vinaland limited aim: vnl · 2019. 10. 24. · 4 investment manager’s quarterly report 31...

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Investment Manager’s quarterly report 31 December 2013

VinaLand Limited AIM: VNL

Fund update 2

Manager comment

Portfolio data

Market update 6

Macro economy

Real estate market

Company and project updates 8

Note on valuation methodology 13

Historical financial information 14

Board and manager information 15

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Performance summary* 31 December 2013

NAV per share** (USD): 0.92

Change (Quarter-on-quarter) 0.0%

Total NAV** (USD 'm): 439.0

Share price (USD): 0.47

Market cap (USD 'm): 224.2

Premium/(discount) -48.9%

* Figures in USD. Return percentages are for the period, not annualized

** NAV and NAV per share data are calculated on a quarterly basis

Cumulative change (% change)

3mth 1yr 3yr 5yr

NAV per share 0.0 -11.5 -32.4 -38.7

Share price 17.5 21.4 -52.8 -2.6

Quarterly performance history (% change)

2013 2012 2011 2010 2009

Q1 -1.0 -1.7 0.7 3.0 -3.3

Q2 -9.7 -4.3 -2.2 -0.7 -9.0Q3 -1.1 0.0 0.7 3.7 -0.8Q4 0.0 -6.3 -12.6 -3.5 1.5YTD -11.5 -11.9 -13.2 2.3 -11.3

Additional portfolio informationCurrent assets 31

Divestments 15 full, 1 partial and residential unit sales

Debt Fund level (ZDPs): 5.6% of NAV Project level (Bank): 15.5% of NAV

Shares outstanding 479,648,227

Manager comment

VNL’s unaudited net asset value (NAV) was USD439.0 million or USD0.92 per share at its close of business on 31 December 2013. This represents a decline of USD4.7 million in total NAV; however, there is no change from a net asset value per share of USD0.92 from its close of business on 30 September 2013. VNL’s share price increased 17.5 percent to USD0.47 as at 31 December 2013, from a closing price of USD0.40 as at 30 September 2013. As a result, the company’s share price to NAV discount is currently 48.9 percent compared to 56.1 percent at the end of September.

During the quarter, VNL’s wholly owned subsidiary VinaLand ZDP Ltd., as at the closing of the Placing and Offer, had received valid acceptances in respect of 15 million Zero Dividend Preference Shares (“ZDP Shares”), with a Gross Redemption Yield of 8.0 percent. The share listing on the London Stock Exchange was completed on 20 December 2013. The proceeds will be utilised to assist in refinancing the Company’s project level debt facilities as they mature across its development portfolio, to fund potential capital investments in its project companies (as necessary) and for general working capital purposes.

During the quarter, VNL announced the divestments of its stakes in the Hao Khang project and Prodigy Pacific Limited. The former is a future development site with a total area of 49,655 square metres which was acquired in 2007. The Company’s 70 percent stake in the project resulted in net proceeds of USD4.6 million which was 2.9 percent (USD125,000) above net asset value. The latter owned a 102 room boutique hotel located in Hanoi. The Company’s 100 percent stake in the project resulted in net proceeds of USD1.7 million which was 5.5 percent (USD100,000) below net asset value. As a result of these divestments, the Company’s debt from the consolidated balance sheet was reduced by USD4.0 million and removed VNL’s future funding commitments related to these assets.

Throughout 2013, VNL achieved net sales of 100 residential units, more than tripling the results of 2012, mainly due to improved sales during the fourth quarter. Over the past six months, Vietnam’s real estate market has experienced some improvement underpinned by the country’s ongoing stability in the macroeconomic environment and renewed confidence from foreign investors looking to enter Vietnam.

Real estate project revaluations

VNL project revaluations were undertaken for the period ending 31 December 2013 with eight projects appraised by international valuation consultants. Additionally, a further seven projects were also externally appraised as part of the semi-annual update for the interim period. A majority of these projects are located in Ho Chi Minh City and its adjoining provinces, as well as one project located in Hanoi and four projects located in the central region. As a result, ten project valuations were adjusted downward; one remained the same, while the remaining four project valuations were adjusted upward. Overall the real estate revaluations resulted in a combined write up of approximately USD440,000.

Fund background

VinaLand Limited (VNL) is a closed-end fund trading on the AIM Market of the London Stock Exchange.

ISIN: KYG936361016

Bloomberg: VNL LN

Reuters: VNL.L

Investment objective

VNL targets medium to long term capital gains with some recurring income through investment in the following real estate sectors: office; residential; retail; town-ship (large scale); and hospitality and leisure.

Click here for VNL's website.

Fund managing director

David Blackhall

Investment ManagerVNL is managed by VinaCapital Investment Management Ltd (“VCIM” or the “Investment Manager”), a Cayman Islands company. VCIM was established in 2008 and manages three listed and several unlisted investment companies.

