VinaLand Limited Annual Report. VinaLand Limited Annual Report

Transcription

1 VinaLand Limited Annual Report 2012 VinaLand Limited Annual Report

2 VinaLand Limited Annual Report CONTENTS Section 1 Introduction / Section 2 Manager s report / Financial highlights 3 Performance highlights 4 Chairman s statement 5 Investment environment 6 Portfolio performance 8 Top holdings 10 Management team 16 Section 3 Financial statements and reports / Board of Directors 20 Governance report 22 Independent Auditors report 27 Consolidated financial statements and notes 30 Section 4 Additional information / Investing structure 108 Valuation process 109 Historical financial information 112 Overview and details 113

3 FINANCIAL HIGHLIGHTS VinaLand Limited Annual Report 2012 Financial Highlights 3 Throughout FY2012, VNL continued to focus on the realisation of assets with the objective of making distributions to shareholders. As a result of the prolonged slowdown in Vietnam s real estate market, residential sales and wholesale divestment activity has been extremely challenging and investment values have been impacted over the past twelve months. As a result, proceeds from the divestment of projects and residential sales were down. Introduction/ Net asset value at 30 June 2012 $546.3 m NAV per share at 30 June 2012 $1.11 Performance summary 30 June 2012 % Change 30 June 2011 % Change 30 June 2010 Number of assets NAV per share (USD) % % 1.36 Share price (USD) % % 0.77 Discount 56.8% 42.5% 43.3% VNL has fully divested 10 projects, achieved one partial exit since inception and continued its programme of residential unit sales. During the past 12 months, only two projects were sold, which is a result of buyers withdrawing from the market and delaying closures until macroeconomic and property market volatility stabilise. Debt remains low, with only 15 percent of NAV on a consolidated basis. The Company has no debt at the fund level. A share buyback programme was initiated in October 2011 and will continue subject to availability of cash, and ongoing support from investors as to the most appropriate method of providing distributions. All shares purchased under the programme are cancelled.

4 VinaLand Limited Annual Report 2012 Performance Highlights 4 PERFORMANCE HIGHLIGHTS In FY2012 VNL continued with its realisation phase, whereby there were no new investments, only investment into existing projects requiring capital. The focus remained on divesting projects and selling residential product to the local market however both the macroeconomic conditions and property market experienced extreme volatility and valuations came under downwards pressure making exits at acceptable valuations difficult. As a result, and despite ongoing funding commitments with existing projects and covering operating expenses VNL did not fire sale any assets and instead chose to weather the storm until market conditions improved enabling exits at appropriate valuations for the portfolio. As VNL progressed towards the end of the initial term, one of the primary objectives of the Board was to ensure the Fund was restructured in such a way to change the investment (divestment) strategy in conjunction with a revised incentive structure with reduced fees that would be beneficial to shareholders. Residential portfolio 30 June June 2011 Residential projects with active sales 8 7 Units offered to market 621 1,305 Total residential sales commitments and reservations (USDm) USD 28.8 million USD 74.6 million During the year, VNL disposed of its 49% equity interest in the Savico Project for a total of USD18.7 million. The book value of the net assets at the disposal date was USD16.1 million. VNL also divested its 75 percent interest in Clear Interest Group Limited which held a stake in the owner and operator of the Legend Hotel, a five-star hotel located in Ho Chi Minh City, and an adjoining office building for USD22 million. The book value of the net assets at the disposal date was USD19.5 million. Both transactions resulted in a gain on disposal. Divestments Period NAV at exit (USD mln) Sales proceeds (USD mln) Exit IRR Savico Tower Q % Legend Hotel Q %

5 VinaLand Limited Annual Report 2012 Chairman s Statement 5 CHAIRMAN S STATEMENT Nicholas Brooke Chairman The Board remains highly cognizant of VNL s declining share price and the widening of the share price discount, and has responded to these challenges by directing investments so that cash is available to return to shareholders. Dear Shareholders, Over the past twelve months, Vietnam has continued to weather economic conditions exacerbated by long term high interest rates and inflation, and currency depreciation. However, after hitting a peak of 23 percent in August 2011, Vietnam s CPI has steadily receded through The government s adoption of a crawling peg for the currency has also helped mitigate inflation pressure and stabilized the VND. Despite better year-to-date economic factors, lower interest rates, and a stable currency which are delivering positive signals for the economy, it will likely take more time before these improvements are reflected in the real estate market. Current lending rates for medium term loans from commercial banks sit at between 15 and 17 percent, down from over 20 percent only a few months ago. However, banks remain cautious in lending for real estate related projects due to growing levels of non performing loans on their balance sheets. Until these are cleared out, it is difficult to foresee a sustained improvement in the real estate sector. The financial results of VNL for the year to 30 June 2012 reflect the impact of Vietnam s economic situation on the Group s activities; with write downs being recorded across most investment properties. As a result VNL s audited NAV per share fell from USD1.33 at 30 June 2011 to USD June VNL s share price has suffered as a result of both domestic issues and global economic events that have seen investors pulling back from emerging markets. The Board remains highly cognizant of VNL s declining share price and the widening of the share price discount, and has responded to these challenges by directing investment manager to divest investments so that cash is available to return to shareholders. This has not been an easy task, given market conditions. While some divestments have been made, and approximately sixteen million shares have been purchased since the commencement of the buy-back programme in October 2011, the amount of cash raised and distributed falls well short of the amount of funds that are needed to buoy the share price and close the share price discount. Notwithstanding the results achieved to date, the Board remains committed to a strategy of divesting assets and returning capital to shareholders over the foreseeable future. Having also consulted with a number of shareholders regarding the Company s continuation vote, the Board believes that this strategy is also in line with what the majority would like to see as a change in VNL s investment policy. On 23 October 2012 the Board announced details of proposals regarding continuation of the Company for the next three years. These proposals are the culmination of extensive consultation with the Company s shareholders, corporate advisers and the investment manager over the last year, and represent the most significant change to the Company since it was established in If the proposals are approved VNL will make no new investments and will distribute all surplus cash to shareholders over a realization period of up to three years. In addition to the changes to the investment and distributions strategies, the investment management agreement has been revised to strongly align the investment manager s interests with shareholders interests, and a range of corporate governance enhancements will be made to align the Company s practices with recognised best practices elsewhere. At the conclusion of the realization period shareholders will be given another opportunity to reassess the Company s strategy and vote for its further continuation. The Board has carefully considered the broad range of options available as regards continuation and believes that the proposals being put forward are in the best interests of shareholders. We highly appreciate the feedback that shareholders have provided over the last year and look forward to your continuing support. Introduction/ Nicholas Brooke Chairman VinaLand Limited 5 November 2012

6 VinaLand Limited Annual Report 2012 Investment Environment 6 INVESTMENT ENVIRONMENT Economy One of Vietnam s most longstanding issues; inflation, subsided substantially during the fiscal year, a stark contrast to the double digit levels recorded over the past two years. For June 2012, CPI actually fell by 0.3 percent, marking the first decline since March 2009 and brought calendar year-to-date inflation to 2.5 percent. However, one area of the country that continued to witness pricing pressure was food and food stuffs, which are more heavily influenced by global supply and demand and less from domestic pressure. Notably, however, during the first six months of 2012, Vietnam s GDP growth failed to meet the government s initial annualized target of 6.0 percent, finishing the period ended 30 June 2012 at 4.7 percent. However, government officials quickly loosened monetary policy in an effort to mitigate further reductions in domestic growth. Despite success in reigning in inflation, Vietnam s officials issued five rate cuts during the year, lowering the refinancing rate by 100 bps to 11 percent by the end of the second quarter. Notwithstanding, many banks have remained resistant in refinancing or adjusting loans specifically within the real estate industry. Overall business activity continued to face difficulties, mainly from a lack of access to credit despite the lowered interest rates. Banks became more resistant to offering new loans to domestic companies due to their rising bad debt ratios. According to the State Bank of Vietnam (SBV), new outstanding credit growth reached just 0.8 percent by the end of June This liquidity trap could continue to curb domestic growth throughout the rest of The VND closed at a reference rate of approximately VND20,920 versus the USD at 30 June 2012, nearly unchanged from a reference rate of VND20,600 versus the USD at 1 July Demand for Vietnamese exports remained strong throughout the year, resulting in a trade deficit of just USD600 at 30 June 2012, far less than USD6.7 billion in the previous year. However, reported inward remittances were down nearly USD500 million during the first half of 2012, due to the persistent global economic slowdown, which could lead to increased foreign currency exchange risk into Real estate market Vietnam s real estate market continued to slow over the past 12 months as high interest rates and restricted access to financing impacted on both developers and prospective home-buyers. As inflation and interest rates increased during the second half of 2011, Vietnamese buyers preferred gold or deposited their VND currency in high-yielding term deposits achieving interest upwards of 14 percent. Over the medium term the fundamentals remain sound for the lower to mid price range residential products as continued urbanisation of this large population will create demand however the market is currently at a very low point in the cycle. Should the macroeconomic volatility continue to reduce and interest rates continue to decline this should provide some stimulus to the residential property market and in fact the real estate market overall. Currently, Vietnamese prospective buyers are waiting to see if pricing reduces before investing in property as developers have been offering incentives to prospective buyers.

7 VinaLand Limited Annual Report 2012 Investment Environment 7 The condominium sales market has been the hardest hit of all the residential products and has experienced a reduction in prices of around percent during the 12 months ending 30 June 2013 in the mid-range segment. There has been an oversupply of stock in this sector as both local and some foreign developers have been unable to sell their apartments. A number of local developers have slowed down or stopped their projects as the cost of debt has been significant. VNL has little exposure in condominiums with only two projects under development, both in Danang. The Azura project has sold 69 out of 225 units while the 45 unit Cham development has been halted. The landed property (villa and townhouse) market has also been very challenging however less so than condominiums. This is primarily because the local buyers generally prefer land and a house rather than high rise apartments. This landed property sector is also preferred by VNL as it offers significant flexibility with phasing of the development and also enables the developer to pre-sell and then selectively build houses once they have been sold which also minimises the level of debt during construction. Pricing in this sector has also been under pressure and some projects have experienced price reductions of percent over the past 12 months, however other incentives are sometimes offered such as extended payment terms or rental guarantees. Manager s report / Vietnam s retail sector saw a significant increase in supply during 2012, as new shopping centres opened in both Hanoi and Ho Chi Minh City. High inflation, however, started to take a toll on consumer spending. Retail sales growth at the end of June 2012 slowed to 16 percent year-on-year (adjusted for inflation) versus 22 percent yearon-year during the same period of To date, retail rents have held steady at CBD shopping centres, dropping only in outlying areas. CBD retail occupancy remains high, averaging over 85 percent in Ho Chi Minh City and Hanoi, and is increasingly the preserve of luxury and high-end brands. Long-term leases are gaining popularity as both international and domestic brands look to expand their market presence. Vietnam s retail development pipeline is substantial, with about one million sqm of of new retail space to be developed in the next two to three years. Foreign retail operators are interested in entering the market given its long-term potential. The current pace of development is slow, however, given continued high interest rates and tight liquidity as banks are not able to lend to real estate developers. In the hospitality sector, Vietnam has had mixed results despite a slow but steady recovery in tourism numbers since the 2009 economic slowdown. Increased hotel development has led to more hotel rooms, thus impacting the occupancy and room rate growth in a number of locations. Overall, the city based hotels have performed better than resort style hotels which are sometimes affected by the frequency of flights into remote locations such as Nha Trang. The three and four-star hotel market is likely to remain more stable, given greater demand from domestic travellers.

8 VinaLand Limited Annual Report 2012 Portfolio Performance 8 PORTFOLIO PERFORMANCE VinaLand Limited ( VNL ) during the year ended 30 June 2012 made progress on its strategic objectives, despite a very difficult market environment. The Fund s most important assets over the medium to long term continue to be the significant portfolio of suburban residential township projects that will provide several means of revenue via land divestment, sales of residential products and an outright sale. Net asset value and share price VNL at the end of June 2012 had an audited NAV of USD546.3 million, or USD1.11 per share. This was a decrease of 16.5 percent from June 2011, when VNL had an audited NAV per share of USD1.33. The share price at the end of June 2012 was USD0.48, a decline of 37.7 percent from the share price at the end of June 2011 of USD0.77. The Fund s share price trading discount widened during the year, reaching 56.8 percent as at 30 June The challenging macroeconomic conditions both globally and in Vietnam combined with a significant slowdown in the real estate market have resulted in investors becoming more cautious and implementing investment strategies that are more risk adverse. This investor sentiment has negatively impacted emerging markets and in particular the property sector, therefore adversely impacting VNL s share price. Since the onset of the share buyback programme initiated in October 2011, VNL has purchased and cancelled over 9.0 million shares, representing 1.8 percent of originally issued shares. As at 30 June 2012, VNL has spent USD5.4m repurchasing its shares in the open market at an average discount to NAV per share of 50.8 percent. The Board and Manager continue to be fully committed to this distribution programme. Residential sales, market and development update The FY 2012 has been a very challenging year for the whole real estate market in Vietnam. Volatile macroeconomic conditions, restricted lending for real estate, high interest rates and inflation, depressed buyer demand and weak confidence have significantly affected almost all market players from local and foreign developers to secondary investors. Many developers experienced pressure on margins as lower than forecast sales revenue did not keep up with higher construction and financing costs. Buyers of residential products delayed their purchase decisions in expectation of additional price reductions, lower borrowing costs, and improved economic climate. Amid these difficult market conditions, VNL s residential sales were also substantially impacted. Higher financing costs also caused some difficulty with existing purchasers struggling to meet the increased mortgage repayments and progress payments in a timely manner which did result in some sales contracts being terminated. VNL has worked to continually manage this issue and created more flexible payment structures for residential customers where possible. During FY2012, VNL saw 123 sale and purchase agreements signed with a total sales contract value of approximately USD29 million. VNL s residential sales have been bolstered by the VinaLiving brand despite the challenging real estate market. The VinaLiving brand was created by VinaCapital to be Vietnam s first brand that provides a tailored-living product dedicated to the Vietnam market. The VinaLiving Property Centre was opened on 16 July 2011 and is used to market and sell VNL residential house and apartment products. In September 2011, VNL launched 40 villas at The Point project within its flagship project Danang Beach Resort with prices ranging from USD250, ,000 per unit to target the mid tier affordable segment in the Danang market. To date, over 50% of the units have been reserved with deposits. In October 2011, VNL officially launched the My Gia project with over 700 land plots in Nha Trang City, a highly popular coastal city and tourist destination in Vietnam. The project is one of the first modern townships in the centre of Vietnam and has achieved good sales pace even during market slowdown. In Q2 2012, the Azura Tower - the first residential tower of the World Trade Centre Danang project was completed with handovers now taking place. Pre-lease commitment for the retail centre in phase 2 has reached 65% should this component proceed to development. VNL will continue to use the VinaLiving brand to sell residential projects comprising land, landed houses, and condominiums owned by VNL. Net asset value at 30 June 2012 $546.3 m NAV per share at 30 June 2012 $1.11 Decrease 16.5 %

9 VinaLand Limited Annual Report 2012 Portfolio Performance 9 For projects in the planning stages, VNL continued to proceed with completing statutory requirements and obtaining necessary licenses to enhance the projects value for future divestment or development. For example, in the final quarter of 2011, the Century 21 Nam Rach Chiec project received a revised 1/500 master plan in principle approval and investment licence. Key licences have now brought the site to an advanced stage, ready for development and or divestment in The opening of the Thu Thiem tunnel in November 2011 has also significantly improved access to the site as well as to other VNL projects in District 2 and District 9 of Ho Chi Minh City. Since March 2012, the Vietnam Government introduced several aggressive policies aimed at controlling inflation and stabilizing the macroeconomic environment which seem to have been successful. Inflation has fallen to reach 6.9 percent year-on-year as at 30 June 2012, while the VND has remained stable thoroughout the past 12 months. In June 2012, the short-term VND deposit rate was capped at 9 percent by the State Bank of Vietnam in an attempt to lower the lending rate. With inflation subsiding, interest rates coming down, and residential prices stabilizing, buyers are expected to shift from depositing savings in banks towards investing in real estate. However, the improving mood has not yet translated into sales as buyers are still psychologically reluctant. There remains an oversupply of condominiums across the country in most locations while quality landed properties with good locations and reasonable prices are still generating some interest from buyers. The market will continue to be slow throughout in the next 12 months, as government policies need time to take effect and long-term stability of the economy and market is needed in order to improve home-buying confidence. The condition of the banking sector will also play an important role in the recovery of the property market. Manager s report / In the retail sector, Vietnam s economic conditions in conjunction with challenging distribution and logistics have brought the country s ranking down in A.T. Kearney s Global Retail Development Index for the fourth consecutive year. However, with the removal of the restriction on 100 percent foreign ownership and the lure of Vietnam s large population, international retailers remain interested in the country including groups such as AEON. Existing retailers like Lotte Mart, Big C, and Saigon Co-op, along with many other general market chains are still working on their medium term expansion plans. The hospitality sector has experienced mixed results. According to a CBRE report, during the first half of 2012, over 3.4 million foreigners visited Vietnam, a 14 percent increase year-on-year. In Hanoi, due to seasonal factors, a number of key 3-star hotels were in demand during the high season and achieved positive growth while higher end hotels saw decreases in average daily rates on a year-on-year basis, specifically a 15.9 percent decrease for 4-star hotels and a 6.8 percent decrease for 5-star hotels. In Ho Chi Minh City, future increased supply will impact the hospitality sector, with an estimated 2,581 new rooms becoming available throughout 2012 and 2013, assuming these projects are actually completed which may not be the case as some are likely to be delayed. In short, there are mixed result across the hotel sector and VNL assets are experiencing similar results. VNL-owned hotels average room rates have generally decreased in-line with others across 3-5 star hotel segments. Despite lower rates, occupancy still decreased slightly. Difficult economic conditions coupled with additional supply have impacted both the business and tourism sub-sectors. In terms of debt financing, VNL s total outstanding debt at the project level is only 15 percent of NAV and there is no debt at the fund level. Some of these loans do mature in the short term, therefore, there is some focus towards ensuring that refinancing is available. Divestment phase VNL invested in a total of 46 real estate projects across the major urban centres of Vietnam, including operating hotels, residential, retail, office, mixed-use and township/ land banking projects. The Fund has since divested ten projects and held 36 projects as at 30 June Following the acquisition phase, VNL has focused on obtaining investment licences and development approvals for its projects to add value to its land and development projects practices. The current strategy is to divest assets in a controlled manner. Current strategy VNL is now in a realisation phase to enable distributions to shareholders. The two primary means of divestment have been via the development of residential for-sale products (apartments and landed property) to Vietnamese homebuyers and the wholesale divestment of land or projects under development to local and foreign investors. However, both forms of exit have become increasingly challenging over the past 12 months ending 30 June 2012, as buyers have withdrawn from the market. VNL s strategy remains to continue, albeit at a slower pace, with a small number of landed property developments where continuing progression of these developments will enhance the Fund s potential for a full exit of the investment or bringing in co-investors. The complete divestment of other assets will be aggressively pursued. VNL will not start new projects or commit to new project level debt while interest rates remain high.

10 VinaLand Limited Annual Report 2012 Top Holdings 10 TOP HOLDINGS Investment Location Sector VNL ownership VOF ownership Site area (ha) % of VNL NAV VNL NAV (USD mln) Bank debt (VNL Portion) (USD mln) Outstanding VNL investment commitments (USD mln) Current status 1 Danang Beach Resort Central Residential 75.00% 25.00% % Construction and sales underway 2 Century 21 South Residential 75.00% 25.00% % Planning / licensing underway 3 Pavilion Square South Mixed Use 90.00% 0.00% % Land compensation underway 4 Dai Phuoc Lotus South Township 54.00% 18.00% % Construction and sales underway 5 Times Square Hanoi North Mixed Use 65.00% 0.00% % Planning / structuring underway 6 VinaSquare South Mixed Use 46.50% 15.50% % Planning / design underway 7 My Gia Township Central Township 53.25% 17.75% % Construction and sales underway 8 Aqua City South Township 40.00% 0.00% % Land bank - Planning/ basic infrastructure 9 World Trade Centre Central Mixed Use 75.00% 25.00% % Construction and sales underway 10 Trinity Park South Residential 75.00% 25.00% % Planning/ licensing underway Total of top 10 Investments (USD million) 68.8% Remaining Investments (USD million) 31.2% Total portfolio (USD million) 100.0% Bank debt: VNL s portion of current outstanding bank finance at the local investment (project) vehicle Outstanding VNL investment commitments: Expected remaining equity commitments for VNL. These forecast commitments are subject to change should local authorities amend policies relating to licensing approvals and capital contributions or should debt be utilized instead of capital or should an investment partner not participate. Some of the Outstanding Investment Commitments may not apply should VNL sell or choose not to proceed to develop the property. Due to a co-investor on phase 1 of WTC, the project is broken down into two separate phases. The ownership percentages of this project reflect the total portion of land area over both phases owned by the funds.

11 VinaLand Limited Annual Report 2012 Top Holdings 11 Manager s report / Danang Beach Resort The 260ha site comprising two parcels, a 50ha beachfront and a 210ha inland ha lot separated by the coastal highway, was acquired in mid The project broke ground in January 2008 with the construction of an 18-hole golf course, The Dunes Course designed by internationally renowned golf legend and designer Greg Norman. The golf course and clubhouse opened in April 2010 and soon received international recognition by winning the Best Golf Development in Vietnam and in Asia Pacific by Bloomberg s Asia Pacific Property Awards Anchored by the award winning golf course, a number of residential villa projects have been developed and achieved good early sales, including The Ocean Villas, The Cham, The Dune Residences, Norman Estates and the Point Residences comprising a total of 229 villas and 45 condominiums. In conjunction with sales, VNL has focused its attention on managing payment schedules for buyers to minimise defaults. Despite the difficult environment and high interest rates, sales have been challenging. For the Ocean Villas which commenced in 2009, 90 out of 93 non-beach front and 10 out of 17 beach-front launched units have been sold. For the Dune Residences, 12 out of 15 launched units have been sold with handovers beginning in May In addition, 16% of the launched units of the remaining projects have been sold. Century 21 Century 21 was acquired in 2006 because of its location close to a new traffic corridor to the CBD. The Thu Thiem tunnel which was part of the Ho Chi Minh City East-West Highway, running from the South West to the North East of the city, opened in November The opening of the tunnel has made the site much more accessible to the city s CBD. In the final quarter of 2011, the Century 21 Nam Rach Chiec project also received a revised 1/500 Master plan and Investment Licence. Key licences have now brought the site to an advanced stage, ready for initial infrastructure development. The strategy is to divest the commercial portion and find co-investors to develop the residential component. On-site work will not commence until a co-investment partner is secured or market conditions strengthen. The surrounding District 2 area, has seen improvements to infrastructure, which have created interest among domestic and foreign investors. Preliminary infrastructure plans are being designed and VNL has initiated ongoing discussions with two potential co-investment partners for the residential Phase 1 and commercial Phase 2 components of the project. Project Summary Sector Area Location History Residential (integrated resort residential). 260ha Danang, central Vietnam Acquired in June 2006, cleared site, under development Investment License received December 2008 Ground breaking in January 2008 Dunes Golf course opened in April 2010 Project Summary Sector Area Location Residential (25ha) and retail (5ha). 30ha; approved GFA 822,781 sqm District 2, Ho Chi Minh City. History Acquired in June 2006 Site cleared and compensated in Jun 2008 Revised Investment Licence received December 2011 Revised masterplan submitted and awaiting approval NAV USD75.4 million. NAV USD74.0 million. Investment rationale Unique mixed use, seaside integrated project with various residental villa projects and one condominium building under construction and sale. Investment rationale A 30ha site is located along new infrastructure corridor in a new desirable suburban area.

12 VinaLand Limited Annual Report 2012 Top Holdings 12 Pavilion Square Located in District 1, Ho Chi Minh City, this mid to high-end for sale freehold residential project with a retail centre is situated in the city centre. Site compensation is underway and approximately 60 percent complete. Clearance has proven to be an issue and has significantly delayed the progress of this project. However, over the last six months, progress has been made in obtaining clearance. Compensation and land clearance should be completed in A new development concept was approved in H to enable the new schematic design to be submitted for approval with the authorities. Following the expected completion of compensation for the residential parcel, and when the property market improves, VNL will commence pre-sales of the apartment complex. However this will be reliant on adequate cash flow and completed pre-sales. Additionally, the Fund will also seek to divest the retail component of the project. Sourcing potential investors is currently underway and VNL will not begin construction until the market environment improves. Dai Phuoc Lotus The Dai Phuoc Lotus Township was acquired due to its attractive location on an island in a future suburban region adjacent to Ho Chi Minh City. The resort residential environment, with transport by both road and boat available to Ho Chi Minh City, will attract second homebuyers as well as young families. The strategy is to develop the first of six zones of the 200ha site over a period of five to seven years, in conjunction with partial wholesale divestment to co-investors. First phase of development commenced with Zone 5, comprising 332 villas. Soft sales began in April 2010 with an official sales launch in April 2011, with the opening of the show village. To date 73 percent (169 of 230) of the villas released have been sold. Sales have however, slowed considerably as the overall market for residential real estate has softened. The construction phase is flexible in that it can be slowed down in line with selling rates. To help bolster unit sales, a community sports and recreation centre will commence construction soon in combination with a recently completed golf course located on the island, owned and operated by a Korean group, used as an additional marketing tool to promote VNL s project. Project Summary Sector Area Location Mixed-use (residential and retail). 1.4ha; approved GFA 162,680 sqm District 1, HCM City. History Acquired in Jan 2007; Investment Licence received in 2007 Compensation 60% complete. Expected completion of compensation in 2013 Planning parameters approved, Concept Design & 1/500 MP revision to be submitted Project Summary Sector Area Location Township ha, approved GFA 1,758,975 sqm Dong Nai Province, near Ho Chi Minh City. History Acquired in June 2007; Investment Licence received in May Land-use rights issued for four of six zones, with Zone 8 and CBD LUR applications underway. Construction and sales of Zone 5 townhouses underway. NAV USD41.7 million NAV USD36.2 million. Investment rationale The site is well-located for a landmark retail and residential development offering freehold residential units. Investment rationale The site lies in the fast-growing eastern region adjacent to Ho Chi Minh City and will benefit from the completed transport infrastructure roll-out in District 2 and 9.

13 VinaLand Limited Annual Report 2012 Top Holdings 13 Times Square Hanoi The site is positioned in a strategic location with excellent exposure opposite the National Conference Centre, which has been hosting many national and regional events since opening in Additionally the location is within a new urban development in western Hanoi, often considered the city s future second CBD. Given this high-profile location the project has considerable potential as a future landmark development. However, obtaining licences and revising master plans have been a challenge, which has led to delays in development. Due to changes in strategy based on market movements, a new revised master plan has just been submitted and it is expected to gain approval soon. This development will comprise of a regional retail shopping centre, 24-storey office tower, 240-key hotel/ serviced apartment building, and three residential buildings totaling over 1,900 apartments. VNL is currently seeking a joint venture equity partner and/or an international retail mall operator prior to commencing. VinaSquare VinaSquare was acquired due to its location in Chinatown (District 5) of Ho Chi Minh City and the ability to enter into a joint venture with a state-owned enterprise that owned the land. The project is a mixed-use residential and commercial development. The current strategy is to wait until the market improves to commence sales of the residential apartments, comprising 1,285 units, and seek co-investors and major tenants for the retail and office space. The construction will not commence until funding by an equity investor is in place and/or a debt facility can be secured on acceptable terms. Relocation of the factory was completed in Q Application for a construction permit has been lodged with an expected approval soon. However, due to market conditions, a soft-sales launch has been put on hold. However, consideration is being given to the construction of a display centre to test the market for pre-sales. Manager s report / Project Summary Sector Area Location Mixed-use (residential, retail, office and hotel) 4.0ha, estimated GFA 350,000 sqm My Dinh, Hanoi History Acquired in Q Investment Licence received May 2008 and revised July 2010 Planning Approval received in March 2010, however, revised masterplan just submitted awaiting approval Initial earth work commenced Project Summary Sector Area Location Mixed-use (residential, retail, office and hotel). 3.1ha; estimated GFA 278,748 sqm. District 5, HCM City. History Acquired in May 2007 Investment Licence received in Oct :500 masterplan approved in Oct 2010 Demolition of existing factory buildings completed Q NAV USD31.3 million NAV USD30.8 million Investment rationale High profile site in a strategic location in the heart of the city s future second CBD, opposite National Convention and Exhibition Centre. Investment rationale The project will serve Ho Chi Minh City s Chinatown, a crowded commercial and residential area surrounded by mainly low-rise buildings.

14 VinaLand Limited Annual Report 2012 Top Holdings 14 My Gia The My Gia site was acquired to offer the first modern township in Nha Trang, a fast-growing tourism destination in central Vietnam. While Nha Trang s seaside strip is largely built up, the city has no master-planned township offering modern living standards for long-term residents, nor second homes in a seaside location. The products on offer include townhouses and villas at affordable pricing. First phase of the project commenced with Parcel 2 (28.5ha) approved for 1,405 land lots. Currently, landfill work on Parcel 2 is 95 percent complete. Infrastructure construction began in April 2012, and is expected to be completed shortly. In December 2010, sales soft launch events were held in Hanoi and Ho Chi Minh City. To date, 488 housing units have been sold out of the 659 units launched (74 percent). Land and associated infrastructure costs (including foundations) can be recouped on a construction milestone basis according to the terms of the contracts signed with buyers. Sales have slowed considerably with a number of buyers having difficulty making progress payments, which is continually being managed. This project allows flexibility to adjust phasing to meet market demand Aqua City This project was purchased in 2006 as a strategic acquisition along the North East corridor leading to the new Long Thanh international airport in Dong Nai. The site is surrounded by the Dong Nai River, approximately 45 minutes from the centre of Ho Chi Minh City, which is part of an emerging industrial park zone. Since acquisition, VNL has been working with a local partner to construct the main access roads to the site, but further road work is required. The current ownership structure is now under review and if successful, VNL could acquire 100 percent ownership of a reduced portion of the original 250ha joint venture development. In February 2012, VNL received the 1:500 master plan approval. The design for earthworks has been completed and once restructuring is finalized, preliminary earthworks could begin for basic infrastructure, but will be dependent on current market conditions. VNL is also seeking an investment partner or sub-developer to join this project. The development master plan includes housing, schools, hotels, office and shopping centers in addition to a marina, parks and waterways. Project Summary Sector Area Location Township. 158ha Nha Trang, central Vietnam History Acquired in Jan 2008; Investment Licence received in Oct 2010 Site cleared and 95 % compensated. Construction permit received for Parcel 2 Sales launched in Dec 2010 NAV Investment rationale USD26.6 million The first modern township site in Nha Trang, a fast-growing tourism destination. Project Summary Sector Area Location Township. 250ha Dong Nai Province, near Ho Chi Minh City History Acquired in 2006 Pre-Investment Licence received in April :2000 Masterplan approved in December :500 Masterplan approved in February 2012 Cleared and partially compensated site NAV Investment rationale USD24.1 million Riverfront township bordering on District 9 of HCMC. The project will provide affordable mass housing units in a modern living township to serve the extended catchment of HCMC s north east area.

15 VinaLand Limited Annual Report 2012 Top Holdings 15 World Trade Center The site was acquired in 2006 given its central, riverfront location in the fast growing city of Danang. The World Trade Center will comprise residential space including apartment towers, an international standard hotel or serviced apartment complex, a retail mall and other commercial uses. The plans allow for high quality public open space within the development site, which will link up with 17,000 sqm of riverside boardwalk, which will be upgraded as part of the overall development. The project was partially exited in 2007 via a coinvestment arrangement with a European investor for a portion of Phase 1 (2.5ha). In late 2009, the project broke ground with the construction of the first residential tower, Azura. The Azura Tower is now complete with the first phase of handovers taking place in Q Sales remained slow throughout the year, however, following completion of the tower, enquires from potential buyers increased. The Retail Centre in Phase 2 is now in the schematic design stage and seeking tender offers for design and construction. Pre-lease commitments have now reached 65 percent without any formal marketing. Trinity Park Formerly called HUD Dong Tang Long, this site was acquired in 2007 in order to serve the high demand in Ho Chi Minh City for mid-range housing, and in 2012 the strategy remains virtually the same. The project s planning will follow the successful sales and exit from The Garland villa project, a smaller VNL development also located in District 9. Ownership of the project was restructured so that VNL and VOF have a combined 100 percent stake. Basic infrastructure on site has helped to facilitate the separation of land use rights for the parcel. VNL is currently seeking a co-investor to provide equity and become a JV partner for the development. A soft-sales launch has been put on hold, and will only commence when property market conditions improve. Manager s report / Project Summary Sector Area Location Mixed-use (commercial and residential) 9.0ha; approved GFA 519,000 sqm Danang City, on riverside opposite City Centre History Acquired in Q Investment Licence received in July 2007 Revised master plan approved in August 2011 Phase 1 (2.5ha) was partially exited with a European investor in 2008 Residential tower, Azura, Completed Q Retail Centre secured 65% pre-lease commitment, with a target for completion Q NAV Investment rationale USD22.8 million Located in the City Centre of Danang City, fronting on Han River. Project Summary Sector Area Location Residential (including school) 33.7ha, estimated GFA 277,900 sqm District 9, Ho Chi Minh City History Acquired in November :500 masterplan approved in May 2007 Investment Licence application submitted Site is cleared and fully compensated Partial infrastructure in place NAV Investment rationale USD22.5 million Sound long-term demand for mid-range, landed residential housing in District 9, following the success of The Garland product.

16 VinaLand Limited Annual Report 2012 Management Team 16 MANAGEMENT TEAM VNL s management team have a combined 86 years of real estate investment and development experience. They manage one of Vietnam s most comprehensive portfolios of direct real estate assets, including large-scale township and mixed-use developments that span Vietnam s major cities MR. LE CONG Don Lam Chief Executive Officer VinaCapital Don Lam co-founded VinaCapital in Don has over 17 years experience in Vietnam, working previously at PricewaterhouseCoopers, Deutsche Bank, and Coopers & Lybrand. Don is one of Vietnam s most internationally recognised business leaders, having brought over USD1.5 billion in foreign indirect investment into the country since Don is also the founder and Chairman of VinaCapital Foundation, a non-profit aimed at improving access to quality health care for poor children. Don is an active member and regular speaker at the World Economic Forum and other leading international conference and events. 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. MR. DANG QUOC TIEN David Henry Managing Director Real Estate David Henry has over 33 years experience in real estate development. Prior to joining VinaCapital in July 2008, David was a Director of Springfield Land Corp. Pty Ltd, a member of MUR Group, where he led development of the 2,860ha Greater Springfield township. He was executive board member of MUR Group for past 16 years. His professional experience includes ten years with Australia s Lend Lease Group, developing projects in Sydney, Brisbane and the Gold Coast. He worked on Riverside Centre Brisbane, the Anchorage Tweed Heads, State Bank Martin Place Sydney, QE 2 Hospital Brisbane, Holiday Inn Cairns, and Times Square Brisbane. David graduated with a first class honours Bachelor of Building degree from the University of New South Wales, and holds an AMDP (GSD Harvard).

17 VinaLand Limited Annual Report 2012 Management Team 17 MR. DANG QUOC TIEN David Blackhall Deputy Managing Director Asset management David Blackhall has 28 years experience in property, design and construction, with the last 20 years in real estate fund and asset management. Prior to joining VinaCapital in 2007 he worked for a Vietnamese property developer based in Hanoi and prior to that worked for 12 years with Deutsche Bank - RREEF Funds Management Ltd, one of Australia s largest property fund managers. Earlier in his career, David was involved in engineering design and management of large-scale power generation projects in Australia. He holds a Masters Degree in Design Science from the University of Sydney, Australia, as well as qualifications in Business/Real Estate management and Civil Engineering, and is a Member of the Royal Institution of Chartered Surveyors (MRICS). MR. DANG QUOC TIEN Anthony House Deputy Managing Director Development Anthony House has over 25 years experience in both the real estate development and construction management sectors, of which the past six years have been spent working in Vietnam. Prior to joining VinaCapital, he worked for Watpac Limited, a leading publicly listed Australian company, specializing in property development and construction. Mr. House s development experience encompasses a range of retail, commercial office and high-rise residential projects. Mr. House holds a Post Graduate Diploma in Project Management and a Bachelor of Applied Science degree in Construction Management, both from the Queensland University of Technology, Australia. Manager s report /

18 VinaLand Limited Annual Report

19 VinaLand Limited Annual Report

20 VinaLand Limited Annual Report 2012 Board of Directors 20 BOARD OF DIRECTORS MR. LE CONG Nicholas Brooke Chairman MR. DANG QUOC TIEN Nicholas Allen Director MR. DANG QUOC TIEN Michael Arnold Director Mr. Brooke was appointed as Chairman in 2010 after serving as Director since the fund s inception in He 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 and was awarded the Silver Bauhinia Star in the 2012 Hong Kong Honours List. Mr. Brooke also sits as a Non-executive Director on the boards of a number of companies including Top Spring International Limited, one of the leading developers of mixed communities in Southern China. He is also a Trustee of the International Valuation Standards Council which is responsible for setting and monitoring global valuation standards. Mr. Brooke has a degree in Estate Management and a Post Graduate Diploma in Business Administration from the University of London. Nicholas Charles Allen was appointed to the Board in 2010 and is an independent non-executive director of CLP Holdings Ltd, Lenovo Group Ltd, and Hysan Development Company Ltd. He is chairman or member of the audit committee for all three companies. Mr. Allen joined Coopers & Lybrand in 1977, coming to Hong Kong with that firm in In 1998 Coopers & Lybrand merged to form PricewaterhouseCoopers, and Mr. Allen worked at PwC until his retirement in During his 24 years with PwC in Hong Kong, Mr. Allen was the partner-in-charge of the Consumer and Industrial Products Group, the Corporate Finance and Recovery Practice division, and the Hong Kong and China Assurance Practice. He is a fellow of the Chartered Accountants in England and Wales and a member of the Hong Kong Institute of Certified Public Accountants. Mr. Allen has a B.A. from Manchester University in the United Kingdom. Mr. Arnold was appointed to the Board in 2009 and 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. 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 a Director the Hong Kong chapter of the Asia Pacific Real Estate Association.

21 VinaLand Limited Annual Report 2012 Board of Directors 21 MR. DANG QUOC TIEN Michel Casselman Director MR. DANG QUOC TIEN Stanley Chou Director MR. DANG QUOC TIEN Horst F. Geicke Director MR. LE CONG Charles Isaac Director Michel Joris Carline Casselman, is a Partner at Leeward, a private equity asset manager investing in SMEs in the Benelux and northern France. Before joining Leeward, he worked for 13 years for Petercam SA, where he started in 1998 as a financial analyst and had several roles with the company, most recently as Director of Petercam Services responsible for private equity investments. In this role he managed or directed investments in aviation and renewable energy, as well as investments in listed private equity funds in Asia (China, India and Vietnam). Mr. Casselman has almost 20 years of experience, including five years at a technology firm, now part of Oracle, where he started as a consultant and left as Director of Consulting Services. He holds two Masters degrees, in Mechanical Engineering and Financial Economics, from the University of Leuven in Belgium. Stanley Yu Chung Chou is Managing Director of SCA International Ltd and Lufin Asia Pacific Ltd, both investment advisory firms based in Hong Kong. Previously, he was with the private equity group of Fidelity Capital (Far East) Ltd, and the leverage finance group of Paribas Merchant Bank. Mr. Chou is a director of Vietnam Growth Fund Ltd. He began his career at Chase Manhattan Bank in New York. Mr. Chou holds an MBA from Stanford University and a BA from Dartmouth College. Horst F. Geicke was one of VinaCapital s founding partners, and served as Chairman of VinaCapital from 2003 to Mr. Geicke was also a founding partner of Pacific Alliance Group, a fund management company in Hong Kong. Mr. Geicke is Chairman of Euro Auto BMW Vietnam, CEO of VinaSecurities and a Board Member of the Metropole Hotel in Hanoi. Mr. Geicke is the President of the Hong Kong-Vietnam Chamber of Commerce. He was previously the President of the European Chamber of Commerce and the German Chamber of Commerce in Hong Kong and was Director of the Regional Board of the Young Presidents Organisation from He is a director or board member of numerous companies and associations, including the German Business Association of Vietnam, the Hong Kong-Thailand Business Council, and the Hong Kong-EU Business Cooperation Committee. Mr. Geicke has a Masters degree in Economics and Business Law from the University of Hamburg, Germany. Charles John Walter Isaac is Managing Partner and Fund Manager at B&I Capital AG which he co-founded in B&I Capital AG manage funds that invest in listed Asian real estate securities. Previously, he was Senior Fund Manager and member of Senior Management at Swisscanto Asset Management, and at Paribas Asia Equity (UK) Ltd. He has 18 years experience in fund management and real estate investment, and started his career at the private client division at Merrill Lynch in London. Mr. Isaac is a CFA charter holder, holds an MSc in Investment Management from City University Business School, an undergraduate degree in Psychology from the University of Newcastle upon Tyne, and the IIMR Investment Management Certificate. Financial statements and reports /