Khang Điền KDH Annual Report 2016 - Khang Điền Báo cáo thường niên 2016 by Valueplus Communications

Where you put your trust - Where you make your home

TRUST FROM

ANNUAL REPORT

TRUE VALUES

MOMENTUM FOR FUTURE GROWTH

CONTENTS ANNUAL REPORT 2016

BUSINESS PERFORMANCE 2016 Overview of the real estate market in 2016 Board of Directors report Inspection Committee report General Director Team report

62 64 70 72

CORPORATE GOVERNANCE Board of Directors Inspection Committee Transactions, remunerations and interest of Board of Directors and Inspection Committee Share transactions of internal shareholders and related persons Risk management

88 89 90 91 94

SUSTAINABILITY REPORT Vision - Mission - Core values - Competitive advantage Chairmanâ&#x20AC;&#x2122;s Statement

04 06

GENERAL INFORMATION Overview 10 Milestones 12 Business scope and scale 14 Full project list 15 Project locations 22 Typical projects in 2016 24 Major events in 2016 34 Honors and awards achieved in 2016 38 Shareholder information 40 Investor relations 43 Subsidiaries, joint ventures and associates 44 Development direction 46 SWOT analysis 48 Governance model 50 Organizational chart 51 Board of Directors 52 General Director Team 54 Inspection Committee 56 Organization and Human Resources 58

Overview of sustainability report Sustainable relationships with stakeholders Mechanism for engagement with stakeholders Assessment of top material issues Business performance Compliance with the laws Corporate ethics Corporate culture Product responsibility Environment protection and energy saving Occupational safety and health Workforce relations Human resource development Community - Social activities

102 104 107 108 109 109 110 111 113 114 115 116 117 120

FINANCIAL STATEMENTS General information Report of Management Independent auditorsâ&#x20AC;&#x2122; report Consolidated balance sheet Consolidated income statement Consolidated cash flow statement Notes to consolidated financial statements

124 125 126 128 130 131 133

VISION - MISSION CORE VALUES - COMPETITIVE ADVANTAGE

VISION

MISSION

To become one of the leading real estate companies in Vietnam through the trust established on the competitive advantages and the valuable experience that Khang Dien has gained over the past 15 years.

Not only Khang Dien creates new homes in different market segments to meet diverse demands, but Khang Dien also contributes to the building of communities complemented by green living spaces and amenities, creating sustainable values to the customers, shareholders and society.

To create breakthrough development to become one of the strongest business groups, contributing to the community well being and social development.

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CORE VALUES

COMPETITIVE ADVANTAGE

Transparency and efficiency

• Transparent legal framework

Transparent governance, feasible plans, strategic operations to bring benefits to customers, shareholders and society.

• Strong financial capacity

Outstanding quality Focus on construction quality, creating perfect utility system, building civilized residential community and leave clear impression in the real estate market.

• Large land bank • Perfect product • Superior quality • Dedicated services

Customer benefit first Put the word “Trust” on top in every work, take the word “Mind” to make every effort to complete. All the goals are set out based on customer satisfaction. Sustainable development Create a firm foundation, ensure stable and sustainable growth, and affirm the position of a prestigious real estate company. 5

CHAIRMANâ&#x20AC;&#x2122;S STATEMENT

ANNUAL REPORT 2016

Dear valued shareholders, Taking advantage of the favorable macro-economy and having the right strategy developed the Board of Directors, Khang Dien had another great performance in 2016, when profit after tax reached VND372 Billion, increasing by 43% compared to 2015.

WITH A SUSTAINABLE DEVELOPMENT DIRECTION, A REPUTATION TO UPHOLD, AND A BRAND REPRESENTING INTEGRITY AND BEST EFFORT, WE BELIEVE THAT KHANG DIEN BRAND NAME WILL DEVELOP STRONGLY, BRINGING PRACTICAL BENEFITS TO THE SHAREHOLDERS AND SUSTAINABLE VALUES TO THE CUSTOMERS AND SOCIETY.

372

PROFIT AFTER TAX

VND BILLION increasing by 43% compared to 2015.

Over the past 15 years of operations, Khang Dien has brought to the market more than 2,000 in villas and townhouses. In 2016, the Company achieved great success with Melosa Garden (won â&#x20AC;&#x153;Best Housing Development 2016â&#x20AC;? in HCMC), Lucasta eco villa, Feliza and, especially, The Venica - an exclusive luxurious green oasis with 43 super premium villas, attracting a lot of attentions from the real estate market. In 2016, Khang Dien continued receiving the enthusiastic supports from the strategic shareholders. The Company increased the charter capital up to VND2,340 Billion. With strong capital base and the trust from the large banks, the Company was confident in developing high-quality large scale projects. Besides, the Company continued making new land investments and expanded land bank to prepare for the future growth. For 2017, with the goal of diversifying products to fully meet the demand of the customers, in addition to the traditional products such as villas and townhouses, the Company will deploy two high-quality apartment projects, offering more than 2,000 apartments at reasonable prices. Besides, the Company will expand business presence to the Southwest of the city and build well-planned, modern and civilized new towns of hundreds of hectares in size and with completed amenities and utilities including hospitals, schools, commercial centers, financebanking district, sport and entertainment districts, etc. For and on behalf of the Board of Directors, I would like to express our sincere thanks to our valued shareholders, who have accompanied Khang Dien through out its operating progress. With sustainable development direction, a reputation to uphold, and a brand representing integrity and best effort, we believe that Khang Dien real estate brand name will develop strongly, bringing practical benefits to the shareholders and sustainable values to the customers and society.

LY DIEN SON Chairman

GENERAL INFORMATION

YEARS OF EXPERIENCE IN GARDENED TOWNHOUSES AND VILLAS PROJECT DEVELOPMENT With the goal of bringing the best quality properties to customers by the most professional services, prime locations, financial strength, enthusiastic and experienced workforce to lift Khang Dien brand to a new height.

OVERVIEW Business name: CÔNG TY CỔ PHẦN ĐẦU TƯ VÀ KINH DOANH NHÀ KHANG ĐIỀN English name: Khang Dien House Trading and Investment Joint Stock Company Address: Room 801, 8th Floor, Centec Building, 72 - 74 Nguyen Thi Minh Khai Street, Ward 6, District 3, Ho Chi Minh City, Vietnam. Tax code: 0302 588 596 Tel: (84-8) 3820 8858 Fax: (84-8) 3820 8859 Email: info@ khangdien.com.vn Website: www.khangdien.com.vn

ANNUAL REPORT 2016

Stock information Stock symbol: KDH Listing date: 01/02/2010 Stock exchange: Hochiminh City Stock Exchange - HOSE Charter capital: VND2,339,998,920,000 Business sector: Real estate trading and investment

Auditor Ernst & Young Vietnam Limited Company Address: 28th Floor, Bitexco Finance Tower No.2 Hai Trieu Street, District 1, Ho Chi Minh City, Vietnam. Tel: (84.8) 3824 5252 - Fax: (84.8) 3824 5250 Website: www.ey.com/VN/en/home

GENERAL INFORMATION

MILESTONES

Over the past 15 years, with passion, creativity and persistence, Khang Dien House Trading and Investment Joint Stock Company has overcome difficulties and challenges, and gradually affirmed its prestigious brand that is consistent with the goal of offering customers the best real estate properties through the best professional services. BEING CONFIDENT WITH ITS INTERNAL STRENGTH: NEARLY 500 HECTARES OF LANDBANK IN PRIME LOCATIONS - TRANSPARENT LEGAL FRAMEWORK - REASONABLE PRICES - OUTSTANDING QUALITY, KHANG DIEN HAS ESTABLISHED ITS POSITION AS A REAL ESTATE DEVELOPER OF COMPREHENSIVE SOLUTIONS WHO OFFERS THE BEST LIVING EXPERIENCE TO CUSTOMERS IN ACCORDANCE WITH THE MOTTO “WHERE YOU PUT YOUR TRUST - WHERE YOU MAKE YOUR HOME”. With smart strategic direction, experienced and dedicated workforce, and tremendous supports from the investors and strategic partners, Khang Dien is confident in its sustainable development journey, creating real estate market breakthroughs in HCMC as well as Vietnam.

2011 2010 2001 Established Khang Dien House Trading and Investment Company Limited.

2007 Transformed from a limited company into a joint stock company and increased charter capital from VND216 Billion to VND332 Billion.

ANNUAL REPORT 2016

Officially listed common shares on Hochiminh City Stock Exchange (HOSE) under KDH ticker. Increased charter capital from VND332 Billion to VND439 Billion by issuing shares to existing shareholders and employees.

Developed Goldora Villa eco villa project (also known as Lucasta).

2013 Increased charter capital from VND439 Billion to VND480,699 Billion. Developed Mega Residence project in District 9 with 160 units.

2016 Increased charter capital to VND2,340 Billion.

2014 Increased charter capital from VND480,699 Billion to VND750 Billion. Officially launched new product line Mega Residence and sold out 160 units within 5 months. Developed Mega Ruby and Mega Sapphire next to Mega Residence project, creating a new residential community of more than 10 hectares in District 9.

2015 Increased charter capital to VND1,800 Billion. Acquired 57.3% of Construction Investment Shareholding Company (BCCI).

Mega Village with more than 300 units sold, Lucasta with 100/140 villas sold and Melosa Garden project with more than 450 townhouses and villas sold out. Launched sales of The Venica, the premium project, the bright spot in the luxury villa segment in the East of the city. Melosa Garden project gained great success with â&#x20AC;&#x153;Best Housing Developmentâ&#x20AC;? prize in Vietnam Property Awards 2016. In October 2016, Khang Dien was honorably selected in Top 50 Best Listed Companies in Vietnam by Forbes. In November 2016, Khang Dien won the first prize about Investor Relation in Vietnam which was organized by Vietstock.

Launched sales of Mega Village, Melosa Garden, Lucasta and The Venica projects. Lucasta project won Vietnam Property Awards 2015 for the best interior decoration.

GENERAL INFORMATION

BUSINESS SCOPE AND SCALE

WITH OVER 15 YEARS OF EXPERIENCE, KHANG DIEN HAS AFFIRMED ITS OUTSTANDING POSITION IN THE FIELD OF REAL ESTATE DEVELOPMENT IN HCMC. KHANG DIEN DETERMINES THAT PRODUCT AND SEGMENT DIVERSIFICATIONS ARE THE KEYS TO GROW CUSTOMER BASE. IN THE COMING YEARS, THE COMPANY WILL CONTINUE TO BETTER SATISFY CUSTOMER DEMANDS, SO EACH CUSTOMER COMING TO KHANG DIEN WILL HAS CHANCES TO CHOOSE SEVERAL REAL ESTATE PRODUCTS THAT ARE SUITABLE WITH THEIR FINANCIAL CONDITIONS REGARDLESS THE PRODUCT SEGMENTS. IN ADDITION, THE COMPANY IS CONSTANTLY PERFORMING MARKET RESEARCH TO CREATE THE BEST PRODUCTS SUITABLE TO THE PREVAILING TRENDS AND AFFORDABLE. AT PRESENT, THE COMPANY HAS BEEN LAUNCHING MANY PRODUCT TYPES INCLUDING TOWNHOUSE, VILLA, AND APARTMENT ACROSS ALL SEGMENTS FROM GOOD TO PREMIUM CLASS, AND SUPER LUXURIOUS CLASS.

Dist.12

Thu Duc Dist. Go Vap Dist.

Dist.9 Tan Binh Dist. Tan Phu Dist.

Binh Thanh Phu Nhuan Dist. Dist.

Dist.2

Dist.3 Dist.1 Dist.10

Binh Chanh Dist.

Dist.11

Binh Tan Dist.

Dist.6

Dist.5 Dist.8

Dist.4 Dist.7

Ho Chi Minh City map

ANNUAL REPORT 2016

FULL PROJECT LIST

COMPLETED PROJECTS

KHANG DIEN - PHUOC LONG B

Location: Duong Dinh Hoi Street, Phuoc Long B Ward, District 9, Ho Chi Minh City. Land area: 10.4 ha Product: 247 detached villas, duplex villas, gardened townhouses, and apartments. Execution progress: • Legal status: 1/500 master plan approved; project land entitlement and land ownership certificate of each lot issued. • Construction - sales: Sold out and forming a community.

TOPIA GARDEN

Location: Bung Ong Thoan Street, Phu Huu Ward, District 9, Ho Chi Minh City. Land area: 6 ha Product: 225 detached villas, duplex villas and townhouses. Execution progress: • Legal status: 1/500 master plan approved; project land entitlement and land ownership certificate of each lot issued. • Construction - sales: Sold out and forming a community.

RIVER TOWN

Location: Phuoc Long B Ward, District 9, Ho Chi Minh City Land area: 7.1 ha Product: 197 detached villas, duplex villas and townhouses. Execution progress: • Legal status: 1/500 master plan approved; project land entitlement and land ownership certificate of each lot issued. • Construction - sales: Sold out and 100% homebuyers have moved in, forming a community.

GENERAL INFORMATION

FULL PROJECT LIST (continued)

COMPLETED PROJECTS (continued)

HOJA VILLA

Location: Phuoc Long B Ward, District 9, Ho Chi Minh City Land area: 0.8 ha Product: 29 garden townhouses. Execution progress: • Legal status: Land entitlement, property ownership certificate of each house and handover completed. • Construction - sales: Sold out 100%, homebuyers have moved in, forming a community.

APARTMENT PROJECT (JOINT-VENTURE WITH CAPITALAND)

Location: Nguyen Duy Trinh Street, Binh Trung Dong Ward, District 2, Ho Chi Minh City Land area: 3 ha Product: 876 apartments. Execution progress: • Legal status: 1/500 master plan approved; project land entitlement and land ownership certificate of each apartment block issued. • Construction - sales: » Parcspring: 404 apartments, sold 99%, handed over apartments » Krista: 344 apartments, sold 86%, handover in progress » Kris Vue: 128 apartments, sold 94%, scheduled to hand over in Quarter II/2018.

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MEGA RESIDENCE

Location: Eastern Ring Road (a.k.a Vo Chi Cong Street), Phu Huu Ward, District 9, Ho Chi Minh City Land area: 3.2 ha Product: 160 townhouses with construction completed. Execution progress: • Legal status: Land entitlement, property ownership certificate of each house and handover completed. • Construction - sales: Sold out 100%; homebuyers have moved in, forming a community.

MEGA RUBY

Location: Phu Huu Ward, District 9, Ho Chi Minh City Land area: 5 ha Product: 222 townhouses with construction completed. Execution progress: • Legal status: Land entitlement, property ownership certificate of each house and handover completed. • Construction - sales: Sold out 100%; homebuyers have moved in, forming a community.

GENERAL INFORMATION

FULL PROJECT LIST (continued)

PROJECTS UNDER DEVELOPMENT

MEGA VILLAGE

Location: Phu Huu Ward, District 9, Ho Chi Minh City Land area: 5.7 ha Product: 335 townhouses with garden and villas. Execution progress: • Legal status: Land entitlement, property ownership certificate of each house and handover completed in Quarter I/2017. • Construction - sales: Sold out and 96%, homebuyers have moved in, forming a community in Quarter I/2017.

MELOSA GARDEN

Location: Phu Huu Ward, District 9, Ho Chi Minh City Land area: 17.3 ha Construction density: • Entire project: 37.16% • Villa: 50% • Townhouse: 60% - 75% Product: 567 gardened townhouses and villas. Execution progress: • Legal status: 1/500 master plan approved; project land entitlement and land ownership certificate of each lot issued. • Construction - sales: Completed construction and handover of 456 houses; the 111 remaining units will be completed in Quarter II/2017.

LUCASTA

Location: Phu Huu Ward, District 9, Ho Chi Minh City Land area: 8.2 ha Construction density: • Entire project: 49.35% • Villa: 50% Product: 140 premium villas. Execution progress: • Legal status: 1/500 master plan approved; project land entitlement and land ownership certificate of each lot issued. • Construction - sales: Completed construction and handover of 100 units; the remaining 40 villas will be completed in Quarter II/2017. 18

ANNUAL REPORT 2016

THE VENICA

Location: Phu Huu Ward, District 9, Ho Chi Minh City Land area: 3.1 ha Construction density: • Entire project: 23.9% • Villa: 50% Product: 43 premium villas. Execution progress: • Legal status: 1/500 master plan approved; project land entitlement and land ownership certificate of each lot issued. • Construction - sales: Completed construction of 43 units; and forming a community.

FELIZA

Location: Phuoc Long B, District 9, Ho Chi Minh City Land area: 0.3 ha Product: 15 townhouses with completed infrastructure and house construction. Execution progress: • Legal status: 1/500 master plan approved; project land entitlement and land ownership certificate of each lot issued. • Construction - sales: Completed construction of 15 units, sold out in Quarter I/2017.

MERITA

Location: Phuoc Long B, District 9, Ho Chi Minh City Land area: 3.1 ha Product: 131 townhouses with garden. Execution progress: • Legal status: 1/500 master plan approved, project land entitlement issued. • Construction - sales: 131 houses constructed and sold out in Quarter I/2017.

GENERAL INFORMATION

FULL PROJECT LIST (continued)

FUTURE PROJECTS

LA ALBA APARTMENT BUILDING

Location: Phu Huu Ward, District 9, Ho Chi Minh City Land area: 1.6 ha Product: 867 apartments. Execution progress: • Legal status: 1/500 master plan approved, investment certificate, land ownership certificate. • Construction - sales: Construction scheduled to start in early Quarter I/2017 and sales start at the end of Quarter II/2017.

GIA PHUOC PROJECT

Location: Phu Huu Ward, District 9, Ho Chi Minh City Land area: 3.1 ha Product : 118 townhouses with gardens. Execution progress: • Legal status: Compensation completed, 1/500 master plan approved, investment certificate, project land entitlement issued. • Construction and sales in Quarter I/2017.

SAPPHIRE PROJECT

Location: Phu Huu Ward, District 9, Ho Chi Minh City Land area: 2.7 ha Product: Premium apartments. Execution progress: • Legal status: Compensation completed; investment certificate, 1/500 master plan, project land entitlement in progress.

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TOWNHOUSE PROJECT

Location: Phu Huu Ward, District 9, Ho Chi Minh City Land area: 4.4 ha Product: 150 villas and townhouses with gardens. Execution progress: • Legal status: 1/500 master plan approved; investment certificate, project land entitlement, land ownership certificate in progress.

BINH TRUNG PROJECT

Location: Binh Trung Dong Ward, District 2, Ho Chi Minh City Land area: 5.7 ha Product: 159 townhouses with gardens, and premium villas. Execution progress: • Legal status: 1/500 master plan approved; investment certificate.

KIM PHAT RESIDENTIAL AREA

Location: Phu Huu Ward, District 9, Ho Chi Minh City Land area: 3.6 ha Product: 146 townhouses with gardens. Execution progress: • Legal status: Compensation completed; investment certificate; 1/500 master plan approval in progress.

GENERAL INFORMATION

PROJECT LOCATIONS

ANNUAL REPORT 2016

GENERAL INFORMATION

TYPICAL PROJECTS IN 2016

EXCLUSIVE LIFESTYLE AN EXCLUSIVE COMPOUND OF 43 VILLAS WITH 24/7 SECURITY. TWENTY FOUR UNITS SOLD IN 2016.

THE VENICA IS A 5-STAR VILLA COMPOUND WITH 43 EXCLUSIVE AND PERFECTLY BUILT VILLAS COMPLEMENTED BY MODERN UTILITIES AND AMENITIES SUCH AS FITNESS CLUB, SWIMMING POOL, BAR, ETC. LOCATED IN A 3-HECTARE CAMPUS WITH THREE SIDES SURROUNDED BY THE RIVER OF MORE THAN 1,000M LONG, THE PROJECT IS LIKE A PEACEFUL GREEN OASIS DETACHED FROM THE BUSY URBAN LIFE.

Designed in Mediterranean semi-classical style and characterized in Italian aristocracy - the “cradle” of the ancient nobles lifestyle famous with luxurious villas on the picturesque hills, The Venica is like a beautiful painting in the East of Saigon. The compound is an artistic architectural masterpiece with luxurious and gorgeous villas elaborately designed and detached from the busy outside world, just for upper class. Located at a prime position with 2 facades facing the intersection of Do Xuan Hop Street and Song Hanh Street, HCMC - Long Thanh - Dau Giay Expressway, District 9, HCMC, The Venica is a “big hit” product of Khang Dien and is considered one of the most beautiful villa compounds in HCMC in particular and in the Vietnam in general.

ANNUAL REPORT 2016

GENERAL INFORMATION

TYPICAL PROJECTS IN 2016 (continued)

ENJOY THE QUINTESSENCE OF LIFE A BEAUTIFUL COMPOUND OF 140 VILLAS UNDER 24/7 SECURITY. NINETY EIGHT UNITS SOLD.

Choosing a dream house is very important for each of us to enjoy a perfect life and to treasure the value of oneself. Lucasta premium eco villas are built for luxurious life and express the style of the owners. To create real living values for each resident in Lucasta, Khang Dien has collaborated with the leading architects in Asia to create a premium resort in the heart of Saigon. In 8.2 hectares campus with construction density of only 49,35%, 140 villas are surrounded by a 1 hectare eco lake and harmonious landscape. The refinement shows in every architectural aspect with open green space to catch sunshine and fresh air, delivering a peaceful, healthy and prosperous life to all residents. No need to travel anywhere else, you can enjoy 5-star hospitality services with the most luxurious utilities and amenities right in the compound. In the fresh atmosphere, you can drop yourselves in the cool blue water of the infinity pool to release stress and tiredness from work. The Gym room is equipped with modern facilities will help you regain health and energy. Managed by the worldâ&#x20AC;&#x2122;s leading property manager - CBRE, Lucasta assures the residents guaranteed security and high-quality services for an elite residential community.

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GENERAL INFORMATION

TYPICAL PROJECTS IN 2016 (continued)

ANNUAL REPORT 2016

HAPPY JOURNEY Melosa Garden compound consists of 567 villas and gardened townhouses on 17.3 hectares of land adjacent to Mega Village located on the Eastern Ring Road in District 9. Melosa Garden delivers a perfect living environment with outstanding utilities and a breakthrough design optimally serving the needs of the residents. The compound offers a peaceful, comfortable and happy living experience. About 4 hectares of the project is allocated for park, green space, and high-class utilities and amenities. Especially, swimming pool and central lake,... are drawn from the artificial waterfalls in Singaporean high-class residences. All become a prominent centre point, the “heart” of the entire project. Besides, a public area of modern facilities of mini-supermarket, Gym room, and tennis courts built to meet international standards has been completed and ready to welcome. Melosa Garden is managed by CBRE - an international professional real estate property management firm. Construction quality is “certified” by SCQC - the leading quality management and consulting firm in Vietnam. In addition, Khang Dien always stress the importance of property ownership transparency. As a result, Melosa Garden continues to receive the warm supports from customers, affirming Khang Dien’s brand and reputation in the real estate market. 567 VILLAS AND GARDEN TOWNHOUSES IN COMPOUND WITH 24/7 SECURITY. OPENED FOR SALES FROM NOVEMBER 2015. SOLD 456 HOUSES.

GENERAL INFORMATION

TYPICAL PROJECTS IN 2016 (continued)

Joyful quality of life in harmony with nature

THE MEGA TOWNHOUSE PROJECTS (MEGA RESIDENCE - MEGA RUBY MEGA VILLAGE)

The Mega townhouse projects have been developed since 2014 with outstanding features - “Compound setting, modern design, high-class facilities, complete property rights, and reasonable prices”. Those projects have attracted many customers when Khang Dien sold nearly 1,000 units within less than 3 years. Currently, 90% of the homebuyers have moved in and formed a civilized and prime community on the frontage of the Eastern Ring Road in District 9. The Mega Townhouse Compound is really a product line symbolizing Khang Dien’s trade mark and earning admirations in the real estate market in the South and in the country.

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GENERAL INFORMATION

TYPICAL PROJECTS IN 2016 (continued)

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VALUES FOR PROSPEROUS LIFE ONLY 131 HOUSES. SOLD OUT IN QUARTER I/2017.

With unique advantages, only 131 gardened townhouses located on the frontage at the intersection of Lien Phuong Street and Eastern Ring Road, one of the most beautiful locations in District 9, Merita has become a â&#x20AC;&#x153;hotâ&#x20AC;? phenomenon in the market. The townhouses are expected to be warmly welcomed by the investment community because its Shop Houses are easily connected to the center of District 1, Phu My Hung new city, and the neighboring public utilities. Especially, it has the fastest connection to the Saigon high-tech park, universities and shopping centers in the East of the city. Merita is for civilized, dynamic and successful residential community.

GENERAL INFORMATION

MAJOR EVENTS IN 2016

IN 2016, KHANG DIEN ONCE AGAIN ASSERTED ITS BRAND AND REPUTATION IN THE REAL ESTATE MARKET BY CONTINUING THE NEXT PHASES OF THE PROJECTS THAT HAVE RECEIVED TREMENDOUS SUPPORTS FROM HOMEBUYERS. IN PARTICULAR, THE MEGA TOWNHOUSE PROJECTS HAVE SOLD MORE THAN 1,000 UNITS WITHIN 18 MONTHS. MELOSA GARDEN HAS BEEN CONSIDERED THE PROJECTS HAVING THE MOST ATTRACTIVE LANDSCAPE AND BEST UTILITIES AND AMENITIES IN THE EAST OF THE CITY. LUCASTA IS A

JAN 16

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THE YEAR 2016 CLOSED WITH OUTSTANDING EVENTS MARKING KHANG DIENâ&#x20AC;&#x2122;S GREAT ACHIEVEMENTS IN DEVELOPMENT AND READINESS FOR NEW BREAKTHROUGHS IN 2017.

MELOSA GARDEN LAUNCHED MODEL HOUSES

Khang Dien launched the model townhouse and villa of Melosa Garden project at the project site on the Eastern Ring Road, Phu Huu Ward, District 9 on January 16th 2016. Within one month from the model house launch day, Khang Dien fully constructed 100 houses and more than 4 hectares of quality utilities and amenities. The homebuyers from the first phase has immediately enjoyed the convenient and comfortable living space when moving in.

PREMIUM ECO VILLA PROJECT DESIGNED WITH GREEN SPACE COVERING 65% OF THE LAND PLOT, AND THE VENICA IS AN LUXURIOUS FIVE-STAR VILLA FAMOUS FOR ITS REFINED SEMI-CLASSIC DESIGN IN MEDITERRANEAN STYLE.

MAR 19

LUCASTA NEW ECO VILLAS OPENED FOR SALES

Beside prime location, Lucasta has a refined design catching morning sunshine and a rustic interior style. On the sales opening, Khang Dien offered special promotion programs for early homebuyers such as the 18% discount for advanced down payment. After the ceremony, Lucasta has been well received by the market and handed over to customers in a short time.

GENERAL INFORMATION

MAJOR EVENTS IN 2016 (continued)

APR 10

HANDING OVER THE FIRST 96 HOUSES OF MELOSA GARDEN

Within four months after the first sales launch in October 2015, the first 96 villas and townhouses of Melosa Garden were officially handed over to the first group of buyers on April 10th 2016. The ceremony was held successfully with the participation of more than 300 customers and representatives from the distributors, investors and CBRE Vietnam, the property manager.

MAY 23

KHANG DIEN COOPERATED WITH COTECCONS TO DEVELOP LUCASTA HIGH-CLASS VILLAS

On May 23rd, 2016, Khang Dien and Coteccons held a strategic partnership signing ceremony at the Intercontinental Asiana Saigon. Accordingly, Coteccons would become a strategic partner, design & build general contractor for Khang Dien in the coming time. The ceremony was attended by top managements from Khang Dien and Coteccons in the presence of 30 media agencies and marked the strategic partnership between the two companies aiming at delivering high-quality housing projects to the society as well as fostering prosperity to both parties.

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APR 24

“THE VENICA MOMENT” GALA DINNER

The Venica is considered a “big hit” of Khang Dien in luxury property segment. On the evening of April 24th 2016, the project, which was fully built, was officially introduced to the customers and partners through Gala Dinner in Mediterranean style. More than 300 prominent business leaders from large investment

funds, banks, securities firms, partners, and customers of Khang Dien attended the event. The project elevates Khang Dien’s market position to a new height and helps implement segment diversification strategy to serve various needs of customers.

GENERAL INFORMATION

HONORS AND AWARDS ACHIEVED IN 2016

MELOSA GARDEN WON

BEST HOUSING DEVELOPMENT

AT THE CEREMONY OF “VIETNAM PROPERTY AWARDS 2016” VIETNAM PROPERTY AWARDS 2016 WERE A PART OF ASIAN PROPERTY AWARDS ORGANIZED BY ENSIGN MEDIA - THE LEADING PROPERTY MEDIA COMPANY IN ASIA TO HONOR THE BEST REAL ESTATE PROJECTS, CONSTRUCTION WORKS, ARCHITECTURES, AND INTERIOR DESIGNS IN VIETNAM. THE AWARDS WERE GIVEN TO THE LEADING PRESTIGIOUS REAL ESTATE WORKS BASED ON THE MOST FAIR, OBJECTIVE, AND TRANSPARENT CRITERIA IN ASIA.

Melosa Garden of Khang Dien made a good impression to the judges, who were real estate experts in Asia, with the luxurious architectures of villas and townhouses in a green space surrounded by river, and stressed with a more than

ANNUAL REPORT 2016

4 hectares high-class utility area in the center. Also thanks to these outstanding points, Melosa Garden modern townhouse and villa project won Best Housing Development (Ho Chi Minh City).

TOP

BEST VIETNAMESE LISTED COMPANIES IN VIETNAM 2016 In 2016 was the first year marking the presence of Khang Dien in Top 50 Best Vietnamese Listed Companies voted by Forbes Vietnam. The list of companies were consolidated based on business performance and superior quality of product.

ENTERPRISE WITH

BEST IR ACTIVITIES IN 2016 ORGANIZED BY VIETSTOCK

Best IR Voting Program 2016 has been an annual event organized by Vietstock since 2011. In 2016, Vietstock co-organized with Vietnam Association of Financial Executives (VAFE) to hold this event. After conducting a comprehensive survey of 639 listed companies on two stock exchanges through two steps: (1) Comprehensive survey on implementing obligation of information disclosure in Vietnam securities market and (2) organizing public voting on website to all investors in parallel with the evaluation from financial institutions. At the end, Khang Dien won 3 major awards of IR 2016, including listed enterprise with best IR activities, Top 5 listed enterprises with highest voting rate from investors, and Top 5 enterprises with highest voting rate from financial institutions.

GENERAL INFORMATION

SHAREHOLDER INFORMATION

SHARE INFORMATION Charter capital

2,339,998,920,000

Number of shares

233,999,892

VND

Face value per share

10,000

Number of outstanding shares

233,999,892

VND/SHARE

Market capitalization value as of December 31st 2016

4,679,997,840,000

VND

SHARE CAPITAL OWNERSHIP PERCENTAGE According to the list of securities holders provided by Vietnam Securities Depository, the percentage of share ownership of the Company is as follows: Domestic shareholders

No. Shareholders

State

Foreign shareholders

Number of Percentage/ shares Charter capital

Total Percentage/ number of Charter shares capital

Shareholders holding 5% or more

80,034,252

34.20%

51,153,116

21.85%

131,187,368

56.05%

Shareholders holding from 1% to less than 5%

21,666,136

9.26%

52,372,615

22.38%

74,038,751

31.64%

Shareholders holding less than 1%

18,301,450

7.83%

10,472,323

4.48%

28,773,773

12.31%

Treasury shares

48.71% 233,999,892

100%

TOTAL

120,001,838

51.29% 113,998,054

12%

Shareholders holding 5% or more 32%

KDH

56%

Shareholders holding from 1% to less than 5% Shareholders holding less than 1%

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SHAREHOLDER STRUCTURE

LIST OF MAJOR SHAREHOLDERS

In many consecutive years, foreign shareholders hold around 49% of the Company’s share capital.

No.

Shareholder structure

Number of shares

Ownership percentage (%)

Treasury shares

Domestic shareholders

120,001,838

51.29%

Institutions

104,802,193

44.79%

Individuals

15,199,645

6.50%

Foreign shareholders

113,998,054

48.71%

Institutions

113,842,990

48.65%

Individuals

155,064

0.06%

233,999,892

100%

TOTAL

No.

Ownership Number of percentage shares (%)

Shareholder name

Tien Loc Investment Co., Ltd.

32,417,840

13.85%

Gam Ma Investment Co., Ltd.

26,495,303

11.32%

A - Au Trading & Investment Co., Ltd.

21,121,109

9.03%

Vietnam Enterprise Limited

20,944,584

8.95%

Vietnam Ventures Limited

15,802,520

6.75%

Mutual Elite Fund

14,406,012

6.16%

131,187,368

56.06%

TOTAL

CAPITAL CHANGE OF OWNERS In October 2016, the Company successfully issued 53,999,892 bonus shares to the existing shareholders to increase charter capital.

TREASURY SHARE TRANSACTIONS: In 2016, the Company did not have any treasury share transaction. SHARE PRICE AND TRADING VOLUME Transaction volume

Price

1,000,000

800,000

18 600,000 16 400,000 14 200,000

10 Jan

2016

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Transaction volume

Price

GENERAL INFORMATION

SHAREHOLDER INFORMATION (continued)

FOREIGN SHAREHOLDERS Over the past 15 years operating in the field of real estate investment and development, Khang Dien gradually affirmed its brand in the market place and became a leading

ANNUAL REPORT 2016

real estate developer in Ho Chi Minh city. With strong finance, Khang Dien always receives the accompanying and enthusiastic support from large international investment funds such

as VinaCapital, Dragon Capital, PYN Elite Fund, SAM, Vietnam Holding, Duxton, etc.

INVESTOR RELATIONS

RELATIONSHIPS WITH STAKEHOLDERS Khang Dien always ensures information transparency by updating news, reports and important information relating to the benefits of the stakeholders on the Company’s website at www.khangdien.com.vn and other media channels. The information relating to the Company’s activities, financial situation, etc. is also sent to Ho Chi Minh City Stock Exchange and State Securities Commission in line with regulations.

DOMESTIC AND OVERSEAS INVESTORS In 2016 Khang Dien attracted strong attention from domestic and overseas investors. Apart from the meetings to update business performance quarterly, the Company coordinated with securities companies to organize project tours for the investors as well as held meetings with large

investment funds from Europe, America, Hong Kong, and Singapore. Through those meetings, Khang Dien introduced the current projects and updated the selling progress, showing the Company’s outstanding capability in the market place. Information about potential projects and land bank were also shared, so that the investors could see Khang Dien’s true values and development possibility in the future. In addition, Khang Dien paid high attention to discussing long-term business plan and development direction with the investors to build rapport between the Company and the investors. Besides the meetings at the Company’s office, Khang Dien actively participated in investment seminars held by prestigious institutions, for examples, the Vietnam Access Day held by Viet Capital in March 2016 and DC Access Day held by Dragon Capital in May 2016 in Ho Chi Minh City. At the seminars, the Company made presentations and answered the questions of the investment communities, both domestic and overseas.

WITH THE EFFORT IN INVESTOR RELATION ACTIVITIES, KHANG DIEN HONORABLY IS ONE OF BEST IR ACTIVITIES.

GENERAL INFORMATION

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATES

Khang Dien group of companies consists of 21 subsidiaries that can be arranged in two sub-groups. The first is 18 subsidiaries operating in the field of real estate and construction that Khang Dien owned 98% of equity

capital. The second is BCCI group of companies, of which Khang Dien owns 57.31% of equity capital. In general, all subsidiaries conduct business and create revenues in Ho Chi Minh City area.

21 98

SUBSIDIARIES

57.31 44

ANNUAL REPORT 2016

EQUITY CAPITAL IN 18 SUBSIDIARIES

EQUITY CAPITAL IN BCCI

SUBSIDIARIES OF WHICH KHANG DIEN OWNS MORE THAN 98% No. Name of subsidiaries

Charter capital (VND Billion)

KDH Ownership percentage

123,6

100.00%

Hao Khang Ltd.

Long Phuoc Dien House Development and Infrastructure Building Ltd.

140

99.95%

Nha Pho Investment Ltd.

430

99.90%

Gia Phuoc Real Estate Investment and Trading Ltd.

250

99.90%

Tri Kiet Real Estate Investment and Trading Ltd.

99.90%

Saphire Real Estate Investment and Trading Ltd.

310

99.90%

International Consulting Co., Ltd.

99.90%

Kim Phat Real Estate Investment and Trading Ltd.

200

99.90%

Mega City Ltd.

99.85%

Saigon Spring Real Estate Trading Ltd.

100

99.80%

Thap Muoi Real Estate Trading and Construction Company Ltd.

150

99.80%

Tri Minh Real Estate Investment and Trading Ltd.

285

99.80%

Binh Trung Real Estate Investment and Trading Ltd.

200

99.80%

Lien Minh Real Estate Investment and Trading Ltd.

100

99.70%

Song Lap Real Estate Investment and Trading Ltd.

305

99.90%

Vila JSC

99.00%

Viet Huu Phu JSC

225

99.00%

Green Space Real Estate Trading and Investment Ltd.

280

98.01%

BINH CHANH CONSTRUCTION GROUP INVESTMENT JSC. (BCCI) KDH OWNS 57.31% No. Name of company

Binh Chanh Construction & Investment JSC. (BCCI)

Charter capital (VND Billion)

KDH Ownership percentage

867.2

57.31%

BCCI has two subsidiaries: 20

BCCI JSC

BCCI Development Investment Ltd.

GENERAL INFORMATION

DEVELOPMENT DIRECTION

OBJECTIVES OF THE COMPANY To become a leading real estate company offering quality housing products with refined design, perfect living environment and transparent property rights. Khang Dien will focus on the following goals:

PRODUCTS

CUSTOMERS

SHAREHOLDERS

Creating perfect housing products in terms of build quality, utilities and property rights.

Place customersâ&#x20AC;&#x2122; benefits above all and put the customers at the center of all activities.

Diversifications of products (lowrise, high-rise) product segments (middle, fair, high class) and locations.

Build houses with refined designs, quality materials and at reasonable prices.

Improve business and financial performances through strengthening governance, enhancing financial capacity, and utilizing all resources.

ANNUAL REPORT 2016

Ensure transparency shareholdersâ&#x20AC;&#x2122; value.

and

maximize

MEDIUM- AND LONG-TERM DEVELOPMENT STRATEGIES Khang Dien set the following development strategies:

DIVERSIFICATIONS OF PRODUCTS, SEGMENTS, AND LOCATIONS

IMPROVE THE EFFECTIVENESS OF CORPORATE GOVERNANCE

SUSTAINABLE DEVELOPMENT

• Product diversification: Besides the core product, lowrise townhouses, the Company will develop high-rise apartment buildings to meet customers’ demand.

• General Director Team to review and standardize all processes and procedures of operations to best serve the fast growing pace of the Company and in compliance with the laws.

• Boost growth and increase business value on the foundation of sustainable development by integrating development strategy with corporate social responsibility.

• Segment diversification: Besides mid- and high-end products, the Company will develop low-end product for lower middle class customers.

• Step up supervising activities and promote the role of corporate governance and risk control in financial management, accounting, auditing to bring best benefits to the Company.

• Diversification of locations: In addition to the ongoing business in the East of the city (in District 9), which benefits from infrastructure development such as Saigon Bridge 2, Thu Thiem Bridge, Thu Thiem Tunnel, Ben Thanh - Suoi Tien Metro, and Long Thanh - Dau Giay Highway, the Company will expand business to the South and Southwest of the city, i.e. Binh Tan and Binh Chanh Districts (BCCI projects) and other good locations.

• Implement succession planning for top management. • Maximize shareholders’ value and balance stakeholders’ benefits in business management.

• Continue to improve transparency about the Company’s activities and perform information disclosure as required. • Provide more corporate governance trainings for Board of Directors, General Director Team and Inspection Committee.

OBJECTIVES FOR BETTER COMMUNITIES AND SOCIETY Not only builds quality houses with refined design, Khang Dien also actively participates in social activities and share responsibilities with the communities in order to build a better society. In recent years, Khang Dien participated in programs with impacts such as donating gifts to the hospitals (Cho Ray, Pham Ngoc Thach, Nhi Dong 1) and Binh Trieu Disabled and Orphaned Center, funding “Lighting up Dreams” program, and charity trips to Tra Vinh, Long An, Ben Tre, Can Gio, etc. Khang Dien did not participate in those social activities for the purpose of promoting brand name but for the spirit of humanity and with the desire to share with the community and to build a better society.

GENERAL INFORMATION

SWOT ANALYSIS

W STRENGTHS

•

Experience in real estate development

WEAKNESSES

•

At present the Company distributes its products through large and well-known real estate trading floors. This helps the Company concentrate resources on other activities such as project development, land bank expansion. However, this is a weakness because Khang Dien has not yet built a strong internal sales force to be independent in selling products, instead of depending on external distribution channels.

•

From 2014 up to now, the Company has achieved strong and outstanding development. It can be said that this is a “hot development” period, and Khang Dien needs to supplement its personnel to meet the growing scale of the Company. However, with the policy of building a labor force of “quality” rather than “quantity”, the Company applies strict criteria in recruitment. This has made the number of personnel short of demand. Members of General Director Team and Board of Directors have to concurrently hold multiple positions.

With 16 years in the real estate development business in Ho Chi Minh City, Khang Dien has gained broad experience about the housing market, demand drivers, land bank development, legal procedures and product development. The experience creates a firm foundation for the Company’s long-term sustainable development. •

Strong financial capacity Having long-term commitments from large, international investment funds and the supports from the largest banks in Vietnam, together with its strong financial capacity and conservative financial structure, Khang Dien always maintains a low ratio of debt over equity.

•

Experience in risk management With strategic vision, experience, and acumen of the top management, Khang Dien always has accurate judgment, realistic analysis and assessment and best decisions for risk management during business operation.

•

Large land bank Khang Dien currently owns large land bank in good locations in Ho Chi Minh City area and continues to make new land investments.

•

Khang Dien brand name Khang Dien brand name is getting more recognition in Ho Chi Minh City are, especially in the segment of low-rise housing in compound. Having placed reputation on top, Khang Dien is proud to be the brand that earns solid belief from the customers. The Company continues to diversify products and expands scale to make Khang Dien brand stronger.

ANNUAL REPORT 2016

OPPORTUNITIES

•

Large market demand Currently housing demand in Ho Chi Minh City remains large, but the supply is short to meet the demand. Although there are many development projects in the area, the product structures and features are not suitable, leading to oversupply in the premium segment. Khang Dien’s core product is quality housing at reasonable price, which satisfies market demand well.

•

Infrastructure development is a catalyst for the real estate market. The completed traffic network in the East of the city including Thu Thiem Bridge, Thu Thiem Tunnel, Long Thanh - Dau Giay Expressway and the under construction Suoi Tien Metro Line stimulate growth of Khang Dien’s market place in District 9, attracting a lot of customers with real demand for housing. Besides, the area in the Southwest of the city with great potential for development in the future is a great opportunity for Khang Dien.

•

Advantage from macroeconomic growth and macroeconomic policies In 2016, Vietnam’s economy achieved stable growth with inflation rate less than 5%. The urbanization rate of Vietnam reached 2.5%, which is the highest rate among the countries in Southeast Asia. In addition, many supportive policies from the Government have been issued and applied. Those factors help real estate market in 2017 have more positive changes.

THREATS

•

Increasing competitions from competitors Khang Dien’s success in low-rise houses built in compound setting with full amenities and environment-friendly design, transparent legal framework, reasonable prices has attracted many other real estate developers to join this segment.

•

Effects from the unstable premium housing segment In Quarter IV/2016, the housing market showed some signs of oversupply in the premium segment while demand in the middle and middle-high segments exceeded supply. In 2016, the majority of the real estate companies focused on developing premium housing selling at high price due to operating expenses and high investment cost. According to experts, this trend contributed to the imbalance (Supply exceeds demand while the price still increases) and, with the growth of credit funding housing project development in 2016, the risk in housing bubble has increased. The oversupply in premium apartment market has been warned by many experts. In that context, the enterprise having enough financial capacity will continue to exist and develop, and the failing enterprises will cause troubles with serious consequences, even creating housing market disruption.

•

Macroeconomic risks Exchange fluctuations: The exchange rate risk is the risk of financial loss due to its fluctuations. The USD dollar exchange rate volatility, fluctuation in gold price, and international issues such as the Trans-Pacific Partnership Agreement (TPP), Brexit, Fed’s interest rate raise, currency devaluation of China and the neighboring countries, etc. have led to a series of reactions in the market, which complicated forecasts. Exchange rate fluctuations between VND and foreign currencies may affect the financial situation, investment activities and business results of Khang Dien.

GENERAL INFORMATION

GOVERNANCE MODEL

KHANG DIEN OPERATES UNDER THE FORM OF JOINT STOCK COMPANY. BESIDES COMPLYING WITH THE LAWS, THE COMPANY FOLLOWS THE CHARTER THAT HAS BEEN APPROVED BY GENERAL SHAREHOLDERS’ MEETING. ORGANIZATIONAL STRUCTURE OF KHANG DIEN INCLUDES:

GENERAL SHAREHOLDERS’ MEETING

Board of Directors (BOD) The incumbent BOD of Khang Dien consists of the Chairman and four members of BOD, in which, three members holds positions in General Director Team and one member is non-executive. Inspection Committee (IC) The incumbent Inspection Committee includes one head and two members. General Director Team (GDT) Head of the Team is the General Director. At present, the Chairman is also the General Director. Assisting the General Director are four Deputy General Director in charge of legal, finance, construction and general affairs. The Company has full set of functional departments and project management teams.

ANNUAL REPORT 2016

ORGANIZATIONAL CHART

GENERAL SHAREHOLDERSâ&#x20AC;&#x2122; MEETING

INSPECTION COMMITTEE

BOARD OF DIRECTORS

GENERAL DIRECTOR

INTERNAL AUDIT TEAM

Legal Department

Project Management Department

DEPUTY GENERAL DIRECTOR

Finance & Accounting Department

Sales & Marketing Department

HR & Administration Department

GENERAL INFORMATION

BOARD OF DIRECTORS

Mr. LY DIEN SON

Mrs. MAI TRAN THANH TRANG

Mr. NGUYEN DINH BAO

Chairman of BOD

Member of BOD

Year of birth: 1966

Year of birth: 1976

Year of birth: 1975

Qualification: Bachelor Degree from the University of Culture

Qualification: Bachelor Degree in Laws, Land Management Engineer

Qualification: Bachelor Degree in Laws - Certified Lawyer

Experience: In the role of Chairman of BOD cum General Director, Mr. Ly Dien Son has directly managed and operated the Company since its establishment date. Over the past 16 years, with passion, dedication, and experience, he has led the Company to overcome challenges and achieved breakthrough success, developing Khang Dien to become one of the leading real estate developers in HCMC.

Experience: One of the strong points of Khang Dien in comparison with the other real estate companies is its practice of transparent legal framework, and Mrs. Trang lays the foundation of this practice.

Experience: Mr. Bao is responsible for the overall corporate legal matters. He coordinates with the departments to build internal process, procedures, regulations to ensure Company’s compliance with the charter and the laws.

Working history: • From 2001 - present: Chairman of BOD cum General Director of Khang Dien House Trading and Investment Joint Stock Company. Positions in other organizations: None.

Working history: • 2001 - 2005: Legal consultant Nguyen Thi Chinh Law Office. • Oct 2005 - July 2007: Administration Manager - Member of BOD of Khang Dien House Trading and Investment Joint Stock Company. • July 2007 - May 2008: Assistant to Chairman of BOD Khang Dien House Trading and Investment Joint Stock Company. • June 2008 - present: Deputy General Director of Khang Dien House Trading and Investment Joint Stock Company. Positions in other organizations: None.

Working history: • January 2000 - July 2002: Deputy Director of Lai Gia Trading - Service Co., Ltd. • February 2004 - March 2006: Associated Lawyer at Thanh Dat Law Office. • March 2006 - August 2007: Deputy Director at Son Tung Real Estate Trading - Service Co., Ltd. • September 2007 - September 2009: Assistant to General Director of Khang Dien House Trading and Investment Joint Stock Company. • October 2009 - present: Deputy General Director of Khang Dien House Trading and Investment Joint Stock Company. Positions in other organizations: • Chairman of BOD of Binh Chanh Construction Group Investment JSC.

ANNUAL REPORT 2016

Mrs. NGUYEN THI DIEU PHUONG

Mr. LE HOANG SON

Member of BOD (non-executive)

Member of BOD Year of birth: 1977 Qualification: Bachelor Degree in Laws, Bachelor Degree in Business Administration

Year of birth: 1980 Qualification: Bachelor Degree in Economic - Finance, ACCA Auditor Experience: With many years of experience and achievements in prestigious financial institutions, in October 2009, Mrs. Phuong was invited to join Khang Dien as a Member of BOD. Since joining Khang Dien, she has had positive contributions to the Company’s development. In addition, Mrs. Phuong gives advices and supports functional departments to build financial strategies suitable to each development stage and general situation of the market. Working history: • 2002 - 2005: Senior Auditor of KPMG. VinaCapital • 2006 - 2010: In charge of the positions from Investment Specialist to Investment Manager. • July 1st 2010 - December 2016: Investment Director - Head of Property Portfolio of Vietnam Opportunity Fund - a fund under VinaCapital. • December 2016 - present: Deputy General Director of Vietnam Opportunity Fund.

Khang Dien • October 2009 - present: Member of BOD. Positions in other organizations: • Member of BOD cum General Director of Thang Loi Textile and Garment JSC. • Member of Inspection Committee of Quoc Cuong Gia Lai JSC. • Member of BOD of Hung Vuong JSC • Member of BOD of BCCI.

Experience: Mr. Son has more than 10 years working for project legal department. He has valuable contributions to the completion of the Company’s project legal framework. Working history: • 2001 - 2003: Project Legal Specialist of Tan Binh Investment and Construction JSC. • 2004 - 2007: Project Legal Specialist of Cotec Housing Investment and Development JSC. • October 2007 - April 2012: Deputy Head of Legal Department of Khang Dien House Trading and Investment Joint Stock Company. • April 2012 - April 26th 2013: Member of BOD cum Deputy Head of Legal Department of Khang Dien House Trading and Investment Joint Stock Company. • October 2014 - present: Director, Head of Legal Department Khang Dien House Trading and Investment Joint Stock Company. • September 11st 2015 - present: Member of BOD of Khang Dien House Trading and Investment Joint Stock Company. Positions in other organizations: None. GENERAL INFORMATION

GENERAL DIRECTOR TEAM

Mr. LY DIEN SON

Mrs. MAI TRAN THANH TRANG

Mr. NGUYEN DINH BAO

General Director

Deputy General Director

Year of birth: 1966

Year of birth: 1976

Year of birth: 1975

Qualification: Bachelor Degree from the University of Culture

Qualification: Bachelor Degree in Laws, Land Management Engineer

Qualification: Bachelor Degree in Laws - Certified Lawyer

Working history: • From 2001 - present: Chairman of BOD cum General Director of Khang Dien House Trading and Investment Joint Stock Company. Positions in other organizations: None.

ANNUAL REPORT 2016

Ms. NGO THI MAI CHI

Mr. NGUYEN DUC TRONG

Deputy General Director Year of birth: 1978

Deputy General Director (Resigned on: September 15th 2016)

Qualification: Bachelor Degree in Accounting

Year of birth: 1972 Qualification: Master Degree in Project Management and Master Degree in Business Administration

Experience: Ms. Chi has more than 15 years of experience in Financial - Accounting and has been working at Khang Dien for 10 years. Ms. Chi is directly responsible for finance management, investment strategic plan and Sales & Marketing department management. Working history: • January 2001 - December 2004: Accountant, Chief of Accounting - Finance of A&B Co., Ltd. • May 2005 - October 2007: Deputy Head of Accounting - Finance Department of Truong Thanh Furniture Corporation. • December 2007 - November 2015: Auditor, Chief Accountant, Chief Financial Officer of Khang Dien House Trading and Investment Joint Stock Company. • December 2015 - present: Deputy General Director of Khang Dien House Trading and Investment Joint Stock Company. Positions in other organizations: • August 19th 2016 - present: Member of BOD of Binh Chanh Construction Group Investment JSC.

Experience: Mr. Nguyen Duc Trong has 14 years of experience in project management. Before joining Khang Dien, he had held senior positions in real estate companies. Mr. Trong has positive contributions to Khang Dien’s project management. Working history: • 2003 - 2009: Deputy General Director of Ariyana - a subsidiary of Sovico Holdings. • January 2011 - December 2011: Director of Green Space Real Estate Trading and Investment Ltd. • January 2012 - December 2013: East Region Real Estate Trading and Investment Co., Ltd. • 2013 - July 2015: Chairman of BOD of Nhat Vuong Trade and Exim Service Co., Ltd. • July 2015 - September 15th 2016: Deputy General Director of Khang Dien House Trading and Investment Joint Stock Company.

GENERAL INFORMATION

INSPECTION COMMITTEE

Ms. VUONG HOANG THAO LINH Head of Inspection Committee Year of birth: 1974 Qualification: Bachelor Degree in Economics, Bachelor Degree in Laws, and Master Degree in Business Administration Experience: Ms. Linh has more than 15 years of experience in accounting and auditing. She used to work as a Senior Auditor of Accounting and Consulting Co., Ltd. (A&C) and Chief Accountant at Air Energy Vietnam and Avon Vietnam. At present, she is the Deputy Investment Director of VinaCapital. In 2014, as the Chief of Inspection Committee, Ms. Linh coordinated with the members of Inspection Committee to check and evaluate business performance and supervise operating activities to ensure the Company’s compliance with the law.

Working history: • 1996 - 2001: Senior Auditor at A&C • 2001 - 2003: General Accountant at New Toyo Tissue Paper Mill (Vietnam) • 2003 - 2004: Chief Accountant of Air Energy Vietnam • 2004 - 2006: Chief Accountant of Avon Cosmetic Vietnam • 2006 - 2014: Investment Manager of VinaCapital Corporate Finance Vietnam • 2014 - present: Deputy Investment Director of VinaCapital Corporate Finance Vietnam Positions in other organizations: • Member of BOD of Thang Loi Textile and Garment JSC • Member of BOD of Saigon Golf • Member of Inspection Committee of HUD.VN Social Housing Development JSC • Member of Inspection Committee of Hung Vuong JSC

ANNUAL REPORT 2016

Mr. HOANG MANH PHONG

Mr. DAO CONG DAT

Member of Inspection Committee

Year of birth: 1969

Year of birth: 1980

Qualification: Bachelor Degree in Economics, Construction Engineer

Qualification: Bachelor Degree in Laws

Experience: Mr. Hoang Manh Phong graduated from Hochiminh City University of Technology (Major in Construction) and holds a Bachelor Degree in Economics. He has worked for large companies in the field of real estate. Together with other members of Inspection Committee, Mr. Phong has valuable contributions to the improvement of the Company’s internal control.

Experience: Mr. Dao Cong Dat has many years of experience in human resource management and development. He has positive contribution to the Company’s human resource development.

Working history: • 2009 - 2012: Deputy Director cum Project Manager of Saigon Khang Dien Company

Working history: • 2007 - 2009: HR Officer at Nguyen Kim Trading JSC • 2009 - present: HR Manager of Khang Dien House Trading and Investment Joint Stock Company Positions in other organizations: None.

• 2012 - 2014: Project Manager of East Region Real Estate Trading and Investment Co., Ltd. • 2014 - Present: Head of Project Management Committee of Hao Khang Co., Ltd. Positions in other organizations: None.

GENERAL INFORMATION

ORGANIZATION AND HUMAN RESOURCES

HUMAN RESOURCE MANAGEMENT REPORT

WITH THE ONGOING STRONG BUSINESS IN THE EAST OF THE CITY, TOGETHER WITH MARKET EXPANSION IN THE CITY’S SOUTHWEST AREA, KHANG DIEN HAS EXPANDED ITS SKILLFULL WORKFORCE IN ORDER TO MEET THE COMPANY’S FAST GROWING PACE.

AS OF DECEMBER 31ST 2016, KHANG DIEN EMPLOYED

343

STAFF

Increasing by 150 employees compared to 2015, up 129%

ANNUAL REPORT 2016

PERSONNEL STRUCTURE BY QUALIFICATIONS

PERSONNEL STRUCTURE BY AGE

5% 27%

KDH

KDH 73%

95%

University and Post-graduate: 325 persons

Over 30 years of age: 249 persons

Others: 18 persons

Under 30 years of age: 94 persons

PERSONNEL STRUCTURE BY GENDER

PERSONNEL STRUCTURE BY POSITION

3% 11% 37%

KDH

11%

63% 75%

Male: 215 person

Senior management: 11 persons

Female: 128 person

Middle management: 37 persons Junior management: 38 persons Staff: 257 persons

PERSONNEL STRUCTURE BY FUNCTION

16%

Office: 211 persons 22%

KDH

62%

Project: 77 persons Sales - Marketing: 55 persons

GENERAL INFORMATION

BUSINESS PERFORMANCE 2016

HECTARES

CLEAN LAND AT PRIME LOCATIONS in the East and South of HCMC helps Khang Dien expand land bank of full property rights, diversify products and become one of the largest real estate companies in Ho Chi Minh City.

OVERVIEW OF THE REAL ESTATE MARKET IN 2016

THE REAL ESTATE MARKET IN 2016 ENJOYED POSITIVE DEVELOPMENTS DRIVEN BY SUPPORTIVE GOVERNMENT POLICIES AND WELL SYNCHRONIZED INFRASTRUCTURE DEVELOPMENTS.

ANNUAL REPORT 2016

MACROECONOMIC STABILITY In 2016, Vietnam achieved a 6.21% growth in GDP. Although the growth rate did not meet the target set by the Government, it was an outstanding figure among the frontier market economies. Inflation rate stabilized at below 5% was the main driver in lowering input costs, reducing prices, stimulating consumption, and promoting economic growth. Moreover, Vietnamâ&#x20AC;&#x2122;s ongoing urbanization rate of 2.5% - the highest rate among the countries in South East Asia and the fast rising middle-income class has boosted demand for real estate and housing products.

POSITIVE DEVELOPMENTS OF THE REAL ESTATE MARKET The real estate market in 2016 saw some positive changes due to the State’s supporting policies and ongoing infrastructure developments. To be specific: • New regulations were issued and implemented to promote market transparency in order to protect the benefits of the homebuyers and boost their confidence. • Policy on real estate lendings was also carefully implemented to create sustainability for the market. The adjustment of State Bank’s Circular 36, which reduced the ratio of short-term deposits to medium and long term loans from 60% down to 50%, had certain impacts on the ability to access real estate credits, helping stabilize the market toward positive development. • Infrastructure development has also been an effective catalyst for the market in recent years. By 2016, Saigon Bridge 2, Thu Thiem Bridge, Thu Thiem

Tunnel, and Vo Van Kiet Street were completed, creating a completed transportation network in the East of the city. Besides, the Ben Thanh - Suoi Tien Metro Line was at the final stage of construction and especially the commissioning of the Long Thanh - Dau Giay Expressway showed the its value of shortening commuting time from District 9 to the city CBD to about 10 minutes. • Homebuyers’ awareness changed in comparison with the previous years – developer’s reputation, construction progress, and transparency of entitlement and property rights became the top factors in home purchasing decisions. These above positive factors will support the real estate market’s sustainable growth in 2017.

BUSINESS PERFORMANCE 2016

BOARD OF DIRECTORS REPORT BOARD OF DIRECTORS ASSESSMENT OF BUSINESS PERFORMANCE

THE YEAR 2016 MARKS A MAJOR SUCCESS OF KHANG DIEN BUSINESS ACTIVITIES WITH OUTSTANDING BUSINESS RESULT COMPARED TO THE PREVIOUS YEARS. THIS SUCCESS IS A FIRM FOUNDATION FOR KHANG DIEN TO CONTINUE GROWING AND CATCHING OPPORTUNITIES TO DEVELOP FURTHER IN THE FUTURE.

ASSESSMENT ON BUSINESS PERFORMANCE 2016 In 2016, the Company achieved impressive growth in revenue and profit. (Unit: VND Billion) ITEMS

2014

2015

2016

Revenues

621

1,050

Profit before tax

105

Profit after tax Profit after tax belong to the Parent company’s shareholders Earnings per share - EPS (VND/share)

Compare 2016 to 2015 Change

3,932

2,882

274%

317

583

266

84%

268

405

137

51%

102

253

372

119

47%

1,610

1,020

1,590

570

56%

Compared to the same period: Revenues in 2016 reached VND3,932 Billion, increasing by 274% and profit after tax belong to the parent company’s shareholders reached VND372 Billion, increasing by 47%. Although Khang Dien delayed launching sales of The Merita project (131 townhouses originally planned for sales in Quarter III/2016) to time the market for better prices, business performance was strong: More than 500 houses from Mega Village, Melosa Garden, Lucasta, The Venica were sold.

ANNUAL REPORT 2016

REVENUES 2016  274% compared to 2015

3,932

VND BILLION

(Unit: VND Billion) However, profit after tax belong to the parent company’s shareholders was 93% of the target approved by the General Shareholders’ Meeting in April 2016.

ITEMS

Plan 2016

Result 2016

Revenues

1,500

Profit after tax belong to the Parent company’s shareholders, including: - Khang Dien group of companies - BCCI group of companies

According to the plan the profit after tax of VND400 Billion target set for the year 2016 are from two sources: VND330 Billion from Khang Dien group of companies and VND70 Billion from BCCI group of companies. The reason for not reaching the target is the under performance of BCCI group of companies. In 2016, BCCI

Result vs. Plan Differential Value

Percentage %

3,932

2,432

262%

400

372

(28)

93%

330

354

107%

(52)

25%

group of companies delivered 25% of the net profit target, affecting Khang Dien consolidated income. Khang Dien group of companies reached VND354 Billion net profit after tax, exceeding the target by VND24 Billion and corresponding to 107% above the target. This good result was driven by the sales from Melosa Garden, Mega Village, The Venica, and Lucasta projects,...

BUSINESS PERFORMANCE 2016

BOARD OF DIRECTORS REPORT (continued)

ACHIEVEMENTS Net profit from Khang Dien group of companies (excluding BCCI) exceeded the target

Maintained healthy capital structure

Succeeded in rebalancing investments

Operational efficiency was significantly improved. Products were sold out quickly and cash collection cycle was shorten because Khang Dien handed over the houses ahead of schedule. Although Merita project did not contribute to 2016 profit, the outstanding business result was driven by key projects such as Mega Village, Lucasta, The Venica, and especially Melosa Garden. Taking advantage of the favorable capital market condition supporting chartered capital increase, Khang Dien successfully issued 53,999,892 bonus shares, increasing the chartered capital to VND2,339,998,920,000 and showing the Company’s strong financial position. Besides, the loans from credit institutions during the year was deployed to finance the ongoing development of the projects having good sales progress such as Mega Village, Melosa Garden, Lucasta, The Venica. The loan amount and the payment terms were balanced against the cash receipt from the projects, thus enhance capital efficiency and ensure healthy capital structure. The Company successfully divested non-core assets, namely land in Long Truong District 9 and some projects under BCCI, to raise capital for new allocation.

LIMITATIONS BCCI not yet delivered good outcome as expected

Internal audit

On December 3rd 2015 Khang Dien completed the acquisition of 57.3% of Binh Chanh Construction & Investment Shareholding Company (BCCI). This is a strategic investment of Khang Dien to develop land band in the South of HCMC, near the key traffic network connecting to the provinces in the West of Vietnam. During 2016, Khang Dien restructured BCCI’s top Management Team, reviewed the projects to form an effective development policy, collected receivables and built up a better customer care policy. The restructuring was step-by-step conducted; therefore, it would take a certain period of time for the new structure to show its efficiency. As a result, in the first year of restructuring, BCCI only delivered 25% of the profit target. However, better performance and results are expected in the coming years. Internal audit was not the focust because all the Company’s activities were directly, permanently supervised by the General Director Team. However, in the coming time, the Company will enhance internal audit to strengthen corporate governance and risk management.

Despite certain limitations, the year 2016 marked a major success of Khang Dien business activities with outstanding business result compared to the previous years. This success is a firm foundation for Khang Dien to continue growing and catching new opportunities to develop further in the coming years.

ANNUAL REPORT 2016

BOARD OF DIRECTORS ASSESSMENT OF GENERAL DIRECTOR TEAM PERFORMANCE

SUPERVISION METHOD BOARD OF DIRECTORS HIGHLY APPRECIATES THE EFFORTS OF THE GENERAL DIRECTOR TEAM IN IMPLEMENTING THE BUSINESS PLAN AS SET OUT. DURING 2016, THE GENERAL DIRECTOR TEAM FULFILLED ITS DUTIES CAREFULLY AND WITH INTEGRITY, COMPLYING WITH THE RESOLUTIONS OF THE SHAREHOLDERS’ MEETING AND THE BOARD OF DIRECTORS AND MET THE NEED OF THE COMPANY’S BUSINESS SITUATIONS.

• Regularly reviewing and assessing the implementations of major plans committed by General Director Team. • Board of Directors fully participated in the regular meetings held by General Director in order to timely give direct instructions for important issues. • Coordinating with the Inspection Committee to comprehend the Company’s activities and give practical suggestions to support General Director Team to complete their duties.

SUPERVISION RESULTS • Board of Directors well conducted their supervision function to ensure General Director Team deliver the outcome in accordance with the goals, orientation and plan as set out, and ensure compliance with the Company Charter and the regulations. • Board of Directors highly appreciated the efforts of General Director Team in implementing the business plan. Upon the execution, General Director Team fulfilled their duties carefully and honestly, complying with the resolutions of Shareholders’ Meeting and the Board of Directors as well as meeting the Company’s business demand.

BUSINESS PERFORMANCE 2016

BOARD OF DIRECTORS REPORT (continued)

BOARD OF DIRECTORS DIRECTION AND PLAN

BOARD OF DIRECTORS DETERMINES THAT THE COMPANYâ&#x20AC;&#x2122;S BUSINESS MUST BE BUILT ON CUSTOMER TRUST. WITH THE ADVANTAGES IN STRONG LEGAL FRAMEWORK AND GOOD LAND BANK IN PRIME LOCATIONS, THE COMPANY CONFIRMS ITS MISSION OF DELIVERING TO THE CUSTOMERS PROJECTS WITH TRANSPARENT LEGAL FRAMEWORK, REASONABLE PRICE, AND QUALITY LIVING SPACE. TO BE SPECIFIC:

PRODUCT DIVERSIFICATION

SEGMENT DIVERSIFICATION

Besides the key products - gardened townhouse of the Mega product line and villas from middle to high class such as Lucasta and The Venica - the Company is developing high-rise apartments to satisfy demands of more customers. To be specific, the latest project expected to open for sales in Quarter II/2017 is an apartment project at Do Xuan Hop Exit of the Long Thanh - Dau Giay Expressway, Phu Huu Ward, District 9 with nearly 900 apartments.

At present, the Company is focusing on many segments from middle-class to high-class. For examples, the Mega product line has the average sales price of VND2 Billion to VND3 Billion per unit, Lucasta middle-class villas with the price from VND7 Billion/unit and The Venica highclass project with the price from VND15 Billion/unit. In the coming time, Khang Dien will expand to the segment for average good income homebuyers with the apartments from VND1 Billion/unit.

COST CONTROL

FINANCIAL CAPACITY ENHANCEMENT

The Company will focus on improving cost control and saving during the development of quality houses, thus enabling reasonable sales price suitable to more customers.

Thoroughly taking advantages of available sources of capital together with quickly mobilization of capital at relatively lower cost.

ANNUAL REPORT 2016

WITH THE MOTTO OF CUSTOMER CENTRIC IN EVERY ACTIVITY, BOARD OF DIRECTORS IS CONFIDENT IN BUILDING THE COMPANY TO BECOME A LEADING REAL ESTATE DEVELOPER, MAXIMIZING BENEFITS AND VALUES FOR THE SHAREHOLDERS.

NEW LOCATIONS

CREATION OF PERFECT PRODUCTS

Not only Khang Dien’s projects are located in the East of the city (in District 2 and 9), but also the Company will expand to the South such as in Binh Tan and Binh Chanh District (BCCI’s projects) and other good locations.

Not just selling houses with exterior finish, Khang Dien will create products with interior finish and ready property titles. They are the “turnkey” products for homebuyers.

EXPAND LAND BANK

DEVELOP HUMAN RESOURCES

Besides the existing land bank of Khang Dien and more than 500 hectares of BCCI, the Company will expand land bank through business partnerships and joint ventures with local and overseas partners.

Training high-quality and dedicated employees to create best products that are the true homes for every customer.

BUSINESS PERFORMANCE 2016

INSPECTION COMMITTEE REPORT

INSPECTION ACTIVITIES Inspection Committee carries out its functions and duties in accordance with the laws, the Company Charter and internal regulations. In 2016, the Inspection Committee conducted the following operations: supervising the activities of Board of Directors and General Director Team, monitoring business operation and financial situation of the Company. Accordingly, the Inspection Committee performed the following tasks: • Supervised the implementation of the Shareholders’ Meeting resolutions in 2016 on dividend distribution, chartered capital increase by issuing bonus shares to existing shareholders, expanding the Company’s real estate business scope (to include pre-school education, primary education, related architectural activities and technical consultancy). • Coordinated with the independent auditor to audit the Company’s 6-month and year-end financial statements in order to evaluate the authenticity and fairness of financial data in compliance with the prevailing Vietnamese accounting regulation. • Verified the compliance with the Company’s internal regulations and proposed modifications for some regulations and procedures. • Coordinated with functional departments of the Company to supervise the activities of affiliates (subsidiaries) in order to enhance the Company management of these affiliates. • Monitored information disclosure in compliance with the laws and ensured transparency in information disclosure to protect the interest of the shareholders.

RESULTS OF INSPECTION OF THE BOARD OF DIRECTORS AND THE GENERAL DIRECTOR TEAM • The Company fully complied with the Laws and the Company Charter in daily management.

in line with the Laws, the Company Charter, and the resolutions of the Shareholders’ Meeting.

• Board of Directors well performed its duties and rights in planning development direction and strategy for the Company. In 2016, Board of Directors issued many resolutions and decisions related to the Company activities. Board of Directors’ decisions were made in accordance with the process and procedure and in compliance with the resolutions of the Shareholder s’ Meetings.

• The Company’s operating procedures were in compliance with the requirements of the internal administration system. Problems were promptly detected, suggestions and solutions were given out timely.

• Members of BOD and General Director Team and the other managers performed their functions and tasks 70

ANNUAL REPORT 2016

• The Company disclosed information and issued reports according to the Laws. • Inspection Committee agreed with Board of Directors Report, Audited Financial Statements 2016, which would be submitted to the General Shareholders’ Meeting 2017.

RESULTS OF INSPECTION OF THE COMPANY’S OPERATION AND FINANCE Inspection Committee reviewed six-month and full year financial statements for 2016 and agreed with the performance items on the financial statements. The statements sufficiently and clearly presented and truly reflected the Company’s financial position.

Some major financial indicators: INDICATORS

LIQUIDITY Short-term liquidity ratio Fast liquidity ratio CAPITAL STRUCTURE Debt ratio/Total asset Debt ratio/Owners’ equity ACTIVITY RATIO Inventory turnover Account receivable turnover Net revenue/Total asset PROFITABILITY ROS ROA ROE

2015

2016

7.4 1.7

5.7 2.1

51% 134%

45% 102%

0.1 1.6 0.1

0.6 2.6 0.5

26% 3% 8%

10% 5% 12%

COORDINATION BETWEEN INSPECTION COMMITTEE, BOARD OF DIRECTORS, AND GENERAL DIRECTOR TEAM In 2016, Board of Directors and General Director Team facilitated Inspection Committee in full information disclosure about the Company’s business operation and financial position. Inspection Committee participated in Board of Directors’

meetings and gave opinions within the scope of its functions and duties. Inspection Committee, Board of Directors and General Director Team coordinated to timely address issues during the course of inspection.

COMMENTS AND PROPOSALS OF INSPECTION COMMITTEE In 2016, the real estate market showed good recovery but Vietnam’s economy still faced difficulties. Board of Directors and General Director Team needed to come up with solutions to maintain the Company’s growth in the coming years. • Applying procedures to closely control construction and management cost, and promote sales to increase profit. • Having policy to motivate, utilize and develop human resources. • Directing sales activities and modifying sales policy to suit the requirements and objectives of each stage.

• Perfecting internal control system, enhancing the roles of internal control department in financial management and supervising the compliance and implementation of the Company’s procedures and regulations. • Strengthening capital base and liquidity, and managing invested capital deployed in projects. • The Company needed to pay more attention to project development to improve competitive advantages in the market.

OPERATIONAL DIRECTION FOR INSPECTION COMMITTEE IN 2017 In 2017, Inspection Committee will continue its duties of inspecting in accordance with the functions and tasks of Inspection Committee as regulated by the Laws and the Company’s Charter. • Inspecting Board of Directors and General Director Team in accordance with the resolutions of General Shareholder’s Meeting and BOD, the Company’s Charter and internal regulations. • Reviewing quarterly and annually financial statements before disclosure and coordinating with the independent auditor to audit financial statements.

• Implementing regular and irregular inspections as requested by the shareholders. • Reviewing the reasonableness and legality of the Company’s business operation. • Continuing to refine procedures to improve the efficiency of Inspection Committee. • Coordinating with Board of Directors and General Director Team in improving and enhancing internal control efficiency. • Continuing reviewing and proposing solutions for issues in the Company’s procedures, regulations and operations. BUSINESS PERFORMANCE 2016

GENERAL DIRECTOR TEAM REPORT

ASSESSMENT ON BUSINESS PERFORMANCE

PROFIT AFTER TAX BELONG TO THE PARENT COMPANY’S SHAREHOLDERS  47% Compared to 2015

372

VND BILLION

REVENUE AND PROFIT Total Revenues (VND Billion)

Profit after tax belong to the Parent company’s shareholders (VND Billion) 3,932

4,000

400

3,500

350

3,000

300

2,500

250

2,000

200

1,500

150 1,050

1,000 500

253

102

100

621

2014

372

2015

2016

2014

2015

2016

(Unit: VND Billion) ITEMS

2014

2015

2016

Revenues

621

1,050

Profit before tax

105

Profit after tax Profit after tax belong to the Parent company’s shareholders Earnings per share - EPS (VND/share) 72

ANNUAL REPORT 2016

Compare 2016 to 2015 Change

3,932

2,882

274%

317

583

266

84%

268

405

137

51%

102

253

372

119

47%

1,610

1,020

1,590

570

56%

REVENUES CONTINUING THE DEVELOPMENT IN 2015, KHANG DIEN ACHIEVED OUTSTANDING GROWTH IN 2016 WITH TOTAL REVENUES OF VND3,932 BILLION, INCREASING NEARLY 3 TIMES COMPARED TO 2015.

The outstanding growth was from:

Revenues recognized from: Mega Village, Melosa Garden, Lucasta, The Venica

• Total revenues consolidated from BCCI group companies was VDN1,064 Billion, a large difference compared to 2015. Reasons: BCCI became a subsidiary of Khang Dien in Quarter IV/2015 (when Khang Dien completed the purchase of 57.31% of charter capital of BCCI). Therefore, the BCCI’s revenue consolidated into Khang Dien in 2015 was not full year and corresponding to the consolidate time period (to be specific, the revenue consolidated to Khang Dien was VND152.7 Billion in the total revenues of VND462.9 Billion of BCCI).

2,388

VND BILLION

Total revenues from BCCI group companies

1,064

VND BILLION

• Sales performance from the projects developed under Khang Dien group of companies - Mega Village, Melosa Garden, Lucasta, and The Venica - was very positive, resulting in VND2,388 Billion in revenue, contributing 61% to total revenues. • Transfer of projects in Long Truong - Villa Long Truong, Long Phuoc Dien Long Truong, and Khang Dien Long Truong - delivered VND429 Billion in revenue, contributing 11% to total revenues. The transfer of these projects was not a part of the 2016 business plan but under the medium-term and long-term strategy of Khang Dien in the effective restructuring of the existing projects.

Total revenue in 2016

(Unit: VND Billion)

PROJECTS

Revenue in 2016

Proportion

Mega Village

346

Melosa

1,198

30%

Lucasta

418

11%

The Venica

426

11%

Long Truong projects

429

11%

From BCCI

1,064

27%

TOTAL

3,932

100%

Others

Revenue structure in 2016 Transfer of projects in Long Truong

429

VND BILLION

Mega Village: 9%

BCCI: 27%

Others: 1% Long Truong projects: 11% The Venica: 11%

KDH

Melosa: 30%

Lucasta: 11%

BUSINESS PERFORMANCE 2016

GENERAL DIRECTOR TEAM REPORT (continued)

PROFIT AFTER TAX BELONG TO THE PARENT COMPANY’S SHAREHOLDERS WAS VND372 BILLION. ALTHOUGH REACHING 93% OF THE TARGET APPROVED BY 2016 GENERAL SHAREHOLDERS’ MEETING, THE PROFIT AFTER TAX IN 2016 GREW BY 47% COMPARED TO THE SAME PERIOD.

PROFIT Profit after tax belong to the Parent company’s shareholders was VND372 Billion. Although reaching 93% of the target approved by 2016 General Shareholders’ Meeting, the profit after tax in 2016 grew by 47% compared to the same period. (Unit: VND billion) Result vs. Plan ITEMS

Plan 2016

Result 2016

Differential Value

Percentage %

1,500

3,932

2,432

262%

Profit after tax belong to the Parent company shareholders, including:

400

372

(28)

93%

Khang Dien group of companies

330

354

107%

(52)

25%

Revenues

BCCI group of companies According to plan, profit after tax of Khang Dien in 2016 was set at VND400 Billion, including: • VND70 Billion consolidated from BCCI group of companies: According to BCCI’s business plan in 2016 approved by General Shareholders’ Meeting in April 2016, the planned profit of the group was VND120 Billion. However, the group earned only VND30.7 Billion profit in 2016, or 25% of the plan, leading to VND18 Billion profit attributed to Khang Dien at the rate of 57.3% ownership of BCCI. This has affected the consolidated business result of Khang Dien. • VND330 Billion was set for Khang Dien group of companies. The result was VND354 Billion of profit after taxes, exceeding the target by VND24 Billion, equivalent to 7.3% of the target. This earnings were 74

ANNUAL REPORT 2016

from the projects Mega Village, Melosa Garden, The Venica, and Lucasta in 2016. Detailed were as follows: » Mega Village: By year-end 2016, cumulative 320/335 units sold, equivalent to 96% closing rate of the whole project. » Melosa Garden: Until the end of 2016, cumulative 456/567 units sold, equivalent to 80% closing rate of the whole project. » Lucasta: Until the end of 2016, cumulative 98/140 units sold, equivalent to 70% closing rate of the whole project. » The Venica: Until the end of 2016, cumulative 24/43 units sold, equivalent to 56% closing rate of the whole project.

COSTS AND EXPENSES The Company’s 2016 earnings growth not only due to the good sales but also to the positive contribution from the effective cost control.

• In 2016, cost of goods sold (COGS) was 75% of revenues, increasing by 7% compared to 2015, mainly driven by BCCI group of companies. Reason: To ensure efficient restructure, the group transferred some noncore apartment projects such as Western Dragon Apartment and 510 Kinh Duong Vuong at relatively low profit. The ratio of COGS over revenues temporarily increased during the restructuring period and would ease back to the efficient level in the coming time.

ITEMS (Proportion of Cost to Revenues)

2015

85%

68%

75%

+7%

Interest

0,2%

Selling expenses

-2%

Administrative overheads

-4%

Cost of goods sold

• The ratio of interest expense over revenues decreased nearly 1%, which was a positive result when the operational scale expanded but debt did not increase accordingly. Instead of taking on more debts, the Company effectively managed cash flow - matching sales and debt service cash flows - and proactively transfered ineffective projects to focus on projects

2016

Compare 2016 to 2015

2014

with strategic locations and efficiency and, therefore, minimizing loan interest expense. • Selling expenses and administrative overheads were reduced, accounting for 2 - 4% of revenues. This cost saving resulted from improvement in corporate management efficiency and effective sales policies.

REASONS FOR NOT MEETING 2016 BUSINESS TARGETS • Khang Dien successfully acquired 57.3% of BCCI in December 2015. Until January 2016, Khang Dien had started restructured BCCI to better suit the market conditions and in consistency with the overall business strategy driven by Khang Dien’s BOD. With the participation of Khang Dien in BCCI’s BOD and General Director Team, in 2016, BCCI made a series of changes: rearranging personnel, restructuring project portfolio, (liquidating inefficient projects, speeding up ongoing projects), and settling outstanding legal issues. • The restructuring affected the 2016 business plan of BCCI. Ineffective projects including Western Dragon and 510 Kinh Duong Vuong were transferred. The transfers of these projects were not included in BCCI’s business

plan in 2016. Thus, BCCI’s profit after tax in 2016 reached VND30.7 Billion, equivalent to 25% of the initial plan was VND120 Billion (Khang Dien’s consolidated profit after tax was VND18 Billion, equivalent in owned ratio of the legal capital of BCCI was 57.3%) It can be said that 2016 was a transitional year for BCCI when its operating model was gradually adjusted to best suit the operational model of Khang Dien, the Parent company. Although BCCI does not meet the 2016 business target, Management of Khang Dien believes that the restructuring in 2016 will make a positive impact to help the business results of BCCI be better in 2017 onwards.

BUSINESS PERFORMANCE 2016

GENERAL DIRECTOR TEAM REPORT (continued) FINANCIAL SITUATION ASSETS Total Assets (VND Billion)

Asset structure (%)

9,000

8,542

8,000

Cash and cash equivalents Receivables Inventories

7,937

100 90

7,000

11%

69%

58%

6,000

5,000

67%

4,000 3,000

1% 1%

Long-term assets Others

3,121

40 30

2,000

1,000

17%

19% 8%

10 14% 2014

2015

2016

11%

2014

13%

2015

2016

Revenues and Profit in 2016 grew strongly compared to 2015, but there was no corresponding increase in total assets. For 2016 year-end, total assets of Khang Dien worth VND7,937 Billion, a slight decrease of 7% compared to 2015, equivalent to VND605 Billion. Reason: Decrease in inventories due to quick sales and liquidation of some inefficient projects to reduce debts. Detailed fluctuations of assets are as follows: Asset structure changes ITEMS

(Unit: VND Billion) 2014

Proportion

2015

Proportion

Cash and cash equivalents

435

14%

983

11%

1,059

13%

Receivables

537

17%

654

1,485

19%

Inventories

2,075

67%

5,865

69%

4,618

58%

Long-term assets

907

11%

696

Others

133

3,121

100%

8,542

100%

7,937

100%

TOTAL ASSETS

2016

Proportion

â&#x20AC;˘ The items with high proportion such as Cash and cash equivalents, accounts receivable, and inventories accounted for a major proportion of total assets in 2016. To be specific, the proportions of these items were 13%, 19% and 58% of total assets (the total proportion of these three items accounted for 90% of total assets). The structure was appropriate for real estate development and demonstrated safety in development for Khang Dien in the future.

