MILITARYCOMMERCIAL JOINT STOCK BANK - MBS · PDF fileMilitary Commercial Joint Stock Bank...

Prospectus: Military Commercial Joint Stock Bank

Listing Advisor: Thang Long Securities (“TLS”) 1 Unofficial English translation by TLS for information purposes only.

THE CERTIFICATE FOR SECURITY LISTING ISSUED BY THE STOCK EXCHANGE

DEMONSTRATES ONLY THAT THE LISTING REGISTRATION PROCESS OF THE STOCK

HAS COMPLIED WITH GOVERNING LAWS AND REGULATIONS. IT DOES NOT IMPLY A

GUARANTEE OF ANY SECURITY VALUES. ANY STATEMENT AGAINST THIS IS

ILLEGAL.

MILITARYCOMMERCIAL JOINT STOCK BANK

(Business Registration Certificate No.0100283873 by Hanoi Department for Planning and

Investment. Initial issuance: September 30, 1994. 27th

amendment: December 31, 2010)

SECURITY LISTED ON HO CHI MINH STOCK EXCHANGE

(Listing Approval No. 155/2011/QĐ-SGDHCM /Listing Approval issued by Ho Chi Minh Stock

Exchange on 18 October 2011)

THIS PROSPECTUS IS AVAILABLE AT

The Military Commercial Joint Stock Bank

Head office : 3 Lieu Giai, Ba Dinh District, Hanoi, Vietnam

Telephone : (84 - 4) 6266 1088 Fax: (84 - 4) 6266 1080

Website : www.mbbank.com.vn

Thang Long Securities Joint Stock Company

Head office : 98 Nguy Nhu Kon Tum, Thanh Xuan District, Hanoi, Vietnam

Telephone : (84 - 4) 3726 2600 Fax: (84 - 4) 3726 2602

Website : www.tls.vn

INFORMATION ANNOUNCER

Full name: Lê Công

Title: CEO, Military Commercial JS Bank

Telephone: (84 - 4) 6266 1088 Fax: (84 - 4) 6266 1080

http://www.mbbank.com.vn/

http://www.tls.vn/



MILITARY COMMERCIAL JOINT STOCK BANK

(Business Registration Certificate No.0100283873 by Hanoi Department for Planning and

Investment. Initial issuance: September 30, 1994. 27th

amendment: December 31, 2010)

SECURITY LISTED ON HO CHI MINH STOCK EXCHANGE

Security Name : Stock of Military Commercial Joint Stock Bank stock

Security Type : Common Stock

Face value : 10,000 VND/ share

Total number of listed shares : 730,000,000 shares

Total value of listed shares : 7,300,000,000,000 VND (in face value)

AUDITOR

Ernst & Young Vietnam Liability Limited

Address : 15th

floor - Daeha Building

- 360 Kim Ma St, - Hanoi

Telephone : (84 - 4).38315100

Fax : (84 - 4).38315090

Website : http://www.ey.com

TỔ CHỨC TƯ VẤN LISTING ADVISOR

Thang Long Securities Joint Stock Company

Address : 98 Nguy Nhu Kon Tum, Thanh

Xuan District, Hanoi

Telephone : (84 - 4) 37262600

Fax : (84 - 4) 37262601


Bloomberg: : TLSV<GO>

http://www.ey.com/

http://www.tls.vn/



TABLE OF CONTENTS

I. ENTITIES RESPONSIBLE FOR THE PROSPECTUS CONTENT .................................. 6

1. Listing institution ................................................................. Error! Bookmark not defined.

2. Listing Advisor ...................................................................................................................6 II. EXPLANATIONS OF TERMINOLOGY AND ABBREVATIONS ................................. 7

1. Terminology ........................................................................................................................7

2. Abbreviations ..................................................................................................................... 9

III. RISK FACTORS ...................................................................................................................11

1. Credit risk .........................................................................................................................11 2. Liquidity risk ....................................................................................................................11 3. Risk from off-balance-sheet activities ............................................................................ 12 4. Interest rate risk ...............................................................................................................12

5. Exchange rate risk ...........................................................................................................13 6. Operational risk ............................................................................................................... 13 7. Equity price risk ...............................................................................................................14

8. Reputation risk .................................................................................................................14 9. Risk from force majeure events ......................................................................................14

IV. CONDITIONS AND CHARACTERISTICS OF LISTING INSTITUTION ................. 15

1. Summary of company history and development ...........................................................15 1.1. Fundamental information .......................................................................................... 15

1.2. History and development ........................................................................................... 16 1.3. Important milestones of MB ...................................................................................... 16

2. Organizational structure .................................................................................................20 2.1. Subsidiaries ................................................................................................................ 20 2.2. Associated companies ................................................................................................ 27

3. Shareholder composition, founding shareholders and large shareholders ................34 3.1. Shareholder composition ........................................................................................... 34

3.2. List of founding shareholders .................................................................................... 35 3.3. List of large shareholders .......................................................................................... 36

4. Services and business activities .......................................................................................36 4.1. Introduction ............................................................................................................... 36 4.2. Main services and business activities ........................................................................ 37 4.3. Business operations development projects in progress ............................................. 50

5. Financial performance .....................................................................................................52 5.1. Business operations results ........................................................................................ 52 5.2. Factors that affected MB‟s business operations results during the reported period .. 54 5.3. Fixed assets ................................................................................................................ 56 5.4. Tax liabilities ............................................................................................................. 60 5.5. Dividend policy ......................................................................................................... 61 5.6. Information on contingent committments ................................................................. 61

6. Suitability of business strategies within the industry context ......................................62



6.1. Position of MB in the banking industry ..................................................................... 63 6.2. Growth potential of the banking industry .................................................................. 69

7. Human resources and policies ........................................................................................70 7.1. Human resources ....................................................................................................... 70 7.2. Assessment of human resources ................................................................................ 70 7.3. Human resource policies ........................................................................................... 70

8. Board of Directors, Executive Board, Supervisory Board, Chief Accountant ...........72 8.1. Board of Directors ..................................................................................................... 72 8.2. Supervisory Board ..................................................................................................... 79 8.3. Management Team .................................................................................................... 83

9. Information, lawsuits related to MB that can potentially affect the price of listed

security (if applicable) ............................................................................................................92 V. BUSINESS AND PROFIT PLAN OF MB IN UPCOMING YEARS ..............................93

1. Potential and challenges ..................................................................................................93

2. MB’s development strategy in upcoming years ............................................................93 3. Assumptions and basis for developing financial plans .................................................94

3.1. Assumptions on macroeconomic conditions ............................................................. 94 3.2. Financial targets in business plan .............................................................................. 94

4. Business profitability and dividend plan for the period of 2011 - 2013 ......................95

5. Assessment of MB’s profit plan and dividend plan by the Listing Advisor ...............96 VI. LISTING SECURITY ..........................................................................................................96

1. Security name ...................................................................................................................96 2. Security type .....................................................................................................................96 3. Denomination value .........................................................................................................97

4. Total number of shares for listing .................................................................................. 97 5. Shares with restricted transfer rights according to legal regulations and MB’s

Articles of Association ............................................................................................................97 5.1. Members of Board of Directors, Supervisory Committee and Management Team .. 97 5.2. Founding members .................................................................................................... 97

5.3. Employees and staff ................................................................................................... 97 5.4. Strategic partners ....................................................................................................... 98

6. Pricing method .................................................................................................................98 6.1. Valuation method ...................................................................................................... 98

6.2. Projected opening price ............................................................................................. 99

7. Limits on percentage of total shares owned by foreign investors ..............................100 8. Taxes related to securities trading activities ............................................................... 101

8.1. For individual investors ........................................................................................... 101 8.2. For foreign institutional investors ............................................................................ 102

VII.PARTIES INVOLVED IN THE LISTING OF SECURITY .........................................103



LIST OF FIGURES Figure 1: List of subsidiaries as of June 30, 2011......................................................................... 20

Figure 2: List of associated companies as of June 30, 2011 ......................................................... 27

Figure 3: Shareholder composition as of September 2011 ........................................................... 34

Figure 4: List of founding shareholders ........................................................................................ 35

Figure 5: List of shareholders holding 5% or more ...................................................................... 36

Figure 6: Funding base structure................................................................................................... 37

Figure 7: The capital mobilization and lending activities ............................................................. 39

Figure 8: Loan portfolio by term .................................................................................................. 39

Figure 9: Loan portfolio by type of clients .................................................................................. 39

Figure 10: Loan portfolio by sector .............................................................................................. 40

Figure 11: Loan portfolio by quality grades and NPL .................................................................. 43

Figure 12: Loan loss provisioning rate ........................................................................................ 43

Figure 13: Loan loss provisioning amounts .................................................................................. 44

Figure 14: Investments in financial markets as of June 30, 2011 ................................................. 48

Figure 15: Office construction and office improvement projects ................................................. 50

Figure 16: Business operations results .......................................................................................... 52

Figure 17: Financial performance KPI ......................................................................................... 52

Figure 18: Profitability and capital adequacy ratios ..................................................................... 53

Figure 19: Summary of tangible fixed assets as of June 30, 2011 ................................................ 56

Figure 20: Summary of tangible fixed assets as of December 31, 2010...................................... 57

Figure 21: Summary of intangible fixed assets as of June 30 2011.............................................. 57

Figure 22: Summary of intangible fixed assets as of December 31 2010 .................................... 57

Figure 23: Land and investment real estate ownership rights of MB as of June 30 2011 ............ 58

Figure 24: Corporate income taxes payable.................................................................................. 60

Figure 25: Other tax expenses payable ......................................................................................... 60

Figure 26: Dividend payout ratio for the 2009 – 2010 period ...................................................... 61

Figure 27: Off- balance-sheet items .............................................................................................. 62

Figure 28: Performance results of some commercial joint stock banks in Vietnam in 2010 ....... 66

Figure 29: Benchmarking total assets with other banks as of December 31, 2010 ...................... 66

Figure 30: Benchmarking chartered capital with other banks as of December 31, 2010 ............. 67

Figure 31: Total customer deposits and total loan portfolio as of December 31, 2010 ................ 67

Figure 32: Earning Per Share (EPS) of commercial joint stock banks ......................................... 68

Figure 33: Staff composition as of June 30, 2011 ........................................................................ 70

Figure 34: Average salary of employees ...................................................................................... 72



ENTITIES RESPONSIBLE FOR THE PROSPECTUS CONTENT

1. Listing institution

Military Commercial Joint Stock Bank

Mr.Le Huu Duc Chairman, Board of Directors

Mrs. Pham Thi Ty Head of Supervisory Board

Mr. Le Cong Chief Executive Officer (“CEO”)

Mrs. Le Thi Loi Chief Financial Officer (“CFO”)

Military Commercial Joint Stock Bank certifies that all the information and data in this

Prospectus reasonably reflect the assets, financial position, business results and potential

prospects of Military Commercial Joint Stock Bank, as known, reviewed and collected

by us in an appropriate manner.

2. Listing Advisor

Thang Long Securities Joint Stock Company (“TLS”)

Mr. Le Dinh Ngoc Chief Executive Officer (“CEO”)

This Prospectus is part of the Listing registration application prepared by Thang Long

Securities Joint Stock Company on the basis of the advisory contract with Military

Commercial Joint Stock Bank. We certify that the analysis, assessment and terminology

selection for this Prospectus have been appropriately and prudently executed, on the basis

of information and data provided by Military Commercial Joint Stock Bank.



I. EXPLANATIONS OF TERMINOLOGY AND ABBREVATIONS

In this Prospectus, the meanings of important terms and abbreviations are explained below:

1. Terminology

Prospectus A document announcing information of MB on its financial

position and business activities. This document serves to

provide information necessary for public investors to

evaluate and make investing decisions in Military

Commercial JS Bank.

Listing institution/MB Military Commercial Joint Stock Bank

Auditing Institution Ernst & Young Vietnam Liability Limited

Articles of Association The Articles of Association of Military Commercial Joint

Stock Bank, which has been enacted by The MB Shareholder

General Meeting and registered with the State Bank of

Vietnam.

Chartered Capital The total amount of capital contributed by all the shareholders

of Military Commercial Joint Stock Bank. The value of

chartered capital is written on MB‟s Articles of Association.

Share The value of chartered capital divided into pieces of equal

value.

Stock A certificate issued by Military Commercial Joint Stock Bank

certifying the possession of one or more Shares of Military

Commercial Joint Stock Bank.

Core Banking The core information system of MB‟s modern commercial

banking system with the ability to monitor safety conditions,

process automatic transactions quickly and enhance risk

management capabilities.

Home Banking A service of MB that allows clients to remotely manage the

information of their accounts, regardless of which transaction

office they were opened at.

Mobile Banking A service of MB that allows clients to transfer money, check

account balances and financial information via mobile phones.

Internet Banking /eMB A banking service that allows clients to transfer money, check

account balances and financial information via Internet.

Bank Plus A product established in conjunction with Viettel that includes

3 service packages: Bankplus account, Bankplus card, and

Mobile Bankplus. Bankplus provides several modern features

such as checking account balances, checking transaction

history, depositing/withdrawing money into/from accounts,



transferring money within the MB system, transferring money

using Civil Identification information, electronic wallet, bill-

paying for mobile phone contracts and landline phones, ADSL

bills, depositing money into Viettel prepaid mobile phone

accounts (for account owners and/or others), and payment

service for other types of bills.

Logistics service A commercial service, in which the service provider engages

in activities such as goods receipt, transportation, inventory

storage, customs procedures, other procedures, client

advisory, packaging, label coding, goods delivery, and other

goods-related services according to agreements with clients in

order to earn commission.

Bancassurance A business activity in which the bank uses its distribution

channels established by the bank to advertise insurance and

insurance-related products through the bank‟s client database.

Related Parties Individuals or institutions are related under the following

circumstances:

Parent company and its subsidiaries, and vice versa;

Credit institution and its subsidiaries, and vice versa;

subsidiaries of the same parent company or the same

credit institution; managers and members of the

Supervisory Board of the parent company or the credit

institution, individuals or institutions with authority to

appoint these positions at subsidiaries and vice versa;

Company or credit institution with its managers and

members of its Supervisory Board, or with companies,

institutions possessing authority to appoint these

positions, and vice versa;

Company or credit institution and individuals, institutions

possessing 5% or more of its charter capital or Shares

with voting rights of that company, and vice versa;

Individuals and their spouses, parents, children and

siblings

Company or credit institution and individuals with titles

specified in part (d) of this section of the company‟s

managers, members of the Supervisory Board, capital-

contribution members or shareholders possessing 5% or

more of its chartered capital or Shares with voting rights,

and vice versa;

Other terms (if any) that are not listed above will be interpreted according to Corporate

Law No. 60/2005/QH11 issued on November 29, 2005, Securities Law No.70/2006/QH11



issued on June 29, 2006, Decree 14/2007/NĐ-CP issued on January 19, 2007 by the

Government and other related legal documents.

2. Abbreviations

ALCO Asset Liability Management Committee

AGM Annual General Shareholders meeting

AMC MB Asset Management Company Ltd., a subsidiary of MB

ATM Automated Teller Machine

BOD Board of Directors

CAR Capital Adequacy Ratio

CEO Chief Executive Officer

CIT Corporate Income Tax

CRR Compulsory Reserves Requirement

GDP Gross Domestic Product

EPS Earnings per Share

FDI Foreign Direct Investment

IT Information Technology

L/C Letter of credit

Ltd Liability Limited

MB Military Commercial Joint Stock Bank

MB Capital MB Fund Management Stock Company

NAV Net Asset Value

NPL Non Performing Loans

OTC Over The Counter

POS Point of Sale

ROA Return on Assets

ROE Return on Equity

SBV State Bank of Vietnam

SME Small and Medium Enterprises

SSC State Securities Commission

SOE State Owned Enterprises

TLS Thang Long Securities Joint Stock Company

USD US Dollar – Official currency of USA



VAT Value-Added Tax

VND Vietnam Dong – Official currency of Vietnam

The following abbreviations are for commercial banks, which may be mentioned in this

document:

ACB A Chau Commercial Joint Stock Bank

BVB Bao Viet Commercial Joint Stock Bank

EIB / Eximbank Vietnam Commercial Joint Stock Export-Import Bank

HBB / Habubank Habubank Commercial Joint Stock Bank

MSB Maritime Commercial Joint Stock Bank

Nam Á Bank Nam A Commercial Joint Stock Bank

TCB / Techcombank Vietnam Technological and Commercial Joint Stock Bank

Seabank South East Asia Commercial Joint Stock Bank

SCB Sai Gon Thuong Tin Commercial Joint Stock Bank

STB / Sacombank Sai Gon Commercial Joint Stock Bank

VIB Vietnam International Commercial Joint Stock Bank

VPB VP Commercial Joint Stock Bank



II. RISK FACTORS

Business in finance and banking contain unique risks. Like other commercial banks in

Vietnam, MB has had to encounter many risks during the recent financial crisis. The

achievements of MB over the last 17 years, especially in the most recent period (2008 -

2011) have demonstrated that strategies and solutions in managing the Bank are timely and

effective; helping the Bank to achieve sustainable growth and development.

Risk factors closely related to banking business operations include credit risk, market risk

and operational risk. MB manages these risks through setting the appropriate risk limits as

well as measure, monitor, report and control all these types of risks in a centralized

manner.

1. Credit risk

Credit risk refers to the risk that a borrower makes late or insufficient payments on its loans

from banks, failing to comply with agreements in the credit agreement. Credit risk events

lead to losses and decrease in the bank‟s profits.

Credit risk is inherent in the banking operations. To ensure efficient operation and preserve

solid financial capabilities, banks need to establish a sound credit risk management system.

To that end, MB has maintained credit risk management policies that adhere to the

following principles:

Establish an suitable credit risk management framework;

Develop and apply appropriate credit granting procedures;

Maintain a proficient system for managing, measuring and monitoring credit; and

Ensure adequate controls over credit risk.

With the current risk management system, MB has managed a consistently growing credit

portfolio over the years, with prudence, efficiency and quality as key objectives.

2. Liquidity risk

Liquidity risk refers to losses to banks that incur when actual payment demand exceeds

expected payment capabilities. When liquidity risk events occur, a bank has to increase

expenses to meet the additional payment demand, decreasing their gross profits. Moreover,

the bank may lose all payment capabilities entirely, leading to insolvency.

To minimize this risk, MB has adopted the following solutions:

Strictly comply with compulsory reserve requirements (“CRR”) on deposits mobilized

from institutions and individuals, while keeping excess deposits at the State Bank of

Vietnam (SBV) and keeping excess cash at an appropriate level, determined through

historical data analyses and future payment demand projections.

Strictly comply with regulations on liquidity ratios set by the SBV, maintain a

sufficient level of liquid assets (that can be easily converted to cash) that exceed short-



term liabilities; manage liquidity in a centralized manner, analyze a range of liquidity

scenarios for each period and point in time to ensure timely solutions can be

implemented for each scenario.

Increase transparency; cooperate with other banks in Vietnam to preserve sufficient

credit reserves in each period that can meet the bank‟s payment demands at any point in

time.

Maintain a pool of good quality valuable papers/ securities which can be used as

collaterals for borrowing at the SBV as well as other financial institutions in order to

meet immediate liquidity demands.

3. Risk from off-balance-sheet activities

In the normal course of business operations, banks may use many financial instruments that

are recorded in off-balance accounts. These financial instruments include mainly guarantee

commitments, letters of credit, and unutilized credit commitments.

Off-balance-sheet risk incurs when clients fail to meet their financial obligations according

to contractual agreements with the bank, leading to the bank having to meet these

obligations on behalf of the clients.

To minimize this risk, most letters of credit opened by MB are demand letters of credit,

Deferred L/Cs account for only a small proportion of the Bank‟s total exposure on L/Cs.

The Bank only extend L/C facilities to clients, who can meet the credit assessment criteria

set forth by the Bank.

Regarding guarantee commitments, MB only deals with clients, who meet certain financial

conditions and are able to fulfill obligations guaranteed by MB (such as bid bond,

performance bond, advance payment guarantee, warranties, etc.). The Bank also applies

stringent monitoring mechanisms as for lending activities. As a result, only a few

guarantees have been called off over the past few years.

In order to manage unutilized credit commitments, the Bank has built a system for

monitoring credit commitments and retrieving data in a timely manner. When clients use

up approved credit lines, the Bank regularly monitors and evaluates their business

performance to ensure that MB‟s credit disbursements are for the right purpose.

4. Interest rate risk

Interest rate risk occurs when there is a duration mismatch between assets and liabilities, or

when changes in market interest rates differ from the bank‟s expectations, or when the

bank fails to hedge against risk resulted from fixed-rate contracts. These situations lead to

decrease in the bank‟s profitability, especially when there are strong market interest rates

volatilities.

In order to minimize interest rate risk, MB has adopted the following solutions:

Centralize the Treasury‟s operations at the Headquarters in order to manage

mismatches in maturities as well as geographical differences. As a result, the impact of

market interest rate volatility is forecasted, updated and dealt with in a timely fashion,



optimizing the Bank‟s benefits according to decisions of ALCO. Maintain appropriate

levels of asset/ liability mismatch according to regulations set by the State Bank of

Vietnam on re-pricing durations of interest earning assets and interest bearing

liabilities;

Develop interest rate re-setting mechanism to match the revenue and costs: The Bank

has developed credit policies with appropriate interest rate pricing mechanism, suitable

for each credit product and projected market interest movement, which allows the Bank

to adjust interest rates appropriately. By doing this, MB could take advantage of market

opportunities in short-term while being able to protect itself against long-term

fluctuation. MB also set up risk limits for each duration, each currency and each

product in order to optimize market opportunities based on the view of market

movements. MB is currently re-setting interest on loans on a monthly and quarterly

basis in reference to the deposit interest rates. This enables more steady revenues and

hedges against interest rate risk.

Analyze and forecast interest rates on major currencies (such as VND, USD, EURO) in

order to develop investment policies appropriate for each period.

5. Exchange rate risk

Exchange rate risk is risk to Banks‟ revenues and capital in present or in the future that

arises from unfavorable changes in foreign exchange rates. Even when the position of spot

and forward contract of each currency is balanced, mismatch in duration of forward

contracts can still cause financial losses from exchange rate movements. Besides, banks

also face risk from the counterparties‟ errors or settlement risk (for example, a client

borrows foreign currencies but fails to pay back on time while the foreign currency

appreciates in value). In those cases, banks will incur additional expenses (that depend on

exchange rate movements).

In order to minimize exchange rate risk, MB has adopted the following measures:

Set limits for each foreign currency position for various intervals such as daily, weekly,

monthly, quarterly as well as limit for term mismatch and trading limit for each type of

foreign currency product. This allows the Bank to minimize foreign exchange risk and

even profit from exchange rate movements;

Centralize the foreign exchange operations at the Treasury department located at the

Headquarters in order to adjust policies and respond to market conditions on a timely

basis;

Analyze and forecast macroeconomic conditions that affect exchange rate fluctuations;

and

Develop policies and operational procedures in order to manage foreign exchange risk

according to international best practices.

6. Operational risk

Operational risk incurs losses to banks due to flawed or inappropriate internal control

procedures, human errors, system errors or external events. Other than credit risk and



market risk, other risks that occur in business operations are divided into seven categories:

internal fraud; external fraud; working safety; clients, products and business practices;

disasters; business delays and informational technology system errors; transaction

procedures.

MB considers operational risk management as important because this type of risk may

happen daily, at every stage of business operations, and is directly related to human

awareness and actions. In order to best manage operational risk, MB has established

operational policies, manuals and procedures, setting decision-making authorization levels,

rights and obligations of staff participating in each procedure. MB has also established a

well designed internal control system, new product introduction process, and developed an

advanced IT system to meet the business demand.

As a commercial bank, most of MB‟s business operations depend upon IT, therefore,

operational risk also includes risks related to the IT system. MB is currently utilizing a core

banking system provided by a leading software provider in the world to implement most

transactions in a precise fashion that also ensures to adhere to standardized principles and

procedures pertaining to establishing safety mode in order to guarantee that transactions are

correctly executed. To date, no significant operational risk event has occurred at MB.

7. Equity price risk

Market security prices are determined by several factors. Reasons for market price

movements, other than business performance results, include demand and supply of stocks,

socio-economic issues, changes in security laws, investors‟ psychology, etc. Equity price

fluctuations can affect banks‟ brand name and value and the psychology of clients.

In order to minimize this risk, MB has developed and issued three internal documents:

“Press release procedures”; “Public announcement procedures”; “Unfavorable information

processing procedures”. The Bank also implements other solutions in order to better

improve investor relations and to mitigate price risk.

8. Reputation risk

Rumors and lawsuits (whether the bank is the defendant or the plaintiff) can damage the

bank‟s credibility in the eyes of the public, potentially leading to fewer clients or higher

legal expenses. In order to minimize reputation risk, in addition to maintaining high

standards of business operations and safety, MB has developed a management information

system (MIS) from the Headquarters to branches that monitors all on-going information.

This ensures that the bank can deal with unexpected circumstances in a timely manner.

9. Risk from force majeure events

In addition to the above-mentioned risk factors, other risk factors of inevitable nature such

as natural disasters, diseases, wars, terrorisms and crises, can also affect the bank‟s

operations. These risks can create an insecure atmosphere and damage income of the

bank‟s individual and institutional clients, and even interrupt the bank‟s operations.

In order to minimize these risks, MB has diversified its investments, distribution channels

and branches; spread its loan portfolio of different maturities over many borrowers,



industries and professions. The Bank also hedge against force majeure risk of the clients by

requesting them to buy insurance to protect against unexpected, unfavorable events.

Besides, MB has also built a backup data storage system and backup solution center, tested

under different scenarios and solutions to make sure the Bank‟s business operations can be

maintained even in unexpected circumstances.

In addition, MB is paying attention to risk arising from changes in social trends. An

example of this risk is that as the economy develops, people may have other investment

options other than depositing their cash at banks. However, this type of risk can be

forecasted based on economic conditions and education levels. MB has actively protected

against this risk by developing and diversifying its products and services, optimizing

sources and usages of capital.

III. CONDITIONS AND CHARACTERISTICS OF LISTING INSTITUTION

1. Summary of company history and development

1.1. Fundamental information

Bank name: Ngân hàng Thương mại cổ phần Quân Đội

Bank’s name in English: Military Commercial Joint- Stock Bank

Name abbreviation: MB

Logo:

Chartered capital: VND 7,300,000,000,000 (Seven thousand three hundred

billion Vietnam Dong)

Headquarters: No. 3 Lieu Giai Street, Ba Dinh District, Hanoi

Telephone: (84 - 4) 6266 1088

Fax: (84 - 4) 6266 1080

Website: www.mbbank.com.vn

Business registration certificate No.: 0100283873 by Hanoi Agency for Planning and

Investment. Initial issuance: September 30, 1994. The 27th

amendment: December 31,

2010. License No.0054/NH-GP issued on September 14, 1994 in conjunction with

Decision 194/QĐ - NH5 on September 14, 1994 by the State Bank of Vietnam.

Business activties:

Engage in commercial banking activities in accordance with regulations issued by the

Governor of the State Bank of Vietnam;

Engage in provision of derivatives products in accordance with legal regulations;

http://www.mbbank.com.vn/



Act as an agent for insurance and other related services in accordance with legal

regulations;

Engage in trading bonds and other valuable papers in accordance with legal

regulations;

Buy, sell, enhance and process gold;

For business activities that are subject to special licensing, the Bank only engages in

these businesses when it meets conditions as specified by legal regulations.

1.2. History and development

Initially established to provide various financial services for military corporations, MB was

founded on November 4, 1994 under Business Registration Certificate No.0100283873

issued on September 30, 1994 by Hanoi Department for Planning and Investment and

Banking License No.0054/NH-GP issued on September 14, 1994 by the State Bank of

Vietnam.

Over the last 17 years, MB has continued to grow rapidly and aimed to become a holding

corporation, with MB (one of Vietnam‟s top commercial joint stock banks) as the parent

company, and five subsidiaries, demonstrating themselves as widely recognized brand

name in the financial services industry (including banking, insurance and securities) and

the real estate industry in Vietnam. With its broad variety of service and product offerings,

MB has experienced robust growth, expanding its operations into new branches of the

industry that reach beyond its traditional market. During the last six years, MB has

consistently been rated in the “A” category by the State Bank of Vietnam, the most

prestigious category for banks according to SBV‟s ranking.

From a mere VND 20 billion of chartered capital at establishment, mainly contributed by

the founding shareholders and 25 employees, today MB‟s chartered capital has increased

by 365 times to VND 7,300 billion. MB now has tens of thousands of shareholders and

over 4,000 employees and staff members (the figure is over 4,620 if taking into account

those from all of MB‟s subsidiaries). MB has proved to have solid financial capacity and a

vigorous competitive position. The Bank also complies with all safety ratios specified by

the State Bank of Vietnam and continuously strives to utilize expansion opportunities in

the future. The Bank‟s total assets have witnessed rapid growth, reaching VND 115,182

billion as of June 30, 2011. Today, MB is one of the top domestic commercial joint stock

banks in terms of both total assets and chartered capital.

1.3. Important milestones of MB

1994

MB was founded with chartered capital of VND 20 billion and started providing

financial services mainly for military corporations.

2000

MB reached beyond the scope of a bank, developed into a corporation starting with the

founding of two subsidiaries: Thang Long Securities Limited Liability Company –

now known as Thang Long Securities Joint Stock Company (“TLS”), and Military



Debt and Asset Management Company (“AMC”) in order to diversify MB‟s service

offerings, aiming to become a versatile and top-notch financial institution.

2003

After seven years of effective operations (1994 – 2002), MB decided to reform in

order to enable rapid and sustainable development in accordance with MB‟s reform

scheme. As a result, MB together with a foreign consulting firm established strategies

for the period 2004 – 2008 with a vision toward 2015.

2004

With a transparent and effective business and financial administration system, MB

boldly pioneered to become the first commercial joint stock bank to issue a total of

VND 20 billion worth of stock offering through public auction.

MB continued to advance with the implementation of restructuring plan for the period

of 2004 – 2008, targeting to separate management activities from business activities;

the scheme aims to benefit MB‟s clients, improve processes and procedures,

facilitating the operations of a public corporation.

MB tapped into the high-potential credit card business through the issuance of the

Active Plus debit card, whereby card owners are awarded with personal insurance

worth tens of millions VND.

2005

MB signed a tripartite agreement with Vietcombank and Viettel (Military

Telecommunications Corporation) to help customers with easy payments for telecom

services provided by Viettel, and a collaborative agreement with Citibank. The signing

of these strategic agreements enabled MB to tap into a new pool of clients and serve

them in a more timely manner.

2006

MB continued to expand by founding Hanoi Fund Management Company (“HFM”),

now known as MB Capital Management Company (“MB Capital”), so as to optimize

MB‟s investment capital as well as augment risk management capabilities through

coordination with the Swedish International Development Cooperation Agency

(SIDA).

Successfully implemented the information technology modernization project, helping

to boost the Bank‟s competitiveness and provide its clients with the best banking

utilities from Temenos Corporation (Sweden).

Issued VND 220 billion of 5-year convertible bonds.

MB launched its Mobile Banking and Internet Banking services.

2007

Continued the modernization process of the Bank‟s technology system, MB

successfully rolled out the Core Banking T24 system.

Issued VND 1,000 billion of 2-year convertible bonds.



MB promoted its businesses through strategic partnerships with important partners,

including Vietcombank, Sacombank and LILAMA.

2008

Restructured the organization model, improved and implemented the human resources

strategy in accordance with the 2008 – 2012 organization models.

Military Telecommunications Corporation (Viettel) became a strategic shareholder of

MB. MB increased chartered capital to VND 3,400 billion, further boosting its

financial capacity.

MB increased the number of transaction offices to 90.

MB began to increase its market reach to the large and promising market of medium &

small businesses in the private sector, through signing comprehensive collaborative

contracts with important partners such as: Agricultural Services Cooperative Union

(Dona Coop), An Phu Long Joint Stock Company, Global Telecommunications

Company (GTel), Phu Thai Limited Liability Company, Tay Nguyen Coffee

Investment & Export-Import Joint Stock Company, Mai Linh Corporation, Small &

Medium Enterprises Association (SME), etc.

MB consistently received prestigious awards, including Prestigious Security Brand

(for the fourth consecutive times), “Strong brand of Vietnam” and received certificate

of merit from the Prime Minister for its excellent achievements in the cause of

controlling inflation and stabilization macroeconomic conditions.

MB became the first joint stock bank to establish an internal credit rating system as

approved by the State Bank of Vietnam.

2009

MB increased its chartered capital to VND 5,300 billion.

MB increased its total number of transaction offices to 103.

Improved services to large domestic economic institutions such as: Vietnam Coal &

Mineral Corporation (TKV), Vietnam National Petroleum Corporation (PVN),

Military Telecommunications Corporation, etc.

Opened the 24/7 customer service center; enhanced, modernized and launched new

banking services: Mobile Banking, Internet Banking, eMB, and Bank Plus with three

main service packages: Bank Plus account, BankPlus card, and Mobile BankPlus.

MB signed collaborative agreements with several enterprises in order to diversify its

service and product offerings. These include: Prudential Vietnam Insurance Compan,

Military Telecommunications Corporation (Viettel) and Vietnam Post Postal Service

Company (VNPOST).

MB received important domestic awards from large institutions such as: Third Grade

Labor Medal, Government‟s Competition Recognition, Certificate of Merit from the

State Bank Governor, Hanoi People‟s Committee Competition Recognition,

Prestigious Securities Brand Name, Vietnam Golden Star, Vietnam Kind Heart, Top



500 Vietnamese Enterprises, and Top 200 Trustworthy Products. At the end of 2009,

MB received the ISO 9001: 2008 Certificate provided by Bureau Veritas Certification,

a prestigious company (UK), after a rigorous quality verification and assessment

process.

2010

A big transition in leadership: the appointment of Mr. Le Cong as MB‟s new CEO in

January 2010. The transition received positive reception and high consensus among

the Board of Directors, the Management Team and the Bank‟s employees and staff.

Signed contract and implemented the strategic advisory project for the period of 2011 -

2015 with a vision toward 2020 with McKinsey. McKinsey completed surveying and

assessing MB; provided advisory on development strategies for MB for the period of

2011 – 2015, proposed business models and an organization model reform program,

established a set of 20 initiatives and detailed action plans for the year of 2011 so as to

enhance the effectiveness of MB‟s banking business operations.

Opened a branch office in Laos – MB‟s first overseas branch, marking the Bank‟s first

effort to expand its operations beyond domestic border.

Rated “E+” by the International credit rating agency, Moody‟s. This rating puts MB

into the high-quality group of banking institutions in Vietnam.

Successfully executed the first step of the expansion strategy in the South of Vietnam;

SME strategy. Implementation result was favorable, growth targets significantly

improved compared to previous years.

Invested in development of a Data Center (DC) and a Disaster Recovery (DR) center,

with total investment capital of USD 10 million, in order to reform and modernize the

Bank‟s technology system. After going live, these systems were evaluated to operate

effectively, helping to improve transaction processing speed and augment utility for

users and clients.

Signed collaborative agreements with large partners, including VFF, Vinaconex,

AKA, PVD, HAFIC, CMC, EVN, SSG, Song Da Thang Long, Bank of New York

Mellon, Western Union, Ha Do, Thai Nguyen Iron & Steel, Banking Academy, etc.

Signed agreements with the State Treasury and the General Department of Customs.

MB received several large prestigious awards. It is one of the only two commercial

joint stock banks to receive the Government‟s Competition Recognition in two

consecutive years 2009 – 2010, the State Bank of Vietnam‟s Competition Recognition,

Vietnam Golden Star, Strong Brand of Vietnam, VNR 500, Prestigious Security Brand

and various awards on international payment services granted by some of the world‟s

prestigious financial institutions. MB continued to be rated in the “A” category of

banks by the State Bank of Vietnam.

Developed new, intelligent online banking services and products:



- For corporate clients: distributed the service package to help corporate clients to

manage working capital, the MB Cash service package; the Supplier Financing

product, the prepaid card for Tan Cang, National budget collection service, etc.

- For individual clients: implemented several new capital raising programs such as

e-savings product (one of the two products of the e-saving package); Certificates

of Deposit program issued through VPPost; BankPlus product and launched

Private Banking project, etc.

- Foreign remittances services: implemented money transfer services including

Western Union and Express Money, etc.

Achieved impressive business performance results: chartered capital reached VND

7,300 billion, total assets reached VND 109,623 billion, pretax income reached VND

2,288 billion, business growth rate reached over 50% compared to the previous year

(deposit increased by 64%, loans rose by 65%, pretax income increased by 52%).

2. Organizational structure

MB‟s network as of June 30, 2011 includes:

Headquarters, one trading center, one branch in Lao PRD, 150 branches and

transaction offices, 327 ATMs, 1,328 POS machines distributed in 24 cities and

provinces over the country;

Five subsidiaries; and

Three associated companies.

2.1. Subsidiaries

Figure 1: List of subsidiaries as of June 30, 2011

No. Company License No. Industry

Chartered

capital

(VND bil)

Ownership

percentage

1

Thang Long

Securities Joint

Stock Company

005/GPHĐKD by

SSC May 11, 2000

Securities

brokerage and

trading

1,200.00 61.85%

2

MB Fund

Management Stock

Company

07/UBCK-

GPHĐQLQ by SSC

on September 29,

2006

Investment

fund

management

100.00 61.78%



No. Company License No. Industry

Chartered

capital

(VND bil)

Ownership

percentage

3

MB Asset

Management

Company Limited

0104000066 on

September 11, 2002

by Hanoi

Department for

Planning and

Investment

Debt and asset

management 514.28 100%

4

MB Real Estate Joint

Stock Company

0103022148 on

January 25, 2008

by Hanoi

Department for

Planning and

Investment

Real estate

investment 571.48 65.26%

5

Viet R.E.M.A.X

Joint Stock Company

Viet REMAX

4102082555 by Ho

Chi Minh City

Department for

Planning and

Investment on

February 2, 2010

Office

investment,

development

and rental

100.00 78.09%

2.1.1. Thang Long Securities Joint Stock Company

Full name : Thang Long Securities Joint Stock Company

Abbreviation : TLS

Logo :

Head office : 98 Nguy Nhu Kon Tum, Thanh Xuan District, Hanoi.


Chartered capital : VND 1,200,000,000,000 (One thousand two hundred billion VND).

Thang Long Securities Joint Stock Company (“TLS”) was founded in May 2000 and was

one of the first five securities firms in Vietnam. Today, TLS has chartered capital of VND

1,200 billion, of which MB owns 61.85%. TLS is one of the few securities firms with the

ability to provide a comprehensive spectrum of high-quality security services. TLS has

achieved remarkable results in its business activities:

Services for individual clients and corporate clients: TLS has been regconised by its

clients as a credible and trustworthy brand name through its offerings of product

packages for investors, from investment advisory, brokerage, and security custody to

http://www.tls.vn/



financial support services. In 2009 and 2010, TLS was the market leader in terms of

securities trading on both the Hanoi Stock Exchange (HNX) and the Ho Chi Minh

Stock Exchange (HSX). TLS emphasizes the importance of training human resouces

and investing in state-of-the-art technologies in order to continuously improve

customer service quality.

Research services: With a team of well-trained and experienced research anlysts, TLS

provides its clients with top-quality research reports that are highly valued by its

clients. These research reports include:

- Economic research;

- Market research;

- Equity research; and

- Fixed income research.

Investment Banking services: With its expertise and broad connections with large

financial entities, TLS offers investment banking services to over 300 corporate clients

in both the public sector and the private sector. Its range of services include:

- Equity Capital Market (ECM);

- Debt Capital Market (DCM);

- Mergers & Acquisitions Services;

- Financial advisory, including the following services:

Privatisation advisory;

Listing issuance advisory;

Financial restructuring advisory;

Investor relation advisory;

Enterprise conversion advisory;

Valuation advisory; and

Capital arrangement service, etc.

In 2010, TLS recorded gross revenues of VND 1,307 billion and pretax income of VND 49

billion.

In its business strategies in 2011 and upcoming years, TLS has determined specific

strategic targets:

Focus on sustainable develpoment and remarkable performance results;

Maintain its position in the Top 10 in term of brokerage market share;

Restructure operation model, focus on initiative, flexibility to take on new

opportunities;

Enhance internal control and compliance systems;



Improve Investment Banking services;

Improve cooperation with subsidiaries within the MB system in order to create

synergies;

Build and promote TLS‟s corporate culture;

Improve financial capacity through increasing chartered capital or issuing convertible

bond.

2.1.2. MB Fund Management Joint Stock Company (“MB Capital”)

Full name : MB Fund Management Joint Stock Company

Abbreviation : MBCapital

Logo :

Main office : Hanoi Toserco Building, 273 Kim Ma, Ba Dinh District, Hanoi.

Website : www.mbcapital.com.vn.

Chartered capital : VND 100,000,000,000 (One hundred billion Vietnam Dong).

MB Fund Management Joint Stock Company, originally Hanoi Fund Management Joint

Stock Company, was founded in 2006 in the form of MB one-member limited liability

company, and later transformed into a joint stock company in 2008. MB Capital has

chartered capital of VND 100 billion, of which MB owns 61.78%. It operates in the

investment fund management business, providing services in fund management, portfolio

management, investment advisory and investment trust asset management.

MB Capital currently manages three member domestic funds and manages a portfolio of

institutional investors and individual investors both in and outside of Vietnam. MB

Capital‟s total assets under management as of December 31, 2010 reached VND 20,000

billion. In 2010, MB Capital, together with members of MB Group, successfully

cooperated with Japan Asia Holding Group (Japan) in forming a domestic private

investment fund, and managing the portfolio of the foreign investment portfolio open

Vietnam Dream Fund. MB Capital has become one of the five fund management

companies with the largest total assets under management (AUM) and an experienced

player in the asset management industry in Vietnam.

In 2011, MB Capital met its growth targets for all of funds and portfolios managed by the

Company, with a target growth rate of 25 – 35% a year. The projected cash dividend

payout rate of MB Capital is in the range of 15 – 20%. Going forward, MB Capital aims to

continue stable development as well as improve its potential and standing in the fund

management industry, and lay a solid foundation for subsequent years.

2.1.3. MB Asset Mangement Company Limited (“AMC”)

Full name : MB Asset Management Company Limited.

Abbreviation : MB AMC., Ltd

Logo :

Main office : 195 Kham Thien, Tho Quan, Dong Da district, Hanoi.

http://www.mbcapital.com.vn/



Website : www.mbamc.com.vn.

Business registration certificate No. 0104000066 issued on September 11, 2002 by Hanoi

Department for Planning and Investment.

Registered chartered capital: VND 200,000,000,000 (Two hundred billion VND)

Paid in chartered capital: VND 514,277,000,000 (Five hundred fourteen billion and

two hundred seventy seven million VND).

AMC is one-member limited liability company, of which MB owns 100% of the chartered

capital. AMC operates in the debt management business, buy and sell debt and trade in

various types of assets including real estate, asset evaluation and valuation, construction

building investment advisory, construction design advisory and supervision, and other

business activities.

The Company‟s chartered capital provided by MB as of December 31, 2010 was

appropximate VND 514 billion. AMC focuses on its core businesses in which it has a

competitive advantage. These businesses include:

Collect overdue debts, buy and sell debts;

Invest in and exploit liquidated assets; and

Invest in and exploit real estate infrastructure.

In the debt collecting and trading business, AMC has effectively fulfilled mandates set

forth by MB. In 2010, AMC handled an estimated amount of VND 150 billion worth of

bad debt recovery for MB, collected VND 56 billion of bad debt. Sales from buying and

selling bad debt with external counterparties were VND 15.6 billion.

AMC provides collateral evaluation and asset valuation service, which assists various

business functions like lending, project financing and investment activities for clients of

MB‟s partners. This service creates customized product packages for MB‟s clients, as well

as contributes significantly to the Company‟s revenues.

In 2010, AMC completed collateral valuations for the Bank for a total of VND 6,000

billion worth of assets, three times of the intial target set at the beginning of the year.

Furthermore, the Company has provided advisory to the Bank‟s branches and subsidiaries

on the quality of collaterals, providing additional safety for the Bank‟s lending operations.

AMC‟s real estate infrastructure management and exploitation operations are one of the

Company‟s main strengths. AMC has efficiently implemented its real estate infrastructure

management and exploiation activities, with a deep focus on office rental and urban

residential housing development. As of 2010, AMC had been managing office rental space

at four office buildings with a total area of over 10,000m2. All these buildings achieved

high occupancy rates of over 95%.

AMC fulfills the function of managing investment assets of MB through several manners,

such as contributing investment capital, and purchasing and selling assets. AMC currently

manages investment assets of MB at MB Real Estate Joint Stock Company (MB Land).

This business generated over VND 50 billion in revenues for the Company in 2010.

http://www.mbamc.com.vn/



At the end of 2010, the Company‟s owner equity reached VND 553 billion while the pre-

tax income was VND 85.9 billion.

For the year of 2011, AMC targets rapid growth in most of its businesses, and focuses

mainly on business activities in which it has a competitive advantage. Accordingly, debt

management and asset exploitation continue to be the Company‟s main business. Human

resource efforts will be focused on optimizing the collection of MB‟s bad debt, purchases

and sales of debt, manage and exploit effectively the Bank‟s assets and other investment

assets. Besides, the asset evaluation and valuation operations will be expanded in scale and

improved in quality, reliability and professional standards.

In 2011, the Company‟s owner equity is projected to reach a minimum of VND 800 billion,

of which the liquid capital will reach a minimum of VND 200 billion and pre-tax income

will reach a minimum of 150 billion VND.

2.1.4. MBLand Joint Stock Company (“MB Land”)

Full name : MB Land Joint Stock Company.

Abbreviation : MB Land

Logo :

Head office : No. 6-8 Chua Boc, Dong Da district, Hanoi

Website : www.MBLand.vn

Business registration certificate No. 0103022148 issued on January 25, 2008 by Hanoi


Chartered capital : VND 571,477,500,000 (Five hundred seventy one billion four

hundred seventy seven million and five hundred thousand VND).

MB Land is a subsidiary of MB as AMC‟s ownership accounting for 65.26% of MB

Land‟s chartered capital. MB Land is licensed to operate in the real estate industry. MB has

established specific strategies to focus its investments in the MB Land Tower project, land

project, residential housing and real estate. Over the last three years, MB has overcome

numerous initial challenges to prove its standing in the industry and work towards a stable

development.

In the first years of operations 2009 and 2010, MB Land was flexible in utilizing its initial

capital for short-term business operations, achieving favorable performance results for the

company and its shareholders. With initial chartered capital of VND 475 billion, in 2010

the Company has increased this figure to VND 571 billion. The Company has consistently

earned profits in the first years of operations.

MB Land has focused its efforts on developing the critical MB Land Tower project (the

retail – hotel – rental office complex zone at No. 6-8 Chua Boc Street, Hanoi). In 2010,

MB Land Tower project went through its initial preparation stage. The project detailed

plans were approved by the Hanoi People‟s Committee, getting it ready for construction in

2011. MB Land has also actively participated in other investment projects through

contributing capital or investing in joint ventures, aiming to develop its land bank and

housing reserves serving real estate and infrastructure activities. One of its key projects

achieving remarkable business performance is the Golden Palace Luxury Apartment

Complex in Me Tri, Hanoi, in which MB Land owns 60% of the project. To date, MB Land

http://www.mbland.vn/



has invested in other projects such as: An Phuoc urban city, Long Thanh, Dong Nai; Cao

Loc urban city, Lang Son.

In 2011, MB Land has continued to focus its resources on investing in key projects

including MB Land Tower, Golden Palace and An Phuoc – Green Valley. Besides, the

Company aims to develop short-term real estate services, establish real estate transaction

centers in order to take advantage of market opportunities to generate additional revenues.

With the goal of accelerating project progress, investing and operating projects, MB Land

has continued to target solid growth in both revenues and earnings, as evidenced by a target

pretax income at a minimum of VND 30 billion for the year of 2011.

2.1.5. VIET R.E.M.A.X Joint Stock Company

Full name : Việt R.E.M.A.X Joint Stock Company

Head office : 10th floor, 225 Tran Hung Dao, District 1, Ho Chi Minh City

Business registration certificate No. 0103022148 issued on January 25, 2008 by Hanoi


Chartered capital : 100,000,000,000 VND (One hundred billion VND)

Industry : Real estate

A private joint stock company operating in the real estate business and rental office, Viet

R.E.M.A.X is the owner of the office building project at 259 Tran Hung Dao, District 1, Ho

Chi Minh City. Since early 2010, Viet R.E.M.A.X has become a subsidiary of MB, with

AMC owning 78% of Viet R.E.M.A.X‟s chartered capital. AMC is the official owner of

Viet R.E.M.A.X, aiming to successfully develop the MB Sunny Tower project at 259 Tran

Hung Dao, District 1, Ho Chi Minh City, which will be used as MB‟s main office in the

Southern region.

In 2010, Viet R.E.M.A.X completed all the preparation steps for the MB Sunny Tower

project (Garde A office building with 22 above ground floors and three underground

floors), launched construction and completed the project‟s foundation parts, while the

underground portion of the project was under construction. Viet R.E.M.A.X aimed to finish

construction and bring the project into full operation in 2012.

2011 is the most critical year of the MB Sunny Tower project. The Company has set forth

aggressive targets in term of construction progress and aims to fulfill the goal of

completing in principle all underground items and the body-section framework by March

31, 2011.



2.2. Associated companies

Figure 2: List of associated companies as of June 30, 2011

No. Company name License Number Industry

Chartered

capital

(VND

billion)

MB’s

ownership

percentage

1 Viet-Asset Joint

Stock Company

No. 0102749334 issued on

May 27, 2010 by Hanoi

Department for Planning

and Investment

Construction

investment 11.11 45.00%

2

Long Thuan

Loc Joint Stock

Company (MB

Land‟s joint

venture project)

No. 4703000542 issued on

May 19, 2008 by Dong Nai

Department for Planning

and Investment

Project

construction 100 29.37%

3

Military

Insurance Joint

Stock company

No. 43GP/KDBH issued on

November 8, 2007 by

Ministry of Finance

Non-life

insurance 300 18.00%

Source: MB


Listing Advisor: Thang Long Securities (“TLS”) Unofficial English translation by TLS for information purposes only.

28

SHAREHOLDERS BOARD

BOARD OF DIRECTORS

SUPERVISO

RY BOARD

INTERNAL AUDIT

COMMITEE

STRATEGIC RESEARCH

& DEVELOPMENT

CEO

STRATEGY IMPLEMENTING

OFFICE

INTERNAL CONTROL

CORPORATE AND

INSTITUTIONAL

BANKING DIVISION

BOARD OF DIRECTORS

OFFICE

ACCOUNTING AND FINANCE

RISK MANAGEMENT

CREDIT ANALYSIS

CEO OFFICE

HUMAN RESOURCE

INVESTMENT AND PROJECT

MANAGEMENT

SME

DIVISION

RETAIL

CLIENT

TREASURY

DIVISION

DISTRIBUTION

AND NETWORK

MANAGEMENT

DIVISION

OPERATION

DIVISION

INFORMATION

TECHNOLOGY

DIVISION

152 BRANCHES AND TRANSACTION OFFICES

BOARD COMMITEES

INVESTMENT

COMMITEE



2.2.1. Functions of departments in the organization structure

Shareholder Board: the highest decision-making authority of MB.

Board of Directors: decision making authority on issues pertaining to MB‟s missions

including strategies, mid term plans, annual plans, and other issues in accordance with legal

regulations and MB‟s Articles of Association (charter).

Board of Directors includes the following members:

Full name Title Appointment date

Mr. Le Huu Duc Chairman Appointed on April 28, 2011

Mr. Le Van Be First Vice-Chairman Re-appointed on July 29, 2009

Mr. Nguyen Manh Hung Vice-Chairman Appointed on July 29, 2009

Mr. Ha Tien Dung Member Appointed on July 29, 2009

Mr. Dau Quang Lanh Member Re-appointed on July 29, 2009

Mr. Nguyen Dang Nghiem Member Appointed on July 29, 2009

Mrs. Tran Thi Kim Thanh Member Appointed on April 28, 2011

Supervisory Board: represents shareholders and is responsible for monitoring and

controlling activities of the Board of Directors, the management team, MB‟s financial

activities; monitoring compliance of accounting principles, prudence in MB‟s activities;

conducting periodic internal audits in all businesses in order to evaluate accurately business

performance results and financial conditions of MB, ensuring that the Bank engages in

efficient, legal business activities and protect benefits of shareholders.

Supervisory Board includes the following members:


Mrs. Pham Thi Ty Chairman Appointed on July 29, 2009

Mr. Nguyen Xuan Truong Member Re-appointed on July 29, 2009

Mrs. Nguyen Thanh Binh Member Appointed on July 29, 2009

Mr. Le Cong Soa Member Appointed on July 29, 2009

Board committees: Board committees are established to support the Board of Directors,

includeing Credit and Investment Committee; Human Resources Committee; Assets and

Liability Management Committee (“ALCO”); Risk management committee. These

committees assist the Board of Directors with specific tasks so as to ensure that strategic

decisions of the Board of Directors are effectively established, executed in accordance with

laws and regulations.

Internal Audit: assists the Supervisory Board in implementing audit and monitoring duties.

Board of Directors Office: assists the Board of Directors in executing its functions and

responsibilities in accordance with legal regulations and MB‟s Articles of Association.

Acting as an intermediary office between the administration and the executives, the Board



of Directors Office is the official channel through which the Board of Directors

communicates with the the management team, and vice versa, in a timely and seamless

manner.

Strategic Research & Development Department: assists and supports the Board of

Directors in strategic issues, providing forecasts as well as specific proposals for key

operations of MB and its subsidiaries. This department is responsible for proposing,

executing and evaluating development plans for MB and its subsidiaries.

Management Team: responsible for executing MB‟s day-to-day operations, organizing

and implementing business strategies and opearational strategies in order to fulfill goals

and targets set forth by the Annual Shareholders General Meeting (AGM) and the Board of

Directors.

The Management Team includes the following members:


Mr. Le Cong CEO Appointed on January 5, 2010

Mr. Dang Quoc Tien Deputy CEO Appointed on May 7, 2002

Mr. Do Van Hung Deputy CEO Appointed on October 18, 2005

Mrs. Cao Thi Thuy Nga Deputy CEO Appointed on January 1, 2006

Mrs. Vu Thi Hai Phuong Deputy CEO Appointed on June 11, 2007

Mr. Luu Trung Thai Deputy CEO Appointed on April 15, 2008

Mrs. Nguyen Thi An Binh Deputy CEO Appointed on Nov 23, 2009

Mrs. Nguyen Minh Chau Deputy CEO Appointed on Nov 23, 2009

Mrs. Pham Thi Trung Ha Deputy CEO Appointed on April 27, 2011

Mrs. Le Thi Loi CFO Appointed on Nov 23, 2009

Risk Management division: assists the CEO in monitoring all risks arising in the Bank‟s

business operations, focusing on credit risk, liquidity risk, market risk, operational risk and

national risk. The main responsibilities of the Risk management division include proposing

risk management policies; develop business continuity and contingency plan, plans to

resolve unexpected circumstances, establish limits; measure, monitor and report risks;

institute and promote risk a system-wide management culture.

Internal Control division: assists the CEO in instituting, maintaining and developing an

effective internal control and monitoring system capable of meeting rigorous demands in

terms of identification, measurement, assessment and management of risks, in order to

ensure effective, prudent and legal operations of the Bank. The Internal Control division

consists of three Internal control offices in three regions: the Northern region, the Central -

Highland region and the Southern region. The presence of these internal control offices

ensures independence and objectivity in system-wide internal control activities.



Credit Analysis division: The division assessed credit worthiness and examine the terms

and conditions for credit granting for all customers of the Bank. It is also charge of

administering the organization, process of credit assessment for all customers on a bank-

wide basis. Responsible for collecting bad debts to achieve the bad debt target set by the

Management, cooperating with related units in conducting credit assessment and collecting

bad debt, as well as developing credit policies in line with the strategy of MB in each

relevant period.

Business Administration functions: include departments and offices in charge of the

Bank‟s administration and are organized according to functions. They include Strategy

Implementation office, CEO office, Finance Accounting department, Human resources

department, IT department. These functions are responsible for instituting, sustaining and

improving management policies and principles so as to support major business divisions,

helping to create high-quality services for clients.

Business Support functions: consist of Operations department, Distribution network and

channel department. These departments are responsible supporting business operations,

establishing and maintaining product and service delivery, ensuring efficient risk

management, developing MB‟s distribution network and channels and conducting

administrative activities.

Business divisions: classified by customer segment and market segment, including:

Treasury Division: Trade local, foreign currencies, and financial derivatives on

monetary markets, capital markets and commodity market. The division manages the

Bank‟s funding in a centralized manner and develops funding policies on a Bank-wide

basis as well as manages foreign currency positions in order to hedge against interest

rate risk and exchange rate risk while diversifying services to boost MB‟s revenues.

Corporate and Institutional banking division: Provide financial solution packages for

large cap enterprises, link services and products with credit institutions and financial

institutions both in and outside of Vietnam.

Small and medium enterprise division: Provide and advise on financial, banking

products and services for small and medium enterprise clients.

Retail banking division: specializes at serving retail clients‟ capital and savings needs,

as well as develop and provide service packages, including: payment, card service,

remittances, personal finance, mobile and internet banking, etc.

Investment unit/ investment and project management department: Manages MB‟s

investment activities. It engages in long-term investments serving business operations,

infrastructure development investments and coordinate with other divisions in

providing investment banking services, financial advisory services for MB‟s clients

and partners.

Branches, transaction centre and transaction outlets: Local units that provide solution

packages, products and services for clients on the basis of MB‟s policies and strategies.



2.2.2. Networks

2.2.2.1. Branch network of MB as of June 30, 2011

MB has one Headquarter, one Transaction Center, one branch in Laos PRD, 150 branches

and transaction outlets in 24 provinces and cities all over the country. This enables MB to

access various types of clients and provide them with banking services in a fast and

convenient fashion.

In line with MB‟s development strategies, MB‟s network is subject to a well defined

development process: MB focuses its network on vital economic regions, major cities to

serve its traditional client segment. As a result, MB has an expansive network covering

provinces and cities across all Northern, Central and Southern regions. MB‟s branches are

convenient, in well-populated areas, supported by a good brand name, solid connections

and partnerships in local areas, and staffed with teams of dedicated employees, who deliver

high-quality services and expertise to clients with high professional standards. The Bank‟s

slogan “Being solid and dependable” and especially the brand name “Military” brings to

MB several advantages and trustworthiness in the eyes of clients. Furthermore, with the

Bank‟s strategic partnerships with Viettel Corporation and VNPost, MB will be able to

bring its product and service offerings to countryside regions, local and remote areas

through the extensive networks of thousands of transaction offices of Viettel and VNPost.

Beside its tangible presence, MB has also developed numerous electronic products and

services such as Internet banking, Mobile banking, e-Com payment system, etc, in order to

increase its access to clients.

For these reasons, the performance results of all branches and transaction offices have been

highly positive. In Hanoi, among joint stock banks with headquarters based in Hanoi

excluding VCB and BIDV, MB has attained a 15.5% market share in terms of saving

deposits, second only to Techcombank. MB also accounts for 17.3% of market share in

terms of customer lending and at second rank. In Ho Chi Minh City, MB‟s savings deposit

makes up 10.4% of market share among joint stock banks that are not based in Ho Chi

Minh City, and 14.8 % of market share in terms of customer loans. MB branches in Central

and Northern cities such as Viet Tri, Hai Phong, Quang Ninh and Ninh Binh provinces

ranked in the top 5 among regional commercial joint stock banks in terms of most key

performance indicators (KPI) such as total assets, savings deposit, customer loans and

profitability.

MB‟s expansion into the Laos PDR has also brought about valuable opportunities for the

Bank to fully gain access to large corporate clients, military related clients and develop

other banking products in the overseas market. As a result, despite being a new player in

the Laos market (since December 2010), MB Laos has built its standing and is confidently

competing with other Vietnamese banks with operations in Laos, such as BIDV and

Sacombank.





2.2.2.2. Networks of subsidiaries, strategic partners and clients

Beside providing a range of financial - banking products and services via its networks, MB

also cooperates to expand the networks of its subsidiaries, partners and strategic

shareholders through many services and products under the same brands, especially

supported by modern telecommunications and technology platforms.

Subsidiaries

Thang Long Securities Joint Stock Company (TLS): includes a Head office in Hanoi,

five branches in Ho Chi Minh City, Hai Phong, Da Nang, Thanh Hoa and Vung Tau,

and eight transaction offices;

MB Capital Management Company (MB Capital): Head office in Hanoi and one

representative office in Ho Chi Minh City;

MB Asset Management Company Limited (AMC): Head office in Hanoi and branches

in Ho Chi Minh City and Da Nang;

MB Real Estate Joint Stock Company (MB Land): Head office in Hanoi; and

Viet R.E.M.A.X Joint Stock Company: Head office in Ho Chi Minh City.

Strategic partners

MB recognizes that building comprehensive partnerships to fully utilize the strengths and

competitive advantages is a necessary and essential goal. MB currently has strategic

coopeartive partnerships with several important partners such as Vietnam Helicopter

Company, Tan Cang Sai Gon Company, Military Telecommunications Corporation

(Viettel) and Commercial Joint Stock Bank for Foreign Trade of Vietnam (Vietcombank).

MB has also signed numerous comprehensive cooperative agreements with corporations

and large enterprises like Vietnam Machinery Erection Corporation (LILAMA), Vietnam

National Petroleum Corporation (PetroVietnam), Vietnam Coal and Mineral Industrial

Corporation (TKV), Song Da Company, Highland Coffee, Military Petroleum Company

and many other private corporations.

