Imexpharm Annual Report 2019 - Imexpharm Báo cáo thường niên 2019 by Valueplus Communications

LEADING

ASPIRATION

ESTABLISHING THE POSITION

LEADING IN TECHNOLOGY

Annual Report 2019

LIST OF ABBREVIATION

AGM

: Annual General Meeting

ASEAN

: Association of Southeast Asian Nations

BOD

: Board of Directors

BSC

: Balance Score Cards

CAGR

: Compound Annual Growth Rate

CTD

: Common Technical Document

DMS

: Distribution Management System

ERP

: Enterprise Resource Planning

ESOP

: Employee Stock Ownership Plan

ETC

: Ethical Drugs

: European Union

FDI

: Foreign Direct Investment

FTA

: Free Trade Agreement

GDP

: Gross Domestic Products

GMP

: Good Manufacturing Practices

GPP

: Good Pharmacy Practices

GRI

: Global Reporting Initial

ICH

: International Conference on Harmonization

IMP

: Imexpharm Corporation

KPIs

; Key Performance Indicators

M&A

: Merger and Acquisition

: Market Authorization

OTC

: Over the Counter

PIC/S

: Pharmaceutical Inspection Co-operation Scheme

: Quality Assurance

: Quality Control

R&D

: Research & Development

: Supervisory Board

VCCI

: Vietnam Chamber of Commerce and Industry

VSD

: Vietnam Securities Depository

: World Bank

WEF

: World Economic Forum

WHO

: World Health Organization

YoY

: Year over year

ESTABLISHING THE POSITION

LEADING IN TECHNOLOGY 4.0 revolution has been creating changes in many aspects of our lives as well as economic and social activities in every nation with high speed transferring based on internet application; this breakthrough has changed industries and fields systematically as well as methods and approaches of manufacture. Vietnam pharmaceutical industry is not an exception. As of May 16th, 2019, Vietnam had approximately 180 enterprises manufacturing pharmaceutical products and 224 factories and sites accredited GMP (Source: Statistics of Drug Administration of Vietnam). How to maintain leading position in the market valued 5.9 billion USD (second largest position in South East Asia and one (1) of seventeen (17) countries having highest growth rate in pharmaceutical industry around the world) is an important question for not only Imexpharm but also for Vietnam pharmaceutical companies. By fast catching opportunities, promoting potentials maximally, increasing in cooperation and credibility built for over 40 years, Imexpharm has impressive achievements in 2019. In which, implementing high technology in production, business and management is one of the most significant factors to create a foothold of Imexpharm.

Annual Report 2019

TABLE OF CONTENTS 06 Message from the General Director

IMEXPHARM - ASPIRATION TO LEAD 12 General Information 14 Mission and Vision, Core value 18 Over forty years committing for quality 20 Pathway of conquering the peak-leading in technology 24 Imexpharm culture â&#x20AC;&#x201C; Foundation of Aspiration 26 Title Honors and Awards 30 Business Scope and Localities 32 Achievements in 2019 34 Key indicators of 2019 36 Significant indicators for 5 years (2015-2019)

MANAGEMENT AND OPERATION 40 Organization and Management Structure 44 Board Of Director Members and Duties 48 Introduction To The Board Of Management 52 Introduction To The Supervisory Board

IMP - Leading Aspiration

54 Eu-Gmp Standardized Factories The Foundation For Breakthrough 56 Nationwide Distribution Footprint 57 Selected Materials Superior Quality 58 Production Management In Line With Advanced Standards 60 R&D Investment Develop High Value Roduct Portfolio 62 Develop Full Fledged Workforce For Success

BUSINESS PERFORMANCE AND FINANCIAL STATEMENTS OF THE EXECUTIVE BOARD IN 2019 - PLANS FOR 2020 68 Macro Environment and Industry 74 Performance Report And Evaluation Of The Board Of Directors In 2019 88 Business Performance and Financial Statements Of The Executive Board In 2019 - Plans For 2020 106 Report Of Supervisory Board

IMEXPHARM’S STRATEGY FOR 2020-2022

FINANCIAL STATEMENTS 2019

126 Performance Review For 2018-2019

178 Corporate Information

128 Swot Analysis For 2020-2022

180 Independent Auditor’s Report

130 Key Strategies To 2022

181 Balance Sheet

134 Vision To 2022

184 Income Statement

SUSTAINABLE GOVERNANCE

185 Cash Flow Statement

140 Comparing Corporate Governance At Imexpharm Based On Balanced Score Card Among Vietnamese Listed Enterprises In 2018

For The Year Ended 31 December 2019

187 Notes To The Financial Statements

148 The Board Of Directors 153 The Supervisory Board 156 Salary, Bonuses And Remuneration Of The Board Of Directors, Board Of Management, And Supervisory Board 157 Information Of Associates : Agimexpharm 160 Information Disclosure 161 Shareholder And Investor Relations 164 Information About Shares And Shareholders 170 Internal Control 171 Legislation And Compliance 172 Risk Management Strategies Implementation

Annual Report 2019

MESSAGE FROM THE GENERAL DIRECTOR

LEADING ASPIRATION is a strategic message of the tenure from 2018 to 2022, which Imexpharm Leadership wishes to transfer to all employees.

Dear shareholders, investors, customers, partners and all members in Imexpharm family!

2019 marked many improvements in the policies of the pharmaceutical industry: Circular 15 on drug procurement; Circular 30/2018 on the Health Insurance Reimbursement Drug List; and Circulars affecting the Law on Pharmaceuticals: Decree 54, Decree 155, Circular 11 on drug quality management; Law on Procurement with Decree 63 and Circular on Drug Registration, etc. This is the first year Imexpharm has better access to ETC market thanks to proprietary policies and the Governmentâ&#x20AC;&#x2122;s policies in favor of domestically produced drugs. For OTC channels, pharmaceutical industry in general and Imexpharm more particular are more affected by Circular 02 on prescription drug management at pharmacies, the growth rate is only 2% against the backdrop of a nearly stagnant market. Fluctuations in material prices also take more toll on Imexpharmâ&#x20AC;&#x2122;s production and business activities in 2019 in a context where pharmaceutical companies pursue price-driven competition to bid and sell through pharmacy channels. In general, competition purely based on price will only cause more difficulties to pharmaceutical businesses in reinvesting and maintaining business efficiency or, in the worst case scenario, staying in business, especially amid the current complexity of Covid-19.

IMP - Leading Aspiration

Despite a turbulent 2019, Imexpharm managed to have a good year with most of the key strategic goals being achieved:

Accomplished 98% of revenue target in 2019

Effectively implemented centralized marketing activities in line with the Company’s strategy:

With total revenue of VND1,420 billion, up by nearly 18% yoy. This is a positive growth amid a gloomy year for pharmaceutical industry, in which: OTC market: Imexpharm has promoted reforms in sales target management for 2019. It should be noted that 03 branches achieved the targets in 11 months, 3 branches achieved in 11.5 months, and 02 branches achieved the targets before December 25, thereby realizing all OTC targets in 2019. In addition, we also continued to improve organizational structure while managing risks at branches to be prepared for full compliance with Circular 02 by the Ministry of Health. ETC revenue has been almost double what it was last year: This is an extremely important indicator to ensure stable development of Imexpharm and to deserve the trust of the shareholders who have supported Imexpharm.

•

The acceptance of the EACRI project by leading experts at the Tuberculosis Institute and Cho Ray Hospital for Bactamox products was completed as planned. This is the brand we developed for the product with a combination of Amoxicillin and Sulbactam, whose efficacy has been clinically proven in treating community-based acute lower respiratory infections.

•

Factory tours to Imexpharm’s EU-GMP IMP2, IMP3 were successfully organized for professors, doctors, pharmacists and pharmacies. Imexpharm has received a lot of good feedback on the modern production system, scale and investment in product quality;

•

2019 also marked the first time Imexpharm organized a Medical Forum in Ho Chi Minh City. Our intention in upgrading scientific workshops to the Forum level is to timely update evidence-based information in treating diseases for medical practitioners.

•

Customer engagement activities are carried out in a way to create differentiation, effectiveness and efficiency.

Accomplish 101% of profit targets In 2019 with VND222 billion or an increase of 16%. These are the outcomes of efforts to control plant operating costs, overhead costs and selling costs in the context of input price escalation.

5. Vinh Loc High-tech Antibiotic Plant (IMP2)

3. Sales of 05 branded products Exceed the target by 4% and account for 43% of OTC revenues.

has obtained EU-GMP certification on 03 lines, which was granted and published by the Portugal Ministry of Health on January 2, 2019, then by the Vietnam Ministry of Health two months later. The plant has been in stable operation since the fourth quarter of 2019, contributing over VND32 billion to the total revenue.

Annual Report 2019

MESSAGE FROM THE GENERAL DIRECTOR

Binh Duong Betalactam High-Tech Plant (IMP3)

Dong Thap Plant (IMP1)

Was successful with re-application for EU-GMP certification for 5 lines, including 2 new lines, certified by the Spanish Ministry of Health in July 2019. As a result, the production output increased by 8% compared to 2018 and by 18% compared to 2017, mainly high-value injectable powder, contributing over 32% to the total revenue in 2019, and will continue to play a key role in 2020.

Also successfully passed the 6th re-application for the WHO-GMP certification in December 2019, with the NonBetalactam factory having been in operation for 22 years, and the Penicillin factory producing oral drugs for over 20 years now. IMP1 is always valued for laying the initial and solid foundation for the Company in our investment strategy for EU-GMP factories.

Binh Duong High-tech Pharmaceutical Plant (IMP4)

R&D and drug registration:

Implemented the project’s objectives according to the Gantt diagram and was granted with WHO-GMP certification by Vietnamese Ministry of Health for 4 lines in September 2019. However, the pandemic outbreak in early 2020 has delayed the review of the IMP4 plant with the travel restrictions applicable to flights from the Europe.

Dedicated efforts have been taken to realize the Company’s strategic objectives with 48 new products being registered in 2019, of which IMP1 contributed 8 numbers, IMP2 contributed 22 numbers and IMP3 contributed 18 numbers. In addition, R&D has also submitted 20 product registration dossiers for IMP4 Plant and developed new dispersible tablets for production at IMP2 Plant.

With all these achievements, I would like to express heart felt appreciation to the senior members of the Board of Directors, the Executive Board, other key staff and the entire Imexpharm family for your relentless efforts and dedication throughout 365 days of the past year to weather any challenges and successfully accomplish major targets for 2019.

Ladies and gentlemen, In these early months of 2020, we have been witnessing the extreme anomaly of Covid-19 pandemic around the globe, which to date has affected the lives of 1/3 of the world’s population. This raise concerns about a global economic recession in 2020, which will persist until 2021. Lots of businesses have to downsize and cut costs. Besides concerns related to human health and life, unemployment poses another threat as the unemployment rate is surging globally.

IMP - Leading Aspiration

All these are challenge faced by Imexpharm when we are entering the operation stage for 3 EU-GMP plants. After a long while of investment and preparation, an economic downturn at this moment will be our major obstacle to operate the completed factories while opex keeps increasing.

Newly invested automatic closing production line of Imexpharm.

In this situation, the Board of Directors and the Executive Board of Imexpharm had extensive internal discussions to devise different scenarios and solutions for Imexpharm. We decided to stick with the business plan expected to submit to the Annual General Meeting of Shareholders, targeting the total revenue of VND1,750 billion or an increase of over 23%, and the profit before tax of VND260 billion or a growth of over 28%. This is a bold decision, and we are determined to pursue this goal to maintain the confidence of our shareholders and investors after all these times of investment. Besides, in line with the strategies until 2022, we decided to keep the commitments with shareholders. Accordingly, the total revenue by 2022 is expected to reach VND2,800 billion with pre-tax profit of VND392 billion. The compound annual growth rate (CAGR) for the 2018-2022 tenure in terms of revenue and profit before tax is targeted at 23%. To that end, besides the EU-GMP plants with many differentiated, diverse product lines, and preferential policies for high-quality domestic drugs; human resources play a vital role for Imexpharm to achieve those goals. We will need to focus on building a high quality, disciplined, compliant and efficient workforce. Accordingly, Imexpharm’s people must live our culture and principles, especially the following principles: Number #2 “You are the first to be held accountable for any problems” - Cooperation, no blame, Principle # 3 “Don’t ever say no but give me a solution” Perseverance, Principle #6 “Numbers speak louder than words”- Performance must be measurable.

Dear Imexpharm family, The world is entering an era of turbulence and instability. For Imexpharm in particular, 2020 may witness major changes in our governance structure with the engagement of strategic shareholders. We need to get prepared for that. This will involve hard work, discipline and efficiency. Each individual must reflect on ourselves to adapt swiftly to the new situation. I always want to pay high salaries to each of my members, but that source of income is generated by ourselves. We need to become worthy employees. And today must definitely be better than yesterday. Sincerely,

General Director Ms. Tran Thi Dao, People’s Doctor and Pharmacist

Annual Report 2019

COMPANY OVERVIEW

IMEXPHARM

ASPIRATION TO LEAD Imexpharm staff are feeding uniting spirit in their hearts, strong to overcome struggles and gradually realizing leading aspiration to assure the greatest objective: sustainable development for the Company and safe to work for over 1,300 employees.

GENERAL INFORMATION IMEXPHARM CORPORATION

English Name

: IMEXPHARM CORPORATION

Abbreviated name

: IMEXPHARM

Business registration certificate : No. 1400384433, first registration on August 01st, 2001, then changes in registration happened and last registration for the 27th version on June 21st, 2018 issued by Dong Thap department of planning and investment.

Charter capital (VND)

494,211,590,000 (Four hundred Ninety-four billion, Two hundred eleven million, Five hundred and Ninety thousand dong)

Ownerâ&#x20AC;&#x2122;s equity (VND)

1,558,889,267,000 (One thousand Five hundred and fifty-eight billion, Eight hundred eighty-nine million, Two hundred and sixty-seven thousand dongs)

Head quarter

: No.04, 30/4 Street, Ward 1, Cao Lanh City, Dong Thap Province

Telephone number : 0277.3851 941

Fax

: 0277.3853 106

: imp@imexpharm.com

Website

: www.imexpharm.com

Stock symbol

: IMP

Stock Exchange

: HOSE, in accordance to the decision no. 76/UBCK-GPNY dated on December 04th, 2006

IMP - Leading Aspiration

000 1

YEARS LATER THE LOTUSES STILL BLOOM Business philosophy

Lotus is a simple flower but bears a noble and pure beauty, which is the characteristic of Dong Thap hometown, where Imexpharm was founded. With sustainable development strategies, effectiveness, respect the community and natural environment, Imexpharm commits to pursue the proposed strategies despite whatever challenge the Company has to face and preserve the glory of pharmaceutical field as the lotus lasting forever and perfuming the lives.

Annual Report 2019 13

IMEXPHARM

INITIALLY BEING COMMITTED Imexpharm commits to keep promises consistently with our customers to follow the chosen pathway; offer high effective solutions for public healthcare.

IMP - Leading Aspiration

MISSION Offering high effective solution for public health Imexpharm has identified our mission as “offering high effective solution for public health.

Operation in pharmaceutical industry, in which the top priority is to take a good care for everybody, Imexpharm has identified our mission as “offering high effective solution for public health”. Imexpharm always targets to produce high quality products that meet global innovative standard and are affordable for Vietnamese budget. Imexpharm is diligent and enthusiastic in the path of caring for health with a Vietnamese heart, global thinking and responsible manufacturing attitude.

VISION High quality European standard Hence, Imexpharm aims that all production lines have to meet European standard, which is the Company’s vision.

Europe is considered to be a “cradle” of modern medicine, a huge amount of branded drugs have been invented in such place. Hence, Imexpharm aims that all production lines have to meet European standard, which is the Company’s vision. European standards consist of many factors: from production sites, to raw materials and human resources that have to meet the strict requirements of European Union. Thus, products manufactured in compliance with this standard have high effectiveness in treatment and are outstanding in quality.

Annual Report 2019 15

Customer focus

Cooperation

Efficiency drive

Perseverance

Learning and improvement

Enthusiasm

CORE VALUE Core value guides all activities in Imexpharm. The Company has always followed the mission together with strategic vision by strictly complying 6 core values.

IMP - Leading Aspiration

Customer focus - Always leading in service All high quality solutions for healthcare of Imexpharm are focusing on customers. Because of consumers, Imexpharm innovates continuously our service quality. Therefore, customer focus is the first criterion in the Company’s core values. Customers’ shares, opinions have become a precise asset for Imexpharm, the Company can rely on these factors to create more preeminent service. Customer focus is a core premise to carry out leading services in the current competitive market.

Cooperation - When the problems occur, considering yourself first Innovative technology which the Company is implementing is not originated from sole Imexpharm. But this is the result of cooperation between Imexpharm and partners especially the experts coming from Europe. Imexpharm’s motto is listening, cooperating and supporting to co-develop. Hence, once conflicts occur, Imexpharm always considers and identifies root causes and roles with responsible and studious spirit.

Perseverance - Don’t say “no”, please give solution At the beginning stage, it was not easy for Imexpharm to operate and the battle in market is more and more fierce when domestic enterprises are not given a high credibility in any aspects. Imexpharm identifies that only perseverance in the objectives can help the Company to stand in the market and build a firm foothold. In the difficult path, Imexpharm always seeks for solutions, never stops and accepts backwards.

Enthusiasm - Don’t leave until it’s done Imexpharm is diligent to serve the community with enthusiasm and passion to bring high quality medicines produced by a Vietnam brand for the Vietnamese, which contributes to praise Vietnam values. In Imexpharm culture, the Company states “don’t leave until it’s done”. Based on this motivation, Imexpharm always researches and dedicates to customers’ health.

Learning and improvement - if you think you are the best, you are left behind Nothing exists forever as well as no best position is kept for all time. Hence, Imexpharm members have to learn and improve continuously. If an employee considers himself to be the best, he will be left behind, slowly update compared to external people and become backward.

Efficiency drive - Let’s work together by Numbers Imexpharm affirms that efficiency is not expressed in words but proved by numbers, real data. The Company always evaluate all activities by indexes. They are numbers about business performance or credibility index that customers rate for Imexpharm. Mission and Vision of Imexpharm are being implemented with 6 set values and 6 cultural principles which is hoped to help Imexpharm develop, integrate and maintain the position in the trend of strong competition in Vietnam pharmaceutical industry and the interaction of globalization.

Annual Report 2019 17

OVER 40 YEARS COMMITTING FOR QUALITY

Imexpharm has remarked bright points in the development of Vietnam pharmaceutical industry and contributed to make a dream of “Vietnamese use Vietnam drugs” come true.

At the first days when South region was fully independent, pharmaceutical operations and trading were very difficult and insufficient. Nevertheless, to serve the community after reunion, Grade 2 Pharmaceutical Company was established in Cao Lanh in 1977, which was initial form of Imexpharm. Grade 2 Pharmaceutical company firstly met essential medicine demand for treatments in Dong Thap and other neighbor provinces in Mekong Delta. In 1983, Dong Thap Pharmaceutical Cooperative enterprise was built from Level 2 Pharmaceutical Company. Undergoing many fluctuations of the market and there were some obstacles due to movements of economy structure; however, the Company had been maintaining the leading position of pharmaceutical sector. Since November of 2019, Dong Thap pharmaceutical Cooperative enterprise was officially belonged to Central Pharmaceutical Corporation and changed name to be Seventh Central Pharmaceutical Company. From this milestone, the Company had strong developments and enlarged its distribution to South East and Central regions. Responding to the call of equitization in state owned enterprises, in 2001 Imexpharm Corporation was formed from Seventh Central Pharmaceutical Company. From then to now, Imexpharm has many changes in owner’s equity, is a pioneer in investing for technology, and improve continuously corporate governance and professional qualification of employees. Imexpharm has remarked bright points in the development of Vietnam pharmaceutical industry and contributed to make a dream of “Vietnamese use Vietnam drugs” come true. Spending many decades investing in quality, Imexpharm has become one of leading domestic enterprises in term of technology applied in factories. The Company has strong turning points to create sustainable values. Up to the end of 2019, Imexpharm has had two EU-GMP plants with 8 production lines certified European standard. Then, opportunities are opened for Imexpharm when the Company can upgrade their position and compete directly with foreign enterprises by its core values.

IMP - Leading Aspiration

Annual Report 2019 19

PATHWAY OF CONQUERING THE PEAK LEADING IN TECHNOLOGY Imexpharm was approved as first pharmaceutical company listed in Hochiminh Stock Exchange by State Securrities Commission, stock symbol: IMP

Dong Thap Pharmaceutical Cooperative Enterprise is the first local company certified ASEAN-GMP. At that time, ASEAN-GMP was a new perception in Vietnam. While domestic enterprises were studying technology to produce Generics, Imexpharm identified the core value that is to invest for quality, improve production technology. In addition, ASEAN-GMP has opened many opportunities for development, created premise for the Company to invest and implement proposed strategies.

Imexpharm had been a leading in pharmaceutical industry as the first company of Vietnam Pharmaceutical Corporation was equitized and become Imexpharm Corporation in accordance with Decision no.907/ QĐTg dated July 25th, 2001, the charter capital at the beginning was 22 billion dong.

The Company kept investing, improving factories followed good practices standard of World Health Organization. In details, the Company upgraded the two factories: Betalactam and nonbetalactam to meet WHO-GMP (Good Manufacturing Practices), laboratories certified GLP-WHO (Good Laboratory Practices) and warehouse system met GSP (Good Storage Practices).

1997

2001

2006

1999

2005

2007

Imexpharm Board of Management (that time was Seventh Central Pharmaceutical Corporation), led by Ms. Tran Thi Dao, had braved to enter “ocean” by flighting to Europe to seek for cooperative chances as well as acquire and study most innovative technology on the world. Thanks to this action, the first franchising deal was signed with Biochiemie-Austria, which open the prospect of improve capability and competitiveness for a pharmaceutical in Mekong Delta.

In front of the developed demand, the Company increased charter capital to 64 billion and initially offered shares to strategic shareholders.

The Company was successful in proving bioequivalence for Imeclor (125md) containing Cefalor. Up to now, Imexpharm has 7 products proved bioequivalence. The Company continued to rise charter capital to 116,598,200,000 by stock dividend and issuance of new shares.

IMP - Leading Aspiration

The Company issued new shares to increase charter capital to 152,145,000,000 dong. The Company diversified its product portfolios by building new Penicillin factory to produce injectable and oral medicines in VSIP II Binh Duong with total investment of 50 billion dong from share premium.

The Company signed manufacturing joint venture contract with PharmaScience Canada.

In this year, the Company commenced to construct new headquarter office in Cao Lanh city with total investment of 28 billion dong.

2008

2010

2009

2011

Cephalosporin factory in VSIP II was put into operation. This is the plant applying European technology in manufacturing new Cephalosporin generation of injectable and oral medicines.

Binh Tan Branch was established to strengthen distribution system in Hochiminh city and neighbor regions, which ended dependences on distributors in Hochiminh city.

Annual Report 2019 21

PATHWAY OF CONQUERING THE PEAK LEADING IN TECHNOLOGY

The Company started the project: SAP-ERP in 8 modules. Imexpharm was the first pharmaceutical company that implemented ERP software to management system. The Company also completed to offer bonus share at 10% of charter capital, which sponsored by share premium and increased charter capital to 167,058,100,000.

2012

The Company started to upgrade 2 Cephalosporin production lines (injectable and oral medicines) and Penicillin line of Betalactam high technology plant in Binh Duong in accordance with EU-GMP with total investment of 100 billion dong from ownerâ&#x20AC;&#x2122;s equity.

2014

2013

2015

head quarter building was put into operation together with successful implementation of SAP-ERP system.

The Company issued new shares for strategic shareholder that was Phano Pharmaceutical Joint Stock Company to increase charter capital to 289,426,460,000 dongs.

BSC (Balance Scored Card) was applied to restructure the Company. Penicillin factory in Binh Duong was started to be certified WHO-GMP. Imexpharm commenced to use new materials from Spain with Enzymatic technology for famous antibiotic products. This technology is very safe for users and contributed to protect the environment.

The Company kept training, rotating and restructuring followed BSC. Imexpharm continued to issue new shares to rise charter capital to 263,114,860,000 dong and ran ESOP program to allow key employees to buy the Company stock.

IMP - Leading Aspiration

The Company built new high technology factory in Binh Duong to manufacture products with special processing forms to lead the market. This factory is expected to get EU-GMP certification with total estimated investment of 470 billion dongs from ownerâ&#x20AC;&#x2122;s equity. The Company completed to innovate 3 production lines in high technology plant in Binh Duong and was issued EU-GMP certification by Spain Ministry of Health in September, 2016 and was officially announced by Vietnam Ministry of Health in November, 2016. In this year, the Company opened new Branch in Binh Dinh to push sales and marketing in central area. The Company kept investing for high technology to catch opportunities of a pioneer by starting to build new high technology antibiotics plant in Vinh Loc, which had total investment of 180 billion dongs.

Imexpharm finished construction and validation for Vinh Loc high technology antibiotics plant. This factory was approved for EU-GMP certification in Jan, 2019 and commercially operated in second quarter of 2019.

Imexpharm revenue firstly was higher than 1,000 billion dong in 2016.

The Company raised charter capital to 494,211,590,000 dong by stock dividend at ratio of 15% charter capital.

2016

2018

2017

2019

Imexpharm concentrated to complete constructing factories as schedule. The Company also increased charter capital to 429,781,510,000 dong and carried out ESOP program for employees.

Also remarked the action to upgrade and revalidate Betalactam factories in Binh Duong (IMP3), including 5 production lines (2 new ones).

Imexpharm received visa approval for the injectable medicine: Imextoxim 1g. Imexpharm was applying Distribution Management System-DMS in 20 sales branches and trained for 230 medical sales representatives to access new technology to improve selling and management system.

Besides, the Company has completed to build IMP4 and was issued WHO-GMP certification for this factory. In this year, Imexpharm started to construct herbal medicine factory and Quality control center in Cao Lanh, Dong Thap

The Company continued to implement BSC to restructure, prepare personnel for new factories that were going to operate.

Annual Report 2019 23

IMEXPHARM CULTURE FOUNDATION OF ASPIRATION

Each employee is a member in the family, all individuals are eager to support and help each other to achieve overall target that is to boost the development of Imexpharm.

Imexpharm always updates and applies innovative technologies in production and management to catch opportunities, strengthen position in the way of global integration of Vietnam. However, Imexpharm decides “integration without assimilation” and does not lose the characteristics. Although the Company considers to refresh continuously, Imexpharm always keeps open and friendly culture of Dong Thap Muoi people. Imexpharm is dedicating to “reaching out to the world” but also devoting for the community, the healthy and glorious Vietnam. Imexpharm culture depicts the fact of “Imexpharm-sustainable home”, in which each employee is a member in the family, all individuals are eager to support and help each other to achieve overall target that is to boost the development of Imexpharm. The Company usually organizes activities for members to meet and communicate, which can raise enthusiasm, uniting spirit and company engagement of employees. Besides, there are many programs to train and educate employees in order to help them fulfil the jobs most effectively. Imexpharm praises the role of efforts and changes by being trained and coached rather than competing to push employee’s developments. Hence, Imexpharm working environment is very friendly, open and concentrating on sharing.

IMP - Leading Aspiration

Annual Report 2019 25

TITLE HONORS AND AWARDS

In its proud journey, Imexpharm has received different awards that honor its contribution. Some of these achievements can be listed as follows

IMP - Leading Aspiration

◊ Labor Hero, awarded by the President of the Socialist Republic of Vietnam in 2006. ◊ ISO Gold Cup, awarded by the Ministry of Science and Technology in 2006 ◊ Certificate of High Quality Product of Vietnam, awarded by Saigon Marketing Newspaper in 2007. ◊ Third-Class Independence Medal, awarded by the President of the Socialist Republic of Vietnam in 2008. ◊ Certificate of Merit for significant contribution to the program “For Development of tomorrow” of Tuoi Tre News, awarded by the People’s Committee of Ho Chi Minh City from 1988 to 2008 consecutively. ◊ Certificate of Excellence for implementation of GPP principle and standard for pharmacies for the hospital block in Ho Chi Minh City, awarded by the Director of the Department of Health of Ho Chi Minh City in 2009. ◊ Leader Flag of the Emulation Movement in 2008, awarded by the President of the Socialist Republic of Vietnam. ◊ AWARDS certificates and cups include “Vietnam Leading Joint Stock Company” in 2008, “50 Best Vietnamese Listed Companies” in 2009 and “Reputable Stock Brand Name” in 2008, 2009 and 2010” ◊ Cup of “Top 100 Reputable Brand Names of Vietnam” in 2014, 10th time, awarded by the Vietnam Union of Science and Technology. ◊ Certificate of Corporation Competitiveness Index, “Top Brands 2014”, awarded via Global GTA Vietnam by Inter Conformity Certification Organization, Federal Republic of Germany. ◊ Top 3 Best Annual Reports Awards in 2018, First Prize of Corporate Governance Awards for the medium-sized enterprise category in 2018; Top 30 Best Annual Reports Awards in 2016; Top 10 Best Annual Reports Awards in 2014, 2015, Presentation, Trustworthiness and Sufficiency of the Sustainability Report Awards; Top 30 Best Annual Reports Awards in 2012, 2013; Top 50 Best Annual Reports Awards in 2011; ◊ “Star of Vietnam’s Medicine”, awarded by the Ministry of Health in 2014, 2015. ◊ In 2016-2018, Imexpharm was honored to be in the top 100 sustainable enterprises of Vietnam. This award was given by Vietnam Chamber of Commerce and Industry -VCCI to honor businesses that promote sustainable development in economic, social and environmental terms.

Annual Report 2019 27

TITLE HONORS AND AWARDS

TOP 100 VIETNAM SUSTAINABLE ENTERPRISES 2019 The award is an initiative put forward by VCCI in coordination with the Ministry of Natural Resources and Environment, Ministry of Labor, Invalids and Social Affairs ... to develop and publish a Corporate Sustainability Index (CSI) with 131 criteria for annual voting, and honor businesses with outstanding performance on sustainable development. The award is to send the message to the business community, that is, to change their business mindset for them to view sustainable development from a new perspective. First of all, it is not a distant scenario for large companies and corporations or world powers. That is ubiquitous and an inevitable requirement of development process. Imexpharm is a responsible enterprise and targeting the highest standard in business and production. Imexpharm continued to hold its position as a responsible business and moved towards the highest standards in business production; in 2018, Imexpharm kept its position in the Top 100 Vietnam Sustainable Enterprise for the third consecutive year. This encouraged the Company to further pursue sustainable management goals and create new values in its health care mission for the community with highly effective solutions at reasonable prices and full implementation of its corporate social responsibility.

IMP - Leading Aspiration

TOP 10 BEST ANNUAL REPORTS AWARDS AND TOP 5 BEST CORPORATE GOVERNANCE AWARDS FOR MEDIUM-SIZED CAPITALIZATION CATEGORY The Best Annual Reports Awards is a prestigious award given by Ho Chi Minh Stock Exchange, Hanoi Stock Exchange and Vietnam Investment Review, with the technical support of IFC and the largest international auditing company in Vietnam. In 2018, the award was expanded to become Vietnam Listed Company Awards to meet the stock marketâ&#x20AC;&#x2122;s development requirements. Despite more and more rigorous rating criterion, Imexpharm still won two awards eventually, i.e. ranked sixth in Annual Reports Awards, and ranked first for the Best Corporate Governance Awards - for Medium-sized capitalization category. The awards recognized the standards and reliability of our Annual Reports, as well as transparent data policies with our investors, shareholders and corporate customers. Imexpharmâ&#x20AC;&#x2122;s reputation is not only confirmed by quality products but also by the management system recognized by the market.

As for the year 2019, Imexpharm received the following notable awards

“GOLDEN CRANE WINGS” PRIZE AWARDED BY VCCI FOR THE PATH OF 10 YEARS

DONG THAP OUTSTANDING ENTERPRISE AWARD IN 2019

In 2019, Imexpharm is honorable to be one of 27 enterprises awarded “Golden Crane Wings” by VCCI Can Tho. The “Golden Crane Wings” is voted and awarded by VCCI for the path of 10 years. Being differentiated from other prizes that were awarded every year, this prize was evaluated for the path of 10 years and reflected the sustainable values created by enterprises. This is precious prize to honor excellent companies that led the industry and had a lot of contributions for social and economic developments in Mekong Delta for 10 years from 2009 to 2019. Again, Imexpharm affirmed that the Company was one of leading pharmaceutical companies in Vietnam and trusted by enterprises and local community. This achievement proved the right strategies of Imexpharm, which is boosting sustainable and stable growth thanks to concentrate on investing in quality and aiming to most effective solutions for public health.

Imexpharm was awarded outstanding enterprise by Dong Thap Provincial People’s committee thanks to positive contribution for home province’s society and economy. Imexpharm is always a leading flag in Dong Thap in promoting production and developing local community. Imexpharm is proud of creating about one thousand jobs that can advocate the industrialization and modernization of Dong Thap.

Annual Report 2019 29

BUSINESS SCOPE AND LOCALITIES As provided in the business registration certificate, Imexpharm’s business scope includes:

• Manufacturing and processing pharmaceuticals. Processing medicinal; • Wholesaling, importing and exporting pharmaceuticals, medical equipment and tools, chemicals, pharmaceutical packaging materials, and materials and chemicals for manufacturing functional foods, disinfectants and sanitizers for human; • Wholesaling cosmetics; • Cultivating material medica; • Wholesaling foods, functional foods, drinks, alcoholic and carbonated drinks; • Manufacturing milk; • Manufacturing and process functional and nutritional foods; • Providing storage system services for storing drugs and materials for production pharmaceuticals; • Retailing medicines, medical equipment, cosmetics and cleaning materials in specialized stores; • Financing activities.

Imexpharm’s main business is manufacturing and trading of western medicines. At Imexpharm, the key products are Betalactam antibiotics, including oral and injectable antibiotics. These products were studied intensively and produced with high-quality materials that meet stringent standards adopted by ICH-CEP member countries in its high-tech factories which are operated in line with the global advanced standards. Besides, the company also focuses on producing non-betalactam products such as: analgesic, antipyretic, cardiovascular, digestive drugs... In recent years, Imexpharm has further invested in functional food products and auxiliary medicinal products to diversify its product lines released to the OTC market. However, the company continued to maintain and promote production and distribution of key products. At the beginning of 2020, Imexpharm had a total of 283 market authorizations for production and distribution, increased 20 MAs compared to the previous year due to the fact that the Company filtered and stop manufacturing lowefficient products of IMP1 factory in Dong Thap. In term of EU-GMP plants in Vinh Loc (IMP2) and Binh Duong (IMP3), they have more than 100 market authorizations, which rose 40 MAs year over year.

IMP - Leading Aspiration

Imexpharm products include the following categories: Antibiotics group (oral and injective), specialized treatment group (cardiovascular, diabetic, antihistaminic and antiallergic, peripheral vasodilator and cerebral activators drugs, etc.), pain relief group, gastrointestinal & hepatobiliary group, musculoskeletal group, functional foods group, vitamin group and other products. Therein, the 3 product groups of: Antibiotics, specialized treatment and pain relief accounted over 80% of consumption value in recent years. Imexpharm’s business areas are located throughout Vietnam. The company first operated only in Dong Thap province and neighboring provinces in the Mekong Delta region. Currently, it coverage has been expanded nationwide while sales in Ho Chi Minh City, the South East, the Central Highlands and the North represent a significant proportion in the Company’s revenue. As of December 31, 2019, the company has 20 sales branches nationwide.

Ha Noi

As of December 31, 2019, Imexpharm has

Nghe An

sales branches

nationwide.

Hoang sa island Con Co island

Antibiotics Da Nang

3 product groups accounted over

80%

Pain relief

Ly Son island

of consumption value in recent years

03 Specialized Treatment

Binh Dinh

Daklak Khánh Hòa

Binh Duong

Tay Ninh

Ho Chi Minh Dong Thap An Giang

Dong Nai

Phu Quy island

Ba Ria - Vung Tau

Tien Giang

Kien Giang

Can tho Phu Quoc

Truong Sa island

Ca Mau Hon khoai

Con Son island

Annual Report 2019 31

WHO-GMP

EU-GMP

Establishing the position - leading in technology WHO-GMP

IMP - Leading Aspiration

Successfully re - validate for IMP3 factory in Binh Duong IMP3 is the first factory of Imexpharm that was certified EU-GMP by Spain Ministry of Health for 3 production lines in 2016. In 2019, IMP had to revalidate EU-GMP standard for this plant. In spite of re-validating procedures, the Company had to prepare perfectly for every process because EU standards are always strict and do not allow any careless. However, based on experiences and core values, Imexpharm was successful to re-validate IMP3 factory in August, 2019. Then, this plant can contribute considerably to Imexpharmâ&#x20AC;&#x2122;s revenue of 2019 and next years.

Finishing construction and obtaining WHO-GMP for IMP4 factory in Binh Duong IMP4 is the modernest plant which had most investments of Imexpharm. In 2019, Imexpharm completed basic construction and was approved WHO-GMP by Vietnam Ministry of Health for this factory. This site is in the stage of waiting for EU-GMP validation and expected to create breakthrough in revenue of Imexpharm in the period from 2020 to 2022.

Commencing to build Quality Control Center and Herbal medicine factory in Headquarter - Cao Lanh, Dong Thap Quality Control center and Herbal medicine factory were firstly erected in October 2019 with total investment of 50 billion together with some tools and equipment transferred from other factories of Imexpharm. Although key products of Imexpharm are high quality antibiotic drugs, the Company also focuses on maintaining and stabilizing growth of OTC channel in revenue structure. Thus, herbal medicine factory being able to produce functional foods is considered to be an addition for OTC product portfolios of Imexpharm in order to diversify type of drugs, foods sold by the Company in OTC and create competitive advantages for this channel which is under strong competition.

Annual Report 2019 33

KEY INDICATORS OF 2019

Growth rate

18.4%

Growth rate

17.7%

1,420.7

1,402.5 BILLION DONG

BILLION DONG

TOTAL NET REVENUE AND INCOME

IMP - Leading Aspiration

TOTAL NET REVENUE

Growth rate

15.4%

222.4 BILLION DONG

Growth rate

17.1%

162.4

BILLION DONG

PROFIT BEFORE TAX AND TECHNOLOGY AND SCIENCE FUND DISTRIBUTION

PROFIT AFTER TAX

Annual Report 2019 35

SIGNIFICANT INDICATORS FOR 5 YEARS: 2015-2019

Total net revenue and income (Unit: Billion VND) 16,000

1,420.7

14,000

1,207.1

1,185.4 12,000

984.1

1,021.0

10,000 800 600 400 200 0

2015

2016

2017

2019

2018

If 2015 is chosen to be base year, compound annual growth rate of total net revenue and income is 9.6%

Profit 2015-2019 (Unit: Billion VND) Profit before tax and technology and science fund distribution

Profit before tax

Profit after tax

250

222.4 202.4

192.8

200

173.8 150

131.7 118.7

100

92.9

140.5 126.5

140.5

146.6

162.4

138.7

117.4

101.2

2015 2016 2017 2018 2019 Profit before tax and technology and science fund distribution compound annual growth rate is 14% while CAGR of profit after tax is 15%. 36

IMP - Leading Aspiration

Ownerâ&#x20AC;&#x2122;s equity (Unit: Billion VND)

Total Asset (Unit: Billion VND)

From 2015 to 2019, ownerâ&#x20AC;&#x2122;s equity increased 652.1 billion dongs with CAGR was 14.5%

Total asset had CAGR of 14%. 20,000 18,000

18,000 16,000

1,395.3

14,000

1,504.6

1,558.9

10,000

1,092.7

12,000

906.8

935.9

2017

2018

1,847.2

1,155.8

10,000

800

600

400

200

400

2015

1,774.2

16,000 14,000

12,000

1,773.6

2016

2017

2018

2019

2015

2016

2019

History of charter capital increase:

The Company was initially listed in 2006 with 84 billion charter capital. Undergoing 13 years since the first public offer, Imexpharm charter has increased nearly 6 times to 494.2 billion.

Charter capital

(Unit: Billion VND)

600.0

500.0

494.2

2018

2019

429.8 400.0

300.0

200.0

100.0

84.0

2006

116.6

2007

2008

2009

152.1

167.1 167.1

2010

2011

2012 2013

263.1

289.4

2014

2015

2016

2017

Annual Report 2019 37

MANAGEMENT AND OPERATION

MANAGEMENT AND OPERATION Based on human as center point, technology as characteristic feature; disciplines together with duties; Imexpharm managerial and operational activities are harmonious combinations between the strength of innovative technology and the responsible labor spirit of Imexpharm employees.

ORGANIZATION AND MANAGEMENT STRUCTURE

SUPERVISORY BOARD

ORGANIZATION Imexpharmâ&#x20AC;&#x2122;s organizational structure is closely aligned and supportive of the business model. Organization chart as to March 2020 is described below:

INTERNAL AUDIT BOARD

IMP - Aspiration to leader

DEPUTY GENERAL DIRECTOR

FINANCING & ACCOUNTING DEPARTMENT

QA DEPARTMENT

INTERNAL CONTROL DEPARTMENT

QC DEPARTMENT

INFORMATION TECHNOLOGY DEPARTMENT

TECHNICAL DEPARTMENT

LEGISLATIVE DEPARTMENT

GENERAL WAREHOUSE

PLANNING DEPARTMENT

NON-BETALACTAM FACTORY

BASIC CONSTRUCTION DEPARTMENT

PENICILLIN FACTORY

BRANCH NO.1 (HO CHI MINH City)

VINH LOC HI-TECH FACTORY

INVESTOR RELATIONS (IR) DEPARTMENT

BRANCH NO.2 (HO CHI MINH City)

SHAREHOLDERS GENERAL MEETING

BOARD OF DIRECTORS

GENERAL DIRECTOR

CONSULTING BOARD

DEPUTY GENERAL DIRECTOR

R&D DEPARTMENT

MARKETING DEPARTMENT

BINH DUONG HI-TECH FACTORY (IMP4)

BINH DUONG BETALACTAM HI-TECH FACTORY (IMP3)

STRATEGICALLY MANAGING DEPARTMENT

SALES DIVISION

ADMINISTRATION & HR DEPARTMENT

SALES SUPPORT DEPARTMENT

ORGANIZATION DEVELOPMENT DEPARTMENT

SALES BRANCH

Annual Report 2019 41

ORGANIZATION AND MANAGEMENT STRUCTURE

Imexpharm’s organization and management is structured according to the model stipulated at Point a, Clause 1, Article 134 of the Law on Enterprises, i.e. the model with the Supervisory Board. The General Meeting of Shareholders is the highest body, to be assisted by the Supervisory Board. The Board of Directors is responsible for reporting to the General Meeting of Shareholders, and devising the strategies, production and business plans for the Board of Management to implement and periodically report to the Board of Directors.

General Director: »» The General Director is responsible for the development strategy and overall management of the Company »» Direct management: (1) Sales Division: comprised of a distribution system with 20 sales branches, (2) Binh Duong High-Tech Plant (IMP4). »» National Sales Director: Assists the General Manager in managing the Sales Division, regularly report and consult the General Manager in managing the Sales Division.

IMP - Leading Aspiration

In addition, Imexpharm has four Deputy General Directors who assist the General Director in the following mandated areas:

»» Dong Thap: (1) Quality Assurance Department (QA), (2) Technical Department, (3) General Warehouse, (4) NonBetalactam Plant, (5) Penicillin Plant (oral drugs).

Deputy General Director of Finance, responsible for managing: (1) Finance and Accounting Department, (2) Internal Control Department, (3) Information Technology Department, (4) Legal Department, (5) Planning Department (coordination between sales, production, procurement and inventory), (6) Office of Capital Investment, (7) Ho Chi Minh City Branch (in charge of supplying raw materials, excipients, chemicals for testing, packaging, import and export, franchising sales, prescribed drugs), Investor Relations Department (IR)

»» Ho Chi Minh City: (1) Vinh Loc high-tech Antibiotics Plant (IMP 2): including 3 EU-GMP production lines, (2) Ho Chi Minh City Branch 2: General warehouse in HCMC.

All branches and plants are financially dependent and subject to reporting requirements to the Finance and Accounting Division.

Deputy General Director of Administration, responsible for managing: (1) Marketing Department, (2) Strategic Management Department, (3) Human Resources Department, (4) Human Resource Development Department.

Deputy General Director of Production Division 1, in charge of Dong Thap Plant and Vinh Loc Plant in Vinh Loc Industrial Park, Binh Tan District, Ho Chi Minh City, covering: Deputy General Director of Production Division 1, in charge of Dong Thap Plant and Vinh Loc Plant in Vinh Loc Industrial Park, Binh Tan District, Ho Chi Minh City, covering:

Deputy General Director of Production Division 2, responsible for managing: (1) R & D Department; (2) Betalactam Binh Duong High-Tech Plant (IMP 2), including Cephalosporin Plant (injectable and oral drugs), Penicillin Plant (injectable drugs).

In addition, Imexpharm also has an Internal Audit function (directly under the Internal Control Department) and Advisory Team to assist the Board of Directors in managing and overseeing the Company.

Annual Report 2019 43

BOARD OF DIRECTOR MEMBERS AND DUTIES

Ms. Tran Thi Dao

Mr. Nguyen Quoc Dinh

Short bio Year of birth: 1952 Place of birth: Dong Thap Nationality: Vietnam Education background: Bachelor of Science in Pharmacy

Short bio Year of birth: 1962 Place of birth: Dong Thap Nationality: Vietnam Education background: Bachelor’s Degree in Finance & Accounting

Duties

Vice Chairwoman of the BOD - General Director

»» Being in charge of development strategies of the Company;

»» Supervising implementation of strategic objectives of the Sales division;

»» Monitoring construction progress, production activities, product plans of EU-GMP qualified factories (Vinh Loc High-tech Antibiotic Factory - IMP2, Betalaactam Binh Duong High-Tech Plant - IMP3, Binh Duong High-Tech Plant - IMP4); and factories in Dong Thap;

»» Supervising production and business activities and participating in the governance of associated companies »» Performing other rights and responsibilities as prescribed by laws, the Company Charter and decisions of the BOD.

Chairman of the BOD, Deputy General Director

»» Devising operational plan and working agenda of the Board of Directors;

»» Supervising implementation of Resolutions and Decisions of the BOD; »» Monitoring progress, quality and budget of the Company’s investment projects

»» Supervising implementation of strategic objectives of the Finance division;

»» Supervising production and business activities and participating in the governance of associated companies »» Taking charge of internal audit and risk management

Employment history:

»» Being in charge of public relations and information disclosure

»» August 2001 - April 2013: Chairwoman of the Board of Directors, General Director of Imexpharm Corporation

Employment history:

»» 1984 - July 2001: Director of Dong Thap Pharmaceutical Company - Central Pharmaceutical Company No. 7.

»» Performing other rights and responsibilities as regulated by laws, the Company Charter and decisions of the BOD

»» May 2013 to present: Vice Chairwoman of the BOD - General Director of Imexpharm.

»» 1995-1999: Manager of Professional Department I - Bureau for State Property Management at Enterprises in Dong Thap province.

»» 1999 - July 2001: Deputy Director of Dong Thap Pharmaceutical Company - Central Pharmaceutical Company No.7. »» August 2001 - April 2013: Member of the Board of Directors, Deputy General Director of Imexpharm Corporation »» May 2013 to present: Chairman of the BOD, Deputy General Director of Imexpharm.

IMP - Leading Aspiration

At the Annual General Meeting 2018, members of the Board of Directors and Supervisor Board for the term of 2018-2022 have been elected. In 2019, there is no change in Imexpharm Board of Directors and Supervisory Board structure.

Mr. Le Van Nha Phuong

Mr. Vo Huu Tuan

Short bio Year of birth: 1980 Place of birth: Dong Thap Nationality: Vietnamese Education background: Doctor of Pharmacy in France

Short bio Year of birth: 1974 Place of birth: Quang Nam Nationality: Vietnamese Education background: Bachelor of Foreign Trade University, University of Technology Sydney UTS (Australia), Master of Finance & Banking (Switzerland).

Member of the BOD, Deputy General Director

Duties

»» Supervising the implementation of strategic objectives of Production Division 2 and the Quality Control system at Betalactam High-tech Factory in Binh Duong (IMP 3); »» Supervising the delivery of the R&D and export market development strategies of the Company;

»» Consolidating reports of the BOD and AGM in assigned areas when required and prior to meetings, AGMs;

»» Performing other rights and responsibilities as prescribed by laws, the Company Charter and decisions of the BOD.

BOD Member

Duties

»» Being in charge of fund raising and financial investments of the Company; »» Supervising information disclosure of the Company;

»» Taking charge of handling communications crises of the Company; »» Consolidating reports of the BOD and AGM in assigned areas when required and prior to meetings, AGMs;

Employment history:

»» Performing other rights and responsibilities as prescribed by laws, the Company Charter and decisions of the BOD.

»» April 2005 - August 2006: Deputy Director of R&D Department at Domesco

»» Mr. Vo Huu Tuan is currently Deputy Director of Bao Viet Securities Joint Stock Company cum Director of Ho Chi Minh Branch of Bao Viet Securities JSC. (listed).

»» October 2004 - April 2005: R&D employee at Domesco Medical Import Export Joint Stock Company

»» August 2006 - August 2008: Director of Department of Export International Supplies and Cooperation at Domesco. »» October 2010 - October 2011: Director of R&D Department at Domesco

Employment history:

»» Mr. Vo Huu Tuan was appointed as a member of Imexpharm’s BOD on 10 April 2009.

»» October 2011- March 2014: Deputy General Director of Domesco

»» April 2014- December 2016: Director of the plant of AMPHARCO »» January 2017 to present: Deputy General Director of Imexpharm Corporation, in charge of the High-tech Betalactam Plant in Binh Duong and R&D Division across the Company. »» Mr. Le Van Nha Phuong was appointed as a member of Imexpharm’s BOD on April 28, 2018.

Annual Report 2019 45

BOARD OF DIRECTOR MEMBERS AND DUTIES

Mr. Huynh Van Nhung

Mr. Tran Anh Tuan

Short bio Year of birth: 1973 Place of birth: Dong Thap Nationality: Vietnamese Education background: Postgraduate Education Junior (PGJ) in Pharmacy

Short bio Year of birth: 1973 Place of birth: HCMC Nationality: Vietnamese Education background: Bachelor of Banking, MBA

Duties

»» Being in charge of supervising activities relating to Human Resource, Remuneration and Bonus

Member of the BOD, Deputy General Director

»» Supervise the implementation of strategic objectives of Production Division 1 and Quality Control system including factories in Dong Thap, Vinh Loc High-tech Antibiotic Factory (IMP2), labor safety, fire and explosion safety throughout the Company; »» Monitoring the delivery of sustainable development goals: energy saving, environmental protection, etc.; »» Consolidating reports of the BOD and AGM in assigned areas when required and prior to meetings, AGMs.

»» Performing other rights and responsibilities as prescribed by laws, the Company Charter and decisions of the BOD. Employment history:

»» 1998-2007: Deputy Director of Quality Assurance (QA) of Imexpharm.

»» 2007-2012: Director of Quality Assurance (QA) of Imexpharm. »» 2012- May 2013: Deputy General Director

»» April 2014 to present: BOD Member, Deputy General Manager of Imexpharm.

IMP - Leading Aspiration

BOD Member

Duties

»» Provide management advisory for the Board of Directors; »» Other activities relating to macroeconomic issues;

»» Consolidating reports of the BOD and AGM in assigned areas when required and prior to meetings, AGMs;

»» Performing other rights and responsibilities as prescribed by laws, the Company Charter and decisions of the BOD. Employment history:

»» 2001 – 2003: Manager of Investment Consultancy Department of Vision Associates »» 2003 to present: Business Development Director of Vietnam Investment Fund Management Joint Stock Company (VFM).

»» Mr. Tran Anh Tuan was appointed as a member of Imexpharm’s BOD on April 10, 2009.

Ms. Han Thi Khanh Vinh

Mr. Ngo Minh Tuan

Short bio Year of birth: 1975 Place of birth: Hung Yen Nationality: Vietnamese Education background: Master of International Accounting Swinburne University of Technology, Australia.

Short bio Year of birth: 1979 Place of birth: Dong Thap Nationality: Vietnamese Education background: Master of Business Administration (MBA)

Duties

»» Provide management advisory for the Board of Directors;

»» Supervising implementation of the Company’s strategic objectives with BSC;

»» Support in building rapport and partnership with industry partners and investors;

»» Supervising the implementation and effective control of marketing and communication activities of the Company;

BOD Member

»» Update the ongoing industry trend in the pharmaceutical sector and advise on financial activities of the Company;

»» Performing other rights and responsibilities as prescribed by laws, the Company Charter and decisions of the BOD. Employment history:

»» 1999 – 2001: Accountant of Daewoo Hanel Electronics Co., Ltd.

»» 2001 – 2002: Accountant cum Assistant to Chief Financial Officer of Canon Vietnam »» 2002 – 2008: Chief Accountant of Language Link Vietnam »» 2008 – 2013: Chief Accountant of KinderWorld Vietnam International JSC.

»» 2013 – 2016: Chief Financial Officer of Pegasus Investment and Consulting JSC. »» 2016 to present: Deputy General Director of Viet Phuong Investment Group JSC. (unlisted)

Member of the BOD, Deputy General Director

Duties

»» Supervising the implementation of the Company’s strategic human resource development;

»» Performing other rights and responsibilities as prescribed by laws, the Company Charter and decisions of the BOD. Employment history:

»» 2004-2014: Secretary to the BOD, Secretary to the General Director. »» 2014- March 2015: Head of the Board of Strategy and Development, Assistant to the General Director

»» April 2015 to present: BOD Member, Deputy General Manager of Imexpharm.

»» Mr. Ngo Minh Tuan was appointed to the position of BOD member at Imexpharm as from 30 March 2015, which was ratified by the General Meeting of Shareholders on 24 April 2015.

»» December 2016 to present: Member of Board of Directors of Vietnam Pharmaceutical Corporation (VINAPHARM) (unlisted) »» February 2017 to present: BOD Member cum Deputy General Director of Vietnam Pharmaceutical Corporation »» Ms. Han Thi Khanh Vinh was elected as an Imexpharm Board Member from April 28, 2018.

Annual Report 2019 47

INTRODUCTION TO THE BOARD OF MANAGEMENT

Ms. TRAN THI DAO General Director

Ms. Tran Thi Dao, People’s Doctor, is considered one of the “Golden Generation” not only at Imexpharm but also in the whole pharmaceutical industry of Vietnam. Accompanying Imexpharm since the very early days, Ms. Dao has been contributing her part in transforming the company from a modest manufacturing pharmaceutical enterprise of Dong Thap province into a leading company of today’s pharmaceutical industry of Vietnam.

Ms. Tran Thi Dao is the soul of Imexpharm. With pioneering strategies, assertiveness and determination, she and other leaders has led Imexpharm and generations of employees through various ups and downs along the path of development to today’s achievements. Among these, a series of EU-GMP-certified plants brings Imexpharm to be the first local manufacturer to have most EUGMP production lines in Vietnam, BSC projects-human resources management and Distribution Management System-DMS, etc. were results of her efforts.

IMP - Leading Aspiration

As recognition for her achievements, Ms. Tran Thi Dao has been awarded numerous notable titles including:

No.

Date

Awarded by

21/10/2005

President

Labor Medal Second Class

Excellence in protection and care of people’s health.

23/03/2006

Ministry of Education and Training

Order of Merit for Education

Contribution to national education.

22/02/2008 President

Honor of Meritorious Doctor

Contribution to protection and enhancement of people’s health

14/01/2009

Labor Hero

Excellent results in labor and innovation during the period 1998 - 2007, contribution to building up the Socialist Republic and National Defense.

Standing Board of Ho Chi Minh Communist 09/03/2009 Youth Union’s Central Committee

Order of Merit

Order of Merit for Young Generation for contribution results for education and improvement of the Youth Union.

30/09/2011

People’s Committee of Certificate of Merit Dong Thap Province

Excellent results during 10 years of contribution to encouraging talents of Dong Thap Province

2005, 2008, 2014

VCCI, Central Representative Committee of Vietnam Businesswoman Women’s Union (Golden Rose Cup)

Excellence in corporate governance and contribution to national socio-economic development.

02/24/2014

President

Title

Achievement

Honor of National Physician

Being a dedicated businesswoman, she is strong, assertive and determined when it comes to change. In addition, she treats everyone with heart and always cares about improving living standards of Imexpharm’s employees while presenting herself as a humble life-long learner. Through her style of leading by example, Ms. Dao is a symbol of Imexpharm’s culture that it has been striving to build next generations into.

Excellent contribution to protection and enhancement of people’s health.

In addition to managing Imexpharm with ambitious development strategies, Ms. Dao has actively supported many affiliated units over many years in finance, technology and production techniques, development strategies, etc. (Kindly refer to Ms. Tran Thi Dao’s CV in the Introduction to the BOD)

Annual Report 2019 49

INTRODUCTION TO THE BOARD OF MANAGEMENT There was no change in Imexpharm Board of Directors member’s structure in 2019.

Mr. NGUYEN QUOC DINH

Mr. LE VAN NHA PHUONG

2019 remarked the 20th year that Mr. Nguyen Quoc Dinh has been attaching in Imexpharm family. Being in charge of the company’s finance since first days joining the Company, Mr. Dinh has focused on building up systems for financial management, internal audit and risk management in order to optimize the use of capital sources and investments; and promptly finance business and production activities of the company. With General Director Tran Thi Dao, Mr. Dinh has engineered Imexpharm to be a public company, listed on Ho Chi Minh City Stock Exchange and repeatedly directed successful share issuance to raise capital. He has also been in charge of information disclosure with a transparent strategy which keeps valued shareholders and investors up-to-date. In addition, with the determination to modernize the management information system in line with 4.0 technology, since 2013, Mr. Dinh has led the implementation of the first SAP-ERP system for pharmaceutical industry on all 8 complete modules, from finance, supply, production to sales, and intelligent reports to deliver accurate and timely management information requirements.

Mr. Le Van Nha Phuong earned his Doctor of Pharmacy in France. Joining Imexpharm Family from the beginning of 2017 as a Deputy General Director in charge of Production Division 2, Mr. Phuong is responsible for Betalactam High-tech Factory in Binh Duong (IMP3) and R&D department. Mr. Phuong is also in charge of the sustainable development goals for Production Division 2.

Deputy General Director

As the Chairman of the Board, Mr. Dinh remains persistent in developing a transparent and advanced corporate governance system in line with the best local and international practices. From 2018, Mr. Dinh also serves as the Head of Imexpharm’s Sustainable Development Committee with hope to make Imexpharm become a leading pharmaceutical company in sustainable development and be most reliable in Vietnam. In addition to the main responsibilities at Imexpharm, Mr. Dinh also actively contributes to the management of associates. He is also dedicated to supporting start-up projects in the province. Mr. Nguyen Quoc Dinh was awarded the title “Representative Businessman of Mekong Delta in the Era of International Integration” by VCCI Can Tho in recognition of his proactive contribution to the economy of the Mekong Delta. That was the 7th year consecutively (2011-2017) he was awarded the title. (Kindly refer to Mr. Nguyen Quoc Dinh’s CV in the Introduction to the BOD) 50

IMP - Leading Aspiration

Deputy General Manager

With professional expertise and innovation, Mr. Phuong has brought many achievements for the R&D department, and successfully operated the IMP3 Plant. Mr. Phuong was also assigned to be in charge of R&D strategy and export market of the Company until 2022. (Kindly refer to Mr. Le Van Nha Phuong’s CV in the Introduction to the BOD)

Mr. HUYNH VAN NHUNG

Mr. NGO MINH TUAN

Mr. TRAN HOAI HANH

Mr. Nhung joined Imexpharm in August 1998 as an employee of the Testing Laboratory. Thanks to his excellent professional and managerial capabilities, Mr. Nhung was highly trusted by the Board of Directors and appointed to the position of Deputy General Director in charge of Quality Assurance System (QA) and Production Division as from 05/15/2012.

He was appointed as the Deputy General Director of Imexpharm from March 30, 2015. After 16 years of serving high managerial positions in Imexpharm, Mr. Tuan has acquired deep understanding of the culture and human, the business and production strategies, the management and selling system at Imexpharm. In his current position, Mr. Tuan is in charge of strategic management, BSC of the whole Company. Besides, he is responsible for staff benefits, recruitment and human resource development strategies, human resource training and development. In addition, Mr. Tuan is in charge of Imexpharm’s supplemental business.

Short bio

(Kindly refer to Mr. Ngo Minh Tuan’s CV in the Introduction to the BOD)

March 2005 - July 2014: Deputy Manager of the Department of Finance and Accounting of Imexpharm Corporation

Deputy General Director

Currently, Mr. Nhung is responsible for Quality Assurance System (QA), Production Division 1 including Dong Thap factory (IMP1), Vinh Loc High-tech Antibiotic Factory (IMP2). In addition, Mr. Nhung is also a sustainable committee member taking charge of goals for Production Division 1, which consists of energy use, production environment and labor health, hygiene and safety. (Kindly refer to Mr. Huynh Van Nhung’s CV in the Introduction to the BOD)

Deputy General Director

Chief Accountant

Year of birth: 1963

Place of birth: Dong Thap Nationality: Vietnamese

Education background: Bachelor’s Degree in Finance & Accounting in Ho Chi Minh City Employment history:

1988: Employee at Department of Finance and Prices of Hong Ngu District. 1990 - 1995: Employee at Department of Finance and Prices of Tan Hong District.

July 1997 - February 2005: Employee at Department of Finance and Accounting of Imexpharm Corporation

2014 to present: Chief Accountant of Imexpharm Corporation

Annual Report 2019 51

INTRODUCTION TO THE SUPERVISORY BOARD

There was no change to the Board of Management in 2019.

Ms. LE THI KIM CHUNG Member of the Supervisory Board

Mr. NGUYEN DUC TUAN Head of the Supervisory Board

Short bio

Place of birth: An Giang

Place of birth: HCMC

Year of birth: 1960

Nationality: Vietnamese

Education background: Bachelor’s Degree in Economics, Bachelor’s Degree in Law Employment history

1992-2006: Secretary, Trial judge cum Head of Review and Inspection Department of People’s Court of Dong Thap Province.

2007-2016: Lawyer, Head of Legal Department of Imexpharm. 2016 to present: Lawyer, Head of Legal Department of Imexpharm.

Ms. Le Thi Kim Chung has held the position of Head of Supervisory Board of Imexpharm since 2008.

Year of birth: 1982

Nationality: Vietnamese

Education background: Bachelor’s Degree in Commerce of Van Lang University, Member of ACCA (UK) and CFA (USA) Employment history

2005: Independent Auditor at PricewaterhouseCoopers Co., Ltd.

2005- March 2012: Technical Director at Dragon Capital Vietnam.

April 2012 - June 2013: Chief Financial Officer of Hoang Anh Gia Lai Rubber Corporation. July 2013 - July 2014: Head of Department of Budget and Investor Relations of Petro Vietnam Drilling and Well Services Corporation.

July 2014 - December 2015: Head of Research Department of Ban Viet Securities Joint Stock Company January 2016 - 2018: Head of Department of Investment Portfolio Management at Phillip Securities (Thailand) Public Company Limited 2019 to present: Investment Director, MB Securities Company

Mr. Tuan was elected as the Chairman of the Supervisory Board since 2009. With professional qualifications and experiences in investment and finance, Mr. Duc Tuan has a lot of contribution to improve Imexpharm risk management system and internal audit. As Head of Supervisory Board, Mr. Tuan is very pro-active in supervise finance management system and operations of Imexpharm. Besides, he gives many independent petitions for the Board of Directors and Management Boards to increase managerial effectiveness for whole Company.

IMP - Leading Aspiration

CORPORATE SECRETARY

Ms. Do Thi Thanh Thuy Member of Supervisory Board Short bio

Ms. NGUYEN THI KIM LE Secretary to the Board of Directors

Year of birth: 1965

Short bio

Nationality: Vietnamese

Place of birth: Tay Ninh

Employment history

Education background: Bachelor Accounting - Auditing, University Economics Ho Chi Minh City.

Place of birth: Dong Thap

Year of birth: 1983

Education background: Bachelor’s Degree in Finance and Accounting

Nationality: Vietnamese

1991-2004: Manager of Corporate Finance Division under Department of Finance of Dong Thap. 2004-February 2015: Head of Administration Department of Imexpharm. March 2015 to present: Head of Internal Audit Department of Imexpharm.

Ms. Do Thi Thanh Thuy has held the position of Head of Supervisory Board of Imexpharm since 2005.

Duties

»» Advising the Board of Directors on organizing the Annual General Meetings in accordance with regulations and related activities between the company and shareholders;

of of

Employment history

2005- May 2006: Sales executive and consultant, Misa Corporation

June 2006 - September 2008: Staff of Management Accounting Department of Imexpharm Corporation

October 2008 - June 2011: Staff of Management Accounting Department cum Head of Accounting Team in HCMC Branch 1 of Imexpharm Corporation July 2011- July 2015: Deputy Head of Management Accounting Department Imexpharm Corporation

July 2015 - August 2018: Secretary to the Board of Directors and Deputy Head of Internal Control Department - Imexpharm Corporation

August 2018 to April 2019: Corporate Secretary - Imexpharm Corporation

»» Prepare meetings of the Board of Directors, Supervisory Board and Annual General Meetings at the request of the Board of Directors or the Supervisory Board; »» Advising procedures of meetings and participation;

»» Advising procedures for developing resolutions of the Board of Directors in accordance with law;

»» Providing financial information, copies of BOD meeting minutes and other information to the members of the Board of Directors and Supervisory Board; »» Supervising and reporting to the Board of Directors on information disclosure activities of the company; »» Securing information privacy in accordance with the law and the company’s Charter;

»» Performing other rights and responsibilities as prescribed by laws and the Company’s Charter.

May 2019 to present: Investors Relations (IR) Manager cum Corporate Secretary

Annual Report 2019 53

EU-GMP STANDARDIZED FACTORIES THE FOUNDATION FOR BREAKTHROUGH Infrastructure and production facilities of the Company include: »» Head Office in Cao Lanh City, Dong Thap Province, with an investment of about VND 28 billion, completed and put into operation in 2013; »» 20 sales branches in total nationwide »» 01 branch in Ho Chi Minh City in charge of supplying, import and export, franchising sales, prescribed drugs. This is also the workstation of Marketing, Customer consultancy, Investor Relation, etc.; »» Warehouse system and testing facilities at each factory; »» R&D department is equipped with modern machinery and equipment; »» Imexpharm is Vietnam’s market leader in generics pharmaceutical with the following plant system:

No.

Plant

Dong Thap Factory (IMP1)

1.1

Location

Standards

Dong Thap

WHO-GMP

Minimum capacity (million units/ year)

Maximum capacity (million units/ year)

Actual output in 2019

1,090.0

1,325.0

858.0

Non-Betalactam Plant

860.0

1,050.0

708.8

1.2

Penicillin Plant (oral drugs)

230.0

275.0

149.2

The Hi-tech Antibiotics Plant in Vinh Loc (IMP2)

Betalactam High-tech Plant in Binh Duong

3.1

Cephalosporins Plant •

Injection production lines

•

Oral drug production lines

HCMC

EU-GMP

220.0

265.0

7.9

Binh Duong

EU-GMP

190.5

225.0

89.2

184.0

217.0

84.6

14.0

17.0

5.0

170.0

200.0

79.6

6.5

8.0

4.6

3.2 Penicillin Plant (injection) 4

Binh Duong High-tech Pharmaceutical Plant (IMP4)

Binh Duong

EU-GMP

Preparing for EU-GMP review, updating capacity when the plant is in stable operation

Pharmaceutical Manufacturing Plant

Dong Thap

GMP

Under construction

Total

IMP - Leading Aspiration

1,500.5

1,815.0

955.1

IMP1 Plant has been in operation for over 22 years, making vital contributions for many years. In 2019, IMP3 Plant was successful in its first re-application process, and started taking up a substantial share in the Corporation’s revenue structure. IMP2 Plant has also been put into operation since mid-2019.

IMP4 Plant is expected to be operational in the second half of 2020. Imexpharm’s EUGMP factories are equipped with online production monitoring system. In particular, IMP4 Factory is also equipped with online building management system.

In early 2019, Imexpharm’s Board of Directors approved the plan to build the Pharmaceutical Manufacturing Plant & Testing Center at Cao Lanh Head Office, with a total estimated investment of VND80 billion.

Annual Report 2019 55

NATIONWIDE DISTRIBUTION FOOTPRINT

Currently, the company’s distribution system includes 20 Sales branches with a team of 425 salespeople who are in charge of introducing and distributing the products across the country. The Sales team plays the key role in Imexpharm’s development. Therefore, the company always seeks to regularly develop and improve the salary and remuneration policies, working environment, continuing learning and growth opportunities to match their their significant contribution. With the growth forecast to 2022, the contribution of the Distribution system is of paramount importance. Therefore, it is exceedingly necessary to develop more Industry 4.0 tools that can integrate with the BSC and SPERP software in supporting the Sales branches, responding to the modern distribution management trend. In 2017, the Company implemented the Distribution Management System (DMS) which helps to increase sales performance and distribution quality, better promotion launching and decision making process. All data on DMS will be synthesized with SAP in real time and DMS will manage and report the application of key performance indicator (KPI) according to BSC. The company has provided DMS training to the whole sales force and distributed nearly 300 tablets to pharmaceutical sales representatives across the country to assist them in their job. In 2019, DMS showed many positive impacts of modern management tools on distribution channels. Imexpharm has also improved and innovated many functions. Imexpharm’s next objectives in 2020 and beyond are to continue to leverage DMS performance, also consider to introduce DMS to customers, assisting them in making orders through DMS and selfmonitoring the transaction information.

IMP - Leading Aspiration

SELECTED MATERIALS SUPERIOR QUALITY All materials used in Imexpharm products are imported from the world’s popular material suppliers in Europe and the Americas. The material inputs always come with highly stable quality. Following is the list of the major materials and their manufacturers:

No.

Active Ingredient

Manufacturer

Country

Region

Cephalexin Monohydrate Compacted

DSM Sinochem Pharmaceuticals Spain

Spain

Europe

Amoxicillin Trihydrate Compacted NQ

Sandoz Industrial Products

Spain

Europe

Cephalexin Monohydrate Compacted NQ

ACS Dobfar S.p.a

Italy

Europe

Clavulanate Potassium – Avicel (1:1)

Lek Pharmaceuticals d.d.

Slovenia

Europe

Ampicillin Trihydrate Compacted NQ

Sandoz Industrial Products

Spain

Europe

Amoxicillin Trihydrate Compacted (Spain)

Deretil S.A. (Spain)

Spain

Europe

Cefotaxime Sodium Sterile

Fresenius Kabi Anti

Italy

Europe

Cefadroxil Monohydrate Compacted

DSM Sinochem Pharmaceuticals Spain

Spain

Europe

Lactobacillus Acidophilus

Danisco US

United States of America

The Americas

Clavulanate Potassium – Syloid (1:1)

Lek Pharmaceuticals d.d.

Slovenia

Europe

Codeine Phosphate (Sanofi/France)

Sanofi Chimie

France

Europe

Paracetamol USA

Mallinckrodt Inc.

United States of America

The Americas

Cefaclor Monohydrate Powder

ACS Dobfar S.p.a

Italy

Europe

Acetylcysteine

Moehs Catalana, S.L

Spain

Europe

Clavulanate Potassium – Avicel (1:1)

Sandoz Industrial Products

Italy

Europe

Codeine Phosphate (MACF/UK)

Macfarlan Smith Ltd

England

Europe

Amoxicillin Trihydrate Compacted

Deretil S.A. (Spain)

Spain

Europe

DSM Spain’s antibiotic active ingredients are produced by fermentation technology (enzymatic), a clean technology safe for users’ health and safe for the environment as well as workers. Imexpharm has been using this technology for many years to produce its famous antibiotic product lines. Imexpharm is comprehensively developing its product lines to European standards and thus material inputs are selected very carefully. The company also seeks to use raw materials that meet CEP (Certification of European Pharmacopoeia) standards in producing the product lines that registered for European visa and category 1 bidding. Our high quality products are placed on par with that of many multinational pharmaceutical groups.

Annual Report 2019 57

PRODUCTION MANAGEMENT IN LINE WITH ADVANCED STANDARDS

Obtaining EU-GMP certification is difficult, but what is even more challenging is to maintain and renew this standard. In addition to complying with hundreds of highly specialized processes from production to testing and quality assurance, EU-GMP factories also have to protect workers’ health and users, protect the environment by modern international air handling system and using 100% fresh air rather than recirculating air. The production environment is tracked online to adjust and maintain desirable factory environment. Antibiotic-rooted waste shall be treated properly before being discharged to the industrial park’s treatment system. Imexpharm tries to minimize our DO oil consumption to limit emissions to the environment. Hazardous solid wastes are well controlled and outsourced to a third party for processing in accordance with regulations.

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In addition to the rigorous process, regular human resource training to ensure they fully understand and master the processes is extremely challenging for EU-GMP factories. Therefore, Imexpharm has developed a standardized and specialized training process in each location of factories, especially technical staff who work on sterile injectable drug production lines. At Imexpharm, quality management systems are developed with stringent standards to best protect users’ health. Imexpharm applies more than 100 quality management processes from input to output in order to ensure absolute safety and product quality.

Imexpharm develops a clear Supplier and Manufacturer Evaluation Process and has been applying them strictly. Materials are purchased through open biddings. Safe transportation of materials is also required to make sure there is no impact on product quality as committed in the contract. Before manufacturing with great number, the quality management system of Imexpharm will take samples for quality evaluation one more time. Before leaving the warehouse, the finished products also go through strict

examination. This entire closed process is supported by SAP-ERP management software, creating synchronization between different components. The results are updated quickly and accurately to ensure the entire quality system works smoothly with minimal errors. Besides that, Imexpharm also establishes a call center to provide customer service as well as to receive customer feedback 24/7 in order to be responsive to consumersâ&#x20AC;&#x2122; comments. In 2019, Imexpharm did not receive any complaint relating low quality products.

EU-GMP

Annual Report 2019 59

R&D INVESTMENT DEVELOP HIGH VALUE PRODUCT PORTFOLIO

With strategic investment focusing on top quality, promoting R&D is taken seriously by Imexpharmâ&#x20AC;&#x2122;s governance body and introduced in the development goals. The R&D department currently comprises of 49 people with relevant professional qualifications, increasing by 7 people compared to the previous year, including 1 doctor, 5 masters, and 1 Postgraduate Education Junior (PGJ) in Pharmacy. Most of the companyâ&#x20AC;&#x2122;s researchers have a college degree, are full of enthusiasm and commitment to the company. Pharmaceutical R&D personnel are continuously trained with programs offered domestically and internationally by many research centers and universities in Ho Chi Minh city and the National University of Singapore (NUS). Putting investment on renovating the formula development and production areas with equipment that can be used for product research from small sample to a pilot batch before the product is produced in an industrial scale. A modern equipment system of seven HPLC (High Performance Liquid Chromatography) with detectors that can analyze even the newest chemical compounds.

IMP - Leading Aspiration

Currently, Imexpharm’s R&D Department engages in the following partnerships:

In 2019, the R&D department has been focusing on the following products:

»» Collaborating in development research with the Dong Thap Experiment Technique and Science Technology Application Center and universities in Ho Chi Minh City.

»» Injection products, infusion drugs and lyophilized injection drugs;

»» Partnering with PT Equilab International (INDONESIA) for research cooperation in bioavailability and bioequivalence. »» Completing drug registration dossier according to the ICHCTD template (Common Technical Document of the International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use) for European export registration.

»» Dispersible tablets are also convenient for use by children and the elderly.

testing for 03 more products (Clarithromycin 500mg filmcoated tablets; Imexime 400 filmcoated tablets and Imexime 200 for oral suspension), raising the number of key products whose safety and efficacy is equivalent to original medicine to 12 products.

2019 marked many successes with R&D as follows: »» The Department has researched and launched 17 new products, up by 04 products compared to the previous year while supplementing many high-value products from EU-GMP plants to the portfolio; »» The Department also collaborated with local research institutes to conduct bioequivalence

Every year, the company sets aside 10% of its pretax profit to put into the Science and Technology Development Fund to partly invest in R&D’s product innovation.

Annual Report 2019 61

DEVELOP FULL FLEDGED WORKFORCE FOR SUCCESS Imexpharmâ&#x20AC;&#x2122;s workforce by department as at the end of 2019 is as follows: 1,200

1,000

1,000 800

648

800

716

648

716

412

425

148

146

2018

2019

600

600 Production Division

400

412

425

148

146

2018

2019

Sales Division

200 0

400 200

Office Division

involve in production, the remaining 55% work in R&D (Research & Development), QC (Testing), and QA (Quality Assurance), warehouse of the factories and Technical Department. During the year, the Company employed another 68 employees to work EU-GMP factories.

The total number of Imexpharm employees by the end of 2019 reached 1,287 people, increasing by 79 people compared to the previous year, of whom 216 people were newly recruited and 137 retired or resigned. Although the employee turnover rate in 2019 decreased by 1% compared to 2018 and stood at 10.6%, this is still higher than the Companyâ&#x20AC;&#x2122;s target of below 10%.

The Sales team comprise of 425 people, or 34.1% of the total, including those working at 20 distribution branches, of which the number of pharmacist sales representatives is about 250 people. The office block employs 146 people, accounting for 11.3% of the total. This is the reasonable labor structure of Imexpharm that has been restructured many years ago.

As EU-GMP factories were increasing their capacity, production personnel accounted for 55.6% of the total workforces of the Company, up by 2% yoy. However, out of 716 production staff, only above 45% of workers directly The labor structure by education level: Primary tertiary and technical workers

12.5% 14.7%

18.7% 39.1% 43.4%

Intermediate tertiary school 9.3%

29.0% 3.3% 3.6% 10.0% 2018

38.5%

31.7%

University

0.0%

36.6%

13.4%

College

Graduate

6.2%

IMP - Leading Aspiration

Under 30 years old 40 - under 50 years old 20.0% 2019

30.0%

40.0%

50.0%

30 - under 40 years old 50 years and older

At Imexpharm, as a pharmaceutical production and distribution company, we have employees with different education backgrounds. The majority of our employees has a junior college degree, most of them are pharmaceutical sales representatives and workers working in plants, accounting for 39.1% in 2019. Next is the ones that have an undergraduate degree, accounting for 31.7%. The new trend at Imexpharm is to increase the number of employees with college degrees and higher in order to meet the high demand of a high quality human capital of the company. Moreover, Imexpharm’s workforce is in golden age for working as 75% of the employees are under 40 years old.

Workers’ Compensation and Benefit Policies Human resources are considered the center in all activities, especially sales force and personnel in high-tech factories. Therefore, the company never stops improving workplace environment and stable policies on salary, reward and compensation. The guiding principle for Imexpharm has always been to honor humanity and to create favorable conditions that promote creativity, encourage its employees to

overcome their own limits, moving forwards to productivity as well as unceasingly to cultivate and develop their professional competency. With these objectives in mind, Imexpharm developed a competitive compensation system that provides a lot of good benefits to its employees. This helps to preserve the current human resource as well as attract new talents that will inherit the company culture and develop it in the future.

Following are some typical terms in the employee compensation packet: • 100% staff and employees receive their salary in time; • 100% staff and employees enroll in health insurance, unemployment insurance and accident insurance; • 100% of employees receive regular health check-ups at prestigious hospitals; • 100% of employees are provided uniforms as required by the regulation; • The company also has bonuses for workers during the year on National Holidays and Tet including: Vietnamese Doctor’s Day February 27, Reunification Day April 30, Independence Day September 2, New Year’s Day, and especially the Lunar New Year; • Besides, at the end of the year, the company also has a remuneration and promotion system based on working ability and work performance evaluations. • Workers are considered for a pay raise periodically according to the salary and compensation policies. • During the year, the company encourages its staff and employees to participate in music or sport activities organized by Imexpharm and other organizations on big holidays like Reunification Day (30/4), Independence Day (2/9) and Lunar New Year. • Reward innovations and immediate bonus for achieving high performance at work; • Imexpharm cares about our staff’s income and living quality to become a desirable employer in the industry, thereby attracting and retaining employees, especially R&D staff and professionals; • ESOP for key officers in 2017 with restricted transfer until 2020 has boosted the commitment and dedication of the staff. Annual Report 2019 63

DEVELOP FULL FLEDGED WORKFORCE FOR SUCCESS

14 13,3

13 12 11

10,8

10,5

2015

2016

11,4

2017

2018

10 9

2019

Monthly per capita income (VND million/person/month

The average income of employees in 2019 increased significantly, up by 16.7% compared to 2018. With positive growth in 2019 revenues and profits, the team are also appropriately rewarded for dedicated efforts. The Companyâ&#x20AC;&#x2122;s goal is to reach a per capita income of VND 19 million per employee per month by 2022.

Continuing learning and development Training hours for both female and male employees 2015-2019 37

60,000

50,000

30 23

40,000 30,000

18 45,149

20,000

10,000

13,523

2015

23,941

21,244

15 10

2016

2017

2018

Tatal average training hours for female employees Average training hours for male employees IMP - Leading Aspiration

Total training hours

48,568

2019

In addition to benefits such as salaries and bonuses, Imexpharm also wants to empower our employees to enhance their future career paths and get prepared for global challenges of the labor market. Therefore, we focus on training for employees and managers at different levels in many ways. In addition, staff training also helps businesses respond to increasingly demanding market needs for labor quality and customer service.

2018. On average, each employee received 32 training hours per year. Female and male employees have equal access to continuing professional development opportunities at Imexpharm.

We manage our education and training issues through Standard operating procedure for Training and Education, to keep the Board of Management posted through quarterly and annual internal/external training plans and reports.

»» Product knowledge and sales skills for pharmaceutical sales representatives nationwide.

In 2019, Imexpharm’s internal and external training programs were generally improved through aligning the training contents with practical work and prioritizing practice over theory. The company’s human resources policy also focuses on succession planning, offering training for the term of 2018-2022, as well as attracting talents to join Imexpharm family, especially those who work in the high-tech plants.

»» Standard operating procedures relate to the assigned work.

In 2019, we organized 575 training programs for our employees, including 53 external training programs, the remaining are internal training programs for all departments. The total number of internal and external training in 2019 is 48,568 hours, up by 8% compared to

Key internal training and coaching programs include: »» Onboarding training for new employees.

»» Training on DMS, SAP, and electronic invoices.

We also conduct monthly performance review against set KPIs. In 2019, 100% of our employees received performance review on a monthly basis. In particular, midlevel managers are assessed based on the BSC index of each department. In addition, to help improve the personnel quality, we also conduct exit interviews for resigning employees. Imexpharm hopes that through these interviews, employees’ opinions, experience, and expectations are heard, so that we can offer them the right support, counseling and better development orientations at the Company. Annual Report 2019 65

BUSINESS PERFORMANCE AND FINANCIAL STATEMENTS OF THE EXECUTIVE BOARD IN 2019 - PLANS FOR 2020

BUSINESS PERFORMANCE AND FINANCIAL STATEMENTS OF THE EXECUTIVE BOARD IN 2019 - PLANS FOR 2020 In the context of general difficulties of the economy, 2019 is a memorable year of Imexpharm with many impressive achievements in business and management.

ENVIRONMENT INDUSTRY 68

IMP - Leading Aspiration

Achievements and challenges of Vietnam’s 2019 socio economic context Vietnam recorded a trade surplus in 2019, with total import and export turnover of US$ 516 billion.

2019 is considered a successful year for Vietnam when it managed to maintain the stable economic growth rate of over 7%. According to the General Statistics Office’s report, Vietnam’s gross domestic product - GDP increased by 7.02% amid the sluggish growth of the world economy and the complicated developments of the US-China trade war. Vietnam’s GDP has exceeded the target of 6.6% -6.8% set by the National Assembly, which is considered the most remarkable achievement of 2019. General Secretary-President Nguyen Phu Trong said, “Dark clouds continue to pull on in the global economy but the sun is still shining above the Vietnamese sky”, as evidenced by Vietnam’s remarkable progress in economic development in 2019. Vietnam recorded a trade surplus in 2019, with total import and export turnover of US$ 516 billion.

Gross domestic product

7.02

GDP

Total import and export turnover

516

BILLION USD

The trade surplus is estimated

9.9

BILLION USD

The trade surplus is estimated at US$ 9.9 billion. In terms of the share of contribution in the economic structure, industry and construction account for 50.4% and have made an impressive growth rate of 8.9% in 2019. This is followed by the service sector with a 7.3% growth rate, contributing 45% to the national GDP. Agriculture, forestry and fishery contribute only 4.6% and the yoy growth rate is 2.01%. In general, manufacturing remains still the key driver of growth which, together with service sectors such as warehousing, retail and financial services, contribute significantly to the overall GDP growth. On June 30, 2019, the free trade agreement between Vietnam and the European Union (EU) signed in Hanoi opened up unprecedented development prospects for businesses, consumers and workers of both the EU and Vietnam. Foreign investment in Vietnam also increased by 6.8% in 2019. The disbursed foreign capital flows are estimated at US$ 20.38 billion. Against the backdrop of universal decline of foreign direct investment (FDI), the increase in capital inflows into Vietnam represents a respectable achievement. However, besides FDI, capital inflows into Vietnam through merger and acquisition (M&A) also increased rapidly in 2019. Vietnam’s position in the international arena has been enhanced, as evidenced by Vietnam’s being elected as a non-permanent member of the UN Security Council with 192/193 votes. This is a great honor for Vietnam and a testimony to the country’s sound and harmonious foreign policies of the Party and the State. Another remarkable milestone is the successful hosting of the U.S.-North Korea summit in Hanoi. Vietnam’s neutral, open and positive foreign policies towards humanity and peace have made Vietnam a reliable friend to the international community.

Annual Report 2019 69

MACRO ENVIRONMENT AND INDUSTRY

VIETNAM PHARMACEUTICAL INDUSTRY IN 2020 According to Fitch Solutions, Vietnam’s Pharmaceutical industry revenue will reach about US$6.5 billion in 2019 and continue to grow in the future.

Vietnam is still in a period of golden population structure, but its population has started the socalled “aging phase” since 2017. A report by the World Bank (WB) shows that the aging process of Vietnam will take place in a very short time and will be completed before 2040. Vietnam’s population aging rate is among the fastest in the world and according to the Ministry of Labor, Invalids and

IMP - Leading Aspiration

Social Affairs’ statistics, by 2049, one in four Vietnamese people will be old. Aging population, increasing per capita income thanks to the rise of the middle class, improved awareness of the Vietnamese people, air and environment pollution also opened up prospects for the pharmaceutical industry. In particular, as consumers become more healthconscious, their requirements for product quality are also higher, leaving much room for growth among the mid- and high-end segments. However, Vietnam is still an importer of pharmaceuticals and pharmaceutical materials. In particular, by the end of 2019, the share of imported drug selected in biddings nearly reached 75%. Besides, M&A activities also gain new momentum due to highly potential market. Market competition will intensify when foreign players further penetrate deeper into the domestic market. The OTC and ETC markets also witnessed significant changes over the past year.

The OTC channel is growing slowly, as the market shows signs of saturation after a period of heated growth, and more stringent regulations on prescription drugs at pharmacies also affect the OTC market. However, OTC channels will be further promoted through the expansion of modern pharmacy outlets such as Pharmacity or Long Chau. Meanwhile, ETC channel tends to grow rapidly as the provisions of Circular 02/2018 tightens the control over prescription drugs and drugs of unknown origin via OTC channels, ETCâ&#x20AC;&#x2122;s sales are also forecast to outperform OTC. Furthermore, the governmentâ&#x20AC;&#x2122;s policies to increase spending on health care and promote universal insurance coverage in the coming years will favor businesses selling to the hospital channels. However, domestic businesses are still under critical competition pressure from multinational pharmaceutical companies in biddings for Generics whereby the ratio of bidwinning imported drugs is estimated at 60%.

The Ministry of Healthâ&#x20AC;&#x2122;s Circular No. 15/2019/TT-BYT on drug procurement at public health facilities, taking effect as of October 2019, has opened up many opportunities for prestigious domestic pharmaceutical companies. This Circular helps the Government accelerate the transition from imported drugs to domestically produced drugs while encouraging domestic businesses to boldly invest in improving technologies and raising Vietnamese medicine to a new level.

Businesses with EU-GMP or PIC/S factories certified by ICH countries are currently prioritized in bidding for categories 1 & 2. However, pharmaceutical raw material remains a puzzling issue for domestic businesses when currently the majority of raw materials are imported from overseas, mainly from China and India. Escalating material prices from China also affect drug prices and gross profit margins of pharmaceutical businesses.

Annual Report 2019 71

MACRO ENVIRONMENT AND INDUSTRY

Strategic vision in 2020 of the Government The targets of 2020 focus on maintaining economic growth, job creation and upskilling for Vietnamese workers, while improving the quality of health services and promoting universal social insurance agenda.

In 2020, the Government sets the target of GDP growth at about 6.8% while curbing the Consumer Price Index below 4% and increasing import export turnover by 7%. The Government also set specific social objectives as follows: The rate of trained laborers will reach about 65%, 25% of whom have diplomas and certificates; the number of beds per ten thousand people (excluding the beds of commune health stations) reaches 28; and the health insurance coverage reaches 90.7%. Environmental targets include: 90% of active industrial parks and export processing zones are equipped with wastewater treatment systems up to environmental standards, and the forest coverage rate is 42%. Therefore, the targets of 2020 focus on maintaining economic growth, job creation and upskilling for Vietnamese workers, while improving the quality of health services and promoting universal social insurance agenda. In addition, economic development must be on good terms with environmental protection to promote sustainable development. The Government will continue to pursue institutional and administrative reforms in 2020. Resolution 01 of the Government dated January 01, 2020 clearly defined the motto of the year as “Discipline, integrity, action, accountability, innovation and efficiency”. Accordingly, the Government will continue to fine tune the legal system towards synchronization, modernization, integration, feasibility and effectiveness, thereby meeting the requirements of innovation and development while adhering to the rule of law. Chairman of Vietnam Chamber of Commerce and Industry (VCCI) - Vu Tien Loc emphasized the two most important keywords in 2020: “remove” and “connect”. More specifically, “remove” here means removing all barriers and channeling resources to fuel economic development. Mr. Loc also emphasized that the government has effectively exercised economic management in 2019, as evidenced by stable growth rate despite global gloom. However, Vietnamese values need to be connected to spread. First, it is connection between foreigninvested enterprises and domestic SMEs to enhance the competitive advantages for Vietnamese businesses through learning and technology transfer. Second, it is connection between profitability pursuit and improved awareness of environmental protection and sustainable development for FDI businesses in the context of environmental disasters that can jeopardize the economy and society. Third, it is connection with the world to absorb the Industry 4.0’s achievements while promoting free trade agreements (FTAs) between Vietnam and other countries. This is also among top priorities for 2020.

IMP - Leading Aspiration

DEVELOPMENT TRENDS OF THE

PHARMACEUTICAL INDUSTRY IN 2020 AND THE PERIOD 2020-2025

Expansion of modern pharmacy outlets such as Pharmacity or Long Chau will continue to be the mainstream trend of the pharmaceutical industry in 2020. Besides, some foreign investors such as Matsumoto Kiyoshi (Japan) - specializing in distributing pharmaceutical and cosmetics products will also join the big playing field of pharmaceutical industry with many ambitions. OTC channel in 2020 and the next 5-year period will continue to be strictly controlled and it is forecast that the number of retail pharmacies will gradually decline. However, given improved heath care needs and income, dietary supplements will have more room for growth and OTC pharmacy outlets will fully capitalize on this advantage.

Competition in the pharmaceutical industry will intensify as the OTC growth slows down and more new players enter the pharmaceutical market. Entrance attempts of foreign pharmaceutical companies will also spur further M&A investment. Domestic pharmaceutical companies will tend to focus on investing in high technology, R&D, and converging advanced standards such as EU-GMP and PIC/S. In the coming years, Vietnam will increase investment in pharmaceutical raw materials to better plan input resources and strengthen the national pharmaceutical industry. However, this is a long way to go given the development level of domestic businesses. Leveraging strategic partnerships with foreign businesses can help Vietnam tackle technology and experience shortfalls to gradually reduce the content of imported materials.

The universal health insurance will still be promoted in the coming period so there will be a shift of market share from OTC to ETC and the ETC channel will account for a larger share of the pharmaceutical industry in Vietnam. This trend is also associated with increasing public spending on health and developing an autonomous pharmaceutical industry to promote technological innovation and product quality of domestic pharmaceutical businesses. The trend in the immediate future will be domestic drugs gradually taking place of imported drugs. In 2019, ETC sales of many domestic pharmaceutical businesses improved significantly.

Annual Report 2019 73

PERFORMANCE REPORT AND EVALUATION OF THE BOARD OF DIRECTORS IN 2019

Board of directors’ assessment on business performance 2019 A stocktaking of 2019 and Prospects for 2020 In 2019, Vietnam achieved a GDP growth of 7.02%, amidst increasing regional and international strategic competition. The World Economic Forum (WEF) has recognized Vietnam’s remarkable progress with a 10-step improvement and among the world’s fastest advancing country in terms of competitiveness. Last year’s financial market also recorded many new developments. The revised Law on Securities was officially adopted by the National Assembly in November 2019 and would take effect as of January 1, 2021, with many new regulations to enhance market transparency and mitigate risks for investors. Foreign capital remains impressive with large equity acquisitions in some of Vietnam’s largest corporations and banks. However, while the stock market’ upgrade from marginal to emerging level is expected to increase liquidity thanks to strong attraction of capital flows, in fact the liquidity in the stock market in 2019 was down by 29% compared to the average in 2018.

Vietnam achieved a GDP growth of 2019 (%)

7.02%

2018: 7,08%

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The pharmaceutical industry in 2019 also marks the further improvement of regulations and guidelines, with the Ministry of Health’s Circular 15/2019/TTBYT guiding the drug procurement after a long time of revision. Accordingly, high quality domestic pharmaceutical companies will be prioritized in ETC channel. Businesses with factories meeting EU-GMP or PIC/S standards granted by ICH countries are prioritized in bidding for categories 1 & 2 in Generics drugs. The Ministry of Health’s regulations on management of prescription drugs in line with international practices also continue to drastically change sales strategies and revenue structure of pharmaceutical companies in 2019, as well as in the medium and long term.

With over 22 years of investing in product quality, franchise production for multinational pharmaceutical corporations, Imexpharm is highly appreciated for its growth potential by long-term development strategies.

As the leading generics manufacturer in Vietnam with EU-GMP certified factories, especially injection drug production lines, Imexpharm also focuses on R&D to develop a high-value product portfolio for each factory. In addition, for many years, Imexpharm has robustly applied 4.0 technology in management, covering from production systems, finance to distribution. Entering early 2020, investors have high expectations for the growth potential of Imexpharm. However, amidst the complicated context of Covid-19 which affects the global input materials, Imexpharm and other pharmaceutical businesses are faced with many challenges in completing production and business targets in 2020

Performance review of 2019

FACTURING NU

ACTICE PR

GOOD M A

Development strategy towards long-term values

IT Y P R O D U

In 2019, Imexpharm remained focused on strategies that bring high and longterm value to shareholders. Accordingly, the Company focused on developing a high-value product portfolio to tap into the hospital bidding channel with the expectation to compete and replace imported drugs, while maintaining the OTC market. This is considered to be the right strategy when Imexpharm’s known competitive edge is antibiotics and specialty drugs, while regulations on the management of prescription drugs in line with international practices are being strictly enforced in Vietnam. Binh Duong High-tech Factory (IMP4) has been successfully reviewed for WHO-GMP certification in September 2019 and will be reviewed for EU-GMP certification in Q2/2020. The progress of the plant was delayed by about one quarter compared with the initial commitment to shareholders due to the complicated evolution of the pandemic and travel restriction from Europe to Vietnam to carry out the review. In the period of 2019-2020, Betalactam High-tech Factory in Binh Duong (IMP3) is playing a key role in contributing a high proportion of value to the operation results of Imexpharm.

Total net revenue and other income reached 98% of the 2019 target, increasing by 17.7% year-over-year

Total revenue of 2019 (Billion VND)

1,420

2018: 1.207

If in 2018, Imexpharm’s revenue only reached a low growth rate of 1.8%, 2019 marked a spectacular recovery with a growth rate of 17.7%, helping the Company reach a total revenue of VND1,420 billion, achieving 98% of revenue target in 2019. Imexpharm branded products account for a high share of 87.2% of the total net revenue. In particular, ETC channel revenue increased significantly by 2 times yoy, and accounted for nearly 32% of the Imexpharm’s revenues, compared to 19% of the previous year. Efficiency from EU-GMP plants shows that ETC return strategies in the high-end segment are showing the desirable outcomes.

Annual Report 2019 75

PERFORMANCE REPORT AND EVALUATION OF THE BOARD OF DIRECTORS IN 2019

Business performance and fundamental financial ratios for 2019 are as follows: Indicator

2019

% of 2019 target

2018

% of change

Business performance (VND million) Total net revenue and other income

1,420,711

1,207,125

1,402,454

1,184,818

Pre-tax profit & Science & Technology Development Fund

222,429

192,769

Pre-tax profit

202,429

173,769

16.5%

162,387

138,683

17.1%

1,847,174

1,774,247

4.1%

Charter capital

494,212

0.0%

Owner’s equity

1,558,889

1,504,613

3.6%

ROS (Net profit/Revenue)

11.6%

11.7%

(0.1%)

ROA ((Net profit/Assets)

9.0%

7.8%

1.2%

ROE (Net profit/Owner’s equity)

10.6%

9.6%

1.0%

EPS (VND)

2,892

2,470

17.1%

31,565

30,457

3.6%

Net revenue

Profit after tax

98.0%

17.7% 18.4%

101.1%

15.4%

Assets - Equity (VND million) Total assets

Profit margin

Book value (VND)

Profit reached 101.1% of the target, recording a high growth rate of 15.4% in profit before tax and before distribution to the Science and Technology Development Fund (Billion VND)

222.4

2018: 192,8

In 2019, Imexpharm continued to achieve the goal of 101.1% growth in profit before tax and before distribution to the Science and Technology Development Fund, reaching VND222.4 billion or a high growth of 15.4%. If excluding the income of VND8.2 billion from the divestment from S.Pharm Pharmaceutical Joint Stock Company (Soc Trang), and Da Nang Pharmaceutical - Medical Equipment Joint stock Company (Dapharco) in 2018, and other income, profits before tax and before distribution to the Science and Technology Development Fund in 2019 achieved a very high growth rate of 19.4% despite rigorous competition among the pharmaceutical industry in this year.

Slight increase in total assets and owner’s equity The charter capital during the year remained unchanged as the Company made no new issuance. However, Total assets and Equity increased by 4.1% and 3.6% respectively thanks to accumulated profits. 76

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Profit margin improved compared to 2018 Operating profit margin ROS was 11.6%, slightly decreasing by 0.1% compared to 2018. However, ROA and ROCE reached 9.0% and 10.6%, respectively, recording an increase of 1.2% and 1.0% yoy thanks to high profit growth. Earnings per share reached VND2,892, increasing by 17.1% yoy. Book value per share remained high at VND31,565 per share, up by 3.6% yoy. The Board of Directors has closely monitored the use of investment capital to deliver maximum return to shareholders.

Maintain high dividend payment to shareholders Imexpharm always maintains a policy of high and stable dividend for shareholders of the Company. Dividends are always fully and duly paid as disclosed, at a rate equal to or higher than the level approved at the Annual General Meeting. Specifically, the dividend /charter capital ratio over the years was as follows: Dividend payout ratio during 2015-2019F Cash dividend

GOVERNACE STRUCTURE FOR SUSTAINABLE DEVELOPMENT

Share divident

25 20 15 10

10%

15%

20%

20% 8%

2015

10%

2016

10%

5% 2017

2018

2019

Dividend payout in 2018 accounted for 20% of the charter capital, the company has paid cash dividends to shareholders in 2019 at a rate of VND2,000/share. The Board of Directors also closely monitored the payment to shareholders on July 11, 2019.

In 2019, Imexpharm continued to apply advanced practices to corporate governance. Standards applied included: OECD Principles of Corporate Governance, IFC Corporate Governance Manual, Corporate Governance Scorecard of Vietnam and ASEAN, HOSE Sustainability Index, GRIâ&#x20AC;&#x2122;s Sustainability Reporting Standards, etc. Imexpharm has made a lot of improvements related to: rights of shareholders, fair treatment of all shareholders, related parties, disclosure of information, and independence of the Board of Directors.

Therefore, the total dividends that Imexpharm paid to shareholders in 2019 was VND98.8 billion, accounting for 71.24% of 2018 profit after tax attributable to the owners.

Imexpharm also compared its corporate governance against Vietnamese Corporate Governance Scorecard for listed companies for further improvements. In particular, 2019 is the second consecutive year that Imexpharm was honored among the Top 5 Corporate Governance Awards for Medium-sized capitalization category.

The expected dividend payout ratio of 20% for 2019, of which 10% is in cash and 10% is in share, will be submitted to the 2020 AGM for approval and will be paid by the Company within 06 months from the date of concluding 2020 AGM.

In addition, the company regularly assessed Sustainability indicators. 2019 is the fourth year in a row Imexpharm was ranked in Top 100 Vietnam sustainable businesses ranked and announced by Vietnam Business Council for Sustainable Development under VCCI. Annual Report 2019 77

PERFORMANCE REPORT AND EVALUATION OF THE BOARD OF DIRECTORS IN 2019

The board of directors’ oversight over the general director and the executive board Based on the Charter, Internal Management Regulation, and Operating Rules of the Board of Directors, the Board of Directors has duly supervised the performance of the General Director and the Executive Board in production and business activities and implementing Resolutions of the General Meeting of Shareholders and Resolutions of the Board of Directors, specifically as follows:

Supervision methods The Board of Directors supervises the General Director and the Executive Board periodically through reports of the Executive Board for quarterly Board meetings, extraordinary meetings, via email and phone, on the implementation status of the production and business strategies, targets and investment projects approved by the General Meeting of Shareholders, and the progress of implementing the BOD’s Resolutions.

•

The Supervisory Board has supervised the following aspects: coordination with Internal Control to monitor compliance at

•

Sales Branches, monitor EU-GMP plant progress, manage financial and operational risks by working with an Independent Auditor and functional departments. •

At the Board meetings, the Executive Board is responsible for explaining the outstanding issues, proposing solutions for implementation, and answering the questions of the Board of Directors and the Supervisory Board for the notable issues. The Board of Directors discussed thoroughly before adopting the resolutions after each meeting, based on which the Executive Board would carry out production and business.

•

The Board of Directors also cooperated closely with the Executive Board in promoting relations with shareholders, investors, partners, employees and other stakeholders.

Evaluation criteria of the Board of Directors to the General Director and other members of the Executive Board are centered around two main aspects:

Regarding the performance of production and business targets

This criterion is evaluated based on the actual performance of: (1) the Company’s overall production and business objectives approved at the AGMs: (2) the quality objectives of the Division headed by each member of the Executive Board under the BSC (Balanced Scorecard).

Conclusion

Regarding the capacity and responsibilities of the Executive Board

The BOD assessed the competence of the Executive Board through self-assessment results in terms of effectiveness of work, leadership competence assessment based on the Dictionary of Leadership Competence issued by the Company, integrating 6 Rules of the Corporate Culture. In addition, the Board of Directors also assessed the accountability of the Executive Board through the following criteria: due diligence, honesty, avoidance of conflicts of interest, confidentiality, and loyalty to Imexpharm.

Through the mechanism of supervision, accountability and periodical reporting on a quarterly and extraordinary basis, the BOD assesses that the General Director and the Executive Board have fulfilled the assigned rights and tasks in accordance with applicable Laws, the Charter of the Company, Resolutions of the General Meeting of Shareholders and Resolutions of the BOD. In 2019, the Executive Board successfully implemented the strategic goals approved by the General Meeting of Shareholders and the Board of Directors on all aspects: business, production, finance, investment, human resource development, etc., thereby driving the Company’s exponential growth thanks to EU-GMP factories and high-value product portfolio, affirming the Imexpharm’s leading position in Vietnam’s pharmaceutical industry. 78

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Activities of the general meeting of shareholders in 2019 Activities of the General Meeting of Shareholders On April 23, 2019, Imexpharm General Meeting of Shareholders held the Annual General Meeting of the financial year 2019. All necessary procedures were fully performed in accordance with applicable regulations and guidelines in the best interests of shareholders and according the following schedule: No.

Event

Date

Note:

Date of issuing BOD Resolution on finalizing the list of shareholders to be convened for 2019 AGM

March 07, 2019 20 days before the record date

Date of announcing the record date and submission of dossier to VSD

March 15, 2019

Ex-dividend date

March 26, 2019

Record date

March 27, 2019

Date of receiving the list of shareholders

March 29, 2019

Date of sending the invitation letter

April 02, 2019

02 business days from the date of receiving the list of shareholders; 21 days before the AGM

Date of releasing the AGM document on www.imexpharm.com

April 06, 2019

16 days before the AGM

Date of 2019 AGM

April 23, 2019

12 days before the record date

The Resolution of 2019 AGM was strongly supported by all shareholders attending the meeting. Resolutions and minutes of the AGM were published and reported within 24 hours as per regulation. Details of the Resolution of 2019 AGM are as follows: No. 1

Resolution No. 13/NQ-ĐHĐCĐ-IMEX

Date of issuance April 23, 2019

Contents Approved 07 topics under the authority of the General Meeting of Shareholders

Annual Report 2019 79

PERFORMANCE REPORT AND EVALUATION OF THE BOARD OF DIRECTORS IN 2019

Information disclosure Imexpharm’s disclosure policy complies with the Company’s Information Disclosure Regulation issued by the BoD, and is consistent with corporate governance policy. Imexpharm adheres to information disclosure guidelines described below:

The information must be transparent, accurate, complete, clear and published on time, either on a regular or ad-hoc basis.

Information that may have material impacts on IMP stock price and investor sentiment, the rights of shareholders, or may cause an event that seriously affects the interests of the investors must be published on time and posted on the official website of Imexpharm, Ho Chi Minh Stock Exchange and the State Securities Commission.

All stakeholders shall have convenient access to the information that Imexpharm publishes.

The Board Chairman is also authorized to disclose information at Imexpharm to help enhance transparency and standardization of information disclosure. Monthly news publication (Investor Relations News) in both Vietnamese and English also helps to communicate Imexpharm’s operating information in a timely manner to shareholders and investors, which is recognized by the investor community.

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Last year, Imexpharm Board Chairman and IR News Division also hosted many meetings with shareholders, investors and quickly responded through emails to the investors’ questions of interest.

The Board of Directors Members of the Board of Directors In 2019, Imexpharmâ&#x20AC;&#x2122;s Board of Directors operated according to the Operation Regulation of the Board of Directors, the Company Charter and Internal Regulation on Governance, amended under the 2014 Enterprise Law and Decree 71/2017/ ND-CP guiding corporate governance of public companies and approved at the 2018 AGM. The BOD had 08 (eight) members, 3 of which were non-executive members. This helped to ensure objectiveness in decision making of the BOD. List of BOD members in 2019:

No.

Full Name

Mr. Nguyen Quoc Dinh

Member of BOD

Position

Chairman of BOD

Executive

Ms. Tran Thi Dao

Deputy Chair Executive of the BOD

Ms. Han Thi Khanh Vinh

Member of BOD

Non-executive

Mr. Ngo Minh Tuan

Member of BOD

Mr. Huynh Van Nhung

IMP share holding ratio % represented

% ownership

11.436(*)

1.01

Date of appointment/ Dismissal

Appointed on 29 July 2001

Starting date in the position of BOD Chairman: May 17, 2013 Appointed as BOD Chairman on 29 July 2001

0.97

11.436(*)

Executive

0.28

Starting date in the position of BOD Member: March 30, 2015

Member of BOD

Executive

0.35

Starting date in the position of BOD Member: May 17, 2013

Mr. Le Van Nha Phuong

Member of BOD

Executive

0.08

Starting date in the position of BOD Member: April 28, 2018

Mr. Vo Huu Tuan

Member of BOD

Non-executive

0.11

Starting date in the position of BOD Member: April 10, 2009

Mr. Tran Anh Tuan

Member of BOD

Non-executive

0.11

Starting date in the position of BOD Member: April 10, 2009

Starting date in the position of BOD Vice Chairman: May 17, 2013

Starting date in the position of BOD Member: April 28, 2018

(*) Ratio of the capital representative of Vietnam Pharmaceutical Corporation, the major shareholder holding 22.87% of Imexpharmâ&#x20AC;&#x2122;s charter capital as at December 31, 2019.

Changes of BOD members during the year In 2019 there was no change of BOD members of Imexpharm Corporation.

BOD Chairman is not concurrently serve as the General Director The clear assignment of roles and responsibilities for the BOD Chairman and the General Director demonstrates the independence of the BOD, which should ensure the division of decision making powers, enhancement of responsibilities as well as the independent nature of BOD activities.

Annual Report 2019 81

PERFORMANCE REPORT AND EVALUATION OF THE BOARD OF DIRECTORS IN 2019

Activities of the BOD in 2019 Quarterly meeting of the BOD The BOD of Imexpharm maintained quarterly meetings in order to summarize and assess business and production operations in each quarter, discussed the orientations and plan for the subsequent quarter and make timely decisions to manage the Company. BOD meetings are regularly held in compliance with the requirements on the quorum and quality. In 2019, the BOD held 04 (four) periodical meetings in person. Organization of meetings of the BOD was carried out in accordance the Company Charter, Internal Regulation and the Regulation on operation of the BOD. Meeting invitations must be sent at least 10 days in advance. Documents and reports for the meeting must be sent to members at least 5 days in advance.

Members of the BOD duly attended the meetings and performed voting, with details as follows:

No.

BOD Member

Position

Number of BOD meetings attended

Attendance rate

Reason for absence

Mr. Nguyen Quoc Dinh

Chairman BOD

100%

Ms. Tran Thi Dao

Vice Chairman BOD

100%

Ms. Han Thi Khanh Vinh

Member of BOD

100%

Mr. Ngo Minh Tuan

Member of BOD

100%

Mr. Huynh Van Nhung

Member of BOD

75%

Engaged with another business duty, authorized Mr. Le Van Nha Phuong

Mr. Le Van Nha Phuong

Member of BOD

75%

Engaged with another business duty, authorized Mr. Huynh Van Nhung

Mr. Vo Huu Tuan

Member of BOD

50%

Personal

Mr. Tran Anh Tuan

Member of BOD

100%

issue, authorized Mr. Tran Anh Tuan

BOD meetings always had the attendance of the Head of Supervisory Board. In each meeting, the Supervisory Board put forth questions to the General Director and Deputy Directors regarding significant matters involving business and production operations of Imexpharm, risks in financial management, production and sales of the Corporation.

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BOD meetings in 2019 concentrated on solving and approving pivotal matters as follows: •

Regular follow-up on the implementation of the business and production Plan in 2019 as per the Resolution of the General Meeting of Shareholders;

•

Salary and bonus rates follow the Collective Labor Agreement and Regulation on sales bonuses for 2019;

•

Approved the investment project for a dietary supplement factory and testing center in Cao Lanh City, Dong Thap Province;

•

Established Investor Relations (IR) Department directly affiliated to the Board of Directors;

•

Authorized the General Director to obtain credit lines at commercial banks in the form of unsecured loans, with a total credit line of VND200 billion;

•

Carried out the procedures as prescribed and finalized the list of shareholders for 2018 dividend payment;

•

Select PwC Vietnam Co., Ltd. as the Company’s independent auditor for 2019;

•

Authorized Ms. Tran Thi Dao and Mr. Nguyen Quoc Dinh to sign contracts with Agimexpharm Pharmaceutical Joint Stock Company;

•

Progress with the hi-tech plant in Binh Duong (EU-GMP);

•

Approval of handling measures of bad debts as per regulations;

•

Approval of exercising the right to purchase additional shares for existing shareholders of Agimexpharm Pharmaceutical Joint Stock Company;

•

Authorized the General Director to sign a credit contract with a limit of VND50 billion (Fifty billion VND) to finance the investment in the dietary supplement factory;

The Resolutions adopted by the Board of Directors forms an important basis and orientation for the Executive Board to effectively and strictly perform production and business tasks. Providing directions and making important decisions within the BOD’s competence based on proposal of the General Director In addition to the four scheduled meetings mentioned above, in 2019, Imexpharm Pharmaceutical JSC’s Board of Directors also had 07 extraordinary meetings via email, specifically:

Invited members include:

On January 03, 2019, to consult the Board of Directors via email on the liquidation of unused real estate to raise capital for core business activities and improve capital efficiency;

On January 10, 2019, to consult the Board of Directors via email on the distribution rate to the Science and Technology Development Fund in 2018;

On January 22, 2019, to consult the Board of Directors via email on organizing 2019 AGM;

On May 23, 2019, to consult the Board of Directors via email on promulgating the Operating Rules of the Board of Directors, and the Regulation on information disclosure of Imexpharm Corporation;

On June 7, 2019, to consult the Board of Directors via email on reclamation of ESOP stocks from resigning employees for treasury stocks.

On August 29, 2019, to consult the Board of Directors via email on reclamation of ESOP stocks from resigning employees for treasury stocks.

On December 12, 2019, to consult the Board of Directors via email on allocating evaluation and production cost at Vinh Loc High-tech Antibiotic Factory (IMP2).

Mr. Nguyen Duc Tuan - Head of the Supervisory Board: In 2019, Mr. Nguyen Duc Tuan fully attended and voiced opinions on all of 11 BOD meetings (04 regular and 07 ad-hoc meetings). Annual Report 2019 83

PERFORMANCE REPORT AND EVALUATION OF THE BOARD OF DIRECTORS IN 2019

Resolutions and Decisions issued by the BOD in 2019 In 2019, the BOD adopted in total 13 significant Resolutions for the Executive Board to implement. The Minutes, Resolutions and Decisions of the BOD are highly agreed among the Board members and in the best interests of shareholders and other relevant stakeholders. All resolutions of the Board of Directors were fully disclosed within 24 hours.

Activities of committees under the Board of Directors The current scale of business is not large enough for Imexpharm to establish committees under the BOD. Policies related to personnel, salary and bonus, investor relations, development policies, internal audit, risk management, etc. are being assigned to BOD members in charge. Issues involving personnel, salary and bonus are managed by non-executive BOD members.

In 2019, the Board of Directors also discussed the plan to propose 2020 AGM to set up committees under the Board of Directors, especially the Audit Committee, in order to meet the current regulations on corporate governance and effectively assist the BOD.

Activities of non-executive members The Board of Imexpharm had members who possessed diversified experiences in various professions and industries. As a result, decision making of the members, despite being unanimous, was of independent nature. Non-executive members often had separate meetings and discussions about the governance of Imexpharm. In the past year, members actively contributed to the activities of the BOD.

Members of the BOD not only stood accountable for periodical analysis of macroeconomic and financial climate but also provided up-to-date news of the pharmaceutical industry and precious advice on development strategy, markets, partners and M&A strategies for the Executive Board. Moreover, members also proactively supported in relations with shareholders, investors and the share issuance strategy for increasing the charter capital. Last but not least, they also advised on matters involving high-ranking personnel, salary and bonus and the ESOP regulation of the Company.

Remuneration and operating expenses of the Board of Directors, Supervisory Board in 2019 Remuneration, operational expenses and bonus of the BOD and SB in 2019 At the Annual General Meeting 2019, Proposal 10/TTr-HÄ?QT-IMEX on remuneration and bonus for the BOD and SB for achieving business goals of 2019 was approved on April 02, 2019, specifically: Remuneration and expenses for the BOD and SB: ratio of 2% of Profit before tax and distribution for Fund for Science & Technology Development and before actual paid expenses for the BOD and SB.

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Bonus for the BOD and SB when the Company completes the profit plan: 1% of the net profit after tax; the bonus for achieving higher than the planned profit target is 5% of the excess profit compared to the planned target.

Table of remuneration and bonus in 2019 for the BOD and SB is as follows (Unit: VND)

Indicator

Remuneration, expenses and bonuses for the BOD and SB: 2019

Opening balance

1,123,582,636

Deduction approved at the General Meeting of Shareholders

6,064,671,907

1,081,316,360

3.9%

5,235,599,608

15.8%

4,800,555,556

5,193,333,332

-7.6%

2,387,698,987

1,123,582,636

112.5%

Actual expenses (before personal income tax)

Closing balance

% Change

2018

Remuneration, expenses and bonuses distributed to the BOD and SB in 2019 were VND6.06 billion, or a yoy increase of 15.8%; the actual expenditures in the year were VND4.8 billion, down by 7.6% yoy. (For details of pay, benefits and remuneration of each member of the Board of Directors, the Executive Board, and the Supervisory Board, refer to the 2019 Annual Report / Sustainable Governance / Transactions, income, remuneration and other benefits of the Board of Directors, Executive Board, Supervisory Board)

Other benefits for BOD and SB members Apart from the aforementioned operating expenses and bonus fund to be approved annually by the General Meeting of Shareholders, members of the BOD and SB had no other benefits. Except the BOD Chairman cum Deputy Financial Director, and Deputy Chair cum General Director, other members were entitled to no provision of private cars. Independent and non-executive BOD members, Head of Supervisory Board were not granted sponsored business travel, allowances of mobile phone nor other allowances.

Transactions between the Company and related persons of the Company, or transactions between the Company and major shareholders, internal persons and related persons thereof The Company enforced a policy of restricting insider trading and no such transaction incurred in the year. In 2019, Imexpharm had transactions with its associate, i.e. Agimexpharm Pharmaceutical Joint Stock Company (Imexpharm currently holds 32.99% of charter capital), details are as follows (Unit: VND million): Sales transactions with Agimexpharm in 2019 increased sharply over the previous year, due to Imexpharmâ&#x20AC;&#x2122;s sharing of raw materials with the associate and the dispatch of raw materials to Agimexpharm for outsourcing of some products.

Indicator Sales Purchase Trade receivables as of Dec 31

Trade payables as at Dec 31

Agimexpharm

% Change

2019

2018

47,779

23,211

105.8%

16,521

19,434

-15.0%

4,413

13,609

-67.6%

Purchasing activity from Agimexpharm is by nature transferring finished products to the Company after the outsourcing is completed. The company also regularly monitors and supervises the production and quality assurance of outsourced products in this associate.

Annual Report 2019 85

PERFORMANCE REPORT AND EVALUATION OF THE BOARD OF DIRECTORS IN 2019

Achievements and limitations in governance in 2019 Major achievements in corporate governance 2019

Imexpharm

Best Corporate Governance in the mid-cap category - Vietnam Listed Company Awards 2019 The Vietnam Listed Company Awards is an extension of the Annual Reports Awards - that has accompanied Vietnam stock market and the listed businesses in the past 10 years. Taking transparency as the core value in all activities, this is the second year in a row that Imexpharm was honored among the Top 5 Corporate Governance Awards for Medium-sized capitalization category. This is a great encouragement from the stock market and investor community, for Imexpharm to review and further strengthen its corporate governance system in a more sustainable manner according to advanced practices and in line with Vietnamese regulations on good corporate governance.

The draft submitted to 2020 Annual General Meeting of Shareholders the establishment of Committees under the Board of Directors, including the Audit Committee

In 2019, Imexpharm Board of Directors discussed and agreed on the establishment of affiliated committees to assist the Board of Directors, especially the Audit Committee to comply with Decree 05/2019/ND-CP, for its Internal Auditing to follow international practices. Accordingly, the Board of Directors will submit to the General Meeting of Shareholders in 2020 for approval the establishment of BOD committees, and at the same time revise the Companyâ&#x20AC;&#x2122;s Charter and Internal Management Regulations to suit the organizational structure. new.

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Improvement of internal management regulations

In 2019, Imexpharm continues to improve regulations on internal governance such as: supplementing the Operating Rules of the Board of Directors, amending the Regulation on Information Disclosure on the stock market, amending the Information disclosure process on the stock market for the relevant departmentsâ&#x20AC;&#x2122; execution. In addition, the Company has also drafted and issued the Code of Conduct in the same year. Through this Code of Conduct, the Board of Directors expects that employees will better understand and adhere to responsible business commitments that the Company has successfully implemented over the years to achieve increasingly sustainable development, meeting the modern corporate governance rules that Imexpharm is pursuing.

Limitations and solutions In addition to the results achieved in 2019, the Board of Directors also acknowledges some limitations in the current structure of the Board of Directors as follows: 1.

