€¦ · Final report: TA 49116 VIE – SOE Reform and Corporate Governance Facilitation Project...

SOE reform and corporate governance facilitation project

Final Report – 2nd phase

October 2009

Final report: TA 49116 VIE – SOE Reform and Corporate Governance Facilitation Project

TABLE OF CONTENTS

PART I: PROJECT OVERVIEW.................................................................................. 1

1. BACKGROUND OF THE PROJECT ......................................................................... 1 2. THE TERMS OF REFERENCE ............................................................................... 1 3. OBJECTIVES OF THIS PROJECT ........................................................................... 1

PART II: EXECUTIVE REPORT................................................................................... 2

1. ACCEPTABILITY IN THE FINANCIAL MANAGEMENT SYSTEM ..................................... 2 2. FINANCIAL ANALYSIS OF THE IMPACT OF ADB’S LOAN ON THE SELECTED GCS ......... 7

APPENDIX ......................................................................................................................14

APPENDIX I – KEY OBSERVATIONS FROM THE REVIEW OF SONG DA .......................... 14

I. COMPLETED FINANCIAL MANAGEMENT ASSESSMENT QUESTIONNAIRE ................. 14 II. FINANCIAL PROJECTIONS ................................................................................. 30 A. BEFORE ADB’S LOAN ....................................................................................... 30 1. COMBINED BALANCE SHEET ............................................................................. 30

1.1 Sector – Hydro Power Plant Construction.................................................... 32 1.2 Sector – Power Trading ............................................................................... 34 1.3 Sector – Industrial Production ...................................................................... 36 1.4 Sector – Property Development ................................................................... 38 1.5 Sector – Others ............................................................................................ 40 1.6 Parent Company .......................................................................................... 42

2. COMBINED PROFIT AND LOSS STATEMENT ......................................................... 44 2.1 Sector - Hydro Power Plant Construction .................................................... 45 2.2 Sector - Power Trading ................................................................................ 46 2.3 Sector – Industrial production ...................................................................... 47 2.4 Sector – Property Development ................................................................... 48 2.5 Others .......................................................................................................... 49 2.6 Parent Company .......................................................................................... 50

3 COMBINED CASH FLOW STATEMENT ................................................................. 51 3.1 Sector – Hydro Power Plant Construction.................................................... 53 3.2 Sector – Power Trading ............................................................................... 55 3.3 Sector – Industrial Production ...................................................................... 57 3.4 Sector – Property Development ................................................................... 59 3.5 Others .......................................................................................................... 61 3.6 Parent Company .......................................................................................... 63

B. AFTER ADB OCR LOAN ..................................................................................... 65 1 COMBINED BALANCE SHEET ............................................................................. 65

1.1 Sector – Hydro Power Plant Construction.................................................... 67 1.2 Sector – Power Trading ............................................................................... 69 1.3 Sector – Industrial Production ...................................................................... 71 1.4 Sector - Property Development .................................................................... 73 1.5 Others .......................................................................................................... 75 1.6 Parent Company .......................................................................................... 77

2 COMBINED PROFIT AND LOSS STATEMENT ......................................................... 79 2.1 Sector – Hydro Power Plant Construction.................................................... 80 2.2 Sector – Power Trading ............................................................................... 81 2.3 Sector – Industrial Production ...................................................................... 82 2.4 Sector – Property Development ................................................................... 83 2.5 Others .......................................................................................................... 84 2.6 Parent Company .......................................................................................... 85

3. COMBINED CASH FLOW STATEMENT ................................................................. 86 3.1 Sector – Hydro Power Plant Construction.................................................... 88 3.2 Sector – Power Trading ............................................................................... 90 3.3 Sector – Industrial Production ...................................................................... 92 3.4 Sector – Property Development ................................................................... 94 3.5 Others .......................................................................................................... 96


3.6 Parent Company .......................................................................................... 98 C. ASSUMPTIONS .............................................................................................. 100 PART 1: SECTOR - HYDRO POWER PLANT CONSTRUCTION ........................................................... 100

1.1 General Assumptions................................................................................. 100 1.2 Assumption – Revenues and capital expenditure ...................................... 101

PART 2: SECTOR - POWER TRADING .......................................................................................... 104 2.1 General Assumptions................................................................................. 104 2.2 Assumptions – Revenues .......................................................................... 105 2.3 Assumptions – CAPEX .............................................................................. 107

PART 3: SECTOR - INDUSTRIAL PRODUCTION ............................................................................. 108 3.1 General Assumptions................................................................................. 108 3.2 Assumptions – Revenues and capital expenditure .................................... 109

PART 4: SECTOR - PROPERTY DEVELOPMENT ............................................................................ 110 4.1 General assumptions ................................................................................. 110 4.2 Assumptions – Revenues .......................................................................... 110 4.3 Assumptions – capital expenditure ............................................................ 111

PART 5: SECTOR – OTHER ........................................................................................................ 111 5.1 General assumptions ................................................................................. 111 5.2 Assumptions – Revenues .......................................................................... 112 5.3 Assumptions – Capital expenditure ........................................................... 113

PART 6: PARENT COMPANY ...................................................................................................... 114 6.1 General assumptions ................................................................................. 114 6.2 Assumptions – Revenues .......................................................................... 115

APPENDIX II - KEY OBSERVATIONS FROM THE REVIEW OF SOWATCO ..................... 116

I. COMPLETED FINANCIAL MANAGEMENT ASSESSMENT QUESTIONNAIRE ............... 116 II. FINANCIAL PROJECTIONS ............................................................................... 128 A. BEFORE ADB OCR LOAN................................................................................. 128

1.1 Balance Sheet .......................................................................................... 128 1.2 Income Statement ...................................................................................... 130 1.3 Cash Flow Statement ................................................................................. 132

B AFTER ADB - SOME CRUCIALLY FINANCIAL ITEMS ............................................. 133 1.1 Balance Sheet ........................................................................................... 133 1.2 Income Statement ...................................................................................... 135 1.3 Cash Flow Statement................................................................................. 136 1.1 Revenue assumptions ............................................................................... 138 1.2 Cost of goods sold assumptions ................................................................ 138

APPENDIX III - KEY OBSERVATIONS FROM THE REVIEW OF DATC ............................... 142

I. FINANCIAL MANAGEMENT ASSESSMENT QUESTIONNAIRE .................................. 142


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PART I: PROJECT OVERVIEW

1. Background of the project

After completing the preparatory technical assistance project1, Ernst & Young was engaged by ADB to assess to the financial management system and financial position of the selected GCs and provide assistance to ADB during Appraisal and Loan Negotiation stages. .

2. The terms of reference In accordance with the requirements of the ADB – Extension Contract dated 19 October 2009, we have performed the necessary work including:

� Undertake Financial Analysis and Assessment for SRCGFP:

• Assess the financial management capabilities of selected GCs via using the FMAQ; • Review and verify costs information provided by the management of the IAs; • Build a financial model, using Excel in order to assess the impact of proposed tranche1

project on the borrower’s (Song Da and Sowatco) financial position; • Identify key risks and their impact documented through cash flow sensitivity analysis for

change of 10%, 15% and 20% of some key revenue and expense items. The consultant shall also identify situation giving rise to risk of inadequacy of cash flows, if any;

• Recommend appropriate fund flow mechanism and disbursement procedures for tranche1 projects. Where applicable, review lending arrangements to ensure compliance with ADB policy. The preliminary design should take into account of the financial management responsibilities of each involved entity. As applicable, review or suggest disbursement procedures, including imprested account and Statement of Expenditure (SOE) arrangements;

• Propose auditing arrangements, and draft terms of reference for auditing tranche 1 projects. � In consultation with the relevant Government agencies (MOF, NSCERD, MPI and others),

identify and outline Government initiatives and actions to be undertaken in preparation of SOE reform plans beyond 2010. Identify areas where technical assistance may be needed on part of Government agencies and the concerned agency

� Review preparation for SRCGFP at the participating GCs, DATC and SCIC, including finalizing the timeline for agreed undertakings, and review progress of initiatives on GCs operational restructuring prior to loan approval

� Participate in the Appraisal mission as needed and facilitate in coordinating with MOF

3. Objectives of this project

The main objective of the Project is to provide inputs to the loan preparations of ADB. The outputs shall include a detail analysis of the current/projected financial position of the selected GCs as well as other type of assistance via email, fax or phone to support ADB during the loan preparation stage. This also includes the participation in important meetings between ADB’s representatives and relevant parties in Vietnam and facilitation of discussion amongst the parties. Details of each output will be provided later in following sections.

1 The project aimed at preparing the selected General Corporations (GCs), Debt Asset Trading Company (DATC) and State

Capital Investment Corporation (SCIC) to receive the planned SRCGF from ADB by formulating and recommending measures to facilitate SOE reform and enhance corporate governance practices in the said entities. The recommended measures shall be consistent with and supplementary to the Government’s overall strategy for State Owned Enterprise (SOE) reform.


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PART II: EXECUTIVE REPORT

1. Acceptability in the financial management system To assess the financial management system of selected GCs, we have: � use the FMAQ to collect the information from Song Da, Sowatco and DATC; � assess the acceptability of accounting policies, including financial reporting standards, the

effectiveness of financial management systems, including internal control mechanisms and general accounting practices;

� based on the information gathered in FMAQ, perform a GC-level review of the Financial Management Internal Control and Risk Management process of Song Da, Sowatco and DATC;

� identify material risks if any and propose actions needed to mitigate them and propose practical recommendations for improving financial management functions and staffing for financial operations.

The overall assessment of the results of our works is summarized as follows: Entity Conclusion of overall financial

management and internal control Improvement needed

Song Da Effective Yes Sowatco Effective Yes DATC Effective Yes Although the overall assessment of all GCs is effective, we nevertheless noted a number of areas where improvements are needed to be implemented by the respective GCs. In the ensuing parts of the report, we have summarized both the areas where we believe the respective GCs are strong in as well as those areas where improvements are needed, for which we have proposed improvement measures..

1.1 Song Da 1.1.1 Strong areas � Accounting policies and procedures (reference to Appendix I, Part I, Section 4)

• The Corporation has been certified to be compliant with ISO 9002 in respect of production management;

• Finance and Accounting Department has its own Manual which clearly defines process flow, roles and responsibilities of all staff levels.

• The Corporation appears to have adequate accounting system as required under the Government Regulations

� Staffing

• The organization structure of the Finance and Accounting Department appears to be relatively effective and clear in term of segregation of duty;

• Appears to have adequate qualified personnel; • Personnel in Accounting Dept. and IT Dept. appears to be committed and have been

regularly updated with current accounting regulations; • Courses relating to management accounting have been organized to enhance staff’s ability

in accounting and business in general; and • Accounting staff are familiar with procedures and requirements for application and

management of loans secured.

� Control over physical assets The organization structure of the Finance and Accounting Department appears to be relatively effective and clear in term of segregation of duty.


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1.1.2 Areas requiring improvements � Control over physical assets The tasks and measures to be under taken and targets to be achieved as indicated in the plan for 2006 to 2010 are not specific or expressed in quantitative terms with precise indicators. The only financial indicator spelled out in the plan was the average remunerations per employee. As such, no key performance indicators (KPIs) or desired milestones with reference to time are available to facilitate monitoring and measurement of achievements and performance.

Recommendation:

The plan should be developed on the basis the desired financial state and milestones to be achieved. In this connection, assumptions as regards trends, desired financial ratios and expected events occurring at a certain time as well as desired key qualitative factors, such as market share, staff turnover and rate of innovations in processes and products, shall be clearly spelled out. In addition, sensitivity analysis of variance of key assumptions should also be analysed.

� Cash management

• Gap exists between the amount of cashflow that Song Da is currently capable of generating from its operations and the expected cash flows required to finance continuing investments and loan repayment obligations. In view of this, the GC would need to arrange for new borrowings to be secured to cover shortages in funds required. From our interview with the management personnel of Song Da, we noted that currently, management of funds is undertaken on a project by project basis. As such, the GC would not be able to gather a view of the cash position of the Group as a whole at a specific point in time. Furthermore, the Group does not prepare periodic consolidated financial statement as a matter of routine.

Recommendation:

The Group should urgently establish a group treasury function tasked with the responsibility of managing the available cash resources and borrowings of the GC and its subsidiaries and manage relationships with the bankers. Rolling six monthly cashflow projections for the whole Group should be prepared to identify the expected cashflows and the funding requirements for loan repayments and investment in on–going and new projects in the foreseeable next six months.

� Internal Audit Function

• Currently, there is no Internal Audit Function at Song Da. From interview with Song Da’s executive, we noted that Song Da and its subsidiaries are subject to review and supervisions from various authorities such as the Supervisory Board, Tax Authority, and State’s Audit Department. The Corporation also engages external auditors to examine the Corporation's financial statements annually.

Recommendation:

Given the size and complexity of the operations of the Group, the management should consider establishing an internal audit function which shall help determine whether the governance, risk management and internal control processes, as designed and represented by management, are adequate and functioning effectively. When properly executed, it would help enhance the overall operational efficiency, effectiveness, and accountability of actions and results.


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� Financial reporting and monitoring/ External audit • In 2006 and 2007, the consolidated financial statements as well as a number of financial

statements of subsidiaries of Song Da were qualified by the external auditors. The audit qualifications of financial statements of subsidiaries were mostly relating to “under provision of severance allowance”, “under provision for bad debt, under recording of expenses, “quick depreciation method applied” etc. Whereas, the consolidated financial statements are usually qualified in respect of non-elimination of transactions and balances between related companies and companies within the Group as well as, qualifications of subsidiaries’ financial statements.

Recommendation:

To review the causes giving to rise to the audit qualifications in the past and undertake the necessary measures to avoid similar audit qualifications in the financial statements in the future.

1.2 Sowatco 1.2.1 Strong areas � Accounting policies and procedures

• Finance and Accounting Department has its own Manual which clearly defines process flow, roles and responsibilities of all staff levels. This allows Sowatco’s accounting functions to be properly performed. The Corporation appears to have adequate accounting system in use.

� Staffing

• The organizational structure of the Finance and Accounting Department appears to be relatively effective and clear in term of segregation of duties.

• Accounting personnel appears to be adequately qualified and experienced and up-to-date with current accounting regulations.

• Accounting courses relating to management accounting have been organized to enhance staff’s ability in accounting and business in general.

• Sowatco has developed detailed training policies which clearly define those eligible for training and the type of training to be provided by the company.

• Accounting staff are familiar with procedures for application and management of loans obtained.

� Control over physical assets • Fixed assets at Head Office of Parent Company are under control of each Department in

charg. • Physical checks are performed annually. • All assets and inventories are insured with Vien Dong Insurance Company.

� Budgeting system

• The GC has put in place guidelines on budget prepration and subsequent management; • Budget is prepared on annual basis by Planning function –part of Accounting and Finance

department, based on historical information and expected operational and financial KPIs developed by related specialized functions submitted to Planning function and approved by the Board of Management.

• Rationale for major variance between actual and budget were supported by detailed market or financial analysis, which take into account the relevant financial ratios and qualitative KPI.

� Information system • The parent company uses Vietsoft accounting software which allows it to generate certain

types of financial statements.Back up is done daily/monthly for accounting data.


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1.2.2 Areas needing improvements � Internal audit function

• Currently, there is no Internal Audit Function in Sowatco. Te management is of the view that as the GC is subjected to review and supervision by various authorities such as the Supervisory Board, Tax Authority, State’s Audit Department and the external auditors, adequate review and assurance on quality of management and control at the GC has been obtained..

Recommendation

The objective of internal audit function is to determine whether the corporate governance, risk management and internal control processes, as designed and represented by management, are adequate and operating efficiently, The focus of internal audit function is hence different from those of the various authorities which undertake review and supervision of the operations of the company and its subsidiairies. For enhance corporate governance of the operations of the company, an internal audit function should be established. � Financial reporting and monitoring

• In 2006, 2007 and 2008, the consolidated financial statements are qualified by the external

auditors. Qualifications relate to limit of audit scope since the auditor could not observe the year end cash count and inventory physical count.

Recommendation

The GC should review the causes giving rise to the audit qualifications in the past and undertake the necessary measures to avoid similar audit qualifications arising in future financial statement.

1.3 DATC 1.3.1 Strong areas � Accounting policies and procedures

• Finance and Accounting Department has its own Manual which clearly defines process flow, roles and responsibilities of all staff levels. It also shows limits of authority for all levels. This allows DATC’s accounting functions to be properly performed.

• The Corporation appears to have adequate accounting system in use. � Staffing

• The organization structure of the Finance and Accounting Department appears to be relatively effective and is clear in terms of segregation of duties.

• Personnel in Accounting Dept. and IT Dept. are committed and have been regularly updated with current accounting regulations.

• Accounting courses relating to management accounting have been organized to enhance staff’s ability in accounting and business in general.

• DATC has developed detailed training policies which clearly define who are eligible for training,and the type of training the company would provide and other necessary relevant information.

• Although the accounting staff are not familiar with ADB’s procedures, they are aware of the general procedures on financial restructuring and application and management of loans.


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� Budgeting system • Budget at DATC is prepared on annual basis by Department of Planning based on historical

information and expected operational and financial KPIs developed by related specialized functions submitted to Department of Planning and approved by Board of Management.

• Reasons for major variances between actual and budget were supported by detailed market or financial analysis which had taken financial ratios and other qualitative KPIs into account.

• Budget is prepared for every single activity and department. Progress is reviewed every month, adjustment would be considered when necessary basing on the evaluation of performance in theprevious month. All significant variance should be explained.

� Control over physical assets

• Fixed assets at the company are under control of each Department in charge with high security.

• Physical checks are performed annually. • All cars – the only high value assets of the corporation - are insured.

� Information system

• The company’s head office and all branches are using Bravo accounting software which allows it to generate certain types of financial statements in the same format. Back up of accounting data is done daily/monthly

1.3.2 Areas needing improvements � Internal audit function

• Currently, there is no Internal Audit Function in DATC

Recommendation

Internal audit function is designed to determine whether the corporate governance, risk management and internal control processes, as designed and represented by management, are adequate and operating efficiently. As such, it would enhance the company’s management of its operations and it should be established at the Corporation level.

� Financial reporting

• In 2006 and 2007, the company’s audited financial statements were subject to qualifcation by in respect of limitation of audit scope because the auditor could not observe the year end cash count.

Recommendation:

The company should review the causesgiving rise to the audit qualification in the past and undertake the necessary measures to avoid similar audit qualifications arising in financial statements in the future.

� Staffing

• The position of Head of Accounting department at Head Office is temporarily vacant.

Recommendation:

The company should urgently recruit a suitable person to assume the role of the Head of Accounting department to ensure that all accounting and finance works are well fulfilled in terms of quality and timeliness.


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2. Financial analysis of the impact of ADB’s loan on the selected GCs

2.1 General information about the ADB’s loan ADB lending will finance the operational restructuring through ADF loan and corporate and debt restructuring through the OCR loan. There will be no physical investments under the ADB lending and no new assets will be created at selected GCs. Many different projects at various stages of implementation underlie the debts to be restructured under the SRCGFP. It is thus neither feasible nor meaningful to calculate FIRR and NPV for each of the various projects the debts in respect of which will be restructured under the OCR facility. Instead, return to capital employed (ROCE) for each of the sub-group or sub-holding companies is calculated. The overall financial viability of selected GCs is established following the restructuring supported by the ADB lending. This can be best evaluated by appraising the financial position of each of the sub-holding companies and the subsidiaries under them on a pro-forma basis. The weighted average cost of capital (WACC) is calculated for each of the sub-groups and these WACCs were compared with the return to capital employed of each of the sub-groups to ascertain the financial viability of the respective sub-group. The sensitivity of adverse movements on the underlying assumptions of each sub-group was also assessed. Based on this analysis, it is clear that the financial viability of each of the sub-group will continue to improve over time.

2.2 Our methodology Under the proposed restructuring plan, the operations of the GC will be grouped under 4 sub-holdings. For the purposes of evaluating the effects of receipt of the borrowings from ADB on the financial position of the Group, the projections of each of the sub-holding and its respcetive subsidiaries under it are first worked out and grouped up on the basis of before receipt of the OCR and ADF loans and implementation of management re-organisation and improvement measures. Thereafter, these numbers in respect of each subgroup are reworked on the basis of undertaking the debt and management restructuring through ADB’s OCR and ADF loans. The numbers for each group are then re-grouped to arrive at the consolidated numbers for the GC as a whole. These numbers then become the base case for the respective sub-group for consideration of sensitivity analysis.

2.3 Financial analysis for selected GCs 2.3.1 Song Da The Song Da group of companies is engaged mainly in 4 business segments: hydro power plant construction, power trading, property development and industrial production. Under the proposed corporate restructuring measures, business activities of the GC will be shifted to appropriate subsidiaries and the subsidiary companies will be grouped under 4 sub-holding companies. Each sub-holding company and the subsidiaries under it will focus on one of the four business segments, while the parent GC shall be more of an investment holding company after the restructuring. 2.3.1.1 Assumptions The financial analysis is carried out in real terms on an after-tax basis. The projected sales are determined based on planned and expected increases in capacity and normal growth rate as realized in the recent past. As a conservative estimate, gross profit margin for each business segment is assumed the same before and after implementation of the proposed management re-organisation. For the expected scenario of the sub-groups, the benefits from implementation of management re-organisation and improvement measures after receipt of the ADB loans are expected to reduce controllable general management and administrative expenses by 5%. It is also assumed that inflation will affect income and expenditure to the same extent. The other assumptions include an international US dollar interest rate of 1%, a tax rate of 25%, and 2.5% for the minimum interest rate test in view of prevailing low international interest rates. The expected capital expenditure for the Song Da Group for the next 10 years is envisaged as follows:


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Table 1: Capital Expenditure Program of Song Da before ADB loan (2009- 2018)

Year Hydro Power

Plant Construction

Power Trading

Industrial Production

Property Development Others Parent

Company Total

2009 453,584 2,244,553 28,573 147,366 221,263 11,500 3,106,840

2010 230,432 2,777,699 34,118 313,034 121,088 11,500 3,487,871

2011 258,160 3,037,732 546,325 259,381 182,978 11,500 4,296,077

2012 261,200 1,893,164 413,500 204,669 185,507 11,500 2,969,539

2013 215,700 1,516,303 49,912 4,151 162,702 11,500 1,960,269

2014 295,700 721,198 49,912 67,450 136,730 11,500 1,282,491

2015 230,100 66,848 49,912 62,750 92,498 11,500 513,608

2016 - 66,848 49,912 - 157,538 11,500 285,798

2017 - 66,848 49,912 - 157,538 11,500 285,798

2018 - 66,848 49,912 - 157,538 11,500 285,798 Source: Song Da Corporation 2.3.1.2 Weighted Average Cost of Capital The WACC is calculated for each of the sub-groups assuming there will be no more capital contribution from shareholders and future financing needs would be funded by retained earnings and loans. The cost of equity of each of the sub-group is estimated using the capital asset pricing model. The risk-free rate of 8.5% has been used based on the prevailing rate of government bonds denominated in local currency. The market risk premium for Viet Nam is taken as 11 % based on the average return on listed companies in Viet Nam. The equity beta for each of the business segment is estimated based on the listed companies engaged in similar businesses in other developing countries. This results in a WACC for respective sub-group during 2009–2018 ranging from 8% to 11.79% as shown in the table below. Table A2: Weighted Average Cost of Capital before ADB loan

Year Hydro Power

Plant Construction

Power Trading

Industrial Production

Property Development Others Parent

Company

2009 9.68% 8.47% 8.08% 10.43% 9.09% 10.26% 2010 9.93% 8.24% 8.11% 10.42% 9.12% 10.77% 2011 10.33% 8.08% 8.09% 10.77% 9.11% 11.16% 2012 10.85% 8.04% 8.09% 11.02% 9.10% 11.16% 2013 11.79% 8.01% 8.14% 11.04% 9.11% 11.16% 2014 11.79% 8.02% 8.21% 11.06% 9.14% 11.16% 2015 11.79% 8.07% 8.28% 11.08% 9.22% 11.16% 2016 11.79% 8.16% 8.37% 11.10% 9.27% 11.16% 2017 11.79% 8.31% 8.47% 11.13% 9.33% 11.16% 2018 11.79% 8.55% 8.61% 11.13% 9.40% 11.16%


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2.3.1.3 Return of capital employed Since the OCR loans are to be given to sub-holding companies to restructure debts which were incurred to finance different projects implemented in the past by subsidiaries, it is neither feasible nor meaningful to calculate FIRR and NPV for each of the projects. Instead, return to capital employed for each of the sub-groups is calculated for comparison purposes. The calculation of return to capital is based on the assumption that profitability will be enhanced due to implementation of the various restructuring and operational and management enhancement measures. This is expected to give rise to operational efficiency and a reductio operational expenditure. For the purposes of this exercise it is assumed that group will realise at least 5% reduction in general and administrative expenses.

Table 3: Return of capital employed before ADB loan

FY10F FY11F FY12F FY13F FY14F FY15F FY16F FY17F FY18F

Return on capital employed

6.17% 6.25% 6.41% 7.10% 8.19% 8.99% 9.50% 10.03% 10.40%

2.3.1.4 Sensitivity Analysis The sensitivity of adverse movements in sales and cost of sales has been computed to assess the robustness of the financial analysis of Song Da Group. Due t lack of information on relationship between production, through-put volume and utilization rate of income generating assets and related expenses, the analysis is conducted limited variance in sales and cost of sales on an aggregate basis. Consequently, the maximum adverse movement considered is a 10% change in sales and in cost of sales. Results of the sensitivity analysis in respect of each sub-group are tabulated in the tables A8.4, A8.5, A8.6, A8.7, A.8.8, and A.8.9: Table 4: Sensitivity analysis for the sector – Hydro Power Plant Construction

Items Min. SFR Min. DSCR Max. D-E

ratio Min. ROCE 1. Base case 2.56 1.91 0.50 4.1% 2010 2011 2010 2018 2. 10% reduction in sales 2.15 1.59 0.52 -8.64% 2012 2011 2010 2018 3. 10% increase in COGS 0.66 0.54 1.36 -49.00% 2012 2011 2018 2018 4. 10% increase in interest rate 2.53 1.82 0.51 4.1% 2010 2011 2010 2018 5. 10% increase in Capex 1.63 1.83 0.51 3.87% 2011 2011 2010 2018


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Table 5: Sensitivity analysis for the sector – Power Trading Items Min. SFR Min. DSCR Max. D-E ratio Min. ROCE 1. Base case 0.2 0.35 5.27 3.50% 2010 2013 2014 2010 2. 10% reduction in sales 0.2 0.31 6.56 3.07% 2010 2013 2014 2010 3. 10% increase in COGS 0.16 0.32 6.26 3.14% 2011 2013 2014 2010 4. 10% increase in interest rate 0.16 0.32 6.08 3.48% 2011 2013 2014 2010 5. 10% increase in Capex 0.15 0.30 6.73 3.39% 2011 2013 2014 2011 6. 10% USD stronger 0.17 0.39 4.77 3.48%

2011 2013 2014 2010 Table 6: Sensitivity analysis for the sector – Industrial Production

Items Min. SFR Min. DSCR Max. D-E ratio Min. ROCE 1. Base case 0.80 0.5 3.23 7.13% 2011 2012 2010 2010 2. 10% reduction in sales 0.71 0.42 3.21 6.17% 2011 2012 2010 2010 3. 10% increase in COGS (7.27) (0.21) 41.80 0.36% 2018 2018 2013 2016 4. 10% increase in interest rate 0.75 0.42 3.29 7.14% 2011 2012 2010 2010 5. 10% increase in Capex 0.72 0.46 3.23 7.12% 2011 2012 2010 2010 6. 10% USD stronger 0.81 0.50 3.23 7.10% 2011 2012 2010 2010

Table 7: Sensitivity analysis for the sector – Property Development

Items Min. SFR Min. DSCR Max. D-E ratio Min. ROCE 1. Base case 1.11 3.75 0.16 20.03% 2010 2010 2011 2018 2. 10% reduction in sales 1.0 3.27 0.18 18.14% 2010 2010 2010 2012 3. 10% increase in COGS 0.89 2.93 0.20 16.28% 2010 2010 2010 2012 4. 10% increase in interest rate 1.10 3.63 - 20.05% 2010 2010 2015 2014 5. 10% increase in Capex 1.11 3.75 0.16 20.03% 2010 2010 2010 2018

Table 8 Sensitivity analysis for the other companies

Items Min. SFR Min. DSCR Max. D-E ratio Min. ROCE 1. Base case 1.00 0.83 1.05 11.89% 2011 2011 2010 2010 2. 10% reduction in sales 0.8 0.69 1.03 8.92% 2011 2011 2012 2018 3. 10% increase in COGS (2.66) (0.50) 23.59 -12.56% 2018 2018 2015 2017 4. 10% increase in interest rate 0.94 0.73 1.06 11.31% 2011 2011 2010 2010 5. 10% increase in Capex 0.90 0.81 1.05 11.81% 2011 2011 2010 2010


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Table 9: Sensitivity analysis for the Parent company

Items Min. SFR Min. DSCR Max. D-E ratio Min. ROCE 1. Base case 19.27 3.09 0.08 4.46% 2014 2010 2010 2018 2. 10% reduction in sales 16.30 2.28 0.08 4.20% 2014 2010 2010 2018 3. 10% increase in COGS -34.16 0.40 0.09 -28.35% 2018 2010 2010 2018 4. 10% increase in interest rate 19.27 3.00 0.08 4.47% 2014 2010 2010 2018 5. 10% increase in Capex 17.52 3.09 0.08 4.45% 2014 2010 2010 2018

Subject to the effects of imperfections of the underlying projection numbers, the sensitivity analysis above indicates that the financial viability of power plant construction, power trading and property development sub-groups is sufficiently robust to withstand 10% adverse movements in volume of business and cost of sales. However, the viability of the industrial products manufacturing sub-group is sensitive to increase in production costs. Hence, greater management attention must be focused on this business segment to enhance the business model and processes of this sub-group. The financial viability of the Song Da group of companies as a whole is affirmed by the sensitivity analysis. 2.3.2 Sowatco Sowatco is engaged mainly in provision of logistic and related services. Under the proposed corporate restructuring measures, the business activities of the Sowatco will first be shifted down to appropriate subsidiaries engaged in similar businesses. Investments in non-core activitiesshall be disposed. Subsequently, Sowatco will serve as an investment holding company with subsidiaries involved in provision of logistic related services, ranging from provision of port services, bulk handling of rice production through buy and sell arrangement, and provision of river budge transport services. Going forward, the management intends to invest in provision of warehousing and land transport services to compliment its current river budge transport services so as to enable it to provide an integrated “door-to-door” service. With the implementation of the recommended corporate and management restructuring measures, Sowatco is set become a key player in the logistic services industry in the Mekong Delta region, with technical and economic strength and capacity to expand and attract higher end customers and at the same time avail itself to more options and cheaper source funds to meet its future financial needs. This may include the possibility of listing in the regional bourses. All these will add to its long term financial stability. 2.3.2.1 Assumptions The sensitivity of adverse movements on the underlying assumptions was also assessed. Based on these analyses, it is clear that the financial viability of Sowatco will improve over time. The methodology and assumptions used for Sowatco are identical to those used above for analysis of Song Da.


