THANH CONG TEXTILE GARMENT INVESTMENT TRADING JOINT STOCK COMPANY AND ITS SUBSIDIARIES

Transcription

1 THANH CONG TEXTILE GARMENT INVESTMENT TRADING JOINT STOCK COMPANY AND ITS SUBSIDIARIES (Incorporated in the S.R of Vietnam) AUDITED CONSOLIDATED FINANCIAL STATEMENTS For the year ended 31 December 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 INDENDEPENT AUDITORS 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

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5 CONSOLIDATED BALANCE SHEET As at 31 December 2012 FORM B 01-DN/HN Unit: ASSETS Codes Notes 31/12/ /12/2011 A. CURRENT ASSETS ,614,042,123 1,018,043,016,076 I. Cash and cash equivalents ,638,555,639 94,524,548, Cash ,438,555,639 57,296,548, Cash equivalents ,200,000,000 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 ,952,633, ,784,101, Trade accounts receivable ,249,008, ,393,408, Advances to suppliers ,502,166,072 23,865,608, Other receivables ,383,176,227 19,733,848, Provision for short-term doubtful debts 139 (1,181,717,467) (1,208,764,552) IV. Inventories ,213,521, ,124,971, Inventories ,927,427, ,026,156, Provision for devaluation of inventories 149 (713,906,308) (12,901,184,679) V. Other short-term assets ,809,331,872 58,609,394, Short-term prepayments 151 1,059,348, ,529, Value added tax deductibles ,996,640,513 40,917,151, Taxes and other receivables from State budget ,885,376,357 16,291,737, Other short-term assets 158 1,867,966,355 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 31 December 2012 FORM B 01-DN/HN Unit: ASSETS (Continued) Codes Notes 31/12/ /12/2011 B. NON-CURRENT ASSETS 200 1,013,182,414,019 1,035,300,644,198 I. Fixed assets ,781,979, ,080,804, Tangible fixed assets ,480,757, ,455,185,762 - Cost 222 1,273,571,415,797 1,284,400,887,569 - Accumulated depreciation 223 (705,090,658,680) (670,945,701,807) 2. Finance lease assets ,927,358, Cost ,626,400, Accumulated depreciation 226 (699,041,680) - 3. Intangible assets ,063,614,408 79,849,314,993 - Cost ,840,190,189 84,532,732,554 - Accumulated amortisation 229 (5,776,575,781) (4,683,417,561) 4. Construction in progress ,310,248,891 9,776,303,914 II. Investment property ,944,685, ,947,437,730 - Cost ,280,625, ,068,172,060 - Accumulated depreciation 242 (2,335,940,455) (2,120,734,330) III. Long-term financial investments ,923,004, ,080,433, Investments in associates ,323,622, ,526,487, Other long-term investments ,352,050,000 4,468,600, Provision for diminution in value of longterm financial investments (2,752,668,000) (2,914,654,500) IV. Other non-current assets ,532,745,379 86,191,968, Long-term prepayments ,467,811,140 82,690,728, Deferred tax assets ,690,457,711 2,147,419, Other long-term assets ,374,476,528 1,353,820,000 TOTAL ASSETS 270 1,965,796,456,142 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

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9 CONSOLIDATED CASH FLOW STATEMENT For the year ended 31 December 2012 FORM B 03-DN/HN Unit: ITEMS Codes I. CASH FLOWS FROM OPERATING ACTIVITIES 1. (Loss)/profit before tax 01 (20,428,387,677) 117,937,344, Adjustments for: - Depreciation and amortisation 02 54,552,474,431 53,856,808,779 - Provisions 03 (12,376,311,956) 11,250,492,304 - Unrealized foreign exchange (gain)/loss 04 (1,295,101,727) 23,867,360,686 - Gain from investing activities 05 (10,060,246,072) (17,036,134,548) - Interest expense 06 57,856,496,247 67,553,158, Operating profit before movements in working capital 08 68,248,923, ,429,030,994 - Changes in receivables 09 (17,379,861,794) 16,322,773,902 - Changes in inventories 10 91,843,734,832 (175,021,736,154) - Changes in accounts payable 11 23,600,741,904 (137,871,074,398) - Changes in prepaid expenses 12 2,447,872,204 2,393,503,423 - Interest paid 13 (58,868,065,923) (66,499,238,687) - Corporate income tax paid 14 - (43,279,833,251) - Other cash inflows 15 15,866, Other cash outflows 16 (8,978,272,219) (10,094,217,273) Net cash from/(used in) operating activities ,930,939,035 (156,620,791,444) II. CASH FLOWS FROM INVESTING ACTIVITIES 1. Acquisition of fixed assets 21 (27,363,467,692) (99,863,658,781) 2. Proceeds from disposal of fixed assets 22 2,546,634,095 11,927,941, Cash recovered from lending, selling debt instruments of other entities ,000, Investments in other entities 25 (883,450,000) (72,100,000) 5. Interest income received, dividends received 27 2,127,918, ,427,582 Net cash used in investing activities 30 (23,572,365,165) (86,570,389,459) The accompanying notes set out on pages 9 to 35 are an integral part of these financial statements 7

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11 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FORM B 09-DN/HN 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 as amended. 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 31 December 2012 was 4,286 (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 31 December 2012 are as follows: Subsidiaries Place of incorporation (or register place) and Name of subsidiaries operation Thanh Cong Medical Center Joint Stock Company ( Thanh Cong Medical Center ) Thanh Quang Corporation ( Thanh Quang ) Tan Phu District, Ho Chi Minh City Tan Phu District, Ho Chi Minh City Proportion of ownership (%) Charter capital as at 31/12/2012 Principal activities ,700,000,000 Medical servicing and trading drugs and medical equipment ,000,000,000 Infrastructures, manufacturing and trading fabric 9

12 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN Associates Place of incorporation (or register place) and Name of associates operation 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 ) Proportion of ownership (%) Charter capital as at 31/12/2012 Principal 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 financial year begins on 01 January and ends on 31 December. 3. ADOPTION OF NEW ACCOUNTING GUIDANCE On 24 October 2012, the Ministry of Finance issued Circular No. 179/2012/TT-BTC ( Circular 179 ) providing guidance on recognition, measurement and treatment of foreign exchange differences in enterprises. Circular 179 came into effect from 10 December 2012 and is applied from financial year Circular 179 provides detailed guidance on the exchange rates applicable to payment and revaluation of monetary items denominated in foreign currencies. According to the Board of Directors assessment, Circular 179 has immaterial effect on the Group s financial statements for the year ended 31 December SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies, which have been adopted by the Group in the preparation of these consolidated financial statements, are as follows: 10

13 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN 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 financial year. Although these accounting estimates are based on the management s best knowledge, actual results may differ from those estimates. 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 enterprises 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 s 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 (see below) 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. 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, trade 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 obligations under finance leases, borrowings, trade 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. 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. 11

14 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN 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: 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 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

15 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN 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. Where a group entity transacts with an associate of the Company, unrealised profits and losses are eliminated to the extent of the Company s interest in the relevant associate. 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 associate entity at the date of acquisition. Goodwill is amortised on the straight-line basis over its estimated period of benefit of 10 years. Goodwill arising on the acquisition of an associate is included within the carrying amount of the associate. 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. 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 13

16 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN 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 (allocated within 2 years). Prepaid land 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. 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 Company 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 and Circular No. 179/2012/TT-BTC dated 24 October 2012 by the Ministry of Finance providing guidance on recognition, measurement and treatment of foreign exchange differences in enterprises. Accordingly, transactions arising in foreign currencies are translated at exchange rates ruling at the transaction date. The balance of monetary items denominated in foreign currencies as at the balance sheet 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. 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. All other borrowing costs are recognised in the income statement when incurred. 14

17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN 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. Severance allowance payable The severance allowance for employees is accrued at the end of each reporting period for all employees having worked at the Company for more than 12 months as of 31 December 2008 with the allowance made for each year of service up to 31 December 2008 equaling to a half of an average monthly salary under the Labour Code, Social Insurance Code and relevant guiding documents. From 1 January 2009, the average monthly salary used for calculation of severance allowance shall be adjusted to be the average of the 6 consecutive months nearest to the date of the financial statements at the end of each reporting period. The increase or decrease in the accrued amount shall be recorded in the income statement. 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 year 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. 15

18 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN 5. CASH AND CASH EQUIVALENTS 31/12/ /12/2011 Cash on hand 809,835,168 1,011,440,182 Cash in bank 65,628,720,471 56,285,108,691 Cash equivalents 24,200,000,000 37,228,000,000 90,638,555,639 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). 6. SHORT-TERM INVESTMENTS Short-term investments represent a loan to third party in The investment has been fully provided provision as at 31 December 2012 in according to the Group s accounting policy. 7. OTHER RECEIVABLES 31/12/ /12/2011 Third parties 12,321,977,914 17,651,948,310 Related parties (Note 38) 3,061,198,313 2,081,900,000 15,383,176,227 19,733,848, INVENTORIES 31/12/ /12/2011 Goods in transit 83,244,593,472 65,116,270,653 Raw materials 179,368,944, ,641,022,794 Tools and supplies 5,130,606 5,187,294 Work in progress 157,943,958, ,443,212,949 Finished goods 182,720,294, ,136,608,247 Merchandise 2,888,156,150 7,279,327,746 Goods on consignment 4,756,349,994 11,404,526, ,927,427, ,026,156,215 Provision for devaluation of inventories (713,906,308) (12,901,184,679) 610,213,521, ,124,971,536 Movement of provision for devaluation of inventories during the year as follow: At 1 January 12,901,184,679 1,986,590,220 Provision for the year 653,141,097 24,602,156,150 Reversal in the year (12,840,419,468) (13,687,561,691) At 31 December 713,906,308 12,901,184, TAXS AND OTHER RECEIVABLES FROM THE STATE BUDGET Taxes and other receivables from the State budget represent the exceed payment of corporate income tax liability during the year 2011 and export - import duties paid in advance according to announcement of Customs Authority. 16

19 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN 10. 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 1,475,387,100 2,193,442,086-1,427,573, ,044,536 5,486,447,067 - Transfer from construction in progress - 2,615,088, ,615,088,055 - Disposals (105,925,000) (10,328,880,177) (236,095,238) - (8,260,106,479) (18,931,006,894) As at 31/12/ ,835,120, ,327,211,159 15,311,938,012 14,172,766, ,924,379,249 1,273,571,415,797 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 year 5,474,803,438 38,089,885,712 1,254,428,548 1,005,574,358 6,703,201,300 52,527,893,356 - Disposals (72,138,730) (9,995,405,000) (133,395,251) - (8,181,997,502) (18,382,936,483) As at 31/12/ ,428,604, ,246,007,609 7,634,880,347 10,078,373,159 98,702,793, ,090,658,680 NET BOOK VALUE As at 31/12/ ,406,516, ,081,203,550 7,677,057,665 4,094,393,750 42,221,585, ,480,757,117 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 23, the Group has pledged its buildings and machine, equipment, which has a carrying value of approximately 463 billion as at 31 December 2012 (31 December 2011: 504 billion), to secure banking facilities granted to the Group. The cost of the Group s tangible fixed assets includes 402 billion which have been fully depreciated but which are still in use (2011: 408 billion). 17

20 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN 11. FINANCE LEASE ASSETS Machine and equipment COST As at 1/1/ Transfer from construction in progress 13,626,400,555 As at 31/12/ ,626,400,555 ACCUMULATED DEPRECIATION As at 1/1/ Charge for the year 699,041,680 As at 31/12/ ,041,680 NET BOOK VALUE As at 31/12/ ,927,358,875 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 - - 4,262,457,635 4,262,457,635 As at 31/12/ ,847,723,787 1,658,858,567 5,333,607,835 88,840,190,189 ACCUMULATED AMORTISATION As at 1/1/2012 3,634,131, ,732, ,554,322 4,683,417,561 Charge for the year 322,590, ,337, ,229,475 1,093,158,220 As at 31/12/2012 3,956,721, ,070, ,783,797 5,776,575,781 NET BOOK VALUE As at 31/12/ ,891,001, ,788,550 4,471,824,038 83,063,614,408 As at 31/12/ ,213,592,615 1,001,126, ,595,878 79,849,314,993 As noted further in Note 20 and 23, the Group has pledged land use rights with a carrying value of approximately 38 billion as at 31 December 2012 (31 December 2011: 38 billion) to secure banking facilities granted to the Group. 13. CONSTRUCTION IN PROGRESS As at 1 January 9,776,303,914 19,213,235,763 Additions 24,037,891,222 95,427,361,171 Transfer to tangible fixed assets (2,615,088,055) (11,524,071,037) Transfer to finance lease assets (13,626,400,555) - Transfer to intangible assets (4,262,457,635) - Transfer to investment properties - (90,033,728,902) Other transfers - (3,306,493,081) As at 31 December 13,310,248,891 9,776,303,914 18

21 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN The total interest expense which had been capitalized into the cost of construction in progress during the year was 2,187,067,103. As at 31 December 2012, construction in progress comprises the following major projects: 31/12/ /12/2011 Thanh Cong Tower 1 Project 9,912,555,235 7,675,488,132 Nhi Xuan Industrial Park 234,000, ,000,000 ERP Project 2,685,361,549 - Others 478,332,107 1,866,815,782 13,310,248,891 9,776,303, INVESTMENT PROPERTY Building and Land use right Total structures 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 31/12/ ,620,896, ,659,728, ,280,625,580 ACCUMULATED DEPRECIATION As at 1/1/2012 2,103,638,338 17,095,992 2,120,734,330 Charge for the year 232,302,117 79, ,381,175 Others - (17,175,050) (17,175,050) As at 31/12/2012 2,335,940,455-2,335,940,455 NET BOOK VALUE As at 31/12/2012 9,284,956, ,659,728, ,944,685,125 As at 31/12/2011 9,281,067, ,666,369, ,947,437,730 As noted further in Note 20 and 23, the Group has pledged investment property with a carrying value of approximately 110 billion as at 31 December 2012 (31 December 2011: 110 billion) to secure banking facilities granted to the Group. As at 31 December 2012, the 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. 15. INVESTMENTS IN ASSOCIATES 31/12/ /12/2011 Cost of investment in associates 121,712,224, ,746,948,671 Share of post-acquisition profits, net of dividends received 6,611,397,817 2,779,539, ,323,622, ,526,487,963 Goodwill (8,666,072,407) (9,806,846,671) Group s share of associates net assets 119,657,549, ,719,641,292 Total assets 490,594,565, ,794,356,546 Total liabilities (74,676,862,359) (79,785,413,765) Net assets 415,917,703, ,008,942,781 Group s share of associates net assets 119,657,549, ,719,641,292 19

22 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN Net profit 15,800,180,618 19,894,754,709 Group s share of associates net profit 4,476,584,415 6,021,106, OTHER LONG-TERM INVESTMENTS 31/12/ /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 (2,752,668,000) (2,914,654,500) Net other long-term investments 2,599,382,000 1,553,945,500 During the year, the Group has reversed provision for other long-term investments with the amount of 161,986, LONG-TERM PREPAYMENTS As at 1 January 82,690,728,645 85,127,047,468 Additions 76,272,900 57,452,996 Allocated to expenses during the year (2,299,190,405) (2,493,771,819) As at 31 December 80,467,811,140 82,690,728,645 Details of long-term prepayments are as follows: 31//12/ /12/2011 Land rental expenses 80,372,830,124 82,465,962,765 Others 94,981, ,765,880 80,467,811,140 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 Tax losses Total and accruals difference As at 1 January ,698,683, ,575,836-4,504,259,417 Credit to profit or loss (1,671,518,869) (685,320,857) - (2,356,839,726) As at 31 December ,027,164, ,254,979-2,147,419,691 (Credit)/charge to profit or loss (470,843,755) (100,803,667) 2,114,685,442 1,543,038,020 As at 31 December ,556,320,957 19,451,312 2,114,685,442 3,690,457,711 20

23 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN Deferred tax assets and liabilities have been offset in accordance with the Group's accounting policy for financial reporting purposes as follows: 31/12/ /12/2011 Deferred tax liabilities (19,717) (695,864,720) Deferred tax assets 3,690,477,428 2,843,284,411 3,690,457,711 2,147,419, OTHER LONG-TERM ASSETS Other long-term assets represent deposit to Kexim Vietnam Leasing Co., Ltd as guarantee for finance lease contract. 20. SHORT-TERM LOANS AND LIABILITIES 31/12/ /12/2011 Short-term loans 573,338,920, ,669,509,205 - Far East National Bank 30,061,719,584 16,619,557,845 - Vietcombank 242,221,153, ,288,274,966 - Standard Chartered Bank 98,376,666,336 57,964,241,729 - BIDV - Ho Chi Minh City Branch 80,653,244,672 47,015,731,307 - HSBC - Ho Chi Minh City Branch 75,315,806,384 31,674,496,544 - VIB - Ho Chi Minh City Branch - 13,843,499,115 - Vietinbank - Ho Chi Minh City Branch 46,710,329,328 55,411,083,653 - Sacombank - 14,852,624,046 Current portion 94,256,774,543 92,297, 563,619 - Current portion of long-term loans 89,424,618,383 92,297,563,619 - Current portion of long-term obligations under finance leases 4,832,156, ,595,694, ,967,072,824 21

24 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN 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 - Vietcombank 400,000,000,000 Less than 6 months - Standard Chartered USD 10,000,000 Less than 4 Bank months - BIDV - Ho Chi Minh 120,000,000,000 Less than 6 City Branch months - HSBC - Ho Chi Minh USD 5,000,000 Less than 4 City Branch months - Vietinbank - Ho Chi Minh City Branch 200,000,000,000 Less than 6 months SIBOR + 1.7% per annum Floating rate LIBOR 3 months + 3.5% Floating rate Floating rate Floating rate Account receivables and inventories valued at USD 5,309,640 Fixed assets Without collaterals Fixed assets Account receivables and inventories valued at USD 2,500,000 Fixed assets 21. OTHER CURRENT PAYABLES 31/12/ /12/2011 Social and health insurance 48,991,838 2,953,903,631 Dividends payable 31,332,490,600 31,328,362,200 Other payable 2,952,055,328 3,199,627,076 34,333,537,766 37,481,892, 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. 23. LONG-TERM LOANS AND LIABILITIES 31/12/ /12/2011 Long-term loans 304,537,324, ,400,470,210 - Far East National Bank - 13,153,688,668 - Vietcombank - Ho Chi Minh City Branch 9,560,979,600 16,279,489,424 - VIB - Ho Chi Minh City Branch 10,374,001,871 24,234,421,275 - Vietinbank - Ho Chi Minh City Branch 134,202,000, ,072,528,000 - E-Land Asia Holding Pte Ltd 145,600,000, ,796,000,000 - VDB - Ho Chi Minh City Branch 4,800,342,843 6,864,342,843 Long-term obligations under finance leases 5,637,513, Kexim Vietnam Leasing Co., Ltd 5,637,513, ,174,837, ,400,470,210 22

25 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN 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 months saving accounts plus the margin or SIBOR 6 months plus the margin Vietcombank 0015/TD1/07CN 12,878,812,000 5 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 /03/HDTD.TDH 315,000,000,000 These loans are secured by fixed assets financed by the loans. 8 years 12 month saving accounts plus 4.8%/p.a or SIBOR USD 12 months plus 4%/p.a but not less than the minimum of longterm loan interest at bank Long-term loans are repayable as follows: 31/12/ /12/2011 On demand or within one year 89,424,618,383 92,297,563,619 In the second year 217,886,781,472 89,516,573,596 In the third to fifth year inclusive 86,650,542, ,883,896, ,961,942, ,698,033,829 Less: Amount due for settlement within 12 months (shown under current liabilities) 89,424, 618,383 92,297,563,619 Amount due for settlement after 12 months 304,537,324, ,400,470,210 Long-term obligations under finance leases represent machine finance lease according to contract No. K dated 12 October 2011 and started since 24 February The total value of contract was USD 634,282 with the credit term over 36 months and bears interest rate as LIBOR 3 months plus 4% per annum. Details of obligations under finance lease are as follows: Minimum lease payments Present value of minimum lease payments 31/12/ /12/2012 Amounts payable under finance leases: 10,977,494,287 10,960,899,156 Within one year 5,188,067,526 5,180,618,043 In the second to fifth year inclusive 5,789,426,761 5,780,281,113 Less: Future finance charges 507,824, ,229,556 Present value of lease obligations 10,469,669,600 10,469,669,600 Less: Amount due for settlement within 12 months (shown under current liabilities) 4,832,156,160 Amount due for settlement after 12 months 5,637,513,440 23

26 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN 24. LONG-TERM PROVISIONS Long-term provisions represent for the severance allowance accrued in accordance with the Group s policies. 25. OWNERS EQUITY The Company's shares, voting rates and capital contribution of shareholders as at balance sheet date as follows: As at 31/12/2012 As at 31/12/2011 Shares % Shares % E-Land Asia Holdings Pte Ltd 19,337, ,370,900,000 19,337, ,370,900,000 Vinatex (*) 3,395, ,958,450,000 3,395, ,958,450,000 irect Securities Corporation 3,133, ,332,680,000 3,133, ,332,460,000 Vietnam Blue - chips Investment Fund ,226, ,269,450,000 Vietnam Growth Investment Fund ,138, ,380,720,000 Others 18,770, ,708,330,000 14,405, ,058,380,000 Treasury shares 100, ,004,500, , ,004,500,000 (*) Vinatex is the State shareholder 44,737, ,374,860,000 44,737, ,374,860,000 The list of main shareholder who are holding 5% of share or more has been fixed as at 12 December 2012 by Ho Chi Minh Stock Exchange (HOSE). Shares 31/12/ /12/2011 Number of shares issued to public 44,737,486 44,737,486 Number of treasury shares 100, ,450 Number of outstanding shares in circulation 44,637,036 44,637,036 The Company has one class of ordinary share which carry no right to receive any fixed dividend with the par value of 10,000/share. The shareholders of ordinary shares are entitles to receive dividends as declared from time to time and are entitled to have one vote per share at the Company s shareholders meetings. 24

27 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN/HN Movement in owners equity: Share capital Share premium Treasury shares Investment and Development funds Financial reserve funds Other funds Retained earnings Total As at 1/1/ ,382,430,000 45,032,400,000 (5,939,990,000) (5,663,667,865) 17,623,726, ,522,767, ,957,666,535 Capital contribution/increase for the year 12,992,430, ,992,430,000 Profit for the year ,078,025, ,078,025,937 Appropriation to reserves ,275,197,414 13,275,197,414 9,482,283,867 (49,307,876,109) (13,275,197,414) Dividends declared (66,955,554,000) (66,955,554,000) Others (744,356,820) (744,356,820) As at 31/12/ ,374,860,000 45,032,400,000 (5,939,990,000) 7,611,529,549 30,898,924,401 9,482,283, ,593,006, ,053,014,238 Capital contribution/increase for the year - (938,268,000) (938,268,000) Loss for the year (20,159,188,699) (20,159,188,699) Appropriation to reserves ,811,703,891 11,207,802,594 5,603,901,297 (44,831,210,376) (11,207,802,594) Dividends declared (66,955,554,000) (66,955,554,000) Others (775,091,881) (775,091,881) As at 31/12/ ,374,860,000 44,094,132,000 (5,939,990,000) 24,423,233,440 42,106,726,995 15,086,185,164 55,871,961, ,017,109,064 According to the Annual General Shareholders Meeting minute dated on 29 April 2012, the Company s Shareholders approved declaration of dividends of 2011 with amount of 66,955,554,000. According to this Resolution, the Company s Shareholders also approved a distribution schedule for profit of 2011 to raise the investment and development fund, financial reserve fund, other funds and bonus and welfare funds in amount of 16,811,703,891, 11,207,802,594, 5,603,901,297 and 11,207,802,594, respectively. 25

28 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN 26. MINORITY INTERESTS Minority interest rate is calculated as follows: Thanh Cong Medical Center Thanh Quang Charter capital of subsidiaries 21,700,000,000 22,000,000,000 In which: Contributed capital from the Company 15,195,000,000 21,450,000,000 Contributed capital from minority interests 6,505,000, ,000,000 Minority interests rate 29.98% 2.50% Minority interests base on net assets as at 31 December 2012: Thanh Cong Medical Center Thanh Quang Total Total assets 22,619,015,037 22,000,000,000 44,619,015,037 Total liabilities 3,268,057,997-3,268,057,997 Total net assets 19,350,957,040 22,000,000,000 41,350,957,040 In which: Charter capital 21,700,000,000 22,000,000,000 43,700,000,000 Share premium (1,340,000,000) - (1,340,000,000) Retained earnings (1,009,042,960) - (1,009,042,960) Minority interests 5,800,756, ,000,000 6,350,756,921 In which: Charter capital 6,505,000, ,000,000 7,055,000,000 Share premium (401,732,000) - (401,732,000) Retained earnings (302,511,079) - (302,511,079) Minority interest is based on business result of the year ended 31 December 2012: Thanh Cong Medical Center Thanh Quang Total Profit after tax of subsidiaries 3,450,043,432-3,450,043,432 Profit after tax of minority interests 1,273,839,042-1,273,839,042 Changes of minority interests during the year as follows: Charter capital Share premium Retained Total earnings Balance as at 1/1/2012 7,055,000,000 - (1,939,023,171) 5,115,976,829 Profit of the year - - 1,273,839,042 1,273,839,042 Loss from share issued - (401,732,000) - (401,732,000) Others ,673, ,673,050 Balance as at 31/12/2012 7,055,000,000 (401,732,000) (302,511,079) 6,350,756,921 26

29 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN 27. BUSINESS AND GEOGRAPHICAL SEGMENTS Business segments The business segment report includes items directly attributable to a segment as well as for segments on reasonable basis. Unallocated items include financial income, financial expenses, selling expenses, general and administration expenses, profit from other activities, and corporate income tax. The income statement of business segment report during the year is as follows: Garment and textile Revenue 2,224,443,618,317 2,113,486,426,756 Cost of goods sold (2,076,005,795,382) (1,797,421,295,552) Gross profit 148,437,822, ,065,131,204 Healthcare Revenue 34,124,413,840 28,521,286,192 Cost of goods sold (24,272,646,264) (20,833,797,289) Gross profit 9,851,767,576 7,687,488,903 Real estate Revenue - 10,000,000,000 Cost of goods sold - (1,257,924,940) Gross profit - 8,742,075,060 Others Revenue 24,932,926,713 42,765,915,698 Cost of goods sold (15,783,612,391) (17,897,040,487) Gross profit 9,149,314,322 24,868,875,211 Geographical segments Geographical segments report depends on geographic location of customers in Vietnam ( Domestic ) or in countries other than Vietnam ("Export"). The Group does not prepare the segment report for items on the balance sheet due to insufficient basis for separation Domestic Revenue 271,526,246, ,124,935,951 Cost of goods sold (245,815,561,625) (379,907,006,172) Gross profit 25,710,684,396 76,217,929,779 Export Revenue 2,011,974,712,849 1,738,648,692,695 Cost of goods sold (1,870,246,492,412) (1,457,503,052,096) Gross profit 141,728,220, ,145,640,599 The consolidated financial statements do not present segments asset due to such information does not available to the Group s management. 27

30 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN 28. NET REVENUE FROM GOODS SOLD AND SERVICES RENDERED Garment and textile products 2,189,999,595,051 2,113,454,116,978 Processing fees 39,418,757,753 9,106,712,580 Sales of investment property - 10,000,000,000 Others 59,057,340,553 71,287,201,890 2,288,475,693,357 2,203,848,031,448 Sales returns and discounts (4,974,734,487) (9,074,402,802) 2,283,500,958,870 2,194,773,628, COST OF SALES Labor costs 254,628,341, ,728,688,992 Depreciation 50,573,679,099 41,002,448,209 Overheads 261,657,226, ,630,920,551 Raw materials 1,533,419,195,108 1,412,893,035,089 Cost of investment property disposed - 1,257,924,940 Others 15,783,612,391 17,897,040,487 2,116,062,054,037 1,837,410,058, PRODUCTION COST BY NATURE Materials 1,448,880,063,244 2,026,674,610,356 Labor cost 303,808,714, ,964,034,199 Depreciation expenses 54,552,474,431 53,856,808,779 Outside service expenses 338,894,745, ,560,804,801 Others 85,532,616,541 83,960,342,188 2,231,668,613,649 2,721,016,600, FINANCIAL INCOME Bank and loan interests 2,140,603, ,427,582 Dividend income 111,056,400 59,000,000 Realised foreign exchange gain 8,972,171,830 28,593,950,008 Unrealised foreign exchange gain 1,295,101,727-12,518,933,466 29,531,377,590 28

31 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN 32. FINANCIAL EXPENSES Interest expense 57,856,496,247 67,553,158,972 Provision for financial investments 150,404,500 Revert provision for financial investments (161,986,500) - Realised foreign exchange loss 9,111,980,401 46,023,823,259 Unrealised foreign exchange loss - 23,867,360,686 Others 91,383, ,392,875 66,897,873, ,268,140, PROFIT FROM OTHER ACTIVITIES Proceeds from disposals of fixed assets 2,546,634,095 1,927,941,741 Others 3,222,579,295 3,907,085,785 Other income 5,769,213,390 5,835,027,526 Net book value of fixed assets disposed (548,070,411) (592,416,493) Others (116,901,641) (2,393,593,134) Other expenses (664,972,052) (2,986,009,627) Profit from other activities 5,104,241,338 2,849,017, CURRENT CORPORATE INCOME TAX EXPENSE (Loss)/profit before tax (20,428,387,677) 117,937,344,801 Adjust for: (4,317,374,782) (12,422,900,011) - Increase taxable income 5,346,701,060 27,840,533,311 - Decrease taxable income (9,664,075,842) (40,263,433,322) Taxable income (24,745,762,459) 105,514,444,790 Of which: + (Loss)/income from activities which entitled incentive tax rate (33,163,639,615) 81,948,787,202 + Other income 8,417,877,156 23,565,657,588 Applicable tax rate + For income from activities which entitled incentive tax rate 15% 15% + For other income 25% 25% Current corporate income tax - 18,183,732,476 Tax exemption - (6,146,159,040) Tax reduction - (2,505,611,570) Utilisation of previously unrecognized tax losses - (504,539,655) Adjustment for prior year - (6,400,151,194) Current corporate income tax expense - 2,627,271,017 The Company is obliged to pay corporate income tax (CIT) at the rate of 15% for its principal activities manufactured in an industrial park. The Company is entitled CIT exemption for 3 years from the first profit making year and the 50% reduction for the following subsequent 7 years. This is under the Article 36, Decree 187/2004/ND-CP dated 16 November 2004, Decree 164/2003/TT-BTC dated 22 December 2003, Circular 128/2003/TT-BTC dated 22 December 2003 and Circular 88/2004/TT-BTC dated 1 29

32 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN September The year 2006 was the first year the Company had taxable profit. The year 2009 was the first year the Company entitled to the 50% CIT reduction. The Company applied CIT rate of 7.5% for its principal activities and 25% for other activities for the year ended 31 December However, no income tax has been provided for during the year as the Company has no assessable income. 35. BASIC EARNINGS PER SHARE The calculation of the basic earnings per share attributable to the ordinary equity holders of the Group is based on the following data: (Loss)/profit for the year attributable to equity holders (20,159,188,699) 112,078,025,937 Earnings for the purposes of basic earnings per share (20,159,188,699) 112,078,025,937 Weighted average number of ordinary shares for the purposes of basic earnings per share 44,637,036 44,637,036 Basic earnings per share (452) 2, OPERATING LEASE COMMITMENTS Minimum lease payments under operating leases recognised in income statement for the year 3,851,462,982 4,052,461,971 At the balance sheet date, the Group had outstanding commitments under non-cancelable operating leases, which fall due as follows: 31/12/ /12/2011 Within one year 3,810,549,522 4,011,548,511 In the second to fifth years inclusive 12,025,462,086 14,147,892,662 After five years 65,296,006,380 72,626,959,737 81,132,017,988 90,786,400,910 Operating lease payments represent: Total rentals payable by the Group for land leases at Tan Phu District - Ho Chi Minh City and management fee at Tan Binh Industrial Zone Ho Chi Minh City and Trang Bang Industrial Zone Tay Ninh Province. The contract terms and rental charges are determined per each specific contract. 37. FINANCIAL INSTRUMENTS Capital risk management The Group manages its capital to ensure that the Group will be able to continue as a going concern while maximizing the return to shareholders through the optimization of the debt and equity balance. The capital structure of the Group consists of equity attributable to shareholders (comprising share capital, share premium, treasury shares, funds and retained earnings). 30

33 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN Gearing ratio The gearing ratio of the Group as at the balance sheet date was as follows: 31/12/ /12/2011 Borrowings 977,770,532, ,367,543,034 Less: Cash and cash equivalents 90,638,555,639 94,524,548,873 Net debt 887,131,976, ,842,994,161 Equity 623,017,109, ,053,014,238 Net debt to equity ratio Significant accounting policies Details of the significant accounting policies and methods adopted (including the criteria for recognition, the bases of measurement, and the bases for recognition of income and expenses) for each class of financial asset and financial liability are disclosed in Note 4. Categories of financial instruments Carrying amounts 31/12/ /12/2011 Financial assets Cash and cash equivalents 90,638,555,639 94,524,548,873 Trade and other receivables 160,450,467, ,918,492,728 Investments 2,767,600,000 2,767,600,000 Deposits 1,844,183,128 1,775,526,600 Total 255,700,806, ,986,168,201 Financial liabilities Obligations under finance leases 10,469,669,600 - Borrowings 967,300,862, ,367,543,034 Trade and other payables 207,396,654, ,890,542,105 Accruals 3,810,488,799 4,833,811,245 Total 1,188,977,675,792 1,186,091,896,384 The Group has not assessed fair value of its financial assets and liabilities as at the balance date since there are no comprehensive guidance under Circular 210/2009/TT-BTC issued by the Ministry of Finance on 6 November 2009 ( Circular 210 ) and other relevant prevailing regulations to determine fair value of these financial assets and liabilities. While Circular 210 refers to the application of International Financial Reporting Standards ( IFRS ) on presentation and disclosures of financial instruments, it did not adopt the equivalent guidance for the recognition and measurement of financial instruments, including application of fair value, in accordance with IFRS. Financial risk management objectives The Group has set up risk management system to identify and assess the risks exposed by the Group and designed control policies and procedures to manage those risks at an acceptable level. Risk management system is reviewed on a regular basis to reflect changes in market conditions and the Group s operations. Financial risks include market risk (including foreign currency risk, interest rate risk, share price risk and commodity price risk), credit risk and liquidity risk. The Group does not hedge these risk exposures due to the lack of a market to purchase financial instruments. 31

34 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN Market risk management Foreign currency risk management The Group undertakes certain transactions denominated in foreign currencies; consequently, exposures to exchange rate fluctuations arise. The carrying amounts of the Group s foreign currency denominated monetary assets and monetary liabilities at the end of the reporting period are as follows: Liabilities Assets 31/12/ /12/ /12/ /12/2011 United States Dollars (USD) 1,002,206,589, ,696,000, ,600,264, ,100,914,389 Euro (EUR) 245,190,554 1,040,640,243 7,075,600 7,368,595 Japanese Yen (JPY) 2,403,200-24,919, ,889,904 Total 1,002,454,182, ,736,640, ,632,260, ,925,172,888 Foreign currency sensitivity analysis The Group is mainly exposed to United States Dollar. The following table details the Group's sensitivity to a 10% increase and decrease in Vietnam Dong against the relevant foreign currencies. 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. For a 10% increase/decrease in the following foreign currencies against Vietnam Dong, the loss before tax for the year would increase/decrease by the same amount as follows: United States Dollar (USD) 80,260,632,462 75,759,508,579 Euro (EUR) 23,811, ,327,165 Japanese Yen (JPY) 2,251,678 81,688,990 Total 80,282,192,279 75,781,146,754 Interest rate risk management The Group has significant interest rate risks arising from interest bearing loans which are arranged. The risk is managed by the Company by maintaining an appropriate level of borrowings and analyzing market competition to enjoy favorable interest rates from appropriate lenders. Interest rate sensitivity The loan s sensitivity to interest rate changes which may arise at an appropriate level. Assuming all other variables were held constant if interest rates applicable to floating interest bearing loans had been 200 basis points higher/lower, the Company s loss before tax would have decreased/ increased by 19,346,017,257 (2011: 19,867,350,861). Share price risk management Shares held by the Group are affected by market risks arising from the uncertainty about future prices of such shares. The Group manages this risk exposure by setting up investment limits. The Group s Board of 32

35 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN Management also assesses and approves decisions on share investments such as operating industry, investees, etc. The Group assesses the share price risk to be immaterial. The Group is also exposed to equity price risks arising from investments in subsidiaries and associates. The Group s Board of Management assesses and approves decisions on investments in subsidiaries and associates such as operating industry, investees, etc. Investments in subsidiaries and associates are held for long-term strategic investments rather than trading purposes. The Group does not have intention to trade these investments in the foreseeable future. Commodity price risk management The Group purchases materials, commodities from local and foreign suppliers for business purpose. Therefore, the Group is exposed to the risk of changes in selling prices of materials, commodities. Credit risk management Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Group. The Group has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group does not have any significant credit risk exposure to any counterparty because receivables consist of a large number of customers, spread across diverse industries and geographical areas. Liquidity risk management The purpose of liquidity risk management is to ensure the availability of funds to meet present and future financial obligations. Liquidity is also managed by ensuring that the excess of maturing liabilities over maturing assets in any period is kept to manageable levels relative to the amount of funds that the Group believes can generate within that period. The Group policy is to regularly monitor current and expected liquidity requirements to ensure that the Group maintains sufficient reserves of cash and adequate committed funding from its shareholders to meet its liquidity requirements in the short and longer term. The following table details the Group s remaining contractual maturity for its non-derivative financial assets and financial liabilities with agreed repayment periods. The tables have been drawn up based on the undiscounted cash flows of financial assets including interest that will be earned on those assets, if any and undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows. The inclusion of information on non-derivative financial assets is necessary in order to understand the Group s liquidity risk management as the liquidity is managed on a net asset and liability basis. 31/12/2012 Less than 1 year Over 1 year Total Cash and cash equivalents 90,638,555,639-90,638,555,639 Trade and other receivables 160,450,467, ,450,467,465 Investments - 2,767,600,000 2,767,600,000 Deposits 469,706,600 1,374,476,528 1,844,183,128 Total 251,558,729,704 4,142,076, ,700,806,232 Obligations under finance leases 4,832,156,160 5,637,513,440 10,469,669,600 Borrowings 662,763,538, ,537,324, ,300,862,825 Trade and other payables 207,396,654, ,396,654,568 Accruals 3,810,488,799 3,810,488,799 Total 878,802,838, ,174,837,754 1,188,977,675,792 Net liquidity gap (627,244,108,334) (306,032,761,226) (933,276,869,560) 33

36 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued) FORM B 09-DN 31/12/2011 Less than 1 year Over 1 year Total Cash and cash equivalents 94,524,548,873-94,524,548,873 Trade and other receivables 150,918,492, ,918,492,728 Investments - 2,767,600,000 2,767,600,000 Deposits 421,706, ,353,820,000 1,775,526,600 Total 245,864,748,201 4,121,420, ,986,168,201 Obligations under finance leases Borrowings 598,967,072, ,400,470, ,367,543,034 Trade and other payables 187,890,542, ,890,542,105 Accruals 4,833,811,245-4,833,811,245 Total 791,691,426, ,400,470,210 1,186,091,896,384 Net liquidity gap (545,826,677,973) (390,279,050,210) (936,105,728,183) Regardless of the existing net liquidity gap, the management believes that the Company will be able to generate sufficient funds to meet its financial obligations as and when they fall due from internally generated cash flows and maintains a minimum credit lines available. Undrawn facilities are disclosed in Note 20 and RELATED PARTY TRANSACTIONS AND BALANCES During the year, the Group entered into the following transactions with related parties: Loan received E-land Asia Holding Pte Ltd - 124,968,000,000 Loan interest E-land Asia Holding Pte Ltd 1,186,560,128 1,003,132,215 Dividend declared to E-land Asia Holding Pte Ltd 29,005,635,000 29,005,635,000 Dividend paid to E-land Asia Holding Pte Ltd 29,005,635,000 15,469,672,000 Dividend declared by Thanh Chi Corporation 520,475,000 - Remuneration paid to the Board of Directors during the year was as follows: Salaries and benefits in kind 11,591,933,347 10,430,046,839 34

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