* Deloitte VITAUNIOMN RTCINFN UIcroae nteScaitRpbi fVenm AUIEUIACA UTTMET FoUh eredd3 eebr21 U30jN21 Uy - -- - -- - -- - VIETNAM ENVIRONMENT PROTECTION FUND 6th Floor, Map Publisher building, No. 85 Nguyen Chi Thanh Dong Da, Hanoi TABLE OF CONTENTS CQTENT PAGE(S) PART I FINANCIAL STATEMENTS STATEMENT OF THE BOARD OF DIRECTORS 2-3 INDEPENDENT AUDITORS' REPORT 4-6 BALANCE SHEET 7-8 INCOME STATEMENT 9 STATEMENT OF CHANGES IN EQUITY 10 - 11 CASH FLOW STATEMENT 12-13 NOTES TO THE FINANCIAL STATEMENTS 14 - 23 PART II REPORT OF INDEPENDENT AUDITORS ON INTERNAL 24- 25 CONTROL PART III INDEPENDENT ASSURANCE REPORT ON COMPLIANCE 26 - 27 PARTIV MANAGEMENT LETTER 28-33 U U U U U U U U U U U U U U PART I * FINANCIAL STATEMENTS U U U U U U U U U U U U U U U U U U U U VIETNAM ENVIRONMENT PROTECTION FUND 6th Floor, Map Publisher building, No. 85 Nguyen Chi Thanh Dong Da, Hanoi, Vietnam STATEMENT OF THE BOARD OF DIRECTORS The Board of Directors of Vietnam Environment Protection Fund (the "Fund") presents this report together with the Fund's financial statements for the financial year ended 31 December 2016. THE BOARDS OF MANAGEMENT, DIRECTORS The members of the Boards of Management and Directors of the Fund who held office during the year and to the date of this report are as follows: Board of Management Mr. Vo Tuan Nhan Chairman (Appointed on 01 March 2016) Mr. Tran Hong Ha Chairman (Appointed on 01 January 2016 and resigned on 28 February 2016) Ms. Truong Thi Hien Member Mr. Nguyen Minh Tien Member Mr. Tran Quy Kien Member Mr. Nguyen Duc Long Member Mr. Nguyen Tuan Anh Member Mr. Duong Hoang Tung Member Board of Directors Mr. Nguyen Nam Phuong Director Ms. Tran Thi Kim Dung Deputy Director Ms. Duong Thi Phuong Anh Deputy Director The member of the Board of Supervisors during the year and to the date of this report are as follows: Mr. Cao Manh Dam Chief Supervisor BOARD OF DIRECTORS' STATEMENT OF RESPONSIBILITY The Board of Directors of the Fund is responsible for preparing the financial statements, which give a true and fair view of the financial position of the Fund as at 31 December 2016, and its financial performance, changes in equity and its cash flows for the year then ended in accordance with Vietnamese Accounting Standards, accounting system of Vietnam Development Assistance Fund, the regime for financial management of Vietnam Environment Protection Fund and legal regulations relating to financial reporting. 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 material departures disclosed and explained in the financial statements; * prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Fund will continue in business; and * design and implement an effective internal control system for the purpose of properly preparing and presenting the financial statements so as to minimize errors and frauds. 2 U VIETNAM ENVIRONMENT PROTECTION FUND 6th Floor, Map Publisher building, No. 85 Nguyen Chi Thanh Dong Da, Hanoi, 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 Fund and that the financial statements comply with Vietnamese Accounting Standards, accounting system of Vietnam Development Assistance Fund, the regime for financial management of Vietnam Environment Protection Fund and legal regulations relating to financial reporting. The Board of Directors is also responsible for safeguarding the assets of the Fund and hence for taking reasonable steps for the prevention and detection of frauds and other irregularities. The Board of Directors confirms that the Fund has complied with the above requirements in preparing these financial statements. For and on behalf of the Board of D[rectors,- Nguyen Nam Phuong Director Hanoi, 26 June 2017 33 Deloitte Vietnam Company Ltd. 12A Floor, Vinaconex Tower, D e lo itte 34 Lang Ha Street- I, Lang Hau Ward, Dong Da District, Hanoi, VEtnam Tel :+844 6288 3568 Fax:+844 6288 5678 www.deloitte.com/vn No.: /VN1A-HN-BC INDEPENDENT AUDITORS' REPORT To: The Boards of Management and Directors Vietnam Environment Protection Fund Qualified Opinion We have audited the financial statements of Vietnam Environment Protection Fund (the "Fund"), which comprise the Balance sheet as at 31 December 2016, the Statement of income, Statement of changes in equity, statement of cash flows for the year then ended, and the notes to the financial statements, including a summary of significant accounting policies. In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion section of our report, the accompanying financial statements give a true and fair view of the financial position of the Fund as at 31 December 2016, its income, expenditures, changes in equity and cash flows for the year then ended in accordance with Vietnamese Accounting Standards, accounting system of Vietnam Development Assistance Fund, financial management regime of Vietnam Environment Protection Fund and legal regulations relating to financial reporting. Basis for Qualified Opinion As presented in Note 5 of the Notes to the financial statements, the balances of Cash and cash equivalents item as at 31 December 2016 and 31 December 2015 include the remaining amounts of budget for the Fund as recorded in the State Treasury System of VND 247,229,000,000 and VND 13,927,457,000, respectively, instead of the balances of the Fund's cash at the State Treasury as at 31 December 2016 and 31 December 2015. Had the Fund's cash item been fairly reflected, the balances of Cash and cash equivalents and Wind power support fund as at 31 December 2016 and 31 December 2015 would have decreased by the same amounts. We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditors' Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Fund in accordance with the ethical requirements that are relevant to our audit of the financial statements, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other matter The financial statements of the Fund for the year ended 31 December 2015 were audited by another auditor who expressed an unmodified opinion on those statements on 31 March 2016. Deoitte refers to one or more of DeloiLte Touche Tu?imatsu Lirirted, a UK pr vate company limited by guarantee ("DTTL"), its rnetwork of member firms, and their related entlities. DTTL and each of its meiber firrrs are legaliy separate and independent entities. DTT L (a so referred ' us "Delu 1te Global") dies not provide services to clents. Please see Aww.dAeloite.corri/abut or nn m r dtailed d e1r pin of iTI IL and 1t membr firms. 4 3 = Deloitte INDEPENDENT AUDITORS' REPORT (Continued) Responsibilities of Management and those charged with governance for the Financial Statements Management is responsible for the preparation of the financial statements in accordance with the Vietnamese Accounting Standards, accounting system of Vietnam Development Assistance Fund, financial management regime of Vietnam Environment Protection Fund and legal regulations relating to financial reporting, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing the Fund's ability to continue as a going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting unless management either intends to liquidate the Fund or to cease operations, or has no realistic alternative but to do so. Those charged with governance are responsible for overseeing the Fund's financial reporting process. Auditors' Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that inculdes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with International Standards on Auditing (ISAs) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: * Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. * Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances. * Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Fund to cease to continue as a going concern. * Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. 5 U 3 * Deloitte INDEPENDENT AUDITORS' REPORT (Continued) Auditors' Responsibilities for the Audit of the Financial Statements (Continued) We communicate with those charged with governance and the Board of Directos of the Fund regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Dang Chi Dung Nguyen Luong Tam Deputy General Director Auditor Audit Practising Registration Certificate Audit Practising Registration Certificate No. 0030-2013-001-1 No. 2303-2013-001-1 DELOITTE VIETNAM COMPANY LIMITED 26 June 2017 Hanoi, S.R. Vietnam 6 U VIETNAM ENVIRONMENT PROTECTION FUND Financial statements 6th Floor, Map Publisher building, For the year ended * No. 85 Nguyen Chi Thanh, Dong Da, Hanoi, Vietnam 31 December 2016 BALANCE SHEET As at 31 December 2016 Unit: VND ASSETS Codes Notes Closing balance Opening balance A. OPERATING ASSETS 100 1,706,923,029,306 1,434,164,002,792 I. Cash and cash equivalents 110 5 268,124,928,583 36,052,085,088 1. Cash on hand 111 466,985,480 814,837,568 2. Cash at bank 112 267,657,943,103 35,237,247,520 II. Financial investments 120 6 791,395,490,297 841,600,000,000 L Short-term investments 121 791,395,490,297 841,600,000,000 III. Bussiness operating assets 130 629,077,576,244 554,158,735,210 1. Loans from the Fund's capital 131 7 515,557,265,543 471,146,129,488 2. Loans from the entrusted capital 132 8 79,320,000,000 72,592,000,000 3. Fund for sponsor and co-sponsor 134 9 34,200,310,701 10,420,605,722 IV. Receivables 140 16,524,749,013 353,506,885 1. Trade receivables 141 663,743,700 - 2. Advances to suppliers 142 1,061,818,461 - 3. Other receivables 144 10 14,799,186,852 353,506,885 V. Other operating assets 150 1,800,285,169 1,999,675,609 1. Advances 152 240,143,063 73,723,000.00 2. Prepayments 153 11 736,874,606 1,102,685,109 3. Deposits, mortgages 155 12 823,267,500 823,267,500 B. FIXED ASSETS 200 161,962,202 307,433,414 I. Fixed assets 210 161,962,202 307,433,414 1. Tangible fixed assets 211 13 121,712,174 251,183,390 - Cost 212 1,116,918,960 1,160,796,960 - Accumulated depreciation 213 (995,206,786) (909,613,570) 2. Intangible fixed assets 217 40,250,028 56,250,024 - Cost 218 258,000,000 258,000,000 - Accumulated amortization 219 (217,749,972) (201,749,976) TOTAL ASSETS (270=100 + 200) 270 1,707,084,991,508 1,434,471,436,206 U The accompanying notes are an integral part of these financial statements 7 U VIETNAM ENVIRONMENT PROTECTION FUND Financial statements 6th Floor, Map Publisher building, For the year ended * No. 85 Nguyen Chi Thanh, Dong Da, Hanoi, Vietnam 31 December 2016 BALANCE SHEET (Continued) As at 31 December 2016 Unit: VND RESOURCES Codes Notes Closing balance Opening balance C. LIABILITIES 300 220,470,541,103 189,738,619,091 I. Liabilities 310 15,874,050,088 9,012,644,839 1. Interest payables 316 8,961,524,313 907,299,296 2. Trade payables 318 15,409,207 15,409,207 3. Amounts payable to the State budget 320 2,439,211,385 - 4. Payables to employees 321 4,457,905,183 4,291,743,603 5. Other payables 322 - 3,798,192,733 II. Liabilities in payment 330 79,782,318,676 72,936,265,975 1. Entrusted fund payables 331 15 79,320,000,000 72,592,000,000 2. Outstanding payments 332 15 462,318,676 344,265,975 III. Other liabilities 340 124,814,172,339 107,789,708,277 1. Environmental remediation deposit in mineral 343 16 124,814,172,339 107,789,708,277 extraction D. EQUITY 400 1,486,614,450,405 1,244,732,817,115 I. Owner's equity 410 1,486,614,450,405 1,24,ti32,817,115 1. Operating capital 411 1,096,749,270,681 879,137,098,935 - Charter capital 411a 650,000,000,000 650,000F0,000 - Additional capital 411b 199,520,270,681 202,64 ,882,935 - Wind power price supporting fund 411c 247,229,000,000 26,514,216,000 2. Investment and development fund 414 17 351,082,033,360 2'8,453,824,203 3. Operational risks reserve fund 415 17 37,098,278,515 30,911,591,328 4. Additional charter capital fund 417 17 - 44,349,569,375 5. Bonus and welfare fund 419 17 1,684,867,849 880,733,274 TOTAL RESOURCES (440 = 300+400) 440 1,707,084,991,508 1,434,471,436,206 Nguyen Hoai Thu Vu Van Chinh Nguyen Nam Phuang Preparer Chief Accountant Director 26 June 2017 The accompanying notes are an integral part of these financial statements *8 VIETNAM ENVIRONMENT PROTECTION FUND Financial statements 6th Floor, Map Publisher building, For the year ended No. 85 Nguyen Chi Thanh, Dong Da, Hanoi, Vietnam 31 December 2016 INCOME STATEMENT For the year ended 31 December 2016 Unit: VND ITEMS Codes Notes Current year Prior year I. Income 01 1. Operational incomes 02 18 21,987,624,517 23,514,146,634 1.1 Interest income from loans at preferential 03 21,983,024,482 23,514,146,634 interest rates 1.2 Others and operational incomes 05 4,600,035 2. Financial income 07 48,784,227,694 44,438,177,599 2.1 Interest income 04 48,784,227,694 44,438,177,599 3. Appraisal fee from the World Bank funded 10 276,312,750 105,715,500 project Gross revenue 21 71,048,164,961 68,058,039,733 II. Expenditures 25 1. Operational expenses 30 19 14,564,414,215 5,965,169,247 2. Administrative expenses 31 20 12,133,999,266 10,987,092,963 3. Labour expenses 32 15,638,376,729 15,312,093,645 4. Financial expenses 40 3,594,045 6,038,991 5. Others 50 171,500,000 9,635,000 Gross expenditure 51 42,511,884,255 32,280,029,846 III. Profit 1. Income over expenditures (60=21-51) 60 28,536,280,706 35,778,009,887 2. Current corporate income tax expense 21 2,439,211,385 3,773,067,898 3. 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VIETNAM ENVIRONMENT PROTECTION FUND Financial statements 6th Floor, Map Publisher building, For the year ended No. 85 Nguyen Chi Thanh, Dong Da, Hanoi Vietnam 31 December 2016 CASH FLOWS STATEMENT For the year ended 31 December 2016 Unit: VND ITEMS Codes Current year Prior year I. CASH FLOWS FROM OPERATING ACTIVITIES 1. Profit before tax 01 28,536,280,706 35,778,009,887 2. Adjustments for. Depreciation and amortisation of fixed 02 145,471,212 172,235,125 assets Provisions 03 6,186,687,187 5,653,753,554 Foreign exchange loss/(gain) arising from 04 3,594,045 6,038,991 translating foreign currency items (Gain) from investing activities 05 (4B,784,227,694) (44,438,177,599) Interest expense 06 8,082,559,894 1,578,263 3. Operating (loss) before movements 08 (5,829,634,650) (2,826,561,779) in working capital Change in loan receivables 09 (6,459,369,246) (19,322,678,239) Change in receivables 10 216,963,880,809 Change in payables (excluding accrued 11 21,216,672,408 2,421,912,703 loan interest and corporate income tax payable) Change in prepaid expenses 12 365,810,503 2,920,437,865 Interest paid 14 (28,334,877) (75,090,336) Corporate income tax paid 15 (3,773,067,898) Net cash (used in) operating 20 222,455,957,049 (16,881,979,786) activities 11. CASH FLOWS FROM INVESTING ACTIVITIES 1. Cash outflow for lending, buying debt 23 (234,431,055,051) (841,600,000,000) instruments of other entities 2. Cash recovered from lending, selling debt 24 216,176,092,966 644,180,176,006 instruments of other entities 3. Interest earned 27 48,784,227,694 44,438,177,599 Net cash generated byl(used in) 30 30,529,265,609 (152,981,646,395) investing activities The accompanying notes are an integral part oF these financial statements 12 VIETNAM ENVIRONMENT PROTECTION FUND Financial statements 6th Floor, Map Publisher building, For the year ended No. 85 Nguyen Chi Thanh, Dong Da, Hanoi, Vietnam 31 December 2016 CASH FLOW STATEMENT (Continued) For the year ended 31 December 2016 Unit: VND ITEMS Codes Current year Prior year III. CASH FLOWS FROM FINANCING ACTIVITIES 1. Increase in operating capital 31 270,073,039 150,261,273,774 2. Decrease in operating capital 32 (21,178,858,157) (11,005,091,959) Net cash (used in)/generated by 40 (20,908,785,118) 139,256,181,815 financing activities Net (decrease) in cash 50 232,076,437,540 (30,607,444,366) (50=20+30+40) Cash and cash equivalents at the 60 36,052,085,088 66,665,568,445 beginning of the year Effects of changes in foreign exchange 61 (3,594,045) (6,038,991) rates Cash and cash equivalents at the end 70 268,124,928,583 36,052,085,088 of the year (70=50+60+61) U2 - -- -- -- Nguyen Hoai Thu Vu Van Chinh Ngujyen Nam Phuong Preparer Chief Accountant Director 26 June 2017 The accompanying notes are an integral part of these financial statements 13 VIETNAM ENVIRONMENT PROTECTION FUND Financial statements 6th Floor, Map Publisher building, For the year ended No. 85 Nguyen Chi Thanh, Dong Da, Hanoi, Vietnam 31 December 2016 NOTES TO THE FINANCIAL STATEMENTS These notes are an integral part of and should be read in conjunction with the accompanying financial statements 1. GENERAL INFORMATION Vietnam Environment Protection Fund is a state financial organization, operating under Ministry of Natural Resources & Environment and managed by Ministry of Finance. The Fund was established under Decision No.82/2002/QD-TTg dated 26 June 2002, Decision No.35/2008/QD- TTg dated 03 March 2008, Decision No.02/2014/QD-TTg dated 13 January 2014 and Decision No.78/2014/QD-TTg dated 26 December 2014 by the Prime Minister. According to the Decision No. 78/2014/QD/TTg dated 26 December 2014, the charter capital of the Fund is VND 1,000,000,000,000. As at 31 December 2016, the actual capital granted was VND 650,000,000,000. The mission of the Fund includes: - Receive, manage and use State budget sources, sources from financial assistance, donations and entrustment from domestic and foreign organizations and individuals to provide financial support for environmental protection activities and response to climate change nationwide; - Provide loans with preferential interest rates for environmental protection projects nationwide; - Support for loan interest for environmental protection projects borrowing capital from credit institutions in accordance with the law; - Funding, co-financing for environmental protection activities: Dealing with environment pollution, responding to and overcoming consequences caused by environmental and natural disaster, and advocacy, communication activities on the management and mining of natural resources and environment of the sea and islands; implementing programs, projects, plans and tasks under the Prime Minister's decisions; granting environmental awards, rewards to honor outstanding organizations and individuals in environment protection; implementing projects and tasks of environmental protection as stipulated in the Fund's Charter on Organization and Operation; - Receive deposits for environmental restoration in mineral mining with organizations and individuals permitted to mine minerals; - Receive deposits to secure imported scrap metal for organizations and individuals; - Implement some financial mechanisms and policies for investment projects under clean development mechanism (CDM), including: monitoring, management and collection of fees for sale of emission reduction certificates for CDM projects implemented in Vietnam; Expenditure to support advocacy, awareness raising activities on investment projects under CDM; Review and approval of CDM project documents; Management and supervision of CDM projects; Price subsidies for CDM project products; - Electricity price support for wind power projects connected with the power grid under the Prime Minister's decisions and prevailing law; - Financial support for activities to response climate change in accordance with prevailing law; - Appraise and approve the level, time and form of financial support for environment protection projects and tasks using the Fund's supporting capital according to the Fund's Charter on organization and operation; - Submit to the Ministries of Natural Resources and Environment for consideration and decision on the contents and forms of assistance arising in the course of operation; and - Implement other programs, proposal, projects and tasks assigned by the Prime Minister, the Minister of Natural Resources and Environment. The number of employees as at 31 December 2016 was 86 (31 December 2015: 84). 14 U U VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) 2. ACCOUNTING CONVENTION AND FINANCIAL YEAR Accounting convention The accompanying financial statements, expressed in Vietnam Dong (VND), are prepared under the historical cost convention in accordance with the Vietnamese Accounting Standards, accounting system of Vietnam Development Assistance Fund, the regime for financial management of Vietnam Environment Protection Fund and legal regulations relating to financial reporting Financial year The Fund's financial year begins on 01 January and ends on 31 December. 3. NEW ACCOUNTING GUIDANCE ISSUED BUT NOT YET ADOPTED On 07 December 2016, the Ministry of Finance issued Circular No. 317/2016/TT-BTC ("Circular 317") guiding the application of accounting system for Vietnam Environment Protection Fund. The Circular is effective from financial year 2017. Circular 317 will supersede the accounting regulations of Vietnam Environment Protection Fund under accounting regime of Development Assistance Fund under Decision No. 78/2003/QD-BTC dated 29 May 2003 issued by the Ministry of Finance". The Board of Directors is considering the extent of the impact of these circulars adoption on the Fund's financial statements for future accounting periods. 4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies, which have been adopted by the Fund in the preparation of these financial statements, are as follows: 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. Financial investments Short-term financial investments include bank deposits with a term of from over 3 months to less than 12 months. Loans from the Fund's capital Financial support for environment protection programs, projects and activities are in the form of loans with preferential interest rates and loan interest support, loan guarantee for environment projects from other credit institutions. Loans are provided on a repayable basis and with interest based on the Ministry of Finance's guidelines and regulations on the loan amount. The amount of loans with preferential interest rates does not exceed 70% of the total expenditures of environmental protection investment projects, the interest rate is determined at the time of loan contracts signing and will be fixed throughout the term. The lending interest rate is set by Board of Management of the Fund for each target group, but must not exceed 50% of the commercial lending interest rate. The loan portfolio of the fund is disclosed and presented according to loan principal as at the end of the fiscal year. 15 U U VIETNAM ENVIRONMENT PROTECTION FUND W NOTES TO THE FINANCIAL STATEMENTS (Continued) The debt classification is implemented in accordance with Circular No. 02/2013/TT-NHNN dated 21 January 2013, which is amended and supplemented in accordance with Circular No. 09/2014/TT-NHNN dated 18 March 2014 by the Governor of the State Bank of Vietnam. Entrusted fund and loans from the entrusted fund The fund receives the trust money under the trust contract, whereby the Fund will lend under the mandate of the trustee and collect the trustee fee. Entrusted capital and loans are recorded on actual incurred. In 2016, the Fund performs entrusted lending under entrusted agreement No. 06/2013/UQ/BTC- QLN dated 02 April 2013 of the Ministry of Finance about the entrusted lending under the World Bank's financial assistance. Fund for sponsor and co-sponsor This is a form of non-refundable financial support from the State through the Fund to organizations and individuals having investment projects in the field of environmental protection in Vietnam. This grant will reduce the fund's libilities when finalizing the project. Funding support, co-financing are recorded on actual incurred. Provision for loans from the Fund's capital Provision for loans by the Fund's capital is recognized as business operation expenses on Income statement and is used to cover bad debts. Balance of loan provision using Fund's capital is recognized as "Fund for risk operational provision" on the Balance Sheet. Fund for risk provision is used to compensate loss due to objective factors incurring in lending environment protection projects. The rate for risk provision set by Board of Management is 0.2% of balance of annum loan. Provision is made annually, at the end of the fiscal year. In the end, in case of surplus fund for risk provision, balance will carry forward the next year. In case of deficit fund for risk provision, Board of Management reports to the Ministry of Resources and Environment and the Ministry of Finance, and the Prime Minister. In 2016, the Fund set up the provision rate of 1.2% of total outstanding loans. Receivables Receivables represent the amounts recoverable from customers or other debtors and are stated at book value less provision for doubtful debts. Provision for doubtful debts is made for receivables that are overdue or when the debtor is in dissolution, in bankruptcy, or is experiencing similar difficulties and so may be unable to repay the debt. Tangible fixed assets and depreciation Tangible fixed assets are stated at cost less accumulated depreciation. The costs of purchased tangible fixed assets comprise their purchase prices and any directly attributable costs of bringing the assets to their working condition and location for their intended use. Tangible fixed assets are depreciated using the straight-line method over their estimated useful lives as follows: Current year 16 U U VIETNAM ENVIRONMENT PROTECTION FUND W NOTES TO THE FINANCIAL STATEMENTS (Continued) Motor vehicles 7 Office equipments 3-5 Others 8 Deposits, collateral received Deposits and collateral are recognized when the organizations and individuals permitted to mine minerals deposit money into the bank account of the Fund for the purpose of securing finance for post-mining environmental rehabilitation and restoration activities. The minimum deposit amount must be equal to the actual cost for rehabilitating the environment after mining. After completion of the rehabilitation and restoration of the environment, authorized organizations and individuals shall be allowed to withdraw environmental remittance deposits and interest arising from such deposits. Owner's equity and funds distribution Owner's equity is recognized at actual contribution from State Budget. Under Circular No.132/2015/TT-BTC dated 28 August 2015 issued by the Ministry of Finance, the Fund is entitled to set additional capital, Development Investment Fund, Bonus and Welfare Fund U from the difference of annual financial income and expenditures. Specificaly, rates are as follows: Items Fund distribution rate from the difference between income and expenditures Additional charter capital fund 20% of income over expenditures Bonus and welfare funds 02 - 03 months of actual salary annual Investment and development Remaining differences between income and expenditures funds Incomes Under Circular No. 132/2015/TT-BTC dated 28 August 2015 issued by Ministry of Finance, revenue of the Fund is all account receivable incurring in the year, including: Operation income includes: Interest receipt from loan, income from funding from entrusted loan, financing support from domestic and foreign organizations and individuals under Trust Contract; income from other activities. Financial income: Interest income and other financial income. Expenditures Under Circular No. 132/2015/TT-BTC dated 28 August 2015 issued by the Ministry of Finance, the expenditures of the Fund are all operating expenses incurring during the year, and comply with matching principle between revenue and expense with invoices, eligible documents in compliance with the Law. Operating expenses include expense relevant to loan and receipt of trust; expense for operational risk provision (under the regulation in business operation guidance of the Fund); interest expense related to environment recovery deposit in mining minerals and imported scrap metal assurance; and other expenses. Business operating expenses are recorded in accordance with business operating income. 17 U VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) Financial expenses include expense related to saving accounts at commercial bank and other financial expenses. Foreign currency translation Transactions arising in foreign currencies are translated at exchange rates ruling at the transaction date. The balances of monetary items denominated in foreign currencies as at the balance sheet date are retranslated at the exchange rates on the same date. Exchange differences arising from the translation of these accounts are recognised in the income statement. Taxation The Environmental Protection Fund is a state financial institution under the Ministry of Natural Resources and Environment, operating for non-profit purposes, but must preserve its charter capital and cover its management costs, exempt from tax and State budget remittances for activities in the domain of environmental protection under the provisions of tax legislation and state budget law. Interest income is applicable to corporate income tax rate of 5%. The determination of the tax currently payable is based on the current interpretation of tax regulations. However, these regulations are subject to periodic variation and their ultimate determination depends on the results of the tax authorities' examinations. Other taxes are paid in accordance with the prevailing tax laws in Vietnam. 5. CASH AND CASH EQUIVALENTS Closing balance Opening balance VND VND Cash on hand 466,985,480 814,837,568 Remaining amount of budget for the Fund (*) 247,229,000,000 13,9W,457,000 Demand deposit 20,428,943,103 11,30 ,790,520 Deposits with term of 3 months or less (**) - 10001 0001000 268,124,928,583 36,052,085,088 (*) Present remaining amount of budget for the Fund as recorded in the State Tredsury System instead of the balance of the Funds's cash at the State Treasury as at 31 December 2016 and 31 December 2015 for Wind power support price. (**) These are term deposits at commercial banks with term of 3 months or less with interest rate about 5.8% per annum. 6. FINANCIAL INVESTMENTS Financial investments are term deposits at commercial banks with term from 6 to 12 months with interest rate about 5,8% per annum. 7. LOANS FROM THE FUNDS' CAPITAL Closing balance Opening balance VND VND Current 466,665,233,818 406,193,696,000 Special mention 11,310,000,000 8,520,000,000 Sub-standard 3,600,000,000 Doubtful 21,749,658,112 22,659,800,000 Loss 12,232,373,613 33,772,633,488 515,557,265,543 471,146,129,488 These loans are guaranteed by commercial banks in Vietnam or secured by assets of borrowers or the third party. 18 VIETNAM ENVIRONMENT PROTECTION FUND * NOTES TO THE FINANCIAL STATEMENTS (Continued) *8. LASB H NRSE AIA Closing balance Opening balance VND VND *Current 79,320,000,000 72,592,000,000 *79,320,000,000 72,592,000,000 *The Fund received entrusted fund from the World Bank to implement Component2 - Pilot Financing for the construction of centralized wastewater treatment plant, under the Industrial wastewater management in Nhue-Day and Dongnai river basins Project in accordance with the Financing Agreement No.5175-VN dated 24 December 2012 between Vietnam Environment * Protection Fund and the World Bank. 9. FUND FOR SPONSOR AND CO-SPONSOR Closing balance Opening balance *VND VND" *Funding projects 30,100,478,673 5,376,133,000 Funding task assigned by the Ministry 4,099,832,028 5,044,472,722 34,200,310,701 10,420,605,722 10. OTKER RECEIVABLES Closing balance Opening balance ( *VND VND Personal income tax receivable from employees 8,7,6 5,9,2 *Overpaid union fees 51,554,739 51,554,739 *Overpaid social insurance 163,053,644 Receivable from General Environmental *Department 14,500,000,000 Other current receivables -50,460,817 Total 14,799,186,852 353,506,885 *11.PRPYET Closing balance Opening balance *VND VD *Fixed assets rental fee 555,845,500 548,845,000 Others 181,029,106 - 553,840,109 736,874,606 1,102,685,109 12. DEPOSITS, MORTGAGES Closing balance Opening balance *VND VND Deposit for office rental 823,267,500 823,267,500 Total 823,267,500 823,267,500 19 U U VIETNAM ENVIRONMENT PROTECTION FUND * NOTES TO THE FINANCIAL STATEMENTS (Continued) 13. TANGIBLES FIXED ASSETS Machinery and equipment Motor vehicles Office equipment Others Total VND VND VND VND VND COST Opening balance 43,878,000 862,496,000 204,362,960 50,060,000 1,160,796,960 Disposals (43,878,000) - - - (43,878,000) Closing balance - 862,496,000 204,362,960 50,060,000 1,116,918,960 ACCUMULATED DEPRECIATION Opening balance 43,878,000 624,349,092 204,362,960 37,023,518 909,613,570 Charge for the year - 6,049,373 - 6,257,496 129,471,216 Disposals (43,878,000) - - - (43,878,000) Closing balance - 747,562,812 204,362,960 43,281,014 995,206,786 NET BOOK VALUE Opening balance - 238,146,908 - 13,036,482 251,183,390 Closing balance - 114,933,188 - 6,778,986 121,712,174 14. INTANGIBLES FIXED ASSETS Computer software Others Total VND VND VND COST Opening balance 98,000,000 160,000,000 258,000,000 Closing balance 98,000,000 160,000,000 258,000,000 ACCUMULATED AMORTISATION Opening balance 98,000,000 103,749,976 201,749,976 Charge for the year - 15,999,996 15,999,996 Closing balance 98,000,000 119,749,972 217,749,972 * NET BOOK VALUE Opening balance - 56,250,024 56,250,024 Closing balance - 40,250,028 40,250,028 15. LIABILITIES IN PAYMENTS Closing balance Opening balance a. Entrusted fund payables VND VND Entrusted fund from World Bank (i) 79,320,000,000 72,592,000,000 79,320,000,000 72,592,000,000 b. Outstanding payments Personal income tax 374,571,174 344,205,975 Other authorized collections and payments 88,060,000 60,000 462,631,174 344,265,975 79,782,631,174 72,936,265,975 20 U VIETNAM ENVIRONMENT PROTECTION FUND W NOTES TO THE FINANCIAL STATEMENTS (Continued) (i) On-lending agreement between the Ministry of Finance and Vietnam Environment Protection Fund on the use of the Financing Agreement No 5175-VN dated 24 December 2012 of the International Development Association for on-lending of centralized wastewater treatment for industrial park in 04 provinces: Ha Nam, Nam Dinh, Dong Nai, Ba Ria -Vung Tau, interest rates of 6.8% per year, loan term for each project is limited at 15 years (including 02 years grace), interest is paid semi-annually on 30 March and 30 September. 16. DEPOSIT, COLLATERAL RECEIVED Closing balance Opening balance VND VND Deposits, collateral received 124,814,172,339 107,789,708,277 124,814,172,339 107,789,708,277 According to Decision No.18/2013/QD-TTg dated 29 March 2013 issued by the Prime Minister on environmental remediation deposit in mineral extraction, the organizations and individuals licensed to extract mineral extraction shall deposit a certain amount of money, in a certain time, to the Vietnam Environment Protection Fund or the Local Environment Protection Fund to ensure the environmental remediation by the organizations and individuals engaged inmineral extraction incompliance with current regulations. The deposit must be equal at least to the actual cost of environmental remediation after mineral mining. After environmental remediation is completed, the organizations and individuals will be able to withdraw the deposit. 17. THE FUNDS Closing balance Opening balance VND VND Investment and development fund 351,082,033,360 289,453,824,203 Operational risks reserve fund 37,098,278,515 30,911,591,328 Bonus and welfare fund 1,684,867,849 880,733,274 Additional charter capital fund - 44,349,569,375 389,865,179,724 365,595,718,180 18. OPERATIONAL INCOME Current year Prior year VND VND Interest income from loans at preferential 21,983,024,482 23,514,146,634 interest rates Others 4,600,035 - 21,987,624,517 23,51491469634 19. OPERATIONAL EXPENSES Current year Prior year VND VND Deposit interest expenses (*) 8,082,559,894 1,578,263 Payment and funding services expenses 180,449,134 193,119,620 Operational risk reserve expense 6,186,687,187 5,653,753,554 Other operational expenses 114,718,000 116,717,810 14,564,414,215 5,965,169,247 (*) Desposit interest expenses in 2016 was recognized based on the actual incur under the Circular No.132/2015/TT-BTC dated 28 August 2015, while deposit interest expenses in 2015 was recognized based on the actual payment under the Circular No.93/2003/TT-BTC dated 6 October 2003. 21 W U VIETNAM ENVIRONMENT PROTECTION FUND * NOTES TO THE FINANCIAL STATEMENTS (Continued) 20. ADMINISTRATION EXPENSES Current year Prior year VND VND The cost of training, professional 148,490,000 496,045,000 training, research, survey Expenses for conferences, seminars 924,770,000 870,426,500 Stationery expenses 986,366,136 969,508,407 Fixed assets expenses 3,473,543,712 3,337,298,003 Administrative expenses 1,200,899,963 818,160,921 Domestical per diem expenses 1,102,166,500 965,465,000 Expenses of Board of Management, Board of Directors, Board of Supervisory Promotion expenses 263,774,516 443,788,760 Others 1,017,054,959 788,567,970 Oversea perdiem and others 829,747,900 - 12,133,999,266 10,987,092,963 21. CORPORATE INCOME TAX EXPENSE Current year Prior year VND VND Current corporate income tax expense - Corporate income tax expense based on 2,439,211,385 2,221,908,880 taxable profit in the current year * - Adjustments for corporate income tax 1,551,159,018 expense in previous years to the current year Total current corporate income tax expense 2,439,211,385 3,773,067,898 The current corporate income tax expense for the year was computed as follows: Current year Prior year VND VND Interest income 48,784,227,694 44,438,177,599 Taxable profit 48,784,227,694 44,438,177,599 Corporate income tax expense based 2,439,211,385 2,221,908,880 on taxable profit in the current year 22. RELATED PARTY TRANSACTIONS Remuneration paid to the Board of Management, Directors and Supervisory during the year was as follows: Current year Prior year VND VND Salary and bonus 1,827,446,018 1,853,861,183 22 VIETNAM ENVIRONMENT PROTECTION FUND NOTES TO THE FINANCIAL STATEMENTS (Continued) 23. COMPARATIVE FIGURES The comparative figures are the financial statements of the Fund for the year ended 31 December 2015 were audited by another auditor.Certain representations have been made to the prior year's figures to enhance their comparability with the current year's presentation to comply with the Inspection conclusion No.990/KL-TTr dated 15 November 2016 relate to receipt and used of Vietnam Enviroment Protection Fund and the 4 provincial Environment Protection Fund issued by State Inspection. Details are as follows: Details are as follows: Previously reported Representation Amount after amount renresentatino VND VND VND Balance sheet Interest payables 316 4,745,665,499 (3,838,366,203) 907,299,296 Other payables 322 25,124,835 3,773,067,898 3,798,192,733 Investment and development fund 415 289,395,055,729 58,768,474 289,453,824,203 Additional charter capital fund 418 44,343,039,544 6,529,831 44,349,569,375 Statements of income and expenditutes Operational incomes 02 67,952,324,233 (44,438,177,599) 23,514,146,634 Financial income 20 - 44,438,177,599 44,438,177,599 Operational expenses 31 9,803,535,450 (3,838,366,203) 5,965,169,247 Current corporate income tax expense - 3,773,067,898 3,773,067,898 Cashflows statements Profit before tax 01 31,939,643,684 3,838,366,203 35,778,0Q ,887 Interest expense 06 - 1,578,263 1,578,263 Operating (loss) before movements in working 08 (6,666,506,245) 3,839,944,466 (2,826,561,779) capital Change in payables (excluding accrued loan 11 8,902,799,234 (6,480,886,531) 2,421,912,703 interest and corporate income tax payable) Interest paid 14 - (75,090,336) (75,090,336) Other cash outflows 17 (2,716,032,401) 2,716,032,401 Nguyen Hoai Thu V6 Van Chinh N lguyen Nam Phuang Preparer Chief Accountant Director 26 June 2017 23 U U U U U B U U U U U PART II 3 REPORT OF INDEPENDENT AUDITORS ON * INTERNAL CONTROL U U * U [. V * N U U U U U U U U U U U U U U U Deloitte Vietnam Company Ltd. 12A Floor, Vinaconex Tower, D e lo itte341 Lang Ha Street, Lang Ha War-d, Dong Da District, Hanot, Vietnam Tel :+844 6288 3568 Fax:+844 6288 5678 wvw.delite .com/vn REPORT OF INDEPENDENT AUDITORS ON INTERNAL CONTROL To The Boards of Management and Directors Vietnam Environment Protection Fund We have audited, in accordance with International Standards on Auditing, the financial statements of Vietnam Environment Protection Fund (the "Fund") for the year ended 31 December 2016 and issued the independent auditors' report thereon dated 26 June 2017 expressing a qualified opinion on those financial statements with respect to the recognition of the Fund's cash item. In connection with our audit of the Fund's financial statements, we also examined the effectiveness of internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as of internal control over financial reporting. As stated in the Statement of the Board of Directors on page 2, the Board of Directors is responsible for designing and maintaining effective internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as over financial reporting for the purpose of properly preparing and presenting the financial statements so as to minimise errors and frauds; and take responsibility for its assertions as to the effectiveness of such internal control. Our responsibility is to express an opinion on the effectiveness of internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as internal control over financial reporting based on our examination. Our examination was conducted in accordance with International Standard on Assurance Engagements (ISAE) 3000. That standard requires that we comply with ethical requirements and plan and perform our procedures to obtain reasonable assurance about whether, in all material respects, the Board of Directors of the Fund has maintained effective internal control over compliance with the requirements that could have a direct and material financial effect on the financial statements as well as internal control over financial reporting. Our examination included obtaining an understanding of internal control over compliance with requirements that could have a direct and material financial effect on the financial statements as well as of internal control over financial reporting, testing, and evaluating the design and operating effectiveness of the internal control, and performing such other procedures as we considered necessary in the circumstances to obtain sufficient appropriate evidence on which to base our opinion. Because of inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not to be detected. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. DOoit te refors to one or niore of Dloitl ( Touche Toht Lt edi , U . il UK private compary irnited by guarantee ('DTTL"- ), its network of memter firms, and their reIated entitis . DTT and each of its member firms are leg ly Sepa rate and i rid pe id ei t niies. DTTL (,a so r 1erred to as "Deo tt Glo ba I ") dos nor provide serv ces to cEents. PIease see www.deloitte.com/about for a more detailed description of DTTL and .ts member firms, 24 Deloitte REPORT OF INDEPENDENT AUDITORS ON INTERNAL CONTROL (Continued) In our opinion, the Board of Directors of the Fund has maintained, in all material respects, effective internal control over compliance with requirements that could have a direct and material financial effect on the Fund's financial statements as well as over financial reporting for the year ended 31 December 2016. Dang Chi Dung Nguyen Luong Tam Deputy General Director Auditor Audit Practising Registration Certificate Audit Practising Registration Certificate No. 0030-2013-001-1 No. 2303-2013-001-1 DELOITTE VIETNAM COMPANY LIMITED 26 June 2017 Hanoi, S.R. Vietnam U U U U2 U . . , . , , 讓 , , . , ,PART 211 . INDEP吃NDENT ASSURANCE REPORT ON CO間PLIANCE 目 , , . , 頗 驪＇ ，斗 . . , 纖 , , . . . , . , , Deloitte Vietnam Company Ltd. 12A Floor, Vinaconex Tower, D e lo itte 34 Lang Ha Street, Lang Ha Ward, Dong Da District, Hanoi, Vietnam Tel :+8,4 6288 3568 Fax + 84 1 6 2 88 56 78 vvwv;.del, itt, com/vn INDEPENDENT ASSURANCE REPORT ON COMPLIANCE To., The Boards of Management and Directors Vietnam Environment Protection Fund We have audited, in accordance with International Standards on Auditing, the financial statements of Vietnam Environment Protection Fund (the "Fund") for the year ended 31 December 2016 and issued the independent auditors' report thereon dated 26 June 2017 expressing a qualified opinion on those financial statements with respect to the recognition of the Fund's cash item. In connection with the audit of the financial statements, we also performed procedures on the Fund's compliance with Financing Agreement No. 5175-VN, laws and regulations that have a direct and material financial effect on the Fund's financial statements for the year ended 31 December 2016 (the requirements"). The Fund is responsible for complying with Financing Agreement No. 5175-VN, laws and regulations applicable to the Fund. Our responsibility is to express an opinion an the Fund's compliance with the requirements based on our procedures. We limited our tests of compliance to the requirements, and we did not test compliance with all laws and regulations applicable to the Fund. We performed our work in accordance with International Standard on Assurance Engagements (ISAE) 3000. That standard requires that we comply with ethical requirements and,plan and perform our procedures to obtain reasonable assurance about whether, in all material respects, the Fund has complied with the requirements. An assurance engagement to report on the compliance with the requirements at the Fund involves performing procedures to obtain evidence about whether the Fund's activities are free of material noncompliance with the requirements, Including obtaining an understand!,r ig of the Internal control relevant to the Fund's compliance with the requirements, The procedures selected depend on the auditors' judgment, including the assessment of risks that the Fund does not comply with the requirements and whether such noncompliance could have a direct and material financial effect on the Fund's financial statements. Our procedures included testing the compliance with the requirements that we consider necessary to provide reasonable assurance that the requirements are complied by the Fund. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Deloitte refers to ane nr mo,-F, of Deloitte Toucn Tolhmatsu 1-imited, a UK privaLe company limited by guaran ee ("13- it- net vork of member firms, and tl- -etated entities. Of fl- and eacti ofits Fl- 1)-erfirmsare legally - ,F-1, ;irid nt entifles- [)TTl- (A' , i-r, I to a,; 'Deloittp Global") d , -,ervices to Clients, il -con-i/aboutfa, o r- -J, :Tiled df?s :ript or, of DTTL OF10 11 - IT 26 U * Deloitte INDEPENDENT ASSURANCE REPORT ON COMPLIANCE (Continued) In our opinion, the Fund has complied, in all material respects, with Financing Agreement No. 5175- VN, laws and regulations that could have a direct and material financial effect on the Fund's financial statements for the year ended 31 December 2016. Dang Chi Dung Nguyen Luong Tam Deputy General Director Auditor Audit Practising Registration Certificate Audit Practising Registration Certificate No, 0030-2013-001-1 No.2303-2013-001-1 DELOITTE VIETNAM COMPANY LIMITED 26 June 2017 Hanoi, S.R. Vietnam 27