VinaCapital_Annual2008_VNI by Phan Thanh

Vietnam Infrastructure Limited

Annual Report 2008

2 VNI 2008 Annual Report

Contents

Vietnam Infrastructure Limited Annual Report 2008

Section 1

Introduction Overview Chairman’s Statement

Section 2

Manager’s Report State of the Economy Investment Environment Portfolio Performance Featured Investments

6 8 10 16

Section 3

Financial Statements and Reports Report of the Board of Directors Independent Auditors’ Report Consolidated Financial Statements Notes to the Consolidated Financial Statements

20 22 23 26

3 5

VNI 2008 Annual Report 1

Rush hour traffic on Ho Chi Minh Cityâ&#x20AC;&#x2122;s crowded roads

2 VNI 2008 Annual Report

Vietnamâ&#x20AC;&#x2122;s busiest port, Saigon Port, is in the middle of HCM City, leading to increased traffic congestion.

VNI 2008 Annual Report 3

VNI Overview Vietnam Infrastructure Limited (VNI) is a closed-end infrastructure and infrastructure related investment company admitted to trading on the AIM market of the London Stock Exchange in July 2007. The company focuses on key strategic sectors with underlying economic demand within Vietnamâ&#x20AC;&#x2122;s emerging infrastructure market, namely energy, transport, telecommunications and water utilities.

VNI DETAILS Size of fund:

USD335 million (NAV as of 30 June 2008)

Term of fund:

Ten years subject to shareholder vote for extension

Maximum investment:

20 percent of NAV in any one project

Geographic focus:

Greater Indochina comprising Vietnam (minimum 70%), Cambodia, Laos and southern China

Fund structure:

Cayman company trading on London Stock Exchange (AIM)

Auditor:

KPMG (Vietnam)

Nominated advisor:

Grant Thornton Corporate Finance (UK)

Custodian:

HSBC Trustee

Lawyers:

Lawrence Graham (UK)

Maples & Calder (Cayman Islands)

Broker:

LCF Rothschild

Manager:

Vinacapital Investment Management Limited

Management and performance fee:

Management fee of 2 percent of NAV. Performance fee of 20 percent of total NAV increase over the higher of an 8 percent compound annual return and the high watermark

4 VNI 2008 Annual Report

Bridge and road construction and repair are constant sights across the country.

VNI 2008 Annual Report 5

Chairman’s Statement

Dear Shareholders, We are pleased to present the first annual financial statements for Vietnam Infrastructure Limited (AIM: VNI) for the year ended 30 June 2008. Infrastructure is a fundamental area of investment in any emerging market. In Vietnam, this is particularly the case as ten years of rapid economic development at an average of 7.5 percent annual GDP growth has not been matched by adequate investment in physical infrastructure. Launched in July 2007, VNI was perfectly timed to capitalise on the need to address the dire infrastructure shortfall in Vietnam, and benefit from the growing willingness of the Government of Vietnam to involve private sector partners in major projects. VNI was established with four target sectors – energy, transportation, telecommunications and water – with the goal to invest the fund’s initial USD389 million capital within two years. After one year, excellent progress has been made in building a diversified portfolio, with some 20 total investments in all target sectors except water, while adding several investments in industrial parks and related infrastructure services.

VNI highlights over the fund’s first year include investments in several major power plants that have resulted in a close working relationship with Electricity of Vietnam, entering into a joint venture company that will be Vietnam’s first major airplane leasor, and becoming Vietnam’s largest investor in mobile telephone base transceiver station towers. The goal of being fully invested within two years is well on track. However, despite the success in building a strong portfolio of investments, it was an extremely challenging year for Vietnam economically, in particular for the stock market which plummeted almost 60 percent over the first half of 2008. This had a negative impact on VNI’s net asset value as a result of several initial investments in listed companies. Moreover, it was a very difficult year for infrastructure stocks and funds across Asia and the world. The negative sentiment saw VNI’s share price fall to USD0.60 at 30 June 2008, versus a net asset value of USD0.84 per share. After the financial year ended, the global financial crisis saw the share price drop in September and October 2008, as emerging market closed-end funds were among the most heavily affected stocks worldwide.

There is no question this has created a difficult situation for VNI as we enter 2009. We remain strongly convinced, however, that VNI is on the correct strategic track and that infrastructure, by its nature a long-term investment, will continue to benefit from Vietnam’s excellent prospects for continued economic growth. Thank you for your continued support. Don Lam, Chairman Vietnam Infrastructure Limited 28 October 2008

VOF 2008 2008 Annual Annual Report Report 6 6VNI

State of the Economy

Vietnam’s economy over the first half of 2008 endured painful adjustments following the exuberance of 2007. Vietnam in 2007 saw strong GDP growth of 8.5 percent – reaching a ten-year average of 7.5 percent – and foreign direct investment (FDI) at a record USD20.3 billion. Industry, manufacturing and services all grew rapidly, with the construction sector leading the way due to a booming real estate market. Vietnam in 2007 continued the trend of becoming an increasingly open economy, with the ratio of total trade (exports plus imports) to GDP at 153 percent, second only to Malaysia in the region. The surge in foreign investment in 2007 led to increased imports, in particular machinery and equipment, and a worsening trade deficit at over USD12 billion. This put strong pressure on the country’s foreign exchange reserves. There was concurrently a rise in inflation due to commodity costs and an expansionary monetary and fiscal policy to facilitate economic growth. Broad money supply and domestic credit grew a staggering 46 and 54 percent, respectively, when the State Bank of Vietnam (SBV) opened its coffers to domestic lenders to fund real estate deals and imports.

Vietnam needs to focus on its ability to absorb foreign direct investment, in terms of infrastructure, expertise and labour.

By the end of 2007, inflation as measured by the consumer price index reached 12.6 percent. In early 2008 inflation continued to rise, reaching 19.4 percent year-on-year at the end of the first quarter. The trade deficit also continued to climb, to USD7.4 billion at the end of the first quarter.

A time to act

Faced with an overheating economy, the government chose to act. In early April 2008, the government made the difficult but necessary decision to slow growth by fighting inflation and the deficit through sharp cutbacks to credit and spending. A comprehensive policy package was announced that included

limiting lending for securities purchases to 20 percent of charter capital for all banks, limiting domestic credit growth to 30 percent for 2008, introducing obligatory one-year 7.8 percent SBV bond purchases for all banks, and increasing interest rates from 8.75 percent at the beginning of the year to 14 percent by the end of June. In addition, controls on foreign exchange conversion were tightened and public expenditure was scaled down, including a 10 percent spending cut across all government ministries. As part of the policy package, the government reduced the official GDP growth target for 2008 from 9 percent to 7 percent. What followed was a period of great turbulence, as a market “priced for perfection” at high valuations adjusted to the new, more restrictive environment. The first and most obvious casualty was the capital markets as represented by the Vietnam Index, which fell a precipitous 60 percent over the first half of 2008. The tightening policies put strong pressure on bank liquidity and placed smaller banks at extreme risk. Meanwhile, the currency came under pressure due to the rising deficit, with the spread between the official and open market rates peaking at over 15 percent in the second quarter of 2008. Both foreign and domestic economic analysts, previously highly bullish on the Vietnamese economy, suddenly began to sound dire and pessimistic, including comment that Vietnam may be heading toward a financial crisis similar to Thailand in 1997. As the second half of 2008 began, however, it was clear that the government policy package was beginning to have its intended effect. Month-on-month inflation, averaging 3 percent monthly over the first half of 2008, slowed notably in June and has fallen further since, to a rate of under one percent month-on-month during the third quarter of 2008.

VOF VNI 2008 Annual Report 7

There was also a marked improvement in the trade deficit, which reached USD14.9 billion at the end of the first half of 2008 but began to slow its growth by June. The threat to the Vietnam dong eased as a result, and by the end of the first half the official and open market exchange rates were nearly even.

Outlook

Overshadowed by the market turmoil was the continued surge in FDI, with USD30.6 billion in new commitments registered in 2008 to June, 50 percent higher than the full-year record set in 2007. Several multi-billion dollar projects were recorded in steel production and real estate development. Growth slowed to 6.5 percent over the first half of 2008 (versus 7.4 percent in the first half of 2007). However, as expectations moderated around the lower growth rate the outlook for the remainder of the year looked positive. Unfortunately, the global economy took a sudden turn for the worse at the end of the third quarter of 2008. This has clouded the short to medium-term outlook for Vietnam, even as the country’s fundamentals continue to be strong. Near the end of the year, the government wavered only slightly in loosening its fiscal and monetary stance to allow faster GDP growth. Controlling inflation and maintaining financial stability remain the top economic priorities. In the context of the dire global economic situation, the government will likely use a flexible interest rate policy as a primary tool to contain inflation while minimising potential liquidity risks in the banking system, to help weak banks survive and to avert any potential rise in real estate loan defaults. Vietnam needs to focus on its ability to absorb the FDI influx, in terms of infrastructure, expertise and labour. The global financial crisis will have an impact on Vietnam chiefly in the potential slowing of FDI disbursement. In other areas, the country’s diverse export base and numerous low-cost exports

(items that may not see a sharp drop in demand) will protect it somewhat from the global slowdown. In the medium term, Vietnam’s young, educated population and emerging middle class will continue to drive economic growth and development. The rise in consumer spending and services, and growing demand for modern urban spaces, will continue. The industrial base will be strengthened as oil refineries come online in 2009 and transport infrastructure improves. The global economic situation will slow, not stop, Vietnam’s inevitable growth. Breakdown of FDI in to Vietnam H1 2008 vs 2007

Vietnam: Some Economic Factors H1 2008 vs 2007

USDbn USDbn

17.3

18 15

2007 H1 2008

13.2

60 50

12 9.4

2007 H1 2008

70 60.8

44.6

48.4

9 7.0

31.6

29.7

6 20 3

1.2

0 Industry & construction

Real estate

12.4

14.9

20.3

10 0.3

Others

0.3 0.2 Agriculture, forestry & aquaculture

Some 478 new FDI projects were registered with a total capital of USD30.9bn. Together with USD661m supplementary capital in 158 projects, total FDI over H1 2008 reached USD31.6bn, a 3.7 fold increase year-on-year over 2007. Disbursed FDI over H1 2008 was USD4.9bn, on track to reach the annual target of USD10bn.

