HOA PHAT GROUP · Pho Noi A Industrial Zone, Giai Pham Commune, Yen My District, Hung Yen Province, Vietnam Hoa Phat Steel JSC Hoa Phat Steel One-member Co.,Ltd. 1 2 As of 31 December

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HOA PHAT GROUP

32013 ANNUAL REPORT

OVERVIEW OF HOA PHAT GROUP

CONTENTSPART I: OVERVIEW OF HOA PHAT GROUP 4

Message from the Chairman of the Board of Management 12

PART II: REPORT OF THE BOARD OF DIRECTORS 14

Assessment of business performance in 2013 15

Financial position 18

Production and business plan in 2014 21

Part III: PERFORMANCE DURING THE YEAR 22

Key financial indicators 23

Personnel organization 24

Investment and implement of major projects 28

Shareholder structure 29

Subsidiaries activities 32

Investors Relation (IR) 40

Social activities 42

Research and Development (R&D) 44

Part IV: THE BOARD OF MANAGEMENT’S ASSESSMENT 46

Part V: CORPORATE GOVERNANCE 50

Members and structure of the Board of Management 51

Risks Management 56

Supervisory Board Report 58

Part VI: AUDITED CONSOLIDATED FINANCIAL STATEMENTS 60

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Part I:


HOA PHAT GROUP

HOA PHAT GROUP PROFILETransaction name: Hoa Phat Group Joint Stock Company Business Registration Certificate No.: 0900189284Charter capital: VND4,190,525,330,000 Address: Pho Noi A Industrial Zone, Giai Pham Commune, Yen My District, Hung Yen ProvinceHead Office: 39 Nguyen Dinh Chieu, Le Dai Hanh Ward, Hai Ba Trung District, HanoiPhone: (84) 4 62848666Fax: (84) 4 62833456Da Nang Branch 171 Truong Chinh, An Khe Ward, Thanh Khe District, Da Nang CityPhone: (84) 511 3721232Fax: (84) 511 3722833HCM City Branch: 129 Nguyen Huu Canh, Ward 22, Binh Thanh District, HCM City Phone: (84) 8 35129896Fax: (84) 8 38991730Website: www.hoaphat.com.vn

SHARE INFORMATION

Stock sticker: HPGStock exchange: HOSEInitial offering date: 15 November 2007Shares in circulation: 419,052,533 shares

BUSINESS ACTIVITIES

1 Trading, exporting and importing iron and steel, materials and equipment for

refining and rolling steel;

2 Producing rolling steel and roof fabrication;

3 Producing steel pipes and galvanized ones, stainless ones;

4 Producing and trading non-ferrous metal and non-ferrous metal scrap;

5 Refining steel and casting iron;

6 Manufacturing and trading coke coal

7 Mining for metal ores; trading metals, metal ores and metal scrap;

8 Manufacturing and trading construction and mining equipment;

9 Producing interior furniture for offices, households and schools;

10 Manufacturing, trading, assembling, repairing, and maintaining electric, electronic,

refrigeration, civil electric products and air conditioners;

11 Investing and building infrastructure for industrial zones and urban areas;

12 Real estate business

5OVERVIEW OF HOA PHAT GROUP

2013 ANNUAL REPORT

Hoa Phat Urban Development and Construction JSC

Golden Gain Vietnam JSC

CORPORATE STRUCTURE

GROUP STRUCTURE

HOA PHAT GROUP

Hoa Phat Steel JSC Hoa Phat Equipment Accessories Co., Ltd

Hoa Phat Furniture JSC

Hoa Phat Refrigeration Engineering Co., Ltd

Hoa Phat Trading Co., Ltd

Hoa Phat Steel One member Co., Ltd

Hoa Phat Steel Pipe Co., Ltd

Hoa Phat Energy JSC

An Thong Mining Investment JSC

Hoa Phat Mining JSC

Nam Giang Mining One-Member Co.,Ltd

THE GROUP OFFICE AFFILIATESSUBSIDIARIES

1. Hoa Phat Steel JSC2. Hoa Phat Steel One member Co., Ltd3. Hoa Phat Steel Pipe Co., Ltd 4. Hoa Phat Energy JSC 5. An Thong Mining Investment JSC 6. Hoa Phat Mining JSC7. Nam Giang Mining One-Member Co.,Ltd 8. Hoa Phat Equipment Accessories Co., Ltd9. Hoa Phat Furniture JSC 10. Hoa Phat Refrigeration Engineering Co., Ltd 11. Hoa Phat Trading Co., Ltd 12. Hoa Phat Urban Development and Construction JSC

1. Hoa Phat - SSG Mining, JSC

2. Yen Phu Investment & Minning, JSC

MANAGEMENT BOARD

GENERAL SHAREHOLDERS

PR DEPARTMENT

FINANCIAL DEPARTMENT

ITDEPARTMENT

ADMINISTRATION DEPARTMENT

CONTROLLER DEPARTMENT

SUPERVISORY BOARD

DIRECTOR BOARD

13. Golden Gain Vietnam JSC

LEGAL DEPARTMENT

7OVERVIEW OF HOA PHAT GROUP

Hoa Phat Group - financial highlights

Content (Unit: VND) 2011 2012 2013

Revenue 18,092,906,336,584 17,122,073,926,267 19,200,234,178,082

HOA PHAT GROUP - FINANCIAL SUMMARY

Net Sales

Cost of goods sold

Gross profit

17,851,896,561,575 16,826,851,892,984 18,934,292,150,531

14,979,112,891,099 14,341,642,566,494 15,650,540,636,204

2,872,783,670,476 2,485,209,326,490 3,283,751,514,327

217,417,162,245 274,039,974,293 253,653,065,057

401,754,381,560 586,966,481,317 416,174,707,153

-13,166,531,076 14,943,260,928 32,866,936,094

2,240,445,595,595 1,639,146,131,809 2,646,790,678,211

541,922,822,267 596,227,337,059 720,195,566,311

2,782,368,417,862 2,235,373,468,868 3,366,986,244,522

(740,551,762,773) (420,399,492,992) (252,130,284,965)

1,489,142,843,681 1,218,205,340,655 2,394,404,194,432

192,292,340,003 187,699,911,137 383,968,791,663

1,296,850,503,678 1,030,505,429,517 2,010,435,402,769

9,485,630,335,670 10,220,788,345,768 12,402,515,338,144

8,039,052,690,405 8,794,975,115,778 10,673,862,524,545

17,524,683,026,074 19,015,763,461,546 23,076,377,862,689

6,424,215,216,403 6,305,957,434,476 7,575,383,424,084

7,413,804,561,023 8,085,135,114,809 9,500,327,254,417

16.09% 14.77% 17.34%

15.59% 13.28% 17.78%

12.55% 9.74% 13.98%

7.26% 6.12% 10.62%

25.13% -5.74% 12.52%

-5.77% -20.54% 95.09%

0.45 0.43 0.37

86.65% 77.99% 79.74%

17.5% 12.7% 21.2%

7.4% 5.4% 8.7%

3,573 2,386 4,663

Selling expenses

General and administration expenses

Results of other activities

EBIT

Depreciation and amortisation expenses

EBITDA

Net financial profit

Profit before tax

Corporate income tax

Net profit

Current assets

Long-term assets

Total assets

Short and long term debts

Owner’s equity

Financial ratios

Gross profit margin

EBITDA margin

EBIT margin

Net profit margin

Net Sales growth rate

Net Profit growth rate

Quick ratio (times)

Debts/ equity

ROE

ROA

EPS (VND/share)

2013 ANNUAL REPORT

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450

1,000

500

150

30

180

99.89%

99.89%

99.96%

99.8%

100%

99.72%

2,500

600

99.99%

100%

Produce and trade various kinds of

steel pipes.

Produce and trade coal coke

Explore, exploit, prepare and make,

process, purchase and sell, export

and import minerals, primarily iron

ores.

Exploit and collect lignite; exploit iron ore, aluminum ore, and other rare metals; non-ferrous metal and rare metal

Exploit iron ore, rare metal ore, and

other non-iron metalore

Manufacture construction

equipment; trade construction and

mining machinery and equipment of

small and medium size.

39 Nguyen Dinh

Chieu, Le Dai Hanh

Ward, Hai Ba Trung

District, Hanoi,

Vietnam

Hiep Son

Commune, Kinh

Mon District, Hai

Duong Province

415 Tran Phu,

Ha Giang City,

Ha Giang Province,

Vietnam

Pho Noi A

Industrial Zone,

Giai Pham

Commune, Yen My

District, Hung Yen

Province, Vietnam

119 Tran Cao Van,

Vinh Dien Town,

Dien Ban District,

Quang Nam

Province, Vietnam

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

Hoa Phat Steel Pipe

Co., Ltd.

Hoa Phat Energy

JSC

An Thong Mining

Investment JSC

Hoa Phat Mining

JSC

Nam Giang Mining

One-Member

Limited Liability

Company

Hoa Phat

Equipments and

Accessories Co.,

Ltd.

3

4

5

6

7

8

Produce iron, steel, and cast iron;

Produce iron, steel, and cast iron;

Hiep Son

Commune, Kinh

Mon District, Hai

Duong Province

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

Hoa Phat Steel JSC

Hoa Phat Steel

One-member

Co.,Ltd.

1

2

As of 31 December 2013 Hoa Phat Group Joint Stock Company has 13 subsidiaries and 2 associates:

SUBSIDIARIES AND ASSOCIATES

No. Subsidiaries Address Principal business activities

Contributed charter capital

(VND billion)

% of equity

owned by HPG

HOA PHAT GROUP

9

400

150

50

300

433

5.73

1.5

99.60%

99.67%

99.00%

99.67%

84.954%

38%

50%

Associates

No. Subsidiaries Address Principal business activities

Contributed charter capital

(VND billion)

% of equity

owned by HPG

Produce and trade furniture and

interior products.

Produce and trade Refrigeration

products.

Trade, import and export various

types of steel, construction materials,

interior furniture, air-conditioners,

washing machines and refrigerators.

Civil and industrial construction;

trading of freehold or leasehold real

estate; house and office leasing;

integrated investment and

construction of infrastructure.

Real estate trading

Exploit and collect lignite; exploit

non-iron ore; provide supporting

services for mining

Exploit and refine metal ores.

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

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

39 Nguyen Dinh

Chieu, Le Dai Hanh

Ward, Hai Ba Trung

District, Hanoi,

Vietnam

39 Nguyen Dinh

Chieu, Le Dai Hanh

Ward, Hai Ba Trung

District, Hanoi,

Vietnam

No3 Dong Nam

Tran Duy Hung

Urban Zone, Hoang

Minh Giam Street,

Trung Hoa Ward,

Cau Giay District,

Hanoi, Vietnam

55B Phan Dinh

Phung, Quyet

Thang Ward, Kon

Tum City, Kon Tum

Province, Vietnam

39 Nguyen Dinh

Chieu, Le Dai Hanh

Ward, Hai Ba Trung

District, Hanoi,

Vietnam

Hoa Phat Furniture

JSC

Hoa Phat

Refrigeration

Engineering Co., Ltd.

Hoa Phat Trading

Co., Ltd.

Hoa Phat Urban

Development and

Construction JSC

Golden Gain

Vietnam JSC

Hoa Phat - SSG

Mining JSC

Yen Phu

Investment and

Mineral JSC

9

10

11

12

13

2

1

OVERVIEW OF HOA PHAT GROUP2013 ANNUAL REPORT

10HOA PHAT GROUP

Hoa Phat Group is one of the leading private industrial manufacturing groups in Vietnam. Originating as a small construction machine and equipment trading company in August 1992, Hoa Phat has gradually expanded its business to trading and production of Furniture (1995), Steel Pipes (1996), Steel (2000), Refrigeration (2001), and Property Development (2001). In 2007, Hoa Phat was reorganized under a group structure with Hoa Phat Group Joint Stock Company being the holding company of its subsidiaries and associates. Since 15th November 2007, Hoa Phat has been officially listed on the Ho Chi Minh City Stock Exchange under the stock ticker symbol “HPG.”

Since its reorganization, Hoa Phat Group has made a number of substantial developments, the most notable of which are (i) the construction and completion of the Hoa Phat Integrated Steel Complex in the Hai Duong Province using the modern steel production technology produced from iron ores; and (ii) the investment in the mining

industry to produce the input for the steel manufacturing industry. Presently, the Hoa Phat Group is recognized as one of the three largest construction steel manufacturers in Vietnam.

To date, the Hoa Phat Group has 13 subsidiaries specializing in steel manufacturing, mining, Coke Coal production, real estate trading, furniture manufacturing, construction machinery, and equipment manufacturing with branches and factories located in Hanoi, Hung Yen, Hai Duong, Lao Cai, Yen Bai, Ha Giang, Ho Chi Minh City, and Binh Duong.

The production of steel and related products such as Coke Coal and iron ore accounts for more than 78.7% of the Group’s total revenue and is regarded as the core business activity of the Group. Hoa Phat Furniture is also a reputable brand in the office furniture segment with the largest market share in Vietnam. In addition, the development of real estate, industrial zones, and urban areas are other well-growing businesses within the Group.

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OVERVIEW OF HOA PHAT GROUP11

“To establish a solid foundation for becoming ONE of the leading industrial

manufacturers in Vietnam with STEEL production as its core business segment”

MISSION STATEMENT

2013 ANNUAL REPORT

HOA PHAT GROUP12 WWW.HOAPHAT.COM.VN

MESSAGE FROM THE CHAIRMAN OF THE BOARD OF MANAGEMENT

“Vững vàng vượt qua khó khăn” có thể là cụm từ chính xác nhất để đánh giá về

Tập đoàn Hòa Phát năm 2012.

OVERVIEW OF HOA PHAT GROUP13

Dear Valued Shareholders,

Although the economy of Vietnam saw signs of recovery in 2013, it is still exposed to the risks of inflation, bad debts, and reduction in aggregate demand. Difficulties at the macro-economic level have revealed only a few bright spots in the overall landscape of Vietnamese enterprises business performance. The unfavorable business environment has had negative effects on the operations of the Hoa Phat Group. However, thanks to its sound strategies, its investments oriented towards large-scale end-to-end production cycles, its strong financial capability, and its well-recognized reputation in the market, the Hoa Phat Group has managed to overcome the economic crisis and has taken strong steps forward to become a phenomenon in the industry.

Our review of 2013 showed that Hoa Phat Group (HPG) has achieved a total revenue of VND19,200 billion and a net profit after tax of VND 2,010 billion, exceeding the annual targets by 4% and 68%, respectively, and its total contribution to the State Budget reached VND1,830 billion. These impressive figures are a result of the sustainable development strategies implemented by the Group s management board during the past 21 years.

When Phase 2 of the Hoa Phat Integrated Steel Complex project in the Hai Duong Province was completed in October 2013, the Hoa Phat Group has fulfilled its most important mission of the year and Steel production truly became the primary business segment of the Group.

While many enterprises have cut down on the number of employees, in 2013 the Hoa Phat Group employed 10,000 direct employees and over 20,000 indirect employees nationwide. In 2013, the Hoa Phat Group also accomplished its commitment to social and charitable causes both in scale and quality, with a total budget of tens of billions of VND in the Ha Giang, Yen Bai, Lao Cai, Hung Yen, and Hai Duong provinces as well as in Hanoi, especially in the mountainous and remote areas. To maintain and develop social activities as well as secure jobs for tens of thousands of employees every year is one of the sustainable development objectives of the Group.

On behalf of the Board of Management, I would like to express our respectful gratitude for the trust and support of our valuable shareholders and for the close cooperation of our customers and business partners over the past year. Especially, I would like to express my sincerest thanks and feelings of respect to all employees of Hoa Phat Group, who have exhibited great dedication and aspiration to achieve the successes of the Hoa Phat Group today.

TYours sincerely,Chairman of the Board of Management

Tran Dinh Long

,

,

2013 ANNUAL REPORT

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HOA PHAT GROUP14

Part II:

REPORT OF THE BOARD OF DIRECTORS

2013 ANNUAL REPORT 15

In 2013, the economy of Vietnam has had many significant achievements: inflation rates were adequately controlled, foreign exchange rates were stabilized, bank interest rates were reduced and maintained at a relatively low level, import and export activities have remarkably increased, and foreign direct investment to Vietnam have been well maintained. However, the economic recovery still remains at a low rate and many enterprises have not managed to revive under the challenging business environment. For the steel industry, domestic demand remained low, which resulted in moderate steel production from many enterprises . By implementing strategic policies and exercising sound corporate governance, the Hoa Phat Group has managed to exceed the approved annual target.

In 2013, the Group achieved total consolidated revenue of VND19,200 billion and a net consolidated profit after tax of VND2,010 billion, recording 104% and 168% of the annual approved budget, respectfully. These achievements represent the remarkable increases of 12% and 95% in revenue and profit, respectively, compared to 2012. All business segments of the Group achieved stable results, and some segments exceeded their profit target for 2013. Most importantly, the steel, coke and mineral production segment played a leading role in the impressive growth of the Group by contributing 78.7% of total revenue and nearly 83 % of the profit of the whole Group.

The impressive results for both revenue and profit are attributed to the following factors:

- Positive changes in the economy along with widened production ability, reduced cost production, and the improvement of local market demand led to an increase in the consumption of Hoa Phat’s products; as a result, sales revenue increased by 12% compared to the previous year;

- The improved production management techniques enabled a reduction in fuel and raw material consumption during the production process and a 17.43% increase in

gross profit for the current year compared to the previous year;

- The decreased interest costs from borrowing also enabled the Group to reduce production costs.

- Enclosed steel production process of the strategic business segment helped Hoa Phat to get significant advantages on costs compared to domestic competitors. This is also reason why Hoa Phat steel still got a large profit in the difficult situation of steel industry. Besides, the others businesses segments of Hoa Phat such as other industrial production, real estate also made a good result.

ASSESSMENT OF BUSINESS PERFORMANCE

Total revenue 17,122 19,200 18,500 12% 104%

Profit after tax 1,031 2,010 1,200 95% 168%

Revenue proportions by segments in 2013

7.5% 2.2%

13.8% 14.9%

78.7% 82.9%

Profit after tax proportion by segments in 2013



Criteria 2012 2013 2013 plan % increase % achieved compared to plan(VND bn) (VND bn) (VND bn)

Steel

Real estate

Other industrial production

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HOA PHAT GROUP16

Pomina 1,600 686 697 15.6% 737 729 15.9%

Hoa Phat 1,150 621 611 13.7% 727 699 15.2%

Tisco 600 540 513 11.5% 482 521 11.4%

Vinakyoei 400 400 402 9.0% 427 443 9.7%

VNS 450 392 395 8.8% 386 374 8.2%

Steel production continues to be the business segment that contributes most to the total revenue and profit of the Group. In 2013, Hoa Phat’s construction steel output reached 727,000 tons, an increase of 17% compared to 2012. Sales of construction steel grew to 699,000 tons, an increase of 14% compared to 2012. 2013 also marked a new milestone for the Hoa Phat steel production segment, as Phase II of the Hoa Phat Integrated Steel Complex was put into commercial operation in October, raising the capacity of the Complex to 850,000 tons per year. From 2014 onward, the total construction steel production capacity of the whole Group will reach 1,150,000 tons per year. Hoa Phat construction steel continued to increase its market share, showing an increase from 13.7% in 2012 to 15.2% in 2013, solidifying Hoa Phat as the second largest producer of construction steel in Vietnam. Hoa Phat also represents a brand name with the largest coverage in the domestic market. Hoa Phat is one of the few steel production companies in the North that have managed to supply steel for the Southern market, while still being able to balance transportation costs and its competitiveness in the Vietnam steel market.

Outputs and market shares of 5 market leaders of Vietnam’s steel industry

Source: VSA

Market shares of Hoa Phat construction steel over the years

2011 2012 2013

13.3%13.7%

15.2%16.0%

15.0%

14.0%

13.0%

12.0%

11.0%

Current designed capacity(thousand

tons)

Production capacity

(thousand tons)

Consumption(thousand

tons)

Market share

(%)

Production capacity

(thousand tons)

Consumption (thousand

tons)

Market share

(%)

2012 2013


fully matured, Hoa Phat’s office furniture and refrigeration segments focused on developing new products and expanding the distribution network, especially to remote areas. Scaffolding and film-coated formwork produced by Hoa Phat Equipment & Accessories Co., Ltd. have demonstrated their presence in a number of ASEAN countries.

In the real estate segment, 2013 was recognized as a challenging year as the real estate market remained stagnant without any signs of recovery. However, in September 2013, the Mandarin Garden Complex was completed and put into operation earlier than scheduled plan, putting it under consideration as one of the most successful projects to date. The industrial zone infrastructure leasing segment remained stable and attracted a lot of Japanese and Korean companies interested in leasing the land for investment purposes.

In order to ensure stable sources of input materials for the construction steel segment, Phase II of the Coke Coal Plant under Hoa Phat Energy JSC was put into operation in August 2013. Soon after, in October 2013, An Thong Mining Investment JSC also inaugurated the Ball Iron Ore Plant with capacity of 300,000 tons per year in the Binh Vang Industrial Zone, Ha Giang Province. The operation of Phase II of the Coke Coal Plant and the Ball Iron Ore Plant enabled Hoa Phat to ensure the input material needed for Phase II and for the Hoa Phat Integrated Steel Complex. Moreover, Hoa Phat Mineral JSC and Hoa Phat An Thong Mining Investment JSC continued to operate their ore exploitation and processing projects to supply the fine ore for the blast furnaces. The Hoa Phat Group’s subsidiaries operating in the energy and mineral fields proactively seek sources of coal and iron ore to streamline production, reducing input costs and accordingly reducing steel production costs.

In the steel segment, steel pipe – a strategic product which accounts for over 15% of the profit of the Group, exceeded the yearly target with an increase of 33% in sales and consumption compared to the year 2012.

Despite facing various challenges from the economic recession, Hoa Phat’s other industrial product segment still saw positive growth in both revenue and profit compared to 2012. All companies in the segment exceeded their respective targets for the year. In a market that has not


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HOA PHAT GROUP18

* Assets:The total assets of the Group at the end of 2013 were VND23,076 billion, an increase of 21% compared to the beginning of 2013. In which:- Current assets were VND12,402 billion, an increase of 21% compared to the beginning of the year. This is mainly due to the investment in the Mandarin Garden Complex which raised the Group’s inventories at the year end to VND8,065 billion. In addition, the arrangements for supplies of materials to be utilized for the operations of some new projects including Hoa Phat Integrated Steel Complex – Phase 2, the Coke Coal Plant – Phase 2, etc. also the factors contributed to the increase of the Group’s inventory balance.

- Long-term assets at the end of 2013 went up by 21%, amounting to VND10,674 billion. This can be explained by the Group completing various large scale projects during the year, including the Hoa Phat Integrated Steel Complex - Phase 2. In addition, the investments in other projects such as Binh Vang Ball Iron Ore Plant from An Thong Mining Investment JSC, and the projects of Hoa Phat Steel Pipe Co., Ltd. and Hoa Phat Furniture JSC, etc. during the year have also resulted in a remarkable increase in long-term assets as compared to 2012.

* LiabilitiesTotal liabilities of the Group as of 31 December 2013 were VND13,489 billion, showing an increase of VND3,051 billion, which can be expalained by the increases in other short-term liabilities recognised from customer prepayments for the purchase of Mandarin Garden apartments, in short-term borrowings to meet the working capital needs, and in long-term borrowings for large scale project investments.

With regard to bank borrowings, as at 31 December 2013, short-term borrowings and long-term borrowings of the Group were VND5,744 billion and VND1,832 billion, respectively, making a total of bank borrowings and liabilities amounting to VND7,576 billion. This has resulted in the Group’s total borrowings and liabilities to equity ratio of 1.42 times. However, the bank borrowings to equity ratio was only 0.80 times. This ratio is considered to be a safe indicator for a typical heavy industrial production group.

23,076

2013

Total assets growth of Hoa Phat Group over 3-year period of 2011 – 2013 (VND billion)

17,52519,016

2011 2012

Leverage ratios

2011 2012 2013

1.20

1.42

0.800.740.81

1.221.40

1.60

1.20

1.00

0.80

0.60

0.40

0.20

-

FINANCIAL POSITION

Total liabilities to equity ratio

Total bank borrowings to equity ratio


2013

1.11

Current ratio

2011 2012

1.391.43

1.40

1.60

1.20

1.00

0.80

0.60

0.40

0.20

-

* The owners’ equityThe owners’ equity of the Group at the end of 2013 reached VND9,500 billion, showing significant growth compared to the beginning of 2013, which was due to remarkable profit growth during year. Return on Assets (ROA) and Return on Equity (ROE) ratios also reached impressive percentages of 8.7% and 21.2%, respectively, which are both higher than those of 2012.

ROE of the Hoa Phat Group 2011 - 2013

2011 2012 2013

17.5%

12.7%

21.2%25.0%

20.0%

15.0%

10.0%

5.0%

0.0%2013

8.7%

ROA of the Hoa Phat Group 2011 - 2013

2011 2012

7.4%

5.4%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

Items 2011 2012 2013

* Other financial indicators- Financial expenses:

Benefited from the Government’s policies to reduce interest rates, the Group’s interest expense decreased by 29.61% compared to 2012 and stood at VND371 billion for the year 2013. Hoa Phat’s average interest rate for the year was always maintained at a low level relative to the common market rate. The active utilisation of such leverage has contributed to the lower operating costs and higher competitiveness of the Group.

- Liquidity ratios:

In 2013, the Group’s liquidity ratios slightly declined compared to those in 2012. The current ratio remained 1.11 times while the quick ratio was 0.37. The current ratio of 1.11 shows that the Group’s ability to meet its current liabilities is at a safe level and the Group remains in a strong financial position.

- Asset turnover ratio:

During the year 2013, the Group continued to invest in large scale projects, resulting in higher value of assets. However, due to most of the projects starting commercial operations late in the year, high production capacity was not achieved and accordingly, significant revenue was not generated; as a result, the asset turnover ratio was only 0.82 times per year. Nevertheless, from 2014 when the projects reach their normal operations and generate stable net revenue, the asset turnover will certainly be improved.

Current ratio (times) 1.43 1.39 1.11

Quick ratio (times) 0.45 0.43 0.37


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HOA PHAT GROUP20

To enhance corporate governance to be in alignment with the advanced models of the world, Hoa Phat continues to strengthen the role of the holding company with its financial investments and governance. Hoa Phat provides support to its subsidiaries with technical advice and operational strategy planning, without direct involvement in actual production and business activities. In 2013, Hoa Phat initiated development of a personnel hierarchy and benefit schemes, expected to be completed and applied to the whole Group in 2014. The personnel hierarchy to be introduced will form the basis for establishing consistent salary, bonus, and benefit schemes within the whole Group but will still ensure flexibility and appropriateness to the specific operations of each entity.

IMPROVEMENT IN ORGANIZATIONAL STRUCTURE AND MANAGEMENT POLICY


With sustainable development strategies and with steel production leading as a core production activity, the Hoa Phat Group will continue to exercise prudence and flexibility with management policies in 2014: to promote sales of goods, to reduce inventories of high value finished goods and raw materials, to carefully review medium- and long-term investment plans, to flexibly and quickly respond to foreign exchange rate movements, and to maintain positive cash flow and capital preservation ratios.

On the basis of results achieved in 2013 and predictions of market performance, the Group’s management has set targets for 2014 as follows:

Revenue: VND23,000 billionProfit after tax: VND2,200 billion

As the total steel production capacity reaches 1.15 million tons in 2014, the Hoa Phat Group in 2014 targets to achieve sales of over 800,000 tons of construction steel in the domestic market and to actively seek new markets to export steel billets. In addition, the Group will expand its market share in the Southern and Central regions by upgrading the size of transit warehouses in its branches. Supplementary segments to steel production such as energy and mining will continue to proactively seek sources of iron and coal ore to meet the demand of steel production of the Complex.

The growth target for other industrial production revenue is between 15 to 20%, using the enhanced development of new products to ceaselessly expand in both domestic and export markets.

For the real estate segment in 2014, Hoa Phat targets to reach the highest occupancy rate in the industrial parks where additional investment was made in technical infrastructure during 2013. In addition, Hoa Phat plans to complete the handover of the Mandarin Garden project’s apartments, while setting plans to initiate the Apartment/Office/Commercial Complex project at No. 493 Truong Dinh Street, Hoang Mai District, Hanoi at an appropriate time.

PRODUCTION AND BUSINESS PLAN IN 2014


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HOA PHAT GROUP22

Part III:

PERFORMANCE DURING THE YEAR

2013 ANNUAL REPORT 23PERFORMANCE DURING THE YEAR

Financial summary

Key financial ratios

Note: Dividend payment rate for 2013 is based on the budget

No. Ratios Unit 2012 2013

I Liquidity ratios

1 Current ratio Times 1.39 1.11

2 Quick ratio Times 0.43 0.37

II Capital structure ratios

1 Liabilities/Total assets Times 0.55 0.58

2 Liabilities/Owners’ Equity Times 1.29 1.42

III Operation capacity ratios

1 Inventory turnover Times 2.10 1.95

2 Total assets turnover Times 0.88 0.82

IV Profitability ratios

1 Profit after tax/Net revenue Times 0.06 0.11

2 Profit after tax/ Owners’ Equity Times 0.13 0.21

3 Profit after tax/Total assets Times 0.05 0.09

4 Profit from operating activities/Net revenue Times 0.10 0.14

Increase/

No. Indicator Unit 2012 2013 decrease (%)

1 Total assets VND billion 19,016 23,076 21.35%

2 Revenue TVND billion 17,122 19,200 12.14%

3 Net revenue VND billion 16,827 18,934 12.52%

4 Profit from operating activities VND billion 1,204 2,362 96.19%

5 Other income VND billion 15 33 119.94%

6 Profit before tax VND billion 1,218 2,394 96.55%

7 Profit after tax VND billion 1,031 2,010 95.09%

8 Dividend payment rate % 20% 30%

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HOA PHAT GROUP24

Educational qualification: Bachelor of

Economics – National Economics University,

Bachelor of Journalism – Vietnam National

University, Hanoi.

Joining date: 1992

Mr. Duong held various management positions

in various subsidiaries of the Group such as Hoa

Phat Equipments and Accessories Co., Ltd., Hoa

Phat Furniture JSC and Hoa Phat Steel Pipe Co.,

Ltd. before he was appointed as the

Vice-Chairman of Board of Management and

General Director of Hoa Phat Group Joint Stock

Company in January 2007.

Educational qualification: Bachelor of Civil

Engineering

Joining date: 2003

Mr. Nguyen Viet Thang had several years in the

management position as the Deputy Director of

Hoa Phat Urban Development and Construction JSC

before he was appointed as the Deputy General

Director of Hoa Phat Group Joint Stock Company

on 7 April 2012.

PERSONNEL ORGANIZATION

Mr. Tran Tuan DuongGeneral Director

Mr. Nguyen Viet ThangDeputy General Director


Educational qualification: Bachelor of Economics

– Hanoi University of Finance and Accounting

Joining date: 1998

Ms. Nguyen Thi Thao Nguyen was the Chief

Accountant of Hoa Phat Steel Pipe Co., Ltd. and

the Head of Supervisory and Legal Board of Hoa

Phat Group Joint Stock Company before she was

appointed as the Deputy General Director of Hoa

Phat Group Joint Stock Company on 1 September

2010.

Educational qualification: Master of Economics

Joining date: August 2007

Ms. Ly Thi Ngan was appointed as

Chief Accountant of Hoa Phat Group

Joint Stock Company on 1 January 2011.

LIST OF THE BOARD OF DIRECTORS MEMBERS:

No. Name Position Percentage of hares held as at 25 February 2014 (%)

1 Mr. Tran Tuan Duong Vice-Chairman cum General Director 2.692

2 Ms. Nguyen Thi Thao Nguyen Deputy General Director 0.003

3 Mr. Nguyen Viet Thang Deputy General Director 0.348

4 Ms. Ly Thi Ngan Chief Accountant 0

Ms. Nguyen Thi Thao NguyenDeputy General Director

Ms. Ly Thi NganChief Accountant


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HOA PHAT GROUP26

Total

Academic level Gender

No Company name Post Vocational Graduate Graduate school Other Male Female

Group1: Steel

1 Hoa Phat Steel JSC

2 Hoa Phat Steel One member Co., Ltd

3 Hoa Phat Steel Pipe Co., Ltd

4 Hoa Phat Energy JSC

5 An Thong Mining Investment JSC

6 Hoa Phat Mining JSC

Group2: Other industrial production

1 Hoa Phat Equipment Accessories Co., Ltd

2 Hoa Phat Furniture JSC

3 Hoa Phat Refrigeration Engineering Co., Ltd

4 Hoa Phat Trading Co., Ltd

Group 3: Real estate

1 Hoa Phat Urban Development and Construction JSC

2 Golden Gain Vietnam JSC

8 1,937 1,021 3,567 5,729 804 6,533

875 415 1,647 2,597 340 2,937

1 229 204 471 795 110 905

4 275 189 562 1,017 113 1,130

216 79 245 434 106 540

1 181 112 461 670 85 755

2 61 22 181 216 50 266

7 580 496 1,766 2,229 620 2,849

1 83 81 167 276 56 332

4 362 283 1,459 1,644 464 2,108

123 131 139 300 93 393

2 12 1 1 9 7 16

0 114 8 201 255 68 323

65 7 198 220 50 270

49 1 3 35 18 53

Total 18 2,666 1,530 5,559 8,248 1,525 9,773

Number of employees of the Group

1 Hoa Phat Group JSC 3 35 5 25 35 33 68


In 2013, the Hoa Phat Group initiated the standardization of human resources and restructured the employee structure on a group-wide basis by buiding personnel hierarchy.

Under the new structure, job descriptions for positions across all entities will be revised and tasks will be appropriately reassigned, to avoid overlapping of responsibilities between employees and to enhance the competency of staff. Employee benefit policies such as social insurance, health insurance, and other benefit schemes have been implemented in strict compliance with the regulations issued by the Government and the labor regulations of the Group.

In addition, various professional and technical training courses, periodical health checks, fire safety training sessions, sport and cultural activities, trade union activities, gift-giving events for staff’s children who performed well academically, and donations for disadvantaged staff took place throughout the year. This created a working environment that fosters safety, well-being, high-achievement, and philanthropy.

Human resources policies


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HOA PHAT GROUP28

INVESTMENT PROJECT IMPLEMENTATION

In 2013, the Hoa Phat Group commenced the following projects:

Hoa Phat Ball Iron Ore Plant

Project owner: An Thong Mining Investment JSC Capacity: 300,000 tons of pelleted iron ore per year Total investment: VND264 billion (owners’ capital: 50%; borrowed capital: 50%) Progress: Commenced commercial operations starting in October 2013 Current capacity: Nearly 100% of designed capacity

Coke Coal Plant – Phase II

Project owner: Hoa Phat Energy JSC Capacity: 350,000 tons of coke coal per year. Total investment: VND1,200 billion (owners’ capital: 50%; borrowed capital: 50%) Progress: Commenced commercial operations starting in August 2013 Current capacity: 80% of designed capacity

Hoa Phat Integrated Steel Complex – Phase II:

Project owner: Hoa Phat Steel JSC Capacity: 500,000 tons of steel per year Total investment: VND3,200 billion (owners’ capital: 55%; borrowed capital: 45%) Progress: Commenced commercial operations starting in October 2013 Current capacity: 100% of designed capacity

Mandarin Garden Complex:

Project owner: Golden Gain Vietnam JSC Progress: Delivered apartments to buyers starting in September 2013


Hoa Phat Ball Iron Ore Plant

Project owner: An Thong Mining Investment JSC Capacity: 300,000 tons of pelleted iron ore per year Total investment: VND264 billion (owners’ capital: 50%; borrowed capital: 50%) Progress: Commenced commercial operations starting in October 2013 Current capacity: Nearly 100% of designed capacity

Mandarin Garden Complex:

Project owner: Golden Gain Vietnam JSC Progress: Delivered apartments to buyers starting in September 2013

No Content Share volume Percentage %

228,649,011 54.6

224,183,804 53.5

4,465,207 1.1

190,403,522 45.4

1,693,256 0.4

188,710,266 45.0

419,052,533 100.00

Demographic shareholding structure as at 25/02/2014

Shareholding structure as at 25/02/2014 Shareholding structure

45.5%34.4%

6.0% 5.6% 8.5%

Shareholder structure by level of ownership as at 25/02/2014

Shares:Share name: Share of Hoa Phat Group Joint Stock CompanyShare type: Ordinary shareStock sticker: HPGPar value: VND10,000 per shareTotal shares in circulation: 419,052,533 shares

Number of free transfer shares: 419,052,533 sharesNumber of shares subject to transfer restriction: 0 shareCharter capital 2013: No changeTreasury share transactions 2013: None

SHAREHOLDING STRUCTURE

BOM, Supervisory Board, Board of Directors, Chief Accountant

Employees

Local shareholders

Foreign shareholders

Related people

1 Vietnam

Individual

Institutional

2 Foreigner

Individual

Institutional

Total

No Content Share volume Percentage %

1 Shareholders with ownership over 5% 219,725,567 52.4

2 Shareholders with ownership from 1% to 5% 101,885,181 24.3

3 Shareholders with ownership below 1% 97,441,785 23.3

Total 419,052,533 100.00


No Content Share volume Percentage %1 State shareholders 0 0%2 Internal shareholders 203,382,963 48.5% BOM, Supervisory Board,

Board of Directors, Chief Accountant 144,302,542 34.4% Related people 35,522,483 8.5% Employees 23,557,938 5.6%3 Other shareholders 215,669,570 51.5% Local shareholders 25,266,048 6.0% Individual 20,800,841 5.0% Institutional 4,465,207 1.0% Foreign shareholders 190,403,522 45.5% Individual 1,693,256 0.4% Institutional 188,710,266 45.1% Total 419,052,533 100.00%

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HOA PHAT GROUP

Largest shareholders as at 25/02/2014

10 largest institutional shareholders as at 25/02/2014

No Full name Address Share volume Percentage %

1 Tran Dinh Long 12 Tran Hung Dao, Hoan Kiem, Ha Noi 101,059,200 24.12

2 Dragon Capital Group 1901 Me Linh Point Tower, 2 Ngo Duc Ke, Dist 1, HCMC, Viet Nam 37,092,979 8.85

3 Vu Thi Hien 12 Tran Hung Dao, Hoan Kiem, Ha Noi 30,952,152 7.39

4 Deutsche Bank + Deutsche Asset Group Winchester House, 1 Great Winchester

Street, London EC2N 2DB 26,693,773 6.37

5 VOF Suite 1703, Sun Wah Tower,

115 Nguyen Hue, Quan 1, Tp HCM 23,927,463 5.71

Total 219,725,567 52.43

No Name of Institutions Address Share volume Percentage %

1 Dragon capital 1901 Me Linh Point Tower, 2 Ngo Duc Ke,

Dist 1, HCMC, Viet Nam 37,092,979 8.85

2 Deutsche Bank + Deutsche Asset Winchester House, 1 Great Winchester Street,

London EC2N 2DB 26,693,773 6.37

3 VOF Suite 1703, Sun Wah Tower, 115 Nguyen Hue Bldv,

Dist.1, HCMC 23,927,463 5.71

4 PRIVATE EQUITY NEW MARKETS II K/S TRANEGARDSVEJ 20 2900 HELLERUP DENMARK 20,291,040 4.84

5 RED RIVER HOLDING 9A TU XUONG STREET, WARD 7, DIST.3,

HO CHI MINH CITY, S.R OF VIETNAM 16,535,402 3.95

6 FRANKLIN TEMPLETON INVESTMENT FUNDS 26,BOULEVARD ROYAL L-2449 LUXEMBOURG

-TEMPLETON FRONTIER MARKETS FUND GRAND DUCHY OF LUXEMBOURG 6,733,120 1.61

7 MARKET VECTORS ETF TRUST- 99 PARK AVENUE,8TH F1 NEW YORK, 5,053,920 1.21

MARKET VECTORS-VIETNAM ETF NY 1006 USA

8 KITMC 27-1, YEOUIDO-DONG, YEONGDEUNGPO

-GU, SEOUL, KOREA 4,409,787 1.05

9 LIONGLOBAL VIETNAM FUND 21 Collyer Quay #14-01 HSBC

Building Singapore 049320. 3,811,898 0.91

10 VIETNAM HOLDING LIMITED Unit 1202 Floor 12, Fideco Tower,

81-85 Ham Nghi, District, HCMC, Vietnam 3,748,070 0.89

Total 148,297,452 35.39

31

2012-2014 changes of HPG stock price

Changing process of charter capital of Hoa Phat Group 2007-2013 (VND Billion)

HPG’s rates of dividend payment

201315% by cash and 15% by

share (estimated)

50%

30%

60%

30%

20% 20%

30%

9/1/2007 8/5/2008 2/12/2010 22/11/2012

VND Billion

Date

1,100

1,964

3,178

4,191

0

10

20

30

40

50

60

3/1/

2012

17/0

1/20

127/

2/20

1221

/02/

2012

6/3/

2012

20/0

3/20

124/

4/20

1218

/04/

2012

4/5/

2012

18/0

5/20

121/

6/20

1215

/06/

2012

29/0

6/20

1213

/07/

2012

27/0

7/20

1210

/8/2

012

24/0

8/20

1210

/9/2

012

24/0

9/20

128/

10/2

012

22/1

0/20

125/

11/2

012

19/1

1/20

123/

12/2

012

17/1

2/20

122/

1/20

1316

/01/

2013

30/0

1/20

1320

/02 /

2013

6/3/

2013

20/0

3/20

133/

4/20

1317

/04/

2013

7/5/

2013

21/0

5/20

134/

6/20

1318

/06/

2013

2/7/

2013

16/0

7/20

1330

/07/

2013

13/0

8/20

1327

/08/

2013

11/9

/201

325

/09/

2013

9/10

/201

323

/10/

2013

6/11

/201

320

/11/

2013

4/12

/201

318

/12/

2013

2/1/

2014

16/0

1/20

1410

/2/2

014

24/0

2/20

14

Biến động giá cổ phiếu HPG 2012-2014

200710% by cash, 40%

by shares

2008 30% by cash

201120% by shares

2009 10% by cash and

50% by shares

201020% by cash and

10% by shares

201210% by cash

PERFORMANCE DURING THE YEAR2013 ANNUAL REPORT


With the completion of Phase 2 of the Hoa Phat Integrated Steel Complex, Hoa Phat Steel for the first time led the market in domestic sales during the last months of the year, accounting for nearly 18% of the nationwide market share at certain points of time.

Hoa Phat’s construction steel sales reached nearly 700,000 tons, an increase of 14.2% compared to 2012. Its market share reached 15.2%, an increase of 1.5% compared to the previous year. Hoa Phat continues to be a strong brand name for steel, with the largest coverage nationwide. As a result of flexible sales methods, storage of goods until the right time for consumption, constant improvement of production processes, and upgrading of product quality to raise competitiveness, Hoa Phat Steel sales sharply increased in all parts of the country, especially in Central and Southern areas with growth rates of 45% and 65%, respectively, in comparison to 2012. Sales in the Northern area of Vietnam increased by nearly 10% as well.

While Hoa Phat Steel One Member Co., Ltd. acts as the major distributor and supplies the market with

construction steel output, Hoa Phat Steel JSC plays the main role in producing the highly demanded Hoa Phat steel. During the year, the blast furnace (Phase 1) of the Complex exceeded the planned target with an output of 383,000 tons, an increase of 25.8% over 2012.

The completion of Phase 2 of the Hoa Phat Integrated Steel Complex in October 2013 is a important milestone as Hoa Phat’s construction steel capacity was raised to nearly 1.2 million tons per year; the proportion of steel products produced by the end-to-end blast furnace technology has now accounted for two-thirds of total output.

Construction steel

STEEL PRODUCTION, TRADING SEGMENT AND SUPPLEMENTARY SEGMENTS

SUBSIDIARIES’ PERFORMANCE

2013 marked a successful year for this core segment of Hoa Phat Group – steel production, where total revenue reached VND15,108 billion, showing an increase of 6% compared to 2012.

HOA PHAT GROUP

33

The key source of energy and a catalyst to refine ore into steel, coke coal has created a competitive advantage for Hoa Phat steel. During the year, Hoa Phat Energy JSC succeeded in putting the coke coal production line No. 2 into stable operation. Control of furnace modes, maintenance of product quality, and waste reduction continued to be reinforced and improved. At the same time, the Company proactively conducted research of new products to serve the special niche market. The Company also organized study tours to foreign countries to learn and update about the new production technology and seek more material sources.

In addition to its main function of providing coke coal for the Integrated Steel Complex, the Company has been actively exploring domestic and export markets. Orders of coke coal from local customers increased by 30% compared to the previous year, and the Japanese market continued to bring long-term customers for Hoa Phat with regular monthly orders. Moreover, the electricity output generated by the coke coal and thermo-electricity plantof Hoa Phat Energy JSC also increased by over 30% compared to 2012, reaching over 120 million KWh of electricity, contributing to steady production for the whole Complex.

In October 2013, the Hoa Phat Ball Iron Ore Processing Plant in the Binh Vang Industrial Zone, Vi Xuyen District, Ha Giang Province was put into operation, which affirmed the strategic step forward of Hoa Phat for deep processing of iron ore at the mining site so ore quality could be improved, transportation costs decreased, and prices of finished steel products reduced. The Plant, an investment by An Thong Mining Investment JSC, has the capacity of 300,000 tons of ball iron ore per year and is currently the largest ball iron ore plant in Vietnam. For the 2013 year, the two companies Hoa Phat Mining JSC and An Thong Mining Investment JSC, have provided approximately 300,000 tons of fine iron ore and 42,800 tons of ball iron ore for the Integrated Steel Complex.

Exploration and initiation of new ore fields have always been promoted in the many mines that the Group was granted mining licenses in Ha Giang, Lao Cai, and Yen Bai. As a result, many ore beds with rich iron content and high reserves have been exploited and exhausted in order to economically use the natural resource for long-term production. In addition, Hoa Phat conducted research, exploration, and mining of iron ores for local production, developed feasibility studies on new mine sites in Ha Giang and Ha Tinh in accordance with the “socialization” policy of the Government in the mining sector.

Coke Coal and thermoelectricity production Mining and mineral processing



Steel pipe

For steel pipe products, Hoa Phat continued to strengthen its position as the market-leading steel pipe producer in Vietnam. Hoa Phat Steel Pipe Co., Ltd. showed impressive growth in 2013 compared to 2012 in all of its budgeted targets. Among these, sales of different types of steel pipes exceeded 200,000 tons, an increase of 33% over 2012.

During the past year, Hoa Phat Steel Pipe Co., Ltd. has intensively concentrated on investment, production expansion, product quality improvement, and retention and development of markets with a focus on unexploited markets; sales services have been maintained and have improved on a regular basis. Investment activities to expand production have been implemented in all factories in Hung Yen and Binh Duong provinces. Hoa Phat steel pipe created the difference of quality, types and is always the best favorite choice in the market.

HOA PHAT GROUP

OTHER INDUSTRIAL PRODUCTION SEGMENTS

Construction and mining machinery

In 2013, the construction and real estate industries continued to encounter difficulties, causing significant impact on the business operations of Hoa Phat Equipment & Accessories Co., Ltd. However, the Company managed to stabilize production and attain revenue growth of 23%, totaling VND359 billion. Hoa Phat Equipment & Accessories Co., Ltd. received an abundance of orders for new-model stone crushers, scaffolds, and film-coated formwork from ASEAN countries.

Reduction of inventory balance, enhancement of mechanization, concentration on and specialization in the mechanic industry, recruitment of qualified young employees, training of skilled workers, and upgrading of the casting and heating system in factories are the main activities undertaken that have led to production stabilization and product quality improvement. In addition, the Company has recently launched some new style cage lifts, scaffolds, and formwork and introduced an array of improvements in conveyor, stone crusher, and ore crusher components.

35

In 2013, the other industrial production segment includes constructive machines, mining equipment, furniture, refrigeration engineering…grew 16% compared to 2012 with VND2,659 billion, contributing 13.8% of revenue and 14.9% of net profit to the Group.



Despite the declined purchasing power of the VND and the increasingly fierce competition in the market, sales of Hoa Phat Furniture JSC reached over VND1,460 billion, showing a slight increase compared to 2012 and contributing VND210 billion to the Group’s profit after tax, an increase of 34.6%. “Hoa Phat Furniture” maintained its brand name as the lead in the sector. The Company’s coverage and market share remain stable in different markets. Market share also increased in some markets in the Northern and Southern regions.

Hoa Phat’s office and home furniture has been the first choice of consumers. Among these product lines are iron and polyurethane painted wooden cabinets, rotary chairs, and products made from steel pipes (home and school furniture), which dominated the market and accounted for a large proportion of the product line’s revenue. Some new products such as sofas, mesh chairs, and luxury chairs also made an impressive mark in the market. In terms of production, Hoa Phat Furniture constantly developed new products in 2013 and launched nearly 2.5 million types of product to the market.

Stabilization of product quality has always been the primary goal of production management within the Company.

The network of the Company’s seven factories in the North operated at full capacity to meet orders from customers, especially in the second half of 2013. The ability to meet orders in the South and Central areas was significantly improved due to the expansion of workshops in the Binh Duong and Ho Chi Minh City factories. The distribution system was stabilized and even expanded into some new markets with great potential, demonstrating wide coverage. The Northern and Southern markets had the same growth rates and developed through continuously expanding the level 2 agent system and increasing Hoa Phat’s product presence in remote districts, communes, and provinces. The pull and push sales strategy is closely directed and promptly handled by the Company’s management, creating a positive effect on sales and consumption. In addition, the Company also conducted studies to open a new distribution channel through supermarket chains.

Furniture

HOA PHAT GROUP


Most of product lines of air conditioners, refrigerators, freezers, and water heaters have cemented their position in the market, competing well against foreign products. The Funiki refrigeration products have been the primary choice for projects, construction projects, buildings, hotels, restaurants, hospitals, and schools nationwide. The Company’s products are considered “the Pride of Vietnamese Goods” due to its local manufacturing, diversified models, high quality, and reasonable prices. Especially in 2013, air-conditioners and refrigerators produced by the Company were labeled as economical and environment-friendly products.

Hoa Phat Refrigeration Engineering Co., Ltd. has strengthened its warranty system to provide the best after-sales service to customers. It increased investment to launch an array of new products to the market, and also advanced various promotional activities to help consumers better access Funiki products. In August 2013, the Company initiated the project to expand its freezer production plant with an investment of nearly VND200 billion, with the goal of increasing output to 300,000 products per year starting from March 2014. The Company hopes to speed up market domination, with the effort of increasing revenue by 20% in 2014.

Funiki refrigeration products


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HOA PHAT GROUP38

In the context where other trading companies encountered numerous difficulties from lower demand and from fiercer competition, Hoa Phat Trading Company had a successful year of business. Apart from trading traditional iron and steel products, the Company proactively adapted itself to market changes by buying and selling goods at the right times. In addition, the Company acted as a bridge between inputs and outputs for the Hoa Phat steel production plants. An important highlight for the Company during the year was that the Company was assigned by the Group the responsibility to sell and distribute Hoa Phat steel billets in domestic and foreign markets and take a new step forward in bringing Hoa Phat products to regional countries. Implementing this activity from the fourth quarter of 2013, apart from domestic sales, export of Hoa Phat steel billets to the Philippines market reached 12,000 tons with the value of approximately USD6.4 million. In addition to trading of traditional iron and steel products, continued market exploration and expansion for Hoa Phat steel billets is a top priority for 2014.

Hoa Phat Trading


Hoa Phat real estate business comprises of industrial zone and housing properties. Although the real estate segment represented a small portion of the Group’s total revenue and profit during the year, it will become a stronger business segnment in 2014 when the real estate market rebounds.

For industrial real estate, given its convenient geographical location supported by significant incentives for investment, Pho Noi A Industrial Zone and Hoa Mac Industrial Zone have regularly welcomed new enterprises that invest in factories, especially from Japanese and South Korean investors. In addition to enhancing promotion for its infrastructure leasing business, Hoa Phat Urban Development and Construction JSC completed site clearance for the whole area of Hoa Mac Industrial Zone (the total area of 131 ha), completed site clearance of another 60 ha of the extension area of Pho Noi A Industrial Zone (Hung Yen), and continued landfilling and technical infrastructure construction work on the extension area. Currently, Pho Noi A industrial Zone and Hoa Mac industrial Zone always have clear area with fulfilled infrastructure to serve investors here.

Especially, the wastewater treatment plant project in Hoa Phat’s Hoa Mac Industrial Zone was granted preferential loans from the World Bank (WB) in accordance with the donor program for water source and environmental treatment in some provinces such as Ha Nam and Nam

Dinh. Construction for the project started in late 2013, and is expected to be operational in the second quarter of 2014 to facilitate production activities of enterprises and ensure environmental protection in the industrial zone.

For housing real estate, Hoa Phat has supported all owners in the Hoa Phat Building at 257 Giai Phong Street, Dong Da District, Hanoi to obtain house ownership certificates. This is considered one of the top apartment building projects in Hanoi where the issuance of house ownership certificates has been completed most quickly, demonstrating the project owner’s high reputation and stature.

With a strategic location that “cannot be beat,” the Mandarin Garden Apartment Complex Project has essentially completed its interior and exterior landscape construction; more than 90% of the total 999 apartments have been sold and the handover of apartments to customers started from September 2013. The Mandarin Garden is one of the few projects within the high-class apartment market having a high liquidity ratio during 2013, due to its integrated infrastructure system, convenient location, modern facilities, and high value sale prices. Going forward, Hoa Phat will continue the handover of the apartments to customers, and at the same time, perform procedures for issuance of house ownership certificates to residents and complete all facilities and services to serve the residents.

REAL ESTATE SEGMENT

As at the end of 2013, real estate revenue reached VND1,433 billion, an increase of 198% compared to 2012.


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HOA PHAT GROUP40

Since being listed on HoSE, Hoa Phat Group Joint Stock Company (HPG) has always complied with Government regulations on information disclosure as well as actively enhancing investor relations (IR) activities, with the aim of regularly updating its investors and shareholders of the Group’s business operation results.

IR activities were implemented throughout 2013 in two ways: one, by proactively organizing meetings, updating information for shareholders and investors, and organizing factory tours for groups of investors and securities companies when requested; secondly, by being prepared to answer questions, solving problems, or providing as requested information regarding the Company’s operations.

During the year, securities companies including SSI, HSC, Ban Viet, Maybank Kim Eng, and Bao Viet, and foreign investment funds including Credit Suisse (Hong Kong), GMO (the United States, specializing in investment in emerging companies’ shares), Cube Capital (Hong Kong), Harvest Global Investments (Hong Kong), LIM Advisors (Hong Kong), Red River Holdings, Caravel Fund (USA), DCG Capital (Singapore), Asian Nikko Fund, and Charlemagne Capital (the United Kingdom) sent their representatives to HPG to obtain information on the Group’s business

operations, and paid visits to the Group’s manufacturing bases in Hai Duong, Hung Yen, and Ha Giang.

At the meetings with investors, HPG’s management and other high-ranking employees were open with sharing information and willing to elaborately answer questions on the business segments of the Group, especially on construction steel, steel pipe, furniture, coal coke export, and real estate projects. Representatives of securities companies, foreign investment funds, and HPG’s shareholders were all satisfied after each visit. They all expressed their trust in the Group’s business strategies and highly appreciated its development and bold investments, as well as its leaders’ strong actions in governance.

Plant tours for groups of investors at Hoa Phat Group were also regularly organized. Particularly in May and October 2013, HPG’s Investor Relations Department organized a site visit to the Hoa Phat Integrated Steel Complex in Kinh Mon District, Hai Duong Province for investors which included representatives of many securities companies and investment funds including Sai Gon Securities Company (HSC), SSI Securities Company, Ban Viet, Agribank Securities, BIDV Securities; IPA fund, APS, Sarus Capital Management, and Nomura. The aim of the site visit was for investors to gain an understanding of steel production

INVESTOR RELATIONS


processes using the end-to-end blast furnace technology, as well as observing phase 2 of the Complex, and observing the production status of the Hoa Phat coal coke and thermo-electricity plants.

In addition, Hoa Phat organized many visits to other factories during the year and proactively held meetings with investors on a quarterly basis in order to update them on the results of business operations for the year as well as its plans for the future. HPG also actively took part in the investor conference event (Frontier Trip) organized by Maybank Kim Eng Security Company in June 2013, with the participation of big investment funds such as P. Morgan Asset Management, Forward Management, Jupiter Capital, etc.

Furthermore, information on HPG’s business operations is regularly updated on the Company’s website at www.hoaphat.com.vn as well as in other mass media, ensuring the most complete and timely information for HPG’s shareholders in particular, and for investors in general.


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HOA PHAT GROUP42

SOCIAL ACTIVITIES

In first days of 2013, Tet gifts comprising of candies and cash were provided by Hoa Phat Group’s staff to the impoverished in Ha Giang, Yen Bai, Lao Cai, Hai Duong, and Hung Yen. This is a practical and meaningful activity organized annually by the Hoa Phat Group near the Lunar New Year in order to bring joy to the impoverished for the Tet holiday.

In parallel with the “Tet for the impoverished” activity, the “Tet for mountainous children” program was implemented in Ha Giang, Lao Cai and Yen Bai by the Hoa Phat Group. Nearly 700 gifts including clothes, milk, candies, stockings, and children’s notebooks were given directly to children. The gifts were given as encouragement, to foster motivation in the children to study and become useful citizens of society in the future.

Tet for the impoverished

Tet for mountainous children


In addition, the Hoa Phat Group also carried out various activities aiming to gradually improve the quality of life for people as well as modernizing educational infrastructure. As a whole, Hoa Phat’s social policies and charitable activities are based on the goals of supporting disadvantaged people in society using the most practical and effective means. It is through such activities that affirm Hoa Phat as a brand name for the community.

The Hoa Phat Group pays great attention to taking care of the younger generations, who are the future human forces of the country. For the goal “Children today – World tomorrow,” the Hoa Phat Group sponsored Hiep Son Nursery School’s construction project in Hiep Son Ward, Kinh Mon District, Hai Duong Province – with a total investment of over VND5.5 billion. Hiep Son Nursery School’s construction project comprises of 2 stories with 8 classrooms and spacious modern multi-purposes rooms built on the former Hiep Son School campus. The aim of extending the facilities will reduce the number of students in each class and ensure adequate space for enhanced child development. This is also to satisfy the increasing demand of parents whose children are at the nursery age. This project carries special significance as when the Hiep Son Nursery School opens, it will be a place to foster the development and education of the next generation in their early life.

As one of the meaningful activities implemented since late 2010, the Kind Heart Foundation of Hoa Phat Group donated more than VND700 million each year to bring nutritious meals to disadvantaged patients at the Vietnam National Cancer Hospital (K Hospital). The 150 meals donated to the impoverished each day expressed the spirit of “the good leaves protect the worn-out leaves” and “mutual trust and cooperation,” which are traditional beliefs of the Vietnamese in general and Hoa Phat in particular. The Hoa Phat Group will endeavor to continue this activity in the coming years in order to share and partly alleviate the pain suffered by the impoverished patients.

Sponsorship of Hiep Son Nursery School’s Construction

Joining hands for the community


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A series of improvement research conducted in Hoa Phat Integrated Steel Complex

The first improvement activity deserving of attention is the additional provision of material spraying equipment for sintering machines to increase the air permeability and the stability of the sintering process, as well as the ore quality. This system came into operation in December 2013. With the coal gas filter system, the Company expanded investment from 7 to 10 dust filter tanks and put them into use in September 2013, and the result was the resolution of overload problems caused by blast furnace coal gas. This system not only ensures stable operation of the equipment, but also resolves the problem of environmental pollution and increases the useful life of equipment fed with blast furnace coal gas.

In addition, technological engineers in the Complex implemented the initiatives of adding coal gas converting furnaces coal gas collectors and coal gas tank in order to utilize coal gas from converting furnaces to feed heating furnaces of Rolling Factory in the Complex. The system came into operation in November 2013, contributing to significantly reduced coal consumption in gas generators. Now only 5 gas generators are used instead of the 8 gas generators used in the past. The coal gas collector system will be expected to help reduce the volume of coal needed to feed gas generators.

In addition, Hoa Phat Steel JSC also upgraded the converting furnaces of the steel making factory; Phase 1 increased the capacity from 30 to 35 tons to meet the production demand. To be able to synchronize two air furnaces in two

RESEARCH AND DEVELOPMENT (R&D)

phases helps to control production more smoothly and harmoniously.

The activities of production, research for improvement, and upgrading of production lines and equipment created initial increased efficiencies. In 2014, the Company will research to upgrade blast furnaces; phase 1 from 350 to 400m3 at the earliest possible time in order to ensure the stability and safety for long-term production. Hoa Phat plans to conduct this in the third quarter of 2014 and at the same time, to operate a more automated system to control operation processes of the whole Complex.

Research to successfully install a induction furnace for the steel billet factory in Hung Yen

Investments for the Hoa Phat Steel Billet Factory in Hung Yen have been made since the early 2000s with the arc furnace technology. After several technology improvements, the factory is now equipped with two arc furnaces and three-line billet casting lines. In 2013, Hoa Phat Steel One Member Co., Ltd. officially conducted research for installation and test run of the 30-ton medium frequency furnace system with the aim of increasing the steel billet output of the factory from 250,000 tons to the maximum 350,000 tons per year, which would minimize production costs. Making steel using medium frequency furnaces helps save electricity and provide much higher durability of products than the arc furnace technology. The test run has been successfully completed.


In order to better support production, Hoa Phat Furniture JSC commenced restructuring of production areas in both the Northern and Southern regions of Vietnam. In the Northern region, the Company completed investment in infrastructure and expansion of the rotary chair factory; the spacious and modern mechanical factory with the 3-floor workshop area to be used for both production floors and offices with an area of 6 ha can facilitate increasing production output and developing new product lines with a focus on mesh chairs, family sofas, office and high-class leather chairs, etc. In the South, the Company restructured its factory system at Cat Lai (HCM City) and Binh Duong to streamline production floors, appropriately apply technology, and improve capacity and output of furniture products such as steel cabinets, safes, rotary chairs, and polyurethane painted wood and industrial wood products. In addition, Hoa Phat Furniture invested in new, modern machinery and equipment including CNC automatic cutters, welding robots, etc.

Successful testing of new materials

Searching for and testing new sources of coal became the focus of research by Hoa Phat Energy JSC in 2013. Nearly 20 types of new coals were researched during the year and the Lake Vermont coal was successfully tested in production of coal coke with a quality grade 1, which is compatible with the operation of blast furnaces in the Integrated Iron Steel Complex. The Company boldly imported 25,000 tons of Lake Vermont coal and PCI Jellinbah coal from Australia to commence mass production, with the aim of reducing the use of high-priced premium coal. The establishment of the Technology Committee and organization of monthly meetings created more energy and excitement in research activities, and also created new production ideas, thus reducing costs and raising the competitiveness of Hoa Phat coal coke in the marketplace.

Operation of the Vietnamese largest Ball Iron Ore Plant

With the aim of providing a long-term ball iron ore source for steel production, Hoa Phat commenced investment in a ball iron ore plant in the Binh Vang Industrial Zone, Ha Giang Province with the highest capacity in Vietnam. This is an important strategic step in deep processing of iron ore at the mining site, reducing transportation costs and the abnormal waste. Input materials of the Plant come from the rich source of fine iron ores from ore mining and processing factories of An Thong Mining Investment JSC in Ha Giang. The plant operates with leading-edge equipment and the most advanced technology in the world, using the pelleting iron ore rotary kiln fed with coal. With this plant, Hoa Phat can proactively supply 100% of pelleted iron ore for blast furnaces in the Integrated Steel Complex.

Restructuring of the factory system by Hoa Phat Furniture


HOA PHAT GROUP46

Part IV:

BOARD OF MANAGEMENT’S ASSESSMENT

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2013 ANNUAL REPORT 47BOARD OF MANAGEMENT’S ASSESSMENT

Macro-economic statistics of 2013 showed that the economy of Vietnam regained some stability. The production sector has showed signs of growth since the late 3rd quarter, as inflation has been controlled and the foreign exchange market has been stabilized. The economy’s stability is illustrated by some key indicators: the inflation rate was maintained at a low level of 6.04% as compared to the set target of 7 - 8%, and the interest rate tended to decline and become more stable without the “high interest rate race” that occurred in previous years. The foreign exchange rate was generally maintained at a relatively stable level for a long period, although the unofficial currency rate fluctuated beyond the price band’s cap from time to time, especially after the State bank of Vietnam increased the official currency rate by 1% in June 2013. 2013 also saw the lowest growth in the consumer price index (CPI) in the past 10 years with the average CPI increase by 6.6% in 2013 as compared to that of 2012. The trade balance was significantly improved to an “in-balance” status from its past trade deficit status. It is certain that the economic stability over the past year was partly attributed to drastic and appropriate solutions provided under the Government’s policies.

However, despite positive signs of recovery of the macro-economy, the economy of Vietnam encountered various challenges when the market purchase power remained moderate, the real estate freeze remained, and the global economy was generally recovering at a lower rate than expected. The steel sector alone encountered multiple difficulties during the year due to increased input costs, over-supply, and fierce competition with cheaper steel imported from China; furthermore, steel and steel pipe export suffered trade barriers from various importing countries. By the end of 2013, the Hoa Phat Group successfully reached its targets with a revenue of VND19,200 billion and profit after tax of VND2,010 billion. The steel production segment contributed mostly to the Group’s target exceeding results and continued to further its leading role contributing 78.7% of revenue and 82.9% of net after tax profit. Hoa Phat construction steel continued to solidify its position as the second largest seller of steel in Vietnam.

Other industrial production segments saw stable and sustainable growth, achieving 13.8% and 14.9% of revenue and profit of the whole Group, respectively.

To navigate the sluggish real estate market, the experienced direction of the Board of Directors towards the Group’s real estate construction projects has allowed Hoa Phat to fulfill plans ahead of schedule and handover apartments in the Mandarin Garden Project to customers 3 months prior to the committed deadline (end of September 2013 instead of December 2013). Mandarin Garden was considered one of the “bright spots” in the stagnant real estate market in Hanoi.

The Board of General Directors and the subsidiaries’ Boards of Directors have made significant contributions and made great efforts for the Group’s target-exceeding performance for revenue and profit in 2013. To implement the directions from the Annual General Shareholders’ Meeting and to carry out the Board of Management’s suggestions for specific actions, the Board of Directors for the Group’s subsidiaries directed business operations in an active and thorough manner in all core projects including Hoa Phat Integrated Steel Complex – Phase 2, the Mandarin Garden Apartment Complex, and the Binh Vang Iron Ore Pelleting Plant (Ha Giang).

ASSESSMENT OF THE BOARD OF MANAGEMENT ON THE GROUP’S OPERATIONS

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Also in the past year, the Board of Directors continued to strengthen internal governance through application of a personnel rating scheme and standardization of personnel positions, with compensation and benefit packages to appropriately reward staff for their dedication. Official document issuance was also enhanced when the Board of Directors speeded up review and finalization of regulations to create legal and administrative corridor for the Group’s operation, and to properly realize the roles of risk management at all levels.

Overall, the Board of Directors’ performance during the year was superb. The Board of Directors properly followed the direction set forth by the General Shareholders’ Meeting and the Board of Management for 2013, by gradually enhancing governance as well as demonstrating

business competency. Strategic target programs of the Group were implemented in accordance with the road map with appropriate adjustments to adapt to the macro-economic conditions and the competitive conditions of the steel sector. The Board of Directors demonstrated their proactiveness and creativeness in business operations and overcame market challenges by utilizing the Group’s strengths.

By maintaining stable and steady growth in a challenging environment, Hoa Phat succeeded in building trust with its customers, business partners, and shareholders; Hoa Phat has more and more strongly affirmed its position in the market. This is also a reflection of the sound judgment by the Group’s Board of Management and the collaboration and direction of the Board of Directors.

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Board of Management’s plans and orientations:

According to the assessments of many economic experts of Vietnam economy’s prospects, 2014 will have a few bright spots but the economy will encounter numerous difficulties and challenges. 2014 will also be a strenuous year for the steel industry due to domestic overproduction, weaker tariff protection, and consequent higher import of steel into Vietnam. Vietnamese steel companies not only face strong competition in the domestic market, but also face legal suits in countries to which they export their products. Given these difficulties and challenges, the Board of Management sets the following direction:

- Collaborate with management and employees in striving for proper management and governance of the business. To keep the momentum of growth, the Board of Management agrees to the Group’s business operation plan put forth by the Board of Directors and will submit it at the General Shareholders’ Meeting for approval, which includes the revenue and profit after tax goals of VND23,000 billion and VND2,200 billion, respectively, for 2014.

- Convene at regular meetings and maintain close cooperation and communication among members of the Board of Management, and strengthen the Company’s governance aimed to promote efficiency and transparency.

- Continue to closely monitor the domestic and international economic markets to make sound judgments, as well as allow the Board of Directors to efficiently manage the business to achieve the best results.

BOARD OF MANAGEMENT’S ASSESSMENT2013 ANNUAL REPORT

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Part V:

CORPORATE GOVERNANCE

Members and structure

Shareholding percentage of members of the Board of Mangement

BOARD OF MANAGEMENT

51CORPORATE GOVERNANCE

Operation of the Board of Management:In 2013, the Board of Management of Hoa Phat Group held the following meetings and passed resolutions on the following matters:- Increase capital contribution in Hoa Phat Steel Pipe Co. Ltd., An Thong Mining Investment JSC, Hoa Phat Steel JSC, and Hoa Phat Furniture JSC.

- Take the transfer of land use rights and assets on land in Ho Chi Minh City for the construction of offices for the Group in Ho Chi Minh City.

- Approve the payment plan for remaining cash dividends for 2012.

- Take the transfer of shares in Hoa Phat Steel JSC.

- Make other important decisions.

No. Name Position

1 Tran Dinh Long Chairman 24.12

2 Tran Tuan Duong Vice Chairman 2.69

3 Nguyen Manh Tuan Vice Chairman 2.65

4 Doan Gia Cuong Vice Chairman 1.98

5 Nguyen Ngoc Quang Member 1.98

6 Ta Tuan Quang Member 0.19

7 Hoang Quang Viet Member 0.47

8 Nguyen Viet Thang Member 0.35

9 Ho An T Member -

10 Hans Christian Member -

Total 34.43

Percentage of shares held as at

25 February 2014 (%)

2013 ANNUAL REPORT

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CURRICULUM VITAE OF KEY LEADERS

Bachelor of Economics - National Economics University Joining date: 1992

As founding shareholder and holding Chairman position of member companies, Mr. Long was the first person setting up the foundation for Hoa Phat Equipment & Accessories, the earliest member in the Group. Mr. Long employed so a lot of experts who had consensus ambition and responsibilities.

During the establishment and development of Hoa Phat, Mr. Long was the person who oriented business strategy for each susidiary.

Bachelor of Economics – National Economics University; Bachelor of Journalism - Hanoi General University.

Joining date: 1992

Mr. Duong held management position in subsidiaries such as: Hoa Phat Equipment & Accessories, Hoa Phat Furniture and Hoa Phat Steel Pipe before he became the Deputy Chairman of Management Board cum CEO of Hoa Phat Group since January 2007. With his in deep experience, Mr. Duong has contributed greatly to strengthen position of Hoa Phat steel and Hoa Phat Group as a whole.

Mr. Tran Dinh Long

BOM Chairman of Hoa Phat Group

Mr. Tran Tuan DuongBOM Vice Chairman

General Director of Hoa Phat Group JSC

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Bachelor of Economics – National Economics University

Joining date: 1996

In 1996, Mr. Tuan was a Vice Director of Hoa Phat Steel Pipe cum Head of trading department. Since 10/2004, holding director of Hoa Phat Steel Pipe Company, Mr. Tuan has helped the Hoa Phat steel pipe become a top steel pipe maker.

MBA, National Economics University

Joining date: 1999

Mr. Cuong was appointed first in the position of Vice Director before promoting as a Director of Hoa Phat Furniture JSC. From 01/2007, he additionally held the Deputy Chairman position of Hoa Phat Group JSC. With his straight forward orientation in achieving realistic goals, Mr. Cuong has helped Hoa Phat Furniture becoming familiar to every Vietnamese consumer.

Mr. Nguyen Manh Tuan BOM Vice Chairman cum Director of

Hoa Phat Steel Pipe Co., Ltd

Mr. Doan Gia CuongBOM Vice Chairman cum Director of

Hoa Phat Furniture JSC

CORPORATE GOVERNANCE2013 ANNUAL REPORT

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Bachelor of Economics National Economics University

Joining date: Since 1995

Mr. Quang was among founders for Hoa Phat Furniture, he was Director of Hoa Phat Furniture for 11 years. Since December 2006, he has been Director of Hoa Phat Refrigeration Engineering where he has contributed significantly to its success and brand name of Funiki position.

Vocational training


Mr. Nguyen Ngoc Quang has been a Director of Hoa Phat Equipment & Accessories in Ho Chi Minh subsidiary for 4 years (1992-1996). He has been a Director of the Company since 1997. As one of the top construction equipments producer in Vietnam, products of Hoa Phat Equipment & Accessories under his management have been successfully persuading customers in domestic and foreign country on their qualities, prices and after sales services.

Mr. Nguyen Ngoc Quang BOM Member cum Director of Hoa Phat

Equipment & Accessories Co., Ltd

Mr. Ta Tuan QuangBOM Member cum Director of Hoa Phat

Refrigeration Engineering Co., Ltd

Mr. Nguyen Viet Thang BOM Member cum Deputy General Director

of Hoa Phat Group JSC

Educational qualification: Bachelor of Civil Engineering

Joining date: 2003

Mr. Nguyen Viet Thang had several years in the management position as the Deputy Director of Hoa Phat Urban Development and Construction JSC before he was appointed as the Deputy General Director of Hoa Phat Group Joint Stock Company on 7 April 2012.

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Mr. Ho An TBOM Member

Mr. Hans ChristianBOM Member

Graduated from People’s Security University


Joining the Group since 2001, Mr. Viet has been elected as a Director of Hoa Phat Urban Development and Construction. He was so successful in real estate, especially for industrial infrastructure such as Pho Noi A industrial park where big international and domestic firms located. Mr. Viet and Board of Directors are now going to deploy other housing and urban areas after the success of Pho Noi A.

Master of Business Administration

Joining date: 2012

Before appointed as a member of the Board of Management, Mr. Andy Ho has held the position of investment director for Dell Computer Corp. (2000 - 2004); Investment director for Prudential Fund Management Company (2004 - 2007); Managing Director of VinaCapital (from 4/2007-now). Mr Andy Ho is also Chairman of the Management Board of Vinawealth Fund Management Company, Khang Dien Business and Investment JSC; Management Board’s Member of Phu Nhuan Jewelry Joint Stock Company.

Master of Business, Denmark

Joining date: 2012

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

Mr. Hoang Quang VietBOM Member cum Director of Hoa Phat Urban

Development & Construction


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HOA PHAT GROUP56

Regulatory risks:General context: Hoa Phat Group and its 13 subsidiaries operate in multiple business segments including heavy industry and light industry production, consumer goods production, mining, real estate, etc. Any single regulatory change may therefore cause a significant impact on one or more companies of within the Group.

Hoa Phat’s solution: The Hoa Phat Group has kept abreast of relevant regulatory changes, being proactive in monitoring and managing its corporate business activities. The Hoa Phat Group has concentrated its investment in its core business activities and specialized industries, representing the strengths of the Group rather than spreading its resources to non-core businesses.

Results: The Hoa Phat Group is currently regarded as the leading private industrial production group and one of the three largest steel construction manufacturers in Vietnam. All of the Group’s three core business segments steel production, other industrial production, and real estate have achieved stable growth and are synonymous with The Hoa Phat Group’s famous brand name within their respective industries.

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RISKS MANAGEMENT

Macro-economic risks General context: In 2013, the economy of Vietnam has made many significant achievements: inflation rates were adequately controlled, foreign exchange rates were stabilized, bank interest rates were reduced and maintained at a relatively low level, import and export activities have remarkably increased, and foreign direct investment to Vietnam have been well maintained. However, the economic recovery still remains at a low rate and many enterprises have not managed to revive under the challenging business environment. For the steel industry, domestic demand remained low, which resulted in moderate steel production from many enterprises.

Hoa Phat’s solution: The Hoa Phat Group implemented specific strategic policies and exercised flexible management and governance.

Results: In 2013, the Group achieved total consolidated revenue of VND19,200 billion and a net consolidated profit after tax of VND2,010 billion, recording 104% and 168% of the annual approved budget, respec-tively. These achievements represent the remarkable increases of 12% and 95% in revenue and profit, respectively, compared

to 2012.

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Technology risks:General context: Given that the core business activity is steel production, technology has always been regarded as the top priority in production management, with the aim to reduce production costs and enhance the competitiveness of the Group’s products. For other segments, continuous development and investment in technology have been the focus of the Group’s management.

Hoa Phat’s solution: Hoa Phat has been perpetually studying and applying world-class advanced technologies relevant to its activities; at the same time, Hoa Phat has been encouraging its employees to actively conduct research activities, to apply and improve current technologies to adapt with the practical operations of the Group.

Results: Hoa Phat’s factories are currently using the most advanced technologies. At the same time, the continuous improvement of manufacturing processes has also enabled the Group to reduce production costs and enhance the competitiveness of its products in the market. In addition, the application of modern and clean technologies makes the Hoa Phat Group accessible to many foreign

partners, accelerating the export of its product.

Environmental risks:General context: Industrial production, especially in heavy industry, is inherently exposed to risks affecting the living environment.

Hoa Phat’s solution: Hoa Phat has always committed to comply with environmental policies and regulations, to adopt modern technologies, and to continuously improve the production processes to minimize impacts on the environment.

Results: Environmental Impact Assessment Reports have been prepared for all factories of the Group. A significant number of technologies used by Hoa Phat are considered preeminent clean technologies such as the super-clean Coke Coal production technology used by Hoa Phat Integrated Steel Complex in the Hai Duong province.

Human resources risk:General context: With nearly 10,000 employees from all over the country in the early stages of their careers, changes in personnel have always been considered an important issue that is given special attention. In addition, in order to meet the continuous development demands, the Hoa Phat Group has no choice but to constantly improve its personnel’s expertise and competency.

Hoa Phat’s solution: Hoa Phat considers its people as its keys of success and has always placed great importance on training and improving the skills of its employees. Policies for human resources development have always been implemented and remain balanced between quality and quantity. Hoa Phat is currently developing a personnel rating system aiming to standardize the human resources management system within the entire Group.

Results: The quality of Hoa Phat’s employees, from blue-collar workers to white-collar workers, managers, and executive officers has remarkably improved over the years, thus meeting the demand for long-term development and orientation of the Group.


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Ownership rate of members of the Supervisory Board

SUPERVISORY BOARD

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1 Nguyen Thi Thanh Van Head of Supervisory Board 0.00003 2 Dang Pham Minh Loan Member of Supervisory Board - 3 Truong Nu Minh Ngoc Member of Supervisory Board - 4 Le Tuan Anh Member of Supervisory Board - 5 Vu Thanh Thuy Member of Supervisory Board - Total 0.00003

Percentage of shares held as at

25/02/2014 (%)No Name Title

Ms. Dang Pham Minh Loan

Member of Supervisory Board

Bachelor of Accountant, ACCA

holder – UK, CPA Vietnam

Working starting time: Since 2007

Ms. Loan held a number of senior positions in the large financial organizations such as, Auditor, Assistant Manager of auditing department KPMG (2000 - 2005); member of Supervisory Board, Specialist and Head of investing department in the Vinacapital Investment Management Ltd’s Representative Office. Since July 2010, she has been a Vice Executive Director of Vinacapital Company.


Degree in economics


Before becoming a member of Supervisory Board, Ms. Thuy held a number of positions in: Staff member in accounting department of Hoa Phat Steel JSC (2005 - 2006), Staff member in Finance department of Hoa Phat Group (2006 – present).


MBA


Ms Truong Nu Minh Ngoc has experienced many positions in large financial institutions such as: Senior Auditor in PricewaterhouseCoopers (9/2000 – 2/2005), financial analyst in Vina Capital (2/2005 – 7/2005), Investment Manager in Bank Invest (2007 - now).

Head of Supervisory Board

BA,Accounting, Academy of Finance, Hanoi

Working starting time: 2007

Before appointed as Head of Supervisory Board , Ms Nguyen Thi Thanh Van was a Chief Accountant of Hoa Phat Group JSC from 2007 to 2010. Since 2011, she is also Chief Accountant of Hoa Phat Steel One member Co. Ltd.


Economic Bachelor; Accounting Practice Certificate (Viet Nam)

Working starting time: Since 2006Before appointed as member of the Supervisory Board, Mr.Le Tuan Anh worked in the accounting department of Hoa Phat Steel Pipe Co., Ltd. (2006 - 2007), specialist of the Supervisory Board (2007 - 2011) and currently he is manager of Controller Department of Hoa Phat Group JSC.

Ms. Nguyen Thi Thanh Van Mr. Le Tuan Anh Ms. Vu Thanh Thuy Ms. Truong Nu Minh Ngoc

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Being comprised of members having a deep understanding of specific operations of the Company, the Supervisory Board implemented the following tasks during the year:

- Review quarterly and annual financial statements; review monthly and annual financial plans; obtain timely updated information of the Group’s financial performance in 2013; study, analyze, and regularly update information of the steel production and trading businesses;

- Obtain updated information of production and operations of the subsidiaries within the Group;

- Review the construction progress of Phase 2 of the Integrated Steel Complex project and the real estate project;

- Review the financial plans and the implementation of the financial plans at the subsidiary and the Group levels;

- Monitor the inventory level, status of account receivables, sales policies, and cash collection, etc.;

- Review the continued acquisition of shares of Hoa Phat Steel Joint Stock Company from ACB Investment Joint Stock Company;

- Obtain updated information of the working schedule of internal audit; review internal audit reports for each subsidiary in the Group;

- Review the implementation of resolutions passed by the General Shareholders’ Meeting and the Board of Management; review management reports prepared by the Board of Directors;

- Attend all the meetings of the Board of Management; provide recommendations to improve operational efficiency of the Group such as financial planning, budget plans, business strategies, trademark, and market promotion.

The Supervisory Board held two meetings in 2013 with full attendance of the Board members to discuss important issues in relation to development and orientation of the Group in general as well as those of each business sector.

The Supervisory Board is greatly appreciative of the Company’s business results achieved in 2013; they assessed that the business strategies of the Group properly followed its orientation and proved to be effective, and the

financial position of the Company proved to be transparent and stable.

The Supervisory Board provided several suggestions to the Company; details are as follows:

Members of the Supervisory Board had regular communication and discussions with members of the Board of Management, the Board of Directors, and heads of functional departments to get updates on issues arising from the Company’s operation. The Supervisory Board provided timely recommendations on executive decisions in order to improve the efficiency of the Company’s business operations.

In 2013, there was no change in members of the Supervisory Board.

Compensation for members of the Supervisory Board: VND20 million/member/year

Internal controlTo fulfill the set plans for 2013, the Internal Control Department implemented internal control activities for all subsidiaries under Hoa Phat Group. During the process, upon detection of any errors or risks at the member entity level, the Internal Control Department coordinated with these entities to fix the errors as well as provide recommended solutions to mitigate errors and risks in the future. Favorable results were attained in the general activities of subsidiaries: member entities incurred virtually no bad debts, transactions in cash were minimized, no outstanding long-term advances existed, and companies purchased materials and supplies at reasonable prices.

In order to improve the function of internal control in the Group’s activities in 2014, the Internal Control Department will continue to focus controls on the purchasing and sales processes; in addition, one of the key targets in 2014 is to formalize the procedures of important processes such as material and goods purchasing, selling processes, and the accounting and finance process in order to strengthen the control function in member entities.

Supervisory Board’s Report

Ms. Truong Nu Minh Ngoc


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2013 consolidated and separate financial statements were reported on the

Website: www.hoaphat.com.vn

Consolidated financial statements for the

year ended as at 31 December 2013

HOA PHAT GROUP JOINT STOCK COMPANY AND ITS SUBSIDIARIES

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Report of The Board of Directors 62

Independent auditor’s report 65

Consolidated balance sheet 67

Consolidated income statement 70

Consolidated cash flow statement 71

Consolidated financial statements 73

CONTENTS

2012 AUDITED CONSOLIDATED FINANCIAL STATEMENTS

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HOA PHAT GROUP62

Hoa Phat Group Joint Stock CompanyReport of the Board of Directors

1

The Board of Directors of Hoa Phat Group Joint Stock Company (“the Company”) is pleased to present its report and the consolidated financial statements of the Company and its subsidiaries (together referred to as “the Group”) for the year ended 31 December 2013.

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

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

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

Corporate information

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

The Company’s Business Registration Certificate has been amended several times, the most recent of which is by Business Registration Certificate No. 0900189284 dated 22 November 2012. The Business Registration Certificate was issued by the Hung Yen Department of Planning and Investment.

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

The subsidiaries and associates of the Group are disclosed in Note 1 to the consolidated financial statements.

2013 ANNUAL REPORT 632012 AUDITED CONSOLIDATED FINANCIAL STATEMENTS

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

2

Operating results and dividends

The consolidated net profit attributable to the equity holders of the Company for the year ended 31 December 2013 was VND1,954,188 million (2012: VND994,024 million).

During the year, the Company completed the second distribution of dividends in cash for 2012 to the shareholders at the rate of 10% of par value of shares, amounting to VND419,053 million, in accordance with Resolution No. 13/NQHP-2013 dated 21 August 2013 of the Company’s Board of Management.

Post balance sheet events

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

Auditors

The auditors of the Company and the Group are KPMG Limited.

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HOA PHAT GROUP64

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

3

Statement of the Board of Directors’ responsibility in respect of the consolidated financial statements

The Board of Directors is responsible for the consolidated financial statements which give a true and fair view of the Group’s consolidated financial position, results of operations and cash flows for the year ended 31 December 2013. In preparing the consolidated financial statements, the Board of Directors is required to:

select suitable accounting policies and then apply them consistently;

make judgments and estimates that are reasonable and prudent;

confirm that applicable accounting standards have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; and

prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

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

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

Approval of the consolidated financial statements

We hereby approve the accompanying consolidated financial statements for the year ended 31 December 2013. These consolidated financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2013 and of their consolidated results of operations and their consolidated cash flows for the year then ended in accordance with the Vietnamese Accounting Standards, the Vietnamese Accounting System and the relevant statutory requirements applicable to financial reporting.

On behalf of the Board of Directors

Tran Tuan Duong General Director

Hanoi,Hanoi, 15 March 2014

2013 ANNUAL REPORT 652012 AUDITED CONSOLIDATED FINANCIAL STATEMENTS

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HOA PHAT GROUP66

2013 ANNUAL REPORT

2012 AUDITED CONSOLIDATED FINANCIAL STATEMENTS67

Công ty Cổ phần Tập đoàn Hòa Phát Bảng cân đối kế toán hợp nhất tại ngày 31 tháng 12 năm 2013

Mẫu B 01 – DN/HN

Các thuyết minh đính kèm là bộ phận hợp thành của báo cáo tài chính hợp nhất này 6

Mã số

Thuyết minh

31/12/2013 VND

31/12/2012 VND

TÀI SẢN Tài sản ngắn hạn (100 = 110 + 120 + 130 + 140 + 150) 100 12.402.515.338.144 10.220.788.345.768

Tiền và các khoản tương đương tiền 110 6 2.125.322.390.697 1.294.493.700.487

Tiền 111 282.763.115.669 171.268.004.046 Các khoản tương đương tiền 112 1.842.559.275.028 1.123.225.696.441

Các khoản đầu tư tài chính ngắn hạn 120 14.1 387.793.671.402 219.951.513.600

Các khoản phải thu ngắn hạn 130 7 1.629.428.547.084 1.646.343.637.635 Phải thu khách hàng 131 1.258.518.278.675 1.150.508.510.152 Trả trước cho người bán 132 350.774.484.077 381.695.830.668 Phải thu khác 135 34.778.986.769 292.729.021.071 Dự phòng phải thu khó đòi 139 (14.643.202.437) (178.589.724.256)

Hàng tồn kho 140 8 8.029.575.289.191 6.822.077.238.740 Hàng tồn kho 141 8.064.854.889.451 6.847.996.509.051 Dự phòng giảm giá hàng tồn kho 149 (35.279.600.260) (25.919.270.311)

Tài sản ngắn hạn khác 150 230.395.439.770 237.922.255.306 Chi phí trả trước ngắn hạn 151 42.122.793.350 37.412.808.587 Thuế giá trị gia tăng được khấu trừ 152 127.795.589.569 141.403.013.965 Thuế và các khoản khác phải thu Ngân sách Nhà nước 154 9 34.144.629.790 32.413.440.414 Tài sản ngắn hạn khác 158 26.332.427.061 26.692.992.340

Hoa Phat Group Joint Stock CompanyConsolidated balance sheet as at 31 December 2013

Form B 01 – DN/HN

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

6

Code Note 31/12/2013

VND 31/12/2012

VND

ASSETS

Current assets (100 = 110 + 120 + 130 + 140 + 150) 100 12,402,515,338,144 10,220,788,345,768

Cash and cash equivalents 110 6 2,125,322,390,697 1,294,493,700,487

Cash 111 282,763,115,669 171,268,004,046 Cash equivalents 112 1,842,559,275,028 1,123,225,696,441

Short-term investments 120 14.1 387,793,671,402 219,951,513,600

Accounts receivable – short-term 130 7 1,629,428,547,084 1,646,343,637,635

Accounts receivable – trade 131 1,258,518,278,675 1,150,508,510,152 Prepayments to suppliers 132 350,774,484,077 381,695,830,668 Other receivables 135 34,778,986,769 292,729,021,071 Allowance for doubtful debts 139 (14,643,202,437) (178,589,724,256)

Inventories 140 8 8,029,575,289,191 6,822,077,238,740

Inventories 141 8,064,854,889,451 6,847,996,509,051 Allowance for inventories 149 (35,279,600,260) (25,919,270,311)

Other current assets 150 230,395,439,770 237,922,255,306

Short-term prepayments 151 42,122,793,350 37,412,808,587 Deductible value added tax 152 127,795,589,569 141,403,013,965 Taxes and other receivables from State Treasury 154 9 34,144,629,790 32,413,440,414 Other current assets 158 26,332,427,061 26,692,992,340

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HOA PHAT GROUP68

Công ty Cổ phần Tập đoàn Hòa Phát Bảng cân đối kế toán hợp nhất tại ngày 31 tháng 12 năm 2013 (tiếp theo)

Mẫu B 01 – DN/HN

Các thuyết minh đính kèm là bộ phận hợp thành của báo cáo tài chính hợp nhất này 7

Mã số

Thuyết minh

31/12/2013 VND

31/12/2012 VND

Tài sản dài hạn (200 = 210 + 220 + 240 + 250 + 260 + 269) 200 10.673.862.524.545 8.794.975.115.778

Các khoản phải thu dài hạn 210 7 449.759.238.679 448.979.590.000

Phải thu khác 218 449.759.238.679 448.979.590.000

Tài sản cố định 220 9.187.130.524.312 7.007.089.647.235 Tài sản cố định hữu hình 221 10 8.864.496.339.790 4.295.767.594.850

Nguyên giá 222 11.747.912.985.324 6.529.948.378.267 Giá trị hao mòn lũy kế 223 (2.883.416.645.534) (2.234.180.783.417)

Tài sản cố định vô hình 227 11 189.063.615.103 166.217.334.650 Nguyên giá 228 215.917.099.640 188.296.995.886 Giá trị hao mòn lũy kế 229 (26.853.484.537) (22.079.661.236)

Xây dựng cơ bản dở dang 230 12 133.570.569.419 2.545.104.717.735

Bất động sản đầu tư 240 13 62.002.294.764 66.519.066.085 Nguyên giá 241 88.066.912.353 88.066.912.353 Giá trị hao mòn lũy kế 242 (26.064.617.589) (21.547.846.268)

Các khoản đầu tư tài chính dài hạn 250 14.2 21.255.298.806 26.218.497.620 Đầu tư vào công ty liên kết 252 5.553.170.441 5.809.369.255 Đầu tư dài hạn khác 258 15.702.128.365 20.409.128.365

Tài sản dài hạn khác 260 380.858.246.946 394.091.242.174 Chi phí trả trước dài hạn 261 15 326.428.533.088 327.676.686.308 Tài sản thuế thu nhập hoãn lại 262 16 54.344.805.858 47.988.208.522 Tài sản dài hạn khác 268 84.908.000 18.426.347.344

Lợi thế thương mại 269 17 572.856.921.038 852.077.072.664

TỔNG TÀI SẢN (270 = 100 + 200) 270 23.076.377.862.689 19.015.763.461.546

Hoa Phat Group Joint Stock CompanyConsolidated balance sheet as at 31 December 2013 (continued)

Form B 01 – DN/HN

The accompanying notes are an integral part of these consolidated financial statements 7


VND 31/12/2012

VND

Long-term assets (200 = 210 + 220 + 240 + 250 + 260 + 269) 200 10,673,862,524,545 8,794,975,115,778

Accounts receivable – long-term 210 7 449,759,238,679 448,979,590,000

Other receivables 218 449,759,238,679 448,979,590,000

Fixed assets 220 9,187,130,524,312 7,007,089,647,235 Tangible fixed assets 221 10 8,864,496,339,790 4,295,767,594,850

Cost 222 11,747,912,985,324 6,529,948,378,267 Accumulated depreciation 223 (2,883,416,645,534) (2,234,180,783,417)

Intangible fixed assets 227 11 189,063,615,103 166,217,334,650Cost 228 215,917,099,640 188,296,995,886 Accumulated amortisation 229 (26,853,484,537) (22,079,661,236)

Construction in progress 230 12 133,570,569,419 2,545,104,717,735

Investment property 240 13 62,002,294,764 66,519,066,085 Cost 241 88,066,912,353 88,066,912,353 Accumulated depreciation 242 (26,064,617,589) (21,547,846,268)

Long-term investments 250 14.2 21,255,298,806 26,218,497,620 Investments in associates 252 5,553,170,441 5,809,369,255 Other long-term investments 258 15,702,128,365 20,409,128,365

Other long-term assets 260 380,858,246,946 394,091,242,174 Long-term prepayments 261 15 326,428,533,088 327,676,686,308 Deferred tax assets 262 16 54,344,805,858 47,988,208,522 Other long-term assets 268 84,908,000 18,426,347,344

Goodwill 269 17 572,856,921,038 852,077,072,664

TOTAL ASSETS (270 = 100 + 200) 270 23,076,377,862,689 19,015,763,461,546

2013 ANNUAL REPORT


Hoa Phat Group Joint Stock CompanyConsolidated balance sheet as at 31 December 2013 (continued)

Form B 01 – DN/HN



VND 31/12/2012

VND

RESOURCES

LIABILITIES (300 = 310 + 330) 300 13,489,417,843,130 10,438,205,916,396

Current liabilities 310 11,142,521,402,951 7,362,009,487,292 Short-term borrowings 311 18 5,743,559,817,748 4,850,248,888,636 Accounts payable – trade 312 2,313,957,097,164 1,520,631,891,532 Advances from customers 313 79,676,433,981 187,595,273,309 Taxes payable to State Treasury 314 19 387,853,096,459 209,932,737,460Payables to employees 315 122,128,725,001 95,436,269,206 Accrued expenses 316 20 345,447,630,212 332,804,558,333 Other payables 319 21 2,045,822,283,922 105,794,771,676 Provisions 320 22 13,212,673,156 11,211,707,436 Bonus and welfare funds 323 90,863,645,308 48,353,389,704

Long-term borrowings and liabilities 330 2,346,896,440,179 3,076,196,429,104

Other long-term liabilities 333 21 514,930,691,650 1,620,487,869,471 Long-term borrowings 334 23 1,831,823,606,336 1,455,708,545,840 Deferred tax liabilities 335 142,142,193 13,793

EQUITY (400 = 410) 400 9,500,327,254,417 8,085,135,114,809

Owners’ equity 410 24 9,500,327,254,417 8,085,135,114,809 Share capital 411 25 4,190,525,330,000 4,190,525,330,000 Capital surplus 412 24 2,207,350,817,068 2,207,350,817,068 Foreign exchange differences 416 - 4,421,231,105 Financial reserve 418 24, 27 459,080,197,478 290,114,305,696 Retained profits 420 2,643,370,909,871 1,392,723,430,940

MINORITY INTEREST 439 86,632,765,142 492,422,430,341 TOTAL RESOURCES (440 = 300 + 400 +439) 440 23,076,377,862,689 19,015,763,461,546

Prepared by: Approved by:

Hoang Thi Thanh Huong Ly Thi Ngan Tran Tuan Duong General Accountant Chief Accountant General Director

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HOA PHAT GROUP70

Hoa Phat Group Joint Stock CompanyConsolidated statement of income for the year ended 31 December 2013

Form B 02 – DN/HN


Code Note 2013 VND

2012 VND

Total revenue 01 28 19,200,234,178,082 17,122,073,926,267

Less revenue deductions 02 28 265,942,027,551 295,222,033,283

Net revenue (10 = 01 - 02) 10 18,934,292,150,531 16,826,851,892,984

Cost of sales 11 29 15,650,540,636,204 14,341,642,566,494

Gross profit (20 = 10 - 11) 20 3,283,751,514,327 2,485,209,326,490 Financial income 21 30 276,278,618,993 164,624,612,181 Financial expenses 22 31 528,408,903,958 585,024,105,173

In which: Interest expense 23 370,947,849,826 526,970,967,624Selling expenses 24 253,653,065,057 274,039,974,293 General and administration expenses 25 416,174,707,153 586,966,481,317

Net operating profit {30 = 20 + (21 - 22) - (24 + 25)} 30 2,361,793,457,152 1,203,803,377,888

Other income 31 32 199,104,247,497 210,272,300,024 Other expenses 32 33 166,237,311,403 195,329,039,096

Results of other activities (40 = 31 - 32) 40 32,866,936,094 14,943,260,928

Share of losses in associates 45 14 (256,198,814) (541,298,162)

Profit before tax (50 = 30 + 40 + 45) 50 2,394,404,194,432 1,218,205,340,654

Income tax expense – current 51 34 390,183,260,599 168,282,075,477

Income tax (benefits)/expenses – deferred 52 34 (6,214,468,936) 19,417,835,660

Net profit after tax(60 = 50 - 51 - 52) 60 2,010,435,402,769 1,030,505,429,517

Attributable to: Minority interest 61 56,247,864,906 36,481,107,081 Equity holders of the Company 62 1,954,187,537,863 994,024,322,436

Basic earnings per share 70 35 4,663 2,386



2013 ANNUAL REPORT


Hoa Phat Group Joint Stock CompanyConsolidated statement of cash flows for the year ended 31 December 2013 (Indirect method)

Form B 03 – DN/HN


Code Note 2013 VND

2012 VND

CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax 01 2,394,404,194,432 1,218,205,340,654 Adjustments for

Depreciation and amortisation 02 720,195,566,311 596,227,337,059 Goodwill amortisation 02 275,023,878,726 125,092,018,440 Allowances and provisions 03 (147,647,242,587) 90,834,354,093Unrealised foreign exchange losses 04 9,755,308,690 1,105,860,020 Profits from investing activities 05 (239,922,767,209) (127,834,058,603) Interest expense 06 370,947,849,826 526,970,967,624

Operating profit before changes in working capital 08 3,382,756,788,189 2,430,601,819,287

Change in receivables 09 184,894,312,063 (58,060,734,370) Change in inventories 10 (1,216,858,380,400) (444,727,394,130) Change in payables and other liabilities 11 1,674,080,391,405 1,256,558,631,126 Change in prepayments 12 43,029,826,617 46,907,773,104 Interest paid 13 (558,923,619,216) (620,947,691,630) Income tax paid 14 (200,847,280,440) (230,283,194,389) Other receipts from operating activities 15 21,180,037,819 3,021,354,308 Other payments for operating activities 16 (95,479,361,817) (113,692,912,579)

Net cash flows from operating activities 20 3,233,832,714,220 2,269,377,650,727

CASH FLOWS FROM INVESTING ACTIVITIES

Payments for additions to fixed assets and other long-term assets 21 (2,921,311,668,380) (1,828,105,150,975) Proceeds from disposals of fixed assets and other long-term assets 22 11,605,368,430 51,448,674,795 Payments for purchase of debt instruments of other entities 23 (163,135,157,802) (222,260,641,965) Proceeds from sales of debt instruments of other entities 24 - 1,600,000,000 Payments for investments in other entities 25 - (1,500,000,000) Collections on investments in other entities 26 116,266,905,518 356,306,160,000 Receipts of interest on loans granted andbank deposits 27 100,056,500,126 66,064,545,910 Acquisition of additional share capitals of subsidiaries from minority interest shareholders 29 (395,947,200,000) (83,221,860,000)

Net cash flows from investing activities 30 (3,252,465,252,108) (1,659,668,272,235)

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HOA PHAT GROUP72

Hoa Phat Group Joint Stock CompanyConsolidated statement of cash flows for the year ended 31 December 2013 (Indirect method - continued)

Form B 03 – DN/HN


Code Note 2013 VND

2012 VND

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from equity issued to minority shareholders 31 620,000,000 - Proceeds from reissuance of treasury shares 31 - 100,459,025,089Proceeds from short-term and long-term borrowings 33 18,941,877,013,166 18,070,024,211,394 Payments to settle loan principals 34 (17,672,451,806,682) (18,188,281,993,321) Payments of dividends 36 (420,496,176,570) (361,790,013,578)

Net cash flows from financing activities 40 849,549,029,914 (379,588,770,416)

Net cash flows during the year (50 = 20 + 30 + 40) 50 830,916,492,026 230,120,608,076

Cash and cash equivalents at the beginning of the year 60 1,294,493,700,487 1,064,384,090,542

Effect of exchange rate fluctuations on cash and cash equivalents 61 (87,801,816) (10,998,131)

Cash and cash equivalents at theend of the year (70 = 50 + 60 + 61) 70 6 2,125,322,390,697 1,294,493,700,487



Hoa Phat Group Joint Stock CompanyConsolidated statement of cash flows for the year ended 31 December 2013 (Indirect method - continued)

Form B 03 – DN/HN


Code Note 2013 VND

2012 VND

CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from equity issued to minority shareholders 31 620,000,000 - Proceeds from reissuance of treasury shares 31 - 100,459,025,089Proceeds from short-term and long-term borrowings 33 18,941,877,013,166 18,070,024,211,394 Payments to settle loan principals 34 (17,672,451,806,682) (18,188,281,993,321) Payments of dividends 36 (420,496,176,570) (361,790,013,578)

Net cash flows from financing activities 40 849,549,029,914 (379,588,770,416)

Net cash flows during the year (50 = 20 + 30 + 40) 50 830,916,492,026 230,120,608,076

Cash and cash equivalents at the beginning of the year 60 1,294,493,700,487 1,064,384,090,542

Effect of exchange rate fluctuations on cash and cash equivalents 61 (87,801,816) (10,998,131)

Cash and cash equivalents at theend of the year (70 = 50 + 60 + 61) 70 6 2,125,322,390,697 1,294,493,700,487



2013 ANNUAL REPORT


Hoa Phat Group Joint Stock CompanyNotes to the consolidated financial statements for the year ended 31 December 2013

Form B 09 – DN/HN

12

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

1. Reporting entity Hoa Phat Group Joint Stock Company (“the Company”) is incorporated as a joint stock company in Vietnam. The consolidated financial statements of the Company for the year ended 31 December 2013 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in associates. The principal activities of the Company and its subsidiaries are as follows:

Office leasing; Financial investments; Integrated investment and construction of infrastructures, industrial zones and urban zones; Manufacturing of furniture for offices, households and schools; Timber production and processing; Manufacturing of mechanical products (mainly construction machinery, office desks, chairs

and cabinets); Leasing machines, equipment and motor vehicles; Dealing in automobiles, motorbikes, equipment, parts for transport and mining sectors,

transport vehicles; Production and trading of construction and mining machineries; Dealing in electrical, electronic appliances, optical and medical equipment; Production, trading, assembly, installation, repair and maintenance of electrical, electronic,

electrical refrigeration and civil electrical appliances and air-conditioners; Production and trading of raw materials and plastic products; Advertisement; Civil and industrial construction; Exploitation of sand, stones and gravel; Production, trading and assembly of furniture products and construction equipment; Real estate trading (excluding land price consultancy); Domestic and foreign investment advisory (excluding law advisory); Production and trading of non-ferrous metal and non-ferrous metal scraps; Trading and export and import of steel and supplies for steel making and rolling; Production of rolled steel products and roofing sheets; Exploitation of metal ores; Trading metals, metal ores, iron and steel scraps; Making cast iron and steel, and casting cast iron, iron and steel; Production of plated and non-plated steel tubes and inox tubes; Rendering sports and gymnastics services (training, competition organisation, athlete transfer); Building and renting sports practice ground and competition ground; and Entrusted export-import activities.

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HOA PHAT GROUP74

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10

Hoa

Pha

t Ene

rgy

JSC

Pr

oduc

ing

and

who

lesa

ling

coke

coa

l, ex

ploi

ting

and

colle

ctin

g co

al;

prod

ucin

g re

fined

pet

role

um p

rodu

cts;

who

lesa

ling

met

als a

nd m

etal

ore

s;

and

tradi

ng v

ario

us k

inds

of c

oal.

99.8

9%

99.8

9%

11

Hoa

Pha

t Ste

el O

ne M

embe

r Co.

, Lt

dPr

oduc

ing

stee

l, iro

n, w

hole

salin

g m

etal

s and

met

al o

res.

100%

10

0%

12

Hoa

Pha

t Min

ing

JSC

Ex

ploi

ting

and

colle

ctin

g lig

nite

; exp

loiti

ng o

res o

f iro

n, a

lum

iniu

m, o

ther

ra

re o

res;

exp

loiti

ng st

one,

sand

, gra

vel,

clay

; pro

duci

ng c

oke

coal

, gyp

sum

, lim

e, n

onfe

rrou

s met

als a

nd ra

re m

etal

s; c

astin

g iro

n an

d no

nfer

rous

met

als.

99.8

0%

99.8

0%

2013 ANNUAL REPORT


Hoa

Pha

t Gro

up J

oint

Sto

ck C

ompa

nyN

otes

to th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts fo

r th

e ye

ar e

nded

31

Dec

embe

r 20

13 (c

ontin

ued)

Fo

rm B

09

– D

N/H

N 14

In

dire

ct o

wne

rshi

p an

d

votin

g ri

ghts

of t

he G

roup

No.

Tie

r 2

- sub

sidi

arie

s Pr

inci

pal a

ctiv

ities

31

/12/

2013

31

/12/

2012

Subs

idia

ries

of H

oa P

hat E

quip

men

t & A

cces

sori

es C

o. L

td

1 H

oa P

hat M

inin

g &

Con

stru

ctio

n M

achi

nery

Man

ufac

turin

g C

o., L

td

Prod

ucin

g an

d tra

ding

con

stru

ctio

n an

d m

inin

g m

achi

nes;

pro

duci

ng

engi

nes a

nd tu

rbin

es.

100%

99

.72%

2 H

oa P

hat M

echa

nica

l M

anuf

actu

ring

Co.

, Ltd

R

epai

ring

and

prod

ucin

g m

echa

nica

l pro

duct

s; le

asin

g m

achi

nes,

equi

pmen

ts a

nd v

ehic

les.

99.9

0%

99.6

2%

Subs

idia

ries

of H

oa P

hat S

teel

Pip

e C

o., L

td

3 H

oa P

hat C

old

Rol

led

Stee

l Co.

, Lt

dPr

oduc

ing

of c

old

rolle

d st

eel p

rodu

cts.

100%

99

.86%

4 H

oa P

hat B

inh

Duo

ng S

teel

Pip

e O

ne M

embe

r Co.

, Ltd

Pr

oduc

ing

and

tradi

ng v

ario

us k

inds

of s

teel

pip

es.

100%

99

.86%

Subs

idia

ries

of H

oa P

hat U

rban

Dev

elop

men

t & C

onst

ruct

ion

JSC

5

Pho

Noi

A In

dust

rial Z

one

Man

agem

ent a

nd O

pera

tion

Com

pany

Civ

il an

d in

dust

rial c

onst

ruct

ion,

free

hold

or l

ease

hold

real

est

ate

tradi

ng,

wor

ksho

p an

d of

fice

leas

ing,

inte

grat

ed in

vest

men

t and

con

stru

ctio

n of

in

fras

truct

ure,

cle

an w

ater

trad

ing,

was

te c

olle

ctio

n, e

xplo

itatio

n, tr

eatm

ent

and

supp

ly o

f wat

er a

nd o

pera

tion

of re

stau

rant

s.

100%

99

.67%

6 H

oa M

ac In

dust

rial Z

one

Man

agem

ent a

nd O

pera

tion

Co.

, Lt

d

Civ

il an

d in

dust

rial c

onst

ruct

ion,

free

hold

or l

ease

hold

real

est

ate

tradi

ng,

wor

ksho

p an

d of

fice

leas

ing,

inte

grat

ed in

vest

men

t and

con

stru

ctio

n of

in

fras

truct

ure,

cle

an w

ater

trad

ing,

was

te c

olle

ctio

n, e

xplo

itatio

n, tr

eatm

ent

and

supp

ly o

f wat

er.

100%

99

.67%

Subs

idia

ries

of G

olde

n G

ain

Viet

nam

JSC

7 H

anoi

Inve

stm

ent a

nd S

ervi

ces

JSC

Sp

orts

, ent

erta

inm

ent a

ctiv

ities

, inc

ludi

ng te

nnis

, bad

min

ton,

bill

iard

s, sw

imm

ing,

bod

y-bu

ildin

g an

d ga

mes

. 94

.96%

94

.96%

8 H

anoi

Tra

nspo

rtatio

n an

d Tr

adin

g Se

rvic

es JS

C

Goo

ds tr

ansp

ort b

y au

tom

obile

s, in

ter-

prov

inci

al p

asse

nger

tran

spor

t by

auto

mob

iles,

mac

hine

ry a

nd e

quip

men

t rep

air,

dom

estic

trav

el, p

etro

l and

oi

l tra

ding

age

ncy,

tran

spor

t age

ncy

serv

ices

and

aut

omob

iles k

eepi

ng

serv

ices

, off

ice,

war

ehou

se a

nd st

orag

e ya

rd se

rvic

es.

99.5

7%

99.5

7%

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP76

Hoa

Pha

t Gro

up J

oint

Sto

ck C

ompa

nyN

otes

to th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts fo

r th

e ye

ar e

nded

31

Dec

embe

r 20

13 (c

ontin

ued)

Fo

rm B

09

– D

N/H

N 15

In

dire

ct o

wne

rshi

p an

d

votin

g ri

ghts

of t

he G

roup

No.

Tie

r 2

- sub

sidia

ries

Pr

inci

pal a

ctiv

ities

31

/12/

2013

31

/12/

2012

Subs

idia

ry o

f Hoa

Pha

t Ste

el O

ne M

embe

r Co.

, Ltd

9

Hoa

Pha

t - B

inh

Din

h O

ne

Mem

ber L

imite

d Li

abili

ty

Com

pany

Prod

ucin

g st

eel,

iron,

who

lesa

ling

met

als a

nd m

etal

ore

s. 10

0%

100%

Subs

idia

ries o

f Hoa

Pha

t Min

ing

JSC

10

Hoa

Yen

Min

ing

JSC

Ex

ploi

ting

and

prod

uctio

n of

iron

, bau

xite

and

oth

er ra

re o

res;

trad

ing

met

al

and

met

al o

res a

nd tr

adin

g m

achi

nes.

99.7

7%

99.5

7%

11

Duc

Lon

g M

inin

g JS

C Ex

plor

ing

and

prod

uctio

n of

iron

, bau

xite

and

oth

er ra

re o

res;

trad

ing

met

al

and

met

al o

res.

99.9

8%

99.7

5%

12

Hoa

Pha

t Mitr

aco

Min

ing

JSC

Ex

plor

ing

and

prod

uctio

n of

iron

, bau

xite

and

oth

er ra

re o

res;

trad

ing

met

al

and

met

al o

res.

63.5

0%

63.3

7%

13

Duc

Tie

n C

o., L

td

Sear

chin

g an

d ex

ploi

ting

of c

oppe

r ore

, gol

d, si

lver

and

oth

er o

res.

- 99

.80%

O

wne

rshi

p an

dvo

ting

righ

ts o

f the

Gro

up

No.

Ass

ocia

tes

Prin

cipa

l act

iviti

es

31/1

2/20

13

31/1

2/20

12

1 H

oa P

hat –

SSG

Min

ing

JSC

Ex

ploi

ting

and

colle

ctin

g lig

nite

; exp

loiti

ng n

onfe

rrou

s ore

s; re

nder

ing

min

ing

supp

ort s

ervi

ces a

nd p

rodu

cing

cok

e co

al, l

ime,

gyp

sum

. 38

%

38%

2 Y

en P

hu In

vest

men

t and

Min

eral

JS

CM

inin

g an

d or

es o

f iro

n ex

ploi

ting;

pro

duci

ng c

oke

coal

; pro

duci

ng

iron,

stee

l, ex

ploi

ting

and

colle

ctin

g lig

nite

, pea

t and

bau

xite

. 50

%

50%

As a

t 31

Dec

embe

r 201

3, th

e G

roup

had

9,7

01 e

mpl

oyee

s (31

/12/

2012

: 8,0

84 e

mpl

oyee

s).

2013 ANNUAL REPORT


Hoa Phat Group Joint Stock CompanyNotes to the consolidated financial statements for the year ended 31 December 2013(continued)

Form B 09 – DN/HN

16

2. Basis of preparation

2.1 Statement of compliance

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

2.2 Basis of measurement

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

2.3 Annual accounting period

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

2.4 Accounting currency

The financial statements are prepared and presented in Viet Nam Dong (“VND”).

3. Summary of significant accounting policies The following significant accounting policies have been adopted by the Group in the preparation of these consolidated financial statements.

3.1 Basis of consolidation

(a) Business combinations

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

Under the purchase method, the assets and liabilities of the acquired entity are consolidated using their fair values. Cost of acquisition consists of the aggregate fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group. Goodwill represents the excess of the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquired entity. When the excess is negative, it is recognised immediately in profit or loss. Where fair value is not available, the Group uses net book value based on historical cost concept to account for the assets and liabilities of the acquired entity based on the Ministry of Finance official guidance letter to the Group.

Transaction costs that the Group incurred in connection with business combinations included any costs directly attributable to the combination, such as professional fees paid to accountants, legal advisers, valuers and other consultants to effect the combination. Transaction costs are capitalised into the cost of business combination. General administrative costs and other costs that cannot be directly attributed to the particular combination being accounted for are not included in the cost of the combination; they are recognized as an expense when incurred.

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP78

Hoa Phat Group Joint Stock CompanyNotes to the consolidated financial statements for the year ended 31 December 2013 (continued)

Form B 09 – DN/HN

17

(b) Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

(c) Minority interests

For changes in the Group’s ownership interest in a subsidiary that do not result in change in control, the difference between the cost of acquisition or proceeds on disposal of the interest and the proportionate carrying amount of net assets acquired or disposed at the date of exchange is recorded directly in equity.

(d) Transactions eliminated on consolidation

Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains and losses arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee.

(e) Associates

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

2013 ANNUAL REPORT



Form B 09 – DN/HN

18

3.2 Foreign currency

(a) Foreign currency transactions

Monetary assets and liabilities denominated in currencies other than VND are translated into VND at rates of exchange ruling at the balance sheet date. Transactions in currencies other than VND during the year have been translated into VND at rates of exchange ruling at the transaction dates.

All foreign exchange differences are recorded in the consolidated statement of income, except when they relate to the construction of tangible fixed assets or the translation of foreign currency monetary items during the Company’s subsidiaries’ pre-operating stages, in which case they are recorded in the Foreign exchange difference account in equity until the subsidiaries commence operations and the tangible fixed assets are put into use. Once the subsidiaries commence operations and the tangible fixed assets are put into use, the related foreign exchange gains are transferred to the Unearned revenue account and foreign exchange losses are transferred to the Long-term prepayment account. The gains and losses are then amortised on a straight line basis over five years.

Foreign exchange differences are accounted for in accordance with Vietnamese Accounting Standard No. 10 – The effects of changes in foreign exchange rates and Circular 179/2012/TT-BTC dated 24 October 2012 issued by the Ministry of Finance providing regulation on recognition, measurement and treatment of foreign exchange differences by enterprises.

(b) Foreign operations

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

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

3.3 Cash and cash equivalents

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

3.4 Investments

Investments are stated at cost. An allowance is made for reductions in investment values if market value of the investment falls below cost or if the investee has suffered a loss. The allowance is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the allowance was recognised. An allowance is reversed only to the extent that the investment’s carrying amount does not exceed the carrying amount that has been determined if no allowance had been recognised.

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP80


Form B 09 – DN/HN

19

3.5 Accounts receivable

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

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

3.6 Inventories

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

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

Allowance for inventories is established for the estimated losses arising due to the impairment of value (through diminution, damage or obsolescence) of inventories owned by the Group, based on appropriate evidences of impairment available at the balance sheet date. Increases and decreases to the allowances for inventories balance are recorded as cost of goods sold account in the consolidated statement of income.

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

Manufacturing, trading and production of goods

Cost in the case of finished goods and manufactured work in progress includes raw materials, direct labour and attributable production overheads.

The Group applies the perpetual method of accounting for inventories.

Real estate development for future sales

Cost is determined on a specific identification basis and includes land costs and other related development and infrastructure costs, and other directly attributable costs.

3.7 Tangible fixed assets

(a) Cost

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

2013 ANNUAL REPORT



Form B 09 – DN/HN

20

(b) Depreciation

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

buildings 5 – 50 years office equipment 3 – 12 years machinery and equipment 2 – 25 years motor vehicles 4 – 10 years others 3 – 10 years

3.8 Intangible fixed assets

(a) Land use rights

Land use rights comprise:

those granted by the State for which land use payments are collected;

those acquired in a legitimate transfer; and

rights to use leased land obtained before the effective date of Land Law (2003) for which payments have been made in advance for more than 5 years and supported by land use rights certificate issued by competent authority.

Land use rights are stated at cost less accumulated amortisation. The initial cost of land use rights comprise the value of the rights as stated in the purchase price and any directly attributable costs incurred in conjunction with securing the land use rights. For land use rights with definite useful lives, amortisation is computed on a straight-line basis over 15 to 46 years. No amortisation is provided for land use rights with indefinite useful lives.

(b) Software

Cost of acquiring new software, which is not an integral part of the related hardware, is capitalised and treated as an intangible asset. Software cost is amortised on a straight-line basis over 2 to 6 years.

3.9 Investment property

(a) Cost

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

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HOA PHAT GROUP82


Form B 09 – DN/HN

21

(b) Depreciation

Depreciation is computed on a straight-line basis over the estimated useful lives of investment property. The estimated useful lives are as follows:

buildings 3 – 49 years

3.10 Construction in progress

Construction in progress represents the costs of construction and machineries which have not been fully completed or installed. No depreciation is provided for construction in progress during the year of construction and installation.

3.11 Long-term prepayments

(a) Pre-operating expenses

Pre-operating expenses are recorded in the consolidated statement of income, except for establishment costs and expenditures on training, advertising and promotional activities incurred from the incorporation date to the commercial operation date. These expenses are recognised as long-term prepayments, initially stated at cost, and are amortised on a straight-line basis over three years starting from the date of commercial operation.

(b) Tools and supplies

Tools and instruments include assets held for use by the Group in the normal course of business whose costs of individual items are less than VND30 million and therefore not qualified for recognition as fixed assets under Circular 45/2013/TT-BTC dated 25 April 2013 of the Ministry of Finance which provides guidance on management, use and depreciation of fixed assets (“Circular 45”). Cost of tools and instruments are amortised on a straight-line basis over a period ranging from 2 to 3 years.

(c) Overhaul and major maintenance expenses

These comprise major overhaul and maintenance expenses incurred on a periodical basis during the use of assets. These expenses are initially stated at cost and are amortised to the consolidated statement of income on a straight line basis over two to three years.

(d) Foreign exchange differences

Realised and unrealised foreign exchange differences in the pre-operating period of some of the Company’s subsidiaries were recorded in the foreign exchange differences account in equity until these subsidiaries commence operations. Then, the foreign exchange losses in the pre-operating period will be transferred to the long-term prepayment account and amortised on a straight-line basis over five years.

2013 ANNUAL REPORT



Form B 09 – DN/HN

22

(e) Exploration and evaluation costs

Exploration and evaluation activity involves the search for mineral resources, the determination of technical feasibility and the assessment of commercial viability of an identified resource.

Exploration and evaluation costs are capitalised as long as the Group’s right of tenure to the area of interest is current and active and significant exploration activities in the area of interest are continuing and there are indicators that future economic benefits will flow to the Group. Exploration and evaluation costs that do not satisfy the above criteria are written off in the year in which they are incurred, except as follows:

At such time as exploration and evaluation procedures have sufficiently progressed to permit the determination of the existence of economically recoverable reserves:

Exploration and evaluation costs that are expected to be recouped by successful development and exploitation of the area are capitalised until commencement of commercial operations and thereafter amortised in the statement of income over the expected commercial duration of the project.

Exploration and evaluation costs in respect of which exploration and evaluation procedures determine that economically recoverable reserves do not exist are written off.

(f) Prepaid land costs

Prepaid land costs comprise prepaid land lease rentals and other costs incurred in conjunction with securing the use of the leased land. These costs are recognised in the consolidated statement of income on a straight-line basis over the term of the leases.

(g) Site clearance costs

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

(h) Bond issuance fees

Bond issuance fees reflect the costs incurred related to the issuance of bonds. These expenses were recognised in the consolidated statement of income on a straight-line basis over three years.

(i) Mines road construction and upgrading costs

These comprise the costs for construction and upgrading mine roads which are initially stated at cost and amortised on a straight-line basis over 8 years.

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HOA PHAT GROUP84


Form B 09 – DN/HN

23

3.12 Goodwill

Goodwill arises on the acquisition of subsidiaries and associates. Goodwill is measured at cost less accumulated amortisation. Cost of goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquirees. If the fair value of the net assets which the Group acquired from subsidiaries and associates exceeds the purchase price, the surplus will be recorded in the consolidated statement of income during the year. Goodwill is amortised on a straight-line basis over 4 - 10 years. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment.

During the year, the Group revised the amortisation period of goodwill arisen from the acquisition of Golden Gain Vietnam JSC in previous years from 10 years to 4 years to more accurately reflect the period the Group realises the economic benefits from this acquisition. The effect on the amortisation charge for the year was to increase the amortisation expense by VND148,338 million.

3.13 Trade and other payables

Trade and other payables are stated at their cost.

3.14 Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

3.15 Classification of financial instruments

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

(a) Financial assets

Financial assets at fair value through profit or loss

A financial asset at fair value through profit or loss is a financial asset that meets either of the following conditions:

It is considered by management as held for trading. A financial asset is considered as held for trading if:

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

effective hedging instrument).

Upon initial recognition, it is designated by the Group as at fair value through profit or loss.

2013 ANNUAL REPORT



Form B 09 – DN/HN

24

Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and a fixed maturity that the Group has the positive intention and ability to hold to maturity, other than:

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

Loans and receivables

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

that the Group intends to sell immediately or in the near term, which are classified as held for trading, and those that the Group on initial recognition designates as at fair value through profit or loss;

that the Group upon initial recognition designates as available-for-sale; or for which the Group may not recover substantially all of its initial investment, other than

because of credit deterioration, which are classified as available-for-sale.

Available-for-sale financial assets

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

financial assets at fair value through profit or loss; held-to-maturity investments; or loans and receivables.

(b) Financial liabilities

Financial liabilities at fair value through profit or loss

A financial liability at fair value through profit or loss is a financial liability that meets either of the following conditions:

It is considered by management as held for trading. A financial liability is considered as held for trading if:

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

effective hedging instrument).

Upon initial recognition, it is designated by the Group as at fair value through profit or loss.

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP86


Form B 09 – DN/HN

25

Financial liabilities carried at amortised cost

Financial liabilities which are not classified as financial liabilities at fair value through profit or loss are classified as financial liabilities carried at amortised cost.

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

3.16 Income tax

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

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amounts of assets and liabilities using the tax rates enacted or substantively enacted at the balance sheet date.

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

3.17 Revenue

(a) Goods sold

Revenue from the sale of goods is recognised in the consolidated statement of income when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due or the possible return of goods.

(b) Services rendered

Revenue from services rendered is recognised in the consolidated statement of income in proportion to the stage of completion of the transaction at the balance sheet date. The stage of completion is assessed by reference to surveys of work performed. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due.

2013 ANNUAL REPORT



Form B 09 – DN/HN

26

(c) Construction contracts

Revenue from construction contracts is recognised in the consolidated statement of income in proportion to the stage of completion of the contract when the outcome of a construction contract can be estimated reliably. The stage of completion is assessed by reference to surveys of work performed. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due.

(d) Rental income

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

(e) Sales of apartments

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

3.18 Operating lease payments

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

3.19 Borrowing costs

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

3.20 Basic earnings per share

The Group presents basic earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to the ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year.

3.21 Related parties

Related parties include the shareholders of the Company, the Group’s associates and other parties as defined in Vietnamese Accounting Standards and the Vietnamese Accounting System.

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP88

Hoa Phat Group Joint Stock CompanyNotes to the consolidated financial statements for the year ended 31 December 2013 (continued) Form B 09 – DN/HN

27

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

Production and trading of various kinds of steel: refining steel; casting steel, iron; trading and import-export of steel, steel-producing machinery and equipment; production of industrial steel including steel sheet, hot rolled steel, cold rolled steel, steel pipe, steel scrap; production and trading of steel pipes; production of steel string machinery;

Trading of construction machinery; production and trading of construction equipment and exploitation of medium and small sized metals;

Manufacturing of furniture and refrigeration products: producing and trading various kinds of interior furniture and refrigerant products;

Construction and development of real estates: civil construction, industrial construction, trading of real estate under its ownership or lease from others; leasing houses, offices and investing in construction of infrastructure; and

Energy and exploring and exploiting minerals: Exploring, exploiting, refining, processing, import-export of minerals, mainly iron ores; production and wholesales of coke coal, exploiting and collecting fossil coal; producing refined oil products; production, transmission, distribution of electricity; wholesales of metals and metal ores and trading of various kinds of coals.


Form B 09 – DN/HN

27

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

Production and trading of various kinds of steel: refining steel; casting steel, iron; trading and import-export of steel, steel-producing machinery and equipment; production of industrial steel including steel sheet, hot rolled steel, cold rolled steel, steel pipe, steel scrap; production and trading of steel pipes; production of steel string machinery;

Trading of construction machinery; production and trading of construction equipment and exploitation of medium and small sized metals;

Manufacturing of furniture and refrigeration products: producing and trading various kinds of interior furniture and refrigerant products;

Construction and development of real estates: civil construction, industrial construction, trading of real estate under its ownership or lease from others; leasing houses, offices and investing in construction of infrastructure; and

Energy and exploring and exploiting minerals: Exploring, exploiting, refining, processing, import-export of minerals, mainly iron ores; production and wholesales of coke coal, exploiting and collecting fossil coal; producing refined oil products; production, transmission, distribution of electricity; wholesales of metals and metal ores and trading of various kinds of coals.

2013 ANNUAL REPORT


Hoa

Pha

t Gro

up J

oint

Sto

ck C

ompa

nyN

otes

to th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts fo

r th

e ye

ar e

nded

31

Dec

embe

r 20

13 (c

ontin

ued)

Fo

rm B

09

– D

N/H

N

28

Prod

uctio

n an

d tr

adin

g of

stee

ls

Tra

ding

of

cons

truc

tion

mac

hine

ry

Furn

iture

&

refr

iger

ator

s R

eal e

stat

es

Ene

rgy

and

min

ing

expl

orat

ion

Elim

inat

ion

Con

solid

ated

tota

l

VN

D

VN

D

VN

D

VN

D

VN

D

VN

D

VN

D

For

the

year

end

ed 3

1 D

ecem

ber

2013

Net

ext

erna

l rev

enue

14

,644

,765

,632

,684

26

1,22

3,15

3,26

7 1,

900,

062,

537,

069

1,42

5,03

8,53

2,46

0 70

3,20

2,29

5,05

1 -

18,9

34,2

92,1

50,5

31N

et in

ter-

segm

ent r

even

ue

6,32

8,04

8,79

5,29

2 97

,386

,033

,526

66

,960

,224

,790

8,

317,

676,

895

2,69

2,42

5,50

6,26

3 (9

,193

,138

,236

,766

) -

20

,972

,814

,427

,976

35

8,60

9,18

6,79

3 1,

967,

022,

761,

859

1,43

3,35

6,20

9,35

5 3,

395,

627,

801,

314

(9,1

93,1

38,2

36,7

66)

18,9

34,2

92,1

50,5

31

Segm

ent n

et o

pera

ting

prof

its

2,65

5,98

8,75

3,81

2 47

,266

,481

,354

31

4,53

2,59

0,35

2 30

1,86

6,65

2,85

1 63

2,24

3,15

4,26

4 (1

,590

,104

,175

,481

) 2,

361,

793,

457,

152

Oth

er in

com

e 17

4,56

0,08

0,68

1 2,

852,

508,

519

5,24

7,77

5,75

5 7,

458,

954,

172

7,59

2,15

8,26

6 1,

392,

770,

104

199,

104,

247,

497

Oth

er e

xpen

ses

(153

,029

,986

,572

) (3

74,3

19,4

96)

(1,7

52,8

90,3

51)

(4,2

23,2

62,8

06)

(6,8

56,8

52,1

78)

- (1

66,2

37,3

11,4

03)

Shar

e of

loss

in a

ssoc

iate

s -

- -

- -

(256

,198

,814

) (2

56,1

98,8

14)

Inco

me

tax

expe

nses

– c

urre

nt

(163

,662

,188

,384

) (9

,508

,411

,922

) (6

9,79

6,08

5,78

8)

(75,

017,

822,

116)

(7

2,19

8,75

2,38

9)

- (3

90,1

83,2

60,5

99)

Inco

me

tax

bene

fits/

(exp

ense

s) –

de

ferr

ed

2,91

7,61

9,79

4 (2

07,7

99,3

06)

402,

302,

636

1,55

2,67

7,65

2 (2

81,2

90,9

48)

1,83

0,95

9,10

8 6,

214,

468,

936

Net

pro

fit a

fter t

ax

2,51

6,77

4,27

9,33

1 40

,028

,459

,149

24

8,63

3,69

2,60

4 23

1,63

7,19

9,75

3 56

0,49

8,41

7,01

5 (1

,587

,136

,645

,083

) 2,

010,

435,

402,

769

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP90

Hoa

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up J

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Sto

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to th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts fo

r th

e ye

ar e

nded

31

Dec

embe

r 20

13 (c

ontin

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Fo

rm B

09

– D

N/H

N 29

Prod

uctio

n an

d tr

adin

g of

stee

ls

Tra

ding

of

cons

truc

tion

mac

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ry

Furn

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&

refr

iger

ator

s R

eal e

stat

es

Ene

rgy

and

min

ing

expl

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ion

Elim

inat

ion

Con

solid

ated

Tot

al

VN

D

VN

D

VN

D

VN

D

VN

D

VN

D

VN

D

As a

t 31

Dec

embe

r 20

13

Se

gmen

t ass

ets

21,8

61,3

36,8

72,0

15

267,

428,

224,

910

1,38

7,68

1,60

7,24

8 3,

616,

561,

415,

557

4,52

7,13

7,55

6,49

9 (8

,589

,320

,983

,981

) 23

,070

,824

,692

,248

In

vest

men

ts in

ass

ocia

tes

5,55

3,17

0,44

1 -

- -

- -

5,55

3,17

0,44

1

Tota

l ass

ets

21,8

66,8

90,0

42,4

56

267,

428,

224,

910

1,38

7,68

1,60

7,24

8 3,

616,

561,

415,

557

4,52

7,13

7,55

6,49

9 (8

,589

,320

,983

,981

) 23

,076

,377

,862

,689

Segm

ent l

iabi

litie

s 9,

026,

844,

532,

326

52,4

79,3

12,5

94

700,

837,

451,

721

2,66

7,01

6,74

0,03

2 2,

159,

942,

758,

354

(1,1

17,7

02,9

51,8

97)

13,4

89,4

17,8

43,1

30

Tota

l lia

bilit

ies

9,02

6,84

4,53

2,32

6 52

,479

,312

,594

70

0,83

7,45

1,72

1 2,

667,

016,

740,

032

2,15

9,94

2,75

8,35

4 (1

,117

,702

,951

,897

) 13

,489

,417

,843

,130

Cap

ital e

xpen

ditu

re

2,45

9,09

6,27

8,41

2 2,

438,

661,

210

68,0

98,1

75,0

41

3,94

2,22

7,43

3 54

9,87

9,21

8,11

7 (9

,631

,363

,196

) 3,

073,

823,

197,

017

Dep

reci

atio

n of

tang

ible

fixe

d as

sets

, fin

ance

leas

es a

sset

s an

d in

vest

men

t pro

perti

es

(410

,080

,404

,315

)(1

4,33

8,50

8,60

1)

(64,

970,

494,

673)

(1

0,79

7,69

3,67

7)

(220

,289

,582

,640

) 5,

350,

691,

729

(715

,125

,992

,177

)

Am

ortis

atio

n of

inta

ngib

le

fixed

ass

ets

(2,1

18,6

49,1

41)

(902

,333

,448

) (2

,126

,275

,028

) -

(231

,126

,873

) 30

8,81

0,35

6 (5

,069

,574

,134

)

2013 ANNUAL REPORT


Hoa

Pha

t Gro

up J

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Sto

ck C

ompa

nyN

otes

to th

e co

nsol

idat

ed fi

nanc

ial s

tate

men

ts fo

r th

e ye

ar e

nded

31

Dec

embe

r 20

13 (c

ontin

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Fo

rm B

09

– D

N/H

N 30

Prod

uctio

n an

d tr

adin

g of

stee

ls

Tra

ding

of

cons

truc

tion

mac

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ry

Furn

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&

refr

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ator

s R

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stat

es

Ene

rgy

and

min

ing

expl

orat

ion

Elim

inat

ion

Con

solid

ated

tota

l

VN

D

VN

D

VN

D

VN

D

VN

D

VN

D

VN

D

For

the

year

end

ed 3

1 D

ecem

ber

2012

Net

ext

erna

l rev

enue

13

,209

,200

,217

,416

240,

731,

985,

407

1,73

6,49

5,94

3,51

5 44

7,42

5,12

3,38

51,

192,

998,

623,

261

-16

,826

,851

,892

,984

Net

inte

r-se

gmen

t rev

enue

6,

147,

123,

638,

135

50,9

80,7

60,1

3711

4,55

5,22

9,68

9 7,

067,

553,

532

2,07

7,51

1,26

7,92

8(8

,397

,238

,449

,421

)-

19,3

56,3

23,8

55,5

5129

1,71

2,74

5,54

41,

851,

051,

173,

204

454,

492,

676,

917

3,27

0,50

9,89

1,18

9(8

,397

,238

,449

,421

)16

,826

,851

,892

,984

Segm

ent n

et o

pera

ting

prof

its

1,28

8,92

9,55

7,60

724

,879

,678

,480

216,

664,

888,

253

146,

082,

675,

511

188,

115,

471,

516

(660

,868

,893

,479

)1,

203,

803,

377,

888

Oth

er in

com

e 13

8,89

4,72

8,57

128

,569

,705

,141

45,3

63,3

28,3

72

7,05

0,44

3,27

614

,376

,897

,799

(23,

982,

803,

135)

210,

272,

300,

024

Oth

er e

xpen

ses

(135

,337

,510

,217

)(1

4,56

3,93

2,66

0)(2

9,90

3,01

4,38

8)

(4,3

50,0

75,3

01)

(13,

616,

480,

002)

2,44

1,97

3,47

2(1

95,3

29,0

39,0

96)

Shar

e of

loss

in a

ssoc

iate

s -

--

--

(541

,298

,162

)(5

41,2

98,1

62)

Inco

me

tax

expe

nses

– c

urre

nt

(65,

498,

001,

679)

(5,2

15,0

24,8

21)

(49,

777,

174,

206)

(3

1,42

3,66

0,39

4)(1

6,36

8,21

4,37

7)-

(168

,282

,075

,477

)In

com

e ta

x be

nefit

s/(e

xpen

ses)

–

defe

rred

(1

7,77

9,57

8,68

1)(1

,782

,210

,577

)(1

,984

,445

,803

) (5

74,9

88,5

32)

3,54

2,22

3,93

8(8

38,8

36,0

05)

(19,

417,

835,

660)

Net

pro

fit a

fter t

ax

1,20

9,20

9,19

5,60

131

,888

,215

,563

180,

363,

582,

228

116,

784,

394,

560

176,

049,

898,

874

(683

,789

,857

,309

)1,

030,

505,

429,

517

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP92

Hoa

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t Gro

up J

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to th

e co

nsol

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nanc

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tate

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ts fo

r th

e ye

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nded

31

Dec

embe

r 20

13 (c

ontin

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Fo

rm B

09

– D

N/H

N 31

Prod

uctio

n an

d tr

adin

g of

stee

ls

Tra

ding

of

cons

truc

tion

mac

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Furn

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&

refr

iger

ator

s R

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stat

es

Ene

rgy

and

min

ing

expl

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ion

Elim

inat

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Con

solid

ated

tota

l

VN

D

VN

D

VN

D

VN

D

VN

D

VN

D

VN

D

As a

t 31

Dec

embe

r 20

12

Segm

ent a

sset

s 17

,563

,949

,492

,469

328,

480,

484,

003

1,17

6,46

8,55

5,09

5 3,

380,

847,

120,

331

3,89

2,55

0,23

9,55

0(7

,332

,341

,799

,156

)19

,009

,954

,092

,292

Inve

stm

ents

in a

ssoc

iate

s 5,

809,

369,

254

--

--

-5,

809,

369,

254

Tota

l ass

ets

17,5

69,7

58,8

61,7

2332

8,48

0,48

4,00

31,

176,

468,

555,

095

3,38

0,84

7,12

0,33

13,

892,

550,

239,

550

(7,3

32,3

41,7

99,1

56)

19,0

15,7

63,4

61,5

46

Segm

ent l

iabi

litie

s 6,

679,

932,

965,

016

118,

385,

543,

645

644,

768,

856,

790

2,49

1,84

1,34

9,68

61,

938,

074,

925,

012

(1,4

34,7

97,7

23,7

53)

10,4

38,2

05,9

16,3

96

Tota

l lia

bilit

ies

6,67

9,93

2,96

5,01

611

8,38

5,54

3,64

564

4,76

8,85

6,79

0 2,

491,

841,

349,

686

1,93

8,07

4,92

5,01

2(1

,434

,797

,723

,753

)10

,438

,205

,916

,396

Cap

ital e

xpen

ditu

re

1,50

5,51

3,67

1,46

45,

326,

545,

521

76,7

13,7

18,6

48

70,8

11,8

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4,87

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,135

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)1,

828,

105,

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975

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reci

atio

n of

tang

ible

fixe

d as

sets

, fin

ance

leas

es a

sset

s and

in

vest

men

t pro

perti

es

(356

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)(1

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ortis

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le

fixed

ass

ets

(1,9

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(942

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)(1

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)-

(224

,978

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)29

9,65

1,18

1(4

,704

,183

,277

)

2013 ANNUAL REPORT



Form B 09 – DN/HN

32

5. Business combination On 30 September 2013, the Group received the transfer of additional 11.99% of share capital and corresponding voting rights of Hoa Phat Steel JSC, a subsidiary of the Group. Accordingly, the Group’s share interest and voting rights in this subsidiary increased from 88% (*) to 99.99%.

(*) Prior to the acquisition, the Group increased its shareholdings in this subsidiary from 85% to 88% through share capital contribution during the year.

The acquisition had the following effects on the Group’s assets and liabilities on acquisition date:

Recognised value on acquisition of the additional

share capital of Hoa Phat Steel JSC

VND

Current assets 2,840,192,759,420 Fixed assets (net book value) 4,853,027,327,662 Other long-term assets 81,605,195,281 Current liabilities (2,741,144,540,852) Long-term borrowings (1,429,053,523,285)

Net identifiable assets and liabilities 3,604,627,218,226

Additionally acquired share in carrying value of net assets of the subsidiary on the acquisition date 432,497,592,151

Goodwill from acquisition (36,550,392,151)

Cost of acquisition 395,947,200,000

Based on the official guidance letter from the Ministry of Finance to the Group, when the Group was not able to determine the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree, the Group had used the net carrying amounts of the assets and liabilities of the acquiree to determine the goodwill arising from acquisition.

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP94


Form B 09 – DN/HN

33

6. Cash and cash equivalents 31/12/2013

VND 31/12/2012

VND

Cash on hand 4,268,531,258 7,290,746,319 Cash in banks 278,483,558,353 160,931,606,040 Cash in transit 11,026,058 3,045,651,687 Cash equivalents 1,842,559,275,028 1,123,225,696,441

2,125,322,390,697 1,294,493,700,487

7. Accounts receivable short-term and long-term Other short-term receivable comprises:

31/12/2013 VND

31/12/2012 VND

Advance for land clearance 8,433,878,502 8,201,388,502 Interest receivables 11,299,623,837 6,780,609,597 Materials issued for outside processing 1,110,597,665 920,717,401 Other receivables (*) 13,934,886,765 276,826,305,571

34,778,986,769 292,729,021,071

(*) Included in the other short-term receivables as at 31 December 2012 was VND264,000 million paid for the purchase of shares in a subsidiary of the Group from a shareholder of this subsidiary. In 2013, this receivable was fully recovered.

Other long-term receivables comprised:

31/12/2013 VND

31/12/2012 VND

Entrusted investment received (**) 448,979,590,000 448,979,590,000Other receivables 779,648,679 -

449,759,238,679 448,979,590,000

(**) The entrusted investment represents the amount the Group invested in Vinaconex-Viettel Urban Development JSC based on the entrustment agreement with Hoa Phat A Chau Real Estate Joint Stock Company. All responsibilities, risks and losses as well as benefits of the investment belong to Hoa Phat - A Chau Real Estate Joint Stock Company. This amount is corresponding to the amount of entrusted investment being recorded in other long-term liabilities (Note 21).

2013 ANNUAL REPORT



Form B 09 – DN/HN

34

8. Inventories 31/12/2013

VND 31/12/2012

VND

Goods in transit 886,720,639,117 721,681,193,928 Raw materials 2,383,614,274,577 1,440,630,638,196 Tools and supplies 250,397,310,728 194,695,141,551 Work in progress 2,724,837,093,296 2,837,866,560,636 Finished goods 1,760,046,969,711 1,596,687,095,873 Merchandise inventories 55,818,315,348 53,548,434,481 Goods on consignment 3,420,286,674 2,887,444,386

8,064,854,889,451 6,847,996,509,051

Allowance for inventories (35,279,600,260) (25,919,270,311)

8,029,575,289,191 6,822,077,238,740

At 31 December 2013 inventories with a carrying value of VND3,151,854 million (31/12/2012: VND1,726,232 million) were pledged with banks as security for loans granted to the Group.

Included in inventories at 31 December 2013 was VND137,251 million (31/12/2012: VND90,085 million) of finished goods carried at net realisable value.

9. Taxes and other receivables from State Treasury 31/12/2013

VND 31/12/2012

VND Corporate income tax overpaid 14,086,226,322 14,567,433,831 Corporate income tax prepaid to the State Treasury for the advances from the customers buying apartments 19,975,680,534 17,348,307,138 Other receivables from State Treasury 82,722,934 497,699,445

34,144,629,790 32,413,440,414

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP96

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of 3

1 D

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(31

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2012

: V

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still

in a

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e.

2013 ANNUAL REPORT



Form B 09 – DN/HN

36

At 31 December 2013, tangible fixed assets with a carrying value of VND6,967,473 million (31/12/2012: VND3,068,910 million) were pledged with banks as security for loans granted to the Group.

(*) The reclassification represents net book value of existing fixed assets’ cost which do not meet one of the criteria for recognition as fixed assets as regulated in Article 3 of Circular 45, i.e. costing VND30 million or more. These assets are reclassified to Long-term prepayments and Short-term prepayments.

11. Intangible fixed assets Land use rights Software Others Total

VND VND VND VND

Cost

Opening balance 184,285,115,653 2,644,303,901 1,367,576,332 188,296,995,886 Additions 26,000,000,000 662,977,540 - 26,662,977,540 Transfer from construction in progress 1,267,660,800 - - 1,267,660,800 Disposals and written off - (16,055,000) - (16,055,000)Reclassifications (*) - (294,479,586) - (294,479,586)

Closing balance 211,552,776,453 2,996,746,855 1,367,576,332 215,917,099,640

Accumulated amortisation

Opening balance 19,654,677,272 1,549,200,334 875,783,630 22,079,661,236 Charge for the year 4,250,963,046 617,747,692 200,863,396 5,069,574,134 Disposals and written off - (16,055,000) - (16,055,000)Reclassifications (*) - (279,695,833) - (279,695,833)

Closing balance 23,905,640,318 1,871,197,193 1,076,647,026 26,853,484,537

Net book value

Opening balance 164,630,438,381 1,095,103,567 491,792,702 166,217,334,650 Closing balance 187,647,136,135 1,125,549,662 290,929,306 189,063,615,103

At 31 December 2013 intangible fixed assets with a carrying value of VND96,265 million (31/12/2012: VND68,955 million) were pledged with banks as security for loans granted to the Group.

(*) The reclassification represents net book values of existing fixed assets’ cost which do not meet one of the criteria for recognition as fixed assets as regulated in Article 3 of Circular 45, i.e. costing VND30 million or more. These assets are reclassified to Long-term prepayments and Short-term prepayments.

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP98


Form B 09 – DN/HN

37

12. Construction in progress 2013

VND 2012 VND

Opening balance 2,545,104,717,735 1,354,316,650,072 Additions during the year 2,948,310,857,967 1,524,586,904,146 Disposal of a tier 1 – subsidiary - (675,421,490)Disposal of a tier 2 – subsidiary (104,523,432,005) - Transfer to tangible fixed assets (5,207,190,776,690) (219,180,090,759)Transfer to intangible fixed assets (1,267,660,800) (22,486,759,346)Transfer to investment property - (58,960,334,604)Transfer to long-term prepayments (30,392,219,720) (8,851,100,428) Transfer to short-term prepayments (8,824,912,067) (334,536,103) Transfer to inventories (5,282,408,650) - Disposals - (23,732,892,826) Others (2,363,596,351) 422,299,073

Closing balance 133,570,569,419 2,545,104,717,735

Major constructions in progress were as follows:

31/12/2013 VND

31/12/2012 VND

Steel billet factory expansion project 44,999,800,849 - Mould factory and swivel chair plant expansion project

44,753,315,330 -

Electricity factory – Phase II - 404,131,469,719 Coke factory – Phase II - 690,186,392,879 Hoa Phat steel and iron complex – Phase II - 1,061,656,962,228 Duc Tien Mine - 92,222,081,327 Coal baking and grinding system - 71,084,748,112 Binh Vang Factory - 20,431,308,120 Other projects 43,817,453,240 205,391,755,350

133,570,569,419 2,545,104,717,735

During the year, borrowing costs capitalised into construction in progress amounting to VND152,512 million (2012: VND54,390 million).

2013 ANNUAL REPORT



Form B 09 – DN/HN

38

13. Investment property Buildings

VND

Cost

Opening balance and closing balance 88,066,912,353

Accumulated depreciation

Opening balance 21,547,846,268 Charge for the year 4,516,771,321

Closing balance 26,064,617,589

Net book value

Opening balance 66,519,066,085 Closing balance 62,002,294,764

The Group’s investment property represents the workshops and factories for rent in Pho Noi A Industrial Park, Giai Pham Commune, Yen My District, Hung Yen Province, Vietnam and certain floors for rent of the building at 257 Giai Phong Street, Hai Ba Trung District, Hanoi, Vietnam.

At the reporting date, the fair value of the Group’s investment property has not been determined as there is no active market for such property.

14. Financial investments

14.1. Short-term investments

31/12/2013 31/12/2012VND VND

Term deposits 387,793,671,402 219,951,513,600

14.2. Long term investments

31/12/2013 31/12/2012 VND VND

Investment in associates (*) 5,553,170,441 5,809,369,255 Other long-term investments (**) 15,702,128,365 20,409,128,365

21,255,298,806 26,218,497,620

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP100


Form B 09 – DN/HN

39

(*) Details of long-term investments in associates are as follows:

31/12/2013 31/12/2012 VND VND

Yen Phu Investment and Mineral JSC 1,470,784,883 1,500,000,000 Hoa Phat - SSG Mining JSC 4,082,385,558 4,309,369,255

5,553,170,441 5,809,369,255

Details of movements of long-term investments in associates as follows:

31/12/2013 31/12/2012 VND VND

Opening balance 5,809,369,255 183,056,336,459 Additions - 1,500,000,000 Share of losses in associates (256,198,814) (541,298,162) Disposal of an associate - (177,522,561,718) Other movements - (683,107,324)

5,553,170,441 5,809,369,255

(**) Details of other long-term investments are as follows:

31/12/2013 31/12/2012 VND VND

Viet Ha Brewery JSC (***) 15,000,000,000 15,000,000,000 Bac Ha Noi Urban Development JSC (***) 700,000,000 700,000,000 Hai Duong Electricity One Member Co., Ltd (****) - 2,400,000,000 Others 2,128,365 2,309,128,365

15,702,128,365 20,409,128,365

(***) These were long-term equity investments with the percentage of equity owned less than 20%.

(****) This was an unsecured loan which bore interest at rate of 1% per annum.

2013 ANNUAL REPORT


Hoa

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s re

gula

ted

in A

rticl

e 3

of C

ircul

ar 4

5. T

hese

ass

ets

wer

e re

clas

sifie

d fr

om ta

ngib

le a

nd in

tang

ible

fix

ed a

sset

s du

ring

the

year

(Not

e 10

and

Not

e 11

). T

he re

mai

ning

net

boo

k va

lues

of t

hese

ass

ets

are

amor

tised

on

a st

raig

ht li

ne b

asis

ove

r the

ir re

mai

ning

est

imat

ed u

sefu

l liv

es, b

ut

not e

xcee

ding

thre

e ye

ars.

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP102


Form B 09 – DN/HN

41

16. Recognised deferred tax assets Deferred tax assets were recognised in respect of the following items:

31/12/2013 31/12/2012 VND VND

Accrued expenses 11,110,638,686 9,110,679,876 Unrealised profits arising on the intra-group sales of inventories and fixed assets 43,114,983,133 37,933,449,536 Unrealised foreign exchange losses 119,184,039 944,079,110

54,344,805,858 47,988,208,522

2013 ANNUAL REPORT


Hoa

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up J

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to th

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13 (c

ontin

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09

– D

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N 42

17.

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n T

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iner

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tnam

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oa P

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ing

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oi

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stm

ent

and

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ice

JSC

(*)

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oi

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nspo

rtat

ion

and

trad

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ices

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) V

iet P

acki

ng

Co.

, Ltd

. (**

)

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Lon

g M

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(***

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, Ltd

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al

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35

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(*)

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e ar

e su

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s of G

olde

n G

ain

Vie

tnam

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. As a

t 31

Dec

embe

r 201

2, th

ey w

ere

subs

idia

ries o

f Hoa

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t Urb

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evel

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nd C

onst

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. (*

*)

This

is a

subs

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ry o

f Hoa

Pha

t Equ

ipm

ent &

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td.

(***

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ese

are

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f Hoa

Pha

t Min

ing

JSC

.

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP104


Form B 09 – DN/HN

43

18. Short-term borrowings 31/12/2013

VND 31/12/2012

VND Short-term borrowings 5,523,878,392,658 4,421,192,510,273 Current portion of long-term borrowings (Note 23) 219,681,425,090 429,056,378,363

5,743,559,817,748 4,850,248,888,636

At 31 December 2013, short-term borrowings include borrowings in VND and USD with carrying amounts of VND4,812,292 million and VND711,586 million (31/12/2012: VND2,952,060 million and VND1,469,132 million), respectively.

At 31 December 2013, the short-term borrowings in VND and USD with the carrying amounts of VND4,486,590 million and VND399,663 million (31/12/2012: VND1,651,050 million and VND961,392 million), respectively, are secured by certain inventories, trade receivables and fixed assets of the Group and a number of Hoa Phat Group Joint Stock Company (“HPG”) shares owned by a number of the members of the Board of Management of the Company. The remaining short-term borrowings were unsecured.

The borrowings denominated in VND and USD bore interest at rates ranging from 4% to 9.5% (2012: 4% to 17%) per annum and 1.6% to 6% (2012: 3% to 7%) per annum, respectively during the year.

19. Taxes payable to State Treasury 31/12/2013

VND 31/12/2012

VND Value added tax 31,168,739,243 63,038,488,570 Special consumption tax 2,150,007,216 1,944,505,846 Import-export tax 41,473,189 3,683,487,535 Corporate income tax 315,239,777,566 124,017,842,930 Corporate income tax temporarily calculated on the progress payments from customers 3,769,734,413 2,897,134,787 Personal income tax 821,584,289 911,925,456 Natural resource taxes 8,667,249,873 5,347,434,394 Land and housing taxes 11,313,731,067 4,070,550,435 Other taxes 14,680,799,603 4,021,367,507

387,853,096,459 209,932,737,460

2013 ANNUAL REPORT



Form B 09 – DN/HN

44

20. Accrued expenses 31/12/2013

VND 31/12/2012

VND Payables to contractors 240,573,720,111 200,946,259,441 Interest expense 24,902,187,906 49,133,268,178 Hoa Mac Industrial Zone construction expense 18,252,745,742 12,015,766,307 Pho Noi A Industrial Zone construction expense 22,383,303,206 22,383,303,206 Electricity expense 9,180,712,054 7,028,807,646 Service fees 1,363,626,166 181,870,000 Promotion expense 17,090,615,414 23,554,892,096 Guarantee expenses 1,903,451,185 4,112,803,561 Salaries and bonuses 2,117,875,473 2,362,252,166 Transportation cost 3,065,411,255 - Others 4,613,981,700 11,085,335,732

345,447,630,212 332,804,558,333

21. Other payables Other short-term payables comprised:

31/12/2013 VND

31/12/2012 VND

Unearned revenue 74,709,180 4,546,262,597 Temporarily received goods 24,923,444,550 17,298,357,276Payable to RHI Retractories Asia-Pacific PTE 11,983,252,776 12,770,664,171 Payable to Golden Gain Enterprises JSC 3,756,425,917 11,864,540,153Dividends payable 29,507,020,000 746,511,000 Short-term deposits and collaterals received 24,861,007,010 17,647,236,019 Sales discounts 26,375,446,235 9,559,659,369 Trade union fee, social and health insurance 2,819,340,463 1,862,326,208 Interest expense 1,749,650,241 12,982,810,722 Progress payments from customers (*) 1,881,758,028,828 - Others 38,013,958,722 16,516,404,161

2,045,822,283,922 105,794,771,676

(*) These were the amounts net of value added tax received from customers in accordance with the payment schedule to purchase apartments from the Group.

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP106


Form B 09 – DN/HN

45

Other long-term liabilities comprised:

31/12/2013 VND

31/12/2012 VND

Progress payments from customers - 1,146,772,731,369Entrusted investment received (**) 448,979,590,000 448,979,590,000Other payables 65,951,101,650 24,735,548,102

514,930,691,650 1,620,487,869,471

(**) The entrusted investment received represents the amount the Group received from Hoa Phat A Chau Real Estate Joint Stock Company to invest in Vinaconex-Viettel Urban Development JSC (Note 7).

22. Provisions Movement of provisions during the year were as follows:

Warranties VND

Opening balance 11,211,707,436 Provision made during the year 6,535,902,055 Provision used during the year (2,393,111,155) Provision reversed during the year (2,141,825,180)

Closing balance 13,212,673,156

The provision for warranties relates mainly to goods sold and services rendered during the years ended 31 December 2013 and 31 December 2012. The provision is based on estimates derived from historical warranty data associated with similar products and services.

23. Long-term borrowings 31/12/2013

VND 31/12/2012

VND Long-term borrowings (a) 2,051,505,031,426 1,684,764,924,203 Long-term bonds (b) - 200,000,000,000

2,051,505,031,426 1,884,764,924,203

Repayable within twelve months (Note 18) (219,681,425,090) (429,056,378,363)

Repayable after twelve months 1,831,823,606,336 1,455,708,545,840

2013 ANNUAL REPORT



Form B 09 – DN/HN

46

Terms and conditions of outstanding long-term borrowings were as follows:

Currency Annual

interest rateYear of

maturity31/12/2013

VND 31/12/2012

VND BIDV (a) VND Floating 2020 714,021,685,457 362,063,874,010VDB (a) VND 9.6% 2026 255,561,278,592 271,209,278,592Techcombank (a) USD Floating 2014 16,447,082,225 146,432,953,664Vietcombank (a) VND/USD Floating 2015 10,000,000,000 63,297,250,000Indovina Bank (a) VND/USD Floating 2014 56,505,291,803 112,874,304,652HSBC (a) VND/USD Floating 2013 - 10,069,051,878ANZ (a) VND/USD Floating 2016 181,674,830,721 262,419,199,649Vietinbank (a) VND Floating 2017 367,294,862,628 297,399,011,758Borrowings from an individual (b) VND 12% 2015 450,000,000,000 159,000,000,000Long-term bonds (c) VND Floating 2013 - 200,000,000,000

2,051,505,031,426 1,884,764,924,203

(a) The long-term bank borrowings are secured by certain inventories, fixed assets and long-term prepayments of the Group. In addition, some of these long-term borrowings are also secured by some HPG shares, land use rights and assets of a subsidiary to be formed in the future, a real estate of a member of the Board of Management of the Company and the mining rights of a subsidiary and all plants, machineries and equipment to be formed in the future at these mines.

(b) The borrowings from an individual which is a related party are unsecured.

(c) The bonds bore interest at the rate equal to 14.5% per annum for the first year commencing from 21 July 2010 and the sum of the reference interest rate (an average derived from four quotations for 12-month VND saving deposit rate payable in arrears provided by Transactions Centres in Hanoi of four major banks (namely, Joint Stock Bank for Investment and Development of Vietnam, Joint Stock Commercial Bank for Foreign Trade of Vietnam, Vietnam Joint Stock Commercial Bank for Industry and Trade and Vietnam Bank for Agriculture and Rural Development) as at the Interest Fixing Date annually plus 3.5% per annum). The bonds were fully repaid in 2013.

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP108

Hoa

Pha

t Gro

up J

oint

Sto

ck C

ompa

nyN

otes

to th

e co

nsol

idat

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nanc

ial s

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men

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r th

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nded

31

Dec

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ontin

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Fo

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09

– D

N/H

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24.

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3 4,

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at 3

1 D

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4,

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7,06

8 -

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459,

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478

2,64

3,37

0,90

9,87

19,

500,

327,

254,

417

2013 ANNUAL REPORT



Form B 09 – DN/HN

48

25. Share capital The Company’s authorised and issued share capitals are:

31/12/2013 31/12/2012 Number of

shares VNDNumber of

shares VND Authorised share capital 419,052,533 4,190,525,330,000 419,052,533 4,190,525,330,000 Issued share capital

Ordinary shares 419,052,533 4,190,525,330,000 419,052,533 4,190,525,330,000

Shares in circulation

Ordinary shares 419,052,533 4,190,525,330,000 419,052,533 4,190,525,330,000

All ordinary shares have a par value of VND10,000. Each share is entitled to one vote at meetings of the Company. Shareholders are entitled to receive dividend as declared from time to time. All ordinary shares are ranked equally with regard to the Company’s residual assets. In respect of shares bought back by the Company, all rights are suspended until those shares are reissued.

Movements in shares in circulation during the year were as follows:

2013 2012 Number of

sharesVND

(at par value)Number of

sharesVND

(at par value) Balance at the beginning of the year 419,052,533 4,190,525,330,000 313,618,830 3,136,188,300,000

Shares issued during the year - - 101,202,773 1,012,027,730,000 Treasury shares reissued - - 4,230,930 42,309,300,000

Balance at the end of the year 419,052,533 4,190,525,330,000 419,052,533 4,190,525,330,000

26. Dividends During the year, the Company completed the second distribution of dividends in cash for 2012 to the shareholders at the rate of 10% of par value of shares, amounting to VND419,053 million, in accordance with Resolution No. 13/NQHP-2013 dated 21 August 2013 of the Company’s Board of Management.

27. Financial reserve Hoa Phat Group Joint Stock Company and its subsidiaries appropriated their net profit after tax on an annual basis to financial reserves in the equity section. The annual appropriation rate is not over 5% of net profit after tax and the total must not exceed 10% of share capital.

WWW.HOAPHAT.COM.VN

HOA PHAT GROUP110


Form B 09 – DN/HN

49

28. Total revenue Total revenue represents the gross value of goods sold and services rendered exclusive of value added tax. Net sales comprised:

2013 VND

2012 VND

Total revenue Sales of finished goods 17,564,294,359,178 16,544,777,846,020 Services rendered 264,267,154,127 137,763,116,377 Land rental 72,593,851,920 64,847,616,600 Construction contract - 1,559,667,271 Sales of apartments 1,299,078,812,857 373,125,679,999

19,200,234,178,082 17,122,073,926,267

Less sales deductions Sales discounts 200,412,506,403 180,653,811,626 Sales allowances 767,780,830 186,823,682 Sales returns 38,932,293,233 67,450,890,997 Special sales taxes 18,646,201,132 15,920,662,537 Export duties 7,183,245,953 31,009,844,441

265,942,027,551 295,222,033,283

Net sales 18,934,292,150,531 16,826,851,892,984

29. Cost of sales 2013

VND 2012 VND

Finished goods sold 8,473,421,172,978 13,188,489,538,270 Merchandise goods sold 5,924,836,990,217 899,851,855,533 Services provided 188,878,344,199 26,143,183,678 Land rental 35,183,000,651 15,779,228,922 Construction contract - 1,447,778,044 Sales of apartments 1,018,860,798,210 260,346,416,138 Allowance for inventories 9,360,329,949 (50,415,434,091)

15,650,540,636,204 14,341,642,566,494

2013 ANNUAL REPORT



Form B 09 – DN/HN

50

30. Financial income 2013

VND 2012 VND

Interest income from deposits and loans 104,575,514,366 69,159,064,148 Realised foreign exchange gains 28,502,845,950 32,327,219,920 Unrealised foreign exchange gains 297,821,748 1,360,532,817 Gain from disposal of long-term investments - 61,093,160,000 Gain from disposal of a tier 2 – subsidiary (*) 142,728,081,604 - Other financial income 174,355,325 684,635,296

276,278,618,993 164,624,612,181

(*) On 31 January 2013, Hoa Phat Mining JSC, a tier 1 – subsidiary of the Group, disposed its shareholdings in Duc Tien Company Limited (“Duc Tien Co., Ltd”).

The disposal had the following effects on the Group’s assets and liabilities at the disposal date:

Recognised value on the disposal of shareholdings in

Duc Tien Co., Ltd VND

Cash and cash equivalents 8,803,344,502 Other current assets 7,415,711,034 Fixed assets (net book value) 3,388,157,715 Construction in progress 104,523,432,005

Net identifiable assets and liabilities 124,130,645,256

The Group’s share in carrying value of net assets of the disposed company at the disposal date 124,130,645,256

Net book value of goodwill arisen previously in connection with acquiring the tier 2 – subsidiary at the disposal date 4,196,272,900

The carrying value of the Group’s investment in the tier 2 – subsidiary at the disposal date 128,326,918,156

Proceeds from the disposal Advance received from the acquirer in 2012 145,984,749,740 Payment in cash by the acquirer during the year 125,070,250,020

Gain from the disposal 142,728,081,604

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31. Financial expenses 2013

VND 2012 VND

Interest expense 370,947,849,826 526,970,967,624 Payment discounts 10,991,021,005 10,837,433,095 Realised foreign exchange losses 83,009,497,041 36,562,312,844Unrealised foreign exchange losses 10,053,130,438 2,466,425,644 Commission fee paid to a third party relating to the disposal of a tier 2 – subsidiary 42,247,074,304 - Other financial expenses 11,160,331,344 8,186,965,966

528,408,903,958 585,024,105,173

32. Other income 2013

VND 2012 VND

Proceeds from disposals of fixed assets 11,605,368,430 51,448,674,795 Income from sales of electricity, water and rendering services 137,657,560,272 109,974,610,976Compensation received from other parties 1,337,297,969 746,555,121 Bad debts recovered - 3,438,901,761 Reversal of provision for severance allowance - 27,840,010,801 Negative goodwill on acquisition of additional share capital of a subsidiary (Note 5) 36,550,392,151 - Others 11,953,628,675 16,823,546,570

199,104,247,497 210,272,300,024

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33. Other expenses 2013

VND 2012 VND

Net book value of disposed and written off fixed assets 13,289,515,039 53,325,542,178 Costs of electricity, water sold and services rendered 135,129,274,388 105,586,225,602Compensation paid and payables to others 4,354,203,398 22,614,020,434 Other expenses 13,464,318,578 13,803,250,882

166,237,311,403 195,329,039,096

34. Income tax

34.1 Recognised in the consolidated statement of income

2013 VND

2012 VND

Current tax expense Current year 387,541,030,040 168,073,770,557 Under provision in prior years 2,642,230,559 208,304,920

390,183,260,599 168,282,075,477

Deferred tax (benefits)/expenses Origination and reversal of temporary differences (6,214,468,936) 3,886,216,637 Reversal of deferred tax assets on tax losses recognised in previous years - 15,531,619,023

(6,214,468,936) 19,417,835,660

Income tax expense 383,968,791,663 187,699,911,137

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34.2 Current income tax

2013 VND

2012 VND

Profit before tax 2,394,404,194,432 1,218,205,340,654

Adjustment to increase/(decrease) accounting profit Share of losses from associates (256,198,814) (541,298,162)Goodwill amortisation 275,023,878,726 125,092,018,440 Reversal of provision for severance allowance - (22,186,024,154) Non-deductible expenses 51,873,936,263 34,136,034,739 Origination and reversal of temporary differences 15,884,305,241 (6,683,958,020)

2,736,930,115,848 1,348,022,113,497

Tax losses utilised (11,144,642,716) (58,729,817,637)

Current year taxable profit 2,725,785,473,132 1,289,292,295,860

Current year income tax expense 681,446,368,283 322,323,073,965

Tax incentives in subsidiaries (281,104,928,159) (136,084,420,204) Effect of different tax rates in subsidiaries (24,934,988,654) (18,164,883,204) Deferred tax assets unrecognised on tax losses of subsidiaries 12,134,578,570 -

Current income tax expense 387,541,030,040 168,073,770,557

Income tax payable at the beginning of the year 124,017,842,930 168,012,714,066

Under provision in prior years 2,642,230,559 208,304,920 Over-payment of income tax at the beginning of the year (14,567,433,831) (475,508,634) Income tax temporarily calculated on the progress payments from customers in previous years - (5,274,697,905) Income tax paid during the year (198,260,005,335) (221,484,562,928) Others (220,113,119) 390,389,023

Income tax payable at the end of the year 301,153,551,244 109,450,409,099

In which: Income tax payable 315,239,777,566 124,017,842,930 Over-payment of income tax (14,086,226,322) (14,567,433,831)

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34.3 Applicable tax rates

The Company has obligation to pay the State Treasury income tax at rate of 25% of taxable profits.

The Company’s subsidiaries have obligations to pay the State Treasury income tax at the rate in accordance with the enacted tax regulations.

On 19 June 2013, the National Assembly passed the amended and supplemented Corporate Income Tax (“CIT”) Law, according to which the Company has an obligation to pay the standard CIT rate 22% from 2014 and 20% from 2016.

35. Basic earnings per share The calculation of basic earnings per share was based on the consolidated net profit attributable to ordinary shareholders of the Company and the weighted average number of ordinary shares outstanding during the year, calculated as follows:

35.1. Weighted average number of ordinary shares 2013 2012 VND VND

Issued ordinary shares at the beginning of the year (*) 419,052,533 344,980,178 Effect of dividends paid in the form of shares - 69,841,425 Effect of treasury shares reissued during the year - 1,848,618 Weighted average number of ordinary shares outstanding during the year 419,052,533 416,670,221

(*) As at 31 December 2012, the issued ordinary shares included 31,361,348 ordinary shares issued for dividend payment.

35.2. Basic earnings per share 2013 2012 VND VND

Net profit attributable to ordinary shareholders 1,954,187,537,863 994,024,322,436Weighted average number of ordinary shares outstanding during the year 419,052,533 416,670,221

4,663 2,386

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36. Financial instruments

36.1 Financial risk management

(a) Overview

The Group has exposure to the following risks from its use of financial instruments:

credit risk; liquidity risk; and market risk.

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk.

The Company’s Board of Management oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group.

(b) Risk management framework

The Company’s and its subsidiaries’ Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Company’s and its subsidiaries’ Board of Directors are responsible for developing and monitoring the Group’s risk management policies.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

36.2 Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers and cash placed at financial institutions.

Exposure to credit risk The total of carrying amounts of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was as follows:

Note 31/12/2013 VND million

31/12/2012 VND million

Cash at banks and cash equivalents (i) 2,121,054 1,287,203 Short-term and long-term investments (ii) 387,794 224,661 Trade and other receivables (iii) 1,279,434 1,264,648

3,788,282 2,776,512

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(i) Cash at banks and cash equivalents

The cash and cash equivalents at banks of the Group is mainly held with well-known financial institutions. The Board of Directors does not foresee any significant credit risks from these deposits and does not expect that these financial institutions may default and cause losses to the Group.

(ii) Long-term and short-term investments

Short-term and long-term investments of the Group represent time deposits with the well-known financial institutions and loans granted to several other companies. The Board of Directors does not foresee any significant credit risks from these deposits and loans and does not expect that these financial institutions and companies may default and cause losses to the Group.

(iii) Trade and other receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. In response to the risk, the Board of Directors of the Company and its subsidiaries have established a credit policy under which each new customer is analysed individually for creditworthiness before the Group’s standard payment and delivery terms and conditions are offered. Credit purchase limit is established for each customer, which represents the maximum open amount without requiring approval from the Board of Directors. The limit is reviewed annually. No collateral is collected from the customers.

Based on historic default rates, the Group management believes that apart from the amount provided for as per below, no further allowance for doubtful debts is necessary in respect of the outstanding trade and other receivables at the reporting date.

The aging of trade and other receivables at the year end is as follows:

31/12/2013 31/12/2012 VND million VND million

Not past due 1,153,575 1,067,896 Past due 0 – 30 days 74,676 156,396 Past due 31 – 180 days 42,692 25,115 Past due more than 180 days 8,491 15,241

1,279,434 1,264,648

Movements in the allowance for doubtful debts during the year were as follows:

31/12/2013 31/12/2012 VND VND

Opening balance 178,589,724,256 13,082,396,194 Increase in allowance during the year 3,678,712,679 166,860,274,959 Decrease due to disposal of a subsidiary - (10,422,876) Allowance utilised during the year (2,544,872,408) - Written back (165,080,362,090) (1,342,524,021)

Closing balance 14,643,202,437 178,589,724,256

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36.3 Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

At the reporting date, the financial liabilities with fixed or determinable payments have the following contractual maturities including the estimated interest payments:

Carryingamount

Contractualcash flows

Within1 year 1 – 2 years 2 – 5 years

More than 5 years

31 December 2013VND

millionVND

millionVND

millionVND

millionVND

millionVND

million Trade and other payables 2,828,249 2,828,249 2,828,249 - - -Borrowings 7,575,383 8,377,416 6,350,171 747,177 967,419 312,649

10,403,632 11,205,665 9,178,420 747,177 967,419 312,649

31 December 2012Trade and other payables 1,954,685 1,954,685 1,954,685 - - -Borrowings 6,305,958 7,019,474 5,226,872 772,634 816,067 203,900

8,260,643 8,974,159 7,181,557 772,634 816,067 203,900

The Group manages its ability to meet the expected operational expenses and servicing its debts by investing its cash surpluses in term deposits and maintaining several bank facilities from some domestic banks.

36.4 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s results of operations or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

(a) Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than VND, the accounting currency of the Group. The currencies in which these transactions primarily are denominated are USD.

The Group’s exposure to currency risk is managed by keeping the exposure to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term over-exposures.

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Exposure to currency risk

At the reporting date, the Group had the following net monetary liability position exposed to currency risk:

31/12/2013 31/12/2012 USD USD

Cash and cash equivalents 1,309,800 3,673,622 Accounts receivable – trade 1,084,011 2,380,125 Other monetary assets 181,024 - Accounts payable – trade (62,413,466) (43,941,723) Short-term borrowings (34,447,456) (65,272,411) Long-term borrowings (2,224,876) (2,370,419)

(96,510,963) (105,530,806)

The followings are the significant exchange rates applied by the Group:

Exchange rate as at 31/12/2013 31/12/2012

USD/VND 21,125 20,855

Below is an analysis of the possible impact on the consolidated profit before tax of the Group, after taking into account the current level of exchange rates and the historical volatility as well as market expectations as at 31 December. This analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecasted sales and purchases:

Effect to consolidated profit before tax

VND31 December 2013 USD (2% strengthening against VND) (40,775,881,868)

31 December 2012 USD (4% strengthening against VND) (88,033,798,365)

The opposite movement of the currencies would have the equal but opposite effect to the consolidated profit before tax of the Group.

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(b) Interest rate risk

At the reporting date, the interest rate profile of the Group’s interest-bearing financial instruments was:

Carrying amount 31/12/2013 31/12/2012

VND million VND million Fixed rate instruments Financial assets 2,230,353 1,347,886 Financial liabilities (6,229,440) (4,851,402)

(3,999,087) (3,503,516)

Variable rate instruments Financial liabilities (1,345,944) (1,454,556)

A change of 1% per annum in interest rate would have increased or decreased the consolidated profit before tax of the Group by VND13,459 million (2012: VND14,546 million). This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

36.5 Fair values

(a) Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:

31/12/2013 31/12/2012 Carrying

amount Fair value Carryingamount

Fairvalue

VND million

VNDmillion

VNDmillion

VNDmillion

Categorised as loans and receivables: - Cash and cash equivalents 2,125,322 2,125,322 1,294,494 1,294,494 - Trade and other receivables 1,279,434 1,279,434 1,264,648 1,264,648 - Other financial assets 387,794 387,794 224,661 224,661

Categorised as liabilities at amortised cost: - Trade and other payables (2,828,249) (2,828,249) (1,932,593) (1,932,593)- Borrowings (7,575,383) (7,678,237) (6,305,958) (6,251,522)

(6,611,082) (6,713,936) (5,454,748) (5,400,312)

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(b) Basis for determining fair values

Cash and cash equivalents, trade and other receivables and short-term non-derivative financial assets and liabilities

The fair value of cash and cash equivalents, trade and other receivables and short-term non-derivative financial assets and liabilities approximates the carrying value due to the short-term nature of these financial instruments. The fair value of the instruments is determined for disclosure purpose only.

The long-term non-derivative financial liabilities

The fair value of the long-term non-derivative financial liabilities, which is determined for disclosure purposes only, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the balance sheet date.

37. Non-cash investing and financing activities 2013 VND

2012 VND

Payments of dividends in the form of shares - 698,414,250,000 Depreciation expenses of fixed assets capitalized into construction in progress - 3,637,095,409

Net assets of a disposed subsidiary at the disposal date: - Cash and cash equivalents 8,803,344,502 717,862,192 Accounts receivable - short-term - 67,463,205,734 Inventories (net-off allowance for inventories) - 20,112,435,473 Other current assets 7,415,711,034 239,083,685 Tangible fixed assets - net book value 3,388,157,715 14,671,602,827 Intangible fixed assets - net book value - 9,503,981,699 Construction in progress 104,523,432,005 675,421,490 Long-term prepayments - 607,802,227 Current liabilities - (33,166,861,590)

38. Significant transactions with related parties In addition to related party balances disclosed in other notes to the consolidated financial statements, the Group had the following significant transactions with related parties during the year.

2013 VND

2012 VND

Members of Supervisory Board and Board of ManagementSalary and bonus 5,607,141,669 5,247,050,747Allowances 2,556,000,000 2,646,000,000

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39. Commitments

39.1 Capital expenditure commitment

At the reporting date, the Group had the following outstanding capital expenditure commitments approved but not provided for in the consolidated balance sheet:

31/12/2013 VND

31/12/2012 VND

Approved but not contracted - 477,161,062,664 Approved and contracted 511,029,000,000 1,518,235,019,557

511,029,000,000 1,995,396,082,221

39.2 Leases commitment

At the reporting date, the future minimum lease payments under non-cancellable operating leases were:

31/12/2013 VND

31/12/2012 VND

Within one year 7,361,064,432 3,971,941,597 Within two to five years 7,775,643,474 10,876,303,724 More than five years 97,005,325,952 58,758,170,924

112,142,033,858 73,606,416,245

39.3 Mineral mining right fees

In accordance with the Law on Minerals No. 60/2010/QH12 dated 17 November 2010, organizations and individuals conducting mineral mining activities must pay fees for issuance of mineral mining rights. Article 77.3 of the Law mentioned that the Government shall provide specific regulations on the method for calculation of fees and the rates of fees for issuance of mineral mining rights.

On 28 November 2013, the Government issued Decree No. 203/2013/ND-CP (“Decree 203”) regulating the method for calculation of fees and the rates of fees for issuance of mineral mining rights which became effective from 20 January 2014. According to Article 7 of Decree 203, the prices applied in calculation of mining right fees shall be determined based on the taxable natural resource prices announced by the respective Provincial People’s Committees. To date, the People’s Committees of the provinces where the Group’s current mine sites are located, have not provided detailed guidance on the method for calculation of mining right fees for some of the minerals that the Group is mining. Accordingly, the mining right fees on the mineral reserves could not presently be determined.

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40. Production and business costs by element 2013

VND 2012 VND

Raw material costs included in production costs 13,937,102,306,181 11,460,355,982,964 Labour costs and staff costs 592,780,194,503 530,032,080,739 Depreciation and amortisation 720,195,566,311 596,227,337,059 Outside services 1,085,670,258,288 1,540,952,035,136 Other expenses 1,201,478,463,530 650,986,015,744



Documents

HOA PHAT GROUP · Pho Noi A Industrial Zone, Giai Pham Commune, Yen My District, Hung Yen Province, Vietnam Hoa Phat Steel JSC Hoa Phat Steel One-member Co.,Ltd. 1 2 As of 31 December