SUSTAINABLE GROWTH 2018

Transcription

1 SUSTAINABLE GROWTH ANNUAL REPORT 2018

2 CONTENTS 04 Vision - Mission - Core values - Competitive advantage 06 Message from Chairperson General information Performance report Overview History of formation and development Core business and operational geography Project location map List of projects 2018 Typical projects 2018 Major event 2018 Awards Shareholder information Investor relations (IR) Subsidiaries, joint ventures and associates Business direction SWOT Governance model Organizational chart Board of Directors General Director Team Inspection Committee (IC) Human resource report Corporate governance Overview of real estate market in 2018 Report and assessment of Board of Directors Report - assessment of General Director Team Inspection Committee report Structure and activities of Board of Directors Structure and activities of Inspection Committee Share transactions of internal shareholders and related persons Risks and risk management Sustainability report Financial statements Sustainability message Overview of sustainability report Material factors Material factors and stakeholders in Khang Dien s value chain Engagement with stakeholders Business efficiency Compliance with the law on environmental protection Control conflict of interest Energy and water savings Responsibilities in marketing and sales Responsibility to products Property management Labor safety and occupational health Employee policies General information Report of management Independent auditors report Consolidated balance sheet Consolidated income statement Consolidated cash flow statement Notes to the consolidated financial statements

3 VISION - MISSION - CORE VALUES - COMPETITIVE ADVANTAGE VISION CORE VALUES COMPETITIVE ADVANTAGE To become one of the top real estate corporations developing large-scale functional cities in Vietnam. MISSION To create perfect living spaces for sensible comfortable ways of lives, and to accompany each resident in building her perfect home. Transparency Transparent about products, service, business operations and financial reporting. Quality Committed to quality and customer satisfaction. Sustainability Doing business based on product quality, dedicated service, community responsibility, environmental protection and a solid legal footing. Brand reputation Khang Dien brand has become a customer trusted brand after 18 years on the market place. Experience Understanding of the market, and experience in land assembly and housing development since 2001 are valuable know-how. Land bank Having large land bank in Ho Chi Minh City and the ability to grow land bank effectively in the future. Finance Having strong financial capacity accompanied by Ernst & Young audit since 2007, the Company always gains the trust from key shareholders, especially the foreign shareholders whose cumulative share holding maintained at more than 45% such as Dragon Capital and VinaCapital. 4 ANNUAL REPORT

4 MESSAGE FROM CHAIRPERSON In each product from Khang Dien, customers can see the impression of high quality, professional service, strong legal foundation, reasonable price, and satisfying the need of each customer. Dear valued Shareholders, Customers, Partners and fellow employees: Taking advantage of our strength in property investment and construction, together with good management strategies, and the non-stop striving of the entire staff, Khang Dien House Trading and Investment Joint Stock Company is honorable and proud to accompany the valuable Shareholders, Customers and Partners in the journey of conquering new challenges and catching new opportunities, to grow in a strong and sustainable way. With the determination to become one of the most successful enterprises in the field of property investment, development and operation, we always strike to work with competence and enthusiasm to make Khang Dien a trusted brand, an ideal business, and a perfect working environment to serve the customer better every day. In each product from Khang Dien, customers can see the impression of high quality, professional service, strong legal foundation, reasonable price, and satisfying the need of each customer. Our development direction is: in order to achieve success and sustainable development, not only the right strategic direction but also business ethics, providing true products and values and the best benefits for customers, partners and the society are the business philosophy that our Company always follows. In addition, with the determination and tireless effort of the Board of Directors, General Director Team and all staff, Khang Dien will reward the trust and expectations the of customers and will be a companion on the journey to prosperity for our partners. Yours sincerely, MAI TRAN THANH TRANG Chairwoman 6 ANNUAL REPORT

5 CHAPTER 1 GENERAL INFORMATION

6 OVERVIEW KHANG DIEN HOUSE TRADING AND INVESTMENT JOINT STOCK COMPANY CÔNG TY CỔ PHẦN ĐẦU TƯ VÀ KINH DOANH NHÀ KHANG ĐIỀN Stock symbol: KDH Abbreviations: KHADIHOUSE JSC Business name: Khang Dien Business registration No initially granted on 02 May 2007 and amended for twentysecond time on 17 October 2018 by Department of Planning and Investment in Ho Chi Minh City. Charter capital: VND 4,140,233,530,000 Head Office: Suite 1 and 2, 11th Floor Saigon Center, 67 Le Loi, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam Tel: +(84.28) Fax: +(84.28) info@khangdien.com.vn Website: 10 ANNUAL REPORT

7 HISTORY OF FORMATION AND DEVELOPMENT Continued to increase capital, merged Khang Phuc House, and launched apartments projects Founded as a private company Established joint stock company The company conducted IPO and converted from a private company into a joint stock company with VND332 billion of charter capital. VinaCapital and Prudential contributed capital and became strategic shareholders. Share listed on Ho Chi Minh City Stock Exchange (HSX) Khang Dien House Trading and Investment Joint Stock Company increased charter capital to VND439 billion and listed 43.9 million common shares (stock code KDH) on Ho Chi Minh City Stock Exchange (HSX) Increased capital and expanded business in the East of Ho Chi Minh City Khang Dien increased charter capital to VND750 billion and welcomed the strategic shareholder - Dragon Capital. The Company focused on developing residential projects in the East of HCMC Increased capital and strategic investment into Khang Phuc House Khang Dien increased charter capital to VND1,800 billion and continued to focus on the East of HCMC while expanded business to the Southwest of HCMC through a strategic investment into Khang Phuc House Khang Dien increased charter capital to more than VND4,140 billion and launched apartments projects Jamila and Safira in the East of HCMC. The Company completed the merge of Khang Phuc House, marking an important milestone of its sustainable development strategy implementation ANNUAL REPORT

8 CORE BUSINESS AND OPERATIONAL GEOGRAPHY CORE BUSINESS 1 Lease and trade houses, land acquisition and transfer for property development, infrastructure investment; 2 Undertake civil and industrial construction works; 3 Provide real estate consulting service; OPERATIONAL GEOGRAPHY Business operations of Khang Dien is in Ho Chi Minh City market place. Ho Chi Minh City 4 Land development; 5 Housing design and construction; Dist.12 6 Develop and operate urban cities; 7 Develop and operate industrial parks; 8 Real estate business. Tan Phu Dist. Tan Binh Dist. Go Vap Dist. Binh Thanh Dist. Phu Nhuan Dist. Dist.10 Dist. 3 Dist.1 Thu Duc Dist. Dist. 2 Dist. 9 Binh Chanh Dist. Binh Tan Dist. Dist. 6 Dist. 11 Dist. 5 Dist. 8 Dist. 4 Dist Nha Be Dist ANNUAL REPORT

9 PROJECT LOCATION MAP 16 ANNUAL REPORT

10 18 ANNUAL REPORT

11 LIST OF PROJECTS COMPLETED PROJECTS KHANG DIEN - PHUOC LONG B Location: Duong Dinh Hoi Street, Phuoc Long B Ward, District 9, HCMC Area: 10.4 hectares Products: 247 detached villas, duplex villas, garden houses and apartment buildings Legal status and progress: filings for house ownership certificates MEGA RESIDENCE Location: Phu Huu Ward, District 9, HCMC Area: 3.2 hectares Products: 158 townhouses Legal status and progress: handed over properties and ownership certificates TOPIA GARDEN Location: Bung Ong Thoan Street, Phu Huu Ward, District 9, HCMC Area: 6 hectares Products: 225 detached villas, duplex villas and townhouses Legal status and progress: land ownership certificates received and proceeding for house construction MEGA RUBY Location: Phu Huu Ward, District 9, HCMC Area: 5 hectares Products: 222 townhouses Legal status and progress: handed over properties and ownership certificates RIVER TOWN Location: Phuoc Long B Ward, District 9, HCMC Area: 7.1 hectares Products: 197 detached villas, duplex villas and townhouses Legal status and progress: already have land ownership certificates and proceeding for house construction MEGA VILLAGE Location: Phu Huu Ward, District 9, HCMC Area: 5.7 hectares Products: 323 garden townhouses Legal status and progress: handed over and obtained house ownership certificates 20 ANNUAL REPORT

12 LIST OF PROJECTS (CONTINUED) COMPLETED PROJECTS (CONTINUED) MELOSA GARDEN Location: Phu Huu Ward, District 9, HCMC Area: hectares Products: 567 villas and garden townhouse Legal status and progress: handed over properties and ownership certificates MERITA Location: Phuoc Long B Ward, District 9, HCMC Area: 3.1 hectares Products: 131 garden townhouses and shophouses Legal status and progress: handed over properties and filing for ownership certificates LUCASTA Location: Phu Huu Ward, District 9, HCMC Area: 8.2 hectares Products: 140 high-end villas Legal status and progress: handed over properties and filing for ownership certificates ROSITA GARDEN Location: Phu Huu Ward, District 9, HCMC Area: 3.1 hectares Products: 118 garden townhouses Legal status and progress: handed over properties and filing for ownership certificates THE VENICA Location: Phu Huu Ward, District 9, HCMC Area: 3.1 hectares Products: 43 high-end villas Legal status and progress: handed over properties and ownership certificates LE MINH XUAN INDUSTRIAL AND SMALL BUSINESS PARK Location: Le Minh Xuan Commune, Binh Chanh District, HCMC Area: 116 hectares Legal status and progress: 100% leased out, with more than 200 enterprises leasing or purchasing lots and factories 22 ANNUAL REPORT

13 LIST OF PROJECTS (CONTINUED) ON-GOING PROJECTS JAMILA Location: Phu Huu Ward, District 9, HCMC Area: 1.7 hectares Products: 867 apartments and 16 shophouses Legal status and progress: handed over apartments, filing for ownership certificates SAFIRA Location: Phu Huu Ward, District 9, HCMC Area: 2.7 hectares Products: 1,570 apartments and 23 shophouses Legal status and progress: under construction; 853 units (block C, D) sold; block A, B opening for sales and expected to close in 2Q2019; property hand-over expected in 3Q2020 LOVERA VISTA Location: Phong Phu 4 Residential Area, Binh Chanh District, HCMC Area: 1.8 hectares Products: more than 1,300 apartments Legal status and progress: preparing for construction in 2Q2019; expected opening sale in 4Q2019 and finish construction in 1Q2021 FUTURE PROJECTS CLARITA Location: District 2, HCMC Area: 5.8 hectares and possible to expand Products: townhouses, villas and apartments Legal status and progress: on-going project legal work LE MINH XUAN INDUSTRIAL PARK (EXPANSION) Location: Le Minh Xuan Commune, Binh Chanh District, HCMC Area: hectares Estimated scale: 10,000 laborers Legal status and progress: on-going project legal work 11A RESIDENCE Location: Binh Hung Commune, Binh Chanh District, HCMC Area: 16.4 hectares Products: townhouses Legal status and progress: on-going project legal work ARMENA Location: District 9, HCMC Area: 4.3 hectares Products: garden townhouses and villas Legal status and progress: on-going project legal work VENITA PARK Location: District 9, HCMC The Company is carrying out project legal work for Tan Tao Residence (Binh Tan District, HCMC) and Phong Phu 2 Residence (Binh Chanh District, HCMC). Area: 8.1 hectares Products: 293 garden townhouses and 3 villas Legal status and progress: completed project legality requirement, on-going infrastructure work, expected to open for sale in 3Q ANNUAL REPORT

14 2018 TYPICAL PROJECTS APARTMENT Apartment projects developed by Khang Dien are normally large to meet the increasing demand for quality housing at reasonable prices in HCMC. These projects are carefully, professionally planed and designed to have good connections to key traffic networks, good mixes of internal roads, landscape and amenities. Each block and each apartment are designed with modern language yet suitable to the local climate conditions. JAMILA Self-contained residence SAFIRA Mixed-use apartment buildings Products: 867 apartments and 16 shophouses Products: 1,570 apartments and 23 shophouses Progress: under operation; filings for apartment ownership certificates Location: Song Hanh road - HCMC - Long Thanh - Dau Giay Expressway (Do Xuan Hop Intersection), District 9, Ho Chi Minh City; 15 minutes driving to CBD and 5 minutes driving to Thu Thiem. Jamila is an outstanding project at the East gate of HCMC, adjacent to the famous luxury villa - The Venica. Jamila is a self-contained residence area with 24/7 security and fully on-site services and amenities. Progress: Under construction; 853 units (block C, D) sold out; block A, B are opening for sales and expected to sell out in 2Q2019; construction expected to finish on 3Q2020 Location: Road no.6 (20-m road boundary) connecting to Road no.5 (20-m road boundary), adjacent to Outer Ring Road no.2, near the intersection with HCMC - Long Thanh - Dau Giay Expressway, District 9, Ho Chi Minh City; 20 minutes of driving from the heart of the City. Located on the East gate of HCMC, Safira enjoys every moment of sunrise - energy for every new day. Safira has many outstanding values, from location, property right, amenities, close-tonature life style and safety for young, modern families. Putting a lot of mind and heart to work, Khang Dien has created this quality living space with full amenities, enabling the residents to enjoy peaceful, fulfilled lives. 26 ANNUAL REPORT

15 2018 TYPICAL PROJECTS (CONTINUED) VILLA The villas developed by Khang Dien are luxury properties with limited quantity, carefully selected site locations, and specially designed to elegance and luxury. THE VENICA Classic riverside villas Products: 43 luxury villas LUCASTA Modern villas in ecological style Progress: ongoing operation; property ownership certificates received Location: Song Hanh Road of HCMC - Long Thanh - Dau Giay Expressway and Do Xuan Hop Street, District 9, Ho Chi Minh City; 15 minutes driving to CBD and 5 minutes driving to Thu Thiem The Venica - an oasis of private luxury and serenity in the city. With three riversides, the Venica is considered one of a few special, top class properties in Ho Chi Minh City. The villas are designed with neo-classical language, reminding the viewers the images of magnificent castles standing next to rivers. The Venica are said to be the favorite of the upper class. Products: 140 high-end detached villas and deluxe villas Progress: ongoing operation; property ownership certificates received Location: Lien Phuong Street at the center of District 9, Ho Chi Minh City; 20 minutes driving to CBD and 10 minutes to Thu Thiem Lucasta, a highend residence in the East of HCMC is the selected choice of many business executives. Lucasta is well-known for its privacy, quietness and environmental-friendliness. In addition, modern design language in combination with top construction quality are the two factors that attract homebuyers. 28 ANNUAL REPORT

16 2018 TYPICAL PROJECTS (CONTINUED) TOWNHOUSE Townhouses are the main and traditional product segment of Khang Dien since inception. These properties are constructed at volume to meet the demands of the middle class and the homebuyers seeking garden properties located km from CBD. MELOSA GARDEN Garden townhouse MERITA Shophouse & garden townhouse Products: 567 garden townhouses and villas Progress: ongoing operation; property ownership certificates received Location: Ring Road no.2, intersection with HCMC - Long Thanh - Dau Giay Expressway, District 9, HCMC; 20 minutes from the heart of the city. Melosa Garden s outstanding feature is the greenery, wide and quiet living space with 4-hectare central park and 9-level waterfall swimming pool built to Singaporean style. In addition, reasonable prices are also the factor that Melosa Garden be selected by middle-class families. Products: 131 shophouse and garden townhouses Progress: ongoing operation; property ownership certificates received Location: Intersection between Ring Road No. 2 and Lien Phuong Street, District 9, HCMC With the prime location for traffic connection and business convenience, Merita was a phenomenon in the real estate market East of HCMC in 2017 when all units of the project was sold out within one week. 30 ANNUAL REPORT

17 2018 MAJOR EVENT The year 2018 recorded many significant events that were very meaningful to the sustainable development of Khang Dien, in particular the Owning Jamila - Receiving Honda Civic event attracted more than 1,200 guests and the Safira workshop event attracted more than 2,000 sale agents, through which Safira became a phenomenon on the real estate market during the last months of JAMILA APARTMENTS SOLD 30 TOPPED OUT 30 DAYS EARLIER MORE THAN 1,200 CUSTOMERS ATTENDING JAMILA GRATITUDE EVENT Just a few months after the official introduction, Jamila impressed the market with nearly 900 apartments getting their owners. In response to the trust of customers, on 17 March 2018, Khang Dien organized a gratitude event named Owning Jamila - Receiving Honda Civic in great success with more than 1,200 attendants. With Jamila, Khang Dien once again earned absolute the trust from customers. All products developed by the Company are always ensured in quality, progress and legal transparency. JAMILA PROJECT TOPPED OUT ONE MONTH EARLIER THEN THE SCHEDULE On 04 May 2018, Khang Dien cooperated with Hoa Binh Corporation to organize the Roof slab finishing ceremony of Jamila project at the project site (frontage Song Hanh Road, HCMC - Long Thanh - Giau Day Express way, District 9, Ho Chi Minh City). Block C s roof was finished one month ahead of schedule, affirming the prestige and enthusiasm of the investor and the contractor. As a reputable real estate developer, Khang Dien has affirmed its position in the real estate market in Ho Chi Minh City with a range of quality projects, providing green living space and transparent legality, especially construction progress always reaches or exceeds the committed schedule. After the topping out ceremony, the project was completed and handed over to customers on schedule, in December % COMPLETE TARGETS SUCCESSFULLY ORGANIZED TRAINING EVENT FOR SALE AGENTS OF SAFIRA PROJECT The event held on 19 September 2018 attracted more than 2,000 participants from the agencies and distributors. The sale team were fully provided with information about the project, legality and selling policy. With the philosophy of always doing more than what we are committed and with all our heart, Khang Dien has marked one more breakthrough with Safira as ensuring the transparency of project legality. Before opening for sale, Block C and Block D had obtained the approval from Ho Chi Minh City Department of Construction to sell houses formed in the future and the handover guarantee letter from Vietcombank for each unit. Those factors have contributed to helping Safira become an attractive phenomenon in the real estate market in the east of HCMC in the 2nd haft of the year 2018 and complete 100% of sale target for first stage. 32 ANNUAL REPORT

18 2018 AWARDS Top50 BEST VIETNAMESE LISTED COMPANIES Khang Dien achieved great success when being honored in Top 50 best Vietnamese listed companies for the 3rd consecutive year. This is the prestigious award by Forbes Vietnam, aiming to honor the companies with best business performance with the capitalization up to billions of dollars through the published financial indicators on Ho Chi Minh City Stock Exchange (HSX) and Hanoi Exchange (HNX). Top10 HOUSING PROJECT WORTH LIVING IN VIETNAM VIETNAM PROPERTY AWARD: TOP 11 MOST PRESTIGIOUS REAL ESTATE DEVELOPER, THE MOST LIVABLE HOUSING AREA - MELOSA GARDEN As one of the prestigious real estate brands in Vietnam, Khang Dien is not only highly valued in sustainable business orientation, developing projects that prosperous living value to customers, but also leaves a good impression with many honorable awards. At the Vietnam Property Award Ceremony, Khang Dien has impressed when receiving two important awards i.e. Top 11 most prestigious real estate developers in Vietnam, and Top 10 most livable housing areas in Vietnam - Melosa Garden. Particularly 2018 is the year Khang Dien affirms its position when being named in Top 50 Best Vietnamese listed companies for the 3rd consecutive year by Forbes, Top 50 best-performing companies in Vietnam 2017 for the 2nd consecutive year, Top 100 Vietnam Gold Star and the most popular Vietnamese brand This shows the Company s belief in the long journey of development, creating positive social impacts and contributing more to the country s economic development. 34 ANNUAL REPORT

19 2018 AWARDS (CONTINUED) Top50 BEST-PERFORMING COMPANIES IN VIETNAM 2017 On 07 June 2018, Khang Dien was named in Top 50 bestperforming companies in Vietnam This is a valuable and prestige rank annually coorganized by Nhip Cau Dau Tu Magazine and Thien Viet Securities JSC (TVS) under the advice of the leading economic and business experts from Harvard and the reference to the prestigious rankings in the world such as Bloomberg Businessweek, Fortune, and Global Forbes to seek and honor the best-performing companies in Vietnam s stock market. Top10 PROPERTY DEVELOPERS IN VIETNAM To be proud to develop quality projects, preserving prestige and transparency, Khang Dien has been named in Top 10 Property Developers in Vietnam. This rank is built by Vietnam Report based on the objective and scientific principles. Accordingly, the reputation of companies is determined based on the researches on the influence of financial factors, company image on the media and evaluation of experts. THE VENICA WON VIET NAM PROPERTY AWARDS - BEST LUXURY HOUSING DEVELOPMENT The Venica - the high-end compound villa project in the east of Ho Chi Minh City continues to impress in the market and is appreciated by experts through Viet Nam Property Awards - Best Luxury Housing Development. The unique design inspired from the city of love - Venice in combination with 5-star facilities that bring a special experience to customers have helped The Venica receive high score from the judges of Viet Nam Property Awards. Top500 FASTEST GROWING ENTERPRISES IN VIETNAM - FAST 500 Not only named in Top 10 Property Developers in Vietnam with impressive growth in revenue and profit, Khang Dien is listed in Top 500 fastest growing enterprises in Vietnam This rank is for the typical enterprises with outstanding business performance, efficiency, good profitability which are evaluated based on such criteria as profitability indicators (ROA, ROE, ROR), pre-tax profits, income statement and the optimistic prospect of revenue and profitability increase in the next 12 months. 36 ANNUAL REPORT

20 2018 AWARDS (CONTINUED) Top3 LARGE CAP: LISTED COMPANIES WITH BEST IR ACTIVITIES VOTED BY THE INVESTORS Khang Dien is always one of the leading companies in IR activities and is worthy to be listed in Top 3 Large Cap - the companies bringing the most profit in the top list as well as in the stock market in TYPICAL REAL ESTATE DEVELOPER 2018 On 10 January 2019, Khang Dien was honorably awarded Vietnam Property Awards 2018 for the content Typical Real Estate Developer 2018 by Nhip Cau Dau Tu Magazine. This has shown the outstanding achievements of Khang Dien in the past year when developing apartment product line with Jamila (2017) and Safira (2018), attracting a great number of customers right after introduction. Top100 VIETNAM GOLD STAR During the year, Khang Dien continues to affirm its leading position in the real estate market with Top 100 Vietnam Gold Star This has shown the reputation of Khang Dien brand in the long journey of development and is also a big challenge for the Company to increasingly enhance service quality and contribute more and more to the social development. MOST FAVORITE VIETNAMESE BRANDS IN 2019 Thanks to the impressive business results during the year, Khang Dien continued to receive the award The most favorite Vietnamese brands in 2019 by Sai Gon Giai Phong Newspaper on 26 January The second consecutive year receiving this award, Khang Dien continues to affirm its prestige in the real estate market. This award also proves the trust of customers to Khang Dien during its business and operation. The products recently developed by Khang Dien such as Safira (2018), Jamila (2017), etc. are highly appreciated by both customers and experts in respects of construction quality, progress, transparent legality and investor s reputation. 38 ANNUAL REPORT

21 SHAREHOLDER INFORMATION SHARE INFORMATION Stock chart according to market price 2,5M 42K Charter capital: VND 4,140,233,530,000 Par value per share: VND 10,000 Volume 2M 1,5M 1M 40K 38K 36K 34K 32M Price Number of treasury share: 0 shares 500K 0 30K 28K 26K SHARE OWNERSHIP NO Market capitalization as of 28 Dec 2018: VND 13,662,770,649,000 SHAREHOLDER DOMESTIC SHAREHOLDER Number of shares Percentage/ Charter capital FOREIGN SHAREHOLDER Number of shares Number of outstanding share: 414,023,353 shares Percentage/ Charter capital TOTAL NUMBER OF SHARES Number of shares Percentage/ Charter capital Jan Feb Mar Apr May Jun Jul Aug Oct Sep Nov Dec SHAREHOLDER STRUCTURE No. Shareholder structure Number of shares Ownership percentage (%) 1 Treasury shares Domestic shareholders 221,267, % Individuals 64,525, % Institutions 156,742, % 3 Foreign shareholders 192,755, % Individuals 524, % Institutions 192,230, % TOTAL 414,023, % 1 Government Shareholders holding 5% or more 123,586, % 58,008, % 181,595, % Note: According to the list of share owners closed on 28 Dec 2018 provided by Vietnam Securities Depository (VSD). 3 Shareholders holding from 1% to less than 5% 27,441, % 100,368, % 127,810, % 4 Shareholders holding less than 1% 70,239, % 34,378, % 104,618, % 5 Treasury shares TOTAL 221,267, % 192,755, % 414,023, % 46.56% FOREIGN SHAREHOLDERS 53.44% DOMESTIC SHAREHOLDERS Note: According to the list of share owners closed on 28 Dec 2018 provided by Vietnam Securities Depository (VSD). 40 ANNUAL REPORT

22 SHAREHOLDER INFORMATION (CONTINUED) CHANGES IN CHARTER CAPITAL In March 2018 In October 2018 The Company issued 51,832,317 shares to swap with the shares of Binh Chanh Construction Investment JSC (Khang Phuc House). The Company issued 26,191,036 shares, including: 19,391,036 shares to pay dividends to shareholders; 6,800,000 shares for ESOP. SHARES OWNED BY INTERNAL SHAREHOLDERS Shareholders No. Name Position Total Board of Directors 1 Mai Tran Thanh Trang 2 Ly Dien Son Chairperson of BOD Deputy Chairman of BOD Ownership percentage (%) 3,105, % 4,097, % 3 Nguyen Thi Dieu Phuong Member of BOD Nguyen Thi Cam Van Member of BOD 1,335, % 5 Le Hoang Son Member of BOD 1,712, % MAJOR SHAREHOLDERS 1 Ngo Thi Mai Chi General Director 1,997, % No. Shareholder name Number of shares Ownership percentage (%) 1 Tien Loc Investment Company Limited 47,654, % General Director Team 2 Le Hoang Son Member of BOD cum Deputy General Director Gam Ma Investment Company Limited 38,948, % 3 A Au Trading Investment Company Limited 36,984, % 4 Vietnam Enterprise Limited 30,788, % 3 Truong Minh Duy 1 Pham Kim Thoa Deputy General Director Head of Inspection Committee 152, % Vietnam Ventures Limited 27,219, % TOTAL 181,595, % Inspection Committee 2 Vuong Hoang Thao Linh Member of IC 2, % Note: According to the list of share owners closed on 28 Dec 2018 provided by Vietnam Securities Depository (VSD). Total ownership of Dragon Capital is around 17.6%. Total ownership of VinaCapital is around 15.1%. Chief Accountant Authorized person for information disclosure 3 Luu Thi Xuan Lai Member of IC Nguyen Tran Cam Hien Chief Accountant 91, % 1 Le Hoang Son Member of BOD cum Deputy General Director - - TREASURY STOCK In 2018 the Company has no transaction related to treasury stock. TOTAL 12,494, % 42 ANNUAL REPORT

23 INVESTOR RELATIONS (IR) In 2018, the Company s Investor Relations Team maintained dialogue and supported the shareholders, investment funds, securities companies and the media to understand vision, goals, core strengths, business model, competitiveness and development strategies and business performance of the Company. In addition, having transparency policy, the Company always announced business results quarterly, every 6 months and annually to Ho Chi Minh City Stock Exchange (HOSE) and the State Securities Commission (SSC) and posts information on the Company s website at www. khangdien.com.vn. The website was a source of information for all subjects to learn about Khang Dien. In 2018, in addition to the periodic meetings to update business situation, the Company actively cooperated with securities companies to hold project tours to enable the analysts and the investors to more understand potential growth and sustainable development of Khang Dien in short-term and long-term vision. Besides, the meetings with the large investment funds from Europe, America, Hong Kong, Singapore and Korea are responded by the Company via . Striking to implement information transparency, the Company achieved certain successes in 2018, for instances, continuing to be named in Top listed companies with best IR activities in 2018 organized by VietStock and Top 50 best listed companies for the 3rd consecutive year by Forbes Vietnam. 3 YEARS CONSECUTIVE IN THE LIST OF 50 BEST LISTED COMPANIES BY FORBES VIETNAM VOTED 44 ANNUAL REPORT

24 SUBSIDIARIES Khang Dien has 23 subsidiaries, including: Name of subsidiaries Head office Core business Operating status Ownership percentage Name of subsidiaries Head office Core business Operating status Ownership percentage (1) Thanh Phuc Real Estate Investment Ltd. Ho Chi Minh City Real estate trading In operation (13) Vi La JSC. Ho Chi Minh City Real estate trading In operation (2) Tri Minh Real Estate Investment and Trading JSC. Ho Chi Minh City Real estate trading In operation (14) Thap Muoi Real Estate Trading and Construction Co., Ltd. Ho Chi Minh City Real estate trading In operation (3) Gia Phuoc Real Estate Investment and Trading Co., Ltd. Ho Chi Minh City Real estate construction consulting and trading In operation (15) Viet Huu Phu JSC Ho Chi Minh City Real estate trading In operation (4) Saigon Spring Real Estate Trading JSC. Ho Chi Minh City Real estate trading In operation (16) Green Space Real Estate Trading and Investment Co., Ltd. Ho Chi Minh City Real estate trading In operation (5) (6) International Consulting Co., Ltd. Long Phuoc Dien House Development and Infrastructure Building Co., Ltd. Ho Chi Minh City Ho Chi Minh City Real estate construction consulting and trading Real estate trading In operation In operation (17) (18) Binh Trung Real Estate Investment and Trading Co., Ltd. Khang Phuc House Trading Investment Co., Ltd. Ho Chi Minh City Ho Chi Minh City Real estate trading House building and trading, land ownership and industrial park infrastructure In operation In operation (7) Hao Khang Co., Ltd. Ho Chi Minh City Real estate construction and trading In operation (19) BCCI Development Investment Co., Ltd. Ho Chi Minh City Real estate trading In operation (8) Saphire Real Estate Investment and Trading Co., Ltd. Ho Chi Minh City Real estate trading In operation (20) Minh Phat Real Estate Investment Co., Ltd. Ho Chi Minh City Real estate trading In operation (9) Lien Minh Real Estate Investment and Trading Co., Ltd. Ho Chi Minh City Real estate trading In operation (21) Kim Phat Real Estate Investment and Trading Co., Ltd. Ho Chi Minh City Real estate trading In operation (10) Song Lap Real Estate Investment and Trading Co., Ltd. Ho Chi Minh City Real estate trading In operation (22) Nam Phu Property Development Co., Ltd. Ho Chi Minh City Real estate trading In operation (11) Tri Kiet Real Estate Investment and Trading Co., Ltd. Ho Chi Minh City Real estate trading In operation (23) Thuy Sinh Real Estate JSC Ho Chi Minh City Real estate trading In operation (12) Mega City Co., Ltd. Ho Chi Minh City Real estate trading In operation ANNUAL REPORT

25 BUSINESS DIRECTION KEY GOALS Become one of the most prestigious real estate companies, safeguarding the interests and improving life values for the customers. Building and developing civilized, modern and high-quality urban areas in Vietnam. Transparent and efficient corporate governance, ensuring the sustainability of the Company s operation and increasing profits, bringing increasing benefits to shareholders. GOALS FOR ENVIRONMENT, SOCIETY AND COMMUNITY Building a dynamic, fair and equal working environment, encouraging and always creating opportunities for employees to develop their working capacity, improve quality, qualifications and ethics, and ensuring life quality for employees and their families. Developing completed-legality real estate projects with the best quality to serve the society in commitment to environmental protection, joining hand for a green and clean environment. MEDIUM-TERM AND LONG-TERM DEVELOPMENT STRATEGIES Maintaining sustainable growth in parallel with better land bank development and improving business efficiency. Consolidating, building and training human resources, especially management team, applying modern corporate governance technology. Ensuring compliance with the laws in business operations and corporate government. Maintaining financial capacity and effective cost management. Developing and operating residences with sustainability mindset. Diversifying real estate products meeting the needs of customers and the cycle of real estate market. Strengthening and expanding cooperation with good strategic partners at home and abroad. 48 ANNUAL REPORT

26 SWOT STRENGTHS WEAKNESSES OPPORTUNITIES THREATS KNOWLEDGE AND EXPERIENCE With 18 years of investing and trading real estate in Ho Chi Minh City, Khang Dien has comprehensive knowledge and extensive experience in housing market, real estate business, land assembly, legal procedures and product development. STRONG FINANCIAL CAPACITY Khang Dien maintains a solid financial foundation based on a safe financial structure, effective management of cash flows and capital use. In addition, the Company has the supports from the major shareholders, who are the leading investment funds such as Dragon Capital, VinaCapital and the largest banks in Vietnam such as VietinBank, VietcomBank and MBBank. LARGE LAND BANK Khang Dien currently owns large land bank in good locations in Ho Chi Minh City area and continues to make new land investments. The Company has 18 years of experience in developing a quality land bank. KHANG DIEN BRAND Khang Dien brand is getting more recognitions in Ho Chi Minh City area. Having placed legal compliance and reputation at the top of business, Khang Dien is proud to be the brand that earns customer trust. The Company continues to diversify products and expands business to make Khang Dien brand stronger every day. Khang Dien pursuits a sale strategy through well-known, large external property exchange to limit risk and control sale overhead in time of challenges. However, this practice is considered to be a weakness given the Company has yet built in-house sale force independent from external distribution channels. The current management personnel, though are capable of running daily operation and development, lack capacity to pursuit long term development goals. In addition, the Company is step-by-step refining internal policies and procedures in order to improve transparency in corporate governance. SIZABLE MARKET POTENTIAL Housing demand in HCMC is still high and grows steadily every year due to biological and mechanical population growth while new supply has not met the demand. On the other hand, there is imbalance in some segments in some areas in the market; for examples, oversupply of high-end apartments but over demand in mid-end segments at new suburban residential areas. Accordingly, the demand on affordable housing and goodquality housing with reasonable price in the east and the southwest of Ho Chi Minh City that Khang Dien is doing business is increasingly developing and is potential. FAVORABLE MACRO-ECONOMIC ENVIRONMENT Vietnam continues to benefit from economic growth and political-social stability in 2018 with GDP growth rate above 7%, inflation below 4% and more than USD30 Billion in foreign investments. Besides, urbanization speed is still the fastest growth rate in Southeast Asia due to population and economic growth. In 2019, Vietnam is forecast to maintain economic growth on the basis of political-social stability and the Government s growth policy, especially for the private sector, consumption, tourism and FDI. INCREASING COMPETITION Khang Dien s success has attracted others to compete on the market place. Developers are launching new projects with diverse products with quality getting better every day and competitive sale price, which increases competition in the market place. MACRO ECONOMIC RISKS OUTSIDE VIETNAM Global economic growth rate is expected to decrease in 2019, especially in North America and Europe because the central banks start the cycle of interest rate increase. The year 2018 witnessed a worrying deceleration of one of the world s two largest economies (China), and this trend is forecasted to continue in The above movements will put pressure on VND/USD exchange rate and interest rate in VND as it occurred in the 4th quarter of ANNUAL REPORT

27 GOVERNANCE MODEL ORGANIZATIONAL CHART Khang Dien operates in the form of a joint stock company. Besides complying with the laws, the Company strictly follows the charter that has been approved by General Shareholder Meetings. GENERAL SHAREHOLDERS MEETING GENERAL SHAREHOLDER MEETING INSPECTION COMMITTEE According to the Law on Enterprises and the Company s Charter, the General Shareholder Meeting ( GSM ) is the highest governing body of the Company. GSM holds annual meetings to approve policies, orientations and business plans for the year. In addition, GSM may hold extraordinary meetings in accordance with the law and the Charter. BOARD OF DIRECTORS GENERAL DIRECTOR INTERNAL AUDIT TEAM BOARD OF DIRECTORS (BOD) BOD is the management body elected by GSM. BOD has full rights to make decisions on all important issues related to purposes and interests of the Company, except for issues under GSM control. The incumbent BOD of Khang Dien consists of the Chairwoman and 04 other members, appointed for five-year terms, in which 02 are non-executive and 03 are executives. INSPECTION COMMITTEE (IC) The incumbent Inspection Committee includes 03 members, including 01 Chief Supervisor and 02 supervisors. Inspection Committee (IC) operates under 5-year term. IC is elected by General Shareholder s Meeting to be responsible for supervising activities of BOD and General Director Team (GDT) in managing and running the Company, verifying business reports and financial statements and reviewing accounting books and management works. IC operates independently from BOD and GDT. GENERAL DIRECTOR TEAM (GDT) The incumbent General Director Team consists of 01 General Director and 03 Deputy General Directors. General Director is the person who is authorized by BOD to be the Company s legal representative in charge of managing all daily activities of the Company and is responsible to BOD for the implementation of the rights and duties assigned. Deputy General Directors directly manage business operations and give advices to the General Director in making strategic decisions for the Company. Financial Department HR & Administration Department Project Management Department DEPUTY GENERAL DIRECTOR Sales & Marketing Department Legal Department 52 ANNUAL REPORT

28 BOARD OF DIRECTORS Mrs. MAI TRAN THANH TRANG Mr. LY DIEN SON Mrs. NGUYEN THI CAM VAN Mrs. NGUYEN THI DIEU PHUONG Mr. LE HOANG SON Chairwoman of BOD Year of birth: 1976 Qualification: Bachelor Degree in Laws, Land Management Engineer Deputy Chairman of BOD Year of birth: 1966 Qualification: Bachelor Degree from the University of Culture Member of BOD (Independent Member) Year of birth: 1960 Qualification: Master Degree in Land Management Member of BOD Year of birth: 1980 Qualification: Bachelor Degree in Economic - Finance, FACCA Auditor Member of BOD Year of birth: 1977 Qualification: Bachelor Degree in Laws, Bachelor Degree in Business Administration Experience: Having almost 20 years of experience in real estate project legal practice, Mrs. Trang has many important contributions for Khang Dien through a number of key positions: Assistant to Chairman of BOD, and Deputy General Director cum Member of BOD, respectively. At present, Mrs. Trang undertakes the position of Chairwoman of BOD in charge of strategic management, especially in project legality, which is the foundation for Khang Dien to grow on the basis of a transparent and solid legal footing, Mrs. Trang is the key factor for this achievement. Working history: : Legal consultant - Law Office. From October 2005 to July 2007: Administration Manager - Member of BOD of Khang Dien House Trading and Investment Joint Stock Company. From July 2007 to May 2008: Assistant to Chairman of BOD Khang Dien House Trading and Investment Joint Stock Company. From June 2008 to April 2017: Member of BOD cum Deputy General Director of Khang Dien House Trading and Investment Joint Stock Company. From April 2017 to present: Chairwoman of BOD of Khang Dien House Trading and Investment Joint Stock Company. Positions in other organizations: None. Experience: Prior to his current role as Deputy Chairman of BOD, Mr. Son held the role of Chairman of BOD cum General Director and directly managed and operated the Company since its establishment date. With passion, dedication, and experience, he has led the Company to overcome challenges and achieved breakthrough success, developing Khang Dien to become one of the leading real estate developers in HCMC. At present, Mr. Ly Dien Son undertakes the position of Deputy Chairman of BOD, assisting the Chairwoman in strategic management and supervising General Director Team. Working history: : Chairman of BOD cum General Director of Khang Dien House Trading and Investment Joint Stock Company : Deputy Chairman of BOD cum General Director of Khang Dien House Trading and Investment Joint Stock Company. From 2013 to March 2017: Chairman of BOD cum General Director of Khang Dien House Trading and Investment Joint Stock Company. From April 2017 to present: Deputy Chairman of BOD of Khang Dien House Trading and Investment Joint Stock Company. Positions in other organizations: None. Working history: : HCMC Department of Land Administration : HCMC Department of Land Administration and Housing Land : HCMC Department of Natural Resources and Environment; Retired in December From April 2017 to present: Member of BOD of Khang Dien House Trading and Investment Joint Stock Company. Positions in other organizations: None. Experience: With many years of experience and achievements in prestigious financial institutions, in October 2009, Mrs. Phuong was invited to join Khang Dien as a Member of BOD. Since joining Khang Dien, she has had positive contributions to the Company s development. In addition, Mrs. Phuong gives advices and supports functional departments to build financial strategies suitable to each development stage and general situation of the market. Working history: : Senior Auditor of KPMG : In charge of the positions from Investment Specialist to Investment Manager of Vina Capital. From July 2010 to December 2016: Investment Director - Head of Property Portfolio of Vietnam Opportunity Fund - a fund under VinaCapital. From December 2016 to present: Deputy General Director of Vietnam Opportunity Fund. From October 2009 to present: BOD member of Khang Dien House Trading and Investment Joint Stock Company. Positions in other organizations: None. Experience: Mr. Son has more than 15 years working in the field of project legal requirement. Mr. Son joined Khang Dien in 2007 and is holding the position of Deputy General Director in charge of project legality. He has valuable contributions to the completion of the Company s project legal framework. Working history: : Project Legal Specialist of Tan Binh Investment and Construction JSC : Project Legal Specialist of Cotec Housing Investment and Development JSC. From October 2007 to April 2012: Deputy Head of Legal Department of Khang Dien House Trading and Investment Joint Stock Company. From April 2012 to April 2013: Member of BOD cum Deputy Head of Legal Department of Khang Dien House Trading and Investment Joint Stock Company. From October 2014 to March 2017: Head of Project Legal Department Khang Dien House Trading and Investment Joint Stock Company. From September 2015 to present: Member of BOD of Khang Dien House Trading and Investment Joint Stock Company. From March 2017 to present: Deputy General Director of Khang Dien House Trading and Investment Join Stock Company. Positions in other organizations: None. 54 ANNUAL REPORT

29 GENERAL DIRECTOR TEAM Mrs. NGO THI MAI CHI Mrs. TRA THANH TRA Mr. LE HOANG SON Mr. TRUONG MINH DUY General Director Year of birth: 1978 Qualification: Bachelor Degree in Accounting Financial Deputy General Director Year of birth: 1976 Qualification: Bachelor Degree in Economics Member of BOD cum Deputy General Director Year of birth: 1977 Qualification: Bachelor Degree in Laws, Bachelor Degree in Business Administration (See Board of Directors for details about Mr. Le Hoang Son.) Deputy General Director Year of birth: 1973 Qualification: Construction engineer Experience: Mrs. Ngo Thi Mai Chi has more than 20 years of experience in finance - accounting. She joined Khang Dien in 2007 and has made many contributions to the Company s financial - accounting management. In the role of General Director since March 2017, Mrs. Chi has made great impacts in improving the business operation efficiency. Working history: From January 2001 to December 2004: Accountant, Chief of Account - Finance of A&B Co., Ltd. From May 2005 to October 2007: Deputy Head of Accounting - Finance Department of Truong Thanh Furniture Corporation. From December 2007 to November 2015: Internal control experts, Chief Accountant, Chief Financial Officer of Khang Dien House Trading and Investment Joint Stock Company. From December 2015 to February 2017: Deputy General Director of Khang Dien House Trading and Investment Joint Stock Company. From March 2017 to present: General Director of Khang Dien House Trading and Investment Joint Stock Company. Positions in other organizations: None. Experience: Mrs. Thanh Tra has a Bachelor degree in Economics and has more than 20 years of experience in construction accounting and real estate business. She used to work as Chief Accountant for Electricity Joint Stock Company (ELECO) and House Vietnam Joint Stock Company (NVN). She joined Khang Dien in July 2009 and was appointed as the Company s Chief Accountant in December Working history: Chief Accountant of Electricity JSC (ELECO). From April 2007 to March 2009: Chief Accountant of House Vietnam JSC. From March 2009 to 2010: Chief Accountant of Eastern Real Estate Investment and Trading Co., Ltd. From : Chief Accountant of Khong Gian Xanh Real Estate Investment and Trading JSC. From December 2011 to August 2016: Chief Accountant of Khang Dien Housing Investment and Trading JSC. From August 2016 to February 2017: Chief Financial Officer of Khang Dien House Trading and Investment JSC. From March 2017 to present: Deputy General Director of Khang Dien House Trading and Investment JSC. Experience: He has more than 24 years of experience in project management. Prior to joining Khang Dien, Mr. Duy used to hold senior positions at real estate trading and investment companies. He has made a lot of positive contributions in advising and operating the construction management at Khang Dien s projects. Working history: : Design Engineer, Design Manager, and Technical Manager at TH Hydraulics Construction Consultant Co., Ltd : Head of Construction Center - Construction Technology & Building Material JSC (Cotec) : Head of Project Management Division - Sai Gon Thuong Tin Real Estate (Sacomreal) : Regional Managing Director of Nova Real Estate Investment Corporation (Novaland). From April 2017 to present: Deputy General Director of Khang Dien House Trading and Investment JSC. Positions in other organizations: None. Positions in other organizations: None. 56 ANNUAL REPORT

30 INSPECTION COMMITTEE Mrs. PHAM KIM THOA Head of Inspection Committee Year of birth: 1975 Qualification: Bachelor of Finance and Accounting Experience: Mrs. Thoa has more than 19 years of experience in accounting. She used to work as an accountant for the companies such as Urban Development and Investment Company and Vuon Pho JSC (Vung Tau) and Chief Accountant for Tri Minh Real Estate Trading and Investment JSC. Mrs. Thoa manages Inspection Committee in evaluating business results and supervising all activities to ensure the Company s compliance to law. Working history: : Deputy Manager of Accounting Department at Urban Development and Investment Company : Chief Accountant at Vuon Pho JSC April 2017: Chief Accountant at Tri Minh Real Estate Trading and Investment JSC. From April 2017 to September 2017: Member of IC at Khang Dien House Trading and Investment JSC. From September 2017 to present: Head of IC at Khang Dien House Trading and Investment JSC. Positions in other organizations: None. Mrs. VUONG HOANG THAO LINH Member of Inspection Committee Year of birth: 1974 Qualification: Bachelor Degree in Economics, Bachelor Degree in Laws, and Master Degree in Business Administration Experience: Ms. Linh has more than 20 years of experience in accounting and auditing. She used to work as a Senior Auditor of Accounting and Consulting Co., Ltd. (A&C) and Chief Accountant at Air Energy Vietnam and Avon Vietnam. At present, she is the Deputy Investment Director of VinaCapital. Working history: : Senior Auditor at A&C : General Accountant at New Toyo Tissue Paper Mill (Vietnam) : Chief Accountant of Air Energy Vietnam : Chief Accountant of Avon Cosmetic Vietnam : Investment Manager of VinaCapital Corporate Finance Vietnam present: Investment Director of VinaCapital Corporate Finance Vietnam. From September 2017 to present: Member of IC at Khang Dien House Trading and Investment JSC. Positions in other organizations: Member of BOD of Thang Loi Textile and Garment JSC Head of Inspection Committee of Hung Vuong Plaza JSC Member of Inspection Committee of HUD.VN Social Housing Development JSC Mrs. LUU THI XUAN LAI Member of Inspection Committee Year of birth: 1978 Qualification: Bachelor of Finance and Accounting Experience: Mrs. Lai has more than 16 years of experience in accounting. She used to work as Manager of Accounting Department at the companies i.e. Traffic Work Construction Company No.507 and Thai Thinh Capital JSC and Chief Accountant for Song Lap Real Estate Investment and Trading Co., Ltd. With her intensive working experience in large real estate enterprises, Mrs. Lai has made positive contributions in supporting to review and control construction costs, ensuring quality of the Company s projects and compliance to law. Working history: : Accountant for the branch Traffic Work Construction Company No : Accountant for Thai Thinh Capital JSC : Accountant for Eastern Real Estate Investment and Trading Co., Ltd : General Accountant for Lam Vien Investment and Construction JSC April 2017: Chief Accountant for Song Lap Real Estate Investment and Trading Co., Ltd. From April 2017 to present: Member of IC at Khang Dien House Trading and Investment JSC. Positions in other organizations: None. 58 ANNUAL REPORT

31 HUMAN RESOURCE REPORT PERSONNEL STRUCTURE OF KHANG DIEN As of 31 December 2018, Khang Dien had totally 292 employees (including employees of its subsidiaries), less than that of The decrease in the number of employees in 2018 results from human resource restructuring post merger of BCCI group into Khang Dien. PERSONNEL STRUCTURE BY QUALIFICATIONS 4% 32% Graduate: 12 University: 188 College down: 92 64% PERSONNEL STRUCTURE BY AGE 16% 27% Over 45 years of age: to 45 years of age: 165 Under 30 years of age: 80 57% PERSONNEL STRUCTURE BY GENDER 45% Male: 131 Female: % 60 ANNUAL REPORT

32 CHAPTER 2 PERFORMANCE REPORT

33 OVERVIEW OF REAL ESTATE MARKET IN 2018 MACROECONOMIC INDICATORS (2018) GDP GROWTH RETAIL REVENUE CREDIT GROWTH 7.1 USD145 BILLION 0.7 PERCENTAGE POINT 12% 13 % 3.5 PERCENTAGE POINT TRADE SURPLUS INTERNATIONAL VISITORS USD7.2 BILLION 15.5 MILLION VISITS FDI 20% 1 % USD 35.5/19.1BILLION 9% HOME MORTGAGE RATE CONSUMER PRICE INDEX GOOD ECONOMIC DEVELOPMENT NUMBER OF NEWLY ESTABLISHED ENTERPRISES 11 % ,300 % Enterprises STABLE 4% Value Annual Growth (%) Source: Market report for the 4th quarter of 2018 by Savills Vietnam economy in 2018 continued to show good development with GDP recorded 7.08% growth rate (the highest rate since 2008), exceeding the target of 6.7% of the Government. Inflation was under 4% while credit growth was at 13%, which showed less dependence of economic growth on the credit growth. Vietnam continued to be a bright spot in the region as FDI attraction maintained momentum. FDI capital reached USD35.46 billion, in which real estate accounted for USD6.6 billion and particularly Ho Chi Minh City recorded USD5.9 billion. In general, the financial sectors of the economy (including real estate) was affected by the downtrend of stock market. However, with steady development of the capital market, the ongoing favorable home mortgage policy, and the ongoing capex deployment for technical and social infrastructures have stimulated aggregated demand and investments in financial products and real properties. STABLE REAL ESTATE MARKET, NO BREAKOUT The real estate market continued to develop steadily in 2018 in spite of challenges. In project legal practice, the Government issuance of new policies to tighten land resource management, the lack of coordination in the guidance on land use right applicable to foreigners and no regulations in ownership of multifunctional products such as condotel, officetel and shophouse created difficulties for developers to complete project legal obligation and product development. Surge in disputes between developers and residents at many apartment projects have negatively affected the psychology of both investors and homebuyers. Homebuyers set higher and higher standard for their decision to buy a house. In 2018, homebuyers paid high attention to construction quality, technical infrastructures and project legality when buying apartment or townhouse. This was also a motivation for the real estate developers to improve service quality to satisfy homebuyers growing demand and to compete in the market. On the other hand, residential properties continued to be the driving factor for development and establishment of new urban cities towards civilization and modern society, stimulating infrastructure development in suburban areas to create the connections among urban centers, meeting the needs of homebuyers and other real estate investors. In general, the policies to support housing market from the Government have been effective, and the confidence of people and investors has been strengthened. Ho Chi Minh City issued many policies to accelerate housing investment and development until 2020 in the direction of limiting new projects in the city center where high population density and overloaded infrastructures occur and focusing on developing new residential and urban projects with synchronous infrastructure in the districts not far from the center. On the other hand, the city reviewed the use and management of state land, the compliance with the land law, land allocation procedure, etc. has partially slow down the development speed and the supply of new constructed houses. Therefore, houses in the suburban areas with completed infrastructures saw price hikes. (According to Market Report in the 4th quarter 2018 by CBRE, townhouses absorption rate in HCMC was above 90%). 64 ANNUAL REPORT

34 REPORT AND ASSESSMENT OF BOARD OF DIRECTORS BOD S ASSESSMENT ON THE COMPANY S OPERATION In 2018, with an effective business strategy and promoting real values, Khang Dien continued to grow on a solid footing created in the previous years. ASSESSMENT ON BUSINESS RESULTS OF 2018 The Company continued to achieve sustainable growth in profit in 2018 with impressive growth speed. Items Unit: VND Billion Compare 2017 to 2018 Change Ratio % Net revenues 3,932 3,055 2,917 (138) -5% Profit before tax , % Profit after tax % Profit after tax belong to the Parent company shareholders % Earnings per share - EPS (VND/share) 1,590 1,760 2, % Compared to the same period of last year: Profit after tax of the shareholders of Parent company reached VND808 billion, exceeding FY2018 target. Items Plan 2018 Actual 2018 Profit after tax of the shareholders of Parent company includes: Actual vs Plan Unit: VND Billion Difference Ratio % % ACHIEVEMENTS Apartment product created good impression on the market place Recently the entire construction work for Jamila project was completed, and Block C and Block D were handed over to the buyers. Block A and Block B are being handed over in April 2019 as committed schedule. Besides, 853 units from Block C and Block D of Safira project were sold out in November The remained units of Block A and Block B are expected to be sold out in the 2nd quarter of With the motto of doing better than promise, and based on the true values and transparent project legal practice, the quality apartments developed by Khang Dien left a good impression in the market place, gaining the trust from homebuyers and satisfying both customers and investors. Impressive growth in business and profit Townhouse and villa segments have become Khang Dien brand for many years. In 2018, apartment product segment, typically the two projects Jamila and Sarifa, was deployed by Khang Dien and left behind a good impression in the market. The cash flow from these projects were contributing to the financial safety and sustainable development of the Company. Maintain a safe financial structure Borrowings from credit institutions during the year were mainly used to fund on-going projects such as Jamila and Safira. Mobilized capital as well as debt repayment schedule of the Company were balanced against revenue the projects to improve the efficiency of capital use and ensure safety for the financial structure. Completed the merger of BCCI into Khang Dien The plan of issuance KDH shares to swap with BCCI shares and merge BCCI (Khang Phuc House) into Khang Dien was executed in March During the year, the Company successfully restructured Khang Phuc House, according to which, human resources were stabilized; department and divisions were properly arranged; the plan to develop project, business operation, finance, etc. were determined. DRAWBACKS The Company owns land bank in the Southwest of HCMC and has been complementing legal documents related to land clearance and compensation, conversion of land use purpose and application for investment license. However, due to many external factors, the Company has changed the schedule accordingly. Though there have been certain drawbacks, 2018 was a successful year of Khang Dien with impressive business results. Khang Dien brand continued to affirm its position in low-rise housing products and left good impression in apartment segment of the market. 66 ANNUAL REPORT

35 REPORT AND ASSESSMENT OF BOARD OF DIRECTORS (CONTINUED) BOD S ASSESSMENT OF GENERAL DIRECTOR TEAM (GDT) The Company s GDT had a successful year, adhering to the BOD s instruction and policy. Each GDT member was not only fulfilled her duties but also coordinated well to work toward the general, common goal. PLANS AND DIRECTIONS BY THE BOARD OF DIRECTORS (BOD) BOD determines that the Company s business must be built on the basis of customers trust. With the advantage of a solid legal footing and effective business strategy, Khang Dien affirms its mission to bring to customers products with sound legal footing, reasonable price and highquality living. Looking ahead, the direction of the Board of Directors is as follows: DIVERSIFYING PRODUCTS AND EXPANDING MARKET GEOGRAPHY BASED ON MARKET DEMAND Each project has its own characteristics, therefore the Company has a plan to develop the product line that is most suitable for each market segment, bringing high benefits to customers and ensuring success for each project. In addition to projects in District 2 and District 9, the Company has moved its investment to the Southwest of the City and continues to carry out compensation to expand land bank. Besides, the Company also continues to explore, study and seek opportunities to participate in other potential housing markets in the City and neighboring provinces. MAINTAINING A HEALTHY FINANCE SITUATION Maintain a healthy financial situation with a large amount of cash, low debt-to-equity ratio, a balanced financial structure, efficient use of selffinanced capital resources and plans for low-cost capital sources. Thanks to that, the Company can both take advantages of available sources and access external capital source effectively. OPTIMIZE COSTS AND MAXIMIZE PROFITS Determining the key goal in project investment through selecting suitable plan and scale, the Company actively pushes project progress and thereby, enhancing profit margin of each project. CREATING PERFECT PRODUCTS Not stopping at handover of structure, external finishing, Khang Dien will accelerate to create complete products with interior furniture finishing and red book - These are turnkey products. At the same time, Khang Dien focuses on amenities at the projects so that the customers can enjoy the best utilities, worthy of Where you put your trust - Where you make your home. STRATEGIC ORIENTATION ON CORPORATE GOVERNANCE AND HUMAN RESOURCE DEVELOPMENT Setting up governance in the direction of standardizing processes and standards to strengthen labor productivity and quality. Developing high quality and dedicated human resources. The Company creates the best working environment so that the employees are assured of working and engaged with the Company to create products which are a real home for the customers. Strike to make Khang Dien become an attractive work place for talented and dedicated people. 68 ANNUAL REPORT

36 REPORT AND ASSESSMENT OF GENERAL DIRECTOR TEAM REPORT AND ASSESSMENT ON BUSINESS OPERATION Business performance in 2018 In 2018, the Company continued to sell 60 remaining units of Rosita project and opened Safira apartments for sale in November Since opening for sale, as at 31 December 2019, 853 units of Block C and Block D were sold out of total 1,593 units of the project. In 2018, the Company also continued to restructure investment portfolio toward optimizing the benefits for shareholders. To be specific, the Company sold its share in Big C An Lac and transferred a part of Phong Phu 2 project. Financial performance Items Actual Plan Unit: VND Billion Actual vs Plan Value Ratio % Net revenues 2,917 3,500 (583) 83.3% REVENUES The Company recorded VND2,917 billion of revenues in 2018, as a result of the handovers of apartment/ house/land lot of the projects Jamila, Rosita, Phong Phu 2, Phong Phu 4, etc. PROFIT Profit after tax reached VND808 billion in 2018, increasing by 61% or VND306 billion from that in 2017, exceeding the year s target. Profit increased due to good business environment and the effective cost management (COGS to revenue ratio of 2018 decreased 9% compared to that of 2017). In general, business operation of Khang Dien continued to deliver good result in The Company focused on ensuring meeting construction schedule and handing over apartment on schedule for Jamila project (opened for sale in May 2017). The success of Jamila project, from sales (sold out nearly 900 apartments within 6 months) to construction and handover to quality and on schedule, solidified customers s trust, enhancing Company s reputation in the market and thereby, creating a foundation for development in the future. Following the success of Jamila, the Company continued to deploy Safira project with 1,570 apartments and 23 shophouses, in which 853 units of Block C and Block D were sold in November The Company expects to finish selling all units of Block A and Block B in the 2nd quarter of Profit after tax of Parent company % 1, PROFIT AFTER TAX (VND BILLION) 61% COMPARED TO ANNUAL REPORT

37 REPORT AND ASSESSMENT OF GENERAL DIRECTOR TEAM (CONTINUED) REPORT AND ASSESSMENT ON FINANCIAL PERFORMANCE ASSETS At the end of 2018, total assets of Khang Dien valued at VND10,228 billion, increasing by 5% equivalent to VND511 billion compared to the same period of last year. Details are as follows: Asset structure in Unit: VND Billion Compare 2018 to 2017 Items 2016 Proportion 2017 Proportion 2018 Proportion Change Ratio % Cash and cash equivalents 1,059 13% 2,592 27% 1,837 18% (755) -29% Receivables 1,485 19% 1,548 16% 1,760 17% % Inventories 4,618 58% 4,858 50% 5,817 57% % Long-term assets 696 9% 606 6% 658 6% 52 9% In general, asset structure in 2018 showed little change compared to that in 2017, in which 3 items (cash, receivables and inventories) accounted for the main proportion of over 90% of total assets. This structure is consistent with the nature of the real estate industry and demonstrates the safety and development capacity of the Company in the coming time: Specifically in 2018, there was a shift from cash and cash equivalents (2018: 18% compared to 2017: 27%) to inventories (2018: 57% compared to 2017: 50%) since the Company continued to expand land bank in accordance with the common trend of real estate industry and the Company deployed ground clearance, infrastructure development and construction investment for the business in the coming years. Maintained necessary cash and cash equivalents (As at 31 December 2018: VND1,837 billion) to ensure the safety and sustainable development of the Company. In general, the Company s assets were mainly inventories (the value of the projects under investment and commerce) and cash (for investment), which would be the resource to ensure revenue and profit in the coming years. Other assets 79 1% 114 1% 156 2% 42 37% Total assets 7, % 9, % 10, % 511 5% ASSET STRUCTURE TOTAL ASSETS (VND BILLION) 5% COMPARE TO ,000 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 9,717 10, % 17% 57% 6% 2% % 16% 50% 6% 1% % 19% 58% 9% 1% Cash and cash equivalents Receivables Inventories Long-term assets Other assets 72 ANNUAL REPORT

38 REPORT AND ASSESSMENT OF GENERAL DIRECTOR TEAM (CONTINUED) SOURCES OF CAPITAL Along with the change in assets, capital structure also changed toward safety with decreasing long-term debts and increasing owner s equity. Details are as follows: Unit: VND Billion Compare 2018 to 2017 Items 2016 Proportion 2017 Proportion 2018 Proportion Change Ratio % Current liabilities 408 5% 544 6% 776 8% % Prepaid from customers 670 8% 1,087 11% 1,367 13% % Other long-term liabilities 567 7% 237 2% 216 2% (21) -9% Loan and debts 1,894 24% 1,658 17% 970 9% (688) -41% Owner s equity 3,477 44% 5,214 54% 6,864 67% 1,650 32% Interest of minority shareholders Total liabilities and owner s equity % % 35 0% (942) -96% 7, % 9, % 10, % 511 5% FINANCIAL INDICATORS Items SOLVENCY RATIOS Current ratio Quick ratio CAPITAL STRUCTURE Total liabilities/total assets Total liabilities/total equity OPERATING RATIOS Inventory turnover Receivable turnover Net income Total revenue 50% 31% 29% PROFITABILITY RATIOS Return on sales (ROS) 10% 18% 28% Return on Assets (ROA) 5% 6% 8% Return on Equity (ROE) 12% 11% 12% Capital structure changed toward safety with increasing owner s equity (from 54% up to 67%, equivalent to VND1,650 billion increase) and decreasing loans (from 17% down to 9%, equivalent to VND688 billion decrease): Current liabilities increased by VND232 billion compared to 2017, mainly from sales and business activities of the Company; Payment in advance from customers increased by VND280 billion, equivalent to an increase of 26% compared to This is the amount received in advance from homebuyers and will decrease when handing over houses/apartments and recording revenue. Therefore, the Company has no pressure to repay debts in the short-term; Loans and debts are the bank loans to implement projects. At the end of 2018, this item dropped sharply by VND688 billion because the Company s revenue was quite good, and the revenue was prioritized to pay debts to reduce interest expense; At the end of 2018, the Company s equity was VND6,864 billion, increasing by VND1,650 billion, or up 32% from the same period. This increase mainly came from the business results in 2018 with the profit after tax of VND808 billion and the increase in charter capital during the year. Accounting for 67% of the total capital, owner s equity would be the main source of capital to form the Company s assets in the future. This shows the Company s self- reliance approach reducing the dependence on loans and ensuring high financial safety. Quick ratio decreased from 2.3 to 1.4 times due to the shift in the proportion of cash and cash equivalents to inventories at the year-end to fund the expansion of land bank, ground clearance, infrastructure development, and the investment in construction of real estate projects during the year to ensure sustainable business development and profit plan of the Company in the coming years. However, the Company still ensures liquidity and the Company is ready to meet due debt payments by maintaining high cash and cash equivalents position, which was VND1,837 billion as at 31 December The Company s capital structure changed toward reduction of the debt and increase of owner s equity when debt-to-equity ratio decreased from 0.68 to This shows that the Company is not too leverage and focuses on self-finance so as not to be affected from business environment change; Operating ratios decreased slightly compared to the same period. This does not mean that the asset efficiency is low but this is the result of a fraction, in which the denominator (inventories and receivables) increases while the numerator (cost of goods sold) decreases. As mentioned above, the Company funded the expansion of land bank during the year to ensure the sustainability of business operations and the development of the Company. On the other hand, cost of goods sold decreased because the Company managed costs effectively. Return on Sales (ROS) and Return on Assets (ROA) reached 28% and 8%, respectively, up 10% and 2% from the same period last year due to good growth in profits and wellmanaged costs. Particularly, return on equity (ROE) increased from 11% to 12%, showing the Company s increase in capital efficiency. The Company maintains a large amount of cash and low debt. The capital sources mainly consist of equity, ensuring safety and sustainability in business operations as well as strong financial structure. The Company also has a large land bank and continues to expand land bank at reasonable prices. This is the resource to ensure stable revenue and profit in the future. In addition, the Company continues to manage cost efficiency and business cash flow, ensuring good liquidity ratios and optimal profits for shareholders. 74 ANNUAL REPORT

39 REPORT AND ASSESSMENT OF GENERAL DIRECTOR TEAM (CONTINUED) DEVELOPMENT PLAN IN 2019 OPERATION PLAN Finishing sales, construction and handover of the on-going projects, namely Jamila and Safira. In particular, finishing construction and handing over Jamila project on time, to be specific, Block C and Block D in December 2018 and Block A and Block B in April In 2019, the Company will continue to deploy new projects, including Lovera Vista highrise project in Binh Chanh and landed house Venita Park project in District 9. Continuing land entitlement and step-bystep completing the legal procedures for the projects in District 2, District 9, Binh Chanh and Binh Tan, preparing for business operation in 2020 onwards; Continuing to restructure investment portfolio in the direction of optimizing the interest of shareholders. Seeking the partners who are reputable investors and have a strong finance to cooperate in large-scale projects; Expanding investment into new projects with the criteria of transparent legality, reasonable price and prime location to increase clean land bank for long-term business plan and sustainable development in the future; Continuing to improve and complete policies and procedures and human resource structure; At the same time, strengthening supervision and consolidating the role of corporate governance and risk management in finance - accounting, project management, legality and other departments. BUSINESS PLAN SAFIRA Safira project is located in District 9, HCMC with a scale of 2.7 hectares including 1,570 apartments and 23 shophouses in 4 blocks A, B, C, and D. The project is finely designed with internal amenities such as swimming pool, gym center, etc. The project is designed by ACCCO and constructed by An Phong Construction JSC, a prestigious contractor; 853 units of Block C and Block D have been opened for sale in Nov 2018 and sold out. The Company plans to sell off the remaining apartments of Block A and Block B in the 2 nd quarter of LOVERA VISTA Lovera has a scale of 1.8 hectares located in the existing residential area Phong Phu 4, including more than 1,300 apartments with different sizes, refined design and full amenities; Construction and sale are expected to be begin in VENITA PARK The project has a scale of 8 hectares with 300 garden townhouses and villas designed in various sizes, in high-end style with full amenities. Infrastructure and houses are under construction, and sale is expected to open in PROFIT PLAN IN 2019 With the planned projects mentioned above, Khang Dien has more than 2,000 apartments and more than 300 townhouses - villas available for sale in Accordingly, the Company expects revenue, profit and dividend plan for 2019 as follows: No. Items 2019 Compare to Revenue VND 3,000 billion 2 Profit after tax VND 900 billion 11.4% 3 Planned dividend 10% 76 ANNUAL REPORT

40 INSPECTION COMMITTEE (IC) REPORT ACTIVITIES OF IC IN 2018 Supervised the implementation of the plan to issue 51,832,317 new shares to swap 37,023,366 shares of Binh Chanh Construction Investment JSC according to the Resolution of Extraordinary General Meeting of Shareholders No. 01/2018/NQ/ĐHĐCĐ dated 12/01/2018. Supervised the implementation of the resolutions of GSM 2018 on sharing dividends in cash and shares for existing shareholders. Coordinated with independent auditor to verify the financial statements for 6 months and for the year to assess the truth and the faith of financial figures in accordance with Vietnamese Accounting Standards. Reviewed the compliance with the Charter, the resolutions of GSM and BOD, and internal regulations of the Company and giving recommendations to amend some regulations and procedures. Coordinated with functional departments in the Company to inspect the performance of the affiliates to enhance the Company s management to these entities. Supervised the information disclosure according to law, ensuring transparency in information disclosure to serve the benefits and the interest of shareholders. RESULTS OF INSPECTING THE COMPANY S BUSINESS OPERATION AND FINANCIAL SITUATION The financial statements fully reflected the business position and the financial situation of the Company and was presented in accordance with the Circular no. 200/2014/TT-BTC dated 22 December 2014 of the Ministry of Finance. As of the end of 2018, IC found no abnormal matters in the Company s business operation. All the Company s activities have complied with the internal governance regulations and the legal laws. The Company made full report and disclosure periodically as required for the listed companies on Ho Chi Minh Stock Exchange according to regulations on information disclosure on the stock market. IC agreed with the report of BOD and the audited financial statements for fiscal year Some major financial indicators Items INSPECTING RESULT OF BOARD OF DIRECTORS AND GENERAL DIRECTOR TEAM ACTIVITIES Inspection Committee takes its functions and duties according to law, the Company s Charter and internal governance regulations. IC s performance plan in 2018 includes supervising the activities of BOD and GDT and supervising the business operation and financial position of the Company. BOARD OF DIRECTORS The BOD has fully completed their roles of management in compliance with the Law on Enterprise, the Law on Securities, the Company s Charter, the resolutions of GSM and other legal regulations. The BOD has closely followed the strategic orientation and the actual situation to make decisions and give instructions timely and exactly. Current Quick ratio CAPITAL STRUCTURE Debt/Total asset ratio Debt/Owners equity ratio OPERATING RATIO Inventory turnover Account receivable turnover Net revenue/total asset 31% 29% PROFITABILITY ROA 6% 8% EPS (VND/share) 1,760 2,020 GENERAL DIRECTOR TEAM Vietnam s real estate market in 2018 showed positive changes but the real estate enterprises faced strong competition. This was a high pressure that required the Company s GDT to frequently update market information to develop the products not only having high quality and beautiful design but also environmental friendliness, safety and full amenities to meet the increasing demand of customers. GDT and other management departments made every effort to direct and execute the Company s business plan, timely giving out new plans and decisions to implement the Resolutions of GSM The Company s process and procedure complied with the internal corporate governance, timely detecting issues and proposing suitable recommendations and solutions. The Company made reports and information disclosure according to regulations. 78 ANNUAL REPORT

41 INSPECTION COMMITTEE (IC) REPORT (CONTINUED) SUGGESTIONS OF INSPECTION COMMITTEE IC suggests: The Company needs to continue to consolidate and complete human resources with high qualification and experience to meet the Company s development requirement. Additionally issue procedures to strictly control construction costs and management costs in the Company. Complete regulations, internal control system; supplement regulation and processes of business operations to ensure efficiency and compliance with the development of the Company. Review and balance investment activities, innovate marketing and brand promotion to develop projects to increase the Company s competitive advantage in the market. ORIENTATION FOR IC IN 2019 In 2019, IC will continue to do the tasks assigned by GSM within the rights and obligations of IC as regulated in the Company s Charter and takes all responsibilities to GSM. Supervise the operation and the execution of BOD and GDT in accordance with the Resolutions of the GSM and the Resolutions of BOD, the Charter of the Company and the internal management regulations of the Company. Strictly control all business management and administration activities of the Company through strengthening the inspection of accounting books and financial statements of the Company. Conduct regular and irregular inspection as requested by GSM to ensure the interests of shareholders and benefits of employees. Monitor the performance of business plan in 2019 which was approved by GSM. IC will strike more and coordinate closely with BOD and GDT in improving and enhancing internal control efficiency. Continue to review and propose the impediments in process, regulations and business activities of the Company. 80 ANNUAL REPORT

42 CHAPTER 3 CORPORATE GOVERNANCE

43 STRUCTURE AND ACTIVITIES OF BOARD OF DIRECTORS MEMBERS AND STRUCTURE OF BOARD OF DIRECTORS As of 31 December 2018, Board of Directors (BOD) of Khang Dien consisted of 5 members, including 3 executive members and 2 non-executive members. Below are the Directors of the Board: No. Member of BOD Position 1 Mrs. Mai Tran Thanh Trang Chairperson 2 Mr. Ly Dien Son 3 Mrs. Nguyen Thi Cam Van 4 Mrs. Nguyen Thi Dieu Phuong 5 Mr. Le Hoang Son Deputy Chairman Member Member (Nonexecutive) (Nonexecutive) Member (Deputy General Director) Number of shares 3,105,420 shares 4,097,000 shares 1,335,000 shares 0 shares 1,712,310 shares Number of share held by related persons 0 shares 117,716 shares 0 shares 62,341,876 shares 0 shares Violation of law Conflict of interest with the Company Benefits related to the Company None None None None None None None None None None None None None None None ACTIVITIES OF BOARD OF DIRECTORS In 2018, with the participation of all members BOD held 28 meetings and issued resolutions on key issues of the Company. At the same time, BOD timely gave instructions to resolve challenging issues and impediments in actual business operations. BOD quickly made strategic decisions and effectively fulfilled its duties in maintaining stable and safe operations for the Company. The Directors unanimously approved all resolutions of the 28 meetings, among which are: Approved the plan to issue additional KDH shares to swap with the outstanding shares of BCCI; Approved the plan to pay dividends for FY2017: 5% stock and 5% cash (of par value); Approved the registration to increase charter capital from VND3,878,323,170,000 to VND4,072,233,530,000 and amendment of the Company s Charter after share issuance; Approved the increase of Khang Dien s charter capital from VND4,072,233,530,000 to VND4,140,233,530,000 due to issuing 6,800,000 shares under ESOP and approved the amendment of the Company s Charter; Approved the transfer of 99.9% of charter capital of Thuy Sinh Real Estate to Vi La JSC; Approved the increase of charter capital of Khang Phuc House Ltd. from VND1,100 billion to VND2,400 billion to prove the financial capacity of project implementation and the amendment of charter after the increase. And some other important contents have been published in the 2018 corporate governance report posted on the Company s website (www. khangdien.com.vn) and Ho Chi Minh Stock Exchange ( BOD S SUPERVISION ON GENERAL DIRECTOR TEAM (GDT) BOD assigned business targets for 2018 and supervised the performance of GDT by attending the periodic meetings and reviewing periodic reports on business performance and financial position of the Company. BOD supervised GDT in business operations, ensuring all activities in compliance with the strategies as oriented by BOD and GSM for the purpose of completing the planned targets. Supervised the implementation of the Company s projects. Organized Annual General Shareholders Meeting 2018 according to law. BOD supervised and directed information disclosure according to the law. Considered and evaluated business performance in 2017 and the quarters of 2018 as well as planning operational strategies to ensure completion of business plan for Selected independent auditor for Khang Dien and its subsidiaries for the fiscal year ANNUAL REPORT

44 STRUCTURE AND ACTIVITIES OF INSPECTION COMMITTEE (IC) MEMBERS AND STRUCTURE OF INSPECTION COMMITTEE SHARE TRANSACTIONS OF INTERNAL SHAREHOLDERS AND RELATED PERSONS Inspection Committee (IC) consists of 3 members elected by General Shareholders Meeting (GSM) to be responsible for supervision work in accordance with the law and the Company s Charter: No. Member of IC Position 1 Mrs. Pham Kim Thoa Chief of IC 2 Mrs. Vuong Hoang Thao Linh Member 3 Mrs. Luu Thi Xuan Lai Member Number of shares 0 shares 2,942 shares 0 shares Number of share held by related persons 0 shares 62,341,876 shares 0 shares Violation of law Conflict of interest with the Company Benefits related to the Company None None None None None None None None None No. 1 2 Transactions conducted by Vietnam Ventures Ltd Mai Tran Thanh Trang Relationship with internal shareholders Beginning number of shares Number of shares Percentage (*) Ending number of shares Number of shares Percentage (*) Related person 23,923, % 27,219, % Reasons for increase/ decrease (purchasing, selling, transferring, bonus, etc.) Investment portfolio restructuring Purchasing ESOP Chairman 1,200, % 3,105, % Purchasing to increase ownership ACTIVITIES OF INSPECTION COMMITTEE 3 Ly Dien Son Deputy Chairman 3,140, % 4,097, % Purchasing ESOP In 2018, IC held 4 meetings with full attendances of the members to summarize the performance during the period and make plans for the next periods. The meetings were unanimously approved by all members. Apart from the official meetings, the IC members regularly exchanged information via and phone to fulfill the duties under their competence. COORDINATION BETWEEN IC, BOD AND GDT IC, BOD and GDT collaborated in the best interests of the Company and the shareholders and in compliance with the laws and the Charter. IC attended Board s meetings and gave comments under its functions and duties. In 2018, BOD and GDT fully provided necessary information and documents to IC for inspection purpose. REMUNERATIONS OF BOD AND IC REMUNERATIONS OF BOD Chairperson of the Board Member of the Board : VND 15 million per month. : VND 10 million per month. 4 Nguyen Thi Cam Van 5 Le Hoang Son Ngo Thi Mai Chi Truong Minh Duy Nguyen Tran Cam Hien 9 Tra Thanh Tra Nguyen Quoc An Bui Ba Nghiep Member of BOD 700, % 1,335, % Purchasing ESOP Member of BOD cum Deputy General Director 977, % 1,712, % Purchasing ESOP General Director 1,045, % 1,997, % Purchasing ESOP Deputy General Director 50, % 152, % Purchasing ESOP Chief Accountant 30, % 91, % Purchasing ESOP Deputy General Director cum CFO (***) Chief Accountant (***) Deputy General Director (***) 995, % 1,257, % Purchasing ESOP 300, % 385, % Purchasing ESOP 0 0% 85, % Purchasing ESOP In addition, in 2018, the Company has exceeded the profit target, so the members of the BOD and GDT received a bonus of 10% of the portion of profit after tax exceeding the target (VND 8,078,193,000), equivalent to the bonus of VND 807,819,300, which had been approved by the 2018 Annual General Meeting of Shareholders. REMUNERATIONS OF IC Head of IC IC member : VND 10 million per month. : VND 5 million per month. Apart from the above-mentioned remunerations, the Company has no payment to the IC members. Notes: * Based on the charter capital of VND3,878,323,170,000 ** Based on new charter capital of VND4,140,233,530,000. Information about changes in Charter capital is shown on page 42 *** Already resigned Shareholders Vietnam Investment Limited, Vietnam Investment Property Limited, Vietnam Enterprise Limited, Viet Nam Ventures Limited under management of VinaCapital Corporate Finance Vietnam has 2 key positions in Khang Dien: BOD member Nguyen Thi Dieu Phuong and IC member Vuong Hoang Thao Linh. 86 ANNUAL REPORT

45 RISKS AND RISK MANAGEMENT RISK MANAGEMENT PRINCIPLE AND PROCEDURE Risk management principles of Khang Dien focus on analysis and assessment of risks in a systematic way to control, prevent and minimize the damages, losses, and negative effects of the risks to the Company s business objectives and results. Based on this principle, the Company s Management evaluates and decides to accept certain risks or not, and if accepting, determines the degree of caution and control mode and, in many cases, takes advantage of business opportunities from the risks. Risk management principle and procedure are integrated and coordinated in all companies in the group (including parent company and subsidiaries). Company s Management is responsible for releasing and implementing policies and procedures of risk management, providing resources for risk management activities. Company group (including Khang Dien and its subsidiaries) separately manage risk by building their own risk management strategies and policies in line with Khang Dien s risk management strategy and policy. The heads of function divisions in parent company, directors of subsidiaries and department heads play the key role in risk management of their scope and relating works. The Company s management positions starting from department head and higher jointly share risk management responsibilities with the General Director Team. The manager of each department, division, or project is accountable for determining, analyzing and evaluating potential risks, proposing solutions to prevent within her scope and reports to General Director Team. The report is made weekly or at any time when the manager finds that the possible risks and their effects to the Company s daily business activities exceeds her management ability. General Director Team summarizes the reports then reports the main risks, preventive measures to General Director, who reviews and evaluates the reports weekly or at any time as required and makes decisions to accept the risks or not, choses preventive measures, and approves budget for those solutions. General Director will report to Board of Directors about major issues related to the risks and their related business opportunities and the impacts on business objectives and results in the current fiscal year as well as the risks causing major impacts on the Company s medium-term and long-term development strategy. PROCEDURE Identify the risks Measure and evaluate the risks Parent Company In 2018, Khang Dien continued to enhance the efficiency of risk management at parent company and member companies of the Group. The Company focused on risk management in development strategies, project legality, and daily business operation to protect its business achievements, prestige and corporate values. Monitor and review risk management procedure Recognize and monitor the risks CONTROL AND REVIEW Subsidiaries Risk management report Risk mitigation Functional Division/ Department 88 ANNUAL REPORT

46 RISKS AND RISK MANAGEMENT (CONTINUED) RISK FACTORS AND RISK MANAGEMENT In 2018, Khang Dien identified major risk factors and risk management solutions as follows: ECONOMIC, POLICY AND REAL ESTATE MARKET RISKS BUSINESS AND FINANCIAL RISK ECONOMIC, POLICY AND REAL ESTATE MARKET RISKS Due to the characteristics of business sector, Khang Dien s business position has a close relationship with the credit cycle of the economy. The cyclical risk has a significant impact on the business, sales volume, investment speed, financial cost, profit, and value of land bank of the Company. Operating in the field of housing trading, Khang Dien subjects to the risks of real estate market in general and the housing market in particular. The real estate market in 2018 continued to show some potential risks such as oversupply in high-end segment, product structure focusing on investment attraction (for instance, large volumes of small-sized apartments in a project or in a locality, strong investment in condotel and officetel) and high speed of price increase. Domestic and overseas economic management policies as well as the State s policies on real estate market have a strong impact on Khang Dien s real estate and housing trading. Policy risk mainly comes from the issuance date and the effective date of the policies and the changes in the policies. The polices have direct impact on supply (through the source of investment capital and limitations in real estate business) and demand (through controlling credit given to home buying and tax). MAIN RISKS RISKS IN LEGALITY, PROJECT IMPLEMENTATION AND REPUTATION Mitigation measures RISK RELATED TO ENVIRONMENT, OCCUPATIONAL HEALTH Focusing on development of projects and products which are able to suffer the impact from credit cycle and policy changes and meeting the demand of almost home buyers. Khang Dien has been carefully selected project locations in the new inner districts of Ho Chi Minh City, where urbanization and infrastructure development have been speedy and attracting investment capital, and convenient for the home buyers in the region and neighboring provinces. The Company closely monitored the macroeconomic situation, the cycle of the real estate market, housing market, and the adjustment in State policies by maintaining good relationships with local authorities, professional associations, major financial institutions and leading experts, etc. to well understand and predict the developments of economic, market and policy. Continuously monitoring, considering and evaluating the market, balancing product investment so as to be suitable to the demand of almost home buyers and the market. Creating products with true values and perfect quality to meet the needs of customers in long term. The Company has been willing to re-evaluate and adjust business strategy and plans closely to the reality in the market. BUSINESS AND FINANCIAL RISK Khang Dien s business risks are mainly related to the time of sale, product structure, sales velocity, selling price, sales volume and inventory. The Company uses loans and accordingly, the credit supply tightening or the increase in loan interest rate from the credit institutions has a great impact on business efficiency and development of the Company. Liquidity risk is related to the fact that the Company s cash flow does not meet payment requirement in business activities as the Company maintains bank loans and liabilities with partners and customers. The Company has to face the risk of land use fee. Since in the project prefeasibility period, the land use fee is unknown, the Company must use an assumption-based figure. During the project development, land use fee may higher than assumption, which is detrimental to the project development and business. Mitigation measures The Company always maintains enough cash for business operations through credit lines for project finance from the largest and safest banks. The Company always manages cash flows and prioritizes loan interest payments, settling loans before maturity and restructuring loans with lower interest rates and or using fixed interest rates. Management continues to mobilize capital from the shareholders and strategic investors in order to maintain stable, low risk capital structure. Khang Dien always practices transparent project legal framework, land entitlement, property ownership and full infrastructure development before sales to earn the trust from the banks. More careful prefeasibility study. 90 ANNUAL REPORT

47 RISKS AND RISK MANAGEMENT (CONTINUED) RISKS IN LEGALITY, PROJECT IMPLEMENTATION AND REPUTATION RISK RELATED TO ENVIRONMENT, OCCUPATIONAL HEALTH AND SAFETY Legal risks are those relating to the changes in legal regulations that may cause negative impact to the Company. In 2018, the Government focused on inspecting land use status and land handover to the investors. Accordingly, the project legality process takes more time and extending the project implementation schedule. Incomplete project legal documents often lead to the authority s conclusion that the enterprises violate project legal procedures and process and, thereby, resulting in arisen costs and delay in production. Land clearance and compensation of the Company faces the risk of delay due to many objective reasons, leading to delay in project implementation and increasing cost of capital. In purchasing land and property projects, the Company is faced with the unknowns relating to legal status, potential obligations and disputes. Khang Dien reputation depends on product quality and after-sales services. At present Vietnam lacks property management professionals and aftersales service providers because they are relatively new professions. Mitigation measures The Company carefully reviews internal processes in project legality and requires absolute compliance. Frequently update the changes in legal policies relating to real estate and laws on project investment to timely have suitable plans and ensure compliance with the law. Selecting reputable consultants and contractors in combination with cross-check and independent supervision. The Company applies strictly standards in experience and reputation to select prestigious personnel and entities to be responsible for operation and maintenance together with a supervision team to ensure project quality. Construction and operation of residential areas may cause surrounding environmental pollution. Environment, condition and working time in the field of land development and construction always hide risks of occupational accidents and health. Strictly implement, always comply with the law and actively finish the obligations on finance, tax and others to ensure complete legality. Khang Dien always cares about and support the communities and the individuals affected by the Company s land clearance. The Company always makes compensations to the affected parties at market prices and supporting them with resettlement. Customer Care Center assigns after-sales specialists on duty at the project sites after the residents have moved in. The team of after-sales staffs coordinates with the project s technical team, security team and operational team to solve the problems in the best way. When a problem attracts the attention of the media industry, Marketing and PR Department will take responsibility to share correct and fair information and to maintain fair and open dialogue with the media, the press and the community. Mitigation measures Strictly comply with construction standards and legal regulations on labor safety and firefighting during the progress of project development. Always take the initiative to guide, affect and encourage the contractors to put safety above all, maintain health of employees and pay special attention to fire prevention and firefighting. Avoid interfering with natural geography, taking advantage of available geographic conditions to develop housing, maintaining land area for green space and lake, limiting land area covered with concrete, partially helping to reduce flooding and increasing the quality of living environment. 92 ANNUAL REPORT

48 CHAPTER 4 SUSTAINABILITY REPORT

49 SUSTAINABILITY MESSAGE FY2018 is the 18th year Khang Dien doing business in the field of real estate development and pursuing sustainable development. The Company always looks ahead to plan and develop projects in harmony with the landscape and natural environment, update modern design trend, do business efficiently, comply with the law, be transparent in corporate governance, contribute to the society, and protect the environmental etc. All of which are for sustainable develop and limit negative impacts in the future. SUSTAINABILITY ROOTED IN KHANG DIEN S CORE VALUES Khang Dien has the cohesion between the staff and the management to pursue the mission of making the Company Where you put your trust - Where you make your home. We are committed to creating values and balancing the interests of stakeholders and the society. Despite beginning to publish sustainability reports since 2016, Khang Dien has followed the road to sustainability early, since its establishment in The Company has always paid attention to the environmental and social factors when planning for projects, designing, building, managing and operating properties as well as in corporate governance. In 2018, Khang Dien continued to pursue sustainability goal, which was an integral part of the Company s long-term strategy. Sustainability was involved in all activities from investment, sale, resource development, cares for the environment and contribution to the society. TRANSPARENCY - HARMONY - SUSTAINABILITY 96 ANNUAL REPORT

50 OVERVIEW OF SUSTAINABILITY REPORT Sustainable development report 2018 is the third consecutive report since This report is made based on Instructions for Information Disclosure about Environment & Society by Vietnam Annual Report Awards (ARA) 2017, Corporate Governance Assessment Report - Vietnamese listed companies 2018 of ARA, Handbook of Vietnam s Sustainable Development Goals by the Ministry of Planning and Investment and Circular 155/2015/TT- BTC by the Ministry of Finance on information disclosure in the securities market. The report is prepared in Vietnam for real estate development business, financial sector of the economy. Information in this report is updated for the fiscal year 2018, from 01 January 2018 to 31 December This report continues from the second report for the period from 01 January 2017 to 31 December This report includes the activities of parent company, subsidiaries (please see subsidiary list on page 46) and project management units. The report reflects the performance in 2018 and set lights on direction and goals for sustainability of Khang Dien in the coming years. This sustainability report and the remainer of the Annual Report 2018 complement each other and provide transparent information to shareholders and stakeholders. We continue to review and evaluate sustainable development issues in relation to our current business operation, identifying material issues to review and improve as well as reflecting more sufficiently in the content of sustainability report of the following years. CONTACT INFORMATION We welcome feedback and suggestion to improve our practice of sustainability. Please reach out, write or call us at : Website: Tel: Fax: Head office: Suite 1&2, 11 th Floor, Saigon Center, 67 Le Loi, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam 98 ANNUAL REPORT

51 MATERIAL FACTORS Khang Dien has reviewed and evaluated the material factors in respects of environment, society and corporate governance relating to the Company and the stakeholders. The consideration and assessment of those material issues were based on the Company s core values with reference to GRI Standards by GlobalReporting.org, Handbook of Vietnam s Sustainable Development Goals by the Ministry of Planning and Investment and Circular 155/2015/TT-BTC by the Ministry of Finance giving guidance on information disclosure in the securities market. Foundation for sustainable development IMPACT SCOPE OF MATERIAL FACTORS Material factors Business performance Khang Dien Partners, contractors, suppliers Customers, residents Society, community Accordingly, Khang Dien has review material factors in the years 2016 and 2017 and reconfirmed 10 most important material factors for the Company and the stakeholders. They are divided into 3 groups which are the foundation for Khang Dien s sustainable development: Improvement in thinking and action Business performance Compliance with the law on environmental protection Control conflict of interest Responsibility in marketing and sales Responsibility for products Advance in thinking and action Environmental compliance Control conflicts of interest Consume responsibly Power saving Responsibility in marketing and sales Water saving Human factor Responsibility to products Employee policies Labor safety and occupational health Sharing with community Saving energy Consume responsibly Saving water Employee policies Human factor Occupational health and safety Sharing with community 100 ANNUAL REPORT

52 MATERIAL FACTORS AND STAKEHOLDERS IN KHANG DIEN S VALUE CHAIN Khang Dien s business activities are related to land investment, project development, trading and sales, and customer care (after-sales services). In business, the Company works with stakeholders such as land partners, financial partners, design consultant, contractor, customers and authorities. Through our economic relationship with the stakeholders in entire value chain, Khang Dien encourages and affects them to pursue long-term sustainable development strategy. MAIN ACTIVITIES MATERIAL FACTORS AND STAKEHOLDERS IN THE VALUE CHAIN OF KHANG DIEN S BUSINESS LAND INVESTMENT Land clearance and compensation, purchase and development Capital preparation PROJECT DEVELOPMENT Planning Designing Construction Project management DISTRIBUTION & SALES Wholesale and retail Marketing CUSTOMER CARE Property operation and management After-sales services Land partners Construction contractors Customers Customers Local communities Consulting companies Financial institutions Local communities STAKEHOLDERS Employees State agencies Agents Service providers Financial institutions Employees Brokerage State agencies State agencies Local communities Employees Employees Media and the press Media and the press 102 ANNUAL REPORT

53 ENGAGEMENT WITH STAKEHOLDERS In 2018, Khang Dien maintained dialogues and communication with stakeholders via meetings and information exchange about various topics, including sustainable development. We are highly aware that engagement with stakeholders is a prerequisite for our success in sustainable development strategy. Through the communication, we continued to share with the stakeholders about vision and objectives in building a sustainable relationship with the community. Stakeholders Ways of engagement Main topics Distributors, Contractors, and Suppliers Bilateral dialogue Regular meetings Project site visits and inspections Exchange information via phone and Quality of products and services Performance efficiency Job safety, worker health, and environmental protection Customers, Residents Bilateral dialogue Customer Care Center Customer care events and model house visits Interview and collecting feedback Consult and answer questions via phone and Quality of products and services Customer satisfaction Assessment on the efficiency and work attitude of employees Laborers Performance evaluation Internal training and guidance for new employees Sport, team building activities Year-end party Gift giving on holidays Outing Efficiency and skills Company policy Occupational safety and health Solidarity Coworker relationship Shareholders and Investors State agencies Quarterly meetings for business performance Annual General Shareholder Meeting, Extraordinary General Shareholder Meeting Investor meetings Bilateral dialogue Project visits Exchange information via phone and Report and request for advice and guidance for implementation Participation in Real Estate Associations Professional networking events Other exchange events Business result Operation status and operational efficiency Development direction and strategy Topics about laws and State management Market trend Difficulties of enterprises Media and the press Interview Press release TVC advertisements, PR articles Disclosure on business result Information disclosure upon the events 104 ANNUAL REPORT

54 BUSINESS EFFICIENCY COMPLIANCE WITH THE LAW ON ENVIRONMENTAL PROTECTION Economic return and annual business performance are the foundation to maintain Khang Dien s sustainability. Financial result has direct impacts to the ability to maintain ongoing operation and contribution to the society and the country. Please see Report and Assessment of General Director Team on page 70, Report and Assessment of Board of Directors on page 66 and Financial Statements 2018 in page 119. Both Khang Dien s management team and staff are highly aware of environmental impacts from the real estate development projects. In 2018, the Company continued to develop business in the direction of compliance with the law on environmental protection, especially in project development and management activities. The Company continued to comply with the legal regulations in environment impact assessment, wastewater treatment, waste management and solutions to protect environment for the residential areas, industrial parks and projects. Sanitation and environmental protection are managed by the site management units and project management units after handover. Quality Control Department and Legality Division of parent company are responsible for coordinating in supervision and inspection. 106 ANNUAL REPORT

55 CONTROL CONFLICT OF INTEREST ENERGY AND WATER SAVINGS Construction and operation of real estate projects consume a large amount of energy. Therefore, to save energy, Khang Dien actively applies many solutions to save power and fuel. For example, in the land development, the Company gives priority to less intervention in geography, landform, green trees, water surface and natural flow to limit energy consumption from using construction machinery and equipment and reduce environmental impacts. During the project development phase, the Company gives at least 50% of land area for trees, water surface and minimizes concreting to reduce heat energy absorbed. The solutions are all aimed at reducing energy consumption for operating related equipment systems. In architectural design, the Company continues to apply environmentally friendly options including natural lighting and ventilation, setback space to reduce direct sunshine contract and covering the roof with green trees. Khang Dien emphasizes exterior treatment in environmentally friendly trend, in which construction materials plays an important role. In 2018, high-rise buildings developed by Khang Dien use 50% unbaked bricks which are ecofriendly and well-insulated. The Company plans to use 75% of unbaked bricks for our high-rise projects in the coming years. In addition, exterior paints with high thermal insulation are used in combination with opening spaces in high-rise buildings and planting trees at height to reduce heat absorption. These solutions are intended to reduce the amount of heat absorbed by the buildings, thereby reducing power consumption for air conditioning system. Clean water is a limited resource; therefore, the Company strikes to minimize the consumption of clean water in ground leveling and construction; for examples, using natural water at construction site to water trees and clean construction equipment, roads, construction sites and construction items. In addition, the site steering committee actively inspects daily and remedies leaks of water supply pipes at the project. In order to save water, the Company also focuses on growing grasses, drought-tolerant trees, and keeps the construction sites, roads and construction sites clean to reduce water consumption for cleaning. In 2018, there was no case involved in conflict of interest at Khang Dien. Maintaining Khang Dien s reputation and brand transparency over the past 18 years, we strictly forbid all activities that may be involved in deception or interest conflict between the Company and the customers in our daily works, business operation and coordination with stakeholders. The Company s management team applies policy of responsibility separation, verification and cross-check and organizes employees into teams to be easier in supervising and reminding each other. At the highest degree, BOD carefully considers before making important decisions or approving large-scale projects while IC supervises the implementation strictly. This is to ensure the faith of the decisions and balance the interest of stakeholders. Khang Dien s management team applies highest governance standards of the law (Law on Enterprises, Circular no.155/2015/tt-btc of the Ministry of Finance guiding information disclosure in security market, Decree no.71/2017/ NĐCP of the Government regarding governance of public joint stock company and Circular no. 95/2017/TT-BTC of the Ministry of Finance regarding governance of public joint stock company) and bases on the Company s core values to release a range of management policies and administration processes and procedures, including the policies, programs and processes to control internal transactions, transactions of stakeholders and risk management (Please see Corporate Governance on page 83). 108 ANNUAL REPORT

56 RESPONSIBILITIES IN MARKETING AND SALES Since beginning, the Company absolutely complies with the Law on Housing, the Law on Real Estate Trading, the Law on Protection of Consumer Rights and other regulations relating to real estate communication, marketing and trading. Ethics and sense of responsibility in communication, marketing and business are always a part of the Company s culture since beginning. In marketing, the Company pays high attention to ensuring that the marketing messages are prepared and communicated in a clear, transparent, complete and timely manner to customers. For each project opened for sale, the Company actively conducts intensive training for distribution agents and brokers and monitors them in sales process, ensuring product information is communicated to homebuyers responsibly. The Company maintains regular meetings with agents and brokers on sale ethical topics and encourages them to maintain business moral and responsible culture. 110 ANNUAL REPORT

57 RESPONSIBILITY TO PRODUCTS RESPONSIBILITY TO PROJECT LEGAL STATUS Prior to launching real estate products to the market, the Company has completed its financial obligations on land, land use rights, land use planning requirements, standards and regulations on fire safety, wastewater treatment, infrastructure connection and land handover procedures and investor recognition. The Company ensures to hand over the house and conduct the procedures for land use right certificates not later than the time specified in the contract and within the time as regulated by law and continuously improves to shorten the time for those procedures. The Company complies with the applicable laws on trading existing houses and houses formed in the future. RESPONSIBILITY TO QUALITY In 2018, all construction works complied with the Company s quality policy as well as complying with the standards and legal regulations on design and construction. In project development, the Company always paid attention to choose the optimal design with building materials as best as possible and suitable for each project, locality and geography. The Company always complied with Vietnamese standards and specifications (TCVN, QCVN). The Company also referred to international standards such as BIS, AIS or Euro Code for design. In terms of expertise, Khang Dien s project development and management team continued to promote the project management experience in the past at leading companies such as Meinhardt Group, Apave, SWA, Cofico, CotecCons, etc. and accumulates more from the Company s projects in the past years in combination with the working experience of new engineers and architects joining the Company during the year. To ensure product quality, the Company coordinates with leading partners in Vietnam such as Accco, Ong & Ong (design consultants); HBC, CotecCons, An Phong (construction contractors); and CBRE, Savills (operational management). After handover to customers, in addition to the warranty of housing product under sales contract or according to the law, the Company also meets the reasonable requirements of residents on repairing. Besides, the Company will repair technical infrastructure outside and inside residential areas as per possible budget to maintain a modern living environment and civilized community for residents. PROPERTY MANAGEMENT We understand that the good living environment and the value of a residential area require not only design and build quality but also good operational management after residents stay in. After handing over houses to the buyers, the Company establishes Residential Management Board (including the experts from the Project Management Unit and Customer Care Center) and hires CBRE to operate the residential areas until the established residential management board can meet the requirements. The Management Board ensures that the following jobs and services are done well for each residential area: Support and guide residents in daily activities 24/24 security Regularly cleaning common utilities and common area Regular maintenance of trees and landscapes Periodic inspection and maintenance of MEP equipment Firefighting rehearsal Decorating landscape periodically or on public holidays 112 ANNUAL REPORT

58 LABOR SAFETY AND OCCUPATIONAL HEALTH EMPLOYEE POLICIES People are an indispensable element in business and also a source of energy for development and innovation. Given that awareness, Khang Dien appreciates a working environment with diversity of age, specialties, ethnicity, religion and life experiences and the Company encourages the employees to promote their capability and personal identify, motivating their engagement with the Company. During the year, the Company organized training courses to improve management skills for all employees such as change management skill, time management skill, risk management skill, etc., guided ISO process, seminar to build vision - mission - core values Khang Dien, etc The Company also organized teamwork activities, coordinating personnel from all departments with different gender, age, cultural background and living experiences to create conditions for workers to exchange experiences and accumulate not only professional knowledge but also living knowledge. In 2018, Quality Control Department continued to take responsibility for occupational health and safety. We continued to update and maintain occupational health and safety policies as well as monitoring the contractors compliance. In project development, the Company strictly adheres to the construction standards as the laws on occupational safety and fire protection throughout the development life cycle. To be specific, Khang Dien carefully reviews safety, health and fire prevention factors in all steps, from architectural and structural design, MEP works to landscape. During construction, the Company always actively guides and encourages the contractors to put labor safety above all, keeping workers healthy and especially, paying high attention to fire prevention in high-rise projects. In order to strengthen labor safety efficiency, keeping workers healthy and reducing fire risk at site, Khang Dien has monthly meetings with contractors about occupational safety and fire protection. In addition, at least once per quarter, the Company s leadership has extraordinary site visits and inspections to rectify the compliance with the Company s policy and the laws. In 2018, all the entities including member companies and project management units successfully ensured labor safety and fire protection. There were no dead labor accidents or fires during the year. 114 ANNUAL REPORT

59 LABOR SAFETY AND OCCUPATIONAL HEALTH (CONTINUED) COMPENSATIONS AND BENEFITS Khang Dien continues to pursue the policy of improving average income for employees through the review and adjustment of annual income to match with the labor market and the operation of the Company. INSURANCES AND WELFARES In order to motivate employees, the Company continues to issue ESOP to all employees. Social insurance - health insurance - unemployment insurance regimes and periodic health checks are strictly implemented by Khang Dien in accordance with the legal regulations and the Company s regulations. In 2018, the Company continued to maintain a private health insurance package for all employees. The Company always maintains the core values by taking care of material conditions, heath and spiritual life of employees through social activities such as organizing birthday parties for employees, giving gifts to female employees on Woman Day, supporting employees when they are sick. SHARING WITH COMMUNITY Contribution to community is a practical and humanious action, expressing the humanism spirit that Khang Dien always maintains and promotes. This is also a basis to build corporate culture of an enterprise for community to enhance the notable values in each member of Khang Dien forward to building a peace and happy house. The program Give love, receive love is an annual activity of Khang Dien on the occasion of New Year with the spirit of The good leaves protect the worn-out leaves to share with the difficult people and give them a happy and meaningful new year. Since the beginning, the Company has implemented a lot of programs and activities for the community across the country, meeting and giving gifts to poor children and difficult families. In 2018 Khang Dien were present in Cu Chi District, many districts in Ben Tre Province and deployed scholarship programs. The gifts cannot fully compensate the difficulties of the children and families in difficult situation but, with our mission, Khang Dien is committed to being a companion with the poor in Vietnam in all journeys, lighting dreams and giving the wings for the children to fly as well as helping the families overcome the difficulties. Visit residents on the occasion of Mid-Autumn Festival 2018 On the occasion of 2018 Mid-Autumn Festival, Khang Dien visited households living in projects developed and managed by the Company. The Company donated more than 1,400 gifts to contribute a warm and meaningful Mid-Autumn Festival to the families. This is also an opportunity for managers to directly exchange information and listen to the feelings and wishes of each household to improve management quality and upgrade life experiences for residents as well as affirming the prestige and brand of the Company. 116 ANNUAL REPORT

