MESSAGE - Bao Viet Holdings · Total financial assets under management by Bao Viet Fund Management...

2010MESSAGE

04 Chairman’s Message

12 Key Performance Indicators

06 Report of The Chief

Executive Officer

BAO VIET – NEW FOUNDATION

Board of Directors

of Bao Viet Holdings

16

One Bao Viet - One New

Foundation

18

Bao Viet 2011-2015 Strategy20

Organizational Structure22

Core Values of Bao Viet21

Bao Viet Development

Milestones

23

Shareholders24

Strategic Partners26

Bao Viet Holdings

Supervisory Board

28

Governance Report29

SUBSIDIARIES

Bao Viet General

Insurance Corporation

Bao Viet Life Corporation

Bao Viet Commercial

Joint Stock Bank

Bao Viet Securities

Joint Stock Company

Bao Viet Investment

Joint Stock Company

Bao Viet Fund Management

Company

34

38

42

44

46

48

COMMUNITYINVOLVEMENTAND SHAREHOLDERRELATIONS

54

56

Community Involvement

30A Program

57 Investor Relations

58 Human Resources

Development

and Efficient Working

Environment Estabishment

52 Ten Highlights in 2010

FINANCIALSTATEMENTS

59

161

Vietnam Accounting

Standard

International Financial

Reporting Standard

COINVAN

One Bao Viet – One New Foundation:

The strategy to develop Bao Viet into the leading

financial-insurance institution in Vietnam is on the

basis of a new solid foundation and unified brand.

This will help the company to meet the changing and

expanding financial demands of customers and

enable it to gradually integrate into the regional and

world economy. In 2010, Bao Viet started to implement

this strategy.

BBN

CHAIRMAN’S MESSAGE

ANNUAL REPORT 2010

04BAO VIET HOLDINGS

05

The mission of Bao Viet is “To ensure the peace of mind, prosperity,

and long term benefits for our customers, investors, employees

and community.”

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Ladies and Gentlemen,

In 2010, Vietnam’s economy and, in particular, the financial-

banking sector faced many difficulties following the global

financial crisis. The year was also challenging for Bao Viet due

to high inflation, a trade deficit, exchange rate fluctuations

and volatile investment environment. Many of our customers

also experienced business constraints in this operating environment.

Under the honourable leadership of the Party and the effective

management of the Government - together with the efforts of the

business community - inflation was restrained, economic growth

was comparatively high with countries in the region, the macro-

economy was stabilized, and social welfare was maintained.

Against the backdrop of a challenging economy, Bao Viet’s Board

of Directors (BOD) carefully monitored market movements,

implemented the policies of the Party and the Government,

and steered the business to meet its 2010 targets, completing

tasks entrusted by the General Shareholders. As a result, Bao

Viet strongly overcame the obstacles to fulfill its business plan,

meeting growth, revenue and profit targets. The company

began to implement its ‘One Bao Viet - One New Foundation’

strategy to take the business to new heights.

In 2010, the total revenue of Bao Viet Holdings was VND1,259

billion, recording a growth of 36.4% which was 8.8% higher

than the plan enstrusted by shareholders. Total profit before

tax was VND887 billion. The return on charter capital for the

year 2010 was 13.6% on charter capital of VND6.267 billion and

12.5% on the new charter capital after the right issue in early

2011. With this result, Bao Viet Holdings will pay its 2010

dividend at 12% on charter capital, higher than the initial plan

of 11% that was approved at the 2010 Annual General Meeting

of Shareholders.

With the support and strategic and technical expertise of

HSBC, Bao Viet’s sole foreign strategic partner, the company

has continued to invest in projects that will deliver long-term

growth and development, according to international

standards. These projects include the establishment of a

modern and transparent corporate governance system;

investments in companywide technology projects to enable

and drive business transformation and growth; the gradual

move to a centralized management business model offering a

‘one-stop shop’; enhanced investment in people management

and brand development; and the promotion of cross-

subsidiary cooperation. Bao Viet is aiming to harness the sum

of its strengths to provide customers with comprehensive

financial-insurance products and services.

The strong fluctuation in the financial, monetary and securities

markets in recent years has resulted in many risks, especially

credit risk, and market risk related to interest rates, inflation and

exchange rates. In this context, the BOD has established a Risk

Management Block, Investment Block, and Asset Liability

Management Committee (ALCO). The operation of these new

governance mechanisms helps Holdings to consistently administer

and manage our investments through the company, enhancing

risk management and improving investment efficiency.

Bao Viet has also improved its financial capacity, completing a

private placement to increase the ownership of its strategic

partner HSBC to 18% as part of the rights issue to existing

shareholders, increasing charter capital to VND6,804 billion,

owner’s equity reached over VND10,680 billion by early 2011.

This provides important financial capacity for the future

development of Bao Viet.

Bao Viet has also finalized a five year business development

strategy (2011-2015), with the mission: “To ensure the peace

of mind, prosperity, and long term benefits for our customers,

investors, employees, and community”, and the objective: “To

become Vietnam’s leading financial–insurance group, with

solid financial strength, strategically integrating into regional

and international markets, focused on three pillars: insurance,

banking and investment.”

To achieve this mission and objective, Bao Viet will complete

the foundation phase of its development in 2011. Against this

solid foundation and under a unified brand, Bao Viet will

continue to change and develop, providing diversified

financial-insurance services and products to customers. In the

process, we will ensure Bao Viet continues to improve

customer service quality and competitiveness, and deliver

strong revenue and profit growth, to meet the expectation of

shareholders, customers and employees.

2010 was an important milestone for Bao Viet as it celebrated

its 45 years of establishment, receiving the Second-Rank

Independence Medal from the State. Bao Viet is proud to be an

insurance company with the longest history in the industry, a

pioneer in business innovation and diversification.

Bao Viet’s success since 1965 has resulted from the hard work

and creativity of our employees across the generations. We are

grateful for this contribution and also appreciate the valuable

support from our investors, customers and partners.

Bao Viet is committed to developing our business with care

and effort, ensuring that the trust that shareholders and

customers place in us is well earned.

On behalf of the BOD of Bao Viet Holdings, I would like to wish

our shareholders, customers and partners a happy, peaceful

and properous year in 2011.

Thank you very much.

Chairman

Le Quang Binh

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REPORT OF THE CHIEF EXECUTIVE OFFICER

In addition to efforts to fullfil the business plan, the key task in 2010 was

to implement the strategy to build One Bao Viet – One New Foundation

and a new unified Bao Viet brand.

ANNUAL REPORT 2010

06

Dear Shareholders, Customers and Partners,

The economy in Vietnam grew by 6.7% in 2010 – which

compared well with the average growth of the world

economy – and the macro economy was stable. Even so,

the financial, banking and investment markets still

contained many risks and irregularities, particularly following

the global financial crisis.

In this challenging environment, Bao Viet’s Board of

Management and our employees worked tirelessly to fullfil

our business plan, under the close and effective direction of

the Board of Directors (BOD).

Business performance in 2010 was positive and Bao Viet

Holdings met its targets. The total consolidated revenue of

Holdings was VND12,863 billion (+21.8% compared to

2009); including revenues from insurance activities that

reached VND8,551 billion (+12%) and revenues from

financial activities that reached VND3,079 billion (+28%).

The consolidated profit before tax (PBT) of Bao Viet was

VND1,255 billion, from which profit after tax (PAT)

amounted to VND953 billion (+6.8%).

Revenue from the core insurance businesses amounted to

66% of the total consolidated revenue. This ratio decreased

from 72% in 2009 due to the improved contribution from

our banking and financial businesses.

The total revenue of the parent company, Bao Viet

Holdings, was VND1,259 billion, 108.8% of plan. Total PAT

was VND852 billion.

Holdings’ revenue from financial investments was VND521

billion (+34%), accounting for 41% of the total revenue of

Holdings. This strong growth was due to the additional

investment capital after the private placement to HSBC.

The detailed business results are explained as follows.

General Insurance

Revenue from non-life insurance reached VND4,574 billion

(+14.7% compared to 2009), accounting for 53% of Bao

Viet’s total revenue from insurance activities. Non-life

insurance profits attributable to the parent company, Bao

Viet Holdings, was VND198 billion (+32%), accounting for

15.7% of the revenue at Holdings.

In 2010, the non-life insurance market grew by approxi-

mately 23% and this increased competition significantly.

The new non-life insurance strategy of growth and

efficiency for general insurance resulted in an industry-

topping profit in Vietnam in 2010 (VND73 billion). Bao Viet

has maintained its position as the market leader with 24.6%

market share.

Life Insurance

Total revenues in the life insurance business reached

VND4,046 billion (+9.2% compared to 2009), accounting

for 47% of the total consolidated revenue of the group. Life

insurance profit transferred to the parent company was

VND402 billion (+23%), accounting for 32% of the revenue

at Holdings.

Significant changes were implemented in the organizational

model of Bao Viet Life in 2010 to improve its competitiveness.

This included a restructure of the life business to a centralized

management model, improvements in training and the

professionalism of the distribution network; improvements

in customer service quality, and the development of

information technology systems to support business

activities.

BAO VIET HOLDINGS

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Investment

The total consolidated financial assets under management

of Bao Viet at the end of 2010 were VND39,333 billion

(+34% compared to 2009). Total financial assets under

management by Bao Viet Fund Management Company was

VND19,966 billion (+13.6%). The financial portfolio of Bao

Viet was dominated by bonds, accounting for 50%. The

proportion of investments in term deposits accounted for

40%, the proportion of investment in equities was below

10% of the total investment portfolio.

In response to the volatile financial market in 2010, Bao Viet

focused on improving our investment governance. This

included the establishment of the Asset Liability

Management Committee, and enforcing improved

investment procedures at Holdings and the subsidiaries.

Banking

After two years in operation, the banking business of Bao

Viet has made huge progress in growing and servicing its

young network. The bank's network has been expanded to

26 transaction offices. The development of Bao Viet’s

banking business has helped to transform the company

into a comprehensive financial group. The company is now

able to provide customers a diversified package of financial

services in the fields of insurance, banking and investment.

Bao Viet’s banking business is growing. Revenue from

banking activities has contributed 7.4% to the total

consolidated revenues of the group in 2010 (+ 3.4%). Profit

from banking also contributed 7% to the PAT of the parent

company.

Securities and Brokerage

The securities business had a difficult year in 2010 due to

volatility and instability in the market. The company has

focused on strengthening its organizational structure and

improving the quality of customer service. It is also

enhancing its information technology infrastructure and

improving risk management to meet sustainable growth

targets in the future.

Real Estate and Property Development and Management

Bao Viet is managing its property porfolio and developing

new projects for customers. In 2010, the Bao Viet Commercial

Building in 233 Dong Khoi, Ho Chi Minh City opened,

contributing to the revenue of Bao Viet Holdings. Some

other key property projects of Bao Viet include the building

in 7 Ly Thuong Kiet Street and Bao Viet –SCIC Financial

Tower in Tran Duy Hung Road - Hanoi.

ONE BAO VIET – ONE NEW FOUNDATION

In addition to efforts to fullfil the business plan,

the key task in 2010 was to imlement the strategy

to build One Bao Viet – One New Foundation and

a new unified Bao Viet brand.

Improvements in Corporate Governance

Bao Viet Holdings continues to develop and improve the

governance structure of Holdings and the subsidiaries,

according to international standards. The Audit Committee

was strengthened to improve its effectiveness in supporting

Bao Viet’s BOD in risk control. As previously mentioned, the

Asset Liability Management Committee was established to

promote efficiency in balance sheet management,

investment and liquidity in the group.

Bao Viet prepared and published financial statements

according to both Vietnam Accounting Standards (VAS)

and IFRS in order to strengthen openess and transparency.

Innovation in Management and Information Technology

Bao Viet has invested around USD25 million in information

technology projects. In 2010, Bao Viet introduced professional

software in life insurance, securities, banking, and accounting,

delivering a consistent IT infrastructure within the group.

Currently, a number of key projects in the areas of non-life

insurance, fund management and technology infrastructure

are still being expeditiously implemented.

The IT development plan is important to create the necessary

technological infrastructure to transform the business

model towards centralized management and a ’one-stop

shop’. This will help to enhance the professionalism of tools

and faciliate improvements in customer service quality.

After finishing Phase II of the Technical Support and

Capability Transfer Agreement (TSCTA) between Bao Viet

and HSBC Insurance (Asia-Pacific) Holdings Limited, Phase

III is being carried out in a number of areas: actuary,

information technology, finance, marketing and communi-

cations, risk management, human resources, insurance,

and banking. This will help to improve and enhance

management quality in key areas.

Investment in Human Resources

In the implementation of Bao Viet’s human resources

development strategy, the company has organized many

training courses outlined in the company’s learning map.

Bao Viet Holdings is also implementing projects on salary

and remuneration policy reform and performance appraisals

in subsidiaries. Great attention is paid to the recruitment of

new employees, with a focus on skills, expertise and

professionalism.

In addition, the introduction of HSBC experts in embedded

leadership roles across Bao Viet has been an important

factor in improving standards, quality and excellence at Bao

Viet. A new governance model, the improving quality of our

workforce, and a performance-based remuneration and

assessment policy are all essential elements to the future

success of Bao Viet.

Brand Development

To begin the process of building a unified brand, that joins

up the collective value of the group, Bao Viet Holdings

launched a new brand identity in January 2010.

Bao Viet will continue to intensively and extensively carry

out the brand development strategy to better serve our

customers, and improve our competitiveness, transparency

and trust among shareholders, employees and community.

ANNUAL REPORT 2010

08

21.8%

VND Billion

12,863Total Consolidated Revenues

33%

VND Billion

44,768Total Consolidated Assets

12 billion

VND Billion

1,255Consollidated Profit before Tax

36%

VND Billion

1,259Total Revenues of Holdings

45 billion

VND Billion

852Profit after Tax of Holdings

18.7%

VND Billion

6,804Charter Capital of Holdings

BAO VIET HOLDINGS

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Modernization of the IT system: Bao Viet promotes the

consolidation of a centralized and modern IT system by

bringing into operation international software in life,

non-life, finance, investment, and by developing customer

database applications that bring into full play the strength

and coordination among subsidiaries under the ’financial

supermarket’ model.

Human Resources Development: The focus on creating a

professional and effective working environment will help

employees to increase their productivity and creativity. Bao

Viet will conduct a range of training courses to develop our

people, and apply market-oriented salary and remuneration

policy, developing a performance-based working culture.

Brand Development: The group will continue to build a

strong and unified brand, strengthen internal and external

communications capability, and conduct marketing

activities to enhance the image and prestige of Bao Viet.

also focusing on macro-economic stabilization and

inflation control policies; with a strong start to the

economic restructuring and growth model transformation

processes. This will create favorable conditions for

enterprises to develop business and grow the market.

There are also many market risks in 2011, especially high

inflation, fluctuation in exchange rates and interest rates.

Many businesses will have difficulties due to the pressure of

rising input costs, high interest rates and exchange rate

fluctuations. The stock market is forecast to be flat. The

insurance market is forecast to grow about 12-15% in the

field of life insurance and 22-25% in non-life insurance.

On the basis of the 2011 economic analysis and forecast, Bao

Viet will ensure we grow our business to meet business targets

while continuing to invest in building a solid foundation for

future development. We also must remain focused on

improving competitiveness in the core areas of insurance,

banking, securities, sustainably developing in these areas.

The business targets and key solutions in 2011 of Bao Viet

Holdings follow.

2011 Business Targets

Bao Viet will continue to build a firm foundation in 2011. Bao

Viet Holdings has targeted total consolidated revenue of

VND14,800 billion (+15% compared with 2010). Consolidated

PAT of Bao Viet is planned to be VND1,138 billion (+16.8%).

Total revenue plan of Bao Viet Holdings is targeted to be

VND1,300 billion (+3%). Total PAT is planned to be VND903

billion, about 106% of 2010.

To reach the above targets of Bao Viet’s BOD, the Board of

Management will carry out the solutions defined in the

strategy for One Bao Viet-One New Foundation. The solutions

for 2011 follow.

Finalization of the Governance Structure: Consolidate

the organizational structure of Holdings and the Subsidiaries

towards specialization and promoting autonomy; improve

the efficiency of Bao Viet’s BOD Supporting Committee;

improve the quality of Risk Management, Asset Liability

Management Committee, Investment, Strategy Committees

to establish a governance mechanism throughout the

company.

ANNUAL REPORT 2010

10

Improved Financial Capacity

The successful private placement to strategic shareholder

HSBC and the wider share issue to existing shareholders

have contributed to an increase in the charter capital of

Bao Viet Holdings from VND5,730 billion to VND6,804

billion. Owner’s equity has grown from VND8,436 billion to

VND10,510 billion. Financial resource obtained after the

two issuances is equivalent to VND2,523 billion and is used

to increase charter capital for non-life insurance being from

VND1,000 billion to VND1,500 billion and will be used to

improve financial capacity in core business areas and

investments in IT development.

Improvements in Service Quality,

Strengthening Coordination among

Subsidiaries

With the advantage of a financial-insurance group, the

subsidiaries of Bao Viet are continuing to research new

products, develop distribution networks, and enhance

coordination and cooperation to provide comprehensive

financial capability and to improve customer service.

“Efforts in 2010 to improve corporate

governance, enhance IT innovation and

improve customer service have established

a firm foundation for development and

competitiveness. This will enable Bao Viet

to successfully roll out its 2011 business

plan and five-year development strategy.”

2011 BUSINESS PLAN

2011 is the first year that the Party and Government

implement the 2011-2015 socio-economic development

strategy. This is also the first year that Bao Viet implements

its 2011-2015 Strategic Plan.

The economic environment in 2011 is promising, particularly

related to the rapid development of science, technology

and the intensive and extensive integration of Vietnam into

the world economy. The Party and the Government are

Improve the Efficiency of Investment Management:

Continue to build the portfolio structure of Holdings.

Complete the internal legal framework on investment

management and improve the professionalism and

efficiency of investment activities. Bao Viet will also

strengthen risk management in investment activities.

Strengthen the Cooperation among Subsidiaries: The

subsidiaries of the group will develop and harness a unified

customer base, thus improving the efficiency in business

cooperation and investment among them.

Developing New Products and Multi-convenience

Financial Services: focus on researching and developing

multi-convenience, integrated financial products across

subsidiaries for the benefit of our customers.

Enhance Customer Service Quality: Bao Viet aims to

continuously improve, standardize and professionalize

customer service… down to each agency and branch. We

will pilot call centers in a number of member companies

with a view to improving customer service quality.

Bao Viet Holdings and its subsidiaries are committed to

working together to successfully implement the 2011-2015

strategic solutions. We will work tirelessly to maintain our

position as the leading financial-insurance group in

Vietnam.

On behalf of the Board of Management, once again I would

like to wish all shareholders, customers and employees good

health and happiness.

Chief Executive Officer

Nguyen Thi Phuc Lam

15%

VND Billion

14,800Estimated Total Consolidated Revenues 2011

15%

VND Billion

1,445Estimated Consollidated Profit before Tax 2011

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6%

VND Billion

903Estimated Total PAT 2011

KEY PERFORMANCE INDICATORS

ANNUAL REPORT 2010

12

CONSOLIDATED PERFORMANCE

Items

BAOVIET HOLDINGS

Total Revenues

Profit Before Tax

2009

922

882

2010

1,259

887

Growth

337

6

%

36%

1%

VND billion

Items

BAO VIET INSURANCE CORPORATION

Total Revenues

Profit Before Tax

2009

4,295

219

2010

4,995

311

Growth

700

92

%

16%

42%

VND billion

Items

BAO VIET LIFE CORPORATION

Total Revenues

Profit Before Tax

2009

5,324

456

2010

6,124

600

Growth

800

144

%

15%

32%

VND billion

Unit: VND billionTotal Consolidated Revenues Consolidated Profit before Tax

10,560

12,863

20092010

1,2431,255

20092010

Unit: VND billionTotal Consolidated AssetsTotal Consolidated Invested Assets under management

29,387

39,333

20092010

33,715

44,768

20092010

Total Consolidated Revenues by Subsidiaries Total Consolidated Revenues by Businesses

219311

20092010

20092010

4,295

4,995

Total Revenues Profit before Tax

456600

20092010

20092010

5,324

6,124


BAO VIET HOLDINGS

13

BVH’s closing price as at December 31, 2009 was

VND30,600; VNIndex on December 31, 2009 was 494.8

BVH’s closing price as at December 31, 2010 was

VND64,500. BVH’s price increased 110% whereas the

market decreased from 494.8 to 484.6 at year end.

882887

20092010


9221,259

20092010

Bao Viet Holdings

Bao Viet Insurance

Bao Viet Life

Bao Viet Bank

Bao Viet Securities

Others

Insurance

Finance

Banking

Others

45%

36%

7%9%2%

1%

67%

7%

24%

2%

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ON

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One Bao Viet – One New Foundation

BOARD OF DIRECTORS OF BAO VIET HOLDINGS

1999 - 2006: Deputy Director of

Corporate Finance Department

2006 - present: Director of

Corporate Finance Department

Mr. Tran Huu Tien

Member of the BOD

2008 - 2010: General Manager -

Regional Head of Insurance

Asia Pacific

Present: Group General

Manager, Group Head of

Insurance of HSBC Holdings plc;

Chairman and Chief Executive

Officer of HSBC Insurance

(Asia-Pacific) Holdings Limited

Mr. David Fried

Member of the BOD

2006 - 2011: Member of the

BOD, Head of Supervisory

Board of State Capital Investment

Corporation (SCIC)

2011 - present: Deputy CEO of

State Capital Investment

Corporation (SCIC)

Mr. Nguyen Quoc Huy

Member of the BOD

7/2004 - 12/2004: Deputy CEO

of Vietnam Insurance Corporation

and CEO of Bao Viet Vietnam

Company

2005 - 2007: CEO of Bao Viet

Vietnam Company

2008 - present: CEO of Bao Viet

Insurance Corporation, Member

of Bao Viet Holdings BOD

Mr. Tran Trong Phuc

Member of the BOD

2003 - 2006: Deputy CEO of

Vietnam Insurance Corporation

and CEO of Bao Viet Life

Company, Member of Vietnam

Insurance Corporation BOD.

2006 - 2007: CEO, Member of

BOD of Vietnam Insurance

Corporation

2007 - present: CEO, Member of

BOD of Bao Viet Holdings

Mdm. Nguyen Thi Phuc Lam

Member of the BOD

2004 - 2006: Deputy CEO of Bao

Viet Life Vietnam Company

2006 - 2007: CEO of Bao Viet Life

Vietnam Company

2008 - present: CEO of Bao Viet

Life Corporation, Member of Bao

Viet Holdings BOD

Mr. Nguyen Duc Tuan

Member of the BOD

2003 - 2006: Director of

Insurance Department Ministry

of Finance

2006 - 2007: Chairman of


2007 - present: Chairman of

Bao Viet Holdings

Mr. Le Quang Binh

Chairman of the BOD

ANNUAL REPORT 2010

16BAO VIET HOLDINGS

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ONE BAO VIET–ONE NEW FOUNDATIONONE BADevelop software and IT infrastructure on a

national scale

Develop unified customer database

INFORMATION TECHNOLOGY

Develop the financial supermarket model

Provide customers with comprehensive package

of products

COOPERATION

Performance management and suitable salary-reward

system

Training according to the companywide learning map

Develop performance-based culture

HUMAN RESOURCES DEVELOPMENT

Unify the brand identity

Develop brand on the basis of

the core values

Support organisational change

BRANDING

Ensure the benefit of shareholders,

employees and community

Unified and effective governance system

Transparent infomation disclosure

GOVERNANCE MODEL

Mr. Alan Royal, Chief Information

Technology Officer: The successful

deployment of information technology

systems will help Bao Viet change to a

centralized management model, helping

improve professionalism and effectiveness.

Mr. Phan Tien Nguyen, Chief Human

Resources Officer: The introduction of a

performance evaluation system in 2010 has

contributed to the development of a working

culture in which the evaluation for

remuneration is on a performance basis.

Mr. Adrian Abbott, Chief Risk Officer: The

establishment of the Risk Management

Council and Asset Liability Management

Committee across the group has created a

consistent governance system that helps to

improve the financial management of Bao Viet

to international standards.

Mr. Duong Duc Chuyen, Chief Investment,

Strategy Officer: In 2010, Bao Viet finalized its

development strategy and defined the targets,

tasks and solutions for 2011-2015. Bao Viet also

completed the investment governance

mechanism in Holdings and the Subsidiaries.

Mr. Le Hai Phong, Chief Financial & Real

Estate Management Officer: 2010 is a

significant milestone because Bao Viet has

prepared a set of financial statements for the

full accounting year according to the

international accounting standard, IFRS, as

well as Vietnamese standard, VAS.

Mr. Nguyen Thanh Hai, Chief Account: The

successful implementation of the Sun Account

software system at the Holdings and continu-

ingly at the subsidiaries in 2010 will contribute to

improve quality and progress of preparing

financial reports as well as information

management according to both IFRS and VAS

ANNUAL REPORT 2010

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BLOCK HEADS AND EXECUTIVES OF BAO VIET HOLDINGS

BAO VIET HOLDINGS

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The key task in 2010 was to implement the strategy One

Bao Viet – One New Foundation through improvements in

corporate governance, investment in information technology

and human resources, brand development, improving

financial capacity and business cooperation.

CORE VALUES OF BAO VIET

112345

QUALITY

APPROACHABLE

TEAMWORK

DYNAMIC

RESPONSIBLE

High quality in all activities and services

Friendly and professional; caring to colleagues and

customers

Cooperation between colleagues within Bao Viet;

creating a strong relationship with customers and

partners based on mutual trust and understanding

Always looking forward; continuous development;

creating opportunities and an environment to

encourage new standards, ideas and initiatives

Transparent and honest; responsible to community

MISSION

“To ensure the peace of mind, prosperity, and long term benefits for our customers,

investors, employees, and community”

STRATEGIC DEVELOPMENT PHASES

BAO VIET 2011-2015 STRATEGY

NEW FOUNDATION

2011 - 2012Integrated information

technology platform, invest-

ment in human resource

development, modern

management processes,

unified brand, strengthened

financial capacity, new

products and services deliver-

ing convenience and added

values to customers.

ADVANCED BUSINESS

MODEL

2012 - 2013One-stop financial supermarket,

centralized management and

on-demand service.

COLLECTIVE STRENGTH

2013 - 2015Create strong growth in

revenue and business

efficiency, attain international

standards for competitiveness,

become the leading brand for

service quality.

VISION

“To become Vietnam’s leading financial–insurance group, with solid financial strength,

strategically integrating into regional and international markets, focused on three pillars:

insurance, banking and investment”

ANNUAL REPORT 2010

20BAO VIET HOLDINGS

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BAO VIET DEVELOPMENT MILESTONESORGANIZATIONAL STRUCTURE

ANNUAL REPORT 2010

22

Establishment of Viet Nam Insurance Company on 15/1/1965 to undertake

non-life business

Transfer into Viet Nam Insurance Cooperation

The first and only company providing life insurance products in Viet Nam

Establishment of BVSC – the first securities company in Vietnam

Establishment of Bao Viet Fund Management Company (BVF)

Successful IPO and establishment of Bao Viet Finance–Insurance Group.

On 15 October 2007, Bao Viet Holdings (Parent Company) was granted its

business license

Establishment of Bao Viet Commercial Bank (BVB)

Listing of Bao Viet Holdings shares (BVH) on HOSE

Launch of new brand identity

On 15 October 2010, Bao Viet proudly celebrated its 45 years anniversary as the

longest running company in the insurance industry, and also a pioneer in financial

services business diversification.

Remuneration and Appointment

Committee

ALCO CommetteeỦy ban Thù lao và Bổ nhiệm

Risk Management

CommitteeAudit Committee

Supervisory Board

Bao Viet Insurance Corporation

Bao Viet Life Corporation

Bao Viet Fund Management Company

Bao Viet Securities Company

Bao Viet Commercial Joint-Stock Bank

Bao Viet Investment Joint Stock Company

Bao Viet - Au Lac Limited Company

Associated Company

Internal Audit

Division

Operations

Block

Human Resources

Block

Information Technology

Block

Real Estate

Management Block

Financial Management

Block

Strategy

Development Block

Risk Management

Block

Investment

Block

Straegy and Investment

Committee

ANNUAL GENERAL MEETING OF SHAREHOLDERS

BOARD OF DIRECTORS

CHIEF EXECUTIVE OFFICER

BAO VIET HOLDINGS SUBSIDIARIES AND ASSOCIATED COMPANIES

BAO VIET HOLDINGS

23

In 2010, Bao Viet Holdings established Investment and Risk Management Blocks in order to enhance the specializa-tion and professionalism of these activities.

ANNUAL REPORT 2010

24

SHAREHOLDERS

No.

Total

Shareholder Number of Shares

Before IssuePrivate

Placementto HSBC

After Private Placement to HSBC

% Ownership

1

2

3

4

MOF

HSBC

SCIC

Other

444,300,000

59,125,161

20,400,000

49,201,444

573,026,605

77.54%

10.32%

3.56%

8.58%

100.0%

53,682,474

Numberof Shares

444,300,000

112,807,635

20,400,000

49,201,444

626,709,079

Amount inVND billion

4,443

1,128

204

492

6,267

% Ownership

70.89%

18.00%

3.26%

7.85%

100.0%

Share Issues and Change of Shareholder Structure

In 2010, Bao Viet Holdings finalized the private placement to HSBC Insurance (Asia-Pacific) Holdings Limited of 53,682,474

shares. The total amount collected from the sale of shares was VND1,878.8 billion.

Following the private placement, there is no change in the shares owned by shareholders other than by HSBC. However

there is a resultant change in the overall ownership structure when compared with 2009:

No

Total

Shareholders Numberof Shares

% ownership

Before the right issue

Public Issuewith

8.6% Ratio

After the right Issue

Numberof Shares

1

2

3

4

MOF

HSBC

SCIC

Others

444,300,000

112,807,635

20,400,000

49,201,444

626,709,079

70.89%

18.00%

3.26%

7.85%

100%

38,209,800

9,701,456

1,754,400

4,096,699

53,762,355

70.91%

18.00%

3.26%

7.83%

100%

4,820

1,225

221

533

6,804

482,509,800

122,509,091

22,154,400

53,298,143

680,471,434

Amount inVND billion

% Ownership

Also during 2010, Bao Viet Holdings issued additional shares to existing shareholders to increase charter capital as

stipulated in Resolution 03/2010/NQ-DHCD dated 17 April 2010 of the Annual General Shareholders’ Meeting (AGM). As a

result, 53,762,355 shares were issued, accounting for 99.75% of the total shares eligible for issuance, raising a total of VND

645.1 billion.

(This structure is based on the closing list of shareholders attending the AGM on 21/3/2011)

After the additional issue the shareholder structure of Bao Viet Holdings follows

No. Shareholder Number of Share % Ownership

1

2

3

4

Major shareholders (Owning more than 5% of charter capital)

- Ministry of Finance

- HSBC

Other shareholders

Local shareholders

- Institution

- Individual

Foreign shareholder

- Institution

- Individual

605,018,891

482,509,800

122,509,091

75,452,543

510,186,840

506,684,274

3,502,566

170,284,594

169,375,700

908,894

88.91%

70.91%

18.00%

11.10%

74.97%

74.46%

0.51%

25.02%

24.89%

0.13%

BAO VIET HOLDINGS

25

The HSBC team is helping to drive real and lasting

improvements across the group. A key milestone in 2010

was HSBC’s involvement in enabling Bao Viet to report its

financial accounts and performance according to

International Financial Reporting Standards (IFRS) –

important broader disclosure that reflects a genuine

commitment by Bao Viet’s management team to improve

the transparency and quality of financial reporting.

HSBC executives are also working with Bao Viet to improve

corporate governance standards. This includes the

establishment of the Asset Liability Committee (ALCO) and

Risk Management Committee (RMC). These meetings are

held regularly and are supported by a growing audit

programme.

HSBC executives are also assisting Bao Viet to manage and

implement technology projects worth some USD25

million, to enable and drive business transformation and

growth. The adoption of advanced technology and

international standards will better enable Bao Viet to

support the future needs of customers, employees and agents.

We will continue to work with Bao Viet’s management

team to drive the changes and improvements that will

consolidate the group’s leadership position in Vietnam. We

look forward to another successful year in 2011.

Mr. David Fried

Group General Manager

and Group Head of Insurance

HSBC Insurance (Asia-Pacific) Holdings Limited has both

life and non-life manufacturing capabilities in nine markets

across the Asia Pacific region including the fastest growing

emerging markets of China, India, Korea, and Vietnam as

well as Hong Kong, Singapore, Malaysia, Macau and

Taiwan. HSBC Insurance is the largest administrator of

retirement schemes in Hong Kong, capturing almost one

third share of the market. In 2010, HSBC Insurance’s profit

before tax exceeded USD1 billion; its premium income

grew nearly 30% with total assets of USD31 billion and

more than 2,500 staff provided professional support to the

business and customers.

STRATEGIC PARTNERS

HSBC INSURANCE

(ASIA-PACIFIC) HOLDINGS LTD

HSBC is delighted to support Bao Viet’s strong and profit-

able performance in 2010.

The group’s 45th anniversary was a proud milestone that

marked an unmatched legacy in Vietnam’s financial

services industry. Bao Viet’s successful brand refresh, in

January 2010, was an important sign that the company is

continuing to evolve and prepare for the future. The

company’s long history of innovation and development,

diversified business and extensive network across Vietnam

means it will continue to be one of the leading financial-

insurance groups.

We are Bao Viet’s sole foreign strategic partner and

completed our investment of an additional VND1,879bn

(USD101mn) for a further 8% shareholding in January 2010.

HSBC maintained its 18% stake in the group by fully

subscribing to the Rights Issue in November 2010 - invest-

ing an additional VND116billion (USD6million).

We have partnered with Bao Viet for over three years,

working via the HSBC Technical Support and Capability

Transfer Agreement (TSCTA). The agreement includes

cooperation across the company in areas including

corporate governance and risk management, finance,

information technology, marketing and communications,

bancassurance, and human resources.

Our partnership was strengthened in 2010 with additional

HSBC executives embedded in Bao Viet. These HSBC

members of staff operate as Bao Viet executives in the roles

of Deputy Chief Financial Officer; Chief Actuary; Chief Risk

Officer; Group Head of Marketing, Communications and

Investor Relations; and Deputy Head of Human Resources.

Statement by Mr. David FriedMr. Lai Van Dao

CEO of SCIC

ANNUAL REPORT 2010

26BAO VIET HOLDINGS

27

STATE CAPITAL INVESTMENT

CORPORATION

To increase cooperation and to harness the strategic

strengths of each party, Bao Viet Holdings and State

Capital Investment Corporation (SCIC) signed, on 22

October 2009, a Comprehensive Strategic Cooperation

Agreement with the following objectives:

Use the resources and strengths of the two companies

to satisfy the insurance needs of all companies

receiving SCIC investment with competitive pricing

and highest service quality

Cooperate in investment projects; invest in financial

products.

Cooperate in introducing, promoting and sharing

experiences in corporate governance, financial

management, human resources management, and

other areas of expertise of Bao Viet and SCIC.

According to this Agreement, SCIC committed to carry

out the obligations of a strategic investor and develop

its long-term interest in Bao Viet. The implementation of

the agreement provides an excellent opportunity for

Bao Viet to access SCIC’s partners in order to maximize

cooperation and business development opportunities,

expand its target customer database, and evolve

common business strategies in areas of mutual interest.

BAO VIET HOLDINGS SUPERVISORY BOARD GOVERNANCE REPORT

Bao Viet Holdings invests in subsidiaries and joint-venture

companies, undertaking financial services and other

activities as stipulated by the law.

After the successful equitization in 2007, the listing of

Holdings’ shares (code BVH) on HOSE in 2009 and with the

technical services support of HSBC Insurance (Asia-Pacific)

Holdings Limited, Bao Viet Holdings continues to develop

international standard governance machinery throughout

Holdings and its subsidiaries.

The operation of Bao Viet’s BOD and the evolution of

governance are evidenced as follows:

GOVERNANCE MODEL

The Governance model of Holdings has a structure whereby

shareholders invest in Bao Viet Holdings – the parent

company. The BOD of Bao Viet Holdings was nominated by

the General Shareholders Meeting to be the representative

body of the shareholders. The organizational structure of

Holdings includes BOD, Board of Management and

functional Blocks established to manage the capital in

subsidiaries, conduct the business of Holdings, and

coordinate business activities in subsidiaries.

Bao Viet Holdings invests capital and conducts its ownership

rights in subsidiaries, joint ventures. Bao Viet Holdings sends

capital representatives to subsidiaries and joint ventures to

serve on the Members’ Council/Board of Directors (where

Bao Viet invests 100% capital) or to be representatives on the

Members‘ Council/Board of Directors. Bao Viet Holdings

develops internal governance regulations to ensure the

efficient capital management throughout Holdings and in

the subsidiaries and joint venture as stipulated in the

Enterprise Law, Operation Regulations and Charters of the

Holdings and subsidiaries.

OPERATION OF BAO VIET’S BOD

In 2010, the membership of Bao Viet Holdings BOD

comprised of seven members. In implementing the Charter

of Bao Viet Holdings and Operation Regulations of the BOD,

four regular meetings were held in 2010 to review and

approve the resolutions under the authority of the BOD.

The BOD collected official comments of BOD members to

resolve nearly 100 issues related to the Holdings’ business

operations including corporate governance, implementation

of investment projects, instruction on the implementation

of BOD resolutions, AGM and BOD’s decisions, leading to

some notable achievements:

Organizational structure: the BOD agreed to establish

Risk Management and Investment Blocks, to appoint Block

Heads to supplement the senior leadership team of Bao

Viet Holdings.

Governance mechanism: The BOD instructed the prepara-

tion and promulgation of Investment Regulations for Bao

Viet Holdings, Regulations for Asset Liability Management

Committee, Investment and Asset Management of Bao Viet

Holdings, Risk Management of Bao Viet Holdings and other

regulations on human resources management.

Investment projects: The BOD made decisions on

property projects, IT development projects and promoted

professionalism in capital management in these projects.

Strategy management: the BOD commissioned the

preparation and development of 2011-2015 strategies for

Holdings and Subsidiaries.

Increased capital to enhance financial capacity: The BOD

successfully carried out two capital increases during 2010

and instructed an increase in capital of the life insurance

business from VND1,000 billion to VND1,500 billion.

Provided instruction on credit rating implementation:

enhanced transparency by commissioning independent

and objective assessment on the management and financial

capability of Bao Viet Holdings by leading enterprise credit

rating companies. Strengthened the financial transparency

for investors at home and abroad.

Throughout 2010, the BOD has successfully performed

its role in directing the implementation the Group’s

strategic objectives and establishing a firm foundation on

which to build the 2011- 2015 development strategy.

ANNUAL REPORT 2010

28

The Supervisory Board attends the quarterly meetings of Bao

Viet’s BOD and the monthly meetings of the CEO with the

purpose of supervising the compliance of legal regulations,

the charter of Bao Viet Holdings and other internal regulations

on administration and management. It also supervises the

implementation of the Resolutions arising from the Bao Viet

Holdings 2010 AGM.

The Supervisory Board acts as the focal point in supervising

and monitoring the content, scope and progress of 2010

financial reports preparation for Bao Viet Holdings and its

subsidiaries with the co-auditors as stipulated by the Law. The

Board also prepares bidding invitation for auditing services

and distributes these to audit companies as approved by the

AGM and cooperates with subsidiaries in choosing independent

auditing companies making recommendations to the BOD for

approval.

The Board supervises the auditing content, scope and

progress of 2010 financial statements in accordance with the

Service Agreement signed with Ernst & Young Vietnam. (E&Y)

The Supervisory Board also reviews and examines the

Holdings’ semi-annual financial statements, quarterly financial

statements and 2010 annual financial statements as audited

by E&Y.

The Supervisory Board holds regular discussions with the

Holding’s functional blocks and with the Audit Committee to

gather information about BOD’s governance, CEO’s business

execution, and business processes compliance through

internal audit results.

In monitoring the administration and execution of the duties

of the BOD, CEO and senior managers of Bao Viet Holdings,

the Supervisory Board has not identified any unusual or

abnormal working practices or processes during 2010. The

Supervisory Board and Bao Viet’s BOD, CEO and senior managers

maintain close cooperation and working relationships for the

benefit of Holdings, shareholders and for compliance with the

laws, charter and internal regulations.

In 2010, according to the Resolution of the AGM, there was a

personnel change in the Supervisory Board membership with

Mr Christopher Edwards nominated by the shareholders to

replace Mrs Majory Miller as a new Supervisory Board

member.

04/1998-09/2007: Member of the BOD, Head of the

Supervisory Board of Vietnam Insurance Corporation

10/2007 - present: Head of the Supervisory Board of

Bao Viet Holdings

09/2004-05/2007: Regional Chief Finance Officer of HSBC

Insurance (Asia–Pacific) Holdings Limited

05/2007 - present: Regional Chief Finance Officer of

HSBC Insurance (Asia–Pacific) Holdings Limited,

Member of the Supervisory Board of Bao Viet Holdings.

Mr. Christopher Alan EdwardsMember of the Supervisory Board

07/2007-01/2008: Deputy CEO of South East Asia

Commercial Bank

01/2008 - present: CEO of South East Asia Commercial Bank

Mr. Le Van ChiMember of the Supervisory Board

03/1997-09/2007: Member of the Supervisory Board,


10/2007 - present: Officer of Internal Supervisory

Division of Baoviet Life Corporation, Member of the

Supervisory Board of Bao Viet Holdings.

Mr. Nguyen Ngoc ThuyMember of the Supervisory Board

6/2005 – 10/2007: Member of the Supervisory Board,


11/2007 - present: Accountant of Baoviet Insuarance,

Member of the Supervisory Board of Bao Viet

Holdings.

Mr. Tran Minh ThaiMember of the Supervisory Board

Mr. Nguyen Trung Thuc

Head of the Supervisory Board

BAO VIET HOLDINGS

29

ANNUAL REPORT 2010

30

REMUNERATION OF THE BOARD OF

DIRECTORS – SUPERVISORY BOARD

In 2010, total actual paid remuneration for Board of Director’s

members was VND816.67 million (equivalent to 63.90% of the

budget approved by Annual General Shareholders’ Meeting,

and 0.096% of profit after corporate income tax of Bao Viet

Holdings). There are currently six part-time Bao Viet Holdings

Board of Directors members.

Total actual paid remuneration for Supervisory Board

members was VND275 million (equivalent to 80.86% of the

budget approved by Annual General Shareholders’ Meeting,

and 0.032% of profit after corporate income tax of Bao Viet

Holdings). At the present Bao Viet Holdings, Supervisory Board

comprises four part-time members.

STAKEHOLDER TRANSACTIONS

There were no significant changes (of over 10,000 shares) in

the stakes of members from Board of Directors/Members’

Council, Board of Management, Supervisory Board and their

relatives during 2010. No contracts have been signed, and no

transactions have been made with the companies of the

above stakeholders. Every stakeholder change or relevant

transaction, under the State Securities Commission regulations,

has been made public.

REPORTS OF COMMITTEES

To improve the governance efficiency of the company in

accordance with international standards, the BOD estab-

lished functional committees to supervise strategy, auditing,

financial management, risk management, senior human

resources management, and investment. The operation of

these committees is as follows:

Audit Committee

The Chairman of the Audit Committee is Mr Nguyen Quoc

Huy, Deputy CEO of the State Capital Investment Corporation

(SCIC), and former Deputy CEO of Deloitte-VACO Vietnam.

The Audit Committee coordinates and reviews the reason-

ableness and objectiveness of financial statements based

on the audit reports of internationally renowned auditing

companies.

The main function of the Audit Committee is to give consul-

tation to and support the BOD in maintaining and strength-

ening the internal control and ensuring compliance in the

Holdings and Subsidiaries.

In 2010, the mechanism and operation of audit activities

was finalized with the establishment of two main divisions

- Life Operations Auditing and Non-Life Operations Audit-

ing – staffed by more than 22 auditors. During the year, the

Internal Audit Division conducted many audits in accor-

dance with the standards established in the HSBC Technical

Support and Capability Transfer Agreement.

In the coming year, audit responsibilities will include

investment activities. The objective of the Committee is to

gradually extend internal audit oversight across all activi-

ties to ensure effective risk management within Bao Viet.

Remuneration-Appointment Committee

The Chairman of this Committee is Mr Nguyen Huu Tien,

member of the BOD of Bao Viet Holdings, Head of Corporate

Finance Department – Ministry of Finance. The main task of

this Committee is to prepare the senior human resources

development strategy for Bao Viet Holdings and to build up

the governance model and human resources strategies.

BAO VIET HOLDINGS

31

Mr. Nguyen Quoc Huy

Chairman of the Audit Committee

In 2010, the Audit Committee was strengthened by the

recruitment and training of high quality human

resources and increasing specialization in audit

activities. The auditing is performed under the processes

transferred by HSBC to help the BOD in risk management.

Over the past two years, Internal Audit has carried out

nearly 20 audits, provided information required to

complete the management responsibilities of Bao Viet

Holdings and delivered many recommendations for

implementation of control measures for insurance

business activities and financial management.

Mr. Danny Lui

Deputy Chief Financial Officer

In 2010, Bao Viet Holdings reported its full year financial

accounts according to International Financial

Reporting Standards (IFRS). This is an important

initiative to support analysis and research, providing

investors and partners with Bao Viet’s business results

according to internationally recognized standards. The

IFRS financial statement is reviewed and appraised

periodically dusing Asset Liability Management

Committee meetings.

In 2010, the Committee researched, prepared and imple-

mented management processes and, policies for senior

managers in Bao Viet Holdings; reviewed and evaluated the

proposals of Holdings and subsidiaries and provided

consultation on the appointment, remuneration of senior

managers/leaders in Holdings and three subsidiaries.

Investment-Strategy Committee

The Investment-Strategy Committee of Bao Viet Holdings is

chaired by Madam Nguyen Thi Phuc Lam - CEO of Bao Viet

Holdings, and was established by the BOD on 10 June 2008 to

provide consultation and advice to the BOD of Bao Viet

Holdings in preparing business strategy, investment strategy

and investment research and evaluation.

Since its establishment, the Investment-Strategy Committee

has participated in the preparation of 2011-2015 strategy;

contributed ideas to the regulations on investment imple-

mentation and management; reviewed the projects and

enterprises that Bao Viet invests in; taken part in Asset Liability

Management Committee, Risk Management Committee.

The Investment-Strategy Committee has contributed to the

improvement of business efficiency and enhanced risk

management in Bao Viet; supported the sustainable growth

goal of Bao Viet, ensuring the rights of shareholders, investors,

customers, partners, and employees as well as contributing to

the state budget.

Asset Liability Management Committee

The Asset Liability Management Committee (ALCO) is chaired

by Madam Nguyen Thi Phuc Lam, CEO of Bao Viet Holdings.

ALCO of the Holdings has responsibility to manage the risks

threatening the balance of assets and liabilities on the asset

sheet of the whole group. ALCO of subsidiaries were estab-

lished in 2010 to create a financial risk management network

across the entire Bao Viet group.

ALCO has organized quarterly meeetings in 2010. In these

meetings, the committee evaluated the key performance

indicators (KPI) of the subsidiaries, the risks related to the

changes in asset and liability mix, changes in liquidity, cash flow,

and the investment results of the Holdings and subsidiaries.

Through financial analysis and evaluation on the basis of both

Vietnamese accounting standards (VAS) and international

standards (IFRS), ALCO has given effective recommendations

on corporate finance governance to the Board of Management

and Board of Directors.

Risk Management Committee

The Chairman of the Risk Management Committee (RMC) is Mr

Adrian Abbott, Chief Risk Officer of Bao Viet Holdings and senior

risk management expert of HSBC. The Risk Management

Committee of Bao Viet Holdings was established to continue

reform the governance model and organizational structure to

international standards and practice. The Risk Management

Block of the Holdings was established and recruited additional

staff to improve professionalism and operations.

In 2010, RMCs of the subsidiaries were set up with a view to

building up a consistent risk management system across

the group.

The RMC organized two meetings on the direction and operating

plan for Risk during the year. Risk and Investment Analysis

Reports, a Market Risk Framework, Credit Risk Limits and Risk

Management Table were developed and approved by the RMC.

Using the Risk evaluation and analysis, Holdings and subsidiary

leaders allocated specific risk management activities for the

specialized divisions of each company.

RMC successfully fulfilled the basic 2010 targets including the

improvement of risk management capacity and technique across

the group and the preparation and implementation of risk

management policies and processes that will drive attainment of

an international standard corporate governance model.

Residual value risk Residual value risk is the risk that has bad financial impact due to the change in value of fixed assets at the end of the term.

Strategic risk Strategic risk is the risk that a company will not be able to recognize and appropriately respond to opportunities

and/or challenges arising from market conditions change, some changes may occur in a few years as changes in

economic political conditions, and requirements of customers, geographic trends, the development of legislation

environment or the acts of competitors. Risks can be minimized by carefully considering the potential opportunities

and challenges during the strategy planning.

Sustainability risk of the

companySustainability risk of the company relates to sensitive environmental and/or social issues or being against the

sustainable development requirements of the company. In fact, the adverse effects on the environment and society

are higher than the economic benefits that it brings. Those risks may arise from the Holdings' services such as asset

management, corporate finance, but in general, mostly arise from the lending operation which establishes direct

links to the bad affect.

Operational risk Operational risk is the risk of loss from errors, illegal acts, and careless mistakes, errors in processes or external

objective causes. Risks hide within each business and involves many aspects. The risks related to credit, market,

liquidity, insurance, pension funds, value recovery, strategies, reputation of the business are not operational risk. The

purpose of operational risk management is to minimize the loss at acceptable levels, ensure consistency between

risk and profit, cost and efficiency.

Reputation risk The reputation of Holdings and the subsidiaries is the key factor determining success. Any financial service organiza-

tion can survive or fail because of its reputation and the trust that such organization brings to clients. Maintaining the

trust of customers is the prerequisite goal of the managers and can be achieved through strong financial manage-

ment and the successful risk control of the managers. However, reputation can be seriously damaged by the failure

to comply with relevant laws or by inappropriate behavior or comments in the mass media. It is necessary to set up

a strong internal control system within the Holdings and subsidiaries to fully assess the potential impact on

reputation, to minimize the risks that may undermine the reputation ranging from inability in operational and

financial management to wrong decision in business operation, business strategy.

Distribution

channel risk

Distribution channel is critical in the business of the group; the externally reflected factors are recruitment,

maintenance, execution, productivity specialization; remuneration change must be controlled under competitive

condition and be consistent with business objectives

Classification Risk Management Basis

Credit risk Risks that customers or partners of Bao Viet cannot or do not want to conduct the commitment signed with Bao Viet

Holdings or subsidiaries. Credit risk is under various forms including lending – non refundable capital, loan

certificates; bonds – unpaid amount that is put as debt; government bonds – the refunding as committed not to be

carried out or ceased; acquisition of enterprises – the invalid debt payment. Insurance risk during reinsurance process

– reinsurance company does not/cannot fulfil the commitment; Cross-border transaction – money transfer can be

freely implemented and can be banned or temporarily ceased; The holding of the pledged assets - property values

drops after the decrease of credit rating.

Liquidity risk Liquidity risk relates to the fact that Holdings and subsidiaries cannot carry out the committed debt obligations when

the debt is due or can only carry out this obligation at very high cost. This is resulted from many factors, ranging from

too many people withdrawing money from the bank to being unable to sell the financial tools at the right time in the

market. In general, liquidity risk is managed by using necessary liquidity parameters.

Market risk Risks related to assets or liabilities can be altered by changes in interest rates or prices. Market risk factors are interest

rate risk, credit spread, exchange rate risk and owner’s equity risk. These risks will be controlled by market risk

calculation tools such as: sensitivity limits, value risk limits, stress testing (testing method to check the stability of the

system).

Insurance risk Insurance risk relates to uncertainties such as incidents, number and duration of the incidents under the insurance

liability approved by insurance company.

ANNUAL REPORT 2010

32

Business operation risks that are managed by the RMC of Holdings and the subsidiaries include:

SU

BS

IDIA

RIE

S

SUBSIDIARIES

BAO VIET GENERAL INSURANCE CORPORATION

ANNUAL REPORT 2010

34BAO VIET HOLDINGS

35

Bao Viet Insurance Corporation (Bao Viet Insurance) is a

subsidiary where 100% charter capital is held by Bao Viet

Holdings. With more than 45 years of experience in non-life

insurance business, Bao Viet Insurance maintains the

number one position in the Vietnamese insurance market

in terms of reputation, service quality, and market share.

Bao Viet Insurance has a nationwide operations network,

with 66 branches, over 300 customer centers, in excess of

3,000 employees and 10,000 agents. Business lines of Bao

Viet Insurance include non-life insurance, assumed and

ceded reinsurance, damage certification, financial invest-

ments and other legally registered businesses.

2010 Business Results

In 2010, despite the difficult economic and insurance

market, Bao Viet Insurance has successfully achieved

revenue and profit targets. Total revenue reached

VND4,995 billion, an increase of 16.3% over 2009. Insurance

revenues increased nearly 15% over the previous year to

VND4,574 billion. Profit before tax is up by over 41%

compared with 2009 to VND311 billion.

Additionally, Bao Viet Insurance has successfully imple-

mented risk appraisal processes and managed claims to

derive profits from insurance business with a combined

ratio of 94.2%. Bao Viet Insurance is the number one player

in the non-life insurance market with 24.7% market share of

primary insurance premium.

2011 Business Plan

Bao Viet Insurance is positioned for success in 2011 by driving three important priorities: INNOVATION – the application of

advanced IT systems and management models, QUALITY – market leader in the delivery of quality products, services and

customer satisfaction, EFFICIENCY – high productivity, accuracy and profitability. Specific business targets include:

• Total revenue of over VND5,792 billion

• Growth rate of 16%

• Primary premium revenue growth of over 16%

• Profit after tax growth of over 25.4%

Bao Viet Insurance also aims to maintain its position as the leading non-life insurer in the Vietnam market for the period of

2011-2015, and strives for an average annual growth rate of 16% in terms of primary premium revenue during this period.

In 2010, Bao Viet Insurance has

exceeded business plans, achieved

profitability and growth targets,

and invested in the development

of its IT system, new products

and services.

Bao Viet Insurance has also focused efforts during 2010 on establishing a new business and operation foundation by:

Investing in the development and modernization of IT software including new systems for policy administration (InsureJ),

accounting (Sun Accounts) and e-mail (Lotus Notes). These initiatives will actively support business administration and manage-

ment; as well as transforming the business model to provide a specialized, centrally managed and one-stop service capability.

Focusing on the development of human resources, organizational structure and human resource administration in cooperation

with the common direction of Bao Viet Holdings.

Developing the bancassurance distribution channel, exploring new distribution channels including e-commerce in cooperation

with HSBC, and establishing a call center to enhance customer service quality and convenience.

Promote the strengths in motor vehicle insurance, health and personal accident insurance, business disruption insurance, hull

insurance, protection and indemnity insurance, hospital expense insurance, etc.

219311

20092010

20092010

4,295

4,995

Key financial indicators

BAO VIET INSURANCE 2009 2010

700

587

119

92

527

1,085

-

-

-

(%)Growth

16%

15%

40%

42%

52%

23%

-

-

-

Total revenue

Revenue from insurance businesses

Revenue from financial activities

Profit before tax

Owner equity

Total asset

Return on equity (ROE)

Loss ratio

Combined ratio

4,295

3,987

296

219

1,013

4,636

16.41%

53.90%

97.59%

4,995

4,574

415

311

1,540

5,721

15.55%

49.30%

94.17%

311

42%

Profit Before Tax

VND Billion

Unit: VND Billion


VND Billion

4,574

15%

Insurance Revenue

VND Billion

Mr. TRAN TRONG PHUC


MEMBERS OF BAO VIET INSURANCE’S BOARD OF MANAGEMENT

From left to right

Mr. Nguyen Kim Phu - Deputy Chief Executive Officer

Mr. Nguyen Xuan Thuy - Deputy Chief Executive Officer

Mr. Tran Trong Phuc - Chief Executive Officer

Mr. Ta Van Can - Deputy Chief Executive Officer

Mr. Nguyen Quang Phi - Deputy Chief Executive Officer

BAO VIET HOLDINGS

37ANNUAL REPORT 2010

36

BALANCE SHEET AS AT 31 DECEMBER 2010

INCOME STATEMENT FOR THE YEAR ENDED 31 DECEMBER 2010

ASSETAs at 31 December 2010

VND

As at 31 December 2009

VND

CURRENT ASSETS 3,202,446,387,782 2,252,540,829,378

Cash 86,398,758,384 104,458,309,835

Short-term investments 1,585,700,800,000 703,864,000,000

Account receivables 1,479,084,928,228 1,409,444,890,826

Inventories 9,602,608,708 9,160,988,407

Other short-term assets 41,659,292,462 25,612,640,310

NON-CURRENT ASSETS 2,518,212,344,699 2,383,761,925,272

Fixed assets 626,633,290,454 569,493,784,283

Long-term investments 1,870,147,088,339 1,795,585,009,882

Other long-term assets 21,431,965,906 18,683,131,107

TOTAL ASSETS 5,720,658,732,481 4,636,302,754,650

RESOURCES

LIABILITIES 4,180,621,301,772 3,623,201,852,257

Short-term liabilities 1,050,913,328,325 958,272,870,093

Reserves 3,117,944,873,780 2,656,941,256,258

Other long-term payables 11,763,099,667 7,987,725,906

OWNER’SEQUITY 1,540,037,430,709 1,013,100,902,393

Owner’s equity 1,540,037,430,709 1,013,100,902,393

Contributed capital 1,500,000,000,000 1,000,000,000,000

Retained earnings and other funds 40,037,430,709 13,100,902,393

TOTAL LIABILITIES AND OWNER’S EQUITY 5,720,658,732,481 4,636,302,754,650

-

FINANCIAL INFORMATION CITED FROM THE FINANCIAL STATEMENTS AUDITED BY E&Y OF BAO VIET GENERAL INSURANCE CORPORATION

ITEMSCurrent year

VND

Previous year

VND

Total revenue 4,994,672,287,391 4,294,530,291,067

Insurance Operating Revenue 4,574,030,982,006 3,987,319,219,075

Financial Revenue 414,940,531,260 296,151,307,473

Other Incomes 5,700,774,125 11,059,764,519

Reinsurance expenses & revenue deduction (1,143,631,627,698) (1,030,842,352,310)

Net Revenue 3,851,040,659,693 3,263,687,938,757

Total Expense (3,540,065,256,909) (3,044,443,182,595)

Insurance Operating expense (2,430,546,218,527) (2,240,573,650,601)

Financial expense (182,895,430,534) (50,239,328,328)

Administrative expense (926,244,164,763) (748,323,085,281)

Other expense (379,443,085) (5,307,118,385)

310,975,402,784 219,244,756,162

Corporate income tax (71,479,938,884) (53,018,678,357)

239,495,463,900 166,226,077,805

BAO VIET LIFE 2009 2010

Total revenue

New underwriting revenue

Revenue from insurance businesses

Revenue from financial activities

Profit before tax

Owner equity

Total asset

Return on equity

Regulatory solvency ratio

Number of agents

5,324

730

3,704

1,615

456

1,527

17,150

23.76%

139.50%

18,000

6,124

760

4,046

2,069

600

1,581

20,594

30.04%

149.30%

19,999

Bao Viet Life Corporation (Bao Viet Life) is a subsidiary in

which 100% charter capital is invested by Bao Viet

Holdings. It was the first life insurer in the market and has

now been operating for 15 years.

Bao Viet Life is a leading life insurer securing a 29.2% of

market share in premium revenue. Business lines of Bao

Viet Life include life insurance, assumed and ceded reinsur-

ance for life insurance, health insurance and personal

accident insurance, fund management, and investment.

Bao Viet Life manages 60 branches and over 500 customer

centers throughout 63 cities and provinces in Vietnam. It

has nearly 2,000 employees and 20,000 agents, serving

more than 1.5 million customers.


Bao Viet Life’s 2010 annual results have been positive with

total revenues of VND6,124 billion, an increase of 15%

compared with 2009, exceeding target by 10%. Premium

revenue has risen 9.2% in comparison with 2009 to

VND4,046 billion, exceeding target by 2.5%. Profit before

tax grew 32% over prior year to VND600 billion.

Business growth can be attributed to customer care

programs, new products development, and the improved

quality of the nationwide distribution system.

BAO VIET LIFE CORPORATION

The year 2011 marks the 15 year anniversary of Bao Viet

Life, also a milestone for the Vietnam life insurance

business. Bao Viet Life has set out 2011 targets including

30% market share, nearly VND4,400 billion total revenue,

and 8.5% growth of which new underwriting revenue is

targeted to grow by 25%. Bao Viet Life will focus on

increasing the professionalism and productivity within

the corporation through product development, comple-

tion of the specialized business model transformation

process, human resources development and investment,

and enhancing agent quality and capability.

BAO VIET HOLDINGS


38

2011 Business Plan

2010 has been a year for Bao Viet Life to

invest in high and sustainable growth,

with successes made in terms of rev-

enue and profit growth, customer

service quality enhancement; trans-

forming the business model, and devel-

oping distribution capabilities.

2010 has also witnessed a high degree of change and transformation across the entire Bao Viet Life operation with five key founda-

tional initiatives being executed during the year.

Enhanced centralization: centralized management for aspects related to the Central Operations Center and finance – accounting

has been running smoothly in the centre allowing branches focus to business development.

IT system deployment: an international standard policy administration system supporting the centralized management model

became operational in February 2011.

Improved service quality: establishment of telemarketing and customer care departments and provision of frequent training to

promote the service quality culture

Continue organizational restructuring: consolidate the business development resources, establish and deliver staff planning and

training policies, develop appropriate salary and reward policies

Focus on business development by specializing the functions of agent development and training, expanding market opportuni-

ties and enhancing agent skills and knowledge training

Progress in creating a new foundation have contributed to improved competitive capacity through specialization and

enhanced productivity. This strengthened competitive capacity will drive significant change in revenue and earnings

growth for subsequent development stages.

456600

20092010

20092010

5,324

6,124

800

30

342

455

144

54

3444

-

-

1,999

15%

4%

9%

28%

32%

4%

20%

-

-

11%

Key financial indicators

(%)Growth

Unit: VND Billion


VND Billion

20,594

20%

Total Assets

600

32%

Profit before Tax

VND Billion VND Billion

Mr. NGUYEN DUC TUAN


MEMBERS OF BAO VIET LIFE’S BOARD OF MANAGEMENT

From left to right

Ms. Nguyen Thi Lam Hong - Deputy Chief Executive Officer

Mr. Nguyen Duc Tuan - Chief Executive Officer

Dr. Nguyen Thanh Quang - Deputy Chief Executive Officer

Mr. Nguyen Quang Tam - Deputy Chief Executive Officer

BAO VIET HOLDINGS


40

FINANCIAL INFORMATION CITED FROM THE FINANCIAL STATEMENTS AUDITED BY E&Y OF BAO VIET LIFE CORPORATION



ASSETAs at 31 December 2010

VND


VND

CURRENT ASSETS 1,262,599,237,885 1,200,994,662,126

Cash and cash equivalent 242,980,700,033 403,750,624,359

Current receivables 1,006,087,352,129 786,648,681,245

Inventory 12,917,679,613 10,286,029,983

Other current assets 613,506,110 309,326,539

NON-CURRENT ASSETS 19,331,315,240,817 15,949,086,093,132

Fixed assets 601,102,745,129 551,587,362,491

Long-term investments 18,671,595,612,623 15,377,320,111,741


TOTAL ASSETS 207,874,419,395,02 17,150,080,755,258

RESOURCES

LIABILITIES 19,013,237,040,387 15,622,647,589,106

Current liabilities 3,223,082,409,255 769,764,756,044

Non-current liabilities 55,137,225,716 43,951,579,032

Reserves 15,735,017,405,416 14,808,931,254,030

OWNERS’ EQUITY 1,581,012,644,669 1,527,433,166,152

Capital 1,580,677,438,315 1,527,433,166,152


Retained earnings and other funds 81,012,644,669 27,433,166,152

TOTAL LIABILITIES AND OWNERS’ EQUITY 20,593,914,478,702 17,150,080,755,258

-

ITEMSCurrent year

VND

Previous year

VND

Total revenue 6,115,269,908,663 5,323,825,645,427

Insurance Operating Revenue 4,037,442,495,252 3,704,401,156,127

Financial Revenue 2,070,769,668,653 1,614,669,789,883

Other Incomes 7,057,744,758 4,754,699,417

Total Expense (3,540,065,256,909) (3,044,443,182,595)

Insurance Operating expense (4,062,051,307,848) (4,001,087,536,607)

Financial expense (905,537,696,869) (325,093,882,630)

Administrative expense (548,046,962,593) (541,836,833,785)

Other expense (90,760,988) (165,289,438)

599,543,180,365 455,642,102,967

Corporate income tax (118,549,558,777) (88,236,088,293)

474,998,189,784 362,849,593,644


2010 proved to be a challenging year for investment and

the stock markets in general. Over the course of the year,

the assets managed by BVF have been relatively flat at

approximately VND20,261 billion. Of which almost 90% is

managed on behalf of Bao Viet Life Company and 8% is

managed on behalf of Bao Viet Insurance (general

insurance business). The total revenue reached VND56

billion, equivalent to 83% of that in 2009. BVF return on

charter capital reached 42% during the period.

Performance (measured as rate of return for each specific

client) has exceeded all customer requirements and the

portfolio compositions have been in-line with expectations.

In order to achieve the goals set by our customers in early

2010, continued development of BVF in each and every

business line was paramount to our success. In particular,

for investment requirements:

The average interest of 2010 deposit portfolio was

higher than that of the market

The Portfolios were constantly balanced to best meet

clients’ liquidity requirements

Credit limits agreed with customers were strictly

followed

The composition of equities and bonds were actively

managed to enhance the investment returns

Repo activities were carried out to take advantage of

market anomalies and further enhance the return of

client portfolios (where applicable).

Over the course of 2010, BVF worked closely with assigned

HSBC executives to strengthen the organisational and

operating structure of the business. In particular focus was

given to the organizational structure within BVF and specifi-

cally the creation and alignment of a new operating model

to enhance BVFs day-to-day efficiency.

2011 Business Plan

Over the course of 2011, BVF plans to further capitalise on

the progress made in 2010 and set about more granular

development in the area of risk, customer service, product

development and IT systems with the objective of interna-

tional best practise. In addition, BVF will focus on developing

a much closer working relationship and support the

‘joining-up’ of all of Bao Viet Holdings’ subsidiary businesses

to create a better service standard to its customers.

Ông TRẦN TRỌNG PHÚC

Tổng Giám đốc

BAO VIET HOLDINGS


42

BAO VIET FUND MANAGEMENT COMPANY

FINANCIAL INFORMATION CITED FROM THE FINANCIAL STATEMENTS AUDITED BY E&Y OF BAO VIET FUND MANAGEMENT COMPANY

Bao Viet Fund Management Company (‘BVF’) is a wholly

owned subsidiary of Bao Viet Holdings. Although estab-

lished as a separate subsidiary in its own right in late 2005,

Bao Viet has over 15 years of experience in investment and

capital markets.

The current financial assets under management of BVF has

increased steadily giving the company the enviable

position of being one of the top two fund management

companies in Vietnam by asset size. BVF’s assets under

management cover a wide spectrum of services for clients

including the management of ‘funds’ and specific

mandated accounts.

Bao Viet Fund Management Com-

pany is striving towards its goal of

international best practice in terms

of fund management and general

investment capabilities.



ASSETS

CURRENT ASSETS 86,925,900,559 99,189,276,182

Cash and cash equivalents 12,029,966,055 5,948,360,103

Short-term investments 46,770,461,000 66,158,383,980

Short-term receivables 24,834,282,553 26,639,994,156

Other current assets 3,291,190,951 442,537,943

FIXED ASSETS AND LONG-TERM INVESTMENTS 780,740,123 1,690,771,416

Fixed assets 780,740,123 1,690,771,416

TOTAL ASSETS 87,706,640,682 100,880,047,598

RESOURCES

LIABILITIES 17,331,184,962 16,830,739,231

Current liabilities 17,120,153,829 14,950,234,182

Non-current liabilities 211,031,133 1,880,505,049

OWNER’S EQUITY 70,375,455,720 84,049,308,367

Capital 70,375,455,720 84,049,308,367

Chartered capital 50,000,000,000 50,000,000,000

Undistributed retained earnings 20,375,455,720 34,049,308,367

TOTAL LIABILITIES AND OWNERS’ EQUITY 87,706,640,682 100,880,047,598

ITEMSCurrent year

VND

Previous year

VND

Revenues from operating activities 45,771,288,984 56,533,849,791

Expenses from operating activities (84,325,650) (62,393,042)

45,686,963,334 56,471,456,749

Financial income 9,888,136,221 10,479,555,255

Financial expenses - 2,798,824,000

General and administration expenses (32,776,957,880) (31,162,150,466)

Other income 301,964,328 198,940,445

Other expenses (26,927,681) (35,217,075)

23,073,178,322 38,751,408,908

20,759,969,610 36,214,710,562


VND


VND

Mr. BUI TUAN TRUNG


Bao Viet Bank continued to make progress in consolidating the organisational structure, investing in IT systems, developing its network, strengthening its product develop-ment and growing its operational scale, targeting business efficiency and security.


In 2010, Bao Viet Bank has made impressive gains in terms of

business scale growth and profit. In summary this translates

to total asset of VND13,718 billion, an increase of 88.69%

against 2009; profit before tax of VND176.6 billion, up 131%

against 2009; network expansion with 26 transaction offices,

up 135% against 2009.

Despite the financial market turbulence and tough competi-

tion, in the second year of operation, BVB has continued to

consolidate the organizational structure, invest in IT systems,

develop its network, strengthen product development and

grow the operation scale, security. The key aim remains both

business efficiency and security. The bank has succeeded in

fulfilling its business and organizational structure develop-

ment. It is encouraging that with a debt balance of VND5,615

billion, Bao Viet Bank currently has no bad debts.

Solutions to enhance and develop the foundations built in 2010:

Complete the organizational structure: during 2010, BVB has

completed the modern banking management model where

functions like ”revenue generation”, ”risk management” and

”operations” are specialised; BVB has also applied centralized

management; carried out direct business management by section

(Corporate banking and Retail banking)

Develop new products: during 2010 BVB has developed 16 new

products, focused on retail products and bancassurance. BVB has

become one of the banks with the biggest number of bancassur-

ance products on the market.

Develope the modern network and distribution: provide 15

outlets more in major markets, develop internet banking .

2011 Business Plan

In 2011, BVB aims to maintain the strong growth demon-

strated in 2010 in terms of business efficiency and scale with

the total asset growth of 81% and 13% growth of profit before

and after tax. This will include expanding and developing the

network. So In order to achieve these targets, the bank shall

begin implementing key solutions to overcome outstanding

issues and enhance inherent strengths, including boosting

capital mobilization, developing credit and monetary trading,

creating a breakthrough in card trading and ebanking, estab-

lishing a proper strategy and regime to promote bancassur-

ance revenue growth, strengthening marketing and commu-

nications to raise customers’ awareness of BVB in the market.

Bao Viet Commercial Joint Stock Bank (BVB) is currently 52% owned

by Bao Viet Holdings. Established in December 2008 with official

operations commencing in January 2009, BVB applies the advanced

centralized corporate governance model based on the modern IT

system and core banking, which directly and constantly connects all

branches/transaction offices. This ensures a high quality and timely

provision of banking products and services to our customers.

BAO VIET COMMERCIAL JOINT STOCK BANK


FINANCIAL INFORMATION CITED FROM THE FINANCIAL STATEMENTS AUDITED BY E&Y OF BAO VIET COMMERCIAL JOINT STOCK BANK

13,718VND Billion

growth 88%

Total Assets


31 December 2010

VND

S31 December

VND

ASSETS

Cash on hand, gold and gemstones 122,623,520,804 32,183,579,905

Balances with State Bank of Vietnam (“the SBV”) 238,513,449,731 195,829,359,746

Due from the banks 4,355,565,558,413 3,643,677,486,369

Trading securities 674,416,600,000 -

Loans and advances to customers 5,581,744,627,368 2,250,149,842,704

Investment securities 2,288,627,529,102 949,066,441,037

Fixed assets 80,699,211,213 47,587,936,017

Other assets 375,680,623,865 151,260,583,764

TOTAL ASSETS 13,717,871,120,496 7,269,755,229,542

LIABILITIES

Borrowings from the Ministry of Finance and the SBV 1,593,235,333,373 420,798,732,663

Deposits and borrowings from other banks 3,019,960,785,943 1,709,021,432,606

Customer deposits and other amounts due to customers 7,291,211,679,405 3,514,340,257,846

Other liabilities 165,592,643,276 62,486,793,925

TOTAL LIABILITIES 12,070,000,441,997 5,706,647,217,040

OWNER’S EQUITY 1,647,870,678,499 1,563,108,012,502

Capital and reserves 1,528,365,919,714 1,509,150,661,813

Capital 1,500,000,000,000 1,500,000,000,000

Reserves 28,365,919,714 9,150,661,813

TOTAL LIABILITIES AND OWNER’S EQUITY 13,717,871,120,496 7,269,755,229,542

Interest and similar income 920,720,951,902 351,806,966,712

Interest and similar expenses (632,649,507,831) (188,107,295,381)

Net interest and similar income 288,071,444,071 163,699,671,331

Fees and commission income 15,833,714,048 2,789,620,472

Fees and commission expenses (5,546,370,401) (1,292,449,919)

Net gain/(loss) from fees and commission income 10,287,343,647 1,497,170,553

Net gain/(loss) from foreign currencies trading 13,111,279,638 114,949,978

Net gain/(loss) from securities trading 43,993,322,604 (29,487,706)

Net gain/(loss) from securities investment 702,397,011 -

Net other operating income 522,998,343 39,289,848

TOTAL OPERATING INCOME 356,688,785,314 165,321,594,004

OPERATING EXPENSE (149,837,064,141) (80,029,804,294)

206,851,721,173 85,291,789,710

Provision for credit losses (30,159,694,493) (8,797,229,101)

PROFIT BEFORE TAX 176,692,026,680 76,494,560,609

132,519,020,010 63,108,012,502

Basic earnings per share 884 421

ITEMSCurrent year

VNDPrevious year

VND

BAO VIET HOLDINGS


44

Mr. PHAN DAO VU


Established in 1999, Bao Viet Securities Joint Stock Company

(BVSC) is the first securities joint stock company incorporated

in Vietnam with the initial charter capital of VND49 billion.

Today, the company charter capital has reached over VND722

billion, 59.92% of which is contributed by Bao Viet Holdings.

BVSC business lines include securities brokerage services,

securities investment advisory and investment banking,

underwriting, enterprise ownership, form conversion

advisory, issue advisory, listing advisory, corporate finance

advisory, merger and acquisition advisory, corporate

governance advisory, and other financial advisory services.


2010 has recorded a key milestone for BVSC. Being the first

securities company incorporated in Vietnam, with over 10

years of development and experience, BVSC has attempted

to actively contribute to the market development and play a

pioneering role.

In 2010, despite facing difficulties caused by unstable

markets, the company Board of Management and employ-

ees have made encouraging successes. The revenue from

underwriting and issue agent has exceeded the plan by 32%.

Revenue generated from deposit and others also have

exceeded the 2010 plan by 2% and 99%, respectively.

