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

DECREE

ON CONVERSION OF STATE OWNED COMPANIES INTO SHAREHOLDING COMPANIES

THE GOVERNMENT

Pursuant to the Law on Organization ofthe Governmentdated 25December2001;

Pursuant to the Law on Enterprises dated 12 June 1999;

Pursuant to the Law on State Owned Enterprisesdated 26 November 2003; On the proposal of the Minister of Finance;

DECREES:

Chapter I

GENERAL PROVISIONS

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

1. Toconvertthose Stateowned companiesinwhichitisnotnecessaryfortheStateto continuetohold onehundred (100)per cent of charter capital into shareholding companies with manyowners;to mobilize capital from both domesticand foreign individuals, economic organizations and social organizations for thepurpose ofincreasing financial capacity and renovating technology and management methods in order to raise theefficiency and competitiveness of theeconomy.

2. ToensureharmonybetweentheinterestsoftheState,theenterprise,theinvestorandemployeesof the enterprise.

3. To ensurepublic notification and transparency on market principles; to overcome the situationof equitizationtakingplaceinsecretwithinenterprises;andtoensurethatdevelopmentrunsparallel with development of the capital marketand the securities market.

Article 2.Applicable subjects

1. This Decree shall apply to State owned companiesnot in the category of those in which itis necessaryfortheStatetoholdonehundred(100)percentofchartercapital,whichshallundergo equitization, comprising: State corporations (including State commercial banks and State finance institutions);independentStateownedcompanies;enterpriseswhicharemembersofcorporations, whichmaintainanindependentcost accounting systemandfor whichthe State madethedecisionon investment andestablishment; and dependently accounting affiliates of State corporations (hereinafterall referred to asenterprises undergoingequitization).

ThePrimeMinisteroftheGovernmentshallmakedecisionsfromtimetotimeonthelistofState ownedcompaniesinwhichitisnecessaryfortheStatetoholdonehundred(100)percentofcharter capital.

2. EquitizationoftheStateownedcompaniesprescribedinclause1ofthisarticlemaybecarriedout whentheystillhaveStatecapital(excludingthevalueoflanduserights)afterdeductingthevalueof assets not required tobe used,assetsawaiting liquidation,losses caused by [annual] losses, reduction inthe value ofassets, baddebts and equitization expenses.

3. EquitizationofdependentlyaccountingaffiliatesofStatecorporationsprescribedinclause1ofthis articlemay 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 toincrease charter capital. The level of additional capital to be mobilized shall depend on the scale of the companyundergoingequitizationanditscapitalrequirements.Thestructureofchartercapitalina company undergoing equitizationshallbe set out in the equitizationplan.

2. SellingpartoftheexistingStateownedcapitalinanenterprise,orcombiningthesaleatdiscountof part of the existing State owned capital in the enterprise withissuing sharesin order tomobilize additional capital.

3. SellingthewholepartoftheexistingStateownedcapitalinanenterprise,orcombiningthesaleof thewholepartoftheexistingStateownedcapitalintheenterprisewithissuingsharesinorderto mobilize additional capital.

Article 4.Whomay purchasesharesand conditions forpurchasing

1. Economic organizations and socialorganizations operatingpursuant to the law of Vietnamand individualsbeingVietnameseresidinginVietnam(hereinafterallreferredtoasdomesticinvestors)shallhave the right to purchase an unlimitednumber of shares inan equitizedenterprise.

2. Enterprises with foreign owned capital and foreign individualslawfully operating in Vietnam and Vietnameseresidingoverseas(hereinafterallreferredtoasforeigninvestors)shallhavetherightto purchaseshares inan equitized enterprise inaccordancewith 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 enterprisein Vietnamesedong.

Article 6.Equitizationexpenses

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

1. Chartercapitaldividedintoanumberofequalpartsisreferredtoasshareholding.Theparvalueof each unit of shareholding shall be uniformly regulatedat ten thousand (10,000) Vietnamese dong.

2. Asharemeansacertificateissuedbyashareholdingcompanyconfirmingtheownershipofoneora numberofsharesofashareholderwhocontributescapitaltothecompany. Sharesmaybenamed orbearer sharesbut must contain all of the basic items stipulated inarticle 59 of theLawon Enterprises.

The Ministry of Finance shallprovide 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.

Thegeneral meeting of shareholders shall decide the minimum numberof shares whicheach foundingshareholdermust own,andtheminimumnumber offounding shareholders,andtheseitems shallbe provided for in thecharter of thecompany.

Article 8.Principlesforinheritanceofrightsandobligationsbyashareholdingcompanyafterconversion froma Stateowned company

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

Ashareholdingcompanyshallberesponsibletoinheritallobligationsinrespectofemployeesfrom the converted State owned company; and shallhave the right to select, arrange and employ employeesand to co-ordinate with the relevant authorities in resolving regimes for employeesin accordancewith regulations.

2. Ashareholdingcompanyshallbeentitled,onitsowninitiative,tousethewholeoftheassetsandcapital funds which have been equitized in order to organize production and business;and shall inheritallinterests,obligationsandliabilitiesoftheStateownedcompanypriortoequitization,and shallhave other rightsandobligations 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 withauthority and in accordance with regulations with existing financialissuespriortovaluingtheenterprisetobeequitizedandthroughouttheequitizationprocess.In casesofdifficultiesorincasesoutsideauthority,theenterpriseundergoingequitizationmustreporttothe competent agency for thelatter sconsiderationand resolution.

Article10.Dealingwithleasedorborrowedassets,assetsreceivedasjointventurecapitalcontribution, jointassets,assetsnotrequiredtobeusedandinvestmentsfundedbytherewardandwelfare funds

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

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 ofdebts 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 ofthe labour collective of the enterprise.

Inparticularwithrespecttoresidencesofstaffandofficials,includingresidencesfundedbytheState budget,theyshallbetransferredtothelocallandandhousingauthorityformanagementorsoldto their current users inaccordancewith current regulations.

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

Article11.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 thedecisionannouncing the valuation of theenterprise, the enterprise undergoing equitizationshallberesponsibletotransferallirrecoverabledebtswhichhavebeenexcludedfrom thevaluationoftheenterprise(togetherwithfilesonthedebtsandotherrelevantdata)toacompany specializingin thepurchaseand sale of debtsand idle stock from enterprises in order for such company to realize in accordancewith law.

3. Withrespecttoitemspaidinadvancetosuppliersofgoodsandservicessuchasrentforhousingor land,purchasepriceofgoodsandwages,theseitemsmustbereviewedandincludedinthevalueof the enterprise.

Article12.Debts payable

1. Anenterprisemustmobilizefundstopaydebtswhichmaturepriortoconductingequitization,orit mustagreewithcreditorsonthemethodofdealingwiththedebtsorontheconversionthereofinto shareholding capitalcontribution.

Theconversionofdebtsintoshareholdingcapitalcontributionshallbedeterminedontheresultsofa share auction, ortheenterpriseand a creditor shall reachagreementinorder to fix a price for participatingin an auction.

2. Ifduringtheequitizationprocesstheenterpriseisindifficultyregardingabilitytopayoverduedebts because businessincurred losses, the debts shall be dealt with inaccordance with current regulations of the State on dealing witharrears of baddebts.

Article13.Reserves,losses orprofits

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 shalluse reserves for retrenchment allowances to pay to employeeswhoareretrenchedduringtheequitizationprocess,andifnotsopaidthensuchreserves shallbe accounted for in the business results of theenterprise.

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,reductioninthevalueofassets,anddebtswhichtheenterprisedoesnothavetheabilitytocollectshallbe distributed inaccordancewith current regulationsprior to valuationof the enterprise to be equitized.

6. Theenterpriseundergoingequitizationshallusefinancialreservesandpre-taxprofitstocoverlosses calculatedup until the time of equitizationand conversion of the enterpriseinto a shareholding company.Iftheenterpriselacks[suchreserves]thenitshalltakemeasurestowriteoffitsdebtsto the State budget, bankdebtsanddebts to the Development Assistance Fund inaccordance with current regulations of theState ondealing with arrears of bad debts.

Ifafterapplyingalltheabovemeasuresanenterprisestillsuffersaloss,theenterpriseshalldeduct the loss fromthe portion ofState ownedcapital.

Article14.Long-term investment capital in other enterprises suchas joint venture capital contribution, associatedventures,shareholdingcapitalcontribution,capitalcontributiontoestablishmentof limited liability companiesand other forms of long-terminvestment

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

2. If the enterprise undergoing equitization does notinherit the long-terminvestmentsmade in other enterprises,thentheenterprisemustreport[suchinvestments]tothecompetentagencytodealwith them as follows:

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

(b) Transfer them to anotherenterprise to act aspartner/entity.

Article15.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

Article16.When any State owned company undergoesequitization, it shall apply one of the following methods of valuation of the enterprise:

1. The asset method.

2. The discounted currency method.

3. Other methods.

The Ministryof Financeshall provideguidelinesonvaluation ofan enterpriseundergoingequitizationin accordancewith the above methods.

Section 2. VALUATION OFAN ENTERPRISE IN ACCORDANCEWITH THEASSET METHOD

Article17.Value of anenterprise undergoing equitization inaccordancewith the assetmethod

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

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

InthecaseofequitizationofthewholeofacorporationforwhichtheStatemadethedecisionon investmentandestablishment, 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:

(a) Value of the assetsstipulated in clauses 1, 2 and 3 of article10 of this Decree;

(b) Debts receivable but whichthe enterprisedoesnot have the ability to collect;

(c) Expensesofunfinishedcapitalconstructionworksinabeyancepriortothetimeofvaluationof the enterprise;

(dd) Long-terminvestments in otherenterprises stipulated in clause 2(b) ofarticle14 of this Decree.

Article18.Bases for determiningactual value of anenterprise

1. Data frombooks of account of theenterprise at the time of equitization.

2. Dataontheinventory,classificationandassessmentofqualityofassetsoftheenterpriseatthetime of equitization.

3. Market valueof assets at the time of equitization.

Article19.Value of landuse rightsand 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 landuse fees), then theenterprise undergoingequitizationshallbeentitledtoselecttheformoflandleaseortheformoflandallocation pursuant to theLawon Land.

(a) Iftheenterpriseundergoingequitizationselectstheformoflandleasethenthevalueofthe landuse right shall not beincluded in the value of the enterprise undergoingequitization;

(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 thelanduse right mustbe includedin the value of the enterpriseundergoing equitization.Suchvalueoflanduserightsshallbedeterminedinaccordancewithclause1(b)ofthis article.

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

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

Article20.Determiningvalueoflong-terminvestmentcapitaloftheenterpriseundergoingequitizationin other enterprises

1. Thevalueofthelong-terminvestmentcapitalofaStateownedcompanyinotherenterprisesshallbe determinedon 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 Vietnamesedong at the average trading exchangerateontheinter-bankforeignexchangemarketasannouncedbytheStateBankat the date of valuation.

2. If the value of the long-term investment capital of a State owned companyin otherenterprisesis determinedto belowerthanthevaluein thebooksofaccount,thenthevalueinthebooksofaccount shallbe usedas the basisfor valuationof the enterprise to be equitized.

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

Section 3. VALUATION OFAN ENTERPRISE IN ACCORDANCEWITH THEDISCOUNTEDCURRENCYMETHOD

Article21.Value of anenterprise inaccordance with the discounted currencymethod

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

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

WheretheStateownedcompanymadecapitalinvestmentsinotherenterprises,thenthebasisfor valuationoftheenterprisetobeequitizedshallbetheprofitbroughtinfromsuchcapitalinvestments in other enterprises.

2. Theactualvalue of theenterprise shall comprisetheactual value of the portion of State owned capital,debtspayable1,cashbalancesinrewardandwelfarefundsandbalanceintheprofessional fundingsource (if any).

Iftheenterpriseselectstheformoflandallocationthenthevalueofthelanduserightmustalsobe includedinthevalueoftheenterpriseundergoingequitizationinaccordancewithclause1ofarticle 19 of this Decree.

Article22.Bases for determination

1. Financialstatementsoftheenterpriseforthefiveconsecutiveyearspriortothetimeofvaluationof the enterprise.

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 AVALUATION OF ANENTERPRISE

Article23.Methods of holding avaluation of an enterpriseundergoing equitization

1. If anenterprise undergoing equitization has totalasset value inits books ofaccount 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 thedecision valuing the enterprise undergoing equitization shall select a valuation organization from the list announcedby the Ministry of Finance.

IfaforeignvaluationorganizationnotyetoperatinginVietnamisselected,itmustbeapprovedby the MinistryofFinance.

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

2. Ifanenterpriseundergoing equitizationhastotalasset valueinitsbooksofaccountoflessthanthirty (30)billionVietnamesedongthenitshallnotbeabsolutelynecessarytohireavaluationorganization to value such enterprise,and in sucha case theenterprise shall be permitted to conduct its own valuationand shall notify the resultto the agency authorized to make the decisionvaluing the enterprise.

3. The file giving the valuation of the enterprise undergoingequitization must be forwarded to the MinistryofFinanceandtotheagencyauthorizedtomakethedecisionvaluingtheenterprise.The agencyauthorizedtomakethedecisionvaluingtheenterpriseshallcheckthefilepriortoissuingits decision andannouncingthe valuationof the enterprise.

Article24.Use of results of valuationof enterprise

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

Article25.Adjustment of value of anenterprise undergoing equitization

Upuntilthetimewhenanenterpriseofficiallyconvertsintoashareholdingcompany,theagencyauthorized to make the decision valuing theenterprise shallbe responsible to inspectand deal with any financial issuesarisingbetweenthetimeofthevaluationandthetimewhenthebusinessregistrationcertificateis issuedtotheshareholdingcompany,inordertoadjustthevalueoftheportionofStateownedcapitalinthe enterprise.

ThedifferencebetweentheactualvalueoftheportionofStateownedcapitalintheenterpriseatthetime when theenterprise converts into a shareholding company and theactual value of the portion of State owned capitalin the enterprise at the time of the valuation shallbe dealt withas follows:

1. Where the difference isan increase:

(a) ItshallbepaidtotheStateownedcorporationortotheindependentStateownedcompany when amember of such State owned corporation or a section of such independent State owned company is equitized, and shallbe used inaccordancewith article35 of this Decree.

(b)ItshallbepaidtotheAssistance Fundfor 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:

(a) Moneycollectedfromequitization(includinganydifferenceinsellingpricesofshares)shallbe used to cover the difference;

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

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

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

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

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

+ Agreementto sell the enterpriseon condition that the purchaserinherits debts and losses;

+ Declare bankruptcy and sellassets inorder to pay debts.

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

Chapter IV.

SALE OF SHARES, AND MANAGEMENT AND UTILIZATION OF PROCEEDS OF SALE OF PORTION OF STATE OWNED CAPITAL IN [EQUITIZED] ENTERPRISES

Section 1. INITIAL SALE OF SHARES

Article26.Whomay purchase initialshares

1. Employees of the enterprise.

2. Strategicinvestors being domesticinvestors such asproducers and regular suppliers of raw materialstotheenterprise;peoplewhoundertaketopurchasetheproductsoftheenterpriseona long-term basis;people closely connected to thelong-term strategic business interests [of the enterprise], with financialpotential andmanagement capability.

When an enterprise undergoing equitization formulates itsequitization plan, suchenterprise may select strategic investors and submit a list of them forapproval to theagency which made the decision onequitization.

3. Other investors (including foreign investors).

Article27.Initial share structure

1. Shares whichthe State shall hold.

2. Sharesforsaleatincentiveratesfortheemployeesoftheenterpriseasprovidedforinarticle37of this Decree.

3. Strategicinvestorsshallbepermittedtopurchaseamaximumoftwenty(20)percentofthenumber ofsharesforsaleatincentiverates.Thelevelofshareswhichmaybesoldtoeachstrategicinvestor shallbeimplementedinaccordancewiththeequitizationplanapprovedbytheagencywhichmade the decision on equitization.

4. Theinitialsharestobesoldatapubliclyannouncedpricetoinvestorsshallnotbelessthantwenty (20) per cent of charter capital (including shares purchasedadditionally to incentive shares by strategic investors andemployees of the enterprise).

Article28.Selling priceof initial shares

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

2. Thesellingpriceofincentivesharestostrategicinvestorsshallbeareductionoftwenty(20)percent compared to the averageauctionprice.

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

Article29.Value of incentives to strategic investors and employees of an equitizedenterprise

The total value of incentives to employees of anequitized enterpriseand to strategic investors shall be taken fromadditional funding collected from share auctions, and if there is a deficiency then it shallbe deductedfromtheportionofStateownedcapitalintheequitizedenterprisebut shallnotexceedtheportion ofStateownedcapitalintheequitizedenterpriseafterdeductingsharesheldbytheStateandequitization expenses.

Article30.Methods of holding initial shareauction

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

2. Auctionatanintermediaryfinancialorganizationinthecaseofanenterpriseundergoingequitization with a volume of shares forsaleabove one billion Vietnamese dong.