More information about VCIM is available here.

http://www.vinacapital.com/index.php?l1=85&l2=92&l3=94&l4=115

http://www.vinacapital.com/index.php?l1=81

http://www.vinacapital.com/index.php?l1=81

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Top ten investments Portfolio by sector Key projects under developmentProject Location Type % of NAV Project Location Type Site Area (ha)

Century 21 South Residential 15.3 9 assets; 2 assets under construction and sales

Danang Beach Resort Central Residential 260.0

Danang Beach Resort Central Residential 12.4 Dai Phuoc Lotus South Township 200.7

Pavilion Square South Mixed Use 8.56 assets; 1 asset under construction

My Gia Central Township 158.0

Dai Phuoc Lotus South Township 7.2 World Trade Center Danang Central Mixed Use 9.0

VinaSquare South Mixed Use 6.2 Total: 4 assets representing a NAV of USD122.5 million

Times Square Hanoi North Mixed Use 6.0 6 assets; 2 assets under construction and sales

Aqua City South Township 4.5

World Trade Center Danang Central Mixed Use 4.2 10 assets; 7 operating assets

Trinity Park South Residential 4.1

Green Park Estate South Mixed Use 4.1

Total 72.5

Portfolio breakdown NAV by sector NAV and share price performance

Portfolio by geographic location % of NAV

Hanoi region 8.3

Central region 26.3

Ho Chi Minh City region 65.4

Valuation breakdown 0.92

Assets not yet revalued * 8.0

Assets revalued 92.0 0.47

Development status

Land banking 7.3

Planning stage 59.0

Development stage 27.8

Operating assets 5.9All NAV and NAV per share related data is calculated on a quarterly basis

* held at cost or below cost

9.0

19.2

30.4

41.4

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

NAV %

Residential

Mixed Use

Township

Hospitality

-

50.0

100.0

150.0

200.0

Total Investment NAV Bank Debt

-0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80

NAV per share Share Price

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VNL strategy

VNL divestment history

Pre-EGM Post-EGM (28 November 2012)

Divestment 10 projects divested Nguyen Du Sheraton Signature 1 Hao Khang Prodigy Total

Type 7 above NAV, 3 below NAV Office Hotel Land Land Hotel

Exit date 2009 - 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q4 2013

NAV at exit (USDm) 188.1 3.0 2.7 2.8 4.5 1.8 14.7

Net proceeds to VNL (USDm) 205.5 3.2 3.1 2.7 4.6 1.7 15.3

Net proceeds vs. NAV 9.3% 7.9% 15.1% -3.3% 2.8% -5.5% 3.9%

Debt removed, VNL portion (USDm) - 25.0 - - 4.0 29.0

NAV at EGM (USDm) 3.4 2.7 2.8 5.0 2.5 16.4

Net proceeds vs. NAV@EGM -6.1% 15.1% -3.3% -7.8% -31.7% -6.5%

* Net proceeds of USD3.1 million for the divestment of the Sheraton Hotel does not include the removal of USD25.0 million in debt obligations

• Cost and Net proceeds from exit includes all transfers of money between the fund and project companies, including dividends, shareholder loans, and capital contributions.

• NAV at exit is taken as the quarterly NAV prior to the exit date.

Current strategy: VNL is now in a cash return period and will not make any investments, except where funds are required for existing projects. The Fund will seek to realise assets in the existing portfolio and continue with the development of selected residential or mixed use projects to maximise value. 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 divestment of land or projects to local and foreign investors. Both forms of exit have continued to be challenging over the past 24 months due to both macro and market difficulties however VNL’s strategy is to continue, albeit at a slower pace, with a small number of landed property developments where the market remains supportive. By pushing forward with selected developments, VNL is demonstrating to investors/sub-developers that the projects are viable developments and offer excellent medium term growth opportunities in the Vietnam property market. Complete divestment of assets is currently the primary focus which includes VNL’s operating hotels where a sale at current market value will result in a higher IRR than holding or continuing to develop the asset. Mixed-use commercial city-centre developments will only proceed following a pre-commitment from anchor tenants and/or equity co-investors. VNL will not commence speculative development, and will first secure new equity investors or securing project level debt at an acceptable cost.

