ITA Group requests HSC to correct distorted information on ITA shares

To:

Mr. Fiachra MacCana,
Managing Director;
President and the Members of the Board of Directors
of Ho Chi Minh City Securities Corporation;

I am NGUYỄN THỊ SƯƠNG, Deputy Managing Director and Chief Accountant of Tan Tao Investment and Industry Corporation (ITACO).

As far as I am concerned, on the website of Ho Chi Minh City Securities Corporation (HSC), there is a disturbing analysis prepared by Mr. Phạm Cao Đức about ITA stocks. Even worse, this analysis has been widely sent to a lot of funds and investors, both domestic and foreign. In this notice, I would like to make clear several important points taken from the analysis:

1. It is complete falsity that Mr. Đức has had a telephone conversation with me, as mentioned in his analysis. I herein declare that I have never had any conversational exchanges to Mr. Đức about ITACO’s financial reports or business activities. It is his including my name in his writing, which led the readers to a wrong conclusion that I myself had provided the misleading figures quoted in his analysis, that has exerted a detrimental impact upon ITACO’s and my own reputation. Consequentially, a great deal of harm has been done to the investors and shareholders of ITACO. It is obviously a SERIOUSLY ILLEGAL ACT OF SLANDERING IN THE CONTEXT OF SUCH A HIGHLY SENSITIVE STOCK MARKET AS THAT OF VIETNAM.

2. Furthermore, in the analysis, the writer does not give a fact-based account of Tan Tao Corporation’s business activities.

2.1. Be a representative of HSC as he may, the writer seemingly does not have enough analytical ability, or deliberately distorts the truth, when he comments that our Corporation’s revenue and profits in the year 2008 have suffered a staple downfall. In fact, following the methods of recording sale by Vietnam’s standards applied in 2007 and the previous years, ITACO has recorded its sale on a basis of cash received from customers. The total amount of money obtained through the lease of land plots and facilities which ITACO allows its customers to pay by installments in five or ten years is not shown on our financial records. During the 2005-2007 period, ITACO was audited by Auditing and Consulting Co. Ltd (A&C) in accordance with the Vietnam Auditing Standards (VAS), and by Ernst & Young (E&Y) in accordance with the international auditing standards. Thus, there were two separate auditing reports.

2.2. In 2008, E&Y audited ITACO in accordance with both the VAS and the International Financial Reporting Standards (IFRS). By the VAS, ITACO just recognized revenue on a cash basis. However, by the IFRS we made a change in the recognition of our revenue as the lump-sum at the time of land plots and facilities transferred to our customers, and customers’ late payments were then recorded in the receivables. It was due to this difference that E&Y recommended we ask the Ministry of Finance to allow us to alter our methods of recording sales in 2008.

2.3. These adjustments of recording sale led to the retrospective adjustments of the years from 2007 backwards, and decreased the 2008 revenue with respect to the signed contracts and transfer of plots of land and of facilities to customers in the years prior to 2008. Nevertheless, the undistributed net profit after tax of the Corporation was rising very quickly. As stated in the review report by E&Y, ITACO’s total undistributed earnings as at 30 June 2008 were 774 billion VND, much higher than the mark of 600 billion VND in the 2008 plan.

2.4. It is also because of the retrospective adjustments in recording sale as explained above that the receivables shown in the report were twice as high as in 2007.

2.5. All these figures are of much greater worth and give a true view of the assets possessed by ITACO.

3. The second grave mistake made by the writer of the analysis is to make the EPS calculations based on the Corporation’s revenue in 2008. In order to get more accurate results, ITA’s EPS must be calculated from the undistributed profits compared with 2007. ITACO’s EPS is 4,954 VND.

4. Also in the report, the writer regards the investments in other entities in our Corporation as part of financial investments, and thus says that ITACO has made too immense financial investments. Such a comment clearly proves a lack of analytical caliber and a distortion of the truth. The purpose of the investments in the Corporation’s affiliates or joint venture companies is mainly to expand the business territory of the Corporation itself. For example, the gathered capital has helped to develop 273 hectares of Tân Đức Industrial Park in the second stage and will assist the development of 712 hectares of Agrita Industrial Zone, the building of the Tân Đức 346-hectare E-city, as well as the E-city Saigon Mekong covering the surface of 2,768 hectares.

5. The deliberate distortion of the truth exercised by the writer is further affirmed when he, just looking at the remaining amount of cash, has a conclusion that ITACO does not have enough cash flow. In the current rising interest-rate environment, the Corporation, in its own good judgment, has made a sound decision: dividing the unused money into smaller sums to enter into the short-term savings deposit for two weeks, one month, or three months, depending on the capital spending plans. It is to minimize the losses resulting from the risks, if any, of any banks being affected, in which case the Corporation’s business operations should not be jeopardized. At the same time, it is to obtain the rates on the portion of idle cash, which has not yet been spent for its own purposes. All of these figures are clearly written in the short deposit terms.

Mr. Phạm Cao Đức’s article, posted on HSC’s official website and widely disseminated, has caused uncertainty among investors, resulting in a decrease in the value of the ITA stocks in the stock exchange. There has never been such an incident since the day ITA went public.

We now formally request that

• HSC submit the corrective measures to us by October 22, 2008.
• HSC immediately send formal apologies to me and to the Corporation in the public media, and to all of the investors to whom you have sent Mr. Đức’s report. If you do not take prompt action to compensate for the bad effects that the Corporation and our investors have suffered, we, together with all our investors, will bring legal proceedings to claim the appropriate damages as a result of investors’ being influenced by the erroneous and worrying analysis published by HSC on the Internet.
• HSC’s top-rank managers contact us to discuss the remedial measures as soon as possible.

I am awaiting your cooperation and good will.

Yours sincerely,

NGUYỄN THỊ SƯƠNG,

ITACO
Deputy Managing Director,