Thiet ke Bao cao thuong nien -Vina ar 2008.

Vietnam Infrastructure Limited
Annual Report 2008

2 VNI 2008 Annual Report

Contents Vietnam Infrastructure Limited
Annual Report 2008

Section 1 Introduction
Overview 3
Chairman’s Statement 5

Section 2 Manager’s Report
State of the Economy 6
Investment Environment 8
Portfolio Performance 10
Featured Investments 16

Section 3 Financial Statements and Reports
Report of the Board of Directors 20
Independent Auditors’ Report 22
Consolidated Financial Statements 23
Notes to the Consolidated Financial Statements 26

VNI 2008 Annual Report 1

Rush hour traffic on Ho Chi Minh City’s crowded roads


Vietnam’s busiest port, Saigon Port, is in the middle of HCM City, leading to increased traffic congestion.


VNI Overview
Vietnam Infrastructure Limited (VNI) is a closed-end infrastructure and infrastructure related
investment company admitted to trading on the AIM market of the London Stock Exchange
in July 2007. The company focuses on key strategic sectors with underlying economic
demand within Vietnam’s emerging infrastructure market, namely energy, transport,
telecommunications and water utilities.

VNI DETAILS
Size of fund: USD335 million (NAV as of 30 June 2008)
Term of fund: Ten years subject to shareholder vote for extension
Maximum investment: 20 percent of NAV in any one project
Geographic focus: Greater Indochina comprising Vietnam (minimum 70%), Cambodia, Laos and southern China
Fund structure: Cayman company trading on London Stock Exchange (AIM)
Auditor: KPMG (Vietnam)
Nominated advisor: Grant Thornton Corporate Finance (UK)
Custodian: HSBC Trustee
Lawyers: Lawrence Graham (UK)
Maples & Calder (Cayman Islands)
Broker: LCF Rothschild
Manager: Vinacapital Investment Management Limited
Management and performance fee: Management fee of 2 percent of NAV. Performance fee of 20 percent of total NAV increase over the higher of an 8 percent compound annual return and the high watermark


Bridge and road construction and repair are constant sights across the country.


Chairman’s Statement

Dear Shareholders,
We are pleased to present the first annual financial VNI highlights over the fund’s first year include investments There is no question this has created a difficult situation
statements for Vietnam Infrastructure Limited (AIM: VNI) in several major power plants that have resulted in a close for VNI as we enter 2009. We remain strongly convinced,
for the year ended 30 June 2008. working relationship with Electricity of Vietnam, entering into however, that VNI is on the correct strategic track and that
a joint venture company that will be Vietnam’s first major infrastructure, by its nature a long-term investment, will
Infrastructure is a fundamental area of investment in any airplane leasor, and becoming Vietnam’s largest investor in continue to benefit from Vietnam’s excellent prospects for
emerging market. In Vietnam, this is particularly the case mobile telephone base transceiver station towers. continued economic growth.
as ten years of rapid economic development at an average
of 7.5 percent annual GDP growth has not been matched The goal of being fully invested within two years is well on
track. However, despite the success in building a strong Thank you for your continued support.
by adequate investment in physical infrastructure.
portfolio of investments, it was an extremely challenging year
Launched in July 2007, VNI was perfectly timed to for Vietnam economically, in particular for the stock market Don Lam, Chairman
capitalise on the need to address the dire infrastructure which plummeted almost 60 percent over the first half of Vietnam Infrastructure Limited
shortfall in Vietnam, and benefit from the growing 2008. This had a negative impact on VNI’s net asset value 28 October 2008
willingness of the Government of Vietnam to involve as a result of several initial investments in listed companies.
private sector partners in major projects. Moreover, it was a very difficult year for infrastructure stocks
and funds across Asia and the world.
VNI was established with four target sectors – energy,
transportation, telecommunications and water – with The negative sentiment saw VNI’s share price fall to USD0.60
the goal to invest the fund’s initial USD389 million capital at 30 June 2008, versus a net asset value of USD0.84 per share.
within two years. After one year, excellent progress has After the financial year ended, the global financial crisis saw
been made in building a diversified portfolio, with some the share price drop in September and October 2008, as
20 total investments in all target sectors except water, emerging market closed-end funds were among the most
while adding several investments in industrial parks and heavily affected stocks worldwide.
related infrastructure services.

6 6VNI 2008 Annual Report
VOF 2008 Annual Report

State of the Vietnam’s economy over the first half of 2008 endured painful
adjustments following the exuberance of 2007. Vietnam in
2007 saw strong GDP growth of 8.5 percent – reaching a
limiting lending for securities purchases to 20 percent of
charter capital for all banks, limiting domestic credit growth
to 30 percent for 2008, introducing obligatory one-year 7.8

Economy ten-year average of 7.5 percent – and foreign direct investment
(FDI) at a record USD20.3 billion. Industry, manufacturing and
services all grew rapidly, with the construction sector leading
percent SBV bond purchases for all banks, and increasing
interest rates from 8.75 percent at the beginning of the year
to 14 percent by the end of June. In addition, controls on
the way due to a booming real estate market. foreign exchange conversion were tightened and public
expenditure was scaled down, including a 10 percent
Vietnam in 2007 continued the trend of becoming an
spending cut across all government ministries.
increasingly open economy, with the ratio of total trade
(exports plus imports) to GDP at 153 percent, second only to As part of the policy package, the government reduced the
Malaysia in the region. official GDP growth target for 2008 from 9 percent
to 7 percent.
The surge in foreign investment in 2007 led to increased
imports, in particular machinery and equipment, and a What followed was a period of great turbulence, as a market
worsening trade deficit at over USD12 billion. This put strong “priced for perfection” at high valuations adjusted to the new,
pressure on the country’s foreign exchange reserves. There more restrictive environment. The first and most obvious
was concurrently a rise in inflation due to commodity costs casualty was the capital markets as represented by the
and an expansionary monetary and fiscal policy to facilitate Vietnam Index, which fell a precipitous 60 percent over the
economic growth. Broad money supply and domestic credit first half of 2008.
grew a staggering 46 and 54 percent, respectively, when the
The tightening policies put strong pressure on bank liquidity
State Bank of Vietnam (SBV) opened its coffers to domestic
and placed smaller banks at extreme risk. Meanwhile, the
lenders to fund real estate deals and imports.
currency came under pressure due to the rising deficit, with
By the end of 2007, inflation as measured by the consumer the spread between the official and open market rates peaking
Vietnam needs to focus on price index reached 12.6 percent. In early 2008 inflation at over 15 percent in the second quarter of 2008. Both foreign
continued to rise, reaching 19.4 percent year-on-year at the and domestic economic analysts, previously highly bullish on
its ability to absorb foreign end of the first quarter. The trade deficit also continued to the Vietnamese economy, suddenly began to sound dire
climb, to USD7.4 billion at the end of the first quarter. and pessimistic, including comment that Vietnam may be
direct investment, in terms heading toward a financial crisis similar to Thailand in 1997.
A time to act
of infrastructure, expertise Faced with an overheating economy, the government chose to
As the second half of 2008 began, however, it was clear
that the government policy package was beginning to have
act. In early April 2008, the government made the difficult but
and labour. necessary decision to slow growth by fighting inflation and the
its intended effect. Month-on-month inflation, averaging 3
percent monthly over the first half of 2008, slowed notably
deficit through sharp cutbacks to credit and spending.
in June and has fallen further since, to a rate of under one
A comprehensive policy package was announced that included percent month-on-month during the third quarter of 2008.

VOF 2008 Annual Report 7
VNI

There was also a marked improvement in the trade deficit, (items that may not see a sharp drop in demand) will protect it
which reached USD14.9 billion at the end of the first half of somewhat from the global slowdown.
2008 but began to slow its growth by June. The threat to the
In the medium term, Vietnam’s young, educated population
Vietnam dong eased as a result, and by the end of the first half
and emerging middle class will continue to drive economic
the official and open market exchange rates were nearly even.
growth and development. The rise in consumer spending
and services, and growing demand for modern urban spaces,
Outlook will continue. The industrial base will be strengthened as oil
Overshadowed by the market turmoil was the continued surge
refineries come online in 2009 and transport infrastructure
in FDI, with USD30.6 billion in new commitments registered in
improves. The global economic situation will slow, not stop,
2008 to June, 50 percent higher than the full-year record set
Vietnam’s inevitable growth.
in 2007. Several multi-billion dollar projects were recorded in
steel production and real estate development.
Breakdown of FDI in to Vietnam H1 2008 vs 2007 Vietnam: Some Economic Factors H1 2008 vs 2007
Growth slowed to 6.5 percent over the first half of 2008
(versus 7.4 percent in the first half of 2007). However, as
USDbn
expectations moderated around the lower growth rate
the outlook for the remainder of the year looked positive. USDbn
18 17.3
Unfortunately, the global economy took a sudden turn for the 2007 70 2007
worse at the end of the third quarter of 2008. This has clouded 15 H1 2008 60.8 H1 2008
13.2 60
the short to medium-term outlook for Vietnam, even as the
12 50 48.4
country’s fundamentals continue to be strong. 44.6
9.4
40
Near the end of the year, the government wavered only 9
31.6
7.0 29.7
slightly in loosening its fiscal and monetary stance to allow 30
6
faster GDP growth. Controlling inflation and maintaining 20
20.3
14.9
financial stability remain the top economic priorities. In the 3
12.4
context of the dire global economic situation, the government 1.2 10 5 4.9
0.3 0.3 0.2
will likely use a flexible interest rate policy as a primary tool to 0 0
contain inflation while minimising potential liquidity risks in Industry Real estate Others Agriculture, Import Export Trade deficit FDI Disbursed FDI
& construction forestry & aquaculture
the banking system, to help weak banks survive and to avert
any potential rise in real estate loan defaults.

Vietnam needs to focus on its ability to absorb the FDI influx, Some 478 new FDI projects were registered with a total capital of Exports reached USD29.7bn in the first half of 2008, up 31.8 percent
in terms of infrastructure, expertise and labour. The global USD30.9bn. Together with USD661m supplementary capital in 158 year-on-year. Imports rose to USD44.5bn, up 60.3 percent against
projects, total FDI over H1 2008 reached USD31.6bn, a 3.7 fold 2007. Over the first half this resulted in a deficit of USD14.9bn,
financial crisis will have an impact on Vietnam chiefly in the
increase year-on-year over 2007. Disbursed FDI over H1 2008 was higher than the trade deficit for the whole of 2007. The largest
potential slowing of FDI disbursement. In other areas, the USD4.9bn, on track to reach the annual target of USD10bn. component of imports was machinery and equipment, accounting
country’s diverse export base and numerous low-cost exports for 15.7 percent of the total.

8 8VNI 2008 Annual Report
VNI 2008 Annual Report

Power

Investment The growth in energy demand in Vietnam over the period from
now to 2020 is expected to be remarkable by international
standards. The government’s 2006 master plan for the power
increase rapidly by 12-14 percent per year to 2010.

Such rapid growth has increased the pressure on Vietnam’s

Environment
transport infrastructure network, which has suffered from
sector, which assumes 7.5 percent annual GDP growth to
decades of underinvestment.
2020, anticipates electricity demand growth of 16 percent
yearly to 2010, 11 percent yearly from 2011-2015, followed by To improve the situation, the government has approved a list
9 percent yearly from 2016-2020. Expected demand growth in of projects to initiate before 2010 that will require USD4.5
the next two years implies almost a doubling of the installed billion for the construction of 10 seaports, USD6.3 billion for
generating capacity of Electricity of Vietnam (EVN). Such high 700km of expressway, and several billion USD more for new
growth rates reflect the projected high level of economic and upgraded airports. Foreign investment in transportation
activity and industrialisation of Vietnam. infrastructure is encouraged through incentive plans such
as BOT and BT project structures. The Ministry of Transport
Given the pace of demand growth, supply is struggling to keep
and provincial and municipal governments are also required
up given long investment lead times. The country’s power system
each year to issue lists of road and bridge projects eligible for
experiences low reserves particularly during the dry season,
foreign investment.
when hydropower plants can only operate at about 40-50 percent
of their rated output. The power system will operate with zero
reserves during dry seasons until 2010, necessitating power
Industrial parks
The continuous flow of foreign direct investment into Vietnam
imports from China and Laos, with rolling black-outs.
has resulted in rapid growth of the industrial park business.
The government has called for increased private sector At the end of 2007 there were 179 industrial parks in Vietnam

The government has called investment in power generation given the significant financial
resources required to increase supply capacity. In addition to
covering an area of 43,000 ha and contributing approximately
36 percent of GDP while creating more than one million jobs.

for increased private private sector participation in greenfield power projects, the
government is also continuing to equitise operating power
Foreign investors are attracted by Vietnam’s central location
in Asia, young and low-cost labour force, and government
sector investment in plants and those under construction.
incentives. Industrial parks are the preferred location to
establish manufacturing and business operations because of
power generation given Transportation
Between 1999 and 2005, freight travel on Vietnam’s roads
their quality infrastructure, utilities and other ready-to-use
facilities and services. Industrial parks have attracted a total of
the significant financial increased by an average of 8 percent yearly, and reached
18 percent yearly in key economic hubs like Hanoi and
2,600 foreign-invested projects worth USD25.3 billion.

resources required to Ho Chi Minh City. The growth in passengers per kilometre
has also increased by about 7.7 percent yearly over the same
The government also encourages local producers to relocate
factories from cities to neighbouring industrial parks, to lower

increase supply capacity. period. Container volume growth of 19.8 percent yearly from
1995 to 2006 may increase to 25 percent in the short term due
pollution and traffic congestion. As a result, the demand for
industrial properties is increasing steadily. Industrial parks built
to rapid growth of trade turnover. Air travel is also expected to and managed by experienced developers like VSIP, AMATA


and Tan Thuan, who understand the requirements of foreign new wave of private investment into the water treatment
investors, have been very successful. In addition to 50-year industry. Led by the Infrastructure Company of Ho Chi Minh
leaseholds, they also offer standard ready-built factories and City – CII, Thu Duc BOO became the first successful BOO
warehouses on a monthly fee basis. As the infrastructure water treatment project in Vietnam. The first BOT project
surrounding industrial parks improves, this sector has high in Vietnam is the 100,000 cu.m per day Binh An water
growth potential for many years. treatment plant.

Water treatment Telecommunications
Vietnam’s water treatment industry has grown substantially Vietnam is seeing rapid growth in its telecommunications
in recent years amid rapid urbanisation, an attractive policy sector, particularly mobile telecommunications, as
framework, and increasing public and government awareness incomes rise and lifestyles modernise. The number of
on the importance of proper hygiene and sanitation. mobile phone subscribers quadrupled from 9 to 36 million
Vietnam is currently experiencing one of the highest rates from 2005 to 2007, resulting in a penetration rate of over
of urbanisation in its history, at 27 percent yearly growth 41 percent. Meanwhile, the number of fixed-line users
in the urban population. This has outpaced infrastructure doubled in the same period to reach 11.4 million,
development in every corner of the country. As of 2004, a penetration rate of 13 percent. Internet use increased by
Vietnam’s rural access to water and sanitation was only 180 percent to 18.9 million users at January 2008, equal
48 percent and 16 percent, respectively, while access rates in to 22 percent of the population.
urban areas for water and sanitation were 82 percent and
Industry analysts expect this rapid growth to continue.
76 percent.
By the end of 2008 the mobile penetration should reach
In 2007 the government signed a decree regulating water 60 percent and by 2011 it should surpass the 100 percent
treatment, distribution, and consumption. This decree threshold. Fixed line users should increase to 13 million
encourages private sector investment into water treatment by the end of 2008, a penetration rate of 15 percent.
and distribution, with attractive incentives including tax The rate is forecast to exceed 17 percent by the end of
breaks, land use rights, and low-interest loans from the 2012. The number of internet users should rise to
Vietnam Development Bank. Moreover, private investors can 31.5 million by 2012, or 34 percent of the population.
enter BOO, BOT, or BT contracts with the government
The strong growth of the sector requires service providers like Mobile operators are now upgrading their infrastructure to 3G
to develop water treatment projects.
VNPT, S-Telecom, Vietel, Hanoi Telecom and GTel to continue and competing for licences. The first commercial deployment
Current targets include 95 percent urban access to clean to invest in expanding their network infrastructure – to meet of 3G mobile services is expected in 2008, with Business
drinking water and 85 percent rural access to national-standard the growing demand, to improve and enhance services and Monitor International predicting Vietnam will have over
clean water of 60 litres per person per day by 2010. By 2020, coverages, and to maintain competitiveness. Four mobile four million 3G customers by the end of 2012, or 7.5 percent
these targets increase to 100 percent urban access to operators will receive 3G licence from the Ministry of Culture of the mobile user base. Such developments in the
120-150 litres and 100 percent rural access to 60 litres per and Information, and five mobile operators will receive telecommunications sector create huge opportunities for
person per day. These goals will be hard to meet, even with the permission to undertake mobile WiMax trials. investment in the related infrastructure.


Portfolio Vietnam Infrastructure Limited (VNI) made great progress
over its first year in building a portfolio of infrastructure assets
portfolio, and the safety of a large remaining balance of
cash and bank deposits which stood at USD197.0 million at

Performance diversified by sector, asset class and geographic location.
VNI began trading on the London Stock Exchange (AIM) on
4 July 2007 after raising USD389 million to invest in Vietnam’s
infrastructure sector, with the goal of fully investing this
30 June 2008.
VNI has been conservative in its valuation process, and avoided
entering numerous deals when prices were at their peak in late
2007 (as one example, VNI entered a significant deal shortly
original capital within a two year period.
after the financial year closed at one-third the cost of the initial
The year ended 30 June 2008 saw great turbulence in the offer received six months earlier). As a result of this discipline,
Vietnamese market, highlighted by a 57 percent decline in some 60 percent of VNI’s NAV remained in cash and deposits at
the benchmark Vietnam Index. VNI saw its net asset value 30 June 2008, of which about half had been committed
and share price challenged by domestic and global economic to projects.
conditions. Despite the difficult environment, VNI can claim
VNI’s target portfolio structure is one-third operating assets,
an excellent performance record to date, with a much smaller
one-third under construction (brownfield) projects, and
decline in net assets than either the VN Index, comparable
one-third greenfield developments. As a significant number of
Vietnam funds, or comparable Asian infrastructure funds.
operating companies are listed, VNI ended the financial year
VNI’s began trading on 4 July 2007 at a net asset value of with 20.8 percent of its assets in listed securities. Some of
USD389 million, or USD0.97 per share. At 30 June 2008 the these investments were privately negotiated placements at
NAV had declined 13.9 percent to USD335 million, or 25 to 30 percent discounts to the prevailing market price.
USD0.84 per share. This compares to a drop of approximately
VNI’s NAV decline to date is entirely from the unrealised losses
38 percent on average for listed, close-ended funds focused on
in these marked-to-market listed and OTC securities. It is
Vietnam, according to the broker LCF Edmond de Rothschild.
realistic for these share prices to recover as in many cases they
The VNI share price was negatively affected near the end have fallen below their intrinsic value and even replacement
of the financial year due to a combination of pessimistic cost. VNI is working with some investee companies to assist
sentiment from the failure of several global infrastructure them with a dual listing on a more mature stock exchange
funds _ despite the fact that VNI has no debt at the fund (eg. Singapore) where more sophisticated investors would
level. The VNI share price peaked at USD1.04 on 16 October be able to properly assess their potential. Currently up to 80
2007 before gradually falling to USD0.60 at 30 June 2008. percent of trading on the Vietnam exchanges is retail investors.
The share price then declined again, sharply, during the
As the year progressed VNI focused more on semi-developed
September-October onset of global financial crisis that saw
projects, particularly in the telecommunications infrastructure
a worldwide ‘flight to safety’ out of emerging market and
sector, where over the year the company became Vietnam’s
other sectors or funds perceived as high risk.
largest investor in privately-owned mobile network towers
At the end of October 2008 the share price stood at (called base transceiver stations). Attractive returns are
USD0.26 per share, well below the fund’s cash position. possible with one transmitter from one mobile operator per
Without question, this is an irrational and unsettling tower. This allows for strong upside potential as there are six
situation that greatly concerns the VNI Board of Directors mobile operators licensed in Vietnam and 3G licences are also
and the investment manager. A review of VNI’s investment expected to be issued in 2009, requiring the infrastructure
performance indicates that there is great potential in the density to increase two or threefold.


Portfolio by sector (to 30 June 2008) Portfolio by asset class (to 30 June 2008)
Outlook
VNI’s original mandate and strategy to invest in Vietnam’s infrastructure sector remains valid.
335m 335m
The need for infrastructure in Vietnam, in every subsector, is extremely strong. The anticipated
global economic slowdown will have some impact on some areas, but the demand for power, 100% 3.92% Other sectors 100% 2.33% Fixed Income
water, roads and bridges is very high and inelastic. 12.40% Private
20.38% IP/Construction
The difficulty in raising debt in the current market for greenfield projects requires VNI to only 4.38% OTC
80% 80%
look at projects that have debt funding already in place. 2.05% Telecom
20.79% Listed
7.81% Energy
An increasing number of investment opportunities are available at very attractive prices. The
5.73% Transport and Aviation
high interest rates and lack of liquidity in Vietnam have project owners looking for new partners 60% 60%
– and VNI is unique in being the only fund focused on infrastructure in Vietnam. With significant
available cash and a strong pipeline, the company has solid prospects going forward. 29.93% Cash 29.93% Cash
and cash equivalent and cash equivalent
40% 40%

20% 20%
30.18% Approved 30.18% Approved
to be disbursed to be disbursed

0% 0%

Top investments 2008 2008

NAV and share price performance (to 30 June 2008)
Company Sector Type
USD
Tan Tao Industrial Park JSC IP Listed 1.2
Vietnam Aircraft Leasing Co. Transport Private 1.0

Long An S.E.A. Industrial Park and Service Area IP Private 0.8 0.839
0.6
Pha Lai Thermal Power JSC Energy Listed
0.4
Can Don Hydropower JSC Energy Listed
0.2 0.595
Mobile Infrastructure Development Co. Telecoms Private
0.0
Song Da Urban & IZ Development & Investment JSC IP/Construction Listed
Ba Ria Thermal JSC Energy Listed
Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jun-08
Petrovietnam Drilling & Well Services Investment Energy OTC
NAV Per share Price


Vietnam Aircraft Leasing Corporation is a joint venture that will lease aircraft on short and long-term contracts.


VNI is Vietnam’s largest investor in base transceiver station towers _ the backbone of mobile networks.


VNI’s first investment in the power sector was Can Don Hydro, a listed company.


VNI has investments in both greenfield and operating industrial parks, like Tan Tao in Ho Chi Minh City.


Feature Power

Investments
Electricity supply in Vietnam cannot meet the demand of a fast growing economy. This is a key
development bottleneck and a fundamental reason for VNI to be a long-term investor in power
generation companies in Vietnam. After one year, 7.8 percent of VNI’s net asset value is invested
in the energy sector.

Can Don Hydro Power Joint Stock Company (SJD)
VNI’s first investment in the power sector was in SJD – a hydro power company with an installed
capacity of 78 MW and listed on the Ho Chi Minh Stock Exchange (HOSE). The plant is located
on the Song Be River just after Thac Mo Hydro Power. The area served by the plant – including
Ho Chi Minh City, Vung Tau, Bien Hoa and Binh Duong provinces – has the fastest growth
rate in Vietnam and is the industrial and technology hub of the country. VNI currently owns
a 16.6 percent stake in SJD, with the majority owner being Song Da, one of Vietnam’s leading
conglomerates.
Thac Mo Hydro Power Joint Stock Company
VNI owns a 1.4 percent stake in Thac Mo Hydropower JSC, which owns a power plant on the
Song Be River in southeastern Vietnam. The total designed capacity of its two generators is
150 MW, equivalent to an annual output of approximately 610 million kWh. The company is
currently undergoing an expansion project to increase annual output by 52 million kWh.
Ba Ria Thermal Power Joint Stock Company
VNI owns a 2.6 percent stake in Ba Ria Thermal Power, which owns a plant in Ba Ria-Vung Tau in
southern Vietnam. The 389 MW capacity plant has a current annual output of approximately two
billion kWh, some 4 percent of total power output in Vietnam. Ba Ria Thermal Company is 80%
owned by Electricity of Vietnam and is one of the top five power companies in Vietnam.
Pha Lai Thermal Power Joint Stock Company (PPC)
VNI has a 3.5 percent stake in the largest thermal power plant in Vietnam, PPC, with 1040 MW
of generating capacity providing approximately 10 percent of Vietnam’s electricity output.
PPC primarily generates electricity derived from thermal (coal) power sources and has the advantage
of proximity to two major coal mines in northern Vietnam, namely Vang Danh and Mao Khe.


Telecommunications Transportation Industrial Parks
The rapid growth of mobile use in Vietnam has translated Vietnam’s road, rail, air and water transport links are all in dire Industrial Parks are the leading model for economic growth in
into a demand for telecommunications infrastructure such as need of upgrading. The government’s willingness to involve the manufacturing sector in Vietnam, as they offer numerous
base transceiver station (BTS) towers. The three major mobile private sector participation in this sector has opened the door benefits for factories including improved infrastructure such
phone operators are estimated to require about 7,000 BTS for VNI to make profitable long-term investments. as independent waste disposal and power supplies. Industrial
over the next two years. VNI is now Vietnam’s largest single Parks are profitable businesses and VNI has invested in
investor in companies that build and lease BTS towers to the listed companies Tan Tao and Song Da, along with two
mobile network providers. independent IP ventures.

Mobile Infrastructure Development Company (MIDC) Innovative Technology Development Corporation (ITD) Ba Thien 2 Industrial Park
VNI established MIDC as a joint venture that is expected to VNI owns a 15 percent stake in ITD, a holding group with VNI has joined with CPK Vinh Phuc to develop Ba Thien 2,
be the largest private BTS owner and lessor in Vietnam. VNI six subsidiaries operating in various areas of infrastructure a modern 308ha industrial park 60km north of Hanoi. VNI
has a 49 percent equity stake in MIDC and is the single largest technology including telecommunications, power, electronics, owns a majority stake in the joint venture, which will invest
shareholder. Since incorporation, MIDC has secured orders to toll-road equipment and information systems. ITD is the in the park infrastructure and lease land to industrial tenants.
build and lease about 1,000 BTS towers across Vietnam. largest toll road equipment provider in Vietnam. Ba Thien 2 is located in Vinh Phuc province, a prime industrial
location for major corporations including Honda, Toyota,
Mobile Information Services (MIS) Vietnam Aircraft Leasing Company (VALC)
Foxconn and Compal.
VNI currently owns a 30 percent stake in Hanoi-based VNI owns a 16 percent stake in VALC, a joint venture between
MIS, which has built over 100 BTS for VMS Mobifone and some of the largest state-owned enterprises, including Long An Industrial Park Service Area
Vinaphone, and is in the process of building another Vietnam Airlines, Bank for Investment and Development of VNI will develop 398ha of industrial park and 239ha of service
100 towers. Vietnam (BIDV), Viet Nam Oil and Gas Group (PetroVietnam), area for the 2,000ha Long An S.E.A complex that will include a
Viet Nam Shipbuilding Industry Group (Vinashin) and Phong port, IP, services, residential areas and park space. The Long An
Global Infrastructure Investment Limited (GII)
Phu Corp. VALC will lease out aircraft on short and long-term complex is located only 25km from Ho Chi Minh City. The future
VNI established GII as a joint venture with two strategic
contracts. The company has already signed contracts with S.E.A port will significantly aid the development of the industrial
partners, Innovative Technology Development Corp. (ITD)
Boeing and Airbus to purchase eight B787-8 Dreamliners and park as manufacturers will be able to significantly reduce time
and Global Lightning Technologies Corp. (GLT). VNI has a
ten A321-200 aircraft, all to be leased by Vietnam Airlines, and cost for the import and export of materials and finished
49 percent equity stake in the joint venture, which is based
with the debt for this lease guaranteed by the Government of products. Construction will begin in 2009.
in Ho Chi Minh City. As of 30 June 2008 – within three
Vietnam. VALC’s potential projects also include investments in
months of being established – GII had constructed 11 BTS
airport infrastructure and aviation services.
towers and secured contracts for an additional 55 towers
from the two largest mobile providers in Vietnam (VMS
Mobiphone and Vinaphone).


Left to right: Mr. Horst F. Geicke, Mr. Ekkehard Goetting, Mr. Luong Van Ly, Mr. Paul Cheng, and Mr. Don Lam.


Board of Directors

Don Lam, Chairman Horst F. Geicke, Director Luong Van Ly, Director
Don Lam is Co-founder and Chief Executive Officer of Horst Geicke is Chairman and Co-founder of VinaCapital Mr. Luong is currently the CEO of DNL Partners, an
VinaCapital Group Limited. He has overseen the Group Limited. He has resided in Asia for almost 30 years investment consultancy company. He has also held the
Group’s growth from manager of a single USD10 million fund and has over 25 years of operating and investing experience position of Deputy Director of the Department of Planning
in 2003 into a full-featured investment house managing four in the region, having made several financial and strategic and Investment in Ho Chi Minh City for six years and before
funds worth almost USD2 billion and offering a complete investments in Vietnam, including the establishment of a that he was the Deputy Director of Foreign Affairs. He has
range of corporate finance and real estate advisory services. manufacturing plant for his family business. Mr. Geicke also had over 25 years of experience in Vietnam giving him a
Before founding VinaCapital, Mr. Lam was a partner at co-founded the Pacific Alliance fund management good understanding of both the government and the market.
PricewaterhouseCoopers (Vietnam) Limited, where he led group, which has more than USD2 billion in assets under He attended the Graduate Institute of International Studies
the Corporate Finance and Management Consulting practices management. Mr. Geicke was the President of the German in Geneva, Switzerland.
throughout the Indochina region. Mr. Lam has also held Chamber of Commerce in Hong Kong for four years and in 2005,
management positions at Deutsche Bank and became the president of the European Chamber of Commerce
Coopers & Lybrand in Vietnam and Canada. in Hong Kong. Mr. Geicke has a Masters degree in Economics
and Business Law from the University of Hamburg, Germany.

Ekkehard Goetting, Director Paul Cheng, Director
Mr. Goetting is currently Chairman and CEO of German Industry Mr. Cheng is an independent non-executive director of Esprit
of Commerce Ltd. (GIC), Hong Kong, South China, Vietnam and Holdings Limited and Kingboard Chemical Holdings Limited
a member of the Board, GIC Taicang Ltd., Taicang, PRC. He is – both listed companies on the Hong Kong Stock Exchange.
also Vice President of the German Chamber of Commerce in He is a member of the International Advisory Board of Abdul
Hong Kong. Mr. Goetting was born in Germany and attended Latif Jameel Co. Ltd., one of the largest private companies in
the University of Hamburg where he studied law and computer Saudi Arabia, and is an advisor to Steelcase Corporation in the
science. He has over 17 years of business experience in Asia, and U.S. He was formerly Chairman of The Link Management Ltd.,
has worked to increase business ties between his native Germany which manages a portfolio of previously government-owned
and Asia. He established a Representative office of German retail and car parking assets, valued at over HK$30 billion.
Industry and Commerce in Hanoi and he has led multiple German The privatisation in late November 2005 was the world’s
and International business missions to Vietnam and Cambodia largest Real Estate Investment Trust (REIT) IPO. Born in China,
starting as early as 1990. He has served on many Asia-specific Mr. Cheng was raised in Hong Kong and received his higher
Advisory Boards, most notably the Asia-Pacific Committee of education in the United States. He has a B.A. degree from
German Industry, the Federation of German Industries, the East Lake Forest College (Illinois, U.S.A) and received his M.B.A.
Asia Business Association and the Association of German Banks. degree from the Wharton Graduate School of Business at the
Currently he also holds the position of Chief Representative for University of Pennsylvania.
the German National Tourist Office, Hong Kong and South China
as well as Messe Berlin, Hong Kong, PRC and Port of Hamburg,
Hong Kong, PRC, Vietnam.


Report of the
The Company
Vietnam Infrastructure Limited is incorporated in the Cayman Islands as a company with limited
liability. The registered office of the Company is PO Box 309GT, Ugland House, South Church

Board of Directors
Street, George Town, Grand Cayman, Cayman Islands.

Principal activity
The Company’s principal activity is to invest in a diversified portfolio of entities owning
infrastructure projects and assets in Vietnam and the surrounding Asian countries. The Company
mainly invests and holds equity, debt and hybrid instruments in unquoted companies that
themselves hold, develop or operate infrastructure assets. The Company may also invest in
entities whose shares or other instruments are listed on a stock exchange, or traded on OTC
markets. The Company also may invest in other funds that invest in infrastructure.

Results and dividends
The results of the Group for the year ended 30 June 2008 and for the period from 18 January 2007

The Board of Directors submits its report (date of establishment) to 30 June 2007 and the state of its affairs as at those dates are set out in
the accompanying consolidated financial statements.

together with the consolidated financial The Company’s ordinary shares were admitted to trade, and commenced trading, on the AIM
market of the London Stock Exchange on 5 July 2007.

statements of Vietnam Infrastructure The Board of Directors do not recommend payment of dividends in respect of the year.

Limited (“the Company”) and its Directors
The directors of the Company during the year were as follows:

subsidiaries (together referred to as “the
Group”) for the year ended 30 June 2008 Name Position Appointed on

and for the period from 18 January 2007 Don Lam Chairman 29 June 2007
Horst Geicke Director 29 June 2007
(date of establishment) to 30 June 2007. Paul Ming Fun Cheng Director 29 June 2007
Ekkehard Goetting Director 29 June 2007
Luong Van Ly Director 29 June 2007


Directors’ interests in the Company
As at 30 June 2008 and 2007, the interests of the Directors in the shares, underlying shares and have been appropriately disclosed, explained and quantified in the financial information;
debentures of the Company were as follows: 3. maintain adequate accounting records and an effective system of internal controls;
4. prepare the financial information on a going concern basis unless it is inappropriate to assume
that the Group will continue its operations in the foreseeable future; and
5. control and direct effectively the Group in all material decisions affecting its operations
No. of shares and performance and ascertain that such decisions and/or instructions have been properly
30 June 2008 30 June 2007 reflected in the financial information.
Horst Geicke 1,000,000 500,000 The Board of Directors is also responsible for safeguarding the assets of the Group and hence for
Don Lam 600,000 500,000 taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Board of Directors confirms that they have complied with the above requirements in
Approximate % of holding preparing the financial information.
30 June 2008 30 June 2007
Statement by the Board of Directors
Horst Geicke 0.25% 0.12% In the opinion of the Board of Directors, the accompanying consolidated balance sheets,
Don Lam 0.15% 0.12% consolidated statements of income, cash flows and changes in equity, together with the notes
thereto, have been properly drawn up and give a true and fair view of the financial position of
the Group as at 30 June 2008 and 2007 and the results of its operations and cash flows for the
At the date of this report there had been no changes in the above holdings. year ended 30 June 2008 and for the period from 18 January 2007 (date of establishment) to 30
June 2007 in accordance with International Financial Reporting Standards.
Subsequent events
Details of significant subsequent events of the Group are set out in Note 26 to the accompanying
consolidated financial statements. On behalf of the Board of Directors,

Directors’ responsibility in respect of the consolidated financial statements Don Lam, Chairman
The Board of Directors is responsible for ensuring that the consolidated financial statements Ho Chi Minh City, Vietnam
(“financial information”) are properly drawn up so as to give a true and fair view of the financial 28 October 2008
position of the Group as at 30 June 2008 and 2007 and of the results of its operations and its
cash flows for the year ended 30 June 2008 and for the period from 18 January 2007 (date of
establishment) to 30 June 2007. When preparing the financial information, the Board of Directors is
required to:
1. adopt appropriate accounting policies which are supported by reasonable and prudent
judgements and estimates and then apply them consistently;
2. comply with the disclosure requirements of International Financial Reporting Standards or, if
there have been any departures in the interest of true and fair presentation, ensure that these


Independent Auditors’ Report

To the shareholders
of Vietnam Infrastructure Limited

Scope
We have audited the accompanying consolidated financial statements of Vietnam Infrastructure In making those risk assessments, we consider internal control relevant to the entity’s
Limited and its subsidiaries (together referred to as “the Group”) which comprise the preparation and fair presentation of the financial statements in order to design audit procedures
consolidated balance sheets as at 30 June 2008 and 2007, and the consolidated statements of that are appropriate in the circumstances, but not for the purpose of expressing an opinion
income, changes in equity and cash flows for the year ended 30 June 2008 and for the period on the effectiveness of the entity’s internal control. An audit also includes evaluating the
from 18 January 2007 (date of establishment) to 30 June 2007, and summary of significant appropriateness of accounting principles used and the reasonableness of accounting estimates
accounting policies and other explanatory notes, as set out on pages 26 to 40. made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide
Management’s Responsibility for the Financial Statements a basis for our opinion.
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with International Financial Reporting Standards. This responsibility
includes: designing, implementing and maintaining internal control relevant to the preparation
Audit opinion
In our opinion, the financial statements present fairly, in all material respects, the financial
and the fair presentation of financial statements that are free from material misstatement,
position of the Group as at 30 June 2008 and 2007, and the results of its operations and its
whether due to fraud or error; selecting and applying appropriate accounting policies; and
cash flows for the year ended 30 June 2008 and for the period from 18 January 2007 (date of
making accounting estimates that are reasonable in the circumstances.
establishment) to 30 June 2007 in accordance with International Financial Reporting Standards.

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

An audit involves performing procedures to obtain audit evidence about the amounts and
KPMG Limited
disclosures in the financial statements. The procedures selected depend on our judgement,
Vietnam
including the assessment of the risks of material misstatement of the financial statements,
28 October 2008
whether due to fraud or error.


Consolidated balance sheets as at 30 June 2008 and 2007

Note 30 June 2008 30 June 2007
USD’000 USD’000
Assets
Non-current
Property, plant and equipment 6 17,970 -
17,970 -
Current
Trade and other receivables 7 6,008 -
Financial assets at fair value through profit and loss 8 112,880 -
Investments in equity accounted investees 9 3,814 -
Bank deposits 10 61,828 -
Cash and cash equivalents 11 135,248 402,100
319,778 402,100
Total assets 337,748 402,100

Equity
Equity attributable to shareholders of the Group
Share capital 12 4,021 4,021
Treasury shares (729) -
Share premium 13 386,367 386,367
Accumulated losses (54,327) (851)
335,332 389,537
Minority interest 14 906 -
Total equity 336,238 389,537

Liabilities
Current liabilities
Payables to related parties 15 827 11,712
Other liabilities 683 851
Total liabilities 1,510 12,563
Total equity and liabilities 337,748 402,100
Net asset value per share (USD per share) 20 0.84 0.97

The notes set out on pages 26 to 40 form an integral part of these consolidated financial statements


Consolidated statements of changes in equity for the year ended 30 June 2008
and for the period from 18 January 2007 (date of establishment) to 30 June 2007

Equity attributable to shareholders of the Group
Minority
Total equity
Share capital Treasury shares Share premium Accumulated losses Total interest

USD’000 USD’000 USD’000 USD’000 USD’000 USD’000 USD’000
At 18 January 2007 (date of establishment) - - - - - - -
Net loss for period ended 30 June 2007 - - - (851) (851) - (851)
Issue of new shares 4,021 - 398,079 - 402,100 - 402,100
Placing fees - - (11,712) - (11,712) - (11,712)
At 30 June 2007 4,021 - 386,367 (851) 389,537 - 389,537
Net loss for the year ended 30 June 2008 - - - (53,476) (53,476) (6) (53,482)
Acquisition of subsidiaries - - - - - 912 912
Buy-back of shares - (729) - - (729) - (729)
At 30 June 2008 4,021 (729) 386,367 (54,327) 335,332 906 336,238

Consolidated statements of income for the year ended 30 June 2008
and for the period from 18 January 2007 (date of establishment) to 30 June 2007
From 1 July 2007 From 18 January 2007
Note to 30 June 2008 to 30 June 2007
USD’000 USD’000
Net changes in fair value of financial assets
16 (46,388)
at fair value through profit and loss
Other investment income 17 18,262 -
Administration expenses 18 (9,750) (851)
Loss from operating activities (37,876) (851)
Net foreign exchange loss (15,491) -
Share of loss of equity accounted investees 9 (115) -
Loss before tax (53,482) -
Income tax 19 - -
Net loss (53,482) (851)
Basic loss per share (USD per share) 20 (0.13) (0.002)



Consolidated statements of cash flows for the year ended 30 June 2008
and for the period from 18 January 2007 (date of establishment) to 30 June 2007 From 1 July 2007 to 30 June 2008 From 18 January 2007 to 30 June 2007
USD’000 USD’000
Operating activities
Net loss before tax (53,482) (851)
Adjustment for
Gains on disposals of financial assets (17) -
Share of loss of equity accounted investees 115 -
Unrealised foreign exchange losses 13,734 -
Net changes in fair value of financial assets at fair value through profit and loss 46,405 -
Interest and dividend income (18,261) -
Net loss before changes in working capital (11,506) (851)
Change in secured bank deposits (61,828)
Change in trade and other receivables (1,016) -
Change in trade and other payables 659 851
(73,691) -
Investing activities
Interest received 12,842 -
Dividends received 427 -
Purchases of property, plan and equipment through acquisition of subsidiaries (See Note 5) (17,000) -
Other purchases of property, plan and equipment (58) -
Investments in associates (3,929)
Purchases of financial assets (166,543) -
Proceeds from disposals of financial assets 217 -
(174,044) -
Financing activities
Proceeds from shares issued - 402,100
Payment for buy-back of shares (729) -
Payment for share issuance costs (11,712) -
(12,441) 402,100
Net (decrease)/increase in cash and cash equivalents for the year/period (260,176) 402,100
Unrealised foreign exchange differences of cash and cash equivalents (6,676) -
Cash and cash equivalents at the beginning of the year/period 402,100 -
Cash and cash equivalents at end of the year/period 135,248 402,100



Notes to the consolidated financial statements for the year ended 30 June 2008 and for the
period from 18 January 2007 (date of establishment) to 30 June 2007

These notes form an integral part of and should be read The financial statements have been prepared using the excluded from consolidation from the date that the
in conjunction with the accompanying consolidated historical cost convention, as modified by the measurement at control ceases.
financial statements. fair value of certain financial assets and financial liabilities, the
In addition, acquired subsidiaries are subject to application
measurement bases of which are described in the accounting
of the purchase method of accounting. This involves the
1. General information policies below.
measurement at fair value of all identifiable assets and
Vietnam Infrastructure Limited (“the Company’) is a limited
The preparation of financial statements in accordance liabilities, including contingent liabilities of the subsidiary,
liability company incorporated in the Cayman Islands. The
with IFRS requires the use of certain accounting estimates at the acquisition date, regardless of whether or not they
registered office of the Company is PO Box 309GT, Ugland
and assumptions. Although these estimates are based on were recorded in the financial statements of the subsidiary
House, South Church Street, George Town, Grand Cayman,
management’s best knowledge of current events and actions, prior to acquisition. On initial recognition, the assets and
Cayman Islands. The Company mainly invests and holds equity,
actual results may ultimately differ from those estimates. liabilities of the subsidiary are included in the consolidated
debt and hybrid instruments in unquoted companies that
The estimates and underlying assumptions are reviewed balance sheet at their fair values, which are also used as the
themselves hold, develop or operate infrastructure assets.
on an ongoing basis. Revisions to accounting estimates are basis for subsequent measurement in accordance with the
The Company may also invest in entities whose shares or other
recognised in the period in which the estimate is revised and Group’s accounting policies. Goodwill represents the excess of
instruments are listed on a stock exchange, or traded on the
in any future period affected. acquisition cost over the fair value of the Group’s share of the
OTC markets. The Company also may invest in other funds that
identifiable net assets of the acquired subsidiary at the date of
invest in infrastructure. The Company’s shares are traded on The areas involving a higher degree of judgment or complexity,
acquisition. Negative goodwill is immediately allocated to the
the AIM market of the London Stock Exchange under the ticker or areas where assumptions and estimates are significant
consolidated statement of income as at the acquisition date.
symbol VNI. to the financial statements, are disclosed in Note 3 to the
consolidated financial statements. All intra-group balances and significant intra-group
The Company’s fiscal year is from 1 July to 30 June. The first
transactions and resulting unrealised profits or losses
fiscal year was from 18 January 2007 (date of establishment) 2.3 Basis of consolidation
(unless losses provide evidence of impairment) are
to 30 June 2007. The financial statements of the Group as of 30 June 2008
eliminated on consolidation.
and 2007 and for the period from 18 January 2007
2. Summary of significant accounting policies (date of establishment) to 30 June 2007 and for the 2.5 Associates
2.1 Statement of compliance year ended 30 June 2008 comprise the Company and its Associates are those entities in which the Group has significant
The consolidated financial statements (the “financial subsidiaries (together referred to as “the Group”) and the influence, but not control, over the financial and operating
statements”) have been prepared in accordance with Group’s interests in associates. policies. Associates are accounted for using the equity
International Financial Reporting Standards (“IFRS”). method and are initially recognised at cost. The Group’s
2.4 Subsidiaries
investment includes goodwill identified on acquisition, net
The consolidated financial statements were approved for issue Subsidiaries are all entities over which the Group has the
of any accumulated impairment losses. The consolidated
by the Board of Directors on 28 October 2008. power to control the financial and operating policies so as
financial statements include the Group’s share of the income
to obtain benefits from their activities. In assessing control,
2.2 Basis of preparation and expenses and equity movements of the equity accounted
potential voting rights that presently are exercisable or
The significant accounting policies that have been used in investees from the date that significant influence commences
convertible, along with contractual arrangements, are taken
the preparation of the financial statements are summarised until the date that significant influence ceases. When the
into account. Subsidiaries are fully consolidated from the
below. These policies have been consistently applied to all the Group’s share of losses exceeds its interest in an associate,
date on which control is transferred to the Group. They are
financial periods presented unless otherwise stated. the carrying amount of that interest is reduced to nil and the

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