60 CHAPTER 5 FINANCIAL STATEMENTS

61 GENERAL INFORMATION CONTENTS KHANG DIEN HOUSE TRADING AND INVESTMENT JOINT STOCK COMPANY Consolidated financial statements For the year ended 31 December 2018 PAGES General information 121 Report of management 122 Independent auditors report Consolidated balance sheet THE COMPANY Khang Dien House Trading and Investment Joint Stock Company ( the Company ) is a shareholding company incorporated under the Law on Enterprise of Vietnam pursuant to the Business Registration Certificate No issued by the Department of Planning and Investment ( DPI ) of Ho Chi Minh City on 2 May 2007, as amended. The Company s shares were listed on the Ho Chi Minh City Stock Exchange ( HOSE ) with code KDH in accordance with Decision No. 11/QD-SGDHCM issued by HOSE on 21 January The current principal activities of the Company and its subsidiaries ( the Group ) are to trade and lease houses, receive land use rights to construct houses for sale and lease, invest in construction of infrastructure in compliance with houses construction scheme to transfer land use rights, undertake engineering and industrial construction works, to provide realestate consulting services. The Company s registered head office is located at Room 1 and 2, 11 th Floor, Saigon Centre, No. 67 Le Loi Street, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam. BOARD OF DIRECTORS Members of the Board of Directors during the year and at the date of this report are: Consolidated income statement 127 Consolidated cash flow statement Notes to the consolidated financial statements Ms Mai Tran Thanh Trang Mr Ly Dien Son Ms Nguyen Thi Dieu Phuong Mr Le Hoang Son Ms Nguyen Thi Cam Van BOARD OF SUPERVISION Chairwoman Deputy Chairman Member Member Member Members of the Board of Supervision during the year and at the date of this report are: Ms Pham Kim Thoa Ms Vuong Hoang Thao Linh Ms Luu Thi Xuan Lai Head Member Member MANAGEMENT Members of the Management during the year and at the date of this report are: Ms Ngo Thi Mai Chi General Director Mr Le Hoang Son Deputy General Director Mr Truong Minh Duy Deputy General Director Mr Bui Ba Nghiep Deputy General Director appointed on 14 May 2018 Deputy General Director resigned on 14 December 2018 Ms Tra Thanh Tra Deputy General Director resigned on 14 May 2018 LEGAL REPRESENTATIVE The legal representative of the Company during the year and at the date of this report is Ms Ngo Thi Mai Chi. AUDITORS The auditor of the Company is Ernst & Young Vietnam Limited ANNUAL REPORT

62 REPORT OF MANAGEMENT INDEPENDENT AUDITORS REPORT Reference: / HN Management of Khang Dien House Trading and Investment Joint Stock Company ( the Company ) is pleased to present this report and the consolidated financial statements of the Company and its subsidiaries ( the Group ) for the year ended 31 December MANAGEMENT S RESPONSIBILITY IN RESPECT OF THE CONSOLIDATED FINANCIAL STATEMENTS Management is responsible for the consolidated financial statements of each financial year which give a true and fair view of the consolidated financial position of the Group and of the consolidated results of its operations and its consolidated cash flows for the year. In preparing those consolidated financial statements, management is required to:»» select suitable accounting policies and then apply them consistently;»» make judgements and estimates that are reasonable and prudent;»» state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and»» prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue its business. Management is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the consolidated financial position of the Group and to ensure that the accounting records comply with the applied accounting system. It is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. Management confirmed that it has complied with the above requirements in preparing the accompanying consolidated financial statements. STATEMENT BY MANAGEMENT Management does hereby state that, in its opinion, the accompanying consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2018 and of the consolidated results of its operations and its consolidated cash flows for the year then ended in accordance with Vietnamese Accounting Standards, Vietnamese Enterprise Accounting System and the statutory requirements relevant to the preparation and presentation of the consolidated financial statements. For and on behalf of management: TO: THE SHAREHOLDERS OF KHANG DIEN HOUSE TRADING AND INVESTMENT JOINT STOCK COMPANY We have audited the accompanying consolidated financial statements of Khang Dien House Trading and Investment Joint Stock Company ( the Company ) and its subsidiaries ( the Group ) as prepared on 15 March 2019 and set out on pages 125 to 161, which comprise the consolidated balance sheet as at 31 December 2018, and the consolidated income statement and the consolidated cash flow statement for the year then ended and the notes thereto. MANAGEMENT S RESPONSIBILITY The Company s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Vietnamese Accounting Standards, Vietnamese Enterprise Accounting System and the statutory requirements relevant to the preparation and presentation of the consolidated financial statements, and for such internal control as management determines is necessary to enable the preparation and presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. AUDITORS RESPONSIBILITY Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Vietnamese Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Group s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Ngo Thi Mai Chi General Director Ho Chi Minh City, Vietnam 15 March ANNUAL REPORT

63 INDEPENDENT AUDITORS REPORT (CONTINUED) B01-DN/HN CONSOLIDATED BALANCE SHEET as at 31 December 2018 OPINION In our opinion, the consolidated financial statements give a true and fair view, in all material respects, of the consolidated financial position of the Group as at 31 December 2018, and of the consolidated results of its operations and its consolidated cash flows for the year then ended in accordance with Vietnamese Accounting Standards, Vietnamese Enterprise Accounting System and the statutory requirements relevant to the preparation and presentation of the consolidated financial statements. ERNST & YOUNG VIETNAM LIMITED Le Quang Minh Deputy General Director Audit Practicing Registration Certificate No Ho Chi Minh City, Vietnam 15 March 2019 Nguyen Quoc Hoang Auditor Audit Practicing Registration Certificate No Code ASSETS Notes Ending balance Beginning balance 100 A. CURRENT ASSETS 9,570,063,085 9,110,239, I. Cash and cash equivalents 6 1,835,706,312 2,591,572, Cash 443,546, ,110, Cash equivalents 1,392,159,893 2,083,462, II. Current accounts receivable 1,760,315,570 1,547,630, Short-term trade receivables 7 828,283, ,355, Short-term advances to suppliers 8 700,570, ,064, Other short-term receivables 9 234,410, ,262, Provision for short-term doubtful receivables 7 (2,949,381) (3,053,063) 140 III. Inventory 10 5,817,380,412 4,857,522, Inventories 5,817,380,412 4,857,522, IV. Other current assets 156,660, ,513, Short-term prepaid expenses 11 95,407,524 83,789, Value-added tax deductible 61,177,845 28,942, Tax and other receivables from the State 75, , B. NON-CURRENT ASSETS 657,831, ,382, I. Long-term receivables 122,872, ,988, Long-term trade receivables 7 64,683,136 67,255, Long-term advances to suppliers 8 46,961,085 50,408, Other long-term receivables 9 13,228,519 16,110, Provision for doubtful long-term receivables 7, 9 (2,000,000) (9,786,000) 220 II. Fixed assets 34,460,515 30,095, Tangible fixed assets 12 34,460,515 30,079, Cost 91,489,116 88,992, Accumulated depreciation (57,028,601) (58,912,498) Intangible fixed assets - 15, Cost 339,700 1,786, Accumulated depreciation (339,700) (1,771,069) 230 III. Investment properties 13 5,170,373 5,498, Cost 17,441,610 19,257, Accumulated depreciation (12,271,237) (13,758,411) 240 IV. Long-term asset in progress 465,990, ,113, Construction in progress ,990, ,113, V. Long-term investments 15 14,300,000 98,457, Investments in associates - 84,457, Investment in other entity 14,000,000 14,000, Held-to-maturity investments 300, VI. Other long-term assets 15,037,078 36,230, Long-term prepaid expenses 11 6,186,801 2,975, Deferred tax assets ,565,973 24,553, Goodwill 16 4,284,304 8,701, TOTAL ASSETS 10,227,894,681 9,716,622, ANNUAL REPORT

64 CONSOLIDATED BALANCE SHEET (CONTINUED) as at 31 December 2018 CONSOLIDATED INCOME STATEMENT for the year ended 31 December 2018 B01 -DN/HN B02 - DN/HN Code RESOURCES Notes Ending balance Beginning balance 300 C. LIABILITIES 3,328,395,397 3,525,725, I. Current liabilities 2,775,104,328 1,817,408, Short-term trade payables ,445,768 54,172, Short-term advances from customers 18 1,366,862,318 1,087,119, Statutory obligations ,336, ,045, Short-term accrued expenses 20 50,898,854 75,389, Short-term unearned revenues 21 2,039,502 3,340, Other short-term payables ,189, ,209, Short-term loans ,774, ,468, Bonus and welfare fund 31,557,041 26,663, II. Non-current liabilities 553,291,069 1,708,316, Long-term advances from customers 60, Long-term accrued expenses 20 84,266,104 93,650, Long-term unearned revenues 21 25,014,730 19,581, Other long-term liabilities 22 47,376,709 42,193, Long-term loans ,509,323 1,471,222, Deferred tax liabilities ,708,180 80,225, Long-term provisions 1,355,149 1,443, D. OWNERS EQUITY 6,899,499,284 6,190,897, I. Capital 6,899,499,284 6,190,897, Share capital ,140,233,530 3,360,000, a - Shares with voting rights 4,140,233,530 3,360,000, Share premium ,724,205,883 1,087,457, Investment and development fund ,173,953 68,061, Undistributed earnings ,630, ,075, a - Undistributed earnings by the end of prior years 98,552, ,824, b - Undistributed earnings of current year 808,078, ,251, Non-controlling interests 25 35,255, ,302, TOTAL LIABILITIES AND OWNERS EQUITY 10,227,894,681 9,716,622,302 Code ITEMS Notes Current year Previous year Revenue from sale of goods and rendering of services ,920,026,535 3,061,083, Deductions 26.1 (3,431,112) (6,271,566) Net revenue from sale of goods and rendering of services ,916,595,423 3,054,811, Cost of goods sold and services rendered 27 (1,677,391,701) (2,019,002,526) Gross profit from sale of goods and rendering of services 1,239,203,722 1,035,809, Finance income ,814,534 72,217, Finance expenses 28 (88,660,889) (124,950,967) 23 - In which: Interest expense (31,709,502) (9,824,847) Share of profit of associates 3,999,718 8,314, Selling expenses 29 (99,262,050) (109,679,562) General and administrative expenses 29 (158,135,349) (133,862,974) Operating profit 1,096,959, ,847, Other income 30 36,938,967 18,930, Other expenses 30 (58,397,094) (37,741,785) Other loss 30 (21,458,127) (18,811,544) Accounting profit before tax 1,075,501, ,036, Current corporate income tax expense 31.2 (267,438,458) (193,288,033) Deferred tax income ,530,139 23,141, Net profit after tax 809,593, ,889, Net profit after tax attributable to shareholders of the parent Net profit after tax attributable to non-controlling interests 808,078, ,251,041 1,515,047 56,638, Basic earnings per share Diluted earnings per share Nguyen Phuong Nam Preparer Nguyen Tran Cam Hien Chief Accountant Ngo Thi Mai Chi General Director Nguyen Phuong Nam Preparer Nguyen Tran Cam Hien Chief Accountant Ngo Thi Mai Chi General Director 15 March March ANNUAL REPORT

65 CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2018 CONSOLIDATED CASH FLOW STATEMENT (CONTINUED) for the year ended 31 December 2018 B03 -DN/HN B03 - DN/HN Code ITEMS Notes Current year Previous year I. CASH FLOWS FROM OPERATING ACTIVITIES 01 Accounting profit before tax 1,075,501, ,036, Adjustments for: Depreciation and amortisation (including amortisation of goodwill) 7,796,198 6,900, Reversal of provision (7,889,682) (271,331) 05 Profits from investing activities (199,555,050) (82,213,671) 06 Interest expenses 28 31,709,502 9,824, Operating profit before changes in working capital 907,562, ,276, (Increase) decrease in receivables (829,602,706) 87,207, Increase in inventories (896,541,404) (84,885,090) 11 Increase in payables 505,086, ,141, Increase in prepaid expenses (14,829,520) (58,563,899) 14 Interest paid (114,489,485) (156,178,436) Code ITEMS Notes Current year Previous year III. CASH FLOWS FROM FINANCING ACTIVITIES 31 Issuance of shares 101,180,001 1,487,543,215 Capital contribution from non-controlling interests 225,730, , Drawdown of borrowings 344,815,743 1,794,205, Repayment of borrowings (1,034,223,366) (2,030,795,530) 36 Dividend paid 24.2 (193,917,029) (233,999,892) 40 Net cash flows (used in) from financing activities (556,414,543) 1,017,091, Net (decrease) increase in cash and cash equivalents (755,866,458) 1,532,083, Cash and cash equivalents at beginning of year 2,591,572,770 1,059,489, Cash and cash equivalents at end of year 6 1,835,706,312 2,591,572, Corporate income tax paid (255,916,699) (113,235,387) 17 Other cash outflows from operating activities (20,219,113) (899,157) 20 Net cash flows (used in) from operating activities (718,950,295) 596,863,236 II. CASH FLOWS FROM INVESTING ACTIVITIES 21 Purchase and construction of fixed assets and other longterm assets (161,298,238) (61,193,398) 22 Proceeds from disposal of fixed assets 500,909 1,850, Payment of term deposits (44,300,000) - 24 Collection of term deposits 44,000, Payments for investments in other entities - (160,000,000) Nguyen Phuong Nam Preparer Nguyen Tran Cam Hien Chief Accountant Ngo Thi Mai Chi General Director 26 Proceeds from sale of investments in other entities 599,722,000 6,602, Interest and dividends received 80,873, ,869, March Net cash flows from (used in) investing activities 519,498,380 (81,871,336) ANNUAL REPORT

66 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS as at 31 December 2018 and for the year then ended B 09 - DN/HN 1. CORPORATE INFORMATION Khang Dien House Trading and Investment Joint Stock Company ( the Company ) is a shareholding company incorporated under the Law on Enterprise of Vietnam pursuant to the Business Registration Certificate No issued by the Department of Planning and Investment ( DPI ) of Ho Chi Minh City on 2 May 2007, as amended. The Company s shares were listed on the Ho Chi Minh City Stock Exchange ( HOSE ) with code KDH in accordance with Decision No. 11/QD-SGDHCM issued by HOSE on 21 January The current principal activities of the Company and its subsidiaries ( the Group ) are to trade and lease houses, receive land use rights to construct houses for sale and lease, invest in construction of infrastructure in compliance with houses construction scheme to transfer land use rights, undertake engineering and industrial construction works, to provide real-estate consulting services. The Company s registered head office is located at Room 1 and 2, 11 th Floor, Saigon Centre, No. 67 Le Loi Street, Ben Nghe Ward, District 1, Ho Chi Minh City, Vietnam. The number of Group s employees as at 31 December 2018 was 292 (31 December 2017: 334). B 09 - DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 1. CORPORATE INFORMATION (CONTINUED) Corporate structure As at 31 December 2018, the Group s corporate structure comprises 23 subsidiaries, including 13 direct subsidiaries and 10 indirect subsidiaries as follows: % of ownership 31 December December 2018 Name of subsidiaries Location Business activities Status 1. Thanh Phuc Investment Company Limited Ho Chi Minh City Trade real estate properties Operating Tri Minh Real Estate Trading and Investment Joint Stock Company Ho Chi Minh City Trade real estate properties Operating Operating Gia Phuoc Real Estate Trading and Investment Company Limited Ho Chi Minh City Consult, construct and trade real estate properties 4. Spring Sai Gon Real Estate Trading Joint Stock Company Ho Chi Minh City Trade real estate properties Operating International Consulting Company Limited Ho Chi Minh City Consult, construct and trade Operating real estate properties 6. Long Phuoc Dien Housing and Infrastructure Development Company Ho Chi Minh City Trade real estate properties Operating Limited 7. Hao Khang One Member Company Limited Ho Chi Minh City Construct and trade real estate properties Operating Saphire Real Estate Investment and Trading Company Limited Ho Chi Minh City Trade real estate properties Operating Lien Minh Real Estate Trading and Investment Company Limited Ho Chi Minh City Trade real estate properties Operating Song Lap Real Estate Trading and Investment Company Limited Ho Chi Minh City Trade real estate properties Operating Tri Kiet Real Estate Trading and Investment Company Limited Ho Chi Minh City Trade real estate properties Operating Mega City Company Limited Ho Chi Minh City Trade real estate properties Operating Vi La Joint Stock Company Ho Chi Minh City Trade real estate properties Operating Thap Muoi Real Estate Trading and Construction Company Limited Ho Chi Minh City Trade real estate properties Operating Viet Huu Phu Company Limited Ho Chi Minh City Trade real estate properties Operating Khong Gian Xanh Real Estate Investment and Trading Company Limited Ho Chi Minh City Trade real estate properties Operating Binh Trung Real Estate Investment and Trading Company Limited Ho Chi Minh City Trade real estate properties Operating Operating Ho Chi Minh City Develop and trade real estate properties including house, land use rights and infrastructure, to provide construction consulting, site clearance and brokerage on land properties 18. Khang Phuc House Trading Investment Company Limited (formerly known as Binh Chanh Construction Investment Joint Stock Company) ANNUAL REPORT

67 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN B 09 - DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 1. CORPORATE INFORMATION (CONTINUED) Corporate structure (continued) As at 31 December 2018, the Group s corporate structure comprises 23 subsidiaries, including 13 direct subsidiaries and 10 indirect subsidiaries as follows: (continued) % of ownership 31 December December 2018 Name of subsidiaries Location Business activities Status 19. BCI Corporation (*) Ho Chi Minh City Invest and trade real estate properties Closed BCCI Development Investment Company Limited Ho Chi Minh City Trade real estate properties Operating Minh Phat Real Estate Investment Company Limited (**) Ho Chi Minh City Trade real estate properties Operating Ho Chi Minh City Trade real estate properties Operating Kim Phat Real Estate Investment and Trading Company Limited 23. Nam Phu Real Estate Development Company Limited (***) Ho Chi Minh City Trade real estate properties Operating Thuy Sinh Real Estate Joint Stock Company (Note 4) Ho Chi Minh City Trade real estate properties Operating Ho Chi Minh City Trade real estate properties Operating Dat An Real Estate Investment Business Joint Stock Company (formerly known as Dong Phu Real Estate Investment Business Joint Stock Company) (****) (*) During the year, BCI Corporation was dissolved in accordance with Resolution of General Meeting No.01/NQ.BCCI.DHCD dated 13 April (**) During the year, the Group contributed of 10,200,000 to establish Minh Phat Real Estate Investment Company Limited ( MP ), a limited liability company with two or more members established in accordance with Enterprise Registration Certificate No issued by the DPI of Ho Chi Minh City on 3 April MP s registered head office is located at 1st Floor, An Phu Plaza, Ly Chinh Thang Street, Ward 7, District 3, Ho Chi Minh City, Vietnam. 1. CORPORATE INFORMATION (CONTINUED) Corporate structure (continued) (***) During the year, the Group contributed of 10,200,000 to establish Nam Phu Real Estate Development Company Limited ( NP ), a limited liability company with two or more members established in accordance with Enterprise Registration Certificate No issued by the DPI of Ho Chi Minh City on 26 March NP s registered head office is located at 5 th Floor, Paxsky Tower, 123 Nguyen Dinh Chieu Street, Ward 6, District 3, Ho Chi Minh City, Vietnam. (****) On 15 June 2018, the Group transferred the entire of investment in Dat An Real Estate Investment Business Joint Stock Company (formerly known as Dong Phu Real Estate Investment Business Joint Stock Company) ( DA ). Accordingly, DA is not the Group s subsidiary from that date. 2. BASIS OF PREPARATION 2.1 Accounting standards and system The consolidated financial statements of the Group expressed in thousands of Vietnam dong ( ), are prepared in accordance with Vietnamese Enterprise Accounting System and Vietnamese Accounting Standards issued by the Ministry of Finance as per:»» Decision No. 149/2001/QD-BTC dated 31 December 2001 on the Issuance and Promulgation of Four Vietnamese Accounting Standards (Series 1);»» Decision No. 165/2002/QD-BTC dated 31 December 2002 on the Issuance and Promulgation of Six Vietnamese Accounting Standards (Series 2);»» Decision No. 234/2003/QD-BTC dated 30 December 2003 on the Issuance and Promulgation of Six Vietnamese Accounting Standards (Series 3);»» Decision No. 12/2005/QD-BTC dated 15 February 2005 on the Issuance and Promulgation of Six Vietnamese Accounting Standards (Series 4); and»» Decision No. 100/2005/QD-BTC dated 28 December 2005 on the Issuance and Promulgation of Four Vietnamese Accounting Standards (Series 5). Accordingly, the accompanying consolidated financial statements, including their utilisation are not designed for those who are not informed about Vietnam s accounting principles, procedures and practices and furthermore are not intended to present the consolidated financial position and consolidated results of operations and consolidated cash flows in accordance with accounting principles and practices generally accepted in countries other than Vietnam. 2.2 Applied accounting documentation system The Group s applied accounting documentation system is the Voucher Journal and the General Journal system. 2.3 Fiscal year The Group s fiscal year applicable for the preparation of its consolidated financial statements starts on 1 January and ends on 31 December. 2.4 Accounting currency The consolidated financial statements are prepared in VND which is also the Group s accounting currency. 132 ANNUAL REPORT

68 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN B 09 DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 2. BASIC FOR PREPARATION (CONTINUED) 2.5 Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its subsidiaries for the year ended 31 December Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continued to be consolidated until the date that such control ceases. The financial statements of the subsidiaries are prepared for the same reporting year as the Company, using consistent accounting policies. All intra-company balances, income and expenses and unrealised gains or losses result from intra-company transactions are eliminated in full. Non-controlling interests represent the portion of profit or loss and net assets not held by the Company s shareholders and are presented separately in the consolidated income statement and within equity in the consolidated balance sheet. Impact of change in the ownership interest of a subsidiary, without a loss of control, is recorded in retained earnings. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 3.1 Cash and cash equivalents Cash and cash equivalents comprise cash on hand, cash in banks and short-term, highly-liquid investments with an original maturity of less than three months that are readily convertible into known amounts of cash and that are subject to an insignificant risk of change in value. 3.2 Inventories Inventory property Property acquired or being constructed for sale in the ordinary course of business, rather than to be held for rental or capital appreciation, is held as inventory property and is measured at the lower of cost and net realisable value ( NRV ). Cost includes:»» Freehold and leasehold rights for land;»» Amounts paid to contractors for construction; and»» Borrowing costs, planning and design costs, costs of site preparation, professional fees for legal services, property transfer taxes, construction overheads and other related costs. NRV is the estimated selling price in the ordinary course of the business, based on market prices at the reporting date and discounted for the time value of money if material, less costs to completion and the estimated costs of sale. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.2 Inventories (continued) Other inventories Inventories are stated at the lower of cost incurred in bringing each product to its present location and condition, and net realisable value NRV. NRV represents the estimated selling price in the ordinary course of business less the estimated costs to complete and the estimated costs necessary to make the sale. The perpetual method is used to record inventories, which are valued as follows: Raw materials - cost of purchase on a weighted average basis. Provision for obsolete inventories An inventory provision is created for the estimated loss arising due to the impairment of value (through diminution, damage, obsolescence, etc.) of inventories owned by the Group, based on appropriate evidence of impairment available at the balance sheet date. Increases or decreases to the provision balance are recorded into the cost of goods sold account in the consolidated income statement. 3.3 Receivables Receivables are presented in the consolidated financial statements at the carrying amounts due from customers and other debtors, after provision for doubtful debts. The provision for doubtful debts represents amounts of outstanding receivables at the balance sheet date which are doubtful of being recovered. Increases or decreases to the provision balance are recorded as general and administrative expenses in the consolidated income statement. 3.4 Fixed assets Fixed assets are stated at cost less accumulated depreciation and amortisation. The cost of a fixed asset comprises its purchase price and any directly attributable costs of bringing the fixed asset to working condition for its intended use. Expenditures for additions, improvements and renewals are added to the carrying amount of the assets and expenditures for maintenance and repairs are charged to the consolidated income statement as incurred. When fixed assets are sold or retired, any gain or loss resulting from their disposal (the difference between the net disposal proceeds and the carrying amount) is included in the consolidated income statement. The cost of inventory property recognised in the consolidated income statement on disposal is determined with reference to the specific costs incurred on the property sold and an allocation of any non-specific costs based on the relative size of the property sold. 134 ANNUAL REPORT

69 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN B 09 DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.5 Leased assets The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset and the arrangement conveys a right to use the asset. Where the Group is the lessee Rentals under operating leases are charged to the consolidated income statement on a straight-line basis over the lease term. Where the Group is the lessor Assets subject to operating leases are included as the Group s investment properties in the consolidated balance sheet. Initial direct costs incurred in negotiating an operating lease are recognised in the consolidated income statement as incurred. Lease income is recognised in the consolidated income statement on a straight-line basis over the lease term. 3.6 Depreciation and amortisation Depreciation of tangible fixed assets and amortisation of intangible assets are calculated on a straight-line basis over the estimated useful life of each asset as follows: Building and structures Machinery and equipment Means of transportation Office equipment ISO certificate Computer software 3.7 Investment properties Investment properties are stated at cost including transaction costs less accumulated depreciation years 3-10 years 6-10 years 3 years 3-10 years 3-10 years Subsequent expenditure relating to an investment property that has already been recognised is added to the net book value of the investment property when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing investment property, will flow to the Group. Depreciation of investment properties is calculated on a straight-line basis over the estimated useful life of each asset as follows: Infrastructure years Investment properties are derecognised when either they have been disposed of or when the investment properties are permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the assets is recognised in the consolidated income statement in the year of retirement or disposal. Transfers are made to investment properties when, and only when, there is a change in use, evidenced by ending of owner-occupation, commencement of an operating lease to another party or ending of construction or development. Transfers are made from investment properties when, and only when, there is change in use, evidenced by commencement of owner-occupation or commencement of development with a view to sale. The transfer from investment property to owner-occupied property or inventories does not change the cost or the carrying value of the property for subsequent accounting at the date of change in use. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.8 Borrowing costs Borrowing costs consist of interest and other costs that the Group incurs in connection with the borrowing of funds. Borrowing costs are recorded as expense during the year in which they are incurred, except to the extent that they are capitalised as explained in the following paragraph. Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily take a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective asset. 3.9 Prepaid expenses Prepaid expenses are reported as short-term or long-term prepaid expenses on the consolidated balance sheet and amortised over the period for which the amounts are paid or the period in which economic benefits are generated in relation to these expenses. The following types of expenses are recorded as prepaid expense and are amortised or recognised consistently with revenue to the consolidated income statement:»» Prepaid rental;»» Tools and supplies; and»» Commission fees Business combinations and goodwill Business combinations are accounted for using the purchase method. The cost of a business combination is measured as the fair value of assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange plus any costs directly attributable to the business combination. Identifiable assets and liabilities and contingent liabilities assumed in a business combination are measured initially at fair values at the date of business combination. Goodwill acquired in a business combination is initially measured at cost being the excess of the cost the business combination over the Group s interest in the net fair value of the acquiree s identifiable assets, liabilities and contingent liabilities. If the cost of a business combination is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the consolidated income statement. After initial recognition, goodwill is measured at cost less any accumulated amortisation. Goodwill is amortized over 10-year period on a straight-line basis. The parent company conducts the periodical review for impairment of goodwill of investment in subsidiaries. If there are indicators of impairment loss incurred is higher than the yearly allocated amount of goodwill on the straight-line basis, the higher amount will be recorded in the consolidated income statement. When the acquisition of subsidiaries does not represent a business combination, it is accounted for as an acquisition of a group of assets and liabilities. The cost of the acquisition is allocated to the assets and liabilities acquired based upon their relative fair values, and no goodwill or deferred tax is recognised. 136 ANNUAL REPORT

70 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN B 09 DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.11 Investments Investments in associates The Group s investment in its associate is accounted for using the equity method of accounting. An associate is an entity in which the Group has significant influence that is neither subsidiaries nor joint venture. The Group generally deems they have significant influence if they have over 20% of the voting rights. Under the equity method, the investment is carried in the consolidated balance sheet at cost plus post acquisition changes in the Group s share of net assets of the associates. Goodwill arising on acquisition of the associate is included in the carrying amount of the investment. Goodwill is not amortised and subject to annual review for impairment. The consolidated income statement reflects the share of the post-acquisition results of operation of the associate. The share of post-acquisition profit (loss) of the associates is presented on the face of the consolidated income statement and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative postacquisition movements are adjusted against the carrying amount of the investment. Dividend received from associates reduces the carrying amount of the investment. The financial statements of the associates are prepared for the same reporting period and use the same accounting policies as the Group. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group. Investments in other entities Investments in other entities are stated at their acquisition costs. Provision for investments Provision is made for any diminution in value of the investments in capital of other entities at the balance sheet date in accordance with the guidance under Circular No. 228/2009/TT-BTC dated 7 December 2009 and Circular No. 89/2013/TT-BTC dated 28 June 2013 issued by the Ministry of Finance. Increases or decreases to the provision balance are recorded as finance expense in the consolidated income statement. Held-to-maturity investments Held-to-maturity investments are stated at their acquisition costs. After initial recognition, held-to-maturity investments are measured at recoverable amount. Any impairment loss incurred is recognised as expense in the consolidated financial statements and deducted against the value of such investments Payables and accruals Payables and accruals are recognised for amounts to be paid in the future for goods and services received, whether or not billed to the Group. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.13 Accrual for severance pay The severance pay to employee is accrued at the end of each reporting year for all employees who have been in service for more than 12 months up to 31 December 2008 at the rate of one-half of the average monthly salary for each year of service up to 31 December 2008 in accordance with the Labour Code and related implementing guidance. The average monthly salary used in this calculation is revised at the end of each reporting year following the average monthly salary of the 6-month period up to the reporting date. Increases or decreases to the accrued amount other than actual payment to employee will be taken to the consolidated income statement. This accrued severance pay is used to settle the termination allowance to be paid to employee upon termination of their labour contract following Article 48 of the Labour Code Appropriation of net profits Net profit after tax (excluding negative goodwill arising from a bargain purchase) is available for appropriation to shareholders after approval by shareholders at the annual general meeting, and after making appropriation to reserve funds in accordance with the Company s Charter and Vietnam s regulatory requirements. The Group maintains the following reserve funds which are appropriated from the Group s net profit as proposed by the Board of Directors and subject to approval by shareholders at the annual general meeting: Investment and development fund This fund is set aside for use in the Group s expansion of its operation or of in-depth investment. Bonus and welfare fund This fund is set aside for the purpose of pecuniary rewarding and encouraging, common benefits and improvement of the employees benefits, and presented as a liability on the consolidated balance sheet Revenue recognition Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, excluding trade discount, rebate and sales return. The following specific recognition criteria must also be met before revenue is recognised: Sale of completed properties Revenue is recorded when the significant risks and returns have been transferred to the buyer, which is normally on unconditional exchange of contracts. For conditional exchanges, sales are recognised only when all the significant conditions are satisfied. Sale of land lots and related infrastructure The Group applies the revenue recognition method as guided in the Official Letter No /BTC-CDKT dated 20 December 2017 of Ministry of Finance. Accordingly, sublease rentals are recognised on a straight-line basis over the lease terms when the Group progressively receives less than 90% of total rentals. The remaining rentals will be recognised in full upon cumulative receipt of 90% of total rentals. Rental income Rental income arising from operating leases is recorded to the consolidated income statement and accounted for on a straight-line basis over the terms of the lease. 138 ANNUAL REPORT

71 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN B 09 DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.15 Revenue recognition (continued) Rendering of services Revenue is recognised upon completion of the services provided. Interest income Interest income is recognised as the interest accrues (taking into account the effective yield on the asset) unless collectability is in doubt. Dividend income Dividend income is recognised when the Group s entitlement as an investor to receive the dividend is established Taxation Current income tax Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted as at the balance sheet date. Current income tax is charged or credited to the consolidated income statement, except when it relates to items recognised directly to equity, in which case the current income tax is also dealt with in equity. Current income tax assets and liabilities are offset when there is a legally enforceable right for the Group to offset current tax assets against current tax liabilities and when the Group intends to settle its current tax assets and liabilities on a net basis. Deferred tax Deferred tax is provided using the liability method on temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amount for financial reporting purposes. Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, carried forward unused tax credit and unused tax losses, to the extent that it is probable that taxable profit will be available against which deductible temporary differences, carried forward unused tax credit and unused tax losses can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Previously unrecognised deferred income tax assets are re-assessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled based on tax rates and tax laws that have been enacted at the balance sheet date. Deferred tax is charged or credited to the consolidated income statement, except when it relates to items recognised directly to equity, in which case the deferred tax is also dealt with in the equity account. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 3.16 Taxation (continued) Deferred tax (continued) Deferred tax assets and liabilities are offset when there is a legally enforceable right for the Group to offset current tax assets against current tax liabilities and when they relate to income taxes levied on the same taxable entity by the same taxation authority Earnings per share Basic earnings per share amount is computed by dividing net profit for the year attributable to ordinary shareholders of the Company (after adjusting for the bonus and welfare fund) by the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share amounts are calculated by dividing the net profit after tax attributable to ordinary equity holders of the Company (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares Segment information A segment is a component determined separately by the Group which is engaged in providing products or related services (business segment), or providing products or services in a particular economic environment (geographical segment), that is subject to risks and returns that are different from those of other segments. As the Group s revenue and profit are derived mainly from real estate business in Vietnam while other sources of revenue are not material as a whole, the management accordingly believed that the Group operates in a sole business segment of real estate. Geographical segment of the Group is in Vietnam only. Accordingly, segment information is not presented Related parties Parties are considered to be related parties of the Group if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions, or when the Group and other party are under common control or under common significant influence. Related parties can be enterprise or individual, including close members of the family of any such individual. 4. ASSET ACQUISITION Acquisition of 99.9% ownership interest in Thuy Sinh Real Estate Joint Stock Company ( TS ) On 24 December 2018, the Group completely acquired 99.9% ownership interest in TS with aggregated amount of 378,861,000 to develop to develop a residential area project located at Phu Huu Ward, District 9, Ho Chi Minh City. TS is a shareholding company incorporated under the Law on Enterprise of Vietnam pursuant to the Business Registration Certificate No issued by the DPI of Ho Chi Minh City on 3 May This acquisition was approved by the Board of Directors and the DPI of Ho Chi Minh City. The Group s management assessed that the cost of acquisition represents the fair value of the land owned by a newly-acquired subsidiary. Management treated this acquisition as asset acquisition rather than as business combination since this real estate subsidiary is not commercially operating and only have land and project for future development. 140 ANNUAL REPORT

72 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN B 09 DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 5. BUSINESS COMBINATION Acquisition of additional ownership interest in Khang Phuc House Trading Investment Company Limited (formerly known as Binh Chanh Construction Investment Joint Stock Company) ( Khang Phuc ) On 2 March 2018, the Group completed the shares swap at the ratio of 1:1.4 through the issuance of 51,832,312 new shares, increasing its ownership interest in Khang Phuc from 57.31% to 100% with consideration of 1,121,891,661. The difference of 161,470,949 between the consideration and the carrying value of the interest acquired has been recognised in undistributed earnings. On 15 May 2018 and 19 November 2018, Khang Phuc received the 22 nd and 23 rd amended Business Registration Certificate from the DPI of Ho Chi Minh City, which approved the increase in charter capital from 867,201,440 to 1,100,000,000 and from 1,100,000,000 to 2,400,000,000, respectively. Accordingly, the Group s contribution in the charter capital of Khang Phuc was proportionally increased. 6. CASH AND CASH EQUIVALENTS Ending balance Beginning balance Cash on hand 8,394,057 6,942,342 Cash in banks 435,152, ,167,677 Cash equivalents (*) 1,392,159,893 2,083,462,751 TOTAL 1,835,706,312 2,591,572,770 (*) Cash equivalents represent bank deposits with maturity of one month and earn interest at the rate of 5.5% per annum. Additional information regarding the consolidated cash flow statement: Current year Previous year Significant non-cash transaction that will have impact on the cash flow statement in the future: Acquisition of other companies shares by issuing shares 1,121,891, TRADE RECEIVABLES Ending balance Beginning balance Short-term 828,283, ,355,598 Receivables from sales of residential land properties to customers 828,283, ,355,598 - Ms Le Thi Hoang Yen 171,480, Mr Tran Huu Loi 106,730, Cuu Long Real Estate Company Limited - 94,083,090 - Others 550,072, ,272,508 Long-term 64,683,136 67,255,900 Receivables from sales of residential land properties to customers 64,683,136 67,255,900 TOTAL 892,966, ,611,498 Provision for doubtful receivables (4,949,381) (5,053,063) In which: Short-term (2,949,381) (3,053,063) Long-term (2,000,000) (2,000,000) NET 888,017, ,558, ADVANCES TO SUPPLIERS Ending balance Beginning balance Short-term 700,570, ,064,832 Advances for transfer of land use right 585,270, ,524,961 - Tay Nam Real Estate Company Limited - 117,985,000 - Others 585,270, ,539,961 Advance for construction services 71,237,908 90,118,460 Advances for consulting services 40,000,000 60,853,800 Advance for transfer of capital ownership (i) - 160,000,000 Others 4,061,952 4,567,611 Long-term 46,961,085 50,408,026 Advances for transfer of land use right 45,000,000 45,000,000 - Tay Nam Real Estate Company Limited 45,000,000 45,000,000 Advances for construction services 1,961,085 5,408,026 TOTAL 747,531, ,472,858 (i) On 10 July 2018, the Group liquidated the Capital transfer principal contract ( CTPC ) with Song Nhieu Investment Company Limited and Thang Long Real Estate Trading Investment Company Limited regarding development of a residential area project located at Phu Huu Ward, District 9, Ho Chi Minh City and recognised interest income of 6,700, OTHER RECEIVABLES Ending balance Beginning balance Short-term 234,410, ,262,990 Advances for projects compensation 153,702,026 3,064,565 Provisional corporate income tax (i) 50,250,581 44,383,302 Accrued interest income 2,328,227 4,040,289 Receivables under Investment Cooperation Contracts ( ICC ) (ii) - 340,000,000 Others 28,130,075 2,774,834 Long-term 13,228,519 16,110,295 Overpaid land use fee 6,399,496 - Deposits 3,248,571 7,243,922 Advances for development of projects 771,370 7,921,979 Others 2,809, ,394 TOTAL 247,639, ,373,285 Provision for long-term doubtful receivables - (7,786,000) NET 247,639, ,587,285 (i) In accordance with Circular No. 96/2015/TT-BTC issued by the Ministry of Finance on 22 June 2015 which provides guidelines for implementation of the Law on Corporate Income Tax, the Group is entitled to provisionally pay tax at the rate of 20% on turnover received by cash from its customers less corresponding expenses or at the rate of 1% on cash collections from its customers pending the appropriate recognition of sales and cost of sales from those transactions. (ii) This represents the investment to Dong Tien Real Estate Company Limited to develop a project at Phu Huu Ward, District 9, Ho Chi Minh City on an area of 35,007 m 2 and a project at Phu Huu Ward, District 9, Ho Chi Minh City on an area of 14,686 m 2. During the year, the Group liquidated these contracts and recognised interest income of 10,800, ANNUAL REPORT

73 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN 10. INVENTORIES Ending balance Beginning balance Inventory properties under development (*) 5,601,254,871 4,854,513,655 Real estate properties available for sale 215,929,549 2,721,676 Tools and supplies 195, ,638 TOTAL 5,817,380,412 4,857,522,969 (*) Inventory properties under development comprise on-going projects to develop the following residential land properties: Ending balance Beginning balance Khang Phuc - Tan Tao Residential Zone 1,784,874,162 1,266,457,762 Thanh Phuc - Jamila (**) 587,343, ,514,955 Khang Phuc - Binh Hung 11A Residential Zone 449,866, ,770,674 Saphire Phu Huu 444,960, ,461,916 Khang Phuc - 2 nd Resettlement Zone Phong Phu 364,364, ,073,560 Binh Trung - Binh Trung Dong (**) 334,240, ,393,065 Thanh Phuc Phu Huu (**) 243,648, ,607,044 Kim Phat Phu Huu (**) 231,633, ,965,524 Khang Phuc - 4 th Resettlement Zone Phong Phu (**) 217,397, ,135,021 Khang Phuc - An Duong Vuong (**) 197,216, ,196,000 Quoc Te Phu Huu ( The Venica ) (**) 51,884, ,251,380 Gia Phuoc ( Rosita Garden ) 21,901, ,219,936 Others 671,922, ,466,818 TOTAL 5,601,254,871 4,854,513,655 (**) Parts of these projects were pledged to obtain loans from banks (Note 23). During the year, the Group capitalised borrowing costs amounting to 74,055,706 (for the year ended 31 December 2017: 154,849,614). These costs relate to borrowings obtained to finance the development and construction of the Group s property projects. 11. PREPAID EXPENSES Ending balance Beginning balance Short-term 95,407,524 83,789,712 Commission fees 45,441,206 38,888,359 Discounts 25,401,616 25,353,573 Tools and supplies 4,239,978 4,368,677 Others 20,324,724 15,179,103 Long-term 6,186,801 2,975,093 Tools and supplies 6,186,801 2,975,093 TOTAL 101,594,325 86,764,805 B 09 - DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 12. TANGIBLE FIXED ASSETS Office equipment Total Means of transportation Machinery and equipment Buildings and structures Cost: Beginning balance 24,429,322 39,244,811 20,080,819 5,237,364 88,992,316 New purchase 579,994 6,286,421 2,610, ,251 9,719,369 Disposal (3,588,880) (1,609,999) (1,510,588) (513,102) (7,222,569) Ending balance 21,420,436 43,921,233 21,180,934 4,966,513 91,489,116 In which: Fully depreciated 660,728 27,564,245 4,698,091 4,184,608 37,107,672 Accumulated depreciation: Beginning balance (11,395,439) (33,225,590) (9,625,917) (4,665,552) (58,912,498) Depreciation for the year (1,036,652) (383,236) (1,678,722) (144,658) (3,243,268) Disposal 118, ,000 4,868,319-5,127,165 Ending balance (12,313,245) (33,468,826) (6,436,320) (4,810,210) (57,028,601) Net carrying amount: Beginning balance 13,033,883 6,019,221 10,454, ,812 30,079,818 Ending balance 9,107,191 10,452,407 14,744, ,303 34,460, ANNUAL REPORT

