U * Deloitte U U U U U U U U U U U U VIETNAM ENVIRONMENT PROTECTION FUND (Incorporated in the Socialist Republic of Vietnam) U U AUDITED FINANCIAL * STATEMENTS * For the year ended 31 December 2018 * U U U U U U U U U U U U U U VIETNAM ENVIRONMENT PROTECTION FUND 6th Floor, Map Publisher building, No. 85 Nguyen Chi Thanh Dong Da, Hanoi, Vietnam TABLE OF CONTENTS CONTENT PAGE(S) PART I FINANCIAL STATEMENTS STATEMENT OF THE BOARD OF DIRECTORS 2 -3 INDEPENDENT AUDITORS' REPORT 4 -5 STATEMENT OF FINANCIAL POSITION 6 -7 INCOME STATEMENT 8 a CASH FLOW STATEMENT 9 -10 NOTES TO THE FINANCIAL STATEMENTS 11 -22 PART II REPORT OF INDEPENDENT AUDITORS ON INTERNAL 23 -24 CONTROL PART III INDEPENDENT ASSURANCE REPORT ON COMPLIANCE STATEMENT OF THE BOARD OF DIRECTORS ON COMPLIANCE 25 B INDEPENDENT AUDITOR'S ASSURANCE REPORT ON COMPLIANCE 26 -27 PARTIV MANAGEMENT LETTER 28-32' U1 ■ • . ■ . ■ . • . • • . •P△B工1 ■FINANCIAL STATE間ENTS • • ■ . . . • • . • , . . ■ • • ■ . . ■ VIETNAM ENVIRONMENT PROTECTION FUND 6th Floor, Map Publisher building, No. 85 Nguyen Chi Thanh Dong Da, Hanoi, Vietnam STATEMENT OF THE BOARD OF DIRECTORS The Board of Directors of Vietnam Environment Protection Fund (the "Fund") presents this report together with the Fund's financial statements for the financial year ended 31 December 2018. THE MANAGEMENT COUNCIL AND THE BOARD OF DIRECTORS The members of the Management Council and Board of Directors of the Fund who held office during the year and to the date of this report are as follows: Management Council Mr. Vo Tuan Nhan Chairman Mr. Nguyen Duc Thuan Member (Appointed on 17 January 2018) Mr. Nguyen Xuan Truong Member (Resigned on 17 January 2018) Mr. Hoang Van Thuc Member Ms. Phan Viet Nga Member Mr. Pham Chi Quang Member Mr. Nguyen Minh Tien Member Mr. Nguyen Tuan Anh Member Board of Directors Mr. Nguyen Duc Thuan Director Mr. Pham Van Trieu Deputy Director Ms. Duong Thi Phuong Anh Deputy Director Mr. Cao Manh Dam Deputy Director (Appointed on 15 May 2018) The member of the Board of Supervisors during the year and to the date of this report are as follows: Ms. Nguyen Thi Huyen Chief Supervisor (Appointed on 28 February 2018) Ms. Phan Viet Nga Chief Supervisor (Resigned on 28 February 2018) 2 VIETNAM ENVIRONMENT PROTECTION FUND 6th Floor, Map Publisher building, No. 85 Nguyen Chi Thanh Dong Da, Hanoi, Vietnam STATEMENT OF THE BOARD OF DIRECTORS (Continued) BOARD OF DIRECTORS' STATEMENT OF RESPONSIBILITY The Board of Directors of the Fund is responsible for preparing the financial statements, which give a true and fair view of the financial position of the Fund as at 31 December 2018, and its financial performance and its cash flows for the year then ended in accordance with Vietnamese Accounting Standards, Circular No. 317/2016/TT-BTC on accounting guidance applicable to Vietnam Environment Protection Fund, the regime for financial management of Vietnam Environment Protection Fund and legal regulations relating to financial reporting. In preparing these financial statements, the Board of Directors 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 financial statements; * Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Fund will continue in business; and * Design and implement an effective internal control system for the purpose of properly preparing and presenting the financial statements so as to minimize errors and frauds. The Board of Directors is responsible for ensuring that proper accounting records are kept, which disclose, with reasonable accuracy at any time, the financial position of the Fund and that the financial statements comply with Vietnamese Accounting Standards, Circular No. 317/2016/TT-BTC on accounting guidance applicable to the Vietnam Environment Protection Fund, the regime for financial management of Vietnam Environment Protection Fund and legal regulations relating to financial reporting. The Board of Directors is also responsible for safeguarding the assets of the Fund and hence for taking reasonable steps for the prevention and detection of frauds and other irregularities. The Board of Directors confirms that the Fund has complied with the above requirements in preparing these financial statements. For and on behalf of the Board of Directors, Nguyen Duc Thuan Director Hanoi, 24 April 2019 3 W W W 3 W Deloitte Vietnam Company Ltd. 5 thFfoor, Vinaconex Tower, 34 Lang Ha Street, Lang Ha Ward, Dong Da District, Hanoi, Vietnam Tel :+84 24 6288 3568 Fax:+84 24 6288 5678 Website: www.deloitte.com/vn No.: 1135/VN1A-HN-BC INDEPENDENT AUDITORS' REPORT To: The Management Council and Board of Directors Vietnam Environment Protection Fund Opinion We have audited the financial statements of Vietnam Environment Protection Fund (the "Fund"), which comprise the statement of financial position as at 31 December 2018, the statement of income, U statement of cash flows for the year then ended, and the notes to the financial statements, including T a summary of significant accounting policies. In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 31 December 2018, its financial performance and cash flows for the year then ended in accordance with Vietnamese Accounting Standards, Circular No. 317/2016/TT-BTC on accounting guidance applicable to Vietnam Environment Protection Fund, the regime for financial management of Vietnam Environment Protection Fund and legal regulations relating to financial reporting. Basis for Opinion 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 Fund in accordance with the ethical requirements that are relevant to our audit of the 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 financial statements, which describes the accounting convention and the summary of the significant accounting policies. The financial statements are prepared in accordance with with Vietnamese Accounting Standards, Circular No. 317/2016/TT-BTC on accounting guidance applicable to Vietnam Environment Protection Fund, the regime for financial management of Vietnam Environment Protection Fund and legal regulations relating to financial reporting and the requirements of the World Bank. As a result, the financial statements may not be suitable for another purpose. Our opinion is not modified in respect of this matter. Responsibilities of the Board of Directors and Management Council for the Financial Statements The Board of Directors is responsible for the preparation of the financial statements in accordance with Vietnamese Accounting Standards, Circular No. 317/2016/TT-BTC on accounting guidance applicable to Vietnam Environment Protection Fund, the regime for financial management of Vietnam Environment Protection Fund and legal regulations relating to financial reporting, and for such internal control as the Board of Directors 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 financial statements, the Board of Directors is responsible for assessing the Fund'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 the Board of Directors either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so. The Management Council are responsible for overseeing the Fund's financial reporting process. 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. DTL (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. 4 W * Deloitte INDEPENDENT AUDITORS' REPORT (Continued) Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the 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 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 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 Fund'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 Fund 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 the Board of Directors. We communicate with the Management Council and the Board of Directors of the Fund 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. 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 24 April 2019 Hanoi, S.R. Vietnam 5 VIETNAM ENVIRONMENT PROTECTION FUND FORM B 01-BVMT 6th Floor, Map Publisher building, Issued under Circular No. 317/2016/TT-BTC No. 85 Nguyen Chi Thanh, Dong Da, Hanoi, Vietnam dated 07 December 2016 of the Ministry of Finance STATEMENT OF FINANCIAL POSITION As at 31 December 2018 Unit: VND ASSETS Codes Notes Closing balance Opening balance (Restated) A. ASSETS 100 1,559,873,117,808 1,518,616,177,691 I. Cash and cash equivalents 110 4 34,590,772,196 7,479,133,341 1. Cash 111 24,590,772,196 7,479,133,341 2. Cash equivalents 112 10,000,000,000 II. Financial investments 120 1,498,072,068,714 1,476,401,515,66 1. Held-to-maturity investments 121 5 665,255,698,630 807,533,208,15)? 2. Loans receivables 122 832,816,370,084 668,868,307,50 a. Medium and long-term loans using the 122a 6 766,798,785,677 603,464,361,897 funds from the State buget b. Medium and long-term loans using the 122b 7 76,660,000,000 79,170,000,000 funds from the WorldBank c. Provision for credit losses 122c 8 (10,642,415,593) (13,766,054,394) III, Receivables 130 25,609,770,867 32,583,486,018 1. Trade receivables 131 23,336,927,059 30,089,568,528 2. Advances to suppliers 132 627,406,461 627,406,461 3. Other receivables 135 9 1,645,437,347 1,866,511,029 IV. Fixed assets 150 1,170,254,923 1,281,927,645 1. Tangible fixed assets 151 10 1,162,004,887 1,257,677,613 - Cost 152 2,580,658,380 2,460,658,380 - Accumulated depreciation 153 (1,418,653,493) (1,202,980,767) 2. Intangible assets 154 11 8,250,036 24,250,032 - Cost 155 258,000,000 258,000,000 - Accumulated amortisation 156 (249,749,964) (233,749,968) V. Other assets 170 430,251,108 870,115,025 1. Prepayments 173 12 430,251,108 870,115,025 8 TOTAL ASSETS (1O 101013+5+7)100 1,559,873,117,808 1,518,616,177,691 (100=110+120+130+150+170) U W U W U U The accompanying notes are an integral part of these financial statements 6 U VIETNAM ENVIRONMENT PROTECTION FUND FORM B 01-BVMT 6th Floor, Map Publisher building, Issued under Circular No. 317/2016/TT-BTC No. 85 Nguyen Chi Thanh, Dong Da, Hanoi, Vietnam dated 07 December 2016 of the Ministry of Finance STATEMENT OF FINANCIAL POSITION (Continued) As at 31 December 2018 Unit: VND RESOURCES Codes Notes Closing balance Opening balance (Restated) B. LIABILITIES 200 393,804,046,192 376,336,965,897 I. Entrusted funds received 210 13 76,660,000,000 79,170,000,000 II. Liabilities 220 317,144,046,192 297,166,965,897 1. Trade payables 221 4,302,000 4,302,000 2. Taxes and amounts payable to the State 223 14 432,958,261 2,278,220,883 budget 3. Payables to employees 224 6,276,092,253 5,643,781,562 4. Short-term accrued expenses 225 2,038,999,000 5. Other payables 228 18,978,054,537 13,061,407,622 6. Environmental remediation deposit in 229 15 144,173,045,353 134,009,882,738 mineral extraction 7. Bonus and welfare fund 232 1,540,486,444 1,323,397,388 8. Entrusted activities payables 233 1,302,794,111 1,297,549,641 9. Receipts for sponsorship 236 16 142,397,314,233 139,548,424,063 C. EQUITY 300 17 1,166,069,071,616 1,142,279,211,794 1. Fund from the State budget 311 733,787,000,000 733,787,000,000 2. Investment and development fund 314 432,282,071,616 408,492,211,794 TOTAL RESOURCES (330 = 200+300) 330 1,559,873,117,808 1,518,616,177,691 Nguyen Hoai Thu Vu Van Chinh Nguyen Duc Thuan Preparer Chief Accountant Director 24 April 2019 The accompanying notes are an integral part of these financial statements 7 W VIETNAM ENVIRONMENT PROTECTION FUND FORM B 02-BVMT 6th Floor, Map Publisher building, Issued under Circular No. 317/2016/TT-BTC W No. 85 Nguyen Chi Thanh, Dong Da, Hanoi, Vietnam dated 07 December 2016 of the Ministry of Finance INCOME STATEMENT For the year ended 31 December 2018 Unit: VND Prior year ITEMS Codes Notes Current year (Restated) 1. Net income from interest 01 19 66,511,722,059 87,691,396,773 1.1 Net revenue from interest of time deposits, 02 70,873,463,272 92,374,927,814 1.2 Operational expenses 03 4,361,741,213 4,683,531,041 2. Net income from entrusted loans activities 04 20 148,396,251 118,314,664 2.1 Net revenue from entrusted loans activities 05 148,396,251 118,314,664 3. Net income from other operation activities 07 21 (122,456,000) 13,492,000 3.1 Revenue from other operational activities 08 - 202,500,000 3.2 Other operational activities' expenses 09 122,456,000 189,008,000 4. Net income from finance activities 10 (2,426,630) 32,397,125 4.1 Financial income 11 - 32,397,125 4.2 Financial expenses 12 2,426,630 - 5. General and administration expenses 13 22 