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Table 10: Capital Expenditure Program of Sowatco (2009- 2018)

Unit: MVND

Year Long Binh

port Lorries Barges Ships Warehouse Total 2009 2010 61,480 7,500 68,980 2011 61,480 7,500 62,476 26,666 7,088 165,209 2012 3,300 17,181 20,481 2013 3,630 18,899 22,529 2014 3,993 20,789 24,782 2015 4,392 22,868 27,260 2016 4,832 25,155 29,986 2017 5,315 27,670 32,985 2018 5,846 30,437 36,283 Total 122,959 46,308 225,474 26,666 7,088 428,494

Source: Management of Sowatco . 2.3.2.2 Weighted Average Cost of Capital WACC is calculated using the same assumptions and methodology as for Song Da above: no additional capital contribution from shareholders; future financing through retained earnings and loans; US dollar interest rate of 1.5%; and, tax rate of 25%. The cost of equity of Sowatco is estimated using the capital asset pricing model. The risk-free rate of 8.5% has been used based on the prevailing rate of government bonds denominated in local currency. The market risk premium for Viet Nam is taken as 11% based on the average return on listed companies in Viet Nam. The equity beta for Sowatco is estimated to be 0.85 based on the listed companies engaged in similar business in other developing countries. WACC of Sowatco during 2009–2019 is 11%. 2.3.2.3 Return of capital employed As with Song Da above, the OCR loan to Sowatco group will not finance new physical investments but restructure existing debts. Neither FIRR nor NPV is therefore feasible or meaningful and return to capital employed (ROCE) is instead calculated for comparison with the WACC. As before, expected enhancement in profitability arising from implementation of the various restructuring and operational and management enhancement measures has not been taken into account. Table 11: Sowatco’s Return on Capital Employed

Year 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ROCE

13%

13%

12%

12%

22%

22%

21%

25%

23%

21%

2.3.2.4 Sensitivity Analysis Subject to the same limitations of financial data noted above for Song Da, sensitivity to adverse movements in sales and cost of sales has been computed to assess the robustness of the financial analysis of Sowatco; as before, the analysis is conducted on sales and cost of sales on a total basis, so the maximum adverse movement considered is 10% of sales and cost of sales. The results of the sensitivity analysis are shown in Table A8.10.


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Table 12: Sensitivity Analysis

Description Min. SFR Min. DSCR Max. D-E

Ratio Min ROCE Base Case 40% 1.39 0.3:1 14% (2009) (2009) (2011) (2012)10% Decrease in Sales 20% 2.00 0.38:1 10% (2009) (2009) (2010) (2012)10% Increase in COS 14% 1.95 0.43:1 9.8% (2009) (2009) (2010) (2012)10% Increase in Interest Rate 39% 1.45 0.27:1 14% (2009) (2009) (2009) (2012) 10% Increase in Capex 35% 1.39 0.32:1 14%

(2009) (2009) (2011) (2012)

D-E = debt-equity, DSCR= debt service coverage ratio, FIRR, Max = maximum, Min = minimum, SFR = self-financing ratio, ROCE= Return on capital employed, COS = Cost of Sales, Capex = capital expenditure. The above sensitivity analysis shows the financial viability of the operations of Sowatco and that its operations are sufficiently robust to withstand the adverse movements in revenue and expense items.


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APPENDIX APPENDIX I – KEY OBSERVATIONS FROM THE REVIEW OF SONG DA I. COMPLETED FINANCIAL MANAGEMENT ASSESSMENT QUESTIONNAIRE

Topic Response Remarks 1. Implementing Agency

1.1 What is the entity’s legal status / registration?

Song Da Corporation (“Song Da”) is a General Corporation (“GC”) that was established under the Decision No. 996/BXD – TCLD dated 15 Nov. 1995 as a GC 90 under the direct authority of the Ministry of Construction.

1.2 Has the entity implemented an externally-financed project in the past (if so, please provide details)?

Yes Many projects under Song Da are financed by bankers and institutional organizations. For example: � Projects being financed by local

lending organizations: Can Don Electricity, Nam Chien Electricity, HH4 Building.

� Projects being financed by foreign lending organizations: Construction of Ha Long Cement Production Factory.

1.3 What are the statutory reporting requirements for the entity?

Vietnamese Accounting Standard

1.4 Is the governing body for the project independent?

Not applicable Song Da’s Parent Company will take over and monitor the Project.

1.5 Is the organizational structure appropriate for the needs of the project?

Not applicable

Song Da’s Parent Company will take over and monitor the Project

2. Funds Flow Arrangements 2.1 Describe (proposed) project funds

flow arrangements, including a chart and explanation of the flow of funds from ADB, government and other financiers.

Please refer to Appendix I for reference of the fund flow arrangement proposed by Song Da.

2.2 Are the (proposed) arrangements to transfer the proceeds of the loan (from the government / Finance Ministry) to the entity satisfactory?

Yes. The process appears to be satisfactory.

2.3 What have been the major problems in the past in receipt of funds by the entity?

No such problem had arisen in the past


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Topic Response Remarks 2.4 In which bank will the Imprest

Account be opened? Financing Bank (Refer to Appendix I for detailed)

2.5 Does the (proposed) project implementing unit (PIU) have experience in the management of disbursements from ADB?

ADB procedures are new to Song Da, however all staffs get used to procedures of acquiring loans for investment projects from local and foreign bankers. In any case, the OCR loan from ADB is intended to be released directly to the creditor banks to settle partly or wholly balance of loans due to them.

2.7 Does the entity have/need a capacity to manage foreign exchange risks?

As most of borrowings are in Vietnamese Dong, Song Da did not consider exchange risks as significant risks. However, if the ADB’s loan is in USD, Song Da together with the assistance from the Ministry of Finance will evaluate options available to manage foreign exchange risks. However, foreign exchange risk to USD loan may be partly mitigated through expected receipts of revenue from its Loas subsidiary company.

2.8 How is the counterpart funds accessed?

Not applicable. The loan is to restructure and enhance the balance sheet of Song Da by replacing part of its outstanding loans by a longer term loan with more favorable interest rate. No contribution from the counterpart in this case.

2.9 How are payments made from the counterpart funds?

2.10 If part of the project is implemented by communities or NGOs, does the PIU have the necessary reporting and monitoring features built into its systems to track the use of project proceeds by such agencies?

Not applicable. Song Da’s Parent Company will monitor and manage the Project.

2.11 Are the beneficiaries required to contribute to project costs? If beneficiaries have an option to contribute in kind (in the form of labor), are proper guidelines formulated to record and value the labor contribution?

Not applicable (refer to 2.9 above) .

3. Staffing 3.1 What is the (proposed)

organizational structure of the accounting department? Attach an organization chart.

Please refer to Appendix II for current structure of accounting department.


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Topic Response Remarks 3.2 Identify the (proposed) accounts

staff, including job title, responsibilities, educational background and professional experience. Attach job descriptions and CVs of key accounting staff.

The Loan will be controlled by experienced and qualified finance staff Credit Group of Finance and Accounting Department at Song Da’s Parent Company. As observed, staffs and leaders work at accounting Department have experience and strong background in accounting and finance. Specifically: � Chief Accountant and accounting

managers have high qualification such as master degree, MBA and also experiences of many other related business sectors such as: financing, credit, management, investment...etc.

� All Accounting Officers graduating from qualified universities on finance and accounting.

� Most of staffs have strong commitment with the Company. They all work at Song Da for long period (between 6 and 30 years).

No separate accounting system will be established for the Project. Song Da’s Parent Company will take over and monitor the Project.

3.3 Is the project finance and accounting function staffed adequately?

The loans will monitored and managed by Song Da’s Parent Company. Being adequately staffed (as mentioned in 3.3), Song Da believes that it management is capable to monitor the loan.

3.4 Is the finance and accounts staff adequately qualified and experienced?

Yes (refer to 3.2).

3.5 Are the project accounts and finance staffs trained in ADB procedures?

ADB procedures are new to finance and accounting staffs, however given that the capacity of its staff in accounting and finance department (who have a lot experience in securing and managing loans from local and foreign bankers, they will be quick to get use to the disbursement procedures of ADB. In any case, the OCR loan will be released directly to the creditor banks to settle partly or wholly loans due to them. Song Da management believes it is capable enough to manage the loans from ADB.


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Topic Response Remarks 3.6 What is the duration of the

contract with the finance and accounts staff?

The GC follows the normal practice in Vietnam. Initially, all staffs will sign a 1 year contract with the corporation. After 1 year of working, this contract will be extended to unlimited period.

3.7 Indicate key positions not contracted yet, and the estimated date of appointment.

All staffs working in accounting department have labor contract. There is no key position that has not been contracted yet.

3.10 Does the project have written position descriptions that clearly define duties, responsibilities, lines of supervision, and limits of authority for all of the officers, managers, and staff?

Finance and Accounting Department has its own Manual. This manual covers the structure of the accounting department, division of work, personnel of each division, responsibilities and authority limits for all staffs. As the loan will be controlled and monitored by Song Da’s Parent Company, its Manual of procedures shall be applicable to monitoring and management of the loans from ADB. Song Da believes that this Manual covers all transactions/functions required by the Project. However, updates of the Manual for ADB project will be made if required.

3.11 At what frequency are personnel transferred?

Staff turnover is very low at the Department (less than 10%).

3.12 What is training policy for the finance and accounting staff?

On the job trainings for all staffs at all divisions are the most commonly adopted method of traning. Accounting staffs will also be appointed to joint external tax update, finance management courses annually and at other times as deemed appropriate.

4. Accounting Policies and Procedures 4.1 Does the entity have an accounting

system that allows for the proper recording of project financial transactions, including the allocation of expenditures in accordance with the respective components, disbursement categories, and sources of funds? Will the project use the entity accounting system?

Song Da’s Parent Company will monitor and the manage the loans from ADB. Song Da Parent company is using SAP as accounting software which allows recording all financial transactions of the company and its subsidiaries, including the allocation of expenditures in accordance with the respective components, disbursement categories, and sources of funds.


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Topic Response Remarks 4.2 Are controls in place concerning

the preparation and approval of transactions, ensuring that all transactions are correctly made and adequately explained?

Controls appear to be in place, specifically:

� For each transaction incurred,

staffs at the related department will make the request, line manager will approve, accounting staff will prepare journal voucher attached with relevant supporting documents, Chief Accountant and then General Director approve.

� All approval journal vouchers are subsequently sent to recording group for review and for posting.

� Every month, recording group will print the accounting record and send to respective groups for review and checking.

� Other than recording group, other group can not access the accounting system.

4.3 Is the chart of accounts adequate to properly account for and report on project activities and disbursement categories?

Chart of the account of Song Da Parent Company is in line with the Vietnamese accounting standards, which they believe to cover all transactions and generate all required reports for the Project. The Project’s will use the same chart of account with Song Da.

4.4 Are cost allocations to the various funding sources made accurately and in accordance with established agreements?

Not applicable. The Loan is to re-finance part of the outstanding loans.

4.5 Are the General Ledger and subsidiary ledgers reconciled and in balance?

Yes. The recording accountants will perform such reconciliation monthly.

4.6 Are all accounting and supporting documents retained on a permanent basis in a defined system that allows authorized users easy access?

Accounting vouchers and supporting documents are properly kept at Accounting Department as required by Accounting Law. Appropriate file system is maintained by accounting staffs

Segregation of Duties 4.7 Are the following functional

responsibilities performed by different units or persons: (i) authorization to execute a transaction; (ii) recording of the transaction; and (iii) custody of assets involved in the transaction?

Yes. (i) Head of Department/

Chief Accountant and GD, if necessary;

(ii) Recording groups; (iii) Requested Department,

Accounting Groups


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Topic Response Remarks 4.8 Are the functions of ordering,

receiving, accounting for, and paying for goods and services appropriately segregated?

Yes. - Orders are prepared and

goods are received by the Department who requests for the purchases

- Payments are made by cashier/bank accountants

- Accounting records are made by recording group

4.9 Are bank reconciliations prepared by someone other than those who make or approve payments?

Yes Banks reconciliation is done by Credit Group and approved by Chief Accountant Payment is made by cashier/Bank accountant and approved by chief accountant and above

Budgeting System 4.10 Do budgets include physical and

financial targets? Yes. Based on the physical target (production volume, extend of completion of construction works), Song Da estimates their financial targets (Sales, COGs, CIP, etc). However, the tasks, targets and measures indicated by the plan 2006 to 2010 are not specific and expressed in quantitative terms with precise indicators as well as not comprehensive enough. Such way of preparing the budget would not facilitate monitoring and achievement and performance.


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Topic Response Remarks 4.11 Are budgets prepared for all

significant activities in sufficient detail to provide a meaningful tool with which to monitor subsequent performance?

The budgets are not prepared in details for all significant activities, especially for financial activities, investment in real estate. Basically "Budget are prepared basing on the template provided by the MoF for the SOEs which cover the following areas: - Total production = Production

volume x Price - Sales = Qtty sold x Price - Statutory Obligation/payment - Investment Plan (Capex) - Average salary/month - Production volume. There is lack of reference to desired financial ratios and other qualitative KPIs in preparing the plan. The only financial indicator spelled out in the plans is the average remunerations. Without the sufficient budget details and the normally expected financial indicators being stipulated in the plans, assessment of performance and achievement of goals could not be effectively undertaken. Further, it is not certain as to whether adequate consideration has been given to the financial aspects of the plans.

4.12 Are actual expenditures compared to the budget with reasonable frequency, and explanations required for significant variations from the budget?

Yes Budget is reviewed every six month, adjustment could be considered when necessary basing on the evaluation of performance in the 1st six months. All significant variance will be explained.

4.13 Are approvals for variations from the budget required in advance or after the fact?

It’s always before the fact.

4.14 Who is responsible for preparation and approval of budgets?

Planning Department prepared the general budget which mostly bases on the physical criteria. The general budget subsequently is sent to other relevant Department, of which the Accounting and Finance Department. Based on the budget received from the Planning Department, the Accounting and Finance Department prepares the financial budgets. When completed, they will submit it to General Director for review before submitting to BOM for approval.


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Topic Response Remarks 4.15 Are procedures in place to plan

project activities, collect information from the units in charge of the different components, and prepare the budgets?

Yes. Subsidiaries and Project Management Units are required to send their annual budget to the GC for approval at the end of each year. As discussed, Song Da’s parent company will not involve in the budgeting process of the subsidiaries. The subsidiaries set their own budgets to which they have to be responsible.

4.16 Are the project plans and budgets of project activities realistic, based on valid assumptions, and developed by knowledgeable individuals?

Annual plan is established basing on plan of all subsidiaries, taken into account the general strategic plan of the GC as a whole, inflation rate, industry growth rate, etc. As this budget is prepared for short term, it realistic is usually assured. 5 year plan is based on the general strategic plan of the GCs, taking into account inflation rate, industry growth rate, etc. Even it is noted within the plan, inflation rate, market risk; industry growth rate, etc are rarely quantified and referenced. It is, consequently, very difficult to conclude the realistic of such plan.

Payments 4.17 Do invoice-processing procedures

provide for: (i) Copies of purchase orders and

receiving reports to be obtained directly from issuing departments?

(ii) Comparison of invoice quantities, prices and terms, with those indicated on the purchase order and with records of goods actually received?

(iii) Comparison of invoice quantities with those indicated on the receiving reports?

(iv) Checking the accuracy of calculations?

The invoice-processing procedures are properly performed: (i) by purchase departments/staffs (ii) by AP accountant, warehouseman,

and requesting for purchase departments/staffs;

(iii) and (iv) are performed by AP accountant;


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Topic Response Remarks 4.18 Are all invoices stamped PAID,

dated, reviewed and approved, and clearly marked for account code assignment?

No. However, the payment process should go through a very strict review, cross check and approval process, in details: � Payment voucher should always

be attached with a complete set of supporting document, including original invoice. Payment dossiers should: • Be prepared by accountant • Be approved by chief

accountant/and then GD (if necessary)

• Be reviewed before posting by recording accountant

• Be reviewed again by cash/bank accountant before making payment.

� On the other hand, system does

not permit invoice number to be recorded twice.

4.19 Do controls exist for the preparation of the payroll and are changes to the payroll properly authorized?

All decisions relating to payroll are approved by GD/BOM. Payroll sheet is prepared monthly by HR Department approved by Chief Accountant and General Director before transferring to accounting department for payment processing.

Policies And Procedures 4.20 What is the basis of accounting

(e.g., cash, accrual)? Accrual basis

4.21 What accounting standards are followed?

Vietnamese accounting standards

4.22 Does the project have an adequate policies and procedures manual to guide activities and ensure staff accountability?

Finance and Accounting Department has its own Manual. This manual covers the structure of the accounting department, division of work, personnel of each division duties, responsibilities, lines of supervision, and limits of authority for all levels. The Corporate has also registered ISO 9002 in production and management which in turn helps to improve the internal control system. The project is done by GC’s staffs. Therefore, this manual will apply to the project too.

4.23 Is the accounting policy and procedure manual updated for the project activities?

Not at the moment but Song Da will update if required.


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Topic Response Remarks 4.24 Do procedures exist to ensure that

only authorized persons can alter or establish a new accounting principle, policy or procedure to be used by the entity?

Yes. Only Head of Accounting Department and Board of Management can make changes in accounting principles, policies or procedures.

4.25 Are there written policies and procedures covering all routine financial management and related administrative activities?

Yes. Finance and Accounting Department has its own operating manual. Song Da believes such manual will cover all routine financial management and related administrative activities.

4.26 Do policies and procedures clearly define conflict of interest and related party transactions (real and apparent) and provide safeguards to protect the organization from them?

No. Eventhough there is not a specific definition and procedures implemented to avoid conflict of interest, all transactions have to go through a very strict review and approval procedures which Song Da believes are able to provide adequate safeguards and protections.

4.27 Are manuals distributed to appropriate personnel?

Yes. They are distributed to all accounting and finance personnel.

Cash and Bank 4.28 Indicate names and positions of

authorized signatories in the bank accounts.

General Director/ authorized Deputy Director and Chief Accountant/authorized Vice Chief Accountant.

4.29 Does the organization maintain an adequate, up-to-date cashbook, recording receipts and payments?

Yes. Cash on hand and cash at bank Accountants have their own control file to keep track the cash flow daily.

4.30 Do controls exist for the collection, timely deposit and recording of receipts at each collection location?

Yes. Song Da applies following controls to deposit and cash receipt process: � Limit on cash on hand balance � Limit for payment via cash on

hand. � Requirement to record cash

receipt/disbursement transactions in the same day when the payment is made

� Monthly bank reconciliation.

4.31 Are bank and cash reconciled on a monthly basis?

Yes, as noted above.

4.32 Are all unusual items on the bank reconciliation reviewed and approved by a responsible official?

Any difference will be further investigated and adjustment will be made accordingly with approval from Chief Accountant and General Director.

4.33 Are all receipts deposited on a timely basis?

Yes. They are deposited on a daily basis.


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Topic Response Remarks Safeguard over Assets

4.34 Is there a system of adequate safeguards to protect assets from fraud, waste and abuse?

The subsidiaries and Dependent Accounting Unit (including the Project Managements) are responsible for managing the fixed assets at their own office. Dependent accounting unit submits their fixed assets report to the Parent Company at year end. At Head Office, the fixed assets are controlled by each department in charge. In addition, they are also under scrutiny of of guard team. Physical checks are performed annually at year end. As the Head Office is not involved in production, inventory at Head Office is not material.

4.35 Are subsidiary records of fixed assets and stocks kept up to date and reconciled with control accounts?

Reconciliation is undertaken annually at year end by comparing the actual counting results and the book balances.

4.36 Are there periodic physical inventories of fixed assets and stocks?

Yes, as documented above.

4.37 Are assets sufficiently covered by insurance policies?

The GC does not purchase insurance for fixed asset hold at Corporation except for cars.

Other Offices and Implementing Entities 4.38 Are there any other regional

offices or executing entities participating in implementation?

Yes. The ADB loan will be used to: � restructure a nd enhance the

balance sheet of Song Da Corporation, (including the Parent Company and selected subsidiaries)

� Enhance the capacity of Song Da Corporation by: • Financing the cost of

restructuring exercise of the Corporation as a whole;

• Financing the cost of improving the internal control system, educating personnel, upgrading the information management system, etc.

For all above activities, subsidiaries of Song Da play the role of co-implementing agencies, under the instruction of its Parent Company.


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Topic Response Remarks 4.39 Has the project established

controls and procedures for flow of funds, financial information, accountability, and audits in relation to the other offices or entities?

The funds flow arrangement stated in the MOU stipulate that: � the OCR loan will be transferred

directly from the Imprest Account to the creditor banks from which Song Da Parent Company and/or its subsidiaries previously borrowed money from;

� the ADF loan will still be under the control of Song Da Parent Company.

As noted in previous sections, there is a written reporting and monitoring mechanism through which the Parent Company manages its subsidiaries. . Song Da Parent Company is still responsible for the MoF/ADB loan.

4.40 Does information among the different offices/implementing agencies flow in an accurate and timely fashion?

No Currently, the reporting from subsidiaries to the Parent Company is via telephone, fax, and email. No interface in the reporting system sometime delays the reporting process. However, Song Da believes that all transactions relating to the Project will be reported timely and accurately.

4.41 Are periodic reconciliations performed among the different offices/implementing agencies?

Reconciliation of intercompany transactions between Parent Company and subsidiaries is made quarterly. However, it is not done for the transaction among subsidiaries as Song Da Parent Company is unable to keep track their transactions. As the Project will be monitored by the Parent Company, Song Da believes that proper reconciliation will be done.

Other 4.42 Has the project advised

employees, beneficiaries and other recipients to whom to report if they suspect fraud, waste or misuse of project resources or property?

No official guidance on such matter but the corporate culture encourages their personnel to report fraud, waste or misuse of project resources or property to GD.


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Topic Response Remarks 5. Internal Audit

5.1 Is there an internal audit department in the entity?

The GC has yet establish internal audit function.. N/A N/A

5.2 What are the qualifications and experience of audit department staff?

5.3 To whom does the internal auditor report?

5.4 Will the internal audit department include the project in its work program?

5.5 Are actions taken on the internal audit findings?

6. External Audit 6.1 Is the entity financial statement

audited regularly by an independent auditor? Who is the auditor?

Yes. - The consolidated financial statements of the Corporation are audited annually. The Auditor is Auditing and Consulting Company, member of HLB International. - In 2007, Financial statements of the Head Office, dependent accounting unit and subsidiaries are also audited.

6.2 Are there any delays in audit of the entity? When were the audit reports issued?

Audit report on the consolidated financial statements for the year ended 31/12/07 was issued in 19 May 2008. Audit report for the year ended 31/12/08 is still not yet issued.

6.3 Is the audit of the entity conducted according to the International Standards on Auditing?

The audit of the Parent Company and subsidiaries are undertaken in accordance with Vietnamese Standards on Auditing.


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Topic Response Remarks 6.4 Were there any major

accountability issues brought out in the audit report of the past three years?

1 - Audit of Financial Statement of subsidiaries � 2006: 18/40 reports of the

subsidiaries are qualified; � 2007: 17/36 reports of the

subsidiaries are qualified. Qualifications are mostly on: under provision of severance allowance, under provision for bad debt, under recorded of expense, quick depreciation method applied, etc. No qualification of the report of the Song Da’s Head Office. 2 – Audit of Consolidated Financial Statement: The 2006 and 2007 consolidated financial statements were also qualified. Qualifications were relating mainly to: 1.no elimination of intercompany transactions; 2 qualifications appearing in the auditors report of subsidiaries..etc

6.5 Will the entity auditor audit the project accounts or will another auditor be appointed to audit the project financial statements?

The project will be monitored by mother company and no separate accounting or management system for the project. It is not clear at this stage whether Song Da needs to prepare separate project accounts but they will do if required. If so, the project accounts will be audited by the entity auditor.

6.6 Are there any recommendations made by the auditors in prior audit reports or management letters that have not yet been implemented?

As noted in section 6.4, the number of limitations decreases from year to year from 2006 to 2007.

6.6 Is the project subject to any kind of audit from an independent governmental entity (e.g., the supreme audit institution) in addition to the external audit?

N/A

6.7 Has the project prepared acceptable terms of reference for an annual project audit?

It is not done at this stage but Song Da will comply if required.


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Topic Response Remarks 7. Reporting and Monitoring 7.1 Are financial statements prepared

for the entity? In accordance with which accounting standards?

The financial statements of Parent Company and its subsidiaries are prepared in accordance with Vietnamese Accounting Standards.

7.2 Are financial statements prepared for the implementing unit?

Not applicable

7.3 What is the frequency of preparation of financial statements? Are the reports prepared in a timely fashion so as to useful to management for decision making?

The financial statements are prepared monthly at the Head Office. The consolidation for the whole GCs is undertaken quarterly.

7.4 Does the reporting system need to be adapted to report on the project components?

Song Da believes that its current reporting system is adequate to report on project components. Therefore, no change is needed.

7.5 Does the reporting system have the capacity to link the financial information with the project's physical progress? If separate systems are used to gather and compile physical data, what controls are in place to reduce the risk that the physical data may not synchronize with the financial data?

Song Da believes that its current reporting system is capable enough to link the financial information with the physical progress of the various projects of the company and its subsidiaries as there is a periodic coordination and reconciliation between accounting, planning and implementing functions.

7.6 Does the project have established financial management reporting responsibilities that specify what reports are to be prepared, what they are to contain, and how they are to be used?

Yes. It is clearly stated in the accounting manual.

7.7 Are financial management reports used by management?

Yes, financial management report provides inputs to the management to evaluate the financial position of the company and prepare the management reports to submit to Board.

7.8 Do the financial reports compare actual expenditures with budgeted and programmed allocations?

Yes. Annual Plan is reviewed every six month. Adjustment to budget will be made accordingly upon approval by the management.

7.9 Are financial reports prepared directly by the automated accounting system or are they prepared by spreadsheets or some other means?

Most of subsidiaries and Parent Company use SAS as accounting system which can directly generate various types of reports.


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Topic Response Remarks 8. Information Systems 8.1 Is the financial management

system computerized? Yes, the Accounting system SAS is able to generate various types of report such management reports and general reports. E.g: Trial balance, Profit and Loss Statement, Balance sheet, Fix asset report, Account receivable/payable aging report, Inventory listing... Song Da intents to upgrade the accounting system, within the next one year

8.2 Can the system produce the necessary project financial reports?

Yes Song Da believes that the existing financial management system can generate all required reports..

8.3 Is the staff adequately trained to maintain the system?

Yes, this accounting system has been applied since the GC started its operation. All staff in accounting department get used to this system for the period form 6 to 26 years. Song Da, consequently, believes all staffs are capable enough to maintain the system. Additional training will be provided when deemed necessary.

8.4 Does the management organization and processing system safeguard the confidentiality, integrity and availability of the data?

Only authorized persons can have access to certain types of information and password is always required. Information is always reviewed and reconciled by management. Data will be displayed/generated if required.


