ANNUAL REPORT MASAN GROUP We are one of Vietnam’s largest private sector companies with a focus on the consumption and resources sectors. We have a track record of actively building, acquiring and managing large-scale operating platforms that capitalize on Vietnam’s structural consumption and resources stories. We believe that substantial value can be created for our shareholders through professional management, global partners and a commitment to serving Vietnam’s emerging middle class. SHARE PRICE SINCE LISTING 200% 100% 0% Nov 09 Feb 10 May 10 Aug 10 Nov 10 Feb 11 May 11 Aug 11 Nov 11 Feb 12 May 12 Aug 12 Nov 12 Feb 13 MSN VN Index Source: Bloomberg PRO FORMA EARNINGS AND ROE CASH AND CASH EQUIVALENTS 24.1% FROM 2009 10,796 19.5% 20.0% 17.5% 3,090 2,783 7,559 1,860 3,885 1,149 1,900 2009 2010 2011 2012 2009 2010 2011 2012 Net income – Proforma (VND billion)* ROE Cash and cash equivalent (VND billion) *Calculation excludes goodwill and is normalized Note: Cash and cash equivalents include short-term by applying our current economic interest investments, which are primarily term deposits with percentages on Techcombank since 2009. lower than 3 month maturities. 2012 does not include cash raised from KKR, who invested in early 2013. ConTENTS Chairman’s Letter 4 Masan Group 18 Our Businesses 25 Masan Consumer 26 Masan Resources 36 Our Associates 55 Management Report 61 UNLOCKING VALUE BY Financial Report SERVING ViEtnam’s 75 CONSUMERS General Corporate Information 163 Annual Report 2012 3 CHAIrman’S LETTER DEAR SHAREHOLDERS, In 2012, Masan Group continued our disciplined approach to business building with a renewed focus on the consumption- Over the past few years, our company has transformed from related sectors and accelerating the development of the being primarily a food manufacturer into one of Vietnam’s Nui Phao project, Vietnam’s largest private sector mining largest private sector business groups. Masan Group’s development. As a result, we have been able to achieve record success derives from having a strong commitment to improving revenues and earnings at Masan Consumer and are on track to the Vietnamese people’s spiritual and material lives each witness the Nui Phao mine’s commissioning ahead of schedule. and every day, applying best practices to build scale and developing leading businesses that can compete and win Our performance and business prospects have also been in a more globalized marketplace. We strive to become the recognized by the financial markets. Since our listing on the pride of Vietnam by demonstrating to the world that a local Ho Chi Minh Stock Exchange in 2009, our share price has company can succeed by putting the Vietnamese consumers increased by 136.1% as compared to a 25.5% decrease of first, focusing on a few objectives and executing with the benchmark index over the same period. Today, our market professionalism. capitalization is VND79,351 billion, or approximately US$3.8 4 Masan Group chairmaN’S LETTER Putting Vietnamese consumers 1ST billion, making us the largest private sector company in Vietnam I am proud to highlight some key milestones from 2012 and by market capitalization1. since my last letter: As with previous years, 2012 continued to be a difficult period We broadened our domestic consumption platform by for Vietnam’s economy. While the country achieved some diversifying our consumer product portfolio and entering success in taming inflation and preserving the strength of the into new consumption related categories: Vietnamese Dong, it also experienced a slowdown in GDP - Masan Consumer successfully partnered with Vinacafe growth, a gloomy real estate market and a banking sector to integrate our best-in-class operational platforms weakened by fast-rising NPLs. These challenges resulted in an and they have realized significant synergies; Vinacafe unfavorable operating environment for companies in Vietnam, delivered record financial results in 2012, growing many of who experienced limited access to capital, slower revenue and net profit after tax by 33.4% and 41.3%, growth and even losses. However, amidst these challenges, respectively. Masan Group was able to deliver a successful year to our - We diversified into other attractive consumer-related shareholders. sectors by acquiring a 40.0% stake in Vietnamese- 1. Private sector defined as not having any significant ownership by the State and market capitalization calculated on a fully diluted share count basis and using the share price as of 31 December, 2012. Annual Report 2012 5 French Cattle Feed JSC, the number two animal feed US$200 million in Masan Consumer, in addition to producer in Vietnam, which will allow us to benefit from US$159 million invested in April 2011. The US$359 Vietnam’s growing protein-based diet. million total investment is the largest ever private equity - In February 2013, Masan Consumer acquired a 24.9% investment in Vietnam. KKR’s deepening partnership stake in Vinh Hao Mineral Water Corporation, one of with Masan demonstrates its strong conviction in Vietnam’s most recognized and trusted brands in the Vietnam’s structural consumption growth story and is a bottled beverage sector. On the back of the transaction, validation that Masan is the partner of choice to access Masan Consumer launched a cash tender offer process Vietnam’s consumer potential. on similar commercial terms to increase its stake. - Masan Resources secured an US$80 million loan from Standard Chartered to develop the Nui Phao project, Masan Resources made significant progress in the Vietnam’s first international loan facility for a private development of the Nui Phao project: sector mining project. This was a validation of the - Masan Resources spent approximately US$220 million progress of the mine’s development and its financial over the course of the year to significantly advance feasibility. construction. - We issued approximately US$130 million in convertible - The processing plant is expected to be in operation instruments to our existing investors, the Richard early in the second quarter of 2013, which is expected Chandler Corporation and Mount Kellett, which to make us the largest operating tungsten producer demonstrates their continued confidence in Masan outside of China. Group. - Nui Phao received the 2013 “Corporate Social Responsibility Excellence Award” from the Ministry of Financially, our core business delivered record results, while our Planning and Investment for the mine’s track record consolidated earnings declined due to lower contribution from of supporting local communities in the Thai Nguyen Techcombank. Driven by increased market share in our key Province and adhering to world-class standards for categories and the successful integration of Vinacafe, our net environmental, safety and social practices. sales grew from VND7,057 billion in 2011 to VND10,389 billion in 2012, representing a 47.2% increase. Normalized to remove We enhanced our management teams at the group and the impact of goodwill amortization from our businesses subsidiary levels with new hires coming from prominent and associates, our pro forma net profit declined slightly multinational corporations and with proven track records in from VND3,090 billion in 2011 to VND2,783 billion in 2012, emerging markets: representing a 9.9% decrease. The decrease in our pro forma - At Masan Consumer, we hired a Chief Operating Officer net profit after tax is primarily attributable to Techcombank, and Chief Marketing Officer. which experienced a 75.7% drop in earnings from VND3,154 - At Masan Group, we strengthened our compliance, risk billion in 2011 to VND766 billion in 2012 due to lower interest management and corporate communication platform by rates, a trying lending environment for the industry as a hiring seasoned executives. whole, and conservative loan loss provisioning. Despite Techcombank’s weaker than expected results, the slight Some of the world’s most reputable investors continue to decline in our overall pro forma net profit after tax is a testimony validate our approach to building leading businesses by to the strength of our core business. Masan Consumer’s net investing in us: profit grew by 26.4% to VND2,850 billion in 2012. - KKR, a leading global private equity firm, invested 6 Masan Group chairmaN’S LETTER With regards to our balance sheet, at the end of 2012 we held These efforts signal an aggressive effort to clean up its balance approximately VND7,559 billion in cash and cash equivalents1. sheet and better position itself for sustainable growth in the This figure does not include the equity capital raised from KKR, years going forward. Given these supportive reasons, Masan which occurred in January 2013. Our cash position strengthens Group expects to grow our earnings by 30% to 70% in 2013, our balance sheet in a volatile macro environment and gives getting us closer to our goal of achieving US$1 billion in us greater resources to deepen our consumption platform consolidated EBITDA within two to three years. organically and through M&A. While we have highlighted our ability to raise capital in the past, 2012 was special as many of I would like to express my gratitude to our valued customers, our existing partners doubled up on their investment in Masan, employees, partners and other stakeholders for their which is one of the strongest forms of validation. tremendous support over the past year. I am very proud that Masan continued to grow and generate significant returns for Operationally, 2012 was a strong year for our company as we our shareholders in 2012 and that our outlook for 2013 is bright. continued to strengthen and invest in our business platforms. I am even prouder that we have proven to the world that a local We successfully integrated the operations of Masan Consumer company can succeed in a challenging environment with a and Vinacafe, resulting in records sales and earnings for our professional team that thinks and executes like entrepreneurs coffee business.