EXPANDING OUR LEAD · to the consumers. To put consumers ahead of everything we do is not an easy task. It takes great dedication of the KDF team, the commitment of our suppliers,

EXPANDINGOUR LEAD

www.kidofoods.vn

ANNUAL REPORT 2017

INTRODUCTION STRATEGY & OPERATIONS01 02 MANAGEMENT REPORT03 FINANCIAL STATEMENTS04

CONTENTS

6 Our Group’s vision7 Our values8 Chairman’s message10 CEO’s message 12 Board of Directors14 Board of Management16 Board of Supervisors

20 Company history22 Our story24 Our operations34 Product strategy36 Category strategy40 Our brands 42 Corporate social responsibility

46 Operating environment48 Financial highlights50 Financial performance54 Risk management56 Board meetings & resolutions

61 General information62 Report of Management63 Independent Auditors’ report65 Balance sheet67 Income statement68 Cash flow statement70 Notes to the financial statements

EXPANDINGBEYOND

CONVENIENCESTORE

Distributor Warehouse

OUR VISION & VALUES

OUR VALUESPEOPLE - KDF is a business built around people, which are the consumers, the KDF team, our suppliers, our shareholders, and other partners. Our core value is the whole-hearted focus on providing the best and freshest product to the consumers. To put consumers ahead of everything we do is not an easy task. It takes great dedication of the KDF team, the commitment of our suppliers, the support of our shareholders, and the collaboration of all our partners. Beyond the factories, the products, and the advertisements, we are a people-centric business that centres on consumers.

BRAND - Another key element of our business is our brands. They are the primary and unique way in which our stakeholders identify with KDF. Brands do not only help us differentiate our products with competitors but also act as the most intimate connection we have with our consumers. Overtime, the products will change and evolve but the values embedded in our brands remain constant. Thus, they are also one of our largest investments and unlike other assets, appreciate over time.

PROCESS - The third element of our business, which is critical to our success, is our business process. These processes run through different functions and departments and what unifies them all is our commitment to act with integrity. This commitment defines what we do, how we do it, and who does it. The individuals’ decisions guided with the commitment to act with integrity are what define the culture of our company and ultimately the basis of our success.

COMMUNITY - Lastly, one final and critical value we hold dearly is our belief in building a better community. Because we are a people-centric business, our decisions have tremendous impact on society. That is why we are committed to putting our best efforts in ensuring that the impact we make is positive and beneficial. We aim to foster this growth and development through providing high-quality products, dedicated and trustworthy service, and responsive support for those in need in our community.

LARGEST FROZEN AND CHILLED PRODUCT DISTRIBUTION NETWORK IN VIETNAM

Acquired in June 2003 by KDC as part of the plan to expand into the ice cream business, KDF has grown into a market leading ice cream business with an expansive frozen and chilled distribution network. KDF currently leads the market in frozen foods, characterized by our 40.2% market share in ice cream with our flagship brands Celano and Merino; a favourite among Vietnamese consumers.

OUR GROUP’S VISION“Create life’s flavor through healthy, nutritious and convenient foods”.

KDF supports this vision by leveraging its extensive distribution network, large scaled manufacturing capability and its unique capability to research and develop fresh, healthy, nutritious foods that are well suited for the Vietnamese consumers. The near term goal is to meet the dynamic needs of the Vietnamese consumer by delivering the right meal solutions and supplies. The longer term goal is to be an integrated part of the Vietnamese dining experience by dominating the space in the freezer and fridge with KDF products.

Annual Report 2017KIDO FOODS

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INTRODUCTION

CHAIRMAN’S MESSAGE

Dear Shareholders,

I am very happy to share this message with everyone in the inaugural year of KIDO Foods listing on UPCOM. Throughout our 14 years history, KIDO Foods has been striving to grow and achieve in the frozen foods segment. The growth of revenue and profit over the past year affirms our transformation and as a result, positive changes in the market. This whole process has been successful thanks to the strong efforts from our team and the companionship of shareholders, customers and partners.

Continue to enhance our position in the market

The Bac Ninh Factory was completed and put into operation at the end of 2016 which has helped KIDO Foods to expand its production capability and penetrate into the Northern market. This was considered a strategic step to enhance the distribution system as well as to target the ambient and frozen foods market. Expanding the business scope and scale has been a challenging process. The act of maintaining a leading position and increasing market share for ice cream segment to reach 40.2% affirms our efforts.

In 2017, KIDO Foods also celebrated a crucial milestone in our journey by going public and officially listing our shares to be traded on UPCOM. The

underlying reason for taking KDF public was about diversifying the shareholder structure and attracting strategic investors, both domestic and international. It was also about creating an opportunity for investors to have a variety of choices in direct investment in specific businesses of KIDO Group.

Our ambition is to be present in the frozen foods, ambient and chilled segments. KIDO Group supported this initiative by acquiring a 50% equity interests in Dabaco Food Processing Co., Ltd – a business unit which has production capability in processed foods. It has the competitive advantage of 3F (Feed, Farm, Food) and strong technological capability of our partner. This coupled with our strengths in distribution, marketing, and research and development will help us to achieve our goal of dominating the frozen foods segment. We will be able to maximize our competitive advantage in the market and create a strong foundation to penetrate quickly into the following fields that we are targeting as frozen foods, chilled and ambient segment.

Ambition to become the leading frozen foods company in the Vietnam

To pursue the goal of becoming the leading frozen foods company in Vietnam while conquering the three food segments consisting of: Frozen foods, Chilled and Ambient foods, KIDO Foods leverage its wide distribution channel of 70,000 cold points of sales across the country. This strength will be continue to help us gain ground in 2018 through cooperation with a variety of partners. This also helps KIDO Group move towards the strategic goal of fulfilling the Vietnamese kitchen.

For the main business segment of the Company – Ice cream, KIDO Foods will continue to maintain its leading position by diversifying into the premium

product portfolio; Dominating the mainstream segment; promoting research and development of products to penetrate into the chilled and ambient segments all by leveraging the unique distribution channel in the frozen foods segment in Vietnam.

The year 2018 is the start of a robust growth opportunity for KIDO Foods as we define our market-driven strategies and practices, following the expressed needs of consumers. KIDO Foods is not only growing in the existing market but also developing the market through our product strategy. We customize our products based on the needs of consumers in different geographies serve the right product meeting the right need.

By leveraging the strong financial resources and management capability of KIDO Group, KIDO Foods will be able to maximize its competitiveness in the frozen foods market. We will quickly fill up the products under KIDO Foods brand in the freezer and refrigerator of Vietnamese consumers.

Dear Shareholders,

On behalf of the Board of Directors, I express my gratitude to our shareholders for their persistent and trusting companionship toward the Company’s development over the last year. KDF will not be where it is today without the valuable support of our partners, shareholders and customers. I deeply appreciate the continuous contribution and dedication of our team for the Company’s overall results. We wish you a prosperous year and always look forward to you joining us in the success of KDF in the future.

TRAN KIM THANHChairman - KIDO Frozen Foods Joint Stock Company Chairman - KIDO Group

To pursue the goal of becoming the leading frozen foods company in Vietnam while conquering the three food segments consisting of: Frozen foods, Chilled and Ambient foods, KIDO Foods leverage its wide distribution channel of 70,000 cold points of sales across the country.


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INTRODUCTION

CEO’S MESSAGE

At the end of the financial year, net revenue increased by 6.9% to reach VND 1,493 billion compared to that in the previous year thanks to market expansion and new product launches that focused on the premium segment. Profit before tax was VND 174 billion and Net profit after tax in 2017 saw a year-on-year increase of 6.7% to gain VND 152 billion.

I am pleased to present to all our stakeholders the business results of KIDO Frozen Foods Joint Stock Company (KDF) for the first time after officially becoming a public company last August. With your trust and support, the KDF’s IPO marked a wonderful start for us to build a sustainable relationship together on the journey to becoming Vietnam’s most prominent frozen foods company.

At the end of the financial year, net revenue increased by 6.9% to reach VND 1,493 billion compared to that in the previous year thanks to market expansion and new product launches that focused on the premium segment. Profit before tax was VND 174 billion and Net profit after tax in 2017 saw a year-on-year increase of 6.7% to gain VND 152 billion. KDF’s Ice cream segment saw robust growth at 15.7% which outperformed the industry as 14.7% (Euromonitor).

With the ambition of “Dominating Vietnamese family’s kitchen” and leading KIDO Group to become one of the leading food conglomerates in Vietnam, KDF’s role is not only to expand in the ice cream and dessert segment. There is a growing demand for frozen foods that is emerging because of evolving consumer trends. These changes are being driven by a

Dear Shareholders,

shift in demographics that see families with young children, working parents, busier lifestyles that lead to a change in shopping patterns. Our goal is to lead the charge to capitalize on this trend and drive the innovation of frozen, chilled and ambient foods category. To do so, we will also need to focus on upgrading and developing the distribution platform to maintain our competitive advantage and ensure the delivery of KDF’s product to consumers at the right place, right time, right product and right price.

In 2017, KDF strengthen its leading position in the ice cream market which market share rise from 38.1% to 40.2% (Euromonitor). The market size of frozen foods field is quite broad but it has room to continue to grow due to the shift in consumer trends. KDF has clearly identified key investments that need to make to leverage our internal resources which will help us capture more of this category. Given the time it takes for consumer trends to shift, it will be some time before KDF can capture a meaningful part of this category, but we are preparing early and ensuring that we are ready. To illustrate the strong start, our frozen foods business (still in its test phase) has grown 76.6% in 2017 to reach VND 40 billion.

The second factory in Bac Ninh was put into operation at the end of 2016 and this has helped us to gain production capability and improve logistic cost. While still in the early days of gaining efficiency, the presence in the North will be a strong foundation for KDF’s growth in the coming year. Our capacity in the South has been maxed out for some time and the Bac Ninh facility gives us room to grow for a number of years.

I have to say that all this growth and changes could not be possible with the support and dedication of the management team. While this year had its fair share of challenges, the team’s persistence and perseverance has helped to support the business.

Finally, I sincerely thank all the stakeholders who have been contributing to the growth of KDF over the past year. Thanks to all the shareholders, partners, distributors, and consumers who have supported us and we hope you have a prosperous new year, full of health and happiness.

TRAN QUOC NGUYEN CEO & Board Director - KIDO Frozen Foods Joint Stock Company

VND 1,493 BILLION

NET REVENUE


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INTRODUCTION

BOARD OF DIRECTORS

Mr. Thanh is the Group Chairman of KIDO Group and concurrently holds the position of Chairman at

KDF. Mr. Thanh is the creative force behind the creation of the KDF brands and was instrumental in the design of the distribution and business model of KDF after the asset acquisition.

A veteran entrepreneur with a lifetime of experience in management and business, Mr. Thanh co-founded the KIDO Group (formerly Kinh Do Corporation) and has lead it to become one of Vietnam’s largest food companies today.

In addition to presiding over KIDO Group’s Board, Mr. Thanh is a member of various Boards at many other large Vietnamese corporations, helping to contribute growth and development in the private sector.

Mr. Nguyen is the Vice Chairman and Group CEO of KIDO Group and presides over KDF’s Board as the

Vice Chairman. Mr. Nguyen was the key driving force that developed the acquisition strategy of KIDO Group that eventually led to the acquisition of the ice cream business from Unilever.

An experienced entrepreneur with a background in establishing and scaling profitable businesses over the last few decades, Mr. Nguyen co-founded KIDO Group (formerly Kinh Do Corporation) and has been instrumental in the development of KIDO Group as its founder and CEO. Under his management, KIDO emerged as one of the most well-known brands in Vietnam.

Mr. Nguyen is an active Board Director of the Vietnam Chamber Commerce and Industry (VCCI) and participates in the Boards of several prominent companies in Vietnam.

