VinaLand. Stabilising economy supports realisation plans. Realisations and cash returns to accelerate? Working capital flexibility could enhance value

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1 VinaLand Stabilising economy supports realisation plans Investment companies With growing indications through the past year that the Vietnamese economy has stabilised, the stock market outperformed most emerging market peers in 2013; VinaLand (VNL) shares also showed recovery despite a still challenging real estate market, perhaps reflecting growing optimism that the trough may have been reached or is close at hand. A weak banking sector poses risks and structural reforms may be needed to take GDP growth from c 5% back to the pre-crisis level of c 7%. However, with VNL at a c 45% discount to NAV, asset price stability and any acceleration in VNL s asset disposal programme should be taken positively by investors. 12 months ending Total share price return* (%) Total NAV return* (%) Vietnam VN Index return US$* (%) Total return MSCI AC Asia ex Japan* (%) Total return MSCI World Index* (%) 31/12/ (2.2) (4.5) /12/11 (32.7) (13.2) (29.9) (17.1) (5.0) 31/12/12 (42.3) (11.9) /12/ (11.5) Note: *12-month rolling discrete performance. Realisations and cash returns to accelerate? VNL is in a cash return period, aiming to realise assets and distribute cash while continuing the limited development of selected projects in order to maximise value. Realisations progressed slowly through 2013 and valuations weakened further, but VNL still estimates it will be able to divest up to US$227m of assets to support up to US$125m of distributions by the time shareholders consider a three-year continuation vote in November Working capital flexibility could enhance value Somewhat paradoxically, VNL has recently raised 15m in a zero coupon preference share issue. The cash is designed to enhance portfolio value creation, providing working capital to refinance project debt (15.5% of NAV) at potentially lower rates, accelerate existing developments and restructure investments for disposal. This means VNL is less likely to be seen as a forced seller going forwards. The economy appears to have stabilised GDP growth accelerated to 5.4% in 2013 and inflation fell to 6%, allowing interest rates to fall. With the trade balance positive and FDI up 54% in the year, the currency is stable and foreign exchange reserves higher. There is growing optimism that real estate may be at or near the trough, despite a still weak banking sector. Valuation: Plenty of room for discount to narrow The discount has narrowed to c 45%, as the share price rose 21.4% in 2013, despite the NAV falling 11.5%. Stability of valuations and accelerated realisations at around NAV would be sufficient triggers for further discount narrowing. The disclosure, in early December, of early stage discussions regarding a possible sale of assets or acquisition of shares has had little impact on the shares. Price Market cap 27 January 2014 US$0.52 US$249m NAV US$0.92 Discount to NAV* 43.4% Yield Nil *As at 31 December 2013 Ordinary shares in issue 479.6m Code Primary exchange AIC sector VNL AIM Asia Pacific Vietnam Share price/discount performance Share Price (US$) *Positive values indicate a discount; negative values indicate a premium. Three-year cumulative perf. graph week high/low US$0.49 US$0.39 NAV* high/low US$1.04 US$0.92 *Excluding income. Gearing Fund (ZDP) 5.6% Projects 15.5% Analysts Dec/12 Jan/13 Feb/13 Mar/13 Apr/13 May/13 Jun/13 Jul/13 Aug/13 Sep/13 Oct/13 Nov/13 Dec/13 Martyn King +44 (0) Andrew Mitchell +44 (0) investmenttrusts@edisongroup.com Edison profile page VNL Equity Discount * Discount (%) Dec/10 Mar/11 Jun/11 Sep/11 Dec/11 Mar/12 Jun/12 Sep/12 Dec/12 Mar/13 Jun/13 Sep/13 Dec/13 VNL Equity Vietnam VN Index USD VinaLand is a research client of Edison Investment Research Limited

2 Exhibit 1: Trust at a glance Investment objective and fund background VinaLand (VNL) is a closed-end Cayman Islands registered, exempted company. It was launched in 2006 to target medium- to long-term capital appreciation with some recurring income, through investment in a diversified portfolio of mainly Vietnamese property and property development projects. In November 2012 shareholders approved a new strategy with increased focus on asset realisation and cash distribution. Recent developments 17 December: 15m zero dividend preference shares issued to raise 15m. 6 December: disclosure of preliminary, early stage discussions regarding potential sale of VNL assets or acquisition by third party of VNL shares. Forthcoming Capital structure Fund details AGM Q414 TER FY % Group VinaCapital Q4 calendar 2013 report February 2014 Project level gearing 15.5% Manager David Blackhall Year end 30 June Fund level gearing 5.6% Address 17th Floor, Sun Wah Tower 115 Nguyen Hue, Dist. 1 Ho Chi Minh City, Vietnam Continuation vote November 2015 Trust life Indefinite Phone Loan facilities N/A Website Dividend paid N/A Annual mgmt fee See page 7 Launch date March 2006 Performance fee See page 7 Dividend policy and history VinaLand has not paid