ANNUAL REPORT 2016

• Although occupying a high proportion in total assets, up to 58%, the proportion of inventories has decreased by 11% compared to 2015. The proportion of accounts receivable rose 11% compared to 2015, which was reasonable given the growth in sales. Asset value changes

(Unit: VND Billion) Compare 2016 to 2015

ITEMS

2014

2015

Cash and cash equivalents

435

983

1,059

Receivables

537

654

1,485

831

127%

Inventories

2,075

5,865

4,618

(1,247)

-21%

Long-term assets

907

696

(211)

-23%

Others

133

(54)

-41%

3,121

8,542

7,937

(605)

-7%

TOTAL ASSETS

2016

Differential Value

Total assets of the Company in 2016 decreased by 7% due to reduction in inventories. In 2016, the value of inventories fell to VND4,618 Billion, decreasing by VND1,247 Billion, equivalent to 21%, compared to the same period. Inventories changes No.

PROJECT NAME

(Unit: VND Billion) 2014

2015

2016

Compare 2016 to 2015

Melosa

663

931

437

(494)

Lucasta

645

462

(183)

Mega Village

296

188

(103)

The Venica

133

258

228

(30)

Merita

135

313

178

Khang Dien Long Truong

229

255

(245)

High-rise townhouses

215

235

Low-rise townhouses

161

172

220

Sapphire

131

160

173

Gia Phuoc

122

Long Phuoc Dien Long Truong

(82)

Villa Long Truong

(53)

Binh Trung Dong

246

264

Kim Phat

183

BCCI’s projects

2,205

1,712

(493)

Other projects

242

222

162

(60)

2,075

5,865

4,618

(1,247)

TOTAL

BUSINESS PERFORMANCE 2016

GENERAL DIRECTOR TEAM REPORT (continued)

The projects with strong decreases in inventories: 1. Inventories of Melosa Garden, Lucasta, Mega Village, and The Venica decreased more than VND800 Billion in total. These projects sales went very well in 2016 with more than 500 units sold, making significant contribution to total revenues. 2. Inventories of Khang Dien Long Truong, Long Phuoc Dien Long Truong and Villa Long Truong decreased

nearly VND380 billion. The Company has transferred these projects to restructure portfolio. 3. Inventories of BCCIâ&#x20AC;&#x2122;s projects decreased nearly VND493 Billion due to the transfer of inefficient projects such as Western Dragon and 510 Kinh Duong Vuong to focus capital for the other projects having strategic locations and efficiency.

Besides focusing on sales, collecting receivables and restructuring inefficient projects, Khang Dien has continued developing new projects to be launched in 2017 such as Merita (inventory increased by VND178 Billion) and Kim Phat (inventory increased by VND183 Billion).

2016 2015 2014

Melosa Lucasta Mega Village The Venica Merita Khang Dien Long Truong High-rise townhouses Low-rise townhouses Sapphire Gia Phuoc Long Khang Dien Long Truong Vila Long Truong Binh Trung Dong Kim Phat BCCIâ&#x20AC;&#x2122;s projects Other projects -

ANNUAL REPORT 2016

500

1,000

1,500

2,000

2,500

CAPITAL STRUCTURE

CAPITAL STRUCTURE CHANGED ALONG WITH THE CHANGES IN TOTAL ASSETS, WITH DEBT REDUCTION AND SHAREHOLDER EQUITY INCREASE.

ITEMS

Fluctuation in structure: Long-term debts decreased over VND1,000 Billion, equivalent to 32% decrease compared to the same period last year. Short-term debts and Shareholder equity increased slightly. Capital structure changed positively with increase in the proportion of shareholder equity (from 38% up to 44% of total capital) and 11% decrease in the proportion of long-term debts compared to the same period, corresponding to the 11% decrease in the proportion of inventories. (Unit: VND Billion) 2014

Proportion

2015

Proportion

2016

Proportion

482

15%

1,037

12%

1,272

16%

Long-term liabilities

1,102

35%

3,333

39%

2,267

28%

Owners’ equity

1,499

48%

3,257

38%

3,477

44%

915

11%

921

12%

3,121

100%

8,542

100%

7,937

100%

Current liabilities

Interests of minority shareholders TOTAL EQUITY

100

11%

12%

48%

38%

44%

35%

39%

28%

15%

12%

16%

90 80 70 Capital structure (%) Current liabilities Long-term liabilities Owner’s equity Interests of minority shareholders

60 50 40 30 20 10

2014

2015

Fluctuations in value ITEMS

(Unit: VND Billion) 2014

2015

2016

482

1,037

Long-term liabilities

1,102

Owners’ equity

Current liabilities

Interest of minority shareholders TOTAL ASSETS

2016

Compare 2016 to 2015 Change

1,272

235

23%

3,333

2,267

(1,066)

-32%

1,499

3,257

3,477

220

915

921

3,121

8,542

7,937

(605)

-7%

BUSINESS PERFORMANCE 2016

GENERAL DIRECTOR TEAM REPORT (continued) Short-term debts For 2016 short-term debts increased by VND235 Billion, equivalent to 23% increase compared to the same period last year, mainly due to the increases in advance payments from customers and tax liability and obligations to the Stage Budget. The change was reasonable given the large growth in sales in 2016. The advance payments from customers will decrease over time when sales become eligible to be recorded as revenue. The taxes and obligations to the Stage Budget will also decrease when they are paid in line with the regulations. Long-term debts These were loans mainly for land and project developments. In 2016, long-term debts decreased more than VND1,000 Billion, a positive change, showing that the Company had good cash inflow during the year. The cash flows from sales and project transfer were used to reduce debts. To be specific:

Long-term debts decreased more than

1,000

VND BILLION

• Khang Dien bought back more than 90% of VND900 Billion of the corporate bond issued at the end of 2015 to finance the development of Melosa project. By the end of 2016, the outstanding bond value was VND95 Billion (the total amount of bond bought back in 2016 was VND805 Billion). • The debts financing Lucasta, Mega Village and The Venica also decreased. In particular, Lucasta’s debts were reduced by VND240 Billion (from VND417 Billion at the end of 2015 down to VND175 Billion at the end of 2016) and the VND250 Billion debts on Mega Village and The Venica were settled in 2016. • The debts financing Khang Dien Long Truong, Long Phuoc Dien Long Truong, and Villa Long Truong were also settled when transfer procedure of these projects was completed.

Shareholder equity

3,477

VND BILLION

SHAREHOLDER EQUITY At the end of 2016 increased from 38% up to 44% of total capital

ANNUAL REPORT 2016

At the end of 2016, the shareholder equity of the Company reached VND3,477 Billion, an increase of VND220 Billion, equivalent to 7%, compared to 2015. This increase came from the retained earnings. Although the value of shareholder equity increased slightly, the proportion of shareholder equity increased from 38% up to 44% as shareholder equity became the main source of capital. This shows that the Company working toward capital independence, reducing the dependence on external debts, reducing interest expenses, improving capital efficiency and ensuring safety for capital structure.

Financial ratios in 2016 were significantly improved compared to the same period. In particular:

FINANCIAL INDICATORS

2014

2015

2016

• Quick ratio increased from 1.7 to 2.1 times, showing that the liquidity of the Company was improving.

Short-term liquidity ratio

6.4

7.4

5.7

Fast liquidity ratio

2.1

1.7

2.1

51%

45%

• Debt over assets ratio decreased significantly from 51% to 45%, showing the Company’s high level of control of capital, not dependent on external debts.

106%

134%

102%

Inventory turnover

0.3

0.1

0.6

Account receivable turnover

1.2

1.6

2.6

Net revenue/Total asset

0.2

0.1

0.5

ROS

10%

26%

10%

ROA

ROE

12%

INDICATORS

LIQUIDITY

CAPITAL STRUCTURE Debt ratio/Total asset Debt Ratio/Owners’ equity ACTIVITY RATIO

PROFITABILITY

• Turnover ratios increased by 0.4 to 1.0 time, showing the efficiency in the Company’s asset uses. • Return on Equity (ROE) and Return on Assets (ROA) remained relatively low at 12% and 5%, respectively showed positive changes, increasing by 2 - 4% compared to last year.

Return on Sales (ROS) sharply decreased from 26% to 10% because as part of restructuring BCCI and rebalance land portfolio, Khang Dien sold some ineffective projects (especially BCCI’s projects) with little profits and focus capital for the more effective projects. In 2016, however, the profitability ratios of Melosa Garden, Lucasta, Mega Village and The Venica were higher than 2015 (minimum 26% in 2016). Therefore, in general, the decrease of ROS in 2016 was temporary, and it would recover soon as the restructuring of BCCI is finished.

THE YEAR 2016 MARKED A GREAT SUCCESS OF KHANG DIEN’S OPERATION IN DEVELOPING PROJECTS AND RESTRUCTURING BCCI. ALTHOUGH NOT REACHING THE PROFIT TARGET AS SET OUT, THE RESTRUCTURING AT BCCI WAS EXECUTED IN THE RIGHT STEPS AND WILL BRING GOOD RESULTS IN THE COMING TIME. THIS IS A FIRM FOUNDATION FOR KHANG DIEN TO SUSTAIN ITS DEVELOPMENT AND BECOME ONE OF THE LEADING REAL ESTATE COMPANIES, MAXIMIZING THE BENEFITS FOR THE SHAREHOLDERS.

BUSINESS PERFORMANCE 2016

GENERAL DIRECTOR TEAM REPORT (continued)

IMPROVEMENTS IN ORGANIZATIONAL STRUCTURE, POLICY AND MANAGEMENT Establishment of Architectural Division

Train and develop human resources

Development of sales team

Improvement of project management apparatus

Improvement of sales policy

To implement the 2016 business plan, Khang Dien determined that the improvements in organizational structure, policy, and management were essential. Accordingly, the improvements were strongly promoted in 2016 as follows:

ESTABLISHMENT OF ARCHITECTURAL DIVISION Determining that the leading duty of the Company is to offer the customers perfect housing products having transparent legal framework, reasonable prices and especially refined designs in an open living space, in 2016, the Company strengthened the Architecture Division with high quality new hires. The Architecture Division would help bring the most aesthetics to the final products, build living spaces friendly with nature, enhance living quality and create added value to the customers. The efficiency of Architectural Division was tested through challenging projects such as The Venica, Lucasta, and Melosa Garden, which won the “Best Housing Development” Award 2016 of Asian Property Awards held by Ensign Media to honor the best real estate projects, construction works, architecture and designs across the country. The prize is for the best real estate projects based on objective, fair, and transparent criteria in Asia.

IMPROVEMENT OF PROJECT MANAGEMENT APPARATUS Determining that project management unit is the key force in the Company’s operation, in 2016 the Company focused on developing project management personnel in quantity and quality, regularly reviewed and consolidated organization toward centralized management to serve and support timely and effectively decision making. Workloads of the projects were arranged in a systematic way and distributed promptly, personnel apparatus was rearranged simultaneously, staff was assigned to each project to ensure execution on progress at high quality and reasonable cost. 82

ANNUAL REPORT 2016

DEVELOPMENT OF SALES TEAM Sales team is a department which is on behalf of the Company to express the Company’s cares for the customers. Therefore, regular professional trainings were held to improve the professionalism for Sales Team in their works: • Consulting customers about product quality, project legality and interior design, etc. • Guiding and assisting customers with simple procedures and preferential interest rates at associated banks. • Quickly resolving complaints and responding to inquiries from customers, fully meeting the customer’s requirements in a timely manner. • Tracking contract closing and customer liabilities until handing over ownership certificate to customers. In the future, the Company will continue consolidating and developing a more advanced team of customer care to always create a firm belief in customers as the Company’s motto “Khang Dien - Where you put your trust, where you make you home”. IMPROVEMENT OF SALES POLICY Expanding collaboration network with professional real estate trading floors in HCMC such as CBRE, Savils, Cengroup, Sunland, etc. to accelerate sales activities. Intensifying financial support programs to support sales. In 2016, in addition to promotion discount at the interest rate of 18%/year for advanced payment, the Company also worked with the large banks who offer preferential interest rates to offer financial support packages for several customer groups. These activities shown Khang Dien’s supports in increasing the possibility of house ownership for many customers. Enhancing after-sales services: In 2016 Khang Dien regularly visit customers in holidays and organized social activities to strengthen the bonding with the communities living in the projects. TRAIN AND DEVELOP HUMAN RESOURCES Recognizing the importance of human resources for the long-term development, the Company has organized more training to improve professional skills through internal training activities and instructions from direct management. To be specific, the managers would quarterly evaluate the employee’s performance and give constructive comments to help the employees improve and enhance their professional qualifications. In addition, the Company paid attention to improvement of multidisciplinary knowledge for employees. The staffs of each department were encouraged to participate in the projects and learn from each other. The tasks were allocated in a scientific way to facilitate the employees to learn about other areas but at the same time ensuring the progress of their work. BUSINESS PERFORMANCE 2016

GENERAL DIRECTOR TEAM REPORT (continued)

BUSINESS PLAN FOR

2017

IN 2017 THE COMPANY WILL CONTINUE PROMOTING SALES, BUILDING NEW HOUSES AND HANDING OVER COMPLETED HOUSES OF MEGA VILLAGE, MELOSA, LUCASTA, AND THE VENICA. THE COMPANY WILL ALSO LAUNCH THREE NEW PROJECTS, MERITA, GIA PHUOC AND AN APARTMENT PROJECT IN PHU HUU WARD, DISTRICT 9.

MEGA VILLAGE

MELOSA GARDEN

Melosa Garden has scale of 17 hectares of land, adjacent to Mega Village. The project was deployed in early 2015 with 567 villas and townhouses in a compound with high-class utilities and amenities. The project was officially opened for sale in November 2015. Until December 31st 2016, 456 units have been sold. The Company expects to complete the sales of 111 remaining units in 2017. Up to present, more than 90% units of Melosa Garden have been constructed and more than 50% of these units have been handed over to the buyers. In 2017, the Company will complete construction and handover the remaining units to the customers.

THE VENICA

Mega Village has a scale of 5.7 hectares of land in Phu Huu Ward, District 9, in front of Inner Ring Road, 600m far away from roundabout between HCMC - Long Thanh - Dau Giay Highway and Inner Ring Road. The project was deployed in the third quarter of 2014 and offered for sales in May 2015. Until December 31st 2016, the project remained 15 units unsold. As expected, the 100% sales will be completed in 2017. At present, 335 houses of Mega Village are 95% construction completed and handed over to customers. The remaining works will be completed and handed over to customers in the first quarter of 2017. Out of 335 units, 145 property ownership certificates have been handed over to the buyers. The remaining ownership certificates will be handed over to the buyers in the second quarter of 2017. 84

ANNUAL REPORT 2016

The Venica has scale of 3.1 hectares of land located at Do Xuan Hop Exit of the Long Thanh - Dau Giay Expressway, in Phu Huu Ward, District 9, bordering District 2. The project is like a small oasis with surrounding river and has 43 super high class villas in a compound with superior utilities and amenities. The Venica has been 100% completed in construction, infrastructure, landscape, and utilities. Ownership certificates of all 43 villas have been ready before officially opening for sales in April 2016. Until December 31st 2016, 24 villas of the project have been sold. The Company plans to continue selling The Venica in 2017.

LUCASTA

Lucasta has a scale of 8 hectares of land located on Lien Phuong Street, Phu Huu Ward, District 9. Lucasta is an eco-villa project in premium segment, including 140 detached and duplex villas having refined designs and in a compound with beautiful scenery and full of high-class utilities. After acquiring Lucasta in Quarter III/2015, Khang Dien has carried out refurbishment and development and officially opened for sales in Quarter IV/2015. Until December 31st 2016, the 98 villas have been sold. The Company expects to complete the sales of the remaining units and hand over the ownership certificates to the buyers in 2017.

GIA PHUOC

Gia Phuoc has a scale of 3 hectares of land located on D2 Street, Phu Huu Ward, District 9 and 500m far away Nguyen Duy Trinh Street. Gia Phuoc has 118 townhouses in a compound with highclass utilities and amenities such as swimming pool, gym center, minimart, etc. In 118 townhouses have about 20 units of Shop House of land located on D2 Street (land requirement of 30m) Gia Phuoc is expected to open for sale in Quarter II/2017 and will be completed in 2017.

MERITA

Merita has a scale of 3 hectares of land located on Lien Phuong Street, Phu Huu Ward, District 9. The project has 131 townhouses in a compound with full of high-class utilities and amenities such as swimming pool, gym center, minimart, etc. More than 40 shop-houses among 131 townhouses are located on the frontage of Lien Phuong Street. Up to now, the entire infrastructure, landscape, and utilities have been fully constructed. Total 131 units are under construction, of which more than 50% have been completed. The rest will be completed in the first quarter of 2017. Merita Project will be opened for sales in the second quarter of 2017 and sold out in opening day.

APARTMENT PROJECT IN PHU HUU WARD, DISTRICT 9

The apartment project has a prime location at Do Xuan Hop Exit of the Long Thanh - Dau Giay Expressway, in Phu Huu Ward, District 9, HCMC. The project is located adjacent to The Venica and The Lake View City. The project offers nearly 900 apartments from 45m2 to 130m2 living space with refined design and full of utilities and amenities such as 800m2 swimming pool, gym center, etc. The apartment is designed and constructed by Hoa Binh Construction a prestigious contractor. At present, the project is under construction and expected to open for sale in Quarter II/2017.

WITH THE BUSINESS PLAN FOR THE PROJECTS DESCRIBED ABOVE, KHANG DIEN EXPECTS TO SELL MORE THAN 400 TOWNHOUSES AND VILLAS AND 700 APARTMENTS IN 2017. THE ESTIMATED CONSOLIDATED PROFITS AFTER TAX IS VND500 BILLION (INCLUDING THE PROFIT FROM BCCIâ&#x20AC;&#x2122;S COMPANIES), INCREASING BY 35% COMPARED TO THE CONSOLIDATED PROFIT IN 2016.

BUSINESS PERFORMANCE 2016

CORPORATE GOVERNANCE

TOWNHOUSES IN COMPOUND SETTING of the Mega townhouse projects, which were sold out in 2014 - 2015. Khang Dien continues launching a plenty of products in different segments: Melosa Garden - upgraded product line of Mega Series, Luscata premium eco villa, The Venica 5-star villa, etc. to meet the real demand on housing of local and overseas middleclass customers.

BOARD OF DIRECTORS BOARD OF DIRECTORS MEMBERS AND STRUCTURE Details are as follows: No.

As of December 31 2016, Board of Directors of Khang Dien consisted of five Directors, including three executive members and two non-executive members. There was no change in Board Directors during the year. st

Member of BOD

Position

Remark

Mr. Ly Dien Son

Chairman

cum General Director

Mrs. Mai Tran Thanh Trang

Member

cum Deputy General Director

Mr. Nguyen Dinh Bao

Member

cum Deputy General Director

Mrs. Nguyen Thi Dieu Phuong

Member

Non-executive

Mr. Le Hoang Son

Member

Non-executive

BOARD OF DIRECTORS ACTIVITIES In 2016, the Board of Directors held 33 meetings with full participation of the Directors and issued Resolutions on major issues of the Company.

100 % RATE OF MEETING ATTENDANCE

At the same time, the Board of Director timely gave policies to solve challenging issues and impediments materializing in actual business. The Board of Directors also quickly made strategic decisions and effectively fulfilled its duties in maintaining stable and safe operation for the Company.

ANNUAL REPORT 2016

INSPECTION COMMITTEE INSPECTION COMMITTEE MEMBERS AND STRUCTURE Inspection Committee consists of three members elected by General Shareholder’s Meeting (GMS) to perform the inspection activities according to the laws and the Company’s charter, including:

No.

Member

Position

Ms. Vuong Hoang Thao Linh

Head of Inspection Committee

Mr. Dao Cong Dat

Member of Inspection Committee

Mr. Hoang Manh Phong

Member of Inspection Committee

SUMMARY OF INSPECTION COMMITTEE’S MEETINGS In 2016, Inspection Committee held quarterly meetings to summarize the performance of the year, plan for the next year and prepare report and suggestions to Board of Directors and General Director Team.

Details of the meetings are as follows:

Inspection Committee also attended the meetings held by the Board of Directors and regularly discussed with the Board of Directors, functional department heads, internal auditor and independent auditor to fulfill the committee’s duties.

• Meeting minutes No. 02/2016/BB-BKS dated 30/06/2016 evaluating and reviewing the implementation of the Board of Directors’ resolutions in Quarter II.

• Meeting minutes No. 01/2016/BB-BKS dated 29/03/2016 reviewing unconsolidated financial statements and consolidated financial statements and 2015 auditor’s report draft and assigning responsibilities to the members of Inspection Committee in 2016

• Meeting minutes No. 03/2016/BB-BKS dated 25/08/2016 evaluating and reviewing the implementation of the Board of Directors’ resolutions in Quarter III, reviewing the implementation of information disclosure procedure and reviewing financial statements for first 6 months. • Meeting minutes No. 04/2016/BB-BKS dated 29/12/2016 summarizing and reporting the activities of Inspection Committee in 2016 and reviewing the developments of some projects of the Company. CORPORATE GOVERNANCE

TRANSACTIONS, REMUNERATIONS AND INTEREST OF BOARD OF DIRECTORS AND INSPECTION COMMITTEE BOARD OF DIRECTORS Remuneration of the Board of Directors: No.

Member of BOD

Working time

Remuneration

Mr. Ly Dien Son

12 months

VND15,000,000/month

Mrs. Mai Tran Thanh Trang

12 months

VND10,000,000/month

Mr. Nguyen Dinh Bao

12 months

VND10,000,000/month

Mrs. Nguyen Thi Dieu Phuong

12 months

VND10,000,000/month

Mr. Le Hoang Son

12 months

VND10,000,000/month

Beside the remunerations mentioned above, the Company did not pay any other compensations to the Board of Directors.

INSPECTION COMMITTEE Remuneration of the Inspection Committee No.

Member of Inspection Committee

Working time

Remuneration

Ms. Vuong Hoang Thao Linh

12 months

VND10,000,000/month

Mr. Dao Cong Dat

12 months

VND5,000,000/month

Mr. Hoang Manh Phong

12 months

VND5,000,000/month

Beside the remunerations mentioned above, the Company did not pay any other compensations to the Inspection Committee.

ANNUAL REPORT 2016

SHARE TRANSACTIONS OF INTERNAL SHAREHOLDERS AND RELATED PERSONS SHARES OWNED BY INTERNAL SHAREHOLDERS Name

Position

Total

Ownership percentage (%)

Ly Dien Son

Chairman

2,340,000

1.000%

Mai Tran Thanh Trang

Member

286,000

0.122%

Nguyen Dinh Bao

Member

299,000

0.128%

Nguyen Thi Dieu Phuong

Member

Le Hoang Son

Member

91,028

0.039%

Ly Dien Son

Chairman of BOD cum General Director

Mai Tran Thanh Trang

Member of BOD cum Deputy General Director

Nguyen Dinh Bao

Member of BOD cum Deputy General Director

Ngo Thi Mai Chi

Deputy General Director

104,000

0.044%

Vuong Hoang Thai Linh

Head of Inspection Committee

2,002

0.001%

Dao Cong Dat

Member of Inspection Committee

26,000

0.011%

Hoang Manh Phong

Member of Inspection Committee

13,000

0.006%

Financial Director

Tra Thanh Tra

Financial Director

104,000

0.044%

Chief Accountant

Nguyen Quoc An

Chief Accountant

Authorized person for information disclosure

Nguyen Dinh Bao

Member of BOD cum Deputy General Director

3,265,030

1.395%

Shareholders

Board of Directors

General Director Team

Inspection Committee

TOTAL

No.

CORPORATE GOVERNANCE

SHARE TRANSACTIONS OF INTERNAL SHAREHOLDERS AND RELATED PERSONS (continued)

TRANSACTIONS OF INTERNAL SHAREHOLDERS AND RELATED PERSONS

No.

Transactions conducted by

Relationship with internal shareholders

Mai Tran Thanh Trang

Member of BOD cum Deputy General Director

Nguyen Dinh Bao

Member of BOD cum Deputy General Director

Le Hoang Son

Member of BOD

Ngo Thi Mai Chi

Deputy General Director

Nguyen Duc Trong

Deputy General Director

Tra Thanh Tra

Financial Director

Dao Cong Dat

Member of Inspection Committee

Hoang Manh Phong

Member of Inspection Committee

Vietnam Investment Property Holdings Limited

Related person, internal person

Vietnam Investment Limited

Related person, internal person

Vietnam Investment Property Limited

Related person, internal person

Vietnam Ventures Limited

Related person, internal person

Vietnam Enterprise Limited

Related person, internal person

Asia Value Investment Limited

Related person, internal person

VOF Investment Limited

Related person, internal person

Notes: * Calculated based on the former charter capital of VND1,800,000,000,000 ** Calculated based on the new charter capital of VND2,339,998,920,000 Investment funds: Vietnam Investment Property Holdings, Vietnam Investment Limited, Vietnam Investment Property Limited, Vietnam Enterprise Limited, Asia Value Investment Limited, and VOF Investment Limited are under the management of VinaCapital Corporate Finance Vietnam, who has two representatives holding important roles at Khang Dien: Nguyen Thi Dieu Phuong - Member of BOD and Vuong Hoang Thao Linh - Member of Inspection Committee.

ANNUAL REPORT 2016

Beginning number of shares

Ending number of shares

Reasons for increase/decrease (purchasing, selling, transferring, bonus, etc.)

Number of share

Percentage

Number of share

Percentage

681,900

0.379%

286,000

0.122%

Portfolio restructuring and receiving bonus shares at the rate of 30%

469,400

0.261%

299,000

0.128%

Portfolio restructuring and receiving bonus shares at the rate of 30%

262,022

0.146%

91,028

0.039%

Portfolio restructuring and receiving bonus shares at the rate of 30%

330,000

0.183%

104,000

0.044%

Portfolio restructuring and receiving bonus shares at the rate of 30%

150,000

0.083%

276,000

0.153%

104,000

0.044%

Portfolio restructuring and receiving bonus shares at the rate of 30%

68,000

0.038%

26,000

0.011%

Portfolio restructuring and receiving bonus shares at the rate of 30%

44,000

0.024%

13,000

0.006%

Portfolio restructuring and receiving bonus shares at the rate of 30%

2,524,691

1.40%

962,508

0.41%

Portfolio restructuring and receiving bonus shares at the rate of 30%

2,682,680

1.49%

3,487,484

1.49%

Receiving bonus shares at the rate of 30%

2,682,680

1.49%

3,487,484

1.49%

Receiving bonus shares at the rate of 30%

7,540,400

4.19%

15,802,520

6.75%

Buying share and receiving bonus shares at the rate of 30%

16,111,219

8.95%

20,944,584

8.95%

Portfolio restructuring and receiving bonus shares at the rate of 30%

1,381,380

0.77%

Portfolio restructuring

3,834,320

2.13%

Portfolio restructuring

CORPORATE GOVERNANCE

RISK MANAGEMENT

RISK MANAGEMENT IS INTEGRATED INTO ALL PHASES OF THE BUSINESS OPERATIONS OF KHANG DIEN GROUP OF COMPANIES (INCLUDING THE PARENT COMPANY AND MEMBER COMPANIES). AFTER GOING THROUGH THE CHALLENGING REAL ESTATE MARKET IN 2010 - 2013, WE HAVE APPROACHED RISK MANAGEMENT IN A MORE SYSTEMATIC WAY IN ORDER TO PROACTIVELY MANAGE ALL RISKS THAT MAY AFFECT THE COMPANY’S SHORT-TERM AND LONG-TERM BUSINESS OBJECTIVES.

RISK MANAGEMENT PRINCIPLE AND PROCEDURE Risk management principles of Khang Dien focus on analysis and assessment of risks in a systematic way to control, prevent and minimize the damages, losses, and negative effects of the risks to the Company’s business objectives and results. Based on this principle, the Company’s Management evaluates and decides to accept certain risks or not, and if accepting, determines the degree of caution and control mode and, in many cases, takes advantage of business opportunities from the risks.

ANNUAL REPORT 2016

IDENTIFY

EVALUATE

MONITOR

CONTROL

General Director Team is responsible for implementing risk management policies and procedures, providing resources for risk management activities, promoting risk management regulations and procedures, and supervising risk management implementation to ensure safety and effectiveness for Khang Dien’s activities. Khang Dien’s subsidiaries separately manage risk by building their own risk management strategies and policies in line with Khang Dien’s risk management strategy and policy. The Company’s management positions starting from department head and higher jointly share risk management responsibilities with the General Director Team. The manager of each department, division, or project is accountable for determining, analyzing and evaluating potential risks, proposing solutions to prevent within her

scope and reports to General Director Team. The report is made weekly or at any time when the manager finds that the possible risks and their effects to the Company’s daily business activities exceeds her management ability. General Director Team summarizes the reports then reports the main risks, preventive measures to General Director, who reviews and evaluates the reports weekly or at any time as required and makes decisions to accept the risks or not, choses preventive measures, and approves budget for those solutions. General Director will report to Board of Directors about major issues related to the risks and their related business opportunities and the impacts on business objectives and results in the current fiscal year as well as the risks causing major impacts on the Company’s medium-term and long-term development strategy.

PROCEDURES

Identify the risks

Group

Measure and evaluate the risks

Recognize and monitor the risks

CONTROL AND REVIEW

Subsidiaries

Risk mitigation Functional Division/ Department Risk management report

Monitor and review risk management procedure

In 2016 Khang Dien performed risk management effectively. However, to implement a stronger risk management system, the Company will refine risk management procedures, define accountabilities and coordination among departments, and improve awareness of risk management culture, which thereby creates a firm foundation for business operations and sustainable development of Khang Dien.

CORPORATE GOVERNANCE

RISK MANAGEMENT (continued)

RISK FACTORS In 2016, Khang Dien determined the major risk factors and risk management solutions as follows:

ECONOMIC AND POLICY RISKS

HOUSING MARKET RISKS

ECONOMIC AND POLICY RISKS

Abnormally strong fluctuation in US Dollar exchange rate, fluctuation in gold price, a series of integration stories such as TPP under Donald Trump, Brexit, Fed’s interest rate raising, China and neighboring countries intentionally devaluing currencies, etc. have led to a series of reactions in the financial market and complicated forecasts, causing negative effects on business performance and homebuyers’ and real estate investors’ confidence. Accordingly, the fluctuations in exchange rate between Vietnam dong and foreign currencies could affect the financial condition, investment activities, sales performance and business results of Khang Dien. In the fourth quarter of 2016, it was said that the Ministry of Finance was studying to issue a law on property taxation that aimed at the people owning the second house and more. Accordingly, from 2016 to 2020, the Ministry of Finance would draft a tax law applicable to the people owning many houses to prevent speculation and to minimize risks in real estate market. This law would impacts on real estate investments and business operations. According to experts, most of the real estate development loans focused on a few large real estate companies developing high-class housing and hospitality projects, which increased the risk of market bubble, especially in the high-class and luxury segments in the big cities. As a result, the Government could soon implement control and corrective measures in order to reduce the risk.

ANNUAL REPORT 2016

Mitigation measures • Khang Dien has been focused on developing middle-class housing projects with completely built infrastructures and facilities and quality housing compounds with full functionality to meet the needs of the majority of the homebuyers. • Khang Dien has been carefully selected project locations in the new inner districts of Ho Chi Minh City, where urbanization and infrastructure development have been speedy and attracting investment capital, and convenient for the homebuyers in the region and neighboring provinces. • The Company closely monitored the macroeconomic situation, the cycle of the real estate market, housing market, and the adjustment in State policies by maintaining good relationships with local authorities, professional associations, major financial institutions and leading experts, etc. to well understand and predict the developments of economic, market and policy. • The Company has been willing to re-evaluate and adjust business strategy and plans closely to the reality in the market.

FINANCIAL RISKS

LEGAL RISKS

REPUTATION RISKS

PROJECT PROGRESS RISKS

HOUSING MARKET RISKS

The recovery and growth of the housing market during the past 3 years has led to surges in new investments from the well-known housing developers as well as attracted new investors to join the market. This has created an increasingly competition in products and services. The above-mentioned names have been the enterprises leading the market trend. They have pursued the goal of rapid growth in market shares and revenues. In competition directly or indirectly with Khang Dien, they have focused on offering products selling at relatively higher prices because of their higher operating and investment costs. According to experts, the above trend driving market imbalance (oversupply but the prices have been rising), and with the high growth in housing development credit in 2016, the risk in housing bubble would increase. In Quarter IV/2016, the housing market showed some signs of over supply in the premium segment while the demand in

middle and middle-high segments continued to experience short supply. The indigestion in high-class apartments has been warned by many experts. Currently, the supply of luxury apartments was estimated to be 20,000 - 30,000 units with sales prices ranging from a few billion to ten billion dong. In this context, the enterprises having enough financial resources would continue to exist and grow, and the weak or failed enterprises would cause negative consequences, even disruption in the housing market. Mitigation measures â&#x20AC;˘ Khang Dien has continuously monitored, reviewed and evaluated market conditions, rebalanced investment portfolio to best suit the purchasing power of the majority of the homebuyers. â&#x20AC;˘ The Company has been creating products that bring true value and excellent living quality to meet the needs of customers in the long term.

CORPORATE GOVERNANCE

RISK MANAGEMENT (continued)

FINANCIAL RISKS

One of the events mostly concerned by the real estate industry has been the State Bank’s amendment draft to Circular 36/2014/TT-NHNN. Accordingly, two points affecting the real estate market: Keeping the ratio of shortterm capital used for medium-term and long-term loans at 60% in 2016, reducing it to 50% from January 1st 2017 and to 40% from January 1st 2018. This amendment draft raises the risk coefficient of real estate business and sets out a roadmap of limiting credit flowing into the real estate market in two years from 2016. In Vietnam, the development of real estate market has been dependent on the credit for project development. Accordingly, that the credit institutions tighten capital supply will cause negative effects on the market. In the short term, interest rate will rise, and it will be more difficult to obtain credits for real estate development since the banks have to restructure their capital bases. In the long term, the real estate market will be under serious impact. Therefore, the ability to mobilize capital from the banks has been a major risk factor in Khang Dien’s business operation.

LEGAL RISKS

Khang Dien is exposed to legal risks associated with changes in Government policies. In 2016, the laws related to land, housing, real estate trading, construction, and investment was still in the refining process, and the guidelines still faced many obstacles when applying to the practice. In regard of procedures, there are some conflicts and inconsistency among the legal documents, and it is difficult to apply some new laws in practice due to the lacks of by-law documents giving detailed guidelines for land entitlement procedures, especially in the field of land using and owning. The above-mentioned factors not only contribute to increasing operating costs and project investment costs of Khang Dien but also lead to disruptions, or even stagnation in the project development and business operation at Khang Dien.

Mitigation measures • The Company always maintains enough cash for business operations through credit lines for project finance from the largest and safest banks. • The Company always manages cash flows and prioritizes loan interest payments, settling loans before maturity and restructuring loans with lower interest rates and or using fixed interest rates. • Management continues to mobilize capital from the shareholders and strategic investors in order to maintain stable, low risk capital structure. • Khang Dien always practice transparent project legal framework, land entitlement, property ownership and full infrastructure development before sales to earn the trust from the banks.

ANNUAL REPORT 2016

Mitigation measures • To timely predict, respond and help the Company with best preparation for the changes in legal environment, Khang Dien maintains an inhouse legal department in charge of monitoring and updating changes in laws and timely advising Management on how to utilize opportunities and minimize losses when a new policy or law impacting the real estate market.

REPUTATION RISKS

Khang Dien reputation depends not only on the ability to develop the projects but also on the quality of operational management and after-sales services. At presence Vietnam lacks property management professionals and aftersales service providers because they are relatively new professions. Though Khang Dien carefully prepares information during the project planning phase, the information is not perfect and many factors evolve during project deployment phase, resulting in many changes. On the other hand, since the construction process is normally long, and because of the changes during the construction, the final products will not completely follow the initial design. This directly affects the reputation and brand name of Khang Dien. The reputation also depends on quality of products and customer care services after handover (after-sales services). Any delay and poor quality in handling technical issues will cause negative effects. The reputation depends on the quality of operating management after the residents have moved to live. Poor maintenance, slow and inadequate repairs and management of internal utilities and services, landscapes and especially lacks of security will increase the risk of incidents as well as create negative impacts on the Company. Mitigation measures • Khang Dien applies strict experience and reputation criteria in screening for third parties performing operation and maintenance activities. The Company also has an inhouse team responsible for frequent monitoring operation in the most effective way with quality assurance.

PROJECT PROGRESS RISKS

For large-scale projects related to land clearance and compensation and land use transformation, the Company normally needs from 2 years to 3 years to complete the process and complete all legal procedures to launch the projects. The time required for land clearance and compensation and legal procedures usually depends on many unforeseen factors, causing delays. Therefore, the Company cannot actively control the project schedule in this context. Mitigation measures • Khang Dien has developed a process for implementing the legal procedures professionally and quickly to ensure project execution on schedule, earning credibility and trust from customers. • The Company has maintained professional and sustainable relationships with Government authorities to constantly be updated on the procedures for land clearance and compensation, land ownership, and project investment. • Khang Dien continuously holds dialogues and cooperates with Government authorities, comply with the laws and proactively fulfill all financial obligations, taxes and other expenses, etc. to ensure full entitlement. • Khang Dien always cares about and support the communities and the individuals affected by the Company’s land clearance. The Company always makes compensations to the affected parties at market prices and implements fully the liabilities under State Regulation.

• Customer Care Center assigns after-sales specialists on duty at the project sites after the residents have moved in. The team of after-sales staffs coordinates with the project’s technical team, security team and operational team to solve the problems in the best way. • When a problem attracts the attention of the media industry, Marketing and PR Department will take responsibility to share correct and fair information and to maintain fair and open dialogue with the media, the press and the community.

CORPORATE GOVERNANCE

SUSTAINABILITY REPORT

HOURS ENJOYING THE GREEN AND MODERN LIVING SPACE Each product has typical features with green space and river in combination with innovative infrastructures. This prime location is suitable to create a modern and environment-friendly living space, nourishing dreams of the future generations.

OVERVIEW OF SUSTAINABILITY REPORT

STABLE RESIDENCE

IS THE KEY FOR SUSTAINABLE DEVELOPMENT OF THE COMMUNITIES.

OVER THE PAST 15 YEARS, KHANG DIEN HAS BEEN CONTRIBUTING TO THE LOCAL COMMUNITIES, THE SOCIETY AND THE IMPROVEMENT OF LIVING QUALITY THROUGH OFFERING MEANINGFUL UTILITIES TO THE HOMEBUYERS. WITH

OUR CORE VALUES BASED ON “TRUE VALUES”,

KHANG DIEN IS PROUD TO MARK ITS PRESENCE IN THE REAL ESTATE MARKET AND BRING “TRUE VALUES” TO ALL STAKEHOLDERS.

102

ANNUAL REPORT 2016

We determines that our Company can only successfully implement its sustainable development strategy only when harmoniously combining economic growth with fulfilling responsibilities with the environment, community, and society. Simultaneously, Khang Dien always tries to balance the benefits between the stakeholders and the Company at presence and in the future in order to implement the strategy.

CONTENTS OF SUSTAINABILITY REPORT The sustainability report of 2016 is an integral part of the annual report and marks the first year Khang Dien approaches reporting in a more structural way about the major aspects of sustainable development as well as their impacts on environment, society, economics and corporate governance. In 2016, Khang Dien applied Guidelines on implementation of sustainability report in Annual Report Guidelines 2016 by Vietnam Annual

Report Awards (ARA), Instructions for Disclosing Information about Environment & Society of SSC, IFC and the Circular No.155/2015/TTBTC by the Ministry of Finance giving guidance on information disclosure in the security market. Besides, we refered to GRI4 Guidelines to determine material areas affecting the stakeholders to build a comprehensive view in forming the report contents and giving out sustainable business strategies in the future.

SCOPE, BOUNDARY AND CYCLE OF REPORT The report is prepared in Vietnam for real estate development and operations of Khang Dien group of companies. Information in this report is updated for the fiscal year 2016, from January 1st 2016 to December 31st 2016. This report includes the activities of the Parent company, the subsidiaries

(except for Binh Chanh Construction and Investment JSC. - a public company and having its own sustainability report), and the project management units under the Parent company. The report reflects the business performance of the group in 2016 and highlights the group’s direction and goals for sustainable development in the coming years.

METHOD OF DETERMINATION OF REPORT CONTENTS Our approach to sustainable development is based on our core values of the past 15 years: transparency and efficiency, quality focus, putting customer benefits above all, compliance with the laws, and contribution to the communities.

The issues related to sustainable development are constantly reviewed by Khang Dien in relation to current activities so as to clearly determine material issues and accordingly, to review, improve and fully present in the next sustainability reports.

CONTACT INFORMATION We welcome feedback and suggestion to improve our practice of sustainability. Please reach out, write or call us at: • Website: https://www.khangdien.com.vn/ (Contact) • Telephone: (84-8) 3820 8858 - Fax: (84-8) 3820 8859 • Address: Room 801, 8th Floor, Centec Tower, 72 - 74 Nguyen Thi Minh Khai Street, Ward 6, District 3, HCMC • Email: info@khangdien.com.vn SUSTAINABLE DEVELOPMENT REPORT

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SUSTAINABLE RELATIONSHIPS WITH STAKEHOLDERS

STAKEHOLDERS ARE IMPORTANT FOR THE SUSTAINABLE DEVELOPMENT AND SUCCESS OF KHANG DIEN. WE ALWAYS LISTEN TO UNDERSTAND THE ASPIRATIONS AND THE NEEDS OF THE KEY STAKEHOLDERS VIA DIALOGUE OR EMAIL.

DISTRIBUTORS, CONTRACTORS, AND SUPPLIERS

CUSTOMERS

EMPLOYEES

KDH

SHAREHOLDERS AND INVESTORS

CUSTOMERS

Customer feedback is vital to Khang Dien’s sustainable development. Our customers are mostly homebuyers around 30 years old who buy home to live in, have stable income or available capital, and have strict requirements for quality, infrastructures, and living environment. Therefore, Khang Dien always finds ways to improve business operations and quality of products and services to bring better values to the customers. Customer satisfaction and trust in our “true values” embedded in the living environment created by Khang Dien will be the foundation for the Company’s sustainable development. Our Customer Care Center welcomes feedback from the customers through multiple channels, including interviewing residents and existing customers about their satisfaction with our quality of products and services (conduct interviews together with CBRE), maintaining dialogue with the project visitors, and other customer care activities associated with the Company’s tradition.

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STATE AGENCIES

FOR MEDIA AND PRESS

SOME EVENTS OF CUSTOMER CARE CENTER IN 2016

“Happy Moment” Competition

“Happy Moment” Competition was held by Khang Dien to facilitate networking, sharing and cohesion in the residential communities developed by Khang Dien, which fosters a high-quality and civilized life.

“Warm Middle Autumn Festival” program

On the 14th and 15th of September 2016, representatives from Khang Dien presented more than 420 gift sets to the children of Khang Dien’s residential communities. The gift sets are a part of the warm and meaningful Middle Autumn Festival that Khang Dien organized to celebrate the beautiful childhood years of the children.

Giving “Dinh Dau Tet holidays 2017 calendar books” to the residents

As part of the after-sales services, customer caring and enhancing the spiritual life of the residents living at the communities Khang Dien developed, representatives from Khang Dien visited and gave calendar books on the occasion of Dinh Dau Tet holidays 2017 to the households. This activity not only shows the Company’s attention to the residents but also expresses the Company’s appreciations to the customers who always believe in and accompany the Company.

EMPLOYEES

Employees are the most valuable assets for the Company’s sustainable development. Therefore, Khang Dien always pays high attention to the investment in human resources, in particular:

In addition, Human Resources Department maintains regular dialogues with employees to share new ideas and listen to their aspirations and legitimate demands on the basis of respecting the employees.

• Create a professional and fair working environment and ensure stable income for all employees.

Staff from HR Department focus on guiding and supporting new employees to understand the basic values, vision, mission, corporate culture and organizational structure of the Company. The activities to support new employees are usually maintained until finishing probationary period in order to facilitate them to integrate with the existing team and get to know their jobs better.

• Frequently open training courses on profession and skills to work effectively. • Apply policies of preferential treatment and rewards for individuals with good performance in the year. At the same time, studying to issue and modify policies for transparent, fair salaries, bonuses, and allowances that are reasonable with the efforts and dedications of the employees. • Organize team-building, sport and entertainment activities to care for the spiritual life of employee.

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SUSTAINABLE RELATIONSHIPS WITH STAKEHOLDERS (continued)

SHAREHOLDERS AND INVESTORS Khang Dien team of investor relation officers are responsible for maintaining and supporting the contact and dialogue between the Company’s management and the shareholders as well as the investment community. Information about our investor relations activities is presented in Page 43 - “Investor Relations” in Annual Report 2016.

In December 2016, Khang Dien was honored with the Certificate of Merit from the Chairman of HCMC People’s Committee for the company’s achievements in building and developing HCMC Real Estate Association in consecutive years and for its contributions to the competition movement on the occasion of the 3rd Congress of HCMC (2016 - 2021).

DISTRIBUTORS, CONTRACTORS, AND SUPPLIERS The most important topics for dialogues between Khang Dien and the contractors, suppliers are labor safety, health of workers, and environmental protection. These topics have an important influence and, thus, Khang Dien requests all contractors and suppliers to maintain certain health and safety policies for workers and take measures to minimize the impacts on the environment.

The Company’s Project Management Units hold monthly meetings with the leaders of contractors, suppliers about labor safety and health of workers and environmental protection. Contractors maintain regular meetings at site every morning of the work day to inform the related contents and draw lessons for better management. The Company’s leadership, including the General Director and Deputy General Directors, regularly pays a visit and inspects the job sites to detect labor safety, site hygiene and environmental protection issues.

STATE AGENCIES Khang Dien is a member of HCMC Real Estate Association, and through the association we maintains dialogues with the local authorities and State agencies over the topics related to the business, including giving feedback on new laws and the topics on sustainable development for the real estate companies and the real estate market in general.

Strictly complying with the laws and regulations on tax obligations and environment protections. Actively coordinating with the local authorities in making new investments and constructions to complete projects one time, contributing to the State budget and create jobs for the local communities.

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Building a good relationship with the media and press on the principle of transparency and legality.

view on the brand name as well as the development and core values of the Company.

The disclosed message and information are guaranteed for accuracy and clarity to help the people have a corrective

Calmly handling and correcting the false information that may affect the Company’s reputation.

ANNUAL REPORT 2016

MECHANISM FOR ENGAGEMENT WITH STAKEHOLDERS

Khang Dien determines the key stakeholders are the parties creating effects or being affected by the Company’s business operations, including customers, employees, shareholders - investors, distributors, contractors suppliers, local authorities - state agencies, and the media - the press. Khang Dien builds and develops sustainable relationships with the key stakeholders with the desire of meeting their long-term needs. The relationships are based

Stakeholders

on trust, transparency and consistency in all of Khang Dien’s activities. In 2016, Khang Dien paid more attention to the issues related to sustainable development. The Company actively approached the stakeholders through multiple channels of communication and joint activities. The mechanism for Khang Dien’s engagement with its stakeholders are described below.

Ways of engagement

Main topics

Distributors, Contractors, and Suppliers

• • • •

Customers

• Bilateral dialogue • Customer Care Center • Customer care events and model house visits • Interview and collecting feedback • Consult and answer questions via phone and email

• Quality of products and services • Customer satisfaction • Assessment on the efficiency and work attitude of employees

Employees

• Performance evaluation • Internal training and guidance for new employees • Sport, team building activities • Year-end party • Gift giving on holidays • Outing

• • • • •

Shareholders and Investors

• Quarterly meetings for business performance • Annual General Shareholder Meeting, Extraordinary General Shareholder Meeting • Investor meetings • Bilateral dialogue • Project visits • Exchange information via phone and email

• Business result • Operation status and operational efficiency • Development direction and strategy

State agencies

• Report and request for advice and guidance for implementation • Participation in Real Estate Associations • Professional networking events • Other exchange events

• Topics about laws and State management • Market trend • Difficulties of enterprises

For media and press

• Interview • Press release • TVC advertisements, PR articles

• Disclosure on business result • Information disclosure upon the events

Bilateral dialogue Regular meetings Project site visits and inspections Exchange information via phone and email

• Quality of products and services • Performance efficiency • Job safety, worker health, and environmental protection

Efficiency and skills Company policy Occupational safety and health Solidarity Coworker relationship

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ASSESSMENT OF TOP MATERIAL ISSUES

To set the direction and boundary for 2016 sustainable development report contents and preparation for the regular report, Khang Dien Management undertook a materiality assessment to define what really matters to the Company and to the key stakeholders. The determination and assessment of material issues were based on the Companyâ&#x20AC;&#x2122;s core values of over the past 15 years of operations and development, Guidelines on Annual Report 2016 by Vietnam Annual Report Awards (ARA), Guideline on disclosure of information about

ECONOMIC EFFICIENCY

1. Business performance

CORPORATE GOVERNANCE

2. Compliance with the laws 3. Corporate ethics 4. Corporate culture 5. Product responsibility

environment & society of SSC and IFC, and the Circular no. 155/2015/TT-BTC by Ministry of Finance giving guidance on information disclosure in securities market. In addition, Global Real Estate Sustainability Benchmark (GRESB) and GRI G4 Construction and Real Estate Sector Disclosure were referred. Accordingly, Khang Dien identified 10 most important material issues to the Company and to the stakeholders, which are organized into four main groups as follows:

ENVIRONMENT & ENERGY

6. Environmental protection and Energy conservation

HUMAN

7. Occupational safety and health 8. Workforce relationships 9. Human resource development 10. Sharing with communities

The above material issues have large influences and impact both inside and outside the Company. Khang Dien constantly explores new methods to improve productivity and passion at work for the employees.

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The goal of the Company is to develop quality projects while using resources effectively and efficiently, contributes to the economic growth of HCMC, and creates a working environment encouraging dedication and performance.

BUSINESS PERFORMANCE

Business performance plays an important role in creating sustainable values for the Company and the stakeholders. For further information, please see Report of Management in Page 72 and Financial Statements in Page 124.

COMPLIANCE WITH THE LAWS COMPLIANCE WITH THE LAWS Khang Dien Management Team and the entire work forces of Khang Dien always comply with the laws on corporate governance and real estate business operations, including the Enterprise Law 2014, Real Estate Business Law 2015, Law on Construction, Law on Housing, etc. Over the past 15 years, Khang Dien has been a leading company in compliance with legal regulations on real estate investment, property development and real estate services. Khang Dienâ&#x20AC;&#x2122;s constant delivery of housing products with transparent legal framework to the market over the past 15 years is a strong evidence of compliance. CORPORATE GOVERNANCE Khang Dien Management applies the highest governance standards prescribed by the laws (Law on Enterprise, Circular No. 121/2012/TT-BTC stipulating corporate governance applied to public companies and Circular No. 155/2015/TT-BTC by Ministry of Finance giving guidance on information disclosure in securities market) and bases upon the Companyâ&#x20AC;&#x2122;s core values to implement rules on management, governance procedure, and execution including policies, inspection programs and process of internal transactions, transactions of related parties and risk management. Please see Corporate Governance for further information in Page 88.

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CORPORATE ETHICS

OVER THE PAST 15 YEARS, KHANG DIEN HAS ALWAYS PRACTICED PROJECT DEVELOPMENT, SALES AND MARKETING BASED ON ETHICAL PRINCIPLES AND FAIRNESS. THE COMPANY PROHIBITS PROJECT DEVELOPMENT TEAMS, SALES AND MARKETING TEAMS TO MAKE EMPTY PROMISES OR PROVIDE INACCURATE INFORMATION TO HOMEBUYERS AND THE MARKET. THIS IS VERY IMPORTANT FOR THE HOUSING PROJECTS DEVELOPED BY THE COMPANY AND AS SUCH, THE INFORMATION ABOUT THE FUNCTIONS, AESTHETICS AND ARCHITECTURE OF THE SAMPLE HOUSE PRINTED ON SALES MATERIALS IS PREPARED AS ACCURATE AS POSSIBLE AND CLOSELY TO THE ACTUAL PRODUCTS HANDED OVER TO THE HOMEBUYERS.

PREVENTION OF CONFLICT OF INTEREST Khang Dien totally prohibits all activities that may lead to conflict of interest with the Company in daily works, business and coordination with related parties. The Company’s Management applies the principles of splitting responsibilities, cross-appraisal and cross-check, and teamwork to facilitate employees to monitor and remind each other. At the highest level, the Board of Directors carefully review Company’s important decisions related to large investments before approval, and the Inspection Committee strictly supervises the executions of the decisions. This will help ensure the reasonableness of decision making and balance of interests among the related parties. BUSINESS ETHICS Over the past 15 years, Khang Dien has always practiced project development, sales and marketing based on ethical principles and fairness. The Company prohibits project development teams, sales and marketing teams to 110

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make empty promises or provide inaccurate information to homebuyers and the market. This is very important for the housing projects developed by the Company and as such, the information about the functions, aesthetics and architecture of the sample house printed on sales materials is prepared as accurate as possible and closely to the actual products handed over to the homebuyers. Although Khang Dien cannot maintain an absolute control of the product information released to the market through the distributors, the Company always influence the distributors to comply with business ethics through training the sales team about project legality, planning, technical infrastructure, social infrastructure and, especially, reputation of the project owner. Khang Dien absolutely prohibits the distributors to raise sales prices above those given by Khang Dien to make quick profits. Khang Dien approaches market competition in a positive way through healthy competition. The Company’s competitive advantage is based on selling skills, professional brokerage and product differentiation. We strictly prohibit any unfair competition.

CORPORATE CULTURE

THE CULTURE OF KHANG DIEN IS BUILT AND PROMOTED AROUND THE COMPANY’S TRADITION OF CONNECTING PEOPLE, PROMOTING CONTRIBUTIONS, AND INCREASING VALUES OF ALL EMPLOYEES IN ORDER TO BEST COMPLETE THE BUSINESS OBJECTIVES SET BY THE MANAGEMENT AND, AT THE SAME TIME, CONTRIBUTE TO THE SUSTAINABLE DEVELOPMENT OF THE COMPANY.

Khang Dien’s culture is considered a brand development policy that is shown in several layers:

First layer

Culture is reflected in the daily work through the communication language with colleagues, partners, customers and in the business reports and administrative procedures at the Company.

Second layer

It is reflected through working spirit the employees express through their determination, their attitudes and reactions to the issues of right and wrong and whether they create benefit or loss to the Company or not.

Third layer

Culture is the foundation for employees’ actions. It is faith, perceptions, thoughts, and emotion in sub-consciousness of each employee working at Khang Dien. It is the default, distinction, and foundation for the values and actions of each employee.

Besides, the corporate culture and characters are inherited and passed through generations of leadership who constantly develop and refine Khang Dien’s corporate image in the future. At a deeper level, the corporate culture is the spirit and value system of Khang Dien. Some corporate characters of Khang Dien are:

Quality of products and services is paramount.

Working environment is friendly to promote employees’ dedication and long term commitment.

Professionalism and responsibility are expressed in the work performed.

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CORPORATE CULTURE (continued)

KHANG DIEN’S CULTURE IS CLEARLY SHOWN THROUGH THE FOLLOWING VALUES:

RESPECT PEOPLE Employees are the most valuable asset

• Employees are recognized and respected as an integral part of the general development of Khang Dien, regardless of their positions. • Employees are trained and are encouraged to participate in training to be ready for new challenges. • Build a dynamic and highly interactive working environment that facilitates employees to strive to achieve higher goals and create sharings for all levels and departments in the Company. • The spirit of creativity, improvement, and innovation at work that brings better efficiency is always encouraged and appreciated. • Attract and retain talents. Ensure employee job satisfaction. • All policies, regulations, rules, code of ethics and other guidelines are well explained for implementation and are clearly and practically implemented. • Focus on fostering succession and expansion of recruitment, training and development of young and suitable human resources.

RESPECT PARTNERS On the principle of mutual benefit

• Every customer of Khang Dien is respected as a valued partner. Therefore, all products and services are aimed at bringing satisfaction to the customers and affirming the position of Khang Dien in their minds. • Constantly improve and complete customer care policies. Place reputation at top to retain trust from customers, investors, shareholders and society. • Maintain fair and transparent relationships with partners on the basis of mutual benefit; Bring worthy values to shareholders through profit growth based on the activities in compliance with the laws and business ethics.

RESPECT COMMUNITIES Co-development with the communities and society

• The development of Khang Dien’s products and projects cannot be separated from the development of the communities. Therefore, Khang Dien aims to offer high quality products and projects to co-develop with the communities and society. • Actively participate in bringing effective solutions to protect the environment and the communities. • Contribute to the local communities as a member of the society by supporting and participating in charitable activities such as helping the poors, giving supports to the victims of natural disasters.

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PRODUCT RESPONSIBILITY

LEGAL COMMITMENT

Over the past 15 years, Khang Dien has been complying with the laws of land use, housing, building, and real estate services. For our customers, we are committed to: • Fulfilling all requirements and obligations on land use rights, land entitlement, project planning, fire prevention and firefighting, wastewater treatment, infrastructure, housing design, and land entitlement before launching housing products in the market. • Handing over house and property ownership certificate no later than the day specified in the purchase contract and within the time period allowed by the laws. • Complying with the laws on purchase and sales of existing houses and houses to be built in the future.

PROJECT QUALITY COMMITMENT

During the design and build processes, Khang Dien always sets the objectives and requirements at the highest quality possible, not below Vietnamese Standards and with reference to international standards such as BIS, AIS or Euro Code. In terms of expertise, Khang Dien’s project management team has many years of experience in design and construction management. The team’s practical experiences are accumulated from Khang Dien’s outstanding projects such as The Venica, Lucasta, and Melosa Garden and from the working time at leading companies in Vietnam such as Meinhardt Group, Apave, SWA, MIA, Cofico and Coteccons. To ensure product quality, Khang Dien works with leading partners in Vietnam such as NQH, Kyta, Haysom (design consultants), HBC, Coteccons (construction contractors), CBRE (operation management), and SCQC, Apvae (supervisionquality management consultant). We are committed to providing product warranty coverage not lower than the level required by the laws (in many cases the warranty period exceeds one year).

HANDLING QUESTIONS AND COMPLAINTS FROM THE RESIDENTS

After the project has been put into operation and the homebuyers have moved in, Khang Dien assigns staffs from Project Management Unit and Customer Care Center to be on duty at the project until the community management board is established. Our management staffs regularly check and coordinate with the design and construction contractors, material and equipment suppliers, and operation managers to carry out not only the warranty obligations as agreed with the customers but also regular maintenance for the projects or whenever there is any technical problem. For effective management, Khang Dien and the representatives from the communities agree to issue regulations for the residences and assign personnel to monitor compliance. Any questions and complaints from the residents will be handled by the representatives from Khang Dien’s Customer Care Center (on duty at the residence) in coordination with the operational manager within 24 hours after verification. SUSTAINABLE DEVELOPMENT REPORT

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ENVIRONMENT PROTECTION AND ENERGY SAVING

ENVIRONMENTAL PROTECTION IN

THE

GENERAL

TREND

PUBLIC COMPANIES AND REAL ESTATE ENTERPRISES

PURSUE

THE

GOAL

OF DEVELOPING GREEN PROJECTS, THE YEAR 2016 MARKS THE FIRST YEAR KHANG DIEN

APPROACHES

PROTECTION

MOVEMENT

ENVIRONMENTAL IN

STRUCTURAL WAY.

With the motto of harmonious development and in consideration of climate changes, the Company focuses on developing housing projects about 10km - 20km away from the city center and in accordance with the cityâ&#x20AC;&#x2122;s master plan in District 2 and District 9, which helps reduce the compression in urban land uses, traffic congestion, and dust and noise pollution. The projects developed by Khang Dien avoid interference with natural geography, utilize the geography to develop housing, maintain land for trees and water surface (up to 60% of the project area), and limit concreting to control flood.

ENERGY SAVING As a real estate developer, Khang Dien is interested in building an energy efficient and environmentally friendly society. Khang Dien always focuses on saving electricity and water in daily activities as well as minimizing waste. The Company maintains paper-saving culture through reusing 100% of one-side printed paper and encourages email in daily communication. At the field offices of Project Management units, subsidiaries, and Parent company, air conditioning systems will automatically turn off after 6 p.m. and turn on after 8 a.m. Similarly, office lighting systems

will turn off after 6 p.m. and turn on locally at the desks where employees work overtime.

Lighting equipment selected is employing Led technology, saving up to

Similarly, Khang Dienâ&#x20AC;&#x2122;s designs give priority to natural ventilation, minimizing the use of electric fans for forced ventilation. In case the forced ventilation is required, the fans with DC motor technology that reduce up to 30% of power consumption are selected. For water savings, the types of sanitary appliances, showers, faucets, etc. with low flow are selected, for example, 3,8/4,5L dual-flush toilets of Toto are used.

of electricity consumption

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At each project, rainwater is collected and waste water is treated to meet the standards for watering trees. Air conditioning systems, refrigerators, and high-power electrical appliances used in the model houses are using Inverter technology to save up to 40% of power consumption. In design, Khang Dien pays attention to natural lighting by planning layout of each house or the entire building with at least two sides directly exposed to nature. The typical house has ceiling height of 3m and uses large glass panels of 2m - 2.7m in height so that the residents do not need to use electric lights before 5 p.m., contributing to energy savings. Lighting equipment selected is employing Led technology, saving up to 70% of electricity consumption.

OCCUPATIONAL SAFETY AND HEATH

AS A REAL ESTATE DEVELOPER WORKING DIRECTLY WITH DISTRIBUTORS, CONTRACTORS AND SUPPLIERS, KHANG DIEN PURSUES THE GOAL OF ENSURING SAFETY AND HEALTH AT THE CONSTRUCTION SITES, IN THE RESIDENTIAL COMPOUNDS AFTER THE PROJECTS COME INTO OPERATIONS, AND ESPECIALLY IN THE COMMUNITIES WHERE KHANG DIEN IS DOING BUSINESS.

In project development, the Company strictly adheres to the construction standards and regulations and the laws on occupational safety and fire protection throughout the development life cycle. To be specific, Khang Dien carefully reviews the issues of safety, health and fire prevention from the architectural, structural design to MEP to landscape. During construction, although Khang Dien cannot maintain absolute control of the entire construction process, the Company always actively guides and encourages the contractors to put labor safety above all, maintain health for workers, and pay attention to fire prevention and firefighting in high-rise building projects. In order to enhance the effectiveness of labor safety control, maintain health and minimize the risk of fire and explosion, Khang Dien holds monthly meetings with contractors about the topics and issues related to occupational safety and fire protection. In addition, at least once a quarter, Khang Dien Management conducts unplanned inspections and pays surprise visits to the project sites and the residential communities to rectify and timely deal with issues. In 2016, there were no fatal occupational accidents and no fires in the all of Khang Dienâ&#x20AC;&#x2122;s companies and units, including member companies and project sites.

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WORKFORCE RELATIONS

KHANG DIEN CONSIDERS EMPLOYEES ITS MOST VALUABLE ASSET. Therefore, the Company continuously amends policies on salary, bonus, welfare, etc. to enhance the quality of human resources.

100% KHANG DIEN’S EMPLOYEES ARE ENTITLED TO IMPORTANT POLICIES IN THE COLLECTIVE BARGAIN AGREEMENT.

EMPLOYEE POLICY Khang Dien always prioritizes the obligations with employees in order to create equality for the employees in their relationships with the Company. In 2016, Khang Dien continued signing and implementing the collective bargaining agreement, contributing to the balance of interests, creating a close bonding between the employees and management. All Khang Dien’s employees are entitled to important policies in the collective bargain agreement. In particular, the agreement gives detailed stipulations on salary, bonus, allowance and other remunerations, and the creation of a safe, comfortable working environment for the workforce. In contrast, the employees are obliged to complete the assigned works, to comply with the working regulations of the Company. This agreement is negotiated and signed by the representatives of employees and the employer on the principle of voluntariness, equality and publicity.

SALARY AND BONUS POLICY Khang Dien always makes every effort to improve the average income of employees by reviewing and adjusting salaries to the labor market’s medium level and the Company’s business performance. To motivate employees, the Company always rewards employees having excellent performances or great contributions to the Company’s development. The reward policy at Khang Dien includes bonus on the occasion of major holidays, year-end bonus, bonus for completion ahead of schedule, etc. Besides good salary, bonus and welfare, Khang Dien’s employees benefit from ESOP offered to all employees who are working in Khang Dien. This increases the cohesion and motivation for employees and contributes to the general development of the Company. In human resource development, Khang Dien pays attention to updating salary and bonus policy to ensure growth in employee incomes on the basis of equity. Accordingly, the employee income level tends to increase compared to previous years.

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INSURANCE AND OTHER WELFARE POLICIES Social insurance - Health insurance - Unemployment insurance and periodic health examination are fully covered in accordance with the laws and the Company’s general policies. Besides, the Company applies the policy of five working days and 40 working hours per week. This enables the employees to have more time for personal life. In addition, the Company cares for the spiritual life of employees through social activities such as organizing birthday parties for employees, giving gifts to female employees on Woman Day, supporting employees when they are sick, etc. Every year the Company finances overseas travels for the whole staff to relax and visit the typical works and architecture in developed countries in Southeast Asia such as Singapore, Malaysia, Thailand, etc. This is also an opportunity for staff to broaden knowledge, enhance vision and develop professional skills.

HUMAN RESOURCE DEVELOPMENT

HUMAN RESOURCE DEVELOPMENT AT KHANG DIEN IS INHERITED AND DEVELOPED. NEW AND OLD VALUES ARE INTERTWINED, SHARED AND COMPLEMENTED WITH EACH OTHER, CREATING THE CORE VALUES OF THE COMPANY.

Khang Dien’s human resources development focuses on talent management and is widely practiced in functional departments, not just in Human Resource Department. Even in unfavorable economic conditions, good human resource management is the key factor for development and maintaining competitive advantage for the Company. Human resource development in Khang Dien is inherited and developed. New and old values are intertwined, shared and complemented with each other, creating the core values of Khang Dien. This has made Khang Dien’s initial breakthrough in the past years and will promote Khang Dien’s overall strengths in new challenges. The philosophy of Human Resource Management at Khang Dien is based on daily interactions between management and staff on how to achieve the best results. This helps the staff to focus more on problem solving and also creates opportunities for management to train employees

through practical exchanges as well as makes the staff more confident in proposing solutions. Management also grasps the strengths and shortcomings of employees to best use the strengths or to overcome the shortcomings. Khang Dien constantly develops a professional, enthusiastic, experienced and dedicated workforce. The Company always focuses on building a workforce with not only high professionalism but also good working attitude, aiming toward a professional and effective team. Khang Dien’s employees are always given favorable conditions to train and promote. Succession planning is conducted based on the assessment of current personnel who have good capability and desire to work for the Company in the long term. Accordingly, the Company maintains programs to develop the potential personnel to suitable management positions.

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HUMAN RESOURCE DEVELOPMENT (continued)

DEVELOP A STRONG, ACTIVE, CREATIVE WORKFORCE In addition, Khang Dien constantly improves working environment to enhance the cohesion of employees, implements employee-centric welfare policies to increase employee benefits, and acknowledges the contributions of employees to the Company’s development. Khang Dien always focuses on building a friendly working environment for development. In 2016, the Company held many activities for employees, including “Looking for Khang Dien representative face” competitions, entertainment programs on special occasions such as year-end party, etc.

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In addition, the Company pays attention to recruitment and training policies to meet the Company’s needs for expansion and new development. For instance, in 2016 the policy on developing and attracting quality human resources having deep practical relevant experience suitable for the Company’s short-term and long-term development strategies achieved certain results. In 2016, Khang Dien recruited 50 new positions accross departments. Recruitments were widely announced throughout the Company’s communication system, via

the Company’s website and mass media to ensure equal opportunities for all candidates and, thereby, to select the employees with appropriate qualifications, good morals, and long-term commitments with the Company. Each position is subject to specific criteria and is recruited in accordance with the Company’s procedures.

improve their professional skills to meet the Company’s needs. Training programs mainly focus on the practical needs of the work such as project management, financial management, human resource management, etc. and soft skills such as communication, presentation, negotiation.

The policy on human resource training and development is considered one of Khang Dien’s sustainable development strategies. The Company encourages employees to participate in training courses domestically and abroad to

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COMMUNITY SOCIAL ACTIVITIES

KHANG DIEN ALWAYS CONSIDERS SOCIAL CONTRIBUTIONS AS A PART OF THE COMPANY’S RESPONSIBILITIES TO THE COMMUNITIES IN ORDER TO CONTRIBUTE TO THE LONG-TERM AND SUSTAINABLE DEVELOPMENT OF VIETNAM SOCIETY. KHANG DIEN DEMONSTRATES ITS SOCIAL RESPONSIBILITY THROUGH PRACTICAL ACTIONS SUCH AS CARING FOR THE COMPANY’S EMPLOYEES, CREATING STABLE JOBS, DEVELOPING SUSTAINABLE BUSINESS, AND CREATING A GOOD WORKING ENVIRONMENT SO THAT THE EMPLOYEES CAN ENJOY A STABLE AND HAPPY LIFE. WITH KHANG DIEN, THESE ACTIONS ALSO CONTRIBUTE TO THE BUILDING OF A CIVILIZED AND PROSPEROUS SOCIETY. THIS IS THE SOCIAL RESPONSIBILITY THAT THE COMPANY ALWAYS PRIORITIZES.

In addition, over the past years, Khang Dien has always been active in supporting the poors by sponsoring and encouraging employees to participate in the programs of gratitude, poverty reduction, supporting the flood victims, etc. as well as organizing charity activities to support the poors.

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SOME TYPICAL ACTIVITIES 1

JANUARY 10TH 2016 Recognizing and promoting the spirit of “Living is giving, not only receiving for yourselves” and deeply understanding the difficulties of the people in An Thoi Dong Commune (Can Gio District - HCMC), Khang Dien donated 155 gift sets with total value of VND116,500,000 to facilitate a prosperous Tet holidays for them.

JUNE 23RD 2016 To encourage and maximize the spirit of solidarity and jointly building a wealthy and strong country of the Vietnamese youth and students, Khang Dien supported Vietnam National University Ho Chi Minh City to successfully organize “Green Summer Volunteer Campaign” - a meaningful activity that left deep impressions in the heart of each participant.

OCTOBER 8TH 2016 With the spirit of sharing, Khang Dien assigned staffs to visit and give 100 gift sets to 80 pupils and 20 disadvantaged families at the meeting hall of Thanh Hai Commune, Thanh Phu District, Ben Tre Province. Moreover, Khang Dien representatives visited 10 families living under hardship and gave 10 gift sets with the value of VND100,000,000.

NOVEMBER 5TH 2016 Thanh Phong Commune is one of the most remote and poorest coastal communes in Ben Tre Province. Due to inconvenient geographical conditions, especially salt and aluminum contamination, the people here cannot drill water wells. They do not have fresh water and have to use rainwater for all living needs. Recognizing the needs for clean water of the people in this commune, in 2016 Khang Dien donated 70 plastic water tanks with capacity of 1,200 liters worth a value of VND118,300,000.

5 With the spirit of solidarity, for many years, Khang Dien’s staffs have joined with the Company in volunteering activities such as contributing VND50,000,000 to the Blind Association of Ben Tre Province, supporting social security in My Phu Commune, etc. 6

JANUARY 10TH 2017 Understanding and sharing with the unfortunate lives, Khang Dien donated VND50,000,000 to support The Ho Chi Minh City Association for the Support of People with Disabilities and Orphans, motivating them to overcome the difficulties ahead.

IN THE FUTURE, THE COMPANY WILL ALWAYS BE INTERESTED IN COMMUNITY SERVICE ACTIVITIES. THE COMPANY WILL ACTIVELY DEVELOP THESE ACTIVITIES BOTH IN QUALITY AND QUANTITY TO BUILD A BETTER SOCIETY.

SUSTAINABLE DEVELOPMENT REPORT

121

FINANCIAL STATEMENTS

VND BILLION OF TOTAL CONSOLIDATED ASSETS The year 2016 witnessed the Company’s growth in revenue and profit, to be specific, revenue increased by 274% and profit after tax belong to the parent company’s shareholders increased by 47% compared to the same period.

GENERAL INFORMATION

THE COMPANY Khang Dien House Trading and Investment Joint Stock Company (“the Company”) is a shareholding company incorporated under the Law on Enterprise of Vietnam pursuant to the Business Registration Certificate No. 4103006559 issued by the Department of Planning and Investment of Ho Chi Minh City on 2 May 2007, as amended. The Company’s shares were listed on the Ho Chi Minh City Stock Exchange with code KDH in accordance with Decision No. 11/QD-SGDHCM issued by the Ho Chi Minh City Stock Exchange on 21 January 2010. The current principal activities of the Company are to trade and lease houses, receive land use rights to construct houses for sale and lease, invest in construction of infrastructure in compliance with houses construction scheme to transfer land use rights, undertake engineering and industrial construction works, and to provide real-estate consulting services. The Company’s registered head office is located at Room 801, 8th Floor, Centec Tower, 72-74 Nguyen Thi Minh Khai Street, Ward 6, District 3, 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 Ly Dien Son Ms Nguyen Thi Dieu Phuong Ms Mai Tran Thanh Trang Mr Nguyen Dinh Bao Mr Le Hoang Son

Chairman Member Member Member Member

BOARD OF SUPERVISION Members of the Board of Supervision during the year and at the date of this report are: Ms Vuong Hoang Thao Linh Mr Dao Cong Dat Mr Hoang Manh Phong

Head Member Member

MANAGEMENT Members of the Management during the year and at the date of this report are: Mr Ly Dien Son Ms Mai Tran Thanh Trang Mr Nguyen Dinh Bao Mr Nguyen Duc Trong Ms Ngo Thi Mai Chi

General Director Deputy General Director Deputy General Director Deputy General Director Deputy General Director

resigned on 15 September 2016

LEGAL REPRESENTATIVE The legal representative of the Company during the year and at the date of this report is Mr Ly Dien Son. Ms Ngo Thi Mai Chi is authorised by Mr Ly Dien Son to sign the consolidated financial statements for the year ended 31 December 2016 in accordance with the Letter of Authorisation No. 03/2016/QD-KD dated 4 January 2016. AUDITORS The auditor of the Company is Ernst & Young Vietnam Limited.

124

ANNUAL REPORT 2016

REPORT OF MANAGEMENT

Management of Khang Dien House Trading and Investment Joint Stock Company (“the Company”) is pleased to present its report and the consolidated financial statements of the Company and its subsidiaries (collectively referred to as “the Group”) for the year ended 31 December 2016. 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 financial position of the Group and of the consolidated results of its operations and its 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 accuracy at any time, the consolidated financial position of the Group and to ensure that the accounting records comply with the applied 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 consolidated 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 2016 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. For and on behalf of Management:

Ly Dien Son General Director

23 March 2017

FINANCIAL STATEMENTS

125

INDEPENDENT AUDITORS’ REPORT Reference: 60766189/18707863-HN

TO: THE SHAREHOLDERS OF KHANG DIEN HOUSE TRADING AND INVESTMENT JOINT STOCK COMPANY We have audited the accompanying consolidated financial statements of Khang Dien House Trading and Investment Joint Stock Company (“the Company”) and its subsidiaries (collectively referred to as “the Group”) as prepared on 23 March 2017 and set out on pages 128 to 169, which comprise the consolidated balance sheet as at 31 December 2016, and the consolidated income statement and 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 the 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 Group’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 Group’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.

126

ANNUAL REPORT 2016

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 2016, 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 the consolidated financial statements. ERNST & YOUNG VIETNAM LIMITED

Le Quang Minh Deputy General Director Audit Practicing Registration Certificate No. 0426-2013-004-1

Nguyen Thanh Sang Auditor Audit Practicing Registration Certificate No. 1541-2013-004-1

Ho Chi Minh City, Vietnam 23 March 2017

FINANCIAL STATEMENTS

127

CONSOLIDATED BALANCE SHEET as at 31 December 2016

B01-DN/HN

VNDâ&#x20AC;&#x2122;000 Code

ASSETS

100

A. CURRENT ASSETS

110

111 112 120

Beginning balance

7,241,327,083

7,635,495,663

1,059,489,169

982,506,232

629,593,202

327,058,577

429,895,967

655,447,655

510,000

44,010,000

Cash equivalents

Held-to-maturity investments

III. Current accounts receivable

510,000

44,010,000

1,485,091,191

653,811,135

131

Short-term trade receivables

5.1

724,960,167

140,792,661

132

Short-term advances to suppliers

5.2

469,339,840

437,470,264

136

Other short-term receivables

294,115,578

79,296,364

137

Provision for short-term doubtful receivables

5.1

(3,324,394)

(3,748,154)

4,617,788,265

5,865,283,119

4,617,788,265

5,865,283,119

78,448,458

89,885,177

140

IV. Inventories

141

1. Inventories

150

V. Other current assets

151

Short-term prepaid expenses

24,403,102

19,048,337

152

Value-added tax deductible

46,951,778

70,561,966

Tax and other receivables from the State

153 200

B. NON-CURRENT ASSETS

210

Long-term receivables

7,093,578

274,874

695,584,455

907,442,132

85,444,073

102,943,172

74,741,495

87,740,748

211

Long-term trade receivables

5.1

212

Long-term advances to suppliers

5.2

5,640,101

7,776,784

216

Other long-term receivables

14,848,477

15,211,640

Provision for doubtful long-term receivables

219 220 221

5.1, 6

II. Fixed assets 1.

Tangible fixed assets

222

Cost

223

227

Accumulated depreciation Tangible fixed assets

228

Cost

229

230

III. Investment properties

Accumulated amortisation 10

(9,786,000)

(7,786,000)

27,546,965

31,676,523

27,488,654

31,570,764

88,206,671

87,696,935

(60,718,017)

(56,126,171)

58,311

105,759

1,786,749

(1,728,438)

(1,680,990)

81,725,597

84,913,865

231

1. Cost

127,557,936

131,865,214

232

(45,832,339)

(46,951,349)

240 242 250 252

Accumulated depreciation

IV. Long-term assets in progress 1.

Construction in progress

V. Long-term investments 1.

272,425,330

439,962,190

272,425,330

439,962,190

208,584,801

226,571,499

193,015,770

210,515,935

Investments in associates

253

Investment in other entity

17,135,455

254

Provision for diminution in value of long-term investments

(1,566,424)

(1,079,891)

19,857,689

21,374,883

3,797,804

4,467,670

26.3

5,224,286

3,937,866

10,835,599

12,969,347

7,936,911,538

8,542,937,795

260

VI. Other long-term assets

261

Long-term prepaid expenses

262

Deferred tax assets

269

3. Goodwill

270

128

Cash and cash equivalents

Ending balance

1. Cash II. Short-term investment

123 130

Notes

TOTAL ASSETS

ANNUAL REPORT 2016

VND’000 Code

RESOURCES

300

C. LIABILITIES

310

Notes

Current liabilities

Ending balance

Beginning balance

3,539,099,200

4,369,914,071

1,272,169,292

1,037,388,780

311

Short-term trade payables

15.1

80,103,089

48,948,085

312

Short-term advances from customers

15.2

670,114,574

500,980,970

313

Statutory obligations

179,043,886

105,562,090

4,134,796

6,862,257

50,391,260

50,044,620

314

Payables to employees

315

Short-term accrued expenses

318

Short-term unearned revenues

8,045,738

2,600,794

319

Other short-term payables

74,976,265

88,846,528

320

Short-term loans

194,351,572

218,819,525

322

Bonus and welfare fund

11,008,112

14,723,911

330

2,266,929,908

3,332,525,291

331

II. Non-current liabilities 1.

Long-term trade payables

15.1

176,432

50,657,501

332

Long-term advances from customers

15.2

80,629,339

82,010,966

333

Long-term accrued expenses

88,832,160

106,699,017

336

Long-term unearned revenues

210,189,314

208,197,968

337

Other long-term liabilities

101,197,965

118,060,269

338

Long-term loans and debts

1,699,929,119

2,699,216,325

341

Deferred tax liabilities

84,038,381

65,914,288

342

Long-term provisions

1,937,198

1,768,957

26.3

400

D. OWNERS’ EQUITY

4,397,812,338

4,173,023,724

410

I. Capital

4,397,812,338

4,173,023,724

411

Share capital

2,339,998,920

1,800,000,000

411a

Shares with voting rights

2,339,998,920

1,800,000,000

21.1

412

Share premium

21.1

619,915,240

1,159,914,160

418

Investment and development fund

21.1

47,936,288

34,915,354

421

Undistributed earnings

21.1

468,978,713

262,238,257

421a

Undistributed earnings up to the end of prior year

97,203,991

8,880,729

421b

Undistributed earnings of current year

371,774,722

253,357,528

429

Non-controlling interests

920,983,177

915,955,953

7,936,911,538

8,542,937,795

440

TOTAL LIABILITIES AND OWNERS’ EQUITY

Nguyen Tran Cam Hien Preparer

Nguyen Quoc An Chief Accountant

Ngo Thi Mai Chi Deputy General Director

23 March 2017

FINANCIAL STATEMENTS

129

CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2016

B02-DN/HN

VNDâ&#x20AC;&#x2122;000 Code

ITEMS

Notes

Current year

Previous year

1. Revenue from sale of goods and rendering of services

22.1

3,938,432,166

1,051,919,567

2. Deductions

22.1

(6,789,172)

(1,979,159)

3. Net revenue from sale of goods and rendering of services

22.1

3,931,642,994

1,049,940,408

4. Cost of goods sold and services rendered

(2,951,969,940)

(712,293,831)

5. Gross profit from sale of goods and rendering of services

979,673,054

337,646,577

6. Finance income

16,495,930

79,355,805

7. Finance expenses

(110,647,824)

(59,149,887)

(8,648,089)

(8,513,956)

10,724,635

14,909,885

23 24

In which: Interest expense

8. Share of profit of associates

9. Selling expenses

(173,123,320)

(61,982,142)

10. General and administrative expenses

(117,510,214)

(76,331,379)

11. Operating profit

605,612,261

234,448,859

12. Other income

13,804,653

98,911,387

13. Other expenses

(36,818,962)

(16,099,085)

14. Other (loss) profit

(23,014,309)

82,812,302

15. Accounting profit before tax

582,597,952

317,261,161

16. Current corporate income tax expense

26.2

(160,404,227)

(47,325,157)

17. Deferred income tax expense

26.3

(16,837,673)

(1,492,591)

18. Net profit after tax

405,356,052

268,443,413

19. Net profit after tax attributable to shareholders of the parent

371,774,722

253,357,528

20. Net profit after tax attributable to non-controlling interests

33,581,330

15,085,885

21. Basic earnings per share

1,59

1,02

22. Diluted earnings per share

1,59

1,02

Nguyen Tran Cam Hien Preparer 23 March 2017

130

22.2

ANNUAL REPORT 2016

Nguyen Quoc An Chief Accountant

Ngo Thi Mai Chi Deputy General Director

CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2016

B03-DN/HN

VNDâ&#x20AC;&#x2122;000 Code

ITEMS I.

Notes

Current year

Previous year

582,597,952

317,261,161

9,847,117

2,800,949

2,062,773

1,513,155

(27,220,566)

(193,071,126)

8,648,089

8,513,956

575,935,365

137,018,095

CASH FLOWS FROM OPERATING ACTIVITIES

Profit before tax Adjustments for:

Depreciation (including amortisation of goodwill)

Provision

Profits from investing activities

Interest expenses

8, 9, 10, 14

Operating profit before changes in working capital

(Increase) decrease in receivables

(629,467,719)

368,351,152

Decrease (increase) in inventories

1,424,146,799

(454,600,244)

Increase in payables

109,012,971

210,496,836

Increase in prepaid expenses

(4,684,899)

(19,795,536)

Interest paid

(145,678,130)

(19,285,993)

Corporate income tax paid

(92,391,951)

(34,888,013)

Other cash outflows from operating activities

(39,387,120)

(2,466,657)

1,197,485,316

184,829,640

(4,308,358)

(7,924,229)

2,596,182

43,500,000

Net cash flows from operating activities II. CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of fixed assets and other long-term assets

Proceeds from disposal of long-term assets

Collection of term deposits

Payments for investments in other entities (net of cash acquired)

(2,111,911,540)

Proceeds from sale of investments in other entities

111,080,340

Interest and dividends received

47,072,412

12,144,584

86,264,054

(1,994,014,663)

560,000

1,605,786,551

Net cash flows from (used in) investing activities III. CASH FLOWS FROM FINANCING ACTIVITIES

Issuance of new shares

Drawdown of borrowings

1,737,593,712

2,798,056,427

Repayment of borrowings

(2,818,920,145)

(1,946,055,857)

Dividend paid

(126,000,000)

(100,784,572)

(1,206,766,433)

2,357,002,549

Net cash flows (used in) from financing activities

21.2

FINANCIAL STATEMENTS

131

CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2016 (continued)

B03-DN/HN

VNDâ&#x20AC;&#x2122;000 Code

ITEMS

Net increase in cash and cash equivalents

Cash and cash equivalents at beginning of year

Cash and cash equivalents at end of year

Nguyen Tran Cam Hien Preparer 23 March 2017

132

Notes

ANNUAL REPORT 2016

Nguyen Quoc An Chief Accountant

Current year

Previous year

76,982,937

547,817,526

982,506,232

434,688,706

1,059,489,169

982,506,232

Ngo Thi Mai Chi Deputy General Director

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended

B09-DN/HN

CORPORATE INFORMATION Khang Dien House Trading and Investment Joint Stock Company (“the Company”) is a shareholding company incorporated under the Law on Enterprise of Vietnam pursuant to the Business Registration Certificate No. 4103006559 issued by the Department of Planning and Investment (“DPI”) of Ho Chi Minh City on 2 May 2007, as amended. The Company’s shares were listed on the Ho Chi Minh City Stock Exchange with code KDH in accordance with Decision No. 11/QD-SGDHCM issued by the Ho Chi Minh City Stock Exchange on 21 January 2010. The current principal activities of the Company and its subsidiaries (“the Group”) are to trade and lease houses, receive land use rights to construct houses for sale and lease, invest in construction of infrastructure in compliance with houses construction scheme to transfer land use rights, undertake engineering and industrial construction works, to provide real-estate consulting services, to trade industrial infrastructure, to provide construction consulting, site clearance and brokerage on land properties. The Company’s registered head office is located at Room 801, 8th Floor, Centec Tower, 72-74 Nguyen Thi Minh Khai Street, Ward 6, District 3, Ho Chi Minh City, Vietnam. The number of Group’s employees as at 31 December 2016 was 339 (31 December 2015: 221).

FINANCIAL STATEMENTS

133

134

ANNUAL REPORT 2016

Construct and trade real estate properties

Ho Chi Minh City Ho Chi Minh City Ho Chi Minh City

5. International Consulting Company

6. Long Phuoc Dien Housing and Infrastruc-

Trading Company Limited

8. Saphire Real Estate Investment and

7. Hao Khang One Member Company Limited

ture Development Company Limited

Limited

Stock Company

Ho Chi Minh City

Trade real estate properties

Ho Chi Minh City

4. Spring Sai Gon Real Estate Trading Joint

Investment Company Limited

Trade real estate properties

Consult, construct and trade real estate properties

Trade real estate properties

Consult, construct and trade real estate properties

Ho Chi Minh City

3. Gia Phuoc Real Estate Trading and

Joint Stock Company

Trade real estate properties

Business activities

Ho Chi Minh City

Location

2. Tri Minh Real Estate Trading and Investment

Limited (previously known as Nha Pho Investment Company Limited)

1. Thanh Phuc Investment Company

Name of subsidiaries

As at 31 December 2016, the Groupâ&#x20AC;&#x2122;s corporate structure includes 21 subsidiaries as follows:

Corporate structure

CORPORATE INFORMATION (CONTINUED)

as at 31 December 2016 and for the year then ended (continued)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Operating

Status

99.9

100

99.95

99.9

99.8

99.9

99.8

99.9

Ending balance

% holding (%)

99.9

100

99.95

99.9

99.8

99.9

99.8

99.9

Beginning balance

B09-DN/HN

FINANCIAL STATEMENTS

135

Trade real estate properties Trade real estate properties Trade real estate properties

Ho Chi Minh City Ho Chi Minh City Ho Chi Minh City

11. Tri Kiet Real Estate Trading and

12. Mega City Company Limited

13. Vi La Joint Stock Company Ho Chi Minh City Ho Chi Minh City

15. Viet Huu Phu Company Limited

Construction Company Limited

14. Thap Muoi Real Estate Trading and

Investment Company Limited

Trade real estate properties

Ho Chi Minh City

10. Song Lap Real Estate Trading and

Investment Company Limited

Trade real estate properties

Business activities

Ho Chi Minh City

Location

9. Lien Minh Real Estate Trading and

Name of subsidiaries

Operating

Status

As at 31 December 2016, the Groupâ&#x20AC;&#x2122;s corporate structure includes 21 subsidiaries as follows: (continued)

Corporate structure (continued)

CORPORATE INFORMATION (CONTINUED)

99.8

99.85

99.9

99.7

Ending balance

% holding (%)

99.8

99.85

99.9

99.7

Beginning balance

136

ANNUAL REPORT 2016

Ho Chi Minh City

21. Kim Phat Real Estate Investment and Trad-

ing Company Limited

Company Limited

Ho Chi Minh City Trade real estate properties

Trade real estate properties

Invest and trade real estate properties

Ho Chi Minh City

Operating

Ho Chi Minh City

20. BCCI Development Investment

19. BCI Corporation

Joint Stock Company

Develop and trade real estate properties including house, land use rights and infrastructure, to provide construction consulting, site clearance and brokerage on land properties

18. Binh Chanh Construction Investment

Trading Company Limited

Operating

Status

Operating

Ho Chi Minh City

17. Binh Trung Real Estate Investment and

Trade real estate properties

Business activities

Trade real estate properties

Ho Chi Minh City

16. Khong Gian Xanh Real Estate Investment

and Trading Company Limited

Location

Name of subsidiaries

As at 31 December 2016, the Groupâ&#x20AC;&#x2122;s corporate structure includes 21 subsidiaries as follows: (continued)

Corporate structure (continued)

CORPORATE INFORMATION (CONTINUED)

as at 31 December 2016 and for the year then ended (continued)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

99.9

57.31

99.8

98.01

Ending balance

% holding (%)

99.9

57.31

99.8

98.01

Beginning balance

B09-DN/HN

BASIS OF PREPARATION

2.1

Accounting standards and system The consolidated financial statements of the Group expressed in thousands of Vietnam dong (“VND’000”), are prepared in accordance with Vietnamese Enterprise Accounting System and Vietnamese Accounting Standards issued by the Ministry of Finance as per: •

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 financial statements, 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, 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 Voucher Journal and 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 consolidated financial statements comprise the financial statements of the Company and its subsidiaries for the year ended 31 December 2016. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continued 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 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. Non-controlling interests represent the portion of profit or loss and net assets not held by the Company’s shareholders and are presented separately in the consolidated income statement and within equity in the consolidated balance sheet, separately from the parent shareholders’ equity. Impact of change in the ownership interest of a subsidiary, without a loss of control, is recorded in retained earnings.

FINANCIAL STATEMENTS

137

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended (continued)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1

Cash and cash equivalents

B09-DN/HN

Cash and cash equivalents comprise cash on hand, cash in banks 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. 3.2 Inventories Property acquired or being constructed for sale in the ordinary course of business, rather than to be held for rental or capital appreciation, is held as inventory property and is measured at the lower of cost and net realisable value. Cost includes: •

Freehold and leasehold rights for land;

•

Amounts paid to contractors for construction; and

•

Borrowing costs, planning and design costs, costs of site preparation, professional fees for legal services, property transfer taxes, construction overheads and other related costs

Net realisable value is the estimated selling price in the ordinary course of the business, based on market prices at the reporting date and discounted for the time value of money if material, less costs to completion and the estimated costs of sale. The cost of inventory property recognised in profit or loss on disposal is determined with reference to the specific costs incurred on the property sold and an allocation of any non-specific costs based on the relative size of the property sold. 3.3 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 or decreases to the provision balance are recorded as general and administrative expense in the consolidated income statement. 3.4

Fixed assets Fixed assets are stated at cost less accumulated depreciation and amortisation. The cost of a fixed asset comprises its purchase price and any directly attributable costs of bringing the 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 fixed assets are sold or retired, any gain or loss resulting from their disposal (the difference between the net disposal proceeds and the carrying amount) is included in the consolidated income statement.

138

ANNUAL REPORT 2016

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.5

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. Where the Group is the lessee Rentals under operating leases are charged to the consolidated income statement on a straight-line basis over the lease term. Where the Group is the lessor Assets subject to operating leases are included as the Groupâ&#x20AC;&#x2122;s investment properties 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.

3.6

Depreciation and amortisation Depreciation of tangible fixed assets and amortisation of intangible assets are calculated on a straight-line basis over the estimated useful life of each asset as follows: Building and structures Machinery and equipment Means of transportation Office equipment ISO certificate and computer software

3.7

10 - 20 years 3 - 10 years 6 - 10 years 3 years 3 - 10 years

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 is calculated on a straight-line basis over the estimated useful life of each asset as follows: Infrastructure

25 â&#x20AC;&#x201C; 46 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 year 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.

FINANCIAL STATEMENTS

139

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended (continued)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.8

Borrowing costs

B09-DN/HN

Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing of funds. Borrowing costs are recorded as expense during the year in which they are incurred, except to the extent that they are capitalized as explained in the following paragraph. Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily take a substantial period of time to get ready for its intended use or sale are capitalized as part of the cost of the respective asset. 3.9

Prepaid expenses Prepaid expenses are reported as short-term 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.

3.10 Business combinations and goodwill Business combinations are accounted for using the purchase method. The cost of a business combination is measured as the fair value of assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange plus any costs directly attributable to the business combination. Identifiable assets and liabilities and contingent liabilities assumed in a business combination are measured initially at fair values at the date of business combination. Goodwill acquired in a business combination is initially measured at cost being the excess of the cost the business combination over the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities. If the cost of a business combination is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated income statement. After initial recognition, goodwill is measured at cost less any accumulated amortization. Goodwill is amortized over 10-year period on a straight-line basis. The parent company conducts the periodical review for impairment of goodwill of investment in subsidiaries. If there are indicators of impairment loss incurred is higher than the yearly allocated amount of goodwill on the straight-line basis, the higher amount will be recorded in the consolidated income statement. 3.11 Investments Investments in associates The Group’s investment in its associate is accounted for using the equity method of accounting. An associate is an entity in which the Group has significant influence that is neither subsidiaries nor joint venture. The Group generally deems they have significant influence if they have from and above 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. Goodwill is not amortised and subject to annual review for impairment. The consolidated income statement reflects the share of the post-acquisition results of operation of the associate.

140

ANNUAL REPORT 2016

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.11 Investments (continued) Investments in associates (continued) 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 recognized in reserves. The cumulative postacquisition movements are adjusted against the carrying amount of the investment. Dividend received from associates reduces 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. Investments in other entities Investments in other entities are stated at their acquisition costs. Provision for investments Provision is made for any diminution in value of the investments in capital of other entities at the balance sheet date in accordance with the guidance under Circular No. 228/2009/TT-BTC dated 7 December 2009 and Circular No. 89/2013/TT-BTC dated 28 June 2013 issued by the Ministry of Finance. Increases or decreases to the provision balance are recorded as finance expense in the consolidated income statement. Held-to-maturity investments Held-to-maturity investments are stated at their acquisition costs. After initial recognition, held-to-maturity investments are measured at recoverable amount. Any impairment loss incurred is recognised as expense in the consolidated financial statements and deducted against the value of such investments. 3.12 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. 3.13 Accrual for severance pay The severance pay to employee is accrued at the end of each reporting year for all employees who have been in service for more than 12 months 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 and related implementing guidance. The average monthly salary used in this calculation is revised at the end of each reporting year following the average monthly salary of the 6-month period up to the reporting date. Increases or decreases to the accrued amount other than actual payment to employee 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. â&#x20AC;&#x192;

FINANCIAL STATEMENTS

141

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended (continued)

B09-DN/HN

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.14 Appropriation of net profits Net profit after tax (excluding negative goodwill arising from a bargain purchase) is available for appropriation to shareholders after approval in the annual general meeting, and after making appropriation to reserve funds in accordance with the Group’s Charter and Vietnam’s 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: •

Investment and development fund This fund is set aside for use in the Group’s expansion of its operation or of in-depth investment.

•

Bonus and welfare fund

This fund is set aside for the purpose of pecuniary rewarding and encouraging, common benefits and improvement of the employees’ benefits, and presented as a liability on the consolidated balance sheet. 3.15 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 completed property A property is regarded as sold when the significant risks and returns have been transferred to the buyer, which is normally on unconditional exchange of contracts. For conditional exchanges, sales are recognized only when all the significant conditions are satisfied. Sale of industrial plots and related infrastructure When the lease period is more than 90% of the useful life of the assets, the Company recognised the sales from lease of land lots and related infrastructures at the entire rental amount received in advance when all these conditions are met: a. The lessee is not entitled to cancel the lease contract and the lessor has no obligation to repay the amount received in advance in all cases and in all forms; b. The amount received in advance from the lease is not less than 90% of the total lease amount expected to get under the contract during the lease term and the lessee must pay the entire amount of lease within 12 months from the beginning of the lease; c. Almost all the risks and benefits associated with ownership of the leased asset are transferred to the lessee; d. The Company must estimate relatively the full cost of the lease. Rental income arising from operating leases is recorded to the consolidated income statement and accounted for on a straight-line basis over the terms of the lease.

142

ANNUAL REPORT 2016

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.15 Revenue recognition (continued) Rendering of services Revenues are recognised upon completion of the services provided. Interest Revenue is recognised as the interest accrues (taking into account the effective yield on the asset) unless collectability is in doubt. Dividend Income is recognised when the Groupâ&#x20AC;&#x2122;s entitlement as an investor to receive the dividend is established. 3.16 Taxation Current income tax Current income tax assets and liabilities for the current and prior periods 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 as at the balance sheet date. Current income tax is charged or credited to the consolidated income statement, except when it relates to items recognised directly to equity, in which case the current income tax is also dealt with in equity. Current income tax assets and liabilities are offset when there is a legally enforceable right for the Group to offset 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 tax Deferred tax is provided using the 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 purposes. Deferred tax liabilities are recognised for all taxable temporary differences. 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 profit will be available against which deductible temporary differences, carried forward unused tax credit and unused tax losses can be utilised. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year 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. â&#x20AC;&#x192;

FINANCIAL STATEMENTS

143

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended (continued)

B09-DN/HN

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.16 Taxation (continued) Deferred tax (continued) Deferred tax assets and liabilities are offset when there is a legally enforceable right for the Group to offset current tax assets against current tax liabilities and when they relate to income taxes levied on the same taxable entity by the same taxation authority. The carrying amount of deferred 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 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. 3.17 Earnings per share Basic earnings per share amount is computed by dividing net profit for the year attributable to ordinary shareholders of the Group (after adjusting for the bonus and welfare fund) by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net profit after tax attributable to ordinary equity holders of the Group (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. 3.18 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. As the Groupâ&#x20AC;&#x2122;s revenue and profit are derived mainly from real estate business in Vietnam while other sources of revenue are not material as a whole, the management accordingly believed that the Group operates in a sole business segment of real estate. Geographical segment of the Group is in Vietnam only. Accordingly, segment information is not presented.

144

ANNUAL REPORT 2016

CASH AND CASH EQUIVALENTS VND’000 Ending balance

Beginning balance

Cash on hand

5,407,855

3,462,062

Cash in banks

624,185,347

323,596,515

Cash equivalents (*)

429,895,967

655,447,655

1,059,489,169

982,506,232

TOTAL

(*) Cash equivalents represent short-term bank deposits with maturity of less than three months and earn interest at the rate from 4.3% to 6.4% per annum. 5.

TRADE RECEIVABLES AND ADVANCES TO SUPPLIERS

5.1

Trade receivables VND’000 Ending balance

Beginning balance

724,960,167

140,792,661

Trade receivables from sales of residential land properties to customers

723,683,404

139,515,898

- Thuan Phat Real Estate Company Limited

392,178,240

Short-term

- Cuu Long Real Estate Company Limited - Others Trade receivables from a related party (Note 27) Long-term Trade receivables from customers TOTAL

139,515,898

1,276,763

74,741,495

87,740,748

74,741,495

87,740,748

799,701,662

228,533,409

Provision for short-term doubtful receivables

(3,324,394)

(3,748,154)

Provision for long-term doubtful receivables

(2,000,000)

794,377,268

224,785,255

NET

5.2

94,083,090 237,422,074

Advances to suppliers VND’000 Short-term

Ending balance

Beginning balance

469,339,840

437,470,264

Advances to subcontractors

341,367,875

358,601,186

- Tay Nam Real Estate Company Limited

117,985,000

- Others

223,382,875

358,601,186

Advance for transfer of land use rights

127,971,965

78,869,078

5,640,101

7,776,784

5,640,101

7,776,784

474,979,941

445,247,048

Long-term Advances to subcontractors TOTAL

FINANCIAL STATEMENTS

145

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended (continued)

B09-DN/HN

OTHER RECEIVABLES VND’000 Ending balance

Beginning balance

294,115,578

79,296,364

Receivables under Investment Cooperation Contracts (“ICC”)

232,635,200

- Dong Tien Real Estate Company Limited (“Dong Tien”) (*)

226,000,000

6,635,200

54,963,918

61,717,678

Advance to employees

4,149,889

4,961,477

Others

2,366,571

12,617,209

Long-term

14,848,477

15,211,640

11,634,814

3,213,663

3,576,826 94,508,004

Short-term

- Thuan Thanh Real Estate Trading Investment Company Limited (“Thuan Thanh”) (**) Provisional corporate income tax (***)

Advances for development of projects Others TOTAL Provision for long-term doubtful receivables NET

308,964,055 (7,786,000)

(7,786,000)

301,178,055

86,722,004

(*) This represents the investment to Dong Tien to develop a project at Phu Huu Ward, District 9, Ho Chi Minh City on an area of 35,007 m2 in accordance with ICC No. 003/2016/HDHT/TMINH-DT dated 14 December 2016. (**) This represents the investment to Thuan Thanh to develop a residential area project at Phuoc Long B Ward, District 9, Ho Chi Minh City on an area of 1,731.8 m2 (“Feliza project”) in accordance with ICC No. 001/2016/ HDHT/TT-KD dated 23 March 2016. (***) In accordance with Circular No. 96/2014/TT-BTC issued by the Ministry of Finance on 22 June 2015 which provides guidelines for implementation of the Law on Corporate Income Tax, the Company is entitled to provisionally pay tax at the rate of 20% on turnover received by cash from its customers less corresponding expenses or at the rate of 1% on cash collections from its customers pending the appropriate recognition of sales and cost of sales from those transactions.

146

ANNUAL REPORT 2016

7. INVENTORIES VND’000 Properties under development (*) Merchandise goods Raw material TOTAL

Ending balance

Beginning balance

4,605,781,609

5,853,216,021

11,685,745

11,780,466

320,911

286,632

4,617,788,265

5,865,283,119

(*) Properties under development comprise on-going projects to develop the following residential land properties: VND’000 Ending balance

Beginning balance

BCCI - Tan Tao Residential Zone

728,929,323

577,368,750

Khong Gian Xanh Phu Huu (“Lucasta”) (**)

462,103,047

645,075,242

Song Lap Phu Huu (“Melosa”) (**)

436,892,411

930,704,865

BCCI - 11A Residential Zone

393,794,690

380,387,975

Thap Muoi Phuoc Long B (**)

313,081,174

134,532,635

Binh Trung - Binh Trung Dong

263,553,900

246,000,577

Thanh Phuc Building (**)

234,795,339

214,680,523

Quoc Te Phu Huu (**) (“The Venica”)

227,559,493

257,785,201

Thanh Phuc Phu Huu (**)

219,944,864

171,893,431

BCCI - 2 Resettement Zone Phong Phu

197,782,000

BCCI - An Duong Vuong

197,196,000

196,646,000

BCCI - 4 Resettlement Zone Phong Phu (**)

193,066,198

461,770,747

Kim Phat Phu Huu

182,679,132

Saphire Phu Huu (**)

172,941,641

160,158,691

Gia Phuoc Phu Huu (**)

122,287,602

86,308,339

Tri Minh Phu Huu (**) (“Mega Village”)

85,259,634

187,511,538

Khang Dien Long Truong

10,432,122

254,542,941

390,559,972

Others

163,483,039

359,506,594

TOTAL

4,605,781,609

5,853,216,021

BCCI - An Lac Building

(**) Parts of these projects were pledged to obtain loans from banks (Note 20).

FINANCIAL STATEMENTS

147

148

ANNUAL REPORT 2016

13,951,689

Ending balance

6,638,415

8,157,309

32,188,718

10,527,807 14,862,969

1,991,540

30,197,178

17,728,354

38,827,133

472,646

38,354,487

Machinery and equipment

911,280

9,616,527

3,400,513

24,479,496

Buildings and structures

Beginning balance

Net carrying amount:

Ending balance

Depreciation for the year

Beginning balance

Accumulated depreciation:

Fully depreciated

In which:

Ending balance

Newly purchased

Beginning balance

Cost:

TANGIBLE FIXED ASSETS

as at 31 December 2016 and for the year then ended (continued)

6,772,768

8,203,204

13,549,695

1,430,436

12,119,259

8,684,281

20,322,463

Means of transportation

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

125,782

347,282

4,451,797

258,590

4,193,207

4,088,289

4,577,579

37,090

4,540,489

Office equipment

27,488,654

31,570,764

60,718,017

4,591,846

56,126,171

33,901,437

88,206,671

509,736

87,696,935

Total

VNDâ&#x20AC;&#x2122;000

B09-DN/HN

INTANGIBLE FIXED ASSETS VND’000 ISO Certificate

Accounting software

Total

331,745

1,455,004

1,786,749

331,745

1,312,660

1,644,405

331,745

1,349,245

1,680,990

47,448

331,745

1,396,693

1,728,438

Beginning balance

105,759

Ending balance

58,311

Cost: Beginning and ending balances In which: Fully amortised Accumulated amortisation: Beginning balance Amortisation for the year Ending balance Net carrying amount:

10. INVESTMENTS PROPERTIES VND’000 Infrastructure Cost: Beginning balance

131,865,214

Sold, disposed

(4,307,278)

Ending balance

127,557,936

Accumulated depreciation: Beginning balance Depreciation for the year

46,951,349 3,074,075

Sold, disposed

(4,193,085)

Ending balance

(45,832,339)

Net carrying amount: Beginning balance

84,913,865

Ending balance

81,725,597

The fair values of the investment property as at the balance sheet date had not yet been formally assessed and determined, but the management believed that it was much higher than the property’s carrying values considering that the investment property (an industrial park) has been almost fully rented out as at the balance sheet date.

FINANCIAL STATEMENTS

149

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended (continued)

11.

B09-DN/HN

CONSTRUCTION IN PROGRESS VND’000 Ending balance

Beginning balance

222,392,518

234,647,054

48,379,548

205,032,743

Others

1,653,264

282,393

TOTAL

272,425,330

439,962,190

Le Minh Xuan Expansion Industrial Park Small-scale industrial zone Project 510 Kinh Duong Vuong

12.

LONG-TERM INVESTMENTS VND’000 Investments in associates (Note 12.1) Investments in other entities (Note 12.2) TOTAL Provision for long-term investments NET

Ending balance

Beginning balance

193,015,770

210,515,935

17,135,455

210,151,225

227,651,390

(1,566,424)

(1,079,891)

208,584,801

226,571,499

12.1 Investments in associates Ending balance VND’000

% of interest

% of voting right

162,177,983

11.46

20,009,719

11.46

EB New City Company Limited

5,965,307

Saigon Asia Investment and Realty Corporation

4,862,761

Espace Big C An Lac Green Buildings Company Limited

TOTAL

150

Beginning balance

ANNUAL REPORT 2016

193,015,770

VND’000

% of interest

% of voting right

171,242,021

11.46

20,011,153

11.46

14,400,000

11.46

28.66

4,862,761

28.66

210,515,935

12.

LONG-TERM INVESTMENTS (CONTINUED)

12.1 Investments in associates (continued) Espace Big C An Lac (“Big C”) is a limited liability company with two or more members established in accordance with Investment License No. 2013/GP issued by the Ministry of Planning and Investment on 16 December 1997, as amended. Big C’s registered office is located at No. 1231 National Road 1A, Quarter 5, Binh Tri Dong Ward, Binh Tan District, Ho Chi Minh City, Vietnam. Big C’s principal activity is to develop and operate supermarket chains with retail and wholesale shops, warehouses and processing workshops. 20% of capital contribution in Big C were pledged to obtain loans from banks (Note 20.2). Green Buildings Company Limited (“GB”) is a limited liability company with two or more members established in accordance with Investment Certificate No. 411022000448 dated 14 August 2010 issued by the Ho Chi Minh City People’s Committee. GB’s registered office is located at No. 1231 National Road 1A, Quarter 5, Binh Tri Dong Ward, Binh Tan District, Ho Chi Minh City, Vietnam. GB’s principal activity is to develop an apartment project for sale named Green Building in Ho Chi Minh City. EB New City Company Limited is a limited liability company with two or more members established in accordance with Investment License No. 0313517445 issued by the Ministry of Planning and Investment on 2 November 2015, as amended. EB New City’s registered office is located at Lot A, City Land Residential, No. 99 Nguyen Thi Thap Street, Tan Phu Ward, District 7, Vietnam. EB New City Company’s principal activity is to develop and operate supermarket chains with retail and wholesale shops, warehouses and processing workshops. Saigon Asia Investment and Realty Corporation (“Saigon Asia Real Estate”) is a joint stock company established in accordance with Business Registration Certificate No. 4103007346 issued by the DPI of Ho Chi Minh City on 19 July 2007, as amended. Saigon Asia Real Estate’s registered office is located at No. 196 Tran Hung Dao Street, Nguyen Cu Trinh Ward, District 1, Ho Chi Minh City, Vietnam. Saigon Asia Real Estate’s principal activities are to invest and trade real estate properties.

FINANCIAL STATEMENTS

151

152

ANNUAL REPORT 2016

LONG-TERM INVESTMENTS (CONTINUED)

4,862,761 4,862,761

Beginning balance

Ending balance

Carrying amount:

862,761

Dividend received

Ending balance

862,761

4,000,000

Share in post-acquisition profit (loss) of the associates for the year

Beginning balance

Accumulated share in post-acquisition profit (loss) of the associates:

Beginning and ending balance

Cost of investment:

Saigon Asia Real Estate Big C

162,177,983

171,242,021

104,980,855

(28,224,800)

19,160,762

114,044,893

57,197,128

Details of these investments in associates at the balance sheet date are presented as follows:

12.1 Investments in associates (continued)

12.

as at 31 December 2016 and for the year then ended (continued)

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

20,009,719

20,011,153

(50,593)

(1,434)

(49,159)

20,060,312

5,965,307

14,400,000

(8,434,693)

14,400,000

193,015,770

210,515,935

97,358,330

(28,224,800)

10,724,635

114,858,495

95,657,440

Total

VNDâ&#x20AC;&#x2122;000

B09-DN/HN

12.

LONG-TERM INVESTMENTS (CONTINUED)

12.2 Investments in other entities Ending balance

Beginning balance

Quantity

Value (VND’000)

Quantity

Value (VND’000)

Thu Duc Housing Development Corporation (“TDH”)

19,354

1,312,145

15,300

1,312,145

Ho Chi Minh City Development Joint Stock Bank (“HDB”)

12,331

123,310

12,331

123,310

Investments in securities

Other long-term investments CVH Spring Company Limited (“CVH”)

14,000,000

1,700,000

TOTAL

17,135,455

Provision for long-term investments

(1,566,424)

(1,079,891)

NET

15,569,031

16,055,564

Others

13.

CAPITALIZED BORROWING COSTS During the year, the Group capitalized borrowing costs amounting to VND’000 119,080,671 (for the year ended 31 December 2015: VND’000 198,076,527). These costs relate to borrowings obtained to finance the development and construction of the Group’s property projects.

14. GOODWILL The movements in goodwill during the year are as follows: VND’000 Cost: Beginning and ending balances

34,008,874

Accumulated amortisation: Beginning balance Amortisation for the year Ending balance

21,039,527 2,133,748 23,173,275

Net carrying amount: Beginning balance

12,969,347

Ending balance

10,835,599

FINANCIAL STATEMENTS

153

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended (continued)

15.

B09-DN/HN

TRADE PAYABLES AND ADVANCES FROM CUSTOMERS

15.1 Trade payables VND’000 Ending balance

Beginning balance

80,103,089

48,948,085

Construction Corporation No. 1

29,999,851

Coteccons Construction Joint Stock Company

13,178,064

Others

36,925,174

48,948,085

176,432

50,657,501

176,432

50,657,501

80,279,521

99,605,586

Short-term

Long-term Trade payables to suppliers TOTAL

15.2 Advances from customers VND’000 Ending balance

Beginning balance

670,114,574

500,980,970

598,092,521

500,980,970

Advance received for disposal of investment (**)

50,000,000

Advance received for transfer of land use right (***)

22,022,053

80,629,339

82,010,966

80,629,339

82,010,966

750,743,913

582,991,936

Short-term Advances received for transfer of land lots, houses (*)

Long-term Advances received for transfer of land lots, houses (*) TOTAL

(*)

This represents advances from customers who buy land lots and houses for which the Group has issued the corresponding invoices. (**) This represents advance received for disposal of investment in Green Building Company Limited in accordance with decision 130/NQ.BCCI.HDQT. (***) This represented advance received from Tan Thuan Industrial Promotion Company Limited for transfer of land use right at Phong Phu 4 residential project in accordance with contract No 197/HDNT.TTCNQSDĐ/ PP4/2011 dated 07 July 2011. 16.

STATUTORY OBLIGATIONS VND’000 Corporate income tax Value-added tax Personal income tax

154

Ending balance

Beginning balance

134,897,032

67,088,792

42,732,913

28,054,274

1,314,934

10,030,419

Others

99,007

388,605

TOTAL

179,043,886

105,562,090

ANNUAL REPORT 2016

17.

ACCRUED EXPENSES VND’000 Ending balance

Beginning balance

50,391,260

50,044,620

Project development costs

26,961,072

18,598,917

Interest expense

10,181,899

28,131,269

Short-term

Others

13,248,289

3,314,434

Long-term

88,832,160

106,699,017

88,832,160

106,699,017

139,223,420

156,743,637

Project development costs TOTAL

18.

UNEARNED REVENUES VND’000 Short-term Advances received for land leases of Le Minh Xuan Industrial Park Others Long-term Advances received for land leases of Le Minh Xuan Industrial Park TOTAL

19.

Ending balance

Beginning balance

8,045,738

2,600,794

7,611,496

2,453,136

434,242

147,658

210,189,314

208,197,968

210,189,314

208,197,968

218,235,052

210,798,762

OTHER PAYABLES VND’000 Ending balance

Beginning balance

74,976,265

88,846,528

Maintenance fund

41,171,703

17,724,088

Dividend payables

2,811,837

38,158,302

Deposits received

4,990,252

3,700,340

Short-term

Others

26,002,473

29,263,798

101,197,965

118,060,269

Land compensation payables (*)

76,115,857

99,342,790

Deposits received

17,698,314

2,843,610

7,383,794

15,873,869

176,174,230

206,906,797

Long-term

Others TOTAL

(*) This represents land compensation payable to owners of raw land where the Group is going to develop Hamlet 2 Tan Tao residential project. This payable will be subsequently paid out of the developed land lots from the said project.

FINANCIAL STATEMENTS

155

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended (continued)

20.

B09-DN/HN

LOANS AND DEBTS VND’000 Short-term Short-term loans from a bank (Note 20.1) Current portion of long-term loans Long-term Long-term loans from banks (Note 20.2)

Ending balance

Beginning balance

194,351,572

218,819,525

88,807,947

10,855,529

105,543,625

207,963,996

1,699,929,119

2,699,216,325

1,227,243,664

1,798,324,410

891,915

472,685,455

900,000,000

1,894,280,691

2,918,035,850

Loans from other entities Bonds (Note 20.3) TOTAL

20.1 Short-term loans from a bank Details of the short-term loans from banks are as follows:

Bank

Ending balance (VND’000)

Principal repayment term

Purpose

Interest rate (% p.a.)

Description of collateral

Orient Commercial Joint Stock Bank – District 4 Branch Loan agreement No. 19/2016/HDTD-DN dated 17 August 2016

156

ANNUAL REPORT 2016

28,000,000

17 August 2017

To finance Lucasta project

9.1%

Land use right from lot 256 to 260 of Lucasta project at Phu Huu Ward, District 9, HCMC

20.

LOANS AND DEBTS (CONTINUED)

20.1 Short-term loans from a bank (continued) Details of the short-term loans from banks are as follows: (continued)

Bank

Ending balance (VND’000)

Principal repayment term

Purpose

Interest rate (% p.a.)

Description of collateral

Orient Commercial Joint Stock Bank – District 4 Branch Loan agreement No. 20/2016/HDTD-DN dated 31 August 2016 Loan agreement No. 13/2016/HDTDHM date 27 July 2016

35,085,400

31 August 2017

25,722,547 27 July 2017

To finance Mega Village project To finance working capital

9,1

Savings deposit interest with term of 6 months plus 2.3% per annum

Land use right at of Mega Village project at Phu Huu Ward, District 9, HCMC Unsecured

88,807,947

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

Bank

Ending balance (VND’000)

Principal repayment term

Purpose

Interest rate (% p.a.)

Description of collateral

Vietnam Bank for Industry and Trade - Ho Chi Minh Branch Loan Agreement No. 16.2680021/HDTDA/ NHCT900-GIAPHUOC dated 11 May 2016 Loan Agreement No. 19/2016/HDTD-DN dated 17 September 2016

70,888,205

47 months

To finance Gia Phuoc Phu Huu project

175,711,453

42 months

To finance Lucasta project

9.5

Land use rights of 29,562 square meters, and future and associated buildings of Gia Phuoc Phu Huu project

Land use rights of 122,674 square meters of Lucasta project

FINANCIAL STATEMENTS

157

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended (continued)

20.

B09-DN/HN

LOANS AND DEBTS (CONTINUED)

20.2 Long-term loans from banks (continued) Details of long-term loans from banks are as follows:

Bank

Ending balance (VNDâ&#x20AC;&#x2122;000)

Principal repayment term

Purpose

Interest rate (% p.a.)

Description of collateral

Vietnam Bank for Industry and Trade - Ho Chi Minh Branch Loan Agreement No. 16.321.000101 dated 22 September 2016

77,509,434

52 months

To pay for 100,000 m2 land rental fee at Quarter 5, Binh Tri Dong B Ward, Binh Tan District

9.5

20% of capital contribution in Espace Big C An Lac; Land use rights of 172,032 m2 and associated assets at Binh Hung Ward, Binh Chanh District belonging to Binh Hung 11A Residential project

Loan Agreement No. 16.321.000102 dated 22 September 2016

70,228,786

42 months

To finance Phong Phu 4 Residential project

9.5

Land use rights of 140,319 m2 and associated assets at Phong Phu Ward, Binh Chanh District belonging to Phong Phu 4 Residential project

Vietnam Bank for Industry and Trade - Branch 1

158

Loan Agreement No. 121/2015 - HDTDDA/ NHCT902-NHAPHO-DANCU dated 12 August 2015

145,757,186

45 months

To finance Thanh Phuc Phu Huu project

All right of assets generating from 44,725 square metres of Nha Pho Phu Huu project

Loan Agreement No. 122/2015 - HDTDDA / NHCT902-NHAPHO-CAOOC dated 12 August 2015

171,225,928

45 months

To finance Thanh Phuc Building project

Land use right of 16,667 square meters and associated buildings of Nha Pho Building project

Loan Agreement No. 71/2016- HDTDDA / NHCT902-THAPMUOI dated 31 March 2016

188,681,406

36 months

To finance Thap Muoi Phuoc Long B residential of project

9.5

Land use right of 30,468 square metres and future associated buildings of Thap Muoi Phuoc Long B project

Loan Agreement No. 16.2680019/HDTDDA/ NHCT900-BINHTRUNG dated 11 May 2016

184,449,614

47 months

To finance Binh Trung - Binh Trung Dong residential project

9.5

Land use rights of 51,672 square meters and future buildings of Binh Trung - Binh Trung Dong project

ANNUAL REPORT 2016

20.

LOANS AND DEBTS (CONTINUED)

20.2 Long-term loans from banks (continued) Details of long-term loans from banks are as follows: (continued)

Bank

Ending balance (VND’000)

Principal repayment term

Purpose

Interest rate (% p.a.)

Description of collateral

Vietnam Export Import Commercial Joint Stock Bank – Ho Chi Minh Branch Loan Agreement No. 2000 - LDS - 201422711 dated 29 December 14

40,443,737

36 months

To finance Saphire Phu Huu project

Land use rights of 24,120 square metres and associated buildings of Saphire Phu Huu project

36 months

To finance land acquisition at The Venica project - Phase 2

9.5

Associated building and future assets on the land lots in accordance with Loan Agreement No. TAT.DN.794.160316 dated 4 April 2016

To finance Hamlet 2 Tan Tao Residential project and 11A Residential project

9.5

Land use right of 18,392 square meters No. T00013/1aQSDD/4028/ UB, 00230/2aQSDD/2580/ UB and 7,647 meters No. CT01135 and associated assets at belonging to 158 An Duong Vuong project

Asia Commercial Bank - Hoa Hung Branch Loan Agreement No. TAT. DN.794.160316 dated 4 April 2016

30,000,000

Orient Commercial Joint Stock Bank – District 4 Branch Loan Agreement No. 06/2015/HDTD-DN dated 1 July 2015 and Appendix No. 06-01/SĐBS - HDTD

TOTAL

177,891,540

48 months

1,332,787,289

In which Current portion Long-term

105,543,625 1,227,243,664

FINANCIAL STATEMENTS

159

160

ANNUAL REPORT 2016

95,000,000

377,685,455

472,685,455

Vietnam Joint Stock Commercial Bank for Industry and Trade – Ha Noi Branch - Order contract No. 01/2015/VIETINBANK106-KHANGDIEN dated 26 October 2015

Vietnam Joint Stock Commercial Bank for Industry and Trade – Ha Noi Branch - Order contract No. 01/2016/DM/VIETINBANK. HN-KHANGDIEN dated 11 August 2016

TOTAL

Issued at par value

Details of bonds are as follows: Ending balance (VND’000)

LOANS AND DEBTS (CONTINUED)

20.3 Bonds

20.

48 months

Principal repayment term

as at 31 December 2016 and for the year then ended (continued)

To finance Melosa and Venica project; restructure loans and borrowings of subsidiaries

To finance the Melosa project

Purpose

Land use right of 72,293 square meters of Melosa project owned by SL.

Land use right of 7,719 square meters of Venica project owned by QT; Land use right of 17,963 square meters of Melosa project owned by SL; and Rights arising from ICC No. 01/2015/HDHT/KD-SL dated 12 October 2015 and ICC No. 01/2016/ HDHT/KD-QT dated 20 July 2016 . These bonds bear an interest rate of 9.5% per annum for the first year and the interest rate of saving deposit in VND with the term of twelve (12) months announced by Vietnam Joint Stock Commercial Bank for Industry and Trade – Ho Chi Minh City Branch plus (+) margin of 4% per annum for subsequent three-month periods.

Description of collateral

B09-DN/HN

These bonds bear an interest rate of 9% per annum for the first threemonth period and the interest rate of saving deposit in VND with the term of twelve (12) months announced by Vietnam Joint Stock Commercial Bank for Industry and Trade – Ha Noi Branch plus (+) margin of 4% per annum for subsequent three-month periods.

Interest rate

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

161

OWNERS’ EQUITY

Dividend declared

Transfer to bonus and welfare fund

(*)

619,915,240

(539,998,920)

1,159,914,160

555,222,000

604,692,160

Share premium

47,936,288

13,020,934

34,915,354

Investment and development fund

468,978,713

(26,013,332)

(126,000,000)

(13,020,934)

371,774,722

262,238,257

(1,289,475)

(100,800,000)

2,098,446

253,357,528

108,871,758

Undistributed earnings

3,476,829,161

(26,013,332)

(126,000,000)

371,774,722

3,257,067,771

(1,289,475)

(100,800,000)

2,098,446

253,357,528

1,605,222,000

1,498,479,272

Total

VND’000

On 29 September 2016, the Company completed the issuance of 53,999,892 new shares to its existing shareholders under forms of bonus shares appropriated from share premium in accordance with the Annual Shareholders Meeting dated 12 April 2016. This increase was approved by the Planning and Investment Department of Ho Chi Minh City through the issuance of the 15th Amended Business Registration Certificate dated 25 November 2016.

2,339,998,920

Ending balance

Appropriation of net profit

539,998,920

1,800,000,000

Net profit for the year

Issuance of new shares (*)

Beginning balance

Current year:

Ending balance

Transfer to bonus and welfare fund

Acquisition of non-controlling interest

Dividend declared

1,050,000,000

750,000,000

Share capital

Net profit for the year

Issuance of new shares

Beginning balance

Previous year:

21.1 Increase and decrease in owners’ equity

21.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended (continued)

21.

B09-DN/HN

OWNERS’ EQUITY (CONTINUED)

21.2 Capital transactions with owners and distribution of dividends VND’000 Current year

Previous year

1,800,000,000

750,000,000

539,998,920

1,050,000,000

2,339,998,920

1,800,000,000

Dividend declared

126,000,000

100,800,000

Dividend paid

126,000,000

100,784,572

Ending balance

Beginning balance

Number of shares

233,999,892

180,000,000

233,999,892

180,000,000

233,999,892

180,000,000

Contributed share capital Beginning balance Increase Ending balance Dividends

21.3 Share capital - ordinary shares

Authorized shares Issued and paid-up shares Ordinary shares Shares in circulation Ordinary shares

162

ANNUAL REPORT 2016

22. REVENUE 22.1 Revenue from sale of goods and rendering of services VND’000 Current year

Previous year

3,938,432,166

1,051,919,567

3,826,410,669

987,938,151

Rendering of services

57,187,987

4,741,323

Outright sale of industrial plots and related infrastructure (*)

42,273,537

Operating lease - land lots and related infrastructure

12,559,973

52,670,534

6,569,559

(6,789,172)

(1,979,159)

3,931,642,994

1,049,940,408

3,819,621,497

985,958,992

Rendering of services

57,187,987

4,741,323

Outright sale of industrial plots and related infrastructure

42,273,537

Operating lease - land lots and related infrastructure

12,559,973

52,670,534

6,569,559

Gross revenue Of which: Sale of residential land properties

Others Less Sale returns Net revenue Of which: Sale of residential land properties

Others

(*)

Revenue from industrial plots and related infrastructure has been outright recognized as described at Note 3.15. When this revenue is recognized on a straight-line basis over the lease terms, revenue and net profit will decrease by VND’000 37,779,996 and VND’000 26,356,939 respectively.

22.2 Finance income VND’000 Interest income Dividends Revaluation surplus of investment at acquisition-date fair value

Current year

Previous year

16,466,769

14,752,584

29,161

Gains on disposal of investments

34,770,414 29,822,369

Others

10,438

TOTAL

16,495,930

79,355,805

FINANCIAL STATEMENTS

163

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended (continued)

23.

B09-DN/HN

COSTS OF GOODS SOLD AND SERVICES RENDERED VND’000 Cost of residential land properties sold Cost of services rendered Cost of industrial plots and related infrastructure for outright sale Cost of operating lease - land lots and related infrastructure

24.

Current year

Previous year

2,691,976,661

688,703,122

243,181,747

779,132

11,943,562

4,867,970

22,563,384

Others

248,193

TOTAL

2,951,969,940

712,293,831

FINANCE EXPENSES VND’000 Discount for early payment

25.

Current year

Previous year

100,998,191

50,446,727

Loan interests

8,648,089

8,513,956

Others

1,001,544

189,204

TOTAL

110,647,824

59,149,887

OTHER INCOME AND EXPENSES VND’000

Other income

Previous year

13,804,653

98,911,387

Penalty on breach of contract

4,679,219

Income from management service

4,259,049

2,791,618

Negative goodwill from acquisition

92,749,882

4,866,385

3,369,887

(36,818,962)

(16,099,085)

Expenses for management service

(15,288,323)

(4,263,859)

Penalty on breach of contract

(12,300,664)

(7,477,019)

Tax penalty

(6,669,352)

(2,419,231)

Others

(2,560,623)

(1,938,976)

(23,014,309)

82,812,302

Others Other expenses

NET

164

Current year

ANNUAL REPORT 2016

26.

CORPORATE INCOME TAX The statutory corporate income tax (“CIT”) rate applicable to the Group is 20% of taxable profits. The Company and its subsidiaries tax returns are subject to examination by the tax authorities. As the application of tax laws and regulations are susceptible to varying interpretations, amounts reported in the consolidated financial statements could be changed at a later date upon final determination by the tax authorities.

26.1 CIT expense VND’000 Current tax expense Adjustment for under (over) accrual of tax from prior years Deferred tax expense TOTAL

Current year

Previous year

159,695,216

48,573,267

709,011

(1,248,110)

16,837,673

1,492,591

177,241,900

48,817,748

Reconciliation between CIT expense and the accounting profit multiplied by CIT rate is presented below: VND’000 Current year

Previous year

Accounting profit before tax

582,597,952

317,261,161

At CIT rate of 20% (2015: 22%) applicable to companies in the Group

116,519,590

69,797,455

Adjustments: Non-deductible expenses

5,158,809

3,441,083

Loss in subsidiaries

5,185,539

11,549,652

Share of profit in associate

(2,144,927)

(3,280,175)

Consolidation adjustments

55,730,230

(22,268,425)

Tax losses carried forward

(3,916,352)

(9,275,351)

709,011

(1,248,110)

101,619

177,241,900

48,817,748

Adjustment for under (over) accrual of tax from prior year Others CIT expense

26.2 Current tax The current CIT payable is based on taxable profit for the current year. The taxable profit of the Group for the year differs from the 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 tax is calculated using tax rates that have been enacted by the consolidated balance sheet date.

FINANCIAL STATEMENTS

165

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended (continued)

26.

B09-DN/HN

CORPORATE INCOME TAX (CONTINUED)

26.3 Deferred tax The following are the deferred tax assets and liabilities recognized by the Group, and the movements thereon, during the current and previous year: VNDâ&#x20AC;&#x2122;000 Consolidated balance sheet

Consolidated income statement

Ending balance

Beginning balance

Current year

Previous year

902,170

1,461,344

(559,174)

1,461,344

Accrued expenses

1,917,999

1,109,032

808,967

(542,922)

Interest expenses

2,658,152

(2,293,123)

(1,055,656)

Provision for severance allowance

269,140

(3,094)

Provision for doubtful debts

400,000 132,481

1,367,490

(1,367,490)

5,224,286

3,937,866

1,286,420

(1,377,795)

4,681,381

6,502,982

(1,821,601)

6,502,982

115,486

341,044

(225,558)

249,311

70,269

(70,269)

35,969

(3,282,770)

(12,295,790)

(4,716,438) (42,984,274)

(337,016) (43,590,357)

(4,379,422) 606,083

(337,016) 5,804,967

(37,851,766)

(28,901,210)

(8,950,556)

(75,219)

(84,038,381)

(65,914,288)

(18,124,093)

(114,796)

(16,837,673)

(1,492,591)

Deferred tax assets Unrealised profit

Accrued interest income

Tax loss carried forward Increase due to acquisition of subsidiaries TOTAL Deferred tax liabilities Tax loss carried forward Provision for severance allowance Accrued expenses Interest expense Accrued interest income Profit from sale of land properties but not yet taxable Increase due to acquisition of subsidiaries TOTAL Net deferred income tax expense

166

ANNUAL REPORT 2016

27.

TRANSACTIONS WITH RELATED PARTIES Transactions with other related parties Remuneration to members of the Board of Directors and management VND’000 Salaries and bonus

Current year

Previous year

6,989,767

9,445,625

Amounts due from and due to related parties at the balance sheet date were as follows: VND’000 Related party

Relationship

Transaction

Related party

Sale of residential land properties

Ending balance

Beginning balance

1,276,763

Short-term trade receivable Ms Truong My Linh

28.

EARNINGS PER SHARE The following reflects the income and share data used in the basic and diluted earnings per share computations: VND’000 Current year

Previous year (Adjusted)

371,774,722

253,357,528

(440,249)

(14,310,409)

Net profit attributable to ordinary equity holders of the Company

371,334,473

239,047,119

Weighted average number of ordinary shares (**)

233,999,892

- Basic

1.59

1.02

- Diluted

1.59

1.02

Net profit after tax attributable to ordinary equity holders of the Company Less bonus and welfare fund (*)

Earnings per share

There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of completion of these consolidated financial statements.

FINANCIAL STATEMENTS

167

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2016 and for the year then ended (continued)

28.

B09-DN/HN

EARNINGS PER SHARE (CONTINUED) (*)

Profit used to compute earnings per share for the year 2015 as presented in the consolidated financial statements for the year 2015 was restated to reflect the actual allocation to bonus and welfare fund from 2015 retained earnings following the resolution of the shareholders meeting dated 12 April 2016.

Profit used to compute earnings per share for the year 2016 was adjusted for the provisional allocation to bonus and welfare fund from 2016 profit following the plan as approved in the resolution of the shareholders meeting dated 12 April 2016.

(**)

The weighted average number of ordinary shares for the year ended 31 December 2015 was adjusted to reflect the additional issuance of 53,999,920 bonus shares from share premium in accordance with the resolution of the shareholders meeting dated 12 April 2016 and was approved by the Planning and Investment Department of Ho Chi Minh City through the issuance of the 15th amended Business Registration Certificate dated 25 November 2015, in accordance to VAS No. 30.

29. COMMITMENTS Capital commitments As the balance sheet date, the Group has a commitment of VND’000 783,794,040 (31 December 2015: VND’000 637,327) principally related to the development of infrastructure of Le Minh Xuan Industrial Park. Lease commitments The Group leases office premises under an operating lease arrangement. Future minimum lease payables at the balance sheet date were as follows: VND’000 Ending balance

Beginning balance

41,719,037

12,535,555

From 1 to 5 years

5,321,552

23,857,332

More than 5 years

21,404,960

2,046,898

TOTAL

68,445,549

38,439,785

Less than 1 year

168

ANNUAL REPORT 2016

30.

CORRESPONDING FIGURES According to Tax Assessment Minutes dated 14 December 2016 and Tax Penalty Decision No. 2490/QD-TCT dated 19 December 2016 issued by the Department of Taxation of Ho Chi Minh City to Binh Chanh Construction Investment Joint Stock Company, the Group’s subsidiary, the Company’s management decided to retrospectively adjust the understatements of the CIT for the financial years from 2009 to 2015 aggregating to VND’000 13,688,456 as described below: •

Increasing in deferred tax assets by VND’000 1,367,490 and increasing in statutory obligations by VND’000 13,688,456 and decreasing in non-controlling interests by VND’000 5,259,821 and decreasing in undistributed earnings by VND’000 7,061,145 as at 31 December 2015;

•

Decreasing in other income by VND’000 7,061,145 for the year ended 31 December 2015.

The net impact of these restatements is presented as follows: VND’000 As previously stated

Restatements

Restated amount

105,972,532

(7,061,145)

98,911,387

2,570,376

1,367,490

3,937,866

91,873,634

13,688,456

105,562,090

Non-controlling interests

921,215,774

(5,259,821)

915,955,953

Undistributed earnings

269,299,402

(7,061,145)

262,238,257

For the year ended 31 December 2015 Other income As at 31 December 2015 Deferred tax assets Statutory obligations

31.

EVENTS AFTER THE BALANCE SHEET DATE There is no matter or circumstance that has arisen since the consolidated balance sheet date that requires adjustment or disclosure in the consolidated financial statements of the Group.

Nguyen Tran Cam Hien Preparer

Nguyen Quoc An Chief Accountant

Ngo Thi Mai Chi Deputy General Director

23 March 2017

The financial statements of Khang Dien House Trading and Investment Joint Stock Company as at 31 December 2016 was audited by Ernst & Young Vietnam Limited Company and disclosed at: www.khangdien.com.vn

FINANCIAL STATEMENTS

169

In order to contribute to environmental protection, Khang Dien’s 2016 Annual Report is printed in limited numbers and used environmentally friendly paper. Therefore, please transfer to those interested if you don’t need to use the report. In addition, Khang Dien’s 2016 Annual Report is also available in electronic version at: www.khangdien.com.vn

KHANG DIEN HOUSE TRADING AND INVESTMENT JSC Room 801, 8th Floor, Centec Tower 72-74 Nguyen Thi Minh Khai Street, Ward 6, District 3, HCM City T | (84.8) 3820 8858 F | (84.8) 3820 8859 E | info@ khangdien.com.vn W | www.khangdien.com.vn