28 Dec 2007 11:35
VinaLand Limited28 December 2007 28 December 2007 Vinaland Limited (the "Company") Annual Report and Accounts We are pleased to present the annual report for Vinaland Limited (AIM: VNL) andits subsidiaries for the year ended 30 June 2007, extracts of which are includedbelow and which is available on the Company's website www.vinaland-fund.com Chi NguyenInvestor RelationsVinaland LimitedTel: + 84 8 821 9930 Philip SecrettGrant Thornton Corporate FinanceTel: +44 (0) 20 7383 5100 Chairman's Statement Dear Shareholders, We are pleased to present the annual financial statements of VinaLand Limited(AIM: VNL) for the year ended 30 June 2007. Economic growth and growing investor confidence in Vietnam has driveninvestments in Vietnamese equities and real estate to record levels with landprices in particular, doubling and even tripling in many areas of the country. With its establishment in March 2006, the launch of VNL was perfectly timed tocapitalise on opportunities in Vietnam's real estate sector. Also, realisingearlier this year that that initial USD $205 million raised would all beinvested by May 2007, the Company raised an additional USD $407 million in March2007 through the issuance of 295 million new shares. Once again the offer wasover-subscribed and scaling was applied. We expect that these funds will befully invested by mid-2008. The investment team has aggressively pursued real estate investmentopportunities over the year and has built up an attractive portfolio of 26properties, either licensed or pending licensing, in a very short time. With anextensive pipeline of other projects, we expect that the total number ofinvestments could double before the end 2008, thus achieving our goal of makingVNL one of the largest property investors and developers in Vietnam, if not theregion. Since 30 June 2006 the net asset value (NAV) per share has increased from USD$0.98 to USD $1.26 (an increase of 29%). The increase in NAV per share occurredas a consequence of revaluation gains on properties held at 30 June 2007 andshare premiums received in March. It is especially pleasing to note that therevaluation gains recognised at 30 June 2007 were approximately USD $42 million,representing a 26% return in less than one year on the properties that wererevalued. All things considered, VNL has made considerable progress since it wasestablished in 2006. Despite these achievements, we appreciate that VNL is onlybeginning to establish itself a major property investment company. The Boardand investment manager remain committed to achieving this ultimate goal and, indoing so, expect that the Company will generate superior returns forshareholders over the coming years. Thank you for your continued support. Horst GeickeChairmanVinaLand Limited Consolidated balance sheet Notes 30 June 2007 30 June 2006 USD USDAssetsNon-currentInvestment property 8 97,185,375 -Property, plant and equipment 9 114,046,850 -Deferred tax assets 355,514Investments in associates 10 - 15,997,102Loan receivables 11 6,817,520 -Prepayments for operating leases 12 13,297,405 -________________________________________________________________________________________________________ 231,702,664 15,997,102 CurrentInventories 13 276,330 -Receivables from related parties 14 22,825,000 -Trade and other receivables 15 33,198,812 4,978,806Financial assets at fair value through profit and loss 16 29,460,259 4,382,670Deposits for acquisitions of investments 17 72,729,074 -Cash and cash equivalents 18 350,898,145 174,787,778________________________________________________________________________________________________________ 509,387,620 184,149,254________________________________________________________________________________________________________Total assets 741,090,284 200,146,356________________________________________________________________________________________________________ Notes 30 June 2007 30 June 2006 USD USDEquityEquity attributable to equity shareholders of theCompanyShare capital 19 4,999,676 2,048,448Additional paid-in capital 20 588,870,239 196,414,163Revaluation reserve 21 776,551 -Translation reserve (529,900) -Retained earnings 34,755,547 120,510________________________________________________________________________________________________________ 628,872,113 198,583,121________________________________________________________________________________________________________ Minority interests 54,010,758 -________________________________________________________________________________________________________Total equity 682,882,871 198,583,121________________________________________________________________________________________________________ LiabilitiesNon-current liabilitiesLong-term borrowings 22 4,705,468 -Other liabilities 577,382 -________________________________________________________________________________________________________ 5,282,850 -Current liabilitiesPayables to related parties 23 40,583,179 1,204,498Trade and other payables 24 11,061,590 358,737Short-term borrowings 22 1,279,794 - 52,924,563 1,563,235________________________________________________________________________________________________________Total liabilities 58,207,413 1,563,235________________________________________________________________________________________________________Total equity and liabilities 741,090,284 200,146,356________________________________________________________________________________________________________ Net assets per share (USD per share) 1.26 0.98________________________________________________________________________________________________________ Consolidated statement of changes in equity Equity attributable to equity holders of the Group Minority Total interests equity Additional Share paid-in Translation Revaluation Retained capital capital reserve reserve earnings USD USD USD USD USD USD USD 1 July 2005 - - - - - - -Profit for the year - - - - 120,510 - 120,510ended 30 June 2006______________________________________________________________________________________________________________Total recognised - - - - 120,510 - 120,510gains for the yearIssue of new shares 2,048,448 196,414,163 - - - - 198,462,611______________________________________________________________________________________________________________30 June 2006/1 July 2,048,448 196,414,163 - - 120,510 - 198,583,1212006Currency translation - - (529,900) - - (176,734) (706,634)Profit for the year - - - - 34,635,037 15,341,293 49,976,330ended 30 June 2007______________________________________________________________________________________________________________Total recognised - - (529,900) - 34,635,037 15,164,559 48,269,696gains for the yearIssue of new shares 2,951,228 392,456,076 - - - - 395,407,304Acquisition of - - - - - 38,143,605 38,143,605subsidiariesRevaluation reserves - - - 776,551 - 702,594 1,479,145______________________________________________________________________________________________________________30 June 2007 4,999,676 588,870,239 (529,900) 776,551 34,755,547 54,010,758 682,882,871______________________________________________________________________________________________________________ Consolidated statement of income Note Year ended 30 June Year ended 30 2007 June 2006 USD USDRevenue 17,458,993 -Cost of sales 26 (7,047,717) -________________________________________________________________________________________________________Gross profit 10,411,276 - Other income 25 7,701,625 -Administration expenses 26 (17,291,613) (1,703,876)Other operating expenses 26 (1,456,868) (48,319)Other net changes in fair value of financial assets at 27 3,084,901 -fair value through profit or lossGain on fair value adjustment of investment properties 28 38,529,935 -________________________________________________________________________________________________________Profit/(loss) from operations 40,979,256 (1,752,195) Financial income 29 11,836,487 1,872,705Finance costs (2,594,112) -________________________________________________________________________________________________________ 9,242,375 1,872,705________________________________________________________________________________________________________Profit before tax 50,221,631 120,510Income tax 30 (245,301) -________________________________________________________________________________________________________Net profit 49,976,330 120,510========================================================================================================Attributable to shareholders 34,635,037 120,510Attributable to minority interests 15,341,293 -Earnings per share - basic and diluted ($ per share) 31 0.12 0.00________________________________________________________________________________________________________ Consolidated statement of cash flows Year ended 30 Year ended 30 June 2007 June 2006 USD USDOperating activitiesNet profit before tax 50,221,631 120,510Adjustment for:Depreciation and amortisation 3,385,849 -Gain on revaluation of financial assets (3,084,901) -Gain on revaluation of investment properties (38,529,935) -Unrealised foreign exchange gain (451,446) -Interest expenses 2,594,112 -Interest income (11,836,487) (662,068)__________________________________________________________________________________________________________Net gain/(loss) before changes in working capital 2,298,823 (541,558)Change in trade and other receivables (25,688,902) (5,527,375)Change in inventory (17,559) -Change in trade and other payables (14,514,913) 1,563,235__________________________________________________________________________________________________________Net cash generated from operating activities (37,922,551) (4,505,698)Investing activitiesInterest received 10,833,901 1,210,637Purchases of property, plant and equipment and other non-current assets (27,901,790) -Acquisition of subsidiaries, net of cash (62,827,628) (15,997,102)Purchases of financial assets (21,992,688) (4,382,670)Deposit for acquisition of investments (72,729,074) -Proceeds of loans repaid by related parties 35,000,000 -Loans provided to related parties (57,825,000) -__________________________________________________________________________________________________________Net cash used in investing activities (197,442,279) (19,169,135)__________________________________________________________________________________________________________ Year ended 30 Year ended 30 June 2007 June 2006 USD USDFinancing activities Proceeds from shares issued 395,407,304 198,462,611Proceeds of loans from related parties 19,548,744 -Proceeds of bank loans 113,261 -Repayments of bank loans (1,000,000) -Interest paid (2,594,112) -__________________________________________________________________________________________________________Net cash generated from financing activities 411,475,197 198,462,611Net increase in cash and cash equivalents for the year 176,110,367 174,787,778Cash and cash equivalents at the beginning of the year 174,787,778 -__________________________________________________________________________________________________________Cash and cash equivalents at end of the year 350,898,145 174,787,778========================================================================================================== Notes to the consolidated financial statements 1 General information VinaLand Limited is a limited liability company incorporated in the CaymanIslands. The registered office of the Company is PO Box 309GT, Ugland House,South Church Street, George Town, Grand Cayman, Cayman Islands. The Company'sprimary objective is to focus on key growth segments within Vietnam's emergingreal estate market, namely residential, office, retail, industrial and leisureprojects in Vietnam and the surrounding countries in Asia. The Company islisted on the London Stock Exchange's Alternative Investment Market under theticker symbol VNL. The principal activities of its subsidiaries are set out innote 6 to the financial statements. The consolidated financial statements have been prepared in accordance withInternational Financial Reporting Standards (IFRS) as developed and published bythe International Accounting Standards Board (IASB). The consolidated financial statements for the year ended 30 June 2007 wereapproved for issue by the Board of Directors on 27 December 2007. 2 Adoption of new and amended standards and interpretations The IASB and the International Financial reporting Interpretations Committeehave issued various standards and interpretations with an effective date afterthe date of this financial information. The following standards, amendments and interpretations to published standardsare mandatory for accounting periods beginning on or after 1 January 2007 butthey are not relevant to the Group's operations: • IFRS 4, 'Insurance contracts';• IFRIC 7, 'Applying the restatement approach under IAS 29, Financial reporting in hyper-inflationary economies'; and• IFRIC 9, 'Re-assessment of embedded derivatives'. The following new standards and interpretations, which are yet to becomemandatory, have not been applied in the 2007 Group financial statements. • IFRIC 14, 'IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction';• IFRIC 13, 'Customer Loyalty Programmes';• IFRIC 12, 'Service Concession Arrangements';• IFRIC 11, 'IFRS 2 Group and Treasury Share Transactions';• IAS 23, 'Borrowing Costs' (revised 2007). The Group has not elected for early adoption of the standards andinterpretations that have been issued as they are not yet effective. The mostrelevant for the Group are the amended IAS 1 "Presentation of the FinancialStatements" (effective for annual periods beginning on or after 1 January 2007),IFRS 7 "Financial Instruments: Disclosures" (effective for annual periodsbeginning on or after 1 January 2007) and IFRS 8 "Operating Segments" (effectivefor annual periods beginning on or after 1 January 2009). Upon adoption of amended IAS 1, the Group will disclose its capital managementobjectives, policies and procedures in each annual financial report and willhave its capital movements and other gains and losses presented separately inthe consolidated statement of changes in equity and statement of recognisedincome and expenses. Upon adoption of IFRS 7, the Group will disclose additionalinformation about its financial instruments, their significance and the natureand extent of risks to which they give rise. More specifically, the Group willbe required to disclose the fair value of its financial instruments and its riskexposure in greater detail. There will be no impact on reported income or netassets. Upon adoption of IFRS 8, the Group will disclose segmental informationwhen evaluating performance and deciding how to allocate resources tooperations. The Directors do not anticipate that the adoption of these standards andinterpretations will have a material impact on the consolidated financialstatements in the period of initial application. 3 Summary of significant accounting policies 3.1 Basis of presentation The significant accounting policies that have been used in the preparation ofthese consolidated financial statements are summarised below. These policieshave been consistently applied to all the years presented unless otherwisestated. The consolidated financial statements have been prepared using the historicalcost convention, as modified by the revaluation of investment property,leasehold land and certain financial assets and financial liabilities, themeasurement bases of which are described in the accounting policies below. The preparation of consolidated financial statements in accordance with IFRSrequires the use of certain accounting estimates and assumptions. Although theseestimates are based on management's best knowledge of current events andactions, actual results may ultimately differ from those estimates. The areasinvolving a higher degree of judgment or complexity, or areas where assumptionsand estimates are significant to the consolidated financial statements, aredisclosed in Note 4 to the consolidated financial statements. 3.2 Basis of consolidation The consolidated financial statements of the Group for the year ended 30 June2007 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 thefinancial and operating policies so as to obtain benefits from their activities.In assessing control, potential voting rights that presently are exercisable orconvertible, along with contractual arrangements, are taken into account.Subsidiaries are fully consolidated from the date on which control istransferred to the Group. They are excluded from consolidation from the datethat the control ceases. In addition, acquired subsidiaries are subject to application of the purchasemethod. This involves the revaluation at fair value of all identifiable assetsand liabilities, including contingent liabilities of the subsidiary, at theacquisition date, regardless of whether or not they were recorded in thefinancial statements of the subsidiary prior to acquisition. On initialrecognition, the assets and liabilities of the subsidiary are included in theconsolidated balance sheet at their revalued amounts, which are also used as thebasis for subsequent measurement in accordance with the Group's accountingpolicies. Goodwill represents the excess of acquisition cost over the fair valueof the Group's share of the identifiable net assets of the acquired subsidiaryat the date of acquisition. Negative goodwill is immediately allocated to thestatement of income as at the acquisition date. All inter-company balances and significant inter-company transactions andresulting unrealised profits or losses (unless losses provide evidence ofimpairment) are eliminated on consolidation. A minority interest represents the portion of the profit or loss and net assetsof a subsidiary attributable to an equity interest that is not owned by theGroup. It is based upon the minority's share of post-acquisition fair values ofthe subsidiary's identifiable assets and liabilities, except where the lossesapplicable to the minority in the subsidiary exceed the minority interest in theequity of that subsidiary. In such cases, the excess and further lossesapplicable 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 thelosses. When the subsidiary subsequently reports profits, the profits applicableto the minority are taken to the consolidated statement of income until theminority's share of losses previously taken to the consolidated statement ofincome is fully recovered. Changes in ownership interests in a subsidiary that do not result in gaining orlosing control of the subsidiary are accounted for using the parent entitymethod of accounting whereby the difference between the consideration paid andthe proportionate change in the parent entity's interest in the carrying valueof the subsidiary's net assets is recorded as additional goodwill. No adjustmentis made to the carrying value of the subsidiary's net assets as reported in theconsolidated financial statements. 3.4 Associates and jointly controlled entities Associates are those entities over which the Group is able to exert significantinfluence, generally accompanying a shareholding of between 20% to 50% of votingrights, but which are neither subsidiaries nor investments in joint ventures. Inthe consolidated financial statements, investments in associates are initiallyrecorded at cost and subsequently accounted for using the equity method. A jointly controlled entity is a contractual arrangement whereby two or moreparties undertake an economic activity where the strategic, financial andoperating decisions relating to the activity require the unanimous consent ofthe venturers. Under the equity method, the Group's interest in an associate or jointlycontrolled entity is carried at cost and adjusted for the post-acquisitionchanges in the Group's share of the associate's or jointly controlled entity'snet assets less any identified impairment loss, unless it is classified as heldfor sale or included in a disposal group that is classified as held for sale.The consolidated statement of income includes the Group's share of thepost-acquisition, post-tax results of the associate or jointly controlled entityfor the year, including any impairment loss on goodwill relating to theinvestment in associate or jointly controlled entity recognised for the year. When the Group's share of losses in an associate or jointly controlled entityequals or exceeds its interest in the associate 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 controlledentity. Any excess of the cost of acquisition over the Group's share of the net fairvalue of the identifiable assets, liabilities and contingent liabilities of anassociate or jointly controlled entity recognised at the date of acquisition isrecognised as goodwill. The cost of acquisition is measured at the aggregate ofthe fair values, at the date of exchange, of assets given, liabilities incurredor assumed, and equity instruments issued by the Group, plus any costs directlyattributable to the investment. Goodwill is included within the carrying amount of an investment and is assessedfor impairment as part of the investment. After the application of the equitymethod, the Group determines whether it is necessary to recognise an additionalimpairment loss on the Group's investments in its associates and jointlycontrolled entities. At each balance sheet date, the Group determines whetherthere is any objective evidence that an investment in an associate or jointlycontrolled entity is impaired. If such indications are identified, the Groupcalculates the amount of impairment as being the difference between therecoverable amount of the associate or jointly controlled entity and itsrespective carrying amount. Unrealised gains on transactions between the Group and its associates andjointly controlled entities are eliminated to the extent of the Group's interestin an associate or jointly controlled entity. Unrealised losses are alsoeliminated unless the transaction provides evidence of an impairment of theasset transferred. 3.5 Functional and presentation currency The consolidated financial statements are presented in United States Dollars(USD) ("the presentation currency"). The financial statements of eachconsolidated entity are prepared in either USD or the currency of the primaryeconomic environment in which the entity operates ("the functional currency"),which for most investments is United States Dollars. USD is used as thepresentation currency because it is the primary basis for the measurement of theperformance of the Group (specifically changes in the Net Asset Value of theGroup) and a large proportion of significant transactions of the Group aredenominated in USD. 3.6 Foreign currency translation In the individual financial statements of the consolidated entities,transactions arising in currencies other than the reporting currency of theindividual entity are translated at exchange rates in effect on the transactiondates. Monetary assets and liabilities denominated in currencies other than thereporting currency of the individual entity are translated at the exchange ratesin effect at the balance sheet date. Translation gains and losses and expensesrelating to foreign exchange transactions are recorded in the consolidatedstatement of income. In the consolidated financial statements all separate financial statements ofsubsidiaries, if originally presented in a currency different from the Group'spresentation currency, are converted into USD. Assets and liabilities aretranslated into USD at the closing rate of the balance sheet date. Income andexpenses are converted into the Group's presentation currency at the averagerates over the reporting period. Any differences arising from this translationare charged to the currency translation reserve in equity. 3.7 Revenue recognition Goods and services rendered Revenue from sale of goods is recognised in the consolidated statement of incomewhen the significant risks and rewards of ownership have been transferred to thebuyer. Revenue from services rendered is recognised in the statement of incomein proportion to the stage of completion of the transaction at the balance sheetdate. No revenue is recognised if there are significant uncertainties regardingthe ultimate receipt of the proceeds or the reasonable estimation of theassociated costs of the sale, or the possibility of the return of the goods. Rental income Rental income from investment property is recognised in the consolidatedstatement of income on a straight-line basis over the term of the lease. Leaseincentives granted are recognised as an integral part of the total rentalincome. Interest income Interest income is recognised on an accrual and, if applicable, effective yieldbasis. Dividend income Dividend income is recorded when the Group's right to receive the dividend isestablished. 3.8 Expense recognition Borrowing costs Borrowing costs, comprising interest and related costs, are recognised as anexpense in the period in which they are incurred, except for borrowing costsrelating to the construction of property, plant and equipment and investmentproperty under development, which are capitalised as a cost of the relatedassets. Operating lease payments Payments made under operating leases are recognised in the consolidatedstatement of income on a straight-line basis over the term of the lease. Leaseincentives received are recognised in the statement of income as an integralpart of the total lease expense. 3.9 Goodwill Goodwill represents the excess of the cost of acquisition of subsidiarycompanies and associated companies over the Group's share of the fair value oftheir identifiable net assets at the date of acquisition. Goodwill is recognised at cost less any accumulated impairment losses. Thecarrying value of goodwill is subject to an annual impairment review andwhenever events or changes in circumstances indicate that it may not berecoverable. An impairment charge will be recognised in the statement of incomewhen the results of such a review indicate that the carrying value of goodwillis impaired (see accounting policy 3.17). Negative goodwill represents the excess of the Group's interest in the fairvalue of identifiable net assets and liabilities over cost of acquisition. It isrecognised directly in the statement of income at the date of acquisition. Gains and losses on disposal of an entity include the carrying amount ofgoodwill relating to the entity disposed of. 3.10 Investment property Investment properties are properties owned or held under finance lease to earnrentals or capital appreciation, or both, or held for a currently undetermineduse. Property held under operating leases (including leasehold land) that wouldotherwise meet the definition of investment property is classified as investmentproperty on a property by property basis. If a leased property does not meetthis definition it is recorded as an operating lease. Investment properties are stated at fair value. Two independent valuationcompanies, with appropriately recognised professional qualifications and recentexperience in the location and category being valued, value each property eachyear. On the valuation date, the fair value is estimated assuming that there isan agreement between a willing buyer and a willing seller in an arm's lengthtransaction after proper marketing; wherein the parties had each actedknowledgeably, prudently and without compulsion. The valuations are preparedbased upon direct comparison with sales of other similar properties in the areaand the expected future discounted cash flows of a property using a yield thatreflects the risks inherent in those cash flows. Valuations are reviewed andapproved by the Valuation Committee of the Board of Directors. The ValuationCommittee may adjust valuations if there are factors that the externalindependent valuers have not considered in their determination of a property'sfair value. Any gain or loss arising from a change in fair value is recognised in the incomestatement. Rental income from investment property is accounted for as describedin the accounting policy 3.7. When an item of property, plant and equipment is transferred to investmentproperty following a change in its use, any differences arising at the date oftransfer between the carrying amount of the item immediately prior to transferand its fair value is recognised directly in equity if it is a gain. Upondisposal of the item the gain is transferred to retained earnings. Any lossarising in this manner is recognised in the statement of income immediately. Property where more than 10% of the property is occupied by the Group for theproduction or supply of goods and services, or for administration purposes, isaccounted for as property, plant and equipment (see accounting policy 3.12). 3.11 Investment property under development Property that is being constructed or developed for future use as investmentproperty is classified as investment property under development (developmentprojects) and stated at cost until construction or development is complete, atwhich time it is reclassified and subsequently accounted for as investmentproperty. At the date of transfer, the difference between fair value and cost isrecorded as income in the consolidated statement of income. All costs directly associated with the purchase and construction of a property,and all subsequent capital expenditures for the development qualifying asacquisition costs are capitalised. Borrowing costs are capitalised if they are directly attributable to theacquisition, construction or production of a qualifying asset. Capitalisation ofborrowing costs commences when the activities to prepare the asset are inprogress and expenditures and borrowing costs are being incurred. Capitalisationof borrowing costs continues until the assets are substantially ready for theirintended use. If the resulting carrying amount of the asset exceeds itsrecoverable amount, an impairment loss is recognised. The capitalisation rate isarrived at by reference to the actual rate payable on borrowings for developmentpurposes or, with regard to that part of the development cost financed out ofgeneral funds, to the average rate. 3.12 Property, plant and equipment Owned assets All property, plant and equipment, except buildings, are stated at cost lessaccumulated depreciation and impairment losses (see accounting policy 3.17). Thecost of self-constructed assets includes the cost of materials, direct labour,overheads and the initial estimate of the costs of dismantling and removing theitems and restoring the site on which they are located. Buildings are revalued to fair value in accordance with the methods set out inaccounting policy 3.10. Any surplus arising on the revaluation is recognised ina revaluation reserve within equity, except to the extent that the surplusreverses a previous revaluation deficit on the building charged to theconsolidated statement of income, in which case a credit to that extent isrecognised in the consolidated statement of income. Any deficit on revaluationis charged in the consolidated statement of income except to the extent that itreverses a previous revaluation surplus on a building, in which case it is takendirectly to the revaluation reserve. If an investment property is reclassified as property, plant and equipment itsfair value at the date of reclassification becomes its deemed cost forsubsequent accounting. Where parts of an item of property, plant and equipment have different usefullives, they are accounted for as separate items of property, plant andequipment. Leased assets Leases under the terms of which the Group assumes substantially all the risksand rewards of ownership are classified as finance leases. Property, plant andequipment and investment property acquired by way of a finance lease is statedat an amount equal to the lower of its fair value and the present value of theminimum lease payments at inception of the lease, less accumulated depreciationand impairment losses. Subsequent expenditure The Group recognises in the carrying amount of an item of property, plant andequipment the cost of replacing part of such an item when that cost is incurredif it is probable that the future economic benefits embodied with the item willflow to the Group and the cost of the item can be measured reliably. Thecarrying values of any parts replaced as a result of such replacements areexpensed at the time of replacement. All other costs associated with themaintenance of property, plant and equipment are recognised in the statement ofincome as incurred. Depreciation Depreciation is charged to the statement of income on a straight-line basis overthe estimated useful lives of property, plant and equipment, and majorcomponents that are accounted for separately. The estimated useful lives are asfollows: Buildings 33 to 50 yearsEquipment 2 to 20 yearsFurniture and fixtures 3 to 25 yearsMotor vehicles 5 to 10 years Assets held under finance leases which do not transfer title to the assets tothe Group at the end of the lease are depreciated over the shorter of theestimated useful lives shown above and the term of the lease. 3.13 Property held for sale Property intended for sale in the ordinary course of business or propertydeveloped for sale is classified as trading property and is accounted for asinventory. Leasehold land upon which trading properties are constructed, or arein the process of construction, is classified as investment property. Property held for sale is stated at the lower of cost and net realisable value.Cost includes development costs and other direct costs attributable to theproperties concerned until they reach a saleable state. Net realisable valuerepresents the estimated selling price in the ordinary course of business lessall estimated costs of completion and the estimated costs necessary to make thesale. 3.14 Leases Leases under the terms of which the Group assumes substantially all the risksand rewards of ownership are classified as finance leases (see accounting policy3.12). Leases which do not transfer substantially all the risks and rewards ofownership to the Group are classified as operating leases. Where the Group hasthe use of an asset held under an operating lease, payments made under the leaseare charged to the statement of income on a straight line basis over the term ofthe lease. Prepayments for operating leases represent property held underoperating leases where a portion, or all, of the lease payments have been paidin advance, and the properties cannot be classified as an investment property. 3.15 Financial assets Financial assets are divided into the following categories: loans andreceivables; and financial assets at fair value through profit or loss. Management determines the classification of its financial assets at initialrecognition depending on the purpose for which the financial assets wereacquired. Where allowed and appropriate management re-evaluates thisdesignation at each reporting date. The designation of financial assets isbased on the investment strategy set out in the Group's Admission Document tothe London Stock Exchange's Alternative Investment Market, dated 16 March 2006. All financial assets are recognised when, and only when, the Group becomes aparty to the contractual provisions of the instrument. When financial assets arerecognised initially, they are measured at fair value, plus, in the case ofinvestments not at a fair value through profit or loss, directly attributabletransaction costs. Derecognition of financial assets occurs when the rights to receive cash flowsfrom the investments expires or are transferred and substantially all of therisks and rewards of ownership have been transferred. At each balance sheetdate, financial assets are reviewed to assess whether there is objectiveevidence of impairment. If any such evidence exists, any impairment loss isdetermined and recognised based on the classification of the financial assets. The Group's financial assets consist primarily of unlisted equities, bonds,loans and receivables. Loans and receivables All loans and receivables, except trustee loans, are non-derivative financialassets with fixed or determinable pay-ments that are not quoted in an activemarket. After initial recognition these are measured at amortised cost usingthe effective interest method, less provision for impairment. Any change intheir value is recognised in profit or loss. The Group's trade and most otherreceivables fall into this category of financial instruments. Discounting,however, is omitted where the effect of discounting is immaterial. Significant receivables are considered for impairment on a case-by-case basiswhen they are overdue at the balance sheet date or when objective evidence isreceived that a specific counterparty will default Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss include financial assetsthat are either classified as held for trading or are designated by the entityto be carried at fair value through profit or loss upon initial recognition. Bydefinition, all derivative financial instruments that do not qualify for hedgeaccounting fall into this category. Other financial assets at fair valuethrough profit or loss held by the Company include listed and unlistedsecurities and trustee loans. Any gain or loss arising from derivative financial instruments is based onchanges in fair value, which is determined by direct reference to active markettransactions or using industry standard valuation techniques where no activemarket exists. Financial assets at fair value through profit and loss include trustee loans tobanks and other parties where the Group receives interest and other income onthe loans calculated based on the proceeds from the sales of specific assetsheld by the counterparties. Fair value is determined based on the expectedfuture discounted cash flows from each loan. 3.16 Inventories Inventories are stated at the lower of cost and net realisable value. Costincludes all expenses directly attributable to the manufacturing process as wellas suitable portions of related pro-duction overheads, based on normal operatingcapacity. Financing costs are not taken into consideration. Costs ofordinarily interchangeable items are assigned using the first in, first out costformula. Net realisable value is the estimated selling price in the or-di-narycourse of business less any applicable selling expenses. 3.17 Impairment of assets The Group's goodwill; operating lease prepayments; property, plant andequipment; property held for development; and interests in associates andjointly controlled entities are subject to impairment testing. For the purpose of assessing impairment, assets are grouped at the lowest levelsfor which there are separately identifiable cash flows (cash-generating units).As a result, some assets are tested individually for impairment and some aretested at cash-generating unit level. Goodwill in particular is allocated tothose cash-generating units that are expected to benefit from synergies of therelated business combination and represent the lowest level within the Group atwhich management controls the related cash flows. All individual assets or cash generating units are tested for impairmentwhenever events or changes in circumstances indicate that the carrying amountmay not be recoverable. An impairment loss is recognised as an expense immediately for the amount bywhich the asset's carrying amount exceeds its recoverable amount unless therelevant asset is carried at a revalued amount under the Group's accountingpolicy, in which case the impairment loss is treated as a revaluation decreaseaccording to that policy. The recoverable amount is the higher of fair value,reflecting market conditions less costs to sell, and value in use. In assessingvalue in use, the estimated future cash flows are discounted to their presentvalue using a pre-tax discount rate that reflects current market assessments ofthe time value of money and the risks specific to the assets. 3.18 Income taxes Current income tax assets and/or liabilities comprise those obligations to, orclaims from, fiscal authorities relating to the current or prior reportingperiods that are unpaid at the balance sheet date. They are calculated accordingto the tax rates and tax laws applicable to the fiscal periods to which theyrelate based on the taxable profit for the year. All changes to current taxassets or liabilities are recognised as a component of tax expense in thestatement of income. Deferred income taxes are calculated using the liability method on temporarydifferences. This involves the comparison of the carrying amounts of assets andliabilities in the consolidated financial statements with their respective taxbases. In addition, tax losses available to be carried forward as well as otherincome tax credits to the Group are assessed for recognition as deferred taxassets. Deferred tax liabilities are always provided for in full. Deferred tax assetsare recognised to the extent that it is probable that they will be able to beoffset against future taxable income. However, the deferred income tax is notaccounted for if it arises from initial recognition of an asset or liability ina transaction other than a business combination that at the time of thetransaction affects neither accounting nor taxable profit or loss. Deferred tax assets and liabilities are calculated, without discounting, at taxrates that are expected to apply to their respective period of realisation,provided they are enacted or substantially enacted at the balance sheet date.Most changes in deferred tax assets or liabilities are recognised as a componentof tax expense in the statement of income. Only changes in deferred tax assetsor liabilities that relate to a change in value of assets or liabilities that ischarged directly to equity are charged or credited directly to equity. 3.19 Cash and cash equivalents Cash and cash equivalents include cash at bank and in hand as well as short termhighly liquid investments such as money market instruments and bank depositswith an original maturity term of not more than three months. 3.20 Equity Share capital is determined using the nominal value of shares that have beenissued. Additional paid-in capital includes any premiums received on the initialissuance of the share capital. Any transaction costs associated with the issuingof shares are deducted from additional paid-in capital, net of any relatedincome tax benefits. Revaluation reserve represents the surplus arising on the revaluation of theGroup's owned buildings which are classified under property, plant andequipment. Currency translation differences on net investment in foreign operations areincluded in the translation reserve. Retained earnings include all current and prior period results as disclosed inthe consolidated statement of changes in equity. 3.21 Financial liabilities The Group's financial liabilities include trade and other payables and otherliabilities. Financial liabilities are recognised when the Group becomes a party to thecontractual agreements of the instrument. All interest related charges arerecognised as an expense in finance costs in the statement of income. Trade payables are recognised initially at their fair value and subsequentlymeasured at amortised cost, using the effective interest rate method. Borrowings are raised for support of long term funding of the Group'sinvestments. They are recognised at fair value. A financial liability is derecognised when the obligation under the liability isdischarged or cancelled or expires. 3.22 Provisions, contingent liabilities and contingent assets Provisions are recognised when present obligations will probably lead to anoutflow of economic resources from the Group that can be reliably estimated. Apresent obligation arises from the presence of a legal or constructiveobligation that has resulted from past events. Provisions are not re-cognisedfor future operating losses. Provisions are measured at the estimated expenditure required to settle thepresent obligation, based on the most reliable evidence available at the balancesheet date, including the risks and uncertainties associated with the presentobligation. Where there are a num-ber of similar obligations, the likelihoodthat an outflow will be required in settlement is determined by considering theclass of obligations as a whole. Long term pro-vi-sions are discounted totheir present values, where the time value of money is material. All provisions are reviewed at each balance sheet date and adjusted to reflectthe current best estimate of Group's management. The Group does not recognise a contingent liability but discloses its existencein the financial statements. A contingent liability is a possible obligationthat arises from past events whose existence will be confirmed by uncertainfuture events beyond the control of the Group or a present obligation that isnot recognised because it is not probable that an outflow of resources will berequired to settle the obligation. A contingent liability also arises in therare circumstance where there is a liability that cannot be recognised becauseit cannot be measured reliably. A contingent asset is a possible asset that arises from past events that'sexistence will be confirmed by uncertain future events beyond the control of theGroup. The Group does not recognise contingent assets but discloses theirexistence when inflows of economic benefits are probable, but not virtuallycertain. 3.23 Related parties Parties are considered to be related if one party has the ability to control theother party or exercise significant influence over the other party in makingfinancial or operational decisions. Parties are considered to be related to theGroup if: 1. directly or indirectly, a party controls, is controlled by, or is under common control with the Group; has an interest in the Group that gives it significant influence over the Group; or has joint control over the Group; 2. a party is a jointly-controlled entity; 3. a party is an associate; or 4. a party is a member of the key management personnel of the Group. 5. a party is a close family member of the above categories. 3.24 Segment reporting An investment segment is a group of assets that are subject to risks and returnsthat are different from those of other business segments. A geographical segment is a particular economic environment that is subject torisks and return that are different from those of segments operating in othereconomic environments. 4 Critical accounting estimates and judgements When preparing the financial statements the Group makes estimates andassumptions concerning the future. The resulting accounting estimates will, bydefinition, seldom equal the related actual results. The estimates andassumptions that have a significant risk of causing a material adjustment to thecarrying amounts of assets and liabilities within the next financial year arediscussed below: Fair value of investment properties and buildings The investment properties and buildings of the Group are stated at fair value inaccordance with the accounting policies. The fair values of investmentproperties and buildings have been determined by independent professionalvaluers including: CB Richard Ellis; Chesterton Petty; Jones Lang LaSalle; andSallmanns. These valuations are based on certain assumptions, which are subjectto uncertainty and might materially differ from the actual results. Impairment of trade and other receivables The Group's management determines the provision for impairment of trade andother receivables on a regular basis. This estimate is based on the credithistory of its customers and prevailing market conditions. Fair value of financial instruments The fair value of financial instruments that are not traded in an active market(for example, unlisted securities) is determined by using industry standardvaluation techniques. The Group uses its judgement to select a variety ofmethods and make assumptions that are mainly based on market conditions existingat each balance sheet date. Impairment of assets The Group's goodwill in associates and jointly controlled entities are subjectto impairment testing in accordance with the accounting policy stated in note3.17. 5 Segment reporting Segment information is presented in respect to the Group's investment andgeographical segments. The primary format, investment segment, is based on theinvestment manager's management and monitoring of investments. Investments areallocated into five main segments: four real estate sectors: commercial;residential; hospitality; and mixed use, and cash (including term deposits andbonds). The Group's secondary reporting format, geographical segments, includesnorth, central and south Vietnam, and outside Vietnam. Year ended 30 June 2007 Vietnam Asia North Central South Pacific Total USD USD USD USD USDIncomeReal estate Commercial 1,417,505 - - - 1,417,505 Residential - - 3,085,000 - 3,085,000 Hospitality 7,230,409 2,995,003 15,290,996 - 25,516,408 Mixed used - 16,443,112 20,189,893 - 36,633,005Cash - - 7,045,357 4,914,666 11,960,023______________________________________________________________________________________________________ 8,647,914 19,438,115 45,611,246 4,914,666 78,611,941______________________________________________________________________________________________________ Total assetsReal estate Commercial 10,029,393 - - - 10,029,393 Residential 7,500,000 - 8,474,720 - 15,974,720 Hospitality 78,966,225 21,948,630 36,386,037 - 137,300,892 Mixed used 45,083,045 51,094,431 130,354,144 - 226,531,620Cash 4,046,715 662,879 84,675,847 261,512,704 350,898,145______________________________________________________________________________________________________ 145,625,378 73,705,940 259,890,748 261,512,704 740,734,770______________________________________________________________________________________________________ Year ended 30 June 2006 Vietnam Asia North Central South Pacific Total USD USD USD USD USDIncomeReal estate Commercial - - - - - Residential - - - - - Hospitality - - - - - Mixed used - - - - -Cash - - 1,096,014 776,691 1,872,705______________________________________________________________________________________________________ - - 1,096,014 776,691 1,872,705______________________________________________________________________________________________________ Total assetsReal estate Commercial - - - - - Residential - 4,280,000 15,997,102 - 20,277,102 Hospitality 36,738 - - - 36,738 Mixed used - - - - -Cash - - 140,782,041 39,050,475 179,832,516______________________________________________________________________________________________________ 36,738 4,280,000 156,779,143 39,050,475 200,146,356______________________________________________________________________________________________________ To determine the geographical segments for investments and cash the followingrules have been applied: • Real estate - location of property; and • Cash - place of deposit. The above segmental reporting information has not been presented fully inaccordance with the requirements of IAS 14 - Segment reporting as the Board ofDirectors believes that the current way of presentation gives more appropriateand relevant information to the users of the financial statements and inaccordance with the way the Investment Manager manage and monitor the risks andreturns of the Group's investments. 6 Subsidiaries Acquisition of 21st Century project As of 30 June 2006, VinaLand held a beneficial interest of 46.5% in the 21stCentury Project. The principal activity of this project is to develop andmanage a 55 hectare site in District 2, Ho Chi Minh City. On 22 November 2007,the Group acquired an additional 15% interest in this project, which increasedthe Group's beneficial ownership in 21st Century project to 61.5%. The totalcost of the acquisitions was USD35,430,978, out of which USD24,622,363 wassettled in cash, US$8,201,187 was financed by a loan from related party andUS$2,607,428 has not been settled as of 30 June 2007. The fair value amounts recognised for each class of the acquiree's assets,liabilities and contingent liabilities at the acquisition date were as follows: Current assets USD Current liabilities USDCash and cash equivalents 19,225,974 Trade and other payables 8Trade and other receivables 32,349 Other liabilities 4,354Other current assets 2,300,470 _____________________________________________________________________________________________________________ 21,558,793 4,362_____________________________________________________________________________________________________________ Non-current assetsInvestment property 21,649,318 Minority interest 7,773,170Property, plant and equipment 399_____________________________________________________________________________________________________________ 43,208,510 7,777,532_____________________________________________________________________________________________________________ The 21st Century Project contributed USD16,426,400 to the consolidated profitfor the period from 12 July 2006 to the balance sheet date. Acquisition of Hilton Hanoi Opera Hotel The Group acquired a 52.5% interest in the five-star Hilton Hanoi Opera Hotel on25 July 2006. The total cost of the acquisitions was USD20,422,346. Thepurchase price was settled in cash. The fair value amounts recognised for each class of the acquiree's assets,liabilities and contingent liabilities at the acquisition date were as follows: Current assets USD Current liabilities USDCash and cash equivalents 2,578,128 Trade and other payables 2,147,112Trade and other receivables 554,415 Borrowings 4,791,054 Other liabilities 172,859_____________________________________________________________________________________________________________ 3,132,543 7,111,025_____________________________________________________________________________________________________________ Non-current assets Non-current liabilitiesProperty, plant and equipment 49,076,734 Borrowings 21,113,267Long term prepayment 5,184,530 Minority interest 8,747,169_____________________________________________________________________________________________________________ 57,393,807 36,971,461_____________________________________________________________________________________________________________ The Hilton Hanoi Opera Hotel contributed USD1,784,766 to the consolidated profitfor the period from 25 July 2006 to the balance sheet date. Acquisition of Hanoi Opera Office project On 17 November 2006, the Group acquired a 70% interest in the Hanoi Opera OfficeProject. The principal activity of this project is to construct and manage anoffice building in Hanoi. The total cost of the acquisition was USD6,700,000,which was settled in cash. The fair value amounts recognised for each class of the acquiree's assets,liabilities and contingent liabilities at the acquisition date were as follows: Current assets USD Current liabilities USDCash and cash equivalents 4,441 Trade and other payables 12,353Other current assets 9,400____________________________________________________________________________________________________________ 13,841 12,353____________________________________________________________________________________________________________ Non-current assetsInvestment property 10,878,976 Minority interest 4,180,464____________________________________________________________________________________________________________ 10,892,817 4,192,817____________________________________________________________________________________________________________ The Hanoi Opera Office Project contributed USD916,243 to the consolidated profitfor the period from 17 November 2006 to the balance sheet date. Acquisition of Sheraton Nha Trang Hotel project The Group acquired a 51% interest in the Sheraton Nha Trang Hotel Project on 15December 2006. The principal activity of this project is to construct and managethe five-star Sheraton Nha Trang Hotel. The total cost of the acquisition wasUSD8,534,330, which was settled in cash. The fair value amounts recognised for each class of the acquiree's assets,liabilities and contingent liabilities at the acquisition date were as follows: Current assets USD Current liabilities USDCash and cash equivalents 1,350,633 Borrowings 4,793,547Inventories 34,306 Current tax liabilities 17,083Trade and other receivables 303,667 Trade and other payables 397,478____________________________________________________________________________________________________________ 1,688,606 5,208,108____________________________________________________________________________________________________________ Non-current assetsProperty, plant and equipment 9,386,324 Minority interest 4,016,157Long term prepayment 6,683,665____________________________________________________________________________________________________________ 17,758,595 9,224,265____________________________________________________________________________________________________________ The Sheraton Nha Trang Hotel Project contributed a loss of USD117,838 to theconsolidated profit for the period from 15 December 2006 to the balance sheetdate. Acquisition of Omni Saigon Hotel The Group acquired a 52.5% interest in the five-star Omni Saigon Hotel on 14February 2007. The total cost of the acquisition was USD23,075,254, which wassettled in cash. The fair value amounts recognised for each class of the acquiree's assets,liabilities and contingent liabilities recognised at the acquisition date wereas follows: Current assets USD Current liabilities USDCash and cash equivalents 737,442 Borrowings 2,482,930Inventories 109,783 Current tax liabilities 792,983Trade and other receivables 403,114 Trade and other payables 1,104,043____________________________________________________________________________________________________________ 1,250,339 4,379,956____________________________________________________________________________________________________________ Non-current assets Non-current liabilitiesProperty, plan and equipment 35,959,172 Other liabilities 489,365Long term prepayment 522,557Deferred tax assets 101,875 Minority interest 9,889,368____________________________________________________________________________________________________________ 37,833,943 14,758,689____________________________________________________________________________________________________________ The Omni Saigon Hotel contributed USD554,218 to the consolidated profit for theperiod from 14 February 2007 to the balance sheet date. Acquisition of Hanoi Guoman Hotel The Group acquired a 55.5% interest in the Hanoi Guoman Hotel on 17 May 2007.The total cost of the acquisitions was USD19,143,036 which was settled in cash. The fair value amounts recognised for each class of the acquiree's assets,liabilities and contingent liabilities at the acquisition date were as follows: Current assets USD Current liabilities USDCash and cash equivalents 322,607 Trade and other payables 4,918,787Trade and other receivables 4,310,680 Other liabilities 68,302____________________________________________________________________________________________________________ 4,633,287 4,987,089____________________________________________________________________________________________________________ Non-current assetsProperty, plant and equipment 19,469,491 Minority interest 1,441,097Long term prepayment 1,193,444Deferred tax assets 275,000____________________________________________________________________________________________________________ 25,571,222 6,428,186____________________________________________________________________________________________________________ The Hanoi Guoman Hotel contributed USD430,426 to the consolidated profit for theperiod from 17 May 2007 to the balance sheet date. Acquisition of Nishimura Restaurant at the Omni Saigon Hotel The Group acquired a 75% interest in Nishimura Restaurant at the Omni SaigonHotel on 26th January 2007. The total cost of the acquisition was USD546,625which was settled in cash. The fair value amounts recognised for each class of the acquiree's assets,liabilities and contingent liabilities recognised at the acquisition date wereas follows: Current assets USD Current liabilities USDOther assets 546,625 -____________________________________________________________________________________________________________ 546,625 -____________________________________________________________________________________________________________ Disclosure of the carrying amounts of the acquirees' assets and liabilitiesimmediately before the combination and disclosure of revenue, profit or loss ofthe combined entity for the year as though the acquisition date for all businesscombinations effected a beginning of the year in accordance with IFRS have notbeen made due to the impracticability of such disclosures. These acquiredbusinesses did not apply IFRS prior to the acquisition by the Group andtherefore certain data prior to the date of acquisition was not available. Particulars of significant subsidiaries+--------------------------------------------------------------------------------------------------------+| Nominal value of || issued share ||Name Place of capital/registered Percentage || incorporation/ capital interest held by | | operations USD the Group Principal activities|| ||Onshine Investments Limited BVI 1 100% Property investment||Vietnam Property Holdings BVI 100 75% Property investment||Ltd ||Prosper Big Investment BVI 50,000 75% Property investment||Limited ||VinaCapital Danang Resorts ||Limited || BVI 4 75% Property investment||Bates Assets Limited BVI 4 100% Property investment||Proforma Asia Limited BVI 4 100% Property investment||Cypress Assets Limited BVI 100 75% Property investment||Roxy assets Limited BVI 4 75% Property investment||VinaCapital Hoi An Resort Vietnam 6,000,000 80% Property investment||VinaCapital Danang Golf Vietnam 23,000,000 75% Property investment||Course Limited ||Maplecity Investments BVI 4 75% Property investment||Limited ||Henry Enterprise Group, BVI 100 61.5% Property investment||Limited ||VinaCapital Danang Resort Vietnam 27,000,000 75% Property investment||Limited ||Tungshing International BVI 50,000 100% Property investment||Investment Limited ||VinaCapital Phuoc Dien Vietnam 2,927,500 84% Property investment||Limited ||VinaCapital Long Dien Vietnam 3,142,375 84% Property investment||Limited ||East Ocean Real Estate and Vietnam 5,912,676 51% Hospitality||Tourism Joint Stock Company ||Guoman Hanoi Limited Jersey 6,400,000 75% Property investment||Vina Properties PTE. Limited Singapore 1 75% Property investment||21st Century International 28,680,000 ||Development Company INC. || Vietnam 61.5% Property investment||Thang Long Tungshing JV Vietnam 6,071,088 70% Property investment||Company ||HLL-Guoco Vietnam Company Vietnam 6,748,923 55.5% Hospitality||Limited ||Best Faith BVI 1 75% Hospitality||CHO France 43,590 75% Hospitality||Top Star International Hong Kong 13 75% Hospitality||SRLHO Vietnam 24,711,683 52.5% Hospitality||A-1 INTRNATIONAL JV Company Vietnam 16,700,000 52.5% Hospitality|+--------------------------------------------------------------------------------------------------------+ 7 Net cash for acquisition of subsidiaries 2007 2006 USD USDCost of investment in the subsidiaries:21st Century Project 35,430,978 -Hilton Hanoi Opera Hotel 20,422,346 -Hanoi Opera Office Project 6,700,000 -Sheraton Nha Trang Hotel Project 8,534,330 -Omni Saigon Hotel 23,075,254 -Hanoi Guoman Hotel 19,143,038 -Nishimura Restaurant at the Omni Saigon Hotel 546,625 - _______________________________ 113,852,571 -Less:Cash and cash equivalents at the date of acquisition (24,219,225) -Cost of acquisition last year as an associate (15,997,102) -Acquisition cost not yet settled (10,808,616) -________________________________________________________________________________________________________Cost of investments settled in cash 62,827,628 -======================================================================================================== 8 Investment properties 2007 2006 USD USD1 July - -Acquisition of subsidiaries 32,528,693 -Additions during the year 26,126,747 -Net gain on fair value adjustments (Note 28) 38,529,935 -_________________________________________________________________________________________________________30 June 97,185,375 -========================================================================================================= Investment properties acquired during the year reflects the fair value ofleasehold land held by the following subsidiaries (Note 6): 2007 2006 USD USD21st Century International Development Company Inc. 43,164,605 -VinaCapital Phuoc Dien Limited 2,278,211 -VinaCapital Long Dien Limited 2,528,939 -VinaCapital Hoi An Resort 4,687,525 -VinaCapital Danang Golf Course Limited 19,691,205 -VinaCapital Danang Resorts Limited 12,401,632 -Thang Long Tungshing JV Company 12,433,258 -________________________________________________________________________________________________________ 97,185,375 -======================================================================================================== 9 Property, plant and equipment Furniture Motor Construction Buildings Equipment and fixtures Vehicles in progress Total USD USD USD USD USD USDHistorical cost1 July 2006 - - - - - -Acquisitions of 117,697,374 20,024,962 1,574,838 583,801 9,367,821 149,248,796subsidiariesNew purchases 319,064 239,083 9,118 79,855 965,203 1,612,323Valuation gain 1,479,145 - - - - 1,479,145_________________________________________________________________________________________________________30 June 2007 119,495,583 20,264,045 1,583,956 663,656 10,333,024 152,340,264 Accumulated depreciation1 July 2006 - - - - - -Acquisitions of (18,509,837) (14,904,167) (1,396,885) (545,789) - (35,356,678)subsidiariesCharge for the year (2,179,977) (743,882) (12,582) (295) - (2,936,736)_________________________________________________________________________________________________________30 June 2007 (20,689,814) (15,648,049) (1,409,467) (546,084) - (38,293,414) Net book value1 July 2006 - - - - - -30 June 2007 98,805,769 4,615,996 174,489 117,572 10,333,024 114,046,850_________________________________________________________________________________________________________ Land, buildings and construction in progress with a net book value ofUSD51,412,506 as at 30 June 2007 are pledged as security for the bank loans asdisclosed in Note 22. 10 Investments in associates 2007 2006 USD USD1 July 15,997,102 -Addition from acquisition of associate - 15,997,102Transferred to subsidiary (15,997,102) -_______________________________________________________________________________________________________30 June - 15,997,102======================================================================================================= Investments in associates as at 30 June 2006 represented an investment in 46.5%of Henry Enterprise Group, Ltd. On 22 November 2006, the Group acquired afurther 15% interest in Henry Enterprise Group, Ltd. On completion of thistransaction the Group obtained control of this company and therefore this entityhas been accounted for as a subsidiary in the consolidated financial statements(Note 6). 11 Loan receivables 2007 2006 USD USDLoan to minority shareholder 6,817,520 -________________________________________________________________________________________________________ 6,817,520 -======================================================================================================== This loan is unsecured, interest free and to be repaid by May 2009. Its carryingvalue is considered a reasonable approximation of their amortised cost as atbalance sheet date. 12 Prepayments for operating leases 2007 2006 USD USD1 July - -Addition from acquisition of subsidiaries 13,584,196 -Addition during the year 162,321 -Charge for the year (449,112) -________________________________________________________________________________________________________30 June 13,297,405 -======================================================================================================== Prepayments for operating leases relates to leasehold land occupied bysubsidiaries of the Group. 13 Inventories The inventory on hand of USD 276,330 as at 30 June 2007 mainly represents rawmaterials, tools and supplies held by the hotel subsidiaries in the Group. 14 Receivables from related parties 2007 2006 USD USDLoan to related party 22,825,000 -________________________________________________________________________________________________________ 22,825,000 -======================================================================================================== This loan is due to a related party which has no fixed term of repayment andbears interest rate at 10% per annum. The loan was repaid in November 2007. 15 Trade and other receivables 2007 2006 USD USDReceivable from third party (*) 19,881,951 -Prepayments to suppliers 4,324,000 4,316,738Interest receivables 1,624,654 662,068Trade receivables 416,765 -Other receivables 3,034,727 -Other current assets 3,916,715 -________________________________________________________________________________________________________ 33,198,812 4,978,806======================================================================================================== (*) This represents short term loan to a third party, which is to be repaid in March 2008 and bears interest rate at the rate of 12% per annum. As all trade and other receivables are short term in nature their carrying valueis considered a reasonable approximation of their fair value as at balance sheetdate. 16 Financial assets held at fair value through profit and loss 2007 2006 USD USDDesignated at fair value through profit or loss:Financial assets in VietnamOrdinary shares - unlisted 155,647 -Trustee loans 21,805,317 -Corporate bonds 7,499,295 4,382,670________________________________________________________________________________________________________Total financial assets designated at fair value through profit or loss 29,460,259 4,382,670________________________________________________________________________________________________________Total financial assets at fair value through profit or loss 29,460,259 4,382,670======================================================================================================== 17 Deposits for acquisitions of investments 2007 2006 USD USDDeposits for acquisitions of investments 72,729,074 -________________________________________________________________________________________________________ 72,729,074 -======================================================================================================== These deposits pertain to payments made by the Group to property vendors wherethe final transfer of the property is pending the approval of the relevantauthorities and/or is subject to either the Group or the vendor completingcertain performance conditions set out in agreements. 18 Cash and cash equivalents 2007 2006 USD USDCash at bank 61,572,411 174,787,778Cash equivalents 289,325,734 -________________________________________________________________________________________________________ 350,898,145 174,787,778======================================================================================================== 19 Share capital 2007 2006 Number of USD Number of USD shares sharesAuthorised: Ordinary shares of USD0.01 each 500,000,000 5,000,000 500,000,000 5,000,000______________________________________________________________________________________________________Issued and fully paid:At 1 July 204,844,779 2,048,448 - -New shares issued 295,122,843 2,951,228 204,844,779 2,048,448______________________________________________________________________________________________________At 30 June 499,967,622 4,999,676 204,844,779 2,048,448______________________________________________________________________________________________________ 20 Additional paid-in capital Additional paid-in capital represents the excess of consideration received overthe par value of shares issued. 2007 2006 USD USD1 July 196,414,163 -Additional paid-in capital during the year 392,456,076 196,414,163_______________________________________________________________________________________________________30 June 588,870,239 196,414,163======================================================================================================= 21 Revaluation reserve 2007 2006 USD USD1 July - -Revaluation gain on property, plant and equipment 1,479,145 -Less: share of gain attributable to minority interests (702,594) -________________________________________________________________________________________________________30 June 776,551 -======================================================================================================== The Group's share of valuation gains resulting from the revaluation ofsubsidiaries' properties has been recorded directly in the Group's revaluationreserve under shareholders' equity. 22 Long-term borrowings 2007 2006 USD USDLong-term loans of East Ocean Real Estate & Tourism Joint Stock Company 4,872,001 -Long-term loans of A-1 International (Vietnam) Corporation Limited 1,113,261 -________________________________________________________________________________________________________ 5,985,262 -Current portion of long-term loans of East Ocean Real Estate & Tourism -Joint Stock Company (251,479)Current portion of long-term loans of A-1 International (Vietnam) (1,028,315) -________________________________________________________________________________________________________Corporation Limited (1,279,794) -________________________________________________________________________________________________________ 4,705,468 -======================================================================================================== Long-term loans of East Ocean Real Estate & Tourism Joint Stock Company, asubsidiary of the Group, represents loans obtained from Dong A Bank. Theseloans are for a period of 10 years and repayable by 2016 and bear an interestrate based on SIBOR plus 2.5% per annum. These loans are secured by leaseholdproperty and the value of construction on such property. These loans are carriedat amortised cost in the balance sheet. Long-term loans of A-1 International (Vietnam) Corporation Limited, a subsidiaryof the Group, represents loans obtained from Vietcombank. These loans are forperiods of between 2 to 6 years since 2005 and bear interest rates based onSIBOR plus 1.55% to 2.4% per annum. These loans are secured by leaseholdproperty and hotel buildings. These loans are carried at amortised cost in thebalance sheet. 23 Payables to related parties 2007 2,006 USD USDVietnam Opportunity Fund Limited (*) 35,548,875 -VinaCapital Investment Management Ltd - management and performance 4,352,464 1,204,498feesOther payables to VinaCapital Investment Management Ltd 681,840 -________________________________________________________________________________________________________ 40,583,179 1,204,498======================================================================================================== (*) This represents loans from Vietnam Opportunity Fund Limited (VOF), a minority shareholder. These loans are unsecured, bear interest at SIBOR 6 month interest rate and are repayable by the end of 2012. The loans are carried at amortised cost in the balance sheet. 24 Trade and other payables 2007 2,006 USD USDTrade payables 5,679,966 -Other accrued liabilities 613,505 358,737Current income tax payable 245,301 -Other payables 2,460,135 -Other liabilities 2,062,683 -________________________________________________________________________________________________________ 11,061,590 358,737======================================================================================================== As all trade and other payables are short term in nature, their carrying valuesare considered a reasonable approximation of their fair values as at balancesheet date. 25 Other income 2007 2006 USD USDGain on shareholder's loan from Maplecity Investments Ltd. to SRLHO 3,078,545 -Gain on waiver of liabilities from ex-shareholder 2,490,505 -Others 2,132,575 -_________________________________________________________________________________________________________ 7,701,625 -========================================================================================================= 26 Expenses by nature 2007 2006 USD USDPerformance fees 3,339,976 -Management fees 6,643,862 1,204,498Professional fees 1,993,023 469,784Staff costs 2,749,777 -Depreciation and amortisation 3,385,845 -Materials 2,888,042 -Outside service costs 4,125,762 -General administration expenses 8,797 29,594Other expenses 661,114 -_________________________________________________________________________________________________________ 25,796,198 1,703,876========================================================================================================= 27 Other net changes in fair value on financial assets at fair value through profit or loss 2007 2006 USD USDUnrealised gain - trustee loans 3,084,901 -_________________________________________________________________________________________________________ 3,084,901 -========================================================================================================= 28 Gain on fair value adjustment of investment properties 2007 2006 USD USDNet gain on fair value adjustments of investment properties 38,529,935 -_________________________________________________________________________________________________________ 38,529,935 -========================================================================================================= The net gain on fair value adjustments of investment properties relates to therevaluation of leasehold land held by subsidiaries, which were revalued on 30June 2007 by independent professional qualified valuers as mentioned in Note 4. 29 Financial income 2007 2006 USD USDInterest income 11,836,487 1,872,705_________________________________________________________________________________________________________ 11,836,487 1,872,705========================================================================================================= 30 Corporate income tax VinaLand Limited is domiciled in the Cayman Islands. Under the current laws ofthe Cayman Islands, there is no income, state, corporation, capital gains orother taxes payable by the Company. The relationship between the expected tax expense based on the effective taxrate of the operating subsidiaries in Vietnam at 20% and the tax expenseactually recognised in the statement of income can be reconciled as follows: 2007 2006 USD USDGroup profit before tax 50,221,631 120,510__________________________________________________________________________________________________________Group profit multiplied by effective tax rate (20%) 10,044,326 24,102Effect of(Profit) loss exempted from tax in British Virgin Islands (9,352,674) (24,102)Utilisation of deductible tax losses (503,741) -Other timing differences 70,301 -Tax rate difference (12,911) -__________________________________________________________________________________________________________Corporate income tax expense 245,301 -__________________________________________________________________________________________________________ The majority of the Group's subsidiaries are domiciled in the British VirginIslands (BVI) and so have a tax exempt status. A number of subsidiaries areestablished in Vietnam and are subject to corporate income tax in Vietnam. Aprovision of USD 245,301 has been made for these Vietnamese subsidiaries of theGroup for the year ended 30 June 2007. Under the law of Vietnam, tax losses can be carried forward to offset withfuture taxable income for five years from the year a loss is incurred.Unrecognised deferred tax assets for tax losses of USD5,614,470 relating tolosses carried forward have not been recognised due to uncertainties as to theirrecoverability. 31 Earnings per share (a) Basic Basic earnings per share is calculated by dividing the profit attributable toshareholders of the Group by the weighted average number of ordinary shares onissue during the year. +---------------------------------------------------------------------------------------------------------+| 2007 2006||Profit attributable to equity holders of the company (USD) 34,635,037 120,510||Weighted average number of ordinary shares on issue 278,625,490 204,844,779||Basic earnings per share ($ per share) 0.12 0.00|+---------------------------------------------------------------------------------------------------------+| |+---------------------------------------------------------------------------------------------------------+ (b) Diluted Diluted earnings per share is calculated by adjusting the weighted averagenumber of ordinary shares outstanding to assume conversion of all dilutivepotential ordinary shares. The Group has no category of potential dilutiveordinary shares. Therefore, diluted earnings per share is equal to basicearnings per share. 32 Directors' remuneration The emoluments paid or payable to the Directors during the year were as follows: +---------------------------------------------------------------------------------------------------------+| 2007 2006|| USD USD| | Horst Geicke 20,000 5,863| | Don Lam 20,000 5,863| | Nguen Khoong Tong 20,000 5,863| | Bruno Schoepfer 20,000 5,863| | Nicholas Brooke 20,000 5,863| +---------------------------------------------------------------------------------------------------------+| 100,000 29,315| +---------------------------------------------------------------------------------------------------------+ 33 Related party transactions Management fees The Group is managed by VinaCapital Investment Management Limited (the "Investment Manager"), an investment management company incorporated in theBritish Virgin Islands ("BVI"), under a management agreement dated 16 March 2006(the "Management Agreement"). The Investment Manager receives a fee based on thenet asset value of the Group, payable monthly in arrears, at an annual rate of2% (30 June 2006: 2%). Total management fees for the year amounted to USD6,643,862 (2006:USD1,204,498), with USD1,012,488 (2006: 1,204,498) in outstanding accrued feesdue to the Investment Manager at the end of the year. Performance fees In accordance with the Management Agreement, the Investment Manager is alsoentitled to a performance fee equal to 20% of the realised returns over anannualised compounding hurdle rate of 8% (30 June 2006: hurdle rate of 8%). Total performance fees, for the year amounted to USD3,339,976 (2006: Nil), withUSD3,339,976 (2006: Nil) in outstanding accrued fees due to the InvestmentManager at the end of the year. Placement fees When raising capital through the issuance of new Ordinary Share a commissionequal to 3% of the subscription price multiplied by the total number of theshares allotted by the Group on admission is payable by the Group to theInvestment Manager. The Investment Manager is responsible for paying placingagents that are engaged in respect to such subscriptions. The net proceeds ofshare subscriptions are recorded after netting off placement fees. Total placement fees for the year amounted to USD11,862,219 (2006:USD5,966,353), with no (2006: Nil) outstanding accrued fees due to theInvestment Manager at the end of the year. Other related party transactions and balances Other related parties transactions and balances are disclosed in Notes 11, 14and 23. 34 Commitments As at 30 June 2007, the Group was committed under lease agreements to paying thefollowing future amounts: USDWithin one year 700,000From two to five years 2,800,000Over five years 10,500,000____________________________________________________________________________________________________________ 14,000,000============================================================================================================ As at 30 June 2007, the Group is committed under the construction agreements topaying USD4,555,457 for future construction work. 35 Risk management objectives and policies The Group invests in a diversified property portfolio in Vietnam and AsiaPacific countries with the objective of achieving capital growth both at thesector level and at the individual property level and providing investors withan attractive level of investment income, together with the potential forcapital growth. The Group is exposed to a variety of financial risks: market risk (includingcurrency risk and interest rate risk,); credit risk; and liquidity risk. TheGroup's overall risk management programme focuses on the unpredictability offinancial markets and seeks to minimise potential adverse effects on the Group'sfinancial performance. The Group's risk management is coordinated by itsInvestment Manager who manages the distribution of the assets to achieve theinvestment objectives. The most significant financial risks to which the Groupis exposed to are described below: Foreign currency risk The Group's exposure to risk resulting from changes in foreign currency exchangerates is low as although transactions in Vietnam are settled in Vietnamese Dong,the value of the Vietnamese Dong is closely linked to that of USD, the reportingcurrency. The Group's exposure to fluctuations in foreign currency exchange rates at thebalance sheet date were as follows: 30 June 2007 30 June 2006 USD USDAssets denominated in Euro/Hong Kong Dollar Currency 25,283 -Assets denominated in Vietnamese Dong 1,719,240 57,638,560__________________________________________________________________________________________________ Cash flow and fair value interest rate risks The Group currently has some financial liabilities with floating interest rates(see Note 22) and this is the maximum exposure of the Group to cash flowinterest rate risk. The Group is not exposed to any other significant cash flowinterest rate risk. Any excess cash and cash equivalents are invested atshort-term market based interest rates. Credit risk Credit risk is the risk that a counterparty will be unable to pay amounts infull when due. Impairment provisions are provided for losses that have beenincurred by the Group at the balance sheet date. The carrying amount of trade and other receivables, loans and deposits paidrepresent the Group's maximum exposure to credit risk in relation to itsfinancial assets. The Group has no other significant concentrations of creditrisk. In accordance with the Group's policy, the Investment Manager monitors theGroup's credit position on a monthly basis. Liquidity risk Liquidity risk is the risk that the Group will experience difficulty in eitherrealising assets or otherwise raising sufficient funds to satisfy commitmentsassociated with investments and financial instruments. The risk managementguidelines adopted are designed to minimise liquidity risk through: • Ensuring that there is no significant exposure to illiquid or thinly traded investments and financial instruments, and • Applying limits to ensure there is no concentration of liquidity risk to a particular counterparty or market. This information is provided by RNS The company news service from the London Stock Exchange
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