Báo cáo thường niên năm 2010 - Ngân hàng Thương mại Cổ phần Việt Nam Thịnh Vượng

Ladies and gentlemen, in 2010, with great efforts made by all staff of the bank, VPBank overcame most of the difficulties and challenges in the market and achieved positive results by th

No 8 Le Thai To, Hoan Kiem District, Ha Noi

Tel: 04.39288869customer Service: 04.39288880 / 1900545415

www.vpb.com.vn

to SucceSS

BoLD tRAnSFoRmAtion

TaBLE OF cONTENTS

68 Message from VPBank's chairman - Mr Ngo chi Dzung

70 Message from VPBank's chief Executive Officer - Mr Nguyen Hung

72 VPBank at a Glance

77 Board of Directors' Report

79 Board of Management's Report

BoLD tRAnSFoRmAtion

to SucceSS

Dear clients and Shareholders,

On behalf of VPBank’s Board of Directors, i would

like to express our sincere thanks to Shareholders

and clients for your support over the last year

The year 2010 has passed with challenges and

fluctuations in the country’s overall economy in

general and with businesses in particular VPBank is

not an exception but we have managed to overcome

these challenges successfully VPBank’s notable

features in 2010 are the organizational stability, the

overachievement of profit targets and the change

of the bank’s image yet, to develop further from the

second –tier to the number one retail bank in Vietnam

as well as among top five jointstock banks in Vietnam

by 2014, VPBank needs to choose our own path

Bold transformation for success or continuous

development as it is? That’s the question that the

Board of Directors and Board of Management have

pondered, and finally arrived at a solution after

working with strategic consulting partners

But where to start transformation?

a new vision with new ambitious goals and a new

brand image that is professional, dedicated, simple,

differentiated are the very first changes Subsequent

changes would be the introduction of new sales skills,

new products and services, new style transaction

points, new service model, etc, which will take place

in the near future

To achieve these ambitious goals, VPBank sets its

development mission and philosophy as follows: top

priority placed on customers’ benefits; attention paid to

employees’ and shareholders’ benefits; and effective

contributions made to community development

► To customers: VPBank is committed to maximizing

customers’ benefits by offering a wide range of

services and products at competitive prices

► To shareholders: VPBank adopts a policy of

increasing stock value and retaining high annual

dividend payout

MESSaGE FROM VPBaNK'S cHaiRMaN -

MR NGO cHi DZuNG

► To employees: VPBank always pays great attention to the work - life balance of employees VPBank ensures stable and highly competitive salary packages as compared to its competitors

in the finance and banking industry Employees are regularly trained to improve their professional skills and enjoy freedom to exercise their own political and cultural rights

► To community: VPBank is committed to fulfilling its financial obligations to the National Budget; and involving regularly in social and charitable activities to share burden with the community

Ladies and gentlemen,

in 2010, with great efforts made by all staff of the bank, VPBank overcame most of the difficulties and challenges in the market and achieved positive results by the end of the year: VPBank’s consolidated profit before tax as of December 31, 2010 was VND

663 billion or 102% of the 2010 target

We anticipate that 2011 will continue to be a difficult year for the finance and banking industry For VPBank, this will also be a very important year with a lot of transformation activities that help turn VPBank into one of the leading retail banks in Vietnam Driven by the staff’s determination and effort, we strongly believe that we will meet the expectation of our Shareholders and clients

Lastly, i would like to wish all good health, happiness and success in your careers, and expect your continuous support to VPBank during our development

ngo chi Dzung

Chairman

MESSaGE FROM VPBaNK'S cHaiRMaN -

MR NGO cHi DZuNG

MR NGO CHI DZUNG

MESSaGE FROM VPBaNK'S cHiEF EXEcuTiVE OFFicER -

MR NGuyEN HuNG

Dear clients, Partners and Shareholders,

although Vietnam made slow but steady recovery

from the global crisis in 2010, its economy remained

unstable amid such unfavorable business

environment, VPBank managed to accomplish

aggressive growth and significant achievements in

2010 Specifically, VPBank surpassed annual profit

targets with a consolidated profit of VND663 billion,

or 102% of the plan Total assets are valued at

VND59,807 billion, increased by VND32,264 billion

or 117% against that of last year VPBank also

maintained security and stability, while achieving

substantial growth; liquidity was secured while

the bank's financial strength and operating size

increased significantly

The year 2010 also saw notable changes in VPBank:

► a new brand image;

► increase in chartered capital to VND 4,000 billion;

► Successful issuance of bonds to diversify types of

mobilized funds;

► improved service quality and professionalism;

► Network coverage expansion with focus in

developed areas

However, dissatisfied with these achievements and

success, we set higher targets for the year 2011:

total assets valued at VND80,000 billion; deposit

from customers at VND36,500 billion, lending

balances at VND30,400 billion, and profit before tax

at VND1,040 billion

in 2011, priority will be given to the following plans:

(1) To enhance productivity and efficiency of transaction points;

(2) To expand customer base;

(3) To restructure and fully strengthen the

management mechanism;

(4) To build solid foundation to accelerate

development strategy in the subsequent years

in 2010, VPBank signed an agreement with McKinsey, one of the world’s leading strategic consulting companies

to restructure the bank comprehensively, so as to enhance the bank’s position, strength and competitiveness in the market

With the above-mentioned plans and ambitious goals,

we strongly believe that the solidarity and devotion of our staff, as well as the support from our clients and shareholders will be key drivers to help us successfully fulfill the plans and to develop VPBank into one of the leading retail commercial banks in Vietnam

We hope that our clients, Partners and Shareholders will join VPBank in the journey ahead

Thank you

nguyen hung

CEO

MR NGUYEN HUNG

VPBAnK At A gLAnce

Vision

To be the leading retail bank in Vietnam by 2014 and

top five commercial bank group in Vietnam

mission

VPBank sets its development mission as follows:

top priority placed on customers’ benefits; attention

paid to employees’ and shareholders’ benefits;

and effective contributions made to community

development

► To customers: VPBank is committed to maximizing

customers’ benefits by offering a wide range

of comprehensive services and products at

competitive prices

► To shareholders: VPBank adopts a policy of

increasing stock value and retaining high annual

dividend payout

► To employees: VPBank always pays great

attention to work life balance of the employees

VPBank ensures stable and highly competitive

salary packages as compared to its competitors

in finance and banking industry Employees are

regularly trained to improve their professional

skills and enjoy freedom to exercise their own

political and cultural rights

VPBaNK aT a GLaNcE

► To community: VPBank is committed to fulfilling its financial obligations to the National Budget; and continuous involvement in social activities and charity aimed at sharing burden with the community

core values

► Professionalism: applying knowledge and experience, together with professional working style, to provide customers with modern, reliable and appropriate banking products/services to fulfill all their needs

► commitment: Enthusiastically consulting, guiding and responding to customers’ inquiries to help them understand VPBank’s products and services clearly

► Differentiation: always searching for ideas to make a difference, offering first class services/products with outstanding features and a variety

of utilities to customers

► Simplicity: focusing on improving VPBank’s service systems with simple, easily understood and convenient procedures, applying modern technology

to serve customers quickly and effectively

history

Vietnam Prosperity Joint Stock commercial Bank

(transaction name: VPBank), previously named the

Vietnam Joint Stock commercial Bank for Private

Enterprises, was founded in accordance with the

License # 0042/NH-GP dated august 12th, 1993 issued

by the State Bank of Vietnam, and License #

1535/QD-uB dated September 4th, 1993 issued by the People’s

committee of Hanoi city The Bank has been officially

in operation since September 10th, 1993

other events

in 2006

► VPBank relocated its headquarters to: 8, Le Thai

To, Hoan Kiem, Hanoi Located in the center of

the capital, the new headquarters serve as both a

modern image and a firm foundation for VPBank’s

long term development

► VPBank and OcBc (Singapore) signed a

strategic cooperation agreement under this

agreement, OcBc officially became the biggest

strategic shareholder of VPBank

► VPBank signed a purchase contract with

Temenos (Switzerland) for the core Banking

system software (core Banking – T24), which is

the best technology foundation to help VPBank

develop high quality products/services for

customers

► VPBank set up two subsidiaries – Debt and

assets Management (VPBank aMc) and VPBank

Securities company

in 2007

► VPBank introduced its VPBank Platinum

Mastercard – the first built in chip card in Vietnam

in 2008

► VPBank was endorsed to increase its chartered

capital to VND2,117 billion by the State Bank of

Vietnam; and to raise OcBc’s shareholding ratio

to 15%

in 2009

► VPBank and Vietnam Prudential corp signed a cooperation agreement under this agreement, VPBank became the official agency of Vietnam Prudential corp to deliver insurance packages to consumers

► VPBank launched the Golf preferential program to VPBank Mastercard Platinum holders by signing service agreements with OaaG corporation (Singapore)

► VPBank launched its internet Banking service

► VPBank obtained the State Bank’s approval

to change its name from “Vietnam Joint Stock commercial Bank for Private Enterprises” to

“Vietnam Prosperity Joint Stock commercial Bank” With that name change, VPBank also launched its new logo and brand identity under such changes, VPBank officially entered a new stage of development with new orientations corresponding to prevailing economic and social situations

► VPBank inaugurated a new branch in Vung Tau city

► VPBank inaugurated a new branch in Binh Duong town

► VPBank increased its chartered capital to VND 4,000 billion

► The number of transaction offices in the entire network reached a total of 150

VPBaNK aT a GLaNcE

VPBaNK aT a GLaNcE

Development history

1 Key services

► Mobilize short-term, mid-term and long-term

capital from all entities in economic sectors

and residents with term and current deposits in

Vietnam dong;

► Be trusted with capital from domestic

organizations for investment and development;

► Borrow capital from the State Bank and other

credit organizations;

► Grant short-term, mid-term and long-term loans

to organizations and individuals depending on

purposes and capabilities of capital resources;

► Discount on bills, bonds and valuable certificates;

► contribute capital, establish joint venture and purchase shares in compliance with the law;

► Function as a payment service provider between customers;

► conduct foreign currency exchange, gold/silver trade and international payment, mobilize different types of capital from overseas and other banking services in foreign relationship authorized by the State Bank;

► Provide brokerage and consulting services for securities investment, custody, enterprise finance and underwriting guarantee;

► Provide services on investment, debt and assets management

50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0

2006

2006 10,111

2007 2008

2008 2009

2009 2010

2010

totAL ASSetS (VnD ‘billion)

outStAnDing LoAn (VnD ‘billion) PRoFit BeFoRe tAX (VnD ‘billion)

DePoSit (VnD ‘billion)

9,056 15,448 15,609

BoARD oF DiRectoRS' RePoRt

outstanding results

Vietnam's economy in 2010, while on the recovering path, remained unstable Various internal issues of the economy could not be resolved any time soon The world economy was undergoing complex changes and fluctuations, which presented many challenges to the Vietnam macro-economy policies Resolving these challenges that emerged within the economy structure would take considerable time as such, the biggest risks for the banking industry in 2010 were from the policy changes, interest risk and exchange rate risk

although facing such a difficult situation, VPBank had the advantage of consistently gaining support and trust from its shareholders and customers at the same time, the Board of Directors and Board of Management continuously monitored the banking market activities, so as to ensure that right and prompt decisions and business strategies were being made, on various aspects such as interest rate, credit, investment, infrastructure, resources, etc in

2010, VPBank officially announced its name change to “Vietnam Prosperity Bank” and kicked off its transformation program as a result, VPBank was able to achieve its targets for the year 2010 with satisfactory results The Bank’s brand name has become increasingly popular

Performance against the plan and significant changes in the year

in 2010, with the concerted effort made by all staff, VPBank overcame most of the major challenges in the market and attained satisfactory results by the end of 2010 in particular, the performance of each entity is as follows:

outlook and future plan

in 2011, it is forecasted that the macro economic conditions will remain complex and business environment will still be unfavorable However, with direction, attention and support from the Board of Directors, VPBank is determined to set strong business growth targets based on achievements in 2010, and prepared to seize all business opportunities for the development of VPBank The planned targets are as follows:

1 consolidated profit before tax: VnD 1,040 billion

2 Profit after tax/Average chartered capital: 19.5%

3 estimated dividend ratio: 17%

The Bank will closely monitor market situation to maintain of its business performance and ensure service quality and brand value

BOaRD OF DiREcTORS' REPORT

no items target Performance 2010 completion ratio (%)

BoARD oF mAnAgement'S

RePoRt

our performance and achievement

in 2010

in 2010, while economies worldwide faced a lot of

difficulties following the financial crisis and economic

recession, Vietnam's economy gradually recovered

and progressed, especially towards the end of the

year Vietnam’s annual GDP reached 6.78%, higher

than the target proposed by the National assembly

(i.e 6.5%) all sectors and areas also obtained

a higher growth rate compared to the previous

year However, some weaknesses and difficulties

still existed as trade deficit remained high, putting

pressure on the balance of payment; real estate

market fluctuated wildly; property prices shot up;

the annual national consumer price index exceeded

forecast, posing difficulties businesses and people

The finance and banking sector faced a lot of

difficulties: the foreign exchange shortage since

2009 became more critical in early 2010; deposit

interest rate suddenly reversed and dramatically

increased in the last 6 months, peaking at 18% per

annum at one time; gold price and exchange rate of

VND/uSD wildly fluctuated and increased sharply

in the last months of the year in addition, on 20

May 2011, the State Bank promulgated circular

No.13, which stipulated capital adequary Ratio

of credit institutions This circular represented the

most prominent policy change in 2010, significantly

BOaRD OF MaNaGEMENT'S REPORT

affecting banks’ operations and stirring up special interest from the public – especially investors Basically, the provisions in circular No.13 were designed to improve prudential standards and strictly control the usage of capital resources of credit institutions

in 2010, despite increasingly intense competition

in the financial market, VPBank made notable achievements: attaining a better-than-expected annual profit, reaching VND663 billion in consolidated profit, or 102% of the annual of target; total assets reached VND59,807 billion, an increase of VND 32,264 billion or 117% compared

to the previous year; ensuring safety, stability and achieving considerable growth; financial capability and operation scale are greatly increased, liquidity was ensured all the time

The year also saw a bold change at VPBank when

it rebranded itself with the launch of a new brand name and logo, drawing much public attention Besides, VPBank increased its chartered capital

to VND 4,000 billion, successfully issued bonds to diversify methods of capital mobilization, focused

on developing products/services, enhanced professionalism and service quality as well as expanded its operation network in developed economic areas in particular

BOaRD OF MaNaGEMENT'S REPORT

items 2009 year year 2010 total deposit Ratio of previous Against

year

% against previous year

current deposits and other deposits 3,537 6,735 14% 3,198 90%

Deposit Structure

Unit: VND ‘billion

our capital mobilization

During the year, capital mobilization experienced a lot of difficulties: deposit interest rate suddenly reversed and dramatically increased at the end of the year; competition in capital mobilization became more and more intense Banks continuously introduced many promotion programs and enticed customers of others, VPBank also launched several interesting promotion programs of its own, such as: “Surf SHi, Drive Mercedes with VPBank”; “Send money, win gold, enjoy wealth and prosperity”; “Spring gifts for a prosperous year”; “Golden week brings wealth to customers” VPBank’s interest rate always conformed to the State Bank’s regulations and flexibly adjusted according to market situation Besides, VPBank’s deposit products were increasingly diversified through the issuance of promissory notes, smart account, etc as a result, funds mobilized from VPBank’s customers remained stable and grew steadily

in 2010, VPBank’s total deposit was VND 48,719 billion, an increase of VND 24,275 billion or 99% against the previous year Deposit from customers as of 31 December 2010 reached VND 23.970 billion, an increase of VND 7,480 billion or 45% against the previous year Of which, VND 17,235 billion was from savings deposits,

an increase of VND 4,282 billion or 33% against the same period of the previous year; VND 6.735 billion were from current deposits and other types of deposits, an increase of VND 3,198 billion against the previous year

(*Source: Audit report)

Actual 2010 Same period of last year Loans under groups 3-5

capital mobilization performance

outstanding loans to customers (VnD ‘billion, %)

2007 2008 2009 2010 Qi/10 Qii/10 Qiii/10

Actual 2010 Actual (same period of 2009)

our credit and investment

as of 31 December 2010, VPBank's outstanding loans reached VND 25,324 billion, which was 110% of the target and an increase of VND 9,511 billion or 60.18% against the previous year

credit quality: The bank-wide NPL was under tight control at year end, which stood at 1.2%, a 0.41% decrease compared to the previous year and much lower than the industry average of 2.5% The percentage of Group 2 loans out of total outstanding loans was 1.15%, a decrease of VND 88 billion or 0.14% compared to the previous year

2007 2008 2009 2010 Qi/10 Qii/10 Qiii/10 m10/10 m11/10 m12/10 e2010

24,017 25,324 23,000 25,324

in 2010, investment operation grew rapidly,

expanding and diversifying the total assets structure

while effectively contributing to the bank’s profit in

the total assets structure, investment in valuable

papers and securities accounted for a larger

proportion and stood at VND 12,742 billion at year

end, of which VND 1,590 billion was government

bonds, the remaining were other types of bonds and

valuable papers

gap trading activities and liquidity coverage

VPBank’s gap trading activities and liquidity

coverage have always remained stable and its

deposit interest rate was always adjusted according

to market although fluctuations of interest rate and

liquidity caused tension in market, especially at the

year end when many banks had to stop lending,

VPBank’s outstanding loans still thrived significantly

in spite of wildly fluctuating foreign exchange rate,

especially uS Dollar, VPBank always managed to

satisfy customer's foreign currency needs

Since the beginning of the third quarter, operation in

the secondary market became more active with scale

expansion and operation diversification, yielding a

considerable income and firmly ensuring liquidity

for VPBank Deposits placed and lending extended

by other credit institutions reached VND 12,579

billion, a VND 5,231 billion or 71% increase from the

previous year in the meantime, received deposits

and borrowing from other credit organizations

reached VND 25,998 billion, a VND 18,379 billion or

241% increase from the previous year in 2010, the

turnover from transactions in interbank market was

over VND 195,056 billion Business limit in interbank

market of VPBank in 2010 increased dramatically,

from VND 12,000 billion to VND 20,100 billion,

signifying VPBank’s prestige in the interbank market

Business operation of the Treasury group showed

remarkable development, significantly contributing

to the bank’s performance with a profit before tax of

more than VND 171 billion, or 26% of the total profit

of the bank

network development

VPBank’s operation network was extensive and

covered most cities and provinces in the country as

of end December 2010, there were 150 transaction

points in total (i.e 38 branches and 112 transaction

offices) in 2010, VPBank opened 3 new branches

and 16 transaction offices Besides, most VPBank’s branches and transaction offices were located in economic zones or other strategic locations for business development also in 2010, VPBank started

a project to standardize branches and transaction offices throughout network in line with modern retail banking model

Report of financial status

Analysis of financial figures

VPBank’s capital usage efficiency had clearly increased The profit after tax to consolidated average chartered capital ratio (or Return on Equity, ROE) was 22.65%, an 8.75% increase from the previous year Profit after tax to average total assets ratio (or Return

on assets, ROa) reached 1.2%, a 0.1% decrease compared to the previous year due to a dramatic increase of total assets

Profitability

Ratio 2009 2010

Profit after tax /average chartered capital (ROE) 13.9% 22.65%Profit after tax/average total

changes in shareholders’ capital

in 2010, VPBank was approved to increase its chartered capital two times The first time was in September 2010 when VPBank’s chartered capital increased from VND 2,117 billion to VND 2,456 billion; the second time was in December 2010 when chartered capital increased from VND 2,456 billion to VND 4,000 billion as of 31 December 2010, a total

of 400,000,000 VPBank shares werein circulation (100% common stocks)

Dividends

Dividend ratio in 2010 was 10.5% paid by shares

BOaRD OF MaNaGEMENT'S REPORT

major events in the year

organization and management structures

in 2010, VPBank’s organization structure continued

to follow the division model, which had gradually

been improved, to enhance its supporting role toward

other business units

Over the past time, VPBank’s business results and

growth were found to be lower than a number of

competitors Therefore, VPBank need significant

innovations to propel itself into a faster development

track and ambitiously become a leading bank in the

market The transformation project consulted by

McKinsey officially started on 15 November 2010

This big, strategic and breakthrough project has

great influence on the entire VPBank The goal of this

project was to restructure the bank’s system so as

to enhance quality, productivity and operation scale,

thereby elevating VPBank to a higher level

Product development

in 2010, VPBank focused on the development of its

products and services as such, its service quality

significantly improved and results had been very

favorable Total service turnover of the entire bank

in 2010 reached VND 334 billion, a 66.4% increase

from the previous year

corporate product development

VPBank has been gradually developing its structures,

policies and products, to offer greater flexibility and

satisfaction to its customer’s needs, focusing on

trade finance products such as full package project

financing, logistics and guarantees Therefore,

corporate customer development plan in 2010 has

attained remarkable results, with the number of

corporate clients reaching 16,357, a 26.94% increase

from the previous year; corporate outstanding loan

reached VND 10,893 billion, a 63.63% increase from

the previous year; especially deposit from corporate

clients reached VND 5,579 billion, a 118.78% increase

from the previous year; service fee from international

payment increased 111.07% to reach VND 32.2 billion

Retail product development

in 2010, based on market research and analyses of VPBank capacity, VPBank provided comprehensive policies targeted at individual customers, strengthening sustainable relationship between VPBank and it's existing customers as well as attracting new customers Noticeably, although capital mobilization activities faced lots of difficulties due to wildly fluctuating interest rates and intense competition among banks in the year, VPBank’s capital mobilization from customers managed to achieve steady growth, thanks to new and competitive products (e.g smart accounts, savings accounts with floating interest rate, savings for cumulative luck) and other interesting promotional programs, 24/7 customer care programs in addition, VPBank also developed business connections with strategic partners such as Prudential, BiDV, Vincom, etc to attract more customers and cross-sell products and services

BOaRD OF MaNaGEMENT'S REPORT

in 2010, VPBank set up a variety of new products

integrated with advanced technology, unique

features and maximized utilities for customers at

the beginning of 2011, VPBank launched new key

products, such as Savings for cumulative Luck, VP

Super and Saving account with floating interest rate

with many distinctive features, attracting customers’

interest as well as becoming outstanding product in

the market

e-banking product development

VPBank has introduced many e-banking products

related to deposit accounts and bank cards, such as

SMS banking, internet Banking-i2b to both individual

and corporate clients With internet banking, the

system offers clients greater protection and security

by using a double authentication system, which

requires an individual password and a OTP password

(one-time password) sent to the customer’s mobile

phone This service has been updated with new

features to provide more utilities to customers

card development

compared to other joint stock commercial banks, VPBank offers a wide range of cards suitable for all groups of customers Besides autolink cards, VPBank Mastercard Platinum is dedicated to businessmen and professionals, VPBank Mastercard Mc2 was aimed at the youth and VPBank Mastercard E-card was designed for online payment in addition, VPBank also paid attention to bringing added value

to cardholders through partnership with a series of pretigious service providers

Rebranding

On 12 august 2010, VPBank officially announced it's new name – “Vietnam Prosperity Joint Stock commercial Bank” and introduced its new brand identity