3.6

36.8

2.8 5.2 4.4 3.2 3.1* 2.7

4.6 1.7

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

Cost Net proceeds from exit to VNLUSDm

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Top 10 investments

Investment Location Sector VNL ownership VOF ownership Site area (ha) NAV (USD mil) % of NAVBank debt (VNL portion, USD mil)

Projected future invest-ments through 2015 (VNL portion, USD mil) Current status

Century 21 South Residential 75.0% 25.0% 30.1 69.4 15.3% 13.4 0.8 Planning

Danang Beach Resort Central Residential 75.0% 25.0% 260.0 56.4 12.4% 12.8 3.7 Development

Pavilion Square South Mixed Use 90.0% 0.0% 1.4 38.4 8.5% 21.7 13.0 Planning

Dai Phuoc Lotus South Township 54.0% 18.0% 200.7 32.7 7.2% 0.6 0.0 Development

VinaSquare South Mixed Use 46.5% 15.5% 3.1 28.0 6.2% 0.0 0.6 Planning

Times Square Hanoi North Mixed Use 65.0% 0.0% 4.0 27.0 6.0% 0.0 0.0 Planning

Aqua City South Township 40.0% 0.0% 250.2 20.3 4.5% 0.0 0.1 Planning

World Trade Center Danang Central Mixed Use 61.0% 20.3% 9.0 19.2 4.2% 5.1 6.0 Development

Trinity Park South Residential 75.0% 25.0% 33.7 18.8 4.1% 0.0 1.1 Planning

Green Park Estate South Mixed Use 46.0% 35.4% 15.7 18.6 4.1% 0.0 0.0 Planning

Total of top 10 investments 328.7 72.5% 53.7 25.3

Remaining investments 124.6 27.5% 14.2 13.5

Total portfolio 453.3 100.0% 67.9 38.8

• Bank debt: VNL’s portion of current outstanding bank finance at the local investment (project) vehicle.

• Projected future investments through to 2015: Projected remaining equity payments from VNL. These projections are subject to change should local authorities amend policies relating to licencing approvals and capital contributions or should debt be utilized instead of capital or should an investment partner not participate. Some of the Projected future investments may not apply should VNL sell or choose not to proceed to develop the property.

• Due to a partial divestment 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.

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Macroeconomic update

According to the General Statistics Office (GSO), Vietnam’s gross domestic product (GDP) growth reached 6.0 percent in the fourth quarter of 2013, bringing full year growth to 5.4 percent. Evidence of a better growth picture was seen in HSBC’s September Purchasing Managers’ Index (PMI) rising to 51.5, the first time above a neutral point of 50.0 in five months and this trend continued throughout the final three months of the year. This expansion in manufacturing has mostly been attributed to rising orders and employment rates; and is considered an encouraging sign that Vietnam’s economy is gradually getting back on its feet.

The country’s foreign direct investment numbers posted some of the highest levels of growth in more than four years, with new commitments reaching USD21.6 billion, an increase of 54.5 percent from a year ago. The majority of new capital (approximately 77 percent) flowed into manufacturing and processing, boding well for long-term production and employment growth in these sectors.

In December, month-on-month the consumer price index (CPI) grew by 0.5 percent, equating to a 6.0 percent increase year-on-year. For the month, a 2.3 percent increase in the price of housing and construction materials led the group, while food and foodstuff prices increased just 0.5 percent due to continued stabilization in global food prices. By spreading out price increases in many administered-price industries and utilities over the year, the government’s stabilization policy succeeded in controlling inflation.

In December, the exchange rate rose slightly to VND21,115 per USD, representing a 1.2 percent increase from VND20,855 per USD as at 31 December 2012. The State Bank of Vietnam (SBV) has followed a crawling-peg system since 2011 which has allowed flexibility in varying the official rate to reflect market developments. Additionally, estimated foreign reserves have reached USD32.0 billion, easily covering three months of imports which satisfies the International Monetary Fund (IMF) recommendation on this issue. According to HSBC, foreign reserves could increase by USD10.0 billion over the next two years, which could further advance stability in Vietnam’s currency.

Fixed income

Both the primary and secondary bond market rallied in December supported by strong demand from investors for fixed income products. On the primary market, a total of USD814.7 million worth of government and government-backed bonds were issued, an increase of 11.0 percent compared to November. Bonds issued by the State Treasury remained the most favourable and accounted for 78.0 percent or USD635.5 million of total issued volume. Notably, bond yields continued to move lower in December with two- to five-year issues falling by 10 to 25 basis points compared to their last issues in November. It is also worth noting that in December, the Vietnam Bank for Social Policy successfully attracted interest from bond investors after failing to issue any bonds over the previous four months.

In the secondary market, total trading volume for government and government-backed bonds increased significantly to USD2.3 billion for the month of December, 2.5 times more than what exchanged hands in November. This significant increase in demand came as a result of secondary bond yields declining by 20 to 50 basis points for short to medium term bonds.

Macroeconomic indicators

2012 Dec-13 YTDY-o-Y

change

GDP growth1 5.0% 6.0% 5.4% 5.4%

Inflation 6.8% 0.5% 6.0% 6.0%

FDI (USDbn) 13.0 0.8 21.6 54.5%

Imports (USDbn) 114.3 11.5 131.3 15.4%

Exports (USDbn) 2 114.6 11.6 132.2 15.4%

Trade surplus/(deficit) 0.8 0.1 0.9

Exchange rate (USD/VND) 3 20,855 21,115 1.2% 1.2%

Bank deposit rate (VND) 8.0% 7.5% -50 bpsSources: GSO, SBV, VCB | 1. Annualized rate, updated quarterly 2. Includes gold 3. (-) Denotes a devaluation in the currency, Vietcombank ask rate

Government bond yields (%)

1yr 2yr 3yr 5yr

December-13 6.41 6.93 7.39 8.31

November-13 6.70 7.50 7.90 8.65

Quarterly GDP growth (%)

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Quarterly GDP growth (%)

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Real estate market update

Despite of all the efforts that had been put into the VND30,000 billion package, the real estate market still does not see real improvement. In particular, the liquid amount of the package up to December 2013 is only 2 percent. The dilemma is that the eligibilities to borrow from this package do not go hand in hand with the credit assessing criteria of banks which has resulted in the blurry impact of the efforts onto the market.

VAMC has bought back approximately USD1.8b from 35 financial institutions year to date. Several other banks are also lining up to have their bad debts cleaned by VAMC. Once NPLs begin to reduce, this may allow the banks to increase credit flow and some will be channelled to the real estate sector. Therefore, banks are believed to have ample liquidity to lend out however they are still very much concerned about adding more bad debts. Current bank lending rates for real estate are in the range of 12-14 percent p.a. Special lower rates can be offered on a case-by-case basis to selective borrowers with stable sales performance and quality collaterals but these loans are often short-termed only. As other investment alternatives (gold, deposit accounts, etc.) offer limited returns, residential real estate may again become attractive for Vietnamese investors.

Condominium sector

Q4 2013 witnessed an increase in the number of new launches compared to that of previous years. Savills reported that new condo supply of over 2,100 units in HCMC and approximately 2,400 units in Hanoi. The majority of these newly launched units and transactions were in the mid-low end segments (Grade C) which pushed down the average primary price level. Developers continue to compete hard with each other on longer and more flexible payment terms or additional incentives in order to attract buyers. Most transactions during the quarter were in the mid-low end segments which accounts for 70% of the total transaction volume. It is forecasted that over 1,200 units will be added later into the Ho Chi Minh City market.

Landed property sector

Q4 2013 was quiet with no new villa or townhouse projects launched. With a current supply of 250 dwellings in the primary market, the supply is expected to remain limited over the next year with more flexible payment terms and incentives being offered. Buying land plots and self-constructing houses remains a competitive choice for mid to long-term investors and homebuyers due to flexibility in construction, quality control and low investment costs. Moreover, 2013 was also the most flexible year in terms of payments, hand-over conditions, promotions, incentives and advertising media as every effort was made to boost sales volume.

Retail sector

Despite the short-term challenges, long-term market confidence remains. Large foreign retail groups continued to roll out major strategic expansion plans. McDonald’s announced a franchise partner in Vietnam and intends to open its first store in early 2014. French Auchan, one of the world’s largest hypermarket chains, is considering investing USD500m into Vietnam over the next 10 years. Moreover, Aeon Vietnam has announced its first retail complex in Vietnam named Tan Phu Celadon which supplies a total of some 50,000 sqm of retail to the market on 11 January 2014 and expects to have a presence in Binh Duong in October 2014, and in Hanoi in 2015.

Hospitality sector

Tourist arrivals to Vietnam are still increasing with approximately 7.5 million visitors in 2013, up 10.6 percent year-on-year, as reported by the GSO. Tough competition has been seen in the four and five star hotel segments while the three star hotel segment has fared better, especially the lower-end three-star properties (mini hotels) which are achieving high occupancy via low room rates.

The Vietnam government’s VAMC has purchased approximately USD1.8 billion of non-performing loans from 35 financial institutions year to date

A majority of the new inventory and transactions in the condo market were in the low to mid-level segments

With no new inventory coming online, the supply in villa or townhouses should remain limited over the next year

More western franchises are entering the Vietnamese market with McDonalds expected to open its first location in the first quarter of 2014

Tourism arrivals continue to increase

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Century 21 Project summary

Sector Residential (25ha) and retail (5ha)

Area 30ha; approved GFA 526,778 sqm

Location District 2, Ho Chi Minh City

History Acquired in June 2006

Site cleared and compensated in June 2008

Investment licence received in Q4 2011

In-principal 1:500 master plan approval received in Q4 2013, targeting formal approval in 2014

Investment rationale A 30ha site is located along new infrastructure corridor in a new desirable suburban area

Danang Beach Resort Project summary

Sector Residential (integrated resort residential)

Area 260 ha

Location Danang, Central Vietnam

History Acquired in June 2006, cleared site, under development

Investment licence received in December 2006

Ground breaking in January 2008

Dunes Golf course opened in April 2010

Beach resort parcel: 1:500 master plan received in June 2011

Golf course parcel: 1:500 revised master plan received in December 2012

Investment rationale Unique mixed used, seaside integrated resort with golf course well located along the coastal road of Danang City, the third largest city in Vietnam. Plan to develop a golf course and other amenities to assist with marketing of residential property.

The 260ha site comprising two parcels, a 50ha beachfront and a 210ha inland lot separated by the coastal highway, was acquired in mid 2006. The project broke ground in January 2008 with construction of an 18-hole golf course, The Dunes Course, designed by renowned golf legend 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 2011. Anchored by the award winning golf course, a number of residential projects have been developed and achieved good early sales, including The Ocean Villas, The Cham Condominium, The Dune Residences, Norman Estates and the Point Residences.

In Q4 2013, buyer sentiment has improved slightly resulting in new sales in the premium beachfront villas. To date, VNL has signed sales and purchase agreements for 78 percent of the 162 villas launched.

The continuing strategy is to proceed with full sale of the remaining serviced villa land, and seek investment partners for a partial or full exit of future development parcels.

Century 21 was acquired in 2006 because of its prime 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 2011. The opening of the tunnel has made the site much more accessible to the city’s CBD. The project site is 100% compensated and cleared. In Q4 2011, the Century 21 Nam Rach Chiec project received a 1:500 master planning parameters approval and Investment Licence. The Long Thanh Dau Giay Highway running in front of the site is currently underway with completion and opening for traffic expected in early 2015. The 1:500 master plan in-principal approval was received in Q4 2013 and VNL targets to obtain the formal approval for the 1:500 detailed master plan in 2014.

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 improve. The surrounding District 2 area has seen improvements to infrastructure, which have created interest among domestic and foreign investors.

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Pavilion Square Project summary

Sector Mixed-use (residential and retail)

Area 1.4ha; approved GFA 156,402 sqm

Location District 1, HCMC

History Acquired in January 2007

Investment licence received in 2007

Compensation 67% completed. Expected completion of compensation in 2014

Revised 1:500 master plan approval received in Q4 2013

Investment rationale The site is well-located for mid to high end residential towers with modern facilities offering freehold residen-tial units.

Dai Phuoc Lotus Project summary

Sector Township (integrated residential)

Area 200.7ha, approved GFA 1,758,975 sqm

Location Dong Nai Province, near HCMC

History Acquired in June 2007

Investment licence received in May 2007

Construction and sales of Zone 5 townhouses underway

Sports and recreation centre and CBD link road com-pleted

Investment rationale The site lies in the fast-growing eastern region adjacent to HCMC and will benefit from the completed transport infrastructure roll-out in District 2 and 9.

Pavilion Square is a mid to high end ‘for sale’ freehold residential project with a retail centre located in the city centre of District 1 of Ho Chi Minh City. The project was acquired in January 2007 and the investment licence was obtained in the same year. Site compensation is underway and approximately 67 percent complete. Clearance has proven to be an issue and has significantly delayed the progress of this project. Over the last quarter, progress has been made in obtaining clearance and planning approvals. VNL expects to complete compensation in 2014. The revised planning parameters with a smaller retail area were approved by the authorities in December 2012 and the revised 1:500 master plan approval was received in Q4 2013.

Following the expected completion of compensation for the residential parcel and market improvement, VNL will seek investors or development partners for a partial or full exit. Discussions are underway with some interested parties.

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-style 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 in conjunction with partial wholesale divestment to co-investors. The 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 together with the opening of the show villas. The project also won the “Best Residential Development - Multiple Units in Vietnam” award at the Asia Pacific Property Awards in May 2013.

Construction of 200 villas and all infrastructures are completed with 121 villas handed over to buyers. The sports and recreation centre and the CBD link road was completed on schedule which resulted in the strongest sales since the project launch with 16 sales and purchase agreements achieved in Q4 2013. VNL is working with the JV partner to revise the overall 1:500 master plan for the site with a target completion in the first half of 2014.

10



VinaSquare Project summary

Sector Mixed-use (residential, retail, office and hotel)

Area 3.1ha; estimated GFA 278,748 sqm


History Acquired in May 2007

Investment licence received in October 2008

1:500 master plan approved in October 2010

Targeting to receive the revised Investment licence and LURCs by Q2 2014

Investment rationale The project will serve HCMC’s Chinatown, a crowded commercial and residential area surrounded by mainly low-rise buildings.

Times Square Hanoi Project summary

Sector Mixed-use (residential, retail, hotel and office)

Area 4.0ha, estimated GFA 308,510 sqm

Location Pham Hung Road, My Dinh area – future second CBD

History Acquired in Q1 2007

Investment licence received in May 2008 and revised in July 2010

1:500 master plan approved in March 2010

1:500 revised master plan underway with target comple-tion in 2014

Investment rationale A high profile site in a strategic location in the heart of the city’s future second CBD, opposite National Conven-tion and Exhibition Centre.

The site is positioned in a strategic location with excellent exposure opposite the National Convention and Exhibition Centre, which has been hosting many national and regional events since opening in 2006. Additionally, the location is within a new urban development in western Hanoi, often considered as 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 recent changes in the master planning for the area surrounding Times Square, a revised master plan is being sought with a target completion in 2014.

The proposed development comprises a regional shopping centre, a 24-storey office building, a 240-key hotel/serviced apartment building, and three 54-58 storey residential towers totalling over 1,900 apartments.

Licensing delays coupled with a slow property market have pushed back the commencement and a new strategy is now in place. The strategy is to secure a long-term commitment from an international retail mall operator and seek to divest all or part of this land parcel to facilitate an early exit.

VinaSquare was acquired in May 2007 due to its prime 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, retail, hotel and serviced apartment development. The Investment licence was obtained in October 2008 and the 1:500 master plan was approved in October 2010. The demolition of the old factory buildings was completed in Q4 2011. Currently the site is fully cleared and a site office has been in place since April 2012. The Manager is working with the JV partner on obtaining the final licensing approvals and expects to obtain the revised Investment licence and the Land Use Right Certificates by Q2 2014.

Due to market conditions, a soft-sales launch has been put on hold. The development will not commence on the residential portion until the market improves and/or an equity partner is secured to jointly develop.

11



Aqua City Project summary

Sector Township (residential, retail, office and hotel)

Area 250.2 ha

Location Dong Nai Province, bordering on District 9 of HCMC

History Acquired in 2006

1:2000 master plan approved in December 2008

1:500 master plan approved in February 2012

Project site restructuring and demerger work ongoing

Investment rationale A 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 catch-ment of HCMC’s north east area.

World Trade Center Danang Project summary

Sector Mixed-use (commercial and residential)

Area 9.0ha; approved GFA 519,000 sqm

Location Danang City, on the river side opposite City Centre


Investment licence received in July 2007

Phase 1 (2.5ha) partially exited with a European investor in 2008. Revised master plan of Phase 1 approved in August 2012

Azura residential apartment tower completed September 2012, and currently 56% apartments sold or leased

Currently negotiating divestment of selected land parcels within the project

Investment rationale Prime site location in the city centre of Danang City, with direct frontage to the Han River, 5 minutes drive to East Sea beach

The 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 part of an emerging industrial park zone, which is surrounded by the Dong Nai River, approximately 45 minutes from the centre of HCMC.

Since acquisition, VNL has been working with a local partner to construct the main access roads to the site with further road work required. In February 2012, the project received its 1:500 master plan approval. 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. The project site restructuring and demerger work in continuing.

The development master plan includes affordable housing, schools, hotels, offices and shopping centres in addition to a marina, parks and waterways. VNL is also seeking an investment partner or sub-developer to join this project.

The project was acquired in 2006 given its central, river front location in the fast growing city of Danang. The project comprises residential apartment towers, a 4/5 star hotel or serviced apartment complex, a retail mall and other commercial uses as well as high quality public open space. The project was partially exited in 2007 via a co-investment with a European investor for a portion of Phase 1 (2.5ha). The revised master plan of Phase 1 which comprised more residential areas was approved in August 2012, and the restructuring process to split the 9ha site into 3 separate investment licenses was successfully completed in June 2012, allowing greater flexibility in development or divestment.

In 2009, the project broke ground on the first residential tower, Azura. The Azura Tower reached completion in September 2012 and has seen a marked increase in sales activity since then. During 2013, Azura sales activity has remained steady averaging 3 unit sales per month. To date, VNL has signed sales and purchase agreements for 106 of 225 apartments (47 percent) and leased out 20 apartments.

Future projects on the WTC site have been placed on hold due to the slow real estate market, and lack of market liquidity to fund projects. VNL is currently negotiating divestment opportunities on selected land parcels within the project.

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Trinity Park Project summary

Sector Residential (including school)

Area 33.7ha, estimated GFA 343,058 sqm


History Acquired in November 2007

1:500 master plan approved in May 2007

Site cleared and fully compensated. Financing for com-mencement of infrastructure works underway.

Upon issuance of Land Use Rights, application for invest-ment licence will be submitted

Investment rationale Sound long-term demand for mid-range, landed resi-dential housing in District 9, following the success of The Garland product.

Green Park Estate Project summary

Sector Residential & commercial (proposed)

Area 15.7 ha

Location Tan Phu District , HCMC


Currently used as textile factories and warehouses

Site clearance and relocation work in progress

1:500 master plan approval being sought

Investment rationale Strategically located in a densely populated suburb near HCMC's Tan Son Nhat International Airport

The Green Park Estate project site was acquired in 2006 given its strategic location in a densely populated suburb near HCMC’s Tan Son Nhat International Airport and only 10km from the city’s CBD. This 15.7ha site has excellent exposure with over 300 metres frontage onto the Truong Chinh Street, a major arterial road with a future Metro Rail Transit (MRT) route running along. Master planning for the project has seen delays in the past due to changes in the government’s legal framework. Currently the site is used as textile factories and warehouses. Site clearance and relocation work is in progress to facilitate development or divestment.

VNL is working on securing the formal 1:500 master plan approval for a mixed use of residential and commercial uses. The proposed mixed use development will comprise 250+ villas and townhouses and 300+ apartments with over 100,000sqm GFA. The strategy is to divest the project to potential investors upon completing site clearance and obtaining authority approvals of the land use fee estimation and the 1:500 master plan.

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. The project’s planning follows the successful sales and exit from The Garland villa project, a smaller VNL development also located in District 9. The ownership of the project was restructured so that VNL and VOF have a combined 100 percent stake in a reduced land area.

The 1:500 master plan for the project was approved in May 2007. Basic infrastructure on site has helped to facilitate the separation of land use rights for the parcel. VNL is working with local banks to arrange funding for the commencement of infrastructure works in phases. Discussion for divestment of the entire site is also continuing with a potential investor.

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The manager update section provides investors with information on the policies and practices of VinaCapital Investment Management Ltd (VCIM), as well as updates on VinaCapital relevant to the performance of its investment funds.

Valuation and NAV calculation

The accurate and fair valuation of assets held in fund portfolios is a central component of fund management. VCIM follows international best practice whenever possible in its valuation process.

Relevant dates

VNL’s financial year-end is 30 June. Audited annual results must be announced within six months of this date. Interim results at 31 December receive an auditor review and must be announced within three months of this date. VNL calculates its unaudited NAV quarterly, and this is announced within fifteen days of the quarter’s end. The fund issues monthly and quarterly update reports, and an annual report with the audited final results.

The methods used to value different assets:

Real estate holdings

Real estate projects are initially valued at cost. Once an investment license is obtained, or by way of other arrangements VNL has a legal entitlement to an investment property, the investment property is revalued. Investment properties are revalued at least annually and may be revalued more frequently if the investment manager or valuation committee believes there has been a material change in the value of a property. The valuation process consists of obtaining at least one however usually two appraisals for each property from independent third-party valuation companies. The valuations are reviewed by the valuation committee as the basis for the final valuation approved by the Board. At the

end of each quarter, the manager also reviews all real estate investments for possible impairment based on internal calculations. If there is evidence of impairment an independent valuation will be obtained to assess the need for any adjustment in the value of the property.

All other assets and liabilities are recorded at their respective fair values or cost, as required by the International Financial Reporting Standards.

More information on valuation is available on the Investing policy page of the VNL website:

VNL Information briefs

Audit and Valuation committees

VNL has two separate audit and valuation committees composed of independent non-executive members of the board of directors of the fund, and chaired by an independent director. Both committees meet at least quarterly.

VNL Audit Committee

Nicholas Allen (Chairman)

Charles Isaac

Michel Casselman

VNL Valuation Committee

Nicholas Brooke (Chairman)

Nicholas Allen

Stanley Chou

http://www.vinacapital.com/index.php?l1=85&l2=92&l3=94&l4=250

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Historical financial information

Years ended 30 June 2009 2010 (*) 2011 (*) 2012 2013

Statement of Income (USD’000)

Total gain/(loss) from ordinary activities (157,130) 143,293 154,278 (42,696) (28,712)

Total operating expenses from ordinary activities (58,057) (64,650) (110,434) (98,304) (102,896)

Operating profit / (loss) before income tax (215,187) 78,643 43,844 (141,000) (131,608)

Income tax 13,564 (11,190) (3,354) (8,474) 15,175

Profit / (loss) for the year (201,623) 67,453 40,490 (149,474) (116,433)

Minority interests 72,194 17,754 25,747 (50,585) (26,296)

Profit / (loss) attributable to ordinary equity holders (129,429) 49,699 14,743 (98,889) (90,137)

Statement of financial position (USD’000)

Total assets 1,097,051 1,260,218 1,318,847 1,134,262 929,344

Total liabilities (436,522) (587,523) (655,508) (587,914) (482,566)

Net assets 660,529 672,695 663,339 546,348 446,778

Share information

Basic earnings / (loss) per share (cents per share) (0.26) 0.10 0.03 (0.20) (0.19)

Share price as 30 June 0.68 0.77 0.77 0.48 0.46

Ordinary share capital (thousand shares) 499,968 499,968 499,968 493,488 481,298

Market capitalization at 30 June (USD’000) 339,978 384,975 384,975 236,874 221,397

Net asset value per ordinary share (USD) 1.32 1.35 1.33 1.11 0.93

Ratio

Return on average ordinary shareholder’s funds (25.9%) 9.9% 2.9% (16.8%) (15.4%)

Total expense ratio (% of NAV) 2.31% 2.36% 2.00% 2.39% 2.15%

(*) Restatement of 30 June 2010 and 30 June 2011 figures, please refer to note 2.30 of the consolidated financial state-ments for the year ended 30 June 2012 for reference.

15



Fund summary

Fund launch: 22 March 2006, new three year term commenced 21 November 2012.

Term of fund: Originally seven years, but now subject to shareholder vote for continuation every three years.

Fund domicile: Cayman Islands

Legal form: Exempted company limited by shares

Investment manager: VinaCapital Investment Management Ltd

Structure: Single class of ordinary shares trading on the AIM market of the London Stock Exchange plc.

Auditor: PricewaterhouseCoopers (Hong Kong)

Nominated adviser: Grant Thornton UK LLP

Fund Administrator: HSBC Trustee (Cayman) Limited

Brokers: Edmond de Rothschild Securities (Bloomberg: LCFR), Numis Securi-ties (Bloomberg: NUMI)

Lawyers: Lawrence Graham (UK), Maples and Calder (Cayman Islands)

Base and incentive fee: The base fee is fixed at USD7.5 million per annum un-til 22 November 2014, reducing each year thereafter until 22 November 2015. No incentive fees, but the recovery of the accrued incentive fee is linked to distributions to shareholders.

Investment policy: The Fund is now in a cash return period and will not make any investments, except where funds are required for existing projects. The Fund will seek to realise assets in the existing portfolio and continue with the development of selected projects to maximize value.

Investment objective by geography: All existing investments are located in Vietnam. There will be no new investments during the current cash return period.

Important Information

This document, and the material contained therein, is not intended as an offer or solicitation for the subscription, purchase or sale of securities in VinaCapital Vietnam Opportunity Fund Limited, VinaLand Limited or Vietnam Infrastructure Limited (each a “Company”). Any investment in any of the Companies must be based solely on the Admission Document of that Company or other offering document issued from time to time by that Company, in accordance with applicable laws.

The material in this document is not intended to provide, and should not be relied on for accounting, legal or tax advice or investment recommendations. Potential investors are advised to independently review and/or obtain independent professional advice and draw their own conclusions regarding the economic benefit and risks of investment in either of the Companies and legal, regulatory, credit, tax and accounting aspects in relation to their particular circumstances.

The securities of the Companies have not been and will not be registered under any securities laws of the United States of America nor any of its territories or possessions or areas subject to its jurisdiction and, absent an exemption, may not be offered for sale or sold to nationals or residents thereof.

No undertaking, representation, warranty or other assurance, express or implied, is given by or on behalf of either of the Companies or VinaCapital Investment Management Limited or any of their respective directors, officers, partners, employees, agents or advisers or any other person as to the accuracy or completeness of the information or opinions contained in this document and no responsibility or liability is accepted by any of them for any such information or opinions or for any errors, omissions, misstatements, negligence or otherwise.

No warranty is given, in whole or in part, regarding the performance of either of the Companies. There is no guarantee that investment objectives of any of the three Companies will be achieved. Potential investors should be aware that past performance may not necessarily be repeated in the future. The price of shares and the income from them may fluctuate upwards or downwards and cannot be guaranteed.

This document is intended for the use of the addressee and recipient only and should not be relied upon by any persons and may not be reproduced, redistributed, passed on or published, in whole or in part, for any purposes, without the prior written consent of VinaCapital Investment Management Limited.

Board of Directors

VNL’s Board of Directors is composed entirely of independent non-executive directors.

Member Role

Michel Casselman Non-executive Chairman (Independent)

Nicholas Allen Non-executive Director (Independent)

Nicholas Brooke Non-executive Director (Independent)

Stanley Chou Non-executive Director (Independent)

Charles Isaac Non-executive Director (Independent)

VinaCapital Investment Management (VCIM)

VCIM is the BVI-registered investment manager of VNL.

Member Role

Don Lam Chief Executive Officer

Brook Taylor Chief Operating Officer

David Blackhall Managing Director, VNL

Anthony House Deputy Managing Director, Real estate

Oai Nguyen Deputy Managing Director, Real estate

Contact

David Dropsey Investor Relations/ Communications [email protected] +848-3821-9930 www.vinacapital.com

Brokers Edmond de Rothschild Securities +44 (0)20 7845 5960 [email protected]

Numis Securities +44 (0)20 7260 1327 [email protected]

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