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PHU LY CITY PEOPLE'S COMMITTEEMEDIUM CITIES DEVELOPMENT PROJECTPART B: SUPPORT TO PHU LY CITYCredit Agreement No. 5031-VN

TABLE OF CONTENTS

CONTENTS PAGE(S)

PART I FINANCIAL STATEMENTS

Statement of the Project Management Unit 2

Independent Auditor's Report 3-4

Statement of Sources and Uses of Funds 5

Statement of Project Implementing Expenditures 6

Balance Sheet 7

Statement of Designated Account 8

Statement of Withdrawals 9

Notes to the Financial Statements 10 - 13

PART II REPORT OF INDEPENDENT AUDITOR ON INTERNAL CONTROL 14

PART III INDEPENDENT ASSURANCE REPORT ON COMPLIANCE 15

PART IV MANAGEMENT LETTER 16-18

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PHU LY CITY PEOPLE'S COMMITTEEMEDIUM CITIES DEVELOPMENT PROJECTPART B: SUPPORT TO PHU LY CITYCredit Agreement No. 5031-VN

STATEMENT OF THE PROJECT MANAGEMENT UNIT

The Project Management Unit of the Medium Cities Development Project - Part B: Support to Phu LyCity (the "Project Management Unit") presents this report together with the financial statements of theMedium Cities Development Project - Part B: Support to Phu Ly City (the "Project") for the year ended31 December 2017.

The Proiect Management Unit

The members of the Project Management Unit who managed the Project during the year and to thedate of this report are as follows:

Mr. Nguyen Van Hoc Project Director

Mr. Trinh Huy Cuong Deputy Project Director

Ms. Pham Thi Quynh Chi Deputy Project Director

Mr. Nguyen Hong Thanh Deputy Project Director

Mr. Do Viet Hung Chief Accountant

The Proiect Management Unit's Statement of Responsibillit

The Project Management Unit is responsible for preparing the financial statements including theBalance Sheet as at 31 December 2017, Statement of Sources and Uses of Funds, Statement ofProject Implementing Expenditures, Statement of Designated Account, Statement of Withdrawals forthe year then ended and Notes to the Financial Statements, which give a true and fair view of thefinancial position as at 31 December 2017 as well as of the receipts, disbursements and expendituresof the Project for the year then ended, in accordance with the accounting convention and theaccounting policies set out in Note 2 and Note 3 of the Notes to the financial statements and thecovenants contained in Credit Agreement No. 5031-VN. In preparing these financial statements, theProject Management Unit is required to:

0 Select suitable accounting policies and then apply them consistently;0 Make judgments and estimates that are reasonable and prudent;0 State whether applicable accounting principles have been followed, subject to any material

departures disclosed and explained in the financial statements; anda Design and maintain 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 reportingfor the purpose of properly preparing and presenting the financial statements so as to minimiseerrors and frauds; and take responsibility for its assertions as to the effectiveness of such internalcontrol.

The Project Management Unit is responsible for ensuring that proper accounting records are kept,which disclose, with reasonable accuracy at any time, the financial position of the Project and that thefinancial statements comply with the accounting convention and the accounting policies set out inNote 2 and Note 3 of the Notes to the financial statements and the covenants contained in CreditAgreement No. 5031-VN. The Project Management Unit is responsible for using the Project's funds asintended for the Project and for complying with Credit Agreement No. 5031-VN as well as laws andregulations applicable to the Project. The Project Management Unit is also responsible forsafeguarding the assets of the Project and hence for taking reasonable steps for the prevention anddetection of frauds and other irregularities.

The Project Management Unit confirms that they have complied with the above requirements inpreparing these financial statements.

