Deloitte U U W U U MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION MANAGEMENT PROJECT Financing Agreement No. 5175-VN AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT LETTER For the year ended 31 December 2017 208US U U U MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION MANAGEMENT PROJECT Financing Agreement No. 5175-VN TABLE OF CONTENTS CONTENT PAGE(S) PART I CONSOLIDATED FINANCIAL STATEMENTS Statement of the Project Management Unit 2 Independent Auditors' Report 3 - 5 Consolidated Balance sheet 6 Consolidated Statement of Income and Expenditures 7 Statements of Designated Accounts 8-10 Statements of Withdrawals 11-13 Notes to the Consolidated Financial Statements 14 - 21 PART II REPORT OF INDEPENDENT AUDITORS ON INTERNAL 22 CONTROL PART III INDEPENDENT ASSURANCE REPORT ON COMPLIANCE 23 PARTIV MANAGEMENT LETTER 24-27 II II II II II PART I * FINANCIAL STATEMENTS U 11 II II/ II U U U 11 UI II II M MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION MANAGEMENT PROJECT Financing Agreement No. 5175-VN STATEMENT OF THE PROJECT MANAGEMENT UNIT The Project Management Unit of Vietnam Industrial Pollution Management Project (the "Management") presents this report together with the consolidated financial statements of Vietnam Industrial Pollution Management Project - Financing Agreement No. 5175-VN (the "Project") for the year ended 31 December 2017. The Project Management Unit The members of the Project Management Unit of the Project who held office during the year and to the date of this report are as follows: Mr. Tran Duy Dong Director Ms. Tran Thi Minh Hien Chief Accountant The Project Management Units' Statement of Responsibility The Project Management Unit is responsible for preparing the consolidated financial statements, which comprise the consolidated balance sheet as at 31 December 2017, the consolidated statement of income and expenditures, statements of designated accounts, statements of withdrawals for the year then ended and the notes to the consolidated financial statements, including a summary of significant accounting policies, which give a true and fair view of the financial position of the Project as at 31 December 2017 as well as its income and expenditures for the year then ended, in accordance with the accounting convention and the accounting policies set out in Note 2 and Note 3 of the Notes to the consolidated financial statements and the covenants contained in Financing Agreement No.5175-VN. In preparing these consolidated financial statements, the Project Management Unit is required to: * Select suitable accounting policies and then apply them consistently; * Make judgments and estimates that are reasonable and prudent; * State whether applicable accounting principles have been followed, subject to any material departures disclosed and explained in the consolidated financial statements; * Prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Project will continue in operation; and * Design and maintain effective internal control over compliance with requirements that could have a direct and material financial effect on the consolidated financial statements as well as over financial reporting for the purpose of properly preparing and presenting the consolidated financial statements so as to minimise errors and frauds; and take responsibility for its assertions as to the effectiveness of such internal control. The Project Management Unit is responsible for ensuring that proper accounting records are kept, which disclose, with reasonable accuracy at any time, the financial position of the Project and that the consolidated financial statements are prepared in accordance with the accounting policies set out in Note 2 and Note 3 of the Notes to the consolidated financial statements. The Project Management Unit is responsible for using the Project's funds as intended for the Project and for complying with Financing Agreement No. 5175-VN as well as laws and regulations applicable to the Project. The Project Management Unit is also responsible for safeguarding the assets of the Project and hence for taking reasonable steps for the prevention and detection of frauds and other irregularities. The Project Management Unit confirms that they have complied with the above requirements in preparing these consolidated financial statements. For and on behalf of the Project Management Unit, Tran Duy Dong Director Hanoi, 27 June 2018 2 Deloitte Vietnam Company Ltd. 15thFloor, Vinaconex Tower, WD eIo ite 34 Lang Ha Street, Lang Ha Ward, Dong Da District, Hanoi, Vietnam Tel :+84 24 6288 3568 Fax:+84 24 6288 5678 No.: /VN1A-HN-BC Website: www.deloitte.com/vn INDEPENDENT AUDITORS' REPORT To: The Project Management Unit of Vietnam Industrial Pollution Management Project Qualified Opinion We have audited the consolidated financial statements of Vietnam Industrial Pollution Management Project (the "Project"), which comprise the consolidated balance sheet as at 31 December 2017, the consolidated statement of income and expenditures, statements of designated accounts, statements of withdrawals for the year then ended, and the notes to the consolidated financial statements, including a summary of significant accounting policies. In our opinion: * Except for the possible effects of the matter described in the "Basis for Qualifiled Opinion" section of our report, the accompanying consolidated financial statements give a true and fair view of the financial position of the Project as at 31 December 2017, and of its income and expenditures for the year then ended in accordance with the accounting convention and the accounting policies set out in Note 2 and Note 3 of the Notes to the consolidated financial statements. * The statements of designated accounts give a true and fair view of the balances of the designated accounts as at 31 December 2017 and the Project's receipts and disbursements via the designated accounts for the year then ended in accordance with the relevant covenants of Financing Agreement No. 5175-VN and prevailing relevant regulations established by the World Bank. * The withdrawal applications were adequately reconciled to the statements of expenditures (SOEs) prepared by the Project Management Unit for the year ended 31 December 2017 and those SOEs were adequately supported. Basis for Qualified Opinion As presented in Note 11 of the Notes to consolidated financial statements, the Project's Component A 1 implementing expenditures exclude an amount of approximately VND 1.615 billion incurred in 2017 but reported for 2018. Such recognition is not in accordance with the Project's accounting policies as set out in Note 3 to the Notes to the consolidated financial statements. Accordingly, had the Project Management Unit duly recognized the above amount, the Project expenditures reported in the consolidated statement of income and expenditures for 2017 would have increased by approximately VND 1.615 billion; and in the balance sheet as at 31 December 2017, the payables to suppliers would have increased by approximately VND 898 million and the advances would have decreased by approximately VND 717 million. 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 Project in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements, 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. Emphasis of Matter - Basis of Accounting We draw attention to Note 2 and Note 3 of the Notes to the consolidated financial statements, which describe the accounting convention and the summary of the significant accounting policies. The consolidated financial statements are prepared in accordance with the accounting convention and the accounting policies set out in Note 2 and Note 3 of the Notes to the consolidated financial statements and the requirements of the World Bank. As a result, the consolidated financial statements may not be suitable for another purpose. Our opinion is not modified in respect of this matter. Deloitte refers to one or more of Deloitte Touche Tohmatsu Ltd., a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as "Deloitte Global") does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms. 3 W = Deloitte INDEPENDENT AUDITORS' REPORT (Continued) Responsibilities of Management and Those Charged with Governance for the consolidated Financial Statements Management is responsible for the preparation of the consolidated financial statements in accordance with the accounting convention and the accounting policies set out in Note 2 and Note 3 of the Notes to the consolidated financial statements, 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 Project's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless management either intends to liquidate the Project, or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Project'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 auditors' report that inculdes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (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 consolidated financial statements. 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. * 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 Project's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Project to cease to continue as a going concern. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 4 W W W 4 W * Deloitte INDEPENDENT AUDITORS' REPORT (Continued) Auditors' Responsibilities for the Audit of the Financial Statements (Continued) We communicate with those charged with governance and the Project Management Unit, 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. Dang Chi Dung Nguyen Luong Tam Deputy General Director Auditor Audit Practising Registration Certificate Audit Practising Registration Certificate No. 0030-2018-001-1 No. 2303-2018-001-1 DELOITTE VIETNAM COMPANY LIMITED 27 June 2018 Hanoi, S.R. Vietnam H5 MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION Consolidated financial statements MANAGEMENT PROJECT For the year ended Financing Agreement No. 5175-VN 31 December 2017 CONSOLIDATED BALANCE SHEET As at 31 December 2017 Notes Closing balance Opening balance VND VND ASSETS Current assets Cash 5 20,673,329,882 33,197,799,863 Other receivables 6 107,002,368 107,002,368 Advances 7 4,544,188,135 3,205,585,000 Total assets 25,324,520,385 36,510,387,231 LIABILITIES Current liabilities Payables to suppliers 8 2,239,293,800 87,000,000 Taxes payable 19,095,450 2,717,917 Total liabilities 2,258,389,250 89,717,917 NET ASSETS 23,066,131,135 36,420,669,314 NET EQUITY Surplus of income over expenditures 17,857,523,041 31,559,212,627 Foreign exchange differences 9 5,208,608,094 4,861,456,687 SURPLUS OF INCOME OVER EXPENDITURES 23,066,131,135 36,420,669,314 OFF BALANCE SHEET ITEMS Closing balance Opening balance USD USD Designated Accounts 912,325.24 1,502,630.09 Vietnam Technological and Commercial Joint Stock Bank - Head Office (PMU Component 1) 414,941.16 703,546.80 Vietnam Technological and Commercial Joint Stock Bank - Head Office (PMU Component 2) 439,821.86 142,841.32 Vietnam Technological and Commercial Joint Stock Bank - Head Office (PMU Component 3) 57,562.22 656,241.97 Interest of Designated Accounts 107.05 1,023.84 Vietnam Technological and Commercial Joint Stock Bank - Head Office (PMU Component 1) 106.78 472.73 Vietnam Technological and Commercial Joint Stock Bank - Head Office (PMU Component 2) 0.27 0.27 Vietnam Technological and Commercial Joint Stock Bank 550.84 - Head Office (PMU Component 3) 912,432.291 1,503,653.93 Tran Thi Minh Hien Tran Duy Dong Preparer/Chief Accountant Director 27 June 2018 The accompanying notes are an integral part of these consolidated financial statements 6 � , ��� �а �о G �о �о �о рр � о г�э о� �о ,� ,i � � = Ф�-э у,,,i о г� о� N v о со г� м� О N �'С О ++ о г � м о о о� о cv о о N t0 � Ф L � N> м°N � �Р � о � noi � й N N II � G7 у. у �у I� � О� �0 � О I� О� И ry и �-1 .. 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Amount advanced by the World Bank 4,000,000.00 2. Add: Total amount advanced by the World Bank in the year 1,310,000.00 3. Deduct: Amount claimed and accepted for advance clearance 3,148,004.62 4. Present outstanding amount advanced to Designated Account as at 31 December 2017 2,161,995.38 5. Closing balance of Designated Account as at 31 December 2017 414,941.16 6. Add: Amount withdrawn but not yet claimed 1,747,054.22 7. Total advances to Designated Account accounted for as at 31 December 2017 2,161,995.38 Tran Thi Minh Hien Tran"Diiy Dong Preparer/Chief Accountant Director 27 June 2018 The accompanying notes are an integral part of these consolidated financial statements 8 MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION Consolidated financial statements MANAGEMENT PROJECT For the year ended Financing Agreement No. 5175-VN 31 December 2017 STATEMENT OF DESIGNATED ACCOUNTS (Continued) For the period : From 01 January 2017 to 31 December 2017 Account holder : Project Management Unit of Component 2 - "Pilot performance based centralized Effluent treatment plant financing" Account Number : 190.27686868.02.4 Depository Bank : Vietnam Technological and Commercial Joint Stock Bank - Head Office Address : Techcombank Tower, 191 Ba Trieu, Hai Ba Trung, Hanoi Financing Agreement No. : 5175-VN Currency unit : USD PART A - ACCOUNT ACTIVITY Amount Opening balance (01/01/2017) 142,841.32 Add: - Total amount advanced by the World Bank in the year 700,000.00 Deduct: - Total amount withdrawn 403,016.46 - Bank charges 3.00 Closing balance (31/12/2017) 439,821.86 PART B - ACCOUNT RECONCILIATION 1. Amount advanced by the World Bank 1,012,758.48 2. Add: Total amount advanced by the World Bank in the year 700,000.00 3. Deduct: Total amount claimed and accepted for advance clearance 878,901.98 4. Present outstanding amount advanced to Designated Account as at 31 December 2017 5. Closing balance of Designated Account as at 31 December 2017 439,821.86 6. Add: Amount withdrawn but not yet claimed 394,010.64 7. Add: Bank charges 24.00 8. Total advance to Designated Account accounted for as at 31 December 2017 Tran Thi Minh Hien Tran Duy Dong Preparer/Chief Accountant Director 27 June 2018 The accompanying notes are an integral part of these consolidated financial statements 1 9 MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION Consolidated financial statements MANAGEMENT PROJECT For the year ended Financing Agreement No. 5175-VN 31 December 2017 STATEMENT OF DESIGNATED ACCOUNTS (Continued) For the period : From 01 January 2017 to 31 December 2017 Project Management Unit of Component 3 - "Technical