5 4.9

0 Import

Export

Trade deficit

FDI

Disbursed FDI

Exports reached USD29.7bn in the first half of 2008, up 31.8 percent year-on-year. Imports rose to USD44.5bn, up 60.3 percent against 2007. Over the first half this resulted in a deficit of USD14.9bn, higher than the trade deficit for the whole of 2007. The largest component of imports was machinery and equipment, accounting for 15.7 percent of the total.

VNI 2008 2008 Annual Annual Report Report 8 8VNI

Investment Environment

Power

The growth in energy demand in Vietnam over the period from now to 2020 is expected to be remarkable by international standards. The government’s 2006 master plan for the power sector, which assumes 7.5 percent annual GDP growth to 2020, anticipates electricity demand growth of 16 percent yearly to 2010, 11 percent yearly from 2011-2015, followed by 9 percent yearly from 2016-2020. Expected demand growth in the next two years implies almost a doubling of the installed generating capacity of Electricity of Vietnam (EVN). Such high growth rates reflect the projected high level of economic activity and industrialisation of Vietnam. Given the pace of demand growth, supply is struggling to keep up given long investment lead times. The country’s power system experiences low reserves particularly during the dry season, when hydropower plants can only operate at about 40-50 percent of their rated output. The power system will operate with zero reserves during dry seasons until 2010, necessitating power imports from China and Laos, with rolling black-outs.

The government has called for increased private sector investment in power generation given the significant financial resources required to increase supply capacity.

The government has called for increased private sector investment in power generation given the significant financial resources required to increase supply capacity. In addition to private sector participation in greenfield power projects, the government is also continuing to equitise operating power plants and those under construction.

Transportation

Between 1999 and 2005, freight travel on Vietnam’s roads increased by an average of 8 percent yearly, and reached 18 percent yearly in key economic hubs like Hanoi and Ho Chi Minh City. The growth in passengers per kilometre has also increased by about 7.7 percent yearly over the same period. Container volume growth of 19.8 percent yearly from 1995 to 2006 may increase to 25 percent in the short term due to rapid growth of trade turnover. Air travel is also expected to

increase rapidly by 12-14 percent per year to 2010. Such rapid growth has increased the pressure on Vietnam’s transport infrastructure network, which has suffered from decades of underinvestment. To improve the situation, the government has approved a list of projects to initiate before 2010 that will require USD4.5 billion for the construction of 10 seaports, USD6.3 billion for 700km of expressway, and several billion USD more for new and upgraded airports. Foreign investment in transportation infrastructure is encouraged through incentive plans such as BOT and BT project structures. The Ministry of Transport and provincial and municipal governments are also required each year to issue lists of road and bridge projects eligible for foreign investment.

Industrial parks

The continuous flow of foreign direct investment into Vietnam has resulted in rapid growth of the industrial park business. At the end of 2007 there were 179 industrial parks in Vietnam covering an area of 43,000 ha and contributing approximately 36 percent of GDP while creating more than one million jobs. Foreign investors are attracted by Vietnam’s central location in Asia, young and low-cost labour force, and government incentives. Industrial parks are the preferred location to establish manufacturing and business operations because of their quality infrastructure, utilities and other ready-to-use facilities and services. Industrial parks have attracted a total of 2,600 foreign-invested projects worth USD25.3 billion. The government also encourages local producers to relocate factories from cities to neighbouring industrial parks, to lower pollution and traffic congestion. As a result, the demand for industrial properties is increasing steadily. Industrial parks built and managed by experienced developers like VSIP, AMATA

VNI 2008 Annual Report 9

and Tan Thuan, who understand the requirements of foreign investors, have been very successful. In addition to 50-year leaseholds, they also offer standard ready-built factories and warehouses on a monthly fee basis. As the infrastructure surrounding industrial parks improves, this sector has high growth potential for many years.

new wave of private investment into the water treatment industry. Led by the Infrastructure Company of Ho Chi Minh City – CII, Thu Duc BOO became the first successful BOO water treatment project in Vietnam. The first BOT project in Vietnam is the 100,000 cu.m per day Binh An water treatment plant.

Water treatment

Telecommunications

Vietnam’s water treatment industry has grown substantially in recent years amid rapid urbanisation, an attractive policy framework, and increasing public and government awareness on the importance of proper hygiene and sanitation. Vietnam is currently experiencing one of the highest rates of urbanisation in its history, at 27 percent yearly growth in the urban population. This has outpaced infrastructure development in every corner of the country. As of 2004, Vietnam’s rural access to water and sanitation was only 48 percent and 16 percent, respectively, while access rates in urban areas for water and sanitation were 82 percent and 76 percent. In 2007 the government signed a decree regulating water treatment, distribution, and consumption. This decree encourages private sector investment into water treatment and distribution, with attractive incentives including tax breaks, land use rights, and low-interest loans from the Vietnam Development Bank. Moreover, private investors can enter BOO, BOT, or BT contracts with the government to develop water treatment projects. Current targets include 95 percent urban access to clean drinking water and 85 percent rural access to national-standard clean water of 60 litres per person per day by 2010. By 2020, these targets increase to 100 percent urban access to 120-150 litres and 100 percent rural access to 60 litres per person per day. These goals will be hard to meet, even with the

Vietnam is seeing rapid growth in its telecommunications sector, particularly mobile telecommunications, as incomes rise and lifestyles modernise. The number of mobile phone subscribers quadrupled from 9 to 36 million from 2005 to 2007, resulting in a penetration rate of over 41 percent. Meanwhile, the number of fixed-line users doubled in the same period to reach 11.4 million, a penetration rate of 13 percent. Internet use increased by 180 percent to 18.9 million users at January 2008, equal to 22 percent of the population. Industry analysts expect this rapid growth to continue. By the end of 2008 the mobile penetration should reach 60 percent and by 2011 it should surpass the 100 percent threshold. Fixed line users should increase to 13 million by the end of 2008, a penetration rate of 15 percent. The rate is forecast to exceed 17 percent by the end of 2012. The number of internet users should rise to 31.5 million by 2012, or 34 percent of the population. The strong growth of the sector requires service providers like VNPT, S-Telecom, Vietel, Hanoi Telecom and GTel to continue to invest in expanding their network infrastructure – to meet the growing demand, to improve and enhance services and coverages, and to maintain competitiveness. Four mobile operators will receive 3G licence from the Ministry of Culture and Information, and five mobile operators will receive permission to undertake mobile WiMax trials.

Mobile operators are now upgrading their infrastructure to 3G and competing for licences. The first commercial deployment of 3G mobile services is expected in 2008, with Business Monitor International predicting Vietnam will have over four million 3G customers by the end of 2012, or 7.5 percent of the mobile user base. Such developments in the telecommunications sector create huge opportunities for investment in the related infrastructure.

VNI 2008 2008 Annual Annual Report Report 1010VNI

Portfolio Performance

Vietnam Infrastructure Limited (VNI) made great progress over its first year in building a portfolio of infrastructure assets diversified by sector, asset class and geographic location. VNI began trading on the London Stock Exchange (AIM) on 4 July 2007 after raising USD389 million to invest in Vietnam’s infrastructure sector, with the goal of fully investing this original capital within a two year period. The year ended 30 June 2008 saw great turbulence in the Vietnamese market, highlighted by a 57 percent decline in the benchmark Vietnam Index. VNI saw its net asset value and share price challenged by domestic and global economic conditions. Despite the difficult environment, VNI can claim an excellent performance record to date, with a much smaller decline in net assets than either the VN Index, comparable Vietnam funds, or comparable Asian infrastructure funds. VNI’s began trading on 4 July 2007 at a net asset value of USD389 million, or USD0.97 per share. At 30 June 2008 the NAV had declined 13.9 percent to USD335 million, or USD0.84 per share. This compares to a drop of approximately 38 percent on average for listed, close-ended funds focused on Vietnam, according to the broker LCF Edmond de Rothschild. The VNI share price was negatively affected near the end of the financial year due to a combination of pessimistic sentiment from the failure of several global infrastructure funds _ despite the fact that VNI has no debt at the fund level. The VNI share price peaked at USD1.04 on 16 October 2007 before gradually falling to USD0.60 at 30 June 2008. The share price then declined again, sharply, during the September-October onset of global financial crisis that saw a worldwide ‘flight to safety’ out of emerging market and other sectors or funds perceived as high risk. At the end of October 2008 the share price stood at USD0.26 per share, well below the fund’s cash position. Without question, this is an irrational and unsettling situation that greatly concerns the VNI Board of Directors and the investment manager. A review of VNI’s investment performance indicates that there is great potential in the

portfolio, and the safety of a large remaining balance of cash and bank deposits which stood at USD197.0 million at 30 June 2008. VNI has been conservative in its valuation process, and avoided entering numerous deals when prices were at their peak in late 2007 (as one example, VNI entered a significant deal shortly after the financial year closed at one-third the cost of the initial offer received six months earlier). As a result of this discipline, some 60 percent of VNI’s NAV remained in cash and deposits at 30 June 2008, of which about half had been committed to projects. VNI’s target portfolio structure is one-third operating assets, one-third under construction (brownfield) projects, and one-third greenfield developments. As a significant number of operating companies are listed, VNI ended the financial year with 20.8 percent of its assets in listed securities. Some of these investments were privately negotiated placements at 25 to 30 percent discounts to the prevailing market price. VNI’s NAV decline to date is entirely from the unrealised losses in these marked-to-market listed and OTC securities. It is realistic for these share prices to recover as in many cases they have fallen below their intrinsic value and even replacement cost. VNI is working with some investee companies to assist them with a dual listing on a more mature stock exchange (eg. Singapore) where more sophisticated investors would be able to properly assess their potential. Currently up to 80 percent of trading on the Vietnam exchanges is retail investors. As the year progressed VNI focused more on semi-developed projects, particularly in the telecommunications infrastructure sector, where over the year the company became Vietnam’s largest investor in privately-owned mobile network towers (called base transceiver stations). Attractive returns are possible with one transmitter from one mobile operator per tower. This allows for strong upside potential as there are six mobile operators licensed in Vietnam and 3G licences are also expected to be issued in 2009, requiring the infrastructure density to increase two or threefold.

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Portfolio by asset class (to 30 June 2008)

Portfolio by sector (to 30 June 2008)

Outlook

VNI’s original mandate and strategy to invest in Vietnam’s infrastructure sector remains valid. The need for infrastructure in Vietnam, in every subsector, is extremely strong. The anticipated global economic slowdown will have some impact on some areas, but the demand for power, water, roads and bridges is very high and inelastic.

335m 100%

335m 3.92% Other sectors

100%

2.33% Fixed Income 12.40% Private

20.38% IP/Construction

The difficulty in raising debt in the current market for greenfield projects requires VNI to only look at projects that have debt funding already in place.

80%

An increasing number of investment opportunities are available at very attractive prices. The high interest rates and lack of liquidity in Vietnam have project owners looking for new partners – and VNI is unique in being the only fund focused on infrastructure in Vietnam. With significant available cash and a strong pipeline, the company has solid prospects going forward.

60%

4.38% OTC

80% 2.05% Telecom 7.81% Energy

20.79% Listed

5.73% Transport and Aviation

29.93% Cash and cash equivalent

40%

60% 29.93% Cash and cash equivalent

40%

20%

20% 30.18% Approved to be disbursed

30.18% Approved to be disbursed

Top investments

2008

NAV and share price performance (to 30 June 2008) Company

Sector

Type

Listed

1.2

Transport

Private

1.0

Private

0.8

Pha Lai Thermal Power JSC

Energy

Listed

0.6

Can Don Hydropower JSC

Energy

Listed

Telecoms

Private

USD Tan Tao Industrial Park JSC Vietnam Aircraft Leasing Co. Long An S.E.A. Industrial Park and Service Area

Mobile Infrastructure Development Co.

IP/Construction

Listed

Ba Ria Thermal JSC

Song Da Urban & IZ Development & Investment JSC

Energy

Listed

Petrovietnam Drilling & Well Services Investment

Energy

OTC

0.839

0.4 0.2

0.595

0.0

Jul-07

Sep-07

Nov-07

Jan-08

Mar-08 NAV Per share

May-08 Jun-08 Price

12 VNI 2008 Annual Report

Vietnam Aircraft Leasing Corporation is a joint venture that will lease aircraft on short and long-term contracts.

VNI 2008 Annual Report 13

VNI is Vietnamâ&#x20AC;&#x2122;s largest investor in base transceiver station towers _ the backbone of mobile networks.

14 VNI 2008 Annual Report

VNIâ&#x20AC;&#x2122;s first investment in the power sector was Can Don Hydro, a listed company.

VNI 2008 Annual Report 15

VNI has investments in both greenfield and operating industrial parks, like Tan Tao in Ho Chi Minh City.

16 VNI 2008 Annual Report

Feature Investments

Power

Electricity supply in Vietnam cannot meet the demand of a fast growing economy. This is a key development bottleneck and a fundamental reason for VNI to be a long-term investor in power generation companies in Vietnam. After one year, 7.8 percent of VNI’s net asset value is invested in the energy sector.

Can Don Hydro Power Joint Stock Company (SJD) VNI’s first investment in the power sector was in SJD – a hydro power company with an installed capacity of 78 MW and listed on the Ho Chi Minh Stock Exchange (HOSE). The plant is located on the Song Be River just after Thac Mo Hydro Power. The area served by the plant – including Ho Chi Minh City, Vung Tau, Bien Hoa and Binh Duong provinces – has the fastest growth rate in Vietnam and is the industrial and technology hub of the country. VNI currently owns a 16.6 percent stake in SJD, with the majority owner being Song Da, one of Vietnam’s leading conglomerates. Thac Mo Hydro Power Joint Stock Company VNI owns a 1.4 percent stake in Thac Mo Hydropower JSC, which owns a power plant on the Song Be River in southeastern Vietnam. The total designed capacity of its two generators is 150 MW, equivalent to an annual output of approximately 610 million kWh. The company is currently undergoing an expansion project to increase annual output by 52 million kWh. Ba Ria Thermal Power Joint Stock Company VNI owns a 2.6 percent stake in Ba Ria Thermal Power, which owns a plant in Ba Ria-Vung Tau in southern Vietnam. The 389 MW capacity plant has a current annual output of approximately two billion kWh, some 4 percent of total power output in Vietnam. Ba Ria Thermal Company is 80% owned by Electricity of Vietnam and is one of the top five power companies in Vietnam. Pha Lai Thermal Power Joint Stock Company (PPC) VNI has a 3.5 percent stake in the largest thermal power plant in Vietnam, PPC, with 1040 MW of generating capacity providing approximately 10 percent of Vietnam’s electricity output. PPC primarily generates electricity derived from thermal (coal) power sources and has the advantage of proximity to two major coal mines in northern Vietnam, namely Vang Danh and Mao Khe.

VNI 2008 Annual Report 17

Telecommunications

Transportation

Industrial Parks

Mobile Infrastructure Development Company (MIDC) VNI established MIDC as a joint venture that is expected to be the largest private BTS owner and lessor in Vietnam. VNI has a 49 percent equity stake in MIDC and is the single largest shareholder. Since incorporation, MIDC has secured orders to build and lease about 1,000 BTS towers across Vietnam.

Innovative Technology Development Corporation (ITD) VNI owns a 15 percent stake in ITD, a holding group with six subsidiaries operating in various areas of infrastructure technology including telecommunications, power, electronics, toll-road equipment and information systems. ITD is the largest toll road equipment provider in Vietnam.

Mobile Information Services (MIS) VNI currently owns a 30 percent stake in Hanoi-based MIS, which has built over 100 BTS for VMS Mobifone and Vinaphone, and is in the process of building another 100 towers.

Vietnam Aircraft Leasing Company (VALC) VNI owns a 16 percent stake in VALC, a joint venture between some of the largest state-owned enterprises, including Vietnam Airlines, Bank for Investment and Development of Vietnam (BIDV), Viet Nam Oil and Gas Group (PetroVietnam), Viet Nam Shipbuilding Industry Group (Vinashin) and Phong Phu Corp. VALC will lease out aircraft on short and long-term contracts. The company has already signed contracts with Boeing and Airbus to purchase eight B787-8 Dreamliners and ten A321-200 aircraft, all to be leased by Vietnam Airlines, with the debt for this lease guaranteed by the Government of Vietnam. VALC’s potential projects also include investments in airport infrastructure and aviation services.

Ba Thien 2 Industrial Park VNI has joined with CPK Vinh Phuc to develop Ba Thien 2, a modern 308ha industrial park 60km north of Hanoi. VNI owns a majority stake in the joint venture, which will invest in the park infrastructure and lease land to industrial tenants. Ba Thien 2 is located in Vinh Phuc province, a prime industrial location for major corporations including Honda, Toyota, Foxconn and Compal.

The rapid growth of mobile use in Vietnam has translated into a demand for telecommunications infrastructure such as base transceiver station (BTS) towers. The three major mobile phone operators are estimated to require about 7,000 BTS over the next two years. VNI is now Vietnam’s largest single investor in companies that build and lease BTS towers to mobile network providers.

Global Infrastructure Investment Limited (GII) VNI established GII as a joint venture with two strategic partners, Innovative Technology Development Corp. (ITD) and Global Lightning Technologies Corp. (GLT). VNI has a 49 percent equity stake in the joint venture, which is based in Ho Chi Minh City. As of 30 June 2008 – within three months of being established – GII had constructed 11 BTS towers and secured contracts for an additional 55 towers from the two largest mobile providers in Vietnam (VMS Mobiphone and Vinaphone).

Vietnam’s road, rail, air and water transport links are all in dire need of upgrading. The government’s willingness to involve private sector participation in this sector has opened the door for VNI to make profitable long-term investments.

Industrial Parks are the leading model for economic growth in the manufacturing sector in Vietnam, as they offer numerous benefits for factories including improved infrastructure such as independent waste disposal and power supplies. Industrial Parks are profitable businesses and VNI has invested in the listed companies Tan Tao and Song Da, along with two independent IP ventures.

Long An Industrial Park Service Area VNI will develop 398ha of industrial park and 239ha of service area for the 2,000ha Long An S.E.A complex that will include a port, IP, services, residential areas and park space. The Long An complex is located only 25km from Ho Chi Minh City. The future S.E.A port will significantly aid the development of the industrial park as manufacturers will be able to significantly reduce time and cost for the import and export of materials and finished products. Construction will begin in 2009.

18 VNI 2008 Annual Report

Left to right: Mr. Horst F. Geicke, Mr. Ekkehard Goetting, Mr. Luong Van Ly, Mr. Paul Cheng, and Mr. Don Lam.

VNI 2008 Annual Report 19

Board of Directors Don Lam, Chairman Don Lam is Co-founder and Chief Executive Officer of VinaCapital Group Limited. He has overseen the Group’s growth from manager of a single USD10 million fund in 2003 into a full-featured investment house managing four funds worth almost USD2 billion and offering a complete range of corporate finance and real estate advisory services. Before founding VinaCapital, Mr. Lam was a partner at PricewaterhouseCoopers (Vietnam) Limited, where he led the Corporate Finance and Management Consulting practices throughout the Indochina region. Mr. Lam has also held management positions at Deutsche Bank and Coopers & Lybrand in Vietnam and Canada.

Horst F. Geicke, Director Horst Geicke is Chairman and Co-founder of VinaCapital Group Limited. He has resided in Asia for almost 30 years and has over 25 years of operating and investing experience in the region, having made several financial and strategic investments in Vietnam, including the establishment of a manufacturing plant for his family business. Mr. Geicke also co-founded the Pacific Alliance fund management group, which has more than USD2 billion in assets under management. Mr. Geicke was the President of the German Chamber of Commerce in Hong Kong for four years and in 2005, became the president of the European Chamber of Commerce in Hong Kong. Mr. Geicke has a Masters degree in Economics and Business Law from the University of Hamburg, Germany.

Ekkehard Goetting, Director Mr. Goetting is currently Chairman and CEO of German Industry of Commerce Ltd. (GIC), Hong Kong, South China, Vietnam and a member of the Board, GIC Taicang Ltd., Taicang, PRC. He is also Vice President of the German Chamber of Commerce in Hong Kong. Mr. Goetting was born in Germany and attended the University of Hamburg where he studied law and computer science. He has over 17 years of business experience in Asia, and has worked to increase business ties between his native Germany and Asia. He established a Representative office of German Industry and Commerce in Hanoi and he has led multiple German and International business missions to Vietnam and Cambodia starting as early as 1990. He has served on many Asia-specific Advisory Boards, most notably the Asia-Pacific Committee of German Industry, the Federation of German Industries, the East Asia Business Association and the Association of German Banks. Currently he also holds the position of Chief Representative for the German National Tourist Office, Hong Kong and South China as well as Messe Berlin, Hong Kong, PRC and Port of Hamburg, Hong Kong, PRC, Vietnam.

Paul Cheng, Director Mr. Cheng is an independent non-executive director of Esprit Holdings Limited and Kingboard Chemical Holdings Limited – both listed companies on the Hong Kong Stock Exchange. He is a member of the International Advisory Board of Abdul Latif Jameel Co. Ltd., one of the largest private companies in Saudi Arabia, and is an advisor to Steelcase Corporation in the U.S. He was formerly Chairman of The Link Management Ltd., which manages a portfolio of previously government-owned retail and car parking assets, valued at over HK$30 billion. The privatisation in late November 2005 was the world’s largest Real Estate Investment Trust (REIT) IPO. Born in China, Mr. Cheng was raised in Hong Kong and received his higher education in the United States. He has a B.A. degree from Lake Forest College (Illinois, U.S.A) and received his M.B.A. degree from the Wharton Graduate School of Business at the University of Pennsylvania.

Luong Van Ly, Director Mr. Luong is currently the CEO of DNL Partners, an investment consultancy company. He has also held the position of Deputy Director of the Department of Planning and Investment in Ho Chi Minh City for six years and before that he was the Deputy Director of Foreign Affairs. He has had over 25 years of experience in Vietnam giving him a good understanding of both the government and the market. He attended the Graduate Institute of International Studies in Geneva, Switzerland.

20 VNI 2008 Annual Report

Report of the Board of Directors

The Company

Vietnam Infrastructure Limited is incorporated in the Cayman Islands as a company with limited liability. The registered office of the Company is PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands.

Principal activity

The Company’s principal activity is to invest in a diversified portfolio of entities owning infrastructure projects and assets in Vietnam and the surrounding Asian countries. The Company mainly invests and holds equity, debt and hybrid instruments in unquoted companies that themselves hold, develop or operate infrastructure assets. The Company may also invest in entities whose shares or other instruments are listed on a stock exchange, or traded on OTC markets. The Company also may invest in other funds that invest in infrastructure.

Results and dividends

The Board of Directors submits its report together with the consolidated financial statements of Vietnam Infrastructure Limited (“the Company”) and its subsidiaries (together referred to as “the Group”) for the year ended 30 June 2008 and for the period from 18 January 2007 (date of establishment) to 30 June 2007.

The results of the Group for the year ended 30 June 2008 and for the period from 18 January 2007 (date of establishment) to 30 June 2007 and the state of its affairs as at those dates are set out in the accompanying consolidated financial statements. The Company’s ordinary shares were admitted to trade, and commenced trading, on the AIM market of the London Stock Exchange on 5 July 2007. The Board of Directors do not recommend payment of dividends in respect of the year.

Directors

The directors of the Company during the year were as follows:

Name Don Lam Horst Geicke

Position

Appointed on

Chairman

29 June 2007

Director

29 June 2007

Paul Ming Fun Cheng

Director

29 June 2007

Ekkehard Goetting

Director

29 June 2007

Luong Van Ly

Director

29 June 2007

VNI 2008 Annual Report 21

Directors’ interests in the Company

As at 30 June 2008 and 2007, the interests of the Directors in the shares, underlying shares and debentures of the Company were as follows:

No. of shares Horst Geicke Don Lam

30 June 2008

30 June 2007

1,000,000

500,000

600,000

500,000

have been appropriately disclosed, explained and quantified in the financial information; 3. maintain adequate accounting records and an effective system of internal controls; 4. prepare the financial information on a going concern basis unless it is inappropriate to assume that the Group will continue its operations in the foreseeable future; and 5. control and direct effectively the Group in all material decisions affecting its operations and performance and ascertain that such decisions and/or instructions have been properly reflected in the financial information. The Board of Directors is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board of Directors confirms that they have complied with the above requirements in preparing the financial information.

Approximate % of holding 30 June 2008

30 June 2007

Horst Geicke

0.25%

0.12%

Don Lam

0.15%

0.12%

At the date of this report there had been no changes in the above holdings.

Subsequent events

Details of significant subsequent events of the Group are set out in Note 26 to the accompanying consolidated financial statements.

Directors’ responsibility in respect of the consolidated financial statements The Board of Directors is responsible for ensuring that the consolidated financial statements (“financial information”) are properly drawn up so as to give a true and fair view of the financial position of the Group as at 30 June 2008 and 2007 and of the results of its operations and its cash flows for the year ended 30 June 2008 and for the period from 18 January 2007 (date of establishment) to 30 June 2007. When preparing the financial information, the Board of Directors is required to: 1. adopt appropriate accounting policies which are supported by reasonable and prudent judgements and estimates and then apply them consistently; 2. comply with the disclosure requirements of International Financial Reporting Standards or, if there have been any departures in the interest of true and fair presentation, ensure that these

Statement by the Board of Directors

In the opinion of the Board of Directors, the accompanying consolidated balance sheets, consolidated statements of income, cash flows and changes in equity, together with the notes thereto, have been properly drawn up and give a true and fair view of the financial position of the Group as at 30 June 2008 and 2007 and the results of its operations and cash flows for the year ended 30 June 2008 and for the period from 18 January 2007 (date of establishment) to 30 June 2007 in accordance with International Financial Reporting Standards. On behalf of the Board of Directors, Don Lam, Chairman Ho Chi Minh City, Vietnam 28 October 2008

22 VNI 2008 Annual Report

Independent Auditors’ Report

To the shareholders of Vietnam Infrastructure Limited

Scope

We have audited the accompanying consolidated financial statements of Vietnam Infrastructure Limited and its subsidiaries (together referred to as “the Group”) which comprise the consolidated balance sheets as at 30 June 2008 and 2007, and the consolidated statements of income, changes in equity and cash flows for the year ended 30 June 2008 and for the period from 18 January 2007 (date of establishment) to 30 June 2007, and summary of significant accounting policies and other explanatory notes, as set out on pages 26 to 40.

In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

Management’s Responsibility for the Financial Statements

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and the fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Audit opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Group as at 30 June 2008 and 2007, and the results of its operations and its cash flows for the year ended 30 June 2008 and for the period from 18 January 2007 (date of establishment) to 30 June 2007 in accordance with International Financial Reporting Standards.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with relevant ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

KPMG Limited Vietnam 28 October 2008

VNI 2008 Annual Report 23

Consolidated balance sheets as at 30 June 2008 and 2007 Note

30 June 2008 USDâ&#x20AC;&#x2122;000

30 June 2007 USDâ&#x20AC;&#x2122;000

17,970

Assets Non-current Property, plant and equipment Current Trade and other receivables

6,008

Financial assets at fair value through profit and loss

112,880

Investments in equity accounted investees

3,814

Bank deposits

61,828

Cash and cash equivalents

135,248

402,100

319,778

402,100

337,748

402,100

4,021

(729)

Total assets Equity Equity attributable to shareholders of the Group Share capital

Treasury shares Share premium

Accumulated losses Minority interest

Total equity

386,367

(54,327)

(851)

335,332

389,537

906

336,238

389,537

827

11,712

Liabilities Current liabilities Payables to related parties

Other liabilities Total liabilities Total equity and liabilities Net asset value per share (USD per share)

683

851

1,510

12,563

337,748

402,100

0.84

0.97

The notes set out on pages 26 to 40 form an integral part of these consolidated financial statements

24 VNI 2008 Annual Report

Consolidated statements of changes in equity for the year ended 30 June 2008 and for the period from 18 January 2007 (date of establishment) to 30 June 2007 Equity attributable to shareholders of the Group Share capital

Treasury shares

Share premium

Accumulated losses

Total

Minority interest

Total equity

USD’000

At 18 January 2007 (date of establishment)

Net loss for period ended 30 June 2007

(851)

4,021

398,079

402,100

Issue of new shares Placing fees

(11,712)

4,021

386,367

(851)

389,537

Net loss for the year ended 30 June 2008

(53,476)

(6)

(53,482)

Acquisition of subsidiaries

912

At 30 June 2007

Buy-back of shares At 30 June 2008

(729)

4,021

(729)

386,367

(54,327)

335,332

906

336,238

Consolidated statements of income for the year ended 30 June 2008 and for the period from 18 January 2007 (date of establishment) to 30 June 2007 Note

From 1 July 2007 to 30 June 2008

From 18 January 2007 to 30 June 2007

USD’000

Net changes in fair value of financial assets at fair value through profit and loss

Other investment income

18,262

Administration expenses

(9,750)

(851)

Loss from operating activities

(37,876)

(851)

Net foreign exchange loss

(15,491)

(115)

(53,482)

Share of loss of equity accounted investees

Loss before tax Income tax

Net loss Basic loss per share (USD per share)

(46,388)

(53,482)

(851)

(0.13)

(0.002)

The notes set out on pages 26 to 40 form an integral part of these consolidated financial statements

VNI 2008 Annual Report 25

Consolidated statements of cash flows for the year ended 30 June 2008 and for the period from 18 January 2007 (date of establishment) to 30 June 2007

From 1 July 2007 to 30 June 2008

From 18 January 2007 to 30 June 2007

USDâ&#x20AC;&#x2122;000

(53,482)

(851)

Gains on disposals of financial assets

(17)

Share of loss of equity accounted investees

115

Unrealised foreign exchange losses

13,734

Net changes in fair value of financial assets at fair value through profit and loss

46,405

Operating activities Net loss before tax Adjustment for

Interest and dividend income

(18,261)

Net loss before changes in working capital

(11,506)

(851)

Change in secured bank deposits

(61,828)

Change in trade and other receivables Change in trade and other payables

(1,016)

659

851

(73,691)

12,842

427

Investing activities Interest received Dividends received Purchases of property, plan and equipment through acquisition of subsidiaries (See Note 5) Other purchases of property, plan and equipment Investments in associates Purchases of financial assets Proceeds from disposals of financial assets

(17,000)

(58)

(3,929) (166,543)

217

(174,044)

402,100

Financing activities Proceeds from shares issued Payment for buy-back of shares Payment for share issuance costs Net (decrease)/increase in cash and cash equivalents for the year/period Unrealised foreign exchange differences of cash and cash equivalents

(729)

(11,712)

(12,441)

402,100

(260,176)

402,100

(6,676)

Cash and cash equivalents at the beginning of the year/period

402,100

Cash and cash equivalents at end of the year/period

135,248

402,100

The notes set out on pages 26 to 40 form an integral part of these consolidated financial statements

26 VNI 2008 Annual Report

Notes to the consolidated financial statements for the year ended 30 June 2008 and for the period from 18 January 2007 (date of establishment) to 30 June 2007 These notes form an integral part of and should be read in conjunction with the accompanying consolidated financial statements.

1. General information

Vietnam Infrastructure Limited (“the Company’) is a limited liability company incorporated in the Cayman Islands. The registered office of the Company is PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands. The Company mainly invests and holds equity, debt and hybrid instruments in unquoted companies that themselves hold, develop or operate infrastructure assets. The Company may also invest in entities whose shares or other instruments are listed on a stock exchange, or traded on the OTC markets. The Company also may invest in other funds that invest in infrastructure. The Company’s shares are traded on the AIM market of the London Stock Exchange under the ticker symbol VNI. The Company’s fiscal year is from 1 July to 30 June. The first fiscal year was from 18 January 2007 (date of establishment) to 30 June 2007.

2. Summary of significant accounting policies 2.1 Statement of compliance The consolidated financial statements (the “financial statements”) have been prepared in accordance with International Financial Reporting Standards (“IFRS”).

The consolidated financial statements were approved for issue by the Board of Directors on 28 October 2008. 2.2 Basis of preparation The significant accounting policies that have been used in the preparation of the financial statements are summarised below. These policies have been consistently applied to all the financial periods presented unless otherwise stated.

The financial statements have been prepared using the historical cost convention, as modified by the measurement at fair value of certain financial assets and financial liabilities, the measurement bases of which are described in the accounting policies below. The preparation of financial statements in accordance with IFRS requires the use of certain accounting estimates and assumptions. Although these estimates are based on management’s best knowledge of current events and actions, actual results may ultimately differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future period affected. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3 to the consolidated financial statements. 2.3 Basis of consolidation The financial statements of the Group as of 30 June 2008 and 2007 and for the period from 18 January 2007 (date of establishment) to 30 June 2007 and for the year ended 30 June 2008 comprise the Company and its subsidiaries (together referred to as “the Group”) and the Group’s interests in associates. 2.4 Subsidiaries Subsidiaries are all entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from their activities. In assessing control, potential voting rights that presently are exercisable or convertible, along with contractual arrangements, are taken into account. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are

excluded from consolidation from the date that the control ceases. In addition, acquired subsidiaries are subject to application of the purchase method of accounting. This involves the measurement at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the basis for subsequent measurement in accordance with the Group’s accounting policies. Goodwill represents the excess of acquisition cost over the fair value of the Group’s share of the identifiable net assets of the acquired subsidiary at the date of acquisition. Negative goodwill is immediately allocated to the consolidated statement of income as at the acquisition date. All intra-group balances and significant intra-group transactions and resulting unrealised profits or losses (unless losses provide evidence of impairment) are eliminated on consolidation. 2.5 Associates Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Associates are accounted for using the equity method and are initially recognised at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share of the income and expenses and equity movements of the equity accounted investees from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the carrying amount of that interest is reduced to nil and the

VNI 2008 Annual Report 27

recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate. 2.6 Functional and presentation currency The consolidated financial statements are presented in United States Dollars (“USD”), the Company’s functional currency. The financial statements of each consolidated entity are presented in either USD or the currency of the primary economic environment in which the entity operates (“the functional currency”), which for most investments is Vietnamese Dong (“VND”). USD is used as the presentation currency because it is the primary basis for the measurement of the performance of the Group (specifically changes in the Net Asset Value of the Group) and the Company’s share price is quoted in USD on the AIM market of the London Stock Exchange. 2.7 Foreign currency translation In the separate financial statements of the consolidated entities, transactions arising in currencies other than the functional currency of the individual entity are translated at exchange rates in effect on the transaction dates. Monetary assets and liabilities denominated in currencies other than the functional currency of the individual entity are translated at the exchange rates in effect at the balance sheet date. Translation gains and losses and expenses relating to foreign exchange transactions are recorded in the statement of income. In the consolidated financial statements, assets and liabilities included in the financial statements of subsidiaries which are prepared in currencies other than USD are translated into USD at the exchange rates in effect at the balance sheet date. Income and expenses of these subsidiaries are translated into USD at exchange rates approximating to the rates in effect on the transaction dates. Differences resulting from the

translation are recorded in the foreign exchange translation reserve in equity. 2.8 Property, plant and equipment Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The initial cost of a property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after property, plant and equipment have been put into operation, such as repairs and maintenance and overhaul costs, are normally charged to income in the year in which the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of property, plant and equipment beyond their originally assessed standard of performance, the expenditures are capitalised as an additional cost of property, plant and equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net in the consolidated statement of income. 2.9 Revenue recognition Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be reliably measured, on the following basis: Interest income Interest income is recognised on a time proportion basis using

the effective interest method. Dividend income Dividend income is recorded when the Group’s right to receive the dividend is established. 2.10 Expense recognition All expenses, including management fees and custodian fees, are recognised in the statement of income on an accrual basis. 2.11 Financial assets Financial assets, other than hedging instruments, are divided into the following categories: loans and receivables; financial assets at fair value through profit or loss; available-for-sale financial assets; and held-to-maturity investments. Management determines the classification of its financial assets at initial recognition depending on the purpose for which the financial assets were acquired. Where allowed and appropriate management re-evaluates this designation at each reporting date. The designation of financial assets is based on the investment strategy set out in the Group’s Admission Document to the AIM market of the London Stock Exchange, dated 29 June 2007. All financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not designated as at fair value through profit or loss, directly attributable transaction costs. Derecognition of financial assets occurs when the rights to receive cash flows from the investments expires or are transferred and substantially all of the risks and rewards of ownership have been transferred. At each balance sheet date, financial assets are reviewed to assess whether there is objective evidence of impairment. If any such evidence exits, any impairment loss is determined and recognised based on the classification of the financial assets.

28 VNI 2008 Annual Report

The Groupâ&#x20AC;&#x2122;s financial assets consist primarily of cash, bank deposits, listed and unlisted securities, private equity investments, bonds, loans and receivables. Loans and receivables All loans and receivables, except trustee loans, are nonderivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less allowance for impairment. The Groupâ&#x20AC;&#x2122;s trade and most other receivables fall into this category of financial instruments. Discounting, however, is omitted where the effect of discounting is immaterial. Significant receivables are considered for impairment on a case-by-case basis when they are overdue at the balance sheet date or when objective evidence is received that a specific counterparty will default. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assets that are either classified as held for trading or are designated to be carried at fair value through profit or loss upon initial recognition. By definition, all derivative financial instruments that do not qualify for hedge accounting fall into this category. Other financial assets at fair value through profit or loss held by the Group include listed and unlisted securities. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred. Any gain or loss arising from financial instruments is based on changes in fair value, which is determined by direct reference to active market transactions or using industry standard valuation techniques where no active market exists. Where the valuation techniques result in a wide range of valuation or when the fair value is not reliably measured the financial assets are recorded at cost less impairment losses considered necessary by the Directors.

Financial assets at fair value through profit and loss includes trustee loans to banks and other parties where the Group receives interest and other income on the loans calculated based on the proceeds from the sales of specific assets held by the counterparties. Fair value is determined based on the expected future discounted cash flows from each loan. Available-for-sale financial assets Available-for-sale financial assets are non-derivative financial assets that are not designated as other categories of financial assets. All financial assets within this category are subsequently measured at fair value. Gains and losses arising from changes in their fair values are recognised directly in equity, except for impairment losses, until the financial asset is derecognised, at which time the cumulative gain or loss previously recognised in equity would be recognised in the statement of income. For available-for-sale investments in equity securities that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, they are measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition. Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities. Investments are classified as held-to-maturity if it is the intention of the Group to hold them until maturity. Held-to-maturity investments are subsequently measured at amortised cost using the effective interest rate method. In addition, if there is objective evidence that the investment has been impaired, the financial asset is measured at the present value of estimated cash flows. Any changes to the carrying amount of the investment are recognised in the statement of income.

2.12 Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand as well as short-term highly liquid investments such as money market instruments and bank deposits with an original maturity term of not more than three months. 2.13 Equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects. Share premium includes any premiums received on the initial issuance of the share capital. Any transaction costs associated with the issuance of shares are deducted from share premium. When share capital recognised as equity is repurchased (treasury shares), the amount of the consideration paid, which includes directly attributable costs, is net of any tax effects, and is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/from retained earnings. Currency translation differences on net investment in foreign operations are included in the translation reserve. Retained earnings/accumulated losses include all results from current and prior periods as disclosed in the statement of income. 2.14 Financial liabilities The Groupâ&#x20AC;&#x2122;s financial liabilities include trade and other payables and other liabilities. Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument.

VNI 2008 Annual Report 29

All interest related charges are recognised as an expense in finance costs in the statement of income. Trade and other payables and other liabilities are recognised initially at their fair value and subsequently measured at amortised cost, using the effective interest rate method. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. 2.15 Provisions, contingent liabilities and contingent assets Provisions are recognised when present obligations will probably lead to an outflow of economic resources from the Group that can be reliably estimated. A present obligation arises from the presence of a legal or constructive obligation that has resulted from past events. Provisions are not recognised for future operating losses. Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the balance sheet date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Long-term provisions are discounted to their present values, where the time value of money is material. All provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate of Group’s management. The Group does not recognise a contingent liability but discloses its existence in the financial information. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of

resources will be required to settle the obligation. A contingent liability also arises in the rare circumstance where there is a liability that cannot be recognised because it cannot be measured reliably. A contingent asset is a possible asset that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses their existence when inflows of economic benefits are probable, but not virtually certain. 2.16 Related parties Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. Parties are considered to be related to the Group if: 1. directly or indirectly, a party controls, is controlled by, or is under common control with the Group; has an interest in the Group that gives it significant influence over the Group; or has joint control over the Group; 2. a party is a jointly-control entity in which the Group is a venturer; 3. a party is an associate of the Group; 4. a party is a member of the key management personnel of the Group; 5. a party is a close member of the family of any individual referred to in (4); 6. a party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred in (4) or (5). Other investment funds under the management of VinaCapital Investment Management Ltd are considered related parties to the Group.

2.17 Earnings per share and net asset value per share The Group presents basic earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to the ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Net asset value (NAV) per share is calculated by dividing the net asset value attributable to ordinary shareholders of the Company by the number of outstanding ordinary shares as at the balance sheet date. Net asset value is determined as total assets less total liabilities. Where treasury shares exist, net asset value per share is calculated based on the assumption that those treasury shares have been cancelled. 2.18 New standards, amendments and interpretations not yet adopted The following new standards, amendments and interpretations to existing standards have been published, but are not yet effective for the year ended 30 June 2008 and the Group has not early adopted them: IFRS 8 Operating Segments, which is effective for financial statements for periods beginning on or after 1 January 2009, introduces the “management approach” to segment reporting. It is not expected that the adoption of IFRS 8 will have a material effect on the Group’s consolidated financial statements. Revised IAS 23 Borrowing Costs, which is effective for capitalisation of borrowing costs to qualifying assets commencing on or after 1 January 2009, removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. It is not expected that the adoption of Revised IAS 23 will have a material effect on the

30 VNI 2008 Annual Report

Group’s consolidated financial statements. IFRIC 12 Service Concession Arrangements provides guidance on certain recognition and measurement issues that arise in accounting for public-to-private service concession arrangements. IFRIC 12, which is effective for financial statements for periods beginning on or after 1 January 2008, is not expected to have any effect on the Group’s consolidated financial statements. IFRIC 13 Customer Loyalty Programmes addresses the accounting by entities that operate, or otherwise participate in, customer loyalty programmes under which the customer can redeem credits for awards such as free or discounted goods or services. IFRIC 13, which is effective for financial statements for periods beginning on or after 1 July 2008, is not expected to have any effect on the Group’s consolidated financial statements. IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction clarifies when refunds or reductions in future contributions in relation to defined benefit assets should be regarded as available and provides guidance on the impact of minimum funding requirements (MFR) on such assets. It also addresses when a MFR might give rise to a liability. IFRIC 14 is effective for financial statements for periods beginning on or after 1 January 2008, with retrospective application required. The adoption of IFRIC 14 is not expected to have any effect on the Group’s consolidated financial statements. IFRIC 15 Agreements for construction of real estates, which is effective for financial statements for periods beginning on or after 1 January 2009, clarifies whether IAS 18, Revenue, or IAS 11, Construction contracts, should be applied to particular transactions. It is likely to result in IAS 18 being applied to a wider range of transactions. The Directors have not assessed

the effect of this interpretation on the Group’s consolidated financial statements. IFRIC 16 Hedges of a net investment in a foreign operation, which is effective for financial statements for periods beginning on or after 1 October 2008, clarifies the accounting treatment in respect of net investment hedging. This includes the fact that net investment hedging relates to differences in functional currency not presentation currency, and hedging instruments may be held anywhere in the group. The requirements of IAS 21, the effects of changes in foreign exchange rates, do apply to the hedged items. The adoption of IFRIC 16 is not expected to have any effect on the Group’s consolidated financial statements. Revised IAS 1 Presentation of Financial Statements (2007), which is effective for financial statements for periods beginning on or after 1 January 2009, introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the statement of income and all non-owner changes in equity in a single statement), or in a statement of income and a separate statement of comprehensive income. The adoption of Revised IAS 1 is expected to have a significant impact on the presentation of the Group’s consolidated financial statements. Amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation requires puttable instruments, and instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation, to be classified as equity if certain conditions are met. The amendments, which are effective for financial statements

for periods beginning on or after 1 January 2009, with retrospective application required, are not expected to have any effect on the Group’s consolidated financial statements. Revised IFRS 3 Business Combinations (2008) has broadened the definition of a business which is likely to result in more acquisitions being treated as business combinations. Further, the Revised IFRS 3 will require contingent consideration to be measured at fair value, with subsequent changes therein recognised in profit or loss and transaction costs, other than share and debt issue costs, to be expensed as incurred. The revised IFRS 3 will also require any pre-existing interest in the acquiree to be measured at fair value with the gain or loss recognised in profit or loss and any non-controlling (minority) interest to be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis. The Group is required to adopt Revised IFRS 3 for business combinations which the acquisition date is on or after 1 April 2010, with prospective application required. Amended IAS 27 Consolidated and Separate Financial Statements (2008) requires accounting for changes in ownership interests by the Group in a subsidiary, while maintaining control, to be recognised as an equity transaction. When the Group loses control of a subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognised in profit or loss. The amendments to IAS 27 are effective for financial statements for periods beginning on or after 1 July 2009. The Directors have not assessed the effect of this amended standard on the Group’s consolidated financial statements. Amendment to IFRS 2 Share-based Payment – Vesting Conditions and Cancellations clarifies the definition of vesting conditions, introduces the concept of non-vesting conditions, requires non-vesting conditions to be reflected in grant-date

VNI 2008 Annual Report 31

fair value and provides the accounting treatment for non-vesting conditions and cancellations. The Group is required to adopt amendments to IFRS 2 for financial statements for periods beginning on 1 April 2009. The adoption of amendments to IFRS 2 is not expected to have any effect on the Group’s consolidated financial statements. 2.19 Segment reporting An investment segment is a group of assets that are subject to risks and returns that are different from those of other business segments.

4. Segment reporting

Segment information is presented in respect to the Group’s investment and geographical segments. The primary format, investment segments, is based on the investment manager’s management and monitoring of investments. Investments are allocated into the following main segments: energy, property and infrastructure developers, telecommunications, aviation, other sectors and cash (including term deposits and bonds). The Group’s secondary reporting format, geographical segments, includes Vietnam and the Asia Pacific region.

A geographical segment is a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments.

3. Critical accounting estimates and judgements

When preparing the financial information the Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below: Impairment of trade and other receivables The Group’s management determines the provision for impairment of trade and other receivables on a regular basis. This estimate is based on the credit history of its customers and prevailing market conditions. Fair value of financial instruments The fair value of financial instruments that are not traded in an active market (for example, unlisted securities) is determined by using valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date.

Total assets Investment – energy Investment – property and infrastructure developers Investment – telecommunications Investment – aviation Investment – other sectors - Securities - Bonds - Others Others Trade and other receivables Cash and other short term investments

Vietnam USD’000

30 June 2008 Asia Pacific USD’000

Total USD’000

26,203 70,828 7,005 19,219

2,226 7,808 1,375

6,008 102,015 242,687

95,061 95,061

6,008 197,076 337,748

32 VNI 2008 Annual Report

5. Subsidiaries and associates

Capital expenditure Investment – property and infrastructure developers Investment – other sectors Income Investment – energy Investment – property and infrastructure developers Investment – telecommunications Investment – aviation Investment – other sectors: - Securities - Bonds Others Cash (*) Expenses Unallocated expenses Net loss

Vietnam USD’000

30 June 2008 Asia Pacific USD’000

Total USD’000

16,288 1,682 17,970

(31,840) (17,659) 77 (314)

(1,959) (2,165) (1,347) 4,962 (50,245)

6,628 6,628

(1,959) (2,165) (1,347) 11,590 (43,617)

6,628

(9,750) (9,750) (53,367)

(9,750) (9,750) (59,995)

To determine the geographical segments for assets the following rules have been applied: • Listed shares − place of primary listing; • Unlisted shares − place of incorporation of the issuer; • Cash − place of deposit; • Bond − place of incorporation of the issuer. Segmental liabilities were not disclosed as they were not material. Segmental assets and income at 30 June 2007 were attributable to cash and cash equivalents in Asia Pacific. (*) including net foreign exchange losses of USD15,491

Acquisition of Bellport Developments Limited The Group acquired a 100% interest in Bellport Developments Limited on 31 March 2008, which owns 80% in Long An Port project. The total cost of the acquisitions was USD6,389,000. The purchase price was settled in cash. The fair value amount recognised in the acquiree’s property, plant and equipment at the acquisition date was USD6,389,000. Bellport Developments Limited has not contributed any profit/loss to the consolidated loss for the period from 31 March 2008 to the balance sheet date. Acquisition of Reckon Developments Limited The Group acquired a 100% interest in Reckon Developments Limited on 31 March 2008, which owns 60% in Long An Industrial Services project. The total cost of the acquisitions was USD7,087,000. The purchase price was settled in cash. The fair value amount recognised in the acquiree’s property, plant and equipment at the acquisition date was USD7,999,000. Reckon Developments Limited has not contributed any profit/loss to the consolidated loss for the period from 31 March 2008 to the balance sheet date. Acquisition of VinaCapital LongAn Industry Limited The Group acquired a 100% interest in VinaCapital LongAn Industry Limited on 31 March 2008, which owns 60% in Long An Industrial Park project. The total cost of the acquisitions was USD3,524,000. The purchase price was settled in cash. The fair value amount recognised in the acquiree’s property, plant and equipment at the acquisition date was USD3,524,000. VinaCapital LongAn Industry Limited contributed a loss of USD15,000 to the consolidated loss for the period from 31 March 2008 to the balance sheet date.

VNI 2008 Annual Report 33

The acquisitions had the following effect on the Groups’ assets and liabilities on acquisition date:

Property, plant and equipment Other assets Net identifiable assets and liabilities Goodwill on acquisition

Recognised values on acquisition USD’000 17,912

Name

Nominal value of issued share capital/registered Place of incorporation/ capital operations USD

Percentage interest held by the Company

Principal activities

VIL Investment Ltd

BVI

100

100%

Investment

Vietnam Infrastructure Investment Ltd

BVI

100

100%

Investment

17,912

Vietnam Infrastructure Development Ltd

BVI

100

100%

Investment

Vietnam Infrastructure Enterprise Ltd

BVI

100

100%

Investment

Vietnam Infrastructure Holding Ltd

BVI

100

100%

Investment

Vietnam Infrastructure Strategic Ltd

BVI

100

100%

Investment

Vietnam Infrastructure Privilege Ltd

BVI

100

100%

Investment

Vietnam Infrastructure Heritage Ltd

BVI

100

100%

Investment

Vietnam Infrastructure Espero Ltd

BVI

100

100%

Investment

VIL Glorious Investment Ltd

BVI

100

100%

Investment

Coastal Pacific Ltd

BVI

100

100%

Investment

Goldrise Global Ltd

BVI

100

100%

Investment

Richluck International Ltd

BVI

100

100%

Investment

Scepter Asia Ltd

BVI

100%

Investment

Fairson Ventures Ltd

BVI

100%

Investment

Vietnam Infrastructure Civilis Ltd

BVI

100%

Investment

Vietnam Infrastructure Pyramid Ltd

BVI

100%

Investment

Vietnam Infrastructure Conventus Ltd

BVI

100%

Investment

Bellport Developments Limited

BVI

100%

Investment

Reckon Developments Limited

BVI

100%

Investment

VinaCapital Long An Industry Limited

BVI

100%

Investment

Long An, Vietnam

10,000,000

Consideration paid

17,912

Less cash acquired

(912)

Cash flows on acquisitions, net of cash acquired

Significant subsidiaries

17,000

Long An S.E.A Industrial Park Development Company Ltd Vina - CPK Ltd Company

Vinh Phuc, Vietnam

60%

Real estate

80%

Construction

34 VNI 2008 Annual Report

Associates

7. Trade and other receivables

Name

Place of incorporation/ operations

Global Infrastructure Investment Company Ltd Mobile Infrastructure Development Company Ltd

Nominal value of issued share capital/ registered capital USD

Ho Chi Minh City, Vietnam

Principal activities

49%

Mobile phone Infrastructure

3,125,000

Hanoi, Vietnam

Prepayments

Percentage interest held by the Company

10,000,000

Mobile phone Infrastructure

49%

Global Infrastructure Investment Company Ltd Mobile Infrastructure Development Company Ltd

Assets

Liabilities

Revenues

Net profit

USD’000

721

6,008 The carrying value of trade and other receivables is considered a reasonable approximation of their fair value as at balance sheet date.

8. Financial assets at fair value through profit and loss

3,262

Financial assets at fair value through profit or loss: Ordinary shares – listed

69,737

Ordinary shares – unlisted

35,335

Corporate bonds

(204)

Included in investments in unlisted ordinary shares were investments in equity instruments of USD22.9 million which were measured at cost because the fair value of these investments could not be reliably assessed as at 30 June 2008. The Directors have assessed the impairment impact of these investments and believe that these investments were not impaired as at 30 June 2008.

9. Investments in equity accounted investees Land and buildings 30 June 2008 USD’000

Opening balance Land compensation costs acquired through acquisition of subsidiaries Other related costs acquired through acquisition of subsidiaries

7,808 112,880

(30)

6. Property, plant and equipment

Closing balance

4,992

30 June 2008 USD’000

Financial information of the associates as of and for the year ended 30 June 2008 is disclosed as below:

Name

Interest receivables

30 June 2008 USD’000 1,016

16,288 1,682 17,970

30 June 2008 USD’000 Opening balance Addition from acquisition of equity accounted investees

3,929

Share of loss of equity accounted investees, net

(115)

Closing balance

3,814

VNI 2008 Annual Report 35

10. Bank deposits

12. Share capital Number of shares

USD’000

10,000,000,000

100,000

At 30 June 2007

402,100,000

4,021

At 30 June 2008

402,100,000

4,021

Authorised 30 June 2008 USD’000 Bank deposits

61,828

The Group has deposited VND1,041 million (equivalent to USD62 million) with a bank. The deposit is repayable within one year and earns interest at the rate of 13% per annum. The deposit is restricted from use for purposes other than its intended purpose described in Note 23 to the consolidated financial statements. The bank has guaranteed to ensure the full repayment of the deposit and associated accrued interest thereon to the Group in VND upon the expiry of the deposit term. The carrying value of the deposit is considered a reasonable approximation of its fair value as at balance sheet date.

11. Cash and cash equivalents

Cash at bank Money market instruments (*)

30 June 2008 USD’000

30 June 2007 USD’000

4,783

402,100

130,465

135,248

402,100

(*) Money market instruments are term deposits with banks, with original terms to maturity of less than three months and bearing interest at rates ranging from 10.5% to 17.5% for VND deposits and 2.1% for USD deposits during the year ended 30 June 2008.

Ordinary shares at par value of USD0.01 each Issued and fully paid

The Company was incorporated on 18 January 2007 with the issuance of 1 share, of USD0.01 par value. The Company’s issued share capital was increased to 402.1 million shares on 28 June 2007 of USD0.01 par value each.

13. Share premium Share premium represents the excess of consideration received over the par value of shares issued after deducting placing fees and other incremental costs directly related to the share issuance.

14. Minority interest 30 June 2008 USD’000 Opening balance Movements during the year of the minority share capital Share of loss of attributable to minority shareholders Closing balance

912 (6) 906

36 VNI 2008 Annual Report

15. Payables to related parties

VinaCapital Investment Management Ltd – management and placement fees Other payables to VinaCapital Investment Management Ltd VinaLand Limited

18. Administration expenses 30 June 2008 USD’000

30 June 2007 USD’000

573

11,712

217

827

11,712

16. Net changes in fair value on financial assets at fair value through profit or loss

Realised gains

46,405 (17) 46,388

17. Other investment income Year ended 30 June 2008 USD’000 Dividend income Interest income Other income

Period from 18 January 2007 to 30 June 2007 USD’000

7,935

Professional fees

500

Custodian fees

599

Directors’ fees

130

General administration expenses

253

851

Management fees (see Note 21)

Other expenses

Year ended 30 June 2008 USD’000 Unrealised losses

Year ended 30 June 2008 USD’000

427 17,834 1 18,262

333

9,750

851

19. Income tax Vietnam Infrastructure Limited is domiciled in the Cayman Islands. Under the current laws of the Cayman Islands, there is no income, State, corporation, capital gains or other taxes payable by the Company. The majority of the Group’s subsidiaries are domiciled in the British Virgin Islands (BVI) and so have a tax exempt status. A number of subsidiaries are established in Vietnam and are subject to corporate income tax in Vietnam. The Vietnam subsidiaries have not yet started commercial operations nor generated taxable income, therefore no provision for current tax have been made for the period from 18 January 2007 (date of establishment) to 30 June 2007 and for the year ended 30 June 2008. Deferred tax was not recognised as the temporary differences and tax losses were not material.

VNI 2008 Annual Report 37

20. Earnings per share and net asset value per share

21. Related party transactions

30 June 2008 Net asset value (USD’000) Number of outstanding ordinary shares Net asset value per share (USD/share)

30 June 2007

335,332

389,537

401,169,300

402,100,000

0.84

0.97

Year ended 30 June 2008

Period from 18 January 2007 To 30 June 2007

402,100,000

(930,700)

401,169,300

402,100,000

(77,558)

402,022,442

402,100,000

(53,476)

(851)

402,022,442

402,100,000

(0.13)

(0.002)

Number of outstanding ordinary shares Number of ordinary shares at the beginning of the year/period Issued during the year Treasury shares Number of ordinary shares at the end of the year/ period Weighted average number of ordinary shares Issued ordinary shares at the beginning of the year/ period Effect of ordinary shares issued during the period Effect of treasury shares Weighted average number of ordinary share at the end of the year/period Losses attributable to ordinary shareholders (USD’000) Weighted average number of shares Losses per share (USD/share)

Management fees The Group is managed by VinaCapital Investment Management Limited (the “Investment Manager”), an investment management company incorporated in the British Virgin Islands (“BVI”), under a management agreement dated 29 June 2007 (the “Management Agreement”). The Investment Manager receives a fee based on the net asset value of the Group, payable monthly in arrears, at an annual rate of 2%. Total management fees for the year ended 30 June 2008 amounted to USD7,935,454 (Period from 18 January 2007 to 30 June 2007: Nil), with USD573,143 in outstanding accrued fees due to the Investment Manager at 30 June 2008 (30 June 2007: Nil). Performance fees In accordance with the Management Agreement, the Investment Manager is also entitled to a performance fee equal to 20% of the realised returns over an annualised compounding hurdle rate of 8%. There was no performance fees for the year ended 30 June 2008 (Period from 18 January 2007 to 30 June 2007: Nil), with no outstanding accrued fees due to the Investment Manager as at the balance sheet dates. Placement fees When raising capital through the issuance of new ordinary shares a commission equal to 3% of the subscription price multiplied by the total number of the shares allotted by the Company on admission is payable by the Group to the Investment Manager. The Investment Manager is responsible for paying placing agents that are engaged in respect to such subscriptions. The net proceeds of share subscriptions is recorded after netting off placement fees. There was no placement fees for the year ended 30 June 2008 (Period from 18 January 2007 to 30 June 2007: USD11,711,650), with no outstanding accrued fees due to the Investment Manager at 30 June 2008 (30 June 2007: USD11,711,650). Director fees The aggregate director fee payable to the directors of the Company for the year ended 30 June 2008 was USD130,000 (Period from 18 January 2007 to 30 June 2007: Nil).

38 VNI 2008 Annual Report

Acquisitions of subsidiaries from related parties. During the year, the Group acquired the following subsidiaries from VinaLand Limited (VNL) and Vietnam Opportunity Fund Limited (VOF): Paid to VNL USD’000

Paid to VOF USD’000

Total USD’000

Bellport Developments Limited

4,792

1,597

6,389

Reckon Developments Limited

5,087

2000

7,087

Name of subsidiaries

expect any losses arising from the non-performance of these financial institutions. The Group also limits its exposure to credit risk by only investing in corporate bonds issued by entities with sound profiles and the management does not expect these entities to fail to meet their obligations. The maximum exposure to credit risk of cash and cash equivalents, deposits, investments in bonds and other receivables is equal to the carrying amounts stated in the balance sheet.

2,643

881

3,524

12,522

4,478

17,000

Liquidity risk Liquidity risk is defined as the risk that the Group may not be able to settle or meet its obligations on time or at a reasonable price. The Group adopts its risk management guidelines which are designed to minimize its liquidity risk through:

Other related party transactions and balances Other related parties balances are disclosed in Note 15 to the consolidated financial statements.

• Monitoring its exposure to illiquid or thinly traded investments and financial instrument, and • Applying limits to ensure there is no concentration of liquidity risk to a particular counterparty or market.

VinaCapital Long An Industry Limited

22. Financial risk management objectives and policies

The Group primarily invests in bank deposits, bonds, listed and unlisted securities and private equity investments in Vietnam and is exposed to credit risk, liquidity risk and market risk arising from the financial instruments it holds. The Group has formulated risk management policies and guidelines which govern its overall business strategies and its general risk management policies, and has established processes to monitor and control transactions in a timely and accurate manner. In essence, the Group and its Investment Manager practice portfolio diversification and adopt a range of appropriate restrictions and policies. Nevertheless, the market can provide no assurance that the Group will not suffer a loss as a result of one or more of the risks described above, or as a result of other risks not currently identified by the Group.

The nature and extent of the financial instruments outstanding at the reporting date and the risk management policies employed by the Group are discussed below. Credit risk Credit risk is the risk of financial loss to the Group if an issuer or counterparty fails to meet a commitment that it has entered into with the Group. The Group’s assets will only be traded on or subject to the rules of a recognised stock exchange or with counterparties which have, or whose parent company has, a specified credit rating. All transactions in listed and unlisted securities are settled/paid for upon delivery using approved brokers. The risk of default is considered minimal since the delivery of securities sold is made only once the broker has received payment. A purchase payment is only made once the securities have been received by the broker. If either party fails to meet their obligations, the trade will fail. As at 30 June 2008 and 2007 the Group’s credit risk arose principally from the Group’s other receivables, bank deposits, investments in bonds and cash and cash equivalents. Other receivables mainly comprised interest income on time deposits. All time deposits were placed with high quality financial institutions with no significant credit risk. The Group does not

The Group also regularly monitors current and expected liquidity requirements to ensure that the Group maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term. As at 30 June 2008 and 2007 the contractual maturities of non-derivative financial liabilities were as follows:

30 June 2008 Payables to related parties and other liabilities 30 June 2007 Other liabilities

Carrying Amount USD’000

Undiscounted contractual cash flow USD’000

Within 1 year USD’000

Over 1 year USD’000

1,510

12,563

Market risk Market risk is the risk that changes in market prices, such as equity prices, interest rates and foreign exchange rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return. (i) Equity price risk Equity price risk is the risk that the fair values of equities decrease as a result of changes in the levels of the equity indices and the values of individual stocks. The trading equity price risk exposure arises from the Group’s investment portfolio. The Group is exposed to equity price risk on all of its listed investments and certain unlisted investments for which an active over-thecounter market exists. The Group’s overall market positions are monitored on a daily basis by the Investment Manager.

VNI 2008 Annual Report 39

(ii) Interest rate risk The Group’s exposure to interest rate risk is related to interest bearing financial assets and financial liabilities.

As at 30 June 2008 and 2007 the Group’s exposure to foreign currency risk was as follows: VND USD’000

Interest bearing financial assets Cash and cash equivalents, bank deposits and bonds are subject to interest at fixed rates. They are exposed to fair value changes due to interest rate changes.

30 June 2008

Interest bearing financial liabilities The Group had no interest bearing financial liabilities as at 30 June 2008.

Trade and other receivables Financial assets at fair value through profit or loss

99,740

As at 30 June 2008 and 2007 the interest rate profile of the Group’s interest bearing financial instruments was:

Bank deposits

61,828

Cash and cash equivalents

36,746

Payables to related parties

30 June 2008 USD’000

30 June 2007 USD’000

5,987

Other liabilities

(229)

Gross balance sheet exposure

204,072

Fixed rate instruments As at 30 June 2007 the Group did not have exposure to foreign currency risk.

Financial assets Cash and cash equivalents Bank deposits Bonds

135,248

402,100

61,828

7,808

Sensitivity analysis to a reasonably possible change in exchange rates A 4% weakening of the VND against USD at the end of the year ended 30 June 2008 would have increased the loss (net of taxation) of the Group equity by the amount shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

Fair value sensitivity analysis for fixed rate instruments As at 30 June 2007 the Group did not hold any fixed rate financial assets or financial liabilities accounted for at fair value through profit or loss. Therefore a change in interest rates at that date would not affect profit or loss and equity. As at 30 June 2008 fixed rate financial assets accounted for at fair value through profit or loss included bonds.

Profit (net of taxation) USD’000 VND

7,975

Fair value sensitivity analysis for bonds was not disclosed as it was not material. (iii) Currency risk Each entity within the Group is exposed to foreign currency risk on sales and purchases of its investments that are denominated in a currency other than its functional currency. The currency giving rise to this risk is primarily VND. The Group ensures that the net exposure to this risk is kept to an acceptable level by buying or selling foreign currencies at spot rates to address short-term imbalances where necessary.

A 4% strengthening of the VND against USD would have had the equal but opposite effect to the amount shown above, on the basis that all other variables remain constant. Sensitivity analysis for the period from 18 January 2007 to 30 June 2007 was not prepared as the Group was not exposed to foreign currency risk.

40 VNI 2008 Annual Report

(iv) Price risk sensitivity analysis The Group invests in listed and unlisted equity securities and is exposed to market price risk of these securities. If the prices of the securities were to fluctuate by 50%, the impact on profit or loss and equity would amount to approximately USD41 million. The Group was not exposed to price risk for the period from 18 January 2007 to 30 June 2007. Capital management The Group considers the capital to be managed as equal to the net assets attributable to the holders of ordinary shares. The Group has engaged the Investment Manager to allocate the net assets in such a way so as to generate investment returns that are commensurate with the investment objectives outlined in the Group’s offering documents.

23. Contingent assets

Co-operation contract with Thai Thinh Capital In accordance with the co-operation contract dated 8 December 2007 between the Group and Thai Thinh Capital (“TTC”), a joint stock company, for which the Group has placed an amount of VND1,041 (equivalent to USD62 million) (Note 10) with a bank for lending to TTC, the Group has an option (“the Option”) to buy shares of TTC when TTC offers its share to public at a favourable price which is 20% lower than the average initial public offer (“IPO”) price. As at 30 June 2008 the following information is uncertain: • Whether TTC will offer its share to the public in the foreseeable future; and • The average IPO price, if TTC offers its shares to the public. As at 30 June 2008, due to the uncertainties as mentioned above, the fair value of the Option, which was not able to be determined reliably, has not been recognised in the consolidated financial statements.

• The amount of tax that may be payable, if the income is subject to tax. The implementation and enforcement of tax regulations in Vietnam can vary depending on numerous factors, including the identity of the tax authority involved. The administration of laws and regulations by government agencies may be subject to considerable discretion, and in many areas, the legal framework is vague, contradictory and subject to interpretation. The Directors believe that it is unlikely that the Company and/or the subsidiaries incorporated in the Cayman Islands and the British Virgin Islands will be exposed to tax liabilities in Vietnam, and in the worse case, if tax is imposed on income arising in Vietnam it will not be applied retrospectively. As at 30 June 2008, due to the uncertainties mentioned above, no liability in relation to taxation has been recognised in the consolidated financial statements.

25. Commitments

There were no other contingent assets or liabilities or commitments as at 30 June 2008.

26. Subsequent events

Subsequent to the year ended 30 June 2008, global markets were sharply affected by the collapse of Lehman Brothers and other financial institutions. As the extent of the credit crisis became clear the market turmoil spread to Europe and emerging markets including the Vietnam stock market. As of the date of issuance of the financial statements, the aggregate fair value of the Group’s financial assets at fair value through profit and loss has fallen by USD32.7 million to USD80.2 million from the aggregate fair value as of 30 June 2008. The details are as follows:

24. Contingent liabilities

Taxation Although the Company and some of its subsidiaries are incorporated in the Cayman Islands and the British Virgin Islands where they are exempt from tax, the Group’s activities are primarily focused on Vietnam. In accordance with the prevailing tax regulations in Vietnam, if an entity was treated as having a permanent establishment, or as otherwise being engaged in a trade or business in Vietnam, income attributable to or effectively connected with such permanent establishment or trade or business may be subject to tax in Vietnam. As at the date of this report the following information is uncertain: • Whether the Company and/or its subsidiaries are considered as having permanent establishments in Vietnam; and

Fair value 30 June 2008 USD’000

28 October 2008 USD’000

Movement USD’000

Ordinary shares – listed

69,737

37,585

(32,152)

Ordinary shares – unlisted

35,335

34,520

(815)

7,808

8,053

245

112,880

80,158

(32,722)

Financial assets at fair value through profit or loss

Corporate bonds

Directory Vietnam Infrastructure Limited is listed on the AIM market of the London Stock Exchange plc. Share price information is available on Bloomberg and Reuters.

Administration The Company Vietnam Infrastructure Limited P.O. Box 309GT Ugland House South Church Street, George Town Grand Cayman, Cayman Islands

Broker LCF Edmond De Rothschild Securities Limited 5 Upper St Martinâ&#x20AC;&#x2122;s Lane, London WC2H 9EA, United Kingdom

Investment Manager VinaCapital Investment Management Ltd Representative Office 17th Floor, Sun Wah Tower 115 Nguyen Hue Boulevard District 1, Ho Chi Minh City, Vietnam

Custodian, Administrator, and Registrar /Receiving Agent HSBC Institutional Trust Services (Asia) Limited 39/F Dorset House, Taikoo Place 979 Kings Road Hong Kong

Legal Advisers (English Law) Lawrence Graham Solicitors 4 More London Riverside, London, SE1 2AU United Kingdom

Nominated Adviser Grant Thornton UK LLP 30 Finsbury Square, London EC2P 2YU, United Kingdom

(Cayman Islands Law) Maples and Calder Ugland House P.O. Box 309GT South Church Street, George Town Grand Cayman Cayman Islands

Auditors KPMG (Vietnam) Ltd. 10th & 14th Floor, Sunwah Tower, 115 Nguyen Hue Blv., District 1, Ho Chi Minh City, Vietnam.

Ho Chi Minh City 17th Floor, Sun Wah Tower 115 Nguyen Hue Bldv. Dist. 1, Ho Chi Minh City Tel. + 84-8 3821 9930 Fax. + 84-8 3821 9931

www.vinacapital.com

Hanoi 5th Floor 13 Hai Ba Trung, Hai Ba Trung District, Hanoi Tel. + 84-4 3936 4630 Fax. + 84-4 3936 4629

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