VinaCapital_Annual2008_VNL by Phan Thanh

VinaLand Limited

Annual Report 2008

2 VNL 2008 Annual Report

Contents

VinaLand Limited (‘VNL’) 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

8 10 12 18

Section 3

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

24 26 27 32

3 5

VNL 2008 Annual Report 1

Vietnamâ&#x20AC;&#x2122;s overcrowded, low-rise inner cities offer VinaLand the opportunity to benefit from urban regeneration and development stretching many years into the future.

2 VNL 2008 Annual Report

VNL 2008 Annual Report 3

VNL Overview VinaLand Limited (‘VNL’) is a closed-end fund trading on the London Stock Exchange (AIM). Launched in 2006, VNL is the largest listed fund for investment in Vietnam’s emerging real estate sector. The fund focuses on key growth sectors including residential, office, retail, hospitality and leisure, and township/ industrial properties. The manager’s objective is to provide shareholders with an attractive level of income as well as creating a potential for capital growth.

VINALAND DETAILS Size of fund:

USD804 million (NAV as of 30 June 2008)

Term of fund:

Vote every seven years to wind up fund

Maximum investment:

20% of NAV in any one project

Geographic focus:

Vietnam, Cambodia, Laos and southern China _ at least 70% invested in Vietnam

Fund structure:

Cayman company traded on London Stock Exchange (AIM)

Auditor:

Grant Thornton (Vietnam)

Nominated Advisor:

Grant Thornton UK LLP

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 VNL 2008 Annual Report

VNL 2008 Annual Report 5

Chairman’s Statement With this 27.8 percent increase in its NAV, VNL was the best performing Vietnam-dedicated fund for the year, and became the largest listed fund for investment in Vietnam. VNL’s performance, in terms of NAV increase, came not only during the heady days at the end of 2007, but also into 2008, when the fund booked moderate valuation increases and divested a minority stake in a large project to an international co-investor. As the 2008 financial year ended, VNL was in an excellent position to continue its strong performance, with a diverse portfolio of projects at various stages of development, including Vietnam’s top portfolio of operating assets in the hospitality sector.

Dear Shareholders, We are pleased to present the annual financial statements of VinaLand Limited (AIM: VNL.L) for the year ended 30 June 2008. Vietnam’s real estate market was the centre of attention in late 2007 and early 2008 as the economy went through a period of exuberant growth followed rapidly by sharp adjustments to combat high inflation and a rising trade deficit.

In the third quarter of 2008, however, the global financial crisis affected us all, Vietnam included, and had an immediate impact on VNL’s share price, which dropped to a substantial discount to net asset value. As a result of these events the Board determined it was prudent to review the carrying values of all properties in the portfolio, the results of which are presented in the subsequent events note of the Financial Statements for the year ended 30 June 2008.

During 2007 Vietnam’s real estate sector saw prices double or triple as an environment of strong economic growth and easy credit led to rampant speculation. This run came to an end when inflation worsened in early 2008 and the government put the brakes on the economy by raising interest rates and sharply restricting credit. As a result the real estate sector entered a down cycle for the remainder of the financial year.

The Board of Directors is concerned about this discount and is exploring all options to protect shareholder value. We recognise, however, that VNL’s best means to preserving shareholder equity is the portfolio itself, which through its strength and diversity allows the investment manager to select and prioritise projects and only advance those that have the best potential returns on investment at a given point in time.

In this difficult environment for domestic developers, VNL had a very good year that saw the fund increase its net asset value at 30 June 2008 to USD804 million, or USD1.61 per share, from USD628 million, or USD1.26 per share, at the end of 30 June 2007.

VNL is in the enviable position of having no debt at the fund level. This important fact does not appear to be recognised by the wider market and investors’ sudden pull-back from investing in close-ended emerging market funds (generally perceived as highly leveraged).

The strategy for the foreseeable future will be to partially or fully divest from select projects in the portfolio, while increasing focus on projects that have entered the construction phase. A number of exit strategies such as private equity co-investment, trusts and other forms of sale are being explored. While recognising the challenges posed by the current global and domestic environment, the Board remains confident in VNL’s prospects for the future. The Board believes that VNL’s real estate team is the strongest in Vietnam, featuring a new managing director with a proven track record of development success. Against the turmoil and volatility of the global capital markets, investment in real estate offers the certainty of developing and managing tangible assets in the residential, retail, office and hospitality sectors, which are clearly so sorely lacking in Vietnam. VNL will continue to break new ground as the country continues its inevitable path of growth.

Thank you for your ongoing support. Horst F. Geicke, Chairman VinaLand Limited 15 November 2008

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The Novotel Hanoi On The Park will be marketed as a â&#x20AC;&#x2DC;resort within the cityâ&#x20AC;&#x2122; due to its unique location.

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8 VNL 2008 Annual Report

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.

VNL 2008 Annual Report 9

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.

10 VNL 2008 Annual Report

Real Estate Investment Environment The cycle of economic growth has created a new consumer group of middle class professionals who need mid-tier residential and office space, and modern leisure and retail environments.

The tight credit environment in 2008 hit property developers particularly hard as project financing was difficult to obtain. As a result, residential retail sale prices for land, villas and apartments dropped significantly during the first six months of 2008. However other real estate sectors such as office and retail rentals have remained strong.

about USD45/sq.m, with new buildings in prime locations asking USD80-100/sq.m. Grade B and C occupancy rates are above 80 percent. There will be some softening of demand due to the global economic slowdown, but the related slowdown in the supply of facilities coming online due to high construction and debt costs may balance this out.

Residential

Retail shopping

The residential retail market in Vietnam experienced rapid growth in late 2006 and 2007 and in some instances residential retail sales prices increased by 100 percent or more. This was driven by high liquidity and significant speculation among local buyers, and was not sustainable in the longer term. During 2008 the economic slowdown and reduction in prices has ‘normalised’ the previously overheated residential market and returned it to a sustainable pace for the medium to long term. Despite the 2008 residential slowdown, with a large young population the fundamental demand for low to mid-tier residences is expected to remain strong. The wholesale real estate market has not seen the drop in prices evident in the retail market. However, margins for developers have been squeezed by rising construction costs and the cost of debt.

Vietnam topped the A.T. Kearney 2008 annual list of emerging opportunities for global retailers. This reflects the high demand and underdeveloped supply of modern retail space, and that under WTO regulations, 100 percent foreign ownership of retail chains will be possible in 2009. The supply base in Ho Chi Minh City is only 500,000sq.m in 15 retail centres and department stores (and even less in Hanoi). Retail centres have very high levels of occupancy and there are few ‘purpose-built’ facilities. Meanwhile, increasing average incomes have led to new consumption patterns and a pent-up demand for facilities that rival those in other regional cities. With large foreign conglomerates circling for opportunities, Vietnam’s retail market is one of great potential.

Office

The hospitality sector remains strong as the demand continues for both city hotels and seaside resorts. There is in particular a shortage of luxury rooms, with a supply of 7,600 rooms at the 3-5 star level in Ho Chi Minh City. International visitors are on the rise, increasing at a consistent 15-20 percent yearly rate. The top countries in terms of visitors to Vietnam are

In office rentals the momentum has not slowed, with Grade A and B office rentals in Hanoi and Ho Chi Minh City remaining high. There is an extreme supply shortage in the central business districts, with 100 percent occupancy in the Grade A office market. Average rental rates for Grade A space are

Hospitality

VNL 2008 Annual Report 11

China, South Korea, USA, Japan and Thailand. Room rates are increasing, particularly for 5-star hotels, but expected to soften in 2009 due to impact of global slowdown.

Outlook The cycle of economic growth has created a new consumer group of middle class professionals who need mid-tier residential and office space, and modern leisure and retail environments. This will be boosted further in the next 2-3 years by the surge in FDI commitments and disbursements in 2008. The tight credit environment alongside continued high FDI growth points to a serious supply squeeze, both presently and in the next few years, this will create an excellent opportunity for cash-rich investors to acquire properties which are distressed or now available at more realistic prices. Restricted credit will likely limit supply further and lengthen the period of excess demand by at least another two years.

12 VNL 2008 Annual Report

Portfolio Performance Vietnam, particularly as part of WTO accession, is putting renewed emphasis on the quality of its built environment, including environmental, economic and social concerns.

The year ending 30 June 2008 saw great turbulence for the Vietnamese market. Real estate developers were challenged by rising costs for materials and, at the beginning of 2008, a restricted credit environment. VNL nonetheless had a stellar year, with net asset value at 30 June 2008 rising to USD804 million, or USD1.61 per share, from USD628 million, or USD1.26 per share at 30 June 2007. This 27.8 percent increase reflects the fact that numerous projects in the portfolio increased in valuation due to reaching development milestones – such as receiving an investment licence, contruction permit, or groundbreaking – in addition to fundamental increases in the value of land. VNL’s share price at 30 June 2008 was USD1.22, down slightly from the previous year’s close of USD1.26. For most of the year, VNI traded at a premium to its NAV, as it has done since inception in March 2006. However, changing global and domestic credit conditions and the perception generated by declines in Vietnam’s residential retail prices caused the share price to fall at the end of the financial year. The onset of global financial crisis in September and October 2008 resulted in a further pullback from emerging market funds, and the share price fell sharply. VNL acquired 15 new assets during the year, moving from 26 to 41 projects in the portfolio. At the end of June 2008, the portfolio had a geographic breakdown (by NAV) of 46.6 percent in Ho Chi Minh City, 36.5 percent in the central region (namely Danang, Hoi An and Nha Trang), and 16.9 percent in Hanoi. The Ho Chi Minh City projects include several outside city limits, in the fast-growing neighbouring province of Dong Nai, for example. The VNL portfolio is divided by sector into hospitality, township/large scale, landmark mixed-use, residential, and office developments. In addition, VNL has several projects considered land banking. The 2008 financial year saw the hospitality and township sectors grow at the fastest rate, due in the former case to new acquisitions and in the latter mainly

to intrinsic growth in the value of holdings. During the year, construction commenced on several projects in Hanoi, Danang and Nha Trang, principally involving leading international hotel brands such as Sheraton and Accor’s Novotel and Mecure. Construction also began on the World Trade Center Danang and on the first of two golf courses at the Danang Beach Resort. The hospitality portfolio benefited from a very strong year in international travel, as well as improvements to the asset base including the rebranding of two hotels, with the Movenpick Hotel Saigon complete during the financial year, and the Movenpick Hotel Hanoi set to open under its new flag in the fourth quarter of 2008. VNL’s development and advisory service, VinaCapital Real Estate Ltd, remains the most experienced team of real estate experts in Vietnam. Near the end of the financial year, David Henry joined as managing director, at the helm of a group of almost 80 investment and development professionals.

Outlook

With the fund now invested in 36 projects and 5 operating hospitality assets across Vietnam, VNL is in an excellent position to focus on the development of the highest potential projects during the upcoming year. Vietnam, particularly as part of WTO accession, is putting renewed emphasis on the quality of its built environment, including environmental, economic and social concerns. With the greater stress on responsible development, VNL considers its projects to be at the forefront of sustainable planning and design. The coming year sees the challenge of a global economic slowdown and restricted access to credit. Given the high demand for real estate across all sectors, however, the greatest profit in coming years will be recognised by those companies able to press forward with development plans and quickly bring quality projects to market. In this regard, VNL has excellent prospects despite the difficult market conditions.

VNL 2008 Annual Report 13

Portfolio by sector 2008 vs 2007

USD804m 100%

Number of invested projects

USD628m

3.3% Oﬃce/retail

4.6% Oﬃce/retail

20.2% Residential

16.1% Residential

15.0% Mixed-use

18.1% Mixed-use

30 Jun 2007

31 Dec 2007

30 Jun 2008

1.26

1.31

1.61

NAV per share No. of invested projects

80%

NAV and Share Price Performance (to 30 June 2008) $1.80

60%

1.61

$1.60 $1.40 40%

44.8% Township /large-scale

28.7% Township /large-scale

$1.20

1.22

$1.00 $0.80

20%

$0.60 16.7% Hospitality

32.6% Hospitality

$0.40 $0.20

2008

$0.00

2007

Mar-06 Jun-06 Aug-06 Oct-06 Dec-06 Feb-07 Apr-07 Jun-07 Aug-07 Oct-07 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08

Portfolio by location 2008 vs 2007 USD804m

USD628m

100%

80% 46.6% Ho Chi Minh City region

54% Ho Chi Minh City region

36.5% Central provinces

21% Central provinces

16.9% Hanoi

25% Hanoi

60%

40%

20%

2008

2007

VNL’s NAV per share

VNL’s Share Price

14 VNL 2008 Annual Report

Top holdings by region

Hanoi

Type

Status

Hilton Hanoi Opera Hotel

Hospitality Operating asset

Movenpick Hotel Hanoi

Hospitality Operating asset

Golden Westlake apartments

Residential Marketing underway

Times Square Hanoi

Mixed-use

Investment licence

Type

Status

Danang Beach Resort

Mixed-use

Under construction

World Trade Center Danang

Mixed-use

Under construction

Sheraton Hoi An Resort and Spa

Hospitality Under construction

Danang

Nha Trang

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

Nha Trang

HCM City

Type

Status

Sheraton Nha Trang Hotel and Spa

Hospitality Under construction

Vinh Thai Nha Trang Township

Township

Investment licence

Type

Status

Movenpick Hotel Saigon

Hospitality Operating asset

Central Garden apartments

Residential Marketing underway

Ho Chi Minh City and region

Dai Phuoc Lotus Township (Dong Nai) Township

Investment licence

Fideco Township (Binh Duong)

Township

Investment licence

Aqua City (Dong Nai)

Residential Under construction

Sunrise City apartments

Residential Investment licence

VinaSquare Tower

Office/retail Investment licence

VNL 2008 Annual Report 15

The Movenpick Hotel Hanoi is the second Movenpick-flagged hotel in Vietnam. The hotel will be positioned at the upper end of the four-star business hotels in central Hanoi.

16 VNL 2008 Annual Report

Construction of the Golden Westlake apartments in Hanoi is nearing completion.

VNL 2008 Annual Report 17

The 260ha Danang Beach Resort will feature a five-star J.W. Marriott hotel and two golf courses, the first designed by Greg Norman and now under construction.

18 VNL 2008 Annual Report

Feature Investments Times Square Hanoi

Movenpick Hotel Hanoi

Type

Mixed-use urban development.

Type

Hospitality.

Location

My Dinh, Hanoi.

Location

Hanoi CBD.

Size/area

Total GFA 230,000sq.m.

Size/area

154 rooms, 2,950sq.m.

Status

Invest licence received; groundbreaking Q4 2008.

Status

Operating asset.

Ownership

VNL 55.6%.

Ownership

VNL and VOF 65%.

Highlights

Renovated and rebranded in 2008.

Highlights

Expected completion of office tower in 2010.

Times Square Hanoi is a landmark upscale mixed-use development on a 40,000sq.m site in My Dinh District, Hanoi. The site is surrounded by high profile buildings including the National Convention Centre, a Big C supermarket, the Viglacera building and the future Hanoi residence for visiting provincial delegates and officials. Times Square Hanoi is a perfect combination of form and function, as the 63,000sq.m retail, 17,000sq.m office, and 300-room hotel space will merge beautifully with the surrounding streetscape and amenities.

The Movenpick Hotel Hanoi is a four-star business hotel in central Hanoi. It is the second Movenpick-flagged hotel in Vietnam, alongside the Movenpick Hotel Saigon. The former Guoman Hotel was renovated and rebranded in 2008. Some 360sq.m of back-of-house area was transformed into additional meeting and conference facilities, and an additional 300sq.m was leased to an international gaming operator.

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Novotel Hanoi On The Park Hotel

Danang Beach Resort

World Trade Center Danang

Type

Hospitality.

Type

Mixed-use hospitality.

Type

Mixed-use urban development.

Location

Hanoi CBD.

Danang City in central Vietnam; 10km from an international airport.

Danang City, central Vietnam.

389 rooms, 10,311sq.m.

Location

Size/area

9ha.

Status

Under construction.

Size/area

260ha.

Status

Ground work underway.

Ownership

VNL 39%.

Highlights

Expected to open in 2010. Designed as ‘resort within the city’ given secluded location within Reunification Park.

Status

Investment licence received, construction of first golf course underway.

Ownership

VNL/VOF and a European partner hold 100% in an FIE licence.

Ownership

VNL 75%.

Highlights

J.W. Marriott beachfront hotel to open in 2011. Features two 18-hole championship golf courses with the first designed by golf legend Greg Norman.

Highlights

Riverfront landmark project in downtown Danang featuring five-star hotel, luxury apartments, retail, office, school, and convention centre.

The Novotel Hanoi On The Park Hotel will be a 389-room four-star hotel on a pristine site overlooking Hanoi’s Reunification Park. The hotel will feature one of the biggest conference facilities and ballrooms in central Hanoi. The location and amenities will allow the hotel to position itself as a ‘resort within the city’ in addition to serving the business market. This hotel, slated to open in 2010, will be managed by Accor.

Located less than 20 minutes from Danang International airport and the UNESCO World Heritage site of Hoi An, the Danang Beach Resort is destined to be the ultimate resort destination in Vietnam. This 260ha resort development features two spectacular 18-hole championship golf courses, the first designed by internationally renowned course designer Greg Norman. The integrated resort will include the 5-star J.W. Marriott Danang hotel with 270 rooms and 196 villas offering a panoramic view of the mountains, beach and serene golf courses. Also featured will be a convention and exhibition centre, and a recreational marina alongside a second hotel.

Facing the beautiful Han River and only a short walk from the city centre, the World Trade Center Danang will be the most spectacular mixed-use development in Danang, a coastal city and one of Vietnam’s top tourism destinations. The World Trade Center covers 333,178sq.m of built-up area, to be constructed in three phases that will see completion in 2017. The 9ha site will be transformed into a complete urban complex comprised of a commercial centre, international-standard hotel, office, convention centre, high-end apartments, an international school and townhouses. Phase 1, to be completed in 2011, will feature a five-star hotel, 246 upscale apartments and 36,960sq.m of retail shopping centre. Ground work is now in progress.

20 VNL 2008 Annual Report

VinaSquare Tower

Saigon Design Center

Type

Mixed-use urban development.

Type

Office and retail.

Location

China town, District 5, HCM City.

Location

Phu My Hung, District 7, HCM City.

Size/area

31,829sq.m, GFA 254,557sq.m.

Size/area

2,475sq.m, GFA 13,937sq.m.

Status

Investment licence received.

Ownership

VNL and VOF hold 49%.

Status

Investment licence received, ground work underway.

Highlights

Prime location in the heart of HCM Cityâ&#x20AC;&#x2122;s Chinatown.

Ownership

VNL 80%.

Highlights

Located in Phu My Hung, the top suburb of HCM City.

VinaSquare is a landmark development on 31,829sq.m in the bustling centre of District 5 in Ho Chi Minh City. Surrounded by hospitals, universities, and the densely populated Cho Lon commercial area (Chinatown), the mixed-use VinaSquare project combines over 254,557sq.m of B-Grade retail and office space with 1,286 mid-and high-end spacious apartments.

Located in the commercial business area of Phu My Hung in District 7, Ho Chi Minh City, the Saigon Design Center will provide 13,937sq.m of B-Grade office and retail space, on a land area of 2,475sq.m. The unique spiral design will make the Saigon Design Center a landmark building in District 7. The structure will also provide parking for 126 cars and 161 motorbikes. The site is cleared with ground work underway. Expected completion date is Q4 2010.

VNL 2008 Annual Report 21

Dai Phuoc Lotus Township

Movenpick Hotel Saigon

Sheraton Nha Trang Hotel and Spa

Type

Township.

Type

Hospitality.

Type

Hospitality.

Location

Nhon Trach, Dong Nai Province (HCM City region).

Location

Phu Nhuan (near airport), HCM City.

Location

Nha Trang, central Vietnam.

Size/area

249 room, 8,657sq.m.

Size/area

282 rooms, 3,690sq.m.

Size/area

200ha.

Status

Operating asset.

Status

Under construction.

Status

Investment licence received; infrastructure construction underway.

Ownership

VNL 52.5%.

Ownership

VNL 62.9%.

Ownership

VNL 54%.

Highlights

Unique island development with access to HCM City by road and riverway.

Highlights

First Movenpick branded hotel in Vietnam and the only five star hotel near HCM Cityâ&#x20AC;&#x2122;s international airport.

Highlights

Expected to open in Q2 2009 as the first major international hotel brand on the coast of Vietnam.

Dai Phuoc Lotus is a landmark resort-style urban development project in Nhon Trach district, Dong Nai province, one of southern Vietnamâ&#x20AC;&#x2122;s key regions of economic development. The island development, in the shape of a boat, will create a distinctive living environment. The 200-hectare project will transform the area with office buildings, shopping centre, residences, marina, recreational facilities, hotels, and public facilities in the midst of parks and lakes.

The Movenpick Hotel Saigon is a 249-room, five-star hotel located in fast-growing Phu Nhuan district, minutes away from Tan Son Nhat International Airport. This was the first Movenpick _ branded hotel in Vietnam, after the former Omni Saigon Hotel was re-branded under the management of the Swiss group, which now also manages the Movenpick Hotel Hanoi. From March 2007 to March 2008 the average room rate at this hotel rose from USD68 to USD123 per night.

The Sheraton Nha Trang Hotel and Spa is the first internationally recognised hotel brand on the coastline of Vietnam. Nha Trang continues to prosper from increasing investment in the leisure and tourism sector, and its popularity with both domestic and international tourists. The hotel will open in 2009 and will include 1,183sq.m of conference facilities, expected to attract a large proportion of conference and event-related business to the coast via cross selling with the Sheraton hotels located in Ho Chi Minh City and Hanoi.

22 VNL 2008 Annual Report

Board of Directors

VNL 2008 Annual Report 23

HORST F. GEICKE, Chairman Horst F. 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. DON LAM, Director 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. NICHOLAS BROOKE, Director Mr. Brooke is the Chairman of Professional Property Services Limited, a Hong Kong-based real estate consultancy that provides a select range of advisory services across the Asia Pacific Region. Mr. Brooke is a former President of the Royal Institution of Chartered Surveyors and was the first overseas surveyor to be accorded that honour. Mr. Brooke is

a recognised authority on land administration and planning matters and has provided advice in these areas to several Asian governments as well as the US State Department. He is also a Justice of the Peace, and a former Deputy Chairman of the Hong Kong Town Planning Board and a former member of the Hong Kong Housing Authority. Mr. Brooke also sits as a Non-executive Director on the Boards of a number of public companies including Shanghai Forte Land Company Limited, one of China’s largest residential developers and Majid Al Futtaim Investments, one of Middle East’s leading shopping centre developers. Mr. Brooke has a degree in Estate Management and a Post Graduate Diploma in Business Administration from the University of London. NGUEN KHOONG TONG, Director Mr. Tong is the co-founder and Group Managing Director of Bukit Kiara Properties (BKP), a premier real estate developer of lifestyle homes in Kuala Lumpur, Malaysia. He was also formerly an Executive Director of Sunrise Berhad, a publicly listed real estate developer in Malaysia. In BKP and formerly Sunrise, Mr. Tong spearheaded the conceptualisation and development of over 3,000 high-end residential homes, and the initial master planning of Mont’ Kiara, the most sought after expatriate suburb in Kuala Lumpur. He was strategic in creating the exit from Sunrise for his family shareholding at the end of 1996, just prior to the Asian financial crisis in 1997. Mr. Tong is also a member of the investment committee and an independent director of both KSC Capital, a dynamic unit trust management company in Malaysia, and Accelera Ventures, a boutique Pacific Rim growth fund in Hong Kong. Mr. Tong has a Bachelor of Arts degree in Architecture from the University of Manchester, United Kingdom, and a Masters of Business Administration degree, majoring in Real Estate, from the Wharton School, University of Pennsylvania, USA.

BRUNO SCHÖPFER, Director Mr. Schöpfer has a distinguished 25-year career in hotel, real estate and consumer goods management, including 15 years in operational positions with leading Asian luxury hotel companies. From 1992 to 1997, he oversaw Mandarin Oriental’s worldwide operations with over USD 1 billion in hotel assets. In 1997, Mr. Schöpfer was Managing Director of Mövenpick’s Asian operations and from 1998 to 2003 Managing Director and CEO of Mövenpick Holding, the well-known Swiss premium hospitality company, with interests in consumer goods, restaurants, and hotels. Until 2005, Mr. Schöpfer was Chairman of Mövenpick Hotels and Resorts Ltd. He is currently a consultant to several hospitality developers and runs two companies in these fields.

2 1

3 5

1. Horst F. Geicke, Chairman 2. Don Lam, Director 3. Nicholas Brooke, Director 4. Nguen Khoong Tong, Director 5. Bruno Schöpfer, Director

24 VNL 2008 Annual Report

Report of the Board of Directors

The Board of Directors submits its report together with the consolidated financial statements of VinaLand Limited (“the Company”) and its subsidiaries (together “the Group”) for the year ended 30 June 2008 (“the year”).

The Group VinaLand Limited is incorporated in the Cayman Islands as a company with limited liability. The registered office of the Company is PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands. Particulars of the Group’s principal subsidiaries and associates are set out in notes 6 and 11.

Principal activities The Company’s primary objective is to focus on key growth segments within Vietnam’s emerging real estate market, namely residential, office, retail, industrial and leisure projects in Vietnam and the surrounding countries in Asia to provide shareholders with an attractive level of income and capital growth, from investing in a diversified portfolio of mainly property investments. The principal activities of the subsidiaries are property investment and hospitality management.

Results and dividend The results of the Group for the year ended 30 June 2008 and the state of its affairs as at that date are set out in the consolidated financial statements on pages 27 to 60. The Board of Directors do not recommend a payment of dividend for the year ended 30 June 2008 (30 June 2007: USDnil).

Board of Directors The members of the Board of Directors of the Company during the year and to the date of this report are as follows:

VNL 2008 Annual Report 25

Name

Position

Horst Geicke

Chairman

Appointed/Resigned on

Don Lam

Director

13 November 2006

Nicholas Brooke

Director

13 November 2006

Nguen Khoong Tong

Director

13 November 2006

Bruno Schöpfer

Director

13 November 2006/ 28 November 2008

31 August 2005

Auditors The Group’s auditors, Grant Thornton (Vietnam) Ltd., have expressed their willingness to accept reappointment.

Subsequent events after the balance sheet date Details of significant subsequent events which impact on the financial position of the Group are set out in Note 39 to the accompanying consolidated financial statements.

Directors’ interest in the Company As at 30 June 2008, the interests of the directors in the shares, underlying shares and debentures of the Company are as follows:

No. of shares

Approximate % of holding

Direct

Indirect

Horst Geicke

2,750,000

412,583

0.63%

Don Lam

1,755,250

412,583

0.43%

Nicholas Brooke

150,000

0.03%

Nguen Khoong Tong

798,500

0.16%

Bruno Schöpfer

300,000

0.06%

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

Board of Directors’ responsibility in respect of the consolidated financial statements The Board of Directors is responsible for ensuring that the consolidated financial statements are properly drawn up so as to give a true and fair view of the financial position of the Group as at 30 June 2008 and of the results of its operations and its cash flows for the year ended on that date. When preparing the consolidated financial statements, the Board of Directors is required to: 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 have been appropriately disclosed, explained and quantified in the consolidated financial statements; 3. maintain adequate accounting records and an effective system of internal control; 4. prepare the consolidated financial statements on a going concern basis unless it is inappropriate to assume that the Group will continue its operations in the foreseeable future; and 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 consolidated financial statements. The Board of Directors is also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Board of Directors confirms that the Group has complied with the above requirements in preparing the consolidated financial statements.

Statement by the Board of Directors In the opinion of the Board of Directors, the accompanying

consolidated balance sheet, consolidated statement of income, changes in equity and cash flows, together with the notes thereto, have been properly drawn up and give a true and fair view of the financial position of the Group as at 30 June 2008 and the results of its operations and cash flows for the year ended 30 June 2008 in accordance with International Financial Reporting Standards. On behalf of the Board of Directors, Horst F. Geicke Chairman Ho Chi Minh City, Vietnam 28 November 2008

26 VNL 2008 Annual Report

Independent Auditors’ Report To the Shareholders of VinaLand Limited We have audited the accompanying consolidated financial statements of VinaLand Limited and its subsidiaries (“the Group”) which comprise the Consolidated Balance Sheet as of 30 June 2008, and the Consolidated Statement of Income, Consolidated Statement of Changes in Equity and Consolidated Statement of Cash Flows for the year then ended, and a Summary of significant accounting policies and other explanatory notes. Management’s responsibility for the consolidated financial statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the consolidated financial statements are free from material misstatement.

Opinion An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend upon the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

In our opinion, the consolidated financial statements give a true and fair view of the financial position of VinaLand Limited and its subsidiaries as of 30 June 2008, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

GRANT THORNTON (VIETNAM) LTD. Ho Chi Minh City, Vietnam 28 November 2008

VNL 2008 Annual Report 27

Consolidated balance sheet Notes

30 June 2008

30 June 2007

USDâ&#x20AC;&#x2122;000

ASSETS Non-current Investment properties

559,966

97,185

Property, plant and equipment

135,106

114,047

Intangible assets

6,421

Investments in associates

26,270

Goodwill

2,939

Prepayments for operating leases

19,635

13,297

6,819

1,077

Loan receivables Other long-term financial assets Deferred tax assets

310

355

Non-current assets

751,724

231,703

Current Inventories

310

276

Receivables from related parties

21,930

22,825

Trade and other receivables

146,750

33,198

Short-term deposits

57,027

Financial assets at fair value through income statement

61,924

29,461

Deposits for acquisitions of investments

77,943

72,729

Cash and cash equivalents

Current assets Total assets

80,806

350,898

446,690

509,387

1,198,414

741,090

The accompanying notes are an integral part of these financial statements.

28 VNL 2008 Annual Report

Notes

30 June 2008

30 June 2007

USDâ&#x20AC;&#x2122;000

EQUITY Equity attributable to shareholders of the parent Share capital

4,999

Additional paid-in capital

588,870

Revaluation reserve

13,844

777

Translation reserve

(4,623)

(530)

Retained earnings

201,437

34,756

804,527

628,872

Minority interests Total equity

219,868

54,011

1,024,395

682,883

21,673

4,705

1,044

577

22,717

5,282

LIABILITIES Non-current Long-term borrowings

Other liabilities Non-current liabilities Current Payables to related parties

116,536

40,583

Trade and other payables

34,491

11,062

Current portion of long-term borrowings

275

1,280

151,302

52,925

Current liabilities Total liabilities Total equity and liabilities Net assets per share attributable to equity shareholders of the parent (USD per share)

174,019

58,207

1,198,414

741,090

1.61

1.26

The accompanying notes are an integral part of these financial statements.

VNL 2008 Annual Report 29

Consolidated Statement of Changes in Equity Equity attributable to shareholders of the parent Share capital

Additional paid-in capital

Translation reserve

Revaluation reserve

Retained earnings

Minority interest

Total equity

USD‘000

USD’000

USD‘000

2,048

196,414

121

198,583

Currency translation

(530)

(177)

(707)

Revaluation reserves

777

703

1,480

Net income recognised directly in equity

(530)

777

526

773

Profit for the year ended 30 June 2007

34,635

15,341

49,976

Total recognised income and expense for the year

(530)

777

34,635

15,867

50,749

2,951

392,456

395,407

38,144

30 June 2007

4,999

588,870

(530)

777

34,756

54,011

682,883

1 July 2007

4,999

588,870

(530)

777

34,756

54,011

682,883

Currency translation

(4,093)

(1,957)

(6,050)

Revaluation reserves

13,067

11,633

24,700

Net income recognised directly in equity

(4,093)

13,067

9,676

18,650

Profit for the year ended 30 June 2008

167,698

80,485

248,183

Total recognised income and expense for the year

(4,093)

13,067

167,698

90,161

266,833

Acquisition of subsidiaries

34,768

Capital contributions in subsidiaries

41,981

1 July 2006

Issue of new shares Acquisition of subsidiaries

Reduction in retained earnings on liquidation of Guoman (Hanoi) Limited

(1,017)

(340)

(1,357)

Dividend distributions

(713)

4,999

588,870

(4,623)

13,844

201,437

219,868

1,024,395

30 June 2008

The accompanying notes are an integral part of these financial statements.

30 VNL 2008 Annual Report

Consolidated Statement of Income

Notes

Revenue Cost of sales

Gross profit

Year ended

30 June 2008

30 June 2007

USDâ&#x20AC;&#x2122;000

35,968

17,459

(17,916)

(7,048)

18,052

10,411

Other income

44,605

7,702

Management fee and administration expenses

(76,508)

(17,292)

Other operating expenses

(11,594)

(1,457)

Other net changes in fair value of financial assets at fair value through income statement

16,869

3,085

Gain on fair value adjustments of investment properties

Profit from continuing operations

247,068

38,530

238,492

40,979

Financial income

18,751

11,836

Finance costs

(6,991)

(2,594)

11,813

9,242

250,305

50,221

(2,122)

(245)

248,183

49,976

167,698

34,635

80,485

15,341

0.34

0.12

Share of profits from associates Profit before tax from continuing operations Income tax

Net profit for the year + Attributable to equity shareholders of the parent: + Attributable to minority interest + Earnings per share â&#x20AC;&#x201C; basic and diluted (USD per share)

The accompanying notes are an integral part of these financial statements.

VNL 2008 Annual Report 31

Consolidated Statement of Cash Flows

Notes

30 June 2008

30 June 2007

USD’000

250,304

50,221

(300,505)

(47,923)

(167,585)

(25,689)

(34)

(18)

142,066

(14,514)

Operating activities Profit for the year before tax Adjustments

Change in trade and other receivables Change in inventory Change in trade and other payables Corporate income tax paid

(1,854)

(77,608)

(37,923)

Investing activities Interest received

16,546

10,834

(15,682)

(27,902)

(59,707)

(62,828)

Proceeds from disposal of fixed assets

108

Proceeds from disposal of investments

10,188

Deposits for acquisitions of investments

(5,214)

(72,729)

Purchase of financial assets

(22,220)

(21,993)

Acquisitions of investment properties

(61,220)

Investment in associates

(26,218)

43,432

54,550

Purchases of property, plant, and equipment Acquisition of a subsidiaries, net of cash

Proceeds from loans repaid Loans provided

(87,412)

(57,825)

(207,399)

(177,893)

Financing activities Proceeds from shares issued

395,406

Loan proceeds from banks

22,197

113

Loan repayments to banks

(6,343)

(1,000)

Dividend paid to minority interest

(450)

Interest paid

(489)

(2,593)

14,915

391,926

(270,092)

176,110

350,898

174,788

80,806

350,898

Net change in cash and cash equivalents for the year Cash and cash equivalents at the beginning of the year Cash and cash equivalents at end of the year

The accompanying notes are an integral part of these financial statements.

32 VNL 2008 Annual Report

Notes to the Consolidated Financial Statements

1. General information VinaLand Limited is a limited liability company incorporated in the Cayman Islands. The registered office of the Company is PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands. The Company’s primary objective is to focus on key growth segments within Vietnam’s emerging real estate market, namely residential, office, retail, industrial and leisure projects in Vietnam and the surrounding countries in Asia. The Company is listed on the AIM market of the London Stock Exchange under the ticker symbol VNL. The consolidated financial statements for the year ended 30 June 2008 were authorised for issue by the Board of Directors on 28 November 2008.

2. Statement of compliance with IFRS and adoption of new and amended standards and interpretations 2.1. Statement of compliance with IFRS The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

2.2. Changes in accounting policies 2.2.1. Overall considerations The IASB and the International Financial Reporting Interpretations Committee have issued various standards and interpretations with an effective date after the date of this financial information. The Group has not early adopted the standards and interpretations that have been issued as they are not yet effective. The most relevant for the Group are amendment to IAS 1 “Presentation of the Financial Statements” (effective for annual periods beginning on or after 1 January 2009), and IFRS 8 “Operating Segments” (effective for annual periods beginning on or after 1 January 2009). Upon adoption of amendment to IAS 1, the Group will disclose its capital management objectives, policies and procedures in each annual financial report and will have its capital movements and other gains and losses presented separately in the statement of changes in equity and statement of recognised income and expenses. Upon adoption of IFRS 8, the Group will disclose segmental information when evaluating performance and deciding how to allocate resources to operations. The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on

the financial statements in the period of initial application. 2.2.2. Adoption of IFRS 7, Financial Instruments: Disclosures IFRS 7 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. The Group has applied IFRS 7 from the annual period beginning 1 January 2007. 2.2.3. Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group At the date of authorisation of these financial statements, certain new standards, amendments and interpretations to existing standards have been published but are not yet effective, and have not been adopted early by the Group. IAS 23 Borrowing Costs (Revised) (effective from 1 January 2009) The revised standard requires the capitalisation of borrowing costs, to the extent they are directly attributable to the acquisition, production or construction of qualifying assets that need a substantial period of time to get ready for their

VNL 2008 Annual Report 33

intended use or sale. The option currently used by the Group of immediately expensing those borrowing costs will be removed. In accordance with the transitional provisions of the revised standard the Group capitalises borrowing costs relating to qualifying assets for which the commencement date is on or after the effective date. No retrospective restatement will be made for borrowing costs that have been expensed for qualifying assets with a commencement date before the effective date. The revised standard will decrease the Group’s reported interest expense and increase the capitalised cost of qualifying assets under construction in future periods. The capitalisation is primarily related to some of the Group’s development projects. IFRS 3 Business Combinations (Revised 2008) (effective from 1 July 2009) The standard is applicable for business combinations occurring in reporting periods beginning on or after 1 July 2009 and will be applied prospectively. The new standard introduces changes to the accounting requirements for business combinations, but still requires use of the purchase method, and will have a significant effect on business combinations occurring in reporting periods beginning on or after 1 July 2009. The Group is required to adopt Revised IFRS 3 for business combinations when the acquisition date is on or after 1 July 2009, with prospective application required. IAS 27 Consolidated and Separate Financial Statements (Revised 2008) (effective from 1 July 2009) The revised standard introduces changes to the accounting requirements for the loss of control of a subsidiary and for changes in the Group’s interest in subsidiaries. Management does not expect the standard to have a material effect on the Group’s financial statements. Annual Improvements 2008 The IASB has issued Improvements for International Financial Reporting Standards 2008. Most of these amendments become effective in annual periods beginning on or after 1 January 2009. The Group expects the amendment to IAS 23 Borrowing Costs to be relevant to

the Group’s accounting policies. The amendment clarifies the definition of borrowing costs by reference to the effective interest method. This definition will be applied for reporting periods beginning on or after 1 January 2009, however forecasts indicate the effect to be insignificant. Smaller amendments are made to several other standards, however, these amendments are not expected to have a material impact on the Group’s financial statements.

3. Summary of significant accounting policies 3.1. Presentation of consolidated financial statement The financial statements are presented in United States Dollars (USD) and all values are rounded to the nearest thousand (’000) unless otherwise indicated. The significant accounting policies that have been used in the preparation of these consolidated financial statements are summarised below. These policies have been consistently applied to all the years presented unless otherwise stated. The consolidated financial statements have been prepared using the historical cost convention, as modified by the revaluation of investment property, leasehold land and certain financial assets and financial liabilities, the measurement bases of which are described in the accounting policies below. The preparation of consolidated 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 areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in Note 4 to the consolidated financial statements. 3.2. Basis of consolidation The consolidated financial statements of the Group 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.

3.3. 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. This involves the revaluation 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 revalued amounts, 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 statement of income as at the acquisition date. All inter-company balances and significant inter-company transactions and resulting unrealised profits or losses (unless losses provide evidence of impairment) are eliminated on consolidation. A minority interest represents the portion of the profit or loss and net assets of a subsidiary attributable to an equity interest that is not owned by the Group. It is based upon the minority’s share of post-acquisition fair values of the subsidiary’s identifiable assets and liabilities, except where the losses applicable to the minority in the subsidiary exceed the minority interest in the equity of that subsidiary. In such cases, the excess and further losses applicable to the minority are taken to the consolidated statement of income, unless

34 VNL 2008 Annual Report

the minority has a binding obligation to, and is able to, make good the losses. When the subsidiary subsequently reports profits, the profits applicable to the minority are taken to the consolidated statement of income until the minority’s share of losses previously taken to the consolidated statement of income is fully recovered. Changes in ownership interests in a subsidiary that do not result in gaining or losing control of the subsidiary are accounted for using the parent entity method of accounting whereby the difference between the consideration paid and the proportionate change in the parent entity’s interest in the carrying value of the subsidiary’s net assets are recorded as changes in goodwill. No adjustment is made to the carrying value of the subsidiary’s net assets as reported in the consolidated financial statements. 3.4. Associates entities Associates are those entities over which the Group is able to exert significant influence, generally accompanying a shareholding of between 20% to 50% of voting rights, but which are neither subsidiaries nor investments in joint ventures. In the consolidated financial statements, investments in associates are initially recorded at cost and subsequently accounted for using the equity method. Under the equity method, the Group’s interest in an associate is carried at cost and adjusted for the post-acquisition changes in the Group’s share of the associate’s net assets less any identified impairment loss, unless it is classified as held for sale or included in a disposal group that is classified as held for sale. The consolidated statement of income includes the Group’s share of the post-acquisition, post-tax results of the associate entity for the year, including any impairment loss on goodwill relating to the investment in associate recognised for the year. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has legal or constructive obligations, or made payments, on behalf of the associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of an associate recognised at the date of acquisition is recognised as goodwill. The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group, plus any costs directly attributable to the investment.

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 consolidated statement of income.

Goodwill is included within the carrying amount of an investment and is assessed for impairment as part of the investment. After the application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investments in its associates. At each balance sheet date, the Group determines whether there is any objective evidence that an investment in an associate is impaired. If such indications are identified, the Group calculates the amount of impairment as being the difference between the recoverable amount of the associate and its respective carrying amount.

In the consolidated financial statements all separate financial statements of subsidiaries, if originally presented in a currency different from the Group’s presentation currency, are converted into USD. Assets and liabilities are translated into USD at the closing rate of the balance sheet date. Income and expenses are converted into the Group’s presentation currency at the average rates over the reporting period. Any differences arising from this translation are charged to the currency translation reserve in equity.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in an associate. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. 3.5. Functional and presentation currency The consolidated financial statements are presented in United States Dollars (USD) (“the presentation currency”). The financial statements of each consolidated entity are prepared in either USD or the currency of the primary economic environment in which the entity operates (“the functional currency”), which for most investments is United States Dollars. 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 a large proportion of significant transactions of the Group are denominated in USD. 3.6. Foreign currency translation In the individual financial statements of entities, transactions

Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction (not retranslated). Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined. 3.7. Revenue recognition Sale of goods and rendering of services Revenue from sale of goods is recognised in the consolidated statement of income when the significant risks and rewards of ownership of goods have passed to the buyer. Revenue from services rendered is recognised in the statement of income in proportion to the stage of completion of the transaction at the balance sheet date. No revenue is recognised if there are significant uncertainties regarding the ultimate receipt of the proceeds or the reasonable estimation of the associated costs of the sale, or the possibility of the return of the goods. In relation of the hotel and related hotel services, revenue is recognised as and when the services are rendered. Rental income Rental income from investment property is recognised in the

VNL 2008 Annual Report 35

consolidated statement of income on a straight-line basis over the term of the operating lease. Lease incentives granted are recognised as an integral part of the total rental income.

in the fair value of identifiable net assets and liabilities over cost of acquisition. It is recognised directly in the statement of income at the date of acquisition.

Interest income Interest income is recognised on an accrual and effective yield basis.

Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity disposed of.

Dividend income Dividend income is recorded when the Group’s right to receive the dividend is established. 3.8. Expense recognition Borrowing costs Borrowing costs, comprising interest and related costs, are recognised as an expense in the period in which they are incurred, except for borrowing costs relating to the construction of property, plant and equipment and investment property under development, which are capitalised as a cost of the related assets. Operating lease payments Payments made under operating leases are recognised in the consolidated statement of income on a straight-line basis over the term of the lease. Lease incentives received are recognised in the statement of income as an integral part of the total lease expense. 3.9. Goodwill Goodwill represents the excess of the cost of acquisition of subsidiary companies and associated companies over the Group’s share of the fair value of their identifiable net assets at the date of acquisition. Goodwill is recognised at cost less any accumulated impairment losses. The carrying value of goodwill is subject to an annual impairment review and whenever events or changes in circumstances indicate that it may not be recoverable. An impairment charge will be recognised in the statement of income when the results of such a review indicate that the carrying value of goodwill is impaired (see accounting policy 3.17). Negative goodwill represents the excess of the Group’s interest

3.10. Investment property Investment properties are properties owned or held under finance lease to earn rentals or capital appreciation, or both, or held for a currently undetermined use. Property held under operating leases (including leasehold land) that would otherwise meet the definition of investment property is classified as investment property on a property by property basis. If a leased property does not meet this definition it is recorded as an operating lease. Investment properties are stated at fair value. Two independent valuation companies, with appropriately recognised professional qualifications and recent experience in the location and category being valued, value each property each year. On the valuation date, the fair value is estimated assuming that there is an agreement between a willing buyer and a willing seller in an arm’s length transaction after proper marketing; wherein the parties had each acted knowledgeably, prudently and without compulsion. The valuations are prepared based upon direct comparison with sales of other similar properties in the area and the expected future discounted cash flows of a property using a yield that reflects the risks inherent in those cash flows. Valuations are reviewed by the Valuation Committee and approved by the Board of Directors. The Valuation Committee may adjust valuations if there are factors that the external independent valuers have not considered in their determination of a property’s fair value. Any gain or loss arising from a change in fair value is recognised in the income statement. Rental income from investment property is accounted for as described in the accounting policy 3.7. When an item of property, plant and equipment is transferred

to investment property following a change in its use, any differences arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value is recognised directly in equity if it is a gain. Upon disposal of the item the gain is transferred to retained earnings. Any loss arising in this manner is recognised in the statement of income immediately. Property where more than 10% of the property is occupied by the Group for the production or supply of goods and services, or for administration purposes, is accounted for as property, plant and equipment (see accounting policy 3.12). 3.11. Investment property under development Property that is being constructed or developed for future use as investment property is classified as investment property under development (development projects) and stated at cost until construction or development is complete, at which time it is reclassified and subsequently accounted for as investment property. At the date of transfer, the difference between fair value and cost is recorded as income in the consolidated statement of income. All costs directly associated with the purchase and construction of a property, and all subsequent capital expenditures for the development qualifying as acquisition costs are capitalised. Borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset are in progress and expenditures and borrowing costs are being incurred. Capitalisation of borrowing costs continues until the assets are substantially ready for their intended use. If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recognised. The capitalisation rate is arrived at by reference to the actual rate payable on borrowings for development purposes or, with regard to that part of the development cost financed out of general funds, to the average rate.

36 VNL 2008 Annual Report

3.12. Property, plant and equipment Owned assets All property, plant and equipment, except buildings, are stated at cost less accumulated depreciation and impairment losses (see accounting policy 3.17). The cost of self-constructed assets includes the cost of materials, direct labour, overheads and the initial estimate of the costs of dismantling and removing the items and restoring the site on which they are located. Buildings are revalued to fair value in accordance with the methods set out in accounting policy 3.10. Any surplus arising on the revaluation is recognised in a revaluation reserve within equity, except to the extent that the surplus reverses a previous revaluation deficit on the building charged to the consolidated statement of income, in which case a credit to that extent is recognised in the consolidated statement of income. Any deficit on revaluation is charged in the consolidated statement of income except to the extent that it reverses a previous revaluation surplus on a building, in which case it is taken directly to the revaluation reserve. If an investment property is reclassified as property, plant and equipment its fair value at the date of reclassification becomes its deemed cost for subsequent accounting. Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

such an item when that cost is incurred if it is probable that the future economic benefits embodied with the item will flow to the Group and the cost of the item can be measured reliably. The carrying values of any parts replaced as a result of such replacements are expensed at the time of replacement. All other costs associated with the maintenance of property, plant and equipment are recognised in the statement of income as incurred. Depreciation Depreciation is charged to the statement of income on a straight-line basis over the estimated useful lives of property, plant and equipment, and major components that are accounted for separately. The estimated useful lives are as follows: Buildings Plant and machinery Office equipment Furniture and fixtures Motor vehicles

33 to 50 years 4 to 20 years 2 to 20 years 3 to 25 years 5 to 10 years

Assets held under finance leases which do not transfer title to the assets to the Group at the end of the lease are depreciated over the shorter of the estimated useful lives shown above and the term of the lease.

Leased assets Leases under the terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Property, plant and equipment and investment property acquired by way of a finance lease is stated at an amount equal to the lower of its fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses.

3.13. Intangible assets Intangible assets comprise software and licences. Intangible assets acquired separately are measured initially at cost. Intangible asset acquired in a business combination is measured at fair value and amortised evenly over the useful economic life. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial acquisition, intangible assets are measured at cost less any accumulated amortisation and accumulated impairment losses. The carrying value of the assets are reviewed annually for impairment

Subsequent expenditure The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of

Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may

be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year-end. The estimated useful lives are as follows: Licence Software

16 to 30 years 5 years

3.14. Property held for sale Property intended for sale in the ordinary course of business or property developed for sale is classified as trading property and is accounted for as inventory. Leasehold land upon which trading properties are constructed, or are in the process of construction, is classified as investment property. Property held for sale is stated at the lower of cost and net realisable value. Cost includes development costs and other direct costs attributable to the properties concerned until they reach a saleable state. Net realisable value represents the estimated selling price in the ordinary course of business less all estimated costs of completion and the estimated costs necessary to make the sale. 3.15. Leases Leases under the terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases (see accounting policy 3.12). Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as operating leases. Where the Group has the use of an asset held under an operating lease, payments made under the lease are charged to the statement of income on a straight line basis over the term of the lease. Prepayments for operating leases represent property held under operating leases where a portion, or all, of the lease payments have been paid in advance, and the properties cannot be classified as an investment property. 3.16. Financial assets Financial assets are divided into the following categories: loans and receivables; and financial assets at fair value through income statement. Management determines the classification of its financial

VNL 2008 Annual Report 37

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 16 March 2006. 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. 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 exists, any impairment loss is determined and recognised based on the classification of the financial assets. The Group’s financial assets consist primarily of unlisted equities, 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 provision for impairment. Any change in their value is recognised in profit or loss. The Group’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 income statement Financial assets at fair value through income statement include financial assets that are either classified as held for trading or are designated by the entity to be carried at fair value through income statement upon initial recognition. Other financial assets at fair value through income statement held by the Company include listed and unlisted securities and trustee loans. Financial assets at fair value through income statement include 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. 3.17. Impairment of assets The Group’s goodwill, operating lease prepayments, property, plant and equipment, property held for development, and interests in associates are subject to impairment testing. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill in particular is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Group at which management controls the related cash flows. All individual assets or cash generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised as an expense immediately for the amount by which the asset’s carrying amount exceeds its recoverable amount unless the relevant asset is carried at a revalued amount under the Group’s accounting policy, in which case the impairment loss is treated as a revaluation decrease according to that policy. The recoverable amount is the higher of fair value, reflecting market conditions less

costs to sell, and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the assets. 3.18. Income taxes Current income tax assets and/or liabilities comprise those obligations to, or claims from, fiscal authorities relating to the current or prior reporting periods that are unpaid at the balance sheet date. They are calculated according to the tax rates and tax laws applicable to the fiscal periods to which they relate based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised as a component of tax expense in the statement of income. Deferred income taxes are calculated using the liability method on temporary differences. This involves the comparison of the carrying amounts of assets and liabilities in the consolidated financial statements with their respective tax bases. In addition, tax losses available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets. However, deferred tax is not provided on the initial recognition of goodwill, or on the initial recognition of an asset or liability unless the related transaction is business combination or affects tax or accounting profit. Deferred tax on temporary differences associated with shares in subsidiaries and associates is not provided if reversal of these temporary differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. Deferred tax liabilities are always provided for in full. Deferred tax assets are recognised to the extent that it is probable that they will be able to be offset against future taxable income. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax assets and liabilities are calculated, without

38 VNL 2008 Annual Report

discounting, at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantially enacted at the balance sheet date. Most changes in deferred tax assets or liabilities are recognised as a component of tax expense in the statement of income. Only changes in deferred tax assets or liabilities that relate to a change in value of assets or liabilities that is charged directly to equity are charged or credited directly to equity. 3.19. 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. 3.20. Equity Share capital is determined using the nominal value of shares that have been issued. Additional paid-in capital includes any premiums received on the initial issuance of the share capital. Any transaction costs associated with the issuing of shares are deducted from additional paid-in capital, net of any related income tax benefits. Revaluation reserve represents the surplus arising on the revaluation of the Group’s owned buildings which are classified under property, plant and equipment. Currency translation differences on net investment in foreign operations are included in the translation reserve. Retained earnings include all current and prior period results as disclosed in the consolidated statement of changes in equity. 3.21. Financial liabilities The Group’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. All interest related charges are recognised as an expense in finance costs in the statement of income.

Trade payables are recognised initially at their fair value and subsequently measured at amortised cost, using the effective interest rate method. Borrowings are raised for support of long term funding of the Group’s investments. They are recognised at fair value less direct transaction costs and carried subsequently at amortised cost. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. 3.22. 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 statements. 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 that’s 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. 3.23. 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-controlled entity; 3. a party is an associate; 4. a party is a member of the key management personnel of the Group; or 5. a party is a close family member of the above categories. 3.24. 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 year. 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 and minority interest. 3.25. 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. A geographical segment is a particular economic environment that is subject to risks and return that are different from those of segments operating in other economic environments.

VNL 2008 Annual Report 39

4. Critical accounting estimates and judgements When preparing the financial statements 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 year are discussed below. Fair value of investment properties and buildings The investment properties and buildings of the Group are stated at fair value in accordance with the accounting policies 3.10. The fair values of investment properties and buildings have been determined by independent professional valuers including: CB Richard Ellis; Savills; Jones Lang LaSalle; Colliers Sallmanns and HVS. These valuations are based on certain assumptions, which are subject to uncertainty and might materially differ from the actual results. Valuations are reviewed by the Valuation Committee and approved by the Board of Directors. The Valuation Committee may adjust valuations if there are factors that the external independent valuers have not considered in their determination of a property’s fair value. 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. Business combinations On initial recognition, the assets and liabilities of the acquired business are included in the consolidated statement of financial position at their fair values. In measuring fair value management uses estimates about future cash flows and discount rates or independence valuation reports for investment properties and buildings. Useful lives of depreciable assets Management reviews the useful lives of depreciable assets at each reporting date. At 30 June 2008 management assesses that the useful lives represent the expected utility of the assets to the

Group. The carrying amounts are analysed in notes 9 and 10. Impairment of assets The Group’s goodwill in associates is subject to impairment testing in accordance with the accounting policy stated in note 3.17.

5. Segment reporting Segment information is presented in respect to the Group’s investment and geographical segments. The primary reporting format, investment segments, is based on the investment manager’s management and monitoring of investments. Investments are allocated into five main segments: four real estate sectors: commercial; residential; hospitality; and mixed use, and cash (including term deposits and bonds). The Group’s secondary reporting format, geographical segments, includes north, central and south Vietnam, and the regions outside Vietnam. As at 30 June 2008 Vietnam

Outside Vietnam

Total

USD’000

North

Central

South

USD’000

Assets Real estate

Commercial

12,799

51,513

64,312

Residential

15,731

149,108

171,718

336,557

Hospitality

108,038

58,069

44,642

210,749

Mixed use

55,015

221,596

229,073

505,684

8,802

4,443

56,605

10,952

80,802

200,385

433,216

553,551

10,952

1,198,104

Cash

For the year ended 30 June 2008 Net profit/(loss) Real estate

Commercial

(6,500)

25,265

18,765

Residential

17,777

11,593

50,455

79,825

Hospitality

(143)

1,273

(979)

(269)

(118)

Mixed use

(3,176)

154,706

(20,571)

130,959

149

883

12,908

4,812

18,752

8,107

168,455

67,078

4,543

248,183

Cash Net profit

40 VNL 2008 Annual Report

Assets

6. Subsidiaries

As at 30 June 2007

Real estate

Commercial

10,029

Residential

7,500

8,476

15,976

Hospitality

78,966

21,949

36,386

137,301

Mixed use

45,083

51,093

130,354

226,530

Cash

4,047

663

84,676

261,513

350,899

145,625

73,705

259,892

261,513

740,735

For the year ended 30 June 2007

Acquisition of Ha Trading Co. Ltd. (Danang 15ha Project) On 12 March 2008, the Group acquired 99.983% interest in Ha Trading Co., Ltd. (Danang 15ha Project), which is incorporated in Vietnam. The principal activity of the company is to construct and manage residential villas for sale and a four-star resort for lease in Danang City, Vietnam. The total cost of the acquisition was USD8.9 million, which was settled in cash. The fair value amounts recognised for each class of the acquiree’s assets, liabilities and contingent liabilities at the acquisition date were as follows:

Assets

Net profit/(loss)

Current assets

Real estate

Loan receivable

Commercial

1,001

(14)

987

Residential

(227)

2,094

1,867

Hospitality

(6,512)

2,024

11,060

(26)

6,546

Mixed use

(1,363)

14,560

15,419

28,616

7,045

4,915

11,960

(7,101)

16,584

35,604

4,889

49,976

Cash Net profit

To determine the geographical segments for investments and cash the following rules have been applied: • Real estate − location of property; and • Cash − place of deposit. The above segmental reporting information has not been presented in accordance with the requirements of IAS 14 – Segment reporting as the Board of Directors believes that the current way of presentation gives more appropriate and relevant information to the users of the financial statements and is in accordance with the way the Investment Manager manages and monitors the risks and returns of the Group’s investments.

Other receivable

USD’000 Liabilities

USD’000

3,179 1 3,180

Non-current asset Investment property

Non-current liabilities 8,900 Long-term borrowing

3,179

Minority interest 12,080

1 3,180

Ha Trading Co. Ltd. contributed a loss of USD10,000 to the consolidated profit for the period from 12 March 2008 to the balance sheet date.

VNL 2008 Annual Report 41

Acquisition of Orchid House Co., Ltd. (HBT Court Project) On 13 December 2007, the Group acquired 30% of Orchid House Co., Ltd (HBT Court Project), which is incorporated in Vietnam. On 4 February 2008, the Group acquired a further 25.56% interest in the company. This company owns and manages an apartment complex with 21 luxury units in District 1, Ho Chi Minh City, Vietnam. The total costs of the acquisitions were USD1.5 million which was settled in cash.

Acquisition of Pavia Properties Ltd., (Nguyen Du Building Project) On 28 March 2008, the Group acquired 100% interest in Pavia Properties Ltd., which is incorporated in British Virgin Islands, which owns 65% interest in Nguyen Du Joint Venture Company (Nguyen Du Building Project). The principal activity of the Nguyen Du Joint Venture Company is to operate an office building for lease located in Hanoi, Vietnam. The total cost of the acquisition was USD4.2 million which was settled in cash.

The fair value amounts recognised for each class of the acquiree’s assets, liabilities and contingent liabilities at the acquisition date were as follows:

Assets

USD’000 Liabilities

Current assets Cash and cash equivalent Receivable Other current assets Total current assets

29 Short-term loan

170 Payable

204 Total current liabilities

94 115

Total current assets

Non-current asset

Other non-current liabilities Minority interest

Cash and cash equivalent Receivable

Non-current liabilities 2,766 Long-term borrowing

2,970

Assets

USD’000 Liabilities

Current assets

Non-current asset Investment property

USD’000

Current liabilities

1,205 1,464

Orchid House Co., Ltd. contributed USD6,000 to the consolidated profit for the period from 4 February 2008 to the balance sheet date.

Investment property

USD’000

Current liabilities 857 Payable

12 869 Total current liabilities

5,454 Minority interest

2,060

6,323

2,124

Nguyen Du Joint Venture Company and Pavia Properties Ltd. contributed USD1,000,000 to the consolidated profit for the period from 28 March 2008 to the balance sheet date.

42 VNL 2008 Annual Report

Acquisition of Vinh Thai Urban Development Corporation (Vinh Thai Urban Residential Project) On 29 December 2007, the Group acquired 68% interest in the Vinh Thai Urban Development Corporation (Vinh Thai Urban Residential Project). The principal activity of the company is to construct and operate urban residential land and infrastructure located in Nha Trang City, Khanh Hoa Province, Vietnam. The total cost of the acquisition was USD36.7 million which was settled in cash. The fair value amounts recognised for each class of the acquiree’s assets, liabilities and contingent liabilities at the acquisition date were as follows:

Acquisition of International Consultant Company Limited (Long Dien Project) On 25 October 2007, the Group acquired a 99% interest in International Consultant Company Limited which has a 16% interest in the VinaCapital Long Dien Limited (Long Dien Project). The principal activity of VinaCapital Long Dien Limited is to construct and develop an apartment building in District 9, Ho Chi Minh City. As at 30 June 2007, the Group owned 84% interest in VinaCapital Long Dien Limited. As a result of this acquisition, the Group increased its beneficial ownership in VinaCapital Long Dien Limited from 84% to 99.84% at the balance sheet date. The total cost of the acquisition was USD2.4 million, which was settled in cash. The fair value amounts recognised for each class of the acquiree’s assets, liabilities and contingent liabilities at the acquisition date were as follows:

Assets Assets

USD’000 Liabilities

Current assets Cash and cash equivalent

USD’000

Current liabilities 621 Payable

Receivable

49,836

Total current assets

50,457 Total current liabilities

Investment property Total

73,932 Minority interest 124,389

Receivable Total current assets

30,434

Non-current asset 30,065 60,499

Vinh Thai Urban Development Corporation contributed a loss of USD1,000 to the consolidated profit for the period from 29 December 2007 to the balance sheet date.

USD’000

Current assets Cash and cash equivalent

30,434

USD’000 Liabilities 1,215 37 1,252

Non-current assets Investment property

641

Investment in associate

503 2,396

International Consultant Company Limited contributed USD25,000 to the consolidated profit for the period from 25 October 2007 to the balance sheet date.

VNL 2008 Annual Report 43

Acquisition of Dien Phuoc Long Real Estate Company Limited (Phuoc Dien Project) On 25 October 2007, the Group acquired a 99% interest in Dien Phuoc Long Real Estate Company Limited which has a 16% interest in the VinaCapital Phuoc Dien Limited (Phuoc Dien Project). The principal activity of VinaCapital Phuoc Dien Limited is to construct and develop an apartment building and villas in District 9, Ho Chi Minh City. As at 30 June 2007, the Group owns 84% interest in VinaCapital Phuoc Dien Limited. As a result of this acquisition, the Group increases beneficial ownership in VinaCapital Phuoc Dien Limited from 84% to 99.84% at the balance sheet date. The total cost of the acquisition was USD3.1 million, which was settled in cash.

Acquisition of SIH Investment Limited (Novotel Hanoi Hotel Project) On 29 October 2007, the Group acquired 75% interest in SIH Investment Limited, a company incorporated in Singapore, which owns 70% interest in SAS Hanoi Royal Hotel Limited (Novotel Hanoi Hotel Project). As a result, the Group owns 52.5% interest in this Project. The principal activity of the SAS Hanoi Royal Limited is to construct and manage a four-star hotel in Hanoi. The total cost of the acquisition was USD4.5 million, which was settled in cash. The fair value amounts recognised for each class of the acquiree’s assets, liabilities and contingent liabilities at the acquisition date were as follows:

The fair value amounts recognised for each class of the acquiree’s assets, liabilities and contingent liabilities at the acquisition date were as follows:

Assets

USD’000 Liabilities

Current assets Cash and cash equivalent Receivable Total current assets

USD’000

Current liabilities 2,654 Payable

Cash and cash equivalents Other receivables

Non-current asset Investment in associate

USD’000 Liabilities

Current assets 9

15 2,669 Total current liabilities

Assets

Total current assets

USD’000

Current liabilities 280 Trade and other payables

6 286 Total current liabilities

Non-current asset 448 3,117

Dien Phuoc Long Real Estate Company Limited contributed a loss of USD364,000 to the consolidated profit for the period from 25 October 2007 to the balance sheet date.

Investment property 9

5,770 Minority interest

1,500

6,056

1,556

SIH Investment Limited and SAS Hanoi Royal Hotel Limited contributed a loss of USD5 million to the consolidated profit for the period from 25 October 2007 to the balance sheet date.

44 VNL 2008 Annual Report

Additional acquisition of East Ocean Real Estate & Tourism Joint Stock Company (Sheraton Nha Trang Hotel Project) As of 30 June 2007, VinaLand held a beneficial interest of 67.6% in East Ocean Real Estate & Tourism Joint Stock Company (Sheraton Nha Trang Hotel Project). The principal activity of this company is to construct and manage the five-star Sheraton Nha Trang Hotel. On 5 July 2007, the Group acquired a further 5.7% interest in this company for USD1.3 million and on 6 May 2008,

the Group acquired additional 7.9% interest in this company for USD2.7 million. These acquisitions increased the Groupâ&#x20AC;&#x2122;s beneficial ownership in East Ocean Real Estate & Tourism Joint Stock Company to 81.2%. The total costs of the additional acquisitions were USD4 million, which was settled in cash.

Particulars of signification subsidiaries

Place of incorporation/ operations

Nominal value of issued share capital/registered legal capital in USD and USD equivalent

Percentage interest held by the Group

Principal activities

Onshine Investments Limited

BVI

100%

Property investment

Vietnam Property Holdings Limited

BVI

100

75%

Property investment

Prosper Big Investment Limited

BVI

50,000

75%

Property investment

VinaCapital Danang Resorts Limited

BVI

75%

Property investment

VinaCapital Commercial Center Limited (*)

BVI

20,000

64.5%

Property investment

Bates Assets Limited

BVI

100%

Property investment

Proforma Asia Limited

BVI

100%

Property investment

Cypress Assets Limited

BVI

100

75%

Property investment

Name

Roxy Assets Limited

BVI

75%

Property investment

VinaCapital Hoi An Resort

Vietnam

6,000,000

80%

Property investment

VinaCapital Danang Golf Course Limited

Vietnam

23,000,000

75%

Property investment

Maplecity Investments Limited

BVI

75%

Property investment

Henry Enterprise Group Limited

BVI

100

61.5%

Property investment

VinaCapital Danang Resort Limited

Vietnam

27,000,000

75%

Property investment

VinaCapital Commercial Center Limited (Vietnam)

Vietnam

65,000,000

64.5%

Property investment

BVI

50,000

100%

Property investment

International Consultant Company Limited

Vietnam

1,237,240

99%

Property investment

Dien Phuoc Long Real Estate Company

Vietnam

2,474,482

99%

Property investment

VinaCapital Phuoc Dien Limited

Vietnam

2,927,500

100%

Property investment

VinaCapital Long Dien Limited

Vietnam

3,142,375

100%

Property investment

Tungshing International Investment Limited

VNL 2008 Annual Report 45

East Ocean Real Estate & Tourism Joint Stock Company

Vietnam

20,495,621

81.2%

Hospitality

Singapore

75%

Property investment

21st Century International Development Company Inc.

Vietnam

28,680,000

61.5%

Property investment

Thang Long Tungshing JV Company

Vietnam

6,071,088

70%

Property investment

Vina Properties Pte. Limited

Roxy Vietnam Co., Ltd (formerly HLL â&#x20AC;&#x201C; Guoco Vietnam Co. Ltd.)

Vietnam

6,748,923

55.5%

Hospitality

Hong Kong

75%

Hospitality

SRLHO

Vietnam

24,711,683

52.5%

Hospitality

A-1 International Corporation Limited

Vietnam

16,700,000

52.5%

Hospitality

Dong Binh Duong Urban Development Co., Ltd.

Vietnam

19,218,507

70%

Property investment

Ha Trading Co., Ltd.

Vietnam

3,562,099

99.98%

Property investment

Orchid House Co. Ltd

Vietnam

562,022

55.56%

Property investment

Vina Dai Phuoc Corporation

Vietnam

100,000,000

100%

Property investment

Prodigy Pacific Vietnam Co., Ltd.

Vietnam

1,500,000

100%

Property investment

Top Star International

Pavia Properties Ltd

BVI

50,000

100%

Property investment

Vietnam

2,324,834

65%

Property investment

Singapore

8,379,168

75%

Property investment

SAS Hanoi Royal Hotel Ltd.

Vietnam

12,000,000

70%

Hospitality

Viet Land Development Corporation

Vietnam

2,500,000

60%

Property investment

BVI

100

75%

Property investment

Vietnam

37,348,756

68%

Property investment

Nguyen Du Joint Venture Company SIH Investment Limited

VinaLand Espero Ltd Vinh Thai Urban Development Corporation

(*) During the year, the Group sold 3,675 Class A shares in VinaCapital Commercial Center Limited. Under the Share Sale and Purchase Agreement, the Buyer has been granted a right to acquire an additional 3,675 Class B shares in the company from the Group.

46 VNL 2008 Annual Report

7. Net cash for acquisition of subsidiaries

30 June 2008

30 June 2007

USD’000

8,901

Cost of investment in the subsidiaries: Ha Trading Co., Ltd. (Danang 15ha Project) Orchid House Co., Ltd (HBT Court Project)

1,506

Nguyen Du Joint Venture Company (Nguyen Du Building Project)

4,200

36,723

2,395

Vinh Thai Urban Development Corporation (Vinh Thai Urban Residential Project) International Consultant Company Limited (Long Dien Project ) Dien Phuoc Long Real Estate Company (Phuoc Dien Project)

3,107

SAS Hanoi Royal Hotel Ltd. (Novotel Hanoi Project) 21st Century International Development Company Inc. (21st Century Project)

4,518

35,431

SRLHO (Hilton Hanoi Opera Hotel Project)

20,423

Thang Long Tungshing JV Company (Hanoi Opera Office Project)

6,700

4,013

8,534

A-1 International Corporation Limited (Omni Saigon Hotel Project)

23,075

Roxy Vietnam Co., Ltd (Hanoi Guoman Hotel Project)

19,143

Nishimura Restaurant at the Omni Saigon Hotel

547

65,363

113,853

(5,656)

(24,219)

Cost of acquisition last year as an associate

(15,997)

Acquisition cost not yet settled

(10,809)

59,707

62,828

East Ocean Real Estate & Tourism Joint Stock Company (Sheraton Nha Trang Hotel Project)

Less: Cash and cash equivalents at the date of acquisition

Cost of investments settled in cash

VNL 2008 Annual Report 47

8. Investment properties

Opening balance

30 June 2008

30 June 2007

USD’000

97,185

Acquisition of subsidiaries

102,598

32,528

Additions during the year

113,919

26,127

(804)

Net gain from fair value adjustments

Translation difference

247,068

38,530

Closing balance

559,966

97,185

9. Property, plant and equipment

The carrying amount can be analysed as follow: Buildings

Equipment

Furniture and fixtures

Motor vehicles

Construction in progress

Total

USD’000

119,495

20,264

1,584

664

10,333

152,340

5,434

5,468

Gross carrying amount 1 July 2007 Acquisitions of subsidiaries Reclassifications

(6,802)

(210)

210

(6,802)

Additions

415

546

150

1,154

6,126

8,391

Decrease

(2,744)

(100)

(434)

(4,343)

(7,621)

Revaluation gains 30 June 2008

24,700

137,808

17,858

1,875

1,385

17,550

176,476

(20,690)

(15,648)

(1,409)

(546)

(38,293)

(4,106)

(1,253)

(276)

(90)

(5,725)

2,175

411

2,648

(24,796)

(14,726)

(1,623)

(225)

(41,370)

98,805

4,616

175

118

10,333

114,047

113,012

3,132

252

1,160

17,550

135,106

Depreciation and impairment 1 July 2007 Charge for the year Decrease 30 June 2008 Carrying amount 1 July 2007 Carrying amount 30 June 2008

48 VNL 2008 Annual Report

For the comparative year, the carrying amount can be presented as follows: Buildings

Equipment

Furniture and fixtures

Motor vehicles

Construction in progress

Total

USD’000

Gross carrying amount 1 July 2006 Acquisitions of subsidiaries New purchases Valuation gain 30 June 2007

117,697

20,025

1,575

584

9,368

149,249

319

239

965

1,612

1,479

119,495

20,264

1,584

664

10,333

152,340

(18,510)

(14,904)

(1,397)

(546)

(35,357)

(2,180)

(744)

(12)

(2,936)

(20,690)

(15,648)

(1,409)

(546)

(38,293)

Depreciation and impairment 1 July 2006 Acquisitions of subsidiaries Charge for the year 30 June 2007 Carrying amount 1 July 2006 Carrying amount 30 June 2007

98,805

4,616

175

118

10,333

114,047

Licences

Software

Total

USD’000

6,802

6,810

Charge for the year

(388)

(1)

(389)

(388)

(1)

(389)

6,414

6,421

Buildings and construction in progress belonging to East Ocean Real Estate & Tourism Joint Stock Company with a net book value of USD14,222,000 as at 30 June 2008 (30 June 2007: USD12,080,000) are pledged as security for the bank loan as disclosed in Note 23. If cost model had been used, the carrying amount of the buildings would be as follows:

10. Intangible assets

Gross carrying amount 1 July 2007

USD’000 Buildings at 30 June 2008

Reclassification Additions

At cost

118,963

30 June 2008

Accumulated depreciation

(22,761)

Amortisation and impairment

Net carrying amount

96,202

Buildings at 30 June 2007

1 July 2007

At cost

119,496

30 June 2008

Accumulated depreciation

(20,690)

Carrying amount 1 July 2007

Net carrying amount

98,806

Carrying amount 30 June 2008

VNL 2008 Annual Report 49

11. Investments in associates

1 July Acquisition of associates Share of associates’ profits, net Transferred to subsidiary 30 June

12. Goodwill 2008

2007

USD’000

15,997

26,217

(15,997)

26,270

The closing balance consists of:

30 June 2008

30 June 2007

USD’000

USD‘000

1,089

Aqua City Joint Stock Company

3,086

Thang Loi Land Joint Stock Company

30 June 2007

USD’000

USD‘000

Increase

2,939

Closing balance

2,939

Opening balance

Under the parent equity method goodwill has been recognised for additional acquisitions of East Ocean Real Estate & Tourism Joint Stock Company (Note 6).

13. Prepayments for operating leases

Long An S.E.A Industrial Park Development Co. Ltd.

Romana Resort and Spa

30 June 2008

1 July Acquisition of subsidiaries

2008

2007

USD’000

13,297

13,584

Addition during the year

7,284

162

13,404

Charge for the year

(938)

(449)

8,691

Translation differences

(8)

26,270

30 June

19,635

13,297

Prepayments for operating leases relates to leasehold land occupied by subsidiaries of the Group. Particulars of operating associates and their summarised financial information, extracted from their financial statements as at 30 June 2008 are as follows:

Incorporation

Equity interest held

Leasehold property held by East Ocean Real Estate and Tourism Joint Stock Company with a net book value of USD1,819,000 as at 30 June 2008 (30 June 2007: USD162,000) are pledged as security for the bank loan is disclosed in Note 23.

Principle activity Status of financial statements

% Long An S.E.A Industrial Park Development Co. Ltd.

Vietnam

Property

Reviewed

Assets

Liabilities

Revenue

Profit/(loss)

USD’000

4,349

(16)

Aqua City Joint Stock Company

Vietnam

Property

Reviewed

17,385

(18)

Thang Loi Land Joint Stock Company

Vietnam

Property

Reviewed

32,796

2,084

(8)

Romana Resort and Spa

Vietnam

Hospitality

Reviewed

4,976

1,930

591

130

50 VNL 2008 Annual Report

14. Receivable from related parties

Vietnam Opportunity Fund Limited

Relation

Transactions

Common control

Loan advance to projects

30 June 2008

30 June 2007

USD’000

3,000

22,825

Expenses paid for projects Cash advance for investments in projects

2,965

14,600

VinaCapital Real Estate Vietnam Co., Limited

Common control

Other

378

Vietnam Infrastructure Fund Limited

Common control

Other

217

Romana Resort and Spa

Associate

Shareholder loan

709

Lam Co Company Limited

Related party

Share premium receivable

21,930

22,825

15. Trade and other receivables 30 June 2008

30 June 2007

USD’000

Loan receivable from third parties (*)

87,412

19,882

Prepayments to suppliers

19,710

4,324

3,678

1,624

916

417

25,505

Other receivables

4,330

Other current assets

5,215 146,766

33,198

Interest receivables Trade receivables Receivable from minority shareholders (**)

Provision for bad and doubtful debts

As remaining all trade and other receivables are short term in nature and their carrying value is considered a reasonable approximation of their fair value as at balance sheet date. (**) Details of receivable from minority shareholders are as follows:

Name

Descriptions

ACM Company

Loan receivables (***)

3,035

NORDICA Capital Square ApS

Disposal of investment

3,916

Thai Thinh Capital Joint Stock Company Receivable

(16)

146,750

33,198

(*) This represents short-term loans to third parties, which are to be repaid during 2009. The loans are unsecured, interest free or bear interest rates ranging from 7.5% to 15% per annum. Their carrying value is considered a reasonable approximation of their expected recovery.

30 June 2008

30 June 2007

USD’000

5,497

9,259

10,749

25,505

(***) This loan is unsecured, interest free, and is to be repaid by May 2009. It is carried at amortised cost at the balance sheet date.

VNL 2008 Annual Report 51

16. Short-term deposits

These financial assets are denominated in the following currencies: 30 June 2008

30 June 2007

30 June 2008

30 June 2007

USD’000

Short-term deposits

23,735

United States Dollars

46,409

21,805

Bank secured deposit (*)

33,292

Vietnam Dong

15,515

7,656

57,027

61,924

29,461

Short-term deposits are term deposits with banks, with term to maturity of more than three months to one year. Their carrying value is considered a reasonable approximation of their fair value as at balance sheet date.

The carrying amounts disclosed above are the Group’s maximum possible credit risk exposure in relation to these instruments. See Note 38 for further information on the Group’s exposure to credit risk.

(*) The Group has deposited VND560.8 billion (equivalent to USD33 million) with a local bank. The deposit is repayable within one year and earns interest at the rate of 13% per annum. The deposit is exclusively for purpose of lending to Thai Thinh Capital Joint Stock Company. 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.

18. Deposits for acquisitions of investments

17. Financial assets held at fair value through income statement 30 June 2008

30 June 2007

USD’000

Designated at fair value through income statement: Financial assets in Vietnam Ordinary shares – unlisted

5,257

157

Trustee loans

46,409

21,805

Corporate bonds

10,258

7,499

Total financial assets at fair value through income statement

61,924

29,461

30 June 2008

30 June 2007

USD’000

Deposits for acquisitions of investments

83,103

72,729

Provision for loss on deposit for acquisition of investment – Note 26 (*)

(5,160)

77,943

72,729

These deposits pertain to payments made by the Group to property vendors where the final transfer of the property is pending the approval of the relevant authorities and/or is subject to either the Group or the vendor completing certain performance conditions set out in agreements. (*) The amount represents provision for a prepayment on acquisition of investment.

19. Cash and cash equivalents 30 June 2008

30 June 2007

USD’000

Cash on hand and in banks

36,090

61,572

Cash equivalents

44,716

289,326

80,806

350,898

52 VNL 2008 Annual Report

20. Share capital

22. Revaluation reserve 30 June 2008 Number of shares

Authorised: Ordinary shares of USD0.01 each

30 June 2007

USD’000

Number of shares

USD’000

500,000,000

5,000

500,000,000

5,000

499,967,622

4,999

204,844,779

2,048

295,122,843

2,951

499,967,622

4,999

499,967,622

4,999

Issued and fully paid Opening balance New shares issued in the year Closing balance

21. Additional paid-in capital

1 July

30 June

USD’000

777

24,700

1,480

Less: share of gain attributable to minority interest

(11,633)

(703)

13,844

777

30 June

The Group’s share of valuation gains resulting from the revaluation of subsidiaries’ hospitality properties has been recorded directly in the Group’s revaluation reserve under shareholders’ equity.

23. Long-term borrowings

Long-term loans of Maplecity Investments Ltd.

Additional paid-in capital during the year

2007

Revaluation gain on property, plant and equipment

Additional paid-in capital represents the excess of consideration received over the par value of shares issued.

1 July

2008

Long-term loans of East Ocean Real Estate & Tourism Joint Stock Company

2008

2007

USD’000

588,870

196,414

Long-term loans of A-1 International (Vietnam) Corporation Limited

392,456

Long-term loan of Orchid House Co., Ltd

588,870

588,870 Current portion of long-term loans of East Ocean Real Estate & Tourism Joint Stock Company Current portion of long-term loan of Orchid House Co., Ltd Total current portions of long-term loans

30 June 2008

30 June 2007

USD’000

18,813

2,982

4,872

1,113

153

21,948

5,985

(188)

(252)

(87)

(1,028)

(275)

(1,280)

21,673

4,705

VNL 2008 Annual Report 53

The long-term loan of Maplecity Investments Ltd, a subsidiary of the Group, represents a loan obtained from Taipei Fubon Commercial Bank Co., Ltd. The loan is payable in full on 11 July 2009 and bears interest based on LIBOR plus 1.18% per annum. The loan is carried at amortised cost at the balance sheet date. The long-term loans of East Ocean Real Estate & Tourism Joint Stock Company, a subsidiary of the Group, represents loans obtained from Dong A Bank. These loans are for a period of 10 years and repayable by 2016 and bear an interest rate based on SIBOR plus 2.5% per annum. These loans are secured by leasehold property and the value of construction on such property. These loans are carried at amortised cost at the balance sheet date. The long-term loan of Orchid House Co., Ltd, a subsidiary of the Group, represents loan obtained from Vietcombank – Ho Chi Minh City branch. The loan is for periods of 6 years since 9 February 2004 and bears interest at prime deposit rate for 12 month-period loan plus 0.18% per annum on reducing balance. The loan is carried at amortised cost at the balance sheet date.

24. Payables to related parties

Vietnam Opportunity Fund Limited

Relation

Transactions

Common management

Shareholder loans (*)

Common management

Management fees Performance fees Others

30 June 2008

30 June 2007

USD’000

Trade payables

2,010

5,680

Tax payable

2,445

245

Payable for land acquisitions and compensations

18,813

Payable to minority shareholders

6,147

Other accrued liabilities

2,692

614

Other payables

2,384

4,523

34,491

11,062

As all trade and other payables are short-term in nature, their carrying values are considered a reasonable approximation of their fair values as at balance sheet date.

26. Expenses by nature

Dividend from a subsidiary VinaCapital Investment Management Ltd

25. Trade and other payables

30 June 2008

30 June 2007

USD’000

66,367

35,549

263

1,409

1,012

48,218

3,340

279

682

116,536

40,583

(*) This represents shareholder loans from Vietnam Opportunity Fund Limited (VOF), a minority shareholder in subsidiaries of the Group. These loans are unsecured, bear interest at SIBOR six-month interest rate and are repayable by the end of 2012. The loans are carried at amortised cost in the balance sheet.

30 June 2008

30 June 2007

USD’000

Performance fees

48,218

3,340

Management fees

13,916

6,644

Professional fees

3,079

1,993

Staff costs

6,687

2,750

Depreciation and amortisation

7,052

3,386

Material costs

4,510

2,888

10,924

4,135

Provision for loss on deposit for acquisition of investment

5,160

Loss on disposal of investments and fixed assets

6,226

246

661

106,018

25,797

General, administration expenses and outside service costs

Other expenses

54 VNL 2008 Annual Report

27. Other income

30. Financial costs 30 June 2008

30 June 2007

30 June 2008

30 June 2007

USD’000

15,976

Interest expenses

1,485

2,594

27,166

Unrealised loss for borrowing at amortised cost

440

108

Realised loss on foreign exchange difference

174

Gain on shareholder’s loan from Maplecity Investments Ltd. to SRLHO

3,078

Gain on waiver of liabilities from ex-shareholder

2,491

1,355

2,133

44,605

7,702

Disposals of investments Negative goodwill (*) Disposals of fixed assets

Unrealised loss on foreign exchange difference

Others

(*) As stated in Note 6, the Group acquired a 68% interest in the Vinh Thai Urban Development Corporation when the fair value of the net assets was USD94 million. The difference between the Group’s share of the net assets of USD63.9 million and the cost of the acquisition of USD36.7 million represents negative goodwill which has been recognised in the Statement of Income at the acquisition date.

4,892

6,991

2,594

31. Corporate income tax

VinaLand 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 at the regular tax rate of 28%. A provision of USD2,122,000 has been made for these Vietnamese subsidiaries of the Group for the year ended 30 June 2008 (30 June 2007: USD245,000).

28. Other net changes in fair value on financial assets at fair value through income statement

The relationship between the expected tax expense based on the applicable tax rate of 0% and the tax expense actually recognised in the statement of income can be reconciled as follows:

30 June 2008

30 June 2007

USD’000

30 June 2008

30 June 2007

18,686

3,085

USD’000

1,051

Group profit before tax

250,305

50,222

Unrealised loss from bonds’ valuation

(2,868)

Group profit multiplied by applicable tax rate (0%)

16,869

3,085

Income tax on Vietnamese subsidiaries

2,122

245

Corporate income tax expense

2,122

245

Unrealised gain from trustee loans Unrealised gain from shares

29. Financial income

Interest income Realised gain on foreign exchange difference

30 June 2008

30 June 2007

USD’000

18,599

11,836

152

18,751

11,836

Under the law of Vietnam, tax losses can be carried forward to offset with future taxable income for five years from the year a loss is incurred. Unrecognised deferred tax assets for tax losses of USD7,329,000 (30 June 2007: USD5,614,000) relating to losses carried forward have not been recognised due to uncertainties as to their recoverability.

VNL 2008 Annual Report 55

32. Earnings per share

34. Directors’ remuneration

a. Basic Basic earnings per share is calculated by dividing the profit attributable to shareholders of the Group by the weighted average number of ordinary shares on issue during the year.

The emoluments paid or payable to the Directors during the year were as follows:

30 June 2008

30 June 2007

Profit attributable to equity holders of the Company (USD)

167,697,519

34,635,037

Weighted average number of ordinary shares on issue

499,968,622

278,625,490

0.34

0.12

Basic earnings per share (USD per share)

b. Diluted Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Group has no category of potential dilutive ordinary shares. Therefore, diluted earnings per share are equal to basic earnings per share.

33. Cash flow statement

The following non-cash flow adjustments have been made to the pre-tax result for the year to arrive at operating cash flow: 2008 2007 Depreciation and amortisation Other net changes in fair value of financial assets at fair value through income statement Gain on fair value adjustment of investment properties Gain on liquidations of subsidiary

USD’000

7,052

3,386

(16,869)

(3,085)

(247,068)

(38,530)

(1,080)

5,160

Gain from disposal of investments, net

(14,681)

Negative goodwill

(27,166)

Provision for loss on deposit for acquisition of investment

Write-off expenses

168

Share of associate’s profit

(53)

Loss on disposal and write-off of fixed assets

5,814

Unrealised loss on foreign exchange difference

4,892

(452)

440

Amortised cost of loan receivable Interest expense Interest income

1,485

2,594

(18,599)

(11,836)

(300,505)

(47,923)

30 June 2008

30 June 2007

USD’000

Horst Geicke

Don Lam

Nguen Khoong Tong

Bruno Schoepfer

Nicholas Brooke

100

56 VNL 2008 Annual Report

35. Related party transactions

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 16 March 2006 (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% (30 June 2007: 2%). Total management fees for the year amounted to USD13,916,000 (30 June 2007: USD6,644,000), with USD1,409,000 (30 June 2007: USD1,012,000) in outstanding accrued fees due to the Investment Manager at the end of the year. 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% (30 June 2007: hurdle rate of 8%). Total performance fees, for the year amounted to USD48,218,000 (30 June 2007: USD3,340,000), in which included the balance of performance fee of USD4,304,000 for the year ended 30 June 2007. The performance fees for the year ended 30 June 2008 have not been paid and included in outstanding accrued fees due to the Investment Manager at the end of the year. Placement fees When raising capital through the issuance of new Ordinary Share a commission equal to 3% of the subscription price multiplied by the total number of the shares allotted by the Group 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 are recorded after netting off placement fees. There was no placement fee for the year (30 June 2007: USD11,862,000). During the year, the Group granted total loans of USD25 million to Lam Co Company Limited, a related party, to acquire shares in Vinh Thai Urban Development Corporation (Vinh Thai Urban Residential Project) and Ha Trading Co., Ltd. (Danang 15ha Project) on behalf of the Group. These loans are fully secured by the shares which Lam Co Company Limited owns in these projects. Other related party transactions and balances Other related parties transactions and balances are disclosed in Notes 11, 14, and 24.

36. Contingent assets and liabilities

Taxation Although the Company and its direct 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 can not be determined: • Whether the Company and/or its subsidiaries are considered as having permanent establishments in Vietnam; and • 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 Group 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 financial information. 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 Joint Stock Company (“TTC”), a joint stock company, for which the Group has placed an amount of USD33 million (Note 16) 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: 1. Whether TTC will offer its share to the public in the foreseeable future; and 2. 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.

VNL 2008 Annual Report 57

37. Commitments

As at 30 June 2008, the Group was committed under operating lease agreements to paying the following future amounts:

The Group’s financial assets and liabilities exposure to risk of fluctuations in foreign currency exchange rates at the balance sheet date were as follows: Short-term exposure

30 June 2008

30 June 2007

USD’000

Within one year

1,422

700

From two to five years

3,505

2,800

13,830

10,500

18,757

14,000

Over five years

Long-term exposure

VND

Others

VND

Other

USD’000

Financial assets

237,157

4,021

Financial liabilities

(28,619)

(3,045)

Total exposure

208,538

4,021

(3,017)

1,235

4,383

30 June 2008

As at 30 June 2008, the Group was also committed under the construction agreements to paying USD31,878,000 (30 June 2007: USD4,555,000) for future construction works.

30 June 2007 Financial assets

327,516

The Group has a broad range of commitments under investment licences it has received, and other agreements it has entered into, to acquire and develop, or make additional investments in investment properties and leasehold land in Vietnam. Further investment in any of these arrangements is at the Group’s discretion.

Financial liabilities

(12,342)

(5,985)

Total exposure

315,174

1,235

(1,602)

38. Risk management objectives and policies

The Group invests in a diversified property portfolio in Vietnam and neighbouring countries with the objective of providing investors with an attractive level of investment income, together with the potential for capital growth. The Group is exposed to a variety of financial risks: market risk (including currency risk and interest rate risk); credit risk; and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group’s risk management is coordinated by its Investment Manager who manages the distribution of the assets to achieve the investment objectives. The most significant financial risks to which the Group is exposed to are described below: Foreign currency sensitivity The Group’s exposure to risk resulting from changes in foreign currency exchange rates is moderate as although transactions in Vietnam are settled in Vietnam Dong, the value of the Vietnam Dong has historically been closely linked to that of USD, the reporting currency.

Sensitivity analysis to a reasonably possible change in exchange rates Property valuations in Vietnam are based on a combination of factors linked to both the USD and VND. Assuming all properties are valued based on VND cash flow, a 5% weakening of the VND against USD at the end of the year ended 30 June 2008 and 30 June 2007 would have impacted net income of the Group’s equity by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

5% devaluation of the Vietnam Dong

30 June 2008

30 June 2007

Loss (net of taxation) USD’000

10,276

15,679

A 5% 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.

58 VNL 2008 Annual Report

Price risk sensitivity Price risk is the risk that the value of the instrument will fluctuate as a result of changes in market prices, whether caused by factors specific to an individual investment, its issuer or all factors affecting all instruments traded in the market. As the majority of the Group’s financial instruments are carried at fair value with fair value changes recognised in the income statement, all changes in market conditions will directly affect net investment income. The Group invests in real estate projects and is exposed to market price risk. If the prices of the real estate were to fluctuate by 10%, the impact on profit or loss and equity would amount to approximately USD67.3 million (2007: USD19.6 million). Cash flow and fair value interest rate sensitivity The Group’s exposure to interest rate risk is related to interest bearing financial assets and financial liabilities. 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. The Group currently has some financial liabilities with floating interest rates which are disclosed in the Notes to the Financial Statements. This is the maximum exposure of the Group to cash flow interest rate risk.

30 June 2008

30 June 2007

USD’000

5,257

157

Corporate bonds

10,258

7,499

Trustee loans

46,409

21,805

1,077

Deposits for acquisitions of investments

77,943

72,729

Short-term deposits

57,027

Cash and cash equivalents

80,806

350,898

168,680

62,842

Classes of financial assets – carrying amounts Ordinary share – unlisted

Other long-term financial assets

Trade and other receivables

Credit risk analysis Credit risk is the risk that a counterparty will be unable to pay amounts in full when due. Impairment provisions are provided for losses that have been incurred by the Group at the balance sheet date.

The carrying amount of trade and other receivables and loans represent the Group’s maximum exposure to credit risk in relation to its financial assets. The Group has no other significant concentrations of credit risk.

The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance sheet date, as summarised on the right:

In accordance with the Group’s policy, the Investment Manager continuously monitors the Group’s credit position on a monthly basis.

VNL 2008 Annual Report 59

Liquidity risk analysis Liquidity risk is the risk that the Group will experience difficulty in either realising assets or otherwise raising sufficient funds to satisfy commitments associated with investments and financial instruments. There is an inherent liquidity risk associated with the Company’s primary business, being property investment. As a consequence, the value of the majority of the Company’s investments cannot be realised as quickly as other investments such as cash or listed equities. Furthermore, the development and realisation of the Company’s property investments will normally require access to debt financing at a reasonable cost or shareholder loans from the Company’s surplus funds and its co-investors. The Company seeks to minimise liquidity risk through: • Preparing and monitoring cash flow forecasts for each investment project and the Company on a consolidated basis, • Arranging financing to fund real estate developments as required, and • Providing amble lead times for the disposal of assets and realisation of cash. At the balance sheet date, the Group’s liabilities have contractual maturities which are summarised below: 30 June 2008 Trade and other payables Payable to related parties (*)

Within 1 year

From 2 to 5 years

Over 5 years

USD’000

34,491

116,536

Short-term borrowings

275

Long-term borrowings

21,673

Other liabilities

1,044

Within 1 year

From 2 to 5 years

Over 5 years

30 June 2007

USD’000

Trade and other payables

11,061

Payable to related parties (*)

40,583

Short-term borrowings

1,280

Long-term borrowings

4,705

Other liabilities

577

(*) Payables to related parties are primarily shareholder loans from related parties to jointly owned subsidiaries. These loans are not repayable until the respective subsidiaries have sufficient cash to repay these obligations. The above contractual maturities reflect the gross cash flows, which may differ to the carrying value of the liabilities at the balance sheet date. 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.

60 VNL 2008 Annual Report

39. Subsequent events

Hanoi Opera Plaza As at 30 June 2008, the Group owned 100% of Tung Shing International Limited which has a 70% interest in Thang Long Tung Shing Joint Venture Company. The joint venture company was entitled to develop the Hanoi Opera Plaza, an office and retail project on a site of 1,700sq.m in the centre of Hanoi. The land had been contributed by the local party to obtain a 30% interest in the Company and was valued at USD12.4 million as at 30 June 2008. As the site has considerable heritage value to the country the Hanoi People’s Committee requested that the Company swap the land for another site. The Company has accepted this offer and received the new land near the Hanoi Convention Centre in My Dinh District. The new land is held under a new subsidiary Golden Gain Enterprises Vietnam Limited. The Investment Manager has determined the value and future potential of the new land is not less than the land site that was given up. Global economic crisis 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 Vietnam. As of the date of issuance of the financial statements, the Board of the Company had determined, based on independent valuations and other available market information that the

fair value of the Group’s real estate investments has fallen by USD32.4 million to USD527.5 million. The details are as follows: USD’000 Real estate investment recorded at fair value through profit or loss Book value of investment properties at 30 June 2008

559,966

Revaluation of investment properties recorded at fair value at 30 June 2008

(39,584)

Revaluation of investment properties not previously recorded at fair value

7,142 527,524

USD’000 Real estate investments recorded as investment in associates Potential equity accounted loss for real estate held by associates

12,900

Directory VinaLand 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 VinaLand 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 Trustee (Cayman) Limited HSBC House Mary Street, George Town Grand Cayman, Cayman Islands

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 Grant Thornton (Vietnam) Ltd. 28th Floor, Saigon Trade Center 37 Ton Duc Thang Street 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

Hong Kong 16/F., St. Johnâ&#x20AC;&#x2122;s Building, 33 Garden Road, Central, Hong Kong SAR Tel. + 852 2918 0088 Fax. + 852 2918 0881