Account holder : Assistance for Industrial Zones and Project Implementation Support" Account Number : 190.26999999.02.6 Depository Bank : Vietnam Technological and Commercial Joint Stock Bank -Head Office Address : Techcombank Tower, 191 Ba Trieu, Hai Ba Trung, Hanoi Financing Agreement No. : 5175-VN Currency unit : USD PART A - ACCOUNT ACTIVITY Amount Opening balance (01/01/2017) 656,241.97 Add: - Total amount deposited by the World Bank for the year 255,312.63 Deduct: - Total amount withdrawn 853,858.42 - Bank charges 133.96 Closing balance (31/12/2017) 57,562.22 PART B - ACCOUNT RECONCILIATION 1. Amount advanced by the World Bank 1,000,000.00 2. Deduct: Amount claimed and accepted for advance clearance 407,462.90 3 Present outstanding amount advanced to Designated Account 592,537.10 * as at 31 December 2017 4. Closing balance of Designated Account as at 31 December 2017 57,562.22 5. Add: Amount claimed but not yet accepted for advance clearance 250,076.45 6. 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О � � � � � - i V О Q F- � ъ V f�- � � Q Oi -J � � v � �. г� � г� г� � {1 = w � а L п г'�а � о о о о � V s� ]. � � � а � v � � � � � � ozQ � �.� � N � ; �_= т �••,� га � о .� �ч ,-� i � V Q � � � � i й rn г� й � � � � � Q•� � у ги о о г.i � 1 Ф � т � F- L U ■ Z � f6 � •� � � � � � � - f0 G) Ш 1�-1 н.С С N о .� г'v м о �� F- G. 1�- �.� tL Z 0 .-� ,-л .-1 н Н � � ■ ■ • MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION Consolidated Financial statements MANAGEMENT PROJECT For the year ended Financing Agreement No. 5175-VN 31 December 2017 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS These notes are an integral part of and should be read in conjunction with the accompanying consolidated financial statements 1. GENERAL INFORMATION Vietnam Industrial Pollution Management Project is implemented under the Financing Agreement No. 5175-VN dated 24 December 2012 between the International Development Association and the Government of Socialist Republic of Vietnam. Total budget of the Project under the Agreement is SDR 32,900,000. The objective of the Project is to improve compliance with industrial wastewater treatment regulations in four of the most industrialized provinces in Vietnam, including: Ha Nam, Nam Dinh, Dong Nai and Ba Ria - Vung Tau. The Project consists of the following parts: Part 1: Environmental Policy, Monitoring, and Enforcement Policy Review and Revision Provision of support for a comprehensive review of the Recipient's legal and regulatory framework on pollution management, including reviewing and revising laws, regulations, and other legal documents at central and provincial levels. Environmental Monitoring and Enforcement Provision of support for the development of environmental monitoring infrastructure and the improvement in environmental enforcement activities, including: - Acquisition of testing laboratory equipment, standard samples, monitoring equipment, protection gears, and vehicles; - Acquisition and installation of automatic water quality monitoring stations; - Monitoring of surface water quality, Industrial Zone wastewater discharge, and inspection and enforcement; - Development and upgrade of the environmental monitoring information management systems of Ministry of Natural Resources and Environment and the Project provinces. Information Disclosure and Public Participation Provision of support for the development of an industrial pollution information disclosure system, including: - Development of an environmental performance rating methodology; - Disclosure of environmental monitoring, enforcement results, and public complaint records on a website; - Maintenance of close communication with Centralized Effluent Treatment Plants (CETP) to enable them to understand the rating system and ways to improve their ratings; - Disclosure of final performance ratings through various media outlets; - Awareness raising activities and dissemination of relevant informational materials; - Facilitation of communication with various media outlets. Part 2: Performance-Based Centralized Effluent Treatment Plant Financing Provision of Loans to finance the construction of new CETPs, the expansion of existing CETPs, and the improvement of other relevant infrastructure of industrial wastewater management in the Industrial Zones of the Project provinces. 14 MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION MANAGEMENT PROJECT Financing Agreement No. 5175-VN Consolidated financial statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) Part 3: Implementation Support Provision of support for capacity building - Facilitation of training on, among other things, environmental management, surface water quality monitoring, CETP operation and maintenance, and environmental information disclosure and public participation; - Facilitation of stakeholder consultation workshops; - Participation in overseas training courses, international study tours, domestic study tours on industrial pollution management. Technical Assistance Provision of support for the improvement of knowledge on sound industrial pollution management in the Project's river basin context, including: - Development of manuals; - Identification and demonstration of environmental management models with effective economic, administrative and technological instruments; - Development of strategies for sustainable development of Industrial Zones; - Establishment of site assessment and remediation strategies for relocation of Industrial Zones; - Institutional capacity assessment of the Nhue - Day River Basin and Dong Nai River Basin within the scope of the Project, with a focus on the Project Provinces; - Development of CETP operation and maintenance manuals; - Strengthening of the capacity of VEPF to perform technical and financial appraisal of CETP proposals, verify relevant performance targets, and manage relevant credit risks; and - Strengthening of the capacity of Industrial Zone Investors to design and operate CETPs in a proper manner. Project Management Provision of support for the Project management and implementation, including: (i) monitoring and evaluation activities; (ii) Incremental Operating Costs for the Project Management Units; and (iii) acquisition of a vehicle. The Project officially came into operation since 25 March 2013 and is expected to close on 30 September 2018. The Project is managed by: - The Project Management Unit (PMU) of Vietnam Industrial Pollution Management Project (VIPMP) under the Ministry of Planning and Investment (MPI), and its office is located at Room No. 203, Van Phuc Building, No. 02 Nui Truc, Ba Dinh District, Hanoi; - The PMU of Component 1 "Institutional Strengthening and Enforcement" under the Ministry of Natural Resourses and Enviroment (MONRE); - The PMU of Component 2 "Pilot Performance Based Centralized Effluent Treatment Plant Financing" under Vietnam Enviroment Protection Fund (VEPF); - The PMU of Component 3 "Technical Assistance for Industrial Zones and Project Implementation Support" under the Ministry of Planning and Investment (MPI). 15 MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION MANAGEMENT PROJECT Financing Agreement No. 5175-VN Consolidated financial statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 2. ACCOUNTING CONVENTION AND FINANCIAL YEAR Accounting convention The accompanying consolidated financial statements, prepared under the historical cost convention, are expressed in Vietnam Dong (VND), except for the statement of designated accounts and statement of withdrawals which are expressed in original currencies. These consolidated financial statements are prepared on the going concern basis, in accordance with the accounting policies set out in Note 3 of the notes to the consolidated financial statements, the requirements of the World Bank, and on the basis of consolidating the figures of three Components of the Project. Financial year The Project's financial year begins on 01 January and ends on 31 December. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies, which have been adopted by the management in the preparation of these consolidated financial statements, are as follows: Recognition of funds and expenditures Funds: - Funds received from the World Bank are recorded when remittances are made into Designated Accounts or direct payments are made by the World Bank to the contractors/suppliers. - Counterpart funds are recorded when payments are made directly from the Vietnam State 0i Treasury to contractors/ suppliers of the Project or funds are remitted to the PMU to pay for the Project activities. Expenditures: Expendiures are recorded when incurred except for those on procurements included in the Component 1's procurement plan which are recognized on a cash basic and expenditures on Finance for Performance Based Centralized Effluent Treatment Plant which are recorded when the funds for which are actually disbursed. Foreign currency translation Funds received from the World Bank in the foreign currency is translated into VND at the exchange rate announced by the Ministry of Finance at the date of remittance made into the Designated Account or direct payment made to contractors. Transactions in foreign currencies are translated to VND at the exchange rate of Vietnam Technological and Commercial Joint Stock Bank at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are revalued at the exchange rate announced by the Ministry of Finance at the balance sheet date. All exchange differences arising from these transactions are recorded into exchange rate difference account. 16 MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION MANAGEMENT PROJECT Financing Agreement No. 5175-VN Consolidated financial statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. DESIGNATED ACCOUNTS Designated accounts under Financing Agreement No. 5175-VN are deposit accounts in USD opened at the Vietnam Technological and Commercial Joint Stock Bank - Head Office for implementation of the Project's activities. Payments out of the designated accounts are for expenditures in accordance with the relevant covenants of Financing Agreement No. 5175-VN and relevant regulations established by the World Bank. Interest of the Designated Accounts is considered as receipts of the State Budget and initially recorded as other funds in Statement of income and expenditures and used to cover bank charges. At the end of the Project, outstanding interest will be returned to the Vietnamese Government. 5. CASH Closing balance Opening balance VND VND Cash on hand - 128,396 Designated accounts 20,673,329,882 33,175,073,088 - Vietnam Technological and Commercial Joint 9,318,241,301 15,532,906,250 Stock Bank - Head Office (PMU Component 1) - Vietnam Technological and Commercial Joint 10,062,759,180 3,153,656,624 Stock Bank - Head Office (PMU Component 2) - Vietnam Technological and Commercial Joint 1,292,329,401 14,488,510,214 Stock Bank - Head Office (PMU Component 3) Interest accounts - 22,598,379 - Vietnam Technological and Commercial Joint - 10,436,933 Stock Bank - Head Office (PMU Component 1) - Vietnam Technological and Commercial Joint - 12,161,446 Stock Bank - Head Office (PMU Component 3) 20,673,329,882 33,197,799,863 6. OTHER RECEIVABLES Closing balance Opening balance VND VND Office rental deposits 107,002,368 107,002,368 107,002,368 107,002,368 17 MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION MANAGEMENT PROJECT Financing Agreement No. 5175-VN Consolidated financial statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. ADVANCES Closing balance Opening balance VND VND Advances to perform environmental monitoring 4,350,936,012 3,195,585,000 in industrial areas - Department of Natural Resources and 1,760,000,000 Environment of Dong Nai province - Centre for Environmental Monitoring 1,496,500,000 2,706,500,000 - Viet Beauty Travel Joint Stock Company 365,250,000 - - Department of Natural Resources and Environment of Nam Dinh province - Centre for Environmental Media and 182,572,500 Consultancy - Department of Natural Resources and 101,734,000 - Environment of Ha Nam province - Department of Natural Resources and 93,317,000 - Environment of Ba Ria - Vung Tau province - Mrs. Du Thi Linh Chi 238,512 - - Pollution Control Department - 320,000,000 - Hoa Binh Travelling International and Trading - 169,085,000 Investment Co., Ltd. 5 ISM Management Solution Co., Ltd. 113,252,123 - Advances for employees 80,000,000 10,000,000 4,544,188,135 3,205,585,000 8. PAYABLES TO SUPPLIERS Closing balance Opening balance VND VND Hoa Binh Travelling International and Trading 702,670,000 Investment Co., Ltd. Centre for Environmental Monitoring 589,139,800 87,000,000 Viet Beauty Travel Joint Stock Company 215,700,000 - Hanoi Enviromental Services and Trading Joint 118,500,000 - Stock Company Mr. Vu Hoang Giang 118,119,600 - Mrs. Phan Thi Nhung 118,119,600 - Mrs. Trinh Thi Phuong Thao 118,119,600 - Mr. Nguyen Gia Long 104,995,200 - Mrs. Du Thi Linh Chi 78,746,400 - Others 75,183,600 - 2,239,293,800 87,000,000 18 MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION MANAGEMENT PROJECT Financing Agreement No. 5175-VN Consolidated financial statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. FOREIGN EXCHANGE DIFFERENCES Accumulated 2017 to 31/12/2017 VND VND Foreign exchange differences 347,151,407 5,208,608,094 347,151,407 5,208,608,094 10. FUNDS RECEIVED FROM THE WORLD BANK Accumulated to 2017 31 December 2017 USD VND USD VND equivalent equivalent Advance to designated accounts 2,010,000.00 46,032,429,071 11,480,000.00 247,487,349,071 Advance to and documentation of 255,312.63 5,735,598,233 6,712,658.84 146,461,902,734 designated accounts Direct payment - 2,594,462.40 57,058,508,905 2,265,312.63 51,768,027,304 20,787,121.24 451,007,760,710 U 19 *EUEEEWUUNEEEENEaUEUa ag agUaUag MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION MANAGEMENT PROJECT Financing Agreement No. 5175-VN Consolidated financial statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. PROJECT IMPLEMENTING EXPENDITURES Unit: VND 2017 Accumulated to 31 December 2017 Contents IDA Counterpart Other Total IDA Counterpart Other Total Component 1 (*) 36,615,703,505 1,100,000,000 11,362,014 37,727,065,519 267,219,650,349 4,075,000,000 38,286,607 271,332,936,956 Enhancing capacity of environmental 33,107,279,287 872,710,600 - 33,979,989,887 253,071,172,131 1,878,644,600 - 254,949,816,731 monitoring and enforcement Project management 3,508,424,218 227,289,400 11,362,014 3,747,075,632 14,148,478,218 2,196,355,400 38,286,607 16,383,120,225 In which: Bank charges 134,571 113,300 11,362,014 11,609,885 846,963 113,300 38,286,607 39,246,870 Component 2 9,136,950,222 - 9,136,950,222 101,403,843,729 - 9,913,073 101,413,756,802 Finance for performance based centralized effluent treatment plant 7,500,000,000 - - 7,500,000,000 92,807,000,000 - - 92,807,000,000 - Nhon Trach III Industrial Zone - - - - 13,185,000,000 - - 13,185,000,000 - An Phuoc Industrial Zone - - - - 15,122,000,000 - - 15,122,000,000 - Bao Minh Industrial Zone - - - - 44,800,000,000 - . 44,800,000,000 - Hoa Mac Industrial Zone - - - - 12,200,000,000 - - 12,200,000,000 - Ducan Enviroment Technology Joint 7,500,000,000 Stock Company 7,500,000,000 - - 7,500,000,000 7,500,000,000 - - Project management 1,636,950,222 - - 1,636,950,222 8,596,843,729 - 9,913,073 8,606,756,802 In which: Bank charges 3,028,339 - - 3,028,339 4,324,840 - 9,913,073 14,237,913 Component 3 19,192,396,106 292,538,378 11,165,243 19,496,099,727 63,939,344,110 1,308,158,714 38,971,087 65,286,473,911 Capacity building 3,207,016,728 - - 3,207,016,728 18,420,598,511 37,207,500 - 18,457,806,011 Technical supporting services activities 11,307,630,809 - - 11,307,630,809 20,465,550,847 - - 20,465,550,847 Project management 4,677,748,569 292,538,378 11,165,243 4,981,452,190 25,053,194,752 1,270,951,214 38,971,087 26,363,117,053 In which: Bank charges 2,941,556 440,000 11,165,243 14,546,799 8,231,894 1,650,000 38,971,087 48,852,981 64,945,049,833 1,392,538,378 22,527,257 66,360,115,468 432,562,838,188 5,383,158,714 87,170,767 438,033,167,669 (*) The Project implementing expenditures exclude the amount of approximately VND 1.615 billion related to Component 1 activities incurred in 2017 which were recognized for 2018. 20 U MINISTRY OF PLANNING AND INVESTMENT VIETNAM INDUSTRIAL POLLUTION MANAGEMENT PROJECT Financing Agreement No. 5175-VN Consolidated financial statements NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. COMPARATIVE FIGURES Comparative figures are the figures of the Project's audited consolidated financial statements for the year ended 31 December 2016. Tran Thi Minh Hien Tran Duy Dong Preparer/Chief Accountant Director 27 June 2018 111 W W W W W Ul W U W W II W W W W W 21 U U U U U U U U U U U U PART II REPORT OF INDEPENDENT AUDITORS ON * INTERNAL CONTROL U U U - * * S/ U U U U U U U U U U U U U U Deloitte Vietnam Company Ltd. 15thFloor, Vinaconex Tower, SD elo itte 34 Lang Ha Street, Lang Ha Ward, Dong Da District, Hanoi, Vietnam Tel :+84 24 6288 3568 REPORT OF INDEPENDENT AUDITORS Fax:+84 24 6288 5678 ON INTERNAL CONTROL Website: www.deloitte.com/vn To: The Project Management Unit of Vietnam Industrial Pollution Management Project We have audited, in accordance with International Standards on Auditing, the consolidated financial statements of Vietnam Industrial Pollution Management Project - Financing Agreement No. 5175-VN (the "Project") for the year ended 31 December 2017 and issued the independent auditors' report thereon dated 27 June 2018 expressing a qualified opinion on those consolidated financial statements. In connection with our audit of the Project's consolidated financial statements, we also examined the effectiveness of internal control over compliance with requirements that could have a direct and material financial effect on the consolidated financial statements as well as of internal control over financial reporting. As stated in the Statement of the Project Management Unit on page 2, the Project Management Unit is responsible for designing and maintaining effective internal control over compliance with requirements that could have a direct and material financial effect on the consolidated financial statements as well as over financial reporting for the purpose of properly preparing and presenting the consolidated financial statements so as to minimise errors and frauds; and take responsibility for its assertions as to the effectiveness of such internal control. Our responsibility is to express an opinion on the effectiveness of internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as internal control over financial reporting based on our examination. Our examination was conducted in accordance with International Standard on Assurance Engagements (ISAE) 3000. That standard requires that we comply with ethical requirements and plan and perform our procedures to obtain reasonable assurance about whether, in all material respects, the Project Management Unit has maintained effective internal control over compliance with the requirements that could have a direct and material financial effect on the consolidated financial statements as well as internal control over financial reporting. Our examination included obtaining an understanding of internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as of internal control over financial reporting, testing, and evaluating the design and operating effectiveness of the internal control, and performing such other procedures as we considered necessary in the circumstances to obtain sufficient appropriate evidence on which to base our opinion. Because of inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not to be detected. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. In our opinion, the Project Management Unit has maintained, in all material respects, effective internal control over compliance with requirements that could have a direct and material financial effect on the Project's consolidated financial statements as well as over financial reporting for the year ended 31 December 2017. Dang Chi Dung Nguyen Luong Tam Deputy General Director Auditor Audit Practising Registration Certificate Audit Practising Registration Certificate No. 0030-2018-001-1 No. 2303-2018-001-1 * DELOITTE VIETNAM COMPANY LIMITED 27 June 2018 Hanoi, S.R. Vietnam Deloitte refers to one or more of Deloitte Touche Tohmatsu Ltd., a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as "Deloitte Global") does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms. 22 II II II PATUI INEEDNUSUAC RPR NCMLAC II UI II IIAT I * NEEDN SUACERPR NCMLAC U 11 U Deloitte Vietnam Company Ltd. 05thFloor, Vinaconex Tower, Do t34 Lang Ha Street, Lang Ha Ward, Dong Da District, Hanoi, Vietnam Tel :+84 24 6288 3568 Fax:+84 24 6288 5678 INDEPENDENT ASSURANCE REPORT ON COMPLAiNCLvw.deloitte.com/vn To: The Project Management Unit of Vietnam Industrial Pollution Management Project We have audited, in accordance with International Standards on Auditing, the consolidated financial statements of Vietnam Industrial Pollution Management Project - Financing Agreement No. 5175-VN (the "Project") for the year ended 31 December 2017 and issued the independent auditors' report thereon dated 27 3une 2018 expressing a qualified opinion on those consolidated financial statements. In connection with the audit of the consolidated financial statements, we also performed procedures on the Project's compliance with Financing Agreement No. 5175-VN, laws and regulations that have a direct and material financial effect on the Project's consolidated financial statements for the year ended 31 December 2017 (the "requirements"). The Project Management Unit is responsible for complying with Financing Agreement No. 5175-VN, laws and regulations applicable to the Project. Our responsibility is to express an opinion on the Project's compliance with the requirements based on our procedures. We limited our tests of compliance to the requirements, and we did not test compliance with all laws and regulations applicable to the Project. We performed our work in accordance with International Standard on Assurance Engagements (ISAE) 3000. That standard requires that we comply with ethical requirements and plan and perform our procedures to obtain reasonable assurance about whether, in all material respects, the Project has complied with the requirements. An assurance engagement to report on the compliance with the requirements at the Project involves performing procedures to obtain evidence about whether the Project's activities are free of material noncompliance with the requirements, including obtaining an understanding of the internal control relevant to the Project's compliance with the requirements. The procedures selected depend on the auditors' judgment, including the assessment of risks that the Project does not comply with the requirements and whether such noncompliance could have a direct and material financial effect on the Project's consolidated financial statements. Our procedures included testing the compliance with the requirements that we consider necessary to provide reasonable assurance that the requirements are complied by the Project. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. In our opinion, the Project has complied, in all material respects, with Financing Agreement No. 5175-VN, laws and regulations that could have a direct and material financial effect on the Project's consolidated financial statements for the year ended 31 December 2017. Emphasis of Matter: We would like to draw reader's attention to our findings presented in the Management Letter. Our opinion is not modified with respect to this matter. Dang Chi Dung Nguyen Luong Tam Deputy General Director Auditor Audit Practising Registration Certificate Audit Practising Registration Certificate No. 0030-2018-001-1 No. 2303-2018-001-1 DELOITTE VIETNAM COMPANY LIMITED 27 June 2018 Hanoi, S.R. Vietnam Deloitte refers to one or more of Deloitte Touche Tohmatsu Ltd., a UK private company limited by guarantee ("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as "Deloitte Global") does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms. 23