Vinaland : VNL Q2 2017 Update

Manager's comment

As of 30 June 2017, VinaLand Limited (the "Company" or "VNL") posted an unaudited net asset value (NAV) of USD244.1 million or USD0.95 per share, a 2.7% increase from the previous quarter's unaudited NAV

per share of USD0.92. The NAV per share on 30 June 2017 was determined incorporating adjustments for operating costs and fees, gains from disposals and revaluations, as well as distributions to shareholders in the form of both on-market share repurchase (buyback) and the USD40 million share repurchase conducted via the tender offer in June 2017, plus accrual of the disposal and alignment fees. VNL's share price increased

by 11.5% to USD0.78 as at 30 June 2017, from the closing price of USD0.70 reported on 31 March 2017. The company's share price to NAV discount, as a result, is currently 18.1%. Since the commencement of the share buyback program, VNL has cancelled 48.4% of the fund's total issued shares prior to the program. In addition to the share buyback programme, VNL repurchased 50.63 million shares in June 2017 via a tender offer at a fixed price of USD0.79. With regard to shareholder distributions, VNL repurchased and cancelled 66.32 million ordinary shares in the second quarter of 2017, including those repurchased via the tender offer, bringing the total of cancelled ordinary shares since October 2011 to 241.98 million.

Fund update

VNL project revaluations were undertaken for the period ending 30 June 2017 with three projects appraised by international valuation consultants while six projects were appraised by the Valuation Committee. Five of these projects are located in Ho Chi Minh City and four projects in the south and central regions of Vietnam. As a result, the project valuation movement was upward due to the steady market across the country during the second quarter of 2017 and this confidence flowed through to real estate land values.

On 10 April 2017, VNL announced that it divested its entire stake in the Dai Phuoc Lotus project located

in Dong Nai province on the outskirts of Ho Chi Minh City. The project consists of a total site area of 198.5 hectares and was acquired by VNL in 2007. VNL disposed of its entire stake in the Project receiving net proceeds of approximately USD48.8 million. The total valuation was 11.2% above the 31 December 2016 audited NAV and 21.8% above the unaudited NAV at the time of VNL's extraordinary meeting (EGM) in November 2016, including adjustments for additional investments up to the date of exit.

On 28 April 2017, VNL announced it had divested its stake in both Parcel 3 and Parcel 7A of the My Gia project. VNL's disposal of its entire stake in both Parcels resulted in net proceeds of USD5.5 million being VNL's stake at a total valuation 0.2% above the unaudited NAV at 31 March 2017 and 5.6% above the NAV at the time of VNL's EGM in November 2016.

Furthermore, on 17 May 2017, VNL announced it had divested its entire stake in the Times Square project, located in Hanoi. The project consists of a total land area of approximately 4.0ha and was acquired by VNL in 2007. VNL divested its stake in the project for net proceeds of approximately USD41.0 million. The total

valuation was 20.4% above the unaudited NAV at 31 March 2017 and 48.1% above the unaudited NAV at the time of VNL's EGM in November 2016, both figures include adjustments for additional investments up to the date of exit.

A VNL shareholder update was presented on 18 May 2017 in Zurich, Switzerland where the Manager had the opportunity to provide shareholders with up to date information on the Company including progress

55.00

VNL shares repurchased (millions)

50.00

45.00

40.00

35.00

30.00

25.00

20.00

15.00

10.00

5.00

0.00

VNL shares repurchased (millions) VNL NAVps VNL share price

1.00

Share price and NAVps (USD)

0.90

0.80

0.70

0.60

0.50

0.40

2.9%

200.0

Residential Mixed Use Township Hospitality

17.7%

59.8%

19.6%

150.0

100.0

50.0

-

Hospitality Township Mixed Use Residential

Total Investment NAV Bank Debt

with the disposal of projects and distributions to shareholders. An electronic copy of the presentation can be downloaded from the Company's website at http://vnl-fund.com/information-briefs/.

On 17 May 2017, VNL announced it would re-purchase up to USD40 million worth of shares from shareholders through a tender offer to purchase ordinary shares of USD0.01 each Ordinary Shares in the Company. As set out in the Tender Offer Circular dated 17 May 2017 and Pricing Notice dated 25 May 2017, the Tender Offer was offered to all shareholders on the register on 26 May 2017 being the Tender Offer Record Date at a fixed price of USD0.79 per ordinary share. Shareholders were able to elect to accept or decline participation in the off-market share buyback via the Tender Offer. The deadline for submitting

completed and signed Tender Forms and to Standard Chartered Bank (SCB), was 5:00 pm Singapore time on Friday, 23 June 2017. Based on the valid Tender Forms received by SCB, by the deadline, 100.0% per cent of the Distribution of Capital allocated, totaling USD40.0 million, was paid in the form of a cash payment. The tender offer was oversubscribed therefore tenders were scaled back, on a pro-rata basis, to approximately 38.7% so that the maximum amount of Ordinary Shares repurchased did not exceed the value of the Tender Offer. Results of Distribution of Capital to Shareholders via the Tender Offer were announced on 26 June 2017. Shareholders' accounts (including those held through Euroclear and/or Clearstream) were credited shortly after the Settlement Date of 30 June 2017.

The Investment Manager will continue to work towards the disposal of additional projects that that will result in further distributions to shareholders during Q3 2017.

Macroeconomic Update

Vietnam's GDP growth rate accelerated from 5.2% yoy in 1Q17 to 6.2% in 2Q16, leading to a GDP growth of 5.7% yoy for 1H17. The acceleration in GDP growth was driven by improvements in both manufacturing and consumption growth. In Q1, manufacturing growth was impeded by a reported 38% fall in Samsung's

production due to issues with the company's Galaxy Note 7 phone, but the launch of the Samsung's new S8 smartphone helped lift Vietnam's manufacturing activity from 8.3% year-on-year (yoy) rate of growth in Q1 to an estimated 12% yoy pace in Q2 (manufacturing activity grew 10.5% yoy in 1H17).

Export growth accelerated from a 5.9% pace in 1H16 to 18.8% yoy growth in 1H17, which was Vietnam's fastest H1 export growth in the last five years, but imports rose 24.1% yoy, degrading Vietnam's trade balance from a circa 1.7% of GDP surplus in 1H16 to a 2.7% of GDP deficit in 1H17. However, the country's import growth was driven by a 37.8% increase in purchases of tools and machinery in the first half of the year - signaling that Vietnam's manufacturing production is likely to continue expanding in 2H17 and 2018.

The other notable improvement from the beginning of the year was an increase in Vietnam's reported real retail sales growth. Vietnam's General Statistics Office (GSO) reported a 6.2% yoy increase in real retail sales in 1Q17, and a 8.4% yoy increase in 1H17, implying an acceleration in real consumption growth in Q2 (the GSO does not report quarterly retail sales growth figures). However, the improvement in the reported real retail sales growth was partly attributable to a drop in the Consumer Price Index (CPI) inflation from 4.7% yoy at the end of 1Q17 to 2.5% at the end of 1H17.

Finally, despite the acceleration in Vietnam's growth from earlier this year, the government's GDP growth target of 6.7% for 2017 now seems challenging. Oil production fell by about 13% in H1, without which Vietnam's GDP would have grown at about a 7% pace in H1. We do not expect this situation to improve in the second half of the year, so we expect GDP to grow by 6.3-6.5% this year. Achieving our forecast would necessitate an increase in Vietnam's GDP growth from 6.7% in 2H16 to above 7% in 2H17, but with the

Vietnam's Purchasing Managers' Index (PMI) rebounding from a 14-month low of 51.6 in May to 52.5 in June, we are optimistic that our forecast can be reached.

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.0

60

55

50

45

40

30

25

20

15

10

5

0

1,500

1,000

500

- (500)

(1,000)

(1,500)

(2,000)

Feb-15 Mar-15 Apr-15

May-15 Jun-15 Jul-15 Aug-15 Sep-15 Oct-15 Nov-15 Dec-15 Jan-16 Feb-16 Mar-16 Apr-16

May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17

May-17 Jun-17

(2,500)

Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar

Jun

2010 2011 2012 2013 2014 2015 2016 2017

Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17

Jun-17

Disbursed (YTD) Registered (YTD)

YoY CPI

MoM CPI

8 1.2

71.0

0.8

6

0.6

50.4

4 0.2

30.0

(0.2)

2

(0.4)

1(0.6)

- (0.8)

2013 2014 2015 2016 2017

YoY CPI MoM CPI

Source: GSO, Vietnam Customs, Bloomberg

Following the outcome of the 2016 AGM and EGM, the Investment Manager is continuing with the orderly realisation of the Company's investment portfolio enabling further distributions to shareholders. Proceeds received from disposals less future commitments (distributable proceeds) will be used for distributions to shareholders via a range of methods including but not limited to share buybacks and re-purchase of shares via tender offers while the trading discount is equal to or greater than 15% of NAV per ordinary share. In addition, if considered appropriate, the Board may also consider making capital distributions by way of returns of capital from the Company's share capital and additional paid in capital. In all cases, the appropriate method of returning distributable proceeds to shareholders will remain at the discretion of the Board.

(USDm)

160 USD151.6m (including USD40m via a tender offer share

repurchase on 30 June 2017)

NAV at exit Net proceeds to VNL Cumulative distribution value post November 2015 EGM

140

120

100

80

60

40

20

0

Project Marina Project C21 Project Golf HBT Court Project Pham Hung Resort Project Project Ceana Project BD Dai Phuoc Lotus Project Times Square Project

Nov-15

Apr-16

May-16

May-16

May-16

Jun-16

Aug-16

Nov -16

Jan-17

Apr-17

May-17 Jun-17

1. All "NAV at exit" figures are based on most recent audited numbers prior to the exit date.

2. Net proceeds from exit include all transfers of money between the fund and project companies, including dividends, shareholder loans, and capital contributions.

3. For comparison purposes, the NAV has been adjusted for subsequent investments and returns. For all disposals up to Project Ceana, the 2012 EGM NAV has been reported while all disposals from Project BD use the 2016 EGM

NAV.

During the first half of 2017, GDP growth and inflation remain steady. Total registered FDI into real estate segment reached nearly USD701.6 million, up approximately 16.0% against the same period last year, according to the Ministry of Planning and Investment. These figures indicate that investors remain confident about Vietnam's investment environment despite ongoing concerns in the world market. As at 30 June 2017, the Vietnam Dong (VND) continued to remain stable, with exchange rates reaching 22,700 VND/USD.

Overall, Vietnam's economy continued to perform well during the first six months of 2017. However, restrictions imposed by the State Bank of Vietnam (SBV) on lending into the real estate sector since January 2017 has increasingly affected lending to real estate projects. Banks are now beginning to slow down the provision of debt to real estate developers and this coupled with sales rates slowing for some sub-sectors, such as condominiums, may impact the market in the second half of 2017 and certainly for 2018.

According to CBRE Vietnam, an additional 3,000 units in Ho Chi Minh City and Hanoi were launched in the first half of 2017. Average selling prices both in Ho Chi Minh City and Hanoi increased by between 3-15% year-on-year during the first six months of 2017. Low supply therefore creates

a more sustainable market for the landed property segment, in terms of liquidity and saleability. With buyer references suited to landed property, land plots remain good investment products and will continue to receive more buyer attention with a focus on medium land size of 50 - 80sqm.

Furthermore, given the rapid development of infrastructure, land prices in Danang have increased significantly since the beginning of 2017 and the market continued to attract attention from local and foreign investors during Q2 2017.

During the first half of 2017, an additional 32,147 units in Ho Chi Minh City and Hanoi were launched, an increase of approximately 15.0% year-on-year, according to CBRE Vietnam. Average selling price remained stable due to developers diversifying to suit discerning residential purchasers with varied purchased rationales. Furthermore, developers have been increasingly responsive due to increased competition, focusing on an improved range of internal facilities, such as large swimming pools, mini-golf courses, children's play areas, tennis courts and modern gyms. Total new supply in 2017, both in Ho Chi Minh City and Hanoi, is expected to reach over 70,000 condominium units, up

approximately 10.0% against the previous year. Developers are now experiencing a slow-down in sale rates and pricing is under pressure. The condominium market remains over supplied in a number

of locations and this imbalance may impact prices and inventory movement during the coming

quarters.

New Grade B office buildings in the first half of 2017 added around 61,460sqm to the Ho Chi Minh City and Hanoi office markets. Fixed supply in Grade A buildings allowed landlords to increase rental prices and occupancy rates slightly. Due to new supply entering the market, rentals are stable and the vacancy rates of Grade B office buildings have increased. Leasing enquiries are increasing for spaces from 300 - 700sqm, while remaining stable for larger spaces from 700sqm and above. Co- working space continued to emerge as an important new source of office leasing demand. Around 225,000sqm of new office space is forecasted for completion in 2017, a marginally higher figure than in 2016. New projects will have to offer more flexible leasing terms and will have to compromise on their ideal tenants. Rental growth is forecasted to slow further in the second half of 2017 or indeed for 2018.

Youth focused mass fashion and F&B continue to dominate the new tenant market. While Zara selected Vincom Ba Trieu building in Hanoi to open its second store in Vietnam this October, H&M is in the fitting out period and is expected to open its first store in Ho Chi Minh City this coming August. Continuing with the convenience store expansion trend during the recent quarters, Ho Chi Minh City welcomed the first 7-Eleven store, an American - Japanese international chain of convenience stores in the second quarter of 2017. Approximately 88,289sqm was added to Ho Chi Minh City and Hanoi retail market in the first half of 2017. Average rental and occupancy rates remained stable. Due to

the limited availability of space in the CBD, retail buildings in non-CBD locations have been sought by potential tenants. New supply in the coming quarters will drive landlords to improve their facilities and add more retail/entertainment elements to ensure that they stay competitive and provide consumers with broad retail offerings.