VPBank’s new brand name with the slogan “act for your dream” was established based on the following factors: Professionalism, commitment, uniqueness and Simplicity

► Professionalism: applying knowledge and experience, together with quick, accurate and professional working style to provide customers with modern, reliable and appropriate banking products/services to fulfill all their needs

► commitment: Enthusiastically consulting, guiding and answering customers’ inquiries to help them understand VPBank’s products and services clearly

► Differentiation: was always researching and innovating to make a difference, offering first class services/products with outstanding features and a variety of utilities to customers

► Simplicity: focusing on improving VPBank’s service systems with simple, easily understood and convenient procedures, applying modern technology to serve customers quickly and effectively

The new symbol is a stylized image of a blooming lotus – a typical flower in Vietnam that represents VPBank’s commitment in contributing to the sustainable development, prosperity and eternity of Vietnam

BOaRD OF MaNaGEMENT'S REPORT

it is also like a cupped pair of hands holding a

growing sprout, representing the bank’s firm and

reliable foundation and support for a continuous

development and prosperity

The vibrant red of the flower petals represents

VPBank’s enthusiasm and devotion towards its work,

the bank’s creativity, prosperity and luck, as well as

its responsibility towards society and community

The typography is an open and simple design to

portray modernity and symbolize its transparency in

all banking transaction activities

The gentle curves of the symbol represent a flexible

and faithful service with simple procedures The

green color shows a new and fresh vitality, which

symbolizes a sustainable success and development

for both the bank and its customers Especially,

a line in the alphabet “k” is an upward red lotus

petal, representing VPBank’s determination to

offer customers modern and unique products and

services, best quality with a professional and reliable

manner through the bank’s efforts and practical

actions, so as to help customers attain their dreams

also, this special petal in the letter “k” expresses a

feeling of persistence and consistence with VPBank’s

orientation of sustainable development and its aim

to brand VPBank as a prestigious partner for a firm

cooperation and development with customers

concurrently, VPBank also carried out a

comprehensive restructuring project to achieve a

modern and versatile bank model that maximizes

management mechanism efficiency, technology

capability and human resources

our priorities in 2011

at the start of 2011, a number of macro-indicators

showed difficulties in the banking industry: Resolution

No.11/NQ-cP dated 24 February 2011 guiding some

measures to curb inflation, stabilize macro-economy

and guarantee social security; Directive

No.01/cT-NHNN dated 1 March 2011 on monetary management

and banking operation solutions to implement

Resolution No.11; help to control credit growth under

20% in accordance with circulars to stipulate deposit

ceiling interest rates; State Bank’s decisions to raise

key interest rates, etc in the meantime, cPi of the

the Government is carrying out fiscal and monetary tightening policies decisively, together with other measures to manage the economy Therefore, banking operations this year is expected to face more pressure and difficulties

it is also not easy to expand network distribution because the State Bank has been applying restriction policies and stopped licensing new Branches/Transaction Offices while waiting for a circular guiding the new Law on credit institutions

although VPBank has increased its capital to VND 4,000 billion and attained a more than VND 5,000 billion equity capital in 2010, there was insufficient capital for the expansion of business operation in

2011, as well as in the subsequent years The capital adequacy Ratio (“caR”), which should be kept at the minimum level of 9%, is currently 14.66% However, due to specific characteristics of VPBank’s credit operation and its growth rate since the beginning

of the year, coupled with the State Bank’s stricter evaluation criteria on loans and risk ratios on granted credit, the caR ratio can be lowered to 9%, which will fail to meet the demands of continuous credit growth, business expansion and other requirements for investment, asset acquisition and other essential and urgent needs Therefore, increase in chartered capital

in 2011 and the subsequent years is still required Based on VPBank’s overall transformation strategy approved by the Board of Directors, performances

in 2010, market activities during first months of 2011 and forecast for the remaining months of the year, the Board of Management has set a number of main targets and development plans for the whole network

Financial targets

Substantial growth was initially anticipated, with bank-wide profit-before-tax target of VND 1,349 billion, deposit and outstanding loan growth of 80% and 45% respectively However, due to the Government’s Resolution No.11, the State Bank Governor’s circular No.01/2011 and other strict macro-economic policies, credit growth must be under 20% and non-production loans must not exceed 16%, and restrictions were imposed on public expenditures There is also tighter control over money supply and possible increase of compulsory

BOaRD OF MaNaGEMENT'S REPORT

business operation and the implementation of its

plans as such, targets for 2011 will be as follows:

Unit: VND ‘billion

under prevailing conditions, it is a challenge for

VPBank to achieve the above mentioned targets,

which requires great efforts from all staffs and

can only be fulfilled provided that the State Bank

does not introduce more stringent regulations to

increase compulsory reserve ratios The increase

in compulsory reserve ratios would put liquidity in

the market under undue pressure, compelling most

banks to sacrifice profits and efficiency to ensure

payment capabilities

Directive orientations

Performing the overall transformation strategy

approved by the Board of Directors, VPBank plans to

implement 6 strategic initiatives in 2011:

► Sale Stimulation Program (SSP), which includes

processes, tools, training and incentives, etc will

6 number of transaction offices 200-210

help branches to achieve sustainable progress

in sales capacity of all sales staffs, including account officers (aO) and tellers so as to turn each branch and transaction office into an effective sales outlet The pilot program held at the Ngo Quyen branch has achieved success since august 2010 and it will be widely applied across the bank in 2011

► Key process centralization: properly and effectively centralize back-office activities to ensure a centralized control Based on analysis, evaluation

of current credit processes and transactions, identify methods to consolidate or optimise those processes to improve VPBank’s production capacity, so it can accommodate ambitious growth targets within next 3-4 years Together with improvement of credit risk management activities, process improvement will create advanced tools for credit risk management, to ensure VPBank’s capability to control credit risks effectively and grant customers credit approval in a fast and timely manner

► Network development and distribution: research and re-design branches and transaction offices according to the latest and most advanced standards so as to best satisfy customers’ needs Set up sales channels management division and establish focal points for area management Divide branch operation according to areas under the control of regional and area managers

BOaRD OF MaNaGEMENT'S REPORT

► Product innovation and development for different

customer segments to raise VPBank’s position

each group: study and develop prominent

products for specific customer segments (i.e

income, education); customized customer

policies for different groups of corporate clients

(e.g SMEs, Micro-SMEs and large corporate

clients) New products will be launched with

innovative marketing tactics, combined with

better service quality, improved sales process,

new layout of branches to improve service quality

► Build and gradually improve the risk management

apparatus, particularly market risk and operation

risk, together with enhancement of credit risk

management Enhance quality of credit risk

analysis and control; build and gradually improve

the customer evaluation and ranking system

for implementation of its price policy; build a

centralized credit risk management department

to assist the leadership in decision-making

► Organizational structure, performance management and human resources strategy: build and strengthen operation mechanism; design modern organizational structure, distinct separate business and back-office divisions, develop a proper reporting structure and ensure accountability of reporting business results; recognize and nurture staffs with potential by building an appropriate training and development program to prepare for the bank’s long-term development and network expansion

Fulfilling all the above initiatives will help VPBank transform in-depth, generating long-term effects to the bank all branches and transaction offices will undergo a complete transformation encompassing various facets, including products, service quality, sale channels, processes and branch layout, etc These changes will bring about “a totally new and different experience” to VPBank’s customers, bringing VPBank the image of a retail bank with enthusiasm, activeness, modernity and devotion to its customers

BOaRD OF MaNaGEMENT'S REPORT

SummARy oF FinAnciAL StAtementS

The Board of Management of Vietnam Prosperity Joint Stock commercial Bank is pleased to present its report and consolidated financial statements of the Bank and its subsidiaries for the year ended 31 December 2010.

The Bank has been established to provide banking services including receiving short, medium and long-term deposits from organisations and individuals; making short, medium and long-term loans and advances to organisations and individuals based on the nature and capability of the Bank's sources of capital; also including foreign exchange transactions, international trade financial services, discount of commercial papers, bonds and other valuable papers, and providing other banking services allowed by the State Bank of Vietnam

The original chartered capital of the Bank was VNDm 20,000 and subsequently supplemented for each period under the approval of the General Shareholders' Meeting as at 31 December 2010, the chartered capital of the Bank is VND million 4,000,000 (as at 31 December 2009' VND million 2,117,474)

The Head Office of the Bank is located at No 8 Le Thai To, Hoan Kiem District, Hanoi, Viet Nam as at 31 Dec

2010, the Bank has one (1) Head Office, one (1) Operations center, two (2) subsidiaries, thirty-seven (37) branches and one hundred and twenty-six (126) transaction offices nationwide

conSoLiDAteD ReSuLtS AnD DiViDenDS

Summary of consolidated results and dividends of the Bank and its subsidiaries is as follows:

2010 VnDm VnDm 2009

SuMMaRy OF FiNaNciaL STaTEMENTS

SuMMaRy OF FiNaNciaL STaTEMENTS

Board of Directors

The members of the Board of Directors for the year ended 31 December 2010 and as at the date of this report are

Full name title Date of appointment/reappointment/resignation

Mr Ngo chi Dzung chairman appointed on 16 March 2010

Mr Pham Ha Trung chairman appointed on 31 March 2006,resigned on 16 March 2010

Mr Bui Hai Quan Deputy chairman appointed on 10 December 2008,reappointed on

16 March 2010

Mr Lo Bang Giang Deputy chairmanMember appointed on 14 July 2010 appointed on 16 March 2010

Ms Nguyen Thi Nguyet Huong Deputy chairman appointed on 16 March 2010,resigned on 21 October 2010

Mr Tran Trong Kien Member appointed on 16 March 2010

Mr Soon Tit Koon Member appointed on 18 august 2009,reappointed on 16 March 2010,

resigned on 7 January 2011

Mr Nguyen Quang a Member appointed on 31 March 2006,resigned on 16 March 2010

Mr Ngo Ha Bac Member appointed on 2 May 2008,resigned on 16 March 2010

Board of Supervisors

The members of the Board of Supervisors for the year ended 31 December 2010 and at the date of this report are as follows:

Full name title Date of appointment

Ms Nguyen Quynh anh Head appointed on 16 March 2010

Ms Trinh Thi Thanh Hang Member appointed on 16 March 2010

Ms Phan Thi Thu Ha Member appointed on 31 March 2006,resigned on 16 March 2010

Mr Tran Duc Ha Member appointed on 31 March 2006,resigned on 16 March 2010

Board of Management and Chief Accountant

The members of the Board of Management and chief accountant during the year ended 31 December 2010 and at the date of this report are:

Full name title Date of appointment

Mr Vu Minh Quynh Deputy cEO appointed on 22 May 2007

Mr Nguyen Thanh Binh Deputy cEO appointed on 21 February 2002

Ms Duong Thi Thuy Deputy cEO appointed on 18 February 2008

Ms Duong Thi Thu Thuy Deputy cEO appointed on 9 april 2009

Ms Nguyen Thi Bich Thuy Deputy cEO appointed on 10 June 2010

Mr Phan Ngoc Hoa Deputy cEO appointed on 25 January 2010

Mr Low Boon Keng Howard Deputy cEO appointed on 2 March 2009

Mr Marek Hovorka Deputy cEO appointed on 5 October 2010

Mr Nguyen Toan Thang chief accountant appointed on 23 March 2009

eVentS Since the conSoLiDAteD BALAnce Sheet DAte

There have been no significant events occurring after the consolidated balance sheet date, which would require adjustments or disclosures to be made in the consolidated financial statements

AuDitoRS

The auditors Ernst & young Vietnam limited, have expressed their willingness to accept reappointment

StAtement oF the mAnAgement'S ReSPonSiBiLity in ReSPect oF the conSoLiDAteD FinAnciAL StAtementS

The Board of Management of the Bank is responsible for the consolidated financial statements of the year

2010, which give a true and fair view of the consolidated state of affairs of the Bank and its subsidiaries and

of their consolidated results and consolidated cash flows for the year in preparing those consolidated financial statements, the Board of Management of the Bank is required to'

► select suitable accounting policies and apply them consistently;

► make judgments and estimates that are reasonable and prudent;

► state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and

► prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Bank will continue its business

The Board of Management of the Bank is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any lime, the consolidated financial position of the Bank and its subsidiaries and to ensure that the accounting records comply with the registered accounting system it is also responsible for safeguarding the assets of the Bank and its subsidiaries and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities

The Board of Management of the Bank has confirmed to the Board of Directors that the Bank has complied with the above requirements in preparing the accompanying consolidated financial statements

On behalf of the Board of Management

Reference: 60755038/14469373

inDePenDent AuDitoRS' RePoRt

to: the Board of Directors

Vietnam Prosperity Joint Stock commercial Bank

(formerly known as Vietnam Joint Stock commercial Bank for Private enterprises)

We have audited the accompanying consolidated balance sheet of Vietnam Prosperity Joint Stock commercial Bank ("the Bank") and its subsidiaries as at 31 December 2010, the consolidated income statement, the consolidated statement of undistributed earnings, the consolidated cash flow statement for the year then ended ("the consolidated financial statements") as set out on pages 94 to 100 These consolidated financial statements are the responsibility of the Bank's management Our responsibility is to express an opinion on these consolidated financial statements based on our audit

Basis of Opinion

We conducted our audit in accordance with Vietnamese and international Standards on auditing applicable

in Vietnam These standards require that we plan and perform the audit to obtain reasonable assurance to determine whether the consolidated financial statements are free of material misstatement an audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements an audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of consolidated financial statements We believe that our audit provides a reasonable basis for our opinion

Opinion

in our opinion, the accompanying consolidated financial statements, in all material aspects, give a true and fair view of the consolidated financial position of the Bank and its subsidiaries as at 31 December 2010, the consolidated results of their operations and consolidated cash flows for the year then ended in accordance with the Vietnamese accounting Standards and System for credit institutions and comply with other relevant statutory requirements of the State Bank of Vietnam

Ernst & young Vietnam Limited

Vo Tan Hoang Van

Hanoi, Vietnam

20 February 2011

iNDEPENDENT auDiTOR'S STaTEMENT