Key policies that have been implemented:

Focus on strengthening areas that generate sustainable

revenue growth such as brokerage, investment advisory

and investment banking services;

Consolidate and stablize the organizational structure and

enhance investment in human resources development;

Provide new products and services including the

BVS@Trade online trading and BVS@45 analysis to serve

investors

Invest in IT development

2011 Business Plan

In 2011, BVSC aims to maintain the strong growth demon-

strated in 2010 in terms of business efficiency and scale with

the total asset growth of 81% and 13% growth of profit before

and after tax. This will include expanding and developing the

network. So In order to achieve these targets, the bank shall

begin implementing key solutions to overcome outstanding

issues and enhance inherent strengths, including boosting

capital mobilization, developing credit and monetary trading,

creating a breakthrough in card trading and ebanking, estab-

lishing a proper strategy and regime to promote bancassur-

ance revenue growth, strengthening marketing and commu-

nications to raise customers’ awareness of BVB in the market.

2010 was the year for Bao Viet

Securities to focus on strengthen-

ing the organizational structure,

applying IT to meet customers’

demands for online trading and

investment analysis; boost busi-

ness development in the fields

that generate stable revenue

growth and enhance investment

risk management.

BAO VIET SECURITIES JOINT STOCK COMPANY


FINANCIAL INFORMATION CITED FROM THE FINANCIAL STATEMENTS AUDITED BY E&Y OF BAO VIET SECURITIES JOINT STOCK COMPANY


ASSETS31 December 2010

VND

31 December 2009

VND

CURRENT ASSETS 1,103,765,229,069 1,268,338,449,109


Short-term investments 634,281,294,280 732,992,652,378

Current accounts receivable 175,208,255,555 56,500,501,323

Other current assets 3,399,848,224 3,037,993,449

NON-CURRENT ASSETS 514,255,891,337 507,656,860,022

Fixed assets 14,772,009,454 13,926,692,554

Long-term investments 486,997,610,397 479,936,000,000


TOTAL ASSETS 1,618,021,120,406 1,775,995,309,131

LIABILITIES 471,985,576,730 537,151,954,844


Non-current liabilities 60,907,731 68,253,001

OWNERS’ EQUITY 1,146,035,543,677 1,238,843,354,287

Contributed charter capital 722,339,370,000 722,339,370,000

Share premium 610,253,166,720 610,253,166,720

Undistributed earnings and other funds (186,556,993,043) (93,749,182,433)

TOTAL LIABILITIES AND OWERS’ EQUITY 1,618,021,120,406 1,775,995,309,131

ITEMSCurrent year

VND

Previous year

VNDITEMS

Current year

VND

Previous year

VND

Revenues 238,908,803,628 292,205,149,076

Operating expense (258,366,846,148) (53,144,117,820)

General and administrative expense (72,490,788,705) (65,157,617,047)

Other income 16,015,015 656,880,561

Other expense (798,494,400) (90,893,452)

(92,731,310,610) 174,469,401,318

(92,731,310,610) 174,469,401,318

Basic earnings per share (1,284) 3,677

ANNUAL REPORT 2010

46BAO VIET HOLDINGS

47

Mr. NHU DINH HOA


ANNUAL REPORT 2010

48

After two years of operation, BVIN-

VEST has improved the efficiency

of Holdings’ property manage-

ment and usage, progressively

proving its prestige as a profes-

sional real estate developer and

service provider.

Under Baoviet Holdings’ strategy to develop multiple invest-

ment and financial services, Baoviet Invest Joint Stock

Company (BVINVEST) was established in January 2009 and

has been operating in property investment, trading, and

supporting services with VND100 billion charter capital.

The performance of BVINVEST in 2010 has been encourag-

ing. Total revenue has reached VND98 billion, four times

larger than that of 2009. Profit before tax has been VND3.3

billion, growing by 71% against 2009.

In addition to investing in property projects and property

trading, the company has carried out construction equip-

ment and machines trading, import and export, and

completed 2010 revenue objectives despite market move-

ments.

In terms of building management, BVINVEST has absorbed

and applied the advanced management techniques and

methods to upgrade the building management quality for

Baovie buildings including No. 8 Le Thai To, No. 71 Ngo Si

Lien - Hanoi and No. 233 Dong Khoi – Ho Chi Minh City to

international standards.

Looking ahead to 2011, with an aim to become one of the

leading property investors in Vietnam, BVINVEST has set out

the following development objectives: 200% revenue

growth rates, equivalent to VND203 billion and VND27

billion profit before tax, eight times larger than that of 2010.

In order to achieve the above objectives, the company will

implement key solutions including consolidating the

organizational structure, enhancing the professionalism

within the company, improving building management

capacity, and focusing on the execution of real estate invest-

ment and construction projects.

BAO VIET HOLDINGS

FINANCIAL INFORMATION CITED FROM THE FINANCIAL STATEMENTS AUDITED BY E&Y OF BAOVIET INVEST


BAOVIET INVESTMENT JOINT STOCK COMPANY


ASSETS31 December 2010

VND

31 December 2009

VND

CURRENT ASSETS 156,654,801,656 133,898,744,922


Current account receivables 55,355,283,664 14,615,981,944

Inventories 92,758,996,462 86,881,533,090

Other current assets 19,863,600 379,651,090

NON-CURRENT ASSETS 42,230,918,915 41,680,262,866

Fixed assets 1,349,793,789 1,420,887,804

Other long-term assets 912,792,126 291,042,062

39,968,333,000 39,968,333,000

TOTAL ASSETS 198,885,720,571 175,579,007,788

RESOURCES

LIABILITIES 95,226,805,182 74,150,904,412


OWNERS’ EQUITY 103,658,915,389 101,428,103,376

Contributed chartered capital 100,000,000,000 100,000,000,000

Undistributed earnings and other funds 3,658,915,389 1,428,103,376

TOTAL LIABILITIES AND OWNERS’ EQUITY 198,885,720,571 175,579,007,788

ITEMS

Revenues from sale of goods and rendering of services 95,961,009,629 19,701,041,029

Costs of goods sold and services rendered (87,940,083,864) (17,174,828,650)

1,934,716,208 5,213,919,053

(18,600,372) (34,710,690)

Selling expenses (653,324,459) -

General and administrative expenses (6,024,117,298) (5,962,386,347)

Other income - 18,000,000

Other expenses - 30,000,000

- (12,000,000)

3,259,599,844 1,731,034,395

2,444,699,882 1,428,103,376

Earning per share 244 143

Current year

VND

Previous year

VND

49

Mr. BUI THANH NGUYEN


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COMMUNITY INVOLVEMENT

AND SHAREHOLDER RELATIONS

11/6/2010

19/1/2010

19/6/2010

17/9/2010

15/10/2010

Bao Viet launches a new brand identity

Bao Viet Insurance increases its charter capital to VND1,500 billion

Bao Viet brand wins ’Top 20 famous Vietnamese brand’ award

Bao Viet Life Chief Executive Officer receives 2010 Thanh Giong Cup

Bao Viet granted the Second rank I n d e p e n d e n c e Medal

1

2

3

4

5

20/10/2010

1965 – 2010

26/11/2010

2010

2010

Bao Viet 45th anniversary

Bao Viet Bank connects with Banknet to serve customers

Bao Viet Securities launches BVS@Trade online trading

Bao Viet invests VND15.5 billion in community activities in 2010

6

7

8

9

10Bao Viet Training Center conducts training for over 3,270 participants under the learning map

TEN HIGHLIGHTS IN 2010

ANNUAL REPORT 2010

52BAO VIET HOLDINGS

53

COMMUNITY INVOLVEMENT

ANNUAL REPORT 2010

54BAO VIET HOLDINGS

55

Bao Viet Senior

Management

attend the

opening

ceremony of a

kindergarten in

Nam Duong

commune

2010 highlights:

Besides pursuing its business goals, Bao Viet also dem-

onstrates great care for the community through its

corporate social responsibility activities.

We also unite with the nation to resolve social issues,

contributing to the common economic growth and

maintaining social stability. Bao Viet community activi-

ties focus on four major areas: youth projects, care for

the aged, disaster recovery, and poverty alleviation.

Bao Viet joins the ’2009

Hands in Hands’ and

donates VND25 billion to

the poor

Bao Viet presents Kim

Dong prizes for the

school year of

2009 - 2010

Bao Viet Holdings

activities on the occasion

of Invalids – Martyrs’ Day

27 July 2010

Bao Viet sponsors

’Mobile Library’ project

to improve literacy

among students in Da

Nang

Bao Viet joins hands to

recover flood impacts in

the Central area

TẬP ĐOÀN BẢO VIỆT

ANNUAL REPORT 2010

56BAO VIET HOLDINGS

57

INVESTOR RELATIONS

The publishing of the audited VAS

and IFRS quarterly financial

statements, together with the

frequent meetings and open

discussions with investors are

among Bao Viet’s efforts to make

our information open and

transparent in accordance with the

advanced global corporate gover-

nance standards.

The website for Bao Viet Holdings -

www.baoviet.com.vn - has been

upgraded to make it more user-

friendly and introduce a quicker,

more convenient and easier way

to access information. Investors

can find useful information

related to business performance,

events, financial information, and

share price.

In 2010, Bao Viet has strengthened its

investor relations and communications

capability. Together with the input of HSBC

experts, we are enhancing our ability to

meet requests for information from share-

holders.

In addition to daily services related to

shareholder certificate management, we

also improved shareholder service quality

in the following ways in 2010:

Publishing information promptly and

comprehensively, including audited

quarterly financial statements to the

media, announcing IFRS financial

statements.

Promptly advising updates and

changes to Bao Viet’s business opera-

tions to ensure openness, transpar-

ency and professionalism.

Upgrading and investing in the corpo-

rate website to better meet sharehold-

ers’ information requirements.

New look of Bao Viet websiteContact details: Public Relations Division Bao Viet Holding No. 8 Le Thai To, Hanoi

30A PROGRAM IS THE KEY SOCIAL SECURITY

PROGRAM OF BAO VIET HOLDINGS

Mr. NGUYEN VAN DU

Vice Chairman of Bac Kan Province People’s Committee

w w w. b a ov i e t . co m . v n

Bao Viet employees actively participated in

community development programs in Pac Nam,

Bac Kan province to support and encourage poor

school children in their studying

Despite making certain socioeconomic improvements, Bac Kan is

still among the most disadvantaged provinces in the nation. Out

of the 122 communes in province, 64 have the proportion of poor

households of over 25%. Two rural districts, Ba Be and Pac Nam,

with the proportion of poor households of over 50% have taken

part in the Rapid and Sustainable Poverty Alleviation Program

under the Resolution No. 30a/2008/NQ-CP dated 28 December

2008 by the Government.

In accordance with the Resolution No. 30a by the Government,

Bao Viet Holdings since 2009 has extended a sincere care,

efficient and realistic support to the ethnic people in Pac Nam

rural district. In 2009, Bao Viet Holdings contributed VND2,050

million to rebuild 410 temporary houses (VND5 million per

house), visited and donated VND183 million to landslide and

flood victims in Nhan Mon and Cong Bang communes. In 2010,

VND5,448 million was donated to construct a medical center,

boarding schools, and purchase tables, chairs, beds for students.

For 2011, Bao Viet Holdings has committed to donate VND10

billion to this rural district for national standard medical centers

construction.

Thanks to the priceless donation from Bao Viet Holdings, and the

local government’s efficient use for the right purpose, Pac Nam

rural district people’s physical and mental lives have been gradu-

ally and considerably improved. The proportion of poor house-

holds of 56.15% in 2008 has reduced to 43.32% in 2010.

Bac Kan Province People’s Committee would like to express our

thanks to the kind attention and support from Bao Viet Holdings

shareholders, Board of Directors, Senior Management, and

employees as well as HSBC executives for the past time, and hope

to receive your further assistance in the future.

Under the 30a Program of the Government, in 2010, on the

basis of the project "Boarding school construction, school

equipment installation within the areas of the communal

secondary schools and medical centers” by the People’s

Committee of Pac Nam rural district, Bac Kan province, Bao

Viet has committed to donate VND5,448 billion for construc-

tion and purchasing items related to facilities including board-

ing house, medical center, kitchen, table, chair, etc.

In Que Phong rural district, Nghe An province, Bao Viet has

committed to donate VND4 billion to construct Muong Noc

commune Medical center, boarding houses for secondary

schools in communes including Tien Phong, Nam Giai, Nam

Nhoong, Cam Muon, Quang Phong, Tri Le and Hanh Dich.

To maintain the poverty alleviation commitment under the

30a Program in 2011, Bao Viet shall actively join the social

security program, committing to support the poor communes

all over the country. Investments in the development projects

in 2011 shall be focused on health care and education with

the estimated budget of VND15 billion. Our strong commu-

nity and social commitments will definitely enhance the

proud tradition of Bao Viet, and establish sustainable value as

a leverage for future development.

Dr. HOANG VIET HABAO VIET HOLDINGS SPOKESPERSON

Mr. NHAN CHIEMDEPUTY CHIEF OPERATING OFFICER

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FINANCIAL STATEMENTS

ANNUAL REPORT 2010

58

HUMAN RESOURCES DEVELOPMENT AND

EFFICIENT WORKING ENVIRONMENT ESTABLISHMENT

Being a financial services provider, Bao Viet understands that

human resources is our most crucial resource and asset.

By 2010, the total number of Bao Viet Holdings employees

was 5,520. During the technology transfer process with

HSBC, many HSBC executives have participated in and been

directly in charge of embedded Bao Viet Holdings leadership

roles, and experienced the ongoing innovation and devel-

opment together with Bao Viet people.

Bao Viet is implementing the human resources develop-

ment strategy based on clearly defining functions and

duties, managing staff performance, training and develop-

ing people, and offering good benefits. At the same time, we

are developing a dynamic and performance oriented enter-

prise culture. These initiatives are being carried out step by

step in Bao Viet Holdings and the subsidiaries. Training and personal development are among the

priorities reflected in Bao Viet’s strategy for human

resources development.

In 2010, Bao Viet Training Center conducted

training for over 3,272 participants under the

learning map. Our 2011 plan includes conducting

80 training courses, completing the learning map,

and preparing necessary conditions for online

training.

Dr. PHI TRONG THAODirector of Bao Viet Training Center

Performance management system to monitor and

appraise the objectives implementation and apply the

performance based salary. This is regarded as an efficient

tool to create the performance oriented working culture.

Revised reward system aimed at the performance based

salary, a competitive salary system in comparison with

the market, internal equality, and salary differences for

people with different performance.

Build up and apply the regulations and standards to

establish and execute the Job Descriptions, develop

the job grade system to evaluate and rate employees’

capacity

Develop learning map system to systematically and

methodically improve employees in order to meet

business requirements, create a continuous learning and

sharing culture within the enterprise to strengthen the

resources competitive capacity.

These positive changes have been contributing to the

implementation of Bao Viet business strategy and group

operations, creating the best working environment, enhanc-

ing the personal performance and development of all Bao

Viet employees.

Dr. PHHI TROONG TTHAOO

Bao Viet Holdings

Report of the Board of Directors and Audited Separate Financial Statements

CONTENTS

Pages

REPORT OF THE BOARD OF DIRECTORS 62 - 65

AUDITED SEPARATE FINANCIAL STATEMENTS

Independent auditors’ report 66

Separate balance sheet 67 - 68

Separate income statement 69

Separate cash flow statement 70

Notes to the separate financial statements 71 - 96

AN

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ANNUAL REPORT 2010

62BAO VIET HOLDINGS 2010

63

REPORT OF THE BOARD OF DIRECTORSThe Board of Directors of Bao Viet Holdings is pleased to present its report and Bao Viet Holdings’ separate financial statements as at and for the year ended 31 December 2010.

CORPORATE INFORMATION

Bao Viet Holdings (herein referred to as the “Holdings”) was previously a state-owned company that was equitized and became a joint stock company pursuant to Business License approved by Hanoi Authority for Planning and Investment on 15 October 2007. The Business License was subsequently modified the first time on 29 October 2009, the second time on 18 January 2010 and the third time on 10 May 2010. Below is a summary of information extracted from the third modified Business License dated 10 May 2010:

Business License Number: 0100111761

Registered company name: Bao Viet Holdings

Head Office’s address: 8 Le Thai To Street, Hoan Kiem District, Hanoi

Operating activities: Equity investments in subsidiaries and associates; financial services and other related services under Vietnamese Laws; real estate businesses;

Charter capital: VND 6,267,090,790,000

Number of registered shares: 626,709,079

Legal representative: Ms. Nguyen Thi Phuc Lam - Chief Executive Officer

The Holdings has listed its entire outstanding stocks of 626,709,079 shares, including the issuance of 53,682,474 shares through a private placement on 18 January 2010 to its strategic partner, HSBC Insurance (Asia Pacific) Holdings Limited, on the Ho Chi Minh Stock Exchange (HOSE). The listing of the additional 53,682,474 shares was approved by the HOSE on 21 April 2010.

Subsidiaries and dependently accounted units of the Holdings are as follow:

Subsidiaries Address Principal activities% directly owned

Bao Viet Insurance Corporation (“Bao Viet Insurance”)

35 Hai Ba Trung Street, Hoan Kiem District, Hanoi

General insurance products, reinsurance, loss adjustment

100%

Bao Viet Life Corporation (“Bao Viet Life”)

1 Dao Duy Anh Street, Dong Da District, Hanoi

Life insurance products, reinsurance 100%

Bao Viet Fund Management Company (“BVF”)

8 Le Thai To, Hang Trong Ward, Hoan Kiem District, Hanoi

Management of investment funds and in-vestment portfolios

100%

Bao Viet Securities Joint Stock Company (“BVSC”)


Securities trading, brokerage, portfolio management, underwriting, consulting and securities placement

59.92%

Bao Viet Commercial Joint Stock Bank (“Baoviet Bank”)


Banking services 52%

Bao Viet Investment Joint Stock Company (“BVInvest”)

71 Ngo Sy Lien, Dong Da District, Hanoi

Real estate investment and consulting, pro-vision of machinery and equipment

55%

Bao Viet Au Lac Limited Compa-ny (“BV - Au Lac”)

Ha Lieu, Phuong Lieu, Que Vo District, Bac Ninh Province

Vocational driving training 60%

Dependently accounted units Address

Bao Viet Training Centre 8 Le Thai To, Hang Trong Ward, Hoan Kiem District, Hanoi

Infrastructure Construction Project Management Unit 71 Ngo Sy Lien, Dong Da District, Hanoi

RESULTS AND DIVIDENDS

The net profits of the Holdings for the year ended 31 December 2010 were VND 852,068,230,108 (for the year ended 31 December 2009: VND 807,785,178,469).

In April 2010, Bao Viet Holdings declared and approved to pay out dividends to its shareholders at the rate of 11% for the year 2009. The total dividend amount of VND 630,329,265,500 has been completely paid out during 2010.

SIGNIFICANT EVENTS

Below are the significant events during the year ended 31 December 2010:

On 18 January 2010, the Holdings issued 53,682,474 additional shares for an amount of VND 1,878,886,590,000 to HSBC Insur-ance (Asia Pacific) Holdings Limited (“HSBC Insurance”) through a private placement, which increased the shareholding of HSBC in Bao Viet Holdings from 10.31% to 18%. This share issuance to HSBC Insurance was made pursuant to the agreement between Bao Viet Holdings and HSBC Insurance and in accordance with Resolution 1527/2009/NQ-DHDCD dated 23 Decem-ber 2009 of Bao Viet General Shareholders’ Meeting. These additionally issued shares were listed on 21 April 2010 pursuant to the approval granted by the Ho Chi Minh Stock Exchange.

At the 2010 Annual General Meeting on 17 April 2010, the shareholders approved the plan to increase the Holdings’ charter capital to VND 6,800 billion to enable Bao Viet Holdings to pursue its strategy of increasing investment in core business sectors and continually enhancing its information system and processes in accordance with the strategy agreed at the equitization. The increase in charter capital was effected in January 2011.

On 11 June 2010, Bao Viet Holdings increased its investment in Bao Viet Insurance Corporation from VND 1,000 billion to VND 1,500 billion.

THE BOARD OF DIRECTORS AND SUPERVISORY BOARD

The members of the Board of Directors for the period from 1 January 2010 to the date of this report are:

Name Position Date of appointment

Mr. Le Quang Binh Chairman 04 October 2007

Ms. Nguyen Thi Phuc Lam Member 04 October 2007

Mr. Tran Huu Tien Member 04 October 2007

Mr. Tran Trong Phuc Member 04 October 2007

Mr. Nguyen Duc Tuan Member 04 October 2007

Mr. David Lawrence Fried Member 04 October 2007

Mr. Nguyen Quoc Huy Member 23 September 2009

REPORT OF THE BOARD OF DIRECTORS

ANNUAL REPORT 2010


65

The members of the Supervisory Board for the period from 1 January 2010 to the date of this report are:

Name Position Date of appointment Date of resignation

Mr. Nguyen Trung Thuc Chairman 04 October 2007

Mr. Tran Minh Thai Member 04 October 2007

Mr. Nguyen Ngoc Thuy Member 04 October 2007

Mr. Le Van Chi Member 04 October 2007

Mr. Christopher Edwards Member 17 April 2010

Ms. Marjory Miller Member 04 October 2007 17 April 2010

THE BOARD OF MANAGEMENT

The members of the Board of Management for the period from 1 January 2010 to the date of this report are:


Ms. Nguyen Thi Phuc Lam Chief Executive Officer 15 October 2007

Mr. Le Hai Phong Chief Financial Officer 30 June 2008

Chief Property & Estate Officer 1 February 2011

Mr. Luu Thanh Tam Chief Property & Estate Officer 30 June 2008 1 February 2011

Mr. Phan Tien Nguyen Chief Human Resources Officer 30 June 2008

Mr. Duong Duc Chuyen Chief Strategy Officer 30 June 2008

Chief Investment Officer 22 April 2010

Mr. Alan Royal Chief Information Officer 08 September 2008

Mr. Adrian Abbott Chief Risk Officer 22 April 2010

Mr. Pham Khac Dung Chief Operating Officer 30 June 2008 15 November 2010

EVENTS SINCE THE REPORTING DATE

In accordance with the Annual General Meeting’s Resolution No. 03/2010/NQ-DHDCD dated 17 April 2010, the Holdings issued ad-ditional shares to existing shareholders to increase its charter capital in January 2011. The number of shares issued was 53,762,355, which increased the Holdings’ charter capital to VND 6,804,714,340,000 on 14 January 2011. These additionally issued shares were approved by the Ho Chi Minh Stock Exchange to be listed on 18 February 2011.

There have been no other significant events occurring after 31 December 2010 which would require adjustments or disclosures to be made in the separate financial statements.

STATEMENT OF THE BOARD OF MANAGEMENT’S RESPONSIBILITY IN RESPECT OF THE SEPARATE FINANCIAL STATEMENTS

The Board of Management of Bao Viet Holdings is responsible for the separate financial statements of the financial period which give a true and fair view of the state of affairs of the Holdings as at 31 December 2010 and of its results and cash flows for the year then ended. In preparing these separate financial statements, 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 ex-plained in the separate financial statements; and

prepare the separate financial statements on the assumption that it will continue its operations on a going concern basis un-less it is inappropriate to presume that the Holdings will continue in business.

The Board of Management is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the financial position of the Holdings and ensuring that the accounting records comply with the registered accounting system. It is also responsible for safeguarding the assets of the Holdings and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Board of Management has confirmed to the Board of Directors that the Holdings has complied with the above requirements in preparing the separate financial statements.

APPROVAL OF THE SEPARATE FINANCIAL STATEMENTS

We hereby approve the accompanying separate financial statements which give a true and fair view of the separate financial posi-tion of the Holdings as at 31 December 2010 and the results of its operations and separate cash flows for the year then ended in accordance with the Vietnamese Accounting Standards and System and comply with the relevant statutory requirements.

On behalf of the Board of Directors:

Mr. Le Quang BinhChairman

Hanoi, Vietnam25 March 2011

REPORT OF THE BOARD OF DIRECTORS REPORT OF THE BOARD OF DIRECTORS

ANNUAL REPORT 2010


67

Code ITEMS Notes 31 December 2010VND

31 December 2009 VND

100 A. CURRENT ASSETS 5,808,051,586,311 4,158,808,819,789

110 I. Cash and cash equivalents 5 851,018,126,099 16,530,312,670

111 1. Cash 667,518,126,099 16,530,312,670

112 2. Cash equivalents 183,500,000,000 -

120 II. Short-term investments 6 3,740,108,825,556 3,176,729,847,461

130 III. Accounts receivable 1,206,045,137,574 963,931,728,224

131 1. Trade receivables 7 240,884,671,205 108,927,751,454

133 2. Receivables from related parties 8 963,674,281,695 854,333,957,588

135 3. Other receivables 9 1,486,184,674 670,019,182

140 IV. Inventory 124,195,000 535,706,172

150 V. Other current assets 10,755,302,082 1,081,225,262

151 1. Prepaid expense 10 9,731,061,326 -

158 2. Advances to employees 1,024,240,756 1,081,225,262

200 B. NON-CURRENT ASSETS 6,961,614,519,573 6,210,971,104,885

220 I. Fixed assets 541,575,089,338 447,987,553,936

221 1. Tangible fixed assets 11 456,128,626,035 186,396,038,084

222 Cost 534,271,735,023 240,959,607,879

223 Accumulated depreciation (78,143,108,988) (54,563,569,795)

227 2. Intangible fixed assets 12 37,256,991,136 13,947,900,474

228 Cost 60,846,699,942 32,220,757,228

229 Accumulated amortization (23,589,708,806) (18,272,856,754)

230 3. Construction in progress 13 48,189,472,167 247,643,615,378

250 II. Long-term investments 14 6,420,039,430,235 5,762,983,550,949

251 1. Investments in subsidiaries and BFV1 4,710,481,388,414 4,210,481,388,414

2522. Investments in associates and joint ventures

252,769,440,000 232,862,440,000

258 3. Other long-term investments 1,797,126,521,875 1,461,270,934,725

2594. Provision for impairment of long-term investments

(340,337,920,054) (141,631,212,190)

270 TOTAL ASSETS 12,769,666,105,884 10,369,779,924,674

SEPARATE BALANCE SHEETas at 31 December 2010

ANNUAL REPORT 2010


69

Code ITEMS Notes31 December 2010

VND31 December 2009

VND

300 A. LIABILITIES 2,259,606,670,990 1,933,355,471,426

310 I. Current liabilities 2,238,341,837,984 1,912,228,266,008

312 1. Trade payables 15 23,074,890,475 1,109,305,001

314 2. Statutory obligations 16 (398,325,815) 75,503,537,980

315 3. Payables to employees 17 20,258,970,199 6,197,547,272

317 4. Payables to related parties 18 1,463,223,728,574 1,324,966,605,661

318 5. Other payables 19 710,164,109,097 485,404,104,622

323 6. Bonus and welfare funds 20 22,018,465,454 19,047,165,472

330 II. Non-current liabilities 21,264,833,006 21,127,205,418

336 1. Provisions for severance allowance 21 21,264,833,006 21,127,205,418

400 B. OWNERS’ EQUITY 10,510,059,434,894 8,436,424,453,248

410 I. Owners’ equity 22 10,510,059,434,894 8,436,424,453,248

411 1. Contributed capital 6,267,090,790,000 5,730,266,050,000

412 2. Shares premium 3,076,807,671,197 1,734,745,821,197

416 3. Foreign exchange difference - 1,668,684,274

420 4. Undistributed profit 1,166,160,973,697 969,743,897,777

440TOTAL LIABILITIES AND OWNERS’ EQUITY

12,769,666,105,884 10,369,779,924,674

OFF-BALANCE SHEET ITEMS

ITEMS 31 December 2010 31 December 2009

1. Foreign currency U.S. Dollar (USD)

1,743,596.40 1,711,941.14

Mr. Nguyen Thanh Hai Mr. Le Hai Phong Ms. Nguyen Thi Phuc LamChief Accountant Chief Financial Officer Chief Executive Officer

25 March 2011

SEPARATE BALANCE SHEET (continued)as at 31 December 2010

Code ITEMS Notes Current yearVND

Previous yearVND

21 1. Income from operating activities 23 1,210,238,783,745 898,758,428,365

22 2. Expenses from operating activities 24 (198,841,308,054) 57,829,782,161

24 3. Gross operating profit 1,011,397,475,691 956,588,210,526

25 4. General and administration expenses 25 (158,116,554,023) (94,580,108,214)

30 5. Net operating profit 853,280,921,668 862,008,102,312

31 6. Other income 26 48,323,388,110 23,694,525,355

32 7. Other expenses 26 (14,476,993,530) (4,081,077,172)

40 8. Net other income 33,846,394,580 19,613,448,183

50 9. Profit before tax 887,127,316,248 881,621,550,495

51 10. Current enterprise income tax expense 27 (35,059,086,140) (81,014,026,134)

52 11. EIT reduction for 2008 27 - 7,177,654,108

60 12. Net profit after tax 852,068,230,108 807,785,178,469

61 13. Earning per share 29 1,366 1,410


25 March 2011

SEPARATE INCOME STATEMENTfor the year ended 31 December 2010

ANNUAL REPORT 2010


71

Code ITEMS NotesCurrent year

VNDPrevious year

VND

I. CASH FLOWS FROM OPERATING ACTIVITIES

01 1. Cash receipts from rendering of services and other revenue 696,984,803,846 147,931,049,444

03 2. Payments to employees (40,474,620,973) (42,709,794,750)

05 3. Payments for enterprise income tax (111,288,125,756) (95,987,938,444)

06 4. Other cash receipts 91,685,400,268 6,784,876,322

07 5. Other cash disbursements (7,781,663,960) (14,821,735,789)

20 Net cash flows from operating activities 629,125,793,425 1,196,456,783

II. CASH FLOWS FROM INVESTING ACTIVITIES

21 1. Payments for purchases and construction of fixed assets (123,303,077,063) (65,930,491,722)

22 2. Proceeds from disposal and liquidation of fixed assets - 23,017,345

25 3. Investments in bonds, shares and others (6,632,078,176,263) (3,868,730,362,126)

26 4. Proceeds from sale of investments 5,523,798,386,525 4,022,197,689,300

30 Net cash flows from investing activities (1,231,582,866,801) 87,559,852,797

III. CASH FLOWS FROM FINANCING ACTIVITIES

31 1. Additional capital contribution through share issues 1,878,886,590,000 -

36 2. Dividends paid to shareholders (630,329,265,500) (128,726,605,000)

373. Cash receipts from existing shareholders for the in-crease in charter capital

188,350,073,855 -

40 Net cash flows from financing activities 1,435,947,398,355 (128,726,605,000)

50VI. NET CASH INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

834,450,324,979 (39,970,295,420)

60 Cash and cash equivalents at the beginning of the period 16,530,312,670 56,469,344,502

61 Net foreign exchange difference 37,488,450 31,263,588

70 Cash and cash equivalents at the end of the period 5 851,018,126,099 16,530,312,670


25 March 2011

SEPARATE CASH FLOW STATEMENT for the year ended 31 December 2010

1. CORPORATE INFORMATION

Bao Viet Holdings (herein referred to as the “Holdings”) was previously a state-owned company that was equitized and became a joint stock company pursuant to Business License approved by Hanoi Authority for Planning and Investment on 15 October 2007. The Business License was subsequently modified the first time on 29 October 2009, the second time on 18 January 2010 and the third time on 10 May 2010. Current Business License number of the Holdings is 0100111761 pursuant to the third modi-fied Business License on 10 May 2010. Below is a summary of information extracted from the third modified Business License dated 10 May 2010:



Head Office’s address: 8 Le Thai To Street, Hoan Kiem District, Ha Noi

Operating activities:Equity investments in subsidiaries and associates; financial services and other related services under Vietnamese Laws; real estate businesses.





The structure of the Holdings’ shareholdings as at 31 December 2010 is as follows:

Shareholders No. of shares %

Founding shareholders 577,507,635 92.15%

The Ministry of Finance 444,300,000 70.89%

HSBC Insurance (Asia Pacific) Holdings Limited 112,807,635 18.00%

State Capital Investment Corporation 20,400,000 3.26%

Other shareholders 49,201,444 7.85%

Total 626,709,079 100%


NOTES TO THE SEPARATE FINANCIAL STATEMENTSas at and for the year ended 31 December 2010

ANNUAL REPORT 2010


73

The Holdings has the following subsidiaries and dependently accounted units:


Bao Viet Insurance Corporation (“Bao Viet Insurance”)



100%






Management of investment funds and invest-ment portfolios

100%



Securities trading, brokerage, portfolio man-agement, underwriting, consulting and securi-ties placement

59.92%





71 Ngo Sy Lien Street, Dong Da District, Hanoi

Real estate investment and consulting, provi-sion of machinery and equipment

55%

Bao Viet Au Lac Limited Com-pany (“BV - Au Lac”)

Ha Lieu, Phuong Lieu, Que Vo Dis-trict, Bac Ninh Province



Bao Viet Training Centre 8, Le Thai To, Hang Trong Ward, Hoan Kiem District, Hanoi


2. BASIC OF PREPARATION OF THE SEPARATE FINANCIAL STATEMENTS

2.1 Accounting standards and systems

The separate financial statements of the Holdings, which are expressed in Vietnam dong (“VND”), are prepared in accordance with the Vietnamese Accounting System and Vietnamese Accounting Standards issued by the Ministry of Finance as per the:

Decision No. 149/2001/QD-BTC dated 31 December 2001 on the Issuance and Promulgation of Four Vietnamese Standards on Accounting (Series 1);

Decision No. 165/2002/QD-BTC dated 31 December 2002 on the Issuance and Promulgation of Six Vietnamese Standards on Accounting (Series 2);


NOTES TO THE SEPARATE FINANCIAL STATEMENTS (continued)as at and for the year ended 31 December 2010

Decision No. 12/2005/QD-BTC dated 15 February 2005 on the Issuance and Promulgation of Six Vietnamese Standards on Ac-counting (Series 4); and

Decision No. 100/2005/QĐ-BTC dated 28 December 2005 on the Issuance and Promulgation of Four Vietnamese Standards on Accounting (Series 5).

Accounting Standard and guidance issued but not yet effective

Circular 210/2009/TT-BTC providing guidance for the adoption in Vietnam of the International Financial Reporting Standards on presentation and disclosures of financial instruments:

On 6 November 2009, the Ministry of Finance issued Circular 210/2009/TT-BTC providing guidance for the adoption in Vietnam of the International Financial Reporting Standards on presentation and disclosures of financial instruments. The adoption of the circular will require further disclosures and have impact on the presentation of certain financial instruments in the financial state-ments. The circular will become effective for financial years beginning on or after 1 January 2011.

2.2 Registered accounting documentation system

The registered accounting documentation system is the general journal voucher system.

2.3 Accounting currency

The Holdings maintains its accounting records in Vietnam dong (“VND”).

2.4 Fiscal year

The Holdings’ financial year starts on 1 January and ends on 31 December.

3. STATEMENT ON THE COMPLIANCE WITH VIETNAMESE ACCOUNTING STANDARDS AND SYSTEMS

The Board of Management confirms that the Holdings has complied with the Vietnamese Accounting Standards and Systems in preparing the separate financial statements. The Holdings has also followed the accounting policy for the recognition of the reval-ued land use rights as set out in Note 4.6.

The accompanying separate balance sheet, related separate income statement and separate cash flow statement and their uti-lisation are not designed for those who are not informed about Vietnam’s accounting principles, procedures and practices and furthermore are not intended to present the financial position and results of operations in accordance with accounting principles and practices generally accepted in countries other than Vietnam.

The separate financial statements reflect only the operations of the Holdings and its dependently accounted units for the year ended 31 December 2010. The consolidated financial statements which include the Holdings and its subsidiaries are prepared separately and independently from the separate financial statements. Users of these separate financial statements should read them together with the consolidated financial statements of the Holdings as at 31 December 2010 and for the year then ended in order to obtain full information on the consolidated financial position, results of operations and cash flows of the Holdings and its subsidiaries as a whole.


ANNUAL REPORT 2010


75

4.1 Changes in accounting policies and disclosures

The accounting policies adopted by the Holdings in preparation of the separate financial statements are consistent with those

followed in the preparation of the Holdings’ annual financial statements for the year ended 31 December 2009 except for the fol-

lowing changes in the accounting policies in relation to the following:

Application of Circular No. 244/2009/TT-BTC

During 2010, the Holdings implemented Circular No. 244/2009/TT-BTC dated 31 Dec 2009 issued by the Ministry of Finance on

amending and supplementing the enterprise accounting regime, which causes the following changes:

Stock dividend and bonus shares received are not recognized as income of the Holdings and the respective increase in number

of shares are only updated off balance sheet;

Bonus and welfare funds are reclassified from owner’s equity to liabilities.

Other than the reclassification of bonus and welfare funds presented in Note 32 to the separate financial statements, comparative

figures as at 31 December 2009 and for the year then ended are not restated as Circular 244/2009/TT-BTC does not require retro-

spective application.

Effects of changes in foreign exchange rates

For the year ended 31 December 2010, the Holdings has adopted Vietnamese Accounting Standard No. 10 - Effects of Chang-

es in Foreign Exchange Rates (the “VAS 10”). The VAS 10 differs from the accounting policy adopted in prior year under Circu-

lar 201/2009/TT-BTC issued on 15 October 2009 by the Ministry of Finance (the “Circular 201”) providing guidance for the

treatment of foreign exchange differences relating to the recognition of unrealised foreign exchange differences as follows:


4. SIGNIFICANT ACCOUNTING POLICIESTransaction Accounting treatment under VAS 10 Accounting treatment under Circular 201

Translation of short-term mone-tary assets and liabilities denomi-nated in foreign currencies.

All unrealised foreign exchange dif-ferences are taken to the separate income statement.

All unrealised foreign exchange differences are taken to the “Foreign exchange differences reserve” account in the equity section of the balance sheet and will be reversed in the following year.

Translation of long-term mon-etary liabilities denominated in foreign currencies at year end.

All unrealised foreign exchange dif-ferences are taken to the separate income statement.

