Kinh Do Annual Report 2013

OF BUILDING THE FOUNDATION

for SUCCESS1993 - 2013

ANNUAL REPORT 2013

Allowing for us to reach beyond ou

r goa

ls

Vision - Missions

KDC - 20 YEARS

Company history - milestones20 years - social responsibilities Testimonials 20 years

MANAGEMENT'S REPORT

General information Corporate action 2013 Key financial highlights Share ownership List of subsidiaries and related parties Chairman's message CEO's message Board meetings and resolutions Board of Directors and Board of ManagementBoard of Management Supervisory Board Change in key personnel - management - transaction of related partiesManagement discussion Human resources Corporate social responsibility Food safety and environmental responsibility

CONSOLIDATED FINANCIAL STATEMENTS

General informationReport of the managementIndependent auditors’ report Consolidated balance sheet Consolidated income statement Consolidated cash flow statementNotes to the consolidated financial statements

CONTENTS

04

06 08 14 16

18

20 2122 26 28 30 34 38 41 4446 48

50 60 62 64

66

68 70 71 72 74 75 77

20 years of building the foundation for success

Creates a healthy and sustainable company

Allowing for us to reach beyond ou

r goa

ls

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2008

2004

2009

2005

2010

2006

2011

2007

20122013

1993

Strength in the core

FLAVOR YOUR LIFE Kinh Do creates life’s flavor through wholesome, healthy, nutritious and convenient foods.

VISION

Our CONSUMER MISSIONIs to identify and produce affordable staple and packaged foods, snacks, bakery products, beverages and juices, confectionaries and condiments, instant foods, processed meats and health supplements that are appealing. Our products are pioneering market-leading, hygienic, healthy, satisfying and conveniently available to all consumers.

Our SHAREHOLDER MISSIONIs to maximize investment returns over the long-term and to manage risks in order to give certainty and confidence that investments in our business can achieve our shareholder’s goals.

Our PARTNER MISSIONIs to create sustainable value for supply chain partners through the creation of innovative food products, which address consumer demand trends and satisfy or exceed consumer expectations; and provide equitable returns for all.

Our STAFF MISSIONIs to nurture and develop the skills and abilities of our people to meet the professional demands of their work and satisfy their personal needs. The aim is to create a dynamic, creative, innovative and dependable community within the company.

Our COMMUNITY MISSIONIs to contribute to the communities in which we operate through sponsorship programs.

MISSIONS

54ANNUAL REPORT 2013

1994

1995

1996

1997

1998

1999

2000

2001

2002

1993

2003

2008

2004

2009

2005

2010

2006

2011

2007

20122013

01KDC

- 2

0 years

01

STRENGTH in the CORE...

COMPANY HISTORY - MILESTONES

Kinh Do has always had its own trade marks demonstrating our creativity, leadership and our emphasis on Vietnamese brands in our journey beyond Vietnam.

1993•Established

Kinh Do Company with only 70 employees.

1995 - 1996•Constructed

a 60.000 m2 factory in Thu Duc District.

2000•Constructed

North Kinh Do factory in Hung Yen with total area of 28,000 m2

and total investment of VND 30 billion.

2001•North Kinh

Do Factory officially went into operations serving the North Vietnam market.

2005•Kinh Do

Corporation is officially listed on the stock exchange with ticker KDC.

•Kinh Do invested into Tribeco Company.

2006•Constructed Kinh Do

Binh Duong factory in VSIP industrial zone with total area of 13 ha and total investment of VND 660 billion.

•Kinh Do cooperated with Cadbury Group.

•Kinh Do received Labor Medal III.

2007•Kinh Do formed a

strategic partnership with Eximbank.

•Kinh Do formed a strategic partnership with Nutifood.

•Kinh Do invested into Vinabico company.

2003•Acquired Wall’s

ice cream factory from Unilever and established KI DO Corporation. Developed Merino and Celano brands.

2004•Established Kinh

Do Binh Duong Corporation. •North Kinh Do is

officially listed on the stock exchange with ticker NKD.

ANNUAL REPORT 2013 98

2008•Kinh Do Binh

Duong factory official went into operations.

•Kinh Do is voted as one of the top Vietnamese brands.

•Kinh Do is voted to be a National Brand organized by MOIT.

2010•North Kinh Do

(NKD) and KI DO Corporation were merged into Kinh Do Corporation (KDC).

•Kinh Do is voted to be a National Brand the second time organized by MOIT.

2011•Signed a strategic

partnership with Ezaki Glico Company (Japan).

2012•Completed the

merge of Vinabico into KDC.

•For the third consecutive time, Kinh Do is voted to be a National Brand organized by MOIT.

2013•Kinh Do

celebrated the company's 20th anniversary.

•Kinh Do received Labor Medal II.

1993

Throughout our 20 years journey serving consumers, Kinh Do not only brings flavor to life with our nutritious, convenient and unique products, but also carry all the sweet happy moments of family reunion, and intimate gathering during every holiday, moment and fills it with happiness for our consumers. From just offering simple snack products, Kinh Do has continuously innovated to bring hundreds of products to serve the market, many of which are now market-leading products. We continue to look forward to bringing nutritious products following the "Food & Flavor" strategy and to become a familiar choice for everyday consumers.

COMPANY HISTORY - MILESTONES

1994 1996 1997

Launched snack products

Launchedcookie products

Launchedbun products

KINH DO founded

19971998

1998 1999

2000 2005

Launchedchocolate candy

Launched candyLaunched

cake products

Launchedmoon cakes

Launchedcracker products

2012

2013

ANNUAL REPORT 2013 1312

2011

2007 2012

LaunchedWel Grow milk

LaunchedWel Yo yogurt

Launched ricecracker products

Launched Pocky products

KINH DO 20th Anniversary

SOCIAL

RESPONSIBILITIESDuring the past twenty years of extraordinary achievements, Kinh Do’s successes have always been associated with meaningful stories of social responsibility brand.

The “TASTE OF HAPPINESS” FOR CONSUMERS

During our 20 year journey with a mission to bring the "taste of happiness" to consumers, Kinh Do has continuously seeked to secure stable raw materials, invest in modern technology, and strictly maintain professional management systems, as well as high hygiene and food safety standards. We have always kept in mind that any manufactured products that does not meet our high quality of standards will not be sold to the consumers. Kinh Do always innovates and researches new products that are nutritious and unique to satisfy the changing demand of customers.

The “TASTE OF HAPPINESS” FOR 8,000 EMPLOYEES

Investment in developing the talents of our employees has been one of the keystones to the success of Kinh Do’s during the past 20 years. Going beyond providing salaries, bonuses and ensuring working safety for our employees, Kinh Do’s management team also organizes continuous training programs, and implements welfare policies to ensure the well being of employees both professionally and personally.


The “TASTE OF HAPPINESS” CORPORATION AND DEVELOPMENT

WITH OUR PARTNERS

In our strategic development, investors and partners have always been important links in our supply chain. We believe in the strategy to forming long-term sustainable and efficient partnerships to grow together. These partnerships have been the pride of Kinh Do during past for years. They are important sources of strength for us in the next stage of development.

The “TASTE OF HAPPINESS” THE COMMUNITY

Kinh Do brings the "taste of happiness" to the community through sharing and contributions. For years, Kinh Do has been the main sponsor for many major cultural, and sports events throughout the country. In addition, we also actively participate in sponsoring students and social programs such as building social housing, sponsoring eye surgeries, or heart surgeries for poor patients. Accompanying many social organizations, Kinh Do also brought joy to thousands of children and less fortunate people across the country during festivities and Tet holidays.

DEVELOPING BUSINESS WITH SOCIAL RESPONSIBILITY IS A PART OF KINH DO’S CULTURE WHICH ARE NURTURED THROUGH OUR BRANDS OVER

THE PAST 20 YEARS.

I started to be impressed with Kinh Do since its acquisition of Wall’s ice cream factory from Unilever. This is evidence that Vietnamese companies have sufficient strength and confidence to integrate with the global market. I think that during the past 20 years Kinh Do has achieved a lot of success. However, the path ahead for the company still has many difficulties and challenges. I hope this brand will always prevail to reaffirm Vietnamese pride on the world stage.

When there is a holiday or a demand for confectionery products, Kinh Do always has been my #1 choice because I believe in the credibility, quality and the taste suitability of Kinh Do's products. 20 years passed like a flash and Kinh Do has grown strongly proving my choice for the family was right. I hope this brand will continue to grow and develop better products for consumers.

Since I was a child, I have seen my mother buy Kinh Do products for our family. As I grew up, I also prioritized the products of this brand. Although it is a Vietnam confectionary brand, I found that the design, and quality of products and food hygiene issues were always well maintained by the company. I also know that the company's products are also exported to many countries around the world such as America, Japan, South Korea, etc. This is an outstanding achievement and a pride of Vietnamese brands.

Mr. Tran Thanh Long Chairman of Hochiminh Sponsoring for

Poor Patients Association

Ms. Huynh Thi Thanh Nhan District 12

(retired teacher)

Mr. Nguyen Van Duong Age 55

Ton That Thuyet, District 4

Mrs. Vo Thi Ngoc Lien Age 50 - Tran Ke Xuong, Ward 7,

Phu Nhuan District

Ms Do Thi Hong Loan Age 25 - Nguyen Huu Tien,

Tan Phu District

Kinh Do is one of the few companies that is very passionate with the community. For sponsoring of Poor Patients Association, Kinh Do spent a lot of enthusiasm financing many association's activities during the past 17 years. We appreciate the companionship of the company not only through sponsor contributions, but also in the devotion, and passion of the leaders and staff of the company. We believe that as the company grows, Kinh Do’s culture of sharing responsibility with the community will also continue to develop bringing further contribution to the community.

Through the compassion "Bring back the light to poor blind patients" program of the Sponsoring for Poor Patients Association and Kinh Do Corporation, my eyesight was recovered. Being able to see again, I also recovered my motivation to rise again in life. I rejoiced and honored to represent over 400,000 cataract patients to express our most sincere gratitude to the Association and Kinh Do. We wish your company success so that the sharing and caring for the community that your company has continuously done our the past 20 years can be shared even further to those less fortunated.

TESTIMONIALS


I have been with Kinh Do for more than 15 years: Since the day the company was just a small establishment until it has become a major corperation. I am lucky to be able to work in such a professional environment. Following the development of Kinh Do, I have also undergone major changes becoming more prosperous and having better relationships. I believe the whole of Kinh Do will always unite and work together to have more successes in the next development stage.

I still remember the feeling when Kinh Do acquired the ice cream factory from a multi-national corporation in 2003. I wondered how my lives, salaries and other related issues would turn out. But we were really relieved as Kinh Do has done far more than our expectations. I truly feel honored and assured as a member of the Kinh Do family. And if I was granted one wish, I would wish Kinh Do and KI DO to grow steadily beyond Vietnam.

I invested in many stocks in VN30 group of companies, including KDC. Having closely followed the development of the company, I noticed that with each passing year Kinh Do not only reached the targets announced with shareholders but the management team always boosted investor confidence by setting a transparent strategic direction. I wish the company to continue to grow and create more value for shareholders in the future.

Having been with the company and attending many activities for over 10 years, I found Kinh Do changing every year. The company organized many activities to help facilitate teamwork and collaboration among employees as well as demonstrate their own talents. I hope that our company will develop further and continue to strengthen the bond of its employees so that whenever Kinh Do is mentioned, people will not only think about the quality of our product but also think of a friendly and professional working environment.

Mr. Pham Van Hoang Hoang Tan Distributor

Mr. Doan Ngoc Thai Thai Duong Distributor

Mr. Phan Thong Cuong General Director Binh Dong Flour Company

Supplier

Ms. Vu Thi Thu VuiCakes Line – BKD

Ms. Nguyen Thi Kim NgaKI DO production

Mr. Nguyen Quoc Binh Professional Investor

Ms. Truong Thi Lan PhuongFinance Manager, KDC

With Kinh Do’s 20 years of experience in the food industry, we as partners have always believed in the direction and growth of the company in the future. The strength of brand, and market position in categories as well as Kinh Do’s diverse product portfolio are major advantages that helped us confidently make long term investments into the market. Hoang Tan Distributor had the opportunity to cooperate with Kinh Do for over 18 years and we recognize the rapid, drastic and long-term oriented changes that were made by Kinh Do’s management. These changes will help to further reinforce the confidence of distributors in developing alongside the company during the next 20 - year journey.

We have many years of experience in the consumer staple industry but we were most impressed when partnering with Kinh Do Corporation. The respect towards distributors and the company’s close guidance, and support in resolving our problems make us feel secure to collaborate with the company. It can be said that the cooperation with Kinh Do is not just a business or career, but also a pride, and long-term commitment.

After 20 years of rapid development, we believe that Kinh Do will continue to be a leading company in Vietnam confectionary market.

Our company has a long history of cooperating and collaborating with Kinh Do. We appreciate Kinh Do’s philosophy of growing together with partners in the value chain of the company. Kinh Do has always set very strict standards for inputs and has closely collaborated with us to manage the quality of products throughout supply chain from inputs received from suppliers to transportation to Kinh Do’s warehouse and finally to products deliver to customers. We also manages jointly with Kinh Do the price fluctuations of inputs. After 20 years of development, as the scale of Kinh Do Corporation increase, so is our cooperation with Kinh Do. We are delighted with such development and wish the relationship between the two parties will continue to grow further.

...creates a HEALTHY & SUSTAINABLE COMPANY 0102Man

agem

ent's

Report

KINH DO CORPORATION8/F, Empress Tower, 138-142 Hai Ba Trung Street, Da Kao Ward,

District 1, Ho Chi Minh City, Vietnam.Tel: +84 (8) 38270838 Fax: +84 (8) 38270839

Email: [email protected]: www.kinhdo.vn

Exchange Listed: Ho Chi Minh Stock Exchange (HSX)Symbol: KDC

Chartered Capital: VND 1,676,282,700,000

GENERAL INFORMATION

LOCAL INDIVIDUALSLOCAL INSTITUTIONS

FORE

IGN IN

STITUTIONS

FOREIGN INDIVIDUA

LS

58,565,196Shares

35.25 %

72,339,538Shares

43.54 %

32,264,473Shares

19.42 %

2,966,807Shares

1.79 %

166,136,014Shares


30/01/2013ESOP SHARE ISSUANCEIssued 1,320,000 bonus shares for Board of Management and issued 5,281,000 discounted shares for Board of Directors, Supervisory Board, and employees.

27/02/20132012 DIVIDEND PART 1 VND 165 billion paid to existing investors at the rate of 10%.

27/06/2013VINABICO SHARE SWAP1,105,645 KDC shares issued to swap with Vinabico shares.

14/08/20132012 DIVIDEND PART 2VND166 billion paid to existing investors at the rate of 10%.

CORPORATE ACTIONS 2013

GROUP SALES

GROSS PROFIT

VND 4,561

10.1%

VND 3,051

BILLION

VND 1,976BILLION

VND 623BILLION

VND 619BILLION

VND 707BILLION

+ 6.4% compare to 2012


Return on Equity

VND 331billionDividends

Earnings Per Share

+ 22.1% compare to 2012

+ 26.3% compare to 2012

+ 53.3% compare to 2012

OPERATING PROFIT

PROFIT BEFORE TAX

OPERATING CASH FLOWS

VALUE FOR SHAREHOLDERS EFFICIENT USE OF CAPITAL

KDC ACHIEVED

CONSERVATIVE USE OF DEBT

0.31x 0.12xDebt Equity RatioExternal GearingRatio

STRONG CASH RESERVE FOR GROWTH

2.54x 2.30xCurrent Ratio Quick Ratio

ASSET TURNOVER

0.77x

RETURN ON ASSETS

7.7%

Gross Pro�t Margin 43.3%

Operating Pro�t Margin 13.7%

KEY FINANCIAL HIGHLIGHTS

GROUP SALES

GROSS PROFIT

VND 4,561

10.1%

VND 3,051

BILLION

VND 1,976BILLION

VND 623BILLION

VND 619BILLION

VND 707BILLION



Return on Equity

VND 331billionDividends

Earnings Per Share

+ 22.1% compare to 2012

+ 26.3% compare to 2012

+ 53.3% compare to 2012

OPERATING PROFIT

PROFIT BEFORE TAX

OPERATING CASH FLOWS

VALUE FOR SHAREHOLDERS EFFICIENT USE OF CAPITAL

KDC ACHIEVED

CONSERVATIVE USE OF DEBT

0.31x 0.12xDebt Equity RatioExternal GearingRatio

STRONG CASH RESERVE FOR GROWTH

2.54x 2.30xCurrent Ratio Quick Ratio

ASSET TURNOVER

0.77x

RETURN ON ASSETS

7.7%

Gross Pro�t Margin 43.3%

Operating Pro�t Margin 13.7%

This year marked the completion of the corporate restructuring. We continue to seek improvements in operations and aim to continue with ongoing efficiency improvements. Leveraging on the strong platform, we will seek opportunities to enhance our growth internally and externally.

2013: COMPLETED RESTRUCTURING OF THE GROUP PLATFORM


2009 2010 2011 2012 2013

1,000

2,000

3,000

4,000

5,000

Unit: Billion VND

1,663

3,202

4,247 4,2864.561

REVENUE

VND1,976BILLION

GROSS PROFIT IN 2013

M&A PERIOD

KEY FINANCIAL HIGHLIGHTS (continued)

ASSET EFFICIENCY OVER THE YEARS

Gross Profit (Billion VND) and Gross Profit Margin (%)

Debt Ratios (x) Liquidity Ratios (x)Performance Breakdown (Billion VND)

Asset Efficiency (x)

Dividend (Billion VND) Earnings per Share (VND)

2012 2013201120102009

500

_

1.000

1.500

2.000

2.500

42

40

38

36

44

4644%

39% 39%

44% 43%

2012 2013201120102009

50

100

_

150

200

250

300

350

134 122144

311331

2012 201320112010

700

_

1,400

2,100

3,500 12%

10%

8%

6%

2,800

2,0822,313

2,774 3,051

7.9%7.2%

9.1%

10.1%

Adjusted EPS Adjusted ROE

2012 2013201120102009

30

_

60

90

60 65

4943

Collection DaysInventory DaysBusiness Cycle

Payable Days

33

2012 2013201120102009

0.40

0.20

_

0.60

0.80 0.72

0.31

0.51

0.36 0.31

0.21 0.12

0.26

0.14 0.12

Debt/Equity External Gearing (times) Current Ratio

2012 2013201120102009_

1.5

2.3

1.4 1.7

2.5

1.4

1.8

1.2 1.5

2.3

0.5

1.0

1.5

2.0

2.5

3.0

Quick Ratio

_

4,561 2,584

40 997

395 619 1,000

2,000

3,000

4,000

5,000

NetSales

COGS NetFinancialIncome

SellingExp

G&AExp

Pro�tBefore

Tax

2012 2013201120102009

0.30

_

0.60

0.90

0.39x

0.64x

0.78x 0.76x 0.77x10.8%

13.9%

5.1%6.3%

7.7%

0.0%

4.0%

8.0%

12.0%

16.0%

Average Asset Turnover ROA (%)

Business Cycle (Days)


SHARE OWNERSHIP

BOARD OF DIRECTORS SHARE OWNERSHIP %

Tran Kim Thanh 0.08%

Tran Le Nguyen 8.42%

Wang Ching Hua 0.52%

Vuong Buu Linh 0.05%

Vuong Ngoc Xiem 3.48%

Tran Quoc Nguyen 0.34%

Nguyen Van Thuan 0.01%

Nguyên Gia Huy Chuong 0.00%

Nguyen Duc Tri 0.00%

BOARD OF MANAGEMENT SHARE OWNERSHIP %

Tran Le Nguyen 8.42%

Vuong Buu Linh 0.05%

Vuong Ngoc Xiem 3.48%

Wang Ching Hua 0.52%

Nguyen Xuan Luan 0.07%

Mai Xuan Tram 0.04%

Bui Thanh Tung 0.04%

Tran Quoc Nguyen 0.34%

Tran Quoc Viet 0.02%

Tran Tien Hoang 0.09%

Kelly Yin Hon Wong 0.02%

Ma Thanh Danh 0.00%

SUPERVISORY BOARD SHARE OWNERSHIP %

Le Cao Thuan 0.00%

Vo Long Nguyen 0.00%

Luong My Duyen 0.00%

34.64%THROUGH DIRECT AND

INDIRECT OWNERSHIP OF BOARD OF DIRECTORS AND BOARD OF MANAGEMENT.


