2012 Vinamilk Annual Report

Head o�ce

10 Tan Trao Street, Tan Phu Ward, District 7, Ho Chi Minh CityTel: (84 8) 54 155 555Fax : (84 8) 54 161 226Email : [email protected] : www.vinamilk.com.vn

VinamilkNever Stop

Growing

Annual Report 2012

2 Annual Report 201202 Annual Report 2012

CONTENTS 12 | REPORT OF THE INSPECTION COMMITTEE

16 | REPORT OF THE BOARD OF EXECUTIVE DIRECTORS

• Financial performance

• Distribution network

• Research and development (R&D)

• Status of the capital expenditure plan

• Dairy cow development

• Improvements on structures, policies and management

• Future strategic business plan

• Awards and achievements in 2012

04 | FINANCIAL CALENDAR 2012

06 | FIVE-YEAR GROUP PERFORMANCE

08 | VISION – MISSION – CORE VALUES

10 | CHAIRWOMAN’S MESSAGE

34 | PRODUCT PORTFOLIO

42 | CORPORATE PROFILE

• Corporate information

• Group structure

• Organization and management structure

• The Board of Management

• The Board of Executive Directors

• The Inspection Committee

BIND TO SCIENCE,NOURISH BRAINPOWER

03

66 | THE CORPORATE GOVERNANCE

• Corporate governance report

• Risk management report

84 | CODE OF CONDUCTS

86 | SUSTAINABILITY REPORT

96 | INVESTOR RELATIONS

100 CONSOLIDATED FINANCIAL STATEMENTS

VINAMILK - Never Stop Growing

04 05Annual Report 2012

FINANCIAL CALENDAR 2012

Issue of new shares:According to the Resolution of the shareholders’ meeting on 23 October 2012, the Company has issued new shares from the owners’ equity to increase the Company’s share capital as follows:

• Record date : 12/21/2012

• Issuing ratio : 2:1 (meaning a shareholder gets one more share

for every 02 shares held)

• The total new shares in issue : 277,841,042

• The effective listing date : 01/23/2013

• The first trading date : 01/25/2013

Annual General Meeting: • The Annual General Meeting of 2012 was held on 23 March 2012.

• The Annual General Meeting of 2013 will be held on 26 April 2013.

Final dividend of 2011 Interim dividend of 2012

• Dividend per share VND2,000 VND2,000

• Record date 04/10/2012 08/23/2012

• Payment 04/25/2012 09/06/2012

Unaudited Audited

• Quarter 1: 04/25/2012 05/07/2012

• Quarter 2: 07/20/2012 08/01/2012

• Quarter 3: 10/22/2012 11/06/2012

• Full year 01/22/2013 03/04/2013

Dividend:The Company has paid dividends to its shareholders during the year as follows:

Announcements of the consolidated financial statements:


07VINAMILK - Never Stop Growing06 Annual Report 2012

FIVE-YEAR GROUP PERFORMANCE

For the year ended 31 December 2008 2009 2010 2011 2012 CAGR

Income statement (VND billion)

Total sales 8,381 10,820 16,081 22,071 27,102 34%

Profit before tax 1,371 2,731 4,251 4,979 6,930 50%

Profit after tax 1,249 2,376 3,616 4,218 5,819 47%

Dividend (VND/share)

Basic earnings per share 3,563 6,769 6,834 5,145 6,981

Dividends paid during the year 3,900 2,000 5,000 3,000 4,000

Balance Sheet (VND billion)

Share capital 1,753 3,513 3,531 5,561 8,340 48%

Owners’ equity 4,666 6,455 7,964 12,477 15,493 35%

Total assets 5,967 8,482 10,773 15,583 19,698 35%

Long term borrowings 22 12 - - -

Net book value per share 26,619 18,378 22,556 22,437 18,577

Financial ratios

Profit before tax/Total sales 16% 25% 26% 23% 26%

Return on Equity(ROE) 28% 43% 50% 41% 42%

Total liabilities/Owners’ equity 28% 31% 35% 25% 27%

8,381

10,820

16,081

22,071

27,102

-

5,000

10,000

15,000

20,000

25,000

30,000

2008 2009 2010 2011 2012

Total sales

1,371

2,731

4,251

4,979

6,930

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2008 2009 2010 2011 2012

Profit before tax

Share capital

Owners’ equity

Total assets

Profit before tax/Total sales

ROE

Total liabilities/ Owners’ equity

Compound average growth rate 34%/year

Compound average growth rate 50%/year

16%25% 26% 23% 26%

28%

43%

50%

41% 42%

28%31%

35%25% 27%

0%

10%

20%

30%

40%

50%

60%

2008 2009 2010 2011 2012

-

2008 2009 2010 2011 2012

1,753 3,513 3,531 5,5618,340 4,666 6,455 7,964

12,477

15,493

5,967

8,482

10,773

15,583

19,698

-5,000

10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000

(VND billion)

(VND billion)

(VND billion)

CAGR: Compound average growth rate


VISION “To become the leading Vietnamese trusted brand on nutrient and healthy products for human life”

MISSION “Vinamilk commits to bring best-quality nutrition to communities that reflects our respect, love and re-sponsibility for the people, life and society”

INTEGRITY

12 3 4 5

RESPECT FAIRNESS COMPLIANCE ETHICS

Integrity and trans-parency in actions

and transactions.To have self-respect and respecting colleagues, the Company, partners. To cooperate with re-spect.

To be fair with em-ployees, customers, suppliers and other parties.

To comply with legal reg-ulations and the Com-pany’s Code of Conduct, Company’s procedures and policies.

To respect the estab-lished ethical standards and act accordingly.

CORE VALUES

VISIONMISSION CORE VALUES


In these first few months of 2013, operating within a still volatile and difficult economic climate, the com-pany has continued with its mission to introduce Vinamilk to the world. To affirm international status with sustainable development, Vinamilk has been well-prepared with strategies that address infrastruc-ture, corporate governance, etc. Yet success will truly depend on the following:

• The long-standing trust and loyalty of consumers

and customers

• The trust and support of Vinamilk shareholders

• Commitment, determination, effort, and bound-

less creativity of all Vinamilk staff

• Sustainable cooperation with partners on the ba-

sis of mutual respect, equality, and harmony

Once again, on behalf of Vinamilk, I would like to ex-tend our gratitude to consumers, customers, share-holders and partners. With our cooperation and best effort, Vinamilk will continue improving in 2013, and Vinamilk’s position in the national and international markets will continue standing significantly high.

Ho Chi Minh City, 28 February 2013

Mai Kieu Lien

Chairwoman

and Chief Executive Officer


CHAIRWOMAN’S MESSAGETo: Honourable shareholders,

2012 saw a volatile and difficult year for the global economy. Purchasing power has not yet recovered, and enterprises in Vietnam have been facing many challenges and difficulties in the financial market. Vinamilk was not an exception. The news, however, is not all so grim. Last year, Vinamilk successfully achieved both revenue and profit targets set by share-holders, and its position and positive reputation were solidified in the market.

At the year’s end, Vinamilk’s revenue reached VND 27,012 billion (102% of the 2012 target and 23% growth over 2011), generating to total 2012 profit be-fore tax of VND 6,930 billion (123% of the 2012 target and 39% growth over 2011). The capitalized value of Vinamilk is VND 73,350 billion (approximately USD 3.52 billion), an increase of 52.6% compared to 2011.

With the objective of sustainable development Vinamilk has retained focus on other aspects of de-velopment aside from the above-mentioned financial targets. Firstly, Vinamilk has fostered a professional environment with safe working conditions, and em-ployees’ efforts are rewarded with fair remuneration. Moreover, employees receive health care, and their benefits and rights are guaranteed. To give back to Vi-etnemese society, Vinamilk has fulfilled its duty by tax payment to the state and has gone beyond that basic requirement to share in social responsibility with prac-tical social activities. To benefit consumers, Vinamilk has put great effort into the diversity and high quality of products to earn the trust from cosumers. Last but not least, Vinamilk has been continuing the long and sustainable cooperation with our partners to ensure mutual benefits.


12 Annual Report 2012 13VINAMILK - Never Stop Growing

REPORT OF THE INSPECTION COMMITTEE

Based on the firm foundation of the year 2011, Vinamilk

has continued to maintain very successful business op-

erations. In addition to positive sales results, Vinamilk

has enhanced its corporate image towards promoting

corporate culture and social responsibility and con-

tributed significantly to the national tax budget. The

success of Vinamilk has stood out even more in con-

text of the year 2012, when there were not only many

challenges for Vietnamese enterprises but also eco-

nomic, political, and social uncertainties throughout

the world. Amid the instability of the macroeconomy,

Vinamilk’s risk management, control, and supervision

systems have to be continuously developed and im-

proved in order to help the company achieve the long

term sustainable development goals.

I. ACTIVITIES OF THE INSPECTION COM-MITTEE

Inspection Committe (IC) consists of three independ-

ent members who are the representatives of the

shareholders and are supported by the Board of Man-

agement (BoM) and the Board of Executive Directors

(BoD). Its role is to continue to investigate, monitor,

and recommend necessary changes for Vinamilk in or-

der to increase the effectiveness of risk management

and improve the quality of corporate management. In

2012, IC held regular meetings with Internal Audit (IA);

actively cooperated and discussed with BoM, BoD and

independent auditors in official meetings; and used

professional consulting services to accomplish the fol-

lowing tasks:

• Monitor the activities of BoD and BoM;

• Monitor the company’s activities through IA;

• Monitor the company’s financial situation;

• Assist the company in completing the Enterprise

Risk Management system (ERM); and

• Propose and submit to the shareholders’ meeting

for approval of the independent auditors selec-

tion for the fiscal year 2013.

Monitoring the activities of BoM and BoD

IC found that the BoM and BoD of the company have

adequately performed their responsibilities and com-

pletely complied with the Company Charter as well as

the government laws and regulations. IC participated

in all quarterly and on-request meetings of BoM, has

kept a close eye on Vinamilk’s actual business situa-

REPORT TO THE SHAREHOLDERS’s MEETINGDear shareholders of Vietnam Dairy Products Joint Stock Company,

The success of

Vinamilk has stood out even more in the con-text of the year 2012 when

there are not only many chal-lenges for Vietnamese enterpris-es but also economic, political,

and social uncertainties all over the world.

Closely control, improve

transparency and increase corporate

value


tions, and offered suggestions to BoM and BoD dur-

ing the implementation of the business strategies ap-

proved by the shareholders’ meeting in March 2012.

The business plans, fundamental investment projects,

investment and capital raising opportunities were

carefully discussed to ensure they were appropriate

and most beneficial to Vinamilk’s development strategy.

Monitoring the company’s activities through IA

After two years of operation, the Internal Audit depart-

ment has affirmed its effectiveness, gained the trust

and are highly appreciated by the management, posi-

tively contributed to the improvement of the com-

pany’s management system. The audit procedures

deployed by IA and directed by IC are fully in accord-

ance with international audit practices. The process

involves conducting on-site research across depart-

ments and units, checking documents of the audited

period, and interviewing managers at various levels

in order to ensure the audit process is comprehensive

and highly detailed.

In 2012, IA conducted 8 audit reviews of the main busi-

ness management processes of the company which

are: marketing activities; internal investment projects

management; the An Khang clinic’s operation; cash,

products, and tangible fixed assets management; dairy

farms operation; logistics and warehouse manage-

ment; quality management in production; and fresh

milk procurement activities. After each audit review,

the IA department provides specific and clear recom-

mendations and receives the consent of relevant au-

dited departments, IC, and the Chief Excutive Officer.

The results of these internal audit reviews showed that

there were no significant risks in the management

processes of Vinamilk and confirmed the compliance

of relevant departments and individuals in the Com-

pany. The action plans to improve the control system

as recommended by IA were fully performed by the

units and departments of the company.

IC also used an independent consultant to assess the

quality of IA activities. It was confirmed that IA has

complied with all audit procedures and processes, en-

suring necessary quality and independence. With the

recommendations of the independent consultant, IC

also established the schedule for improving the activi-

ties of IA in the next 3 years as part of the Enterprise

Risk Management (ERM) development of Vinamilk.

Monitoring the company’s financial situation in 2012

Together with the representative of the Audit Commit-

tee of BoM, IC has had regular meetings with the in-

dependent auditor of Vinamilk (PwC Ltd. Co. for 2012)

to discuss the scope of audits at the beginning of the

year, review audit results and other matters (if any)

raised in the management letters. Every quarter, IC

also performed an analysis on the financial statements

which are reviewed by the independent auditors.

Based on the periodic report and data analysis pre-

sented by BoM in the BoD meetings, the quarterly and

year-end financial statements which are reviewed and

audited, IC found that Vinamilk maintained its healthy

financial position:

• The basic indicators of debts, loan capital, liquid-ity, efficiency of assests usage, provisions, and eq-uity were all highly qualified, and

• Vinamilk’s business results all met and exceeded the objectives approved by the shareholders’

meeting in early 2012.

Assisting Vinamilk in improving the Enterprise Risk Management (ERM) system

In 2012, IC used the risk management consulting

service of KPMG to support Vinamilk in reviewing the

entire existing ERM system. The results provided BoD

and IC with an overview of the existing system and

helped to establish a schedule for improvement and

development towards an ERM system on par with

international standards. IC appreciated the deter-

mination of BoD in approval of a specific plan with

detailed steps to build and promote the role of ERM

as a strategic tool that will support BoM in decision-

making and corporate management.

With the introduction of IC, Vinamilk agreed to be-

come the first Vietnamese enterprise to take part in

the Asia Corporate Governance Association (ACGA).

This demonstrates BoM’s focus and effort to raise

the company’s corporate management level. Partici-

pation in ACGA has given Vinamilk the opportunity

to appoach more advanced corporate management

models in the world and enhanced the company’s

image at both the regional and international level.

Representatives of IC and Vinamilk attended the

Annual Meeting of ACGA in Bangkok in November

2012 where the trends and outstanding issues of

corporate management in the region and in Viet-

nam were discussed. This information will be useful

to Vinamilk in establishing a corporate management

culture and integrating beyond the region and into

the world.

Proposing and submitting to the sharehold-ers’ meeting for approval of the independent auditors selection for the fiscal year 2013

IC has directly selected an independent auditor for

Vinamilk for the fiscal year 2013. The selection proc-

ess of IC was carried out with the participation of all

members of IC and was fully objective and independ-

ent from the BoD. The criteria were clearly defined in

details to ensure a fair and accurate selection process.

After assessment, IC notified BoM of the procedures to

submit to the shareholders’ meting for approval of the

independent auditor selection for the fiscal year 2013.

II. STRUCTURAL CHANGES OF THE IN-SPECTION COMMITTEE IN THE PERIOD OF 2012-2016

According to the Company’s regulations, one-third

of IC will be re-elected at annual GMS. However, Mr.

Nguyen Anh Tuan, a member of IC, submitted his res-

ignation from IC due to personal reason. Therefore, IC

would like to submit this to shareholders’ meeting for

approval and election of a substitute.

III. CONCLUSIONS AND PROPOSALS

In review of the results of 2012, IC believes that the

risk management, inspection and control activities

have provided BoM, BoD and other departments with

important information about the system’s current sta-

tus and the necessary steps to continue to improve

Vinamilk’s management and operation, effectively use

the resources, and facilitate growth to take advantage

of the market opportunities in the long term.

In 2013, IA will focus on developing staff, maintain-

ing the quality of audit activities, expanding the proc-

esses and scope of audit and re-audit activities, and

strengthening post-audit monitoring activities in the

key departments of Vinamilk.

The improvement of the ERM system will be an impor-

tant focus and objective in the period of 2013–2015. A

complete and effectively operated ERM system will be

an essential link to promote the coherence between

activities of IC, IA, and the production and business ac-

tivities of the company.

We are commited to stand side by side with Vinamilk

as the company progresses and thank shareholders for

the trust and support given to IC in 2012 and in the

many years to come.

Sincerely,

Ho Chi Minh City, 01 March, 2013

On behalf of the Inspection Committee

Nguyen Trung Kien

Head of the Inspection Committee


REPORT OF THE BOARD OF EXECUTIVE DIRECTORS

1. Financial performance

The Company’s financial position is always maintained healthy. Although, the Company has spent an ever biggest amount on capital expenditures of VND 3,111 billion and the dividend payout for the final dividend of 2011 and the interim dividend of 2012 was to-talled at VND 2,223 billion (equivalent to VND 4,000 per share), but the cash flow posi-tion is still maintained in a high surplus. The financial ratios are also very good and being maintained for many years.

Some basic financial information is below:

(VND billion) 2012 2011% increase/

(decrease)

Total assets 19,698 15,583 26%

Total sales 27,102 22,071 23%

Operating profit 6,630 4,751 40%

Profit before tax 6,930 4,979 39%

Profit after tax 5,819 4,218 38%

Net profit attributable to shareholders (*) 5,241 3,802 38%

Dividend paid during the year 2,223 741

Dividend payout ratio 42% 20%

(*): Appropriation of 10% from the profit after tax to the bonus and welfare fund (please refer to notes

2.19 of the consolidated financial statements, page 120 for more information).

Dividend payments during the years:

Final dividend of 2011 Interim dividend of 2012

Dividend per share VND 2,000 VND 2,000

Record date 04/10/2012 08/23/2012

Payment 04/25/2012 09/06/2012

The report on the actual performance versus the budget 2012 is as follows:

Actual Budget % achieved

Total sales 27,102 26,480 102%



Maintain a strong financial position

and focus on sustainable growing

strategy

• Financial performance• Distribution network

• Research and development (R&D)• Status of the capital expenditure plan

• Dairy cow development• Improvements on structures, policies and management

• Future strategic business plan• Awards and achievements in 2012


In general, although the market conditions are still difficult, Vinamilk has achieved an impressive growth, achieved all the targets set at the beginning of the year. Profit before tax and profit after tax growing faster than the total sales were results of controlling expense budget well and improving the effectiveness of sales and marketing campaigns.

Key financial ratios:

2012 2011% increase/

(decrease)

i. Liquidity

· Total assets/ Total liabilities 4.7 5.0 (0.3)

· Current ratio 2.7 3.2 (0.5)

· Quick ratio 1.8 2.1 (0.3)

· Interest cover 2,311.0 356.6 1,954.4

ii. Debt ratios

· Total liabilities/Total assets 21% 20%

· Total liabilities/Owners’ equity 27% 25%

iii. Operating efficiency ratios

· Inventory turnover ratio 5.2 5.3 (0.1)

· Trade accounts receivable turnover ratio 12.0 13.1 (1.1)

· Working capital turnover ratio 2.6 2.8 (0.2)

· Total assets turnover ratio 1.5 1.6 (0.1)

iv. Profitability ratios

· Return on net sales (ROS) 21.9% 19.5% 2.4%

· Return on total assets (ROA) 33.0% 32.0% 1.0%

· Return on Equity (ROE) 41.6% 41.3% 0.3%

Overall, the Company’s financial position continues to be maintained healthy. There was a slight drop in liquidity ratios due to significant capital expenditure cash layout. Other ratios are better than those of 2011.

Bank loans: The Company operates on its own equity, without bank loans.

2. Distribution network

The distribution network continues to be consolidated and never stop growing in order to meet the long term growth objectives.

The distribution network model is as follows:

• Modern trade channel: Vinamilk deals directly with supermarkets across the country.

• General trade channel: Vinamilk set up 250 exclusive distributors national-wide. These distributors deliver products to retailers within their assigned territory. As at 31/12/2012, Vinamilk covered more than 200,000 retailers, increased by 22,000 retailers as compared to that of 2011.

DOMESTIC:

EXPORT:

Modern trade channel

General trade channel

Export sales contributed 14% of the total sales in 2012. The main export markets include Middel East countries, Cambodia, Philippines, Thailand,….

The main export products include powdered milk and condensed milk; especially export of fresh milk increases from 70% - 100%.

END CONSUMERS

DISTRIBUTORS

RETAILERS

SUPERMARKETS


3. Product Research and Development – “THE MILESTONES OF 2012”

In 2012, Vinamilk continued to have robust growth in sales, pro-duction, and range of products.

To meet the market’s increasing demand, Vinamilk continued to focus on developing products that enhance health and beauty and are good for both physical and intellectual development. This plan also ensures that food quality and safety standards are met.

The year 2012 marked particular success in the field of product research and development. Vinamilk launched multiple prod-uct lines, including: Vinamilk 100% fresh pasteurized skim milk, ProBeauty yogurt with collagen, Susu yogurt milk with soluble fiber and probiotics, Vanilla ice cream, Icy salted lemonade, GoldSoy milk, Dielac Optimum formula powdered milk (for in-fants and young children), Sure Prevent nutritional product (for patients in recovery and the elderly), etc..

The most outstanding products among Vinamilk’s newest offer-ings are GoldSoy milk, ProBeauty yogurt, and Dielac Optimum formula powered milk. These three products in particular have experienced impressive initial success and earned customers’ support and appreciation.

Nowadays, consumers are tending to choose purely natural products since it’s widely accepted that nature is the best source of the nutrients our bodies need to be healthy and strong. .. Like other Vinamilk products, nutrient-rich GoldSoy is made from 100% non-genetically modified soybeans and makes consum-ers feel safe, especially when there is controversy about wheth-er or not genetically modified products can be harmful.

. Although it launched very recently, GoldSoy has won consum-ers’ trust and has gained a strong fan base among women. Soy-bean milk contains protein, 8 types of amino acids, zinc, and vi-tamins such as A, E, and B12. It reduces blood-cholesterol levels, accelerates metabolism, and helps maintain a healthy weight. Specifically, protein-rich soybean milk with calcium and vitamin D helps to prevent osteoporosis and strengthen bones.

ProBeauty premium yogurt with collagen is an unmatched health and beauty innova-tion that came from Vinamilk’s research and development team.

Collagen constitutes about 70% of skin mass and is what makes it resilient and elastic. From the age of 20, total collagen decreases about 1% per year due to aging, stress, and environmental pollution, resulting in wrinkles as early as 25. Gradual collagen supplementation after the age of 20 will therefore help women and men prevent the traces of aging and maintain skin’s vitality and softness.

In recent years, the trend of using collagen, an essential protein for nourishing and revitalizing the skin, in natural health and beauty care has been gaining momentum across the globe, and awareness is growing of how to treat skin from the inside out by eating naturally collagen-rich foods.

In an attempt to at long last unleash the fountain of youth, the company has intro-duced a natural skincare secret: Vinamilk ProBeauty yogurt. Each ProBeauty product contains 1,350 milligrams of collagen (as recommended by the Collagen Research Institute) plus vitamin C and antioxidants from pomegranates and blueberries. Two boxes of Vinamilk ProBeauty yogurt provide the necessary nutrients for firm, vibrant, and smooth skin

Another sector of the product market that Vinamilk targeted in 2012 is powdered milk and nutrition powder, introducing Dielac Optimum formula powered milk. This marked a new success in the collaboration of product research between Vinamilk and the company’s European partners.

Dielac Optimum with Opti-Digest formula supports the digestive system of infants and toddlers by facilitating the maximum absorption of nutrients, increasing immu-nity, and supporting comprehensive development. The product contains whey rich in alpha-lactalbumin, an easily digested and absorbed protein that provides an ample amount of essential amino acids that support brain development and restful sleep.

Packaging Machine for Probeauty yogurt -Tien Son Milk Plant

Probeauty yogurt on the production line – Tien Son Milk Plant

2 0 1 2 witnessed the

implementation of the strategy of hi-end

market penetration by pioneering new prod-

uct introductions

22 Annual Report 2012 23VINAMILK - Never Stop Growing22 Annual Report 2012

Along with vitamins, minerals, and soluble fibers, beneficial bacteria called probiotics are added to the product to improve children’s absorption of nu-trients and prevent digestive ailments and imbalances.

To build on the success of these new product lines, in 2013 Vinamilk will aim to continuously improve the quality of its product lines and expand into var-ious flavors and types of dairy products in order to satisfy the varied tastes of its target consumers.

With the motto of always leading in product and technology development to meet customers’ needs at a reasonable price, Vinamilk is proud to take part in enhancing community health by providing a wide assortment of deli-cious, high quality products.

4. Status of the capital expenditure plan

The actual capital expenditure payout in accordance with the Resolution of the shareholder’s meeting 2012 was as follows:

Total investment Actual 2012 Budget 2012 % budget

Vietnam dairy factory 2,349 1,267 1,651 77%

Dielac 2 powder milk factory 1,906 869 958 91%

Da Nang dairy factory 421 158 176 90%

Office branches, warehouses 598 18 233 8%

Upgrading factories, supply chain, sales department and IT

2,642 539 689 78%

VINAMILK 7,916 2,850 3,707 77%

Lam Son Dairy One Member Company Limited

253 57 181 31%

Vietnam Dairy Cow One Member Lim-ited Company

2,006 204 646 32%

International Real Estate One Member Limited Company

100 - 2 0%

Total 10,275 3,111 4,537 69%

In general, the Company has been focusing all efforts, resources for big and important projects. In which, two key projects, Vietnam milk factory and powdered milk factory, have been constructed under good control of timeline and project quality. The unpaid budget 2012 will be transferred to 2013.


i. Vietnam powder milk factory

This is the second powdered milk factory of Vinamilk. The construction was started on October 1st 2011 on its location of 6 hectares in Vietnam - Singapore Industrial Park I, Binh Duong province.

At the moment, the factory has been finished the basic construction and installation of machinery and equipment, and being completed the remaining parts in order to prepare for its trial run in January 2013. The technology of machinery and equipment for this factory is from Europe which meets the international standards. The dryers are the key equipment technology and considered as the heart of the factory. The factory has two dryers and their capacity is the biggest in Asia. The diameter of each dryer is 13.6 meters and 32 meters high.

On 24 April 2013, the factory will be opened, on the occasion of the 38th year anniversary of the independence of the South (30/04/1975 – 30/04/2013).

Some pictures during its construction

Pasteurized area: completion of test, GEA had trial run and cleaned the system by water

Designed concept (3D)

Detailed status of the 02 key projects

Panorama: basic completion

To lift dryers by 40.6 meters high

26 Annual Report 2012 27

Main workshop area before installing machinery

& equipment

Packaging area of liquid milk production lines

Intelligent warehouse under construction

Purchase of fresh milk:

Purchased volume in 2012 was 161,591 ton, achieved by 100.64% as compared to the budget and increased by 12.24% as compared to that of 2011. In which, the purchase from Vietnam Dairy Cow One Member Limited Company was 20,051 ton.

Dairy cow development:

Currently, Vinamilk has five cow farms with 8,200 cows in total. The size of each farm is from 2,000 – 3,000 heads. The total cows imported during the year were 664 heads.

According to our strategic business plan 2012 – 2016, Vinamilk will increase the number of cows at our farms to 25,500 heads by 2015 and to 28,000 heads by 2016. The Company continues to work with local authorities in order to invest more 04 cow farms in Thanh Hoa, Tay Ninh and Ha Tinh. The total investment for these 04 farms is more than VND1,500 billion.

5. Dairy cow development

ii. Vietnam dairy factory

The construction was started on 01 September 2011 on its location of 20 hectares in My Phuoc 3 Industrial Park, Binh Duong province. Machinery and equipment were directly imported from well-known suppliers in Europe. Especially, the factory will be equipped with the entirely auto warehouse, called the intelligent warehouse. We have finished the main construction work and installa-tion of machinery and equipment and being completed the remaining parts in order to prepare for its trial run commercial operation in quarter 2 of 2013.

Tanks for pasteurized milk

Some pictures during its construction:



“Cows carried by special aircraft”: A special aircraft of giant Boe-ing 747, marked MH 6204, of Malaysia airline carrying 300 cows (adult and pregnant cows) from Australia safely arrived at Tan Son Nhat airport at 8:05PM on 15 may 2012.

This is the 8th import from Australia, importing high quality cows in order to add more cows into Vinamilk’s farms. Since 2009, Vinamilk has imported more than 4,000 HF high productivity heads from Australia and New Zea-land. All cows have clear profile (certified by Australian/ New Zealand Seed Federation), and approved by Vietnamese /overseas veterinary institutes.

Improving quality and increasing volume of raw fresh milk

In order to produce high quality products, it is required to have a complete process: raising cows – feed – environment – harvesting – processing into finished products. Such process has been developed for years at Vinamilk, especially the strict control over source of raw fresh milk supply and production process. All cows at our five farms, together with thousands of cows from local farmers are taken care in due course and in compliance with technical guidelines in order to ensure raw fresh milk is at high and pure quality. Annually, Vinamilk purchases about 60% fresh milk vol-ume of the whole country with the improving quality. The Company not only creates jobs for local farmers, but also contributes to the development of the Vietnamese dairy industry for its stability and sustainability.

For coming time, Vinamilk continues its supporting policy in order to improve qual-ity of cow breed, productivity and develop more industrial cow farm models. Local farmers will be able to buy high quality cow breed and sperm which Vinamilk im-ports from well-known companies in the world.

Special aircraft carried cows to arrive at Tan Son Nhat airport “Cow girls” enjoyed hearty meal before going to the milking house


6. Improvements on organization struc-ture, policies and management:

a. Deploy the online sales system:

In 2012, Vinamilk has signed contract with Viettel sup-plier in order to deploy the online sales system nation-wide. The advantages of this system over the existing sales system are:

• Using Tablet with more functions than Palm.

• Real-time information, help to update sales by each retailer, showroom and distributor fast. Mon-itor salesmen’s location, sales supervisors, sales routes and retailers visited during day.

• Improve the accuracy of information about retail-ers/ customers, plan sales routes better and moni-tor and supervise sales staff better.

• Help sales forces at different levels in their man-agement and reporting more efficiently. Improve professionalism, management knowledge and fast reaction to the changes of the market condi-tions. Improve the quality of training and remind-ing staff timely.

• The Company’s management team has updated information of sales from all distributors, show-rooms in real- time and have intelligent business analysis reports.

• Develop customer service programs, customer membership,….

In 2012, the Company has deployed this system to 29 distributors in Ho Chi Minh City and it is expected to complete this deployment for remaining distributors nation-wide by this June 2013.

b. Promulgate the Company’s corporate governance in accordance with IFC’s guidances and standards.

c. Promulgate the Company’s social responsibility policy.

d. Finalize the method, content and standard for prepar-ing the sustainability report (the Company’s social re-sponsibility) for 2012.

e. Deploy the stage 1 of the security system in accordance with ISO 27001.

f. Risk management: Develop and improve the risk man-agement system under KPMG’s consultancy. Please refer to Risk management report, page 79. This is a significant step in improving the Company’s quality of corporate governance.

g. Human resources:

• Adjusted organisational structure and manage-ment of sales, Supply Chain to improve the effi-ciency of sales and distribution activities.

• Issue the professional competence kit– the stand-ard competence. Apply them in staff performance appraisal.

• Issue and apply the new salary frame and remu-neration by work performance.

• Issue the new policy on supporting working con-ditions across the Company.

7. Business plan in the future

The Company’s business objectives in mid-term and long-term are defined as follows:

The overall long- term business strategy:

• Focus on our core business of producing dairy: fo-cus on 04 key categories of liquid milk, condensed milk, powdered milk and spoon yogurt.

• Develop more into healthy beverage with key products such as fruit juices, soy milk, traditional drinks e.g green tea, aloe drink, lemonade,…

• Look for investment opportunities in foreign coun-tries in order to ensure the stability and safety of raw materials supply and develop export markets.

• Continue to improve the local distribution net-work, open more retailers and increase the deliv-ery coverage.

• Continue to expand the export markets.

The approved strategic plan for 2012 – 2016 :

(VND billion) 2011 2012 2013 2014 2015 2016 CAGR

Total revenues 22.071 26.480 31.780 38.130 45.760 54.900 20%

Profit before tax 4.979 5.625 6.355 7.180 8.115 9.170 13%

Profit after tax 4.218 4.690 5.230 5.720 6.180 6.870 10%

(Extracted from the solution of the shareholders ‘ meeting 2012)

Plan on capital expenditures

The AGM approved the additional capital expenditure of 1,545 billion VND (including 373 billion VND for provi-sion) for 2012-2016, totalling to 10,275 billion VND until 2016. The additional capital is used for:

• Expansion of Lamson Dairy factory to serve Thanh Hoa province and neighboring regions: 137 billion VND.

• Infrastructure upgrade for sales and offices: 238 billion VND.

• Expansion of the existing farms and building more new farms, increasing Vinamilk’s current herds of 8,200 cows to 30,000 cows by 2020: 1,170 billion VND.

Therefore, total investment until 2016 is as follows:

(VND billion) Total investment Already paid Budget 2012 Budget

2013 - 2016

TOTAL 10,275 2,572 4,537 3,166

VINAMILK 7,916 2,489 3,707 1,720

Viet Nam dairy factory project 2,349 415 1,651 283

Dielac II dairy factory project 1,906 569 958 379

Da Nang dairy factory project 421 204 176 40

Branch office building, warehouses 598 75 233 291

Expansion at existing factories, branches

2,642 1,225 689 727


253 47 181 25

Vietnam Dairy Cow One Member Limited Company

2,006 36 646 1.323


100 0 2 98

(Extracted from the resolution of the AGM 2012)


Seq. Name of awards/achievements Time Granted by

1 National brand 2012 Jan, 2013Ministry of Industry & Com-

merce

2 Strong brand Mar, 2012 VnEconomy

3 Top 5 Vietnamese high quality product 2012 Mar, 2012 SGTT News

4 Trust & Use product Nov, 2012 VnEconomy

5Leading contribution to “Vietnamese using Vietnam-ese products 2012”

Nov, 2012Daklak people’s committee

(Credit)

6Excellent achievement in the campaign “Vietnamese using Vietnamese products 2012”

Jan, 2012HCM City people committee

(Credit)

7One of Top 500 Vietnamese fastest growing enter-prises

Mar, 2012 Fast 500

8 Top 50 most profitable enterprises in Vietnam May, 2012 Nhip Cau Dau Tu News

9Excellent efforts in organization of “Net Ve Xanh” Contest

Apr, 2012 Vietnamese High Quality

10Excellent efforts in organization of “Net Ve Xanh” Contest

Jun, 2012HCM City people committee

(Credit)

11 Top 30 Best Annual Report 2012 Jul, 2012HOSE and Securities Invest-

ment magazine

12Credit from State Securities Commission for the Best Annual Report in 5 years: 2008 – 2012

Jul, 2012 State Securities Commission

13 The best Investor Relations 2012 in Vietnam Jul, 2012 VietStock Communications

14“Green business for 3 factories: Truong Tho, Thong Nhat and Sai Gon

Dec, 2012SGGP News and Department

of natural resources & environ-ment

8. Awards and achievements in 2012

During the year, the Company has achieved several awards and achievements from the local and foreign bodies:

Seq. Award name Time Granted by

1 Top 50 Asia's Most Powerful Businesswomen. Mar, 2012 Forbes Asia

2 One of Top 51 excellent Businesswoman in Asia, 2012. May, 2012Corporate Govern-ance Asia Journal

3 Best Corporate Investor Relations 2012Corporate Govern-ance Asia Journal

4Top 50 for Achievement In Business - Asia's Women In The Mix:

Mar, 2013 Forbes Asia

Besides the above awards, Madam Mai Kieu Lien (Chairwoman and CEO) was honoured with 04 achieve-ments:

34 Annual Report 2012

We have more than 200 SKUs which are grouped into the following categories: Powdered milk, infant cereals and nutrition products Condensed milk Liquid milk Yoghurt, ice-cream, cheese Soy milk, fruit juices and beverage

BOUNDLESS energy

for a beautiful life

PRODUCT PORTFOLIO

37VINAMILK - Never Stop Growing36 37Annual Report 2012

POWDERED MILK, INFANT RECEALS AND NUTRITION PRODUCTS

Some products by each category:



LIQUID MILKCONDENSED MILK



SOY MILK, FRUIT JUICES & BEVERAGE

YOGHURT, ICE-CREAM & CHEESE


CORPORATE PROFILE

1976

Our Company was founded under the name of Southern Coffee-Dairy Com-pany, a subsidiary of the Food General Directorate and had two factories in operation, namely Thong Nhat Dairy Factory and Truong Tho Dairy Factory.

1978

The Company had more factories: Bich Chi Powder Factory, Lubico Cake Fac-tory and Bien Hoa Coffee Factory. The Company was transferred to the Minis-try of Food Industry and the Company was renamed United Enterprises of Milk Coffee Cookies and Candies I.

1989

Dielac Powdered Milk Factory came into operation and introduced its first batch of products to the market in Vietnam.

1991

The “white revolution” started the de-velopment of fresh milk. The first time we launched UHT milk products and yoghurt to the Vietnam market.

1992

The United Enterprises of Milk Coffee Cookies and Candies I was formally renamed Vietnam Dairy Company and came under the direct management of the Ministry of Light Industry.

1994

In the expansion plan to meet the mar-ket demand in the North, the Company built the Hanoi dairy factory.

On 7 October 1994, the sales office was opened and responsible for sales activi-ties in the north provinces.

1996

Binh Dinh Dairy Joint Venture Enter-prise was founded as the result of our joint venture with Dong Lanh Quy Nhon Joint Stock Company. Ha Noi Dairy Factory came into operation.

In May 1996, Da Nang sales office was opened and responsible for sales activi-ties in the central provinces.

43

CORPORATE INFORMATION

A steady growth & improvement



1998

Can Tho sales office was opened in order to develop sales activities in the mekong delta provinces.

2001

Can Tho Dairy Factory was inaugurated and put into operation in the Mekong Delta.

2003

The company was formally transformed into a joint stock company in November 2003 and renamed as Vietnam Dairy Prod-ucts Joint Stock Co., to reflect its change in legal status.

2004

Acquired Saigon Milk Joint Stock Com-pany and increased share capital of the company to VND 1,590 billion.

2005

Bought our joint venture partner’s remain-ing equity in Binh Dinh Dairy Products Company Ltd (which was then known as Binh Dinh Dairy Factory) and inaugurated Nghe An Dairy Factory, located in Cua Lo Industrial Zone, Nghe An province, on 30 June 2005.

2006

Vinamilk was listed on Hochiminh City Stock Exchange (HOSE) on 19 January 2006.

In June, An Khang Clinic was opened in Ho Chi Minh City. The clinic provides nutrition advices, paediatrics, and gen-eral health checks for all functions. It is the first clinic in Vietnam to be managed information by electronics.

In November, we started our cow farm development by buying Tuyen Quang cow farm with 1,400 heads. The farm was put into operation afterwards.

2007

In September 2007, the Company acquired a controlling stake of 55% in Lam Son Milk Company Ltd., located in Le Mon Industrial Zone, Thanh Hoa province and changed its name into Lam Son Milk Joint Stock Company.

2008

Tien Son Dairy Factory was inaugurated and put into operation in Hanoi.

2009

In September, the cow farm in Nghe An was opened. This is the most modern farm in Vietnam with its designed size of 3,000 cows.

2010

The Company started its strategy of invest-ment overseas by contributing nearly USD 10 million (equivalent to 19.2% of the project’s share capital) in powdered milk project in New Zealand.

Acquired 100% shares from F&N Vietnam Limited and changed its name to Dielac Dairy One Member Co., Ltd. This is 100% new and the second powdered milk fac-tory of Vinamilk.

Acquired the remaining shares of Lamson Milk Joint Stock Company and changed its name to Lam Son Dairy One Member Co., Ltd.

Inaugurated and put the Beverage Factory into operation in Binh Duong.

Vinamilk was honored by Forbes Asia for its “Top 200 Best Under A Million” in Asia 2012. This was the first and unique a Viet-namese company was honored in the list of Forbes Asia.

2012

In June 2012, Da Nang dairy factory was opened and put into commercial opera-tion.

45VINAMILK - Never Stop Growing


DETAILS OF SUBSIDIARIES AND ASSOCIATES

100%Vietnam Dairy

Cow One Member Co., Ltd

100%Lam Son Dairy One Member

Co., Ltd

15%Asia Saigon Food

Ingredients JSC

19,3%Miraka Limited

100%International Real

Estate One Member Co., Ltd

Seq. Company name Nature of businessShare capital (VND billion)

Owned byVinamilk (%)

1Vietnam Dairy Cow One Member Co., Ltd.

Breeding dairy cows 1,550 100

2Lam Son Dairy One Member Co., Ltd.

Producing and trading dairy products and beverages

80 100

3International Real Estate One Member Co., Ltd

Real estate business (not yet operating)

160 100

4 Asia Saigon Food Ingredients JSC.Producing cream powder used for foods

120 15

5 Miraka LimitedManufacturing and trading dairy products

NZD 55 million 19.3

47

Vietnam Dairy Cow One Member Co., Ltd

Was founded on 11 July 2007 and 100% owned by Vinamilk. It builds the model cow farms to provide the breed and technology support to farmers to secure the stable and good quality fresh milk supply to the parent company as input materials.

All these farms are received intensive investments into breeding cows, quality input feeding, breeding facilities and milking technology meeting the Europe standards in order to ensure that fresh milk materials are at the best quality. This is the key material source for the production of 100% fresh milk products of the parent Company’s factories.

As at 31 December 2012, this company manages five dairy cow farms in Tuyen Quang, Nghe An, Thanh Hoa, Binh Dinh and Lam Dong with 8,200 heads (2011: 6,712 heads).

During 2012, this company also supplied 20,051 tons of raw fresh milk to Vinamilk, increased by 56% as compared to 2011 (12,848 tons).

Please refer to page 27 – 29 for more information about our cow farm development.


Annual Report 201248 49

MILKING WORKER – WORKING PASSION

The milking process plays an important part in ensur-ing that milk harvested by Vinamilk is nutritious and conforms to all food safety standards. Cleaning and pasteurizing phases must strictly comply with the process as detailed below in order to harvest fresh milk of the best quality and highest hygienic standards. The farm workers on the milking team receive periodical medical check-ups and tests so as to ensure that they are always in the best health

Milking workers comply with the following process:

• Step 1: Clean cow udders• Step 2: Extract first milk-ray• Step 3: Clean teats• Step 4: Plug teat cups of milking machine into cow

udders• Step 5: Pasteurize teats after milking

All steps require workers to be gentle and friendly with the cows to ensure expedient and effective milking. Workers are not allowed to use phones, to talk loudly, or to hurt, startle, or scare the cows because these ac-tions reduce the amount of Oxytocine released.

All farms are equipped with automatic milking system of advanced technology from nations in G7 (European standard), all cows have chips attached to identify and monitor daily milk ca-pacity, and also remove sick cows before mov-ing to milking rack. Cows are milked twice a day: morning shift from 4.00 to 8.00; evening shift from 16.00 to 20.00.

A herd of cows are wandering in a green field in Thanh Hoa Farm

The cows are eagerly waiting for their turns

Workers are performing in modern milking rack (60 cows/turn, each turn lasts 8-10 minutes)



The company has the factory located in Le Mon Industrial Park, Thanh Hoa City, Thanh Hoa Province.

This factory is planned to produce mainly liquid milk and yoghurt under Vinamilk’s brand and orders in order to serve the local market demand in the surrounding provinces.

This company is expanding its production capacity up to 49.28 litres of liquid milk and 156 million jars of yoghurt.

Some basic financial information:

(VND billion) 2012 2011

Total sales 331 284

Profit before tax 43 61

Profit after tax 39 61

Total assets 220 164

Lam Son Dairy One Member Co., Ltd

51

Was founded on 22 February 2006 to invest in real es-tate. However, Vinamilk’ s strategy is to focus on its core business and as such the company has been dormant.

International Real Estate One Member Co., Ltd



Was founded on 7 May 2008. Its current share capital is VND 120 billions of which Vinamilk contributed by VND 18 billion, equivalent to 15%.

The designed capacity of the factory is 11,000 ton/year, producing raw materials used in the foodstuff process-ing industry. The company started its first commercial production in May 2011.

Asia Saigon Food Ingredients JSC

Its share capital is NZD55 million, in which Vinamilk has contributed NZD 12.5 million (equivalent to 19.3%). This is the first investment project in overseas. The plant is located in the central of Taupo, New Zealand The plant buys raw fresh milk from the local farmers in Taupo and produces high-quality milk powders to oversea markets.

This high-quality milk powder plant has the capacity of 32,000 ton/ year. The plant is equipped with modern technology at the international standard. The plant is powered by renewable steam and electricity from the

nearby Tuaropaki geothermal power station.

The plant is of high automation, robot can replaces a lot of human forces.

This is the right investing strategy for long-term view in order to better secure the high- quality and stable supply of milk materials for Vinamilk.

Miraka started its commercial operation in August 2011 and achieved 100% capacity utilization by Au-gust 2012.

Miraka Limited

Some basic financial information:

(VND billion) 2012 2011

Total sales 277 114

Profit before tax 44 (13)

Profit after tax 44 (13)

Total assets 224 212

Some basic financial information: the fiscal year ended as at 31st July

(NZD) 2012 2011

Total sales 125,361,635 -

Profit before tax 2,555,950 (1,892,902)

Profit after tax 1,813,662 (1,366,624)

Total assets 97,082,279 75,137,435

SHARE-HOLDERS’ MEETING

BOARD OF MANAGEMENT

INSPECTION COMMITTEE

INTERNAL AUDIT

DIRECTOR

INTERNAL CONTROL AND

RISK MANAGEMENT

DIRECTOR

CHIEF EXECU-TIVE OFFICER

INFORMATION TECHNOLOGY DIRECTOR (IT)

PRODUCT DEVELOPMENT

DIRECTOR

EXECUTIVE DIRECTOR

RAW MATERIALS DEVELOPMENT

EXECUTIVE DIRECTOR

PRODUCTION and R & D

EXECUTIVE DIRECTOR

SUPPLY CHAIN

EXECUTIVE DIRECTOR FINANCE

EXECUTIVE DIRECTORPROJECT

EXECUTIVE DIRECTOR

MARKETING

EXECUTIVE DIRECTOR

SALES

EXECUTIVE DIRECTOR

HR & ADMIN PUBLIC RELATION DIRECTOR


ORGANIZATION AND MANAGEMENT STRUCTURE



THE BOARD OF MANAGEMENT

Ms. Mai Kieu Lien Chairwoman and Chief Executive Officer

The Board of Management consists of 05 members with the current board period of 05 years from 2012 to 2016. During the year, the Board has accepted a resignation letter from a member and appointed Mr. Pascal De Petrini, the representative of the major shareholder F&N Dairy Investments Pte Ltd, to the Board on 04 April 2012. The annual shareholder meeting in 2013 will approve this change.

• From August 1976 to August 1980, she was an engineer in charge of the con-densed milk production at Truong Tho Dairy Factory.

• From September 1980 to February 1982, she was a technology engineer in the Technical Department of the United Enterprises of Milk Coffee Cookies and Candies I.

• From February 1982 to June 1983, she worked as a Vice Technical Director in charge of production at Thong Nhat Dairy Factory.

• After finishing her training at Economic University of Leningrad in the former Soviet Union (currently Russia), in 1984, she was appointed Deputy Chief Ex-ecutive Officer of the United Enterprises of Milk Coffee Cookies and Candies I.

• In December 1992, she was promoted to Chief Executive Officer of Vietnam Dairy Products Company.

• From 1996 – 2001, she was a member of the Central Committee of the Viet-namese Communist Party.

• On 14 November 2003, she was elected Chairwoman of the Board of Manage-ment and thereafter appointed as Chief Executive Officer of our Company for 3 consecutive board periods: 2003 – 2007;2007 – 2011 and 2012 - 2016.

Ms. Lien graduated from Mosco University of Meat & Milk Processing Technology, Russia with a bachelor of science degree in 1976. She holds a Certificate of Leningrad Economic Management from University of Economy, Russia, and a Certificate of Government Management from National Political Institute, Vietnam.

• In 2001, she was granted the Labor Medal II by the Government.

• In 2005, she was granted the “Hero of Labor in the innovation period” and Labor Medal I in 2006 by the Government.

• In February 2012, she was in the Top Asia’s 50 Most Powerful Businesswomen, honored by Forbes Asia.

• In May 2012, she was One of Top 51 excellent Businesswoman in Asia 2012, honored by Corporate Governance Asia Journal.

• In 2012, she was in the Best Corporate Investor Relations, honored by Corporate Governance Asia Journal.

• In March 2013, she was again in the Top 50 for Achievement In Busines - Asia’s Women In The Mix, honored by Forbes Asia.

Her positions at other entities:

• Chairwoman of Vietnam Dairy Association for the period 2010 – 2015.

• Member of the management board, period 2010 – 2015 at Miraka Limited, New Zealand.


She has been Deputy General Director and Financial Direc-tor of our Company since March 2005. She joined the Com-pany in 1985 as a financial analyst, and in January 1995, she became a Vice Manager in the Accounting-Statistics Department of the Vietnam Dairy Products Company. She held this position until December 1997 and served be-tween January 1998 and February 1998 as the Head of the Accounting – Statistic Department. From February 1998 to March 2005, she held the position of the Chief Accountant in charge of the Accounting Department of the Vietnam Dairy Products Company. In March 2005, she was appoint-ed Deputy General Director and Finance Director. From 20 August 2009, the title of Ms. Trang has been changed to Executive Director Finance.

Ms. Trang graduated from the Finance-Accounting Uni-versity of Ho Chi Minh City, majoring in accounting and finance in 1984.

She also holds a Master of Business Administration degree in 1998.

Member of the Board of Management since April 2012. His work and experience are summarized below:

• From August 1996 to October 1996: Lawyer, Fresh-fields Law firm, Ha Noi branch.

• From October 1996 to November 2003: Officer at Insurance Department, Ministry of Finance

• From November 2003 to August 2006: Vice Depart-ment Head of Insurance Department, Ministry of Finance

• From August 2006 up to now: Deputy General Direc-tor of the State Capital Investment Corporation.

His positions at other entities:

• Member of the Board of Management (concurrently) – Bao Minh Joint Stock Corporation

• Member of the Board of Management (concurrently) – Vietnam National Reinsurance Joint Stock Corporation

• Member of the Board of Management (concurrently) – FPT Joint Stock Company

• Chairman of the Board of management (concurrently) – Trang Tien Investment & Trading Co., Ltd

Education background: Master degree in Laws

Ms. Ngo Thi Thu Trang

Member, Executive Director Finance

Mr. Le Song LaiMember

Mr. Minh holds a Bachelor of Administration and Econom-ics from Vietnam’s University of Banking in 1991. He ob-tained his Master of Business Administration from Wharton Business School, University of Pennsylvania USA. He first started working for Peregine Capital Vietnam under the fi-nancial institutions group. He was credited for the success-ful acquisition of Dai Nam Bank, a first case for Vietnam, and restructured the bank within 12 months. He was the Deputy CEO of Dai Nam Bank from 1994 to 1996 manag-ing the Business Development and Credit portfolio. Later he became the Chief Finance Officer in Coca Cola South-east Group for four years. He joined Dragon Capital Group Limited in 2002 with position of Director of Finance. Beside his enterprise financial activities, he is currently a member of the Investment Council of several investment funds and securities companies.

Member of the Board of Management since April 2012. From 1984 to 2011, he worked for Danone Group, France. His last appointment with Danone was Vice President of Danone Baby Nutrition Asia Pacific (Singapore) from 2007 to 2011. From 2011 to today, Mr. De Petrini was appointed Chief Executive Officer, Food & Beverage of the Fraser and Neave Limited, Singapore.

Mr. Pascal De Petrini graduated with a Master’s degree from Mines De Nancy, France, in 1981 and a Master of Science in Management, ESSSEC, France, in 1983.

Mr. Le Anh MinhMember

Mr. Pascal De PetriniMember


(Refer to “Board of Management” for information about Ms. Mai Kieu Lien on page 56 – 57)

Ms. Mai Kieu LienChairwoman and Chief Executive Officer

THE BOARD OF EXECUTIVE DIRECTORS

The Chief Executive Officer is assisted by the Executive Board

with 08 members in charge of different operational functions

and 04 functional Directors reporting directly to the Chief Ex-

ecutive Officer.

During the year, the Board of Management has approved the

resignation letter from Mr. Pham Phu Tuan, Acting Executive Di-

rector Sales for his personal reason to live abroad and the Board

has appointed Mr. Mai Hoai Anh to replace this position since

May 2012.

Ms. Hang first joined our Company in 1981 where she held the position of Deputy Manager in the consumption depart-ment until 2001. She was later promoted to the position of Director of Logistics Enterprise in August 2001 and held this position until December 2002. Then Ms. Hang was promoted to Deputy General Director in January 2003, where she was in charge of the technical project department. From July 2006, Ms. Hang was in charge of customers services and then in charge of managing and developing dairy farms that sup-ply fresh milk to the Company. In July 2007, Ms. Hang was appointed Director of Vietnam Dairy Cow One Member Co., Ltd., a subsidiary of Vinamilk. From 20 August 2009, the posi-tion of Ms. Hang has been changed to Executive Director in dairy development.

Ms. Hang graduated from the Ho Chi Minh City University of Economics with a Bachelor degree in business administra-tion.

Between September 1978 and June 1983, Ms. Hoa was a lecturer at the Ho Chi Minh Polytechnic University. She later joined our Company in 1983 as a Process Engineer at Truong Tho Dairy Factory. Ms. Hoa held the position of Deputy Direc-tor and then Director of Truong Tho Dairy Factory from July 1991 to 1999. In December 1999, Ms. Hoa was appointed Deputy General Director of our Company. From 20 August 2009, her title has been changed to Executive Director in charge of supply chain. She is currently in charge of plan-ning, import - export, customer services departments, sup-ply chain and logistics enterprises of our Company.

Ms. Hoa graduated from Moscow University of Meat & Milk Processing Technology (now called Moscow National Gen-eral University of Applied Biology Technology) in 1978 with a Bachelor degree in Milk Processing Technology.

Ms. Nguyen Thi Nhu HangExecutive Director Raw Materials Development

Ms. Nguyen Thi Thanh HoaExecutive Director Supply Chain

Mr. Mai Hoai Anh was appointed Executive Director Sales in May 2012. He has been working for Vinamilk more than 16 years holding different positions as follows:

• From February 1996 to April 2001: staff in Import – Export department.

• From May 2001 to December 2003: Vice department head of Import – Export department.

• From January 2004 to December 2004: Department Head of Import – Export.

• From January 2005 to May 2012: Import – Export Director.

• From May 2012 to today: Executive Director Sales.

Mr. Mai Hoai Anh graduated from Ho Chi Minh Economics University with a bachelor degree and Master of Business Ad-ministration in 2011 from Bolton University, United Kingdom.

Mr. Mai Hoai AnhExecutive Director Sales


Between 1990 and July 1994, Mr. Van was a Deputy Director assisting the Director of Thong Nhat Dairy Factory. In August 1994, he was appointed Director of the Thong Nhat Dairy Factory and continued to hold this position until June 2006. He was appointed Deputy General Director in charge of the Project Department of our Company in July 2006. In Decem-ber 2006, Mr. Van was appointed Director of a subsidiary namely, International One-Member Real Estate Investment Co., Ltd. From 20 August 2009, position of Mr. Van has been changed to Executive Director in charge of projects.

Mr. Van graduated from Ho Chi Minh City Polytechnic Uni-versity in 1981 with a Bachelor degree in engineering. He obtained a Bachelor in Business Administration from Ho Chi Minh City University of Economics in 1994, a Bachelor of Law with major in commercial laws from Ha Noi University of Laws in 2001 and a Master in Business Administration from Ha Noi Polytechnic University in 2004.

Has been holding the position Executive Director Production And R & D in charge of production and product development since September 2009, he currently is responsible to manage factories and research and development center of our Com-pany. Mr. Khanh joined our Company in January 1988 at the position of KCS at checking department, Thong Nhat Dairy Factory. In 1996, Mr. Khanh was appointed Deputy Manager of production workshop, then was Manager of production workshop of Thong Nhat Dairy Factory in 1998. In 2003, Mr. Khanh was promoted to the position of Acting Director of Can Tho Dairy Factory. In 2004, he was appointed Director of Can Tho Dairy Factory and held this position until September 2009.

Mr. Khanh graduated from Ho Chi Minh City Polytechnic Uni-versity in 1987, majoring in Chemical Technique and Foods. He also held a Bachelor in Business Administration from Ho Chi Minh City University of Economics in 1997 and a Bachelor of English from Ho Chi Minh City University of Social Science and Humanism in 2001.

Mr. Tran Minh Van

Executive Director Project

Ms. Ngo Thi Thu Trang

Member, Executive Director Finance

Mr. Nguyen Quoc Khanh

Executive Director Production and R&D

Ms. Tran joined Vinamilk in July 2008 at the position of Di-rector in charge of developing marketing strategy. In August 2009, she was appointed Acting Executive Director, in charge of Marketing. She is responsible to developing Marketing strategies for dairy and beverage products of our Company. Previously, Ms. Tran served as Marketing Manager for Pepsi Vietnam Co., Ltd. between 2003 and 2005. She was then moved to Pepsi Malaysia at position of Marketing Manager. Prior working for Vinamilk, Ms. Tran had a period working for Tan Hiep Phat Group at the position of Marketing Manager.

Ms. Tran graduated from Ho Chi Minh City University of For-eign Trade.

Ms. Nguyen Huu Ngoc Tran

Acting Executive Director Marketing

THE BOARD OF EXECUTIVE DIRECTORS

(Refer to “Board of Management” for information about Ms. Ngo Thi Thu Trang on page 59)


THE INSPECTION COMMITTEE

Order from left to right

Mr. Nguyen Trung KienHead of Inspection Committee

Member of the Inspection Committee since March 2009, Mr. Kien is currently the Director of MDKT Co., Limited. From 2001, he was an analyst on the corporate finance and M&A team at Credit Suisse First Boston, Singapore. After that, Mr. Kien was an Manager on the structured finance team at Commonwealth Bank of Australia, New York branch, USA. From 2004 to 2005, he was Assistant Vice President, Corporate Develop-ment at OCBC Bank, Singapore where he helped with the analysis and execution in the M&A activities for the bank. Subsequently, he joined the investment team at Temasek Holdings, Singapore as an Associate Direc-tor. Mr. Kien was the founder and Managing Director of TNK Capital in Vietnam from 2008 to 2011.

He was awarded a Bachelor of Applied Finance from Macquarie University, Australia and a Master of Business Administration from University of Chicago Booth School of Business, USA.

Mr. Nguyen Anh TuanMember

Member of the Inspection Committee since March 2008, Mr. Tuan was a founder, the Board’s Chairman and General Director of Goldengate Medical Supplies Joint Stock Companny since 2004. From 1990 to 1992, he was an officer of the Department of Monetary-Credit Research of the State Bank of Vietnam. From 1992 to 1994, he was a Sales Executive of Gold & Gemstones Corporation of the State Bank of Vietnam. In 1994, he moved to work as a Sales Executive for the representative office of Taisei Corporation of Japan and had been working here until 1997. In 1999, he joined Johnson & Johnson Medical, United States as a Marketing Direc-tor in charge of ASEAN region and stayed here until 2004.

Mr. Tuan graduated from American University, Washington D.C., USA with Master Degree in Business Ad-ministration.

Mr. Nguyen Ngoc Vu ChuongMember

Member of the Inspection Committee since April 2012. From 2006 to 2009, he was a credit officer for Asia Commercial Bank (ACB) and an investment analyst for ACB Capital. He also concurrently joined a team to set up the ACB’s financial leasing company during this time. From 2010 to present, he is a portfolio manage-ment officer at the State Capital Investment Corporation (SCIC), in charge of investment portfolio of aquac-ulture, real estate and sugar companies in Ba Ria – Vung Tau and Soc Trang provinces.

Mr. Chuong graduated from Ho Chi Minh Banking University, major in Finance & Banking. He also passed level 2 of the Chartered Financial Analyst (CFA), USA. In addition, he also had different certificates on Stock market, Securities law and Asset management, granted by the State Securities Commission.

The award named The Most Powerful Businesswomen In Asia is honored annually by this Journal to recognize the talented business leaders. There is a unique and one representa-tive from Vietnam, the Chief Executive Office of Vinamilk, among 51 Asian business leaders.

67

THE CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE REPORT

The two events below marked the important turn-point in the corporate governance at Vinamilk:

ACGA’s members comprise of 94 members, in which 56 members from Asia- Pacific and 38 members from Europe and North America. They are global and regional pension and in-vestment funds, financial institutions, listed and unlisted companies, law and accounting firms, and educational institutions. Vinamilk is the first Vietnamese member of this organi-zation. The organization members can engage in a constructive dialogue with other busi-nesses and individuals on practical issues affecting the implementation of better corporate governance practices.

Corporate Governance Asia Journal, Hongkong just selected Ms. Mai Kieu Lien – Chairwoman and Chief Executive Officer of Vinamilk as the Most Powerful Businesswomen in Asia”.

Vinamilk becomes first Vietnamese en-terprise join the Asian Corporate Gov-ernance Association (ACGA), Hongkong.Vinamilk

is approaching to the best practice

of the corporate governance



1. Responsibility of the Board

The responsibility and duty of the Board are stipulated in the Company’s charter and corporate governance statute. Accordingly, the Board is responsible for de-velop the strategy and determine the priorities of the Company’s operations, determine the business direc-tions, manage and make decisions for matters which do not belong to the authorization of the shareholders’ meeting.

The main responsibilities of the Board comprise of con-tents below:

• Supervise the strategy and monitor the opera-tions, appoint and supervise the Chief Executive Officer and the senior managers.

• Ensure the shareholders’ right through organizing the annual shareholders’ meeting, develop the dividend policy and solve the conflicts of interest between the Company and its shareholders.

• Responsibilities relating to the Company’s share capital and assets.

• Disclose information and its transparency..

In 2012, the Board has executed its responsibilities and

duties accordingly.

2. Board composition and its structure

The Board term of 2012 – 2016 has 05 members as be-low:

- Ms. Mai Kieu Lien : Chairwoman

- Mr. Wang Eng Chin : Member

- Mr. Lê Song Lai : Member

- Mr. Lê Anh Minh : Member

- Ms. Ngô Thị Thu Trang : Member

During the year, the Board has approved the resigna-tion letter from Mr. Wang Eng Chin. Mr. Pascal De Petrini was appointed to the Board in accordance to the Board’s Resolution No. 20/NQ-CTS.HĐQT/2012 , dated December 4th 2012. The nearest shareholders’ meeting (2013) will consider and approve this appointment.

The Board has 3 non-executive members whose brief biography is mentioned from page 56 – 59 of this an-nual report.

Vinamilk’s Board members consist of those who have much experience and capability in business, finance, accounting and corporate governance. These mem-bers have an independent view on their work and great contribution to the Company.

3. Term of appointment

The Board term is 05 years. The new Board term 2012 – 2016 was approved at the annual shareholders’ meeting held on 23-March-2012.

In addition, according to the Company’s Charter, there is at least 1/3 Board members to be re-elected at each an-nual shareholders’ meeting.

4. The Board’s Committees

To facilitate the effective management, the Board has established its 04 committees as follows:

Seq. Committee name Head of committee Member

1 Strategy and development committee Mr. Le Song LaiMs. Mai Kieu LienMs. Ngo Thi Thu Trang

2 Audit committee Mr. Le Anh Minh Mr. Wang Eng Chin (*)

3 Nominating committee Ms. Mai Kieu LienMr. Le Song LaiMr. Le Anh Minh

4 Remuneration committee Mr. Wang Eng Chin (*) Ms. Ngo Thi Thu Trang

Note: (*) Mr. Pascal De Petrini was temporarily appointed as a Board member to replace Mr Wang Eng Chin’s position at the committees since December 2012.

These Board’s Committees operate under clearly defined principles and practices in accordance with the Com-pany’s corporate governance.

5. The Board’s meetings and attendance

The Board conducts its meeting on a quarterly basis during the year. The extraordinary meetings are convened when circumstances required. The members of the Inspection Committee are also informed and invited to attend the meetings of the Board for their supervisory purpose.

The attendance record of Board meetings held during the fiscal year ended 31 December 2012 is set out in the table below:

Stt Full name Number of meetings Number of attendance

• Ms. Mai Kieu Lien 4 4

• Mr. Le Song Lai (*) 3 3

• Mr. Le Anh Minh 4 4

• Ms. Ngo Thi Thu Trang 4 4

• Mr. Wang Eng Chin 4 4

• Mr. Hoang Nguyen Hoc (*) 1 1

(*): Mr. Le Song Lai was appointed to the Board and Mr. Hoang Nguyen Hoc’s term of office expried in accordance with the resolution of the shareholders’ meeting held on 23/03/2012.

A. MATTERS ON THE BOARD OF MANAGEMENT CONDUCT OF AFFAIRS (“THE BOARD”)


• Approved the bonus multiples for the Executive Team and the Chief

Account based on 2012 business results.

• Approved the adjustment and change in the ERM’s structure upon the

proposal of KPMG.

• Approved issues on CSR report upon GRI standards.

• Approved the establishment of Vinamilk’s representative office in

Cambodia.

• Approved the charter capital increase of 710 billion dong of Vietnam

Dairy Cow Co., from 840 billion to 1,550 billion dong. The capital con-

tribution should be made upon the progress of the project.

Main contents of the Board meetings are as follows

Meeting Numbers of Attendants Content

Meeting 1

1/31/2012

5/5

Observers: IC members

• Approved the business result in 2011.

• Approved the plan to organize AGM 2012.

• Approved the business plan for 2012-2016 to propose to the AGM.

• Approved the 2012 remuneration for BOM, IC to propose to the AGM.

• Approved the dividend of 2012 to propose to the AGM.

• Amended ESOP policy: For an employee who has passed away, his

her shares should be lifted. For an employee whose ESOP shares are

being recalled (the payment has been made to him/her) whereas the

procedures have not been completed, the benefits rising from their

being-recalled shares are revoked as well.

• Approved the Board meeting schedule in 2012.

Meeting 24/27/2012

5/5


• The new-term Board reviewed issues on corporate governance as:

the outstanding issues from the previous term, the content of Board’s

authorization to the CEO, the rules and regulations required to be

issued, committees of the Board to be set up, the appointment of

company secretaries in the new term, etc.

• Determined the priorities of the Board in 2012 and in the term of

2012-2016: (i) Business targets: 20%/year growth in revenue, 13%/year

growth PBT; (ii) to build operation processes for Vinamilk to meet the

standards of listing on international markets.

• Approved the business results in Q1/2012 and the business plan for

Q2/2012.

• Approved the dissolution of Dielac Dairy One-member Ltd. and its

conversion into a branch of Vinamilk.

Meeting 37/27/2012

5/5


• Approved the business result in Q2/2012 and business plan for

Q3/2012.

• Approved the adjustment of investment plan for the period of 2012-

2016: adjustments of investment capital among the projects and

additional items. The total investment capital remained unchanged.

• Approved the record date for the first installment of dividend 2012.

• Approved the adjusted corporate governance policy, the corporate

social responsibility policy, the adjusted information disclosure policy.

• Approved the adjusted salaries for the Executive Team and the Chief

Accountant.

• Discussed on issuing bonus shares at ratio of 1 : 2 in order to collect

the shareholders’ opinions.

Meeting 411/30/2012

5/5 Observers: IC members

• Approved the business plan for Q4/2012.

• Approved the updated business plan for 2013 and updated strategic

plan 2012-2016.

• Approved lifting of ESOP shares to be conducted at every June 30th in

2013 and 2014.

After these meetings, the BOM passed the following resolutions:

No. Reference Date Description

1 01/NQ-CTS.HĐQT/2012 1/31/2012 Result of the meeting as of Jan 30th 2012.

2 02/ NQ-CTS.HĐQT/2012 1/31/2012 Adjustment of ESOP policy.

3 03/ NQ-CTS.HĐQT/2012 3/14/2012 Investment plan to 2016

4 04/ NQ-CTS.HĐQT/2012 4/27/2012 Dissolution of Dielac Dairy One-Member Co. Ltd.

5 05/ NQ-CTS.HĐQT/2012 4/27/2012 Result of the meeting as of April 27th 2012

6 06/ NQ-CTS.HĐQT/2012 5/21/2012 Approved the resignation of Mr. Pham Phu Tuan.

7 07/ NQ-CTS.HĐQT/2012 5/21/2012Appointed Mr. Mai Hoai Anh as Acting Director of Domestic and Export Sales

8 08/ NQ-CTS.HĐQT/2012 6/27/2012 Approved the remuneration for the Board and the IC 2012

9 09/ NQ-CTS.HĐQT/2012 6/27/2012 Approved the first installment of dividend 2012.

10 10/ NQ-CTS.HĐQT/2012 8/1/2012Approved collecting shareholders’ opinions on issue of bonus shares.

11 11/ NQ-CTS.HĐQT/2012 8/15/2012Approved issue of salary frame for the Executive Team and the Chief Account.

12 12/ NQ-CTS.HĐQT/2012 8/24/2012 Approved the adjusted remuneration for the Board and the IC.

13 13/ NQ-CTS.HĐQT/2012 8/29/2012 Result of the meeting as of July 27th 2012.

14 14/ NQ-CTS.HĐQT/2012 8/29/2012 Approved the transfer of TH2 dairy farm to Lamsonmilk

15 15/ NQ-CTS.HĐQT/2012 8/29/2012 Approved Tien Son factory’s expansion on workshop 3.

16 16/ NQ-CTS.HĐQT/2012 9/14/2012 Ninh Approved the investment in Tay Dairy Farm.

17 17/ NQ-CTS.HĐQT/2012 10/15/2012Approved the establishment of Vinamilk branch - Vietnam powder milk factory

18 18/ NQ-CTS.HĐQT/2012 11/14/2012 Approved the record date for issuing bonus shares

19 19/ NQ-CTS.HĐQT/2012 11/22/2012Approved the change in Resolution No.17 (regarding to ad-dress change)

20 20/ NQ-CTS.HĐQT/2012 12/4/2012Approved the resignation of Mr. Wang Eng Chin and appoint-ment of a new member.

21 21/ NQ-CTS.HĐQT/2012 12/5/2012 Result of the meeting as of Nov 30th 2012

22 22/ NQ-CTS.HĐQT/2012 12/26/2012 Approved the additional investment in Miraka’s UHT project.

23 23/ NQ-CTS.HĐQT/2012 12/26/2012Approved the establishment of Vinamilk’s representative office in Cambodia


6. Chairwoman

The Chairwoman is also the Chief Executive Officer of the Company. This concurrent holding brings more convenient and effective internal communications. The concurrent holding must be approved by the an-nual shareholders’ meeting.

7. Board membership

Vinamilk maintains a formal and transparent process for the appointment of new Board members. Any ap-pointment of a new member must undergo a formal selection process. According to the Company’s corpo-rate governance, the nominating committee will re-view and evaluate for the new candidates to the Board.

If there are changes of the Board members during the year, the Board will appoint new members and then submit to the nearest shareholders’ meeting for the of-ficial approval.

8. Board Performance

The company maintains a formal assessment on the performance efficiency of the Board especially contri-bution of each member in particular. The assessment process is detailed in the Company’s corporate gov-ernance.

9. Access of Information

Board members are provided with adequate and time-ly information related to the Company on an on-going basis to enable them to carry their duties. The Execu-tive Board provides adequately and timely information as well as reviews the Company’s performance prior to the Board meetings.

The Board has a separate and independent access to Vinamilk information from senior management and the Board Secretaries if they have any queries on the operations. A notice of meeting, which contains an agenda, is delivered to the Board prior to each meet-ing. The Board Secretaries attend all Board meetings and are responsible for ensuring that the meeting is held in accordance with the procedures and regula-tions.

The Board Secretaries comprise of 03 members:

»» Mr. Nguyen Thanh Tu

»» Ms. Le Quang Thanh Truc

»» Mr. Nguyen Trung

B. REMUNERATION MATTERS

1. Remuneration Policy

The Remuneration Committee reviews and recom-mends to the Board an appropriate and competitive remuneration policy. A formal and transparent proce-dure is applied to determine the remuneration of each member of the Board of Management and each mem-bers of the Board of Executive Directors.

The approved remuneration policy for the Board mem-bers consists of the following:

• A fixed allowance and an allowance for attending the board meetings.

• An allowance for position at Board’s committees.

• An allowance for additional responsibilities such as chairwoman, head of Board committee.

2. Remuneration level and structure

The level of remuneration should be appropriate for the purposes of attracting, keeping and motivating the Board members and the Directors in order to run Vinamilk successfully. A portion of the remuneration level is based on the Company’s performance and in-dividual’s performance as well.

When proposing remuneration levels, the Remunera-tion Committee takes into consideration the payment levels and the occupations in the same industry and in comparable companies, the relative performance of corporate performance, of each individual Board member and key executive officer. The annual bonus scheme is also applied to all employees.

3. Disclosure of Remuneration

The allowance of the Board of management, Inspec-tion Committee is approved annually by the share-holders’ meeting. The approved allowance for 2012 was VND5.2 billion. This amount has been exactly paid during the year.

Remuneration of the members of the Board of Man-agement and the Board of Executive Directors is dis-closed annually. This enables investors to understand the relation between remuneration of Directors, key executives and their performance. Remuneration of key management is disclosed in the note no.31 of the consolidated financial statements, page 140.

Below is the detail of the Board’s allowance in 2012:

Fixed al-lowance

Allowance for chairwoman,

head of inspec-tion committee

Allow-ance for

committee members

Allowance for head

of Board’s committee

Allow-ance for

attending meetings

Bonus Total

THE BOARD OF MANAGEMENTMs. Mai Kieu Lien 120 102 120 33 60 342 777

Mr. Wang Eng Chin 300 - 120 18 60 285 783

Mr. Hoang Nguyen Hoc 120 - 30 15 15 71 251

Mr. Le Song Lai 180 - 90 18 45 214 547

Mr. Le Anh Minh 300 - 120 33 60 285 798

Ms. Ngo Thi Thu Trang 120 - 120 - 60 285 585

THE INSPECTION COMMITTEEMs. Nguyen Thi Tuyet Mai 60 15 - - - 50 125

Mr. Nguyen Anh Tuan 263 - - - 45 143 450

Mr. Nguyen Trung Kien 263 50 - - 60 186 558

Mr. Nguyen Ngoc Vu Chuong 203 - - - 45 107 355

Total 1,928 167 600 117 450 1,969 5,200

Note: (*) the perm of these 02 personnel ended at the shareholders’ meeting 2012.

VND million


1. Accountability

The Board of Management is accountable to the share-holders while the Board of Executive Directors is ac-countable to the Board of Management. The Board of Management should present and disclose the finan-cial statements and other information which help the viewer to understand Vinamilk’s position and pros-pects in the annual reports and other reports.

The Board of Management holds quarterly meetings to review corporate performance. The quarterly detailed and summarized financial statements are submitted to the Ho Chi Minh City Stock Exchange (HOSE). The annual shareholders’ meeting is held to approve the Company’s business objectives.

2. The Inspection Committee

The Inspection Committee operates in accordance with written regulations and principles, which clearly set out its authority and duties. This Board is respon-sible to review the scope of works and results of the internal and external audit, cost-efficiency, material issues on the financial statements, and adequacy of the internal control system, as well as the efficiency of the internal audit function.

The Inspection Committee has three members and being appointed at the shareholders’ meeting for a term of five years. The current term is from 2012 to 2016. All the members of the Inspection Committee are not employees of Vinamilk.

• Mr. Nguyen Trung Kien : Head• Mr. Nguyen Anh Tuan : Member• Mr. Nguyen Vu Ngoc Chuong : Member

Members of the Inspection Committee have qualified capacity and competence to discharge their responsi-

bilities. They also should possess professional qualifi-cations and experiences on accounting and financial management. The Inspection Committee has the au-thority to investigate any matters within their respon-sibilities, has full access to and work of the Board of Management as well as has full discretion to invite any Director or executive officers to attend meetings. It has reasonable resources to enable it to discharge its func-tions properly.

Annually, and as deemed appropriate, the Inspection Committee works with the internal and external audi-tors, without the presence of the Board of Executive Directors.

The Inspection Committee considers the independ-ence and objectivity of the external auditors and recommends to the Board of Management the nomi-nees of the external auditors for re-appointment. The Inspection Committee reviews the level of non-audit services provided by the external auditors to ensure that their independence as external auditors of the company is not compromised.

3. The Internal control system

The Board of Management should ensure that the Board of Executive Directors maintains a comprehen-sive and complete internal control system to protect the company’s assets and shareholders’ investments.

With assistance from the Internal Audit, the Board of Management and the Inspection Committee review the effectiveness of the key internal control instru-ments to ensure timely and necessary corrective ac-tions are taken. There are formal procedures in place for both internal and external auditors to report their independent conclusions and recommendations to the Board of Executive Directors and the Inspection Committee.

C. ACCOUNTABILITY AND AUDIT D. INFORMATION ON SHARE CAPITAL AND SHAREHOLDERS

As at 31 December 2012, the Company’s share capital is as follows:

• The Company’s share capital : VND8,339,557,960,000.

In which, the share capital has increased by VND2,778,41,420,000 as a result of share split from the source of owners’ equity.

• The total listed shares : 833,955,796 shares

• The total outstanding shares : 833,525,676 shares

• The treasury shares : 430,120 shares

• Face value per share : VND10,000

• The market capitalization value : VND73,350 billions, the biggest on the Vietnam Stock Market.

1. Shareholder structure

The shareholder structure is unchanged as compared with 2011. The State Capital Investment Corporation (“SCIC”) holds 45%, the foreign shareholders hold 49% and the local shareholders hold 6% of the Company’s share capital.

2. Treasury share transactions

During the year, the Company conducted 10 transactions to buy back employees’ share in accordance with the statute of share scheme for employees due to their resignation or change of position. The details of the buying transactions are disclosed below:

Seq. Notice DateTransaction

typeTransaction

dateReporting

dateRetrieval number

1 246/CV-CTS.DT/12 01/31/2012 Buying 21-Feb-12 22/02/2012 50,870

2 664/CV-CTS.DT/12 03/14/2012 Buying 26-Apr-12 8-May-12 9,620

3 702/CV-CTS.DT/12 03/17/2012 Buying 5-Apr-12 10-Apr-12 4,600

4 796/CV-CTS.DT/12 03/29/2012 Buying 22-May-12 26-May-12 11,630

5 1045/CV-CTS.DT/12 04/20/2012 Buying 12-Jun-12 13-May-12 6,210

6 1401/CV-CTS.DT/12 05/26/2012 Buying 11-Jul-12 11-Jul-12 19,360



9 2043/CV-CTS.DT/12 08/06/2012 Buying 21-Aug-12 23-Aug-12 5,300

10 2402/CV-CTS.DT/12 09/10/2012 Buying 12-Oct-12 15-Oct-12 19,400

182,980

The treasury shares as at January 1st 2012 247,140

The treasury shares as at December 31st 2012 430,120

Local Shaholders(Except SCIC)

6%

Foreign Shaholders49%

SCIC45%


3. Transaction of the internal shareholders, major shareholders and their related parties

• Share trading:

• Trading of shares from the internal shareholders:

Shareholder name Related personnel at Vinamilk

Trading type

Share vol-ume

Trading time

% interest after trad-

ing

Grinling International limited

Mr. Le Anh Minh, the Board member

Selling 512,400 12/13 – 12/14 0.75%

Amersham Industries Limited

Mr. Le Anh Minh, the Board member

Selling 2,000,000 11/15 – 11/16 1.99%

Ms. Nguyen Thi Nhu HangMr. Nguyen Thi Nhu Hang, Executive Director Raw materials development

Selling 60,000 4/17 – 4/26 0.04%

Deutsche Bank Aktienges-ellschaft

Of major shareholder group Buying 3,554,690 08/15/2012 4.73%

• Trading of the internal shareholders’ related parties: nil

• Other transactions: (transactions of the internal shareholders, major shareholders and their related parties with the Company):

Regarding to the responsibility of honesty and avoidance of conflict of interests as stipulated in the Com-pany’s Charter, the Board members, the Inspection Committee members, Executive Directors, Chief Account-ant and other key positions who are appointed and removed by the Board of Management basing the Chief Executive Officer’s recommendation, has responsibility to disclose to the Board all their interests which may cause conflict of interests through other legal entities, transactions or other individuals within 7 working days from the date those interest incur.

During 2012, the Company did not receive any notice from these members and their related parties

The Company also did not provide any loan, guarantee or credit facility to these members and their related parties.

During 2012, the Board of Management and Inspection Committee has declared their related parties in due time according to Vinamilk’s internal policies.

4. Changes in ownership rate of internal shareholders

31/12/2011 31/12/2012 % change

The Board of management

1

The State Capital Investment Corporation (“SCIC”)

(Represented by Mr. Le Song Lai: 66.67%, Ms. Mai Kieu Lien: 16.665% and Ms. Ngo Thi Thu Trang: 16.665%)

45.0425% 45.0542% 0.0117%

2 Ms. Mai Kiều Liên (personal) 0.2716% 0.2717% 0.0001%

3 Ms. Ngo Thi Thu Trang (personal) 0.0823% 0.0823% 0.0000%

4Vietnam Enterprise Investments Limited

(Represented by Mr. Le Anh Minh)2.3393% 2.3399% 0.0006%

5Grinling International Limited

(Represented by Mr. Le Anh Minh)0.8373% 0.7454% -0.0919%

7Amersham Industries Limited

(Represented by Mr. Le Anh Minh)2.3522% 1.9931% -0.3591%

8F&N Dairy Investments Pte Ltd

(Represented by Mr. Pascal De Petrini ) 9.5313% 9.5338% 0.0025%

The Inspection Committee

9 Mr. Nguyen Trung Kien 0.0027% 0.0027% 0.0000%

10 Mr. Nguyen Anh Tuan 0.0000% 0.0000% 0.0000%

11 Mr. Nguyen Vu Ngoc Chuong 0.0000% 0.0000% 0.0000%

The Board of Executive Directors

12 Ms. Mai Kieu Lien (as above)

13 Ms. Ngo Thi Thu Trang (as above)

14 Mr. Mai Hoai Anh 0.0183% 0.0183% 0.0000%

15 Ms. Nguyen Thi Nhu Hang 0.0539% 0.0431% -0.0108%

16 Ms. Nguyen Thi Thanh Hoa 0.0638% 0.0638% 0.0000%

17 Mr. Nguyen Quoc Khanh 0.0285% 0.0285% 0.0000%

18 Ms. Nguyen Huu Ngoc Tran 0.0253% 0.0253% 0.0000%

19 Mr. Tran Minh Van 0.0504% 0.0504% 0.0000%

Chief Accountant

20 Mr. Le Thanh Liem 0.0174% 0.0174% 0.0000%

Except for the transactions of the internal shareholders as mentioned in page 76, the change of the ownership was mainly due to the share split (2:1) in 2012, as there was not share split on the treasury shares of 430,120.


5. Changes in ownership of the major shareholders

Shareholder name 12/31/2011 12/31/2012 % change

1The State Capital Investment Corporation (“SCIC”)

45.0425% 45.0542% 0.0117%

2 F&N Dairy Investments Pte Ltd 9.5313% 9.5338% 0.0025%

3 A group of shareholders (*) 4.7790% 5.4976% 0.7186%

BEIRA LIMITED 0.2411% 0.2566% 0.0155%

Deutsche Bank AG London 4.0896% 4.7926% 0.7030%

EPSOM LIMITED 0.3688% 0.3689% 0.0001%

GREYSTANES LIMITED 0.0796% 0.0796% 0.0000%

Note (*): this group of shareholders became the major shareholder based on their transaction reported on August 24th 2012. The reporting figures above are from the shareholder listing as at December 21st 2012 and its comparative figures were as at right before becoming the major shareholder.

6. Other information about the share structure:

The information below is based on the shareholder listing as at December 21st 2012:

Number of shareholders Share volume % share capital

- Total number of shareholders 9,603 833,525,676 99.95%

- Treasury shares 1 430,120 0.05%

9,604 833,955,796 100.00%

- Local shareholders 8,503 425,219,745 50.99%

• Institutional 62 382,926,376 45.92%

• Individual 8,441 42,293,369 5.07%

- Foreign shareholders 1,101 408,736,051 49.01%

• Institutional 153 405,268,257 48.60%

• Individual 948 3,467,794 0.42%

In 2012, Vinamilk implemented the integration and improvement of a risk management system. Since it was a challenging year with many changes and impor-tant turning points, a “future position” of risk manage-ment was opened for the next periods.

Risk management (“RM”) consulted by KPMG Vietnam at Vinamilk is organized as follows:

RISK MANAGEMENT REPORT

BoM

Financial Unit

Project Unit

Marketing Unit

SalesUnit

KhốiHành chính

- Nhân sự

Material Areas

Develoment Unit

Product Production & Development

Supply Chain Unit

Coordinate with speci�c professionals (SMEs) when necessary

Notes

Functions of RM

Function of independence assurance

Risk owners

Reporting channel of risks

Two-way communications of risks

CEO

RM Manager

Risk Specialist

Speci�c Professionals

IA

ICRM

Committee

RM Council

Administra-tion – HR

Unit

THE SHARE-HOLDERS’ MEETING

RM structure in Vinamilk constitutes of 4 protective layers as shown in the below chart:

• In this kind of structure, most of risks will be regularly managed by business units (the 1st protective layer)

• Risks are also managed by IA & RM department, which is responsible for inspecting and analyzing risk informa-tion from various sources. RM Manager (RMM) takes the responsibility of developing and enforcing the RM frame-work in the Company. RRM is also in charge of consulting about RM, supporting Heads of RM departments, and re-

porting to BoD and BoM about RM efforts, and Informa-tion of risk situations (the 2nd protective layer)

• GM and BoM of the Company take the official responsibil-ity of RM.

• IA provides independent assurance for verification of risks information and effectiveness of control practices (the 3rd protective layer).

• Finally, BoD takes the final responsibility in front of share-holders and makes sure that risks have been properly managed (the 4th protective layer)

E. THE IMPLEMENTATION OF THE CORPORATE GOVERNANCE

In 2012, Vinamilk has revised and issued its corporate governance in order to approach to the best practices of the corporate governance. Vinamilk has been trying to implement its corporate governance comprehensively. How-ever, there are still some areas which have not been implemented.

At the moment, the Company does not have the independent Board members. This is due the fact that i) the can-didates must be introduced by the major shareholders/ or their related parties; ii) the current Board members of five are not feasible to ensure that the required ratio of independent Board members is met.

In coming time, when the size of the Board is increased appropriately, the Company will recommend candidates for the shareholders’ meeting to approve them as the independent Board members.


An integrated risk management sys-tem in Vinamilk:

In 2012, Vinamilk gradually integrated risk manage-ment into business activities in three steps, as follows:

1. Risk management is one of the top rules of cor-porate management, and as such, it is given special care by the Management (BoM). The BoM’s regulations state that the risk manage-ment system must be continuously developed by the company in order to enhance the value and quality of corporate management.

2. Risk management is applied to specific busi-ness activities. It is integrated by the Board of Managers into major processes such as production capacity creation, product devel-opment, new product launch, etc. Accord-ingly, risk management has been integrated

into production, marketing, and new product launch in 2012.

3. Risk management is the basis for strengthen-ing the internal control system by providing assessment of its relevance and efficiency. Thus, it can provide a basis for management to make business decisions in consideration of all aspects of the company’s operations.

A risk management system to enter the improvement period at Vinamilk:

Continuous improvement is one of the important prin-ciples of any system. In 2012, the company reviewed its new risk management activities and the results of that process. Through this review, the company has identified its relevance and weaknesses and devised solutions to strengthen Vinamilk’s corporate culture and market position.

Accomplishments in 2012:

In 2012, risk management has achieved the following major accomplishments:

• Risk management activities were conducted quarterly at various levels (e.g., company, unit, de-partment) to identify, analyze, rank, and respond in a timely manner to all risks. The results were pe-riodically reported to the BoM. Simultaneously, a list of important risks to which the company had to allocate resources to appropriately address was defined and approved.

• Methods and techniques for major risk assess-ment (e.g., checklist, Delphi method) were ap-plied and managed by the department in order to ensure comprehensive risk identification and analysis.

• A list of effective control methods was developed, which aided in developing an action plan of es-tablishing proper control methods. This provides managers with a basis for assessment of the rel-evance of any control system to effectively man-age future risks.

Improve and update managers’ knowledge of risk management as well as enhance their skills in risk as-sessment through real risk assessment sessions with the participation of risk departments and stakehold-ers.


Vinamilk company risks:

In 2012, Vinamilk identified and categorized major risks throughout the organization. Top-level managers (risk owners) were assigned specific responsibilities related to risks under the control of their department.

Risks are classified into four groups: i) Strategic risks, ii) Operational risks, iii) Financial risks, and iv) Compliance risks. These risks are as follows:

No. Major risks Risk owner

Strategic risks

1 Risk of losing market share due to competition Executive Director Marketing

2 Risk of bad handling of crisis Public Relation Director

Operational risks

3 Risk of products being undermined

Executive Director Production

and R&D4 Risk of defective products falling out of circulation

5 Risk of fire and explosion at production facilities

6 Risk of interruption due to IT system IT Director

7 Risk of unqualified human resources HR Director

8 Risk of bad project management Executive Director Project

Financial risks

9 Risk of loss of money Executive Director Finance

Compliance risks

10Risk of litigation/dispute regarding to obligations under contract agree-ment

Internal Control

& Risk Management Director11 Risk of untimely update of law and regulation changes

12 Risk of leakage and loss of confidential information

To best manage and control these as well as risks in the development process, Vinamilk has been improving and enhancing the risk management system, including policies, procedures, and reporting. In addition, a control sys-tem for each activity (e.g., regulations on investment management, information disclosure, and monetary policies) has been generated. Based on this progress, Vinamilk will develop a comprehensive response plan to prevent and handle risks properly and effectively.

Please note that financial risks are handled separately and are detailed within the company’s consolidated finan-cial statements (pages 142 to 149).

In 2012, the company managed and controlled all types of risks, resulting in no loss of assets or other issues.

Position and direction of RM in the next period

Vinamilk always treats risk management activities as being in harmony with its business operations. The goal of risk management is to continuously develop new methods and improve practices to conform to the latest risk management standards in the world.

2013 Implementation plan

With its improved market position and more devel-oped direction, Vinamilk will implement several stra-tegically planned changes in 2013. This will include restructuring the risk management system as follows:

1. Risk owners will be classified into many layers. The structure aims to establish a committee within the BoM responsible for risk management. This Board of Risk Management will consist of carefully select-ed top-level managers. Its tasks will include identi-fying managers who are in charge of specific risks and holding them accountable for taking appropri-ate action.

2. The basic principles of the existing risk manage-ment system will be built upon to create an ad-vanced model. This will include development of a comprehensive Vinamilk Risk Management Handbook containing procedures, guidelines, and methods.

3. A team of professionals with knowledge and skills in crucial areas of the business will be identified. They will be tasked with providing input for risk assessment, and each individual will monitor the management process in his or her area of exper-tise.

4. The BoM has made management of major risks a high priority for the company. A major goal for 2013 is development of a self-assessed and self-controlled mechanism to gradually improve the quality and value of the risk management system.

In 2013, Vinamilk will also retain focus on the activi-ties outlined in the 2012 plan to ensure that planned changes are executed in the best possible manner.

THE CODE OF CONDUCTS

85

o To Laws:

We always comply with the Laws of Vietnam and with laws in any country where we operate.

o To Customers, Consumers:

We commit to provide a diversified product portfolio and services with the best quality, competitive price and we are always honest in all transactions.

o To Shareholders:

We are continuously improving the considerable value to the shareholders by using and protecting effectively Vinamilk’s resources while complying strictly our ethics and laws in doing business.

o To Employees:

We treat all employees fairly and respectfully. We cre-ate fair opportunities for every one, build and maintain a safe, friendly and an open working environment.

o To Suppliers, Partners:

We will respect and fair in all transactions with our sup-pliers and partners. We also repsect a long term rela-tionship on the basis of mutual trust, transparency and benefits.

Please visit our website at http://www.vinamilk.com.vn/?vnm=boquytac for the full set of our Code of Con-duct

THE CODE OF CONDUCTS

The Code of Con-

duct is our commitment for highly appreciating the Integrity,

enhancing the Respect, ensuring the Fairness, maintaining the Compliance and esteeming the Ethics. The core values and

commitments set out in this Code of Conduct will reflect our talents and professionalism,

which create a distinguished view on Vinamilk from its consumers, partners,

shareholders employees and the public.

The basic commitments in Vinamilk’s Code of Conduct are:


SUSTAINABILITY REPORTING

Protect & Contribute to building a Green

Environment


2012 was the year that Vinamilk focused on and made an official announcement regarding the sustainable devel-opment orientation, social responsibility and responsi-bility commitments regarding relevant parties. Accord-ingly, Vinamilk issued its Corporate Social Reponsibility policy and it is in the fiscal year 2012 Vinamilk had made a sustainable development report for the first time. The sustainable development report along with the annual report will make up an overall picture of Vinamilk’s ac-tivities in one year.

The 2012 sustainable development report includes 5 main points as follows:

RESPONSIBILITY FOR PRODUCT

Being the manufacturer of nutritious and healthy prod-ucts, our main principle in doing business is “quality is the highest priority”.

• Focus on product safety.

• Focus on research and product development in order to manufacture the best nutritional prod-ucts for human’s intellectual and physical health.

• Provide truthful and complete information to cus-tomers.

WORKING ENVIRONMENT

For the human resource development strategy, Vinamilk focuses on such following targets:

• Safe working conditions and health care.

• Developing a diverse workforce, respecting differ-ences.

• Labour agreement is made on the basis of free will and legal compliance.

• Employees’ performance is recognized and com-pensated satisfactorily.

• Employee improvement plan.

• Promoting a harmonious working culture.

ENVIRONMENTAL RESPONSIBILITY

Vinamilk has always been aware of the impact on the environment of its business and production activities.

2 0 1 2 was the year

that Vinamilk paid more attention to sustainability

activities, social responsibilities systematically and targets at disclosure in compliance with

good practices and stand-ards in the world.

Thus, along with business targets, the Company has also been seriously taking environment protection into con-sideration. The Company considers the environment protection a great contribution to the sustainable devel-opment of the society as well as Vinamilk itself. There-fore Vinamilk has always been seeking the solutions to prevent pollution, reduce the amount of waste, utilize the natural resources in an environmentally friendly, ef-fective and economical way.

ECONOMIC DEVELOPMENT

Being a component of national economy, Vinamilk has always combined its business with regional economic development and consolidate its cooperation with re-gions.

SOCIAL ACTIVITIES

Over the past years, along with contributing efforts to improve the quality of life by manufacturing valuable products, Vinamilk has been organizing many social ac-tivities as well as charity activities and human develop-ment programmes, especially targeting the Vietnamese children. Social activities of Vinamilk aim at:

• Developing physical and intellectual health for children.

• Supporting the poor and sick people, and others af-

fected by natural disasters, etc.

For more details, please refer to “2012 Sustainable De-velopment Report”.


Truong Tho Milk Plant awarded the 1st prize of Green Business Award 2012

With a focus on providing sustainable development and long-term benefits to the community, Vinamilk dedicates time and resources to look for solutions to prevent pollution, reduce emissions, save natural re-sources, and reduce fossil fuel usage. The company is always moving toward becoming more environmen-tally friendly, and efforts related to that goal were part of Vinamilk’s outstanding success in 2012.

Vinamilk significantly decreased its average spring wa-ter and energy usage as compared to the prior year; the company used 4.13% less electricity, 11.46% less FO oil, and 0.3% water per ton of products. These fig-ures show that Vinamilk’s existing policies on environ-

mental protection and natural resources management and usage continue to produce positive results.

In 2012, all three Vinamilk plants in Ho Chi Minh City (HCMC) – Truong Tho, Thong Nhat, and Sai Gon – won the Green Business Award, a prestigious environmen-tal award presented by the HCMC People’s Committee and the Ministry of Natural Resources and Environ-ment. This award honors local enterprises that have taken practical actions to protect the environment, raise community awareness about green living, and improve the quality of life in HCMC. Truong Tho Milk Plant was awarded the 1st prize in the category of for-eign-invested enterprises and large-scale enterprises

VINAMILK – A GREEN BUSINESS

Entrance of Hang Duong cemetery

thanks to its excellent achievements in production methods that are good for the environment, and all of Vinamilk’s plants were certified as complying to ISO 14001:2004, a global standard for environment man-agement systems.

The company has also set up an investment fund to aid causes that improve the quality of living condi-tions, collect and recycle materials, and benefit society and the environment in other ways. Through this fund, Vinamilk financed the construction of solar LED light-ing system at Hang Duong Cemetery, Con Dao in 2012. LEDs are a green light source due to their small size; easy recyclability; lack of toxic substances like mercury,

lead, and cadmium; and insignificant heat produced during operation. As an added benefit, LEDs do not emit the greenhouse gas CO2 or radiation. The lights are installed at main entrance, near monuments, and along the aisles in the cemetery. This modern lighting system makes use of solar panels – a clean and limitless source of energy – to power it.

With the health and wellness of present and future generations in mind, Vinamilk is committed pioneer-ing energy-saving solutions and new ways to effec-tively use natural resources in order to contribute to environmental protection in Vietnam and around the world.


VINAMILK FUNDS SOLAR LIGHTING SYSTEM IN CON DAO

To celebrate the Vietnam Veterans Day

of 27 July, respond to “Gratitude Activi-

ties”, and apply new energy-saving tech-

nology, Vinamilk financed the construc-

tion of solar LED lighting system at Hang

Duong cemetery, Con Dao. The lights

were installed at main entrance, monu-

ments and along the aisle in the cem-

etery. In the night, they shine brightly

and sparklingly as thousands of candles

for heroes sacrificing themselves for the

country in Hang Duong cemetery.

This is a modern lighting system com-

pletely using solar energy. Its total in-

vestment value is more than VND600

million and Vinamilk is the main sponsor.

Solar energy is a clean and limitless

source of energy. Solar cells in the pan-

els are small and can produce electricity

directly from sunlight. Solar cell panels,

or photovoltaic panels, are made of spe-

cial materials constituting photovoltaic

cells operating in sync with each other

and converting solar energy of sunlight

into electricity.

Nowadays, the image of paper milk boxes has become familiar to millions of Vietnamese consumers. Due to special multi-layer design to block light, ultraviolet rays, and block oxygen and steam in the air, with UHT technology, products in UHT packaging can be stored in a relatively long time. The nutrients remain the same even when preservatives are not used.

Paper packaging is easily collected and recycled. On average, it takes 2.2 to 4.4 tons of wood to produce one ton of pulp. However, it only takes 1.4 tons of used paper to produce one ton of recycled paper. Therefore, recycled paper helps to save::

• 24 natural forest trees

• The amount of oxygen for 12 adults in a year

• 39,084 liters of water (enough for 875 times of bathing, each lasts 5 minutes; 3,000 times of toilet flush)

• Nearly 4,000 kWh of electricity (enough for a house with 3 bedrooms to use in a year)

• 605 liters of crude oil

• Reduction in CO2 emissions by an amount equiva-lent to car emission in 6 weeks (less 95% of pol-

lutant emissions than the production process of 1 ton of paper from wood)

Currently, the development of used paper recycling technology has allowed us to recycle food packaging, i.e. the type of paper consisting of many layers and having contacted with food.

Vinamilk milk boxes will be moved to the recycling plant after being collected. In the plant, they will be soaked, washed, crushed and separated from paper fiber. Paper fiber pulp will be processed and transferred to paper making machine to produce recycled paper products. These products are very plentiful and can be used in many areas of our lives such as stationery, cardboard, decorations, roof sheets, etc..

Vinamilk also takes part in the “Recycling Day” held by Waste Recycling Fund of Ho Chi Minh city Department of Natural Resources and Environment in Ho Chi Minh on 5 April, 2012. This activity aims to raise consumers’ awareness of environmental protection and saving mo-rale as well as encourage them to use environmentally-friendly products.

VINAMILK – PARTCIPATING IN THE RECYCLING DAY

Yogurt boxes to enter processing tank

Produce roof sheets from aluminium and plastic seperated from yogurt boxes

Produce recycled papers


The “One million green trees for Vietnam” fund is es-tablished by Vfresh, a brand name of Vietnam Dairy Products Joint Stock Company (Vinamilk), and the Vi-etnam Environment Administration under the Ministry of Natural Resources and Environment, aiming to plant green trees in the cities and improve the living condi-tions for Vietnamese people.

Objectives of the “One million green trees for Viet-nam” fund:• Improve the living conditions of urban residents

in Vietnam by planting more green trees in these areas.

• Call upon communities to plant more green trees in Vietnam.

Website: www.trieucayxanh.com.vn

In summary of the first-year implementation, Vinamilk planted trees in 8 provinces and cities.

3500 willow trees planted by “One million green trees for Vietnam” fund in the 12 kms walking street along the lakes and the canals

in Hai Phong province

The “One million green trees for Vietnam” fund for planting

trees in Hoi An, Quang Nam

Deputy Prime Minister Hoang Trung Hai participates in the

afforestation in Vinh Phuc province

VINAMILK – ‘ONE MILLION GREEN TREES FOR VIETNAM’ FUND

The grant program for student studying in Russia began in 1993. At the time being, there are 39 students in Russia in this program and 30 current employees previously trained in Russia.

In 2012, Vietnam Dairy Products Joint Stock Company – Vinamilk recruited 15 students for training at Moscow State University of Food Production, Russia. The majors include: Technology of milk and milk product processing, Automation of production line; Veterinary Epidemiology Test. Total 5-year tuition fee of the course will be at the Company’s expense. This is a specially favourable policy of Vinamilk to attract and train talents. The students gradu-ated under this program have a long-term commitment to serve in the departments of Vinamilk. Students who have good learning records and strive to develop them-selves through the scholarship will have opportunities of contributing to the development of Vinamilk in particular, and the dairy industry in Vietnam in general. This program has been maintained for years, and now, over 60 students across Vietnam have been granted full scholarships to Rus-sia. Many of them are holding important management po-sitions in Vinamilk.

Students receiving scholarship to study in Russia in 2011 took photographs with friends in Russia

VINAMILK CONTINUES GRANTING TO STUDENTS STUDYING ABROAD IN RUSSIA


In the spirit of solidarity and sharing difficulties with poor patients, Vinamilk’s representative has directly granted VND500 million to the Poor Patient Support Fund to support the Sponsoring Association for Poor Patients in Ho Chi Minh city in the heart surgery program for chil-dren with defective hearts. The amount includes donation of all employ-ees of Vinamilk and a part of Vinamilk’s Welfare Fund. This meaningful activity has been maintained for over 10 years, and until now, Vinamilk has supported more than VND2.7 billion for children’s heart surgeries.

Mr. Nguyen Thanh Tu, Chairman of the Vinamilk’s Labor Union, said, “Supporting poor children in their difficult times shows Vinamilk’s CSR towards the community. This is the beautiful traditional of Vietnamese people in general and Vinamilk’s culture in particular.”

In more than 36 years operating in Vietnamese market, Vinamilk not only gave consumers a variety of healthy products but also cared about community-oriented activities.

Support the Poor Patients’ Fund to conduct children’s congenital heart surgery

VINAMILK SUPPORTS VND500 MILLION FOR PATIENTS’ HEART SURGERY

Since 2008, Vinamilk has cooperated with Vietnam Children Support Fund under the Ministry of Labor, War Invalids, & Social Welfare to establish the “Vietnam Never Stops Growing” Milk Fund. Until 2012, more than 273 thousand children across the country have enjoyed nearly 19 mil-lion glasses of milk in the program with a total value of about VND69 billion grant-ed by Vinamilk.

In nine consecutive years, until 2012, the “Vinamilk - Nurturing Vietnamese Young Talents” Scholarship Fund had granted VND18 billion of scholarships to over 33 thousand primary school students in 63 provinces.

In 2012, Vinamilk supported VND500 million to the “For Changsha dear students” pro-gram; VND1.4 billion to the “Collect Stones to Build Changsha” program; cooperated with the Central Vietnam Disaster Preven-tion Support Fund to present 70 lifeboats with the value of nearly 600 million for local youth volunteer teams in Binh Dinh, Hue, Quang Binh, Thanh Hoa, Ninh Thuan, Khanh Hoa, and Phu Yen.

Earlier, the delegation of Vinamilk in col-laboration with the delegation of the Min-istry of Health have visited and given milk to people suffering from “strange disease” in Ba To district, Quang Ngai province with a total value of nearly VND500 million. In many years, when there were floods in the Middle region, Vinamilk directly visited, en-couraged and gave gifts to many people there. It took about billions of VND per year. In 2012, Vinamilk also granted VND500 mil-lion to support the Poor Patient Support Fund in the heart surgery program for chil-dren with defective hearts. Vinamilk had maintained this activity for over 10 years, and supported more than VND2.7 billion for the children’s heart surgery. Vinamilk also established health and nutrition con-sulting centers across the country to ex-amine thousands of primary school and malnourished children and provide them with free milk.

With practical and meaningful activities and programs, Vinamilk is truly the brand for the community./.

Ms. Nguyen Thi Nghia, Deputy President of the Ministry of Education and Training, and Ms. Mai Kieu Lien, Chairman and General Director of Vinamilk, awarded the scholarship of “Vinamilk – Nurturing Vietnamese Young Talents” Scholarship Fund to primary school students in 2011-2012 school year

OTHER SOCIAL ACTIVITIES - CHARITIES:


INVESTOR RELATIONS

To ensure and main-tain an uninterrupt-ed communication between Vinamilk

and its shareholders, investors, local au-thorities and other

stakeholders

According to Vietstock’s survey, Vinamilk is the best enterprise in term of investor relations for the last 02 years. In 2012, Vinamilk has the promi-nent voting by the viewer at 81.91%, which is 27.3% higher than the second best enterprise. And in 2011, Vinamilk also had the prominent voting by the viewer at 61.46%, which was 32.68% higher than the second best enterprise.

Some key investor relations activities during the year:

• November 16th 2012: Attended the investment seminar in Hongkong or-ganized by Daiwa Securities Group. This is their big and prestigious annual event in the region. At the

event, Vinamilk met more than 26 institutional investors, such as: Black-rock, Wellington Global Investment Management, SAC, Mirae Asset Management, Harvest Global Inves-tors, ICBC Asia Investment Manage-ment,…

• October 23rd 2012: Attended the investment seminar in Ho Chi Minh City, organized by Vietcapital. Vinamilk met with more than 100 local and foreign investors.

• May 23rd 2012: Attended the invest-ment seminar in Bankok, Thailand, organized by UBS Corporation. At this event, Vinamilk met with more than 25 institutional investors, such

We are of the

best investor rela-tions for 02 consecutive

years 2011 - 2012


as Blue Pool, Lynas Capital, Indus Capital, Government Pension Fund, One Asset Management, BBL Asset Management, TAR, Morgan Stanley, Mount Kellett, Overlook, JP Morgan Asset Management, Prusik, Quest Capital, Ward Ferry, Lloyd George, Coupland Cardiff, BNP Paribas, Ro-hatyn, Charlemagne Capital, Proa Partners, Elliott, MFC Asset Manage-ment, Brooker Group, Genesis, UBS.

• March 23rd 2012, the Company or-ganized the annual shareholders’ meeting in order to approve on the performance of 2011, approve on the targets for 2012 and approve other important matters of the Company.

In addition, Vinamilk has received more than 100 investors at its head office. Some big investors such as Matthews Group, Route One, Fidelity, Citigroup, Arisaig, Dempsey Hill Capital, Deutsche Bank, Goldman Sachs, Nomura, KITMC, Bridger Capital,….

The Company’s financial and non-finan-cial information is disclosed adequately and timely on our website at http://www.vinamilk.com.vn/?vnm=share

Our investor relations function is very flexible and to create the most conven-ient conditions for the investors to get update on the Company’s operations through:

• Attending the Company’s annual shareholders’ meeting

• Visiting our head office directly.

• Investor relations personnel can discuss with investors through tel-ephone, teleconference

• Responding to investors’ queries by email

• Responding to investors’ que-ries through Q&A on our web-site at http://www.vinamilk.com.vn/?vnm=FAQ

• Investor relation personnel can at-tend investment seminars organ-ized by securities companies, insti-tutional funds

With non-stopping effort in improving the transparency and provision of in-formation adequately and timely to its shareholders and potential investors, Vinamilk has been improving the quali-ty of its annual report and achieved the award “one of the best annual report in 05 years 2008 - 2012 from the co-organizers HOSE and Vietnam Invest-ment Review.

CONSOLIDATED FINANCIAL STATEMENTS

Achieve the goal of $3 billion revenue and get in the Top 50 World’s biggest dairy product companies

by 2017

• Corporate information• Statement by the Board of Directors

• Auditor’s report • Consolidated balance sheet

• Consolidated income statement • Consolidated cash flow statement

• Notes to the consolidated financial statements


CORPORATE INFORMATION

Business Registration 4103001932 dated 20 November 2003 issued by the Planning and Certificate No. Investment Department of Ho Chi Minh City.

The Business Registration Certificate has been amended severaltimes and its latest amendment no. 0300588569 dated 6 November 2012 was issued by the Planning and Investment Department of Ho Chi Minh City.

Board of Management Mdm Mai Kieu Lien Chairwoman Mr Le Song Lai Member (appointed on 23 March 2012) Mr Hoang Nguyen Hoc Member (resigned on 23 March 2012) Ms Ngo Thi Thu Trang Member Mr Pascal De Petrini Member (appointed on 4 December 2012) Mr Wang Eng Chin Member (resigned on 4 December 2012) Mr Le Anh Minh Member

Board of Directors Mdm Mai Kieu Lien Chief Executive Officer Ms Nguyen Thi Thanh Hoa Executive Director - Supply Chain Ms Nguyen Thi Nhu Hang Executive Director Dairy Farm Development Ms Ngo Thi Thu Trang Executive Director - Finance Mr Tran Minh Van Executive Director - Project Mr Nguyen Quoc Khanh Acting Executive Director Production and Products Development Ms Nguyen Huu Ngoc Tran Acting Executive Director - Marketing Mr Pham Phu Tuan Acting Executive Director - Sales (resigned on 21 May 2012) Mr Mai Hoai Anh Acting Executive Director - Sales (appointed on 21 May 2012)

Legal representative Mdm Mai Kieu Lien Chief Executive Officer

Registered office 10 Tan Trao Street, Tan Phu Ward, District 7, Ho Chi Minh City, SR Vietnam

Auditor PricewaterhouseCoopers (Vietnam) Limited

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

The Board of Directors is responsible for the consolidated financial statements of Vietnam Dairy Products Joint Stock Company (“the Company”) and its subsidiaries (together “the Group”) which give a true and fair view of the consolidated financial posi-tion of the Group as at 31 December 2012 and of the consolidated results and cash flows for the year then ended. In preparing these 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; and

• prepare the consolidated financial statements on a going concern basis unless it is inappropriate to presume that the Company and its subsidiaries will continue in business.

The Board of Directors is responsible for ensuring that proper accounting records are maintained, which disclose, with reason-able accuracy at any time, the financial position of the Group and which enable these consolidated financial statements to be prepared which complies with the basis of accounting set out in Note 2 to these consolidated financial statements. We are also responsible for safeguarding the assets of the Company and its subsidiaries and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

APPROVAL OF THE CONSOLIDATED FINANCIAL STATEMENTS

We hereby approve the accompanying consolidated financial statements set out on pages 5 to 46 which give a true and fair view of the consolidated financial position of the Group as at 31 December 2012, and of the consolidated results of operations and cash flows for the year then ended in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System and applicable regulations in SR Vietnam.

On behalf of the Board of Directors

Mai Kieu Lien

Chief Executive Officer

Ho Chi Minh City, SR Vietnam

28 February 2013


INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF VIETNAM DAIRY PRODUCTS JOINT STOCK COMPANY

We have audited the accompanying consolidated financial statements of Vietnam Dairy Products Joint Stock Company (“the Company”) and its subsidiaries (together “the Group”), which were approved by the Board of Directors on 28 February 2013. These consolidated financial statements comprise the consolidated balance sheet as of 31 December 2012, the related consoli-dated income statement and cash flow statement for the year then ended, and explanatory notes to the consolidated financial statements including significant accounting policies, as set out on pages 106 to 149.

Board of Directors’ Responsibility for the Consolidated Financial Statements

The Board of Directors of the Company is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System and applicable regula-tions in SR Vietnam. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with Vietnamese Standards on Auditing. Those standards require that we comply with ethical require-ments and plan and perform the audit in order to obtain reasonable assurance as to whether the consolidated financial state-ments are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including an assessment of the risks of ma-terial misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of express-ing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

PricewaterhouseCoopers (Vietnam) Ltd., 4th Floor, Saigon Tower, 29 Le Duan Street, District 1, Ho Chi Minh City, Vietnam

T: +84 (8)38230796, F:+84 (8) 38251947, www.pwc.com/vn

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial posi-tion of the Group as at 31 December 2012, and its consolidated financial performance and cash flows for the year then ended in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System and applicable regulations in SR Vietnam.

Ian S. Lydall Quach Thanh Chau

AC No. N.0559/KTV AC No. N.0875/KTV

Chairman

PricewaterhouseCoopers (Vietnam) Limited

Ho Chi Minh City, SR Vietnam

Audit report number HCM3352

28 February 2013

As indicated in Note 2.1 to the consolidated financial statements, the accompanying consolidated financial statements are not intended to present the financial position and consolidated results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than SR Vietnam, and furthermore their utilisation is not designed for those who are not informed about SR Vietnam’s accounting principles, procedures and practices.


Form B 01 – DN/HN

CONSOLIDATED BALANCE SHEET

Code ASSETS NoteAs at 31 December

2012 2011

100 CURRENT ASSETS 11,110,610,188,964 9,467,682,996,094

110 Cash and cash equivalents 3 1,252,120,160,804 3,156,515,396,990

111 Cash 852,120,160,804 790,515,396,990

112 Cash equivalents 400,000,000,000 2,366,000,000,000

120 Short-term investments 4(a) 3,909,275,954,492 736,033,188,192

121 Short-term investments 4,039,304,630,112 815,277,431,792

129Provision for diminution in value of

short-term investments(130,028,675,620) (79,244,243,600)

130 Accounts receivable 2,246,362,984,001 2,169,205,076,812

131 Trade accounts receivable 5 1,269,841,759,012 1,143,168,467,855

132 Prepayments to suppliers 576,619,318,260 795,149,182,591

135 Other receivables 6 403,754,490,615 232,805,433,796

139 Provision for doubtful debts (3,852,583,886) (1,918,007,430)

140 Inventories 7 3,472,845,352,518 3,272,495,674,110

141 Inventories 3,476,300,517,903 3,277,429,580,780

149 Provision for decline in value of inventories (3,455,165,385) (4,933,906,670)

150 Other current assets 230,005,737,149 133,433,659,990

151 Short-term prepayments 8(a) 72,343,567,655 56,909,099,519

152 Value Added Tax to be reclaimed 154,118,437,302 74,772,661,634

158 Other current assets 3,543,732,192 1,751,898,837

The notes on pages 113 to 149 are an integral part of these consolidated financial statements.

Unit: VND Unit: VND

Form B 01 – DN/HN

CONSOLIDATED BALANCE SHEET (continued)

Code ASSETS NoteAs at 31 December

2012 2011

200 LONG-TERM ASSETS 8,587,258,231,415 6,114,988,554,657

220 Fixed assets 8,042,300,548,493 5,044,762,028,869

221 Tangible fixed assets 9(a) 4,223,443,459,603 3,493,628,542,454

222 Cost 6,512,875,316,427 5,301,826,836,260

223 Accumulated depreciation (2,289,431,856,824) (1,808,198,293,806)

227 Intangible fixed assets 9(b) 253,615,655,556 256,046,089,531

228 Cost 387,180,023,184 383,409,370,867

229 Accumulated depreciation (133,564,367,628) (127,363,281,336)

230 Construction in progress 9(c) 3,565,241,433,334 1,295,087,396,884

240 Investment properties 10 96,714,389,090 100,671,287,539

241 Cost 117,666,487,460 117,666,487,460

242 Accumulated depreciation (20,952,098,370) (16,995,199,921)

250 Long-term investments 4(b) 284,428,762,040 846,713,756,424

252 Investments in joint ventures and associates 217,944,646,507 205,418,475,253

258 Other long-term investments 80,840,000,000 783,646,073,800

259Provision for diminution in value of long-term investments

(14,355,884,467) (142,350,792,629)

260 Goodwill 11 13,662,186,598 15,503,335,522

270 Other long-term assets 150,152,345,194 107,338,146,303

271 Long-term prepayments 8(b) 41,073,978,122 25,598,314,795

272 Deferred income tax assets 12 108,001,947,072 80,643,411,508

278 Other long-term assets 1,076,420,000 1,096,420,000

280 TOTAL ASSETS 19,697,868,420,379 15,582,671,550,751



Form B 01 – DN/HN

CONSOLIDATED BALANCE SHEET (continued)

Code RESOURCES Note As at 31 December

2012 2011

300 LIABILITIES 4,204,771,824,521 3,105,466,354,267

310 Current liabilities 4,144,990,303,291 2,946,537,015,499

312 Trade accounts payable 13 2,247,659,149,802 1,830,959,100,474

313 Advances from customers 21,589,364,414 116,844,952,210

314 Taxes and other payables to the State Budget 14 333,952,869,847 287,462,890,828

315 Payable to employees 106,150,509,860 44,740,312,110

316 Accrued expenses 15 365,103,636,850 260,678,009,293

319 Other payables 16 664,137,048,409 59,478,925,315

320 Bonus and welfare fund 406,397,724,109 346,372,825,269

330 Long-term liabilities 59,781,521,230 158,929,338,768

333 Other long-term liabilities 17 - 92,000,000,000

336 Provision for severance allowances 18 59,635,777,000 66,923,897,268

338 Unearned revenue 145,744,230 5,441,500

400 OWNERS’ EQUITY 15,493,096,595,858 12,477,205,196,484

410 Capital and reserves 15,493,096,595,858 12,477,205,196,484

411 Share capital 19, 20 8,339,557,960,000 5,561,147,540,000

412 Share premium 20 1,276,994,100,000 1,276,994,100,000

414 Treasury shares 20 (4,504,115,000) (2,521,794,000)

417 Investment and development fund 20 93,889,017,729 908,024,236,384

418 Financial reserve fund 20 588,402,022,008 556,114,754,000

420 Undistributed earnings 20 5,198,757,611,121 4,177,446,360,100

440 TOTAL RESOURCES 19,697,868,420,379 15,582,671,550,751

Unit: VND


OFF BALANCE SHEET ITEMS Included in cash and cash equivalents are balances held in following foreign currencies:

As at 31 December

2012 2011

USD 11,737,838.41 27,989,325.30

EUR 49,847.54 1,482,877.52

Le Thanh Liem Ngo Thi Thu Trang Mai Kieu Lien

Chief Accountant Executive Director - Finance Chief Executive Officer 28 February 2013

Unit: VND



Code NoteFor the year ended 31 December

2012 2011

01 Sales 27,101,683,739,278 22,070,557,490,766

02 Less deductions (540,109,559,314) (443,128,597,657)

10 Net sales 22(a) 26,561,574,179,964 21,627,428,893,109

11 Cost of sales 23 (17,484,830,247,188) (15,039,305,378,364)

20 Gross profit 9,076,743,932,776 6,588,123,514,745

21 Financial income 22(b) 475,238,586,049 680,232,453,133

22 Financial expenses 24 (51,171,129,415) (246,429,909,362)

23 - In which: Interest expenses on loans (3,114,837,973) (13,933,130,085)

24 Selling expenses 25 (2,345,789,341,875) (1,811,914,247,629)

25 General and administration expenses 26 (525,197,269,346) (459,431,997,199)

30 Operating profit 6,629,824,778,189 4,750,579,813,688

31 Other income 350,323,343,748 323,106,037,829

32 Other expenses (63,006,276,113) (85,880,005,676)

40 Net other income 27 287,317,067,635 237,226,032,153

41 Share of associate’s result 12,526,171,255 (8,813,950,770)

50 Net accounting profit before tax 6,929,668,017,079 4,978,991,895,071

51 Business income tax - current 28 (1,137,571,835,560) (778,588,561,106)

52 Business income tax - deferred 28, 12 27,358,535,564 17,778,374,972

60 Net profit after tax 5,819,454,717,083 4,218,181,708,937

70 Basic earnings per share (VND) 29 6,981 5,145



Form B 02 – DN/HN

CONSOLIDATED INCOME STATEMENT

Unit: VND


Form B 03 – DN/HN

CONSOLIDATED CASH FLOW STATEMENT (Indirect method)


2012 2011

CASH FLOWS FROM OPERATING ACTIVITIES

01Net profit before taxAdjustments for:

6,929,668,017,079 4,978,991,895,071

02 Depreciation and amortisation 9,10 535,451,905,298 414,590,126,008

03 (Reversal of provisions)/provisions (75,028,609,419) 46,246,669,182

04 Unrealised foreign exchange losses 22, 24 23,750,178,315 7,605,774,684

05 Losses from disposal of fixed assets 27 20,674,462,045 22,448,930,471

05 Interest and dividends income 22(b) (362,908,428,453) (492,526,979,114)

05 Losses from other investing activities 12,177,054,066 9,240,144,764

06 Interest expense 24 3,114,837,973 13,933,130,085

08Operating profit before changes in

working capital7,086,899,416,904 5,000,529,691,151

09 Increase in receivables (177,763,748,924) (1,105,678,269,247)

10 Increase in inventories (273,491,911,774) (1,021,809,144,291)

11 Increase in payables 268,727,745,184 703,897,108,817

12 Increase in prepaid expenses (18,320,018,252) (28,541,385,553)

13 Interest paid (3,114,837,973) (14,785,659,974)

14 Business income tax paid (1,073,341,754,164) (793,480,641,563)

15 Other receipts from operating activities 3,704,175,480 1,255,501,334

16 Other payments on operating activities (518,731,228,162) (330,218,588,434)

20 Net cash inflows from operating activities 5,294,567,838,319 2,411,168,612,240

CASH FLOWS FROM INVESTING ACTIVITIES

21 Purchases of fixed assets and constructions (3,133,999,297,771) (1,767,206,055,153)

22 Proceeds from disposals of fixed assets 16,830,384,644 47,134,169,534

23 Loans granted to associates - (18,000,000,000)

23 Loans granted to third party (30,000,000,000) -

24 (Increase)/decrease in deposits at banks (2,536,900,000,000) 1,170,408,000,000

24 Collection of loans granted to associates 18,000,000,000 -

24 Proceeds from disposal of long term investments 70,114,387,315 1,161,512,182

24 Proceeds from bonds matured 250,000,000,000 100,000,000,000

27 Dividends and interest received 372,293,347,387 472,509,194,809

30Net cash (outflows)/inflows from investing activities

(4,973,661,178,425) 6,006,821,372

Unit: VND



Form B 03 – DN/HN

CONSOLIDATED CASH FLOW STATEMENT (Indirect method) (continued)


2012 2011

CASH FLOWS FROM FINANCING ACTIVITIES

31 Proceeds from issuance of shares - 1,454,528,400,000

32 Payment for share returns and repurchases 19, 20 (1,982,321,000) (1,852,743,000)

33 Proceeds from borrowings - 624,835,000,000

34 Repayments of borrowings - (1,209,835,000,000)

36 Dividends paid 20, 21 (2,222,994,056,000) (741,428,260,000)

40Net cash (outflows)/inflows from financing activities

(2,224,976,377,000) 126,247,397,000

50Net (decrease)/increase in cash and cash equivalents

(1,904,069,717,106 2,543,422,830,612

60Cash and cash equivalents at beginning of year

3 3,156,515,396,990 613,472,368,080

61 Effect of foreign exchange differences (325,519,080) (379,801,702)

70 Cash and cash equivalents at end of year 3 1,252,120,160,804 3,156,515,396,990



Unit: VND


Form B 09 – DN/HN

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012

1. GENERAL INFORMATION

Vietnam Dairy Products Joint Stock Company (“the Company”, or “Vinamilk”) was initially established as a State Owned Enterprise under the control of the Ministry of Industry of the Socialist Republic of Viet-nam (“SR Vietnam” or “the State”) in accordance with Decision No. 420/CNN/TCLD dated 29 April 1993. On 1 October 2003, the Company was equitised following Decision No. 155/2003/QD-BCN issued by the Ministry of Industry. On 20 November 2003, the Company was incorporated as a joint stock company under the Law on Enterprises of SR Vietnam according to Business Registration Certificate No. 4103001932 issued by the Planning and Investment Department of Ho Chi Minh City. The Company was subsequently listed on the Ho Chi Minh City Stock Exchange on 19 January 2006 ac-cording to the Listing Licence No. 42/UBCK-GPNY dat-ed 28 December 2005 issued by the State Securities Commission.

On 19 April 2011, the Planning and Investment De-partment of Ho Chi Minh City issued another amended Business Registration Certificate No. 0300588569 ap-proving the change in the Company’s registered office and the increase in owners’ capital to 3,565,706,400 thousand Vietnamese Dong.

On 23 August 2011, the Planning and Investment De-partment of Ho Chi Minh City issued another amended Business Registration Certificate No. 0300588569 ap-proving the increase in owners’ capital to 3,708,255,500 thousand Vietnamese Dong.

In December 2011, the Company increased the share capital to 5,561,147,540 thousand Vietnamese Dong by issuing bonus shares to existing shareholders at ratio 2:1 as approved by the relevant authorities. The amended Business Registration Certificate No. 0300588569 for such increase in share capital was is-sued by the Planning and Investment Department of Ho Chi Minh City on 7 March 2012.

In December 2012, the Company increased the share capital to 8,339,557,960 thousand Vietnamese Dong by issuing bonus shares to existing shareholders at ratio 2:1 as approved by the relevant authorities. At the date of approval of the financial statements, the Company is in the process of registration for amended Business Registration Certificate for the increase in share capital.

The principal activities of the Company and its subsidi-aries are:

• Process, manufacture and distribute milk cake, soya milk, fresh milk, refreshment drinks, bottled milk, powdered milk, nutritious powder and other products from milk;

• Trading in food technology, spare parts, equip-ment, materials and chemicals;

• Trading in houses, brokerage and leasing of real estate;

• Warehousing, transportation services and load-ing;

• Manufacture, sell and distribute beverages, gro-cery and processing foods, roasted-ground-fil-tered and instant coffee;

• Manufacture and sell plastic packages and label printing;

• Manufacture and sell plastic products; • Health care clinic operations; • Cattle raising and agricultural operations;• Cattle raising: supply of breeding animals and

breeding techniques;• Activities supporting agricultural operations such

as: supply of seeds of cultivated crops, guidance on cultivation techniques, cultivation harvest, soil working, irrigation;

• Post-harvest services;• Treatments on seeds for multiplication purposes;

and• Manufacture biscuits.


Form B 09 – DN/HN

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 (continued)

Form B 09 – DN/HN


1. GENERAL INFORMATION (continued)

The consolidated financial statements for the year ended 31 December 2012 comprises of the financial statements of the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interest in associates and joint ventures as listed below:

Name Address

12.31.2012 12.31.2011

(%) of

ownership

% of voting rights

(%) of

ownership

% of voting rights

Subsidiaries:

Vietnam Dairy Cow One Member Limited Company

10, Tan Trao Street, Tan Phu Ward, District 7, Ho Chi Minh City, Vietnam

100% 100% 100% 100%


Le Mon Industry Zone, Thanh Hoa Province, Vietnam

100% 100% 100% 100%


10, Tan Trao Street, Tan Phu Ward, District 7, Ho Chi Minh City, Vietnam

100% 100% 100% 100%

Dielac Dairy One Member Com-pany Limited (*)

9, Tu Do Venue, Vietnam - Singa-pore Industrial Zone, Thuan An, Binh Duong

100% 100% 100% 100%

Jointly controlled entities:

Dairy Cow Development ProjectTu Tra Ward, Don Duong District, Lam Dong Province, Vietnam

25% 25% 25% 25%

Horizon Apartment -Business Cooperation Contract

214, Tran Quang Khai, District 1, Ho Chi Minh City, Vietnam

24.5% 24.5% 24.5% 24.5%

Associates:

Asia Saigon Food Ingredients Joint Stock Company

Lot C, 9E My Phuoc 3 Industrial Zone, Ben Cat District, Binh Duong Province, Vietnam

15% 15% 15.79% 15.79%

Miraka Limited Becker Findlay Allen C Tower 109 Tuwharetoa St, PO Box 1091, Taupo, New Zealand

19.3% 19.3% 19.3% 19.3%

(*) On 18 September 2012, the Board of Management of the Company issued the decision to liquidate Dielac Dairy One Member Company Limited (“Dielac”) to convert it to a branch of the Company. The liquidation of Dielac was ap-proved by the Management Board of Vietnam – Singapore Industrial Park on 25 September 2012. On 29 November 2012, the tax code of Dielac was closed by Binh Duong Province’s tax department. On 4 December 2012, the Business Registration Certificate of the branch was issued by the Planning and Investment Department of Binh Duong Prov-ince, which renamed Dielac as Vietnam Powder Milk Factory. As at 31 December 2012, certain liquidation procedures of Dielac were still in progress.

As at 31 December 2012, the Group had 5,000 employees (2011: 4,638 employees).

2. ACCOUNTING SYSTEM AND AC-COUNTING POLICIES

2.1 Basis of preparation of consolidated financial

statements

The consolidated financial statements have been

prepared in accordance with Vietnamese Accounting

Standards, the Vietnamese Accounting System and

applicable regulations in SR Vietnam. The consolidat-

ed financial statements have been prepared under the

historical cost convention.

The accompanying consolidated financial statements

are not intended to present the financial position and

results of operations and cash flows in accordance

with accounting principles and practices generally

accepted in countries and jurisdictions other than SR

Vietnam. The accounting principles and practices uti-

lised in SR Vietnam may differ from those generally

accepted in countries and jurisdictions other than SR

Vietnam.

2.2 Fiscal year

The Group’s fiscal year is from 1 January to 31 December.

2.3 Consolidation

In 2012, the Company prepared its consolidated fi-

nancial statements in accordance with Vietnamese Ac-

counting Standard 25 – Consolidated Financial State-

ments and Accounting for Investments in Subsidiaries.

Subsidiaries

Subsidiaries are all entities over which the Group has

the power to govern the financial and operating poli-

cies generally accompanying a shareholding of more

than one half of the voting rights. The existence and

effect of potential voting rights that are currently

exercisable or convertible are considered when as-

sessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on

which control is transferred to the Group. They are

de-consolidated from the date that control ceases.

The purchase method of accounting is used to ac-

count for the acquisition of subsidiaries by the Group.

The cost of an acquisition is measured as the fair

value of the assets given, equity instruments issued

and liabilities incurred or assumed at the date of ex-

change, plus costs directly attributable to the acqui-

sition. Identifiable assets acquired and liabilities and

contingent liabilities assumed in a business combina-

tion are measured initially at their fair values at the

acquisition date, irrespective of the extent of any mi-

nority interest. The excess of the cost of acquisition

over the fair value of the Group’s share of the identifi-

able net assets acquired is recorded as goodwill. If

the cost of acquisition is less than the fair value of the

net assets of the subsidiary acquired, the difference is

recognised directly in the income statement.

Inter-company transactions, balances and unreal-

ised gains and losses on transactions between group

companies are eliminated. Accounting policies of

subsidiaries have been changed where necessary to

ensure consistency with the policies adopted by the

Group.

Transactions and minority interests

The Group applies a policy of treating transactions

with minority interests as transactions with parties

external to the Group. Disposals to minority inter-

ests result in gains and losses for the Group that are

recorded in the income statement. Purchases from

minority interests result in goodwill, being the dif-

ference between any consideration paid and the

relevant share acquired of the carrying value of net

assets of the subsidiary.


2. ACCOUNTING SYSTEM AND AC-COUNTING POLICIES (continued)

2.3 Consolidation (continued)

Joint ventures and associates

Joint ventures are contractual arrangements whereby two or more parties undertake an economic activity which is subject to joint control. Associates are all enti-ties over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Invest-ments in joint ventures and associates are accounted for using the equity method of accounting and are initially recognised at cost. The Group’s investment in joint ventures and associates includes goodwill iden-tified on acquisition, net of any accumulated impair-ment loss.

The Group’s share of its joint ventures’ and associates’ post-acquisition profits or losses is recognised in the consolidated income statement, and its share of post-acquisition movements in reserves is recognised in consolidated reserves. The cumulative post-acqui-sition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in a joint venture or associate equals or ex-ceeds its interest in the joint venture or associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint venture or associate.

Unrealised gains and losses on transactions between the Group and its joint ventures and associates are eliminated to the extent of the Group’s interest in the joint ventures and associates. Accounting policies of joint ventures and associates have been changed where necessary to ensure consistency with the poli-cies adopted by the Group.

2.4 Use of estimates

The preparation of the consolidated financial state-ments in conformity with Vietnamese Accounting Standards requires the Board of Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of finan-cial statements and the amounts of revenues and expenses during the year. Although these estimates are based on the Board of Directors’ best knowledge of current events and actions, actual results may differ from those estimates.

2.5 Currency

The consolidated financial statements are prepared and presented in Vietnamese Dong.

Transactions arising in foreign currencies are translat-ed at exchange rates ruling at the transaction dates. Foreign exchange differences arising from these trans-actions are recognised in the income statement.

Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the rates of exchange ruling at the balance sheet date. Foreign exchange differences arising from these trans-lations are recognised in the income statement.

2.6 Form of records applied

The Group uses voucher ledgers to record its transac-tions.

2.7 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash at bank, cash in transit, demand deposits and other short-term investments with an original matu-rity of three months or less.


2.8 Trade receivables

Trade receivables are carried at original invoice amount less an estimate made for doubtful receivables based on a review by the Board of Directors of all outstand-ing amounts at the year end. Bad debts are written off when identified.

2.9 Inventories

Inventories are stated at the lower of cost and net real-isable value. Cost is determined by the weighted aver-age method and includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured products, cost includes all direct expenditure and production overheads based on normal levels of operating activity. Net realis-able value is the estimated selling price in the normal course of business, less the estimated costs of comple-tion and selling expenses. Provision is made, where necessary, for obsolete, slow-moving and defective inventory items.

2.10 Investments

(a) Short-term investments

Short-term investments are investments with maturi-ties less than 12 months from the balance sheet date and investments that are held with the intention to dispose within 12 months from the balance sheet date. Short-term investments are initially accounted for at cost. Provision for diminution is recognised for short term equity securities where the cost exceeds the fair value of such securities.

(b) Investments in joint ventures and associates

Investments in joint ventures and associates are ac-counted under the equity method of accounting in

the consolidated financial statements.

(c) Long-term investments

(i) (i) Long-term bank deposits are those maturing after 12 months from the balance sheet date and are accounted for at cost.

(ii) (ii) Investments in bonds are classified as long-term when they are held with no intention to dispose within 12 months from the balance sheet date. Invest-ments in bonds are initially stated at cost. Subsequent-ly, they are measured at cost less provision. Provision is required if there is evidence of a long-term decline in the value of the securities or in the case where the Group cannot recover its investments.

(iii) Other long-term investments comprise share-holding of less than 20% in listed and unlisted entities which are held with no intention to dispose within 12 months from the balance sheet date. These invest-ments are initially stated at cost of acquisition. Provi-sion is made where there is a diminution in value of these investments.

2.11 Fixed assets

Tangible and intangible fixed assets

Fixed assets are stated at historical cost less accumu-lated depreciation. Historical cost includes expendi-ture that is directly attributable to the acquisition of the fixed assets.

Depreciation

Fixed assets are depreciated on the straight-line meth-od, to write off the cost of the assets to their residual value over their estimated useful lives or over the term of the project if shorter. The estimated useful lives of the assets are as follows:

Form B 09 – DN/HN


Form B 09 – DN/HN




2.11 Fixed assets (continued)

Years

Buildings and structures 10 - 50Machinery and equipment 8 - 10Motor vehicles 10Office equipment 3 - 8Software 6Livestock 6

Land use rights are amortised, using the straight-line method over the terms indicated in the land use right certificates. Land use rights which are granted for an indefinite term are carried at cost and not amortised.

Subsequent expenditure

Subsequent expenditure relating to fixed assets that has already been recognised is added to the carrying amount of the asset only when it is probable that fu-ture economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expense is recognised in the income statement when incurred.

Disposals

Gains and losses on disposals are determined by comparing net disposal proceeds with the carrying amount and are recognised as income or expense in the income statement.

2.12 Leased assets

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under

operating leases are charged to the income statement on the straight-line basis over the period of the lease.

2.13 Investment properties

Investment properties are a building – or part of a building – or infrastructure held by the Group to earn rentals or for capital appreciation or both rather than for use in the production or supply of goods or servic-es or administrative purposes or for sale in the normal course of business.

Investment properties are stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisi-tion of the investment properties.

Depreciation

Investment properties are depreciated on the straight-line method to write off the cost of the assets over their estimated useful lives, as follows:

Years

Buildings 10 - 50

Infrastructure 10

Land use rights are amortised, using the straight-line method over the terms indicated in the land use right certificates. Land use rights which are granted for an indefinite term are carried at cost and not amortised.

Disposals

Gains or losses on disposals are determined by com-paring net disposal proceeds with the net book value and are recognised as income or expense in the in-come statement


2.14 Share capital and treasury shares

Ordinary shares in issue are classified as equity. Incre-mental costs directly attributable to the issuance of new shares or options are shown in equity as a deduc-tion from the proceeds.

Where the Group purchase the Group’s equity share capital (treasury shares), the consideration paid, in-cluding directly attributable incremental costs, is deducted from equity attributable to the Group’s eq-uity holders until the shares are cancelled or reissued. Where such shares are subsequently sold or reissued, any consideration received less any directly attributa-ble incremental transaction costs is included in equity attributable to the Group’s equity holders.

2.15 Borrowing costs

Borrowing costs that are directly attributable to the construction or production of any qualifying assets are capitalised during the period of time that is required to complete and prepare the asset for its intended use. Other borrowing costs are recognised in the income statement when incurred.

2.16 Revenue recognition

(a) Sales of goods

Revenue from the sale of goods is recognised in the income statement when the significant risks and re-wards 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 likely return of goods.

(b) Provision of services

Revenue from the provision of services is recognised in

the income statement when the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided.

(c) Interest income

Interest income is recognized on the basis of the ac-tual time and interest rate in each period.

(d) Dividend income

Dividend income is recognised in the period in which the dividends are declared by the investee entities.

2.17 Current and deferred income tax

Income taxes include all income taxes which are based on taxable profits including profits generated from pro-duction and trading activities in other countries that the Socialist Republic of Vietnam has not signed any double tax relief agreement. Income tax expense comprises current tax expense and deferred tax expense.

Current income tax is the amount of income taxes pay-able or recoverable in respect of the current year taxable profit and the current tax rates. Current and deferred tax should be recognized as income or an expense and included in profit or loss for the period, except to the ex-tent that the tax arises from a transaction or event which is recognized, in the same or a different period, directly in equity.

Form B 09 – DN/HN


Form B 09 – DN/HN




2.17 Current and deferred income tax (continued)

Deferred income tax is provided in full, using the liabil-

ity method, on temporary differences arising between

the tax bases of assets and liabilities and their carrying

amounts in the financial statements. Deferred income

tax is not accounted for if it arises from initial recogni-

tion of an asset or liability in a transaction other than

a business combination that at the time of occurrence

affects neither the accounting nor the taxable profit

or loss. Deferred income tax is determined at the tax

rates that are expected to apply to the financial year

when the asset is realised or the liability is settled,

based on tax rates that have been enacted or substan-

tively enacted by the balance sheet date.

Deferred income tax assets are recognised to the ex-

tent that it is probable that future taxable profit will

be available against which the temporary differences

can be utilised.

2.18 Dividend distribution

The Company’s net profit after tax is available for ap-

propriation to shareholders as dividends after approv-

al by shareholders at the Company’s Annual General

Meeting and after making appropriation to reserve

funds in accordance with the Company’s Charter.

Interim dividends are declared and paid based on the

estimated earnings of the year. Final dividends are de-

clared and paid in the following year from undistrib-

uted earnings based on the approval of shareholders

at the Company’s Annual General Meeting.

2.19 Method of reserve appropriation

Appropriation to reserve funds in accordance with the

Company’s Charter is as follows:

Investment and

development fund 10% of profit after tax

Bonus and welfare fund 10% of profit after tax

Financial reserve fund up to 5% of profit after tax

Appropriation to financial reserve fund will cease

when the amount reaches 10% of the Company’s

paid-in capital. Utilisation of the above reserve funds

requires approval of the Chief Executive Officer, the

Board of Directors or the shareholders depending on

the nature and magnitude of the transactions involved

as stated in the Company’s Charter and financial regu-

lations.

2.20 Related parties

Enterprises and individuals that directly, or indirectly

through one or more intermediaries, control, or are

controlled by, or are under common control with, the

Company, including holding companies, subsidiaries

and fellow subsidiaries are related parties of the Com-

pany. Associates and individuals owning, directly or

indirectly, an interest in the voting power of the Com-

pany that gives them significant influence over the en-

terprise, key management personnel, including direc-

tors and officers of the Company and close members

of the family of these individuals and companies as-

sociated with these individuals also constitute related

parties.

The State Capital Investment Corporation holds the

largest shareholding in the Company and accordingly

is regarded as a related party. However, enterprises

which are controlled or significantly influenced by the

State Capital Investment Corporation are not consid-

ered as related parties of the Company for the purpos-

es of disclosure since they do not influence, or are not

influenced by, the Company.


2.20 Related parties (continued)

In considering each possible related party relation-

ship, attention is directed to the substance of the rela-

tionship, and not merely the legal form.

2.21 Provisions

Provisions are recognised when: the Company or its subsidiaries have a present legal or constructive ob-ligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimat-ed. Provisions are not recognised for future operating losses.

Provisions are measured at the expenditures expected to be required to settle the obligation. If the time val-ue of money is material, provisions will be measured at their present value using a pre-tax rate that reflects current market assessments of the time value of mon-ey and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expenses.

2.22 Provision for severance allowances

In accordance with Vietnamese labour laws, employ-ees of the Company and its subsidiaries are entitled to a severance allowance based on their years of service. This will be paid as a lump sum when the employee leaves the Company and its subsidiaries. A provision for severance allowance is made for the estimated lia-bility for employment termination as a result of servic-es rendered by employees. Pursuant to Law on Social Insurance, effective from 1 January 2009, the Com-pany and its subsidiaries are required to contribute to an unemployment insurance fund managed by the Vietnam Social Insurance Agency. With the implemen-tation of the unemployment scheme, the Company and its subsidiaries are no longer required to provide for the service period after 1 January 2009. However, provision for severance allowance as of 31 December 2012 is determined based on the employees’ number of years of service up to 31 December 2008 and their average salary for the six-month period prior to the balance sheet date.

Form B 09 – DN/HN


Form B 09 – DN/HN



2012 2011

Cash on hand 1,007,244,458 748,676,117

Cash at bank 850,362,916,346 789,766,720,873

Cash in transit 750,000,000 -

Cash equivalents (*) 400,000,000,000 2,366,000,000,000

1,252,120,160,804 3,156,515,396,990

(*) Cash equivalents include term deposits with an original maturity of 3 months or less.

4. INVESTMENTS

(a) Short-term investments

2012 2011

Investment in unlisted equity securities 82,283,660,000 82,283,660,000

Investment in listed equity securities 211,020,970,112 24,993,771,792

Short-term deposits at banks 2,974,000,000,000 440,000,000,000

Bonds issued by local corporates - 50,000,000,000

Bonds issued by local credit institutions 300,000,000,000 200,000,000,000

Other short-term investments 472,000,000,000 18,000,000,000

4,039,304,630,112 815,277,431,792

Provision for diminution in value of short-term invest-ments

(130,028,675,620) (79,244,243,600)

3,909,275,954,492 736,033,188,192

Provision for diminution in value of short-term investments has been made to reflect the fall in market prices of the related shares as at year end.

Form B 09 – DN/HN


3. CASH AND CASH EQUIVALENTS

Unit: VND

Unit: VND

2012 2011

Opening balance 79,244,243,600 70,657,669,500

Increase - 8,586,574,100

Reclassification from provision for diminution in value of long-term investments (Note 4(b))

54,008,653,800 -

Reversal (3,224,221,780) -

Closing balance 130,028,675,620 79,244,243,600

(b) Long-term investments

The details of the long-term investments of the Group are as follows:Unit: VND

2012 2011

Long-term equity investments in associates and joint ventures:

Miraka Limited 178,904,317,366 173,228,494,143

Asia Saigon Food Ingredients Joint Stock Company 21,888,373,590 15,038,025,559

Horizon Apartment – Business Cooperation Contract 9,942,684,826 9,942,684,826

Dairy Cow Development Project 7,209,270,725 7,209,270,725

217,944,646,507 205,418,475,253

Other long-term investments:

Long-term bonds issued by local corporates 50,000,000,000 50,000,000,000

Long-term bonds issued by local credit institutions - 300,000,000,000

Other long-term investments:

Listed equity securities - 206,996,073,800

Investment funds 30,540,000,000 106,350,000,000

Others 300,000,000 120,300,000,000

80,840,000,000 783,646,073,800

Provision for diminution in value of long-term investments (14,355,884,467) (142,350,792,629)

284,428,762,040 846,713,756,424

Form B 09 – DN/HN


4. INVESTMENTS (continued)

(a) Short-term investments (continued)

Movements in the provision for diminution in value of short-term investments during the year were as follows:Unit: VND


2012 2011

Opening balance 142,350,792,629 108,580,084,548

Increase 763,261,300 34,898,977,981

Reversal (74,749,515,662) (1,128,269,900)

Reclassification to provision for diminution in value of short-term investment (Note 4(a)) (*)

(54,008,653,800) -

Closing balance 14,355,884,467 142,350,792,629

(*) As at 31 December 2012, long-term investments in listed equity securities amounting to VND189,402,373,800 and the correspond-

ing provision of VND54,008,653,800 were reclassified to short-term investments as the Company’s management had intention to

dispose them within 12 months from the balance sheet date.

5. TRADE ACCOUNTS RECEIVABLE

Unit: VND

2012 2011

Third parties 1,269,841,759,012 1,143,168,467,855

6. OTHER RECEIVABLES

Unit: VND

2012 2011

Dividends receivable - 6,144,600

Interest income on deposits 55,733,508,797 39,118,333,339

Interest income receivable on bonds and loans granted to other entities

27,586,763,700 53,480,095,630

Import duty refundable 235,708,097,835 128,535,499,715

Rebates receivable from suppliers 76,841,890,627 -

Others 7,884,229,656 11,665,360,512

403,754,490,615 232,805,433,796

Form B 09 – DN/HN


4. INVESTMENTS (continued)

(b) Long-term investments (continued)

The movements in the provision for diminution in value of long-term investments were as follows:

Unit: VND2012 2011

Goods in transit 702,869,203,610 972,360,197,401

Raw materials 2,041,420,485,347 1,590,350,151,377

Tools and supplies 8,332,323,313 1,833,344,075

Work in progress 89,198,796,393 61,562,596,516

Finished goods 591,779,813,093 579,265,915,242

Merchandise goods 20,857,268,341 23,686,995,937

Goods on consignment 21,842,627,806 48,370,380,232

3,476,300,517,903 3,277,429,580,780

Provision for decline in value of inventory (3,455,165,385) (4,933,906,670)

3,472,845,352,518 3,272,495,674,110

Movements in the provision for inventories during the year were as follows:

Unit: VND

2012 2011

Opening balance 4,933,906,670 4,133,214,915

Increase 8,686,194,492 10,074,642,239

Reversal (8,476,656,163) (8,018,602,015)

Written-off (1,688,279,614) (1,255,348,469)

Closing balance 3,455,165,385 4,933,906,670

Form B 09 – DN/HN


7. INVENTORIES

Unit: VND


2012 2011

Advertising expenses 2,542,287,500 8,320,100,182

Land, warehouse and other rental expenses 1,587,393,638 2,414,274,654

Software development and server maintenance expenses 2,499,507,569 3,862,183,375

Tools and supplies supporting selling activities 46,373,495,946 34,676,924,998

Other tools and supplies 10,519,642,156 4,255,096,359

Repair and maintenance expenses 7,133,316,219 1,381,630,958

Other expenses 1,687,924,627 1,998,888,993

72,343,567,655 56,909,099,519

(b) Long-term prepayments

Unit: VND

2012 2011

Land rental 2,159,885,571 2,434,012,586

Tools and supplies supporting selling activities 15,699,234,727 11,241,646,159

Other expenses 23,214,857,824 11,922,656,050

41,073,978,122 25,598,314,795

Movement of long-term prepayments during the year was as follows:

Unit: VND

2012 2011

Opening balance 25,598,314,795 97,740,813,322

Increase 98,456,539,909 75,772,676,087

Charged to income statement (8,365,677,045) (3,668,511,654)

Transfers to intangible fixed assets - (82,680,130,919)

Transfers to short-term prepayments (*) (74,615,199,537) (61,566,532,041)

Closing balance 41,073,978,122 25,598,314,795

(*) Represented a portion of long-term prepayments to be allocated within a year.

Form B 09 – DN/HN


8. PREPAYMENTS

(a) Short-term prepaymentsUnit: VND

Buildings and structures

Machinery and equipment

Motor vehicles

Office equipment

Livestock Total

Historical cost

At 1 January 2012 910,815,133,889 3,595,320,134,802 342,750,559,768 257,437,883,086 195,503,124,715 5,301,826,836,260

New purchases 26,327,202,110 136,900,621,045 58,794,694,591 56,748,352,395 - 278,770,870,141

Transfers from construction in

progress (Note 9(c))257,951,636,615 681,819,789,341 14,868,734,720 6,522,338,934 - 961,162,499,610

Transfers from inventory - - - - 72,831,881,331 72,831,881,331

Reclassifications 2,201,083,457 (2,382,953,980) 251,261,432 (69,390,909) - -

Disposals (9,982,438,826) (7,508,693,865) (54,545,807,852) (4,619,456,413) (25,056,789,279) (101,713,186,235)

Other decreases - (3,584,680) - - - (3,584,680)

At 31 December 2012 1,187,312,617,245 4,404,145,312,663 362,119,442,659 316,019,727,093 243,278,216,767 6,512,875,316,427

Accumulated depreciation

At 1 January 2012 217,612,580,950 1,285,791,657,838 143,083,992,356 120,979,925,716 40,730,136,946 1,808,198,293,806

Charge for the year 48,704,874,132 362,635,368,504 30,188,603,674 46,006,042,200 36,488,175,567 524,023,064,077

Reclassifications 67,482,521 (126,500,985) 67,003,048 (7,984,584) - -

Disposals (2,152,794,721) (6,873,800,632) (21,809,552,972) (4,574,502,487) (7,378,850,247) (42,789,501,059)

At 31 December 2012 264,232,142,882 1,641,426,724,725 151,530,046,106 162,403,480,845 69,839,462,266 2,289,431,856,824

Net book value

At 1 January 2012 693,202,552,939 2,309,528,476,964 199,666,567,412 136,457,957,370 154,772,987,769 3,493,628,542,454

At 31 December 2012 923,080,474,363 2,762,718,587,938 210,589,396,553 153,616,246,248 173,438,754,501 4,223,443,459,603

Included in the tangible fixed assets were assets costing VND671,586,199,605 which were fully depreciated as at 31 December 2012 (31 December 2011: VND628,995,160,327), but which are still in active use.

Form B 09 – DN/HN


9. FIXED ASSETS

(a) Tangible fixed assetsUnit: VND


Land use rights Software Total

Historical cost

At 1 January 2012 324,478,280,840 58,931,090,027 383,409,370,867

Additions - 5,041,508,797 5,041,508,797

Disposals - (1,270,856,480) (1,270,856,480)

At 31 December 2012 324,478,280,840 62,701,742,344 387,180,023,184

Accumulated amortisation

At 1 January 2012 78,679,820,739 48,683,460,597 127,363,281,336

Charge for the year 4,076,328,249 3,395,614,523 7,471,942,772

Disposals - (1,270,856,480) (1,270,856,480)

At 31 December 2012 82,756,148,988 50,808,218,640 133,564,367,628

Net book value

At 1 January 2012 245,798,460,101 10,247,629,430 256,046,089,531

At 31 December 2012 241,722,131,852 11,893,523,704 253,615,655,556

Included in the intangible fixed assets were assets costing VND45,221,516,597 which were fully amortised as at 31 December 2012 (2011: VND43,568,790,597), but which are still in active use.

(c) Construction in progress

Unit: VND

2012 2011

Opening balance 1,295,087,396,884 665,282,453,729

Additions 3,244,215,655,105 1,765,978,487,062

Transfers to tangible fixed assets (Note 9(a)) (961,162,499,610) (1,130,614,746,336)

Transfers to inventory - (4,529,164,165)

Other decreases (12,899,119,045) (1,029,633,406)

Closing balance 3,565,241,433,334 1,295,087,396,884

Form B 09 – DN/HN


9. FIXED ASSETS (continued)

(b) Intangible fixed assetsUnit: VND

Main projects relate to the following locations:

Unit: VND

2012 2011

Vietnam milk factory 1,819,204,239,183 252,972,591,210

Dielac 2 powder milk factory 1,509,809,070,248 383,594,721,240

Can Tho branch 45,086,527,051 44,989,951,351

Dairy cow farms 35,366,294,536 15,893,206,674

Da Nang milk factory 21,448,226,014 237,931,390,899

Saigon milk factory 591,352,078 80,403,563,112

Tien Son milk factory - 81,555,694,010

Nghe An milk factory - 35,495,060,435

Dielac milk factory - 33,679,200,351

10. INVESTMENT PROPERTIESUnit: VND

Land use rights Infrastructure Buildings Total

Historical cost

At 1 January 2012 and 31 December 2012

27,489,150,000 5,994,290,197 84,183,047,263 117,666,487,460

Accumulated depreciation

At 1 January 2012 - 1,144,301,491 15,850,898,430 16,995,199,921

Charge for the year - 599,429,017 3,357,469,432 3,956,898,449

At 31 December 2012 - 1,743,730,508 19,208,367,862 20,952,098,370

Net book value

At 1 January 2012 27,489,150,000 4,849,988,706 68,332,148,833 100,671,287,539

At 31 December 2012 27,489,150,000 4,250,559,689 64,974,679,401 96,714,389,090

The land use rights represented freehold land in Hai Chau District, Da Nang City and was carried at cost and not amortised.

Included in the investment properties were assets costing VND6,976,800,000 which were fully depreciated as at 31 December 2012 (31 December 2011: VND6,976,800,000), but which are still in active use.

Form B 09 – DN/HN


9. FIXED ASSETS (continued)

(c) Construction in progress (continued)


Movements of goodwill during the year were as follows:

Unit: VND

2012 2011

Opening balance 15,503,335,522 19,556,808,664

Decrease - (2,269,050,480)

Charged to the income statement (1,841,148,924) (1,784,422,662)

Closing balance 13,662,186,598 15,503,335,522

12. DEFERRED INCOME TAX ASSETS

The gross movement in the deferred income tax, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Unit: VND

2012 2011

Opening balance 80,643,411,508 62,865,036,536

Income statement credit 27,358,535,564 17,778,374,972

Closing balance 108,001,947,072 80,643,411,508

The deferred income tax asset mainly arises from unrealised foreign exchange differences, provisions and accruals.

13. TRADE ACCOUNTS PAYABLE

Unit: VND

2012 2011

Third parties 2,242,761,181,733 1,722,763,113,643

Related parties (Note 31(b)) 4,897,968,069 108,195,986,831

2,247,659,149,802 1,830,959,100,474

Form B 09 – DN/HN


11. GOODWILL

Unit: VND

2012 2011

Value Added Tax 59,106,005,706 78,912,830,769

Import duty 3,932,727,653 5,819,918,779

Business income tax 252,860,913,932 188,626,252,026

Personal income tax 18,020,617,756 13,715,531,182

Others 32,604,800 388,358,072

333,952,869,847 287,462,890,828

15. ACCRUED EXPENSESUnit: VND

2012 2011

Sales incentives for distributors 172,183,794,781 166,981,423,467

Expenses for product display - 138,181,804


Transportation expenses 23,976,054,607 25,359,546,962

Fuel expenses 7,115,522,438 5,795,564,015

Repair and maintenance expenses 5,797,227,711 6,357,023,147

Expenses for outsourced employees 11,164,299,513 7,252,173,600

Others 27,956,701,587 19,365,394,796

365,103,636,850 260,678,009,293

Other accrued expenses as at 31 December 2012 mainly comprised of land rentals and other general and ad-ministration expenses.

Form B 09 – DN/HN


14. TAXES AND OTHER PAYABLES TO STATE BUDGET


Unit: VND

2012 2011

Deposits received from customers 18,642,185,025 13,510,621,271

Import duty payable not past due 176,541,502,888 31,891,388,948

Payables to minority shareholders of subsidiaries - 34,800,000

Other payables relating to financial investments (*) 448,007,419,155 184,859,155

Staff insurance and trade union fees 582,711,892 615,429,742

Others 20,363,229,449 13,241,826,199

664,137,048,409 59,478,925,315

(*) Other payables relating to financial investments included an advance payment of VND447,822,000,000 received from a third

party in respect of the future transfer of the Company’s investment in a bank. The transfer can only be effective upon approval

by the bank’s Annual General Meeting or Board of Management and its founding shareholders; or after five years from the date

of establishment of the bank, whichever comes first. The advance amount comprised of VND92,000,000,000 received in previ-

ous years and VND355,822,000,000 received in 2012.

17. OTHER LONG-TERM LIABILITIES

Other long-term liabilities were reclassified to other short-term payables in 2012 as they will be settled within 12 months from the balance sheet date (Note 16).

18. PROVISION FOR SEVERANCE ALLOWANCES

Movements for provision for severance allowances during the year were as follows:

Unit: VND

2012 2011

Opening balance 66,923,897,268 51,373,933,083

Increase 1,687,443,587 16,618,656,982

Payment during the year (680,685,501) (1,068,692,797)

Reversal (8,294,878,354) -

Closing balance 59,635,777,000 66,923,897,268

Form B 09 – DN/HN


16. OTHER PAYABLES

On 20 November 2012, the Ho Chi Minh City Stock Exchange issued Notification No. 926/2012/TB-SGDHCM to approve for the registration of 277,841,042 bonus shares of 2:1 ratio in circulation, which were issued using the In-vestment and Development Fund and undistributed earnings to raise the share capital to VND8,339,557,960,000. As at 31 December 2012, the Company is in the process of registration for amended Business Registration Certifi-cate for the increase in share capital.

The Company’s authorised and issued share capitals are:

12.31.2012 12.31.2011

Number of shares VND Number of shares VND

Authorised share capital 833,955,796 8,339,557,960,000 556,114,754 5,561,147,540,000

Issued share capital

Ordinary shares 833,955,796 8,339,557,960,000 556,114,754 5,561,147,540,000

Treasury shares

Ordinary shares (430,120) (4,504,115,000) (247,140) (2,521,794,000)

Shares currently in circulation

Ordinary shares 833,525,676 8,335,053,845,000 555,867,614 5,558,625,746,000

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

20. MOVEMENTS IN OWNERS’ EQUITY

Unit: VND

Share capital

Share premium

Treasury shares

Investment and develop-

ment fund

Financial reserve fund

Undistribut-ed earnings Total

As at 1 January 2011 3,530,721,200,000 - (669,051,000) 2,172,290,789,865 353,072,120,000 1,909,021,531,417 7,964,436,590,282

Capital increase during the year 2,030,426,340,000 1,276,994,100,000 - (1,852,892,040,000) - - 1,454,528,400,000

Purchase of treasury shares - - (1,852,743,000) - - - (1,852,743,000)

Profit for the year - - - - - 4,218,181,708,937 4,218,181,708,937

Appropriations to reserves - - - 588,625,486,519 203,042,634,000 (1,208,328,620,254) (416,660,499,735)

Dividends paid - - - - - (741,428,260,000) (741,428,260,000)

As at 31 December 2011 5,561,147,540,000 1,276,994,100,000 (2,521,794,000) 908,024,236,384 556,114,754,000 4,177,446,360,100 12,477,205,196,484

Form B 09 – DN/HN


19. SHARE CAPITAL


Unit: VND

Share capital

Share premium

Treasury shares

Investment and develop-

ment fund

Financial reserve fund

Undistribut-ed earnings Total

As at 1 January 2012 5,561,147,540,000 1,276,994,100,000 (2,521,794,000) 908,024,236,384 556,114,754,000 4,177,446,360,100 12,477,205,196,484

Capital increase during the year 2,778,410,420,000 - - (1,628,883,194,992) - (1,149,527,225,008) -

Purchase of treasury shares - - (1,982,321,000) - - - (1,982,321,000)

Profit for the year - - - - - 5,819,454,717,083 5,819,454,717,083

Appropriations to reserves - - - 814,747,976,337 32,287,268,008 (1,425,622,185,054) (578,586,940,709)

Dividends paid (Note 21) - - - - - (2,222,994,056,000) (2,222,994,056,000)

As at 31 December 2012 8,339,557,960,000 1,276,994,100,000 (4,504,115,000) 93,889,017,729 588,402,022,008 5,198,757,611,121 15,493,096,595,858

21. DIVIDENDS

During 2012, the Company has declared and paid final dividends of 20% in cash of the year ended 31 December 2011 and interim dividends of 20% in cash of the year ended 31 December 2012.

Final dividends in respect of the year ended 31 December 2012 are to be proposed at the Company’s Annual Gen-eral Meeting in 2013.

22. REVENUE

(a) Net sales

Unit: VND

2012 2011

Sales

Sales of merchandise goods 378,856,511,250 302,234,100,241

Sales of finished goods 26,687,053,494,046 21,737,996,256,230

Revenue from provision of real estate services 11,694,544,989 9,636,945,888

Revenue from provision of other services 24,079,188,993 20,690,188,407

27,101,683,739,278 22,070,557,490,766

Sales deductions

Trade discounts (529,926,422,029) (441,891,678,905)

Sales returns (10,183,137,285) (1,236,918,752)

(540,109,559,314) (443,128,597,657)

Net sales 26,561,574,179,964 21,627,428,893,109

Form B 09 – DN/HN


20. MOVEMENTS IN OWNERS’ EQUITY (continued)

Unit: VND

2012 2011

Interest income on loan granted 468,750,000 2,445,000,000

Interest income on deposits 249,762,897,095 366,516,423,111

Interest income on bonds 77,056,806,958 97,988,961,693

Dividends income 35,619,974,400 25,576,594,310

Realised foreign exchange gains 103,438,947,734 133,011,736,352

Gains from foreign currency translation at year end - 53,335,201,499

Gain on disposal of investments 8,790,592,000 -

Others 100,617,862 1,358,536,168

475,238,586,049 680,232,453,133

23. COST OF SALESUnit: VND

2012 2011

Merchandise goods sold 313,985,989,376 286,607,568,444

Finished goods sold 17,110,723,660,326 14,684,630,075,415

Real estate services provided 5,511,306,230 5,461,852,413

Other services provided 1,021,956,715 1,314,885,592

Inventories deficiencies 6,163,282,024 2,017,880,798

Expenses in excess of normal value 47,214,514,188 57,217,075,478

Provision for the decline in value of inventory 209,538,329 2,056,040,224

17,484,830,247,188 15,039,305,378,364

Form B 09 – DN/HN


22. REVENUE (continued)

(b) Financial income


Unit: VND

2012 2011

Payment discounts for distributors 31,602,235,707 22,667,657,049

Interest expenses on loans 3,114,837,973 13,933,130,085

Interest expenses on deposits received 1,016,360,739 1,173,590,655

Realised foreign exchange losses 37,855,110,550 105,298,278,209

Losses on foreign currency translation at year end 23,750,178,315 60,940,976,183

(Reversal of provision)/provision for diminution in value of investments

(77,210,476,142) 42,357,282,181

Other financial expenses 31,042,882,273 58,995,000

51,171,129,415 246,429,909,362

25. SELLING EXPENSESUnit: VND

2012 2011


Promotion expenses 635,694,113,386 501,645,805,671

Support and commission expenses for distributors 405,354,439,716 330,271,502,489

Staff costs 154,142,240,782 126,040,690,295

Material expenses 56,236,043,231 46,661,138,368

Tools and supplies expenses 61,297,993,881 36,459,224,005

Depreciation expenses 25,653,373,488 25,827,515,080

Expenses of damaged goods 13,803,784,829 10,079,299,960

Transportation for goods sold 307,016,838,337 254,224,204,720

Outside service expenses 99,969,890,863 80,501,413,118

2,345,789,341,875 1,811,914,247,629

Form B 09 – DN/HN


24. FINANCIAL EXPENSESUnit: VND

2012 2011

Staff costs 165,496,215,666 139,108,109,646

Material expenses 13,566,054,345 10,884,949,950

Office supplies 4,275,239,859 5,130,371,249

Depreciation expense 60,091,120,002 50,962,059,856

Fees and duties 15,421,910,323 5,136,600,449

Provision of doubtful debts and severance allowance 1,344,579,930 18,452,003,759

Transportation for internal transfer of goods 50,852,128,502 47,134,745,105


Loading expenses 24,670,644,465 32,483,865,536

Per diem allowances 18,037,151,325 14,907,572,769

Bank charges 5,975,197,656 6,926,788,557

Others 42,223,338,513 32,213,261,678

525,197,269,346 459,431,997,199

27. NET OTHER INCOMEĐơn vị tính: VNĐ

2012 2011

Other income

Compensation received from other parties 789,778,800 3,140,520,594

Proceeds from disposals of fixed assets 38,249,877,676 58,616,361,045

Proceeds from sales of scraps, tools and supplies 94,593,140,503 81,356,185,908

Rebate income from suppliers 196,470,446,738 166,810,521,148

Sundry income 20,220,100,031 13,182,449,134

350,323,343,748 323,106,037,829

Other expenses

Net book value of fixed assets disposed (58,923,685,176) (81,065,291,516)

Cost of tools, supplies and scraps disposed (81,732,178) (1,395,686,642)

Fines due to contract breach - (722,472,308)

Sundry expenses (4,000,858,759) (2,696,555,210)

(63,006,276,113) (85,880,005,676)

Net other income 287,317,067,635 237,226,032,153

Form B 09 – DN/HN


26. GENERAL AND ADMINISTRATION EXPENSES


The Company is required to pay business income tax (“BIT”) at rates ranging from 15% to 25%, depending on loca-tions of its factories, on taxable profits. In the Group, only the Company and Lam Son Dairy One Member Company Limited incurred the business income tax charges. Other companies have no taxable income.

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the normal tax rate of 25% as regulated in current tax regulations as follows:

Unit: VND

2012 2011

Net accounting profit before tax 6,929,668,017,079 4,978,991,895,071

Tax calculated at the tax rate of 25% 1,732,417,004,270 1,244,747,973,768

Effect of:

Different tax rates applicable for branches and subsidiaries (313,944,391,849) (226,947,759,566)

Income not subject to tax (21,681,732,054) (24,161,191,796)

Expenses not deductible for tax purposes 6,147,267,330 5,821,560,435

Tax incentives (316,897,335,259) (251,427,181,503)

Recognition of deferred income tax asset which was not previously recognised

(7,099,509,506) -

Deferred income tax asset written off 5,315,132,448 -

Current tax losses in subsidiaries for which no deferred in-come tax asset was recognised

7,720,353,075 7,362,992,662

Under-provision in previous years 18,236,511,541 5,413,792,134

Business income tax charge 1,110,213,299,996 760,810,186,134

The Group’s business income tax charge for the year is based on estimated taxable income and is subject to review and possible adjustment by the respective local tax authorities.

29. BASIC EARNINGS PER SHARE

The calculation of basic earnings per share at 31 December 2012 was based on the profit attributable to ordinary shareholders and a weighted average number of ordinary shares outstanding.

Form B 09 – DN/HN


28. BUSINESS INCOME TAX Unit: VND

2012 2011

Net profit attributable to shareholders (VND) 5,819,454,717,083 4,218,181,708,937

Weighted average number of ordinary shares in issuance 833,639,586 546,582,775

Basic earnings per share based on weighted average number of ordinary shares in issuance (VND)

6,981 7,717

Weighted average number of ordinary shares in issuance recalculated on the assumption that the bonus shares issued in December 2012 had been issued since 1 January 2011

833,639,586 819,874,163

Basic earnings per share recalculated on the assumption that the bonus shares issued in December 2012 had been issued since 1 January 2011 (VND)

6,981 5,145

The Group does not have potentially dilutive ordinary shares.

30. COST OF GOODS MANUFACTURED BY FACTORSUnit: VND

2012 2011

Raw materials 16,367,691,633,669 14,287,698,212,202

Labour costs 736,961,575,667 601,635,087,269

Depreciation expenses 534,303,105,072 414,590,126,002


Other cash expenses 1,842,875,132,323 1,418,792,597,684

20,403,947,729,615 17,470,110,031,297

31. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES

The largest shareholder of the Company is the State Capital Investment Corporation (“SCIC”) which owns 45.05% of the Company’s share capital. The SCIC is controlled by the Government of SR Vietnam.

(a) Related party transactions

During the year, the following transactions were carried out with related parties:

i) Sales of goods and servicesUnit: VND

2012 2011

Associates:

Asia Saigon Food Ingredients Joint Stock Company - 112,180,852

Form B 09 – DN/HN


29. BASIC EARNINGS PER SHARE (continued)


ii) Purchases of goods and services

Unit: VND

2012 2011


Dairy Cow Development Project 3,761,820,098 3,483,876,513

Associates:

Miraka Limited 376,348,603,444 208,625,385,663

Asia Saigon Food Ingredients Joint Stock Company 37,676,635,000 8,283,190,000

417,787,058,542 220,392,452,176

iii) Collection of loans granted to an associate

During the year, Asia Saigon Food Ingredients Joint Stock Company has paid off the loan of VND18 billion granted by the Company in 2011.

iv) Dividends paid

Unit: VND

2012 2011

Major shareholder:

The State Capital Investment Corporation 1,001,952,000,000 333,984,000,000

v) Remuneration of key management

Unit: VND

2012 2011

Remuneration of members of Board of Management and Board of Directors

56,403,673,599 46,643,535,904

(b) Year end balances with related parties

Unit: VND

2012 2011

Trade accounts payable (Note 13)


Dairy Cow Development Project 1,693,428,819 145,509,003

Associates:

Asia Saigon Food Ingredients Joint Stock Company 3,204,539,250 -

Miraka Limited - 108,050,477,828

4,897,968,069 108,195,986,831

Form B 09 – DN/HN


31. SIGNIFICANT TRANSACTIONS WITH RELATED PARTIES (continued)

Segment information is presented in respect of the Group’s geographical segment. The primary format, geo-graphical segments, is based on the Group’s management and internal reporting structure.

Segment results include items directly attributable to a segment as well as those that can be allocated on a reason-able basis. Unallocated items comprise assets and liabilities, financial income and expenses, selling, general and administration expenses, other gains or losses, and corporate income tax.

Geographical segments

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers, which is located in Vietnam (“Domestic”) or countries other than Vietnam (“Export”).

Unit: VND

Domestic Export Total

2012 2011 2012 2011 2012 2011

Sales revenue 22,849,151,383,120 18,854,564,315,218 3,712,422,796,844 2,772,864,577,891 26,561,574,179,964 21,627,428,893,109

Cost of sales (14,546,267,732,706) (12,815,260,529,233) (2,938,562,514,482) (2,224,044,849,131) (17,484,830,247,188) (15,039,305,378,364)

Segment income 8,302,883,650,414 6,039,303,785,985 773,860,282,362 548,819,728,760 9,076,743,932,776 6,588,123,514,745

33. CAPITAL COMMITMENTS

Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements is as follows:

Unit: VND

2012 2011

Buildings, factories, machineries and equipment 453,394,023,691 2,142,064,573,853

34. COMMITMENTS UNDER OPERATING LEASES

The future minimum lease payments under non-cancellable operating leases are as follows:

Unit: VND

Land and warehouse rental

Số cổ phiếu VNĐ

Within 1 year 9,046,521,632 5,281,677,565

Between 1 and 5 years 36,186,086,528 21,133,710,260

Over 5 years 256,388,911,967 175,917,048,989

Total minimum payments 301,621,520,127 202,332,436,814

Form B 09 – DN/HN


32. SEGMENTAL REPORTING


Financial risk factors

Overview

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

• Market risk

• Liquidity risk

• Credit risk

The Board of Directors (“the Board”) has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board establishes policies to identify and analyse the risks faced by the Group, to set up appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management poli-cies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.

(a) Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and price risk. The objective of market risk management is to manage and control market risk exposures within acceptable pa-rameters, while optimising the return.

(i) Currency risk

The Group is exposed to foreign currency risk on sales and purchases that are denominated in currencies other than the VND. The currencies giving rise to this risk are primarily United States Dollar (“USD”) and Euro (“EUR”).

The Group ensures that the net exposure to this risk is kept to an acceptable level by buying or selling foreign cur-rencies at spot rates where necessary to address short-term imbalances. The Board does not enter into currency hedging transactions since it considers that the cost of such instruments outweigh the potential risk of exchange rate fluctuations.

The Group’s currency exposure to the USD and EUR is as follows:

Form B 09 – DN/HN


35. FINANCIAL RISK MANAGEMENT

As at 31 December 2012

Original currency Equivalent to VND

USD EUR USD EUR

Financial assets

Cash and bank deposits 11,737,838 49,848 244,147,038,928 1,360,887,689

Trade and other receivables 26,862,852 9,151 558,747,318,929 249,831,451

38,600,690 58,999 802,894,357,857 1,610,719,140

Financial liabilities

Trade and other payables (35,559,707) (12,185,695) (739,641,898,740) (332,681,669,023)

Currency exposure 3,040,983 (12,126,696) 63,252,459,117 (331,070,949,883)


Original currency Equivalent to VND

USD EUR USD EUR

Financial assets

Cash and bank deposits 27,989,325 1,482,878 582,961,667,350 40,976,354,510

Trade and other receivables 25,905,903 - 539,568,149,410 -

53,895,228 1,482,878 1,122,529,816,760 40,976,354,510

Financial liabilities

Trade and other payables (38,849,352) (12,606,518) (809,154,305,747) (348,355,921,842)

Currency exposure 15,045,876 (11,123,640) 313,375,511,013 (307,379,567,332)

Financial risk factors (continued)

(a) Market risk (continued)

(i) Currency risk (continued)

Form B 09 – DN/HN


35. FINANCIAL RISK MANAGEMENT (continued)


At 31 December 2012, if the USD had strengthened/weakened by 10% against the VND with all other variables including tax rate being held constant, the Group’s consolidated profit after tax for the financial year would have been VND4,743,934,434 higher/lower as a result of currency translation gains/losses on the remaining USD-denominated financial instruments.

At 31 December 2012, if the EUR had strengthened/weakened by 10% against the VND with all other variables including tax rate being held constant, the Group’s consolidated profit after tax for the financial year would have been VND24,830,321,241 lower/higher as a result of currency translation losses/gains on the remaining EUR-denominated financial instru-ments.

(ii) Price risk

The Group invests in equity investments of listed and non-listed companies and is exposed to risks of price fluctuations of these investments. The risk factors af-fecting the performance of these investments include financial performance and position of invested com-panies and market conditions. The Board manages the former factor by selecting industries and entities to invest in. The latter factor is itself affected by gen-eral economic conditions in Vietnam and behaviours of investors, which are all out of the Board’s control. These factors have caused market conditions to be volatile in the past two years.

For the investments in listed securities, if the share prices had increased/decreased by 10% with all other

variables including tax rate being held constant, the Group’s consolidated profit after tax would have been VND10,425,695,430 higher/lower.

(iii) Interest rate risk

The Group is not exposed to significant interest rate risk on its borrowings as the Group’s policy is to main-tain 100% of fixed-rate borrowings. In addition, as at 31 December 2012, the Group had fully repaid all of its borrowings.

(b) 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 princi-pally from the Group’s receivables from customers.

Trade and other receivables

The Group’s exposure to credit risk is influenced main-ly by the individual characteristics of each customer.

The Board has established a credit policy under which each new customer is analysed individually for credit-worthiness before the Group’s standard payment and delivery terms and conditions are offered. Purchase limits are established for each customer, which repre-sents the maximum open amount without requiring approval from the Board. Customers that fail to meet the Group’s benchmark creditworthiness may transact with the Group only on a prepayment basis.

Form B 09 – DN/HN




(a) Market risk (continued)(i) Currency risk (continued)

The Group establishes an allowance for impairment that represents its estimate of incurred losses in re-spect of trade and other receivables and investments. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component estab-lished for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on his-torical data of payment statistics for similar financial assets.

Investments

The Group limits its exposure to credit risk by investing only in liquid securities and only with counter parties that have good creditworthiness. The Board actively monitors credit risk and does not expect any counter party failing to meet its obligations.

Balances with banks

All the bank balances are placed with local financial in-stitutions. The Board does not expect any losses aris-ing from performance of these financial institutions.

The maximum exposure to credit risk for each class of financial assets is the carrying amount of that class of financial instruments presented on the balance sheet. The Group’s major classes of financial assets are bank deposits and trade and other receivables, and invest-ments.

(i) Financial assets that are neither past due nor im-paired

Bank deposits and investments in bonds that are neither past due nor impaired are mainly term deposits and in-vestments in bonds issued by local banks which have high credit-ratings in Vietnam as assessed by the Board. Trade and other receivables that are neither past due nor impaired are substantially companies with good collec-tion track records with the Group.

The Group’s trade and other receivables not past due amounted to VND1,651,987,314,538 (2011: VND1,353,317,082,254).

(ii) Financial assets that are past due and/or im-paired

There is no other class of financial assets that is past due and/or impaired except for trade and other re-ceivables.

Trade and other receivables that are past due but not impaired are as follows:

Form B 09 – DN/HN




(b) Credit risk (continued)


Unit: VND

As at 31 December

2012 2011

Past due 1 to 30 days 13,392,747,256 15,058,558,138

Past due 31 days to 60 days 214,534,274 287,717,434

Past due 61 days to 90 days 574,491,413 630,000

Past due over 90 days - 3,727,445,863

14,181,772,943 19,074,351,435

The carrying amount of trade and other receivables determined to be impaired and the movement in the related allowance for impairment are as follows:

Unit: VND

As at 31 December

2012 2011

Carrying amount

Gross amount 7,427,162,147 3,582,467,962

Less: Allowance for impairment (3,852,583,886) (1,918,007,430)

3,574,578,261 1,664,460,532

Allowance for impairment

Beginning of financial year 1,918,007,430 596,556,111

Allowance made 1,972,328,394 1,833,346,777

Written-off (37,751,938) (511,895,458)

End of financial year 3,852,583,886 1,918,007,430

Form B 09 – DN/HN




(b) Credit risk (continued)

(ii) Financial assets that are past due and/or impaired (continued) (c) Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations associated with financial li-abilities. The Group’s policy is to regularly monitor current and expected liquidity requirements to ensure that the Group maintains sufficient reserves of cash to meet its liquidity requirements in the short and medium term. The Group’s holdings of cash, together with net cash flows from operations, are expected to be sufficient to cover the Group’s liabilities due in the next financial year.

The table below analyses the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining period from the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

Unit: VND

Less than 1 year Between 1 and 2 years


Trade and other liabilities 3,383,050,344,921 -


Trade and other liabilities 2,195,856,347,192 92,000,000,000

Form B 09 – DN/HN





(d) Fair value measurements

The carrying value less provision of trade receivables, deposits and trade and other payables approximate to their fair values.

Below are the fair values of short-term and long-term investments:

Unit: VND

Book valueCompared to market value

Market value ProvisionIncrease Decrease


Short-term investments

Listed equity securities 211,020,970,112 14,318,490,708 (61,470,408,420) 163,869,052,400 (61,470,408,420)

Unlisted equity securities 82,283,660,000 - (68,558,267,200) 13,725,392,800 (68,558,267,200)

Other long-term investments

Investment funds 30,540,000,000 - (14,355,884,467) 16,184,115,533 (14,355,884,467)

323,844,630,112 14,318,490,708 (144,384,560,087) 193,778,560,733 (144,384,560,087)


Short-term investments


Unlisted equity securities 82,283,660,000 - (68,558,267,200) 13,725,392,800 (68,558,267,200)

Other long-term investments


Investment funds 106,350,000,000 - (45,907,987,129) 60,442,012,871 (45,907,987,129)

420,623,505,592 17,736,131,208 (221,595,036,229) 216,764,600,571 (221,595,036,229)

Form B 09 – DN/HN




Market value of equity securities listed on the Ho Chi Minh Stock Exchange is based on the closing prices of the last official trading date of the year at the Ho Chi Minh Stock Exchange.

Market value of unlisted equity securities is based on the average of trading prices provided by 3 securities com-panies.

Market value of investment funds is based on Net Asset Value of funds portfolio which is verified by the appointed securities company and supervising bank.

36. COMPARATIVE FIGURES

Certain comparative figures have been reclassified to conform to the current year’s presentation.

The consolidated financial statements were approved by the Board of Directors on 28 February 2013.



Form B 09 – DN/HN




(d) Fair value measurements (continued)


Head office

10 Tân Trào Street, Tân Phú Ward, District 7, Ho Chi Minh CityTel: (84 8) 54 155 555Fax : (84 8) 54 161 226Email : [email protected] : www.vinamilk.com.vn

CONTACTS

Ha Noi branch

Floor 11, Tower B, Handi Resco Tower, 521 Kim Ma Street, Ngọc Khanh Ward, Ba Dinh District, Ha Noi Capital.

Tel : (84 4) 37 246 019

Fax : (84 4) 37 246 005

Da Nang branch

12 Chi Lang Street, Hai Chau 2 Ward, Hai Chau District, Da Nang City

Tel : (84 511) 3 584 848

Fax : (84 511) 3 897 223

Can Tho branch

86D Hung Vuong Street, Thoi Binh Ward, Ninh Kieu District, Can Tho City

Tel : (84 710) 6 256 555

Fax : (84 710) 3 827 334

Truong Tho Dairy Factory

32 Dang Van Bi Street, Truong Tho Ward, Thu Duc District, Ho Chi Minh City

Tel : (84 8) 62 527 555

Fax : (84 8) 38 966 884

Binh Dinh Dairy Factory

87 Hoang Van Thu Street, Quy Nhon City, Binh Đinh Province

Tel : (84 56) 6 253 555

Fax : (84 56) 3 746 065

Can Tho Dairy Factory

Lot 46, Tra Noc I Industrial Park, Tra Noc Ward, Binh Thuy District, Can Tho City

Tel : (84 710) 6 258 555

Fax : (84 710) 6 255 998

Da Nang Dairy Factory

Lot Q, Road No. 7, Hoa Khanh Industrial Park, Lien Chieu District, Da Nang City

Tel : (0511) 6259 777

Fax: (0511) 6259 555

Ho Chi Minh Logistics Enterprise

32 Dang Van Bi Street, Truong Tho Ward, Thu Đuc District, Hồ Chí Minh City

Tel : (84 8) 62 526 555

Fax : (84 8) 38 960 804

Thong Nhat Dairy Factory

12 Dang Van Bi Street, Truong Tho Ward, Thu Duc District, Ho Chi Minh City

Tel : (84 8) 625 29 555

Fax : (84 8) 62 88 57 27

Nghe An Dairy Factory

Sao Nam Street, Nghi Thu Ward, Cua Lò Town, Nghe An Province

Tel : (84 38) 6 259 555

Fax : (84 38) 3 824 717

Tien Son Dairy Factory

Tien Son Industrial Park, Hoan Son Ward, Tien Du District, Bac Ninh Province

Tel : (84 241) 31 739 568

Fax : (84 241) 31 714 814

Viet Nam Dairy Factory

Lot A-4-CN, A-5-CN, A-6-CN, My Phuoc 2 Indus-trial Park, Ben Cat District, Binh Duong Province

(Construction in progress)

Ha Noi Logistics Enterprise

Km 10/National road No. 5, Dương Xa Ward, Gia Lâm District, Hà Nội Capital

Tel : (84 4) 38 276 418

Fax : (84 4) 38 276 966

Dielac Dairy Factory

Bien Hoa I Industrial Park, Binh An Ward, Bien Hoa City, Đong Nai Province

Tel : (84 61) 6 256 555

Fax : (84 61) 3 836 015

Sai Gon Dairy Factory

Lot 1-18, G1 Area, Tan Thoi Hiep Industrial Park Avenue 80, Hiep Thanh Ward, District 12, Ho Chi Minh City

Tel : (84 8) 62528 555

Fax : (84 8) 37 176 353

Vietnam Beverage Factory

Lot A-2-CN, A-9-CN, My Phuoc 2 Industrial Park, Ben Cat District, Binh Duong Province

Tel : (84 650) 3 556 839

Fax : (84 650) 3 556 890

Viet Nam Milk Powder Factory

No. 9, Tu Do Avenue, Vietnam - Singapore Indus-trial Park I , Thuan An Town, Binh Duong Province

(Construction in progress)

An Khang Clinic

87A Cach Mang Thang 8 Street, District 1, Hồ Chí Minh City

Tel : (84 8) 62 911 722

Fax : (84 8) 39 253 727

Vietnam Dairy Cow One Member Co., Ltd.

10 Tan Trao Street, Tan Phu Ward,

District 7, Ho Chi Minh City

Tel: (84 8) 54 155 555

Fax : (84 8) 54 161 226

Asia Saigon Food Ingredients JSC.

Lot C- 9E - CN, My Phuoc 3 Industrial Park, Ben Cat District, Binh Dương province

Tel : (84 650) 3 510 175

Fax : (84 650) 3 510 176

Website : www.afi.vn

International Real Estate One Member Co., Ltd

10 Tan Trao Street, Tan Phu Ward, District 7, Ho Chi Minh City

Tel: (84 8) 54 155 555

Fax : (84 8) 54 161 226

Miraka Limited

108 Tuwharetoa St, Taupo, New Zealand, PO Box 740, Taupo, 3351, New Zealand

Tel : +64 7 376 0075

Fax: +64 7 377 0694

Lam Son Dairy One Member Co., Ltd.

Le Mon Industrial Park, Thanh Hoa City, Thanh Hoa province

Tel : (84 37) 3 912 540

Fax : (84 37) 3 912 541

SALES OFFICES

SUBSIDIARIES, ASSOCIATES

FACTORY BRANCHES

Head o�ce

10 Tan Trao Street, Tan Phu Ward, District 7, Ho Chi Minh CityTel: (84 8) 54 155 555Fax : (84 8) 54 161 226Email : [email protected] : www.vinamilk.com.vn

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Annual Report 2012

2012 Vinamilk Annual Report

Documents

Transcript of 2012 Vinamilk Annual Report