VNL.L Regulatory News (VNL)

31 March 2015

VinaLand Limited

Interim results for the six months ended 31 December 2014

VinaLand Limited (the "Company" or "VNL"), the AIM-quoted investment vehicle established to target strategic segments within Vietnam's emerging real estate market, today announces its interim results for the six months ended 31 December 2014 (the "Period").

Financial highlights:

· Net Asset Value ("NAV") of USD389.3 million (30 June 2014: USD420.1 million)

· NAV per share of USD0.90 (30 June 2014: USD0.92).

Operational highlights:

· During the Period, VNL completed the divestment of several projects resulting in net proceeds of USD30.8 million and a USD6.0 million reduction in the Company's consolidated debt.

Notes to Editors:

VinaCapital is the leading investment management and real estate development firm in Vietnam, with a diversified portfolio of USD1.5 billion in assets under management. VinaCapital was founded in 2003 and boasts a team of managing directors who bring extensive international finance and investment experience to the firm. VinaCapital 's mission is to produce superior returns for investors by using its experience and knowledge to identify the key trends and opportunities that emerge as Vietnam continues to develop its economy. To achieve this, VinaCapital has industry-leading asset class teams covering capital markets, private equity, fixed income, venture capital, real estate and infrastructure.

VinaCapital manages three closed-end funds trading on the AIM Market of the London Stock Exchange. These funds are: VinaCapital Vietnam Opportunity Fund Limited (VOF), VinaLand Limited (VNL), and Vietnam Infrastructure Limited (VNI). VinaCapital also co-manages the USD32 million DFJ VinaCapital L.P. technology venture capital fund with Draper Fisher Jurvetson.

VinaCapital has offices in Ho Chi Minh City, Hanoi, Danang, Nha Trang, Singapore and Yangon. More information about VinaCapital is available at www.vinacapital.com.

More information on VinaLand Limited is available at www.vnl-fund.com.

Enquiries:

David Dropsey

VinaCapital Investment Management Limited

Investor Relations/Communications

+84 8 821 9930

david.dropsey@vinacapital.com

Philip Secrett

Grant Thornton UK LLP, Nominated Adviser

+44 (0)20 7383 5100

philip.j.secrett@uk.gt.com

Hiroshi Funaki / Andrew Davies

Edmond de Rothschild Securities, Broker

+44 (0)20 7845 5960

funds@lcfr.co.uk

David Benda / Hugh Jonathan

Numis Securities Limited

+44 (0)20 7260 1000

funds@numis.com 

Andrew Walton

FTI Consulting, Public Relations (London)

+44 20 7269 7204

andrew.walton@fticonsulting.com

Chairman's Statement

Dear Shareholders,

Entering the final year of the three-year cash return period, which began after VNL's extraordinary general meeting ("EGM") held on 21 November 2012, the Board and the Investment Manager remains committed to divesting assets and returning capital to shareholders.

During the six months under review the Company divested three assets, including the Movenpick Hotel in Hanoi as well as the Marie Curie development site in Ho Chi Minh City. These divestments generated net proceeds of USD30.8 million which in aggregate was 7.8% above their combined net asset values at the time of exit. Additionally, the Company's debt in the consolidated balance sheet has been reduced by USD6.0 million by these disposals. The closing of these transactions brings the total number of full divestments since November 2012 to eight, raising a total of USD62.2 million of cash. Another project located in Danang has been partially divested resulting in another USD3.2 million of funds for the Company.

The real estate market in Vietnam has improved over the past 6 months, mainly due to improved liquidity. However sourcing investors to acquire VNL assets remains challenging and closing transactions always takes longer than envisaged. Subsequently we are currently behind our divestment target and are using all resources available to us to close some larger transactions between now and the end of 2015.

We have also begun looking into various strategic options in the lead up to the next EGM and continuation vote scheduled for November 2015. Our objective is to commence dialogue with shareholders about the future of VNL during the summer.

The net asset value per share of the Company decreased by 2.1 % to USD0.90 at 31 December 2014, from an audited net asset value per share of USD0.92 as at 30 June 2014. However, during this same period the Company's share price increased by 5.5 % from USD0.55 to close at USD0.58 per share. As a result, the share price to NAV discount at the end of the period narrowed to 35.3% from 39.7% as at 30 June 2014. Over the period the Company bought back 24,311,860 shares, which were immediately cancelled, returning USD 13.7 million to shareholders.

The Board and the Manager remain highly focussed on the objectives set out for the remaining year of this three year period; meanwhile I thank you for your continued support.

Michel Casselman

Chairman

VinaLand Limited

30 March 2015

CONDENSED INTERIM CONSOLIDATED BALANCE SHEET

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

CONDENSED INTERIM CONSOLIDATED INCOME STATEMENT

CONDENSED INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

CONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

· GENERAL INFORMATION

VinaLand Limited ("the Company") is a limited liability company incorporated in the Cayman Islands. The registered office of the Company is PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands. The Company's primary objective is to focus on key growth segments within Vietnam's emerging real estate market, namely residential, office, retail, industrial and leisure projects in Vietnam and the surrounding countries in Asia. The Company is listed on the AIM Market of the London Stock Exchange under the ticker symbol VNL.

At the Extraordinary General Meeting ("EGM") held on 21 November 2012, the shareholders supported both recommendations put forth by the Board regarding the continuation of the Company. As a result, the Special Resolution which called for the continuation of the Company as presently constituted was not passed and the Ordinary Resolution to restructure the Company was passed with over a two-thirds approval rate.

The Ordinary Resolution established the framework to restructure the Company including changes to the Company's investment strategy, distribution policy, the Investment Manager's remuneration and corporate governance. Key changes impacting these financial statements are summarised as follows:

· During the three-year period until 21 November 2015 ("the Cash Return Period") the Company will make no new investments, save that it can invest in existing projects within its existing portfolio of assets. The Company will instead implement a realisation strategy whereby the Company's existing assets will be developed (if necessary) and/or divested in a controlled, orderly and timely manner.

· Net proceeds of these realisations will be returned to shareholders, subject to the Board's discretion and consideration in respect of the Company's working capital requirements, the need to invest in existing projects, and the cost/tax efficiency of such transactions/distributions.

· Once the Cash Return Period has ended, shareholders will be given the opportunity to reassess the strategy of the Company through another continuation resolution.

· The fees payable to the Investment Manager have been amended as discussed in Note 33 to these condensed interim consolidated financial statements.

The Company will organise no later than November 2015 a general meeting of shareholders to vote on the Company's strategy after that date. The Board of Directors and the Investment Manager are currently considering several continuation proposals, one of which will be presented to shareholders for approval at the meeting.

The condensed interim consolidated financial statements for the six months ended 31 December 2014 were approved for issue by the Company's Board of Directors on 30 March 2015.

These condensed interim consolidated financial statements have been reviewed, not audited.

2 BASIS OF PREPARATION

The Company and its subsidiaries herein are referred to as the Group.

These condensed interim consolidated financial statements are for the six months ended 31 December 2014. They have been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting" as issued by the International Accounting Standards Board ("IASB"). They do not include all of the information required in the annual consolidated financial statements which are prepared in accordance with International Financial Reporting Standards ("IFRSs"). Accordingly, these financial statements are to be read in conjunction with the annual consolidated financial statements of the Group for the year ended 30 June 2014, which have been prepared in accordance with IFRSs.

3 ACCOUNTING POLICIES

3.1 Accounting policies

These condensed interim consolidated financial statements (the "interim financial statements") have been prepared in accordance with the accounting policies, methods of computation and presentation adopted in the last annual consolidated financial statements for the year ended 30 June 2014.

4 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

When preparing the condensed interim consolidated financial statements, management undertakes a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. The actual results may differ from the judgements, estimates and assumptions made by management, and may not equal the estimated results.

Information about significant judgements, estimates and assumptions that have the most effect on recognition and measurement of assets, liabilities, income and expenses were the same as those that applied to the last annual consolidated financial statements for the year ended 30 June 2014.

4.1 Realisation fee

As of the date of the condensed interim consolidated financial statements, management has assessed that the fair value of the realisation fee liability under the restructured terms is USD28.2 million (30 June 2014: USD27.3 million). Payment of any realisation fees is contingent on the Group realising their portfolio investments and making distributions to the shareholders of the Company. Given that the Group is adopting a new realisation strategy during the Cash Return Period it is reasonable to assume that the accrued realisation fees will be paid to the Investment Manager.

4.2 Fair value of investment properties, buildings and leasehold land improvements

The investment properties, buildings and leasehold land improvements of the Group are stated at fair value in accordance with accounting policies 2.5 and 2.8 of the annual consolidated financial statements for the year ended 30 June 2014. The fair values of investment properties, buildings and leasehold land improvements are based on valuations by independent professional valuers including CB Richard Ellis, Savills, Jones Lang LaSalle, Colliers and HVS. These valuations are based on certain assumptions which are subject to uncertainty and might materially differ from the actual results. The estimated fair values provided by the independent professional valuers are used by the Valuation Committee as the primary basis for estimating each property's fair value for recommendation to the Board.

In making its judgement, the Valuation Committee considers information from a variety of sources including:

(i) current prices in an active market for properties of different nature, condition or location (or subject to different lease or other contracts), adjusted to reflect those differences;

(ii) recent prices of similar properties in less active markets, with adjustments to reflect any changes in economic conditions since the dates of those transactions;

(iii) recent developments and changes in laws and regulations that might affect zoning and/or the Group's ability to exercise its rights in respect to properties and therefore fully realise the estimated values of such properties;

(iv) discounted cash flow projections based on reliable estimates of future cash flows, derived from the terms of external evidence such as current market rents and sales prices for similar properties in the same location and condition, and using discount rates that reflect current market assessments of the uncertainty in the amount and timing of the cash flows; and

(v) recent compensation prices public by local authority at the province where the property is located.

4.3 Prepayments for acquisition of investments

The Group estimates the recoverable amounts of significant prepayments for acquisitions of investments either based on management's internal assessment or by engaging independent valuers in accordance with the valuation methods and processes as set out in Notes 2.5 and 3.1 of the annual consolidated financial statements for the year ended 30 June 2014.

4.4 Derivative financial instruments and hedging activities

Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as either:

(a) Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge);

(b) Hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge); or

(c) Hedges of a net investment in a foreign operation (net investment hedge).

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining hedged item is more than 12 months, and as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.

In the case of a derivative that qualifies for cash flow hedge, the effective portion of changes in its fair value is recognised in other comprehensive income. The gain or loss is removed from equity and included in profit or loss in the same period and periods during which the hedged items affects profit or loss. In the case of a derivatives that qualifies for fair value hedge, the effective portion of changes in its fair value is recognised in the income statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedge risk.

If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortised to profit or loss over the period to maturity.

5 SEGMENT ANALYSIS

In identifying its operating segments, management generally follows the Group's sectors of investment which are based on internal management reporting information for the Investment Manager's management, monitoring of investments and decision making. The operating segments by investment portfolio include commercial, residential and office buildings, hospitality, mixed-use segments and cash and short-term investments.

Detail of activities undertaken by each segment and how each segment is managed and monitored, can be found in Note 4 to the annual consolidated financial statements of the Group for the year ended 30 June 2014.

There is no measure of segment liabilities regularly reported to the Investment Manager; therefore, liabilities are not disclosed in the sector analysis. Segment information can be analysed as follows for the reporting periods under review:

(a) Condensed Interim Consolidated Income Statement

(b) Condensed Interim Consolidated Balance Sheet

(*) The amount presented in this table does not include the fair value of the call options which give the Group the rights to early redeem the ZDP shares. The Investment Manager does not manage the ZDP shares and call options under any particular segment.

6 INVESTMENT PROPERTIES

The Group's investment properties were revalued during the year by independent professionally qualified valuers who hold recognised relevant professional qualifications and have recent experience in the locations and categories of the investment properties valued.

Bank borrowings are secured by investment properties with a fair value of USD228.5 million (30 June 2014: USD236.9 million). During the period, the Group capitalised borrowing costs amounting to USD2.7 million (year ended 30 June 2014: USD5.1 million) in investment properties.

At 31 December 2014, land use rights certificates have not been fully issued for certain portions of the Group's investment properties as final issuance is subject to the completion of a number of administrative steps required by local authorities and/or the settlement of any outstanding land taxes. In the Investment Manager's view, the lack of land use rights certificates does not have any material impact on the existence and valuation of the investment properties as land use rights over the land area for each project have been specifically granted under each investment licence.

The Group's policy is to recognise transfers into and out of fair value hierarchy levels as of the date of the event or change in circumstances that caused the transfer. All of the Group's investment properties are in Level 3 of the fair value hierarchy. There were no transfers between levels during the period (year ended 30 June 2014: none).

Information about fair value measurements using unobservable inputs (Level 3) is set out below:

For the comparative balance sheet date:

(*) The valuations of these investment properties assume that they will be developed and sold within a definite time period; therefore, no capitalisation rates are used in such valuations.

7 PROPERTY, PLANT AND EQUIPMENT