Dear fellow shareholders, colleagues, and other PARTNERS, 
With the VN Index appreciating 48% in 2017, it is probably expected that anyone who participated in the Vietnam stock market had a good year financially. For HSC, I believe that we can call 2017 one of our most successful years in which we achieved exceptional business development and financial performance. It was a success based not merely on how significant our financial results were, but more importantly on what type of business we did, and on how we carried out those businesses. It was a year in which our business models, especially the investment banking business, were further defined and refined. It was a year in which we carried out some of the first of its kind of business and some of the biggest transactions in the history of Vietnam’s stock market. I believe it was a year in which all of our business functions from brokerage and sales to corporate advisory and investment banking were orchestrated better than ever before in order to produce the most effective results from the OPPORTUNITIES of 2017 (this was the theme for 2017 as mentioned in our annual report last year). It was also a year in which we came to the realization that we can find PARTNERS in our business, from shareholders and clients, to service providers as well as friendly competitors, from the media to market regulators and policy makers. We found that a PARTNERSHIP is a relationship in which complementary support and mutual benefits can be gained and grown in a sustainable way with understanding and trust for each other. But first and foremost, PARTNERSHIP should begin and be fostered from within HSC, among our various functions and colleagues.
In 2017 when we had to search for a person as Head of Human Resources for HSC, I suddenly realized that most of us at the Company have for a long time had a mindset of referring to each other as “front offices” and “back offices”; and that the mindset in “front offices” was to generate revenue and the mindset in the “back offices” was only to “support” in non-revenue generating activities. From trade processing to risk management, to human resource management and communications, we were merely doing our jobs administratively and without the understanding of HSC’s underlying business models or knowledge of where HSC fits in the overall capital markets. The word PARTNER came to me in an enlightening way when I had an opportunity to interview a candidate with a background in human resource management who had a job as a “business partner”. We never looked at human resource management and other “back office” functions as business PARTNERS. It dawned upon me how far removed our supporting functions or “back offices” were in understanding HSC’s business as a securities house and an investment bank. Our “back office” colleagues were not savvy on their contribution in day-to-day work to HSC’s revenue generating activities because they were not directly engaged and incentivized. We have always had KPIs and appraisals but we had not defined a direct linkage between the “back offices” to revenue generating activities. 
With that realization, we created incentive programs to directly and indirectly link in all functions who would participate in a business transaction or in the sale of a product, in a revenue generating activity. All people from functions which participate in a business activity should now be aware of how their contribution is translated directly into the revenue and profits made in a business, from sales to customer service, to IT, Legal, Treasury, to Finance and Accounting. While they still need to be improved further and institutionalized, our incentive programs, which include and cover cross sale initiatives, customer referrals, transaction referrals, out-of-theordinary types of transactions, one-off transactions, have reached the ranks and files at HSC in both direct and indirect business functions. There is no doubt that our commercial orientation and the direct incentivization concept have contributed to a very enthusiastic business environment and a high performance in all business lines at HSC in 2017. However, in addition to commercial success, what we also clearly witnessed was a strong sense of PARTNERSHIP being developed when people of different ranks and files and functions had a common understanding of the business and a common goal to achieve commercial results. Starting in 2018, I would like us to refer to each other NOT as “front offices” and “back offices”, but as “direct business functions” and “indirect business functions”.
Besides raising the level of collaboration internally between different business lines, between direct business functions and indirect business functions, in 2017 we also extended collaboration with our major shareholders (Dragon Capital and HFIC), customers, service providers, even with competitors. Some of our most significant transactions were carried out in 2017 together with other top local investment banks as co-advisors and co-underwriters. The highly successful results from both the Viglacera underwriting job where we worked with VietCapital Securities (VCSC) and Vietcombank Securities (VCBS), and the HDBank IPO where we collaborated with Saigon Securities (SSI) evidenced that there was significant value and benefit to gain when top securities firms in Vietnam become PARTNERS.
“2017 was a year in which we came to the realization that we can find PARTNERS in our business, from shareholders and clients, to service providers as well as friendly competitors, from the media to market regulators and policy makers.”
The IPO of HDBank was considered one of the most successful and high profiled IPOs the market had seen not only in 2017 but for the past many years. This transaction helped project HSC’s name to the market as one of the top investment banks in Vietnam on whom corporates can rely for capital raising, particularly in view of the short amount of time and a tight window of timing we had in bringing HDBank (HDB) to the market at the year end. The level of success was evidenced in the amount of oversubscription of the shares and the performance of the share price we have seen since listing, particularly because there were other bank IPOs in the market to compete for investors’ money. Besides the highly profiled HDB transaction, the other most noteworthy deal we completed in 2017 was also reputed to be one of the biggest transactions in Vietnam’s capital markets history. As a buy side advisor, we had arranged for the Jardine Matheson Group, one of the biggest foreign investors in Vietnam, to acquire 10% of Vinamilk (VNM)’s shares from the market as well as from the state owned State Capital Investment Corporation (SCIC). These two mentioned transactions were not only a commercial success but were also a public relations booster for HSC. Further, given our proven capabilities now I also hope HSC is in a favorable position to be considered by prominent institutional and strategic investors as a top local capital markets PARTNER for their investments in Vietnam in the future.
With the major landmark deals we carried out in 2017, including the VNM and HDB transactions, we believe that our investment banking and institutional business gained a very strong and firm foothold which put HSC on the map as a top tier investment bank in Vietnam. We have put significant efforts into developing the investment banking business over the last couple of years and we can again affirm that our business model going into the future will essentially include a prominent investment banking platform.
In 2017 we signed business MOUs with PARTNERS from other markets, including Samsung Securities in Korea, and Aozora Bank in Japan. These PARTNERSHIPS aim to develop various cross border businesses, including in investment banking transactions like M&As and IPOs, in Vietnam inbound institutional and retail brokerage business, as well as in the wealth management business. Our PARTNERSHIP particularly with Samsung Securities is perceived as an important strategic development for HSC starting in 2017. Investment flow from Korea to Vietnam has increased significantly over the last few years both in the capital markets as well as in acquisitions. Besides the investment banking business, we have mapped out a strategy for HSC’s next phase of growth which would focus on the wealth management business. Our interaction with Samsung Securities has revealed that these are the business lines in which we can find an alliance in and synergy with Samsung Securities to work as PARTNERS for business development in Vietnam. While we have begun firming our position in the investment banking arena, we have only started forming the concept of what the wealth management business might comprise in Vietnam in the near future. We believe that this is a business in which a PARTNER like Samsung Securities can add significant value for our mutual benefits.
In 2017, the concept of wealth management was switched on to us at HSC when we saw a need from wealthy individual clients to have a professional firm and team helping them with securities investment in the Vietnam markets. We have initiated a Managed Account service model in which HSC would provide wealthy clients with investment advisory work and recommend an investment portfolio to each client depending on their individual risk appetite. Although it is still a small business, the number of clients and the value of investment under our team’s management have grown steadily throughout 2017. This appears to be the first successful step we have achieved in the learning process and the set-up of the wealth management business, given that it has generated some fees and was profitable in 2017. As the next step this year, we are taking efforts to build and test a distribution mechanism with the intention to bring other products including mutual funds and corporate bonds to the wealth management client segment.
Speaking of funds, one of the most significant developments in Vietnam’s capital markets in 2017 was the rapid growth of subscription in the VN30 ETF which is managed by our PARTNER Viet Fund Management (VFM). All new subscriptions have come in from foreign institutional investors. HSC acts as the sole market maker for VFM’s ETF and our support has helped expanded the fund from USD 19 million at the beginning of 2017 to USD 117 million at the end of 2017. The fact that we also have a dominant and active role in the index futures business helped mitigate our market making role for the VN30 ETF and afforded us the ability to also take arbitrage opportunities in the market.
We were one of the select few securities firms in Vietnam to pioneer and collaborate with the State Securities Commission (SSC), the Hanoi Stock Exchange (HNX), and the Vietnam Securities Depository (VSD), to undertake the development and launch of the first derivative product in Vietnam in 2017: the Index Futures. We are now one of the biggest bookers of futures contracts in the market with an average market share of between 20-25%. Our PARTNERSHIP with the authorities in bringing new products to the Vietnam market, especially the highly technical products, has been well recognized in the market and has given us a first mover advantage in setting the operational parameters for these products according to our knowledge of market best practices. Over the years our leadership in product development has gained us a high level of trust from market agencies, exchanges, and policy makers. In 2018, we will see the launch of the next derivative product in Vietnam: Covered warrant. HSC is again well positioned to be one of the first service providers in Vietnam to bring this highly anticipated product to the market given that we have PARTNERED with the Ho Chi Minh City Stock Exchange (HSX) from the initial stage to structure the operational features of the product. With our market making capability and track record in managing the index futures product, a commanding market share and distribution capability in both the retail and institutional client segments, and a strong balance sheet, we strongly believe that this new product will be comprehensively supported and will add fresh liquidity to the cash market. We believe the covered warrant business has significant potential to become a key component in our prime brokerage and investment banking business platforms in the near future.
“With the business and commercial orientation as the underlying fabric of our corporate culture, we aim to promote and put to practice the concept of PARTNERSHIP at HSC in 2018.”
For the first time, we have created a position for a Chief Partnership Officer at HSC and earlier this year our new CPO has joined us in the ranks of managing directors. My hope is for HSC to continue on a journey to cement the connectivity between all of our business functions, direct as well as indirect, so that all functions are knowledgeable on HSC’s business model and all would be aligned in the direction of commercial orientation. In addition to helping us with the task of aligning all internal functions, the CPO would also coordinate and facilitate all business alliances between HSC and external PARTNERS. At an ideal stage, our objective is to be able to assess and value the level of success of all of our PARTNERSHIPS in commercial terms and in our ability to expand PARTNERSHIPS to multifaceted relationships. In other words, clients can become shareholders or service providers can also be clients.
Going into 2018, HSC will undoubtedly continue to operate in a market environment abound with both opportunities and challenges. Foreign investors’ sentiment is favorable for Vietnam, evidenced in their relatively sizeable net buying position in the first quarter of the year. Local investors’ sentiment is very strong as shown by an exponential increase in trading volumes in the first quarter. The VNIndex has appreciated by 19.3% over 1Q2018. Vietnam’s economic growth as targeted by the country’s leadership to achieve over 6.8% in 2018 is on the high side compared to the average for the last five years. Nevertheless, uncertain global geopolitical conflicts, inflationary pressure in the big economies like the US, and a potential global trade war are all posing not so small concerns to the global markets this year. As HSC gradually advances to the next level of growth and the Vietnam markets are more connected to the global market environment, I believe there is still a lot of work for HSC to tackle in terms of further improving our business management systems and controls. At the beginning of 2018, we have created a new position at the managing director level to lead our business process management office. With this senior personnel joining our team, we aim at not only redefining and refining our business processes from top to bottom, but at the core of the PARTNERSHIP mindset we also want to make sure that our indirect business functions (previously known as back offices) have a good grasp of our business model and services and take part in the Company’s commercial orientation. The concept of PARTNERSHIP may be easy to understand but I reckon the practice of creating a PARTNERSHIP environment will be as challenging as our business itself. With that note, I seek for a PARTNERSHIP with each of you in contributing to a profitable business with HSC and look forward to our next phase of collaboration and growth.
Johan Nyvene 
Chief Executive Office

Dear fellow Shareholders, Customers & Colleagues, 
I wish to use the theme “Opportunities” to describe what we have in mind for 2017 and beyond. Opportunities certainly come and go. HSC has been in existence for 14 years and invariably we have seen numerous opportunities appearing over those years. We have taken some opportunities and regretfully missed out on others. Some of those opportunities turned out to be less spectacular or riskier than others. But this time I believe we are facing a major turning point. 
There were two key characteristics to Vietnam’s stock market starting in 2016: an accelerated schedule in the privatization of state owned companies and assets, and an emergence of large privately owned companies going public. We have seen a clear trend as well as potentially attractive opportunities in the market with these two characteristics.
Vietnam has turned a significant corner in recent history in the government’s administrative mindset. The country appears to have embarked on a more progressive reform path with a visible sense of determination and decisiveness.
As the government continues to carry on the unfinished job of privatization, there is now a clear sense of urgency with a number of equitization cases which have been lingering over the past several years. The road map for equitization suggests that “everything must go” (be privatized and divested) by the end of 2020. The mandate has also been cascaded from the central government to the provincial and city governments, and various levels of administration at the ministries who are held accountable to carry out this mandate. This process would mean that the opportunities for investors to access the shares of some of the largest companies in Vietnam would present themselves in the next three to four years. Although still somewhat awkward in its process, we have seen the auction of Vinamilk (VNM) by the State Capital Investment Company (SCIC). Besides VNM, the SCIC is also scheduled to gradually sell down a significant part of its remaining holdings in companies in various industries including consumer goods, insurance, and foods. The divestment in Sabeco and Habeco by the Ministry of Industry and Trade should be well underway by the middle of 2017.
I would like to share with you a vision our senior management and I have had since the middle of 2016.  We believe we have arrived at another crossroad where the decision to take a strategic turn might be critical for our future.  We believe this turn will lead us to where new opportunities lie.  We strongly believe these opportunities will shape and form our organization into a more competitive and profitable engine for growth in the next three to five years.  There will be divestment in confectionary companies by Vinataba. Viglacera is currently being divested by the Ministry of Construction, and Vinachem also has a list of group companies in fertilizer and chemical industries that need to be divested. These are just some examples of the pipeline of divestments in the state-owned sector.In addition to equitization and divestment of state holdings, the direction of reform in Vietnam has turned its attention towards empowering the private sector. At the onset of its new term, the newly assembled government already reached out to the corporate sector, by organizing various high level meetings directly with all types of companies both in Hanoi and HCMC. One of the most exemplary results was the establishment of the Vietnam Private Sector Forum (VPSF), with which I am involved in my personal capacity as the Chairman of the Capital Markets and Finance Committee. The aim of the VPSF is to connect the voice of the private sector to the central government, and at the highest level, as the initiative has been directed by none less than Deputy Prime Minister Vuong Dinh Hue. With ten different steering committees guiding ten most important aspects of the development of Vietnam’s private sector including agriculture, logistics and distribution, the digital economy, supporting industries, etc, we are confident that the empowerment of the private sector will be one of the top priorities of the government in the immediate future. This initiative could mean that the legal and administrative framework will be made less onerous to the private sector, and there would be additional resources allocated to the private sector to fuel their growth and produce more competitive companies in the future.With these exciting developments in the corporate sector, we have awakened to the idea of broadening our business scope, market segments, as well as risk appetite.Looking ahead, we see tremendous potential in the Private Client business. At HSC, we have achieved and built a prominent business as a brokerage firm, having captured one of the largest market shares over a number of years. We have secured the position as one of the most reliable and trust worthy brokers in both institutional and retail investor segments. However, 2016 was a year of revelation in our business. While we had a stellar performance that met the financial goals, our business model continued to be primarily driven by the secondary markets and fueled by a significant expansion in our margin financing business. Market share in the brokerage business, especially on the private client side continued to be extremely competitive. We continued to lead the market on private clients but inevitably found ourselves defending our position on various aspects of the business. We have had to revamp our policies on brokers’ commission rates, service pricing, and credit provision. We have monitored the expansion of our margin loan book in conjunction with the expansion in our brokerage market share and detected that growth on the two sides was not in tandem. Our average margin loan book grew by almost 60% in 2016 YOY, while our brokerage market share edged up to only 11.2% from 10.4% the year before. This has prompted us to believe that we need to expand our reaches beyond the traditional private client pool and explore new segments.The investment environment in Vietnam has been traditionally limited given the perceived high level of risk in information inefficiency and in the lack of investment know-how. These reasons have turned the mass market in Vietnam away shy from the stock markets and investors continue to favor other types of assets, including real estate, gold and hard currencies. The lack of pension funds further exacerbates this situation as virtually all institutional investors in Vietnam’s equity markets are foreign. This risk mentality has resulted in a very low level of liquidity in Vietnam’s stock market. Although Vietnam’s market capitalization level has risen significantly over the years, the markets have been relatively lackluster in liquidity. In fact, the lack of liquidity remains one of the trickiest factors for investors, both institutional as well as private to overcome, and it has become a vicious circle.The risks in Vietnam’s stock markets are further weighed by the occasional anomalies in corporate accounting practices, whether intentional or not, that have resulted in inaccurate information from the companies, and hence inaccurate valuation of their share price. This is sometimes a serious issue, which could result in over exposure to investors and market intermediaries including ourselves. In 2016, despite our conservative credit culture and a fortified risk management framework, HSC fell victim to a case of corporate fraud and lost some money in margin lending activities. While margin lending continues to be the backbone of our business, we have realized that the risk in this business is not because of flaws in the products, but because of a significant dependence on financing on our part, to expand in a very concentrated market.The realization that the existing private client segment has limitations has led us to think about expanding our private client business beyond the current reach. We have conceptually categorized the private client business into different segments. We believe that the private client segment that has been traditionally served by most brokers including ourselves consists of mostly day traders who are inclined to employ margin financing but who are not significantly adhered to fundamental factors. While we continue to serve this segment, we have also recognized that with the growth of the Vietnamese economy, the emergence of a middle class and growth in people's savings and wealth, there would be a need for mainstream investment in capital market products by the mass market. We have recognized a need for wealth management in the high net worth individual segment, and have approached this segment with the managed account concept. Our specialized strategists would recommend tailor made investment portfolios to individual investors who would employ their dedicated trading team at HSC to manage day-to-day trading activities for them. For the mass market, the most visible trend of development is in online channels and automated services. With internet and mobile trading tools already developed and available for use, we aim to develop a web based platform to provide internet based clients the flexibility to access all of our current and future products and services through one single portal online. This portal would also allow us to consider the discount brokerage concept in the future. We are aware of the fact that this concept has prospered in developed markets, and while the market in Vietnam is still not developed, we believe that we should be prepared for that future.One of the most notable achievements for HSC in 2016 was the development of derivative products. HSC has been a pioneering securities firm in developing new products and we have closely cooperated with the stock exchanges and the central depository to formulate what would be the first derivative products in Vietnam. We should witness the launch of the index futures product at the end of the first half of 2017 and the covered warrant product later on in the year. These products will be a part of our comprehensive offerings on the aforementioned web portal, which is also aimed for launch in its initial phase by the end of 2017.HSC has built and operated a highly stable service oriented business model over the last ten years. However, we believe that there are more opportunities in Vietnam's capital markets than just being a brokerage service provider. With the rising trend of privatization and IPOs, there would be opportunities for the firm to take advantage of its established distribution networks in various investor segments, as well as technical capabilities to build up positions and take market exposure. HSC would be in a position to further establish itself as a market maker, and provide liquidity to the market by leveraging the well-established brokerage capabilities. At the same time, we can explore opportunities to put more of our capital to work and take advantage of market upside potential. We envision that there will be significant opportunities for underwriting and principal investment activities. The formula to shape this business is by developing corporate finance advisory capabilities and corporate access work, further aligning corporate finance work with our brokerage functions, and establishing an efficient capital allocation process. There might be situations where capital requirements are significant in which we would aim to cooperate with other top securities firms to jointly underwrite and distribute an issue.The commercial direction we have embarked upon in business has also been reflected into our human capital policy. In 2016, we launched a company-wide incentive program to promote cross-sale activities and business referrals. On various HR communication occasions, I have reiterated the message among all HSC personnel that we will recognize and directly reward people who bring extra business opportunities to the Company, or who go above and beyond their normal scope of work in order to generate revenue for HSC. This commercial mindset, driven by the incentive program has certainly resulted in extra business activities in all of our business functions, which have contributed to a 43% increase in revenue over the previous year. I believe that HSC’s competitive mindset will be further sharpened going forward with our direct reward system. This is the mindset from which we will derive opportunities.2016 also marked a sharp change in our human capital mindset. In addition to incentivization, we also opened up opportunities for high caliber managers to take charge of their business forward. On the institutional client side, we took the opportunity of having a new managing director in the team to restructure the organization of the business. On the private client side, we have created additional business regions and units and have promoted middle level managers into leadership roles to manage new business units. This movement has in turn fortified our management of the private client business, and more importantly empowered our personnel in various layers of the business to be able to recognize opportunities on their own. This is also a positive step toward succession planning in my view.One of the most notable achievements for HSC in 2016 is the development of derivative products. HSC has been a pioneering securities firm in developing new products and we have closely cooperated with the stock exchanges and the central depository to formulate what would be the first derivative products in Vietnam.Opportunities will not wait for anyone and I am very happy to say that I have already detected a strong sense of urgency in many of our colleagues in pushing business forward. I strongly believe that the next three to five years will be a window of opportunity for HSC, not only to do good business, but also to rise to the next level of playing field.I wish all of you success in seizing new opportunities in 2017.Johan Nyvene Chief Executive Office

Dear shareholders, clients, and colleagues, 
Despite a challenging 2015, we continued to define HSC’s path to a sustainable future. On the business front, although our profitability was inevitably affected by a lackluster market performance, a lower level of market liquidity and unfavorable legal restrictions, we further cemented our core business model and set the platform for the next level of market development. 
With the brokerage business being extremely competitive both in the retail and institutional customer segments, we continued to invest in and prepare our technological platform, in order to anchor our position in the internet trading segment. Our advances in internet trading have given us a superior capability to further automate the margin lending functionality, which has become our core revenue contributor in our business model, and resulted in a significant expansion in our margin loan book by the end of 2015. This significant development is a very important component in our comprehensive brokerage business model, which has allowed us to increase our leverage capability, and enhance the ultimate return to shareholders without requiring additional shareholder capital.
We also overhauled our corporate finance advisory function with new and senior personnel. We are firmly determined to secure a top position in the ranks of reputable local advisory firms given the fact that we already have a superior HSC brand value and distribution network. With a growing deal flow and solid distribution capabilities, the synergy between the corporate finance advisory business and the brokerage business has never been better defined, facilitating investment banking transactions in the future.
While our business model gradually reveals our future identity, the concept of sustainable growth has taken a more concrete shape. Throughout the year we endured and sustained competitive pressures in all facets of the business, including pricing, products, policies, and ultimately people. To succeed and outperform, I believe we need to raise our business ideology and focus to a higher level. I wish to call this level Humanity.
The word Humanity began to stick in my mind at one point during 2015 when I was following the news on the Syrian crisis. As painful and disheartening as those images can be, the pictures of suffering people fleeing from the war torn areas were shown almost every day across news and internet channels. The situation has worsened even to this day.
The picture of a two year-old Syrian refugee child, who drowned during a boat smuggling trip and washed ashore brought the world to anger and tears, but it was still not enough to bring any resolution to what started as a political conflict then became a humanitarian crisis. It may have triggered some sentiments from the rich countries to open up their hearts for the refugees, but the plight of the little girl only accelerated the exodus of the people and made parts of the world more divided on refugee issues, and on the concept of Humanity.In writing this letter to HSC’s stakeholders, I have tried to refrain from making sentimental remarks. But emotions are what make us human, and as a manager in this people-powered business, I find myself challenged, fulfilled, agonized, and elated by people and with people issues on a daily basis.I was personally touched by an occurrence a few months ago. At lunch by myself one day, I was tapped on the shoulder, turned around and encountered two boys in elementary school uniform who begged me for food. They claimed that their father was out working as a motorbike taxi driver and did not leave them any money for lunch. Their ages 9 and 6, were coincidentally the same as my two sons. I bought them lunch and believe this was my reminder of the principle of Humanity, on how misfortune, pain and suffering can be very close to home, and that we often forget these misgivings can be overlooked within our proximity as we frequently take things for granted.My stance on Humanity is my observation on how we as human beings treat one another and how we behave toward our fellow human beings. An inspiring friend of mine has a principle of categorizing everyone he knows into either a “taker” or a “giver”. We can probably recognize subjectively that we are sometimes givers and sometimes takers. But what we can also recognize is that the world is full of situations in which we make it troublesome for others to live. We can see these situations in geopolitical confrontations, racial tensions, and conflicts in religious beliefs or ideologies. We can also see them in colleagues backstabbing each other at work, in motorists cursing at one another and yielding to no one, in neighbors quarreling over a fence, on the sporting field and even in our family being withdrawn at the dinner table. In business, it’s the rule of “survival of the fittest” and a highly competitive world in which we live in. We have all learnt to compete against one another from very early on in life, but sadly this is often at the expense of others.As a corporation, we must be able to compete and advance. But this is where I have recognized a very fine line between taking and giving. Within the context of business, we need to find a balance to satisfy customer demands, to fulfill shareholders’ requirement for financial returns, and at the same time keep employees happy. On the business front, I believe we should have many things to rave about. However, with an ever increasing awareness and expectation for sustainable growth, we also need to find a balance between doing good business, and doing good deeds for society. To me, society begins with Humanity.We need not look far to do something good for society. As an individual and a manager, I recognize that the first place I should try to make a positive impact impacts is at HSC, for my colleagues, for Vietnam’s capital market, and at a further reach, for the people of Vietnam.HSC is still a relatively young company of thirteen years in the making. With respect to local equity markets and our 2015 results, I reflect on 2015 as a year of consolidation in the natural course of the “2 steps forward, 1 step back” catchphrase reflecting normal progress. Our business environment is full of optimism however Vietnam’s capital markets are in their infancy and remain challenging to investors and operators alike. Global economic and geopolitical impacts have made it much harder for Vietnam’s economy and securities market to prosper. HSC’s resources are still limited so our ability to attract, retain, and develop our personnel is also restricted. But I think the element of Humanity here extends beyond pay, perks, and policies. I believe that concurrent with meeting the basic requirements, we as human beings need to treat one another with respect and decency. While we need to conform and contribute to a common goal, we can also accommodate and encourage one another’s personal endeavors and aspirations. And we should try to come to the aid of those most in need, or when one of us is in a dire situation. To me this is where Humanity begins.We have had a few instances at HSC where our colleagues or their immediate family members suffered terminal illnesses and did not have the means to cover medical expenses or family obligations. The financial collections from friends and colleagues while genuine, were reactive in nature and sometimes too little and too late. Starting this year, in addition to increasing the coverage of our employee medical and accidental insurance, I have called upon my colleagues to set up an emergency assistance fund whereby each of us in the Company will be able to commit to a monthly contribution of one percent of our salary on a voluntary basis. Our lower income colleagues would potential be the biggest beneficiaries of this endeavor whereas our manager levels would have a chance to help on a more sustainable basis, and hopefully we will be able to grow the fund over time.The majority of my HSC colleagues are young and starting out family life and I understand the need of our staff to take care of family requirements whilst being able to also work. We have initiated a policy on working from home to accommodate colleagues in special situations. As I myself am aiming to achieve a better work – life balance, I would encourage our staff, committee members and colleagues in the Trade Union to engage more members on sports and wellness activities, as well as in special interest hobbies where the Company compensates part of the costs.We at HSC are probably more fortunate compared to the majority of people in Vietnam, both in rural areas as well as in the slums of the big cities. Last Lunar New Year, I was extremely touched by my colleagues in Hanoi who drove a fund raising effort to bring warm clothing and other basic amenities to the poor people in the mountainous regions in Son La Province. Seeing the photos of children who braved the extreme cold weather with what little cover they had was disheartening. Another HSC colleague in Ho Chi Minh City took a personal initiative to facilitate for us to donate used computers to a middle school in Hoa Binh Province. We received a very emotional thank-you letter from the head of that school and the gift was highly appreciated by the disadvantaged students in the countryside. I praise and thank my colleagues for their good hearts and commit to supporting them in similar future endeavors. I hope we can make similar charitable contributions more regularly.One of my personal social endeavors is to contribute to the development of Vietnam’s youth, from impoverished disadvantaged children to new college graduates preparing to enter the work force. I recently accepted to join the boards of advisors of two very meaningful organizations: AIESEC Vietnam, the local chapter of a global non-profit organization that helps youths with leadership development and cross cultural networking; and Streets International, a private charity from New York with a base in Quang Nam Province, which aims to improve the lives and work skills of orphans and street kids in Vietnam. I hope that with my personal time and with the networks and resources of HSC, we can contribute and positively influence the goals and aspirations of these organizations in helping young people in Vietnam.As an economy and a society, Vietnam has undoubtedly advanced on many fronts over the last twenty years. In technical terms, Vietnam has advanced from a low income country to a middle income country. But I don’t think it is just the income levels that define Humanity. I believe Humanity needs to be defined by the dignity that we afford our fellow human beings, and the dignity that we hold for ourselves.As a service provider in the capital markets of Vietnam, HSC has made firm steps in our growth and presence, including 2015 when we enhanced our position for a sustainable future. But while we have gradually become institutionalized, we have also emerged more visibly as a people driven institution. One can see this critical difference in the correlation between our growth and low staff turnover rate. Our investment in people is no doubt the most critical investment we need to make. This is where Humanity needs to be nurtured, for HSC, for Vietnam’s capital markets, and for Vietnam.I greatly cherish your partnership with HSC and hope you can join me in further investing in, defining and promoting Humanity.“As a service provider in the capital markets of Vietnam, HSC has made firm steps in our growth and presence, including 2015 when we enhanced our position for a sustainable future.”Johan Nyvene Chief Executive Office

Dear fellow shareholders, clients and colleagues, 2014 was a year of redefining moments. It was a period of critical events and perspective-changing occurrences around the world. There were unexpected transitions of geopolitical, economic and financial power; relations and alliances were deconstructed and redesigned; bitter enemies became acquaintances, and friends of convenience fell out of favour.
We witnessed a tumultuous period of international relations, during which there were many astounding events, ranging from regional socio-political and economic conflicts in the Middle East, Africa, and Europe, with repercussions felt as far as Australia; to internal social struggles in America and maritime territorial disputes in Asia. These were turning points in world history, creating rips and patches in the fabrics of our societies, amending our definitions of enemies and friends, and in many cases redefining our outlook and approach to life.
We were brought together by an aviation tragedy, with the world joining and lending hands in an international search. We were also appalled by a subsequent aviation tragedy, this time caused by geopolitical turmoil. As the national borders of a country in conflict were redefined, superpowers the world over took sides, and, in the process, realigned their geopolitical positions.
We feared and faltered at the verge of a global viral epidemic, with parts of the world shut off from outsiders. Entirely unexpectedly, the planet’s common nemesis was for a time redefined as a virus, with scant regard for borders, thus demanding unprecedented levels of international cooperation. This temporarily distracted from the War on Terror, the escalation of which emerged as one of the most significant themes in 2014, with grave consequences for the Middle East and Africa, and it is now knocking on the doors of Europe and South East Asia. The world’s most fearsome enemies are now not so much regimes but ideologies that extend beyond geographical borders and conventional parameters.
Falling oil prices, as well as economic distresses in Europe and South America, have sent tremors through global markets, and there were doomladen predictions by some about the next major market collapse occurring imminently. However, the ongoing progress of America’s economic recovery has enabled it to defy these fears, as positive economic growth and employment data has periodically emerged.
The information revolution continued to advance in the age of the internet. The world is now perhaps entirely accessible from a gadget, and data security has emerged as the biggest concern for businesses as well as for individuals, especially in the high tech environs. This is one of the global issues that is close to home for HSC, and has prompted us to proceed with one of our most important corporate governance projects, which I will elaborate on later.Perhaps the most significant redefinition in the global financial services sector relates to corporate governance and ethics. We have learnt of Swiss bank account revelations; punitive fines in the billions of dollars levied on major global banks in relation to the rigging of foreign exchange markets; and hefty settlements over the mis-selling of mortgagebacked securities. This redefinition and heightened awareness should serve to make financial institutions the world over much more accountable and socially responsible in their commercial activitiesOUR MARKETS Here in Vietnam, we witnessed the turbulence in the East Sea that threatened the country’s geopolitical stability. We were troubled by more stories of financial mismanagement in the corporate sector, as well as by rumours of additional arrests in the business community. We were hopeful, then fearful; hopeful again, but ultimately disappointed that the stock markets did not uphold predictions of a rally towards the end of the year. Nonetheless, the overall stock market doubled its trading volume, and in the process set new standards and redefined the norm as inherently volatile.In the context of Vietnam’s economic integration and capital markets development, there were positive signs of the country’s economy establishing a firmer footing. Interest rates dropped further, continuing on a trajectory which began in 2013. The banking sector continued its consolidation process with mergers as well as the packaging of non-performing assets for transfer to the Government’s asset management company (VAMC). The authorities continued to place a strong emphasis on restructuring Vietnam’s economy, by attempting to redefine it in alignment with the private sector and the global economy.Perhaps the most substantial redefining moments were in the drastic attempts taken by the authorities to widen and deepen Vietnam’s capital markets. From the very top level, the aim and pursuit of the state to turn State-Owned Enterprises (“SOEs”) over to the public was clear and aggressive.After many years of economic renovation, and after being spurred on by both internal and international pressures, the privatisation process was still dragging its feet, frustrating the economy and the markets. At the beginning of 2014, there were more than 500 companies that required privatising by the end of 2015, many of which are the crown jewels of Government-controlled industries. This would have averaged one equitisation per day, yet it was insisted upon at the highest level of Government; there was now an obligation to list on a stock exchange, not just to equitise. There were also attempts by the authorities to open up the foreign ownership limits (“FOL”) in the hope of attracting more institutional funds, given the fact that many blue chip stocks had reached their limits. While this manoeuvre has been hampered by technical clashes between various laws, the authorities are still working on the concept and we expect to see some progress in the third or fourth quarter of this year. In addition, the stock market authorities have established a project to study Non-Voting Depository Receipts (“NVDRs”), which have been used in some regional markets to circumvent FOL. This product has been lobbied for in Vietnam by many foreign institutional investors.Other new concepts and conventions were rolled out for the first time in 2014. The launch of the first domestic Exchange-Traded Fund (“ETF”) carried with it significant hope for Vietnam, as it was seen as an opportunity for foreign institutional investors to increase their appetite for the Vietnamese market by mirroring the VN Index, while also improving access to the blue chip stocks where FOL are full. With the establishment of the ETF, the rules on securities borrowing and lending were also ratified by the authorities, albeit only for the benefit of ETF participants. As an Authorised Participant (“AP”) to the VFM ETF VN30, we are proud to be the first liquidity provider to the first domestic ETF in Vietnam.In late 2014, the authorities initiated discussions with market participants on a draft legal framework for derivative products, aiming to circulate this draft later in 2015. The first derivative offerings that are being studied are fairly basic products, such as index futures and covered warrants. We have actively participated in this process, helping the authorities to establish a fundamental framework to govern the issue of all derivative products. We are hopeful that this preparation will incite the market and improve liquidity in the near future, and we expect to gain first mover’s advantages.Nevertheless, Vietnam’s stock market did not rally in the fourth quarter as anticipated earlier in the year. Despite having built up a strong momentum in the first quarter, based on expectations of expanding FOL, the turmoil in the East Sea spooked investors, resulting in a loss of 11% in just one week. While some investors believed a war loomed over the horizon, others seized the opportunity to enter the market after standing on the sidelines in the first quarter. However, despite the indices recovering much of their losses in subsequent weeks, market confidence was still hampered by the uncertainty of new policies and directions. The free fall in global oil prices in late 2014 and the announcement of Circular 36 removed any hope remaining for the market to return to its earlier heights.Circular 36, which actually aims to reduce the crossholding relationships that have been established between banking groups and their related entities through internal financing arrangements, is a significant step towards the restructuring of the tangled web that is Vietnam’s banking system, replete with special interest groups. This has had a negative impact on the country’s stock market, but it must surely be more psychologically than practically disturbing to the retail investors that dominate the market. From what we can see, major independent margin lenders like ourselves are well capitalised, and less reliant on bank borrowing than smaller players and the securities arms of banking groups. Nonetheless, the intention of the decree, while good for corporate governance, will inevitably reduce liquidity in the short term.OUR CORPORATE GOVERNANCE MATURITY Here at HSC, while we still face intense competition commercially, we continue to proceed with our corporate governance roadmap. Two and a half years after launching our Enterprise Risk Management (“ERM”) project, we have now reached a new stage in our corporate governance framework. The subsequent steps in the application of ERM in 2014 have redefined our corporate maturity and further reshaped our development roadmap. The concept of corporate governance had been much touted in the broader corporate environment, as well as at HSC, without clear definitions of standards and benchmarks. Where practical situations revealed our weaknesses and areas for improvement, we have had to re-evaluate corporate governance with more precise and scientific measures. We have come to realise that corporate governance is an ongoing and ever-evolving concept, and one that will steer us clear from dangerous activities as long as we have established a clear governance framework, which we continually update and adhere to. Our Business Process Improvement (“BPI”) project, which was rolled out in 2013 with guidance from PwC, was completed in 2014 and resulted in an overhaul of our policies, processes and procedures. BPI showed that we had hundreds of processes in our operations, many of which were redundant or overlapping in some areas while lacking or insufficient in others. The updating of our processes is an ongoing requirement, as we evolve our governance environment in response to the introduction of new products and regulations.BPI has now led us to the next step, the Business Process Management (“BPM”) project, which seeks to automate and systemise as many of our policies, processes and procedures as possible. Defined as “the process of optimising processes”, BPM will require us to set parameters for our Limits of Authority, approval processes and work flow, as well as to digitally monitor processes in line with the eventual target of a paper-free operation. At the time of writing, we are poised to initiate BPM in its first phase.One of the most significant landmarks in our corporate governance roadmap has been the establishment of HSC’s Internal Audit Function. We have engaged KPMG as advisors on this project, with a view to working with them over a three-year period. In 2014, KPMG assisted in setting up the internal audit process and carrying out internal audit work in high priority areas. This year, HSC’s Internal Audit team is more adequately staffed, and it will co-source and collaborate with our advisor on the audit of several of the Company’s divisions and functions. In 2016, the Internal Audit team is expected to be self-sufficient in performing its work, with the advisor providing external review and consultancy services only. In conjunction with the establishment of the Internal Audit Function, we have also set up the Internal Audit Sub-committee at the Board level. Internal audit processes continue to expose risks that can be mitigated and processes that can be revised and improved, and so our corporate governance picture is beginning to look more complete.On the Information Technology (IT) side, we have carried out the Information Technology Infrastructure Library (“ITIL”) project in 2014 following the completion of our Information Security Management System (“ISMS”) project. The ITIL project enables our IT Function to match its capabilities with the needs of our core business functionalities, as well as to support our operational processes. We completed phase 1 in late 2014 and will begin phase 2 in the second quarter of 2015, with an aim to finish the last of five phases in the middle of 2016. Some of the most important concepts that will be addressed in this project include “incident management”, “change management” and “service validation and testing”.As mentioned above, with data security becoming increasingly important in light of a number of system-hacking incidents in developed countries, we felt it was necessary for us to review our own security situation. We have received engagement proposals from potential partners to map out our security structure as part of the Enterprise IT Security (“EITS”) project, which we aim to launch during the second quarter of 2015.In late 2014, we also contracted with a consultant to help us design a Disaster Recovery Plan (“DRP”). While we have established backup capabilities among our various transaction offices in the country, and we have also formed and employed certain Business Contingency Planning (“BCP”) methodologies, both in terms of hardware and software, ultimately we will need to build a disaster recovery site to complete the BCP project. We have tentatively budgeted for our DRP to be assembled by the end of 2015.OUR BUSINESS IN 2014 I have purposefully talked about our progress on corporate governance before discussing our business achievement in this message, in order to highlight the importance of doing “sound business” over doing “good business”. But the truth is that we could only afford to engage ourselves in non-commercial projects, both mentally and financially, because our commercial activities were profitable. We recorded a commendable financial performance for 2014, producing VND 376 billion net profit after tax, which exceeded the target and overshot the previous year by 33%. This bottom line delivers an EPS of VND 2,956 for 2014. The main contributors to our profitability were brokerage fee income, interest income in margin lending to the retail segment, and gains in our positions in both equity and bond trading. In essence, the main driver to our profitability was the liquidity of the market, which generated enough fee income to make us profitable over total operating costs, and triggered the average margin loan portfolio to grow by 80% in 2014.Brokerage continued to be our core business, accounting for 36% of total revenue, and it was profitable in its own right, thanks to an active year in trading. 2014 saw a significant increase in market liquidity over the previous year. Average daily trading value reached VND 3 trillion, more than doubled 2013’s levels. At our Annual General Meeting (“AGM”) in April 2014, we presented a business plan (“the Plan”) with a projection that the market would reach VND 2.5 trillion on average, as it was trading at VND 3.2 trillion per day during the first quarter of 2014.“I have purposefully talked about our progress on corporate governance before discussing our business achievement in this message, in order to highlight the importance of doing “sound business” over doing “good business”The high liquidity was most likely caused by the anticipated influx of foreign money in the event that FOL were expanded. In addition, a lack of lending opportunities in the banking sector resulted in the banks channelling part of their excess liquidity into securities firms for more lucrative margin lending. If it wasn’t for the announcement of Circular 36 in Q4/2014, liquidity could have reached an even higher level for the year.While market volumes doubled, we saw our total market share drop from 12.2% in 2013 to 10.6% in 2014, broadly in line with expectations. We did not achieve the same level of market share as the year before primarily due to the fact that foreign institutional investors’ trading comprised a smaller percentage of total market trading in 2014. In addition, there were several one-off transactions in 2013 arising out of takeover initiatives that resulted in a high number of large block transactions in our favour, which did not recur in 2014 on the institutional front. Indeed, foreign trading made up only 10% of the total market in 2014. We continued to hold nearly 30% of the foreign trading market, but, given the smaller part played by foreign trading in the overall market, this translated into only 3% of overall market share. The retail segment held its ground with a 7.4% market share of the total market.Margin lending continued to be the main driver of our retail business and contributed 30% to our top line. HSC’s margin portfolio exposure rapidly expanded in 2014. At one point we reached our internal limit of VND 2 trillion in outstanding exposure and so briefly had to tap into credit limits from banks. The larger loan portfolio helped to offset a shrinking interest rate and allowed us to increase our lending interest income by 60%. While margin lending is still a relatively safe product in terms of credit risk, and is profitable to us, it has been under tremendous pressure from the central bank’s looser monetary policy in 2014, as well as from significant competition from the banking sector. The banking system had excess liquidity, while overall credit growth in the country did not meet the Government’s target due to a relatively slow economy. The securities firms that affiliate with banking groups enjoyed this ample and low cost liquidity, and as a result were able to undercut the market in order to gain brokerage market share. By the end of 2014, our margin loan portfolio fell by around 36% from its peak, while margin interest rates continued to face downward pressure.Our proprietary investment activities, including in both equity and bonds, contributed 23% of total revenue in 2014, an increase of 27% over 2013. The two main components that made up this result were the remaining gains in the fund certificates portfolio and the new portfolio of T-bonds. The fund certificates portfolio was the outcome of our opportunism in response to exceptional circumstances in 2013, when several closed-end funds approaching expiration were trading at deep discounts to NAV. These funds were converted into open-ended funds and we redeemed at NAV. Furthermore, the markets appreciated during the period which helped to raise the value of our redemptions. We cashed out the remainder of this portfolio in 2014 as the indices began to fall. The resulting profits translated into a very high return rate in 2014.Our investments in T-bonds were also highly profitable in 2014. As interest rates continued to decline after a significant drop in 2013, we re-entered the bond market in early 2014 and exited when interest rates stabilised. We did not subsequently re-enter the bond market as we deemed the risk of rates increasing again to be too high.In terms of proprietary trading, we have established a portfolio to provide liquidity to the VFM ETF VN30 in our role as an AP to the fund. Although hedging tools in relation to this activity are not yet available, we have limited our risk by avoiding a full LP commitment, and by keeping the size of our portfolio small. The profit from spreads in managing this portfolio translated into a very reasonable return rate for us in 2014.The corporate finance advisory business struggled in 2014 with only a few transactions completed, which were all relatively small. Although this is also a core business function for HSC, it continued to face many challenges, in what can fairly be described as an unconventional environment for corporate finance activities. In terms of M&A, there were few notable transactions presented in the market in 2014. In terms of IPO, the traditional practice is the equitisation process, which applies to SOEs when they privatise. Although a large number of SOEs were equitised in 2014, the size of the equitised stakes was in most cases small. In addition, the listing step was not tied in with the equitisation step, and so many SOEs remained unlisted for some time after their privatisation. Through this business division, we assist in the IPO of companies in the private sector, but opportunities in this segment are limited given that most privately-owned companies are small. With the equitisation of the remaining SOEs being rushed through the door in 2015, we envisage that after the administrative processes are finished, there will be a distinct need for practical capital raising exercises, and we aim to penetrate this sector going forward.We are now facing a highly challenging year in 2015. The economy is projected to grow slightly faster than last year, and the fundamental macroeconomic issues appear to have been more or less addressed. However, economic recovery will most probably be achieved only at a gradual pace, as Vietnam has become further integrated into the still-troubled global economy. As Q1/2015 is about to close at the time of writing and the market as well as our own targets are slightly trailing expectations, I am concerned that the end results this year will not be as positive as 2014 for all market participants.Nevertheless, our industry will continue to consolidate and evolve as the capital market environment in Vietnam develops further. We have determined that we are here to stay, and I have once before referenced the “survival of the fittest” theory. As we redefine our competitive position, I want to restate this reference by saying that we are here to stay, and to lead.