Corporate fraud in the Vietnam upcom stock market: a case study of the central mining, mineral exporting and importing company

MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HO CHI MINH CITY FULBRIGHT ECONOMICS TEACHING PROGRAM ANH NGUYEN NHAT CORPORATE FRAUD IN THE VIETNAM UPCOM STOCK MARKET: A CASE STUDY OF THE CENTRAL MINING, MINERAL EXPORTING AND IMPORTING COMPANY MASTER IN PUBLIC POLICY THESIS HO CHI MINH CITY - 2017 MINISTRY OF EDUCATION UNIVERSITY OF ECONOMICS HO CHI MINH CITY FULBRIGHT ECONOMICS TEACHING PROGRAM ANH NGUYEN NHAT CORPORATE FRAUD IN THE VIETNAM UPCOM STOCK MARKET: A CASE STUDY OF THE CENTRAL MINING, MINERAL EXPORTING AND IMPORTING COMPANY MASTER THESIS Major: Public Policy Code: 06340402 THESIS ADVISORS Prof David O Dapice Thanh Nguyen Xuan Ho Chi Minh City, 2017 i CERTIFICATE OF ORIGINALITY I hereby declare that the thesis entitled: "Corporate fraud in the Vietnam Upcom stock market: A case study of the Central Mining, Mineral Exporting and Importing Company" is my own original work carried out as a Master's student at Fulbright Economics Teaching Program (FETP) except to the extend that assistance from others in the thesis design and conception or in style, presentation and linguistic expression are duly acknowledged All sources used for the thesis have been fully and properly cited It contains no material which to a substantial extent has been accepted for the award of any other degree at FETP or any other educational institution in any language fully or partly except where due acknowledgement is made in the thesis The thesis does not reflect the views of the University of Economics Ho Chi Minh City or FETP Hanoi, 08/09/2017 Author Nguyen Nhat Anh ii ACKNOWLEDGEMENT Studying in FETP seems to be the hardest way to get Master degree, however it is the fastest way that you can learn every things about how our society is going on I am not able to complete the coursework as well as the thesis without elegant supports by FETP staff, my classmates and family I would first like to thank my thesis advisor Mr Thanh Nguyen Xuan of the Fulbright School of Public Policy and Management at Fulbright University Vietnam He consistently allowed this thesis is my own work and steered me in the right direction when I lost my way Without his adjustments, I not think that I can have my own perfect theoretical framework to solve a case study I would also like to thank experts in the Committee of my thesis defense: Dr Khai Dinh Cong as Chairman, Dr Giang Tran Thi Que and Dr Du Huynh The as the second readers of my thesis, and I am deeply indebted to your valuable comments and corrections on my thesis I very much want to thanks again Dr Du who is my second tutor in the finalize stage of my thesis His suggestion about the second framework is a brilliant idea to wake me up to see what happened in the real life I not know how to thank MPP7 members enough for your physical and mental backup Many challenges and accomplishments would not have been possible without our teamwork I also have a big thank to Mr An Bui Quoc in particular, who sat next to me in the 1st year and provide tremendous assistance to me in the finalize stage Finally, I owe my wife a great debt of gratitude for unfailing support and continuous encouragement throughout my years of studying and researching Hanoi, 08/09/2017 Author Anh Nguyen Nhat iii ABSTRACT The Central Mining, Mineral Exporting and Importing Company (MTM) is the typical case that illustrates clearly the situation of agency cost and fraudulent behaviors in the Vietnam Upcom stock market The first part reveals the weaknesses of regulation and current policies in Vietnam by using the principal-principal agency perspective of Young (2008) particularly with regard to the mechanisms of stock scanning, no controlling the changes of regulated capital, the undemanding capital contribution and no legal responsibilities of former majority shareholders The second part of thesis uses the modified fraud of triangle of Soltani (2014) as a theoretical framework with several adjustments to adapt the current circumstance of MTM The case of MTM shows a number of fraudulent behaviors by controlling shareholders including: (1) The reconstruction of human resource before listing; (2) Having no major shareholder - holding more than 5% of the chartered capital - but the power is concentrated; (3) Using the brand and pictures makes confusion with another company; (4) Increasing the regulated capital in the short term; (5) No core business or production, mainly the joint venture or capital contribution; (6) The external audit accepted despite of the fact that financial statements have the problems; (7) The business situation is not good but the price and volume of stock trading is still high; (8) Tax obligation and social insurance are not completed In conclusion, the thesis strongly recommends the policies to reduce the likelihood of expropriation of minority shareholders due to the principal-principal agency conflicts and these fraudulent behaviors Keywords: corporate fraud, fraud triangle, MTM, principal-principal agency conflicts iv LIST OF ABBREVIATIONS Abbreviations Meaning BoD Board of Director HNX Hanoi Stock Exchange IPO Initial public offering JSC Joint stock Company Ltd Private Limited Company MoF Ministry of Finance MTM The Central Mining, mineral Exporting and Importing Joint Stock Company OTC Over-the-counter market SFP Statement of Financial Position SSC State Securities Commission of Vietnam PO Payment order Upcom Unlisted Public company market US The United States VSD Vietnam Securities Depository VND Vietnamdong v TABLE OF CONTENT CERTIFICATE OF ORIGINALITY i ACKNOWLEDGEMENT ii ABSTRACT iii LIST OF ABBREVIATIONS iv LIST OF FIGURES viii LIST OF APPENDICES .viii LIST OF TABLES ix Chapter Introduction 1.1 Background 1.2 Thesis motivation and contribution 1.3 Research questions 1.4 Research Methodology 1.5 The structure of thesis Chapter Theoretical frameworks 2.1 The Principal-Principal Agency Perspective 2.2 Fraud triangle 2.2.1 Incentives/pressures 2.2.2 Fraudulent Opportunity 10 2.2.3 Attitudes/Rationalization 10 2.2.4 Transformation of Fraud triangles 10 Chapter The weaknesses of regulations in Upcom market 13 3.1 Overview of regulatory framework in the Vietnam stock markets 13 3.2 No scanning fraudulent companies in the Upcom market 15 3.2.1 The easy and quick process to be listed 16 vi 3.2.2 Audit companies are not the market guardians 17 3.2.3 Ranking is not enough 17 3.3 The increase of the registered capital without controlling 19 3.4 The undemanding capital contribution 20 3.4.1 The capital contribution through investment 20 3.4.2 The capital contribution though invoices 21 3.5 The legal responsibilities of former majority shareholders 21 Chapter 4.1 The fraudulent behaviors that led to the collapse of MTM 23 Overview of MTM 23 4.1.1 Stealing the brand name of unlisted company 23 4.1.2 No tax payment 25 4.1.3 A ghost company and its address 25 4.1.4 Be a public company 26 4.2 Fraudulent opportunities 28 4.2.1 The capital contributions 29 4.2.2 Fake invoices and manipulating the financial statements 30 4.3 Incentives 34 4.3.1 The high profit in the harsh economic 35 4.3.2 Selling the stock of the valueless company 36 4.3.3 The collusion of the former BoD 37 4.4 Ethical problems 40 4.5 The fraudulent behaviors in the case of MTM: 42 Chapter Conclusion, policy recommendation, limitation 43 5.1 Conclusion 43 5.2 Policy recommendations 43 5.3 Limitations 44 vii References 45 Appendix Market capitalization of the Upcom market since 2013 to 1st quarter 2017 47 Appendix The trading detail of MTM stock 47 Appendix The detail of Market Capitalization and trading value on the Upcom market 48 Appendix The reform of Vietnam in Business report over time 49 Appendix The highlighted fraudulent cases in the Vietnam stock market 49 Appendix The business license of MTM 52 viii LIST OF FIGURES Figure Market capitalization of the Upcom market since 2013 to 2rd quarter 2017 Figure 2.Trading value and volume of the Upcom market annually Figure Principal-agent conflicts versus Principal-principal conflicts (Young, Peng, Ahlstrom, Bruton, & Jiang, 2008) Figure Classification of incentives for fraud-committing Figure Fraud Triangle 11 Figure Modified Fraud Triangle 11 Figure The components of ethical problems 11 Figure The modified fraud triangle with several adjustments 11 Figure Legal Matrix System 14 Figure 10 The timeline of the MTM collapse 27 Figure 11 The continuous process of selling and issuing stocks of FID and MTM 34 Figure 12 Trading price and volume of MTM stock since 15/4 to 20/6/2016 37 LIST OF APPENDICES Appendix Market capitalization of the Upcom market since 2013 to 1st quarter 2017 47 Appendix The trading detail of MTM stock 47 Appendix The detail of Market Capitalization and trading value on the Upcom market 48 Appendix The reform of Vietnam in Business report over time 49 Appendix The highlighted fraudulent cases in the Vietnam stock market 49 Appendix The business license of MTM 52 38 the partners under the cover of the deposit, capital contribution Then the leaders of MTM will retract and appropriate the asset of company The details of tactic are below: Table 15 The money transactions to another companies/bank of the former MTM BoD Company Vietnam Enterprise Value 114,893,694,400 Method Transferring money (including 09 PO Investment and of year 2014 and 03 PO of year 2015) Development Joint Stock to buy the purchase invoices of FID Company (FID) with the value upto 85,005,646,143 VND To deal with the remaining, FID automatically delete the liability and does not confirm and reconcile this liability with MTM Even though, CEO and Chief accountant of FID not endorse these accounting entries BacCan Mining and 120,000,000,000 Metallurgy JSC Transferring money (including 12 PO, Each PO equals 10 billion VND) to the capital contribution of the LeadZinc project in Sao Sao of BacCan However, the CEO confirmed that that amount of money was withdrew and paid back Vietnam commercial and 60,000,000,000 investment JSC (VCI) Transferring money to deposit the received However, CEO of VCI confirmed that paid the cash back for Mr Duong Dai Vu - CEO MTM MTM sold the stock of KSS 20,077,130,000 This is the amount of money that sold and take cash the investment in the KSS stock of MTM Checking the stock statement in the stock securities, Mr Duong Vu 23 Including: (1) Mr Cuong Le Van - the former Chairman of BoD, (2) Mr Duong Vu Dai - the former member of Bod and CEO, (3) Mrs Thuy Thai Thi Hong - The former member of BoD and vice president, (4) Mrs Van Duong Thi - The former member of BoD and chief accountant 39 Dai had withdrawn and misappropriate that amount of MTM Cash in hand on 31/12/2014 59,567,008,776 This is the cash in hand according to the cash report on 31/12/2014 Mr Duong Vu Dai and Mrs Thuy Thai Thi Hong misappropriate that amount money of MTM Withdrawing cash at bank 3,500,000,000 Mr Duong Dai Vu had withdrawn and misappropriated from MTM Withdrawing cash at bank 12,832,000,000 Mrs Van accountant Duong Thi - Chief misappropriated from MTM Withdrawing cash at bank 200,000,000 Mrs Loan Tong Thi - the former staff misappropriated from MTM Withdrawing cash at bank 280,284,000 Mrs Trang Nguyen Thi - the former staff misappropriated from MTM Withdrawing cash at bank 3,300,000,000 Mrs Vinh Vu Thi - the former staff misappropriated from MTM Total 394,450,117,176 Source: The petition of Phuong Chu Danh that sent to A92, the Supreme People's Procuracy of Vietnam Thus, the other fraudulent behavior is that the management of company focused on the small number of individuals with the dominant power and collusion This characteristic has the same point with Mark S.Beasley, the non-fraud companies has more the percentage of outside member significantly than the fraud And the more outside director, the less likelihood of financial statement fraud decrease (Beasley, 1996) The relationship between the CEO and the BoD was so collusive that there was no room for implementing the control environment which reflects a supportive attitude towards internal control at all times This collusion either resulted from the family relationship between CEO and BoD member related to the influential position of the CEO who was representing the majority of the shareholders 40 4.4 Ethical problems According to Soltani, "the greater the incentive or pressure, the more likely an individual will be able to rationalize fraud" (Soltani, 2014) With the fraudulent amount of hundreds of billions, all members of the former and new leaders will try to find out the most efficient fraudulent ways which have the least damage According to the research of Soltani for six big companies from United State and Europe, all scandals have the poor ethical climate and lack of commitment to ethical principles and deontology within them (Soltani, 2014) The companies that run by families (Healthsouth, Parmalat, Royal Ahold) has the "clan" characteristics and the decisions were made on the personal actions In MTM, the company is manipulated by a small number of people These people have ethical problems because they use the MTM as a tool to fraud all investors Understanding the ethical climate and business ethics in Vietnam, they reinforce the culture of individual interest, intimidation, abuse of trust, domination, abuse of power Through the petition of Phuong Chu Danh, he asks for help because he was threatened to death if he continued providing the evidence for the investigation team They warn him that his efforts are hopeless due to their overwhelming ascendancy If he ended the MTM proceeding, he would receive the investment back They not only lobby their "clan" but also have impact on a new factor to be sure that MTM would be abolished That is the reason why "the firms that lobby have a significantly lower hazard rate of being detected for fraud, evade fraud detection 117 days longer, and are 38% less likely to be detected by regulators" (Yu & Yu, 2012) In the thesis' perspective, ethic climate in Vietnam is the negative factor for minority investors The conflicts of interests between the minority and majority investors solve in the unfair ways As a result, the damage often belongs to the smaller due the potential information asymmetry, the abuse of power, abuse of trust (frequently in the financial statement) and the lobby culture As shown in the table 17, the concern is that no shareholders own more the 5% of the company's stock No organizations or funds hold the stock of MTM Even the board members not hold any stock of the company that they owned Only the chief accountant Van Duong Thi holds 100.000 stock (0.32%) No majority shareholder is one of the common characteristic of the fraud firm in Vietnam Holding less than 5% of the total 41 stock number would help trading more rapidly without the public disclosure Although the stock seems to be scattered but the real owners are still the former BoD Table 16 The structure of the shareholders in MTM Category The number of The number of shareholder shares 103 31.000.000 Institution _ _ Individual 103 31.000.000 _ _ _ _ Institution _ _ _ _ Individual _ _ _ _ 103 31.000.000 The domestic shareholder The foreign shareholder Total Value (VND) Rate 310.000.000.000 100% _ _ 310.000.000.000 100% 310.000.000.000 100% (Source: The list of shareholder provided by VSD on 12/08/2015) 4.2 The shareholders hold more than 5% of the shares: None According to the 2016 Prospectus, all new leaders of MTM are too young to go steady in the mining business Most of them have no experience in the core business of MTM and not have any share of MTM (table 12) They seem to be puppets which were controlled by the force behind the scene Table 17 The characteristics of new leaders of MTM24 Position Board of Director Name Birth Year Degree/ Working experience Tiep Tran Huu 17/101983 Bachelor of Banking/Sale Truong Nguyen Le 21/08/1980 Bachelor of Banking Phung Nguyen The 02/07/1987 Bachelor of Banking Nhat Thai Khac 19/05/1983 Bachelor of Technical Engine Thanh Le Tien 31/12/1989 High School Cong Phung Thanh 12/09/1979 Executive Committee Trung Ly Quoc Thu Nguyen Dao 24 Bachelor of Economics 07/04/1984 Bachelor of Language 17/12/1982 Bachelor of Language http://s.cafef.vn/mtm-189734/nhung-nhan-vat-chu-chot-dang-sau-viec-mtm-bien-mat-chi-sau-2-thang-len-san.chn 42 4.5 The fraudulent behaviors in the case of MTM: According to the analysis of the fraud triangle, the controlling shareholders showed some fraudulent behaviors that the controlling shareholders exploited the rights and interests of minority shareholders: (1) The reconstruction of human resource before listed; (2) Having no major shareholder - holding more than 5% of the chartered capital - but the power is concentrated; (3) Using the brand and pictures makes confusion with another company; (4) Increasing the regulated capital in the short term; (5) No core business or production, mainly the joint venture or capital contribution; (6) The external audit accepted despite of the fact that financial statements have the problems; (7) The business situation is not good but the price and volume of stock trading is still high; (8) Tax obligation and social insurance are not completed Table 18 The fraudulent behaviors in the case of MTM # The fraudulent behaviors Public Policy The reconstruction of human resource Legal The role of investor Prudent before listed Having no major shareholder - holding Legal Prudent more than 5% of the chartered capital but the power is concentrated Using the brand and pictures makes Intervene Prudent confusion with another company Increasing the chartered capital in the Legal Prudent short term No core business or production, Legal Prudent mainly the joint venture or capital contribution The external audit accepted despite of Intervene Enhance the fact that financial statements have capacity of financial the problems statements analysis The business situation is not good but Intervene- the Detecting Prudent the price and volume of stock trading the unusual volatility is still high of price and volume Tax obligation and social insurance Public disclosure are not completed Update information 43 Chapter Conclusion, policy recommendation, limitation 5.1 Conclusion MTM is the typical case that has the larger number of fraudulent behaviors in the Upcom market in Vietnam By the buying the small-capital company, manipulating the financial statements, issuing valueless stocks and selling in the Upcom, majority shareholders expropriated dispersed investors If the price of stock fell to the extreme low price, the group of scammers would buy back up to 75% of the regulated capital to the bankruptcy procedure However, minority investors sue their violations and coordinate with regulatory agencies to take their investment back This is the first time that the investors take the active role for their property rights instead of waiting the response of the regulatory bodies The weaknesses of regulation in Upcom market leaves the doors open for fraudulent behaviors In addition, the principal - principal agency problems are main reasons that led to the collapse of MTM The collusion of controlling shareholders, audit company and authority agencies damaged the wealth of minority shareholders With all fraudulent behaviors mentioned above, some contents could be intervened by public policies Not only the roles of the SSC and other stock agencies, the coordination with other regulatory bodies would help prevent the fraudulent companies and strengthen minority investor protections The thesis highly recommends HNX to adjust the Circular 180/2015/MoF with the mandatory equity report Additionally, HNX and other agencies need to establish the mechanism to control the activities that related to capital contributions and the rise of the regulated capital 5.2 Policy recommendations To reduce the likelihood of expropriation of minority shareholders due to the principal-principal agency conflicts, the thesis highly recommend establishing a new mechanism to control the capital contribution and changes of regulated capital Publishing the contracts or essential material is a good way to reduce asymmetric information between majority shareholders and minority shareholders The adjustment in the Circular 180/2015/MoF with the mandatory equity report is one suggestion from the thesis's perspective The rapid rise of regulated capital seems to be 44 a common characteristic of fraudulent company If the authority agencies have clear vision of this process, this kind of company would not be listed in Upcom market According to the list of fraudulent behaviors, HNX should put more criteria to scan stocks in Upcom market Although these efforts require more resources, it would help eliminate the ghost companies as a way to protect minority shareholders In addition, it would raise the concern and awareness among investors 5.3 Limitations The thesis based on one case scenario so that the scale is small The case is the firm trading on the Upcom so could not extrapolate the results to the HNX and HOSE The framework modified the fraud triangle by author Soltani (2014) so that the behaviors of investors are limited in the analysis The trend of modern microeconomics is moving to irrational assumptions The case of MTM is the long observation from 2014 up to now However, the investigation of MTM have not finalized yet The allegations and indemnities for the related parties have not been disclosed and have affected policies not yet implemented Therefore, the direction of research company MTM is opened for further research The Chinese and Vietnamese stock markets have some companies that showed similar fraudulent behaviors Investor fraud cases are also common in China and there is a lot of documentation and analysis However, these materials are mainly in Chinese and not widely available, it is difficult to access these materials directly but through another study Increasing the corporate governance is the vital solutions to again the financial scandals There is abundant evidences supporting for the relationship between the quality of governance mechanism with the credibility of the financial reporting (Farber, 2005) However, MTM is the small and "ghost" company so the corporate governance is not in the extent of this case 45 References AICPA (2002) SAS No.99, Consideration of Fraud in a Financial Statement Audit Paragraph, Albrecht, W S., Albrecht, C O., Albrecht, C C., & Zimbelman, M F (2011) Fraud examination: Cengage Learning Awasthi, K (2017) Taking Stock of the Principal–Principal Agency Perspective: A Review and the Way Ahead International Business Strategy (pp 17-42): Springer Bai, B., Yen, J., & Yang, X (2008) False financial statements: characteristics of China's listed companies and CART detecting approach International journal of information technology & decision making, 7(02), 339-359 Beasley, M S (1996) An empirical analysis of the relation between the board of director composition and financial statement fraud Accounting Review, 443-465 Berle, A A., & Means, G C (1932) The modern corporation and property New York, Mad· lilIan Co Berle, A A., & Means, G G C (1991) The modern corporation and private property: Transaction publishers C.Fei (2001) The performance of four classes of listed companies are incredible (in Chinese) Hunan Daily Chung, H.-M (2006) Managerial ties, control and deregulation: An investigation of business groups entering the deregulated banking industry in Taiwan Asia Pacific Journal of Management, 23(4), 505-520 Cressey, D R (1953) Other people's money; a study of the social psychology of embezzlement Dieleman, M., & Sachs, W (2006) Oscillating between a relationship-based and a marketbased model: The Salim Group Asia Pacific Journal of Management, 23(4), 521536 Dorminey, J W., Fleming, A S., Kranacher, M., & Riley, R (2010) Beyond the fraud triangle The CPA Journal, 80(7), 17-23 Faccio, M., Lang, L H., & Young, L (2001) Dividends and expropriation American Economic Review, 54-78 Farber, D B (2005) Restoring trust after fraud: Does corporate governance matter? The Accounting Review, 80(2), 539-561 Giannetti, M., & Wang, T Y (2016) Corporate scandals and household stock market participation The journal of finance Government (2017) Decree 71/2017/Dec-Gov: Guidelines on Corporate Governance for public companies Howe, M A., & Malgwi, C A (2006) Playing the ponies: A $5 million embezzlement case Journal of Education for Business, 82(1), 27-33 Jensen, M C., & Meckling, W H (1976) Theory of the firm: Managerial behavior, agency costs and ownership structure Journal of financial economics, 3(4), 305360 Johnson, S A., Ryan, H E., & Tian, Y S (2009) Managerial incentives and corporate fraud: The sources of incentives matter Review of Finance, 13(1), 115-145 46 La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R W (2001) Law and finance Corporate governance (pp 26-68): Springer Mackevičius, J., & Giriūnas, L (2013) Transformational research of the fraud triangle Ekonomika, 92 Mansor, N (2015) Fraud Triangle Theory and Fraud Diamond Theory Understanding the Convergent and Divergent For Future Research International Journal of Academic Research in Accounting, Finance and Management Sciences, 5(4), 38-45 Milhaupt, C J., & Pistor, K (2008) Law & capitalism: What corporate crises reveal about legal systems and economic development around the world: University of Chicago Press Ministry of Finance (01/2015) Circulars: The guidance for trading registration of the public unlisted company Nguyen, H., Oates, G., & Dunkley, M (2014) A Review of the establishment of the stock market in Vietnam–in relation to other transitional economies International Journal of Economics and Finance, 6(10), 17 Shleifer, A., & Vishny, R W (1997) A survey of corporate governance The journal of finance, 52(2), 737-783 Smith, A (1827) An Inquiry into the Nature and Causes of the Wealth of Nations: Printed at the University Press for T Nelson and P Brown Soltani, B (2014) The anatomy of corporate fraud: A comparative analysis of high profile American and European corporate scandals Journal of Business Ethics, 120(2), 251-274 Sorensen, D P., & Miller, S E (2017) Financial Accounting Scandals and the Reform of Corporate Governance in the United States and in Italy Corporate Governance: The International Journal of Business in Society, 17(1) Sutherland, E H., & Geis, G (1949) White collar crime: Dryden Press New York Uzun, H., Szewczyk, S H., & Varma, R (2004) Board composition and corporate fraud Financial Analysts Journal, 60(3), 33-43 Wilks, T J., & Zimbelman, M F (2004) Decomposition of Fraud‐Risk Assessments and Auditors' Sensitivity to Fraud Cues Contemporary Accounting Research, 21(3), 719-745 Yin, R K (2013) Case study research: Design and methods: Sage publications Yiu, D., Bruton, G D., & Lu, Y (2005) Understanding business group performance in an emerging economy: Acquiring resources and capabilities in order to prosper Journal of management studies, 42(1), 183-206 Young, M N., Peng, M W., Ahlstrom, D., Bruton, G D., & Jiang, Y (2008) Corporate governance in emerging economies: A review of the principal–principal perspective Journal of management studies, 45(1), 196-220 Yu, F., & Yu, X (2012) Corporate lobbying and fraud detection Journal of Financial and Quantitative Analysis, 46(06), 1865-1891 Zainal, Z (2007) Case study as a research method Jurnal Kemanusiaan, Zhang, J (2016) Public governance and corporate fraud: Evidence from the recent anticorruption campaign in China Journal of Business Ethics, 1-22 47 Appendix Market capitalization of the Upcom market since 2013 to 1st quarter 2017 Trading information Year 2013 2014 2015 2016 2017 Market Cap Trading Volumee Trading Value 25,745,261,743.88 80,115,446 510,626,391.40 37,169,559,450.54 546,558,910 5,410,073,575.80 61,033,252,069.62 934,613,568 14,288,084,712.40 303,359,258,269.10 2,083,596,377 31,946,170,700.10 356,794,930,434.02 2,945,976 63,642,861.50 Appendix The trading detail of MTM stock Date 15/04/2016 19/04/2016 20/04/2016 21/04/2016 22/04/2016 25/04/2016 26/04/2016 27/04/2016 28/04/2016 29/04/2016 4/5/2016 5/5/2016 6/5/2016 9/5/2016 10/5/2016 11/5/2016 12/5/2016 13/05/2016 16/05/2016 17/05/2016 18/05/2016 19/05/2016 20/05/2016 Volume 114,000 462,100 488,300 657,000 1,151,400 747,000 560,000 536,500 1,620,600 802,700 1,358,000 1,437,900 951,300 1,025,300 1,103,700 1,260,600 789,000 834,400 1,183,200 801,600 949,500 996,400 1,104,800 Value (Mil VND) 729 2,955 3,174 4,678 8,985 6,319 4,351 3,693 9,701 5,039 8,202 8,438 4,962 5,303 5,402 6,607 4,011 4,094 5,140 3,276 3,437 3,994 4,902 Cap 456 205 226 229 251 270 226 208 183 189 189 174 158 155 155 164 155 146 130 115 108 127 140 Average 6,391 6,393 6,501 7,120 7,804 8,459 7,769 6,883 5,986 6,280 6,043 5,870 5,216 5,172 4,894 5,241 5,084 4,911 5,000 4,127 3,621 4,008 4,436 Sum Vol 114,000 462,100 488,300 657,000 1,151,400 747,000 560,000 526,500 1,620,600 802,700 1,358,000 1,437,900 951,300 1,025,300 1,103,700 1,260,600 789,000 834,400 1,183,200 801,600 949,500 996,400 1,104,800 Val 729 2,955 3,174 4,678 8,985 6,319 4,351 3,615 9,701 5,039 8,202 8,438 4,962 5,303 5,402 6,607 4,011 4,094 5,140 3,276 3,437 3,994 4,902 48 23/05/2016 24/05/2016 25/05/2016 26/05/2016 27/05/2016 30/05/2016 31/05/2016 1/6/2016 2/6/2016 3/6/2016 6/6/2016 7/6/2016 8/6/2016 9/6/2016 10/6/2016 13/06/2016 14/06/2016 15/06/2016 16/06/2016 17/06/2016 20/06/2016 1,033,700 1,868,600 3,320,800 337,400 1,637,400 2,202,100 1,382,600 946,400 2,395,700 1,045,600 1,948,800 1,315,500 1,860,900 4,283,700 1,145,100 4,267,100 3,100,400 6,062,700 7,012,800 2,025,400 4,300 6,855 11,932 1,228 5,376 7,230 4,395 2,982 7,673 3,269 5,920 3,823 5,392 11,983 3,225 11,728 8,317 16,225 18,808 5,293 121 115 108 115 102 99 99 96 102 96 90 90 93 90 87 84 84 84 87 81 81 4,185 3,593 3,640 3,283 3,285 3,178 3,153 3,202 3,128 3,051 2,898 2,797 2,817 2,749 2,683 2,676 2,682 2,615 1,033,700 1,868,600 3,320,800 337,400 1,637,400 2,202,100 1,382,600 925,500 2,395,700 1,045,600 1,948,800 1,315,500 1,860,900 4,283,700 1,145,100 4,267,100 3,100,400 6,062,700 7,012,800 2,025,400 4,300 6,855 11,932 1,228 5,376 7,230 4,395 2,907 7,673 3,269 5,920 3,823 5,392 11,983 3,225 11,728 8,317 16,225 18,808 5,293 Appendix The detail of Market Capitalization and trading value on the Upcom market Matching Month Agreement Market Cap Vol Value Vol Value Jan-17 414,645,567,287 16,842,498 391,455,235.8 21,576,141 239,560,426.7 Dec-16 303,359,258,269 106,939,012 2,427,764,215.8 136,721,634 1,912,950,052.3 Nov-16 253,096,766,377 95,622,061 1,963,136,238.9 54,248,405 1,206,691,203.9 Oct-16 151,159,608,532 78,614,623 939,377,077.6 56,658,617 922.288.641,5 Sep-16 117,682,186,519 66,951,691 839,135,575.5 69,625,495 1,176,442,895.8 Aug-16 112,146,738,476 73,105,125 1,027,566,059.1 47,478,050 918,108,824.9 Jul-16 109,677,138,630 85,405,808 1,326,819,371.3 50,373,223 1,023,230,749.3 Jun-16 111,185,970,845 177,970,918 2,206,891,659.0 66,628,901 1,179,937,476.3 May-16 108,453,093,826 100,154,958 1,059,978,042.4 44,539,121 708.676.820,8 Apr-16 100,661,229,869 149,292,586 1,546,895,494.3 66,131,378 1,060,428,757.8 Mar-16 104,787,559,734 180,504,686 1,896,724,094.1 133,575,299 3,161,773,359.3 Feb-16 68,442,486,132 53,859,343 529,288,569.4 25,569,711 409,160,770.5 49 Appendix The reform of Vietnam in Business report over time Year of Doing The content of reform in minority investor protections25 Bussiness report DB 2017 Vietnam strengthened minority shareholder protections by making it easier to sue directors in cases of prejudicial transactions amongst interested parties, by increasing shareholder rights and role in major corporate decisions, by strengthening the ownership and control structures of companies and by increasing corporate transparency requirement DB 2014 Vietnam strengthened an investor protection by introducing greatere disclosure requirements for publicly held companies in cases of related-party transactions DB 2012 Vietnam strengthened investor protections by requiring higher standard of accountability for company directors DB 2008 Vietnam strengthened investor protections by increasing disclosure requirements for bot regular and related-party transactions Appendix The highlighted fraudulent cases in the Vietnam stock market Time Name 11/2015 Pha Lai Market Reason Value HOSE: Controling this stock price to million of PPC underbuy PPC in IPO, the PPC stocks Power investigation agency prosecuted caused a loss of Station JSC Mai Pham Thi Tuyet, Former around 89 Director of CTS, due to the billion VND of manipulating stock prices and the national caused a loss Hieu Duc Nguyen, budget Thermal Vice Director of VIBank and AGR sercurities were involved 25 http://www.doingbusiness.org/Reforms/Overview/Topic/protecting-minority-investors#vietnam accessed on 25/03/2017 50 2007- Snow White HOSE: IN 2007, BBT announced a boost 7/8/2009, HSX 2009 Cotton JSC BBT to profits, however the company delisted 6.84 suffered heavy losses due to the million shares inefficient business A way of of BBT and all hiding the financial losses was of investors had accounting tricks by the tone of suffered losses the top This case raised awareness of a transperancy in a financial report of SJC 4/2008 La Nga OTC: Misuse of funds by former 17.7 billions Sugar SJC DuongLa director He used cash in hand VND NGa and bank to invest in stock markets but had lost 9/2010 Green HOSE: The increase of the market price of Stock Securities Environment AAA AAA stock from 43.000 to around cannot sell off and Plastic 90.000 dong attracted many VIP AAA shares in JSC investors With the extreme high margin liquidity in the long period and at accounts the peak prices, Most of AAA Most of shares distributed to public after investors the successful manipulation As a suffered intense result, the market price had fallen losses rapidly 06- Ha Thanh Son Truong Duy, Chairman of 9/2011 Stock HASC, has escaped with the debts securities up hundreds of billions VND Company 3/2011 Golden HNX: As one of the largest capitalization Dragon KLS in Vietnam stock market, KLS Stock stopped the business that related to Securities stock 51 Company 12/2011 NgheAn UPCOM: PVA announced the stock issuing There was a PVA plan to public After an aggressive trick of issuers Vietnam propest of minority investors by without the Construction selling all their shares, PVA control of law SJC cancelled this plan and the market or HNX Petro- price increased right after that So those who sold had suffered losses 2011 Vien Dong HOSE: This is particularly the case for all Pharma JSC DVD negative characteristics of the stock market including: manipulation, in Vietnam market fraud price financial statements; scam investors and unfair business 04/2016 Tay Bac Mineral JSC Upcom: One investor found out that KTB, KTB which is the listed company in Upcom, did not exist Right after that, KTB was suspended trading by HNX According to the information above, KTB had many fake transactions with MTM 52 Appendix The business license of MTM