3. Shareholder composition, founding shareholders and large shareholders

3.1. Shareholder composition

Figure 3: Shareholder composition as of September 2011

No. Shareholder type Number of

shareholders

Ownership percentage

(%)

1 Institutional shareholders 131 66.69%

Domestic 131 66.69%

Foreign 0 0%



No. Shareholder type Number of

shareholders

Ownership percentage

(%)

2 Individual shareholders 9,130 33.31%

Domestic 9,130 33.31%

Foreign 0 0%

Total 9,261 100%

Source: MB

3.2. List of founding shareholders

Figure 4: List of founding shareholders

No. Shareholder Address Number of

shares Ownership

1 Vietnam helicopter

corporation 172 Truong Chinh, Hanoi

52,882,207 7.24%

2 28 corporation

3 Nguyen Oanh – Go Vap

district – Ho Chi Minh

City

8,307,057 1.13%

3 Military industrial

supplies company

21 Linh Lang – Cong Vi –

Ba Dinh – Hanoi 11,919,894 1.63%

4 Thanh An corporation 141Ho Dac Di – Hanoi 1,172,570 0.16%

5 Chemical mechanics 13

company

Tan Binh – Yen Son –

Tuyen Quang 1,434,016 0.19%

6 Mr. Le Van Be B12b Ngoc Khanh, Ba

Dinh, Hanoi 937,014 0.12%

7 Electrical mechanics and

explosives 31 company

Dong Tien commune –

Pho Yen – Thai Nguyen 927,551 0.12%

8

Tay Ho investment and

construction Joint Stock

company

2 Hoang Quoc Viet – Cau

Giay – Hanoi 605,421 0.08%

9 Minh Thanh company

2 Bis Nguyen Thi Minh

Khai – District 1 – Ho Chi

Minh City

380,857 0.05%

Total 78,566,587 10.72%

Source: MB



According to Part 5, Article 84 of Corporate Law 2005, founding shareholders are not

allowed to transfer their ownership within the first three years since establishment.

However, at this point, the restriction on the transferring of share ownership has expired;

hence shares of the founding members have become freely transferable.

3.3. List of large shareholders

Figure 5: List of shareholders holding 5% or more

No. Shareholder Address Number of

shares

Ownership

1 Commercial Joint Stock

bank for foreign trade of

Vietnam (Vietcombank)

198 Tran Quang Khai,

Hanoi

80,300,000 11.00%

2 Military

Telecommunications

Corporation (Viettel)

1 Giang Van Minh, Hanoi 73,000,000 10.00%

3 Commercial Joint Stock

bank for maritime of

Vietnam (Maritime

bank)

7 Floor, A Tower, Sky

Tower building -88 Lang

Ha, Dong Da, Hanoi

64,704,764 8,86%

3 Vietnam Helicopter

Corporation

172 Truong Chinh, Hanoi 52,882,207 7.24%

4 Tan Cang Sai Gon

corporation

Tan Cang – P22 – Binh

Thanh – Ho Chi Minh City

41,736,239 5.71%

Source: MB

4. Services and business activities

4.1. Introduction

MB provides a wide range of products and services. The major offerings and activities

include:

Commerical banking activities in accordance with regulations by the State Bank of

Vietnam;

Provide derivatives products in accordance with legal regulations;

Act as an agent for insurance and related services in accordance with legal regulations;

Trading bonds and other financial products in accordance with laws/legal regulations;

Trade and process gold;



For businesses that require special licensing, the Bank only operates in those

businesses when it is capable of meeting these conditions in accordance with legal

regulations.

4.2. Main services and business activities

4.2.1. Savings deposit mobilization activities

MB has implemented many solutions to attract funding sources to serve its business

operations.

MB received savings deposits from corporates and individual customers via numerous

channels. Deposits that come from corporate clients through MB‟s sales network from CIB

division (Corporate, Institutional Banking Division), SME division (Small & Medium

Enterprises Division) and retail clients have all brought about favourable results. MB has a

diverse and flexible means of attracting deposits, which serves well to meet the diversified

needs of corporate and retail clients. During the years of 2008, 2009 and 2010, in the

middle of the financial crisis and amid fierce competition among commercial banks, MB‟s

deposit base continued to witness favourable growth rate (154% in 2008 compared to

2007; 153% in 2009 compared to 2008; and 164% in 2010 compared to 2009 and 103% in

the first six months of 2011 compared to 2010). A strong capability to consistently attract

customer deposits has helped MB tremendously in meeting the business exapansion needs

and in managing liquidity risk in a challenging situation of both Vietnam economy and the

global economy.

Figure 6: Funding base structure

Source

December 31, 2009 December 31, 2010 June 30, 2011

Value

(VND bil) %

Value

(VND bil) %

Value

(VND bil)

%

Loan from State

Bank of Vietnam 4,709 7.94% 8,769 9.04% 500 0.5%

Deposits and loans

from other credit

institutions

11,697 19.73% 16,917 17.4% 21,741 21.7%

Deposits from clients

(corporates and

individuals)

39,978 67.44% 65,741 67.8% 72,685 72.6%

Investment trust fund 475 0.80% 117 0.12% 177 0.2%

Commercial paper

issuance 2,420 4.08% 5,411 5.58% 5,059 5.1%

Total 59,279 100% 96,954 100%

100,162

100%

Source: MB



Along with developing and diversifying traditional deposit mobilization methods, the

launching of modern banking services such as cash-flow management, cash management

and financial advisory services of MB and its subsidiaries have brought to MB a crucial

stability in capital funding base.

MB strongly emphasizes the importance of attracting savings deposits from individual

clients as it is decisive component in stabilizing the capital sources of the Bank. Over the

past few years, MB has implemented and launched several modern retail banking utilities

and products for individual clients and has thus earned increasing trustworthiness and

credibility from this segment.

4.2.2. Lending activities

MB has achieved good growth in terms of both the number of clients and size of the loan

portfolio.

MB‟s credit approval process involves the Credit Committee (including senior executives)

and thus warrants that the credit approval activity is executed with the highest possible

quality. The Credit Committee serves all three main groups of clients (large enterprises and

financial entities; small & medium enterprises; and individuals) with the goal of evaluating

and making credit approval decisions according to its given authority as specified in each

period. MB has provided loans for corporates, institution and individuals with different

types and maturities, such as short-term, mid and long term credits, clean credit or

collateralized loans in various currencies… MB has funded major defense economic

projects through lending activities. Besides, MB has implemented credit financing

activities for customers such as large State owned corporations, small and medium

enterprises, household as well as individuals, who have needs for mortgage-back loans for

consumption or running business.

The average annual growth rate of number of credit clients during the three-year period of

2008 – 2010 is 15% per year. The value of total outstanding loans at 2008 year-end was

VND 15.740 billion (an increase of 35% compared to 2007); at year-end 2009 was VND

VND 29.588 billion (an increase of 88% compared to 2008); at year-end 2010 was VND

48.797 billion (an increase of 65% as compared to 2009) and as of the end of June 2011

was VND 54.100 billion (an increase of 11% as compared to 2010). The value of

outstanding loans to corporates and institutional clients accounts for over 80% of MB‟s

total outstanding loans.



Figure 7: The capital mobilization and lending activities

Source: MB

Figure 8: Loan portfolio by term

Type


Value

(VND mil) %

Value

(VND mil) %

Value

(VND mil) %

Total outstanding

loans 29,587,941 100% 48,796,587 100% 54,099,838 100%

Of which:

Short-term loans 15,756,724 53.25% 29,235,903 59.92% 34,701,783 64.14%

Mid-term loans 7,487,475 25.31% 10,102,472 20.70% 10,312,295 19.06%

Long-term loans 3,820,263 12.91% 5,943,530 12.18% 6,682,030 12.35%

Financial assistance

and Repos 2,523,479 8.53% 3,514,682 7.20% 2,403,730 4.44%

Figure 9: Loan portfolio by type of clients

Type


Value

(VND mil) %

Value

(VND mil) %

Value

(VND mil) %

Total loans 29,587,941 100% 48,796,587 100% 54,099,838 100%

Of which:

SOE and

institutions 5,100,904 17,24% 10,295,187 21,10% 11,588,167 21,42%



Private enterprises

and institutions 17,285,710 58,42% 27,519,277 56,40% 33,049,299 61,09%

Other institutions 318,112 1,08% 150,735 0,31% 82,077 0,15%

Individuals 4,359,736 14,73% 7,316,706

14,99%

6,976,566 12,90%

Financial

assistance and

Repo

2,523,479 8,53% 3,514,682 7,20% 2,403,730 4,44%

Figure 10: Loan portfolio by sector

Type


Value

(VND mil) %

Value

(VND mil) %

Value

(VND mil) %

Total loans 29,587,941 100% 48,796,587 100% 54,099,838 100%

Of which:

Agriculture and

forestry 1,752,875 5.92% 2,371,704 4.86% 2,485,544 4.59%

Mining 1,128,756 3.81% 1,524,714 3.12% 2,076,455 3.84%

Processing industry 5,546,332 18.75% 9,652,349 19.78% 12,979,882

23.99

%

Fuel and utilities 917,445 3.10% 3,556,825 7.29% 6,007,490

11.10

%

Construction 1,804,689 6.10% 3,839,417 7.87% 4,183,134 7.73%

Commerce, motor

vehicles, consumer

goods

5,564,390 18.81% 9,769,661 20.02% 9,017,104 16.67

%

Hotels and

restaurants 88,852 0.30% 107,148 0.22% 290,215 0.54%

Transportation and

information –

telecommunications

4,010,695 13.56% 4,792,738 9.82% 4,867,852 9.00%

Asset management

and advisory services 1,063,682 3.59% 1,612,481 3.30% 1,757,058 3.25%

Community service 135,622 0.46% 319,650 0.66% 269,041 0.50%

Other industries 691,388 2.34% 418,512 0.86% 785,767 1.45%

Personal loans 4,359,736 14.73% 7,316,706 15.00% 6,976,566 12.90



Type


Value

(VND mil) %

Value

(VND mil) %

Value

(VND mil) %

%

Financial assistance

and Repo 2,523,479 8.53% 3,514,682 7.20% 2,403,730 4.44%

Corporate and institutional clients

MB has provided funding to various economic corporations and companies to undertake

important projects. These include: Tan Cang Sai Gon Corporation, Military

Telecommunications Corporation (Viettel), Vietnam National Petroleum Corporation,

Vietnam Coal and Mineral Corporation (TKV), Song Da Corporation, Energy projects of

National Power Transmission Corporation, Vietnam Helicopter Corporation, Northern /

Central regions power project management unit, etc.

Through funding key national projects and development projects in fundamental, essential

industries of the country, over the years MB has significantly contributed to Vietnam‟s

economic development in general and the success of its clients in particular.

In implementing business strategies as approved by the Board of Directors, in addition to

the large enterprise market segment, MB has increasingly developed strategies for SME

clients in order to exploit to the full extent abundant economic resources and potential, as

well as diversify risks arising from MB‟s credit activities. MB has been providing products

and services such as funding for renewing and upgrading of taxi fleet for Mai Linh Taxi

Corporation, ABC Taxi Corporation, etc; provide working capital for clients with a

nationwide presence in various industries such as telecommunications, distribution, food,

household goods, consumer products, etc.

MB has continually improved the export funding programs for some of Vietnam‟s most

popular export goods, most notably agricultural products produced by Tay Nguyen Coffee

Corporation, Northern Food Corporation – Vinafood 2, Intimex, etc. In addition, MB has

taken initiatives to cross-sell products and services with MB‟s strategic partners in order to

capitalize the strengths of each party and achieve maximal synergies. Some notable

products are: selling Viettel e-services, which provides synchronized information

technology and telecommunications for MB clients that are also Viettel‟s clients or share

Viettel‟s brands; the bill payment service by MB designated for clients of Tan Cang Sai

Gon Corporation; the Bancassurance product, a joint cross sale program with Military

Insurance Company. MB is also in the process of developing more joint-products in the

field of oil & gas, telecommunication, distribution, and tax collection through partnership

with the Customs Department and the State Treasury Department.



In order to excel in granting credit to clients, MB has established a range of credit products

and services to support corporate clients, including:

Funding projects in fields of energy, oil & gas, ports, etc.;

One time loans or revolving credit lines;

Discounting the export documentation;

Overdraft facilities;

Factoring based on discounting local receivables portfolio;

Loans backed by inventories and receivables; and

Loans to support equitisation of State owned enterprises, etc,

Individual clients

In order to best serve the diverse needs of individual clients, MB has built and

continuously improved of the range of retail products and services, which are flexible and

convenient for retail clients. These include:

Auto loan financing;

Loans for study and work overseas;

Mortgage loans to buy homes and project land;

Loans for securities trading;

Discounting of proceeds from selling securities;

Loans to buy shares under equitisation programs;

Loans for small business operations;

Overdraft facilities;

Personal clean loans (no collaterals); and

Loans backed by valuable papers, etc,

MB‟s retail clients are categorized and are considered to be supportive to MB‟s

development strategies. The credit extension to retail clients at MB is executed with

prudence and under strict supervision, involving conditions that clients have to fulfill in

terms of financial standing, business experience, personal ethics, etc, according to MB‟s

credit policies. Over the last few years, MB has witnessed high growth in terms of both the

number of clients and loan value: the outstanding retail loans account for 15% - 20% of

MB‟s total loan portfolio. The year-end 2007 value of retail loans was VND 2,401 billion,

year-end 2008 value was VND 2,141 billion; and year-end 2009 value was VND 4,360

billion (increase of 104% of the year-end 2008). As of December 31, 2010, the retail loans

were VND 7,317 billion, an increase of 68% over 2009 year-end. As of June 30, 2011, the

retail loans were VND 6.977 billion (a slight decrease of 5% compared to 2010 year-end).



Quality of loan portfolio

MB recognizes that the development and growth in size of loans must be based on the

principle of ensuring the highest possible credit quality. MB‟s loan portfolio is constantly

under strict supervision. In past years, MB has managed to maintain the loan portfolio at a

good quality, managed bad loans and kept the ratio of non-performing loans (NPL) under

2% of total loan portfolio. By creating a standardized system of credit-granting procedures,

credit assessment, credit approval and disbursement, credit contract forms, MB became the

first commercial bank approved by the State Bank of Vietnam to use an internally

developed credit rating system, including loan classification and quantitative debt

provisioning methods. The system has helped MB tremendously in implementing a risk

management system that is professional and conforms to international standards.

Figure 11: Loan portfolio by quality grades and NPL

Category

December 31,

2009

(VND mil)

December 31,

2010

(VND mil)

June 30,

2011

(VND mil)

Pass 25,778,282 44,043,228 49,547,811

Special-mention 818,438 625,506 1,359,045

Substandard 213,354 124,717 80,071

Doubtful 77,025 71,005 212,599

Loss 177,363 417,449 496,582

Financial assistance and Repo 2,523,479 3,514,682 2,403,730

Total loan portfolio 29,587,941 48,796,587 54,099,838

NPL ratio 1.58% 1.26% 1.46%

Source: MB

Loan loss provisioning

In accordance with Decision 493/2005/QĐ-NHNN issued by the State Bank of Vietnam,

credit institutions must make loss provisions, including specific provision and general

provision.

Loss provisions are determined according to certain percentages matching their respective

loan categories after subtracting value of collaterals.

Figure 12: Loan loss provisioning rate

Group Category Provision percentage

1 Pass 0%

2 Special-mention 5%



Group Category Provision percentage

3 Substandard 20%

4 Doubtful 50%

5 Loss 100%

6 Financial assistance and Repo Subject to regulations

Source: MB

General provision

Credit institutions must set aside and maintain an amount of general provision equal to

0.75% of the total value of outstanding loans in categories 1 through 4, guarantee items,

letters of credit (L/C) and irrevocable unutilized credit commitments.

Figure 13: Loan loss provisioning amounts

Year/period Specific allowance

(VND mil)

General allowance

(VND mil)

Total allowance

(VND mil)

December 31, 2009 257,199 393,370 650,569

December 31, 2010 425,927 453,468 879,395

June 30, 2011 659,753 622,639 1,282,392

Source: Financial statements for 2009, 2010 and first half 2011 of MB

Adhering to prudence principles and the goal of warranting a healthy and controllable loan

portfolio, in addition to keeping NPL at a maximum of 2% of total outstanding loans, MB

also sets aside sufficient reserves in anticipation of the worst case scenario when risk

events occur. In fact, MB has always maintained allowances in excess of the possible value

of bad debt.

In accordance with Decision 493, since May 2010, credit institutions have had to set aside

reserve equal to 0.75% of the outstanding loans for general provision. MB had complied

with the general provision requirement by the State Bank of Vietnam since December

2009.

4.2.3. Bank guarantee

MB provides a wide range of bank guarantee services, such as bid bond, performance

bond, advance payment guarantee, guarantee for warranty obligations, payment guarantee,

tax payment guarantee, product quality guarantee, etc. MB‟s revenues from guarantee

activities in 2009 were VND 111 billion, an increase of 45% compared to 2008 (VND 76

billion) and equal to 2.4 times of the 2007 figure (VND 46 billion). In 2010, MB‟s



revenues generated from guarantee activities reached VND 209 billion, an increase of 88%

compared to 2009. In 6 first half of 2011, this figure is VND 189 billion.

MB‟s bank guarantee services have significantly contributed to MB‟s sources of income

and have been efficient and prudent without any substantial risk events, Among domestic

commercial joint stock banks, MB is one of the few with the highest revenues generated

from bank guarantee operation since MB has a diverse client base operating in a large

number of industries with high demands for bank guarantee services. Moreover, MB

possesses the financial capacity and credibility to win business from beneficiaries of these

guarantees.

4.2.4. Payment services

Domestic payments

MB offers a domestic payment service via its network of transaction offices, ATM

machines, e-banking system and agreements with other banks that gives MB clients access

to their payment networks. Specifically, MB provides services such as domestic payment,

transaction account management for deposit withdrawals, balance management and other

account management services. MB has strived to improve technologies and service quality

to meet clients‟ rising expectations. MB has established a Payment Center at its

Headquarter and gradually established international payment centers in several regions and

local branches in order to ensure payment services are accessible, efficient to clients all

over the country in a timely manner. MB has put in place procedures on payment

processing, reward and penalty policies for its tellers as well as a rating system for its

branches to monitor and encourage higher quality services.

International payments

MB‟s network of over 800 correspondent banks all over the globe means that its

international payment services are effective, timely and well-respected by its partners. In

the years of 2006, 2007 and 2008, MB consistently received the “Excellent international

payment services” award from Citigroup. In 2007, MB also earned the “Excellent

international transaction services” award from HSBC. In 2008 and 2009, MB was granted

the “The Recognition Award For Achieving a Highly Success Rate for Electronic

Payment” from Wachovia N.Y.

In 2010, although there was a drop in export and import activities, MB‟s international

payment services still experienced solid growth compared to the previous year. By the end

of the year, the total value of MB‟s international transactions was equal to USD 5,3 billion,

an increase of 71% from 2009. Fees generated from these international transactions reached

VND 83 billion, a rise of 7% year-on-year. Fees generated from these international

transaction of 6 months of 2011 also attained VND 38 billion, an increase of 12,6% from

previous period.

The international payment services that MB offers include:

Barter transaction payments;

Overseas outward remittance;



Overseas inward remittance;

Documentary Collection including Documentary Collection Against Payment (D/P)

and Documentary Collection Against Acceptance (D/A), where MB acts as the

collecting bank and transfer documents;

Issuing export letter of credit with services including Advising and Amending L/C,

Discounting L/C or Confirming L/C;

Import letter of credit;

Discounting bills from export letter of credit; and

International guarantee issuance.

4.2.5. Money Market and Forex trading

With many partners that are banking and non-banking financial insitutions both in and

outside of Vietnam, MB is an active player in the monety market.

Trading in the money market helps MB utilize effectively its sources of capital while

managing liquidity and earning a reliable income stream. The Bank‟s outstanding short-

term MM as of December 31 of the years 2007, 2008, 2009 and 2010 are VND 12 trillion,

VND 11 trillion, VND 14 trillion and VND 34 trillion, respectively. This figure as of June

30, 2011 reached VND 33 trillion.

In the area of trading valuable papers, MB has taken full advantage of times when the

discount rate for Treasury bonds was at very high levels to make sound investment

decisions. As a result, high-return Treasury bonds make up a large proportion in MB‟s

bond portfolio while MB can flexibly use these bonds for borrowing from open market

operations with the State Bank when necessary.

Derivative products like forex swaps, cross currency swaps, forex options, forex forwards

and interest rate swaps are offered by MB for corporate clients in hedging their own risks.

In 2010, with an expanded transaction network and higher client demands, MB has

expanded its full range of foreign exchange services for institutional and individual clients.

Institutional and corporate clients use foreign exchange services for international payment,

debt payment and crossborder investment while individual clients use foreign remittances,

money transfer for overseas studying, travelling and hospital payments, etc.

MB handles transactions with almost all major currencies such as USD, EUR, GBP, JPY,

HKD, AUD, SGD, and CHF, etc via a reciprocal currency, usually VND or another foreign

currency. Exchange rates offered to clients are kept at competitive levels, helping win

trustworthiness among key clients.

Beside its competitive advantage of trading foreign currencies with clients, MB is one of

the largest player in the interbank market. From 2007 until now, MB has been rated by the

State Bank of Vietnam as one of the few banks that possess trading and risk management

systems to international standard and one that has significant influence on Vietnam foreign

exchange market. MB has been well-respected locally and internationally as demonstrated



by the Bank‟s partners continually increasing its forex trading limits with the Bank while

there is a perception in higher risk in Vietnam economy.

The Bank‟s foregin exchange products include spot contracts, forward contracts, forex

swaps, cross currency swaps and forex options. The total value of trading volume increased

steadily over the years. Specifically, total value of transaction volume was USD 3.6 billion

in 2008; USD 4.7 billion in 2009 (an increase of 131% compared to 2008); USD 6.27

billion in 2010 (an increase of 33% compared to 2009). For the first half of 2011, this

figure was USD 5.6 billion.

In order to obtain these achievements, MB‟s foreign exchange operations have been based

on these critical factors:

Knowledge, experience and ethics of MB‟s employees and staff;

Strict processes and procedures for handling foreign exchange transactions and

appropriate risk management; and

A modern and synchronized interbank transaction system.

In 2009, MB was honorned to be one of the only few banks granted with special license

from the State Bank of Vietnam to provide commodity derivatives for clients.

4.2.6. Card services

In 2004, MB started offering the debit card Active Plus for its clients. This product has

important features such as payment through POS, money transfer via ATM, and personal

insurance for card owners. The Bank successfully established connections with the card

union system Smart Link, enabling clients to complete transactions from any ATM

machine within the card alliance. MB has also officially become a member of Master.

Regarding the Visa Card project, MB succeeded in launching an internal payment system

on December 27, 2010.

As of June 30, 2011, MB had issued in total of 398,500 cards; established 1,328 POS and

installed 327 ATM machines. Since early 2011, the Bank has also launched the Visa Card

and Master Card international credit card programs.

4.2.7. Investment activities

4.2.7.1. Investment strategies

MB‟s investment strategies, as approved by the Board of Directors, focus on investing in

the capital market and enhancing the capacity of the Bank‟s subsidiaries; increasing

strategic cooperations with large shareholders and potential partners, aiming to diversify

sources of revenues, take advantage of high-return investment opportunities, improve uses

of shareholders‟ equity, and develop the Bank‟s infrastructure.

MB‟s main investing activities include:

Investments in capital markets;

Enhancing the capacity of subsidiaries; and



Developing human resources, building offices, facilities, infrastructure and technology

systems for the Bank.

MB centralizes the investment operations at the Headquarter. MB‟s investment operations

are executed in compliance with regulations specified by the State Bank of Vietnam and

resolutions from the shareholders meetings on investing with shareholders‟ equity. The

Bank‟s subsidiaries engage in investing activities in fields of securities, portfolio

management, debt trading and asset exploitation, real estate, etc, in accordance with

regulations in each respective industry.

4.2.7.2. Capital investment activities

As of June 30 2011, the total value of MB‟s investment portfolio was estimated at VND

20,665 billion, in which:

Held to Maturity and Available for Sale securities: VND 18,828 billion; and

Strategic investments and long-term joint venture capital contribution: VND 1,837

billion.

Figure 14: Investments in financial markets as of June 30, 2011

Source: MB

Investments in financial markets

Investing in financial markets constitutes the major investing activities of MB, including

investing in Debt, Equities at MB level and proprietary trading at its subsidiaries.

The securities investment portfolio accounts for 91% of the entire investment portfolio,

consisting of mainly of debt instruments (including valuable paper such as government

bonds, treasury bonds, bonds issued by credit institutions and economic institutions, etc,

and other debt instruments).

Securities investment also include proprietary securities trading at subsidiaries, mainly

conducted by TLS and MB Capital. Trading securities is maintained a small weight of the

total portfolio‟s capital.

Long-term capital contribution



As of June 30, 2011, the Bank‟s long-term and joint venture capital portfolio reached a

value of VND 1,837 billion and had been a portfolio with proper risk management and

profitability potential. The current structure of investments by industry of MB has been

maintained according to original targets and shareholders capital plans approved by the

Annual General Shareholders Meeting.

MB‟s long-term and joint-venture capital contribution projects focus especially on the

following industries: finance and banking, energy, telecommunications, sea port

infrastructure, banking human resources training and development, etc. MB has contributed

long-term capital to high-potential, profitable projects that also promise opportunities for

coopearation and enhancing banking products and services. These projects include: ICD

Long Binh seaport exploitation project, Tan Cang – Cai Mep seaport, Thai An

hydroelectric power plant, Hua Na hydroelectric power plant, Viettel postal services, etc. In

addition, MB has been actively involved in strategic investments and foundations of some

reputed financial institutions such as: Military Insurance Joint Stock Company, Song Da

Financials, Handico Financials, Vinaconex – Viettel Financials, etc.

Through joint-venture investment operations, MB obtains opportunities to access

promising investment projects and collaborate on a deeper level with strategic partners

such as: Song Da Corporation, Tan Cang Sai Gon Corporation, Military

Telecommunications Corporation (Viettel), Vietnam Coal and Mineral Corporation (TKV),

Petro Vietnam, Vietnam Helicopter Corporation (SFC), Vietnam Construction, Export and

Import Joint Stock Corporation (Vinaconex), Hanoi Construction Corporation, etc, in order

to utilize to the full extent benefits of these cooperation relationships, share investment

opportunities, and provide financial product and service packages, etc.

Risk management and securities price allowances

MB strictly adheres to regulations regarding limits and industry restrictions on investments

issued by the State Bank of Vietnam and relevant legal regulations. MB‟s investment

portfolio is periodically and frequently evaluated, and much attention is paid to investment

risk management activities and provision for losses. As of June 30, 2011, total value of the

provision account for the entire portfolio was VND 850 billion.

4.2.7.3. Investments in properties, plants and equipment

Investments in properties and facilities

MB sets aside an appropriate portion of its budget for the development of MB‟s network of

offices in cities, provinces and key urban regions all over the country, serving the goal of

expanding operations and improving customer service capabilities.

As of June 30, 2011, MB invested over VND 1,096 billion into real estate infrastructure

development projects. According to its infrastructure development plan for 2010 and

following years, MB targeted robust development in real estate infrastructure for MB‟s

offices in Hanoi, Ho Chi Minh city and other key economic regions in the country, using a

budget of VND 1,000 billion – part of the shareholders‟ equity usage plan dedicated for

capacity improvement.



4.3. Business operations development projects in progress

Aiming to further develop its business operations, MB has continually conducted projects

pertaining to construction investments and information technology system investment as

detailed below:

Figure 15: Office construction and office improvement projects

No. Project Area / Scale

Projected

completion

date

Project progress and

plans

1

Construct, overhaul

and develop 50

transaction outlets

December 31,

2011

Currently renovating and

developing 50

transaction outlets

2

Complete Office

Building at No. 538

CMT8 street, District

3, HCM city

+ Ground area:1,004

m2;

+ 12 stories and 2

underground floors

+ Total construction

area: 6,565 m2

2011

Completed, about to go

into operations staring

Q2 2011

3

Construction of MB‟s

main office at No, 21

Cat Linh, Dong Da,

Hanoi

+ Ground area:

2,384 m2

+ 18 stories and 3

undergound floors


area 25,058 m2

Q1 2012

Finished basic

framework, currently

completing

4

Construction of MB

office in HCM city –

MB Sunny Tower at

No, 259 Tran Hung

Dao – District 1 –

HCM city

+ Ground area:

1,424 m2

+ 22 stories and 2

underground floors


area: 21,000 m2

Q3 2012

Drilling foundation

piles, about to construct

underground floors

5

Development of MB

Viet Tri main office

at No.1596 Hung

Vuong avenue, Viet

Tri, Phu Tho province

+ Ground area:

3,110 m2

+ 5 floors (tentative)

Q4 2012 Pre-investment stage

6

Construction of Can

Tho branch and rental

office at No. 77 Vo

Van Tan, Ninh Kieu,

Can Tho city

Overhaul area: 592

m2

2012

Renovate and

development the office

in 2012



No. Project Area / Scale

Projected

completion

date

Project progress and

plans

7

Construction of Bac

Ninh branch and

rental office on Ly

Thai To street, Ninh

Xa, Bac Ninh city

+ Ground area 6,225

m2

+ 11 stories and 1

underground 1 floor

2013 Pre-investment approval

stage

Source: MB

Investment projects in IT system

With its competitive advantage of being a pioneer in developing information technology

and with the goal of bringing to clients the best services in a timely manner, MB has

consistently conducted investment projects in information technology serving banking

operations. These projects are currently in progress with investment values of tens of

millions USD, and once completed will significantly improve the capacity, customer

service as well as risk management capabilities of MB.

The data center upgrade and reserve center project: MB has been actively executing

this project with technology standards and modern facilities provided by the world‟s

leading firms, with two major goals in mind: upgrade the main data center (DC) at the

Headquarter in order to improve the capacity of the server system and the data storage

system, ensuring adequate infrastructure for the next five year period of MB. The

investment capital required for 2010 was approximately USD 10 million. Starting

December 20 2010, the T24 system has been officially been run on the brand new

server environment. The system was currently assessed to be efficient, substantially

improving transaction processing speed, as well as increasing utility for users and

clients;

The T24 software upgrade project: The R10 version (the latest version) provided by

Temenos will bring to MB‟s clients convenience and utility in service, improve

security measures, increase transaction processing speed and offer CRM features;

The GL project (Financial and Managerial accounting software): the software

provided ORACLE will be the basis for managerial accounting, improving the

financial management capacity of MB;

Data storage – Data Warehouse: this intelligent data processing system is the system-

wide common data storage center of MB. Its main function is to store data from

multiple sources and create reports that fulfill legal regulations and administrative

requests of the Bank;

Data reserve center: constructed under rigid standards, the reserve center will serve

MB‟s continuous operations purposes even under unexpected unfavorable events such

as floods, disasters and diseases. At the same time, the reserve center enables the



processing of back office operations such as reports, tracking, audit and other

activities.

5. Financial performance

5.1. Business operations results

Figure 16: Business operations results

Descriptions 2009

(VND mil)

2010

(VND mil) % change

First half 2011

(VND mil)

Total assets 69,008,288 109,623,198 58.86% 115,181,592

Revenues 5,460,364 10,789,083 97.59% 7,623,424

Earnings before tax 1,505,070 2,288,071 52.02% 1,088,376

Earnings after tax 1,173,727 1,745,170 48.69% 720,840

Figure 17: Financial performance KPI

Descriptions 2009

(VND mil)

2010

(VND mil) % change

First half

2011

(VND mil)

1. Capital

- Chartered capital 5,300,000 7,300,000 37.74% 7,300,000

- Total assets 69,008,288 109,623,198 58.86% 115,181,592

2. Business results

- Deposits 20,261,198 29,188,163 44% 6,822,233

- Loans 69,829,709 113,235,174 62.15% 72,603,120

- Receivables collected 57,008,443 93,702,261 64.37% 66,551,359

- Overdue loans 1,286,180 1,238,677 -3.69% 2,148,297

- NPL 467,742 613,171 31.09% 789,252

- Percentage of guaranteed

loans overdue/Total

outstanding guaranteed

loans

0.00% 0.00% - 0.00%

- Percentage of overdue

loans / total outstanding

loans

4.35% 2.54% - 3.97%.

- Percentage of NPL / total

outstanding loans 1.58% 1.26% - 1.45%



Descriptions 2009

(VND mil)

2010

(VND mil) % change

First half

2011

(VND mil)

- Profitability ratio

-

ROA 2.66% 2.56% - -

ROE 26.60% 29.02% - -

3. Payment capability

- Payment capability in the

next seven days

(According to Circular 13)

o In VND (times) N/A 1.26 - 1.38

o In USD N/A 1.31 - 1.54

o In EUR N/A 1.6 - 3.31

- Quick ratio (According to

Decision 457) 185 % N/A - N/A

- Immediate repayment

capability (According to

Circular 13)

N/A 21% - 26%

- Current ratio (within one

month) (According to

Decision 457)

135% N/A - N/A

Notes: Regarding to liquidity of the Bank. Decision 457/2005/QĐ-NHNN issued on April 19 2005

stipulates prudential ratios of credit institution including quick ratio and current ratio as measure

of liquidity. Circular 13/2010/TT-NHNN issued on May 20. 2010 by the State Bank of Vietnam

replaced these quick ration and current ration by immediate repayment capability and payment

capability in the next seven days for each currency.

Figure 18: Profitability and capital adequacy ratios

No. Target 2009 2010

1 Earnings before tax/Average shareholders equity 26.60% 29.02%

2 Earnings before tax/Average total assets 2.66% 2.56%

3 Capital Adequacy Ratio (CAR) 12% 11.6%



5.2. Factors that affected MB’s business operations results during the reported period

The Vietnamese economy has recovered from the recession and re-gained economic growth.

The real GDP growth rate in 2010 was 6.78%, higher than the Government‟s target. The CPI

index rose by 11.75% y-o-y. Although the economy achieved its target in terms of economic

growth, which boosted the recovery of the banking industry. Vietnam‟s GDP growth is not yet

sustainable with many macroeconomic imbalances and instabilities: high inflation, soaring

public debt and widening budget deficit; trade deficit has yet to see improvement.

Stepping into 2011, from the starting year to September, the macro economy has significantly

unexpected changes, especially, with inflation rate, medium-level growth rate, banking system

was inevitably affected because of tightening monetary policies to control high inflation rate.

As of June 30. 2011, the CPI index has increased approximately 17% compare to the end of

2010 while the GDP growth rate is only 5.57% in the first 6 months of 2011. In addition to

monetary policies, the State Bank of Vietnam has utilized administrative solutions such as

controlling credit growth in 2011 of 20%, putting limits on the percentage of loans for non-

production fields, etc.

The Government‟s interest rate subsidies policy (initiated during 2009) ended on December 31

2009, and thus has significant impact on businesses. In a situation where the economy just

started recovering, businesses were still in weak conditions. The ending of the stimulus policy

and the subsequent rapid increase in interest rates in 2010 put many businesses in jeopardy;

risk of defaulting on bank loans surged. In 2010, the credit quality of Vietnam banks was also

heavily influenced by the incident of Vinashin. According to reports by the State Bank of

Vietnam, Vinashin‟s bad debt has contributed to increasing the overall bad debt ratio of the

banking industry by 0.7%. This has affected negatively the banking sector in general and MB

in particular. The annual credit growth limit of 20%, together with high level of interest rate

have created obstacles to enterprises in accessing credit financing.

In 2010, monetary policies witnessed several unexpected changes, substantially affecting

banking activities. In the first ten months of 2010, monetary policies were loose as

demonstrated by low interest rates to support economic recovery. However, in the face of

deteriorating inflation conditions, the State Bank of Vietnam abruptly tightened monetary

policies starting November 2010 (base interest rates rose to 9% since November 5 2010).

Deposit mobilization of banks, already difficult, got even more difficult in the last few months

of the year. Banks rushed to raise deposit interest rates, at some point reaching a peak of over

17% / year, leading to higher lending interest rates. Banks‟ interest rate margins narrowed,

negatively affecting the safety of the entire system and the profitability of banks.

Stepping into 2011, the financial market in general and the monetary market in particular have

more significant unexpected events and bringing much more risks for bank system. This is

especially threatening liquidity of commercial bank under higher inflation circumstance when

the Government used a range of solutions to control inflation and gave the goal of reining in

inflation as the overriding priority over growth. Monetary market has seen complicated



developments in the first six months in 2011 with an extraordinary increase in interest rate and

high volatility in foreign exchange.

Since February 2011, tightening monetary policies have been implemented and are expected to

be maintained until at least the end of 2011. During the first six months of 2011, the following

tools of the monetary market to control inflation have been applied:

Legal documents Effective date Descriptions

11/02/2011

Increase average interbank exchange rate. reduce

trading band from 3% to 1%, apply more flexible

exchange rate administration mechanism.

271/QĐ-NHNN 17/2/2011 Raise re-discount interest, interbank interest in clearing

settlement activities to 11% p.a.

2/2011/TT-NHNN 3/3/2011

Impose cap on deposit interest on credit institutions of

14% p.a. (including promotion bonus) and 14.5% p.a.

for credit funds (compound interest)

379/QĐ-NHNN 8/3/2011 Increase discount interest from 7% p.a. to 12% p.a..

rediscount interest from 11% p.a. to 12% p.a.

692/QĐ-NHNN 1/4/2011 Increase rediscount interest rate. overnight borrowing

in e-payment and clearing settlement to 13% p.a.

09/2011/TT-

NHNN 13/9/2011

Impose a cap on deposit interest rate from economic

institutions in USD of 1% p.a. and 3% p.a. for

individuals

929/QĐ-NHNN 1/5/2011

Increase rediscount interest to 13% p.a.. refinancing

interest. interbank interest for interbank settlement to

14% p.a.

11/2011/TT-

NHNN 1/5/2011

Stop to deposit and lending of gold of credit

institutions

750/QĐ-NHNN 1/5/2011

Raise compulsory reserve requirements (CRR) on

foreign currencies by 2% to 6% and 4% for term

deposits in foreign currencies over and under 12

months

1209/QĐ-NHNN Kỳ tháng 6

Raise compulsory reserve requirements (CRR) on

foreign currencies by 1% to 7% and 5% for term

deposits in foreign currencies over and under 12

months



Legal documents Effective date Descriptions

14/2011/TT-

NHNN 2/6/2011

Impose a cap on USD deposits of 0.5% p.a. for

corporate clients and 2% p.a. for individual clients

Source :MB

The foreign exchange market in 2010 experienced strong volatility, with the average interbank

rates increasing twice by a total of 5.5% compared with 2009 year-end. The issue of dual

exchange rate system still prevailed and got even more serious.

Stepping into 2011, after devaluing VND by 9.3% versus USD on February 11 and with other

solutions of the State Bank of Vietnam, the foreign exchange market tends to be stable. In

second quarter of 2011, the gap in foreign exchange rate between illegal market and the bank is

narrowed. In the two recent months, the exchange rate in black market is even lower than the

official rate. From July 1 2011, legal entities that are required to sell foreign currencies to

banks was expanded. In addition to the Group of seven large State owned corporations, the

companies, in which the State owns more than 50% of chartered capital are also required to sell

foreign currencies to banks. This has contributed to an increase foreign currencies supply in the

market and help increase the Government‟s foreign currency reserve.

Amidst difficulties in the banking industry and ever stiffer competition, MB has taken

initiatives to devise solutions to counter these difficulties and put efforts to improve

business performance, achieve stable growth and meet business performance target. During

the 2007 – 2010 period, MB‟s total assets and shareholder‟s equity grew steadily at a

reasonably high speed by 70% and 66% y-o-y respectively. Deposit from clients (including

client deposits and valuable papers) increased by 71% while loans to customers also rose

by 71%.

The Bank‟s capital adequacy ratio at the end of 2010 was 11.6%, much higher than the

minimum level of 9% set by the State Bank of Vietnam. The Bank‟s NPL ratio was always

kept lower than 2%. Specifically, this ratio was 1.26% in 2010 and 1.46% at June 30. 2011.

MB has always set aside adequate credit risk allowances in compliance with regulations of

the State Bank of Vietnam. In terms of revenues, MB‟s total operating revenues increase on

average by 71% y-o-y over the last three years. Stringent cost controlled to average pretax

income growing faster than revenues at 81% y-o-y. Especially in 2010, pretax income of

the Bank reached VND 2.288 billion, an increase of 52% compared to 2009 and 14%

higher than the initial target. During the first 6 months of 2011, pretax income of the Bank

reached VND 1,088 billion.

5.3. Fixed assets

5.3.1. Tangible fixed assets

Figure 19: Summary of tangible fixed assets as of June 30. 2011



Descriptions Historical cost

(VND mil)

Accumulated

depreciation

(VND mil))

NBV

(VND mil)

Properties and facilities 150,244 17,085 133,159

Equipment 358,563 238,402 120,161

Transportation vehicles 164,865 77,769 87,096

Other fixed assets 35,454 18,321 17,133

Total 709,126 351,577 357,549

Source: Consolidated financial statements the first 6months of 2011 of MB

Figure 20: Summary of tangible fixed assets as of December 31. 2010


(VND mil)

Accumulated

depreciation

(VND mil))

NBV

(VND mil)

Properties and facilities 73,335 15,119 58,216

Equipment 306,152 203,014 103,138

Transportation vehicles 152,032 64,787 87,245

Other fixed assets 29,284 14,526 14,758

Total 560,803 297,446 263,357

Source: Audited consolidated financial statements 2010 of MB

5.3.2. Intangible fixed assets

Figure 21: Summary of intangible fixed assets as of June 30 2011


(VND mil)

Accumulated

depreciation

(VND mil))

NBV

(VND mil)

Land ownership rights 751,655 11,700 739,955

Technology system software 171,660 84,246 87,414

Other intangible assets 277,311 - 277,311

Total 1,200,626 95,946 1,104,680

Source: Consolidated financial statements the first 6 months of 2011 of MB

Figure 22: Summary of intangible fixed assets as of December 31 2010


(VND mil)

Accumulated

depreciation

(VND mil))

NBV

(VND mil)



Land ownership rights 653,155 4,692 648,463

Technology system software 98,279 63,883 34,396

Other intangible assets 277,311 0 277,311

Total 1,028,745 68,575 960,170

Source: Audited consolidated financial statements 2010 of MB

5.3.3. Land ownership rights as of June 30 2011

Total land area directly managed and used by MB: 7,460 m2

Total land area managed and used by MB‟s subsidiaries: 557,057m2

Figure 23: Land and investment real estate ownership rights of MB as of June 30 2011

No Asset name.

address Area (m

2)

Duration

(years) Purpose Notes

1

Land in Quang

Ninh (Hung

Thang ward –

Quang Ninh)

1,572 50 years Hotel construction Land use right

certificate obtained

2

Land in Hai

Phong (No. 6

May To Hai

Phong)

1,000 Long-

term

Main office of

Hai Phong branch

Land use right


3

No. 3 Lieu

Giai. Ba Dinh.

Hanoi

1,500 Long-

term Office and garage

Land use right


4 Land at 21 Cat

Linh 2,384 50 years Office

Land ownership right

license obtained

5

No. 538

CMT8.

District 3.

HCM City (*)

1,004 50 years Office for

Southern region

Land use right


6

77B Vo Van

Tan. Can Tho

province

592 Long

term

Office of MB in

Can Tho city Managed by AMC

7

My Dinh I

urban region.

Tu Liem.

Hanoi

4,435 50 years

commercial office

and apartment

complex in My

Dinh urban region

Managed by AMC

8

No. 08 Hung

Vuong street.

Loc Tho

ward.Nha

1,751.40 Long-

term

Hung Vuong

project – Nha

Trang

Managed by AMC



Note: (*) The above assets are still in investment stage and have not yet been recognized as the

Bank’s fixed assets.

In addition to the above land and facilities ownership rights. the Bank is executing projects

to construct and renovate offices (as mentioned in Figure 15 under the “Investment

Trang city

9

Land piece No.

2432. Map #01

Phu Thu ward.

Cai Rang

district. Can

Tho city

2,959.50 Long-

term

Cai Rang project

– Can Tho Managed by AMC

10

No. 90/1 Luy

Ban Bich. Tan

Phu district.

HCM city

10,712 50 years

Apartment

complex project

90/1 Luy Ban

Bich. Tan Phu.

HCM city

43% managed and

used by AMC

11 Everville-Binh

Tan 50,477

Long

term

Apartment and

urban residential

Everville. Binh

Tan District.

HCM city-

9blocks apartment

CT 45

50% managed and

used by AMC

12 Me Tri. Tu

Liem. Hanoi 16,000 50 years

Luxury residential

apartment

complex project

Golden Palace –

1000 apartments

60% managed and

used by AMC and

MB Land

13

No. 6-8 Chua

Boc. Dong Da.

Hanoi

9,825.70 50 years

Commercial. hotel

and office

complex MB

Land Tower

Managed by MB

Land

14

Long Thanh

district. Dong

Nai

450,253 50 years

Infrastructure

investment. An

Phuoc urban

region – Long

Thuan Loc

45% managed and

used by MB Land

15

4 land pieces

No. A1- Nam

Cam Le

Residential

area. Da Nang

30,296 Long

term

Nam Cam Le

residential area.

Hoa Vang.

Danang

Managed by AMC

Source: MB



Activities" section). These projects and buildings will be put into operation upon

completion and will increase the Bank's fixed assets.

5.4. Tax liabilities

Corporate Income Tax

In 2010. the Bank and its subsidiaries are obliged to pay Corporate Income Tax (CIT) at

the rate of 25% of total taxable income.

Figure 24: Corporate income taxes payable

No. Item 2009

(VND mil)

2010

(VND mil)

First half 2011

(VND mil)

1 Taxable income 1,369,403 2,186,009 1,062,803

The Bank‟s CIT expenses 298,926 516,192 359,207

Subsidiaries‟ CIT expenses 32,417 35,203 8,775

2 Income taxes 331,343 551,395 367,982

Adjustment according to 2008 final

tax statement 210 50 2,361

CIT payable at the beginning of the

year 71,755 149,345 260,932

CIT paid during year (253,963) (439,841) (400,474)

Adjustments 0 (17) -

3 CIT payable at the end of the year 149,345 260,932 230,801

Source: Audited financial statements in 2009. 2010 and the first 6 months of 2011 of MB

Other taxes and expenses

In addition of corporate income taxes. MB must also pay:

Value-added tax at tax rate 10% on the added value portion of goods and services that

arises during the course of business operations. excluding credit activities. securities

trading. capital transfer. etc. as specified in value-added tax laws; and

Other taxes including: regular / irregular personal income tax. foreign contractor tax.

etc. The tax rate for each type of tax is applied according to regulations of the Ministry

of Finance.

Figure 25: Other tax expenses payable

No. Tax type 2009

(VND mil)

2010

(VND mil)

First half 2011

(VND mil)

1 CIT 331,553 551,445 367,982



2 Value-added tax 23,728 43,820 17,717

3 Other taxes 20,529 137,035 48,272

Total 375,810 732,300 433,971

Source: Audited financial statements in 2009. 2010 and the first 6 months of 2011 of MB

Since its inception, MB has always fulfilled its tax obligations, contributing to the national

budget trillion of VND. In 2009 and 2010 alone, MB paid VND 1.108 billion in taxes.

Every year, MB receives certificate of recognition from the Ministry of Finance and the

General Tax Department for fulfilling its tax obligations.

5.5. Dividend policy

The Bank‟s policy for utilizing earnings is determined based on the principle of balancing

between providing shareholders with a reliable and reasonable stream of income, and at the

same time maintain the Bank‟s sustainable growth, and increase the value of the

contributed capital of shareholders through retaining some of the earnings for reinvestment

in future business operations and maintenance of the Bank„s stock price. The Board of

Directors of the Bank, elected by the Annual General Shareholders Meeting, will decide

the divident payout ratio according to the Bank‟s annual performance results. From

earnings after tax, a portion will be set aside for reserve accounts in accordance with legal

regulations, dividends and other fund accounts. The Bank projects that it will pay out

approximately 50% of the annual after-tax income in dividends in two forms: cash

dividends and stock dividends in order to increase the chartered capital. The earnings (if

any) that remain after dividends are paid to shareholders will be added back to the Bank‟s

shareholders equity.

Figure 26: Dividend payout ratio for the 2009 – 2010 period

Item 2009 2010

Dividend payout

ratio 18% in cash and 5% in stock 15% in cash and 8.95% in stock

Dividend value

(billion VND) 888 1,413

Divident payout ratio of MB is 18% in cash dividends and 5% in stock dividends in 2009.

In 2010, dividends is 15% in cash and 8.95% in stock. Cash dividents paid for shareholders

were taken from earning after tax while stock dividend (bonus shares) were taken from

retained earning and share premium reserve.

5.6. Information on contingent committments

5.6.1. Consolidated off-balance-sheet committment



According to Financial statements for 2009, 2010 and the first 6 months of 2011, MB

recorded the following off-balance-sheet committments.

Figure 27: Off- balance-sheet items

Item

December 31

2009

(VND mil)

December 31

2010

(VND mil)

June 30 2011

(VND mil)

Guarantees 5,908,394 10,166,345 9,716,545

Commitments under letters of credit 19,392,604 42,942,888 43,029,327

Unutilized credit commitment 2,123,426 4,581,820 6,025,828

Contingencies and off-balance-sheet 27,424,424 57,691,053 58,771,700

During the normal course of operations, MB enters into financial commitments which give

rise to off-balance-sheet items. These financial commitments mostly consist of guarantee

and letters of credit. These commitments may cause credit risk for the Bank other than the

credit risk recognized within the balance sheet.

5.6.2. Plan to increase chartered capital

In 2011, MB projects that its chartered capital will increase to VND 10,000,000,000,000

(ten trillion VND). The chartered capital increase proposal has been made available for

approval at the 2011 Annual General Shareholders Meeting and the Board of Directors has

been authorized to execute the plan. MB is currently in the process of preparing the share

issuance application according to resolutions approved at the AGM in order to submit

relevant authorities for approval.

5.6.3. Other commitments / contingencies None.

6. Suitability of business strategies within the industry context

The Board of Directors and the Management Team of MB track the macro strategy

orientation of the Vietnamese Government in developing the economy in general and the

finance-banking industry in particular. The financial services is a critical industry of the

national economy. The development of this industry reflects the capability, scale, dynamics

and the general development trends of the economy. As a developing economy, revenues

from banking services contributing to Gross Domestic Product (GDP) still account for a

modest weight compared to countries with a more developed banking sector.

With the goal of developing the banking industry and exploiting the full potential of

Vietnam‟s financial markets, the Prime Minister has approved the Banking Industry

Development Strategy up to 2010 and orientation toward 2020 under Decision 112/2006-

QD-TTg on May 24 2006. According to the blueprint, the development direction of the

industry will be:

Establish a legal framework that is transparent and fair so as to promote competition

and ensure the system safety;



Accelerate the process of international economic integration, take initiative in

international integration in the field of finance and banking in accordance with pre-

determined roadmap taking into account the level of competitiveness of credit

institutions and the ability of the State Bank of Vietnam in supervising the banking

system;

Implement comprehensive reforms to develop the system of Vietnam‟s credit

institutions to become modern, versatile, diversified in terms of ownership and types

of credit institution with large scales and solid financial capabilities; and

Enhance the financial capability of credit institutions by re-capitalising, improving the

quality of assets and profitability.

Over recent periods, MB‟s development has always tracked the orientation of the State

Bank of Vietnam, MB is one of the top leading joint stock commercial banks that operate

prudently and reliably with consistenly improved financial capabilities, The Bank has been

rated as a "A" grade bank by the State Bank of Vietnam in several consecutive years, MB

performance in terms of safety, credit quality and growth rate have all exceed the targets

set by the State Bank of Vietnam. This not only contributes substantially to national

economic development and benefits shareholders, but also lays a solid foundation for MB‟s

future development.

In the coming years, MB‟s strategies are also in line with the general development

strategies of the banking industry. MB will continue to increase its financial capabilities,

diversify operations, enhance banking management and risk management capabilities,

invest in technologies, etc, so as to achieve rapid and sustainable growth, toward the vision

of becoming one of the top financial institutions in Vietnam. MB is determined to become

a bank that is friendly with the community, with high professionalism, bringing

convenience to customers on a superior risk management platform and within a solid

corporate culture.

6.1. Position of MB in the banking industry

6.1.1. MB’s business advantages

After 17 years of development, MB has gradually established its standing as one of the

leading joint stock commercial banks in Vietnam and built trust with clients. These

achievements are results of MB fully utilizing its unique advantages. MB takes pride in

possessing:

Strength in the high quality Management Team and employees: MB‟s team of senior

employees is steadily maintained and continuously enhanced over the years, especially

in management positions, Members of MB‟s Board of Directors all have experience

working as CEOs/Deputy CEOs of large economic institutions with rich experience in

business administration. More than 50% of the Management Team members are aged

between 35 and 40 years old and over 77% of them hold Master‟s degrees in

Economics obtained in Vietnam and/or abroad, MB‟s management Team has

consistently grown both in quantity and quality and is strongly committed to MB‟s



development. A strong sense of unity in administration has built up trust among

employees and staff, helping MB attain steady development according to the slogan

“being solid and reliable”.

MB’s organizational and operational model are constructed in a modern fashion.

managed and developed in a vertical structure with the goal of balancing revenues –

risk – growth – control. With this model, MB concentrates in major businesses,

conducts effective risk management, as well as augment centralized management by

department from the Headquarters throughout all branches and transaction offices.

Effective risk management system: MB always pays special attention to risk

management, being one of the first few banks in Vietnam to establish an international-

standard risk management system. Since 2003, MB has brought into operation its

banking risk management system. In 2007, MB became one of the first commercial

banks to construct an internal credit rating system with the assistance of technologies.

The State Bank of Vietnam approved the Bank‟s internal credit rating system and loss

provisioning model for bad debts using quantitative methods in accordance with

Article 7 of Decision 493.

Advantage in capital resources and shareholders: With many of its shareholders

being large and influential enterprises and economic institutions, including Military

Telecommunications Corporation (Viettel), Vietcombank, Vietnam Helicopter

Corporation, Tan Cang Sai Gon Corporation, etc. MB possesses a solid base of

shareholders that contribute significantly to the growth of chartered capital and lay a

sturdy foundation for the Bank‟s continuous growth.

Advantage in sources of mobilized capital: MB‟s sources of mobilized capital are

diverse, ranging from individuals, corporates and credit institutions. The funding

sources from individuals and economic institutions make up a large proportion of total

capital mobilized and represent client loyalty. MB will continue its strategies to boost

savings deposits by diversifying funding products and improving customer services so

as to attract deposits from enterprises and individuals.

Always a market leader in modern technologies: MB has successfully implemented

Core Banking system since 2007, and is implementing the intelligent data storage

system (Data warehouse), a management information system (MIS), and a risk

management information system. Using a centralized data management structure from

the Headquarters throughout transaction offices, MB is able to make quick and

effective business and risk management decisions. In addition, MB provides an

internet banking service (eMB) and a mobile banking service (Mobile Banking), MB

always strives to maintain the most modern technology platform among commercial

banks in Vietnam, aiming to become a financial institution with the most advanced

online services for clients. Currently, MB is implementing the upgrade of its main data

center and the construction of its Disaster Recovery Center in order to enhance system

capacity and ensure continuous services and operations for both clients the Bank itself.



Advantage in offering a wide range of financial service packages through its

connections with subsidiaries and other business partners. With the goal of becoming

the leading financial group in the country, MB has founded subsidiaries operating in

many fields such as investment banking, fund management and real estate in order to

diversify its product and service offerings, provide product packages, and incessantly

expand its network of clients. Moreover, MB partners with large corporations to

provide clients with special products through cross-selling. These include products

from Military Telecom Corporation (Viettel), Prudential Insurance Corporation,

VNPost, etc.

MB’s brand has been established and developed for over the past 17 years and now

has a solid standing in the market. MB is widely known as a solid bank with high

growth that is trustworthy among current and potential clients and investors. The MB

brand is recognized to be an active bank, yet manages to retain stable growth towards

the goal of sustainable development, contributing to the success of its clients, the Bank

itself and the entire community.

A diverse and sustainable client base: MB has hundreds of thousands of clients

including corporates, financial institutions, small and medium businesses, households,

and individuals coming from all fields and professions. By maintaining solid customer

relationships, providing effective customer services, MB‟s close relationships with its

clients over the years have contributed to strengthening MB‟s competitive advantages,

laying the foundation for future development.

6.1.2. MB’s standing in the banking industry

Through its 17 years of development, MB has been one of the very few commercial banks

that achieve comprehensive growth, increasing profits each year and consistently creating

value for shareholders. Even during economic recessions in 1997 - 1999 and 2008–2009

periods, MB still experienced stable development and maintained its dividend payout ratio

at 16% per year or higher. Particularly, after the three year financial crisis from 2008 to

2010, with appropriate strategies and sound solutions and ability to adapt to changes. MB

has witnessed solid growth in scale across almost all performance targets such as total

assets, chartered capital, revenues and profits, etc. As for these KPI, the growth rate in

2009 doubles that in 2007 and the growth rate in 2010 doubles that in 2008. As a result,

MB is considred one of the leading commercial joint stock banks in its selected market

segments and consistently ranked as a grade “A” bank by the State Bank of Vietnam.



Figure 28: Performance results of commercial joint stock banks in Vietnam in 2010

Bank

Average

total assets

(VND bil)

Average

share

holders

equity

(VND

bil)

Charted

capital

(VND bil)

Customer

deposits

(VND bil)

Total

loans

(VND

bil)

Pretax

income

(VND

bil)

After-tax

income

(VND bil)

Pretax

income/A

verage

total

assets (%)

Pretax

income/A

verage

share

holders

equity

(%)

ACB 186,492 10,742 9,377 106,937 87,195 3,102 2,335 1.66% 28.88%

MB 89,316 7,885 7,300 65,741 48,797 2,288 1,745 2.56% 29.02%

STB 128,203 12,283 10,931 78,335 82,485 2,560 1,910 2.00% 20.84%

TCB 121,437 8,357 6,932 80,551 52,928 2,744 2,073 2.26% 32.84%

EIB 98,280 13,432 10,560 58,151 62,346 2,378 1,815 2.42% 17.70%

MSB 89,609 4,941 5,000 48,627 31,830 1,518 1,157 1.69% 30.73%

VPB 43,716 3,913 4,000 23,970 25,324 663 503 1.52% 16.94%

HBB 33,614 3,393 3,000 16,186 18,685 602 476 1.79% 18.51%

BVB 10,494 1,606 1,500 7,291 5,615 177 133 1.69% 11.02%

VIB 75,231 4,769 4,000 44,990 41,731 1,051 791 1.40% 22.04%

Seaba

nk 42,920 5,612 5,335 24,790 20,512 829 629 1.93% 14.77%

Nam

A 12,723.5 1,756 2,000 5,782 5,302 185 139 1.45% 10.54%

Source: Financial Statements of Commercial Banks in 2010

6.1.3. Total assets

MB is among commercial joint stock banks with a large scale of assets, with total assets

amounting to VND 109,623 billion as of December 31. 2010.

Figure 29: Benchmarking total assets with other banks as of December 31. 2010




6.1.4. Chartered capital

MB is among banks with chartered capital exceeding VND 7,000 billion while total

shareholders equity has reached almost VND 10,000 billion.

Figure 30: Benchmarking chartered capital with other banks as of December 31, 2010


6.1.5. Customer deposits and lending

MB is among commercial joint stock banks with the largest amounts of customer deposits,

which reached VND 65,741 billion as of December 31. 2010. Customer deposits makes up

73% of total mobilized capital of MB, helping retain a high level of stability and liquidity.

The Bank‟s total mobilized capital as of December 31 2010 was 96,953 billion VND.

Meanwhile, MB is also among commercial joint stock banks with an appropriate scale of

credit lending with total loan portfolio as of December 31 2010 of VND 48,797 billion.

Figure 31: Total customer deposits and total loan portfolio as of December 31. 2010




6.1.6. Profitability

MB is among commercial joint stock banks with the highest amounts of pretax income

which reached VND 2,288 billion for the financial year ended December 31. 2010.

Figure 32: Earning Per Share (EPS) of commercial joint stock

banks


MB takes pride in being one of the commercial banks in Vietnam to maintain an ability to

consistently make profits and increase value for shareholders in a sustainable fashion,

supported by a sound financial structure and income models.



6.2. Growth potential of the banking industry

With its crucial role as the blood vessel of the entire economy, the banking industry has

witnessed impressive progress over the years to meet increasingly high development needs

of the economy. Up to December 2010, there has been a boom of banks with 42 local

banks, 5 100% foreign owned banks, 5 joint-venture banks and 48 branches of foreign

banks. This proves a remarkable development compared to a mere nine banks in 1991.

Besides, the scale of banks has also strongly expanded, which helped the banking industry

in Vietnam to stand firm throughout the recent financial crisis. Despite these remarkable

achievements, there is still a lot of room for development potential in the banking business.

Vietnam economy is in developing periods and has many potential for growth. It is

expected that the GDP growth rate target for the next periods will be over 7% per year on

average. Hence, the banking industry inevitably boosts to meet demand of economy.

Besides, Vietnam has a population of 86 million people with average income per person

approximately in medium level and the usage rate of banking services is lower than other

countries in the region. Therefore, in line with economic growth, there will be increase in

living standard and banking service utility demand. This will lead to huge demands for

capital and banking services. Growth rate of net revenue of the banking industry is

expected to reach 15%-20% per year in the upcoming years.

Along with this expansion in market scale, the legal framework for the banking sector is

also improved for sustainable development. The Laws on State Bank of Vietnam and Laws

on credit institutions have been appropriately amended in 2010. The State Bank of Vietnam

has continuously revamped their structures and models and performed due management

function for banking activities.

In the long run, the orientation for the banking industry is to:

Establish a legal framework that is transparent and fair so as to promote competition

and ensure the system safety;

Accelerate the process of international economic integration, take initiative in

international integration in the field of finance and banking in accordance with pre-

determined roadmap taking into account the level of competitiveness of credit

institutions and the ability of the State Bank of Vietnam in supervising the banking

system;

Implement comprehensive reforms to develop the system of Vietnam‟s credit

institutions to become modern, versatile. diversified in terms of ownership and types

of credit institution with large scales and solid financial capabilities; and

Enhance the financial capability of credit institutions by re-capitalising, improving the

quality of assets and profitability.

Thus, it can be seen that the development potential of the banking sector in the future is

very significant. This means not only a great opportunity for the banking industry but also

an urgent need for the industry to adequately serve the economic development of Vietnam.



7. Human resources and policies

7.1. Human resources

Figure 33: Staff composition as of June 30. 2011

Category Headcount Weight (%)

By education level 3,798 100%

Bachelor‟s and above 3,443 90.65%

Two year college. vocational school 355 9.35%

By gender 3,798 100%

Female 2,396 63.08%

Male 1,402 36.92%

Source: MB

7.2. Assessment of human resources

MB has a senior management team with a young average age (over 50% of the Bank‟s

Management Team members are less than 40 years old and over 77% have obtained

master‟s degrees in economics) has English proficiency, is capable of absorbing new

information and adapting to dynamic business environments. Over 90% of MB‟s

employees and staff members have bachelor‟s degrees and higher education.

MB has a young team of employees and staff, who possess a high capacity for learning

new knowledge, enthusiasm and dedication built upon the strong corporate culture. This is

an important competitive advantage of MB compared to other banks. MB‟s young staff are

trained and guided by hundreds of experienced staff and senior managers with rich

experience and dedication.

In order to reinforce and enhance the skills and expertise of employees and staff, MB

annually attracts and selects workers with a high level of professional expertise, sufficient

banking and finance experiences. The Bank also organizes various training programs to

improve the skill sets of employees.

7.3. Human resource policies

7.3.1. Training policies

MBs training activities are centrally administered at the Training Center. All training

programs, whether internal or external, are constructed with the involvement of the Bank‟s

experts.

In 2008, MB organized 146 training courses both in and outside of Vietnam for the Bank‟s

officers and managers. In 2009, MB organized 207 training courses in Vietnam and 27

training courses overseas for 6,655 officers. In 2010, 275 training courses were held

including 182 professional training courses, 72 skill training courses and 21 overseas



training courses. For the first half of 2011, MB has organized 217 training courses for

3,730 trainees. All courses were evaluated by employees to have high practical values.

Domestic short-term training courses

MB constructs methodical and high-standard training programs for all employees and staff

members, including skill training, specialized professional training in certain fields,

training by title/position and administration training courses.

Overseas training courses

Overseas specialized training programs give MB officers an opportunity to learn valuable

knowledge about the banking profession in developed countries.

Encourage long-term training programs

MB utilizes policies to encourage employees to participate in long-term training programs.

MB‟s employees can take a second bachelor‟s degree courses, post-graduate courses in

finance and banking or MBA programs to enhance their professional knowledge,

capabilities and administrative ability with financial support from MB.

Young talent management

MB has constructed the HIPO (high potential) training program for employees with

management potential. Through contests on professional expertise or periodic employee

assessment results, MB is able to select talented officers to focus its training efforts. The

HIPO training program brings MB a capable and experienced team of successors.

7.3.2. Compensation

MB‟s compensation policy was constructed on the basis of performance results, which are

measured based on job descriptions of individuals, departments and the contribution of

each individual into the overall results of the Bank. In recent years, MB has regularly

adjusted the salaries of employees to be in line and competitive with the general salary

level on the labor market, maintaining competitive compensation levels that are sufficient

to give employees a higher life quality. In addition, MB also has other benefits programs

for its employees such as stock bonuses, salary bonuses, special benefits for employees at

specific positions, policies for attracting talent, recognition and awards and irregular

bonuses in order to timely reward individuals and departments who achieve remarkable

business performance. This policy motivates and instills loyalty into employees. MB

possesses a strong, stable and loyal workforce and is the bank with the lowest employee

turnover rate in recent years.



Figure 34: Average salary of employees

Item 2009

(VND mil/month)

2010

(VND mil/month)

First half of 2011

(VND mil/month)

Average salary 7.7 7.9 7.7

Source: MB

8. Board of Directors, Executive Board, Supervisory Board, Chief Accountant

8.1. Board of Directors

8.1.1. Chairman of Board of Directors

Full name : LE HUU DUC

Gender : Male

Date of birth : February 14 1955

Place of birth : Luong Lo commune, Thanh Ba district, Phu Tho province

Personal ID number : 013028063

Issuance location : Hanoi, Issuance date: 06/12/2007

Nationality : Vietnamese

Ethnicity : Kinh

Hometown : No. 6 Cu Chinh Lan, Khuong Mai, Thanh Xuan, Hanoi

Phone number : 62661088

Education level : 10/10

Professional level : Military Doctor

Current title : Chairman, Military Commercial Joint Stock Bank

Positions at other organizations :

Commissioner, Communist Party Executive Committee XI;

Member of Parliament, National Assembly XII;

Commissioner, Communist Party Military Committee;

Deputy Minister of Military.

Criminal activity : None

Conflicting interest with the Company : None

Number of shares owned : 36,500,000 shares (percentage: 5% of chartered

capital)

Of which:

Personal ownership : None (0% of chartered capital)

Representative ownership for Viettel: 36,500,000 shares (5%chartered capital)

Shares under ownership of related parties: None

Indebtedness with the bank: None



8.1.2. Vice Chairman of Board of Directors

Full name : LE VAN BE

Gender : Male

Date of birth : 28/12/1947

Location of birth : Ha Tinh


Issuance location : Hanoi Police, Issuance date: August 23 2000


Ethnicity : Kinh

Hometown : Truong Loc commune, Can Loc, Ha Tinh

Registered residential address : Room 6, B12b, Ngoc Khanh, Ba Dinh, Hanoi



Professional level : Bachelors degree in Economics, concentration in

Finance – Accounting

Current title : First Vice Chairman, MB


Chairman, MB Capital;

Chairman, Thang Long Securities JS Company (TLS);

President, Military Asset Management Company Limited (AMC);

Member of Board of Directors, Vinaconex – Viettel Financial JS Company; and

Member of Board of Directors, Tan Cang – Cai Mep JS Conpany.



Number of shares owned : 937,014 shares (0.128 % of chartered capital)

Of which:

Personal ownership : 937,014 shares (0.128 % of chartered capital)

Shares under ownership of related parties:

No. Full name Relationship Shares owned %

01 Nguyen Thi Ngoc Mai Wife 43,538 0.005%



02 Le Phuong Dung Child 21,791 0.002%

Indebtedness with the Bank : None

8.1.3. Vice Chairman of Board of Directors

Full name : NGUYEN MANH HUNG

Gender : Male


Place of birth : Phu Tho, Vinh Phuc


Issuance location : Ministry of Defense, Issuance date: December 15 2009


Ethnicity : Kinh

Hometown : Tu Son, Bac Ninh

Current residential address : P.1204 Khu The Manor, Me Tri, Hanoi



Professional level : MBA, Master of Digital Telecommunications, Engineer

of radio-electricity

Current title : Vice Chairman, Military Commercial Joint Stock Bank


Deputy, Military Telecom Corporation;

Member of Board of Directors, VINACONEX;

Member of Board of Directors, Viettel International Investment JS Company;

Member of Board of Directors, VVF JS Company;

Chairman, Viettel – CHT Joint Venture,



Number of shares owned:

Of which:

Personal ownership : 100,238 shares (0.013% of chartered capital)



Representative ownership for Viettel: 36,500,000shares (5% of chartered capital)



01 Luong Thi Hai Ha Wife 4,434 0.0006%

Indebtedness with the bank : None

8.1.4. Member of Board of Director

Full name : NGUYEN DANG NGHIEM

Gender : Male


Place of birth : Thanh Hoa


Issuance location : HCM City Issuance date: August 21 2002


Ethnicity : Kinh

Hometown : Quang Giao, Quang Xuong, Thanh Hoa

Current residential address : No. 2/8. 31 Tran Nao, Binh An, District 2. HCM

City



Professional lvel : Bachelors degree in Economics


Vice Chairman and CEO, Tan Cang Sai Gon Corporation;

Vice Chairman, Cat Lai Port JS Company;

Chairman, Tan Cang Cai Mep JS Company;

Chairman of Members Committee, Tan Cang – Cai Mep International Port LLC;

Member of Board of Directors, Ship Transportation and Rental Company.



Number of shares owned : 41,798,733 shares (5.72% of chartered capital)



Of which:


Representative ownership for Tang Cang Sai Gon Corporation: 41,736,239 shares

(5.71% of chartered capital)

Shares under ownership of related parties


01 Tran Thi Thoa Wife 102,490 0.014%

Indebtedness with the Bank:

Personal debt : None

Loan by Tan Cang Sai Gon Corporation (that Mr. Nguyen Dang Nghiem is

nominated to representative) toward MB as of June 30 2011: VND 427,876,089,205,

8.1.5. Member of Board of Directors

Full name : DAU QUANG LANH

Gender : Male


Place of birth : Nghe An

Personal ID number : 2A0E070242

Issuance location : Ministry of Defence

Issuance date : October 15 2006


Ethnicity : Kinh

Hometown : Hong Long commune, Nam Dan, Nghe An

Current residential address : 163B - Nguyen Oanh, P10, Go Vap district, HCM

City



Professional level : Bachelors degree in Economics–HCM University

of Economics

Current title : Member of Board of Directors, MB




Chairman and CEO, Corporation 28;

Chairman of subsidiaries and affiliated companies of Corporation 28, including: 28-

Hung Phu JS Company; 28-Quang Ngai JS Company, Binh Phu JS Company and 28-

1 Company;


Conflicting interest with the Compnay : None

Number of shares owned : 8,467,710shares (1.159% of chartered capital)

Of which:

Person ownership : 160,653 shares (0.022% of chartered capital)

Representative ownership for Corporation 28: 8,307,05 shares (1.137% of chatered

capital)



01 Truong Minh Hien Wife 86,283 0.0118%

Indebtedness with the Bank

Personal debt : None

Loan by 28 Corporation (that Mr.Dau Quang Lanh is nominated to representative)

towards MB as of June 30 2011: 30,118,316,209 VND

8.1.6. Member of the Board of Directors:

Full name : HA TIEN DUNG

Gender : Male

Date of birth : July 06 1985

Place of birth : Phu Tho

Personal ID number : 8A7E262141

Place of issue : Ministry of Defense, Date of issue: 15/10/2002


Ethnicity : Kinh



Home town : Phu Khe commune, Cam Khe district, Phu Tho

Current residential address : No, 13/136 Le Trong Tan, Khuong Mai, Thanh

Xuan, Hanoi



Professional level : National Economics University, Air Force officer

(pilot), GagaRin Institute (Soviet Union), Ho Chi

Minh National Acedemy of Politics (advanced

reasoning)

Current tittle : Members of the BOD, MB


CEO of Vietnam Helicopter Corporation - Ministry of Defense

Chairman of the BOD for MB Land

Criminal activity : No

Conflicting interest with the Company : No

Number of shares owned : 52,959,880 shares (7.254% of chartered capital)

Of which:

Personal ownership : 77,673 shares (0.010% chartered capital)

Representative for Vietnam Helicopter Corporation: 52,882,207 shares ( 7.244%

chartered capital)



01 Tang Thi Quynh Giao wife 214,716 0.029%


8.1.7. Member of the Board of Directors

Fullname : TRAN THI KIM THANH

Gender : Female


Place of birth : Hanoi




Place of issue : Hanoi Police

Date of issue : 14/01/1997


Ethnicity : Kinh

Hometown : 2/1 Ham Long, Hoan Kiem, Hanoi

Current address : 7/126 Doc Ngu, Ba Dinh, Hanoi



Professional level : Master of Economics, majoring in Banking and

Finance

Current tittle : Member of BOD, MB

Potitions in other organizations :

Head of Banking Invesment Office - Vietcombank

Council member of Real Estate Company VCB 198;

Council member of Life Insurance Company Vietcombank – Cardif.

Criminal activity : No

Conflicting interest with the Company : No

Number of shares owned : 80,359,349 shares (11.00813% of MB)

Of which:

Personal ownership : 59,349 shares (0.00813% of MB)

Representative ownership for Joint Stock commercial Bank for Foreign Trade of

Vietnam (Vietcombank): 80,300,000 shares (11% MB chartered capital).


No Full name Relationship Shares owned %

01 Tran Anh Tuyet Younger sister 70,575 0.0096%

Indebtedness with the Bank: None

8.2. Supervisory Board

8.2.1. Head of Supervisory Board

Full name : PHAM THI TY



Gender : Female


Place of birth : Thach Ban, Thach Ha, Ha Tinh


Place of issue : Hà Nội Police, Date of issue: 01/08/2007


Ethnicity : Kinh

Hometown : Thach Ban, Thach Ha, Ha Tinh

Current residential address : E17 The Manor, Tu Liem, Hanoi

Contact number : 0913220982


Professional level : Bachelor of Banking, University of Economics

and Finance

Employment history

Curent tittle : Head of Supervisory Board - Military Bank

Positions in other organizations :

Vice Chairman of the BOD of Joint Stock company Cavico Vietnam;

Chairman of the BOD for Cavico Tower Joint Stock company;

Vice President of Findex Financial Comapny.



Number of shares owned : 202,620 shares (0.027% chartered capital)

Of which:



Indebted ness with the Bank : None

8.2.2. Member of Supervisory Committee

Full name : NGUYEN XUAN TRUONG

Gender : Male

Date of birth : August 26 08 1944



Place of birth : Ha Nam


Place of issue : Ho Chi Minh Police. Date of issue : 10/03/2006


Ethnicity : Kinh

Hometown : La Cau village, My Tho commune, Binh Luc

district, Ha Nam province

Current residential address : 25/12 Hau Giang, District No.4, Tan Binh, HCM

city



Professional level : Air force officer–Air Force Academy

Curent tittle : Member of the Supervisory Board – Military Bank

Positions in other organizations : None




Of which:



No Full name Relationship Shares owned Percentage of

chartered capital

01 Nguyen Thi Dao Wife 27,857 0.0038%

02 Nguyen Hong Son Son 75,867 0.010%

03 Nguyen Thi Phuong

Hien

Daughter 24,109 0.0033%


8.2.3. Member of Supervisory Committee

Full name : NGUYEN THANH BINH

Gender : Female



Date of birth : Nov 26 1954

Place of birth : An Vy, Khoai Chau, Hung Yen

Personal ID number : TY207816

Place of issue : TCCNQP-KT Date of issue: 23/02/1995


Ethnicity : Kinh

Hometown : An Vy, Khoai Chau, Hung Yen

Current residential address : Số 7 No. 119/1/3 Ho Dac Di, Dong Da, Ha Noi



Professional level : Bachelor of Economics in Praha

Curent tittle : Member of the Supervisory Board – Military Bank




Of which:

Personal ownership : 87,447shares (0.011% chartered capital)

Representative ownership of TayHo Investment and Construction Joint Stock

Company : 605,421 shares (0.082% chartered capital)


Indebtedness with the Bank

Personal debt: None

Loan by Tay Ho Investment and construction JSC where Mrs Nguyen Thanh Binh is

nominated to be representative) as of June 30 2011: VND 10,343,691,863.

8.2.4. Member of Supervisory Board

Full name : LE CONG SOA

Gender : Male


Place of birth : Hien Luong, Vinh Thanh, Vinh Linh, Quang Tri


Place of issue : Hanoi police

Date of issue : Jan 13 2009




Ethnicity : Kinh

Hometown : Hien Luong, Vinh Thanh, Vinh Linh, Quang Tri

Current residential address : No 14, Pham Tuan Tai, Cau Giay, Hanoi



Professional level : University of Finance – Concentration in banking

Curent tittle : Member of Supervisory Board -Military Bank





Of which:




01 Le Viet Hai Son 147,931 0.020%

02 Le Thi Hai Yen Daughter 24,657 0.003%


8.3. Management Team

8.3.1. Chief Executive Director (CEO)

Full name : LE CONG

Gender : Male


Place of birth : Nghe An


Place of issue : Hanoi Police, Date of issue: 11/02/2010




Ethnicity : Kinh

Hometown : Dan chu, Hoa An, Cao Bang

Current residential address : P4 Đ6, Nam Dong, Dong Da, Hanoi,

Contact number : 04 38570064


Professional level : Master of Economics – Concentration in Banking

and Finance

Curent tittle : CEO ofMilitary Bank

Positions in other organizations: Vice Chairman of the BOD of Military Petrochemical

Joint Stock Company



Number of shares owned : 730,637 shares (0.1% chartered capital).

Of which:

Personal ownership : 730,637 shares (0.1% chartered capital).



01 Vuong Thi Lan Anh Wife 510,528 0.069%

02 Le Phuong Linh Daughter 143,540 0.019%


8.3.2. Deputy CEO

Full name : DO VAN HUNG

Gender : Male

Date of birth : Dec 25 1960

Place of birth : Tan Khanh, Vu Ban, Nam Dinh

Personal ID number : 82 111 244

Place of issue : General Industry Military office

Date of issue : Nov 15 2009




Ethnicity : Kinh

Hometown : Tan Khanh, Vu Ban, Nam Dinh

Current residential address : No 83, Lane 6, Dang Van Ngu Street, Dong Da.

Hanoi

Contact number : (84 4) 35739297


Professional level : Bachelor Degree

Curent tittle : Deputy CEO of Military Bank

Positions in other organizations : Chairman of the BOD of Military Joint Stock

Insurance Company



Number of shares owned : 1,005,111 shares (0.137% chartered capital)

Of which:

Personal ownership : 1,005,111 shares(0.137% chartered capital)



8.3.3. Deputy CEO

Full name : DANG QUOC TIEN

Gender : Male

Date of birth : June 15 1955


Personal ID number : A8 E753702

Place of issue : Ministry of Defense

Date of issue : Jan 15 2003


Ethnicity : Kinh

Hometown : Dong Tam, My Duc, Ha Noi

Current residential address : 243 A Hoang Hoa Tham, Commune No,13, Tan

Binh District, Ho Chi Minh city

Contact number : 0913837704 - 0983150755




Professional level : Master of Business and Administration

Curent tittle : Deputy CEO ofMilitary Bank

Positions in other organizations : Chairman of the BOD of VIETR.E.M.A.X Joint

Stock Company




Of which:




01 Nguyen Thi Thu Hoai Wife 107,020 0.0014%


8.3.4. Deputy CEO

Full name : VU THI HAI PHUONG

Gender : Female

Date of birth : Sep 11 1970

Place of birth : Quang Ninh


Issuance location : Quang Ninh Police, Issuance date: May 17 1988


Ethnicity : Kinh

Hometown : Quynh Hung, Quynh Phu, Thai Binh

Current residential address : 6/B12, New urban city, My Dinh 1, Tu Liem.

Hanoi


Education level : Masters degree

Professional level : Masters degree in Economics, Banking Academy

Current title : Deputy CEO, MB



Positions at other organizations : Member of Board of Directors, Song Da Financial

Joint Stock Company



Number of shares owned : 287,527 shares (0.039% of chartered capital)

Of which:


Shares under ownership of related parties


01 Tran Minh Tuan Husband 9,950 0.0013%


8.3.5. Deputy CEO

Full name : CAO THI THUY NGA

Gender : Female

Date of birth : July 24 1958



Issuance location : Hanoi Police

Issuance date : Nov 06 2007


Ethnicity : Kinh

Hometown : Nam Cuong commune, Nam Truc, Nam Dinh

Current residential address : Apartment complex 11 Lang Ha, Dong Da, Hanoi



Professional level : Masters degree in Finance


Positions at other organizations : None






Of which:



No. Full name Relationship Shares

owned %

01 Nguyen Hoang Cuong Husband 26,771 0.0036%

02 Nguyen Minh Hanh Child 1,709 0.00023%

03 Nguyen Thuy Hang Child 1,768 0.00024%


8.3.6. Deputy CEO

Full name : LUU TRUNG THAI

Gender : Male

Date of birth : Dec 05 1975

Place of birth : Hoa Binh


Issuance location : Hòa Bình Police

Issuance date : Sep 10 1996


Ethnicity : Kinh

Hometown : Tien Ngoai, Duy Tien, Ha Nam

Current residential address : 20 Alley 46 Van Cao, Ba Dinh, Hanoi



Professional level : Bachelors degrees from Banking Academy and

University of Law, MBA


Positions at other organizations : Member of Board of Directors, Viettel Postal

Corporation




Conflicting interest : None


Of which:




01 Luu Thieu Thu Younger sister 17,748 0.0024%


8.3.7. Deputy CEO

Full name : NGUYEN THI AN BINH

Gender : Female


Place of birth : Thái Bình


Issuance location : Hà Nội Police, Issuance date: April 21 2009


Ethnicity : Kinh

Hometown : Nghi Kieu, Nghi Loc, Nghe An

Current residential address : 56 Group 46 Nghia Tan, Cau Giay, Hanoi

Phone number : (04) 6266 1088


Professional level : Bachelors degree in Economics, majoring in

Finance - Banking






Of which:






8.3.8. Deputy CEO

Full name : NGUYEN MINH CHAU

Gender : Female

Date of birth : April 06 1973



Issuance location : Hanoi Police. Issuance date: June 06 1988


Ethnicity : Kinh

Hometown : Dinh Bang, Tu Son, Bac Ninh

Current residential address : No. 5, Tran Nguyen Han, Hoan Kiem, Hanoi

Phone number : (04) 37875404


Professional level : Masters degree in Finance


Positions at other organizations : Member of Board of Directors, Thang Long

Securities JSC




Of which:




8.3.9. Deputy CEO

Full Name : PHAM THI TRUNG HA

Gender : Female

Date of birth : August 20 1975

Place of birth : Thanh Hoa




Issuance location : Hanoi Police, Issuance date: August 22 2009


Ethnicity : Kinh

Hometown : Thanh Hoa

Current residential address : No. 127 village 67 Tuong Mai, Hoang Mai, Hanoi


Education level : 12/12 Master of Economics

Professional level : Master of Economics

Current title : Deputy CEO and Director of Risk Management

department, MB





Of which



No.

T

Full Name Relationship Share owned %

01 Pham Thanh

Binh

Younger brother 5,823 0.00079%


8.3.10. Chief Financial Officer (CFO)

Full name : LE THI LOI

Gender : Female

Date of birth : June 30 1970

Place of birth : Hai Binh, Tinh Gia, Thanh Hoa


Issuance location : Hanoi police. Issuance date: May 07 2008




Ethnicity : Kinh

Hometown : Hai Binh, Tinh Gia, Thanh Hoa

Current residential address : No. 2. B17. My Dinh 1, Tu Liem, Hanoi



Professional level : Masters Degree in Economics, Finance - Banking

Current title : CFO, MB

Positions at other organizations : Vice Chairman, MB Land




Of which:



No. Full Name Relationship Shares owned %

01 Le Thi Lai Sister 42,208 0.0057%

02 Le Xuan Linh Brother 3,115 0.0004%


9. Information, lawsuits related to MB that can potentially affect the price of

listing security (if applicable)

None.



IV. BUSINESS AND PROFIT PLAN OF MB IN UPCOMING YEARS

1. Potential and challenges

Potential

As analysed above, Vietnam banking industry has a lot of potential as supported by a

favorable political environment. Being one of the first commercial joint stock banks, MB

has prepared solid platform in order to take advantage and exploit development potential of

banking market. MB has consistently improved administration capacities, financial

capacity and developed well-qualified human resource, enlarged network, upgraded

technology and affirmed its prestigious brand name in market. In 2010, MB set the

development strategy for 2011-2015 periods with the goal of becoming a top three

commercial banks of Vietnam in term of size. This goal is highly attainable given the fact

that there are no major dominant players in the industry at this stage.

Challenges

Vietnam has been increasingly affiliated with the world economy and certainly been

negatively affected by the instability of global economy. Besides, although the economy of

Vietnam is growing faster, there are numerous invisible threats. Thus, the banking sector in

general and MB in particular must to focus on timely and appropriate solutions in order to

restraint negative effects even and turn them into opportunities. Competition among local

banks has become more and more fierce. In addition, some 100% foreign owned banks

have been established and operated in Vietnam. With strengths in capacity of

administration, technology, experience, professional expertise, the foreign banks gradually

become formidable rivals. Therefore, there is a risk that MB can lag behind other banks if

it does not have a right strategy and focus.

2. MB’s development strategy in upcoming years

Foreseeing opportunities as well as challenges, MB has established a comprehensive

development strategy for 2011-2015 period with a vision to become one of the three

leading commercial Joint Stock banks in Vietnam in 2015. The Bank‟s mottos in this

period focus on stable growth while differentiating by business culture, experted and well-

skilled staff, high commitment and good organisation. Based on the assessment of potential

of the banking sector in Vietnam and the capacity of MB, MB expects to attain a growth

rate of 1.5 to 2 times of the industry average in the upcoming years. As a result, the size of

the Bank will increase by 5-7 times of 2009/2010‟s. Development strategy of MB was built

based on orientation in which MB shall become a leading financial corporation providing

the full range of financial services to its clients.

To implement this strategy, MB has conducted synchronous solutions in order ro

differentiate the Bank based on five key pillars:

Community bank for individual customers and SMEs;

Professional bank for medium and large corporates;

Convenient bank for all clients;



Superior risk management; and

Provision of fast and reliable services while building a corporate culture towards

customer focus, disciplines and teamwork.

The strategic solutions have been implemented rigorously by the Bank and had brought in

some initial results.

3. Assumptions and basis for developing financial plans

The assumptions used to develop financial plans were based on economic forecasts of

Vietnam and MB‟s development orientation in the near future.

3.1. Assumptions on macroeconomic conditions

Economic – political – societal landscape continue to be stable;

Vietnam‟s economic development will witness faster growth in coming years based on

the economy‟s inherent strength and the recovery pace of the world economy.

Vietnam‟s projected GDP growth during the 2011 – 2013 period is over 6.5% / year;

and

Banking services is a critical sector contributing to growth targets and macroeconomic

stability. As a result, MB will devise appropriate strategic solutions, increase operating

capacity (improve management capacity, develop resources, enhance competitiveness

etc.) and enhance credibility in the market.

3.2. Financial targets in business plan

With its new business strategy, MB aims to become a top 3 commercial joint stock bank in

Vietnam with sustainable growth. In order to achieve this goal, MB targets a growth rate

by 1.5 to 2 times of the industry average.

Below are some of the specific targets:

Total assets: average annual growth during 2011 – 2013 at about 35 – 40%. During

this period, the Bank will expand its business operations as well as improve efficiency

and quality of assets;

Chartered capital and shareholders equity: average annual growth of chartered

capital at about 24% through various means such as increasing profit retention rate,

paying bonus stocks, issuing shares and convertible bonds, issuing bonds and other

long-term debt instruments, etc;

Capital adequacy ratio (CAR): MB will comply with the State Bank‟s regulation on

minimum CAR as well as meeting safety requirements for its own business operation.

However, MB will aim to keep a right balance between risk and leverage;

Net Interest Income: average annual growth during 2011 – 2013 at 30% by

expanding credit lending on a selective basis;



Income from other activities: average annual growth during 2011 – 2013 at 40%

through improving quality, broadening and diversifying banking l services. improving

operational efficiency in money markets;

Operating expenses: MB will improve business efficiency and control costs through

several means such as improving work productivity, reform processes, adjust

expenditure structure to reduce the ratio of expenses over gross income. This ratio

during 2011 – 2013 will be kept stable at a rate of 30% - 32%;

Pre-tax profits: Average annual growth of pretax profits during 2011 – 2013 at 30% -

33%. This growth rate is greater than the growth rate of owner‟s equity. Therefore,

ROE will increase;

Dividend payout ratio: In order to ensure benefits to shareholders, each year MB will

balance paying out dividend at about of 15% through various means such as cash

dividend and stock dividend to increase chartered capital. Hence, improving financial

capacity and generating long-term benefits to shareholders. MB‟s dividend policy aims

at balancing between creating stable income to shareholders and sustainable

development of the Bank. The dividend policy will help preserve the value of

shareholders‟ shares by retaining parts of the annual earnings to re-invest in the future

and maintain stock value.

4. Business profitability and dividend plan for the period of 2011 - 2013

Figure 35: Projected business plans, income and dividend during 2011 - 2013

Year 2011

(VND mil)

2012

(VND mil)

2013

(VND mil)

Year-end chartered capital 10,000 11,500 14,000

Net interest related income 4,319 5,614 7,299

Revenues from other activities 1,401 1,962 2,747

Total revenues 5,720 7,576 10,045

Salary and related expenses 880 1,170 1,556

Depreciation expense and other expenses 1,075 1,430 1,902

Total operating expenses 1,955 2,600 3,458

Income from business operations 3,765 4,976 6,587

Expenses for credit risk allowances and other

off-balance-sheet commitments 850 1,105 1,437

Total pretax income 2,915 3,871 5,150

Dividend payout ratio A minimum of 15% per year

Source: MB



5. Assessment of MB’s profit plan and dividend plan by the Listing Advisor

As the listing advisor for MB, TLS has collected information, conducted due diligence and

analysis in order to provide insights and assessments about projected business operations

and financial results of MB in the next few years. All research, analysis and assessment on

MB of the listing advisor were provided in the context of the Vietnamese economy in

2011, forecasts about the world and Vietnam‟s economy as well as the banking industry in

the coming years.

In 2010, the world economy has not recovered from severe consequences of the global

financial crisis. However, economic experts agree that the world economy is witnessing

positive and optimistic movements in the coming years.

With respect to Vietnam economy, the results achieved in 2010 were encouraging in spite

of macroeconomic instability. A stable society and high GDP growth will pave the way for

further growth in the near future. During the first six months of 2011, macroeconomic

policies and financial market policies aiming to resolve problems in the economy have

caused much trouble for the banking sector, notably capping deposit rates and curbing

credit growth, etc. However, these difficulties are short-term, and in the long run the

policies will help create a stable economic development environment in which the banking

sector will benefit sustainable development.

Finance and banking is an industry with strong, multilateral connections with economic

growth. Although the Vietnam economy still faces several difficulties in the coming years,

an economic growth rate that is not too low and the huge potential of the banking industry

provide the basis to targeting a solid growth rate for performance targets in business

performance of MB during the period of 2011 – 2013.

With its position as a professional financial advisor, TLS evaluates MB‟s profit and

dividend plans to be realistic except for occurrence of force majeure events. TLS notes that

the above assessments were provided from the perspective of an advisor, on the basis of

our research on MB‟s stock and stock market, potential of the economy, the banking

industry and MB itself. The advisor‟s assessments are only for reference purposes for

investors and are not deemed as a recommendation to buy, sell or hold MB‟s stock.

V. LISTING SECURITY

1. Security name

Stock of Military Commercial Joint Stock Bank (MBB)

2. Security type

Common stock



3. Denomination value

Share denomination value is 10,000 VND/share

4. Total number of shares for listing

Total number of shares for listing is 730,000,000 shares, equivalently VND 7,300 billion

according to denomination value.

5. Shares with restricted transfer rights according to legal regulations and

MB’s Articles of Association

Total Shares with restricted transfer rights is 277,023,411 shares. In which

5.1. Members of Board of Directors, Supervisory Committee and Management Team

According to Item 3, Article 11, Decree 14/2007/NĐ-CP on January 19 2007 by the

Government: “During the time the Stock Exchange and/or the Securities Trading Center

evaluating the security listing application, members of the Board of Directors, Supervisory

Board, CEO, Deputy CEO, Chief accountant and large shareholders of the organization are

not allowed to sell shares that they own”.

According to Point d, Item 1, Article 11, Decree 14/2007/NĐ-CP on January 19 2007 by

the Government: “Shareholders who are members of the Board of Directors, Supervisory

Committee, CEO, Deputy CEO, Chief accountant of the organization must commit that

they hold on to 100% of the shares they own for six months since date of listing and 50%

of these shares over the next six months, except for shares owned by the Government held

by the above individuals as the Government‟s representatives”. The total number of shares

held by members of the Board of Directors, Supervisory Board, Management Team

(including: CEO, Deputy CEOs, CFO) that are subject to transfer restriction under this

provision is 5,309,896 shares. This includes 623,218 shares issued to employees subject to

one year lock up period (from 01/12/2010 to 01/12/2011) as mentioned in Section 5.3.

5.2. Founding members

According to Item 5, Article 84 of Corporate Law in 2005, founding members are not

permitted to transfer their founding shares within the first three years since the Business

registration license was initially issued (September 30 1994). As of this date, this lock up

period has expired; therefore all shares of founding members are freely transferable under

this provision.

5.3. Employees and staff

According to Board resolution No 159/NQ-MB-ĐHĐCĐ of the Annual General

Shareholders Meeting on April 21 2010: “Shares issued to employees and staff members

are subject to a lock up period of one year since the date of issuance”. The total number of

shares issued to employees and staff under this resolution is 6,535,809 shares (including

623,218 shares issued to members of the Board of Directors. Supervisory Committee and



Management Team as referred to in Section 6.1 above). These lock up period will expire

on 01/12/2011.

5.4. Strategic partners

According to legal regulations and the Annual Shareholders Meeting resolutions, the total

number of shares that are subject to transfer restriction of strategic partners is 265,800,924

shares. In details:

The total number of shares that the members of Board of Directors. Supervisory Board

and Management Team hold is 169,231,120 shares. 100% of these shares are not freely

transferable during the first six months since date of listing, and 50% of these shares are

not freely transferable during the next six months.

Number of shares held by Viettel, subject to a three-year lock up period from

31/12/2008 to 31/12/2011, is 34,000,000 shares as stipulated in the share purchase

agreement.

Number of MB‟shares were purchased by 15 strategic Shareholders whose shares are

not freely transferable from 31/12/2009 to 31/12/2011 (under Board Resolution No.

328/NQ-MB-HDQT dated 29/7/2009) is 58,569,804 shares.

Number of MB‟shares that owned by Military Telecommunications Corporation (Viettel),

Vietcombank, Commercial Joint Stock bank for foreign trade of Vietnam (Vietcombank),

Military industrial supplies company, Sourthen Flight service corporation, 28.1 company

and locked up period from 01/12/2010 to 10/12/2012 (under AGM Resolution No.

159/NQ-MB-DHDCD dated 21/04/2010) is 4,000,000 shares.

6. Pricing method

The reference price in the first day of trading is estimated using the following methods and

is based on assessments of demand and supply of shares and the inherent strength of the

Bank.

6.1. Valuation method

Method 1: Average P/B

The method uses the average P/B of banks listed on the HCM Stock Exchange and Hanoi

Stock Exchange. P/B is calculated based on the closing price and the book value of the

listed banks.

Projected listing price = Book value × Reference P/B multiples.

In which:

BV (Book Value): The book value of MB shares.

Reference P/B: based on P/B of banks listed on the HCM Stock Exchange and Hanoi

Stock Exchange at a specific point in time.

Method 2: Average P/E



The method uses the average P/E ratios of banks listed on HCM Stock Exchange and

Hanoi Stock Exchange. This P/E ratio is calculated using the closing price and earnings per

share (EPS).

Projected listing price = EPS × Reference P/E multiples.

In which:

EPS: Earnings per share of MB.

Reference P/E: based on P/E of banks listed on the HCM Stock Exchange and Hanoi

Stock Exchange at a specific point in time.

6.2. Projected opening price

Estimated EPS

According to the AGM in 2011, MB plans to raise chartered capital to VND 10.000 billion

in 2011. Specifically, the Bank shall issue VND 1.700 billion as rights issues for existing

shareholder and VND 1.000 billion VND for strategic partners. The issuance will be

conducted after MB is listed on HOSE or at the year end 2011. Therefore, we assume that

new capital will support business operations of the Bank from 2012 while this does not

contribute to business results in 2011.

We expected that EPS in 2011 is VND 2.660 per share (on the basis of VND 7.300 billion

of chartered capital) or VND 1.939 billion of after-tax earnings. Forward book value per

share is estimated based on the current level of chartered capital is VND 14.770 per share.

Valuation

We valued MB share according to P/E and P/B method. We used market price of reference

banks as of Sep 23 2011. EPS figure is projected for 2011. Forward BV is also estimated as

of Dec 31 2011.

Forward P/E. estimated P/B of seven listed commercial joint stock banks in Vietnam are as

follows:

Name of Stock

Share price as of

Sep 23 2011

(VND)

P/E P/B

EIB 16,000 6.72 1.09

STB 14,200 6.65 1.04

ACB 21,500 6.87 1.45

VCB 26,500 10.11 1.92

CTG 25,500 8.69 1.74

HBB 7,200 5.52 0.59

SHB 8,100 6.43 0.67



Name of Stock

Share price as of

Sep 23 2011

(VND)

P/E P/B

Average 7.29 1.22

Taking into account the level of total assets and operation efficiency of MB, we suggested

that EIB. STB are the two banks that are most comparable because of the closest

approximation in total assets and operation efficiency. Therefore, we used P/E, P/B of EIB

and STB as reference data and base to price MB share.

With prudent assumption that P/E is 6.69 and EPS is VND 2,660 per share, the estimated

price of MB share is 6.69*2,660 = VND 17,800 per share.

With P/B is 1.07 and BV per share is VND 14,770 per share, the estimated price of MB

share is 1.07*14,770 = VND 15,800 per share.

Based on both two above methods, with the corresponding weight of these methods is

50/50, the estimated price of MB share is VND 16,800 per share.

As the stock market is a bearish period with the macro-economy subject to uncertainties,

we recommended a listing price of VND 13,800 per share to support performance of MB

share in the after market.

7. Limits on percentage of total shares owned by foreign investors

Decree 69/2007/NĐ-CP by the Government on April 20 2007 regarding foreign investors

purchasing shares of commercial banks in Vietnam provides regulations on ownership

restriction on foreign investors as follows:

Total share ownership of foreign investors (including current foreign shareholders) and

related parties of those foreign investors cannot exceed 30% of MB‟s chartered capital;

Total share ownership of a foreign investor, who is not a foreign credit institution and

their related parties, cannot exceed 5% of MB‟s chartered capital;

Total share ownership of a foreign credit institution and its related parties cannot

exceed 10% of MB‟s chartered capital; and

Total share ownership of a foreign strategic partner and their related parties cannot

exceed 15% of MB‟s chartered capital.

In special circumstances, the Prime Minister, following suggestions of the State Bank of

Vietnam, may decide to lift the limit on total ownership of a foreign strategic partner and

their related parties to above 15% but not exceeding 20% of MB‟s shares.

Related parties of foreign institutions and individuals, as defined in Item 28, Article 4 of

Law of Credit Institutions in 2010 (Law No. 47/2010/QH12), include:

Parent company and subsidiaries and vice versa; credit institution and its subsidiaries

and vice versa; subsidiaries of the same parent company or the same credit institution;



managers, members of the Supervisory Board of a parent company or credit institution.

individuals or institutions with authority to appoint these individuals at subsidiaries and

vice versa;

Company or credit institution with its mangers, members of the Supervisory Board or

with the company, organization that has authority to appoint these individuals, and vice

versa;

Company or credit institution with organizations, individuals owning 5% or more of

chartered capital or shareholders equity with voting rights, and vice versa;

Individual with their spouse, parents, children, siblings;

Company or credit institution with individuals according to point d of this item of

managers, members of the Supervisory Board, capital contributing members or

shareholders owning 5% or more of chartered capital or shareholders equity with voting

rights, and vice versa;

Individual with authority to represent an organization or individual according to points

1, 2, 3, 4, and 5 of this item with the organizing or individual; authorized individuals

represents the portion of contributed capital of the same organization.

As of Sep 09, 2011, MB does not have a foreign shareholder as yet.

8. Taxes related to securities trading activities

8.1. For individual investors

According to Personal Income Tax Law No. 04/2007/QH12 issued on November 21 2007

and effective since January 1 2009:

Taxable personal income includes: income from capital investment (dividend income) and

income from capital transfers (capital gains).

The tax rate for each type is specified below:

Tax rate on income from capital investment (i.e. dividend income): 5%.

Tax rate on income from capital transfer (i.e. capital gains) is determined as follows:

- In the case that the individual seller has registered to pay taxes according to tax

brackets: pay taxes at a tax rate of 20% of capital gains;

- In the case that the individual seller has not registered to pay taxes according to tax

brackets: pay a tax flat rate of 0.1% on the value of the transaction, regardless of

whether the transfer takes place in Vietnam or overseas;

- In the case that the individual seller has registered to pay taxes at a tax rate of 20%:

the investor will need to pay a temporary tax at a flat rate of 0.1% on the value of

the transaction then finalise the tax liability at the end of the year.

Taxable period:

Taxable period for non tax residents is based on each transaction.



Taxable period for tax residents is determined as follows: Taxable period based on

each transaction applies to income from capital investment and income from capital

transfer. Taxable period based on each transaction or by year for income from

securities transfer.

8.2. For foreign institutional investors

Foreign institutional investors, who operate businesses in Vietnam, must pay taxes on the

sale of securities as follows:

Income tax on price difference when selling shares = Taxable income x Tax rate

In which:

Taxable income = Total value of securities sold during the period – Total cost of

securities sold during the period – Trading fee + Interest income from bond holding.

Tax rate = Corporate Income Tax applicable to the institutional investor.

Foreign institutional investors, which are not registered to operate business in Vietnam but

only have securities brokerage accounts in Vietnam, must pay a tax when selling securities

as follows:

Tax from selling shares = Total value of shares sold in each transaction x 0.1%.



VI. PARTIES INVOLVED IN THE LISTING OF SECURITY

1. Auditor Ernst & Young Vietnam Liability Limited

Main office : Level 15, Daeha building, 360 Kim Ma, Hanoi

Telephone : (84 4) 38 315 100

Fax : (84 4) 38 315 090

Website : http://www.ey.com

2. Listing Advisor Thang Long Securities Joint Stock Company

Main office : 98 Nguy Nhu Kon Tum, Thanh Xuan District, Hanoi

Telephone : (84 – 4) 37 262 600

Fax : (84 – 4) 37 262 602


Bloomberg : TLSV<GO>

http://www.ey.com/

http://www.tls.vn/



ON BEHALF OF THE LISTING INSTITUTION

MILITARY COMMERCIAL JOINT STOCK BANK

CHAIRMAN OF THE BOARD OF DIRECTORS

LE HUU DUC

CHIEF EXECUTIVE

OFFICER

LE CONG

HEAD OF THE

SUPERVISORY BOARD

PHAM THI TY

CHIEF FINANCIAL

OFFICER

LE THI LOI

ON BEHALF OF THE LISTING ADVISOR

THANG LONG SECURITIES JOINT STOCK COMPANY

CHIEF EXECUTIVE OFFICER

LE DINH NGOC

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