KINH DO BINH DUONG CORPORATION

Address: Singapore Industrial Park, Thuan An District, Binh Duong Province, Vietnam.

Operating scope: Process agricultural products and foods; produce confectionery, purified water, and fruit juice; and sell and purchase agricultural products and foods, industrial products, and fabric.

KI DO CORPORATION

Address: Cu Chi Northwest Industrial Park, Cay Sop Village, Tan An Hoi Ward, Cu Chi District, Ho Chi Minh City, Vietnam.

Operating scope: Produce and trade all kinds of food and drink products such as ice, ice cream, milk and other dairy products.

VINABICO CONFECTIONERY JOIN STOCK COMPANY

Address: 436 No Trang Long Street, Ward 13, Binh Thanh District, Ho Chi Minh City, Vietnam.

Operating scope: Produce and sell confec-tionery and purified water.

LIST OF SUBSIDIARIES AND RELATED PARTIES

100%

PERCENTAGE OWNERSHIP

100%


99.8%


LAVENUE INVESTMENT CORPORATION

Address: 7th floor, Sun Wah Tower, 115 Nguyen Hue, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam.

Operating scope: Operate in real estate industry.

NORTH KINH DO FOOD JOINT STOCK COMPANY

Address: Ban Yen Nhan Town, My Hao District, Hung Yen Province, Vietnam.

Operating scope: Produce and process food stuffs, including various ranges of high-grade cookies, to trade food and food stuffs, various type of beverages and liquors as well ascigarettes produced in Vietnam, and to lease a factory.

TAN AN PHUOC COMPANY LIMITED

Address: 6/134 National Road No. 13, Hiep Binh Phuoc Ward, Thu Duc District, Ho Chi Minh City.

Operating scope: Operate in real estate industry.

50%


49%


100%



NET PROFIT BEFORE TAX 619BILLION


CHAIRMAN'S MESSAGE

Dear Stakeholders,

2013 was an extraordinary year and marked the 20th anniversary of Kinh Do Group. This is a momentous and poignant milestone for the Group and for me personally as one of the founders of the Group.

We first established the company at the beginning of the 1990’s when Vietnam and the confectionery industry was a very different place. Founded at a very early stage of the market, our company has been able to grow consistently along side the many changes of the market. For the past 20 years, the overall food industry has witnessed vast changes in a variety of aspects. KDC has become a market leader across major confectionary categories and is one of the most recognized Vietnamese brands in the country.

On this occasion we are pleased to report that we have delivered our best results in our company’s history with revenues reaching VND 4,561bn and net profit before tax at VND 619bn while also completing stage 4 of the restructuring process “Profitable Growth”. More importantly we gave a commitment two years ago to increase our return on equity and we have achieved the first milestone with an ROE for 2013 at 10.1%. In addition, we continued to improve the

efficiency of our consolidated platform. We have established a nationwide distribution network and a broad product portfolio with many products being market leaders and loved by consumers. These achievements are significant given the challenging economic conditions and under which we achieved all this and also the added complexity of a corporate transformation of such scale. This entire undertaking was not merely a sum of parts consolidation of companies but also an undertaking in which we transformed and unified our company under a two part strategy: 1) to unite the company under one consolidated platform and 2) to elevate the product strategy to a broader Food & Flavor offering.

Looking back at our heritage these past 20 years, we were able to build our company’s competitive advantage and make use of opportunities amidst increasingly competitive environment. Not only was able to build an extensive distribution networks and a portfolio of well-known brands, KDC was able to build up many brands to become the leader in their respective categories with sales of over VND 1,000 billion such as Solite, AFC, Cosy, Kinh Do mooncakes, Merino and Celano ice cream.

BILLION4,561

REVENUE

LOOKING BACK AT OUR HERITAGE THESE PAST 20 YEARS, WE WERE ABLE TO BUILD OUR COMPANY’S COMPETITIVE ADVANTAGE AND MAKE USE OF

OPPORTUNITIES AMIDST INCREASINGLY COMPETITIVE ENVIRONMENT. WE HAVE BUILT A SUFFICIENTLY ROBUST PLATFORM TO BE ABLE TO ENDURE DESPITE ANY

EXTERNAL PRESSURES. THIS PLATFORM WILL CONTINUE TO GROW IN LINE WITH THE OVERALL MARKET AND CONTINUE TO PROVIDE A STEADY RETURN ON CAPITAL.

With regards to corporate governance, KDC has built a foundation for sustainable growth through a professional management system and an experienced management team. KDC was able to build a operational system of many SBUs all under the management of an Executive Management Committee (EMC) which helped to increase the efficiency of the subs overall. Another important basis of our success has been the investment in IT systems to improve our commercial activities and management capability. The modernization of our operations and incorporation of new technology have vastly improved our management capability decision making mechanism which resulted in better company performance overall.

During our journey, KDC also led the M&A market with various cooperation, partnership and investment deals to broaden the product portfolio which built the Group to the scale of today.

I believe that post the challenging restructure process that we underwent for the past years our company has been able to build a strong foundation for growth that will help us succeed in the future amidst an increasingly competitive and integrated environment.

Vietnam is now becoming increasingly integrated into the global supply chain with the WTO and AFTA becoming effective in 2018 whereby removing many trade barriers. In addition, Vietnam will also participate in the TPP and become a part of a larger free trade zone through multilateral free trade agreements. Amidst such globalization trends, KDC will continue to strengthen our competitive core and maintain the market leading position while actively seeking new partnership and cooperation opportunities to accelerate growth and diversify our product portfolio to serve consumers.

Though we have achieved many successes in the past, KDC will continue to seek ways to improve our operational systems, strengthen our scale and competitive advantages beyond current levels to create a platform for future growth. The goal is to be ready for future acquisitions in the coming years which will accelerate our growth opportunities.

During our years of development and through our many cooperations and partnerships, KDC has always prepared extensively in order to swiftly capitalize on any investment


opportunities that arose. KDC will also continue to seek new partnerships that can create disruptive changes to the market and strengthen our business capabilities. Core business however remains our key focus following the Food & Flavor strategy with us actively seeking investment opportunities in companies that fit with our preset criteria, as well as cooperation and partnership with global companies to bring the Kinh Do brand abroad.

Over the past 20 years, we have strived to grow KDC and have successfully become one of the leading brands in the food industry. From a small factory in 1993, we have become a major food corporation in Vietnam with an average growth rate of over 30% per year during the first 10 years. During the next 10 years, we have made many bold and remarkable initiatives including the acquisition of Wall’s ice cream factory from Unilever, the listing of our shares on the stock exchange, and many acquisitions, partnerships, and cooperations with both domestic and overseas companies. Throughout those years, we consecutively achieved our business targets, and grew the company steadily creating enormous values for

shareholders, the community, and our supply chain partners. We succesfully completed our restructuring process and are now ready to seize new opportunities within and even beyond Vietnam. For the next 10 years journey, KDC will continue to pursue deals with remarkable scale to enter into new categories and increasingly cooperate with new partners to grow beyond Vietnam seeking more achievements and writing new history for the company.

I would like to thank our many stakeholders, shareholders, investors, employees, partners, suppliers, distributors for their business, support, patience, commitment throughout our journey and we truly could not have made it this far without you. These will be the strength and the source of confident for us during our next 10 years of development.

Finally, I would like to wish you all great health and success in the upcoming year.

TRAN KIM THANHChairman Kinh Do Group

FOR THE NEXT 10 YEARS JOURNEY, KDC WILL CONTINUE TO PURSUE DEALS WITH REMARKABLE SCALE TO ENTER INTO NEW CATEGORIES AND INCREASINGLY COOPERATE WITH NEW PARTNERS TO GROW BEYOND VIETNAM SEEKING MORE ACHIEVEMENTS AND WRITING NEW HISTORY FOR THE COMPANY.

WITH THE COMPLETION OF STAGE 4 OF THE RESTRUCTURING PROCESS IN 2013, I BELIEVE THAT WE HAVE ACHIEVED WHAT WE SET OUT TO DO IN 2010, WHICH WAS TO CREATE A SCALABLE AND UNIFIED PLATFORM FOR FUTURE GROWTH THAT WOULD BE ABLE TO RAISE OUR PRODUCT DEVELOPMENT STRATEGY TO THE NEXT LEVEL, THE FOOD & FLAVOR STRATEGY.


CEO'S MESSAGE

Dear Valued Shareholders,

We have witnessed a majority of the economic headwinds dissipate both in Vietnam and globally, but the overall market continued to be constrained by microeconomic issues that limited growth in 2013. We again managed our business with focus on the core food business using all our strengths and experience to find and exploit market opportunities. In 2013, KDC also completed stage 4 of the restructuring process: Profitable Growth. The result of such change was a record profit for 2013, despite slower consumption KDC.

We have persevered to pursue our restructuring process during the past 5 years through 4 stages of change: Preparation (2009 – 2010) – Building Foundation (2011) – Profit through Efficiency (2012) and Profitable Growth (2013). During 2010 and 2011 we were focused on internal changes and also process alignments. We spent the greater part of two years syncing up the different companies and the operations. By 2012 we entered phase 3 of our transformation in which we targeted on profitability and specific changes which leveraged process realignments to better quality profits (Profitability by Efficiencies) including major changes in the sales process, brand management, working capital management and rationalization of products.

With the completion of stage 4 of the restructuring process in 2013, I believe that we have achieved what we set out to do in 2010, which was to create a scalable and unified platform for future growth that would be able to raise our product development strategy to the next level, the Food & Flavor strategy. The KDC platform will continue to see incremental

improvements with marginal efficiency gains over the long term. Growth over the last two years was constrained by the overall market conditions and slower consumption but with a market- focused strategy KDC was able to grow both revenue and profit.

Last year, the product portfolio restructuring process focused on core SKUs and continued to focus on generating further efficiencies, which contributed to the improved profitability of KDC. In addition, the company further diversified its product ranged through the launching of many new type of products including: whole grain AFC, Kinh Do fresh bread, and other new products serving the delights and gifting segments during Mid Autumn and Lunar New Year holidays.

Reviewing our product strategy, for 2013 we entered into the beginning phases of the Food & Flavor strategy which is defined as meal compliments and replacements. The goal was to improve choices for consumers through new types of products and at the same time improve the value proposition for consumers through better quality products and innovations to extend choices. The product strategy is a much longer-term strategy and while we began the process in 2013, it is nowhere near done, especially with the adverse market conditions we faced in 2012 and 2013. With market conditions constraining the distribution channel, we focused more closely than ever on profitability by leveraging our existing portfolio and deliberately delaying the launch of new products under the Food & Flavor strategy. We recognized the fierce competition of new categories, which we intended to participate in and thus wanted to prepare ourselves

1,976BILLION

GROSS PROFIT

extensively in order to have a steady footing upon entry. For the past year, we have focused on improving profitability using our core existing products and achieved record results.

The extraordinary performance of KDC in the past year is the most sound evidence of the committment of our management team in delivering results amidst a challenging environment. In particular, the company achieved VND 4,562 billion in net revenue in 2013 despite difficult market conditions and slower consumer demand. The company’s profitability also improved with profit before tax reaching VND 612 billion, increasing 24.9% compared to 2012. These achievements have shown the positive effects of the restructuring process of our company undertaken during the past few years. Furthermore, the management team’s committment and dedication have improved profitability over the last four years since the change began. These factors together have formed a strong foundation to continue generating value for shareholders in the future.

We have also institutionalized our group management process, which now includes a well-rounded Executive Management Committee that’s directly responsible for many key functions and driving the strategy of the company. This committe will now able to make the day-to-day decisions in a timely and effective manner to maximize opportunities. By assigning responsibilities directly to the Executive Management Committee – EMC, we are now able to manage the increasing complexity and scale of the organization.

As we look beyond the completion of the final phase of our transition, we believe we have established a strong enough foundation

WITH THE ADVANTAGE OF SCALE AND EXISITING STRENGTH WHICH KDC HAS BUILT OVER THE YEARS, I BELIEVE THAT KDC IS NOW A COMPANY READY TO PURSUE NEW PARTNERSHIPS AND COOPERATION IN BOTH VIETNAM AND OVERSEAS. WE ARE READY TO BUILD OUR SUCCESS IN NEW POTENTIAL CATEGORIES, CREATING VALUE FOR SHAREHOLDERS IN 2014 AND BEYOND.

operationally and strategically to carry us forward. This platform allows us to be focused and flexible enough to capitalize on the potential opportunities while managing unforeseen risks. Currently, KDC is moving to the next stage of development with revenue target of VND 5,150 billion and profit before tax of VND 660 billion for the year of 2014.

For the next part of this journey, we will leverage the scale and strength of our platform built over 20 years as well as embark on a continuous improvement process to ensure that we will not ever be complacent. We will strive to improve our operations and find incremental improvements throughout our processes. This will be translated into improved profitability and steady growth in financial returns for our stakeholders and supply chain partners.

With the advantage of scale and exisiting strength which KDC has built over the years, I believe that KDC is now a company ready to pursue new partnerships and cooperation in both Vietnam and overseas. We are ready to build our success in new potential categories, creating value for shareholders in 2014 and beyond.

On behalf of our management team, I want to thank our shareholders, investors, partners for your support and valued contribution to Kinh Do’s successes over the past 20 years. I wish that our cooperation will continue to be strengthened so that our company can continue to deliver value to our shareholders and partners.

TRAN LE NGUYENCEO Kinh Do Group


BOARD OF DIRECTORS MEETING CONTENTS

10/01/2013 Meeting: Approved the merger of Vinabico 23/01/2013 Meeting: Approve the first dividend payment of 2012 10/04/2013 Meeting: Approve all issues that will be present to shareholders during the AGM. 23/04/2013 Meeting: Approved first quarter financial statements of 2013 26/04/2013 Meeting: Approved company charter for 2013 08/07/2013 Meeting: Selected auditor for 2013 01/08/2013 Meeting: Approve the second dividend payment of 2012 20/10/2013 Meeting: Reviewed company performance of the first nine months of 2013, review Mid-

Autumn season performance, approved financial statements of 3Q2013. 04/11/2013 Meeting: Issued resolution to ask for shareholders’ approvals to conduct a private

issuance to strategic shareholder

No MEMBER POSITION MEETING ATTENDED % NOTES

1 Tran Kim Thanh Chairman 9/9 100%

2 Tran Le Nguyen Vice Chairman 9/9 100%

3 Wang Ching Hua Member 9/9 100%

4 Vuong Buu Linh Member 9/9 100%

5 Nguyen Gia Huy Chuong Member 9/9 100%

6 Vuong Ngoc Xiem Member 9/9 100%

7 Tran Quoc Nguyen Member 9/9 100%

8 Nguyen Van Thuan Member 9/9 100%

9 Nguyen Duc Tri Member 9/9 100%

10 Le Cao Thuan Head of SB 9/9 100%

11 Vo Long Nguyen Member of SB 9/9 100%

12 Luong My Duyen Member of SB 9/9 100%

BOARD MEETINGS AND RESOLUTIONS

RESOLUTION OF BOARD OF DIRECTORS

No RESOLUTION NO. DATE CONTENTS

1 01/2013/NQ-HĐQT 18/01/2013 Approved merger of Vinabico

2 02/2013/NQ-HĐQT 23/01/2013 Approved the first dividend payment of 2012

3 03/2013/NQ-HĐQT 08/07/2013 Selected auditor for 2013

4 04/2013/NQ-HĐQT 01/08/2013 Approved the second dividend payment of 2012

5 05/2013/NQ-HĐQT 04/11/2013 Issued resolution to ask for shareholders’ approvals on issuing new shares for stategic investors

BOARD OF DIRECTORS’ ACTIVITIES WITH BOARD OF MANAGEMENT:

Supervised of the Board of Management conducted on a quarterly basis through quarterly meetings. As six (6) members of Board of Director are in Board of Management, the Board of Directors were able to fully appreciate

and comprehend the business issues faced by the Management and therefore was able to efficiently supervise the activities of the Board of Management.

BOARD OF DIRECTOR’S COMMITTEES ACTIVITIES

Until 4Q2013, Kinh Do Corporation has not formed any committee.


A entrepreneur with a lifetime of experience in management and business, he is a combination of boldness in driving the company and caution in managing risk. Under his leadership, Kinh Do has grown from a small family business to become Vietnam’s number one confectionary company. His strengths are his acute business senses, thorough risk analysis, and quick decision making mechanism. These abilities have help him to many successes in the M&A field especially acquisition of Wall’s ice cream factory from Unilever.

Mr. Thanh’s leadership strategy for Kinh Do Corporation is to create the best company, consisting of the best people built around the best processes. Dedicated to many activities and all milestones of Kinh Do, he is the source of inspiration and the guiding light for the company staffs. He is currently Chairman of the Board for Kinh Do Corporation and sits on various boards of other large Vietnamese corporations; helping to contribute to the growth and development of the country. He is a Member of the Central Committee of the Vietnam Homeland Front. He has received several awards and accolades from both the central and local Government of Vietnam for his significant contributions to the socio-economic developments of the country. Mr. Thanh is the founder of Kinh Do Corporation.

An experienced entrepreneur with a track record of building large and profitable businesses over the last few decades, Mr. Nguyen has been instrumental in the development of Kinh Do Corporation to become one of the biggest food corporation in Vietnam. Under his management, Kinh Do has emerged as one of the most well-known brands in Vietnam in addition to a broad portfolio of market dominating products that are the best in their categories. Mr. Nguyen successfully initiated and engineered the acquisition of the Kido’s ice cream factory and spear-headed the development of the market for ice cream and built the business as it is today. In addition, He is also very successful in other M&A deals. He wishes for the long lasting of Kinh Do brands.

Mr. Nguyen serves concurrently as both the Vice-Chairman of the Board and as the CEO of Kinh Do Corporation. He is an active member of the board of directors for the Vietnam Chamber Commerce and Industry (VCCI) and participates on the board of several prominent companies in Vietnam.

The founder of Kinh Do Corporation,Chairman of the Board of Directorsof Kinh Do Group

Mr. TRAN KIM THANHCo-founder Kinh Do Corporation,Vice Chairman of the Board of Directors& CEO of Kinh Do Group

Mr. TRAN LE NGUYEN

BOARD OF DIRECTORS AND BOARD OF MANAGEMENT


Mr. Wang has over 20 years of experience in the food manufacturing and processing industry, and was one of the original founders that helped to set up Kinh Do Corporation’s manufacturing operations. He has since been instrumental in helping to develop and scale Kinh Do Corporation’s manufacturing footprint in Vietnam.

He is a member of the Board of Directors and a Vice President.

Co-founder Kinh Do Corporation,Member of the Board of Directors & Vice President Kinh Do Corporation

Mr. WANG CHING HUA

Ms. Xiem co-founded Kinh Do Corporation and has been actively participating in the management of the company since. She has many years of experience in managing operations and particularly in retailing & exporting. With her experience and hands-on approach, she has been a key part of the management team since the founding of the company and also contributed largely to the growth of the company.

Ms. Xiem is currently a member of the Board of Directors and a Vice President at Kinh Do Corporation.


Mrs. VUONG NGOC XIEM

Ms. Linh co-founded Kinh Do Corporation and has been active in the development and growth of the company since. She is experienced in business and supply chain management; contributing greatly to the development of both for Kinh Do Corporation and all its subsidiaries. Under her guidance, Kinh Do implemented the ERP system by SAP, effectively increasing the company’s capability in making timely and accurate decisions with the right information.

Currently, Mrs. Linh is both a member of the Board of Directors and a Vice President.


Mrs. VUONG BUU LINH

BOARD OF DIRECTORS AND BOARD OF MANAGEMENT

Mr. Nguyen has over 17 years of experience managing various member companies within Kinh Do Corporation. He has held several key senior management positions including General Manager, Board Member and Vice President at both the group and subsidiary level.

He is currently the General Manager of the KI DO Corporation, a member of the Board of Directors at Kinh Do and Vice President of Kinh Do Corporation.

Mr. TRAN QUOC NGUYEN Member of the Board of Directors & General Director of KI DO Corporation

Mr. Thuan is a Member of the Board of Directors of Kinh Do. He has a Doctorate in economics, and is currently the Dean of Finance – Banking Department at Ho Chi Minh City Open University. He has over 30 years’ of experience as a lecturer in the field of banking and finance.

Besides his academic works at Ho Chi Minh Open University, he is also a financial consultant and advisor for many companies and foreign organizations operating in Vietnam.

Mr. NGUYEN VAN THUAN Member of the Board of Directors

Mr. Chuong joined the Board of Directors of Kinh Do in 2013. He holds a Master of Law at Law University of Bristol (UK), specializing in International Commercial Law.

He is currently an advisor at Luat Viet and a General Director/Managing Partner at Phuoc & Co.

Mr. NGUYEN GIA HUY CHUONG Member of the Board of Directors

Mr. Tri was voted into the Board of Directors of Kinh Do since 2013. He holds a PhD in Business Management at Nanyang Technological University – Singapore.

He has been working for a sugar company under Agricultural Ministry and teaches at Trident University (California, US), Faculty of Economics – Risho University (Tokyo, Japan), Ho Chi Minh Economic University, and other joint programs in Vietnam.

Mr. NGUYEN DUC TRI Member of the Board of Directors


Mr. Wong joined Kinh Do in 2011 and is responsible for managing the group finance and accounting functions. Mr. Wong has worked and lived in Vietnam for almost 10 years in various financial institutions.

Mr. Wong holds a Bachelor of Commerce from the University of British Columbia in Vancouver, Canada and a Diploma in Asia Pacific Management from the McRae Institute of Management at Capilano University.

Mr. Viet has over 17 years of experience in managing companies in the FMCG industry and has been with Kinh Do Corporation since 2004 As the General Director of North Kinh Do, he has led the group’s norther operations to achieve remarkable growth over the during last 9 years.

He is also a member of the Executive Committee of Vietnam Marketing Association (VMA), Vietnam Food Safety Association (VINAFOSA) and an expert in analyzing and consulting business strategy. Mr. Viet is Doctor of Business Administration.

Mr. Luan has been with Kinh Do Corporation since 1996. He has since held top positions throughout the group including, Chairman of the Board of Directors, CEO, and Deputy CEO at Kinh Do's various subsidiaries and investments.

Currently, Mr. Luan is in charge of building Business Operations Systems and Decision Making Systems at Kinh Do as well as managing one of the Strategic Business Units.

Mr. NGUYEN XUAN LUAN Vice President of Systems Kinh Do Corporation

Mr. TRAN QUOC VIET Vice President of Kinh Do Corporation & General Director of North Kinh Do

Mr. KELLY WONG Kinh Do Corporation CFO

BOARD OF MANAGEMENT

Mr. Tung has been with Kinh Do Corporation since 1993. He has over 10 years of experience in manufacturing management and with in-depth knowledge on the Strategic Business Unit operating model.

He is currently a SBU Director and Head of the Labor Union for Kinh Do Corporation. He holds a degree from the University of Economics with a specialization in Business Administration and Higher Leadership Skill Certificate from UCLA Anderson (Los Angeles, USA).

Mr. BUI THANH TUNG Director of Kinh Do Corporation

Mr. Tram was among the first of the management team to help lay the foundation of the current distribution system used throughout the group.

He has been with Kinh Do since 2000 and has developed a deep understanding of the company, its competitive environment and the Vietnamese market through hands-on practical experience. He holds an MBA from California Miramar University in the United States.

Mr. MAI XUAN TRAM Director of Kinh Do Corporation & General Director of VINABICO

Mr. Danh served on Kinh Do Corporation’s Board of Directors between 2010 and 2013. Mr. Danh joined Kinh Do’s management team in 2013 and looks after the Internal Control department of the group.

Mr. Danh holds a Bachelor’s of Science (BSC) in electrical engineering, Degree in Business Administration from the University of Economics and a Masters of Business Administration with a focus in International Business Strategy and Brand Management from Belgium. He has over ten years of experience in financial management, business strategy and brand management consultancy and advisory in mergers and acquisitions.

Mr. Hoang joined Kinh Do Corporation in 1997 and has over 17 years of experience in procurement management in the FMCG industry. He was appointed to Director of Supply Chain at Kinh Do Corporation in 2011.

He currently leads the company’s COST TEAM and plays a significant role in developing the order management strategy for the entire group. He holds a Bachelor of Economics from the University of Economics and Higher Leadership Skill Certificate from UCLA Anderson (Los Angeles, USA).

Mr. MA THANH DANH Director of Kinh Do Corporation

Mr. TRAN TIEN HOANG Director of Kinh Do Corporation


Mr. Nguyen holds a Bachelor of Economics with a specialization in Business Administration. He is a certified Fund Manager with a certificate issued by the State Securities Commission of Vietnam.

He has extensive experience in finance and investment, focusing primarily on the Vietnamese capital markets.

Mr. Thuan was one of the first pioneers who helped to successfully establish North Kinh Do Company and played an important role in building the operations to what it is today. Mr. Thuan graduated with an MBA and as the valedictorian at Benedictine University in the USA, he also holds a Bachelor of Accounting and Audit from the University of Economics and a Bachelor of Computer and Mathematics Applications from Polytechnic University.

He is currently the Finance Director of North Kinh Do and Head of the Supervisory Board at Kinh Do Corporation.

Ms. Duyen has been working for Kinh Do Corporation since 1993 and has held several key positions, including Accountant, Deputy Manager of the Accounting Department at Kinh Do and Chief Accountant Kinh Do.

Since 2006 Mrs. Duyen has been the Chief Accountant at Kinh Do Real Estate Joint Stock Company. She holds a degree in Finance and Accounting and has spent her career at Kinh Do.

SUPERVISORY BOARD

Mr. LE CAO THUAN Head of theSupervisory Board

Mr. VO LONG NGUYEN Member of theSupervisory Board

Mrs. LUONG MY DUYEN Member of theSupervisory Board


No. DATE CONTENTS

1 15/03/2013 Resignation from the Board of Directors - Mr Co Gia Tho and Mr. Ma Thanh Danh

2 12/04/2013 Appointment to the Board of Directors – Mr. Nguyen Duc Tri and Mr. Nguyen Gia Huy Chuong

3 10/05/2013 Resignation of Mr. Foo Woh Seng - Vice President

4 25/09/2013 Resignation of Mr. Le Anh Quan - Vice President

5 05/12/2013 Appointment of Mr. Ma Thanh Danh - Director

6 24/12/2013 Resignation of Mr. Nguyen Khac Huy - COO

CHANGE IN KEY PERSONNEL

No. NAME RELATIONSHIPSHARES OWNED AT BEGINNING SHARES OWNED AT ENDING

ACTIONSAmount % Amount %

1. BKD Subsidiary 13,043,112 8.15% - 0.00% Bonus + Sell

2. Bui Thanh Tung Vice President 135,000 0.00% 73,000 0.04% Sell

3. Le Cao ThuanHead of Supervisory Board

2,865 0.00% 2,865 0.00% Bonus + Sell

4. Le Cao Tu Relative of Le Cao Thuan

3,505 0.00% 505 0.00% Sell

5. Luong My Duyen Member of Supervisory Board

5,509 0.00% 6,009 0.00% Sell + Bonus

6. Mai Xuan Tram Vice President 135,006 0.08% 72,506 0.04% Sell

7. Nguyen Thi Oanh Chief Accountant 55,010 0.03% 50,000 0.03% Sell

8. Tran Le Nguyen General Director 13,498,668 8.44% 13,858,748 8.35% Buy

9. Tran Quoc Viet Vice President 125,273 0.07% 50,273 0.03% Sell

10. Tran Thi Thanh Thuy Relative of Tran Tien Hoang

2,006 0.00% 6 0.00% Sell

11. Vinabico Subsidiary 15,960 0.01% 0 0.00% Sell

12. Vuong Buu Dinh Relative of Ma Thanh Danh

208,876 0.13% 205,936 0.13% Sell + Buy + Bonus

13. Vuong Buu Ngoc Relative of Vuong Buu Linh

308,557 0.19% 303,557 0.19% Sell

14. Vuong Ngan Hao Relative of Vuong Ngoc Xiem

400 3,500 0.00% Sell + Bonus

15. Vuong Thu Binh Relative of Vuong Buu Linh

75,000 0.00% 12,500 0.00% Sell

16. Vuong Thu Le Relative of Vuong Ngoc Xiem

2,047 0.00% 9,007 0.00% Sell + Bonus

No. NAMERELATIONSHIP WITH MANAGEMENT

SHARES OWNED AT BEGINNING

SHARES OWNED AT ENDING ACTIONS

Amount % Amount %

1. Vuong Buu Dinh Ma Thanh Danh 195,936 0.12% 182,996 0.11% Buy & Sell

2. Tran Thi Thanh Thuy Tran Tien Hoang 2,006 0.00% 6 0.00% Sell

3. Vuong Buu Ngoc Vuong Buu Linh 308,557 0.19% 309,557 0.19% Buy & Sell

4. Vuong Ngan Hao Vuong Ngoc Xiem 2,400 0.00% 5,602 0.00% Buy & Sell

5. Vuong Thu Le Vuong Ngoc Xiem 2,047 0.00% 9,007 0.01% Buy & Sell

6. Vuong Thu Binh Vuong Ngoc Xiem - - 12,500 0.01% Buy & Sell

MANAGEMENT

TRANSACTION OF RELATED PARTIES


INTRODUCTION

Economic stability returned to Vietnam in 2013. Overall the GDP of Vietnam in 2013 reached a growth rate of 5.4% and inflation averaged an estimated 6% for the year. Foreign exchange rates were also relatively stable with a good reserve of USD being built up by the country. Despite the stability there were still no clear signs of a recovery. The risk heading into 2014 continues to be that economic recovery and activity remains sluggish but with a slight increase in inflation which is expected to lead the economic cycle rather than lag it. With that we may end up in a situation where inflation is being driven up faster than an economic recovery.

The root of this problem is still primarily the non-performing loans and as a result risks appetites in the Vietnamese banking system. There is a clear polarization of risk appetite which is skewed towards large manufacturing companies, and away from small and medium enterprises (SME’s). This is product of the system not wishing to add on higher risk loans of

+6.4%VERSUS 2012

GROUP SALES 2013

small companies and focusing on large manufacturing corporates. This while supportive of sustainable corporate growth and production output, is not supportive of demand and consumption. Inadvertently, we have fallen into a stasis between stability and recovery but without a clear catalyst for demand and therefore economic recovery.

The impact on our business is that while we enjoy low rates and preferential treatment by the banks. Our distributors and retailers are still unable to access capital at a reasonable rate, creating a deleveraging of risk downstream. As a result, demand remains at relatively moderate with little incentive or capital to increase their inventory levels. Distributors are therefore focused on selling core products which can to some extent guarantee success versus taking risk on new products. Within our own portfolio we have noticed that the winning strategy has been to continue to focus on our core product offering and not deviate too far from that.

VND4,561BILLION

GROUP SALES 2013

WE EFFECTIVELY IMPROVED THE QUALITY OF THE PROFITABILITY WITH A SYSTEMATIC AND ROUTINE APPROACH TO ASSESSING RISK VERSUS REWARD. THIS PROCESS IS NOW INGRAINED INTO OUR MANAGEMENT CULTURE AND AS A RESULT, WE ARE WORKING BOTH HARDER AND SMARTER TO GET THE RESULTS WE NEED.

MANAGEMENT DISCUSSION

2010

2011

2012

2013

2010

2011

2012

2013

160,000POINTS OF SALE

SIGNIFICANT CASH RETURN FOR SHAREHOLDERS

(VND BILLION)

GROUP SALES (VND BILLION)

GROUP RESULTS 2013

Against this economic backdrop we have completed Stage 4: Profitable Growth of our transformative change process. Profitable growth is defined as the improvement in the quality of our earnings with a strong focus on asset efficiency and profit growth. It’s essentially the decision to balance each investment against a growth in revenue and corresponding profit. This stage has been fairly successful in the sense that we were able to balance growth with profitability in 2013 and reached a record year for profitability. We effectively improved the quality of the profitability with a systematic and routine approach to assessing risk versus reward. This process is now ingrained into our management culture and as a result, we are working both harder and smarter to get the results we need.

Overall revenue growth of 6.4% versus 2012 was constrained primarily by external factors that affected the market and was due to the lack of capital and risk appetite through the distribution channel. As we mentioned, production output was encouraged but demand was discouraged due to the disparity in the markets. Therefore consumer demand while stable was not recovering. This changed in the latter part of the year as demand began to accelerate and should flow through to 2014.

2009

2009

134

1,66

3

3,20

2

4,24

7

4,28

6

4,56

1

122

144

311

331

30,000FREEZERS


AS A RESULT OPERATING PROFIT MARGINS IMPROVED FROM 11.9% TO 13.7%, REFLECTING THE EFFORTS OF THE LAST TWO YEARS TO IMPROVE THE QUALITY OF THE EARNINGS. OPERATING PROFIT

BillionVND623

MANAGEMENT DISCUSSION (continued)

GROUP RESULTS 2013 (continued)

Input prices were relatively stable for all major cost categories, including raw materials which allowed for fairly stable gross profits margins of 43.3% vs 43.6% in 2012. Last year as we entered the inflection point between stability and recovery we saw very marginal pressure on input prices. We expect pressure to increase slightly in 2014 as we enter into a new economic cycle both in Vietnam and globally which will see input prices inch up due to return of demand. Barring any major natural disaster events globally the rise should be manageable, but nonetheless we expect some increase of raw material prices in the coming year.

Sales and marketing costs saw an increase of 4% versus 2012, primarily due to the one-time costs associated with the 20th anniversary. These costs were not purely celebratory, but were primarily used to leverage the realignment around the Kinh Do brand across our daily products and increase exposure between product brands. These costs were offset somewhat by the rationalization in spending at the product brand levels which saw some reductions due to brand restructuring and cross promotions conducted in conjunction with the 20th anniversary.

Financing costs declined significantly last year as average borrowing costs declined from 8% to 6% versus 2012; contributing to a net financing income of VND 39bn in 2013. We continue to expect the rates to be at these levels but risk is to the upside as we begin to see inflation creep into the system and demand improving

across the country. We are net cash positive so we are well positioned to manage this risk.

As a result operating profit margins improved from 11.9% to 13.7%, reflecting the efforts of the last two years to improve the quality of the earnings. We will continue to focus on improving efficiencies using the current base as a platform to seek incremental changes. We would expect some marginal improvements in operating margins but at a rate of improvement much lower than the last few years where the platform changes were transformative. The challenge of the current environment persists where capital remains constrained at the distribution and retail level. Consumer sentiment continues to be stable but at low levels. There is yet to be a strong catalyst for inducing demand in the Vietnamese market so the coming year will continue to be challenging.

Economic stability has been achieved but a recovery is only now just starting to gain momentum. Hopefully this will provide some momentum in improving demand but the added risk for us is that as this begins to happen, inflationary pressures will be more prevalent than in previous cycles due to the long period of stable pricing we experienced in 2013. In spite of these risks, there are clear opportunities in Vietnam this year and we are well positioned given the changes we have undertaken in the organization in the last two years to capitalize on them. At the same time we are also cognizant of the risks and managing the potential downside.

ASSETS

Cash balance continues to be strong and we continue to build up a reserve in order to take advantage of potential opportunities in the Vietnamese and regional markets. As the overall economic conditions improve, we are seeing some interesting opportunities that were previously too risky or where price expectations were too far apart to be able to rationalize.

In addition to cash, key improvements have been achieved in working capital management with the business cycle reducing from 43 to 33 days. This was achieved due to improvements on inventory reductions and also efficiency improvements in communication and stock level monitoring in the supply chain through the new Distributor Management System. This has resulted in unlocking additional free cash flows of VND 72bn. We do not believe that there will be significant improvements in this area in the coming years, but our goal is to maintain this consistency in efficiencies even against seasonality through good planning and coordination.

Fixed asset levels remained fairly constant for the year as the previous year saw little new capital expansion. We continue to be in a digestion period for some of the new production lines that were delivered in early 2013 and finally setup towards the end of the 4Q2013. We will see products come off these lines in 2014 which will help to improve the quality of the products and range of products from these lines. Plans for expanding capacity remain limited at this point as we look to leverage existing capacity to higher profitability before making further investments into new machinery. Overall return on assets increased from 6.3% to 7.7% due to higher profitability and stable levels of assets; improving both efficiencies and returns.

LIABILITIES

External debt levels declined in 2013 by VND 13bn. We deliberately restructured the short-term debt to more stable longer-term debt in early 2013 in response to market conditions in 2011/2012. We started this initiative in the beginning of 2013 to create stability in our funding base as a hedge against volatile liquidity conditions in the Vietnamese money markets. While we don’t believe these conditions will return, we believe that the additional comfort of long-term commitments versus short-term revolving funding is worth the slight premium we are paying especially as rates begin to rise. We continue to maintain some short-term debt to finance working capital for seasonality and relationship reasons. The debt levels are managed within very strict limits and maintain debt to equity ratios of well below our goals of 0.50x and external gearing levels below 0.20x throughout the year.

Debt Ratio

Asset Efficiency/Assets

2012 2013201120102009

0.40

0.20

_

0.60

0.80 0.72

0.31

0.51

0.36 0.31

0.21 0.12

0.26

0.14 0.12

Debt/Equity External Gearing (times)

2012 2013201120102009

0.30

_

0.60

0.90

0.39x

0.64x

0.78x 0.76x 0.77x10.8%

13.9%

5.1%6.3%

7.7%

0.0%

4.0%

8.0%

12.0%

16.0%

Average Asset Turnover ROA (%)

7,7% RETURN ON ASSETS

VND707BILLION OPERATING CASH FLOW



MANAGEMENT/POLICY CHANGES

The organization continues to be managed based on Strategic Business Units with shared services in key areas. One significant change that has been undertaken is to establish an Executive Management Committee for the operations which takes responsibilities for the key functional and strategic areas of the company. By allocating areas of responsibility and creating an Executive Management Committee on operations, we have been able to deal with managing the fast growing complexity and scope of the entire organization.

BRAND RESTRUCTURINNG

The change in brand infrastructure has been completed 2013 and we have successfully linked the product brands with the corporate Kinh Do brand as part of the 20th anniversary campaign with the message: “20 years Taste of Happiness”. The result now is a clear communication of positioning based on the brand including:

Kinh Do represents "Celebration" group.

Cosy, AFC, Solite, Slide, Korento represents "Delight" group.

Kinh Do represents "Packaged meals" group.

Celano, Merino, Wel Yo, Wel Cream represents "Dairy" group.

A significant change made during the past year was the restructuring of the Marketing function with the product brands are not put under the direct management of SBU Director. Such change will help to improve the coordination between category development strategy and market activities. We also established a Media department in order to increase the media spending efficiency of brands. Furthermore, brands’ Activation activities were also consolidated as part of the cross branding exercise and increase spending efficiency overall. During 2013, retail audit, brand health check data provided by CMI department also helped us get market insight to organize appropriate campaign for each brand. We continue to diversify our product portfolio through launching new products including AFC whole grains, Kinh Do fresh bread, and other new gifting products such as green, and mochi mooncakes serving Mid-Autumn or other new type for Lunar New Year festival.

In the past year, brand restructuring process also include scaling up existing key product brands such as Cosy, or Kinh Do fresh bread. Cosy brand now has become both a daily brand, and Lunar New Year brand. Cosy product portfolio after the restructure was able to penetrate the market very well. Kinh Do media campaign during Mid-Autumn and Lunar New Year festival also made remarkable imprints in the consumer minds. In the last year, Cosy, and other products serving Mid-Autumn and Lunar New Year made significant contribution to the company results. Overall, the brand restructuring not only invigorated the product image but also

THE ORGANIZATION CONTINUES TO BE MANAGED BASED ON STRATEGIC BUSINESS UNITS WITH SHARED SERVICES IN KEY AREAS. ONE SIGNIFICANT CHANGE THAT HAS BEEN UNDERTAKEN IS TO ESTABLISH AN EXECUTIVE MANAGEMENT COMMITTEE FOR THE OPERATIONS WHICH TAKES RESPONSIBILITIES FOR THE KEY FUNCTIONAL AND STRATEGIC AREAS OF THE COMPANY. BY ALLOCATING AREAS OF RESPONSIBILITY AND CREATING AN EXECUTIVE MANAGEMENT COMMITTEE ON OPERATIONS, WE HAVE BEEN ABLE TO DEAL WITH MANAGING THE FAST GROWING COMPLEXITY AND SCOPE OF THE ENTIRE ORGANIZATION.

Delights

Dairy

Celebration

Packaged Meals


financially this change will also have an impact on the advertising and promotions costs. While there will not be a sharp decline, they will be more effective and impactful which are in line with our goals pertaining to transformative change and will result in improved profitability.

Finally the integrated platform transformation has completed as of the end of 2013 and will be

able to sustain and support future growth. The management team has endeavored to firmly establish this platform over the last four years with thousands of hours going into streamlining and aligning processes and procedures that link up the entire organization. Going forward we will look to leverage this hard work into accelerated revenue and profit growth through organic or inorganic opportunities.

WE MANAGE THIS RISK WITH VERY STRICT CONTROLS, INCLUDING FIXED TENOR AND FIXED RATE CONTRACTS TO MITIGATE SHORT-TERM FLUCTUATIONS IN ORDER TO PROVIDE PREDICTABILITY ON OUR INPUT COSTS. WE ALSO WORK COOPERATIVELY WITH OUR SUPPLIERS TO PROVIDE A CLEAR TRANSPARENT VIEW ON OUR DEMAND SCHEDULE SO THAT THE RISK OF RAW MATERIAL PRICE RISKS CAN BE MANAGED BY THEM.

RISK FACTORS

Raw material price risk continues to be our primary risk factor that has the largest potential impact on our business. This exposure includes soft commodities such as wheat, sugar, edible oils and milk. We continue to be very prudent in our approach to monitoring and managing these risks, but markets continue to be volatile and exposed to global supply and demand factors.



We manage this risk with very strict controls, including fixed tenor and fixed rate contracts to mitigate short-term fluctuations in order to provide predictability on our input costs. We also work cooperatively with our suppliers to provide a clear transparent view on our demand schedule so that the risk of raw material price risks can be managed by them.

Foreign exchange rate risk continues to be a primary concern especially given that a large part

of our inputs are imported directly by ourselves or our suppliers. We hedge this risk by sourcing as much as we can locally to offset the foreign exchange rate risk, but as Vietnam still imports a large part of their capital inputs we are indirectly exposed. We do however have a reasonably strong export business that creates a natural hedge, and for those risks that are indirect, we work closely with our suppliers to manage the risk by using fixed tenor and fixed rate contracts.

AS PART OF OUR NEW STRATEGY TO INVEST IN THE FUTURE, WE WILL BE SEEKING IN MORE DETAIL OPPORTUNITIES THAT FIT. OVERALL WE ARE LOOKING TO CONTINUE TO ENGAGE OUR FOOD & FLAVOR STRATEGY BY LEVERAGING OUR PLATFORM.


Future developments will include a strong focus on deploying the incremental efficiency improvements around the existing business which we believe is still possible. These incremental improvements will be a philosophical approach to continuously improving what we do and how we do it in order to meet the dynamic changes of the operating environment. In addition, our product strategy from previous years which included improving the breadth and quality of our offering will continue to endure. This will include future capex to improve, quality, efficiency and range of products. Capex in 2014 will be small as we continue to be in the digestion period for the previous lines purchased late 2012, but we may see some purchases in 2015 and beyond.

As part of our new strategy to invest in the future, we will be seeking in more detail opportunities that fit. Overall we are looking to continue to engage our Food & Flavor strategy by leveraging our platform, but we are widening our scope of exploration to including interesting opportunities that will add immediate and/or future value to our business.

FUTURE DEVELOPMENT PLAN


2014 FINANCIAL TARGETS

VND5,150 BILLION

REVENUE 2014

VND660 BILLION

PROFIT BEFORE TAX

HUMAN RESOURCES

THROUGH PROFESSIONAL HUMAN RESOURCES MANAGEMENT, AND COMPETITIVE REMUNERATION POLICIES, KINH DO HAS BUILT UP A POOL OF TALENTED EMPLOYEES THAT SHARE THE LONG-TERM VISION OF SUCCESS WITH KINH DO.

Over the last 20 years, human resources has become one of the most important asset of Kinh Do. We are a diversified group of people with a broad range of experiences, joined together with a common goal. Through professional human resources management, and competitive remuneration policies, Kinh Do has built up a pool of talented employees that share the long-term vision of success with Kinh Do. This team will be one of the primary success factors of Kinh Do in the future.

KINH DO HAS BUILT UP A POOL OF TALENTED EMPLOYEES

HUMAN RESOURCE POLICIES

Our human resources management and development policies are founded upon the philosophy: “If a country’s most precious resources are the people, then an organization’s most precious resources are the right people”. To develop the human resources needed for future growth, Kinh Do has continued to source, nurture and develop both internal and external talents to transform them collectively into one of the most competitive teams in the market, becoming an invaluable resources for the company. This is accomplished through:

Satisfying human resource needs of the company based on long-term strategic development objectives.

Maximizing human resource potential to achieve optimal efficiency for the company.

Investing in training and developing talents. Enhancing employee to employee relationships

and building successful teams.

At Kinh Do, we commit to nurture and develop the skills and abilities of our people to meet the professional demands of their work and satisfy their personal needs. We value the capabilities, attitudes, and commitments of our professional staffs. Kinh Do’s continuous growth helps to ensure that our compensation and bonus packages always remains attractive to attract the right talent. To attract the best talents is to become the best company will always be our philosophy.


brings to consumers through our products not only include products but also social activities that are well regarded by the community.

Over the years, Kinh Do’s image has been associated with various activities for students such as scholarships programs and competitions. Factory tours for students

CORPORATE SOCIAL RESPONSIBILITY

AFTER TWENTY YEARS OF DEVELOPMENT, THE KINH DO BRAND HAS BECOME A BRAND THAT IS CLOSELY ASSOCIATED WITH QUALITY AND SOCIAL VALUE.

After twenty years of development, the Kinh Do brand has become a brand that is closely associated with quality and social value. Leveraging this, Kinh Do has continuously tried to respond to the support and appreciation by our consumers through our contribution to the community by actively supporting social programs. "The taste of happiness" that Kinh Do

and the "Management Trainee" program which Kinh Do is currently deploying create an ideal condition for young people to learn and experience valuable practical lessons.

Accompanying the National Fatherland Front, Sponsoring Association for Poor Patients, Red Cross and other social organizations, Kinh Do has brought joy to thousands of unfortunate children, and poor households across the country during many occasions and Tet through countless visits, and meaningful gifts. Some illustrations of our companies during the past year includes:

Coordinate with Sponsoring Association for Poor Patients to fund the 400,000th eye surgery for patients with difficult circumstances.

Coordinate with Sponsoring Association for Poor Patients to award nearly 1,500 health insurance cards for the poor in HCM City.

Spent VND 1.8 billion to provide Tet sponsoring for the poor including: bus tickets for youth workers; coordinated with the HCMC Fatherland Front Committee to visit and present gifts to unfortunate children and families to celebrate 2013 Tet Festival.

Awarded 8,000 gifts with value of VND 750 million for poor children to celebrate 2013 Mid-Autumn Festival.

Donated VND 2.5 billion to many social organizations including Children's Fund of Vietnam, the Fatherland Front Committee of Ho Chi Minh City, HCMC Sponsoring Association for Poor Patients during the 20th anniversary of Kinh Do Corporation.

Kinh Do's social programs and activities have helped to create a strong corporate image as well as increase consumers support to our brands.

400,000

1,500Coordinate with

Sponsoring Association for Poor Patients to fund the

eye surgery

th

health insurance cards


Green, clean, and environmentally friendly production processes.

High quality management systems to ensure consistency and quality.

Strict control of waste treatment, modern processing equipment to minimize externalities.

GREEN, CLEAN, AND ENVIRONMENTALLY FRIENDLY PRODUCTION

We focus on quality assurance, food safety and hygiene in every product we make. In addition, we implement strict production standards with a green and environmentally friendly mindset throughout our company’s development. We strive to bring nutritional and healthy products to consumer and minimize adverse impacts on the environment. Throughout our manufacturing processes, Kinh Do always chooses and sources material of the highest quality, and clear origin that are carefully selected from reputable suppliers. Furthermore, we specifically focus on the research and development of new innovative products and continuously aim to meet consumers tast profiles by providing high quality products that are delicious, healthy, and nutritious.

WITH A MODERN FACTORY, ALL PRODUCTS OF KINH DO ARE PRODUCED TO MEET THE WORLD’S HIGHEST STANDARDS FOR QUALITY AND FOOD SAFETY.

FOOD SAFETY AND ENVIRONMENTAL RESPONSIBILITY

AS A FOOD COMPANY, KINH DO STRICTLY ADHERES TO HIGH FOOD QUALITY, SAFETY AND HYGIENE. WE ARE ALSO WELL AWARE AND COMMITTED TO ENVIRONMENTAL RESPONSIBILITIES THROUGHOUT ALL THE MANUFACTURING LOCATIONS OF KINH DO (INCLUDING FACTORIES AT KINH DO BINH DUONG, NORTH KINH DO, AND KI DO). OUR FOCUS IS BASED ON:

Clean, green, andenvironmental

friendly productionprocesses

Professionalquality control

systems

Strict policies on waste treatment and disposal

with all facilities upgraded to meet international

standards

HIGH QUALITY MANAGEMENT SYSTEM

Kinh Do’s factories possess modern production facilities with world's most advanced technology from Europe (Italy, Netherlands, Denmark). The factories also apply many international quality management production processes including:

Quality Management System according to ISO 9001:2008 standards certified and reviewed by Bureau Veritas Certification.

Food Hygiene and Safety Management System ISO 22.000:2005 certified and reviewed by SGS.

Production hazard control system - HACCP. Environmental Management System ISO 14001:2004. Occupational Health Safety Administration System

OHSAS 18001:2007. Good Manufacturing Practice (GMP). Quality Management Systems TQM (Total Quality

Management). Implementation of 5S and TPM programs (Total

Productive Maintenance).With a modern factory, all products of Kinh Do are produced to meet the world’s highest standards for quality and food safety.

KINH DO RECOGNIZES AND ENSURES THAT OUR COMPANY ADOPTS AND USES APPROPRIATE TREATMENTS FOR ALL FORMS OF WASTE ARISING FROM OUR PRODUCTION. TRAININGS FOR INCIDENTS THAT POTENTIALLY IMPACT THE ENVIRONMENTAL, ENVIRONMENTAL TESTING, AND COMPLIANCE WITH GOVERNMENT LEGISLATION ON ENVIRONMENTAL PROTECTION. .

STRICT CONTROL OF WASTE TREATMENT, MODERN PROCESSING EQUIPMENT

Kinh Do recognizes and ensures that our company adopts and uses appropriate treatments for all forms of waste arising from our production. Kinh Do factories are equipped with environmental friendly waste treatment facilities and we continually strive to improve our production lines and apply new energy-saving application to minimize impacts to the environment. Our factories also apply many practical production programs including: implementation of cleaner production process, energy audits, trainings for incidents that potentially impact the environmental, environmental testing, and compliance with government legislation on environmental protection. All factories comply with legal regulations on waste treatment and we strive to build an environmentally friendly working environment.


...allowing FOR US to REACH BEYOND OUR GOALS...

01

Consolidated f nancial statements

03

COMPANY

Kinh Do Corporation (“the Company”) is a shareholding company incorporated under the Law on Enterprise of Vietnam pursuant to the Business Registration Certificate (“BRC”) No. 4103001184 issued by the Ho Chi Minh City Department of Planning and Investment on 6 September 2002 and the following amended BRC:

Amended BRC: Date:

No. 4103001184

The first amendment 26 November 2002The second amendment 22 September 2003The third amendment 11 December 2003The fourth amendment 3 August 2004The fifth amendment 7 October 2004The sixth amendment 11 May 2005The seventh amendment 18 May 2006The eighth amendment 6 July 2006The ninth amendment 6 November 2007The tenth amendment 10 October 2008

No. 0302705302

The eleventh amendment 21 January 2010The twelfth amendment 1 November 2010The thirteenth amendment 26 March 2011The fourteenth amendment 2 March 2012The fifteenth amendment 23 November 2012The sixteenth amendment 21 March 2013The seventeenth amendment 2 April 2013The eighteenth amendment 18 November 2013

The Company’s shares were listed on the Ho Chi Minh Stock Exchange in accordance with the License No. 39/UB-CK-GPNY issued by the State Securities Commission on 18 November 2005.

The principal activities of the Company are to process agricultural products and foods; produce confectionery, purified water, and fruit juice; and sell and purchase agricultural products and foods, industrial products, and fabric.

The registered head office of the Company is located at 138 - 142 Hai Ba Trung, Da Kao Ward, District 1, Ho Chi Minh City, Vietnam.

BOARD OF DIRECTORS

Members of the Board of Directors during the year and at the date of this report are:

Mr Tran Kim Thanh ChairmanMr Tran Le Nguyen Vice ChairmanMr Wang Ching Hua MemberMs Vuong Buu Linh MemberMs Vuong Ngoc Xiem MemberMr Tran Quoc Nguyen MemberMr Nguyen Van Thuan MemberMr Nguyen Gia Huy Chuong Member appointed on 12 April 2013 Mr Nguyen Duc Tri Member appointed on 12 April 2013Mr Co Gia Tho Member resigned on 12 April 2013Mr Ma Thanh Danh Member resigned on 12 April 2013

GENERAL INFORMATION


BOARD OF SUPERVISION

Members of the Board of Supervision during the year and at the date of this report are:

Mr Le Cao Thuan Head of the Board of SupervisionMs Luong My Duyen MemberMr Vo Long Nguyen Member

MANAGEMENT

Members of the management during the year and at the date of this report are:

Mr Tran Le Nguyen General Director

Ms Vuong Buu Linh Deputy General Director

Ms Vuong Ngoc Xiem Deputy General Director

Mr Wang Ching Hua Deputy General Director

Mr Nguyen Xuan Luan Deputy General Director

Mr Mai Xuan Tram Deputy General Director

Mr Bui Thanh Tung Deputy General Director

Mr Tran Quoc Nguyen Deputy General Director

Mr Tran Quoc Viet Deputy General Director

Mr Tran Tien Hoang Deputy General Director

Mr Kelly Yin Hon Wong Deputy General Director

Mr Ma Thanh Danh Deputy General Director appointed on 5 December 2013

Mr Foo Woh Seng Deputy General Director resigned on 10 May 2013

Mr Le Anh Quan Deputy General Director resigned on 25 September 2013

Mr Nguyen Khac Huy Deputy General Director resigned on 24 December 2013

LEGAL REPRESENTATIVE

The legal representative of the Company during the year and at the date of this report is Mr Tran Kim Thanh.

AUDITORS

The auditor of the Company is Ernst & Young Vietnam Limited.

Management of Kinh Do Corporation (“the Company”) is pleased to present its report and the consolidated financial statements of the Company and its subsidiaries (“the Group”) for the year ended 31 December 2013.

MANAGEMENT’S RESPONSIBILITY IN RESPECT OF THE CONSOLIDATED FINANCIAL STATEMENTS

Management is responsible for the consolidated financial statements of each financial year which give a true and fair view of the consolidated state of affairs of the Group and of the Group’s consolidated results and consolidated cash flows for the year. In preparing those consolidated financial statements, management is required to:

» select suitable accounting policies and then apply them consistently;

» make judgements 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 Group will continue its business.

Management is responsible for ensuring that proper accounting records are kept which disclose, with reasonable ac-curacy at any time, the consolidated financial position of the Group and to ensure that the accounting records comply with the registered accounting system. It is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Management confirmed that it has complied with the above requirements in preparing the accompanying consolidat-ed financial statements.

STATEMENT BY MANAGEMENT

Management does hereby state that, in its opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2013 and of the consolidated results of its operations and its consolidated cash flows for the year then ended in accordance with Vietnamese Accounting Standards, Vietnamese Enterprise Accounting System and the statutory requirements relevant to preparation and pre-sentation of consolidated financial statements.

For and on behalf of management:

Tran Le NguyenGeneral Director

26 March 2014

REPORT OF MANAGEMENT


To: The Shareholders of Kinh Do Corporation

We have audited the accompanying consolidated financial statements of Kinh Do Corporation and its subsidiaries (collectively referred to as “the Group”) as prepared on 26 March 2014 and set out on pages 72 to 121 which comprise the consolidated balance sheet as at 31 December 2013, the consolidated income statement and the consolidated cash flow statement for the year then ended and the notes thereto.

Management's Responsibility

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Vietnamese Accounting Standards, Vietnamese Enterprise Accounting System and the statutory requirements relevant to preparation and presentation of consolidated financial statements, and for such internal control as management determines is necessary to enable the preparation and presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Vietnamese Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view, in all material respects, of the consolidated financial position of the Group as at 31 December 2013, and of the consolidated results of its operations and its consolidated cash flows for the year then ended in accordance with Vietnamese Accounting Standards, Vietnamese Enterprise Accounting System and the statutory requirements relevant to preparation and presentation of consolidated financial statements.

Ernst & Young Vietnam Limited

Reference: 60752643/16352013

Duong Le AnthonyDeputy General Director Audit Practicing Registration CertificateNo. 2223-2013-004-1

Ho Chi Minh City, Vietnam26 March 2014

Hang Nhat QuangAuditorAudit Practicing Registration CertificateNo. 1772-2013-004-1

INDEPENDENT AUDITORS’ REPORT

A member firm of Ernst & Young Global Limited

Code ASSETS Notes Ending balance Beginning balance100 A. CURRENT ASSETS 3,208,951,948,303 2,289,382,509,434

110 I. Cash and cash equivalents 5 1,958,064,548,124 829,459,259,294

111 1. Cash 287,064,548,124 215,149,047,387

112 2. Cash equivalents 1,671,000,000,000 614,310,211,907

120 II. Short-term investments 13.2 39,479,723,350 237,482,984,125

121 1. Short-term investments 48,576,276,394 274,454,915,888

129 2. Provision for short-term investments (9,096,553,044) (36,971,931,763)

130 III. Current accounts receivable 6 859,893,313,934 882,114,197,701

131 1. Trade receivables 188,931,745,641 180,529,903,420

132 2. Advances to suppliers 70,757,652,186 196,058,013,223

135 3. Other receivables 603,491,045,600 507,157,423,689

139 4. Provision for doubtful debts (3,287,129,493) (1,631,142,631)

140 IV. Inventories 7 303,697,604,128 316,605,949,009

141 1. Inventories 317,614,040,657 323,945,751,898

149 2. Provision for obsolete inventories (13,916,436,529) (7,339,802,889)

150 V. Other current assets 47,816,758,767 23,720,119,305

151 1. Short-term prepaid expenses 14,434,824,512 17,310,449,270

152 2. Value-added tax deductible 5,679,645,734 73,411,292

154 3. Tax and other receivables from the State 8 17,515,321,638 -

158 4. Other current assets 10,186,966,883 6,336,258,743

200 B. NON-CURRENT ASSETS 3,169,293,630,695 3,225,321,952,576

218 I. Other long-term receivables - 299,618,517

220 II. Fixed assets 1,371,191,674,104 1,451,929,592,575

221 1. Tangible fixed assets 9 919,281,789,101 941,976,539,062

222 Cost 1,755,145,801,018 1,689,567,812,006

223 Accumulated depreciation (835,864,011,917) (747,591,272,944)

227 2. Intangible fixed assets 10 326,200,228,842 412,023,311,045

228 Cost 429,548,357,289 492,810,355,420

229 Accumulated amortization (103,348,128,447) (80,787,044,375)

230 3. Construction in progress 11 125,709,656,161 97,929,742,468

240 III. Investment property 12 21,444,908,571 24,018,297,599

241 1. Cost 34,524,970,816 34,524,970,816

242 2. Accumulated depreciation (13,080,062,245) (10,506,673,217)

250 IV. Long-term investments 1,272,100,000,000 1,271,100,000,000

252 1. Investments in associates and jointly controlled entity 13.1 1,257,100,000,000 1,256,100,000,000

258 2. Other long-term investments 13.3 15,000,000,000 15,000,000,000

260 V. Other long-term assets 178,234,881,999 128,053,492,580

261 1. Long-term prepaid expenses 14 124,374,000,279 79,707,784,012

262 2. Deferred tax assets 28.3 40,647,012,600 47,795,925,568

268 3. Deferred tax assets 13,213,869,120 549,783,000

269 VI. Goodwill 4 326,322,166,021 349,920,951,305

270 TOTAL ASSETS 6,378,245,578,998 5,514,704,462,010

CONSOLIDATED BALANCE SHEET as at 31 December 2013

VND

B01-DN/HN


Code RESOURCES Notes Ending balance Beginning balance

300 A. LIABILITIES 1,495,030,377,728 1,469,330,630,943

310 I. Current liabilities 1,265,590,486,146 1,353,059,965,053

311 1. Short-term loans and debts 15 400,939,212,302 529,559,033,303

312 2. Trade payables 16 283,772,381,108 274,618,256,546

313 3. Advances from customers 17 34,950,728,208 37,628,753,830

314 4. Statutory obligations 18 81,827,122,663 102,723,109,885

315 5. Payables to employees 58,642,156,537 48,828,794,770

316 6. Accrued expenses 19 230,109,039,925 194,023,168,467

319 7. Other payables 20 122,357,506,054 121,494,113,721

323 8. Bonus and welfare fund 52,992,339,349 44,184,734,531

330 II. Non-current liabilities 229,439,891,582 116,270,665,890

333 1. Other long-term liabilities 60,554,121,882 63,637,569,390

334 2. Long-term loans and debts 21 168,885,769,700 52,633,096,500

400 B. OWNERS’ EQUITY 22 4,881,643,588,931 4,010,273,661,046

410 I. Capital 4,881,643,588,931 4,010,273,661,046

411 1. Issued share capital 1,676,282,700,000 1,599,216,250,000

412 2. Share premium 2,344,308,719,177 2,189,781,329,788

414 3. Treasury shares (152,626,203,900) (655,246,276,814)

417 4. Investment and development fund 25,370,280,515 25,370,280,515

418 5. Financial reserve fund 25,792,635,752 25,792,635,752

419 6. Other funds belonging to owners’ equity 15,909,752,661 15,909,752,661

420 7. Undistributed earnings 946,605,704,726 809,449,689,144

439 C. MINORITY INTERESTS 1,571,612,339 35,100,170,021

440 TOTAL LIABILITIES AND OWNERS’ EQUITY 6,378,245,578,998 5,514,704,462,010

OFF BALANCE SHEET ITEM

ITEM Ending balance Beginning balance

Foreign currencies:

- United States dollar (US$) 1,389,939 2,041,170

- Euro (EUR) 110 102

Tran Minh Nguyet Preparer26 March 2014

Nguyen Thi OanhChief Accountant


Code ITEMS Notes Current year Previous year

01 1. Revenue from sale of goods and rendering of services 23.1 4,674,796,415,910 4,311,914,226,281

02 2. Deductions 23.1 (114,198,130,572) (26,116,782,870)

10 3. Net revenue 23.1 4,560,598,285,338 4,285,797,443,411

11 4. Cost of goods sold and services rendered 24 (2,584,484,709,244) (2,416,751,839,765)

20 5. Gross profit 1,976,113,576,094 1,869,045,603,646

21 6. Finance income 23.2 113,135,293,907 133,281,778,819

22 7. Finance expenses 25 (73,516,940,227) (190,339,813,268)

23 In which: Interest expense (43,391,810,398) (94,369,615,032)

24 8. Selling expenses (996,843,091,578) (958,733,196,493)

25 9. General and administration expenses (395,953,432,450) (343,004,410,348)

30 10. Operating profit 622,935,405,746 510,249,962,356

31 11. Other income 26 30,372,643,049 20,132,906,361

32 12. Other expenses 26 (34,690,086,601) (40,454,914,532)

40 13. Other loss 26 (4,317,443,552) (20,322,008,171)

50 14. Profit before tax 618,617,962,194 489,927,954,185

51 15. Current income tax expense 28.2 (118,676,164,588) (131,641,468,329)

52 16. Deferred income tax expense 28.3 (7,148,912,968) (856,794,455)

60 17. Net profit after tax 492,792,884,638 357,429,691,401

Attributable to:

61 17.1 Minority interests (1,076,667,504) 3,485,288,065

62 17.2 The Company’s shareholders 493,869,552,142 353,944,403,336

80 18. Basic and diluted earnings per share 22.4 3,051 2,318

B02-DN/HN

Tran Minh Nguyet Preparer26 March 2014



CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2013

VND



I. CASH FLOWS FROM OPERATING ACTIVITIES

01 Profit before tax 618,617,962,194 489,927,954,185

Adjustments for:

02 Depreciation and amortization4. 9,

10,12230,052,975,960 215,148,557,479

03 Provisions (7,383,394,361) 11,013,981,270

04 Unrealised foreign exchange losses (gains) 2,258,288,851 (2,781,973,065)

05 Profits from investing activities (103,152,864,326) (51,459,916,808)

06 Interest expense 25 43,391,810,398 94,369,615,032

08 Operating profit before changes in working capital 783,784,778,716 756,218,218,093

09 Decrease in receivables 70,706,973,679 64,968,349,554

10 Decrease in inventories 6,331,711,241 75,709,579,408

11 Increase (decrease) in payables 51,056,516,330 (94,402,339,724)

12 Decrease in prepaid expenses 21,822,216,240 24,994,132,139

13 Interest paid (44,439,725,376) (96,483,378,327)

14 Corporate income tax paid 28.2 (181,490,308,355) (77,403,326,392)

15 Other cash inflows from operating activities 6,232,230,468 6,453,122,221

16 Other cash outflows from operating activities (39,495,349,366) (9,706,163,034)

20 Net cash flows from operating activities 674,509,043,577 650,348,193,938

II. CASH FLOWS FROM INVESTING ACTIVITIES

21 Purchase and construction of fixed assets (179,465,405,244) (222,818,458,228)

22 Proceeds from disposals of fixed assets 7,167,957,959 7,788,090,788

23 Loans to other entities (2,410,500,000,000) (2,773,200,000,000)

24 Collections from borrowers 2,592,419,036,288 2,851,929,343,712

25 Payments for investments in other entities (1,000,000,000) (258,883,483,745)

26 Proceeds from sale of investments in other entities 32,504,017,702 111,288,125,542

27 Dividends and interest received 48,790,143,022 30,504,845,950

30 Net cash flows from (used in) investing activities 89,915,749,727 (253,391,535,981)

B03-DN/HNCONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2013

VND


III. CASH FLOWS FROM FINANCING ACTIVITIES

31 Issuance of shares 696,877,189,600 693,153,676,333

Capital contribution from minority interest - 200,000,000

32 Capital redemption - (501,376,498,414)

33 Borrowings received 1,603,649,310,611 2,102,838,534,453

34 Borrowings repaid (1,618,068,675,638) (2,517,380,411,634)

36 Dividends paid to equity holder of the parent (317,070,140,579) (311,706,777,813)

Dividends paid to minority interest (1,188,717,337) (3,546,360,564)

40 Net cash flows from (used in) financing activities 364,198,966,657 (537,817,837,639)

50 Net increase (decrease) in cash and cash equiv-alents 1,128,623,759,961 (140,861,179,682)

60 Cash and cash equivalents at beginning of year 5 829,459,259,294 967,330,130,617

61 Impact of exchange rate fluctuation (18,471,131) 2,990,308,359

70 Cash and cash equivalents atend of year 5 1,958,064,548,124 829,459,259,294

Tran Minh Nguyet Preparer 26 March 2014



B03-DN/HNCONSOLIDATED CASH FLOW STATEMENT (continued) for the year ended 31 December 2013

VND


1. CORPORATE INFORMATION

The Group consists of Kinh Do Corporation (“KDC” or “the Company”) and its subsidiaries, associates and a jointly controlled entity as follows:

Company

KDC is a shareholding company incorporated under the Law on Enterprise of Vietnam pursuant to the Business Registration Certificate (“BRC”) No. 4103001184 issued by the Ho Chi Minh City Department of Planning and Investment on 6 September 2002 and the following amended BRC:

Amended BRC: Date:No. 4103001184The first amendment 26 November 2002The second amendment 22 September 2003The third amendment 11 December 2003The fourth amendment 3 August 2004The fifth amendment 7 October 2004The sixth amendment 11 May 2005The seventh amendment 18 May 2006The eighth amendment 6 July 2006The ninth amendment 6 November 2007The tenth amendment 10 October 2008No. 0302705302The eleventh amendment 21 January 2010The twelfth amendment 1 November 2010The thirteenth amendment 26 March 2011The fourteenth amendment 2 March 2012The fifteenth amendment 23 November 2012The sixteenth amendment 21 March 2013The seventeenth amendment 2 April 2013The eighteenth amendment 18 November 2013

The Company’s shares were listed on the Ho Chi Minh Stock Exchange in accordance with the License No. 39/UBCK-GPNY issued by the State Securities Commission on 18 November 2005.

The principal activities of the Company are to process agricultural products and foods; produce confectionery, purified water, and fruit juice; and sell and purchase agricultural products and foods, industrial products, and fabric.

The registered head office of the Company is located at 138 - 142 Hai Ba Trung, Da Kao Ward, District 1, Ho Chi Minh City, Vietnam.

The number of the Group’s employees as at 31 December 2013 was 7,069 (31 December 2012: 5,889).

B09-DN/HNNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at and for the year ended 31 December 2013

B09-DN/HNNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) as at and for the year ended 31 December 2013

Subsidiaries

Kinh Do Binh Duong Corporation (“KDBD”)

KDC holds a 99.8% equity interest in KDBD which is a shareholding company incorporated under the Law on En-terprise of Vietnam pursuant to the BRC No. 4603000129 issued by the Department of Planning and Investment of Binh Duong Province on 13 October 2004 and the subsequent amended BRC.

The principal activities of KDBD are to process agricultural products and foods; produce confectionery, purified water, and fruit juice; and sell and purchase agricultural products and foods, industrial products, and fabric.

The registered head office and factory of KDBD are located at VSIP, Vietnam – Singapore Industrial Park, Thuan An District, Binh Duong Province, Vietnam.

1. CORPORATE INFORMATION (continued)

Subsidiaries (continued)

Vinabico Corporation (“Vinabico”)

KDC holds a 100% equity interest in Vinabico which is a shareholding company incorporated under the Law on Enterprise of Vietnam pursuant to the BRC No. 4103001904 issued by the Ho Chi Minh City Department of Plan-ning and Investment on 3 November 2003 and the subsequent amended BRC.

The principal activities of Vinabico are to produce and sell confectionery and purified water.

The registered head office and factory of Vinabico are located at 436 No Trang Long Street, Ward 13, Binh Thanh District, Ho Chi Minh City, Vietnam.

Kido Company Limited (“KIDO”)

KDC holds a 100% equity interest in KIDO, was formerly a shareholding company, is currently a one member lim-ited liability company incorporated under the Law on Enterprise of Vietnam pursuant to the BRC No. 4103001557 issued by the Ho Chi Minh City Department of Planning and Investment on 14 April 2003 and the subsequent amended BRC.

The principal activities of KIDO are to produce and trade all kinds of food and drink products such as ice, ice cream, milk and other dairy products.

The registered head office and factory of KIDO are located at Cu Chi Northwest Industrial Park, Cay Sop Village, Tan An Hoi Ward, Cu Chi District, Ho Chi Minh City, Vietnam.

North Kinh Do One Member Company Limited (“NKD”)

KDC holds a 100% equity interest in NKD, was formerly a shareholding company, is currently a one member limit-ed liability company incorporated under the Law on Enterprise of Vietnam pursuant to the Decision No.139/QD-UB dated 19 August 1999 issued by the People’s Committee of Hung Yen Province and the BRC No. 0503000001 and No. 0900178525 issued by the Department of Planning and Investment of Hung Yen Province on 28 January 2000 and 25 January 2011, respectively.

The principal activities of NKD are to produce and process food stuffs, including various ranges of high-grade cookies, to trade food and food stuffs, various types of beverages and liquors as well as cigarettes produced in Vietnam, and to lease a factory.

The registered head office is located at Ban Yen Nhan Town, My Hao District, Hung Yen Province, Vietnam and one branch at 200 Thai Ha Street, Dong Da District, Hanoi City, Vietnam.


Associates

Tan An Phuoc Company Limited (“TAP”)

KDC holds a 49% equity interest in TAP which is a limited liability company with two and more members incor-porated under the Law on Enterprise of Vietnam pursuant to the BRC No. 0309403269 issued by the Ho Chi Minh City Department of Planning and Investment on 24 September 2009.

The principal activity of TAP is to operate in the real estate industry.

The registered office of TAP is located at 6/134 National Road No. 13, Hiep Binh Phuoc Ward, Thu Duc District, Ho Chi Minh City, Vietnam.

Thanh Thai Real Estate Corporation (“TTR”)

KDC holds a 30% equity interest in TTR which is a shareholding company incorporated under the Law on Enter-prise of Vietnam pursuant to the BRC No. 0310442801 issued by the Ho Chi Minh City Department of Planning and Investment on 10 November 2010.

The principal activity of TTR is to operate in the real estate industry.

The registered office of TTR is located at 332 To Hien Thanh, Ward 14, District 10, Ho Chi Minh City, Vietnam.

Jointly controlled entity

Lavenue Investment Corporation (“Lavenue”)

KDC holds a 50% equity interest in Lavenue which is a shareholding company incorporated under the Law on Enterprise of Vietnam pursuant to the BRC No. 0310306044 issued by the Ho Chi Minh City Department of Plan-ning and Investment on 10 September 2010.

The principal activity of Lavenue is to operate in the real estate industry.

The registered office of Lavenue is located at 3th Floor, May Flower Tower, 12 Le Thanh Ton, District 1, Ho Chi Minh City, Vietnam.


2. BASIS OF PREPARATION

2.1 Accounting standards and system

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

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

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

» Decision No. 234/2003/QD-BTC dated 30 December 2003 on the Issuance and Promulgation of Six Vietnamese Accounting Standards (Series 3);

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

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

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

2.2 Applied accounting documentation system

The Group’s applied accounting documentation system is the General Journal system.

2.3 Fiscal year

The Group’s fiscal year applicable for the preparation of its consolidated financial statements starts on 1 January and ends on 31 December.

2.4 Accounting currency

The consolidated financial statements are prepared in VND which is also the Group’s accounting currency.


2.5 Basis of consolidation

The Group’s consolidated financial statements comprise the financial statements of KDC (“the parent company”) and the financial statements of its subsidiaries for the year ended 31 December 2013.

Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continues to be consolidated until the date that such control ceases.

The financial statements of the subsidiaries are prepared for the same reporting year as the parent company, using consistent accounting policies.

All intra-company balances, income and expenses and unrealised gains or losses result from intra-company transactions are eliminated in full.

Minority interests represent the portion of profit or loss and net assets that is not held by the Group’s shareholders and are presented separately in the consolidated income statement and consolidated balance sheet. Acquisitions of minority interests are accounted for using the parent entity extension method, whereby, the difference between the consideration and the book value of the share of the net assets acquired is recognised in goodwill.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Change in accounting policies and disclosures

The accounting policies adopted by the Group in preparation of the consolidated financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended 31 December 2012.

3.2 Cash and cash equivalents

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

3.3 Inventories

Inventories are stated at the lower of cost incurred in bringing each product to its present location and condition, and net realisable value.

Net realisable value represents the estimated selling price in the ordinary course of business less the estimated costs to complete and the estimated costs necessary to make the sale.

The perpetual method is used to record inventories, which are valued as follows:

Raw materials, consumables and goods for resale.Finished goods and work in process.

- actual cost on a weighted average basis. - cost of direct materials and labour plus attributable overhead

based on the normal level of activities.


3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

3.3 Inventories (continued)

Inventories (continued)

An inventory provision is created for the estimated loss arising due to the impairment (through diminution, damage, obsolescence, etc.) of raw materials, finished goods, and other inventories owned by the Group, based on appropriate evidence of impairment available at the balance sheet date. Increases and decreases to the provision balance are recorded into the cost of goods sold account in the consolidated income statement.

3.4 Receivables

Receivables are presented in the consolidated financial statements at the carrying amounts due from customers and other debtors, after provision for doubtful debts.

The provision for doubtful debts represents amounts of outstanding receivables at the balance sheet date which are doubtful of being recovered. Increases and decreases to the provision balance are recorded as general and administration expense in the consolidated income statement.

3.5 Tangible fixed assets

Tangible fixed assets are stated at cost less accumulated depreciation.

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

Expenditures for additions, improvements and renewals are added to the carrying amount of the assets and expenditures for maintenance and repairs are charged to the consolidated income statement as incurred.

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

3.6 Leased assets

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset.

A lease is classified as a finance lease whenever the terms of the lease transfer substantially all the risks and rewards of ownership of the asset to the lessee. All other leases are classified as operating leases.

Where the Group is the lessee

Rentals under operating leases are charged to the consolidated income statement on a straight-line basis over the term of the lease.

Where the Group is the lessor

Assets subject to operating leases are included as the Group’s fixed assets in the consolidated balance sheet. Initial direct costs incurred in negotiating an operating lease are recognised in the consolidated income statement as incurred.

Lease income is recognised in the consolidated income statement on a straight-line basis over the lease term.


3.7 Intangible fixed assets

Intangible fixed assets are stated at cost less accumulated amortization.

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

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

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

Land use rights

Land use rights are recorded as intangible assets representing the value of the right to use the lands acquired by the Group. The useful lives of land use rights are assessed as either finite or indefinite. Accordingly, land use right with finite lives representing the land lease are amortised over the term of lease while the land use right with indefinite useful lives are not amortised.

The advance payment for land rental, of which the land lease contracts have effectiveness prior to 2003 and Land use right certificate being issued, are recorded as intangible asset according to Circular No. 45/2013/TT-BTC issued by the Ministry of Finance on 25 August 2013 guiding the management, use and depreciation of fixed assets (“Circular 45”).

3.8 Depreciation and amortization

Depreciation of tangible fixed assets and amortization of intangible fixed assets are calculated on a straight-line basis over the estimated useful life of each asset as follows:

Buildings and structures 10 years

Machinery and equipment 5 - 10 years

Means of transportation 6 - 10 years

Office equipment 3 - 5 years

Land use right 46 years

Brand name 10 - 20 years

Computer software 3 years

Land lease advantage 20 - 55 years

Customer relationships 16 years

Others 8 years

The useful life of the fixed assets and depreciation and amortization rates are reviewed periodically to ensure that the method and the period of the depreciation and amortization are consistent with the expected pattern of economic benefits that will be derived from the use of the fixed assets.



3.9 Investment properties

Investment properties are stated at cost including transaction costs less accumulated depreciation.

Subsequent expenditure relating to an investment property that has already been recognized is added to the net book value of the investment property when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing investment property, will flow to the Group.

Depreciation of investment properties are calculated on a straight-line basis over the estimated useful life of each asset as follows:

Plant 13.5 years

Investment properties are derecognised when either they have been disposed of or when the investment properties are permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the assets is recognised in the consolidated income statement in the period of retirement or disposal.

Transfers are made to investment properties when, and only when, there is a change in use, evidenced by ending of owner-occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment properties when, and only when, there is change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale. The transfer from investment property to owner-occupied property or inventories does not change the cost or the carrying value of the property for subsequent accounting at the date of change in use.

3.10 Construction in progress

Construction in progress represents tangible fixed assets under construction and is stated at cost. This includes costs of construction of plant, installation of equipment and other direct costs. Construction in progress is not depreciated until such time as the relevant assets are completed and put into operation.

3.11 Borrowing costs

Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing of funds and are recorded as expense during the year in which they are incurred.

3.12 Prepaid expenses

Prepaid expenses are reported as short-term prepaid expenses or long-term prepaid expenses on the consolidated balance sheet and amortised over the period for which the amounts are paid or the period in which economic benefits are generated in relation to these expenses.

Starting from 10 June 2013, according to Circular 45, the prepaid rental related to land lease contract with effectiveness after 2003 is not qualified for recognition as intangible fixed asset. Accordingly, the unamortised balances of prepaid rental made in accordance with lease contract with effectiveness after 2013 are reclassified from intangible assets to long-term prepaid expenses for allocation to the income statement over the remaining lease term.


3.13 Business combination and goodwill

Business combinations are accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at fair values at the date of business combination.

Goodwill is initially measured at cost being the excess of the cost of the business combination over the Group’s share in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the consolidated income statement.

After initial recognition, goodwill is measured at cost less accumulated amortization. Amortization of goodwill is calculated on a straight-line basis over ten (10) years during which the source embodying economic benefits are recovered by the Group.

3.14 Investment in associates

The Group’s investment in its associates is accounted for using the equity method of accounting. An associate is an entity in which the Group has significant influence and which is neither a subsidiary nor a joint venture. The Group generally deems they have significant influence if they have over 20% of the voting rights.

Under the equity method, the investment is carried in the consolidated balance sheet at cost plus post acquisition changes in the Group’s share of net assets of the associates. Goodwill arising on acquisition of the associate is included in the carrying amount of the investment and is amortized over a 10-year period. The consolidated income statement reflects the share of the post-acquisition results of operation of the associate.

The share of post-acquisition profit (loss) of the associates is presented on the face of the consolidated income statement and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividend or profit sharing received or receivable from associates reduce the carrying amount of the investment.

The financial statements of the associates are prepared for the same reporting year and use the same accounting policies as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.



3.15 Investment in joint venture

The Group’s investment in jointly controlled entity is accounted for using the equity method of accounting. Under the equity method, the investment is carried in the consolidated balance sheet at cost plus post joint venture changes in the Group’s share of net assets of the jointly controlled entity. The consolidated income statement reflects the share of the post-acquisition results of operation of the jointly controlled entity.

The share of profit (loss) of the jointly controlled entity is presented on face of the consolidated income statement and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. Dividend or profit sharing received or receivable from jointly controlled entities reduces the carrying amount of the investment.

The financial statements of the jointly controlled entities are prepared for the same reporting year and use the same accounting policies as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

3.16 Investments in securities and other investments

Investments in securities and other investments are stated at their acquisition costs. Provision is made for any diminution in value of the marketable investments at the balance sheet date representing the excess of the acquisition cost over the market value at that date in accordance with the guidance under Circular No. 228/2009/TT-BTC issued by the Ministry of Finance on 7 December 2009. Increases and decreases to the provision balance are recorded as finance expense in the consolidated income statement.

3.17 Payables and accruals

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

3.18 Accrual for severance pay

The severance pay to employees is accrued at the end of each reporting period for all employees who have more than 12 months in service up to 31 December 2008 at the rate of one-half of the average monthly salary for each year of service up to 31 December 2008 in accordance with the Labour Code, the Law on Social Insurance and related implementing guidance. Commencing 1 January 2009, the average monthly salary used in this calculation will be revised at the end of each reporting period following the average monthly salary of the 6-month period up to the balance sheet date. Any changes to the accrued amount will be taken to the consolidated income statement.

This accrued severance pay is used to settle the termination allowance to be paid to employee upon termination of their labour contract following Article 48 of the Labour Code.


3.19 Foreign currency transactions

The Group follows the guidance under Vietnamese Accounting Standard No. 10 - Effects of Changes in Foreign Exchange Rates and Circular No. 179/2012/TT-BTC providing guidance on recognition, measurement, treatment for foreign exchange differences issued by the Ministry of Finance on 24 October 2012 in relation to foreign currency transactions as applied consistently in prior year.

Transactions in currencies other than the Group’s reporting currency of VND are recorded at the exchange rates ruling at the date of the transaction. At the end of the year, monetary assets and liabilities denominated in foreign currencies are translated at buying exchange rate announced by the commercial bank where the Group maintains bank accounts ruling at the balance sheet date. All realised and unrealised foreign exchange differences are taken to the consolidated income statement.

3.20 Treasury shares

Treasury shares, which represent the reacquired shares of the Company, are deducted from equity at acquisition cost. No gain or loss is recognised in the consolidated income statement upon purchase, sale, re-issue or cancellation of the Group’s own equity instruments.

3.21 Earnings per share

Basic earnings per share is computed by dividing net profit for the year attributable to ordinary shareholders, before appropriation for bonus and welfare fund by the weighted average number of ordinary shares outstanding during the year, where applicable.

Diluted earnings per share amounts are calculated by dividing the net profit after tax attributable to ordinary equity holders of the Company (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

3.22 Segment information

A segment is a component determined separately by the Group which is engaged in providing products or related services (business segment) or providing products or services in a particular economic environment (geographical segment), that is subject to risks and returns that are different from those of other segments.

3.23 Appropriation of net profit

Net profit after tax is available for appropriation to shareholders after approval in the shareholders’ meeting, and after making appropriation to reserve funds in accordance with the Company’s charter and Vietnamese regulatory requirements.

The Group maintains the following reserve funds which are appropriated from the Group’s net profit as proposed by the Board of Directors and subject to approval by shareholders at the Annual General Meeting:

Financial reserve fund

This fund is set aside to protect the Group's normal operations from business risks or losses, or to prepare for unforeseen losses or damages for objective reasons and force majeure, such as fire, economic and financial turmoil of the country or elsewhere.



3.23 Appropriation of net profit (continued)

Investment and development fund

This fund is set aside for use in the Company’s expansion of its operation or in-depth investments.

Bonus and welfare fund

This fund is set aside for the purpose of pecuniary rewarding and encouragement, common benefits and improvement of the employees’ benefits.

Dividends

Final dividends proposed by the Group’s Board of Directors are classified as a separate allocation of undistributed earnings within the equity section of the consolidated balance sheet, until they have been approved by the Group’s shareholders at the Annual General Meeting. When these dividends have been approved by the shareholders and declared, they are recognised as a liability in the consolidated balance sheet.

3.24 Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, excluding trade discount, rebate and sales return. The following specific recognition criteria must also be met before revenue is recognised:

Sale of goods

Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually upon the delivery of the goods.

Rendering of services

Revenue is recognised when service is rendered.

Interest

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

Dividends

Income is recognised when the Group’s entitlement as an investor to receive the dividend is established.

3.25 Taxation

Current income tax

Current income tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted by the balance sheet date.

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


Deferred income tax

Deferred income tax is provided using the balance sheet liability method on temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amount for financial reporting purpose.

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

» Where the deferred tax liability arises from the initial recognition of an asset or liability in a transaction which at the time of the transaction affects neither the accounting profit nor taxable profit or loss; and

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

Deferred tax assets are recognised for all deductible temporary differences, carried forward unused tax credit and unused tax losses, to the extent that it is probable that taxable profits will be available against which deductible temporary differences, carried forward unused tax credit and unused tax losses can be utilised, except:

» Where the deferred tax asset in respect of deductible temporary difference which arises from the initial recognition of an asset or liability which at the time of the related transaction, affects neither the accounting profit nor taxable profit or loss; and

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

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

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

Deferred tax is charged or credited to the consolidated income statement, except when it relates to items recognised directly to equity, in which case the deferred tax is also dealt with in the equity account.

Deferred tax assets and liabilities are offset when there is a legally enforceable right for the Group to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority on either the same taxable entity or when the Group intends to either settle current tax liabilities and assets on a net basis or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.



3.26 Financial instruments

Initial recognition and presentation

Financial assets

On 6 November 2009, the Ministry of Finance issued Circular No. 210/2009/TT-BTC providing guidance for the adoption in Vietnam of the International Financial Reporting Standards on presentation and disclosures of financial instruments (“Circular 210”) with effectiveness from financial years beginning on or after 1 January 2011.

Financial assets within the scope of Circular 210 are classified, for disclosures in the notes to the consolidated financial statements, as financial assets at fair value through profit or loss, held-to-maturity investments, loans and receivables or available-for-sale financial assets as appropriate. The Group determines the classification of its financial assets at initial recognition.

All financial assets are recognised initially at cost plus directly attributable transaction costs.

The Group’s financial assets include cash and short-term deposits, trade and other receivables, loan receivables and short-term and long-term investments.

Financial liabilities

Financial liabilities within the scope of Circular 210 are classified, for disclosures in the notes to the consolidated financial statements, as financial liabilities at fair value through profit or loss or financial liabilities measured at amortised cost as appropriate. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at cost plus directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables and loans.

Subsequent re-measurement

No subsequent re-measurement of financial instruments is currently required.

Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount reported in the consolidated balance sheet if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.


4. BUSINESS COMBINATION AND GOODWILL

4.1 Business combination

In accordance with the 2013 Annual General Meeting Resolution dated 12 April 2013, the Company’s shareholders approved a plan for the merger of Vinabico Corporation (“Vinabico”) into the Company through the issuance of the Company’s new shares at a ratio of 1:2.2 (2.2 existing shares of Vinabico will be in exchange for 1 new share of the Company).

On 28 June 2013, the Company completed the issuance of 1,105,645 new shares at par value of VND 10,000 per share in exchange for the shares of Vinabico.

The fair value of the net assets owned by Vinabico at the date of acquisition was subsequently assessed by the Group’s management. The management’s assessment showed that there were not any identifiable intangible assets recognised on the acquisition and the fair value of the net assets approximate their provisional amounts recognised in the Group’s consolidated financial statements for the six-month period ended 30 June 2013. The fair values of the identifiable assets and liabilities of Vinabico as at the acquisition date were as follows:

Fair value recognized on acquisition

VNDAssets

Property, plant and equipment 7,388,107,304

Trade receivables 5,235,691,428

Inventories 2,801,038,999

Cash and cash equivalents 2,829,719,234

Investments 41,174,484,744

Other current assets 3,823,496,136

Intangible assets 7,462,892,695

Other long-term assets 10,688,039,534

81,403,470,074

Liabilities

Account payables 1,364,916,322

Other liabilities 15,994,860,175

17,359,776,497

Total net assets 64,043,693,577

Total net assets acquired, 48.8% 31,252,450,241

Goodwill arising on acquisition 21,044,558,259

Consideration, shares issued at fair value 52,297,008,500

The total cost of the business combination amounted to VND 52,297,008,500 comprising the issuance of 1,105,645 ordinary shares at fair value which was determined by the published price of the Company’s share at the acquisition date, which was VND 47,300 per share.


4. BUSINESS COMBINATION AND GOODWILL (continued)

4.2 Goodwill

Goodwill is amortised on a straight line basis over ten years from acquisition date. The amortisation charges of goodwill during the year and the accumulated amortisation as at balance sheet date are as follows:

AmountVND

Cost

Beginning balance 433,015,187,595

Increase due to business combination 21,044,558,259

Ending balance 454,059,745,854

Accumulated amortisation


Amortisation for the year 44,643,343,543


Net carrying amount



5. CASH AND CASH EQUIVALENTS

Ending balance VND

Beginning balanceVND

Cash on hand 1,902,172,564 1,459,782,477

Cash in banks 282,810,221,399 211,785,272,910

Cash in transit 2,352,154,161 1,903,992,000

Cash equivalents 1,671,000,000,000 614,310,211,907

TOTAL 1,958,064,548,124 829,459,259,294

Cash equivalents represent bank term deposits at the commercial banks with the original maturity of less than three months and earn interest at the applicable deposit rates.

6. CURRENT ACCOUNTS RECEIVABLE

Ending balance VND


Trade receivables 188,931,745,641 180,529,903,420

In which:

Due from related parties (Note 29) 26,479,518,640 51,543,851,651

Due from third parties 162,452,227,001 128,986,051,769

Advances to suppliers 70,757,652,186 196,058,013,223


Ending balance VND


In which:

Due from a related party (Note 29) 13,950,621,542 27,929,026,963

Due from third parties 56,807,030,644 168,128,986,260

Other receivables 603,491,045,600 507,157,423,689

In which:

Due from related parties (Note 29) 402,054,592,874 344,901,764,350

Receivables from the sale of investments 156,776,770,363 156,776,698,020

Interest receivable 3,023,356,389 -

Other receivables 41,636,325,974 5,478,961,319

Provision for doubtful debts (3,287,129,493) (1,631,142,631)

NET 859,893,313,934 882,114,197,701

7. INVENTORIES

Ending balance VND


Raw materials 182,115,956,240 184,979,783,982

Finished goods 66,529,353,608 91,901,676,725

Tools and supplies 37,506,961,237 28,842,914,533

Merchandise goods 11,119,095,817 2,586,365,048

Goods on consignment 8,479,275,211 2,067,862,904

Goods in transit 8,398,681,676 10,239,873,840

Work in process 3,464,716,868 3,327,274,866

TOTAL 317,614,040,657 323,945,751,898

Provision for obsolete inventories (13,916,436,529) (7,339,802,889)

NET 303,697,604,128 316,605,949,009

Details of movement of provision for obsolete inventories:

Current yearVND

Previous yearVND

At beginning of year 7,339,802,889 1,623,240,670

Provision created during the year 13,916,436,529 7,339,802,889

Utilization and reversal of provision during the year (7,339,802,889) (1,623,240,670)

At end of year 13,916,436,529 7,339,802,889

8. TAX AND OTHER RECEIVABLE FROM THE STATE

Ending balance VND


Corporate income tax overpaid (Note 28.2) 16,764,949,919 -

Others 750,371,719 -

TOTAL 17,515,321,638 -


9. TANGIBLE FIXED ASSETSBuildings and structures

VNDMachinery and equipment

VNDMeans of transportation

VNDOffice equipment

VNDTotal

VNDCost

Beginning balance 391,412,863,319 1,091,707,291,181 133,612,141,888 72,835,515,618 1,689,567,812,006

Increases 19,125,229,299 97,107,882,563 9,091,441,847 17,791,219,005 143,115,772,714

In which:

Newly purchased 3,284,300,106 41,523,433,494 5,444,180,072 16,011,438,330 66,263,352,002

Transferred from construction in progress 15,840,929,193 55,584,449,069 3,647,261,775 1,779,780,675 76,852,420,712

Decreases 658,129,003 (51,132,382,033) (12,468,158,678) (14,595,371,994) (77,537,783,702)

In which:

Sold, disposed - (6,911,712,487) (11,574,041,642) (957,639,120) (19,443,393,249)

Reclassifications 658,129,003 (44,220,669,546) (894,117,036) (13,637,732,874) (58,094,390,453)

Ending balance 411,196,221,621 1,137,682,791,711 130,235,425,057 76,031,362,629 1,755,145,801,018

In which:

Fully depreciated 17,095,052,818 127,627,080,550 17,916,613,827 38,187,804,964 200,826,552,159

Accumulated depreciationBeginning balance 92,033,184,946 547,364,507,782 56,182,891,435 52,010,688,781 747,591,272,944

Depreciation for the year 23,854,875,057 103,323,780,397 15,539,934,597 8,060,770,390 150,779,360,441

Decreases 159,046,871 (44,038,036,253) (7,269,225,133) (11,358,406,953) (62,506,621,468)

In which:

Sold, disposed - (6,213,249,023) (6,526,484,762) (938,075,859) (13,677,809,644)


Ending balance 116,047,106,874 606,650,251,926 64,453,600,899 48,713,052,218 835,864,011,917

Net carrying amountBeginning balance 299,379,678,373 544,342,783,399 77,429,250,453 20,824,826,837 941,976,539,062

Ending balance 295,149,114,747 531,032,539,785 65,781,824,158 27,318,310,411 919,281,789,101

The machinery and equipment of the Group with a carrying amount of VND 237,031,514,595 were placed as collateral for the Group’s short-term and long-term loans from the banks. Details of such loans are presented in Notes 15 and 21.

10. INTANGIBLE FIXED ASSETS Brand name

VNDLand use right

VNDComputer software

VNDLand lease advantage

VNDCustomer relationships

VNDOthers

VNDTotal

VNDCost

Beginning balance 16,591,966,348 64,772,106,766 76,563,143,961 55,268,061,157 277,615,077,188 2,000,000,000 492,810,355,420

Increases - Newly purchased - 349,200,000 231,829,865 - - - 581,029,865

Reclassifications - (63,843,027,996) - - - - (63,843,027,996)

Ending balance 16,591,966,348 1,278,278,770 76,794,973,826 55,268,061,157 277,615,077,188 2,000,000,000 429,548,357,289

In which:

Fully amortized - 671,220,840 2,439,995,855 - - - 3,111,216,695

Accumulated amortizationBeginning balance 3,318,393,116 7,794,602,688 27,841,536,558 5,130,627,365 34,701,884,648 2,000,000,000 80,787,044,375

Amortization for the year 1,659,196,789 2,171,338,917 7,836,150,379 2,789,254,539 17,350,942,324 250,000,000 32,056,882,948

Reclassifications - (8,897,288,093) (181,844,115) - - (416,666,668) (9,495,798,876)

Ending balance 4,977,589,905 1,068,653,512 35,495,842,822 7,919,881,904 52,052,826,972 1,833,333,332 103,348,128,447

Net carrying amountBeginning balance 13,273,573,232 56,977,504,078 48,721,607,403 50,137,433,792 242,913,192,540 - 412,023,311,045

Ending balance 11,614,376,443 209,625,258 41,299,131,004 47,348,179,253 225,562,250,216 166,666,668 326,200,228,842


9. TANGIBLE FIXED ASSETSBuildings and structures

VNDMachinery and equipment

VNDMeans of transportation

VNDOffice equipment

VNDTotal

VNDCost

Beginning balance 391,412,863,319 1,091,707,291,181 133,612,141,888 72,835,515,618 1,689,567,812,006

Increases 19,125,229,299 97,107,882,563 9,091,441,847 17,791,219,005 143,115,772,714

In which:

Newly purchased 3,284,300,106 41,523,433,494 5,444,180,072 16,011,438,330 66,263,352,002

Transferred from construction in progress 15,840,929,193 55,584,449,069 3,647,261,775 1,779,780,675 76,852,420,712

Decreases 658,129,003 (51,132,382,033) (12,468,158,678) (14,595,371,994) (77,537,783,702)

In which:

Sold, disposed - (6,911,712,487) (11,574,041,642) (957,639,120) (19,443,393,249)


Ending balance 411,196,221,621 1,137,682,791,711 130,235,425,057 76,031,362,629 1,755,145,801,018

In which:

Fully depreciated 17,095,052,818 127,627,080,550 17,916,613,827 38,187,804,964 200,826,552,159

Accumulated depreciationBeginning balance 92,033,184,946 547,364,507,782 56,182,891,435 52,010,688,781 747,591,272,944

Depreciation for the year 23,854,875,057 103,323,780,397 15,539,934,597 8,060,770,390 150,779,360,441

Decreases 159,046,871 (44,038,036,253) (7,269,225,133) (11,358,406,953) (62,506,621,468)

In which:

Sold, disposed - (6,213,249,023) (6,526,484,762) (938,075,859) (13,677,809,644)


Ending balance 116,047,106,874 606,650,251,926 64,453,600,899 48,713,052,218 835,864,011,917

Net carrying amountBeginning balance 299,379,678,373 544,342,783,399 77,429,250,453 20,824,826,837 941,976,539,062

Ending balance 295,149,114,747 531,032,539,785 65,781,824,158 27,318,310,411 919,281,789,101

The machinery and equipment of the Group with a carrying amount of VND 237,031,514,595 were placed as collateral for the Group’s short-term and long-term loans from the banks. Details of such loans are presented in Notes 15 and 21.

10. INTANGIBLE FIXED ASSETS Brand name

VNDLand use right

VNDComputer software

VNDLand lease advantage

VNDCustomer relationships

VNDOthers

VNDTotal

VNDCost

Beginning balance 16,591,966,348 64,772,106,766 76,563,143,961 55,268,061,157 277,615,077,188 2,000,000,000 492,810,355,420

Increases - Newly purchased - 349,200,000 231,829,865 - - - 581,029,865

Reclassifications - (63,843,027,996) - - - - (63,843,027,996)

Ending balance 16,591,966,348 1,278,278,770 76,794,973,826 55,268,061,157 277,615,077,188 2,000,000,000 429,548,357,289

In which:

Fully amortized - 671,220,840 2,439,995,855 - - - 3,111,216,695

Accumulated amortizationBeginning balance 3,318,393,116 7,794,602,688 27,841,536,558 5,130,627,365 34,701,884,648 2,000,000,000 80,787,044,375

Amortization for the year 1,659,196,789 2,171,338,917 7,836,150,379 2,789,254,539 17,350,942,324 250,000,000 32,056,882,948

Reclassifications - (8,897,288,093) (181,844,115) - - (416,666,668) (9,495,798,876)

Ending balance 4,977,589,905 1,068,653,512 35,495,842,822 7,919,881,904 52,052,826,972 1,833,333,332 103,348,128,447

Net carrying amountBeginning balance 13,273,573,232 56,977,504,078 48,721,607,403 50,137,433,792 242,913,192,540 - 412,023,311,045

Ending balance 11,614,376,443 209,625,258 41,299,131,004 47,348,179,253 225,562,250,216 166,666,668 326,200,228,842


11. CONSTRUCTION IN PROGRESS

Ending balance VND


Installation of machinery 120,770,769,156 83,046,025,998

Software development 2,437,080,393 3,581,574,577

Construction of new plants - 5,510,118,012

Others 2,501,806,612 5,792,023,881

TOTAL 125,709,656,161 97,929,742,468

12. INVESTMENT PROPERTY

PlantVND

Cost

Beginning and ending balances 34,524,970,816

Accumulated depreciation


Depreciation for the year 2,573,389,028


Net carrying amount



Investment property represents the plant which was leased out to North Tribeco Joint Stock Company for 15 years starting from 25 May 2007. The cost of this investment property is depreciated over 13.5 years commencing from 17 November 2008. The fair value of the investment property had not yet been formally assessed and determined as at 31 December 2013. However, it is management’s assessment that this property’s market values are much higher than its carrying value as at the balance sheet date.

13. INVESTMENTS

13.1 Investments in associates and jointly controlled entity

Name of associates and jointly controlled entity

Carrying valueInterest

%Ending balance

VNDInterest

%Beginning balance

VND

Lavenue Investment Corporation (“Lavenue”) 50.00 1,050,000,000,000 50.00 1,050,000,000,000

Tan An Phuoc Company Limited (“TAP”) 49.00 205,300,000,000 49.00 204,300,000,000

Thanh Thai Real Estate Corporation (“TTR”) 30.00 1,800,000,000 30.00 1,800,000,000

TOTAL 1,257,100,000,000 1,256,100,000,000


13.2 Short-term investments

Ending balance Beginning balanceNumber of

shares Amount Number of shares Amount

VND VNDMarketable securities, net 3,681,723,350 24,265,947,837Short-term securities 95,691 4,778,276,394 1,991,386 48,737,879,600

of which:

Listed shares

Asia Commercial Joint Stock Bank 27,412 1,021,814,918 27,412 1,021,814,918Refrigeration Electrical Engineering Corporation (“REE”)

18,144 252,000,000 91,044 1,458,264,693

Other securities 135 4,461,476 90,129 3,516,100,478

Thien Long Group Corporation - - 455,281 15,885,188,911

Prudential Balanced Fund - - 1,040,000 10,860,118,000

Unlisted sharesSaigon Beer - Alcohol - Beverage Corporation

50,000 3,500,000,000 50,000 3,500,000,000

Vien Dong Assurance Corporation - - 237,520 12,496,392,600

Provision for diminution in value of securities (1,096,553,044) (24,471,931,763)

Other short-term investments, net 35,798,000,000 213,217,036,288Other short-term investments 43,798,000,000 225,717,036,288

In which:

Short-term investments in bonds 1,000 98,000,000 1,000 98,000,000

Corporate bond of REE 1,000 98,000,000 1,000 98,000,000

Short-term investments 43,700,000,000 225,619,036,288

Loans to related parties

of which:

Hung Vuong Corporation (*) 35,700,000,000 35,700,000,000

Kinh Do Investment Co., Ltd. - 156,919,036,288

Dat Thang Company 15,000,000,000

Vimec Trading Investment Corporation - 10,000,000,000

Other short-term investment 8,000,000,000 8,000,000,000

Provision for other short-term investments (8,000,000,000) (12,500,000,000)

Net value of short-term investments 39,479,723,350 237,482,984,125

(*) At the date of these consolidated financial statements, Hung Vuong Corporation repaid to the Group an amount of VND 35,700,000,000.


13. INVESTMENTS (continued)

13.3 Other long-term investments

Ending balance Beginning balance

Number of fund certificates

AmountVND

Number of fund certificates

AmountVND

Viet Capital Healthcare fund 150 15,000,000,000 150 15,000,000,000

14. LONG-TERM PREPAID EXPENSES

Ending balanceVND


Land rental 71,275,053,740 16,709,161,152

Tools and consumables 47,416,744,169 56,921,307,813

Maintenance expenses 3,579,907,327 2,158,899,606

Others 2,102,295,043 3,918,415,441

TOTAL 124,374,000,279 79,707,784,012

15. SHORT-TERM LOANS AND DEBTS

Ending balanceVND


Short-term loans 255,722,512,286 529,559,033,303

Current portion of long-term loans (Note 21) 145,216,700,016 -

TOTAL 400,939,212,302 529,559,033,303


The Group has obtained short-term loans from banks for the purpose of financing its working capital requirements with balances due at year-end as set out in the table below:

Name of bank Ending balanceVND Term

Interest rate

% p.a.Description of collateral

Vietinbank 99,618,277,545180 days from drawdown date

6.5 Unsecured

Vietcombank – Hai Duong Branch (“VCB”)

74,972,459,9455 months from drawdown date

6.4Machinery and equipment valued at VND 4,891,677,858

Hongkong and Shanghai Bank Corporation (“HSBC”)

35,566,234,31190 days from drawdown date

5.8 - 6.5 Unsecured

Military Joint Stock Commercial Bank ("MB")


7.5 - 8.5Land use right and assets at Tay Bac Cu Chi Industrial Zone

Vietnam International bank (“VIB”) 8,811,646,8696 months from drawdown date

7 Unsecured


8

The Group's receivables and inventory with minimum value equal to outstanding loan balance at all time

Standard Chartered Bank ("SCB")1,438,803,740 120 days from

drawdown date6

Machinery and equipment valued at VND 27,856,590,036

255,722,512,286


16. TRADE PAYABLES

Ending balance VND


Due to third parties 265,262,235,541 257,155,299,694

Due to related parties (Note 29) 18,510,145,567 17,462,956,852

TOTAL 283,772,381,108 274,618,256,546

17. ADVANCE FROM CUSTOMERS

Ending balance VND



Due to a related party (Note 29) 104,852,253 104,852,253

TOTAL 34,950,728,208 37,628,753,830

18. STATUTORY OBLIGATIONS

Ending balance VND


Corporate income tax (Note 28.2) 60,627,851,285 79,116,759,336

Value-added tax payable 17,662,993,337 17,798,220,570

Personal income tax 2,704,945,678 4,233,648,849

Import/export duties - 480,358,799

Other taxes 831,332,363 1,094,122,331

TOTAL 81,827,122,663 102,723,109,885

19. ACCRUED EXPENSES

Ending balance VND


Marketing expenses 93,547,309,568 69,694,923,489

13th month salary and bonus 45,985,328,998 33,534,434,998

Tax on changing of purpose for use of land 34,594,000,000 34,594,000,000

Sales commission 20,871,418,585 26,425,323,237

Transportation fees 14,350,962,827 13,560,403,738

License fees 5,752,005,440 3,274,139,000

Utilities 5,458,486,312 3,278,987,013

Interest expense 1,931,764,928 2,979,679,906

Others 7,617,763,267 6,681,277,086

TOTAL 230,109,039,925 194,023,168,467


20. OTHER PAYABLES

Ending balance VND


Capital holding on behalf 100,000,000,000 100,000,000,000

Unearned revenue 2,947,932,000 2,947,932,000

Deposits received 2,767,218,796 2,987,218,796

Dividends payable 2,435,013,268 1,364,047,360

Social, health and unemployment insurance 1,526,414,089 1,811,992,728

Trade union fees 1,017,711,076 2,466,048,047

Others 11,663,216,825 9,916,874,790

TOTAL 122,357,506,054 121,494,113,721

In which:

Due to related parties (Note 29) 100,614,628,800 102,334,622,604


21. LONG-TERM LOANS AND DEBTS

Ending balance VND


Long-term loans from banks 314,102,469,716 52,633,096,500

Less:

Current portion of long-term loans (Note 15) 145,216,700,016 -

NON-CURRENT PORTION 168,885,769,700 52,633,096,500

Details of long-term loans from banks are as follows:

Name of banks Ending balance VND Term

Interest rate

% p.a.Description of collateral

SCB - In USD 172,112,727,2343 years from first drawdown date on 7 March 2013

3.8

Machinery and equipment of two subsidiaries valued at VND 125,257,984,370

In which: current portion 76,494,545,532

SCB - In VND 40,909,090,910 1,076 days from first drawdown date on 27 March 2013

6.9 As aboveIn which: current portion 18,181,818,180

United Overseas Bank ("UOB") - In USD

101,080,651,572 36 months from the first withdrawal date on 8 November 2012

5

The new soft-cakes production line amounting to VND 79,025,262,331In which: current portion 50,540,336,304

TOTAL 314,102,469,716

In which:

Current portion 145,216,700,016

Non-current portion 168,885,769,700


22. OWNERS’ EQUITY

22.1 Increase and decrease in owners’ equity

VND

Issued share capital Share premium Treasury sharesForeign

exchange differences



Other funds belonging to

owners’ equity

Undistributed earnings Total

Previous year

Beginning balance 1,195,178,810,000 1,950,665,093,455 (153,869,778,400) (891,411,434) 25,370,280,515 25,792,635,752 15,909,752,661 779,434,568,252 3,837,589,950,801

Issuance of new shares 140,000,000,000 503,153,676,333 - - - - - - 643,153,676,333

Issuance of bonus shares 264,037,440,000 (264,037,440,000) - - - - - - -

Acquisition of treasury shares - - (501,376,498,414) - - - - - (501,376,498,414)

Foreign exchange differences - - - 891,411,434 - - - - 891,411,434

Net profit for the year - - - - - - - 353,944,403,336 353,944,403,336

Dividends declared - - - - - - - (311,455,718,925) (311,455,718,925)

Transferred to funds - - - - - - - (6,728,181,334) (6,728,181,334)

Board of Directors’ allowance - - - - - - - (5,745,382,185) (5,745,382,185)

Ending balance 1,599,216,250,000 2,189,781,329,788 (655,246,276,814) - 25,370,280,515 25,792,635,752 15,909,752,661 809,449,689,144 4,010,273,661,046

Current year

Beginning balance 1,599,216,250,000 2,189,781,329,788 (655,246,276,814) - 25,370,280,515 25,792,635,752 15,909,752,661 809,449,689,144 4,010,273,661,046

Issuance of new shares to employees 66,010,000,000 31,686,000,000 - - - - - - 97,696,000,000

Issuance of new shares for business combination

11,056,450,000 40,630,558,500 - - - - - - 51,687,008,500

Issuance of treasury shares - 82,210,830,889 502,620,072,914 - - - - - 584,830,903,803





Ending balance 1,676,282,700,000 2,344,308,719,177 (152,626,203,900) - 25,370,280,515 25,792,635,752 15,909,752,661 946,605,704,726 4,881,643,588,931

In accordance with the 2013 Annual General Meeting Resolution dated 12 April 2013, the Company’s shareholders approved a plan for the merger of Vinabico into the Group through the issuance of the Company’s new shares at a ratio of 1:2.2 (2.2 existing shares of Vinabico will be in exchange for 1 new share of the Company).

On 28 June 2013, the distribution of new shares for the purpose of exchanging the shares of Vinabico was completed and the Company is in process of completion of the Report of Distribution Result to submit to the State Security Committee.

As at the balance sheet date, the Company is in process of obtaining the Amended Business Registration Certificate regarding the increase in share capital arising from the new issuances of share for the said mergers from relevant authorities.


22. OWNERS’ EQUITY

22.1 Increase and decrease in owners’ equity

VND

Issued share capital Share premium Treasury sharesForeign

exchange differences



Other funds belonging to

owners’ equity

Undistributed earnings Total

Previous year

Beginning balance 1,195,178,810,000 1,950,665,093,455 (153,869,778,400) (891,411,434) 25,370,280,515 25,792,635,752 15,909,752,661 779,434,568,252 3,837,589,950,801

Issuance of new shares 140,000,000,000 503,153,676,333 - - - - - - 643,153,676,333

Issuance of bonus shares 264,037,440,000 (264,037,440,000) - - - - - - -

Acquisition of treasury shares - - (501,376,498,414) - - - - - (501,376,498,414)

Foreign exchange differences - - - 891,411,434 - - - - 891,411,434





Ending balance 1,599,216,250,000 2,189,781,329,788 (655,246,276,814) - 25,370,280,515 25,792,635,752 15,909,752,661 809,449,689,144 4,010,273,661,046

Current year

Beginning balance 1,599,216,250,000 2,189,781,329,788 (655,246,276,814) - 25,370,280,515 25,792,635,752 15,909,752,661 809,449,689,144 4,010,273,661,046

Issuance of new shares to employees 66,010,000,000 31,686,000,000 - - - - - - 97,696,000,000

Issuance of new shares for business combination

11,056,450,000 40,630,558,500 - - - - - - 51,687,008,500

Issuance of treasury shares - 82,210,830,889 502,620,072,914 - - - - - 584,830,903,803





Ending balance 1,676,282,700,000 2,344,308,719,177 (152,626,203,900) - 25,370,280,515 25,792,635,752 15,909,752,661 946,605,704,726 4,881,643,588,931

In accordance with the 2013 Annual General Meeting Resolution dated 12 April 2013, the Company’s shareholders approved a plan for the merger of Vinabico into the Group through the issuance of the Company’s new shares at a ratio of 1:2.2 (2.2 existing shares of Vinabico will be in exchange for 1 new share of the Company).

On 28 June 2013, the distribution of new shares for the purpose of exchanging the shares of Vinabico was completed and the Company is in process of completion of the Report of Distribution Result to submit to the State Security Committee.

As at the balance sheet date, the Company is in process of obtaining the Amended Business Registration Certificate regarding the increase in share capital arising from the new issuances of share for the said mergers from relevant authorities.


22. OWNERS’ EQUITY (continued)

22.2 Capital transactions with owners and distribution of dividends

Current year VND

Previous yearVND

Issued share capital

Beginning balance 1,599,216,250,000 1,195,178,810,000

Increase 77,066,450,000 404,037,440,000

Ending balance 1,676,282,700,000 1,599,216,250,000

Dividends

Dividends declared 318,141,106,487 311,455,718,925

22.3 Shares

Ending balanceShares

Beginning balanceShares

Ordinary shares authorised to be issued 167,628,270 159,921,625

Ordinary shares issued and fully paid 167,628,270 159,921,625

Treasury shares held by the Group (1,492,335) (14,535,368)

In which: held by the Company (1,492,256) (1,492,256)

Ordinary outstanding shares 166,135,935 145,386,257

22.4 Earnings per share

Current year VND

Previous yearVND

Net profit attributable to the Company’s shareholders (VND) 493,869,552,142 353,944,403,336

Weighted average number of ordinary shares 161,876,676 152,692,848

Basic earnings per share (VND)(Par value: VND 10,000 per share)

3,051 2,318

The weighted average number of ordinary shares has taken into account the treasury shares and bonus shares made by the Company up to the date of these consolidated financial statements. Accordingly, the opening weighted average number of ordinary shares has been adjusted retrospectively.

There are no potential dilutive ordinary shares as at the balance sheet date.


23. REVENUE

23.1 Revenue from sale of goods and rendering of services

Current year VND

Previous yearVND

Gross revenue 4,674,796,415,910 4,311,914,226,281

Of which:

Sale of finished goods 4,593,939,105,675 4,261,773,089,546

Sale of merchandise goods 78,697,252,611 48,768,953,487

Rendering of services 2,160,057,624 1,372,183,248

Less: (114,198,130,572) (26,116,782,870)

Of which:

Sales returns (52,633,490,262) (15,862,928,415)

Sales discounts (61,564,640,310) (10,253,854,455)

NET REVENUE 4,560,598,285,338 4,285,797,443,411

23.2 Finance income

Current year VND

Previous yearVND

Interest income 108,281,743,978 122,931,646,545

Realised foreign exchange gains 2,630,600,578 5,746,638,478

Gains from disposal of investment 1,569,220,394 418,433,704

Dividends income 653,728,957 1,088,283,677

Unrealised foreign exchange gains - 2,781,973,065

Gains from securities investments - 314,803,350

TOTAL 113,135,293,907 133,281,778,819

24. COST OF GOODS SOLD AND SERVICES RENDERED

Current year VND

Previous yearVND

Cost of finished goods sold 2,489,214,834,327 2,362,933,789,580

Cost of merchandise sold 44,467,415,735 31,428,101,387

Provision for obsolete inventories 6,576,633,640 5,716,562,219

Cost of services rendered 2,573,389,028 2,573,389,029

Other 41,652,436,514 14,099,997,550

TOTAL 2,584,484,709,244 2,416,751,839,765


25. FINANCE EXPENSES

Current year VND

Previous yearVND

Interest expense 43,391,810,398 94,369,615,032

Finance consulting fees 34,328,987,760 -

Realised foreign exchange loss 3,139,219,009 9,017,219,090

Unrealised foreign exchange loss 2,258,288,851 -

Discounts for early payment 1,300,075,820 2,138,505,535

Loss on disposal of investments 765,514,385 75,227,233,816

(Reversal of provision) provision for investment diminution (15,616,014,863) 6,127,874,987

Others 3,949,058,867 3,459,364,808

TOTAL 73,516,940,227 190,339,813,268

26. OTHER INCOME AND EXPENSES

Current year VND

Previous yearVND

Other income 30,372,643,049 20,132,906,361

Sale of scrap materials 12,340,588,017 8,950,392,665

Proceeds on disposal of fixed assets 7,167,957,959 7,788,090,788

Others 10,864,097,073 3,394,422,908

Other expenses (34,690,086,601) (40,454,914,532)

Disposal of scrap materials (6,707,431,121) (6,313,758,422)

Expenses on disposal of fixed assets (5,765,583,605) (5,854,107,440)

Expenses relating to Hiep Binh Phuoc Project (4,407,114,395)

Penalty (4,243,636,059) (13,102,514,941)

Expenses from writing off receivables - (9,598,048,875)

Expenses from the depreciation of fixed assets not used in normal business activities

- (1,568,797,253)

Others (13,566,321,421) (4,017,687,601)

NET (4,317,443,552) (20,322,008,171)

27. PRODUCTION AND OPERATING COSTS

Current year VND

Previous yearVND

Cost of merchandise goods 44,467,415,735 31,428,101,387

Raw materials 1,986,466,175,919 2,038,113,660,539

Labor costs 665,734,246,822 589,804,207,979

Depreciation and amortization (Notes 4, 9, 10 and 12) 230,052,975,960 213,579,760,226

Expenses from external services 581,591,958,146 438,501,829,445

Other expenses 477,497,756,620 441,229,532,421

TOTAL 3,985,810,529,202 3,752,657,091,997


28. CORPORATE INCOME TAX

The Company and its subsidiaries, except for KDBD, have the obligation to pay corporate income tax (“CIT”) at the rate of 25% of taxable profits.

KDBD has the obligation to pay the CIT at the rate of 15% of taxable profits for twelve (12) years from commencement of its operations, and 25% for the years thereafter. KDBD is entitled to an exemption from CIT for three (3) years commencing from the first year of earning profits (year 2008) and a 50% reduction from CIT for the following seven (7) years.

The tax returns filed by the Company and its subsidiaries are subject to examination by the tax authorities. Because the application of tax laws and regulations to many types of transactions is susceptible to varying interpretations, amounts reported in the consolidated financial statements could change at a later date upon final determination by the tax authorities.

28.1 CIT expense

Current year VND

Previous yearVND

Current CIT expense (118,676,164,588) (131,641,468,329)

Deferred CIT expense (7,148,912,968) (856,794,455)

TOTAL (125,825,077,556) (132,498,262,784)

28.2 Current CIT

The current CIT payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or deductible. The Group’s liability for current CIT is calculated using tax rates that have been enacted by the balance sheet date.


28. CORPORATE INCOME TAX (continued)

28.2 Current CIT (continued)

The reconciliation between the taxable profit and accounting profit as reported in the consolidated income statement is presented below:

Current year VND

Previous yearVND

Accounting profit before tax 618,617,962,194 489,927,954,185 Adjustments:

Permanent differencesProfit from reissuing treasury shares held by subsidiaries 109,771,116,686 -

Advertising expenses in excess of 10% cap 82,496,490,142 179,773,366,015

Payments not related to taxable income 50,610,068,519 42,133,667,060

Amortization of goodwill 44,643,343,543 43,591,115,630

Amortization of revalued intangible assets 21,708,646,991 21,638,639,385

Penalty 1,342,902,318 13,132,414,941

Rental income at subsidiary level 787,874,376 1,575,748,752

Depreciation of fixed assets exceeded 1,413,682,130 1,253,219,666

Loss arising from disposal of investment - (40,005,209,054)

Income not subject to CIT (653,728,957) (1,088,283,677)

Provision for investment diminution, not deducted in prior years (12,256,671,256) -

Other adjustments 1,118,141,906 3,540,436,016

Temporary differencesProvision for other short-term investment 8,000,000,000 -

Provision for obsolete inventories 5,613,303,193 1,660,036,536

Accrued expenses 5,099,602,203 (48,801,956,047)

Allocation of prepaid expenses exceeded 4,165,600,000 -

Unrealized foreign exchange differences 2,927,966,169 (3,009,124,805)

Unrealised profits 725,046,329 4,863,283,977

Provision for investment diminution at subsidiary level 605,174,500 (605,174,500)

Severance allowance 417,312,314 3,892,508,779

Provision for loans to related parties (12,500,000,000) 12,500,000,000

Estimated current taxable income 934,653,833,300 725,972,642,859Estimated current CIT 191,816,622,453 152,938,697,307CIT exemption (31,956,622,487) (22,490,550,974)Adjustment for CIT from re-issue of treasury shares by subsidiaries recognised directly to share premium

(27,560,285,797) -

Estimated CIT expense 132,299,714,169 130,448,146,333(Over-accrual) under-accrued CIT in previous years (13,623,549,581) 1,193,321,996

CIT expense 118,676,164,588 131,641,468,329CIT payable at beginning of year 79,116,759,336 24,878,617,399

Adjustment for CIT from re-issue of treasury shares by subsidiaries 27,560,285,797 -

CIT paid during the year (181,490,308,355) (77,403,326,392)

CIT payable at end of year 43,862,901,366 79,116,759,336In which:

CIT payable (Note 18) 60,627,851,285 79,116,759,336

CIT overpaid (Note 8) (16,764,949,919) -


28.3 Deferred CIT

The Group recognized deferred CIT as at the balance sheet date as follows:

Consolidated balance sheet Consolidated income statementEnding balance

VNDBeginning balance

VNDCurrent year

VNDPrevious year

VNDAccrued expenses 25,203,852,708 31,835,959,199 (6,632,106,491) (9,875,899,116)

Severance allowance 9,089,061,831 10,036,783,622 (947,721,791) 2,823,216,382

Unrealised profits 2,656,344,922 2,837,312,193 (180,967,271) 3,549,868,152

Provision for other short-term investment

1,760,000,000 - 1,760,000,000 -

Allocation of prepaid expenses exceeded

916,432,000 - 916,432,000 -

Provision for obsolete inventories 778,982,791 432,579,421 346,403,370 400,085,414

Depreciation 250,317,725 312,799,927 (62,482,202) (94,556,493)

Provision for loans to related parties

- 3,125,000,000 (3,125,000,000) 3,125,000,000

Provision for investment diminution at subsidiary level

- (45,388,088) 45,388,088 (45,388,088)

Unrealized foreign exchange differences

(7,979,377) (739,120,706) 731,141,329 (739,120,706)

TOTAL 40,647,012,600 47,795,925,568 (7,148,912,968) (856,794,455)

29. TRANSACTIONS WITH RELATED PARTIES

Related parties transactions include all transactions undertaken with other companies to which the Group is related, either through the investor/investee relationship or because they share a common investor and thus are considered to be a part of the same corporate group.

Significant transactions with related parties during the year were as follows:

Related party Relationship Transaction Amount VND

Kinh Do Investment Co., Ltd. Related party

Loan collection 2,566,919,036,288

Short term loans (2,410,000,000,000)

Loan interest receivable 51,692,598,524

License fees (12,707,643,598)

Kinh Do Saigon Bakery Joint Stock Corporation

Related partySale of finished goods 43,318,136,309Sale of raw and packaging materials, tools and supplies

2,421,763,149

Tong Yuan Co., Ltd. Related party Purchase of packaging (78,355,524,132)

Hung Vuong Corporation Related party Loan interest receivable 5,429,375,000


29. TRANSACTIONS WITH RELATED PARTIES (continued) Remuneration to members of the Board of Directors, management and the Board of Supervision during the year was as follows:

Current year VND

Previous yearVND

Board of Directors

Allowance and bonus 7,016,950,000 5,649,382,185

Management

Salaries and bonus 25,407,190,000 16,230,000,000

Board of Supervision

Allowance and bonus 174,000,000 96,000,000

TOTAL 32,598,140,000 21,975,382,185

Amounts due from and due to related parties at the balance sheet date, other than the investments disclosed in Note 13, were as follows:

Related party Relationship Transaction Receivable (payable)VND

Trade receivables


Related partySale of finished goods, materials, tools and supplies

26,452,049,604

Kinh Do Land Corporation Related party Sale of finished goods 23,171,121

Kinh Do Investment Co., Ltd Related party Sale of finished goods 4,297,915

26,479,518,640

Other receivables

Kinh Do Investment Co., Ltd (*) Related partyLoan InterestPayment on behalf

371,071,397,75325,219,543,505

Hung Vuong Corporation (*) Related party Loan interest 5,429,375,000

Tan An Phuoc Co., Ltd Associate Payment on behalf 303,421,616


Related party Payment on behalf 30,855,000

402,054,592,874

Advance to supplier

Kinh Do Investment Co., Ltd. Related party Advance to license fees 13,950,621,542

(*) At the date of these consolidated financial statements, Kinh Do Investment Co., Ltd. and Hung Vuong Corporation repaid to the Company an amount totalling VND 401,720,316,258.


Amounts due from and due to related parties at the balance sheet date, other than the investments disclosed in Note 13, were as follows: (continued)

Related party Relationship Transaction Receivable (payable)VND

Trade payables

Tong Yuan Co., Ltd.Related

partyPurchase of packaging (16,819,913,538)

Kinh Do Investment Co., Ltd.Related

partyReceiving on behalf (1,071,225,527)

Kinh Do Saigon Bakery Joint Stock CorporationRelated

partyPurchase of finished goods (619,006,502)

(18,510,145,567)

Other payables

Tan An Phuoc Co., Ltd. Associate Capital holding on behalf (100,000,000,000)

Kinh Do Investment Co., Ltd.Related

partyPayment on behalf (563,130,800)


partyPayment on behalf (51,498,000)

(100,614,628,800)

Advance from customer


partyPurchase of finished goods (104,852,253)


30. COMMITMENTS

Operating lease commitment The Group leases land, offices and warehouses under operating lease arrangements. The minimum lease commitment as at 31 December 2013 under the operating lease agreements is as follows:

Ending balanceVND


Within one year 54,810,143,295 11,531,870,595

After one year but not more than five years 168,147,573,881 21,921,430,926

More than five years 170,712,526,759 817,920,000

TOTAL 393,670,243,935 34,271,221,521

Capital contribution obligation

As at 31 December 2013, the Group had outstanding capital contribution obligation to an associate amounting to VND 39,700,000,000.

31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group’s principal financial liabilities comprise loans and debts and trade and other payables. The main purpose of these financial liabilities is to finance the Group’s operations. The Group has loans, receivables, trade and other receivables, and cash and short-term deposits that arise directly from its operations. The Group does not hold or issue derivative financial instruments.

The Group is exposed to market risk, credit risk and liquidity risk relating to its operations.

Risk management is integral to the whole business of the Group. The Group has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Group's risk management process to ensure that an appropriate balance between risk and control is achieved.

Management reviews and agrees on the policies for managing each of these risks which are summarized below:

Market risk

Market risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four types of risk: interest rate risk, currency risk, commodity price risk and other price risk, such as equity price risk. Financial instruments affected by market risk include loans and borrowings, deposits and available-for-sale investments.

The sensitivity analyses in the following sections relate to the position as at 31 December 2013 and 2012.

The sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed to floating interest rates of the debt and the proportion of financial instruments in foreign currencies are all constant.


31. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)

Market risk (continued)

In calculating the sensitivity analyses, management assumed that the consolidated balance sheet relates to available-for-sale debt instrument; the sensitivity of the relevant income statement item is the effect of the assumed changes in respective market risks. This is based on the financial assets and financial liabilities held at 31 December 2013 and 2012.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Group’s exposure to market risk for changes in interest rate relates primarily to the Group’s cash and short-term deposits. These investments are mainly short term in nature and they are not held for speculative purposes.

The Group manages interest rate risk by looking at the competitive structure of the market to obtain rates which are favourable for its purposes within its risk management limits.

Interest rate sensitivity

With all other variables held constant, the following table demonstrates the sensitivity to a reasonably possible change in interest rates on that portion of loans and debts and deposits and its effect to the Group’s profit before tax:

Increase/decrease in basis points

Effect on profit before taxVND

Current year

US$ +100 (2,439,546,151)

VND +300 48,965,734,669

US$ -100 2,439,546,151

VND -300 (48,965,734,669)

Previous year

US$ +100 (101,196,123)

VND +300 6,142,527,967

US$ -100 101,196,123

VND -300 (6,142,527,967)

The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment.

Foreign currency risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities.

The Group is not exposed to foreign currency risk as most of the Group’s operating activities, which are relating to purchases and sales of goods, are denominated in VND, the Group’s accounting currency. The Group does not employ any derivative financial instruments to hedge its foreign currency exposure.



Market risk (continued)

Equity price risk

The Group’s listed and unlisted equity securities are susceptible to market price risk arising from uncertainty about future values of the investment securities. The Group manages equity price risk by placing a limit on equity investments. The Group’s Board of Directors reviews and approves all equity investment decisions.

At the balance sheet date, the Group is not exposed to significant equity securities price risk.

Commodity price risk

The Group is exposed to commodity price risk in relation to purchase of certain commodities. The Group manages its commodity price risk by keeping close watch on relevant information and situation of commodity market in order to properly manage timing of purchases, production plans and inventories level. The Group does not employ any derivative financial instruments to hedge its commodity price risk.

Credit risk

Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks, short-term investments, foreign exchange transactions and other financial instruments.

Trade receivables

Customer credit risk is managed by the Group based on its established policy, procedures and control to minimise credit risk at an acceptable level. In view of the aforementioned and the fact that the Group’s trade receivables relate to a large number of diversified customers, the Group’s management evaluates that there is no significant concentration of credit risk.

Bank deposits

The Group's bank balances are mainly maintained with well-known banks in Vietnam. Credit risk from balances with banks is managed by the Group’s treasury department in accordance with the Group’s policy. The Group’s maximum exposure to credit risk for the components of the consolidated balance sheet at each reporting dates are the carrying amounts. The Group’s management evaluates the concentration of credit risk in respect to bank deposit as low.

31. FIN

AN

CIAL RISK M

AN

AGEM

ENT O

BJECTIVES A

ND

POLICIES (continued)

Credit risk (continued)

Other financial instrum

ents


ents of the Group m

ainly include short-term loans to related parties and the m

anagement

evaluate all financial assets are neither past due nor impaired as they related to recognized and creditw

orthy counterparties except for the follow

ing receivable which are past due but not im

paired as at 31 Decem

ber 2013:

VND

TotalNeither past

due nor impaired

Past due but not impaired

< 90 days91–180 days

181–210 days> 210 days

31 Decem

ber 2013

Bank deposits1,953,810,221,399

1,953,810,221,399 -

--

-

Trade receivables and other receivables

792,422,791,241 693,425,596,331

62,623,704,495 9,720,926,085

1,071,556,890 25,581,007,440

Loans to related parties 35,700,000,000

35,700,000,000 -

--

-

31 Decem

ber 2012

Bank deposits826,095,484,817

826,095,484,817 -

--

-


687,986,945,626572,134,743,602

41,075,625,521 29,371,638,227

11,042,635,028 34,362,303,248

Loans to related parties217,619,036,288

192,619,036,288 -

- -

25,000,000,000

Other short-term

investment

8,000,000,000-

--

-8,000,000,000


31. FIN

AN

CIAL RISK M

AN

AGEM

ENT O

BJECTIVES A

ND

POLICIES (continued)

Credit risk (continued)


ents


ents of the Group m

ainly include short-term loans to related parties and the m

anagement

evaluate all financial assets are neither past due nor impaired as they related to recognized and creditw

orthy counterparties except for the follow

ing receivable which are past due but not im

paired as at 31 Decem

ber 2013:

VND

TotalNeither past

due nor impaired

Past due but not impaired

< 90 days91–180 days

181–210 days> 210 days

31 Decem

ber 2013

Bank deposits1,953,810,221,399

1,953,810,221,399 -

--

-


792,422,791,241 693,425,596,331

62,623,704,495 9,720,926,085

1,071,556,890 25,581,007,440

Loans to related parties 35,700,000,000

35,700,000,000 -

--

-

31 Decem

ber 2012

Bank deposits826,095,484,817

826,095,484,817 -

--

-


687,986,945,626572,134,743,602

41,075,625,521 29,371,638,227

11,042,635,028 34,362,303,248


192,619,036,288 -

- -

25,000,000,000

Other short-term

investment

8,000,000,000-

--

-8,000,000,000



Liquidity risk

The liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligation due to shortage of funds. The Group’s exposure to liquidity risk arises primarily from mismatches of maturities of financial assets and liabilities.

The Group monitors its liquidity risk by maintaining a level of cash and cash equivalents and bank loans deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.

The table below summarizes the maturity profile of the Group’s financial liabilities based on contractual discounted payments:

Less than 1 yearVND

From 1 to 5 yearsVND

TotalVND

31 December 2013

Loans and debts 400,939,212,302 168,885,769,700 569,824,982,002

Trade payables 283,772,381,108 - 283,772,381,108

Other payables and accrued expenses 206,481,216,981 11,873,420,941 218,354,637,922

891,192,810,391 180,759,190,641 1,071,952,001,032

31 December 2012

Loans and debts 529,559,033,303 52,633,096,500 582,192,129,803

Trade payables 274,618,256,546 - 274,618,256,546

Other payables and accrued expenses 181,982,847,190 15,766,479,023 197,749,326,213

986,160,137,039 68,399,575,523 1,054,559,712,562

The Group’s management assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is sufficiently available and debt maturing within 12 months can be rolled over with existing lenders.


32. FIN

AN

CIAL A

SSETS AN

D FIN

AN

CIAL LIA

BILITIES

Set out below is a com

parison by class of the carrying amounts and fair value of the G

roup’s financial instruments that

are carried in the consolidated financial statements:

VND

Carrying amount

Fair value

Ending balanceBeginning balance

Ending balanceBeginning balance

CostProvision

CostProvision

Financial assets

Investments in securities

Listed shares1,278,276,394

(596,553,044)32,741,487,000

(11,412,567,907)681,723,350

21,328,919,093

Unlisted shares

3,500,000,000(500,000,000)

15,996,392,600 (13,059,363,856)

3,000,000,0002,937,028,744

Fund certificates15,000,000,000

-15,000,000,000

-15,000,000,000

15,000,000,000

Corporate bond98,000,000

-98,000,000

-98,000,000

98,000,000

Short-term deposits

13,240,682,284-

880,399,390-

13,240,682,284880,399,390


- 217,619,036,288

(12,500,000,000)35,700,000,000

205,119,036,288

Other short-term

investment

8,000,000,000(8,000,000,000)

8,000,000,000-

-8,000,000,000

Trade receivables188,931,745,641

(3,287,129,493)180,529,903,420

(1,631,142,631)185,644,616,148

178,898,760,789

Other receivables

603,491,045,600 -

507,157,423,689-

603,491,045,600 507,157,423,689

Cash and cash equivalents1,958,064,548,124

- 829,459,259,294

-1,958,064,548,124

829,459,259,294

TOTA

L2,827,304,298,043

(12,383,682,537)1,807,481,901,681

(38,603,074,394)2,814,920,615,506

1,768,878,827,287


32. FINANCIAL ASSETS AND FINANCIAL LIABILITIES (continued)

VND

Carrying amount Fair value

Ending balance Beginning balance Ending balance Beginning balance

Financial liabilities

Loans and debts 569,824,982,002 582,192,129,803 569,824,982,002 582,192,129,803

Trade payables 283,772,381,108 274,618,256,546 283,772,381,108 274,618,256,546

Other current liabilities 218,354,637,922 197,749,326,213 218,354,637,922 197,749,326,213

TOTAL 1,071,952,001,032 1,054,559,712,562 1,071,952,001,032 1,054,559,712,562

The fair value of the financial assets and liabilities are included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale.

The following method and assumption were used to estimate the fair values:

» Cash and short-term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely due to the short-term maturities of these instruments.

» Long-term fixed-rate and variable-rate receivables/borrowings are evaluated by the Group based on parameters such as interest rates, specific country risk factors, individual creditworthiness of the customer and the risk characteristics of the financed project. Based on this evaluation, allowances are taken to account for the expected losses of these receivables.

» Fair value of quoted bonds and shares is based on price quotations at the reporting date.

» Fair value of available-for-sale financial assets is derived from quoted market prices in active markets, if available.


33. SEGMENT INFORMATION

The Group’s principal activities are to process agricultural products and foods which include purified drinks and dairy products. The Group views these activities as one business segment. However, the Group manages its geographical segments based on the location of the Group’s assets. Sales to external customers disclosed in geographical segments are based on the geographical location of its customers.

The Group’s geographically segments comprise South and North of Vietnam. The following tables present revenue, profit and certain asset information regarding the Group’s geographical segments:

VND

South segment North segment Total

Current year

Segment revenue

Sales to external customers 3,129,441,180,449 1,545,355,235,461 4,674,796,415,910

Sales deductions (88,181,185,216) (26,016,945,356) (114,198,130,572)

Inter-segment sales 304,367,007,200 60,331,807,297 364,698,814,497

3,345,627,002,433 1,579,670,097,402 4,925,297,099,835

Reconciliation:

Elimination of inter-segment sales (364,698,814,497)

Revenue for the year 4,560,598,285,338

Segment results 382,405,095,828 215,966,276,329 598,371,372,157

Reconciliation:

Interest income 108,281,743,978

Interest expense (43,391,810,398)

Amortization of goodwill (44,643,343,543)

Profit before tax 618,617,962,194

Segment assets 5,329,538,962,849 960,366,669,489 6,289,905,632,338

Reconciliation:

Elimination of inter-segment receivables (237,982,219,361)

Unallocated assets 326,322,166,021

Total assets 6,378,245,578,998

Segment liabilities 1,273,148,393,589 459,864,203,500 1,733,012,597,089

Reconciliation:

Elimination of inter-segment payables (237,982,219,361)

Total liabilities 1,495,030,377,728

Other segment information

Depreciation and amortization 168,430,076,741 61,622,899,219 230,052,975,960

Provision for doubtful debts 1,758,295,537 (102,308,675) 1,655,986,862

Provision for obsolete inventories 8,473,486,616 (1,896,852,976) 6,576,633,640

Provision for investment diminution (15,316,014,863) (300,000,000) (15,616,014,863)


33. SEGMENT INFORMATION (continued)

The following tables present revenue, profit and certain asset information regarding the Group’s geographical segments: (continued)

VND

South segment North segment Total

Previous year

Segment revenue

Sales to external customers 3,026,404,677,984 1,285,509,548,297 4,311,914,226,281

Sales deductions (22,096,413,959) (4,020,368,911) (26,116,782,870)

Inter-segment sales 198,304,298,996 15,915,689,606 214,219,988,602

3,202,612,563,021 1,297,404,868,992 4,500,017,432,013

Reconciliation:

Elimination of inter-segment sales (214,219,988,602)

Revenue for the year 4,285,797,443,411

Segment results 392,840,886,046 184,987,499,176 577,828,385,222

Reconciliation:

Interest income 122,931,646,545

Interest expense (94,369,615,032)

Amortization of goodwill (43,591,115,630)

Loss on disposal of investments (72,871,346,920)

Profit before tax 489,927,954,185

Segment assets 4,609,428,459,472 743,082,810,024 5,352,511,269,496

Reconciliation:

Elimination of inter-segment receivables (187,727,758,791)

Unallocated assets 349,920,951,305

Total assets 5,514,704,462,010

Segment liabilities 1,258,501,133,350 398,557,256,384 1,657,058,389,734

Reconciliation:

Elimination of inter-segment payables (187,727,758,791)

Total liabilities 1,469,330,630,943

Other segment information

Depreciation and amortization 156,970,415,897 58,178,141,582 215,148,557,479

Provision for doubtful debts (830,455,937) - (830,455,937)

Provision for obsolete inventories 5,991,163,344 (274,601,125) 5,716,562,219

Provision for investment diminution 6,127,874,988 - 6,127,874,988


34. CORRESPONDING FIGURES

Certain corresponding figures on the consolidated balance sheet have been reclassified to reflect the presentation of the current year’s consolidated financial statements.

35. EVENTS AFTER THE BALANCE SHEET DATE

There has been no significant event occurring after the balance sheet date which would require adjustments or disclosures to be made in the consolidated financial statements.

Tran Minh Nguyet Preparer 26 March 2014



KINH DO CORPORATION Address: 138 - 142 Hai Ba Trung Street, Da Kao Ward, District 1, HCMC, Vietnam Tel: (08-8) 3827 0838 Fax: (08-8) 3827 0839 Email: [email protected]

www.kinhdo.vn

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Kinh Do Annual Report 2013

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