* '~ GrantThornton I Consolidated financial statements and independent auditors' report (Prepared in accordance with International Financial Reporting Standards) U g Vietnam Expressway Corporation and its subsidiaries 1 Year ended 31 December 2018 U Vietnam Expressway Corporation and its subsidiaries For the year ended 31 December 2018 8 Contents U U Page Report of the Board of Directors 1 Independent auditors' report 4 Consolidated statement of comprehensive income 8 Consolidated statement of financial position 9 Consolidated statement of changes in equity 10 Consolidated satement of cash flows 11 Notes to the consolidated financial statements 12 z U U 8 U c 8' 8A * * A Vietnam Expressway Corporation and its subsidiaries For the year ended 31 December 2018 * Report of the Board of Directors U 8 The Board of Directors presents its report together with the audited consolidated financial statements of Vietnam Expressway Corporation ("the Company") and its subsidiaries (hereafter collectively referred as "the Group") for the year ended 31 December 2018. Background of the Company Vietnam Expressway Corporation, formerly known as the Vietnam Expressway Investment Development Company Limited, was established under Decision No. 3033/QD-BGTVT dated 6 October 2004 of the Minister of Ministry of Transport. Accordingly, the Company was an independent State-owned Company, under the Ministry of Transport of Vietnam. From 7 July 2010, Vietnam Expressway Investment Development Company Limited has been approved to change its legal form from a state-owned company to be a limited liability company with one member and change its name to Vietnam Expressway Corporation in accordance with Decision No. 1666/QD - BGTVT dated 17 June 2010 issued by the Minister of Ministry of Transport. The Company received the first Business Registration Certificate No. 0101573511 issued by Hanoi Department of Planning and Investment on 7 July 2010, and subsequently received the latest seventh amended business registration certificate to change information of the legal representative and head office address on 21 November 2017. The Company's registered head office is located at 2nd, 3rd, 4th, 5th Floors, Central Point Building, No 219 Trung Kinh street, Yen Hoa Ward, Cau Giay District, Hanoi, Vietnam. The Company has dependent units which involves directly in the management of its projects: - Project Management of Southern expressways; - Project Management of Da Nang - Quang Ngai expressway; -Laboratory testing and quality control Center; - Research and Development Center of Vietnam expressway; and - Project Management of expressway of Northern provinces. The Company has the following subsidiaries and associate: Interest holding percentage 2018 2017 Subsidiaries Vietnam Expressway Services Engineering Joint Stock Company ("VECE") 51% 51% Vietnam Expressway Operation and Maintenance Limited Liability Company ("VEC OM") 81.3% 81.3% Associate Vietnam Expressway Services Joint Stock Company ("VEC Services") 22.38% 22.38% Principal activities The principal activities of the Group are to invest, develop and operate national expressway networks. In 2018, the Group operates Cau Gie - Ninh Binh expressway, Noi Bai - Lao Cai expressway, Long Thanh - Dau Giay expressway, Da Nang - Quang Ngai expressway and is in the construction stages of other expressway projects. U Results of operations The results of the Group's operations for the year ended 31 December 2018 and the financial position as at 31 December 2018 are set out in the consolidated financial statements on pages 8 to 35. Vietnam Expressway Corporation and its subsidiaries For the year ended 31 December 2018 Members' Council and Board of Directors The members of the Members' Council and the Board of Directors of the Company during the year and to the date of this report were: Members' Council: Position Mr Mai Tuan Anh Chairman Ms Pham Thi Hong Huong Member Mr Phung Minh Mo Member Mr Ngo The Nghia Member Tran Van Tam Member Board of Directors: Mr Tran Van Tam General Director Mr Nguyen The Cuong Deputy General Director Mr Nguyen Quoc Binh Deputy General Director Mr Nguyen Manh Hung Deputy General Director Mr Le Quang Hao Deputy General Director Mr Nguyen Van Nhi Deputy General Director Auditors The accompanying consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS"), for the year ended 31 December 2018 have been audited by Grant Thornton (Vietnam) Limited. The consolidated financial statements of the Group prepared in accordance with Vietnamese Accounting Standards and System ("VAS") for the year ended 31 December 2018 have been audited by other auditors and separately presented. Subsequent events No significant event has occurred since the reporting date which would have impact on the consolidated financial position or performance of the Group. The Board of Directors' responsibility in respect of the consolidated financial statements The Board of Directors is responsible to ascertain that the consolidated financial statements are properly drawn up so as to give a true and fair view of the financial position of the Group as at 31 December 2018 and of the results of its operations and its cash flows for the year then ended. In preparing these consolidated financial statements, the Board of Directors are required to: U * adopt appropriate accounting policies which are supported by reasonable and prudent judgements and estimates and then apply them consistently; * comply with the disclosure requirements of International Financial Reporting Standards or present true and fair information of any departures in the financial statements. * maintain adequate accounting records and an effective system of internal control; * prepare the consolidated financial statements on the going concern basis unless it is inappropriate to assume that the Group will continue its operations in the foreseeable future; and * control and direct effectively the Group in all material decisions affecting its operations and performance and ascertain that such decisions and/or instructions have been properly reflected in the consolidated financial statements. U 8 2 U Vietnam Expressway Corporation and its subsidiaries For the year ended 31 December 2018 The Board of Directors is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board of Directors confirms that the Group has complied with the above requirements in preparing the consolidated financial statements. Statement by the Board of Directors In the opinion of the Board of Directors, the accompanying consolidated financial statements of the Group together with the notes thereto, have been properly drawn up and give a true and fair view of the financial position of the Group as at 31 December 2018 and of the results of its operations, its changes in equity and its cash flows for the year then ended in accordance with International Financial Reporting Standards. On behalf of the Board of Directors,v Tran Van Tam GenerainDirector Hanoi, Vietnam 28 June 2019 U 5 U 8 * GrantThornton a a Independent auditors' report on the consolidated financial statements of Vietnam Expressway Corporation and its subsidiaries 18t Floor for the year ended 31 December 2018 Hoa Binh International Office Building 106 Hoang Quoc Viet Street Cau Giay District, Hanoi Vietnam T +84 24 3850 1686 F +84 24 3850 1688 No. 16-11-237-2018-VEC-2 To: The Members' Council and Board of Directors Vietnam Expressway Corporation * Opinion We have audited the accompanying consolidated financial statements of Vietnam Expressway Corporation ("the Company") and its subsidiaries (hereafter collectively referred as "the Group") which comprise the consolidated statement of financial position as at 31 December 2018 and the consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory notes prepared on 28 June 2019 as disclosed on pages 8 to 35. In our opinion, because of the significance of the matters discussed in the "Basis for Auditors' Opinion" section of our report, the accompanying consolidated financial statements of the Group for the year ended 31 December 2018 do not present fairly in accordance with International Financial Reporting Standards ("IFRS"). Basis for auditors' opinion Limitation of audit scope In accordance with the agreed scope of audit, we were not engaged to perform audit on the expressway construction activities prior to 1 January 2016, therefore, we were not able to provide our opinion on the cumulative historical costs of expressways and construction in progress as at 1 January 2016 amounting to VND31,445 billion and VND23,103 billion respectively. Recognition and measurement of financial liabilities As disclosed in Note 6, for the purposes of consistent presentation of borrowing information in its financial statements with the information recorded by the lenders, as well as due to the impractical and complicated application of amortised cost method, instead of applying amortised costs as required by IFRS 9, the Group opted to apply historical cost accounting policy for borrowings at preferential interest rates obtained under Development Credit Agreements signed between the Government of Vietnam and the lenders. K Application of IFRIC 12 - Service concession arrangements As presented in Note 6, the Group's Management decided to not apply IFRIC 12 - Service concession arrangements to recognize development costs of expressways as an intangible asset, as its rights to collect toll fees from expressway users, equivalent to the value received from the Government of Vietnam in exchange of expressway construction services. Instead, the Group's policies are to recognise development costs of expressways as its property, plant and equipment in accordance with lAS 16 - Property, plant and equipment. This accounting policy is based on the Management's judgement that the Group has rights and controls over its developed expressways after the end of toll fee collection period, thus, these assets are out of scope of IFRIC 12. Grant Thornton (Vietnam) Limited grantthornton.com.vn Company code and tax: 0101476557 RegiStered in Vietnam. U U I U However, as at the date of this report, the Group has not been received any official approvals by the local authorities with regard to determination of the rights to control expressways during and after the toll fee collection periods to recover investment capitals. The Group's Management is also still in progress to clarify the financial policies and controls of expressways with authorized bodies to determine proper accounting treatments. Due to the significant uncertainty of further instructions from the related local authorities on the