vinh son song hinh hydro power joint stock company audited financial statements for the year ended 31 december 2006

Deloitte VINH SON ~ SONG HINH HYDRO-POWER JOINT STOCK COMPANY AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006 Audit... VINH SON — SONG HINH HYDRO-POWER JOINT STOCK COM

Deloitte

VINH SON ~ SONG HINH HYDRO-POWER JOINT STOCK COMPANY

AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006

Audit Tax Consulting Financial Advisory

VINH SON — SONG HINH HYDRO-POWER JOINT STOCK COMPANY

21 Nguyen Hue, Qui Nhon City

Binh Dinh Province, §.R Vietnam

TABLE OF CONTENTS CONTENTS

STATEMENT OF BOARD OF DIRECTORS

AUDITORS’ REPORT

BALANCE SHEET

INCOME STATEMENT

CASH FLOW STATEMENT

NOTES TO THE FINANCIAL STATEMENTS

VINH SON — SONG HINH HYDRO-POWER JOINT STOCK COMPANY

21 Nguyen Hue, Qui Nhon City

Binh Dinh Province, S.R Vietnam

STATEMENT OF THE BOARD OF DIRECTORS

The Board of Directors of Vinh Son — Song Hinh Hydro-power Joint Stock Company (“the Company”) presents

this report together with the Company’s audited financial statements for the year ended 31 December 2006

THE BOARDS OF MANAGEMENT AND DIRECTORS

The members of the Boards of Management and Directors of the Company who held office during the year and

at the date of this report are as follows:

Board of Management

Mr Nguyen Duc Doi Chairman

Mr Tran Le Canh Member

Mr Nguyen Duy Hung Member

Mr Trinh Van Tuan Member

Mr Dang Van Tuan Member (resigned on 27 March 2006)

Mr Vo Thanh Trung Member (appointed on 27 March 2006)

Board of Directors

Mr Tran Le Canh Director

Mr Nguyen Van Thanh Deputy Director

Mr Do Phong Thu Deputy Director

RESULTS AND DIVIDENDS

The Company’s financial position as at 31 December 2006 and the results of its operation and cash flows for the

year then ended are set out in the financial statements on pages 4 to 22

As stated in Note 14 of the Notes to the financial statements, on 9 March 2006, the Company’s Board of

Management declared additional dividend payment for the year 2005 at the rate of 2% per share, equivalent to

VND 24,846,000,000 and temporarily declared the first payment of dividends for year 2006 at the rate of 6% per

share, equivalent to VND 74,538,000,000 On 17 October 2006, the Company’s Board of Management

temporarily declared the second payment of dividends for the year 2006 at the rate of 8% per share, equivalent to

VND 99,384,000,000 our of the Company’s retained earnings As at 31 December 2006, except for the

remaining dividend payable to some shareholders totaling VND 90,389,200, all dividends were fully paid to

shareholders on 20 April 2006 and 27 November 2006

BOARD OF DIRECTORS’ STATEMENT OF RESPONSIBILITY

The Board of Directors of the Company is responsible for preparing the financial statements of each year, which

give a true and fair view of the financial position of the Company and of its results and cash flows for the year

In preparing these financial statements, the Board of Directors is required to:

* — Select suitable accounting policies and then apply them consistently;

* Make judgments and estimates that are reasonable and prudent,

© State whether applicable accounting principles have been followed, subject to any materia! departures

disclosed and explained in the financial statements; and

* Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the

Company will continue in business

VINH SON — SONG HINH HYDRO-POWER JOINT STOCK COMPANY

21 Nguyen Hue, Qui Nhon City

Binh Dinh Province, $.R Vietnam

STATEMENT OF THE BOARD OF DIRECTORS (Continued)

The Board of Directors is responsible for ensuring that proper accounting records are kept, which disclose, with

reasonable accuracy at any time, the financial position of the Company and to ensure that the financial

statements comply with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing

accounting regulations in Vietnam It is also responsible for safeguarding the assets of the Company and hence

for taking reasonable steps for the prevention and detection of fraud and other irregularities

The Board of Directors confirms that the Company has complied with the above requirements in preparing these

VIETNAM AUDITING COMPANY

8 - Pham Ngoc Thach Road Dong Da District, Hanoi Tel : +(84-4) 852 4123 Fax: +(84-4) 852 4143 www.vacodtt.com

No 5 /VACO.KTISD

AUDITORS’ REPORT

To: The Boards of Management and Directors

Vinh Son — Song Hinh Hydro-power Joint Stock Company

We have audited the accompanying balance sheet of Vinh Son — Song Hinh Hydro-power Joint Stock Company (“the Company”) as at 31 December 2006, and the related statements of income and cash flows for the year then ended The accompanying financial statements are not intended to present the financial position, results of operations and cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than Vietnam

Respective Responsibilities of the Board of Directors and Auditors

As stated in the Statement of the Board of Directors on pages 1 and 2, these financial statements are the responsibility of the Company's Board of Directors Our responsibility is to express an opinion on these financial statements based on our audit

Basis of Opinion

We have conducted our audit in accordance with Vietnamese Standards on Auditing Those standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation

We believe that our audit provides a reasonable basis for our opinion

Opinion

In our opinion, the accompanying financial statements give a true and fair view of, in all material respects, the financial position of the Company as at 31 December 2006 and the results of its operations and its cash flows for the year then ended in accordance with Vietnamese Accounting Standards, Vietnamese Accounting System and prevailing accounting regulations in Vietnam

Without qualifying our opinion, we would draw the readers’ attention to the following

The value of Company’s constructions in progress as at 31 December 2006 of VND 143.403.931.974 (2005: VND 104.365.782.372) was presented in the financial statements Since the Company’s constructions were yet

to be completed, the value thereof has not been audited in accordance with Vietnamese Auditing Standards No

final accounts of investment Therefore, the value of the constructions is subject to change upon

CPA Certificate No D.0031/KTV CPA Certificate No 0294/KTV For and on behalf of

VIETNAM AUDITING COMPANY

A Member Firm of Deloitte Touche Tohmatsu

09 February 2007

Danang City, S.R Vietnam

Audit Tax Consulting Financial Advisory

VINH SON — SONH HINH HYDRO-POWER JOINT STOCK COMPANY

21 Nguyen Hue, Qui Nhon City

Binh Dinh Province, $.R Vietnam

II Short term financial investments

1, Short term investments

ILL Short-term receivables

1 Trade accounts receivable

2 Other receivables from State budget

3, Other short-term assets

1,711,905,243,705 — 1,817,371,889,339

8 1,568,501,311,731 1,713,006, 106,967

2,745,408,868,268 2,742,935,263,135 (1,176,907,556,537) (1,029,929,156,168)

9 143,403,931,974 104,365,782,372

9,812,957,192 9,812,957,192

10 9,812,957, 192 9,812,957,192

382,079,647 858,187,964 382,079,647 858,187,964 1,884,041,590,154 — 1,953,024,641,108

The notes set out on pages 9 to 22 are an integral part of these financial statements

4

VINH SON - SONH HINH HYDRO-POWER JOINT STOCK COMPANY

21 Nguyen Hue, Qui Nhon City

Binh Dinh Province, S.R Vietnam

Financial Statements For the year ended 31 December 2006

BALANCE SHEET (Continued)

As at 31 December 2006

RESOURCES

A - LIABILITIES (300 = 310 + 330)

I Current liabilities

1 Short-term loans and liabilities

2 Trade accounts payable

3 Advance from customers

4 Taxes and amounts payable to State budget

5 Payables to employees

6, Accrued expenses

7 Other current payables

Ii Long-term liabilities

1 Long-term loans and liabilities

2 Provision for severance allowance

II Other resources and other funds

1 Bonus and welfare funds

2 Funds for fixed assets acquisition

117,823,092,738 4,752,769,896 199,524,517 761,755,152 1,022,164,451 1,221,127,697 90,389,200

420,565,679,295 420,524,794,865 40,884,430

1,337,605,087,208

1,337,416,615,538 1,250,000,000,000 (9,933,000,000) 880,000,000

96 469,615,538

124,838,552,136 2,662,163,130 224,924,000 6,248,914,939 1,106,153,374 740,233,783 38,058,474,606 511,386,158,726 511,386,158,726

1,267,759,066,414

1,266,568,221,458 1,250,000,000,000 (9,933,000,000)

31/12/2006 31/12/2005 163,316,733 163,316,733

09 February 2007

The notes set out on pages 9 to 22 are an integral part of these financial statements

VINH SON ~ SONH HINH HYDRO-POWER JOINT STOCK COMPANY

21 Nguyen Hue, Qui Nhon City

Binh Dinh Province, S.R Vietnam

INCOME STATEMENT

Financial Statements

For the year ended 31 December 2006

For the year ended 31 December 2006

FORM B 02 - DN

Unit: VND

ITEMS Codes Notes 2006 from 3112/2005

1 Gross sales of merchandise and service 01 16 409,274,295,173 195,810,240,988

3 Gross profit from sale of merchandise

- Including: Interest expenses 23 19,310,596,544 13,868,977,89 1

6 General and administration expenses 25 4,984,565,554 3,258,764,856

VINH SON - SONH HINH HYDRO-POWER JOINT STOCK COMPANY

21 Nguyen Hue, Qui Nhon City

Binh Dinh Province, $.R Vietnam

CASH FLOW STATEMENT

Financial Statements

For the year ended 31 December 2006

For the year ended 3] December 2006

ITEMS

I CASH FLOWS FROM OPERATING ACTIVITIES

1 Profit before tax

2 Adjustments for:

- Depreciation and amortisation

- Unrealised foreign exchange difference

- (Gain) from investing activities

- Increase/(Decrease) in account payable (not including

accrued interest and business income tax payable)

- Decrease/(Increase) in long-term prepayments

- Interest paid

- Other cash inflows

- Other cash outflows

Net cash from operating activities

I CASH FLOWS FROM INVESTING ACTIVITIES

1 Acquisition of fixed assets and other long-term assets

2 Proceeds from sales of long-term assets

3 Cash outflow for buying debt instruments

4 Investment in other entities

5, Interest income, dividend and profit paid

Net cash from (used in) investing activities

Ill CASH FLOWS FROM FINANCING ACTIVITIES

1 Capital withdrawal, buying back issued stocks

2 Proceeds from borrowings

3 Repayment of borrowings

4, Dividends paid

Net cash used in financing activities

Net increase/(decrease) in cash and cash equivalents

Cash at beginning of the year

Cash at end of the year

385,244,725,507 4,141,286,272 (5,656,075,939) (260,748,004)

1,755,191,281 471,743,317 (21,901,879,557) 431,306,000 (2,059,788,757) 362,165, 760,120

(44,218,300,692) 61,476,800,000 (5,000,000,000)

9,054,871,834 21,313,371,142

20,976,832,000 (124,838,552,136) (236,177,610,800) (340,039,330,936) 43,439,800,326 9,318,890,600 52,758,690,926

FORM B 03-DN Unit: VND From 04/05/2005 to

31/12/2005 88,916,221,458

79,241,665,037 2/732,295,132 (431,156,250) 13,868,977,891 184,328,003,268 (16,457,066,989) 737,792,487 (385,592,951) (8,979,817,697) (858,187,964) (8,899,237,835) 1,486,551,000 (618,657,011) 150,353,786,308

(2,073.373,406)

(75,812,957,192) 431,156,250 (97,455,174,348)

(9,933,000,000) 17,852,083,500 (41,833,372,356) (24,615,000,000) (58,529,288,856) (5,630,676,896) 14,949,567,496 9,318,890,600

VINH SON — SONH HINH HYDRO-POWER JOINT STOCK COMPANY

Binh Dinh Province, $.R Vietnam For the year ended 31 December 2006

CASH FLOW STATEMENT (Continued)

For the year ended 31 December 2006

FORM B 03-DN

Unit: VND Supplemental non-cash disclosures

outflows for purchases of fixed assets and construction in progress during the year exclude an amount of

5,791,896 (2005: VND 10,388,124, 810), representing an addition in fixed assets during the year that een paid Consequently, changes in accounts payable have been adjusted by the same amount

pe

VINH SON - SONG HINH HYDRO-POWER JOINT STOCK COMPANY

Binh Dinh Province, S.R Vietnam For the year ended 31 December 2006

These notes are an integral part of and should be read in conjunction with the accompanying financial statements

Structure of ownership

Vinh Son - Song Hinh Hydro-power Joint Stock Company (“the Company”) is established as a joint stock

company which was converted from Vinh Son — Song Hinh Hydro Power Plant, a State-owned enterprise

(“the Plant”) Previously, the Plant was a dependent accounting unit of Electricity of Vietnam (“EVN”)

According to Decision No 219/QD-TTg dated 18 October 2003 by the Prime Minister approving the

general plan for renovation of State-owned Enterprises under Electricity of Vietnam in the period of 2003-

2005 and Decision No 2992/QD-TCCB of Ministry of Industry on equitising Vinh Son - Song Hinh Hydro-

Power Plant The Plant is responsible for proceeding equitisation in 2004 On 2 December 2004, the

Ministry of Industry issued Decision No 151/2004/QD-BCN on converting Vinh Son - Song Hinh Hydro

Power Plant into Vinh Son - Song Hinh Hydro-power Joint Stock Company

On 4 May 2005, the Plant officially started operating in under the model of a joint stock company and under

the name of Vinh Son - Song Hinh Hydro-power Joint Stock Company The Company Business

Certification No 3503000058 was issued by the Plan and Investment Department of Binh Dinh province on

4 May 2005, detailing the Company’s share par value, charter capital and number of shares as follows:

Par value: VND 10,000 per share

Charter capital: VND 1,250,000,000,000

Number of shares: 125,000,000 shares

The major shareholder of the Company is EVN (contributing 60% of legal capital) On 7 July 2005, the

Company was granted certificate to trade in Hanoi Stock Trading Center in accordance with Decision No

01/QD-TTGDHN On 28 June 2006, the Company was granted certificate to be listed in Ho Chi Minh City

Stock Trading Center in accordance with Decision No.54/ 54/UBCK-GDNY by the State Securities

Committee On 18 July 2006, the Company officially started trading in Ho Chi Minh City Stock Trading

VND billion % YND billion % YND billion %

The Company had 121 employees as at 31 December 2006 (2005: 131)

Operating industry and principal activities

The Company operates in utility industry, being specialised in generating and trading electricity, providing

services of management, operation and maintenance of hydro power plants, project management consulting,

supervising construction of hydro power plants, electricity experiments, and trading electricity materials and

equipment

Principal activities of the Company are to operate two hydro power plants of Vinh Son and Song Hinh

Major product of the Company is electricity All of the Company's products are directly sold to EVN

VINH SON - SONG HINH HYDRO-POWER JOINT STOCK COMPANY

Binh Dinh Province, S.R Vietnam For the year ended 31 December 2006

These notes are an integral part of and should be read in conjunction with the accompanying financial statements

2 ACCOUNTING CONVENTION AND ACCOUNTING PERIOD

Accounting convention

The accompanying financial statements, expressed in Vietnam Dong (VND), are prepared under the

historical cost convention and in accordance with Vietnamese Accounting Standards, Vietnamese

Accounting System and prevailing accounting regulations in Vietnam

Accounting period

The Company’s financial year begins on 1 January and ends on 31 December

In the current year, the Company adopted the following Vietnamese Accounting Standards (VASs) for

the first time:

VAS 18 Provisions, contingent liabilities and assets

VAS 30 Earnings per share

The application of these new standards did not have significant effect on the amounts reported for the

current or prior periods

4 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies, which have been adopted by the Company in the preparation of

these financial statements, are as follows:

Estimates

The preparation of financial statements in conformity with Vietnamese Accounting Standards,

Vietnamese Accounting System and prevailing accounting regulations in Vietnam requires management

to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures

of contingent assets and liabilities at the date of the financial statements and the reported amounts of

revenues and expenses during the reporting period Actual results could differ from those estimates

Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid

investments that are readily convertible to known amounts of cash and which are subject to an

insignificant risk of changes in value

Inventories

Inventories are stated at the lower of cost and net realisable value The Company’s inventories mainly

include materials, spare parts for electricity generators in Vinh Son Hydro-power plant and Song Hinh

Hydro-power plant, Cost of inventories comprises prices and transportation expenses, if any that have

been incurred in bringing the inventories to their present location and condition Cost of inventories is

calculated using weighted average method

These specialised materials and spare parts are used to replace synchronous generators and have been

stored since the installation of these generators (in Vinh Song hydro power plant in 1995 and in Song

Hinh hydro power plant in 2000)

10