Decree No. 187/2004/ND-CP of November 16th, 2004, on conversion of state owned companies into shareholding companies.

DECREE

ON CONVERSION OF STATE OWNED COMPANIES INTO SHAREHOLDING COMPANIES

THE GOVERNMENT

DECREES:

Chapter I

GENERAL PROVISIONS

Article 1. TheobjectivesofandrequirementsforconversionofStateownedcompaniesintoshareholdingcompanies (hereinafter referred to asequitization)shall be:

1. Toconvertthose Stateowned companiesinwhichitisnotnecessaryfortheStateto continuetohold one hundred (100) per cent of charter capital into shareholding companies with many owners; to mobilize capital from both domestic and foreign individuals, economic organizations and social organizations for the purpose of increasing financial capacity and renovating technology and management methods in order to raise the efficiency and competitiveness of theeconomy.

2. ToensureharmonybetweentheinterestsoftheState,theenterprise,theinvestorandemployeesof the enterprise.

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Article 2. Applicable subjects

1. This Decree shall apply to State owned companies not in the category of those in which it is necessaryfortheStatetoholdonehundred(100)percentofchartercapital,whichshallundergo equitization, comprising: State corporations (including State commercial banks and State finance institutions);independentStateownedcompanies;enterpriseswhicharemembersofcorporations, whichmaintainanindependentcost accounting systemandfor whichthe State madethedecision on investment and establishment; and dependently accounting affiliates of State corporations (hereinafter all referred to as enterprises undergoingequitization).

ThePrimeMinisteroftheGovernmentshallmakedecisionsfromtimetotimeonthelistofState ownedcompaniesinwhichitisnecessaryfortheStatetoholdonehundred(100)percentofcharter capital.

2. EquitizationoftheStateownedcompaniesprescribedinclause1ofthisarticlemaybecarriedout whentheystillhaveStatecapital(excludingthevalueoflanduserights)afterdeductingthevalueof assets not required to be used, assets awaiting liquidation, losses caused by [annual] losses, reduction in the value of assets, bad debts and equitization expenses.

3. EquitizationofdependentlyaccountingaffiliatesofStatecorporationsprescribedinclause1ofthis article may only be carriedout when:

(a) Thedependentlyaccountingaffiliateofanenterprisesatisfiesallconditionsformaintainingan independent cost accounting system;

(b) Itdoesnotcausedifficultiesorhaveadverseconsequencesontheproductionandbusiness results of theenterprise orthe remainingpart of the enterprise.

Article 3. Forms of equitization of State owned companies

1. MaintainingtheexistingStateownedcapitalinanenterpriseandissuingsharesinordertomobilize additional capital applicable to enterprises to be equitized which have a requirement to increase charter capital. The level of additional capital to be mobilized shall depend on the scale of the companyundergoingequitizationanditscapitalrequirements.Thestructureofchartercapitalina company undergoing equitizationshall be set out in the equitizationplan.

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3. SellingthewholepartoftheexistingStateownedcapitalinanenterprise,orcombiningthesaleof thewholepartoftheexistingStateownedcapitalintheenterprisewithissuingsharesinorderto mobilize additional capital.

Article 4. Who may purchasesharesand conditions for purchasing

1. Economic organizations and social organizations operating pursuant to the law of Vietnam and individualsbeingVietnameseresidinginVietnam(hereinafterallreferredtoasdomesticinvestors) shall have the right to purchase an unlimitednumber of shares inan equitizedenterprise.

2. Enterprises with foreign owned capital and foreign individuals lawfully operating in Vietnam and Vietnameseresidingoverseas(hereinafterallreferredtoasforeigninvestors)shallhavetherightto purchaseshares in an equitized enterprise in accordancewith the law of Vietnam.

Foreigninvestorswishingtopurchasesharesinanequitizedenterprisemustopenanaccountatan organizationprovidingpaymentserviceswhichiscurrentlyoperatingintheterritoryofVietnam,and mustcomplywiththelawofVietnam. Allactivitiesofpurchasingandsellingshares,receivingand usingdividendsandotherincomefrominvestmentsinthepurchaseofsharesmustbeconductedvia that account.

Article 5. Both domestic investors and foreign investors must purchase shares in an equitized enterprise in Vietnamese dong.

Article 6. Equitization expenses

The expenses of conducting equitization shall be deducted from the existing State owned capital in the enterpriseundergoingequitization.Thecontentsandlevelofequitizationexpensesshallbeimplementedin accordancewith guidelines issuedby the Ministry of Finance.

Article 7. Shareholding,shares and founding shareholders

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2. Asharemeansacertificateissuedbyashareholdingcompanyconfirmingtheownershipofoneora numberofsharesofashareholderwhocontributescapitaltothecompany. Sharesmaybenamed or bearer shares but must contain all of the basic items stipulated in article 59 of the Law on Enterprises.

The Ministry of Finance shall provide guidelines on unified sample forms for shares in order for enterprises to print and manage them inaccordancewith regulations.

3. Foundingshareholdersofanequitizedenterprisemeansshareholderswhosatisfyallofthefollowing conditions:

(a) They participate in approving the first charter of the shareholding company;

(b) Theytogetherholdatleasttwenty(20)percentofthenumberofordinaryshareswhichare freely transferable;

(c) Theycomplywiththeprovisionsofthecharterofthecompanyonownershipofaminimum number of shares.

The general meeting of shareholders shall decide the minimum number of shares which each foundingshareholdermust own,andtheminimumnumber offounding shareholders,andtheseitems shall be provided for in thecharter of thecompany.

Article 8. Principlesforinheritanceofrightsandobligationsbyashareholdingcompanyafterconversion froma Stateowned company

1. Equitized enterprises shall be responsible for restructure, for employing the maximum number of employeesasatthetimeofequitization,andforresolvingregimesforemployeesinaccordancewith current regulations.

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2. Ashareholdingcompanyshallbeentitled,onitsowninitiative,tousethewholeoftheassetsand capital funds which have been equitized in order to organize production and business; and shall inheritallinterests,obligationsandliabilitiesoftheStateownedcompanypriortoequitization,and shall have other rights andobligations inaccordancewith law.

Chapter II

DEALING WITH FINANCES ON EQUITIZATION

Article 9. Responsibilities of enterprises undergoing equitization to deal withexisting financial issues

An enterprise undergoing equitization shall be responsible, on its own initiative, to co-ordinate with the relevant agencies to deal in accordance with authority and in accordance with regulations with existing financialissuespriortovaluingtheenterprisetobeequitizedandthroughouttheequitizationprocess.In casesofdifficultiesorincasesoutsideauthority,theenterpriseundergoingequitizationmustreporttothe competent agency for the latter'sconsideration and resolution.

Article 10. Dealingwithleasedorborrowedassets,assetsreceivedasjointventurecapitalcontribution, jointassets,assetsnotrequiredtobeusedandinvestmentsfundedbytherewardandwelfare funds

1. Assetswhichanenterpriseleases,borrowsorreceivesasjointventurecapitalcontribution,andjoint assetsandotherassetswhichdonotbelongtotheenterpriseshallnotbeincludedinthevalueof theenterprisetobeequitized.Priortoconversiontoashareholdingcompany,anenterprisemust liquidatecontractsoragreementswithownersofassetsinorderfortheequitizedcompanytoinherit the previously-signed contracts orsignnew ones.

2. With respect to assets of an enterprise which are not required to be used, idle stock and assets awaitingliquidation,theenterpriseshallliquidate, transferorsellthem,or reporttothecompetent agencytotransferthemtoanotherunitinaccordancewithcurrentregulations. Iftheseassetshave notbeendealtwithbythetimeofvaluationoftheenterprise,theyshallnotbeincludedinthevalue of the enterprise. During the equitization process the enterpriseshall continue to deal with these assets,andiftheseassetshavestillnotbeendealtwithbythetimeofthedecisionannouncingthe valuationoftheenterprisethentheyshallbetransferredtoacompanyspecializinginthepurchase and sale of debts and idlestock forsuch company to realize in accordance withlaw.

3. Withrespecttoassetsbelongingtowelfarebuildingssuchaskindergartens,nurseries,dispensaries andotherwelfareassetsfrominvestmentsfundedbytherewardandwelfarefunds,theyshallbe transferred to the shareholding company for management and use for the benefit of the labour collective of the enterprise.

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4. Withrespecttoassetsoftheenterprisebeinginvestmentsfundedbytherewardandwelfarefunds andwhich the shareholding company continues touse for productionandbusiness, theyshallbe includedinthevalueoftheenterpriseundergoingequitizationandconvertedintoshareholdingtobe dividedamongstemployeesoftheenterpriseatthetimeofequitizationinaccordancewiththeactual period of work of each person at the enterprise.

Article 11. Debts receivable

1. An enterprise undergoing equitization shall be responsible to review, confirm and recover debts whicharedueandreceivablepriortoequitization. If,bythetimeofvaluationoftheenterprise,there arestillarrearsofbaddebts,theyshallbedealtwithinaccordancewithcurrentregulationsofthe State on dealing with arrears of bad debts.

2. By the time of the decision announcing the valuation of the enterprise, the enterprise undergoing equitizationshallberesponsibletotransferallirrecoverabledebtswhichhavebeenexcludedfrom thevaluationoftheenterprise(togetherwithfilesonthedebtsandotherrelevantdata)toacompany specializing in the purchase and sale of debts and idle stock from enterprises in order for such company to realize in accordancewith law.

3. Withrespecttoitemspaidinadvancetosuppliersofgoodsandservicessuchasrentforhousingor land,purchasepriceofgoodsandwages,theseitemsmustbereviewedandincludedinthevalueof the enterprise.

Article 12. Debts payable

1. Anenterprisemustmobilizefundstopaydebtswhichmaturepriortoconductingequitization,orit mustagreewithcreditorsonthemethodofdealingwiththedebtsorontheconversionthereofinto shareholding capitalcontribution.

Theconversionofdebtsintoshareholdingcapitalcontributionshallbedeterminedontheresultsofa share auction, or the enterprise and a creditor shall reach agreement in order to fix a price for participating in an auction.

2. Ifduringtheequitizationprocesstheenterpriseisindifficultyregardingabilitytopayoverduedebts because business incurred losses, the debts shall be dealt with in accordance with current regulations of the State on dealing with arrears of baddebts.

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1. Reservesforreductionofpriceofgoodsinstock,forbaddebts,forreductionofvalueofsecurities, and for exchange rate differences shall be accounted for in the business results of the enterprise.

2. The enterprise undergoing equitization shall use reserves for retrenchment allowances to pay to employeeswhoareretrenchedduringtheequitizationprocess,andifnotsopaidthensuchreserves shall be accounted for in the business results of the enterprise.

3. Reservesfor risksandprofessionalreserves withinthebankingandinsurance systems oroffinancial organizations shall be transferred to theshareholdingcompany to continue to manage.

4. Thebalanceinfinancialreservestocoverlosses(ifany)andinfinancialreservestocoverdamage toassetsandirrecoverabledebtsshallbeincludedinthevalueoftheportionofStateownedcapital in the enterprise undergoing equitization.

5. Thebalanceinreservesofprofitsgeneratedinordertocoverpreviousyears'losses(ifany)andin reservestocoverlossesbeingassetsnotrequiredtobeused,assetsawaitingliquidation,reduction inthevalueofassets,anddebtswhichtheenterprisedoesnothavetheabilitytocollectshallbe distributed inaccordancewith current regulations prior to valuationof the enterprise to be equitized.

6. Theenterpriseundergoingequitizationshallusefinancialreservesandpre-taxprofitstocoverlosses calculated up until the time of equitization and conversion of the enterprise into a shareholding company.Iftheenterpriselacks[suchreserves]thenitshalltakemeasurestowriteoffitsdebtsto the State budget, bank debts and debts to the Development Assistance Fund in accordance with current regulations of theState ondealing with arrears of bad debts.

Ifafterapplyingalltheabovemeasuresanenterprisestillsuffersaloss,theenterpriseshalldeduct the loss fromthe portion ofState ownedcapital.

Article 14. Long-term investment capital in other enterprises such as joint venture capital contribution, associatedventures,shareholdingcapitalcontribution,capitalcontributiontoestablishmentof limited liability companiesand other forms of long-terminvestment

1. Iftheenterpriseundergoingequitizationinheritedlong-terminvestmentcapitalwhichaStateowned companyinvestedinotherenterprises,thenthewholeofsuchcapitalshallbeincludedinthevalue oftheenterpriseundergoingequitizationinaccordancewiththeprinciplesstipulatedinarticle20of this Decree.

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(a) Reach agreement on sale of the investment capital to another partner/entity or to other investors;

(b) Transfer them to anotherenterprise to act as partner/entity.

Article 15. Cash balancein reward funds and welfare funds

Anycashbalanceinrewardfundsandwelfarefundsshallbedistributedtothecurrentworkforceinthe enterpriseforthepurposeofpurchaseofshares. Employeesshallnotberequiredtopayincometaxon such item ofincome.

Chapter III

VALUATION OF AN ENTERPRISE TO BE EQUITIZED

Section 1. METHODS OFVALUATION OFAN ENTERPRISE

Article 16. When any State owned company undergoes equitization, it shall apply one of the following methods of valuation of the enterprise:

1. The asset method.

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3. Other methods.

The Ministryof Financeshall provideguidelinesonvaluation ofan enterpriseundergoingequitization in accordancewith the above methods.

Section 2. VALUATION OFAN ENTERPRISE IN ACCORDANCEWITH THEASSET METHOD

Article 17. Value of an enterprise undergoing equitization in accordancewith the asset method

1. Theactualvalueofanenterpriseundergoingequitizationshallbethetotalvalueofallexistingassets oftheenterpriseatthetimeofequitization,includingtheprofitabilityoftheenterprise,asacceptedby both the purchaser and theseller ofshareholding.

TheactualvalueoftheportionofStateownedcapitalinanenterpriseshallbetheactualvalueofthe enterpriseminus(-)debtspayable,includingbalancesinrewardandwelfarefundsandbalancein the professional funding source (if any).

InthecaseofequitizationofthewholeofacorporationforwhichtheStatemadethedecisionon investment and establishment, the value of the portion of Stateowned capital in the whole of the corporationundergoingequitizationshallbetheactualvalueoftheportionofStateownedcapitalin theofficeofthecorporation,inthemembercompanies,andintheprofessionalunitsbelongingtothe corporation (ifany).

Inthecaseofequitizationofthewholeofacorporationforwhichcompaniesmadetheirown[fon] investmentandestablishment,thevalueoftheportionofStateownedcapital[inthewholeofthe corporation]undergoingequitizationshallbetheactualvalueoftheportionofStateownedcapitalin the parent company.

2. The followingitems shall not be included inthe valueof an enterprise undergoing equitization:

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(b) Debts receivable but whichthe enterprisedoes not have the ability to collect;

(c) Expensesofunfinishedcapitalconstructionworksinabeyancepriortothetimeofvaluationof the enterprise;

(dd) Long-term investments in other enterprises stipulated in clause 2(b) of article 14 of this Decree.

Article 18. Bases for determining actual value of anenterprise

1. Data from books of account of theenterprise at the time of equitization.

2. Dataontheinventory,classificationandassessmentofqualityofassetsoftheenterpriseatthetime of equitization.

3. Market valueof assets at the time of equitization.

Article 19. Value of landuse rights and value of business advantages of enterprise

1. Withrespecttoareasoflandwhichtheenterpriseundergoingequitizationiscurrentlyusingasland forconstructionofitsheadoffice,transactionofficeandproductionandbusinessestablishment;or landforthepurposesofagriculture,forestry,aquacultureandsaltproduction(includinglandwhich has been allocated by the State with or without collection of land use fees), then the enterprise undergoingequitizationshallbeentitledtoselecttheformoflandleaseortheformoflandallocation pursuant to the Law on Land.

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(b) Iftheenterpriseundergoingequitizationselectstheformoflandallocationthenthevalueof thelanduserightmustbeincludedinthevalueoftheenterpriseundergoingequitization.The valueofalanduserightwhichisincludedinthevalueofanenterpriseundergoingequitization shallbethepricestipulatedbythepeople’scommitteeoftheprovinceorcityundercentral authority,closetotheactualmarketpricesofassignmentoflanduserightsandannounced annually on 1 January in accordance with regulations of the Government. The order and proceduresforlandallocation,paymentoflandusefees,andissuanceofcertificatesofland use right shall be implemented in accordance with the current lawon land.

2. With respect to areas of land which the State has allocated to the enterprise for construction of residentialhousingforsaleorlease,orforconstructionofinfrastructurebusinessforassignmentor lease, the value of the land use right must be included in the value of the enterprise undergoing equitization.Suchvalueoflanduserightsshallbedeterminedinaccordancewithclause1(b)ofthis article.

3. Business advantages of an enterprise shall comprise geographical position, the value of trade names, and the potential for development.

Valueofbusinessadvantagesoftheenterpriseshallbebasedontheratioofafter-taxprofitsover Stateownedcapitalintheenterprisepriortoequitizationandthepre-paidinterestrateforlongterm Governmentbonds at the most recent date priorto the time of valuation of the enterprise.

Article 20. Determiningvalueoflong-terminvestmentcapitaloftheenterpriseundergoingequitizationin other enterprises

1. Thevalueofthelong-terminvestmentcapitalofaStateownedcompanyinotherenterprisesshallbe determined on the following bases:

(a) Valueofthecapitaloftheownerrecordedinthemostrecentauditedfinancialstatementsof the enterprisein which the State ownedcompany made its investment;

(b) Investment capital ratio of the State owned companyprior to equitization in other enterprises;

(c) WheretheStateownedcompanymadeitsinvestmentinforeigncurrency,whendetermining the investment capital it must be converted into Vietnamese dong at the average trading exchangerateontheinter-bankforeignexchangemarketasannouncedbytheStateBankat the date of valuation.

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3. ThevalueofthecapitalcontributionofaStateownedcompanyinshareholdingcompanieslistedon thesecuritiesmarketshallbedeterminedonthebasisofthesharetradingpriceonthesecurities market at the time of valuation of the enterprise.

Section 3. VALUATION OFAN ENTERPRISE IN ACCORDANCEWITH THEDISCOUNTEDCURRENCYMETHOD

Article 21. Value of an enterprise in accordance with the discounted currency method

1. TheactualvalueoftheportionofStateownedcapitalinanenterpriseundergoingequitizationshall be determined by the discounted currency method based on the ability of the enterprise to be profitable in the future.

WherethewholeofaStateownedcompanyisvaluedbythismethod,theabilityoftheStateowned companytobeprofitableshallbedeterminedonthebasisoftheprofitoftheStateownedcompany pursuant to provisions in the financial regulations of [such] State owned company.

WheretheStateownedcompanymadecapitalinvestmentsinotherenterprises,thenthebasisfor valuationoftheenterprisetobeequitizedshallbetheprofitbroughtinfromsuchcapitalinvestments in other enterprises.

2. The actual value of the enterprise shall comprise the actual value of the portion of State owned capital,debtspayable1,cashbalancesinrewardandwelfarefundsandbalanceintheprofessional fundingsource (if any).

Iftheenterpriseselectstheformoflandallocationthenthevalueofthelanduserightmustalsobe includedinthevalueoftheenterpriseundergoingequitizationinaccordancewithclause1ofarticle 19 of this Decree.

Article 22. Bases for determination

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2. Plan for production and business operations of the enterprise for from three to five years after conversion toa shareholding company.

3. InterestrateforlongtermGovernmentbondsatthemostrecentdatepriortothetimeofvaluationof the enterpriseand the discountedcurrency indicatorof the enterprise being valued.

Section 4. HOLDING A VALUATION OF ANENTERPRISE

Article 23.Methods of holding avaluation of an enterprise undergoing equitization

1. If an enterprise undergoing equitization has total asset value in its books of account of thirty (30) billion Vietnamese dong or more then valuation of the enterprise shall be conducted by an organizationspecializinginvaluationssuchasanauditingcompany,asecuritiescompany,aprice evaluationorganizationoraninvestmentbank,eitherdomesticorforeign,withthecapacitytomake the valuation(hereinafter referred to asa valuation organization).

The agency authorized to make the decision valuing the enterprise undergoing equitization shall select a valuation organization from the list announcedby the Ministry of Finance.

IfaforeignvaluationorganizationnotyetoperatinginVietnamisselected,itmustbeapprovedby the Ministry ofFinance.

Whenthevaluationorganizationholdsavaluationofanenterpriseundergoingequitization,itmust complywithcurrentregulationsandcompletethevaluationwithinthetimeschedulestipulatedinthe signed contract, and the valuation organization shall be liable for the accuracy and legality of the results of thevaluation.

2. Ifanenterpriseundergoing equitizationhastotalasset valueinitsbooksofaccountoflessthanthirty (30)billionVietnamesedongthenitshallnotbeabsolutelynecessarytohireavaluationorganization to value such enterprise,and in sucha case the enterprise shall be permitted to conduct its own valuation and shall notify the result to the agency authorized to make the decision valuing the enterprise.

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Article 24. Use of results of valuationof enterprise

TheresultsofavaluationofanenterprisecarriedoutinaccordancewiththeprovisionsofthisDecreeshall bethebasisforfixingthescaleofchartercapital,thestructureofsharesfortheinitialissue,andapriceas the starting point for holding an auction to sell shares.

Article 25. Adjustment of value of an enterprise undergoing equitization

Upuntilthetimewhenanenterpriseofficiallyconvertsintoashareholdingcompany,theagencyauthorized to make the decision valuing the enterprise shall be responsible to inspect and deal with any financial issuesarisingbetweenthetimeofthevaluationandthetimewhenthebusinessregistrationcertificateis issuedtotheshareholdingcompany,inordertoadjustthevalueoftheportionofStateownedcapitalinthe enterprise.

ThedifferencebetweentheactualvalueoftheportionofStateownedcapitalintheenterpriseatthetime when the enterprise converts into a shareholding company and the actual value of the portion of State owned capitalin the enterprise at the time of the valuation shall be dealt with as follows:

1. Where the difference is an increase:

(a) ItshallbepaidtotheStateownedcorporationortotheindependentStateownedcompany when a member of such State owned corporation or a section of such independent State owned company is equitized, and shallbe used in accordancewith article 35 of this Decree.

(b) It shall be paid to the Assistance Fund for Restructure of Enterprises under the Ministry of Finance when the whole of an independent State owned company or the whole of a State owned corporation is equitized, and shall be usedin accordance with article 35 of this Decree.

2. Wherethedifferenceisadecrease,theenterpriseshallberesponsibletoreporttotheagencywhich madethedecisiononequitizationinorderforthelattertocheckandclarifythereasons,dealwith liabilitytopaycompensationformaterialloss(ifsuchlosswasduetosubjectivereasons),andthe remaining differenceshallbe dealt withas follows:

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(b) Ifthereisinsufficient,thenthereshallbeareductionintheportionofStateownedcapitalin theenterpriseandtheplanforsharesalesatincentiveratestoemployeesoftheenterprise, andatthesametimethereshallbeanadjustmenttothescaleandstructureofchartercapital of the shareholdingcompany;

(c) Ifaftertakingtheactionstipulatedinsub-clauses(a)and(b)abovethereisstillinsufficientto cover the decrease, then:

- Theagencywhichmadethedecisiononequitizationshallconsidermakingadecisionon conversionto theformofsaleorbankruptcyoftheenterprise(wherebusinessregistration pursuant to the Law on Enterpriseshasnot yet been conducted);

- The board of management shall convene an extraordinary general meeting of shareholders(inacasewherebusinessregistrationpursuanttotheLawonEnterprises has already been conducted) in order tovote on:

+ Agreementto inheriting remaining losses so as to continue to operate;

+ Agreementto sell the enterprise on condition that the purchaser inherits debts and losses;

+ Declare bankruptcy and sell assets inorder to pay debts.

- Inthecaseofconversiontoimplementingasaleorbankruptcy,theenterpriseshallbe responsibletoco-ordinatewiththerelevantauthoritiestoreturntoallinvestorsthemoney they paid to purchase shares, prior to paying any other creditors.

Chapter IV.

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Section 1. INITIAL SALE OF SHARES

Article 26. Who may purchase initialshares

1. Employees of the enterprise.

2. Strategic investors being domestic investors such as producers and regular suppliers of raw materialstotheenterprise;peoplewhoundertaketopurchasetheproductsoftheenterpriseona long-term basis; people closely connected to the long-term strategic business interests [of the enterprise], with financial potential andmanagement capability.

When an enterprise undergoing equitization formulates its equitization plan, such enterprise may select strategic investors and submit a list of them for approval to the agency which made the decision on equitization.

3. Other investors (including foreign investors).

Article 27. Initial share structure

1. Shares whichthe State shall hold.

2. Sharesforsaleatincentiveratesfortheemployeesoftheenterpriseasprovidedforinarticle37of this Decree.

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4. Theinitialsharestobesoldatapubliclyannouncedpricetoinvestorsshallnotbelessthantwenty (20) per cent of charter capital (including shares purchased additionally to incentive shares by strategic investors and employees of the enterprise).

Article 28. Selling priceof initial shares

1. Thesellingpriceofincentivesharestoemployeesofanenterpriseshallbeareductionofforty(40) per cent compared to the average auction price.

2. Thesellingpriceofincentivesharestostrategicinvestorsshallbeareductionoftwenty(20)percent compared to the average auction price.

3. Thesellingpricetoentitiesprescribedinarticle27.4ofthisDecreeshallbethesuccessfulauction bid of each such investor.

Article 29. Value of incentives to strategic investors and employees of an equitized enterprise

The total value of incentives to employees of an equitized enterprise and to strategic investors shall be taken from additional funding collected from share auctions, and if there is a deficiency then it shall be deductedfromtheportionofStateownedcapitalintheequitizedenterprisebut shallnotexceedtheportion ofStateownedcapitalintheequitizedenterpriseafterdeductingsharesheldbytheStateandequitization expenses.

Article 30. Methods of holding initial share auction

1. Auction directlyattheenterpriseinthe case ofan enterpriseundergoing equitizationwith avolume of sharesforsaleofonebillionVietnamesedongorless(theenterpriseshallitselfholdthesharesale auction).

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Inthecaseofanenterpriseundergoingequitizationwithavolumeofsharesforsaleaboveten(10) billionVietnamesedong,anauctionshallbeheldataSecuritiesTradingCentreinordertoattract investors.

The agency which made the decision on equitization of the State owned company shall make a selection in order to hire auctioneeringorganizations.

3. Inthecaseofanenterpriseinaremoteareawherethereisnointermediaryfinancialorganization available to takeon thesale of shares, the agencywhich madethe decisionon equitization shall reach agreement with theMinistry of Finance on asale method.

Article 31. Order for holding initial share auction

1. Atleasttwenty(20)dayspriortotheauction,theorganizationholdingtheauction(theenterprise,or an intermediary financial organization, or a Securities Trading Centre) must make a public announcementattheenterprise,attheplacewheretheauctionwillbeheld,andonthemassmedia aboutthetime,location,formofsale,conditionsforparticipation,numberofsharesproposedtobe sold and other issues relevant to the share auction.

2. Theauctiontootherinvestorsshallbeheldinaccordancewiththemethodsprescribedinarticle30 of this Decree.

3. Theaverageauctionpriceshallbedeterminedinordertocalculatetheincentivepriceforstrategic investors andemployees ofthe enterprise.

4. There shall be distribution and sale of shares to each strategic investor and employee of the enterprise.

5. Theenterprisemustcompletethesaleofshareswithinatime-limitoffourmonthsfromthedateof thedecisionapprovingtheequitizationplan.Ifthesharesarenotallsold,thentheenterpriseshall reporttotheagencyauthorizedtomakethedecisiononequitizationinorderforthelattertoadjust thescaleorstructureofchartercapitalintheequitizationplanandtoimplementconversionofthe State ownedcompany intoa shareholding company.

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After completion of the sale of shares and after holding a general meeting of shareholders correctly in accordance with the Law on Enterprises, the equitized enterprise must conduct business registration pursuant to Decree No. 109-2004-ND-CP of the Government dated2 April 2004on business registration.

Article 33. Ensuring public notification and transparency of information, listing on the securities market

1. Anequitizedenterprisemustprovidepubliclynotifiedfinancialstatementstoitsshareholdersandto the administrative agency correctly in accordance with theLaw on Enterprisesand other laws.

2. The State shall have a preferential policy in favour of equitized enterprises which satisfy the conditions for immediate listing on the securities market.

Article 34. Management of portion ofState ownedcapital in ashareholding company

1. TheportionofStateownedcapitalinashareholdingcompanyshallbemanagedinaccordancewith the law on management ofthe portion ofState ownedcapital invested in other enterprises.

2. InthecaseofequitizedenterprisesnotinthecategoryofthoseinwhichitisnecessaryfortheState to be the controlling shareholder, then depending on the particular conditions, the agency representingtheowneroftheportionofStateownedcapitalintheshareholdingcompanyshallhave therighttomakedecisionstoon-selltheStatesharesintheshareholdingcompanyinaccordance with current law and the charter of the shareholding company.

Article 35. Managementand utilizationof proceeds fromequitization of a State owned company

TheproceedswhichtheStatecollectsfromequitizationofaStateownedcompany(comprisingproceeds from thesaleof the portion of State owned capitaland thedifference being an increaseresulting fromtheauctionofadditionallyissuedsharesinanequitizedenterprise),afterdeductingequitization expenses shall be used for the following purposes:

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(a) Toassisttheenterprisetopaysubsidiestoemployeeswhoceaseworkorlosetheirjob uponconversion of the State owned company into the shareholding company.

(b) To assist the enterprise to train employees of the equitized enterprise so as to assign them to newwork in the shareholding company.

2. The remaining sum of money shall be managed and used as follows:

(a) In the case of equitization of a member of a State owned corporation or equitization of a section of an independent State owned company, then such State owned corporation or independent State owned company shall use the proceeds for business operations and to assist equitized enterprises to continue to resolve the issue of retrenched employees in accordancewith article 36.8 of this Decree;

(b) InthecaseofequitizationofthewholeofanindependentStateownedcompanyorthewhole of a State owned corporation, the remaining sum of money shall be transferred to the Assistance Fund for Restructure of Enterprises at the Ministry of Finance for investment in companiesinwhichitisnecessaryfortheStatetoholdonehundred(100)percentofcapital but which lack capital, in shareholding companies in which the State is the controlling shareholderwheretheStatecapitalinsuchequitizedenterpriseisinsufficienttoensurethefull numberofStateshares,andtoassistequitizedenterprisestocontinuetoresolvetheissueof retrenchedemployeesinaccordancewitharticle36.8ofthisDecree.Theremainingsumof money shall be invested in enterprises via the State Capital Business and Investment Corporation.

Chapter V

POLICIES APPLICABLE TO ENTERPRISES AND TO EMPLOYEES AFTER EQUITIZATION

Article 36. Incentives applicable to enterprises after they have been equitized

1. Incentivesshallbeapplicableasinthecaseofnewly-establishedenterprisesinaccordancewiththe provisions of the law on encouragement of investment, and equitized enterprises shall not be required to carry out procedures for issuanceof a certificate of investment incentives.

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2. Exemptionfromregistrationfeesshallbegrantedwithrespecttoanytransferofassetsunderthe right of management and use of an equitized State owned enterprise to the ownership of the shareholding company.

3. Equitized enterprises shall be exempt from registration fees for the issuance of a business registration certificate upon conversionfrom a State owned enterprise into ashareholding company.

4. Equitizedenterprisesshallbeentitledtomaintainleasecontractsforresidentialhousingandother buildingsofStateagenciesorshallbeentitledtopreferentialtreatmentwithrespecttoacquisitionof such housing and buildings at the market price as at the time of equitization, in order to stabilize production and business activities.

5. EquitizedenterprisesshallbeentitledtolanduserightsinaccordancewiththeprovisionsoftheLaw on Land when the value of the enterprise undergoing equitization included the value of land use rights.

6. The regime applicable to State owned companies shall continue to apply to loans borrowed by equitizedenterprisesfromcommercialbanks,financecompaniesandothercreditinstitutionsofthe State.

7. Equitized enterprises shall be permitted to maintain and develop welfare funds in kind, such as cultural facilities, clubs, dispensaries, nursing homes and kindergartens, in order to ensure the welfareofemployeesofshareholdingcompanies. Suchassetsshallbeundertheownershipofthe labour collective and shall be managedby the shareholdingcompany.

8. IfafteraStateownedcompanyconvertsintoashareholdingcompany,someemployeesintheState owned company which has converted lose their jobs or cease work including voluntary cessation becauseoftheneedto restructure businessoperationsorthe need tochange technology,then these issues shall be resolved as follows: