VIETNAM OPPORTUNITY FUND            ANNUAL REPORT 2007                                 1
ContentsOverview	                                         4Chairman’s Statement	                             7State of the...
“Vietnam is undergoing exciting andunprecedented change: an annualgrowth rate of over 8% (the secondfastest in the world);...
VOF Overview        VOF DETAILS        Size of fund: 		        USD 822 (NAV as of 30 June 2007)        Term of fund: 		   ...
Vietnam Opportunity Fund (VOF) is aclosed-end fund listed on the LondonStock Exchange’s AIM board (VOF.L).Launched in 2003...
6
Chairman’s StatementDear Shareholders,We are pleased to present the annual financial statements of the Vietnam Opportunity...
8    OVER THE    NEXT 5 YEARS    VIETNAM’S GDP    GROWTH IS    EXPECTED TO    CONTINUE TO                                 ...
9
Ho Chi Minh City at night.10
State of the EconomyVietnam’s GDP continues to grow with increasing               A dark spot on the horizon has emerged a...
Investment Environment     Despite record asset prices and excellent returns across     owned companies) that have not app...
Traders in action in HanoiReal estateThe State owns all land in Vietnam and thus occupiers        Regulatory changes, a st...
Portfolio     Performance Summary     During the financial year VOF’s total assets increased from USD 259 million to USD 8...
VOF PORTFOLIO BY SECTOR AS OF 30 JUNE 07                       Income 2006                                    Income 2007 ...
Portfolio Highlights     Top 10 listed     Company                     Industry              Cost of   Shares held      % ...
Top private equityCompany                       Industry                 Cost of           %     Market                   ...
Feature Investments     Mr. Don Lam - CEO, VinaCapital (on left) and Mr. Andy Ho - Head of Investment, VinaCapital.18
Vietnam Dairy Products                                      Hoa Phat Group(Vinamilk)Ho Chi Minh City-based Vinamilk produc...
Pho 24                                               Refrigeration Electrical                                             ...
Sofitel Metropole Hotel                                   A&B Office BuildingThe Sofitel Metropole Hotel is located in the...
Consolidated     financial statements     and auditors’ report                            8                       $22
822                               million  Net asset value at 30 June 2007 (USD 3.28 per share)                           ...
Board of DirectorsFrom left to right: Mr. William Vanderfelt - Mr. Philip S.R. Skevington - Mr. Jonathan Choi - Mr. Horst ...
JONATHAN CHOI, CHAIRMAN                                      PHILIP S.R. SKEVINGTON, DIRECTORMr. Choi is the President of ...
Report of     the Board of Directors     The Board of Directors submits its report together with the audited consolidated ...
Directors’ interest in the CompanyAs at 30 June 2007, the interests of the Directors in the shares, underlying shares and ...
28
Auditors’ reportTo the ShareholdersVietnam Opportunity Fund LimitedWe have audited the accompanying consolidated balance s...
Consolidated balance sheet                                                                                           Unit:...
Consolidated balance sheet                                                                Unit: USD                       ...
Consolidated statement     of changes in equity                                                                           ...
Consolidated statement of income                                                                                          ...
Consolidated statement of cash flows                                                                                      ...
Notes to the consolidatedfinancial statements1	 General informationVietnam Opportunity Fund Limited is a limited liability...
3.2	Basis of consolidation     The consolidated financial statements of the Company for the year ended 30 June 2007 compri...
Under the equity method, the Group’s interest in an associate or jointly controlled entity is carried at cost and adjusted...
3.7	Revenue recognition     Goods and services rendered     Revenue from sale of goods and provision of services is recogn...
3.10 GoodwillGoodwill represents the excess of the cost of acquisition of subsidiary companies and associated companies ov...
Borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of a     ...
Leasehold improvements			                        5 to 20 yearsPlant, machinery and equipment		                 5 to 10 yea...
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
Thiet ke Bao cao thuong nien - Vina 2007 (vof)
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Thiet ke Bao cao thuong nien - Vina 2007 (vof)

  1. 1. VIETNAM OPPORTUNITY FUND ANNUAL REPORT 2007 1
  2. 2. ContentsOverview 4Chairman’s Statement 7State of the Economy 11Investment Environment 12Portfolio Performance Summary 14Portfolio Highlights 16Feature Investments 18Consolidated Financial Statementsand Auditors’ Report 22Board of Directors 24Report of the Board of Directors 26Auditors’ Report 29Consolidated Balance Sheet 30Consolidated Statement of Changes in Equity 32Consolidated Statement of Income 33Consolidated Statement of Cash Flows 34Note to the consolidated financial statements 35Directory 62
  3. 3. “Vietnam is undergoing exciting andunprecedented change: an annualgrowth rate of over 8% (the secondfastest in the world); an increasinglyprogressive government; a hardworkingand educated workforce; and newlaws, regulations and WTO accession.The case for investment in Vietnam hasnever been stronger.” Mr. Don Lam - CEO, VinaCapital Group 3
  4. 4. VOF Overview VOF DETAILS Size of fund: USD 822 (NAV as of 30 June 2007) Term of fund: Vote every 5 years to wind up fund Maximum investment: 20% of NAV in any one project Geographic focus: Vietnam, Cambodia, Laos and China - at least 70% invested in Vietnam Fund structure: Cayman company listed on London Stock Exchange (AIM) Auditor: Grant Thornton (Vietnam) Nominated Advisor: Grant Thornton Corporate Finance (UK) Custodian: HSBC Trustee Lawyers: Lawrence Graham (UK) Baker and McKenzie (Vietnam) Maples & Calder (Cayman Islands) Broker: LCF Rothschild Manager: VinaCapital Investment Management Limited Team of 150 investment professionals Management fee: 2% of NAV Incentive fee of 20% of total increase of the NAV over a hurdle rate of 8% compound annual returns with high watermark and catch up.4
  5. 5. Vietnam Opportunity Fund (VOF) is aclosed-end fund listed on the LondonStock Exchange’s AIM board (VOF.L).Launched in 2003, VOF is one of thelargest and most successful Vietnamfunds, with NAV increasing over225% since its inception. The fundmanagers focus on key growth sectorsof the domestic economy, seeking tocapitalise on their broad network oflocal business leaders and governmentofficials to realise sustainable capitalappreciation and provide attractivelevels of return for investors. 5
  6. 6. 6
  7. 7. Chairman’s StatementDear Shareholders,We are pleased to present the annual financial statements of the Vietnam Opportunity Fund (AIM: VOF.L) for theyear ended 30 June 2007.The Vietnamese economy has been bolstered by Vietnam’s admission to the World Trade Organisation and it’shosting of the APEC heads meeting in late 2006. Real gross domestic product has maintained its growth rate above8% for the last ten years with 2006 closing at an increase of 8.2%. Industrial production, exports and retail sales areall increasing as the domestic sector flourishes in the new open commercial environment and the country continuesto attract an ever increasing level of foreign investment, in healthy competition with China, India and other SouthEast Asian countries.Economic growth and growing investor confidence in Vietnam energised share prices and propelled the VietnameseStock Index to the number one position (146% increase in 2006) in terms of global stock market returns. Significantgrowth has been felt in other sectors of the economy, with land prices in particular doubling and even tripling inmany areas.We are very pleased to report that VOF has been in a prime position to benefit from these opportunities.The Company raised an additional USD 304 million in January 2007 through the issuance of 128 million new shares.Once again the offer was over-subscribed and scaling was applied. Most of the funds raised had already been fullyinvested before the end of the financial year, necessitating the launch of VOF Round 7 fund raising in October 2007.Since 30 June 2006 the net asset value per share has increased from USD 2.00 to USD 3.28 (an increase of 64%)and earnings per share has risen from USD 0.76 to USD 1.34 (an increase of 76%).The accelerated equitisation of State Owned Enterprises and listing of private enterprises were catalysts which havedriven the diversification of the Company’s investment portfolio during the year. The Company acquired significantstakes in a number of very attractive businesses which are expected to provide solid investment returns over thenext few years. At 30 June 2007 the investment portfolio was comprised of over 80 listed and over-the-countertrade securities spread across most major industrial sectors. The Company also held stakes in over 10 real estateprojects and 6 private companies.Whilst there will always be challenges, we remain extremely confident that the reforms being undertaken in Vietnamwill continue and that Vietnam will grow in stature and importance within the global arena. We believe that VOF willcontinue to be well positioned to seize the opportunities which arise from these changes and that the Company willcontinue to perform well.Thank you for your continued support.Dr Jonathan ChoiChairmanVietnam Opportunity Fund19 November 2007 7