For and on behalf of the Project Management Unit,

Nguyen VanProject Director

Phu Ly City, 06 lune 2018

Deloitte Vietnam Company Ltd.15thFloor, Vinaconex Tower,34 Lang Ha Street, Lang Ha Ward,Dong Da District, Hanoi, VietnamTel :+84 24 6288 3568Fax:+84 24 6288 5678

No.: 023 /VN1A-HN-BC Website: www.deloitte.com/vn

INDEPENDENT AUDITOR'S REPORT

TO: The Project Management Unit of the Medium Cities Development Project - Part B:Suport to Phu Ly City

Opinion

We have audited the financial statements of the Medium Cities Development Project - Part B: Supportto Phu Ly City (the "Project"), which comprise the Balance Sheet as at 31 December 2017, Statementof Sources and Uses of Funds, Statement of Project Implementing Expenditure, Statement ofDesignated Account, Statement of Withdrawals for the year then ended, and Notes to the financialstatements, including a summary of significant accounting policies.

In our opinion:

* The financial statements give a true and fair view of the financial position of the Project as at 31December 2017, and of its receipts, disbursements and expenditures for the year then ended inaccordance with the accounting convention and the accounting policies set out in Notes 2 and 3 ofthe Notes to the financial statements.

* The Statement of Designated Account gives a true and fair view of the balances of the DesignatedAccount as at 31 December 2017 and the Project's receipts and disbursements via the DesignatedAccount for the year then ended in accordance with the relevant covenants of Credit AgreementNo. 5031-VN and prevailing relevant regulations established by the World Bank.

* The withdrawal applications were reconciled to the Statements of Expenditures (SOEs) preparedby the Project Management Unit for the year and those SOEs were adequately supported.

Basis for Opinion

We conducted our audit in accordance with International Standards on Auditing (ISAs). Ourresponsibilities under those standards are further described in the Auditors' Responsibilities for theAudit of the Financial Statements section of our report. We are independent of the Project inaccordance with the ethical requirements that are relevant to our audit of the financial statements, Iand we have fulfilled our other ethical responsibilities in accordance with these requirements. We Abelieve that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour opinion.

Basis of Accounting

We draw attention to Note 2 and Note 3 of the Notes to the financial statements, which describe theaccounting convention and the summary of the significant accounting policies. The financialstatements are prepared in accordance with the accounting convention and the accounting policies setout in Note 2 and Note 3 of the Notes to the financial statements and the requirements of the WorldBank.

Responsibilities of Management and those charged with governance for the FinancialStatements

Management is responsible for the preparation of the financial statements in accordance with theaccounting convention and the accounting policies set out in Note 2 and Note 3 of the Notes to thefinancial statements, and for such internal control as management determines is necessary to enablethe preparation of financial statements that are free from material misstatement, whether due tofraud or error.

In preparing the financial statements, management is responsible for assessing the Project's ability tocontinue as a going concern, disclosing, as applicable, matters relating to going concern and using thegoing concern basis of accounting unless management either intends to liquidate the Project or tocease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Project's financial reportingprocess.

Deloitte refers to one or more of Deloitte Touche Tohmatsu Ltd., a UK private company limited by guarantee("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legallyseparate and independent entities. DTTL (also referred to as "Deloitte Global") does not provide services to clients.Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.

3

W

* Deloitte

INDEPENDENT AUDITORS' REPORT (Continued)

Auditors' Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a wholeare free from material misstatement, whether due to fraud or error, and to issue an auditor's reportthat includes our opinion. Reasonable assurance is a high level of assurance, but is not a guaranteethat an audit conducted in accordance with International Standards on Auditing (ISAs) will alwaysdetect a material misstatement when it exists. Misstatements can arise from fraud or error and areconsidered material if, individually or in the aggregate, they could reasonably be expected toinfluence 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 maintainprofessional skepticism throughout the audit. We also:

* Identify and assess the risks of material misstatement of the financial statements, whether dueto fraud or error, design and perform audit procedures responsive to those risks, and obtainaudit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of notdetecting a material misstatement resulting from fraud is higher than for one resulting fromerror, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or theoverride of internal control.

* Obtain an understanding of internal control relevant to the audit in order to design auditprocedures that are appropriate in the circumstances.

* Conclude on the appropriateness of management's use of the going concern basis of accountingand, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on the Project's ability to continue as a goingconcern. If we conclude that a material uncertainty exists, we are required to draw attention inour auditor's report to the related disclosures in the financial statements or, if such disclosuresare inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtainedup to the date of our auditor's report. However, future events or conditions may cause theProject to cease to continue as a going concern.

* Evaluate the appropriateness of accounting policies used and the reasonableness of accountingestimates, if any, and related disclosures made by management.

We communicate with the those charged with governance and the Project Management Unitregarding, among other matters, the planned scope and timing of the audit and significant auditfinigs, including any significant deficiencies in internal control that we identify during our audit.

34

Khuc Thi Lan Anh Nguyen Luong TamDeputy General Director AuditorAudit Practising Registration Certificate Audit Practising Registration CertificateNo. 0036-2018-001-1 No. 2303-2018-001-1

DELOITTE VIETNAM COMPANY LIMITED

06 June 2018Hanoi, S.R. Vietnam

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PHU LY CITY PEOPLE'S COMMITTEEMEDIUM CITIES DEVELOPMENT PROJECTPART B: SUPPORT TO PHU LY CITY FINANCIAL STATEMENTSCredit Agreement No. 5031-VN For the year ended 31 Decennember 2017

STATEMENT OF PROJECT IMPLEMENTING EXPENDITURES

For the year ended 31 Decemember 2017

Unit: VND

No. Contents Year 2017 Accumulated to31/12/2017

1 Urban Basic Infrastructure Upgrading and Service (739,121,000) 67,960,018,000Improvement

2 Urban Environment Sanitation 97,158,562,000 255,023,634,000

3 Urban Roads and Bridges 111,153,471,031 670,320,166,194

4 Project Management Support and Technical Assistance 15,966,819,559 57,612,862,756

5 Land acquisition, Resettlement and other consultation 4,015,318,046 191,797,285,612expenses

6 Project Management expenses 2,346,092,100 11,982,427,170

7 Others (Bank charges) 8,590,772 82,752,654

Total 229,909,732,508 1,254,779,146,3861

-Xguy-en-Vairi Hpc, Do Viet HungProject Director Chief Accountant

Phu Ly City, 06 -7une 2018

The accompanying notes are an integral part of these financial statements

6

PHU LY CITY PEOPLE'S COMMITTEEMEDIUM CITIES DEVELOPMENT PROJECTPART B: SUPPORT TO PHU LY CITY FINANCIAL STATEMENTSCredit Agreement No. 5031-VN For the year ended 31 Decemember 2017

BALANCE SHEET

As at 31 December 2017

31/12/2017 31/12/2016

ASSETS Notes VND VND

A. CURRENT ASSETS 97,104,697,636 64,321,574,768

I. Cash 5 93,098,800,436 44,739,916,780Cash on handCash in bank 93,098,800,436 44,739,916,780

II. Receivables 4,005,897,200 19,581,657,988Advances to suppliers 6 4,005,897,200 19,581,657,988

B. FIXED ASSETS AND PROJECT 1,255,477,971,136 1,025,807,111,628IMPLEMENTING EXPENDITURES

I. Fixed assets 698,824,750 937,697,750Tangible fixed assets 693,574,750 923,447,750- Cost 1,546,343,000 1,546,343,000- Accumulated depreciation (852,768,250) (622,895,250)Intangible assets 5,250,000 14,250,000- Cost 45,000,000 45,000,000- Accumulated amortisation (39,750,000) (30,750,000)

II. Project implementing expenditures 1,254,779,146,386 1,024,869,413,878Project implementing expenditures 1,254,779,146,386 1,024,869,413,878

TOTAL ASSETS 1,352,582,668,772 1,090,128,686,396

RESOURCES

A. CURRENT LIABILITIES 77,986,324,935 72,222,597,339

Payables to suppliers 7 77,986,080,793 72,214,870,255Other payables 244,142 7,727,084

B. RESOURCES 1,274,596,343,837 1,017,906,089,057Exchange rate difference 9,976,505,085 7,331,152,747Counterpart funds 206,479,719,070 199,606,479,970IDA funds 8 1,057,358,542,278 809,956,596,708Other funds 82,752,654 74,161,882Fund for fixed assets acquisition 698,824,750 937,697,750

TOTAL RESOURCES 1,352,582,668,772 1,090,128,686,396

OFF BALANCE SHEET ITEMS 31/12/2017 31/12/2016USD USD

Designated Account 4,056,325.00 2,017,209.12Interest on Designated Account 6.95 386.33

Nguyen Va Hoc Do Viet HungProject Direct-or Chief Accountant

Phu Ly City, 06 June 2018


7


STATEMENT OF DESIGNATED ACCOUNT

For the period: From 01/01/2017 to 31/12/2017

Account Number: 17702-0000003361

Depositary Bank: Vietnam Joint Stock Commercial Bank for Industry and Trade - Ha Nam Branch

Address: No. 211, Le Hoan Street, Quang Trung District, Phu Ly City, Ha Nam Province

Credit Agreement: No. 5031-VN

Currency: USD

AmountPART A: ACCOUNT ACTIVITIES

Opening balance (01/01/2017) 2,017,209.12

Add: 11,030,490.00

Total amount advanced by the World Bank to the Designated Account in the year 11,030,490.00

Total amount refunded to Designated Account from Interest Account

Total interest earned for the year

Deduct: 8,991,374.12

Total amount withdrawn 8,991,374.12

Total bank charges incurred for the year

Interest transferred to Interest Account

Closing balance (31/12/2017) 4,056,325.00

PART B: ACCOUNT RECONCILIATION

1 Opening balance of advances by the World Bank 3,596,175.702 Add: Total amount advanced by the World Bank to the Designated Account 11,030,490.00

in the year

3 Deduct: Total amount applied for advance clearance and approved by 9,226,700.73the World Bank

4 Total advance to the Designated Account as at 31/12/2017 5,399,964.97

5 Closing balance of the Designated Account as at 31/12/2017 4,056,325.00

6 Add: Amount claimed and not yet replenished

7 Add: Amount withdrawn but not yet claimed 1,343,639.97

8 Deduct: Bank interest earned

9 Add: Bank charges

10 Total advance to the Designated Account as at 31/12/2017 5,399,964.97

Nguyen Van Hoc Do Viet HungProject Director /- Chief Accountant



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NOTES TO THE FINANCIAL STATEMENTS(These notes are an integral part of and should be read in conjunction with the accompanying financialstatements)

1. GENERAL INFORMATION

The Medium Cities Development Project operates under Credit Agreement No. 5031-VN dated12 January 2012 signed between the Socialist Republic of Vietnam and the InternationalDevelopment Association ("IDA").

The objective of the Medium Cities Development Project is to increase access to improve urbaninfrastructure service in Lao Cai City, Phu Ly City and Vinh City in a sustainable and efficientmanner.

The Medium Cities Development Project includes 03 Parts: (i) Part A: Support to Lao Cai City;(ii) Part B: Support to Phu Ly City; and (iii) Part C: Support to Vinh City.

The Medium Cities Development Project - Part B: Support to Phu Ly City (the "Project")includes the following components:

9 Urban Basic Infrastructure Upgrading and Service Improvemen : Improvement of urbaninfrastructure and service conditions in existing or newly developed urban areas includingconstruction and rehabilitation of basic infrastructure systems such as water supply andsanitation, drainage, power supply, lighting, roads, schools.

0 Urban Environmental Sanitation: Construction and rehabilitation of primary and secondaryinfrastructure for drainage, wastewater collection and treatment, and flood mitigation,including construction and rehabilitation of selected small lakes. 4

0 Urban Roads and Bridges: Construction of roads and bridges.

0 Project Management Support and Technical Assistance: Provision of support for (a) project :Hmanagement and supervision; (b) Independent social, environment and financial accountmonitoring; (c) urban planning, asset management, safeguards, and internal audit capacitybuilding; (d) equipment and facilities including the acquisition of one car; (e) training andcapacity building; and (f) management and administration.

The total fund of the Project is USD 68.7 million, including:

IDA funds USD 57.5 millionCounterpart funds USD 11.2 million

The Project has been implemented since 12 January 2012 (the date of the Credit Agreement)and is expected to be completed on 31 December 2018.

2. ACCOUNTING CONVENTION AND FINANCIAL YEAR

Accounting convention

The accompanying financial statements, expressed in Vietnam Dong (VND), are preparedunder the historical cost convention, except for the Statement of Designated Account andStatement of Withdrawals which are expressed in original currencies. These financialstatements are prepared in accordance with the accounting policies set out in Note 3 of theNotes to the financial statements and the requirement of the World Bank.

The accompanying financial statements exclude figures in the Project preparation period.

Financial year

The Project's financial year begins on 01 January and ends on 31 December.

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PHU LY CITY PEOPLE'S COMMITTEE MEDIUM CITIES DEVELOPMENT PROJECTPART B: SUPPORT TO PHU LY CITY

NOTES TO THE FINANCIAL STATEMENTS (Continued)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies, which have been adopted by the Project Management Unitin the preparation of these financial statements, are as follows:

Foreign currency translation

Transactions arising in foreign currencies are translated into Vietnam Dong (VND) atexchange rates ruling on the transaction date. The balances of monetary items denominatedin foreign currencies at the Balance Sheet date are retranslated at the exchange rates on thesame date.

Foreign exchange differences are not cash flows. However, the effect of changes in foreignexchange rates is reported separately in the Statement of Sources and Uses of Funds in orderto reconcile with balances of assets and liabilities in the Balance Sheet.

Recognition of funds and expenditures

Funds and expenditures are recognized when incurred, except for compensation expendituresfor households which are recognized based on actual payment to beneficiaries and underState Treasury verification.

Fixed assets and depreciation/amortisation

Fixed assets are stated at cost less accumulated depreciation/amortisation. Depreciation andamortisation are calculated once a year using the straight-line method, at the rates inaccordance with Circular No. 162/2014/TT-BTC dated 06 November 2014 of the Minister ofFinance.

The entire cost of fixed assets is charged once to the Project implementing expenditures whenincurred. Depreciation and amortisation are debited to fund for fixed assets acquisition.

4. DESIGNATED ACCOUNT

Designated Account is a deposit account in United States Dollar opened at Vietnam JointStock Commercial Bank for Industry and Trade - Ha Nam Branch for the implementation of

W the Project activities. Payments out of the Designated Account are for expenditures inaccordance with the relevant covenants of Credit Agreement No. 5031-VN and relevantregulations set by the World Bank.

5. CASH

31/12/2017 31/12/2016VND VND

Cash on hand

Cash in bank, treasury 93,098,800,436 44,739,916,780

Account in VND - Counterpart funds 2,135,468,788 31,932,000

Account in VND - BIDV 87,669 87,300

Designated Account - USD 90,963,088,125 44,699,336,734

Interest on Designated Account - USD 155,854 8,560,746

93,098,800,436 44,739,916,780

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PHU LY CITY PEOPLE'S COMMITTEE MEDIUM CITIES DEVELOPMENT PROJECTPART B: SUPPORT TO PHU LY CITY


6. ADVANCES TO SUPPLIER

31/12/2017 31/12/2016VND VND

Joint venture between Phuc Thanh Phat ConstructionTrading Company Limited and SEEN Technologies 2,939,808,000 15,806,919,000Corporation

Joint venture between Getinsa (Spain) Company andGrontmij (Denmark) Company - 888,389,654

Land Development Center of Phu Ly City, Ha Nam Province 551,091,500 434,777,900Others 514,997,700 2,451,571,434

4,005,897,200 19,581,657,988

7. PAYABLES TO SUPPLIERS

31/12/2017 31/12/2016VND VND

Joint venture between Civil Engineering ConstructionCorporation No. 4 and Hai Son Investment Development 11,002,518,785 33,057,445,254Joint Stock Corporation

Joint venture between Construction and Investment JointStock Company No. 492 and Hai Son Investment 35,148,283,000 24,830,232,000Development Joint Stock Corporation - No. 86 Corporation

Urban Development Investment Corporation - Joint StockCompany - 5,361,990,000

Hai Son Investment Development Joint Stock Corporation - 15,799,189,000 4,531,264,000No. 86 Corporation

Joint venture between Phuc Thanh Phat ConstructionTrading Company Limited and SEEN Technologies 10,871,639,000 -Corporation

Others 5,164,451,008 4,433,939,001

77,986,080,793 72,214,870,255

8. IDA FUNDS

Year 2017 Accumulated to 31/12/2017

Currency Original currency VND equivalent Original currency VND equivalent

Designated account USD 11,030,490.00 247,401,945,570 39,943,043.39 869,042,953,410

Direct payments VND - 188,315,588,868 188,315,588,868

247,401,945,570 1,057,358,542,278

12

UPHU LY CITY PEOPLE'S COMMITTEE MEDIUM CITIES DEVELOPMENT PROJECTPART B: SUPPORT TO PHU LY CITY


9. COMMITMENTS

As at 31 December 2017, the outstanding balance of the contracts signed with suppliers wasabout VND 162 billion.

10. COMPARATIVE FIGURES

Comparative figures are the figures of the Project's audited financial statements for the yearended 31 December 2016.

Nguyen Van Hoc Do Viet HungProject Director Chief Accountant


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PART II

REPORT OF INDEPENDENT AUDITORS ON INTERNAL CONTROL

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WDeloitte Vietnam Company Ltd.15thFloor, Vinaconex Tower,D elo itte 34 Lang Ha Street, Lang Ha Ward,Dong Da District, Hanoi, VietnamTel :+84 24 6288 3568Fax:+84 24 6288 5678

REPORT OF INDEPENDENT AUDITORS Website: www.deloitte.com/vn

ON INTERNAL CONTROL

To: The Project Management Unit of the Medium Cities Development ProjectPart B - Support to Phu Ly City

We have audited, in accordance with International Standards on Auditing, the financial statements ofthe Medium Cities Development Project - Part B: Support to Phu Ly City (the "Project") for the yearended 31 December 2017 and issued the independent auditors' report thereon dated 06 3une 2018expressing an unmodified opinion on those financial statements.

In connection with our audit of the Project's financial statements, we also examined the effectivenessof internal control over compliance with requirements that could have a direct and material financialeffect on the financial statements as well as of internal control over financial reporting.

As stated in the Statement of the Project Management Unit on page 2, the Project Management Unit isresponsible for designing and maintaining effective internal control over compliance with requirementsthat could have a direct and material financial effect on the financial statements as well as overfinancial reporting for the purpose of properly preparing and presenting the financial statements so asto minimise errors and frauds; and takes responsibility for its assertions as to the effectiveness ofsuch internal control. Our responsibility is to express an opinion on the effectiveness of internalcontrol over compliance with requirements that could have a direct and material financial effect onthe financial statements as well as internal control over financial reporting based on our examination.

Our examination was conducted in accordance with International Standard on AssuranceEngagements (ISAE) 3000. The Standard requires that we comply with ethical requirements and planand perform our procedures to obtain reasonable assurance about whether, in all material respects,the Project has maintained effective internal control over compliance with requirements that couldhave a direct and material financial effect on the financial statements as well as over financialreporting.

Our examination included obtaining an understanding of internal control over compliance withrequirements that could have a direct and material financial effect on the financial statements as wellas of internal control over financial reporting, testing, and evaluating the design and operatingeffectiveness of the internal control, and performing such other procedures as we considerednecessary 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 ofcollusion or improper management override of controls, material misstatements due to error or fraudmay occur and not to be detected. Also, projections of any evaluation of the effectiveness of theinternal control over financial reporting to future periods are subject to the risk that controls maybecome inadequate because of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.

In our opinion, the Project Management Unit has maintained, in all material respects, effective internalcontrol over compliance with requirements that could have a direct and material financial effect onthe Project's financial statements as well as over financial reporting for the year ended 31 December2017.

Khuc Thi Lan Anh Nguyen Luong TamDeputy-General Director AuditorAudit Practising Registration Certificate Audit Practising Registration CertificateNo. 0036-2018-001-1 No. 2303-2018-001-1


06 June 2018Hanoi, S.R. Vietnam

Deloitte refers to one or more of Deloitte Touche Tohmatsu Ltd., a UK private company limited by guarantee("DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legallyseparate and independent entities. DTTL (also referred to as "Deloitte Global") does not provide services to clients.Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.

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.INDEPENDENT ASSURANCE REPORT ON CO�PLIANCE

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Deloitte Vietnam Company Ltd.15thFloor, Vinaconex Tower,D e lo itte 34 Lang Ha Street, Lang Ha Ward,Deng Da District, Hanoi, Vietnam

Tel :+84 24 6288 3568Fax:+84 24 6288 5678Website: www.deloitte.com/vn

INDEPENDENT ASSURANCE REPORT ON COMPLIANCE

To: The Project Management Unit of the Medium Cities Development Project

Part B - Support to Phu Ly City

We have audited, in accordance with International Standards on Auditing, the financial statements of

the Medium Cities Development Project - Part B: Support to Phu Ly City (the "Project") for the year

ended 31 December 2017 and issued the independent auditors' report thereon dated 06 June 2018expressing an unmodified opinion on those financial statements.

In connection with the audit of the financial statements, we also performed procedures on the

Project's compliance with Credit Agreement No. 5031-VN, laws and regulations that could have adirect and material financial effect on the Project's financial statements for the year ended 31December 2017 (the "requirements").

The Project Management Unit is responsible for complying with Credit Agreement No. 5031-VN, lawsand regulations applicable to Project. Our responsibility is to express an opinion on the Project's

compliance with the requirements based on our procedures. We limited our tests of compliance to therequirements, and we did not test compliance with all laws and regulations applicable to the Project.

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 ourprocedures to obtain reasonable assurance about whether, in all material respects, the Project hascomplied with the requirements.

An assurance engagement to report on the compliance with the requirements at the Project involvesperforming procedures to obtain evidence about whether the Project's activities are free of materialnoncompliance with the requirements, including obtaining an understanding of the internal controlrelevant to the Project's compliance with the requirements. The procedures selected depend on theauditors' judgment, including the assessment of risks that the Project does not comply with therequirements and whether such noncompliance could have a direct and material financial effect on theProject's financial statements. Our procedures included testing the compliance with the requirementsthat we consider necessary to provide reasonable assurance that the requirements are complied bythe Project.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for,ouropinion.

In our opinion, the Project has complied, in all material respects, with Credit Agreement No. 5031-VN,laws and regulations that could have a direct and material financial effect on the Project's financialstatements for the year ended 31 December 2017.

Khuc Thi Lan Anh Nguyen Luong TamDeputy General Director Auditor

Audit Practising Registration Certificate Audit Practising Registration CertificateNo. 0036-2018-001-1 No. 2303-2018-001-1


06 June 2018

Hanoi, S.R. Vietnam

Deloitte refers to one or more of Deloitte Touche Tohmatsu Ltd., a UK private company limited by guarantee('DTTL"), its network of member firms, and their related entities. DTTL and each of its member firms are legallyseparate and independent entities. DTTL (also referred to as "Deloitte Global") does not provide services to clients.Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.

15

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