2 VNL Annual Report 2010 Contents VinaLand Limited (VNL) Annual Report 2010 Section 1 Introduction VinaCapital introduction 03 Financial highlights 04 Performance highlights 05 Chairman’s statement 06 Section 2 Manager’s report Management team 08 Real estate investment environment 11 Portfolio performance 16 Featured investments 24 Section 3 Financial statements and reports Board of Directors 28 Report of the Board of Directors 30 Governance report 32 Independent Auditors’ report 36 Consolidated financial statements and notes 38 Section 4 Annex Investing policy 89 Historical financial information 93 VNL overview and details 95
VNL Annual Report 2010 3Taking Vietnam to VinaCapital is an asset management group inspired by the energy, creativity and entrepreneurial spirit of the people the world of Vietnam. Formed in 2003, VinaCapital manages USD1.8 billion across all asset classes - listed and private equities, fixed income, infrastructure and real estate. VinaCapital’s growth is driven by the most experienced asset and fund management teams in Vietnam. VNL USD682 million net assets under management. Vietnam’s largest real estate investment and development fund. VNL has the deepest residential sector pipeline of any foreign real estate fund or developer in Vietnam, alongside the top portfolio of operating hotels and landmark mixed-use projects across all major cities.
4 VNL Annual Report 2010 Financial highlights Revenue (USD’000) FY2010 17,277 FY2009 28,014 change % -38% USD1.36 Gross profit 7,042 12,303 -43% NAV per share Operating profit 102,152 (217,082) 147% Net profits 75,992 (201,623) 138% Earnings per share (USD) 0.10 (0.26) 139% NAV per share (USD) 1.36 1.32 3.2% 40.2% NAV gain since inception VNL’s stable FY2010 financial The top performing Vietnam fund over the past three years according to LCF Edmond de performance was due to strong Rothschild Securities. results in the launch and sale of residential units, and success in obtaining project financing.
VNL Annual Report 2010 5Performance highlights FY2010 FY2009 VNL’s primary driverResidential projects with active sales 7 4 of investment returnsNew units offered to market 663 413 during FY2010 was inTotal residential sales commitmentsand reservations (USDm) 115.7m 65.7m the sales of residential villas and apartmentsDanang Beach Resort (Ocean Villas and Cham Condominiums), World to end-users.Trade Center Danang (The Azura), The Garland and Dai Phuoc Lotus allhad sales launches during FY2010.VNL’s USD115.7 million in residential unit sales commitments andreservations during FY2010 represents early returns on the largestpipeline of residential development projects in Vietnam.
6 VNL Annual Report 2010 Chairman’s statement “Investors clearly remain Dear Shareholders, We are pleased to present the annual report concerned about macro of VinaLand Limited (AIM: VNL) for the year ended 30 June 2010. issues affecting Vietnam, and Vietnam’s real estate market during the they want greater clarity on financial year saw strong performance in the low and mid-range residential sector, and a performance and the ability much-improved hospitality sector, again with the best performance seen in the mid-range of of the investment manager to the market. realise proceeds and return The pace of foreign investment into Vietnam’s property sector was slower than the previous value to shareholders.” year, with Vietnam appearing to miss out on the increased investment into emerging markets around the world. Despite Vietnam’s rapid economic growth, reaching 6.5 percent year-on-year over the first half of 2010, foreign exchange and inflation concerns kept many investors on the sidelines. In the real estate market, oversupply in the office sector persisted, and retail investment remained slow as large foreign retailers continued a cautious approach to entering a market where site access and branch expansion remain difficult.
VNL Annual Report 2010 7VNL’s strategy, however, saw the fund The VNL Board was further strengthened This distribution policy, in addition to othersuccessfully avoid underperforming sectors. at the end of the year by the addition of measures announced at the time, aims toVNL at the end of June 2010 had an NAV of independent director Nicholas Allen, who reduce the share price discount while stillUSD682 million, or USD1.36 per share, an brings valuable accounting expertise to the leaving VNL with the ability to invest in newincrease of 3.2 percent from the end Board, built on his previous experience with projects. The Board believes this policy is in theof June 2009, when VNL had an NAV of PriceWaterhouseCoopers and his participation best interests of the shareholders - particularlyUSD660 million, or USD1.32 per share. in the audit committees of listed companies as it will offer the investment manager theThe four cent NAV per share gain in FY2010 CLP Holdings Ltd, Lenovo Group Ltd, and Hysan opportunity to continue to demonstrateis a positive turn-around from the 29 cent Development Company Ltd. the value of the fund’s holdings, as moreNAV per share loss the previous year. projects move to the development and sales/ Despite the wide-ranging progress VNL divestment phases. On 10 December 2010,The reason for the turn-around is primarily recorded during FY2010, the company’s shareholders voted at an EGM to allow VNL todue to progress with the development and share price continued to trade at a significant buy back and tender for shares, a decision thatsales of several key residential holdings in discount to net asset value. Investors clearly allows the distribution policy to proceed.the portfolio. During the year, VNL brought remain concerned about macro issues affectinga total of 663 residential units to market, Vietnam, and they want greater clarity on The Board welcomes shareholder feedback,with residential sales commitments and performance and the ability of the investment and we hope to be in touch with many of youreservations totalling USD115.7 million. manager to realise proceeds and return value over the coming year. Thank you for your to shareholders. continued support.Another performance highlight is thesuccess in obtaining project financing, with Recognising this, the Board announced on 28a total of USD197 million in non-recourse October 2010 that VNL would distribute 50construction loans now secured. There were percent of cash generated from divestments,five construction starts during the year. In the after providing for future investmenthotel portfolio, the Sheraton Nha Trang Hotel commitments, as a semi-annual tender for Nicholas Brookeand Spa opened near the end of the year, and the repurchase of shares at NAV. The first Chairmanthe Movenpick Hotel Saigon re-opened after a distribution will occur following finalisation of VinaLand Limitedcomplete renovation in August 2010. the 30 December 2010 interim results. 17 December 2010
8 VNL Annual Report 2010 Management team 1 Don Lam Chief Executive Officer Don Lam founded VinaCapital in 2003 alongside partners Horst F. Geicke (Group chairman) and Chris Gradel. Don has over 15 years experience in Vietnam, working previously at PricewaterhouseCoopers, Deutsche Bank, and Coopers & Lybrand. Don is one of Vietnam’s most internationally recognised business leaders, having brought over USD1.5 billion in 5 4 foreign indirect investment into the 2 3 1 country since 2003. Don is an active member and regular speaker at the (Left to right: Mr. Brook Taylor; Mr. Anthony House; Mr. David Blackhall; Mr. David Henry; Mr. Don Lam) World Economic Forum and other leading international conferences and events. He has a degree in VNL’s management team have a combined 75 years of Commerce and Political Science from real estate investment and development experience. the University of Toronto, and is a member of the Institute of Chartered They manage Vietnam’s most comprehensive portfolio Accountants of Canada. He is a of direct real estate assets, including complex township Certified Public Accountant and holds a Securities Licence in Vietnam. and landmark mixed-use developments that span Vietnam’s major cities.
VNL Annual Report 2010 92 Brook Taylor 3 David Henry 4 David Blackhall 5 Anthony House Chief Operating Officer Managing Director Deputy Managing Director Deputy Managing Director Real Estate Asset Management Development Brook Taylor has almost 20 years David Henry has over 30 years David Blackhall has 28 years Anthony House has over 23 of management experience, experience in real estate experience in the property, design years experience in both the including eight years in Vietnam development. Previously was and construction sectors, with real estate development and as a senior partner with major Director of Springfield Land Corp. the last 19 years in real estate construction management sectors, accounting firms. Previously, Brook Pty Ltd, a member of MUR Group, fund and asset management. of which the past three years was deputy managing partner of where he led development of He worked for 12 years with were spent working in Vietnam. Deloitte in Vietnam and head of the 2,860ha Greater Springfield Deutsche Bank - RREEF Funds Prior to joining VinaCapital, he the firm’s audit practice. He was township. He was executive board Management Ltd, one of worked for Watpac Limited, a also managing partner of Andersen member of MUR Group for past Australia’s largest property fund leading publicly listed Australian Vietnam and a senior audit partner 16 years. His professional experience managers. Prior to this he was company, specialising in property at KPMG. Brook has expertise includes ten years with Australia’s involved in engineering design and development and construction. spanning financial audits, internal Lend Lease Group, developing management of large-scale civil Mr. House’s development audits, corporate finance, taxation, projects in Sydney, Brisbane and and structural power generation experience encompasses a business planning and IT systems the Gold Coast. He worked on projects in Australia. David has range of retail, commercial risk management. He has a B.A. Riverside Centre Brisbane, the five years property industry office and high-rise residential in Commerce and Administration Anchorage Tweed Heads, State Bank experience in Hanoi and Ho Chi projects. Mr. House holds a Post from Victoria University of Martin Place Sydney, QE 2 Hospital Minh City, Vietnam. He holds a Graduate Diploma in Project Wellington, New Zealand, and is Brisbane, Holiday Inn Cairns, and Masters Degree in Design Science Management and a Bachelor a member of the New Zealand Times Square Brisbane. David from the University of Sydney, of Applied Science degree in Institute of Chartered Accountants. graduated with a first class honours Australia and is a Member of the Construction Management, both Bachelor of Building degree from the Royal Institution of Chartered from the Queensland University of University of New South Wales, and Surveyors (MRICS). Technology, Australia. holds an AMDP (GSD Harvard).
VNL Annual Report 2010 11 Real estate investment environment EconomyVietnam’s Vietnam’s GDP grew by 5.3 percent in 2009, making it one of the world’s fastest growing economies during a year of financial crisis inurbanisation trend Europe and America. Resilient domestic consumption and effective government stimulus policies helped Vietnam weather the storm,and the rise of a while inflation fell to 6.5 percent from 23 percent in 2008.middle-class keen on The pace of economic growth in Vietnam remained stable in the first half of 2010, even as the government moved to curb inflation andmodern living space the global economic recovery lost momentum. Monetary policy was tightened in late 2009 and credit growth subsequently fell towill fuel demand for 10.5 percent over the first half of 2010. Nonetheless, GDP growth remained healthy at 6.2 percent annualised for H1 2010. With inflation remaining moderate at under nine percent year-on-year, Vietnam’saffordable, high-quality economy has proven resilient and analysts forecast GDP growth of seven percent or higher in 2011. The trade deficit is less than 10 percent ofhousing for years to exports, but currency stability remains a concern. The Vietnam dong was devalued by 2.1 percent in August 2010, a move that aimed to forestallcome. foreign exchange pressure for the remainder of the year. Real estate market snapshot Residential sector Strong demand in the mid-range of the market, with supply dependent on domestic developers’ access to construction financing. Office sector Rents continue to soften across all grades due to oversupply. Retail sector Significant potential as both international and domestic retailers keen to meet growing demand. Hospitality sector Visitor numbers recovering, outlook is strong given prospects of Vietnam tourism industry.
12 VNL Annual Report 2010 Residential Office The strength of Vietnam’s residential market is a key indicator of domestic Vietnam’s office market saw substantial new supply come online during the demand. Construction and sales activity saw a marked turnaround from 2008, slowdown caused by the global financial crisis. Although absorption rates have when projects were postponed or stalled due to the economic slowdown and started to recover, oversupply across all office grades will continue for the the retreat of some international developers. Over the first half of 2010, the next several years. In 2011, Ho Chi Minh City and Hanoi will see a combined total number of condominiums in Ho Chi Minh City and Hanoi had increased 500,000sq.m of additional office supply come on line which equates to about 48 percent over the same point a year prior. Ho Chi Minh City saw the addition 40% of total current stock. This is well in excess of the annual absorption rate of of some 10,000 units, still below the estimated yearly demand for 40,000 200,000sq.m for both markets alone. The office market is likely to experience new households. The UN ranked Vietnam second in urban population growth further challenges ahead as the market moves into a period of over-supply among Southeast Asian countries over the past five years, with an urbanisation creating weakened demand that will have downward pressure on rents. rate of 3.26 percent. Vietnam’s Ministry of Construction says the country needs By the end of Q2 2010, Vietnam’s office market was affected by the impact over 15 million sq.m of new housing each year to accommodate new urban stemming from the global financial crisis and the amount of A to C Grade office dwellers. Together with income growth and the rise of a middle-class keen buildings being developed. The market remains in favor of tenants where on modern living space, Vietnam’s urbanisation trend will fuel demand for quality long-term tenancies have been negotiated for lower rents and rent affordable and high-quality housing for years to come. incentives have been provided by most local office landlords. Ho Chi Minh City Buying patterns are changing, with end-users now predominant. Developers vacancy rates continued to increase across all grades. At Q2 2010, A Grade are shifting from luxury and high-end products to more affordable and average rent in Ho Chi Minh City and Hanoi was USD37.5 and USD39.6 per mid-range residences. CB Richard Ellis reports that 95 percent of new launches square meter respectively, showing drops of 47 percent and 26 percent from in Ho Chi Minh City in 2009 were mid-range and affordable projects, versus the peak in 2008. only 60 percent in 2008. High-end projects have struggled to sell, while sales figures have been solid across the lower grades. It is evident that the market Net Absorption, HCM City has shifted to the growing demand among average Vietnamese for affordable, Vacancy rate, HCM City quality housing. Net Absorption, Hanoi Vacancy rate, Hanoi Asking prices of residential apartments in HCM City, Q2 2010 Net absorption and vacancy rates, HCM City USD/sq.m Net absorption (NLA sq.m) Vacancy rate (%) 6,000 Affordable 80,000 20 Mid-end 70,000 5,000 High-end Luxury 60,000 15 4,000 50,000 3,000 40,000 10 2,000 30,000 20,000 5 1,000 10,000 0 0 0 2004 2005 2006 2007 2008 2009 2010 2004 2005 2006 2007 2008 2009 2010 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2 Q2
VNL Annual Report 2010 13Retail HospitalityVietnam’s retail market continues to offer excellent prospects, although The hospitality sector was heavily affected by the global financial crisis,the lack of suitable retail premises has slowed the arrival of international with declines in occupancy and average room rates starting in mid-2008.chains, and put upward pressure on retail rents. The slower than expected Over the first half of 2010, the market began to recover, as occupancy ratesroll-out of foreign brands is one reason Vietnam slipped from first place in at three, four and five-star hotels increased by 9.0, 23.3 and 14.5 percent,A.T Kearney’s 2008 Global Retail Development Index, to eleventh place in year-on-year, respectively. Vietnam welcomed 2.5 million international2010. The Index tracks the retail investment attractiveness of 30 emerging guests in the first six months of 2010, a 32.6 percent year-on-year increase.markets. Visits from China increased by 92.5 percent. The Vietnam National Administration of Tourism forecasts 4.5 million total visitors in 2010,The fundamentals of the market remain strong, however. Over the first half a 20 percent increase over 2009.of 2010, retail sales saw a real growth rate of 16.4 percent year-on-year,eight percent higher than the same period in 2009. The mid- to long-term Despite the recovery in international arrivals and domestic travel, however,outlook for this sector is very positive, given the large, young population additional supply will continue to put pressure on occupancy and roomand rising disposable incomes, coupled with a low base of modern rates. In fact, average room rates in HCM City for three, four and five-starshopping facilities. Demand for prime retail space remains high, with many hotels fell by 25.0, 7.9 and 10.1 percent year-on-year, respectively, over theinternational retailers keen to either enter the market or to expand their first half of 2010. Over the long term, however, the outlook remains strongcurrent portfolios. Domestic retailers are also expanding their operations as Vietnam increasingly becomes a major travel destination for tourists fromto capitalise on the growing market. Fashion, lifestyle and F&B retailers around the world.continue to lead the way, as expected in an emerging market. CBD rentshave risen as a result of the limited supply of prime shopping destinationsin the inner city areas of Ho Chi Minh City and Hanoi. In these two cities,CBD retail rents have increased from USD76 to USD123 per sq.m per month,while average rents in outlying areas have declined slightly.Retail rates in select Asian citiesUSD/sq.m35030025020015010050 0 HCM City Hanoi Bangkok Manila Kuala Lumpur Singapore
14 VNL Annual Report 2010 Outlook The office sector will continue to struggle in the short term, and developers would be wise to secure anchor tenants before starting new projects. The short-term prospects for the hospitality market are also challenging, although longer term the market potential remains strong, with Vietnam expected to be among the world’s top ten tourism destinations in the coming decade. Retail facilities are expected to see substantial growth and development in the coming years, and the residential sector will remain in focus as developers compete to offer compelling mid-range offerings that blend affordability and high quality. Vietnam’s expected high economic growth rate and political stability will sustain it as one of Asia’s best long-term real estate investment opportunities.
16 VNL Annual Report 2010 Portfolio performance VNL has the VinaLand Limited (VNL) during the year ending 30 June 2010 made significant progress with distributed to investors in the form of a tender for shares. It is anticipated that this policy will largest residential the development of several top holdings in its greatly reduce the discount during FY2011. portfolio, particularly residential resort and township developments. The sales of villas and VNL also continued to benefit from the strong project pipeline apartments recorded during the year were an extremely positive indicator of the fund’s ongoing demand for newly built residential housing, a hallmark of Vietnam’s growing middle of any domestic investment and return prospects over the coming years. class and rising urbanisation. This long-term trend plays perfectly into VNL’s investment or foreign real strategy, which has focused on acquiring VNL at the end of June 2010 had an NAV of township sites in prime suburban locations, USD682 million, or USD1.36 per share. This was along with select city-centre locations for estate developer an increase of 3.2 percent from the end of June 2009, when VNL had an NAV of USD660 million, high-end, mixed-use developments. Many of these sites are already under construction. in Vietnam. or USD1.32 per share. The share price at the end of June 2010 was USD0.77, up 11.6 percent from VNL is positioned to bring over 10,000 villas and townhouses, and an equal number of apartment USD0.69 at the end of June 2009. Despite this units, to market over the next five years. No improvement, the discount at 30 June remained foreign or domestic real estate developer or significant at 43.4 percent, a disappointing result fund has a residential pipeline that compares. given the comparatively strong performance of the fund over the year. Financing the construction of the residential and mixed-use assets will be an important driver The discount first emerged in mid-2008, and has of progress for the fund. At 30 June 2010, VNL persisted until now. Addressing the discount and had secured USD197 million in project financing increasing shareholder value is the manager’s from domestic banks, with several more loan top concern, and an announcement related to agreements in the final stages of negotiation. the fund’s distribution policy was issued after VNL is supported by an in-house development the period ended, in late October 2010. The team that has a strong project delivery track policy will see 50 percent of cash generated record, boding well for further rounds of from divestments, after taxes and expenses, financing applications.
VNL Annual Report 2010 17Beyond the residential market, VNL is also 25-26 assets in the portfolio, and proceed with (which consists of staged payments). The VNLwell-positioned in other sectors. The fund development on all these assets. strategy is to divest mature projects, developholds eight retail assets spread across Hanoi, and sell residential holdings, and move forwardDanang, Nha Trang and Ho Chi Minh City, and FY2010 saw four construction starts, and with retail and office projects only when anchornegotiations with anchor tenants are underway FY2011 will see construction commence on five tenant leases are in place. The assets VNL holdsat four of these projects. It is expected that additional assets, including Times Square Hanoi, are perfect for this strategy, and the fund moves2011 will see construction commence at four Norman Estates at the Danang Beach Resort, into 2011 with solid growth prospects.of these projects. and VinaSquare Tower, HUD, and Thang Loi in Ho Chi Minh City. Performance summaryIn hospitality, VNL continues to hold Vietnam’stop portfolio of operating hotels. The year VNL during the year benefited from the FY2010 FY2009saw the opening of the Sheraton Nha Trang establishment of VinaProjects, a project and NAV p.s. 1.36 1.32Hotel and Spa, the first five-star international construction management joint venture with inProjects of Hong Kong. VinaProjects will Change on previous year 3.2% (18%)flag along Vietnam’s coast. Shortly after the further strengthen project delivery, providing Share price 0.77 0.69financial year ended, the Movenpick HotelSaigon re-opened after a substantial renovation. the most cost-effective support for VinaCapital’s Change on previous year 11.6% (43.4%)The hospitality market in Vietnam continues to in-house real estate development team. Premium/(discount) to NAV 43.4% 47.7%recover after the 2008-09 slowdown, with Outlook Number of projects 38 472010 revenue and gross operating profit of Vietnam’s macro economy is expected to bethe VNL-owned hotels up an estimated 28.5 stable in the second half of 2010, with GDP Portfolio by geographic region (% NAV)and 27.7 percent, respectively, over 2009. growth topping seven percent in 2011. FY2010 FY2009VNL has now divested full or partial stakes in Liquidity should gradually increase as the cost of debt declines, which will support the real Hanoi 13% 19%13 projects, generating total proceeds ofUSD324.7 million on acquisition costs of estate market in general. VNL has a pipeline Central Vietnam 25% 25%USD163.6 million. VNL exited several mature that includes over 4,000 new residential HCM City and region 62% 56%assets in FY2010, and will look to dispose or find units to bring to market in 2011, most beingco-investors on an estimated eight additional mid-range offerings. These holdings dependassets in 2011-12. The business plan, agreed by less on acquiring financing, as construction isthe VNL Board of Directors, is to hold typically financed via the end-user sales process
18 VNL Annual Report 2010 VNL Portfolio by sector (end June 2010) 100% Township/large-scale 37% 31% Township/large-scale 16% Mixed use/retail Mixed use/retail 18% 24% Residential Residential 24% 6% Office Office 5% Hospitality 16% 23% Hospitality USD682 million USD660 million FY2010 FY2009 NAV vs share price performance 2.0 1.5 1.36 NAV per share 1.0 0.77 Share price 0.5 0.0 Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun 06 06 06 06 07 07 07 07 08 08 08 08 09 09 09 09 10 10
VNL Annual Report 2010 19Development progress Construction in Completion in 2009-2010 Construction in 2010 2011 (estimate)Projects Location Refurbishment Construction On-going Start StartMovenpick Hotel Hanoi Hanoi 2009Movenpick Hotel Saigon HCM City 2010Mercure La Gare Hanoi Hotel Hanoi 2009Sheraton Nha Trang Hotel and Spa Nha Trang 2010Ocean Villas (Danang Beach Resort) DanangThe Garland HCM CityAzura (Danang WTC) DanangThe Dunes Residences (Danang Beach Resort) DanangThe Ceana Hoi An Hoi AnDai Phuoc Lotus Township HCM CityMy Gia Township Nha TrangVinaSquare Tower HCM CityGreen Park Estate (Thang Loi) HCM CityHUD HCM CityTimes Square Hanoi HanoiNorman Estates (Danang Beach Resort) Danang
20 VNL Annual Report 2010 Project capital structure Debt to equity ratio of VNL projects Debt to equity ratio (% debt) Danang Beach Resort 37% WTC Danang 17% My Gia Nha Trang 28% The Garland 67% Long Truong 70% Hospitality portfolio 66%* VNL carries no debt at the fund level, and project level debt is Top ten holdings at 30 June 2010 conservative. NAV % The highest level of debt is in the operating hotels, where the Danang Beach Resort 10.0% Movenpick Hanoi and Saigon hotels were recently renovated, and Century 21 9.5% the four-star Mercure Hanoi La Gare and five-star Sheraton Nha Dai Phuoc Lotus Township 9.0% Trang Hotel and Spa completed construction and opened in 2009 Pavilion Square 7.0% and 2010, respectively. My Gia Nha Trang 6.0% * Total 14 assets, including five operating hotels. VinaSquare Tower 5.0% Times Square Hanoi 4.3% Aqua City (Long Hung) 4.0% Fideco Binh Duong 3.5% Mövenpick Hotel Saigon 3.0%
VNL Annual Report 2010 21 Top holdings by regionHanoi Hanoi Type Status Times Square Hanoi Mixed use Investment licence Movenpick Hotel Hanoi Hospitality Operating asset Mercure La Gare Hanoi Hotel Hospitality Operating asset Danang Type Status World Trade Center Danang Mixed use Sales underway Danang Beach Resort Township Sales underway Danang Ceana Hoi An Villas and Hotel Mixed use Under construction Nha Trang Type Status Sheraton Nha Trang Hotel and Spa Hospitality Operating asset Nha Trang My Gia Nha Trang Township Sales underway Ho Chi Minh Type Status Dai Phuoc Lotus Township Sales underway Century 21 Residential Under construction Ho Chi Minh VinaSquare Tower Mixed use Investment licence Pavilion Square Mixed use Investment licence The Garland Villas Residential Sales underway Movenpick Hotel Saigon Hospitality Operating asset
22 VNL Annual Report 2010 VNL owns five operating hotels and has reached the construction and sales phase on numerous residential sites in central Vietnam and the Ho Chi Minh City region.
24 VNL Annual Report 2010 Featured investments My Gia Nha Trang Movenpick Hotel Saigon My Gia is a 158-hectare township site strategically positioned between The Movenpick Hotel Saigon re-opened in August 2010 after a the mountains and the famous beaches of Nha Trang, one of the most complete renovation that included a redesign of the lobby and popular coastal tourist destinations in central Vietnam. The township 278 guestrooms, five new interiors for the hotel’s restaurants, will offer a complete community of luxury villas, townhouses, a semi-open bar near the third floor pool, and a new rear entrance apartments, hospital, international school, retail centre and framed by a massive Cay Da (Banyan) tree. The renovation follows entertainment facilities. A display village is now under construction. VNL’s strategy of acquiring under-performing hotel assets in prime Phase 1 and 2 sales of land lots launched in November 2010, locations and renovating and re-branding them under international with 80 percent of the 1,400 land lots available reserved for sale. flags. VNL holds a 52.5 percent stake in the Movenpick Hotel Saigon. VNL holds a 53.25 percent stake in My Gia Nha Trang. Type Mixed-use township. Type Five-star hotel. Location Nha Trang, central Vietnam. Location Ho Chi Minh City (near Tan Son Nhat airport). Details 88ha of residential lots, plus school, hospital, Details 278 keys; five food and beverage outlets, retail, sports and recreation facilities and five function rooms, swimming pool, fitness centre, administrative offices. spa and e-gaming club. Status Sale of cleared land lots underway. Status Operating asset, newly renovated.
VNL Annual Report 2010 25Ceana Villas and Hotel Danang Beach ResortThe Ceana Villas and boutique hotel project is a 100% VNL-owned The 260-hectare Danang Beach Resort is Vietnam’s first truly integratedasset on an 8.6ha site on the beach in Hoi An, central Vietnam. luxury beachfront resort. The resort has pioneered the second-home marketThe revised master plan comprises an 82-key boutique hotel and in Vietnam, with sales of The Ocean Villas, the first residential component,31 villas for sale. Each of the three- to five-bedroom villas, including successfully launched to entirely domestic buyers. The Dunes golf course,eight beachfront units, will be serviced by the hotel operator. designed by golf legend Greg Norman, is now open for play and garneringPreliminary site infrastructure is completed and construction of the praise as Vietnam’s top championship-level course. Upcoming residentialvilla foundations is now underway. Marketing efforts will begin once components to launch in 2011 include the Norman Estates and Dunesfoundations are complete and target buyers looking to pre-purchase Residences. The Danang Beach Resort, when fully complete, will set thevillas off-plan. Loan negotiations are underway with two banks for standard for Vietnam’s fast-growing hospitality industry. At 30 Septembercomplete financing of the villas and hotel construction. 2010, total villa and condominium sales and reservations at the Danang Beach Resort stood at USD68 million. VNL holds a 75 percent stake in the Danang Beach Resort, with VOF holding 25 percent.Type Mixed-use residential and hospitality. Type Mixed-use integrated resort.Location Hoi An, central Vietnam. Location Danang, central Vietnam.Details 31 villas for sale; 82-key boutique hotel. Details Phase 1 components include: The Dunes Golf CourseStatus Villa foundations under construction, marketing (18-hole championship course, now open); 115 detached villas and sales to begin in early 2011. (The Ocean Villas); 132 beach condominiums (The Cham); 15 detached golf course villas (The Dunes Residences); 37 branded golf course and oceanfront villas (The Norman Estates); Five-star hotel; The Ocean Villa beach club. Status Under construction, with the first golf course operational and over 80 villas built and handed over to owners.
26 VNL Annual Report 2010 Dai Phuoc Lotus Green Park Estate (Thang Loi) Dai Phuoc Lotus is a unique resort-style township project covering The Green Park Estate project (formerly called Thang Loi) development 200 hectares on an island of 400 hectares in a branch of the Saigon in Ho Chi Minh City is a 26.7 hectare site on a major road link to River. The island township is located in Dong Nai Province, between the Cambodian border and the TransAsia Expressway. The project Ho Chi Minh City and the future Long Thanh International Airport. enjoys a high land value as it is located along a planned MRT line Construction of several model villas is underway. A total of 332 villas that will connect the site to the central business district. In addition have been launched to date, with 233 sales contracts and reservations to residential villas and apartments, warehouse retail will supply signed as of 30 September 2010. VNL holds a 54 percent stake in neighbouring townships, the city centre and even Cambodia. Green Dai Phuoc Lotus. Park Estate will be also be a major destination for recreation, as areas under aviation height constraints will be used for sport facilities and parks. The residential sections of the development will comprise 1,250 units, with construction of villas to start in Q4 2011, and construction of the retail components to begin by Q3 2012. VNL holds a 49 percent stake in Green Park Estate. Type Mixed-use. Type Mixed-use township. Location Ho Chi Minh City. Location Dong Nai Province, near Ho Chi Minh City. Details 26.7ha plot with total approved GFA of 342,377sq.m. Details 200ha comprising residences, retail, golf course, Status Investment licence received, 1:500 master schools, medical facilities, hotels, parkland plan submitted. and sports facilities. Status Sales underway for Phase 1 villas, covering 20ha.
VNL Annual Report 2010 27Times Square Hanoi Mercure Hanoi La GareTimes Square is a landmark four-hectare mixed-use project in the The Mercure Hanoi La Gare opened in September 2009 afternew suburban area of My Dinh, in western Hanoi. The site is in a a complete top-to-bottom renovation and rebranding underprime location next to Hanoi’s most popular retail hypermarket, Accor’s well-regarded four-star boutique flag. The acquisition of thisBig C, and across from the National Convention Centre. Times Square city-centre property followed VNL’s strategy of targeting domestichas a distinctive integrated retail podium and high-rise office, hotel business travel and mid-range tourism - which proved timely givenand serviced apartment components. Preparatory work on the site is the travel downtrend that took hold in 2008. The Mercure hasunderway, with the first phase comprising a 30,300sq.m GFA office garnered strong operating results since opening, with occupancytower, 20,000sq.m GLA retail podium, and 33,200sq.m GFA serviced and room rates above the average for four-star hotels in Hanoi.apartment. VNL holds a 65 percent stake in this project. VNL holds a 100 percent stake in the Mercure Hanoi La Gare.Type Mixed-use urban landmark. Type Four-star boutique hotel.Location My Dinh, Hanoi. Location Hanoi CBD.Details 40,000sq.m land area, with total approved GFA Details 102 keys; food and beverage outlets, conference of 351,140sq.m comprised of retail, office, hotel room and fitness centre. and serviced apartment components. Status Operating asset, with 68.8% occupancy and USD70.7 Status Investment licence received, construction to average room rate for 2010 to September. start Q1 2011.
28 VNL Annual Report 2010 Board of Directors Nicholas Brooke Horst F. Geicke Don Lam Chairman Director Director Mr. Brooke is the Chairman of Professional Property Horst F. Geicke is one of VinaCapital Group’s Don Lam is a founding partner of VinaCapital Services Limited, a Hong Kong-based real estate three founding partners. He has resided in Group, with over 15 years experience in consultancy that provides a select range of advisory Asia for almost 30 years and has over 25 years Vietnam. He has overseen the Group’s growth services across the Asia Pacific Region. Mr. Brooke of operating and investing experience in the from manager of a single USD10 million fund is a former President of the Royal Institution of region, having made several financial and in 2003 into a full-featured investment firm Chartered Surveyors and was the first overseas strategic investments in Vietnam, including the managing numerous listed and unlisted funds, surveyor to be accorded that honour. Mr. Brooke is establishment of a manufacturing plant for his and offering a complete range of corporate a recognised authority on land administration and family business. Mr. Geicke also co-founded finance and real estate advisory services. Before planning matters and has provided advice in these Pacific Alliance Group, a fund management group founding VinaCapital, Mr. Lam was a partner areas to several Asian governments as well as the US in Hong Kong. Mr. Geicke is the President of the at PricewaterhouseCoopers (Vietnam), where State Department. He is also a Justice of the Peace, European Chamber of Commerce in Hong Kong he led the Corporate Finance and Management and a former Deputy Chairman of the Hong Kong and was previously the President of the German Consulting practices throughout the Indochina Town Planning Board and a former member of the Chamber of Commerce in Hong Kong. He is the region. Mr. Lam has also held management Hong Kong Housing Authority. Mr. Brooke also sits as chairman or board member of numerous public positions at Deutsche Bank and Coopers & a Non-executive Director on the Boards of a number and private companies. Mr. Geicke has a Masters Lybrand in Vietnam and Canada. He has a degree of public companies including Shanghai Forte Land degree in Economics and Business Law from the in Commerce and Political Science from the Company Limited, one of China’s largest residential University of Hamburg, Germany. University of Toronto, and is a member of the developers and Majid Al Futtaim Investments, one Institute of Chartered Accountants of Canada. of Middle East’s leading shopping centre developers. He is a Certified Public Accountant and holds a Mr. Brooke has a degree in Estate Management and Securities Licence in Vietnam. a Post Graduate Diploma in Business Administration from the University of London.
VNL Annual Report 2010 29Robert A. E. Gordon Michael Arnold Nicholas AllenDirector Director DirectorRobert Gordon was British Ambassador to Mr. Arnold is a senior executive with over forty Nicholas Charles Allen is an independentVietnam from 2003-2007 and to Burma years experience in the property industry, including non-executive director of CLP Holdings Ltd, Lenovofrom 1995-1999. He was head of the Foreign over thirty years in Asia. He retired as an Executive Group Ltd, and Hysan Development Company Ltd.and Commonwealth Office’s Southeast Asia Director of Hongkong Land in 2002 and is currently He is chairman or member of the audit committeeDepartment in London from 1999-2003. He joined Managing Director of Arnco Ltd, which provides for all three companies. Mr. Allen joined Coopers &the British Diplomatic Service in 1973 and served an advisory service to the property industry in Asia Lybrand in 1977, coming to Hong Kong with that firmin Poland, Chile and France. After retiring from the and the Middle East. Mr. Arnold sits on the boards in 1983. In 1998 Coopers & Lybrand merged to formFCO in April 2008, he now advises a number of of a number of companies including The Link, as PricewaterhouseCoopers, and Mr. Allen workedcompanies and organisations on issues concerning an Independent Non Executive Director, and The at PwC until his retirement in 2007. During his 24Southeast Asia. He also provides expert advice to Business Environment Council, as a Non Executive years with PwC in Hong Kong, Mr. Allen was theseveral UK law firms, as well as lecturing at the Director. During his career with Hongkong Land, partner-in-charge of the Consumer and IndustrialUniversity of Strasbourg. Mr. Gordon was Mr. Arnold was responsible for all project Products Group, the Corporate Finance and Recoveryawarded an OBE in 1983 and a CMG in 1999. developments in Hong Kong and Asia, spanning Practice division, and the Hong Kong and ChinaHe was born in Trieste, Italy and educated at from Australia to Southeast Asia and China. Assurance Practice. He is a fellow of the CharteredKing’s School Canterbury and graduated from Mr. Arnold is a Fellow of the Hong Kong Institute Accountants in England and Wales and a memberMagdalene College, Oxford in 1973 with a BA of Surveyors and an Associate of the Royal Institute of the Hong Kong Institute of Certified Public(later MA) in Modern Languages. of Chartered Surveyors. Accountants. Mr. Allen has a B.A. from Manchester University in the United Kingdom.
30 VNL Annual Report 2010 Report of the Board of Directors The Board of Directors submits its report together The Board of Directors do not recommend with the consolidated financial statements the payment of dividend for the year ended of VinaLand Limited (“the Company”) and its 30 June 2010 (30 June 2009: USD nil). subsidiaries (together “the Group”) for the year ended 30 June 2010 (“the year”). Board of Directors The members of the Board of Directors of the The Group Company during the year and to the date of this VinaLand Limited is incorporated in the Cayman report are as follows: Islands as a company with limited liability. The registered office of the Company is PO Box 309GT, Name Position Appointed on Ugland House, South Church Street, George Town, Nicholas Brooke Chairman 13 January 2006 Grand Cayman, Cayman Islands. Horst Geicke Director 31 August 2005 Don Lam Director 13 January 2006 Particulars of the Group’s principal subsidiaries and associates are set out in Note 7 and Note 13. Robert Gordon Director 16 February 2009 Michael Arnold Director 17 March 2009 Principal activities Nicholas Allen Director 29 June 2010 The Company’s primary objective is to focus on key growth segments within Vietnam’s emerging real estate market, namely residential, office, On 12 March 2010 Mr. Nicholas Brooke replaced retail, industrial and leisure projects in Vietnam Mr. Horst Geicke as Chairman of the Board of and the surrounding countries in Asia to provide Directors. shareholders with an attractive level of income Auditors and capital growth, from investing in a diversified The Group’s auditors, Grant Thornton Cayman portfolio of mainly property investments. Islands, with the assistance of Grant Thornton The principal activities of the subsidiaries are Vietnam Ltd., have expressed their willingness property investment and hospitality management. to accept reappointment. Results and dividend Subsequent events after the reporting date The results of the Group for the year ended Other than the matter outlined in Note 20, there 30 June 2010 and the state of its affairs as at were no material events after the reporting date that date are set out in the consolidated financial that has a bearing on the understanding of these statements on pages 38 to 88. consolidated financial statements.
VNL Annual Report 2010 31Directors’ interest in the Company view of the financial position of the Group as at The Board of Directors is also responsible forAs at 30 June 2010, the interests of the directors 30 June 2010 and of the results of its operations safeguarding the assets of the Group and hencein the shares, underlying shares and debentures of and its cash flows for the year ended on that for taking reasonable steps for the prevention andthe Company are as follows: date. When preparing the consolidated financial detection of fraud and other irregularities. statements, the Board of Directors is required to: The Board of Directors confirms that the Group No. of shares Approximate i. adopt appropriate accounting policies which has complied with the above requirements in % of direct are supported by reasonable and prudent preparing the consolidated financial statements. and indirect judgements and estimates and then apply Direct Indirect holding Statement by the Board of Directors them consistently;Horst Geicke 2,750,000 184,979 0.59% ii. comply with the disclosure requirements of In the opinion of the Board of Directors, theDon Lam 2,457,250 122,649 0.52% International Financial Reporting Standards accompanying Consolidated Statement of Financial or, if there have been any departures in the Position, Consolidated Statement of ChangesNicholas Brooke 150,000 - 0.03% in Equity, Consolidated Statement of Income, interest of true and fair presentation, ensureSubsequent to the reporting date, Mr. Michael that these have been appropriately disclosed, Consolidated Statement of ComprehensiveArnold and Mr. Nicholas Allen purchased 64,500 explained and quantified in the consolidated Income, Consolidated Statement of Cash Flows,and 95,627 ordinary shares bringing their total financial statements; together with the notes thereto, have beenshareholdings to 0.01% and 0.02% respectively. properly drawn up and give a true and fair view of iii. maintain adequate accounting records and an the financial position of the Group as at 30 June effective system of internal control; 2010 and the results of its operations and its cashSubsequent to the reporting date, the InvestmentManager of the Group, VinaCapital Investment iv. prepare the consolidated financial statements flows for the year then ended in accordance withManagement Limited, purchased 660,000 shares on a going concern basis unless it is International Financial Reporting Standards.on the open market representing 0.13% interest inappropriate to assume that the Group willin the Group. As Mr. Don Lam and Mr. Horst continue its operations in the foreseeable On behalf of the Board of DirectorsGeicke are shareholders in this company, future; andtheir shareholdings consequently increased v. control and direct effectively the Group into 0.56% and 0.65% respectively. all material decisions affecting its operations and performance and ascertain that suchBoard of Directors’ responsibility in respect of decisions and/or instructions have been Nicholas Brookethe consolidated financial statements properly reflected in the consolidated financial ChairmanThe Board of Directors is responsible for ensuring statements. Hong Kong, SAR Chinathat the consolidated financial statements are 17 December 2010properly drawn up so as to give a true and fair
32 VNL Annual Report 2010 Governance report VNL 2010 Corporate Governance Report The members of the Board of Directors On behalf of the Board, I am pleased to report At the date of this report, the Board is comprised of four independent non-executive on the activities of the Board and its Committees Directors, including the Chairman, and two non-independent Directors. This is in during the 2010 financial year. VinaLand Limited line with the Combined Code recommendations that at least half the Board are (’VNL’ or ‘the Company’) is a Cayman Island independent non-executive Directors. The independent non-executive Directors have company established in 2006 and traded on the all declared that they were, and continue to be, independent from the Company, the AIM Market of the London Stock Exchange. manager and any of its managed vehicles. The Board is committed to meeting the highest At the end of the financial year, the annual aggregate director fees amounted to standards of corporate governance. The ultimate USD120,000. aim of the corporate governance programme is to protect shareholders’ and other stakeholders. Current Board Members Independence to the Exec/Non-exec Director In order to achieve this, the Company has created Company a clear and effective structure for responsibility Nicholas Brooke Yes Non-executive and governance. Robert Gordon Yes Non-executive The responsibility of the Board and its committees Michael Arnold Yes Non-executive is set out in Part 2 of the Company’s Articles of Nicholas Allen Yes Non-executive Association. Over time, these responsibilities have Don Lam No* Non-executive been further refined and clarified, as presented in Horst Geicke No** Non-executive this report. * Mr. Don Lam is an executive of the Manager, VinaCapital Investment Management Ltd and a director of Compliance to AIM Rules and Corporate Governance VinaCapital Group Ltd best practice ** Mr. Horst Geicke is the Chairman of VinaCapital Group Ltd The Company complied with the AIM rules and regulations. Furthermore the Company uses as guidelines other relevant best practice corporate governance frameworks, such as the UK Combined Code on Corporate Governance (‘the Combined Code’) and the Association of Investment Companies Code of Corporate Governance (‘the AIC Code’), which adapts the Combined Code specifically for investment companies.
VNL Annual Report 2010 33Organisation of corporate governance Shareholders Audit committee Investment committee The Board provides strategic direction and has an oversight Board of Directors role over the investment manager Nomination/Remuneration/ to ensure that shareholder Valuation committee Management evaluation committee returns are maximised. Investment teams Reporting and accounting The investment manager executes Corporate Investment manager Treasury the Board’s strategic direction communications/ within the agreed framework of Investor relations reward, incentive and control. Legal Risk and compliance Reporting and accounting The investment manager cascades Business development Operating unit down and apply the framework to Country, branch office all investment vehicles. Risk
34 VNL Annual Report 2010 The responsibility of the Board of Directors The Board is responsible for managing the Company on behalf of its shareholders. In order to create and deliver sustainable shareholder value, the Board established the objectives and policies of the Company, and ensured throughout the year that the overall strategic direction was delivered within the agreed framework of reward, incentive and control. Certain responsibilities of the Board are delegated to Board Committees to assist the Board in carrying out its functions and to ensure independent oversight of internal control and risk management. Each Board committee’s terms of reference endeavoured to follow the model terms of reference from the Institute of Chartered Secretaries and Administrators (ICSA). The committee’s terms of reference set out the committee administration requirements, duties and responsibilities of specific areas. The Committee Chairman reports to the Board on matters discussed and any proposals requiring decision making. The Board has held four scheduled Board meetings during the year, and used a structured agenda to ensure all key areas are reviewed over the course of the year. Summary of the members’ attendance and fees paid are shown below. Attendance (2) Current Audit Valuation RNME Board AC VC RNME Total Board Member Elected Board Committee Committee Committee meetings meetings meetings meetings Fee Position (AC) (VC) (RNME) (4) (4) (4) (1) USD Nicholas Brooke 2006 Chairman Member Member Member 4/4 4/4 4/4 2/2 40,000 Robert Gordon 2009 Member Member - Chairman 4/4 4/4 - 2/2 40,000 Michael Arnold 2009 Member - Chairman Member 4/4 - 4/4 2/2 40,000 Nicholas Allen(1) 2010 - Chairman - Member 1/1 1/1 - 1/1 - Don Lam 2006 Member - - - 4/4 - - - - Horst Geicke 2006 Member - - - 4/4 - - - - Total 120,000 (1) Nicholas Allen was appointed to the Board and Committees in June 2010. (2) Attendances of Board and Committee are from July 2009 to June 2010.
VNL Annual Report 2010 35Board Delegated Committees • Determined and agreed the framework for the day-to-day management of the Company’s the remuneration of the Board and Committee investment portfolio including the acquisition,Audit Committee members; monitoring and disposal of assets in line withThe committee monitored the effectiveness of the strategy adopted by the Board. For furtherinternal controls, internal audit activities, the risk • Reviewed the structure, size and composition information of the investment manager pleasemanagement system and financial reporting. (skill, knowledge and experience) of the Board refer to the AIM admission document.The committee’s terms of reference are based and recommended changes if necessary;on The Smith Guidance recommended in the Internal Controls and Risk Management • Evaluated the performance of the Company’sCode. The committee was also kept informed In 2009, the Board endeavoured to adopt The key third-party service providers, this includingof the annual audit and bi-annual review of the Turnbull Guidance as recommended by the Code the investment manager, nominated advisor,Company’s financial statements. It assessed the for internal controls and risk management. Thus company secretary, corporate broker, custodianexternal auditor’s independence and approved the internal audit function was introduced to and administrator;any non-audit services provided by the external the Company in the third quarter of 2009, asauditor. The committee also evaluated the • Reviewed and evaluated the Committee’s own the Board and investment manager sought toperformance of both the internal and external performance, duties and responsibilities and strengthen the internal control process to meetauditors following each audit cycle. At each Board concluded that it and its members are effective. the Company’s needs. The Board appointedmeeting, the committee’s Chairman presented the PricewaterhouseCoopers (PwC) Vietnam as the The committee’s Chairman reported thecommittee’s findings and proposals to the Board. internal auditor at the time. The internal audit committee’s findings and proposals to the BoardThe committee met four times during the year work was performed based on an internal audit for approval.(three times in person and once by telephone call). plan determined and in agreement with the Audit Investment Committee Committee. The internal auditor participated in allValuation Committee The committee met many times during the year audit committee meetings. The audit committeeThe committee ensured the investment manager to consider and approve real estate projects that has decided to continue to outsource the internalvaluation process and policies are consistent, the Investment Manager felt were suitable for audit function and to reappoint PwC as the internaltransparent and valuation results are determined investment by VNL. The committee is comprised auditor for 2011.on an appropriate basis. The committee of individuals with financial and businessChairman presented the committee’s findings and Sincerely, backgrounds combined with extensive hands-onrecommendations to the Board for final decisions on local experience. The current committee membersall valuations. The committee met four times during include Nicholas Brooke, Horst Geicke, Don Lamthe year. and David Henry. ___________________________________________Remuneration/ Nomination/ Management Investment Manager Nicholas BrookeEngagement/ Evaluation Committee VNL has given VinaCapital, the investment ChairmanThe committee met twice during the year and manager, overall responsibility for conducting VinaLand Limitedperformed multiple roles. The committee: