CIRCULAR

GUIDING THE SETTLEMENT OF A NUMBER OF FINANCIAL MATTERS UPON THE TRANSFORMATION OF ENTERPRISES WITH 100% STATE CAPITAL INTO JOINT-STOCK COMPANIES UNDER THE GOVERNMENT’S DECREE No. 109/2007/ND-CP OF JUNE 26, 2007

In furtherance of the Government’s Decree No. 109/2007/ND-CP of June 26, 2007, on transformation of enterprises with 100% state capital into joint-stock companies (below referred to as Decree No. 109/2007/ND-CP for short), the Ministry of Finance guides a number of financial matters as follows:

I. GENERAL PROVISIONS

1. This Circular applies to entities undergoing equitization under Article 2 of Decree No. 109/2007/ND-CP (below referred to as equitized enterprises).

2. Equitized enterprises shall conduct inventory, financial settlement and revaluation of their assets and state capital portions. If state capital in enterprises no longer exists, another appropriate form of reorganization shall be applied in accordance with law. The State does not allocate more capital for equitization.

3. Based on the revaluation of their assets and state capital portions, equitized enterprises shall determine their charter capital, work out equitization plans and organize an initial offering of shares and the shareholders’ general meeting, continue settling financial matters which remain unsettled by the time of their official transformation into joint-stock companies, make final settlement with the state and hand over all assets to joint-stock companies.

4. The process of equitization must be conducted in a lawful, public and transparent manner and ensure that no state capital and asset is lost. Involved organizations and individuals that fail to comply with state regulations, causing damage to or loss of state assets shall bear administrative liability, pay material compensations or be examined for penal liability in accordance with law.

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6. Proceeds from the equitizauon, after subtracting related expenses, shall be remitted to competent agencies according to regulations. Enterprises are strictly prohibited from using equitizalion proceeds for business or any other purposes. Late remittance of equitization proceeds shall be fined according to current financial disciplines.

II. INVENTORY AND CLASSIFICATION OF ASSETS AND LIABILITIES

A. TIME OF ENTERPRISE INVENTOR YAND VALUATION

1. When receiving an equitization notice or decision from a competent agency, au equitized enterprise shall inventory and classify assets it manages and uses at the time of enterprise valuation.

2. Time of enterprise valuation shall be decided by the equitization-deciding agency to suit the time of closing accounting books, making a financial statement and selecting a method of enterprise valuation, specifically as follows:

2.1. In case of application of the method of enterprise valuation based on assets, the time of enterprise inventory and valuation is the end of a quarter following the quarter in which the equitization decision is issued.

2.2. In case of application of the method of enterprise valuation based on discount cash flow, the time of enterprise inventory and valuation is the end of a fiscal year following the year in which the equitization decision is issued.

3. The equitized enterprise shall use its audited annual financial statement as a basis for determining its monetary capital and liabilities.

If the time of enterprise valuation is not coincidental with the time of making an annual financial statement, the enterprise shall make a financial statement up to the time of enterprise valuation.

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Past the above time limit, if the enterprise value and the value of the state capital portion in the enterprise are not yet disclosed for equitization, the equitization-deciding agency may consider and decide to prolong the duration for enterprise valuation but shall ensure the principle that the time of disclosure of the enterprise value and the value of the state capital portion in the enterprise is within 12 months after the enterprise valuation.

B. INVENTORY AND CLASSIFICATION OF ASSETS AND LIABILITIES

1. Inventory and classification of assets:

1.1. To inventory and accurately determine the quantity and quality of existing assets currently managed and used by the enterprise; to check cash in safe and the balance of bank deposits at the time of enterprise valuation; to determine surplus or deficit assets and cash compared with accounting books, and clearly identify reasons for the surplus or deficit.

1.2. Inventoried assets shall be classified into the following groups:

a/ Assets that the enterprise needs to use.

b/ Assets that the enterprise no longer needs, redundant assets and assets pending liquidation.

c/ Assets formed from the reward fund or welfare fund (if any).

d/ Assets hired from outside, supplies and goods consigned by other entities for safe-keeping, processing or sale agency.

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2.1. Payable debts:

a/ To compare and classify debts by creditor (including also arrears of taxes and other state budget remittances) on the basis of clearly breaking down undue debts, overdue debts, debt principals and interests, and payable debts which arc not required to be paid.

b/ Payable debts which arc not required to be paid mean debts of creditors that no longer exist, specifically as follows:

- Debts of dissolved or bankrupt enterprises without institutional or individual heirs.

- Debts of creditors that are dead persons without heirs.

- Debts of other creditors which have become overdue for many years without creditors coining for comparison and certification. In this case, the equitized enterprise shall notify in writing those debts to its creditors or announce them on the mass media before the time of inventory.

2.2. Receivable debts:

a/ To clearly break down recoverable and irrecoverable receivable debts.

Irrecoverable receivable debts must have adequate documents proving their irrecoverability under the State’s current regulations on handling of outstanding debts.

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3. For state commercial banks, the inventory, appraisal and classification of assets being monetary capital, financial leasing assets and liabilities shall be conducted as follows:

3.1. To inventory and compare deposits of clients, deposit certificates (bills, promissory notes, bonds) as follows:

a/ Inventorying in detail each item on the accounting book.

b/ Comparing and certifying the outstanding deposits of clients that are legal entities.

c/ For savings, personal deposits and deposit certificates, crosscheck with their clients is not required but figures recorded in accounting books and client cards kept by the banks must be compared. For some specific cases in which outstanding deposits are great or there are differences between figures on accounting books and client cards), crosscheck with clients must be made.

3.2. To compare assets being outstanding credit loans (including those monitored off-balance sheet) as follows:

a/ Based on each client’s credit dossier at the commercial bank, drawing up a list of clients still having outstanding credit loans and outstanding credit loans of each client under each credit contract.

b/ Comparing figures recorded in credit dossiers and figures reflected in the commercial bank’s accounting book; crosschecking outstanding credit loans with each client in order to obtain clients’ certification of outstanding credit loans.

For clients that are individuals, if no crosscheck with those clients can be conducted, the commercial bank shall compare its accounting book with client cards they keep.

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3.3. To classify outstanding receivable debts that are subject to handling under the guidance of the State Bank of Vietnam.

3.4. For financial leasing assets: To conduct crosscheck with each client to clearly determine the payable debt amount of each financial leasing asset.

4. If omitting any asset or liability in the course of inventory and comparison, resulting in a decrease in the enterprise value and the value of the stale capital portion in the equitized enterprise, the director, the chief accountant and concerned organizations and individuals are liable for the whole value of the above liability or asset in accordance with law.

C. FINANCIAL SETTLEMENT

1. Before the enterprise valuation

1.1. Assets:

Based on results of asset inventory and classification, the enterprise shall handle its assets in accordance with Article 14 of Decree No. 109/2007/ ND-CP:

a/ For surplus or deficit assets, the enterprise shall analyze and identify reason(s) for the surplus or deficit and handle them as follows:

- For deficit assets, the responsibility of concerned organizations and individuals must be identified for payment of material compensations under current regulations. The value of deficit assets, after subtracting compensations, shall be accounted into business results.

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b/ Unused assets, which are approved in writing by the equitization-deciding agency, redundant assets and assets pending liquidation shall be handled as follows:

- Liquidation, transfer or sale: the enterprise’s director shall direct the liquidation, transfer or sale of assets in accordance with current legal provisions.

Proceeds from and expenses for liquidation, transfer or sale of assets shall be accounted as incomes and expenditures of the enterprise.

- By the time of enterprise valuation, unused assets, redundant assets and assets pending liquidation which have not yet been handled shall be accounted into the enterprise value. The equitized enterprise shall preserve and transfer such assets to the agencies defined in Clause 2, Article 14 of Decree No. 109/2007/ND-CP.

c/ Assets being welfare facilities previously invested with the reward fund or welfare fund shall be handled under Clause 3, Article 14 of Decree No. 109/2007/ND-CP.

d/ Assets invested with the reward fund or the welfare fund and already used for production and business and continuing to be used by the equitized enterprise for its production or business shall be handled under Clause 4, Article 14 of Decree No. 109/2007/ND-CP.

- The capital amount equal to the residual value of these assets shall be returned to the reward fund or welfare fund for division to the enterprise’s employees at the time of enterprise valuation according to the number of years they have actually worked in the equitized enterprise.

e/ Assets being welfare facilities invested with state capital and continuing to be used by the equitized enterprise shall be accounted into the value of the equitized enterprise.

1.2. Receivable debts:

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a/ For receivable debts with sufficient documents proving their irrecoverability under the State’s current regulations on handling of outstanding debts, the enterprise shall clearly identify the reason for their irrecoverability and the responsibility of concerned individuals or organizations for payment of compensations under current provisions of law. Any loss after the handling shall be made up for by the enterprise with its bad receivable debt reserve. If this reserve is insufficient, the outstanding loss shall be accounted as the enterprise’s business expense.

b/ For other overdue receivable debts, the enterprise shall continue claiming or agree to sell them to economic organizations engaged in sale and purchase of outstanding debts and assets. It may not sell them directly to debtors. Any loss from the sale of debts shall be accounted as business expense.

c/ At the time of enterprise valuation, the equitized enterprise shall hand over liabilities not accounted into its value (including also those already handled with the bad receivable debt reserve, contingency reserve, professional operation reserve, etc., currently monitored off-balance sheet) to concerned agencies under Clause 2, Article 14 of Decree No. 109/2007/ ND-CP.

d/ For amounts paid in advance by the enterprise to goods and service providers, such as house and land rents, payments for purchased goods and remunerations, which have already been fully accounted as business expenses, the enterprise shall compare and account them as decreases in expenses for goods and services not yet provided or for the remaining rent duration and as increases in advanced amounts (or to-be-allocated funds).

1.3. Payable debts:

The principles for handling payable debts comply with Article 16 of Decree No. 109/2007/ND-CP:

a/ Payable debts which are not required to be paid shall be accounted as increases in state capital.

b/ For arrears of taxes and other state budget remittances: The enterprise shall declare and send a tax finalization report made by the time of enterprise valuation to the tax office for inspection and determination of tax amounts to be paid under regulations. The tax office shall assign tax inspectors to inspect the equitized enterprise before the notified time of enterprise valuation.

If the inspection remains uncompleted by the time of enterprise valuation, the enterprise may use the available financial statement as a basis for enterprise valuation (covering the determination of the enterprise’s tax obligations and profit division). Any difference in the enterprise’s tax obligation toward the State (if any) shall be adjusted when the enterprise is granted a business registration certificate for official transformation into a joint-stock company.

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- If the equitized enterprise suffers from losses, has no more state capital or is unable to pay overdue debts, it shall carry out procedures and file a dossier of request for debt freezing, prolongation or loan interest remission under current provisions of law.

Within 20 working days after receiving the enterprise’s dossier, the lending bank shall notify in writing the enterprise of its handling opinion.

- Loan principals and interests which are ineligible for remission shall be handled as follows:

+ The enterprise shall carry out all procedures for transferring these loan principals and interests to the succeeding joint-stock company for repayment.

+ The enterprise shall agree with the lending bank on conversion of loan principals and interests into equity capital. The conversion of loans into equity capital shall be made through an auction. The lending bank shall participate in this auction under regulations.

+ The enterprise shall coordinate with the lending bank in handling debts by selling them to the company for sale and purchase of outstanding debts and assets of enterprises (below referred to as the debt sale and purchase company) at agreed prices. Based on the debt sale and purchase agreement, the equitized enterprise shall acknowledge debts with the debt sale and purchase company and at the same time coordinate with the latter in working out and submitting a plan on debt rescheduling to the equitization-deciding agency for consideration and agreement with the debt sale and purchase company on approval of the plan on transformation of the enterprise into a joint-stock company.

d/ For guaranteed overdue foreign loans, the enterprise and the guarantor shall negotiate with creditors on a plan on debt handling under the provisions of law on management of boo owing and repayment of foreign loans.

e/ For unpaid social premiums or wages for its employees, the enterprise shall completely pay them before being transformed into a joint-stock company in order to ensure interests of employees.

1.4. Reserves, losses and profits shall be handled under Article 17 of Decree No. 109/2007/ND-CP.

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1.6. Reward fund and welfare fund:

a/ The monetary balance of the reward fund and the welfare fund shall be divided to the equitized enterprise’s employees who are employed at the time of enterprise valuation according to the number of years of working in the equitized enterprise. The director and the trade union in the equitized enterprise shall jointly plan and decide on the division.

The source of the reward fund and the welfare fund is determined to be equal to their balance (excluding the source constituting welfare assets) plus (+) the actual value of assets invested with the reward fund and the welfare fund and currently used for production and business.

b/ If the enterprise has overspent the reward fund and the welfare fund, the excessive amounts shall be settled as follows:

- Amounts directly paid to employees on the list of regular payees at the time of issuance of the equitization decision shall not be covered with the state capital portion in the enterprise. The enterprise director shall coordinate with the trade union in settling these amounts by recovering or convening them into receivable debts for payment by the succeeding joint-stock company.

- For payments in excess of the reward fund and the welfare fund to payees who are unidentifiable for recovery (such as payments to employees who have lost or quitted their jobs before the time of issuance of the equitization decision), the steering committee for equitization shall report them to the enterprise value-deciding agency for settlement like irrecoverable receivable debts.

2. Financial settlement in the period from the date of enterprise valuation to the date of official transformation of the enterprise into a joint-stock company

2.1. In the period from the date of its valuation to the date of its official transformation into a joint-stock company, the enterprise shall continue settling financial matters under the State’s regulations. At the time of issuance of the decision on disclosure of the enterprise value, the equitized enterprise shall settle financial matters and adjust its accounting books under regulations. At the same time, it shall transfer its assets and debts not accounted into its value to the agencies defined in Clause 2, Article 14 of Decree No. 109/2007/ND-CP within 30 days from the date of disclosure of the enterprise value.

2.2. If the period from the deadline for investors to pay money amounts for share purchase to the time the company is granted a business registration certificate is more than three months, the enterprise may calculate loan interests to be paid to investors on the following principles:

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- The interest rate must not exceed the short-term loan interest rate applied by the commercial bank where the equitized enterprise opens its account at the time of interest calculation.

- The expense for interest payment may be accounted by the enterprise as its business expense and must cause no loss to the enterprise.

2.3. Making of a financial statement, a report on valuation of the state capital portion at the lime the join-stock company is granted a business registration certificate and a report on final settlement of equitization expenses:

a/ Within 30 days after being granted a business registration certificate, the enterprise shall make a financial statement and a declaration of taxes by the time of grant of the business registration certificate, then send them to the enterprise value-deciding agency, the tax office and the finance agency of the same level for coordinated inspection and revaluation of the state capital portion.

Within 30 working days after receiving the financial statement, the competent enterprise value-deciding agency shall inspect and settle financial matters arising during the aforesaid period; revaluate the stale capital portion and issue a decision on state capital valuation at the time the enterprise is officially transformed into a joint-stock company for use as a basis for handover between the equitized enterprise and the join-Stock company.

If the enterprise has submitted a complete dossier but the tax office fails to conduct an inspection within a set time limit, the joint-stock company will not be liable for any difference between the additional tax liability and that resulting from figures in the financial statement already approved and handed over by a competent agency. The tax office’s leadership is responsible for all losses caused by the delayed inspection.

b/ The director and the chief accountant of the equitized enterprise shall make and sign the financial statement, a report on valuation of the state capital portion at the time of transformation of the enterprise into a joint-stock company, and a report on final settlement of equitization expenses, and take responsibility for the truthfulness and accuracy of these statement and reports.

The Board of Directors of the (new) joint-stock company shall create conditions for the leadership of the equitized enterprise to discharge their duties and sign and append a seal of certification of signatures of the director and the chief accountant of the equitized enterprise in the financial statement. The director and the chief accountant of the equitized enterprise may neither be transferred to other jobs nor retire under regulations until they complete the financial statement.

c/ If the date of enterprise valuation falls in a year and the date of official transformation into a joint-stock company falls in the subsequent year, a consolidated financial statement is required for the whole period.

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2.4. The difference between the actual value of state capital at the time of transformation of the enterprise into a joint-stock company and the actual value of state capital at the time of enterprise valuation shall be settled under Article 21 of Decree No. 109/2007/ND-CP. If this difference is negative (due to loss-making business operation), its reasons, both objective and subjective, must be clearly identified before the difference is handled:

a/ Negative difference due to objective reasons means losses caused by natural disasters, sabotages, changes in state policy or the world market or other force majeure circumstances.

b/ All other reasons for the negative difference are subjective ones. The equitization-deciding agency may not select or nominate individuals responsible for the equitized enterprise’s loss-making business operation causing the negative difference to act as representatives of the state capital contribution in the. joint-stock company.

3. Handover of assets and capital

Based on the decision on adjustment of the enterprise value at the time of business registration for transformation into a joint-stock company, the steering committee for equitization shall direct the enterprise in adjusting accounting books, making a handover dossier and organizing the handover between the enterprise and the joint-stock-company.

The joint-stock company may use the whole assets and capital handed over to it for its production and business; receive all interests, obligations and responsibilities handed over by the equitized enterprises and have other rights and obligations provided for by law.

Obligations and responsibilities of the equitized enterprise which are additionally determined after the final settlement and handover to the joint-stock company will not rest with the joint-stock company. If some debts of the equitized enterprise are not handed over to the joint-stock company, leading to the fact that the obligation to pay those debts is rejected by the joint-stock company, the director and the chief accountant of the equitized enterprise and concerned organizations and individuals shall take full responsibility for debt payment.

3.1. A handover dossier comprises:

a/ A dossier of enterprise valuation and the decision on disclosure of the enterprise value.

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c/ A competent agency’s decision on valuation of the state capital portion at the time of transformation into the joint-stock company.

d/ A written record on handover of assets and capital made at the time of handover (including a detailed table on liabilities handed over to the joint-stock company for payment and unsettled financial matters which need to be settled - if any).

3.2. Participants in the handover include:

a/ Representatives of the concerned ministry, ministerial-level agency or provincial/municipal People’s Committee and of the Ministry of Finance (in case of- equitization of an economic group, corporation, parent company).

b/ Representatives of the economic group, corporation or parent company (in case of equitization of member enterprises of the economic group, corporation or affiliate company), and the director and the chief accountant of the equitized enterprise representing the handing over party.

c/ The chairman of the Board of Directors, the director, the chief accountant and a representative of the trade union of the joint-stock company representing the taking over party.

d/ A representative of the Corporation for State Capital Investment and Trading, for equitized enterprises which are obliged to hand over their right to represent the owner of state capital to the Corporation for State Capital Investment and Trading.

3.3. The written record of handover must bear all signatures of handover participants and clearly state:

a/ The actual state of assets, capital and employees at the lime of handover.

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c/ Unsettled matters that the joint-stock company shall continue settling.

III. METHODS OF ENTERPRISE VALUATION

A. THE ASSET METHOD

1. Asset method means a method for enterprise valuation on the basis of appraising the actual value of all existing assets of the enterprise at the lime of enterprise valuation.

2. Book value of an enterprise means the total value of assets stated in the enterprise’s accounting balance sheet.

The book value of the state capital portion in the enterprise is equal to the enterprise’s book value minus (-) payable debts, the balance of the reward fund and the welfare fund and the balance of the non-business funding source (if any).

3. Actual value of an enterprise is the actual value of all existing assets of the enterprise at time of enterprise valuation with the enterprise’s profitability taken into account.

3.1. The actual value of an enterprise does not cover items specified in Article 28 of Decree No. 109/2007/ND-CP.

3.2. Bases for determination of the actual value of an enterprise at the time of enterprise valuation:

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b/ Quantity and quality of assets actually inventoried and classified;

c/ Technical properties, needs for use and market prices of assets;

d/ Value of land use rights and profitability of the enterprise (geographical location, brand, etc.).

When conducting enterprise valuation by the asset method, financial and credit institutions may use audited financial statements to determine monetary capital assets and liabilities but shall also inventory and appraise fixed assets, long-term investments and land use right value under the State’s regulations.

4. Determination of actual value of assets:

Actual value of assets is determined in Vietnam dong. Assets already accounted in a foreign currency must be converted into Vietnam dong at an average exchange rate on the inter-bank foreign currency market announced by the Slate Bank at the time of enterprise valuation.

4.1. For assets in kind:

a/ Only assets that continue to be used by the joint-stock company are revalued.

b/ Actual value of an asset is equal to (=) its historical cost calculated at the market price at the time of valuation multiplied (x) by its residual quality at the time of valuation.

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- Market price is:

+ Price of a brand-new asset of the same type currently purchased or sold on the market, including also transportation and installation expenses (if any). For special assets unavailable on the market, the asset purchase price is the purchase price of a similar brand-new asset, which is made in the same country, has the same capacity or equivalent properties. If no similar asset is available, the asset purchase price is the asset price recorded in the accounting book.

+ Capital construction unit price or investment ratio set by a competent agency at the latest time prior to the time of valuation, for assets being capital construction products. If no unit price or investment ratio is set. the booked price will be referred to, with the inflation factor in capital construction taken into account.

Particularly for works in which construction investment has been completed within three years before the enterprise valuation, the work settlement value approved by a competent agency will be used.

For works with the work settlement value not yet approved by a competent agency but already put into operation, prices recorded in accounting, books will be used.

- The quality of an asset is determined in a certain percentage of the quality of a brand-new asset of the same type purchased or newly constructed, complies with the State’s regulations on safety conditions for use or operation of assets, and assures the quality of manufactured products and environmental sanitation under the guidance of ministries managing economic technical branches. If no relevant state regulations exist, the quality of revalued assets must not be lower than 20% of the quality of purchased brand-new assets of the same type, if assets are machinery, equipment or means of transport, or 30% of the quality of newly constructed assets of the same type, if assets are workshops or architectures.

c/ Fixed assets which have been fully depreciated and working and managing tools with their value fully amortized and accounted as business expenses but further used by the joint-stock company must be revalued and accounted into the enterprise value on the principle that their value must not be lower than 20% of that of brand-new assets and tools.

4.2. Monetary assets, including cash, deposits and valuable papers (bills, bonds, etc.) of the enterprise are determined as follows:

a/ Cash is determined according to the written record of inventory of cash in safe.

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c/ Valuable papers are determined at market trading prices. If there is no trading in these valuable papers, their par values are used for determination.

4.3. Receivable debts included in the enterprise value are determined according to their actual balance on the accounting book after being handled under Point 1.2, Part C, Section II of this Circular.

4.4. Investments in uncompleted capital construction works and expenses for uncompleted production, business or non-business activities are determined according to actual amounts reflected in the accounting book.

4.5. The value of assets used as short-term or long-term collaterals or escrow accounts are determined according to their actual balance in the accounting book already checked and certified.

4.6. The value of intangible assets (if any) is determined according to their residual value currently accounted in the accounting book. Particularly, the land use right value is determined under Point 5, Part A, Section III of this Circular.

4 7. Value of business advantages

a/ The value of business advantages of an enterprise is determined by either of the following two methods:

- Determination based on the profit ratio and interest rate of government bonds:

Value of business advantage of an enterprise

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Value of state capital portion recorded in the accounting book at the time of valuation

x

In which:

Average after-tax profit ratio on state capital over three years prior to the time of enterprise valuation

=

Average after-tax profit over three years prior to the time of enterprise valuation

x 100%

Average slate capital recorded in the accounting book in three years prior to the time of enterprise valuation

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Value of business advantages of an enterprise

=

Value of geographical location advantage

+

Brand value

In which:

+ The value of geographical location advantage is applicable to equitized enterprises (regardless of their business lines and performance) that use leased urban land lots. The value of geographical advantage of these land lots must be determined and included in the enterprise value.

The value of geographical location advantage of a land lot is equal to the difference between the land price set close to the actual market price of land use right transfer under normal conditions (under Clause 12, Article 1 of the Government’s Decree No. 123/ 2007/ND-CP of July 27, 2007, amending and supplementing a number of articles of Decree No. 188/2004/ND-CP of November 16, 2004, on methods of determination of land prices and price brackets of various categories of land) and the price decided and announced by the provincial/municipal People’s Committee on January 1 of the year of enterprise valuation.

For a central enterprise, based on the land use right transfer price determined by a price appraisal agency, the equitization-deciding agency shall consult the People’s Committee of the province or city where the enterprise is located on the actual market price of the land use right transfer before making a decision.

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+ The value of brand (including mark and trade name) is determined on the basis of actual expenses for the creation, establishment and protection of marks, labels and trade names of the enterprise over ten years prior to the enterprise valuation or since the date of establishment, for enterprises that have operated for less than ten years (including also expenses for advertising at home and abroad the enterprise and its products, developing its website, etc.). .

b/ The value of business advantages to be included in the equitized enterprise’s value is either of the values determined by the above two methods, whichever is higher.

4.8. The value of the enterprise’s long-term investment capital in other enterprises is determined under Article 32 of Decree No. 109/2007/ND-CP.

- The value of shares of enterprises listed on the securities market is determined according to prices of stocks traded on the securities market at the time of enterprise valuation.

- For the value of shares of unlisted enterprises, the steering committee for equitization shall base itself on results of valuation by a consultancy agency to consider and propose it to the agency competent to approve the enterprise value for decision.

5. Value of land use rights

The determination and inclusion of the value of land use rights in the enterprise value comply with Article 30 of the Government’s Decree No. 109/2007/ND-CP and Decree No. 123/2007/ND-CP of July 27, 2007, amending and supplementing a number of articles of Decree No. 188/2004/ND-CPof November 16, 2004, on methods of determination of land prices and price brackets of land:

5.1. If the enterprise leases land:

a/ If the equitized enterprise pays land rent on an annual basis, the land rent value is not included in the enterprise value. If the enterprise uses urban land lots, the value of geographical advantages of these land lots must be determined and included in the enterprise value under Item a. Point 4.7, Section A, Part III of this Circular.

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The joint-stock company shall take over (or re-sign the land lease contract) and use land for proper purposes under the land law. It is not required to pay the land rent for the remaining duration of the land lease contract or the duration for which the equitized enterprise has paid the land rent.

c/ For equitized enterprises that are allocated land by the State with collection of land use levy and have paid land use levy into the state budget but now shift to lease such land and pay annual land rents; the value of the allocated land use rights is not included in the enterprise value.

The equitized enterprise shall complete procedures for shifting from land allocation to land lease before the official transformation into a joint-stock company.

5.2. If the enterprise is allocated land with collection of land use levy, the determination of the land use right value for calculation of its value shall be conducted as follows:

a/ For equitized enterprises that shift from land lease to land allocation with collection of land use levy, the land use right value must be included in the enterprise value.

The land price for determination of the land use right value to be included in the equitized enterprise’s value is the land price promulgated by the provincial-level People’s Committee close to the actual market price of the land use right transfer under normal conditions according to Clause 12, Article 1 of the Government’s Decree No. 123/2007/ND-CP of July 27, 2007, amending and supplementing a number of articles of Decree No. 188/2004/ND-CP of November 16, 2004, on methods of determination of land prices enterprice brackets of various categories of land.

The order and procedures for land allocation, payment of land use levy and grant of land use right certificate comply with the Land Law and its guiding documents.

b/ For equitized enterprises that have been allocated land and paid land use levy into the state budget or received the lawful land use right transfer (including land areas already allocated to enterprises for building of. houses for sale or lease for hotel business, commercial activities or service provision, or construction of infrastructures for transfer or lease), the value of land use rights must be included in the enterprise value.

The land price for determination of the land use right-value to be included in the equitized enterprise’s value is the land price promulgated by the provincial-level People’s Committee close to the actual market price of the land use right transfer under normal conditions according to Clause 12, Article 1 of the Goveowncnt’s-Decree No. 123/2007/ND-CP of July 27, 2007, amending and supplementing a number of articles of Decree No. 188/2004/ND-CP of November 16, 2001, on methods of determination of land prices and price brackets of various categories of land. If the determined land use right value is higher than actual expenses for land use rights recorded in the accounting book, the positive difference may be included in the actual value of the state capital portion in the enterprise.

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d/ If the equitized enterprise that was allocated land for building of houses and infrastructures for transfer-or lease has handed over part of the multi-storied house area to other agencies for use as offices or for trading purpose, then:

Land use right value included in the enterprise value

=

Allocated land use right value

-

Land use right value distributed to the handed over house area

The land use right value distributed to the handed-over house area is determined on the basis of the sale price of each floor or the coefficient applicable for all floors set by the provincial/municipal People’s Committee.

e/ If the equitized enterprise that was allocated land for building residential houses for sale has sold these houses, it is exempt from the revaluation of the sold house area corresponding to the collected house sale proceeds which have been accounted into its revenues, included in annual business results and for which taxes have been paid in strict accordance with state regulations.

5.3. The equitized enterprise shall hire a functional consultancy organization to determine the land use right value, then report it to the provincial-level People’s Committee for consideration and decision.

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The actual value of the state capital portion in an enterprise is equal to the total actual value of the enterprise minus (-) actual payable debts, the balance of the welfare fund and reward fund and the balance of the non-business funding source (if any). Actual payable debts are the total value of the enterprise’s payable debts minus (-) debts not required to be paid.

7. Actual value of economic groups, corporations or parent companies:

In case an economic group, corporation or parent company is wholly equitized, apart from general regulations, the following guidance must also be complied with:

7.1. For economic groups or corporations invested and established by the State:

a/ The actual value of an economic group or a corporation consists of the actual value of all assets of the parent company of the economic group or the office of the corporation (including also dependent accounting units), independent-accounting member companies and non-business units (if any).

b/ The actual value of the state capital portion in an economic group or a corporation consists of the actual value of the state capital portion in the parent company of the economic group or the office of the corporation, independent-accounting member companies and non-business units (if any).

7.2. For parent companies:

a/ The actual value of a parent company for equitization is the actual value of all existing assets of the parent company.

b/ The actual value of state capital is the actual value of the state capital portion in the parent company.

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a/ Capital of an economic group, a corporation or a parent company in a one-member limited liability company transformed from a member company of or established by the economic group, corporation or parent company is considered a long-term investment of the economic group, corporation of parent company under Article 18 of Decree No 109/2007/ND-CP.

b/ The business advantage value of an economic group, a corporation or a parent company consists of values of business advantages of the office of the corporation or the parent company of the economic group and independent-accounting member companies.

Profits and state capital used for calculation of the profit ratio are determined under the Regulation on management of enterprise finance and slate capital proportions invested in other enterprises, promulgated together with the Government’s Decree. No. 199/2004/ND-CP of December 3, 2004.

B. METHOD OF DISCOUNT CASH FLOW

1. Method of discount cash flow means a method for determination of an enterprise’s value on the basis of the enterprise’s future profitability.

2. This method applies to enterprises engaged in main business lines of provision of financial, banking or commercial services, construction consultancy and designing, information technology and technology transfer, and having an average after-tax profit ratio on state capital over five years prior to equitization higher than the interest rate of government bonds of five-year term at the latest time prior to the time of enterprise valuation.

The handling of reserves under Article 17 of Decree No. 109/2007AD-CP shall be conducted at the time ot the enterprise’s official transformation into a joint-stock company.

3. Bases for enterprise valuation:

3.1. The enterprise’s financial statements over five years prior to the enterprise valuation.

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3.3. The interest rate of government bonds of five- year terra at the latest time prior to the time of enterprise valuation and the coefficient for cash flow discount of the enterprise.

3.4 The land use right value for the allocated land area.

4. The actual value of the state capital portion in an enterprise is determined as follows:

Actual value of state capital portion

=

+

Difference inallocated or lease land-use right value

In which:

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: present value of dividends in year No. i

: present value of state capital portion in year No. n

i: ordinal number of a year subsequent to the year of enterprise valuation (i: 1 → n).

Di: after-tax profit used for division of dividends in year No. i.

n: number of chosen future years (3-5 years).

Pn: value of state capital portion in year No. n and determined according to the following formula:

: after-tax profit used for division of expected dividends in year No. n + 1.

K: necessary discount rate or capital recovery rate of investors when purchasing shares and determined according to the following formula:

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Rf: ratio of profits earned from risk-free investments, which is equal to the interest rate of government bonds of five-year term at the latest time prior to the lime of enterprise valuation.

Rp: risk surcharge rate of investments in shares of companies in Vietnam, which is determined according to the table of world stock risk surcharge indices in the valuation year book or determined by valuation companies for each enterprise but must not exceed the ratio of profits earned from risk-free investments (Rf).

g: annual growth rate of dividends, which is determined as follows:

g = b x R

In which:

b: percentage of after-tax profits retained for capital supplementation.

R: average ratio of after-tax profits on own capital in future years.

5. The actual enterprise value at the time of valuation by the method of discount cash flow is determined as follows:

Actual enterprise value

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...

Actual value

of state capital portion

+

Actual payable debts

+

Balance of reward fund and welfare fund

+

Non- business funding source

In which:

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6. The positive difference of the state capital portion between the actual value and the book value shall be accounted as a business advantage of the enterprise, recorded as an asset and gradually distributed to its production and business expenses for no more than 10 years after the date of its official transformation into a joint-stock company.

7. For corporations and commercial banks eligible for enterprise valuation by the method of discount cash flow, profits and state capital shall be determined under current provisions of law on financial management applicable to state corporations and commercial banks.

C. OTHER METHODS

In addition to the two methods of enterprise valuation provided for in Parts A and B, Section III of this Circular, the enterprise value-deciding agency and the valuation organization may apply other valuation methods to determine the equitized enterprise’s value. Those methods of enterprise valuation must be scientific and applicable worldwide and ensure the truthful valuation of enterprises.

D. SELECTION AND USE OF RESULTS OF ENTERPRISE VALUATION

1. Results of enterprise valuation by the method of discount cash flow or other methods must be compared with results of enterprise valuation by the asset method at the same time for selection on the following principle:

The determined and disclosed enterprise value must not be lower than the enterprise value determined by the asset method.

2. The enterprise value determined 1 elected on the above principle shall serve as a basis for determination of charter capital, structure of shares for initial offering and reserve price for share auction.

IV. ORGANIZATION OF ENTERPRISE VALUATION

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2. Selection and hiring of valuation consultancy organizations

2.1. Valuation consultancy organizations include audit companies, securities companies, price appraisal organizations and investment banks with the valuation function and capability satisfying the criteria and conditions specified in the Ministry of Finance’s Regulation on selection and supervision of valuation consultancy organizations.

2.2. Based on the notified list of valuation consultancy organizations, the equitization deciding agency shall select a valuation consultancy organization and take responsibility for its selection.

If two or more valuation consultancy organizations register for provision of valuation services, the equitization-deciding agency shall organize a restricted bidding to select a consultancy organization.

2.3. Based on the selection decision of the equitization-deciding agency, the enterprise’s director shall sign a contract on hiring of the valuation consultancy organization. The contract for consultancy on enterprise valuation must contain the following:

a/ The valuation method used by the consultancy organization for determining the enterprise value.

b/ Time limit for valuation completion, which is 60 days after the signing of the contract and the consultancy organization is supplied with all relevant information, for equitization of economic groups, corporations or parent companies, or 30 days for other cases.

For large-sized and special-type equitized enterprises with many affiliates and complicated financial matters which require a long time, approval of the agency that has decided on equitized is required.

c/ Responsibilities of the equitized enterprise: The equitized enterprise shall perform tasks related to the valuation, such as inventory and classification of assets, settlement of financial matters, elaboration of production and business plans, supply of relevant documents, etc., and take responsibility before law for the accuracy and legality of supplied documents.

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dd/ Charges for valuation consultancy, payment and settlement:

Charges for valuation consultancy shall be agreed upon by the enterprise and the consultancy organization but must not be higher than the winning bid. In case no bidding is organized, the steering committee for equitization shall negotiate with the valuation consultancy organization on charges and propose them to the equitization-deciding agency for decision.

Valuation consultancy charges shall be paid after a decision on disclosure of the enterprise value is issued.

2.4. In the course of implementation of the equitization plan, the valuation consultancy organization shall coordinate with the enterprise in explaining matters related to the valuation.

3. Enterprise valuation dossier:

3.1. The enterprise valuation consultancy organization and the equitized enterprise shall jointly compile an enterprise valuation dossier, which comprises:

a/ The enterprise’s financial statement at the time of valuation.

b/ A report on results of inventory and valuation of the enterprise’s assets.

c/ A written record of enterprise valuation (made according to a set form, not printed herein).

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e/ Other necessary documents (depending on the application of different methods of enterprise valuation).

3.2. The steering committee for equitization shall verify the valuation results, then report them to the enterprise value-deciding agency.

4. Decision on and disclosure of the enterprise value:

4.1. Decision on and disclosure of the enterprise value:

a/ For independent enterprises under ministries or provincial/municipal People’s Committees: Within 10 working days after receiving the report of the steering committee for equitization and the enterprise valuation dossier, the enterprise value-deciding agency shall issue a decision on disclosure of the enterprise value (made according to a set form, not printed herein).

b/ For economic groups, state corporations and enterprises engaged in special domains such as insurance, banking, telecommunications, aviation and precious mineral mining, the steering committee for equitization shall send the enterprise valuation report and dossier to the concerned ministries or provincial/ municipal People’s Committee for decision on disclosure of the enterprise value, and concurrently to the Ministry of Finance for supervision.

c/ For independent-accounting member units and dependent-accounting units of economic groups and special corporations (named in the Appendix to the Government’s Decree No. 86/2006/ND-CP of August 21. 2006): After issuing decisions on disclosure of enterprise value, the Boards of Directors of groups or special corporations shall send enterprise valuation results to the Ministry of Finance for supervision.

4.2. Decision on and disclosure of the value of the state capital portion in an equitized enterprise at the time of its official transformation into a joint-stock company:

The enterprise value-deciding agency shall definitely solve financial matters arising during the period from the time of enterprise valuation to the time of the enterprise’s official transformation into a joint-stock company and issue a decision on revaluation of the state capital portion under Point 2, Part C, Section II of this Circular.

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5.1. The equitized enterprise may be considered for adjustment of its value already disclosed under Article 26 of Decree No. 109/2007/ND-CP.

5.2. Responsibilities of the competent equitization-deciding agency and the equitized enterprise:

a/ If its value is affected by an objective reason, the equitized enterprise shall take the initiative in organizing an inventory to determine the extent of damage and promptly report it in writing to the competent equitization-deciding agency for consideration and decision on adjustment of its value

Within 15 days after receiving the equitized enterprise’s report, the competent equitization-deciding agency shall inspect and revalue the equitized enterprise and direct the steering committee for equitization in coordinating with the enterprise in adjusting the equitization plan.

b/ If 12 months after the date of enterprise valuation, the enterprise still fails to organize an offering of shares, the competent equitization-deciding agency shall request the enterprise to suspend steps of implementation of the Approved equitization plan, identify reasons for the failure and handle collectives and individuals at fault. At the same time, it shall direct the steering-committee for equitization in revaluing the enterprise and adjusting the equitization plan (if necessary). Expenses for enterprise revaluation and adjustment of the equitization plan (after subtracting compensations paid by concerned individuals) must be cleared against proceeds from the enterprise equitization.

V. INITIAL OFFERING OF SHARES

A. PURCHASERS, SHARE STRUCTURE AND OFFERING PRICE

1. Purchasers:

1.1. Employees on the list of the enterprise’s regular employees at the time of disclosure of the enterprise value for equitization.

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1.3. Domestic and foreign investors defined in Clauses 1 and 2, Article 6 of Decree No. 109/2007/ ND-CP, including:

a/ Strategic investors that are domestic or foreign investors defined in Clause 3, Article 6 of Decree No. 109/2007/ND-CP. Employees in the equitized enterprise, the trade union in the enterprise, legal entities in the same economic group, corporation or parent company are not regarded as strategic investors.

b/ Ordinary investors that are domestic and foreign organizations and individuals, including also employees participating in public share auction.

2. Entities ineligible for participation in the auction for initial share purchase:

2.1. Members of the steering committee for equitization of the enterprise, except for those being representatives of the equitized enterprise;

2.2. Intermediary financial institutions that provide consultancy on enterprise valuation and individuals belonging to these institutions and taking part in the enterprise valuation.

2.3. The organization conducting the auction of shares of the equitized enterprise and involved individuals belonging to this organization.

2.4. The Stock Exchange, the Securities Trading Center and staffs of the Stock Exchange and the Securities- Trading Center who personally join in the Commission for Share Auction.

3. Determination of charter capital:

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3.2. Based on its charter capital, the equitized enterprise shall determine the total number of shares by dividing its charter capital by the par value of a share, which is uniformly set at VND 10.000.

4. Determination of the structure of initial equity capital:

The structure of initially offered shares complies with Clauses 2 and 3, Article 35 of Decree No. 109/2007/ND-CP.

The number of shares projected to be offered to the trade union in the enterprise shall be determined by the steering committee for equitization in coordination with the trade union in the enterprise on the basis of capital source but must not exceed 3% of the charter capital proposed to a competent authority for approval in the equitization plan.

5. Initial share selling prices:

5.1. Selling prices of shares offered to investors through an auction are successful bids of such investors at the auction. Investors shall purchase shares at prices they have bid.

5.2. The selling price of shares offered to employees and the trade union in the enterprise is equal to 60% of the average successful bid.

For enterprises meeting with exceptional difficulties in remote or deep-lying areas, of which employees are unable to purchase shares at this price, the steering committee for equitization shall project a preferential share selling price for employees and report it to the equitization-deciding agency for proposal to the Prime Minister for decision.

5.3. The selling price of shares offered to strategic investors must not be lower than the average successful bid. For any separate auction organized to select a strategic investor, the Prime Minister’s approval under Point c, Clause 3, Article 6 of Decree No. 109/2007/ND-CP is required.

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6. Based on the charter capital and structure of initial equity capital, the steering committee for equitization shall elaborate and submit an equitization plan to a competent authority for decision (according to a set form, not printed herein).

B. ORGANIZATION OF SALE OF SHARES

1. Sale by auction

1.1. Auction applies to the sale of shares to ordinary investors with a price competition and regardless of institutional and individual investors, domestic and foreign investors.

1.2. Auctioning agencies:

a/ An auction may be organized at an intermediary organization (a securities company) if the value of shares put up for auction is less than VND 10 billion (calculated according to the par value of shares).

If no intermediary organization undertakes to organize such an auction, the steering committee for equitization shall consider and decide on an auction at the Stock Exchange or the SecuritiesTrading Center or organize an auction right in the enterprise.

b/ An auction shall be organized at the Stock Exchange or the Securities Trading Center if the value of shares put up for auction is VND 10 billion or more (calculated according to the par value of shares).

If the equitized enterprise has the value of offered shares of less than VND 10 billion and wishes to auction its shares at the Stock Exchange or the Securities Trading Center, the steering committee for equitization shall decide on the auction venue.

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a/ The steering committee for equitization shall decide on disclosure of information on the enterprise at least 20 days before an auction is organized under Clause 1, Article 36 of Decree No. 109/2007/ND-CP. Information on the equitized enterprise to be disclosed must be specified according to Appendix 6 to this Circular (not printed herein).

b/ The equitization-deciding agency shall consider and decide on the reserve price of shares put up for auction and publicize such reserve price together with information on the enterprise or authorize the steering committee for equitization to do so. The reserve price of shares put up for auction is determined on the basis of results of enterprise valuation and the enterprise’s future potential and the value of the professional operation risk reserve left to the enterprise (if any).

c/ The steering committee for equitization shall coordinate with the auctioning agency in answering investors’ inquiries about the enterprise (when necessary).

1.4. Auction:

a/ Within the time limit set in the auction regulation, investors shall register share amounts they intend to purchase and pay deposits equal to 10% of the value of the to be-purchased shore amount calculated at the reserve price. Investors shall be issued auction participation tickets by the auctioning agency.

b/ Within the time limit set in the auction regulation, investors shall write their bids in their auction participation tickets and send them to the auctioning agency by:

- Submitting their tickets directly at the enterprise (if the auction is organized by the steering committee for equitization at the enterprise), the intermediary financial institution (if the auction is organized by an intermediary financial institution), or the Stock Exchange or the Securities Trading Center and its agents (if the auction is organized by the Stock Exchange or the Securities Trading Center).

- Sending their tickets by post as prescribed by the auctioning agency.

1.5. Determination of auction results:

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Amount of shares each investor is determined to purchase

=

Remaining amount of offered shares

x

Amount of shares each investor has registered to purchase

Total amount of shares investors have registered to purchase

b/ Based on auction results, the steering committee for equitization and the auctioning agency shall make a minutes according to a form set in Appendix 10 to this Circular (not printed herein).

The auction minutes shall be sent to the equitization-deciding agency, the steering committee for equitization, the enterprise and the auctioning agency.

c/ The steering committee for equitization and the auctioning agency shall coordinate with each other in disclosing share auction results and collect share purchase money amounts.

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a/ Cases of violation of the auction regulation include:

- Making bids lower than the reserve price.

- Waiving the right to purchase shares for the won amount of shares.

- Other cases specified in the auction regulation.

b/ Investors that violate the auction regulation are not allowed to receive back their deposits.

1.7. Handling of shares not sold out through auction:

a/ If the amount of shares investors refuse to purchase is smaller than 30% of the total amount of offered shares, the steering committee for equitization may subsequently sell this amount to investors having participated in the auction through agreement at prices not lower than the average successful bid of the auction.

Investors that intend to subsequently purchase shares at prices higher than the average successful bid will be selected from the highest price down to the average successful bid.

Any shares that still remain unsold after the sale through agreement shall be handled by the steering committee for equitization under Point 2 of this Section.

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Any shares that remain unsold after the second auction shall be handled by the steering committee for equitization under Point 2 of this Section.

2. Issuance underwriting:

2.1. Issuance underwriting applies to subsequent sale of shares that remain unsold through auctions as specified at- Items a and b, Point 1.7 above.

2.2. Issuance underwriting means that intermediary financial institutions with the function of issuance underwriting commit to purchase the whole amount of offered shares for resale to investors.

2.3. Selling prices of shares sold by issuance underwriting are agreed upon by the steering committee for equitization but must not be lower than the average successful bid.

2.4. Issuance underwriting organizations may enjoy underwriting charges as agreed upon between them and the steering committee for equitization, which must not exceed the maximum underwriting charge set by the Ministry of Finance. Underwriting charges are accounted as equitization expenses.

3. Direct agreement:

3.1. Direct agreement applies to the sale of shares to strategic investors or investors defined in Article 42 of Decree No. 109/2007/ND-CP.

3.2. The steering committee for equitization may agree directly with investors on selling prices of shares, which must not be lower than the average successful bid.

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4.1. Based on criteria of strategic investors approved by a competent authority, the steering committee for equitization shall draw up a list of potential investors and organize the selection of qualified investors. Criteria for selection shall be formulated and submitted by the steering committee for equitization to the equitization-deciding agency for approval.

4.2. Based on the approval of the list of qualified strategic investors, the steering committee for equitization shall agree with strategic investors on the amount of shares that the latter may purchase and the selling price of shares. The selling price of shares must not be lower than the average successful bid.

Any strategic investor that commits to purchase shares shall pay a deposit equal to 10% of the value of the share amount it intends to purchase calculated at the reserve price.

4.3. Based on auction results, the steering committee for equitization and strategic investors shall sign share purchase and sale contracts.

Any strategic investor that waives the right to purchase shares is not allowed to receive back its deposit.

4.4. The steering committee for equitization may apply the form of competitive bidding to determine the preemptive right for qualified strategic investors. Bids of strategic investors serve only as a basis for making a preemptive order of these strategic investors.

These bids are not used for determining selling and buying prices of shares.

4.5. Any case of a separate, auction to select-strategic investors must be decided by the. Prime Minister.

5. Management of deposits and payment of share purchase money amounts

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a/ Within five working days after the conclusion of sale of shares, the share-auctioning agency shall refund deposits to investors that have lawfully participated in the auction but have failed

b/ For successful bidders to purchase shares or investors that purchase shares under agreement, their deposits will be cleared against total money amounts they shall pay for actual amounts of shares they have registered to purchase.

c/ Deposits non-refundable to investors shall be transferred by the auctioning agency to the enterprise for handling under regulations on management and use of proceeds from equitization.

5.2. Payment of share purchase money amounts:

a/ Within 10 working days after the disclosure of initial share offering results, investors and underwriting organizations shall complete the share sale and purchase and remit share purchase money amounts into the bank account of the share-selling organization.

b/ Past that time limit, if investors and issuance underwriting organizations still fail to pay or pay insufficient money amounts for share purchase, the unpaid amount of shares shall be considered the amount of shares investors refuse to purchase and handled under Point 1.7, Part B, Section V of this Circular.

c/ Within five working days after the deadline for payment by investors, the share-selling organization shall transfer proceeds from the share sale to the equitized enterprise.

5.3. The share purchase shall be paid for in Vietnam dong in cash or by account transfer.

6. Handling of unsold share amount:

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a/ Shares are not sold out through auctions (if no intermediary financial institution provides issuance underwriting).

b/ Employees or trade unions do not purchase the whole amount of preferential shares.

6.2. Unsold shares shall be reported by the steering committee for equitization to the equitization-deciding agency for adjustment of size and structure of the enterprise’s charter capital.

7. Share auction plan:

7.1. The equitization-deciding agency shall base itself on the plan on equitization of enterprises under its management to project the time of share auction for enterprises conducting auctions at the Stock Exchange or the Securities Trading Center for these enterprises to register their auction plans (offered amount and projected time of offering) with the Stock Exchange or the Securities Trading Center, and concurrently send them to the Ministry of Finance.

7.2. The Ministry of Finance shall base itself on auction plans registered by enterprises and amounts of shares projected to be auctioned in the period to elaborate share auction plans and notify them to the Stock Exchange or the Securities Trading Center and the equitization-deciding agency of enterprises.

7.3. The equitized enterprise shall coordinate with the Stock Exchange or the Securities Trading Center in setting a specific schedule of share auction and publicizing it on the websites of the Stock Exchange or the Securities Trading Center and the equitized enterprise

8. Responsibilities of the steering committee for equitization for organizing auction of shares:

8.1.To propose the equitization-deciding agency to decide on the amount of shares to be auctioned and the reserve price.

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8.3. To send relevant documents and an application for organization of an auction (made according to a form set in Appendix 7 to this Circular) to the Stock Exchange or the Securities Trading Center (in case of registration for sale of shares through the Stock Exchange or the Securities Trading Center), or sign a contract with an intermediary financial institution if shares are to be sold through this institution.

8.4. To coordinate with the auctioning agency in disclosing information on the enterprise and the auction to investors at least 20 days before the auction is organized.

8.5. To supervise the organization of the share auction.

8.6. To sum up and report share auction results.

9. Responsibilities of the auctioning agency (the steering committee for equitization, the intermediary financial institution, the Stock Exchange or the Securities Trading Center):

9.1. To request the enterprise to fully supply documents and information on equitization as prescribed and take responsibility for information on the enterprise disclosed before the auction is organized. If disclosed information is inaccurate and untruthful about the real situation of the enterprise due to the fault of the steering committee for equitization, the Stock Exchange, the Securities Trading Center or the intermediary financial institution, such agency is subject to administrative discipline or payment of compensations in accordance with law.

9.2. To notify the steering committee for equitization and the enterprise of the date and venue of the auction.

9.3. To post up at the enterprise and the auction venue and announce on the mass media (on three consecutive issues of a national newspaper and a newspaper of the locality where the enterprise is located) information on the sale of shares at least 20 days before the auction is organized (as specified in Appendix 8 to this Circular, not printed herein).

9.4. To supply to investors information on the equitized enterprise (as specified in Appendix 65 to this Circular, not printed herein), the equitization plan, the draft charter on organization and operation of the joint-stock company, applications for registration for participation in the auction (made according to forms set in Appendices 9a and 9b to this Circular, not printed herein) and information on the auction.

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Unqualified investors participating in the auction shall be notified of their ineligibility and have their deposits refunded (if they have paid deposits) by the auctioning organization.

9.6. To organize the auction, make the auction minutes (according to a form set in Appendix 10 to this Circular, not printed herein) and notify auction results to the steering committee for equitization.

9.7. To keep secret investor bids until official results are disclosed.

10. Responsibilities of investors participating in the auction:

10.1. To send their applications for registration, made according to a set form, to the auctioning agency and papers proving their full civil capacity (for individuals) or legal entity status (for organizations). Particularly, foreign investors shall observe Clause 2, Article 6 of Decree No. 109/2007/ND-CP.

10.2. To fully pay deposits equal to 10% of the value of shares they register to purchase calculated at the reserve price.

10.3. To file their applications and pay deposits at least five days before the auction is organized.

10.4. To make bids in compliance with regulations. If committing violations, they shall have their right to participate in the auction cancelled without having their deposits refunded.

10.5. To pay fully and on time share purchase, money amounts if they win the auction.

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1. Part of proceeds from the sale of shares (including also shares originating from the state capital portion in the enterprise and additionally issued shares) corresponding to the value of additionally issued shares calculated according to the par value shall be left to the enterprise. The remainder after subtracting equitization expenses (as specified at Point 2, Section VI of this Circular) shall be managed and used as follows:

1.1. To support the enterprise in realizing policies toward its employees in accordance with the provisions of law in force upon the equitization.

If proceeds from equitization are nor enough to support the enterprise in realizing policies toward its employees, the provisions of Item b, Clause 1, Article 45 of Decree No. 109/2007/ND-CP and relevant guiding documents shall be complied with.

1.2. The remainder shall be handled under Article 45 of Decree No. 109/2007/ND-CP, of which the proceeds from the sale of additionally issued shares left to the joint-stock company (symbolized as A) are determined as follows:

a/ If the state capital portion is kept intact and shares are additionally issued to increase charter capital:

A =

Number of additionally issued shares

x

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Value of additionally issued shares calculated according to par value

-

Equitization expenses

-

Total number of shares issued from the charter capital

b/ If part of the slate capital portion is sold in combination with additional issuance:

A =

Number of additionally issued shares

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-

Value of sold shares calculated according to the par value

-

Equitization expenses

-

Total number of shares issued from the charter capital

1.3. Proceeds from the sale of additionally issued shares left to the joint-stock company means an incremental gain in capital under the shareholders’ owners, is used to increase business capital. The joint-stock company shall account this proceeds in accordance with the State’s regulations.

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Ministries, ministerial-level agencies, government-attached agencies (for central enterprises;, provincial/municipal People’s Committees (for enterprises managed by provinces or cities) shall direct and urge the remittance of proceeds from the sale of shares into the Support Fund for Enterprise Reorganization managed by the State Capital Trading Corporation. In case of late remittance, the equitized enterprise shall also remit an interest calculated at the interest rate of loans of the same term set by the commercial bank where the equitized enterprise opens its account.

1.5. Proceeds from equitization of the state capital portion shall be managed and used under Article 46 of Decree No. 109/2007/ND-CP.

The management and use of the Support Fund for Enterprise Reorganization at economic groups, corporations and parent companies (including also the Corporation for State Capital Investment and Trading) comply with the State’s regulations.

2. Equitization expenses include spendings on the equitization of the enterprise made during the period from the time of decision on equitization to the time of handover between the enterprise and the joint-stock company.

2.1. Equitization expenses include:

a/ Direct expenses paid at the enterprise:

- Expenses for professional training on enterprise equitization;

- Expenses for asset inventory and valuation;

- Expenses for elaboration of the equitization plan and the charter;

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- Expenses for communication and disclosure of information on the enterprise;

- Expenses for the sale of shares;

- Expenses for the first Shareholders’ General Meeting;

- Other expenses related to the enterprise equitization.

b/ Charges for hiring auditors and consultants for enterprise valuation and share sale shall be decided by the equitization-deciding agency or the steering committee for equitization (if so authorized).

The payment of charges for consultancy on share sale is based on the contract signed between the parties and auction results.

c/ Expenses for the steering committee for equitizalion and the assistance team.

2.2. Maximum total expenses shall be determined according to the enterprise’s book value, specifically as follows:

- VND 200 million at the maximum, for enterprises valued at under VND 30 billion.

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- VND 400 million at the maximum, for enterprises valued at between VND 50 and 100 billion.

- VND 500 million at the maximum, for enterprises valued at over VND 100 billion.

- If an economic group or state corporation is wholly equitized, estimated equitization expenses incorporated in the equitization plan of that economic group or state corporation are subject to approval of the equitization-deciding agency.

- The general director or director of the enterprise shall decide on necessary expense items and levels not exceeding the maximum level for the process of equitization and take responsibility for the lawfulness of these expenses.

- For large-sized equitized enterprises involving complicated matters and requiring necessary equitization expenses exceeding the prescribed maximum level, the enterprise value-deciding agency shall consider and decide on those expenses before reporting them to the Ministry of Finance.

Upon completion of equitization, the enterprise shall make final settlement of equitization expenses and report them to the enterprise value-deciding agency for approval.

2.3. Equitization expenses shall be covered by proceeds from sale of shares. If the enterprise keeps intact the existing state capital portion and additionally issues shares, but proceeds from the sale of additionally issued shares are not enough to cover equitization expenses, the agencies defined at Point c, Clause 1, Article 45 of Decree No. 109/2007/ND-CP shall set aside and allocate part of proceeds from the equitization to the enterprise to pay for the deficit or reduce the value of the state capital portion in the enterprise.

VII. ORGANIZATION OF IMPLEMENTATION

1. The steps of the equitization process are specified in Appendix 1 to this Circular.

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2. The steering committee for equitization:

2.1. It shall assist the equitization-deciding agency in directing and organizing the equitization of one or several enterprises. Its rights and responsibilities are specified in Clause 5, Article 54 of Decree No. 109/2007/ND-CP (the decision on establishment of the steering committee for equitization is made according to a form set in Appendix 11 to this Circular, not primed herein).

2.2. A steering committee for equitization is composed of:

a/ A leader of the equitization-deciding agency (or an authorized person) - head of the committee.

In case of equitization of an economic group or a corporation, a leader of the concerned ministry or provincial/municipal People’s Committee shall act as the chairman.

b/ Representatives of functional units of the equitization-deciding agency - members.

c/ A representative of the Ministry of Finance, in case of equitization of economic groups or corporations under the Prime Minister’s decisions.

d/ A representative of the Corporation for State Capital Investment and Trading, for enterprises required to-transfer their function as representatives of the owner of the state capital to the State Capital Trading Corporation.

e/ Leaders of the equitized enterprise (the Board of Directors, general director, director or authorized persons) - members.

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Deputy heads, the number and structure of members of a steering committee shall be decided by the head of the equitization-deciding agency.

2.3. The assistance team of a steering committee:

a/ The steering committee for equitization shall set up an assistance team to assist the steering committee in performing works related to the enterprise equitization.

b/ The assistance team is composed of:

- A leader of the enterprise - head of the team.

- The chief accountant or the head of the accounting section - member.

- Heads and deputy heads of functional sections and divisions - members.

In case of equitization of dependent units of a state corporation, heads of these units are required to join the assistance team.

The number and structure of members of the assistance team shall be decided by the head of the steering committee for equitization.

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A member of a steering committee for equitization of many enterprises may only enjoy the allowance at the highest level at one enterprise.

3. Ministries, ministerial-level agencies, government-attached agencies, provincial/municipal People’s Committees, Boards of Directors of economic groups and state corporations shall report to the Steering Committee for Enterprise Renewal and Development and the Ministry of Finance on the following contents related to the equitization process:

3.1. Results of settlement of arising financial matters.

3.2. Results of enterprise valuation, expressed in the written record of enterprise valuation, the decision on disclosure of the enterprise value (within five days after the decision on disclosure of the enterprise value is issued by a competent agency).

3.3. Decision on approval of the equitization plan (within five days after the equitization plan is approved).

3.4. Results of share sale (within five days after the share sale is completed).

3.5. Final settlement of equitization expenses.

3.6. Decision on revaluation of the state capital portion at the time of official transformation into a joint-stock company.

3.7. Written record of hand-over between the equitized enterprise and the joint-stock company.

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4.1. Enterprises with equitization plans approved before August 1, 2007, shall continue implementing these plans. If their shares have not yet been auctioned, their steering committees for equitization shall conduct auction of shares in accordance with the provisions of Part B, Section V of this Circular.

4.2. Enterprises with enterprise value disclosure decisions issued before August 1, 2007, are not subject to enterprise revaluation but shall elaborate plans on equitization and share sale under Decree No. 109/2007/ND-CP and this Circular.

The handover of unused assets, redundant assets, assets pending liquidation and bad receivable debts of these enterprises still complies with the Government’s Decree No. 187/2004/ND-CP of November 16, 2004, on transformation of state companies into joint-stock companies.

5. The management and use of shares sold to grassroots trade union organizations in enterprises comply with separate guiding documents of the Ministry of Finance and the Vietnam General Confederation of Labor.

6. This Circular takes effect 15 days after its publication in “CONG BAO” and replaces Circular No. 126/2004/TT-BTC of December 24, 2004, Circular No. 95/2006/TT-BTC of October 12, 2006, and other documents of the Ministry of Finance guiding the Government’s Decree No. 187/2004/ND-CP of November 16, 2004, on transformation of state companies into joint-stock companies.

Any problems arising in the course of implementation of this Circular should be reported to the Ministry of Finance for study and amendment or supplement.

FOR THE MINISTER OF FINANCE
VICE MINISTER





Tran Xuan Ha

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APPENDIX 1
(To the Ministry of Finance’s Circular No /4o/ 2007/lT-BTC of December 6, 2007)

PROCESS OF TRANSFORMATION OF ENTERPRISES WITH 100% STATE CAPITAL INTO JOINT-STOCK COMPANIES

The process of transformation of an enterprise with 100% state capital into a joint-stock company involves the following steps:

Step 1: Elaboration of an equitization-plan.

1. Setting up of a steering committee for equitization and an assistance team.

1.1. The equitization-deciding agency shall issue a decision on setting up of a steering committee for equitization concurrently with the decision on enterprise equitization.

1.2. The head of the steering committee shall select and issue a decision on setting up of an equitization assistance team within five working days after the, decision on setting up of the steering committee for equitization is issued.

2. Preparation of dossiers and documents:

Within 10 working days after issuing the decision on setting up of an equitization assistance team, the steering committee shall direct the assistance team to work with the enterprise in:

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2.2. Preparing the following documents:

- Legal dossiers on the establishment of the enterprise.

- Legal dossiers on assets of the enterprise (including also allocated or leased land areas).

- Dossiers on debts (especially outstanding debts and debts settled under regulations before the time of enterprise valuation).

- Dossiers on redundant assets, supplies and goods in stock or of inferior quality (if any), assets formed from the reward fund and the welfare fund.

- Dossiers on uncompleted capital construction works (including also works stopped or suspended under decisions of competent authorities).

- Dossiers on long-term capital investments in other enterprises, such as capital contributions to joint ventures- equity capital contributions, capital contributions to limited liability companies, and other forms of long-term investment.

- Financial statements and tax finalization reports of the company up to the date of enterprise valuation.

- Estimates of equitization expenses made under regulations.

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The assistance team and the enterprise shall coordinate with the consultancy organization (if any) in:

3.1. Inventorying and classifying assets and making financial settlement and tax finalization, coordinating with concerned agencies in settling financial matters existing at the time of enterprise valuation.

3.2. Enterprise valuation:

The steering committee for equitization shall select (or organize a bidding to select) a valuation organization, then introduce it to the enterprise for signing a valuation contract, or assign the assistance team or the enterprise to conduct by itself the enterprise valuation.

- If the consultancy organization has also the function of valuation, it may be hired for the package job of elaboration of an equitization plan, enterprise valuation and organization of share sale

3.3. The steering committee shall verify results ol asset inventory and classification and results of enterprise valuation, and report them to the enterprise value-deciding agency and the Ministry of Finance.

The time limit for completion of jobs specified at Points 3.1, 3.2 and 3.3 is 90 working days after the preparation of dossiers and documents is completed, for economic groups, corporations and parent companies, or 60 working days, for other cases.

3.4. Decision on and disclosure of the enterprise value:

Within 10 working days after receiving the report of the steering committee for equitization, the enterprise value-deciding agency shall issue a decision on disclosure of the equitized enterprise’s value.

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- A list of employees named in the list of the enterprise’s regular employees at the time of issuance of the decision on disclosure of the enterprise value, in order to project the number of preferential shares to be offered to employees.

- A list of regular employees working for the company at the time of issuance of the decision on disclosure of the enterprise value, classifying employees into following groups: employees working under indefinite-term labor contracts, employees working under labor contracts of a term of 1-3 years, and redundant laborers, etc.

5. Finalization of the equitization plan:

5.1. Elaboration of an equitization plan:

Based on current regulations and the actual state of the enterprise, the steering committee shall consider and decide on hiring of a consultancy organization or assign the assistance team and the enterprise to elaborate an equitization plan with the following principal contents:

a/ Introduction of the company, generally describing the establishment and organizational structure of the company; and production and business results of the company over 3-5 years prior to the equitization.

b/ Assessment of the actual status of the company at the time of enterprise valuation, covering:

- Assets (including also allocated or leased land areas).

- Finance and liabilities.

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- Issues that need to be further addressed.

c/ Plan on rearrangement of employees:

- Number of employees named in the list of regular employees at the time of issuance of the decision on disclosure of the enterprise value.

- Number of employees to be further employed.

- Number of redundant employees and plan on rearrangement of each group of redundant employees.

d/ Plan on production and business operations for 3-5 subsequent years, clearly stating:

- A plan on reorganization of the enterprise when it is transformed into a joint-stock company: reorganization of sections in the enterprise, renewal of business lines; investment in renewal of technology and raising of production and business capacity.

- Production and business plans for subsequent years concerning products, output, market, profit, etc., and solutions to capital, materials, production organization, labor and wage, etc.

e/ Equitization plan:

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- Projected structure of the charter capital: shares to be held by the State, preferential shares to be offered to employees (enclosed with a list of employees registering for share purchase), shares to be offered to the trade union in the enterprise, shares to be sold to strategic investors (enclosed with a list of .strategic investors) and shares to be auctioned to ordinary investors.

- Mode of share issuance under regulations (auction directly at the company, auction at an intermediary financial institution, auction at the Stock Exchange).

f/ Draft charter on organization and operation of the joint-stock company prepared under the Enterprise Law and current legal documents.

5.2. Finalization of the equitization plan.

a/ Based on the decision on disclosure of the enterprise value, the assistance team and the enterprise shall coordinate with the consultancy organization (if any) in finalizing and sending the equitization plan to each section of the company for study before organizing an extraordinary employees’ meeting.

b/ The assistance team shall organize an extraordinary employees’ meeting to gather comments for finalization of the equitizalion plan.

c/ After the employees’ meeting, the assistance team and the enterprise shall coordinate-with the consultancy organization (if any) in finalizing the equitization plan before submitting it to a competent agency for approval.

d/ The steering committee shall evaluate the equitization plan, then report it to the equitization-deciding agency for approval.

The time limit for completion of jobs specified at Point 5.2 of this step is 20 working days after the decision on disclosure of the equitized enterprise’s value.

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The equitization-deciding agency shall consider and issue a decision on approval of the equitization plan within five working days after receiving the steering committee’s report.

Step 2: Organization of share sale

1. The steering committee for equitization shall select the mode of share sale under regulations.

2. Organizing the share sale:

2.1. Organization of an auction of shares to ordinary investors:

a/ For an auction organized directly at the enterprise:

The steering committee and the enterprise shall organize the auction of shares to investors.

b/ For share sale at an intermediary financial institution.

- The steering committee shall select and introduce an intermediary financial institution to the enterprise for signing a contract.

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c/ For share sale at the Stock Exchange or the Securities Trading Center.

The steering committee for equitization may register with the equitization-deciding agency the projected time of share sale and number of shares projected to be sold for the latter to decide on selection of a share-selling organization, register the auction plan with the Stock Exchange or the Securities Trading Center, and report the date of auction of shares to the Ministry of Finance for decision.

2.2. Based on the average successful bid of ordinary investors, the steering committee for equitization shall:

- Direct the enterprise in selling preferential shares to employees and the trade union in the enterprise (if any).

- Sell shares to strategic investors or negotiate with selected strategic investors.

3. Summing up share sale results in a report to the equitization-deciding agency.

4. Reporting to the equitization-deciding agency for issuance of a decision on adjustment of the number and structure of shares of the equitized enterprise, for cases in which shares are not sold to eligible subjects under the approved equitization plan.

(The time limit for completion of step 2 is three months after the decision on approval of the equitization plan is issued).

Step 3: Completion of transformation of the enterprise into a joint-stock company

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The steering committee for equitization shall direct its assistance team and the enterprise in organizing the first shareholders’ general meeting to adopt the organization and operation charter and the production and business plan, elect the Board of Directors, the Control Board and the executive apparatus of the joint-stock company.

2. Based on results of the first shareholders’ general meeting, the Board of Directors of the joint-stock company shall make business registration, return the seal of the former enterprise and apply for permission to carve the joint-stock company’s seal.

(The time limit for completion of jobs specified at Points 1 and 2 of step 3 is 30 days).

3. To make and send a financial statement at the time the joint-stock company is granted a business registration certificate for the first time, the tax finalization and the final settlement of equitization expenses to the equitization-deciding agency.

To remit proceeds from equitization to the economic group, corporation, parent company, slate company or the Support Fund for Enterprise Reorganization at the Corporation for State Capital Investment and Trading.

4. The joint-stock company shall purchase or print and issue share certificates to shareholders under current regulations.

5. To organize the operation inauguration of the joint-stock company and make an announcement on the mass media under regulations.

If the enterprise decides to list itself immediately on the securities market, it shall make and submit a dossier of application for a listing license to the Ministry of Finance (the State Securities Commission) under current regulations.

6. To organize the handover between the enterprise and the joint-stock company.

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