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Committing itself to leading in quality, Hoa Phat rose to a new stature

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CONTENTANNUAL REPORT 2019

PERFORMANCE IN 2019

GENERAL INFORMATION

REPORT OF THE BOARD OF DIRECTORS

Development orientation

Message from the Chairman of the Board of Management

10 Impressive milestones of Hoa Phat Group in 2019

PERFORMANCE OF SUBSIDIARIES

1.1. Iron and Steel

1.2. Steel pipe & Prepainted hot dipped galvanized steel coils

1.3. Agriculture

1.4. Other industrial production

1.5. Real estate

HUMAN RESOURCE MANAGEMENT

POLICIES FOR EMPLOYEES

INVESTMENT STATUS OF KEY PROJECT

STRUCTURE OF SHAREHOLDERS

SHAREHOLDER RELATIONS

BASIC INFORMATION

DETAILS OF SHARE

BUSINESS LINES

ORGANIZATION STRUCTURE

OPERATING MODEL

KEY FINANCIAL INDICATORS

SUBSIDIARIES & THEIR OWNERSHIP PERCENTAGE

BACKGROUND OF HOA PHAT GROUP

HISTORY OF DEVELOPMENT

OPERATIONAL RISKS

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29

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37

45

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52

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LIST OF MEMBERS OF BOD

REPORT OF BOD

OPERATING PERFORMANCE EVALUATION

FINANCIAL SITUATION

IMPROVEMENT OF MANAGEMENT STRUCTURE

BUSINESS PLAN FOR 2020

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337

41

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44

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CORPORATE GOVERNANCE

REPORT OF SUPERVISORY BOARD

SUSTAINABLE DEVELOPMENT

AUDITED FINANCIAL STATEMENTS

LIST OF MEMBERS OF BOM AND OWNERSHIP RATIO

BOM’S ASSESSMENT OF OPERATION

BOM’S ASSESSMENT OF BOD’S OPERATION

BOM’S MAIN ACTIVITIES DURING THE YEAR

PLANS AND DIRECTIONS

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LIST OF PERSONNEL AND OWNERSHIP PERCENTAGE

REPORT OF SUPERVISORY BOARD

REPORT OF INTERNAL CONTROL BOARD

SUSTAINABLE DEVELOPMENT STRATEGY WITH RELEVANT PARTIES

RESEARCH & DEVELOPMENT

CIRCULAR ECONOMIC MODEL IN HOA PHAT GROUP

TECHNICAL INNOVATION

SOCIAL RESPONSIBILITY

REPORT OF THE BOD

INDEPENDENT AUDITOR’S REPORT

CONSOLIDATED BALANCE SHEET

CONSOLIDATED STATEMENT OF INCOME

CONSOLIDATED STATEMENT OF CASH FLOWS

NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS

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Hoa Phat will become one of the 50 largest steel enterprises in the world with annual revenue of approximately VND 100,000 billion.

Vision: To become an industrial manufacturer with top quality and core area of steel.

Mission: To provide leading products, contribute to improving living conditions and gain customers’ trust.

Position: Hoa Phat – Vietnamese brand, global standard.

Core value:The core value of Hoa Phat Group is the philosophy of Harmony for Joint Development. This is reflected in the relationship among the employees, between the Group and its partners, agents, shareholders and the social community, ensuring the harmony of interests of stakeholders on the same boat, towards sustainable development.

Especially, Hoa Phat Group has built a long-term, sustainable and trusting partnership with the sales agents who have been with the Group since the beginning of its establishment.

DEVELOPMENT ORIENTATION

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TRAN DINH LONGthe Chairman

“HOA PHAT’SINTERNAL STRENGTH”

Mr.

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Dear all shareholders, The year 2019, as expected, is the time to witness the unpredictable position of the US-China trade war. A series of instable developments made the world economy fall into a state of “losing momentum”, including the largest economies such as the US, EU, China, Japan ..., which all dropped clearly. However, Vietnam has proved “fl exible economic vitality” with the second fastest growth rate in Southeast Asia, reaching 6.8% in 2019, 4 times higher than the average in the world.

In that context, the Board of Management (BoM) and Board of Directors (BoD) of Hoa Phat Group correctly and appropriately assessed the increasing protectionism and the international commodity market to have appropriate preparation and responses. With the solid foundation available, Hoa Phat roller excelled over the profi t plan of VND 7,578 billion, the size of revenue in 2019 tripled after 6 years (from 2013). Hoa Phat Group also contributed over VND 6,600 billion to the State Budget, equivalent to the 40th province of Vietnam.

FIRMLY STEP FORWARD In 2019, Hoa Phat Group achieved revenue of VND 64,678 billion, an increase of 14% compared to 2018. Asset structure is very standard and typical of industrial production. The Group’s fi elds of business fl ourished, especially in the core fi eld of steel production and trading.The steel segment plays a key role, accounting for 80% of the Group’s total revenue. In 2019, total steel consumption is 3,618,000 tons, up 14% compared to 2018. Hoa Phat construction steel and steel pipes continue to maintain the No. 1 market share in the market of 26.2% and 31.5% respectively.

The Group’s agriculture segment began to enter the “fruit-harvesting” stage, growing revenue by 72%. The proportion of Agriculture’s revenue contribution to the Group increased from 8% (2018) to 12% (2019). Hoa Phat’s agricultural products such as supplying Australian beef and clean chicken eggs are at the top of the market.

Other industries have exceeded the after tax profi t target compared to the assigned plan. In Hoa Phat Refrigeration, Funiki air conditioner output has been boosted with a total of 260,000 units sold to the market. Freezers and refrigerators have also grown well. Hoa Phat Furniture has made a strong impression on the household furniture products, and continuously led the market share of offi ce furniture products with a series of large-scale projects. Real Estate has exceeded revenue and profi t targets compared with the assigned plan. As of the end of 2019, Hoa Phat industrial parks have subleased more than 43.2 hectares of land, an increase of 48% over the same period, revenue increased 56% to over VND 702 billion.

The company is constantly improving technology, saving energy, applying initiatives to optimize capacity and protect the environment. In 2019, the Group has saved hundreds of billion dong by investing in research and development and encouraging creative labor.

Hoa Phat always implements the corporate social responsibility in a substantive manner and comes from the heart with the business philosophy of “Harmony for Joint Development”. This is clearly refl ected in annual action programs such as “Heartbeat for Love” - sponsoring heart surgeries for poor children, “Hoa Phat follows children to school” or “Charity rice – Kind heart” in daily cooking daily for poor patients, giving Tet gifts to disadvantaged people ... The Company has been creating jobs for tens of thousands of workers, making greater and greater contributions to the State Budget, and well performing social security.

HOA PHAT’SINTERNAL STRENGTHVietnam’s economy has experienced the fi rst 3 months of the year with the ups and downs of the market according to the global pandemic SARS-CoV-2. However, in the diffi culties, Hoa Phat is showing its toughness, maintained the business momentum, guaranteeing the interests of shareholders and the lives of the Group’s employees.

In the steel segment, the Group continues to increase production, dominate the market, in parallel with investment in expanding production, constantly diversifying types, grades and optimizing the value chain of steel products. Hoa Phat aims to complete the plan in 2020 with an output of 3.5 - 3.6 million tons of construction steel, up 100% compared to the output achieved in the South in 2019.

The company aims to complete the construction investment items of Phase 2 of Hoa Phat Dung Quat Steel Integrated Complex, consume all the produced products, and continues leading the national market share of construction steel and steel pipe – prepainted hot dipped galvanized steel coils in steel production and trading.

In agricultural segment, the company strives to continue to hold the No. 1 market share of Australian beef supply, with steady growth in the animal feed, poultry and pig segment; continues to maintain the achievements of 2019 in the fi eld of real estate and other industries including furniture, refrigeration.

Facing the situation of the world and Vietnam economy, Hoa Phat identifi es 2020 as a particularly challenging year, however, with the determination and unanimity of 22,300 employees, Hoa Phat believes that we will overcome all diffi culties and go ahead in despite of any obstacle.

On behalf of the Board of Management, I would like to thank the confi dence and support of the shareholders, thank the positive cooperation of customers and partners. In particular, I would like to express my sincere thanks to all employees of Hoa Phat Group, who have joined with us in the hearts and faithfulness to this day.

Yours sincerely, The Chairman

TRAN DINH LONG

Yours sincerely, The Chairman

TRAN DINH LONG

10 IMPRESSIVE MILESTONES OFHOA PHAT GROUP IN 2019

Nearly VND 65,000 billion was Hoa Phat Group’s record level ofnet income

The Group’s totalassets exceeded

VND 100,000billion for the first time

2.77 million tons of construction steel was record output

The first

2 blast furnaces of Hoa Phat Dung Quat Steel Integrated Complex with a capacity of 1 million tons / furnace were put into operation.

3.6 million tons of steel of all kinds were supplied to the market (including construction steel, steel pipes, prepainted hot dipped galvanized steel coils of all kinds)

Vietnam’s No. 1 market share for construction steel and steel pipes, respectively, 26.2% and 31.5%

The fi rst 100,000 ton vessel arrived at Hoa Phat Dung Quat port at the end of 2019

2.2 million tons is the crude steel output of Hoa Phat Hai Duong Steel Integrated Complex

172% was the revenue achieved by the agricultural segment compared to 2018

VND 6,639 billion was contributed to the State Budget by Hoa Phat from 25 provinces and cities

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GENERAL INFORMATION1. BASIC INFORMATION

2. DETAILS OF SHARE

3. BUSINESS LINES

4. ORGANIZATION STRUCTURE

5. OPERATING MODEL

6. KEY FINANCIAL INDICATORS

7. SUBSIDIARIES & THEIR OWNERSHIP PERCENTAGE

8. BACKGROUND OF HOA PHAT GROUP

9. HISTORY OF DEVELOPMENT

10. OPERATIONAL RISKS

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1. BASIC INFORMATIONTransaction name: Hoa Phat Group Joint Stock CompanyBusiness Registration Certificate No: 09 0018 9284Authorized capital: VND 27,610,741,150,000 Head office address: Pho Noi A Industrial Zone, Giai Pham Commune, Yen My District, Hung Yen Province, VietnamHanoi Office: 66 Nguyen Du, Nguyen Du Ward, Hai Ba Trung District, Hanoi CityTel: 024 6284 8666 | Fax: 024 6283 3456Da Nang Branch: 171 Truong Chinh, An Khe Ward, Thanh Khe District, Da Nang CityTel: 023 637 21 232 | Fax: 023.637 22 833HCM City Branch: 643 Dien Bien Phu, Ward 25, Binh Thanh District, Ho Chi Minh CityTel: 028. 629 85 599 | Fax: 028. 629 87 799Website: www.hoaphat.com.vn

2. DETAILS OF SHAREStock sticker: HPGStock exchange: HOSEInitial offering date: 15/11/2007Fair value of stock: 10,000 VND/shareOutstanding shares: 2,761,074,115 shares

3. BUSINESS LINES1. Trading, exporting and importing iron and steel, materials and equipment for refining and rolling steel;2. Producing rolling steel, roofing steel sheet, galvanized steel coil, galvalum steel sheet and pre-painted hot dipped galvanized steel coil;3. Producing non-galvanized and galvanized steel pipes and stainless steel pipes;4. Producing and trading non-ferrous metal and non-ferrous metal scrap;5. Refining cast iron and steel; Casting iron and steel;6. Manufacturing and trading coke coal;7. Mining for metal ores; trading metals, metal ores and scrap;8. Manufacturing and trading construction and mining equipment;9. Producing interior furniture for offices, households and schools;10. Manufacturing, trading, assembling, installing, repairing, and maintaining electric, electronic, refrigeration, civil electric products and air conditioners;11. Investing in and building infrastructure for industrial zones and urban areas;12. Real estate;13. Producing and trading animal feed for livestock and poultry, raising livestock, and processing meat and meat products, etc.

GENERAL INFORMATION Basic informationHOA PHAT’S INTERNAL STRENGTH

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OPERATING MODEL

ORGANIZATION STRUCTURE

GENERAL MEETING OF SHAREHOLDERS

BOARD OF MANAGEMENT

SUBSIDIARIES

BOARD OF DIRECTORS

HEAD OFFICE

SUPERVISORY BOARD

HOA PHAT GROUP

OTHER INDUSTRIALPRODUCTION

REAL ESTATE

AGRICULTURE

IRON AND STEEL

STEEL PIPE -PREPAINTED HOTDIPPED GALVANIZEDSTEEL SHEET

GENERAL INFORMATION Organization structure & Operating model

1. Hoa Phat Hung Yen Steel Co., Ltd2. Hoa Phat Hai Duong Steel JSC3. Hoa Phat Dung Quat Steel JSC4. Hoa Phat Metal Producing Co., Ltd5. An Thong Mineral Investment JSC6. Hoa Phat Steel Pipe Co., Ltd7. Hoa Phat Steel Sheet Co., Ltd8. Hoa Phat Agriculture Development JSC9. Hoa Phat Furniture JSC10. Hoa Phat Refrigeration Engineering Co., Ltd11. Hoa Phat Urban Development and Construction JSC

Hoa Phat Hung Yen Steel Co., LtdHoa Phat Hai Duong Steel JSCHoa Phat Dung Quat Steel JSCHoa Phat Metal Producing Co., LtdAn Thong Mineral Investment JSC

Hoa Phat Steel Pipe Co., LtdHoa Phat Steel Sheet Co., Ltd

Hoa Phat Agriculture Development JSC

Hoa Phat Furniture JSCHoa Phat Refrigeration Engineering Co., Ltd

Hoa Phat Urban Development andConstruction JSC

1. Internal control board2. Financial department3. IT department4. Legal department5. PR department6. Administration department7. R&D department

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Indicator (Unit: VND billion) 2017 2018 2019

INCOME STATEMENT

Net fi nancial expenses (370) (478) (711)

Profi t before tax 9,288 10,071 9,097

Depreciation and amortization 2,005 2,286 2,639

Net revenue 46,162 55,836 63,658

General and administration expenses 409 444 569

Profi t after tax 8,015 8,601 7,578

Total assets 53,022 78,223 101,776

Liabilities 20,625 37,600 53,989

Revenue from sales of goods and provision of services 46,855 56,580 64,678

Selling expenses 595 677 873

Corporate income tax 1,274 1,471 1,518

BALANCE SHEET

Non-current assets 19,954 52,914 71,339

Gross profi t 10,626 11,671 11,185

Other income 36 (1) 66

Profi t of shareholder as holding company 8,007 8,573 7,527

Current assets 33,068 25,309 30,437

Owner’s equity 32,398 40,623 47,787 Authorized capital 15,171 21,239 27,611 CASH FLOW STATEMENT Net cash from business activities 6,058 7,642 7,715 Net cash from investment activities 17,926 (20,533) (18,064)Net cash from fi nancial activities 11,574 11,143 12,378 Net cash fl ow during the period (294) (1,748) 2,029Cash and equivalents at the beginning of the period 4,559 4,265 2,516 Cash and equivalents at the end of the period 4,265 2,516 4,545

ROA 15% 11% 7%


ROE 25% 21% 16%

Gross profi t/Net sales rate 23% 21% 18%

EBIT 9,658 10,549 10,278

Net income/Net sales rate 17% 15% 12%

EBITDA 11,663 12,835 12,918

GENERAL INFORMATION Key fi nancial indicatorsHOA PHAT’S INTERNAL STRENGTH

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SUBSIDIARIES AND THEIROWNERSHIP PERCENTAGES AS AT 31/12/2019

No.

1

9

5

3

11

7

2

10

6

4

HOA PHAT HUNG YEN STEEL CO., LTD.

AN THONG MINERAL INVESTMENT JSC

HOA PHAT FURNITURE JSC

HOA PHAT DUNG QUAT STEEL JSC

HOA PHAT STEELSHEET CO., LTD

HOA PHAT URBAN DEVELOPMENTAND CONSTRUCTION JSC

HOA PHAT HAI DUONG STEEL JSC

HOA PHAT STEEL PIPE CO., LTD.

HOA PHAT REFRIGERATIONENGINEERING CO., LTD.

HOA PHAT METAL PRODUCING CO., LTD.

HOA PHAT AGRICULTUREDEVELOPMENT JSC

Pho Noi A Industrial Zone, Giai Pham Commune, YenMy District, Hung Yen Province, Vietnam

Hiep Son Ward, Kinh Mon Town,Hai Duong Province, Vietnam

Dung Quat Economic Zone, Binh Dong Commune,Binh Son District, Quang Ngai Province, Vietnam

39 Nguyen Dinh Chieu, Le Dai Hanh Ward, Hai Ba Trung District, Hanoi City, Vietnam

415 Tran Phu, Tran Phu Ward, Ha Giang City, Ha Gi-ang Province, Vietnam


Road E1, Area E, Pho Noi A Industrial Zone, Lac Dao Commune, Van Lam District, Hung Yen Province, Vietnam


Road B4, Area B, Pho Noi A Industrial Zone, Lac Hong Commune, Van Lam District, Hung Yen Prov-ince, Vietnam



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SUBSIDIARY ADDRESS

GENERAL INFORMATION ANNUAL REPORT 2019

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500 99.960%

150 99.667%

1,500 99.967%

30,000 100%

3,100 99.999%

400 99.875%

7,000 99.998%

1,300 99.846%

2,000 100%

1,000 100%Producing steel, iron, wholesaling metals and metal ores

Producing steel and cast iron, exploiting iron ores, exploiting and collecting lignite; wholesale of metals and metal ores; producing and trading coke coal.

Producing steel and iron. Generating, transmitting and distributing electricity. Trading solid, liquid and gas fuel and related products. Transporting goods by coastal, by sea and inland waterways

Producing construction equipment, trading construction machinery and equipment, exploiting small and medium-sized minerals.

Exploring, exploiting, preparing and making, processing, exporting and importing minerals, mainly iron ores.

Producing and trading steel pipes.

Producing roof coverings of galvanized steel, galvanized aluminum alloy, painting and metal plating; producing iron, steel, cast iron.

Producing fertilizers and nitrogen compounds.Pig farming, poultry breeding, and livestock services. Processing and preserving meat and meat products. Production of animal feed, poultry and fisheries.

Producing and trading various kind of furniture.

Producing and trading various kinds of refrigerant equipment

Civil and industrial construction, real estate business, investing in and building technical infrastructure.

400 99.600%

PRINCIPAL BUSINESS ACTIVITIES

CONTRIBUTEDAUTHORIZED

CAPITAL (VND BILLION)

OWNERSHIP PERCENTAGE

BY HPG

GENERAL INFORMATION HOA PHAT’S INTERNAL STRENGTH

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BACKGROUND OF HOA PHAT GROUP

Hoa Phat is the leading industrial manufacturing groups in Vietnam. Starting up as a construction machine and equipment trading company in August 1992, Hoa Phat gradually expanded its business to trading and production of Furniture (1995), Steel Pipe (1996), Steel (2000), Refrigeration (2001), Real Estate (2001), Agriculture (2016). In 2007, Hoa Phat was reorganized into a group structure, with Hoa Phat Group Joint Stock Company restructured as the Parent Company of its subsidiaries. Since November 15, 2007, Hoa Phat has been officially listed on the Stock Exchange under the stock ticker ‘HPG’.

Currently, Hoa Phat Group has 11 subsidiaries and many affiliated companies, which are operating in the five key areas of iron and steel; steel pipe and prepainted hot dipped galvanized steel coils; agriculture; other industrial production such as furniture, refrigeration; and real estate. Iron and steel production is the core with over 80% revenue and profit of the Group. Capacity of Hoa Phat construction steel is 4.4 million tons per year with two closed Steel Integrated Complexes in Hai Duong and Quang Ngai provinces.

Currently, Hoa Phat is the largest manufacturer of construction steel and steel pipes in Vietnam with market share of 26.2% and 31.5%, respectively. In agricultural field, the Group holds the largest market share of

Australian beef supply with percentage of 50%, leading position in the North in the production of clean chicken eggs. Hoa Phat Furniture leads the market share for office furniture. From the year of 2020, the Group officially adds a new strategic product as hot rolled coils (HRC), with a capacity of 2.5-3 million tons per year for completion of the value chain of steel products from iron ore, to steel billets, construction steels, high quality steels, hot rolled coils, steel pipes, prepainted hot dipped galvanized steel coils and pre-stressed concrete steels.

For years, Hoa Phat has been recognized as National Brand, becomes one of Vietnam’s 50 largest and most efficient enterprises; one of Vietnam’s 10 largest private enterprises, etc.

In parallel with business and production development, Hoa Phat allocates an annual budget of dozens of billion dongs in order to exercise corporate social responsibilities to the community through various charity and social programs in different parts of the country where the Group and its subsidiaries are located.

GENERAL INFORMATION Background of Hoa Phat Group ANNUAL REPORT 2019

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HISTORY OF DEVELOPMENT

Establishing Hoa Phat Equipment & Accessories Co., Ltd – the first company that bore the brand of Hoa Phat.

August 1992

Establishing Hoa Phat Steel JSC, now Hoa Phat Hung Yen Steel Co., Ltd; Hoa Phat Refrigeration Engineering Co., Ltd. and Hoa Phat Urban Development and Construction JSC.

2001

Restructuring as a group with Hoa Phat Group Joint Stock Company being the Parent Company of its subsidiaries

January 2017

Establishing Hoa Phat Hai Duong Steel JSC to initiate the Hoa Phat Steel Integrated Complex in Kinh Mon District, Hai Duong Province.

August 2007

Listing HPG shares on theVietnam Stock Market

November 15, 2007

An Thong Mineral Investment JSC became a member of the Hoa Phat Group.

June 2009

Finishing the first phase of Hoa Phat Steel Integrated Complex.

December 2009

Structuring of operation model of the Parent Company by separating the steel production and trading segment.

January 2011

Establishing Hoa Phat Steel Pipe Co., LtdAugust 1996

Establishing Hoa Phat Furniture JSC.November 1995

GENERAL INFORMATION History of development ANNUAL REPORT 2019

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20th anniversary of Hoa Phat development, Third Class Labour Order awarded by the President.

August 2012

Finishing the second phase of the Hoa Phat Steel Integrated Complex, raising the total capacity of Hoa Phat to 1.15 million tons per year.

October 2013

Hoa Phat officially launched Hoa Phat Hung Yen Feeds Limited Liability Company, marking a new step in the Group’s development history by penetrating the agricultural segment.

March 2015

Establishing Hoa Phat Agriculture Development JSC, which manages and coordinates the operations of all subsidiaries in the agriculture segment (including animal feed and breeding).

February 2016

Finishing the third phase of Hoa Phat Hai Duong Steel Integrated Complex, raising the total capacity of Hoa Phat to 2 million tons per year.

February 2016

Establishing Hoa Phat Steel Sheet Co., Ltd, starting the project of prepainted hot dipped galvanized steel coil, galvanized steel coil and galvalum steel sheet with the capacity of 400,000 tons per year.

April 2016

Establishing Hoa Phat Dung Quat Steel JSC, initiating Hoa Phat Dung Quat Steel Integrated Complex in Quang Ngai Province with the capacity of 4 million tons per year and the total investment of VND 52,000 billion, marking a turning point in Hoa Phat Group’s development.

February 2017

The first two blast furnaces of the Hoa Phat Dung Quat Steel Integrated Complex Project were officially put into operation, bringing the total construction steel capacity of Hoa Phat to 4.4 million tons per year.

2019

GENERAL INFORMATION History of developmentHOA PHAT’S INTERNAL STRENGTH

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OPERATIONAL RISKSHoa Phat is a multidisciplinary manufacturing Group, operating nationwide. On the other hand, in the socio-economic conditions in Vietnam that are easily influenced by outside, Hoa Phat Group’s activities cannot avoid risks, both objective and subjective. In order to effectively prevent risks that may arise in the course of production and business, the Group sets out specific solutions for each key risk group, especially in preventing legal and policy risks.

Policy risk:Legal and by-law documents are being finalized with regular adjustments. Any change in policy has some impact on the Group’s business activities.

Solutions:Coordinating with departments to perform the expertise at the subsidiaries, the Group builds specialized departments such as the Legal Department, the Internal Control Board and the Finance Board under the Group’s office. These departments take charge of collecting information and regularly updating and guiding the affiliated companies regarding to changes in laws and legal effects, if any, on the business activities of the Group. The Group also timely advises the Board of Management and the Board of Directors to make the most reasonable decision when necessary. In addition, these departments are also directly involved in reviewing documents and contracts in the Group’s daily transactions to minimize any related policy risks.

Risks of trade remedies of countries:The escalation of the US-China trade war and a series of investigations and imposition of trade remedy taxes of countries around the world have had and will have certain impacts and influences on domestic industries. According to the Vietnam Steel Association, although in recent years, Vietnam’s steel industry has made many changes in quality and quantity with a fairly rapid growth. Every year, it still

has to import a large amount of finished and semi-finished steel products from China, accounting for more than 50% of total steel imports.For the steel industry, the direct influence of the trade remedies and the US-China trade war is not much, but in the long term, when the pressure on China’s steel exports is increasing, it will probably cause the cheap China’s steel products such as construction steel, cold rolled steel, various kinds of steel sheet ... to be imported in Vietnam more massively, affecting the domestic market.This will create strong competition with Vietnam steel, making it difficult for the consumption of domestic steel products. At the same time, a certain part will “disguise” Vietnamese goods to evade taxes and export to third countries.

Solutions:Recognizing the impact of the trade war, Hoa Phat Group understands that the most radical measure to respond to China’s steel imported is that domestic enterprises must improve the competitiveness of their products, develope export markets, in which, the most competitive criterion must be price.The costs of production inputs, production process must be rationalized to increase competition by price, while quality must be guaranteed. Hoa Phat Group is also aware of the need to protect its market by improving the knowledge of the laws of steel importing countries to avoid trade remedies, thereby offering the best competitive conditions with China’s steel. At the same time, it is necessary to protect the domestic market by using both tariff and non-tariff tools, ie trade remedies as well as technical barriers.

Exchange rate risk: The State Bank of Vietnam continues its application of daily central rate as reference for transaction rate of joint stock commercial banks under the Decision No. 2730/QD-NHNN on announcement of central rate of VND and USD, cross rate of VND and other foreign currencies. The aforesaid central rate is based on three principal indicators including fluctuation of currency basket of currencies of Vietnam’s key partners, foreign currency demand and supply index, macro balances. Transaction margin is consistently remained at 3%.

Solutions:Although the exchange rate was quite stable last year with a fluctuation range of 1.8-2.2% compared to the beginning of the year but with the operating mechanism of central rate, unpredictable changes, the Group always calculated carefully implementation time and payment term of import contracts to take measures to balance foreign currency accordingly. All measures ranging from production revenue, onshore or offshore facility, deviratives have been taken to balance foreign currency and minimize exchange rate risks.

GENERAL INFORMATION Operational risks ANNUAL REPORT 2019

25

Interest rate risks: The Group is currently in process upgrading its range through investing in various large projects in various areas. Accordingly, the Group has a very high demand for capital. Hence, any relatively high increase in interest rates will lead to an increase in interest expenses which will significantly influence the Group’s operations.

Solutions:Always taking the initiative to implement a debt and equity structuring which is suitable to the Group’s operations and credit market developments from time to time. With 28 years of experience and a high credit rating in the credit market, Hoa Phat Group has been able to achieve loan agreements while incurring reasonable borrowing costs.

Price fluctuation risk: Steel is a core product of the economy in general and of Hoa Phat in particular. In this regard, the steel segment consistently accounts for more than 80% of the Group’s revenue and profit. The price of raw materials for steel production such as iron ores and coals and the selling price of steel are similarly sensitive to the international market. In the past year, prices of raw materials increased sharply.

Solutions:Continuously updating information, taking advantage of high-class technology and commodity derivative products to control the cost at low levels. Management and prevention of price fluctuation are implemented every day through departments with the same functions such as Materials Department, Accounting Department. Materials Department and Accounting Department jointly aggregate and encode all types of materials with respect to the whole Group, compare vendors in order to determine the most optimal choice from the most competitive supplier in the market. Accordingly, these specialised departments have effectively contributed to the overall development of the Group.

Personnel risks: With 22,300 employees coming from all parts of the country at young working age, the personnel fluctuation is always a special matter to be resolved. While the steel production segment always needs a large amount of skilled workers, the training system of Vietnam in mechanical engineering has not yet met the actual requirement.

Solutions:Considering human resources to be the central factor to success, Hoa Phat consistently focuses on training knowledge and skills for employees. Subsidiaries regularly hold training courses, closely coordinate with universities, colleges, vocational schools in mechanical engineering to attract skilled workers satisfying requirements for business development. Development policies in terms of both quality and quantity are always implemented equally. Hoa Phat Group has deployed a rating system to standardize the human resource system on a group scale to be applied on a step by step basis in calculation and payment of salaries to motivate employees.

Project progress risk:The Group is accelerating the implementation of Hoa Phat Dung Quat Steel Integrated Complex project and many other projects. This work consists of various procedures on law, land, environment, site clearance, contracts with foreign providers, recruitment for projects. All of these may effect progress and plans.

Solutions:Hoa Phat Group is always proactive in its project implementation plan with extensive experience and good coordination with relevant authorities. With contractors, equipment suppliers, the Group always clearly stipulates the requirements on progress, quality of work when participating in supplying materials, deploying the work, with clear rewards and penalties, etc. Thanks to that, the progress of Hoa Phat Group’s projects is ensured according to the plan.

Epidemic riskIn 2019, our country’s agriculture will be seriously affected by the African swine fever spreading throughout the country. This is also an epidemic causing unprecedented damage to the livestock industry. In reality, the livestock industry is still facing many difficulties and challenges such as low productivity, high product cost, unstable quality and food safety, low competitiveness, etc.The main cause of this situation is that farmers’ disease prevention and control is still subjective, neglected and irresponsible.In early 2020, the outbreak of acute respiratory infections COVID-19 raised concerns about the global economy, including Vietnam. Because of the dangerous infectious disease, Vietnam and other countries around the world have taken many strong measures to limit the spread of the disease. This has greatly affected the production and business activities of businesses.

Solutions:For agricultural segment, one of the direct and decisive factors is biosafety and disease control, especially dangerous infectious diseases, such as foot and mouth disease, blue ear, African swine fever, bird flu. Hoa Phat Group fully complies with the most stringent processes of advanced countries in biosecurity and epidemic control.The acute respiratory infections CoVID-19, caused by corona virus, is still unpredictable globally. In the face of complicated disease situation, Hoa Phat Group has actively implemented many synchronous solutions as recommended by the Ministry of Health to minimize the risk of disease in all activities at companies, minimize impact of the disease on the Group’s production and business activities.

GENERAL INFORMATION Operational risksHOA PHAT’S INTERNAL STRENGTH

26


28 BÁO CÁO BAN GIÁM ĐỐC các rủi ro trong quá trình hoạt động

REPORT OFBOARD OF DIRECTORS1. LIST OF MEMBERS OF BOD

2. REPORT OF BOD

3. OPERATING PERFORMANCE EVALUATION

4. FINANCIAL SITUATION

5. IMPROVEMENT OF MANAGEMENT STRUCTURE

6. BUSINESS PLAN FOR 2020

29

LIST OF MEMBERS OF BOD

TRAN TUAN DUONGGeneral Director 2.68 %

Number of shares held at 02/03/2020

• Educational qualification: Bachelor of economics – National Economics University• Joining date: 1992Before he became the Deputy Chairman of Management Board cum CEO of Hoa Phat Group since January 2007, Mr. Tran Tuan Duong held management position in subsidiaries such as: Hoa Phat Equipment & Accessories Co., Ltd, Hoa Phat Furniture JSC and Hoa Phat Steel Pipe Co., Ltd.

NGUYEN VIET THANGDeputy General Director 0.32 %• Educational qualification: Bachelor of civil engineering, National University of Civil Engineers.• Joining date: 2003Mr. Nguyen Viet Thang had several years in the management position as the Deputy Director of Hoa Phat Urban Development and Construction JSC and Director of Hoa Phat Hung Yen Feeds Co.,Ltd before he was appointed as the Deputy General Director of Hoa Phat Group Joint Stock Company on 7th April 2012. He was appointed as the Director of Hoa Phat Hai Duong Steel JSC since March 2018.

NGUYEN T. THAO NGUYENDeputy General Director 0.02 %• Educational qualification: Bachelor of economics – Hanoi University of Finance and Accounting• Joining date: 1998Ms. Nguyen Thi Thao Nguyen was the Chief Accountant of Hoa Phat Steel Pipe Co., Ltd. and the Head of Supervisory and Legal Board of Hoa Phat Group Joint Stock Company before she was appointed as the Deputy General Director of Hoa Phat Group Joint Stock Company on 1st September 2010.

PHAM T. KIM OANHCFO & Chief Accountant 0.0006 %• Educational qualification: Master of economics, National Economics University• Joining date: 2008 Ms. Pham Thi Kim Oanh was appointed as CFO & Chief Accountant of Hoa Phat Group Joint Stock Company on April 28, 2016.




REPORT OF BOARD OF DIRECTORS List of members of BODHOA PHAT’S INTERNAL STRENGTH

30

% achieved compared to

plan

In 2019, the world economic growth slowed down due to many instability factors such as: the rise of trade protectionism, the US-China trade war is still lasting, the Federal Reserve System (FED) continuously lowered basic interest rates, fluctuating oil prices ... In this context, Vietnam’s economy still achieved impressive results with a growth rate of 7.02%, exceeding the target of 6.6% -6.8% set by the National Assembly of Vietnam. This was the second consecutive year that Vietnam’s economic growth reached over 7% since 2011. Timely and effective direction and control were made by the Government and efforts made by agencies and localities in realizing socio-economic development plan to achieve the above growth target.

The industry and the construction in 2019 still maintained an 8.9% growth momentum compared to the previous

Despite many challenges, in 2019, the Group achieved a revenue of VND 64,678 billion, although only reaching 92% of the plan, but achieved a growth rate of 14% compared to 2018, with a triple size after 6 years (from 2013). In particular, the main contribution was still the steel industry when the revenue growth of 11% was mainly from the increase in output by Hoa Phat Dung Quat Steel JSC along with the Hoa Phat Equipment & Accessories Co., Ltd. renamed as Hoa Phat Metal Producing Co., Ltd. transfering to steel production and trading (including drawn steel and prestressed concrete steel).

In parallel with the growth, the steel segment was still a key segment contributing 80% of the Group’s total revenue. In 2019, the total output of steel consumed was 3,618,000 tons, an increase of 14% compared to 2018. While the

whole market of finished steel products of all types grew by 6.4% over the same period in 2018. Hoa Phat Group’s construction steel and steel pipes continued to maintain the No. 1 market share in the market respectively 26.2% and 31.5%.

The Group’s agriculture segment also developed significantly with revenue growth of 72%, increasing the proportion of revenue from 8% (2018) to 12% (2019). 2019 was a quite successful year for the agricultural segment of Hoa Phat Group with strong growth of the livestock and animal feed segments. Agricultural products such as Australian beef supply, Hoa Phat Group’s clean chicken eggs were at the top of the market, thereby showing great potential for development in the coming years.

INDICATORS

Total revenue 56,580

8,601

64,678

7,578

70,000

6,700

14%

-12%

92%

113%Profit after tax

2018(VND bn)

2019(VND bn)

2019 plan(VND bn)

% growth rate 2019/2018

REPORT OF BODyear, of which the industry increased by 8.86% thanks to the manufacturing and processing increased by 11.29%, playing a key role in leading the overall growth of the entire segment. In addition, the construction also achieved good growth, estimated from 9-9.2%. (Source: VSA, 2019)

However, Vietnam’s steel segment continued to face many challenges, especially the sharp increase in iron ore prices, which reduced the segment’s profit margin. In such circumstances, 2019 was still considered to be stable with Hoa Phat Group when it obtained many achievements in different fields. Revenue reached VND 64,678 billion, profit after tax VND 7,578 billion. The total payment to the State Budget for the year was VND 6,639 billion, an increase of 4% over the same period, of which, three provinces that Hoa Phat contributed the most were Hung Yen, Hai Duong and Quang Ngai.

OPERATING PERFORMANCE EVALUATION

REPORT OF BOARD OF DIRECTORS Report of BOD ANNUAL REPORT 2019

31

2013 2015 20172014 2016 2018 2019

19,200

25,852 27,865

33,885

46,855

56,580

64,678

2,010 3,250 3,5046,606 8,015 8,601 7,578

Chart of Revenue, Profi t of Hoa Phat GroupSales Profi t after tax

Other industrial segment exceeded the target of profi t after tax compared to the assigned plan. Hoa Phat Refrigeration, Funiki air conditioner output was boosted with the total output sold to the market of 260,000 products. The segment of freezers and refrigerators also grew well. Hoa Phat Furniture recorded a strong impression with the household products, in parallel with constantly leading the

market share of offi ce furniture with a series of large-scale projects across the country. Real estate exceeded the revenue and profi t targets compared to the assigned plan. By the end of 2019, Hoa Phat industrial parks subleased more than 430,000 m2 of land, up 48% over the same period, revenue increased 56% to over VND 702 billion with 25 investors coming to lease land in 2019.

2018 20162019 2017 20150%

20%

40%

60%

80%

100%

120% Share of revenue by industry segments in 2019

3% 3% 2% 2% 4%5% 6% 6% 8% 9%12% 8% 6% 4%

8%

Although the revenue achieved was lower than the plan, the Group’s profi t after tax still exceeded the plan, completed 113% when reaching VND 7,578 billion. The ratio of net income/net sales in 2019 reached 12%. Profi t exceeded the target, the profi tability ratio for industrial production in the context of the steel market continued to be diffi cult, showing the effi ciency of the Group’s cost management despite the rising ore price and the advantage of a closed production process from upstream.

Ebitda (profi t before tax, interest and depreciation) in 2019 was VND 12,918 billion, an increase compared to 2018, showing that the net profi t from business activities excluding corporate income tax, loan interest and depreciation fl ow.

Steel Real estateAgriculture Other industries

REPORT OF BOARD OF DIRECTORS Operating performance evaluation HOA PHAT’S INTERNAL STRENGTH

32

FINANCIAL SITUATION

Asset structureThe Group’s total assets increased sharply in 2019 with an increase of 30% compared to 2018. In particular, non-current assets still accounted for the majority with an increase of VND 18,425 billion, reaching VND 71,339 billion, thereby, the process of investing in fi xed assets has been promoted by the Group since 2018. Although there is a sharp increase in non-current assets, the asset structure is still maintained by the Group compared to

Out of current assets which increased sharply, inventory accounted for 64%, inventory turnover as at 31/12/2019 was 2.7 times. The fi gures indicating the fast inventory turnover rate continued showing that the Group’s inventory management was always monitored, supervised and operated effectively.

Non-current assets increased sharply over the same period last year, as at December 31, 2019, non-current

2018, thereby the current assets are found to increase signifi cantly by VND 5,128 billion. By the end of 2019, current assets accounted for 30% of the asset structure, non-current assets accounted for 70%. Total assets doubled after only 2 years (from 2017, the time to start investing in the construction of Hoa Phat Dung Quat Steel Integrated Complex). This is still a very standard and typical asset structure of industrial production.

assets reached VND 71,339 billion, an increase of 35% over the same period as at December 31, 2018, of which fi xed assets, investment properties and long-term work in progress accounted for 97%. 2019 continued to be the year when the Corporation focused its investment to gradually complete the Hoa Phat Dung Quat Steel Integrated Complex, which strongly increased the long-term asset indicator.

2009 20152012 20182010 20162013 20192011 20172014

8,24

410

,243

4,89

9

14,4

9314

,904

6,39

8

18,0

9317

,525

7,41

4

17,1

2219

,016

8,08

5

19,2

0023

,076

9,50

0

25,8

5222

,089

11,7

96

27,8

6525

,507

14,4

67

33,8

8533

,227

19,8

50

46,8

5553

,022

32,3

98

56,5

8078

,223

40,6

23

64,6

7810

1,79

147

,788

Sales revenue, total assets,Equity of whole group for period of 2009-2019

2015 20182016 20192017

Asset structure from 2015 to 2019

53%45% 38%

68% 70%

47% 55% 62%32% 30%

Current assets Non-Current assets

Sales Total assets Equity

REPORT OF BOARD OF DIRECTORS Financial situation ANNUAL REPORT 2019

33

Capital source structure

2015 20182016 20192017

Capital source structure from 2015 to 2019 (vnd bn)

43%40% 39%

48% 53%

57% 60% 61%52% 47%

Liabilities Owner’s equity

In 2019, the Group’s fi nancial structure was maintained at a stable level. Equity increased by 18%, from VND 40,623 billion to VND 47,787 billion from the profi t generated during the year. Although the debt-to-equity ratio increased to above coeffi cient of 1, the ratio of bank debt to equity increased at 0.77 times. The year marked a strong investment process of Hoa Phat Dung Quat Steel Integrated Complex. Therefore, this was also the year with the highest ever bank loan level but still at a safe level,

helping the Group have a very strong rebound in the near future. Cash fl ow from operating activities grew steadily and remained stable to operate.

Current ratio at the end of 2019 was 1.13 times, better than the same period in 2018. This ratio always stays more than 1, indicating that the Group’s ability to pay short-term obligations is good.

2016 20182015 2017 2019-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

1.80

Quick ratio and Current ratioCurrent solvency

REPORT OF BOARD OF DIRECTORS Financial situationHOA PHAT’S INTERNAL STRENGTH

34

Operating PerformanceThe key indicators when evaluating performance are ROE (ratio of net profit to equity) and ROA (ratio of net profit to total assets). In 2019, Hoa Phat Group’s ROE reached 16%, lower than the 21.2% of 2018. Along with that, the Group’s ROA also decreased from 11% in 2018 to 7.4%. The decline was due to the Group’s strong investment in assets in 2019, but many assets have not been put into operation, so they

Investment

The Group’s investments in subsidiaries in 2019

Company name

Hoa Phat Hung Yen Steel Co., Ltd 1,000 600 400

Hoa Phat Dung Quat Steel JSC 29,800 21,688 8,112

Hoa Phat Hai Duong Steel JSC 7,000 3,500 3,500

Hoa Phat Metal Producing Co., Ltd 400 350 50Hoa Phat Steel Sheet Co., Ltd 2,000 1,500 500Hoa Phat Agriculture Development JSC 3,100 2,880 220

Investment 31/12/2019

Investment 1/1/2019

Additional investment

Unit: Billion VND

In 2019, in parallel with the investment of Hoa Phat Dung Quat Steel Integrated Complex, the Group also invested in increasing authorized capital in other subsidiaries to increase their own capital resources to support their production and business activities.

Hoa Phat Group’s office block is the first unit to apply technology in management with the use of the V-Office electronic office system of Viettel Group. With this software, documents are stored synchronously, quickly searched, while minimizing the time for processing, signing/submitting documents.

Immediately after V-Office, on January 01, 2019, Hoa Phat Dung Quat Steel Joint Stock Company officially put the overall management system of SAP S/4HANA enterprise resources into operation to manage all production and trading activities in Hoa Phat Dung Quat Steel Integrated Complex. SAP S/4HANA was applied in all operations such as finance - accounting, product quality control, production management, sales ... After 1 year of implementation, SAP showed its effectiveness in accurate, coherent and consistent data linking which helped to avoid errors and minimized uptime.

During the year, the Board of Directors of Hoa Phat Group approved the policy to equip some professional positions of Microsoft Office 365 toolkit - a package of professional office IT utilities. Office employees will experience the most advanced features available today, with many outstanding

have not been profitable. Last year, we could see that the total assets increased remarkably, above VND 100,000 billion, along with the increase in owner’s equity, causing the ROA and ROE to decrease. However, in the near future, when the new asset block is profitable, the above indicators will be better.

features such as data access anytime, anywhere, multimedia access, integrated messaging, conference meetings, online calling ... The application of information technology in the organization and management work shows that the Board of Directors of the Group is always conscious of innovation, adapting to the era, and constantly improving, cultivating itself so that performance results are at their highest.

In 2019, Hoa Phat Group continued to apply the salary system based on scale and work results, rewarding employees for excellent achievements or innovation. The salary fund of the Group increased in the past year, all employees’ incomes were increased in accordance with the scale, year of experience and the corresponding level.Many appointment decisions were made at both office and factory blocks. The personnel appointed to the management level were often those who have had many years of experience working at the Group, therefore, not only have the ability, high professional qualifications but also understand their businesses and jobs from the most basic problem. The open working environment, attractive remuneration policies and open promotion opportunities are factors that make employees in Hoa Phat ready to devote to the company.

IMPROVEMENT OF MANAGEMENT STRUCTURE:

REPORT OF BOARD OF DIRECTORS Improvement of management structure ANNUAL REPORT 2019

35

In 2019, Vietnam’s economy achieved many breakthrough results with GDP growth rate exceeding the set target, reaching 7.02%, the scale of Vietnam’s economy was raised to USD 266 billion, per capita reached USD 2,800/year, trade surplus reached nearly USD 10 billion; foreign exchange reserves reached USD 80 billion; Public debt decreased to 56% of GDP. This is an important foundation for Vietnam’s economy to continue to have positive development in 2020. However, risks and challenges from the global economy, geopolitical tensions, the US-China trade war continues with many long negotiations, the Covid 19 pandemic spreads all over the world, the psychology is widespread, the domestic economy is still facing many difficulties, human and animal diseases are affecting significantly on the target of inflation control and the target of economic growth.

Before the situation of the world and Vietnam economy, Hoa Phat Group identifies 2020 as a challenging year for the whole Group, however, with the determination and unanimity of 22,300 employees, Hoa Phat Group believes that the orientation and the direction are right, the Board of Directors strives to achieve the following goals:

Completing construction investment items of Phase 2 of Hoa Phat Dung Quat Steel Integrated Complex.

Consuming all the products produced. Continue to lead the nationwide market share of construction steel and steel pipe - galvanized steel in the field of steel production and trading. Striving to continue to hold the No. 1 market share of Australian beef supply in the agricultural segment.

Managing inventory well, keeping track of the price of raw materials, having a reasonable regulation policy.

Updating the fluctuations of the world and domestic economic situation, especially the exchange rate, interest rates to have effective cash flow management policies.

Concentrating measures to prevent and control Covid-19 pandemic, at the same time maintain continuous production and business activities, ensuring the year plan and stable jobs for workers.

BUSINESS PLAN FOR 2020

REPORT OF BOARD OF DIRECTORS Business plan for 2020HOA PHAT’S INTERNAL STRENGTH

36

PERFORMANCE IN 20191. PERFORMANCE OF SUBSIDIARIES

1.1. Iron and Steel

1.2. Steel pipe & Prepainted hot dipped galvanized steel coils

1.3. Agriculture

1.4. Other industrial production

1.5. Real estate

2. HUMAN RESOURCE MANAGEMENT

3. POLICIES FOR EMPLOYEES

4. INVESTMENT STATUS OF KEY PROJECT

5. STRUCTURE OF SHAREHOLDERS

6. SHAREHOLDER RELATIONS

37

PERFORMANCE OF SUBSIDIARIESIRON AND STEELIn 2019, Hoa Phat Construction Steel recorded the highest ever business record with 2.77 million tons of finished steel products of all kinds, an increase of 16.7% compared to 2018. With business production results, the subsidiaries in the field of iron and steel play a leading role in keeping the growth pace.

20162011 20182013 20152010 PoscoSS

Vina kyoei

HPG

POM

VNSteel

20172012 20192014

Growth percentage chart of Top 5 construction steel enterprises

Hoa Phat Steel firstly reached 300,000 tons in November, the market share of steel exceeded 26%.

In November 2019, the production and sales volume of Hoa Phat construction steel reached record numbers ever. The amount of steel supplied to the market reached 300,000 tons, the highest volume in nearly 20 years of the Group’s history in term of construction steel business, an increase of 36.4% compared to November 2018. In the Southern region, sales volume also hit a record 80,000 tons for the first time in November, nearly three times higher than the same period in 2018.

Accumulated throughout the year, Hoa Phat Steel produced and provided nearly 2.77 million tons of high quality steel to the market, up 16.7% over the same period, of which over 265,000 tons were exported to markets such as Japan, Cambodia, Korea, Taiwan, Malaysia, Australia, and the US ... the market share reached 26.2%, further confirming the No. 1 position in market share in Vietnam.

The record output level is a confirmation of Hoa Phat Steel’s initial success in investing in expanding production towards focusing on product quality, constantly diversifying types, grades and optimizing value chain from steel products.

This is also a motivation for Hoa Phat Steel to complete the plan in 2020 with the goal of achieving 3.5 - 3.6 million tons of construction steel, of which it is striving for 100% growth compared to the output achieved in the South in year 2019.

0%

5%

10%

15%

20%

25%

30%

12%

21%

26%

PERFORMANCE IN 2019 Performance of SubsidiariesHOA PHAT’S INTERNAL STRENGTH

38

Chart of output and market share of construction steelof Hoa Phat over the years

2010

6,000,000

8,000,000

10,000,000

4,000,000

30%

2,000,00005%

10%

15%

20%

25%

00%

2011 2012 2013 2014 2015 2016 2017 2018 2019

580,

000

644,

000

611,

000

698,

000

1,00

1,00

0

1,38

0,00

0

4,80

6,00

012

% 13% 14

% 15%

19% 21

% 22%

24%

24%

26%

4,84

4,00

0

4,46

4,00

0

4,57

9,00

0

5,23

7,00

0

6,48

2,00

0

8,13

8,00

0

9,12

7,00

0

9,99

7,00

0

10,5

94,1

29

1,80

3,00

0

2,18

0,00

0

2,37

7,00

0

2,77

5,06

6

Consumption output of Vietnam Steel Association (tons)

Consumption output of HPG (tons)

Consumption market share of HPG

20162011 20182013 201520102009

Growth percentage of HPG

Growth percentage of Vietnam Steel Association

2017

2012

20192014

Chart of growth percentage of construction steel consumption from 2009-2019

31

16

22

1

-8

3

14

2426

1210

6

64

11

-5

14

43

43

31

21

9

17

PERFORMANCE IN 2019 Performance of Subsidiaries ANNUAL REPORT 2019

39

Hoa Phat Hai Duong Steel Integrated Complex increased its generating capacity by 12MW

The dry coke stamping line at Hoa Phat Hai Duong Steel Integrated Complex was officially put into operation in Mid-August 2019. This is the most advanced clean heat recovery coke technology in the world today, eco-friendly, improves coke quality and reduces coke consumption for blast furnaces. In particular, the recovery of residual heat from the dry coke stamping line will increase the generating capacity of the Complex by 12MW/year, increase the total capacity of the Complex to 64MW.

Previously coke coal and thermoelectricity factory in Hai Duong Steel Integrated Complex invested in a gas and excess heat collection and treatment system and 3 generating units with a capacity of 52MW, equivalent to a medium-sized thermal power plant. This measure proactively supplies power for steel production, on the other hand ensures the production environment as well as the surrounding community.

Since 2018, Hoa Phat Hai Duong Steel Joint Stock Company has invested about nearly VND 700 billion to invest in the nitrogen dry coke stamping system to improve the technology to be more eco-friendly, save production costs, raising the generation of electricity for production, from 52MW to 64MW from the third quarter of 2019, helping Hoa Phat Group take the initiative in 50-60% of the electricity demand for production, raising the competitiveness of Hoa Phat steel.

The company is also focusing on building and installing machinery and equipment with a surplus capacity of 50 MW. It is expected that when the project of this super-high-pressure thermal power plant is completed in September 2020, the total surplus thermal power output of Hoa Phat Hai Duong Steel will be increased to 114MW, help the Complex self-control 80% of the total electricity demand for production.

Hoa Phat Dung Quat Steel Integrated Complex carried out trial operation of the first phase

After nearly 3 years, Hoa Phat Dung Quat Steel Integrated Complex basically completed phase 1 and commissioning of No. 1 and No. 2 blast furnaces together with related items in a closed production chain from iron ore to construction steel.For phase 2, over 80% of main equipment items have been completed, expected to put into operation the remaining 2 blast furnaces and hot rolled coil line (HRC) in operation in the year of 2020.In parallel with the trial operation of phase 1, Hoa Phat Dung Quat seaport was capable of receiving 200,000-ton ships is also being completed. In 2019, the total volume of goods delivered to Hoa Phat Dung Quat port reached about 3.7 million tons, including both export and import goods. When two project phases are completed, Hoa Phat Group’s port will have a total capacity of 32 million tons/year.With 11 wharfs, Hoa Phat Dung Quat Port is considered as one of the most important items of Hoa Phat Dung Quat Steel Integrated Complex, because it is a huge and unique advantage of Hoa Phat Dung Quat Steel, helping to minimize optimizing logistic problems, easily importing input materials, unloading goods and exporting finished products ... from the complex to domestic and foreign markets.Thanks to the deep-water port, each ton of fuel helps Hoa Phat Dung Quat reduce USD 3-5/ ton, this is a great advantage because the material must be imported every year up to millions of tons.


40

Hoa Phat Steel Hung Yen completed continuous casting and rolling complexAfter 19 years of attachment to Nhu Quynh land, on June 17, 2019, the Rolling Steel Factory, Hoa Phat Hung Yen Steel Co., Ltd. moved to Pho Noi A Industrial Park, forming a closed steel production process from scrap to finished steel.

Previously, cast billets must be cooled, stored and transported from Pho Noi A Industrial Park to Rolling Factory in Nhu Quynh - Van Lam Industrial Cluster in Hung Yen province for rolling steel. That fact interrupted the production process, increased transportation costs, storage, kiln fuel and billet consumption. After moving the Rolling Factory to Pho Noi A Industrial Park to complete the continuous casting and rolling complex, Hoa Phat Hung Yen Steel Co., Ltd created a closed production process, contributing to reduce material consumption, costs, production stages, increase recovery of finished steel products.

In addition to optimizing costs, the casting and rolling complex also helps to improve factory infrastructure and landscape to improve working conditions and environment for employees, reduce emissions and be more eco-friendly. The continuous casting and rolling process helps the Company control the stages and inputs for the production system and equipment, maintaining stability and efficiency for the whole factory.

Starting operation in September, currently the continuous casting and rolling complex has run about 90% of design capacity. When reaching 100% capacity, the Company will supply the market with nearly 400,000 tons of construction steel per year.

Hoa Phat Equipment & Accessories Co., Ltd changed its name to Hoa Phat Metal Producing Co., Ltd.After 27 years of pioneering in supplying high quality products to the market, Hoa Phat Equipment & Accessories Co., Ltd transformed itself into the steel business (prestressed steel, drawn steel wire) and achieved remarkable achievements in terms of production as well as sales volume. With the focus on deep processing of steel products, Hoa Phat Equipment & Accessories Co., Ltd. changed its name to Hoa Phat Metal Producing Co., Ltd. from September 19, 2019.

The company’s steel drawn wire is rated to be of the highest quality on the market today with products including: hot-dipped galvanized steel wire, soft annealed steel wire widely used in construction, fences, wire mesh, gabions ... These products are certified by the Quality Assurance and Testing Center (Quacert 1) to meet all standards such as TCVN, ASTM (USA), BSI (UK) and JISG (Japan).

In August 2019, the company completed installation of the second hot-dip galvanized steel wire line in Hung Yen to double the capacity of galvanized wire product. Not only replacing imported goods, Hoa Phat Group’s wire-

drawn steel was exported to countries such as Korea, USA, Canada, Laos and Cambodia. In 2019, steel wire exports accounted for 39% of the total withdrawn steel output of Hoa Phat Metal Producing Company.

For prestressed steel products, on March 18, 2019, the Company officially launched a new product - prestressed steel bars (PC Bar) and received the attention of foreign and domestic customers. Many large enterprises in the Association of prestressed concrete piles have “registered” to purchase products of the Company and PC Bar products have been exported to markets in Cambodia, Hong Kong, Taiwan, etc. and completing the manual requisements to meet export standards for Japan.

The company is also rushing to speed up the process of putting pre-stressed strand (PC Strand) line imported from Italy into operation, so that it can bring products to market in 2020.

With the advantage of autonomy in input materials, Hoa Phat prestressed steel factory in Dung Quat Economic Zone, Quang Ngai Province supplies high-class products with competitive prices, including: pre-stressed steel bars (PC Bar), prestressed steel cable (PC Strand). Hoa Phat Group’s pre-stressed steel products are used in large-scale projects requiring engineering, load-bearing capacity, high safety such as towers, viaducts, sea-crossing bridges, high-rise buildings, cable cars, etc at the same time help optimize the space as well as the cost of materials, shorten the construction time for works.

Pioneering in the production of wire drawn steel, high-quality post-tensioning to replace imported goods, it is expected that when the Company completes the investment stages and put the equipment into operation, the capacity will reach about 200,000 tons/ year, meeting domestic demand and boosting exports.

Maintain iron ore mining and processingIn 2019, An Thong Mineral Investment Joint Stock Company achieved the highest consumption volume ever with over 500,000 tons of ores of all kinds.

The refined iron ore and pellet iron products of An Thong Company were mainly supplied to Hoa Phat Steel Integrated Complex in Kinh Mon, Hai Duong. Minh Son iron ore refining factory actively researched and changed technology to suit the properties of the original ore according to the mining divergence of the Sang Than iron mine in order to produce refined iron ore of good quality, in accordance with the current steel production technology of Hoa Phat Hai Duong Steel Joint Stock Company.

In 2020, the Company continues to focus on improving product quality to stabilize production costs to maintain profit margins.


41

STEEL PIPE & PREPAINTED HOT DIPPEDGALVANIZED STEEL COILSLast year, Hoa Phat steel pipe overcame many difficulties, continued to maintain the number 1 in terms of market share in the industry, set the highest record ever in sales volume. Meanwhile, sales volumes of Hoa Phat Sheet Steel increased 5 times compared to 2018.

Hoa Phat Steel Pipe exceeded 750,000 tons for the first time

In November 2019, not only the sales of construction steel achieved record volume, but Hoa Phat steel pipe also reached the highest level ever in sales history, reaching 72,500 tons, increased by 27.6% over the same period of 2018. In particular, the North market had the highest growth rate with 38.4%. With this result, Hoa Phat maintained its position as the No. 1 steel pipe manufacturer in Vietnam

with over 31.5% market share.Accumulated in 12 months, Hoa Phat provided 750,800 tons of steel pipe, increased by 14.8% over the same period of 2018, exports reached 19,100 tons, up 17% over the same period. Besides the No. 1 position in Vietnam, Hoa Phat Steel Pipe also exports to markets in North America, Southeast Asia, India, Australia and Latin America, etc. In addition to supplying finished steel pipes, Hoa Phat Steel Pipe Company also supplied more than 80,000 tons of galvanized iron sheets as raw materials to other factories in the market.

Along with consistent sales policy and superior and stable product quality, Hoa Phat steel pipe products were positively welcomed by customers and partners, helping Hoa Phat Group continuously grow, affirming its leading position in the market. These are also important factors for Hoa Phat Steel Pipe to achieve the 10% growth target

20162011 20182013 2015 20172012 20192014

Pecentage chart of growth of Top 5 steel pipe enterprises

Minh Ngoc

14%

23%

26% 26%28%

32%

for 2020.In December, the Company put into operation a large-sized steel pipe line. Hoa Phat large-sized steel pipes will be supplied for bridges and roads, steel structures for large national projects, fire protection systems, high-rise buildings, apartments, airport construction, gas pipelines, oil pipelines systems, etc.

The launch of Hoa Phat large-sized steel pipes in the market helps engineers and contractors to actively select reputable quality suppliers for projects. This is also the first and only large-sized steel pipe production project in the North, contributing to affirming No. 1 position of Hoa Phat Steel Pipe in Vietnamese market.

HSG

HPG

Viet Duc

SeAH VN

0%

5%

10%

15%

20%

25%

30%


42

Hoa Phat Steel Sheet Co., Ltd achievedsales volume increased by 5 times compared to 2018After nearly 2 years of official presence on the market, with the enthusiastic support of customer agents, Hoa Phat Steel Sheet Co., Ltd built a distribution system throughout the country, achieved an increase in sales volume in 2019 increased by 5 times compared to 2018.

With modern technology lines imported from Europe, Hoa Phat Steel Sheet Co., Ltd supplied the main product ranges such as pickled and oiled (PO) steel sheet, cold rolled (Full hard) steel sheet, galvanized (GI) steel sheet, galvanlume (GL) steel sheet, color coated steel sheet, especially galvanized steel coil applied in harsh environmental conditions (SPE paint, PVDF paint), widely used for civil, domestic and industrial projects and exported to markets all over the world.

Currently, Hoa Phat Steel Sheet Co., Ltd increased its coverage, gained a certain position in the domestic market and conquered many export markets such as the EU, US and some Southeast Asian countries (Indonesia, Malaysia) ,etc. Hoa Phat Steel Sheet Co., Ltd products were highly appreciated by partners for quality and after-sales service. Following the successes in the North and the Central, since September 2019, Hoa Phat Steel Sheet Co., Ltd has continued to expand its market into the Southern region.

AGRICULTUREAfter 4 years of investing in agriculture, Hoa Phat Group recorded remarkable achievements in agriculture segment. The revenue in 2019 of this segment reached 172% compared to 2018.

2019 was a quite successful year for the agricultural segment of Hoa Phat Group with strong growth of the livestock and animal feed segments. In which, the supply of Australian beef and clean chicken eggs of Hoa Phat Group was at the top of the market.

Hoa Phat Trading Co., Ltd. (under Hoa Phat Agriculture Development JSC) had impressive business results, the consumption of Australian beef accounted for over 50% of the national market share. By increasing the market share of Australian beef from 42% from the end of 2018 to 50% in 2019, Hoa Phat Group continued to affirm its position, holding the number 1 market share of Australian beef supply across the country.

Only after a short time to enter the market, from September 2019, chicken egg production of Hoa Phat Poultry Co., Ltd also took the lead among businesses supplying chicken eggs in North region with an output of 450,000 eggs per day. Hoa Phat Group’s commercial chicken eggs are processed through a modern line to ensure high quality eggs - clean - safe to consumers.

In the field of pig breeding, with the farm system in both regions, the market price of live weight increased sharply in 2019, also contributed to the revenue growth for Hoa Phat Group’s pig breeding.


43

OTHER INDUSTRIAL PRODUCTION

The other subsidiaries of other industries made important strides in the past year, contributed to the overall growth of the Group. In particular, Hoa Phat Furniture JSC had strong impression in the market, while Hoa Phat Refrigeration Engineering Co., Ltd exceeded the revenue of VND 1,100 billion for the first time.

Hoa Phat Furniture JSC – A strong impression in 2019

As a leading furniture manufacturer in Vietnam, constantly leading the market for office furniture with a series of large-scale projects across the country, 2019 was a breakthrough year for projects. The most outstanding was the success of the Family Product Project - with two Vietbuild exhibitions successfully held in Hanoi and Ho Chi Minh City bringing great reputation for Hoa Phat Furniture JSC in the vibrant Southern market. The application of the latest technologies in production has brought advantages and strong growth momentum for Hoa Phat Furniture JSC, from office furniture to home furniture, in which the family ranges grew by 46% compared to 2018.

Not only interested in numbers, Hoa Phat Furniture JSC was proud to lead the trend when it was the first furniture business to launch a campaign to reduce plastic waste in the factory system located in 3 regions. With millions of furniture products each year, the practical action of reducing plastic waste of Hoa Phat Furniture JSC is expected to help formulate habits for businesses in reducing plastic waste and at the same time be able to provide positive consumer reception.

With this action, Hoa Phat Furniture JSC hopes to become a leading furniture business in synchronous development, unifying the goal of maintaining the leading manufacturer position, and green development for a clean environment.

Hoa Phat Refrigeration Engineering Co., Ltd exceeded the revenue of VND 1,100 billion for the first time With the high temperature base for many months, the demand for refrigeration products in Vietnam has increased, especially air conditioners. This is the main factor helping to increase sales volume of Hoa Phat Refrigeration Engineering Co., Ltd. For the first time in 18 years of development, the Company “smoothly” exceeded the profit target in 2019 before the deadline of 5 months.For the whole year of 2019, the Company sold a total of about 260,000 products to the market. Especially, the after-tax profit target increased by 82% over the same period and exceeded 9% of the plan assigned by the Group for the whole year 2019.

Funiki Air Conditioner MMC2 is the air conditioner range produced in Malaysia, imported and distributed in Vietnam by Hoa Phat Refrigeration Engineering Co., Ltd. The product has many outstanding features, compact and sophisticated design; using Gas R410a which is safe and eco-friendly; extremely fast cooling; energy saving, etc. In 2019, the company supplied Funiki HSC series air conditioners using the new generation R32 refrigerant with the cooling efficiency much faster than other types of gas, saving more electricity and safer.

This year, Funiki air conditioner not only increased in the segment of civil and family, but also in many schools, hospitals, industrial park projects, public works. In addition to quality, reasonable prices, warranty, after-sales are also factors that promote sales growth.

In addition to the Air conditioner products, Hoa Phat Freezers and Refrigerators also grew well, of which the most popular was the Hoa Phat Freezer with the traditional form. Manufactured on modern lines, meeting high quality standards, durable, power-saving, preserving food always fresh, Funiki refrigerators and Hoa Phat freezers are becoming the familiar brand for consumers.


44

REAL ESTATE

Products of Hoa Phat Urban Development and Construction JSC prospered in 2019. During the difficult period of real estate market, Hoa Phat Group’s real estate sales in the industrial park still achieved impressive growth, up 56% compared to 2018.

In 2019, Hoa Phat Group’s Industrial Parks continuously “welcome” many large domestic and foreign enterprises to rent land as factories, help residential real estate, urban areas and industrial zone infrastructure business of the Company with many flourishes, remarkable growth compared to the total area and revenue of 2018.

For the whole year, Hoa Phat Group’s Industrial Parks leased out more than 432,000 m2 of land, an increase of 48% over the same period, revenue increased 56% to over VND 700 billion with 25 investors coming to lease land in 2019. With favorable geographical location, located between two highways 5A and 5B, Yen My II Industrial Park with a total planning area of 300ha (phase 1 is 100ha) becomes an attractive destination for foreign and domestic investors.

These include Kokwang Industry Vietnam (Korea), Mingshin Vietnam (Hong Kong), especially Uni-President Group headquarted in Taiwan, headquartered in Taiwan, one of the earliest foreign investors to Vietnam, specializing in manufacturing beverage, food, animal feed. In its plan to expand its scale, Uni - President Group selected Yen My II Industrial Park to set the location of the Group’s two factories, Uni - President Vietnam Co., Ltd. and Northern Tribeco Co., Ltd. with an area of 13.7 ha, total investment of VND 1,023 billion (about 44 million USD), the highest among enterprises that chose Yen My II Industrial Park as the investment destination over the past time.

Not only Yen My II, but Pho Noi A (Hung Yen) and Hoa Mac (Ha Nam) Industrial Parks, which are invested by Hoa Phat Group, also attracted many enterprises to lease land.

With a convenient location, synchronous and modern technical infrastructure, from internal transport systems, electricity, water, centralized wastewater treatment systems ..., Hoa Phat Group’s Industrial Parks are always attractive to investors and have high occupancy rates. As for real estate segment, Pho Noi - Hung Yen Urban Area is expected to be sold by the company by the end of 2020.


45

HUMAN RESOURCE MANAGEMENT

No. COMPANY NAME

QUALIFICATION

Above University Degree

Technical WorkerCollege Male

University Degree

Unskilled Worker

VocationalSecondary

SchoolFemale

2I. Hoa Phat Group JSC 610 5051 307 56 106

28II. Iron and Steel 3,6012,707 13,091 2,506 3,3142,410 1,475 14,566

11III. Steel pipe and prepaintedhot dipped galvanized steel coils

352474 2,589506 1,100449 303 2,892

3V. Other industrial production 138135 1,559266 1,663186 832 2,391

11IV. Agriculture 163163 1,165466 739126 502 1,668

2VI. Real Estate 6149 505208 32730 172 677

57 VII. Total (VII=I+II+III+IV+V+VI) 4,3213,538 18,959 4,002 7,1733,208 3,340 22,300

21 Hoa PhatHung Yen Steel Co., Ltd

21698 734126 293129 130 864

92 Hoa PhatHai Duong Steel JSC

1,713818 4,540725 883816 424 4,964

133 Hoa PhatDung Quat Steel JSC

1,5191,734 7,0901,513 1,7001,386 775 7,865

24 Hoa PhatMetal Producing Co., Ltd

7421 42981 27746 72 501

25 An ThongMineral Investment JSC

7936 29861 16133 74 372

71 Hoa PhatSteel Pipe Co., Ltd.

306395 2,207332 1,015386 234 2,441

31 Hoa Phat Furniture JSC 9598 1,300196 1,528119 739 2,039

111 Hoa PhatAgriculture Development JSC 163163 1,165466 739126 502 1,668

21 Hoa Phat Urban Development and Construction JSC

6149 505208 32730 172 677

42 Hoa Phat Steel Sheet Co., Ltd 4679 382174 8563 69 451

02 Hoa Phat RefrigerationEngineering Co., Ltd.

4337 25970 13567 93 352

GENDER

TOTAL

PERFORMANCE IN 2019 Human resource managementHOA PHAT’S INTERNAL STRENGTH

46

POLICIES FOR EMPLOYEES With over 22,000 employees located across 3 regions, it is not easy to manage and take care of such a large workforce. However, with clear Human resources hierarchy, payroll policies and benefits generally applicable to the whole Group, all employees of Hoa Phat Group are guaranteed all rights according to the provisions of the state and many other welfare regimes, and there are many promotion opportunities when many areas of the Group are expanding production and business.

Personnel size and training

In 2019, the whole Group had 22,300 employees, an increase of 12.5% compared to 2018. The strongest fluctuation continued to be recorded at Hoa Phat Dung Quat Steel Joint Stock Company with 7,865 employees at the end of December 2019, an increase of 44.4% over the same period last year. It is forecasted that the number of employees of this Company will continue to increase sharply in 2020 as the Hoa Phat Dung Quat Steel Integrated Complex is in the process of finishing with extremely large human resource demand.

The number of highly qualified employees (from Intermediate level and above) was 10,805, equivalent to nearly 50% of the total employees of the Group. Characterized by the Industrial Manufacturing Group, the male labor force accounts for 80%.

With the desire to promote the continuous development of the whole team, Hoa Phat Group pays special attention to training and professional training for all employees in all positions. Training courses on environmental safety, occupational safety and health, fire prevention training, supplementing professional skills and knowledge dissemination, etc. took place continuously throughout the past year at all subsidiaries of the Group.

In particular, in order to strengthen the team of highly knowledgeable and skilled employees, Hoa Phat Group cooperated with many colleges and universities to improve the skills of its employees. In 2019 particularly, hundreds of Hoa Phat Group’s employees were granted certificates by many advanced training units such as Hanoi University of Science and Technology, Thai Nguyen University of Agriculture and Forestry, and Dung Quat Technological College (Quang Ngai), Northeast Agriculture and Forestry College, Thai Nguyen Metallurgical Engineering College, Railway College, Maritime College I, Danang Vocational College, etc.

On January 1, 2019, Hoa Phat Dung Quat Steel Joint Stock Company officially put the overall corporate management system of SAP S/4HANA into operation to manage all production and business activities at Hoa Phat Dung Quat Steel Integrated Complex. This move showed the determination of the BOD in applying modern and professional management methods, keeping up with the general trend of the world, and contributing to supporting the management and transparency of information in production process.

SAP S/4HANA was applied in all majors such as finance - accounting, product quality management, production management, sales, etc. After 1 year of implementation, SAP has shown its effectiveness in linking data accurate, coherent and consistent that to avoid errors and minimize uptime of operations.

Benefit policies

Hoa Phat continued to apply the salary system based on scale and job results. In 2019, the Board of Directors approved the increase of basic wage and salary fund in accordance with the Group’s periodic pay rise schedule.

In addition to the main source of income as salary, employees in Hoa Phat Group also often have the opportunity to receive awards for outstanding achievements or innovation in their work. This policy has motivated employees to dedicate to work, and constantly promote their capacity, improve the quality of work efficiency. Since then, many initiatives were implemented in the past year, with initiatives benefiting businesses of VND billions such as at Hoa Phat Hai Duong Steel Joint Stock Company.

The welfare regime for employees was strictly implemented in accordance with the regulations of the State, employees were fully paid compulsory insurance such as social insurance, health insurance, etc. Besides, the company also cooperated with Trade Union, to develop many life care programs for employees. For the personnel in difficult circumstances, being sick or having relatives with serious illness, the Group promptly shared, visited and helped at the same time with support for living expenses and medical treatment. In some units, Hoa Phat Group also deployed a series of trips to bring workers to their hometowns to celebrate Lunar New Year in the days before New Year when it was difficult to catch means of transportation.

Internal cultural & sport activities

Activities of sightseeing, vacation, team building, etc. were also implemented in all units, creating conditions for employees to have time to rest, recharge after stressful working hours, and it was also an opportunity to tighten the spirit of solidarity in the Group.

In particular, the sports movement was still a content of special interest in Hoa Phat Group. A series of sports competitions in many subjects such as football, tennis were organized and professionally within the Group during the past year, which were also an opportunity for exchanges between units, factories and facilities, an opportunity for employees to show their talents and improve their health.The efforts of Hoa Phat Group were acknowledged by the hard work of all employees, not few employees were dedicated to working here for several decades and they are willing to contribute more to the Group in the coming time. Hoa Phat really has done well the philosophy of “harmony for joint development” for its employees.

PERFORMANCE IN 2019 Policies for employees ANNUAL REPORT 2019

47PERFORMANCE IN 2019 Investment status of key projects

INVESTMENT STATUS OF KEY PROJECTS• Hoa Phat Dung Quat Steel Integrated Complex- Address: Dung Quat Economic Zone, Quang Ngai Province- Total investment: VND 50,000 billion, of which:- Designed capacity: 4 million tons per year First phase: 2 million tons of long steel per year Second phase: 2 million tons of hot rolled coils (HRC) per year- Progress: Has put in operation the Phase 1 items of Hoa Phat Dung Quat Steel Integrated Complex and is continuing to invest in the construction of Phase 2. The total amount invested for the Project by the end of 2019 is VND 46,000 billion. It is expected that in the second quarter of 2020, Phase 2 of the project will produce the fi rst hot rolled steel products to market.• North Pho Noi Urban Area Project in Hung Yen Province- Address: Phan Dinh Phung Commune, Nhan Hoa Commune and Ban Yen Nhan Township of My Hao District, Hung Yen Province.- Area: 262 hectares- Size: Urban area and infrastructure complex including trading centers, offi ce services, high-rise buildings, low-rise buildings, row houses, villas.- Total investment: The project is divided into two phases. Phase 1 is estimated at VND 6,500 billion in total investment. Upon fi nishing the fi rst, the second will be invested in.Progress: The land clearance and trees growing were completed. The sale is expected to start by the end of 2020.

STRUCTURE OF SHAREHOLDERSShare information

- Authorized capital: VND 27,610,741,150,000 - Share title: Hoa Phat Group Joint Stock Company- Share type: Ordinary share- Stock sticker symbol: HPG- Par value of share: VND 10,000 per share- Initial offering date: November 15, 2007- Total of shares: 2,761,074,115- Total of treasury shares: 0- Total of outstanding shares: 2,761,074,115 - Number of freely transferred shares: 2,761,074,115 - Number of shares restricted from transfer: 0

Changes to owner’s equity during the year - On Jun 12, 2019, the Group announced the change in number of outstanding shares due to issue of shares to pay dividend of 2018.+ Authorized capital before issue: VND 21,239,071,660,000+ Authorized capital after issue: VND 27,610,741,150,000 - Treasury share transaction:+ Total of treasury shares as at December 31, 2019: 0+ Treasury share transaction in 2019: 0

HOA PHAT’S INTERNAL STRENGTH

48

36%

8%18%

38%

Structure of shareholder by group

Structure of shareholder by equity percentage as at March 02, 2020

Structure of shareholderby geographical region

Board of Management, Supervisory Board, Board of Directos, Chief Accountant

Domestic shareholders

Related people

Other domestic shareholders

Foreign shareholders

Foreign shareholders62%

38%

No.

1

2

3

Content

Total

Shareholders holding more than 5%

Shareholders holding from 1% to 5%

Shareholders holding less than 1%

Number of shares

2,761,074,115

902,550,000

758,147,080

1,100,377,035

Percentage

100.00%

32.69%

27.46%

39.85%

Structure of shareholder as at March 02, 2020

PERFORMANCE IN 2019 Structure of shareholders ANNUAL REPORT 2019

49

Share transaction of internalshareholders and related people in 2019

No.

1

2

3

4

5

6

7

8

9

Dai Phong Tradingand Investment Co., Ltd.

Ta Tuan Duong

Nguyen Thi Hong hai

Tran Dinh Long

Pham Thi Kim Oanh

Nguyen Ngoc Quang

Vu Thi Hien

Pham Thi Thu Lan

PENM IV Germany GMBH &CO.KG

0

172,450

270,068

694,433,990

67,813

54,608,837

201,150,751

5,404,369

28,173,600

1,300,000

354,185

481,088

700,000,000

17,813

53,108,837

202,550,000

4,854,369

32,635,600

0.00

0.01

0.01

25.15

0.00

1.98

7.29

0.20

1.02

0.05

0.01

0.02

25.35

0.00

1.92

7.34

0.18

1.18

Purchase

Sales

Sales

Purchase

Sales

Purchase

Mr. Tran Vu Minh, director of Dai Phong Trading and Investment Co., Ltd. Mr. Tran Dinh Long’s son- Chairman of the BOM

Member of the BOM Mr. Ta Tuan Quang’s son

Member of the BOM Mr. Ta Tuan Quang’s wife

Chairman of the Board

Finance director

Member of the BOM

Chairman of the BOM Mr. Tran Dinh Long’s wife

Vice Chairman of the BOM Mr. Doan Gia Cuong’s wife

The company is related to Mr. Hans Christian Jacobsen - Member of the BOM

Purchase + share-

based dividend

2018 rate 30%

Transactionsperformed by

Relation withinternal shareholder Number of

shares Number of

shares %

Number of shares owned at the

beginning of period

Number of shares owned at the end of

period Reason

%

PERFORMANCE IN 2019 Structure of shareholdersHOA PHAT’S INTERNAL STRENGTH

50

Top 10 institutional shareholders as at March 02, 2020

List of majority shareholders at March 02, 2020

No.

No.

1 VOF INVESTMENT LIMITED 102,148,628 3.70Commence Chambers, P.O Box 2208, Road Town, Tortola, British Virgin Islands

2 PENM III GERMANY GMBH & CO.KG

63,773,811 2.31c/o Johanna Beteiligungsverwaltungs GmbH, Friedrich-Ebert-Allee 13, 53113 Bonn, Germany

3 EMPLOYEES PROVIDENT FUND BOARD

60,645,725 2.20EPF Building Jalan Raja Laut 50350 Kuala Lumpur Malaysia

4 NORGES BANK 42,670,000 1.55Bankplassen 2 P.O. Box 1179 Sentrum NO-0107 Oslo

5 VIETNAM ENTERPRISE INVESTMENTS LIMITED

38,330,214 1.391501 Cao Ốc Mê Linh Point, 2 Ngô Đức Kế, Quận 1, Tp HCM, Việt Nam

6 PENM IV GERMANY GMBH & CO. KG

32,635,600 1.18c/o Johanna Beteiligungsverwaltungs GmbH, Friedrich-Ebert-Allee 13, 53113 Bonn, Germany

7 RWC EMERGING MARKETS EQUITY MASTER FUND LIMITED

31,002,712 1.12Ugland house, South Church street, George town, Grand Cayman, ky1-1104, Cayman islands

8 KIM VIETNAM GROWTH EQUITY FUND

30,211,143 1.09Hoehyeon-dong, 1(il)-ga, 51 Sogong ro Jung-gu, Seoul, 100-792, Republic of Korea

9 JPMORGAN VIETNAM OPPORTUNITIES FUND

28,500,834 1.031 Queen’s Road Central, Hong Kong

10 FRANKLIN TEMPLETON INVESTMENT FUNDS-TEM-PLETON ASIAN SMALLER COMPANIES FUND

27,503,483

457,422,150

1.00

16.57

8A, rue, Albert Borschette, L-1246 Luxembourg, Grand Duchy of Luxembourg

1

2

Tran Dinh Long

Vu Thi Hien

Total

Totall

700,000,000

202,550,000

902,550,000

25.35%

7.34%

32.69%

119, Bui Thi Xuan, Hai Ba Trung, Hanoi

119, Bui Thi Xuan, Hai Ba Trung, Hanoi

Institution name

Shareholder

Address

Address

Number of shares

Number of shares

Rate

Pecentage as at March 02, 2020

(%)

PERFORMANCE IN 2019 Structure of shareholders ANNUAL REPORT 2019

51

2007 2012 2014 20172016 20192008 2010 2015 2018

1,320 1,9643,178

4,191 4,819

7,3308,429

15,171

21,239

27,611

Increased authorized capitalof Hoa Phat Group from 2007-2019 (VND billion)

2007 20122009 2014 20172011 2016 20192008 20132010 2015 2018

50% 50%

40%

30% 30% 30% 30% 30% 30%

20%20% 20%

60%

Table of dividend contribution of HPG from 2007 to 2019 (%)

10% cash and 40%

share

20% cash 10% cash and 50%

share

15% cash and 15%

share

30% cash 20% share20% cash and 10%

share

10% cash and 20%

share

15% cash and 15%

share

50% share 40% share 30% share Expected 20%

PERFORMANCE IN 2019 Structure of shareholdersHOA PHAT’S INTERNAL STRENGTH

52

SHAREHOLDER RELATIONS2019 was the year that the activities of the Shareholder Relations took place with many exciting events and programs. The candor, openness in sharing and exchanging information of the Board of Directors were highly appreciated by shareholders and investors.

The Investor Relations Department always maintained the interaction with shareholders through annual programs such as the General Meeting of Shareholders, investor contact; meetings with domestic and foreign analysts, organizations and investors. The situation of production and business of key industries such as steel, agriculture, real estate, etc. the progress of the projects being implemented, especially Dung Quat Steel Integrated Complex project, were regularly updating on the Group’s website and in the mass media.

Meetings with investors were regularly held to exchange, disclose information, and promptly answer questions of investors. Typically, the meeting with investors in the

second quarter of 2019 took place online in Hanoi and Ho Chi Minh City with the participation of about 150 investors. In particular, the meeting with investors in the forth quarter held in Dung Quat - Quang Ngai Complex welcomed more than 200 investors, showing the great attraction of the Hoa Phat Dung Quat Steel Integrated Complex Project to the investors, representatives of securities companies, domestic and foreign investment funds.

Within the framework of the program, the delegation of investors was witnessed firsthand and was amazed at the scale and progress of Hoa Phat Dung Quat Steel Integrated Complex. The items are gradually completed and put into trial operation as or even beyond the schedule. Through this program, the investment community got better understanding on the production technology and environmental protection of the project, to firmly believe in the investment strategies of Hoa Phat Group’s Board of Directors and together looked at the future ahead with great prospects.

PERFORMANCE IN 2019 Shareholder relations ANNUAL REPORT 2019

53

In addition to the above key programs, Hoa Phat Group welcomed a lot of investment funds accessing to learn and update information such as Fulleton, Consilium, Truck Capital, Sumitomo Asset Management, EPF, etc. In May 2019, the Group welcomed Korean business delegation including 24 senior managers, CEOs, CFOs from leading companies and organizations of Korea such as Korea Trade Association, Lotte Construction Company, LG Group, Doosan Co., Ltd, etc. visiting to work, explore the activities, production areas of the Group.

According to the announcement of Forbes Vietnam on December 30, 2019, Hoa Phat Group was in the top 10 largest public companies. This was the first time Forbes Vietnam implemented this list in Vietnam based on four criteria: revenue, profit, total assets and capitalization, according to Global 2000 list ranking method (2,000 largest companies worldwide) by Forbes (US).

In 2020, the Company’s goal continues to be to make information transparent, provide sufficient information to shareholders and investors; quickly respond and answer information; ensuring accuracy and timeliness; complying with and abide by the law on information disclosure. The Investor Relations Department will continue to promote and diversify investor relations activities in order to access and provide information to investors better.

PERFORMANCE IN 2019 Shareholder relationsHOA PHAT’S INTERNAL STRENGTH

54 BÁO CÁO BAN GIÁM ĐỐC các rủi ro trong quá trình hoạt động

CORPORATEGOVERNANCE 1. LIST OF MEMBERS OF BOM AND OWNERSHIP RATIO

2. BOM’S ASSESSMENT OF OPERATION

3. BOM’S ASSESSMENT OF BOD’S OPERATION

4. BOM’S MAIN ACTIVITIES DURING THE YEAR

5. PLANS AND DIRECTIONS

55

Mr. TRAN TUAN DUONGBOM Vice ChairmanGeneral Director of Hoa Phat Group JSC

• Educational qualifi cation: Bachelor of economics – National Economics University• Joining date: 1992Mr. Duong held management position in subsidiaries such as: Hoa Phat Equipment & Accessories Co., Ltd, Hoa Phat Furniture JSC and Hoa Phat Steel Pipe Co., Ltd; before he became the Deputy Chairman of Management Board cum CEO of Hoa Phat Group since January 2007. With his in deep experience, Mr. Duong has contributed greatly to strengthen the position of Hoa Phat steel and Hoa Phat Group as a whole.

Mr. TRAN DINH LONGBOM Chairmanof Hoa Phat Group

• Educational qualifi cation: Bachelor of economics - National Economics University• Joining date: 1992 As founding shareholder and holding Chairman position of member companies, Mr. Long was the fi rst person setting up the foundation for Hoa Phat Equipment & Accessories Co., Ltd, the earliest member in the Group. Mr. Long employed a lot of experts who had consensus ambition and responsibilities.During the establishment and development of Hoa Phat, Mr. Long was the person who oriented business strategy for each subsidiary.

Mr. NGUYEN MANH TUANBOM Vice Chairman cum Directorof Hoa Phat Steel Pipe Co., Ltd

• Educational qualifi cation: Bachelor of economics – National Economics University• Joining date: 1996In 1996, Mr. Tuan was a Vice Director of Hoa Phat Steel Pipe Co., Ltd cum Head of trading department. Since 10/2004, being Director of Hoa Phat Steel Pipe Company, Mr. Tuan has helped the Hoa Phat steel pipe become a top steel pipe maker.

Number of shares held at March 2nd, 2020

25.35%


2.68%


2.63%

LIST OF MEMBER OF BOMAND OWNERSHIP RATIO (2/3/2020)

CORPORATE GOVERNANCE List of member of BOM and ownership ratioHOA PHAT’S INTERNAL STRENGTH

56

Mr. DOAN GIA CUONGBOM Vice Chairman cum Directorof Hoa Phat Furniture JSC

• Educational qualification: MBA, National Economics University• Joining date: 1999Mr. Cuong was appointed first in the position of Vice Director before promoting as a Director of Hoa Phat Furniture JSC. From 01/2007, he additionally held the Deputy Chairman position of Hoa Phat Group JSC. With his straight forward orientation in achieving realistic goals, Mr. Cuong has helped Hoa Phat Furniture becoming familiar to every Vietnamese consumer. From April 2016, he held the position of Director of Hoa Phat Agricultural Development Joint Stock Company, responsible for managing the whole agricultural segment of Hoa Phat Group.

Mr. NGUYEN NGOC QUANGBOM member cum Directorof Hoa Phat Equipment & Accessories Co.,Ltd.

• Educational qualification: Vocational training• Joining date: 1992Mr. Nguyen Ngoc Quang had been Director of Hoa Phat Equipment & Accessories Co., Ltd in Ho Chi Minh subsidiary for 4 years (1992-1996). He has been Director of the Company (currently as Hoa Phat Metal Producing Co.,Ltd) since 1997. As one of the top construction equipments producer in Vietnam, products of Hoa Phat Metal Producing Co., Ltd under his management have been successfully persuading customers in domestic and foreign country on their qualities, prices and after sales services.


1.98%


1.92%

Mr. TA TUAN QUANGBOM Member cum Director ofHoa Phat Refrigeration Engineering Co., Ltd.

• Educational qualification: National Economics University• Joining date: 1995Mr. Quang was among founders of Hoa Phat Furniture, he was Director of Hoa Phat Furniture JSC for 11 years. Since December 2006, he has been Director of Hoa Phat Refrigeration Engineering Co., Ltd where he has contributed signicantly to its success and brand name of Funiki position.


0.13%

CORPORATE GOVERNANCE List of member of BOM and ownership ratio ANNUAL REPORT 2019

57

Mr. HOANG QUANG VIETBOM Member cum Directorof Hoa Phat Urban Development & Construction Jsc.

• Educational qualification: Graduated from People’s Security University• Joining date: 2001Joining the Group since 2001, Mr. Viet has been elected as a Director of Hoa Phat Urban Development and Construction JSC. He was successful in real estate, initically with constructings trading for industrial infrastructure starting with Pho Noi A industrial park. Mr. Viet and Board of Directors are now going to deploy other housing and urban areas after the success of Pho Noi A.


0.49%

Mr. NGUYEN VIET THANGBOM Member cum DeputyGeneral Director of Hoa Phat Group JSC

• Educational qualification: Bachelor of civil engineering, National Universi-ty of Civil Engineers.• Joining date: 2003Mr. Nguyen Viet Thang had several years in the management position as the Deputy Director of Hoa Phat Urban Development and Construction JSC and Director of Hoa Phat Hung Yen Feeds Co.,Ltd before he was appointed as the Deputy General Director of Hoa Phat Group Joint Stock Company on 7th April 2012. He was appointed as the Director of Hoa Phat Hai Duong Steel JSC since March 2018.


0.32%

Mr. HANS CHRISTIANBOM Member

• Educational qualification: Master of Business, Denmark• Joining date: 2012Being appointed as a member of the Management Board in 2012, Mr. HANS CHRISTIAN has held many important responsibilities of the Industrialization Fund for Developing Countries (IFU), Denmark (1983-1989); Regional Director, Investment Fund for the Europe Central and East, Denmark (1989 - 1991); CEO of array of agriculture, the European Bank for construction and development (EBRD), London (1991-2006); CEO of PENM I, PENM II, PENM IV (2006 - present).


0%

CORPORATE GOVERNANCE List of member of BOM and ownership ratioHOA PHAT’S INTERNAL STRENGTH

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In the context that the world economy slowed down due to geopolitical problems, US-China trade tensions have been escalating, Vietnam’s GDP in 2019 achieved impressive results with a growth rate of 7.02%, inflation was controlled at a low level, the average consumer price index in 2019 increased by only 2.79. Industrial development indexes also achieved positive growth, helping domestic production to overcome significant challenges. With synchronous solutions and quickly adapting to volatile economic conditions at home and abroad, Hoa Phat Group achieved impressive results.

Iron and SteelThe price of iron ore, coal and other steelmaking fuels increased sharply during the year, combined with the increasing protectionism trend in the world, etc. which are adverse factors for Hoa Phat construction steel. However, Hoa Phat construction steel still achieved an output of 2.77 million tons, up 16.7% over the same period, of which over 265,000 tons were exported to markets such as Japan, Cambodia, South Korea, Taiwan, Malaysia, Australia, USA, etc. The market share reached 26.2%, further confirming the No. 1 position in market share in Vietnam.

After nearly 3 years, Hoa Phat Dung Quat Steel Integrated Complex basically completed phase 1 and was testing and operating the No. 1 and No. 2 blast furnaces and related items in a closed production chain from iron ore to construction steel. This is also a motivation for Hoa Phat Steel to complete the plan in 2020 with the goal of reaching 3.6 million tons of construction steel, of which the Central region - Central Highlands strives to grow by 50% and the South to grow by 100% compared to production in 2019.

For phase 2, over 80% of main equipment items have been completed, expected to put into operation the remaining 2 blast furnaces and hot rolled coil (HRC) line in 2020.

Steel Pipe and Prepainted Hot Dipped Galvanized Steel Coil The market of steel pipe and galvanized steel coil was never as difficult as last year. Many countries initiated ongoing investigations aimed at these two product lines of Vietnam. However, Hoa Phat Steel Pipe still achieved the plan and exceeded 750,000 tons of finished steel pipe of all kinds for the first time, an increase of 14.8% compared to the same period in 2018, exports reached 19,100 tons, an increase of 17% compared to the same period. Besides the No. 1 position in Vietnam, Hoa Phat Steel Pipe also exported to markets in North America, Southeast Asia, India, Australia and Latin America, etc. With this result, Hoa Phat maintained its position as the No. 1 steel pipe manufacturer in Vietnam with over 31% market share.

Another important highlight is that at the end of the year, the Company put into operation a large steel pipe line,

becoming the first unit in the North to be able to supply this special product line. For steel sheet product line, after nearly 2 years of official presence in the market, Hoa Phat Steel Sheet Company Limited has built a distribution system throughout the country, achieving 2019 annual sales volume of 5 times higher than 2018. Currently, Hoa Phat Steel Sheet has increased its occupation, gained a position in the domestic market and conquered many export markets such as the EU, US and some Southeast Asian countries (such as Indonesia, Malaysia), etc. Since September 2019, Hoa Phat Steel Sheet has continued to expand its market into the Southern region.

BOM’S ASSESSMENT OF OPERATION

Agriculture2019 was a quite successful year for the agricultural segment of Hoa Phat Group with strong growth of the livestock and animal feed segments. Revenue of this segment reached 172% compared to 2018, in which the output of Australian beef, clean chicken eggs of Hoa Phat Group was at the top of the market.

Specifically, the consumption of Australian beef accounted for more than 50% of the national market share, confirming its position and No. 1 in supplying Australian beef nationwide. In addition, in term of the egg production, Hoa Phat Poultry Company Limited was also the leading enterprise in supplying eggs in the North with the output of 450,000 eggs per day. In term of pig breeding, with the farm system in both 2 regions, the market price of live pig increased sharply in 2019, also contributing to the revenue growth for Hoa Phat Group’s pig farming segment.

Other industrial production

After restructuring, other industrial production segments of Hoa Phat Group have two subsidiaries, namely Hoa Phat Furniture Joint Stock Company and Hoa Phat Refrigeration Engineering Co., Ltd. Hoa Phat Metal Producing Co., Ltd. moved into the field of iron and steel to conform to the new development strategy.

CORPORATE GOVERNANCE Bom’s assessment of operations ANNUAL REPORT 2019

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BOM’S ASSESSMENT OF BOD’S OPERATIONS

The strong development of technology and application of technology in production brought the maximum strength to Hoa Phat Furniture in developing a series of new products, from office furniture to household furniture with strong growth momentum in 2019. In which the household furniture grew by 46% compared to 2018, solidified the position of the leading furniture manufacturer in Vietnam.For Refrigeration products, this group’s revenue exceeded VND 1,100 billion for the first time last year. In particular, the target profit after tax increased to 82% over the same period and exceeded 9% of the plan assigned by the Group for the whole year of 2019. In the year 2019, the Company sold a total of about 260,000 products to the market.

Real estatesIn 2019, the Industrial Parks of Hoa Phat Urban Development and Construction JSC continuously “welcomed” many large domestic and foreign enterprises to rent land as factories, bringing the company’s real estate, urban area and industrial zone infrastructure business to prosperity and outstanding growth compared to the total area and revenue of 2018. For the whole year, Hoa Phat Group’s industrial parks leased out over 43.2 hectares of land, up 48% over the same period. During the period, revenue increased by 56% to over VND 702 billion with 25 investors coming to lease land in 2019.

For residential real estate and urban areas, Hoa Phat Group is focusing on developing Northern Pho Noi urban area (Hung Yen) with a scale of over 262ha. It is expected that phase I of the project will be eligible for sales by the end of 2020.

After a year of 2019 with a lot of domestic and international events affecting the production and business activities of the Group, the Board of Directors highly appreciated the efforts of the General Director and the Executive Board at all levels in the process of implementing the Group’s production and business plan in 2019.

The General Director and the Executive Board successfully performed their roles through timely, flexible management solutions in line with the guidelines and orientations of the Board of Management. The policies and guidelines given by the Board of Management were also fully and timely implemented by the Executive Board and reported in details of implementation results with a high sense of responsibility. The results achieved in all business segments continued to maintain and strengthen the trust from partners, customers and shareholders.

The Board of Management believes with firm, flexible solutions in the management of the Board of General Directors of the Group and the Board of Directors of the subsidiaries, which will contribute to increasing the stability in production activities, gradually conquer new markets, difficult markets in the region and international in the context of many complex difficulties.

CORPORATE GOVERNANCE Bom’s assessment of operationsHOA PHAT’S INTERNAL STRENGTH

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BOM’S MAIN ACTIVITIES DURING THE YEAR

During the year, the BOM carried out the following supervision activities:

• Supervise and direct the General Director and the Executive Board in managing daily business and production activities of the Group’s companies. Coordinate closely with the General Director and the Executive Board to give directions and timely solve the proposals and requests of the Executive Board of companies in daily production and business;

• Regularly organize periodic and extraordinary meetings between the Board of Directors and the Board of Management to listen to reports and timely solve arising situations;

• Decide to restructure the organizational model of companies, bring efficiency in management;

• Decide on investment plans and projects of the Group’s companies, arrange capital and human resources for senior management of projects.

In order to serve the growth goals for the Group, the Board of Management has issued 11 Resolutions and passed many important contents:

• Approve the 2019 business plan for the whole Group and submit it to the General Meeting of Shareholders;

• Approve the detailed plan for dividend payment in 2018;

• Increase capital contribution at Hoa Phat Dung Quat Steel Joint Stock Company, Hoa Phat Steel Sheet Company Limited; Hoa Phat Hai Duong Steel Joint Stock Company; Hoa Phat Hung Yen Steel Company Limited; Hoa Phat Metal Producing Company Limited;

• And many other important decisions

CORPORATE GOVERNANCE Bom’s main activities during the year ANNUAL REPORT 2019

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PLANS AND DIRECTIONSAccording to a survey of the Pacific Economic Cooperation Council (PECC; December 2019), the top 5 risks to growth of Asia-Pacific economies include: Protectionism rise and trade war; Global trade growth slowed down; China’s economy slowed down; The US economy decelerated; Lack of political leadership.

2019 showed slowing down signs of global steel market and it is expected in the first quarter of this year, industry consumption will not be improved. In the ASEAN region, many proposed integrated steel projects in ASEAN will lead to a serious oversupply and it will take about 20 years for ASEAN steel consumption to catch up with this capacity. Domestic steel industry continues to face challenges due to competitive pressure from increasing domestic supply, imported steel from abroad; tightening lending credit to the domestic real estate market; and, in addition, the slow construction progress.

From the assessments and forecasts of the economy as above, the Board of Management of the Group set out the orientations in 2020 as follows:

1 Closely monitor the developments of the global and Vietnamese economic situation to set out orientations for the Group’s production and business activities, especially the development of US-China relations, the situation of the epidemic named COVID-19 acute respiratory tract disease, the impact of the Chinese economy on the Vietnamese economy, the policies governing the economy of the Government and the policies of the Ministries and Departments related to economic activities business of the Group.

2 Assess the trend of price fluctuation of main raw materials related to the Group’s production and business activities, in particular, the price movements of iron ore, coal and some other basic materials.

3 The project of Hoa Phat Dung Quat Steel Integrated Complex must be a top priority, ensuring the operation on schedule, especially in 2020, will be brought the HRC production line into production and supply finished products to the market.

4 Diversify the steel export market. Maintain the domestic market, actively expand new locations in regions across the country.

5 Keep traditional goods continuously promoting their strengths and available positions in the market; Research for new product lines to catch up with the trend of the market.

6 Ensuring biosecurity for livestock, increasing capacity and output of pig, Australian beef, and egg; supplying more and more good quality products to meet the needs of the market. Research and expand the value chain of processed foods.

7 Strengthen risk control, corporate governance, technical improvement, continue to apply information technology to improve productivity, update production and business data in a timely manner, thereby contributing to saving production costs, reducing product costs and supporting the Board of Directors timely in daily business and production decisions.

8 Continue to improve the living quality and incomes of employees, improve the working environment so that Hoa Phat Group is always an attractive environment and enhance the creativity, dedication and engagement of employees to the Group.

CORPORATE GOVERNANCE Plans and directionsHOA PHAT’S INTERNAL STRENGTH

62

REPORT OFSUPERVISORY BOARD 1. LIST OF PERSONNEL AND OWNERSHIP PERCENTAGE

2. REPORT OF SUPERVISORY BOARD

3. REPORT OF INTERNAL CONTROL BOARD

63

LIST OF PERSONNELAND OWNERSHIP PERCENTAGE

0.00%

Mrs.BUI THI HAI VANHead of Supervisory BoardFinance-Accounting Bachelor

Working starting time: 2008Before coming Head of Supervisory Board, Ms Van held position Deputy Chief accountant - Hoa Phat Hai Duong Steel JSC (2008 - 2016) and currently she is also head of Internal control Board of Hoa Phat Group JSC (2016-present).

Number of shares held as at02/03/2019 (%)



-

Mrs.LE THI KIM ANHMember of Supervisory BoardMaster of BusinessAdministration

Working starting time: 2018Before being voted as a member of Supervisory Board, Mrs. Le Thi Kim Anh held a number of position in: auditor of Pricewaterhouse Coopers Vietnam Co.,Ltd (2001 – 2004); manager of Portfolio Management Department, project manager of Vietfund Management (2008 – 2014), manager of Investment Department – PENM Partners ApS Fund (from 2017 – now).

-

Mrs.VU THANH THUYMember of Supervisory BoardEconomic Bachelor

Working starting time: 2005Before becoming a member of Supervisory Board, Ms Thuy held a number of position in: staff member in accounting department of Hoa Phat Hai Duong Steel JSC (2005-2006); staff member in Finance Department of Hoa Phat Group (2007-present)

REPORT OF SUPERVISORY BOARD List of personnel and ownership percentageHOA PHAT’S INTERNAL STRENGTH

64

REPORTS OF SUPERVISORY BOARD

In 2019, the Supervisory Board worked closely with the Board of Management and the Board of Directors to follow the issuance and implementation of resolutions of the General Meeting of Shareholders and the Board of Management. In addition, the Supervisory Board also participated in monitoring and supervising the audit and internal control activities at the Group and its subsidiaries, ensuring that the operation of the apparatus complied with the provisions of law and management regulations of the Group.

During the year, the Supervisory Board implemented the following tasks:

Attend all meetings of the Board of Management, timely update information on the situation of production and business activities, the implementation of projects, supervise the implementation of Resolutions of the General Meeting of Shareholders and Board of Management;Supervise and comment on the implementation of production and business objectives to achieve the Group’s revenue and profit plan;Audit the quarterly, interim and annual financial statements to assess the truthfulness and reasonableness of financial data, in accordance with Vietnam’s prevailing standards, accounting regimes and financial policies;Coordinate with the Internal Control Board, Finance Board, Legal Department to review and evaluate the potential and significant risks in order to develop and propose a control plan for 2019, and monitor, supervise and evaluate the results of internal control;Control the compliance with the regulations on information announcement of the Group in accordance with the provisions of the law;Monitor the progress of key projects in the Group such as: Dung Quat Steel Integrated Complex Project, Prepainted Hot dipped galvanized steel sheet Plant Project, Agriculture Projects, etc.

During the audit, review, the Supervisory Board assessed that the Group’s production, business and investment activities were conducted transparently and in compliance with the provisions of law. In 2019, the Supervisory Board did not recognize any abnormal signs affecting or violating the regulations of the State as well as the Company in the activities of the members of the Board of Management, the Executive Board as well as the officers of the company.

In 2020, with the goal of promoting the role of supervision and compliance, transparency in the Group’s operations, the Supervisory Board is expected to continue to promote its operations, focusing more on internal audit, specifically:

Supervise the compliance with regulations and rules in the management and operation of the Group’s production and business activities and the results of implementing resolutions of the General Meeting of Shareholders and the Board of Management;Inspect and supervise the observance of the law on capital mobilization, management and usage; the promulgation and implementation of Financial Regulations, internal regulations of enterprises, profit distribution, appropriation and use of funds; evaluate the efficiency of using capital of enterprises;Periodically verify the truthfulness and transparency of the Group’s quarterly and annual financial statements and subsidiaries;Coordinate with the specialized divisions of the Group to conduct irregular and regular inspections of certain areas of potential risks.

CORPORATE GOVERNANCE Reports of supervisory board ANNUAL REPORT 2019

65

REPORT OF INTERNAL CONTROL BOARD

In 2019, the Internal Control Board of Hoa Phat Group inspected, reviewed and assessed the business activities and compliance resolution of the Group and its subsidiaries with the following activities:

Coordinate with the Finance Board to supervise quarterly, interim and annual financial statements before the Executive Board submits to the Board of Management, the General Meeting of Shareholders or discloses to the outside in accordance with the law.Supervising results showed that:

• Quarterly, interim and annual financial statements were prepared and published in accordance with accounting standards and current law provisions;• No significant or unreasonable errors were detected relating to accounting estimates (e.g. provisions, goodwill determination, etc.);• There was no unusual record for related party transactions;• Some opinions of the Independent Audit in the Management Letter to improve internal control were reviewed, evaluated and considered by the Supervisory Board that there was no significant effect the preparation and publication of financial statements, and at the same time agreed on improvement resolution with the Executive Board and related parties;

Monitor and manage relationships between subsidiaries and contractors, suppliers in the construction and implementation of contracts to ensure transparency, fairness, timeliness and the spirit of cooperation between the two parties for mutual benefit;Review the working environment and welfare for employees through inspecting the kitchen and labor reward and reward regimes, recruitment programs to ensure that all staffs and employees have fair conditions to develop and to be treated as committed when recruiting;Coordinate with the specialized division at the Group to control the safety in the prevention of fire and explosion in labor at all the Group’s factories and plants;Coordinate with the Legal Department to regularly check the compliance with legal and administrative procedures in accordance with provisions of the Law;Coordinate with Information Technology Department to apply information technology into the construction of material code lookup systems of the Group and its subsidiaries. Thereby controlling the price of materials purchased in the Company to ensure the right purchase needs, approved by the authorities and can compare prices between companies in the Group.Follow the progress of key projects in the Group such as: Hoa Phat Dung Quat Steel Intergrated Complex Project, pre-painted galvanized steel coil factory, Agricultural projects, etc.Carry out overall control at a number of companies with the following main contents: Cash management, advance payment; management of receivables; inventory management; accounting and tax declaration, etc. The control report includes advice and recommendations to help companies operate more efficiently and effectively.

In 2019, the activities of the companies in the Group strictly complied with the provisions of laws and internal regulations of the Group, thereby achieved significant results. The Supervisory Board did not detect any material errors in the operations of the Companies. A number of immaterial errors with negligible influence levels were proposed to be overcome.

In order to promote effective internal control activities, in 2020, the Supervisory Board will build appropriate human resources in combination with departments and divisions to enhance evaluation and consultancy activities to support the Group and Subsidiaries achieve the goals set by the Board of Directors.

REPORT OF SUPERVISORY BOARD Report of internal control boardHOA PHAT’S INTERNAL STRENGTH

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SUSTAINABLEDEVELOPMENT1. SUSTAINABLE DEVELOPMENT STRATEGY WITH RELEVANT PARTIES

2. RESEARCH & DEVELOPMENT

3. CIRCULAR ECONOMIC MODEL IN HOA PHAT GROUP

4. TECHNICAL INNOVATION

5. SOCIAL RESPONSIBILITY

67

SUSTAINABLE DEVELOPMENT STRATEGY WITH RELEVANT PARTIES “The motto “Harmony for Joint Development” is the lodestar for all activities of Hoa Phat Group. This is shown in all relations among employees, between the Group and shareholders, partners, agents and social

Relations between Hoa Phat Group and relevant parties;

EMPLOYEE

• Friendly and safe working environment without discrimination• Encouraging and facilitating employees to promote their ability and creativity• Equal opportunity for training and promotion• Ensuring all benefit policies

SOCIAL COMMUNITY

• Actively supporting welfare works at localities where factories and offices are situated nationwide• Implementing social responsibility in various forms• Production and business attached to environmental protection

AGENT & CUSTOMER

• Flexible sales policies ensuring rights of agents and customers• Various, high quality, reliable and sustainable products• Reasonable and competitive prices• Good after sale services

SHAREHOLDER

• Always publicizing information• Ensuring effectiveness of shareholder’s investment capital• Constantly enhancing enterprise value• Managing enterprise well

PARTNER

• Cooperation on basis of mutual benefit• Equal competition• Ensuring prestige of purchase, obligations with suppliers, contractors

NATIONAL LEVEL

• Strictly complying with policies of the State and provisions of laws• Making more contributions to the State Budget• Playing pioneering role as a national brand enterprise

community for mutual benefits of parties concerned in the same boat in direction to sustainable development”, said Mr. Tran Dinh Long, Chairman of BOM of Hoa Phat Group.

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68

RESEARCH ANDDEVELOPMENT Research and development activities in Hoa Phat Group are always actively implemented. Based on data from various sources at home and abroad, the Board of Management analyzed and made investment decisions to anticipate future growth opportunities.

The steel industry has many medium and long-term growth motivations

Steel is used in all economic segments with thousands of different product categories, from simple to complex, civil to industrial. The volume of raw steel in 2019 reached nearly 1.9 billion tons, increasing slightly compared to the previous year. Chinese state-owned steel companies dominate steel production, accounting for six of the top ten positions for global steel companies. The top 10 businesses account for more than 26% of global production.

Vietnam continued to be a net importer of steel, showing a large and sustainable demand for domestic steel. By the end of December 31, 2019, iron and steel imports increased by 7.6% in volume, reaching 14.56 million tons, valued at USD 9.51 billion, with the main import markets being China with 5.14 million tons. Meanwhile, the total consumption of finished steel products in the year reached over 23 million tons, an increase of 6.4% compared to 2018. The above figures show that Vietnam’s steel demand is mainly dependent on imported steel, including many types such as hot rolled coil (HRC), pre-stressed concrete steel, section steel, manufacturing ingot steel, etc. which are still being mostly imported. VSA’s statistics shows that Vietnam’s hot rolled coil demand is currently about 10 - 11 million tons/year, while the new production capacity is over 4 million tons/year (of Formosa Ha Tinh). Even when Hoa Phat Dung Quat Steel Integrated Complex produces hot rolled steel products in 2020, domestic production can only meet about 60% of domestic demand.

Besides, Vietnam’s orientation is still towards industrial production activities, the demand for infrastructure construction is still very large with the major projects being considered for implementation such as highways, Long Thanh airport, North - South railway, urban highway routes, subway systems, etc. Thus, it is forecasted that there are many chances for long-term growth of investments in the steel industry, especially in term of high quality steel products, ingot steel, steel for manufacturing engineering and supporting industries.

According to World Steel, compared to other more developed Asian countries, Vietnam is still ranked at lower level in terms of per capita consumption of steel, showing strong growth prospects for future steel usage. In 2018, per capita consumption of steel in Vietnam was only

234kg, much lower than other Southeast Asian countries such as Thailand, Malaysia and Singapore.

Based on the assessment of market potential, since 2017, Hoa Phat has invested in Hoa Phat Dung Quat Steel Integrated Complex with a maximum capacity of 4 million tons, including 2 million tons of construction long steel and 2 million tons of hot rolled coil (HRC) for the mechanical engineering industry. It is expected that in the of 2020, the entire project will be completed and put into operation synchronously in both stages, bringing the Group into the Top 50 largest steel enterprises in the world. Not stopping there, Hoa Phat is continuing to research and implement legal procedures to expand the production scale of this Complex at the appropriate time towards increasing production of products that Vietnam has not been able to produce.

Vietnam Steel Exports

2014 20172015 20182016 2019

Vietnam Steel Imports

Net Imports

Vietnam has had net import of steel for many years (Million tons).

South

Korea

Taiwan China Japan Singapore Malaysia Vietnam

Per capita consumption of steelin 2018 (finished steel in kg)

1,050

752585 514 504

310234

SUSTAINABLE DEVELOPMENT Research and development ANNUAL REPORT 2019

69

Agriculture: Demand for cattle meat is expected to increase sharply

For nearly 30 years, the Group’s success in many fields such as construction steel, steel pipes, furniture, refrigeration, real estate and recently the products of pig, cow and poultry breeding are the most vivid examples of the view that Hoa Phat does nothing half-heartedly. After more than 3 years of investing in high-tech agriculture, Hoa Phat has taken a leading position in the field of supplying Australian beef and clean chicken eggs. This segment also contributed the second largest after steel segment in terms of revenue and profit in 2019. In 2020, Hoa Phat aims to achieve further growth in agriculture. What is the basis for the Group to realize this goal? According to statistics, meat consumption in Vietnam has increased significantly over the past decade, with annual per capita consumption increasing from 33kg in 2009 to over 40kg in 2019. This is due to strong income growth, as well as population growth, which will make the demand for meat from cattle expected to 2023 increase sharply. In particular, pork consumption is expected to continue to account for a large proportion of each Vietnamese family’s meal with about 60-70%. However, the consumption growth of chicken and beef will be higher in the future because these two types of meat still have a lot of potential.

Furniture, refrigeration and real estate fields with much chance for growth

Although, these fields do not have large proportions in the total of the Group’s annual revenue and profit, they are highly stable and well profitable. Hoa Phat Group’s products in these fields have long been trusted and appreciated by customers, famous brands in the market, especially furniture products and high-class real estate projects.

Macro factors of Vietnam indicate that these fields still have a lot of chances for development. The characteristics of Vietnam’s young and urbanized population are creating a basic need for urban areas and commercial centers. Statistics show that in the period from 2000 - 2018, the proportion of Vietnam’s population was living in urban areas increased from 24% to 36% while the total population increased only 20%, and by 2040, it is

With high and stable demand, Vietnam is expected to continue to be a net importer of meat and cattle in the period of 2019 - 2023. Meanwhile, our country is an agricultural country, having many advantages to develop cattle and poultry breeding, promoting agricultural and foodstuff processing towards large-scale, biosecurity, thereby is active in supplying source right in the domestic market.

Therefore, in the next time, Hoa Phat Group will continue to promote the existing animal farms and expand when it is able to do so. The Group’s goal in the near future will reach a maximum capacity of 600,000 tons of animal feed per year; 450,000 commercial pigs per year; 150,000 beefs and 300 million clean chicken eggs per year.

expected that 50% of the population live in urban areas. In addition, the rise of the middle class and foreign capital inflows will create demand for housing, interior and exterior decoration as well as residential refrigeration products with higher quality requirements.

In the coming time, Hoa Phat Group will invest in manufacturing to maintain its leading position in office furniture, promote the development of high-class family furniture, lines of freezer refrigerators with large capacity, strive to grow 20-25%/year in the field of furniture and refrigeration. With real estate segment, the Group focuses on developing industrial zones in the North, selectively invests in housing real estate, middle and high-class urban areas.

2019-2013Poultry CAGR: 6.8%

2019-2013Pig CAGR: 0.8%

SUSTAINABLE DEVELOPMENT Research and development HOA PHAT’S INTERNAL STRENGTH

2019-2013Cow CAGR: 4.6%

70

The circular economic model aims to effectively use natural resources throughout the value chain, from production to consumption and to the process of restoring and promoting the use of high-tech products and services, thereby optimizing the use of resources, limiting emissions to the environment and developing sustainably. Therefore, Hoa Phat Group has applied the closed circular economic model in production right from the beginning of steel making.

Solution of closed circular economic model: Proven efficiency

The closed steel production process from iron ore to finished steel is a long cycle in which the output of one stage is the input of another. During the process, the recovery and reuse of waste gas, waste water, excess heat and even solid waste are treated in a circulation chain, without discharging into the environment, saving energy and protecting environment, optimizing production efficiency, product competitiveness. This solution is applied to both Hoa Phat Steel Integrated Complexes in Hai Duong and Quang Ngai Provinces. The investment capital for environmental items of Hoa Phat steel accounts for about 20-30% of the total investment capital for the projects. The effectiveness of the application of closed circulation technology has been proved very specific in these Complexes. With closed

blast furnace technology, all waste, exhaust gas and wastewater are thoroughly treated, meeting the current standards in heavy industry production, reused circularly, and not discharged into the environment. The amount of iron-containing dust recovered during the process of iron and steel refining is also reused at the production stages for saving costs and improving the working environment.

Hoa Phat Steel selects the most advanced ultra-clean coke heat recovery technology in the world today that is eco-friendly. This is a technology to produce clean coke with heat recovery that meets environmental standards under the CDM clean development mechanism to reduce greenhouse gas emissions under the Kyoto Protocol. This technology eliminates all gases, fumes and toxic chemicals generated from the coke making process, only recovers heat to run the generator.Thanks to this solution, Hoa Phat Hai Duong Steel Integrated Complex has a generating capacity of 64MW, contributing to proactively 60% of the annual electricity demand. With the Complex in Dung Quat and Quang Ngai, the active power output is up to 70% thanks to 04 generating sets with a capacity of 240MW, bringing significant economic value, and increasing competitiveness for Hoa Phat steel. Not stopping there, the Group’s subsidiaries are continuing to research and develop technologies to increase generation capacity, reduce consumption of coal fuel and other materials to increasingly optimize the equipment line.

CIRCULAR ECONOMIC MODEL IN HOA PHAT GROUP

SUSTAINABLE DEVELOPMENT Circular economic model in Hoa Phat Group ANNUAL REPORT 2019

71SUSTAINABLE DEVELOPMENT Circular economic model in Hoa Phat GroupHOA PHAT’S INTERNAL STRENGTH

Manufacting process Process

Dust

Coal gas

72

Turn blast furnace slag into building materials

Deep processing along the chain of steel products is a long-term strategic orientation of Hoa Phat Group. The collection and processing of blast furnace slag, a solid waste generated during iron making, has been in place since 2017, turning waste into a mineral additive for cement or used as input materials for enterprises producing concrete and cement.

Hoa Phat has optimized the slag granulation technology with high pressure cold water and invested the slag crushing line in Hai Duong and Dung Quat Steel Integrated Complexes. This is a vertical crushing technology line, classified as the most modern synchronized type today. Hoa Phat Group’s S95 granulated blast furnace slag products contribute to thoroughly treat the solid waste in Hoa Phat Group’s green steel production process, turning solid waste generated in the process of iron making into building materials products, not only protecting the environment but also creating a stable source of revenue for Hoa Phat Group, bringing significant added value to the steel production chain.

With two Steel Integrated complexes in Kinh Mon - Hai Duong and Dung Quat - Quang Ngai, Hoa Phat Group can supply to domestic and foreign markets 2.6 million tons of the granulated blast furnace slag per year, in which, the Complex in Hai Duong supplies 750,000 tons/year and the Complex in Dung Quat supplies 1.85 million tons/year.

S95 granulated blast furnace slag has many outstanding advantages, applied as highly activated mineral additives for the production of cement, concrete, mortar or as a binder to reinforce weak ground. With S95, it is possible to produce mass concrete by reducing hydrothermal heat of concrete, producing heat resistant concrete due to increased thermal stability of concrete, durable concrete production in seawater, saltwater and brackish water environments, due to the increased waterproofing of concrete, preventing the erosion of chlorine and sulfate, meeting the need to increase the life expectancy of constructions on the sea, on islands and coastal areas. In particular, this product will help lower the cost of commercial concrete due to lower costs of S95 Hoa Phat, while reducing clinker content in cement, thereby reducing CO2 emissions, contributing to environmental protection. According to the Circular No. 10/2019/TT-BXD of the Ministry of Construction, S95 granulated blast furnace slag is used to replace up to 30% of PCB 40 cement in the material grading norm for all grades of concrete mortars. This has opened an additional very large and convenient channel of consuming the granulated blast furnace slag for the enterprises which produces steel from iron ore such as Hoa Phat Group. From here, granulated blast furnace slag from steel making process continues to contribute value to the community in an official and sustainable manner.

Hoa Phat product ecosystem complements each other effectively

Hoa Phat has 11 subsidiaries supplying a wide range of high quality products to the society with main products from construction steel, steel pipe, steel sheets, pre-stressed steel, furniture, refrigeration, agriculture. In particular, the products of each segment group have close support to each other.

High quality rolled steel is the raw material for production of drawn steel, pre-stressed concrete steel, welding rod core, etc. Hot rolled steel coil (HRC) is the input material for the production of steel pipes, galvanized steel, shaped steel, industrial steel and other mechanical products. The Group’s steel products are also supplied to apartment projects, industrial park infrastructure and in construction of farms in the agricultural segment.

Some steel pipe and steel sheet products are used in the manufacture of interior and refrigeration products. Plastic factory of Hoa Phat Refrigeration can produce product details not only of Hoa Phat Refrigeration but also of Hoa Phat Furniture. In addition to be sold in the market, the animal feed is also is supplied to the internal livestock farm system across the country with a relatively large output.

In particular, the implementation of Hoa Phat Dung Quat Steel Integrated Complex project has consumed thousands of tons of steel pipes and high-quality pre-painted galvanized steel coil of the Group, helping to ensure the progress and quality of the project with the most reasonable cost. Mutual complementarity between business fields contributes to cost optimization, reducing initial investment for the Group’s projects and production activities.

SUSTAINABLE DEVELOPMENT Circular economic model in Hoa Phat Group ANNUAL REPORT 2019

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74

With the characteristics of multidisciplinary and multifield industrial production, of which iron and steel production consumes a large amount of electricity, water, coal, etc. Hoa Phat emphasizes the economical use of energy and natural resources and encourages the application of technical innovation initiatives to be deployed at the manufacturing plants of the Group

Hai Duong Steel operates more and more effectively thanks to encouraging creative labor

In Hoa Phat Group, the Board of Directors always motivates, encourages the employees to promote their creativity. Therefore, every year, the innovation movement of subsidiaries takes place very excitingly. Among them is Hoa Phat Hai Duong Steel, where there are several dozen initiatives, benefiting the company tens, hundreds of billions dong each year.

The Company synthesizes initiatives twice a year and organizes rewarding activities for individuals and teams that have the most outstanding initiatives. In 2019, Hoa Phat Hai Duong Steel Company has 55 innovation initiatives, with a profit of about VND 150 billion. These include the initiative of designing and installing the coal sorting system of Mr. Le Quang Vuong, Mr. Nguyen Van Duong - Steel Factory to sort the qualified types of coal for production and remove coal dust. The designed capacity of the system reaches 50-70 tons/hour, ensuring supply of coal for production, crushing and sorting of coal with specifications (particle size 8-10mm) to serve post-furnace alloying, remove unqualified fine coal dust.

This initiative saves for the company VND 89 billion per year while ensures the quality of coal supplied to the furnace, reduces the amount of dust generated from post-furnace alloying, reduces loss and limits the generation of coal dust from post-furnace alloying, takes advantage of the fine coal dust to provide for sintering.

And the initiative “Improving the quality of billet for casting system” proposed by Mr. Ho Van Cuong, Manager of Casting workshop, Steel Factory contributes to limit billet cracks, increase casting speed. In term of technology, the initiative completed the standard billet water cooling level table for each steel grade and each billet cross section. For equipment, it completed the process of calibration and installation of water plants, adjusted R&M curved radius for casting machines. The collective spirit of this initiative helps achieve not only the billet quality, but also the value benefiting the company with not small number - over VND 12.3 billion per year.In order to find the optimal solution for the company in production activities, Mr. Dang Viet Thanh - Head of Technology Department proposed the initiative “Using blast furnace ores instead of sintered ores for slag production in the stage of steel making in basic oxygen furnace” which benefits more than VND 11.35 billion

per year. More importantly, the amount of recovered ore is used to completely replace the sintered ore, meets the requirements of slag production in basic oxygen furnace and furnace heat conditioning. Quantity and quality are satisfactory, since March 2019, there is no shortage of sintered ores serving for 3 blast furnaces.

In addition, the Steel Factory also contributed two additional initiatives, such as “Improving the cover of the intermediate barrel” and “ Fixing air holes in the billet surface “ proposed by Mr. Ho Van Cuong and Mr. Phung Nhat Quang – Manager of BOF with the estimated benefit value at over VND 2.5 billion per year.

Some initiatives are not of high value but have very important implications in production, contributing to stable machinery operation, reducing material consumption, benefiting health, protecting the environment, ensuring occupational safety and health for operating workers. There are some important initiatives, which creating new products for the company such as “Improving and perfecting the technological process of producing SWRY11 steel grade to replace 05Kπ as raw materials for welding rod steel production” of Technology Department. Thanks to the application of this initiative, the Company supplied nearly 5,500 tons of Ø6 wire steel and nearly 200 tons of Ø 5.5 wire steel to welding rod manufacturers in the past year.

Hoa Phat Steel Pipe and many solutions of energy saving, reducing consumption of raw materials

With many proposed innovations which effectively applied in practice, Steel pipe factories have benefited Hoa Phat with many billion dongs every year. More importantly, the innovative movement has greatly spread to staffs, engineers and workers in all workshops and factories of Hoa Phat Steel Pipe nationwide.

At Hoa Phat Hung Yen Steel Pipe Factory, with 16 initiatives, Steel Pipe has saved over 3.6 billion per year by the improvement projects arising from the actual work in production, bringing the high economic results, helping reduce raw material consumption, contribute to environmental protection.

By realizing that the peak electricity consumption on production lines, especially the rolling line was relatively high, accounting for 18-24% of the total electricity used, while the unit price of electricity for peak hours was 1.85 times higher than normal time and 2.85 times higher than off-peak hours, Mr. Tran Ngoc Duy, Technical Department adjusted the capacity, reduced the operating time of the rolling mill during peak hours, increased productivity during off-peak hours to save energy for the plant. Thereby, VND 1.36 billion per year on electricity costs is saved for the plant when being implemented.

HOA PHAT GROUP SAVES HUNDREDS OF BILLIONS ANNUALLY THANKS TO TECHNICAL INNOVATION

SUSTAINABLE DEVELOPMENT Technical innovation ANNUAL REPORT 2019

75

Contributing to the energy saving initiatives of the plant is also the topic of reducing fan capacity by designing inverter control circuits. This design by Mr. Hoang Van Vinh allows adjusting the Cyclon fan speed from 0 to 100% of the rated speed to reduce power consumption, benefiting the plant over VND 210 million per year.

In addition, the initiatives of Hung Yen Steel Pipe also focus on topics of reducing raw material consumption and avoiding material waste such as the topic of making full use of straps at production stages proposed by Mr. Truong Van Dinh Nguyen, Quality Control Department. During the production process, Mr. Nguyen saw that BR32x0.9mm steel straps of the raw steel coils and the plastic straps of galvanized steel coil became scrap after cutting, so he proposed to take advantage of these straps for all stages of production at the factory. The plastic straps of galvanized steel coils are welded after cut and used for packing newly manufactured steel sheets. A BR32mm strap of material corrugated coils is taken to strap for corrugated strips produced at rusting and rolling process. After applying this initiative, 50% of plastic straps have been reduced, completely reducing the amount of straps required for rusting and rolling, benefiting the factory VND 380 million per year.

A number of initiatives also contributed to improving the environment, limiting the risk of unsafe, such as: Reduce the acid vapor released through the breathing tube of HCL acid storage tanks in Rolling and galvanizing workshops of Mr. Nguyen Duc Co, Director of Hoa Phat Hung Yen Steel Pipe Factory; Fabrication and erection of hoist suspended beams for feeding Dainichi lathes and servicing for welding CO2 of Mr. Dinh Van Chu, mechanic and electricity workshop, reducing risks to people and equipment failure.

At Hoa Phat Steel Pipe factory in Danang, the initiative of production rationalization to save electricity was leaded by Mr. Huynh Thanh Thuan - Deputy Director of Da Nang Steel Pipe Factory, contributing to saving tens of millions of dong each month. Particularly, the substation of galvanizing, bending, and pipe plating plants saves over VND 70 million, bringing remarkable efficiency. And the initiative of manufacturing semi-automatic sealing rigs of mechanical engineering group - Technical Department has reduced the labor force for workers, ensuring safety for workers. The improvement of the inside blowing for tubes Ø 21mm, Ø 27mm also helps the plant reduce zinc consumption by over 20% compared to conventional blow molds.

Hoa Phat Binh Duong Steel Pipe Company also contributed 10 equipment improvement initiatives in 2019. Among them are: Improving oil recovery system for cutting bending machine; removing the sink base which is high cost and occupying the production area of the Technical Department has greatly reduced the cost of large underground tunnels and iron barrels, especially clearance of packing areas and warehouses. In addition, the topic of improving step 1 of drying tunnel tube assembly, stabilizing the control reduces pipe errors and improving the productivity of the second pipe plating line which performed by the Department of Engineering and Mechatronics to help reduce the electricity consumption for engine, reduce the cost of equipment provision for pipe supply clusters, improve the productivity of the 2nd line.

Hoa Phat Furniture has diversified competition activities

The competition movement, technical improvement at Hoa Phat Furniture Joint Stock Company has gained many “sweet fruits” thanks to a series of initiatives and improvements that benefit the company, including 03 areas: Product improvement initiatives - Initiatives in labor manufacturing - Initiatives for environmental protection.

In 2019, hundreds of innovative products and initiatives to increase the aesthetics and product structure, brought practical value to users. Through product evaluations, listening to customers, Hoa Phat Furniture’s engineers have developed the functions, features, changed the size appropriately, increased the use of products to fit the market demand, for example, improving the style of legs and chair backs, increased the ability to stack chairs, avoiding scratching the coating paint of the legs to increase product life. Not only improving the structure, Hoa Phat Furniture prioritizes increasing the aesthetics of the product such as improving the edge of the table surface, adding decorative lines, or creating an elegant and various pattern for cabinet, wardrobe, shoe cabinet products, etc. to offer many options to customers. With constant research, each improved product has been evaluated and tested by a team of experts many times before publication, and received a good response from a large number of customers.

According to the leader of Hoa Phat Furniture Joint Stock Company, in order for the movement of initiative and technical improvement to develop strongly, the company has specific incentive mechanisms and policies to encourage and reward based on the benefits created. Thanks to the encouragement of the Board of Directors, outstanding initiatives from North and South factories are continuously proposed, evaluated, tested and put into practice. In the North, initiatives from Tan Quang Wood Factory, Iron Cabinet Factory (Hung Yen) such as research of mold improvement, welding jigs by robots or research of alignment of 400T hydraulic press machines to increase productivity and significant power efficiency and savings. In the South, the research for supported devices has contributed to saving power for the plant system, increasing labor productivity by dozens of times, supporting workers for easier work performance.

In 2019, Hoa Phat Furniture will improve packaging of some products, change the specification from using plastic in product packaging to direct packaging by carton box, significantly reducing the amount of plastic waste in the environment. With millions of products every year, this is a major improvement that brings practical benefits to society.

The movement of technological creativity and innovation in Hoa Phat Furniture Joint Stock Company is spreading and gaining success. Most importantly, it is spreading the spirit of non-stop creativity, creating a motivation for development, striving daily for the staffs of Hoa Phat Furniture.

SUSTAINABLE DEVELOPMENT Technical innovationHOA PHAT’S INTERNAL STRENGTH

76

Heartbeat for Love

“Heartbeat for Love” is a free of charge heart operation program for poor children held by Hoa Phat Group since 2015. So far, after four years of operation, the event has become a reliable address for poor patients with congenital heart disease requiring supports.

Nong Tran Tri Nghia (left) and Luc Bao An in Lang Son were sponsored for heart surgery by Hoa Phat

In 2019, Hoa Phat supported successful surgery for 39 cases, confirmed 13 cases waiting for surgery, performed mainly at Hospital E, Hanoi Heart Hospital and National Hospital of Pediatrics at a cost of over VND 1.7 billion.

Hoa Phat follows children to school

“Hoa Phat follows children to school” is a practical activity of Hoa Phat Group, in order to modernize educational infrastructure, improve the quality of teaching and learning in localities across the country.

In 2019, Hoa Phat Group develops the activity of giving bunk beds to the ethnic minority schools in Chien Pho and Ho Thau, Hoang Su Phi Districts, Ha Giang through Hope fund (VnExpress), helping young people always feel comfortable and have fun in studying and living.

Hoa Phat a companion of students

This is a scholarship sponsor activity for students with excellent academic results and disadvantaged students studying at the National Economics University.

In 2019, the total sponsorship value for this activity was over VND 800 million. Specifically, the Group awarded 01 batch of scholarships to students of the National Economics University and paid 03 months of the 2nd batch of scholarships with a total of 169 students who received scholarships, scholarships awarded in each semester of each student was 5.5 million. At the same time, Hoa Phat Group also sponsored 13 scientific research projects of the students which won the 1st prize at the Student Science Research Conference 2019.

“Charity rice - Kind heart”

“Charity rice - Kind heart” which is also known as “Hospital K Meal” is given by patients at Vietnam National Cancer Hospital (Hospital K), Tam Hiep campus – branch II to meaningful activities which have been performed by Hoa Phat since 2010 up to now and will be maintained in the future.

Accordingly, at noon during the week from Monday - Saturday, Hoa Phat Group will distribute free lunch to patients treated at Vietnam National Cancer Hospital (Tam Hiep - Thanh Tri Campus). In 2019, the number of daily meals were 100 hot meals with full of nutrients, regularly delivered to poor patients being treated at the hospital.

Although it is not a large number, it is performed from the heart of Hoa Phat Group’s employees with the desire to share the pains that patients suffer, reduce the economic burden for patients in difficult circumstances.

HOA PHAT WITH SOCIAL AND CHARITY ACTIVITIES 2019In addition to production and business activities, in the past 28 years, Hoa Phat has always carried out its corporate social responsibility substantially and from the heart with the motto “Harmony for joint development”. This is reflected in the increasing contribution to the annual state budget, stable employment for thousands of labors, good implementation of social security and a meaningful series of charity, for community programs. In 2019, the total amount of Hoa Phat Group’s funding for social and charity activities reached nearly VND 19 billion.

SUSTAINABLE DEVELOPMENT Social resposibility ANNUAL REPORT 2019

77

Spring of Love

It is an annual activity carried out by Hoa Phat Group before the Lunar New Year, in order to bring a warm and joyful new year to families in difficult circumstances

“Spring of Love” gave New Year gifts for families in difficult circumstances in localities nationwide where Hoa Phat’s factories and breeding farms are located. In 2019, Hoa Phat group reached 14 provinces across the country, bringing nearly 2,500 gifts with a value of VND 500,000/gift and total value of more than VND 1.2 billion.

“Spring of Love” has become the traditional practice of Hoa Phat Group. Every Lunar New Year comes, Hoa Phat companies organize charity programs and give gifts to poor people in 3 regions across the country. This activity attracted numerous employees to participate in the spirit of “good leaves protect the torn leaves”, sharing with the difficult circumstances to bring a warm and meaningful New Year to the people.

Brigde building

Started in 2019, this activity aims to support localities in the West and the Mekong Delta provinces to build bridges through canals, contribute to improving the quality of people’s life and boost local economic development.

In 2019, Hoa Phat Group built the first bridge in Xi Nghiep Hamlet, Tam Giang Tay commune, Ngoc Hien District, Ca Mau.

In 2020, Hoa Phat continues to build bridges in the most remote and most difficult areas of the Mekong Delta region, helping people in the areas where new bridges are built be convenient in trade, transportation and helping the road to school of many children be more joyful and less rugged.

In addition to the main programs that are conducted annually, in 2019 there were many other sponsorships and charity activities that Hoa Phat contributed to the community.

These included financing for construction and repair of roads in Kinh Mon and Hai Duong with a budget of VND 1 billion; financing for road renovation around Hoa Phat Dung Quat Complex (VND 1.27 billion); Supporting the anti- plastic waste project named “Kindness to Sa Can”, supporting households raising fish in cages in Binh Son district, Quang Ngai. Hoa Phat Group also spent VND 4 billion to renovate the graves of martyrs in Hai Duong and Hung Yen provinces in Truong Son cemetery. Especially, at the end of December 2019, Hoa Phat Group supported VND 5 billion for the Program “Joining hands to build houses for meritorious people and poor households in Hung Yen province in 2019-2020” held by the Provincial Party Committee, People’s Council, People’s Committee, Vietnam Fatherland Front Committee, etc.

SUSTAINABLE DEVELOPMENT Social resposibilityHOA PHAT’S INTERNAL STRENGTH

78


80

AUDITED FINANCIAL STATEMENTS1. REPORT OF THE BOD

2. INDEPENDENT AUDITOR’S REPORT

3. CONSOLIDATED BALANCE SHEET

4. CONSOLIDATED STATEMENT OF INCOME

5. CONSOLIDATED STATEMENT OF CASH FLOWS

6. NOTE TO THE CONSOLIDATED FINANCIAL STATEMENTS

81

The audited consolidated Financial Statementis posted on Company’s website at: www.hoaphat.com.vn

82

Hoa Phat Group Joint Stock Company Report of the Board of DirectorsThe Board of Directors of Hoa Phat Group Joint Stock Company (“the Company”) presents this report and the consolidated financial statements of the Company and its subsidiaries (together referred to as “the Group”) for the year ended 31 December 2019.

The members of the Board of Management and the Board of Directors of the Company during the year and at the date of this report are as follows:

CORPORATE INFORMATION

The Company was originated from Hoa Phat Steel Joint Stock Company incorporated under the Law on Enterprise of Vietnam pursuant to the initial Business Registration Certificate No. 0503000008 issued by Hung Yen Department of Planning and Investment on 26 October 2001. In accordance with the 8th amendment of the Business Registration Certificate No. 0503000008 issued by Hung Yen Department of Planning and Investment on 9 January 2007, Hoa Phat Steel Joint Stock Company was transformed into Hoa Phat Group Joint Stock Company.

The Company’s Enterprise Registration Certificate has been amended several times, the most recent of which is by Enterprise Registration Certificate No. 0900189284 dated 4 July 2019. The Enterprise Registration Certificate was issued by the Hung Yen Department of Planning and Investment.

The registered office of the Company is located in Pho Noi A Industrial Zone, Giai Pham Commune, Yen My District, Hung Yen Province, Vietnam.

The subsidiaries of the Company are disclosed in Note 1.4 to the consolidated financial statements

Board of Management Mr. Tran Dinh Long Chairman Mr. Tran Tuan Duong Vice Chairman Mr. Nguyen Manh Tuan Vice Chairman Mr. Doan Gia Cuong Vice Chairman Mr. Nguyen Ngoc Quang Member Mr. Ta Tuan Quang Member Mr. Hoang Quang Viet Member Mr. Nguyen Viet Thang Member Mr. Hans Christian Jacobsen Member

Board of Directors Mr. Tran Tuan Duong General Director Mrs. Nguyen Thi Thao Nguyen Deputy General Director Mr. Nguyen Viet Thang Deputy General Director

ANNUAL REPORT 2019

83

Hoa Phat Group Joint Stock Company Report of the Board of Directors (continued)

OPERATING RESULTS AND DIVIDENDS

The consolidated net profit attributable to the equity holders of the Company for the year ended 31 December 2019 was VND7,527,443 million (2018: VND8,573,014 million).

On 29 March 2019, the Company’s General Meeting of Shareholders passed the resolution on the distribution of 2018 dividends to the shareholders in the form of shares at the rate of 30% (shareholders will receive 3 additionally-issued shares for every 10 ordinary shares they own). This dividend payment scheme was approved for execution by the Company’s Board of Management in the resolution dated 9 May 2019 and executed during the second Quarter of 2019.

POST BALANCE SHEET EVENTS

There are no significant post balance sheet events that need to be adjusted or disclosed in the consolidated financial statements.

AUDITOR

The auditor of the Company and the Group is KPMG Limited.

STATEMENT OF THE BOARD OF DIRECTORS’ RESPONSIBILITY IN RESPECT OF THE CONSOLIDATED FINANCIAL STATEMENTS

The Board of Directors is responsible for the preparation and presentation of the consolidated financial statements which give a true and fair view of the Group’s consolidated financial position as at 31 December 2019, consolidated results of operations and consolidated cash flows for the year then ended in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System for Enterprises and the relevant statutory requirements applicable to financial reporting. In preparing the consolidated financial statements, the Board of Directors is required to:

• select suitable accounting policies and then apply them consistently;• make judgments and estimates that are reasonable and prudent;• confirm that applicable accounting standards have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and• prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The Board of Directors is also responsible for ensuring that proper accounting records are prepared and kept which disclose, with reasonable accuracy at any time, the financial position of the Group and to ensure that the accounting records comply with Vietnamese Accounting Standards, the Vietnamese Accounting System for Enterprises and the relevant statutory requirements applicable to financial reporting. The Board of Directors is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Board of Directors confirms with the Company’s Board of Management and Shareholders that they have complied with the above requirements in preparing the consolidated financial statements.


84

Hoa Phat Group Joint Stock Company Report of the Board of Directors (continued)

APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS

We hereby approve the accompanying consolidated financial statements for the year ended 31 December 2019. These financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2019, its consolidated results of operations and its consolidated cash flows for the year then ended in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System for Enterprises and the relevant statutory requirements applicable to financial reporting.

On behalf of the Board of Directors

Hung Yen, 16 March 2020

Tran Tuan DuongGeneral DirectorTran Tuan Duong

ANNUAL REPORT 2019

85

INDEPENDENT AUDITOR’S REPORT

TO THE SHAREHOLDERS AND BOARD OF MANAGEMENTHOA PHAT GROUP JOINT STOCK COMPANY

We have audited the accompanying consolidated financial statements of Hoa Phat Group Joint Stock Company (“the Company”), which comprise the consolidated balance sheet as at 31 December 2019, the consolidated statements of income and cash flows for the year then ended and the explanatory notes thereto which were authorised for issue by the Company’s Board of Directors on 16 March 2020, as set out on pages 6 to 74.

MANAGEMENT’S RESPONSIBILITY

The Company’s Board of Directors is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System for Enterprises and the relevant statutory requirements applicable to financial reporting, and for such internal control as the Board of Directors determines is necessary to enable the preparation of the consolidated 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 these consolidated financial statements based on our audit. We conducted our audit in accordance with Vietnamese Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of 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 judgement, including the 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 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 Company’s Board of Directors, 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.


86

WANG TOON KIM Practicing Auditor Registration Certificate No.: 0557-2018-007-1Deputy General Director

DOAN THANH TOANPracticing Auditor RegistrationCertificate No.: 3073-2019-007-1

Hanoi, 16 March 2020

AUDITOR’S OPINION

In our opinion, the consolidated financial statements give a true and fair view, in all material respects, of the consolidated financial position of Hoa Phat Group Joint Stock Company as at 31 December 2019 and of its consolidated results of operations and its consolidated cash flows for the year then ended in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System for Enterprises and the relevant statutory requirements applicable to financial reporting.

KPMG LIMITEDVietnamAUDIT REPORT NO.: 19-02-00184-20-2

ANNUAL REPORT 2019

87

HOA PHAT GROUP JOINT STOCK COMPANYCONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2019

Form B 01 – DN/HN(Issued under Circular No. 202/2014/TT-BTC

dated 22 December 2014 of the Ministry of Finance)

ASSETS

Current assets (100 = 110 + 120 + 130 + 140 + 150)

Cash and cash equivalentsCashCash equivalents

Short-term financial investmentsHeld-to-maturity investments

Accounts receivable – short-termAccounts receivable from customersPrepayments to suppliersOther receivablesAllowance for doubtful debtsShortage of assets awaiting resolution

InventoriesInventoriesAllowance for inventories

Other current assetsShort-term prepaid expensesDeductible value added taxTaxes and others receivable from State Treasury

100

110111112

120123

130131132136137139

140141149

150151152

153

5

6.1

78

9

15.1

30,436,936,909,894

4,544,900,252,2041,678,314,252,2042,866,586,000,000

1,374,340,352,9101,374,340,352,910

3,561,397,190,6882,699,937,350,329

757,832,561,191139,273,246,353(37,145,790,132)

1,499,822,947

19,411,922,748,09519,480,666,530,260

(68,743,782,165)

1,544,376,365,997118,551,289,085

1,400,159,900,793

25,665,176,119

25,308,725,187,618

2,515,617,135,4571,822,302,135,457

693,315,000,000

3,724,562,710,5353,724,562,710,535

3,210,278,608,7512,281,760,501,157

810,319,171,039150,952,350,749(37,693,842,866)

4,940,428,672

14,115,139,048,90814,188,336,169,734

(73,197,120,826)

1,743,127,683,967122,420,331,320

1,601,957,215,751

18,750,136,896

Code Note 31/12/2019VND

1/1/2019VND

The accompanying notes are an integral part of these consolidated financial statements


88

HOA PHAT GROUP JOINT STOCK COMPANYCONSOLIDATED BALANCE SHEET AS AT 31 DECEMBER 2019 (CONTINUED)


1/1/2019VND


Long-term assets (200 = 210 + 220 + 230 + 240 + 250 + 260)

Accounts receivable – long-term Loans receivable – long-termOther long-term receivables

Fixed assetsTangible fixed assets

CostAccumulated depreciation

Intangible fixed assetsCostAccumulated amortisation

Investment propertyCostAccumulated depreciation

Long-term work in progressLong-term work in progressConstruction in progress

Long-term financial investmentsInvestments in associatesEquity investments in other entitiesHeld-to-maturity investments

Other long-term assetsLong-term prepaid expensesDeferred tax assetsGoodwill

TOTAL ASSETS (270 = 100 + 200)

200

210215216

220221222223227228229

230231232

240241242

250252253255

260261262269

270

10

11

12

1314

6.26.1

15.21617

71,339,093,190,006

27,717,594,9844,910,346,000

22,807,248,984

31,249,493,917,96030,980,122,434,70443,804,940,121,895

(12,824,817,687,191)269,371,483,256339,570,963,463(70,199,480,207)

576,616,510,917663,239,742,390(86,623,231,473)

37,435,320,467,014750,146,398,723

36,685,174,068,291

45,794,216,642(1,431,313,615)

700,000,00046,525,530,257

2,004,150,482,4891,650,738,623,090

292,226,687,88261,185,171,517

101,776,030,099,900

52,914,282,483,307

22,301,804,672-

22,301,804,672

12,782,560,625,00112,565,363,529,87922,992,663,946,845

(10,427,300,416,966)217,197,095,122268,391,812,870(51,194,717,748)

179,740,530,488246,767,060,543(67,026,530,055)

38,107,320,507,117910,420,483,699

37,196,900,023,418

66,584,926,457-

700,000,00065,884,926,457

1,755,774,089,5721,461,311,868,435

206,227,896,90088,234,324,237

78,223,007,670,925



ANNUAL REPORT 2019

89




1/1/2019VND

RESOURCES

LIABILITIES (300 = 310 + 330)

Current liabilitiesAccounts payable to suppliersAdvances from customersTaxes and others payable to State TreasuryPayables to employeesAccrued expensesUnearned revenue – short-termOther payables – short-termShort-term borrowingsProvisions – short-termBonus and welfare fund

Long-term liabilitiesLong-term accounts payable to suppliersLong-term accrued expensesLong-term unearned revenueOther payables – long-termLong-term borrowingsDeferred tax liabilitiesProvisions – long-term

300

310311312

313314315318319320321322

330

331333336337338341342

18

19.1

20.121.12223

19.2

20.221.2

22

53,989,393,956,205

26,984,198,187,9777,507,198,913,115

408,691,837,688

478,426,384,718247,936,926,136429,777,297,411

27,406,111,996237,391,747,239

16,837,653,470,3873,111,122,885

806,604,376,402

27,005,195,768,228

6,652,492,138,554427,328,992,030

3,369,818,10058,387,110,781

19,842,099,219,7201,104,751,459

20,413,737,584

37,600,057,830,115

22,636,149,492,1368,706,913,341,857

361,444,408,581

481,510,200,714252,288,255,386261,634,131,158

9,929,720,982300,069,780,261

11,494,717,393,3276,238,723,132

761,403,536,738

14,963,908,337,979

1,647,091,707,192 451,100,573,027

-36,480,820,999

12,810,996,979,972-

18,238,256,789




90

Mã số Thuyết minh

31/12/2019VND

1/1/2019VND

16 March 2020

Prepared by: Approved by:

Nguyen Thi Thu Trang Pham Thi Kim Oanh Tran Tuan Duong General Accountant Chief Accountant General Director


Nguyen Thi Thu Trang Pham Thi Kim Oanh Tran Tuan Duong Nguyen Thi Thu Trang Pham Thi Kim Oanh Tran Tuan Duong General Accountant Chief Accountant General Director

EQUITY (400 = 410)

Owners’ equityShare capital

Ordinary shares with voting rightsShare premiumForeign exchange differencesInvestment and development fundRetained profi ts

Retained profi ts brought forwardRetained profi ts for the current year

Non-controlling interest

TOTAL RESOURCES (440 = 300 + 400)

400

410411411a412417418421421a421b429

440

2425

47,786,636,143,695

47,786,636,143,69527,610,741,150,00027,610,741,150,0003,211,560,416,270

565,534,994923,641,612,156

15,876,913,750,9488,349,470,883,0747,527,442,867,874

163,213,679,327

101,776,030,099,900

40,622,949,840,810

40,622,949,840,81021,239,071,660,00021,239,071,660,0003,211,560,416,270

276,819,257918,641,612,156

15,126,437,863,9056,553,423,653,4918,573,014,210,414

126,961,469,222

78,223,007,670,925





ANNUAL REPORT 2019

91

Code Note 2019VND

2018VND

Revenue from sales of goods and provision of services

Revenue deductions

Net revenue (10 = 01 - 02)

Cost of sales Gross profit (20 = 10 - 11)

Financial incomeFinancial expenses

In which: Interest expenseShare of loss in associates Selling expensesGeneral and administration expenses

Net operating profit {30 = 20 + (21 - 22) + 24 - (25 + 26)}

Other incomeOther expenses

Results of other activities (40 = 31 - 32)

Accounting profit before tax(50 = 30 + 40)

Income tax expense – current

Income tax benefit– deferred

Net profit after tax (carried forward to next page)(60 = 50 - 51 - 52)

01

02

10

11

202122232425

26

303132

40

50

51

52

60

28

28

28

29

3031

32

33

3435

37

37

64,677,906,575,644

1,019,713,901,853

63,658,192,673,791

52,472,820,451,654

11,185,372,222,137471,053,832,011

1,181,675,710,916936,710,218,359(1,431,313,615)

873,333,584,688

569,005,805,722

9,030,979,639,207657,680,931,477591,998,447,298

65,682,484,179

9,096,662,123,386

1,603,307,926,680

(84,894,039,523)

7,578,248,236,229

56,580,423,695,083

743,965,315,324

55,836,458,379,759

44,165,626,148,685

11,670,832,231,074294,408,270,741772,317,161,901539,861,243,640

-676,809,221,259

444,024,985,823

10,072,089,132,832488,856,588,036489,872,848,566

(1,016,260,530)

10,071,072,872,302

1,506,320,087,551

(35,797,921,476)

8,600,550,706,227

HOA PHAT GROUP JOINT STOCK COMPANYCONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED 31 DECEMBER 2019





92

Code Note 2019VND

2018VND

HOA PHAT GROUP JOINT STOCK COMPANYCONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)



16 March 2020





Net profi t after tax (brought forward from previous page) (60 = 50 - 51 - 52)

Attributable toEquity holders of the parent companyNon-controlling interest

Basic earnings per share

60

6162

70 38

7,578,248,236,229

7,527,442,867,87450,805,368,355

2,726

8,600,550,706,227

8,573,014,210,41427,536,495,813

Restated3,105


ANNUAL REPORT 2019

93

Code Note 2019VND

2018VND

HOA PHAT GROUP JOINT STOCK COMPANYCONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 (INDIRECT METHOD)



CASH FLOWS FROM OPERATING ACTIVITIESProfit before taxAdjustments forDepreciation and amortisationAmortisation of goodwillAllowances and provisionsExchange losses arising from revaluation of monetary items denominated in foreign currenciesProfits from investing activitiesInterest expense

Operating profit before changes in working capital

Change in receivables Change in inventoriesChange in payables and other liabilities Change in prepaid expenses

Interest paidIncome tax paidOther payments for operating activities

Net cash flows from operating activities

01

020203

040506

08

0910

1112

1415

17

20

9,096,662,123,386

2,566,183,420,30927,049,152,720(5,772,614,376)

24,183,514,856(286,185,193,464)936,710,218,359

12,358,830,621,790

(288,519,564,021)(5,132,237,172,021)

3,556,649,268,254(8,476,974,345)

10,486,246,179,657

(867,276,241,172)(1,551,743,688,539)

(352,057,555,830)

7,715,168,694,116

10,071,072,872,302

2,259,594,298,26826,051,152,720

(72,990,493,823)

29,910,869,480(112,985,971,103)539,861,243,640

12,740,513,971,484

(1,423,156,571,992)(2,301,594,154,020)

1,459,709,130,157(500,921,130,265)

9,974,551,245,364

(611,767,789,386)(1,416,437,918,395)

(304,001,386,852)

7,642,344,150,731



94

HOA PHAT GROUP JOINT STOCK COMPANYCONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 (INDIRECT METHOD - CONTINUED)



Code Note 2019VND

2018VND

CASH FLOWS FROM INVESTTING ACTIVITIESPayments for additions to fixed assets and other long-term assetsProceeds from disposals of fixed assets and other long-term assetsPayments for purchase of debt instruments of other entitiesReceipts from collecting loans, sales of debt instruments of other entitiesPayments for investments in other entitiesCollections on investments in other entitiesReceipts of interests on term deposits and loans

Net cash flows from investing activities

21

22

23

24

25

26

27

30

(20,825,371,574,660)

26,937,572,033

(4,467,553,072,509)

6,832,224,480,334

-

-

369,546,551,545

(18,064,216,043,257)

(27,594,117,760,420)

64,821,767,118

(11,295,502,021,543)

17,443,013,202,984

(115,947,860,804)

17,599,680,288

946,999,021,433

(20,533,133,970,944)


ANNUAL REPORT 2019

95

Code Note 2019VND

2018VND

CASH FLOWS FROM FINANCING ACTIVITIES

16 March 2020



Prepared by: Approved by: Prepared by: Approved by: Prepared by: Approved by:


Proceeds from equity issued, capital contributed by non-controlling shareholders Proceeds from borrowingsPayments to settle loan principalsPayments of dividends

Net cash fl ows from fi nancing activities

Net cash fl ows during the year(50 = 20 + 30 + 40)

Cash and cash equivalents at the beginning of the year

Effect of exchange rate fl uctuations on cash and cash equivalents

Cash and cash equivalents at the end of the year (70 = 50 + 60 + 61)

31333436

40

50

60

61

70 5

85,000,00067,944,184,644,118

(55,553,681,828,677)(12,646,859,136)

12,377,940,956,305

2,028,893,607,164

2,515,617,135,457

389,509,583

4,544,900,252,204

11,424,719,20253,472,014,216,173

(42,335,009,094,686)(5,918,198,429)

11,142,511,642,260

(1,748,278,177,953)

4,264,641,954,689

(746,641,279)

2,515,617,135,457

HOA PHAT GROUP JOINT STOCK COMPANYCONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2019 (INDIRECT METHOD - CONTINUED)





96

HOA PHAT GROUP JOINT STOCK COMPANYNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019



These notes form an integral part of and should be read in conjunction with the accompanying consolidated financial statements.

1. REPORTING ENTITY

1.1 Ownership structure Hoa Phat Group Joint Stock Company (“the Company”) is incorporated as a joint stock company in Vietnam. The consolidated financial statements of the Company for the year ended 31 December 2019 comprise the Company and its subsidiaries (together referred to as “the Group”) and the Group’s interest in associates.

1.2 Principal activities The principal activities of the Group are as follows:

• Office leasing;• Financial investments;• Integrated investment and construction of infrastructures, industrial zones and urban zones;• Manufacturing of furniture for offices, households and schools;• Timber production and processing;• Manufacturing of mechanical products (mainly construction machinery, office desks, chairs and cabinets);• Leasing machines, equipment and motor vehicles;• Dealing in automobiles, motorbikes, equipment, parts for transport and mining sectors, trans port vehicles;• Production and trading of construction and mining machineries;• Dealing in electrical, electronic appliances, optical and medical equipment;• Production, trading, assembly, installation, repair and maintenance of electrical, electronic, electrical refrigeration and civil electrical appliances and air-conditioners;• Production and trading of raw materials and plastic products;• Advertisement;• Civil and industrial construction;• Exploitation of sand, stones and gravel;• Production, trading and assembly of furniture products and construction equipment;• Real estate trading (excluding land price consultancy);• Domestic and foreign investment advisory (excluding law advisory);• Production and trading of non-ferrous metal and non-ferrous metal scraps;• Trading and export and import of steel and supplies for steel making and rolling;• Production of rolled steel products and roofing sheets;• Exploitation of metal ores;• Trading metals, metal ores, iron and steel scraps;• Making cast iron and steel, and casting cast iron, iron and steel; • Production of plated and non-plated steel pipes and inox pipes;• Production and trading of galvanized steel sheet, color coated steel sheet and galvalum steel sheet;

ANNUAL REPORT 2019

97

HOA PHAT GROUP JOINT STOCK COMPANYNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)



• Rendering sports and gymnastics services (training, competition organisation, athlete transfer);• Building and renting sports practice ground and competition ground; • Entrusted export-import activities;• Raising pigs;• Raising cows;• Raising poultry;• Raising other animals;• Provision of raising services;• Processing and preserving meat and meat products; • Producing feeds for cattle, poultry and aquaculture sector;• Producing fertilizer and nitrogen compounds; and • Trading agricultural equipment, machineries and accessories.

1.3 Normal operating cycle The normal operating cycle of the Group is generally within 12 months.


98

HO

A P

HAT

GRO

UP

JOIN

T ST

OC

K C

OM

PAN

YN

OTE

S TO

TH

E C

ON

SOLI

DAT

ED F

INA

NC

IAL

STAT

EMEN

TS F

OR

THE

YEA

R EN

DED

31

DEC

EMBE

R 20

19 (C

ON

TIN

UED

)

Form

B 0

9 –

DN

/HN

(Issu

ed u

nder

Circ

ular

No.

202

/201

4/TT

-BTC

da

ted

22 D

ecem

ber

2014

of

the

Min

istr

y of

Fin

ance

)

1.4

Gro

up s

truc

ture

As

at 3

1 D

ecem

ber

2019

, the

Gro

up’s

sub

sidi

arie

s ar

e as

fol

low

s:

No.

Tier

-1 s

ubsi

diar

ies

Prin

cipa

l act

ivit

ies

1/1/

2019

31/1

2/20

19

Perc

enta

ge o

f ow

ners

hip

and

votin

g rig

hts

of th

e G

roup

1 2 3 4 5 6 7 8 9 10 11

99.9

6%

99.9

98%

99.9

99%

100%

99.9

67%

100%

99.8

75%

99.6

0%99

.67%

99.8

5%

99.9

99%

99.9

6%

99.9

98%

99.9

99%

100%

99.9

67%

100%

99.8

75%

99.6

0%99

.67%

99.8

5%

99.9

99%

An

Thon

g M

iner

al In

vest

men

t JSC

Hoa

Pha

t Hai

Duo

ng S

teel

JSC

Hoa

Pha

t Dun

g Q

uat S

teel

JSC

Hoa

Pha

t Hun

g Ye

n St

eel C

o., L

td.

Hoa

Pha

t Ste

el P

ipe

Co.

, Ltd

.H

oa P

hat S

teel

She

et C

o., L

td.

Hoa

Pha

t Met

al P

rodu

cing

Co.

, Ltd

.(p

revi

ousl

y kn

own

as H

oa P

hat

Equi

pmen

t and

Acc

esso

ries

Co.

, Ltd

.)H

oa P

hat F

urni

ture

JSC

Hoa

Pha

t Ref

riger

atio

n En

gine

erin

g C

o., L

td.

Hoa

Pha

t Urb

an D

evel

opm

ent a

nd

Con

stru

ctio

n JS

C

Hoa

Pha

t Agr

icul

ture

Dev

elop

men

t JSC

Expl

orin

g, e

xplo

iting

, pro

cess

ing,

impo

rtin

g an

d ex

port

ing

min

eral

s (m

ainl

y iro

n or

es).

Prod

ucin

g st

eel,

iron,

exp

loiti

ng ir

on o

res,

exp

loiti

ng a

nd c

olle

ctin

g lig

nite

; w

hole

salin

g m

etal

s an

d m

etal

ore

s; p

rodu

cing

, tra

ding

cok

e co

al.

Prod

ucin

g st

eel,

iron,

exp

loiti

ng ir

on o

res;

who

lesa

ling

met

als

and

met

al o

res;

pr

oduc

ing

and

who

lesa

ling

coke

coa

l and

oth

er re

late

d bu

sine

ss a

ctiv

ities

.Pr

oduc

ing

stee

l, iro

n, w

hole

salin

g m

etal

s an

d m

etal

ore

sPr

oduc

ing

and

trad

ing

vario

us k

inds

of s

teel

pip

es.

Prod

uctio

n an

d tr

adin

g of

gal

vani

zed

stee

l she

et, c

olor

coa

ted

stee

l she

et

and

galv

alum

ste

el s

heet

Prod

ucin

g co

nstr

uctio

n eq

uipm

ent,

trad

ing

cons

truc

tion

mac

hine

ry a

nd

equi

pmen

t, ex

ploi

ting

smal

l and

med

ium

-siz

ed m

iner

als.

Prod

ucin

g an

d tr

adin

g va

rious

kin

ds o

f fur

nitu

re.

Prod

ucin

g an

d tr

adin

g va

rious

kin

ds o

f ref

riger

ant e

quip

men

t.

Civ

il an

d in

dust

rial c

onst

ruct

ion,

dev

elop

men

t of r

eal e

stat

e fo

r sal

es a

nd

leas

e, le

asin

g ho

uses

and

offi

ces,

inve

stin

g in

and

bui

ldin

g te

chni

cal

infr

astr

uctu

re.

Rais

ing

lives

tock

and

pou

ltry;

farm

ing;

pro

vidi

ng p

lant

atio

n, ra

isin

g, p

ost-

harv

est s

ervi

ces;

pro

duci

ng fe

eds

for c

attle

, pou

ltry

and

aqua

cultu

re s

ecto

r.

ANNUAL REPORT 2019

99

HO

A P

HAT

GRO

UP

JOIN

T ST

OC

K C

OM

PAN

YN

OTE

S TO

TH

E C

ON

SOLI

DAT

ED F

INA

NC

IAL

STAT

EMEN

TS F

OR

THE

YEA

R EN

DED

31

DEC

EMBE

R 20

19 (C

ON

TIN

UED

)Fo

rm B

09

– D

N/H

N(Is

sued

und

er C

ircul

ar N

o. 2

02/2

014/

TT-B

TC

date

d 22

Dec

embe

r 20

14 o

f th

e M

inis

try

of F

inan

ce)

No.

Tier

-2 s

ubsi

diar

ies

Prin

cipa

l act

ivit

ies

1/1/

2019

99.8

88%

-

100%

99.9

7%

99.9

9%99

.987

%99

.99%

99.9

99%

99.9

99%

-

1/1/

2019

99.8

9% -

100%

99.9

7%

89.9

9%89

.99%

89.9

9%10

0%98

% -

31/1

2/20

19

99.8

88%

67.9

98%

100%

99.9

7%

99.9

9%99

.987

%99

.99%

99.9

99%

99.9

99%

99.9

99%

31/1

2/20

19

99.8

9%

68%

100%

99.9

7%

89.9

9%89

.99%

89.9

9%10

0%98

%10

0%

Perc

enta

ge o

f ow

ners

hip

and

votin

g rig

hts

of th

e G

roup

Perc

enta

ge o

f dire

ct

owne

rshi

p of

tie

r-1 s

ubsid

iarie

s

3 4 11 125 6 7 8 9 10

Hoa

Pha

t Ene

rgy

JSC

Hoa

Pha

t Shi

ppin

g JS

C (i

)

Hoa

Pha

t - B

inh

Din

h O

ne M

embe

r Co.

, Lt

d.N

hon

Trac

h Se

rvic

e Tr

adin

g C

o., L

td.

Hoa

Pha

t Dun

g Q

uat F

erro

Allo

y JS

CH

oa P

hat D

ung

Qua

t Ste

el P

ipe

JSC

Hoa

Pha

t Dun

g Q

uat S

teel

She

et J

SCH

oa P

hat T

radi

ng In

tern

atio

nal P

te L

td.,

Hoa

Pha

t Mul

ti-Pu

rpos

e Po

rt J

SCH

arm

onia

Co.

, Ltd

. (i)

Prod

ucin

g an

d w

hole

salin

g co

ke c

oal,

expl

oitin

g an

d co

llect

ing

coal

; pro

duci

ng re

fined

pet

role

um p

rodu

cts;

who

lesa

ling

met

als

and

met

al o

res;

and

trad

ing

vario

us k

inds

of c

oal.

Coa

stal

, inl

and

wat

erw

ay a

nd o

cean

tran

spor

tatio

n

Prod

ucin

g st

eel,

iron,

who

lesa

ling

met

als

and

met

al o

res.

Prov

isio

n of

war

ehou

ses,

sto

rage

yar

ds fo

r ren

t; an

d st

orin

g,

load

ing/

unlo

adin

g of

goo

ds.

Prod

uctio

n of

iron

, ste

el a

nd c

ast i

ron

prod

ucts

.Pr

oduc

tion

of ir

on, s

teel

and

cas

t iro

n pr

oduc

ts.

Prod

uctio

n of

iron

, ste

el a

nd c

ast i

ron

prod

ucts

.Tr

adin

g of

iron

, ste

el a

nd c

ast i

ron

prod

ucts

Dire

ct s

uppo

rt s

ervi

ces

for w

ater

way

tran

spor

tatio

n.H

ospi

talit

y se

rvic

es

SUBS

IDIA

RIES

OF

HO

A P

HAT

HA

I DU

ON

G S

TEEL

JSC

SUBS

IDIA

RIES

OF

HO

A P

HAT

HU

NG

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EL C

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.

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AT S

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98.3

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98.4

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1 2

Binh

Van

g O

ne M

embe

r Co.

, Ltd

.

Hoa

Pha

t Mitr

aco

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ing

JSC

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g iro

n or

e, n

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, bau

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er ra

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res;

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adin

g m

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al o

res.

SUBS

IDIA

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G M

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AL

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ENT

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ted

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2014

of

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y of

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ance

)

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99.9

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17 18 19 20

Hoa

Pha

t Ste

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o., L

td. (

prev

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ly

know

n as

Hoa

Pha

t Min

ing

and

Con

stru

ctio

n M

achi

nery

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ufac

turin

g C

o., L

td.)

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Pha

t Mec

hani

cal M

anuf

actu

ring

Co.

, Ltd

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oa P

hat P

rest

ress

ed C

oncr

ete

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l C

o., L

td.

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Noi

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dust

rial Z

one

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agem

ent

and

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ratio

n C

ompa

ny

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ucin

g an

d tr

adin

g co

nstr

uctio

n an

d m

inin

g m

achi

nes;

pr

oduc

ing

engi

nes

and

turb

ines

.

Repa

iring

and

pro

duci

ng m

echa

nica

l pro

duct

s; le

asin

g m

achi

nes,

equ

ipm

ent a

nd v

ehic

les.

Prod

uctio

n of

iron

, ste

el a

nd c

ast i

ron

prod

ucts

.

Civ

il an

d in

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free

hold

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ease

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tate

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grat

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stm

ent a

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onst

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of in

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truc

ture

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an w

ater

tr

adin

g, w

aste

col

lect

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exp

loita

tion,

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tmen

t and

sup

ply

of

wat

er a

nd o

pera

tion

of re

stau

rant

s.

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IDIA

RIES

OF

HO

A P

HAT

MET

AL

PRO

DU

CIN

G C

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EVIO

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Y KN

OW

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S H

OA

PH

AT E

QU

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ENT

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CC

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RIES

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., LT

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OF

HO

A P

HAT

URB

AN

DEV

ELO

PMEN

T A

ND

CO

NST

RUC

TIO

N J

SC

99.9

67%

99.9

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99.9

44%

99.9

67%

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99.9

8%10

0%

99.9

67%

99.9

67%

99.9

44%

99.9

67%

100%

100%

99.9

8%10

0%

13 14 15 16

Hoa

Pha

t Col

d Ro

lled

Stee

l Co.

, Ltd

.H

oa P

hat B

inh

Duo

ng S

teel

Pip

e O

ne

Mem

ber C

o., L

td.

Hoa

Pha

t Da

Nan

g St

eel P

ipe

Co.

, Ltd

. H

oa P

hat L

ong

An

Stee

l Pip

e O

ne

Mem

ber C

o., L

td.

Prod

ucin

g of

col

d ro

lled

stee

l pro

duct

s.Pr

oduc

ing

and

trad

ing

vario

us k

inds

of s

teel

pip

es.

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ucin

g an

d tr

adin

g va

rious

kin

ds o

f ste

el p

ipes

.Pr

oduc

ing

and

trad

ing

vario

us k

inds

of s

teel

pip

es.

SUBS

IDIA

RIES

OF

HO

A P

HAT

STE

EL P

IPE

CO

., LT

D.

No.

Tier

-2 s

ubsi

diar

ies

Prin

cipa

l act

ivit

ies

1/1/

2019

1/1/

2019

31/1

2/20

1931

/12/

2019

Perc

enta

ge o

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hip

and

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g rig

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e G

roup

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ge o

f dire

ct

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p of

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r-1 s

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s

ANNUAL REPORT 2019

101

99.8

99%

99.9

74%

99.9

99%

99.9

99%

99.9

99%

99.9

0%

99.9

75%

100%

100%

100%

99.8

99%

99.9

74%

99.9

99%

99.9

99%

99.9

99%

99.9

0%

99.9

75%

100%

100%

100%

25 26 27 28 29

Hoa

Pha

t Tra

ding

Co.

, Ltd

.

Hoa

Pha

t Liv

esto

ck D

evel

opm

ent J

SC

Hoa

Pha

t Hun

g Ye

n Fe

eds

Co.

, Ltd

.

Hoa

Pha

t Don

g N

ai F

eeds

Co.

, Ltd

.

Hoa

Pha

t Pou

ltry

Co.

, Ltd

.

Rais

ing

buffa

los,

cow

s; p

rovi

ding

pla

ntat

ion,

rais

ing,

pos

t-ha

rves

t ser

vice

s.Ra

isin

g an

d pr

ovid

ing

bree

ding

and

mar

ket p

igs.

Prod

ucin

g an

d tr

adin

g fe

eds

and

mat

eria

ls fo

r pro

duci

ng fe

eds

for c

attle

, pou

ltry

and

aqua

cultu

re s

ecto

r.Pr

oduc

ing

and

proc

essi

ng fe

eds

for c

attle

, pou

ltry

and

aqua

cultu

re s

ecto

r.Ra

isin

g po

ultr

y.

SUBS

IDIA

RIES

OF

HO

A P

HAT

AG

RIC

ULT

URE

DEV

ELO

PMEN

T JS

C

HO

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UP

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OM

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ED F

INA

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DED

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rm B

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ircul

ar N

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date

d 22

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r 20

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f th

e M

inis

try

of F

inan

ce)

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99.8

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99.8

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99.9

9%99

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99.8

5%

99.8

5%

99.8

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21 22 23 24

Hoa

Mac

Indu

stria

l Zon

e M

anag

emen

t an

d O

pera

tion

Co.

, Ltd

.

Hoa

Pha

t Hun

g Ye

n U

rban

Dev

elop

men

t an

d C

onst

ruct

ion

Co.

, Ltd

.

Gol

den

Gai

n Vi

etna

m J

SCLo

ng V

iet C

onst

ruct

ion

JSC

Civ

il an

d in

dust

rial c

onst

ruct

ion,

free

hold

or l

ease

hold

real

es

tate

trad

ing,

wor

ksho

p an

d of

fice

leas

ing,

inte

grat

ed

inve

stm

ent a

nd c

onst

ruct

ion

of in

fras

truc

ture

, cle

an w

ater

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adin

g, w

aste

col

lect

ion,

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loita

tion,

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tmen

t and

sup

ply

of

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er.

Trad

ing

of re

al e

stat

e, la

nd u

se ri

ghts

of l

and

owne

rs, l

and

user

s or

land

less

ees

Real

est

ate

trad

ing.

Real

est

ate

trad

ing.

No.

Tier

-2 s

ubsi

diar

ies

Prin

cipa

l act

ivit

ies

1/1/

2019

1/1/

2019

31/1

2/20

1931

/12/

2019

Perc

enta

ge o

f ow

ners

hip

and

votin

g rig

hts

of th

e G

roup

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ge o

f dire

ct

owne

rshi

p of

tie

r-1 s

ubsid

iarie

s


102

Form

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9 –

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/HN

(Issu

ed u

nder

Circ

ular

No.

202

/201

4/TT

-BTC

da

ted

22 D

ecem

ber

2014

of

the

Min

istr

y of

Fin

ance

)

No.

Tier

-3 s

ubsi

diar

iest

Prin

cipa

l act

ivit

ies

1/1/

2019

1/1/

2019

31/1

2/20

1931

/12/

2019

Perc

enta

ge o

f ow

ners

hip

of

the

Gro

up

Perc

enta

ge o

f dire

ct

owne

rshi

p of

tier

-2

subs

idia

ries

95.1

11%

99.7

36%

72.6

47%

99.8

99%

99.8

99%

-

95.2

7%

99.9

0%

72.7

2%

100%

100% -

100%

100%

100%

100%

95.1

11%

99.7

36%

72.6

47%

99.8

99%

99.8

99%

99.8

99%

99.9

74%

99.9

74%

99.9

74%

99.9

74%

95.2

7%

99.9

0%

72.7

2%

100%

100%

100%

100%

100%

100%

100%

1 2 3 4 5 6 7 8 9 10

Han

oi In

vest

men

t and

Ser

vice

s JS

C H

anoi

Tra

nspo

rtat

ion

and

Trad

ing

Serv

ices

JSC

Hoa

Pha

t Qua

ng B

inh

Bree

ding

C

o., L

td.

Viet

Hun

g Br

eedi

ng O

ne-m

embe

r Co.

, Ltd

.D

ong

Phat

Bre

edin

g O

ne-m

embe

r Co.

, Lt

d.D

rago

n Tr

adin

g an

d In

vest

men

t Pty

Ltd

. (ii)

Thai

Thu

y Br

eedi

ng C

o., L

td.

Lac

Thuy

Bre

edin

g C

o., L

td.

Hoa

Yen

Bre

edin

g O

ne M

embe

r Co.

, Ltd

. H

oa P

hat B

ac G

iang

Bre

edin

g O

ne-m

embe

r Co.

, Ltd

.

Spor

ts, e

nter

tain

men

t act

iviti

es, i

nclu

ding

tenn

is, b

adm

into

n,

billi

ards

, sw

imm

ing,

bod

y-bu

ildin

g, g

ames

and

real

est

ate

trad

ing.

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ds tr

ansp

ort b

y au

tom

obile

s, in

ter-p

rovi

ncia

l pas

seng

er

tran

spor

t by

auto

mob

iles,

mac

hine

ry a

nd e

quip

men

t rep

air,

dom

estic

trav

el, p

etro

l and

oil

trad

ing

agen

cy, t

rans

port

ag

ency

ser

vice

s an

d au

tom

obile

s ke

epin

g se

rvic

es, o

ffice

, w

areh

ouse

and

sto

rage

yar

d se

rvic

es a

nd re

al e

stat

e tr

adin

g.

Rais

ing

lives

tock

and

pou

ltry:

pro

vidi

ng p

lant

atio

n se

rvic

es.

Rais

ing

lives

tock

and

pou

ltry:

pro

vidi

ng p

lant

atio

n se

rvic

es.

Rais

ing

lives

tock

and

pou

ltry:

pro

vidi

ng p

lant

atio

n se

rvic

es.

Impo

rt, e

xpor

t, tr

adin

g an

d di

strib

utio

n of

live

stoc

k, p

oultr

y,

othe

r agr

icul

tura

l pro

duct

s, o

re, c

oal,

iron

and

stee

l.

Rais

ing

pigs

, rai

sing

pou

ltry,

rais

ing

othe

r ani

mal

s.Ra

isin

g po

ultr

y, ra

isin

g ot

her a

nim

als.

Rais

ing

pigs

, rai

sing

oth

er a

nim

als.

Rais

ing

pigs

, rai

sing

pou

ltry,

rais

ing

othe

r ani

mal

s.

SUBS

IDIA

RIES

OF

GO

LDEN

GA

IN V

IETN

AM

JSC

SUBS

IDIA

RIES

OF

HO

A P

HAT

TRA

DIN

G C

O.,

LTD

.

SUBS

IDIA

RIES

OF

HO

A P

HAT

LIV

ESTO

CK

DEV

ELO

PMEN

T JS

C

HO

A P

HAT

GRO

UP

JOIN

T ST

OC

K C

OM

PAN

YN

OTE

S TO

TH

E C

ON

SOLI

DAT

ED F

INA

NC

IAL

STAT

EMEN

TS F

OR

THE

YEA

R EN

DED

31

DEC

EMBE

R 20

19 (C

ON

TIN

UED

)

99.9

74%

99.9

74%

99.9

74%

99.9

74%

ANNUAL REPORT 2019

103

No.

Tier

-3 s

ubsi

diar

iest

Prin

cipa

l act

ivit

ies

1/1/

2019

1/1/

2019

31/1

2/20

1931

/12/

2019

Perc

enta

ge o

f ow

ners

hip

of

the

Gro

up

Perc

enta

ge o

f dire

ct

owne

rshi

p of

tier

-2

subs

idia

ries

99.9

74%

99.9

72%

99.9

99%

99.9

99%

99.9

99%

100%

99.9

98%

100%

100%

100%

99.9

74%

99.9

72%

99.9

99%

99.9

99%

99.9

99%

100%

99.9

98%

100%

100%

100%

11 12 13 14 15

Hoa

Pha

t Lan

g So

n Br

eedi

ng

One

-mem

ber C

o., L

td.

Hoa

Phu

oc B

reed

ing

Co.

, Ltd

.

Hoa

Pha

t Phu

Tho

Pou

ltry

One

Mem

ber C

o., L

td.

Hoa

Pha

t Don

g N

ai P

oultr

y O

ne M

embe

r Co.

, Ltd

.Va

n Th

ang

Phu

Tho

JSC

(pre

viou

sly

know

n as

Van

Tha

ng L

ives

tock

One

M

embe

r Co.

, Ltd

.)

Rais

ing

pigs

, rai

sing

pou

ltry,

rais

ing

othe

r ani

mal

s.

Rais

ing

bree

ding

and

mar

ket p

igs.

Rais

ing

pigs

, rai

sing

pou

ltry,

rais

ing

othe

r ani

mal

s.

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ing

pigs

, rai

sing

pou

ltry,

rais

ing

othe

r ani

mal

s.

Rais

ing

lives

tock

and

pou

ltry,

pro

vidi

ng p

lant

atio

n se

rvic

es.

SUBS

IDIA

RIES

OF

HO

A P

HAT

LIV

ESTO

CK

DEV

ELO

PMEN

T JS

C

SUBS

IDIA

RIES

OF

HO

A P

HAT

PO

ULT

RY C

O.,

LTD

HO

A P

HAT

GRO

UP

JOIN

T ST

OC

K C

OM

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YN

OTE

S TO

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E C

ON

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DAT

ED F

INA

NC

IAL

STAT

EMEN

TS F

OR

THE

YEA

R EN

DED

31

DEC

EMBE

R 20

19 (C

ON

TIN

UED

)Fo

rm B

09

– D

N/H

N(Is

sued

und

er C

ircul

ar N

o. 2

02/2

014/

TT-B

TC

date

d 22

Dec

embe

r 20

14 o

f th

e M

inis

try

of F

inan

ce)

(i)

Thes

e ar

e ti

er-2

sub

sidi

arie

s th

at w

ere

esta

blis

hed

duri

ng t

he y

ear.

(ii)

Thes

e ar

e ti

er-3

sub

sidi

arie

s th

at w

ere

esta

blis

hed

duri

ng t

he y

ear.

All

the

Gro

up’s

sub

sidi

arie

s ar

e in

corp

orat

ed in

Vie

tnam

, exc

ept

Hoa

Pha

t Tr

adin

g In

tern

atio

nal P

te L

td.,

whi

ch is

inco

rpor

ated

in S

inga

pore

and

Dra

gon

Trad

ing

and

Inve

stm

ent

Pty

Ltd.

, whi

ch is

inco

rpor

ated

in A

ustr

alia

.

As

at 3

1 D

ecem

ber

2019

, the

Gro

up h

ad 2

2,30

0 em

ploy

ees

(1/1

/201

9: 1

9,91

4 em

ploy

ees)

.


104

HOA PHAT GROUP JOINT STOCK COMPANYNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED)



2. BASIS OF PREPARATION2.1 Statement of compliance

These consolidated financial statements have been prepared in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System for Enterprises and the relevant statutory requirements applicable to financial reporting.

2.2 Basis of measurement The consolidated financial statements, except for the consolidated statement of cash flows, are prepared on the accrual basis using the historical cost concept. The consolidated statement of cash flows is prepared using the indirect method.

2.3 Annual accounting period The annual accounting period of the Group is from 1 January to 31 December.

2.4 Accounting and presentation currency The Group’s accounting currency is Vietnam Dong (“VND”), which is also the currency used for consolidated financial statement presentation purpose.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following significant accounting policies have been adopted by the Group in the preparation of these consolidated financial statements.

The accounting policies that have been adopted by the Group in the preparation of these consolidated financial statements are consistent with those adopted in the preparation of the latest consolidated annual financial statements.

3.1 Basis of consolidation (a) Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of the subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

(b) Non-controlling interestsNon-controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at date of acquisition.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners. The difference between the change in the Group’s share of net assets of the subsidiary and any consideration paid or received is recorded directly in retained profits under equity.

(c) Loss of controlWhen the Group losses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related non-controlling interest and other components of equity. Any resulting gain or loss is recognised in the consolidated income statement. Any interest retained in the former subsidiary when control is lost is stated at the carrying amount of the retained investment

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in the consolidated financial statements adjusted for appropriate shares of changes in equity of the investee since the acquisition date, if significant influence in the investee is maintained, or otherwise stated at cost.

(d) Associates Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Associates are accounted for using the equity method. The consolidated financial statements include the Group’s share of the income and expenses of the associates, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in associates, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associates.

(e) Transactions eliminated on consolidationIntra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains and losses arising from transactions with equity accounted associates are eliminated against the investment to the extent of the Group’s interest in the associates.

(f) Business combination Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account.

3.2 Foreign currency(a) Foreign currency transactions

Transactions in currencies other than VND during the year have been translated into VND at rates approximating actual rates of exchange ruling at the transaction dates.

Monetary assets and liabilities denominated in currencies other than VND are translated into VND at the account transfer buying rates (for assets) and account transfer selling rates (for liabilities) at the end of the accounting period quoted by the commercial bank where the Group most frequently conducts transactions.

All foreign exchange differences are recorded in the consolidated statement of income.(b) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to VND at exchange rates as at 31 December 2019. The income and expenses of foreign operations are translated to VND at exchange rates at the dates of transactions.

Foreign currency differences arising from the translation of foreign operations are recognised in the balance sheet under the caption “Foreign exchange differences” in equity.

3.3 Cash and cash equivalents


106

Cash comprises cash balances and call deposits. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

3.4 Investments (a) Held-to-maturity investments

Held-to-maturity investments are those that the Company’s and its subsidiaries’ management has the intention and ability to hold until maturity. Held-to-maturity investments include term deposits at bank and bonds. These investments are stated at costs less allowance for doubtful debts.

(b) Investments in equity instruments of other entities Investments in equity instruments of other entities are initially recognised at cost which include purchase price plus any directly attributable transaction costs. Subsequent to initial recognition, these investments are stated at cost less allowance for diminution in value. An allowance is made for diminution in investment values if the investee has suffered a loss, except where such loss was anticipated by the Group’s management before making the investment. The allowance is reversed if the investee subsequently made a profit that offsets the previous loss for which the allowance had been made. An allowance is reversed only to the extent that the investment’s carrying amount does not exceed the carrying amount that would have been determined if no allowance had been recognised.

3.5 Accounts receivable Trade and other receivables are stated at cost less allowance for doubtful debts.

Allowance for doubtful debts is established for amount of outstanding receivables at the balance sheet date which are overdue more than 6 months or are doubtful of recovery. Increases and decreases to the allowance for doubtful debts balance are recorded as general and administration expense account in the consolidated statement of income.

3.6 Inventories Inventories are stated at the lower of cost and net realisable value.

Cost is determined on a weighted average basis and includes all costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price of inventory items, less the estimated costs of completion and direct selling expenses.

Allowance for inventories is established for the estimated losses arising due to the impairment of value (through diminution, damage or obsolescence) of inventories owned by the Group, based on appropriate evidences of impairment available at the balance sheet date. Increases and decreases to the allowances for inventories balance are recorded in cost of goods sold account in the consolidated statement of income.Manufacturing, trading and production of goodsCost in the case of finished goods and manufactured work in progress includes raw materials, direct




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labour and attributable production overheads. The Group applies the perpetual method of accounting for inventories.Real estate development for future salesCost is determined on a specific identification basis and includes land costs and other related development and infrastructure costs, other direct costs and attributable manufacturing overheads.

3.7 Tangible fixed assets (a) Cost

Tangible fixed assets are stated at cost less accumulated depreciation. The initial cost of a tangible fixed asset comprises its purchase price, including import duties, non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition for its intended use. Expenditure incurred after tangible fixed assets have been put into operation, such as repair and maintenance cost, except overhaul and major maintenance expenses recognised in long-term prepaid expenses (Note 3.11(b)), is charged to the consolidated statement of income in the year in which the cost is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of tangible fixed assets beyond their originally assessed standard of performance, the expenditure is capitalised as an additional cost of tangible fixed assets.

(b) DepreciationDepreciation is computed on a straight-line basis over the estimated useful lives of tangible fixed assets. The estimated useful lives are as follows:

• buildings 5 – 50 years• machinery and equipment 1 – 25 years• motor vehicles 1 – 30 years• office equipment 2 – 12 years• livestock 3 – 5 years• others 2 – 12 years

3.8 Intangible fixed assets (a) Land use rights

Land use rights comprise:• those granted by the State for which land use payments are collected;• those acquired in a legitimate transfer; and • rights to use leased land obtained before the effective date of Land Law (2003) for which payments have been made in advance for more than 5 years and supported by land use rights certificate issued by competent authority.

Land use rights are stated at cost less accumulated amortisation. The initial cost of land use rights comprise the purchase price and any directly attributable costs incurred in conjunction with securing the land use rights. For land use rights with definite useful lives, amortisation is computed on a straight-line basis over 10 to 50 years. No amortisation is provided for land use rights with indefinite useful lives.

(b) Software Cost of acquiring new software, which is not an integral part of the related hardware, is capitalised and treated as an intangible asset. Software cost is amortised on a straight-line basis over 3 to 8 years.





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3.9 Investment property held to earn rental(a) Cost

Investment property held to earn rental is stated at cost less accumulated depreciation. The initial cost of an investment property held to earn rental comprises its purchase price, cost of land use rights and any directly attributable expenditures of bringing the property to the condition necessary for it to be capable of operating in the manner intended by management. Expenditure incurred after the investment property held to earn rental has been put into operation, such as repairs and maintenance, is charged to the consolidated statement of income in the year in which the expenditure is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in future economic benefits in excess of the originally assessed standard of performance of the existing investment property held to earn rental, the expenditure is capitalised as an additional cost of the investment property.

(b) Depreciation Depreciation is computed on a straight-line basis over the estimated useful lives of investment property held to earn rental. The estimated useful lives are as follows:

• buildings 3 – 49 years

For land use rights with indefinite useful live, depreciation is not required.

3.10 Construction in progress Construction in progress represents (i) the costs of construction and machinery which have not been fully completed or installed and (ii) the costs directly attributable to raising breeding pigs which are growing and not mature enough for producing piglets. No depreciation is provided for construction in progress during the period of construction, installation and the period in which breeding pigs are not mature enough for producing piglets.

3.11 Long-term prepaid expenses (a) Tools and instruments

Tools and instruments include assets held for use by the Group in the normal course of business. Tools and instruments are labour materials not satisfying requirements pertaining to value and useful life prescribed in regulations of fixed assets. Cost of tools and instruments are amortised on a straight-line basis over a maximum period of 3 years.

(b) Overhaul and major maintenance expensesThese comprise major overhaul and maintenance expenses incurred on a periodical basis during the use of assets. These expenses are initially stated at cost and are amortised to the consolidated statement of income on a straight line basis over 2 to 3 years.

(c) Prepaid land costs Prepaid land costs comprise prepaid land lease rentals, including those for which the Group obtained land use rights certificate but are not qualified as intangible fixed assets under prevailing regulations and other costs incurred in conjunction with securing the use of leased land. These costs are recognised in the consolidated statement of income on a straight-line basis over the term of the lease.

(d) Site clearance costs




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Site clearance costs comprise compensation and clearance fee paid by the Group. These expenses are initially stated at cost and amortised on a straight-line basis over the useful lives of land lease period.

(e) Pre-operating expenses Pre-operating expenses are recorded in the statement of income, except for establishment costs and expenditures on training, advertising and promotional activities incurred from the incorporation date to the commercial operation date. These expenses are recognised as long-term prepaid expenses, initially stated at cost, and are amortised on a straight-line basis over a period of no more than three years.

3.12 GoodwillGoodwill arises on the acquisition of subsidiaries. Goodwill is measured at cost less accumulated amortisation. Cost of goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (gain from bargain purchase), it is recognised immediately in the consolidated statement of income.

Goodwill arising on acquisition of a subsidiary is amortised on a straight-line basis over 10 years. Carrying value of goodwill arising on acquisition of a subsidiary is written down to recoverable amount as management determines that it is not fully recoverable.

3.13 Trade and other payables Trade and other payables are stated at their cost.

3.14 ProvisionsA provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.WarrantiesThe provision for warranties relates mainly to goods sold and services rendered during the year. The provision is based on estimates derived from historical warranty data associated with similar products and services.

3.15 Share capital(a) Ordinary shares

Ordinary shares are recognised at par value. The excess of proceeds from share issuance over the par value of shares issued is recorded as share premium. Incremental costs directly attributable to the issue of shares, net of tax effects, are recognized as a deduction from share premium.

(b) Issuance of bonus shares to employeesUnder the Company’s policies, bonus shares issued for employees from share premium are recognised at par value and not recognised as expenses in the consolidated statements of income.

(c) Withdrawal of bonus shares to employees as treasury sharesWhen bonus shares recognised as equity are withdrawn, the par value of these shares is recognised





110

in retained profits under equity. Withdrawn shares are classified as treasury shares under equity. When treasury shares are sold for reissue, subsequently, the cost of the reissued shares is determined on a weighted average basis. Any difference between the amount received and the cost of the reissued shares is presented within share premium.

3.16 Classification of financial instruments Solely for the purpose of providing disclosures about the significance of financial instruments to the Group’s consolidated financial position and consolidated results of operations and the nature and extent of risk arising from financial instruments, the Group classifies its financial instruments as follows:

(a) Financial assetsFinancial assets at fair value through profit or lossA financial asset at fair value through profit or loss is a financial asset that meets either of the following conditions:

• It is considered by the Board of Directors as held for trading. A financial asset is considered as held for trading if:

- it is acquired principally for the purpose of selling it in the near term;- there is evidence of a recent pattern of short-term profit-taking; or- a derivative (except for a derivative that is financial guarantee contract or a designated and effective hedging instrument).

• Upon initial recognition, it is designated by the Group as at fair value through profit or loss.Held-to-maturity investmentsHeld-to-maturity investments are non-derivative financial assets with fixed or determinable payments and a fixed maturity that the Group has the positive intention and ability to hold to maturity, other than:

• Those that the Group upon initial recognition designates as at fair value through profit or loss;• Those that the Group designates as available-for-sale; and • Those that meet the definition of loans and receivables.

Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market, other than those:

• That the Group intends to sell immediately or in the near term, which are classified as held for trading, and those that the Group on initial recognition designates as at fair value through profit or loss;• That the Group upon initial recognition designates as available-for-sale; or• For which the Group may not recover substantially all of its initial investment, other than because of credit deterioration, which are classified as available-for-sale.

Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivative financial assets that are designated as available for sale or that are not classified as:

• Financial assets at fair value through profit or loss;• Held-to-maturity investments; or• Loans and receivables.

(b) Financial liabilitiesFinancial liabilities at fair value through profit or loss A financial liability at fair value through profit or loss is a financial liability that meets either of the




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following conditions:• It is considered by the Board of Directors as held for trading. A financial liability is considered as held for trading if:

- it is incurred principally for the purpose of repurchasing it in the near term;- there is evidence of a recent pattern of short-term profit-taking; or- a derivative (except for a derivative that is financial guarantee contract or a designated and effective hedging instrument).

• Upon initial recognition, it is designated by the Group as at fair value through profit or loss.Financial liabilities carried at amortised costFinancial liabilities which are not classified as financial liabilities at fair value through profit or loss are classified as financial liabilities carried at amortised cost.

The above described classification of financial instruments is solely for presentation and disclosure purpose and is not intended to be a description of how the instruments are measured. Accounting policies for measurement of financial instruments are disclosed in other relevant notes.

3.17 Income tax Income tax on the consolidated profit or loss for the year comprises current and deferred tax. Income tax is recognised in the consolidated statement of income except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the end of the accounting period, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amounts of assets and liabilities using the tax rates enacted or substantively enacted at the end of the accounting period.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

3.18 Revenue and other income(a) Goods sold

Revenue from the sale of goods is recognised in the consolidated statement of income when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due or the possible return of goods. Revenue on sales of goods is recognised at the net amount after deducting sales discounts stated on the invoice.

(b) Services renderedRevenue from services rendered is recognised in the consolidated statement of income in proportion to the stage of completion of the transaction. The stage of completion is assessed by reference to surveys of work performed. No revenue is recognised if there are significant





112

uncertainties regarding recovery of the consideration due.(c) Revenue from sublease of leasehold land

Revenue from sublease of leasehold land is recognised in the consolidated statement of income when the following conditions are met:• The leasehold land has been completed and transferred to the buyer. The Group has transferred the risks and rewards associated with the ownership of the real estate to the buyer;• The Group no longer holds the right to manage (as the owner of the real estate) or control the real estate;• The revenue is reliably measured; • The Group has received or will receive economic benefits from the sale of real estate; and• The expenses related to the sublease of leasehold land are determinable.

(d) Rental incomeRental income from leased property is recognised in the consolidated statement of income on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income.

(e) Sales of apartmentsRevenue from the sale of apartments is recognised in the consolidated statement of income when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due. The transfer of significant risks and rewards is determined to be at the time of completion and hand over of the apartments.

(f) Interest incomeInterest income is recognised on a time basis with reference to the principal outstanding and the applicable interest rate. Interest income from deposits during the period of construction is set off with borrowing costs relating to borrowings in respect of the construction of qualifying assets, net of the remaining difference from adjustment to decrease the value of investment.

(g) Dividend incomeDividend income is recognised when the right to receive dividend is established.

3.19 Operating lease paymentsPayments made under operating leases are recognised in the consolidated statement of income on a straight-line basis over the term of the lease. Lease incentives received are recognised in the consolidated statement of income as an integral part of the total lease expense.

3.20 Borrowing costsBorrowing costs are recognised as an expense in the year in which they are incurred, except where the borrowing costs relate to borrowings in respect of the construction of qualifying assets, in which case the borrowing costs incurred during the period of construction are capitalized as part of the cost of the assets concerned.

3.21 Earnings per shareThe Group presents basic earnings per share for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to the ordinary shareholders of the Company (after deducting any amounts appropriated to bonus and welfare funds for the accounting period)




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by the weighted average number of ordinary shares outstanding during the year. At the reporting date, the Group did not have any dilutive potential ordinary shares. Therefore, the presentation of diluted earnings per share is not applicable.

3.22 Related parties Parties are considered to be related to the Group if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions, or where the Group and the other party are subject to common control or significant influence.

Related parties may be individuals, directly or indirectly, having voting rights that give them significant influence over the Group, the Group’s key management personnel, close family members of any individual considered to be a related party.

4. SEGMENT REPORTINGA segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment) or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Group’s primary format for segment reporting is based on business segments. The Group comprises the following main business segments:

• Production and trading of steel: refining steel; casting steel, iron; trading and import-export of steel, steel-producing machinery and equipment; production of industrial steel including steel sheet, hot rolled steel, cold rolled steel, steel pipe, steel scrap; production and trading of steel pipes; production of steel string machinery;• Other industrial production: production and trading of construction equipment; producing and trading various kinds of interior furniture and refrigerant products.• Construction and development of real estate: civil construction, industrial construction, trading of real estate under its ownership or lease from others; leasing houses, offices and investing in construction of infrastructure;• Agriculture: raising pigs, cows, poultry; provision of raising services; processing and preserving meat and meat products; producing feeds for cattle, poultry and aquaculture sector; producing fertilizer and nitrogen compounds; trading agricultural equipment, machineries and accessories; and other relevant auxiliary sectors; and• Financial investment (parent entity): equity investments in other entities.The Group did not present geographical segment because the Board of Directors determines that the Group currently operates in a sole geographical segment which is Vietnam territory.





114

Production and trading of steels

VND

Other industrial production

VND

FOR THE YEAR ENDED 31 DECEMBER 2019

AS AT 31 DECEMBER 2019

Net external revenueNet inter-segment revenue

Total segment revenue

Segment net operating profits

Other incomeOther expensesShare of loss in associatesIncome tax expenses – currentIncome tax (expenses)/benefit– deferred

Net profit after tax

Segment assets

Total assets

Segment liabilities

Total liabilities

2,817,712,434,540108,085,621,241

2,925,798,055,781

433,838,415,313

4,965,484,603(601,653,980)

-(85,209,957,087)

4,456,555,534

357,448,844,383

1,710,025,863,879

1,710,025,863,879

920,714,227,148

920,714,227,148

51,233,120,178,42434,507,078,536,582

85,740,198,715,006

18,349,735,019,472

751,180,909,150(582,603,733,733)

-(1,339,481,995,523)

5,289,924,979

17,184,120,124,345

97,305,517,934,909

97,305,517,934,909

55,469,885,069,405

55,469,885,069,405

FOR THE YEAR ENDED 31 DECEMBER 2019Capital expenditureDepreciation of tangible fixed assets and investment propertiesAmortisation of intangible fixed assetsAmortisation of long-term land prepaid expenses

19,993,459,899,558

2,082,192,603,44315,503,594,66323,192,855,261

36,481,789,960

105,097,946,0842,068,077,8621,922,056,121




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115

Bất động sảnVND

1,622,043,994,33936,560,304,199

1,658,604,298,538

578,705,175,478

4,300,049,645(7,400,744,172)

-(136,141,722,023)

5,175,725,890

444,638,484,818

3,139,152,865,264

3,139,152,865,264

899,017,552,839

899,017,552,839

EliminationVND

AgricultureVND

Real estatesVND

ConsolidatedVND

7,985,316,066,4882,095,876,750

7,987,411,943,238

606,035,403,717

2,836,887,646(5,402,833,606)(1,431,313,615)

(42,474,252,047)(1,019,358,304)

558,544,533,791

5,962,449,415,148

5,962,449,415,148

2,059,970,080,875

2,059,970,080,875

-(34,653,820,338,772)

(34,653,820,338,772)

(10,935,903,061,158)

(105,602,399,567)4,010,518,193

--

70,991,191,424

(10,966,503,751,108)

(6,341,115,979,300)

(6,341,115,979,300)

(5,360,192,974,062)

(5,360,192,974,062)

63,658,192,673,791-

63,658,192,673,791

9,032,410,952,822

657,680,931,477(591,998,447,298)

(1,431,313,615)(1,603,307,926,680)

84,894,039,523

7,578,248,236,229

101,776,030,099,900

101,776,030,099,900

53,989,393,956,205

53,989,393,956,205

494,067,552,518

58,605,925,717396,737,776

-

644,812,426,291

314,171,386,8621,048,564,3877,620,698,407

(343,450,093,667)

1,343,588,304(12,212,229)

(729,190,280)

20,825,371,574,660

2,561,411,450,41019,004,762,45932,006,419,509





116

Production and trading of steels (VND)

Other industrial production (VND)

Real estatesVND

FOR THE YEAR ENDED 31 DECEMBER 2018

AS AT 31 DECEMBER 2018

Net external revenueNet inter-segment revenue

Total segment revenue

Segment net operating profits

Other incomeOther expensesIncome tax expenses – currentIncome tax (expenses)/benefit– deferred

Net profit after tax

Segment assets

Total assets

Segment liabilities

Total liabilities

3,143,642,159,1851,512,209,181,834

4,655,851,341,019

400,450,243,651

6,427,041,940(505,693,124)

(77,598,081,433)

4,353,955,612

333,127,466,646

2,352,850,909,969

2,352,850,909,969

1,156,149,078,573

1,156,149,078,573

46,424,438,557,48424,846,558,699,153

71,270,997,256,637

9,074,781,411,234

481,555,388,120(473,877,140,311)

(1,282,407,631,700)

(15,011,401,092)

7,785,040,626,251

70,112,614,533,225

70,112,614,533,225

34,668,413,777,196

34,668,413,777,196

1,672,193,024,47069,825,151,585

1,742,018,176,055

608,767,909,016

2,361,816,807(10,517,197,278)

(126,462,893,836)

9,288,714,217

483,438,348,926

3,103,472,590,479

3,103,472,590,479

1,295,312,499,076

1,295,312,499,076

FOR THE YEAR ENDED 31 DECEMBER 2018Capital expenditureDepreciation of tangible fixed assets and investment propertiesAmortisation of intangible fixed assetsAmortisation of long-term land prepaid expenses

26,738,252,580,611

1,777,947,106,997

4,034,426,400

222,372,671,125

272,317,873,374

151,603,926,387

2,702,816,090

12,761,252,832

87,759,535,150

39,907,758,171

343,278,188

4,133,271,398




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EliminationVND

AgricultureVND

ConsolidatedVND

Financial investment (parent entity) (VND)

4,596,184,638,62020,993,986,355

4,617,178,624,975

167,737,638,337

4,648,172,875(4,911,728,653)

(15,845,962,217)

(366,828)

151,627,753,514

4,736,137,299,885

4,736,137,299,885

1,587,916,921,745

1,587,916,921,745

-(26,594,337,018,618)

(26,594,337,018,618)

(7,474,354,333,886)

(12,014,153,612)3,387,588,122

-

37,167,019,567

(7,445,813,879,809)

(3,365,897,542,576)

(3,365,897,542,576)

(2,740,634,936,813)

(2,740,634,936,813)

-144,749,999,691

144,749,999,691

7,294,706,264,480

5,878,321,906(3,448,677,322)

(4,005,518,365)

-

7,293,130,390,699

1,283,829,879,943

1,283,829,879,943

1,632,900,490,338

1,632,900,490,338

55,836,458,379,759-

55,836,458,379,759

10,072,089,132,832

488,856,588,036(489,872,848,566)

(1,506,320,087,551)

35,797,921,476

8,600,550,706,227

78,223,007,670,925

78,223,007,670,925

37,600,057,830,115

37,600,057,830,115

531,980,846,312

255,399,752,105

944,383,552

38,883,623,930

119,758,395,348

25,698,547,463

3,201,650,812

8,669,289,252

(156,713,428,631)

(11,414,656,220)

(12,212,230)

(1,411,580,970)

27,593,355,802,164

2,239,142,434,903

11,214,342,812

285,408,527,567





118

1/1/2019VND

31/12/2019VND

Cash and cash equivalents at 31 December 2019 included VND3,000 million (1/1/2019: VND231,499 million) pledged with banks as security for loans granted to the Group.

Cash equivalents at 31 December 2019 included VND190,000 million (1/1/2019: Nil) pledged with banks as security for L/C contracts of Hoa Phat Dung Quat Steel JSC, a tier 1 subsidiary of the Group.

5. CASH AND CASH EQUIVALENTS

Cash on handCash in banksCash in transitCash equivalents

16,566,142,0921,661,725,195,112

22,915,0002,866,586,000,000

4,544,900,252,204

21,227,327,4401,801,074,808,017

-693,315,000,000

2,515,617,135,457




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119

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DAT

ED F

INA

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IAL

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EMEN

TS

FOR

THE

YEA

R EN

DED

31

DEC

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R 20

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ON

TIN

UED

)

Form

B 0

9 –

DN

/HN

(Issu

ed u

nder

Circ

ular

No.

202

/201

4/TT

-BTC

da

ted

22 D

ecem

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2014

of

the

Min

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tV

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6.

INV

ESTM

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6.1

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d-t

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ity

inve

stm

ents

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d-to

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urity

inve

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ort-

term

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rm d

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its (i

)

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d-to

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urity

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ents

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ng-t

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rm d

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its (i

i)•

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s (ii

i)

3,72

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5 (*) -

(*)

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5

65,8

84,9

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65,8

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0

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-

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0 (*)

(*)

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(i)

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e re

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term

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s w

ith

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ter

m o

f no

mor

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an 1

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at

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m

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dep

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7.4

%

to 7

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(201

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% t

o 7.

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er a

nnum

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(iii)

Thes

e re

pres

ent

the

bond

s is

sued

by

Viet

nam

Joi

nt S

tock

Com

mer

cial

Ban

k fo

r In

dust

ry a

nd T

rade

, mat

urin

g in

202

6 an

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rnin

g an

nual

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rest

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e at

the

ref

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ce in

tere

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e re

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e is

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of

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dual

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cial

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k fo

r In

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ry a

nd T

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, Joi

nt S

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cial

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k Fo

r Fo

reig

n Tr

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of V

iet

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, Joi

nt S

tock

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mer

cial

Ban

k fo

r In

vest

men

t an

d D

evel

opm

ent

of V

ietn

am, a

nd B

ank

for

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icul

ture

and

Rur

al D

evel

opm

ent.

(*)

The

Gro

up h

as n

ot d

eter

min

ed f

air

valu

es o

f th

ese

finan

cial

inst

rum

ents

for

dis

clos

ure

in t

he c

onso

lidat

ed f

inan

cial

sta

tem

ents

bec

ause

info

rmat

ion

abou

t th

eir

mar

ket

pric

es is

not

ava

ilabl

e an

d th

ere

is c

urre

ntly

no

guid

ance

on

dete

rmin

atio

n of

fai

r va

lue

usin

g va

luat

ion

tech

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es u

nder

Vie

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ese

Acc

ount

ing

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dard

s or

the

Vie

tnam

ese

Acc

ount

ing

Syst

em f

or E

nter

pris

es.

The

fair

val

ues

of t

hese

fin

anci

al in

stru

men

ts m

ay d

iffer

fro

m t

heir

car

ryin

g am

ount

s.


120

6.2

Long

-ter

m f

inan

cial

inve

stm

ents

(*) T

he G

roup

has

not

det

erm

ined

fair

val

ues

of t

hese

fina

ncia

l ins

trum

ents

for

disc

losu

re in

the

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solid

ated

fina

ncia

l sta

tem

ents

bec

ause

info

rmat

ion

abou

t th

eir

mar

ket

pric

es is

not

ava

ilabl

e an

d th

ere

is c

urre

ntly

no

guid

ance

on

dete

rmin

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fai

r va

lue

usin

g va

luat

ion

tech

niqu

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nder

Vie

tnam

ese

Acc

ount

-in

g St

anda

rds

or t

he V

ietn

ames

e A

ccou

ntin

g Sy

stem

for

Ent

erpr

ises

. Th

e fa

ir v

alue

s of

the

se f

inan

cial

inst

rum

ents

may

diff

er f

rom

the

ir c

arry

ing

amou

nts.

Equi

ty in

vest

men

ts in

ot

her e

ntiti

es•

Bac

Ha

Noi

Urb

an

Dev

elop

men

t JSC

Han

oi,

Viet

nam

7.00

%7.

99%

700,

000,

000

(*)

7.00

%7.

99%

(*)

700,

000,

000

31/1

2/20

191/

1/20

19

Add

ress

% o

f eq

uity

ow

ned

% o

f eq

uity

ow

ned

% o

f vo

ting

ri

ghts

% o

f vo

ting

ri

ghts

Car

ryin

g am

ount

VN

DC

arry

ing

amou

ntV

ND

Fair

val

ueV

ND

Fair

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ND

HO

A P

HAT

GRO

UP

JOIN

T ST

OC

K C

OM

PAN

YN

OTE

S TO

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DAT

ED F

INA

NC

IAL

STAT

EMEN

TS

FOR

THE

YEA

R EN

DED

31

DEC

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R 20

19 (C

ON

TIN

UED

)

Form

B 0

9 –

DN

/HN

(Issu

ed u

nder

Circ

ular

No.

202

/201

4/TT

-BTC

da

ted

22 D

ecem

ber

2014

of

the

Min

istr

y of

Fin

ance

)

ANNUAL REPORT 2019

121

7. PREPAYMENTS TO SUPPLIERS

8. OTHER RECEIVABLES

9. INVENTORIES

1/1/2019VND

1/1/2019VND

AllowanceVND

AllowanceVND

1/1/2019

31/12/2019VND

31/12/2019VND

CostVND

CostVND

31/12/2019

76,483,806,00070,417,790,130

-610,930,965,061

757,832,561,191

33,200,395,07930,757,172,31029,169,457,4462,937,478,865

460,791,004-

42,747,951,649

139,273,246,353

2,871,139,551,9057,381,248,359,6742,101,425,673,0441,573,282,308,4514,489,362,757,309

741,358,297,5681,777,303,715

321,072,278,594

19,480,666,530,260

1,623,197,709,8544,961,008,117,9901,332,123,835,4042,141,040,914,2963,580,989,993,951

543,305,582,635-

6,670,015,604

14,188,336,169,734

-25,293,887,95297,670,989,755

687,354,293,332

810,319,171,039

81,149,546,7005,909,590,0497,232,772,3151,785,851,7828,023,107,4317,232,060,000

39,619,422,472

150,952,350,749

-(3,877,969,713)(5,840,805,888)

(28,311,250,423)(13,381,769,149)(17,331,986,992)

--

(68,743,782,165)

-(20,733,723,761)(5,238,692,265)

(11,097,564,473)(24,439,053,883)(11,688,086,444)

--

(73,197,120,826)

Included in inventories as at 31 December 2019 was VND708,398 million (1/1/2019: VND860,882 million) of inventories carried at net realisable value.

As at 31 December 2019, inventories with a carrying value of VND4,220,685 million (1/1/2019: VND5,215,369 million) were pledged with banks as security for loans granted to the Group.

OTHER PARTIESCisdi Thermal & Environmental Engineering Co., Ltd.Thien Truong Trading and Production Co., Ltd.Danieli & C. Offcine Meccaniche S.P.A.Other suppliers

Interest incomeShort-term depositsExport tax paid Materials lent to third parties Materials issued for outside processingCommodity swap contractOther receivables

Goods in transitRaw materialsTools and suppliesWork in progressFinished goodsMerchandise inventoriesGoods sent for processingGoods on consignment





122

HOA PHAT GROUP JOINT STOCK COMPANYNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 DECEMBER 2019 (CONTINUED) Form B 09 – DN/HN

(Issued under Circular No. 202/2014/TT-BTC dated 22 December 2014 of the Ministry of Finance)

Motor vehiclesVND

Machinery and equipment VND

BuildingsVND

10. TANGIBLE FIXED ASSETST

Cost Opening balanceAdditionsTransfer from construction in progressTransfer to long-term prepaid expensesDisposals and written offReclassificationsOther movements

Closing balanceAccumulated depreciationOpening balanceCharge for the yearDisposals and written offReclassifications

Closing balance

Net book value Opening balanceClosing balance

5,443,056,494,03916,305,364,784

7,668,104,263,995

(1,542,271,353)(12,384,014,117)

-(72,383,422)

13,113,467,453,926

1,727,328,640,341484,277,108,835(5,135,951,606)

-

2,206,469,797,570

3,715,727,853,69810,906,997,656,356

16,249,878,974,087162,979,333,853

12,916,395,073,590

-(114,967,366,412)

(1,995,000,000)(251,067,177)

29,212,039,947,941

8,121,862,125,5861,824,768,435,087(109,382,450,179)

(546,250,000)

9,836,701,860,494

8,128,016,848,50119,375,338,087,447

936,724,916,92277,409,391,599

36,956,422,482

-(31,832,793,032)

1,995,000,000533,636,364

1,021,786,574,335

435,126,501,546126,425,813,571(29,226,124,822)

546,250,000

532,872,440,295

501,598,415,376488,914,134,040

Included in tangible fixed assets were assets costing VND2,499,266 million which were fully depreciated as at 31 December 2019 (1/1/2019: VND1,808,092 million) but still in active use.

As at 31 December 2019, tangible fixed assets with a carrying value of VND22,097,737 million (1/1/2019: VND2,322,746 million) were pledged with banks as security for loans granted to the Group.

ANNUAL REPORT 2019

123



TotalVND

OthersVND

Office equipmentVND

LivestockVND

73,040,957,14018,835,481,805

7,116,050,816

-(554,955,593)

--

98,437,534,168

39,583,083,27117,323,533,702

(552,952,160)-

56,353,664,813

33,457,873,86942,083,869,355

284,786,687,591-

68,279,572,007

----

353,066,259,598

101,915,939,62488,331,547,350

--

190,247,486,974

182,870,747,967162,818,772,624

5,175,917,066913,232,811

53,202,050

----

6,142,351,927

1,484,126,598688,310,447

--

2,172,437,045

3,691,790,4683,969,914,882

22,992,663,946,845276,442,804,852

20,696,904,584,940

(1,542,271,353)(159,739,129,154)

-210,185,765

43,804,940,121,895

10,427,300,416,9662,541,814,748,992(144,297,478,767)

-

12,824,817,687,191

12,565,363,529,87930,980,122,434,704


124

11. INTANGIBLE FIXED ASSETS

TotalVND

SoftwareVND

OthersVND

Land use rightsVND

CostOpening balanceAdditionsTransfer from construction in progress

Closing balance

Accumulated amortisationOpening balanceCharge for the year

Closing balance

Net book valueOpening balance Closing balance

230,430,259,099 36,977,769,000

-

267,408,028,099

35,303,798,938 6,379,358,609

41,683,157,547

195,126,460,161 225,724,870,552

36,460,644,107 4,850,014,441

29,351,367,152

70,662,025,700

14,390,009,146 12,625,403,850

27,015,412,996

22,070,634,961 43,646,612,704

1,500,909,664 -

-

1,500,909,664

1,500,909,664 -

1,500,909,664

--

268,391,812,870 41,827,783,441

29,351,367,152

339,570,963,463

51,194,717,748 19,004,762,459

70,199,480,207

217,197,095,122 269,371,483,256

Included in intangible fixed assets were assets costing VND10,145 million which were fully amortised as of 31 December 2019 (1/1/2019: VND5,012 million), but which are still in active use.

At 31 December 2019, intangible fixed assets with a carrying value of VND72,655 million (1/1/2019: VND74,684 million) were pledged with banks as security for loans granted to the Group.



ANNUAL REPORT 2019

125

Investment property of the Group and its subsidiaries includes:

• Land use rights and factories for rent in Pho Noi A Industrial Park, Giai Pham Commune, Yen My District, Hung Yen Province, Vietnam, some floors for rent of the building at 257 Giai Phong Street, Hai Ba Trung District, Hanoi, Vietnam.

• Land use rights and areas for commercial lease at Mandarin Garden Complex 1 at South-East Tran Duy Hung Urban Area, Trung Hoa Ward, Cau Giay District, Hanoi, Vietnam; Mandarin Garden Complex 2 at 493 Truong Dinh, Hoang Mai District, Hanoi, Vietnam and Apartment buildings at 70 Nguyen Duc Canh Street, Hoang Mai District, Hanoi, Vietnam.

As the investment property being land use right has an indefinite term, the Group did not depreciate it.

At the reporting date, the Group has not determined the fair value of its investment property as there was no active market for such property for reliable determination of the fair value.

12. INVESTMENT PROPERTY

Land use rightsVND

BuildingsVND

TotalVND

CostOpening balanceTransfer from construction in prog-ress

Closing balance

Accumulated depreciationOpening balanceCharge for the year

Closing balance

Net book valueOpening balance Closing balance

15,780,994,600

39,921,706,365

55,702,700,965

--

-

15,780,994,60055,702,700,965

230,986,065,943

376,550,975,482

607,537,041,425

67,026,530,05519,596,701,418

86,623,231,473

163,959,535,888520,913,809,952

246,767,060,543

416,472,681,847

663,239,742,390

67,026,530,05519,596,701,418

86,623,231,473

179,740,530,488576,616,510,917




126

13. LONG-TERM WORK IN PROGRESS

14. CONSTRUCTION IN PROGRESS

Major constructions in progress were as follows:

Cost and recoverable amount31/12/2019

VND

2018VND

31/12/2019VND

1/1/2019VND

2019VND

1/1/2019VND

Opening balanceAdditions during the yearInterest expenses capitalised during the yearDecrease due to disposal and dissolution of subsidiaryTransfer to tangible fixed assetsTransfer to intangible fixed assetsTransfer to investment propertiesTransfer to long-term prepaid expensesTransfer to short-term prepaid expensesDisposals Others

Closing balance

Iron and Steel Production Complex Project in Dung QuatColor Coating Steel Sheet Factory ProjectIron and Steel Production Complex Project in Hai DuongAgriculture projectsSteel pipe Factory expansion ProjectOther projects

730,370,717,35219,775,681,371

750,146,398,723

4,726,077,899,79733,710,099,893,236

419,620,498,455(2,413,696,610)

(1,535,599,568,042)(18,506,979,186)

-(45,567,864,862)

(6,161,692,214) (50,248,878,905)

(399,588,251)

37,196,900,023,418

33,097,995,330,2492,471,423,149,154

244,430,685,541434,027,505,133123,602,944,657313,694,453,557

36,685,174,068,291

864,094,718,49346,325,765,206

910,420,483,699

33,754,919,592,3512,540,735,364,553

228,647,924,909252,111,559,414

23,605,102,727396,880,479,464

37,196,900,023,418

At 31 December 2019 constructions in progress with a carrying value of VND34,763,405 million (1/1/2019: VND34,275,473 million) were pledged with banks as security for loans granted to the Group.

The Urban Area and Industrial Park Project in Hung YenOther projects

37,196,900,023,41819,398,227,780,457

1,371,477,036,921-

(20,696,904,584,940)(29,351,367,152)

(416,472,681,847)(126,351,414,583)

(5,248,613,116)(490,150,000)

(6,611,960,867)

36,685,174,068,291



ANNUAL REPORT 2019

127

31/1

2/20

19V

ND

1/1/

2019

VN

D

57,6

92,5

51,3

6127

,582

,504

,748

33,2

76,2

32,9

76

118,

551,

289,

085

53,3

69,6

10,3

2239

,975

,823

,527

29,0

74,8

97,4

71

122,

420,

331,

320

HO

A P

HAT

GRO

UP

JOIN

T ST

OC

K C

OM

PAN

YN

OTE

S TO

TH

E C

ON

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DAT

ED F

INA

NC

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EMEN

TSFO

R TH

E YE

AR

END

ED 3

1 D

ECEM

BER

2019

(CO

NTI

NU

ED)

Form

B 0

9 –

DN

/HN

(Issu

ed u

nder

Circ

ular

No.

202

/201

4/TT

-BTC

da

ted

22 D

ecem

ber

2014

of

the

Min

istr

y of

Fin

ance

)

Tool

s an

d su

pplie

sV

ND

Site

cle

aran

ce

cost

sV

ND

Prep

aid

land

cos

tsV

ND

Tota

lV

ND

Ove

rhau

l and

m

ajor

mai

nte-

nanc

e ex

pens

esV

ND

Oth

ers

VN

D

85,3

66,2

34,9

1982

,609

,941

,863

41,8

62,3

98,7

52-

(25,

617,

584)

(82,

664,

939,

152)

(1,1

60,5

25,8

89) -

125,

987,

492,

909

470,

808,

008,

956

102,

502,

473,

526

51,3

51,8

36,1

191,

542,

271,

353 -

(346

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,444

)62

7,81

0,38

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6,09

8,11

0)

279,

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134,

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74,2

92,7

81,9

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7,73

7,67

2,36

214

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- -(5

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102,

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231,

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252

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3,06

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4,83

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63,6

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748

103,

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539,

159

19,3

76,3

53,5

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042,

420 - -

(15,

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982,

099)

(371

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) -

113,

611,

568,

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209,

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242

35,6

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27,0

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(63,

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521)

(38,

623,

818)

124,

913,

411,

183

1,46

1,31

1,86

8,43

560

9,19

9,57

7,02

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6,35

1,41

4,58

31,

542,

271,

353

(198

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)(5

47,3

73,6

20,2

95) -

(94,

721,

928)

1,65

0,73

8,62

3,09

0

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31 D

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2019

, lon

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repa

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ses

wit

h th

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of

VND

29,3

61 m

illio

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019:

VN

D36

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mill

ion)

wer

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edge

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bank

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Pre-

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enan

ce a

nd re

pair

cost

of a

sset

sO

ther

exp

ense

s

15.

PREP

AID

EX

PEN

SES

15.1

Sh

ort-

term

pre

pai

d e

xpen

ses

15.2

Lo

ng-t

erm

pre

pai

d e

xpen

ses

Ope

ning

bal

ance

Add

ition

sTr

ansf

er fr

om c

onst

ruct

ion

in p

rogr

ess

Tran

sfer

from

tang

ible

fixe

d as

sets

Dis

posa

ls a

nd w

ritte

n of

fA

mor

tisat

ion

for t

he y

ear

Recl

assi

ficat

ions

Oth

er m

ovem

ents

Clo

sing

bal

ance


128

16. DEFERRED TAX ASSETSDeferred tax assets were recognised in respect of the following items:

17. GOODWILL

31/12/2019VND

1/1/2019VND

82,643,228,965

204,750,794,495-

4,832,664,422

292,226,687,882

70,387,522,690

131,616,679,8524,090,510,804

133,183,554

206,227,896,900

CostOpening and closing balanceAccumulated amortisationOpening balanceAmortisation for the year

Closing balance

Net book value Opening balanceClosing balance

206,244,396,684

177,026,440,494

20,624,439,672

197,650,880,166

29,217,956,1908,593,516,518

4,367,130,430

436,713,048

436,713,048

873,426,096

3,930,417,3823,493,704,334

195,950,665

-

-

-

195,950,665195,950,665

270,687,477,779

182,453,153,542

27,049,152,720

209,502,306,262

88,234,324,23761,185,171,517

59,880,000,000

4,990,000,000

5,988,000,000

10,978,000,000

54,890,000,00048,902,000,000

Hoa Phat Energy JSC

VND

Lac Thuy Breeding Co.,

Ltd.VND

Nhon Trach Service Trading

Co., Ltd.VND

Long Viet Construction

JSCVND

TotalVND

Accrued expensesUnrealised profits arising on the intra-group sales of inventories and fixed assetsAllowance for inventoriesUnrealised foreign exchange differences



ANNUAL REPORT 2019

129

18. TAXES AND OTHERS PAYABLE TO STATE TREASURY

19. ACCRUED EXPENSES19.1 Accrued expenses – short-term

19.2 Accrued expenses – long-term



31/12/2019VND

31/12/2019VND

1/1/2019VND

1/1/2019VND

Interest expenseElectricity expensePromotion expenseExpenses payable to contractor Transportation costSalaries and bonusesOthers

74,350,883,643241,999,747198,446,246

372,463,071,71013,619,484,3283,536,723,610

17,029,601,830-

69,989,600

481,510,200,714

1/1/2019VND

Incurred/offsetVND

PaidVND

31/12/2019VND

4,873,968,107,08065,634,931,735

250,056,568,7861,604,549,422,019

104,763,488,97236,112,026,242

124,527,370,15111,912,234,575

103,910,991,310

7,175,435,140,870

(4,915,884,847,428)(65,580,595,978)

(250,055,557,914)(1,551,743,688,539)

(106,089,299,322)(34,423,096,500)

(139,755,048,416)(11,912,234,575)

(103,074,588,194)

(7,178,518,956,866)

32,434,143,295296,335,504199,457,118

425,268,805,19012,293,673,9785,225,653,3521,801,923,565

- 906,392,716

478,426,384,718

247,399,009,82253,493,139,58644,055,822,91257,456,841,99913,083,272,1804,082,998,879

10,206,212,033

429,777,297,411

403,328,992,03024,000,000,000

427,328,992,030

134,576,976,32046,778,473,60746,566,249,18515,622,014,62710,328,348,7933,799,166,0053,962,902,621

261,634,131,158

433,100,573,02718,000,000,000

451,100,573,027

Value added taxSpecial consumption taxImport-export taxCorporate income taxWithholding taxPersonal income taxNatural resource taxesLand rentalOther taxes

Accruals for cost of industrial zone landAccruals for infrastructure maintenance


130

20. OTHER PAYABLES20.1 Other payables – short-term

20.2 Other payables – long-term

31/12/2019VND

31/12/2019VND

1/1/2019VND

1/1/2019VND

Payables related to imports of goods Sales discountsTrade union fee, social and health insuranceDeposits received for lease of land in industrial parksSurplus of assets awaiting resolutionDividends payableOthers

-32,161,933,75537,005,877,75745,531,873,259

1,571,432,4898,222,744,202

112,897,885,777

237,391,747,239

38,791,080,14519,596,030,636

58,387,110,781

24,620,141,40011,860,679,599

36,480,820,999

137,111,395,75046,513,739,46126,193,773,06418,945,712,017

9,640,059,1076,231,445,088

55,433,655,774

300,069,780,261

Apartment maintenance fundOthers



ANNUAL REPORT 2019

131

HO

A P

HAT

GRO

UP

JOIN

T ST

OC

K C

OM

PAN

YN

OTE

S TO

TH

E C

ON

SOLI

DAT

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STAT

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TSFO

R TH

E YE

AR

END

ED 3

1 D

ECEM

BER

2019

(CO

NTI

NU

ED)

Form

B 0

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DN

/HN

(Issu

ed u

nder

Circ

ular

No.

202

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4/TT

-BTC

da

ted

22 D

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2014

of

the

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)

21.

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S 21

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t-te

rm b

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win

gs

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t-te

rm b

orro

win

gsC

urre

nt p

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lo

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bor

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ings

(N

ote

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)

11,1

86,3

94,0

38,7

47

308,

323,

354,

580

11,4

94,7

17,3

93,3

27

54,5

02,3

67,0

67,4

36

2,73

6,32

0,26

8,36

3

57,2

38,6

87,3

35,7

99

14,1

51,3

19,2

02,0

24

2,68

6,33

4,26

8,36

3

16,8

37,6

53,4

70,3

87

11,1

86,3

94,0

38,7

47

308,

323,

354,

580

11,4

94,7

17,3

93,3

27

(51,

537,

441,

904,

159)

(358

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,354

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)

(51,

895,

751,

258,

739)

14,1

51,3

19,2

02,0

24

2,68

6,33

4,26

8,36

3

16,8

37,6

53,4

70,3

87

1/1/

2019

Mov

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yea

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2019

Car

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itio

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ND

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with

in

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VN

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with

in

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VN

D

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reas

eV

ND

At

31 D

ecem

ber

2019

, sho

rt-t

erm

bor

row

ings

incl

uded

bor

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in V

ND

and

USD

wit

h ca

rryi

ng a

mou

nts

of V

ND

12,4

03,6

59 m

illio

n an

d V

ND

1,74

7,66

0 m

illio

n (1

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019:

VN

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565,

188

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ion

and

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621,

206

mill

ion)

, res

pect

ivel

y.

At

31 D

ecem

ber

2019

, sho

rt-t

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bor

row

ings

in V

ND

and

USD

wit

h th

e ca

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mou

nts

of V

ND

8,51

5,11

9 m

illio

n an

d V

ND

1,46

3,07

9 m

illio

n (1

/1/2

019:

V

ND

7,85

1,79

8 m

illio

n an

d V

ND

1,20

4,27

1 m

illio

n),

resp

ecti

vely

, ar

e se

cure

d by

cas

h eq

uiva

lent

s (N

ote

5),

inve

ntor

ies

(Not

e 9)

, ta

ngib

le a

nd i

ntan

gibl

e fix

ed a

sset

s (N

otes

10

and

11),

cons

truc

tion

in p

rogr

ess

of s

ome

proj

ects

of

the

Gro

up (N

ote

14),

long

-ter

m p

repa

id e

xpen

ses

(Not

e 15

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the

righ

t to

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re

ceiv

able

s an

d a

num

ber

of H

oa P

hat

Gro

up J

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Sto

ck C

ompa

ny (

“HPG

”) s

hare

s ow

ned

by a

num

ber

of t

he m

embe

rs o

f th

e B

oard

of

Man

agem

ent

of

the

Com

pany

(rel

ated

par

ties

).

The

rem

aini

ng s

hort

-ter

m b

orro

win

gs w

ere

unse

cure

d.

The

borr

owin

gs d

enom

inat

ed in

VN

D b

ore

inte

rest

at r

ates

rang

ing

from

2.8

0% to

6.2

0% (2

018:

from

4.3

% to

9.6

%) p

er a

nnum

. The

bor

row

ings

den

omin

ated

in

USD

bor

e in

tere

st a

t ra

tes

rang

ing

from

3.1

9% t

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(201

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4% t

o 4.

1%) p

er a

nnum

.


132

21.2 Long-term borrowings

Terms and conditions of outstanding long-term borrowings were as follows:

31/12/2019VND

31/12/2019VND

1/1/2019VND

1/1/2019VND

Long-term borrowingsRepayable within twelve months (Note 21.1)

Repayable after twelve months

22,528,433,488,083(2,686,334,268,363)

19,842,099,219,720

13,119,320,334,552(308,323,354,580)

12,810,996,979,972

Vietnam Joint Stock Commercial Bank for Industry and Trade – Hanoi Branch (*)Joint Stock Commercial Bank For Foreign Trade of Viet Nam – Thanh Cong branch (*)BNP Parisbas Bank (***)HSBC Bank (Vietnam) Ltd. (**)ANZ Bank (Vietnam) Ltd. (*)Vietnam Joint Stock Commercial Bank for Industry and Trade – Dong Da Branch (*)Vietnam Joint Stock Commercial Bank for Industry and Trade – Hoang Mai Branch (*)HSBC Bank (Vietnam) Ltd. (*)Environmental Protection FundBorrowings from individuals

VND

VND USDVNDVND

VND

VNDVNDVNDVND

2025

2025202320222020

2020

2021202420252020

8,732,692,162,550

7,806,883,295,8154,640,000,000,000

736,327,292,253169,970,721,924

2,162,000,000

22,412,209,541137,731,806,00023,154,000,000

257,100,000,000

22,528,433,488,083

7,245,457,423,257

3,400,291,289,471699,000,000,000898,829,176,016339,941,443,852

163,948,792,415

48,512,209,541-

23,340,000,000300,000,000,000

13,119,320,334,552

CurrencyYear of

maturity

(*) These long-term borrowings are secured by certain inventories (Note 9), tangible and intangible fixed assets (Notes 10 and 11), construction in progress of some projects of the Group (Note 14).

(**) This long-term borrowing is guaranteed by a company within the Group.

(***) This loan has a limit of USD200 million from BNP Paribas Bank– Singapore Branch that acts as the representative of the lenders. This loan is secured over the debt payment account at BNP Paribas Bank – Hanoi Branch and is guaranteed by two companies within the Group.

The remaining long-term borrowings are unsecured.

The long-term borrowings in VND bore interest rates ranging from 2.60% to 11% (2018: from 4.59% to 11%) per annum. The long-term borrowings in USD bore interest at LIBOR + 2.05% per annum.



ANNUAL REPORT 2019

133

22. PROVISIONS

23. BONUS AND WELFARE FUNDThis fund is established by appropriating from net profit after tax as approved by shareholders at Gener-al Meeting of Shareholders. This fund is used to pay bonus, welfare and allowance to the Company’s and subsidiaries’ Board of Management, Board of Directors and employees in accordance with the Group’s bonus and welfare policies. Movements of bonus and welfare fund during the year were as follows:



2018VND

2019VND

Balance at the beginning of the yearAppropriation during the yearUtilisation during the year

Balance at the end of the year

705,690,675,557361,741,289,236

(306,028,428,055)

761,403,536,738

761,403,536,738399,055,995,494

(353,855,155,830)

806,604,376,402

Opening balance Provision made during the yearProvision used during the yearProvision reversed during the year

Closing balance

CurrentNon-current

14,272,558,2494,315,764,072(180,896,471)

(5,587,381,372)

12,820,044,478

3,111,122,8859,708,921,593

WarrantiesVND

TotalVND

10,204,421,672500,394,319

-

-

10,704,815,991

- 10,704,815,991

Environmental restorationVND

24,476,979,9214,816,158,391(180,896,471)

(5,587,381,372)

23,524,860,469

3,111,122,88520,413,737,584


134

24. CHANGES IN OWNERS’ EQUITY

Balance at 1/1/2018

Net profit for the yearPayment of dividends in the form of sharesIncrease due to acquisition of a subsidiary Withdrawal of bonus shares to employees as treasury sharesReissuance of treasury sharesAppropriation to bonus and welfare fundAppropriation to investment and development fundDividends paid by subsidiaries to non-controlling shareholdersEffect of reportingcurrency translationOther movements

Balance at 31/12/2018

3,202,198,967,068

-

-

-

-

9,361,449,202

-

-

-

--

3,211,560,416,270

Share premiumVND

15,170,790,000,000

-

6,068,281,660,000

-

-

-

-

-

-

--

21,239,071,660,000

Share capitalVND

(1,693,270,000)

-

-

-

(370,000,000)

2,063,270,000

-

-

-

--

-

Treasury sharesVND

-

-

-

-

-

-

-

-

-

276,819,257-

276,819,257

Foreign exchange

differencesVND



ANNUAL REPORT 2019

135

518,641,612,156

-

-

-

-

-

-

400,000,000,000

-

--

918,641,612,156

Investment anddevelopment fund

VND

110,613,825,490

27,536,495,813

-

120,000,000

-

-

(1,295,800,000)

-

(10,013,052,081)

--

126,961,469,222

Non-controlling interestVND

13,397,029,077,196

8,573,014,210,414

(6,068,281,660,000)

-

370,000,000

-

(360,445,489,236)

(400,000,000,000)

-

-(15,248,274,469)

15,126,437,863,905

Retained profitsVND

32,397,580,211,910

8,600,550,706,227

-

120,000,000

-

11,424,719,202

(361,741,289,236)

-

(10,013,052,081)

276,819,257(15,248,274,469)

40,622,949,840,810

TotalVND




136

3,211,560,416,270

--

-

-

-

-

--

3,211,560,416,270

21,239,071,660,000

--

6,371,669,490,000

-

-

-

--

27,610,741,150,000

-

--

-

-

-

-

--

-

276,819,257

--

-

-

-

-

288,715,737-

565,534,994

Balance at 1/1/2019

Contributed capitalNet profit for the yearPayment of dividends in the form of shares (Note 26)

Appropriation to bonus and welfare fundAppropriation to investment and development fundDividends paid by subsidiaries to non-controlling shareholdersEffect of reporting currency translationOther movements

Balance at 31/12/2019

Share premiumVND

Share capitalVND

Treasury sharesVND

Foreign exchange

differencesVND



ANNUAL REPORT 2019

137

918,641,612,156

--

-

-

5,000,000,000

-

--

923,641,612,156

126,961,469,222

85,000,00050,805,368,355

-

-

-

(14,638,158,250)

--

163,213,679,327

15,126,437,863,905

-7,527,442,867,874

(6,371,669,490,000)

(399,055,995,494)

(5,000,000,000)

-

-(1,241,495,337)

15,876,913,750,948

40,622,949,840,810

85,000,0007,578,248,236,229

-

(399,055,995,494)

-

(14,638,158,250)

288,715,737(1,241,495,337)

47,786,636,143,695

Investment anddevelopment fund

VND

Non-controlling interestVND

Retained profitsVND

TotalVND




138

25. SHARE CAPITALThe Company’s authorised and issued share capital are;

Authorised share capital

Issued share capitalOrdinary shares

Shares in circulation Ordinary shares

Opening balancePayment ofdividends in the form of sharesWithdrawal of bonus shares to employees as treasury sharesReissuance of treasury shares

Closing balance

27,610,741,150,000

27,610,741,150,000

27,610,741,150,000

21,239,071,660,000

6,371,669,490,000

-

-

27,610,741,150,000

VND

Par valueVND

Par valueVND

VND

21,239,071,660,000

21,239,071,660,000

21,239,071,660,000

15,169,096,730,000

6,068,281,660,000

(370,000,000)

2,063,270,000

21,239,071,660,000

2,761,074,115

2,761,074,115

2,761,074,115

2,123,907,166

637,166,949

-

-

2,761,074,115

Number of shares

Number of shares

Number of shares

Number of shares

2,123,907,166

2,123,907,166

2,123,907,166

1,516,909,673

606,828,166

(37,000)

206,327

2,123,907,166

All ordinary shares have a par value of VND10,000. Each share is entitled to one vote at meetings of the Company. Shareholders are entitled to receive dividend as declared from time to time. All ordinary shares are ranked equally with regard to the Company’s residual assets.

Movements of share capital during the year were as follows:

31/12/2019

2019

1/1/2019

2018



ANNUAL REPORT 2019

139

26. DIVIDENDSOn 29 March 2019, the Company’s General Meeting of Shareholders passed the resolution on the distribution of 2018 dividends to the shareholders in the form of shares at the rate of 30% (shareholders will receive 3 additionally-issued shares for every 10 ordinary shares they own). This dividend payment scheme was approved for execution by the Company’s Board of Management in the resolution dated 9 May 2019 and executed during the second Quarter of 2019.

27. OFF BALANCE SHEET ITEMS 27.1 Foreign currencies

United State Dollars (“USD”)Euro (“EUR”)Japanese Yen (“JPY”)Australian Dollar (“AUD”)

445,702,718,51049,637,572

727,713,0006,723,818,346

453,203,887,428

VND equivalent

VND equivalent

511,742,354,76647,108,949

--

511,789,463,715

19,286,1411,922

3,465,300417,914

Original currency

Original currency

22,027,5611,802

--

31/12/2019 1/1/2019

27.2 Capital expenditure commitmentsAt the reporting date, the Group had the following outstanding capital commitments approved but not provided for in the consolidated balance sheet:

Approved but not contractedApproved and contracted

74,306,833,278666,931,828,182

741,238,661,460

31/12/2019VND

1/1/2019VND

-11,681,964,854,599

11,681,964,854,599

27.3 LeaseAt the reporting date, the Group had the following future minimum lease payments under non-cancellable operating leases:

Within one yearWithin two to five yearsMore than five years

32,007,469,097133,074,077,652269,888,924,130

434,970,470,879

31/12/2019VND

1/1/2019VND

23,967,816,01095,871,264,041

125,107,937,387

244,947,017,438




140

28. REVENUE FROM SALES OF GOODS AND PROVISION OF SERVICESTotal revenue represents the gross value of goods sold and services rendered exclusive of value added tax. Net revenue comprised:

TOTAL REVENUE• Sales• Services• Revenue from sublease of leasehold land • Rental income from investment property• Sales of real estate • Others

LESS REVENUE DEDUCTIONS• Sales discounts• Sales allowances• Sales returns

62,523,707,011,126613,633,954,877738,144,858,62554,280,124,794

711,872,407,01636,268,219,206

64,677,906,575,644

(957,210,485,501)(2,425,393,504)

(60,078,022,848)

(1,019,713,901,853)

63,658,192,673,791

2019VND

2018VND

54,925,454,767,158210,022,988,666449,966,515,63340,744,093,902

950,772,479,5243,462,850,200

56,580,423,695,083

(704,201,282,232)(714,583,730)

(39,049,449,362)

(743,965,315,324)

55,836,458,379,759

29. COST OF SALES

Finished goods and merchandise goods soldServices providedCost of leasehold land subleasedCost of investment property held to earn rental Cost of real estate soldOther costsAllowance for inventories

51,076,008,928,634486,688,612,434421,970,093,15118,923,757,872

463,656,461,97610,025,936,248(4,453,338,661)

52,472,820,451,654

43,262,052,605,460136,039,024,534296,004,982,95717,912,392,359

523,208,991,3931,521,935,744

(71,113,783,762)

44,165,626,148,685

2019VND

2018VND



ANNUAL REPORT 2019

141

30. FINANCIAL INCOME

31. FINANCIAL EXPENSES

Interest income from deposits Realised foreign exchange gainsUnrealised foreign exchange gainsPayment discountsOther financial income

Interest expensePayment discountsRealised foreign exchange lossesUnrealised foreign exchange lossesOther financial expenses

276,783,283,933177,270,502,59915,303,987,880

-1,696,057,599

471,053,832,011

936,710,218,35912,037,994,693

188,554,340,70839,487,502,7364,885,654,420

1,181,675,710,916

2019VND

2019VND

2018VND

2018VND

163,434,005,510115,851,955,886

7,311,244,5523,963,967,2003,847,097,593

294,408,270,741

539,861,243,64013,562,300,498

165,195,158,54937,222,114,03216,476,345,182

772,317,161,901

32. SELLING EXPENSES

Staff costsDepreciationWarranty expensesTransportation expensesAdvertising expensesPromotion expensesExport expensesOutside services and other selling expenses

105,060,273,04124,256,179,8389,226,513,057

305,033,724,481108,229,175,275

1,807,663,244133,011,396,233186,708,659,519

873,333,584,688

2019VND

2018VND

90,304,394,64423,778,051,7787,613,411,168

238,679,725,65960,566,399,3399,056,295,407

100,146,389,143146,664,554,121

676,809,221,259




142

33. GENERAL AND ADMINISTRATION EXPENSES

34. OTHER INCOME

Goodwill amortisationStaff costsDepreciation expensesOutside services and other general and administration expenses

Gain from disposals of fixed assets and construction in progressIncome from sales of electricity, water and rendering services Compensation received from other partiesOthers

27,049,152,720227,158,953,78253,200,254,814

261,597,444,406

569,005,805,722

19,930,474,713

563,556,916,80325,307,799,11048,885,740,851

657,680,931,477

2019VND

2019VND

2018VND

2018VND

26,051,152,720196,492,766,19040,289,154,302

181,191,912,611

444,024,985,823

2,047,287,701

430,657,845,9425,012,698,203

51,138,756,190

488,856,588,036

35. OTHER EXPENSES

Loss on disposals of fixed assets and construction in progress Costs of electricity, water sold and services renderedOther expenses

9,097,251,567560,414,088,23422,487,107,497

591,998,447,298

2019VND

2018VND

52,620,505,786416,094,814,60221,157,528,178

489,872,848,566



ANNUAL REPORT 2019

143

36. PRODUCTION AND BUSINESS COSTS BY ELEMENT

37. INCOME TAX37.1 Recognised in the consolidated statement of income

Raw material costs included in production costsStaff costsDepreciation and amortisationOutside servicesOther expenses

Current corporate income tax expense (“CIT”)Current yearAdditional corporate income tax for prior year

Deferred tax benefitOrigination and reversal of temporary differences

Income tax expense

43,216,883,256,3861,857,975,662,7932,566,183,420,3093,775,041,395,0463,353,922,546,681

1,596,527,974,2356,779,952,445

1,603,307,926,680

(84,894,039,523)

1,518,413,887,157

2019VND

2019VND

2018VND

2018VND

36,585,746,491,1781,584,989,943,7902,259,594,298,2682,639,853,534,4603,631,779,099,564

1,455,876,632,22850,443,455,323

1,506,320,087,551

(35,797,921,476)

1,470,522,166,075




144

37.2 Income tax expense

37.3 Applicable tax ratesUnder the terms of the prevailing Law on Corporate Income Tax, the Company has an obligation to pay the Government income tax at the rate of 20% of taxable profits.

The Group’s subsidiaries have obligations to pay the Government income tax at the rate as defined in the enacted tax regulations.

38. BASIC EARNINGS PER SHAREThe calculation of basic earnings per share for the year ended 31 December 2019 was based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding during the year, calculated as follows:

Accounting profit before tax

Adjustments to increase/(decrease) accounting profitNon-deductible expenses Goodwill amortisation Allowance for inventoriesUnrealised foreign exchange differences Accrued cost of sales of real estate soldOrigination and reversal of other temporary differencesShare of loss from associates

Tax losses brought forward

Current year taxable profit

Income tax expense at the Company’s tax rateTax incentives in subsidiariesEffect of different tax rates in subsidiariesDeferred tax assets unrecognised on tax losses of subsidiariesDeferred tax benefitAdditional corporate income tax for prior year

Income tax expense

9,096,662,123,386

52,217,309,06027,049,152,72017,976,419,050(4,734,516,843)96,389,167,191

499,996,948,997(1,431,313,615)

9,784,125,289,946(67,977,454,503)

9,716,147,835,443

1,943,229,567,089(364,948,615,888)

(5,444,236,159)

23,691,259,193(84,894,039,523)

6,779,952,445

1,518,413,887,157

2019VND

2018VND

10,071,072,872,302

16,482,132,68326,051,152,720

(47,304,208,908)18,997,010,01153,447,507,077

141,779,316,094-

10,280,525,781,979(14,220,505,384)

10,266,305,276,595

2,053,261,055,319(601,511,349,283)

(5,804,120,081)

9,931,046,273(35,797,921,476)50,443,455,323

1,470,522,166,075



ANNUAL REPORT 2019

145

38.1 Weighted average number of ordinary sharesi

38.2 Basic earnings per share

38.3 Restatement for the weighted average number of ordinary shares and basic earnings per share for the year ended 31 December 2018

Due to the effect of dividends paid in the form of shares (Note 26), the weighted average number of ordinary shares and basic earnings per share for the year ended 31 December 2018 were restated as follows:

Issued ordinary shares at the beginning of the yearEffect of dividends paid in the form of shares(Note 26)

Effect of withdrawal of bonus shares to employees as treasury shares Reissuance of treasury shares

Weighted average number of ordinary shares outstanding during the year

Net profit attributable to ordinary shareholders (VND)Weighted average number of ordinary shares outstanding during the year (Number of shares)

Basic earnings per share (VND)

As previously reportedEffect of dividends paid in the form of shares

As restated

2,123,907,166

637,166,949

--

2,761,074,115

7,527,442,867,874

2,761,074,115

2,726

2,123,830,077637,166,949

2,760,997,026

2019(Number of shares)

2019VND

Weighted average number of ordinary shares

2018(Number of shares)

Restated

2018VND

Restated

Basic earnings per shareVND

1,516,909,673

1,243,995,115

(37,000)129,238

2,760,997,026

8,573,014,210,414

2,760,997,026

3,105

4,037(932)

3,105




146

39. FINANCIAL INSTRUMENTS39.1 Financial risk management

(a) OverviewThe Group has exposure to the following risks from its use of financial instruments:

• credit risk; • liquidity risk; and• market risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk.

The Company’s Board of Management oversees how the Board of Directors monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

(b) Risk management framework The Company’s and its subsidiaries’ Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Company’s and its subsidiaries’ Board of Directors are responsible for developing and monitoring the Group’s risk management policies.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

39.2 Credit riskCredit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables and cash placed at financial institutions.

Exposure to credit risk The total of carrying amounts of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows:

Cash at banks and cash equivalents Held-to-maturity investments - short-term and long-termAccounts receivable from customers – short-term, loans receivable – long-term and other short-term and long-term receivables

4,528,3341,420,866

2,829,322

8,778,522

(a)(b)

(c)

31/12/2019VND million

Note 1/1/2019VND million

2,494,3903,790,448

2,409,298

8,694,136



ANNUAL REPORT 2019

147

(a) Cash at bank and cash equivalentsCash at bank and cash equivalents of the Group is mainly held with well-known financial institutions. The Board of Directors does not foresee any significant credit risks from these deposits and does not expect that these financial institutions may default and cause losses to the Group.

(b) Held-to-maturity investments Held-to-maturity investments of the Group represent time deposits with well-known financial institutions. The Board of Directors does not foresee any significant credit risks from these deposits and does not expect that these financial institutions may default and cause losses to the Group.

(c) Accounts receivable from customers short-term, loans receivable - long-term and other short-term and long-term receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. In response to the risk, the Board of Directors of the Company and its subsidiaries has established a credit policy under which each new customer is analysed individually for creditwor-thiness before the Group’s standard payment and delivery terms and conditions are offered. Credit purchase limit is established for each customer, which represents the maximum open amount without requiring approval from the Board of Directors of the Company and its subsidiaries. The limit is reviewed annually. No collateral is collected from the customers.

Based on historic default rates, the Board of Directors believes that apart from the amount provid-ed for as per below, no further allowance for doubtful debts is necessary in respect of the outstand-ing trade and other receivables at the reporting date.

The aging of trade and other receivables not impaired at the year end is as follows:

Not past duePast due 0 - 30 daysPast due 31 - 180 daysPast due more than 180 days

Opening balanceIncrease in allowance during the yearWritten back and used during the year

2,702,95873,70417,46935,191

2,829,322

37,693,842,8662,696,967,351

(3,245,020,085)

37,145,790,132

31/12/2019VND million

2019VND

1/1/2019VND million

2018VND

2,227,45954,64866,64460,547

2,409,298

35,984,891,8392,928,473,222

(1,219,522,195)

37,693,842,866

Movements in the allowance for doubtful debts during the year were as follows:




148

39.3 Liquidity risk Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

At the reporting date, the financial liabilities with fixed or determinable payments have the following contractual maturities including the estimated interest payments:

Accounts payable to suppliers and other payablesBorrowings

Accounts payable to suppliers and other payablesBorrowings

14,762,34736,679,753

51,442,100

10,872,00824,305,714

35,177,722

Carryingamount

VND million

14,762,34743,515,430

58,277,777

10,872,00826,853,781

37,725,789

Contractual cash flows

VND million

8,090,25920,655,992

28,746,251

9,213,05612,255,813

21,468,869

Within 1 year

VND million

6,672,0886,820,442

13,492,530

1,658,9521,255,356

2,914,308

1 – 2 yearsVND million

-16,038,996

16,038,996

-2,374,919

2,374,919

2 – 5 yearsVND million

--

-

-10,967,693

10,967,693

More than 5 years

VND million

The Group manages its ability to meet the expected operational expenses and servicing its debts by investing its cash surpluses in term deposits and maintaining several bank facilities from some domestic banks.

39.4 Market riskMarket risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s results of operations or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.(a) Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than VND, the accounting currency of the Group. The currency in which these transactions primarily are denominated is United States Dollar (“USD”), Euro (“EUR”).

The Group’s exposure to currency risk is managed by keeping the exposure to an acceptable level by buying or selling foreign currencies at spot rates when necessary.

31 DECEMBER 2019

1 JANUARY 2019



ANNUAL REPORT 2019

149

Exchange rate as at

EUR

EUR

USD

USD

31/12/2019

AUD CNYJPY

1/1/2019

Cash and cash equivalentsAccounts receivable from customersAccounts payable to suppliersShort-term borrowingsLong-term borrowings

Cash and cash equivalentsAccounts receivable from customersAccounts payable to suppliersShort-term borrowingsLong-term borrowings

Buying exchange rate of USD/VNDSelling exchange rate of USD/VNDBuying exchange rate of EUR/VNDSelling exchange rate of EUR/VNDBuying exchange rate of JPY/VNDBuying exchange rate of AUD/VNDBuying exchange rate of CNY/VND

19,286,141

13,335,794

(253,611,805)(72,892,904)

(200,000,000)

(493,882,774)

22,027,561

16,964,223

(213,358,450)(69,568,540)(30,000,000)

(273,935,206)

3,465,300

-

---

3,465,300

1,922

-

(38,585,799)--

(38,583,877)

1,802

-

(15,950,676)--

(15,948,874)

417,914

5,868

---

423,782

-

-

(411,442)--

(411,442)

23,11023,23025,82626,601

21016,0893,332

23,15523,30026,31127,179

---

The followings are the significant exchange rates applied by the Group:

31/12/2019

1/1/2019



Exposure to currency riskAt the reporting date, the Group had the following net monetary asset/(liability) position exposed to currency risk:


150

Carrying amount31/12/2019VND million

1/1/2019VND million

Fixed rate financial instrumentsFinancial assetsFinancial liabilities

Variable rate financial instrumentsFinancial liabilities

4,287,452(32,039,753)

(27,752,301)

(4,640,000)

4,483,763(23,606,714)

(19,122,951)

(699,000)

(b) Interest rate riskAt the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments was:

A change of 100 basis points in interest rates would have increased or decreased the consolidated net profit of the Group by VND37,120 million (2018: VND5,592 million). This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

39.5 Fair values(a) Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the consolidated balance sheet, are as follows:



ANNUAL REPORT 2019

151

31/12/2019

Carrying amountVND

million

Carrying amountVND

million

1/1/2019

Fair valueVND

million

Fair valueVND

million

Categorised as held-to-maturity investments:- Held-to-maturity investments – short-term- Held-to-maturity investments – long-term

Categorised as loans and receivables:- Cash and cash equivalents- Accounts receivable from customers and other receivables – short-term- Loans receivable – long-term and other long-term receivable

Categorised as financial assets available-for-sale:- Equity investments in other entities

Categorised as financial liabilities at amortised cost:- Accounts payable to suppliers and other payables – short-term- Accounts payable to suppliers, accrued expenses and other payables – long-term - Borrowings

1,374,340

46,526

4,544,900

2,801,604

27,718

700

(8,090,259)

(6,672,088)(36,679,753)

(42,646,312)

1,374,340

(*)

4,544,900

2,801,604

(*)

(*)

(8,090,259)

(*)(*)

3,724,563

65,885

2,515,617

2,386,996

22,302

700

(9,213,056)

(1,658,952)(24,305,714)

(26,461,659)

3,724,563

(*)

2,515,617

3,091,875

(*)

(*)

(9,213,056)

(*)(24,298,044)

(b) Basis for determining fair values Cash and cash equivalents, held-to-maturity investments – short-term, accounts receivable from customers – short-term and other short-term receivables and short-term non-derivative financial liabilities

The fair value of cash and cash equivalents, held-to-maturity investments – short-term, accounts receivable from customers – short-term and other short-term receivables and short-term non-derivative financial liabilities approximates the carrying value due to the short-term nature of these financial instruments. The fair value of these instruments is determined for disclosure purpose only.




152

(*) The Group has not determined fair values of these financial instruments for disclosure in theconsolidated financial statements because information about their market prices is not availableand there is currently no guidance on determination of fair value using valuation techniques under Vietnamese Accounting Standards or the Vietnamese Accounting System for Enterprises. The fair values of these financial instruments may differ from their carrying amounts.

(c) Hedging The Group adopts a policy to ensure that a certain percentage of its exposure to changes in interest rates on borrowings is on a fixed rate basis. Interest rate swaps have been entered into to achieve an appropriate mix of fixed and floating rate exposure within the Group’s policy. At 31 December 2019, the Group had interest rate swaps with a notional contract amount of VND4,640,000 million (1/1/2019: Nil). The Group does not apply hedge accounting.

40. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIESIn addition to related party balances disclosed in other notes to the consolidated financial statements, the Group had the following significant transactions with related parties during the year:

41. NON-CASH INVESTING AND FINANCING ACTIVITIES

Transaction value2019VND

2019VND

2018VND

2018VND

Members of Supervisory Board, Board of Directors and Board of ManagementSalary and BonusAllowances

Payment of dividends in the form of shares

7,200,600,00040,812,000,000

6,371,669,490,000

8,385,499,0002,504,000,000

6,068,281,660,000



ANNUAL REPORT 2019

153

42. CORRESPONDING FIGURESCorresponding figures as at 1 January 2019 were derived from the balances and amounts reported in the Company’s consolidated financial statements as at and for the year ended 31 December 2018.

16 March 2020



Prepared by: Approved by: Prepared by: Approved by: Prepared by: Approved by:






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