According to current regulations, the Imexpharm BOD does not meet the prescribed ratio of independent members applicable for listed companies (at least 1/3), since non-executive members have held concurrent positions for more than 5 years. Imexpharmâ&#x20AC;&#x2122;s current Board of Directors possess diverse professional experience in different industries, ensuring the independence and balance between the ratio of executive and non-executive members. The members of the Board of Directors are elected in the General Meeting of Shareholders for the term 2018-2022. On the other hand, regional corporate governance regulations also provide for a longer time for independent board members. We also believe that 5 years is a relatively short time for a senior executive to understand and maximize their performance in a business. Current members of the Board of Directors are making valuable and effective contributions to the Companyâ&#x20AC;&#x2122;s operations.

The absence of independent Directors also makes it difficult for the Company to establish Committees under the Board of Directors because it is customary to have an independent member to head the Committees, especially the Audit Committee.

In addition, female BOD members now account for only 2/8 of the total membership. Imexpharm is also trying to find the right person to be added as an independent Board member to the Company.

Annual Report 2019 87

OBJECTIVES AND PLAN OF THE BOD IN 2020

The Board of Directors anticipates that risks remain ahead in terms of raw material supply when the pandemic is prolonged and complicated on a global scale. In addition, export revenue is not likely to make a positive contribution to growth in 2020.

However, with the potential for revenue growth from EU-GMP certified factories (IMP2, IMP3, IMP4) to compete in national biddings for the high-end segment, the Board of Directors still agreed on the revenues and profits targets proposed by the Executive Board for 2020 as follows:

Profit before tax and distribution for Fund for Science & Technology Development

Total net revenue and income

Profit before tax

260 Billion VND

1,750 Billion VND

260

Growth: 16.9%

Growth: 23.2%

Growth: 28.4%

Billion VND

(No distribution is expected to be made to the Fund for Science & Technology Development in 2020)

IMP - Leading Aspiration

Total revenue and income in 2020 is expected to reach VND1,750 billion or an increase of 23.2%; pre-tax profit and contribution to the Science & Technology Development Fund will reach VND260 billion at a growth rate of 16.9% compared to 2019. This is a real challenge, given that the expected average growth until 2022 is only above 10% per annum. However, with the potential of EU-GMP factories that are being constructed, Imexpharm is expected to maintain its high growth rate which would double the industryâ&#x20AC;&#x2122;s average growth rate to 2022. Besides, to meet the growth rate till 2022, the Board of Directors will improve corporate governance in accordance with advanced practices and against ASEAN and Vietnamese corporate governance score card in compliance with Decree No. 71/2017/ND-CP on corporate governance. Accordingly, the Board of Directors will set up affiliated committees, including the Audit Committee, to support and ensure the effectiveness of the Boardâ&#x20AC;&#x2122;s operations. Performance review of the Board of Directors and Supervisory Board, supervision of the General Director and the Executive Board will also be improved to enhance the roles and accountability of all members.

For sustainable development goals, the Board of Directors will also further accompany the Executive Board in its management of production, product development and distribution network in a way that promotes efficient application of eco-friendly Industry 4.0 technology. At the same time, Imexpharm is committed to maintain and promote investment for communities, study support funds, and support to local communities, improved access to health care for disadvantaged people. In particular, the Corporation will continue to ensure long-term employment and career development for its employees while harmonizing the interests of stakeholders. Above is the business performance report for 2019 and the operation plan for 2020 of the Board of Directors of Imexpharm Pharmaceutical Joint Stock Company. On behalf of the Board of Directors, I would like to express sincere thanks to our shareholders, investors, customers, partners, and all staff members who have always extended your confidence and dedication to Imexpharm.

Annual Report 2019 89

BUSINESS PERFORMANCE AND FINANCIAL STATEMENTS OF THE EXECUTIVE BOARD IN 2019 - PLANS FOR 2020 OPERATIONAL AND FINANCIAL PERFORMANCE 2019 Operational performance briefing 2019 Indicator (VND million) Total net revenue and other income Net revenue Export turnover Revenues from produced goods (Imexpharm products)

2018

% Change

2019 target

% of 2019 target

1,420,716

1,207,125

17.7%

1,450,000

98.0%

1,402,454

1,184,818

18.4%

505

12,482

(96)%

1,293,655

1,064,214

16.5%

220,000

101.1%

2019

Revenues from franchises

95,937

67,329

42.4%

Revenues from other goods

12,358

40,793

(69.7%)

Financial income and other income

10,049

22,307

(55%)

Cost of goods sold

874,535

715,187

22.2%

Gross profit

527,920

469,631

12.4%

Operation expenses

343,723

318,169

17,599

225,124

212,134

6.1%

99,753

88,184

13.1%

Financial expenses Selling expenses General administration expenses Other expenses

18,670

176

252

(69.8%)

Pre-tax profit & appropriation to science & technology development funds

222,429

192,769

15.4%

Pre-tax profit

202,249

173,769

16.4%

Profit after tax

162,387

138,683

17.1%

Total assets

1,847,174

1,774,247

4.1%

Ownerâ&#x20AC;&#x2122;s equity

1,558,889

1,504,613

3.6%

Charter capital

494,212

% COGS/Net Revenue

62.3%

60.4%

1.9%

% Operating Expense/Net Revenue

24.5%

26.9%

(2.4%)

IMP - Leading Aspiration

Performance of 2019 Revenue Targets In 2019, the total revenue and income target set by the General Meeting of Shareholders is VND1,450 billion, up by over 20% yoy. By the end of 2019, Imexpharm achieved 98% of our revenue target, equivalent to VND1,420 billion. Although the revenues are not up to expectations, Imexpharm’s collective efforts are appreciated. As mentioned earlier, in 2019 the whole pharmaceutical industry is faced with the saturation of OTC market and merger activities in line with globalization trends. Amidst increasingly fierce competition, it is a challenge just to maintain the market share but Imexpharm successfully managed to maintain a growth rate of 17.7% in gross revenue and 18.4% in net revenue. The Executive Board also recognizes limitations in developing export markets and increasing export sales. Given intensified domestic competition, exports are seen as targets to ease pressure on the OTC segment. However, Imexpharm has not operated effectively in the export business line in 2019. In 2020, the Executive Board will 6.8%

promote market research activities and source markets for high quality products from EU-GMP factories. Revenues from other goods also decreased in line with the Company’s direction of shifting focus on exploiting key product lines to increase profits. Revenues from financial activities in 2019 witnessed a downturn due to Imexpharm’s divestment from S.Pharm Pharmaceutical Joint Stock Company and Da Nang Pharmaceutical-Medical Equipment Joint Stock Company in 2018. By late 2019, except for dividends received from Argimexpharm, the company has no major financial activities. The Executive Board recognizes Imexpharm’s collective efforts in fulfilling 2019 revenue targets, although the actual results are lower than expected. In particular, the Company sets a high reward for branches which can achieve revenue targets within 11 months and 11.5 months, helping the Company plan forward in terms of production, business, inventory stocking and receivables. 0.9%

Revenue Structure by Product Category Revenues from Imexpharm products still account for the overwhelming majority and contributes over 92% in the revenue structure. Franchised goods in 2019 account for 6.8%. Exports, outsourcing and other goods account for a negligible proportion in the total revenue.

Export revenue Imexpharm products revenue Franchsing products revenue Other purchases revenue 92.2%

Production and consumption Value contribution from factories

Volume (million unit)

2.2%

1.6%

Functional food factory

32.4%

Agimexpharm Factory IMP3 factory Binh Duong IMP2 factory Vinh Loc

2.3%

IMP1 factory Cao Lanh city

92.2%

IMP1 factory - Cao Lanh city IMP2 factory - Vinh Loc

Agimexpharm Factory

IMP3 factory - Binh Duong

Functional food factory

200

400

600

800

1.000

Annual Report 2019 91

BUSINESS PERFORMANCE AND FINANCIAL STATEMENTS OF THE EXECUTIVE BOARD IN 2019 - PLANS FOR 2020 The IMP1 factory in Cao Lanh, which has been in operation for over 22 years, contributes 61.5% to the company’s total revenues and also accounts for 81.7% of the total production output. Although IMP3 Binh Duong’s production output accounts for only 8.5% of the total, its value represents 32.4% due to high quality EU-GMP certified products. The contribution of Vinh Loc factory is marginal since it was only put into operation in early 2019. Besides key product lines, Imexpharm also have products processed at Argimexpharm and dietary supplement products. However, the contribution value of these product groups remains modest. Given Imexpharm’s restructuring of our key product portfolio towards lower share of low-value pill products at IMP1 and higher value of Cephalosprins and Penicillin injection product lines at IMP3, so production output decreased compared to 2018. 1,250 1,200

1,202.8

Unit: Million products

1,225.9

1,150 1,100

1,066.9

1,050

1,050.4

1,000 950

2018 Manufacture volume

2019 Consuption volume

Cost of Goods Sold and Operating Expenses Cost of goods sold accounted for 62.4% of the net revenue, compared to 60.3% in 2018. In 2019, ETC revenues grew dramatically. Distribution activities in ETC channel are mainly done through Imexpharm’s partners, so gross profit margin will not be as high as when distributed by Imexpharm ourselves, leading to higher ratio of COGS/net revenue. On the other hand, selling through partners will substantially reduce the risks for Imexpharm and align with the development trend while ensuring the net profit ratio for the Company. Taking into account the fluctuations of raw material prices in 2019, the Executive Board acknowledges that despite Imexpharm’s initiatives to proactively cope with raw material

IMP - Leading Aspiration

price escalation, heavy dependence on imported raw materials inevitably leads to price increase. Imexpharm is trying to diversify our supplier base, thereby planning better amidst rising material prices. The Executive Board will continue to strictly control this matter. Besides, worsening environment and pandemic crisis together with climate change also take their toll on the material supply chain. The Executive Board also regularly assesses risks to devise coping solutions. A positive highlight for Imexpharm in 2019 is the selling and general administration expenses are well under control. Selling expenses increased marginally by 6.1%

and general administration costs increased by 13.1%. In the context of 2.8% inflation, especially at the end of 2019 when the consumer price index increased sharply, the company’s costs were reasonably curbed to maintain profitability. Total operating expenses increased by 8% yoy, much lower than the revenue growth rate, which is an encouraging signal. However, the company will take more radical measures in controlling costs to improve profitability. Given the current growth context, the Executive Board appreciates Imexpharm’s cost and COGS control, but many limitations need to be addressed to increase the company’s operational efficiency.

Performance of profit targets As raw material prices increase, other costs also escalate in line with the overall growth of the economy; therefore, it is a challenge to achieve the profit before tax and distribution to the Science and Technology Development Fund of VND220 billion. However, Imexpharm successfully managed to exceed the profit target, reaching VND222 billion, up by 15.4% yoy. As price competition becomes more intense, the profit margins of pharmaceutical companies decrease

significantly compared to the period of 2010-2015, however Imexpharm relies on our core competencies of quality products which can directly compete with foreign players with EU-GMP products, thereby easing price competition pressure for the company. Imexpharm’s investment in EU-GMP plants has started to bear fruit, as the company’s profits grow steadily and among the few listed pharmaceutical companies to meet its profit targets in 2019. 19.0%

250 200 150

192.8

18.5%

173.8

138.7

18.0% 17.5%

100

17.0%

16.5% 16.0%

2019 (billions dong)

2018 (billions dong)

Profit before tax and sien and fund distribution Profit before tax Profit after tax Profit after tax growth rate

Total assets and equity Total assets and equity in 2019 increased marginally at 4.1% and 3.6%, respectively, while the charter capital remained stable at VND494.2 billion. Imexpharm’s assets have gradually stabilized after the completion of Vinh Loc high-tech antibiotic factory and Binh Duong hi-tech factory (IMP4) has also been granted with WHO-GMP certification and prepared for the final stage of EU-GMP review, so the assets would not increase as strongly as in the previous period.

Equity also remained unchanged since the company did not issue any new share during the year. 2018 dividend accounted for 20% of the charter capital and was paid in cash in 2019. In general, Imexpharm has managed effectively asset and capital ratios and the progress of factories, besides leveraging existing and new assets. Working capital is also strictly controlled to meet production and business needs

Annual Report 2019 93

BUSINESS PERFORMANCE AND FINANCIAL STATEMENTS OF THE EXECUTIVE BOARD IN 2019 - PLANS FOR 2020

Science and Technology Development Fund Imexpharm contribution to and use of Science and Technology Fund for 7 years as follows: (Unit: VND million) Year

Distributed amount

Used

Closing balance

2012

11,500

2013

10,500

2,793

19,207

2014

12,200

3,909

27,498

2015

13,000

11,180

29,318

2016

14,000

21,597

21,721

2017

16,000

3,310

34,411

2018

19,000

20,805

32,606

2019

20,000

27,065

25,541

Total

116,200

90,659

25,541

Science and technology is promoted to invest in internationally standardized products and improve management capacity through the application of advanced software such as: SAP, supply chain management software - DMS, Balanced scorecard - BSC. In addition, the costs of EUGMP consultancy and review are also financed by this source. 2019 is the 8th year Imexpharm replenishes this fund, in an amount of VND20 billion as approved by the Board of Directors, equivalent to 9.0% of profit before tax and distribution to the Science and Technology Development Fund. It is expected that when Binh Duong High-tech Factory (IMP4) is put into commercial operation in 2020, the company will consider suspending this Fund.

Cash flows Cash flows

2019

2018

% of change

Net cash flows from operating activities

68,632

132,094

(48%)

Net cash flows from investing activities

(122,665)

(48,101)

(155%)

Net cash flows from financing activities

(61,363)

N/A

(115,396)

83,993

(237.3%)

75,035

190,437

(60.6%)

Net cash flows in the period Closing cash and cash equivalents Cash flows in 2019 generally decreased compared to 2018. Despite increase in operating profits, receivables increased sharply, leading to a decrease in net cash flow from operating activities by 48% yoy. Acquisition of assets for new plants has decreased in 2019 compared to 2018, however divestments from Da Nang Pharmaceutical-Medical Equipment Joint Stock Company and S.Pharm Pharmaceutical Joint Stock Company in 2018 also made financial revenue soar. In 2019, Imexpharm did not have any outstanding financial activities, so the cash flows from investing activities also decreased. Besides, the Company has paid VND98.8 billion dividends in cash to shareholders

IMP - Leading Aspiration

in 2019, thus net cash flows from financing activities dropped dramatically. At the end of 2019, cash and cash equivalents decreased, as bank deposits reduced significantly. In general, cash flows in 2019 fluctuate in an unfavorable direction for the company, but it is mainly attributed to the fact that increased revenue will lead to increases in receivables and inventories, and cash dividend payment also affected the companyâ&#x20AC;&#x2122;s cash flows. Imexpharm will maintain close oversight to ensure stable cash flows, contributing to the businessâ&#x20AC;&#x2122;s sustainable growth.

Performance report of the executive board in 2019

Sales - Distribution - Marketing In 2019, although the revenues still fall short of expectations, sales team’s substantial efforts are highly appreciated in achieving the sales target set out by the company. The OTC market in 2019 is under critical saturation pressure while there are many small manufacturers on the market; however, Imexpharm’s OTC channel still managed to achieve stable sales of over VND835 billion. The ETC channel has grown significantly by 99% in 2019, contributing VND387 billion to the total revenues. ETC revenue increased sharply thanks to the efficient operation of the EU-GMP factories in Binh Duong and Vinh Loc. Imexpharm has gradually established firm footprint in the premium drug segment and gained initial results. In 2019, Imexpharm focuses on the core product lines according to the original orientation of the Executive Board. The sales department has successfully completed the sales target of key products, thereby achieving the desired profit target. By the end of 2019, Imexpharm has 20 sales branches nationwide and possesses one of the best pharmaceutical distribution network in Vietnam. Sales are performed by a team of experienced medical representatives and supported by DMS management software. However, branch management remains suboptimal. Most notably, sales forecast at branches is not done effectively to inform production planning, and the commitment of each branch

in fulfilling the company’s targets is not really high, leading to a situation in which the medical representatives only sells items that sell well rather than key products in line with the company’s strategic direction. Therefore, the goal of 2020 is for all sales branches to improve their forecasting capacity and work closely with the production department to ensure optimal inventory control and avoid shortage of goods when the production capacity is still high. KPIs for each medical representative must be set in accordance with the company’s strategic directions towards achieving revenue and profit targets. The marketing department in 2019 coordinated with sales branches to perform well marketing and customer care activities. The acceptance of the EACRI project for Bactamox products was completed as planned. In addition, Marketing department has actively supported the sales team in guiding physicians and doctors to visit Imexpharm’s EU-GMP certified factories to enhance interactions and promote Imexpharm’s image to our targeted customer base. 2019 also marked the first time Imexpharm organized a Medical Forum with the participation of over 200 leading doctors and experts on the topic of community pneumonia treatment. The event is appreciated and Imexpharm will continue to leverage this strength in the future.

Annual Report 2019 95

BUSINESS PERFORMANCE AND FINANCIAL STATEMENTS OF THE EXECUTIVE BOARD IN 2019 - PLANS FOR 2020

Improve and maintain a high quality production system

Human resources training and development

Quality control activities remain top priority at Imexpharm because product quality is the first commitment that Imexpharm delivers to customers.

High quality human resources is the key success factor of Imexpharm. The company always focuses on succession planning to maintain Imexpharm’s production and business efficiency. In 2019, recruitment activities are maintained steadily to meet the human resources needs of new factories. High quality training is focused on key personnel and sales teams. The company spent VND4 billion on our training activities in 2019. Staff rotation between factories was also implemented effectively to meet the Company’s strategic requirements. High quality human resources is crucial to Imexpharm’s operation of EU-GMP compliant factories. However, many shortcomings still remain in human resource management. Amidst fluctuations of the pharmaceutical industry, human resources need to stay responsive to such changes and fit the new situation. The Executive Board also acknowledges that besides the positive factors, some employees are not really committed to the Company’s common goals, which we are actively working on via Imexpharm culture programs with a view to improving engagement, for the common interests of the Company in 2020. Besides, we will pay due attention on the living quality and well-being of each employee. The Executive Board also conveyed to all employees about the company’s medium- and long-term vision so that each individual can adapt to the overall situation. We consider working capacity and attitude most valuable factors in developing Imexpharm towards integration and sustainable growth.

Vinh Loc high-tech antibiotics factory was accredited EU-GMP in early 2019 and put into operation in the mid year of 2019, contributing to improving the investment strategy for firm footprint in the premium drug segment that used to be the playground of multinational pharmaceutical corporations. In July 2019, Imexpharm also successfully obtained the reapproval of EU-GMP certification for the factory in Binh Duong (IMP3) with 3 existing production lines and 2 more new ones were certified. Binh Duong High-tech Factory (IMP4) was also completed and certified for WHO-GMP in September 2019. The Executive Board is expediting the EU-GMP approval process so that it can be conducted in Quarter 2/2020, and the plant will be officially put into operation at the end of Quarter 3/2020, one quarter later than the committed schedule with shareholders due to the complicated situation of Covid-19. In 2020, Imexpharm will become the first domestic pharmaceutical company to possess the largest number of EU-GMP factories in Vietnam. This achievement is the outcome of persistent investment from the whole Imexpharm team, backed by trust and support from shareholders and investors. Without such dedication, the company could not have achieved impressive growth in the period of 2011-2015 to focus on investing in capital quality which is considered as the core competency of the company. In Quarter 4/2019, Imexpharm also commenced the construction of the Pharmaceutical Manufacturing Plant & Testing Center at Cao Lanh Head Office, Dong Thap province, with initial capital investment of nearly VND80 billion. Besides achievements, production is still posed by many shortcomings, failing to meet the expectations of the Executive Board; in particular, the coordination between the production, sales and input supply department has not been really smooth. The Executive Board will review and address these weaknesses in 2020. 96

IMP - Leading Aspiration

Develop and consolidate a sound and transparent financial system Imexpharm view a sound financial position as the top goal for business development, and hence is exposed to low financial risks. Financial activities in 2019 mainly revolve around controlling costs, debts and tracking changes in the material market to take preventive measures and maintain stable profit margins. It is equally important to maintain working capital for the company’s operations. The Executive Board acknowledges the efforts of the financial team in building a sound system and controlling costs. However, bad debt management and recovery still has room for improvement. The Executive Board recognizes this issue and will continue to address and develop preventive measures in 2020.

Legislation and Compliance Imexpharm undertakes to fully comply with the legal provisions and actively develops a robust risk prevention system to minimize possible damages to the company in case any compliance issues arise. In 2019, no significant violations were recorded at Imexpharm, which, according to the Executive Board, resulted from successful governance and risk prevention. However, the tax administrative penalties, though insignificant, also present potential risks. Therefore, the Executive Board requires that compliance activities be strengthened, preventive measures to cope with potential risks be systematically developed, and risk assessment be reviewed periodically. In 2020, Imexpharm’s Code of Ethics and Compliance will also be issued as a guidance to Imexpharm’s employees on corporate compliance and ethical standards.

Sustainable development Impacts of air and environmental pollution on human health are unquestionable, especially in the current situation when natural disasters are increasingly frequent with such climatic events as forest fires, floods. In addition to increased health spending on prevention and treatment of relevant diseases, Imexpharm also cares about the physical and mental damages to the community which the Company has been aware of and made efforts to address. Specifically, the Imexpharm’s Executive Board envisions responsible production and consumption to contribute to environmental protection and mitigation of climate change. Imexpharm is fully compliant with the legal regulations in its production and wastewater treatment and discharge as part of its responsibility to maintain a healthy environment for our community. Energy saving and water saving are introduced as assessment criteria for efficiency of the production, contributing to a better awareness among its employees in environmental protection and thrift practices. Imexpharm also internally circulates its sustainable development directions through its Sustainable Development Committee and training programs on sustainable development in collaboration with GRI- Global Reporting Initiative in Vietnam in 2019. In addition to the impacts of climate change, the development of dangerous epidemics is also on the rise. As a pharmaceutical manufacturer, Imexpharm also benefits from many opportunities while facing challenges in this situation. In every situation, Imexpharm is always a responsible manufacturer, undertaking risk assessment of diseases for its supply chain as well as the production capacity to meet community needs.

Annual Report 2019 97

BUSINESS PERFORMANCE AND FINANCIAL STATEMENTS OF THE EXECUTIVE BOARD IN 2019 - PLANS FOR 2020

Achievements in 2019 In the context of fluctuating material prices, operating costs increased but Imexpharm has successfully managed to achieve our profit targets. The Executive Board once again appreciates the entire team’s achievements towards important goals of 2019.

Efficient marketing activities Outstanding performance of key product lines In 2019, Imexpharm focuses on restructuring its key product proportion in which Imexpharm holds competitive edges to consolidate profits in the context of escalating competition and raw material prices. Sales of key product lines have exceeded our targets. The Executive Board acknowledges the efforts of the sales team for such exceptional performance.

Timely completion and re-application of certification for factories On January 5, 2019, Vinh Loc high-tech antibiotic factory was granted with the EU-GMP certification by the Portuguese Ministry of Health for 3 production lines: Tablets, capsules and packs. On top of that, Imexpharm’s first factory to achieve EU-GMP certification (IMP3) in Binh Duong was successful in its re-application process and received certificate in July 2019. In total, in this review, IMP3 factory has 5 production lines that meet EU-GMP standards. Basic construction for Binh Duong high-tech factory IMP4 has been completed and 4 production lines have been granted with WHO-GMP certification while EU-GMP is expected in Quarter 1/2020. In 2019, the Company also successfully passed the 6th re-application for the Penicillin factory and the Non-betalactam factory in Dong Thap.

IMP - Leading Aspiration

Imexpharm’s marketing in 2019 is centered around efficiency in line with the company’s strategic direction. Forums and conferences to connect health practitioners were successfully organized, contributing to enhancing Imexpharm’s brand image. In addition, customer care activities have also been improved remarkably, thereby increasing customer interactions and enhancing Imexpharm’s image.

Research and development, drug registration activities in line with the company’s orientation Imexpharm pursues intensive investment in research and development activities to increase our competitive advantages and product differentiation. Last year, the R&D department has actively researched and successfully registered 48 Registration Numbers for IMP3 factory and is currently registering products for the new IMP4 factory.

Stable salary and bonus for employees In 2019, human resources have met the needs of new factories, with regular training and retraining being conducted at Imexpharm. Imexpharm’s remuneration policies and talent policies are well implemented to maintain a competent and engaged team for the overall development of the Company.

Limitations in 2019 performance

Governance and sales forecasting of sales branches The 2019 revenue, despite its strong growth, has not met the targets of the General Meeting of Shareholders. Therefore, the Executive Board believed that the governance of the sales branches has not been so effective as expected. The branches have not delivered the target goals in a systematic manner and failed to offer their complete and determined focus on such goals. The Executive Board acknowledged this limitation and provided its specific guidance to each sales branch, for all the goals set by the company for 2020 to be met. Quarterly and annual sales forecasting by each sales branch has failed to produce expected results. This disabled the production to plan and purchase the necessary materials, while also affecting the inventories of the company. In 2020, sales branches shall focus on addressing this limitation for stronger synergies with other departments and improved efficiency of Imexpharmâ&#x20AC;&#x2122;s supply chain. Bad debts and capital tie-up among medical representatives still exist Internal control activities are always strengthened, while the legal department always coordinates with sales branches to ensure internal compliance; yet, bad debts and capital tie-up among medical representatives still exist. In 2020, the Executive Board will direct relevant branches and departments to stick to agreed targets to thoroughly handle Imexpharmâ&#x20AC;&#x2122;s bad debt issue. Commenced production at Vinh Loc high-tech antibiotic factory (IMP2); IMP2 factory was just put into operation in early 2019, this is the second factory of Imexpharm to meet EU-GMP standard. Production activities are somewhat behind the planned schedule due to a number of bottlenecks. However, since this is a new factory, coordination with other teams is not really smooth, time is needed to overcome the above mentioned situation. The Executive Board will actively direct training, team development, operation review of the plant in 2020 to make necessary adjustments in line with emerging situation.

Annual Report 2019 99

BUSINESS PERFORMANCE AND FINANCIAL STATEMENTS OF THE EXECUTIVE BOARD IN 2019 - PLANS FOR 2020

ANALYSIS OF FINANCIAL INDICATORS 2019

2018

Change

Operating income/Revenue

13.9%

14.4%

(0.5%)

ROS (Net profit/Revenue)

11.6%

11.7%

(0.1%)

ROA (Net profit/Assets)

9.0%

7.8%

1.2%

10.6%

9.6%

1.0%

Quick ratio

1.6

2.2

(0.6)

Current ratio

3.0

3.5

(0.5)

139

153

(14)

(7)

(43)

154

132

Liabilities/Owner's equity

18.5%

17.9%

1.6%

Liabilities/Total assets

15.6%

15.2%

0.4%

2,893

2,470

17.1%

48,000

60,900

(21.2%)

(8)

31,544

30,457

3.6%

1.5

(0.5)

Key indicators

Profit margin

ROE (Net profit/Ownerâ&#x20AC;&#x2122;s equity) Liquidity ratio (times)

Days Working Capital (days) Average days of inventories Average days of trade receivables Average days of trade payables Days Working Capital Debt ratios

Stock market performance indicators EPS (VND) Market price on December 31 (VND/share) P/E ratio (times) Book value of a share (BV, VND) P/B ratio (times)

100 IMP - Leading Aspiration

Profitability ratios Return on sales (ROS) decreased slightly over the same period due to the fact that net sales grew at a faster rate than profits. However, ROE and ROA are both higher than 2018. Specifically, ROA reached 9%, up by 1.2% yoy while ROE reached 10.6%, up by 1% yoy. These indicators are expected to grow in 2019 and beyond when Imexpharm’s new factories have been completed and put into operation. The Executive Board also recognizes that Imexpharm’s ROA and ROE are somewhat lower than other companies in the same industry and more efforts are needed to further improve these indicators in the coming years via leveraging the potential of EU-GMP certified factories that Imexpharm has invested.

Liquidity ratios All Imexpharm’s liquidity ratios decreased compared to 2018, but still within the prudential thresholds. Specifically, its current ratio is 3 times, down by 0.5 times yoy. The quick ratio is 1.6 times, down by 0.4 times. In 2019, cash and cash equivalents decreased, and the company’s dividend payment in cash also affect liquidity ratios. However, the Company followed an agile and flexible approach to maintains a sound financial position, thereby supporting its production and business activities.

Efficiency ratios Imexpharm’s days in inventory were 139 days, down by 14 days yoy and accounts receivable days also decreased by 7 days. On the other hand, accounts payable days are also shortened by 43 days yoy and hence, days working capital increased to 22 days. These indicators have decreased but not to the level targeted by Imexpharm. The company will try to reduce the number of days in inventory and accounts receivable days while improving the bargaining power with suppliers to increase accounts payable days in 2020.

Debt ratios IMP’s debt ratio in 2019 improved compared to 2018. The debt-to-equity ratio increased by 1.6% from 17.9% in 2018 to 18.5% in 2019. The debt/asset ratio increased marginally by 0.4% over the same period. Despite an increase in Imexpharm’s debt ratios, it is still curbed within prudential level and the company also has a low risk appetite. However, Imexpharm will consider the cost of capital to use leverage in business operations for better capital efficiency.

Stock market performance indicators Imexpharm’s earnings per share (EPS) increased by 17.1% yoy thanks to higher profits and no new share issuance in 2019. P/E indicators. P/B are down compared to 2018 due to diminution of IMP stock price by 21.2% yoy. IMP stocks now became more attractive to investors and more liquid.

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BUSINESS PERFORMANCE AND FINANCIAL STATEMENTS OF THE EXECUTIVE BOARD IN 2019 - PLANS FOR 2020

Business performance targets for 2020 Based on the development potential of the company and changes in the pharmaceutical market, Imexpharm’s Board of Directors has endorsed the proposals of the Executive Board to be presented to the General Meeting of Shareholders as follows:

Target (VND billion)

2020

2019

Growth

1,750.0

1,420.7

23.2%

Profit before tax and distribution for Fund for Science & Technology Development

260.0

222.4

16.9%

Pre-tax profit

260.0

202.4

28.4%

Total net revenue and income

Imexpharm’s total net revenue target for 2020 is VND1,750 billion or a yoy growth rate of 23.2%. In 2020, Imexpharm does not plan to distribute to the Science & Technology Development Fund, so the company’s targeted profit before tax is VND260 billion or a yoy growth rate of 28.4% compared to 2019. These targets are highly ambitious amidst the current pandemic context but Imexpharm team is confident that together we will successfully fulfill the task of 2020.

Complete the construction of the factories Binh Duong High-tech Plant (IMP4) is expected to be reviewed for EU-GMP to be officially certified by the end of Quarter 3/2020. The Executive Board has directed the departments to coordinate closely to complete the plant on schedule and put into commercial production by Quarter 4/2020. Construction of the Pharmaceutical Manufacturing Plant & Testing Center in Dong Thap province commenced at the end of 2019 and is expected to be completed in 2020 to diversify its product lines released to the OTC market, as well as improve the quality testing of Imexpharm products. 102 IMP - Leading Aspiration

Maintenance of a quality management system for factories, especially EU-GMP certified factories Operation of factories must follow the initially approved standards. Every activity in a factory must be strictly adhered to such standards to ensure the highest-quality products. EU-GMP certified factories must be reviewed every 3 years; thus, quality management, trouble shooting and handling of gaps must be supervised and delivered as planned to ensure maintenance of EU-GMP quality management systems for factories.

Promote research activities and drug registration In the current context where many businesses are upgrading their factories following latest applicable standards, making a difference is more important than ever. Therefore, Imexpharm will continue to strongly promote its research and development activities, especially product lines for EU-GMP certified factories.

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BUSINESS PERFORMANCE AND FINANCIAL STATEMENTS OF THE EXECUTIVE BOARD IN 2019 - PLANS FOR 2020

IMPLEMENTATION SOLUTIONS FOR 2020 In order to deliver the plan for 2020, the Executive Board has provided specific instructions for the departments as follows:

Sales, Marketing and Material Supply: The sales department shall closely track the targets as assigned by the Executive Board, provide forecasts of the expected volume of products so that the Material Supply department is ready in stockpiling raw materials. In the current complicated situation due to the Covid-19 outbreak, the marketing department shall work closely with the sales department to review the annual sales and customer care programs for any necessary adjustments to the work plan in line with the actual market and Imexpharm’s development. The Material Supply department shall coordinate closely with the factories to ensure adequate inventories to timely meet production needs. Strategic management: The strategic management department shall evaluate the impacts of external issues on the overall strategies of Imexpharm. This will provide a ground for relevant recommendations to the Executive Board. Imexpharm’s current and future opportunities and challenges must be carefully analyzed and corresponding strategies must aim to promote growth and improve the reputation of the Imexpharm brand.

Human resources management: The employee recruitment for EU-GMP certified factories must be conducted in parallel with the training and development of high-performing officers to maintain effective operation of Imexpharm. Salary and bonus policies for employees must be based on latest market rates while ensuring the competitiveness of Imexpharm brand to attract and retain talents.

Production Division: Addressing the shortcomings of the factories must be conducted continuously, while the production division should coordinate more closely with the material supply department to ensure adequate volume of goods released to the market and delivery of the company’s sales targets.

Finance and accounting: It is necessary to closely coordinate with the sales department in the implementation of sales programs, and, at the same time, undertake inventory assessment and coordinate with the material supply department to ensure the stockpiling of products in the current complicated situation due to the Covid-19 outbreak in China that has had negative impacts on the global supply chain. At the same time, debt review must be conducted regularly to ensure transparency in financial activities and control capital tie-ups.

Legal Department: Regularly update regulations and policies, especially changes in the pharmaceutical industry to timely update the departments, thereby improving management efficiency and regulatory compliance at Imexpharm.

104 IMP - Leading Aspiration

CONCLUSION 2019 draws to a close with great successes and embraces challenges ahead for Imexpharm. Once again, the Executive Board would like to convey our heartfelt thanks for dedicated support of the shareholders, investors, and over 1,200 Imexpharm engaged family members who have contributed their precious part to our achievements last year. 2020 will be a challenging year for Imexpharm, but it is expected to be a year when the Company continues to affirm our position as the leading pharmaceutical company in Vietnam in the new decade. Although the journey ahead will not be easy, the Executive Board is convinced that Imexpharm with our inherent core values and internal resources will successfully fulfill our production and business targets for 2020 and the term 2018-2022.

Annual Report 2019 105

REPORT OF SUPERVISORY BOARD

INTRODUCTION TO THE SUPERVISORY BOARD

Mr. Nguyen Duc Tuan

Head of SB

Ms. Le Thi Kim Chung

Member

106 IMP - Leading Aspiration

Ms. Do Thi Thanh Thuy

Member

REPORT AT THE GENERAL MEETING OF SHAREHOLDERS Reporting period: The financial year ended December 31, 2019 Cao Lanh City, April 17, 2020 Valued Shareholders, In accordance with »» Articles on rights and obligations of the Supervisory Board provided in the Enterprise Law No. 68/2014/QH13 dated November 26, 2014; »» Articles on rights and obligations of the Supervisory Board provided in the Charter of Imexpharm Corporation (“Company”) dated April 26, 2016; and »» The Charter of the Supervisory Board of Imexpharm Corporation dated October 26, 2018; We, the Supervisory Board of Imexpharm Corporation, supervised operations of the Company in the financial year ended December 31, 2019. Specific contents of the Report include:

KEY ACTIVITIES OF THE SUPERVISORY BOARD IN 2019 Activity

Date

Supervising the implementation of 2018 AGM Resolution Supervising financial statements of the year ended December 31, 2019 Meeting with the Board of Directors - 1st Quarter 2019

March 7, 2019

Meeting with the Board of Directors - 2nd Quarter 2019

July 31, 2019

Meeting with the Board of Directors - 3rd Quarter 2019

October 25, 2019

Meeting with the Board of Directors - 4th Quarter 2019

February 13, 2020

Participation in internal control sessions of the Company

2019

Discussing with Internal Audit of the Company

2019

Through strategic supervision activities, operations control and auditing financial statements, the Supervisory Board hereby submits this report to the General Meeting of Shareholders with detailed contents as follows:

Annual Report 2019 107

REPORT OF SUPERVISORY BOARD

RESULTS OF IMPLEMENTATION OF THE RESOLUTION OF THE GENERAL MEETING OF SHAREHOLDERS 2018 The Board of Directors and Executive Board of the Company fully implemented the Resolution of the General Meeting of Shareholders 2018 and complied with legal regulations and the Company Charter in the management activities. In term of distributing profits of the financial year 2018, cash dividends at 20% of share par value were paid to shareholders on July 11, 2019 and full distributions have been duly made to the investment and development fund and the bonus and welfare Fund. As for business results in 2019, the Company achieved 98.0% of the planned total revenue and 101.1% of the planned profit before tax (profit before tax and distribution for Fund for Science & Technology Development). Planned

Total revenue (VND billion) Profit before tax and distribution for Fund for Science & Technology development (VND billion)

Achieved

Completed

1,450.0

1,420.7

98.0%

220.0

222.4

101.1%

In regard to the selection of auditor, the Board of Directors and Supervisory Board selected PwC Vietnam Ltd. Co. to audit Interim financial statements and financial statements for 2019.

108 IMP - Leading Aspiration

BALANCE SHEET We supervised financial situations of the Company and reviewed the auditor’s report. We agree with the independent auditor’s notes on figures of assets as of December 31, 2019. We took into consideration the in-term changes of assets, liabilities and capital with the following remarkable points:

Unit: VND million CURRENT ASSETS Cash and cash equivalents

Short-term financial investments

Auditedvalue

Ratio

Change

12/31/2019

779.755

42.2%

-6.6%

75.036

4.1%

-60.6% If term deposits at banks were recorded in the value

5.188

0.3%

21.2% During the year, the Company divested from DHG

of investment held to maturity, the cash and cash equivalents of the Company at the end of 2019 were VND76.5 billion, lower than VND190.7 billion at the end of 2018 since the Company continued to disburse investment in two high-tech factory projects of Vinh Loc and Binh Duong. and did not make any new financial investments.

The balance of provision for devaluation of financial investments at the end of 2019 was 3.1 billion VND, higher than to the provision of VND2.4 billion at the end of 2018, due to additional provisions made for short term investments. In our opinion, such distribution of provision for devaluation was sufficient and in accordance with existing regulations. Short-term receivables »» Trade receivables

329.717

17.8%

13.7%

254.244

13.8%

37.1% The proportion of trade receivables for therapeutic

product lines and the market product lines was 52.2% and 47.8% respectively (2018: 24.3% -75.7%).

Proportion of overdue receivables (overdue from 1 month to over 3 years) accounted for 23.4% of total trade receivables, higher than 17.5% and 24.7% in 2018 and 2017 respectively. Out of overdue receivables, the proportion of debt for therapeutic product lines was 35.4%, equivalent to VND21.1 billion (2018: VND9.8 billion) and the rest was overdue receivables for the market product lines, accounting for 64.3%, equivalent to VND38.4 billion (2018: VND22.7 billion) These fluctuations were mainly attributed to the Company’s increased investment in therapeutic product lines in the fourth quarter and in promoting market channel sales programs at the end of the year.

Annual Report 2019 109

REPORT OF SUPERVISORY BOARD BALANCE SHEET

Unit: VND million

Auditedvalue

Ratio

Change

12/31/2019

% Normally revenues from the therapeutic product line has the payment term of over 3 months with low risk of bad debt. Currently, the ratio of overdue receivables over 3 months of the therapeutic product line is 31.2%, down from 2018 (38.2%). Similarly, for the market product line, the ratio of overdue debts over 3 months accounted for 33.5% of the total, down from 2018 (42.5%). However, debts overdue for over 3 months in both ETC and OTC channels increased (ETC: VND6.6 billion, compared to VND3.7 billion in 2018; OTC: VND12.9 billion, compared to VND9.7 billion in 2018). Therefore, the Company needs to monitor closely such ratios and ask to settle these debts to minimize the risk of bad debts.

»» Advanced payments to suppliers

56.240

3.0%

-29.9% Including: VND26,576 billion purchase of assets, the rest is to

»» Provision for short-term receivables which are difficult to collect

(14.432)

-0.8%

15.5% Within the year, the Company made additional provision of

cover the costs of registering for European visa, bioequivalence testing and purchasing materials and conducting Pre-Audit for IMP4 factory.

VND1.9 billion for overdue receivables. In addition, in 2019, the Company has recovered VND1.3 billion out of VND12.5 billion doubtful receivables whose provisions have been made at the end of 2018, completed legal procedures to seek judicial agencies’ intervention in collecting VND11.0 billion (of which VND3.7 billion was entrusted to a judgment enforcement agency, VND2.1 billion was entrusted to the Court and VND5.3 billion was entrusted to the police); and performed write-off of VND0.4 billion. As for arising bad debts in 2019, the Company applied its financial management regulations to settle such bad debts, while took legal actions in some cases to recover the debts.

Inventories

350.457

19.0%

8.2% Inventory increased mainly due to (i) the Company’ stored

materials for production (accounting for 63.7% of the total inventories) went up by 38.5% compared to 2018 based on predictions that material prices could fluctuate, and (ii) finished products (accounting for 29.4% of the total inventories) increased by 22.2% compared to 2018 as the Company reserved goods before expiry of registration and produced goods by order. Therefore, the average days of inventories increased from 135 days in 2018 to 140 days 2019.

We would like to recommend that the company should stringently manage inventory at branches, sales departments should take measures to boost revenue of products in stock to mitigate the risk of slow inventory flow, which could adversely affect product quality and force opening provision for devaluation of stocks.

110

IMP - Leading Aspiration

Auditedvalue

Ratio

Change

12/31/2019

19.358

1.0%

-26.5%

1,067,419

57.8%

13.6%

Fixed assets

967.262

52.4%

12.1%

Tangible fixed assets

405.882

22.0%

67.3% During the year, the Company invested VND202.7 billion to

71.082

3.8%

-2.3% During the year, the Company recorded an increase of

490.298

26.5%

-10.5% Construction in progress includes machinery for high-

51.678

2.8%

25.8% During the year, IMP exercised the right to purchase

46.060

2.5%

44.6%

1,847,174

100.0%

4.1%

LIABILITIES

288.285

15.6%

6.9%

Current liabilities

262.454

14.2%

11.0%

Short-term borrowings and liabilities

37.579

2.0%

These include short-term loans from Sacombank, Dong Thap Branch of VND20 billion, Shinhan Bank - North Saigon Branch VND3.2 billion, Vietinbank Sa Dec Branch VND14.376 billion

Short-term trade payable

90.859

4.9%

-16.7% Trade payables decreased to VND90.9 billion, including

Deferred short-term revenue

21.422

1.2%

141.2% This is the advance payment to buy drugs from partners to

Short-term payables

48.305

2.6%

-21.9% Short-term payables decreased mainly due to lower

Non-current liabilities

25.831

1.4%

-22.1%

Unit: VND million Other short-term assets NON-CURRENT ASSETS

Intangible fixed assets

Long-term construction in progress

Long-term financial investments

Other long-term assets TOTAL ASSETS

Long-term borrowings and liabilities

acquire additional tangible fixed asset including buildings and architectural objects (VND55.2 billion) and machinery and equipment (VND129.8 billion); office equipment and supplies (VND13.9 billion); means of transport and transmission (VND3.8 billion). VND341 million in the Backup software for the server system.

tech factories - VND403.9 billion, Binh Duong high-tech pharmaceutical factory - VND68.5 billion, with the rest being items such as machinery (VND5.0 billion), other construction in progress (VND11.3 billion), purchase of Binh Duong sales branch (VND11.2), and internal roads in the Companyâ&#x20AC;&#x2122;s head office.

additional shares issued by Agimexpharm Pharmaceutical Joint Stock Company, with an investment value of VND10.6 billion, thereby maintaining the ownership ratio of 32.99% at this associate.

asset purchase of VND8.6 billion, purchase of raw materials and promotional goods. participate in biddings for therapeutic product line.

royalties, market research and development costs, etc.

Annual Report 2019 111

REPORT OF SUPERVISORY BOARD BALANCE SHEET

Unit: VND million Fund for Science & Technology Development

Auditedvalue

Ratio

Change

12/31/2019

25.281

1.4%

-22.5% In 2019, the Company made an additional contribution of VND20 billion from pre-tax profit for the Science and Technology Development Fund and used VND27.3 billion for items such as: Purchase of new tangible fixed assets (VND0.26 billion), bioequivalence testing (VND7.5 billion), upgrading at IMP3 (VND11 billion), investment in IMP4 factory (VND4.2 billion), innovation initiatives (VND0.32 billion), etc. It is expected that in 2020 the Company will continue to use the Science and Technology Development Fund for new factory investment projects, and no additional distribution will be made to the Science and Technology Development Fund from pre-tax profits generated in 2020.

OWNERS’ EQUITY

1,558,889

84.4%

3.6%

Owner’s equity

1,558,889

84.4%

3.6%

Paid-in capital

494.212

26.8%

0.0% Owner’s equity in the year increased after the dividend

Share premium

601.241

32.5%

0.0%

Investment and development fund

303.580

16.4%

7.7%

Retained earnings

157.795

8.5%

26.1%

1,847,174

100.0%

TOTAL LIABILITIES AND OWNERS’ EQUITY

payment in 2017 in shares at the ratio of 100: 15

4.1% The debt to equity ratio was 15.6% - 84.4% in the

capital structure (2018: This proportion was 15.2% - 84.8% respectively). Ratios including the current ratio and quick ratio decreased compared to 2018 as a result of the Company’s use of cash for capital construction and increase in short-term loans to finance working capital needs.

KEY INDICATORS

Quick ratio (x)

1.6

2018: 2.3

Current ratio (x)

3.0

2018: 3.5

Average days of trade receivables

2018: 63 days

140

2018: 135 days

Average days of inventories Financial investments/Total assets (%) Provision for devaluation/ Total value of investments

112

IMP - Leading Aspiration

0.4 % 39.2 %

2018: 0.4% 2018: 32.3%. The balance of provision for devaluation of securities investments in 2019 was VND3.1 billion, higher than VND2.4 billion in 2018, due to additional provisions made for investments in MKP

BUSINESS REPORT We agree upon audited figures of business results in 2019 and hereby make several notes as follows:

Unit: VND million Net revenue

Audited value

Change

2019

1,402,454

Comments

18.4% Net revenue in 2019 increased sharply compared to 2018, mainly

because of the strong growth across nearly all product lines, namely (i) joint venture and Imexpharm branded products increased dramatically by 22.3%, accounting for 89.8% of the total revenue (2018: 86.9%) and (ii) franchise categories increase by 42.5%, accounting for 6.8% of the total revenue (2018: 5.7%). In continuing the recovery momentum in 2016-2018, the revenue from therapeutic product lines of Imexpharmâ&#x20AC;&#x2122;s joint venture and brand products increased by 115.8% in 2019 (2018: + +8.8%), higher than the growth rate of the market product lines which only increased by 0.8% (2018: +1.2%). As a result, the contribution to turnover between therapeutic product lines and the market product lines was 66.2% -33.8%, respectively compared to 80.7% -19.3% in 2018. The revenue from the intensive therapeutic product lines was positive thanks to the contribution of injection products Cephalosporins and Penicillin, specialty medical products with bioequivalence testing advantage and the development of private health care. In addition, in 2019, sales of therapeutic product lines via partners continue to increase sharply, accounting for more than a quarter of the total therapeutic line revenues. According to the Executive Board, in the year, the Company continued to focus on quality management of revenue and debt from the market product lines, including shortened terms of payment from 105 days in 2016 to 75 days (applicable as of January 01 2017), further down to 45 days as of July 1, 2018, and only 30 days as of July 01, 2018. Revenues from franchise bounced back because some products with expired registration licenses have regained authorization for production and marketability in 2019.

Cost of goods sold

874,535

22.3%

Annual Report 2019 113

REPORT OF SUPERVISORY BOARD BUSINESS REPORT

Unit: VND million Gross profit

Audited value

Change

2019

Comments

527.920

12.4% The gross profit margin of the Company decreased to 37.6% compared

Income from financial activities

10.079

-46.6% During the year, the Company received VND4.1 billion of dividends from

Expenses of financial activities

18.694

6.2% Financial expenses increased due to (i) interest expenses increased

Interest expenses Sales expenses

3.728 225.125

to 39.6% in 2018 due to the fact that higher share of Imexpharm’s joint venture and brand products in the total revenues only contributed lower share in the gross margin (50.1% as compared to 54.6% in 2018) given changes in distribution channel structure where therapeutic lines’ revenues went up but gross profit went down, leading to lower gross profit margin. The upside is this sales channel involves very low selling cost, and hence contributes higher to operating profits. investments (2018: VND269 million). However, due to the disbursement of capital construction investments, interest income from the deposits in 2019 decreased to VND2.6 billion (2018: VND5.6 billion) and profit from divesting from financial investment was also lower than 2018, leading to lower financial revenues in 2019.

from VND1.3 billion in 2018 to VND3.7 billion, and (ii) payment discount increased from VND10.9 billion in 2018 to VND13.8 billion.

192.2% 6.1% The increase in selling expenses was mainly attributable to an increase of 11.3% in staff costs (due to higher staffing size for IMP2 and IMP4 factories) while other expenses did not change significantly compared to 2018. The company has made targeted investment in programs to sell and promote key brands such as: Claminat Day, Bactamox Club, Imexfamily, etc.

General and administration expenses

Profit from business operations Other incomes/expenses

99.753

194.427

13.1% Significant increases in overhead costs include (i) staff cost increased by 9.5% due to increased management staff, (ii) outsourced service costs increased by 36.8% due to increased costs of hiring experts and consultants, in-kind costs, bank fees, fire insurance, rental and car insurance, etc., and (iii) contribution to Science and Technology Development Fund (10% on pre-tax profit) increased from VND19 billion in 2018 to VND20 billion.

14.0%

8.002

152.7% Other profits mainly came from the liquidation of investment properties,

Profit before tax and distribution for Fund for Science & Technology Development

222.429

15.4% The company has completed its profit target before tax and

Profit before tax and after distribution for Fund for Science & Technology Development

202.429

16.5% Thanks to divestment of financial investments and other profits, the

Current Corporate income tax

40.042

14.1%

162.387

17.1%

Profit after tax

114

IMP - Leading Aspiration

which earned VND7.7 billion.

before contribution to Science & Technology Development Fund in 2019 of VND220 billion.

Company’s pre-tax and post-tax profit margins improved, comparable to that of 2018.

Unit: VND million

Audited value

Change

2019

Comments

KEY INDICATORS Gross profit/Revenue

37.6%

Profit from operations/ Revenue

13.9%

Profit before tax/Revenue

14.7%

2018: 14.7%

Profit after tax/Revenue

11.6%

2018: 11.7%

Profit after tax/Total assets (ROA)

9.0%

Profit after tax/Total capital (ROE)

10.6%

Sales expenses/Revenue

16.1%

Costs of management/ Revenue

7.1%

2018: 39.6% 2018: 14.4%

2018: 7.8% 2018: 9.6% 2018: 17.9% 2018: 7.4%

Annual Report 2019 115

REPORT OF SUPERVISORY BOARD

KEY INDICATORS

37.6%

GROSS PROFIT/ REVENUE

13.9%

PROFIT FROM OPERATIONS/ REVENUE

14.7%

7.1%

PROFIT BEFORE TAX/REVENUE

COSTS OF MANAGEMENT/ REVENUE

11.6%

16.1%

PROFIT BEFORE TAX/REVENUE

SALES EXPENSES/ REVENUE

10.6%

PROFIT AFTER TAX/ TOTAL CAPITAL (ROE)

116

IMP - Leading Aspiration

9.0%

PROFIT AFTER TAX/ TOTAL ASSETS (ROA)

CASH FLOW STATEMENT We agree upon audited figures of the Cash flow statement in 2019 and hereby make some notes as follows Audited value

Audited value

2019

2018

(Increase)/Decrease in receivables

(70,696)

81,375

(Increase)/Decrease in inventories

(25,446)

(43,798)

6,749

(13,724)

Unit: VND million

Nhận xét

Cash flow from operating activities

Increase/(Decrease) in payables

Net cash flows generated by operating activities

68,632

Stockpiling of raw materials negatively affected inventory turnover. However, despite the Company’s more stringent debt management and shorter accounts receivable turnover, selling activities in Quarter IV in both market and 132,094 therapeutic channels led to increased accounts receivable turnover at the end of the year. Therefore, net cash flows operating activities decreased compared to 2018, but remained positive at VND68.6 billion.

Cash flows from investing activities Acquisition and construction of fixed assets and other noncurrent assets

(133,036)

Net cash flows from investing activities

(122,664)

(272,440) The company continues to disburse (48,101) investments in new factory projects and upgrading of existing plants.

Cash flows from financing activities Proceeds from share issue and owners’ contributed capital

Dividends and profit paid to owners

(98,803)

Net cash flows from financing activities

(61,363)

Net cash flows in the period

(115,396)

83,993

Cash and cash equivalents at the beginning of the year

190,437

106,457

Cash and cash equivalents at the end of the year

75,036

190,437

If term deposits are also included, the company’s cash balance at the end of 2019 is VND76.5 billion, down from VND190.7 billion in 2018. This cash reserve accounts for 4.9% of the total assets (2018: 10.7%). Annual Report 2019 117

REPORT OF SUPERVISORY BOARD

ENVIRONMENT PROTECTION AND CAPITAL CONSTRUCTION PROJECTS IN 2019 Environment control In 2019, the company submitted a hazardous waste management report to Dong Thap Environmental Protection Department under the Department of Natural Resources and Environment. Paid environmental protection fees for industrial wastewater and other environmental protection fees. The environmental treatment costs in 2019 are VND890 million. The company signed a hazardous waste treatment contract with Tien Phat Environment Service and Trading Co., Ltd. For the waste collection and transport, the company signed a contract with Dong Thap Urban Water Supply and Urban Environment Joint Stock Company. On November 27, 2019, Dong Thap Department of Natural Resources and Environment performed inspection over the observance of legal provisions on water resources. The inspection team highly appreciated the Companyâ&#x20AC;&#x2122;s implementation of discharge control and quality analysis of waste water discharged into the environment. At IMP 2, IMP4 and IMP3 factories, the Company signed a hazardous waste treatment contract with Sen Vang Environment Co., Ltd. for this purpose

Vinh Loc high-tech Antibiotics Plant (IMP 2): IMP 2 factory came into operation and generated revenue for the overall business results in 2019. By the end of December 2019, the Company had disbursed VND193.6 billion for the project (99.0% of the total investment value), the outstanding amount to be disbursed is VND2.0 billion.

118

IMP - Leading Aspiration

The hi-tech plant in Binh Duong (IMP 4): The factory has been granted with GMP-WHO certification by the Ministry of Health for 4 production lines on September 27, 2019, preparing for EUGMP approval at the end of the first quarter 2020. The factory is expected to be granted with EU-GMP certification and announced by the Ministry of Health in the second quarter of 2020, then from the third quarter of 2020 the factory will start producing products for bidding in the therapeutic lines. By the end of December 2019, the Company had disbursed VND462.1 billion for the project (89.7% of the total investment value), the outstanding amount to be disbursed is VND53.3 billion.

Herbal Medicine Factory and Quality Control Center: The plant was commenced on October 14, 2019 and is expected to be completed in the third quarter of 2020. The factory is allowed to change the approval criteria to GMP so that the outputs can be put for bidding in the therapeutic lines, besides the main goal of the project of expanding the list of drugs supplied in the OTC market. Total estimated investment capital is VND120 billion, of which the amount to be disbursed for investment is VND53.2 billion, the remaining is the value of existing machinery and equipment (some of which are fully depreciated). By the end of December 2019, the Company had disbursed VND16.0 billion, the remaining VND37.2 billion is expected to be disbursed in 2020. The Company plans to borrow VND50 billion from the bank to finance this project.

Annual Report 2019 119

REPORT OF SUPERVISORY BOARD

OVERALL ASSESSMENT OF COORDINATION BETWEEN THE SUPERVISORY BOARD, THE BOARD OF DIRECTORS, AND THE EXECUTIVE BOARD; AND INDEPENDENT AUDIT PERFORMANCE IN THE FINANCIAL YEAR 2019 During the term of 2019, the Supervisory Board has monitored the activities of the Board of Directors and the General Director in managing and operating the company through the following specific tasks:

120 IMP - Leading Aspiration

Attending quarterly and annual meetings of the Board of Directors with updated financial, accounting, production - quality control, procurement import/export, sales - marketing, and legal reports. The Supervisory Board has discussed with members of the Board of Directors and the Executive Board to identify problems in the operation process and suggested specific recommendations.

Evaluate quarterly, semi-annual and annual financial statements of the Company to ensure transparency and integrity of the data provided to shareholders and investors.

Inspecting the implementation of the Annual General Meetingâ&#x20AC;&#x2122;s Resolution on business plan, investments, distribution of profits, dividends, appropriation and use of funds in the Company.

Working with the Internal Audit Committee on periodic audit and control results recorded at the business units and monitoring the implementation of remedial measures.

Contribute ideas in the process of drafting and adopting the Regulations on Financial Management - Accounting Decentralization at sales branches.

Attending the Sales Meeting to deploy the business plan in 2020 and propose recommendations for sales improvement.

The Board of Directors and General Director created good conditions for the Supervisory Board to fulfill its rights and powers as set forth in the Charter of the Supervisory Board. The Supervisory Board could access significant information and documents as well as worked with relevant members of the Board of Directors, General Director and high-ranking officers in order to complete quarterly and yearly supervisory reports. The recommendations of the control reports are published at BOD meetings and are followed up in practice. Annual Report 2019 121

REPORT OF SUPERVISORY BOARD

REPORT ON REMUNERATION OF THE SUPERVISORY BOARD (BEFORE TAX) IN 2019: Full Name

Position

Remuneration VND

Mr. Nguyen Duc Tuan

Head of SB

300,000,000

Ms. Le Thi Kim Chung

Member

200,000,000

Ms. Do Thi Thanh Thuy

Member

200,000,000

RECOMMENDATIONS Recommendations for the Executive Board »» Implement product and market strategies in a coordinated and strict manner via sales branches and domestic and foreign partners for efficient operation of EU-GMP Cephalosporins and Penicillin plant (IMP 3) and hightech Antibiotics Plant (IMP 2), especially the ETC market segment, leveraging the brand for OTC market as well. »» Promote the branding and promotion of key products in 2020 while reviewing and streamlining the product portfolio, eliminating non-performing products and further promoting R&D activities to launch new products for therapeutic and market product lines. 122 IMP - Leading Aspiration

»» Closely manage trade receivables, ensure revenue quality, and reduce risk of bad debts while making provision for doubtful receivables. »» Strictly manage inventory to ensure sufficient raw material reserve for production in the context of Covid 2019 which affects the supply of medicine materials from China while mitigating overstock risks for optimal working capital and avoid slow-moving, expired goods. In particular, it is important to pay attention to the quality control of goods in stock at the branches, so as to prevent the damage or deterioration of the medicine delivered to consumers.

»» Stringently manage the investment progress in the hi-tech Plant in Binh Duong (IMP 4) and the Pharmaceutical Manufacturing Plant & Testing Center in order to commission the two plants as scheduled and up to expectations. »» Effectively strengthen fire and explosion prevention throughout the company, especially regular inspection of fire safety systems at production plants, organize regular drills to get prepared for emergencies. »» Review human resources, organizational structure, salary structure, especially personnel in manufacturing, R & D, sales, etc., to develop existing resources while attracting external talents and plan the development of successive human resource.

»» Instruct branches/sales units to comply strictly with recommendations of the Internal Audit Committee and to feedback on due remedies, and give warnings to branches/sales units violating repeatedly compliance regulations to find out effective solutions for their issues. In addition, in the course of controlling the operations of the branches, it is necessary to continue reviewing and fine-tuning the Regulations on Financial Management - Accounting Decentralization in line with actual annual business performance to further improve the quality of business risk management activities. »» The Board of Directors and Executive Board should continue to restructure the equity portfolio where appropriate time, retaining joint venture investments to promote production linkages and market development, thereby channeling capital for production and business activities. Annual Report 2019 123

IMEXPHARM’S STRATEGY FOR 2020-2022

IMEXPHARM

IMEXPHARM’S STRATEGY FOR 2020-2022 With the philosophy “after 1000 years, lotuses still blossom”, Imexpharm is always proud of the achievements but also serious to identify the reality and make most appropriate strategies to ensure that “lotuses” always “blossom” most brightly!

PERFORMANCE REVIEW FOR 2018-2019

The period of 2018-2019 witnessed Imexpharm’s superior growth compared to the industry average and close alignment with our initial strategic directions. Despite high growth rate, the Company’s revenues still fall short of the target set by the General Meeting of Shareholders. However, amid the current market turbulence, what the leadership and the Imexpharm team have achieved are highly appreciated.

Profits also grew at a high rate and this is the second successive year that Imexpharm fulfilled the profit targets assigned by the General Meeting of Shareholders. This success is a testimony to Imexpharm’s efforts in restructuring its product portfolio, controlling costs and managing the fluctuations of raw material prices.

126 IMP - Leading Aspiration

Financial management and human resource management are well implemented to maintain stable operation and sound financial position of the company.

Marketing efforts are more substantive and aligned with the company’s overall goals. Industrial networking activities are carried out by the marketing department in the form of large-scale forum, attracting hundreds of leading doctors and officials.

The EU-GMP plants have been completed on schedule and contributed to the overall growth of Imexpharm.

The shift in Imexpharmâ&#x20AC;&#x2122;s revenue structure is also in alignment with the companyâ&#x20AC;&#x2122;s strategic direction, i.e. focusing on ETC market via EU-GMP factories.

Besides, Imexpharm remains engaged in community activities such as health care for poor patients and contributions to the Student Support Fund, etc.

In the past two years, Imexpharm also witnessed a slow down in the OTC market for many reasons, which hinders retail operations whereas competition landscape in this market gets more intense.

Domestic manufacturers started realizing the advantages of investing in standardized factories, so the number of EUGMP plants invested in 2018 and 2019 also went up. Imexpharm still holds many advantages in the high quality drug segment as one of the pioneers in this field. However, in the early operation phase of EUGMP plants, the company is faced with certain challenges in increasing its profit margin.

Annual Report 2019 127

STRENG THS WEAKNESSES

SWOT ANALYSIS FOR 2020 -2022

Strengths

Weaknesses

• One of the first companies in Vietnam’s pharmaceutical industry to invest in advanced standards in production and governance.

• Despite intensive investment, research and development (R&D) still fall short of operational requirements of EU-GMP plants.

• Possess highly qualified, adaptive workforce.

and

• Uneven capacity among factories’ workforce, resulting in lack of cohesion within the Company.

• Quality and affordable drug brand trusted by professionals for Vietnamese people

• Dependence on foreign sources of material supply leads to highly volatile profit margins along with supply and price fluctuations.

experienced,

• Imexpharm has a solid and stable financial background, contributing to good production and business objectives. • Possess one of the largest distribution network in Vietnam with 20 branches, over 16,000 pharmacies and nearly 400 pharmaceutical sales representatives nationwide..

128 IMP - Leading Aspiration

OPPORTUNITIES

TS THREA

Opportunities

Challenges

• Vietnam’s population aging and increasing health expenditures. Unpredictability in weather, pandemics and natural disasters is driving up demand for medicines, creating opportunities for pharmaceutical businesses including Imexpharm.

• More and more businesses are investing in hightech factories and hence, intensify competition as most domestic pharmaceutical businesses produce Generics drugs and do not have high R&D content.

• The market is growing steadily, despite signs of slowing down but still maintaining an average rate of 12% per year;

• Global raw material prices tend to increase when China is tightening factory standards to protect the environment. In addition, a supply shortage may occur at a global scale under the impacts of Covid-19 pandemic.

• The Government’s incentive policies to encourage domestic pharmaceutical businesses to invest in the quality enhancement, as evidenced by new Circulars in favor of domestic manufacturers of high-quality drugs. • Strong foreign investment inflows into Vietnam in recent years and extensive technology transfer activities also open up opportunities to learn from the advanced countries and apply for domestic pharmaceutical businesses. • M&A activities are flourishing in the market in general and the pharmaceutical industry more particular, creating opportunities for domestic pharmaceutical businesses to find strategic partners and improve their competitiveness.

• Vietnam’s pharmaceutical industry is also heavily sensitive to state policies, especially regulations on drug procurement in hospitals, drug price control, and prescription drug management, etc. • M&A activities may also entail the risks of domestic pharmaceutical businesses being acquired by foreign businesses rich in finance and technology.

Annual Report 2019 129

KEY STRATEGIES TO 2022 Imexpharm’s revenue and profit outturn in 2018-2019 and forecast until 2022 are shown below:

Indicator

Unit: billion dong

2018

2019

2020F

2021F

2022F

CAGR

Total net revenue and other income

1,207.1

1,420.7

1,751.0

2,350.0

2,800.0

23.4%

In which, revenue from Imexpharm products:

1,017.9

1,222.7

1,670.0

2,250.0

2,650.0

27.0%

Profit before tax and distribution for Fund for Science & Technology Development

192.8

222.4

260.0

329.0

392.0

19.4%

Pre-tax profit

173.8

202.4

260.0

329.0

392.0

22.5%

20.0%

15-20%

Dividend/Charter capital ratio

To successfully implement key strategies and pursue the “Aspiration to lead” by 2022, the Executive Board and the Board of Directors have agreed upon the following basic operating indicators:

Total revenue of Imexpharm by 2022

2-2.5% Represent market share

of the whole pharmaceutical industry

Profit before tax is projected to growth by a

22.5% CAGR of

130 IMP - Leading Aspiration

»» Total revenue of Imexpharm by 2022 will represent 2-2.5% market share of the whole pharmaceutical industry in Vietnam, with CAGR of 23.4%; focusing on developing Imexpharm branded products; »» Profit before tax is projected to growth by a CAGR of 22.5%; »» R&D spending accounts for 3-5% of revenue. This budget will be used to invest in researching new products, testing bioequivalence for key products, further investing in modern machines and training R&D human resources; »» Maintain dividend payout ratio for shareholders between 15% and 20% of the charter capital.

Imexpharm’s strategic solutions in the period of 2020-2022 include: »» Focusing on shifting revenue structure from OTC market to ETC market. However, the company will still maintains the revenue of OTC channel at about VND800 billion. »» Restructuring product portfolio, diversifying product lines for the OTC market to increase Imexpharm’s competitiveness. »» Promoting research and development, new products registration, and European visa application for some products to be qualified for bidding with Category 1, increasing sales for the ETC segment. »» Closely monitoring changes in raw material prices and taking preventive measures by following a reasonable inventory policy to maintain stable profit growth.

Imexpharm’s core strategies are also centered around harmonizing the interests of stakeholders in the Company’s development goals. Key stakeholders of Imexpharm are identified as: shareholders, employees, trading partners, suppliers/ manufacturers, and the local community.

»» Promoting branding activities to boost sales for flagship products. The marketing strategy will be more substantive and aligned with the company’s development strategy in terms of revenue structure and target customer segment. »» Completing and putting into production IMP4 High-tech Plant in Binh Duong on schedule. Maintaining stable operation of existing factories, especially EU-GMP certified factories to ensure timely supply for business activities. »» Attracting high quality human resources and efficiently operating high-tech factories. Promoting rotation of employees among factories to facilitate smooth coordination in Imexpharm’s supply chain. »» Taking initiative in forecast work to manage the production and inventory progress to increase Imexpharm’s business performance. »» Improving management activities at sales branches with stringent debt management and bad debt minimization. Managing branches by sales targets for each pharmaceutical sales representatives. Annual Report 2019 131

KEY STRATEGIES TO 2022

Shareholders

Employees

»» The Company has always maintained high and stable dividend payout ratio to win trust of our shareholders. Dividend is maintained thanks to sound business strategies to maintain the Company’s revenue and profit growth rate.

Human resource is among our key success factors, so Imexpharm’s personnel policies for the remaining years of the 2018-2022 term are:

»» Shareholders are regularly informed about the company’s operation situation on the principle of fair treatment. Information is fully communicated to shareholders and investors on a monthly and quarterly basis. Questions from shareholders and investors are promptly addressed through Investor Relations.

»» Consolidating personnel policies to attract talents.

»» General meeting of shareholders are well organized with the highest sense of responsibility, winning trust of shareholders. Imexpharm’s positive image is perceived by the investment community through our engagement in workshops, forums and direct meetings with domestic and foreign investors.

»» Maintaining stable salary, bonus and welfare for employees. »» Human resource management focuses on efficiency and cultural principles, thereby creating a cohesive and bonding Imexpharm team.

»» Developing specific KPIs for each employee to ensure work efficiency.

»» Further implementing human resource management according to the balanced scorecard (BSC). Further reviewing BSC criteria to effectively perform human resource management. »» Fine tuning Imexpharm’s Code of Conduct to serve as a guideline for all activities of employees.

»» Promoting training activities including internal training and external training to ensure Imexpharm employees stay abreast of new trends and knowledge to meet their job requirements and career development objectives in Imexpharm.

132 IMP - Leading Aspiration

Partners & suppliers

Local community

»» Bidding on ETC channel is done through partners, so issues related to our partners’ regulatory compliance will be closely monitored to safeguard Imexpharm’s reputation, image and brand on the market.

»» Fulfilling obligations and complying with legal regulations, contributing to the local budget.

»» Credit limits and terms for partners will be established based on the harmonized benefits between Imexpharm and partners.

»» Actively engaging in local development, learning, talent nurturing and helping poor patients. »» Generating more jobs, contributing to local economic development, and improving workers’ income.

»» Imexpharm conducts regular assessment of suppliers and manufacturers to maintain a stable supply of raw materials meeting EU-GMP standards. »» Suppliers will be publicly notified of Imexpharm’s bid selection standards to ensure transparent procurement activities.

Annual Report 2019 133

VISION TO 2022

IMEXPHARM LEADING ASPIRATION

Possessing the largest number of EU-GMP production lines in Vietnam

134 IMP - Leading Aspiration

Affirming the leading position in quality and technology Imexpharm, Possessing the largest number of EU-GMP production lines in Vietnam.

2020 is viewed as a pivotal year for Imexpharm in the transformation period where the company plans to affirm its position in the ETC market with all EU-GMP plants being completed. Possessing the largest number of EU-GMP production lines in Vietnam, Imexpharm strives to reach 52:48 ratio of ETC:OTC share in the revenue structure in 2020.

We will also review factories to ensure adherence to all quality standards.

Besides, good management of distribution system will be maintained across 20 sales branches. Distribution system will be more deeply invested.

Inventory forecasting will need to be improved, assessing materials supply and meeting production needs.

Promoting Imexpharm brand among the community of medical professionals.

Annual Report 2019 135

VISION TO 2022

Sustainable development Imexpharm, Possessing the largest number of EU-GMP production lines in Vietnam.

Leading Vietnamâ&#x20AC;&#x2122;s pharmaceutical industry in terms of 5-year average growth rate.

Strengthening all aspects from productivity, research capacity to human resource development.

Performing measures to save energy and protect the environment.

Taking initiative to contribute to community responsibilities and enhance Imexpharmâ&#x20AC;&#x2122;s image.

136 IMP - Leading Aspiration

Human resources development Imexpharm, Possessing the largest number of EU-GMP production lines in Vietnam.

High quality human resource is a decisive factor in maintaining our business and production. Therefore, Imexpharm will continue to develop competitive compensation regime to attract talents. Conducting intensive training programs and promoting R&D activities within the company.

Continuing to improve productivity and work efficiency. Conducting upskilling and training programs for employees, especially capacity building for sales and marketing teams.

Focusing on human resource development and succession planning.

Annual Report 2019 137

SUSTAINABLE GOVERNANCE

SUSTAINABLE GOVERNANCE One of the most crucial factors to ensure sustainable development for an enterprise is corporate governance. Based on good governance practices in the region and the globe (such as ASEAN Corporate Governance Scorecard), in parallel with full compliance with Vietnam Laws on corporate governance for public companies, Imexpharm is keeping and perfecting managerial mechanism. Moreover, risk management and control compliance are also concentrated to create a continuous and unified mechanism in order to supervise and adjust operations of the Company in professional, transparent and effective ways.

COMPARING CORPORATE GOVERNANCE AT IMEXPHARM BASED ON BALANCED SCORE CARD AMONG VIETNAMESE LISTED ENTERPRISES IN 2019 þ: Fully fulfilled þ: Partially fulfilled ý: Unfulfilled Question Code

Question

Reference

Current status of 2019

Justification

LEVEL 1 QUESTIONS A - SHAREHOLDER’S RIGHTS A.1

Does the company pay full dividends within 06 months from the end of the Annual General Meeting?

Clause 3, Article 132 of the Law on Enterprises

A. 2

"The company adopted the following policies in the AGM: a) Dividend payout rate for the past year b) Plan for next year's business performance"

Clause 2, Article 136 of the Law on Enterprises

A. 3

Does the company disclose information on making a list of shareholders entitled to attend the AGM at least 20 days before the final registration date?

Article 8, Decree 71

A. 4

Does the company send an invitation to all Clause 1, Article shareholders entitled to attend the AGM no later 139 of the Law than 10 days prior to the AGM date? on Enterprises

A. 5

Is the Company's AGM held within 4 months from the end of the financial year, or no more than 6 months in the event of an extension?

Article 8, Decree 71, Article 136 of the Law on Enterprises

A. 6

Does the company include provisions in the internal regulations on authorization procedures and form of proxy for shareholders and guide shareholders to authorize proxy to attend the AGM?

Article 8, Decree 71

A. 7

Are all the documents of the AGM published on the company's website (the standard set of documents) including: (1) An invitation letter containing the meeting agenda, (2) A form of proxy to authorize representatives to attend the meeting, (3) A draft resolution for each issue in the meeting agenda, (4) Report of the Board of Directors, Report of the Supervisory Board/Audit Sub- committee (the files must be in good condition)

Clause 4, Article 139 of the Law on Enterprises

A. 8

Are shareholders guided to provide comments on the AGM agenda?

G20/OECD Principles (2015) II (C)

A. 9

Are materials including key information on the candidates of the Board of Directors and the Supervisory Board (if any) (at least age, qualification, expertise, experience, initial appointment date, BOD membership in another listed company, independence) provided at least 10 days before the AGM date?

Article 11, Decree 71

140 IMP - Leading Aspiration

July 11th, 2019 is the date to pay dividend for 2018 by cash, 2,000 dong/share. AGM date was April 23rd, 2019

The company announced dividends and next year operating plans as reflected in the AGM Resolution No. 13/NQ- DHDCD- IMEX dated April 23, 2019

"- Date of announcing the last registration date for the AGM: March 07th, 2019 - Last registration date: March 27th, 2019, 20 days before"

"- Date of send the invitation letter to shareholders was April 2nd, 2019, 21 days before meeting date - Date of posting documents for AGM: April 6th, 2019, 16 days before AGM date"

AGM date: April 23rd, 2019, which satisfies the time limit of 04 months from the end of the financial year

The company includes detailed guideline on authorizing proxies to attend the AGM in Article 16 of the Company Charter approved by the General Meeting of Shareholders on April 28, 2018

"All documents are published at: ht t p : / /w w w.i m exph ar m .c o m /do i -t ac nha-dau-tu/tai-lieu-dai-hoi-dongco-dong-thuong-nien-nam-2019/ as of April 06, 2019"

The company issues guidelines for shareholders to provide comments in the ground rules at the AGM, published with the AGM Invitations and Materials

AGM 2019 did not appoint new members of BOD and SB. The Company will apply this rule for the next AGM having new member appointment.

Current status of 2019

Justification

A.10

Clause 2 Article Is there evidence showing that the AGM has adopted 158 of the Law remuneration, expenses, and fringe benefits paid on Enterprises, by the company to the Board of Directors and the Article 167 of Supervisory BoD members (if any)? the Law on Enterprises

AGM annually pass the statement on BOD, SB remuneration, expenses and fringe benefits. The company presents in its annual report to shareholders at the AGM, and in the AGM materials.

A. 11

Does the company apply modern information technology so that shareholders can best engage and voice their opinions at the AGM, including guidelines for shareholders to vote via teleconference AGM, electronic voting or other electronic forms?

Article 140, Clause 2 of the Law on Enterprises

This has not been applied yet

A. 12

Does the company announce the appointment of an independent party (inspector, supervisor) to represent in the vote counting committee at the AGM?

G20/OECD Principles (2015) II (C)

The company appointed a vote counting supervisor and specified this in the AGM Minutes No. 181/BB- ĐHĐCĐ- 2018, announced on April 24, 2018

A. 13

Does the company announce the voting results for all resolutions on the next working day of the latest AGM?

Circular 155

The company announced AGM Resolution No. 13/NQ- DHDCD- IMEX dated April 23, 2019 on April 24, 2019 as per regulations.

A. 14

Does the company announce the voting results including the number of consensus votes, protest votes and blank votes for each consultation issue in the nearest AGM?

Article 142 of the Law on Enterprises

The company fully announced this in the AGM Minutes No. 181/BB- DHDCD- 2019 dated April 24, 2019

A. 15

Does the latest AGM minutes note that shareholders have the opportunity to ask questions and are questions and answers recorded?

G20/OECD Principles (2015) II (C)

A. 16

Does the company develop and publish policies related to shareholders’ complaints?

G20/OECD Principles (2015) II (C)

Question Question Code

Reference

The AGM minutes fully did not fully demonstrates the questions and answers of shareholders þ

The Company adopts and discloses this policy in its Charter, Section XIX Article 55 on internal dispute resolution.

B - EQUAL TREATMENT TO ALL SHAREHOLDERS B. 1

Does the company publish in English AGM invitation letter and materials?

B. 2

Does the company have internal regulations which require the insiders/related persons to disclose information on trading of the company's shares at least 3 days before the date of transaction?

G20/OECD Principles (2015) II (C)

Circular 155

The Company presents AGM invitation and materials in English and publishes them on the company’s website but not in an adequate manner

"Insiders/Related persons fully disclose information to HOSE on trading of the company's shares. - The company will incorporate this provision into the Company's Information Disclosure Regulation in 2019"

C - ROLE OF STAKEHOLDERS C. 1

Does the company publish an Assessment Report related to environmental and social responsibilities?

Circular 155

The company prepares and publishes the annual Sustainability Report

C. 2

Does the company publish policies and practices describing the company's efforts to integrate environmental factors in its business processes to ensure sustainable development?

G20/OECD Principles (2015) II (C)

The company disclose fully in the annual Sustainability Report; the company has obtained ISO 14001 environmental certification

Annual Report 2019 141

COMPARING CORPORATE GOVERNANCE AT IMEXPHARM BASED ON BALANCED SCORE CARD AMONG VIETNAMESE LISTED ENTERPRISES IN 2019 þ: Fully fulfilled þ: Partially fulfilled ý: Unfulfilled Question Code

Question

Reference

C. 3

Does the company publish policies and practices to protect customer rights?

G20/OECD Principles (2015) IV (A)

C. 4

Does the company clearly disclose policies and practices on health, safety, and employee benefits?

G20/OECD Principles (2015) IV (C)

C. 5

Does the company clearly disclose policies and practices on employee training and personal development?

G20/OECD Principles (2015) IV (C)

Current status of 2019

Justification

The company has a Customer Service Department, puts in place a complaint process for customers and maintains customer information privacy.

The company organizes regular training on occupational health and safety for employees as shown in the Sustainability Report; the company also builds collective labor agreement

"- The company has the Department of Human Resource Development in charge of professional training for employees - The annual training programs are published in the Annual Report"

C. 6

Does the company have a performancebased reward policy aiming at long term rather than short term?

G20/OECD Principles (2015) IV (C)

"- The Company’s reward policy is associated with the annual performance in each year - ESOP policy for employees for past and future contributions (3 years from now) - In addition, the Company also has policies to reward innovation initiatives and outstanding achievements which bring long- term benefits to the Company"

C. 7

Does the company provide contact information on the company's website or the Annual Report so that the related parties (e.g. customers, suppliers, the public, etc.) can voice their concerns and/or complaints about possible violations of their rights?

G20/OECD Principles (2015) IV (B)

The company fully discloses contact information on the company’s website, Annual Report/Sustainable Report

D- INFORMATION DISCLOSURE AND TRANSPARENCY D. 1

Does the company provide information about direct share ownership of each member of the Board of Directors, Supervisory Board and Board of Management/General Director?

Circular 155

The company fully discloses information about direct ownership of IMP shares in the Corporate Governance Report and Annual Report

D. 2

Does the company fully disclose information about direct ownership ratio of major shareholders?

G20/OECD Principles (2015) IV (B)

The company fully discloses information about ownership ratio of major shareholders in the Annual Report

D. 3

Does Annual Report provide information about the company's shareholder structure?

Circular 155

The Annual Report fully discloses information about the company's shareholder structure

D. 4

Does the annual report publish independence of the BoD members?

Circular 155

The annual report fully discloses the independence of the BoD members

142 IMP - Leading Aspiration

the

Question Code

Question

Reference

Current status of 2019

D. 5

Does the annual report contain statements affirming the company's full compliance with corporate governance rules and in the event of non- compliance, is there justification for such issues?

Circular 155

The company fully discloses this in its Annual Report/Corporate Governance section

D. 6

Does the annual report disclose remuneration, other benefits and expenses paid by the company to each member of the Board of Directors and/or the Supervisory Board (if any)?

The annual report fully discloses remuneration, bonuses and other benefits paid to each member of the Board of Director, Board of Management and Supervisory Board

D. 7

Is the salary of the Director (General Director) and other managers (Chief Accountant or higher) presented as a separate item in the annual financial statements of the company and reported to the General Meeting of Shareholders at the AGM?

Article 31, Decree 71

"- The annual financial statements have not detailed this item - The company fully reports this content in the AGM materials and in the Annual Report distributed to shareholders at the AGM"

D. 8

Does the company publish the Annual Report on time as prescribed?

Circular 155

The company always publishes the Annual Report within the prescribed time limit

D. 9

Does the company disclose information on the audited annual financial statements and reviewed interim financial statements in a timely manner

Circular 155

The company discloses information on the audited annual financial statements and reviewed interim financial statements in a timely manner

D. 10

Does the company publish information on the corporate governance situation on a semiannual and annual basis within the prescribed time limit?

Article 30 of Decree 71

The company publishes information on the corporate governance situation on a semi-annual and annual basis within the prescribed time limit

D. 11

Updated information published on the company’s website (can be downloaded): Annual reports

Circular 155

The annual reports in Vietnamese and English can be downloaded from the company's website

D. 12

Updated information published on the company’s website (can be downloaded): Quarterly, interim and annual financial statements of the latest year

Quarterly, interim and annual financial statements of the latest year are fully posted on the company's website and can be downloaded easily

D. 13

Updated information published on the company’s website (can be downloaded): The company’s Charter & Corporate Governance Regulations

The company’s Charter and Corporate Governance Regulations approved by the 2018 General Meeting of Shareholders on April 28, 2018, can be fully downloaded from the company's website.

Circular 155

Justification

Annual Report 2019 143

COMPARING CORPORATE GOVERNANCE AT IMEXPHARM BASED ON BALANCED SCORE CARD AMONG VIETNAMESE LISTED ENTERPRISES IN 2019 þ: Fully fulfilled þ: Partially fulfilled ý: Unfulfilled Question Code

Question

Reference

Current status of 2019

Justification

The company publishes policies on reviewing and approving critical/material related-party transactions, as shown in the amended Charter of the Company in 2018 (Clause 12 Article 30. Board of Directors Meetings, Article 40. Responsibility of Honesty and Avoidance of Conflict of Interest)

D. 14

Does the company adopt policies on reviewing and approving critical/material related-party transactions?

G20/OECD Principles (2015) V

D. 15

Does the company disclose the related party's name, relationship, nature and value of each critical/material related-party transaction?

Article 24, Decree 71

The Annual Reports, Financial Statements of the Company fully disclose information on related parties and related-party transactions

D. 16

Does the company announce trading of the company’s shares by the insiders?

Circular 155

The company fully discloses information on trading of the company’s shares by the insiders

D. 17

Biographical details (at least age, qualification, expertise, experience, initial appointment date, BOD membership in another listed company) of BoD members

G20/OECD Principles (2015) II (C), Circular 155

The company fully discloses the biographical information of the BoD members in the Annual Report/Introduction of the Board of Directors, Board of Management, Supervisory Board, Secretary to the Board of Directors.

D. 18

Details of the participation of each BoD member in the BoD meetings conducted during the year

The company fully discloses the participation of of each BoD member in the BoD meetings conducted during the year in the Annual Report/Corporate Governance section; and Corporate Governance Report

NĐ71

E - RESPONSIBILITIES OF THE BOARD OF DIRECTORS E. 1

Is the Board of Directors composed of sufficient members as prescribed?

Article 13, Decree 71

E. 2

Are at least 1/3 of the BoD independent members?

Article 13, Decree 71

This requirement has not been fulfilled. The company has two non- executive BoD members who do not represent the major shareholders, however, all of them have held positions for more than 5 years.

E. 3

Does the company have a BoD member who concurrently sits on the Board of Directors of more than 05 other companies?

Article 12, Decree 71

No BoD member of the company concurrently sits on the Board of Directors of more than 05 other companies

E. 4

The structure of the Board of Directors should ensure the diversity among members with expertise and experience in law, finance and business.

Article 13, Decree 71

Imexpharm's BoD members are diverse in terms of expertise and experience in law, financial management and business administration, etc.

E. 5

Does the BoD structure ensure gender balance?

Article 13, Decree 71

Imexpharm's members

144 IMP - Leading Aspiration

Imexpharm's BOD is composed of 8 members

BoD

has

2/8

female

Question Code

Question

Reference

Current status of 2019

Justification

"- The company publishes in its Charter and Regulation for Nomination and Selfnomination for BoD and Supervisory Board members, announced before the AGM 2018 - Selection criteria are based on the statutory baseline level"

E. 6

Does the company publish the selection criteria in appointing new BoD members based on the statutory baseline level?

G20/OECD Principles (2015) II (C)

E. 7

Does the BoD appoint/designate at least 1 person to be in charge of corporate administration?

Article 32, Circular 95

The company has issued resolution and decision to appoint Ms. Nguyen Thi Kim Le as the Secretary to the BoD and in charge of corporate administration

E. 8

Does the BoD meet at least once a quarter?

Article 30, Circular 95

The BoD had four formal meetings in 2019, as disclosed in the Corporate Governance Report and Annual Report

E. 9

Is the annual performance evaluation report of the Board of Directors prepared by the Independent Member?

Article 16, Decree 71

The annual performance evaluation report of the Board of Directors is prepared by the Board Chairman

E. 10

Does the BoD's performance report include Board meetings’ minutes and decisions?

Article 9, Decree 71

The BoD's performance report include all of these contents

E. 11

Does the BOD's performance report include future plans?

Article 9, Decree 71

The BoD's performance report include future plans

E. 12

Does the BoD Chairman concurrently serve as the General Director

G20/OECD Principles (2015) VI

As of 2013 the BoD Chairman does not concurrently serve as the General Director

E. 13

Is the BoD Chairman an independent member?

G20/OECD Principles (2015) VI

The BoD Chairman is not an independent member

E. 14

Does the company establish the following BoD subcommittees: Policy Development Subcommittee, Personnel Subcommittee, Remuneration Subcommittee?

G20/OECD Principles (2015) VI (E)

The company does not establish subcommittees

BoD

E. 15

Are BoD subcommittees (Policy Development Subcommittee, Personnel Subcommittee, Remuneration Subcommittee) chaired by independent BoD members?

G20/OECD Principles (2015) VI (E)

The company does not establish subcommittees

BoD

E. 16

Are the Chairman of the Supervisory Board/ Chairman of the Audit Subcommittee independent? (The regulation on the independence of the Supervisory Board is similar to that of the Board of Directors).

G20/OECD Principles (2015) VI (E)

This requirement has not been fulfilled. The Chairman of the Supervisory Board has concurrently held the position for more than 5 years

E. 17

Does the Chairman of the Supervisory Board/Chairman of the Audit Subcommittee have expertise/experience in accounting, auditing or finance?

Article 20, Decree 71

The Chairman of the Supervisory Board has extensive experience working in auditing firms, investment funds, and is a CFA, ACCA holder

Annual Report 2019 145

COMPARING CORPORATE GOVERNANCE AT IMEXPHARM BASED ON BALANCED SCORE CARD AMONG VIETNAMESE LISTED ENTERPRISES IN 2019 þ: Fully fulfilled þ: Partially fulfilled ý: Unfulfilled Question Code

Question

Reference

Current status of 2019

Justification

E. 18

Is there evidence showing that the Board of Directors evaluates the General Director/ Director and the Board of Management annually?

Circular 155

The company has fulfilled this requirement, as reflected in the annual BoD report and performance evaluation report of the Board of Directors submitted to the General Meeting of Shareholders, and in the Annual Report (BoD Supervision over the Board of Management in the year).

E. 19

Does the company issue and publish the Code of Conduct/Ethics?

G20/OECD Principles (2015) VI

The Company has issued the Code of Conduct in 2020

E. 20

Did the BoD members participate in Corporate Governance training courses in the past year?

Circular 155

In 2019, BoD member did not participate in Corporate Governance training courses

E. 21

Is there evidence showing that the Supervisory Board or the Audit Subcommittee assesses the coordination between the Supervisory Board or the Audit Subcommittee and the Board of Directors and the Board of Management?

Article 10, Decree 71

The Supervisory Board evalute this coordination in Supervisory Report included in Annual Report 2019/ Supervisory Board

E. 22

Is there any evidence showing that the Supervisory Board or the Audit Subcommittee conducts an assessment of the independent Auditing Firm and the Financial Statements?

Article 10, Decree 71

The Supervisory Board Report includes an evaluation on the Financial Statements and the independent auditing firm-PwC in Annual Report/Supervisory Report 2019

E. 23

Is the participation of each member in the Supervisory Board/Audit Subcommittee’s meetings made publicly available?

G20/OECD Principles (2015) VI

The Company discloses the participation of the Supervisory BoD members in the Supervisory Board meetings in the Corporate Governance Report and Annual Report 2019

E. 24

Did the Supervisory Board/Audit Subcommittee meet at least twice last year?

Article 23 of Decree 71

In 2019, the Supervisory Board had 03 meetings

E. 25

Does the company publish how to manage critical risks (such as finance, operations including information technology, environment, society and economy)?

G20/OECD Principles (2015) II (C)

The company has published how to manage important risks in the Annual Report

E. 26

Does the BoD Report cover the BoD's leadership role in the process of developing and monitoring/supervising the company's strategy?

G20/OECD Principles (2015) II (C)

The BoD report fully covers the role of the Board in monitoring/supervising the company's strategy

146 IMP - Leading Aspiration

Question Code

Question

Reference

Current status of 2019

Justification

LEVEL 2 QUESTIONS

B.1

Has the company been accused of any insider trading violation in relation to the BoD members, the Board of Management; and employees so far since the beginning of this financial year?

G20/OECD Principles (2015) II (C)

No violation has been found

B.2

Are there any legal violations related to significant or material related-party transactions so far since the beginning of the financial year?

G20/OECD Principles (2015) II (C)

The company has fully complied with regulations

Does the company prepare and publish internationally recognized Sustainable Development reports (in line with GRI standards, Integration Reports, SASB)?

G20/OECD Principles (2015) IV (A)

The Company prepares a Sustainable Report referring to GRI, submit it to HOSE, SSC, and post it on the company’s website.

D.1

Does the enterprise disclose audit fees and non-audit fees (fees collected from other services provided by the auditing firm)?

G20/OECD Principles (2015) V (A)

This has not been disclosed yet

D.2

Has the company received any warnings or sanctions by the Stock Exchange/State Securities Commission (SSC) for violations related to information disclosure or other obligations of listed companies?

Article 28, Decree 71

The company has received warning one time due to delayed information disclosure on tax administrative penalties related to Hanoi branch.

D.3

Has the company received any "qualified opinon" in the independent audit report with no accompanying explanation?

G20/OECD Principles (2015) II (C)

The company has not received audit report with no accompanying explanation

D.4

Has the company reissued the audited Financial Statements in the past year for reasons other than changes in accounting policies?

The company has not reissued audited financial statements in 2019

No member of the Supervisory Board/ Audit Subcommittee is working in the finance and accounting department of the company

Do members of the Supervisory Board/ Audit Subcommittee work in the finance and accounting department of the company?

Article 20, Decree 71

Annual Report 2019 147

THE BOARD OF DIRECTORS Board of Directors and their shares as of December 31, 2019:

No.

Full Name

Position

Non-executive member

Total number of shares owned

Ownership percentage

Shares subject to free transfer

Mr. Nguyen Quoc Dinh

Chairman of BOD

497,380

1.01%

40,000

Ms. Tran Thi Dao

Vice chairwoman of BOD

477,537

0.97%

40,000

Ms. Han Thi Khanh Vinh

Member of BOD

Mr. Ngo Minh Tuan

Member of BOD

138,000

0.8%

20,000

Mr. Huynh Van Nhung

Member of BOD

174,802

0.35%

20,000

Mr. Le Van Nha Phuong

Member of BOD

37,950

0.08%

8,000

Mr. Vo Huu Tuan

Member of BOD

52,687

0.11%

8,000

Mr. Tran Anh Tuan

Member of BOD

52,687

0.11%

8,000

1,431,043

2.90%

Total

148 IMP - Leading Aspiration

144,000

In 2019, there is no change in term of Board of Directors members.

Subcommittees of the Board of Directors

Operations of the Board of Directors

The current scale of business is not large enough for Imexpharm to establish subcommittees under the BOD. The issues related to human resources, compensation, internal control, risk management, etc. are being assigned to appropriate staff to solve by the BOD. Potential application of good practices in governance is always considered by the BOD, in addition to further improvement of its operation.

In 2019, the Board of Directors (BOD) of Imexpharm Corporation operated according to the Operating Rules of the BOD, Company Charter and Rules of Corporate Governance issued on April 28, 2018 in compliance with Decree 71 and Circular 95 guiding governance of public companies.

Imexpharm BOD planned to present to the General Meeting of Shareholders 2020 to pass the establishment of subcommittees under BOD consisting of Audit Subcommittee.

The BOD of Imexpharm maintained quarterly meetings in order to summarize and assess business and production operations in each quarter, discussed the orientations and plan for the subsequent quarter and make timely decisions for Imexpharmâ&#x20AC;&#x2122;s operations. In addition to 04 regular meetings, in 2019, the BOD also organized 07 ad-hoc meetings under the form of email discussions and written ballots to timely address important issues as proposed by the General Director. Likewise, the BOD engaged in monitoring the activities of General Director and other managing officers.

(For more details on activities of the BOD, its evaluation on the result of production, business and investment as well as the monitoring results on the performance of the General Director and other executive members in 2019, please refer to the Report and performance evaluation of the Board of Directors in 2019 - Plans for 2020)

Annual Report 2019 149

THE BOARD OF DIRECTORS

Activities of non-executive members of the Board of Directors who do not represent the capital contribution at Imexpharm The structure of the Imexpharm BOD ensures a balance between executive and non-executive members, in which 3 over 8 members of the Board are non-executive members, thus ensuring objectivity and independence of the decisions of the BOD. The two non-executive members who do not represent the capital contribution at Imexpharm have undertaken many independent activities that generate positive results as follows:

Mr. Vo Huu Tuan

Mr. Tran Anh Tuan

Mr. Vo Huu Tuan was elected to the Board of Directors of Imexpharm Pharmaceutical Joint Stock Company at the General Meeting of Shareholders of the fiscal year 2008 held on 10 April 2009. As an active member of the BOD, Mr. Vo Huu Tuan is responsible for many important issues as follows:

Mr. Tran Anh Tuan was elected to the Board of Directors of Imexpharm Pharmaceutical Joint Stock Company at the General Meeting of Shareholders of the fiscal year 2008 held on 10 April 2009. He is now an active member of the BOD, assuming the following responsibilities:

Non-executive member of the Board of Directors

•

Monitoring the implementation of the strategic objectives of the BOD.

•

Responsible for activities related to HR or remuneration and bonus policies;

•

Updating relevant macroeconomic information related to exchange rate, financial and stock market, banking to the BOD;

•

Monitoring the implementation of the strategic objectives of the BOD.

•

Responsible for the capital mobilization, financial investment and investors’ relations activities (IR) of the Company;

•

Consulting the BOD on management issues, supporting investor relation activities;

•

Updating relevant macroeconomic information and stock market of Vietnam and the world;

•

Responsible for reporting to the BOD and the General Meeting of Shareholders about assigned fields upon request and before the meetings and the General Meeting;

•

Performing other rights and responsibilities as prescribed by laws, the Company Charter and decisions of the BOD.

•

Responsible for managing risks in disclosing information of the Company.

•

Responsible for reporting to the BOD and the General Meeting of Shareholders about assigned fields upon request and before the meetings and the General Meeting;

•

Performing other rights and responsibilities as prescribed by laws, the Company Charter and decisions of the BOD.

150 IMP - Leading Aspiration

BOD Chairman must not concurrently be a General Director Since 2013, Imexpharm has been separating and clearly dividing the responsibilities of the Chairman and the General Director in order to enhance the independence of the BOD and the Board of Management. This separation also ensures the independence of the decisions of the BOD.

Appointment of new members to the BOD The selection and appointment procedures of new members to the BOD are in compliance with the clear and transparent provisions of the Company Charter and the Internal Regulations on Corporate Governance. In 2019, there was no new member in the Board of Directors.

Member of the Board of Directors, the Board of Management, the Supervisory Board and key staff undertaking training in Corporate governance

No.

Full Name

Position

Mr. Nguyen Quoc Dinh

Chairman of the BOD, Deputy General Director

Ms. Tran Thi Dao

Vice Chairwoman of the BOD, General Director

Ms. Han Thi Khanh Vinh

BOD Member

Mr. Ngo Minh Tuan

Member of the BOD, Deputy General Director

Mr. Huynh Van Nhung

Member of the BOD, Deputy General Director

Ms. Le Thi Kim Chung

Member of the SB, Legal Manager

Ms. Do Thi Thanh Thuy

Member of the SB, Internal Control Manager

Mr. Phan Hoang Minh Tri

Assistant to the BOD Chairman

Ms. Nguyen Thi Kim Le

Secretary to the Board of Directors

During the year, the Chairman and members of the Board of Directors and Secretary of the Company also actively participated in the training on corporate to improve corporate governance practices at Imexpharm.

Annual Report 2019 151

THE BOARD OF DIRECTORS

Overall evaluation on activities of the BOD In 2019, the BOD attempted to further improve the corporate governance quality at Imexpharm to be in alignment with Vietnam and regional best practices. Members of the Board dutifully fulfilled their responsibilities and demonstrated the role of non-executive members to safeguard shareholders’ interests. In addition, the Board of Directors also endeavored to create favorable conditions for shareholders to exercise their legitimate rights and equitable opportunities. The structure of the BoD also reflects the efficiency and diversity of its members, including subject matter experts specialized in pharmaceuticals, finance, business administration, etc. All members are well-versed and dedicated in their area of mandate. In addition to overseeing the Board of Management and the implementation of resolutions, decisions of BOD and the General Meeting of Shareholders, BOD members also advise the Board of Management on a number of important issues in production, business and strategic joint ventures, R&D promotion, etc. Overall, in 2019, the BOD has been operating in an effective, diligent and independent manner. Imexpharm’s long-term and medium-term development strategies have clearly defined the orientations and demonstrated sustainability and good management of major risks. The Board of Directors has supervised the Board of Management over the use of capital to invest in projects and production and business activities as committed to shareholders and investors. Transparency and safeguard policies also helped to ensure a healthy financial situation for Imexpharm in 2019 and throughout the past tenure. The Board of Directors demonstrated utmost responsibilities while working with the Board of Management to get a massive workload done. All devised strategies have been drastically enforced, helping Imexpharm navigate boldly through challenges. The Company has strongly positioned Imexpharm brand and remained resilient to all legal and market risks. With sustainable strategies, good corporate governance and internal strengths, the Board of Directors and the Board of Management will lead Imexpharm to more robust developments, with “Aspiration to lead” in the 2018-2022 tenure and the years to come. 152 IMP - Leading Aspiration

THE SUPERVISORY BOARD

Members of the Supervisory Board and Shares Ownership as at 31/12/2019 No.

Full Name

Mr. Nguyen Duc Tuan

Le Thi Kim Chung

Do Thi Thanh Thuy

Total

Position

Total number of shares owned

Head of Supervisory Board

Ownership percentage

Shares subject to free transfer

40,662

0.08%

8,300

Member

16,113

0.03%

5,600

Member

4,801

0.01%

4,800

61,576

0.12%

18,700

Head of Supervisory Board is Mr. Nguyen Duc Tuan who is not an employee at Imexpharm, however, he is not considered to be an independent member due to the fact that he has held this position form more than 5 years.

Activities of the Supervisory Board By controlling strategies, operations and financial statements, the main activities of the Supervisory Board in 2018 included: Activities

Time

Supervising the implementation of the Resolution the General Meeting of Shareholders 2019 Supervising financial statements of the year ended 31 Dec 2018 Meeting with the Board of Directors - 1st Quarter 2019

7/03/2019

Meeting with the Board of Directors – 2nd Quarter 2019

31/07/2019

Meeting with the Board of Directors – 3rd Quarter 2019

25/10/2019

Meeting with the Board of Directors – 4th Quarter 2019

13/02/2020

Participation in internal control sessions of the Company

2019

Discussing with Internal Audit of the Company

2019

(For more details on the activities as well as the evaluations and proposals of the Supervisory Board in 2019, please refer to the Report of the Supervisory Board)

Overall evaluation on activities of the SB All members of Imexpharm Supervisory Board are professionally qualified and appropriated for these positions. During the year, the Supervisory Board with their due care and diligence has been successful in controlling Company strategies, operations and financial statements while preserving their independence. The Supervisory Board is provided with the most convenient access to necessary information for their activities in the best interest of shareholders. The Supervisory Board usually asked questions and received

responses from the Board of Management about business performance, operating expenses, working capital, rate of returns, progress of investment projects, etc. Moreover, the Supervisory Board also gave valued recommendations for the Board of Management. The Supervisory Board also maintained regular communication with the Company’s internal audit to detect any potential risks in the company’s operations. In 2019, the Chairman of the Supervisory Board worked with internal auditors to review operation of sales branches. Annual Report 2019 153

THE SUPERVISORY BOARD

Contents not comparable with the rules on governance of public companies In consideration the corporate governance at Imexpharm with the provisions of Decree 71/2017/ND-CP dated 06 June 2017, Imexpharm had not yet fulfilled some requirements as follows: Clause 3 of Article 8 stipulates the Annual General Meeting:

Article 13: Structure of the Board of Directors

“Public companies shall define in the internal regulation on the application of modern information technology so that shareholders can best attend and voice their opinions at annual general meetings, including guidelines for shareholders to vote via teleconference AGM, electronic voting or other electronic forms as stipulated in Article 140 of the Law on Enterprises and the Company’s Charter.”

Clause 1: Structure of the Board of Directors with gender considerations: Currently only two out of eight members of Imexpharm’s Board of Directors are female.

However, to date, Imexpharm has not yet conducted teleconferences or online voting for shareholders. The Board of Directors will consider applying this channel in upcoming AGMs to best facilitate the shareholders’ attendance and voting. 154 IMP - Leading Aspiration

Clause 5: The structure of the Board of Directors of a listed company must ensure that at least 1/3 are independent members: According to new regulations in Decree 71 on the criteria of independent Board members, who are defined in Clause 2, Article 151 of the Law on Enterprises, currently none of Imexpharm’s Board members is qualified to be independent members since they have held the position for over 5 years.

Article 17: Provisions establishment of the Subcommittees.

on the Board’s

Imexpharm does not set up these subcommittees since the size of the company is not large enough. Nonexecutive members are assigned by the Board of Directors to be in charge of remuneration and bonuses (these members are no longer considered independent). The Board of Directors has planned to present to the General Meeting of Shareholders in 2020 to pass the establishment of Subcommittees supporting for the activities of BOD.

Contracts or transactions with internal shareholders Imexpharm policy does not encourage transactions between the Company and internal shareholders. Up to 2019, no contract or transaction has been made between the Company and the internal shareholders. Equity share transaction traded by internal shareholders and related persons in 2019

No.

Trader

Number of shares at the Position in beginning of term the Company/ Related to internal Percentage shareholders Amount %

Number of shares at the end of term Amount

Percentage %

Reason for increase/ decrease

Tran Hoai Hanh

Chief Accountant

21,007

0.05%

7,007

0.014%

Sold holdings

Do Thi Thanh Thuy

Member of SB

11,031

0.02%

4,801

0.010%

Sold holdings

Huynh Van Nhung

Member of BODDeputy General Director

189,802

0.38%

174,802

0.35%

Sold holdings

Transactions between the Company and related persons of insiders and major shareholders During the year, Imexpharm had a deal with Agimexpharm Pharmaceutical JSC. Mr. Nguyen Quoc Dinh - Chairman of the Board of Directors, Deputy General Director, and Ms. Tran Thi Dao - Vice Chairman of the Board of Directors, General Director were appointed to join the Board of Directors of Agimexpharm as the representative of Imexpharm’s contributed capital.

(For details on the deal with Agimexpharm, please see below in the section: Report of the Board of Directors 2019/Transactions between the Company and the related persons or Transactions between the Company and major shareholders, internal persons, individuals related to internal persons)

Trading of major shareholders In 2019, major shareholders of Imexpharm had below transactions: •

•

Foreign investment Funds authorized to Ms. Truong Ngoc Phuong to manage, which consisted of 07 Funds: (1) Amersham Industries Limited, (2) Balestrand Limited, (3) DC Developing Markets Strategies Public Limited Company, (4) Grinling International Limited, (5) Norges Bank, (6) Vietnam Enterprise Investments Limited, (7) Wareham Group Limited. During the year, this group of Shareholders had many purchases and sales. The number of share owned at the beginning was 11,217,126 shares, which accounted for 22.7%. The number of share owned at the end was 10,871,847, which made up 22.0%.

•

Templeton Funds had disclosed to sell stock and decreased ownership rate and they were no long major shareholders of Imexpharm since August 22nd, 2019.

•

KWE Fund has bought more to increase ownership ratio at Imexpharm from 10.17% to 14.16%. KWE currently owns 7,041,297 shares and disclosed this transaction on September 30th, 2019.

Annual Report 2019 155

SALARY, BONUSES AND REMUNERATION OF THE BOARD OF DIRECTORS, BOARD OF MANAGEMENT, AND SUPERVISORY BOARD

Total compensation and bonus including remuneration of the BOD, BOM, Chief Accountant in 2019: No.

Full Name

Position

Income after tax 2019 (VND)

Ms. Tran Thi Dao

Vice Chairwoman of the BOD - General Director

4,053,036,835

Mr. Nguyen Quoc Dinh

Chairman of the BOD, Deputy General Director

3,110,884,512

Mr. Ngo Minh Tuan

Member of the BOD, Deputy General Director

1,561,924,877

Mr. Huynh Van Nhung

Member of the BOD, Deputy General Director

1,591,041,262

Mr. Le Van Nha Phuong

Member of the BOD, Deputy General Director

2,107,711,862

Mr. Tran Hoai Hanh

Chief accountant

783,647,148

Total

13,208,246,496

Remuneration and bonuses of the BOM and Chief Accountant were paid in compliance with the salary and bonus policy of the Imexpharm Corporation. Operating expenses, remuneration and bonuses of the BOD and the Supervisory Board were paid at the rate stipulated in the Proposal operating expenses, remuneration and bonuses of the BOD and the Supervisory Board as approved at the Annual General Meeting of Shareholders. Remuneration and bonus of non-executive members of the BOD in 2019 are shown as below: No.

Full Name

Position

Income and bonuses after tax 2019

Ms. Han Thi Khanh Vinh

BOD Member

225,000,000

Mr. Vo Huu Tuan

BOD Member

275,000,000

Mr. Tran Anh Tuan

BOD Member

225,000,000

Total

725,000,000

Renumeration and bonuses of the Supervisory Board in 2019 is as follows: No.

Full Name

Position

Income and bonuses after tax 2019

Mr. Nguyen Duc Tuan

Chief of the Supervisory Board

Ms. Le Thi Kim Chung

Supervisory Board Member

180,000,000

Ms. Do Thi Thanh Thuy

Supervisory Board Member

180,000,000

Total

270,000,000

630,000,000

Others benefits for BOD and Supervisory Board Apart from monthly remuneration and accrued bonus thanks to fulfillment of the planned profit to be awarded on yearly public holidays, in the year, as well as the right to buy shares under the ESOP program offered in March, 2017, the members of BOD and Supervisory Board had no other benefits.

156 IMP - Leading Aspiration

SUSTAINABLE GOVERNANCE

Capital investment and percentage of ownership at Agimexpharm is as below

Criteria

Agimexpharm

Investment capital up to December 31st (million dong) Ownership percentage

2019

2018

% Change

46,631

36,044

29.4%

32.99%

0,0%

As of December 31st, 2019 Imexpharm Board of Directors decided to invest 10.6 billion dong more in Agimexpharm Pharmaceutical Joint Stock Company by executing the rights for existing shareholders to purchase more shares, which increase investment capital in Agimexpharm to 46.6 billion dongs to keep ownership rate at 32.99% of charter capital. The fair value of the investment in Agimexpharm determined by PwC Vietnam Co., Ltd. As of December 31, 2019 was 67.7 billion dongs (as of December 31sr, 2018 was 65.5 billion dongs)

Information of Associate Company Agimexpharm Pharmaceutical Joint Stock Company Head office : 27 Nguyen Thai Hoc Street, My Binh Ward, Long Xuyen City, An Giang Province Telephone : 0296.3856 961 Fax : 0296.3857 301 Business Registration Certificate: No. 600699279, registered 14th revision on October 10th, 2019 issued by An Giang Planning and Investment Department (first issuance on June 03rd, 2014) Website: www.agimexpharm.com

Charter capital

Ownerâ&#x20AC;&#x2122;s equity

128,351,770,000

212,695,223,683

(VND)

Annual Report 2019 157

INFORMATION OF ASSOCIATES: AGIMEXPHARM

Major fields of business: •

Manufacturing drugs, pharmaceutical chemicals and medicinal;

•

Trading drugs and pharmaceuticals;

•

Manufacturing and trading cosmetics;

•

Trading medicinal materials and chemicals for production of pharmaceuticals;

•

Trading medical biologics;

•

Manufacturing and trading herbal oils;

•

Manufacturing and trading food, nutritious food, functional food.

Some operating and financial results of the fiscal year 2018 - 2019 of Agimexpharm are as follows:

2018

2019

Plan of 2019

Compared to plan 2019

YoY growth rate

Net revenue

419.5

467.5

450.0

104%

11.4%

Production revenue

402.6

454.4

Cost of goods sold

281.9

323.1

300.4

108%

14.6%

Gross margin

137.6

144.4

149.7

97%

5.0%

1.4

1.7

1.1

155%

21.4%

10.2

16.6

11.3

148%

62.7%

8.4

15.1

Selling Expenses

65.1

69.8

72.0

97%

7.2%

Administrative Expense

23.3

24.3

22.5

108%

4.3%

Operating profit

40.3

35.5

Profit before tax

40.2

35.5

45.0

79%

-11.7%

Profit after tax

32.4

28.4

36.0

79%

-12.3%

465.1

541.4

16.4%

Owner’s equity

174.1

212.7

22.2%

Charter Capital

96.3

128.4

33.3%

Criteria

Business result

Financial revenue Financial expenses In which: borrowing interest

12.9%

79.8%

-11.9%

Asset-Equity Total asset

158 IMP - Leading Aspiration

Net revenue of Agimexpharm was 467.5 billion dongs in 2019, over 4% compared to annual plan, increased 11.4% year over year. This growth rate is not very high but it reflected Agimexpharm’s efforts to boost development in the context of strong competition in pharmaceutical industry. Cost of Goods Sold rose 14.6% compared to 2018, which made gross profit go up only 5.0% due to the impact of increase in input materials price. Selling and administrative expenses increased in 2019 with growth rate of 7.2% and 4.3% respectively. This increase was considered to be medium speed in align with the general trend of market and lower than revenue growth rate. Profit before tax of Agimexpharm was only 79% of the target and decreased 11.7% compare to earlier year. Profit before tax also dropped 12.3% year over year and only

Indicators

met 79% plan. Although revenue grew, financial expenses, especially borrowing interest, surged 79.8% compared to 2018, which made profit before and after tax reduced. Total assets of Agimexpharm increased 16.4% from 465.1 billion dong to 541.4 billion dodng. In 2019, Agimexpharm did not put Bin hHoa factory into operation. Furthermore, the Company decreased selling product ratio in structure; therefore, account payable plummeted 40 billion while used short term borrowings to stock materials to prevent influences of increase in materials price. Owner’s equity increased 22.2% due to accrued profit and during the year, the Company issued new shares for existing shareholders with ratio 10: 3 to add more working capital, which raised charter capital 33% from 96.3 to 128.4 billion dong.

2019

2018

2019/2018

Quick ratio (time)

0.6

0.7

(0.1)

Current ratio (time)

1.2

0,0

Asset turnover (circle)

1.0

0.9

0,1

Profit after tax/ Net Sales (ROS) (%)

6.1%

7.7%

-1,6%

Profit after tax/ Average Asset (ROA)

5.6%

8.0%

-2,4%

Profit after tax/Average Equity (ROE)

14.7%

19.9%

-5,2%

Liquidation ratios of Agimexpharm were kept stable in 2019 and not different from 2018. Asset turnover was also not fluctuating compared to previous year. Profitability ratios declined because profit after tax decreased and assets and owner’s equity increased, which led to sharp decrease in ROS, ROA, ROE in comparison with 2018.

Overall, though profit dropped, net revenue of Agimexpharm still increased and business operation is on the developed way thanks to exploiting Binh Hoa factory to produce herbal medicines and traditional drugs. Hence, potential growth of Agimexpharm is considered to be high in the industry.

Annual Report 2019 159

INFORMATION DISCLOSURE Imexpharm has always pursued prosperity and sustainability of local communities in general and our investors in particular, thus adopting transparency as a core value in its corporate governance.

Imexpharm has always paid special attention and strictly controlled the information disclosure process, seeing this as a criterion for sustainable development. Information disclosure is under responsibility by Mr. Nguyen Quoc Dinh - Chairman of the Board of Directors and Deputy General Director in charge of finance. Besides, Mr. Dinh also receives the support of two non-executive members of the Board of Directors in the process of information disclosure.

With integrity and openness, Mr. Dinh has developed Imexpharmâ&#x20AC;&#x2122;s information disclosure activities in line with the standards and practices applicable to public companies according to three criteria:

Quality and transparency of disclosed information

Timely actions and integration with the investors and stock market

Respect the benefits and rights of shareholders

These measurements contributed to build a transparent, accurate and appropriate information disclosing system. From this, Imexpharmâ&#x20AC;&#x2122;s investors, customers and partners can obtain fast access to clear and accurate information about its business performance as well as its reports.

In 2019, Imexpharm was honored to receive the Best Corporate Governance Award in the category of small and medium-sized enterprises. In its sustainable development strategy, beside the promotion of the role of Imexpharm shareholders, Imexpharm also focus of balancing the benefits of stakeholders. Thus, information disclosure activities of the company are always undertaken in a timely manner in accordance with the regulations of Ho Chi Minh Stock Exchange and Vietnamese laws. Imexpharm has always managed to further improve these activities by refining its Information Disclosure Regulations in line with international practices before being able to disclose information bilingually.

160 IMP - Leading Aspiration

SHAREHOLDER AND INVESTOR RELATIONS Shareholders are the owners of the Company and participate in deciding important issue, strategies thanks to voting rights. Beside shareholders, investors are also interested in Imexpharm business and productions. Shareholder and investor relations activities are concentrated by Imexpharm in recent years due to the fact that communication, meeting with investors will create opportunity for Imexpharm to advertise the Company image in stock market as well as improve the position of IMP stock. In 2019, Investors Relations Division was officially established. Although newly setting up the functional department, investors relations activities have been performed before in accordance to good practices; met needs of stakeholders and assist Board of Management in information disclosure.

Annual Report 2019 161

SHAREHOLDER AND INVESTOR RELATIONS

The achievements of investors relations in 2019 are described as follows:

Coordinating with other departments to sucessfully hold the Annual General Meeting of Shareholders in 2019;

Preparation and disclosure of Annual Report, Sustainable Report on time, contributing to affirm Imexpharm image. In the last two years, Imexpharm stood on top 10 mid-cap enterprises having best annual report. Furthermore, the Company was one of 5 enterprises receiving Best Corporate Governance Award for mid cap group.

Investor Relations department was active in collecting date and participate in Sustainable Companies prize awarded by Vietnam Chamber of Commerce and Industry (VCCI). Imexpharm is proud to be one of 100 sustainable enterprises for 3 consecutive years.

Every year, Imexpharm organizes EU-GMP factory visits for shareholders, investors in order to help stakeholders understand more about modern technology that Imexpharm is applying in production, which makes shareholder feel safe to invest in Imexpharm.

Moreover, Imexpharm also regular met with shareholders and investors such as Dragon Capital Fund, KWE, Vietcombank, Bao Viet, Viet Dragonâ&#x20AC;Ś to update business performance as well as brief about Imexpharm strategies for next periods.

Every month, Imexpharm prepares carefully investor news to timely update information about Imexpharm that investors are interested in.

Beside meetings with shareholders and investors, IR department also answers questions from investors via email to ensure that all concerns are addressed.

Investors Relations was also active in participating in seminars about investment, securities, sustainable development held by investment funds, ACCA, State Securities Commission, Hochiminh Stock Exchange, Global Initiative Reports-GRI, etc.

162 IMP - Aspiration to leader

Imexpharm investors relations activities are initially held in more professional, procedures are standardized to build a transparent and effective system. Motto of investors relations is to mostly focus on core values such as: rights and benefits of shareholders, transparency of information, actively interact and support investors. Complied criteria are applied by investors relations department to ensure information disclosure be performed rightly and gain trust from investors. Furthermore, Investors Relations department is responsible for public relations in order to build Imexpharm image and brand. Beside concentrating on financial market with magazines about securities, the Company also advertises the image via pharmaceutical magazines. In 2019, Investor Relations department had many achievements and coordinated effectively with other divisions to address concerns of shareholders. Imexpharm image was improved considerably in investorsâ&#x20AC;&#x2122; eyes. Information Disclosures were performed timely, adequately and transparently. Besides, communication about corporate social governance was delivered by the coordination between Investors Relations Department and Sustainable Development Committee via internal program and building community programs of Imexpharm.

In 2020, investor relations activities are continuously strengthened. Investors Relations department has been playing a role of connection between investors and Imexpharm to bring harmony benefits for stakeholders and building Imexpharm brand in modern, professional and sustainable way in financial market.

Annual Report 2019 163

INFORMATION ABOUT SHARES AND SHAREHOLDERS

Information about share

IMP

Number of shares listed (31/12/2019)

49,421,159 SHARES

Market capitalization (31/12/2019)

2,370.6 BILLION VND

Number of treasury shares Market capitalization (31/12/2019) Charter capital increased due to additional issuance Earnings per share (EPS) in 2019 Dividend for 2018 paid in 2019 Book value per share (BV) 2019 Market price as at 31/12/2019 Highest closing price in 2019 Lowest closing price in 2019 Total transaction volume in 2019 Total transacted amount in 2019 (calculated by closing prices) Average transaction volume in 2018 P/E (31/12/2019) P/B (31/12/2019)

164 IMP - Leading Aspiration

Number of outstanding shares

49,387,359 SHARES

Total transaction volume in 2019

6,507,443

: 35,860 shares : 2,370.6 billion VND : 0 dong : 2,892 dong/share : 20% of charter capital, paid by cash : 31,565 dong : 48,000 dong/share : 60,000 dong/share : 46,200 dong/share : 6,507,443 shares : 322.7 billion dongs : 26,134 shares/day : 17 : 1.5 time

Treasury shares transactions in 2019 In 2019, Imexppharm had two times of information disclosure about purchasing stocks of leaving employees to add in treasury stock. Total purchase volume was 14,000 shares and amount was 140 million dong.

Date

Buy

Volume

Purchase value VND

30/09/2019

3,000

30,000,000

23/08/2019

11,000

110,000,000

14,000

140,000,000

Total

Closed price chart: IMP shares in comparison with VNIndex from 1/1/2019 to 31/12/2019

In 2019, stock market had upward trend. VNIndex peaked on November 08th, 2019 at the point of 1,022.49, which increased 14.7% compared to the beginning of the year. Then, the market witnessed decreased rounds until yearend. VNIndex closed on December 31st, 2019 at 960.99 points, which rose 7.8% year over year.

2/ /1 02

1/ /1 02

0/ /1 02

9/ 02

8/ /0 02

/0 7/ 02

6/ /0 02

5/ /0 02

19 3/ /0 02

2/ /0 02

1/ /0 02

VNIndex

800 19

850

900

950

1,000

1,050

IMP

IMP stock in 2018 had decreased trend and fluctuated in the range of 46.2-60 thousand dong/share. IMP close price at the last round of the year was 48,000 dong/share, which dropped 20% compared to the beginning of the year.

Annual Report 2019 165

INFORMATION ABOUT SHARES AND SHAREHOLDERS IMP shares trading volume from 1/1/2019 to 31/12/2019 Total transaction volume consisting of order-matching and put through methods of IMP reached 6.5 million shares, which moderately increased 1.6% compared to the amount of 6.4 million shares in 2018. Average transaction volume of IMP was about 26,134 shares/day. The dates which had large amount due to put-through deals of major shareholders. It is said that 2019 liquidation of IMP stock in 2019 was considerably low and this year witnessed poor trading performances of IMP. 2,400,000 2,200,000 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000

19 2/ /1 02

19 /0 02

19 /0 7/

19 02

5/ 02

/0 02

19 4/

19 3/

19 2/ 02

Transactions of foreign investors in 2019 Transaction volume by month (Unit: shares) 2,800,000

2,600,000

2,400,000 2,200,000 2,000,000 1,800,000

1,600,000

1,400,000 1,200,000 1,000,000 800,000

600,000

400,000 200,000 0

Purchase

Sales

Net buy/ sale

In 2019, foreign investors bought 3.9 million shares, and sold 3.8 million shares. Total net buy was 0.1 million shares (in 2018, net sales was 0.13 million shares) Transaction value by month (Unit: VND million) 140.0 120.0 100.0 80.0 60.0 40.0 20.0 (20)

Purchase

Sales

Net purchase

Total purchase value of foreign investors was 194 billion dong while sales value was 189 billion dong. Total net purchase of foreign investor was 5 billion dong (in 2018, total net sales was 3.4 billion dong) 166 IMP - Leading Aspiration

Shareholders structure Shareholder Structure according to the list finalized by Securities Depository Center on 18/03/2020 shown as Shareholder structure classified by types of shareholders No.

Participants

State shareholder

Founding shareholders/FDI shareholders

Number of Ownership share percentage (%)

Number Shareholder

Structure of shareholders (*) Organization

Individual

12,328,156

24.95%

12,328,156

24.95%

21,275,678

43.05%

11,305,027

22.87%

9,970,651

20.17%

20,603

0.04%

20,603

0.04%

33,800

0.07%

27,067,949

54.77%

2,151

2,059

- Domestics

12,833,301

25.97%

1,892

1,848

- Foreign

14,234,648

28.80%

259

211

TOTAL

49,421,159

100.00%

2,162

2,065

In which : - Domestics

25,215,860

51.02%

1,901

1,854

24,205,299

48.98%

261

211

- Domestics - Foreign 3

Major shareholders - Domestics - Foreign

Company Trade Union - Domestics - Foreign

Treasury shares

Shareholders owning preferred shares (if applicable)

Other shareholders

- Foreign

Shareholder structure classified by major shareholders and professional securities investors Number of Share

Ownership rate (%)

Number of Shareholders

Shareholders structure(*)

No.

Criteria

Major shareholders own 5% of equity or more - but not professional securities investors - Domestics

11,305,027

22.87%

Organization

Individual

- Foreign 2

Professional securities investors are major shareholders own 5% of equity or more - Domestics - Foreign

9,970,651

20.17%

12,563,984

25.42%

- Domestics

4,047,425

8.19%

- Foreign

8,516,559

17.23%

33,839,662

68.47%

Professional securities investors are major shareholders own 1% to 5% of equity

TOTAL

Annual Report 2019 167

INFORMATION ABOUT SHARES AND SHAREHOLDERS Shareholder structure classified by type of shares Shares subject to transferred restriction

Criteria

Shares freely transferred

Total

4=2+3

Ownership rate (%)

I. Internal Persons

169,700

1,329,926

1,499,626

3.03%

1. Board of Directors

144,000

1,287,043

1,431,043

2.90%

2. Management Board

128,000

1,212,669

1,340,669

2.71%

18,700

42,876

61,576

0.12%

7,000

6. Person authorized to disclose information

40,000

457,380

497,380

1.01%

II. Treasury share

17,800

16,000

33,800

0.07%

20,603

0.04%

393,250

47,473,880

47,867,130

96.86%

393,250

23,268,581

23,661,831

47.88%

393,250

6,789,623

7,182,873

14.53%

16,478,958

33.34%

24,205,299

48.98%

516,378

1.04%

23,688,921

47.93%

48,840,409

49,421,159

100.00%

3. Supervisory Board 4. Finance Director 5. Chief Accountant/Head of finance and accounting department

III. Company Trade Union

7,007

0.01%

IV Shareholders of preferred shares (if applicable) V. Other Shareholders 1. Domestics 1.1 Individual 1.1 Organization 2. Foreign 2.1 Individual 2.1 Organization TOTAL

580,750

Listed of special shareholders

Name of entity/individual

Number of shares

Ownership rate (%)

A. State Shareholders

Total A

11,305,027

22.87%

2,923,934

5.92%

7,046,717

14.26%

21,275,678

43.05%

C. Strategic Shareholders

Total C

B. Major Shareholders 1

Vietnam Pharmaceutical Corporation

Balestrand Limited

KWE Beteiligungen AG

Total B

168 IMP - Leading Aspiration

Shares subject to share transfer restriction

Name of entity/individual

Number of shares

Ownership rate (%)

Shares subject to share transfer restriction

D. Founding Shareholders 1

Vietnam Pharmaceutical Corporation

11,305,027

22.87%

Tran Thi Dao

477,537

0.97%

Tran Thai Hoang

9,203

0.02%

Nguyen Quoc Dinh

497,380

1.01%

Nguyen Thi Thu Hong

0.00%

Luu Thi Hanh

0.00%

Nguyen Kim Phuong

19,000

0,04%

Hoang Tho Phon

20,004

0,04%

12,328,156

24.95%

Total D

40.000 40.000

Detailed List of Internal Shareholders (as of December 31, 2019) No.

Full Name

Position

Shares subject to transferred restriction

Shares freely transferred

Total

Ownership percentage (%)

Board of Directors

Nguyen Quoc Dinh

Chairman of BOD

40,000

457,380

497,380

1.01%

Tran Thi Dao

Vice Chairwoman of BOD

40,000

437,537

477,537

0.97%

Huynh Van Nhung

Member of BOD

20,000

154,802

174,802

0.35%

Le Van Nha Phuong Member of BOD

8,000

29,950

37,950

0.08%

Ngo Minh Tuan

Member of BOD

20,000

118,000

138,000

0.28%

Vo Huu Tuan

Member of BOD

8,000

44,687

52,687

0.11%

Tran Anh Tuan

Member of BOD

8,000

44,687

52,687

0.11%

Han Thi Khanh Vinh Member of BOD

Management Board

Tran Thi Dao

General Directors

40,000

437,537

477,537

0.97%

Nguyen Quoc Dinh

Deputy General Directors

40,000

457,380

497,380

1.01%

Huynh Van Nhung

Deputy General Directors

20,000

154,802

174,802

0.35%

Le Van Nha Phuong Deputy General Directors

8,000

29,950

37,950

0.08%

Ngo Minh Tuan

20,000

118,000

138,000

0.28%

III

Supervisory Board

Nguyen Duc Tuan

Supervisory Board

8,300

32,362

40,662

0.08%

Le Thi Kim Chung

Member of SB

5,600

10,513

16,113

0.03%

Do Thi Thanh Thuy

Member of SB

4,800

4,801

0.01%

Chief Accountant Chief Accountant

7,000

7,007

0.01%

40,000

457,380

497,380

1.01%

Deputy General Directors

Tran Hoai Hanh

Authorized person to disclose information

Nguyen Quoc Dinh

0.00%

Annual Report 2019 169

INTERNAL CONTROL

At Imexpharm, the Board of Directors is responsible for the accuracy and effectiveness of internal control system. The Board of Management is in charge of building and maintaining the efficiency of internal control system. Middle managers and staff are requested to apply internal control process, find and prevent risks in operations. Furthermore, Imexpharm also has professional committees to support the Board of Management in dealing with problems related to assets, receivables, award bidding in purchasing activities of the Company. Internal control methods are set and processed for all activities of Imexpharm. Besides, there are also procedures to do in daily business, controlled and cross-checked via SAP-ERP and Distribution Management System-DMS. Additionally, the Company also developed the hierarchy, clear authority, transparency to avoid frauds in Imexpharm. Beside Supervisory Board is under the Board of Directors, Imexpharm also established internal control division led by the Finance Deputy General Director that usually receives directors from Management Board in order to improve risk prevention system. Employees in Internal Control division have many experiences, and well understand the Companyâ&#x20AC;&#x2122;s operations. Internal Control Division coordinates with Finance and Legislation division to perform adequately main functions: identify risks, building preventive system, control and remedy consequences once incidents occur. On an annual basis, internal auditors the reviews of branches and departments, including production, supply chain, procurement (of materials, supplies and assets), 20 sales and marketing branches nationwide. The Internal Control Division ensures that all division, branches are reviewed at least 1 time per year. The audit result will be directly reported to the Management Board to make timely interaction to maintain business and production activities of the Company. Internal control also cooperates closely with the Supervisory Board under the Board of Directors to report the Companyâ&#x20AC;&#x2122;s operation and consult the Supervisory Board to improve performance effectiveness. In 2019, Internal Control Division fulfilled assigned responsibilities satisfactorily. During the year, Divisions of the Company also seriously perform their duties in accordance with regulations, no any material mistakes was recorded.

170 IMP - Leading Aspiration

LEGISLATION AND COMPLIANCE

Imexpharm has a Legal Department to advise the Board of Directors on all aspects of business operations, transactions, and contracting, to ensure that Imexpharm operates in compliance with laws and minimizes legal risks for the Company. In 2019, the Legal Department has effectively performed the following tasks: Reviewing and controlling hundreds of contracts signed by the Company in the year, including contracts with customers, production partners, distribution partners, raw material suppliers, consultancy contracts, property procurement contracts, equipment procurement contracts, service contracts, etc. Coordinating with internal auditors to scrutinize compliance, credit risks, risk of sales promotion programs at sales branches; Assisting the Chairman of the Board of Directors to verify the legality of information disclosure, resolutions of the Board of Directors, etc. Assisting the Chairman of the Board of Directors on the procedures to organize the 2019 Annual General Meeting of Shareholders in compliance with regulations. Coordinating regular activities of the Legal Club to communicate new and relevant regulations across the whole company for further study and shared understanding among its employees and staff; Assisting the company leaders in providing comments and inputs to the Circulars on drug procurement in hospitals and other relevant regulations concerning Imexpharmâ&#x20AC;&#x2122;s business activities; Completing procedures for changing business registration certificate, procedures for establishment and operation of branches, etc. The activities of the Legal Department are very important and will be further strengthened in order to help Imexpharm minimize legal risks in its operations and enhance compliance across the Company.

Annual Report 2019 171

RISK MANAGEMENT STRATEGIES IMPLEMENTATION Imexpharm risk tolerance is low. Hence, the Company has built risk management sytem based on its risk acceptance level.

Business operation risks

Lack of materials risk:

Legal risk in pharmaceutical industry

In the context of complicated global trends, natural disasters and pandemic, lack of materials is highly possible to happen due to the fact that 90% of raw materials have to be imported. If there are insufficient materials to serve production demand, business operations will be hugely impacted.

In current circumstances, change in tender decree will directly influence to Imexpharm because the Company is determinating to ETC market. There are a lot of factors affecting changes in government policies and these issues are out of Imexpharm control.

Imexpharm assessed that this risk was at high medium level.

Risk assessment for Imexpharm is high

Risk management: Imexpharm is maintaining and evauating inventory periodically in the coordinate among sales, procument and production divisions. Material stocks have to be enough for the Company at least 1 quarter. Besides, the Company ususally validates suppliers to increase bargaining power as well as have many back-up proposals in the case that key suppliers could not meet the Companyâ&#x20AC;&#x2122;s demand for materials

To well mange this risk, Imexpharm has to do market research carefully, usually re-structure product porfolios to be suitable with market and tender trends. On the other hand, the Company keeps investing for quality, creates the competitiveness in the ground of many rivals. Expenses are concurrently controlled to stabilize selling prices and increase competitiveness of Imexpharm products.

172 IMP - Leading Aspiration

Product quality risk

Product portfolio risk

Operating in pharmaceutical industry, product quality is sharply significant because it directy impacts to users’ health.

At present, the issue of antibiotic resitances is happening, World Health Organization (WHO) has alerted the use of antibiotic without prescriptions and encouraged researche new drug to replace antibiotics in the future researches on, WHO asks for strictly controlling use of antibotics.

Imexpharm evaluates this risk be low, however; if there is a problem related to product quality, the consequences are very critical. In order to manage the issue related to product quality, Imexpharm ebstablished customer service center with contact center operating 24/7 to explain all customers’ concerns about Imexpharm products. Besides, the Company has professional quality control and assurance system to ensure that there is no defect from material input to drug output sent to customers. Delivery is fulfilled by Imexpharm staff to assure product quality during the time of transports. Imexpharm partners in distributing the Company’s products are usually assessed to comply with quality and storage standards proposed by the Company.

Antibiotic products are key ones of Imexpharm. Antibitotic resitance can not be overlooked, however; antibiotic invention has been a breakthrough of modern medicines and it takes a lot of time for mankind to find a reaplacement for such a drug. Antibiotic replacement is evaluated as low risk by Imexpharm. Nevertheless, the situation of being strictly control is not avoidable and this action will have great impacts on drugstores’ revenue. Hence, on the one hand, Imexpharm is maintaining to develop the key antibitoics. On the other hand, the Company puts efforts to add more products into porfolios to make them diversed. Besides, the Company pushes tendering in hospitals to compensate for the decrease of OTC. Furthermore, Imexpharm will actively seek export markets and increase investment for research and development to obtain more European visa of its products.

Annual Report 2019 173

RISK MANAGEMENT STRATEGIES IMPLEMENTATION

Human resources risk:

Information system risk

Imexpharm evaluates human resources risk to be high medium, especially risky in the sector of key staff with good experiences, white collar workers and techinicians in pharmaceutical industry.

Imexpharm is implementing innovative software for the productions and business operations including ERP-SAP, Distribution Management System and Imexpharm website together with the Company’s pages in social networks. These systems contribute to maintain business activities to operate smoothly, synchronously and keep connection among sales, finance and production divisions.

Resolution of Imexpharm to mitigate this risk is to attract talented people by salary, bonus and benefits scheme. Besides, shares are issued under ESOP program for employees attaching with performances to increase employees’ engagement. Training, career development and coaching of Management board are usually offered to strengthen successor staff for Imexpharm..

174

IMP - Leading Aspiration

Internet sercurity is very crucial in the epoch of 4.0 revolution, enterpises’ data can be hacked in any time and the consequences are very critical. However, in Imexpharm circumstance, a small and medium enterprise, risk level is medium. To protect and prevent accessing and being attacked by hackers via internet, the Information technology deparment always follows, checks the whole company system, builds back-up system, timely solves inccidents, concurrently communicates with all employees about cautions, not open strange messages and immediately inform to IT department once there is doutbful information.

Bad debt risk Imexpharm sells the products in OTC channel thanks to medical sales representative and in ETC channel, the Company distributes to partners. Selling products via sales representatives could make debt and appropriation occur. Selling via partners may be less risky but account receivables shall increase. Imexpharm evaluated bad debt risk at low medium level since the Company did not have concentrating account receivables but disperse to many customers. To manage this risk, Imexpharm has internal control system to check all transactions, reconcile account receivables to reduce appropriation of medical sales representatives. Concurrently, legislation division coordinates to validate sales contracts with partners and pharmacies to ensure transaction be legal and in compliance with law, the Company policies and approved selling programs. The Supervisory Board has participated in Board of Directors meetings to understand the Companyâ&#x20AC;&#x2122;s operations and has appropriate solutions to advise to Board of Director in order to reduce bad debt, uncollectible debt.

Payment risk When all factories are put into operations in 2020, Imexpharm needs working capital for productions and business activities, the Company will use borrowing capital from banks. With good credit history, Imexpharm procedures of borrowing is easily done. Imexpharm evaluated risks related to payment is low. Imexpharm negotiated with banks based on the advantage of the enterprise credibility to have favorable interest rate. However, borrowings are supervised tightly and approved by the Board of Directors. the BOD assigned to the General Director to timely interact with changes in the Companyâ&#x20AC;&#x2122;s operations. Besides, the Company maintains a safe financial system and does not overuse financial leverage.

Financial risk

Exchange rate risk Exchange rate impacts Imexpharmâ&#x20AC;&#x2122;s business operations as 90% raw materials are imported from overseas. Payment currency is mostly USD. When USD exchange rate fluctuates, Imexpharm profit shall be influenced. Currently, USD exchange rate is controlled by the Government; thus, Imexpharm assesses exchange rate risk at medium level. Imexpharm analyzes the impacts of exchange rate on profit before tax of the Company. In details, if the exchange rate appreciates or depreciates 3%, the profit before tax of the Company will increase or decrease 1,994,676,736 dong. Thus, profit could be fluctuated 0.9% when exchange rate changes 3%. Imexpharm manages exchange rate risk by reevaluating the impacts of exchange rate every year. The Company has plan to import materials for stock to reduce the risk of appreciate exchange rate. However, the inventory has to be balanced with business and production demand.

Materials price risk Price of materials fluctuated with upward trend due to the stricter regulations on protecting environment. Increase in price of materials will directly influence to products cost and make gross profit decreased, which can impact on business and production targets. Imexpharm evaluates this risk at high medium level. Ratio of materials in product cost was 73.3% in 2019. if price of materials goes up or down 1%, product cost will increase or decrease 0.73% respectively. Risk management: The Company assesses inventory every month, is actively sourcing potential suppliers to increase purchase power. Due to large enterprise in the industry, Imexpharm is able to request vendors to sign contract with fixed price for whole year to avoid surge in price of materials.

Annual Report 2019 175

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2019

FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019

CORPORATE INFORMATION

Enterprise registration certificate

No. 1400384433 which was initially issued by the Department of Planning and Investment of Dong Thap Province on 1 August 2001 and the 27th amendment dated 21 June 2018.

Board of Directors

Mr. Nguyen Quoc Dinh

Chairman

Mrs. Tran Thi Dao

Vice chairman

Mr. Le Van Nha Phuong

Member

Mr. Huynh Van Nhung

Member

Mr. Ngo Minh Tuan

Member

Mr. Tran Anh Tuan

Member

Mrs. Han Thi Khanh Vinh

Member

Mr. Vo Huu Tuan

Member

Board of Supervision

Mr. Nguyen Duc Tuan

Chief Supervisor

Mrs. Le Thi Kim Chung

Member

Mrs. Do Thi Thanh Thuy

Member

Board of Management

Mrs. Tran Thi Dao

General Director

Mr. Nguyen Quoc Dinh

Deputy General Director

Mr. Huynh Van Nhung

Deputy General Director

Mr. Ngo Minh Tuan

Deputy General Director

Mr. Le Van Nha Phuong

Deputy General Director

Mr. Tran Hoai Hanh

Chief Accountant

Legal representative

Mrs. Tran Thi Dao

General Director

Registered office

No 4, 30/4 Street, Ward 1, Cao Lanh City, Dong Thap Province, Vietnam

Auditor

PwC (Vietnam) Limited

178 IMP - Leading Aspiration

STATEMENT OF RESPONSIBILITY OF THE BOARD OF MANAGEMENT OF THE COMPANY IN RESPECT OF THE FINANCIAL STATEMENTS The Board of Management of Imexpharm Corporation (“the Company”) is responsible for preparing financial statements which give a true and fair view of the financial position of the Company as at 31 December 2019 and the results of its operations and its cash flows for the year then ended. In preparing these financial statements, the Board of Management is required to: • Select suitable accounting policies and then apply them consistently; • Make judgements and estimates that are reasonable and prudent; and • Prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business. The Board of Management is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the financial position of the Company and which enable financial statements to be prepared which comply with the basis of accounting set out in Note 2 to the financial statements. The Board of Management is also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud or errors. APPROVAL OF THE FINANCIAL STATEMENTS We hereby approve the accompanying financial statements as set out on pages 179 - 212 which give a true and fair view of the financial position of the Company as at 31 December 2019, and of the results of its operations and its cash flows for the year then ended in accordance with Vietnamese Accounting Standards, the Vietnamese Corporate Accounting System and applicable regulations on preparation and presentation of financial statements. On behalf of the Board of Management

Nguyen Quoc Dinh

Deputy General Director Authorised by Legal Representative Dong Thap Province, SR Vietnam 9 March 2020

Annual Report 2019 179

INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF IMEXPHARM CORPORATION We have audited the accompanying financial statements of Imexpharm Corporation (“the Company”) which were prepared on 31 December 2019 and approved by the Board of Management on 9 March 2020. The financial statements comprise the balance sheet as at 31 December 2019, the income statement and the cash flow statement for the year then ended, and explanatory notes to the financial statements including significant accounting policies, as set out on pages 181 to 214.

Responsibility of the Board of Management The Board of Management of the Company is responsible for the preparation and the true and fair presentation of these financial statements in accordance with Vietnamese Accounting Standards, the Vietnamese Corporate Accounting System and applicable regulations on preparation and presentation of financial statements and for such internal control which the Board of Management determines as necessary to enable the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express an opinion on the 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 standards and requirements and plan and perform the audit in order to obtain reasonable assurance as to whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including an assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation and true and fair presentation of the 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 Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Auditor’s Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2019, its financial performance and cash flows for the year then ended in accordance with Vietnamese Accounting Standards, the Vietnamese Corporate Accounting System and applicable regulations on the preparation and presentation of financial statements.

Other Matter The independent auditor’s report is prepared in Vietnamese and English. Should there be any conflict between the Vietnamese and English versions, the Vietnamese version shall take precedence.

For and on behalf of PwC (Vietnam) Limited

Mai Viet Hung Tran

Audit Practising Licence No. 0048-2018-006-1 Authorised signatory

Report reference number: HCM8806 Ho Chi Minh City, 9 March 2020

180 IMP - Leading Aspiration

Trieu Nguyen Duy

Audit Practising Licence No. 3022-2019-006-1

BALANCE SHEET

Form B 01 – DN

As at 31 December

Code ASSETS

Note

2019 VND

2018 VND

779,754,902,383

834,742,066,160

75,035,614,726

190,436,654,283

75,035,614,726

60,436,654,283

130,000,000,000

5,187,529,260

4,280,825,260

100

CURRENT ASSETS

110

Cash and cash equivalents

111

Cash

112

Cash equivalents

120

Short-term investments

121

Trading securities

4(a)

6,476,068,160

6,235,578,160

122

Provision for decline in value of trading securities

4(a)

(2,788,538,900)

(2,172,002,900)

123

Investments held to maturity

4(b)

1,500,000,000

217,250,000

130

Short-term receivables

329,717,064,645

289,884,339,434

131

Short-term trade accounts receivable

254,243,682,480

185,494,599,108

132

Short-term prepayments to suppliers

56,239,591,813

80,227,308,348

135

Short-term lendings

4,950,000,000

136

Other short-term receivables

33,666,029,278

31,712,651,019

137

Provision for doubtful debts – short-term

(14,432,238,926)

(12,500,219,041)

140

Inventories

350,457,017,273

323,809,107,094

141

Inventories

352,429,048,651

326,982,599,909

149

Provision for decline in value of inventories

(1,972,031,378)

(3,173,492,815)

150

Other current assets

19,357,676,479

26,331,140,089

151

Short-term prepaid expenses

487,308,005

443,234,596

152

Value added tax (“VAT”) to be reclaimed

18,379,471,234

24,129,338,389

153

Tax and other receivables from the State

490,897,240

1,758,567,104

15(a)

The notes on pages 187 to 214 are an integral part of these financial statements.

Annual Report 2019

181

BALANCE SHEET (CONTINUED)

Form B 01 â&#x20AC;&#x201C; DN As at 31 December

Code ASSETS (continued)

Note

2019 VND

2018 VND

200

LONG-TERM ASSETS

1,067,419,412,879

939,504,623,313

210

Long-term receivables

2,419,733,410

3,550,244,742

215

Long-term lendings

2,369,488,670

3,500,000,002

216

Other long-term receivables

50,244,740

220

Fixed assets

476,963,731,000

315,304,833,923

221

Tangible fixed assets

405,881,869,551

242,576,553,974

772,901,475,918

575,112,884,123

(367,019,606,367)

(332,536,330,149)

71,081,861,449

72,728,279,949

93,176,416,886

92,835,037,094

(22,094,555,437)

(20,106,757,145)

490,298,169,896

547,705,487,912

490,298,169,896

547,705,487,912

51,677,954,400

41,093,514,700

222

Historical cost

223

Accumulated depreciation

227

Intangible fixed assets

228

Historical cost

229

Accumulated amortisation

10(a)

10(b)

240

Long-term asset in progress

242

Construction in progress

250

Long-term investments

252

Investments in associates

4(c)

50,621,446,700

40,034,396,700

253

Investments in other entities

4(c)

1,326,668,000

254

Provision for long-term investments

4(c)

(270,160,300)

(267,550,000)

260

Other long-term assets

46,059,824,173

31,850,542,036

261

Long-term prepaid expenses

46,059,824,173

31,850,542,036

270

TOTAL ASSETS

1,847,174,315,262

1,774,246,689,473

182 IMP - Leading Aspiration

The notes on pages 187 to 214 are an integral part of these financial statements.

As at 31 December 2018 VND

RESOURCES

300

LIABILITIES

288,285,048,243

269,634,123,949

310

Short-term liabilities

262,453,980,527

236,477,695,853

311

Short-term trade accounts payable

90,858,539,368

109,020,003,485

312

Short-term advances from customers

21,421,846,398

8,882,372,011

313

Tax and other payables to the State

9,188,452,181

12,484,292,871

314

Payables to employees

47,951,699,128

27,817,999,931

315

Short-term accrued expenses

48,304,871,474

61,848,533,123

319

Other short-term payables

3,303,579,481

2,441,888,370

320

Short-term borrowings

37,579,456,821

322

Bonus and welfare fund

3,845,535,676

13,982,606,062

330

Long-term liabilities

25,831,067,716

33,156,428,096

337

Other long-term payables

550,000,000

343

Fund for scientific and technological development

25,281,067,716

32,606,428,096

400

OWNERS’ EQUITY

1,558,889,267,019

1,504,612,565,524

410

Capital and reserves

1,558,889,267,019

1,504,612,565,524

411

Owners’ capital

494,211,590,000

411a

Ordinary shares with voting rights

494,211,590,000

412

Share premium

601,241,079,354

414

Owners’ other capital

2,420,789,142

415

Treasury shares

(358,600,000)

(218,600,000)

418

Investment and development fund

303,579,793,377

281,866,737,047

421

Undistributed earnings

157,794,615,146

125,090,969,981

421a

»»

Undistributed post-tax profits of the previous years

407,928,353

421b

»»

Post-tax profit of current year

157,386,686,793

124,683,041,628

440

TOTAL RESOURCES

1,847,174,315,262

1,774,246,689,473

Duong Hoang Vu

Note

2019 VND

Code

15(b)

20, 21

Tran Hoai Hanh

Nguyen Quoc Dinh

Preparer Chief Accountant Deputy General Director Authorised by Legal Representative 9 March 2020

The notes on pages 187 to 214 are an integral part of these financial statements.

Annual Report 2019 183

INCOME STATEMENT

Form B 02 – DN Year ended 31 December

Code

Note

2019 VND

2018 VND

1,428,206,373,424

1,234,684,829,387

(25,751,879,560)

(49,867,100,156)

Revenue from sales of goods

Less deductions

Net revenue from sales of goods

1,402,454,493,864

1,184,817,729,231

Cost of goods sold

(874,534,666,490)

(715,187,247,219)

Gross profit from sale of goods

527,919,827,374

469,630,482,012

Financial income

10,079,093,563

18,888,215,287

Financial expenses

(18,694,026,339)

(17,598,693,224)

- Including: Interest expense

(3,727,735,820)

(1,275,879,713)

Selling expenses

(225,124,875,118)

(212,133,585,451)

General and administration expenses

(99,753,066,675)

(88,183,904,806)

Net operating profit

194,426,952,805

170,602,513,818

Other income

8,177,907,152

3,419,180,185

Other expenses

(175,749,326)

(252,256,271)

Net other income

8,002,157,826

3,166,923,914

Net accounting profit before tax

202,429,110,631

173,769,437,732

Business income tax (“BIT”) - current

(40,042,423,838)

(35,086,396,104)

Net profit after tax

162,386,686,793

138,683,041,628

Basic earnings per share

2,892

2,470

Diluted earnings per share

2,892

2,470

Duong Hoang Vu

Tran Hoai Hanh

Nguyen Quoc Dinh

Preparer Chief Accountant Deputy General Director Authorised by Legal Representative 9 March 2020

184 IMP - Leading Aspiration

The notes on pages 187 to 214 are an integral part of these financial statements.

Form B 03 – DN

CASH FLOW STATEMENT (Indirect method)

Year ended 31 December

Mã số

Note

2019 VND

2018 VND

202,429,110,631

173,769,437,732

41,208,658,249

30,515,092,412

1,349,704,748

1,196,235,052

296,083,244

(469,250,320)

(14,277,746,820)

(15,899,254,511)

CASH FLOWS FROM OPERATING ACTIVITIES 01

Net accounting profit before tax Adjustments for:

Depreciation and amortisation

Provisions

Unrealised foreign exchange losses/(gains)

Profits from investing activities

Interest expense

3,727,735,820

1,275,879,713

Other adjustments

20,000,000,000

19,000,000,000

Operating profit before changes in working capital

254,733,545,872

209,388,140,078

(Increase)/decrease in receivables

(64,061,938,449)

22,334,105,781

Increase in inventories

(25,446,448,742)

(43,797,978,420)

Increase/(decrease) in payables

6,749,916,226

(13,724,008,827)

(Increase)/decrease in prepaid expenses

(14,253,355,546)

5,187,058,567

Increase in trading securities

(240,490,000)

Interest paid

(3,707,340,260)

(1,275,879,713)

BIT paid

(42,339,105,925)

(32,083,024,291)

Other payments on operating activities

(44,844,395,761)

(13,933,959,026)

Net cash inflows from operating activities

66,590,387,415

132,094,454,149

(131,124,961,007)

(272,440,024,143)

9,215,909,092

1,689,090,910

(21,500,000,000)

(43,817,250,000)

26,297,761,332

221,737,811,648

CASH FLOWS FROM INVESTING ACTIVITIES 21

Construction and purchases of fixed assets

Proceeds from disposals of fixed assets

Loans granted and term deposits placed at banks

Collection of loans and term deposits at banks

The notes on pages 187 to 214 are an integral part of these financial statements.

Annual Report 2019 185

CASH FLOW STATEMENT (CONTINUED)

Form B 03 â&#x20AC;&#x201C; DN

(Indirect method)

Year ended 31 December

Code

Note

Investments in other entities

Proceeds from divestment in other entities

Dividends and interest received

Net cash outflows from investing activities

2019 VND

2018 VND

(10,587,050,000)

(1,000,000,000)

33,691,625,000

7,075,276,232

12,037,505,317

(120,623,064,351)

(48,101,241,268)

(140,000,000)

CASH FLOWS FROM FINANCING ACTIVITIES 32

Payments for share repurchases

Proceeds from borrowings

218,888,228,325

Repayments of borrowings

(181,308,771,504)

Dividends paid

(98,802,718,000)

Net cash outflows from financing activities

(61,363,261,179)

Net (decrease)/increase in cash and cash equivalents

(115,395,938,115)

83.993.212.881

Cash and cash equivalents at beginning of year

190,436,654,283

106,457,131,642

Effect of foreign exchange differences

(5,101,442)

(13,690,240)

Cash and cash equivalents at end of year

75,035,614,726

190,436,654,283

Duong Hoang Vu

3 3

Tran Hoai Hanh

Nguyen Quoc Dinh

Preparer Chief Accountant Deputy General Director Authorised by Legal Representative 9 March 2020

186 IMP - Leading Aspiration

The notes on pages 187 to 214 are an integral part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

Form B 09 – DN

For the year ended 31 december 2019

GENERAL INFORMATION Imexpharm Pharmaceutical Joint Stock Company (the “Company”), formerly known as Dong Thap Pharmaceautical Union incorporated under Decision No. 284/TCCQ dated 28 September 1983 issued by the Health Department of Dong Thap Province, was transformed from a State-Owned company into a joint stock company in accordance with initial Enterprise registration certificate No. 1400384433 dated 1 August 2001 issued by the Department of Planning and Investment of Dong Thap Province. The Company’s shares were listed on Ho Chi Minh Stock Exchange (“HOSE”) on 4 December 2006 with the stock code IMP under Decision No. 76/UBCK-GPNY of HOSE. The principal activities of the Company are manufacturing pharmaceutical products, processing pharmaceutical materials, trading, importing and exporting pharmaceutical products, medical equipment and supplies, chemicals, materials for medicine manufacturing and packaging, chemicals used for sterilization or disinfection in humans (except for those listed under Point A, Part II, Appendix No. 04 accompanying Decision No. 10/2007/QD-BTM dated 21 May 2007 issued by the Ministry of Trade, currently known as the Ministry of Industry and Trade). The normal business cycle of the Company is 12 months. As at 31 December 2019, the Company had 25 branches and 3 associates. Details of the Company’s associates are presented below:

Company name

Principal activities

Address of registered office

Percentage of ownership and voting rights 2019

2018

Agimexpharm Pharmaceutical Joint Stock Company

Manufacturing and trading pharmaceutical products

An Giang

32,99%

Dong Thap Muoi Research Conservation and Development Pharmaceutical Joint Stock Company

Researching, conserving and developing pharmaceutical materials

Long An

23,56%

Ho Chi Minh

26,00%

Manufacturing Gia Dai Pharmaceutical and trading Company Limited pharmaceutical products

As at 31 December 2019, the Company had 1,287 employees (as at 31 December 2018: 1,208 employees).

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1

Basis of preparation of financial statements The financial statements have been prepared in accordance with Vietnamese Accounting Standards, the Vietnamese Corporate Accounting System and applicable regulations on preparation and presentation of financial statements. The financial statements have been prepared under the historical cost convention. The accompanying financial statements are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Vietnam. The accounting principles and practices utilised in Vietnam may differ from those generally accepted in countries and jurisdictions other than Vietnam. The financial statements in the Vietnamese language are the official statutory financial statements of the Company. The financial statements in the English language have been translated from the Vietnamese version.

2.2

Fiscal year The Company’s fiscal year is from 1 January to 31 December. Annual Report 2019 187

NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 december 2019

Form B 09 â&#x20AC;&#x201C; DN

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.3 Currency The financial statements are measured and presented in Vietnamese Dong (â&#x20AC;&#x153;VNDâ&#x20AC;?). The Company determines its accounting currency based on the currency which is mainly used in sales of goods and rendering of services, which has a significant impact on selling prices of goods and services, which is normally used for list selling prices and receive payments; which is mainly used in purchases of goods or services, which has a significant impact on cost of labor, materials and other production or operating costs and normally used as payments of those costs. In addition, the Company also uses this currency to raise financial resources (such as via issuance of shares) and regularly collects this currency from business operation and savings.

2.4

Exchange rates Transactions arising in foreign currencies are translated at exchange rates ruling at the transaction dates. Foreign exchange differences arising from these transactions are recognized as income or expenses in the income statement. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are respectively translated at the buying and selling exchange rates at the balance sheet date of the commercial bank where the Company regularly trades. Foreign currencies deposited in bank at the balance sheet date are translated at the buying exchange rate of the commercial bank where the Company opens its foreign currency accounts. Foreign exchange differences arising from these translations are recognised in the income statement.

2.5 Cash and cash equivalents Cash and cash equivalents comprise cash on hand, cash at bank, cash in transit, demand deposits and other shortterm investments with an original maturity of three months or less. 2.6 Receivables Receivables represent trade receivables from customers arising from sales of goods or non-trade receivables from others and are stated at cost. Provision for doubtful debts is made for each outstanding amount based on overdue days in payment according to the initial payment commitment (exclusive of the payment rescheduling between parties) or based on the expected loss that may arise. Bad debts are written off when identified. Receivables are classified into long-term and short-term receivables on the balance sheet based on the remaining period from the balance sheet date to the maturity date. 2.7 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined by the weighted average method and includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured products, cost includes all direct expenditure and production overheads based on normal levels of operating activity. Net realisable value is the estimated selling price in the normal course of business, less the estimated costs of completion and selling expenses. The Company applies the perpetual system for inventories. Provision is made, where necessary, for obsolete, slow-moving and defective inventory items. The difference between the provision of this period and the provision of the previous period are recognised as an increase or decrease of cost of goods sold in the year.

188 IMP - Leading Aspiration

2.8 Investments (a)

Trading securities Trading securities are securities, which are held for trading to earn profits. Trading securities are initially recorded at historical cost including cost of acquisition and any expenditure that is directly attributable to the acquisition. Subsequently, the Board of Management reviews all outstanding investments to determine the amount of provision to recognise at the year end. The provision for diminution in value of trading securities is made when their cost is higher than their fair value. Changes in the provision balance during the accounting fiscal year are recorded as an increase or decrease in financial expenses. A reversal, if any, is made only to the extent the investment is restored to its original cost. The Company recorgnises trading securities when it has ownership of the assets, specifically as follows:

â&#x20AC;˘ Listed securities are recognised at the time of order matching; â&#x20AC;˘ Unlisted securities are recognised at the time when official ownership is established in accordance with regulations. Profit or loss from liquidation or disposal of trading securities is recognised in the income statement. The costs of trading securities disposed are determined by using the moving weighted average method. (b)

Investments held to maturity Investments held to maturity are investments which the Board of Management has positive intention and ability to hold until maturity. Investments held to maturity include term deposits, held-to-maturity loans for interest earnings and other held-to-maturity investments. Those investments are initially accounted for at cost. Subsequently, the Board of Management reviews all outstanding investments to determine the amount of provision to recognise at the year end. Provision for diminution in value of investments held to maturity is made when there is evidence that the investment is uncollectible in whole or in part. Changes in the provision balance during the accounting fiscal year are recorded as an increase or decrease in financial expenses. A reversal, if any, is made only to the extent the investment is restored to its original cost.

(c)

Investments in associates Associates are investments that the Company has significant influence but not control and would generally have from 20% to under 50% of the voting rights of the investee. Investments in associates are accounted for at cost of acquisition including purchase cost or capital contribution value plus other expenditure directly attributable to the investments. Subsequently, the Board of Management reviews all outstanding investments to determine the amount of provision to recognise at the year end.

(d)

Investments in other entities Investments in other entities are investments in equity instruments of other entities without controlling rights or co-controlling rights, or without significant influence over the investee. These investments are accounted for initially at cost. Subsequently, the Board of Management reviews all outstanding investments to determine the amount of provision to recognise at the year end.

Annual Report 2019 189

NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 december 2019

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.8

Investments (continued)

(e)

Provision for investments in associates and other entities

Form B 09 – DN

Provision for investments in associates and other entities is made when there is a diminution in value of the investments at the year end. Regarding investments in listed shares or those whose fair value can be determined reliably, the provision for diminution in value is made when cost is higher than market value. For other investments, provision for diminution in value is made when the investees make losses, except when the loss is anticipated by the Board of Management before the date of investment. Changes in the provision balance during the accounting fiscal year are recorded as an increase or decrease in financial expenses. A reversal, if any, is made only to the extent the investment is restored to its original cost. 2.9 Lendings Lendings are loans for interest earning granted under agreements among parties but not being traded as securities. Lendings are initially recognised at cost. Subsequently, the Board of Management reviews all outstanding amounts to determine the amount of provision to recognise at the year end. Provision for doubtful lending is made for each lending based on overdue days in payment of principals according to the initial payment commitment (exclusive of the payment rescheduling between parties), or based on the expected loss that may arise. Changes in the provision balance during the accounting fiscal year are recorded as an increase or decrease in financial expenses. A reversal, if any, is made only to the extent the investment is restored to its original cost. Lendings are classified into short-term and long-term lending on the balance sheet based on the remaining term of the lending as at the balance sheet date.

2.10 Fixed assets Tangible and intangible fixed assets

Fixed assets are stated at historical cost less accumulated depreciation/amortisation. Historical cost includes expenditure that is directly attributable to the acquisition of the fixed assets bringing them to their suitable conditions for their intended use. Expenditure incurred subsequently which has resulted in an increase in the future economic benefits expected to be obtained from the use of fixed assets, can be capitalised as an additional historical cost. Otherwise, they are charged to the income statement when incurred. Depreciation and amortisation

Fixed assets are depreciated and amortised using the straight-line method so as to write off the historical cost of the fixed assets over their estimated useful lives or over the term of the enterprise registration certificate if shorter. The estimated useful lives of each asset class are as follows: Plants and buildings

5 – 50 years

Machinery and equipment

3 – 20 years

Motor vehicles

6 – 15 years

Office equipment

3 – 10 years

Land use rights are comprised of land use rights with an indefinite useful life and land use rights with a definite useful life as follows: • Land use rights with an indefinite useful life are recorded at historical cost and are not armortised; • Land use rights with a definite useful life are recorded in accordance with the terms indicated in the land use rights certificate and amortised using the straight-line method in accordance with such land use rights certificates. 190 IMP - Leading Aspiration

Disposals

Gains or losses on disposals are determined by comparing net disposal proceeds with the carrying amount of the fixed assets and are recognised as income or expense in the income statement. Construction in progress

Construction in progress represents the cost of assets in the course of construction for production, rental or administrative purposes, or for purposes not yet determined, including construction costs; costs of tools and equipments; project management expenditures; construction consulting expenditures; and capitalised borrowing costs for qualifying assets in accordance with the Company’s accounting policies. Depreciation of these assets, on the same basis as other fixed assets, commences when the assets are ready for their intended use.

2.11 Operating leases Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the term of the lease.

2.12 Prepaid expenses Prepaid expenses include short-term and long-term prepayments on the balance sheet. Prepaid expenses are recorded at historical cost and allocated on the straight-line basis over estimated useful lives. Additionally, prepayments for land rental contracts, which are in effective after 2003, are also recorded as prepaid expenses in accordance with the guidance of Circular No. 45/2013/TT-BTC dated 25 April 2013 issued by Ministry of Finance and and allocated using the straight-line method in accordance with such land use right certificates.

2.13 Payables Classifications of payables are based on their nature as follows: •

Trade accounts payable are trade payables arising from purchase of goods and services.

• Other payables are non-trade payables and payables not related to purchases of goods and services. Payables are classified into short-term and long-term payables on the balance sheet based on remaining period from the balance sheet date to the maturity date.

2.14 Borrowings Borrowings include borrowings from banks. Borrowings are classified into short-term and long-term borrowings on the balance sheet based on their remaining terms from the balance sheet date to the maturity date. Borrowing costs that are directly attributable to the construction or production of any qualifying assets are capitalised during the period of time that is required to complete and prepare the asset for its intended use. In respect of general-purpose borrowings, a portion of which used for the purpose of construction or production of any qualifying assets, the Company determines the amount of borrowing costs eligible for capitalisation by applying a capitalisation rate to the weighted average expenditure on that assets. The capitalisation rate is the weighted average of the interest rates applicable to the Company’s borrowings that are outstanding during the period, other than borrowings made specificially for the purpose of obtaining a qualifying asset. Other borrowing costs are recognised in the income statement when incurred.

Annual Report 2019

191

NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 december 2019

Form B 09 – DN

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.15 Accrued expenses Accrued expenses include liabilities for goods and services received in the period but not yet paid for due to pending invoices or insufficient records and documents. Accrued expenses are recorded as operating expenses in the reporting period.

2.16 Provisions Provisions are recognised when the Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provision is not recognised for future operating losses. Provisions are measured at the expenditures expected to be required to settle the obligation. If the time value of money is material, provision will be measured at the present value using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as financial expenses. Changes in the provision balance during the accounting fiscal year are recorded as an increase or decrease in operating expenses..

2.17 Fund for scientific and technological development Fund for scientific and technological development is appropriated for scientific and technological development activities. The fund is set up on the basis of maximum 10% of profit before tax and charged to operating expenses when appropriated.

2.18 Provision for severance allowances In accordance with Labour Law of Vietnam, employees of the Company who have worked regularly for a period of 12 months or longer are entitled to severance allowance. The working period used for the calculation of severance allowance is the period during which the employee actually works for the Company less the period during which the employee participates in the unemployment insurance scheme in accordance with labour regulations and the working period for which the employee has received severance allowance from the Company. Severance allowance is accrued on the basis that each employee is entitled to half of an average monthly salary for each working year. The average monthly salary used for calculating severance allowance is the employee’s average salary for the six-month period prior to the balance sheet date. As at 31 December 2019, the estimated provision for severance allowances to be accrued is VND12,218,847,500. In accordance with the guidances of Circular No. 180/2012/TT-BTC dated 24 October 2012 issued by the Ministry of Finance, the Company is not required to recognise provision for severance allowances. The Company records and pays severance allowances when employees leave the Company.

2.19 Capital and reserves Owners’ capital is recorded according to the actual amounts contributed and is recorded according to par value of the shares. Share premium is the difference between the par value and the issue price of shares; the difference between the repurchase price and re-issuing price of treasury shares. Owners’ other capital represents other capital of the owners at the reporting date. Treasury shares are shares issued by the Company and bought back by itself, but these are not cancelled and may be re-issued subsequently in accordance with the Law on securities. Undistributed earnings record the Company’s results (profit or loss) after BIT at the reporting date.

192 IMP - Leading Aspiration

2.20 Appropriation of profit The Company’s dividends are recognised as a liability in the Company’s financial statements in the period in which the dividends are approved by the Company’s General Meeting of shareholders. Profit after BIT could be distributed to shareholders after approval at General Meeting of shareholders, and after appropriation to other funds in accordance with the Company’s charter and Vietnamese regulations. The Company’s funds are as below:

(a)

Investment and development fund Investment and development fund is appropriated from the Company’s profit after BIT as approved by shareholders at the General Meeting of Shareholders. This fund is appropriated for investment and business expansion activities, and offseting against damages incurred during the course of business (if any). The fund’s disbursement is decided by the Board of Directors.

(b)

Bonus and welfare fund Bonus and welfare fund is appropriated from the Company’s profit after BIT and subject to shareholders’ approval at the Company’s General Meeting. This fund is presented as a liability on the balance sheet. The fund is set aside for the purpose of rewarding, encouragement and improvement of the employees’ welfare.

2.21 Revenue recognition (a)

Revenue from sales of goods Revenue from sale of goods is recognised in the income statement when all five (5) following conditions are satisfied: •

The Company has transferred to the buyer the significant risks and rewards of ownership of the goods;

• The Company retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; • The amount of revenue can be measured reliably; • It is probable that the economic benefits associated with the transaction will flow to the Company; and • The costs incurred or to be incurred in respect of the transaction can be measured reliably. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due or the possible return of goods. Revenue is recognised in accordance with the “substance over form” principle and allocated to each sales obligation. In cases where the Company gives promotional goods to customers associated with their purchases, the Company allocates the total considerations received between goods sold and promotional goods. The cost of promotional goods is recognised as cost of sales in the income statement.

(b)

Interest income Interest income is recognised on an earned basis.

(c)

Dividend income Income from dividend is recognised when the Company has established the receiving right from investees.

Annual Report 2019 193

NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 december 2019

Form B 09 â&#x20AC;&#x201C; DN

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

2.22 Sales deductions Sales deductions include sales returns and allowances. Sales deductions incurred in the same period of the related sales of products, goods and services are recorded as deduction of revenue of that period. Sales deductions for sale of products, goods which are sold in the period but are incurred after the balance sheet date but before the issuance of the financial statements are recorded as deduction of revenue of the period

2.23 Cost of goods sold Cost of goods sold are cost of finished goods, merchandises, materials sold during the year, and recorded on the basis of matching with revenue and on a prudent basis.

2.24 Financial expenses Financial expenses are expenses incurred in the year for financial activities mainly including interest expenses, loss from disposal financial investmemts, provision for diminution in value of investments in other entities, losses from foreign exchange differences and payment discounts.

2.25 Selling expenses Selling expenses represent expenses that are incurred in the process of selling products, goods, which mainly comprise salary expenses of sales staff, marketing expenses, research and development market expenses, conference and travelling expenses, material costs, outsourced services and other expenses.

2.26 General and administration expenses General and administration expenses represent expenses for administrative purposes which mainly include salary expenses of administrative staff, depreciation of fixed assets used for administration, conference and travelling expenses, appropriation to Fund for scientific and technological development, outsourced services and other expenses.

2.27 Current and deferred income tax Income taxes include all income taxes which are based on taxable profits including profits generated from production and trading activities in other countries with which the Socialist Republic of Vietnam has not signed any double taxation agreement. Income tax expense comprises current tax expense and deferred tax expense. Current income tax is the amount of income taxes payable or recoverable in respect of the current year taxable profits at the current year tax rates. Current and deferred tax should be recognised as an income or an expense and included in the profit or loss of the period, except to the extent that the tax arises from a transaction or event which is recognised, in the same or a different period, directly in equity. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of occurrence affects neither the accounting nor the taxable profit or loss. Deferred income tax is determined at the tax rates that are expected to apply to the financial year when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred income tax assets are recognised to the extent that it is probable that future taxable profits will be available against which the temporary differences can be utilised

194 IMP - Leading Aspiration

2.28 Related parties Enterprises and individuals that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the Company, including holding companies, subsidiaries and fellow subsidiaries are related parties of the Company. Associates and individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the Compnay, key management personnel, including directors of the Company and close members of the family of these individuals and companies associated with these individuals also constitute related parties. In considering the related party relationship, the Company considers the substance of the relationship not merely the legal form.

2.29 Segment reporting A segment is a component, which can be separated by the Company, engaged in providing products or services (business segment) or providing products or services within a particular economic environment (geographical segment). Each segment is subject to risks and returns that are different from those of other segments. Segment reporting is prepared and presented in accordance with accounting policies applied to the preparation and presentation of the Company’s financial statements in order to help users of financial statements understand and evaluate the Company’s operations in a comprehensive way.

2.30 Accounting estimates The preparation of financial statements in conformity with Vietnamese Accounting Standards, the Vietnamese Corporate Accounting System and applicable regulations on preparation and presentation of financial statements requires the Board of Management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the financial year. The areas involving significant estimates and assumptions are as follows: • Dự phòng nợ phải thu khó đòi (Thuyết minh 8); • Dự phòng giảm giá hàng tồn kho (Thuyết minh 9); và • Thời gian hữu dụng ước tính của TSCĐ (Thuyết minh 10). Such estimates and assumptions are continually evaluated. They are based on historical experience and other factors, including expectations of future events that may have a financial impact on the Company and that are believed to be reasonable under the circumstances.

CASH AND CASH EQUIVALENTS 2019 VND

2018 VND

Cash on hand

1,108,904,944

4,438,217,043

Cash at banks

73,926,709,782

55,458,434,022

Cash in transit

540,003,218

Cash equivalents (*)

130,000,000,000

75,035,614,726

190,436,654,283

(*)

Cash equivalents represent bank deposits with maturity from one to three months at fixed interest rates in Vietnamese Dong.

Annual Report 2019 195

NOTES TO THE FINANCIAL STATEMENTS (continued)

Form B 09 â&#x20AC;&#x201C; DN

For the year ended 31 december 2019

4 (a)

INVESTMENTS Trading securities 2019 Cost VND

2018

Fair value VND

Provision VND

Cost VND

Fair value VND

Provision VND

Mekophar Chemical 6,069,637,900

3,343,464,000

2,726,173,900

5,589,637,900

3,455,100,000

2,134,537,900

Bach Tuyet Cotton Corporation

239,465,000

177,100,000

62,365,000

239,465,000

202,000,000

37,465,000

OPC Pharma Joint Stock Company

166,965,260

449,062,500

166,965,260

465,000,000

239,510,000

505,363,000

3,969,626,500 2,788,538,900

6,235,578,160

4,627,463,000

2,172,002,900

Pharmaceutical Joint-Stock Company

DHG Pharma Corporation

6,476,068,160

(b)

Investments held to maturity 2019 Cost VND Term deposits at banks

1,500,000,000

2018 Book value VND 1,500,000,000

Cost VND

Book value VND

217,250,000

The term deposits represent bank deposits with maturity of more than three months and less than one year at fixed interest rates in Vietnamese Dong.

(c)

Long-term investments 2019 Cost VND

2018 Provision VND

Cost VND

Provision VND

(i) Investments in associates Agimexpharm Pharmaceutical Joint Stock Company

46,631,446,700

36,044,396,700

Dong Thap Muoi Research Conservation and Development Pharmaceutical Joint Stock Company

3,808,000,000

182,000,000

(182,000,000)

182,000,000

(182,000,000)

50,621,446,700

(182,000,000)

40,034,396,700

(182,000,000)

Gia Dai Pharmaceutical Company Limited

196 IMP - Leading Aspiration

Operational status of associates

Gia Dai Pharmaceutical Company Limited has ceased operation since 2015. Other associates are operating in their normal course of business. Fair value

TV.Pharm Pharmaceutical Joint Stock Company

503,000,000

581,428,000

Cost VND

125,635,050

583,386,100

1,205,592,060

Fair value VND

(86,105,350)

(2,054,950)

Provision VND

1,326,668,000

114,550,000

127,690,000

503,000,000

581,428,000

Cost VND

1,591,661,884

29,000,000

149,386,950

580,689,400

832,585,534

Fair value VND

(85,550,000)

Provision VND

2018

Vidipha Central Pharmaceutical Joint Stock Company

127,690,000

28,444,650

(88,160,300)

2019

Saigon Thuong Tin Commercial Joint Stock Bank

114,550,000

1,943,057,860

Investments in equity of other entities

As at 31 December 2019 and 31 December 2018, the fair value of investment in Agimexpharm Pharmaceutical Joint Stock Company were VND67,757,120,000 and VND65,522,300,000, respectively. The Company has not had sufficient information to determine the fair value of the remaining investments.

(ii)

No. 25 Central Pharmaceutical Joint Stock Company

1,326,668,000

Equity investments in other entities represent the investments that the Company holds less than 20% voting rights in those entities.

Annual Report 2019 197

NOTES TO THE FINANCIAL STATEMENTS (continued)

Form B 09 â&#x20AC;&#x201C; DN

For the year ended 31 december 2019

SHORT-TERM TRADE ACCOUNTS RECEIVABLE 2019 VND Third parties (*) Related party (Note 34(b))

2018 VND

249,830,542,400

171,886,006,639

4,413,140,080

13,608,592,469

254,243,682,480

185,494,599,108

(*) Details of customers accounting for 10% or more of total short-term trade accounts receivable balance are as follows: 2019 VND Orgalife Nutritional Science Co, Ltd.

2018 VND

40,208,252,051

8,792,918,487

As at 31 December 2019 and 31 December 2018, the balances of short-term trade accounts receivable which were past due, amounting to VND11,315,056,683 and VND10,642,892,313 respectively, are presented in Note 8.

SHORT-TERM PREPAYMENTS TO SUPPLIERS 2019 VND Third parties (*)

2018 VND

56,239,591,813

80,227,308,348

(*) Details of suppliers accounting for 10% or more of total short-term prepayments to suppliers balance are as follows: 2019 VND Orioled International Pte. Ltd

22,205,436,866

14,487,362,420

Dong Thap Hydraulic JSC

7,800,000,000

11,189,078,300

Hoa Viet Mechanical Refrigeration Electrical Co, Ltd.

7,200,000,000

23,338,525,100

12,581,456,859

Greensol Co, Ltd.

2018 VND

OTHER SHORT-TERM RECEIVABLES 2019

Cost VND

Advance to employees Interest income from banks Others

2018

Provision VND

Cost

Provision

VND

15,642,374,971

10,417,238,735

43,106,302

452,238,673

17,980,548,005

7,765,648,379

20,843,173,611

5,421,256,914

33,666,029,278

7,765,648,379

31,712,651,019

5,421,256,914

As at 31 December 2019 and 31 December 2018, the balances of other short-term receivables which were not past due but doubtful, amounting to VND8,882,705,886 and VND8,964,871,021 respectively, are presented in Note 8.

198 IMP - Leading Aspiration

Cost VND

2019 Recoverable amount VND

Provision VND

Cost VND

2018

Recoverable amount VND

Provision VND

From 1 year to 2 years

From 6 months to 1 year 1,773,227,029

2,363,353,362

3,698,904,363

531,968,109

1,181,676,681

2,589,233,054

3,133,983,637

1,241,258,920

1,181,676,681

1,109,671,309

5,079,335,506

423,784,393

2,813,873,979

2,325,898,435

434,000,000

94,864,293

1,406,936,989

1,628,128,904

4,645,335,506

328,920,100

1,406,936,990

697,769,531

11,315,056,683 4,648,466,136 6,666,590,547 10,642,892,313 3,563,930,186 7,078,962,127

From 2 years to 3 years

345,588,292

Cost VND

(1,972,031,378)

Provision VND

84,340,602,767

191,590,665,909

Cost VND

(3,173,492,815)

Provision VND

12,500,219,041

8,964,871,021 3,543,614,107 5,421,256,914

7,107,544,293

202,186,070,567

13,571,387,521

19,607,763,334

Raw materials

103,023,542,433

27,493,068,349

14,432,238,926

1,117,057,507 7,765,648,379

3,479,571,929

Receivables that were not past due 8,882,705,886 but doubtful

Over 3 years

Receivables that were past due

DOUBTFUL DEBTS

ii)

5,765,523,643

Finished goods

28,166,118,388

3,800,781,110

20,197,762,569

Goods in transit

13,670,237,076

6,186,094,253

(3,173,492,815)

9 INVENTORIES

Work in progress

4,100,876,318

326,982,599,909

2018

Tools and supplies

1,282,203,869

(1,972,031,378)

2019

Merchandises

352,429,048,651

Annual Report 2019 199

200 IMP - Leading Aspiration

Tangible fixed assets

(a)

(752,500,000)

Reclassification

143,027,902,435

96,308,098,176

106,118,151,354

210,980,048,203

100,796,789,183

180,651,013,542

(4,758,602,855)

19,775,011,359

165,634,605,038

391,631,061,745

(4,665,165,355)

122,157,689,179

7,707,143,700

266,431,394,221

Machinery and equipment VND

28,132,685,561

31,150,022,347

61,863,560,667

4,762,665,355

(1,831,459,839)

6,775,121,877

52,157,233,274

89,996,246,228

4,762,665,355

(1,831,459,839)

2,733,710,636

1,024,074,455

83,307,255,621

Motor vehicles VND

772,901,475,918

(4,997,583,739)

190,129,879,631

12,656,295,903

575,112,884,123

Total VND

367,019,606,367

(4,997,583,739)

39,480,859,957

23,741,233,352

405,881,869,551

14,321,644,268 242,576,553,974

18,386,880,804

20,468,750

5,128,158,702

13,238,253,352 332,536,330,149

42,128,114,156

655,000,000

9,988,138,788

3,925,077,748

27,559,897,620

Office equipment VND

For the year ended 31 december 2019

The historical cost of fully depreciated tangible fixed assets but still in use as at 31 December 2019 was VND227,167,229,246 (as at 31 December 2018: VND233,348,522,115).

As at 31 December 2019

As at 1 January 2019

Net book value

As at 31 December 2019

(24,531,250)

(3,166,123,900)

Disposals

Reclassification

7,802,568,019

101,506,238,485

Charge for the year

As at 1 January 2019

Accumulated depreciation

249,146,053,789

(3,166,123,900)

Disposals

As at 31 December 2019

55,250,341,028

197,814,336,661

Plant and buildings VND

Transfers from construction in progress (Note 11)

New purchases

As at 1 January 2019

Historical cost

FIXED ASSETS

NOTES TO THE FINANCIAL STATEMENTS (continued) Form B 09 â&#x20AC;&#x201C; DN

(b)

Intangible fixed assets

75,549,435,195

744,712,823

13,102,736,190

15,440,088,868

341,379,792

15,098,709,076

Computer software VND

480,726,667

709,711,667

1,442,180,000

22,094,555,437

1,987,798,292

20,106,757,145

93,176,416,886

341,379,792

92,835,037,094

75,549,435,195

744,712,823

978,538,625

1,190,438,334

72,728,279,949

5,549,596,465

14,081,274,815

732,468,333

71,081,861,449

Total VND

As at 1 January 2019

528,533,000

744,712,823

1,995,972,886

251,741,666

Others VND

Charge for the year

6,078,129,465

1,358,814,053

Land use rights VND

As at 31 December 2019

69,999,838,730

Historical cost

As at 1 January 2019

69,471,305,730

Net book value

Accumulated amortization

As at 31 December 2019

Transfers from construction in progress (Note 11)

As at 1 January 2019

As at 31 December 2019

The historical cost of fully amortized intangible fixed assets but still in use as at 31 December 2019 was VND13,220,010,899 (as at 31 December 2018: VND13,077,610,899).

Annual Report 2019 201

NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 december 2019

Form B 09 â&#x20AC;&#x201C; DN

CONSTRUCTION IN PROGRESS 2019 VND Purchases of machinery

2018 VND

403,861,163,236

465,606,055,018

High-tech pharmaceutical factory

68,541,633,876

79,446,154,172

Others

17,895,372,784

2,653,278,722

490,298,169,896

547,705,487,912

Movements in construction in progress during the year are as follows:

2019 VND Beginning of year

547,705,487,912

427,223,610,659

Purchase

134,627,736,861

188,975,201,769

(190,129,879,631)

(66,796,920,516)

(341,379,792)

(1,696,404,000)

(1,563,795,454)

490,298,169,896

547,705,487,912

Transfers to tangible fixed assets (Note 10(a)) Transfers to intangible fixed assets (Note 10(b)) Disposals End of year

2018 VND

LONG-TERM PREPAID EXPENSES 2019 VND

2018 VND

Quality evaluation costs (*)

16,928,160,183

Land rental

11,632,367,887

11,984,765,122

8,854,421,717

10,287,731,732

Tools and supplies

3,641,460,035

3,321,657,132

Others

5,003,414,351

6,256,388,050

Office furniture

46,059,824,173 31,850,542,036 (*) Included the costs incurred in order to obtain the EU-GMP certification for the production lines at high-tech antibiotic factories. The EU-GMP certification is valid for a period of 3 years. These expenses shall be allocated over this period accordingly.

202 IMP - Leading Aspiration

Movements in long-term prepaid expenses during the year are as follows:

2019 VND

2018 VND

Beginning of year

31,850,542,036

35,508,490,512

Increase

30,334,270,035

9,194,955,494

Allocation

(16,124,987,898)

(12,852,903,970)

End of year

46,059,824,173

31,850,542,036

SHORT-TERM TRADE ACCOUNTS PAYABLE 2019 Value VND Third parties (*)

90,858,539,368

2018 Able-to-pay amount VND 90,858,539,368

Value VND

Able-to-pay amount VND

109,020,003,485

(*) Details of suppliers accounting for 10% or more of the total short-term trade accounts payable balance are as follows:

2019 VND

2018 VND

Novartis (Singapore) Pte.Ltd

26,574,873,659

17,561,388,603

Alcapharm B.V.

15,124,338,650

27,115,000

China Union

12,336,425,614

DSM Sinochem Pharmaceuticals

16,872,348,020

Fresenius Kabi iPSUM S.r.l.

13,132,406,144

As at 31 December 2019 and 31 December 2018, there was no balance of short-term trade accounts payable that was past due.

Annual Report 2019 203

NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 december 2019

Form B 09 – DN

SHORT-TERM ADVANCES FROM CUSTOMERS

Third parties (*)

2019 VND

2018 VND

21,421,846,398

8,882,372,011

(*) Details of customers accounting for 10% or more of the total short-term advances from customers balance are as follows:

2019 VND

2018 VND

Newzilan Trading JSC

7,000,000,000

Orgalife Co., Ltd.

6,580,400,000

2,512,007,337

Moc Tinh Pharmaceutical JSC

TAX AND OTHER RECEIVABLES FROM/PAYABLES TO THE STATE Movements in tax and other receivables from/payables to the State during the year are as follows:

As at 1.1.2019 VND

Payable during the year VND

Payment during the year VND

As at 31.12.2019 VND

(1,758,567,104)

11,407,461,418

(10,139,791,554)

(490,897,240)

10,095,833,698

40,042,423,838

(42,339,105,925)

7,799,151,611

790,933,974

8,895,677,102

(8,302,832,767)

1,383,778,309

1,597,525,199

3,768,022,930

(5,360,025,868)

5,522,261

VAT on importation

23,435,192,514

(23,435,192,514)

Import – export duties

13,732,752,273

(13,732,752,273)

VAT on domestic sales

167,372,727

(167,372,727)

Other taxes

1,870,892,343

(1,870,892,343)

12,484,292,871

91,912,333,727

(95,208,174,417)

9,188,452,181

a) Receivables Personal income tax

b) Payables BIT - current Personal income tax Foreign contractor tax

204 IMP - Leading Aspiration

SHORT-TERM ACCRUED EXPENSES 2019 VND

2018 VND

39,858,328,725

52,956,136,447

Research and market development

5,207,508,748

5,558,549,843

Royalty fees

3,239,034,001

3,333,846,833

48,304,871,474

61,848,533,123

Advertising and promotion

SHORT-TERM BORROWINGS As at 1.1.2019 VND

Increase VND

Decrease VND

As at 31.12.2019 VND

Sai Gon Thuong Tin Commercial Joint Stock Bank (i)

152,000,000,000

(132,000,000,000)

20,000,000,000

Vietnam Joint Stock Commercial Bank for Industry and Trade (ii)

14,376,247,040

Shinhan Bank Vietnam Limited (iii)

202,254,968,385

(199,051,758,604)

3,203,209,781

Joint Stock Commercial Bank for Investment and Development of Vietnam

10,000,000,000

(10,000,000,000)

378,631,215,425

(341,051,758,604)

37,579,456,821

(i) The balance represents a short-term loan from Saigon Thuong Tin Commercial Joint Stock Bank under a

credit facility with a credit limit of VND100billion. This loan is unsecured and bears interest at rates from 6.5% to 7.5% per annum. The repayment term for each drawn-down does not exceed 90 days from the disbursement date. The purpose of the loan is to finance the Company’s working capital requirements.

(ii) The balance represents a short-term loan from Vietnam Joint Stock Commercial Bank for Industry and

Trade under a credit facility with a credit limit of VND25billion. This loan is unsecured and bears interest at a rate of 6% per annum. The repayment term for each drawn-down does not exceed 6 months from the disbursement date. The purpose of the loan is to finance the Company’s working capital requirements.

(iii) The balance represents a short-term loan from Shinhan Bank Vietnam Limited under a credit facility with a credit limit of VND100billion. This loan is unsecured and bears interest at rates from 5.8% to 6% per annum. The repayment term for each drawn-down does not exceed 6 months from the disbursement date. The purpose of the loan is to finance the Company’s working capital requirements.

Annual Report 2019 205

NOTES TO THE FINANCIAL STATEMENTS (continued)

Form B 09 – DN

For the year ended 31 december 2019

18 BONUS AND WELFARE FUND Movements of bonus and welfare fund during the year are as follows:

Beginning of year Appropriated during the year (Note 21) Utilised End of year

2019 VND

2018 VND

13,982,606,062

507,209,190

7,641,964,995

28,083,204,894

(17,779,035,381)

(14,607,808,022)

3,845,535,676

13,982,606,062

FUND FOR SCIENTIFIC AND TECHNOLOGICAL DEVELOPMENT Movements of fund for scientific and technological development during the year are as follows:

2019 VND

2018 VND

Beginning of year

32,606,428,096

34,411,385,694

Appropriated during the year (*)

20,000,000,000

19,000,000,000

(27,325,360,380)

(20,804,957,598)

25,281,067,716

32,606,428,096

Utilised End of year

(*) In accordance with Resolution No. 01/NQ-HDQT-IMEX dated 16 January 2020 of the Board of Directors..

OWNERS’ CAPITAL

(a)

Number of shares 2019

2018

Ordinary shares

Preference shares

Ordinary shares

Preference shares

Number of shares registered

49,421,159

Number of shares issued

49,421,159

(33,800)

(19,800)

49,387,359

49,401,359

Number of shares repurchased Number of existing shares in circulation

206 IMP - Leading Aspiration

(b)

Details of ownersâ&#x20AC;&#x2122; shareholding 2019 Ordinary shares

Ordinary shares

11,305,027

22.87

11,305,027

22.87

7,041,197

14.25

5,016,704

10.15

Balestrand Limited

2,923,934

5.92

2,900,944

5.87

Others

28,150,901

56.96

30,198,484

61.11

4,9421,159

100

49,421,159

100

Number of share capital

Ordinary shares VND

Preference shares VND

Total VND

As at 1 January 2018

42,978,151

429,781,510,000

New shares issued

6,443,008

64,430,080,000

49,421,159

494,211,590,000

Vietnam Pharmaceutial Corporation Kwe Beteiligungen AG

(c)

2018

Movements of share capital

As at 31 December 2018 and 31 December 2019 Par value per share: VND10,000.

Annual Report 2019 207

208 IMP - Leading Aspiration

Advance to Bonus and welfare fund in 2018

Bonus for the Board of Directors and Board of Supervision

Cash dividend paid (*)

Share repurchase

Appropriation to investment and development fund (*)

Appropriation to bonus and welfare fund (*)

Advance to Bonus and welfare fund in 2019 (**)

Bonus for the Board of Directors and Board of Supervision (*) -

601,241,079,354

2.420.789.142

2,420,789,142

Owners’ other capital VND

(140,000,000)

(218,600,000)

Treasury shares VND

21,713,056,330

281,866,737,047

16,058,604,442

Total VND

138,683,041,628

(1,301,529,450)

(14,000,000,000)

(14,083,204,894)

157,794,615,146

(1,525,302,303)

(5,000,000,000)

(2,641,964,995)

(21,713,056,330)

(98,802,718,000)

162,386,686,793

1,558,889,267,019

(1,525,302,303)

(5,000,000,000)

(2,641,964,995)

(140,000,000)

(98,802,718,000)

162,386,686,793

125,090,969,981 1,504,612,565,524

(1,301,529,450)

(14,000,000,000)

(14,083,204,894)

(16,058,604,442)

138,683,041,628

96,281,347,139 1,395,314,258,240

Undistributed earnings VND

- (64,430,080,000)

265,808,132,605

Investment and development fund VND

(**)In accordance with Decision of the Board of Management on 30 September 2019, an amount of VND5,000,000,000 has been accrued to bonus and welfare fund from the 2019 profits. The final appropriated amount to the bonus and welfare fund is subject to approval and possible adjustments by shareholders at the General Shareholders’ Annual Meeting.

c) Dividend in form of cash of VND98,802,718,000.

b) Bonus of VND1,525,302,303 for the Board of Directors and Board of Supervision for achieving the Company’s profit targets.

For the year ended 31 december 2019

a) Appropriation to the investment and development fund of VND21,713,056,330 and bonus and welfare fund of VND16,641,964,995.

(*) In accordance with Resolution No. 13/NQ-ĐHCĐ-IMEX of the General Shareholders’ Meeting of the Company on 23 April 2019, the 2018 profit after tax distributionplan has plan been approved as follows:

As at 31 December 2019

Net profit for the year

494,211,590,000

Appropriation to bonus and welfare fund

As at 31 December 2018

Appropriation to investment and development fund

64,430,080,000

Net profit for the year

Stock dividend declared

429,781,510,000

Owners’ capital Share premium VND VND

MOVEMENTS IN OWNERS’ EQUITY

As at 1 January 2018

NOTES TO THE FINANCIAL STATEMENTS (continued) Form B 09 – DN

EARNINGS PER SHARE

(a)

Basic earnings per share Basic earnings per share is calculated by dividing the net profit attributable to shareholders after deducting the bonus and welfare fund by the weighted average number of ordinary shares outstanding during the year, excluding ordinary shares repurchased by the Company and held as treasury shares:

2019

2018 (*)

Net profit attributable to shareholders (VND)

162,386,686,793

138,683,041,628

Less amount appropriated to bonus and welfare fund (VND) (**)

(19,486,402,415)

(16,641,964,995)

142,900,284,378

122,041,076,633

49,416,173

49,401,359

2,892

2,470

Weighted average number of ordinary shares in issue (shares) Basic earnings per share (VND)

(*) Basic earnings per share of the year 2018 were recalculated as per actual amount appropriated to bonus and welfare fund in accordance with the 2018 profit distribution plan as follows: 2018 As previously reported

Adjustments

As restated

Net profit attributable to shareholders (VND)

138,683,041,628

Less amount allocated to bous and welfare fund (VND) (Note 21)

(14,000,000,000)

(2,641,964,995)

(16,641,964,995)

124,683,041,628

(2,641,964,99)

122,041,076,633

Weighted average number of ordinary shares in issue (shares) Basic earnings per share (VND)

49,401,359

2,524

2,470

(**) Estimated amounts appropriated to bonus and wellfare fund for the year ended 31 December 2019 are determinted based on the prior year’s allocation ratio to the bonus and welfare fund.

(b)

Diluted earnings per share The Company did not have any ordinary shares potentially diluted during the year and up to the date of this financial statements.

OFF BALANCE SHEET ITEMS

(a)

Foreign currencies 2019 United States Dollar (“USD”) Euro (“EUR”)

2018

6,176.99

124,228.10

20,612.12

2,052.00

Annual Report 2019 209

NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 december 2019

(b)

Bad debts written off 2019 VND Bad debts written off

Form B 09 â&#x20AC;&#x201C; DN

19,935,509,018

2018 VND 19,536,179,950

NET REVENUE FROM SALES OF GOODS 2019 VND

2018 VND

Revenue Sales of finished goods Sale of franchised goods Sale of exported goods Sales of others

1,319,406,228,849

1,114,081,182,960

95,936,648,825

67,328,879,801

505,420,095

12,481,606,939

12,358,075,655

40,793,159,687

1,428,206,373,424

1,234,684,829,387

(23,346,466,221)

(41,998,624,329)

(2,405,413,339)

(7,868,475,827)

(25,751,879,560)

(49,867,100,156)

1,402,454,493,864

1,184,817,729,231

2019 VND

2018 VND

Sales deductions Trade discounts Sales returns

Net revenue from sales of goods

COST OF GOODS SOLD

Cost of finished goods Cost of franchised goods Cost of exported products Cost of others Cost of promotion goods

210 IMP - Leading Aspiration

676,509,649,888

536,484,874,854

72,783,042,299

53,358,947,465

277,857,312

5,813,304,799

11,020,224,821

29,603,289,353

113,943,892,170

89,926,830,748

874,534,666,490

715,187,247,219

FINANCIAL INCOME 2019 VND Dividend income

4,054,676,900

269,182,000

Interest income from deposits and lendings

2,960,670,159

6,139,875,270

Realised foreign exchange gains

2,541,568,504

1,018,282,697

522,178,000

10,991,625,000

469,250,320

10,079,093,563

18,888,215,287

Gain from disposal financial investments Net gain from foreign currency translation at year-end

FINANCIAL EXPENSES 2019 VND

2018 VND

Payment discounts

13.810.323.743

10.885.301.900

Interest expense

3.727.735.820

1.275.879.713

619.146.300

(470.610.000)

Net loss from foreign currency translation at year-end

296.083.244

Realised foreign exchange losses

237.487.232

3.063.258.361

2.802.480.000

3.250.000

42.383.250

18.694.026.339

17.598.693.224

Provision/(reversal of provision) for diminution in value of investments

Loss from disposal financial investments Others

2018 VND

SELLING EXPENSES 2019 VND Staff costs

2018 VND

101,149,659,324

90,936,309,551

53,587,016,651

52,546,368,508

Conference and business travel

21,711,673,187

21,437,143,589

Material costs

15,332,112,163

13,285,814,836

Outsourced services

8,820,739,587

7,719,452,094

Depreciation and amortisation

5,639,395,809

4,948,621,900

Repairs and maintenance

2,805,541,298

3,067,369,714

16,078,737,099

18,192,505,259

225,124,875,118

212,133,585,451

Marketing, research and market development

Others

Annual Report 2019

211

NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 december 2019

Form B 09 – DN

GENERAL AND ADMINISTRATION EXPENSES 2019 VND Staff costs

2018 VND

27,821,860,721

25,368,913,381

20,000,000,000

19,000,000,000

11,125,329,792

9,515,606,450

Depreciation and amortisation

4,815,816,727

4,209,534,239

Conference and business travel

4,664,601,475

4,947,132,961

Remunerations for the Board of Directors and Board of Supervision

4,539,369,604

3,934,070,158

26,786,088,356

21,208,647,617

99,753,066,675

88,183,904,806

Scientific and technological fund appropriation Outsourced services

Others

30 BIT The BIT on the Company’s profit before tax differs from the theoretical amount that would arise using the applicable tax rate of 20% as follows: 2019 VND

2018 VND

Net accounting profit before tax

202,429,110,631

173,769,437,732

Tax calculated at a rate of 20%

40,485,822,126

34,753,887,546

Non-deductible expenses

367,537,092

386,344,958

Income not subject to tax

(810,935,380)

(53,836,400)

40,042,423,838

35,086,396,104

40,042,423,838

35,086,396,104

40.042.423.838

35,086,396,104

Effects of:

BIT charge (*) Charged to income statement: BIT – current BIT – deferred

(*) The BIT charge for the year is based on estimated taxable income and is subject to review and possible adjustments by the tax authorities.

212 IMP - Leading Aspiration

COSTS OF OPERATION BY FACTOR 2019 VND

2018 VND

Raw materials

519,012,793,585

402,859,452,123

Labour costs

260,600,140,599

223,514,427,897

41,468,658,249

30,775,092,412

61,000,381,120

44,336,676,107

322,190,743,123

314,189,925,455

1,204,272,716,676

1,015,675,573,994

Depreciation and amortisation Outsourced service Others

SEGMENT REPORTING Geographical Segments The Company’s revenue is mainly generated by domestic sales whereas export sales only account for a small portion in the total revenue in the Company’s income statement for the year ended 31 December 2019 and the prior periods. As a result, the Company did not present the report by geographical segment. Business Segments The Company’s principal activities are to manufacture pharmaceutical products and trade materials used for processing pharmaceutical products. Other business activities only make up a small portion in the total revenue. Therefore, the Company did not present the report by business segment.

ADDITIONAL INFORMATION ON CERTAIN ITEMS OF THE CASH FLOW STATEMENT

(a)

Non-cash transactions affecting the cash flow statement

Purchases of fixed assets not yet paid Stock dividend declared

(b)

2018 VND

17,964,261,159

24,282,797,949

64,430,080,000

2019 VND

2018 VND

378,631,215,425

160,076,187,844

2019 VND

2018 VND

341,051,758,604

160,076,187,844

Amount of borrowings actually drawn down during the year

Proceeds from borrowings following normal borrowing contracts

(c)

2019 VND

Amount of borrowings actually repaid during the year

Repayments of borrowings following normal borrowing contracts

Annual Report 2019 213

NOTES TO THE FINANCIAL STATEMENTS (continued) For the year ended 31 december 2019

RELATED PARTY DISCLOSURES

(a)

Related party transactions

Form B 09 â&#x20AC;&#x201C; DN

During the year, the following major transactions were carried out with related parties:

2019 VND

2018 VND

47,779,108,798

23,210,726,715

16,520,642,190

19,434,391,150

21,439,445,117

16,130,187,324

2019 VND

2018 VND

Sales of goods Associates Agimexpharm Pharmaceutical Joint Stock Company

ii)

Purchases of goods Associates Agimexpharm Pharmaceutical Joint Stock Company

iii) Compensation of key management Gross salaries and other benefits

(b)

Year end balances with related parties

Short-term trade accounts receivable (Note 5) Associates Agimexpharm Pharmaceutical Joint Stock Company

4,413,140,080

13,608,592,469

CAPITAL COMMITMENTS Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements was as follows: 2019 VND Property, plant and equipment

92,493,649,369

2018 VND 93,774,316,485

The financial statements were approved by the Board of Management on 9 March 2020.

Duong Hoang Vu

Tran Hoai Hanh

Preparer Chief Accountant

214 IMP - Leading Aspiration

Nguyen Quoc Dinh

Deputy General Director Authorised by Legal Representative

Vì mục đích bảo vệ môi trường, Báo cáo thường niên Imexpharm 2019 được in với số lượng có hạn. Quý cổ đông có nhu cầu sử dụng, vui lòng liên hệ văn phòng Công ty hoặc truy cập Website: www.imexpharm.com tải và xem phiên bản điện tử.