  8. 8. 8 OVER THE NEXT 5 YEARS VIETNAM’S GDP GROWTH IS EXPECTED TO CONTINUE TO % EXCEED Rush hour traffic in Ho Chi Minh city8
  9. 9. 9
  10. 10. Ho Chi Minh City at night.10
  11. 11. State of the EconomyVietnam’s GDP continues to grow with increasing A dark spot on the horizon has emerged as inflation hasvitality. According to official estimates, real GDP grew increased dramatically during 2007, with the CPI risingby 7.9% on an annual basis in the first half of 2007, by 5.2% in the first six months. Inflationary pressurescompared with 7.4% in the first half of 2006. This became notable through the sharp rise of food andwas led by the continued expansion of the industry imported fuel prices (which account for the bulk ofand construction sector and the services sector. the CPI index), the latter reflecting the impact of avianRapid growth was spurred by the diversification of flu, blue ear pig disease and a global increase in grainthe industrial base into more manufacturing products, prices, stemming partly from strong food demand bybooming construction activities and strong textile and neighbouring China. Upward price pressures have beengarment exports; which has proved resilient in the face fed through to other productive sectors, especially theof a liberalised global trading environment. construction material and services sectors. Inflation is expected to continue to increase in the second half dueA further acceleration of the growth pace is expected to further rises in fuel prices and monetary expansion;in the second half of 2007, with a growth rate forecast the whole year level for 2007 might double the 6.6%at 8.5% for the whole of 2007, which is consistent rate seen last year.with the official target. This will be fueled by a surge inthe growth of the services sector, particularly tourism Inflation is now a major concern for the Government,and financial services. With business sentiment and which faces a difficult policy choice.consumer confidence remaining buoyant, private The Government has initiated some measures to tameinvestment outlays and consumer spending continue to inflation. These include: decreasing import duties;support Vietnam’s economic expansion prompted by tightening monetary policy; and allowing the localthe post-WTO environment. currency to appreciate slightly. Further considerationsWTO membership has also given rise to favourable which seem to be on the anti-inflation agenda include:developments which are ushering Vietnam more fully a tighter monetary policy to absorb excess liquidity; taxtoward a market economy rapidly integrated into the measures to calm down real estate speculative fever;global economy, for example: and a more flexible exchange rate policy to reduce the pressure on the State Bank to buy foreign currencies.° The adoption of business laws, like the new Unified Enterprise Law and Investment Law, which help to Medium Term outlook create a level playing field for both foreign and local Over the next five years, real economic growth should investors. be maintained in the range of 8%-8.5% yearly, slightly° The emergence of a strong domestic economy on below the government target of 9%, on account of account of a robust and fast growing private sector; the containing impact of the anti-inflation policies which has begun to surpass the State sector in on medium-term growth. We expect that the strong industrial production. performance of the economy will continue to be led by exports, but these will also be supported by robust° The openness of the Vietnamese economy, with total domestic demand. trade (exports plus imports) accounting for more than 150% of GDP, ranking second after Malaysia in the With a young population (60% currently below the age region. of 25), there will emerge a strong domestic economy with a young and wealthy middle-class which will give° The foreign direct and indirect investment capital flow rise to booming retail spending and business and a fast has continued to swell. FDI recorded more than USD growing consumer sector, hence the need for more 5 billion in the first half and is expected to more than shopping centres. double that in the second half to reach USD 18-20 billion for 2007, compared with USD 12 billion for The fast rising equity and real estate markets 2006. accompanied by the rapid development of the banking sector will also help to transform the informalHowever, the above capital influxes have also led sector more deeply into a monetised economy. FDIto increasing imports, predominantly machinery and is expected to swell to annual flows of USD 15-20equipment. The worsening trade deficit (expected billion for the next few years in light of the vigour ofto surpass USD 10 billion in 2007) and intensified the Vietnamese economy and the “newly found”inflationary pressures are linked with the sharp increase attractiveness of its business environment. This FDIin money supply. influx will strongly stimulate demand for new real estate projects, especially for high-end residential, office spaces, and hotels. 11
  12. 12. Investment Environment Despite record asset prices and excellent returns across owned companies) that have not applied, or not yet all investment sectors over the last year, Vietnam’s fast been admitted to, the Ho Chi Minh or Hanoi stock growing economy is expected to continue to provide exchanges. Originally operating in the bars and cafes in excellent investment opportunities for a number of years Ho Chi Minh City and Hanoi, most transactions are now to come. VOF remains perfectly positioned to both brokered through the 50 or so securities companies identify and capitalise on these opportunities through its now operating in Vietnam. The total OTC market investments in capital markets (both listed and over-the- capitalisation is estimated to be approximately USD counter), private equity and real estate. 50 billion. OTC stocks tend to trade at a 20% to 30% discount to listed securities. Listed securities The OTC market is not for the faint hearted. Historically, At 30 November 2007 there were approximately 220 with little or no information available about individual companies listed on the Ho Chi Minh Stock Exchange companies or trading activity, market rumours abound. and the Hanoi Stock Trading Centre. Their combined The market also suffers from a shortage of liquidity, market capitalisation is approximately USD 25 billion, often resulting in significant price movements over with an average daily turnover of approximately USD short periods. These problems have become all the 60 million. more evident over the last few months as OTC share After increasing 147% in 2006 the Vietnam Index has prices have tended to drift downward as the market has drifted since April, essentially taking a much needed moved out of favour with local investors. break until company earnings catch up. Half year results The authorities have recognised the potential problems to June 2007 indicated that company earnings had in the operation of such an unregulated market and been growing satisfactorily, but this failed to ignite the have recently implemented several new measures to market as the Government delayed the equitisation protect investors. These have included regulations that of several major State-owned enterprises and moved require larger OTC companies to: register with the State to implement reforms to quell speculation across a Securities Commission; distribute financial information range of investment sectors. The most significant of to shareholders; and move to the main exchanges over these changes being restricting banks’ exposure to the next few years. securities lending to 3% (effective from 1 January 2008) and implementing a capital gains tax on securities The proposed reforms of the OTC market should trading and real estate (effective from 1 January 2009). improve the quality of this market. However, despite The much anticipated equitisation of Vietcombank these changes, the market will continue to be plagued is set for late 2007. This is an important step for the by poor liquidity for all but a few of its leading stocks. Vietnamese Government as it will help to reconfirm Proper analysis and careful selection of companies will their commitment to the equitisation of the major State be critical over the next six months, as the overall OTC companies and should trigger the Vietnam Index to market is unlikely to grow until there is a pick-up in the move in a positive direction. listed sector. Despite several challenges, the medium term future Private equity for listed securities seems very positive. The drift in Historically there has not been a lot of private equity the markets over the last six months has lead to a opportunities in Vietnam, and those that have been levelling in the PEG (Price Earnings to Growth) ratio, available have tended to be small (less than USD 5 which for a number of blue chip companies is now very million). This now seems to be changing as the market close to, or less than, 1:1. Therefore, some equities develops. now seem far more reasonably priced than they have been for some time; despite the fact that they are still The most significant drivers of change in this sector have trading at PE (Price Earnings) multiples above 20x. With been Vietnam’s economic growth and reform of the shares now more reasonably priced, growing GDP, private sector, particularly the new Enterprise Law. As a the equitisation of major corporations, and improved consequence there is now a growing number of privately- company performance, listed securities should continue owned medium sized companies (with turnover of to perform well over the medium term. Vietnam was between USD 30 million to USD 100 million), where in the recently added to the MSCI Frontier index, positive past there had been none (as all sectors were dominated news for the country’s stocks. by State corporations). The owners of companies in these sectors are increasingly recognising the value that Over the counter securities private equity managers can bring to their companies and The over the counter (OTC) market is an unregulated as a result we expect a growing number of private equity market comprising of several thousand securities deals in Vietnam over the next few years. in companies (many of which are equitised State-12
  13. 13. Traders in action in HanoiReal estateThe State owns all land in Vietnam and thus occupiers Regulatory changes, a strong domestic economy andof land, both local and foreign, are tenants (albeit very a bright outlook for the future have combined to drivelong term tenants). Many investors view the State’s real estate markets to record highs over the last year.ownership of all land as an unacceptable investment With many property values doubling and even tripling inrisk, despite the fact that these conditions are similar the space of 12 months, such returns cannot continueto many developed countries (for example, Hong indefinitely. However, despite the Government’s attemptKong, where most land is leasehold). Furthermore, to quash speculation, there are a number of factorsover the last five years the Government has made which should mean that higher property prices andconsiderable progress in land reform, to the extent that strong returns will continue; at least for the mediummany Vietnamese companies and individuals now have term. These factors include:quasi land ownership. The reforms have also benefited 1. A current shortage of quality office space and foreign investors to the extent that foreign investors’ hotel rooms in Hanoi and Ho Chi Minh City, and no rights regarding land in Vietnam are far superior to a additional significant capacity becoming available fair number of neighbouring ASEAN countries. There within the next three years.are also rumours that foreign individuals will be granted 2. Changing demographics and growing domesticthe same rights as Vietnamese nationals for selected purchasing power which will result in growing demandproperties. It’s fair to say that these reforms are highly for residential developments.progressive. 3. The growing tourism sector. 13
  14. 14. Portfolio Performance Summary During the financial year VOF’s total assets increased from USD 259 million to USD 822 million. Adjusting for new capital raisings, this represents a 64% increase in the net asset value per share; a 37% compounded annual growth rate since the inception of the Company. The Company raised an additional USD 304 million in January 2007 through the issuance of 128 million new shares. At the end of June 2007 most of these funds had already been invested, with only 13% of total assets held in cash and cash equivalents available for investment. The swift investment of these funds and a pipeline of investment opportunities exceeding USD 100 million necessitated the launch of VOF Round 7 in October 2007. A further USD 272 million was raised during that offering and will be quickly put to work. At June, VOF’s portfolio comprised of investments in capital markets 66% (2006: 57%), real estate 17% (2006: 21%), private equity 3% (2006: 9%) and cash 13% (2006: 13%). The slight increase in the weighting of the capital markets portfolio is a consequence of the strong performance of Vietnam’s capital markets over the year. We expect that this swing will be addressed as we execute the latter half of our strategy which is to trim assets that have recently gone public and recycle the cash into privately negotiated pre-listed investment opportunities. Further, the capital market allocation should also decline as we place more emphasis on private equity deals over the next year, where there is an increasing number of medium to large private companies emerging. The capital markets component of the VOF portfolio continues to represent the bulk of VOF assets and generate the greatest level of income. This reflects our strategy at the beginning of the year to focus on privately negotiated pre-IPO or over-the-counter deals with a view that these assets will list in 6 to 12 months. Since making these investments, many of these shares have listed on the Vietnam stock market, a market that has come to be internationally recognised for its potential growth since Vietnam joined the WTO. These investments are typically done at a considerable discount to the market value or OTC prices. Although levels of investment in real estate have declined as a proportion of total funds invested, the overall investment has increased substantially from USD 58 million to USD 161 million. VOF continues to exercise its pre-emptive rights to 25% of real estate projects undertaken by its sister fund, VinaLand Limited. In June the VOF recorded USD 33 million of equity gains and property revaluations in the real estate portfolio, representing a very good return from this portfolio. Only a small amount of investment income was recorded in the private equity portfolio. This is because these assets are normally equity accounted or carried at cost, due to the lack of a market for such investments. This treatment means that the real value of these investments may not be fully reflected in the financial statements. If they were sold we would expect to generate quite a sizable gain on these investments.14
  15. 15. VOF PORTFOLIO BY SECTOR AS OF 30 JUNE 07 Income 2006 Income 2007 2% 1% 9% Capital markets 25% 89% Real estate 3% Private equity 71% Cash Total asset 2006 Total asset 2007 13% 13% Capital markets 3% 9% Real estate 21% 17% Private equity Cash 57% 66%During the year VOF shares have consistently traded on the London Stock Exchange’s AIM Boardat a premium to the net asset value; peaking in January 2007 at well over USD 4.00 per share.VOF shares are now amongst the most traded securities on the London Stock Exchange’s AIMBoard with an average daily turnover now exceeding USD 8 million. They are also the most liquidVietnam focused securities listed on an international stock exchange. As a consequence ofthis, the Company’s shareholder base has widened considerably over the last year; with strongrepresentation across a wide range of investors spanning Europe, the Americas and Asia. NAV PER SHARE AND SHARE PRICE PERFORMANCE BY QUARTER US$ 3. 90 3. 90 3.41 3. 40 3.28 2. 90 2. 40 1. 9 0 1. 4 0 0. 90 Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun- 03 03 04 04 04 04 05 05 05 05 06 06 06 06 07 07 NAV per Share Share Price 15
  16. 16. Portfolio Highlights Top 10 listed Company Industry Cost of Shares held % Market P/E Investment by VOF Stake Value 2007 (USD ‘000) (‘000) (USD ‘000) Vinamilk (VNM) Dairy 36,118 7,298 4.4 81,409 35.1x Reetech (REE) Engineering 22,311 6,184 10.8 57,485 33.6x Kinh Do (KDC) Confectionary 13,937 3,067 8.5 44,853 35.2x Tan Tao Industrial (ITA) Infrastructure 10,783 2,800 4.0 20,823 35.5x Hau Giang Pharma (DHG) Pharmaceutical 6,380 759 9.5 20,473 39.5x Can Don Hydropower (SJD) Energy 15,316 6,382 24.5 17,006 18.6x Bao Minh Insurance (BMI) Insurance 8,785 3,147 4.2 14,041 49.4x Pha Lai Thermal (PPC) Energy 12,952 3,146 1.0 12,476 20.8x Domesco Medicine (DMC) Pharmaceutical 8,367 1,447 10.5 10,311 24.6x Transimex (TMS) Freight 4,994 1,468 22.6 5,730 24.3x Top 10 OTC Company Industry Cost of Shares held % Market P/E Investment by VOF Stake Value 2007 (USD ‘000) (‘000) (USD ‘000) Hoa Phat Group Manufacturing 47,119 10,560 8.0% 50,064 23.0x PVFCCo Energy 26,258 8,000 2.1% 32,722 31.3x Tay Ninh Rubber Rubber 6,943 1,600 5.3% 13,535 20.3x Masan Manufacturing 2,429 1,666 14.7% 10,325 16.4x Doruco Rubber 5,335 1,600 4.0% 9,023 18.2x VinaCafe Food & Beverage 4,123 100 10.4% 8,141 18.9x Vinaconex Construction 3,283 1,900 1.3% 8,125 25.9x Kido’s Ice cream Confectionary 892 1,320 22.0% 6,585 28.4x Minh Hai Seafood 6,149 1,240 10.0% 6,109 16.5x Halico Food & Beverages 5,296 970 20.0% 6,011 7.5x16
  17. 17. Top private equityCompany Industry Cost of % Market Investment Stake ValueZedex Minerals Mining 8,334 20.0% 11,427Olympus Pacific Minerals Mining 9,112 7.8% 11,397Axiom Mining Mining 4,952 21.1% 8,620IBS Construction 2,956 100.0% n/aPho 24 Food & Beverage 2,349 30.0% n/aInternational School, HCMC Education 1,602 35.0% n/aAA Decor Furniture 526 5.1% n/aTop 10 real estateProject Investment Type Cost of % Investment Stake (USD ‘000)Indotel (Sofitel Metropole) Hotel 5,738 28.9%Hilton Hanoi Hotel 5,106 17.5%Guoman Hotel Hotel 4,786 18.5%Omni Hotel Hotel 6,210 17.5%Century 21 project Mixed use 8,202 20.5%Hung Vuong Corp Mixed use 4,858 30.0%SCREC Apartments 5,943 100.0%Kinh Do Real Estate Investment Company 5,237 30.0%Saigon Water Park project Residential 3,616 100.0%A&B Office Building Office Building 6,700 50.1% 17
  18. 18. Feature Investments Mr. Don Lam - CEO, VinaCapital (on left) and Mr. Andy Ho - Head of Investment, VinaCapital.18
  19. 19. Vietnam Dairy Products Hoa Phat Group(Vinamilk)Ho Chi Minh City-based Vinamilk produces a Hoa Phat Group Joint Stock Company waswide range of dairy products and beverages the first private company established just afterthat accounts for 75% of the domestic market. the implementation of the Enterprise Law, inVinamilk’s main business lines include: the August 1992. Hoa Phat is emerging as Vietnam’sproduction and trading of milk powder, cereal leading private industrial group, operating mainlywith milk powder, condensed milk, fresh milk; in steel production. The group activities coverproduction and trading of cakes, soybean milk, manufacturing and distribution of many types ofcarbonated water, pure water and fresh fruit equipment and machinery for the constructionjuice; trading industrial foods and equipment and and mining industry. It has over 5,000 staff andmaterials. workers.Vinamilk has entered into a joint venture with The Hoa Phat officially listed its shares on theSouth African SABMiller, the second largest Ho Chi Minh City Stock Exchange (HoSE) inbrewery company in the world by volume, and November 2007, offering 132 million shares totogether they formally opened a brewery in My investors.Phuoc II Industrial Zone which is situated in Binh Hoa Phat is currently constructing a new cementDuong Province with a capacity of 100 million factory and a cast iron and steel factory. Totallitres per year. SAB Miller will utilise Vinamilk’s investment for the cement factory is USD 37.5nationwide distribution network. Vinamilk has million, while total investment for the cast iron andalso recently increased its financial investments in steel factory is more than USD 62.5 million.Bourbon Tay Ninh, VF1 and Bao Viet Bank andTien Son Milk Factory. 81.4 million 50.0 million USD 468 million USD 468 million USD 323 million USD 321 million USD 53.12 million USD 45.68 million USD 21 million USD 12.56 million 19
  20. 20. Pho 24 Refrigeration Electrical Engineering Corporation Pho 24 is Vietnam’s most successful domestic Refrigeration Electrical Engineering Corporation restaurant chain, having grown from a single (REE) was a State-owned company established location in 2003 into a 64 branch chain spanning in 1977. In 1993, REE became the first equitised Vietnam, as well as Indonesia, the Philippines company in Vietnam. Its main business activities and Singapore. The restaurant offers a set range include: M&E engineering and contracting of ‘Pho’ (or noodle soups) which is the national for industrial, commercial and civil projects; Vietnamese dish. The company opened an manufacturing of Reetech air-conditioners, additional three branches during the last quarter. home appliances, electrical panels and industrial Pho 24’s aggressive expansion remains on plan mechanical products; developing and operating real and the chain should have 80 domestic venues estate and investing in joint-stock companies and opened by the end of 2008. banks. REE’s shares are listed on HoSE. VOF currently hold a 32.5% interest in Pho E-Town 3 with a total construction area of 16,300m2 24, which was purchased in August 2006 and has just completed its land clearance phase. The October 2007 at a cost of USD 3.55 million. company plans to start construction at the end of 2007 and complete at the end of 2008. REE has many other projects in the pipeline which are still in the process of obtaining construction licences. REE has begun construction on its E-town 4 office building, with a total construction area of 18,800m2, in August, which is also expected to be completed in 2008. 7.02 million 22.3 million 62.5 million 51.5 million 15.3 million 13.9 million20
  21. 21. Sofitel Metropole Hotel A&B Office BuildingThe Sofitel Metropole Hotel is located in the centre The A&B office building is a 25 storey Gradeof Vietnam’s capital city, Hanoi. It is a 5 star French B+ office building which is currently undercolonial style hotel which covers a site area of construction. Although still 2 years from7,468m2. The Sofitel Metropole Hotel first opened completion this will be one of the next completedits doors in 1901. Throughout the Metropole’s rich office buildings in Ho Chi Minh City’s CBD area.history it has seen service as the residence for The site area covers 1,832m2 and is situated onofficial visitors to the country following Vietnam’s the corner of Le Lai and Nguyen Thi Nghia Street,independence in the 1950s, and during the next to the 5 star New World Hotel. The locationAmerican war as the base for journalists and is excellent with good proximity to the centraldiplomats. The hotel recently converted office business district, local amenities and facilities suchspace into 80 additional five-star rooms. The total as a central city park, restaurants and hotels. Theinvestment in the Sofitel Metropole Hotel to date total amount of investment to date is USD 6.7is USD 5.7 million. VOF currently holds a 28.8% million. VOF currently own 50.1% of the A&B Jointstake in this project. Stock Company with Saigon Tourist (25%) and A&B Limited (24.9%). Cost 5.7 million Cost 6.7 million * Under construction 21
  22. 22. Consolidated financial statements and auditors’ report 8 $22
  23. 23. 822 million Net asset value at 30 June 2007 (USD 3.28 per share) 23
  24. 24. Board of DirectorsFrom left to right: Mr. William Vanderfelt - Mr. Philip S.R. Skevington - Mr. Jonathan Choi - Mr. Horst Geicke - Mr. Bernard C. Grigsby24
  25. 25. JONATHAN CHOI, CHAIRMAN PHILIP S.R. SKEVINGTON, DIRECTORMr. Choi is the President of the Sun Wah Group, Mr. Skevington has nearly two decades of experiencea financial services, technology, infrastructure and as an executive in the international banking and financialfoodstuff conglomerate. He is also Chairman of Kingsway services industry. He worked in Asia for StandardInternational Holdings, a Toronto listed company, and Chartered Bank for over sixteen years. From 2002 toSW Kingsway, a Hong Kong listed investment bank and 2004 he was based in Hanoi as the Chief Executivefund manager. Mr. Choi is also the Vice Chairman of the Officer for Standard Chartered’s operations in Vietnam,Chinese General Chamber of Commerce in Hong Kong Cambodia and Laos. He has also worked for the bankand a member of the National Committee of the Chinese in Hong Kong, South Korea, Indonesia, the PhilippinesPeople’s Political Consultative Conference (CPPCC) of the and Singapore and is now an independent consultant.People’s Republic of China. Mr. Choi has been an active Mr. Skevington holds a Bachelor of Arts from Durhaminvestor in Vietnam since 1971. University, a Bachelor of Science in Financial Services from Manchester Business School and is an Associate of the UK Chartered Institute of Bankers.HORST GEICKE, DIRECTORMr. Geicke is Chairman and Co-Founder of VinaCapital BERNARD (‘BEN’) C. GRIGSBY, DIRECTORGroup Limited, the immediate parent company of theInvestment Manager, and has resided in Asia for 25 Mr. Grigsby has more than three decades of experienceyears. He has over 22 years of operating and investing as a senior and board level executive in the internationalexperience in the region, having made several financial capital markets and financial services industry.and strategic investments in Vietnam, including the Mr. Grigsby retired from the Swiss Re-Insurance Group inestablishment of a manufacturing plant for his family December 2005, and currently serves as a non-executivebusiness which is headquartered in Hong Kong, and director of JP Morgan Fleming Japan Smaller Companiesestablishing the Vietnam Opportunity Fund in 2003. Investment Trust Plc, Tudor BVI Global Fund Ltd.,Mr. Geicke also co-founded the Pacific Alliance fund The Raptor Global Fund Ltd., Corney & Barrow Groupmanagement group, which has more than USD 1.5 Limited, and is a member of the Board of Trustees ofbillion in assets under management. Mr. Geicke was Washington & Lee University, amongst other interests.the President of the German Chamber of Commerce Mr. Grigsby joined Swiss Re in 2001 as the inauguralin Hong Kong for four years and in 2005 became the Chief Executive of Swiss Re Financial Products andpresident of the European Chamber of Commerce in served as the Joint Chief Executive and then as ViceHong Kong. He is a founding and active Director of the Chairman of Swiss Re Capital Management and Advisory.Hong Kong-Thailand Business Council. He is a member He also held positions as Chairman of Swiss Re Capitalof the Hong Kong-EU Business Cooperation Committee Markets Limited and Swiss Re Capital Markets (Japan)and a past member of the Trade and Industry advisory Corporation as well as Vice Chairman of Fox-Pitt,panel of the government of the Hong Kong Special Kelton Limited, amongst other Swiss Re appointments.Administrative Region from 2004 to 2006. Mr. Geicke is a Previously, Mr. Grigsby was the Joint Chief Executive ofdirector of Vietnam Opportunity Fund, VinaLand, Vietnam Tokai Bank Europe Plc from 1995 to 2001, and spentInfrastructure Limited, ARC Capital Holdings Limited and eight years with the Barclays Group from 1987, managingPacific Alliance Asia Opportunity Fund Limited, five AIM businesses in New York, Tokyo, and London. A dual USAtraded investment companies. He is also a director of and UK citizen born in Virginia, Mr. Grigsby graduatedthe Omni Saigon Hotel, Hilton Hanoi Opera and Sofitel in economics and psychology from Washington & LeeMetropole Hotel Hanoi, as well as several other listed and University.private companies in Asia and the USA. Mr. Geicke has aMaster degree in Economics and Business Law from theUniversity of Hamburg, Germany.WILLIAM VANDERFELT, DIRECTORMr. Vanderfelt has over 30 years of experience asManaging Partner of Petercam, the leading Beneluxinvestment bank, in charge of Institutional Research andSales. Mr. Vanderfelt is an experienced fund investor andacts as a board director of several listed funds. He is apassionate proponent of good corporate governanceand will help the Company ensure that it maintains bestpractice in its corporate governance. 25
  26. 26. Report of the Board of Directors The Board of Directors submits its report together with the audited consolidated financial statements of Vietnam Opportunity Fund Limited (“the Company”) and its subsidiaries (together “the Group”) for the year ended 30 June 2007. The Group Vietnam Opportunity Fund 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 7 and 11. Principal activities The Company’s principal activity is to undertake various forms of investment in Vietnam, Cambodia, Laos and Southern China. The Company mainly invests in listed and unlisted companies, debt instruments, assets and other opportunities with the objective of achieving medium to long-term capital appreciation and providing investors with an attractive level of investment income. The principal activities of the subsidiaries are financial services, property investment, hospitality management and retailing. Other particulars of the subsidiaries are set out in notes 7 and 11 to the consolidated financial statements. Results and dividends The results of the Group for the year ended 30 June 2007 and the state of its affairs as at that date are set out in the consolidated financial statements on pages 30 to 61. The Board of Directors do not recommend the payment of a dividend. Directors The directors of the company during the year were as follows: Name Position Appointed/resigned on Jonathan Choi Chairman 29 July 2003 Horst Geicke Director 14 March 2003 William Vanderfelt Director 10 December 2004 Robert Knapp Director 29 July 2003/ 1 July 2006 Bernard Grigsby Director 16 October 2006 Philip Skevington Director 16 October 2006 Auditors The Group’s auditors, Grant Thornton (Vietnam) Ltd., have expressed their willingness to accept re-appointment. Subsequent events On 9 October 2007, the Company announced its intention to raise USD 200 million by way of a placement of approximately 54 million new Ordinary Shares at a price of USD 3.68 per share (“the Placement”). The closing date for subscriptions for the Placement was 14 November 2007. On 15 November 2007 the Company announced that the capital raising had been significantly over-subscribed and that the Placement would be increased to approximately 77 million new Ordinary Shares for a consideration of approximately USD 285 million. At the date of this report the allotment of shares is still pending. After allotment an application will be made to begin trading the new Ordinary Shares on the London Stock Exchange’s Alternative Investment Market.26
  27. 27. Directors’ interest in the CompanyAs at 30 June 2007, the interests of the Directors in the shares, underlying shares and debentures of the Companywere as follows:No. of shares Approximate % of holdingHorst Geicke 1,775,000 0.7%Jonathan Choi 1,500,000 0.598%Philip Skevington 10,000 0.004%Bernard Grigsby 100,000 0.040%At the date of this report there had been no further changes in the above holdings.Directors’ responsibility in respect of the consolidated financial statementsThe Board of Directors is responsible for ensuring that the consolidated financial statements are properly drawn upso as to give a true and fair view of the financial position of the Group as at 30 June 2007 and of the results of itsoperations and its cash flows for the year ended on that date. When preparing the financial statements, the Boardof Directors is required to:(i) adopt appropriate accounting policies which are supported by reasonable and prudent judgements andestimates and then apply them consistently;(ii) comply with the disclosure requirements of International Financial Reporting Standards or, if there have beenany departures in the interest of true and fair presentation, ensure that these have been appropriately disclosed,explained and quantified in the financial statements;(iii) maintain adequate accounting records and an effective system of internal control;(iv) prepare the financial statements on a going concern basis unless it is inappropriate to assume that the Groupwill continue its operations in the foreseeable future; and(v) control and effectively direct the Group in all material decisions affecting its operations and performance andascertain that such decisions and/or instructions have been properly reflected in the financial statements.The Board of Directors is also responsible for safeguarding the assets of the Group and hence for taking reasonablesteps 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 theconsolidated financial statements.Statement by the Board of DirectorsIn the opinion of the Board of Directors, the accompanying consolidated balance sheet, statement of income,statement of changes in equity and statement of cash flows, together with the notes thereto, have been properlydrawn up and give a true and fair view of the financial position of the Group as at 30 June 2007 and the results ofits operations and cash flows for the year ended 30 June 2007 in accordance with International Financial ReportingStandards.On behalf of the Board of DirectorsChairman Ho Chi Minh City, Vietnam19 November 2007 27
  28. 28. 28
  29. 29. Auditors’ reportTo the ShareholdersVietnam Opportunity Fund LimitedWe have audited the accompanying consolidated balance sheet of Vietnam Opportunity Fund Limited and itssubsidiaries (“the Group”) as of 30 June 2007, and the related consolidated statements of income, changes in equityand cash flows for the year then ended and a summary of significant accounting policies and other explanatorynotes. These consolidated financial statements are the responsibility of the Group’s management.Management’s responsibility for the consolidated financial statementsManagement is responsible for the preparation and fair presentation of these financial statements in accordance withInternational Financial Reporting Standards. This responsibility includes: designing, implementing and maintaininginternal controls relevant to the preparation and fair presentation of consolidated financial statements that are freefrom material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies;and making accounting estimates that are reasonable in the circumstances.Auditor’s responsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. Weconducted our audit in accordance with International Standards on Auditing. Those standards require that wecomply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether thefinancial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend upon the auditor’s judgment, including the assessment ofthe risks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal controls relevant to the entity’s preparation and fair presentation ofthe financial statements in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates madeby management, as well as evaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our auditopinion.OpinionIn our opinion, the consolidated financial statements give a true and fair view of the financial position of VietnamOpportunity Fund Limited and its subsidiaries as of 30 June 2007, and of its financial performance and its cash flowsfor the year then ended in accordance with International Financial Reporting Standards. GRANT THORNTON (VIETNAM) LTD.Ho Chi Minh City, VietnamDate: 19 November 2007 29
  30. 30. Consolidated balance sheet Unit: USD Notes 30 June 2007 30 June 2006 Assets     Non-current     Investment property 8 15,124,235 - Property, plant and equipment 9 3,026,951 4,274,135 Investment properties under development 10 3,967,424 2,271,821 Investments in associates 11 69,176,640 23,844,581 Other long term investments 12 1,954,485 9,183,209 Loan receivables 13 41,459,674 19,659,480 Prepayments for operating leases 14 1,971,024 2,109,491 Other non-current assets 129,210 1,375,513 Goodwill 15 1,752,688 1,719,231   138,562,331 64,437,461       Current     Inventories 16 4,755,153 4,319,823 Receivables from related parties 33 1,019,604 - Trade and other receivables 17 26,113,564 8,445,696 Financial assets at fair value through profit and loss 18 624,575,488 168,032,453 Held to maturity investments 19 47,940,593 - Deposits for acquisitions of investments 20 10,442,162 - Cash and cash equivalents 21 71,376,594 32,706,460   786,223,158 213,504,432 Total assets 924,785,489 277,941,89330
  31. 31. Consolidated balance sheet Unit: USD Notes 30 June 2007 30 June 2006 EquityEquity attributable to shareholders  Share capital 22 2,506,483 1,226,572Additional paid-in capital 23 459,150,780 164,950,181Revaluation reserve 24 17,716,945 -Translation reserve (663,801) (34,084)Retained earnings 342,954,144 78,787,207 821,664,551 244,929,876Minority interests 22,137,688 14,084,467Total equity 843,802,239 259,014,343LiabilitiesCurrentPayables to related parties 33 4,790,326 -Trade and other payables 25,33 75,016,283 17,476,172Borrowings - 118,772Other liabilities 1,176,641 1,332,606Total liabilities 80,983,250 18,927,550Total equity and liabilities 924,785,489 277,941,893Net asset per share (USD per share) 3.278 1.997 31
  32. 32. Consolidated statement of changes in equity Unit: USD Equity attributable to equity holders of the Group Minority Total interests equity Share capital Additional paid-in Translation Revaluation Retained capital reserve reserve earnings 1 July 2005 751,547 91,634,442 - - 3,854,607 - 96,240,596 Currency translation - - (34,084) - - - (34,084) Profit for the year ended - - - - 74,932,600 522,792 75,455,392 30 June 2006 Total gains/(losses) for the year - - (34,084) - 74,932,600 522,792 75,421,308 Issue of new shares 475,025 73,315,739 - - - - 73,790,764 Acquisition of - - - - - 13,561,675 13,561,675 subsidiaries 30 June 2006/1 July 2006 1,226,572 164,950,181 (34,084) 78,787,207 14,084,467 259,014,343 Currency translation - - (629,717) - - - (629,717) Profit for the year ended - - - - 264,166,937 1,195,667 265,362,604 30 June 2007 Total gains/(losses) for the year - - (629,717) - 264,166,937 1,195,667 264,732,887 Issue of new shares 1,279,911 294,200,599 - - - - 295,480,510 Acquisition of subsidiaries - - - - - 6,857,554 6,857,554 Revaluation reserves - - - 17,716,945 - - 17,716,945 30 June 2007 2,506,483 459,150,780 (663,801) 17,716,945 342,954,144 22,137,688 843,802,23932
  33. 33. Consolidated statement of income Unit: USD Note Year ended 30 June 2007 Year ended 30 June 2006Revenue 9,451,988 14,218,400Cost of sale   (8,118,799) (9,614,287)Gross profit 1,333,189 4,604,113Other income 26 3,581,928 14,167,754Administration expenses 27 (86,353,598) (26,343,605)Other operating expenses (691,983) (116,191)Other net changes in fair value on financial assets 28 315,206,185 78,236,372at fair value through profit or lossGain on fair value adjustments of investment properties   1,124,235 -Profit from operations 234,199,956 70,548,443Financial income 29 13,266,332 4,893,303Finance costs (3,142,073) (371,372)Share of profit gain (losses) of associates, net 21,038,389 385,018 31,162,648 4,906,949Profit before tax 265,362,604 75,455,392Income tax 30 - -Net profit   265,362,604 75,455,392Attributable to shareholders 264,166,937 74,932,600Attributable to minority interests 1,195,667 522,792Earnings per share – basic and diluted 31 1.34 0.76(USD per share) 33
  34. 34. Consolidated statement of cash flows Unit: USD Year ended 30 June 2007 Year ended 30 June 2006 Operating activities Net profit before tax 265,362,604 75,455,392 Adjustment for: Depreciation and amortisation 635,302 492,004 Reversal of impairment loss (232,360) - Impairment loss 593,728 - Gain on revaluation of financial assets (255,441,202) (62,112,662) Gain on disposal of financial assets (59,764,983) (16,123,710) Gain on revaluation of investment properties (1,124,235) - Share of associates’ profits (21,038,389) (385,018) Negative goodwill (2,984,094) (13,685,855) Unrealised foreign exchange losses 2,276,911 201,202 Interest and dividend income (13,007,466) (4,664,935) Net loss before changes in working capital (84,724,184) (20,823,582) Change in trade and other receivables (3,351,412) (3,433,015) Change in inventory (435,330) - Change in trade and other payables (2,772,556) 18,014,659   (91,283,482) (6,241,938) Investing activities Interest received 7,376,864 1,579,775 Dividends received 5,687,464 2,477,631 Purchases of property, plant and equipment and other non-current assets (1,650,986) (2,667,274) Acquisition of a subsidiary, net of cash (2,716,323) (1,666,751) Purchases of financial assets (319,786,440) (116,109,932) Proceeds from disposals of financial assets 179,896,126 48,786,145 Proceeds from disposals of investments and fixed assets 2,770 - Proceeds from loans repaid 177,033 - Loans provided (34,513,402) (19,659,480)   (165,526,894) (87,259,886) Financing activities Proceeds from shares issued 295,480,510 73,790,764   295,480,510 73,790,764 Net increase in cash and cash equivalents for the year 38,670,134 (19,711,060) Cash and cash equivalents at the beginning of the year 32,706,460 52,417,520 Cash and cash equivalents at end of the year 71,376,594 32,706,46034
  35. 35. Notes to the consolidatedfinancial statements1 General informationVietnam Opportunity Fund Limited is a limited liability company incorporated in the Cayman Islands. The registeredoffice of the Company is PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, CaymanIslands. The Company’s primary objective is to undertake various forms of investment in Vietnam, Cambodia, Laos andSouthern China. The Company is listed on the London Stock Exchange’s Alternative Investment Market under the tickersymbol VOF. The principle activities of its subsidiaries are set out in Note 7 to the financial statements.The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)(including International Accounting Standards (IAS)) as developed and published by the International AccountingStandards Board (IASB). The financial statements for the year ended 30 June 2007 were approved for issue by theBoard of Directors on 19 November 2007.2 Adoption of new and amended standards and interpretationsThe IASB and the International Financial reporting Interpretations Committee have issued various standards andinterpretations with an effective date after the date of this financial information. The Group has not elected for earlyadoption of the standards and interpretations that have been issued as they are not yet effective. The most relevant forthe Group are amended IAS 1 “Presentation of the Financial Statements” (effective for annual periods beginning on orafter 1 January 2007), IFRS 7 “Financial Instruments: Disclosures” (effective for annual periods beginning on or after 1January 2007) and IFRS 8 “Operating Segments” (effective for annual periods beginning on or after 1 January 2009).Upon adoption of amended IAS 1, the Group will disclose its capital management objectives, policies and proceduresin each annual financial report and will have its capital movements and other gains and losses presented separately inthe statement of changes in equity and statement of recognised income and expenses. Upon adoption of IFRS 7, theGroup will disclose additional information about its financial instruments, their significance and the nature and extentof risks to which they give rise. More specifically, the Group will be required to disclose the fair value of its financialinstruments and its risk exposure in greater detail. There will be no impact on reported income or net assets. Uponadoption of IFRS 8, the Group will disclose segmental information when evaluating performance and deciding how toallocate resources to operations.The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact onthe financial statements in the period of initial application.3 Summary of significant accounting policies3.1 Basis of presentationThe significant accounting policies that have been used in the preparation of these consolidated financial statements aresummarised below. These policies have been consistently applied to all the years presented unless otherwise stated.The financial statements have been prepared using the historical cost convention, as modified by the revaluation ofinvestment property, leasehold land and certain financial assets and financial liabilities, the measurement bases of whichare described in the accounting policies below.The preparation of financial statements in accordance with IFRS requires the use of certain accounting estimates andassumptions. 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 financial statements, are disclosed in Note 4 to theconsolidated financial statements. 35
  36. 36. 3.2 Basis of consolidation The consolidated financial statements of the Company for the year ended 30 June 2007 comprise the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interests in associates and jointly controlled entities. 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 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 is recorded as additional 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 and jointly controlled 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. A jointly controlled entity is a contractual arrangement whereby two or more parties undertake an economic activity where the strategic, financial and operating decisions relating to the activity require the unanimous consent of the venturers.36
  37. 37. Under the equity method, the Group’s interest in an associate or jointly controlled entity is carried at cost and adjustedfor the post-acquisition changes in the Group’s share of the associate’s or jointly controlled entity’s net assets less anyidentified impairment loss, unless it is classified as held for sale or included in a disposal group that is classified as heldfor sale. The consolidated statement of income includes the Group’s share of the post-acquisition, post-tax results ofthe associate or jointly controlled entity for the year, including any impairment loss on goodwill relating to the investmentin associate or jointly controlled entity recognised for the year.When the Group’s share of losses in an associate or jointly controlled entity equals or exceeds its interest in theassociate or jointly controlled entity, the Group does not recognise further losses, unless it has legal or constructiveobligations, or made payments, on behalf of the associate or jointly controlled entity.Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilitiesand contingent liabilities of an associate or jointly controlled entity recognised at the date of acquisition is recognisedas goodwill. The cost of acquisition is measured at the aggregate of the fair values, at the date of exchange, of assetsgiven, liabilities incurred or assumed, and equity instruments issued by the Group, plus any costs directly attributable tothe investment.Goodwill is included within the carrying amount of an investment and is assessed for impairment as part of theinvestment. After the application of the equity method, the Group determines whether it is necessary to recognise anadditional impairment loss on the Group’s investments in its associates and jointly controlled entities. At each balancesheet date, the Group determines whether there is any objective evidence that an investment in an associate or jointlycontrolled entity is impaired. If such indications are identified, the Group calculates the amount of impairment as beingthe difference between the recoverable amount of the associate or jointly control entity and its respective carryingamount.Unrealised gains on transactions between the Group and its associates and jointly controlled entities are eliminated tothe extent of the Group’s interest in an associate or jointly controlled entity. Unrealised losses are also eliminated unlessthe transaction provides evidence of an impairment of the asset transferred.3.5 Functional and presentation currencyThe consolidated financial statements are presented in United States Dollars (USD) (“the presentation currency”). Thefinancial statements of each consolidated entity are prepared in either USD or the currency of the primary economicenvironment in which the entity operates (“the functional currency”), which for most investments is Vietnamese Dong.USD is used as the presentation currency because it is the primary basis for the measurement of the performance ofthe Group (specifically changes in the Net Asset Value of the Group) and a large proportion of significant transactions ofthe Group are denominated in USD.3.6 Foreign currency translationIn the individual financial statements of the consolidated entities, transactions arising in currencies other than thereporting currency of the individual entity are translated at exchange rates in effect on the transaction dates. Monetaryassets and liabilities denominated in currencies other than the reporting currency of the individual entity are translatedat the exchange rates in effect at the balance sheet date. Translation gains and losses and expenses relating to foreignexchange transactions are recorded in the statement of income.In the consolidated financial statements all separate financial statements of subsidiaries, if originally presented in acurrency different from the Group’s presentation currency, are converted into USD. Assets and liabilities are translatedinto USD at the closing rate of the balance sheet date. Income and expenses are converted into the Group’spresentation currency at the average rates over the reporting period. Any differences arising from this translation arecharged to the currency translation reserve in equity. 37
  38. 38. 3.7 Revenue recognition Goods and services rendered Revenue from sale of goods and provision of services is recognised in the combined statement of income when the significant risks and rewards of ownership have been transferred to the buyer or the services have been provided. 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. Rental income Rental income from investment property is recognised in the statement of income on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income. Interest income Interest income is recognised on an accrual and, if applicable, effective yield basis. 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 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. Finance lease payments Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. 3.9 Intangible assets Intangible assets that are acquired by the Group are stated at cost less accumulated amortisation and impairment losses. Expenditure on internally generated goodwill and brands is recognised in the statement of income as an expense when incurred. Amortisation Amortisation is charged to the statement of income on a straight-line basis over the estimated useful lives of intangible assets unless such lives are indefinite. Intangible assets with an indefinite useful life are systematically tested for impairment at each balance sheet date. Other intangible assets are amortised from the date they are available for use. The estimated useful lives are as follows: Software 3 to 5 years38
  39. 39. 3.10 GoodwillGoodwill represents the excess of the cost of acquisition of subsidiary companies and associated companies overthe 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 subjectto an annual impairment review and whenever events or changes in circumstances indicate that it may not berecoverable. An impairment charge will be recognised in the statement of income when the results of such a reviewindicate that the carrying value of goodwill is impaired (see accounting policy 3.18).Negative goodwill represents the excess of the Group’s interest in the fair value of identifiable net assets andliabilities over cost of acquisition. It is recognised directly in the statement of income at the date of acquisition.Gains and losses on disposal of an entity include the carrying amount of goodwill relating to the entity disposed of.3.11 Investment propertyInvestment 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 byproperty 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 recognisedprofessional qualifications and recent experience in the location and category being valued, value each propertyeach year. On the valuation date, the fair value is estimated assuming that there is an agreement between a willingbuyer and a willing seller in an arm’s length transaction after proper marketing; wherein the parties had each actedknowledgeably, prudently and without compulsion. The valuations are prepared based upon direct comparisonwith sales of other similar properties in the area and the expected future discounted cash flows of a property usinga yield that reflects the risks inherent in those cash flows. Valuations are reviewed and approved by the ValuationCommittee of the Board of Directors. The Valuation Committee may adjust valuations if there are factors that theexternal 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 frominvestment 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 transferand its fair value is recognised directly in equity if it is a gain. Upon disposal of the item the gain is transferred toretained earnings. Any loss arising in this manner is recognised in the statement of income immediately.Properties where more than 10% of the property is occupied by the Group for the production or supply of goodsand services, or for administration purposes, is accounted for as property, plant and equipment (see accountingpolicy 3.13).3.12 Investment property under developmentProperty that is being constructed or developed for future use as investment property is classified as investmentproperty under development (development projects) and stated at cost until construction or development iscomplete, at which time it is reclassified and subsequently accounted for as investment property. At the date oftransfer, 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 capitalexpenditures for the development qualifying as acquisition costs are capitalised. 39
  40. 40. 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. 3.13 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 3.18). 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 3.11. 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 statement of income, in which case a credit to that extent is recognised in the statement of income. Any deficit on revaluation is charged in the 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. 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. Subsequent expenditure The Group recognises in the carrying amount of an item of property, plant and equipment the cost of replacing part of 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:40
  41. 41. Leasehold improvements 5 to 20 yearsPlant, machinery and equipment 5 to 10 yearsOffice furniture and fittings 4 to 9 yearsMotor vehicles 5 to 10 yearsAssets held under finance leases which do not transfer title to the assets to the Group at the end of the lease aredepreciated over the shorter of the estimated useful lives shown above and the term of the lease.3.14 Property held for saleProperty intended for sale in the ordinary business or property developed for sale is classified as trading property andis accounted for as inventory. Leasehold land upon which trading properties are constructed, or are in the process ofconstruction, 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 otherdirect costs attributable to the properties concerned until they reach a saleable state. Net realisable value representsthe estimated selling price in the ordinary course of business less all estimated costs of completion and the estimatedcosts necessary to make the sale.3.15 LeasesLeases under the terms of which the Group assumes substantially all the risks and rewards of ownership are classifiedas finance leases (see accounting policy 3.13).Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified asoperating leases. Where the Group has the use of an asset held under an operating lease, payments made underthe lease are charged to the statement of income on a straight line basis over the term of the lease. Prepayments foroperating leases represent property held under operating leases where a portion, or all, of the lease payments havebeen paid in advance, and the properties cannot be classified as an investment property.3.16 Financial assetsFinancial assets, other than hedging instruments, are divided into the following categories: loans and receivables;financial assets at fair value through profit or loss; available-for-sale financial assets; and held-to-maturity investments.Management determines the classification of its financial assets at initial recognition depending on the purpose forwhich the financial assets were acquired. Where allowed and appropriate, management re-evaluates this designationat each reporting date. The designation of financial assets is based on the investment strategy set out in the Group’sAdmission Document to the London Stock Exchange’s Alternative Investment Market, dated 24 September 2003.All financial assets are recognised when, and only when, the Group becomes a party to the contractual provisionsof the instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case ofinvestments not at a fair value through profit or loss, directly attributable transaction costs.Derecognition of financial assets occurs when the rights to receive cash flows from the investments expires or aretransferred and substantially all of the risks and rewards of ownership have been transferred. At each balance sheetdate, financial assets are reviewed to assess whether there is objective evidence of impairment. If any such evidenceexits, any impairment loss is determined and recognised based on the classification of the financial assets.The Group’s financial assets consist primarily of listed and unlisted equities, bonds, loans and receivables. 41

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