Joint Stock Commercial Bank for Foreign Trade of Vietnam : 5. SB report

THE JOINT STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIET NAM

SOCIALIST REPUBLIC OF VIETNAM Independence - Freedom - Happiness

Address: 198 Tran Quang Khai St, Ha Noi

Business Registration No. 0100112437 (15th revision dated April 14th, 2022 )

Hanoi, April 29th, 2022

REPORT OF THE SUPERVISORY BOARD ON OPERATION IN 2021 AND 2022 ORIENTATION

The Supervisory Board (SB) hereby submit the report to 2022 Annual General Shareholders' Meeting (AGM) with the following contents:

I. PERFORMANCE OF THE SUPERVISORY BOARD IN 2021 1. Organization and operation of the Supervisory Board in 2021

1.1. The Supervisory Board's organizational structure and personnel

From Jan 1st 2021 to Dec 31st 2021, the Supervisory Board of VCB includes 03 (three) members: Mr. Lai Huu Phuoc - Head of the Supervisory Board and two members including Ms. La Thi Hong Minh and Ms. Do Thi Mai Huong.

There are units under the Supervisory Board: The Internal Audit Department (in Head Office and Southern Office) and the Operational Supervisory Department.

1.2. The Supervisory Board's meetings - Findings and Recommendations:

In 2021, the Supervisory Board held periodically meeting sessions in order to discuss, take into consideration to approve the scope of work relating to the Supervisory Board's functions and duties, including: summary on performance in 2020 and performance orientation in 2021; selection of independent auditing firm for VCB financial statements and internal control system in FY2022; the Supervisory Board's appraisal on 2020 financial statements and the Supervisory Board's report content in 2021 AGM; assessment on preliminary performance of the Supervisory Board in quarterly/semi-annually basis and the Supervisory Board's orientations for the next period; implementation of tasks relating to the Supervisory Board's personnel. The Supervisory Board's meeting sessions, summoned by the Head of the Supervisory Board, have been fully participated by all of the Supervisory Board's members. Meeting minutes have been well made and filed in line with the regulations.

Additionally, the Supervisory Board has held monthly internal meetings to bring issues into discussion which are relating to VCB's governance and business management via operational supervisory and auditing result, as well as evaluate the performance of the Supervisory Board's members and functional departments.

Based on supervisory results, the Supervisory Board has given opinions, proposals and recommendations to the Board of Directors ("BOD"), the Board of Management ("BOM") to enhance supervision, risk mitigation, compliance with legislation, VCB Charter and other internal regulations, contributing to the improvement of quality, operational effectiveness as well as safe and sustainable development for VCB.

1.3. Operational results of the Supervisory Board members; remuneration, operational expense and other benefits of the Supervisory Board:

In 2021, the Supervisory Board has fully carried out functions and duties in line with regulations stated in VCB Charter, Regulations on the organization and operation of the Supervisory Board. The Supervisory Board members have well fulfilled duly assigned tasks; fully participated in periodical and unscheduled the Supervisory Board's meeting sessions, entered into discussion and voting for issues in line with the Supervisory Board responsibilities and functions.

Operational expenses for the Supervisory Board have been implemented in line with the VCB internal regulations. The remuneration in 2021 paid for members of the BOD and members of the Supervisory Board was 0.08% of consolidated profit after tax, which is complied with the Resolution No. 14/TN2021/NQ-ĐHĐCĐ approved by 14th VCB AGM dated Apr 23rd 2021 (maximum of 0.27% profit after tax).

2. VCB's 2021 business performance & the Supervisory Board's supervision:

The Supervisory Board has appraised VCB financial statements (which have been independently audited) and would like to inform the details as follows:

- The Consolidated Financial Statements for the fiscal year 2021 fully have reflected the performance and financial situation of VCB and its subsidiaries, presented in accordance SBV regulation on financial report regimes for credit institutions in accordance with the Vietnamese Accounting Standards as well as relevant statutory regulations.

- The Consolidated Financial Statements for the fiscal year 2021, in all material aspects, gave a true and fair view of financial situation of VCB and its subsidiaries as at Dec 31st 2021.

The key figures relating to equity and assets as at Dec 31st 2021 and results of operations of VCB for the year 2021 are as follows:

1. 2. 3.

Total assets:

VND 1,414,673 billion

Total shareholders' equity:

VND

109,117 billion

Results of business operation in 2020:

• - Profit before tax:

• - Corporate Income tax:

  VND VND

• - Profit after tax:

VND

27,389 billion 5,450 billion 21,939 billion

Profit after tax recorded in single financial report

 Non-controlling interest  Net profit during the year

VND VND VND

21.191 billion 20 billion 21,919 billion

3. Implementation of making, storing and updating the list of related parties of the BOD's members, the Supervisory Board's members, the CEO, founding shareholders and owners of at least 5% of the voting shares of VCB

In 2021, there have been personnel changes in the BOD's members and CEO compared to 31/12/2020, specifically: (i) On 23/04/2021, the AGM approved the dismissal of Mr. Eiji Sasaki from being BOD member and nominate Mr. Shojiro Mizoguchi to BOD for the term 2018-2023; (ii) on 03/07/2021 the BOD issued a resolution to dismiss Mr. Nghiem Xuan Thanh from being Chairman of the Board based on decision of the Political Bureau about personnel deployment and State Governor decision about dismissal from being State capital representative at VCB; (iii) on 30/08/2021, BOD nominated Mr. Pham Quang Dung to be the Chairman of the Board for the term 2018-2023. The information of related parties of the BOD's members, the Supervisory Board's members, the CEO has been updated accordingly in line with the regulation.

4. Results on the operations of the BOD, the CEO and the Supervisory Board's supervision

4.1. The Supervisory Board's supervision:

The Supervisory Board's supervision on management and administration activities of the BOD, the BOM has been regularly implemented by theme, on thebasis of orientations and guidelines on credit institution activities of the Government and State bank of Vietnam (SBV) which are related to implementation of monetary, credit and foreign exchange policies, capital contribution and investment, purchase of shares, enhancement of governance and management capability, risk management, enhancement of financial capability, ensuring safety in banking operations…

4.2. Assessment on the compliance with the Law and execution of the guidance documents by the Government, SBV in terms of governance and management activities:

The BOD, the BOM have enacted Resolutions, documents regarding the orientation on business objectives in 2021 and pivotal tasks in VCB's business management which are inaccordance with executive and administrative direction of the Government and SBV, establish agenda to deploy solutions synchronously and drastically in order that business objectives and plans adopted by AGM would be well accomplished amidst the complicated development of Covid.

VCB established and enacted internal regulations on business operation for financial institution, ensured the mechanism of internal audit and supervision, risk management for each business operation procedure. Vietcombank has controlled business operation to comply with the indicators of operational adequacy ratios in banking activities as adopted by SBV (capital adequacy ratio (CAR), liquidity ratio, loan/deposit ratios, capital contribution and shares investment ratios, credit facility,…).

4.3. Assessment on risk management

In 2021, VCB continued implementing and applying 3 pillars of Basel II in business operation, complying with the requirements of SBV on internal control of commercial banks, and in line with the international practices as follows:

- To boost the supervision of the BOD, the BOM and the Supervisory Board in terms of risk management system, enhance the performance of the Risk Mananagement Committee and the Risk Council.

- To continue the implementation of restructuring and re-arrangement of the operational mechanism, standardize the functions and responsibilities of Departments/Centers at the Head Office in the Three lines of defense model to improve risk management and business efficiency.

- To continue implementing projects of IT infrastructure system enhancement to improve banking service quality and provide management information in timely, adequate, accurate manner and supportive for the process of digital banking transformation.

- To implement the project "Enhance capital stress testing framework" to complete Internal Capital Adequacy Assessment process (ICAAP).

- VCB established, periodically assessed and updated the system to identify, measure, monitor, alert material risks such as credit risk, operational risk, market risk, interest risk in the banking book (IRRBB), liquidity risk, concentration risk.

- Proactively offered the appropriate solutions and focused on drastically implementing business operation, safe and flexible adaptation, effective supervision on Covid epidemic in bankwide scope, ensured the stabilization and step-by-step boosted the business performance as planned, while continued implementing solutions for enhancing financial capability, management capability in line with 2021 AGM Resolution.

5. The coordination among the Supervisory Board, the Board of Directors, the CEO and shareholders

Following the Internal Governance Regulations, the Supervisory Board has participated in periodical meetings of the BOD and monthly meetings of the BOM. The BOD and the BOM have provided information and documents on the management, operations and business activities of VCB for the purpose of the Supervisory Board's supervision.

The BOD and the BOM have hold meetings with reports submitted by the Supervisory Board, then directed the guideline to various units to strictly carry out the Supervisory Board's recommendations, and periodically reported the progress of actions. The Supervisory Board's reviewing results and recommendations have been informed widely in bankwide scope in semi-annual and annual conference to learn from experience, correct and remedy. The cooperation among the Supervisory Board, the BOD and the BOM has complied with regulations specified by the Law, VCB Charter and other internal regulations.

The Supervisory Board fully made the report on results of VCB operational