74 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN B 09 DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 13. INVESTMENTS PROPERTIES Infrastructure 15. LONG-TERM INVESTMENTS (CONTINUED) 15.1 Investments in associates Cost: Beginning balance 19,257,083 Disposal (1,815,473) Ending balance 17,441,610 Accumulated depreciation: Beginning balance (13,758,411) Depreciation for the year (119,702) Disposal 1,606,876 Ending balance (12,271,237) Net carrying amount: Beginning balance 5,498,672 Ending balance 5,170,373 The fair values of the investment property as at the balance sheet date had not yet been formally assessed and determined, but the management believed that it was much higher than the property s carrying values considering that the investment property (an industrial park) has been almost fully rented out as at the balance sheet date. 14. CONSTRUCTION IN PROGRESS Ending balance Beginning balance Le Minh Xuan Expansion Industrial Park (*) 426,608, ,649,241 Others 39,382,231 40,463,884 TOTAL 465,990, ,113,125 (*) Part of this project has been pledged to obtain a loan from bank (Note 23). 15. LONG-TERM INVESTMENTS Ending balance Beginning balance Investments in associates (Note 15.1) - 84,457,344 Investment in other entity (Note 15.2) 14,000,000 14,000,000 Held-to-maturity investment (Note 15.3) 300,000 - TOTAL 14,300,000 98,457,344 Details of investments in associates as at 31 December 2018 are presented as follows: Cost of investment: Espace Big C An Lac (*) EB New City Company Limited (*) Beginning balance 57,197,128 14,400,000 71,597,128 Disposal (57,197,128) (14,400,000) (71,597,128) Ending balance Accumulated share in post-acquisition profit (loss) of the associates: Beginning balance 27,260,216 (14,400,000) 12,860,216 Share in post-acquisition profit of the associates for the year 3,999,718-3,999,718 Disposal (31,259,934) 14,400,000 (16,859,934) Ending balance Carrying amount: Beginning balance 84,457,344-84,457,344 Ending balance (*) On 29 June 2018, the Company entirely transferred its investments in Espace Big C An Lac and EB New City Company Limited to EB Services Company Limited in accordance with the Capital Transfer Contracts dated 27 June 2018 with consideration of 211,122,000 and 14,400,000, respectively, and recorded gains on disposal of investment amounting to 122,664,938 and 14,400,000, respectively Investment in other entity Amount Ending balance % of interest Amount Beginning balance Total % of interest CVH Spring Company Limited 14,000, ,000, Held-to-maturity investment This represents 30 bonds at par value of 10,000/bond with an original maturity of ten years and earns interest at the reference saving account rate plus 0.8% per annum issued by Vietnam Joint Stock Commercial Bank for Industry and Trade - Hanoi Branch. 146 ANNUAL REPORT

75 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN B 09 DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 16. GOODWILL The movements in goodwill during the year are as follows: Cost: Beginning and ending balances 34,008,874 Accumulated amortisation: Beginning balance (25,307,022) Amortisation for the year (4,417,548) Ending balance (29,724,570) Net carrying amount: Beginning balance 8,701,852 Ending balance 4,284, SHORT-TERM TRADE PAYABLES Ending balance Beginning balance Hoa Binh Construction Group Joint Stock Company 173,057,094 8,415,722 Others 111,388,674 45,757,062 TOTAL 284,445,768 54,172, SHORT-TERM ADVANCES FROM CUSTOMERS Ending balance Beginning balance Advances received for transfer of houses and apartments (*) 1,204,918,193 1,041,119,344 Advance received for transfer of project (**) 161,000,000 46,000,000 Others 944,125 - TOTAL 1,366,862,318 1,087,119,344 (*) This represents advances based on agreed progress billings from customers who buy houses and apartments of the Group s projects which are under construction. The Group will hand over houses and apartments to customers upon completion of construction and recognize revenue correspondingly. (**) This represents advance received from Minh An Trading Investment Joint Stock Company for transfer An Duong Vuong project in accordance with contract No. 99/2017/HDK/BCCI-MA dated 11 May 2017 and appendixes. 19. STATUTORY OBLIGATIONS Beginning balance Payable for the year Payment made in the year Ending balance Corporate income tax 197,565, ,438,458 (249,442,636) 215,561,269 Value-added tax 34,014, ,776,500 (212,184,034) 22,607,379 Personal income tax 1,302,541 9,433,175 (9,760,652) 975,064 Land use fee 26,077,123 - (26,077,123) - Others 85,020 1,391,716 (1,283,497) 193,239 TOTAL 259,045, ,039,849 (498,747,942) 239,336, ACCRUED EXPENSES Ending balance Beginning balance Short-term 50,898,854 75,389,396 Project development costs 37,045,254 52,712,970 Interest expense 9,953,647 18,677,924 Others 3,899,953 3,998,502 Long-term 84,266,104 93,650,606 Project development costs 84,266,104 93,650,606 TOTAL 135,164, ,040, UNEARNED REVENUES Ending balance Beginning balance Short-term 2,039,502 3,340,485 Advances received for land leases of Le Minh Xuan Industrial Park 2,039,502 2,758,229 Others - 582,256 Long-term 25,014,730 19,581,389 Advances received for land leases of Le Minh Xuan Industrial Park 25,014,730 19,581,389 TOTAL 27,054,232 22,921, ANNUAL REPORT

76 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN 22. OTHER PAYABLES Ending balance Beginning balance Short-term 168,189, ,209,720 Maintenance fund 120,280,767 86,630,551 Deposits received 38,332,469 14,199,439 Dividend payables 1,123,525 1,970,305 Others 8,453,010 22,409,425 Long-term 47,376,709 42,193,033 Land compensation payables (*) 23,205,857 23,505,857 Deposits received 16,808,063 5,498,383 Others 7,362,789 13,188,793 TOTAL 215,566, ,402,753 (*) This represents land compensation payables to owners of raw land where the Group is going to develop Hamlet 2 Tan Tao Residential project. This payable will be subsequently paid out of the developed land lots from the said project. 23. LOANS AND DEBTS 23.1 Bonds Ending balance Beginning balance Short-term 631,774, ,468,556 Short-term loans from a bank - 23,107,090 Bonds (Note 23.1) 149,996,667 - Current portion of long-term loans (Note 23.2) 481,807, ,361,466 Long-term 336,509,323 1,471,222,513 Long-term loans from banks (Note 23.2) 336,509,323 1,171,389,180 Bonds (Note 23.1) - 299,833,333 TOTAL 968,283,446 1,657,691,069 Details of bonds are as follows: Issued at par value: Vietnam Debt Fund SPC - Order contract No. 01/KDH-DC and Order contract No. 02/KDH-DC dated 7 September 2017 Ending balance Principal repayment term 149,966,667 7 September 2019 Purpose To increase working capital for investment business activities Interest rate % p.a. Description of collateral 12 Unsecured B 09 - DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 23. LOANS AND DEBTS (CONTINUED) 23.2 Long-term loans from banks Details of long-term loans from banks are as follows: Description of collateral Purpose Interest rate % p.a. Principal repayment term Bank Ending balance Vietnam Bank for Industry and Trade - Ho Chi Minh Branch 11 Land use right of 51,672 m 2 and associated assets of Binh Trung - Binh Trung Dong Residential project Loan 1 127,232, months To finance Binh Trung - Binh Trung Dong residential project 9,5 Land use rights of 6,876 m 2 and associated assets of Phong Phu 4 Resettlement Zone project Loan 2 47,771, months To finance Phong Phu 4 Resettlement Zone project Vietnam Bank for Industry and Trade - Ha Noi Branch Loan 1 102,919, months To finance Kim Phat - Phu Huu project 10,8 All right of assets generating from Kim Phat - Phu Huu project Vietnam Bank for Industry and Trade - Branch 1 Loan 1 (*) 146,037, months To finance Thanh Phuc - Jamila project 11 Land use right of 16,667 m 2 and associated assets of Thanh Phuc - Jamila project All right of assets generating from 44,725 m 2 of Thanh Phuc - Phu Huu project Loan 2 42,564, months To finance Thanh Phuc - Phu Huu project 11 (*) On 8 January 2019, the Group repaid this loan. 150 ANNUAL REPORT

77 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 - DN/HN 23. LOANS AND DEBTS (CONTINUED) 23.2 Long-term loans from banks (continued) Details of long-term loans from banks are as follows: (continued) Bank Ending balance Principal repayment term Purpose Interest rate % p.a. Description of collateral Orient Commercial Joint Stock Bank - District 4 Branch Loan 1 134,000, months To finance project at Phu Huu Ward, District 9, Ho Chi Minh City 11 Land use right and associated assets of the land No. 56, the map No. 14, Phu Huu Ward, District 9, Ho Chi Minh City Loan 2 98,148, months To finance working capital 10,8 Real estates at Quarter 2, Phu Huu Ward, District 9, Ho Chi Minh City Loan 3 87,500, months To finance Le Minh Xuan Expansion Industrial zone project 9,5 Land use right of ha of Le Minh Xuan Loan 4 32,142, months To finance Hamlet 2 Tan Tao Residential project and 11A Residential projects 9,5 Land use right of 18,392 m 2 and associated assets at An Lac Ward, Binh Tan District TOTAL 818,316,779 In which Current portion 481,807,456 Long-term 336,509,323 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 - DN/HN 24. OWNERS EQUITY 24.1 Increase and decrease in owners equity Share capital Share premium Investment and development fund Undistributed earnings Total Previous year: Beginning balance 2,339,998, ,915,240 47,936, ,978,713 3,476,829,161 Issuance of new shares 1,020,001, ,542, ,487,543,215 Net profit for the year ,251, ,251,041 Appropriation of net profit ,125,113 (20,125,113) - Dividend paid (233,999,892) (233,999,892) Transfer to bonus and welfare fund (19,028,985) (19,028,985) Ending balance 3,360,000,000 1,087,457,375 68,061, ,075,764 5,213,594,540 Current year: Beginning balance 3,360,000,000 1,087,457,375 68,061, ,075,764 5,213,594,540 Issuance of new shares (i) 586,323, ,748, ,223,071,678 Net profit for the year ,078, ,078,193 Consolidation s difference due to shares swap transaction (Note 5) (161,470,949) (161,470,949) Appropriation of net profit ,112,552 (25,112,552) - Dividend share (ii) 193,910, (193,910,360) - Dividend paid (193,917,029) (193,917,029) Transfer to bonus and welfare fund (25,112,552) (25,112,552) Ending balance 4,140,233,530 1,724,205,883 93,173, ,630,515 6,864,243, ANNUAL REPORT

78 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN B 09 DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 24. OWNERS EQUITY (CONTINUED) 24.1 Increase and decrease in owners equity (continued) (i) On 28 February 2018, the Company completed the issuance of 51,832,317 new shares to swap 37,023,366 shares of Binh Chanh Construction Investment Joint Stock Company in accordance with Resolution of Extraordinary General Meeting No. 01/2018/NQ-DHDCD dated 12 January 2018, which was approved by the DPI of Ho Chi Minh city through the issuance of the 20 th amended Business Registration Certificate dated 14 March On 11 October 2018, the Company completed the issuance of 6,800,000 new shares with the price of VND 15,000/share and par value of VND 10,000/share to its employees in accordance with the Resolution of General Meeting No. 02/2018/NQ-DHDCD dated 26 April 2018, which was approved by the DPI of Ho Chi Minh City through the issuance of the 22 nd amended Business Registration Certificate dated 17 October (ii) On 27 September 2018, the Company completed the issuance of 19,391,034 new shares to paid dividends to shareholders in accordance with the Resolution of General Meeting No. 02/2018/NQ-DHDCD dated 26 April 2018, which was approved by the DPI of Ho Chi Minh city through the issuance of the 21 st amended Business Registration Certificate dated 5 October Capital transactions with owners and distribution of dividends Contributed share capital Current year Previous year Beginning balance 3,360,000,000 2,339,998,920 Increase 780,233,530 1,020,001,080 Ending balance 4,140,233,530 3,360,000,000 Dividends Dividend declared 387,827, ,999,892 Dividend paid 387,827, ,999, Share capital - ordinary shares Ending balance Quantity Beginning balance Authorised shares 414,023, ,000,000 Issued and paid-up shares Ordinary shares 414,023, ,000,000 Shares in circulation Ordinary shares 414,023, ,000, NON CONTROLLING INTERESTS Ending balance Beginning balance Contributed charter capital 32,477, ,658,525 Share premium - 260,729,200 Investment and development fund ,695,208 Other funds belonging to owners equity - 5,264,530 Increase from asset acquisitions 265,568 62,934,008 Undistributed earnings 2,511, ,021,159 TOTAL 35,255, ,302, REVENUES 26.1 Revenue from sale of goods and rendering of services Current year Previous year Gross revenue 2,920,026,535 3,061,083,503 Of which: Sale of residential land properties 2,864,133,739 2,798,139,921 Rendering of services 39,809,570 52,370,410 Sale of land use right and related infrastructure (*) 13,220, ,350,509 Operating lease 2,862,333 8,222,663 Less (3,431,112) (6,271,566) Sale returns (1,921,455) (3,053,784) Trade discount (1,509,657) (3,217,782) Net revenue 2,916,595,423 3,054,811,937 Of which: Sale of residential land properties 2,860,702,627 2,791,868,355 Rendering of services 39,809,570 52,370,410 Sale of land use right and related infrastructure (*) 13,220, ,350,509 Operating lease 2,862,333 8,222,663 (*) During the year, the Group recognised revenue from industrial land and related infrastructure in accordance with accounting policy as described in Note If this revenue is recognised on a straight-line basis over the lease terms, the impact of revenue, cost of sales and gross profit of the Group for the current year are presented below: Outright revenue recognition Revenue recognition on a straight-line basis Revenue 13,220, ,321 Cost of sales (3,843,282) (103,872) Gross profit 9,377, , ANNUAL REPORT

79 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN B 09 DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 26. REVENUES (CONTINUED) 26.2 Finance income Current year Previous year Gains on disposal of investments 137,065,083 29,584,281 Interest income 62,713,074 42,614,164 Others 36,377 19,354 TOTAL 199,814,534 72,217, COSTS OF GOODS SOLD AND SERVICES RENDERED Current year Previous year Cost of residential land properties sold 1,642,795,277 1,887,205,395 Cost of services rendered 30,289,573 34,908,562 Cost of land use right and related infrastructure 3,843,282 94,203,346 Cost of operating lease 463,569 2,685,223 TOTAL 1,677,391,701 2,019,002, FINANCE EXPENSES Current year Previous year Discount for early payment 44,258,521 95,618,781 Loan interests 31,709,502 9,824,847 Finance support to customers 6,062,436 19,417,483 Loss from disposal of investments 4,773,681 - Others 1,856,749 89,856 TOTAL 88,660, ,950, SELLING EXPENSES AND GENERAL AND ADMINISTRATIVE EXPENSES Current year Previous year Selling expenses 99,262, ,679,562 Commission fees 47,657,092 68,442,613 Promotion expenses 16,899,172 15,455,990 Advertising expenses 14,089,009 18,574,900 Labour costs 6,532,013 4,240,577 Others 14,084,764 2,965,482 General and administrative expenses 158,135, ,862,974 Labour costs 71,668,457 75,389,442 Expenses for external services 54,668,984 24,334,068 Depreciation expenses 4,229,750 4,492,611 Others 27,568,158 29,646,853 TOTAL 257,397, ,542, OTHER INCOME AND EXPENSES Current year Previous year Other income 36,938,967 18,930,241 Penalties on violation of contracts 21,060,637 4,009,994 Income from management services 11,839,112 11,036,069 Gains from disposal of fixed assets 580,909 1,737,374 Others 3,458,309 2,146,804 Other expenses (58,397,094) (37,741,785) Expenses for management services (19,993,906) (17,172,466) Support expenses for land revocation (11,222,560) - Penalties on violation of contracts (10,593,634) (7,770,922) Tax penalties on late payments (7,536,699) (9,579,687) Others (9,050,295) (3,218,710) OTHER LOSS (21,458,127) (18,811,544) 31. CORPORATE INCOME TAX The statutory corporate income tax ( CIT ) rate applicable to the Company and its subsidiaries is 20% of taxable profits. The Company and its subsidiaries tax returns are subject to examination by the tax authorities. As the application of tax laws and regulations are susceptible to varying interpretations, amounts reported in the consolidated financial statements could be changed at a later date upon final determination by the tax authorities CIT expense Current year Previous year Current tax expense 254,128, ,786,642 Adjustment for under accrual of tax from prior years 13,310,197 4,501,391 Deferred tax income (1,530,139) (23,141,749) TOTAL 265,908, ,146, ANNUAL REPORT

80 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN B 09 DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 31. CORPORATE INCOME TAX (CONTINUED) 31.1 CIT expense (continued) Reconciliation between CIT expense and the accounting profit multiplied by CIT rate is presented below: Current year Previous year Accounting profit before tax 1,075,501, ,036,217 At CIT rate of 20% 215,100, ,807,243 Adjustments: Non-deductible expenses 3,988,130 1,509,867 Loss in subsidiaries not yet recognised as deferred tax asset 23,039, ,369 Non-taxable income 2,525,622 - Share of profit in associates (799,944) (1,666,682) Consolidation adjustments 10,722,853 26,856,639 Tax losses carried forward (1,978,778) (7,477,543) Adjustment for under accrual of tax from prior years 13,310,197 4,501,391 CIT expense 265,908, ,146, Current tax The current CIT payable is based on taxable profit for the current year. The taxable profit of the Group for the year differs from the profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or deductible. The Group s liability for current tax is calculated using tax rates that have been enacted by the balance sheet date. 31. CORPORATE INCOME TAX (CONTINUED) 31.3 Deferred tax The following are the deferred tax assets and liabilities recognised by the Group and the movements thereon, during the current year and previous year: Ending balance Consolidated balance sheet Beginning balance Current year Consolidated income statement Previous year Deferred tax assets Interest expense 3,777,766 7,073,317 (3,295,551) 4,415,165 Provision for doubtful debts 400, ,000 (400,000) Provision for severance allowance 157,016 8, ,230 (260,354) Tax loss carried forward - 17,469,782 (17,469,782) 17,337,301 Unrealised profit - 68,632 (68,632) (833,538) Accrued expenses - 7,274 (7,274) (1,910,725) Accrued interest income (136,763) (74,667) (62,096) 980,989 Adjustment due to consolidation of subsidiaries 367, ,954 - TOTAL 4,565,973 24,553,124 (19,987,151) 19,328,838 Deferred tax liabilities Tax loss carried forward 24,436,895 12,578,914 11,857,981 7,897,533 Provision for severance allowance 111, ,039 (165,839) 161,553 Interest expense - 10,541,844 (10,541,844) 5,890,911 Provision for doubtful debts - 400,000 (400,000) 400,000 Unrealised profit - 216,192 (216,192) 216,192 Accrued interest income (3,500,986) (21,782,163) 18,281,177 (17,065,725) Profit from sale of land properties but not yet taxable (33,235,179) (33,234,400) (779) 9,749,874 Adjustment due to consolidation of subsidiaries (46,520,110) (49,222,896) 2,702,786 (3,437,427) TOTAL (58,708,180) (80,225,470) 21,517,290 3,812,911 Net deferred tax income 1,530,139 23,141, ANNUAL REPORT

81 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended B 09 DN/HN B 09 DN/HN NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) as at 31 December 2018 and for the year then ended 32. TRANSACTIONS WITH RELATED PARTIES Remuneration to members of the Board of Directors, Board of Supervision and Management: Current year Previous year Salaries and bonus 7,985,630 8,582, EARNINGS PER SHARE The following reflects the income and share data used in the basic and diluted earnings per share computations: Current year Previous year (adjusted) Net profit after tax attributable to ordinary equity holders of the Company 808,078, ,251,041 Less bonus and welfare fund (*) - (25,112,552) Net profit attributable to ordinary equity holders of the Company 808,078, ,138,489 Weighted average number of ordinary shares (**) 400,298, ,457,251 Earnings per share Basic (/share) Diluted (/share) OPERATING LEASE COMMITMENTS The Group leases office premises under operating lease arrangements. Future minimum lease payables at the balance sheet date were as follows: Ending balance Beginning balance Less than 1 year 12,921,122 12,724,361 From 1 to 5 years 11,477,941 27,209,103 More than 5 years 12,420,280 13,153,353 TOTAL 36,819,343 53,086, EVENT AFTER THE BALANCE SHEET DATE There have been no significant events occurring after the balance sheet date which would require adjustments or disclosures to be made in the consolidated financial statements of the Group. (*) Profit used to compute earnings per share for the year ended 31 December 2017 have been restated to the amounts reported in the consolidated financial statements for the year ended 31 December 2017 to reflect the actual appropriation of bonus and welfare funds from undistributed net income of 2017 in accordance with the Annual General Meeting of Shareholders on 26 April Bonus and welfare fund for the current year is not approved by Shareholders as at the date of these consolidated financial statements. (**) The weighted average number of ordinary shares in the previous year has been retrospectively adjusted for the dividend shares issued on 27 September Nguyen Phuong Nam Preparer 15 March 2019 Nguyen Tran Cam Hien Chief Accountant Ngo Thi Mai Chi General Director There have been no dilutive potential ordinary shares during the year and up to the date of these consolidated financial statements. 160 ANNUAL REPORT

82 In order to protect the environment, Khang Dien s 2018 annual report is printed on environmental-friendly paper and in a limited number of copies. Therefore, once no longer in use, please kindly hand them over to persons who are interested in. In addition, Khang Dien s 2018 annual report is also announced in electronic version, interested readers please kindly access to: