Joint Stock Commercial Bank for Foreign Trade of Vietnam : 12. Proposal on Charter capital increase plan 2022

JSC BANK FOR FOREIGN	SOCIALIST REPUBLIC OF VIETNAM
TRADE OF VIETNAM	Independence - Freedom - Happiness
Address: 198 Tran Quang Khai, Hanoi
Business Registration No. 0100112437	Hanoi, April 28th 2022
(15th revision dated April 14th, 2022)
PROPOSAL

ON THE CHARTER CAPITAL INCREASE PLAN 2022

To realize the strategic development direction of VCB to 2025 with the vision up to 2030; to improve the financial capability to meet the business development requirement and risk management, the BOD would like to present the charter capital increase plan 2022 as follows:

1. Increase charter capital through issuing shares to pay dividend from 2019, 2020 retained earnings

• - Type of share: common share;

• - Par value: VND 10,000 per share (ten thousand dong per share);

• - Number of outstanding shares: 4,732,516,571 shares;

• - Treasury shares: 0 share.

• - Charter capital before issuance: VND 47,325,165,710,000

• - Expected number of shares to be issued: 856,585,497 shares

• - Expected total issuance value under by par value: VND 8,565,854,970,000.

• - Expected charter capital post-issuance: VND 55,891,020,680,000.

• - Issuance subjects: VCB existing shareholders at the time of finalizing the right of receiving bonus shares determined by the notice of VCB about ex-right date regarding the share issuance to pay dividend from 2019 retained earnings after tax, fund allocation, cash dividend, stock dividend and 2020 retained earnings after tax, fund allocation and cash dividedn. These shareholders will have rights in accordance with laws and regulations.

• - Issuance proportion: 18.1%. The shareholder that possesses 1000

shares at the time of issuance will receive 181 shares.

• - Source: 2019 retained earnings after tax, fund allocation, cash dividend, stock dividend as per 2021 Charter capital increase plan and 2020 retained earnings after tax, fund allocation and cash dividend;

• - Implementation time: in 2022, specific time will be decided by the BOD upon obtaining approval of local state authorities;

• - Handling of odd shares: Number of bonus shares issued to shareholders will be rounded down and figures after the point (.) will be ignored. For example, the shareholder holding 160 shares at the time of subject shareholder list finalization will receive 28 shares.

2. Plan to use additional capital

The additional equity will be used in the business of VCB on the principle of ensuring safety, efficiency and bringing the highest benefits to shareholders. The intended use for some areas is as follows:

- Investment in facility and technological infrastructure: construction of working offices, expansion of operation networks, investment in technologies and fixed assets (about VND 500 billion);

- Increasing credit operations, treasury trading and other business activities of VCB.

3. Rights and obligations of investor(s) receiving VCB's additionally issued shares

- Organizations/ individuals receiving VCB's additionally issued shares have the obligations to comply with the laws, regulations set by the State Bank of Vietnam, VCB's Charter as well as all the regulations mentioned in the "Charter Capital increase plan" attached herewith.

- Organizations/ individuals receiving/ purchasing VCB's additionally issued shares are treated equally and are entitled to all the benefits of VCB's shareholders in accordance with laws and regulations.

BOD would like to propose the AGM to

1. Approve the capital increase plan 2022 (Plan) with main contents as mentioned in this Proposal and the detailed Plan attached herewith;

2. Approve the amendment of VCB's Charter relating capital after the share issuance in accordance with the approved Plan and actual issuance results.

3. Authorize the BOD to:

- Decide on the time to conduct share issuance to pay stock dividend from 2019 retained earnings after tax, fund allocation, cash dividend, stock dividend as per 2021 Charter capital increase plan and 2020 retained earnings after tax, fund allocation and cash dividend;

- Decide on ex-right date to finalize the list of shareholders having right after receiving approval from competent authorities;

- Decide on the detailed Charter capital increase based on the approval of competent authorities in accordance with laws and regulations and the actual issuance result;

- Proceed with all the necessary procedures to successfully conduct share issuance, register VCB's newly issued shares at Vietnam Securities Depository (VSD), additionally list those at Hochiminh Stock Exchange (HOSE), register VCB's new charter capital (in accordance with actual increased share after the issuance) with competent authorities, amend VCB's Charter (relating to the new charter capital), complete all the procedures after the capital raise in accordance with laws and regulations;

- Flexibly adjust and allocate funds for the usage mentioned in the Plan;

- Decide all the other issues relating to the charter capital increase.

Respectfully to the AGM's perusal and approval.

ON BEHALF OF THE BOARD OF DIRECTORS

CHAIRMAN

Pham Quang Dzung

PLAN

TO INCREASE CHARTER CAPITAL

THROUGH ISSUING SHARES TO PAY DIVIDEND FROM

2019, 2020 RETAINED EARNINGS

A. CAPITAL INCREASE PURPOSE

To implement the undertaking of the Government and the State Bank of Vietnam (SBV) on the restructuring of the banking sector, Joint Stock Commercial Bank for Foreign Trade of Vietnam (VCB) set the development strategy until 2025 with the vision to 2030: To become the No. 1 bank in Vietnam, one of the top 100 leading banks in Asia and top 300 largest financial institutions in the world, one of the top 1000 listed companies in the world, contributing to the growth of Vietnam.

Regarding the risk management criteria, on November 28th 2018, VCB had been officially approved by the SBV for the application of Circular 41, one year earlier than the validity period. By this event, VCB had become the first bank to meet Basel II standards in Vietnam. Whereby, one of the main pillars of Basel II application is the capital adequacy. The consolidated CAR ratio according to Basel II of VCB at December 31st 2021 was ~9.31%, meeting the minimum requirements under current regulations of SBV.

Besides, with the direction to become the leading bank in term of risk management and asset quality, VCB strives to achieve the CAR ratio not only meeting the minimum requirement under current regulation (8%) but also at higher level. In order to have a full and assessment on the internal capital requirement of VCB, the bank has studied and basically met all requirements of ICAAP, officially applied since July 2020 which is 6 months earlier than the deadline regulated by Circular No.13/2018/TT-NHNN of SBV dated on 18 May 2018. Therefore, in addition to 3 major risks assessed under Pillar 1 when computing CAR, which are credit risk,market risk and operational risk, VCB need to determine and calculate additional capital for other key risks such as concentration risk, interest rate risk of bank book. As a result, capital allocated to major risk increased by 3%. Furthermore, capital stress tests also showed the CAR gap between base case and worst case at 0.5 percentage point. Therefore, in the context of a turbulent economy both domestically and globally, VCB need to increase charter capital in order to ensure operational safety in unfavored events, maintaining business plan and risk appetite, maintaining the mission of sustainable growth.

In January 2019, VCB completed the share issuance of ~3% Charter capital (post-issuance rate) for foreign investor GIC and existing shareholder Mizuho, which brought about a capital surplus of nearly ~VND 5,000 bil. After the issuance, the Charter capital of VCB has increased to over VND 37,000 bil.

On 23 December 2021, VCB completed 2019 stock dividend payment with the payment ratio of 27.6%, increased VCB charter capital to more than VND 47.3 trillion.

Currently, Charter capital of VCB is ~VND10,800 billion lower than the planning level at the restructuring plan approved by the SBV for 2020. Charter capital is the important factor in determining, evaluating the capital structure of the banks when performing the international credit rating. The capital increase would also facilitate VCB to expand the business activities scale, meet the capital demand for the economy and invest in transformation plan to improve the management capability and operation of the bank.

Especially, in the context of prolonged covid pandemic since early 2020, which has caused pressure on the bank's asset quality, after restructuring package ends on 30 June 2022 (restructure in accordance with Circular 01), VCB's non performing loan balance is expected to increase, causing an increase of risk weighted assets and have negative impact on CAR. Currently, the bank-only CAR of VCB (as of 31 December 2021) is 9.4%, which is only 1.4 percentage point above the minimum required level and is far lower than that of other non State owned banks as well as other peers in Asean market. In the coming time, when the economy recovers