Mr. Nguyen has over 20 years of experience in managing various companies within KIDO Group

and is currently a Board Director of KIDO Group. He has held various key senior management positions throughout the Group. Mr. Nguyen has been the CEO of KDF since the acquisition and has been critical to its expansion and development since the beginning. Mr. Nguyen was instrumental in the expansion of the product portfolio from ice cream to include frozen foods, the expansion of the distribution network to become the number one frozen network in Vietnam, and the driver in creating two of Vietnam’s largest ice cream brands.

MR. TRAN KIM THANHChairman - KIDO Group

Chairman - KIDO Frozen Foods

MR. TRAN LE NGUYENVice Chairman & CEO - KIDO Group

Vice Chairman - KIDO Frozen Foods

MR. TRAN QUOC NGUYENCEO - KIDO Frozen Foods (KDF)

Board Member - KIDO Group


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INTRODUCTION

BOARD OF MANAGEMENT

Ms. Linh is currently a Deputy CEO of KDF and has held the position since 2014. She was originally

with KDC and joined KDF after the acquisition to lead the Finance and Accounting function as the Finance Director. Ms. Linh previously worked for Ernst & Young Vietnam. She graduated from the Faculty of Food Technology at Nha Trang University of Aquaculture and is a Masters graduate from the Faculty of Business Administration at Ho Chi Minh City Open University.

Ms. Diep joined KDF in 2010 and has served as the Marketing Director since then. She graduated

from Business in Marketing in Swinburne University in Australia. She has over 20 years of experience in marketing management and the dairy industry. Prior to joining KDF, she has held the position of Marketing Manager with multi-national FMCG companies such as International Nutrition Vietnam, Fonterra Vietnam, and Dutch Lady.

Mr. Loc joined KDF as the Sales Director for KDF in 2012. He graduated from University of Economics

majoring in International Business and has over 20 years of experience in consumer products industry. Before joining the Group, Mr. Loc held senior positions in sales and trade marketing at various multinational firms such as Unilever, SC Johnson, ICP, and DKSH.

Ms. Thanh joined KDF to lead the R&D function from 2003. She holds a degree from Ho Chi

Minh City University of Technology majoring in chemical food engineering. At the present time, Ms. Thanh has over 20 years of local and international experience in R&D and Quality Assurance. In addition to her practical experience, Ms. Thanh has completed international training programs such as Food Safety & Quality Assurance course organized by Rabelais University, France; Dairy Production Technology from US Dairy Export Council, and Ice-cream and Yogurt production technology at Research and Application Center in England, Denmark, Italy, Singapore, Malaysia and Thailand.

MS. TRAN THI THUY LINHDeputy CEO (Finance)

MS. TRAN THI NGOC DIEPMarketing Director

MR. TRAN HAI LOCSales Director

MS. NGUYEN THI THANHR&D Director


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INTRODUCTION

BOARD OF SUPERVISORS

Mr. Kelly has been with the KIDO Group since 2011 and has held the post of Group CFO; managing the

Group’s finance, accounting and investment activities. He has lived and worked in Vietnam from more than 10 years in various finance roles.

Mr. Kelly holds a Bachelor Degree in Commerce from the University of British Columbia in Vancouver, Canada and a Diploma in Asia Pacific Management from the McRae Institute of Management at Capilano University Canada.

Ms. Trang has extensive experience in financial and portfolio management. She has been involved

in implementing the Group’s merger and acquisition strategy, managing cash flows, raising capital as well as restructuring various acquisitions.

Ms. Trang graduated with a Bachelor’s degree which specializing in Accounting and Auditing and currently she holds a position as an Investment Director; Secretary of Board of Directors at Tuong An Joint Stock Company; and Head of Supervisory Board at Vietnam Vegetable Oils Industry Corporation.

Ms. Oanh joined the KIDO Group as a Deputy Manager of Accounting Department when it was

established in from 1995. Since 2012, she has held the position as Chief Accountant of KIDO Group. With her carefulness and extensive experience in management, she has helped the Group’s accounting system to fully comply with the Vietnam Accounting Standards by maintaining strict accounting controls in terms of accuracy and timeliness. Furthermore, she is also a Chief Accountant at the KIDO Investment Limited Company; Chief Accountant of Thien Phuc Dien Corporation; Head of Supervisory Board at Rong Viet Securities Corporation.

She graduated from the University of Economics Ho Chi Minh City - specializing in Business Administration and completed the Certificate of Chief Accountant.

MR. KELLY YIN HON WONGGroup CFO - KIDO Group

Head of Supervisory Board - KIDO Frozen Foods

MS. NGUYEN THI TRANGSupervisory Board Member - KIDO Frozen Foods

MS. NGUYEN THI OANH Supervisory Board Member - KIDO Frozen Foods


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INTRODUCTION

OUR IMPACT

4092 95 124 167

227 289

463

645

838772 783

1,068

1,3961,493

Unit:VND BILLION

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

• Acquired the Wall’s Ice cream factory from the Unilever

• Charter capital VND 30 B

• Launched the ice cream brand name - Merino

• Launched the premium ice cream brand name - Celano

• Increased charter capital to VND 50 B

• Entered into dairy business with the Wel Yo brand name

• Increased charter capital to VND 69 B

• Doubled production capacity in the South

• Increased charter capital to VND 560 B• Commenced the 2nd factory in North Vietnam

• Entered into frozen food business under the brand name - KIDO Foods

• Initial Public Offering (UPCOM: KDF) • Cooperated with strategic partner - Dabaco Food

COMPANY HISTORY


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STRATEGY & OPERATIONS

OUR STORY

KIDO Foods is a member of KIDO Group and KIDO was founded in 1993 as a manufacturer and distributor of confectionery products for the Vietnamese consumer. Since then, Group has transformed into a diversified food and beverage company with a large portfolio of products that range from frozen, chilled and ambient foods to packaged foods. The basis of the Group’s success is based on our 3P approach to business.

PLATFORMIn order to manage and integrate such a large range of business, we must have well defined systems. The success of the business is defined by the ability of teams to collaborate within companies and across the Group. This requires clear procedures and intuitive processes that everyone can adopt and understand when working together. This is made possible by our integrative platform, which we have spent the last 5 years perfecting. The organization and operational platform serves to reinforce the culture of collaboration and support the execution of strategy and initiatives that drive growth and profitability.

PEOPLEOur business focuses on people. From the consumers we serve, to the team that makes it all happen, to the business partners that support us, and to the shareholders that invest with us. We believe in treating all stakeholders consistently and with fairness. Having said that, our people are not only essential to our success but also the real core DNA that defining the Group. Having a good people strategy are essential to our success. We have a strong mentorship mentality, supporting the development of a whole new generation of leaders that will begin to take on more independent and critical roles in the Group. We treat each of our senior managers as business owners and allow them to do what is needed to create partnerships inside and outside the Company to drive the business forward.

PRODUCTProduct capability is critical to our success and innovation is crucial to our future. Our goal of dominating the kitchen of the Vietnamese consumer is heavily dependent on creating the right portfolio of products that meets the dynamic demands of the consumer. We have leveraged our consumer insight derived from the last two decades to create highly successful products and brands. We are now driving one step further to design the right portfolio of the products to deliver solutions and convenience to consumers. These products, portfolios and brands are meant to be a reflection of our market knowledge and also what we believe in: wholesome, healthy and nutritious products.

PLATFORM

PEOPLE

PRODUCT


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OUR OPERATIONS

GROUP MANAGEMENT » Determine the long-term strategy for the Group and outline the annual operating plan for

each Business Unit like KDF.

» In charge of communicating the Group’s strategy and monitoring the operational plans to ensure the effective capital allocation as well as profit and shareholders value maximization.

» Goals are longer term in nature and shareholder returns are consistent over a longer period.

The KIDO Group strategy is to leverage its broad distribution platform across its different channels to deliver a basket of right products to consumers, at the right place, right time in the right format. KDF is a key Business Unit and forms the frozen, chilled and ambient foods channel of the KIDO Group distribution platform. In order to achieve efficiencies across the group, KDC and as a result each Business Unit’s management structure must be well coordinated but at the same time also sensitive to the market changes and consumer demands. To do this, the operations are structured with a combination of centralized and de-centralized functions, each with its different roles and responsibilities.

The centralization of services is considered when those services require long-term investment in infrastructure and may benefit from scale of implementation. The de-centralization of services and activities are designed for activities and functions that are more closely connected with the market and consumers. This includes activities that are shorter term and require agility and flexibility to adapt and respond to changing market conditions.

BUSINESS UNIT MANAGEMENT » Execute the Group’s strategy and manage the coordination among various functions to

implement the annual operating plan as stated.

» Responsible for the implementation of the strategies as well as operating activities.

» Ultimately responsible for business production activities and results.

» Goals are annual and seek to deliver short-term results for the fiscal year.


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OUR OPERATIONS

TEAM 1Team 1, the Commercial Team, which leads the business operations: sales, distribution, marketing, product development, consumer insights and R&D. The Commercial Team interacts closely with the consumers, competitive environment, and market landscape. Their role is to be a conduit of feedback and information to the rest of the Company. All supporting functions (Team 2 and Team 3) are aligned around the Commercial Team to support initiatives that respond to and anticipate customer demand and market trends, creating a truly consumer-centric organization.

TEAM 2The next critical component of the operations is Team 2, the Supply Chain Management Team, which handles the production of finished goods, quality control, logistics, and warehousing. In KDF, this team is a critical part of the overall competitive advantage of the Company. Given the nature of the products we produce, SCM is a core component of ensuring the products made, packed, delivered and sold at each point of sale is at the right temperature to ensure consistent quality. Their ability to work well with the Commercial Team also ensures that the right product and right volume are arriving at the right locations; minimizing out of stock, maximizing sales volumes and guaranteeing consistent quality throughout the country.

TEAM 3Finally, there is Team 3, which consists of the Support Functions. The support functions are Company specific functions that provide support to the Company operations in HR & Admin, Financial Accounting, and Management Accounting. The nature of the Team 3’s services are infrastructure related; therefore services such as Information Technology, Business Process Management, Corporate Communications, Investor Relations, Order Management and Finance are centralized with the Group. This allows each Company to focus on creating value and profitability while the group coordinates the deployment of resources to balance long-term infrastructure investment.

ORGANIZATIONAL STRUCTURE

The Company is led by an Executive Management Committee (EMC) that oversees the implementation of the Group’s strategic objectives and drives the overall business results.


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OUR OPERATIONS

Every year, our brands continue to tap new markets to capture a wider consumer base and a greater market share. Our continued growth illustrates the strength of our supply chain which is number one in frozen, chilled and ambient product; providing us with strong leverage to continue to expand our business across new categories and products.

CU CHI PLANTWith an area of nearly 24,000 m² in the Tay Bac Cu Chi Industrial Zone, the plant was designed to manufacture the leading brands such as Celano, Merino and Wel Yo. Since 2011, we embarked on an expansion plan which doubled our ice cream and yogurt capacity. With a production range encompassing over 80 SKUs, the Cu Chi Plant is driven by our strategic vision to become the ice cream and frozen foods leader in Vietnam.

BAC NINH PLANTLocated at a distance of 25km from Hanoi, the Bac Ninh Plant covers an area of 25,000 m² of land in the Vietnam-Singapore Industrial Zone of Bac Ninh. With an initial invested capital of VND 400 billion, the plant features some of the latest technologies in frozen food. The new plant was inaugurated at the end of 2016, and gives us a national footprint in our manufacturing and distribution capabilities. This footprint is critical to our continued growth as we are able to find more operating efficiencies with two sites and a physical presence in the North of Vietnam. With the expansion beyond ice cream and yogurt to frozen food, this will prove to be a strategic advantage in creating a nationwide capability.

SUPPLY CHAIN MANAGEMENTWith our commitment to product quality, we always ensure our manufacturing and distribution facilities utilize world-class technology, best practices with a focus on excellence. The reason being, with frozen, chilled and ambient product, every step in how we handle the product from start of production to delivery can alter or affect the quality.

The whole process starts with our team of over 1,900 employees passionate about serving our consumers and taking primary responsibility on procuring the best materials, manufacturing the best quality and delivering the consistency in service for our customers.

Next part of our supply chain is the production facilities that use some of the world’s most advanced technologies to create the quality and consistency that defines our brands. This plays a key role in driving our operational success as we focus on innovation, expansion and growth of our business. From research and development to product management, distribution and quality control, at KDF, we effectively leverage our strengths to ensure efficiency at every level of our operations, and within the very core of our business. Presently, our state-of-the-art manufacturing, distribution and production set-up includes our Cu Chi Plant in the South and Bac Ninh Plant in the North.

Every day, our brands touch the lives of consumers in multiple ways, and as Vietnam’s premiere frozen food company, our products deliver quality, value, and nutrition to more than 85% of Vietnam population in over 63 provinces across the length of Vietnam.


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OUR OPERATIONS

DISTRIBUTION AND SALES

KIDO FOODS

PACKAGINGPROCESSINGMATERIALS

ICE CREAM& FROZEN

FOOD

Marketing & Branding

Management

R & D

Distribution

Logistics

Technology

Finance

KDC PLATFORM VALUE GROWTH

MARKET

Packaged Food

Industry

Trading

450,000 POS

CONSUMERSCHANNEL

70,000 FROZEN POS

EXPORTAPPROXIMATELY

95 MILLION PEOPLE AND EXPANDINGTO OTHER COUNTRIES

DABACO FOODS

PROCESSEDMEATS

JAMBON CHA LUAPATE

PROCESSEDMEATS

Frozen FoodAmbient FoodChilled FoodOEM

PROCESSING

PRODUCTS

PARTNERS

PRODUCTS

AMBIENT FOOD


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DISTRIBUTION PLATFORM

One of the critical components of KIDO Group’s success is distribution reach. As part of KDC’s strategy to reach consumers at the right place, right time, in the right format with the right product, KDF serves to expand the offering by making it possible for the Group to deliver frozen, chilled and ambient products. KDF is the single largest ice cream distribution platform in Vietnam and anchored by our number one position in ice cream and reaches 70,000 points of sale.

Because of this extensive network in Vietnam, it creates a unique opportunity that KDC and KDF can leverage to include additional products into the pipeline. This is a part of KDC’s goal of selling a diversified product portfolio with the aim to create a basket of packaged products that serves the Vietnamese consumer during their daily lives of products to consumers that fulfill. KDF is the mechanism of reaching those consumers for frozen, chilled and ambient products.

Our wide distribution platform, complemented with a differentiated offer by channels and segments, allows us to have products available in the appropriate frequency and maintains a close relationship with customers.

OUR OPERATIONS

Distributor

ICE CREAMMOTORCYCLES

POINT OF SALES

CONSUMERS

FACTORY

RIGHT FORMATRIGHT TIME RIGHT PRODUCTRIGHT PLACE


PRODUCT STRATEGY

Product capability is critical to our success and innovation is crucial to the future of the Group. Our goal of dominating the kitchen of the Vietnamese consumer is heavily dependent on creating the right portfolio of products that meets the dynamic demands of the consumer. KDF’s role is to support this strategy by innovating products that will help to fill the refrigerators and freezers of the Vietnamese consumers. We have leveraged our consumer insight derived from the last two decades to create highly successful products and brands and KDF has inherited this capability to apply this to the frozen, chilled and ambient foods. KDF’s product strategy is a critical component of the Group’s overall strategy of expanding into the frozen, chilled and ambient channel. The product range has now been expanded from Desserts to include Meal Supplies and Solutions. This will be the key driver of growth in the coming years and is designed to complement the Group’s capabilities in packaged foods. The intention is to extend our consumer reach by targeting a broader range of Vietnamese consumers. The extended range of products will help us to achieve the goal of targeting 85% of the Vietnamese population nationwide.

This is consistent with the Group’s strategy, which is to provide a range of products that will serve the Vietnamese consumers every day and throughout the day. The strong portfolio will allow our products to dominate shelf space in both refrigerators and freezers of store locations in our large number of point of sales. Our strong presence in frozen and chilled point of sales for general trade is a key competitive advantage. Therefore, the extension of product range into frozen, chilled and ambient foods will help support company growth through better penetration of products.

The aim of the product strategy is to encourage the consumers to use our products more often throughout the day, effectively increasing sales volume while spreading the incremental cost of distribution across a larger number of products. The combination of both packaged product and frozen, chilled and ambient products provides the Vietnamese consumers more choices that suit their unique needs and modern day lifestyle. The higher number of products and broader range of products helps to further increase our competitive advantage by deepening our relationships with our distributors and retailers by helping them improve their sales volume and profitability from their partnership with us.


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CATEGORY STRATEGY

DAILY EVERY 3 DAYS WEEKLY

FRESH FOODS

PROCESSED MEATS

ICE CREAM

DESSERTS

YOGURT

BEVERAGES

EDIBLE OIL MARGARINE & SHORTENING

STEAMEDBUNS

FRENCH FRIES

SUGAR

SAUCE NOODLE

TRADITIONAL MARKET

CONVENIENCE STORE

RIGHT PLACE

RIGHT TIME

SUPERMARKET

RIG

HT

PRO

DU

CT

RIG

HT

FORM

AT

SNACKS

FOOD & FLAVOR

CONSUMER PRODUCTS

RIGHT PRODUCT RIGHT FORMAT

CHILLED

YOGURT

STEAMED BUNS

GIO LUA

JAMBON

PATE

SAUCE

BEVERAGE

NOODLE

MARGARINE

OIL

SUGAR

PACKAGED AMBIENT

ICE CREAM

STEAMED BUNS

FRENCH FRIES

DESSERTS

FROZEN


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AM

BIE

NT

CH

ILLE

D

-180 C

00 C50 C

180 C

FRO

ZEN

PRODUCT STRATEGY

Banana ice cream

Superteen

Yeah

TUB

CUP Cone Classic Cone Extra

TaiyakiMochi IC CUP

Passion Stick

Sweetie IC Pieces Tub Sorbet

Lysine

Preserved lemons flavor

Meat steamed wheat flour cake

Steamed wheat flour cake

Sweet steamed wheat flour cake

French Fries

Sausage

Orange flavor

Mango flavor Pineapple flavor

Lemon flavor Melon flavor

Aloe vera flavor

Strawberry & banana

Natural Delicious like home

DHA strawberry

Wel Yo tamarind frozen syrup

Wel Yo orange & peach frozen syrup

Cha Lua Pate Jambon

Meat steamed wheat flour cake

Steamed wheat flour cake


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OUR BRANDS

As the premium brand of KDF, Celano is the great combination between flavor and taste made from milk and imported ingredients, Celano has a wide range of flavors including Vanilla, Chocolate, Tiramisu, and Pistachio which are mixed with other ingredients such as nuts or jams to bring a unique taste. Besides the familiar ice-cream cones, ice-cream sticks and ice-cream tubs, Celano also caters to the changing needs of consumers with innovative and creative products such as ice-cream nuggets, mochi ice-cream and ice-creams which has the trendy flavors like green tea matcha. Celano is the most preferred brand name in the market for ice cream and leads the premium market in terms of market share and awareness. In 2018, Celano aims at a growth rate of more than 30% as achieved in the past years’ performance.

Inspired by the traditional ingredients, Merino caters to a wide range of consumer groups and various consumers’ preferences. Available in a number of traditional flavors such as green bean, red bean, taro and durian, Merino delights Vietnamese consumers, from the North to South. The brand is available across Vietnam from supermarkets to mom-and-pop shops, primary schools and recreational areas.

With its vibrant packaging, Merino represents freshness to consumers who are seeking a familiar experience. Merino, characterized by, “Dzui bất tận” also aim to create happiness for everyone all the time.

Merino is currently the market leader in the ice cream category with a 100% brand awareness and ranks at over 40% for being Top of Mind (“TOP”) with consumers.

Wel Yo is specially formulated to supply essential micronutrients that support healthy growth and immune function for children, adolescents, and adults. With delicious flavours and appealing packaging, Wel Yo is a daily snack that aims to provide a healthy alternative to the health conscious Vietnamese consumer.

KIDO Foods in the primary brand for the Company’s frozen foods. Our goal is to continue to extend this line of products to serve consumers with a variety of nutritious and convenient products. The Company aims to build KIDO Foods to be the premiere brand name in the Vietnam’s frozen foods industry.


CORPORATE SOCIAL RESPONSIBILITY

KDF firmly believes that a successful organization can only develop in a sustainable environment and society. We always ensure our products are made from safe and stable sources of raw material, modern technology and are subjected to the most rigorous quality management system with the highest commitment to quality and food safety. We are always conscious of our impact on the environment and do our best to protect our ecosystem. Furthermore, we are committed to providing a stable foundation with promising career path for each member of KDF’S family. KDF is proud to be a brand name associated with community betterment through our annually community activities and philanthropic efforts.

COMMUNITY SUPPORT » The sponsorship of Yogurts by Wel Yo for the following schools (April 2017):

+ The Kindergarten - Gia Lai Province.

+ The Ho Chi Minh City University of Foreign Languages - Information Technology.

+ Phuoc An A Junior School - Vinh Long Province.

+ The Kien Cam Social Group - Tan Phu District - Ho Chi Minh City.

» Sponsorship of yogurt products in the Mid-Autumn festival (August 2017):

+ Phuoc An Pagoda - Da M’ri Town.

+ An Lac Church - Ho Chi Minh City.

+ The charity event “Giving the Love - Receiving the Smile” of Unihomes at Dieu Giac Pagoda - Ho Chi Minh City.

» Creating 400 jobs for local community in Bac Ninh province.

ENVIRONMENTWe always strictly comply with the environmental regulations to prove our commitment on protecting the environment such as:

» The production management is in compliance with the following standards: ISO 14001:2004; ISO 22000:2005; HACCP CODEX CAC/RCP 1-1969 REV.4-2003; OHSAS 18001:2007 and ISO 9001:2015.

» The manufacturing management of Cu Chi Plant is followed by the “green” standard of the People’s Committee of Ho Chi Minh City with the aim of contributing to the city’s ecosystem protection. KIDO Foods has been consecutively voted to own the title of environmental friendliness via the award “Green Business” for the past 12 years (since 2006 until now).

» KIDO Foods strictly comply with and exceeds environmental standards as well as regulations: using green fuel like D.O Oil and Gas during the production activity instead of F.O Oil and Coal with the aim to reduce the Carbon emission to the surrounding environment, mitigating the carbon emission by replacing all lighting equipment into LEDs, actively standardizing and improving the water-based sanitation procedures to eliminate the wastewater and recycle 1,500 m³ and using solar energy for the plant’s manufacturing activity, etc.


42

43


70,000 POS

50,000 ICE - CREAM CABINETS

ICE - CREAM MOTORCYCLES

EVERY ONE COLD STORAGE 400km

40.2%MARKET SHARE

2FACTORIES

3,500SUPERMARKETS

TRADE CENTER

FROZEN TRUCKS

OUR REACH

OPERATING ENVIRONMENT

The Vietnamese economy in 2017 created a stable operating environment for consumer companies. Both the economy expanded by 6.81% versus 2016 and inflation was stable at around 3.53%. Interest rates and foreign exchange fluctuated within the year but the volatility from previous years were gone. One factor that did affect most consumer companies in Vietnam was the weather. We saw an abnormal amount of poor weather which negatively affected consumer demandin the north and the middle of Vietnam. Despite this optimism and consumer confidence were higher, with disposable income accelerating against a low inflation environment which mean spending could arguably increase.

However the year of 2017 still faced certain difficulties and challenges. For example Vietnam’s agriculture sector suffered unfavourable weather conditions that negatively affected production activity and as a result people’s livelihoods. There was also the increase in minimum labour wage by approximately 7.0% to 7.5% which impacted productions costs. There continued to be ongoing challenges in government restructuring of the markets, disbursements of public investments, environmental issues and food safety concerns which affected confidence levels.

The Vietnamese economy in 2017 created a stable operating environment for consumer companies. Both the economy

expanded by 6.81% versus 2016.

Vietnam’s average per capita income is expected to rise to USD

3,400 per year.

6.81 3,400% USD

There is also an increasing pace of urbanization and UN Habitat expects

this to reach 45% by 2020.

45%

Overall the category is expected to grow at a Compound Annual Growth Rate (“CAGR”) of approximately 6.7%, respectively over the period 2017-2022 (Euromonitor).

Overall, Vietnam continues to possess an enormous amount of potential capability to grow, according to the Boston Consulting Group centre for Consumer and Customer Insight, the middle and affluent class in Vietnam will dramatically increase and reach around 33 million of people by 2020. By the same year, Vietnam’s average per capita income is expected to rise to USD 3,400 per year. There is also an increasing pace of urbanization and UN Habitat expects this to reach 45% by 2020. As a result Vietnam will see a large and fast growing middle class that will be urbanized. This is one of the key foundations of KDF’s thesis for entering into frozen, chilled and ambient foods.

In other markets as incomes rise and urbanization accelerates, we see a strong movement to meal solutions and supplies like frozen, chilled and ambient foods. KDF’s approach is not to wait passively for this to happen and compete in areas of modern trade for space. In contrast we are actively working with our existing distribution network to in traditional trade to begin introducing products that are curated for each

geography. Similar to packaged foods, we are trying to create a customized basket for each consumer that allows them to buy what they want, where they want, when they want and in the format they want.

All of this would not be possible without the success of our ice cream, desserts and yogurts business. KDF is currently at a 40.2% market share as of 2017 according to Euromonitor. The market continues to premiumize and we see this in our Celano brand versus our Merino brand. Overall the category is expected to grow at a Compound Annual Growth Rate (“CAGR”) of approximately 6.7%, respectively over the period 2017-2022 (Euromonitor).

Coupled with the strong base of ice cream and desserts, KDF’s risk into entering into frozen, chilled and ambient foods should be well mitigated. We will continue to have steady growth in a segment where we are number one in market share and at the same time leveraging this into a new category that should coincide with the consumer shift into meal supplies and solutions.


46

47

MANAGEMENT REPORT

FINANCIAL HIGHLIGHTS

Unit: VND Billion

2017

2016

+ 6.7% NET PROFIT AFTER TAX

Unit: %

2017

2016

- 7.9%

0.4x

RETURN ON EQUITY

Unit: X

2017

2016CURRENT RATIO

Unit: X

2017

2016DEBT EQUITY RATIO

Unit: %

2017

2016

- 3.2%

1.3x

RETURN ON ASSETS

Unit: VND Billion

2017

2016

- 1.1 %

PROFIT BEFORE TAX

Unit: VND Billion

2017

2016

+ 6.9% NET REVENUE

Unit: VND Billion

2017

2016

+ 1.8%

GROSS PROFIT

Unit: %

2017

2016

- 2.7%

GROSS PROFIT MARGIN

Unit: VND Billion

2017

2016

+ 11.8 %

EBITDA

1,493

1,397

797

783

53.4

56.0

233

260

176

174

152

143

12.3

15.5

21.8

29.7

0.4

0.6

1.3

1.4


48

49

MANAGEMENT REPORT

FINANCIAL PERFORMANCE

REVENUE In 2017, net revenue was VND 1,493 billion with growth of 6.9% compared to 2016. KDF maintained its leading position in the ice cream segment with sales of VND 1,179 billion (up by 15.7% y-o-y). The growth of ice cream segment was driven by both market expansion and new product launches, especially in premium segment. In 2017, our market share increased from 38.1% to 40.2% according to Euromonitor. The yogurt segment declined by 22.9% from VND 355 billion to VND 274 billion due to increasing price competition. KDF strategy was not to engage in price competition but rather focus on developing new categories of products in which we could gain a number one position (i.e. frozen, chilled and ambient foods). It is still early days in the frozen food category but we believe that we are well positioned to consolidate frozen foods in traditional trade by leveraging our distribution network. With that we would expect strong year on year growth from frozen, chilled and ambient foods and larger contribution of frozen foods to the overall sales mix in coming years.

VND 1,493 BILLION

NET REVENUE

COST OF GOODS SOLD AND GROSS PROFIT In absolute terms, cost of goods sold increased by 13.4% to VND 696 billion in 2017 from VND 614 billion in 2016. This was ahead of sales growth and due mainly to the additional depreciation from the Bac Ninh production facility. Gross profit margins as a result were affected and declined from 56.0% to 53.4%.

VND 696 BILLION

COST OF GOODS SOLD

FIXED ASSETS As at 31 December 2017, net fixed assets was VND 665 billion increasing by 7.4% from VND 619 billion compared to same point of time in 2016. The increase was primarily driven by capital expenditures for the Bac Ninh Plant factory.

VND 665 BILLION

FIXED ASSETS

OPERATING EXPENSES Total operating expenses in 2017 was approximately VND 611 billion equivalent to a slight increase by 1.7% y-o-y. General and administrative expenses reduced by 6.7% from VND 74 billion to VND 69 billion even though the expected increase in the cost bases from the additional Bac Ninh operations which proved the effective cost management. Besides, this was in turn reinvested in the distribution network which saw sales expenses rise from VND 527 billion to VND 542 billion, equivalent to 2.8% y-o-y.

VND 611 BILLION

OPERATING EXPENSES

EBITDA Overall EBITDA increased from VND 233 billion to VND 260 billion with a margin of 16.6% compared to 17.4%. This was due to the increase in gross profit from VND 783 billion to VND 797 billion and rise in depreciation expense from the Bac Ninh factory from VND 51 billion to VND 74 billion. Additionally, there was an insignificant rise in operating expenses due to the expansion in distribution channels.

VND 260 BILLION

EBITDA

CASH AND CASH EQUIVALENTS Cash and cash equivalents as at 31 December 2017 was VND 8 billion and short-term investments reached VND 80 billion. Aggregated cash position increased by 25% from VND 70 billion to gain VND 88 billion

VND 8 BILLION

CASH AND CASH EQUIVALENTS


50

51

MANAGEMENT REPORT

OWNER’S EQUITY Owner’s equity as at 31 December 2017 was around VND 737 billion which rose by 11.1%. This was largely due to net profits for 2017. In 2017, the Company also announced and prepaid the cash dividend with the ratio of 14%.

VND 737 BILLION

OWNER’S EQUITY

BORROWINGS As at 31 December 2017, the balance of short-term and long-term borrowings was VND 324 billion, declining by 15.3% as at 31 December 2016. This was driven by repayment of long-term borrowings, namely financing for construction of Bac Ninh factory. Net debt positions were VND 316 billion compared to VND 313 billion in 2016. External gearing reduced slightly from 0.6x in 2016 to 0.4x in 2017.

VND 324 BILLION

BALANCE OF SHORT-TERM AND LONG-TERM BORROWINGS

FINANCIAL PERFORMANCE


RISK MANAGEMENT

CUSTOMER RELATIONSHIP RISK Failure to maintain these relationships represents a potential risk factor and to mitigate this, we are committed to delivering outstanding customer service which is supported by our technological infrastructure. Technology enables us to connect to our value chain downstream. The level of integration and collaboration we maintain with our customers also helps to mitigate any risk of our customers defecting. We are able to monitor inventory levels, sales process, and also consumer feedback in real time which allows us to be proactive in working with our customers.

The depth of our customer relationships also help to mitigate any risks. Most distributors have been working with our company since we took over the Wall’s ice cream factory and have grown with us over the last decade. Our products form a significant percentage of their revenue and profitability; therefore the economic interdependence creates a depth in the relationship that helps us to mitigate customer relationship risk.

VOLATILITY OF RAW MATERIAL PRICES Changes in raw material prices pose a significant risk to our profitability and margins. In order to mitigate this risk, we share the responsibility of managing this risk with our suppliers. We provide them with a clear forward looking materials demand plan and secure fixed pricing for a significant period of time in order to have stability and certainty in our production costs.

FINANCING AND LIQUIDITY RISKS Changes in the global and regional financial markets may have a significant impact on interest rates, which may lead to risks associated to profitability, liquidity and financing. In order to mitigate this risk, we actively monitor the markets and also the duration of our debt positions to ensure that we have adequate cash flows and cash balances to meet our obligations.

CUSTOMER RELATIONSHIP

RISK

VOLATILITY OF RAW

MATERIAL PRICES

FINANCING AND LIQUIDITY RISKS


54

55

MANAGEMENT REPORT

BOARD MEETINGS & RESOLUTIONS

ACTIVITIES OF BOARD OF DIRECTORS AND SUPERVISORY BOARD

MEETINGS OF THE BOARD OF DIRECTOR

BOARD OF DIRECTORS’s ACTIVITIES TOWARD BOARD OF MANAGEMENT

The Board of Directors closely supervised the management through quarterly report of Board of Management in quarterly meeting.

No. Resolution No. Date Content

1 20/03/2017 Organized Extraordinary Annual General Meeting of shareholders for 2017

2 30/03/2017 Organized the Annual General Meeting of shareholders for 2017

3 01CT/2017 06/10/2017 Dividend payment in 2017


Distributor Warehouse

KIDO FOODS

OUR PATH

KIDO FROZEN FOODS JOINT STOCK COMPANY

Financial statements

31 December 2017

CONTENTS

Pages

General information 61

Report of management 62

Independent auditors’ report 63 - 64

Balance sheet 65 - 66

Income statement 67

Cash flow statement 68 - 69

Notes to the financial statements 70 - 95

THE COMPANY

KIDO Frozen Foods Joint Stock Company (“the Company”) is a joint stock company incorporated under the Law on Enterprise of Vietnam pursuant to the Business Registration Certificate (“BRC”) No. 4103001557 issued by the Ho Chi Minh City Department of Planning and Investment on 14 April 2003 and the subsequent amended BRCs.

The current principal activities of the Company are to produce and trade an assortment of food and drink products such as ice cream, milk, dairy products, non-alcoholic drinks, mineral water and frozen foods.

The Company’s registered office and factory are located at Lot A2-7, Road No.N4, Cu Chi Northwest Industrial Park, Cay Sop Village, Tan An Hoi Ward, Cu Chi District, Ho Chi Minh City, Vietnam. In addition, the Company has two branches located at Ho Chi Minh, and five branches located in Ha Noi, Da Nang, Khanh Hoa, Bac Ninh and Cambodia.

BOARD OF DIRECTORS

Members of the Board of Directors during the year and at the date of this report are:

Mr Tran Kim Thanh Chairman

Mr Tran Le Nguyen Member

Mr Tran Quoc Nguyen Member

BOARD OF SUPERVISION

Members of the Board of Supervision during the year and at the date of this report are:

Mr Kelly Yin Hon Wong Head

Ms Nguyen Thi Oanh Member

Ms Nguyen Thi Trang Member appointed on 20 March 2017

MANAGEMENT

Members of the management during the year and at the date of this report are:

Mr Tran Quoc Nguyen General Director

Ms Tran Thi Thuy Linh Deputy General Director cum Finance Director

LEGAL REPRESENTATIVE

The legal representative of the Company during the year and at the date of this report is Mr Tran Kim Thanh.

Mr Tran Quoc Nguyen is authorised by Mr Tran Kim Thanh to sign the accompanying financial statements for the year ended 31 December 2017 in accordance with the Letter of Authorization No. 01/2011/CT-UQ dated 1 September 2011.

AUDITORS

The auditor of the Company is Ernst & Young Vietnam Limited.

GENERAL INFORMATION


60

61

FINANCIAL STATEMENTS

REPORT OF MANAGEMENT

Management of KIDO Frozen Foods Joint Stock Company (“the Company”) is pleased to present this report and the financial statements of the Company for the year ended 31 December 2017.

MANAGEMENT’S RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS

Management is responsible for the financial statements of each financial year which give a true and fair view of the financial position of the Company and of its results and cash flows for the year. In preparing those financial statements, management is required to:

• Select suitable accounting policies and then apply them consistently;• Make judgements and estimates that are reasonable and prudent;• State whether applicable accounting standards have been followed, subject to any material departures disclosed

and explained in the financial statements; and• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the

Company will continue its business.

Management is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the financial position of the Company and to ensure that the accounting records comply with the applied accounting system. It is also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Management confirmed that it has complied with the above requirements in preparing the accompanying financial statements.

STATEMENT BY MANAGEMENT

Management does hereby state that, in its opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2017, and of the results of its operations and its cash flows for the year then ended in accordance with Vietnamese Accounting Standards, Vietnamese Enterprise Accounting System and the statutory requirements relevant to the preparation and presentation of the financial statements.

For and on behalf of management:

Tran Quoc NguyenGeneral Director

Ho Chi Minh City, Vietnam15 March 2018

TO: THE SHAREHOLDERS OF KIDO FROZEN FOODS JOINT STOCK COMPANY

We have audited the accompanying financial statements of KIDO Frozen Foods Joint Stock Company (“the Company”) as prepared on 15 March 2018 and set out on pages 65 to 95 which comprise the balance sheet as at 31 December 2017, the income statement and the cash flow statement for the year then ended and the notes thereto.

MANAGEMENT’S RESPONSIBILITY

The Company’s management is responsible for the preparation and fair presentation of these financial statements in accordance with Vietnamese Accounting Standards, Vietnamese Enterprise Accounting System and the statutory requirements relevant to the preparation and presentation of the financial statements, and for such internal control as management determines is necessary to enable the preparation and presentation of the financial statements that are free from material misstatement, whether due to fraud or error.

AUDITORS’ RESPONSIBILITY

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

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

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

Reference: 60752642/19356648

INDEPENDENT AUDITORS’ REPORT


62

63


Reference: 60752642/19356648

INDEPENDENT AUDITORS’ REPORT (CONT.)

OPINION

In our opinion, the financial statements give a true and fair view, in all material respects, of the financial position of the Company as at 31 December 2017, and of the results of its operations and its cash flows for the year then ended in accordance with Vietnamese Accounting Standards, Vietnamese Enterprise Accounting System and the statutory requirements relevant to the preparation and presentation of the financial statements.

ERNST & YOUNG VIETNAM LIMITED

Hang Nhat QuangDeputy General DirectorAudit Practicing Registration CertificateNo. 1772-2018-004-1

Luong Kim Dien AnAuditorAudit Practicing Registration CertificateNo. 2736-2014-004-1

Ho Chi Minh City, Vietnam15 March 2018

VND

Code ASSETS Notes Ending balance Beginning balance

100 A. CURRENT ASSETS 468,525,903,535 494,824,806,359

110 I. Cash and cash equivalents 4 8,000,838,515 70,392,468,576

111 Cash 8,000,838,515 64,392,468,576

112 Cash equivalents - 6,000,000,000

120 II. Short-term investments 80,000,000,000 3,416,900

121 1. Held-for-trading securities - 5,808,700

1222. Provision for diminution in value of held-for-trading

securities- (2,391,800)

123 3. Held-to-maturity investments 5 80,000,000,000 -

130 III. Current accounts receivable 6 263,908,106,657 292,769,822,363

131 1. Short-term trade receivables 175,608,649,478 35,645,290,670

132 2. Short-term advances to suppliers 85,673,493,043 70,692,190,009

135 3. Short-term loan receivables - 181,395,942,000

136 4. Other short-term receivables 2,625,964,136 5,036,399,684

140 IV. Inventories 7 109,973,620,718 115,605,457,111

141 1. Inventories 110,046,333,133 117,330,016,917

149 2. Provision for obsolete inventories (72,712,415) (1,724,559,806)

150 V. Other current assets 6,643,337,645 16,053,641,409

151 1. Short-term prepaid expenses 12 4,801,284,377 8,176,491,396

152 2. Value-added tax deductible - 7,387,730,232

153 3. Tax and other receivables from the State 16 1,842,053,268 489,419,781

200 B. NON-CURRENT ASSETS 772,604,631,705 747,206,751,150

210 I. Long-term receivable 6,211,197,801 1,097,197,801

216 1. Other long-term receivables 8 6,211,197,801 1,097,197,801

220 II. Fixed assets 665,186,626,898 619,110,387,346

221 1. Tangible fixed assets 9 658,388,603,116 613,440,071,726

222 Cost 920,020,812,598 805,813,938,387

223 Accumulated depreciation (261,632,209,482) (192,373,866,661)

227 2. Intangible fixed assets 10 6,798,023,782 5,670,315,620

228 Cost 16,352,431,891 13,407,299,451

229 Accumulated amortization (9,554,408,109) (7,736,983,831)

240 III. Long-term asset in progress 16,338,494,153 37,253,547,680

242 1. Construction in progress 11 16,338,494,153 37,253,547,680

260 IV. Other long-term assets 84,868,312,853 89,745,618,323

261 1. Long-term prepaid expenses 12 79,590,623,078 80,579,527,836

262 2. Deferred tax asset 29.3 5,277,689,775 9,166,090,487

270 TOTAL ASSETS 1,241,130,535,240 1,242,031,557,509

BALANCE SHEET as at 31 December 2017

B01-DN


64

65


VND

Code RESOURCES Notes Ending balance Beginning balance

300 C. LIABILITIES 504,258,524,981 579,134,862,337

310 I. Current liabilities 357,567,259,661 349,731,594,226

311 1. Short-term trade payables 14 56,365,157,336 64,260,723,113

312 2. Short-term advances from customers 15 6,306,306,425 7,621,973,478

313 3. Statutory obligations 16 3,792,674,988 10,432,331,104

314 4. Payables to employees 48,550,176,574 51,912,626,400

315 5. Short-term accrued expenses 17 24,513,599,843 35,257,822,417

319 6. Other short-term payables 18 7,824,466,410 3,629,294,764

320 7. Short-term loans 19.1 210,214,878,085 176,616,822,950

330 II. Non-current liabilities 146,691,265,320 229,403,268,111

337 1. Other long-term liabilities 18 26,312,699,246 17,091,490,664

338 2. Long-term loans 19.2 114,164,192,628 206,314,241,034

342 3. Other long-term provision 20 6,214,373,446 5,997,536,413

400 D. OWNERS’ EQUITY 736,872,010,259 662,896,695,172

410 I. Capital 21 736,872,010,259 662,896,695,172

411 1. Share capital 560,000,000,000 560,000,000,000

411a - Shares with voting rights 560,000,000,000 560,000,000,000

418 2. Investment and development fund 2,200,000,000 2,200,000,000

421 3. Undistributed earnings 174,672,010,259 100,696,695,172

421a - Undistributed earnings by the end of prior year 100,696,695,172 -

421b - Undistributed earnings of current year 73,975,315,087 100,696,695,172

440 TOTAL LIABILITIES AND OWNERS’ EQUITY 1,241,130,535,240 1,242,031,557,509

VND

Code ITEMS Notes Current year Previous year

01 1. Revenue from sale of goods 22.1 1,502,953,006,107 1,403,976,365,391

02 2. Deductions 22.1 (10,269,977,890) (7,137,352,936)

10 3. Net revenue from sale of goods 22.1 1,492,683,028,217 1,396,839,012,455

11 4. Costs of goods sold 23 (696,035,312,782) (613,939,229,861)

20 5. Gross profit from sale of goods 796,647,715,435 782,899,782,594

21 6. Finance income 22.2 9,617,298,563 13,706,316,238

22 7. Finance expenses 24 (23,207,471,470) (19,987,244,079)

23 In which: Interest expense (21,507,661,902) (16,139,300,372)

25 8. Selling expenses 25 (541,741,333,168) (526,982,125,296)

26 9. General and administrative expenses 26 (69,115,945,105) (74,055,951,838)

30 10. Operating profit 172,200,264,255 175,580,777,619

31 11. Other income 27 2,134,439,066 672,048,466

32 12. Other expenses (82,512,068) (114,949,855)

40 13. Other profit 2,051,926,998 557,098,611

50 14. Accounting profit before tax 174,252,191,253 176,137,876,230

51 15. Current corporate income tax expense 29.1 (17,988,475,454) (37,493,847,195)

52 16. Deferred tax (expense) income 29.3 (3,888,400,712) 3,974,964,664

60 17. Net profit after tax 152,375,315,087 142,618,993,699

70 18. Basic earnings per share 21.4 2,721 4,028

71 19. Diluted earnings per share 21.4 2,721 4,028

BALANCE SHEET as at 31 December 2017 (continued)

INCOME STATEMENTfor the year ended 31 December 2017

B02-DNB01-DN

Cao Thi Thanh HongPreparer

Tran Thi Thuy LinhDeputy General Directorcum Finance Director


15 March 2018




15 March 2018


66

67


VND


I. CASH FLOWS FROM OPERATING ACTIVITIES

01 Accounting profit before tax 174,252,191,253 176,137,876,230

Adjustments for:

02 Depreciation and amortization 74,127,093,268 50,641,399,221

03 (Reversal of provisions) provisions (1,437,402,158) 1,574,986,332

04Foreign exchange gains arising from revaluation of monetary accounts denominated in foreign currency

(42,222,991) (62,482,444)

05 Profit from investing activities (9,350,297,384) (11,246,561,212)

06 Interest expense 24 21,507,661,902 16,139,300,372

08 Operating profit before changes in working capital 259,057,023,890 233,184,518,499

09 Increase in receivables (134,120,473,162) (30,364,869,074)

10 Decrease (increase) in inventories 7,283,683,784 (35,532,870,472)

11 (Decrease) increase in payables (13,538,156,398) 73,251,428,388

12 Decrease (increase) in prepaid expenses 2,522,274,393 (3,395,031,133)

14 Interest paid (22,877,853,993) (21,618,465,938)

15 Corporate income tax paid 16 (29,856,147,233) (35,551,519,258)

17 Other cash outflows for operating activities (787,475,724) (10,759,171,196)

20 Net cash flows from operating activities 67,682,875,557 169,214,019,816

II. CASH FLOWS FROM INVESTING ACTIVITIES

21 Purchase and construction of fixed assets (107,529,477,516) (372,523,786,293)

22 Proceeds from disposals of fixed assets 887,951,226 445,797,038

23 Loans to other entities (80,000,000,000) (651,208,116,000)

24 Collections from borrowers 181,398,333,800 469,812,174,000

26 Proceeds from sale of investments in other entities 3,514,500 169,861,695

27 Interest and dividends received 12,076,776,740 10,912,395,879

30 Net cash flows from (used in) investing activities 6,837,098,750 (542,391,673,681)

III. CASH FLOWS FROM FINANCING ACTIVITIES

31 Capital contribution - 223,395,943,000

33 Drawdown of borrowings 19 307,475,560,889 933,299,047,846

34 Repayment of borrowings 19 (366,027,554,160) (649,503,152,895)

36 Dividends paid 21.2 (78,360,100,000) (90,839,649,944)

40 Net cash flows (used in) from financing activities (136,912,093,271) 416,352,188,007

VND


50 Net (decrease) increase in cash and cash equivalents (62,392,118,964) 43,174,534,142

60 Cash and cash equivalents at beginning of year 4 70,392,468,576 27,216,455,822

61 Impact of exchange rate fluctuation 488,903 1,478,612

70 Cash and cash equivalents at end of year 4 8,000,838,515 70,392,468,576

CASH FLOW STATEMENT for the year ended 31 December 2017

CASH FLOW STATEMENT for the year ended 31 December 2017 (continued)

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1. CORPORATE INFORMATION

KIDO Frozen Foods Joint Stock Company (“the Company”) is a joint stock company incorporated under the Law on Enterprise of Vietnam pursuant to the Business Registration Certificate (“BRC”) No. 4103001557 issued by the Ho Chi Minh City Department of Planning and Investment on 14 April 2003 and the subsequent amended BRCs.

The current principal activities of the Company are to produce and trade an assortment of food and drink products such as ice cream, milk, dairy products, non-alcoholic drinks, mineral water and frozen foods.

The Company’s registered office and factory are located at Lot A2-7, Road No.N4, Cu Chi Northwest Industrial Park, Cay Sop Village, Tan An Hoi Ward, Cu Chi District, Ho Chi Minh City, Vietnam. In addition, the Company has two branches located at Ho Chi Minh, and five branches located in Ha Noi, Da Nang, Khanh Hoa, Bac Ninh and Cambodia.

The Company’s normal course of business cycle is 12 months.

The Company’s number of employees as at 31 December 2017 was 1,978 (31 December 2016: 1,511).

2. BASIS OF PREPARATION

2.1 Accounting standards and system

The financial statements of the Company, expressed in Vietnam dong (“VND”), are prepared in accordance with the Vietnamese Enterprise Accounting System and Vietnamese Accounting Standards issued by the Ministry of Finance as per the:

• Decision No. 149/2001/QD-BTC dated 31 December 2001 on the Issuance and Promulgation of Four Vietnamese Accounting Standards (Series 1);

• Decision No. 165/2002/QD-BTC dated 31 December 2002 on the Issuance and Promulgation of Six Vietnamese Accounting Standards (Series 2);

• Decision No. 234/2003/QD-BTC dated 30 December 2003 on the Issuance and Promulgation of Six Vietnamese Accounting Standards (Series 3);

• Decision No. 12/2005/QD-BTC dated 15 February 2005 on the Issuance and Promulgation of Six Vietnamese Accounting Standards (Series 4); and,

• Decision No. 100/2005/QD-BTC dated 28 December 2005 on the Issuance and Promulgation of Four Vietnamese Accounting Standards (Series 5).

Accordingly, the accompanying financial statements, including their utilization are not designed for those who are not informed about Vietnam’s accounting principles, procedures and practices and furthermore are not intended to present the financial position and results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries other than Vietnam.

2. BASIS OF PREPARATION (CONTINUED)

2.2 Applied accounting documentation system

The Company’s applied accounting documentation system is the General Journal.

2.3 Fiscal year

The Company’s fiscal year applicable for the preparation of its financial statements starts on 1 January and ends on 31 December.

2.4 Accounting currency

The financial statements are prepared in VND which is also the Company’s accounting currency.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3.1 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, cash in banks and short-term, highly liquid investments with an original maturity of less than three months that are readily convertible into known amounts of cash and that are subject to an insignificant risk of change in value.

3.2 Inventories

Inventories are stated at the lower of cost incurred in bringing each product to its present location and condition, and net realizable value.

Net realizable value represents the estimated selling price in the ordinary course of business less the estimated costs to complete and the estimated costs necessary to make the sale.

The perpetual method is used to record inventories, which are valued as follows:

Raw materials, consumables and goods for resale

Finished goods

- cost of purchase on a weighted average basis.

- cost of direct materials and labor plus attributable overheads based on the normal level of activities.

Provision for obsolete inventories

An inventory provision is created for the estimated loss arising due to the impairment of value (through diminution, damage, obsolescence, etc.) of raw materials, finished goods, and other inventories owned by the Company, based on appropriate evidence of impairment available at the balance sheet date. Increases or decreases to the provision balance are recorded into the cost of goods sold account in the income statement.

3.3 Receivables

Receivables are presented in the financial statements at the carrying amounts due from customers and other debtors, after provision for doubtful receivables.

The provision for doubtful receivables represents amounts of outstanding receivables at the balance sheet date which are doubtful of being recovered. Increases or decreases to the provision balance are recorded into general and administration expense account in the income statement.

NOTES TO THE FINANCIAL STATEMENTSas at and for the year ended 31 December 2017

NOTES TO THE FINANCIAL STATEMENTSas at and for the year ended 31 December 2017 (continued)

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

3.4 Tangible fixed assets

Tangible fixed assets are stated at cost less accumulated depreciation.

The cost of a tangible fixed asset comprises its purchase price and any directly attributable costs of bringing the tangible fixed asset to working condition for its intended use. Expenditure for additions, improvements and renewals are added to the carrying amount of the assets and expenditure for maintenance and repairs are charged to the income statement as incurred.

When tangible fixed assets are sold or retired, any gain or loss resulting from their disposal (the difference between the net disposal proceeds and the carrying amount) is included in the income statement.

3.5 Intangible fixed assets

Intangible fixed assets are stated at cost less accumulated amortization.

The cost of an intangible fixed asset comprises its purchase price and any directly attributable costs of preparing the intangible asset for its intended use. Expenditures for additions, improvements are added to the carrying amount of the assets and other expenditures are charged to the income statement as incurred.

When intangible fixed assets are sold or retired, any gain or loss resulting from their disposal (the difference between the net disposal proceeds and the carrying amount) is included in the income statement.

3.6 Depreciation and amortizationDepreciation of tangible fixed assets and amortization of intangible fixed assets are calculated on a straight-line basis over the estimated useful life of each asset as follows:

Buildings and structures 25 yearsMachinery and equipment 5 – 9 yearsMeans of transportation 4 – 9 yearsOffice equipment 3 – 6 yearsComputer software 3 – 8 years

3.7 Construction in progress

Construction in progress represents tangible fixed assets under construction and is stated at cost. This includes costs of construction, plant, equipment and other direct costs. Construction in progress is not depreciated until such time as the relevant assets are completed and put into use.

3.8 Borrowing costs Borrowing costs consist of interest and other costs that the Company incurs in connection with the borrowing of funds.

Borrowing costs are recorded as expense during the year in which they are incurred, except to the extent that they are capitalized as explained in the following paragraph.

Borrowing costs that are directly attributable to the acquisition, construction or production of an asset that necessarily take a substantial period of time to get ready for its intended use are capitalized as part of the cost of the respective asset.


3.9 Prepaid expenses

Prepaid expenses are reported as short-term or long-term prepaid expenses on the balance sheet and amortized over the period for which the amounts are paid or the period in which economic benefits are generated in relation to these expenses.

Prepaid land rental

Prepaid land rental represents the unamortized balances of advanced payments made in accordance with lease contracts for a period of 30 and 42 years. Such prepaid rental is recognized as a long-term prepaid expense for allocation to the income statement over the remaining lease period according to Circular No. 45/2013/TT-BTC issued by the Ministry of Finance on 25 April 2013 guiding the management, use and depreciation of fixed assets.

3.10 Held-for-maturity investments

Held-to-maturity investments are stated at their acquisition costs. After initial recognition, held-to-maturity investments are measured at recoverable amount. Any impairment loss incurred is recognised as expense in the separate financial statements and deducted against the value of such investments.

3.11 Payables and accruals

Payables and accruals are recognized for amounts to be paid in the future for goods and services received, whether or not billed to the Company.

3.12 Accrual for severance pay

The severance pay to employees is accrued at the end of each reporting year for all employees who have been being in service up to 31 December 2008 at the rate of one-half of the average monthly salary for each year of service up to 31 December 2008 in accordance with the Labor Code and related implementing guidance. The average monthly salary used in this calculation will be revised at the end of each reporting period following the average monthly salary of the 6-month period up to the reporting date. Any increase or decrease to the accrued amount will be taken into the income statement.

This accrued severance pay is used to settle the termination allowance to be paid to employee upon termination of their labor contract following Article 48 of the Labor Code.

3.13 Foreign currency transactions

Transactions in currencies other than the Company’s reporting currency of VND are recorded at the actual transaction exchange rates at transaction dates which are determined as follows:

• Transactions resulting in receivables are recorded at the buying exchange rates of the commercial banks designated for collection; and

• Transactions resulting in liabilities are recorded at the selling exchange rates of the commercial banks designated for payment.

At the end of the year, monetary balances denominated in foreign currencies are translated at the actual exchange rates at the balance sheet date which are determined as follows:

• Monetary assets are translated at buying exchange rate of the commercial bank where the Company conducts transactions regularly; and

• Monetary liabilities are translated at selling exchange rate of the commercial bank where the Company conducts transactions regularly.

All exchange differences incurred during the year and arising from the revaluation of monetary accounts denominated in foreign currency at year-end are taken to the income statement.


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3.14 Appropriation of net profits

Net profit after tax is available for appropriation to shareholders after approval in the Annual General Meeting, and after making appropriation to reserve funds in accordance with the Company’s Charter and Vietnam’s regulatory requirements.

The Company maintains the following reserve funds which are appropriated from the Company’s net profit after tax as proposed by the Board of Directors and subject to approval by shareholders at the Annual General Meeting:

Investment and development fund

This fund is set aside for use in the Company’s expansion of its operation or in-depth investments.

3.15 Revenue recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable, excluding trade discount, rebate and sales return. The following specific recognition criteria must also be met before revenue is recognized:

Sale of goods

Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer, usually upon the delivery of the goods.

Interest

Revenue is recognized as the interest accrues (taking into account the effective yield on the asset) unless collectability is in doubt.

Dividends

Revenue is recognized when the Company’s entitlement as an investor to receive the dividend is established.

3.16 Taxation

Current income tax

Current income tax assets and liabilities for the current and prior years are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted as at the balance sheet date.

Current income tax is charged or credited to the income statement, except when it relates to items recognized directly to equity, in which case the current income tax is also dealt with in equity.

Current income tax assets and liabilities are offset when there is a legally enforceable right for the Company to set off current tax assets against current tax liabilities and when the Company intends to settle its current tax assets and liabilities on a net basis.

Deferred tax

Deferred tax is provided using the liability method on temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amount for financial reporting purpose.


3.16 Taxation (continued)

Deferred tax (continued)

Deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized for all deductible temporary differences, carried forward unused tax credit and unused tax losses, to the extent that it is probable that taxable profit will be available against which deductible temporary differences, carried forward unused tax credit and unused tax losses can be utilized.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilized. Previously unrecognized deferred tax assets are re assessed at each balance sheet date and are recognized to the extent that it has become probable that future taxable profit will allow the deferred tax assets to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the year when the asset realised or the liability is settled based on tax rates and tax laws that have been enacted at the balance sheet date.

Deferred tax is charged or credited to the income statement, except when it relates to items recognized directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right for the Company to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority on either the same taxable entity or when the Company intends either to settle current tax liabilities and assets on a net basis or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected to be settled or recovered.

3.17 Earnings per share

Basic earnings per share amounts are calculated by dividing net profit after tax for the year attributable to ordinary shareholders of the Company (after adjusting for the bonus and welfare fund) by the weighted average number of ordinary shares outstanding during the year.

Diluted earnings per share amounts are calculated by dividing the net profit after tax attributable to ordinary equity holders of the Company (after adjusting for interest on the convertible preference shares) by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares.

3.18 Related parties

Parties are considered to be related parties of the Company if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions, or when the Company and other party are under common control or under common significant influence. Related parties can be enterprise or individual, including close members of the family of any such individual.


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4. CASH AND CASH EQUIVALENTS

VND

Ending balance Beginning balance

Cash on hand 1,952,417,338 1,024,295,487

Cash in banks 6,048,421,177 63,368,173,089

Cash equivalents - 6,000,000,000

TOTAL 8,000,838,515 70,392,468,576

5. HELD-TO-MATURITY INVESTMENTS

The balance represents the short-term deposits at the commercial bank with original maturity of six months and earn the interest rate at 7.1% per annum.

6. CURRENT ACCOUNTS RECEIVABLE

VND


Short-term trade receivables 175,608,649,478 35,645,290,670

In which:

Due from related parties (Note 30) 7,257,580 11,867,508

Vincommerce General Commercial Services Joint Stock Company - Ha Noi Branch

6,865,019,562 3,049,096,948

Other parties 168,736,372,336 32,584,326,214

Short-term advances to suppliers 85,673,493,043 70,692,190,009

In which:

Quoc Thuan Phat Company Limited 58,121,348,903 64,221,407,955

New Viet Diary Joint Stock Company 17,412,422,500 -

Other parties 10,139,721,640 6,470,782,054

Short-term loan receivables - 181,395,942,000

In which:

Due from a related party (Note 30) - 181,395,942,000

Other short-term receivables 2,625,964,136 5,036,399,684

In which:

Due from a related party (Note 30) - 3,381,788,485

Advance to employees 801,036,652 648,524,014

Other parties 1,824,927,484 1,006,087,185

TOTAL 263,908,106,657 292,769,822,363

All short-term trade receivables were placed as collateral for the Company’s short-term loan from the bank (Note 19.1).

7. INVENTORIES

VND

Ending balanceBeginning

balance

Raw materials 46,937,674,605 59,754,007,273

Finished goods 37,857,921,959 37,336,715,303

Tools and supplies 22,119,761,301 20,239,294,341

Merchandise goods 3,064,748,933 -

Work in progress 57,301,881 -

Goods in transit 8,924,454 -

TOTAL 110,046,333,133 117,330,016,917

Provision for obsolete inventories (72,712,415) (1,724,559,806)

NET 109,973,620,718 115,605,457,111

Inventories valued at VND 109,973,620,718 were pledged as collateral for the Company’s short-term loan from the bank (Note 19.1).

Details of movement of provision for obsolete inventories

VND

Current year Previous year

Beginning balance 1,724,559,806 499,859,297

Provision made during the year 276,060,174 1,724,559,806

Reversal of provision during the year (1,927,907,565) (499,859,297)

Ending balance 72,712,415 1,724,559,806

8. OTHER LONG-TERM RECEIVABLES

VND

Ending balanceBeginning

balance

Due from a related party (Note 30) 5,000,000,000 -

Deposits 1,211,197,801 1,097,197,801

TOTAL 6,211,197,801 1,097,197,801


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9. TANGIBLE FIXED ASSETS

VND

Buildings and

structures Machinery and

equipment Means of transportation Office equipment Total

Cost

Beginning balance 244,609,873,170 484,006,907,910 60,717,165,705 16,479,991,602 805,813,938,387

New purchase 34,130,776,364 54,176,184,947 6,940,829,911 - 95,247,791,222

Transfer from construction in progress 17,102,578,402 3,298,733,069 - - 20,401,311,471

Disposal - - (1,442,228,482) - (1,442,228,482)

Ending balance 295,843,227,936 541,481,825,926 66,215,767,134 16,479,991,602 920,020,812,598

In which:

Fully depreciated 1,280,051,822 23,709,980,329 14,079,083,351 9,740,700,703 48,809,816,205

Accumulated depreciation


Depreciation for the year 14,899,477,094 46,586,091,875 7,494,938,968 1,487,323,669 70,467,831,606

Disposal - - (1,209,488,785) - (1,209,488,785)

Ending balance 37,288,046,343 179,702,136,995 31,576,895,562 13,065,130,582 261,632,209,482

Net carrying amount


Ending balance 258,555,181,593 361,779,688,931 34,638,871,572 3,414,861,020 658,388,603,116

In which:

Pledged as short-term loan security (Note 19.1) 56,943,360,736 133,336,620,854 - - 190,279,981,590

Pledged as long-term loan securities (Note 19.2) 155,279,732,131 215,169,764,892 - - 370,449,497,023


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10. INTANGIBLE FIXED ASSETS

VND

Computer software

Cost

Beginning balance 13,407,299,451

New purchase 1,240,000,000

Transferred from construction in progress 1,705,132,440

Ending balance 16,352,431,891

In which:

Fully amortized 6,166,063,560

Accumulated amortization


Amortization for the year 1,817,424,278


Net carrying amount



11. CONSTRUCTION IN PROGRESS

VND

Ending balance Beginning

balance

Installation of new machinery 11,427,890,153 13,336,859,573

Upgrade and construction of the plants 4,135,000,000 10,080,000,000

Others 775,604,000 13,836,688,107

TOTAL 16,338,494,153 37,253,547,680

The Company has pledged the assets to be formed in future as collateral for the Company’s short-term (Note 19.1) and long-term loans (Note 19.2) from the banks estimated at VND 4,778,830,490 and VND 10,784,059,663, respectively.

12. PREPAID EXPENSES

VND


balance

Short-term 4,801,284,377 8,176,491,396

Tools and equipment 3,508,843,062 1,939,066,136

Insurance fee 854,964,820 5,811,831,560

Others 437,476,495 425,593,700

Long-term 79,590,623,078 80,579,527,836

Prepaid land rental 64,014,288,398 63,856,125,782

Tools and consumables 15,576,334,680 16,723,402,054

TOTAL 84,391,907,455 88,756,019,232

The land use rights of the Company were placed as collateral for the Company’s short-term loan (Note 19.1) and long-term loan (Note 19.2) from the banks with carrying amounts of VND 15,448,568,697 and VND 45,003,262,201, respectively.

13. CAPITALIZED BORROWING COSTS

During the year, the Company capitalized borrowing costs amounting to VND 1,165,538,445 (2016: VND 6,062,376,585). These were interest arising from loans in order to finance the construction of the plants Phu Dong II and Phu Dong III of the Company.

14. SHORT-TERM TRADE PAYABLES

VND


balance

Due to related parties (Note 30) 2,466,654,369 1,152,417,517

Admiral Industries SDN. BHD 3,614,152,932 1,910,478,107

Other parties 50,284,350,035 61,197,827,489

TOTAL 56,365,157,336 64,260,723,113

15. SHORT-TERM ADVANCES FROM CUSTOMERS

VND


balance

Saigon Union of Trading Co-operatives 3,136,175,079 2,912,034,445

Other parties 3,170,131,346 4,709,939,033

TOTAL 6,306,306,425 7,621,973,478


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16. STATUTORY OBLIGATIONS

VND

Beginning balance Increase Decrease Ending balance

Corporate income tax 10,412,320,305 17,988,475,454 (29,856,147,233) (1,455,351,474)

Value-added tax - 149,117,987,603 (145,649,362,124) 3,468,625,479

Personal income tax - 11,256,137,355 (10,932,977,828) 323,159,527

Others (469,408,982) 12,370,115,194 (12,286,518,024) (385,811,812)

TOTAL 9,942,911,323 190,732,715,606 (198,725,005,209) 1,950,621,720

In which:

Tax payables 10,432,331,104 3,792,674,988

Tax overpaid (489,419,781) (1,842,053,268)

17. SHORT-TERM ACCRUED EXPENSES

VND


balance

Marketing expenses 21,970,321,215 32,140,168,924

Transportation expenses 1,209,043,178 516,210,760

Interest expense 567,019,873 771,673,519

Utilities 545,215,577 1,055,360,609

Others 222,000,000 774,408,605

TOTAL 24,513,599,843 35,257,822,417

18. OTHER PAYABLES

VND


balance

Short-term 7,824,466,410 3,629,294,764

Trade union fee 2,775,556,231 1,751,255,299

Social and health insurance 1,929,851,734 724,020,587

Dividends payable 387,849,700 347,949,700

Others 2,731,208,745 806,069,178

Long-term 26,312,699,246 17,091,490,664

Deposits received from distributors 26,312,699,246 17,091,490,664

TOTAL 34,137,165,656 20,720,785,428

In which:

Other parties 34,137,165,656 20,720,785,428

19. LOANS

VND

Beginning balance Drawdown Repayment Ending balance

Loan from banks 382,931,063,984 307,475,560,889 (366,027,554,160) 324,379,070,713

In which:

Short-term loans 176,616,822,950 154,480,431,713

Current portion of long-term loans - 55,734,446,372

Long-term loans 206,314,241,034 114,164,192,628

19.1 Short-term loans

The Company obtained short-term loans from banks for the purpose of financing its working capital requirements with ending balances as follows:

Name of bank Amount Maturity dateInterest

rate Description of collateral

VND % p.a.

Military Commercial Joint Stock Bank - Ho Chi Minh City Branch

125,564,131,862 From 6 January 2018 to 29 June

2018

From 5.4 to 5.8

Building and structures, machinery and equipment belong to Phu Dong Project valued

at VND 56,943,360,736 and VND 133,336,620,854, respectively (Note 9); construction in progress

valued at VND 4,778,830,490 (Note 11); land use right at Tay Bac Cu Chi Industrial Zone

with carrying amount of VND 15,448,568,697 (Note 12); inventories valued at VND

109,973,620,718 (Note 7) and account receivables amounting to VND 175,608,649,478 (Note 6)

CTBC Bank Co., Ltd., - Ho Chi Minh City Branch

18,016,425,602 From 14 May 2018 to 27 May

2018

From 5.7 to 5.9

Unsecured

Joint Stock Commercial Bank for Foreign Trade of Vietnam

7,699,376,078 8 May 2018 5.2 Unsecured

Hong Kong and Shanghai Banking Corporation

3,200,498,171 27 April 2018 4.0 Unsecured

TOTAL 154,480,431,713


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19. LOANS (CONTINUED)

19.2 Long-term loans

The Company obtained long-term loans from banks for the purpose of financing its purchase and installation of machineries and construction of new plant in Bac Ninh with ending balances as follows:

Name of bank Amount Maturity dateInterest

rate Description of collateral

VND % p.a.

Military Commercial Joint Stock Bank - Ho Chi Minh City Branch

149,689,147,000 From 12 January 2021 to 25

October 2021

From 6.5 to 8.7

Building and structures, machinery and equipment of Bac Ninh factory valued at VND 155,279,732,131 and VND 136,165,107,355, respectively (Note 9); construction in progress valued at VND 10,517,674,930 (Note 11) and land used rights in VSIP Bac Ninh with carrying amount of VND 45,003,262,201 (Note 12)

Joint Stock Commercial Bank for Foreign Trade of Vietnam

12,909,492,000 From 30 May 2022 to 31 May 2022

7.6 Machine and equipment valued at VND 27,258,186,043 (Note 9) and construction in progress valued at VND 266,384,733 (Note 11)

CTBC Bank Co., Ltd., - Ho Chi Minh City Branch

7,300,000,000

From 26 October 2018

to 30 December 2018

From 6.5 to 7.0

Machine and equipment sponsored by this loan according to Chartel Mortage Agreement CMA-MTVN938-15 date 26/Oct/2015 valued at VND 51,746,471,494 (Note 9)

TOTAL 169,898,639,000

In which:

Current portion 55,734,446,372

Non-current portion

114,164,192,628

20. OTHER LONG-TERM PROVISION

This represents the severance pay to employee is accrued at the end of each reporting period for all employees who have been being in service up to 31 December 2008.

21. OWNERS’ EQUITY

21.1 Increase and decrease in owners’ equity

VND

Share capital

Investment and

development fund

Undistributed earnings Total

Previous year

Beginning balance 176,604,057,000 2,200,000,000 118,077,701,473 296,881,758,473

Increase in capital 223,395,943,000 - - 223,395,943,000

Transfer from undistributed earnings 160,000,000,000 - (160,000,000,000) -

Net profit for the year - - 142,618,993,699 142,618,993,699

Ending balance 560,000,000,000 2,200,000,000 100,696,695,172 662,896,695,172

Current year

Beginning balance 560,000,000,000 2,200,000,000 100,696,695,172 662,896,695,172

Net profit for the year - - 152,375,315,087 152,375,315,087

Dividends declared - - (78,400,000,000) (78,400,000,000)

Ending balance 560,000,000,000 2,200,000,000 174,672,010,259 736,872,010,259

21.2 Capital transactions with owners and distribution of dividends

VND


Issued share capital

At beginning and end of year 560,000,000,000 560,000,000,000

Dividends

Interim dividends for 2017: VND 1,400 per share 78,400,000,000 -

In which: Dividends paid (78,360,100,000) (90,839,649,944)


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21. OWNERS’ EQUITY (CONTINUED)

21.3 Shares


Quantity AmountVND

Quantity AmountVND

Authorized shares 56,000,000 560,000,000,000 56,000,000 560,000,000,000

Issued shares

Ordinary shares 56,000,000 560,000,000,000 56,000,000 560,000,000,000

Shares in circulation

Ordinary shares 56,000,000 560,000,000,000 56,000,000 560,000,000,000

21.4 Earnings per share

Basic and diluted earnings per share are calculated as follows:


Net profit attributable to the Company’s shareholders (VND) 152,375,315,087 142,618,993,699

Less: Bonus and welfare fund (VND) - -

Net profit after tax attributable to ordinary shares (VND) 152,375,315,087 142,618,993,699

Weighted average number of ordinary shares (shares) 56,000,000 35,406,068

Basic earnings per share (VND) 2,721 4,028

Diluted earnings per share (VND) 2,721 4,028

There have been no dilutive potential ordinary shares during the year and up to the date of these financial statements.

22. REVENUE

22.1 Revenue from sale of goods

VND


Gross revenue 1,502,953,006,107 1,403,976,365,391

In which:

Sale of finished goods 1,496,399,750,139 1,402,940,869,462

Sale of merchandise goods 4,851,030,652 268,466,384

Sale of scraps 1,702,225,316 767,029,545

Less: (10,269,977,890) (7,137,352,936)

Trade discounts (10,024,017,090) (6,823,218,730)

Sales returns (172,118,225) (76,432,026)

Sales allowances (73,842,575) (237,702,180)

Net revenue 1,492,683,028,217 1,396,839,012,455

22.2 Finance income

VND


Interest income 8,694,676,324 10,841,396,157

Foreign exchange difference gains 922,310,308 2,793,920,359

Others 311,931 70,999,722

TOTAL 9,617,298,563 13,706,316,238


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23. COST OF GOODS SOLD

VND


Cost of finished goods sold 685,868,854,609 608,309,647,817

Cost of merchandise goods sold 2,956,323,564 245,977,530

Others 7,210,134,609 5,383,604,514

TOTAL 696,035,312,782 613,939,229,861

24. FINANCE EXPENSES

VND


Loan interest 21,507,661,902 16,139,300,372

Foreign exchange difference losses 767,665,733 3,032,347,327

Others 932,143,835 815,596,380

TOTAL 23,207,471,470 19,987,244,079

25. SELLING EXPENSES

VND


Advertising and promotion 172,808,527,922 205,266,323,850

Payroll 151,110,554,396 130,462,227,017

External services 117,776,143,798 93,512,191,184

Transportation expenses 70,318,912,626 67,119,022,829

Depreciation and amortization 13,566,885,896 12,220,220,208

Allocation of prepaid expenses 5,778,558,077 9,726,665,058

Raw material 792,925,999 692,013,192

Others 9,588,824,454 7,983,461,958

TOTAL 541,741,333,168 526,982,125,296

26. GENERAL AND ADMINISTRATIVE EXPENSES

VND


Payroll 41,643,957,984 41,169,397,724

External services 16,097,835,703 22,809,293,752

Depreciation and amortization 4,435,555,932 3,591,324,788

Rental fee and maintenance fees 2,902,352,268 2,898,636,377

Others 4,036,243,218 3,587,299,197

TOTAL 69,115,945,105 74,055,951,838


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27. OTHER INCOME

VND


Income on disposal of fixed assets 655,211,529 266,076,718

Compensation received 485,373,622 285,158,060

Others 993,853,915 120,813,688

TOTAL 2,134,439,066 672,048,466

28. PRODUCTION AND OPERATING COSTS

VND


Cost of raw materials 500,292,237,228 466,365,415,661

Expenses for external services 405,663,956,508 410,765,106,760

Labor costs 275,515,465,667 246,669,997,454

Depreciation and amortization (Notes 9 and 10) 72,285,255,884 48,799,561,837

Allocation of prepaid expenses 5,816,751,664 9,882,896,152

Other expenses 47,318,924,104 32,494,329,131

TOTAL 1,306,892,591,055 1,214,977,306,995

29. CORPORATE INCOME TAX

The Company applied the corporate income tax (“CIT”) rates for its initial project (“Phu Dong I”) and expansion projects (“Phu Dong II” and “Phu Dong III”) based on the Investment Certificates as follows:

• Taxable income of Phu Dong I was subject to CIT at the applicable tax rate (20%);• Taxable income of Phu Dong II was subject to CIT at the applicable rate (20%). In addition, Phu Dong II

was entitled to an exemption from CIT for two (2) years commencing from the first year (2016) in which a taxable profit is earned, and a 50% reduction of the applicable CIT rate for the following four (4) years; and

• Taxable income of Phu Dong III was subject to CIT at the applicable rate. In addition, Phu Dong III was entitled to an exemption from CIT for two (2) years commencing from the first year (2018) in which a taxable profit is earned, and a 50% reduction of the applicable CIT rate for the following four (4) years.

The tax returns filed by the Company are subject to examination by the tax authorities. As the application of tax laws and regulations is susceptible to varying interpretations, the amounts reported in the financial statements could change at a later date upon final determination by the tax authorities.

29.1 CIT expense

VND


Current CIT expense 17,988,475,454 37,493,847,195

Deferred tax expense (income) 3,888,400,712 (3,974,964,664)

TOTAL 21,876,876,166 33,518,882,531


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29. CORPORATE INCOME TAX (CONTINUED)

29.1 CIT expense (continued)

Reconciliation between the CIT expense and the accounting profit multiplied by CIT rate is presented below:

VND


Accounting profit before tax 174,252,191,253 176,137,876,230

At CIT rate of 20% 34,850,438,251 35,227,575,246

Adjustments:

Non-deductible expenses 388,902,867 1,621,596,109

Dividends received (42,660) (12,858,473)

Tax incentive for Phu Dong II project (2,901,139,478) (3,317,430,351)

Tax incentive for Phu Dong III project (10,551,872,402) -

Adjust for under accrual of CIT expense in previous years 90,589,588 -

CIT expense 21,876,876,166 33,518,882,531

29.2 Current tax

The current CIT payable is based on taxable profit for the current year. The taxable profit of the Company for the year differs from the profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted by the balance sheet date.

29.3 Deferred tax

The following are deferred tax assets and deferred tax liability recognized and the movements thereon, during the current and previous years:

VND

Balance sheet Income statement

Ending balance

Beginning balance

Current year

Previous year

Accrued expenses 3,226,290,999 6,664,102,339 (3,437,811,340) 3,713,959,597

Severance allowance 1,242,874,689 1,192,845,134 50,029,555 63,859,012

Estimated trade discount payable 797,051,727 990,052,644 (193,000,917) (25,272,654)

Provision for obsolete inventories 9,569,847 321,772,420 (312,202,573) 221,800,561

Foreign exchange differences arising from revaluation of monetary accounts denominated in foreign currency 1,902,513 (2,682,050) 4,584,563 618,148

TOTAL 5,277,689,775 9,166,090,487 (3,888,400,712) 3,974,964,664

30. TRANSACTIONS WITH RELATED PARTIES

Terms and conditions of transactions with related parties

Related party transactions include all transactions undertaken with other companies to which the Company is related, either through the investor, investee relationship or because they share a common investor and thus are considered to be a part of the same corporate company. Sales and purchases to/from related parties are made on the basis of negotiated contracts. Outstanding balances at the year-end are unsecured and settlement occurs in cash.

Significant transactions of the Company with its related parties during the year were as follows:

VND

Related party Relationship Transaction Current year Previous year

Kido Group Corporation (“KDC”)

Parent company Collect from borrower 181,395,942,000 207,604,058,000

Interest income 6,129,764,510 10,641,651,369

Office rental 1,657,682,084 1,589,430,060

Service rendered 439,999,500 376,652,259

Sales of finished goods 42,555,810 26,621,886

Tuong An Vegetable Oil Joint Stock Company (“TAC”)

Related party Purchase of materials 35,746,463,000 1,254,538,600

Dabaco Food Processing Joint Stock Company (“Dabaco”)

Related party Long-term deposit 5,000,000,000 -

Amounts due from and due to related parties at the balance sheet date were as follows:

VND

Related party Relationship Transaction Ending balance

Beginning balance

Short-term trade receivables

KDC Parent company Sale of finished goods 7,257,580 1,451,516

Kido Food One Member Company Limited (“Kidofood”)

Related party Sale of finished goods -

10,415,992

7,257,580 11,867,508

Other short-term receivable

KDC Parent company Interests receivable - 3,381,788,485

Short-term loan receivable

KDC Parent company Loan receivables - 181,395,942,000

Other long-term receivable

Dabaco Related party Long-term deposit 5,000,000,000 -


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30. TRANSACTIONS WITH RELATED PARTIES (CONTINUED)

Amounts due from and due to related parties at the balance sheet date were as follows: (continued)

VND

Related party Relationship Transaction Ending balance Beginning balance

Short-term trade payables

TAC Related party Purchase of materials (1,884,732,300) (932,753,000)

KDC Parent company Rental fees (581,922,069) (144,907,617)

Kidofood Related party Purchases of raw materials - (74,756,900)

(2,466,654,369) (1,152,417,517)

Remuneration to members of the Board of Directors and management during the year was as follows:

VND


Salary and benefit in kind 5,108,124,655 20,012,962,428

31. OPERATING LEASE COMMITMENT

The Company leases land, office, cars and warehouse space under operating lease arrangements. The minimum future lease payable under these operating lease agreements as at the balance sheet dates were as follows:

VND


balance

Less than one year 21,917,331,221 3,666,109,876

From one to five years 43,508,450,706 56,531,668,005

More than five years 2,530,827,570 25,140,731,457

TOTAL 67,956,609,497 85,338,509,338

32. OFF BALANCE SHEET ITEM


balance

Foreign currencies:

- United States dollar (USD) 17,445 22,169

- Euro (EUR) 112 3,910

- Chinese Yuan Renminbi (CNY) - 17,200

33. EVENTS AFTER THE BALANCE SHEET DATE

There is no other significant events occurring after the balance sheet date which would require adjustments or disclosures to be made in the financial statements.


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EXPANDINGOUR LEAD

www.kidofoods.vn

ANNUAL REPORT 2017

KIDO FROZEN FOODS JOINT STOCK COMPANYLot A2-7, N4 Street, Tay Bac Cu Chi Industrial Zone, Cay Sop Hamlet, Tan An Hoi Commune, Cu Chi District, Ho Chi Minh City, VietnamPhone: (84) (28) 3819 1326Fax: (84) (28) 3819 1327Email: [email protected]

Documents

EXPANDING OUR LEAD · to the consumers. To put consumers ahead of everything we do is not an easy task. It takes great dedication of the KDF team, the commitment of our suppliers,