- All unrealized foreign exchange gains are taken to the income statement.- All foreign exchange losses will be charged to the income statement. However, if the charging of all for-eign exchange losses results in net loss before tax for the company, part of the exchange losses can be de-ferred and allocated to the income statement within the subsequent years. In any case, the total foreign exchange loss to be charged to current year’s income statement must be at least equivalent to the foreign exchange losses arising from the translation of the current portion of the long-term liabilities, while the remaining portion of the foreign exchange losses can be deferred in the balance sheet and allocated to the income statement within the subsequent five years.

As the impacts of this change in accounting policy on the opening balance of 2010 are immaterial, they have been recorded in this year separate income statement.

4.2 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash at banks, demand deposits and short-term, highly liquid investments with an original maturity of three months or less which are readily convertible into known amounts of cash and that are subject to an insignificant risk of change in value.

4.3 Financial investments

Investment in subsidiaries

Investments in subsidiaries over which the Holdings has control are carried at cost in the separate financial statements. Appropri-ated profits from accumulated profits of the subsidiaries arising subsequent to the date of acquisition are recognised in the sepa-rate income statement. Distributions from sources other than from such profits are considered a recovery of investment and are deducted from the cost of the investment.

A listing of the Holdings’ subsidiaries is shown in Note 14.1.


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77

Investment in BVF1

The capital contribution to BVF1 is accounted for at cost. Profit or loss arising from this investment is recognized in the income statement based on the profit appropriation notice from the Board of Representatives at the reporting date. The provision for impairment losses of investment to BVF1 is recognized when the carrying value of the investment is higher than net asset value (NAV) of BVF 1 at the balance sheet date.

Further information of BVF1 and capital contribution of each trustees are shown in Note 14.2.

Investment in joint ventures, associates

Investments in joint ventures, associates are accounted for under the cost method of accounting in the separate financial state-ments. Distributions from the accumulated net profits of the joint ventures, associates arising subsequent to the date of acquisition by the Holdings are recognized as income in the separate income statement. Distributions from sources other than such profits are considered a recovery of investment and are deducted from the cost of the investment.

A listing of the Holdings’ joint ventures and associates is shown in Note 14.3.

Investments in securities and other investments

All financial investments are initially recognised at cost and subsequently are recognized at cost less provision for impairments.

Short-term investments comprise holdings of listed shares, government bonds, corporate bonds and other liquid securities which are readily realisable and are intended to be held for not more than one year.

Long-term investments include listed and unlisted shares, government bonds, corporate bonds, trusted loans and term-depos-its at financial institutions, which are intended to be held for more than one year.

Investments held under trusted investment management contracts

Assets and liabilities under the trusted investments contracts have been aggregated to the separate balance sheet as the manage-ment believes that it better reflects the operations of the Holdings.

Provision for devaluation of investments in securities and other investments

The primary source of reference for impairment provisioning is Circular 228/2009/TT-BTC dated 07 December 2009 issued by the Ministry of Finance (the “Circular 228”). Details of the basis of determination of impairment of investment are as follows:

Listed securities

For listed securities that are carried at cost in accordance with Vietnamese Accounting Standards, if there is objective evi-dence that their market value is lower than book value, the provision amount is measured as the difference between the se-curities’ carrying amount and the closing market value as of the balance sheet date in accordance with the following formula given in Circular 228:


Provision amount =Number of impaired securities as at report-ing date

xCarrying value of secu-rities

- Market value of securities

Unlisted securities

For unlisted shares, the following methods are used in calculating the fair value in order to compare with book value to determine the provision amount:

for securities registered to be traded on the trading market of unlisted public companies’ securities (UPCom), fair value is deter-mined as the average trading prices quoted on UPCom;

for securities yet registered to be traded on UPCom, fair value is determined as the average price of public quotations from at least three securities companies as at reporting date;

for securities that fair value is not determinable, the Holdings does not make provision for devaluation.

Equity investments in other entities

For equity investments in other entities and other long-term investments, a provision for devaluation is set up if the investees are suffering from loss (except where such loss is already included in their business plans prior to the investment).

The amount of provision for each investment shall not exceed the invested capital and is calculated according to the following formula given in Circular 228:


Provision amount =Actual capital contribu-tions of investors in the investee

– Actual owners’ equity

x

Investment capital of the Holding

Actual capital contributions of investors in the investee

The basis for setting up the provision is the positive difference between the investors’ actual capital contributions and the actual amount of owners’ equity in the investee’s financial statements at the balance sheet date.

The provision amount presented in the balance sheet of the Holdings excludes the provision for devaluation of investments under the trusted investments contracts.

4.4 Receivables

Receivables comprise of trade receivables and other receivables that are initially recognized at cost and subsequently are recog-nized at cost less provision for impairment.

Provision for impairment of receivables will be made base on their overdue ages. For receivables that are undue and owed by debtors who have become bankrupt or are undergoing dissolution pro¬cedures, are missing, have absconded, are prosecuted, detained or tried by law enforcement bodies, are serving sentences or have deceased, provision should be estimated based on the amount of expected loss. The increase or decrease to the provision balance is recorded as an administrative expense in the separate income statement.

The Holdings uses the provision policy regulated by the Ministry of Finance in Circular 228/2009/TT-BTC dated 07 December 2009 (“Circular 228”). Details are as follows:

Overdue receivable aging Allowance rate

Overdue from six months to less than one year 30%

Overdue from one to less than two years 50%

Overdue from two to less than three years 70%

Overdue over three years 100%

ANNUAL REPORT 2010


79


4.5 Tangible fixed assets

Tangible fixed assets are stated at cost less accumulated de-preciation.

The cost of a tangible fixed asset comprises of its purchase price and any directly attributable costs of bringing the tangi-ble fixed asset to working condition for its intended use.

Expenditures for additions, improvements and renewals are added to the carrying amount of the assets and expenditures for maintenance and repairs are charged to the separate in-come statement as incurred.

When tangible fixed assets are sold or retired, their costs and accumulated depreciation are removed from the balance sheet and any gain or loss resulting from their disposal is included in the separate income statement.

4.6 Intangible fixed assets

Intangible fixed assets are stated at cost less accumulated am-ortisation.

The cost of an intangible fixed asset comprises of its purchase price and any directly attributable costs of preparing the intan-gible fixed asset for its intended use.

Expenditures for additions, improvements are added to the carrying amount of the assets and other expenditures are charged to the separate income statement as incurred.

When intangible fixed assets are sold or retired, their costs and accumulated amortisation are removed from the balance sheet and any gain or loss resulting from their disposal is in-cluded in the separate income statement.

Land use rights are recognised based on the revalued amount as determined by an independent valuer for the land areas that the Holdings had land use right certificates, or was in the process of obtaining the land use right certificates, as at 31 De-cember 2005 for the equitization purpose of the Holdings.

4.7 Depreciation and amortisation Depreciation and amortisation of tangible fixed tangible and intangible fixed assets is calculated on a straight-line basis over the estimated useful lives of these assets, which are as follows:

Buildings 6 - 25 yearsMachinery and equipment 3 - 7 yearsMeans of transportation and communication 6 - 8 yearsOffice equipment 3 - 6 yearsOther fixed assets 4 yearsSoftware 3 - 5 years

Land use rights with indefinite terms are not amortised in ac-cordance with Circular 203/2009/TT-BTC issued by the Ministry of Finance on 20 October 2009.

4.8 Payables and accruals

Payables and accruals are recognised for the amount to be paid in the future for goods and services received, whether or not billed to the Holdings.

4.9 Employee benefits

Post employment benefits

Post employment benefits are paid to retired employees of the Holdings by the Vietnam Social Insurance Agency. The Holdings is required to contribute to these post employment benefits by paying social insurance premiums to the Vietnam Social Insur-ance Agency at the rate of 16% of employee basic salaries on a monthly basis since 1 January 2010 (15% for the periods before 1 January 2010). The Holdings has no further obligation concern-ing post employment benefits for its employees other than this.

Voluntary resignation and retrenchment benefits

Voluntary resignation benefits: the Holdings has the obligation, under Section 42 of the Labor Code amended on 2 April 2002, to pay an allowance to voluntarily resigning employees, equal to half of one-month’s basic salary for each year of employ-ment plus wage allowances (if any) until 31 December 2008. Commencing 1 January 2009, the average monthly salary used in this calculation will be revised at the end of each reporting period based on the average monthly salary of the most recent 6 months up to the reporting date;

Retrenchment benefits: the Holdings has the obligation, under Section 17 of the Labor Code, to pay an allowance to employ-ees who are retrenched as a result of organizational restructur-ing or technological changes. In such cases, the Holdings shall pay to employees an allowance for loss of work equivalent to the aggregate amount of one month salary for each year of employment, but no less than two month salary.

Although the obligations under Sections 17 and 42 are compul-sory, the implementation of these Sections is subject to detailed guidance by the Ministry of Finance. In accordance with Circular 64/1999/TT-BTC dated 7 June 1999 and subsequently Circular 82/2003/TT-BTC dated 14 August 2003 by the MOF which super-seded Circular 64, companies are required to calculate retrench-ment allowance at the rate of 1-3% per annum, of the basic sal-ary fund; and the outstanding balance of employee termination

reserve which was previously created at 10% from the profit after tax and after appropriation for supplementary capital reserve in accordance with the guidance of Circular 64 should be transferred to the retrenchment allowance as allowed under Circular 82.

Unemployment Insurance Fund

According to the Social Insurance Law No. 71/2006/QH11 is-sued on 29 June 2006, and Decree 127/2008/ND-CP issued on 12 December 2008, employee and employer are required to contribute 1% each of employee basic salary to the unem-ployment insurance fund, with effect from 01 January 2009. Further, the Government will also contribute 1% of the basic salary of each employee to this fund. Vietnam Social Insurance Agency is responsible for the collection, distribution and man-agement of the Fund.

4.10 Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Holdings and the revenue can be reliably measured. The following specific revenue recog-nition criteria must also be met before revenue is recognised:

Interest

Revenue is recognised as interest accrues (taking into account the effective yield on the asset) unless the collectability is in doubt.

Revenue from bond is recognized on an accrual basis. Inter-est revenue also includes the amount of amortization of any discount, premium or other difference between the initial carrying amount of a bond and its amount at matu-rity and allocated using straight-line method. When unpaid bond coupon interest has accrued before the acquisition of a bond, the subsequent receipt of coupon interest is allo-cated between pre-acquisition and post-acquisition period. Only post-acquisition bond coupon interest is recognized as revenue. Pre-acquisition bond coupon interest is deducted from the cost of the bond.

Dividends and appropriated profits

Income is recognised when the Holdings’ right to receive the cash dividend or the appropriated profit is established. Stock dividend and bonus shares received are not recognized as in-come of the Holdings and the respective increase in number of shares are only updated off balance sheet.

Other income

Revenues from irregular - activities other than turnover-gen-erating activities are recorded to other incomes as stipulated by “VAS 14 - Revenue and other income”, including: Revenues from asset liquidation and sale; fines paid by customers for their contract breaches; collected insurance compensation; collected debt which had been written off and included in the preceding period expenses; payable debts now recorded as revenue increase as their owners no longer exist; collected tax amounts which now are reduced and reimbursed; and other revenues.

4.11 Taxation

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be re-covered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted as at the balance sheet date.

Current income tax is charged or credited to the separate in-come statement, except when it relates to items recognised directly to equity, in which case the deferred current income tax is also dealt with in equity.

Current income tax assets and liabilities are offset when there is a legally enforceable right for the Holdings to set off current tax assets against current tax liabilities and when the Holdings in-tends to settle its current tax assets and liabilities on a net basis.

As disclosed in Note 4.1, the Holdings adopted the “VAS 10” in relation to foreign currency transactions from the year 2010. However, the Holdings applies Circular 130/2008/TT-BTC dat-ed 26 December 2008 and Circular 177/2009/TT-BTC dated 10 September 2009 issued by the Ministry of Finance in calculat-ing the taxable income relating to these transactions.

Deferred tax

Deferred tax is provided using the liability method on tem-porary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amount for fi-nancial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:


ANNUAL REPORT 2010


81

where the deferred tax liability arises from the initial recog-nition of an asset or liability in a transaction which at the time of the related transaction affects neither the account-ing profit nor taxable profit or loss; and

in respect of taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures where timing of the reversal of the temporary difference can be controlled and it is probable that the tem-porary difference will not reverse in the foreseeable future.

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 in respect of deductible tem-porary difference which arises from the initial recognition of an asset or liability which at the time of the related transac-tion, affects neither the accounting profit nor taxable profit or loss; and

in respect of deductible temporary differences associated with investments in subsidiaries, associates, and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred income tax assets is re-viewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Previously unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has be-come probable that future taxable profit will allow the de-ferred tax assets to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the period when the as-set realised or the liability is settled based on tax rates and tax laws that have been enacted at the balance sheet date.

Deferred tax is charged or credited to the separate 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 le-gally enforceable right for the Holdings to set off current tax assets against current tax liabilities and when they relate to in-come taxes levied on the same taxable entity by the same taxa-tion authority.

4.12 Offsetting

Financial assets and liabilities are offset and presented on net basis on the separate balance sheet when and only when the Holdings has the intention and legal right to make payment on net basis, or the settlement of financial assets and liabilities happen at the same time.

4.13 Appropriation of net profits

Profit after tax of the Holdings is appropriated in accordance with resolutions of the General Shareholders’ Meeting and Viet-namese regulatory requirements.

4.14 Foreign currency transactions

The Holdings adopted the “VAS 10” in relation to foreign cur-rency transactions from the year 2010.

Transactions in currencies other than the Holdings’ reporting currency of VND are recorded at the exchange rates ruling at the date of the transaction. At the end of the year, monetary as-sets and liabilities denominated in foreign currencies are trans-lated at inter-bank exchange rates ruling at the balance sheet date. All realised and unrealised foreign exchange differences are taken to the separate income statement.

The above guidance related to unrealized foreign exchange dif-ferences provided by VAS 10 is different from those stipulated in the Circular 201/2009/TT-BTC issued on 15 October 2009 by the Ministry of Finance providing guidance for the treatment of foreign exchange differences (the “Circular 201”) as applied by the Holdings in 2009 as described in Note 4.1.

The impact to the separate financial statements had the Hold-ings adopted the Circular 201 in 2010 is presented in Note 30.



5. CASH AND CASH EQUIVALENTS

31 Dec 2010VND

31 Dec 2009 VND

Cash on hand in VND 830,825,704 693,051,531

In Holdings’ Head office 721,861,569 679,640,280

In Bao Viet Training Center 108,964,135 13,411,251

Cash at bank 666,687,300,395 15,837,261,139

Cash at bank in VND 666,051,253,350 15,443,615,146

Bao Viet Holdings’ own funds 665,779,662,919 13,747,166,957

Bao Viet Life’s trusted investments 146,417,440 416,836,059

Bao Viet Insurance’s trusted investments 99,432,498 941,913,244

MOF’s trusted investments 25,740,493 337,698,886

Cash at bank in USD 636,047,045 393,645,993

Bao Viet Holdings’ own funds 636,047,045 393,645,993

Cash equivalents (*) 183,500,000,000 -

Bao Viet Holdings’ own funds 124,000,000,000 -

Bao Viet Insurance’s trusted investment contracts 27,000,000,000 -

MOF’s trusted investments 32,500,000,000 -

851,018,126,099 16,530,312,670

(*) Cash equivalents comprises of term deposits at financial institutions having original maturity of not more than 3 months with interest at rates ranging from 12% to 16% per annum.

6. SHORT-TERM INVESTMENTS

31 Dec 2010VND

31 Dec 2009 VND

Short-term deposits in VND at financial institutions (**)

From Bao Viet Holdings’ own funds 3,088,006,000,000 2,116,760,503,079

From trusted investments of Bao Viet Life 483,529,105,556 416,700,000,000

From trusted investments of Bao Viet Insurance 136,200,000,000 106,439,496,921

From trusted investments of MOF - 447,080,000,000

3,707,735,105,556 3,086,980,000,000

Short-term deposits in USD at financial institutions ( VND equivalent) (**)

From Bao Viet Holdings’ own funds 32,373,720,000 30,320,290,000

32.373.720.000 30.320.290.000

Short-term portion of bonds

Bao Viet Holdings’ own funds - 59,429,557,461

- 59,429,557,461

Total short term investments 3,740,108,825,556 3,176,729,847,461

(**) The above short-term deposits at financial institutions have maturity not more than one year and interest at rates ranging from 8.2%% p.a. to 17.5% p.a. for VND and being 1% p.a. for USD.

ANNUAL REPORT 2010


83

7. TRADE RECEIVABLES

Trade receivables represent the interest receivables from investment activities carried out by the Holdings:

31 Dec 2010VND

31 Dec 2009 VND

Interest receivables from:

Investments of the Holdings’ own funds 163,777,164,785 71,961,976,304

Investments trusted by Bao Viet Life 60,177,019,242 27,723,341,367

Investments trusted by Bao Viet Insurance 16,529,653,845 6,764,865,452

Investments trusted by MOF 400,833,333 2,477,568,331

240,884,671,205 108,927,751,454

8. RECEIVABLES FROM RELATED PARTIES

31 Dec 2010VND

31 Dec 2009 VND

Receivables from Bao Viet Life 612,634,690,349 601,016,051,505

Receivables from Bao Viet Insurance 318,148,907,505 213,453,540,178

Receivables from BVF 23,583,899,190 37,469,189,623

Receivables from BVSC 4,915,901,362 1,954,264,162

Receivables from BV - Au Lac 1,260,000 1,260,000

Receivables from Bao Viet Bank 4,389,623,289 439,652,120

963,674,281,695 854,333,957,588

9. OTHER RECEIVABLES

31 Dec 2010VND

31 Dec 2009 VND

North East Mai Linh Joint Stock Company 5,000,000 5,000,000

Green Star Joint Stock Company 26,239,697 26,239,697

Dat Viet Energy Investment Joint Stock Company 579,564,331 -

S.S.G Group Joint Stock Company 270,335,800 -

Advances to Financial Regime Drafting Divisions - 399,822,222

Petroleum Vietnam – SSG Real estate JSC 162,593,174 -

LG Electronic Vietnam 176,982,251 -

Others 265,469,421 238,957,263

1,486,184,674 670,019,182

10. PREPAID EXPENSE

This represents the expenditures related to the Technical Support and Capability Transfer Agreement with HSBC Insurance (Asia Pacific) Holdings Limited which is allocated to expense for 2 years. During the year 2010, VND 9,731,061,326 was allocated into expense and the remaining of VND 9,731,061,326 will be allocated to expense in 2011.



11. TANGIBLE FIXED ASSETS

Items

BuildingVND

Machinery & equipment

VND

Means of trans-portation and

communicationVND

Office equipment

VND

Other fixed assets

VND

TotalVND

Cost:

Balance at 31 December 2009 164,587,933,800 919,234,639 33,974,348,890 41,420,110,550 57,980,000 240,959,607,879

Additions: 219,793,540,625 - 64,806,430,739 8,712,155,780 - 293,312,127,144

New purchases - - - 2,813,155,780 - 8,712,155,780

Newly constructed or transferred from CIP

219,793,540,625 - 64,806,430,739 5,899,000,000 - 284,599,971,364


Accumulated depreciation:


Depreciation for the year 9,054,661,512 36,342,658 8,594,151,734 5,883,607,509 10,775,780 23,579,539,193


Net book value:



12. INTANGIBLE FIXED ASSETS

ItemsLand use rights

VNDSoftwareVND

TotalVND

Cost:

Balance at 31 December 2009 11,667,900,000 20,552,857,228 32,220,757,228

Addition

New purchases - 5,322,093,000 5,322,093,000

Transferred from CIP - 23,303,849,714 23,303,849,714


Accumulated amortisation:

Balance at 31 December 2009 - 18,272,856,754 18,272,856,754

Amortisation during the year - 5,316,852,052 5,316,852,052

Balance at 31 December 2010 - 23,589,708,806 23,589,708,806

Net book value:



ANNUAL REPORT 2010


85

13. CONSTRUCTION IN PROGRESS

Items

31 Dec 2009 VND

IncreasesVND

DecreasesVND

31 Dec 2010VND

Headquarter at No 8 Le Thai To, Hanoi 105,024 2,677,497,159 2,677,602,183 -

Office at No 233 Dong Khoi, HCM 183,622,163,685 32,855,601,387 216,000,000,000 477,765,072

Bao Viet Ha Tinh Office 397,105,337 - - 397,105,337

Bao Viet Thai Nguyen Office (*) 19.917.161.261 - 15.910.650.980 4.006.510.281

Bao Viet Ha Tay Office 25,000,000,000 235,620,226 - 25,235,620,226

Bao Viet An Giang Office 610,191,011 - - 610,191,011

BVAccount Software 2,360,570,920 - - 2,360,570,920

Human resource management Software - 139,952,554 139,952,554 -

International accounting software 4,176,981,077 7,681,099,600 11,858,080,677 -

Financial statement consolidation software - 1,047,989,200 - 1,047,989,200

Anti Virus software 170,005,900 1,530,053,100 1,700,059,000 -

Lotus Note software - 15,504,757,483 15,504,757,483 -

The Holdings’ Information Center 10,396,985,085 68,455,915,774 64,806,430,739 14,046,470,120

Others 992,346,078 801,556,000 1,786,652,078 7,250,000

247,643,615,378 130,930,042,483 330,384,185,694 48,189,472,167

(*) Part of Bao Viet Thai Nguyen Office Building, owned by Bao Viet Insurance, was constructed under the management of the Hold-ings, and was recorded as construction in progress in the Holdings’ book. During 2010, the Holdings has transferred a completed part with a finalised value of VND 15,910,650,980 to be recognised as fixed assets at Bao Viet Insurance.

14. LONG-TERM INVESTMENTS

Items Notes 31 Dec 2010VND

31 Dec 2009 VND

Investment in subsidiaries and BVF1 4,710,481,388,414 4,210,481,388,414

Investment in subsidiaries 14.1 4,616,291,148,720 4,116,291,148,720

Investment in BVF1 14.2 94,190,239,694 94,190,239,694

Investment in associates and joint-ventures 14.3 252,769,440,000 232,862,440,000

Other long-term investments 14.4 1,797,126,521,875 1,461,270,934,725

Bonds 14.4.a 632,871,555,108 531,511,227,958

Term deposits 14.4.b 202,000,000,000 -

Other long-term investments 14.4.c 962,254,966,767 929,759,706,767

6,760,377,350,289 5,904,614,763,139

Provision for impairment of long-term investments (340,337,920,054) (141,631,212,190)

6,420,039,430,235 5,762,983,550,949

Details of long-term investments by sources of capital as at 31 December 2010 are as follows:


ItemsTrusted investment

from Bao Viet Life VND

Trusted investment from Bao Viet Insurance

VND

Long-term invest-ment of the Holdings

VND

Total

VND

Investment in subsidiaries - - 4,616,291,148,720 4,616,291,148,720

Investment in BVF1 - - 94,190,239,694 94,190,239,694

Investment in associates and joint- ventures 77,719,440,000 - 175,050,000,000 252,769,440,000

Other long-term investments 71,205,200,000 59,872,226,767 1,666,049,095,108 1,797,126,521,875

Bonds - - 632,871,555,108 632,871,555,108

Term deposits - 2,000,000,000 200,000,000,000 202,000,000,000

Other long-term investments 71,205,200,000 57,872,226,767 833,177,540,000 962,254,966,767

148,924,640,000 59,872,226,767 6,551,580,483,522 6,760,377,350,289

Provision for impairment of long-term investments

This represents provision for impairment of listed shares, deposit contracts, investment in BVF1 and unlisted shares as at 31 De-cember 2010.

Details of the provision for impairment of long-term financial investments are as follows:

31 Dec 2010VND

31 Dec 2009 VND

Provision for impairment of listed shares (176,919,725,000) (57,280,000,000)

Provision for impairment of unlisted shares (58,312,000,000) (79,839,500,000)

Provision for impairment of deposit contracts (95,397,026,975) -

Provision for impairment of net assets of BVF1 (9,709,168,079) (4,511,712,190)

(340,337,920,054) (141,631,212,190)

14.1 Investment in subsidiaries

31 Dec 2010VND

31 Dec 2009 VND

Bao Viet Life 1,500,000,000,000 1,500,000,000,000

Bao Viet Insurance 1,500,000,000,000 1,000,000,000,000

BVF 50,000,000,000 50,000,000,000

BVSC 694,895,148,720 694,895,148,720

Baoviet Bank 780,000,000,000 780,000,000,000

BVInvest 55,000,000,000 55,000,000,000

BV - Au Lac 36,396,000,000 36,396,000,000

4,616,291,148,720 4,116,291,148,720

Details of investments in subsidiaries as at 31 December 2010 are as follows:


ANNUAL REPORT 2010


87

Investee Charter capitalVND

Committed contribution capital

VND

Contributed capitalVND

Bao Viet Life 1,500,000,000,000 1,500,000,000,000 1,500,000,000,000

Bao Viet Insurance 1,500,000,000,000 1,500,000,000,000 1,500,000,000,000

BVF 50,000,000,000 50,000,000,000 50,000,000,000

BVSC 722,339,370,000 432,811,930,000 694,895,148,720

Baoviet Bank 780,000,000,000 780,000,000,000 780,000,000,000

BVInvest 100,000,000,000 55,000,000,000 55,000,000,000

BV - Au Lac 60,660,000,000 36,396,000,000 36,396,000,000

4,616,291,148,720

Investments in Bao Viet Securities Investment Fund (“BVF1”)

BVF1 was established as a closed-end member investment fund in Vietnam in accordance with License No. 05/UBCK-TLQTV issued by the State Securities Commission on 19 July 2006. The Fund was licensed to operate for a period of five years. BVF1 originally had a charter capital of VND 500,000,000,000, equivalent to 50,000,000 units with a par value of VND 10,000 per unit. BVF1 increased its charter capital to VND 1,000,000,000,000 on 4 March 2008, as approved in Official Letter No. 98/TB-UBCK issued by the State Securities Commission, which is equivalent to 100,000,000 units with a par value of VND 10,000 per unit.

The Fund is managed by BVF, a subsidiary of the Holdings. The custodian bank of the Fund is HSBC Bank (Vietnam) Ltd.

At 31 December 2010, direct and indirect holding of the Holdings in BVF1 is as follows:


% of charter capitalVND

Direct investment of the Holdings 94,190,239,694 9.42%

Indirect investment via subsidiaries 821,659,537,741 82.16%

Bao Viet Life 601,214,295,907 60.12%

Bao Viet Insurance 220,445,241,834 22.04%

915,849,777,435 91.58%

14.3 Investments in associates and joint ventures

31 Dec 2010VND

31 Dec 2009 VND

Investments from Bao Viet Holdings’ own funds 175,050,000,000 171,150,000,000

Baoviet Tourism Hotel JSC 7,050,000,000 3,150,000,000

Bao Viet Tokio Marine Insurance Joint Venture Com-pany

153,000,000,000 153,000,000,000

International Investment and Construction JSC (“VIGEBA”)

15,000,000,000 15,000,000,000


Investment from trusted capital of Bao Viet Life 77,719,440,000 61,712,440,000

Baoviet Tourism Hotel JSC 9,450,000,000 4,250,000,000

International Investment & Construction Joint Stock Company (“VIGEBA”)

39,000,000,000 39,000,000,000

Quang Minh Project - 14,000,000,000

Long Viet Investment and Construction JSC 29,269,440,000 4,462,440,000

252,769,440,000 232,862,440,000

Details of the investments in associates and joint ventures as at 31 December 2010 are as follows:

Invested company Charter capitalVND

Committed con-tribution capital

VND

% Contributed capitalVND

Capital to be contributed

VND

Associates

Baoviet Tourism Hotel JSC 60.000.000.000 21.000.000.000 35% 16.500.000.000 4.500.000.000

VIGEBA 180.000.000.000 54.000.000.000 30% 54.000.000.000 -

Long Viet Investment and Construction JSC 65.043.200.000 29.269.440.000 45% 29.269.440.000 -

Joint ventures

Bao Viet Tokio Marine Insurance Joint Venture

Company (Control right: 50%)

300.000.000.000 153.000.000.000 51% 153.000.000.000 -

252.769.440.000

14.4 Other long-term investments

14.4.a Bonds

31 Dec 2010

VND

31 Dec 2009

VND

Corporate Bonds 534,421,421,004 487,604,752,707

Government Bonds 98,450,134,104 43,906,475,251

632,871,555,108 531,511,227,958

The Holdings’ bonds include government bonds with interest at rates ranging from 7.86% p.a. to 12.1% p.a. and corporate bonds with interest at rates ranging from 9.4% p.a. to 14.05% p.a.

14.4.b Long term deposits

31 Dec 2010

VND

31 Dec 2009

VND

Long term deposits in VND at financial institutions

From Bao Viet Insurance’s trusted funds 200,000,000,000 -

From Bao Viet Holdings’ own funds 2,000,000,000 -

202,000,000,000 -

The Holdings’ long term deposits in VND at financial institutions include term deposits at Bank for Investment and Development of Vietnam (BIDV) and Thanh Hoa Development Bank with interest at rates ranging from 10.5% p.a. to 11.5% p.a. and one term deposit contract at Da Nang Development Fund with interest rate at 11.3% p.a.


14.3 Investments in associates and joint ventures (continued)

ANNUAL REPORT 2010


89


14.4.c Other long-term investments

31 Dec 2010 31 Dec 2009

Quantity of shares CostVND

Quantity of shares CostVND

Investments from Holdings’ own funds 833,177,540,000 800,408,280,000

Maritime Commercial Joint Stock Bank 3,937,542 39,375,420,000 3,937,542 39,375,420,000

Saigon Ha Long Joint Stock Company 1,000,000 10,000,000,000 1,000,000 10,000,000,000

Vietnam Ocean Shipping Company 3,000,000 59,587,500,000 3,000,000 59,587,500,000

SSG Construction and Real Estate Joint Stock Company 2,750,000 225,000,000,000 2,250,000 225,000,000,000

Viet Long Growth Investment Fund 3,000,000 30,450,000,000 3,000,000 30,450,000,000

Bao Long Insurance Joint Stock Company 6,368,272 63,682,720,000 3,184,136 31,841,360,000

HiPT Group Joint Stock Company 1,766,250 63,250,000,000 1,125,000 63,250,000,000

Vietnam National Reinsurance Corporation 5,762,400 57,624,000,000 5,762,400 57,624,000,000

Sai Gon Beer Alcohol Beverage Joint Stock Company 500,000 35,000,000,000 500,000 35,000,000,000

CMC Corporation 3,200,000 144,000,000,000 3,200,000 144,000,000,000

Vietnam Commercial Joint Stock Bank of Foreign Trade 1,092,790 105,207,900,000 1,000,000 104,280,000,000

Investments from Bao Viet Life’ s trusted capital 71,205,200,000 71,479,200,000

Hai Phong Thermal Power Joint Stock Company 3,777,165 37,771,650,000 3,777,165 37,771,650,000

Tay Ninh Cable Car Tour Joint Stock Company 511,490 5,114,900,000 538,890 5,388,900,000

Tay Ninh Transportation Joint Stock Company 55,070 550,700,000 55,070 550,700,000

Hai Au Shipping Joint Stock Company 441,000 4,410,000,000 441,000 4,410,000,000

Hanoi Entertainment Service Joint Stock Company 1,800,000 18,330,750,000 1,800,000 18,330,750,000

Saigon Phu Quoc Joint Stock Company 502,720 5,027,200,000 502,720 5,027,200,000

Investments from Bao Viet Insurance’s trusted

capital57,872,226,767 57,872,226,767

Da Nang Bus and Trading Services Company 20,000 200,000,000 20,000 200,000,000

Quang Nam Transportation JSC 58,138 581,376,767 58,138 581,376,767

Vietnam Ocean Shipping Company 1,000,000 19,862,500,000 1,000,000 19,862,500,000

Hai Phong Thermal Power Joint Stock Company 3,722,835 37,228,350,000 3,722,835 37,228,350,000

962,254,966,767 929,759,706,767

15. TRADE PAYABLES

31 Dec 2010VND

31 Dec 2009 VND

Prepaid interest from term deposits 13,709,361,125 -

Prepaid interest from bonds 3,032,054,795 -

Dividend advance 4,881,550,723 -

Medicine Technology Development Joint Stock Company 110,805,001 110,805,001

Contractors of Building No. 8 Le Thai To 518,618,831 -

Others 822,500,000 998,500,000

23,074,890,475 1,109,305,001

16. STATUTORY OBLIGATIONS

31 Dec 2009 VND

IncreaseVND

Paid during the year

VND

31 Dec 2010VND

Taxes

Value added tax 676,205,276 3,632,021,985 2,793,468,382 1,514,758,879

Enterprise Income Tax 73,550,488,349 35,059,086,140 111,288,125,756 (2,678,551,267)

Land leasing fee - 314,369,742 314,369,742 -

Other taxes 1,276,844,355 6,018,631,927 6,530,009,709 765,466,573

License duty - 3,000,000 3,000,000 -

Foreign contractor withholding tax 600,640,537 2,687,856,846 3,286,663,364 1,834,019

Personal income tax 596,265,579 2,793,646,349 2,927,166,465 462,745,463

Irregular income tax 79,938,239 534,128,732 313,179,880 300,887,091

75,503,537,980 45,024,109,794 120,925,973,589 (398,325,815)

Enterprise Income Tax expenses for the year is presented in Note 27.

17. PAYABLES TO EMPLOYEES

31 Dec 2010VND

31 Dec 2009 VND

Salary fund payable 20,258,970,199 6,197,547,272

20,258,970,199 6,197,547,272


ANNUAL REPORT 2010


91

18. PAYABLES TO RELATED PARTIES

31 Dec 2010VND

31 Dec 2009VND

Payables to Bao Viet Life 1,089,644,890,232 975,576,515,708

Payables to Bao Viet Insurance 365,293,699,484 347,702,226,512

Payables to BVInvest 8,285,138,858 1,687,863,441

1,463,223,728,574 1,324,966,605,661

19. OTHER PAYABLES

31 Dec 2010VND

31 Dec 2009VND

Trade Union’s fees 1,078,649,472 751,370,685

Social and health insurance 190,148,379 119,865,509

Unemployment Insurance 17,901,180 -

Payable related to BAVINA liquidation - 12,193,416,456

Payable for HSBC Insurance Asia Pacific 10,423,137,760 16,736,723,282

Advance from shareholders (*) 646,867,673,855 -

Dividend payable to the Ministry of Finance (**) 32,926,573,826 449,895,267,217

Payables for Thanh Vinh Furniture Ltd. 190,000,000 -

Payables related to 30a Program 14,386,072,248 5,135,707,709

Deposits from tenants at 233 Dong Khoi 3,180,775,820 -

Other payables 903,176,557 571,753,764

710,164,109,097 485,404,104,622

(*) This represents the subscription money received from existing shareholders for their exercise of right issues in January 2011.

(**) This relates to the 2008 dividend payable to MOF that the Holdings was authorized to use to increase MOF’s contribution in the Holdings’ charter capital. During the year 2010, an amount of VND 458,517,600,000 was transferred to a bank account for the preparation of the MOF’s contribution in the Holdings’ charter capital that took place in January 2011.

20. BONUS AND WELFARE FUNDS

31 Dec 2009VND

Increased during the year

VND

Used during the year

VND

31 Dec 2010VND

Bonus Fund 11,678,792,153 6,646,711,071 3,725,342,039 14,600,161,185

Welfare Fund 7,368,373,319 17,586,844,283 17,536,913,333 7,418,304,269

19,047,165,472 24,233,555,354 21,262,255,372 22,018,465,454


21. PROVISIONS FOR SEVERANCE ALLOWANCE

31 Dec 2010VND

31 Dec 2009 VND

Opening balance 21,127,205,418 21,227,073,732

Increase 147,059,588 103,982,986

Utilized (9,432,000) (203,851,300)

Closing balance 21,264,833,006 21,127,205,418

22. OWNERS’ EQUITY

Contributed Capital

VND

Shares Premium

VND

Foreign Exchange Difference

VND

Undistributed Profit VND

Total

VND

As at 31 December 2009 5,730,266,050,000 1,734,745,821,197 1,668,684,274 969,743,897,777 8,436,424,453,248

Additional capital contribution 536,824,740,000 1,342,061,850,000 - - 1,878,886,590,000

Profit of current year - - - 852,068,230,108 852,068,230,108

Dividends for the year 2009 paid to Shareholders

- - - (630,329,265,500) (630,329,265,500)

Appropriation to bonus and welfare fund for the year 2009

- - - (24,233,555,354) (24,233,555,354)

Remuneration to BOD and Supervisory Committee for the year

- - - (1,088,333,334) (1,088,333,334)

Recognition of foreign exchange differ-ence to income of the year

- - (1,668,684,274) - (1,668,684,274)

As at 31 December 2010 6,267,090,790,000 3,076,807,671,197 - 1,166,160,973,697 10,510,059,434,894

23. INCOME FROM OPERATING ACTIVITIES

Current yearVND

Previous yearVND

Interest from demand deposits 948,688,305 28,864,672,094

Interest from term deposits 408,931,325,919 246,459,545,855

Gain from trading securities 64,230,038,578 62,236,356,695

Income from dividends or distributed profits 731,415,531,077 558,730,600,086

Bao Viet Insurance 197,583,757,718 149,205,247,802

Bao Viet Life 402,095,241,388 326,162,856,501

BVF 19,337,457,239 33,893,752,812

Bao Viet Bank 70,200,000,000 -

BVSC - 6,390,761,070

Bao Viet Tokio Marine Insurance Joint Venture Company 9,911,913,955 13,935,661,901

Shared dividends from other equity investments 32,287,160,777 29,142,320,000

Gain from foreign exchange rate differences 3,409,602,724 -

Income from other financial activities 1,303,597,142 2,467,253,635

1,210,238,783,745 898,758,428,365


ANNUAL REPORT 2010


93

24. EXPENSES FROM OPERATING ACTIVITIES

Current yearVND

Previous yearVND

Reversal of provision for impairment of investments - (58,133,911,004)

Provision for impairment of investments 198,706,707,864 -

Other financial expenses 134,600,190 304,128,843

198,841,308,054 (57,829,782,161)

25. GENERAL AND ADMINISTRATION EXPENSESa

Current yearVND

Previous yearVND

Staff costs 58,787,509,243 41,528,000,000

Materials expenses 1,684,032,812 1,102,811,597

Office stationery expenses 1,358,963,762 772,960,728

Fixed asset depreciation and amortisation 28,896,391,245 19,209,863,945

Taxes and fees 382,717,389 8,102,418

Consultancy fees 17,845,250,184 3,205,752,951

Provision for severance allowance 147,059,588 146,080,000

Social security expenses 2,080,000,000 2,350,000,000

External service fees 27,385,031,693 19,143,918,647

Others 19,549,598,107 7,112,617,928

158,116,554,023 94,580,108,214

26. OTHER INCOME AND EXPENSES

Current yearVND

Previous yearVND

Other income

Rental income 35,913,028,904 23,629,992,632

Gain on disposal of BAVINA company 12,193,416,456 -

Others 216,942,750 41,515,378

48,323,388,110 23,694,525,355

Other expenses

Building management expenses 14,456,793,530 4,056,077,172

Others 20,200,000 25,000,000

14,476,993,530 4,081,077,172

Net other income 33.846.394.580 19.613.448.183


27. ENTERPRISE INCOME TAX

The Holdings has the obligation to pay Enterprise Income Tax (“EIT”) at the rate of 25 % of taxable profits of the period.

The Holdings’ tax returns are subject to examination by the tax authorities. Because the application of tax laws and regulations to many types of transactions is susceptible to varying interpretations, the amounts reported in the audited separate financial state-ments could be changed at a later date upon final determination by the tax authorities.

The current tax payable is based on taxable profit for the period. The taxable profit of the Holdings for the period differs from the profit as reported in the separate income statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are not taxable or deductible. The Holdings liability for current tax is calculated using tax rates that have been enacted by the balance sheet date.

Current Enterprise Income Tax

Current yearVND

Previous yearVND

Total accounting profit before tax 887,127,316,248 881,621,550,495

Non taxable dividend income, unrealized foreign exchange gain and other adjustments

(746,890,971,690) (558,708,980,669)

Total taxable income 140,236,344,558 322,912,569,826

Enterprise income tax rate 25% 25%

Estimated enterprise income tax 35,059,086,140 80,728,142,457

Additional EIT payable according to tax authorities’ inspection minutes - 285,883,677

Enterprise income tax 35,059,086,140 81,014,026,134

EIT reduction according to Circular No. 03/2009/TT-BTC - (7,177,654,108)

Enterprise income tax expenses for the year 35,059,086,140 73,836,372,026

28. TRANSACTIONS WITH RELATED PARTIESDuring the normal course of operations, the Holdings engages in transactions with entities to which it is related through equity participation. As set out below, the Holdings and the related entities with which it trades, are linked either through the investor/investee relationship, or share a common investor and thus are a part of the same corporate group.

Related parties with the Holdings include:

Related parties Relationship

Ministry of Finance Shareholder

HSBC Insurance (Asia Pacific) Holdings Limited Shareholder

State Capital Investment Corporation (SCIC) Shareholder

Bao Viet Insurance Subsidiary

Bao Viet Life Subsidiary

Bao Viet Fund Management Ltd, Co (BVF) Subsidiary

Bao Viet Securities Joint Stock Company (BVSC) Subsidiary

Bao Viet Au Lac Ltd, Co (BV - Au Lac) Subsidiary


ANNUAL REPORT 2010


95


Bao Viet Investment Joint Stock Company (BVInvest) Subsidiary

Bao Viet Commercial Joint Stock Bank (Baoviet Bank) Subsidiary

Bao Viet Tokio Marine Insurance Joint Venture Company Joint venture

Baoviet Tourism Hotel Joint Stock Company (“Bao Viet Resort JSC”) Associate

International Investment and Construction Joint Stock Company – (“VIGEBA”) Associate

Long Viet Investment and Construction JSC (“Long Viet JSC”) Associate

Significant related party transactions during the year are given below:

Related parties Transactions For the year ended 31 December 2010

VND

Ministry of Finance Dividends for the year 2009 paid to MOF 488,730,000,000

HSBC Insurance (Asia Pacific) Holdings Limited

Additional capital contribution to the Holdings 1,878,886,590,000

Dividends for the year 2009 paid to HSBC Insurance (Asia Pacific) Holdings Limited 59,050,721,400

Additional capital contribution to the Holdings 116,417,472,000

SCICDividends for the year 2009 paid to SCIC 22,440,000,000


BVInvestOffice management fee paid to BVInvest 14,9 90,971,337

Office rental expense payable to the Holdings 462,138,548

Bao Viet Insurance Profit transfer to the Holdings 197,583,757,718

Bao Viet Life

Profit transfer to the Holdings 402,095,241,388

Investment portfolio management fee 1,165,979,581

Office rental expense payable to the Holdings 3,737,732,805

BVFProfit transfer to the Holdings 19,337,457,239


Baoviet BankOffice rental expense payable to the Holdings 70,200,000,000


BVSCOffice rental expense payable to the Holdings 9,514,588,251

Advisory fee of organizing Shareholders’ General Meeting 587,361,574

VIGEBA Dividend advance to the Holdings 27,000,000,000

BaoViet Resort JSC Additional capital contribution by the Holdings 9,100,000,000

Long Viet JSC Additional capital contribution to Long Viet JSC 24,807,000,000

Amounts due to and due from related parties at the balance sheet date are presented in Note 8 and Note 18 to the separate finan-cial statements.

Remuneration of members of the Board of Directors and the CEO:

Current yearVND

Previous yearVND

Remuneration of members of the Board of Directors and the CEO

1,449,600,000 1,464,320,998

1,449,600,000 1,464,320,998


29. EARNINGS PER SHAREBasic earnings per share (“EPS”) amount is calculated by dividing net profit after tax for the year attributable to ordinary sharehold-ers of the Holdings by the weighted average number of ordinary shares outstanding during the year.

The following information has been used for the calculation of EPS:

Current yearVND

Previous yearVND

Net profit after tax attributable to holders of ordinary share 852,068,230,108 807,785,178,469

Weighted average number of ordinary shares during the year 623,914,649 573,026,605

EPS 1,366 1,410

30. THE EFFECTS OF VAS 10 TO THE SEPARATE FINANCIAL STATEMENTS

As disclosed in Note 4.1, for the year ended 31 December 2010, the Holdings has changed its accounting policy for foreign cur-rency transactions from those guided by Circular 201 as applied in 2009 to those required by VAS 10. Had the Holdings continued to follow Circular 201 in 2010, the separate financial position and separate financial operating results of the Holdings would have been as follows:

VAS 10VND

Circular 201VND

DifferenceVND

Separate balance sheet

Foreign exchange difference reserves - 1,740,918,450 (1,740,918,450)

Retained earnings 1,740,918,450 - 1,740,918,450

Separate income statement

Net foreign exchange gain taken to the separate income statement 1,740,918,450 - 1,740,918,450

Earnings per share

Basic 1,366 1,363 3

31. EVENTS AFTER BALANCE SHEET DATE

Other than disclosed elsewhere in the separate financial statements, there have been no significant events occurring after 31 De-cember 2010 which would require adjustments or disclosures to be made in the separate financial statements. 32. COMPARATIVE INFORMATION

As referred to in Note 4.1, bonus and welfare fund balance as at 31 December 2009 was reclassified from owners’ equity to liabilities as follows:

31 Dec 2009 ReportedVND

AdjustmentVND

31 Dec 2009 ReclassifiedVND

Reclassification of bonus and welfare fund

Current liabilities 1,893,181,100,536 19,047,165,472 1,912,228,266,008

Owners’ equity 8,455,471,618,720 (19,047,165,472) 8,436,424,453,248Impact to total liabilities and owner’s equity

-

ANNUAL REPORT 2010

96


In addition, some comparative information in the separate financial statements for the year ended 31 December 2009 has been represented to be in conformity with the financial statement presentation of this year.

33. RATIOS ON OVERALL FINANCIAL POSITION AND BUSINESS RESULTS OF THE HOLDINGS

Items Unit of measurement Current year Previous year

1. Structures of assets and capital sources

1.1 Structure of assets

- Current assets/ Total assets % 45.48 40.11

- Long-term assets/Total assets % 54.52 59.89

1.2 Structure of capital sources

- Liabilities/Total capital sources % 17.70 18.64

- Owners’ equity/Total capital sources % 82.30 81.36

2. Liquidity

2.1 Current ratio Times 2.59 2.17

2.2 Quick ratio Times 2.59 2.17

3. Profitability ratios

3.1 Profit margin on sales

Profit before tax/ Net sales % 73.30 98.89

Profit after tax/ Net sales % 70.40 89.88

3.2 Profit/ Total assets

Profit before tax/ Total assets % 6.95 8.57

Profit after tax/ Total assets % 6.67 7.79

3.3 Profit after tax/ Owners’ equity % 8.11 9.57

25 March 2011

Mr. Nguyen Thanh HaiChief Accountant

Mr. Le Hai PhongChief Financial Officer

Ms. Nguyen Thi Phuc LamChief Executive Officer

BAO VIET HOLDINGS

Report of the Board of Directors and Audited Consolidated Financial Statements

CONTENTS

REPORT OF THE BOARD OF DIRECTORS 98 - 101

AUDITED CONSOLIDATED FINANCIAL STATEMENTS

Independent auditors’ report 102

Consolidated balance sheet 103 - 105

Consolidated income statement 106 - 107

Consolidated cash flow statement 108

Notes to the consolidated financial statements 109 - 160

CON

SOLI

DAT

ED F

INA

NC

IAL

REPO

RTS

ANNUAL REPORT 2010


99

REPORT OF THE BOARD OF DIRECTORThe Board of Directors of Bao Viet Holdings is pleased to present its report and the consolidated financial statements of Bao Viet Holdings and its subsidiaries (the “Group”) as at and for the year ended 31 December 2010.

CORPORATE INFORMATION

Bao Viet Holdings (herein referred to as the “Holdings”) was previously a state-owned company that was equitized and became a joint stock company pursuant to Business License approved by Hanoi Authority for Planning and Investment on 15 October 2007. The Business License was subsequently modified the first time on 29 October 2009, the second time on 18 January 2010 and the third time on 10 May 2010.Below is a summary of information extracted from the third modified Business License dated 10 May 2010:




Operating activities: Equity investments in subsidiaries and, financial services and other related services under Vietnamese Laws





Subsidiaries and dependently accounted units of the Holdings are as follows:

Subsidiaries Address Principal activities% directly

owned

Bao Viet Insurance Corpora-tion (“Bao Viet Insurance”)



100%







100%




59.92%





71 Ngo Sy Lien, Dong Da Dis-trict, Hanoi


55%

Bao Viet Au Lac Limited Com-pany (“BV - Au Lac”)




Bao Viet Training Centre 8 Le Thai To, Hang Trong Ward, Hoan Kiem District, Ha Noi


RESULTS AND DIVIDENDS

The net profit attributable to the equity holders of the Holdings for the year ended 31 December 2010 was VND 952,597,195,373 (for the year ended 31 December 2009: VND 891,754,255,672).

On 17 April 2010, Annual General Meeting of Shareholders declared and approved to pay out dividends to its shareholders at the rate of 11% for the year 2009. The total dividend amount of VND 630,329,265,500 has been completely paid out during 2010.

SIGNIFICANT EVENTS

Below are the significant events during the year ended 31 December 2010:

On 18 January 2010, the Holdings issued 53,682,474 additional shares for an amount of VND 1,878,886,590,000 to HSBC Insur-ance (Asia Pacific) Holdings Limited (“HSBC Insurance”) through a private placement, which increased the shareholding of HSBC in Bao Viet Holdings from 10.31% to 18%. This share issuance to HSBC Insurance was made pursuant to the agreement between Bao Viet Holdings and HSBC Insurance and in accordance with Resolution 1527/2009/NQ-DHDCD dated 23 Decem-ber 2009 of Bao Viet General Shareholders’ Meeting. These additionally issued shares were listed on 21 April 2010 pursuant to the approval granted by the Ho Chi Minh Stock Exchange.

At the 2010 Annual General Meeting on 17 April 2010, the shareholders approved the plan to increase the Holdings’ charter capital to VND 6,800 billion to enable Bao Viet Holdings to pursue its strategy of increasing investment in core business sectors and continually enhancing its information system and processes in accordance with the strategy agreed at the equitization. The increase in charter capital was effected in January 2011.

On 11 June 2010, Bao Viet Holdings increased its investment in Bao Viet Insurance Corporation from VND 1,000 billion to VND 1,500 billion.

THE BOARD OF DIRECTORS AND SUPERVISORY BOARD The members of the Board of Directors for the period from 1 January 2010 to the date of this report are:

Name Position Date of appointment








REPORT OF THE BOARD OF DIRECTORS (continued)

ANNUAL REPORT 2010


101












Mr. Nguyen Trung Thuc Chairman 04 October 2007

Mr. Tran Minh Thai Member 04 October 2007

Mr. Nguyen Ngoc Thuy Member 04 October 2007

Mr. Le Van Chi Member 04 October 2007

Mr. Christopher Edwards Member 17 April 2010

Ms. Marjory Miller Member 04 October 2007 17 April 2010

THE BOARD OF MANAGEMENT

The members of the Board of Management for the period from 1 January 2010 to the date of this report are:


Ms. Nguyen Thi Phuc Lam Chief Executive Officer 15 October 2007

Mr. Le Hai Phong Chief Financial Officer 30 June 2008

Chief Property & Estate Officer 1 February 2011

Mr. Luu Thanh Tam Chief Property & Estate Officer 30 June 2008 1 February 2011

Mr. Phan Tien Nguyen Chief Human Resources Officer 30 June 2008

Mr. Duong Duc Chuyen Chief Strategy Officer 30 June 2008

Chief Investment Officer 22 April 2010

Mr. Alan Royal Chief Information Officer 08 September 2008

Mr. Adrian Abbott Chief Risk Officer 22 April 2010

Mr. Pham Khac Dung Chief Operating Officer 30 June 2008 15 November 2010

EVENTS SINCE THE REPORTING DATE


There have been no other significant events occurring after 31 December 2010 which would require adjustments or disclosures to be made in the consolidated financial statements.


STATEMENT OF THE BOARD OF MANAGEMENT’S RESPOSIBILITY IN RESPECT OF THE CON-SOLIDATED FINANCIAL STATEMENTS

The Board of Management of Bao Viet Holdings is responsible for the consolidated financial statements of each financial year which give a true and fair view of the consolidated state of affairs of the Group and of the Group’s consolidated results and consolidated cash flows for the year. In preparing those consolidated financial statements, 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 ex-plained in the consolidated financial statements; and

prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue its business.

The Board of 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 Group and to ensure that the accounting records comply with the registered accounting system. It is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Board of Management has confirmed to the Board of Directors that the Holdings has complied with the above requirements in preparing the 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 finan-cial position of the Group as at 31 December 2010, the consolidated results of its operations and the consolidated cash flows for the year then ended in accordance with the Vietnamese Accounting Standards and System and comply with the relevant statutory requirements.

On behalf of the Board of Directors:

Mr. Le Quang BinhChairman Hanoi, Vietnam 25 March 2011


ANNUAL REPORT 2010


103

Code ASSET Notes31 December 2010

VND31 December 2009

VND

100 A. CURRENT ASSETS 18,279,349,724,769 13,673,103,807,542110 I. Cash and cash equivalents 5,844,707,147,758 2,532,644,263,412111 1. Cash 5 723,039,874,862 540,937,036,319 112 2. Cash equivalents 5,121,667,272,896 1,991,707,227,093120 II. Short-term investments 13.1 9,032,191,623,735 8,576,063,696,075121 1. Short-term investments 9,885,894,075,590 8,939,362,811,569

129 2. Provision for impairment of short-term

investments(853,702,451,855) (363,299,115,494)

130 III. Accounts receivables 6 3,206,514,890,912 2,427,630,124,465 131 1. Receivables from insurance activities 1,453,370,439,126 1,273,174,332,975 132 2. Trade advances 51,438,200,967 9,351,089,507 133 3. Other advances 15,004,672,895 14,169,850,360 137 4. Receivables from investment activities 1,485,851,186,757 1,068,732,816,372 138 5. Other receivables 272,320,059,245 100,924,531,492 139 6. Provision for doubtful debts (71,469,668,078) (38,722,496,241)140 IV. Inventories 7 117,263,182,664 107,121,526,352150 V. Other current assets 78,672,879,700 29,644,197,238151 1. Short-term prepaid expenses 64,122,955,098 18,119,677,599

155 2.Shortage of current assets waiting for

resolution 149,740,507 137,942,020

152 3. VAT deductible 1,431,426,197 1,073,545,982154 4. Tax and other receivables from the State 8,967,622,683 5,322,979,220156 5. Margin deposits 2,994,243,432 3,599,500,616158 6. Others 1,006,891,783 1,390,551,801160 B. LOANS AND ADVANCES TO CUSTOMERS 8 5,889,067,477,368 2,624,756,884,104161 1. Loans and advances to customers 5,924,279,393,498 2,633,023,390,293169 2. Provision for credit losses (35,211,916,130) (8,266,506,189)200 C. NON-CURRENT ASSETS 20,599,519,961,390 17,416,755,972,025

220 I. Fixed assets 1,937,675,150,696 1,702,679,360,400

221 1. Tangible fixed assets 9 888,368,098,875 569,869,121,953

222 Cost 1,502,061,361,597 1,100,690,387,362

223 Accumulated depreciation (613,693,262,722) (530,821,265,409)

227 2. Intangible fixed assets 10 709,672,873,718 650,130,000,618

228 Cost 792,990,562,889 707,105,030,491

229 Accumulated amortization (83,317,689,171) (56,975,029,873)

230 3. Construction in progress 11 339,634,178,103 482,680,237,829

240 II. Investment Properties 12 23,448,947,000 23,448,947,000

250 III. Long-term investments 13.2 18,543,754,501,476 15,630,164,051,412

252 1. Investments in associates and joint-ventures 338,561,803,678 313,559,572,889

258 2. Other long-term investments 18,402,589,538,431 15,512,602,012,844

259 3. Provision for impairment of long-term invest-

ments(197,396,840,633) (195,997,534,321)

260 IV. Other long-term assets 94,641,362,218 60,463,613,213

261 1. Long-term prepaid expenses 14 52,531,464,772 18,120,011,138

262 2. Deferred tax assets 17.2 12,668,907,308 10,654,317,835

267 3. Long-term margin deposits 25,654,827,632 20,641,706,845

268 4. Other long-term assets 3,786,162,506 11,047,577,395

270 TOTAL ASSETS 44,767,937,163,527 33,714,616,663,671

CONSOLIDATED BALANCE SHEET as at 31 December 2010

ANNUAL REPORT 2010


105

Code RESOURCES Notes31 December 2010

VND

31 December 2009

VND

300 A. LIABILITIES 32,752,630,760,483 23,826,885,284,184

310 I. Current liabilities 6,221,002,414,770 2,500,811,457,427

311 1. Short-term loans and borrowings 15 1,593,235,333,373 420,948,732,663

312 2. Trade payables 16.1 3,100,216,309,659 960,615,920,164

313 3. Advances from customers 16.2 35,305,467,978 43,226,021,957

314 4. Statutory obligations 17 87,863,714,694 128,841,596,905

315 5. Payables to employees 205,641,088,427 135,423,296,316

316 6. Accrued expenses 23,372,079,839 17,242,129,166

318 7. Other payables 18 1,106,255,039,321 744,657,262,135

319 8. Bonus and welfare funds 19 69,113,381,479 49,856,498,121

320 II. Amount due to customers 20 7,597,839,409,023 3,786,961,866,864

321 1. Deposits from commercial banks 20.1 3,019,960,785,943 1,709,021,432,606

322 2. Deposits from customers 20.2 4,577,878,623,080 2,077,940,434,258

330 III. Non-current liabilities 80,826,657,494 73,239,449,605

333 1. Long-term deposits, mortgage 27,376,215,506 24,444,886,406

335 2. Deferred tax liabilities 17.2 8,613,670,942 4,476,408,636

336 3. Provision for severance allowance 44,836,771,046 44,318,154,563

340 IV. Reserves 21 18,852,962,279,196 17,465,872,510,288

341 1. Unearned premium reserve 2,447,163,648,748 2,219,898,075,597

342 2. Mathematical reserve 13,947,735,874,260 13,149,693,155,870

343 3. Claims reserve 1,221,357,297,901 1,096,611,181,704

344 4. Catastrophe reserve 307,012,203,931 193,572,226,768

345 5. Dividend reserve 906,960,197,603 789,360,245,400

346 6. Equalization reserve 22,733,056,753 16,737,624,949

CONSOLIDATED BALANCE SHEET (continued)as at 31 December 2010

CONSOLIDATED BALANCE SHEET (continued)as at 31 December 2010

Code RESOURCES Notes31 December 2010

VND31 December 2009

VND

400 B. EQUITY 10,667,776,713,657 8,538,905,644,218

410 I. Owners’ equity 22 10,667,776,713,657 8,538,905,644,218

411 1. Contributed capital 6,267,090,790,000 5,730,266,050,000

412 2. Share premium 3,076,807,671,197 1,734,745,821,197

415 3. Foreign exchange differences reserve 16,075,608,000 18,387,227,948

416 4. Statutory reserves for insurance operations 79,245,733,155 43,521,050,471

417 5. Investment and development fund 13,810,688,873 10,222,384,015

418 6. Financial reserve fund 18,316,956,265 11,699,111,508

419 7. Other reserve 103,568,802,818 103,568,802,818

420 8. Undistributed earnings 1,092,860,463,349 886,495,196,261

500 C. MINORITY INTERESTS 23 1,347,529,689,387 1,348,825,735,269

440TOTAL LIABILITIES AND EQUITY AND

MINORITY INTERESTS44,767,937,163,527 33,714,616,663,671

OFF BALANCE SHEET ITEMS

ITEMS31 December 2010

VND31 December 2009

VND

1. Insurance policies signed but not yet effective (VND)

223,855,361,342 115,681,301,363

2. Bad debt written off (VND) 4,792,072,858 4,401,672,856

3. Foreign currency (USD) 2,448,850 3,027,404

4. Securities under custody (VND) 14,143,012,400,000 15,731,400,660,000

5. Letters of credit (VND) 234,468,403,536 158,727,549,353

6. Other guarantees (VND) 81,382,221,188 15,948,831,827

ANNUAL REPORT 2010


107

CONSOLIDATED INCOME STATEMENTfor the year ended 31 December 2010


Previous yearVND

01 Gross written premium 24.1 8,243,995,446,509 7,393,367,704,806

02 Reinsurance premium assumed 24.2 186,623,651,556 151,666,182,986

03 Deductions 24.3 (1,152,034,398,163) (1,036,847,985,406)

04 Reinsurance premium ceded (1,083,576,007,876) (979,534,348,986)

05 Premium deduction (2,065,444,546) (1,915,407,401)

06 Premium returns (66,392,945,741) (55,398,229,019)

08 Increase in unearned premium reserve and technical reserve (1,025,308,291,541) (1,467,453,204,038)

09 Commissions on reinsurance ceded 183,298,558,113 146,828,204,959

10 Other income 5,958,591,545 5,863,915,547

11 Income on reinsurance assumed 2,095,474,697 1,127,872,732

12 Income on reinsurance ceded 333,858,761 308,514,166

13 Income from other activities 3,529,258,087 4,427,528,649

14 Total net revenue from insurance business (14 = 01+02+03+08+09+10) 6,442,533,558,019 5,193,424,818,854

15 Claim and maturity payment expenses 25.1 (4,634,714,084,183) (4,050,560,862,254)

16 Claim expenses for reinsurance assumed 25.2 (51,747,327,052) (46,246,678,770)

17 Deductions 391,909,000,095 386,713,469,741

18 Recoveries from reinsurance ceded 25.3 372,222,596,599 366,196,782,586

19 Subrogation recoveries 6,834,114,530 13,815,213,821

20 Salvages 12,852,288,966 6,701,473,334

21 Claim expenses on retained risks(21 = 15+16+17) (4,294,552,411,140) (3,710,094,071,283)

22 Claim expenses using catastrophe reserve - -

23 Increase in claims reserve (70,365,084,289) (105,617,698,741)

24 Provision for catastrophe reserve (113,439,977,163) (98,132,466,119)25 Other insurance operating expenses (988,931,762,242) (860,363,747,027)

26 Other underwriting expenses (924,160,351,685) (812,295,263,119)

27 Commission (830,054,332,159) (714,761,159,822)

28 Risk minimization expenses (35,566,098,265) (54,457,729,341)

29 Loss adjusting fee, risk assessment and others (58,539,921,261) (43,076,373,956)

30 Other reinsurance assumed expenses (40,479,795,339) (35,541,606,643)

31 Other reinsurance ceded expenses (24,291,615,218) (12,526,877,265)

33Total direct insurance operating expenses (33

= 21+22+23+24+25)(5,467,289,234,834) (4,774,207,983,170)

34Gross insurance operating profit

(34 = 14+33)975,244,323,185 419,216,835,684

35.1 Income from banking activities 957,223,058,373 355,479,712,399


Previous yearVND

35.2 Expenses from banking activities (538,591,304,881) (126,218,988,181)

35 Net operating income from banking activities 26 418,631,753,492 229,260,724,218

36.1 Revenue from other activities 198,297,078,626 144,166,331,292

36.2 Expenses from other activities (156,377,596,191) (59,566,766,423)

36 Net operating income from other activities 27 41,919,482,435 84,599,564,869

37 Selling expenses (142,837,253,724) (122,023,207,897)

38 General and administrative expenses 28 (1,724,057,419,395) (1,449,516,010,995)

38.1General and administrative expenses of

insurance operation(1,328,369,465,286) (1,187,481,587,361)


banking operation(136,995,092,835) (67,507,827,941)


other operations of the Group(258,692,861,274) (194,526,595,693)

39.1Net operating loss from insurance opera-

tion (39.1 = 34+37+38.1)(495,962,395,825) (890,287,959,574)

39.2Net profit from bank operation

(39.2=35+38.2)281,636,660,657 161,752,896,277

39.3Net loss from other operation

(39.3=36+38.3)(216,773,378,839) (109,927,030,824)

40 Financial income 29.1 3,078,930,495,583 2,393,475,592,072

41 Financial expenses 29.2 (1,468,414,780,544) (331,877,326,646)

42Profit from financial activities

(42 = 40+41)1,610,515,715,039 2,061,598,265,426

43 Other income 23,550,981,715 13,275,225,337

44 Other expenses (1,775,611,065) (6,569,981,488)

45 Net other profit (45 = 43+44) 30 21,775,370,650 6,705,243,849

46Share of the profit in associates and joint

ventures53,709,140,782 13,057,543,886

47Profit before tax

(47 = 39.1+39.2+39.3+42+45+46)1,254,901,112,464 1,242,898,959,040

48 Equalisation reserve (5,995,431,804) (4,556,421,030)

49 Enterprise income tax for the year 17.1 (274,604,981,244) (226,842,397,703)

50 Profit after tax (50 = 47+48+49) 974,300,699,416 1,011,500,140,307

51 Minority interest 21,703,504,043 119,745,884,635

52Net profit attributable to shareholders of

the Holdings (52 = 50-51)952,597,195,373 891,754,255,672

53 Earnings per share 32 1,527 1,556

CONSOLIDATED INCOME STATEMENT (continued) for the year ended 31 December 2010

ANNUAL REPORT 2010


109

CONSOLIDATED INCOME STATEMENT (continued) for the year ended 31 December 2010

Code ITEMS NotesCurrent year

VNDPrevious year

VND

I. CASH FLOWS FROM OPERATING ACTIVITIES

01 1. Premium received and interest income received 12,454,944,888,704 8,784,866,696,654

02 2. Payment to suppliers (9,981,578,704,434) (7,128,510,955,183)

03 3. Payment to employees (570,328,597,249) (598,670,981,585)

05 4. Enterprise income tax paid (318,521,037,200) (192,697,194,230)

06 5. Other cash inflows from operating activities 3,956,910,541,401 1,022,896,275,546

07 6. Other cash outflows from operating activities (4,922,592,129,067) (1,444,775,176,900)

10 Net cash inflows from operating activities 618,834,962,155 443,108,664,302

II. CASH FLOWS FROM INVESTING ACTIVITIES

21 1. Purchase and construction of fixed assets (244,601,678,911) (315,726,997,458)

22 2. Proceeds from disposals of fixed assets 654,142,947 7,459,136,006

23 3. Loans to other entities and payments for purchase of debt instru-

ments of other entities (10,594,663,873,796) (7,296,464,781,636)

24 4. Repayments from borrowers and proceeds from sales of debt

instruments of other entities 4,928,885,195,844 1,287,210,525,579

25 5. Payments for investments in other entities (6,007,088,767,440) (2,967,338,985,684)

26 6. Proceeds from sales of investments in other entities 6,739,077,003,398 4,157,816,410,833

27 7. Interest received, coupon and distributed profits 194,782,794,193 497,054,068,939

20 Net cash outflows from investing activities (4,982,955,183,765) (4,629,990,623,421)

III. CASH FLOWS FROM FINANCING ACTIVITIES

31 1. Cash receipts from issuing shares of the Holdings 1,878,886,590,000 720,000,000,000

33 2. Cash receipts short and long term loans 6,260,247,375,606 5,646,136,030,318

36 3. Dividends paid out (651,929,265,500) (128,728,400,000)

37 4. Cash receipts from existing shareholders for the increase in charter

capital188,350,073,855 -

38 5. Other cash outflows from financing activities (150,000,000) -

30 Net cash inflows from financing activities 7,675,404,773,961 6,237,407,630,318

40 Net cash inflows during the year 3,311,284,552,351 2,050,525,671,199

50 Cash and cash equivalents at the beginning of the year 5 2,532,644,263,412 480,836,990,174

51 Impact of exchange rate fluctuation 778,331,995 1,281,602,039

60 Cash and cash equivalents at the end of the year 5 5,844,707,147,758 2,532,644,263,412


25 March 2011

1. CORPORATE INFORMATION

Bao Viet Holdings (herein referred to as the “Holdings”) was previously a state-owned company that was equitized and became a joint stock company pursuant to Business License approved by Hanoi Authority for Planning and Investment on 15 October 2007. The Business License was subsequently modified the first time on 29 October 2009, the second time on 18 January 2010 and the third time on 10 May 2010. Current Business License number of the Holdings is 0100111761 pursuant to the third modified Busi-ness License on 10 May 2010.

Below is a summary of information extracted from the third modified Business License dated 10 May 2010:




Operating activities: Equity investments, financial services and other related services under Vietnamese Laws





The structure of the Holdings’ shareholdings as at 31 December 2010 is as follows:

Shareholders No. of shares %

Founding shareholders 577,507,635 92.15%

The Ministry of Finance 444,300,000 70.89%

HSBC Insurance (Asia Pacific) Holdings Limited 112,807,635 18.00%

State Capital Investment Corporation 20,400,000 3.26%

Other shareholders 49,201,444 7.85%

Total 626,709,079 100%


Details of the Holdings’ subsidiaries, dependently accounted units and its investment in Bao Viet Securities Investment Fund (“BVF1”) are as follows:

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSas at and for the year ended 31 December 2010

ANNUAL REPORT 2010


111

Subsidiaries


Bao Viet Insurance Corpora-tion (“Bao Viet Insurance”)



100%







100%




59.92%





71 Ngo Sy Lien Street, Dong Da District, Hanoi


55%

Bao Viet Au Lac Limited Com-pany (“BV- Au Lac”)



Bao Viet Insurance was established in accordance with Decision No. 1296/QD/BTC issued by the Ministry of Finance on 21 June 2004 and Business License No. 01/GPDC3/KDBH issued by the Ministry of Finance on the same date. On 23 November 2007, the Ministry of Finance has approved the re-establishment of Bao Viet Insurance in pursuant to the Establishment and Operating Li-cense No. 45GP/KDBH. On 11 June 2010, the Ministry of Finance has approved the increase of Bao Viet Insurance’s charter capital to VND 1,500,000,000,000 in pursuant to the Modified License No. 45/GPDC3/KDBH.

Bao Viet Life was established in accordance with Decision No. 3668/QD/BTC issued by the Ministry of Finance on 4 December 2003. On 23 November 2007, the Ministry of Finance approved the re-establishment of Bao Viet Life in pursuant to the Establish-ment and Operating License No. 46/GP/KDBH. The charter capital of Bao Viet Life is VND 1,500,000,000,000.

BVF was established in accordance with Decision No. 911/2005/QD/HDQT-BV on 22 August 2005 by the Group’s Board of Man-agement and operating in accordance with Business License No. 0104000256 issued on 22 August 2005 by Hanoi Authority for Planning and Investment and modified business registration No. 10/UBCK-GPDCQLQ issued on 14 December 2007 by the State Securities Commission. The charter capital of BVF is VND 50,000,000,000.

BVSC is a joint stock company established in Vietnam in accordance with Incorporation License No. 4640/GP-UB dated 1 October 1999 issued by the Hanoi People’s Committee and Business License No. 056655 issued by the Hanoi Authority for Planning and Investment on 11 October 1999 and Operating License No. 01/GPHDKD dated 26 November 1999 issued by the State Securities Commission. According to the 6th Amended Business License No. 056655 granted on 17 December 2009 by Hanoi Authority for Planning and Investment, the total value of registered securities of BVSC is VND 722,339,370,000.

BV - Au Lac was established on 18 February 2009 under the License No. 2300373648 granted by Bac Ninh Authority for Planning and Investment. The charter capital of BV Au Lac is VND 60,660,000,000.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)as at and for the year ended 31 December 2010


Baoviet Bank was incorporated in Vietnam on 11 December 2008 under the Establishment and Operating License No. 328/GP-NHNN provided by the Governor of the State Bank of Vietnam and the Business License No. 0103034012 granted by Hanoi Author-ity for Planning and Investment on 24 December 2008. Baoviet Bank’s charter capital is VND 1,500,000,000,000.

BVInvest was established on 9 January 2009 in accordance with Business License No. 0103034168 granted on 9 January 2009 by Hanoi Authority for Planning and Investment. The charter capital of BVInvest is VND 100,000,000,000. At 31 December 2010, indi-rect and direct investments of Bao Viet Holdings in BVInvest are as follows:



Direct investment of the Holdings 55,000,000,000 55%

Indirect investment via subsidiaries 45,000,000,000 45%

Bao Viet Life Insurance 20,000,000,000 20%

Bao Viet Insurance 20,000,000,000 20%

BVSC, in which: 5,000,000,000 5%

The Holdings’ indirect interest 2,995,500,000 3%

Minority interest 2,004,500,000 2%

100,000,000,000 100%

Bao Viet Securities Investment Fund (“BVF1”)

BVF1 was established as a closed-end member investment fund in Vietnam in accordance with License No. 05/UBCK-TLQTV issued by the State Securities Commission on 19 July 2006. The Fund was licensed to operate for a period of five years. BVF1 originally had a charter capital of VND 500,000,000,000, equivalent to 50,000,000 units with a par value of VND 10,000 per unit. BVF1 increased its charter capital to VND 1,000,000,000,000 on 4 March 2008, as approved in Official Letter No. 98/TB-UBCK issued by the State Securities Commission, which is equivalent to 100,000,000 units with a par value of VND 10,000 per unit.

The Fund is managed by BVF, a subsidiary of the Holdings. The custodian bank of the Fund is HSBC Bank (Vietnam) Ltd.

At 31 December 2010, direct and indirect holding by the Holdings in BVF1 is as follows:



Direct investment of the Holdings 94,190,239,694 9.42%

Indirect investment via subsidiaries 821,659,537,741 82.16%

Bao Viet Life Insurance 601,214,295,907 60.12%

Bao Viet Insurance 220,445,241,834 22.04%

915,849,777,435 91.58%

Dependently accounted units:


Bao Viet Training Centre 8, Le Thai To, Hang Trong Ward, Hoan Kiem District, Hanoi


ANNUAL REPORT 2010


113

2. BASIS FOR THE PRESENTATION OF THE CONSOLIDATED FINANCIAL STATEMENTS

2.1 Accounting standards and system

The consolidated financial statements of the Holdings and its subsidiaries, which are expressed in Vietnamese dong (“VND”), are prepared in accordance with the Vietnamese Accounting System and other Vietnamese Accounting Standards issued by the Min-istry of Finance as per:

Decision No. 149/2001/QD-BTC dated 31 December 2001 on the Issuance and Promulgation of Four Vietnamese Standards on Accounting (Series 1);



Decision No. 12/2005/QD-BTC dated 15 February 2005 on the Issuance and Promulgation of Six Vietnamese Standards on Ac-counting (Series 4); and

Decision No. 100/2005/QD-BTC dated 28 December 2005 on the Issuance and Promulgation of Four Vietnamese Standards on Accounting (Series 5).

Bao Viet Holdings is a company operating in equity investments and financial services and prepares its financial statements accord-ing to Decision 15/2006/QD-BTC on the formulation of corporate accounting system dated 20 March 2006 issued by the Ministry of Finance. However, as the Holdings and its subsidiaries (the “Group”) have major operations in insurance services, the consolidated financial statements of the Group are prepared in accordance with Decision 15/2006/QD-BTC and modified to follow the Vietnam-ese Accounting System for insurance companies issued by the Ministry of Finance in Decision 1296 TC/QD/CDKT dated 31 Decem-ber 1996 and Decision 150/2001/QD-BTC dated 31 December 2001 on amended accounting policies for insurance companies.

Accounting Standard and guidance issued but not yet effective

Circular 210/2009/TT-BTC providing guidance for the adoption in Vietnam of the International Financial Reporting Standards on presen-tation and disclosures of financial instruments

On 6 November 2009, the Ministry of Finance issued Circular 210/2009/TT-BTC providing guidance for the adoption in Vietnam of the International Financial Reporting Standards on presentation and disclosures of financial instruments. The adoption of the circular will require further disclosures and have impact on the presentation of certain financial instruments in the financial state-ments. The circular will become effective for financial years beginning on or after 1 January 2011.

2.2 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Holdings (the parent company), its subsidiaries and BVF1 as at 31 December 2010 (collectively referred to as the “Group”).

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continues to be consolidated until the date that such control ceases. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of a company so as to obtain benefits from its activities.

The financial statements of the subsidiaries are prepared for the same reporting year as the parent entity, using consistent account-ing policies.

All intra-group balances, income and expenses and unrealized gains or losses arising from intra-group transactions, are eliminated in full


Minority interests represent the portion of profit or loss and net assets of the subsidiaries not held by the Holdings and are pre-sented separately in the consolidated income statement and in the consolidated balance sheet.

2.3 Registered accounting documentation system

The registered accounting documentation system of the Group is the general journal voucher system.The Group maintains its accounting records in Vietnamese dong (“VND”).

2.4 Fiscal year

The Group’s financial year starts on 1 January and ends on 31 December.The Group also prepares its consolidated financial statements quarterly.

3. STATEMENT ON THE COMPLIANCE WITH VIETNAMESE ACCOUNTING STANDARDS AND SYSTEMS

The Board of Management confirms that the Holdings has complied with the Vietnamese Accounting Standards and Systems in preparing the consolidated financial statements. The Holdings has also followed the accounting policy for the recognition of the revalued land use rights as set out in Note 4.8.

The accompanying consolidated balance sheet, consolidated income statement, consolidated cash flow statement and related notes, including their utilisation are not designed for those who are not informed about Vietnam’s accounting principles, proce-dures and practices and furthermore are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries other than Vietnam.

4. SIGNIFICANT ACCOUNTING POLICIES

4.1. Changes in accounting policies and disclosures

The accounting policies adopted by the Group in preparation of the consolidated financial statements are consistent with those followed in the preparation of the Group’s annual financial statements for the year ended 31 December 2009 except for the follow-ing changes in the accounting policies in relation to the following:

Application of Circular No. 244/2009/TT-BTC

During 2010, the Group implemented Circular No. 244/2009/TT-BTC dated 31 Dec 2009 issued by the Ministry of Finance on amending and supplementing the enterprise accounting regime, which causes the following changes:

Stock dividend and bonus shares received are not recognized as income of the Group and the respective increase in number of shares are only updated off balance sheet;

Bonus and welfare funds are reclassified from owner’s equity to liabilities.

Other than the reclassification of bonus and welfare funds as presented in Note 38 to the financial statements, comparative figures as at 31 December 2009 and for the year then ended are not restated as Circular 244/2009/TT-BTC does not require retrospective application.

Effects of changes in foreign exchange rates

For the year ended 31 December 2010, the Group has adopted Vietnamese Accounting Standard No. 10 - Effects of Changes in Foreign Exchange Rates (the “VAS 10”). VAS 10 differs from the accounting policy adopted in prior year under Circular 201/2009/TT-BTC issued on 15 October 2009 by the Ministry of Finance (the “Circular 201”) providing guidance for the treatment of foreign exchange differences relating to the recognition of unrealised foreign exchange differences as follows:


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TransactionAccounting treatment under VAS 10

Accounting treatment under Circular 201

Translation of short-term monetary assets and liabilities denom-inated in foreign cur-rencies.

All unrealised foreign exchange differences are taken to the con-solidated income state-ment.

All unrealised foreign exchange differences are taken to the “Foreign ex-change differences reserve” account in the equity section of the balance sheet and will be reversed in the following year.

Translation of long-term monetary liabili-ties denominated in foreign currencies at year end.

All unrealised foreign exchange differences are taken to the con-solidated income state-ment.

All unrealized foreign exchange gains are taken to the income statement.

All foreign exchange losses will be charged to the income statement. However, if the charging of all foreign exchange losses results in net loss before tax for the company, part of the exchange losses can be deferred and allocated to the income statement within the subsequent years. In any case, the total foreign exchange loss to be charged to current year’s income statement must be at least equivalent to the foreign exchange losses arising from the translation of the current portion of the long-term liabilities, while the remaining portion of the foreign exchange losses can be deferred in the balance sheet and allocated to the income statement within the subsequent five years.

As the impacts of this change in accounting policy on the opening balance of 2010 are immaterial, they have been charged to this year’s consolidated income statements.

4.2 Cash and cash equivalents

Cash and cash equivalents comprise of cash on hand, cash at banks, demand deposits and short-term, highly liquid investments with an original maturity of three months or less which are readily convertible into known amounts of cash and that are subject to an insignificant risk of change in value.

4.3 Accounts receivables

Accounts receivable comprise of trade receivables and other receivables that are initially recognized at cost and subsequently are recognized at cost less provision for impairment.

Provision for impairment of receivables will be made based on their overdue ages. For receivables that are undue and owed by debtors who have become bankrupt or are undergoing dissolution procedures, are missing, have absconded, are prosecuted, detained or tried by law enforcement bodies, are serving sentences or have deceased, provision should be estimated based on the amount of expected loss. The increase or decrease to the provision balance is recorded as an administrative expense in the consolidated income statement.

The Group uses the allowance ratio as stipulated in Circular 228/2009/TT-BTC issued on 7 December 2009 by the Ministry of Fi-nance, as follows:

Overdue receivables aging Allowance ratio

Overdue from six months to less than one year 30%

Overdue from one to less than two years 50%

Overdue from two to less than three years 70%

Overdue over three years 100%


4.4 Loans and advances to customers

Loans and advances to customers are presented at the principal amounts outstanding at the end of financial year.

4.5 Provision for credit losses

Loans and advances to customers are classified and provided for credit losses 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 Institu-tions effective from 1 October 2004; Decision 1627/2001/QD-NHNN dated 31 December 2001 by the Governor of the State Bank of Vietnam on lending statutory; Decision 127/2005/QD-NHNN dated 3 February 2005 amending and supplementing Decision 1627/2001/QĐ-NHNN; Decision 493/2005/QD-NHNN dated 22 April 2005 and Decision 18/2007/QD-NHNN dated 25 April 2007 by the State Bank of Vietnam on loan classification and provision. Accordingly, loans are classified into 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. Decision 493/2005/QD-NHNN and Decision 18/2007/QD-NHNN stipulated specific discount rates for certain accepted collaterals.

Specific provision is created on the net loans and advances exposure of each borrower using a 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 493/2005/QD-NHNN of the State Bank of Vietnam, loan classification is made at the end of each quar-ter for the first three quarters and on 30 November for the last quarter each year.

In accordance with Decision 493/2005/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 Group is required to fully create and maintain a general provision at 0.75% of total loans and advances to customers; guarantees and irrevocable lending commitments and acceptance for payments which are classified from groups 1 to 4 within 5 years commencing from May 2005.

The provisions are recorded in the consolidated income statement as an expense and will be used to write off any credit losses incurred. According to Decision 493/2005/QĐ-NHNN, at the discretion of the Group’s Bad Debt Resolution Committee, the Group can write off the loans that are classified in group 5 and of which the borrower are bankrupted or liquidated (for corporate) or are deceased or missing (for individuals).

Details on the loan classification and related provision as at 31 December 2010 are presented in Note 8.1 and Note 8.2.


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4.6 Provision for off-balance-sheet commitmentsAccording to Article 6 and 7 of Decision 493/2005/QĐ-NHNN and Decision 18/2007/QĐ-NHNN by the SBV, credit institutions must classify and make provision for guarantees, payment acceptances, and non-cancellable loan commitments with specific effective date (generally called off-balance-sheet commitments) into groups, namely Current, Special Mention, Substandard, Doubtful and Loss based on the overdue status and other qualitative factors.

Specific and general provision for off-balance-sheet commitments is calculated similarly to the provision for loans and advances to customers. Provision expense is recorded in the consolidated income statement and provision balance is recorded in other li-abilities in the consolidated balance sheet.

4.7 Tangible fixed assetsTangible fixed assets are stated at cost less accumulated depreciation.

The cost of a tangible fixed asset comprises of its purchase price and any directly attributable costs of bringing the tangible fixed asset to working condition for its intended use.

Expenditures for additions, improvements and renewals are added to the carrying amount of the assets and expenditures for maintenance and repairs are charged to the consolidated income statement as incurred.

When tangible fixed assets are sold or retired, their costs and accumulated depreciation are removed from the balance sheet and any gain or loss resulting from their disposal is included in the consolidated income statement.

4.8 Intangible fixed assetsIntangible fixed assets are stated at cost less accumulated amortisation.

The cost of an intangible fixed asset comprises of its purchase price and any directly attributable costs of preparing the intangible fixed asset for its intended use.

Expenditures for additions, improvements are added to the carrying amount of the assets and other expenditures are charged to the consolidated income statement as incurred.

When intangible fixed assets are sold or retired, their costs and accumulated amortisation are removed from the balance sheet and any gain or loss resulting from their disposal is included in the consolidated income statement.

Land use rights are recognised based on the revalued amount as determined by an independent valuer for the land areas that the Holdings had land use rights certificates, or was in the process of obtaining the land use right certificates, as at 31 December 2005 for the equitization purpose of the Holdings.

4.9 Depreciation and amortisation Depreciation and amortisation of fixed tangible and intangible assets is calculated on a straight-line basis over the estimated use-ful lives of these assets, which are as follows:

Buildings 6 - 25 years

Machinery 3 - 7 years

Means of transportation and communication 6 - 8 years

Office equipment 3 - 6 years

Other tangible fixed assets 4 years

Software 3 - 5 years

Other intangible assets 3 years

Land use rights with definite term according to the term specified on the land use right certificate

Land use rights with indefinite terms are not amortised in accordance with Circular 203/2009/TT-BTC issued by the Minister of Finance on 20 October 2009.


4.10 Investment properties

Investment properties are stated at cost including transaction costs less accumulated depreciation.

Subsequent expenditure relating to an investment property that has already been recognized is added to the net book value of the investment property when it is probable that future economic benefits, in excess of the originally assessed standard of perfor-mance of the existing investment property, will flow to the Group.

Depreciation and amortisation of investment properties are calculated on a straight-line basis over the estimated useful life of each asset as follows:

Land use rights with definite term according to the term specified on the land use right certificate

Buildings 6 - 25 years

Others 5 - 10 years

Investment properties are derecognised when either they have been disposed of or when the investment properties are perma-nently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the assets is recognised in the consolidated income statement in the year or retirement or disposal.

Transfers are made to investment properties when, and only when, there is a change in use, evidenced by ending of owner-occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment properties when, and only when, there is change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale.

4.11 Investments in associates

Investments in associates over which the Group has significant influence and which is neither a subsidiary nor a joint venture (typically those that the Group owns from 20% to 50% of voting rights) are accounted for under the equity method of accounting.

Under the equity method, the investment is initially recorded at cost and the carrying value is increased or decreased to recog-nize the Group’s share of the profits or losses in the associate after the date of acquisition. Distributions actually received from an associate reduce the carrying amount of the investment. Adjustments to the carrying value are recognized for changes in the Group’s proportionate interest in the associate arising from changes in the associate’s equity that have not been included in the consolidated income statement.

The reporting dates of the associates and the Group are identical and the associates’ accounting policies conform to those used by the Group for transactions and events in similar circumstances.

A listing of the Group’s associates is shown in Note 13.2.1.

4.12 Interests in jointly controlled entities

Under the equity method, the Group’s interest in jointly controlled entities is carried in the consolidated balance sheet at cost plus post joint venture changes in the Group’s share of net assets of the jointly controlled entities. The consolidated income statement reflects the share of the post-acquisition results of operation of the jointly controlled entities.

The share of profit/ (loss) of the jointly controlled entities is presented on the face of the consolidated income statement and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are ad-justed against the carrying amount of the investment. Dividends receivable from jointly controlled entities reduce the carrying amount of the investment.


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The financial statements of the jointly controlled entities are prepared for the same reporting period as the Group. Where neces-sary, adjustments are made to bring the accounting policies in line with those of the Group.

A listing of the Group’s significant joint ventures is presented in Note 13.2.1.

4.13 Investments in securities and other investments

All financial investments are initially recognised at cost and subsequently are recognized at cost less provision for impairment.

Short-term investments comprise holdings of listed shares, government bonds, corporate bonds and other liquid securities which are readily realisable and are intended to be held for not more than one year.

Long-term investments include listed and unlisted shares, government bonds, corporate bonds, trusted loans and term-depos-its at financial institutions, which are intended to be held for more than one year.

Provision for devaluation of investments in securities and other investments

The primary source of reference for impairment provisioning is Circular 228/2009/TT-BTC dated 07 December 2009 issued by the Ministry of Finance (the “Circular 228”). Details of the basis of determination of impairment of investment are as follows:

Listed securities

For listed securities that are carried at cost in accordance with Vietnamese Accounting Standards, if there is objective evidence that their market value is lower than book value, the provision amount is measured as the difference between the securities’ carrying amount and the closing market value as of the balance sheet date in accordance with the following formula given in Circular 228:

Provision amount =Number of impaired securities as at reporting date

xCarrying value of securities

-Market value of securi-ties

Unlisted securities

For unlisted shares, the following methods are used in calculating the fair value in order to compare with book value to determine the provision amount:

for securities registered to be traded on the trading market of unlisted public companies’ securities (UPCom), fair value is de-termined as the average trading prices quoted on UPCom;

for securities yet registered to be traded on UPCom, fair value is determined as the average price of public quotations from at least three securities companies as at reporting date;

for securities that fair value is not determinable, the Group does not make provision for devaluation.

Equity investments in other entities

For equity investments in other entities and other long-term investments, a provision for devaluation is set up if the investees are suffering from loss (except where such loss is already included in their business plans prior to the investment).

The amount of provision for each investment shall not exceed the invested capital and is calculated according to the following formula given in Circular 228:

Provision amount =Actual capital contributions of investors in the investee

–Actualowners’ equity

x

Investment capital of the Group

Actual capital contributions of inves-tors in the investee

The basis for setting up the provision is the positive difference between the investors’ actual capital contributions and the actual amount of owners’ equity in the investee’s financial statements at the balance sheet date.

4.14 Advances on surrender value

Policyholders who have fulfilled their premium payment obligations for at least twenty-four (“24”) months are entitled to an ad-vance on the surrender value, with the advance amount at a maximum of 80% of the surrender value and accumulated un-with-drawn dividend for the relevant policy. Advances on surrender value are carried at cost.

4.15 Securities purchased/sold under agreement to resell/repurchase (“repo”)

Securities sold under agreements to repurchase at a specified future date (“repo”) are not derecognized from the consolidated financial statements. The corresponding cash received is recognized as a liability in the consolidated balance sheet. The difference between the selling price and repurchasing price is allocated to expense in the consolidated income statement over the life of the agreement using straight-line method.

Securities purchased under agreements to resell at a specified future date (“reverse repo”) are not recognized in the consolidated financial statement. The corresponding cash paid is recognized as an asset in the consolidated balance sheet. The difference be-tween the purchasing price and reselling price is allocated to income in the consolidated income statement over the life of the agreement using straight-line method.

4.16 Payables and accruals

Payables and accruals are recognised for amount to be paid in the future for goods and services received, whether or not billed to the Group.

4.17 Provision for severance allowance

Post employment benefits

Post employment benefits are paid to retired employees of the Group by the Vietnam Social Insurance Agency. The Group is required to contribute to these post employment benefits by paying social insurance premiums to the Vietnam Social Insurance Agency at the rate of 16% of employee basic salaries on a monthly basis since 1 January 2010 (15% for the periods before 1 January 2010). The Group has no further obligation concerning post employment benefits for its employees other than this.

Voluntary resignation and retrenchment benefits

Voluntary resignation benefits: the Holdings has the obligation, under Section 42 of the Labor Code amended 2 April 2002, to pay an allowance to voluntarily resigning employees, equal to half of one-month’s basic salary for each year of employment plus wage allowances (if any) until 31 December 2008. Commencing 1 January 2009, the average monthly salary used in this calculation will be revised at the end of each reporting period based on the average monthly salary of the most recent 6 months up to the reporting date;


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Retrenchment benefits: the Holdings has the obligation, under Section 17 of the Labor Code, to pay an allowance to employees who are retrenched as a result of organizational restructuring or technological changes. In such cases, the Holdings shall pay to employees an allowance for loss of work equivalent to the aggregate amount of one month salary for each year of employ-ment, but no less than two month salary.

Although the obligations under Sections 17 and 42 are compulsory, the implementation of these Sections is subject to detailed guidance by the Ministry of Finance. In accordance with Circular 64/1999/TT-BTC dated 7 June 1999 and subsequently Circular 82/2003/TT-BTC dated 14 August 2003 by the MOF which superseded Circular 64, companies are required to calculate retrench-ment allowance at the rate of 1-3% per annum, of the basic salary fund; and the outstanding balance of employee termination reserve which was previously created at 10% from the profit after tax and after appropriation for supplementary capital reserve in accordance with the guidance of Circular 64 should be transferred to the retrenchment allowance as allowed under Circular 82.

Unemployment Insurance Fund

According to the Social Insurance Law No. 71/2006/QH11 issued on 29 June 2006, and Decree 127/2008/ND-CP issued on 12 De-cember 2008, employee and employer are required to contribute 1% each of employee basic salary to the unemployment insur-ance fund, with effect from 01 January 2009. Further, the Government will also contribute 1% of the basic salary of each employee to this fund. Vietnam Social Insurance Agency is responsible for the collection, distribution and management of the Fund.

4.18 Reserves

Technical reserves are established in accordance with provisions and instructions of Circular 156/2007/TT-BTC dated 20 December 2007 issued by the Ministry of Finance providing guidelines for implementation of Decree 46/2007/ND-CP of the Government dated 27 March 2007 on financial regime applicable to insurers and insurance brokers. The Group’s technical reserves include:

Life insurance services General insurance services

Unearned premium reserve Unearned premium reserve

Claims reserve Claims reserve

Mathematical reserve Catastrophe reserve

Dividend reserve

Equalisation reserve

Details on the reserve calculation method are as follows:

4.18.1 Life insurance reserves

Mathematical Reserve: is the difference between present value of total insurance payables in the future and the actuarially adjusted present value of insurance premiums receivable in the future. Mathematical reserve is calculated for all products with specific ac-tuarial formulas and factors for each type of products as registered and approved by the Ministry of Finance;

The Group estimates the mathematical reserve for universal life products in accordance with the provisions and instructions of MOF’s Decision 96/2007/QD-BTC dated 23 November 2007 as amended by Circular 86/2009/TT-BTC dated 28 April 2009 and with actuarial principles and methods which are widely recognised in international practice. Furthermore, the methodology and actu-arial principles used to estimate these universal life reserves have been registered and approved by the MOF.

Unearned premium reserve: is the provision for unearned revenue out of already-paid premium as at the balance sheet date, and is calculated for all outstanding policies as at the reporting date;

Claims Reserve: is the provision for claims submitted but still in the course of settlement as at the balance sheet date;


Dividend Reserve: is the provision for accumulated unpaid dividends for participating policies, which is established on the variances of actual rate of return announced for participating policies and the respective nominal interest rate; and

Equalisation Reserve: Annual contributions shall be made up until the time when this reserve is equal to five per cent (5%) of the premiums collected in the fiscal year of an insurer. The rate of annual contributions shall be one per cent (1%) of the before-tax profit of the issuer.

4.18.2 General insurance reserves

Unearned premium reserve

Unearned premium reserve is established as a percentage of total retained premium or in accordance with a coefficient of the insurance contracts’ terms as such:

For cargo insurance, unearned premium reserve is made at 25% of the retained premium;

For other insurance lines, unearned premium reserve is calculated based on the 1/8 method. This method assumes that premi-ums for all insurance contracts issued in a quarter are allocated equally between each month within the quarter. In other word, all insurance contracts of a particular quarter are assumed to be effective at that mid quarter. Unearned premium reserve is calculated based on the following formula:

Unearned premium reserve = Retained premiums X Unearned premium rate

For the insurance policies with period cover is more than one year, unearned premium reserve is calculated based on the daily method, following the formula:

Unearned premium reserve =Retained premiums x Remaining day of insurance policy

-------------------------------------------------------------------------------------------------Number of coverage days

Claims reserve

Claims reserve includes the reserve for outstanding claims and for claims incurred but not reported.

Outstanding claims reserve is established based on the estimated claim payments for each claim for which the insurer is liable, which is either notified to the insurer or requested for payment but is still unresolved at the end of the fiscal year, in accordance to the Circular 156/2007/TT-BTC; and

Reserve for incurred but not reported claims for which the insurer is liable (IBNR).

Circular 156 stipulates the application of a formula for calculation of IBNR which requires statistical information inputs of the past three years. However, the Group’s information system in use for the mentioned period did not maintain the required statistical data.

On application by the Group, the Ministry of Finance granted permission to modify the application of the formula stipulated in the Circular 156 to enable the Group to reasonably comply with the requirements of the said Circular. In this regard, the Ministry of Finance has approved the Group to use the statistic data of the reporting year only for the purpose of calculation of IBNR as per the Official Letter No.1393/BTC-QLBH dated 06 February 2009 and the Official Letter No.2250/BTC-QLBH dated 24 February 2011. On this basis, the reserve for incurred but not reported claims is established based on the following formula:


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Reserve for payment of losses which have incurred but not yet reported for the current fiscal year

=

Total indemnity for claims incurred but not reported at the end of the last year

x

Indemnity for losses arising in the current fiscal year

x

Net operating revenue of current fiscal year

Total indemnity for losses arising in the last year Net operating revenue

of the previous fiscal year

Catastrophe reserve

Catastrophe reserve is accrued annually until such reserve reaches 100% of the retained premiums of the current fiscal year and is made based on retained premiums and based on Bao Viet Insurance’s management’s experience of historical data.

On 28 December 2005, the Ministry of Finance issued Decision 100/2005/QD-BTC governing the publication of four new account-ing standards, one of which is Vietnamese Accounting Standard (“VAS”) 19 - Insurance Contract. Following the issuance of this Standard, starting from January 2006, the provision of catastrophe reserve is no longer required since it represents “possible claims under contracts that are not in existence at the reporting date”. However, since the Ministry of Finance has not issued detailed guidance for the implementation of VAS 19 and in accordance with the provision set out in Decree 46/2007/ND-CP issued by the Government of Vietnam on 27 March 2007 regarding financial regulations for insurance enterprises, the Group is still providing for the catastrophe reserve at 3.5% of total retained premium for the year ended 31 December 2010 according to official letter No.1393/BTC-QLBH dated 06 February 2009 and Official letter No.727/BTC-QLBH dated 18 January 2010.

4.19 Statutory reserves

The below statutory reserve funds are made in accordance with the regulations applicable to specific industries that the Group’s subsidiaries are operating in.

Insurance operation

The compulsory reserve fund is established in order to supplement the contributed capital of Bao Viet Life and Bao Viet Insurance and ensure solvency. Appropriation to the compulsory reserve fund is made annually at 5% of after-tax profits until it reaches 10% of contributed capital in compliance with Decision 46/2007/ND-CP dated 27 March 2007.

Securities operation

Exclusively applied for the securities companies, investment and development reserve fund is appropriated at the rate of 5% of the companies’ annual net profit and is limited to 100% of contributed capital in accordance with Decision No. 27/2007/TT- BTC dated 24 April 2007 issued by Ministry of Finance. This fund is set aside for use in the companies’ expansion of its operation or increase in contributed capital.

Financial reserve fund is appropriated at the rate of 5% of the companies’ annual net profit and is limited to 10% of contributed charter capital in accordance with Decision No. 27/2007/TT- BTC. This reserve is set aside to secure the companies’ normal opera-tions from business risks or losses, or to prepare for unforeseen losses or damages due to objective reasons.

Banking operation

On 23 November 2005, the Government issued Decree No. 146/2005/ND-CP regarding the financial management regime of credit institutions which was effective from 16 December 2005. Accordingly, commercial banks are required to make the following alloca-tions of profit after tax to create statutory reserves:

Percentage of profit after tax Maximum balance

Supplementary capital reserve Not applicable Not applicable


Moreover, the Financial Risk Reserve is calculated based on profit after tax, and after deducting the allocation to the supplemen-tary capital reserve (remaining profit after tax):

Financial risk reserve 10% of remaining profit after tax 25% charter capital

In 2010, Baoviet Bank has temporarily made 5% of its profit after tax for supplementary capital reserve and 10% of the profit after tax for financial risk reserve. The appropriation to statutory reserve of Baoviet Bank is determined by Shareholders’ meeting. The utilization of these statutory reserves is in accordance with guidelines as stipulated in Decree. 146.

4.20 Revenue recognitionRevenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Gross written premium

Life insurance

Premiums are established in accordance with provisions and instructions of Circular 156/2007/TT-BTC dated 20 December 2007 as amended by Circular 86/2009/TT-BTC dated 28 April 2009 issued by the Ministry of Finance providing guidelines on financial regime applicable to insurers and insurance brokers. Premiums from life insurance contracts are recognised as revenue when payables by the policyholder. For single premium business, revenue is recognised on the date from which the policy is effective. Premiums due after the reporting period but received before the balance sheet date are shown as “premiums in advance” and included in the “Other payables” in the consolidated balance sheet.

Total premium received from Universal Life policy holders are recorded as revenue, Policy holders account value is calculated actu-arially and recognized through technical reserves in the consolidated balance sheet.

General insurance

Gross written premiums are recognized in accordance with Circular 156/2008/TT-BTC issued by the Ministry of Finance on 20 De-cember 2008 (“Circular 156”) and Circular 86/2009/TT-BTC modifying some clauses of Circular 156 on financial regime applicable to insurers and insurance brokers. Specifically, gross written premium is recognized as revenue at the point of time when the fol-lowing conditions are met: (1) the insurance contract has been entered into by the insurer and the insured; and (2) the premium has been paid by the insured or there is agreement between the Corporation and the insured for delayed payment of insurance premium. Prepaid premium before due date is recorded as “Premium received in advance” in the consolidated balance sheet as at the balance sheet date.

Interests

Revenue is recognised as interests accrue (taking into account the effective yield on the asset) unless recoverability is in doubt.

Revenue from bond is recognized on an accrual basis. Interest revenue also includes the amount of amortization of any discount, premium or other difference between the initial carrying amount of a bond and its amount at maturity and allocated using straight-line method. When unpaid bond coupon interest has accrued before the acquisition of a bond, the subsequent receipt of coupon interest is allocated between pre-acquisition and post-acquisition period. Only post-acquisition bond coupon interest is recognized as revenue. Pre-acquisition bond coupon interest is deducted from the cost of the bond.

Interest income from banking activities is recognized in the consolidated income statement on an accrual basis using nominal interest rate. The recognition of accrued interest income is suspended when loans become impaired, which occurs when a loan is classified from either group 2 to group 5 according to criteria set in Decision 493/2005/QD-NHNN dated 22 April 2005 and Decision 18/2007/QD-NHNN dated 25 April 2007 by the State Bank of Vietnam. Suspended interest income is recorded off-balance sheet and recognized in the consolidated income statement upon actual receipt.

Fees from rendering of services

Fees from rendering of services include fund management fees, placement fees, incentive fees, brokerage, underwriting activi-ties…, which are recognized when services are performed and the revenue can be reliably measured.


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Gains from securities trading

Gains from securities trading are the excess of selling prices over the weighted average cost of securities sold.

Dividends and appropriated profits

Income is recognised when the Group’s right to receive the cash dividend or the appropriated profit is established. Stock dividend and bonus shares received are not recognized as income of the Group and the respective increase in number of shares are only updated off balance sheet.

Other income

Revenues from irregular - activities other than turnover-generating activities are recorded to other incomes as stipulated by “VAS 14 - Revenue and other income”, including: Revenues from asset liquidation and sale; fines paid by customers for their contract breaches; collected insurance compensation; collected debt which had been written off and included in the preceding period expenses; payable debts now recorded as revenue increase as their owners no longer exist; collected tax amounts which now are reduced and reimbursed; and other revenues.

4.21 Expense recognition

Claim and maturity payments

Claim and maturity payment expenses for life insurance are recognised when the liability to the policyholder under the policy has been determined.

For general insurance, claim expense is recognized at the point of time when the claim documents are completed and approved by authorized persons. In case that the final claim amount has not been finalized but the Group is certain that the loss is within its insured liabilities and has paid an advance to the customer as per their request, such advance would also be recognized as claim expenses. Any claim that is not yet approved by authorized persons is considered an outstanding claim and included in claims reserve.

Commission

For life insurance, commission expenses are calculated as the percentages of premium revenue and are recognized in the con-solidated income statement. Commission is calculated for all products with specific percentages for each type of products, and in accordance with Circular 155/2007/TT-BTC dated 20 December 2007 issued by the Ministry of Finance providing guidelines for implementation of Decree 45/2007/ND-CP dated 27 March 2007 on Law on Insurance and Circular 86/2009/TT-BTC issued on 28 April 2009 by the Ministry of Finance to provide guidance and amendment to Circular 155/2007/TT-BTC.

For general insurance, commission expense is recognized when incurred.

Interest expense from banking activities

Interest expense is recognized in the consolidated income statement on an accrual basis.

Leased assets

Rentals paid under operating leases are charged to the consolidated income statement on a straight-line basis over the term of the lease.

4.22 Recognition of reinsurance activities of general insurance

(i) Reinsurance ceded

Reinsurance premiums ceded under treaty reinsurance agreements are recognized when gross written premiums within the scope of the treaty agreements are recognized.

Reinsurance recoveries are recognized when there is evidence of liability on the part of the reinsurer.

Reinsurance recoveries are recognized when there is evidence of liability on the part of the reinsurer.


Reinsurance commission is recognized when there is a corresponding reinsurance premium ceded.

(ii) Reinsurance assumed

Reinsurance assumed under treaty arrangement

Income and expenses relating to reinsurance assumed under treaty arrangements are recognized when the statement of account is received from the cedants. As at the reporting date, income and expenses relating to reinsurance assumed under treaty arrange-ments for which the cedants have not sent their statement of accounts have been estimated based on statistical data and based on the cedants’ own estimate.

Reinsurance assumed under facultative arrangement

Reinsurance premium assumed is recognized when the facultative reinsurance agreement has been entered into by the Group and a statement of account (for each facultative reinsurance agreement) has been received from the cedants;

Claim expenses for reinsurance assumed are recognized when there is evidence of liability of the Group and when a statement of account has been sent to the Group;

Reinsurance commission is recognized when the reinsurance premium is recorded and when a statement of account has been sent to the Group.

4.23 Taxation

Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or sub-stantively enacted as at the balance sheet date.

Current income tax is charged or credited to the consolidated income statement, except when it relates to items recognised di-rectly to equity, in which case the deferred current income tax is also dealt with in equity.

Current income tax assets and liabilities are offset when there is a legally enforceable right for the Group to set off current tax assets against current tax liabilities and when the Group intends to settle its current tax assets and liabilities on a net basis.

As disclosed in Note 4.1, the Group adopted the “VAS 10” in relation to foreign currency transactions from the year 2010. However, the Group applies Circular 130/2008/TT-BTC dated 26 December 2008 and Circular 177/2009/TT-BTC dated 10 September 2009 issued by the Ministry of Finance in calculating the taxable income relating to these transactions.

Deferred tax

Deferred tax is provided using the liability method on temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amount for financial reporting purposes.

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 related transaction affects neither the accounting profit nor taxable profit or loss; and

in respect of taxable temporarily differences associated with investments in subsidiaries and associates, and interests in joint ventures where timing of the reversal of the temporary difference can be controlled and it is probable that the temporary dif-ference will not reverse in the foreseeable future.

Deferred tax assets are recognized for all deductible temporary differences, carried forward unused tax credit and unused tax losses, to the extent that it is probable that future taxable profits will be available against which these deductible temporary differences, carried forward unused tax credit and unused tax losses can be utilized, except:


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Where the deferred tax arises from the initial recognition of an asset or liability in a transaction which at the time of the transac-tion affects neither the accounting profit nor taxable profit or loss.

in respect of deductible temporarily differences associated with investments in subsidiaries, associates, and interests in joint ventures, deferred tax assets are recognized only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilized.

The carrying amount of deferred income tax assets is audited at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Previously unrecognised deferred income tax assets are re assessed 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 period 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.

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 for the Group to set off current tax assets against current tax liabilities and when they relate to income taxes levied on the same taxable entity by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

4.24 Appropriation of net profits

Profit after tax of the Group is appropriated in accordance with resolutions of the General Shareholders’ Meeting and Vietnamese regulatory requirements.

4.25 Transactions in foreign currencies

The Group adopted the “VAS 10” in relation to foreign currency transactions from the year 2010.

Transactions in currencies other than the Group’ reporting currency of VND are recorded at the exchange rates ruling at the date of the transaction. At the end of the year, monetary assets and liabilities denominated in foreign currencies are translated at inter-bank exchange rates ruling at the balance sheet date. All realised and unrealised foreign exchange differences are taken to the consolidated income statement.

The above guidance relating to unrealized foreign exchange differences provided by VAS 10 is different from those stipulated in the Circular 201/2009/TT-BTC issued on 15 October 2009 by the Ministry of Finance providing guidance for the treatment of for-eign exchange differences (the “Circular 201”) as applied by the Group in 2009. The differences are described in Note 4.1.

The impact to the consolidated financial statements had the Holdings adopted the Circular 201 in 2010 is presented in Note 34.

4.26 Offsetting

Financial assets and liabilities are offset and presented on net basis on the consolidated balance sheet when and only when the Group has the intention and legal right to make payment on net basis, or the settlement of financial assets and liabilities happen at the same time.


4.27 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 about several factors involving varying degrees of judgment and uncertainty and actual results may differ resulting in future changes in such provisions.

4.28 Off-balance sheet items

In accordance with the Vietnamese Accounting System for insurance company, insurance policies that have been signed but for which no obligations have arisen on the part of the insurers are not recorded in the consolidated balance sheet until the premium is collected or the policies become effective.


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5. CASH AND CASH EQUIVALENTS31 December 2010

VND31 December 2009

VND

Cash on hand 155,587,174,546 68,973,179,827

Cash at banks 507,654,505,084 471,869,527,792

Cash in transit 59,798,195,232 94,328,700

Cash equivalents (*) 5,121,667,272,896 1,991,707,227,093

Total cash and cash equivalents 5,844,707,147,758 2,532,644,263,412

(*) Cash equivalents comprise of term deposits at financial institutions having original maturities of no more than 3 months and interest at rates denominated in

Vietnam dong ranging from 8.5% to 16.5% per annum and in US dollar with interest rate ranging from 0.2% to 1.4% per annum.

6. ACCOUNTS RECEIVABLES

31 December 2010VND

31 December 2009VND

Receivables from insurance activities

Gross written premium receivables 501,744,386,049 318,134,288,531

Reinsurance assumed receivables 69,830,833,871 74,315,180,815

Reinsurance ceded receivables 857,276,129,659 873,267,024,099

Other receivables from insurance activities 1,264,166,676 1,122,133,839

Receivables from co-insurers 23,254,922,871 6,335,705,691

1,453,370,439,126 1,273,174,332,975

Trade advancesAdvances to suppliers 51,438,200,967 9,351,089,507

51,438,200,967 9,351,089,507

Other advances 15,004,672,895 14,169,850,360Receivables from investment activities

Dividend receivables 10,923,835,861 8,928,848,933

Bank deposit interest 432,084,476,342 293,214,114,444

Bond coupon receivables 750,381,556,782 511,835,722,629

Receivables from repo contracts - 22,988,904,912

Receivables from securities trading 993,842,121 11,067,001,000

Interest receivables from automatic loans 4,822,755,596 2,874,246,605

Loans interest receivables from customers 4,196,209,448 5,021,488,048

Interest receivables from advances on surrender value 238,920,490,000 208,516,086,800

Other receivables from investment activities 43,528,020,607 4,286,403,001

1,485,851,186,757 1,068,732,816,372

Other receivables (*) 272,320,059,245 100,924,531,492 Total receivables 3,277,984,558,990 2,466,352,620,706

Provision for doubtful debts (71,469,668,078) (38,722,496,241)

Net receivables 3,206,514,890,912 2,427,630,124,465

(*) Other receivables as at 31 December 2010 include an amount of VND 106,761,864,000 being the money transferred to issuers to buy shares for BVSC’s customers under brokerage contracts signed between BVSC and clients.

7. INVENTORIES

31 December 2010VND

31 December 2009VND

Pre-printed certificates 13,750,685,339 10,177,565,405

Materials and stationery 8,636,859,860 9,488,302,527

Tools/ Equipment 2,116,641,003 574,125,330

Work in progress (*) 92,758,996,462 86,881,533,090

Total inventories 117,263,182,664 107,121,526,352Provision for obsolete inventories - -

Net realisable value of inventories 117,263,182,664 107,121,526,352

(*) Work in progress represents investment properties under construction of BVInvest. These items are recorded in inventory account and will be recognized in cost of

goods sold when they’re sold.

8. LOANS AND ADVANCES TO CUSTOMERS

31 December 2010VND

31 December 2009VND

Commercial loans 5,394,881,793,498 2,070,446,430,293In which:

Short-term loans 2,945,413,518,436 1,224,593,789,651

Medium-term loans 1,115,916,458,477 471,228,961,441

Long-term loans 1,333,551,816,585 374,623,679,201

Loans and advances to credit institutions 529,397,600,000 562,576,960,000

5,924,279,393,498 2,633,023,390,293

Provision for credit losses (35,211,916,130) (8,266,506,189)

Net loans and advances to credit institutions 5,889,067,477,368 2,624,756,884,104

For the year ended 31 December 2010 interest rate (% per annum)

Commercial loans in VND 12% - 22%

Commercial loans in foreign currency 4% - 9%

8.1. Analysis of commercial loans by quality

31 December 2010VND

31 December 2009VND

Current 5,341,330,710,017 2,069,588,097,293

Special mention 53,084,683,481 858,333,000

Substandard 466,400,000 -

Doubtful - -

Loss - -

5,394,881,793,498 2,070,446,430,293


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131

8.2 Provision for credit losses

Changes in the provision for credit losses for the year ended 31 December 2010 are summarized below:

Specific provision

VND

General provision

VND

Total

VND

Balance as at 31 Dec 2009 13,750,000 8,252,756,189 8,266,506,189

Provision expense in the year for credit losses 370,683,381 26,574,726,560 26,945,409,941

Balance as at 31 Dec 2010 384,433,381 34,827,482,749 35,211,916,130

9. TANGIBLE FIXED ASSETS

Building

VNDMachinery

VND

Means of trans-portation and

communicationVND

Office equipmentVND

Others tangible fixed assets

VND

TotalVND

Cost:

31 Dec 2009 574,108,338,213 35,388,309,102 177,122,050,807 313,023,765,644 1,047,923,596 1,100,690,387,362

Additions 281,846,912,137 8,594,245,653 84,407,057,820 41,997,209,133 37,232,955 416,882,657,698

In which:

New purchases 60,708,691,265 8,485,455,153 19,600,627,081 35,548,957,133 37,232,955 124,380,963,587

Newly con-structed

221,138,220,872 - 64,806,430,739 6,448,252,000 - 292,392,903,611

Others - 108,790,500 - - - 108,790,500

Disposals (1,744,867,469) (1,083,369,873) (2,649,079,218) (10,008,573,903) (25,793,000) (15,511,683,463)

31 Dec 2010 854,210,382,881 42,899,184,882 258,880,029,409 345,012,400,874 1,059,363,551 1,502,061,361,597

Accumulated depre-

ciation:

31 Dec 2009 184,440,340,420 16,170,370,407 94,238,307,189 234,988,112,711 984,134,682 530,821,265,409

Depreciation for the

year33,225,493,358 6,981,298,669 24,490,972,656 33,421,297,978 48,124,625 98,167,187,287

Decrease due to

disposal(1,744,867,469) (1,077,837,669) (2,649,079,218) (9,797,612,618) (25,793,000) (15,295,189,974)

31 Dec 2010 215,920,966,309 22,073,831,407 116,080,200,627 258,611,798,071 1,006,466,307 613,693,262,722

Net book value:

31 Dec 2009 389,667,997,793 19,217,938,695 82,883,743,618 78,035,652,933 63,788,914 569,869,121,953

31 Dec 2010 638,289,416,572 20,825,353,475 142,799,828,782 86,400,602,803 52,897,244 888,368,098,875


10. INTANGIBLE FIXED ASSETS

Land use rights

VND

Software

VND

Other intangible fixed assets

VND

Total

VND

Cost:31 Dec 2009 619,162,684,653 86,050,244,082 1,892,101,756 707,105,030,491

New purchases 2,551,361,733 83,627,611,783 - 86,178,973,516

Disposals (293,441,118) - - (293,441,118)

31 Dec 2010 621,420,605,268 169,677,855,865 1,892,101,756 792,990,562,889

Accumulated amortisation:

31 Dec 2009 7,105,055,229 48,856,611,950 1,013,362,694 56,975,029,873

Amortisation during the year 5,336,369,799 20,749,827,766 503,345,356 26,589,542,921

Decrease due to disposals (246,883,623) - - (246,883,623)

31 Dec 2010 12,194,541,405 69,606,439,716 1,516,708,050 83,317,689,171

Net book value:

31 Dec 2009 612,057,629,424 37,193,632,132 878,739,062 650,130,000,618

31 Dec 2010 609,226,063,863 100,071,416,149 375,393,706 709,672,873,718

11. CONSTRUCTION IN PROGRESS

31 December 2010

VND

31 December 2009

VND

Purchasing fixed assets 97,139,041,830 52,547,596,674

Capital constructions in progress 242,422,455,753 429,277,918,123

Major assets overhaul 72,680,520 854,723,032

339,634,178,103 482,680,237,829

Details of the capital constructions in progress at 31 December 2010 are as follows:

31 December 2010

VND

31 December 2009

VND

Buildings under construction at Bao Viet Insurance 12,879,128,752 21,899,868,122

Buildings under construction at Baoviet Bank 6,352,444,033 2,482,812,425

Buildings under construction at Bao Viet Life 174,930,810,801 157,251,622,198

Buildings under construction at the Holdings 30,734,441,927 240,936,057,481

Software under development at the Holdings 17,455,030,240 6,707,557,897

Construction in progress of BVSC 70,600,000 -

242,422,455,753 429,277,918,123


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133

12. INVESTMENT PROPERTIES

This is the investment in Quang Minh Housing Project at Dong Dia, Cua Cuong, Ma Vang areas in Gia Tan, Quang Minh, Me Linh Dis-trict, Vinh Phuc. These projects are held for capital appreciation at the date of preparation of these consolidated financial statements.

13. INVESTMENTS

13.1 Short-term investments

Notes31 December 2010

VND

31 December 2009

VND

Term deposits at financial institutions 13.1.1 6,889,370,528,889 6,652,102,000,000

Bonds 13.1.2 860,005,838,111 478,650,208,005

Listed shares 13.1.3 1,885,055,919,490 1,808,610,603,564

Other short-term investments 251,461,789,100 -

9,885,894,075,590 8,939,362,811,569

Provision for impairment of short-term investments (853,702,451,855) (363,299,115,494)

Net value of short – term investments 9,032,191,623,735 8,576,063,696,075

13.1.1 Term deposits at financial institutions

31 December 2010

VND

31 December 2009

VND

Term deposits in VND 6,889,370,528,889 6,598,279,000,000

Term deposits in USD - 53,823,000,000

6,889,370,528,889 6,652,102,000,000

The above short-term deposits have maturities not over one year and interest at rates ranging from 8.2% to 17.8% per annum for VND and being1% per annum for USD.

13.1.2 Bonds

Type of bonds Currency Term (years) Rate (%) 31 December 2010

VND

Corporate bonds VND 1-5 years 8% - 15% 650,022,000,000

Government bonds VND 5-7 years 7.15% - 16% 209,983,838,111

860,005,838,111

The Group’s short-term bonds are bonds which have remaining maturity of not over one year.


13.1.3 Listed shares

Besides investments in term deposits and bonds, the Group has invested in shares listed in Hanoi Stock Exchange and Ho Chi Minh Stock Exchange. The Group currently does not have any investment in overseas stock markets.

13.2 Long-term investments

Notes 31 December 2010

VND

31 December 2009

VND

Investments in associates and joint ventures 13.2.1 338,561,803,678 313,559,572,889

Other long-term investments

Term deposits at financial institutions 13.2.2 1,683,500,000,000 789,000,000,000

Bonds 13.2.3 14,450,546,217,240 12,218,952,105,078

Loans and trusted loans 13.2.4 41,385,137,366 42,662,403,128

Advances from surrender value 13.2.5 862,658,975,058 903,945,810,246

Other long-term investments 13.2.6 1,364,499,208,767 1,558,041,694,392

18,402,589,538,431 15,512,602,012,844

Total long-term investments 18,741,151,342,109 15,826,161,585,733

Provision for impairment (197,396,840,633) (195,997,534,321)

Net value of long-term investments 18,543,754,501,476 15,630,164,051,412

13.2.1 Investments in associates and joint ventures

As at 31 December 2010, the Group’s investments in associates and joint ventures include:

Notes 31 December 2010

VND

31 December 2009

VND

Bao Viet Tourism Hotel JSC 13.2.1.a 16,500,000,000 7,400,000,000

International Investment & Construction Joint Stock Com-pany (“VIGEBA”)

13.2.1.b 54,000,000,000 54,000,000,000

Long Viet Investment and Construction Co. Ltd and Quang Minh Project

13.2.1.c 34,812,144,191 19,797,937,689

Bao Viet Tokio Marine Insurance Joint Venture Company 13.2.1.d 212,554,391,751 186,892,261,619

Bao Viet-SCIC Investment Limited Company (“BV-SCIC”) 13.2.1.e 20,695,267,736 45,469,373,581

338,561,803,678 313,559,572,889


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135

Details of the investments in associates and joint ventures as at 31 December 2010 are presented as below:

Invested companyCharter capital

VND

Committed con-

tribution capital

VND

%Contributed capital

VND

Capital to be

contributed

VND

Associates

Bao Viet Tourism Hotel JSC 60,000,000,000 21,000,000,000 35% 16,500,000,000 4,500,000,000

VIGEBA 180,000,000,000 54,000,000,000 30% 54,000,000,000 -

Long Viet Investment and Construc-tion Co. Ltd

65,043,200,000 29,269,440,000 45% 29,269,440,000 -

Joint ventures

Bao Viet Tokio Marine Insurance Joint Venture (Control right: 50%)

300,000,000,000 153,000,000,000 51% 153,000,000,000 -

Bao Viet-SCIC Investment Limited Company

40,000,000,000 20,000,000,000 50% 20,000,000,000 -

272,769,440,000

13.2.1.a Bao Viet Tourism Hotel JSC

31 December 2010VND

31 December 2009VND

Opening balance 7,400,000,000 7,400,000,000

Increase in capital 9,100,000,000 -

Closing balance 16,500,000,000 7,400,000,000

13.2.1.b International Investment & Construction Joint Stock Company (“VIGEBA”)

31 December 2010VND

31 December 2009VND

Opening balance 54,000,000,000 39,000,000,000

Increase in capital - 15,000,000,000

Dividend paid (9,426,417,396) -

Share of net profit during the year 9,426,417,396 -

Closing balance 54,000,000,000 54,000,000,000


13.2.1.c Investment in Long Viet Investment and Construction Company Ltd (“Long Viet”) and interest in Quang Minh Project

31 December 2010VND

31 December 2009VND

Opening balance 19,797,937,689 21,405,085,041

Capital recovery upon the liquidation of Quang Minh Project

(14,000,000,000) -

Increase investment in Long Viet 24,807,000,000 -

Dividend received - (3,637,321,762)

Share of retained profit for the year 4,207,206,502 2,030,174,410

Closing balance 34,812,144,191 19,797,937,689

13.2.1.d Bao Viet Tokio Marine Insurance Joint Venture Company

31 December 2010VND

31 December 2009VND

Opening balance 186,892,261,619 186,640,010,026

Dividend received (9,911,913,955) (13,935,661,901)

Foreign exchange difference due to application of Circular 201 in 2009

- 3,629,917,600

Adjustment for the foreign exchange difference as the Group applied VAS 10 in 2010

(3,629,917,600) -

Share of retained profit for the year 39,203,961,687 10,557,995,894

Closing balance 212,554,391,751 186,892,261,619

13.2.1.e Bao Viet-SCIC Investment Limited Company

31 December 2010VND

31 December 2009VND

Opening balance 45,469,373,581 -

(Decrease)/Increase in capital (25,000,000,000) 45,000,000,000

Dividend paid (645,661,041) -

Share of retained profit for the year 871,555,196 469,373,581

Closing balance 20,695,267,736 45,469,373,581


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137

13.2.2 Term deposits at credit institutions

31 December 2010VND

31 December 2009VND

Term deposits in VND 1,683,500,000,000 789,000,000,000

1,683,500,000,000 789,000,000,000

These deposits have terms ranging from 1 to 15 years and interest at rates ranging from 8.8% to 16% per annum.

13.2.3 Bonds

Type of bonds Currency Term (years) Interest rate

(%)

Value as at 31 December 2010

VND

Corporate bonds VND 2-20 years 7.2%-16% 4,159,352,934,482

Government bonds VND 2-15 years 7.7%-12.1% 10,291,193,282,758

14,450,546,217,240

13.2.4 Loans and trusted loans

As at 31 December 2010, details of the loans under investment category of the Group are as follows:

Loans

Name of borrower Term (years) Interest rate (%) 31 December 2010

VND

Greenline Limited Company Ltd 2 years 9.6% 2,106,027,200

2,106,027,200

Trusted loans

Name of borrower Currency Trusted bank Term Rate (%) 31 December 2010 VND

Orion Hanel Company Ltd USDBIDV - Bac

Thang Long6 years 7.4% 39,279,110,166

39,279,110,166

Total loans and trusted loan 41,385,137,366

The above loans and trusted loans are overdue and borrowers have no capacity for paying back the loans. Hence, the Group has made 100% provision for credit losses for these loans.


13.2.5 Advances from surrender values

Advances from surrender values are carried at cost.

Policyholders who have fulfilled their premium payment obligations for at least 24 months are entitled to an advance on the sur-render value, with the advance amount at a maximum of 80% of the surrender value and accumulated un-withdrawn dividend for the relevant policy.

13.2.6 Other long-term investments

These are equity investments in other entities which the Group has neither control right nor significant influence on. Hence, these are not investment in joint-ventures or associates. Breakdown of the investments by source is as follows:

Breakdown of the investments by source is as follows:

31 December 2010

VND

31 December 2009

VND

The Holdings 962,254,966,767 638,504,280,000

Bao Viet Insurance 60,500,000,000 103,460,559,767

Bao Viet Life 88,747,960,000 226,072,777,000

Bao Viet Security Joint Stock Company 92,911,383,000 400,058,558,625

Bao Viet Security Investment Fund 105,346,105,000 125,466,565,000

Bao Viet Fund Management Company 14,770,461,000 24,510,621,000

BVInvest 39,968,333,000 39,968,333,000

1,364,499,208,767 1,558,041,694,392

14. LONG-TERM PREPAID EXPENSES

31 December 2010

VND

31 December 2009

VND

Beginning balance 18,120,011,138 18,692,585,177

Increase 91,609,710,537 18,546,776,391

Charged as expenses (57,198,256,903) (19,119,350,430)

Ending balance 52,531,464,772 18,120,011,138

15. SHORT-TERM LOANS AND BORROWINGS

These are loans of Baoviet Bank from the State Bank of Vietnam, including loans in VND for capital replenishment under the form of valuable paper discounting to ensure the Bank’s liquidity. These loans have a term of 7 days and bear interest at rate of 10% p.a.


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139

16. ACCOUNTS PAYABLES

16.1 Trade payables

31 December 2010

VND

31 December 2009

VND

Insurance activities

Life insurance 101,637,171,829 78,294,863,262

Claims payables 41,928,770,562 30,909,622,212

Commissions payables 56,791,508,044 45,118,047,019

Premium returns payables 105,682,201 1,205,393,917

Dividends payables - life insurance 2,811,211,022 1,061,800,114

General insurance 561,633,862,961 527,528,538,481

Commissions payables 40,544,856,355 36,265,822,959

Payables relating to direct insurance activities 45,942,008,701 51,424,540,911

Reinsurance assumed payables 42,537,943,062 44,132,188,818

Reinsurance ceded payables 432,609,054,843 395,705,985,793

663,271,034,790 605,823,401,743

Financial activities

Prepaid bond interest 45,470,109,657 48,737,767,142

Prepaid deposit interest 39,504,785,202 13,622,315,414

Interest payable to customer deposits 71,080,071,486 22,107,099,657

Other payables from financial activities 51,209,531,821 34,430,572,452

207,264,498,166 118,897,754,665

Payables to suppliers and service providers

Payables to suppliers 58,620,367,443 29,436,471,962

Payables to securities issuing organisations 4,193,069,302 7,364,535,134

Payables to lender in repo contracts 2,165,153,642,558 174,367,077,046

Others 1,713,697,400 24,726,679,614

2,229,680,776,703 235,894,763,756

3,100,216,309,659 960,615,920,164


16.2 Advances from customers

31 December 2010

VND

31 December 2009

VND

Advances from customers for securities trading 4,648,902,058 3,973,208,500

Premium in advance 30,656,565,920 39,252,813,457

35,305,467,978 43,226,021,957

17. STATUTORY OBLIGATIONS

31 Dec 2009VND

Increase

VND

Paid

VND

31 Dec 2010VND

Taxes

Value added tax 18,042,750,720 295,947,115,802 287,403,399,457 26,586,467,065

Enterprise Income Tax 93,170,087,183 272,482,308,411 318,521,037,200 47,131,358,394

Personal Income Tax 3,939,485,398 71,590,043,372 67,056,801,811 8,472,726,959

Land lease tax 9,817,641 2,263,656,733 2,207,299,048 66,175,326

Other taxes 13,679,455,963 29,487,645,126 37,560,114,139 5,606,986,950

128,841,596,905 671,770,769,444 712,748,651,655 87,863,714,694

17.1 Current Enterprise Income Tax

In 2010, except for the case of Bao Viet Fund Management Company and BV Au Lac, the Group has the obligation to pay Enterprise Income Tax (“EIT”) at the rate of 25% of taxable profits.

For the training service of BV - Au Lac, the Enterprise Income Tax rate imposed is 10%. In the first 10 years from the establishment of the company, BVF is subject to enterprise income tax at the rate of 20%. The company is exempted from EIT for two years from the first profit making year and enjoy a reduction of 50% in the next 3 years. Therefore from 2008 to 2010, BVF has the obligation to pay the tax at the rate of 10%.

The Group’s tax returns are subject to examination by the tax authorities. Because the application of tax laws and regulations on 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.


ANNUAL REPORT 2010


141

Current year

VND

Previous year

VND

Current Enterprise Income Tax 272,482,308,411 227,108,847,520

Deferred Enterprise Income Tax 2,122,672,833 (266,449,817)

Enterprise Income Tax Expense 274,604,981,244 226,842,397,703

The current tax payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expenses that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted by the balance sheet date.

Current yearVND

Previous yearVND

Profit before tax 1,254,901,112,464 1,242,898,959,040

Increase adjustment on profit before tax 31,906,643,605 16,764,412,148

Expenses disallowed for tax purpose 31,906,643,605 16,764,412,148

Reduction adjustment on profit before tax (249,761,504,870) (142,942,648,620)

Dividends (tax exempted) (133,558,710,320) (115,183,397,972)

Bond interest which is subject to tax exemption (43,637,255,776) (9,853,616,104)

Gain from foreign exchange difference (34,922,724,364) (17,905,634,544)

Other reductions (37,642,814,410) -

Non-taxable (loss)/profit arising from consolidation adjust-ments

(112,629,466,034) 253,626,218,571

Non-taxable loss 154,463,863,895 -

Loss transferred from last year - (378,221,351,467)

Total adjustment on profit before tax (176,020,463,404) (250,773,369,368)

Equalization reserve (5,995,431,804) (4,556,421,030)

Estimated current taxable income 1,072,885,217,256 987,569,168,642

in which:

Profit taxed at 25% 1,051,842,920,820 869,652,559,502

Profit taxed at preferential rate of 17.5% - 79,364,908,893

Profit taxed at 10% 21,042,296,436 -

Profit taxed at preferential rate of 7% - 38,551,700,247

Adjustment according to State Investigators 7,579,376,993 -

Total estimated tax expense 272,482,308,411 234,000,617,951

EIT reduction according to Circular No. 03/2009/TT-BTC - (7,177,654,108)

Other adjustments (162,028,433) 285,883,677

Tax expense charged to current year 272,482,308,411 227,108,847,520

Opening balance of EIT payables 93,170,087,183 58,758,433,893

Current EIT paid during the year (318,521,037,200) (192,697,194,230)

Estimated enterprise Income Tax payables 47,131,358,394 93,170,087,183


17.2 Deferred Tax

The following are the major deferred tax assets and liabilities recognized by the Group, and the movements thereon, during the current and prior reporting periods.

Consolidated balance sheet Consolidated income statement

31 December 2010VND

31 December 2009VND

Current yearVND

Previous yearVND

Deferred tax assets on deductible temporary differences

12,668,907,308 10,654,317,835 2,014,589,473 3,797,053,009

Deferred tax liabilities on taxable temporary differences

(8,613,670,942) (4,476,408,636) (4,137,262,306) (3,530,603,192)

Net deferred income tax credit (charge) to consolidated Income statement

(2,122,672,833) 266,449,817

18. OTHER PAYABLES

31 December 2010

VND

31 December 2009

VND

Surplus assets awaiting resolution 38,459,281 22,729,580

Social Insurance, Health Insurance, Trade Union Fees 5,268,842,172 5,733,287,034

Share allotment monies received (*) 646,867,673,855 -

Dividend payables to shareholders 10,613,306,875 -

Deferred revenue 18,974,714,214 8,085,122,877

Payables relating to security operation 12,501,781,144 -

Payables to Ministry of Finance (**) 32,926,520,739 449,895,267,217

Payable to HSBC Insurance (Asia Pacific) Holdings Limited for Technical Support and Capability Transfer Agreement (TSCTA)

74,408,814,579 106,072,353,436

Others (***) 304,654,926,462 174,848,501,991

1,106,255,039,321 744,657,262,135

(*) This represents the subscription money received from existing shareholders for their exercise of right issues in January 2011.

(**) This relates to the dividend payable in respect of 2008 to the Ministry of Finance (the “MOF”) that the Holdings has been authorized to use as the MOF’s contribution in the Holdings’ charter capital. During the year 2010, an amount of VND 458,517,600,000 was transferred to a bank account for the preparation of the MOF’s contribution in the Holdings’ charter capital that took place in January 2011.

(***) These include amounts received from customers under brokerage contracts to buy shares totaling VND 106,761,864,000.


ANNUAL REPORT 2010


143

19. BONUS AND WELFARE FUNDS

31 December 2010

VND

31 December 2009

VND

Opening balance 49,856,498,121 36,500,034,959

Increased during the year 68,159,512,505 35,048,205,891

Utilized during the year (48,902,629,147) (21,691,742,729)

Closing balance 69,113,381,479 49,856,498,121

20. AMOUNT DUE TO CUSTOMERS

31 December 2010

VND

31 December 2009

VND

Deposits from commercial banks 3,019,960,785,943 1,709,021,432,606

Deposits from customers 4,577,878,623,080 2,077,940,434,258

7,597,839,409,023 3,786,961,866,864

20.1 Deposits from commercial banks

31 December 2010

VND

31 December 2009

VND

Term deposits

In VND 2,754,912,785,943 1,655,198,432,606

In gold and foreign currencies 265,048,000,000 53,823,000,000

3,019,960,785,943 1,709,021,432,606



20.2 Deposits from customers

31 December 2010

VND

31 December 2009

VND

Demand deposits 452,914,877,809 365,294,918,913

Demand deposits in VND 444,262,169,207 362,572,397,652

Demand savings deposits in VND 3,422,568 232,324

Demand deposits in foreign currencies 8,591,260,022 2,482,959,406

Demand savings deposits in foreign currencies 58,026,012 239,329,531

Term deposits 4,104,108,685,744 1,675,619,756,327

Term deposits in VND 2,623,855,520,334 1,265,467,327,953

Term savings deposits in VND 826,429,877,181 235,524,744,555

Term deposits in foreign currencies 17,376,853,389 48,874,345,273

Term savings deposits in foreign currencies 636,446,434,840 125,753,338,546

Margin deposits 20,855,059,527 37,025,759,018

Margin deposits in VND 13,649,052,864 9,604,677,526

Margin deposits in foreign currencies 7,206,006,663 27,421,081,492

4,577,878,623,080 2,077,940,434,258

Current year

interest rate

per annum

Previous year

interest rate

per annum

Demand deposits in VND 2.4% 3.6%

Demand savings deposits in VND 2.4% 3.6%

Demand deposits in foreign currencies 0.5% - 0.6% 0.6%

Demand savings deposits in foreign currencies 0.5% - 0.6% 0.6%

Term deposits in VND 10% - 14% 7.5% - 10.49%

Term savings deposits in VND 10.49% - 14% 7.2% - 10.49%

Term deposits in foreign currencies 0.8% - 6.02% 2.8% - 3.3%

Term savings deposits in foreign currencies 2.57% - 6.05% 4.3%

Certificates of deposit in VND 10.49% - 14% 7.2% - 10.15%

ANNUAL REPORT 2010


145

21. RESERVES

UPR ReserveVND

Mathematical ReserveVND

Claims ReserveVND

Catastrophe ReserveVND

Dividend ReserveVND

Equalisation ReserveVND

TotalVND

Life Insurance

Balance at 31 Dec 2009 845,499,257,711 13,149,693,155,870 7,640,970,100 - 789,360,245,400 16,737,624,949 14,808,931,254,030

Net movement of provision 6,282,742,289 798,042,718,390 (1,834,693,300) - 117,599,952,203 5,995,431,804 926,086,151,386

Balance at 31 Dec 2010 851,782,000,000 13,947,735,874,260 5,806,276,800 - 906,960,197,603 22,733,056,753 15,735,017,405,416

General Insurance

Balance at 31 Dec 2009 1,374,398,817,886 - 1,088,970,211,604 193,572,226,768 - - 2,656,941,256,258

Net movement of provision 220,982,830,862 - 126,580,809,497 113,439,977,163 - - 461,003,617,522

Balance at 31 Dec 2010 1,595,381,648,748 - 1,215,551,021,101 307,012,203,931 - - 3,117,944,873,780

Total balance at 31 Dec 2009 2,219,898,075,597 13,149,693,155,870 1,096,611,181,704 193,572,226,768 789,360,245,400 16,737,624,949 17,465,872,510,288

Balance at 31 Dec 2010 2,447,163,648,748 13,947,735,874,260 1,221,357,297,901 307,012,203,931 906,960,197,603 22,733,056,753 18,852,962,279,196

22. OWNERS’ EQUITY

Contributed capital

VND

Share premium

VND

Foreign exchange

differences reserve (*)

VND

Statutory reserves for

insurance operation

VND

Investment and

development fund

VND

Financial

reserve fund

VND

Other reserve (**)

VND

Undistributed earnings

VND

Total

VND

31 Dec 2009 5,730,266,050,000 1,734,745,821,197 18,387,227,948 43,521,050,471 10,222,384,015 11,699,111,508 103,568,802,818 886,495,196,261 8,538,905,644,218

Additional capital con-

tribution536,824,740,000 1,342,061,850,000 - - - - - - 1,878,886,590,000

Profit of current year - - - - - - - 952,597,195,373 952,597,195,373

Appropriation to other

reserves- - - 35,724,682,684 3,588,304,858 6,617,844,757 - (45,930,832,299) -

Dividends for the

year 2009 paid to

Shareholders

- - - - - - - (630,329,265,500) (630,329,265,500)

Appropriation to bonus

and welfare fund for the

year 2009

- - - - - - - (67,199,512,505) (67,199,512,505)

Remuneration to the

Board of Directors and

Supervisory Board of the

Holdings and subsidiar-

ies for the year

- - - - - - - (2,772,317,981) (2,772,317,981)

Recognition ò foreign

exchange difference to

income of the year

- - (2,311,619,948) - - - - - (2,311,619,948)

31 Dec 2010 6,267,090,790,000 3,076,807,671,197 16,075,608,000 79,245,733,155 13,810,688,873 18,316,956,265 103,568,802,818 1,092,860,463,349 10,667,776,713,657

(*) The balance of foreign exchange translation reserve of VND 16,075,608,000 as at 31 December 2010 represents the foreign exchange difference resulted from the conversion of accounting currency of Bao Viet Tokio Marine Insurance Joint Venture from USD to VND since 1 January 2008. This balance does not include the foreign exchange difference related to the application of Circular 201 in 2009, as that difference has been charged to this year’s consolidated income statement arising from the Group’s change in accounting policy to adopt VAS 10 during the year. (**) Other reserve represents the Group’s retained interest in share premium of Bao Viet Securities Joint Stock Company (BVSC) arising after consolidating

the financial statements of BVSC into the Group’s consolidated income statements.



23. MINORITY INTERESTS

Minorities interest

VND

31 Dec 2009 1,348,825,735,269

Profit for the year 21,703,504,043

Dividends for the year 2009 (21,600,000,000)

Profit appropriation to bonus and welfare funds for the year 2009 (960,000,000)

Payment to the Board of Directors and Supervisory Board (363,049,925)

Buy treasury shares (76,500,000)

31 Dec 2010 1,347,529,689,387

24. REVENUE24.1 Gross written premium

Current year

VND

Previous year

VND

Life Insurance

Endowment insurance 3,387,950,268,309 3,427,486,254,644

Universal life 507,352,226,058 142,598,222,121

Term insurance 2,364,709,869 2,350,738,591

Whole Life insurance 9,240,606,719 10,436,638,371

Life annuity 35,607,154,756 44,628,470,307

Rider 100,921,532,389 81,977,216,471

Bancassurance 2,408,767,617 929,248,718

Total life insurance premium 4,045,845,265,717 3,710,406,789,223

General Insurance

Cargo Insurance 310,121,673,435 268,817,818,616

Hull- P&I Insurance 526,994,515,342 493,828,426,844

Oil & Gas Insurance 43,003,905 1,280,716,534

Aviation Insurance 197,709,637,806 209,152,701,150

Engineering Insurance 391,534,726,447 292,439,471,825

Fire & Special Risk Insurance 333,230,309,272 289,678,053,640

General Indemnity Insurance 81,200,645,832 77,382,803,115

Agriculture Insurance 1,838,316,517 1,691,144,952

Automobile Insurance 1,272,336,429,565 1,141,252,840,591

Health & Personal Accident Insurance 1,083,140,922,671 907,436,938,316

Total general insurance premium 4,198,150,180,792 3,682,960,915,583

Total gross premium 8,243,995,446,509 7,393,367,704,806

ANNUAL REPORT 2010


147


24.2 Reinsurance premium assumed

Current year

VND

Previous year

VND

Cargo Insurance 12,283,819,020 11,516,394,816


Oil & Gas Insurance 8,467,641,186 8,714,791,012



Fire & Other Insurance 70,983,152,160 46,246,484,130

186,623,651,556 151,666,182,986

24.3 Deductions

Current year

VND

Previous year

VND

Reinsurance premium ceded 1,083,576,007,876 979,534,348,986

Cargo Insurance 45,600,557,199 76,721,126,322


Oil & Gas Insurance 1,077,373,187 (1,409,820,503)




Human Insurance 45,820,395,172 25,747,635,643

Premium deduction 2,065,444,546 1,915,407,401

General insurance activities 2,065,444,546 1,915,407,401

Premium returns 66,392,945,741 55,398,229,019

Life insurance activities 8,402,770,465 6,005,633,096

General insurance activities 57,990,175,276 49,392,595,923

Total deductions 1,152,034,398,163 1,036,847,985,406

25. DIRECT EXPENSES OF INSURANCE ACTIVITIES

25.1 Claim and maturity payment expenses

Current yearVND

Previous yearVND

Life Insurance

Maturity payments 2,020,411,495,836 1,895,897,507,201

Surrender value payments 826,993,601,131 474,487,748,506

Claim expenses 31,882,227,401 54,473,671,703

2,879,287,324,368 2,424,858,927,410

General Insurance

Cargo Insurance 107,378,918,707 133,927,217,887


Oil & Gas Insurance 8,931,661,968 242,795,847

Aviation Insurance 59,823,323,111 113,083,558


Fire & Special Risk Insurance 118,940,856,929 159,315,273,022

General Indemnity Insurance 2,041,459,452 1,956,066,928

Agriculture Insurance - 285,074,800

Automobile Insurance 675,134,056,935 603,796,494,981

Health & Personal Accident Insurance 480,400,635,197 428,940,001,864

1,755,426,759,815 1,625,701,934,844

4,634,714,084,183 4,050,560,862,254

25.2 Claim expenses for reinsurance assumed

Current yearVND

Previous yearVND

Cargo Insurance 2,070,264,209 6,298,835,423



Aviation Insurance 707,650,153 1,648,424,215



51,747,327,052 46,246,678,770


ANNUAL REPORT 2010


149

25.3 Recoveries from reinsurance ceded

Current yearVND

Previous yearVND

Cargo Insurance 19,274,421,947 37,429,513,061



Aviation Insurance 55,593,521,765 764,236,373



Health care Insurance 22,325,558,609 -

372,222,596,599 366,196,782,586

26. NET OPERATING INCOME FROM BANKING ACTIVITIES

Current yearVND

Previous yearVND

Interest and similar income

Interest income from deposits 237,105,833,881 206,083,468,641

Interest income from lending 459,976,442,570 94,225,028,212

Interest from debt securities investment 194,560,997,283 48,332,027,190

Other income from credit activities 7,156,614,750 13,364,930

898,799,888,484 348,653,888,973

Other banking operating income

Fee income from banking activities 15,833,714,048 2,789,620,472

Gain from FX trading 27,703,529,777 4,036,202,954

Income from securities trading 14,885,926,064 -

58,423,169,889 6,825,823,426

Total revenue from banking activities 957,223,058,373 355,479,712,399

Interest and similar expenses

Interest expenses on deposits 386,713,119,676 108,394,933,939

Interest expenses on borrowings 94,347,313,673 3,676,414,055

Other expenses on credit activities 6,216,577,167 107,220,485

487,277,010,516 112,178,568,479

Other banking operating expenses

Expenses on banking operations 5,564,749,733 1,321,937,625

Loss from FX trading 15,589,850,139 3,921,252,976

Loan loss provision expenses 30,159,694,493 8,797,229,101

51,314,294,365 14,040,419,702

Total expenses from banking activities 538,591,304,881 126,218,988,181

Net banking operation income 418,631,753,492 229,260,724,218


27. NET OPERATING INCOME FROM OTHER ACTIVITIES

Current yearVND

Previous yearVND

Operating income from other activities

Brokerage service 60,270,507,596 91,806,996,273

Securities underwriting 6,490,795,709 2,305,985,042

Investment advisory service 6,300,671,770 6,677,103,761

Custody service 2,064,448,252 2,533,336,169

Portfolio investment management 162,222,222 3,709,429,446

Training services 17,486,448,587 17,788,076,627

Construction machinery trading activities 66,856,747,569 15,907,582,199

Others 38,665,236,921 3,437,821,775

198,297,078,626 144,166,331,292

Operating expenses from other activities

Brokerage service expense 25,831,402,828 26,733,548,719

Securities underwriting 1,998,121,544 99,434,682

Investment advisory service 5,024,520,498 5,643,012,432

Custody service 8,125,310,878 4,866,974,216

Real estate management service 9,190,954,318 2,047,858,373

Construction machinery trading activities 78,136,774,389 15,126,970,277

Others 28,070,511,736 5,048,967,724

156,377,596,191 59,566,766,423

Net operating income from other activities 41,919,482,435 84,599,564,869


ANNUAL REPORT 2010


151


28. GENERAL AND ADMINISTRATIVE EXPENSES

Current yearVND

Previous yearVND

Insurance operation

Salaries and other staff costs 568,299,751,178 452,971,660,097

Materials and office supplies 87,459,804,250 68,231,108,682

Depreciation expenses 68,437,181,254 67,261,604,448

Taxes and fees expenses 12,124,236,677 1,528,189,590

Expenses for external service 219,250,791,704 299,281,711,491

Provision expenses 21,625,743,138 19,344,876,192

Other expenses 351,171,957,085 278,862,436,861

1,328,369,465,286 1,187,481,587,361

Banking operation


Materials and office supplies 5,656,293,280 924,431,393


Taxes and fees expenses 2,057,071,774 13,865,930,257


Other expenses 10,770,180,371 4,049,561,412

136,995,092,835 67,507,827,941

Other operations of the group


Materials and office supplies 9,070,666,532 8,294,082,609


Taxes and fees expenses 1,914,388,743 200,492,030


Provision expenses 11,121,428,699 -

Other expenses 29,399,169,191 24,355,845,269

258,692,861,274 194,526,595,693

1,724,057,419,395 1,449,516,010,995

29. FINANCIAL ACTIVITIES

29.1 Financial income

Current yearVND

Previous yearVND

Interest from term deposits 1,185,626,488,564 798,608,237,220

Interest from investments in bonds and treasury bills 1,292,247,734,837 1,009,383,409,804

Loan interest 138,779,643,025 134,587,760,205

Dividend income 172,649,771,720 115,183,397,972

Gains from foreign exchange rate difference 85,159,812,378 37,962,027,832

Gain from securities trading 202,266,719,820 296,360,210,695

Other financial income 2,200,325,239 1,390,548,344

3,078,930,495,583 2,393,475,592,072

29.2 Financial expenses

Current yearVND

Previous yearVND

Dividend reserves 117,599,952,203 258,514,225,821

Exchange rate difference 81,604,113,636 47,113,399,541

Loan interest expenses 188,219,664,922 -

Dividend paid to policyholders 165,930,761,116 81,675,392,628

Loss from trading securities 356,479,792,648 90,993,378,238

Financial provision expenses/(reversal) 491,802,642,676 (636,133,369,371)

Other financial expenses 66,777,853,343 489,714,299,789

1,468,414,780,544 331,877,326,646


ANNUAL REPORT 2010


153

30. NET OTHER PROFIT

Current yearVND

Previous yearVND

Other income

Proceeds on disposal of assets 1,255,104,284 8,191,844,310

Collection of bad debts 77,364,151 -

Gain on disposal of BAVINA company 12,193,416,456 -

Other income 10,025,096,824 5,083,381,027

23,550,981,715 13,275,225,337

Other expenses

Expenses on disposal of assets 60,116,749 102,046,181

Others 1,715,494,316 6,467,935,307

1,775,611,065 6,569,981,488

Net other profit 21,775,370,650 6,705,243,849

31. RELATED PARTIES TRANSACTIONS

During the normal course of operations, the Group engages in transactions with entities to which it is related through equity par-ticipation. As set out below, the Group and the related entities with which it trades, are linked either through the investor/investee relationship, or share a common investor and thus are a part of the same corporate group.

Related parties of the Group as at and for the year ended 31 December 2010 include:

Related parties Relationship

Ministry of Finance Shareholder

HSBC Insurance (Asia Pacific) Holdings Limited Shareholder

State Capital Investment Corporation (SCIC) Shareholder

Bao Viet-SCIC Investment Limited Company (“BV-SCIC”) Joint Venture

Bao Viet Tokio Marine Insurance Joint Venture Joint Venture

Long Viet Investment and Construction JSC (“Long Viet JSC”) Associate

Baoviet Tourism Hotel JSC (“Bao Viet Resort JSC”) Associate

International Investment and Construction JSC (“VIGEBA”) Associate



Significant related party transactions during the year are given below:

Related parties TransactionsFor the year ended 31

December 2010VND

Ministry of Finance Dividends for the year 2009 paid to MOF 488,730,000,000

HSBC Insurance (Asia Pacific) Holdings Limited Additional capital contribution to the Holdings 1,878,886,590,000

Dividends for the year 2009 paid to HSBC Insurance (Asia Pacific) Holdings Limited

59,050,721,400


SCIC Dividends for the year 2009 paid to SCIC 22,440,000,000


VIGEBA Dividend advance to the Holdings 27,000,000,000

Bao Viet Resort JSC Additional capital contribution by the Holdings 9,100,000,000

Long Viet JSC Additional capital contribution to Long Viet JSC 24,807,000,000

Remuneration of members of the Board of Directors and the CEO of the Holdings:

Current year

VND

Previous year

VND

Remuneration of members of the Board of Directors and the CEO of the Holdings

1,449,600,000 1,464,320,998

1,449,600,000 1,464,320,998

32. EARNINGS PER SHARE

Basic earnings per share (“EPS”) amounts is calculated by dividing net profit after tax for the period attributable to ordinary share-holders of the Group by the weighted average number of ordinary share outstanding during the period.

The following reflects the income and share data used in the basic earnings per share computation.

Current yearVND

Previous yearVND

Net profit after tax attributable to ordinary equity holders for basic earnings

952,597,195,373 891,754,255,672

Weighted average number of ordinary shares (ex-cluding treasury shares) for basic earnings per share

623,914,649 573,026,605

EPS 1,527 1,556

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these consolidated financial statements.

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33. SEGMENT INFORMATION

The primary segment reporting format is determined to be business segments as the Group’s risks and rates of return are affected predominantly by differences in the products and services rendered. The operating businesses are organized and managed sepa-rately according to the nature of the products and services provided, with each segment representing a strategic business unit offering different products and serves different markets. Accordingly, the Group’s management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment.

For management purposes, the Group is organised into business units based on their products and services, and has five report-able Business segments as follows:

The life insurance segment offers a wide range of Whole Life, Pure Endowment, Term Life, Endowment, Annuity, Universal life, Bancassurance, Healthcare and personal accident riders, other types of life insurance, reinsurance assumed and ceded in life, healthcare insurance and personal accident.

Non-life insurance services include health and personal accident insurance, property insurance, cargo insurance, hull - P&I insurance, general indemnity insurance, aviation insurance, automobile insurance, fire & special risk insurance, agriculture in-surance and others; assuming and ceding reinsurance for all types of non-life insurance.

Financial services such as fund management, investment portfolio management, security brokerage and trading, invest-ment consulting, etc. The investment management segment also provides investment management services to policyholders through the investment management services in Bao Viet Fund Management Company (BVF). The security brokerage, securi-ties underwriting and issuance agency, securities trading, custody, investment and financial consulting services are provided by Bao Viet Security Joint Stock Company (BVSC).

Banking services: Including the provision of various banking services such as handling individual customer deposit, deposit and current account for corporate and institutional customers and providing consumer loan, overdraft, credit card facilities and fund transfer facilities though Bao Viet Commercial Joint Stock Bank.

Real Estate operation and other activities: includes the provision of rental and related services at the Bao Viet Building 8 Le Thai To, Hoan Kiem, Ha Noi and 71 Ngo Sy Lien, Dong Da, Hanoi and other places... In addition, the Group is in the progress of developing other real estate projects such as Bao Viet Life Building in Hanoi, project in Ho Chi Minh City and other real estate projects around the countries.

Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. Segment revenue, segment expenses and segment result include transfers between business segments. Those transfers are eliminated in preparation of consolidated financial statements.

Geographical segments

These consolidated financial statements do not include information on geographical segments of Bao Viet Group that is engaged in providing products or services within the same economic environment and that is subject to similar risks and returns.

Business segments

The following tables present revenue and profit information regarding the Group’s business segments for the year ended 31 December 2010 and for the year ended 31 December 2009, respectively:

1 Currently, the Group has not yet provided life reinsurance services.



The following table presents operating result of the Group’s operating segments for the year ended 31 December 2010:

Unit: Million VND

For the year ended 31 December 2010 Life insurance services

General insurance services

Financial services

Banking services

Real -estate operations and other activities

Adjustments and eliminations

Total

Gross written premium 4,045,845 4,198,150 - - - - 8,243,995

Reinsurance premium assumed - 186,624 - - - - 186,624

Deductions (8,403) (1,143,632) - - - - (1,152,035)

(Increase)/decrease in unearned premium reserve and math-

ematical reserve

(804,325) (220,983) - - - - (1,025,308)

Commissions on reinsurance ceded - 183,299 - - - - 183,299

Other income from insurance activities - 5,959 - - - - 5,959

Total operating revenues 3,233,117 3,209,417 - - - - 6,442,534

Claim and maturity payment expenses (2,879,287) (1,755,427) - - - - (4,634,714)

Claim expenses for reinsurance assumed - (51,747) - - - - (51,747)

Deductions - 391,909 - - - - 391,909

Claim expenses using catastrophe reserve - - - - - - -

(Increase)/ decrease in claims reserve 1,835 (72,200) - - - - (70,365)

Provision for catastrophe reserve - (113,440) - - - - (113,440)

Other operating expenses (380,273) (608,659) - - - - (988,932)

Total direct expenses for insurance activity (3,257,725) (2,209,564) - - - - (5,467,289)

Gross operating profit (24,608) 999,853 - - - - 975,245

Net profit from banking activities - - - 326,006 - 92,626 418,632

Net profit from other activities - - 95,854 - 9,304 (63,239) 41,919

Selling expenses (142,184) - - - (653) - (142,837)

General administration expenses (405,863) (926,244) (264,965) (149,837) (9,580) 32,432 (1,724,057)

Finance profit 1,163,821 232,045 933,466 - 1,910 (720,726) 1,610,516

Other income 6,967 5,321 11,581 523 36 (2,654) 21,774

Profit in associates and joint venture 1,411 - - - - 52,298 53,709

Profit before tax 599,544 310,975 775,936 176,692 1,017 (609,263) 1,254,901

2 Majority of this adjustment relate to dividend and profit transferred from subsidiaries, associates and joint-ventures to the Parent Company

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157


The following table presents operating results of the Group’s operating segments for the year ended 31 December 2009:

Unit: Million VND

For the year ended 31 December 2009 Life insurance services


Financial services Banking services


Adjustments and eliminations

Total

Gross written premium 3,710,407 3,682,961 - - - - 7,393,368

Reinsurance premium assumed - 151,666 - - - - 151,666

Deductions (6,006) (1,030,842) - - - - (1,036,848)

(Increase)/decrease in unearned premium reserve and

mathematical reserve

(1,241,075) (226,378) - - - - (1,467,453)

Commissions on reinsurance ceded - 146,828 - - - - 146,828

Other income from insurance activities - 5,864 - - - - 5,864

Total operating revenues 2,463,326 2,730,099 - - - - 5,193,425

Claim and maturity payment expenses (2,424,859) (1,625,702) - - - - (4,050,561)

Claim expenses for reinsurance assumed - (46,247) - - - - (46,247)

Deductions - 386,713 - - - - 386,713

Claim expenses using catastrophe reserve - - - - - - -

(Increase)/ decrease in claims reserve (2,624) (102,994) - - - - (105,618)

Provision for catastrophe reserve - (98,132) - - - - (98,132)

Other operating expenses (332,530) (527,834) - - - - (860,364)

Total direct expenses for insurance activity (2,760,013) (2,014,196) - - - - (4,774,209)

Gross operating profit (296,687) 715,903 - - - - 419,216

Net profit from banking activities - - - 156,484 - 72,776 229,260

Net profit from other activities 3,540 - 145,660 - 20,410 (85,011) 84,599

Selling expenses (122,023) - - - - - (122,023)

General administration expenses (419,814) (748,323) (190,899) (80,030) (20,417) 9,968 (1,449,515)

Finance profit 1,289,576 245,912 1,357,548 - 5,174 (836,612) 2,061,598

Other income 1,050 5,753 (152) 39 16 - 6,706

Profit in associates and joint venture - - - - - 13,058 13,058

Profit before tax 455,642 219,245 1,312,157 76,493 5,183 (825,821) 1,242,899

3 Majority of this adjustment relate to dividend and profit transferred from subsidiaries, associates and joint-ventures to the Parent Company


The following table presents financial position of the Group’s operating segments as at 31 December 2010: Unit: Million VND

As at 31 December 2010 Life insurance

services


Financial services

Banking services


Adjustments and

eliminations

Total

ASSETS

Cash and cash equivalents 172,981 86,399 1,271,228 3,499,094 8,673 806,332 5,844,707

Receivables from reinsurance - 927,107 - - - - 927,107

Receivables from insurance 32,361 - - - - - 32,361

Other receivables 973,726 565,950 1,418,379 543,553 60,365 (1,314,927) 2,247,046

Financial investments 18,741,596 3,455,848 12,097,469 3,653,044 39,968 (10,411,978) 27,575,947

Tangible fixed assets 155,146 185,934 464,780 39,078 43,430 - 888,368

Intangible fixed assets 210,517 398,806 44,088 41,621 14,640 - 709,672

Loans to customers - - - 5,889,067 - - 5,889,067

Other assets 307,587 100,615 74,627 52,414 94,263 24,156 653,662

TOTAL ASSETS 20,593,914 5,720,659 15,370,571 13,717,871 261,339 (10,896,417) 44,767,937

LIABILITIES

Short-term liabilities 3,250,231 1,050,914 2,754,358 1,758,828 96,010 (2,689,338) 6,221,003

Customer deposits - - - 10,311,172 - (2,713,333) 7,597,839

Long-term liabilities 27,653 11,763 21,331 - - 20,080 80,827

Insurance technical reserves 15,735,017 3,117,945 - - - - 18,852,962

TOTAL LIABILITIES 19,012,901 4,180,622 2,775,689 12,070,000 96,010 (5,382,591) 32,752,631

OWNERS’ EQUITY 1,581,013 1,540,037 12,594,882 1,647,871 165,329 (6,861,356) 10,667,776

MINORITY INTERESTS - - - - - 1,347,530 1,347,530

TOTAL LIABILITIES AND OWNERS’ EQUITY 20,593,914 5,720,659 15,370,571 13,717,871 261,339 (10,896,417) 44,767,937

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159

The following table presents financial position of the Group’s operating segments as at 31 December 2009:Unit: Million VND

As at 31 December 2009 Life

insurance services


Financial services

Banking services


Adjustments and

eliminations

Total

ASSETS

Cash and cash equivalents 204,451 104,458 379,849 1,891,961 33,737 (81,812) 2,532,644

Receivables from reinsurance - 947,582 - - - - 947,582

Receivables from insurance 21,099 303,371 - - - - 324,470

Other receivables 765,550 171,600 1,064,688 128,946 16,523 (991,729) 1,155,578

Financial Investments 15,576,620 2,499,449 10,856,161 2,369,066 39,968 (7,111,588) 24,229,676

Tangible fixed assets 348,860 175,511 448,211 31,467 48,500 - 1,052,549

Intangible fixed assets 202,727 393,983 15,394 23,386 14,640 - 650,130

Loans to customers - - - 2,809,879 - (185,122) 2,624,757

Other assets 30,774 40,349 18,776 15,050 88,474 3,808 197,231

TOTAL ASSETS 17,150,081 4,636,303 12,783,079 7,269,755 241,842 (8,366,443) 33,714,617

LIABILITIES

Short-term liabilities 789,010 958,273 2,126,666 483,285 76,663 (1,933,085) 2,500,812

Customer deposits - - - 5,223,362 - (1,436,400) 3,786,962

Long-term liabilities 24,707 7,988 21,200 - - 19,345 73,240

Insurance technical reserves 14,808,931 2,656,941 - - - - 17,465,872

TOTAL LIABILITIES 15,622,648 3,623,202 2,147,866 5,706,647 76,663 (3,350,140) 23,826,886

OWNERS’ EQUITY 1,527,433 1,013,101 10,635,213 1,563,108 165,179 (6,365,219) 8,538,815

MINORITY INTERESTS - - - - - 1,348,916 1,348,916

TOTAL LIABILITIES AND OWNERS’ EQUITY 17,150,081 4,636,303 12,783,079 7,269,755 241,842 (8,366,443) 33,714,617



34. THE EFFECTS OF VAS 10 TO THE CONSOLIDATED FINANCIAL STATEMENTS

As disclosed in Note 4.1, the Group has changed its accounting policy for treatment of foreign currency exchange differences from guidance provided under Circular 201, as applied in 2009, to adoption of VAS 10. Had the Group continued to adopt the guidance under the Circular 201 in 2010, the consolidated financial position and consolidated financial operating results of the Group would have been as follows:

VAS 10

VND

Circular 201

VND

Difference

VND

Consolidated balance sheet

Foreign exchange difference reserves - 5,566,044,904 (5,566,044,904)

Retained earnings 5,566,044,904 - 5,566,044,904

Consolidated income statement

Net foreign exchange gain taken to the con-solidated income statement

5,566,044,904 - 5,566,044,904

Basic earnings per share 1.527 1.518 9

35. COMMITMENT UNDER OPERATING LEASES

The minimum lease payments under non-cancellable leases of offices are as follows:

31 December 2010

VND

31 December 2009

VND

Total lease payments under non-cancellable operating lease contracts which fall due:

Within one year 39,150,040,652 69,831,611,273

From one to five years 153,566,642,631 147,660,558,069

Above five years 56,782,451,578 11,035,983,931

249,499,134,861 228,528,153,273

36. CONTINGENT LIABILITIES

Outstanding dispute, litigations

As at 31 December 2010, general insurance business of the Group has on-going disputes or litigations with its customers on claims lodged by the customers, which the Group does not accept or accepting only partially. The total outstanding claims lodged by the customers which are being disputed or under on-going litigations as at the 31 December 2010 amounted to VND 13,452,215,000. The final outcome of these disputes or litigations can only be finalized upon the verdict of an arbitrator, or by the court. Accord-ingly, the Group has not made any provision in respect of these claims in the financial statements as the Group considers that the likelihood of financial loss is remote based on the information available as at 31 December 2010.

Foreign contractor withholding tax

The general insurance business of the Group has not provided for the potential foreign contractor withholding taxes from the offshore payments of reinsurance premiums ceded to overseas reinsurers for the period from 01 Jan 2005 to 31 December 2008 as this was based on the practice of the insurance industry as well as the tax finalisation results in previous years. According to Official Letter No. 8667/BTC-TCT dated 06 July 2010 by the Ministry of Finance, reinsurance premium ceded to overseas reinsurers who are

ANNUAL REPORT 2010

160


from countries which have Double Taxation Agreement with Vietnam would be exempted from Foreign Contractor Withholdings Taxes (FCWT). For the period from 2005 to 2008, the estimated FCWT on the reinsurance premium ceded to overseas reinsurers who are not from countries which have Double Taxation Agreement with Viet Nam is VND 1,472 million. For reinsurance premium ceded to overseas reinsurers who are from countries which have Double Taxation Agreement with Viet Nam, the estimated FCWT amount is VND 33,620 millions. The Group is carrying the procedure to finalise those tax liabilities.

For the year 2009 and 2010, the Group only accounted for the FCWT on reinsurance premiums ceded to overseas reinsurers from countries without Double Tax Treaty with Vietnam or from countries with Double Tax Treaty with Vietnam but the reinsurers have not submitted adequate supporting documents. The FCWT amount that the Group has not withheld is estimated at VND 11,449,777,111.

37. EVENTS AFTER BALANCE SHEET DATE

Other than disclosed elsewhere in the consolidated financial statements, there have been no significant events occurring after 31 December 2010 which would require adjustments or disclosures to be made in consolidated financial statements.

38. COMPARATIVE INFORMATION

As referred to in Note 4.1, bonus and welfare fund balance as at 31 December 2009 was reclassified from owners’ equity to liabilities as follows:

31 Dec 2009

ReportedVND

Adjustment

VND

31 Dec 2009

Reclassified

VND

Reclassification of bonus and welfare fund

Current liabilities 2,450,954,959,306 49,856,498,121 2,500,811,457,427

Owners’ equity 8,588,762,142,339 (49,856,498,121) 8,538,905,644,218

Impact to total liabilities and owner’s equity -

In addition, some comparative information in the consolidated financial statements for the year ended 31 December 2009 has been represented to be in conformity with the financial statement presentation of this year.

25 March 2011

Mr. Nguyen Thanh HaiChief Accountant

Mr. Le Hai PhongChief Financial Officer

Ms. Nguyen Thi Phuc LamChief Executive Officer

Bao Viet Holdings SUPP

LEM

ENTA

RY F

INA

NC

IAL

INFO

RMAT

ION

Supplementary financial informationin accordance with the International Financial Reporting Standards (“IFRS”)

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163

SUPPLEMENTARY FINANCIAL INFORMATIONfor the year ended 31 December 2010

This supplementary financial information is extracted from the audited consolidated financial statements of Bao Viet Holdings and its subsidiaries (“the Group”), which were prepared in accordance with the International Financial Reporting Standards (“IFRS”) is-sued by the International Accounting Standards Board. The preparation of these IFRS financial statements is not required under Vietnamese rules or regulations but as part of the Group’s restructuring and enhancing corporate governance programs in order to improve the prestige and strengthen the competitiveness in Vietnam and international markets.

The disclosure of this supplementary financial information is solely on a voluntary basis. The Group’s management believes the disclosure of this supplementary financial information may help the users of this annual report to better understand the Group from an internationally accepted accounting principles.

A full detailed audited consolidated financial statements prepared under IFRS for the year ended 31 December 2010 is available for download in our website (www.baoviet.com.vn). Users of this annual report should refer to the full set audited consolidated financial statements to ensure the completeness and accuracy of financial information.

2010VND

2009VND

Gross premiums 8,362,160,707,778 7,487,720,251,372

Less: Reinsurance premiums ceded (1,083,576,007,876) (979,534,348,986)

Net written premiums 7,278,584,699,902 6,508,185,902,386

Changes in unearned premium reserves (220,982,830,862) (215,504,405,765)

Net earned premiums 7,057,601,869,040 6,292,681,496,621

Commission income on reinsurance ceded 183,298,558,113 146,828,204,959

Other insurance income 5,958,591,545 5,863,915,547

Total revenue from insurance business 7,246,859,018,698 6,445,373,617,127

Net income from banking operations 403,745,827,428 229,260,724,218

Investment income 2,136,964,480,980 2,524,029,143,776

Other operating income 221,848,060,341 164,619,210,737

Total other revenues 2,762,558,368,749 2,917,909,078,731

TOTAL OPERATING INCOME 10,009,417,387,447 9,363,282,695,858

Gross benefit and claim expenses (4,898,558,394,006) (4,370,233,793,548)

Claims expenses for reinsurance assumed (51,747,327,052) (46,246,678,770)

Claims ceded to reinsurers 372,222,596,603 366,196,782,586

Gross change in insurance contract liabilities (1,165,179,176,829) (1,412,603,234,671)

Change in insurance contract liabilities ceded to reinsurers 221,988,660,835 21,340,944,724

Net claims and benefits incurred (5,521,273,640,449) (5,441,545,979,679)

Commission and underwriting expenses of insurance operations (924,160,351,685) (812,295,263,119)

Other reinsurance assumed expenses (40,479,795,339) (35,541,606,643)

Expenses on reinsurance ceded (24,291,615,218) (12,526,877,265)

Selling expenses (142,837,253,724) (122,023,207,897)

General and administrative expenses (1,815,221,814,718) (1,508,025,648,804)

Financial expenses (266,230,168,791) (89,309,579,912)

Other operating expenses (159,466,623,297) (62,080,670,739)

Total commission and expenses (3,372,687,622,772) (2,641,802,854,379)

TOTAL BENEFITS, CLAIMS AND OTHER EXPENSES (8,893,961,263,221) (8,083,348,834,058)

Profit before share of profit of associates and joint ventures 1,115,456,124,226 1,279,933,861,800

Share of profits of associates and joint ventures 53,709,140,782 13,057,543,886

PROFIT BEFORE TAX 1,169,165,265,008 1,292,991,405,686

Income tax expense (227,581,071,801) (235,025,704,943)

PROFIT AFTER TAX 941,584,193,207 1,057,965,700,743

SUPPLEMENTARY FINANCIAL INFORMATION (continued)

CONSOLIDATED INCOME STATEMENTfor the year ended 31 December 2010

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165

2010VND

2009VND

Net profit attributable to:

Equity holders of the parent 919,459,250,402 953,906,618,399

Non-controlling interests 22,124,942,805 104,059,082,344

941,584,193,207 1,057,965,700,743

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEfor the year ended 31 December 2010

2010VND

2009VND

PROFIT AFTER TAX941,584,193,207 1,057,965,700,743

Other comprehensive income for the year

Available-for-sale investments:

net movement in the fair value reserve(861,692,667,688) 293,635,150,900

Income tax relating to components of other comprehensive income 208,955,335,843 (60,064,657,819)

Other comprehensive income for the year, net of tax(652,737,331,845) 233,570,493,081

Total comprehensive income for the year, net of tax288,846,861,362 1,291,536,193,824

Total comprehensive income attributable to:

Equity holders of the parent280,338,142,997 1,165,450,111,352

Non-controlling interests8,508,718,365 126,086,082,472

SUPPLEMENTARY FINANCIAL INFORMATION (continued)CONSOLIDATED INCOME STATEMENT (continued)for the year ended 31 December 2010

31 December 2010

VND

31 December 2009

VND

Assets

Tangible fixed assets 979,030,747,437 873,384,210,750

Investment properties 23,448,947,000 23,448,947,000

Intangible assets 576,759,679,199 477,971,962,067

Investments in associates and joint ventures 338,561,803,678 313,559,572,889

Fixed maturity investments

Available-for-sale 10,519,261,133,615 8,836,925,601,627

Loans and receivables 13,405,885,995,299 11,873,808,593,954

Equity investments

Available-for-sale 2,091,984,300,963 2,735,560,526,347

Fair value through profit or loss 815,858,725,100 765,373,585,900

Loans and advances to customers 5,930,242,259,658 2,651,619,373,077

Loans and trusted loans - 1,030,002,323

Policy loans 1,106,402,220,654 1,115,336,143,651

Deferred tax assets 278,252,333,116 174,133,911,091

Insurance receivables 394,053,603,348 259,370,910,528

Reinsurance assets 1,737,555,070,923 1,530,374,005,223

Other assets and prepayments 1,049,074,183,733 593,395,822,082

Cash and cash equivalents 5,877,952,763,741 2,544,295,519,291

TOTAL ASSETS 45,124,323,767,464 34,769,588,687,800

Shareholders’ Equity


Share premium reserve 3,076,807,671,197 1,734,745,821,197

Retained earnings 688,471,240,981 515,243,918,864

Revaluation reserve for available-for-sale assets (22,868,249,209) 616,252,858,196

Foreign exchange translation reserve 16,075,608,000 18,387,227,948

Investment and development fund 13,810,688,873 10,222,384,015

Finance reserve fund 18,316,956,265 11,699,111,508

Statutory reserve 79,245,733,155 43,521,050,471

Other reserves 103,568,802,818 103,568,802,818

Shareholders’ Equity 10,240,519,242,080 8,783,907,225,017

Non-controlling interests 1,355,361,118,553 1,369,851,950,129

TOTAL EQUITY 11,595,880,360,633 10,153,759,175,146

Liabilities

Insurance contract liabilities 19,722,345,843,077 18,157,177,388,009

Severance allowance 28,797,689,798 44,318,154,563

Amount due to customers 4,619,623,951,636 2,097,098,977,495

Due to banks and other financial institutions 4,642,530,862,246 2,132,918,721,689

Advances from customers 35,305,467,978 43,226,021,957

Tax and statutory obligations 87,863,714,694 128,841,596,905

Deferred tax liabilities 14,774,169,054 164,512,319,485

Insurance payables 663,271,034,790 605,823,401,743

Trade and other liabilities 3,713,930,673,558 1,241,912,930,808TOTAL LIABILITIES 33,528,443,406,831 24,615,829,512,654

TOTAL EQUITY AND LIABILITIES 45,124,323,767,464 34,769,588,687,800

SUPPLEMENTARY FINANCIAL INFORMATION (continued) CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at 31 December 2010

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167

Share capital

VND

Share premium reserve

VND

Retained earnings

VND

Revaluation reserve for

available-for-sale assets

VND

Foreign exchange difference

VND

Investment and development

fund

VND

Financial reserve

VND

Statutory reserves

VND

Other reserve

VND

Total

VND

Balance at 1 January 2009 5,730,266,050,000 1,736,438,449,955 175,924,227,439 404,709,365,243 16,075,608,000 8,609,458,421 8,609,458,421 17,067,266,899 103,568,802,818 8,201,268,687,196

Profit for the year - - 953,906,618,399 - - - - - - 953,906,618,399

Profit appropriation to other

reserves - - (31,156,362,253) - - 1,612,925,594 3,089,653,087 26,453,783,572 - -

Dividends paid to shareholders - - (581,239,974,257) - - - - - - (581,239,974,257)

Payment to Board of Directors

and Supervisory Board - - (1,655,222,225) - - - - - - (1,655,222,225)

Buy treasury shares - - (90,775,901) - - - - - - (90,775,901)

Movement in value of Available-

for-sale investments - - - 211,543,492,953 - - - - - 211,543,492,953

Other increase/(decrease) - (1,692,628,758) (444,592,338) - 2,311,619,948 - - - - 174,398,852

Balance as at 31 December 2009

and 1 January 20105,730,266,050,000 1,734,745,821,197 515,243,918,864 616,252,858,196 18,387,227,948 10,222,384,015 11,699,111,508 43,521,050,471 103,568,802,818 8,783,907,225,017

Additional capital contribution 536,824,740,000 1,342,061,850,000 - - - - - - - 1,878,886,590,000

Profit for the period - - 919,459,250,402 - - - - - - 919,459,250,402

Profit appropriation to other

reserves - - (45,930,832,299) - - 3,588,304,858 6,617,844,757 35,724,682,684 - -

Dividend paid to shareholders - - (630,329,265,500) - - - - - - (630,329,265,500)

Profit appropriation to bonus

and welfare fund- - (67,199,512,505) - - - - - - (67,199,512,505)

Payment to BOD and Supervi-

sory Board - - (2,772,317,981) - - - - - - (2,772,317,981)

Movement in value of

Available-for-sale investments - - - (639,121,107,405) - - - - - (639,121,107,405)

Foreign exchange difference - - - - (2,311,619,948) - - - (2,311,619,948)

Balance as at

31 December 20106,267,090,790,000 3,076,807,671,197 688,471,240,981 (22,868,249,209) 16,075,608,000 13,810,688,873 18,316,956,265 79,245,733,155 103,568,802,818 10,240,519,242,080

SUPPLEMENTARY FINANCIAL INFORMATION (continued)CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2010

2010VND

2009VND

CASH FLOWS FROM OPERATING ACTIVITIES

Premium received and interest income received 12,454,944,888,704 8,784,866,696,654

Payment to suppliers (9,981,578,704,434) (7,128,510,955,183)

Payment to employees (570,328,597,249) (598,670,981,585)

Enterprise income tax paid (318,521,037,200) (192,697,194,230)

Other cash inflows from operating activities 3,956,910,541,401 1,022,896,275,546

Other cash outflows from operating activities (4,922,592,129,067) (1,444,775,176,900)

Net cash flows from operating activities 618,834,962,155 443,108,664,302

CASH FLOWS FROM INVESTMENT ACTIVITIES

Purchase of tangible fixed assets (244,601,678,911) (315,726,997,458)

Proceeds from disposals of tangible fixed asset 654,142,947 7,459,136,006

Loans to other entities and payments for purchases of debt instruments

(10,573,069,513,692) (7,284,813,525,757)

Repayments from borrowers and proceeds from sales of debt instruments

4,928,885,195,844 1,287,210,525,579

Payments for investments (6,007,088,767,440) (2,967,338,985,684)

Proceeds from sales of investments 6,739,077,003,398 4,157,816,410,833

Interest received, coupon and distributed profits 194,782,794,193 497,054,068,939

Net cash outflows from investing activities (4,961,360,823,661) (4,618,339,367,542)

CASH FLOWS FROM FINANCING ACTIVITIES

Cash receipts from issuing additional shares 1,878,886,590,000 720,000,000,000

Cash receipts short and long term loans 6,260,247,375,606 5,646,136,030,318

Dividends paid to shareholders (651,929,265,500) (128,728,400,000)

Cash receipts from the rights issue 188,350,073,855 -

Other cash outflows from financing activities (150,000,000) -

Net cash inflows from financing activities 7,675,404,773,961 6,237,407,630,318

Net cash inflows during the year 3,332,878,912,455 2,062,176,927,078

Cash and cash equivalent at the beginning of the year 2,544,295,519,291 480,836,990,174

Impact of exchange rate fluctuation 778,331,995 1,281,602,039

Cash and cash equivalent at the end of the year 5,877,952,763,741 2,544,295,519,291

SUPPLEMENTARY FINANCIAL INFORMATION (continued)CONSOLIDATED STATEMENT OF CASH FLOWSfor the year ended 31 December 2010

ANNUAL REPORT 2010


169

2010VND

2009VND

Prepared in accordance with VAS 952,597,195,373 891,754,255,672

Financial assets – Valuation differences and impairment adjustments

Bond investments (216,338,590,915) (33,818,926,325)

Equity investments 86,798,827,182 44,344,913,420

Term deposits 91,341,721,493 (20,895,244,429)

Insurance related balances

Insurance contracts liabilities (68,499,971,022) (33,695,792,934)

Reversal of catastrophe and equalisation reserve 119,435,408,967 102,688,887,149

Impairment on direct premium and reinsurance premium receivables

(45,720,728,597) (1,838,118,035)

Other accounting balances

Inventories written (off)/back to/from income statement (4,264,192,940) 4,380,159,817

Bonus and welfare fund written off - (35,048,205,891)

Reversal on loan and receivables provision - 22,405,692,895

Fixed assets impairment and written off (12,576,381,390) (1,052,152,099)

REPO contracts fee amortisation adjustment (1,313,416,041) -

Adjustment on severance allowance provision 16,039,081,248 -

Adjustment on professional expenses due to different recognition basis

(44,642,173,637) -

Deferred tax provision on above adjusting items 47,023,909,443 (1,005,653,132)

Non-controlling interests (421,438,762) 15,686,802,291

Prepared in accordance with IFRS and reported in this supplementary financial information

919,459,250,402 953,906,618,399

SUPPLEMENTARY FINANCIAL INFORMATION (continued) MATERIAL GAAP DIFFERENCESfor the year ended 31 December 2010

1. RECONCILIATION OF GAAP DIFFERENCES BETWEEN VIETNAMESE ACCOUNTING STANDARDS (“VAS”) AND INTERNATIONAL FINANCIAL REPORTING STANDARDS (“IFRS”) FOR NET PROFIT AND EQUITY

(i) Net profit attributable to equity holders of the parent

(ii) Shareholders’ Equity

31 December 2010VND

31 December 2009VND

Prepared in accordance with VAS 12,015,306,403,044 9,887,731,379,487

Financial assets – Valuation differences and impairment adjustments

Bond investments (728,649,915,711) (136,667,006,402)

Equity investments 251,250,175,881 650,499,697,995

Term deposits 70,446,477,049 (20,895,244,429)

Insurance related balances

Insurance contracts liabilities (382,097,730,829) (313,597,759,806)

Reversal of catastrophe and equalisation reserve 329,745,260,684 210,309,851,717

Impairment on direct premium and reinsurance premium receivables

(78,444,619,212) (32,723,890,616)

Other accounting balances

Inventories written off (24,504,186,202) (20,239,993,262)

Fixed assets impairment and written off (86,677,923,337) (74,101,541,947)

REPO contracts fee amortisation adjustment (1,313,416,041) -

Adjustment on severance allowance provision 16,039,081,248 -

Adjustment on professional expenses due to different rec-ognition basis

(44,642,173,637) -

Deferred tax provision on above adjusting items 259,422,927,696 3,443,682,408

Non-controlling interests (1,355,361,118,553) (1,369,851,950,128)

Prepared in accordance with IFRS and reported in this supplementary financial information

10,240,519,242,080 8,783,907,225,017

SUPPLEMENTARY FINANCIAL INFORMATION (continued)MATERIAL GAAP DIFFERENCES (continued)for the year ended 31 December 2010

ANNUAL REPORT 2010


171

2 NARRATIVE DESCRIPTION OF MATERIAL MEASUREMENT AND INCOME RECOGNITION DIFFER-ENCES BETWEEN VAS AND IFRS

ITEM VAS IFRS

Financial assets Investments in securities and other investments are stated at their acquisition cost. Short term investments comprise the holdings of listed shares and other liquid securities, which are readily realisable and are intended to be held for not more than one year. Long term investments in-clude listed and over-the-counter shares, government bonds, loans and trusted loans, and term deposits at banks, which are intended to be held for more than one year.Allowance for devaluation in value of all shares is created representing the excess of the acquisition cost over the market value at the reporting date.

i) Financial assets designated at fair value through profit or loss is financial assets which on initial recognition are designated by the Group for measurement at fair value through profit or loss.

ii) Investments intended to be held on a continuing basis are classified as available-for-sale (“AFS”) securities, and are initially measured at fair value plus direct and incremental transaction costs. At each balance sheet date the fair value is re-measured, with any resultant gain or loss being rec-ognised in other comprehensive income and accumulated separately in equity in the fair value reserve until the in-vestments are either sold or become impaired. When AFS investments are sold, cumulative gains or losses previously recognised in equity are recognised in the consolidated in-come statement.

iii) Loans and receivables are non-derivative financial assets with fixed determinable payments that are not quoted in an active market. These investments are initially recog-nised at cost, being the fair value of the consideration paid for the acquisition of the investment. All transaction costs directly attributable to the acquisition are also included in the cost of the investment. After initial measurement, loans and receivables are measured at amortised cost, us-ing the effective interest rate method. Gains and losses are recognised in the consolidated income statement when the investments are derecognised or impaired, as well as through the amortisation process.

SUPPLEMENTARY FINANCIAL INFORMATION (continued)MATERIAL GAAP DIFFERENCES (continued)for the year ended 31 December 2010

ITEM VAS IFRS

Impairment Allowance for the diminution in value of all shares is created representing the excess of the acquisition cost over the market value at the reporting date.

Impairment is recognised on financial assets that are carried at amortised cost and on AFS financial assets whose fair value changes are recognised in other comprehensive income.Past impairment losses on AFS debt instruments (monetary as-sets) are reversed through income when fair value increases.For AFS equity instruments (non-monetary assets), past im-pairment losses are reversed through equity.

AssociateInvestment in an associate is not subject to impairment testing under VAS 7.

An investment in an associate is stated initially at cost and is thereafter adjusted for the post-acquisition change in the Group’s share of the assets of the investee. This carrying value is reduced where there is objective evidence of impairment.

Receivables

Receivables are presented at the carrying amount due from customers and other debtors, along with the allowance for doubtful debts. The allowance for doubtful debts represents the estimated loss due to non-payment arising on receiva-bles that were outstanding at the balance sheet date, is calculated based on different ratio relating to the aging of the receivables.

Receivables are carried at cost less any accumulated impair-ment losses.

Tangible fixed assets

Fixed asset is carried at its cost less accumulated depre-ciation. Revaluation or write down for impairment is not allowed, unless a specific ap-proval is received from the Ministry of Finance.

Fixed asset is carried at its cost less accumulated depreciation and any accumulated impairment losses.

SUPPLEMENTARY FINANCIAL INFORMATION (continued) MATERIAL GAAP DIFFERENCES (continued)for the year ended 31 December 2010

ANNUAL REPORT 2010

172

ITEM VAS IFRS

Intangible assets

Intangible assets are stated at cost less accumulated amor-tisation. Revaluation or write down for impairment is not allowed.

Intangible assets are carried at cost less any accumulated am-ortisation and any accumulated impairment losses. Where the useful life of an intangible asset is assessed as indefinite, IAS 38 requires that the asset should not be amortised.

Life insurance reserves

Equalisation reserve is ac-crued based on net after tax profit of Bao Viet Life Corporation.

IFRS 4 does not permit provisions for claims on contracts that are not in existence at the end of the reporting period (such as equalisation and catastrophe provisions).

General insurance re-serves

The reserve for incurred but not reported claims in Bao Viet Insurance is calculated based on a specific formula agreed by the Ministry of Finance. Catastrophe reserve is accrued based on retained premiums and management judgement.

Full provision is made for the estimated cost of claims notified but not settled at the balance sheet date and for the estimated cost of claims incurred but not reported by that date.

Presentation UPR liability is presented net of related reinsurance asset.

IFRS 4 does not allow offset of reinsurance assets against relat-ed insurance liabilities, or of income or expense from reinsur-ance contracts against the expense or income from the related insurance contracts. Therefore, the UPR assets and liability are presented gross on the statement of financial position and the consolidated income statement impact is similarly presented gross.

Income tax

VAS 17 does not address tem-porary differences and the deferred tax recognition in respect of business combina-tions, goodwill, assets carried at fair value and government grants.

Deferred tax assets and liabilities arise from deductible and tax-able temporary differences respectively, being the differences between the carrying amounts of assets and liabilities for fi-nancial reporting purposes and their tax bases. Deferred tax assets also arise from unused tax losses and unused tax cred-its, if any. The amount of deferred tax recognised is measured based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates en-acted or substantively enacted at the balance sheet date.

SUPPLEMENTARY FINANCIAL INFORMATION (continued) MATERIAL GAAP DIFFERENCES (continued)for the year ended 31 December 2010

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