Circular No. 43 TC/TCNH on the financial management regulations for the Urban Development Investment Fund of Ho Chi Minh City

CIRCULAR

REGULATIONS ON THE MANAGEMENT OF FINANCIAL RESOURCES FOR THE HO CHI MINH CITY URBAN DEVELOPMENT INVESTMENT FUND

- Pursuant to Decision No. 644/TTg dated September 10, 1996 of the Prime Minister on the establishment of the Ho Chi Minh City Urban Development Investment Fund;

- Pursuant to Decree No. 178/CP dated October 28, 1994 of the Government on the tasks, powers, and organizational structure of the Ministry of Finance;

- Pursuant to Decision No. 1148/QDUB-KT dated March 15, 1997 of the Chairman of the People's Committee of Ho Chi Minh City approving the charter of the Ho Chi Minh City Urban Development Investment Fund;

The Ministry of Finance hereby guides the regulations on the management of financial resources for the Ho Chi Minh City Urban Development Investment Fund as follows:

I. GENERAL PROVISIONS

1. The Ho Chi Minh City Urban Development Investment Fund (hereinafter referred to as the Fund) is a state financial organization established to mobilize capital for direct and indirect investment in economic and social infrastructure projects, urban development projects in Ho Chi Minh City; provide investment advisory services and participate in capital market activities.

2. The Fund has legal personality, with a registered capital of five hundred billion Vietnamese dong at its establishment, and it enjoys rights under the law and bears responsibilities regarding assets within the limit of its registered capital managed by the Fund.

3. Financial income and expenditure, accounting, and settlement shall be carried out in accordance with the Accounting and Statistics Law and the financial regulations of the State. The fiscal year of the Fund starts from January 1 and ends on December 31 each year.

4. The operation of the Fund shall be conducted on the principle of financial autonomy, preservation and development of capital, self-financing of costs, and bearing risks independently. The Fund is subject to state financial management in accordance with the provisions of this circular.

5. The Fund is responsible for registering and declaring taxes payable according to the regulations of the State.

II. CONTENTS OF FINANCIAL MANAGEMENT

1. Sources of Operating Capital: Sources of capital for the Fund include:

- Registered Capital;

- Mobilized capital;

- Entrusted capital;

- Other sources of funding (if any).

a) Registered capital and additional sources of capital:

- The initial registered capital of the Fund is five hundred billion Vietnamese dong, formed from current revenues of Ho Chi Minh City as prescribed by law, including: proceeds from the sale of state-owned houses; land fund; surcharges on electricity, water, and telephone rental fees; part of the surplus budget of the city in 1996; and voluntary contributions from organizations and individuals both domestically and internationally (if any).

- The registered capital may be supplemented annually. The mechanism for supplementing the registered capital is stipulated in Section 2, Article 19 of the Charter of the Organization and Operation of the Fund.

b) Mobilized Capital: The Fund can mobilize and accept capital from the following sources:

- Medium and long-term loans from domestic and foreign organizations and individuals and other forms of capital mobilization permitted by law;

- Domestic loans from domestic organizations and individuals belonging to various economic sectors through lawful means such as: public issuance of project bonds, urban bonds, corporate bonds... and credit contracts;

- Foreign loans through methods: direct and indirect issuance of bonds to international financial markets; composite loans, direct loans from foreign banks and financial institutions; from government and international sources... as prescribed by the State;

- Other forms of capital mobilization from grants and aid;

- Entrusted investment management funds from domestic and foreign investors according to entrustment contracts.

The total outstanding debt of commercial loan transactions is limited to not more than one (01) time the registered capital of the Fund at the corresponding time (including reserve funds and supplementary registered capital).

2/ Use of Capital:

2.1/ Principles of Capital Use: The investment and utilization of the Fund’s capital must ensure financial autonomy, effectiveness, preservation and development of capital; meet the regular payment requirements of the Fund and comply with the following principles:

- The Fund may use up to twenty percent (20%) of its registered capital to purchase shares of other enterprises, with a maximum shareholding ratio of ten percent (10%) of the enterprise. In other cases, permission from the Chairman of the Ho Chi Minh City People's Committee must be obtained, in compliance with current laws, before the Management Board can decide to purchase shares exceeding ten percent, but such holdings must be gradually reduced over a period of three (03) to five (05) years to ensure that the maximum shareholding ratio does not exceed ten percent.

- The Fund may lend to specific projects at interest rates determined by the Ho Chi Minh City People's Committee based on the proposal of the Management Board, but these rates must not exceed the ceiling for medium and long-term lending rates announced by the State Bank at the time of lending.

2.2/ Investment of Capital:

a) The Fund is permitted to use legitimate sources of capital (including reserve funds for supplementary registered capital) and mobilized capital to invest in projects in Ho Chi Minh City:

- Economic and social infrastructure development projects;

- Key industrial projects; Agricultural projects.

- Certain public welfare infrastructure projects that are not profit-oriented.

b) Investment advisory activities and other investments as prescribed in the Fund's Charter.

3/ Settlement and Preservation of Capital:

- The Fund is responsible for fully and timely repaying principal and interest on all domestic and foreign loans, including international credits approved by the Government for the Fund to accept.

- Purchasing asset insurance, business risk insurance, and other types of insurance as prescribed by current State regulations.

- The Fund is responsible for managing and using capital for the intended purposes and objects effectively, recovering both principal and interest promptly and fully to ensure capital recovery, cost compensation, and timely and full repayment to organizations and individuals who have lent to the Fund.

- In case of risk, capital loss, or asset damage, the Fund must clearly identify the cause, extent of the loss, and develop a resolution plan. For cases where individual or collective responsibility is clearly identified, the individuals or groups causing the asset loss must compensate; the compensation amount shall be determined by the Management Board in accordance with the Law. For risks and losses due to objective reasons, they will be offset by the Financial Reserve Fund; if the risks and losses are force majeure events such as natural disasters, storms, floods, etc., after using the Financial Reserve Fund for offsetting and still not being sufficient, the Management Board of the Fund must report clearly on the causes and extent of the damage to the People's Committee of Ho Chi Minh City for consideration and resolution after consulting the Ministry of Finance.

4/ Depreciation of fixed assets, construction costs, procurement, and management of fixed assets:

- The Fund must strictly follow the current regulations on the extraction and use of depreciation of fixed assets.

- Sources of capital for new construction, repair, and procurement of fixed assets of the Fund include the following:

+ A portion of the registered capital for initial physical infrastructure construction (the level of registered capital usage for infrastructure construction shall be proposed by the Management Board to the People's Committee of Ho Chi Minh City for approval).

+ Source of basic depreciation of fixed assets

+ Other sources such as foreign and domestic organization aid funds under various sponsorship projects...

The Fund shall carry out construction activities, procurement of fixed assets within the available funds and in compliance with the Investment Management and Construction Regulations issued together with Decree No. 42/CP dated July 16, 1996 of the Government.

III. INCOME AND EXPENSES OF THE FUND

1. Income items of the Fund:

- Interest income from direct and indirect investment capital;

- Income from direct investment activities;

- Interest income from loan financing;

- Interest income from deposits at State Treasury, banks;

- Investment advisory fees;

- Management fees from entrusted investment capital according to entrusted contracts;

- Revenue from market operations;

- Recovery of reserve fund write-offs;

- Other income generated during operations outside the above items;

2. Operating expenses:

a/ Business expenses:

- Expenses related to joint ventures, partnerships, and share capital contributions (if applicable);

- Interest payments on raised bonds;

- Interest payments on medium and long-term loans;

- Payment of interest on entrusted capital according to the Entrustment Contract;

- Expenses for issuing bonds, stocks, and raising capital;

- Costs incurred in investment appraisal, lending, inspection, and debt recovery for investment projects or projects funded by the Fund;

- Expenses for participating in the capital market;

- Service and brokerage commissions as per budget estimates and economic contracts;

- Other business expenses

b/ Administrative expenses:

- Wages and various wage supplements;

- Contributions to social insurance, health insurance, and other mandatory deductions based on salary as prescribed by state regulations;

- Allowances for members of the Management Board who hold concurrent positions and other concurrent positions; hiring domestic and foreign experts (if any);

- Extracting basic depreciation of fixed assets in accordance with state regulations;

- Purchase and provision of working materials and equipment;

- Rent for office space and other fixed assets (if any);

- Repair and maintenance costs for assets;

- Travel expenses;

- Communication and advertising fees;

- Office supplies and seals;

- Training and professional development costs;

- Uniforms and occupational safety equipment costs;

- Other necessary and reasonable expenses such as electricity, water, sanitation, hospitality, conferences, transactions, etc.;

- Provision for price reduction of assets.

3. Financial Revenue and Expenditure Management:

All revenue and expenditure items of the Fund are recorded based on the aforementioned revenue and expenditure categories and valid vouchers.

a/ The Fund is responsible for collecting all revenues generated during its operation accurately, fully, and promptly to record them as income; it is not allowed to have off-the-books revenues or fail to record them as income.

b/ The Fund may allocate expenses for its operations as follows:

- Business expenses: Actual business expenses arising from the specified expenses in paragraph a of point 2 above;

- Administrative expenses:

+ The General Director of the Fund establishes economic and technical norms, indirect cost norms to submit to the Management Board for approval as a basis for managing the Fund's operations.

+ Salaries and allowances for full-time and part-time staff of the Management Board and Supervisory Board are implemented according to current regulations.

+ Salaries and allowances for the operational staff: Based on staffing norms and salary regulations set by the State, the Fund determines the total salary fund, establishes a wage and bonus system suitable for its operational characteristics to submit to the People's Committee of the City for approval. Even when facing difficulties in business operations, the Fund must ensure a minimum basic salary for its employees. The salary fund cannot be used for other purposes.

+ Fixed asset depreciation expenses: All fixed assets of the Fund must be utilized in business operations and depreciated in full as prescribed by the State.

+ For expenses that do not comply with regulations, the person who approves the non-compliant expense shall bear the responsibility to compensate; excess expenses over approved norms must clearly identify responsibility and propose a resolution plan to the Management Board for handling. The Management Board of the Fund is responsible under the law for its resolution decisions and must report in writing to the People's Committee of the City.

+ Economic activities arising shall be reflected in Vietnamese Dong; if there are transactions in foreign currency, they must be converted into Vietnamese Dong at the official exchange rate published by the State Bank of Vietnam at the time of transaction occurrence.

- The Fund shall not account for the following expenses:

+ Losses and damages from joint ventures, investment activities;

+ Losses compensated or reimbursed by the party causing the loss or insurance companies;

+ Overseas travel expenses exceeding the state-prescribed limit;

+ Expenses related to the Fund's reward and welfare programs such as bonuses, hardship allowances, support for social organizations, agencies, and localities;

+ Basic construction investment and fixed asset procurement expenses funded from investment construction capital;

+ Risks covered by the financial reserve fund;

+ Expenses from other funding sources;

+ Other expenses that do not conform to the provisions in item 2 above;

4/ Distribution of surplus income of the Fund:

The surplus income of the Fund is determined by the difference between revenue and legitimate, reasonable expenses for these activities. Specifically:

(Surplus Income) = (Income) - (Legitimate, Valid Expenses)

The surplus income of the Fund is distributed in the following sequence:

1. Fulfill tax obligations as stipulated by the State: The Fund enjoys tax exemption and reduction policies (capital tax, turnover tax, profit tax) as provided by the Law.

2. Deduct fines for violations of budget collection discipline, administrative penalties, breach of contract penalties, overdue debt penalties, and legitimate expenses not deducted before determining the profit tax payable.

3. Deduct losses not deducted from pre-tax profit;

4. Distribute profits to capital contributors according to the joint venture agreement (if applicable);

5. After deducting items 1 to 4 above, the remaining profit shall be allocated to the following reserves:

a) Additional Capital Reserve Fund: The amount to be set aside is 15% until it equals the registered capital.

b) Financial Reserve Fund: The amount to be set aside is 10%, and this will continue until it reaches 25% of the registered capital.

c) Business Development Fund: The minimum amount to be set aside is 50%.

d) Unemployment Assistance Reserve Fund: The maximum amount to be set aside is 5%, but not exceeding six months' salary.

e) After setting aside the aforementioned funds, the bonus fund and welfare fund shall be established according to the regulations:

- The maximum amount to be set aside does not exceed three months' salary if the profit rate for the current year is not lower than that of the previous year.

- The maximum amount to be set aside does not exceed two months' salary if the profit rate for the current year is lower than that of the previous year.

f) The remaining portion shall be continued to be added to the Business Development Fund.

The contents of using the above funds shall be implemented according to the provisions of Decree No. 59/CP dated October 3, 1996 of the Government.

5/ Accounting, statistics, and auditing systems of the Fund:

1. The Fund must establish accounting books, record vouchers, and conduct financial accounting and reporting in accordance with the Accounting and Statistics Ordinance and regulations of the Ministry of Finance.

2. The Fund implements the auditing system as currently prescribed and conducts internal audits of its financial reports or hires independent auditors if deemed necessary. The Management Board and General Director of the Fund are responsible for the accuracy and truthfulness of these reports.

3. Annually disclose and publicly announce the results of operations, assets, capital, and debts of the Fund in accordance with the guidelines of the Ministry of Finance and bear legal responsibility for the accuracy and truthfulness of the disclosed content.

4. The Management Board of the Fund is responsible for approving the annual financial settlement of the Fund and bears responsibility for this approval. The Fund is responsible for submitting the annual tax settlement report to the Tax Authority in accordance with the law and tax authority guidelines. Regularly report to the People's Committee of the City, the city's Tax Authority, and the Ministry of Finance the following documents:

- Quarterly, no later than 15 days after the end of each quarter:

+ Report on sources and use of capital;

+ Income and Expense Report.

- Annually, within 30 days after the end of the fiscal year:

+ Summary Balance Sheet.

+ Income and expense settlement report;

+ Report on the balance and use of capital.

- Decision approving the financial settlement.

The Fund shall be subject to inspection, examination, and supervision by financial authorities in accordance with the provisions of the Law. The Ministry of Finance shall organize inspections on the implementation of financial reporting systems of the Fund when necessary.

6. Financial Planning

At the time of preparing the annual budget plan, the Fund must prepare and report to the People's Committee of the city for simultaneous submission to the Ministry of Finance the plan for mobilizing and utilizing capital, and the financial income and expenditure plan.

The Fund is responsible for developing annual and long-term financial plans to be submitted to the People's Committee of the city for approval and forwarded to the Ministry of Finance, including:

- Capital source plan and capital utilization plan.

- Financial income and expenditure plan.

- Plan for distributing income and expenditure differences.

IV. IMPLEMENTATION PROVISIONS

1. The Fund is accountable under the law for the effective use, preservation, and development of state assets and funds, as well as other organizations' and individuals' raised capital throughout its operations in accordance with the investment and development objectives of economic and social infrastructure in Ho Chi Minh City.

2. This Circular shall take effect fifteen days from the date of signature; During the implementation process, if there are difficulties, they should be reported to the Ministry of Finance for timely review and amendment./.