VinaLand Limited. VNL 2009 Annual Report 1

Transcription

1 VinaLand Limited VNL 2009 Annual Report 1

2 Contents VinaLand Limited Annual Report 2009 Section 1 Section 2 Section 3 Section 4 Introduction Overview 5 Financial and Operational Highlights 7 Chairman s Statement 9 Manager s Report State of the Economy 10 Investment Environment 12 Portfolio Performance 16 Featured Investments 20 Financial Statements and Reports Report of the Board of Directors 32 Auditors Report 34 Consolidated Financial Statements 36 Notes to the Consolidated Financial Statements 42 Annex Investing Policy 80

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4 4 VNL 2009 Annual Report Energising prosperity. VinaCapital is an asset management group inspired by the energy, creativity and entrepreneurial spirit of the people of Vietnam.

5 VNL 2009 Annual Report 5 VNL Overview VinaLand Limited ( VNL ) is a closed-end fund trading on the AIM Market of the London Stock Exchange. Launched in 2006, VNL is the largest listed fund for investment in Vietnam s emerging real estate sector. The fund invests in residential, office, retail, hospitality, and township/ industrial properties. The manager s objective is to provide shareholders with an attractive level of income as well as creating a potential for capital growth. VNL DETAILS Fund size USD660 million (NAV as of 30 June 2009). Fund launch 22 March Term of fund Fund domicile Legal form Structure Auditor Nominated advisor (Nomad) Custodian Lawyers Seven years subject to shareholder vote for extension. Cayman Islands. Exempted company limited by shares. Single class of ordinary shares trading on the AIM market of the London Stock Exchange plc. Grant Thornton (Vietnam). Grant Thornton Corporate Finance. HSBC Trustee. Lawrence Graham (UK). Maples and Calder (Cayman Islands). Management and performance fee Management fee of 2 percent of NAV. Performance fee of 20 percent of total NAV increase over the higher of an 8 percent compound annual return and the high watermark. Investment manager Investment policy VinaCapital Investment Management Ltd. Medium to long-term capital gains with some recurring income through investment in the following real estate sectors: Office; Residential; Retail; Township/Industrial (large scale); and Hospitality and Leisure. Investment focus by geography Greater Indochina comprising: Vietnam (minimum of 70 percent), Cambodia, Laos, and southern China.

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7 VNL 2009 Annual Report 7 Financial and Operational Highlights Financial highlights Net loss attributable to shareholders for the period of USD129.4 million. Net Asset Value ( NAV ) of USD660 million. Losses per share (basic and diluted) of USD0.26 for the period. Cash and cash equivalents as at 30 June 2009 of USD50.3 million. Low debt at fund level (7.6 percent of NAV); total project-level debt 17.0 percent of NAV. Operational highlights Sale of stake in Hilton Hanoi Opera Hotel for IRR of 23 percent. Residential sales underway at four projects Central Gardens, The Garland, Golden Westlake and The Ocean Villas. Two hotels Sheraton Nha Trang Hotel and Spa, and Mercure Hanoi La Gare nearing completion. Robert Gordon and Michael Arnold joined the Board as independent directors.

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9 VNL 2009 Annual Report 9 Chairman s Statement Dear Shareholders, We are pleased to present the annual report of VinaLand Limited (AIM: VNL.L) for the year ended 30 June Vietnam s real estate market was among the sectors most visibly affected by the tightened financial policies implemented by the government in early 2008 to control runaway inflation. By the beginning of the 2009 financial year, inflation had peaked at almost 30 percent year-on-year. Under strict credit controls, real estate project financing all but dried up and speculators disappeared from the market. Residential housing prices, led by high-end condominiums, were the first to suffer, with price declines of percent and a much lower volume of transactions. Then, following the onset of the global financial crisis in the second half of 2008, the office and hotel sectors also saw reduced performance. Finally, the expected 2008 increase in retail sector development following WTO commitments to open the retail market did not materialise, as major international retailers facing great pressure in their home markets halted expansion plans. In early 2009, therefore, it was not surprising to see investor confidence sapped to the breaking point. VNL at the end of March 2009 traded at a substantial discount of 79 percent. Investors around the world clearly did not have confidence that real estate investment funds would be able to realise and return their declared values. However, international sentiment did not match actual events in Vietnam. Furthermore, throughout the ups-anddowns of the market over the past two years, VNL has in fact been remarkably stable in its performance. VNL s net asset value declined by 17.9 percent to USD660 million (USD1.32 per share) at 30 June 2009, from USD804 million (USD1.61 per share) at 30 June This essentially means the fund gave up most of the USD176 million in gains recorded during the 2008 financial year. At the end of 2007, the fund s NAV stood at USD628 million, some 5.1 percent below where it stands now. The nearly level performance of the fund over the past two years in the face of considerable market turbulence is due to several factors, including VNL s conservative valuation policy, the low debt at project holding company level and lack of leverage at the fund level, as well as the continued ability to move projects forward and realise exits even in the midst of a down market. The manager s report on the following pages will describe these points in more detail. Of importance to note here is that, despite the broader market slowdown, positive progress was recorded in the past year on numerous VNL projects. During 2009, construction work began on three projects, bringing the number of projects under construction to nine, including two hotels the Sheraton Nha Trang Hotel and Spa, and Mercure Hanoi La Gare Hotel both due to open in the fourth quarter of In the third quarter of 2009, the marketing and sale of residential units at the Central Garden, Golden Westlake and The Ocean Villas (Danang Beach Resort) projects saw positive results. The strong sales bode very well for VNL s immediate prospects, as the fund has numerous residential projects that will help meet the pent-up demand for new, modern living space in Vietnam. Beyond residential unit sales, other deal activity has also picked up. Shortly after the financial year ended, VNL announced the sale of its equity stake in the Hilton Hanoi Opera Hotel, and other exits are being finalised and will be announced soon. VNL has an excellent team of investment managers, which was strengthened this year by the addition of David Henry as Managing Director of VinaCapital Real Estate Ltd. At the board level, two new independent directors were added, with Michael Arnold and Robert Gordon replacing NK Tong and Bruno Schopfer. As a much more positive picture of Vietnam s growth prospects emerged at the end of the 2009 financial year, VNL s depressed share price began to look like an unprecedented bargain. One investor that took advantage of this was the VinaCapital Vietnam Opportunity Fund Ltd (AIM: VOF.L), which announced its intention to acquire shares in VNL given their undervalued price and excellent potential over the medium to long term. Clearly, the depressed trading in VNL shares in early 2009 did not match the potential of the fund to generate investor returns. The directors of the fund, along with the investment manager, remain convinced as ever that VNL s diversified portfolio of real estate assets remains the best means of gaining exposure to the inevitable growth and transformation of Vietnam s built environment. Thank you for your continued support. Horst Geicke Chairman VinaLand Limited 18 December 2009

10 10 VNL 2009 Annual Report State of the Economy With the economy stabilised, renewed progress with equitisations and banking sector reform will make Vietnam once again one of the world s most attractive destinations for investment. GDP growth by sector Source: General Statistics Office of Vietnam. Vietnam s economy, in the first half of 2009, began to recover from the extremely challenging double disaster of Vietnam in 2008 saw a domestic crisis caused by inflationary overheating, followed rapidly by the onset of the global financial crisis and strong deflationary pressures. During this difficult period, Vietnam s government managed economic policy with a notable degree of flexibility and competence. As a result, Vietnam appears to have weathered the storm better than neighbouring ASEAN countries. The origin of the domestic problems in 2008 lies in the perfect storm of excess liquidity, rising commodity prices, and deflationary pressures on the Vietnam dong. Broad money supply and domestic credit in 2007 rose 46 and 54 percent, respectively. Inflation spiked to a peak of 28.3 percent in August Imports also rose sharply in early 2008, reaching USD14.9 billion over the first six months, up from USD12.4 million for all of The currency came under intense pressure, and there was speculation of a balance of payments crisis. The government s response was a stabilisation policy composed of measures to restrict money supply and tighten fiscal policy. Lending for equities purchases was limited to 20 percent of banks chartered capital, domestic credit growth was limited to 30 percent, and the State Bank issued obligatory one-year bonds at 7.8 percent to commercial banks. The State Bank s base rate was raised in incremental steps to 14 percent. Finally, many state-led investment projects were scaled down, paused or abandoned altogether. From slowdown to stimulus During the second half of 2008, the tightening policies began to have their intended effect. The trade deficit and inflation declined, the latter helped along by lower food and energy prices. However, as the economy began to stabilise, another shock arrived following the Lehman Brothers collapse as financial crisis spread rapidly around the globe. In Vietnam, foreign direct investment slowed, and export values fell due to declining commodity prices. When a few foreign-owned factories closed the government was prompted to take decisive action. From its efforts to slow economic activity only six months prior, in January 2009 the government acted to stimulate consumption and investment. The central components of the government s stimulus plan were a six month personal income tax holiday for workers and a four percent interest rate subsidy on business loans. Domestic consumption was promoted and banks were encouraged to lend to growing businesses. The total cost of these measures, was put at USD8 billion (8.6 percent of 2009 GDP). By the end of the first half of 2009 the plan s positive impact was apparent. GDP growth fell to 3.1 percent for Q1 2009, but rose to 4.5 percent in Q2 (and 5.8 percent in Q3 2009). The industrial sector was revived by strong domestic demand, fueled by the lower cost of debt and increased credit supply, and lower import prices of materials and machinery. The service sector and construction activity also showed robust growth, driven by internal consumption and government-financed infrastructure projects. Retail sales maintained this 20 percent growth during the first six months of 2009.

11 VNL 2009 Annual Report 11 The stimulus plan provided a great boost to capital markets, with the Vietnam Index up 91 percent at the end of June from the four-year low set in February Domestic investors drove the market up, expressing their confidence in the government s ability to stabilise and help grow the economy. Outlook Consensus opinion is that Vietnam pulled through the twin crises of 2008 relatively well, and notably better than many of its ASEAN neighbours. But there are still risks and potential problems on the horizon. First, there is uncertainty on how long the global economic slowdown will last. Export demand remains weak and this will have an effect on Vietnam s economy. a widely reported drop in the State Bank s foreign reserves to USD17.3 billion in June 2009 from USD23 billion at the end of The situation was alleviated somewhat by a USD500 million stabilisation loan from the ADB. Despite these issues, Vietnam s medium and longterm prospects remain very strong. The government s handling of the economic crisis in 2008 and early 2009 has instilled confidence in the market. Industry, services and agriculture are all performing well. Capital inflows are expected to pick up as investor confidence returns. Vietnam s external debt is manageable due to its concessionary nature (ie. low interest rates and long amortisation periods). The debt service burden is under control, consuming only 4.5 percent of exports in A balance of payments crisis is now considered unlikely. Economic indicators Second, the potential for inflationary pressures to reappear is very real. Inflation fell from its August 2008 peak to 0.6 percent per month in June However, the trend in declining prices ended there, and in subsequent months inflation has risen slightly. The interest rate subsidy and 7 percent base rate have seen money supply and credit growth increase almost 30 percent, raising the likelihood that inflationary pressures will resume in late 2009 and Another problem emerging in the second half of 2009 is a shortage of foreign exchange caused by the decline in export earnings, lower FDI inflow, and rising imports as economic growth picks up pace. The Vietnam dong consistently trades at the upper end of the five percent band. External financing will likely emerge as a constraining factor on economic growth, as evidenced by Vietnam s economic fundamentals remain in place: a young and educated labour force, a rising middle class with ever-greater purchasing power, rich natural resources, and a stable political environment. The 2008 challenges forced the government to put on hold the equitisation of state-owned enterprises and reform of the banking system. With the economy stable, renewed progress with equitisation and reform will make Vietnam once again one of the world s most attractive destinations for investment. Inflation rate, year-on-year %

12 12 VNL 2009 Annual Report Investment Environment With the economy stabilising in the second half of 2009, the growing middle class continues to drive the complete reconstruction of Vietnam s urban landscape.

13 VNL 2009 Annual Report 13 Like most countries around the world, Vietnam s real estate market did not escape the impact of the 2008 financial crisis. The office and hospitality sectors were particularly affected. However, the government stimulus package of early 2009 boosted domestic consumption and investment, with a positive impact on residential real estate transactions. The 2009 financial year therefore witnessed both winners and losers in the property development and investment sectors. The main driving force in the market remains Vietnam s growing number of middle-class consumers, who are looking for affordable, high-quality housing and modern shopping facilities. Residential During 2008 the market for high-end housing, previously dominated by speculators, sharply contracted following the government-imposed monetary tightening. Prices for luxury condominiums dropped by percent. While the high-end market has yet to recover, the latter half of 2008 and the first six months of 2009 continued to see a healthy level of transactions for mid-range, affordable condominiums and villas in both Ho Chi Minh City and Hanoi. A downward trend in interest rates from mid stimulated buying activity. Average selling prices for the entire residential sector have declined due to the high-end slowdown. However, prices in the low to midrange brackets are stable and increasing slightly. Current housing stock is still well below demand. The Ministry of Construction has stated that up to 20 million square metres of new housing is required in the next five years alone. Residential market asking prices, by grade Office The office market in Vietnam s major cities saw an increase in supply during the 2009 financial year. Savills have estimated that up to 900,000 square metres of Grades A to C buildings will come online over the next two years in Ho Chi Minh City alone. The global financial crisis resulted in reduced demand for all grades of office space as businesses slowed or stopped expansion. Some moved to less expensive office accommodation to control costs. Occupancy and lease rates within the better quality Grade A buildings dropped 25 percent from mid-2008 to the end of Q Due to the high volume of office buildings coming online, it is anticipated that this sector will have further difficulties and remain a tenant s market until the excess supply has been absorbed. Office occupancy rates in HCM City Source: CB Richard Ellis (Vietnam)

14 14 VNL 2009 Annual Report Retail Vietnam dropped from first to sixth in A.T. Kearney s 2009 Global Retail Development Index ranking of retail opportunities in emerging markets. The report noted, however, that though Vietnam has some short-term challenges, the long-term outlook for the country remains positive. Given that the youth market is always looking for a better retail experience, the mid- to long-term outlook for this sector remains very encouraging given Vietnam s incredibly young population. Access to quality sites still remains an issue to bring international-standard shopping centres to Vietnam. Nonetheless, the major international operators are keen to consider opportunities here. Domestic Vietnamese retailers are also expanding their presence to take the international operators head-on, which can only be good for a competitive marketplace. VNL sees high growth potential in the retail sector and will continue to develop modern retail facilities in Hanoi, Danang and Ho Chi Minh City. Department store and shopping centre rents, HCM City CBD Non - CBD USD/sq.m/month Q1 09-Q2 Hospitality The hospitality sector has suffered the most from the global financial crisis in terms of decline in average room and occupancy rates since mid Most five-star hotels have launched strong promotional campaigns for food and beverage and spa facilities in order to maintain revenue. The average five-star occupancy rate slumped by approximately 28 percent year-on-year, and average room rates fell approximately 15 percent year-on-year over the first half of The four-star market has held firm on room rates, to the detriment of occupancy rates which saw a considerable decrease of 28 percent on-quarter from Q1 to Q The onset of the H1N1 (swine flu) scare also affected international arrivals into the country, which fell 50 percent below the government forecast for the first half of The hotel sector will face short- to medium-term difficulties as a result. The low supply of hotels will however protect the market, and the medium to long-term outlook remains strong as Vietnam increasingly becomes a travel destination for tourists from around the world. Outlook The difficulties faced by the office and hospitality sectors in 2009 do not overshadow the excellent prospects for real estate investment in Vietnam. With the economy stabilising in the second half of 2009, the growing middle class continues to drive the complete reconstruction of Vietnam s urban landscape. Investors and developers able to bring high-quality, value-oriented properties online over the next several years will see steady demand for such products. Across the real estate spectrum, Vietnam remains one of Asia s best long-term real estate investment opportunities.

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16 16 VNL 2009 Annual Report Portfolio Performance International and domestic retailers continue to look for prime facilities, and Vietnam s rising middle class have a high demand for modern living and shopping spaces. VinaLand Limited (VNL) for the year ending 30 June 2009 saw a complete reversal in the real estate market from the previous year. Real estate developers in 2009 welcomed a return to a low inflation marketplace and a loosening of construction credit. The global credit crisis had a limited impact on the domestic real estate market but a drastic impact on the VNL share price and, to a lesser extent, NAV. VNL nonetheless weathered the storm and ended the year with an NAV at 30 June 2009 of USD660 million, or USD1.32 per share, down 17.9 percent from USD804 million, or USD1.61 per share, at 30 June This decrease is primarily due to unrealised losses from writedowns in the hospitality component of the portfolio, and the conservative valuations applied to the portfolio s land bank projects. VNL s share price at 30 June 2009 was USD0.69, down sharply from the previous year s close of USD1.22. VNL traded at a significant discount throughout the financial year under the impact of the global retreat from equities, in particular emerging market closed-end funds. In the midst of the financial crisis, VNL shares fell to an all-time low of USD0.32 in March Thankfully, this depressed trading level did not last long. Shortly after the financial NAV and share price performance Portfolio by sector

17 VNL 2009 Annual Report 17 year ended, with sales at several of VNL s residential projects underway, the share price began to recover, reaching USD0.92 at the end of September The depressed share price in early 2009 was a result of international events and did not accurately reflect conditions on the ground in Vietnam (with the partial exception of the hospitality market). The six-month tax holiday and looser credit environment created by the government s stimulus plan saw a boost in construction and in residential retail transaction volumes and prices. VNL projects with active sales that benefited from the healthy residential market include Golden Westlake apartments in Hanoi, Central Garden apartments and The Garland villas in Ho Chi Minh City, and The Ocean Villas at the Danang Beach Resort. VNL s valuation policy ensures the fund does not try to chase short-term trends. Assets are valued based on third-party valuation reports beginning when a project receives an investment licence and at roughly oneyear intervals thereafter (all projects in the portfolio are revalued at least once yearly). In addition, desktop revaluations or impairment tests in adverse conditions (write-downs) are carried out if warranted by market conditions. During the 2009 financial year, three valuation rounds saw a total of 33 projects revalued, and desktop write-downs of 16 additional projects. VNL did not acquire any significant assets during the year, although the number of holdings in the portfolio did increase to 47 from 41. Construction began on three projects, including two hotels, and continued on six other projects including the World Trade Center Danang and on the Dunes golf course at the Danang Beach Resort, with the first course to open for play by February The hospitality portfolio suffered during the year due to the slowdown in international travel. The hotel market is likely to remain slow for another 18 months. Nonetheless, VNL made progress in strengthening its impressive hospitality portfolio, continuing renovations at the Movenpick Hotel Saigon and Movenpick Hotel Hanoi, and moving forward with construction of the Sheraton Nha Trang Hotel and Spa, and the Mercure Hanoi La Gare. Both hotels are due to open in late VNL s development and advisory service, VinaCapital Real Estate Ltd (VCRE), remains the most experienced team of real estate experts in Vietnam. Near the end of the financial year, VCRE with consent of the VinaCapital Group board entered negotiations to establish a new project and construction management joint venture with InProjects from Hong Kong, to provide an international standard of service to the fund. This business is expected to commence operations in the fourth quarter of Outlook VNL s portfolio is almost perfectly placed to benefit from current conditions in Vietnam s real estate market. Shortly after the financial year ended, brisk sales were noted at VNL s residential developments. More residential projects will see sales and marketing launches in 2010, including Dai Phuoc Lotus and Thang Loi in Ho Chi Minh City, and The Azura at the World Trade Center in Danang. In addition, the retail components at several mixed-use facilities are set to begin construction, such as VinaSquare and Thang Loi in Ho Chi Minh City, and the World Trade Center Danang and Times Square Hanoi. Although Vietnam s office and hospitality markets are expected to remain slow in 2010, international and domestic retailers continue to look for prime facilities, and Vietnam s rising middle class have a high demand for modern living and shopping spaces. With over 40 projects and five operating hotels, the sector and geographic spread of VNL s portfolio means the investment manager can carefully select projects to bring forward those with the highest potential in the current market. NAV performance and invested projects 30 June 2009 Portfolio by geographic region 30 June June 2007 NAV per share Change on previous year (18%) 27.8% 28.6% Number of projects Hanoi 19% 17% Central provinces 25% 36% HCM City and region 56% 47%

18 18 VNL 2009 Annual Report Top Holdings by Region Hanoi investments focus on two premier hotels alongside residential and retail projects. Danang is a rapidly growing coastal city. VNL has invested heavily in hospitality, office and conference facilities. Nha Trang is another centre of tourism in Vietnam. HCM City as the nation s economic hub is home to many projects across all sectors.

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20 20 VNL 2009 Annual Report Featured Investments VNL has the most diverse portfolio of real estate assets of any foreign investor in Vietnam. The fund is able to invest across all real estate sectors due to the team of investment managers with deep experience in hotel and property management, sales and marketing, deal sourcing, planning and construction.

21 VNL 2009 Annual Report 21 Mercure Hanoi La Gare Hotel Located opposite Hanoi Central Railway Station, Mercure Hanoi La Gare is a boutique four-star hotel in the heart of bustling Hanoi s city centre. Situated close to the Old Quarter, the commercial precinct and ICE Exhibition Center, this hotel features modern design and facilities, 102 rooms, a French brasserie, internal courtyard and gym. Ideal for business and leisure guests, Mercure Hanoi La Gare offers easy access to Hanoi attractions including the Temple of Literature and Hoan Kiem Lake. Type Location Size/area Status Four star. Hanoi. 102 rooms. Operating asset. Ownership VNL 100%. Highlights Opened at the end of Q as the business hotel market began to recover from 2008 slowdown.

22 22 VNL 2009 Annual Report Times Square Hanoi Times Square Hanoi is a landmark upscale mixeduse development on a 40,000sq.m site in My Dinh District, Hanoi. The site is surrounded by high-profile buildings including the National Convention Centre, a Big C supermarket, the Viglacera office building and the future Hanoi residence for visiting provincial delegates and officials. Times Square Hanoi is a perfect combination of form and function, as the total development allows for 85,000sq.m of retail, up to 289,000sq.m of office, and a 400-room hotel and convention centre space that will merge beautifully with the surrounding streetscape and amenities. Type Location Size/area Status Mixed-use urban development. My Dinh, Hanoi. Total GFA 405,000sq.m. Invest licence received; construction to commence in Ownership VNL 65%. Highlights Retail component to commence in 2010.

23 VNL 2009 Annual Report 23 Danang Beach Resort Located less than 20 minutes from Danang International airport and the UNESCO World Heritage site of Hoi An, the Danang Beach Resort will be the ultimate integrated resort destination in Vietnam. This 260ha resort development features two spectacular 18-hole championship golf courses, the first designed by internationally renowned course designer Greg Norman. The integrated resort will include up to three internationally-managed hotels and luxury apartments and villas offering panoramic views of the mountains, beach and golf courses. Also featured will be a convention centre, cultural village, golf clubhouse and a recreational lake. Type Location Mixed-use integrated development. Danang City in central Vietnam; 10km from an international airport. Size/area Status 260ha. Construction of villas and first golf course underway; sales of The Ocean Villas underway. Ownership VNL 75%. Highlights Luxury villas now selling. Beachfront hotel to open in The first golf course, designed by golf legend Greg Norman, to open in Q

24 24 VNL 2009 Annual Report World Trade Center Danang Facing the Han River and only a short walk from the city centre, the World Trade Center Danang will be the most spectacular mixed-use development in Danang, a coastal city and one of Vietnam s top tourism destinations. The nine-hectare development will be constructed in three phases that will transform the site into a complete, modern urban environment comprising two retail developments, hotels, offices, a convention and exhibition centre, and an extensive range of residential properties. Phase 1 features a 32,800sq.m shopping centre, an international midrange hotel, and a 225-unit luxury apartment tower, which is under construction now and will be completed in late Type Location Size/area Status Ownership Highlights Mixed-use urban development. Danang City, central Vietnam. 9ha. Ground work underway. VNL/VOF and a European partner hold 100% in an FIE licence. Riverfront landmark project in downtown Danang featuring five-star hotel, luxury apartments, retail, office, school, and convention centre.

25 VNL 2009 Annual Report 25 Sheraton Nha Trang Hotel and Spa The Sheraton Nha Trang Hotel and Spa is the first internationally recognised hotel brand on the coastline of Vietnam. Nha Trang continues to prosper from increasing investment in the leisure and tourism sector, and its popularity with both domestic and international tourists. The hotel will open in Q and will include 1,183sq.m of conference facilities, expected to attract a large proportion of conference and eventrelated business to the coast via cross-selling with the Sheraton hotels located in Ho Chi Minh City and Hanoi. Type Location Size/area Status Five star. Nha Trang, central Vietnam. 284 rooms, 3,690sq.m. Under construction. Ownership VNL 62.9%. Highlights Expected to open in Q as the first major international hotel brand on the coast of Vietnam.

26 26 VNL 2009 Annual Report VinaSquare Tower VinaSquare Tower is a landmark development on 31,829sq.m in the bustling centre of District 5, Ho Chi Minh City. Surrounded by hospitals, universities, and the densely populated Cho Lon commercial area (Chinatown), the mixed-use VinaSquare Tower project combines an estimated 250,000sq.m of retail and office space with over 1,200 mid and high-end apartments. Type Location Size/area Status Mixed-use urban development. Chinatown, District 5, HCM City. 31,820sq.m, GFA 254,557sq.m. Investment licence received. Ownership VNL holds 46.5%. Highlights Prime location in the heart of HCM City s Chinatown.

27 VNL 2009 Annual Report 27 Dai Phuoc Lotus Township Dai Phuoc Lotus is a landmark resort-style urban township project in Nhon Trach district, Dong Nai province, one of southern Vietnam s key regions of economic development. The island development comprises mainly residential villas and townhouses with river frontages and river views. Dai Phuoc Lotus will have a distinctive living environment that is close enough to central HCM City to commute daily while enjoying a resort-style living atmosphere. The 200- hectare project will transform the area with office buildings, shopping centre, residences, marina, recreational facilities, hotels, and public facilities in the midst of parks, lakes and a golf course. Type Location Size/area Status Township. Nhon Trach, Dong Nai Province (HCM City region). 200ha. Investment licence received; infrastructure construction underway. Ownership VNL 54%. Highlights Unique island development with access to HCM City by road and riverway.

28 28 VNL 2009 Annual Report The Garland The Garland is a boutique residential project in District 9, Ho Chi Minh City. The development will feature 53 detached and semi detached villas within a gated community, and a high-rise condominium tower. The development will feature a swimming pool, recreational parks and a children s playground. The soft launch of the project s villa component in Q saw sales reservations for all 53 homes within one week. The total value of these reservations was USD15.3 million, an average of USD289,000 for each of the 277sq.m bare shell, semi-detached villas. Vietnam s residential market continues to see strong demand from a growing middle class of consumers looking for a modern, contemporary lifestyle. Type Location Size/area Status Residential District 9, HCM City. 53 villas, one apartment tower. Under construction; villas sales complete. Ownership VNL 100% Highlights High-quality mid-range residential properties continue to see high demand across Vietnam.

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30 30 VNL 2009 Annual Report Board of Directors Horst F. Geicke is one of VinaCapital Group s three founding partners. He has resided in Asia for almost 30 years and has over 25 years of operating and investing experience in the region, having made several financial and strategic investments in Vietnam, including the establishment of a manufacturing plant for his family business. Mr. Geicke also co-founded Pacific Alliance Group, a fund management group in Hong Kong. Mr. Geicke is the President of the European Chamber of Commerce in Hong Kong and was previously the President of the German Chamber of Commerce in Hong Kong. He is the chairman or board member of numerous public and private companies. Mr. Geicke has a Masters degree in Economics and Business Law from the University of Hamburg, Germany. Horst F. Geicke Chairman Nicholas Brooke Director Mr. Brooke is the Chairman of Professional Property Services Limited, a Hong Kong-based real estate consultancy that provides a select range of advisory services across the Asia Pacific Region. Mr. Brooke is a former President of the Royal Institution of Chartered Surveyors and was the first overseas surveyor to be accorded that honour. Mr. Brooke is a recognised authority on land administration and planning matters and has provided advice in these areas to several Asian governments as well as the US State Department. He is also a Justice of the Peace, and a former Deputy Chairman of the Hong Kong Town Planning Board and a former member of the Hong Kong Housing Authority. Mr. Brooke also sits as a Non-executive Director on the Boards of a number of public companies including Shanghai Forte Land Company Limited, one of China s largest residential developers and Majid Al Futtaim Investments, one of Middle East s leading shopping centre developers. Mr. Brooke has a degree in Estate Management and a Post Graduate Diploma in Business Administration from the University of London.

31 VNL 2009 Annual Report 31 Robert A. E. Gordon Director Michael Arnold Director Don Lam Director Robert Gordon was British Ambassador to Vietnam from and to Burma from He was head of the Foreign and Commonwealth Office s Southeast Asia Department in London from He joined the British Diplomatic Service in 1973 and served in Poland, Chile and France. After retiring from the FCO in April 2008, he now advises a number of companies and organisations on issues concerning Southeast Asia. He also provides expert advice to several UK law firms, as well as lecturing at the University of Strasbourg. Mr. Gordon was awarded an OBE in 1983 and a CMG in He was born in Trieste, Italy and educated at King s School Canterbury and graduated from Magdalene College, Oxford in 1973 with a BA (later MA) in Modern Languages. Mr. Arnold is a senior executive with over forty years experience in the property industry, including over thirty years in Asia. He retired as an Executive Director of Hongkong Land in 2002 and is currently Managing Director of Arnco Ltd, which provides an advisory service to the property industry in Asia and the Middle East. Mr Arnold sits on the boards of a number of companies including The Link, as an Independent Non Executive Director, and The Business Environment Council, as a Non Executive Director. During his career with Hongkong Land Mr. Arnold was responsible for all project developments in Hong Kong and Asia, spanning from Australia to Southeast Asia and China. Mr. Arnold is a Fellow of the Hong Kong Institute of Surveyors and an Associate of the Royal Institute of Chartered Surveyors. Don Lam is a founding partner of VinaCapital Group, with over 15 years experience in Vietnam. He has overseen the Group s growth from manager of a single USD10 million fund in 2003 into a full-featured investment firm managing numerous listed and unlisted funds, and offering a complete range of corporate finance and real estate advisory services. Before founding VinaCapital, Mr. Lam was a partner at PricewaterhouseCoopers (Vietnam), where he led the Corporate Finance and Management Consulting practices throughout the Indochina region. Mr. Lam has also held management positions at Deutsche Bank and Coopers & Lybrand in Vietnam and Canada. He has a degree in Commerce and Political Science from the University of Toronto, and is a member of the Institute of Chartered Accountants of Canada. He is a Certified Public Accountant and holds a Securities Licence in Vietnam.

32 32 VNL 2009 Annual Report Report of the Board of Directors The Board of Directors submits its report together with the consolidated financial statements of VinaLand Limited ( the Company ) and its subsidiaries (together the Group ) for the year ended 30 June 2009 ( the year ). The Group VinaLand Limited is incorporated in the Cayman Islands as a company with limited liability. The registered office of the Company is PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands. Particulars of the Group s principal subsidiaries and associates are set out in Notes 6 and Note 11. Principal activities The Company s primary objective is to focus on key growth segments within Vietnam s emerging real estate market, namely residential, office, retail, industrial and leisure projects in Vietnam and the surrounding countries in Asia to provide shareholders with an attractive level of income and capital growth, from investing in a diversified portfolio of mainly property investments. The principal activities of the subsidiaries are property investment and hospitality management. Results and dividend The results of the Group for the year ended 30 June 2009 and the state of its affairs as at that date are set out in the consolidated financial statements on pages 6 to 49. The Board of Directors do not recommend the payment of dividend for the year ended 30 June 2009 (30 June 2008: USD nil). Board of Directors The members of the Board of Directors of the Company during the year and up to the date of this report are: Name Position Date of appointment Horst Geicke Chairman 31 August 2005 Don Lam Director 13 January 2006 Nicholas Brooke Director 13 January 2006 Robert Gordon Director 16 February 2009 Michael Arnold Director 17 March 2009 Bruno Schoepfer Director 13 January 2006/28 November 2008 Nguen Khoong Tong Director 13 January 2006/17 March 2009

33 VNL 2009 Annual Report 33 Auditors The Group s auditors, Grant Thornton Cayman Islands with the assistant of Grant Thornton (Vietnam) Ltd., have expressed their willingness to accept reappointment. Subsequent events after the balance sheet date Details of significant subsequent events after the balance sheet date which impact on the financial position of the Group are set out in Note 45 to the accompanying consolidated financial statements. Directors interest in the Company As at 30 June 2009, the interests of the directors in the shares, underlying shares and debentures of the Company are as follows: Approx. of No. of shares direct and indirect holding Direct Indirect Horst Geicke 2,750, , % Don Lam 2,357, , % Nicholas Brooke 150, % At the date of this report, there have been no further changes in the above holdings. Board of Directors responsibility in respect of the consolidated financial statements The Board of Directors is responsible for ensuring that the consolidated financial statements are properly drawn up so as to give a true and fair view of the financial position of the Group as at 30 June 2009 and of the results of its operations and its cash flows for the year ended on that date. When preparing the consolidated financial statements, the Board of Directors is required to: i. adopt appropriate accounting policies which are supported by reasonable and prudent judgements and estimates and then apply them consistently; ii. comply with the disclosure requirements of International Financial Reporting Standards or, if there have been any departures in the interest of true and fair presentation, ensure that these have been appropriately disclosed, explained and quantified in the consolidated financial statements; iii. maintain adequate accounting records and an iv. effective system of internal control; prepare the consolidated financial statements on a going concern basis unless it is inappropriate to assume that the Group will continue its operations in the foreseeable future; and v. control and direct effectively the Group in all material decisions affecting its operations and performance and ascertain that such decisions and/ or instructions have been properly reflected in the consolidated financial statements. v. control and direct effectively the Group in all material decisions affecting its operations and performance and ascertain that such decisions and/or instructions have been properly reflected in the consolidated financial statements. The Board of Directors is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board of Directors confirms that the Group has complied with the above requirements in preparing the consolidated financial statements. Statement by the Board of Directors In the opinion of the Board of Directors, the accompanying consolidated balance sheet, consolidated statement of income, changes in equity and cash flows, together with the notes thereto, have been properly drawn up and give a true and fair view of the financial position of the Group as at 30 June 2009 and the results of its operations and cash flows for the year then ended in accordance with International Financial Reporting Standards. On behalf of the Board of Directors, Horst. Geicke Chairman Hong Kong, SAR China 18 December 2009

34 34 VNL 2009 Annual Report

35 VNL 2009 Annual Report 35 Independent Auditors Report To the Shareholders of VinaLand Limited We have audited the accompanying consolidated financial statements of VinaLand Limited and its subsidiaries ( the Group ) which comprise the Consolidated Balance Sheet as of 30 June 2009, and the Consolidated Statement of Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows for the year then ended, and a Summary of significant accounting policies and other explanatory notes from page 42 to page 79. Management s responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the consolidated financial statements are free from material misstatement. The financial statements of the Group as at 30 June 2008 were audited by Grant Thornton Vietnam whose report dated 28 November 2008 expressed an unqualified opinion on those statements. This report, including the opinion, has been prepared for and only for the shareholders. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Basis of opinion An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend upon the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements give a true and fair view of the financial position of VinaLand Limited and its subsidiaries as of 30 June 2009, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. GRANT THORNTON Grand Cayman, Cayman Islands 18 December 2009

36 36 VNL 2009 Annual Report Consolidated Balance Sheet Note 30 June June 2008 USD 000 USD 000 (Reclassified) ASSETS Non-current Investment properties 8 489, ,356 Property, plant and equipment 9 72, ,106 Intangible assets 10 12,091 6,421 Investments in associates ,764 26,270 Goodwill 12-2,939 Prepayments for operating lease assets 13 17,334 19,635 Prepayments for acquisitions of investments 14 66,097 88,512 Deferred tax assets Other long-term financial assets 1,112 1,077 Non-current assets 762, ,626 Current Inventories Trade and other receivables , ,750 Receivables from related parties 16 2,572 21,930 Short-term investments 17 34,888 57,027 Financial assets at fair value through income statement 18 46,298 61,924 Cash and cash equivalents 19 50,274 80,806 Current assets 244, ,747 Assets classified as held for sale 21 85,321 - Total assets 1,092,313 1,228,373

37 VNL 2009 Annual Report 37 EQUITY AND LIABILITIES EQUITY Note 30 June June 2008 USD 000 USD 000 (Reclassified) Share capital 22 4,999 4,999 Additional paid-in capital , ,870 Revaluation reserve 24 10,799 13,844 Translation reserve (16,147) (4,623) Retained earnings 72, , , ,527 Minority interests 166, ,868 Total equity 826,974 1,024,395 LIABILITIES Long-term borrowings and debts 25 21,841 21,673 Long-term payables to related party 29 65,018 66,367 Deferred tax liabilities 26 14,629 29,959 Other liabilities 912 1,044 Non-current liabilities 102, ,043 Current Short-term borrowings and debts 27 20, Trade and other payables 28 74,354 34,491 Payable to related parties 29 49,943 50,169 Current liabilities 144,881 84,935 Liabilities included in disposal group held for sale 21 18,058 - Total liabilities 265, ,978 Total equity and liabilities 1,092,313 1,228,373 Net assets per share attributable to equity shareholders of the parent (USD per share)

38 38 VNL 2009 Annual Report Consolidated Statement of Changes in Equity Share capital Equity attributable to shareholders of the parent Minority interests Total equity Additional paid-in capital Revaluation reserve Translation reserve Retained earnings USD 000 USD 000 USD 000 USD 000 USD 000 USD 000 USD July , , (530) 34,756 54, ,883 Currency translation (4,093) - (1,957) (6,050) Revaluation gains on buildings (Note 24) , ,633 24,700 Net income/(expense) recognised directly in equity ,067 (4,093) - 9,676 18,650 Profit for the year ended 30 June ,698 80, ,183 Total recognised income and expense for the year ,067 (4,093) 167,698 90, ,833 Acquisitions of subsidiaries ,768 34,768 Capital contributions in subsidiaries ,981 41,981 Reduction in retained earnings on liquidation of subsidiary (1,017) (340) (1,357) Dividend distribution to minority interests (713) (713) 30 June , ,870 13,844 (4,623) 201, ,868 1,024,395 1 July , ,870 13,844 (4,623) 201, ,868 1,024,395 Currency translation (11,524) - (6,129) (17,653) Revaluation losses on buildings (Note 24) - - (3,045) - - (2,544) (5,589) Net expenses recognised directly in equity - - (3,045) (11,524) - (8,673) (23,242) Losses for the year ended 30 June (129,429) (72,194) (201,623) Total recognised income and expense for the year - - (3,045) (11,524) (129,429) (80,867) (224,865) Acquisitions of subsidiaries ,553 12,553 Capital contributions in subsidiaries ,935 15,935 Dividend distribution to minority interests (1,044) (1,044) 30 June , ,870 10,799 (16,147) 72, , ,974

39 VNL 2009 Annual Report 39 Consolidated Statement of Income Note Year ended 30 June 2009 USD 000 Year ended 30 June 2008 USD 000 (Reclassified) Revenue 28,014 35,968 Cost of sales 30 (15,711) (17,916) Gross profit 12,303 18,052 Operating, selling and administration expenses 30 (35,611) (76,508) Net (losses)/gains on fair value adjustments of investment properties 31 (153,544) 274,520 Other net changes in fair value of financial assets at fair value through income statement 32 (4,754) 16,869 Other income 33 2,591 44,605 Other expenses 34 (38,067) (11,594) Operating (loss)/profit from continuing operations (217,082) 265,944 Financial income 35 11,972 18,751 Financial costs 36 (6,735) (6,991) Share of (losses)/profits of associates 11 (3,342) 53 1,895 11,813 (Loss)/profit from continuing operations before tax (215,187) 277,757 Tax income/(expense) 37 13,564 (29,574) Net (loss)/profit for the year from continuing and total operations (201,623) 248,183 Attributable to equity shareholders of the parent (129,429) 167,698 Attributable to minority interests (72,194) 80,485 (201,623) 248,183 Earnings per share basic and diluted (USD per share) 38 (0.26) 0.34

40 40 VNL 2009 Annual Report Consolidated Statement of Cash Flows Note Year ended 30 June 2009 Year ended 30 June 2008 USD 000 USD 000 (Reclassified) Operating activities Net (loss)/profit for the year before tax - (215,187) 277,757 Adjustments ,636 (327,957) Net (loss)/profit before changes in working capital - (16,551) (50,200) Change in trade and other assets - 48,906 (167,585) Change in inventory (34) Change in trade and other liabilities - 15, ,065 Cash and cash equivalents classified as held for sale assets - (19,858) - Corporate income tax paid - (1,352) (1,854) Cash flow from operating activities - 26,708 (77,608)

41 VNL 2009 Annual Report 41 Investing activities Note Year ended 30 June 2009 Year ended 30 June 2008 USD 000 USD 000 (Reclassified) Interest received - 7,420 16,546 Purchases of investment property, plant, equipment, and other non-current assets - (80,023) (69,618) Acquisitions of subsidiaries, net of cash 7 (7,189) (59,707) Proceeds from disposals of property, plant and equipment Proceeds from disposals of investments - 5,132 10,188 Deposits for acquisitions of investments - (11,664) (5,214) Proceeds/(purchases) of financial assets - 10,873 (22,220) Investments in associates 11 (61,962) (26,217) Acquisitions of long-term assets - (5,774) (7,284) Proceeds/(deposits) from/for short-term investments - 22,139 (57,027) Net cash receipts from related parties for real estate projects - 16,072 13,046 Cash flow from investing activities - (104,976) (207,399) - Financing activities - Additional capital contributions from minority shareholders - 15,935 - Loan proceeds from banks - 42,305 22,197 Loan repayments to banks - (8,488) (6,343) Dividends paid to minority interests - (1,044) (450) Loans proceeds from minority shareholders - 1,481 - Interest paid - (2,453) (489) Cash flow from financing activities - 47,736 14,915 Net change in cash and cash equivalents - (30,532) (270,092) Cash and cash equivalents at the beginning of the year - 80, ,898 Cash and cash equivalents at end of the year 19 50,274 80,806

42 42 VNL 2009 Annual Report Notes to the Consolidated Financial Statements 1. General information VinaLand Limited is a limited liability company incorporated in the Cayman Islands. The registered office of the Company is PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands. The Company s primary objective is to focus on key growth segments within Vietnam s emerging real estate market, namely residential, office, retail, industrial and leisure projects in Vietnam and the surrounding countries in Asia. The Company is listed on the AIM Market of the London Stock Exchange under the ticker symbol VNL The consolidated financial statements for the year ended 30 June 2009 were authorised for issue by the Board of Directors on 18 December Statement of compliance with IFRS and adoption of new and amended standards and interpretations 2.1 Statement of compliance with IFRS The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). 2.2 Changes in accounting policies Overall considerations The IASB and the International Financial Reporting Interpretations Committee have issued various standards and interpretations with an effective date after the date of this financial information. The Group has not early adopted the standards and interpretations that have been issued as they are not yet effective. The most relevant for the Group are amendment to IAS 1 (Revised 2007) Presentation of the Financial Statements (effective for annual periods beginning on or after 1 January 2009), and IFRS 8 Operating Segments (effective for annual periods beginning on or after 1 January 2009). The adoption of IAS 1 (Revised 2007) makes certain changes to the format and titles of the primary financial statements and to the presentation of some items within these statements. Upon adoption of IFRS 8, the Group will disclose segmental information when evaluating performance and deciding how to allocate resources to operations. The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the consolidated financial statements in the period of initial application. Annual Improvements 2008 The IASB has issued Improvements for International Financial Reporting Standards Most of these