dividends so far, preferring to make distributions to shareholders via buy-backs. DPS (US$) Full year div payment Special dividends Share buyback policy and history The share buy-back programme was started in October 2011 following investor feedback as to the best method of distribution. The programme is ongoing, as agreed by the board, and all shares acquired under the programme are cancelled Portfolio composition by property type (as at 31 December 2013) Shareholder structure (as at 30 September 2013) 2013 No. of shares ('000s) Jan/13 Feb/13 Mar/13 Apr/13 May/13 Repurchases Total cost Jun/13 Jul/13 Aug/13 Sep/13 Oct/13 Nov/13 Allotments Total proceeds Dec/ Cost/proceeds (US$000s) Residential (41.4%) Mixed Use (30.4%) Township (19.2%) Hospitality (9.0%) Six Sis AG (13%) Credit Suisse AG (11%) Vietnam Master (7%) Bank Julius Baer (6%) JPMorgan Chase (6%) Morgan Stanley (3%) Bewaarbed r Schretlen (3%) SMBC Nikko (3%) Pacific Alliance Asia (3%) Other (45%) Portfolio composition by region (as at 31 December 2013) Portfolio composition by stage of development (as at 31 December 2013) Hanoi region (8.3%) Central region (26.3%) Ho Chi Minh City (65.4%) Land bank (7.3%) Planning stage (59.0%) Development stage (27.8%) Operating assets (5.9%) Source: VinaLand, Edison Investment Research VinaLand 27 January

3 Vietnam economic backdrop: Growing stability Vietnam is a developing economy with obvious potential. It is resource rich and has a favourable demographic profile with a population of c 90m, 25% of whom are under 14. Growth was strong in the period up to the financial crisis (upwards of 7% pa), as the government adopted the principles of the Chinese socialist market economic model to this traditionally agrarian economy, ravaged by decades of civil war. Yet despite the progress made, GDP per capita remains around a third of that of Thailand and China, and since the global financial crisis Vietnamese economic growth has struggled to fulfil its potential for catch-up. The economy recovered quickly after the credit crunch, boosted by loose fiscal and monetary policy, but inflation rose to a peak of 23% in 2011 and corrective measures caused a sharp subsequent slowdown in GDP growth. Exhibit 2: Real GDP growth Vietnam vs advanced economies, developing Asia and world % GDP growth, constant prices Average Average Average e Vietnam Developing Asia G7 World Source: IMF, Edison Investment Research. Note: G7 = Canada, France, Germany, Italy, Japan, the UK and the US. In the second half of 2013, after a weak start to the year, Vietnamese economic growth began to show signs of acceleration (Q4 growth was just over 6%, taking annual growth to 5.4%) while inflation fell (ending the year at c 6%, well down from the peak of c 23% faced in 2011). Lower inflation, falling interest rates (lending rates at c 10% are now less than half the level of a couple of years ago), a relatively stable currency, and growing foreign exchange reserves on the back of a small trade surplus and increasing foreign direct investment (FDI) all point to a stabilised economic background. But a fairly broad consensus remains that for growth to accelerate back towards the c 7% pa seen before the financial crisis, further progress on structural reform is needed (especially regarding the often inefficient and indebted state owned enterprises [SOEs], and a banking system still getting to grips with a high level of non-performing loans [NPLs]). Growth of more than 5% may seem reasonable from a developed country perspective, but Vietnam is the only large developing country in the East Asia and Pacific region, other than China, whose post crisis growth has been lower than its pre-crisis level (source: World Bank). Vietnam s export performance has continued to be strong (2013 exports increased by c 15%) and resilient to the country s domestic economic problems. The mix of exports continues to gradually move up the value-added chain, and the country remains popular as a destination for FDI (2013 FDI increased by 54%). Evidence that the slowdown of Vietnam s economic growth since the financial crisis may be structural as well as cyclical can be seen in the failure of credit growth to respond to lower interest rates. Under the weight of NPLs, the banks have been reluctant to lend, while demand for credit has waned due to economic uncertainty. Restoring the functioning of the credit markets is considered by many observers to be an essential ingredient for sustaining growth and lifting it towards its full potential. The authorities have been focusing on the restructuring of the banking sector, as well as introducing measures to support the real estate market and reform the SOE VinaLand 27 January

4 sector, both sources of credit problems for the banks; the SOE sector is also considered to exert a broader sclerotic effect on the economy. Weak banks have been merged, the limit on strategic foreign investment in domestic financial institutions raised, and NPLs have been partially addressed through the creation of a state-owned asset management company (the VAMC) to acquire these from the banks. The effectiveness of the VAMC is as yet uncertain, however, and its programme has been criticised for not establishing a sufficiently thorough assessment of the extent of the NPL problem upfront, and for allowing the banks a fairly lengthy five-year period to provide for those NPLs that have been identified. Plans for the SOEs revolve around the greater transparency and accountability of transforming them into joint stock companies. But the goal of equitizing 500 of the remaining 1,200 or so SOEs (40-50 in 2013, including four state-owned commercial banks) seems ambitious. The government s plans include a target of 5.8% GDP growth in Vietnamese property: Reaching a trough? The longer-term prospects for real estate in a faster growing economy like Vietnam should be positive, with growth demanding a broad range of quality property, developed to international standards. However, the slowdown in the economy combined with a tightening of credit conditions has slowed development activity and had a negatively impact on valuations in recent years. During 2013, overall prices for villas and townhouses, in both primary and secondary markets, continued to trend down, and take-up rates remained low. However, there remains a preference for better quality landed projects compared with condominiums. Government policy has supported the latter at the low end, amid general oversupply and downward pricing pressure. Retail sector rents have been pressured by significant new supply coming on stream. In the hospitality sector, occupancy and room rates have been negatively affected by a slowdown in business and leisure travel. Against the background of a stabilised economic situation (inflation and interest rates both reduced, the currency is stable, and growth is showing some signs of recovery), a growing number of observers are becoming increasingly optimistic that following five years of decline, the property market is at or near to reaching a trough. This optimism is supported by government initiatives aimed at supporting the banking and real estate market, adding weight to the prospect of a better balance between end user demand and supply, and an improvement in investment demand. In addition to efforts to strengthen the banking sector, the government has introduced measures specifically targeted at the real estate market. In April 2013 a US$1.4bn interest rate subsidy package targeted at low income housing was introduced. More recently, the Vietnamese prime minister gave his support to plans being drawn up since August 2013 that would make it easier for foreigners to own Vietnamese residential properties. The plans would permit foreigners to buy more than one apartment, for longer than the currently permitted 50-year lease, and extend their rights to buying townhouses and villas with small amounts of land attached. Reflecting current restrictions, the Construction Ministry estimates that just 126 expatriates and foreign organisations had purchased apartments in Vietnam as of 30 June Some market participants expect increasing investment interest from international investors and believe that the Warburg Pincus investment in Vincom Retail may be the first of a number of transactions. In May 2013, US-based private equity house Warburg Pincus led a consortium that pledged to invest around US$200m to acquire c 20% of Vincom Retail, part of Vingroup, a significant Vietnamese real estate developer. With bank deposit rates falling, the stock market having rallied and gold out of favour, it seems possible that residential real estate could become more attractive for local investors. Probably the main risk for the property market remains the weakness of the banking system and its appetite and ability to provide credit. VinaLand 27 January

5 Fund profile VinaLand (VNL) is a closed-end investment company incorporated in the Cayman Islands. It is engaged in property investment and property development, predominantly in Vietnam but with the potential to include surrounding Asian countries. It currently has a portfolio of real estate development projects and real estate assets in Vietnam. VNL was launched and admitted to the AIM market in March 2006, and is managed by VinaCapital Investment Management (VCIM) with VinaCapital Real Estate acting as development adviser. VCIM is part of the VinaCapital Group, a leading asset management and real estate development firm in Vietnam, with a diversified portfolio of US$1.5bn of assets under management (as of 30 June 2013). VinaCapital Group was founded in 2003, and has asset class teams covering capital markets, private equity, fixed income and venture capital, as well as real estate and infrastructure. Within VCIM, the VNL investment team is led by Managing Director David Blackhall (who is manager of the fund) and Deputy Managing Director Anthony House (who is head of development for VCIM). The investment team includes three senior members, supported by 40 staff. The past year has seen key staff changes including a new MD and new DMD. Overall, the team has been restructured to so as to focus more resources on divestment, and land licensing and approvals, intended to expedite the completion of exits. The original investment objective was to achieve medium- to long-term (three-to-five years) capital appreciation and give shareholders an attractive level of income (from interest and dividends). However, the fund is now in a cash return period and intends to make no new investments other than where investment is required for existing projects. The aim is to realise assets while continuing the limited development of selected projects in order to maximise value. While issuing zero dividend preference (ZDP) shares to provide three-year working capital (see page 8), it was also disclosed on 6 December 2013 that VCIM, on behalf of the board, was in preliminary discussions with an unnamed party that could lead to an offer for all or some of VNL s ordinary shares, a disposal of some or all of VNL s assets, or a transaction with a similar effect. The board stressed the early stage nature of these discussions. No further information has been provided and there has been no noticeable impact on the trading of VNL shares in relation to the disclosed NAV. The fund manager: David Blackhall David Blackhall has nearly 30 years of experience in property and construction, the last 20 years of which were spent in real estate fund and asset management. He joined VinaCapital in The manager s view: Bouncing along the bottom The manager sees the real estate market as bouncing along the bottom; although some subsectors may fall further, the general position has probably flattened out. He acknowledges the fact that the realisation programme has made slow progress over the past year however, he believes that 2014 will see acceleration. Meanwhile the additional cash raised from the ZDP issue will make it easier to strike a balance between the interests of investors wanting cash returns and those who are anxious not to destroy value. The cash raised from ZDP takes some of the urgency away from asset sales and should help achieve attractive prices. He still believes that VNL can sell the assets earmarked for disposal at or above NAV. There is a diverse programme of disposals. The portfolio contains five projects considered the crown jewels and the aim is to keep these for long enough to ensure that more of their potential value can be realised. Meanwhile, the hotels are being divested faster; both the Sheraton and the VinaLand 27 January

6 Prodigy Pacific have already been sold and there are three to four others where transactions are possible over the next three months. Although trading conditions are tough, the hotels are relatively attractive to foreign investors because they are income-producing and low risk. The asset disposal programme includes several land bank and residential developments (however the bulk of the proceeds in the plan are from commercial properties). Residential has been very slow over the last 18 months although more recently sales have been running at double last year's figure, but this does not represent a significant absolute level. Where there are sales, the proceeds are absorbed by the costs of running the projects with little or no current contribution to the fund. Once the residential market does come back, the manager believes this can ramp up quickly. VNL has the advantage that there are four or five projects with infrastructure in place, so that it is able to build for sale rather than building speculatively. At the moment it is a case of maintaining these companies and looking for the market to improve over two to three years. The manager reports having seen significant interest in recent years from foreign buyers who, due to restrictions, have been unable to acquire housing in Vietnam. He thinks that opening up to foreign buyers could give the sector a significant boost. Moreover, since March 2013 it has become possible for real estate investors like VNL to sell land lots with completed infrastructure. Licences to do this have been applied for, but are yet to be received; the manager believes this measure could have a positive impact on valuations if and when valuers begin to take this into account. The positive impact is a result of saving development time (perhaps 12 months) while still enabling VNL to earn the majority of the profit that it would on full development. Asset allocation and strategy Portfolio summary As at the end of December 2013 the portfolio consisted of 31 investments, with an aggregate NAV of US$439m. 15 of the 46 investments originally made by the fund since launch have now been divested. The top 10 investments by value account for 72.5% of the total NAV and are listed in Exhibit 3. The portfolio is a mixture of development and operating assets, diversified by sector and region. The portfolio contains seven operating assets, within the hospitality sector (9.0% of NAV in aggregate). The majority of the portfolio is at various stages of development (licensing/land banking stage 7.3%, planning stage 59.0% and development 27.8%). Given this profile, the fund has a relatively low level of recurring income (from the hotel investments) while revenues from the sale of residential units have been subdued, though showing signs of increase from that low level. At 30 September 2013 (the last available figures) VNL s share of the projected outstanding investment in development projects through 2015 was US$40m. VinaLand 27 January

7 Exhibit 3: Top 10 investments as at 31 December 2013 Investment Location Sector VNL stake VOF stake Combined Minority Site area % of VNL Status stake ha NAV Century 21 South Residential 75.0% 25.0% 100.0% 0.0% % Planning/licensing Danang Beach Central Residential 75.0% 25.0% 100.0% 0.0% % Construction/sales Pavilion Sq South Mixed Use 90.0% 0.0% 90.0% 10.0% % Land compensation Dai Phuoc Lotus South Township 54.0% 18.0% 72.0% 28.0% % Construction/sales VinaSquare North Mixed Use 46.5% 15.5% 62.0% 38.0% % Planning/licensing Times Square North Mixed Use 65.0% 0.0% 65.0% 35.0% % Planning/structuring Aqua City South Township 40.0% 0.0% 40.0% 60.0% % Land bank-planning/basic infrastructure World Trade Centre South Township 61.0% 20.3% 81.3% 18.7% % Construction/sales Trinity Park North Residential 75.0% 25.0% 100.0% 0.0% % Planning/licensing Green Park Estate South Mixed Use 47.3% 34.1% 81.4% 18.6% % Planning/structuring Total of top 10 investments % Remaining investments 27.5% Total portfolio 100.0% Source: VNL Investment structure and valuation policy Each of VNL s property investments is held within a Vietnam incorporated entity or other investment structure, which in turn is owned by an offshore holding company, the location of which is determined by a number of factors, including regulatory structure and tax considerations. A number of VNL s offshore holding companies include VinCapital Vietnam Opportunities Fund Ltd as a minority joint venture partner. Land assets are held at cost (less an impairment adjustment) until they receive an investment licence or similar documentation that represents a legally enforceable and transferable right of ownership. At 31 December 2013, 8% of NAV represented assets not yet revalued, and held on this basis, as prepayments. Once title has been received, assets are included in the annual revaluation programme. Revaluations are scheduled in a way that sees a part of the portfolio independently valued at the end of each quarter and every portfolio independently valued at least once in the preceding year. VNL uses a range of internationally recognised independent valuers, with two independent valuations taken at any valuation date; these are considered by the manager, which makes a recommendation to VNL s valuation committee, which makes a recommendation to the board for approval. In addition to the annual revaluation cycle, the manager reviews the entire portfolio on a quarterly basis to determine whether there have been any material changes to projects or any other developments that would indicate a material change to property values. Divestment has been slower than expected VNL has completed five divestments since the November 2012 EGM, with combined net proceeds of US$15.3m and generating a US$42.0m reduction in project level bank debt consolidated within the VNL balance sheet. VNL has made less progress with the divestment programme than initially expected, reflecting slower than expected economic recovery and the continued weakness in the real estate market; the weakness in market values since the programme was first announced also means that the amounts targeted for realisation and distribution by FY15 are now slightly reduced: VinaLand 27 January

8 Exhibit 4: VNL s estimated realisation and distribution profile Revised distribution profile Original distribution profile US$m Total Q3/Q Total Q3/Q413 Opening cash balance Collection from outstanding receivables Cash from exits Management fee Operating expenses Future capital commitments Available for distribution Estimated realisation fee Closing cash balance Source: VNL Over the past four to six months there has been an increase in enquiries from prospective buyers of projects, and the manager expects 2014 to show much greater progress if current market conditions continue. During September 2013, VNL signed two sales contracts to divest Hao Khang and Prodigy Pacific which have subsequently closed, and during November and December signed two further term sheets of which one has since been converted to a sales contract. At the same time, residential sales performance is showing signs of improvement, albeit from low levels; October and November, the last months reported, were the best for two years. VNL now estimates it will be able to divest up to US$227m (was US$250m) worth of assets by the end of After deducting management fees, operating expenses, future capital expenditure commitments and accrued performance fees, it is targeting shareholder returns of up to US$125m (was US$142m). If we assume no increase in values before June 2015 and that future sales are achieved at NAV (the five realisations to date have been made at an average c 4% premium to NAV), nearly half the current NAV (US$439m at 31 December 2013) would remain at the end of the process. The manager remains hopeful that VNL will continue to sell assets at valuations at or above NAV. On the assumption that the disposal and distribution programme is successfully implemented, the current market cap of US$224m, adjusted for US$125m of distributions, represents a discount of 68% to the residual net assets of US$314m (the current US$439m less the distributions). Exhibit 5: Realisations since November 2012 Project Location Property type VNL ownership Exit announced Net proceeds Exit value/nav 30 Nguyen Du Hanoi Operating office 65.0% Jan-13 US$3.2m 6.5% Sheraton Hotel Nha Trang Operating hotel 66.7% May-13 US$3.1m 17.1% Signature One HCMC Residential development site 70.0% Jul-13 US$2.7m -3.3% Hao Khang HCMC Residential development site 70.0% Oct-13 US$4.6m 2.9% Prodigy Pacific Hanoi Operating hotel 100.0% Dec-13 US$1.7m -5.5% Total/average US$ % Source: VNL Future cash returns are most likely to be effected via continuing share repurchases in the first instance, certainly until the discount narrows more substantially to below 25%. If a larger cash sum is realised, then VNL is more likely to consider other options, including a tender offer. The board has detected little enthusiasm for dividends among shareholders. Working capital flexibility from the ZDP issue Paradoxically, as part of its efforts to achieve its realisation programme and distribute proceeds to shareholders, while continuing to create value within the portfolio, VNL has recently raised gross proceeds of 15m (US$24m at $1.6/ ) by placing (via a wholly owned subsidiary) 15m zero dividend preference (ZDP) shares at 100p. The ZDP has a final capital entitlement of 126p paid in 2016 (a gross redemption yield of 8%) and is listed on the Official List of the LSE. The proceeds will be used to assist the refinancing of project level debt facilities as these mature, to fund potential capital investments and for general working capital purposes. VinaLand 27 January

9 VNL had no fund level debt prior to the ZDP issue and a relatively low level (16% of NAV) of nonrecourse project level debt (within the consolidated subsidiaries). At the end of FY13, the consolidated cash balance was US$16.5m (FY12: US$40.1m), of which US$3.4m (FY12: US$10.8m) was held at the company level and the balance within the subsidiaries. Operating cash flow (before changes in working capital) was negative US$19.5m in FY13 (FY12: negative US$10.9) reflecting the bias towards development-stage assets, with relatively little recurrent income; revenues are provided by the hotel assets and residential property sales. At 31 December 2013, post the ZDP issue, fund level debt (represented by the ZDP) was 5.6% of NAV with project level debt accounting for an additional 15.5% of NAV. Management is working to restructure the remaining project bank debt, on which the interest rates payable range between 13% and 15%, and believes that savings are achievable. In order to renew or renegotiate existing debt, it is now necessary for that debt to first be repaid in full, creating a short-term working capital requirement in excess of the cash resources currently available to the fund. VNL believes it will also have more flexibility to inject capital into project companies to improve the terms on which they can be refinanced, expedite their development licencing, or restructure them for divestment. At the very least, the additional funds should help ensure that VNL is able to divest of assets in an orderly manner without appearing a forced seller. Performance: Beginning to anticipate improvement The share price increased by 21.4% in 2013, only slightly (4.2%) underperforming the broader Vietnamese stock market index (the VN Index), and despite a continuation of challenging conditions in the real estate market and further decline in NAV per share (11.5%). So far in 2014, the shares have increased by 4.3% compared with 7.7% for the VN Index. In 2013, the VN Index performed well relative to the weakness of the MSCI Asia ex Japan (+18.1% relative), perhaps reflecting the stabilisation of the Vietnamese economy and currency, and declining interest rates. Relative to the MSCI World Index for global equities, performance remained weak. The unaudited NAV per share of US$0.92 at 31 December 2013 was unchanged from 30 September 2013, the first quarter since Q312 when it has not declined and perhaps indicating a more stable environment. Exhibit 6: Investment company performance to 31 December 2013 Price, NAV and benchmark total return perf, one year rebased Price, NAV and benchmark total return performance (%) Dec/12 Jan/13 Feb/13 Mar/13 Apr/13 May/13 Jun/13 Jul/13 Aug/13 Sep/13 Oct/13 Nov/13 Dec/13 VNL Equity VNL NAV Vietnam VN Index USD m 3 m 6 m 1 y 3 y 5 y VNL Equity VNL NAV Vietnam VN Index USD Source: Thomson Datastream, Edison Investment Research VinaLand 27 January

10 Exhibit 7: Share price and NAV total return performance, difference vs benchmarks (% points), to 31 December 2013 One month Three months Six months One year Three years Five years Price versus MSCI Vietnam Index (US$) (5.2) (4.2) (62.2) (60.9) NAV versus MSCI Vietnam Index (US$) 0.3 (3.8) (8.5) (37.2) (41.7) (98.2) Price versus MSCI AC Asia Ex Japan (7.3) 18.1 (58.0) (120.2) NAV versus MSCI AC Asia Ex Japan 1.1 (3.4) (10.5) (14.9) (37.5) (157.4) Price versus MSCI World Index (14.9) (5.9) (93.9) (109.7) NAV versus MSCI World Index (2.2) (8.1) (18.2) (38.9) (73.3) (147.0) Source: VinaLand, Thomson Datastream, Edison Investment Research Discount: The discount has started to narrow Mirroring the deterioration in prospects for the Vietnamese real estate market, the emergence and steady widening of the discount since late 2006 (when VNL stood at a premium to NAV of more than 50%) continued through to a peak discount to NAV of 65% in late The discount peaked around the time of the EGM approval of the new investment and distribution strategy, and has subsequently narrowed to just below 45%. As we discuss above, the discount narrowing coincides with growing optimism that the steady decline in the Vietnamese real estate market may be at or near an end. Even if the market is unable to generate any material improvement, a stabilisation of values and an increase in market liquidity would provide a much improved backdrop for VNL s programme of asset realisations and distribution. Accelerated distributions of proceeds generated by sales at or approaching current valuations would provide substantial support for further discount narrowing. Since the EGM in November 2012, VNL has spent US$1.6m to buy back 3.8m shares. The last purchase was 300k shares on 4 November 2013 (see Exhibit 1 on page 2). Exhibit 8: Discount over three years Dec/10 Feb/11 Apr/11 Jun/11 Aug/11 Oct/11 Dec/11 Feb/12 Apr/12 Jun/12 Aug/12 Oct/12 Dec/12 Feb/13 Apr/13 Jun/13 Aug/13 Oct/13 Dec/13 Source: VinaLand, Thomson Datastream Capital structure and fees The fund has 479.6m ordinary shares outstanding and 15.0m zero dividend preference (ZDP) shares. The ZDP shares were issued by a wholly owned subsidiary of VNL, VinaLand ZDP Ltd, established for this purpose. The funds raised are on-lent to VNL. The ZDP shares are issued at a price of 100p, with a final capital entitlement of 126p paid in 2016, a gross redemption yield of 8%. Additional security for the repayment of the loan made to VNL by the issuer has been provided in the form of a Reserve Account; this is a controlled bank account, in favour of the issuer, into which VNL will deposit 25% of any distributions made to VNL ordinary shareholders. Share buy-backs of up to US$1m per month are allowed without the need to deposit funds in the Reserve Account. In practice, VNL does not intend to pay dividends to ordinary shareholders during the three years that the ZDP shares are in issue. VinaLand 27 January

11 The fund has no limits on its authority to borrow, although prior to the ZDP issue, VNL had only project level debt (on a non-recourse basis). The company was established with a life of seven years but is now subject to a shareholder continuation vote every three years; the next continuation vote is due in November To reflect the adoption of an accelerated asset realisation strategy at the November 2012 EGM, the old management fee based on a percentage (2%) of NAV was replaced with a declining, fixed fee structure. This was set at US$8.25m pa for the first year, ending 21 November 2013, subsequently reducing to US$7.5m in year two, and US$6.25m in year three. Thereafter, the management contract and fee are subject to renegotiation, depending on the outcome of the continuation vote scheduled for November The new management fee structure generated an initial saving of c 25% (using net assets at the time) and sought to balance the need to reward the manager while encouraging a timely realisation of assets. To the same end, the previous performance fee was abolished and performance fees accrued over previous years but not paid (US$28m) were deferred, and replaced with a realisation fee. The manager is entitled to realisation fees, up to an amount equivalent to the deferred performance fees (US$28m) based upon distributions made to shareholders out of contracted realisations of assets, during the period up to November There is no payment of deferred fees until US$50m has been returned to shareholders (US$1.63m returned to date). The total expense ratio for the last financial year was 2.15% (FY12: 2.39%). The board For the EGM in November 2012, the board undertook a review of VNL s corporate governance in relation to evolving international standards and practices since launch. This resulted in a number of changes including a commitment to enhanced transparency for shareholders, the introduction of annual general meetings (from November 2013), a reduction in the size of the board from seven members to five, and the introduction of a policy of director rotation, with one-third of directors retiring each year and standing for re-election at the AGM. The five members, all independent of the fund manager, are Michel Casselman (chairman), Nicholas Brooke, Nicholas Allen, Charles Isaac and Stanley YC Chou. The average length of service for the directors is approximately three and a half years. VinaLand 27 January

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