36,384,332,634 34,696,261,883 6. Other net income 14 (2,800,000) 4,300,000 6.1 Net revenue from other activities 15 - 4,300,000 6.2 Other expenses 16 2,800,000 - 7. Oprerating profit before risk provison 20 30,148,103,046 53,163,638,679 (20=01+04+07+10-13+14) 8. Provision expenses for credit losses 30 23 (3,123,638,801) (23,332,224,121) 9. Accounting income 40 33,271,741,847 76,495,862,800 (40 =20 - 30) Nguyen Hoai Thu Vu Van Chinh Nguyen Duc Thuan Preparer Chief Accountant Director 24 April 2019 The accompanying notes are an integral part of these financial statements 8 VIETNAM ENVIRONMENT PROTECTION FUND FORM B 03-BVMT 6th Floor, Map Publisher building, Issued under Circular No. 317/2016/TT-BTC No. 85 Nguyen Chi Thanh, Dong Da, Hanoi, Vietnam dated 07 December 2016 of the Ministry of Finance CASH FLOWS STATEMENT For the year ended 31 December 2018 Unit: VND Prior year ITEMS Codes Current year (resta _________________(Restated) I. CASH FLOWS FROM OPERATING ACTIVITIES 1. Accounting income 01 33,271,741,847 76,495,862,800 2. Adjustments for: Depreciation and amortisation of fixed 02 231,672,722 206,865,724 Provisions 03 (3,123,638,801) (23,332,224,121) Foreign exchange (gain)/loss arising from 04 2,426,630 (32,397,125) translating foreign currency items Changes in assets and payables Changes in assets (153,410,844,712) (102,885,663,215) Changes in loans receivables 05 (160,824,423,780) (87,757,096,354) Changes in interest receivables 06 6,973,715,151 (14,995,326,442) Changes in other assets 09 439,863,917 (133,240,419) Changes in payables 7,985,198,270 (30,328,918,568) Changes in entrusted fund received 10 (2,510,000,000) (150,000,000) Changes in environmental remediation 11 deposits in mineral extraction 10,163,162,615 9,195,710,399 Changes in receipts for sponsorship 14 (3,805,458,199) (41,094,674,711) Changes in payables to suppliers, 15 6,747,938,454 5,948,892,944 employees and other payables Other cash outflows 17 (2,610,444,600) (4,228,847,200) Net cash (used in)/generated by 30 (115,043,444,044) (79,876,474,505) operating activities II. CASH FLOWS FROM INVESTING ACTIVITIES 1. Acquisition and construction of fixed 31 (120,000,000) (1,222,000,000) assets and other long-term assets 2. Cash outflow for lending, buying debt 33 (378,144,515,803) (145,137,717,862) instruments of other entities 3. Cash recovered from lending, selling debt 34 520,422,025,332 129,000,000,000 instruments of other entities Net cash (used in)/generated by 40 142,157,509,529 (17,359,717,862) investing activities The accompanying notes are an integral part of these financial statements 9 U VIETNAM ENVIRONMENT PROTECTION FUND FORM B 03-BVMT 6th Floor, Map Publisher building, Issued under Circular No. 317/2016/TT-BTC No. 85 Nguyen Chi Thanh, Dong Da, Hanoi, Vietnam dated 07 December 2016 of the Ministry of Finance CASH FLOW STATEMENT (Continued) For the year ended 31 December 2018 * Unit: VND Prior year ITEMS Codes Current year (Restated) III. CASH FLOWS FROM FINANCING ACTIVITIES 1. Increase in funds from the State budget 41 - 83,787,000,000 Net cash (used in)/generated by 50 - 83,787,000,000 financing activities Net increase/(decrease) in cash 60 27,114,065,485 (13,449,192,367) (60=30+40+50) Cash and cash equivalents at the 70 7,479,133,341 20,895,928,583 beginning of the year Effects of changes in foreign exchange 71 (2,426,630) 32,397,125 rates Cash and cash equivalents at the end 80 34,590,772,196 7,479,133,341 of the year (80=60+70+71) Nguyen Hoai Thu Vu Van Chinh Nguyen Duc Thuan Preparer Chief Accountant Director 24 April 2019 U W W The accompanying notes are an integral part of these financial statements 10 VIETNAM ENVIRONMENT PROTECTION FUND FORM B 09-BVMT 6th Floor, Map Publisher building, Issued under Circular No. 317/2016/TT-BTC No. 85 Nguyen Chi Thanh, Dong Da, Hanoi, Vietnam dated 07 December 2016 of the Ministry of Finance NOTES TO THE FINANCIAL STATEMENTS These notes are an integral part of and should be read in conjunction with the accompanying financial statements 1. GENERAL INFORMATION Vietnam Environment Protection Fund is a State financial organization, operating under Ministry of Natural Resources and Environment and is managed by the Ministry of Finance in term of financial activities. The Fund was established under Decision No.82/2002/QD-TTg dated 26 June 2002, Decision No.35/2008/QD-TTg dated 03 March 2008, Decision No.02/2014/QD-TTg dated 13 January 2014 and Decision No.78/2014/QD-TTg dated 26 December 2014 by the Prime Minister. According to the Decision No. 78/2014/QD/TTg dated 26 December 2014, the charter capital of the Fund is VND 1,000,000,000,000. As at 31 December 2018, the actual amount of grant received was VND 733,787,000,000. The obligations of the Fund includes: - Receive, manage and use State budget sources, sources from financial assistance, donations and entrustment from domestic and foreign organizations and individuals to provide financial support for environmental protection activities and response to climate change nationwide; - Provide loans with preferential interest rates for environmental protection projects nationwide; - Support borrowing interest for environmental protection projects borrowing capital from credit institutions in accordance with the law; - Finance, co-finance environmental protection activities including: treating and overcoming environment pollution, responding to and overcoming consequences caused by environmental and natural disasters, and advocacy, communication activities on the management and mining of natural resources and environment of the sea and islands; implementing programs, projects, plans and tasks under the Prime Minister's decisions; granting environmental awards, rewards to honor outstanding organizations and individuals in environment protection; implementing projects and tasks of environmental protection as stipulated in the Fund's Charter on Organization and Operation; - Receive deposits for environmental restoration in mineral extraction from organizations and individuals permitted to mine minerals; - Receive deposits to secure imported scrap metal for organizations and individuals; - Implement some financial mechanisms and policies for investment projects under clean development mechanism (CDM), including: monitoring, management and collection of fees for sale of emission reduction certificates for CDM projects implemented in Vietnam; spending for awareness raising activities on investment projects under CDM; review and approval of CDM project documents; management and supervision of CDM projects; Price subsidies for CDM project products; - Provide electricity price support for wind power projects connected with the power grid under the Prime Minister's decisions and prevailing law; - Provide financial support for activities to response climate change in accordance with prevailing law; - Appraise and approve the level, time and form of financial support for environment protection projects and tasks using the Fund's supporting capital according to the Fund's Charter on organization and operation; - Submit to the Minister of Natural Resources and Environment for consideration and decision on the contents and forms of assistance arising in the course of operation; and - Implement other programs, proposal, projects and tasks assigned by the Prime Minister, the Minister of Natural Resources and Environment. The number of the Fund's employees as at 31 December 2018 was 91 (31 December 2016: 86). 11 VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) FORM B 09-BVMT 2. ACCOUNTING CONVENTION AND FINANCIAL YEAR Accounting convention The accompanying financial statements, expressed in Vietnam Dong (VND), are prepared under the historical cost convention in accordance with the Vietnamese Accounting Standards, Circular No. 317/2016/TT-BTC on accounting guidance applicable to Vietnam Environment Protection Fund, the regime for financial management of Vietnam Environment Protection Fund and legal regulations relating to financial reporting. Financial year The Fund'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 Fund in the preparation of these financial statements, are as follows: Cash and cash equivalents Cash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. Financial investments Loans from the Fund's capital Financial support for environment protection programs, projects and activities are in the form of loans with preferential interest rates and loan interest support, loan guarantee for environment projects from other credit institutions. Loans are provided on a repayable basis and with interest based on the Ministry of Finance's guidelines and regulations on the loan amount. The amount of loans with preferential interest rates does not exceed 70% of the total expenditures of environmental protection investment projects, the interest rate is determined at the time of loan contracts signing and will be fixed throughout the term. The lending interest rate is set by Management Council of the Fund for each target group, but must not exceed 50% of the commercial lending interest rate. The loan portfolio of the fund is disclosed and presented according to loan principals as at the end of the fiscal year. The debt classification is implemented in accordance with Circular No. 02/2013/TT-NHNN dated 21 January 2013, which is amended and supplemented in accordance with Circular No. 09/2014/TT- NHNN dated 18 March 2014 by the Governor of the State Bank of Vietnam. Accordingly, the debts are classified into 5 groups as follows: i) Group 1: Current debts; ii) Group 2: Special mention debts; iii) Group 3: Sub-standard debts; iv) Group 4: Doubtful debts; v) Group 5: Loss debts. Entrusted fund and loans from the entrusted fund The fund receives the trust money under the trust contract, whereby the Fund will lend under the mandate of the trustee and collect the trustee fee. Entrusted capital and loans are recorded on actual incurred. In 2018, the Fund performs entrusted lending under Entrusted agreement No. 06/2013/UQ/BTC- QLN dated 02 April 2013 of the Ministry of Finance about the entrusted lending under the World Bank's financial assistance. 12 VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) FORM B 09-BVMT Provision for credit losses Provision for credit losses is recognized as expenses on the income statement and is used to cover bad debts. Provision for credit losses include general provision and specific provision. General provision refers to a monetary amount used for protecting against any unspecified loss that may arise from the process of debt classification and specific hedge creation, or in case of financial difficulties that Vietnam Environment Protection Fund faces when the debt quality is reduced. Specific provision refers to a monetary amount created on the basis of classification of specific debts as a contingency fund or provision for any loss that may arise. Provision for credit losses is made under the guidance of Circular No. 03/2017/TT-BTNMT dated 21 March 2017 of the Ministry of Natural Resources and Environment guiding the award of preferential lending and post-investment interest rate incentives by Vietnam Environment Protection Fund. In 2016, the Fund set up the provision rate of 1.2% of total outstanding loans, accordance with the decision of the Fund's Management Council, in line with the guidance in Circular No. 132/2015/TT-BTC dated 28 August 2015 guiding the financial management mechanism for Vietnam Environment Protection Fund". Held-to-maturity investments Short-term financial investments include bank deposits with a term of from over 3 months to less than 12 months. Receivables Receivables represent the amounts recoverable from customers or other debtors and are stated at book value less provision for doubtful debts. Provision for doubtful debts is made for receivables that are overdue or when the debtor is in dissolution, in bankruptcy, or is experiencing similar difficulties and so may be unable to repay the debt. Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less accumulated depreciation. The costs of purchased tangible fixed assets comprise their purchase prices and any directly attributable costs of bringing the assets to their working condition and location for their intended use. Tangible fixed assets are depreciated using the straight-line method over their estimated useful lives as follows: Years Motor vehicles 7 Office equipments 3 - 5 Others 8 Prepayments Long-term prepayments represent prepaid house rentals and tools and supplies issued for consumption. House rentals are charged to expenses during the year using the straight-line method over the lease term. 13 VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) FORM B 09-BVMT Environmental remediation deposits in mineral extraction Deposits are recognized when the organizations and individuals permitted to mine minerals deposit money into the bank account of the Fund for the purpose of securing the funding for post-mining environmental rehabilitation and restoration activities. The minimum deposit amount must be equal to the actual cost for rehabilitating the environment after mining. After completion of the rehabilitation and restoration of the environment, authorized organizations and individuals shall be allowed to withdraw the original deposited amount and interest arising from such deposits. Receipts for sponsorship Receipts for sponsorship reflect the following: the funds received from the State budget and the payment out of such funds as financial support for environment protection projects and assignments as settled with the State budget; penalties for damages to environment and biodiversity which are required to be paid to the State Budget according to law; proceeds from selling certified greenhouse emission reduction (CERs) received from CDM projects implemented in Vietnam; donations, supports, voluntary contributions and entrusted funds received from domestic and overseas organizations and individuals for environmental protection and responses to climate change. Under Circular No.132/2015/TT-BTC dated 28 August 2015 issued by the Ministry of Finance, the Fund is allowed to appropriate 20% of the excess of annual financial income over expenditures to sponsorship. Receipts for sponsorship are recognized on an accrual basis. Owner's equity and distribution to funds Owner's equity is recognized at the actual receipts from the State Budget. Under Circular No.132/2015/TT-BTC dated 28 August 2015 issued by the Ministry of Finance, the Fund is allowed to make distributions to its additional capital, investment and development fund, bonus and welfare funds from the excess of annual financial income over expenditures. Specificaly, rates are as follows: Items Fund distribution rate from the difference between income and expenditures Additional capital fund 20% of excess of income over expenditures Bonus and welfare funds 02 - 03 months of actual salary on an annual basic Investment and development Remaining excess of income over expenditures fund Revenue from operational activities Under Circular No. 317/2016/TT-BTC dated 07 December 2016 issued by Ministry of Finance, revenue from operational activities of the Fund including interest on time deposits; interest on loan receivables; loan appraisal fee received; entrusted fee and revenue from other operational activities. Operational expenditures Under Circular No. 317/2016/TT-BTC dated 07 December 2016 issued by the Ministry of Finance, the operation expenditures of the Fund include expenses of loans activities, entrusted fund activities, provision, interest expense on environmental remediation deposits in mineral extraction activities and other operational expenses. 14 VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) FORM B 09-BVMT Foreign currency translation Transactions arising in foreign currencies are translated at exchange rates ruling at the transaction date. The balances of monetary items denominated in foreign currencies as at the Statement of financial position date are retranslated at the exchange rates on the same date. Exchange differences arising from the translation of these accounts are recognised in the income statement. Taxation The Environment Protection Fund is a State financial institution under the Ministry of Natural Resources and Environment, operating for non-profit purposes, but must preserve its charter capital and cover its management costs, exempt from taxes and other obligations to State budget for activities relating to environmental protection under the provisions of laws on tax and the State budget. Interest income is applicable to corporate income tax rate of 5%. The determination of the tax currently payable is based on the current interpretation of tax regulations. However, these regulations are subject to periodic variation and their ultimate determination depends on the results of the tax authorities' examinations. Other taxes are paid in accordance with the prevailing tax laws in Vietnam. 4. CASH AND CASH EQUIVALENTS Closing balance Opening balance VND VND Cash on hand 144,394,610 815,067,006 Demand deposit 24,446,377,586 6,664,066,335 Cash equivalents 10,000,000,000 - 34,590,772,196 7,479,133,341 5. HELD TO MATURITY INVESTMENTS Held to maturity investments are term deposits at commercial banks with terms from 6 to 12 months earning interest rate at about 6,1% per annum. 6. MEDIUM AND LONG-TERM LOANS FROM STATE BUDGET' CAPITAL Closing balance Opening balance VND VND Group 1 711,764,235,939 557,604,679,864 Group 2 35,270,000,000 12,920,000,000 Group 3 Group 4 Group 5 (*) 19,764,549,738 32,939,682,033 766,798,785,677 603,464,361,897 (*) Group 5 loans are guaranteed by commercial banks in Vietnam with the amount of VND 19,123,364,750, accounting for 96.76% of the closing balance of Group 5 loan principal, the rest are secured by assets of borrowers. The other loans are guaranteed by commercial banks in Vietnam or secured by assets of borrowers or a third party. 15 VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) FORM B 09-BVMT 7. MEDIUM AND LONG-TERM LOANS FROM WORLDBANK' CAPITAL Closing balance Opening balance VND VND Group 1 76,660,000,000 79,170,000,000 76,660,000,000 79,170,000,000 The Fund received entrusted fund from the World Bank to implement Component 2 - Pilot Financing for the construction of centralized wastewater treatment plants in industrial areas under the Industrial Pollution Management Project in Nhue-Day and Dong Nai river basins in accordance with the Financing Agreement No.5175-VN dated 24 December 2012 between Vietnam Environment Protection Fund and the World Bank. 8. PROVISION FOR CREDIT LOSSES General provision Specific provision Risk provision VND VND VND Opening balance (Restated) 2,852,623,399 10,913,430,995 13,766,054,394 Additions 882,547,780 - 882,547,780 Reversal in the year - (4,006,186,581) (4,006,186,581) Utilization in the year Closing balance 3,735,171,179 6,907,244,414 10,642,415,593 9. OTHER RECEIVABLES Opening balance Closing balance (Restated) VND VND Deposit for office rental 823,267,500 823,267,500 Personal income tax receivable from - 212,431,833 employees Overpaid union fees 73,713,427 49,027,575 Overpaid social insurance - 297,513,062 Advances to employees 717,777,863 462,271,059 Others 30,678,557 22,000,000 Total 1,645,437,347 1,866,511,029 16 VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) FORM B 09-BVMT 10. TANGIBLES FIXED ASSETS Motor vehicles Office equipment Others Total VND VND VND VND COST Opening balance 2,084,496,000 204,362,960 171,799,420 2,460,658,380 (Restated) Additions - 120,000,000 120,000,000 Closing balance 2,084,496,000 204,362,960 291,799,420 2,580,658,380 ACCUMULATED DEPRECIATION Opening balance 891,591,238 204,362,960 107,026,569 1,202,980,767 (Restated) Charge for the year 174,571,428 - 41,101,298 215,672,726 Closing balance 1,066,162,666 204,362,960 148,127,867 1,418,653,493 NET BOOK VALUE Opening balance 1,192,904,762 - 64,772,851 1,257,677,613 (Restated) Closing balance 1,018,333,334 - 143,671,553 1,162,004,887 11. INTANGIBLES FIXED ASSETS Computer software Others Total VND VND VND COST AiV Opening balance 98,000,000 160,000,000 258,000,000 Closing balance 98,000,000 160,000,000 258,000,000 ACCUMULATED AMORTISATION Opening balance 98,000,000 135,749,968 233,749,968 Charge for the year - 15,999,996 15,999,996 Closing balance 98,000,000 151,749,964 249,749,964 NET BOOK VALUE Opening balance - 24,250,032 24,250,032 Closing balance - 8,250,036 8,250,036 12. PREPAYMENTS Closing balance Opening balance VND VND Fixed assets rental fee - 555,857,500 Others 430,251,108 314,257,525 430,251,108 870,115,025 17 VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) FORM B 09-BVMT 13. ENTRUSTED FUND PAYABLES Closing balance Opening balance VND VND Entrusted fund from World Bank (i) 76,660,000,000 79,170,000,000 Total 76,660,000,000 79,170,000,000 (i) On-lending agreement between the Ministry of Finance and Vietnam Environment Protection Fund on the use of the Financing Agreement No. 5175-VN dated 24 December 2012 of the International Development Association for on-lending of centralized wastewater treatment for industrial areas in 04 provinces: Ha Nam, Nam Dinh, Dong Nai, Ba Ria - Vung Tau, interest rates of 6.8% per year, loan term for each project is limited at 15 years (including the grace period of 02 years grace), interest is paid semi-annually on 30 March and 30 September. 14. TAX AND AMOUNTS PAYABLES TO THE STATE BUDGET Opening balance Payable Paid (Restated) during the year during the year Closing balance VND VND VND VND Value added tax 11,000,000 - 11,000,000 Corporate income tax 1,817,471,227 2,466,637,981 4,066,073,917 218,035,291 Personal income tax 449,749,656 242,713,134 488,539,820 203,922,970 Total 2,278,220,883 2,709,351,115 4,554,613,737 432,958,261 15. ENVIRONMENTAL REMEDIATION DEPOSITS IN MINERAL EXTRACTION Closing balance Opening balance VND VND Environmental remediation deposits in 144,173,045,353 134,009,882,738 mineral extraction 144,173,045,353 134,009,882,738 According to Decision No.18/2013/QD-TTg dated 29 March 2013 issued by the Prime Minister on environmental remediation deposits in mineral extraction, the organizations and individuals licensed to extract mineral extraction shall deposit a certain amount of money, in a certain time, to the Vietnam Environment Protection Fund or the Local Environment Protection Fund to ensure the environmental remediation by the organizations and individuals engaged in mineral extraction in compliance with current regulations. The deposit amount must be equal at least to the actual cost of environmental remediation after completion of mineral mining activities. After environmental remediation is completed, the organizations and individuals will be able to withdraw the deposits and interest earned on such deposits. 18 VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) FORM B 09-BVMT 16. RECEIPTS FOR SPONSORSHIP Closing balance Opening balance VND VND Opening balance (Restated) 139,548,424,063 165,343,926,214 Additions from retain earnings 6,654,348,369 15,299,172,560 Proceeds from selling CERs 620,536,817 507,985,659 Recovery of unused financial support 3,941,368,984 130,516,000 Payment for financial support (8,367,364,000) (41,733,176,370) Closing balance 142,397,314,233 139,548,424,063 17. EQUITY Investment and Charter capital development fund Retained earnings Total VND VND VND VND Prior year's opening balance 650,000,000,000 351,172,898,293 - 1,001,172,898,293 Capital increase 83,787,000,000 - - 83,787,000,000 Profit for the year - 76,495,862,800 76,495,862,800 Fund distribution - 57,319,313,501 (76,495,862,800) (19,176,549,299) Current year's opening balance 733,787,000,000 408,492,211,794 - 1,142,279,211,794 (Restated) Profit for the year - 33,271,741,847 33,271,741,847 Fund distribution (*) - 23,789,859,822 (33,271,741,847) (9,481,882,025) Current year's closing balance 733,787,000,000 432,282,071,616 - 1,166,069,071,616 (*) During the year 2018, Vietnam Environment Protection Fund distributed retained earnings to investment and development fund, welfare fund and for sponsorship activities with the respective amounts of VND 23,789,859,822 VND 2,827,533,656 and VND 6,654,348,369 according to Circular No. 132/2015/TT-BTC dated 28 August 2015 issued by the Ministry of Finance, effective from 01 January 2016 (replacing Circular No.93/2003/TT-BTC dated 06 October 2003 guiding the regime for financial management of Vietnam Environment Protection Fund). 18. OFF BALANCES SHEET ITEMS Foreign currencies Currency Closing balance Opening balance United States Dollar USD 7,696 7,702 Euro EUR 8,022 8,022 U1 VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) FORM B 09-BVMT 19. NET INCOME FROM INTEREST Current year Prior year VND VND Net revenue 70,873,463,272 92,374,927,814 In which: - Interest of loan receivables 21,540,703,441 21,028,348,854 - Interest of time deposits 49,332,759,831 71,346,578,960 Expenses for lending activities 8,074,000 429,242,500 Expense of environmental remediation 4,353,667,213 4,254,288,541 deposit in mineral extraction activities Total 66,511,722,059 87,691,396,773 20. NET INCOME FROM ENTRUSTED LOANS ACTIVITIES Current year Prior year VND VND Entrusted fees 148,396,251 118,314,664 148,396,251 118,314,664 21. NET INCOME FROM OTHER ACTIVITIES Current year Prior year VND VND Appraisal fee of loan receivables - 202,500,000 Operation expenditures 122,456,000 189,008,000 (122,456,000) 13,492,000 22. GENERAL AND ADMINISTRATION EXPENSES Current year Prior year VND VND Administration staffs 22,096,477,366 19,135,889,877 Materials and office supplies 819,626,990 572,555,801 Depreciation and amortisation 231,672,722 206,865,724 Taxes and fees 2,466,637,981 3,567,328,948 Out-sourced services 5,595,627,354 6,396,006,058 Other administration expenses 5,174,290,221 4,817,615,475 36,384,332,634 34,696,261,883 2 W 20 W VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) FORM B 09-BVMT 23. PROVISIONS EXPENSES FOR CREDIT LOSSES Current year Prior year VND VND General provision 882,547,780 2,852,623,399 Specific provision (4,006,186,581) 10,913,430,995 Reversal of risk provision of 2016 - (37,098,278,515) (3,123,638,801) (23,332,224,121) 24. RELATED PARTY TRANSACTIONS Remuneration paid to the Management Council, Board of Directors and Supervision Department during the year was as follows: Current year Prior year VND VND Remuneration of the Board of Management, Management Council and 1,236,205,997 1,863,991,000 Board of Supervisors 25. COMPARATIVE FIGURES In the year, the Company decided to make retrospective adjustments to the reported figures of the prior year according to the recommendations of the State Audit Office. Details are as follows: Unit: VND Previously Amount after Items Codes Adjustments adjustments Statement of financial position Loans receivables 122 668,703,609,093 164,698,410 668,868,307,503 Provision for credit losses 122c (13,930,752,804) 164,698,410 (13,766,054,394) Other receivables 135 1,844,511,029 22,000,000 1,866,511,029 Tangible fixed assets 151 1,080,010,946 177,666,667 1,257,677,613 - Cost 152 2,278,658,380 182,000,000 2,460,658,380 - Accumulated depreciation 153 (1,198,647,434) (4,333,333) (1,202,980,767) Taxes and amounts payable to the Sta 223 2,256,220,883 22,000,000 2,278,220,883 Payables to employees 224 5,637,145,776 6,635,786 5,643,781,562 Bonus and welfare fund 232 1,428,197,388 (104,800,000) 1,323,397,388 Receipts for sponsorship 236 139,460,318,204 88,105,859 139,548,424,063 Investment and development fund 314 408,139,788,362 352,423,432 408,492,211,794 Income statement General and administration expenses 13 34,972,092,764 (275,830,881) 34,696,261,883 Provision expenses for credit losses 30 (23,167,525,711) (164,698,410) (23,332,224,121) Accounting income 40 76,055,333,509 440,529,291 76,495,862,800 21 VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) FORM B 09-BVMT Unit: VND Previously Amount after reported amount adjustments Cash flow statement Accounting income 76,055,333,509 440,529,291 76,495,862,800 Adjustments for: Depreciation and amortisation of fixed 02 202,532,391 4,333,333 206,865,724 Provisions 03 (23,167,525,711) (164,698,410) (23,332,224,121) Changes in assets (102,863,663,215) (22,000,000) (102,885,663,215) - Changes in interest receivables 06 (14,973,326,442) (22,000,000) (14,995,326,442) Changes in payables (30,252,754,354) (76,164,214) (30,328,918,568) - Changes in receipts for sponsorship 14 (41,094,674,711) 440,529,291 (40,654,145,420) - Changes in payables to suppliers, employees and other payables 15 5,920,257,158 28,635,786 5,948,892,944 - Other cash outflows 17 (4,124,047,200) (545,329,291) (4,669,376,491) Net cash (used in)/generated by operating activities 30 (80,058,474,505) 182,000,000 (79,876,474,505) - Acquisition and construction of fixed assets and other long-term assets 31 (1,040,000,000) (182,000,000) (1,222,000,000) - Cash outflow for lending, buying debt instruments of other entities 33 (16,137,717,862) (129,000,000,000) (145,137,717,862) selling debt instruments of other entities 34 - 129,000,000,000 129,000,000,000 Net cash (used in)/generated by investing activities 40 (17,177,717,862) (182,000,000) (17,359,717,862) Nguyen Hoai Thu Vu Van Chinh Nguyen Duc Thuan Preparer Chief Accountant Director 24 April 2019 22 .} ．… ．… ．一 . . . . . . . . .PA盯11 二，．。。甲。，，。二。。。k．。二．，。二。T，。00 nkl 一REPORT OF INDEPENDENT AUDITORs oN .INTERNALCONTROL . . . 一 …． …． }. }. }. l. }. }. l. l. l. l. l. l. }. Deloitte Vietnam Company Ltd. 15thFloor, Vinaconex Tower, D e lo itte 34 Lang Ha Street, Lang Ha Ward, Dong Da District, Hanoi, Vietnam Tel :+84 24 6288 3568 Fax:+84 24 6288 5678 Website: www.deloitte.com/vn REPORT OF INDEPENDENT AUDITORS ON INTERNAL CONTROL To: The Management Council and Board of Directors Vietnam Environment Protection Fund Report on internal control We have audited, in accordance with International Standards on Auditing, the financial statements of Vietnam Environment Protection Fund (the "Fund") for the year ended 31 December 2018 and issued the independent auditors' report thereon dated 24 April 2019 expressing an unmodified opinion. In connection with our audit of the Fund's 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 financial statements as well as of internal control over financial reporting. Responsibilities ofBoard ofDirectors As stated in the Statement of the Board of Directors on page 2 and 3, the Board of Directors is responsible for designing and maintaining effective internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as over financial reporting for the purpose of properly preparing and presenting the financial statements so as to minimise errors and frauds; and take responsibility for its assertions as to the effectiveness of such internal control. Our Independence and Quality Control We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behavior. We apply International Standard on Quality Control 1 and accordingly maintain a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Auditor's Responsibilities 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 based on the evidence we have obtained. We conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements 3000, Assurance Engagements other than Audits and Reviews of Historical Financial Information ("ISAE 3000"), issued by the International Auditing and Assurance Standards Board. That standard requires that we plan and perform this engagement to obtain reasonable assurance about whether, in all material respects, the management has maintained effective internal control over compliance with the requirements that could have a direct and material financial effect on the financial statements as well as internal control over financial reporting. 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 U * Deloitte REPORT OF INDEPENDENT AUDITORS ON INTERNAL CONTROL (Continued) 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 opinion, as well as our findings as presented in the Management Letter on page 28 to page 32. Opinion In our opinion, the Board of Directors of the Fund 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 financial statements as well as over financial reporting for the year ended 31 December 2018. 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 24 April 2019 Hanoi, S.R. Vietnam 24 ■ ■ ■ ■ ■ ■ ■ ■ ■ . . ■ PART 111 ■ y, INDEPENDENT ASSURANCE REPORT ON C아래PLIANCE ■ ■ ■ ■ ■ ■ . ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ . ■ ■ ■ ■ VIETNAM ENVIRONMENT PROTECTION FUND 6th Floor, Map Publisher building, No. 85 Nguyen Chi Thanh Dong Da, Hanoi, Vietnam STATEMENT OF THE BOARD OF DIRECTORS ON COMPLIANCE The Board of Directors of Vietnam Environment Protection Fund ("Fund") is responsible for complying with Financing Agreement No. 5175-VN, laws and regulations applicable to the Fund. The Board of Directors confirms the following: 0 An effective internal control has been designed and maintained over compliance with Financing Agreement No. 5175-VN, laws and regulations applicable to the Fund; 0 The Fund has complied with Financing Agreement No. 5175-VN, laws and regulations applicable to the Fund that could have a direct and material financial effect on the Fund's financial statements for the year ended 31 December 2018; 0 The proceeds of the funds from World Bank were used only for the purpose of Financing Agreement No. 5175-VN; . The borrowers and executing agencies has complied with the financial covenants of the Agreement. For and on behalf of the Board of Director Nguyen Duc Thuan Director Hanoi, 24 April 2019 25 Deloitte Vietnam Company Ltd. 15thFloor, Vinaconex Tower, D elo itte 34 Lang Ha Street, Lang Ha Ward, Dong Da District, Hanoi, Vietnam Tel :+84 24 6288 3568 Fax:+84 24 6288 5678 Website: www.deloitte.com/vn INDEPENDENT ASSURANCE REPORT ON COMPLIANCE To: The Boards of Management and Directors Vietnam Environment Protection Fund Report on compliance We have audited, in accordance with International Standards on Auditing, the financial statements of Vietnam Environment Protection Fund (the "Fund") for the year ended 31 December 2018 and issued the independent auditors' report thereon dated 24 April 2019 expressingn an unmodified opinion. In connection with the audit of the financial statements, we also performed procedures on the Fund's compliance with Financing Agreement No. 5175-VN, laws and regulations that have a direct and material financial effect on the Fund's financial statements for the year ended 31 December 2018 (the "requirements"). Responsibilities of Board of Directors The Board of Directors is responsible for complying with Financing Agreement No. 5175-VN, laws and regulations applicable to the Fund. Our Independence and Quality Control We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior. We apply International Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Auditor's Responsibilities Our responsibility is to express an opinion on Fund's compliance based on the evidence we have obtained. We limited our tests of compliance to the requirements, and we did not test compliance with all laws and regulations applicable to the Fund. We conducted our reasonable assurance engagement in accordance with International Standard on Assurance Engagements 3000, Assurance Engagements other than Audits and Reviews of Historical Financial Information ("ISAE 3000"), issued by the International Auditing and Assurance Standards Board. That standard requires that we plan and perform this engagement to obtain reasonable assurance about whether, in all material respects, the Fund has complied with the requirements. An reasonable assurance engagement in accordance with ISAE 3000 to report on the compliance with the requirements at the Fund involves performing procedures to obtain evidence about whether the Fund's activities are free of material noncompliance with the requirements, including obtaining an understanding of the internal control relevant to the Fund's compliance with the requirements. The procedures selected depend on the auditor's judgment, including the assessment of risks that the Fund does not comply with the requirements and whether such noncompliance could have a direct and material financial effect on the Fund's 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 Fund. 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 descriptior ( DTTL and its member firms. Deloitte INDEPENDENT ASSURANCE REPORT ON COMPLIANCE (Continued) We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion, as well as our findings as presented in the Management Letter on page 29 to page 33. Opinion In our opinion: * The Fund 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 financial statements for the year ended 31 December 2018. * The proceeds of the funds from World Bank were used only for the purpose of Financing Agreement No. 5175-VN. * The borrowers and executing agencies has complied with the financial covenants of the Agreement. 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 24 April 2019 Hanoi, S.R. Vietnam 27