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II. FINANCIAL PROJECTIONS

A. BEFORE ADB’s LOAN 1. Combined balance sheet Table 13: Combined Balance Sheet

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ASSETS

A. CURRENT ASSETS

I. Cash 1,625,367 826,973 985,192 1,233,556 1,776,235 2,327,389 2,949,774 3,607,983 4,248,889 4,897,286 5,771,926

II. Current receivables 3,074,783 3,312,918 3,547,655 3,866,505 4,304,755 4,734,407 5,269,709 5,784,081 6,314,099 6,891,352 7,445,384

Inc: Current internal receivables 0

III. Inventories 6,614,071 6,771,669 7,028,428 7,357,602 7,778,932 8,190,827 8,565,564 9,158,340 9,859,444 10,667,693 11,641,684

IV. Other current assets 3,812,706 4,089,632 4,308,606 4,572,801 5,055,389 5,492,230 6,035,540 6,583,590 7,049,512 7,561,592 8,141,400

Total current assets 15,126,927 15,001,193 15,869,881 17,030,464 18,915,311 20,744,854 22,820,588 25,133,995 27,471,94

3 30,017,923 33,000,394

B. NON-CURRENT ASSETS

I. Fixed assets

Fixed assets 5,022,364 7,689,871 8,318,267 8,706,351 13,197,719 12,082,243 11,085,607 12,062,372 12,626,31

9 13,119,839 13,804,985

Construction in progress 7,911,864 7,535,201 9,477,942 12,375,421 9,269,953 10,726,911 11,341,732 8,973,302 6,529,450 3,885,599 1,291,748

II. Long-term finance investments 4,769,503 4,769,503 4,769,503 4,769,503 4,818,115 5,288,184 6,253,628 7,471,924 9,465,227 11,754,348 14,033,806

III. Other long-term assets 3,671,472 3,683,402 3,696,525 3,710,960 3,726,839 3,744,306 3,763,520 3,784,655 3,807,904 3,833,477 3,861,608

Total non - current assets 21,375,203 23,677,976 26,262,236 29,562,235 31,012,626 31,841,644 32,444,486 32,292,252 32,428,90

0 32,593,263 32,992,147

TOTAL ASSETS 36,502,130 38,679,169 42,132,117 46,592,700 49,927,937 52,586,498 55,265,074 57,426,246 59,900,84

3 62,611,185 65,992,540

RESOURCES

A. LIABILITIES

I. Current liabilities


Ernst & Young 31

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Short-term loans and borrowings 3,521,636 4,033,820 4,182,028 4,251,402 3,664,308 3,090,469 2,871,940 2,560,228 2,332,325 2,104,211 2,058,120

Payables and prepaid expenses 2,726,951 3,117,478 3,489,496 3,893,790 4,540,206 5,096,788 5,804,582 6,561,474 7,292,960 8,125,671 8,999,924

Inc : Internal payables 0

Other current liabilities 6,078,555 6,850,566 7,757,396 8,868,560 10,154,596 11,408,979 13,042,008 14,747,952 16,940,92

7 19,066,458 21,339,131

Total current liabilities 12,327,141 14,001,865 15,428,919 17,013,752 18,359,111 19,596,236 21,718,530 23,869,654 26,566,21

2 29,296,339 32,397,175

II. Non -current liabilities 0

Long-term loans and borrowings 10,152,267 9,746,581 10,835,928 12,762,711 13,792,302 14,239,420 13,755,876 12,339,415 10,283,01

5 7,969,758 5,493,398

Current portion of long-term loans and debts 0

Other non - current liabilities 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718

Total Non-current Liabilities 13,803,984 13,398,299 14,487,645 16,414,428 17,444,019 17,891,138 17,407,594 15,991,133 13,934,73

3 11,621,476 9,145,116

B. OWNERS’ EQUITY 0

Shares 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463

Preference shares 0

Undistributed earnings and other funds 996,299 1,904,301 2,840,848 3,789,814 4,750,102 5,724,419 6,764,245 8,190,754

10,025,193 12,318,665 15,075,545

Total owners' equity 10,371,005 11,279,006 12,215,553 13,164,520 14,124,808 15,099,124 16,138,950 17,565,459 19,399,89

9 21,693,370 24,450,251

TOTAL LIABILITIES AND OWNERS’ EQUITY 36,502,130 38,679,170 42,132,118 46,592,700 49,927,938 52,586,498 55,265,074 57,426,247

59,900,843 62,611,186 65,992,541


Ernst & Young 32

1.1 Sector – Hydro Power Plant Construction

Table 13.1: Projected Balance Sheet for Hydro Power Plant Construction

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ASSETS

A. CURRENT ASSETS

I. Cash 143,304 159,738 163,370 177,287 193,802 211,013 229,507 247,602 266,992 477,792

II. Current receivables 834,445 896,376 948,124 1,027,483 1,101,961 1,192,688 1,289,304 1,383,164 1,492,434 1,591,720

Inc : Current internal receivables - - - - - - - - - -

III. Inventories 1,854,321 1,906,086 1,948,922 1,997,884 2,066,176 2,146,838 2,237,758 2,334,589 2,441,380 2,541,166

IV. Other current assets 440,401 463,991 474,418 514,128 563,926 613,843 667,383 720,106 776,994 837,747

Total current assets 3,272,471 3,426,191 3,534,835 3,716,783 3,925,864 4,164,383 4,423,952 4,685,461 4,977,800 5,448,426


I. Fixed assets

Fixed assets 1,666,140 1,668,642 1,679,013 1,672,332 1,603,558 1,592,039 1,497,219 1,172,299 847,380 697,774

Construction in progress 433,820 433,820 433,820 433,820 433,820 433,820 433,820 433,820 433,820 433,820

II. Long-term finance investments 489,803 489,803 489,803 489,803 541,272 1,075,716 1,727,314 2,968,617 4,273,738 5,444,196

III. Other long-term assets 36,582 36,582 36,582 36,582 36,582 36,582 36,582 36,582 36,582 36,582

Total non - current assets 2,626,345 2,628,847 2,639,218 2,632,537 2,615,232 3,138,157 3,694,935 4,611,318 5,591,520 6,612,372

TOTAL ASSETS 5,898,817 6,055,037 6,174,053 6,349,320 6,541,097 7,302,539 8,118,887 9,296,779 10,569,320 12,060,797

RESOURCES

A. LIABILITIES


Short-term loans and borrowings 927,756 927,756 786,756 462,756 - - - - - -

Payables and prepaid expenses 649,012 700,615 763,767 856,236 951,693 1,097,273 1,267,075 1,463,116 1,699,477 1,991,977

Inc : Internal payables - - - - - - - - - -

Other current liabilities 1,483,457 1,648,507 1,843,575 1,997,884 2,191,399 2,385,376 2,593,428 3,118,115 3,709,518 4,467,985

Total current liabilities 3,060,225 3,276,878 3,394,097 3,316,876 3,143,092 3,482,648 3,860,503 4,581,231 5,408,995 6,459,962

II. Non -current liabilities


Ernst & Young 33

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Long-term loans and borrowings 662,177 324,295 62,402 - - - - - - -

Current portion of long-term loans and debts - - - - - - - - - -

Other non - current liabilities 6,480 6,480 6,480 6,480 6,480 6,480 6,480 6,480 6,480 6,480

Total Non-current Liabilities 668,657 330,775 68,881 6,480 6,480 6,480 6,480 6,480 6,480 6,480

B. OWNERS’ EQUITY

Shares 1,639,806 1,639,806 1,639,806 1,639,806 1,639,806 1,639,806 1,639,806 1,639,806 1,639,806 1,639,806

Preference shares - - - - - - - - - -

Undistributed earnings and other funds 530,128 807,578 1,071,268 1,386,157 1,751,718 2,173,604 2,612,098 3,069,262 3,514,039 3,954,550

Total owners' equity 2,169,935 2,447,385 2,711,074 3,025,964 3,391,525 3,813,411 4,251,904 4,709,068 5,153,846 5,594,356

TOTAL LIABILITIES AND OWNERS’ EQUITY 5,898,817 6,055,037 6,174,053 6,349,320 6,541,097 7,302,539 8,118,887 9,296,779 10,569,320 12,060,797


Ernst & Young 34

1.2 Sector – Power Trading

Table 13.2: Projected Balance Sheet for Power Trading

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ASSETS

A. CURRENT ASSETS

I. Cash 97,390 97,905 121,302 160,255 177,518 249,333 316,209 347,609 347,987 347,556

II. Current receivables 52,628 52,628 64,791 86,923 95,986 135,968 168,684 187,022 187,022 187,022


III. Inventories 30,158 30,158 37,128 49,811 55,004 77,916 96,664 107,172 107,172 107,172

IV. Other current assets 788,920 749,800 802,689 861,508 891,869 926,469 1,003,108 1,042,650 1,065,820 1,100,575

Total current assets 969,096 930,491 1,025,911 1,158,497 1,220,377 1,389,685 1,584,666 1,684,454 1,708,002 1,742,326


I. Fixed assets

Fixed assets 2,511,681 2,231,189 1,943,711 6,187,529 5,382,462 4,570,710 5,908,159 6,999,380 7,844,373 8,777,379

Construction in progress 4,538,184 7,248,735 10,219,618 7,003,734 8,453,189 9,107,539 6,712,111 4,316,683 1,921,255 (474,173)

II. Long-term finance investments 9,400 9,400 9,400 9,400 9,400 9,400 9,400 9,400 9,400 9,400


Total non – current assets 7,154,542 9,594,128 12,288,015 13,327,477 13,984,547 13,841,094 12,798,459 11,511,131 9,979,263 8,537,266

TOTAL ASSETS 8,123,638 10,524,619 13,313,926 14,485,974 15,204,924 15,230,780 14,383,125 13,195,585 11,687,265 10,279,592

RESOURCES

A. LIABILITIES


Short-term loans and borrowings 1,011,977 1,420,098 1,724,309 1,505,561 1,493,904 1,307,624 1,021,192 798,049 635,452 669,773

Payables and prepaid expenses 123,880 156,480 192,645 301,528 416,206 606,416 794,128 926,800 1,088,990 1,204,840


Other current liabilities 423,800 521,600 642,151 861,508 951,327 1,347,591 1,671,847 2,085,301 2,201,151 2,201,151


II. Non –current liabilities


Ernst & Young 35

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Long-term loans and borrowings 4,179,050 6,124,411 8,478,046 9,616,264 10,397,242 10,417,410 9,505,176 7,903,688 5,994,119 3,946,181


Other non – current liabilities - - - - - - - - - -

Total Non-current Liabilities 4,179,050 6,124,411 8,478,046 9,616,264 10,397,242 10,417,410 9,505,176 7,903,688 5,994,119 3,946,181

B. OWNERS’ EQUITY

Shares 2,339,086 2,339,086 2,339,086 2,339,086 2,339,086 2,339,086 2,339,086 2,339,086 2,339,086 2,339,086


Undistributed earnings and other funds 45,845 (37,056) (62,313) (137,972) (392,841) (787,348) (948,304) (857,339) (571,534) (81,440)

Total owners’ equity 2,384,932 2,302,030 2,276,774 2,201,115 1,946,245 1,551,739 1,390,782 1,481,747 1,767,553 2,257,647



Ernst & Young 36

1.3 Sector – Industrial Production

Table 13.3: Projected Balance Sheet for Industrial Production

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ASSETS

A. CURRENT ASSETS

I. Cash 53,969 104,871 117,070 124,887 140,370 148,154 166,816 178,369 192,442 205,579



III. Inventories 2,788,702 2,841,740 2,903,385 2,969,954 3,058,405 3,145,328 3,297,063 3,535,293 3,842,096 4,223,167

IV. Other current assets 540,667 633,061 745,464 847,371 952,541 1,059,946 1,193,381 1,279,609 1,374,460 1,478,796



I. Fixed assets

Fixed assets 2,162,078 2,764,019 3,289,875 3,388,305 3,119,820 2,848,008 2,606,142 2,360,950 2,112,429 1,860,582

Construction in progress 1,068,136 267,034 - - - - - - - -




TOTAL ASSETS 6,891,408 6,961,243 7,484,508 7,838,875 7,863,975 7,892,286 8,039,037 8,210,031 8,472,973 8,805,999

RESOURCES

A. LIABILITIES


Short-term loans and borrowings 299,390 364,036 537,919 575,989 500,788 484,866 523,524 532,765 497,247 464,635

Payables and prepaid expenses 796,772 865,183 973,026 1,079,983 1,186,008 1,296,585 1,415,406 1,517,676 1,617,388 1,705,774


Other current liabilities 291,480 422,041 588,524 789,218 1,003,904 1,232,495 1,498,665 1,785,502 2,045,708 2,338,562




Ernst & Young 37

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Long-term loans and borrowings 4,325,826 3,980,915 3,971,623 3,924,742 3,589,140 3,128,199 2,674,584 2,270,282 1,911,991 1,516,936




B. OWNERS’ EQUITY

Shares 884,020 884,020 884,020 884,020 884,020 884,020 884,020 884,020 884,020 884,020


Undistributed earnings and other funds 292,777 443,904 528,253 583,780 698,973 864,978 1,041,696 1,218,643 1,515,476 1,894,928




Ernst & Young 38

1.4 Sector – Property Development

Table 13.4: Projected Balance Sheet for Property Development

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ASSETS

A. CURRENT ASSETS

I. Cash 40,662 59,325 66,199 73,788 85,276 98,877 115,874 132,906 152,999 175,565

II. Current receivables 243,969 326,288 413,745 512,814 625,198 761,623 901,516 1,051,672 1,220,868 1,412,774


III. Inventories 75,569 110,255 148,948 188,642 230,225 270,253 317,333 364,934 419,674 482,625

IV. Other current assets 243,969 326,288 388,920 454,207 523,815 609,298 715,443 822,759 946,173 1,088,099



I. Fixed assets

Fixed assets 621,788 872,032 1,012,151 1,047,270 1,077,389 1,102,745 1,123,089 1,138,183 1,338,277 1,523,371





TOTAL ASSETS 2,407,668 2,890,241 3,286,975 3,688,750 4,278,590 4,979,783 5,841,748 6,833,487 8,087,819 9,504,333

RESOURCES

A. LIABILITIES


Short-term loans and borrowings 91,500 113,308 91,500 - - - - - - -

Payables and prepaid expenses 203,307 237,300 264,797 293,037 323,160 358,700 395,224 431,285 473,087 526,500



Total current liabilities 650,595 869,702 1,109,312 1,190,462 1,379,239 1,587,123 1,837,649 2,090,074 2,456,998 2,807,998



Ernst & Young 39

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Long-term loans and borrowings 206,703 189,782 43,975 36,347 29,077 21,808 14,539 7,269 - -


Other non - current liabilities - - - - - - - - - -

Total Non-current Liabilities 206,703 189,782 43,975 36,347 29,077 21,808 14,539 7,269 - -

B. OWNERS’ EQUITY

Shares 1,257,324 1,257,324 1,257,324 1,257,324 1,257,324 1,257,324 1,257,324 1,257,324 1,257,324 1,257,324


Undistributed earnings and other funds 293,047 573,433 876,364 1,204,617 1,612,951 2,113,528 2,732,236 3,478,820 4,373,497 5,439,012




Ernst & Young 40

1.5 Sector – Others

Table 13.5: Projected Balance Sheet for other companies

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ASSETS

A. CURRENT ASSETS

I. Cash 175,218 199,530 221,548 259,206 297,494 338,265 383,351 431,216 485,697 546,905

II. Current receivables 492,096 500,533 533,579 624,255 701,518 798,033 883,288 994,431 1,120,176 1,218,745


III. Inventories 636,919 725,314 805,302 942,153 1,021,721 1,026,949 1,161,277 1,307,399 1,472,719 1,714,515

IV. Other current assets 2,007,129 2,095,041 2,126,706 2,345,565 2,524,892 2,788,018 2,963,310 3,140,186 3,350,451 3,584,721



I. Fixed assets

Fixed assets 602,255 657,606 658,546 781,529 781,134 857,676 817,358 849,703 876,751 851,000





TOTAL ASSETS 4,478,706 4,763,498 5,065,403 5,678,176 6,155,578 6,631,030 7,095,172 7,661,101 8,295,536 9,007,204

RESOURCES

A. LIABILITIES


Short-term loans and borrowings 1,092,156 1,090,789 1,110,917 1,120,003 1,095,777 1,079,451 1,015,511 1,001,511 971,511 923,711

Payables and prepaid expenses 420,507 478,867 531,676 751,617 862,550 981,220 1,109,567 1,249,182 1,407,141 1,585,918






Ernst & Young 41

Long-term loans and borrowings 256,230 216,524 206,665 214,949 223,962 188,459 145,117 101,775 63,648 30,281




B. OWNERS’ EQUITY - - - - - - - - - -

Shares 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464


Undistributed earnings and other funds 147,066 203,059 250,486 298,486 347,438 400,108 458,217 523,108 593,928 671,761




Ernst & Young 42

1.6 Parent Company

Table 13.6: Projected Balance Sheet for Parent Company

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ASSETS

A. CURRENT ASSETS

I. Cash

316,430

363,823

544,067

980,812

1,432,929

1,904,132

2,396,226

2,911,186

3,451,169

4,018,529

II. Current receivables

1,443,750

1,455,300

1,513,916

1,583,902

1,658,765

1,735,571

1,814,160

1,894,334

1,975,853

2,058,431

Inc : Current internal receivables

-

-

-

-

-

-

-

-

-

-

III. Inventories

1,386,000

1,414,875

1,513,916

1,630,488

1,759,296

1,898,281

2,048,245

2,210,056

2,384,651

2,573,038

IV. Other current assets

68,547

40,425

34,604

32,610

35,186

37,966

40,965

44,201

47,693

51,461

Total current assets

3,214,726

3,274,423

3,606,503

4,227,812

4,886,177

5,575,949

6,299,596

7,059,778

7,859,366

8,701,458


I. Fixed assets

Fixed assets

125,929

124,779

123,054

120,754

117,879

114,429

110,404

105,804

100,630

94,880

Construction in progress

527,186

527,186

527,186

527,186

527,186

527,186

527,186

527,186

527,186

527,186

II. Long-term finance investments

3,529,809

3,529,809

3,529,809

3,529,809

3,529,809

3,529,809

3,529,809

3,529,809

3,529,809

3,529,809

III. Other long-term assets

3,481,281

3,481,281

3,481,281

3,481,281

3,481,281

3,481,281

3,481,281

3,481,281

3,481,281

3,481,281

Total non - current assets

7,664,206

7,663,056

7,661,331

7,659,031

7,656,156

7,652,706

7,648,681

7,644,081

7,638,906

7,633,156

TOTAL ASSETS

10,878,932

10,937,479

11,267,835

11,886,843

12,542,333

13,228,655

13,948,277

14,703,859

15,498,273

16,334,614

RESOURCES

A. LIABILITIES


Short-term loans and borrowings

611,041

266,041

0

-

-

-

-

-

-

-

Payables and prepaid expenses

924,000

1,051,050

1,167,878

1,257,805

1,357,171

1,464,388

1,580,075

1,704,901

1,839,588

1,984,915

Inc : Internal payables


Ernst & Young 43

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 - - - - - - - - - -

Other current liabilities

2,772,000

2,910,600

3,114,342

3,354,146

3,619,124

3,905,035

4,213,532

4,546,401

4,905,567

5,293,107

Total current liabilities

4,307,041

4,227,691

4,282,220

4,611,951

4,976,295

5,369,423

5,793,607

6,251,302

6,745,155

7,278,022


Long-term loans and borrowings

116,595

-

-

-

-

-

-

-

-

- Current portion of long-term loans and debts

-

-

-

-

-

-

-

-

-

-

Other non - current liabilities

3,644,095

3,644,095

3,644,095

3,644,095

3,644,095

3,644,095

3,644,095

3,644,095

3,644,095

3,644,095

Total Non-current Liabilities

3,760,690

3,644,095

3,644,095

3,644,095

3,644,095

3,644,095

3,644,095

3,644,095

3,644,095

3,644,095

B. OWNERS’ EQUITY

Shares

2,215,763

2,215,763

2,215,763

2,215,763

2,215,763

2,215,763

2,215,763

2,215,763

2,215,763

2,215,763

Preference shares

-

-

-

-

-

-

-

-

-

-

Undistributed earnings and other funds

595,438

849,929

1,125,756

1,415,033

1,706,180

1,999,375

2,294,812

2,592,699

2,893,259

3,196,734

Total owners' equity

2,811,201

3,065,693

3,341,519

3,630,796

3,921,943

4,215,138

4,510,575

4,808,462

5,109,023

5,412,497

TOTAL LIABILITIES AND OWNERS’ EQUITY

10,878,932

10,937,479

11,267,835

11,886,843

12,542,333

13,228,655

13,948,277

14,703,859

15,498,273

16,334,614


Ernst & Young 44

2. Combined Profit and Loss Statement

Table 14: Combined Profit and Loss Statement

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 14,752,065 16,841,493 18,189,313 20,020,708 22,232,647 24,693,853 27,613,286 30,203,389 32,817,338 35,711,141

2. COST OF GOODS SOLD 12,636,701 14,364,389 15,504,159 16,978,900 18,769,893 20,629,158 22,835,424 24,865,221 27,000,642 29,178,203

Inc: Internal Expense

3. GROSS PROFITS 2,115,364 2,477,105 2,685,153 3,041,808 3,462,754 4,064,694 4,777,862 5,338,169 5,816,695 6,532,938

4. OPERATING EXPENSES

Selling Expenses 55,118 59,566 58,065 62,820 70,824 83,365 93,671 101,937 111,119 121,325

Research and Development Expenses

General and administrative expenses 720,010 769,894 778,130 954,799 1,049,564 1,232,936 1,666,156 2,068,160 2,364,685 2,917,737

TOTAL OPERATING EXPENSES 775,128 829,460 836,195 1,017,619 1,120,388 1,316,302 1,759,826 2,170,097 2,475,805 3,039,062

5. EARNINGS BEFORE TAX AND INTEREST 1,340,236 1,647,645 1,848,958 2,024,189 2,342,366 2,748,393 3,018,035 3,168,072 3,340,891 3,493,876

6. FINANCE INCOMES/(EXPENSES) (212,682) (421,441) (612,298) (748,183) (887,549) (1,123,725) (917,655) (566,453) (149,528) 298,009

- Interest Incomes (614,691) (823,449) (1,014,306) (1,154,324) (1,333,646) (1,651,884) (1,549,369) (1,367,598) (1,145,248) (891,465)

- Investment Incomes 402,009 402,009 402,009 406,141 446,097 528,159 631,715 801,145 995,721 1,189,475

7. OPERATING PROFITS 1,127,554 1,226,204 1,236,661 1,276,006 1,454,817 1,624,668 2,100,380 2,601,619 3,191,363 3,791,885

8. OTHER INCOMES/(EXPENSES) 46,208 46,235 46,264 46,295 46,327 46,360 46,395 46,432 46,471 46,512

9. EARNINGS BEFORE TAX 1,173,762 1,272,439 1,282,925 1,322,301 1,501,144 1,671,028 2,146,776 2,648,052 3,237,834 3,838,397

10. ENTERPRISE INCOME TAX EXPENSES (173,690) (217,426) (212,184) (228,485) (373,162) (454,117) (519,281) (586,516) (691,165) (797,085)

11. NET PROFITS 1,000,072 1,055,013 1,070,741 1,093,815 1,127,981 1,216,911 1,627,495 2,061,535 2,546,669 3,041,312


Ernst & Young 45

2.1 Sector - Hydro Power Plant Construction

Table 14.1: Projected income statement for Hydro Power Plant Construction

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 4,635,803 5,151,584 5,267,357 5,708,241 6,261,139 6,815,359 7,409,794 7,995,168 8,626,786 9,308,302


Inc : Internal Expense - - - - - - - - - -

Per Revenue (%) 86% 85% 86% 86% 86% 86% 85% 85% 85% 83%

3. GROSS PROFITS 670,598 750,871 753,009 816,685 905,143 987,699 1,082,941 1,194,162 1,314,170 1,618,972

Per Revenue (%) 14.5% 14.6% 14.3% 14.3% 14.5% 14.5% 14.6% 14.9% 15.2% 17.4%



Research and Development Expenses - - - - - - - - - -

General and administrative expenses 292,399 365,499 365,499 402,048 402,048 462,356 587,192 775,093 1,023,123 1,432,372

TOTAL OPERATING EXPENSES 294,788 370,650 370,766 407,757 408,310 475,986 602,011 791,083 1,040,376 1,450,988

Per Revenue (%) 6.4% 7.2% 7.0% 7.1% 6.5% 7.0% 8.1% 9.9% 12.1% 15.6%

5. EARNINGS BEFORE TAX AND INTEREST 375,810 380,220 382,243 408,928 496,833 511,712 480,930 403,079 273,793 167,983

6. FINANCE INCOMES/(EXPENSES) (61,109) (43,626) (63,427) (23,962) 22,870 91,436 146,822 252,332 363,268 462,757

- Interest Incomes (102,742) (85,260) (105,060) (65,596) (23,138) - - - - -

- Investment Incomes 41,633 41,633 41,633 41,633 46,008 91,436 146,822 252,332 363,268 462,757

7. OPERATING PROFITS 314,701 336,594 318,816 384,966 519,704 603,148 627,752 655,411 637,061 630,740


9. EARNINGS BEFORE TAX 336,569 358,463 340,684 406,834 541,572 625,016 649,620 677,280 658,929 652,608


11. NET PROFITS 289,450 308,278 292,988 349,877 406,179 468,762 487,215 507,960 494,197 489,456


Ernst & Young 46

2.2 Sector - Power Trading

Table 14.2: Projected Income Statement for Power Trading

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 652,000 652,000 802,689 1,076,884 1,189,159 1,684,489 2,089,809 2,317,001 2,317,001 2,317,001

2. COST OF GOODS SOLD 293,400 293,400 361,210 484,598 535,122 758,020 940,414 1,042,650 1,042,650 1,042,650


Per Revenue (%) 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0%

3. GROSS PROFITS 358,600 358,600 441,479 592,286 654,038 926,469 1,149,395 1,274,350 1,274,350 1,274,350

Per Revenue (%) 55.0% 55.0% 55.0% 55.0% 55.0% 55.0% 55.0% 55.0% 55.0% 55.0%


Selling Expenses - - - - - - - - - -


General and administrative expenses 67,273 67,946 67,946 91,047 102,883 144,037 201,651 225,850 225,850 225,850

TOTAL OPERATING EXPENSES 67,273 67,946 67,946 91,047 102,883 144,037 201,651 225,850 225,850 225,850

Per Revenue (%) 10.3% 10.4% 8.5% 8.5% 8.7% 8.6% 9.6% 9.7% 9.7% 9.7%

5. EARNINGS BEFORE TAX AND INTEREST 291,327 290,654 373,533 501,239 551,154 782,432 947,744 1,048,501 1,048,501 1,048,501

6. FINANCE INCOMES/(EXPENSES)

(254,320)

(376,627)

(401,860)

(579,969)

(809,094) (1,180,010) (1,111,771)

(960,606)

(765,766)

(561,477)

- Interest Incomes

(255,119)

(377,426)

(402,659)

(580,768)

(809,893) (1,180,809) (1,112,570)

(961,405)

(766,565)

(562,276)

- Investment Incomes 799 799 799 799 799 799 799 799 799 799

7. OPERATING PROFITS 37,007

(85,972)

(28,327)

(78,730)

(257,940) (397,578) (164,028) 87,894 282,734 487,023


9. EARNINGS BEFORE TAX 40,078

(82,902)

(25,256)

(75,659)

(254,869) (394,507) (160,957) 90,965 285,805 490,094

10. ENTERPRISE INCOME TAX EXPENSES (3,777) - - - - - - - - -

11. NET PROFITS 36,301

(82,902)

(25,256)

(75,659)

(254,869) (394,507) (160,957) 90,965 285,805 490,094


Ernst & Young 47

2.3 Sector – Industrial production

Table 14.3: Projected income statement for Industrial production

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 2,845,614 3,517,005 3,923,494 4,153,781 4,669,321 4,929,981 5,550,611 5,951,672 6,392,839 6,878,123



Per Revenue (%) 86.7% 87.1% 87.8% 88.1% 87.3% 87.0% 85.8% 85.5% 85.2% 84.9%

3. GROSS PROFITS 377,297 452,537 477,578 494,918 592,120 639,622 790,592 865,471 948,171 1,039,474

Per Revenue (%) 13.3% 12.9% 12.2% 11.9% 12.7% 13.0% 14.2% 14.5% 14.8% 15.1%






Per Revenue (%) 4.5% 2.2% 1.5% 2.0% 2.0% 2.0% 4.7% 6.0% 4.7% 4.7%


6. FINANCE INCOMES/(EXPENSES) (67,283) (218,032) (339,244) (365,874) (363,741) (338,281) (312,687) (291,039) (270,529) (228,864)

- Interest Incomes (68,151) (218,899) (340,112) (366,742) (364,609) (339,149) (313,555) (291,907) (271,397) (229,731)






11. NET PROFITS 172,481 151,127 84,349 55,527 115,193 166,005 176,718 176,947 296,832 379,453


Ernst & Young 48


Table 14.4: Projected Income Statement for Property Development

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 1,016,536 1,483,127 1,654,979 1,831,480 2,112,157 2,456,847 2,884,850 3,317,577 3,815,214 4,387,496

2. COST OF GOODS SOLD 654,962 954,588 1,069,419 1,182,084 1,358,297 1,573,570 1,839,665 2,108,628 2,427,187 2,791,279


Per Revenue (%) 64.4% 64.4% 64.6% 64.5% 64.3% 64.0% 63.8% 63.6% 63.6% 63.6%

3. GROSS PROFITS 361,574 528,538 585,561 649,396 753,860 883,277 1,045,185 1,208,949 1,388,027 1,596,217

Per Revenue (%) 35.6% 35.6% 35.4% 35.5% 35.7% 36.0% 36.2% 36.4% 36.4% 36.4%






Per Revenue (%) 5.2% 5.4% 6.2% 7.8% 7.4% 7.1% 6.6% 6.3% 6.1% 5.8%

5. EARNINGS BEFORE TAX AND INTEREST 308,438 448,936 482,750 506,657 596,607 709,969 854,098 998,398 1,156,013 1,340,532

6. FINANCE INCOMES/(EXPENSES) 1,798 8,233 11,256 28,725 69,626 106,988 155,884 220,531 304,898 399,526

- Interest Incomes (31,386) (24,951) (21,928) (8,591) (3,271) (2,544) (1,817) (1,090) (363) -


