintain a floating balance for the compulsory reserve requirement ( CRR ). The monthly average balance of the reserve must not be less than CRR rates multiply with preceding month s average balances of deposits in scope as follows: Deposits in scope CRR rates Preceding month's average balances of: Deposits in foreign currencies with term of less than 12 months 8% 4% Deposits in foreign currencies with term of and more than 12 months 6% 2% Deposits in VND with term of less than 12 months 3% 3% Deposits in VND with term of and more than 12 months 1% 1% Deposits in foreign currencies from oversea banks 1% - Compulsory reserve and current account 13,639,375 4,636,306 284,081 87,775 Effective year-end annual interest rates are as follows: Deposits in VND Within the compulsory reserve requirement 1.20% 1.20% Exceeding the compulsory reserve requirement 0% 0% Deposits in Within the compulsory reserve requirement 0% 0% Exceeding the compulsory reserve requirement 0.05% 0.10% 18
5. Deposits with and loans to credit institutions Current accounts Current accounts in VND 333,403 423,572 6,944 8,019 Current accounts in foreign currencies 3,373,307 5,819,695 70,259 110,179 Term deposits Term deposits in VND 42,922,988 50,179,590 894,000 950,000 Term deposits in foreign currencies 51,553,101 76,000,000 1,073,748 1,438,832 Loans to credit institutions Loans in VND 3,396,491-70,742 - Loans in foreign currencies 5,000,000-104,140-106,579,290 132,422,857 2,219,833 2,507,030 Effective year-end annual interest rates are as follows: Current accounts in VND 3% 3% Current accounts in 0.1% - 0.6% 0.25% - 0.5% Term deposits in VND 11% - 13.5% 10% - 13.5% Term deposits in 0.20% - 0.57% 0.34% - 0.55% Loans in VND 16.65% - Loans in 2.56% - 19
6. Loans and advances to customers Loans to local corporates and individuals 292,921,762 300,417,838 6,100,974 5,687,511 Bills bought or valuable papers discounted 2,900,699 441,029 60,416 8,350 295,822,461 300,858,867 6,161,390 5,695,861 Loan portfolio by loan group is as follows: Current 295,822,461 300,858,867 6,161,390 5,695,861 Loan portfolio by term is as follows: Short term 210,957,874 204,883,216 4,393,830 3,878,850 Medium term 53,915,066 68,944,954 1,122,943 1,305,266 Long term 30,949,521 27,030,697 644,617 511,745 295,822,461 300,858,867 6,161,390 5,695,861 20
Loan portfolio by industry sectors is as follows: Agriculture, forestry and aquatics 12,703,501 31,020,406 264,589 587,278 Processing and manufacturing 231,616,947 209,863,427 4,824,117 3,973,136 Electricity, oil and gas supplying 11,908,161 14,336,570 248,023 271,420 Construction 39,593,852 45,638,464 824,661 864,027 295,822,461 300,858,867 6,161,390 5,695,861 Loan portfolio by type of borrower is as follows: State owned enterprises 30,258,965 31,455,822 630,234 595,522 Foreign invested companies 241,007,964 249,147,587 5,019,714 4,716,863 Joint venture companies 13,576,160 15,249,909 282,764 288,711 Limited liability companies 5,576,964 4,600,250 116,157 87,092 Individuals and others 5,402,408 405,299 112,521 7,673 295,822,461 300,858,867 6,161,390 5,695,861 Effective year-end annual interest rates are as follows: Loans and advances in VND 5.00% - 19.50% 12.80% - 19.50% Loans and advances in 1.79% - 6.60% 1.48% - 8.70% 21
7. Allowance for loans and advances to customers Allowance for loans and advances to customers consists of: General allowance 2,362,841 2,158,555 49,213 40,866 Movements in general allowance for loans and advances to customers were as follows: Opening balance 2,158,555 2,041,795 40,866 36,632 Allowance made during the year 204,286 116,760 4,255 2,211 Foreign exchange translation difference - - 4,092 2,023 Closing balance 2,362,841 2,158,555 49,213 40,866 Movements in specific allowance for loans and advances to customers were as follows: Opening balance - 316,760-5,683 Reversal made in the year - (316,760) - (5,997) Foreign exchange translation difference - - - 314 Closing balance - - - - 8. Investment securities The held-to-maturity government bonds have a coupon rate of 7.8% per annum and a term to maturity of 5 years from 19 March 2007 to 19 March 2012 and are pledged with the SBV. 22
9. Tangible fixed assets Leasehold improvements Office equipment Total Cost Opening balance 206,310 490,157 696,467 Additions 365,596 27,096 392,692 Disposal (206,310) (31,597) (237,907) Closing balance 365,596 485,656 851,252 Closing balance () 7,615 10,115 17,730 Accumulated depreciation Opening balance 143,003 346,690 489,693 Charge for the year 45,866 53,693 99,559 Disposal (177,388) (31,182) (208,570) Closing balance 11,481 369,201 380,682 Closing balance () 239 7,690 7,929 Net book value Opening balance 63,307 143,467 206,774 Closing balance 354,115 116,455 470,570 Closing balance () 7,376 2,425 9,801 Included in the costs are fixed assets costing 199,879 (: 219,290) which have been fully depreciated as of 31 December 2011, but are still in active use. 23
10. Other assets Deposit for office rental 219,976 76,299 4,582 1,444 Prepaid expenses 39,370 36,113 820 683 Deductible value added tax 35,209 2,187 733 41 Other receivables 2,012 3,627 42 69 296,567 118,226 6,177 2,237 11. Deposits and borrowings from credit institutions Demand deposits Demand deposits in VND 137,547-2,865 - Demand deposits in foreign currencies 59,565-1,240 - Term deposits Term deposits in VND 1,440,369-30,000 - Term deposits in 151,584,441 192,800,000 3,157,201 3,650,090 153,221,922 192,800,000 3,191,306 3,650,090 Effective year-end annual interest rates are as follows: Demand deposits in VND 0.5% - Demand deposits in foreign currencies 0.05% - Term deposits in VND 10.50% - Term deposits in 0.25% - 3.2% 0.24% - 0.65% 24
12. Deposits from customers Current accounts Current accounts in VND 30,043,518 31,104,400 625,746 588,868 Current accounts in foreign currencies 40,943,828 50,720,214 852,778 960,235 Term deposits Term deposits in VND 51,386,623 59,604,418 1,070,281 1,128,431 Term deposits in foreign currencies 57,282,182 29,127,349 1,193,073 551,439 179,656,151 170,556,381 3,741,878 3,228,973 Deposits from customers by type of customers are as follows: Economic entities 155,928,541 149,713,564 3,247,679 2,834,377 Individuals 23,727,610 20,842,817 494,199 394,596 179,656,151 170,556,381 3,741,878 3,228,973 Effective year-end annual interest rates are as follows: Current accounts in VND 0.5% 0.5% Current accounts in 0.05% 0.05% Term deposits in VND 6% - 13.5% 4% - 12.2% Term deposits in 0.4% - 2.0% 0.35% - 1% 25
13. Other liabilities Management fee payable to Head office 1,800,440 1,516,530 37,500 28,711 Taxes payable (i) 433,398 562,028 9,027 10,640 Payable to employees 366,232 134,048 7,628 2,538 Provision for severance allowance (ii) 80,400 72,128 1,675 1,366 Remittance payables 68,672 173,207 1,430 3,279 Other payables 80,642 8,549 1,679 161 2,829,784 2,466,490 58,939 46,695 (i) Taxes payable: Corporate income tax 395,632 521,819 8,240 9,879 Value added tax 12,049 14,393 251 272 Personal income tax - 278-6 Other taxes 25,717 25,538 536 483 433,398 562,028 9,027 10,640 (ii) Movements in provision for severance allowance were as follows: Opening balance 72,128 69,485 1,366 1,247 Provision made during the year 11,730 14,847 244 281 Provision utilised during the year (3,458) (12,204) (72) (231) Foreign exchange translation difference - - 137 69 Closing balance 80,400 72,128 1,675 1,366 26
14. Provision for off-balance sheet commitments Movements in general provision for off-balance sheet commitments were as follows: Opening balance 705,983 125,983 13,366 2,260 Provision made during the year - 580,000-10,981 Provision reversed during the year (165,456) - (3,446) - Foreign exchange translation difference - - 1,338 125 Closing balance 540,527 705,983 11,258 13,366 15. Capital and reserves Statement of changes in equity Allocated capital Reserve to supplement allocated capital Financial reserve Retained profits Total Balance at 1 January 2010 15,000,000 765,856 1,486,385 12,719,553 29,971,794 Capital contribution 35,000,000 - - - 35,000,000 Net profit for the year - - - 5,863,562 5,863,562 Transfer to reserves - 293,178 586,356 (879,534) - Balance at 1 January 2011 50,000,000 1,059,034 2,072,741 17,703,581 70,835,356 Net profit for the year - - - 8,815,529 8,815,529 Transfer to reserves - 440,776 881,553 (1,322,329) - Balance at 31 December 2011 50,000,000 1,499,810 2,954,294 25,196,781 79,650,885 27
Allocated capital Reserve to supplement allocated capital Financial reserve Retained profits (Note 2(e)) Total Balance at 1 January 2010 269,115 13,740 26,668 228,201 537,724 Capital contribution 662,620 - - - 662,620 Net profit for the year - - - 111,009 111,009 Transfer to reserves - 5,550 11,101 (16,651) - Foreign exchange translation difference 14,865 760 1,472 12,606 29,703 Balance at 1 January 2011 946,600 20,050 39,241 335,165 1,341,056 Net profit for the year - - - 183,610 183,610 Transfer to reserves - 9,181 18,361 (27,541) - Foreign exchange translation difference 94,800 2,008 3,930 33,565 134,303 Balance at 31 December 2011 1,041,400 31,238 61,532 524,799 1,658,969 28
Allocated capital As at 31 December 2011 and 2010, the Branch s investor and its respective contributed capital was as follows: Allocated capital Ownership % Chinatrust Commercial Bank 50,000,000 1,041,400 100% The Branch s capital has been fully contributed by Chinatrust Commercial Bank, which is incorporated in Taiwan. The ultimate parent company is Chinatrust Financial Holding Co., Ltd, which is incorporated in Taiwan. Movements in allocated capital during the year were as follows: Opening balance 50,000,000 15,000,000 946,600 269,115 Cash contribution by the Head Office - 35,000,000-662,620 Foreign exchange translation difference - - 94,800 14,865 Closing balance 50,000,000 50,000,000 1,041,400 946,600 29
16. Net interest income 2011 2010 2011 2010 Interest and similar income From placements and loans to credit institutions 6,074,696 2,461,485 126,523 46,601 From loans and advances to customers 16,895,554 12,572,202 351,901 238,017 From investment securities 67,973 73,827 1,416 1,398 23,038,223 15,107,514 479,840 286,016 Interest and similar expenses On deposits and borrowings from credit institutions (2,179,553) (1,164,933) (45,396) (22,055) On deposits from customers (6,096,625) (4,207,004) (126,980) (79,647) (8,276,178) (5,371,937) (172,376) (101,702) Net interest income 14,762,045 9,735,577 307,464 184,314 17. Net fee and commission income 2011 2010 2011 2010 Fee and commission income Guarantees 485,766 488,068 10,118 9,240 Settlement and cash services 996,500 829,099 20,755 15,697 Trade finance services 595,512 582,044 12,403 11,019 2,077,778 1,899,211 43,276 35,956 Fee and commission expenses Settlement and cash services (186,201) (182,268) (3,878) (3,451) Net fee and commission income 1,891,577 1,716,943 39,398 32,505 30
18. Net gain from trading of foreign currencies 2011 2010 2011 2010 Gain from foreign exchange contracts 289,794,583 96,833,799 6,035,842 1,833,258 Loss from foreign exchange contracts (288,497,102) (95,617,260) (6,008,818) (1,810,226) 1,297,481 1,216,539 27,024 23,032 19. Operating expense 2011 2010 2011 2010 Salaries and related expenses 2,110,217 1,147,901 43,952 21,732 Management fee from Head Office 1,928,769 1,495,150 40,172 28,306 Office rental 1,048,974 902,256 21,848 17,082 Tax, duties and fees 429,231 256,169 8,940 4,850 Telecommunication expenses 127,450 162,679 2,655 3,080 Depreciation of fixed assets 99,559 91,615 2,074 1,734 Tools and equipment expenses 48,447 54,607 1,009 1,034 Others 330,597 288,904 6,885 5,469 6,123,244 4,399,281 127,535 83,287 31
20. Income tax (a) Recognised in the statement of income 2011 2010 2011 2010 Current tax expense Current year 2,925,000 2,033,000 60,922 38,489 (b) Reconciliation of effective tax rate 2011 2010 Profit before tax 11,740,529 7,896,562 Tax at the Branch s tax rate 2,935,132 1,974,141 Non-deductible expenses 146,098 16,381 Deferred tax (assets)/liabilities previously unrecognised (156,230) 42,478 2,925,000 2,033,000 in () Profit before tax 244,532 149,498 Tax at the Branch s tax rate 61,133 37,374 Non-deductible expenses 3,043 310 Deferred tax (assets)/liabilities previously unrecognised (3,254) 805 60,922 38,489 (c) Applicable tax rate The Branch has an obligation to pay the government income tax at the rate of 25% of taxable profit. The income tax computation is subject to the review and approval of the tax authorities. 32
21. Cash and cash equivalents Note 2(e) Note 2(e) Cash on hand 551,780 596,940 11,492 11,301 Balances with the State Bank of Vietnam 13,639,375 4,636,306 284,081 87,775 Balances with other credit institutions with original terms of not exceeding three months 98,182,799 132,422,857 2,044,951 2,507,030 112,373,954 137,656,103 2,340,524 2,606,106 33
22. Significant transactions with related parties In the normal course of banking business, the Branch carries out transactions with related parties, mainly with the Head Office and other entities within the Group. As at the year-end and during the year, there were the following significant balances and transactions with related parties: Transactions Chinatrust Commercial Bank, (Head office) 2011 2010 2011 2010 Interest income 234,167 1,119 4,877 21 Interest expenses 844,975 339,483 17,599 6,427 Management fee expense 1,928,769 1,495,150 40,172 28,306 Payment for management fee 1,644,858 2,049,835 34,259 38,807 Chinatrust Commercial Bank, Hongkong Interest expense 409,270 474,667 8,524 8,986 Balances Chinatrust Commercial Bank, (Head office) Placements 23,553,102 71,034,846 490,564 1,344,832 Takings 78,441,584 93,000,000 1,633,781 1,760,676 Management fee payables 1,800,440-37,500 - Chinatrust Commercial Bank, Hongkong Chinatrust Commercial Bank, USA Chinatrust Commercial Bank, Singapore Takings 7,142,858 10,000,000 148,771 189,320 Nostro accounts 60,779 24,756 1,266 469 Nostro accounts 5,429 10,090 113 191 34
23. Geographical segment disclosure 31 December 2011 Loans and advances to customers Balances with and loans to credit institutions Deposits and borrowings from credit institutions Deposits from customers Domestic 295,822,461 81,001,245 67,590,882 179,656,151 Overseas - 25,578,045 85,631,040-295,822,461 106,579,290 153,221,922 179,656,151 31 December 2011 Loans and advances to customers Balances with and loans to credit institutions Deposits and borrowings from credit institutions () Deposits from customers Domestic 6,161,390 1,687,093 1,407,783 3,741,878 Overseas - 532,740 1,783,523-6,161,390 2,219,833 3,191,306 3,741,878 31 December 2010 Loans and advances to customers Balances with and loans to credit institutions Deposits and borrowings from credit institutions Deposits from customers Domestic 300,858,867 57,577,610 89,800,000 170,556,381 Overseas - 74,845,247 103,000,000-300,858,867 132,422,857 192,800,000 170,556,381 31 December 2010 Loans and advances to customers Balances with and loans to credit institutions Deposits and borrowings from credit institutions () Deposits from customers Domestic 5,695,861 1,090,060 1,700,094 3,228,973 Overseas - 1,416,970 1,949,996-5,695,861 2,507,030 3,650,090 3,228,973 35
24. Employee benefits 2011 2010 2011 2010 Total number of employees 64 60 64 60 Employees income 1. Salaries 1,417,597 789,269 29,526 14,942 2. Bonus 414,376 105,153 8,631 1,991 3. Others 278,243 253,479 5,795 4,799 4. Total (1+2+3) 2,110,216 1,147,901 43,952 21,732 5. Average annual salary 22,150 13,154 461 249 6. Average annual income 32,972 19,132 687 362 25. Obligation to State Budget Movement Opening balance Incurred Paid Closing balance Corporate income tax 521,819 2,925,000 (3,051,187) 395,632 Withholding tax 25,538 160,860 (160,681) 25,717 Value added tax 14,393 146,408 (148,752) 12,049 Personal income tax 278 667,531 (667,809) - 562,028 3,899,799 (4,028,429) 433,398 Movement Foreign Opening balance Incurred Paid exchange translation difference Closing balance Corporate income tax 9,880 60,922 (63,550) 749 8,240 Withholding tax 483 3,350 (3,347) 50 536 Value added tax 272 3,049 (3,098) 23 251 Personal income tax 5 13,903 (13,909) - - 10,640 73,831 (76,266) 822 9,027 36
26. Type and value of collateral from customers Note 2(e) Cash, notes, deposit accounts 32,741,414 29,453,297 681,938 557,610 Real estate 22,431,306 96,244,010 467,199 1,822,092 Movable assets 48,943,561 73,287,170 1,019,396 1,387,473 104,116,281 198,984,477 2,168,533 3,767,175 27. Contingent liabilities and commitments issued Financial guarantees 6,144,069 6,658,467 127,969 126,058 At sight letters of credit 38,080,036 66,052,252 793,131 1,250,501 Undrawn loan commitments - 18,402,896-341,588 44,224,105 91,113,615 921,100 1,718,147 Less: Marginal deposits - - - - 44,224,105 91,113,615 921,100 1,718,147 37
28. Disclosure of financial instruments in accordance with Circular 210 (a) Disclosure of collaterals As at 31 December 2011, there s no pledged asset for the Branch s liabilities and contingent liabilities. The Branch does not take control of collateral assets which the Branch is entitled to sell or pledge with third parties when the customers are still capable of repaying their loan balances. (b) Disclosure of fair value Circular 210 requires the disclosure of fair value measurement principles and fair value of financial assets and financial liabilities so that users of financial statements can compare the book value of these financial instruments against their fair value. However, given the lack of guidance about fair value measurement in Vietnamese Accounting Standards, the Vietnamese Accounting System for Credit Institutions stipulated by the State Bank of Vietnam and the relevant statutory requirements, which is the basis of separate financial statements preparation, the Branch does not disclose the fair value of financial assets and liabilities as required by Circular 210. (c) Disclosure of risk Credit risk arises from all transactions that give rise to actual, contingent or potential claims against any counterparty, borrower or obligor ( counterparties ). Management of credit risk Limit Setting & Risk Concentration Management: The Branch manages credit risk by lending to a diverse base of corporate customers in various industry and geographic sectors. The Branch is able to assign credit risk limits based upon credit history and industry information as well as balance exposure to country risk to prevent concentration risk. Internal Rating System: In order to monitor and evaluate credit risk properly, the Branch installed advanced internal rating systems, which helps to differentiate and categorise different credit risks. The Branch s internal rating system measures the financial as well as the non-financial aspects of each borrower and examines the impact of external economic or industry changes on each borrower before it determines each borrower s credit rating. Credit Officer Mechanism: Coupled with rating system, the Branch s Credit Officer Mechanism is also the foundation of a riskbased organization. Full credit approval of individual credit transactions must be given by at least two credit officers. They must independently approve or decline each credit request according to their respective delegated authorities. The Branch keeps credit officers compensation and performance evaluations separate from sales and marketing divisions in order to ensure the officers independence. 38
Basel II Compliance: Currently, the Branch is in the process of implementing IRB approach of Basel II Accord, which equips the Branch with proactive framework of credit risk measurement and management. Not only does the implementation comply with the incoming regulatory capital requirement, but IRB approach is also applied to regular business operations. Credit Information: To prevent severe credit events, the Branch takes advantage of abundant default data from Vietnam s Credit Information Center (CIC), which holds all credit information among companies and individuals in Vietnam. Exploited by the risk control units, the acquired data further facilitate the Branch s internal risk measurement and control by effectively scrutinizing customer-level line of credit management, solvency of secured loan borrowers as well as value changes of collaterals. Core Credit Policy: The core credit policy is drawn up for governing the lending business of the Branch. It shall serve as the highest principles for all relative departments to set up related guidelines and working manuals for maintaining the quality of lending assets. The contents include: The principle of portfolio management, customer level credit line management, credit product program management, credit risk measurement, loan review management, impaired asset management, credit transaction delegation, and compliance with laws and regulations etc. Portfolio Monitoring: For monitoring asset quality, the credit risk management units keep track of portfolio structure and development of all credit products and submit related credit reports to relevant management level(s) periodically. Those reports include: Credit portfolio review reports, relevant model validation reports and country risk exposure report, etc. Stress Testing: In order to control the extreme credit risk during economic downturns, the Branch stress tests its portfolio. We assume several economic scenarios and evaluate the impacts of portfolio structure and credit loss. Stress testing will be included as a part of limit setting management. Exposure to credit risk As at 31 December 2010, the Branch s credit risk arises principally from the Branch s credit facilities to customers, off - balance sheet commitments and balances with credit institutions. The maximum exposure to credit faced by the Branch is equal to the carrying amounts of loans and advances to customers, balances with and loans to credit institutions, unutilised letters of credit and other guarantees. The Branch s concentrations of risk are managed by client, by geographical region and by industry sector. 39