Hoa Phat Group Joint Stock Company and its subsidiaries Report of the Board of Directors

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2 Report of the Board of Directors The Board of Directors of Hoa Phat Group Joint Stock Company ( the Company ) is pleased to present its report and the consolidated financial statements of the Company and its subsidiaries ( the Group ) for the year ended 31 December The members of the Board of Management and the Board of Directors during the year and at the date of this report are: Board of Management Mr. Tran Dinh Long Chairman Mr. Tran Tuan Duong Vice Chairman Mr. Nguyen Manh Tuan Vice Chairman Mr. Doan Gia Cuong Vice Chairman Mr. Nguyen Ngoc Quang Member Mr. Ta Tuan Quang Member Mr. Hoang Quang Viet Member Mr. Don Di Lam Member Mr. Lars Kjaer Member Board of Directors Mr. Tran Tuan Duong General Director Mr. Kieu Chi Cong Deputy General Director (until 31 December 2010) Mrs. Nguyen Thi Thao Nguyen Deputy General Director (from 1 September 2010) Corporate information The Company was originated from Hoa Phat Steel Joint Stock Company incorporated under the Law on Enterprise of Viet Nam pursuant to the initial Business Registration Certificate No issued by Hung Yen Department of Planning and Investment on 26 October In accordance with the 8 th amendment of the Business Registration Certificate No issued by Hung Yen Department of Planning and Investment on 9 January 2007, the Hoa Phat Steel Joint Stock Company was transformed to Hoa Phat Group Joint Stock Company. The Company s Business Registration Certificate has been amended several times, the most recent of which is by Business Registration Certificate No dated 2 December The Business Registration Certificate was issued by the Hung Yen Department of Planning and Investment. The registered office of the Company is in Pho Noi A Industrial Zone, Giai Pham Commune, Yen My District, Hung Yen Province, Vietnam. As at 31 December 2010, the Company has 13 subsidiaries and 4 associates as disclosed in Note 1 to the consolidated financial statements.

3 Report of the Board of Directors Operating results and dividends The Company shareholders consolidated net profit for the year ended 31 December 2010 was 1,349,314 million (2009: 1,271,888 million). On 30 March 2010, the Company declared the dividend payment in the form of shares at the ratio of 2:1. This share issuance was taken from the retained profits to all existing shareholders of the Company. The additional shares were listed on Ho Chi Minh Stock Exchange on 1 July Board of Management Meeting on 3 November 2010 resolved to distribute interim dividends equal to 2,000 per share. Significant events The General Meeting of Shareholders of the Company on 30 March 2010 resolved to distribute dividends amounting to 60% par value of shares of which 10% was paid in cash in advance in 2009 and 50% remaining was paid in the form of shares at the ratio of 2:1. Accordingly, the company increased share capital from 1,963,639,980,000 to 2,945,459,940,000 in the form of dividend payment for the year 2009 to the shareholders by share at the ratio of 2:1; On 10 May 2010, the Group acquired Golden Gain Vietnam Joint Stock Company s shares to increase the portion of shares held by the Group in Golden Gain Vietnam Joint Stock Company to 84.92% with the respective amount of 368 billion; On 2 June 2010, the Group acquired to increase its shareholding in Hoa Phat Energy Joint Stock Company from 50% to 99.86%; On 21 July 2010, the Company completed the issuance of 800 three-year unsecured floating interest rate bonds with the total value of 800 billion; On 3 November 2010, the Company s Board of Management decided to distribute interim dividends equal to 2,000/share; On 30 November 2010, the Company converted 870,000 convertible bonds equivalent to 870 billion into 23,303,766 shares. As a result, the Company s share capital increased from 2,945,459,940,000 to 3,178,497,600,000. The additional shares were listed on Ho Chi Minh Stock Exchange on 16 December Post balance sheet events There are no significant post balance sheet events that need to be adjusted or disclosed in the consolidated financial statements. Auditors The auditor of the Group is KPMG Limited.

4 Report of the Board of Directors Statement of the Board of Directors responsibility in respect of the consolidated financial statements The Board of Directors is responsible for the consolidated financial statements which give a true and fair view of the Group s consolidated state of affairs, consolidated results of operations and consolidated cash flows for the year. In preparing the consolidated financial statements, the Board of Directors is required to: 2010 auditted consolidated finacial statements and notes select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; confirm that applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the consolidated financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business. The Board of Directors is also 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 accounting records comply with the registered accounting system. 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 with the Board of Management that they have complied with the above requirements in preparing the consolidated financial statements. Approval of the consolidated financial statements We hereby approve the accompanying consolidated financial statements. These financial statements give a true and fair view of the consolidated financial position of the Group as at 31 December 2010 and the consolidated results of its operations and consolidated cash flows for the year then ended in accordance with the Vietnamese Accounting Standards and Vietnamese Accounting System and comply with relevant statutory requirements. On behalf of the Board of Directors Tran Tuan Duong General Director Hanoi,

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6 Consolidated balance sheet at 31 December 2010 Code Note 31/12/ /12/2009 ASSETS Current assets 100 7,866,093,787,662 5,407,840,665,885 Cash and cash equivalents ,047,177,227,261 1,480,490,925,374 Cash ,131,658, ,772,994,337 Cash equivalents ,045,568, ,717,931,037 Short-term investments ,230,500, ,137,615,408 Short-term investments ,230,500, ,137,615,408 Accounts receivable - short-term ,832,703,218, ,023,387,201 Accounts receivable - trade 131 1,503,995,277, ,028,795,343 Prepayments to suppliers ,580,818, ,794,095,889 Other receivables ,870,287,473 49,425,229,789 Allowance for doubtful debts 139 (8,743,166,041) (7,224,733,820) Inventories ,540,810,505,212 2,556,676,319,108 Inventories 141 4,549,531,050,816 2,564,854,388,112 Allowance for inventories 149 (8,720,545,604) (8,178,069,004) Other current assets ,172,337, ,512,418,794 Short-term prepayments ,937,003,359 11,276,991,645 Deductible value added tax ,040,305,417 91,398,981,334 Taxes and other receivables from State 154 2,551,817,942 2,807,498,457 Other current assets ,643,210, ,028,947,358 The accompanying notes are an integral part of these consolidated financial statements

7 Consolidated balance sheet as at 31 December 2010 Code Note 31/12/ /12/2009 Long-term assets 200 7,037,564,444,437 4,835,399,323,200 Accounts receivable - long-term ,008,590,000 43,404,000 Other long-term receivables ,008,590,000 43,404,000 Fixed assets 220 4,603,672,511,871 3,065,311,850,943 Tangible fixed assets ,979,294,726, ,483,904,113 Cost 222 5,109,678,090,211 1,634,137,248,326 Accumulated depreciation 223 (1,130,383,363,325) (757,653,344,213) Finance lease tangible fixed assets ,662,903,383 11,677,291,317 Cost ,488,423,548 16,488,423,548 Accumulated depreciation 226 (5,825,520,165) (4,811,132,231) Intangible fixed assets ,793,292, ,764,834,646 Cost ,335,392, ,458,505,168 Accumulated amortisation 229 (12,542,100,222) (8,693,670,522) Construction in progress ,921,589,471 1,902,385,820,867 Investment property ,189,484,788 19,549,586,087 Cost ,106,577,749 29,106,577,749 Accumulated depreciation 242 (13,917,092,961) (9,556,991,662) Long-term investments ,792,906,574 1,101,992,112,536 Investments in associates ,650,566, ,972,112,536 Other long-term investments ,142,340, ,020,000,000 Other long-term assets 260 1,260,900,951, ,502,369,634 Long-term prepayments ,060,809, ,805,877,399 Deferred tax assets ,313,170,818 30,147,903,044 Other long-term assets ,585,297,631 2,731,879,000 Goodwill ,941,673, ,816,710,191 TOTAL ASSETS ,903,658,232,099 10,243,239,989,085 The accompanying notes are an integral part of these consolidated financial statements

8 Consolidated balance sheet as at 31 December 2010 Code Note 31/12/ /12/2009 RESOURCES LIABILITIES 300 8,165,669,159,381 5,178,291,447,425 Current liabilities 310 6,136,481,866,444 4,638,797,523,573 Short-term borrowings and liabilities ,021,625,285,657 3,648,096,119,795 Accounts payable - trade ,906,970, ,426,109,610 Advances from customers ,419,085,859 53,204,605,485 Taxes payable to State Treasury ,652,794, ,236,576,239 Payables to employees ,566,529,544 24,465,398,028 Accrued expenses ,533,736,200 55,605,566,843 Other payables ,640,924,257 33,874,093,557 Provisions ,181,335,039 10,204,569,304 Bonus and welfare funds ,955,204,839 73,684,484,712 Long-term borrowings and liabilities 330 2,029,187,292, ,493,923,852 Other long-term liabilities ,093,237,312 9,554,858,112 Long-term borrowings ,544,868,352, ,747,790,221 Deferred tax liabilities ,764,907 9,083,762 Provision for severance allowance ,468,938,472 26,182,191,757 EQUITY 400 6,398,095,940,358 4,825,091,164,581 Owners equity 410 6,398,095,940,358 4,825,091,164,581 Share capital ,178,497,600,000 1,963,639,980,000 Capital surplus 412 2,257,862,350,000 1,620,900,010,000 Foreign exchange differences ,064,385 (58,267,697,294) Financial reserves ,910,352, ,179,946,479 Retained profits ,654,573,637 1,154,638,925,396 MINORITY INTEREST ,893,132, ,857,377,079 TOTAL RESOURCES ,903,658,232,099 10,243,239,989,085 Prepared by: Approved by: Ly Thi Ngan Chief Accountant Tran Tuan Duong General Director The accompanying notes are an integral part of these consolidated financial statements

9 Consolidated statement of income for the year ended 31 December 2010 Code Note Total revenue ,492,717,731,336 8,244,251,646,520 Less sales deductions ,633,914, ,857,031,774 Net sales 10 14,267,083,816,361 8,123,394,614,746 Cost of sales ,808,395,972,088 6,147,351,692,197 Gross profit 20 2,458,687,844,273 1,976,042,922,549 Financial income ,711,471, ,695,300,222 Financial expenses ,801,025, ,066,057,342 In which: Interest expenses ,090,188,796 76,177,480,256 Selling expenses ,343,647, ,506,130,685 General and administration expenses ,508,673, ,485,507,502 Net operating profit 30 1,515,745,968,515 1,505,680,527,242 Other income ,775,799,502 30,136,197,668 Other expenses ,360,923,593 15,538,643,438 Results of other activities 40 2,414,875,909 14,597,554,230 Share of profit/(losses) in associates ,990,249,642 (10,298,743,625) Profit before tax 50 1,564,151,094,066 1,509,979,337,847 Income tax expense current ,252,593, ,195,791,158 Income tax benefit deferred (20,417,586,653) (11,923,076,728) Net profit 60 1,376,316,086,778 1,270,706,623,417 Attributable to: Minority interest 61 27,002,469,604 (1,180,996,696) Equity holders of the Company 62 1,349,313,617,174 1,271,887,620,113 Earnings per share Restated Basic earnings per share ,550 4,318 Prepared by: Approved by: Ly Thi Ngan Chief Accountant Tran Tuan Duong General Director The accompanying notes are an integral part of these consolidated financial statements

10 Consolidated statement of changes in equity for the year ended 31 December 2010 Share capital Capital surplus Foreign exchange differences Financial reserves Retained profits Total owners equity Balance at 1 January ,963,639,980,000 1,620,900,010,000 (6,052,555,381) 76,429,969, ,743,316,148 4,070,660,719,967 Net profit for the year ,271,887,620,113 1,271,887,620,113 Dividends (392,727,996,000) (392,727,996,000) Appropriation to equity funds ,749,977,279 (130,530,868,373) (62,780,891,094) Allowance to members of the Board of Management (9,750,000,000) (9,750,000,000) Other movements - - (52,215,141,913) - 16,853,508 (52,198,288,405) Balance at 1 January ,963,639,980,000 1,620,900,010,000 (58,267,697,294) 144,179,946,479 1,154,638,925,396 4,825,091,164,581 Share capital issued by payment of dividends in form of shares (Note 34) 981,819,960, (981,819,960,000) - Interim dividends of 2010 (Note 34) (635,699,520,000) (635,699,520,000) Share capital issued from conversion of bonds 233,037,660, ,962,340, ,000,000,000 Foreign exchange differences during pre-operating period - - (181,235,811) - - (181,235,811) Transfer to statement of income ,632,263, ,632,263,864 Transfer to long term prepayment ,987,733, ,987,733,626 Net profit for the year ,349,313,617,174 1,349,313,617,174 Appropriation to equity funds ,730,405,857 (127,179,299,074) (66,448,893,217) Allowance to members of Supervising Board and Board of Management (2,790,000,000) (2,790,000,000) Other movements ,810, ,810,141 Balance at 31 December ,178,497,600,000 2,257,862,350, ,064, ,910,352, ,654,573,637 6,398,095,940,358 Prepared by: Approved by: Ly Thi Ngan Tran Tuan Duong Chief Accountant General Director The accompanying notes are an integral part of these consolidated financial statements

11 Consolidated statement of cash flows for the year ended 31 December 2010 Code Note CASH FLOWS FROM OPERATING ACTIVITIES Profit before tax 01 1,564,151,094,066 1,509,979,337,847 Adjustments for Depreciation and amortisation ,821,928, ,044,819,170 Amortisation of goodwill 02 90,871,208,266 28,823,125,345 Allowances and provisions 03 (532,403,447) (183,665,314,449) Unrealised foreign exchange losses 04 77,615,698,472 82,707,770 Profits from investing activities 05 (244,449,834,490) (94,970,602,901) Share of profits from associates 05 45,990,249,642 (10,298,743,625) Interest expense ,090,188,796 76,177,480,256 Operating profit before changes in working capital 08 2,305,558,130,255 1,520,172,809,413 Change in receivables and other current assets 09 (270,860,849,472) 631,941,882,432 Change in inventories 10 (676,327,671,681) (1,062,448,213,617) Change in payables and other liabilities 11 (256,934,982,422) (667,519,768,296) Change in prepayments 12 (58,269,901,758) (11,129,357,107) 1,043,164,724, ,017,352,825 Interest paid 13 (393,268,078,518) (108,212,085,175) Corporate income tax paid 14 (265,793,824,683) (51,677,033,815) Other receipts from operating activities ,447,050,025 17,691,457,489 Other payments for operating activities 16 (121,339,205,479) (350,857,410,034) Net cash generated from/(used in) operating activities ,210,666,267 (82,037,718,710) The accompanying notes are an integral part of these consolidated financial statements

12 Consolidated statement of cash flows for the year ended 31 December 2010 Code Note CASH FLOWS FROM INVESTING ACTIVITIES Payments for additions to fixed assets and other long-term assets 21 (979,887,380,364) (1,458,256,687,573) Proceeds from disposals of fixed assets and other long-term assets ,668,358,381 9,459,872,168 Payments for purchase of debt instruments of other entities 23 (440,315,194,592) (118,985,000,000) Proceeds from sales of debt instruments of other entities ,875,860, ,433,383,592 Payments for investments in other entities 25 (639,735,062,583) (1,177,004,497,177) Collection of investments in other entities 26 9,476,820, ,047,812 Receipts of interests on loans given, deposits and dividends ,661,603, ,734,925,126 Net cash used in investing activities 30 (1,421,254,995,696) (1,960,970,956,052) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from equity issued 31 8,456,520,000 1,428,720,000 Proceeds from short-term and long-term borrowings 33 10,862,814,502,121 8,163,590,489,922 Payments to settle debts 34 (9,647,393,130,599) (4,751,922,352,762) Payments to settle finance lease liabilities 35 (163,190,854) (1,680,268,449) Payments of dividends 36 (637,985,549,983) (394,439,393,734) Net cash generated from financing activities ,729,150,685 3,016,977,194,977 Net cash flows during the year 50 (437,315,178,744) 973,968,520,215 Cash and cash equivalents at the beginning of the year Effect of exchange rate fluctuations on cash and cash equivalents Cash and cash equivalents at the end of the year 60 1,480,490,925, ,218,287, ,001,480,631 (3,695,882,090) ,047,177,227,261 1,480,490,925,374 The accompanying notes are an integral part of these consolidated financial statements

13 Consolidated statement of cash flows for the year ended 31 December 2010 NON-CASH FINANCING AND INVESTING ACTIVITIES Payments of dividends in the form of shares 981,819,960,000 - Conversion of bonds into shares 870,000,000,000 - Entrusted investment received from an associate 448,979,590,000 - Non-cash account receivables from disposal of a sub-subsidiary 10,241,630,040 - Prepared by: Approved by: Ly Thi Ngan Chief Accountant Tran Tuan Duong General Director The accompanying notes are an integral part of these consolidated financial statements

14 These notes form an integral part of and should be read in conjunction with the accompanying consolidated financial statements. 1. Reporting entity Hoa Phat Group Joint Stock Company ( the Company ) is incorporated as a joint stock company in Vietnam. The consolidated financial statements of the Company for the year ended 31 December 2010 comprise the Company and its subsidiaries (together referred to as the Group ) and the Group s interest in associates. The principal activities of the Company and its subsidiaries are: - Financial investments; - Integrated investment and construction of infrastructures, industrial zones and urban zones; - Production of furniture products for offices, households, and schools; - Timber production and processing; - Production of mechanical products (mainly construction machinery, office desks, chairs, cabinets); - Dealing in automobiles, motorbikes, equipment, parts for transport and mining sectors, transport vehicles; - Production and trading of construction and mining machineries; - Dealing in electrical, electronic appliances, optical and medical equipment; - Production, trading, assemblage, installation, repair and maintenance of electrical, electronic, electrical refrigeration and civil electrical appliances and air-conditioners; - Production and trading of raw materials and plastic products; - Advertisement activities; - Civil and industrial construction; - Exploitation of sand, stones and gravel; - Production of cement and construction materials; - Production, trading and assemblage of furniture products and construction equipment; - Real estate trading (excluding land price consultancy); - Domestic and foreign investment advisory (excluding law advisory); - Production and trading of non-ferrous metal and non-ferrous metal scraps; - Trading and export and import of steel and supplies for steel making and rolling; - Production of rolled steel products and roofing sheets; - Trading metals, metal ores, iron and steel scraps; - Making cast iron and steel, and casting cast iron, iron, and steel; - Production of plated and non-plated steel tubes and inox tubes; - Rendering sports and gymnastics services (training, competition organisation, athlete transfer); - Building and renting sports practice ground and competition ground; and - Export-import mandate.

15 The subsidiaries and associates were incorporated in Vietnam and Laos. At 31 December 2010, the Group has subsidiaries and associates as follows: Ownership and voting rights No. Principal activities 31/12/ /12/2009 Subsidiaries 1 Hoa Phat Equipment & Accessories Co., Ltd. Producing construction equipment, trading construction machinery and equipment, exploiting small and medium-sized minerals. 2 Hoa Phat Furniture JSC Producing and trading various kinds of furniture. 3 Hoa Phat Steel Pipe Co., Ltd. 4 Hoa Phat Refrigeration Engineering Co., Ltd. 5 Hoa Phat Urban Development & Construction JSC 6 Hoa Phat Trading Co., Ltd. Producing and trading various kinds of steel pipes. Producing and trading various kinds of refrigerant equipment. Civil and industrial construction, trading real its own or its leased estates, leasing houses offices, investing in and building technical infrastructure. Export, import and trade steel, construction materials, furniture, air-conditioners, washing machines, refrigerators. 7 Hoa Phat Steel JSC Producing steel, iron, exploiting iron ores, exploiting and collecting lignite; wholesaling metals and metal ores; producing, trading coke coal. 8 Hoa Phat Laos Co., Ltd. 9 An Thong Mineral Investment JSC Hoa Phat Binh Dinh One member Co., Ltd Golden Gain Vietnam JSC Hoa Phat Energy JSC Hoa Phat Steel One Member Co., Ltd. Surveying, exploring mineral projects in Laos. Exploring, exploiting, processing, importing and exporting minerals mainly iron ores % 99.64% 99.50% 99.50% 99.82% 99.82% 99.67% 99.67% 99.67% 99.67% 99.00% 99.00% 85.00% 85.00% 100% 100% 99.90% 99.90% Assembling production machines, assembling furniture and refrigeration products. 100% - Real estate trading % - Producing and wholesaling coke coal, exploiting and collecting coal; producing refined petroleum products; wholesaling metals and metal ores; and trading various kinds of coal. Producing steel, iron, wholesaling metals and metal ores % - 100% -

16 Ownership and voting rights No. Principal activities 31/12/ /12/2009 Associates 1 Hoa Phat Mineral JSC Exploiting and collecting lignite; exploiting ores of iron, aluminium, other rate ores; exploiting stone, sand, gravel, clay; producing coke coal, gypsum, lime, nonferrous metals and rare metals; casting iron and nonferrous metals. 2 Hoa Phat Cement JSC Producing and trading clinker, cement; producing and trading auxiliary material, additive substance of cement industry; exploiting and trading construction materials; and trading cement-producing machinery and equipment. 3 Hoa Phat Energy JSC Producing and wholesaling coke coal, exploiting and collecting coal; producing refined petroleum products; wholesaling metals and metal ores; and trading kinds of coal. 4 Hoa Phat A Chau Real Estate JSC 5 Hoa Phat SSG Mining JSC Trading real estates, land use rights, building technical and civil works, kinds of houses, installing electricity system and water drainage system. Exploiting and collecting lignite; exploiting nonferrous ores; rendering mining support services; and producing coke coal, lime, gypsum. 49% 49% 50% 50% - 50% 30% 30% 38% - (*) (*) The Group s authorised share capital and voting rights in Hoa Phat SSG Mining JSC is 40% in accordance with the business registration certificate. However, by 31 December 2009 Hoa Phat SSG Mining JSC had yet commenced its business operations and the Group had not contributed its share capital in this company. As at 31 Dec 2010, the Group had 8,497 employees (31/12/2009: 6,833 employees).

17 2. Summary of significant accounting policies The following significant accounting policies have been adopted by the Group in the preparation of these consolidated financial statements Basis of financial statement preparation (a) General basis of accounting The consolidated financial statements, expressed in Vietnam Dong ( ) have been prepared in accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System and the relevant statutory requirements. The consolidated financial statements, except for the consolidated statement of cash flows, are prepared on the accrual basis using the historical cost concept. The consolidated statement of cash flows is prepared using the indirect method. (b) Basis of consolidation Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Associates Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Associates are accounted for using the equity method. The consolidated financial statements include the Group s share of the income and expenses of associates, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group s share of losses exceeds its interest in an associate, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associates. Transactions eliminated on consolidation Intra-group balances, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

18 2.2. Fiscal year The fiscal year of the Group is from 1 January to 31 December Foreign currency transactions Monetary assets and liabilities denominated in currencies other than are translated into at rates of exchange ruling at the balance sheet date. Transactions in currencies other than during the year have been translated into at rates approximating those ruling at the transaction dates. In 2009, the Group adopted Circular No. 201/2009/TT-BTC issued by the Ministry of Finance on 15 October 2009 regarding recognition of foreign exchange differences which allowed deferral of exchange differences arising from period end translation of current monetary assets and liabilities denominated in currencies other than and non-current monetary assets and long-term liabilities denominated in currencies other than. As at 31 December 2010, the Group changed its accounting policy to follow Vietnamese Accounting Standard No. 10 The Effects of Changes in Foreign Exchange Rates which requires foreign exchange differences, including exchange differences arising from the year end translation of current monetary assets and liabilities denominated in foreign currencies, be recorded in the consolidated statement of income except when they relate to the translation of foreign currency monetary items during some subsidiaries pre-operating stage, in which case they are recorded in the Foreign Exchange Difference Account in equity until the subsidiaries commence operations. Once the subsidiaries commence operations, the related realised foreign exchange differences are transferred to the statement of income, unrealised foreign exchange gains are transferred to the Unearned Revenue Account and unrealised foreign exchange losses are transferred to the Longterm Prepayment Account. The unrealised gains and losses are then amortised on a straight line basis over five years. The Board of Directors of the companies in the Group believes that this change in accounting policy does not have a material effect on the Group s consolidated financial statements. As at 31 December 2010, the Group translated the monetary liabilities denominated in United States Dollar as at 31 December 2010 using the rates of exchange ranging from 18,932/USD1 to 20,500/USD1. The Company s Board of Directors believes that the rate applied by the Group is more appropriate to reflect the Group s monetary liabilities denominated in USD at the balance sheet date as compared to the average inter-bank exchange rate of 18,932/USD1 as published by the State Bank of Vietnam as at 31 December Subsequent to the year end, as at 1 March 2011, the inter-bank exchange rate of Vietnam Dong against United States Dollar has been depreciated by 9.2% from 18,932/USD1 to 20,668/USD Cash and cash equivalents Cash comprises of cash balances and call deposits. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

19 2.5. Investments Investments are stated at cost. An allowance is made for reductions in investment values if market value of the investment falls below cost or if the investee has suffered a loss. The allowance is reversed if the subsequent increase in recoverable amount can be related objectively to an event occurring after the allowance was recognised. An allowance is reversed only to the extent that the investment s carrying amount does not exceed the carrying amount that has been determined if no allowance had been recognised Accounts receivable Trade and other receivables are stated at cost less allowance for doubtful debts. Allowance for doubtful debts is established for amount of outstanding receivables overdue more than six months. Increases and decreases to the allowance for doubtful debts balance are recorded as general and administration expense account in the consolidated statement of income Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average basis and includes all costs incurred in bringing the inventories to their present location and condition. Cost in the case of finished goods and work in progress includes raw materials, direct labour and attributable manufacturing overheads. Net realisable value is the estimated selling price of inventory items, less the estimated costs of completion and selling expenses. The Group applies the perpetual method of accounting for inventory. Allowance for inventories is established for the estimated losses arising due to the impairment of value (through diminution, damage, obsolescence, etc.) of inventories owned by the Group, based on appropriate evidences of impairment available at the balance sheet date. Increases and decreases to the allowances for inventories balance are recorded as cost of goods sold account in the consolidated statement of income.

20 2.8. Tangible fixed assets (a) Cost Tangible fixed assets are stated at cost less accumulated depreciation. The initial cost of a tangible fixed asset comprises its purchase price, including import duties and any directly attributable costs of bringing the asset to its working condition for its intended use. Expenditure incurred after tangible fixed assets have been put into operation, such as repairs and maintenance and overhaul cost, is charged to the consolidated statement of income in the year in which the cost is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of tangible fixed assets beyond their originally assessed standard of performance, the expenditure is capitalised as an additional cost of tangible fixed assets. (b) Depreciation Depreciation is computed on a straight-line basis over the estimated useful lives of tangible fixed assets. The estimated useful lives are as follows: buildings 5 35 years office equipment 3 12 years machinery and equipment 2 25 years motor vehicles 4 20 years others 3 10 years 2.9. Finance lease tangible fixed assets Leases in terms of which the Group assume substantially all the risks and rewards of ownership are classified as finance leases. Tangible fixed assets acquired by way of finance leases are stated at an amount equal to the lower of fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation. Depreciation on leased assets is computed on a straight-line basis over the estimated useful lives of items of the leased assets. The estimated useful lives of leased assets are consistent with the useful lives of tangible fixed assets as described in accounting policy 2.8 (b).

21 2.10. Intangible fixed assets (a) (b) Land use rights Land use rights are stated at cost less accumulated amortisation. The initial cost of a land use right comprises the value of the right as stated in the its purchase price and any directly attributable costs incurred in conjunction with securing the land use right. Amortisation is computed on a straightline basis over years. Software The cost of acquiring new software, which is not an integral part of the related hardware, is capitalised and treated as an intangible asset. Software costs are amortised on a straight-line basis over 2-10 years Investment property (a) (b) Cost Investment property is stated at cost less accumulated depreciation. The initial cost of an investment property comprises its purchase price, cost of land use rights and any direct costs of bringing the asset to its working condition for its intended use. Expenditure incurred after investment property has been put into operation, such as repairs and maintenance, is charged to the consolidated statement of income in the year in which the cost is incurred. In situations where it can be clearly demonstrated that the expenditure has resulted in future economic benefits in excess of the originally assessed standard of performance of the existing investment property, the expenditure is capitalised as an additional cost of investment property. Depreciation Depreciation is computed on a straight-line basis over the estimated useful lives of investment property. The estimated useful lives are as follows: buildings 3 49 years Construction in progress Construction in progress represents the cost of construction and machinery which have not been fully completed or installed. No depreciation is provided for construction in progress during the period of construction and installation.

22 2.13. Long-term prepayments (a) (b) (c) (d) (e) (f) (g) Pre-operating expenses Pre-operating expenses are recorded in the statement of income, except for establishment costs and expenditures on training, advertising and promotional activities incurred from the incorporation date to the commercial operation date. These expenses are recognised as long-term prepayments, initially stated at cost, and are amortised to the statement of income on a straight line basis over three years starting from the date of commercial operations. Tools and supplies Tools and supplies are stated at cost, and are amortised to the statement of income on a straight line basis over two to three years. Maintenance expenses Maintenance expenses comprise major expenses on a periodical basis during the use of assets. These expenses are initially stated at cost, and are amortised to the statement of income on a straight line basis over two to three years. Foreign exchange differences Realised and unrealised foreign exchange differences in the pre-operating period from Company s subsidiaries were recorded in the Foreign Exchange Differences Account in Equity until these subsidiaries start operating and relevant assets are put into use. Then, the realised foreign exchange losses in the pre-operating period will be moved to Long-term Prepayment Account and amortised on a straight line basis over five years. Exploration expenses Exploration expenses incurred in conjunction with exploration activities on iron ore mine carried out by a subsidiary which is currently in the pre-operating period in support for future exploitation of the subsidiary. The exploration expenses initially stated at cost and, when the related project commences business operation, these expenses is expected to be armotised to the statement of income on a straight line basis over the commercial exploitation period of the project. Prepaid land costs Prepaid land costs comprise prepaid land lease rentals and other costs incurred in conjunction with securing the use of leased land. These costs are recognised in the statement of income on a straight-line basis over the term of the leases. Site clearance expenses Site clearance expenses comprise compensation for site clearance paid by the Group. The expenses will be deducted from the Group s land rental upon the incurring of the rental payment obligation in the following years.

23 (h) Bond issuance fees Bond issuance fees reflect the costs incurred related to the issuance of bonds in the year. These expenses were recognised in the statement of income on a straight-line basis over three years Goodwill Goodwill arises on the acquisition of subsidiaries and associates. Goodwill is measured at cost less accumulated amortisation. Cost of goodwill represents the excess of the cost of the acquisition over the Group s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquirees. If the fair value of the net assets which the Group acquired from subsidiaries and associates exceeds the purchase price, the surplus will be recorded in the consolidated statement of income during the year. Goodwill is amortised on a straight-line basis over periods less than 10 years. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment Trade and other payables Trade and other payables are stated at their cost Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability Taxation Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the statement of income except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

24 Deferred tax is provided using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised Revenue (a) (b) (c) Goods sold Revenue from the sale of goods is recognised in the statement of income when the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due or the possible return of goods. Services rendered Revenue from services rendered is recognised in the statement of income in proportion to the stage of completion of the transaction at the balance sheet date. The stage of completion is assessed by reference to surveys of work performed. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due. Construction contracts Revenue from construction contracts is recognised in the statement of income in proportion to the stage of completion of the contract when the outcome of a construction contract can be estimated reliably. The stage of completion is assessed by reference to surveys of work performed. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due Operating lease payments Payments made under operating leases are recognised in the statement of income on a straight-line basis over the term of the lease. Lease incentives received are recognised in the statement of income as an integral part of the total lease expenses Borrowing costs Borrowing costs are recognised as an expense in the year in which they are incurred, except where the borrowing costs relate to borrowings in respect of the construction of qualifying assets, in which case the borrowing costs incurred during the period of construction are capitalised as part of the cost of the assets concerned.

25 2.21. Earnings per share The Group presents basic earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to the ordinary shareholders of the Group by the weighted average number of ordinary shares outstanding during the year Related parties Related parties include the shareholders of the Company and the Group s associates Off balance sheet items Amounts which are defined as off balance sheet items under the Vietnamese Accounting System are disclosed in the relevant notes to these consolidated financial statements.

26 3. Segment reporting A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The Group s primary format for segment reporting is based on business segments. The Group comprises the following main business segments: Production and trading of various kinds of steel: refining steel; casting steel, iron; trading and import-export of steel, steel-producing machinery and equipment; production of industrial steel including steel sheet, hot rolled steel, cold rolled steel, steel pipe etc., steel scrap; production and trading of steel pipes; exploiting iron ores, wholesales of metals and metal ores, production of steel string machinery as to expand operation; Trading of construction machinery; production and trading of construction equipment, and exploitation of medium- and small-sized metals; Production of interior furniture: producing and trading various kinds of interior furniture; Production of refrigeration products: producing and trading refrigerant products; Trading of real estates: civil construction, industrial construction, trading of real estate under its ownership or lease from others; leasing houses, offices; and investing in construction of infrastructure; and Energy and exploring and exploiting minerals: Exploring, exploiting, refining, processing, import-export of minerals, mainly iron ores; production and wholesales of coke coal, exploiting and collecting fossil coal; producing refined oil products; production, transmission, distribution of electricity; wholesales of metals and metal ores; and trading of various kinds of coal.

27 Year ended 31 December 2010 Production and trading of steels Trading of construction machineries Production of interior furniture Production of refrigerators Trading of real estates Energy and exploring and exploiting minerals Elimination Consolidated total Net external revenue 10,924,292,989, ,690,694,440 1,234,332,992, ,656,621, ,766,055, ,344,463,512-14,267,083,816,361 Net inter-segment revenue 4,951,836,252,644 28,714,811,833 24,718,123,115 56,447,090,629 47,974,048, ,838,177,933 (5,912,528,504,604) - Total revenue 15,876,129,242, ,405,506,273 1,259,051,115, ,103,712, ,740,103,593 1,693,182,641,445 (5,912,528,504,604) 14,267,083,816,361 Segment result 1,208,022,579,902 98,485,831, ,348,073,814 59,038,181,638 59,686,560, ,468,687,228 (533,303,946,388) 1,515,745,968,515 Other income 243,371,743,400 3,195,554,865 3,093,099,216 2,407,443,019 5,541,343,468 4,856,495,142 (5,689,879,608) 256,775,799,502 Other expenses (244,353,832,220) (2,743,336,244) (514,532,118) (1,181,271,083) (4,439,816,579) (4,116,524,449) 2,988,389,100 (254,360,923,593) Share of profit in associates ,124,904,129-44,865,345,513 45,990,249,642 Income tax current (101,993,938,481) (10,482,762,155) (62,922,183,117) (13,703,347,115) (19,063,666,018) (86,697,055) - (208,252,593,941) Deferred tax benefit/(expense) 3,776,910, ,522,989 (51,568,727) 805,385,692 2,069,703,595-12,998,632,630 20,417,586,653 Net profit after tax 1,108,823,463,075 89,273,811, ,952,889,068 47,366,392,151 44,919,029, ,121,960,866 (478,141,458,753) 1,376,316,086,778 Segment assets 13,716,196,732, ,878,285, ,464,975, ,533,909,016 1,383,395,858,165 2,721,959,669,532 (5,137,421,764,252) 14,330,007,665,525 Investment in equity accounted associates 529,250,000, ,447,009,542 - (155,046,442,968) 573,650,566,574 Total assets 14,245,446,732, ,878,285, ,464,975, ,533,909,016 1,582,842,867,707 2,721,959,669,532 (5,292,468,207,220) 14,903,658,232,099 Segment liabilities 6,505,420,536, ,896,296, ,964,172, ,759,040, ,772,124,487 1,344,137,370,050 (1,304,280,382,747) 8,165,669,159,381 Total liabilities 6,505,420,536, ,896,296, ,964,172, ,759,040, ,772,124,487 1,344,137,370,050 (1,304,280,382,747) 8,165,669,159,381 Capital expenditure 429,669,786,849 28,880,952, ,447,210,268 23,492,205, ,575, ,633,865,180 (46,906,183,999) 959,715,411,472 Depreciation of tangible fixed assets, finance lease assets and investment properties (231,731,128,432) (15,183,943,140) (36,333,298,060) (14,698,716,779) (12,675,616,555) (52,960,947,744) 2,023,829,966 (361,559,820,744) Amortisation of intangible fixed assets (1,746,423,742) (783,420,469) (772,396,487) (127,161,525) - (122,063,761) 296,598,125 (3,254,867,859)

28 Year ended 31 December 2009 Production and trading of steels Trading of construction machineries Production of interior furniture Production of refrigerators Trading of real estates Energy and exploring and exploiting minerals Elimination Consolidated total Net external revenue 5,593,864,023, ,383,336,767 1,051,868,707, ,168,238, ,110,308, ,123,394,614,746 Net inter-segment revenue 938,430,982,845 25,213,995,564 15,557,442,403 49,482,844,735 60,048,627,483 - (1,088,733,893,030) - Total revenue 6,532,295,006, ,597,332,331 1,067,426,149, ,651,083, ,158,935,655 - (1,088,733,893,030) 8,123,394,614,746 Segment result 1,589,810,513, ,547,633, ,817,143,773 62,394,779, ,734,795,656 (8,407,948,200) (643,216,389,549) 1,505,680,527,242 Other income 17,295,611,822 9,407,327,158 2,108,673,050 1,701,969,529 4,908,977,129 25,877,110 (5,312,238,130) 30,136,197,668 Other expenses (7,079,304,977) (10,054,293,760) (668,496,438) (1,571,233,868) (1,365,046,923) (23,706,713) 5,223,439,243 (15,538,643,438) Share of profit in associates (10,298,743,625) (10,298,743,625) Income tax - current (137,428,301,045) (21,218,581,177) (50,256,363,843) (14,092,009,360) (28,200,535,733) - - (251,195,791,158) Deferred tax benefit/(expense) (503,839,768) 733,409,373 (1,258,280,155) (49,012,871) 2,293,260,786-10,707,539,363 11,923,076,728 Net profit after tax 1,462,094,679, ,415,494, ,742,676,385 48,384,492,546 99,371,450,915 (8,405,777,803) (642,896,392,698) 1,270,706,623,417 Segment assets 10,005,706,135, ,091,695, ,725,260, ,288,446, ,180,029,011 79,810,651,961 (3,029,534,342,481) 9,312,267,876,549 Investment in equity accounted associates 914,500,000, ,472,112, ,972,112,536 Total assets 10,920,206,135, ,091,695, ,725,260, ,288,446, ,180,029,011 79,810,651,961 (3,013,062,229,945) 10,243,239,989,085 Segment liabilities 4,449,784,234, ,688,842, ,019,261, ,454,446, ,434,235,906 10,673,390,263 (488,762,964,232) 5,178,291,447,425 Total liabilities 4,449,784,234, ,688,842, ,019,261, ,454,446, ,434,235,906 10,673,390,263 (488,762,964,232) 5,178,291,447,425 Capital expenditure 1,944,245,550,685 65,291,333,786 17,434,990, ,077,479 4,121,512,069 15,268,670,934 (1,758,998,670) 2,045,206,136,328 Depreciation of tangible fixed assets, finance lease assets and investment properties 111,151,232,695 29,977,756,832 42,623,632,444 14,665,891,037 12,220,972, ,985,700 (174,549,399) 211,029,921,989 Amortisation of intangible fixed assets 1,795,842, ,871, ,785, ,807,759-7,222,717 (300,725,399) 3,143,804,285