7. OPERATING PROFITS 310,236 457,169 494,006 535,382 666,233 816,957 1,009,982 1,218,929 1,460,911 1,740,058

8. OTHER INCOMES/(EXPENSES) 979 979 979 979 979 979 979 979 979 979

9. EARNINGS BEFORE TAX 311,215 458,148 494,985 536,361 667,212 817,936 1,010,962 1,219,908 1,461,890 1,741,038


11. NET PROFITS 224,075 329,867 356,389 386,180 480,392 588,914 727,892 878,334 1,052,561 1,253,547


Ernst & Young 49

2.5 Others

Table 14.5: Projected Income Statement for other companies

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 1,752,112 1,995,278 2,215,318 2,591,784 2,974,310 3,383,517 3,826,094 4,307,525 4,852,210 5,468,682



Per Revenue (%) 86.3% 86.3% 86.2% 86.2% 86.0% 86.0% 85.8% 85.7% 85.6% 85.5%

3. GROSS PROFITS 240,020 273,891 306,661 357,908 416,145 474,445 543,857 615,588 697,440 793,277

Per Revenue (%) 13.7% 13.7% 13.8% 13.8% 14.0% 14.0% 14.2% 14.3% 14.4% 14.5%






Per Revenue (%) 7.5% 6.7% 6.1% 7.1% 8.1% 8.8% 9.6% 10.1% 10.6% 11.1%









11. NET PROFITS 34,753 65,874 55,796 56,471 57,590 61,965 68,363 76,343 83,317 91,568


Ernst & Young 50

2.6 Parent Company

Table 14.6: Projected Income Statement for Parent Company

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 3,850,000 4,042,500 4,325,475 4,658,537 5,026,561 5,423,659 5,852,128 6,314,447 6,813,288 7,351,538



Per Revenue (%) 97.2% 97.2% 97.2% 97.2% 97.2% 97.2% 97.2% 97.2% 97.1% 97.1%

3. GROSS PROFITS 107,275 112,668 120,865 130,615 141,449 153,184 165,891 179,648 194,537 210,648

Per Revenue (%) 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.9% 2.9%


Selling Expenses 344 362 387 417 450 485 523 565 609 658




Per Revenue (%) 2.6% 2.5% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4% 2.4%



- Interest Incomes (65,157) (29,810) (13,302) (0) - - - - - -





10. ENTERPRISE INCOME TAX EXPENSES - - - - - - - - - -

11. NET PROFITS 243,012 282,768 306,474 321,419 323,496 325,772 328,263 330,986 333,956 337,194


Ernst & Young 51

3 Combined Cash Flow Statement

Table 15: Combined Cash flow Statement

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. CASH FLOWS FROM OPERATING ACTIVITIES

Earnings before tax 1,000,072 1,055,013 1,070,741 1,093,815 1,127,981 1,216,911 1,627,495 2,061,535 2,546,669 3,041,312

Depreciations 815,996 916,734 1,010,513 1,583,640 1,618,787 1,664,306 1,905,274 2,165,702 2,436,130 2,194,503

Profits/ (losses) from investing activities (402,009) (402,009) (402,009) (406,141) (446,097) (528,159) (631,715) (801,145) (995,721) (1,189,475)

Operating profit/(loss) before changes in working capital

(Increase)/decrease in receivables (238,136) (234,737) (318,850) (438,250) (429,652) (535,302) (514,372) (530,017) (577,253) (554,032)

(Increase)/decrease in inventories (157,598) (256,759) (329,174) (421,330) (411,895) (374,737) (592,776) (701,103) (808,249) (973,991)

(Increase)/decrease in other current assets (276,926) (218,974) (264,195) (482,588) (436,841) (543,310) (548,050) (465,922) (512,080) (579,807)

(Increase)/decrease in payables and in prepaid expenses 390,528 372,017 404,294 646,416 556,582 707,794 756,893 731,486 832,710 874,253

(Increase)/decrease in current liabilities 772,011 906,830 1,111,164 1,286,036 1,254,383 1,633,029 1,705,944 2,192,974 2,125,532 2,272,673

Net cash flows from operating activities 1,903,939 2,138,116 2,282,485 2,861,598 2,833,248 3,240,531 3,708,693 4,653,509 5,047,738 5,085,436

2. CASH FLOWS FROM INVESTING ACTIVITIES Purchase and construction of fixed assets and other long-term assets (3,106,840) (3,487,871) (4,296,077) (2,969,539) (1,960,269) (1,282,491) (513,608) (285,798) (285,798) (285,798)

Payments for investments 0 0 0 (48,612) (470,069) (965,444) (1,218,296) (1,993,303) (2,289,121) (2,279,458)

Interest and dividends received 402,009 402,009 402,009 406,141 446,097 528,159 631,715 801,145 995,721 1,189,475

Other items

Net cash flows from investing activities (2,716,761) (3,098,985) (3,908,503) (2,627,889) (2,001,708) (1,738,989) (1,121,325) (1,501,204) (1,604,772) (1,403,912)

3. CASH FLOWS FROM FINANCING ACTIVITIES

Increase/(decrease) in short - term loans and debts 512,184 148,208 69,374 (587,093) (573,840) (218,528) (311,713) (227,903) (228,114) (46,091) Increase/(decrease) in current portion of long-term loans and debts

Increase/(decrease) in long - term loans and debts (405,685) 1,089,346 1,926,783 1,029,591 447,119 (483,544) (1,416,461) (2,056,400) (2,313,257) (2,476,361)

Increase/(decrease) in shares


Ernst & Young 52

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Increase/(decrease) in preference shares

Dividends paid for owners

Net cash flows from financing activities 14,428 1,119,088 1,874,383 308,970 (280,386) (879,158) (1,929,160) (2,511,399) (2,794,568) (2,806,883)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (798,393) 158,218 248,364 542,679 551,154 622,385 658,209 640,905 648,397 874,640 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 1,625,367 826,973 985,192 1,233,556 1,776,235 2,327,389 2,949,774 3,607,983 4,248,889 4,897,286

CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 826,973 985,192 1,233,556 1,776,235 2,327,389 2,949,774 3,607,983 4,248,889 4,897,286 5,771,926


Ernst & Young 53


Table 15.1: Projected Cash flow statement for Hydro Power Plant Construction

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


Earnings before tax

289,450

308,278

292,988

349,877

406,179

468,762

487,215 507,960 494,197 489,456

Depreciations

210,205

227,930

247,789

267,881

284,473

307,220

324,920 324,920 324,920 149,606

Profits/ (losses) from investing activities

(41,633)

(41,633)

(41,633)

(41,633)

(46,008)

(91,436)

(146,822) (252,332) (363,268) (462,757)


(Increase)/decrease in receivables

(54,178)

(61,931)

(51,749)

(79,359)

(74,477)

(90,727)

(96,616) (93,860) (109,270) (99,286)

(Increase)/decrease in inventories

(34,488)

(51,765)

(42,836)

(48,962)

(68,292)

(80,662)

(90,920) (96,831) (106,791) (99,786)

(Increase)/decrease in other current assets

(3,020)

(23,590)

(10,427)

(39,709)

(49,798)

(49,917)

(53,539) (52,723) (56,888) (60,753)

(Increase)/decrease in payables and in prepaid expenses 22,657 51,603 63,151 92,469 95,457

145,580

169,802 196,041 236,361 292,500

(Increase)/decrease in current liabilities 88,958

165,050

195,068

154,309

193,514

193,977

208,052 524,688 591,403 758,467

Net cash flows from operating activities

477,951

573,942

652,351

654,873

741,049

802,796

802,092 1,057,861 1,010,663 967,448

2. CASH FLOWS FROM INVESTING ACTIVITIES Purchase and construction of fixed assets and other long-term assets

(453,584)

(230,432)

(258,160)

(261,200)

(215,700)

(295,700)

(230,100) - - -

Payments for investments - - - -

(51,469)

(534,444)

(651,598) (1,241,303) (1,305,121) (1,170,458)

Interest and dividends received 41,633 41,633 41,633 41,633 46,008 91,436

146,822 252,332 363,268 462,757

Other items - - - - - - - - - -

Net cash flows from investing activities

(411,951)

(188,799)

(216,527)

(219,567)

(221,161)

(738,708)

(734,876) (988,971) (941,853) (707,701)


Increase/(decrease) in short - term loans and debts - -

(141,000)

(324,000)

(462,756) - - - - - Increase/(decrease) in current portion of long-term loans and debts - - - - - - - - - -

Increase/(decrease) in long - term loans and debts

(244,882)

(337,882)

(261,893)

(62,402) - - - - - -

Increase/(decrease) in shares - - - - - - - - - -


Ernst & Young 54

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Increase/(decrease) in preference shares - - - - - - - - - -


(28,945)

(30,828)

(29,299)

(34,988)

(40,618)

(46,876)

(48,722) (50,796) (49,420) (48,946)

Net cash flows from financing activities

(273,827)

(368,710)

(432,192)

(421,389)

(503,374)

(46,876)

(48,722) (50,796) (49,420) (48,946) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

(207,827) 16,434 3,632 13,917 16,514 17,212 18,494 18,095 19,390 210,801

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD

351,131

143,304

159,738

163,370

177,287

193,802

211,013 229,507 247,602 266,992

CASH AND CASH EQUIVALENTS AT THE END OF PERIOD

143,304

159,738

163,370

177,287

193,802

211,013

229,507 247,602 266,992 477,792


Ernst & Young 55


Table 15.2: Projected Cash flow statement for Power Trading

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


Earnings before tax 36,301 (82,902) (25,256)

(75,659)

(254,869)

(394,507)

(160,957) 90,965 285,805 490,094

Depreciations 340,926 347,641 354,326 865,230 871,915

878,600

1,124,828 1,371,055 1,617,283 1,529,269

Profits/ (losses) from investing activities (799) (799) (799)

(799) (799)

(799)

(799) (799) (799) (799) Operating profit/(loss) before changes in working capital

(Increase)/decrease in receivables (7,056) - (12,163)

(22,132) (9,063)

(39,982)

(32,716) (18,338) (0) 0

(Increase)/decrease in inventories (4,043) - (6,970)

(12,683) (5,193)

(22,911)

(18,748) (10,509) (0) 0

(Increase)/decrease in other current assets (2,841) 39,120 (52,889)

(58,818)

(30,362)

(34,600)

(76,639) (39,542) (23,170) (34,755) (Increase)/decrease in payables and in prepaid expenses 10,882 32,600 36,165 108,882 114,678

190,210

187,711 132,673 162,190 115,850

(Increase)/decrease in current liabilities 88,747 97,800 120,551 219,356 89,820

396,264

324,256 413,453 115,850 -

Net cash flows from operating activities 462,117 433,460 412,965 1,023,377 776,127

972,276

1,346,936 1,938,959 2,157,159 2,099,660

2. CASH FLOWS FROM INVESTING ACTIVITIES

Purchase and construction of fixed assets and other long-term assets

(2,244,553)

(2,777,699) (3,037,732)

(1,893,164)

(1,516,303)

(721,198)

(66,848) (66,848) (66,848) (66,848)

Payments for investments - - - - - - - - - -

Interest and dividends received 799 799 799 799 799 799 799 799 799 799

Other items (8,662) (9,528) (10,480)

(11,529)

(12,681)

(13,950)

(15,344) (16,879) (18,567) (20,424)


(2,252,415)

(2,786,428) (3,047,414)

(1,903,893)

(1,528,186)

(734,349)

(81,394) (82,928) (84,616) (86,473)

3. CASH FLOWS FROM FINANCING ACTIVITIES Increase/(decrease) in short - term loans and debts 496,539 408,121 304,211

(218,749)

(11,657)

(186,280)

(286,432) (223,144)

(162,596) 34,321

Increase/(decrease) in current portion of long-term loans and debts - - - - - - - - - - Increase/(decrease) in long - term loans and debts 1,158,592 1,945,361 2,353,635 1,138,218 780,978 20,168

(912,234) (1,601,487)

(1,909,569) (2,047,938)


Ernst & Young 56

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018



Dividends paid for owners - - - - - - - - - -

Net cash flows from financing activities 1,655,131 2,353,483 2,657,846 919,469 769,321

(166,112)

(1,198,666) (1,824,631)

(2,072,165) (2,013,617) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

(135,167) 515 23,397 38,953 17,262 71,815 66,876 31,400 378 (431)

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 232,557 97,390 97,905 121,302 160,255

177,518

249,333 316,209 347,609 347,987

CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 97,390 97,905 121,302 160,255 177,518

249,333

316,209 347,609 347,987 347,556


Ernst & Young 57


Table 15.3: Projected cash flow statement for Industrial Production

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


Earnings before tax 172,481 151,127 84,349 55,527 115,193 166,005 176,718 176,947 296,832 379,453

Depreciations 177,598 233,279 287,503 315,070 318,397 321,725 291,777 295,105 298,432 301,760


(868)

(868)

(868)

(868)

(868)

(868)

(868)

(868)

(868)

(868)



(69,910)

(70,499)

(75,819)

(77,028)

(81,603)

(94,848)

(81,302)

(76,346)

(91,522)

(81,696)


(45,780)

(53,039)

(61,645)

(66,568)

(88,452)

(86,923)

(151,735)

(238,230)

(306,803)

(381,071)


(75,487)

(92,394)

(112,403)

(101,908)

(105,170)

(107,405)

(133,435)

(86,228)

(94,851)

(104,336)


(Increase)/decrease in current liabilities 82,824 130,560 166,483 200,694 214,686 228,591 266,170 286,837 260,207 292,853

Net cash flows from operating activities 308,852 366,579 395,444 431,876 478,209 536,855 486,145 459,488 461,140 494,481



(28,573)

(34,118)

(546,325)

(413,500)

(49,912)

(49,912)

(49,912)

(49,912)

(49,912)

(49,912)



Other items

(1,965)

(2,162)

(2,378)

(2,616)

(2,877)

(3,165)

(3,482)

(3,830)

(4,213)

(4,634)


(29,671)

(35,412)

(547,835)

(415,248)

(51,922)

(52,210)

(52,526)

(52,874)

(53,257)

(53,678)


Increase/(decrease) in short - term loans and debts - 64,646 173,883 38,069

(75,201)

(15,922) 38,659 9,241

(35,518)

(32,612)

Increase/(decrease) in current portion of long-term loans and debts - - - - - - - - - -


(361,114)

(344,910)

(9,293)

(46,881)

(335,602)

(460,940)

(453,616)

(404,301)

(358,292)

(395,055)



Ernst & Young 58

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018




(361,114)

(280,264) 164,590

(8,812)

(410,803)

(476,862)

(414,957)

(395,061)

(393,810)

(427,666)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

(81,933) 50,902 12,199 7,817 15,484 7,784 18,663 11,553 14,073 13,137

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 135,901 53,969 104,871 117,070 124,887 140,370 148,154 166,816 178,369 192,442

CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 53,969 104,871 117,070 124,887 140,370 148,154 166,816 178,369 192,442 205,579


Ernst & Young 59


Table 15.4: Projected cash flow statement for Property Development

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


Earnings before tax 224,075 329,867 356,389 386,180 480,392 588,914 727,892 878,334 1,052,561 1,253,547

Depreciations 34,875 49,881 59,881 64,881 69,881 74,894 79,906 84,906 99,906 114,906


(33,184)

(33,184)

(33,184)

(37,316)

(72,897)

(109,532)

(157,701)

(221,621) (305,261) (399,526)



(60,530)

(82,319)

(87,457)

(99,070)

(112,384)

(136,424)

(139,893)

(150,156) (169,196) (191,905)


(37,922)

(34,686)

(38,694)

(39,694)

(41,583)

(40,028)

(47,080)

(47,600) (54,740) (62,951)


(42,033)

(82,319)

(62,632)

(65,287)

(69,608)

(85,483)

(106,145)

(107,316) (123,414) (141,926)





(147,366)

(313,034)

(259,381)

(204,669)

(4,151)

(67,450)

(62,750) - - -

Payments for investments - - -

(48,612)

(418,600)

(431,000)

(566,698)

(752,000) (984,000) (1,109,000)

Interest and dividends received 33,184 33,184 33,184 37,316 72,897 109,532 157,701 221,621 305,261 399,526

Other items

(1,303)

(1,434)

(1,577)

(1,735)

(1,908)

(2,099)

(2,309)

(2,540) (2,794) (3,073)


(115,486)

(281,284)

(227,774)

(217,700)

(351,763)

(391,018)

(474,056)

(532,919) (681,533) (712,547)


Increase/(decrease) in short - term loans and debts - 21,808

(21,808)

(91,500) - - - - - - Increase/(decrease) in current portion of long-term loans and debts - - - - - - - - - -


(104,506)

(16,921)

(145,807)

(7,628)

(7,269)

(7,269)

(7,269)

(7,269) (7,269) -



Ernst & Young 60

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018



(33,611)

(49,480)

(53,458)

(57,927)

(72,059)

(88,337)

(109,184)

(131,750) (157,884) (188,032)


(138,117)

(44,593)

(221,074)

(157,055)

(79,328)

(95,606)

(116,453)

(139,019) (165,153) (188,032) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 18,331 18,663 6,873 7,589 11,488 13,601 16,996 17,032 20,093 22,565 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 22,331 40,662 59,325 66,199 73,788 85,276 98,877 115,874 132,906 152,999

CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 40,662 59,325 66,199 73,788 85,276 98,877 115,874 132,906 152,999 175,565


Ernst & Young 61

3.5 Others

Table 15.5: Projected cash flow statement for other companies

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


Earnings before tax

34,753

65,874

55,796

56,471

57,590

61,965

68,363

76,343

83,317

91,568

Depreciations

40,318

45,353

47,789

56,777

59,745

66,918

68,318

73,616

78,914

81,712


(25,491)

(25,491)

(25,491)

(25,491)

(25,491)

(25,491)

(25,491)

(25,491)

(25,491)

(25,491)



(45,195)

(8,437)

(33,046)

(90,675)

(77,263)

(96,515)

(85,255)

(111,143)

(125,745)

(98,568)


(22,677)

(88,394)

(79,988)

(136,851)

(79,568)

(5,228)

(134,329)

(146,122)

(165,320)

(241,795)


(156,969)

(87,913)

(31,664)

(218,859)

(179,327)

(263,126)

(175,292)

(176,876)

(210,265)

(234,270)

(Increase)/decrease in payables and in prepaid expenses

106,803

58,360

52,810

219,941

110,932

118,670

128,347

139,615

157,959

178,777

(Increase)/decrease in current liabilities

231,979

211,513

191,398

327,462

332,732

355,941

384,967

418,764

473,784

536,226


163,520

170,865

177,604

188,775

199,351

213,133

229,628

248,706

267,151

288,158



(221,263)

(121,088)

(182,978)

(185,507)

(162,702)

(136,730)

(92,498)

(157,538)

(157,538)

(157,538)


Interest and dividends received

25,491

25,491

25,491

25,491

25,491

25,491

25,491

25,491

25,491

25,491

Other items - - - - - - - - - -


(195,772)

(95,597)

(157,487)

(160,015)

(137,211)

(111,239)

(67,007)

(132,047)

(132,047)

(132,047)


Increase/(decrease) in short - term loans and debts

15,645

(1,367)

20,129 9,086

(24,226)

(16,326)

(63,940)

(14,000)

(30,000)

(47,800)



(137,143)

(39,707)

(9,858) 8,284 9,013

(35,503)

(43,342)

(43,342)

(38,127)

(33,368)


Ernst & Young 62

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018




(5,213)

(9,881)

(8,369)

(8,471)

(8,639)

(9,295)

(10,254)

(11,451)

(12,498)

(13,735)


(126,711)

(50,955) 1,901 8,899

(23,852)

(61,124)

(117,536)

(68,793)

(80,624)

(94,903)


(158,963)

24,312

22,018

37,658

38,288

40,771

45,086

47,866

54,480

61,209


334,181

175,218

199,530

221,548

259,206

297,494

338,265

383,351

431,216

485,697


175,218

199,530

221,548

259,206

297,494

338,265

383,351

431,216

485,697

546,905


Ernst & Young 63

3.6 Parent Company

Table 15.6: Projected cash flow statement for Parent Company

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018



Depreciations 12,075 12,650 13,225 13,800 14,375 14,950 15,525 16,100 16,675 17,250


(300,034)

(300,034)

(300,034)

(300,034)

(300,034)

(300,034)

(300,034)

(300,034)

(300,034)

(300,034)



(1,267)

(11,550)

(58,616)

(69,986)

(74,863)

(76,806)

(78,589)

(80,174)

(81,520)

(82,577)


(12,688)

(28,875)

(99,041)

(116,572)

(128,809)

(138,984)

(149,964)

(161,811)

(174,594)

(188,387)

(Increase)/decrease in other current assets 3,425 28,122 5,821 1,994

(2,576)

(2,780)

(2,999)

(3,236)

(3,492)

(3,768)




2. CASH FLOWS FROM INVESTING ACTIVITIES Purchase and construction of fixed assets and other long-term

assets

(11,500)

(11,500)

(11,500)

(11,500)

(11,500)

(11,500)

(11,500)

(11,500)

(11,500)

(11,500)


Interest and dividends received 300,034 300,034 300,034 300,034 300,034 300,034 300,034 300,034 300,034 300,034

Other items - - - - - - - - - -

Net cash flows from investing activities 288,534 288,534 288,534 288,534 288,534 288,534 288,534 288,534 288,534 288,534


Increase/(decrease) in short - term loans and debts -

(345,000)

(266,041)

(0) - - - - - -



(716,633)

(116,595) - - - - - - - -




Ernst & Young 64

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


(24,301)

(28,277)

(30,647)

(32,142)

(32,350)

(32,577)

(32,826)

(33,099)

(33,396)

(33,719)


(740,934)

(489,872)

(296,688)

(32,142)

(32,350)

(32,577)

(32,826)

(33,099)

(33,396)

(33,719)


(232,835) 47,393 180,245 436,744 452,118 471,202 492,094 514,960 539,983 567,360

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 549,265 316,430 363,823 544,067 980,812 1,432,929 1,904,132 2,396,226 2,911,186 3,451,169

CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 316,430 363,823 544,067 980,812 1,432,929 1,904,132 2,396,226 2,911,186 3,451,169 4,018,529


Ernst & Young 65

B. AFTER ADB OCR Loan

1 Combined Balance Sheet

Table 16: Combined projected Balance Sheet

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ASSETS

A. CURRENT ASSETS

I. Cash 1,625,367 826,973 1,352,215 2,319,157 3,186,981 4,032,606 4,587,783 5,440,622 5,768,122 6,323,478 6,941,846

II. Current receivables 3,074,783 3,312,918 3,547,655 3,866,505 4,304,755 4,734,407 5,269,709 5,784,081 6,314,099 6,891,352 7,445,384

Inc : Current internal receivables 0

III. Inventories 6,614,071 6,771,669 7,028,428 7,357,602 7,778,932 8,190,827 8,565,564 9,158,340 9,859,444 10,667,693 11,641,684

IV. Other current assets 3,812,706 4,089,632 4,308,606 4,572,801 5,055,389 5,492,230 6,035,540 6,583,590 7,049,512 7,561,592 8,141,400

Total current assets 15,126,927 15,001,193 16,236,903 18,116,065 20,326,057 22,450,071 24,458,597 26,966,633 28,991,176 31,444,114 34,170,313


I. Fixed assets

Fixed assets 5,022,364 7,689,871 8,318,267 8,706,351 13,197,719 12,082,243 11,085,607 12,062,372 12,626,319 13,119,839 13,804,985

Construction in progress 7,911,864 7,535,201 9,449,190 12,284,689 9,114,459 10,508,471 11,123,292 8,754,862 6,311,010 3,667,159 1,073,308

II. Long-term finance investments 4,769,503 4,769,503 4,571,503 4,179,783 4,035,395 4,380,373 5,372,420 6,625,082 8,661,704 11,164,967 13,881,369

III. Other long-term assets 3,671,472 3,683,402 3,696,525 3,710,960 3,726,839 3,744,306 3,763,520 3,784,655 3,807,904 3,833,477 3,861,608

Total non - current assets 21,375,203 23,677,976 26,035,484 28,881,783 30,074,412 30,715,393 31,344,838 31,226,970 31,406,937 31,785,442 32,621,270

TOTAL ASSETS 36,502,130 38,679,169 42,272,388 46,997,848 50,400,469 53,165,464 55,803,435 58,193,603 60,398,113 63,229,556 66,791,584

RESOURCES

A. LIABILITIES


Short-term loans and borrowings 3,521,636 4,033,820 4,144,382 4,204,129 3,530,612 2,960,471 2,699,814 2,349,084 2,057,130 1,814,774 1,707,251

Payables and prepaid expenses 2,726,951 3,117,478 3,489,496 3,893,790 4,540,206 5,096,788 5,804,582 6,624,169 7,316,130 8,125,671 8,999,924


Ernst & Young 66

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Inc: Internal payables 0

Other current liabilities 6,078,555 6,850,566 7,792,566 8,915,822 10,165,365 11,408,979 13,042,008 14,956,933 16,940,927 19,066,458 21,339,131

Total current liabilities 12,327,141 14,001,865 15,426,443 17,013,741 18,236,183 19,466,238 21,546,403 23,930,186 26,314,187 29,006,903 32,046,305

II. Non -current liabilities 0

Long-term loans and borrowings 10,152,267 9,746,581 10,734,087 12,462,876 13,395,200 13,667,289 12,989,081 11,335,737 9,061,759 6,648,528 4,125,567 Current portion of long-term loans and debts 0

Other non - current liabilities 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718 3,651,718

Total Non-current Liabilities 13,803,984 13,398,299 14,385,805 16,114,594 17,046,918 17,319,007 16,640,798 14,987,455 12,713,477 10,300,245 7,777,284

B. OWNERS’ EQUITY 0

Shares 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463 9,370,463

Preference shares 0 Undistributed earnings and other funds 996,299 1,904,301 3,085,434 4,494,808 5,742,664 7,005,514 8,241,528 9,901,257 11,995,745 14,547,703 17,593,289

Total owners' equity 10,371,005 11,279,006 12,460,140 13,869,513 15,117,369 16,380,219 17,616,234 19,275,963 21,370,450 23,922,408 26,967,995 TOTAL LIABILITIES AND OWNERS’ EQUITY 36,502,130 38,679,170 42,272,388 46,997,849 50,400,470 53,165,464 55,803,435 58,193,603 60,398,114 63,229,557 66,791,584


Ernst & Young 67


Table 16.1: Projected Balance Sheet for Hydro Power Plant Construction 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ASSETS

A. CURRENT ASSETS

I. Cash 143,304 160,208 163,688 177,221 194,888 212,123 230,602 248,097 267,909 287,945

II. Current receivables 834,445 896,376 948,124 1,027,483 1,101,961 1,192,688 1,289,304 1,383,164 1,492,434 1,591,720


III. Inventories 1,854,321 1,906,086 1,948,922 1,997,884 2,066,176 2,146,838 2,237,758 2,334,589 2,441,380 2,541,166




I. Fixed assets

Fixed assets 1,666,140 1,668,642 1,679,013 1,672,332 1,603,558 1,592,039 1,497,219 1,172,299 847,380 697,774





TOTAL ASSETS 5,898,817 6,055,507 6,174,371 6,349,254 6,609,092 7,391,161 8,233,860 9,446,471 10,764,700 12,330,910

RESOURCES

A. LIABILITIES


Short-term loans and borrowings 927,756 927,756 786,756 413,756 0 0 0 0 0 0

Payables and prepaid expenses 649,012 700,615 763,767 856,236 951,693 1,097,273 1,267,075 1,463,116 1,699,477 1,991,977





Long-term loans and borrowings 662,177 310,295 32,402 - - - - - - -


Ernst & Young 68

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Current portion of long-term loans and debts - - - - - - - - - -



B. OWNERS’ EQUITY

Shares 1,639,806 1,639,806 1,639,806 1,639,806 1,639,806 1,639,806 1,639,806 1,639,806 1,639,806 1,639,806

Preference shares - - - - - - - - - - Undistributed earnings and other funds 530,128 822,048 1,101,585 1,435,091 1,819,714 2,262,226 2,727,071 3,218,954 3,709,419 4,224,662

Total owners' equity 2,169,935 2,461,855 2,741,392 3,074,898 3,459,521 3,902,032 4,366,877 4,858,761 5,349,226 5,864,469 TOTAL LIABILITIES AND OWNERS’ EQUITY 5,898,817 6,055,507 6,174,371 6,349,254 6,609,092 7,391,161 8,233,860 9,446,471 10,764,700 12,330,910


Ernst & Young 69


Table 16.2: Projected Balance Sheet for Power Trading 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ASSETS

A. CURRENT ASSETS

I. Cash 97,390 97,669 127,801 173,018 177,781 252,057 585,082 371,521 347,794 347,848


Inc: Current internal receivables - - - - - - - - - -

III. Inventories 30,158 30,158 37,128 49,811 55,004 77,916 96,664 107,172 107,172 107,172

IV. Other current assets 788,920 749,800 802,689 861,508 891,869 926,469 1,003,108 1,042,650 1,065,820 1,100,575



I. Fixed assets

Fixed assets 2,511,681 2,231,189 1,943,711 6,187,529 5,382,462 4,570,710 5,908,159 6,999,380 7,844,373 8,777,379

Construction in progress 4,538,184 7,219,982 10,128,886 6,848,240 8,234,749 8,889,099 6,493,671 4,098,243 1,702,815 (692,613)




TOTAL ASSETS 8,123,638 10,495,631 13,229,692 14,343,243 14,986,748 15,015,064 14,433,557 13,001,057 11,627,509 10,381,767

RESOURCES

A. LIABILITIES


Short-term loans and borrowings 1,011,977 1,396,398 1,687,109 1,457,561 1,432,104 1,232,324 926,692 689,149 515,437 515,437

Payables and prepaid expenses 123,880 156,480 192,645 301,528 416,206 606,416 856,822 949,970 1,088,990 1,204,840


Other current liabilities 423,800 521,600 650,178 872,276 951,327 1,347,591 1,880,828 2,085,301 2,201,151 2,201,151




Ernst & Young 70

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Long-term loans and borrowings 4,179,050 6,069,111 8,289,126 9,280,924 9,899,282 9,745,930 8,640,476 6,843,668 4,908,961 2,872,137 Current portion of long-term loans and debts - - - - - - - - - -



B. OWNERS’ EQUITY

Shares 2,339,086 2,339,086 2,339,086 2,339,086 2,339,086 2,339,086 2,339,086 2,339,086 2,339,086 2,339,086

Preference shares - - - - - - - - - - Undistributed earnings and other funds 45,845 12,955 71,547 91,868 (51,257) (256,284) (210,347) 93,883 573,883 1,249,116

Total owners' equity 2,384,932 2,352,042 2,410,633 2,430,954 2,287,829 2,082,803 2,128,739 2,432,970 2,912,969 3,588,202 TOTAL LIABILITIES AND OWNERS’ EQUITY 8,123,638 10,495,631 13,229,692 14,343,243 14,986,748 15,015,064 14,433,557 13,001,057 11,627,509 10,381,767


Ernst & Young 71



2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ASSETS A. CURRENT ASSETS

I. Cash 53,969 105,285 117,705 124,613 140,080 147,899 166,518 178,550 191,785 206,344

II. Current receivables 246,031 316,530 392,349 469,377 550,980 645,828 727,130 803,476 894,997 976,693 Inc : Current internal receivables - - - - - - - - - -

III. Inventories 2,788,702 2,841,740 2,903,385 2,969,954 3,058,405 3,145,328 3,297,063 3,535,293 3,842,096 4,223,167

IV. Other current assets 540,667 633,061 745,464 847,371 952,541 1,059,946 1,193,381 1,279,609 1,374,460 1,478,796 Total current assets 3,629,368 3,896,617 4,158,904 4,411,316 4,702,006 4,999,001 5,384,093 5,796,928 6,303,339 6,885,001


I. Fixed assets

Fixed assets 2,162,078 2,764,019 3,289,875 3,388,305 3,119,820 2,848,008 2,606,142 2,360,950 2,112,429 1,860,582

Construction in progress 1,068,136 267,034 - - - - - - - -


III. Other long-term assets 21,618 23,779 26,157 28,773 31,650 34,815 38,297 42,127 46,339 50,973 Total non - current assets 3,262,040 3,065,040 3,326,240 3,427,286 3,161,678 2,893,031 2,654,647 2,413,284 2,168,976 1,921,762

TOTAL ASSETS 6,891,408 6,961,657 7,485,144 7,838,601 7,863,684 7,892,031 8,038,739 8,210,212 8,472,315 8,806,764 RESOURCES A. LIABILITIES



Payables and prepaid expenses 796,772 865,183 973,026 1,079,983 1,186,008 1,296,585 1,415,406 1,517,676 1,617,388 1,705,774 Inc : Internal payables - - - - - - - - - -


Total current liabilities 1,387,643 1,674,284 2,130,432 2,411,494 2,626,702 2,930,059 3,354,951 3,726,648 4,074,922 4,428,438 II. Non -current liabilities


Ernst & Young 72

Long-term loans and borrowings 4,325,826 3,952,575 3,898,509 3,876,580 3,536,169 3,057,343 2,555,485 2,124,346 1,686,638 1,229,889 Current portion of long-term loans and debts - - - - - - - - - -

Other non - current liabilities 1,143 1,143 1,143 1,143 1,143 1,143 1,143 1,143 1,143 1,143 Total Non-current Liabilities 4,326,969 3,953,718 3,899,652 3,877,723 3,537,311 3,058,486 2,556,628 2,125,489 1,687,781 1,231,032

B. OWNERS’ EQUITY

Shares 884,020 884,020 884,020 884,020 884,020 884,020 884,020 884,020 884,020 884,020


Undistributed earnings and other funds 292,777 449,634 571,040 665,365 815,651 1,019,466 1,243,140 1,474,055 1,825,592 2,263,273 Total owners' equity 1,176,797 1,333,654 1,455,060 1,549,384 1,699,671 1,903,486 2,127,160 2,358,075 2,709,612 3,147,293



Ernst & Young 73

1.4 Sector - Property Development

Table 16.4: Projected Balance Sheet for Property Development

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


I. Cash 40,662 59,686 66,421 73,991 85,181 99,250 115,630 133,013 152,585 175,623

II. Current receivables 243,969 326,288 413,745 512,814 625,198 761,623 901,516 1,051,672 1,220,868 1,412,774 Inc : Current internal receivables - - - - - - - - - -

III. Inventories 75,569 110,255 148,948 188,642 230,225 270,253 317,333 364,934 419,674 482,625

IV. Other current assets 243,969 326,288 388,920 454,207 523,815 609,298 715,443 822,759 946,173 1,088,099 Total current assets 604,168 822,516 1,018,035 1,229,654 1,464,420 1,740,424 2,049,922 2,372,378 2,739,300 3,159,120


I. Fixed assets

Fixed assets 621,788 872,032 1,012,151 1,047,270 1,077,389 1,102,745 1,123,089 1,138,183 1,338,277 1,523,371






Short-term loans and borrowings 91,500 112,708 91,500 - - - - - - -

Payables and prepaid expenses 203,307 237,300 264,797 293,037 323,160 358,700 395,224 431,285 473,087 526,500 Inc : Internal payables - - - - - - - - - -

Other current liabilities 355,788 519,094 753,016 897,425 1,056,079 1,228,424 1,442,425 1,658,789 1,983,911 2,281,498 Total current liabilities 650,595 869,102 1,109,312 1,190,462 1,379,239 1,587,123 1,837,649 2,090,074 2,456,998 2,807,998 II. Non -current liabilities


Ernst & Young 74

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Long-term loans and borrowings 206,703 188,382 42,775 35,347 28,277 21,208 14,139 7,069 - - Current portion of long-term loans and

debts - - - - - - - - - -

Other non - current liabilities - - - - - - - - - - Total Non-current Liabilities 206,703 188,382 42,775 35,347 28,277 21,208 14,139 7,069 - -

B. OWNERS’ EQUITY

Shares 1,257,324 1,257,324 1,257,324 1,257,324 1,257,324 1,257,324 1,257,324 1,257,324 1,257,324 1,257,324


Undistributed earnings and other funds 293,047 575,794 882,067 1,215,100 1,628,936 2,135,781 2,761,673 3,516,408 4,420,363 5,496,351 Total owners' equity 1,550,370 1,833,118 2,139,391 2,472,424 2,886,260 3,393,105 4,018,997 4,773,732 5,677,686 6,753,674



Ernst & Young 75

1.5 Others

16.5: Projected Balance Sheet for other companies

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


I. Cash 175,218 199,975 222,387 259,701 298,337 338,903 382,674 430,899 485,879 547,120

II. Current receivables 492,096 500,533 533,579 624,255 701,518 798,033 883,288 994,431 1,120,176 1,218,745 Inc : Current internal receivables - - - - - - - - - -

III. Inventories 636,919 725,314 805,302 942,153 1,021,721 1,026,949 1,161,277 1,307,399 1,472,719 1,714,515

IV. Other current assets 2,007,129 2,095,041 2,126,706 2,345,565 2,524,892 2,788,018 2,963,310 3,140,186 3,350,451 3,584,721 Total current assets 3,311,362 3,520,864 3,687,974 4,171,674 4,546,466 4,951,902 5,390,549 5,872,916 6,429,226 7,065,100


I. Fixed assets

Fixed assets 602,255 657,606 658,546 781,529 781,134 857,676 817,358 849,703 876,751 851,000







Payables and prepaid expenses 420,507 478,867 531,676 751,617 862,550 981,220 1,109,567 1,249,182 1,407,141 1,585,918 Inc : Internal payables - - - - - - - - - -

Other current liabilities 1,524,041 1,735,554 1,926,952 2,254,414 2,587,147 2,943,087 3,328,055 3,746,819 4,220,603 4,756,829 Total current liabilities 3,036,704 3,304,010 3,567,746 4,123,035 4,541,273 4,990,818 5,419,133 5,940,512 6,515,255 7,150,457 II. Non -current liabilities


Ernst & Young 76

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Long-term loans and borrowings 256,230 213,724 200,065 202,349 203,562 164,600 125,638 86,676 52,929 23,541 Current portion of long-term loans and debts - - - - - - - - - -

Other non - current liabilities - - - - - - - - - - Total Non-current Liabilities 256,230 213,724 200,065 202,349 203,562 164,600 125,638 86,676 52,929 23,541

B. OWNERS’ EQUITY

Shares 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464


Undistributed earnings and other funds 147,066 207,504 259,725 314,582 372,881 437,545 511,019 594,891 688,829 794,715 Total owners' equity 1,185,772 1,246,210 1,298,431 1,353,287 1,411,586 1,476,250 1,549,725 1,633,596 1,727,535 1,833,421



Ernst & Young 77

1.6 Parent Company


2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


I. Cash 175,218 199,975 222,387 259,701 298,337 338,903 382,674 430,899 485,879 547,120

II. Current receivables 492,096 500,533 533,579 624,255 701,518 798,033 883,288 994,431 1,120,176 1,218,745 Inc : Current internal receivables - - - - - - - - - -

III. Inventories 636,919 725,314 805,302 942,153 1,021,721 1,026,949 1,161,277 1,307,399 1,472,719 1,714,515

IV. Other current assets 2,007,129 2,095,041 2,126,706 2,345,565 2,524,892 2,788,018 2,963,310 3,140,186 3,350,451 3,584,721 Total current assets 3,311,362 3,520,864 3,687,974 4,171,674 4,546,466 4,951,902 5,390,549 5,872,916 6,429,226 7,065,100


I. Fixed assets

Fixed assets 602,255 657,606 658,546 781,529 781,134 857,676 817,358 849,703 876,751 851,000







Payables and prepaid expenses 420,507 478,867 531,676 751,617 862,550 981,220 1,109,567 1,249,182 1,407,141 1,585,918 Inc : Internal payables - - - - - - - - - -

Other current liabilities 1,524,041 1,735,554 1,926,952 2,254,414 2,587,147 2,943,087 3,328,055 3,746,819 4,220,603 4,756,829 Total current liabilities 3,036,704 3,304,010 3,567,746 4,123,035 4,541,273 4,990,818 5,419,133 5,940,512 6,515,255 7,150,457 II. Non -current liabilities


Ernst & Young 78

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Long-term loans and borrowings 256,230 213,724 200,065 202,349 203,562 164,600 125,638 86,676 52,929 23,541 Current portion of long-term loans and debts - - - - - - - - - -

Other non - current liabilities - - - - - - - - - - Total Non-current Liabilities 256,230 213,724 200,065 202,349 203,562 164,600 125,638 86,676 52,929 23,541

B. OWNERS’ EQUITY

Shares 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464 1,034,464


Undistributed earnings and other funds 147,066 207,504 259,725 314,582 372,881 437,545 511,019 594,891 688,829 794,715 Total owners' equity 1,185,772 1,246,210 1,298,431 1,353,287 1,411,586 1,476,250 1,549,725 1,633,596 1,727,535 1,833,421



Ernst & Young 79

2 Combined Profit and loss Statement

Table 17: Combined projected Profit and loss Statement

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 14,752,065 16,841,493 18,189,313 20,020,708 22,232,647 24,693,853 27,613,286 30,203,389 32,817,338 35,711,141


Inc : Internal Expense

Per Revenue (%)

3. GROSS PROFITS 2,115,364 2,477,105 2,685,153 3,041,808 3,462,754 4,064,694 4,777,862 5,338,169 5,816,695 6,532,938

Per Revenue (%)



Research and Development Expenses

General and administrative expenses 720,010 731,399 739,224 907,059 997,086 1,171,289 1,582,848 1,964,752 2,246,451 2,771,851

TOTAL OPERATING EXPENSES 775,128 790,965 797,289 969,879 1,067,910 1,254,655 1,676,519 2,066,689 2,357,570 2,893,176

Per Revenue (%)

5. EARNINGS BEFORE TAX AND INTEREST 1,340,236 1,686,139 1,887,865 2,071,929 2,394,844 2,810,040 3,101,343 3,271,480 3,459,125 3,639,763

6. FINANCE INCOMES/(EXPENSES) (212,682) (389,573) (530,789) (672,875) (809,107) (965,260) (735,922) (358,888) 89,176 577,710

- Interest Incomes (614,691) (774,752) (882,672) (1,012,485) (1,178,040) (1,418,517) (1,295,655) (1,091,734) (856,447) (598,808)

- Investment Incomes 402,009 385,179 351,883 339,610 368,933 453,257 559,733 732,846 945,623 1,176,518

7. OPERATING PROFITS 1,127,554 1,296,566 1,357,075 1,399,054 1,585,737 1,844,780 2,365,421 2,912,592 3,548,301 4,217,472


9. EARNINGS BEFORE TAX 1,173,762 1,540,801 1,799,339 1,643,348 1,830,064 1,891,140 2,411,817 2,959,024 3,594,772 4,263,984


11. NET PROFITS 1,000,072 1,321,027 1,569,402 1,399,120 1,433,230 1,410,837 1,859,897 2,322,558 2,808,338 3,337,575


Ernst & Young 80


Table 17.1: Projected Balance Sheet for Hydro Power Plant Construction

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 4,635,803 5,151,584 5,267,357 5,708,241 6,261,139 6,815,359 7,409,794 7,995,168 8,626,786 9,308,302



Per Revenue (%) 85.5% 85.4% 85.7% 85.7% 85.5% 85.5% 85.4% 85.1% 84.8% 82.6%

3. GROSS PROFITS 670,598 750,871 753,009 816,685 905,143 987,699 1,082,941 1,194,162 1,314,170 1,618,972

Per Revenue (%) 14.5% 14.6% 14.3% 14.3% 14.5% 14.5% 14.6% 14.9% 15.2% 17.4%




General and administrative expenses 292,399 347,224 347,224 381,946 381,946 439,238 557,832 736,338 971,967 1,360,753

TOTAL OPERATING EXPENSES 294,788 352,375 352,491 387,654 388,207 452,869 572,652 752,329 989,220 1,379,370

Per Revenue (%) 6.4% 6.8% 6.7% 6.8% 6.2% 6.6% 7.7% 9.4% 11.5% 14.8%


6. FINANCE INCOMES/(EXPENSES) (61,109) (43,206) (61,227) (20,012) 31,008 98,874 156,501 265,014 379,797 501,853

- Interest Incomes (102,742) (84,840) (102,860) (61,646) (20,688) (0) (0) (0) (0) (0)






11. NET PROFITS 289,450 324,355 310,597 370,562 427,359 491,680 516,494 546,537 544,961 572,492


Ernst & Young 81


Table 17.2: Projected Balance Sheet for Power Trading

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 652,000 652,000 802,689 1,076,884 1,189,159 1,684,489 2,089,809 2,317,001 2,317,001 2,317,001

2. COST OF GOODS SOLD 293,400 293,400 361,210 484,598 535,122 758,020 940,414 1,042,650 1,042,650 1,042,650


Per Revenue (%) 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0% 45.0%

3. GROSS PROFITS 358,600 358,600 441,479 592,286 654,038 926,469 1,149,395 1,274,350 1,274,350 1,274,350

Per Revenue (%) 55.0% 55.0% 55.0% 55.0% 55.0% 55.0% 55.0% 55.0% 55.0% 55.0%


Selling Expenses - - - - - - - - - -




Per Revenue (%) 10.3% 9.9% 8.0% 8.0% 8.2% 8.1% 9.2% 9.3% 9.3% 9.3%




- Investment Incomes 799 799 799 799 799 799 799 799 14,303 28,027

7. OPERATING PROFITS 37,007 (39,382) 61,616 19,364 (146,196) (208,097) 42,866 311,665 526,868 742,414


9. EARNINGS BEFORE TAX 40,078 (36,312) 64,687 22,435 (143,125) (205,026) 45,937 314,736 529,939 745,485

10. ENTERPRISE INCOME TAX EXPENSES (3,777) 3,422 (6,096) (2,114) - - - (10,506) (49,940) (70,252)

11. NET PROFITS 36,301 (32,890) 58,591 20,321 (143,125) (205,026) 45,937 304,230 480,000 675,233


Ernst & Young 82



2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 2,845,614 3,517,005 3,923,494 4,153,781 4,669,321 4,929,981 5,550,611 5,951,672 6,392,839 6,878,123



Per Revenue (%) 86.7% 87.1% 87.8% 88.1% 87.3% 87.0% 85.8% 85.5% 85.2% 84.9%

3. GROSS PROFITS 377,297 452,537 477,578 494,918 592,120 639,622 790,592 865,471 948,171 1,039,474

Per Revenue (%) 13.3% 12.9% 12.2% 11.9% 12.7% 13.0% 14.2% 14.5% 14.8% 15.1%






Per Revenue (%) 4.5% 2.2% 1.5% 2.0% 2.0% 2.0% 4.5% 5.8% 4.5% 4.5%









11. NET PROFITS 172,481 156,858 121,405 94,325 150,286 203,815 223,674 230,915 351,537 437,681


Ernst & Young 83

2.4 Sector – Property Development Table 17.4: Projected Balance Sheet for Property Development

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 1,016,536 1,483,127 1,654,979 1,831,480 2,112,157 2,456,847 2,884,850 3,317,577 3,815,214 4,387,496

2. COST OF GOODS SOLD 654,962 954,588 1,069,419 1,182,084 1,358,297 1,573,570 1,839,665 2,108,628 2,427,187 2,791,279


Per Revenue (%) 64.4% 64.4% 64.6% 64.5% 64.3% 64.0% 63.8% 63.6% 63.6% 63.6%

3. GROSS PROFITS 361,574 528,538 585,561 649,396 753,860 883,277 1,045,185 1,208,949 1,388,027 1,596,217

Per Revenue (%) 35.6% 35.6% 35.4% 35.5% 35.7% 36.0% 36.2% 36.4% 36.4% 36.4%






Per Revenue (%) 5.2% 5.1% 5.9% 7.4% 7.1% 6.7% 6.3% 6.0% 5.8% 5.5%



- Interest Incomes (31,386) (24,891) (21,768) (8,481) (3,181) (2,474) (1,767) (1,060) (353) -


7. OPERATING PROFITS 310,236 461,027 499,467 543,192 675,224 827,199 1,021,720 1,232,247 1,476,071 1,757,171


9. EARNINGS BEFORE TAX 311,215 462,006 500,446 544,171 676,203 828,178 1,022,700 1,233,226 1,477,050 1,758,150


11. NET PROFITS 224,075 332,644 360,321 391,803 486,866 596,288 736,344 887,923 1,063,476 1,265,868


Ernst & Young 84

2.5 Others

Table 17.5: Projected Balance Sheet for other companies 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 1,752,112 1,995,278 2,215,318 2,591,784 2,974,310 3,383,517 3,826,094 4,307,525 4,852,210 5,468,682



Per Revenue (%) 86.3% 86.3% 86.2% 86.2% 86.0% 86.0% 85.8% 85.7% 85.6% 85.5%

3. GROSS PROFITS 240,020 273,891 306,661 357,908 416,145 474,445 543,857 615,588 697,440 793,277

Per Revenue (%) 13.7% 13.7% 13.8% 13.8% 14.0% 14.0% 14.2% 14.3% 14.4% 14.5%






Per Revenue (%) 7.5% 6.4% 5.8% 6.7% 7.7% 8.3% 9.1% 9.6% 10.1% 10.6%









11. NET PROFITS 34,753 71,104 61,436 64,537 68,587 76,075 86,441 98,672 110,516 124,571


Ernst & Young 85

2.6 Parent Company


2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE

3,850,000

4,042,500

4,325,475

4,658,537

5,026,561

5,423,659

5,852,128

6,314,447

6,813,288

7,351,538

2. COST OF GOODS SOLD

3,742,725

3,929,832

4,204,610

4,527,922

4,885,112

5,270,476

5,686,237

6,134,798

6,618,751

7,140,890


Per Revenue (%) 97.2% 97.2% 97.2% 97.2% 97.2% 97.2% 97.2% 97.2% 97.1% 97.1%

3. GROSS PROFITS

107,275

112,668

120,865

130,615

141,449

153,184

165,891

179,648

194,537

210,648

Per Revenue (%) 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.9% 2.9%


Selling Expenses 344 362 387 417 450 485 523 565 609 658


General and administrative expenses

99,348

95,324

96,278

103,980

112,298

121,282

130,985

141,463

152,780

165,003

TOTAL OPERATING EXPENSES

99,692

95,686

96,665

104,397

112,748

121,767

131,508

142,028

153,390

165,660

Per Revenue (%) 2.6% 2.4% 2.2% 2.2% 2.2% 2.2% 2.2% 2.2% 2.3% 2.3%

5. EARNINGS BEFORE TAX AND INTEREST 7,583

16,982

24,200

26,218

28,701

31,416

34,383

37,620

41,147

44,987

6. FINANCE INCOMES/(EXPENSES)

234,877

253,393

236,242

232,714

215,884

215,884

215,884

215,884

215,884

215,884

- Interest Incomes

(65,157)

(29,810)

(13,302)

(0) - - - - - -

- Investment Incomes

300,034

283,204

249,544

232,714

215,884

215,884

215,884

215,884

215,884

215,884

7. OPERATING PROFITS

242,459

270,375

260,442

258,932

244,585

247,300

250,267

253,504

257,031

260,871

8. OTHER INCOMES/(EXPENSES) 553

198,580

396,609

198,640

198,672 705 740 778 816 857

9. EARNINGS BEFORE TAX

243,012

468,955

657,051

457,572

443,256

248,005

251,007

254,281

257,847

261,728

10. ENTERPRISE INCOME TAX EXPENSES - - - - - - - - - -

11. NET PROFITS

243,012

468,955

657,051

457,572

443,256

248,005

251,007

254,281

257,847

261,728


Ernst & Young 86

3. Combined Cash Flow Statement

Table 18: Combined projected Cash Flow Statement

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1. CASH FLOWS FROM OPERATING ACTIVITIES

Earnings before tax 1,000,072 1,321,027 1,569,402 1,399,120 1,433,230 1,410,837 1,859,897 2,322,558 2,808,338 3,337,575

Depreciations 815,996 916,734 1,010,513 1,583,640 1,618,787 1,664,306 1,905,274 2,165,702 2,436,130 2,194,503

Profits/ (losses) from investing activities (402,009) (385,179) (351,883) (339,610) (368,933) (453,257) (559,733) (732,846) (945,623) (1,176,518) Operating profit/(loss) before changes in working capital

(Increase)/decrease in receivables (238,136) (234,737) (318,850) (438,250) (429,652) (535,302) (514,372) (530,017) (577,253) (554,032)

(Increase)/decrease in inventories (157,598) (256,759) (329,174) (421,330) (411,895) (374,737) (592,776) (701,103) (808,249) (973,991)

(Increase)/decrease in other current assets (276,926) (218,974) (264,195) (482,588) (436,841) (543,310) (548,050) (465,922) (512,080) (579,807) (Increase)/decrease in payables and in prepaid expenses 390,528 372,017 404,294 646,416 556,582 707,794 819,587 691,962 809,540 874,253

(Increase)/decrease in current liabilities 772,011 942,000 1,123,256 1,249,543 1,243,614 1,633,029 1,914,925 1,983,993 2,125,532 2,272,673

Net cash flows from operating activities 1,903,939 2,456,130 2,843,364 3,196,941 3,204,891 3,509,360 4,284,752 4,734,326 5,336,334 5,394,655


Purchase and construction of fixed assets and other long-term assets (3,106,840) (3,459,119) (4,234,097) (2,904,778) (1,897,322) (1,282,491) (513,608) (285,798) (285,798) (285,798)

Payments for investments 0 198,000 391,720 144,388 (344,978) (992,047) (1,252,662) (2,036,622) (2,503,263) (2,716,403)

Interest and dividends received 402,009 385,179 351,883 339,610 368,933 453,257 559,733 732,846 945,623 1,176,518

Other items

Net cash flows from investing activities (2,716,761) (2,889,063) (3,504,929) (2,436,659) (1,890,835) (1,840,494) (1,227,672) (1,612,823) (1,869,011) (1,853,814)


Increase/(decrease) in short - term loans and debts 512,184 110,562 59,747 (673,517) (570,141) (260,657) (350,730) (291,954) (242,356) (107,524)


Ernst & Young 87

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Increase/(decrease) in current portion of long-term loans and debts Increase/(decrease) in long - term loans and debts (405,685) 987,506 1,728,789 932,324 272,089 (678,209) (1,653,344) (2,273,978) (2,413,231) (2,522,961)

Increase/(decrease) in shares

Increase/(decrease) in preference shares


Net cash flows from financing activities 14,428 958,175 1,628,508 107,542 (468,431) (1,113,689) (2,204,241) (2,794,003) (2,911,967) (2,922,473)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (798,393) 525,241 966,943 867,824 845,625 555,177 852,839 327,501 555,355 618,368

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 1,625,367 826,973 1,352,215 2,319,157 3,186,981 4,032,606 4,587,783 5,440,622 5,768,122 6,323,478 CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 826,973 1,352,215 2,319,157 3,186,981 4,032,606 4,587,783 5,440,622 5,768,122 6,323,478 6,941,846


Ernst & Young 88


Table 18.1: Projected Cash flow statement for Hydro Power Plant Construction


Earnings before tax

289,450

324,355

310,597

370,562

427,359

491,680

516,494 546,537 544,961

572,492

Depreciations

210,205

227,930

247,789

267,881

284,473

307,220

324,920 324,920 324,920

149,606


(41,633)

(41,633)

(41,633)

(41,633)

(51,695)

(98,874)

(156,501)

(265,014)

(379,797)

(501,853) Operating profit/(loss) before changes in working capital


(54,178)

(61,931)

(51,749)

(79,359)

(74,477)

(90,727)

(96,616)

(93,860)

(109,270)

(99,286)


(34,488)

(51,765)

(42,836)

(48,962)

(68,292)

(80,662)

(90,920)

(96,831)

(106,791)

(99,786) (Increase)/decrease in other current assets

(3,020)

(23,590)

(10,427)

(39,709)

(49,798)

(49,917)

(53,539)

(52,723)

(56,888)

(60,753)


22,657

51,603

63,151

92,469

95,457

145,580

169,802 196,041 236,361

292,500


88,958

165,050

195,068

154,309

193,514

193,977

208,052 524,688 591,403

758,467


477,951

590,020

669,960

675,558

756,541

818,275

821,692 1,083,757 1,044,898

1,011,387



(453,584)

(230,432)

(258,160)

(261,200)

(215,700)

(295,700)

(230,100) - - -

Payments for investments - - - -

(118,378)

(555,047)

(677,964)

(1,276,622)

(1,350,387)

(1,435,955)


41,633

41,633

41,633

41,633

51,695

98,874

156,501 265,014 379,797

501,853

Other items - - - - - - - - - -


(411,951)

(188,799)

(216,527)

(219,567)

(282,383)

(751,873)

(751,563)

(1,011,608)

(970,590)

(934,102)


Ernst & Young 89

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 3. CASH FLOWS FROM FINANCING ACTIVITIES

Increase/(decrease) in short - term loans and debts - -

(141,000)

(373,000)

(413,756) - - - - -

Increase/(decrease) in current portion of long-term loans and debts - - - - - - - - - - Increase/(decrease) in long - term loans and debts

(244,882)

(351,882)

(277,893)

(32,402) - - - - - -




(28,945)

(32,436)

(31,060)

(37,056)

(42,736)

(49,168)

(51,649)

(54,654)

(54,496)

(57,249)


(273,827)

(384,318)

(449,953)

(442,458)

(456,492)

(49,168)

(51,649)

(54,654)

(54,496)

(57,249)


(207,827)

16,903

3,480

13,533

17,667

17,234

18,479 17,495 19,812

20,036


351,131

143,304

160,208

163,688

177,221

194,888

212,123 230,602 248,097

267,909


143,304

160,208

163,688

177,221

194,888

212,123

230,602 248,097 267,909

287,945


Ernst & Young 90


Table 18.2: Projected Cash flow statement for Power Trading


Earnings before tax 36,301 (32,890) 58,591 20,321 (143,125)

(205,026) 45,937 304,230 480,000 675,233

Depreciations 340,926 347,641 354,326 865,230 871,915

878,600 1,124,828 1,371,055 1,617,283 1,529,269

Profits/ (losses) from investing activities (799) (799) (799) (799) (799)

(799) (799) (799) (14,303) (28,027) Operating profit/(loss) before changes in working

capital - - - - - - - - - -

(Increase)/decrease in receivables (7,056) - (12,163) (22,132) (9,063)

(39,982) (32,716) (18,338) (0) 0

(Increase)/decrease in inventories (4,043) - (6,970) (12,683) (5,193)

(22,911) (18,748) (10,509) (0) 0

(Increase)/decrease in other current assets (2,841) 39,120 (52,889) (58,818) (30,362)

(34,600) (76,639) (39,542) (23,170) (34,755) (Increase)/decrease in payables and in prepaid expenses 10,882 32,600 36,165 108,882 114,678

190,210 250,406 93,148 139,020 115,850

(Increase)/decrease in current liabilities 88,747 97,800 128,578 222,098 79,051

396,264 533,237 204,472 115,850 -

Net cash flows from operating activities 462,117 483,472 504,839 1,122,099 877,102

1,161,756 1,825,504 1,903,718 2,314,679 2,257,571

2. CASH FLOWS FROM INVESTING ACTIVITIES Purchase and construction of fixed assets and other long-term assets (2,244,553) (2,748,947) (2,975,752) (1,828,402) (1,453,357)

(721,198) (66,848) (66,848) (66,848) (66,848)

Payments for investments - - - - - - - - (158,876) (161,448)

Interest and dividends received 799 799 799 799 799 799 799 799 14,303 28,027

Other items (8,662) (9,528) (10,480) (11,529) (12,681)

(13,950) (15,344) (16,879) (18,567) (20,424)

Net cash flows from investing activities (2,252,415) (2,757,676) (2,985,434) (1,839,132) (1,465,240)

(734,349) (81,394) (82,928) (229,988) (220,693)

3. CASH FLOWS FROM FINANCING ACTIVITIES Increase/(decrease) in short - term loans and debts 496,539 384,421 290,711 (229,549) (25,457)

(199,780) (305,632) (237,544) (173,711) -


Ernst & Young 91

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Increase/(decrease) in current portion of long-term loans and debts - - - - - - - - - - Increase/(decrease) in long - term loans and debts 1,158,592 1,890,061 2,220,015 991,798 618,358

(153,352) (1,105,454) (1,796,807) (1,934,707) (2,036,825)




Net cash flows from financing activities 1,655,131 2,274,483 2,510,726 762,249 592,901

(353,132) (1,411,086) (2,034,351) (2,108,418) (2,036,825)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (135,167) 279 30,131 45,217 4,764 74,276 333,025 (213,561) (23,727) 53

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 232,557 97,390 97,669 127,801 173,018

177,781 252,057 585,082 371,521 347,794

CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 97,390 97,669 127,801 173,018 177,781

252,057 585,082 371,521 347,794 347,848


Ernst & Young 92


Table 18.3: Projected cash flow statement for Industrial Production

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018



Depreciations 177,598 233,279 287,503 315,070 318,397 321,725 291,777 295,105 298,432 301,760


(868)

(868)

(868)

(868)

(868)

(868)

(868)

(868)

(868)

(868)



(69,910)

(70,499)

(75,819)

(77,028)

(81,603)

(94,848)

(81,302)

(76,346)

(91,522)

(81,696)


(45,780)

(53,039)

(61,645)

(66,568)

(88,452)

(86,923)

(151,735)

(238,230)

(306,803)

(381,071)


(75,487)

(92,394)

(112,403)

(101,908)

(105,170)

(107,405)

(133,435)

(86,228)

(94,851)

(104,336) (Increase)/decrease in payables and in prepaid expenses 67,993 68,411 107,843 106,957 106,024 110,578 118,821 102,271 99,712 88,386




(28,573)

(34,118)

(546,325)

(413,500)

(49,912)

(49,912)

(49,912)

(49,912)

(49,912)

(49,912)



Other items

(1,965)

(2,162)

(2,378)

(2,616)

(2,877)

(3,165)

(3,482)

(3,830)

(4,213)

(4,634)


(29,671)

(35,412)

(547,835)

(415,248)

(51,922)

(52,210)

(52,526)

(52,874)

(53,257)

(53,678)


Increase/(decrease) in short - term loans and debts - 52,500 177,756 12,646

(105,502)

(35,812) 39,902

(17,410)

(11,645)

(27,724)


Ernst & Young 93

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Increase/(decrease) in current portion of long-term loans and debts - - - - - - - - - -


(361,114)

(373,250)

(54,067)

(21,929)

(340,412)

(478,826)

(501,858)

(431,139)

(437,708)

(456,749)





(361,114)

(320,750) 123,690

(9,283)

(445,914)

(514,637)

(461,956)

(448,549)

(449,353)

(484,472)


(81,933) 51,316 12,420 6,908 15,466 7,819 18,619 12,031 13,235 14,559

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 135,901 53,969 105,285 117,705 124,613 140,080 147,899 166,518 178,550 191,785 CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 53,969 105,285 117,705 124,613 140,080 147,899 166,518 178,550 191,785 206,344


Ernst & Young 94

3.4 Sector – Property Development Table 18.4: Projected cash flow statement for Property Development


Earnings before tax

224,075

332,644

360,321

391,803

486,866

596,288

736,344

887,923

1,063,476

1,265,868

Depreciations

34,875

49,881

59,881

64,881

69,881

74,894

79,906

84,906 99,906 114,906


(33,184)

(33,184)

(33,548)

(38,105)

(74,196)

(111,341)

(160,190)

(224,790)

(309,280)

(404,395) Operating profit/(loss) before changes in

working capital


(60,530)

(82,319)

(87,457)

(99,070)

(112,384)

(136,424)

(139,893)

(150,156)

(169,196)

(191,905)


(37,922)

(34,686)

(38,694)

(39,694)

(41,583)

(40,028)

(47,080)

(47,600)

(54,740)

(62,951)


(42,033)

(82,319)

(62,632)

(65,287)

(69,608)

(85,483)

(106,145)

(107,316)

(123,414)

(141,926) (Increase)/decrease in payables and in prepaid expenses

37,876

33,993

27,496

28,240

30,123

35,540

36,525

36,061 41,801 53,413


148,778

163,307

233,921

144,410

158,653

172,345

214,001

216,364

325,123 297,587


271,934

347,317

459,289

387,179

447,754

505,790

613,468

695,390

873,676 930,597


(147,366)

(313,034)

(259,381)

(204,669)

(4,151)

(67,450)

(62,750) - - -

Payments for investments - -

(4,280)

(53,612)

(424,600)

(437,000)

(574,698)

(760,000)

(994,000)

(1,119,000)


33,184

33,184

33,548

38,105

74,196

111,341

160,190

224,790

309,280 404,395

Other items

(1,303)

(1,434)

(1,577)

(1,735)

(1,908)

(2,099)

(2,309)

(2,540)

(2,794)

(3,073)


(115,486)

(281,284)

(231,691)

(221,911)

(356,464)

(395,209)

(479,567)

(537,750)

(687,514)

(717,678)


Ernst & Young 95

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

3. CASH FLOWS FROM FINANCING ACTIVITIES Increase/(decrease) in short - term loans and debts -

21,208

(21,208)

(91,500) - - - - - -

Increase/(decrease) in current portion of long-term loans and debts - - - - - - - - - - Increase/(decrease) in long - term loans and debts

(104,506)

(18,321)

(145,607)

(7,428)

(7,069)

(7,069)

(7,069)

(7,069)

(7,069) -




(33,611)

(49,897)

(54,048)

(58,770)

(73,030)

(89,443)

(110,452)

(133,188)

(159,521)

(189,880)


(138,117)

(47,010)

(220,863)

(157,699)

(80,099)

(96,513)

(117,521)

(140,258)

(166,591)

(189,880)


18,331

19,024

6,735

7,569

11,191

14,069

16,380

17,383 19,571 23,038


22,331

40,662

59,686

66,421

73,991

85,181

99,250

115,630

133,013 152,585


40,662

59,686

66,421

73,991

85,181

99,250

115,630

133,013

152,585 175,623


Ernst & Young 96

3.5 Others

Table 18.5: Projected cash flow statement for other companies

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


Earnings before tax

34,753

71,104

61,436

64,537

68,587

76,075

86,441

98,672

110,516

124,571

Depreciations

40,318

45,353

47,789

56,777

59,745

66,918

68,318

73,616

78,914

81,712


(25,491)

(25,491)

(25,491)

(25,491)

(25,491)

(25,491)

(25,491)

(25,491)

(25,491)

(25,491)



(45,195)

(8,437)

(33,046)

(90,675)

(77,263)

(96,515)

(85,255)

(111,143)

(125,745)

(98,568)


(22,677)

(88,394)

(79,988)

(136,851)

(79,568)

(5,228)

(134,329)

(146,122)

(165,320)

(241,795)


(156,969)

(87,913)

(31,664)

(218,859)

(179,327)

(263,126)

(175,292)

(176,876)

(210,265)

(234,270)


106,803

58,360

52,810

219,941

110,932

118,670

128,347

139,615

157,959

178,777


231,979

211,513

191,398

327,462

332,732

355,941

384,967

418,764

473,784

536,226


163,520

176,094

183,244

196,841

210,348

227,243

247,706

271,035

294,351

321,161

2. CASH FLOWS FROM INVESTING ACTIVITIES Purchase and construction of fixed assets and other long-

term assets

(221,263)

(121,088)

(182,978)

(185,507)

(162,702)

(136,730)

(92,498)

(157,538)

(157,538)

(157,538)



25,491

25,491

25,491

25,491

25,491

25,491

25,491

25,491

25,491

25,491

Other items - - - - - - - - - -


(195,772)

(95,597)

(157,487)

(160,015)

(137,211)

(111,239)

(67,007)

(132,047)

(132,047)

(132,047)



Ernst & Young 97

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Increase/(decrease) in short - term loans and debts

15,645

(2,567)

19,529

7,886

(25,427)

(25,065)

(85,000)

(37,000)

(57,000)

(79,800) Increase/(decrease) in current portion of long-term loans and debts - - - - - - - - - -


(137,143

)

(42,507)

(13,658)

2,284

1,212

(38,962)

(38,962)

(38,962)

(33,747)

(29,388)




(5,213)

(10,666)

(9,215)

(9,681)

(10,288)

(11,411)

(12,966)

(14,801)

(16,577)

(18,686)


(126,711)

(55,740)

(3,345) 489

(34,502)

(75,439)

(136,928)

(90,763)

(107,324)

(127,873)


(158,963)

24,758

22,412

37,314

38,635

40,566

43,771

48,226

54,980

61,241


334,181

175,218

199,975

222,387

259,701

298,337

338,903

382,674

430,899

485,879


175,218

199,975

222,387

259,701

298,337

338,903

382,674

430,899

485,879

547,120


Ernst & Young 98

3.6 Parent Company

Table 18.6: Projected cash flow statement for Parent Company

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1. CASH FLOWS FROM OPERATING ACTIVITIES Earnings before tax 243,012 468,955 657,051 457,572 443,256 248,005 251,007 254,281 257,847 261,728 Depreciations 12,075 12,650 13,225 13,800 14,375 14,950 15,525 16,100 16,675 17,250

Profits/ (losses) from investing activities (300,034) (283,204) (249,544) (232,714) (215,884) (215,884) (215,884) (215,884) (215,884) (215,884) Operating profit/(loss) before changes in working capital (Increase)/decrease in receivables (1,267) (11,550) (58,616) (69,986) (74,863) (76,806) (78,589) (80,174) (81,520) (82,577) (Increase)/decrease in inventories (12,688) (28,875) (99,041) (116,572) (128,809) (138,984) (149,964) (161,811) (174,594) (188,387) (Increase)/decrease in other current assets 3,425 28,122 5,821 1,994 (2,576) (2,780) (2,999) (3,236) (3,492) (3,768) (Increase)/decrease in payables and in prepaid expenses 144,317 127,050 116,828 89,927 99,367 107,217 115,687 124,826 134,687 145,327 (Increase)/decrease in current liabilities 130,725 138,600 203,742 239,804 264,978 285,911 308,498 332,869 359,166 387,540


2. CASH FLOWS FROM INVESTING ACTIVITIES Purchase and construction of fixed assets and other long-term assets (11,500) (11,500) (11,500) (11,500) (11,500) (11,500) (11,500) (11,500) (11,500) (11,500) Payments for investments - 198,000 396,000 198,000 198,000 - - - - - Interest and dividends received 300,034 283,204 249,544 232,714 215,884 215,884 215,884 215,884 215,884 215,884 Other items - - - - - - - - - - Net cash flows from investing activities 288,534 469,704 634,044 419,214 402,384 204,384 204,384 204,384 204,384 204,384


Increase/(decrease) in short - term loans and debts - (345,000) (266,041) (0) - - - - - - Increase/(decrease) in current portion of long-term loans and debts - - - - - - - - - - Increase/(decrease) in long - term loans and debts (716,633) (116,595) - - - - - - - - Increase/(decrease) in shares - - - - - - - - - - Increase/(decrease) in preference shares - - - - - - - - - -

Dividends paid for owners (24,301) (46,896) (65,705) (45,757) (44,326) (24,801) (25,101) (25,428) (25,785) (26,173) Net cash flows from financing activities (740,934) (508,491) (331,746) (45,757) (44,326) (24,801) (25,101) (25,428) (25,785) (26,173)

NET INCREASE/(DECREASE) IN CASH AND CASH (232,835) 412,961 891,764 757,282 757,902 401,212 422,564 445,926 471,485 499,441


Ernst & Young 99

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 EQUIVALENTS

CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 549,265 316,430 729,391 1,621,155 2,378,437 3,136,339 3,537,551 3,960,115 4,406,041 4,877,526 CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 316,430 729,391 1,621,155 2,378,437 3,136,339 3,537,551 3,960,115 4,406,041 4,877,526 5,376,966


Ernst & Young 100

C. Assumptions

Part 1: Sector - Hydro Power Plant Construction

1.1 General Assumptions

1 Interest rate is assumed to be 10% per in the forecasted period. However, in the FY09F and FY10F, the interest rate is just 6% as another 4% is supported by the VN Government

2 Interest payment is computed based on the average of beginning and ending balance 3 Debt services are computed by Interest payment of S/T + L/T debt and principal payments of long term debt. Note that, Song Da does not need to pay

principal for S/T loans as it borrows these S/T loan amount by Credit Limitation 4 Assume long term debt has 7 year term 5 Assume no stock issuing 6 Assume the Sector 1 pays out 10% from the net income for dividend in the projected years 7 Cash requirement partially based on historical practices and our consideration on the revenue growth rate perspective 8 Our Sensitivity Analysis is applied from 2010. Also, G&A cost after restructing is 5% in deduction from 2010 9 Corporate income tax is assumed 14% from 2009 to 2012 and assumed 25% in the period of 2013-2018 10 Cost of good sold is assumed around 81% of revenues that based on the historical data and the saving cost strategy of the Sector 11 Operating expenses are assumed to be 8.3% of revenues 12 Depreciation of assets is applied to the Vietnamese Accounting Standard 13 Return from long term investment is assumed to be 7.5% 14 Internal transactions are not eliminated from our forecast as we have no information from Song Da 15 Revenues of projected years are assumed as below table:


Ernst & Young 101

1.2 Assumption – Revenues and capital expenditure

Table 19: Assumption on revenue and capital expenditure for subsidiaries of Song Da Corporation Sông Đà 1 2008 2009 2010 2011 2012 2013 2014 2015 1 Revenue 258,000 294,000 334,000 384,100 441,715 504,972 584,168 608,500 CAPEX 7 Equipments & Machinery 7,967 17,000 27,200 17,000 17,000 17,000 17,000 17,000 Sông Đà 2 2008 2009 2010 2011 2012 2013 2014 2015 1 Revenue 340,000 365,204 407,524 441,898 481,892 528,657 579,592 636,026 CAPEX 7 Equipments & Machinery 5,386 8,000 11,200 11,200 11,900 13,100 14,500 15,000

Sông Đà 3 2008 2009 2010 2011 2012 2013 2014 2015 1 Revenue 240,000 315,550 352,900 366,460 405,700 476,600 505,760 558,540 CAPEX 7 Equipments & Machinery 16,902 44,151 19,432 10,000 15,000 25,000 35,000 40,000 Sông Đà 4 2008 2009 2010 2011 2012 2013 2014 2015 1 Revenue 344,000 304,000 301,000 323,000 347,000 371,000 400,000 435,000 CAPEX 7 Equipments & Machinery 4,480 - 3,600 5,000 - - 7,500 12,000


Ernst & Young 102

Sông Đà 5 2008 2009 2010 2011 2012 2013 2014 2015 1 Revenue 750,000 810,000 896,400 698,400 767,700 845,100 934,200 1,033,200 CAPEX 7 Equipments & Machinery 113,115 34,703 8,000 100,700 21,200 35,500 32,800 21,100 Sông Đà 6 2008 2009 2010 2011 2012 2013 2014 2015 1 Revenue 633,500 659,781 753,619 835,196 900,054 983,443 1,073,104 1,189,483 CAPEX 7 Equipments & Machinery 101,755 87,600 59,700 100,000 80,000 45,000 45,000 45,000 Sông Đà 7

2008 2009 2010 2011 2012 2013 2014 2015 1 Revenue 398,000 412,400 480,800 491,400 504,900 519,600 535,400 556,200 CAPEX 7 Equipments & Machinery 15,300 45,000 - - - - - - Sông Đà 8 2008 2009 2010 2011 2012 2013 2014 2015 1 Revenue 203,550 270,050 318,250 362,520 373,040 406,020 433,590 470,390 CAPEX 7 Equipments & Machinery Sông Đà 9 2008 2009 2010 2011 2012 2013 2014 2015 1 Revenue 470,000 523,000 548,000 555,000 581,013 609,002 665,000 727,000 CAPEX 7 Equipments & Machinery 7,486 100,800 41,300 64,900 36,100 20,100 63,900 -


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Sông Đà 10 2008 2009 2010 2011 2012 2013 2014 2015 1 Revenue 592,517 681,818 759,091 809,383 905,227 1,013,745 1,104,545 1,195,455 CAPEX 7 Equipments & Machinery 71,875 80,000 60,000 60,000 80,000 60,000 80,000 80,000 Consolidated 2008 2009 2010 2011 2012 2013 2014 2015 1 Revenue 4,229,567 4,635,803 5,151,584 5,267,357 5,708,241 6,261,139 6,815,359 7,409,794 11% 2% 8% 10% 9% 9% CAPEX 7 Equipments & Machinery 391,916 453,584 230,432 368,800 261,200 215,700 295,700 230,100


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Part 2: Sector - Power Trading


1 Interest rate is assumed to be 10% per in the forecasted period. However, in the FY09F and FY10F, the interest rate is just 6% as another 4% is supported by the VN Government

2 Interest payment is computed based on the average of beginning and ending balance 3 Debt services are computed by Interest payment of S/T + L/T debt and principal payments of long term debt. Note that, Song Da does not need to

pay principal for S/T loans as it borrows these S/T loan amount by Credit Limitation 4 Assume long term debt has 7 year term 5 Assume no stock issuing 6 Assume the Sector does not pay dividend as it is in the investment periods 7 Cash requirement partially based on historical practices and our consideration on the revenue growth rate perspective 8 Our Sensitivity Analysis is applied from 2010. Also, G&A cost after restructing is 5% in deduction from 2010 9 Corporate income tax is assumed 9.4% from 2009 to 2018 10 Cost of good sold is assumed around 45% of revenues that based on the historical data and the saving cost strategy of the Sector 11 Depreciation of assets is applied to the Vietnamese Accounting Standard 12 Operating expenses are assumed to be 9% of revenues 13 Return from long term investment is assumed to be 7.5% 14 Internal transactions are not eliminated from our forecast as we have no information from Song Da


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2.2 Assumptions – Revenues Table 19: Assumptions on Revenue of incoming electricity generation projects

Year 2006

Year 2007

Year 2008

Year 2009

Year 2010

Year 2011

Year 2012

Year 2013

Year 2014

Year 2015

Year 2016

Year 2017

Year 2018

Nậm Chiến Revenue Bil 85 317 423 423 423 423 423 423

Quantity Mil kWh 128 480 640 640 640 640 640 640

Trà Xom Revenue Bil ® 26 48 48 48 48 48 48 48

Quantity Mil kWh 40 73 73 73 73 73 73 73

Việt Lào Xekaman 3

Revenue Bil 330 531 531 531 531

Quantity Mil kWh 500 804 804 804 804

Xekaman 1 Revenue Bil 165 370 597 597 597

Quantity Mil kWh 250 560 904 904 904

Xekaman 4 Revenue Bil 106 361 515 515 515 515 515 515

Quantity Mil kWh 160 546 780 780 780 780 780 780

Sông Đà - Hoàng Liên Sừ Pán 2

Revenue Bil 53 73 79 79 79 79 79 79

Quantity Mil kWh 80 110 120 120 120 120 120 120

Se san 3A


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Year 2006

Year 2007

Year 2008

Year 2009

Year 2010

Year 2011

Year 2012

Year 2013

Year 2014

Year 2015

Year 2016

Year 2017

Year 2018

Revenue Bil 2 229 270 320 320 319 319 319 319 319 319 319 319

Quantity Mil kWh 6 342 394 479 479 479 479 479 479 479 479 479 479

Nà Lơi Revenue Bil 30 31 49 36 36 34 34 34 34 34 34 34 34

Quantity Mil kWh 50 43 65 48 48 46 46 46 46 46 46 46 46

Ry Ninh Revenue Bil 40 38 40 38 38 38 38 38 38 38 38 38 38

Quantity Mil kWh 55 58 54 52 52 55 55 55 55 55 55 55 55

Cần Đơn Revenue Bil 231 277 263 258 258 248 248 248 248 248 248 248 248

Quantity Mil kWh 300 360 358 337 337 330 330 330 330 330 330 330 330

TOTAL REVENUES 303 575 622 652 652 803 1,077 1,189 1,684 2,090 2,317 2,317 2,317


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2.3 Assumptions – CAPEX Table 20: Assumption on revenues of hydro power plant construction project

PROJECTS Year 2006

Year 2007

Year 2008

Year 2009

Year 2010

Year 2011

Year 2012

Year 2013

Year 2014

Year 2015

Year 2016

Year 2017

Year 2018

CTCP TĐ NẬM CHIẾN 280 297 626 998 887 586 0 0 0 0 0 0 0

CTCP TĐ TRÀ XOM 20 150 150 70 0 0 0 0 0 0 0

CT CP ĐIỆN VIỆT LÀO 0 0 0 0 0

THUỶ ĐIỆN SÊKA MAN 3 221 589 568 1,032 1,091 482 0 0 0 0 0 0

THUỶ ĐIỆN XEKAMAN 1 44 118 241 654 982 1,309 1,636 1,309 654 0 0 0 0

THUỶ ĐIỆN XEKAMẢN 4 4 24 50 502 753 1,004 1,029 1,129 551 0 0 0

CTCP SÔNG ĐÀ HOÀNG LIÊN

THUỶ ĐIỆN SỬ PÁN 2 46 85 165 210 90 0 0 0 0 0 0 0 0

TOTAL (exclude Xekaman 4) 591 1,089 1,620 3,044 3,199 2,447 1,636 1,309 654 0 0 0 0


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Part 3: Sector - Industrial Production


1 Interest rate is assumed to be 10% per in the forecasted period. However, in the FY09F and FY10F, the interest rate is just 6% as another 4% is supported by the Vn Government.

2 Interest payment is computed based on the average of beginning and ending balance. 3 Debt services are computed by Interest payment of S/T + L/T debt and principal payments of long term debt. Note that, Song Da does not need to

pay principal for S/T loans as it borrows these S/T loan amount by Credit Limitation 4 Assume no stock issuing 5 Assume long term debt has 7 year term 6 Assume the Sector does not pay dividend as it is in the investment periods 7 Cash requirement partially based on historical practices and our consideration on the revenue growth rate perspective 8 Our Sensitivity Analysis is applied from 2010. Also, G&A cost after restructing is 5% in deduction from 2010 9 Cost of good sold is assumed around 86.5% of revenues that based on the historical data and the saving cost strategy of the Sector 10 Depreciation of assets is applied to the Vietnamese Accounting Standard. 11 Return from long term investment is assumed to be 7.5% 12 Internal transactions are not eliminated from our forecast as we have no information from Song Da 13 Corporate income tax is assumed 14% from 2009 to 2012; 25% for the period 2013-2018 14 Operating expenses are assumed to be 3.4% of revenues


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3.2 Assumptions – Revenues and capital expenditure

Table 21: Assumptions on revenue and capital expenditure for cement and steel manufacturing companies

CÔNG TY XI MĂNG SÔNG ĐÀ YALY 2008E 2009F 2010F 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F

1 Revenues

231,387

282,623

365,560

387,914

412,211

492,774

514,357

874,044

961,448

1,057,593

1,163,353

8 CAPEX

11,900

27,973

33,218

475,000

413,500

144,000

-

-

CÔNG TY XI MĂNG SÔNG ĐÀ 2008E 2009F 2010F 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F

1 Revenues

100,636

167,069

232,976

242,917

252,239

254,096

254,096

279,506

307,456

338,202

8 CAPEX

600

900

71,325

-

-

-

-

THEP VIET Y

Revenues

1,622,355

1,794,376

1,972,603

2,168,653

2,384,308

2,621,528

2,882,471

3,170,718

3,487,789

3,836,568

CAPEX

34,185

HA LONG CEMENT 2008E 2009F 2010F 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F

Revenues

840,000

1,190,000

1,330,000

1,330,000

1,540,000

1,540,000

1,540,000

1,540,000

1,540,000

1,540,000

CAPEX

2008E 2009F 2010F 2011F 2012F 2013F 2014F 2015F 2016F 2017F 2018F

TOTAL

Revenues

2,845,614

3,517,005

3,923,494

4,153,781

4,669,321

4,929,981

5,550,611

5,951,672

6,392,839

6,878,123 Investment in fixed assets

28,573

34,118

546,325

413,500

144,000

-

-

-

-

-


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Part 4: Sector - Property Development

4.1 General assumptions

1 Interest rate is assumed to be 10% per in the forecasted period. However, in the FY09F and FY10F, the interest rate is just 6% as another 4% is supported by the Vn Government.

2 Interest payment is computed based on the average of beginning and ending balance. 3 Debt services are computed by Interest payment of S/T + L/T debt and princial payments of long term debt. Note that, Song Da does not need to

pay principal for S/T loans as it borrows these S/T loan amount by Credit Limitation 4 Assume long term debt has 7 year term 5 Assume no stock issuing 6 Assume the Sector pay out 15% dividend from the net income 7 Cash requirement partially based on historical practices and our consideration on the revenue growth rate perspective 8 Corporate Income tax is assumed 14% for the period 2009 - 2012 và 25% for the period 2013 - 2018 9 Cost of good sold is assumed around 64% of revenues that based on the historical data and the saving cost strategy of the Sector 10 Depreciation of assets is applied to the Vietnamese Acccounting Standard. 11 Return from long term investment is assumed to be 7.5% 12 Operating expenses are assumed to be 6.4% of revenues 13 Internal transactions are not eliminated from our forecast as we have no information from Song Da 14 Our Sensitivity Analysis is applied from 2010. Also, G&A cost after restructing is 5% in deduction from 2010

4.2 Assumptions – Revenues

Table 22: Assumptions on revenue and investment of property development companies

Revenue Year 2009 Year 2010 Year 2011 Year 2012 Year 2013 Year 2014 Year 2015 Year 2016 Year 2017 Year 2018

Investment 105,286 341,864 347,415 331,869 378,297 447,146 579,716 666,673 766,674 881,676 Sudico 693,750 797,813 917,484 1,055,107 1,213,373 1,395,379 1,604,686 1,845,389 2,122,197 2,440,527 Suridco 217,500 343,450 390,080 444,504 520,487 614,322 700,448 805,515 926,342 1,065,294 Total 1,016,536 1,483,127 1,654,979 1,831,480 2,112,157 2,456,847 2,884,850 3,317,577 3,815,214 4,387,496


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4.3 Assumptions – capital expenditure Table 23: Assumptions on capital expenditure of property development companies

Year 2009 Year 2010 Year 2011 Year 2012 Year 2013 Year 2014 Year 2015 Year

2016 Year 2017

Year 2018

Investment 101,368 250,000 220,000 200,000 0 0 0 0 0 0 Sudico 0 0 0 0 0 0 0 0 0 0 Suridco 45,998 63,034 39,381 4,669 4,151 67,450 62,750 0 0 0 Total 147,366 313,034 259,381 204,669 4,151 67,450 62,750 0 0 0

Part 5: Sector – Other


1 Interest rate is assumed to be 10% per in the forecasted period. However, in the FY09F and FY10F, the interest rate is just 6% as another 4% is supported by the VN Government.

2 Interest payment is computed based on the average of beginning and ending balance. 3 Debt services are computed by Interest payment of S/T + L/T debt and principal payments of long term debt. Note that, Song Da does not need to

pay principal for S/T loans as it borrows these S/T loan amount by Credit Limitation 4 Assume long term debt has 7 year term 5 Assume no stock issuing 6 Assume the Sector pay out 15% dividend from the net income 7 Cash requirement partially based on historical practices and our consideration on the revenue growth rate perspective 8 Corporate income tax is assumed 17,9% for the period 2009 - 2018 9 Cost of good sold is assumed around 86% of revenues that based on the historical data and the saving cost strategy of the Sector 10 Depreciation of assets is applied to the Vietnamese Accounting Standard. 11 Operating expenses are assumed to be 8.5% of revenues 12 Return from long term investment is assumed to be 7.5% 13 Internal transactions are not eliminated from our forecast as we have no information from Song Da 14 Our Sensitivity Analysis is applied from 2010. Also, G&A cost after restructing is 5% in deduction from 2010


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5.2 Assumptions – Revenues

Table 24: Assumptions on revenues of other companies

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1 Sông Đà 12

355,593

415,314

338,224

375,229

400,947

439,217

478,081

478,081

478,081

478,081

2 Sông Đà 17

3 Sông Đà 25

310,500

387,250

521,150

614,100

696,750

806,500

924,000

924,000

924,000

924,000

4 SIMCO

171,156

161,802

168,793

174,338

188,377

223,128

254,351

254,351

254,351

254,351

5 Song Da consultancy

123,537

128,712

131,962

138,391

141,226

167,288

176,785

176,785

176,785

176,785

6 Song Da 11

219,434

248,678

281,818

302,273

356,364

400,000

463,636

463,636

463,636

463,636

7 Thanh Hoa SĐ

72,000

80,000

91,000

109,000

140,000

160,000

180,000

180,000

180,000

180,000

8 Bách hóa số 3

33,796

35,993

38,512

41,208

44,298

47,621

51,192

55,032

59,159

63,596

9 Someco Sông Đà

342,441

374,775

422,614

506,663

587,884

668,973

763,807

821,092

882,674

948,875

10 Sông Đà 27

78,400

90,200

104,600

122,400

143,200

168,000

198,000

198,000

198,000

198,000

11 Hương Sơn

12 PCCC

12,242

33,013

39,541

77,105

131,078

144,186

158,604

158,604

158,604

158,604

13 Song Da Finance

33,013

39,541

77,105

131,078

144,186

158,604

177,637

177,637

177,637

177,637

TOTAL

1,375,875

1,584,510

1,754,193

2,043,913

2,342,127

2,666,923

3,011,095

3,011,095

3,011,095

3,011,095


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5.3 Assumptions – Capital expenditure Table 25: Assumptions on capital expenditure of other companies

Year 2009 Year 2010 Year 2011 Year 2012 Year 2013 Year 2014 Year 2015

Year 2016

Year 2017

Year 2018

CP Sông Đà 12

CP Sông Đà 17

CP Sông Đà 25 0 0 0 0 0 0 0 0 0 0

SIMCO 2,760 6,500 2,000 13,000 0 3,000 5,000 0 0 0

Tư vấn SĐ 6,200 8,758 10,730 5,760 5,350 5,460 6,000 0 0 0

CP Sông Đà 11 94,000 38,892 0 0 0 0 0 0 0 0

Thanh Hoa SĐ 16,000 22,000 47,033 72,000 88,000 60,000 20,000 0 0 0

Bách hóa số 3 0 0 0 0 0 0 0 0 0 0

Someco Sông Đà 34,244 29,938 106,215 71,747 40,352 33,270 24,498 5,752 0 0

Sông Đà 27 28,900 5,000 10,000 16,000 22,000 28,000 30,000 0 0 0

Thủy điện Hương Sơn 0 0 0 0 0 0 0 0 0 0

PCCC 0 0 0 0 0 0 0 0 0 0

Tài chính Sông Đà 0 0 0 0 0 0 0 0 0 0


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Part 6: Parent Company


1 Interest rate is assumed to be 10% per in the forecasted period. However, in the FY09F and FY10F, the interest rate is just 6% as another 4% is supported by the VN Government.

2 Interest payment is computed based on the average of beginning and ending balance 3 Debt services are computed by Interest payment of S/T + L/T debt and principal payments of long term debt. Note that, Song Da does not need to

pay principal for S/T loans as it borrows these S/T loan amount by Credit Limitation 4 Assume long term debt has 7 year term 5 Our Sensitivity Analysis is applied from 2010. Also, G&A cost after restructing is 5% in deduction from 2010 6 Assume no stock issuing 7 Assume the Sector pay out 10% dividend from the net income 8 Cash requirement partially based on historical practices and our consideration on the revenue growth rate perspective 9 Corporate income tax is assumed 0% for the period 2009 - 2018 due to its negative operating profit 10 Cost of good sold is assumed around 97.1% of revenues that based on the historical data and the saving cost strategy of the Sector 11 Depreciation of assets is applied to the Vietnamese Accounting Standard. 12 Internal transactions are not eliminated from our forecast as we have no information from Song Da 13 Operating expenses are assumed to be 2.4% of revenues


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6.2 Assumptions – Revenues Revenue is assumed according to Song Da planning in 2009. However Song Da has no planning from 2010. From 2010, we assume based on GDP growth rate as BMI forecast 2010 2011 2012 2013 2014 2015 2016 2017 2018 GDP 5.0% 7.0% 7.7% 7.9% 7.9% 7.9% 7.9% 7.9% 7.9%

Revenue from other projects

We understand that Parent company is building one construction - HH4 Building for sale and rent, however we have no evidence from Song Da. Hence, in our forecasted revenue did not include revenue from HH4 Building

We understand that Parent company is constructing one project - National road 1A, but we have no explanation on this project, hence our forecasted revenue did not include revenue from National road 1A

CAPEX Replace costs are assumed about 5%

DIVESTING AT ASSOCIATES

At the 31/12/2008, Song Da has around 990 billion VND of the total book value of investments in associates. According to the proposed structure of the Song Da, we assume that these investments in associates will be divested as below:

2010 2011 2012 2013 % Divestment 20% 40% 20% 20%

Upon equitisation and IPO, the shares of most of these companies were sold at 6 to 8 times of book price. Assuming that the value of these shares have since dropped by 50% the current value should average to 3 time book value. On a conservative basis, we take 2 times of book value for the purposes of this exercise. Hence, the total divesting value would be 1980 billion VND.


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APPENDIX II - KEY OBSERVATIONS FROM THE REVIEW OF SOWATCO I. COMPLETED FINANCIAL MANAGEMENT ASSESSMENT QUESTIONNAIRE



Southern Waterborne Transport Corporation (Sowatco) was established under Decision No 2124/QD-TCCB-LD dated 13 August 1996 as a GC 90 under the direct authority of the Ministry of Transport.


Yes. Long Binh Port project - first phase was financed by Vietnam Development Bank (MVND 59,000)


Vietnamese Accounting Standards


Not applicable Sowatco’s Parent Company will take over and monitor the Project.


Not applicable Sowatco’s Parent Company will take over and monitor the Project

2. Funds Flow Arrangements 2.1 Describe (proposed) project funds flow

arrangements, including a chart and explanation of the flow of funds from ADB, government and other financiers.

Please refer to Appendix II for reference of the fund flow arrangement proposed by the GC.


Yes. The loan will be released directyly to the creditor bank to settle outstanding loan balance.


No noted problem arisen in the past

2.4 In which bank will the Imprest Account be opened?

TBD


Loan will be released directly to the creditor bank.


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Topic Response Remarks 2.7 Does the entity have/need a capacity to

manage foreign exchange risks? As there is no secondary financial market, there is little opportunity to manage foreign exchange risk. In any case, assistance from MoF will be sort when we need answers. However, Sowatco together with the assistances from the MOF will further study necessary procedures to manage foreign exchange risks.

2.8 How are the counterpart funds accessed?

Not applicable. The loan is to refinance part of existing loans

No counterpart fund is applied

2.9 How are payments made from the counterpart funds?

Not applicable. No counterpart fund is applied


Not applicable. The project is implemented by Sowatco itself.


Financing margin from existing bankers for fixed assets acquisition is usually 10%. The company would finance the balance from internal sources.

3. Staffing 3.1 What is the (proposed) organizational

structure of the accounting department? Attach an organization chart.

Please refer to Appendix III for current structure of accounting department.

3.2 Identify the (proposed) accounts staff, including job title, responsibilities, educational background and professional experience. Attach job descriptions and CVs of key accounting staff.

The Loan will be managed by experienced and qualified accountants in Finance and Accounting Department at Parent Company including: - Chief Accountant (an

accounting bachelor) who is responsible for the overall operation of the Department, reviewing and approving all transactions and reports prior to the GD’s approval;

- AR, AP accountants (accounting bachelors) who are responsible for transactions and records relating to collection and payment;

- Bank accountant (an accounting bachelor) who is responsible for all transactions through bank account.


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Topic Response Remarks 3.3 Is the project finance and accounting

function staffed adequately? Sowatco’s Accounting Department has one Chief Accountant (Head of the Department), two Deputy Head and 10 Accounting Officers being responsible for different functions. They believe that their personnel is adequate to perform all necessary functions.


They are all qualified and experienced accountants holding bachelor degree and have hold several years of experience. - They are all graduated from

qualified universities in accounting and finance.

- Most of staffs are permanent and have been working for Accounting Department for 3 to almost 30 years.

3.5 Is the project accounts and finance staff trained in ADB procedures?

ADB procedures are new to finance and accounting staffs, however all staffs are used to procedures for securing loans for investment projects from local bankers. Hence, they would be able to quickly cope with and be familiar with ADB procedures.

3.6 What is the duration of the contract with the finance and accounts staff?

The GC follows the normal practice in Vietnam. Initially, all staffs will sign a 1 year contract with the corporation. After 1 year of working, this contract will be extended to unlimited period.


All staffs working in accounting department have labor contract. No key position has not been contracted yet.


Finance and Accounting Department has its own Manual. This manual covers the structure of the accounting department, division of work, personnel of each division duties, responsibilities, lines of supervision, and limits of authority for all levels. The project will be monitired by the GC. Therefore, this manual will also apply to the project. Updates to the Manual will be done if required under the Project.


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Topic Response Remarks 3.11 At what frequency are personnel

transferred? Staff turnover is very low of less than 10%.

3.12 What is training policy for the finance and accounting staff?

Sowatco has developed detailed training policies which clearly define who are eligible for trainings, what type of trainings the company could provide and other necessary relevant information.


system that allows for the proper recording of project financial transactions, including the allocation of expenditures in accordance with the respective components, disbursement categories, and sources of funds? Will the project use the entity accounting system?

The mother company is using Vietsoft accounting software allows for recording all financial transactions of the group, including the allocation of expenditures in accordance with the respective components, disbursement categories, and sources of funds.

4.2 Are controls in place concerning the preparation and approval of transactions, ensuring that all transactions are correctly made and adequately explained?

Controls appear to be in place, specifically: ♦ For each transaction

incurred, staffs at the related department will make the request, line manager will approve, accounting staff will prepare journal voucher in attached with relevant supporting documents, Chief Accountant and then General Director approve;

♦ All approval journal vouchers are subsequently sent to relevant accountant for review and for posting.

♦ Every month, general accountant will print the accounting record and send to respective accountant for review and checking.

♦ Other than accounting group, other group can not access the accounting system.

4.3 Is the chart of accounts adequate to properly account for and report on project activities and disbursement categories?

Chart of the account of the entity is in line with the Vietnamese accounting standard, which they believe to cover all transactions and generate all required reports for the Project. The Project’s will use the same chart of account with Sowatco.


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Topic Response Remarks 4.4 Are cost allocations to the various

funding sources made accurately and in accordance with established agreements?

Not applicable. The OCR loan from ADB is to re-finance existing outstanding shorter term loans,


Yes. The general accountant will perform such reconciliation on an annual basis.


Accounting vouchers and supporting documents are properly kept at Accounting Department as required by law. Only accounting staff can have access to such documents. Others are subject to Head of Accounting Department’s approval.



Yes. (i) is performed by

Chief Accountant (ii) is performed by

relevant detail accountant

(iii) respective head of operation.

4.8 Are the functions of ordering, receiving, accounting for, and paying for goods and services appropriately segregated?


goods are received by the department who requests the purchase

- Payments are made by cashier/AP accountant

- Accounting records are made by relevant accountants


Yes. Reconciliations are performed by General Accountant and approved by Chief Accountant. Payments are made by cashier/AP accountant and approved by Chief Accountant.

Budgeting System 4.10 Do budgets include physical and

financial targets? Yes. Physical and financial targets are taken into account in all captions. Based on the physical target (capacity, fuel consumption …), Sowatco estimates their financial targets (Sales, COGs, etc).


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Topic Response Remarks 4.11 Are budgets prepared for all significant

activities in sufficient detail to provide a meaningful tool with which to monitor subsequent performance?

Budget are prepared for all significant activities for 1 to 5 years basing on very detailed raw data such as expected capacity, every single cost components of each business activity, capital expenditure, etc… Then they come up with expected sales, expenses and all PL, BS and CF components.


Yes. It’s performed on a monthly basis. Explanations are provided in case of significant variations.


It’s always before the fact.


Raw data of budget such as production, sales volume, etc… are initially prepared by Planning function and then sent to Accounting function for overall budget preparation. This budget will later on be approved by Board of Management.

4.15 Are procedures in place to plan project activities, collect information from the units in charge of the different components, and prepare the budgets?

The GC has detailed procedures in place, which provide guidance on how to prepare budget including how to collect information.


Detailed budget is developed by personnel who clearly understand about planning and budgeting procedures basing on historical information and expected operational and financial KPIs developed by related specialized functions submitted to Planning function and approved by Board of Management.


provide for: (i) Copies of purchase orders and receiving reports to be obtained directly from issuing departments? (ii) Comparison of invoice quantities, prices and terms, with those indicated on the purchase order and with records of goods actually received? (iii) Comparison of invoice quantities with those indicated on the receiving reports? (iv) Checking the accuracy of calculations?

The invoice-processing procedures are properly performed: (i): is performed by AP accountants (ii): is performed by AP accountant, warehouseman, and purchase order issuing department; (iii) and (iv): are performed by AP accountant


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Topic Response Remarks 4.18 Are all invoices stamped PAID, dated,

reviewed and approved, and clearly marked for account code assignment?

No. However, Accounting Group will check the content, amount, date of invoice accordance with other supporting documents. Journal Voucher presents description of transaction as well as Account Code assignment. In addition, all invoice numbers are recorded into the system when the related transaction is recorded. Therefore, no double payment could happen.


All decisions relating to payroll are approved by GD/BOM. Payroll information are obtained from Human Resource Department and then processed by Accounting Department for payroll calculation. Payroll sheet is prepared monthly by Payroll Accountant and approved by Chief Accountant and General Director.

Policies And Procedures 4.20 What is the basis of accounting (e.g.,

cash, accrual)? Accrual basis


Vietnamese accounting standard


Finance and Accounting Department has its own Manual. This manual covers the structure of the accounting department, division of work, personnel of each division duties, responsibilities, lines of supervision, and limits of authority for all levels. The project will be monitored by GC’s staffs. Therefore, this manual will also apply to the project.


Not at the moment but Sowatco will update if required.

4.24 Do procedures exist to ensure that only authorized persons can alter or establish a new accounting principle, policy or procedure to be used by the entity?

Yes. Only Head of Accounting Department and Board of Management can make changes in accounting principles, policies or procedures.


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Topic Response Remarks 4.25 Are there written policies and

procedures covering all routine financial management and related administrative activities?

Yes. Finance and Accounting Department has its its operating manual. Sowatco believes such manual will cover all routine financial management and related administrative activities.

4.26 Do policies and procedures clearly define conflict of interest and related party transactions (real and apparent) and provide safeguards to protect the organization from them?

No specific definition and procedures being implemented to avoid conflict of interest. All transactions are treated in the same manner and follow the same procedures which Sowatco believes that they are strict enough to provide safeguards and protections.


Yes. They are distributed to all accounting and finance personnel.



General Director/ authorized Deputy Director and Chief Accountant/authorized Vice Chief Accountant


Yes. Cash on hand and cash at bank Accountants have their own control file to keep track the cash flow daily. Cash receipt report is daily submitted to Head of each cash collection related functions. The GC’s policy is goods delivery and cash collections to be on the same day. Therefore, they are confident on the timeliness of collection, deposit and record.



Bank reconciliation are performed daily by General Accountant and approved by Chief Accountant.


Any difference will be further investigated and adjustment will be made accordingly with approval from Chief Accountant and General Director.


Yes. They are deposited on a daily basis.


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Topic Response Remarks Safeguard over Assets

4.34 Is there a system of adequate safeguards to protect assets from fraud, waste and abuse?

At Parent Company, the fixed assets and inventories are controlled by each department in charge. In addition, they are also under security of guard team. Physical checks are performed annually at year end.


Reconciliation is undertaken annually at year end by comparing the actual counting results and the book balance.

4.36 Are there periodic physical inventories of fixed assets and stocks?

Yes. Both fixed assets and inventories physical checks are performed annually.


Yes. All high value assets and inventories are insured by Vien Dong insurance company.

Other Offices and Implementing Entities 4.38 Are there any other regional offices or

executing entities participating in implementation?

Not applicable

4.39 Has the project established controls and procedures for flow of funds, financial information, accountability, and audits in relation to the other offices or entities?

Not applicable


Not applicable


Not applicable

Other 4.42 Has the project advised employees,

beneficiaries and other recipients to whom to report if they suspect fraud, waste or misuse of project resources or property?

No official guidance on such matter but the corporate culture encourages their personnel to report fraud, waste or misuse of project resources or property to GD.

5. Internal Audit 5.1 Is there a internal audit department in

the entity? There is no internal audit department within the GC.






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Topic Response Remarks 6. External Audit 6.1 Is the entity financial statement audited

regularly by an independent auditor? Who is the auditor?

Yes. Financial statement of the parent company and all subsidiaries were audited by SAASC since 2000.

6.2 Are there any delays in audit of the entity? When are the audit reports issued?

No delay. Reports are issued by the end of Quarter 2.


It is undertaken in accordance with Vietnamese Standards on Auditing.

6.4 Were there any major accountability issues brought out in the audit report of the past three years?

In 2006, 2007 and 2008, the GC’s consolidated financial statements are qualified. Qualifications are related to limit of audit scope since the auditor could not observe the year end cash count and inventory physical count.


The project will be monitored by mother company and no separate accounting or management system for the project. It is not clear at this stage whether Sowatco needs to prepare separate project accounts but they will do if required. If so, the project accounts will be audited by the entity auditor.


Not implemented. Such qualifications still occur year after year.


It is not clear at this stage for such matter but Sowatco will comply if required.


It is not done at this stage but Sowatco will comply if required.

7. Reporting and Monitoring 7.1 Are financial statements prepared for

the entity? In accordance with which accounting standards?

The financial statements of Parent Company and its subsidiaries are prepared in accordance with Vietnamese Accounting Standards.


Not applicable


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Topic Response Remarks 7.3 What is the frequency of preparation of

financial statements? Are the reports prepared in a timely fashion so as to useful to management for decision making?

The financial statements are prepared quarterly at the parent company. The consolidation for the whole GCs is undertaken quarterly.

7.4 Does the reporting system need to be adapted to report on the project components?

Sowatco believes that its current reporting system is adequate to report on project components. Therefore, no change is needed.


Sowatco believes that its current reporting system is capable enough to link the financial information with the project's physical progress since there is always a coordination and reconciliation between accounting, planning and implementing functions.


Yes. It is clearly stated in the accounting manual.


Yes, accounting department prepares management report monthly and submits to BOM for review and decision making purpose.


Yes. It is performed every month by accounting department.


The parent company uses Vietsoft accounting software which can automatically generate various types of reports. Some subsidiaries use excel spreadsheet to record transaction and prepare financial statements.

8. Information Systems 8.1 Is the financial management system

computerized? Yes, the parent company uses Vietsoft accounting software which can generate various types of report such management reports and general reports. E.g: Trial balance, Profit and Loss Statement, Balance sheet, Fix asset report, Account receivable/payable aging report, Inventory listing...



Sowatco believes all staffs are capable enough to maintain the system. Additional training will be provided when necessary.


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Topic Response Remarks 8.4 Does the management organization

and processing system safeguard the confidentiality, integrity and availability of the data?

Only authorized persons can have access to certain types of information and password is always required. Information is always reviewed and reconciled by management. Data will be displayed/generated if required.


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II. FINANCIAL PROJECTIONS

A. BEFORE ADB OCR LOAN

1.1 Balance Sheet

Table 26: Projected Balance Sheet 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

ASSETS A. CURRENT ASSETS I. Cash 147,244 161,969 185,756 203,157 223,473 245,820 267,944 292,058 315,423 340,657 II. Current receivables 64,787 71,266 79,105 89,389 98,328 108,161 117,895 128,506 138,786 149,889 Inc : Current internal receivables - - - - - - - - - - III. Inventories 35,339 38,872 43,148 48,758 53,633 58,997 64,306 70,094 75,702 81,758 IV. Other current assets 141,354 155,490 165,402 186,904 196,656 216,321 225,073 245,329 252,339 272,526 Total current assets 388,724 427,597 473,412 528,208 572,090 629,299 675,218 735,987 782,250 844,829 B. NON-CURRENT ASSETS I. Fixed assets Fixed assets 222,287 270,574 404,077 391,487 379,442 367,999 357,216 347,160 337,904 329,528 Construction in progress 0 0 0 0 0 0 0 0 0 0 II. Long-term finance investments 873,032 912,268 912,268 1,028,986 1,168,043 1,318,322 1,501,078 1,696,801 1,937,019 2,198,402 III. Other long-term assets 3,208.00 3,208.00 3,208.00 3,208.00 3,208.00 3,208.00 3,208.00 3,208.00 3,208.00 3,208.00 Total non - current assets 1,098,527 1,186,050 1,319,553 1,423,681 1,550,693 1,689,529 1,861,502 2,047,169 2,278,131 2,531,138 TOTAL ASSETS 1,487,250 1,613,647 1,792,965 1,951,888 2,122,783 2,318,828 2,536,720 2,783,156 3,060,381 3,375,967

RESOURCES A. LIABILITIES I. Current liabilities Short-term loans and borrowings 104,553 74,553 74,553 74,553 74,553 74,553 74,553 74,553 74,553 74,553


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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Payables and prepaid expenses 70,677 77,745 86,297 97,515 107,267 117,994 128,613 140,188 151,403 163,515 Inc : Internal payables - - - - - - - - - - Other current liabilities 265,039 291,543 323,613 365,682 402,251 442,476 482,299 525,705 567,762 613,183 Total current liabilities 440,269 443,841 484,463 537,751 584,071 635,022 685,465 740,447 793,718 851,251 II. Non -current liabilities Long-term loans and borrowings 72,762 83,314 115,358 96,131 76,905 57,679 38,453 19,226 6,409 0 Current portion of long-term loans and debts - - - - - - - - - - Other non - current liabilities 3,061 3,061 3,061 3,061 3,061 3,061 3,061 3,061 3,061 3,061 Total Non-current Liabilities 75,823 86,375 118,419 99,192 79,966 60,740 41,514 22,287 9,470 3,061 B. OWNERS’ EQUITY Shares 692,906 692,906 692,906 692,906 692,906 692,906 692,906 692,906 692,906 692,906 Preference shares - - - - - - - - - -

Undistributed earnings 278,252 390,525 497,177 622,039 765,840 930,160

1,116,836

1,327,517

1,564,287

1,828,749

Total owners' equity 971,158

1,083,431

1,190,083

1,314,945

1,458,746

1,623,066

1,809,742

2,020,423

2,257,193

2,521,655 TOTAL LIABILITIES AND OWNERS’ EQUITY

1,487,250

1,613,647

1,792,965

1,951,888

2,122,783

2,318,828

2,536,720

2,783,156

3,060,381

3,375,967


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1.2 Income Statement

Table 27: Projected Income Statement 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 545,348 588,976 647,873 719,140 812,628 893,890 983,279 1,071,775 1,168,234 1,261,693 1,362,628 Inc : Internal Revenue 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2. COST OF GOODS SOLD 527,852 487,274 538,991 607,018 683,173 749,686 822,849 895,462 974,629 1,051,595 1,134,763

Inc : Internal Expense 0 0 0 0 0 0 0 0 0 0 0 Per Revenue (%) 96.79% 82.73% 83.19% 84.41% 84.07% 83.87% 83.68% 83.55% 83.43% 83.35% 83.28%

3. GROSS PROFITS 17,496 101,702 108,883 112,122 129,454 144,205 160,430 176,312 193,605 210,098 227,866 Per Revenue (%) 3.2% 17.3% 16.8% 15.6% 15.9% 16.1% 16.3% 16.5% 16.6% 16.7% 16.7%

4. OPERATING EXPENSES Selling Expenses 0 0 0 0 0 0 0 0 0 0 0

General and administrative expenses 23,054 27,433 30,177 33,496 37,850 41,635 45,799 49,921 54,414 58,767 63,468 TOTAL OPERATING EXPENSES 23,054 27,433 30,177 33,496 37,850 41,635 45,799 49,921 54,414 58,767 63,468

Per Revenue (%) 4.2% 4.7% 4.7% 4.7% 4.7% 4.7% 4.7% 4.7% 4.7% 4.7% 4.7%

5. EARNINGS BEFORE TAX AND INTEREST (5,558) 74,269 78,706 78,626 91,604 102,569 114,631 126,391 139,191 151,331 164,398

6. FINANCE INCOMES/(EXPENSES) 35,536 64,078 66,650 58,759 69,434 83,177 97,873 115,330 133,889 155,910 179,088 - Interest Incomes (19,443) (10,130) (10,892) (18,784) (18,030) (16,107) (14,184) (12,262) (10,339) (8,737) (7,776) - Investment Incomes 54,979 74,208 77,543 77,543 87,464 99,284 112,057 127,592 144,228 164,647 186,864

7. OPERATING PROFITS 29,978 138,346 145,356 137,385 161,038 185,746 212,504 241,721 273,080 307,240 343,486

8. OTHER INCOMES/(EXPENSES) 6,656 37,946 4,341 4,818 5,445 5,989 6,588 7,181 7,827 8,453 9,130

9. EARNINGS BEFORE TAX 36,634 176,292 149,697 142,203 166,482 191,735 219,092 248,902 280,907 315,694 352,616


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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 10. ENTERPRISE INCOME TAX EXPENSES (1,369) (44,073) (37,424) (35,551) (41,621) (47,934) (54,773) (62,225) (70,227) (78,923) (88,154)

11. NET PROFITS 35,265 132,219 112,273 106,652 124,862 143,801 164,319 186,676 210,680 236,770 264,462 Per Revenue (%) 6.47% 22.45% 17.33% 14.83% 15.37% 16.09% 16.71% 17.42% 18.03% 18.77% 19.41%


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1.3 Cash Flow Statement Table 28: Projected Cash flow Statement 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. CASH FLOWS FROM OPERATING ACTIVITIES Earnings before tax 132,219 112,273 106,652 124,862 143,801 164,319 186,676 210,680 236,770 264,462 Depreciations 16,093 20,692 31,706 33,071 34,573 36,225 38,043 40,042 42,241 44,660

Profits/ (losses) from investing activities (74,208) (77,543) (77,543) (87,464) (99,284) (112,057) (127,592) (144,228) (164,647) (186,864) Operating profit/(loss) before changes in working capital

(Increase)/decrease in receivables (8,055) (6,479) (7,839) (10,284) (8,939) (9,833) (9,734) (10,611) (10,280) (11,103) (Increase)/decrease in inventories 1,333 (3,534) (4,276) (5,609) (4,876) (5,363) (5,310) (5,788) (5,608) (6,056) (Increase)/decrease in other current assets (2,798) (14,135) (9,912) (21,502) (9,752) (19,666) (8,751) (20,257) (7,009) (20,187) (Increase)/decrease in payables and in prepaid expenses 51,753 7,068 8,552 11,219 9,752 10,727 10,619 11,575 11,215 12,112 (Increase)/decrease in current liabilities (72,801) 26,504 32,070 42,070 36,568 40,225 39,823 43,407 42,056 45,421

Net cash flows from operating activities 43,537 64,846 79,409 86,362 101,844 104,577 123,774 124,822 144,739 142,444 2. CASH FLOWS FROM INVESTING ACTIVITIES

Purchase and construction of fixed assets and other long-term assets (20,119) (68,980) (165,209) (20,481) (22,529) (24,782) (27,260) (29,986) (32,985) (36,283) Payments for investments (226,216) (39,236) 0 (116,718) (139,057) (150,279) (182,756) (195,723) (240,218) (261,383) Interest and dividends received 74,208 77,543 77,543 87,464 99,284 112,057 127,592 144,228 164,647 186,864 Other items 0 0 0 0 0 0 0 0 0 0

Net cash flows from investing activities (172,127) (30,673) (87,666) (49,735) (62,302) (63,004) (82,424) (81,481) (108,556) (110,802) 3. CASH FLOWS FROM FINANCING ACTIVITIES

Increase/(decrease) in short - term loans and debts 0 (30,000) 0 0 0 0 0 0 0 0 Increase/(decrease) in current portion of long-term loans and debts 0 0 0 0 0 0 0 0 0 0 Increase/(decrease) in long - term loans and debts 16,961 10,552 32,044 (19,226) (19,226) (19,226) (19,226) (19,226) (12,818) (6,409) Increase/(decrease) in shares 0 0 0 0 0 0 0 0 0 0 Increase/(decrease) in preference shares 0 0 0 0 0 0 0 0 0 0 Dividends paid for owners 0 0 0 0 0 0 0 0 0 0

Net cash flows from financing activities 16,961 (19,448) 32,044 (19,226) (19,226) (19,226) (19,226) (19,226) (12,818) (6,409)

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (111,629) 14,725 23,787 17,401 20,316 22,348 22,124 24,114 23,365 25,234 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 258,873 147,244 161,969 185,756 203,157 223,473 245,820 267,944 292,058 315,423 CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 147,244 161,969 185,756 203,157 223,473 245,820 267,944 292,058 315,423 340,657


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B AFTER ADB - SOME CRUCIALLY FINANCIAL ITEMS

1.1 Balance Sheet Table 29: Projected Balance Sheet 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


I. Cash 147,244 161,968 201,687 205,229 227,823 259,686 292,843 336,664 382,205 432,028

II. Current receivables 64,787 71,266 79,105 89,389 98,328 108,554 118,758 129,921 140,835 152,665 Inc : Current internal receivables - - - - - - - - - -

III. Inventories 35,339 38,872 43,148 48,758 53,633 59,211 64,777 70,866 76,819 83,272


Total current assets 388,724 427,596 489,342 530,280 576,440 644,560 703,098 785,484 855,922 945,537 B. NON-CURRENT ASSETS

I. Fixed assets

Fixed assets 222,287 270,574 404,077 391,487 379,442 367,999 357,216 347,160 337,904 329,528

Construction in progress 0 0 0 0 0 0 0 0 0 0

II. Long-term finance investments 875,160 922,079 922,079 1,077,199 1,239,042 1,412,457 1,618,722 1,838,366 2,096,354 2,369,461

III. Other long-term assets 3,208.00 3,208.00 3,208.00 3,208.00 3,208.00 3,208.00 3,208.00 3,208.00 3,208.00 3,208.00


TOTAL ASSETS 1,489,379 1,623,458 1,818,706 2,002,173 2,198,132 2,428,223 2,682,244 2,974,218 3,293,388 3,647,734

RESOURCES A. LIABILITIES



Payables and prepaid expenses 70,677 77,745 86,297 97,515 107,267 118,423 129,554 141,732 153,638 166,544 Inc : Internal payables - - - - - - - - - -

Other current liabilities 265,039 291,543 323,613 365,682 402,251 444,085 485,829 531,497 576,142 624,538 Total current liabilities 440,269 443,841 484,463 537,751 584,071 637,060 689,936 747,782 804,333 865,635


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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 II. Non -current liabilities

Long-term loans and borrowings 72,762 87,928 129,201 123,817 118,434 113,051 107,667 102,284 96,900 91,517 Current portion of long-term

loans and debts - - - - - - - - - -

Other non - current liabilities 3,061 3,061 3,061 3,061 3,061 3,061 3,061 3,061 3,061 3,061 Total Non-current Liabilities 75,823 90,989 132,262 126,878 121,495 116,112 110,728 105,345 99,961 94,578 B. OWNERS’ EQUITY

Shares 692,906 692,906 692,906 692,906 692,906 692,906 692,906 692,906 692,906 692,906


Undistributed earnings 280,381 395,721 509,076 644,638 799,661 982,146 1,188,674 1,428,185 1,696,187 1,994,615

Total owners' equity 973,287 1,088,627 1,201,982 1,337,544 1,492,567 1,675,052 1,881,580 2,121,091 2,389,093 2,687,521 TOTAL LIABILITIES AND OWNERS’ EQUITY 1,489,379 1,623,458 1,818,706 2,002,173 2,198,132 2,428,223 2,682,244 2,974,218 3,293,388 3,647,734


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1.2 Income Statement

Table 30: Projected Income Statement

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

1. NET REVENUE 545,348 588,976 647,873 719,140 812,628 893,890 986,855 1,079,619 1,181,104 1,280,316 1,387,863 Inc : Internal Revenue 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2. COST OF GOODS SOLD 527,852 487,274 538,991 607,018 683,173 749,686 817,815 893,101 966,027 1,046,009 1,132,744

Inc : Internal Expense 0 0 0 0 0 0 0 0 0 0 0 Per Revenue (%) 96.79% 82.73% 83.19% 84.41% 84.07% 83.87% 82.87% 82.72% 81.79% 81.70% 81.62%

3. GROSS PROFITS 17,496 101,702 108,883 112,122 129,454 144,205 169,040 186,518 215,077 234,307 255,119 Per Revenue (%) 3.2% 17.3% 16.8% 15.6% 15.9% 16.1% 17.1% 17.3% 18.2% 18.3% 18.4%

4. OPERATING EXPENSES Selling Expenses 0 0 0 0 0 0 0 0 0 0 0

General and administrative expenses 23,054 26,062 28,668 31,821 33,196 36,515 40,313 44,102 48,248 52,301 56,694 TOTAL OPERATING EXPENSES 23,054 26,062 28,668 31,821 33,196 36,515 40,313 44,102 48,248 52,301 56,694

Per Revenue (%) 4.2% 4.4% 4.4% 4.4% 4.1% 4.1% 4.1% 4.1% 4.1% 4.1% 4.1%

5. EARNINGS BEFORE TAX AND INTEREST (5,558) 75,640 80,215 80,301 96,258 107,689 128,727 142,416 166,828 182,007 198,424

6. FINANCE INCOMES/(EXPENSES) 35,536 65,544 69,232 66,021 79,046 93,018 107,974 125,722 144,607 166,751 190,181 - Interest Incomes (19,443) (8,844) (9,145) (12,356) (12,516) (12,300) (12,085) (11,870) (11,654) (11,439) (11,224) - Investment Incomes 54,979 74,389 78,377 78,377 91,562 105,319 120,059 137,591 156,261 178,190 201,404

7. OPERATING PROFITS 29,978 141,184 149,447 146,322 175,305 200,708 236,701 268,137 311,435 348,758 388,605

8. OTHER INCOMES/(EXPENSES) 6,656 37,946 4,341 4,818 5,445 5,989 6,612 7,233 7,913 8,578 9,299

9. EARNINGS BEFORE TAX 36,634 179,131 153,787 151,140 180,749 206,697 243,313 275,371 319,349 357,336 397,904


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2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 10. ENTERPRISE INCOME TAX EXPENSES (1,369) (44,783) (38,447) (37,785) (45,187) (51,674) (60,828) (68,843) (79,837) (89,334) (99,476)

11. NET PROFITS 35,265 134,348 115,341 113,355 135,562 155,022 182,485 206,528 239,511 268,002 298,428 Per Revenue (%) 6.47% 22.81% 17.80% 15.76% 16.68% 17.34% 18.49% 19.13% 20.28% 20.93% 21.50%

1.3 Cash Flow Statement

Table 31: Projected Cash flow


Earnings before tax 134,348 115,341 113,355 135,562 155,022 182,485 206,528 239,511 268,002 298,428 Depreciations 16,093 20,692 31,706 33,071 34,573 36,225 38,043 40,042 42,241 44,660

Profits/ (losses) from investing activities (74,389) (78,377) (78,377) (91,562) (105,319) (120,059) (137,591) (156,261) (178,190) (201,404) Operating profit/(loss) before changes in working

capital (Increase)/decrease in receivables (8,055) (6,479) (7,839) (10,284) (8,939) (10,226) (10,204) (11,163) (10,913) (11,830) (Increase)/decrease in inventories 1,333 (3,534) (4,276) (5,609) (4,876) (5,578) (5,566) (6,089) (5,953) (6,453) (Increase)/decrease in other current assets (2,798) (14,135) (9,912) (21,502) (9,752) (20,452) (9,612) (21,312) (8,032) (21,509) (Increase)/decrease in payables and in prepaid expenses 51,753 7,068 8,552 11,219 9,752 11,156 11,132 12,178 11,906 12,906 (Increase)/decrease in current liabilities (72,801) 26,504 32,070 42,070 36,568 41,834 41,744 45,668 44,646 48,396 Net cash flows from operating activities 45,485 67,080 85,278 92,964 107,031 115,385 134,473 142,574 163,706 163,193 2. CASH FLOWS FROM INVESTING ACTIVITIES

Purchase and construction of fixed assets and other long-term assets (20,119) (68,980) (165,209) (20,481) (22,529) (24,782) (27,260) (29,986) (32,985) (36,283) Payments for investments (228,344) (46,919) 0 (155,120) (161,843) (173,415) (206,265) (219,644) (257,988) (273,107) Interest and dividends received 74,389 78,377 78,377 91,562 105,319 120,059 137,591 156,261 178,190 201,404 Other items 0 0 0 0 0 0 0 0 0 0

Net cash flows from investing activities (174,074) (37,522) (86,832) (84,039) (79,053) (78,138) (95,934) (93,369) (112,783) (107,986) 3. CASH FLOWS FROM FINANCING ACTIVITIES

Increase/(decrease) in short - term loans and debts 0 (30,000) 0 0 0 0 0 0 0 0


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2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Increase/(decrease) in current portion of long-term

loans and debts 0 0 0 0 0 0 0 0 0 0 Increase/(decrease) in long - term loans and debts 16,961 15,166 41,272 (5,383) (5,383) (5,383) (5,383) (5,383) (5,383) (5,383) Increase/(decrease) in shares 0 0 0 0 0 0 0 0 0 0 Increase/(decrease) in preference shares 0 0 0 0 0 0 0 0 0 0

Dividends paid for owners 0 0 0 0 0 0 0 0 0 0 Net cash flows from financing activities 16,961 (14,834) 41,272 (5,383) (5,383) (5,383) (5,383) (5,383) (5,383) (5,383) NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS (111,629) 14,724 39,718 3,542 22,594 31,864 33,156 43,822 45,540 49,823 CASH AND CASH EQUIVALENTS AT THE BEGINNING OF PERIOD 258,873 147,244 161,968 201,687 205,229 227,823 259,686 292,843 336,664 382,205 CASH AND CASH EQUIVALENTS AT THE END OF PERIOD 147,244 161,968 201,687 205,229 227,823 259,686 292,843 336,664 382,205 432,028


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C - Assumptions for projection

1.1 Revenue assumptions Table 32: Revenue Assumption

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Revenue 545,348 588,976 647,873 719,140 812,628 893,890 983,279 1,071,775 1,168,234 1,261,693 1,362,628 Growth rate 8.0% 10.0% 11.0% 13.0% 10.0% 10.0% 9.0% 9.0% 8.0% 8.0%

- - - - - -

Assumed growth rate of sales 8.0% 10.0% 11.0% 13.0% 10.0% 10.0% 9.0% 9.0% 8.0% 8.0%

1.2 Cost of goods sold assumptions Table 33: Cost of goods sold assumption

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Revenue 545,348 588,976 647,873 719,140 812,628 893,890 983,279 1,071,775 1,168,234 1,261,693 1,362,628 8.00% 10.00% 11.00% 13.00% 10.00% 10.00% 9.00% 9.00% 8.00% 8.00%

1/ Variable costs % revenue 80.00% 471,181 518,299 575,312 650,102 715,112 786,624 857,420 934,587 1,009,354 1,090,103

Fixed costs Depreciation 16,093 20,692 31,706 33,071 34,573 36,225 38,043 40,042 42,241 44,660 Other fixed costs Total fixed costs 16,093 20,692 31,706 33,071 34,573 36,225 38,043 40,042 42,241 44,660

Total COGS 527,852 487,274 538,991 607,018 683,173 749,686 822,849 895,462 974,629 1,051,595 1,134,763

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Total COGS 527,852 487,274 538,991 607,018 683,173 749,686 822,849 895,462 974,629 1,051,595 1,134,763 % revenue 96.8% 82.7% 83.2% 84.4% 84.1% 83.9% 83.7% 83.5% 83.4% 83.3% 83.3%

- 17.27% 16.81% 15.59% 15.93% 16.13% 16.32% 16.45% 16.57% 16.65% 16.72%


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Table 34: Other Assumptions

Unit (Mil VND) 1,000,000

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 A. INCOME STATEMENT ACCOUNT

REVENUE 545,348 588,976 647,873 719,140 812,628 893,890 983,279 1,071,775 1,168,234 1,261,693 1,362,628 1/ SELLING EXPENSES Selling expenses as % to sales 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Total selling expenses - - - - - - - - - - - 2/ GENERAL & ADMINISTRATIVE

EXPENSES 23,054 2.1. Fixed costs

Depreciation - - - - - - - - - - Others - - - - - - - - - - -

2.2. Variable costs GA expenses as % to sales 4.23% 4.7% 4.7% 4.7% 4.7% 4.7% 4.7% 4.7% 4.7% 4.7% 4.7%

Variable costs 23,054 27,433 30,177 33,496 37,850 41,635 45,799 49,921 54,414 58,767 63,468 Total G&A expenses 23,054 27,433 30,177 33,496 37,850 41,635 45,799 49,921 54,414 58,767 63,468

3/ OTHER REVENUES Growth rate (%) 1.72% 1.72% 1.72% 1.72% 1.72% 1.72% 1.72% 1.72% 1.72% 1.72% Value 10,170 44,130 11,143 12,369 13,977 15,375 16,912 18,435 20,094 21,701 23,437

4/ OTHER EXPENSES Growth rate (%) 0.00% 1.05% 1.05% 1.05% 1.05% 1.05% 1.05% 1.05% 1.05% 1.05% 1.05% Value 3,514 6,184 6,803 7,551 8,533 9,386 10,324 11,254 12,266 13,248 14,308

5/ Corporate income tax (%) 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% 25.0% B. BALANCE SHEET ACCOUNT I. CAPITAL EXPENDITURE 1. Computers, Software & Office

Equipment Original costs - - - - - - - - - - - Accumulated depreciation -

Useful life (years) 3 2. Plant & Equipment

Original costs 186,716 20,119 68,980 165,209 20,481 22,529 24,782 27,260 29,986 32,985 36,283 Accumulated depreciation 65,260


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Unit (Mil VND) 1,000,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Useful life (years) 15 3. Others

Original costs - - - - - - - - - - - Accumulated depreciation - Useful life (years) 10 4. Construction in Progress

New Investment 96,805 - - - - - - - - - - Transferred to FA 96,805 - - - - - - - - -

II. OTHER NON CURRENT ASSETS 3,208 3,208 3,208 3,208 3,208 3,208 3,208 3,208 3,208 3,208 3,208 III. WORKING CAPITAL

1. Accounts Receivable % to sales 18.51% 11.00% 11.00% 11.00% 11.00% 11.00% 11.00% 11.00% 11.00% 11.00% 11.00% Value 56,732 40 40 40 40 40 40 40 40 40 40 Internal AR - - - - - - - - - -

2. Inventory % to sales 6.72% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% Value 36,672 22 22 22 22 22 22 22 22 22 22

3. Other Current Assets % to sales 25.41% 24.00% 24.00% 23.00% 23.00% 22.00% 22.00% 21.00% 21.00% 20.00% 20.00% Value 138,556

4. Accounts Payable & Accrued Expenses % to sales 9.20% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% Value 18,924 44 44 44 44 44 44 44 44 44 44 Internal AP - - - - - - - - - -

5. Other Current Liabilities % to sales 61.95% 45.00% 45.00% 45.00% 45.00% 45.00% 45.00% 45.00% 45.00% 45.00% 45.00% Value 337,840

C. FUNDING (BALANCING ACCOUNTS) I. BEGINNING CASH BALANCE 258,873 II. EQUITY 1. Common 692,906 692,906 692,906 692,906 692,906 692,906 692,906 692,906 692,906 692,906 692,906

Equity addition plan 2. Preferred - IV. OTHER NON - CURRENT

LIABILITIES 3,061 3,061 3,061 3,061 3,061 3,061 3,061 3,061 3,061 3,061 3,061 V. INVESTMENT (TO BALANCE

SURPLUS CASH) 646,816 1. Addition 234,216 39,236 - 116,718 139,057 150,279 182,756 195,723 240,218 261,383 2. Assumed interest rate on Investment 9% 9% 9% 9% 9% 9% 9% 9% 9% 9% 9%

3. Assumed deposit rate 9% 9% 9% 9% 9% 9% 9% 9% 9% 9% 9%


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Unit (Mil VND) 1,000,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

VI. DIVIDEND - - - - - - - -


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APPENDIX III - KEY OBSERVATIONS FROM THE REVIEW OF DATC

I. Financial Management Assessment Questionnaire



DATC is a special State owned company established under Decision No 109/2003/QD-TTg dated 6 June 2003 of the Prime Minister.


No


Vietnamese Accounting Standard


Not applicable


Not applicable

2. Funds Flow Arrangements 2.1 Describe (proposed) project funds

flow arrangements, including a chart and explanation of the flow of funds from ADB, government and other financiers.

Please refer to Appendix I for reference of the fund flow arrangement proposed by entity.


Yes


No problem arisen in the past

2.4 In which bank will the Imprest Account be opened?

Not applicable They proposed loans to be directly transferred to DATC.


Not applicable

2.7 Does the entity have/need a capacity to manage foreign exchange risks?

As there is no secondary financial market, there is little opportunity to manage foreign exchange risk.

2.8 How are the counterpart funds accessed?

Not applicable. No counterpart fund is applied


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Topic Response Remarks 2.9 How are payments made from the

counterpart funds? Not applicable. No counterpart

fund is applied


Not applicable. The project is implemented by DATC itself.


Financing margin from existing bankers for fixed assets acquisition is usually 10%. The company would finance the balance from internal sources.

3. Staffing 3.1 What is the (proposed)

organizational structure of the accounting department? Attach an organization chart.

Please refer to Appendix II for current structure of accounting department.

3.2 Identify the (proposed) accounts staff, including job title, responsibilities, educational background and professional experience. Attach job descriptions and CVs of key accounting staff.

The Loan will be controlled and followed by experienced and qualified accountants in Accounting Department at Parent Company including: - Deputies Head of Accounting Department (bachelor degree with major in Accounting) who is responsible for the overall operation of the Department, reviewing and approving all transactions and reports prior to the GD’s approval; managing overall investment activities, Selling & Buying Debts.. - AR & AP accountant, Sales accountant, Bank accountant and Cashier who are specialized in each accounting segments such as cash transaction, CIT, payroll, account payable and receivable.. they deal mostly with processing transactions and collection and payment of cash.


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Topic Response Remarks 3.3 Is the project finance and

accounting function staffed adequately?

DATC’s Accounting Department has one Chief Accountant (Head of the Department), two Deputy Head and 4 Accounting Officers being responsible for different functions. The position of Head of Accounting department is temporarily vacant but will be filled soon. One Deputy Head is assigned to perform the role of the Head. They believe that their personnel are adequate to perform all necessary functions.


They are all qualified and experienced accountants holding bachelor degree and have hold several years of experience. - They are all graduated from

qualified universities in accounting and finance.

- Most of staffs are permanent and have been working for Accounting Department for 3 to almost 30 years.

3.5 Are the project accounts and finance staffs trained in ADB procedures?

ADB procedures are new to finance and accounting staffs, however all staffs are used to procedures for securing loans for investment projects from local bankers. Hence, they would be able to quickly cope with and be familiar with ADB procedures.

3.6 What is the duration of the contract with the finance and accounts staff?

The company follows the normal practice in Vietnam. Initially, all staffs will sign a 1 year contract with the corporation. After 1 year of working, this contract will be extended to unlimited period.


All staffs working in accounting department have labor contract. The position of Head of Accounting department is temporarily vacant.


Accounting Department has their own Manual. This manual shows the structure of the accounting department, duties and responsibilities of each personnel, and limits of authority for all levels. The project is done by company’s staffs. Therefore, this manual will apply to the project too.

3.11 At what frequency are personnel transferred?

Staff turnover is very low at the Department.


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Topic Response Remarks 3.12 What is training policy for the

finance and accounting staff? DATC has developed detailed training policies which clearly define who are eligible for training, what type of training the company could provide and other necessary relevant information.


system that allows for the proper recording of project financial transactions, including the allocation of expenditures in accordance with the respective components, disbursement categories, and sources of funds?

Will the project use the entity accounting system?

The mother company is using BRAVO accounting software allows for record all financial transactions of the group, including the allocation of expenditures in accordance with the respective components, disbursement categories, and sources of funds.

4.2 Are controls in place concerning the preparation and approval of transactions, ensuring that all transactions are correctly made and adequately explained?

There is segregation between executing and recording function under the accounting department. In details: ► For each transaction incurred,

staffs at the related department will make the request, line manager will approve, accounting staff will prepare journal voucher in attached with relevant supporting documents, Head/Deputy of Head of Accounting Department and then General Director approve;

► All approval journal vouchers are subsequently sent to relevant accountant for review and for posting.

► Every month, each accountant performs reconciliation of accounts and the results are reviewed and checked by Deputy Head of Accounting

► Except for the accounting department, no other personnel neither departments can access the accounting system.

► Each ID of staff has certain level of access to the accounting system.


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Topic Response Remarks 4.3 Is the chart of accounts adequate

to properly account for and report on project activities and disbursement categories?

Chart of the account of the entity is in line with the Vietnamese accounting standard, which they believe to cover all transactions and generate all required reports for the project. The Project’s will use the same chart of account with DATC.

4.4 Are cost allocations to the various funding sources made accurately and in accordance with established agreements?

Not applicable. The Loan is to re-finance outstanding loan, not to finance a specific projects which are funded by various funding resources.


Yes. Accountants will perform such reconciliation on an monthly and annual basis. Deputy Head of department will review and check the result of reconciliation.


Accounting voucher and supporting document are properly kept and controlled at Accounting Department.



Yes. (iv) is performed by Deputy

Head of Department (v) is performed by relevant

detail accountant (vi) respective head of

operation

4.8 Are the functions of ordering, receiving, accounting for, and paying for goods and services appropriately segregated?


goods are received by the department who requests

- Payments are made by cashier/AP accountant

- Accounting records are made by relevant accountants


Yes. Banks reconciliation is done by Bank accountant basing on the cash balance per book and bank balance per bank statement. All difference should be explained in the reconciliation. Consequently, adjustment voucher is prepared for any adjustment arise. Chief accountant/supervisor will approved on this work.


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Topic Response Remarks Budgeting System

4.10 Do budgets include physical and financial targets?

Yes. Basing on the physical target (potential enterprises for debt acquisition and IPO), the entity estimates their financial targets (Revenue, expense, etc)

4.11 Are budgets prepared for all significant activities in sufficient detail to provide a meaningful tool with which to monitor subsequent performance?

Budget are prepared for every single activity and department


Progress is reviewed every month, adjustment could be considered when necessary basing on the evaluation of performance in the 1st month. All significant variance should be explained.


They need get approval in advance.


Accounting and Finance Department prepared, and then submit General Director for review before submitting this to the BOM for approval.

4.15 Are procedures in place to plan project activities, collect information from the units in charge of the different components, and prepare the budgets?

No official written procedures in place. Information is collected from different department by Planning Department and then sent to Accounting Department for budget preparation and then to BOM for approval.


Due to changes in economic environment including collapse of blue chip companies and fluctuations in stock prices budgets sometimes had been revised


provide for: (i) Copies of purchase orders and receiving reports to be obtained directly from issuing departments? (ii) Comparison of invoice quantities, prices and terms, with those indicated on the purchase order and with records of goods actually received? (iii) Comparison of invoice quantities with those indicated on the receiving reports? (iv) Checking the accuracy of calculations?

The invoice-processing procedures are performed properly. The invoice-processing procedures are properly performed. They cover all those steps: (i,ii): is performed by AP accountants (iii) and (iv): are performed by AP accountant and


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Topic Response Remarks 4.18 Are all invoices stamped PAID,

dated, reviewed and approved, and clearly marked for account code assignment?

The Company does not use "Paid Stamp" on the disbursed voucher or invoices Invoice is attached with other supporting document. Accounting Department will check the content, amount, date of invoice accordance with other supporting documents. Journal Voucher presents description of transaction as well as Account Code assignment. In addition, all invoice numbers are recorded into the system when the related transaction is recorded. Therefore, no double payment could happen.


All decisions relating to payroll are approved by GD/BOM. Payroll information are obtained from Human Resource Department and then processed by Accounting Department for payroll calculation. Payroll sheet is prepared monthly by Payroll Accountant and approved by Chief Accountant and General Director.

Policies And Procedures 4.20 What is the basis of accounting

(e.g., cash, accrual)? Accrual basis


Vietnamese accounting standard


Accounting Department has their own Manual. This manual shows the structure of the accounting department, duties and responsibilities of each personnel, and limits of authority for all levels. The project is done by company’s staffs. Therefore, this manual will apply to the project too.


Not at the moment but they will do it if required.

4.24 Do procedures exist to ensure that only authorized persons can alter or establish a new accounting principle, policy or procedure to be used by the entity?

Only Head of Accounting Department and Board of Management can make changes in accounting principles, policies or procedures.

4.25 Are there written policies and procedures covering all routine financial management and related administrative activities?

Yes, Accounting Department has its own operating manual. DATC believes such manual will cover all routine financial management and related administrative activities.


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Topic Response Remarks 4.26 Do policies and procedures

clearly define conflict of interest and related party transactions (real and apparent) and provide safeguards to protect the organization from them?

No specific definition and procedures being implemented to avoid conflict of interest. All transactions are treated in the same manner and follow the same procedures.


Yes. They are distributed to all accounting personnel.



General Director/ Deputy Director


Yes. Cash on hand and cash at bank Accountants have their own control file to keep track the cash flow daily. At the end of the month, Cash Accountants will reconcile their balance with the balance generated from the Accounting system. Any difference will be further investigated and adjustment will made accordingly with approval from Chief Accountant/ Supervisor and General Director.



Yes. Bank reconciliation are performed monthly by Bank Accountant and approved by Deputy Head of Accounting Department.


Yes. Any difference will be further investigated and adjustment will made accordingly with approval from Deputy Head of Accounting Department.


Most cash receipts are through banks. Therefore, timely deposit can be ensured.

Safeguard over Assets 4.34 Is there a system of adequate

safeguards to protect assets from fraud, waste and abuse?

- The branches are responsible for managing the fixed assets at their own office. They submit their fixed assets report to the Head Office at year end. - At Head Office, the fixed assets is controlled by each department in charge. In addition, they are also under security of guard team. Physical checks are performed annually at year end.


Reconciliation is undertaken annually at year end by comparing the actual counting results and the book balance.


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Topic Response Remarks 4.36 Are there periodic physical

inventories of fixed assets and stocks?

Yes. Fixed assets physical checks are performed annually.


Company does not purchase insurance for fixed asset hold at Corporation except for the cars.

Other Offices and Implementing Entities 4.38 Are there any other regional

offices or executing entities participating in implementation?

Not applicable

4.39 Has the project established controls and procedures for flow of funds, financial information, accountability, and audits in relation to the other offices or entities?

Not applicable


Not applicable


Not applicable

Other 4.42 Has the project advised

employees, beneficiaries and other recipients to whom to report if they suspect fraud, waste or misuse of project resources or property?

Not applicable

5. Internal Audit 5.1 Is there a internal audit

department in the entity? There is no internal audit department as well as internal audit function within the Company and Subsidiaries.





6. External Audit 6.1 Is the entity financial statement

audited regularly by an independent auditor? Who is the auditor?

Yes. Yes. Financial statement of the parent company and all subsidiaries were audited by CPA Vietnam.


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Topic Response Remarks 6.2 Are there any delays in audit of

the entity? When are the audit reports issued?

- Audit report on the consolidated financial statements for the year ended 31/12/07 was issued in early June 2007. Audit report for the year ended 31/12/08 was not issued till now.


The audit of the Parent Company and subsidiaries are undertaken in accordance with Vietnamese Accounting Standard.

6.4 Were there any major accountability issues brought out in the audit report of the past three years?

In 2006, 2007, the company’s consolidated financial statements are qualified. Qualifications are related to limit of audit scope since the auditor could not observe the year end cash count.


Not specified. The project is done by the Head Ofice and no separate accounting or management system for the project. It is not clear at this stage whether DATC needs to prepare separate project accounts but they will do if required. If so, the project accounts will be audited by the entity auditor.


The external auditors did not issue any management letter to the Company for current year and previously years.


Not specified.


Not specified.

7. Reporting and Monitoring 7.1 Are financial statements prepared

for the entity? In accordance with which accounting standards?

The financial statements of Head Office and its branches are prepared in accordance with Vietnamese Accounting Standards.


Not applicable

7.3 What is the frequency of preparation of financial statements? Are the reports prepared in a timely fashion so as to useful to management for decision making?

The trial balance is prepared and sent to Head Office monthly. The consolidation financial statements are prepared monthly and quarterly by the Accounting department of Head Office.


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Topic Response Remarks 7.4 Does the reporting system need

to be adapted to report on the project components?

Currently, the consolidation is generated systematically except for the eliminated entries of branches. Every month, the accounting department will collect the trial balance and FSs from branches via email. Received data will be re-imported to the accounting system for the purpose. of processing consolidation report.


DATC believes that their current reporting system is capable enough to link the financial information with the project's physical progress since there is always a coordination and reconciliation between accounting, planning and implementing functions.


No specific guideline for the Project at that point of time.


Yes, accounting department need prepare management report quarterly.


Budget is reviewed every six months.


All subsidiaries and Parent Company use BRAVO as accounting system which can directly generate financial reports.

8. Information Systems 8.1 Is the financial management

system computerized? Yes, the Accounting system BRAVO is able to generate various types of report such management reports and general reports. E.g: Trial balance, Profit and Loss Statement, Balance sheet, Fix asset report, Account receivable/payable aging report, Inventory listing...



Yes, this accounting system has been applied since the Company started operating. All staffs in accounting department are familiar with using functions of the accounting system. They all be trained when the system is upgraded.


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Topic Response Remarks 8.4 Does the management

organization and processing system safeguard the confidentiality, integrity and availability of the data?

Yes.

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