rights and controls over the expressways operated by the Group resulting in whether or not IFRIC 12 would be applied, we were unable to express our opinion on the Group's current accounting policies to recognise expressways as the Group's tangible fixed assets in accordance with IAS 16 - Property, plant and equipment. Differences in application of expressway depreciation methods In the case of non-application of the aforesaid IFRIC 12 - Service concession arrangements is consistent with the related local authorities' instructions in the future, the current expressway depreciation method of the Group is difference to the depreciation policy as allowed by IAS 16 - Property, plant and equipment. As presented in Note 5.5 - Property, plant and equipment, instead of straight-line depreciation method, the Group is applying the revenue-based depreciation method which is determined by proportion rate of revenue recognized each year over total forecasted revenue for the whole toll fee-collection period. This depreciation method is one of the accepted depreciation methods under the guidance of Vietnamese Accounting Standards and System. The depreciation method is different from IFRS requirements that revenue-based depreciation method is not an approved method in accordance with the Clarification of Acceptable Methods of Depreciation and Amortisation (Amendments to IAS 16 and IAS 38) published by the International Accounting Standards Board (IASB) on 12 May 2014. Had the Group applied the straight-line depreciation method, the Group's depreciation expenses for the current year would have been increased by VND705 billion (for the year ended 31 December 2017: depreciation expense would have been increased VND1,321 billion) and the carrying value of property, plant and equipment as at 31 December 2018 would have been decreased by VND4,455 billion (as at 31 December 2017, carrying value of property, plant and equipment would have been decreased by VND3,750 billion). Changes in the depreciation period of expressways have not been officially approved by the local authorities During the year, the Group has changed its accounting estimate of useful life of the Expressways of Noi Bai - Lao Cai, Long Thanh - Gia Giay, Cau Gie - Ninh Binh, Ben Luc - Long Thanh and Da Nang- Quang Ngai from initial depreciation periods ranging from 24 to 50 years to a depreciation period of 80 years. Those changes have been applied in accordance with the Circular No. 147/2016/ TT-BTC dated 13 October 2016 of the Ministry of Finance and Appendix No. 01 of Circular 03/2016 / TT-BXD 10 March 2016 issued by the Minister of Ministry of Construction. However, at the date of this report, the Group has not received an official decision from the local authorities with regarding the Company's rights to operate the above expressways for 80 years. The Group's Management is still in progress to apply for operating time extension for these expressways. Due to the importance of the authorities' approval in the future on the time extension for operation of these expressways as basic to determine the depreciation cost of expressways, we were unable to express our opinion on the Group's accounting estimates on the depreciation period of expressways as presented in the consolidated financial statements. Unrecorded site clearance expenses Due to nature of the Group's structure, site clearance activities are implemented by provincial project units. As such, there were certain expenditures incurred in provinces have not been recorded in the consolidated financial statements due to late submission of accounting documents. This construction cost will be recorded in January of the following year based on the reconciliation from local State Treasury office. Accordingly, the Group's construction cost balance would have been increased by VND776 billion as at 31 December 2017 and payable balances would have been increased by the same amount. Accounting policy for investment capital In accordance with Decision No. 2072/QD-TTg issued by the Prime Minister dated 8 November 2013 relating to the restructuring of financial resources of the five expressway projects implemented by the Group, all (i) ODA borrowing funds, except for the borrowings from Asian Development Bank - OCR fund and borrowings from International Restructure and Development Bank ("IBRD"), that are provided to the Group for its projects in the form of re-lending; (ii) the funds from State-guaranteed corporate bonds issued in relation to the Cau Gie - Ninh Binh expressway and Noi Bai - Lao Cai expressway and related bond interests; and (iii) funds advanced by the State in relation to expressway projects of Hanoi - Lao Cai and Cau Gie - Ninh Binh were accounted as direct capital contribution by 5 5 S the Government of Vietnam. Accordingly, the Group converted all ODA borrowing principals and related interest, advanced funds from the Government and corporate bonds as the construction capital contribution by the Government in previous years. As the Group's rights and obligations related to the aforesaid items have not been consistently set out in the current regulations of the local authorities, the Group's current accounting policies on recognition and classification of these items are depended on the ultimate legal regulations issued by the local authorities in future. Due to impacts of significant uncertainty of this matter, we were not able to express our opinion on the accounting recognition and presentation of the aforesaid items and impacts, if any, to the Group's consolidated financial statements for the current year. Accounting policy on recognition of provision for expressway overhaul costs As presented in Note 13 - Provision, provision for expressway overhaul costs was recognised by the Group based on the business plan in 2018 with an amount of VND809.7 billion. This provision policy is consistent with the Vietnamese Accounting Standards and System. However, in accordance with the International Accounting Standard No 37 - Provisions, contingent liabilities and assets, the Group is not allowed to make provision for future expenses as the Group has no contractual obligation at the present. If the provision policies are applied in consistent with the IAS 37, the Group's provision for expressway overhaul cost as presented in the consolidated statement of financial position as at 31 December 2018 would be reduced by VND809.7 billion and other operating expenses as presented in the consolidated statement of comprehensive income for the current year would be reduced by the same amount. We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Vietnam, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Others matters Restiction of uses These consolidated financial statements are prepared for and only for the internal use purposes of the Group's Management and the donors. Responsibilities of the Management and Those Charged with Governance for the consolidated financial statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Group's financial reporting process. Auditors' responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. 6 6 U As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Group to cease to continue as a going concern. * Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. GRANT THORNTON (VIETNAM) LIMITED Nguyen Hong Ha Auditors Practising Certificate No. 1710-2018-068-1 Deputy General Director Le Quang Hoa Auditor's Practising Certificate No. 2587-2018-068-1 Auditor Hanoi, Vietnam 28 June 2019 Vietnam Expressway Corporation and its subsidiaries a Consolidated statement of comprehensive income for the year ended 31 December 2018 Notes Year ended Year ended 31 December 2018 31 December 2017 VND VND Revenue 19 3,224,884,503,728 2,768,774,883,895 Other income 19 1,081,259,270 1,487,080,247 Cost of material 19 (6,153,876,674) (6,477,594,827) Employees benefits expense 19 (43,356,433,828) (31,419,785,909) Depreciation & amortisation expense - net 19 (54,362,692,734) (435,383,774,706) Other expenses 19 (616,890,069,586) (725,933,697,178) Operating profit 2,506,202,690,176 1,571,047,111,522 Shared profits from associates 1,112,024,725 1,444,976,337 Financial income 20 385,362,420,695 208,848,958,444 Financial expenses 21 (2,887,835,932,287) (843,530,237,527) Profit from operation before tax 3,841,203,309 937,810,808,776 Corporate income tax for the year 22 (1,409,569,017) (1,534,875,090) Deferred corporate income tax 22 Profit from continuing operation after tax 2,431,634,292 936,275,933,686 Other comprehensive income Net Comprehensive income for the year 2,431,634,292 936,275,933,686 Profit attributable to: Non-controlling interests 1,849,424,156 1,782,489,340 Owner of the Parent 582,210,136 934,493,444,346 Net Comprehensive income for the year 2,431,634,292 936,275,933,686 T U ThUcopnigntsaea nerlpr o h osldtdfnnilsaeet 3 Vietnam Expressway Corporation and its subsidiaries U a Consolidated statement of financial position as at 31 December 2018 Notes 31 December 2018 31 December 2017 VND VND ASSETS Non - current Other intangible assets 9,522,687,396 10,412,611,873 Property, plant and equipment 7 76,848,213,965,902 71,153,330,404,429 Other long-term assets 1,260,029,212 1,705,248,431 Investment in associates 8 21,601,820,856 21,889,796,131 76,880,598,603,366 71,187,338,060,864 Current Inventories 26,664,028,332 24,738,354,447 Other short-term financial assets 2,623,481,545 1,080,828,804 Current tax assets 10 252,529,235,047 200,449,440,542 Trade and other receivables 11 18,890,919,769,185 16,784,137,353,521 Cash and cash equivalents 12 503,697,394,734 944,554,477,396 19,676,433,908,843 17,954,960,454,710 TOTAL ASSETS 96,557,032,412,209 89,142,298,515,574 EQUITY AND LIABILITIES Equity Charter capital 16 1,000,000,000,000 1,000,000,000,000 Other components of equity 17 8,518,224,422,413 8,784,537,298,506 Retained earnings 8,483,751,215 10,108,459,119 9,526,708,173,628 9,794,645,757,625 Non-controlling interest 18 30,454,770,307 32,473,761,245 9,557,162,943,935 9,827,119,518,870 Liabilities Non-Current Provision 13 809,753,914,769 343,200,000,000 Long-term borrowings and debts 14 66,517,465,696,195 60,146,465,906,933 67,327,219,610,964 60,489,665,906,933 Current Short-term borrowings 12,750,959,398 16,839,280,168 Trade and other payables 15 19,608,193,499,358 18,772,841,197,742 Employee obligations 42,606,491,652 29,372,741,043 Tax liabilities 6,602,772,539 5,622,365,187 Other liabilities 2,496,134,363 837,505,631 19,672,649,857,310 18,825,513,089,771 Total Liabilities 86,999,869,468,274 79,315,178,996,704 TOTAL EQUITY AND LIABILITIES 96,557,032,412,209 89,142,298,515,574 T B The accompanying notes are an integral part of the consolidated financial statements 9 I MWWsan U gN00 00g"gowgggagggggnggwsso Vietnam Expressway Corporation and its subsidiaries Consolidated statement of changes in equity for the year ended 31 December 2018 The Owner's equity Non-controlling Total Other owner's equity Retained earnings/ interest Charter capital (Note 17) (Accumulated losses) Total (Note 18) VND VND VND VND VND VND Balance, 1 January 2018 1,000,000,000,000 8,784,537,298,506 10,108,459,119 9,794,645,757,625 32,473,761,245 9,827,119,518,870 Increases - 523,452,254,737 - 523,452,254,737 - 523,452,254,737 Adjustment (*) - (789,204,896,608) - (789,204,896,608) - (789,204,896,608) Fund transfer - 1,085,445,183 - 1,085,445,183 (1,085,445,183) Other - (1,645,679,405) (2,206,918,040) (3,852,597,445) (2,782,969,911) (6,635,567,356) Transactions with owners 1,000,000,000,000 8,518,224,422,413 7,901,541,079 9,526,125,963,492 28,605,346,151 9,554,731,309,643 Profit for the year - 582,210,136 582,210,136 1,849,424,156 2,431,634,292 Balance, 31 December 2018 1,000,000,000,000 8,518,224,422,413 8,483,751,215 9,526,708,173,628 30,454,770,307 9,557,162,943,935 Balance, 1 January 2017 1,000,000,000,000 6,891,676,556,218 (926,892,258,986) 6,964,784,297,232 33,198,545,664 6,997,982,842,896 Increases in the year - 1,893,533,885,544 - 1,893,533,885,544 - 1,893,533,885,544 Decreases in the year - 2,507,273,759 2,507,273,759 - 2,507,273,759 Other decreases - (673,143,256) - (673,143,256) (2,507,273,759) (3,180,417,015) Transactions with owners 1,000,000,000,000 8,784,537,298,506 (924,384,985,227) 8,860,152,313,279 30,691,271,905 8,890,843,585,184 Profit for the year - 934,493,444,346 934,493,444,346 1,782,489,340 936,275,933,686 Balance, 31 December 2017 1,000,000,000,000 8,784,537,298,506 10,108,459,119 9,794,645,757,625 32,473,761,245 9,827,119,51 8,8 0 (*)Adjustment is to revert fund receipts from JICA to loan capital in accordance with the results of the State audit. The accompanying notes are an integral part of the consolidated financial statements 10 ___________________________________________hA C1_'_,, U Vietnam Expressway Corporation and its subsidiaries U 5 I Consolidated statement of cash flows for the year ended 31 December 2018 I 5 Year ended Year ended 31 December 2018 31 December 2017 VND VND Operating activities Profit before tax 3,841,203,309 937,810,808,776 Adjustments Depreciation and amortisation - net 54,922,926,957 435,383,774,706 Foreign exchange loss - net 1,623,715,702,447 367,788,194,771 Interest income and dividend (366,123,967,491) (205,865,904,148) Interest expenses - net 735,602,511,48 473,777,511,533 Operating profit before adjustments to working capital 2,051,958,376,706 2,008,894,385,638 Changes in trade and other receivables (67,019,742,625) (804,761,903,038) Changes in inventories (1,925,673,885) 2,676,013,215 Changes in trade and other payables 1,367,970,322,477 1,075,769,547,667 Corporate income tax paid (1,978,995,253) (1,534,875,090) Net cash flow from operating activities 3,349,004,287,420 2,281,043,168,392 Investing activities Purchase of property, plant and equipment (4,563,829,567,996) (6,499,189,342,304) Lending, purchase debt instruments of other entities (7,542,859,026,950) (6,247,000,000,000) Proceeds from withdrawals of investments 5,514,738,252,246 2,201,000,000,000 Interest and dividend received 301,592,816,404 127,829,570,815 Net cash flow used in investing activities (6,290,357,526,296) (10,417,359,771,489) Financial activities Proceeds of borrowings' principals 4,282,381,826,390 7,595,463,528,397 Repayments of borrowings' principals (1,356,721,336,099) (191,059,830,068) U Interest paid (428,604,920,363) (56,144,020,698) Net cash flow generated from financing activities 2,497,055,569,928 7,348,259,677,631 Net decrease in cash and cash equivalents (444,297,668,948) (788,056,925,466) Cash and cash equivalents at beginning of the year 12 944,554,477,396 1,733,234,998,310 Impact from foreign exchange differences 3,440,586,281 (623,595,448) Cash and cash equivalents at end of the year 12 503,697,394,734 944,554,477,396 T U B The accompanying notes are an integral part of the consolidated financial statements 11 I Vietnam Expressway Corporation and its subsidiaries a Notes to the consolidated financial statements 1. General information Vietnam Expressway Corporation, formerly known as the Vietnam Expressway Investment Development Company Limited, was established under Decision No. 3033/QD-BGTVT dated 6 October 2004 of the Minister of Ministry of Transport. Accordingly, the Company was an independent State-owned Company, under the Ministry of Transportation of Vietnam. From 7 July 2010, Vietnam Expressway Investment Development Company Limited has been approved to change its legal form from a state-owned company to be a limited liability company with one member and change its name to Vietnam Expressway Corporation in accordance with Decision No. 1666/QD - BGTVT dated 17 June 2010 issued by the Minister of Ministry of Transport. The Company received the first Business Registration Certificate No. 0101573511 issued by Hanoi Department of Planning and Investment on 7 July 2010, and subsequently received the latest seventh amended business registration certificate to change information of the legal representative and head office address on 21 November 2017. The Company's registered head office is located at 2 nd, 3d 4 th, 5th Floors, Tower A, Central Point Building, No 219 Trung Kinh Street,Yen Hoa Ward, Cau Giay District, Hanoi, Vietnam. The Company has dependent units which involves directly in the management of its projects: - Project Management of Southern expressways; - Project Management of Da Nang - Quang Ngai expressway; - Laboratory testing and quality control Center; - Research and Development Center of Vietnam expressway; and - Project Management of expressway of Northern provinces. The Company has the following subsidiaries and associate: Interest holding percentage 2018 2017 Subsidiaries Vietnam Expressway Services Engineering Joint Stock Company ("VECE") 51% 51% Vietnam Expressway Operation and Maintenance Limited Liability Company ("VECOM") 81.3% 81.3% Associate Vietnam Expressway Services Joint Stock Company ("VEC Services") 22.38% 22.38% U Detailed information of the Company's subsidiaries and associate are as follows: Company name Primary location Principal activities Vietnam Expressway Operation and Vuc Vong, Yen Bac commune, Duy Tien Provision of expressway management, Maintenance Company LLC district, Ha Nam province, Vietnam operation and maintenance services Vietnam Expressway Services No 07, 990 Street, neighborhood 4, Phu Huu Provision of expressway management, Engineering Joint Stock Company ward, 9 district, Ho Chi Minh. operation and maintenance services Vietnam Expressway Services Joint 5th floor, Mitec building, Lot E2, Cau Giay new Provision of construction consulting Stock Company urban area, Yen Hoa ward, Cau Giay district, services Hanoi. U 12 B Vietnam Expressway Corporation and its subsidiaries U 2. Statement of compliance with International Financial Reporting Standards (IFRS) The consolidated financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board (IASB), except for the recognition and measurement of long term borrowings from donors as described in Note 5.9 - Financial instruments. The Management's judgement on the departure from IFRS in relation to application of accounting policies for borrowings are disclosed in Note 6. The consolidated financial statements for the year ended 31 December 2018 (including comparative figures) were approved and authorised for issue by the Board of Directors on 28 June 2019 (see Note 29). 3. Basis of preparation of consolidated financial statements Basis of preparation of consolidated financial statements The statutory consolidated financial statements of the Company are prepared on historical cost basis and in accordance with Vietnamese Accounting Standards and System ("VAS"). The consolidated VAS financial statements are then converted to IFRS compliant for reporting to the World Bank. The consolidated financial statements are prepared on the basis of separate financial statements of the Parent company and separate financial statements of subsidiaries as described in Note 1 after elimination of internal balances and transactions. The preparation of consolidated financial statements under IFRS requires the use of accounting estimates and assumptions. Although the estimates are based on the best understanding of the Board of Directors for the events and current operating activities, the actual results can be different from the estimates. The items that have high level of complexity and judgment, or assumptions and estimates that impact materially to the consolidated financial statements are disclosed in Note 6 of this report. Subsidiaries Subsidiaries are entities that the Company has the power to govern the financial and operating policies so as to obtain benefits from their activities. Control right is determined through voting rights, usually presented by capital contribution percentage. Subsidiaries' financial statements are consolidated into the consolidated financial statements from the date when the Company acquired control until the date the Company loses its control over the subsidiaries. Subsidiaries' accounting policies are applied to be consistent with the Group's accounting policies. The financial statements of subsidiaries are consolidated in accordance with purchase method. A non-controlling interests represent the portion of a subsidiary's profit or loss and net assets that is not held by the Group. It is based upon the minority's share of post-acquisition fair values of the subsidiary's identifiable assets and liabilities except the case that the losses calculated for minority shareholders in subsidiaries exceed the share of minority shareholders in the capital of the subsidiaries. If losses in a subsidiary applicable to a minority interest exceed the minority interest in the subsidiary's equity, the excess is allocated to the majority interest except to the extent that the non-controlling entity has a binding obligation and is able to cover the losses. If then the subsidiary is profitable, the interest for the minority shareholders will be recognized in the consolidated statement of income until enough compensation are recovered for the losses which were previously recognised in the statement of income. Changes in share interest in subsidiaries which do not impact the control over the Group's subsidiaries will be recognised as a capital transaction. Associates Associates are entities in which the Group has significant influence but are neither subsidiaries nor joint ventures. Significant influence is the power to participate in the financial and operating policy decisions but not to control them. Investments in associates are recognized in the consolidated financial statements under the equity method. Under this method the investment is initially recorded at cost. Subsequently, the carrying amount of the investment is adjusted up or down in proportion to the Group's ownership in the profits or losses of the investee after the date of investment. The amount receive from the investee is recorded as a reduction to the carrying value of the investment. 13 Vietnam Expressway Corporation and its subsidiaries U The adjusted carrying amount is to be done when the Group's interests have changed due to changes in the equity of the investee. Elimination of inter-company transactions and balances All transactions, balances, and unrealised profit/loss between inter-companies are eliminated when preparing the Group's consolidated financial statements. Unrealised profit/loss arising from transactions with associates is also eliminated to the extent of the Group's interest in the associates. Consolidated financial statements of the Group are adjusted to ensure the consistency with the accounting policies applied in the Company. Operating results and other comprehensive income of subsidiaries/associates acquired or deposed during the year are recognised from the date of termination of control. 4. Changes in accounting policies 4.1 New and revised standards that are effective for annual periods beginning on or after 1 January 2018 The Group has not adopted any new standards or amendments that have a significant impact on the Group's results or financial position. IFRS 9 'Financial Instruments' The new standard introduces extensive changes to IAS 39's guidance on the classification and measurement of financial assets and introduces a new 'expected credit loss' model for the impairment of financial assets. When applying IFRS 9, the Group has selected the transition plan without retrospective adjustment of the previous accounting periods. Differences in the application of IFRS 9 related to classification, measurement and value reduction are recorded in retained earnings. IFRS 9 also includes regulations on the application of derivative accounting. However, this provision does not affect the consolidated financial statements of the Group because there are no derivative financial instruments. The application of IFRS 9 has no significant effect on the classification and presentation of financial assets and financial liabilities payable by the Group. C Comparison table for classification and measurement of financial assets and financial liabilities payable as at 31 December 2017 as follows: Financial assets Reclassification of measurement Book value as at 31 December 2017 Per lAS 39 Adjustment Per IFRS9 Per IAS39 Per IFRS9 VND VND VND Trade and other receivables Amortised cost Amortised cost 4,838,786,795,289 - 4,838,786,795,289 Cash and cash equivalent Aortised cost Amortised cost 944,554,477,396 - 944,554,477,396 5,783,341,272,685 - 5,783,341,272,685 The Group has applied IFRS 9 with the detailed accounting policies presented in Note 5. IFRS 15 'Revenue from Contracts with Customers' IFRS 15 presents new requirements for the recognition of revenue, replacing IAS 18 'Revenue', IAS 11 'Construction Contracts', and several revenue-related Interpretations. The new standard establishes a control-based revenue recognition model and provides additional guidance in many areas not covered in detail under existing IFRSs, including how to account for arrangements with multiple performance obligations, variable pricing, customer refund rights, supplier repurchase options, and other common complexities. The Group's management have assessed that no any significant impact of IFRS 15 on these consolidated financial statements. 14 Vietnam Expressway Corporation and its subsidiaries 4.2 Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group At the date of authorisation of these financial statements, certain new standards, and amendments to existing standards have been published by the IASB that are not yet effective, and have not been adopted early by the Group. Information on those expected to be relevant to the Group's financial statements is provided below. Management anticipates that all relevant pronouncements will be adopted in the Group's accounting policies for the first period beginning after the effective date of the pronouncement. New standards, interpretations and amendments not either adopted or listed below are not expected to have a material impact on the Group's financial statements. IFRS 16 'Leases' IFRS 16 will replace IAS 17 and three related Interpretations. It completes the IASB's long-running project to overhaul lease accounting. Leases will be recorded on the statement of financial position in the form of a right-of-use asset and a lease liability. IFRS 16 is effective from periods beginning on or after 1 January 2019. The Group's management have not yet assessed the impact of IFRS 15 on these consolidated financial statements. 5. Summary of accounting policies 5.1 Foreign currency translation Functional and presentation currency The Company used Vietnam Dong (VND) as functional currency and the consolidated financial statement are also presented in Vietnam Dong. Foreign currency transactions and balances Foreign currency transactions are translated into the functional currency of the Company, using the exchange rates prevailing at the dates of the transactions (spot exchange rate). Foreign exchange gains and losses resulting from the settlement of such transactions and from the re-measurement of monetary items denominated in foreign currency at year-end exchange rates are recognised in profit or loss. Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined. 5.2 Revenue Revenue of the Group mainly comes from the operation and collection of Expressway. Accordingly, the Group's revenue is recorded in five steps: 1. Determine contracts and customers 2. Determine performance obligations 3. Determine the transaction price 4. Allocating transaction prices for performance obligations 5. Recognize revenue when performance obligations are completed Revenue from toll fees is recognized when the customer uses the highway utilities and pays fees through purchasing highway tickets. Interest income is recognised in the statement of income on a time-proportion basis using the effective interest method. Dividend income is recognised in the statement of income when the right to receive dividends of Company is established. 5.3 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are capitalised during the period of time that is necessary to complete and prepare the asset for its intended use or sale. Other borrowing costs are expensed in the period in which they are incurred and reported in finance costs. 5 15 Vietnam Expressway Corporation and its subsidiaries U 5.4 Intangible fixed assets Intangible fixed assets including land use rights and software are recognized initially on the basis of historical cost includes costs directly attributable to bringing the asset to working condition for operation. Intangible fixed assets are then recognized based on cost less accumulated depreciation and impairment value of assets. Depreciation of intangible fixed assets is recognised on a straight-line basis to write down the cost less estimated residual value. The following useful lives are applied: Land use rights 50 years Software 3 years 5.5 Property, plant and equipment Property, plant and equipment are initially recognized at acquisition cost including any costs directly attributable to IN bringing the assets to the location and condition necessary for them to be capable of operating in the manner intended by the Group's management. Property, plant and equipment are subsequently measured at cost less accumulated depreciation and impairment losses. Depreciation For the expressways, the Group applied revenue-based depreciation method as guided in Circular No.147/2016 I TT-BTC dated 13 October 2016 of the Ministry of Finance and applied from 2016 financial year. Accordingly, depreciation expenses are calculated at a fixed rate based on the total investment of expressways on the total expected revenue for the entire period of the Group's operation and exploitation. In previous years, the time for expressway operation was estimated by the Group from 24 to 50 years. In 2018, the Group adjusted the estimated time of operation of expressways to 80 years as stipulated in Appendix No. 01 Circular 45/2018 / TT-BTC on 7 May 2018 on houses and construction works Level I. The Group has applied changes prospectively to the expressway operation time and with effectiveness in the fiscal year 2018. The impact of changes in the estimated operating time of expressways are as follows: Per last year's Per this year's estimation estimation Difference VND VND VND Depreciation for the year ended 31 December 2018 534,326,972,005 40,147,943,025 494,179,028,980 (Loss)/profit before tax (493,286,878,744) 892,150,236 (494,179,028,980) Property, plant and equipment - Net book value as at 31 December 2018 76,354,034,936,922 76,848,213,965,902 (494,179,028,98C Depreciation of other assets is recognised on a straight-line basis to write down the cost less estimated residual value. The following useful lives are applied: Buildings 50 years Machinery and equipment 5 - 15 years Motor vehicles 6 - 10 years Other office equipment 3 - 10 years Gains or losses arising on the disposal of property, plant and equipment are determined as the difference between the disposal proceeds and the carrying amount of the assets and are recognised in profit or loss within other income or other expenses. Construction in progress Cost of construction in progress comprises direct cost and indirect cost incurred related to the construction of expressways until the date that the expressways completed, handed over and ready to put in use. Costs incurred directly related to the acquisition, construction projects/works are recognised as costs of each specific construction project. The projects administration expenses are allocated to the cost of each construction project based on the rates determined and approved by the Group's Members' Council which is calculated based on the approved budget for each project. 16 Vietnam Expressway Corporation and its subsidiaries U U Construction costs are recognised based on the certificates of work completion and cost schedule that are agreed between the Group and its contractors and in line with the project budget. No depreciation is recorded until the construction and installation are complete at which time the related costs are transferred to fixed assets and until the asset is put into use. 5.6 Leases Operating leases Where the Group is a lessee, payments on operating lease agreements are recognised as an expense on a straight- line basis over the lease term. Associated costs, such as maintenance and insurance, are expensed as incurred. 5.7 Impairment of assets For impairment assessment purposes, assets are grouped at the lowest levels for which there are largely independent cash inflows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. U All individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's (or cash-generating unit's) carrying amount exceeds its recoverable amount, which is the higher of fair value less costs of disposal and value-in-use. To determine the value-in-use, management estimates expected future cash flows from each cash-generating unit and determines a suitable discount rate in order to calculate the present value of those cash flows. The data used for impairment testing procedures are directly linked to the Group's latest approved budget, adjusted as necessary to exclude the effects of future reorganisations and asset enhancements. Discount factors are determined individually for each cash-generating unit and reflect current market assessments of the time value of money and asset-specific risk factors. Impairment loss is charged pro rata to the assets in the cash-generating unit. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. An impairment loss is reversed if the asset's or cash-generating unit's recoverable amount exceeds its carrying amount. 5.8 Financial instruments Recognition and derecognition Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires. Classification and initial measurement of financial assets Except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable). Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories: * amortised cost; * fair value through profit or loss (FVTPL); * fair value through other comprehensive income (FVOCI). U In the periods presented the corporation does not have any financial assets categorised as FVTPL and FVOCI. The classification is determined by both: * the entity's business model for managing the financial asset; * the contractual cash flow characteristics of the financial asset. 1 17 U Vietnam Expressway Corporation and its subsidiaries U U All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within other expenses. Subsequent measurement of financial assets Financial assets are measured at amonised cost Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL): * they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows * the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents and most other receivables fall into this category of financial instruments. U Impairment of financial assets IFRS 9's impairment requirements use more forward-looking information to recognise expected credit losses - the expected credit loss (ECL) model'. U Recognition of credit losses is no longer dependent on the Company first identifying a credit loss event. Instead the Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument. In applying this forward-looking approach, a distinction is made between: * financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk ('Stage 1'); and * financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low ('Stage 2'). 'Stage 3' would cover financial assets that have objective evidence of impairment at the reporting date. '12-month expected credit losses' are recognised for the first category while 'lifetime expected credit losses' are recognised for the second category. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument. Trade and other receivables and contract assets The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. U Classification and measurement of financial liabilities The Group's financial liabilities include borrowings, trade and other payables. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. a Subsequently financial liabilities are measured at amortised cost using the effective interest method, except for derivatives and financial liabilities designated at FVTPL, that are carried subsequently at fair value with gains or losses recognised in profit or loss. 5 U 18 5 Vietnam Expressway Corporation and its subsidiaries U U All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within finance costs or finance income. Despite the above policy, due to certain consideration made by the Management as discussed in Note 6, the Group accounts for borrowings with interest rates below market rates obtained from donors (including the World Bank, Asian Development Bank and Bank of Japan International Cooperation) under Development Credit Agreements with the Government of Vietnam, at cost. 5.9 Inventories Inventory is accounted for using the perpetual method and calculated using weighted average method and valued at the lower of cost and net realizable value. Cost of finished goods is composed of material, direct labour and production overheads. Cost of raw material and tools and supplies consists of purchase and related costs. Net realizable value comprises estimated sales proceeds less selling expenses. A provision for decline is recorded where cost exceeds net realizable value. 5.10 Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand as well as short term highly liquid investments such as money market instruments and bank deposits with original maturity term of not more than three months. 5.11 Equity Charter capital Charter capital represents the contributed capital of the owner. Other components of equity - construction fund Construction capital represents the matching funds provided by the Ministry of Finance to finance for construction projects in accordance with the rate of counterpart fund contribution as set out in the development credit agreements. The amount contributed is recorded in the construction capital account under the owner's equity and will be transferred to charter capital upon finalisation of the construction projects. N Other funds Other funds include the balance of cumulative retained earnings as at 31 December 2018. Other funds are presented separately from charter capital for monitoring purposes. 5.12 Employee benefits Post-employment benefits Post-employment benefits are paid to retired employees of the Group by the Vietnam Social Insurance. The Group is required to contribute to these post-employment benefits by paying social insurance premium to the Social Insurance Agency at the rate of 17.5% based on the monthly basic salary in accordance with the Decree No 44/2017/ND-CP stipulated by the Government dated 14 April 2017 with effective date on 1 June 2017. The Company has no further obligation in pension contributions for employees. Unemployment benefits In accordance with Vietnamese regulations on Labour Code and the latest Decree No. 28/2015/ND-CP issued by the Government on 12 March 2015 with effective date from 1 January 2015 providing guidance on implementation of Law on Employment No. 38/2013/QH13 on unemployment insurance, the Group is obliged to pay unemployment insurance at 1% of its salary fund used for payment of unemployment insurance for insurance participants and deduct 1% of salary of each employee to simultaneously pay to the Unemployment Insurance Fund. 5.13 Income taxes Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods, that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in the statement of income. Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the financial statements with their respective tax 1 19 U Vietnam Expressway Corporation and its subsidiaries U bases. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be offset against future taxable income. Deferred tax assets and liabilities are calculated, without discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted at the balance sheet date. Most changes in deferred tax assets or liabilities are recognised as a component of tax expense in the statement of income. Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that is charged directly to equity are charged or credited directly to equity. 5.14 Related parties Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. Parties are considered to be related to the Group if: 1. directly or indirectly, a party controls, is controlled by, or is under common control with the Group; has an interest in the Company that gives it significant influence over the Group; or has joint control over the Group; 2. a party is a jointly-controlled entity; 3. a party is an associate; 4. a party is a member of the key management personnel of the Group; or 5. a party is a close family member of the above categories. 5.15 Provisions, contingent assets and contingent liabilities Provisions for warranties, legal disputes, onerous contracts or other claims are recognised when the Company has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of economic resources will be required from the Company and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. Restructuring provisions are recognised only if a detailed formal plan for the restructuring exists and management has either communicated the plan's main features to those affected or started implementation. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material. Any reimbursement that the Company is virtually certain to collect from a third party with respect to the obligation is recognised as a consolidated asset. However, this asset may not exceed the amount of the related provision. No liability is recognised if an outflow of economic resources as a result of present obligations is not probable. Such situations are disclosed as contingent liabilities unless the outflow of resources is remote. Provision for expressway overhaul costs Provision for expressway overhaul costs is recognised based on the annual business plans as approved by the Group's Members' Council. 6. Significant management judgment in applying accounting policies and estimation uncertainty When preparing the financial statements, the Board of Directors undertakes a number of judgments, estimates and assumptions about the recognition and measurement of assets, liabilities, income and expenses. 8 20 Vietnam Expressway Corporation and its subsidiaries B Significant management judgements Recognition and measurement of borrowings at cost The Group opted to apply historical cost accounting for real preferential interest rate borrowings from donors under the Development Credit agreements signed with the Government of Vietnam instead of amortised cost as required by IFRS 9. This departure from IFRS as determined by management is to ensure that the financial information is relevant and appropriate for the intended users, being the lenders, who are recording and monitoring credit information at cost. Besides, the borrowings were withdrawn several times during the year based on the disbursement progress resulting in difficulties in estimating the amortised costs of borrowings at the obtaining dates as required by IFRS. Non-application of IFRIC 12 - Service concession agreements on recognition and measurement of expressways In accordance with IFRIC 12 - Service concession arrangements, the Group, as operator, will not recognize expressways within the scope of IFRIC 12 as property, plant and equipment because the contractual service arrangement does not convey to it the right to control expressways. Instead, the Company will recognize an intangible asset, as its rights to collect toll fees from expressway users, for the consideration that it receives from the Government of Vietnam in exchange of expressway construction services. However, as at the date of this report, the Group has not been received any official approvals by the local authorities with regard to determination of the rights to control expressways during and after the toll fee collection periods to recover investment capitals. The Group's Management is also still in progress to clarify the financial policies and controls of expressways with authorized bodies to determine proper accounting treatments. Based on the Management's judgement, the Group has rights and controls over its developed expressways, therefore, these assets are out of scope of IFRIC 12. Accordingly, expressways are recognized as the Group's property, plant and equipment and depreciated on revenue-based method. Estimation uncertainty Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different. Useful lives of depreciable assets and expressways The Board of Directors reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. The useful lives of assets are presented in Note 5.4 and 5.5. Allocation of general administrative costs to construction projects General administrative expenses are allocated to construction projects on a pro-rata basis as approved by the Group's Management at the beginning of the year. Allocation criteria were based on the capital expenditure budget and planned activities for each projects. The actual approved allocation value is subject to review and approval when the construction work is completed which might differ from the budget allocation. Provision for overhaul of fixed assets The Group accrued the cost of overhaul highway sections in accordance with the annual approved production and business plan from the Members' Council of the Group. 2 S U S 3 U 8 21 U *WWWWWWWWWWWWmuuWWW aaa agem Nemamma Vietnam Expressway Corporation and its subsidiaries 7. Property, plant and equipment Expressways Buildings Machinery Vehicles Office equipment Construction in progress Other Total VND VND VND VND VND VND VND VND Cost 1 January 2018 56,388,570,424,044 104,792,789,313 19,881,462,952 47,506,952,735 2,368,298,373 17,064,111,156,886 418,596,201 73,627,649,680,504 Acquisitions - 11,725,956,749 553,000,000 515,545,455 83,000,000 5,736,292,115,006 - 5,749,169,617,210 Transferred from construction in progress 9,207,372,131,128 - - - - (9,207,372,131,128) - 31 December 2018 65,595,942,555,172 116,518,746,062 20,434,462,952 48,022,498,190 2,451,298,373 13,593,031,140,764 418,596,201 79,376,819,297,714 Accumulated depreciation 1 January 2018 (2,442,425,353,349) (2,843,840,530) (3,229,827,662) (23,485,373,544) (2,109,650,593) - (225,230,397) (2,474,319,276,075) Depreciation expense (40,147,943,026) (4,783,506,399) (4,666,298,224) (4,453,886,504) (135,414,002) - (99,007,582) (54,286,055,737) 31 December 2018 (2,482,573,296,375) (7,627,346,929) (7,896,125,886) (27,939,260,048) (2,245,064,595) - (324,237,979) (2,528,605,331,812) Net book value 31 December 2018 63,113,369,258,797 108,891,399,133 12,538,337,066 20,083,238,142 206,233,778 13,593,031,140,764 94,358,222 76,848,213,965,902 Cost 1 January 2017 45,688,870,038,930 28,989,340,494 19,881,462,952 44,814,663,645 2,337,297,446 19,431,087,462,536 496,141,450 65,216,476,407,453 Acquisitions - 72,443,521,629 - 2,692,289,090 35,363,636 8,335,915,098,696 87,000,000 8,411,173,273,051 Transferred from construction in progress 10,699,700,385,114 3,195,381,941 - - (4,362,709) (10,702,891,404,346) - 31 December 2017 56,388,570,424,044 104,628,244,064 19,881,462,952 47,506,952,735 2,368,298,373 17,064,111,156,886 583,141,450 73,627,649,680,504 Accumulated depreciation 1 January 2017 (2,009,786,916,396) (1,182,697,477) (2,539,934,871) (20,109,610,797) (1,800,406,573) - (131,962,405) (2,035,551,528,519) Depreciation expense (432,638,436,953) (1,661,143,053) (689,892,791) (3,375,762,747) (309,244,020) - (93,267,992) (438,767,747,556) 31 December 2017 (2,442,425,353,349) (2,843,840,530) (3,229,827,662) (23,485,373,544) (2,109,650,593) - (225,230,397) (2,474,319,276,075) Net book value 31 December 2017 53,946,145,070,695 101,784,403,534 16,651,635,290 24,021,579,191 258,647,780 17,064,111,156,886 357,911,053 71,153,330,404,429 22 _ _ _ _ _ _ _ _ _ _ _ _ _ _. ....... ; U Vietnam Expressway Corporation and its subsidiaries U U Construction in progress 31 December 2018 31 December 2017 VND VND Da Nang- Quang Ngai Expressway - 6,476,361,679,413 Ben Luc- Long Thanh Expressway 13,027,531,063,864 10,066,215,104,363 Ben Luc- Long Thanh Technical assistance Project 353,210,897,993 315,178,991,876 Others 212,289,178,907 206,355,381,234 13,593,031,140,764 17,064,111,156,886 8. Investment in associate 31 December 2018 31 December 2017 VND VND Opening balance 21,889,796,131 21,744,819,794 Profit shared from associate 1,112,024,725 1,444,976,337 Dividend received (1,400,000,000) (1,300,000,000) 21,601,820,856 21,889,796,131 9. Financial assets and liabilities The carrying amounts of financial assets and financial liabilities in each category are as follows: 9.1 Financial assets Amortised cost FVTPL FVOCI Total VND VND VND VND 31 December 2018 Short term financial assets Trade and other receivables 6,949,452,647,545 - - 6,949,452,647,545 Cash and cash equivalents 503,697,394,734 - - 503,697,394,734 7,453,150,042,279 - -7,453,150,042,279 31 December 2017 Short term financial assets Trade and other receivables 4,838,786,795,289 - - 4,838,786,795,289 Cash and cash equivalents 944,554,477,396 - - 944,554,477,396 5,783,341,272,685 - - 5,783,341,272,685 Trade and other receivables Accounts receivable are mainly term saving deposit, accrued interest income and other amounts receivable as presented in Note 11 - Trade receivables and other receivables. The carrying value of accounts receivable equivalent to the fair value due to be carried out under the usual terms. 9.2 Financial liabilities Other liabilities Other liabilities at FVTPL (Amortised cost) Total VND VND VND 31 December 2018 Short term borrowings - 12,750,959,398 12,750,959,398 Long term borrowings - 66,517,465,696,195 66,517,465,696,195 Trade and other payables - 19,608,193,499,358 19,608,193,499,358 - 86,138,410,154,951 86,138,410,154,951 31 December 2017 Short term borrowings - 16,839,280,168 16,839,280,168 Long term borrowings - 60,146,465,906,933 60,146,465,906,933 Trade and other payables - 18,772,841,197,742 18,772,841,197,742 - 78,936,146,384,843 78,936,146,384,843 23 Vietnam Expressway Corporation and its subsidiaries U U Long term borrowings Details of borrowings are presented in Note 14. Borrowings measured at cost with carrying value of VND66,517,465,696,195 (2017: VND60,146,465,906,933). Management estimated their fair value as at 31 December 2018 approximate the book values. Trade and other payables Trade and other payables are all short term and having normal trade terms, and their fair values are approximate to their book values. U 10. Current tax assets Current tax assets represent the deductible value added tax inputs which are waiting for tax refund procedures. B 11. Trade and other receivables 5 31 December 2018 31 December 2017 VND VND Financial assets Trade receivables 16,832,775,179 20,810,876,766 Other receivables 188,499,097,662 101,975,918,523 VAT has not had invoice yet 28,374,487,753 7,373,132,699 Accrued interest from bank deposits 150,258,148,629 84,603,630,555 Others 9,866,461,280 9,999,155,269 Short-term bank deposit (term of 6 months) 6,744,120,774,704 4,716,000,000,000 6,949,452,647,545 4,838,786,795,289 Non-financial assets Prepayments to contractors 11,941,467,121,640 11,945,350,558,232 18,890,919,769,185 16,784,137,353,521 12. Cash and cash equivalents 31 December 2018 31 December 2017 VND VND Cash on hand 2,642,677,160 2,365,810,885 Cash at bank 427,150,126,811 771,164,371,511 Cash in transits 33,124,500,000 31,024,295,000 Short-term deposits (term less than 3 months) 40,780,090,763 140,000,000,000 503,697,394,734 944,554,477,396 13. Provisions Provision balance represents accrual for expressway overhaul costs expected to be incurred in future related to Noi Bai - Lao Cai, Long Thanh - Dau Giay and Cau Gie - Ninh Binh expressway, detailed as below: 31 December 2018 31 December 2017 VND VND Noi Bai- Lao Cai Expressway 400,753,914,769 179,200,000,000 Long Thanh - Dau Giay Expressway 242,000,000,000 97,200,000,000 Cau Gie- Ninh Binh Expressway 167,000,000,000 66,800,000,000 809,753,914,769 343,200,000,000 2 g 24 U Vietnam Expressway Corporation and its subsidiaries U U 14. Long-term borrowings 31 December 2018 31 December 2017 VND VND Borrowing from banks Asian Development Bank (OCR fund) 30,790,916,146,032 29,672,975,480,669 Japan Bank for International Cooperation (JICA) 28,156,452,301,746 25,058,909,802,330 World Bank - International Development Association (IDA) 2,012,008,455,700 761,915,124,473 World Bank - International Bank of Reconstruction and Development 3,192,599,604,275 2,207,686,135,577 Corporate bonds 900,000,000,000 900,000,000,000 65,051,976,507,753 58,601,486,543,049 Interest and fee added to principals Asian Development Bank (OCR fund) 453,246,972,950 782,047,521,003 Japan Bank for International Cooperation (JICA) 803,197,991,978 634,536,232,133 World Bank - International Development Association (IDA) 87,109,446,181 65,200,694,404 World Bank - International Bank of Reconstruction and Development 121,934,777,333 63,194,916,344 1,465,489,188,442 1,544,979,363,884 66,617,465,696,195 60,146,465,906,933 U U U B U B B B I B 2 I Vietnam Expressway Corporation and its subsidiaries Detailed unsecured borrowings from Asian Development Bank: Loan Agreement Original currency (USD) Balance (VND) Interest Payment schedule Expressway Ben Luc - Long Thanh Project, 21,278,007 494,713,665,540 LIBOR for the common ordinary capital loan quoted by 30 years, including grace Loan agreement No. 3391- VIE dated 23/11/2017 ADB. Commitment fee is 0.15% per annum. Re-lending fee period of 7 years is 0.25% per annum Expressway NoiBai- Lao CaiProject, 187,268,453 4,354,927,873,120 LIBOR for the OCR loan. Commitment fee is 0.15% per 32 years. Loan agreement No. 2392-VIE dated 11/12/2008 annum. Re-lending fee is 0.25% per annum. Expressway Noi Bai - Lao Ca/Project, 756,528,649 17,593,073,730,402 LIBOR for the OCR loan quoted by ADB on 1/7/2011. Semi-annually from 1/6/2015 Loan agreement No. 2391-VIE (SF) dated 26/09/2008 from Commitment fee is 0.15% per annum, Re-lending fee is to 1/12/2034 ADB with the credit limit equivalent to USD896 million 0.25% per annum. Technical assistance Long Thanh- Dau Giay Project, 9,583,227 222,714,193,388 LIBOR for the OCR loan quoted by ADB. Commitment fee Semi-annually in 19 years, 5 Loan agreement No. 2374-VIE dated 03/7/2008 is 0.15% per annum. years of grace period. Expressway Long Thanh - Dau Giay Project, 160,311,760 3,725,645,298,682 LIBOR for the common ordinary capital loan quoted by Semi-annually from Loan agreement No. 2451-VIE dated 12/12/2008 from ADB ADB. Commitment fee is 0.15% per annum, Re-lending fee 15/11/2013 to 15/5/2033 with the credit limit equivalent to SDR16,616,000 is 0.25% per annum. Expressway Ben Luc - Long Thanh Project, 155,693,366 3,618,313,835,601 LIBOR for the common ordinary capital loan quoted by Semi-annually from 1/6/2018 Loan agreement No. 2730-VIE dated 1/12/2012 from ADB ADB, Commitment fee is 0.15% per annum to 1/12/2037 with the credit limit equivalent to USD350,000,000 Expressway Ha Noi- Lang Son and Technical assistance 15,348,108 356,920,256,424 Interest rate is 3.15% per annum, Re-lending fee is 0.25% Semi-annually from 1/4/2017 Ben Luc- Long Thanh Project., per annum. to 1/10/2033 Loan agreement No. 2460-VIE (SF) dated 12/12/2008 Expressway Noi Bai- Lao Cai Project, 18,258,753 424,607,292,875 LIBOR for the common ordinary capital loan quoted by 23 years. Loan agreement No. 3207-VIE (SF) dated 04/5/2015 ADB on 1/7/2011, Commitment fee is 0.15% per annum, Re-lending fee is 0.25% per annum. 1,324,270,323 30,790,916,146,032 Detailed unsecured borrowings from World Bank: Loan Agreement Original currency (USD) Balance (VND) Interest Payment schedule International Development Association 86,500,793 2,012,008,455,700 Service fee is 0.75% per annum, interest rate is 3.2% per 35 years, including grace (IDA) - Loan agreement No. 4941 annum, re-lending fee is 0.25% per annum. period of 10 years. International Bank of Reconstruction and Development 137,257,077 3,192,599,604,275 LIBOR. Commitment fee is 0.15% per annum, Re-lending 25 years, including grace (IBRD) - Loan agreement No. 80490 fee is 0.25% per annum. period of 10 years. 223,757,870 5,204,608,059,975 26 Vietnam Expressway Corporation and its subsidiaries Detailed loans from JBIC Original currency Balance, Loans (PY) VND Interest Payment Ben Luc- Long Thanh 0.2%/year with original loans I, 0.01% with original loans II; Every 6 months to 20/11/2051 - Loan agreement no VN1 1-P3 dated 02/11/2011 12,802,487,779 2,716,303,832,070 commitment fee 0.1%/year. -Loan agreement no VN14-P3 dated 31/3/2015 18,450,697,834 3,914,684,559,440 0.1%/ year with original loans I, 0.01% year with original loans II. Every 6 months to 20/3/2055 Da Nang- Quang Ngai 1.4%/ year with original loans 1, 0.01% year with original loans II. Every 6 months to 20/3/2044 - Loan agreement no VN13-P4 dated 18/3/2014 27,352,213,530 5,797,028,135,470 -Loan agreement no VN10-P8 datedl5/6/2011 15,566,513,323 3,299,166,833,677 1.2%/ year with original loans 1, 0.01 year with original loans II; Every 6 months to 20/6/2041 commitment fee 0,1 %year. -Loan agreement no VN15-P2 dated3l/3/2016 9,811,990,566 2,079,553,280,558 1.4%/ year with original loans 1, 0.01% year with original loans II. Every 6 months to 20/3/2046 Ho Chi Minh- Long Thanh- Dau Giay 1.2%/year with original loans 1, 0.01% year with original loans II; Every 6 months to 20/6/2041 - Loan agreement no VN10-P7 datedl 5/6/2011 23,549,546,491 4,996,507,278,995 commitment fee 0.1%/year. -Loan agreement no VN13-P5 datedl8/3/2014 8,998,254,737 1,909,159,707,549 1.4%/year with original loans I, 0.01% year with original loans il; Every 6 months to 20/3/2044 commitment fee 0.2%/year -Loan agreement no VNXV1 dated 3/2008 16,232,495,989 3,444,048,673,986 1.2%/ year with original loans I, 0.01%year with original loans II; Every 6 months to, item I until commitment fee 0.1%/year. 20/3/2048, item II until 20/3/2038 132,764,200,249 28,156,452,301,745 Corporate bonds issuance detailed: Phase Amount Interest rate Quantity Par Value Duration Guarantors/ tenders for bond issuance VND (%) (Bond) (VND) I Cau Gie- Ninh Binh Expressway 400,000,000,000 1. Hanoi Housing Commercial Joint Stock Bank - Securities Corporation Co Ltd- tender Phase 1 400,000,000,000 9.00% 400,000 1,000,000 15 years II Noi Bai- Lao Cai Expressway 500,000,000,000 1 Vietinbank- Chuong Duong Branch Phase 1 100,000,000,000 16.00% 15 years 2 . Agribank Vietnam Phase 1 400,000,000,000 16.00% 15 years Total 900,000,000,000 27 Vietnam Expressway Corporation and its subsidiaries 15. Trade and other payables 31 December 2018 31 December 2017 VND VND Payable to construction contractors 11,425,927,535,745 10,536,497,223,943 Accrual for bond interest payables (Note 14) 30,666,666,667 232,018,022,454 Accural for maintenance & opreration expense 14,774,718,696 123,602,454,640 Accrual for interest payables 152,124,849,049 Bond and bond interest payable to the State (*) 7,926,707,659,020 7,834,368,400,000 Re-lending fee- BIDV branch 1 21,115,858,875 29,320,115,360 Others 36,876,211,306 17,034,981,345 19,608,193,499,358 18,772,841,197,742 (*) The balance is consisted of the bond principal and interest paid on behalf by the State which are recorded as payable under adjustments by the State Audit. 16. Charter capital Registered Contributed Amount to be charter capital charter capital contributed VND VND VND The Government of Vietnam 1,018,793,632,233 1,000,000,000,000 18,793,632,233 17. Other components of equity Fund for asset Construction capitalisation capital Other funds Total VND VND VND VND Balance, 1 January 2018 569,170,900 8,776,544,712,886 7,423,414,720 8,784,537,298,506 Additions - 523,452,254,737 - 523,452,254,737 Adjustment (*) - (789,204,896,608) - (789,204,896,608) Decreases (560,234,222) - (560,234,222) T Balance, 31 December 2018 8,936,678 8,510,792,071,015 7,423,414,720 8,518,224,422,413 Balance, 1 January 2017 1,242,314,156 6,883,010,827,342 7,423,414,720 6,891,676,556,218 Additions - 1,893,533,885,544 - 1,893,533,885,544 Decreases (673,143,256) - (673,143,256) Balance, 31 December 2017 569,170,900 8,776,544,712,886 7,423,414,720 8,784,537,298,506 (*) Adjustment is to revert fund receipts from JICA to loan capital in accordance with the results of the State audit. 18. Non-controlling interests 31 December 2018 31 December 2017 VND VND Paid in capital 26,510,920,000 26,510,920,000 Retained earnings 3,943,850,307 5,962,841,245 30,454,770,307 32,473,761,245 28 � � т � й N ш о °O т io т со м м ш с� � р; м м м и.л ° м ш а°Oо м й г oNO о� � ~ � ш� о � м � ш а � v м о�O с� пмi ш rn� rn о v й м о�Oо м й ш N fD м М tD О е� а- � � м � м tD г- о v� 7 � 1`- СиV� � �� � N ш о й о �� � � cv ш ш � = г м м rn и � ш � t� й й � � й � о й 0 � C° о� °о_ м й°м ch й с° v� r оо о�_ N N 6� м й CV CV О и � и и т м пNi м ro�° м й и rn г� � �O v о м v оо � rn � � .... � � о � � о � ^ � о о � г ° ° й с�гv м т �- ш М г� � со и v � °' о о оио амо °г�' й ш � N � � м м и � �r �r w и � � о � `N о v м� о о� м �О м, N 41 м � °' и и �' � ` � м N Z v т � � � Т р и � � и с0 N М О �= (О °' с- � (> > � � (О � е� Омi N Cr0 О � N N и cv й г� м и� т .- t- и со и со м и N � _ о� г� м г� и оо � C° �° ш о ш � , й °' ° � � � r � �' м N ш й N ш � � r CO `� ` е�- � си-> м � °_ °_ V � �- си °° � о � � �- О J � � �j г Г , � Г й�'°т й cNV й� � � м <- и cv � т � � мi � �о v � м ,v � -� сд и о о�о м�r м о�° т � � �° N � о �°- Z � � N` �� м поi о r и � � � `- N � . � о � сп � � °� о , , �� , -.-.� Г � р с Z � � г� ш м о г� � й � и �р � - о и v т cv о v � -� N пNi пi сб сб .� й с� ° � r � т т ш о cv оо °, �� о г � �� ��м �� п i v v й vi со oi со и � й �- ш_ v_ v_ �� � v v � cv � и � о о `� С �" � и Ш � i., � N а С- "i и у и т � - � v � о � т � о � .� � � � `' ш � N о � � и о � т с с � т = � U о гТс � N и и го`о ш ш� � � а� й � аиi ��.� � Е о о� Q, °- о � и � _ с_� � д � х ш �, > ° Q о � _ � � ш � Е N м ° Z и х �<ц � й� с о с2 ш � ш и > �..�. ш � ш � и°� � т°-� ш с�' 4� ia � и � v ar 3°с' �° ° с й 4 о т ш xQ � �' Е с 7 и � � � w О С� � � Ш й гz О т ш с и ш � т о � � � � � с_° � С L Ш � 'о й � Ш о� -с L° ы т о � > � �� ш� с� О� О U ¢ F°- а � .! � Wassommuman =mamas a ==mason mown snows Vietnam Expressway Corporation and its subsidiaries Cau Gie- Ninh Binh Noi Bai- Lao Cai Long Thanh- Dau Giay Da Nang- Quang Ngai Others Total VND VND VND VND VND VND Year ended 31 December 2017 Revenue Expressway toll fee 619,013,240,906 1,144,316,114,630 941,520,989,869 35,911,409,089 - 2,740,761,754,494 Rendering services - 19,820,722,318 19,820,722,318 Construction services - 8,192,407,083 8,192,407,083 Other income - 1,487,080,247 1,487,080,247 Total income 619,013,240,906 1,144,316,114,630 941,520,989,869 35,911,409,089 29,500,209,648 2,770,261,964,142 Operating expenses Cost of sales (73,406,490,954) (227,895,979,465) (351,325,532,932) (13,778,716,173) (470,533,708,977) (1,136,940,428,501) Operation, maintenance (40,685,116,945) (122,941,658,903) (57,903,531,326) (6,922,239,253) 4,640,304,999 (223,812,241,428) Construction expense (6,285,080,147) (6,285,080,147) Materials (1,770,711,965) (1,181,798,894) (1,545,844,742) (33,309,195) (4,531,664,7 5) Depreciation expense (30,950,662,044) (103,772,521,668) (291,876,156,864) (6,823,167,725) (433,422,608,301) Expressway overhaul - (468,888,933,829) (468,888,933,829) Administrative expense - (62,274,424,119) (62,274,424,119) Total operating expense (73,406,490,954) (227,895,979,465) (351,325,532,932) (13,778,716,173) (532,808,133,096) (1,199,214,852,620) Profitiloss from operating 545,606,749,952 916,420,135,165 590,195,456,937 22,132,69g,916___(503,307,923,448) 1,571,047,111,522 30 U Vietnam Expressway Corporation and its subsidiaries K 20. Financial income Year ended Year ended 31 December 2018 31 December 2017 VND VND Deposit interest 366,123,967,491 204,551,093,036 Gain of foreign exchange gains 19,238,453,204 4,297,865,408 385,362,420,695 208,848,958,444 21. Financial expenses Yearended Year ended 31 December 2018 31 December 2017 VND VND Bonds interest 116,000,000,000 116,000,000,000 Loan interest, commitment fee 619,602,511,484 359,741,322,756 Realised foreign exchange loss 528,246,932,388 Unrealised foreign exchange loss 1,623,715,702,447 367,788,194,771 Others 270,785,968 720,000 2,887,835,932,287 843,530,237,527 22. Income tax 22.1 Current income tax The Parent company is entitled to corporate income tax exemption for the first 2 years 2006 and 2007 and to a reduction of income tax equivalent to 50% of the applicable tax rate in the following 3 years. Thereafter, the Parent Company is liable to corporate income tax at the rate of 20% of its taxable income for the period of 10 years since the first year of having taxable income. The subsidiaries are liable to corporate income tax at the rate of 20%. A reconciliation between accounting loss and tax loss is presented as follows: Year ended Year ended 31 December 2018 31 December 2017 VND VND Accounting profit 3,841,203,309 937,810,808,776 Adjustment: Increase of: 4,318,666,499 750,515,644 Loss from Parent company 4,179,725,363 - Others 138,941,136 750,515,644 Consolidation adjustments (1,112,024,725) (1,444,976,337) Taxable income before loss utilisation 7,047,845,083 937,116,348,083 Tax loss carried forward from previous years - (929,569,637,402) Taxable income of subsidiaries 7,047,845,083 7,546,710,681 CIT expense for the current year 1,409,569,017 1,509,342,136 Adjustments 25,532,954 Total CIT expense 1,409,569,017 1,534,875,090 The determination of the first taxable profit year and calculation of CIT is subject to the review and approval of the local tax authorities. 22.2 Deferred tax No deferred tax asset is recorded in the accompanying financial statements for the above tax losses as it is not probable that the Group will have sufficient future taxable income to utilise the tax losses before their expiry. U Vietnam Expressway Corporation and its subsidiaries 23. Non-cash transactions Non-cash transaction incurred during the year which impacted to the statement of cash flows are presented as follows: Year ended Year ended Transactions 31 December 2018 31 December 2017 VND VND Counterpart fund for site clearance activities capitalised as cost of property, plant and equipment 523,452,254,737 1,893,533,885,544 24. Related parties balance and transactions During the year, the following significant transactions with related parties were recorded: Year ended Year ended Related parties Relation Nature of transaction 31 December 2018 31 December 2017 VND VND U VEC Services Associate Operation and maintenance costs of Noi Bai - Lao Cai toll station (29,810,666,454) (57,946,848,409) Dividend received 1,400,000,000 1,300,000,000 As at 31 December 2018, the following balances were outstanding with related parties: Related parties Relation Nature Receivables Payables VND VND VEC Services Associate Trade accounts payable As at 31 December 2017, the following balances were outstanding with related parties: Related parties Relation Nature Receivables Payables VND VND VEC Services Associate Trade accounts payable - 16,147,904,368 25. Management's remuneration During the year, members of the Board of Directors received total remuneration as follows: Yearended Yearended 31 December 2018 31 December 2017 VND VND Remuneration 3,394,799,999 4,198,206,523 26. Risk management objectives and policies The Group is exposed to various risks in relation to financial instruments. The Group's financial assets and liabilities by category are summarised in Note 9. The main types of risks are market risk, credit risk and liquidity risk. The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write options. The most significant financial risks to which the Group is exposed are described below. 26.1 Market risk The Group is exposed to market risk through its use of financial instruments and specifically to currency risk and interest rate risk which result from both its investing and operating activities. Foreign currency sensitivity Foreign currency risk arises from payable to contractors and borrowings denominated in foreign currencies. The Group is exposed to risk of changes in foreign currency exchange rates related to operating activities denominated in currencies other than Vietnam dong. 3 5 32 U Vietnam Expressway Corporation and its subsidiaries Foreign currency denominated financial assets and liabilities, translated into VND at the closing rate, are as follows. 31 December 2018 31 December 2017 VND Equivalent VND Equivalent JPY USD JPY USD Financial assets - 319,623,828,453 - 681,885,000,797 Financial liabilities Short-term exposure - 319,623,828,453 - 681,885,000,797 Financial assets Financial liabilities (27,989,348,696,416) (35,968,435,068,126) (25,721,610,737,579) (33,567,280,523,864) Long-term exposure (27,989,348,696,416) (35,968,435,068,126) (25,721,610,737,579) (33,567,280,523,864) The following table illustrates the sensitivity of the net result for the year and equity in regards to the Group's financial assets and financial liabilities and the US Dollar/ VND exchange rate. It assumes a +/-2% change of the VND/USD exchange rate for the year ended 31 December 2018 (2017: 1%) and a +1-4% of the JPY/USD exchange rate (2017: 3%). Both of these percentages have been determined based on the average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on the Group's foreign currency financial instruments held at each balance sheet date. If the USD had weakened against the VND by 2% (2017: 1%) and weakened against JPY by 4% respectively (2017:3%) respectively then this would have had the following impacts: Year ended Year ended 31 December 2018 31 December 2017 VND VND Net result for the year (1,821,686,492,744) (1,096,510,143,806) Equity (1,821,686,492,744) (1,096,510,143,806) If the VND had strengthened against the US Dollar by 2% (2017: 1%) and JPY by 4% ( 2017: 3%) then this would have had adverse impact, calculated for each case with a value equivalent to the value above, assuming other factors unchanged. Interest rate sensitivity Interest rate risk is the risk that fair value or future cash flows of a financial instrument changes due to changes in market interest rate. At 31 December 2018, the Group had loan payable was VND32,890,870,202,311 with fixed rates and other loans of VND33,626,595,493,883 with floating rates (31 December 2017: VND26,186,879,021,757 with fixed rates and VND31,514,607,521,292 with floating rates). The impact of interest rate risk related to the fair value of financial instruments arises primarily from fixed interest rate loans, however, the Group did not revaluate any financial instrument according to fair value so the changes in interest rate did not affect fair value of financial instrument on financial statement of the Group. The Group did not present the analysis of impact of foreign currency fluctuation to the operating results and owner's equity as the impact was insignificant. 26.2 Credit risk The Group's exposure to credit risk is limited to the carrying amount of the financial assets recognised at the balance sheet date, as summarised below: 31 December 2018 31 December 2017 VND VND Classes of financial assets - carrying amounts Cash and cash equivalents 503,697,394,734 944,554,477,396 Trade and other receivables 6,949,452,647,545 4,838,786,795,289 7,453,150,042,279 5,783,341,272,685 I3 I Vietnam Expressway Corporation and its subsidiaries Given the fact that most receivables were attributable to prepayments to contracts and land clearance units, the Group's Management believed that there was no credit risk for operating activities. The credit risk for liquid funds is considered negligible, since the counterparties are reputable banks. 26.3 Liquidity risk The Group manages the payment needs for each activity: * For investing activities, the payment for construction contractors is made in accordance the payment schedule by requesting for counterpart funds from the State budget and loans from donors. Therefore, the Board of Directors has not established procedures to control because liquidity risk is determined as low. * For operating activities, the Group manages payment for operating expenses using receipts from its operation. Payment by cash is monitored by several different time intervals. As at 31 December 2018, the Group's liabilities have contractual maturities which are summarised below: Current Non-current Within 6 months 6 to 12 months I to 5 years Over 5 years VND VND VND VND 1 31 December 2018 Short-term borrowings - 12,750,959,398 Long-term borrowings - - - 66,517,465,696,195 Trade and other Payabl,s 19,608,193,499,358 19,608,193,499,358 12,750,959,398 - 66,517,465,696,195 31 December2017 Short-term borrowings - 16,839,280,168 Long-term borrowings - 60,146,465,906,933 Trade and other Payables 18,772,841,197,742 18,772,841,197,742 16,839,280,168 - 60,146,465,906,933 27. Capital management policies and procedure The Group's capital management objectives are to ensure the Group effectively use loans and State budget for construction of expressway. The Group also takes responsibility in paying back the loans to the donors as schedule. Capital for the reporting periods under review is summarized as follows: 31 December 2018 31 December 2017 VND VND Total equity 9,557,162,943,935 9,827,119,518,870 Cash and cash equivalents (503,697,394,734) (944,554,477,396) Capital 9,053,465,549,201 8,882,565,041,474 Total equity 9,557,162,943,935 9,827,119,518,870 Borrowings 66,517,465,696,195 60,146,465,906,933 Overall financing 76,074,628,640,130 69,973,585,425,803 Capital overall financing 0,12 0,13 28. The events occurring after the fiscal year-end date No significant events have occurred since the reporting date which would impact on the consolidated financial position of the Group as disclosed in the consolidated financial position as at 31 December 2018 or on the result of its operation and its cash flows for the year then ended. * $4 K Vietnam Expressway Corporation and its subsidiaries I U * 29. Authorisation of consolidated financial statements The consolidated financial statements were authorised for issuance by the Board of Directors on 28 June 2019. * On behalf of the Board of Directors Trn a TmNguyen Thi Minh Thoa Genera Oetor Deputy Finance and Accounting Department K U K