THANH CONG TEXTILE GARMENT INVESTMENT TRADING JOINT STOCK COMPANY AND ITS SUBSIDIARIES (Incorporated in the Socialist Republic of Vietnam)

Transcription

1 THANH CONG TEXTILE GARMENT INVESTMENT TRADING JOINT STOCK COMPANY AND ITS SUBSIDIARIES (Incorporated in the Socialist Republic of Vietnam) REVIEWED CONSOLIDATED FINANCIAL STATEMENTS For the six-month period ended 30 June 2012 August 2012

2 36 Tay Thanh, Tay Thanh Ward, Tan Phu District Ho Chi Minh City, S.R. Viet Nam TABLE OF CONTENTS CONTENTS PAGE(S) STATEMENT OF THE BOARD OF DIRECTORS 1 REVIEW REPORT 2 CONSOLIDATED BALANCE SHEET 3 5 CONSOLIDATED INCOME STATEMENT 6 CONSOLIDATED CASH FLOW STATEMENT 7 8 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 9 35

3 36 Tay Thanh, Tay Thanh Ward, Tan Phu District Ho Chi Minh City, S.R. Viet Nam STATEMENT OF THE BOARD OF DIRECTORS The Board of Directors of Thanh Cong Textile Garment Investment Trading Joint Stock Company ( the Company ) and its subsidiaries (to gather as the Group ) presents this report together with the Group s financial statements for the six-month period ended 30 June THE BOARDS OF MANAGEMENT AND DIRECTORS The members of the Boards of Management and Directors of the Company who held office during the period and at the date of this report are as follows: Board of Management Ms. Phan Thi Hue Mr. Kim Soung Gyu Mr. Kim Jung Heon Mr. Lee Eun Hong Ms. Nguyen Minh Hao Mr. Tran Nhu Tung Ms. Do Thanh Huong Chairman Vice Chairman Member Member Member Member Member Board of Directors Mr. Lee Eun Hong General Director Mr. Kim Dong Ju Deputy General Director (appointed on 10 April 2012) Mr. Kim Soung Gyu Deputy General Director (appointed on 10 April 2012) Mr. Kim Jung Heon Deputy General Director (resigned on 10 April 2012) THE BOARD OF DIRECTORS STATEMENT OF RESPONSIBILITY The Board of Directors of the Company is responsible for preparing the consolidated financial statements of each period, which give a true and fair view of the consolidated financial position of the Group and of its results and cash flows for the period. In preparing these consolidated 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 Group will continue in business; and design and implement and effective internal control system for the purpose of properly preparing the financial statements so as to minimise 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 Group and to ensure that the financial statements comply with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing relevant regulations in Vietnam. The Board of Directors is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board of Directors confirms that the Group has complied with the above requirements in preparing these consolidated financial statements. For and on behalf of the Board of Directors, Lee Eun Hong General Director 24 August

4 Deloitte Vietnam Company Limited 11th Floor, Saigon Trade Center 37 Ton Duc Thang Street, District 1 Ho Chi Minh City, Vietnam Tel : +(84-8) Fax: +(84-8) No. /Deloitte-AUDHCM-RE REVIEW REPORT To: The Shareholders, Boards of Management and Directors Thanh Cong Textile Garment Investment Trading Joint Stock Company. We have reviewed the consolidated balance sheet of Thanh Cong Textile Garment Investment Trading Joint Stock Company ( the Company ) and its subsidiaries (together as the Group ) as at 30 June 2012, the related statements of income and cash flows for the six-month period ended 30 June 2012 and the notes thereto (collectively referred to as "the consolidated financial statements") which were prepared on 24 August 2012, as set out from page 3 to page 35. The accompanying consolidated financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Vietnam. These consolidated financial statements are the responsibility of the Company s management. Our responsibility is to issue a report on these consolidated financial statements based on our review. The consolidated financial statements for the six-month ended 30 June 2011 and for the year ended 31 December 2011 were reviewed and audited by another auditor whose review report dated 29 August 2011 and auditors report dated 22 March 2012, expressed the unqualified opinions. We conducted our review in accordance with Vietnamese Standard on Auditing No.910 Engagements to review financial statements. This Standard requires that we plan and perform the review to obtain moderate assurance as to whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of Company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the accompanying consolidated financial statements do not give a true and fair view of, in all material respects, the financial position of the Group as at 30 June 2012 and the results of its operations and its cash flows for the six-month period ended 30 June 2012 in accordance with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing relevant regulations in Vietnam. Le Chi Nguyen Audit Partner CPA Certificate No. D.0049/KTV For and on behalf of Deloitte Vietnam Company Limited 24 August 2012 Ho Chi Minh City, S.R. Vietnam Bui Van Trinh Auditor CPA Certificate No.1808/KTV 2

5 CONSOLIDATED BALANCE SHEET As at 30 June 2012 FORM B 01-DN Unit: ASSETS Codes Notes 30/6/ /12/2011 A. CURRENT ASSETS 100 1,048,696,961,592 1,018,043,016,076 I. Cash and cash equivalents ,789,233,929 94,524,548, Cash ,389,233,929 57,296,548, Cash equivalents ,400,000,000 37,228,000,000 II. Short-term financial investments Short-term investments ,000,000,000 2,000,000, Provision for diminution in value of short-term investment 129 (2,000,000,000) (2,000,000,000) III. Short-term receivables ,766,190, ,784,101, Trade accounts receivable ,093,785, ,393,408, Advances to suppliers ,249,189,676 23,865,608, Other receivables ,021,312,636 19,733,848, Provision for short-term doubtful debts 139 (1,598,097,467) (1,208,764,552) IV. Inventories ,023,389, ,124,971, Inventories ,954,624, ,026,156, Provision for devaluation of inventories 149 (4,931,235,219) (12,901,184,679) V. Other short-term assets ,118,148,032 58,609,394, Short-term prepayments 151 1,431,651, ,529, Value added tax deductibles ,687,872,843 40,917,151, Taxes and other receivables from the State budget ,829,526,160 16,291,737, Other short-term assets 158 1,169,097,305 1,256,976,280 The accompanying notes set out on pages 9 to 35 are an integral part of these Consolidated Financial Statements 3

6 CONSOLIDATED BALANCE SHEET (Continued) As at 30 June 2012 FORM B 01-DN Unit: ASSETS (Continued) Codes Notes 30/6/ /12/2011 B. NON-CURRENT ASSETS 200 1,029,470,305,666 1,035,300,644,198 I. Fixed assets ,469,230, ,080,804, Tangible fixed assets ,164,771, ,455,185,762 - Cost 222 1,268,816,632,440 1,284,400,887,569 - Accumulated depreciation 223 (679,651,861,425) (670,945,701,807) 2. Finance lease assets ,383,618, Cost ,626,400, Accumulated depreciation 226 (242,781,928) - 3. Intangible assets ,893,776,126 79,849,314,993 - Cost ,018,753,446 84,532,732,554 - Accumulated amortisation 229 (5,124,977,320) (4,683,417,561) 4. Construction in progress ,027,064,442 9,776,303,914 II. Investment property ,061,049, ,947,437,730 - Cost ,280,625, ,068,172,060 - Accumulated depreciation 242 (2,219,575,843) (2,120,734,330) III. Long-term financial investments ,405,904, ,273,586, Investments in associates ,744,747, ,719,641, Other long-term investments ,352,050,000 4,468,600, Provision for diminution in value of longterm financial investments 259 (2,690,892,500) (2,914,654,500) IV. Other non-current assets ,297,661,569 86,191,968, Long-term prepayments ,555,965,304 82,690,728, Deferred tax assets ,387,997,245 2,147,419, Other long-term assets ,353,699,020 1,353,820,000 V. Goodwill ,236,459,539 9,806,846,671 TOTAL ASSETS 270 2,078,167,267,258 2,053,343,660,274 The accompanying notes set out on pages 9 to 35 are an integral part of these Consolidated Financial Statements 4

7 CONSOLIDATED BALANCE SHEET (Continued) As at 30 June 2012 FORM B 01-DN Unit: RESOURCES Codes Notes 30/6/ /12/2011 A. LIABILITIES 300 1,427,289,533,234 1,325,174,669,207 I. Current liabilities 310 1,034,374,871, ,723,630, Short-term loans and liabilities ,053,010, ,967,072, Trade accounts payable ,301,739, ,408,649, Advances from customers ,049,244,758 65,189,505, Taxes and amounts payable to State budget ,488, ,367, Payables to employees ,915,465,820 28,511,148, Accrued expenses 316 3,009,457,536 4,833,811, Other current payables ,492,970,093 37,481,892, Bonus and welfare funds 323 8,887,493,625 5,633,182,986 II. Long-term liabilities ,914,661, ,451,038, Other long-term payables ,876,000,000 17,876,000, Long-term loans and liabilities ,706,618, ,400,470, Provision for severance allowance ,332,043,797 21,156,568, Unearned revenue ,000,000 B. EQUITY ,168,002, ,053,014,238 I. Owners equity ,168,002, ,053,014, Share capital ,374,860, ,374,860, Share premium ,032,400,000 45,032,400, Treasury shares 414 (5,939,990,000) (5,939,990,000) 4. Investment and development funds ,423,233,440 7,611,529, Financial reserve funds ,106,726,995 30,898,924, Other funds ,086,185,164 9,482,283, Retained earnings ,084,586, ,593,006,421 C. MINORITY INTEREST ,709,731,998 5,115,976,829 TOTAL RESOURCES 440 2,078,167,267,258 2,053,343,660,274 OFF BALANCE SHEET ITEMS 30/6/ /12/ Foreign currencies - United States Dollars (USD) 5,734,199 3,378,466 - Japanese Yen (JPY) 104, ,282 Ho Chi Minh City, 24 August 2012 Pham Thi Thanh Thuy General Accountant Nguyen Minh Hao Chief Accountant Lee Eun Hong General Director The accompanying notes set out on pages 9 to 35 are an integral part of these Consolidated Financial Statements 5

8 CONSOLIDATED INCOME STATEMENT For the six-month period ended 30 June 2012 FORM B 02-DN Unit: ITEMS Codes Notes From 1/1/2012 to 30/6/2012 From 1/1/2011 to 30/6/ Gross revenue from goods sold and services rendered 01 1,249,488,453,146 1,207,469,315, Deductions 02 2,551,951, ,523, Net revenue from goods sold and services rendered (10 = 01-02) ,246,936,501,831 1,206,873,792, Cost of sales ,152,489,570, ,644,375, Gross profit from goods sold and services rendered (20 = 10-11) 20 94,446,931, ,229,417, Financial income ,363,568,781 17,877,187, Financial expenses ,039,663,537 83,714,923,130 In which: Interest expense 23 30,202,298,150 31,995,583, Selling expenses 24 28,236,033,587 25,821,238, General and administration expenses 25 41,988,770,920 43,569,039, Operating (loss)/profit {30 = 20 + (21-22) - ( )} 30 (4,453,968,012) 145,001,402, Other income 31 3,235,379,114 3,009,804, Other expenses ,635,061 1,193,326, Profit from other activities (40 = 31-32) ,015,744,053 1,816,477, Profit from associates 45 3,563,781,710 1,757,742, Profit before tax (50 = ) 50 2,125,557, ,575,622, Current corporate income tax expense ,977,919 18,919,008, Deferred corporate tax expense ,422,446 1,878,497, Profit after tax (60 = ) ,157, ,778,116, Attributable to the minority interests ,489,130 16,974, Attributable to the Group's shareholders ,668, ,761,142, Basic earnings per share ,862 Ho Chi Minh City, 24 August 2012 Pham Thi Thanh Thuy General Accountant Nguyen Minh Hao Chief Accountant Lee Eun Hong General Director The accompanying notes set out on pages 9 to 35 are an integral part of these Consolidated Financial Statements 6

9 CONSOLIDATED CASH FLOW STATEMENT For the six-month period ended 30 June 2012 FORM B 03-DN Unit: ITEMS Codes From 1/1/2012 to 30/6/2012 From 1/1/2011 to 30/6/2011 I. CASH FLOWS FROM OPERATING ACTIVITIES 1. Profit before tax 01 2,125,557, ,575,622, Adjustments for: - Depreciation and amortisation 02 27,126,387,847 26,978,050,975 - Provisions 03 (7,804,378,545) 11,199,403,108 - Unrealized foreign exchange loss 04 63,358,426 26,133,465,723 - Gain from investing activities 05 (6,839,093,616) (12,216,574,913) - Interest expense 06 30,202,298,150 31,995,583, Operating profit before movements in working capital 08 44,874,130, ,665,550,958 - (Increase)/decrease in receivables 09 (2,546,050,242) 17,251,892,255 - Decrease/(increase) in inventories 10 32,816,537,943 (132,151,496,518) - Increase/(decrease) in accounts payable 11 65,816,954,960 (142,140,803,716) - Decrease in prepaid expenses ,027,831 1,337,088,173 - Interest paid 13 (32,077,489,753) (32,451,522,455) - Corporate income tax paid 14 - (38,345,376,969) - Other cash inflows 15 41,476, ,603,609 - Other cash outflows 16 (7,982,703,955) (9,042,953,594) Net cash from/(used in) operating activities ,359,882,833 (102,638,018,257) II. CASH FLOWS FROM INVESTING ACTIVITIES 1. Acquisition of fixed assets 21 (18,005,643,811) (97,311,394,207) 2. Proceeds from disposal of fixed assets 22 2,212,443,181 11,647,559, Investments in other entities 25 (883,450,000) (72,100, Interest income received, dividends received 27 1,252,671, ,667,482 Net cash used in investing activities 30 (15,423,979,169) (85,222,266,803) The accompanying notes set out on pages 9 to 35 are an integral part of these financial statements 7

10 CONSOLIDATED CASH FLOW STATEMENT (Continued) For the six-month period ended 30 June 2012 FORM B 03-DN Unit: ITEMS Codes From 1/1/2012 to 30/6/2012 From 1/1/2011 to 30/6/2011 III. CASH FLOWS FROM FINANCING ACTIVITIES 1. Proceeds from borrowings ,210,236, ,738,453, Repayments of borrowings 34 (719,112,173,666) (473,447,718,251) 3. Finance lease principal payments 35 (1,210,846,182) (847,058,785) 4. Dividends paid 36 (31,258,988,000) (35,682,933,600) Net cash (used in)/from financing activities 40 (33,371,771,299) 125,760,742,502 Net increase/(decrease) in cash during the period 50 52,564,132,365 (62,099,542,558) Cash and cash equivalents at the beginning of the period 60 94,524,548, ,338,192,555 Effect of changes in foreign exchange rates 61 (299,447,309) 147,292,339 Cash and cash equivalents at the end of the period ,789,233,929 77,385,942,336 Supplemental non-cash disclosures: Cash outflows for dividend paid during the period exclude an amount of 67,024,928,200 (30/6/2011: 31,329,681,400) representing an appropriation for dividend payable during the period that has not yet been paid. Consequently, changes in accounts payable have been adjusted by the same amount. Ho Chi Minh City, 24 August 2012 Pham Thi Thanh Thuy General Accountant Nguyen Minh Hao Chief Accountant Lee Eun Hong General Director The accompanying notes set out on pages 9 to 35 are an integral part of these financial statements 8

11 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FORM B 09-DN 1. GENERAL INFORMATION Structure of ownership Thanh Cong Textile Garment Investment Trading Joint Stock Company ( the Company ) was incorporated in Vietnam as a joint stock Company under Business Registration Certificate No dated 23 June 2006 issued by the Department of Planning and Investment of Ho Chi Minh City and amendeds. According to 10 th amended Business Registration Certificate No dated 13 July 2011 issued by the Department of Planning and Investment of Ho Chi Minh City, the Company's share capital is 447,374,860,000 and E-land Asia Holding Pte Ltd a company incorporated in Singapore is the Company s main shareholder. The number of the Company s employees as at 30 June 2012 was 4,205 (2011: 4,282). The principal activities of the Company are manufacture and garment trading, details are as follows: - Manufacture and trade cotton, fiber, garment products, footwear, machinery and equipment, spare parts, raw materials, chemicals (excluding strong toxic chemicals), dye, packing for garment and textile industry; - Trade cold equipment, air-conditioners, radios and televisions, building materials, and transport vehicles; - Provide services of installation and repairs for machinery and equipment; - Trade road transport and merchandise transport; - Trade real estates, commercial centres; - Lease office buildings, factories, freight yard, machinery and equipment; - Act as a commercial brokerage; - Act as an agent for goods trading and goods consignment; - Invest, build, trade, assemble, repair, prepare overall estimates for civil/industrial construction works, infrastructure of industrial parks and tourist area; - Short-term accommodation services; - Restaurant and foods services; - Retails of beverage in the specialised shops; - Retails of foods in the specialised shops; - Trade of real estate, land use rights owned or leased; and - Other retails. Details of Thanh Cong Textile Garment Investment Trading Joint Stock Company' subsidiaries and associates as at 30 June 2012 are as follows: Subsidiaries Name of subsidiaries Thanh Cong Medical Center Joint Stock Company ( Thanh Cong Medical Center ) Thanh Quang Corporation ( Thanh Quang ) Place of incorporation (or registed place) and operation Tan Phu District, Ho Chi Minh City Tan Phu District, Ho Chi Minh City Proportion of ownership (%) Charter capital as at 30/6/2012 Principal activities ,000,000,000 Medical servicing and trading drugs and medical equipment ,000,000,000 Infrastructures, manufacturing and trading fabric 9

12 Associates Name of associates Thanh Chi Corporation ( Thanh Chi ) Thanh Cong Securities Joint Stock Company ( TCSC ) Thanh Phuc Investment Construction Corporation ( Thanh Phuc ) Vung Tau Golf Tourism Joint Stock Company ( Golf Vung Tau ) Place of incorporation (or registed place) and operation Proportion of ownership (%) Charter capital as at 30/6/2012 Pricipal activities Vung Tau City ,890,000,000 Trading and exploiting sand and stone District 3, Ho Chi Minh City Tan Phu District, Ho Chi Minh City Ba Ria, Vung Tau City ,000,000,000 Brokerage, self -trading securities, securities guaranty and securities investment consultancy ,000,000,000 Constructing and managing projects ,000,000,000 Providing tourism and entertainment services 2. ACCOUNTING CONVENTION AND FISCAL YEAR Accounting convention The accompanying consolidated financial statements, expressed in Vietnam Dong (), are prepared under the historical cost convention and in accordance with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing relevant regulations in Vietnam. The accompanying consolidated financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Vietnam. Fiscal year The Group s fiscal year begins on 1 January and ends on 31 December. The interim consolidated financial statements are prepared for the period from 1 January to 30 June. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies, which have been adopted by the Company in the preparation of these consolidated financial statements, are as follows: Estimates The preparation of consolidated financial statements in conformity with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing relevant regulations in Vietnam requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. 10

13 Basic of consolidation The consolidated financial statements incorporate the financial statements of the Company and enterprises controlled by the Company (its subsidiaries) up to the end of each reporting period. Control is achieved where the Company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by the Company. All inter-company transactions and balances between group enterprises are eliminated on consolidation. Minority interests in the net assets of consolidated subsidiaries are identified separately from the Company s equity therein. Minority interests consist of the amount of those interests at the date of the original business combination and the minority s share of changes in equity since the date of the combination. Losses applicable to the minority in excess of the minority s interest in the subsidiary s equity are allocated against the interests of the Company except to the extent that the minority has a binding obligation and is able to make an additional investment to cover the losses. Goodwill Goodwill represents the excess of the cost of acquisition over the Company s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of a subsidiary, associate or jointly controlled entity at the date of acquisition. Goodwill is recognised as an asset and is amortised on the straight-line basis over its estimated period of benefit of 10 years. Goodwill arising on the acquisition of subsidiaries and jointly controlled entities is presented separately as an intangible asset in the balance sheet. On disposal of a subsidiary, associate or jointly controlled entity, the attributable amount of unamortised goodwill is included in the determination of the profit or loss on disposal. Financial instruments Initial recognition Financial assets At the date of initial recognition, financial assets are recognized at cost plus transaction costs that are directly attributable to the acquisition of the financial assets. Financial assets of the Group comprise cash and cash equivalents, receivables and other receivables, investments in securities of public and listed companies and deposits. Financial liabilities At the date of initial recognition financial liabilities are recognized at cost net of transaction costs that are directly attributable to the issue of the financial liabilities. Financial liabilities of the Group comprise borrowings, trade payables and other payables, and accruals. Re-measurement after initial recognition Currently there are no requirements for the re-measurement of the financial instruments after initial recognition. 11

14 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. Provision for doubtful debts Provision for doubtful debts is made for receivables that are overdue for six months or more, or when the debtor is in dissolution, in bankruptcy, or is experiencing similar difficulties and so maybe unable to repay the debt. Inventories Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution. The evaluation of necessary provision for inventory obsolescence follows current prevailing accounting regulations which allow provisions to be made for obsolete, damaged, or sub-standard inventories and for those which have book value higher than net realisable value as at the balance sheet date. Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less accumulated depreciation. The cost of purchased tangible fixed assets comprises its purchase price and any directly attributable costs of bringing the assets to its working condition and location for its intended use. The costs of self-constructed or manufactured assets are the actual construction or manufacturing cost plus installation and test running costs. Tangible fixed assets are depreciated using the straight-line method over their estimated useful lives as follows: 12 Years Buildings and structures Machine and equipment 7-15 Motor vehicles 10 Office equipment 7-15 Others 7-22 Intangible assets and amortisation Intangible assets represent land use rights, patents, and software. Intangible assets are stated at cost less accumulated amortisation and are amortised on the straight-line basis over their estimated useful lives. Definite land use rights are carried at cost and amortised on the straight-line basis over their estimate useful lives from years. Indefinite land use rights are carried at cost and not amortised. Patents and software are amortised on the straight-line basis over their estimate useful lives from 4-10 years. Leasing Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss, unless they are

15 directly attributable to qualifying assets, in which case they are capitalised in accordance with the Group s general policy on borrowing costs. Leases where substantially all the rewards and risks of ownership of assets remain with the leasing Group are accounted for as operating leases. Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term. Assets held by the Group under finance leases are machinery which depreciated over the period of 15 years. Construction in progress Properties in the course of construction for production, rental or administrative purposes, or for the purposes not yet determined, are carried at cost. Cost includes professional fees, and for qualifying assets, borrowing costs dealt with in accordance with the Group s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Investment property Investment properties, which are composed of land use rights and buildings and structures held by the Group to earn rentals or for capital appreciation or both, are stated at cost less accumulated depreciation. The cost of purchased investment properties comprises its purchase price and any directly attributable expenditures, such as professional fees for legal services, property transfer taxes and other related transaction costs. The costs of self-constructed investment properties are the finally accounted construction or directly attributable costs of the properties. Building and structures are depreciated using the straight-line method over their estimated useful lives of 50 years. Definite land use rights are amortised using the straight-line method over number of years in accordance with the terms indicated in each land use right certificate. Land use rights which are granted for an indefinite term are carried at cost and not amortised. Investments in associates An associate is an entity over which the Company has significant influence and that is neither a subsidiary nor an interest in joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but not control or joint control over those policies. The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting. Interests in associates are carried in the balance sheet at cost as adjusted by post-acquisition changes in the Company s share of the net assets of the associate. Losses of an associate in excess of the Company's interest in that associate (which includes any long-term interests that, in substance, form part of the Company's net investment in the associate) are not recognised. Other long-term investments Other long-term investments include investments in securities and investments in companies with the proportion of ownership interest less than 20%. Other long-term investments are recognised on a trade date basis and are initially measured at cost including directly attributable transaction costs. At the subsequent reporting dates, other long-term investments are measured at cost, less the amount of diminution in value of investments. Provision for diminution in value of other long-term investments is made in accordance with current prevailing accounting regulations. Long-term prepayments Long-term prepayments comprise prepaid land rentals at Tan Binh Industrial Zone Ho Chi Minh City, Xuyen A Industrial Zone Long An Province, Nhi Xuan Industrial Zone Hoc Mon District, Ho Chi Minh City and Trang Bang Industrial Zone Tay Ninh Province, and other prepayments. Prepaid land 13

16 rentals are charged to income statement using the straight-line method over the lease term from 45 to 58 years. Revenue recognition Revenue from the sale of goods is recognised when all five (5) following conditions are satisfied: (a) the Group has transferred to the buyer the significant risks and rewards of ownership of the goods; (b) the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (c) the amount of revenue can be measured reliably; (d) it is probable that the economic benefits associated with the transaction will flow to the Group; and (e) the costs incurred or to be incurred in respect of the transaction can be measured reliably. Revenue of a transaction involving the rendering of services is recognised when the outcome of such transactions can be measured reliably. Where a transaction involving the rendering of services is attributable to several periods, revenue is recognised in each period by reference to the percentage of completion of the transaction at the balance sheet date of that period. The outcome of a transaction can be measured reliably when all four (4) following conditions are satisfied: (a) the amount of revenue can be measured reliably; (b) it is probable that the economic benefits associated with the transaction will flow to the Group; (c) the percentage of completion of the transaction at the balance sheet date can be measured reliably; and (d) the costs incurred for the transaction and the costs to complete the transaction can be measured reliably. Interest income is accrued on a time basis, by reference to the principal outstanding and at the applicable interest rate. Dividend income from investments is recognised when the Group s right to receive payment has been established. Foreign currencies The Group applies the method of recording foreign exchange differences in accordance with Vietnamese Accounting Standard No. 10 (VAS 10) Effects of changes in foreign exchange rates. Accordingly, transactions arising in foreign currencies are translated at exchange rates ruling at the transaction date. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rates of exchange prevailing on the balance sheet date. Exchange differences arising are recognised in the income statement. Unrealised exchange gains at the balance sheet date are not treated as part of distributable profit to shareholders. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the cost of those assets. Borrowing costs are recognised in the income statement when incurred. Provisions Provisions are recognised when the Group has a present obligation as a result of a past event, and it is probable that the Group will be required to settle that obligation. Provisions are measured at the management s best estimate of the expenditure required to settle the obligation at the balance sheet date. 14

17 Tax Income tax expense represents the sum of the tax currently payable and deferred tax.the tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Deferred tax is recognised on significant differences between carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using balance sheet liability method. Deferred tax liabilities are generally recognised for all temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilised. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis. The determination of the current tax payable and deferred tax 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. Appropriation of funds and dividend distribution Dividend distribution to the Group s shareholders is recognised as a liability in the Group s financial statements in the period in which the dividends are approved by the Group s shareholders. Net profit after tax is available for appropriation to shareholders after approval by the shareholders at the Annual General Meeting, and after making appropriation to funds in accordance with the Group's Charter and Vietnamese regulatory requirements. 4. CASH AND CASH EQUIVALENTS 30/6/ /12/2011 Cash on hand 1,479,394,783 1,011,440,182 Cash in bank 122,909,839,146 56,285,108,691 Cash equivalents 22,400,000,000 37,228,000, ,789,233,929 94,524,548,873 Cash equivalents represent short-term bank deposits with an original maturity of 3 months or less. This fixed term deposits earn average interest rate of 9% per annum (2011: 14% per annum). 5. SHORT-TERM INVESTMENTS Short-term investments represent a loan to third party in The investment has been fully provided provision as at 30 June 2012 in according to the Group s accounting policy. 15

18 6. OTHER RECEIVABLES 30/6/ /12/2011 Third parties 11,418,937,636 17,651,948,310 Related parties 2,602,375,000 2,081,900,000 14,021,312,636 19,733,848, TAXS AND OTHER RECEIVABLES FROM THE STATE BUDGET Taxes and other receivables from the State budget represent the overpaid corporate income tax during the year 2011 and export - import duties paid in advance according to announcement of Customs Authority. 8. INVENTORIES 30/6/ /12/2011 Goods in transit 133,068,849,753 65,116,270,653 Raw materials 193,469,986, ,641,022,794 Tools and supplies 6,107,294 5,187,294 Work in progress 125,002,099, ,443,212,949 Finished goods 207,707,285, ,136,608,247 Merchandise 2,279,735,686 7,279,327,746 Goods on consignment 8,420,560,126 11,404,526, ,954,624, ,026,156,215 Provision for devaluation of inventories (4,931,235,219) (12,901,184,679) 665,023,389, ,124,971,536 Movement of provision for devaluation of inventories during the period/year as follow: At 1 January 12,901,184,679 1,986,590,220 Provision for the period/year 653,141,097 24,602,156,150 Reversal in the period/year (8,623,090,557) (13,687,561,691) At 30 June/31 December 4,931,235,219 12,901,184,679 16

19 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN 9. TANGIBLE FIXED ASSETS Buildings and Machine and Motor Office structures equipment vehicles equipment Others Total COST As at 1/1/ ,465,658, ,847,561,195 15,548,033,250 12,745,193, ,794,441,192 1,284,400,887,569 - Purchases - 802,690, ,305, ,619,900 2,101,615,154 - Transfer from construction in progress - 153,617, ,617,894 - Disposals (105,925,000) (9,298,473,212) (236,095,238) (8,198,994,727) (17,839,488,177) As at 30/6/ ,359,733, ,505,395,877 15,311,938,012 13,721,498, ,918,066,365 1,268,816,632,440 ACCUMULATED DEPRECIATION As at 1/1/ ,025,939, ,151,526,897 6,513,847,050 9,072,798, ,181,589, ,945,701,807 - Charge for the period 2,730,755,843 19,100,439, ,614, ,263,170 3,428,957,040 26,326,029,597 - Disposals (72,138,730) (9,293,450,248) (133,395,251) (8,120,885,750) (17,619,869,979) As at 30/6/ ,684,556, ,958,516,021 6,948,065,971 9,571,061,971 95,489,661, ,651,861,425 NET BOOK VALUE As at 30/6/ ,675,176, ,546,879,856 8,363,872,041 4,150,436,847 45,428,405, ,164,771,015 As at 31/12/ ,439,719, ,696,034,298 9,034,186,200 3,672,394,763 48,612,851, ,455,185,762 As noted further in Note 20 and 24, the Group has pledged its buildings and machine, equipment, which has a carrying value of approximately 483 billion as at 30 June 2012 (31 December 2011: 504 billion), to secure banking facilities granted to the Group. The cost of the Group s tangible fixed assets includes 395 billion which have been fully depreciated but which are still in use (2011: 408 billion). 17

20 10. FINANCE LEASE ASSETS Machine and equipment COST As at 1/1/ Transfer from construction in progress 13,626,400,555 As at 30/6/ ,626,400,555 ACCUMULATED DEPRECIATION As at 1/1/ Charge for the period 242,781,928 As at 30/6/ ,781,928 NET BOOK VALUE As at 30/6/ ,383,618,627 As at 31/12/ INTANGIBLE ASSETS Land use right Patents Software Total COST As at 1/1/ ,847,723,787 1,658,858,567 1,026,150,200 84,532,732,554 Purchases ,000,000 45,000,000 Transfer from construction in progress - - 1,441,020,892 1,441,020,892 As at 30/6/ ,847,723,787 1,658,858,567 2,512,171,092 86,018,753,446 ACCUMULATED AMORTISATION As at 1/1/2012 3,634,131, ,732, ,554,322 4,683,417,561 Charge for the period 161,295, ,168, ,095, ,559,759 As at 30/6/2012 3,795,426, ,901, ,649,710 5,124,977,320 NET BOOK VALUE As at 30/6/ ,052,297, ,957,525 1,990,521,382 80,893,776,126 As at 31/12/ ,213,592,615 1,001,126, ,595,878 79,849,314,993 As noted further in Note 20 and 24, the Group has pledged land use rights with a carrying value of approximately 38 billion as at 30 June 2012 (31 December 2011: 38 billion) to secure banking facilities granted to the Group. 18

21 12. INVESTMENT PROPERTY Building Land for lease use right Total COST As at 1/1/ ,384,706, ,683,465, ,068,172,060 Purchases 236,190, ,190,506 Others (23,736,986) - (23,736,986) As at 30/6/ ,597,159, ,683,465, ,280,625,580 ACCUMULATED DEPRECIATION As at 1/1/2012 2,103,638,338 17,095,992 2,120,734,330 Charge for the period 115,937,504 79, ,016,563 Others (17,175,050) - (17,175,050) As at 30/6/2012 2,202,400,792 17,175,051 2,219,575,843 NET BOOK VALUE As at 30/6/2012 9,394,758, ,666,290, ,061,049,737 As at 31/12/2011 9,281,067, ,666,369, ,947,437,730 As noted further in Note 20 and 24, the Group has pledged investment property with a carrying value of approximately 110 billion as at 30 June 2012 (31 December 2011: 110 billion) to secure banking facilities granted to the Group As at 30 June 2012, the Company s management has not determined fair value of the investment property due to the intention of holding for a long-term and there is no basis for determination. 13. CONSTRUCTION IN PROGRESS As at 1 January 9,776,303,914 19,213,235,763 Additions 17,471,799,869 95,427,361,171 Transfer to tangible fixed assets (153,617,894) (11,524,071,037) Transfer to finance lease assets (13,626,400,555) - Transfer to intangible assets (1,441,020,892) - Transfer to investment properties - (90,033,728,902) Other transfers - (3,306,493,081) As at 30 June 12,027,064,442 9,776,303,914 The total interest expense which had been capitalized into the cost of construction in progress during the period was 1,593,967,718. As at 30 June 2012, construction in progress comprises the following major projects: 30/6/ /12/2011 Thanh Cong Tower 1 9,319,455,850 7,675,488,132 Nhi Xuan Industrial Park 234,000, ,000,000 ERP 1,995,699,501 - Others 477,909,091 1,866,815,782 12,027,064,442 9,776,303,914 19

22 14. INVESTMENTS IN ASSOCIATES 30/6/ /12/2011 Cost of investment in associates 112,940,102, ,940,102,000 Share of post-acquisition profits, net of dividends received 5,804,645,111 2,779,539, ,744,747, ,719,641,292 30/6/ /12/2011 Total assets 480,873,232, ,794,356,546 Total liabilities 68,241,008,135 79,785,413,765 Net assets 412,632,224, ,008,942,781 Group s share of associates net assets 118,744,747, ,719,641,292 From 1/1/2012 to 30/6/2012 From 1/1/2011 to 30/6/2011 Net profit 12,514,701,867 5,115,072,678 Group s share of associates net profit 3,563,781,710 1,757,742, OTHER LONG-TERM INVESTMENTS 30/6/ /12/2011 Viet Thang Textile Joint Stock Company 125,000, ,000,000 Thang Loi Textile and Garment Company 1,576,000,000 1,576,000,000 Hue Garment and Textile Company 318,000, ,000,000 SY Vina Joint Stock Company 883,450,000 - Vietcombank 2,449,600,000 2,449,600,000 5,352,050,000 4,468,600,000 Provision for other long-term investments (2,690,892,500) (2,914,654,500) Net other long-term investments 2,661,157,500 1,553,945,500 During the period, the Group has reversed provision for other long-term investments with the amount of 223,762, LONG-TERM PREPAYMENTS As at 1 January 82,690,728,645 85,127,047,468 Additions 21,836,900 57,452,996 Allocated to expenses during the period/year (1,156,600,241) (2,493,771,819) As at 30 June/31 December 81,555,965,304 82,690,728,645 20

23 Detail of long-term prepayments are as follows: 30/6/ /12/2011 Land rental expenses 81,419,396,445 82,465,962,765 Others 136,568, ,765,880 81,555,965,304 82,690,728, DEFERRED TAX The followings are the major deferred tax assets and liabilities recognized by the Group, and the movements thereon, during the current and prior years: Provisions Foreign exchange Total and accruals difference As at 1 January ,698,683, ,575,836 4,504,259,417 Credit for the year (1,671,518,869) (685,320,857) (2,356,839,726) As at 31 December ,027,164, ,254,979 2,147,419,691 Credit for the period (639,167,467) (120,254,979) (759,422,446) As at 30 June ,387,997,245-1,387,997, OTHER LONG-TERM ASSETS Other long-term assets represent deposit to Kexim Vietnam Leasing Co., Ltd as guarantee for finance lease contract. 19. GOODWILL As at 1 January 9,806,846,671 10,850,669,173 Addition during the period/year - 94,587,085 Allocation for the period/year (570,387,132) (1,138,409,587) As at 30 June/31 December 9,236,459,539 9,806,846,671 Goodwill arising on the acquisition of 24,75% shares of Thanh Cong Securities Joint Stock Company. An associate company. was recognized at the acquisition date. This is amortized using the straight-line basis over ten (10) years in accordance with the Company s policies. 21

24 20. SHORT-TERM LOANS AND LIABILITIES 30/6/ /12/2011 Short-term borrowings 538,021,833, ,669,509,205 - Far East National Bank 32,515,460,994 16,619,557,845 - Vietcombank 299,833,096, ,288,274,966 - Standard Chartered Bank 92,146,891,855 57,964,241,729 - BIDV - Ho Chi Minh City Branch 37,175,976,971 47,015,731,307 - HSBC - Ho Chi Minh City Branch 42,305,452,239 31,674,496,544 - VIB - Ho Chi Minh City Branch - 13,843,499,115 - Vietinbank - Ho Chi Minh City Branch 34,044,954,135 55,411,083,653 - Sacombank - 14,852,624,046 Current portion of long-term loans 95,031,177,658 92,297, 563, ,053,010, ,967,072,824 The Group has short-term credit facilities from local banks to finance its working capital requirements, details are as follow: Lenders Credit limit Credit term Interest rates Secured by - Far East National Bank USD 3,300,000 Less than 4 months SIBOR + 1.7% per annum Trade receivables and inventories - Vietcombank 400,000,000,000 Less than 6 months Floating rate Fixed assets - Standard Chartered Bank USD 10,000,000 Less than 4 months LIBOR 3 months + 3.5% Without collaterals - BIDV - Ho Chi Minh City Branch 120,000,000,000 Less than 6 months Floating rate Fixed assets - HSBC - Ho Chi Minh City Branch USD 2,500,000 Less than 4 months Floating rate Without collaterals - Vietinbank - Ho Chi Minh City Branch 200,000,000,000 Less than 6 months Floating rate Fixed assets 21. TAXES AND AMOUNTS PAYABLE TO STATE BUDGET 30/6/ /12/2011 Personal income tax 662,570, ,367,618 Others 2,918, ,488, ,367, OTHER CURRENT PAYABLES 30/6/ /12/2011 Social and health insurance 3,012,681,515 2,953,903,631 Dividends payable 67,024,928,200 31,328,362,200 Other payable 3,455,360,378 3,199,627,076 73,492,970,093 37,481,892,907 22

25 23. OTHER LONG-TERM PAYABLES Other long term payables represent the amount payable to State Treasury for the increase in value of a number of land lots which were granted to the Company or leased when it was equitized in In accordance with the asset revaluation report dated 28 September 2005, among other land lots, there were 5 land lots with the total areas of 36,716 sqm were revalued. The amount will be paid once the Company completes the transfer of title of the land use rights to the Company s name. 24. LONG-TERM LOANS AND LIABILITIES 30/6/ /12/2011 Long-term loans 349,642,185, ,400,470,210 - Far East National Bank 6,576,846,105 13,153,688,668 - Vietcombank - Ho Chi Minh City Branch 12,920,778,160 16,279,489,424 - VIB - Ho Chi Minh City Branch 17,311,194,074 24,234,421,275 - Vietinbank 161,205,024, ,072,528,000 - E-Land Asia Holding Pte Ltd 145,796,000, ,796,000,000 - VDB - Ho Chi Minh City Branch 5,832,342,843 6,864,342,843 Long-term obligations under finance leases 8,064,432, Kexim Vietnam Leasing Co., Ltd 8,064,432, ,706,618, ,400,470,210 The long-term loans are from local banks and shareholders obtained by the Group, details are as follows: Lenders Contract No. Credit limits Credit term Interest rates E-land Asia Holding Pte Ltd 04/2010 USD 1,000,000 3 years From 0.78% to 0.99% p.a E-land Asia Holding Pte Ltd 01/2011 USD 6,000,000 3 years From 0.78% to 0.99% p.a USD 3,300,000 for both of short-term and long-term loans SIBOR 6 months plus Far East National Bank years 2%/p.a SIBOR 6 months plus Vietcombank 00004/TD1/07CD 21,700,000,000 7 years 1.85%/p.a Vietcombank 0032/ĐTDA/10CD CHF 1,056,000 5 years Floating rate 12 month saving accounts plus the margin or SIBOR 6 months plus the margin Vietcombank 0015/TD1/07CN years Vietnam Development Bank 46/HĐTD TW 22,000,000, years 3% per annum 0041/HDTD2- SIBOR 6 months + VIB VIB625/07 USD 3,489,000 7 years 2%/p.a Vietinbank Kexim Vietnam Leasing Co., Ltd 12 month saving accounts plus 4.8%/p.a or SIBOR USD 12 months plus 4%/p.a /03/HDTD.TDH 315,000,000,000 8 years K USD 634, years LIBOR 3 months plus 4%/p.a These loans are secured by fixed assets financed by the loans. 23