Annual Financial Report

RNS Number : 1690L
Vietnam Enterprise Investments Ltd
17 April 2018
 

COMPANY ANNOUNCEMENT

 

For Immediate Release                                                                                                              

17 April 2018

 

Vietnam Enterprise Investments Limited

Annual Report and Financial Statements for the year ended 31 December 2017

 

Vietnam Enterprise Investments Limited ("VEIL" or the "Company"), a closed-end investment fund listed on the London Stock Exchange, today announces its annual report and financial statements for the year ended 31 December 2017.

 

Launched in 1995, VEIL is the longest running fund focused on Vietnam. The Company is one of the largest funds investing primarily in listed and pre-IPO companies in Vietnam that offer attractive growth and value metrics, and strong corporate governance.  The Company's investment objective is to seek medium to long-term capital appreciation of its assets. VEIL provides investors with access to Vietnam's leading blue chip companies, many of which have reached their foreign ownership limit.

 

Highlights for the year ended 31 December 2017

 

Financial highlights:

•       In USD terms, NAV per share increased 60.1% from US$4.41 to US$7.06, outperforming the VN Index by 7.3%.

•       In GBP terms, NAV per share increased 46.2% from £3.57 to £5.22.

•       VEIL's share price rose 49.3% in GBP terms.

•       VEIL's share price discount to NAV at the end of the period narrowed to 15.27%, from 17.09% at the end of 2016, reflecting VEIL's strong portfolio performance.

 

Investment highlights:

•       VEIL continued to hold the majority of its portfolio in listed equities, with only 7.5% in OTC/pre-listing equities.

•       VEIL maintained its strategy of tracking high profit growth and focus on listed blue-chip companies that benefit from Vietnam's macro dynamics, in addition actively participated in the privatisation of state-owned companies and IPOs of private companies.

•       During the period, VEIL participated in 17 deals with total value of more than $280m from privatisation, IPOs and private placement with notable IRR.

 

The annual report and financial statements of the Company can be found on VEIL's website; www.veil-dragoncapital.com/ 

 

Enquiries:

 

Vietnam Enterprise Investments Limited

Rachel Hill

rachelhill@dragoncapital.com

+44 7971214852

+44 (0) 1225 618 150

 

Jefferies International Limited

Stuart Klein

stuart.klein@jefferies.com

+44 (0) 20 7029 8703

 

Smithfield

Mav Wynn

Mav.Wynn@smithfieldgroup.com

+44 (0) 20 3047 2545

 

VEIL's LEI code is 213800SYT3T4AGEVW864

 

 

 

 

CHAIRMAN'S STATEMENT

 

Dear Shareholders,

 

2017 was a record-breaking year for Vietnam's economy. The Government achieved all of its economic growth and stability targets for the year. GDP growth reached 6.8%, its highest rate in 10 years, and surpassed the Government's target of 6.7%. Consumer consumption continued its upward trajectory supported by higher GDP per capita growth from US$2,215 to US$2,400. Rising incomes and a growing middle-income group will be the main driver for rising consumption in the coming years. Inflation was stable at 2.6%, well below the 4.0% target. Vietnam posted a trade surplus of US$2.9 billion due to strong export growth, the fastest growth in five years, of 21.2% to US$214 billion. The budget deficit improved significantly from 5.1% in 2016 to 3.5% of GDP supported by a strong economy and controlled government spending. Foreign reserves reached an all-time high due to large US$ inflows into State Owned Enterprise ("SOE") divestments, strong foreign direct investment ("FDI") and a trade surplus.

 

The stock market performed robustly in 2017 with the Vietnam Index ("VN Index") increasing by 52.8%, and closing at its highest for the last 10 years at 984.24. The liquidity also improved significantly with average trading value per day around US$225 million. Foreign investors remain positive on Vietnam, demonstrated by their net buying for the whole year of US$1,154 million, the highest level since 2007. IPOs and privatisation of SOEs accelerated including companies such as Vietjet Air, VPBank, HDBank, Idico, Becamex, Vincom Retail and Petrolimex. These new listings led to the market value of the three exchanges, Ho Chi Minh City Stock Exchange ("HSX"), Hanoi Stock Exchange ("HNX") and Unlisted Public Companies Market ("UPCoM") more than doubling to US$155 billion at the end of 2017 from US$86 billion at the end of 2016. The derivatives market opened for trade in July 2017 with the introduction of the VN30 Index futures with covered warrants being introduced in the first half of 2018.

 

Capitalising on this surging economic performance, 2017 was also an excellent year for us. Vietnam Enterprise Investments Limited ("VEIL", or the "Fund") delivered a total return of 60.1%, beating its benchmark VN Index by 7.3% and also outperformed VN Index on 3 year rolling basis by 20.4%. The outperformance was mainly due to the recovery in the banking sector which increased by 88.7% in the portfolio. Our holdings in banks achieved great earnings growth from 38% to 52% in 2017 thanks to improvement in net interest margin, better credit growth, and significant reduction in provision for non-performing loans as a result of efforts to solve bad debts issues in recent years. Other sectors that performed well and contributed to the strong performance of VEIL include transportation and retail. Utilising its local knowledge VEIL also continued to participate in IPOs, state divestment and private placements such as VPBank, Viglacera, FPT Retail, and DIG Group which made a meaningful contribution to the Fund's performance.

 

With a stable currency, healthy IPO pipeline, continued GDP growth and low levels of inflation predicted for 2018, we remain positive on the outlook for Vietnam. Market prospects remain bright going into 2018 thanks to the stable growth of the economy with expected GDP growth of 6.7% and inflation remaining at around 3%. Meanwhile currency remains stable thanks to strong trade surplus and high foreign reserves. Whilst a strong rally in 2017 might cause concerns over potential upside, however, as the market's valuation is still reasonable compared to regional peers with forecasted 2018's PE of 14.7x for the top 50 companies, and earnings growth of 19% in key sectors such as banking and property performing well in 2018. In addition, new listings from incoming IPOs, the possibility of opening foreign ownership limits and our potential inclusion in MSCI Emerging Market's Index Watch List are key catalysts for Vietnam to attract strong foreign inflows into the market. Our extensive experience in the market and deep local knowledge leaves us well-positioned to benefit from Vietnam's long term growth outlook and stock market developments.

 

The Board is presently undertaking a review of its composition to ensure thorough and complete gender and ethnic diversity and retained an independent third party specialist to undertake an evaluation and review of the Board. A detailed description is set out in the Corporate Governance Statement on pages 17 to 27.

 

At VEIL's Annual General Meeting ("AGM") which took place at 1101-02, 11/F, Euro Trade Centre, 21-23 Des Voeux Road, Central, Hong Kong, on 6 June 2017 at 11:00am (Hong Kong time), all ordinary and special resolutions were passed by the required majority on a poll vote.

 

 

 

 

Wolfgang Bertelsmeier

Chairman

Vietnam Enterprise Investments Limited

17 April 2018

 

INVESTMENT MANAGER'S REPORT

 

FUND PERFORMANCE

 

VEIL delivered a stellar performance in 2017, increasing by 60.09%, outperforming the VN Index by 7.3%. This performance was driven by strength with NAV per share in the banking sector and VEIL's overweight holdings in ACB (+110.2%) and Military Bank (+99.1%). The real estate & construction sector also contributed to the Fund's performance with DIG (+177.7%), Dat Xanh Group (+109.3%) and Khang Dien House (+62.8%) performing strongly. That said, due to an underweight position in Vingroup the sector's overall contribution to VEIL was slightly under that of the Index. The transportation sector also performed well with ACV (+125.5%) and Vietjet Air (+95.5%) standing out. In the food and beverage sector, Vinamilk was the standout performer (+72.3%) and in the retail sector, Mobile World (+69.8%) performed well on the back of strong earnings growth. The biggest drag on VEIL's relative performance to its benchmark was its underweighted investments in the energy sector.

 

Attribution analysis

 

After a relatively quiet 2016, the banking sector was front and center in 2017's VN Index rally. VEIL's bank holdings rose by 88.7% (total return in US$ term) year-on-year and were the biggest contributor (+13.7%) to the Fund's overall performance. Both VEIL's largest bank positions more than doubled during 2017.

 

For ACB, 2017 should be the start of an important turnaround as it posted strong results for 2017 with pre-provisioning operating profit up by 81% year-on-year. Even so, ACB was conservative in its provisioning expense as 2017 was expected to be the last year it had to provision for a legacy loan. Meanwhile, profit before tax ("PBT") increased by 59.3% for the year. The shift towards more retail lending helped improve its asset yield from 8.1% to 8.3% in 2017. This improvement is expected to continue and coupled with the expected fall in provisioning suggests ACB is well-placed to deliver another good result in 2018. 

 

The newly appointed CEO at Military Bank, Mr Luu Trung Thai, was instrumental in turning around the fortunes of this bank. With an emphasis on efficiency, profitability and transparency, Mr Thai has ushered in a new era of a more proactive Military Bank in which all of the previous key advantages were fully leveraged to deliver an improved performance and increased profitability. Net interest income grew 41%, fee income rose by 48.4% whilst net interest margin ("NIM") expanded 60bps to 3.9%. Similar to ACB, Military Bank was also prudent in its provisioning expense which increased 60% year-on-year. This led to a 39% increase in pre-provisioning operating profit and translated to a 26.4% growth in PBT. Looking to 2018, given its strong capital base we expect the bank's profit growth to accelerate as a result of expansion of NIM and falling provisioning expense.

 

The real estate & construction sector was the second largest contributor to VEIL's 2017 return (+8.5%) led by three mid-cap companies, DIG (+177.7%), Dat Xanh Group (+109.3%) and Khang Dien House (+62.8%).

 

DIG has conducted an impressive turn-around in 2017. The stock was trading at a 30% discount to book value at the beginning of 2017 despite having over 1,000 ha of undeveloped residential and resort land. A successful spin off of one of its assets, that generated VND1,000 billion in revenue, and a successful 49% State divestment resulted in a more dynamic utilisation of its assets.

 

Dat Xanh Group, transformed from being the biggest property brokerage name in Vietnam into a fully-fledged property developer. In addition to strong performance from its traditional brokerage business, delivering a 99% increase in revenue year-on-year, it also successfully delivered the Opal Riverside project in 2017. The Group now turns its attention to the launch of its largest project to-date, the 3,100-unit Gem Riverside in the first half of 2018, which will be a key driver for Dat Xanh Group's performance over the next few years.

Khang Dien House continued to execute its strategy efficiently and took steps to consolidate its expansion. As such the swap for the 43% stake in Binh Chanh Construction Investment ("BCI"), a company which holds 400 ha land bank in Ho Chi Minh City, was greeted with great enthusiasm.

 

Despite the strong performance, VEIL's real estate & construction sector contribution underperformed the VN Index by 0.5% mainly due to the rally of Vingroup (+84.5%) in which VEIL had an underweight holding.

 

The third largest contribution to VEIL's performance came from the transportation sector (+8.3%) represented by ACV (+125.6%) and Vietjet Air (+95.5%). Both companies benefited from booming tourism and air travel demand. ACV experienced 16% passenger growth for the year in 2017 whilst Vietjet Air reported 22% growth. The outlook remains positive for the transportation sector as demand from Vietnam's emerging middle income class for air travel growth.

 

The next notable contributor to VEIL's performance was the foods and beverages sector (+7.5%) driven by a stand-out performance from Vinamilk (+72.3%). 

 

And, in the retail sector (+5.5%), VEIL's top holding, Mobile World, enjoyed another good year rising 64.2% with strong earnings growth of 39.8% in 2017.

 

VEIL's holdings in the energy sector (+2.5%) underperformed 4.0% compared to that of the VN Index due to the fund's underweight holding in PV GAS (+70.5%) and not having invested in Petrolimex (+60.9%).

 

Major sector return and contribution

Sector

Portfolio return

 VN Index return

Portfolio contribution


%

%

%

Banks

88.7

61.6

13.7

Real Estate & Construction

48.1

59.9

8.5

Transportation

132.5

80.1

8.3

Foods & Beverages

60.0

44.5

7.5

Materials & Resources

64.3

35.3

6.2

Retail

65.7

59.2

5.5

Software & Services

59.3

55.8

3.2

Diversified Financials

54.3

70.7

2.1

Energy

58.0

57.6

2.5

 

Outlook

 

We remain bullish on the market outlook for 2018 as we believe that the ongoing development of the market remains a key priority for the Government. Our view is further compounded by the expectation of an accelerated number of privatisation and IPOs, the growth of the futures market following its successful launch in 2017, as well as new product offerings with covered warrants being launched in the first half of 2018 together with market friendly policies. 

 

VEIL will continue to focus on privatisations and IPOs in 2018. In the near-term, three companies in the energy sector, namely Binh Son Refinery (US$3.2 billion market capitalisation), Petro Vietnam Power (US$1.5 billion market capitalisation) and Petro Vietnam Oil (US$0.9 billion market capitalistion) are of particular focus to VEIL.

 

We will continue to apply fundamental analysis to select stocks. We believe that our emphasis on choosing fundamentally sound stocks at reasonable valuation yields better results over the medium to long term and better fit our mandate. Finally, we look forward to working closely with our investee companies as we continue to deliver strong returns and unlock more value for shareholders.

 

Vu Huu Dien

Investment Manager

Vietnam Enterprise Investments Limited

12 April 2018

REPORT OF THE BOARD OF DIRECTORS

 

The Directors of Vietnam Enterprise Investments Limited (the "Company") present their report and the audited financial statements of the Company for the year ended 31 December 2017.

 

PRINCIPAL ACTIVITY

 

The Company is an investment holding company incorporated as an exempted company with limited liability in the Cayman Islands on 20 April 1995.  The shares of the Company have been listed on the main market of the London Stock Exchange since 5 July 2016 (until 4 July 2016: listed on the Irish Stock Exchange).  The principal activity of the Company is investing directly or indirectly in a diversified portfolio of listed and unlisted securities in Vietnam.

 

RESULTS AND DIVIDENDS

 

The Company's profit for the year ended 31 December 2017 and its financial position at that date are set out in the attached financial statements.  The Directors have taken the decision not to pay a dividend in respect of the year ended 31 December 2017 (2016: Nil).

 

SHARE CAPITAL

 

Details of movements in the Company's share capital during the year are presented in Note 8.  As at 31 December 2017, the Company had 220,125,680 Ordinary Shares and 1,000 Management Shares outstanding (31 December 2016: 220,920,746 Ordinary Shares and 1,000 Management Shares).

 

DIRECTORS

 

The Directors of the Company during the year were:

 

Wolfgang Bertelsmeier      Chairman & Independent Non-Executive Director

Stanley Chou                        SeniorIndependent Non-Executive Director

Derek Loh                             Independent Non-Executive Director

Gordon Lawson                    Independent Non-Executive Director

Dominic Scriven                  Non-Executive Director

Marc Faber                           Independent Non-Executive Director (until 19 October 2017)

 

In accordance with Article 91 of the Restated and Amended Memorandum and Articles of Association (the "Articles"), the Independent and Non-independent Non-executive Directors are required to submit themselves for re-election at the next occurring Annual General Meeting ("AGM").  All the Independent Non-executive Directors were duly re-appointed at the AGM held on 6 June 2017 following the expiry of their respective term.  Dominic Scriven also submitted himself for re-election, even though the Articles do not explicitly require him to stand for election, and was duly re-appointed. Marc Faber resigned on 19 October 2017.

 

DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES

 

At no time during the year was the Company a party to any arrangement to enable the Company's Directors or their respective spouses or minor children to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

 

DIRECTORS' INTERESTS IN SHARES

 

Dominic Scriven has indirect interests in the share capital of the Company as he is a shareholder of Dragon Capital Group Limited, the parent company of Dragon Capital Limited which holds the Management Shares of the Company.  On 5 February 2018, Dominic Scriven bought 36,423 Ordinary Shares of the Company, equivalent to 0.017% of the outstanding issued Ordinary Shares (see Note 14 to the financial statements).  Dragon Capital Group Limited is also the ultimate parent company of Enterprise Investment Management Limited, the Investment Manager of the Company and Dragon Capital Markets Limited.  As at 31 December 2017, Dragon Capital Markets Limited beneficially held 3,700,359 Ordinary Shares of the Company for investment and proprietary trading purposes (31 December 2016: 3,700,359 Ordinary Shares).  Gordon Lawson, a Director of the Company, is a beneficial shareholder of the Company, holding 25,000 Ordinary Shares of the Company as at 31 December 2017 (31 December 2016: 25,000 Ordinary Shares).

 

Apart from the above, no other Director had a direct or indirect interest in the share capital of the Company, or its underlying investments at the end of the year, or at any time during the year.

 

DIRECTORS' INTERESTS IN CONTRACTS

 

Dominic Scriven has indirect interests in the investment management agreement between the Company and Enterprise Investment Management Limited where he is a director.  There were no further contracts of significance in relation to the Company's business in which a Director of the Company had a material interest, whether directly or indirectly, at the end of the year or at any time during the year. 

 

SUBSTANTIAL SHAREHOLDERS

 

As at 31 December 2017, the Company's register of shareholders showed that the following shareholder held more than a 10% interest in the issued Ordinary Share capital of the Company.

 

Registered shareholders

Number of Ordinary Shares held

% of total Ordinary

 Shares in issue

Computershare Investor Services PLC (*)

220,902,746

100%

 

(*) Computershare Investor Services PLC acts as depositary in respect of a facility for the issue of depositary interests representing the Company's Ordinary Shares.

 

SUBSEQUENT EVENTS

 

Details of the significant subsequent events of the Company are set out in Note 14 to the financial statements.

 

AUDITORS

 

KPMG Limited, Vietnam

 

DIRECTORS' RESPONSIBILITY IN RESPECT OF THE FINANCIAL STATEMENTS

 

The Board of Directors is responsible for ensuring that the financial statements of the Company are properly drawn up so as to give a true and fair view of the financial position of the Company as at 31 December 2017 and of its financial performance and its cash flows for the year then ended.  When preparing these financial statements, the Board of Directors is required to:

 

§ adopt appropriate accounting policies which are supported by reasonable and prudent judgments and estimates and then apply them consistently;

§ comply with the requirements of International Financial Reporting Standards ("IFRSs") or, if there have been any departures in the interest of true and fair presentation, ensure that these have been appropriately disclosed, explained and quantified in the financial statements;

§ maintain adequate accounting records and an effective system of internal controls;

§ prepare the financial statements on a going concern basis unless it is inappropriate to assume that the Company will continue its operations in the foreseeable future; and

§ control and direct effectively the Company in all material decisions affecting its operations and performance and ascertain that such decisions and/or instructions have been properly reflected in the financial statements.

 

The Board of Directors is also responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the financial position of the Company.  It is also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

 

The Directors confirm to the best of their knowledge that:

 

§ the financial statements have been prepared in conformity with IFRS and give a true and fair view of the assets, liabilities, financial position and profit of the Company, and the undertakings included in the Financial Statements taken as a whole as required by the United Kingdom Financial Conduct Authority Disclosure and Transparency Rules ("DTR") 4.1.12R and are in compliance with the requirements set out in the Companies Law;

§ the financial statements include a fair review of the information required by DTR 4.1.8R and DTR 4.1.11R, which provide an indication of important events and a description of principal risks and uncertainties during the year; and

§ the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

 

The Board of Directors confirms that they have complied with the above requirements in preparing the financial statements.

 

APPROVAL OF THE FINANCIAL STATEMENTS

 

The Board of Directors hereby approves the accompanying financial statements which give a true and fair view of the financial position of the Company as of 31 December 2017, and of its financial performance and its cash flows for the year then ended in accordance with IFRS.

 

Signed on behalf of the Board by:

 

 

Wolfgang Berterlsmeier                                                                               

Chairman

 

 

Signed on behalf of the Audit Committee by:

 

 

Stanley Chou

Chairman of the Audit Committee

Vietnam Enterprise Investments Limited

17 April 2018

 

 

 


 

CONDENSED FINANCIAL STATEMENTS

 

Audited statement of financial position as at 31 December 2017

 

Note

31 December 2017

31 December 2016

Change



US$

US$

in %

CURRENT ASSETS





Financial assets at fair value through profit or loss

5

1,602,661,219

995,759,344


Other receivables


1,134,004

 436,608


Balance due from brokers


-

720,731


Cash and cash equivalents

6

32,443,551

19,837,882




1,636,238,774

1,016,754,565

60.93






CURRENT LIABILITIES





Borrowings

7

80,000,000

40,000,000


Accounts payable and accruals


2,961,669

1,951,794




82,961,669

41,951,794

97.75

NET ASSETS


1,553,277,105

974,802,771

59.34






EQUITY





Issued share capital

8

2,201,266

2,209,217


Share premium

8

560,096,358

563,283,425


Retained earnings


990,979,481

409,310,129


TOTAL EQUITY


1,553,277,105

974,802,771

59.34






NUMBER OF ORDINARY SHARES IN ISSUE

9

220,125,680

220,920,746







NET ASSET VALUE PER ORDINARY SHARE

9

7.06

4.41

60.09

 


 

Audited statement of comprehensive income for the year ended 31 December 2017

 

Note

2017

2016



US$

US$

INCOME




Bank interest income


15,834

47,210

Dividend income


9,171,229

7,582,111

Net changes in fair value of financial assets at fair value through profit or loss

5

584,221,626

162,976,600

Gains on disposals of investments


18,234,758

33,038,858

Other income


23,977

736,650

TOTAL INCOME


611,667,424

204,381,429





EXPENSES




Administration fees

10

(1,194,259)

(967,680)

Custodian fees

10

(754,817)

(590,575)

Directors' fees

10

(150,007)

(176,712)

Management fees

10

(24,122,990)

(17,759,320)

Legal and professional fees

10

(553,497)

(1,610,626)

Restructuring fee of short-term borrowings


(1,590,000)

(260,000)

Interest expense


(1,246,673)

(337,530)

Withholding taxes


(39,636)

(24,144)

Other operating expenses


(347,256)

(385,751)

TOTAL EXPENSES


(29,999,135)

(22,112,338)





NET PROFIT BEFORE EXCHANGE LOSSES


581,668,289

182,269,091





EXCHANGE LOSSES




Net foreign exchange gains/(losses)


1,063

(119,198)

PROFIT BEFORE TAX


581,669,352

182,149,893

Income tax

11

-

-





NET PROFIT AFTER TAX FOR THE YEAR


581,669,352

182,149,893





OTHER COMPREHENSIVE INCOME FOR THE YEAR


-

-





TOTAL COMPREHENSIVE INCOME FOR THE YEAR


581,669,352

182,149,893





TOTAL COMPREHENSIVE INCOME FOR THE YEAR ATTRIBUTABLE TO ORDINARY SHAREHOLDERS


581,669,352

182,149,893





BASIC EARNINGS PER ORDINARY SHARE

12

2.64

0.82


Audited statement of changes in net assets attributable to holders of Ordinary Shares for the year ended 31 December 2017

 






Issued share capital

Share premium

Retained earnings

Total


US$

US$

US$

US$

Balance at 1 January 2016

2,209,217

563,283,425

227,160,236

792,652,878

Total comprehensive income for the year:





Net profit for the year

-

-

182,149,893

182,149,893






Balance at 1 January 2017

2,209,217

563,283,425

409,310,129

974,802,771






Total comprehensive income for the year:





Net profit for the year

-

-

581,669,352

581,669,352






Transactions with shareholders, recognised directly in equity: directly in equity:





Repurchase of Ordinary Shares

(7,951)

(3,187,067)

-

(3,195,018)






Balance at 31 December 2016

2,201,266

560,096,358

990,979,481

1,553,277,105


Audited statement of cash flow for the year ended 31 December 2017

 

Note

2017

2016



US$

US$

CASH FLOWS FROM OPERATING ACTIVITIES




Profit for the year


581,669,352

182,149,893

Adjustments for:




Bank interest income


(15,834)

(47,210)

Dividend income


(9,171,229)

(7,582,111)

Net changes in fair value of financial assets at fair value through profit or loss


(584,221,626)

(162,976,600)

Gains on disposals of investments


(18,234,758)

(33,038,858)



(29,974,095)

(21,494,886)





Net cash flow from subsidiaries carried at fair value


23,722,850

50,962,362

Changes in other receivables


403,877

(1,431,346)

Changes in balances due to brokers and accounts payable and accruals


1,009,875

(5,648,877)



(4,837,493)

22,387,253





Proceeds from disposals of investments


86,491,374

80,210,782

Purchases of investments


(114,659,715)

(126,184,230)

Bank interest income received


15,834

8,202,341

Dividends received


8,790,687

47,210

Net cash used in operating activities


(24,199,313)

(15,336,644)





CASH FLOWS FROM FINANCING ACTIVITIES




Proceeds from short-term borrowings


40,000,000

20,000,000

Repurchase of Ordinary Shares


(3,195,018)

-

Net cash generate from financing activities


36,804,982

20,000,000





NET INCREASE IN CASH AND CASH EQUIVALENTS


12,605,669

4,663,356

Cash and cash equivalents at the beginning of the year


19,837,882

15,174,526





CASH AND CASH EQUIVALENTS

AT THE END OF THE YEAR

6

32,443,551

19,837,882

Notes to the financial statements for the year ended 31 December 2017

 

1.      THE COMPANY

Vietnam Enterprise Investments Limited (the "Company") is a closed-end investment fund incorporated as an exempted company with limited liability in the Cayman Islands on 20 April 1995.  It commenced operations on 11 August 1995, the date on which the initial subscription proceeds were received.

 

The investment objective of the Company is to invest directly or indirectly in publicly or privately issued securities of companies, projects and enterprises issued by Vietnamese entities, whether inside or outside Vietnam.

 

The Company's Ordinary shares have been listed on the main market of the London Stock Exchange since 5 July 2016 (until 4 Jul 2016: listed on the Irish Stock Exchange). The Company is established for an unlimited duration. 

 

The Company had the following investments in subsidiaries and joint operations as at 31 December 2017, for the purpose of investment holding:

 

Subsidiaries

Country  of incorporation

Principal activities

% Ownership





Grinling International Limited

British Virgin Islands

Investment holding

100%

Wareham Group Limited

British Virgin Islands

Investment holding

100%

Goldchurch Limited

British Virgin Islands

Investment holding

100%

VEIL Holdings Limited

British Virgin Islands

Investment holding

100%

Venner Group Limited

British Virgin Islands

Investment holding

100%

Rickmansworth Limited

British Virgin Islands

Investment holding

100%

Geffen Limited

British Virgin Islands

Investment holding

100%

VEIL Cement Limited

British Virgin Islands

Investment holding

100%

VEIL Estates Limited

British Virgin Islands

Investment holding

100%

VEIL Industries Limited

British Virgin Islands

Investment holding

100%

VEIL Infrastructure Limited

British Virgin Islands

Investment holding

100%

VEIL Paper Limited

British Virgin Islands

Investment holding

100%

Amersham Industries Limited

British Virgin Islands

Investment holding

100%

Balestrand Limited

British Virgin Islands

Investment holding

100%

Asia Reach Investment Limited (*)

British Virgin Islands

Investment holding

100%

 

(*) In 2017, the Company acquired 100% of the new subsidiary - Asia Reach Investment Limited.

 

Joint operation

Country  of incorporation

Principal activities

% Ownership





Dragon Financial Holdings Limited

British Virgin Islands

Investment holding

90%

 

As at 31 December 2017 and 31 December 2016, the Company had no employees.

 

2.      BASIS OF PREPARATION

 

(a)     Statement of compliance

 

        The Company's financial statements as at and for the year ended 31 December 2017 have been prepared in accordance with International Financial Reporting Standards ("IFRSs").

 

(b)     Basis of measurement

 

The financial statements have been prepared on the historical cost basis, except for financial instruments classified as financial assets at fair value through profit or loss which are measured at fair value. 

 

(c)     Functional and presentation currency

 

The financial statements are presented in United States Dollar ("US$"), which is the Company's functional currency.

 

(d)     Use of estimates and judgments

 

The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses.  Actual results may differ from these estimates.

 

In particular, information about significant areas of estimation, uncertainty and critical judgments in applying accounting policies that have significant effect on the amounts recognised in the financial statements are discussed as follows:

 

Assessment as investment entity

 

Entities that meet the definition of an investment entity within IFRS 10 - Consolidated Financial Statements are required to account for investments in controlled entities, as well as investments in associates and joint ventures, at fair value through profit and loss.  Subsidiaries that provide investment related services or engage in permitted investment related activities with investees continue to be consolidated unless they are also investment entities. 

 

The criteria which define an investment entity are currently as follows:

 

-         An entity that obtains funds from one or more investors for the purpose of providing those investors with investment services;

-         An entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and

-         An entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

 

The Board of Directors has made an assessment and concluded that the Company meets the above listed criteria of an investment entity. The investment objective of the Company is to provide shareholders with attractive capital returns by investing directly or indirectly through its subsidiaries in a diversified portfolio of listed and unlisted securities in Vietnam. The Company has always measured its investment portfolio at fair value.  The exit strategy for all investments held by the Company and its subsidiaries is assessed regularly, documented and submitted to the Investment Committee for approval. 

 

The Company also meets the additional characteristics of an investment entity, in that it has more than one investment; the investments are predominantly in the form of equities and similar securities; it has more than one investor and its investors are not related parties.  The Board has concluded that the Company therefore meets the definition of an investment entity.  These conclusions will be reassessed on an annual basis for changes in any of these criteria or characteristics. 

 

Fair value of financial instruments

 

The most significant estimates relate to the fair valuation of each subsidiary and the fair valuation of financial instruments with significant unobservable inputs in their underlying investment portfolio. 

 

The Board has assessed the fair valuation of each subsidiary to be equal to its net asset value at the reporting date, and the primary constituent of net asset value across subsidiaries is their underlying investment portfolio.

 

Within the underlying investment portfolio, the fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Board uses its judgments to select a variety of valuation methods and make assumptions that are mainly based on market conditions existing at each reporting date.

 

Impairment of receivables

 

The Directors determine the allowance for impairment of receivables on a regular basis.  This estimate is based on the Directors' review of each individual account balance taking into account the credit history of the debtors and prevailing market conditions.

 

The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to the accounting estimates are recognised in the period in which the estimates are revised and in any future period affected.

 

3.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The following significant accounting policies have been applied consistently to all periods presented in these financial statements.

 

(a)     Financial assets and financial liabilities

 

(i)      Classification

 

The Company classifies financial assets and financial liabilities into the following categories:

 

Financial assets at fair value through profit or loss

§ Designated at fair value through profit or loss - equity investments.

 

Financial assets at amortised cost

§ Loans and receivables - cash and cash equivalents, balance due from brokers and other receivables.

 

Financial liabilities at amortised cost

§ Other liabilities - borrowings, accounts payables and accruals, and balances due to brokers.

 

 (ii)    Recognition

 

Financial assets and financial liabilities at fair value through profit or loss are initially recognised on the trade date, which is the date on which the Company becomes a party to the contractual provisions of the instrument. Other financial assets and liabilities are recognised on the date on which they are originated.

 

Financial assets and financial liabilities at fair value through profit or loss are recognised initially at fair value, with transaction costs recognised in profit or loss as incurred.  Other financial assets or financial liabilities are recognised initially at fair value plus transaction costs that are directly attributable to their acquisition or issue.

 

(iii)    Measurement

 

Non-derivative financial assets

 

§ Financial assets at fair value through profit or loss

A financial asset is classified as at fair value through profit or loss if it is classified as held-for-trading or is designated as such on initial recognition. Directly attributable transaction costs are recognised in profit or loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, including any interest or dividend income, are recognised in profit or loss.

 

§ Loans and receivables

These assets are initially measured at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method.

 

Non-derivative financial liability

Non-derivative financial liabilities are initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.

 

 (iv)   Derecognition

 

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in which the Company neither transfers nor retains substantially all the risks and rewards of ownership and does not retain control of the financial asset.  Any interest in such transferred financial assets that is created or retained by the Company is recognised as a separate asset. 

 

On derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to the portion of the asset derecognised), and the consideration received (including any new asset obtained less any new liability assumed) is recognised in profit or loss.

 

The Company derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

 

(v)     Offsetting

 

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the recognised amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

 

Income and expenses are presented on a net basis for gains and losses from financial instruments at fair value through profit or loss and foreign exchange gains and losses.

 

                                             

(vi)    Amortised cost measurement

 

The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.

 

(vii)   Fair value measurement

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Company has access at that date.

 

When available, the Company measures the fair value of an instrument using the quoted price in an active market for that instrument.  A market is regarded as 'active' if transactions for the assets or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.  The Company measures instruments quoted in an active market at the current bid price.

 

The fair value of listed investments is determined based on quoted market prices on a recognised exchange at the reporting date without any deduction from estimated selling costs. Unlisted investments for which an active over-the-counter ("OTC") market exists are stated at fair value based upon the average price quotations received from two independent brokers.

 

Where no quotes or insufficient quotes are available, the Board of Directors will decide the appropriate method(s) for the estimation of fair value of the relevant asset(s). The Board of Directors will use valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation techniques incorporate all of the factors that market participants would take into account in pricing a transaction.

 

(viii)  Impairment

 

At each reporting date, the Company assesses whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired.  A financial asset or a group of financial asset(s) is (are) impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset(s), and that the loss event has an impact on the future cash flows of the asset(s) that can be estimated reliably.

 

Objective evidence that financial assets are impaired includes significant financial difficulty of the borrower or issuer, default or delinquency by a borrower, restructuring of amount due on terms that the Company would not consider otherwise, indications that a borrower or issuer will enter bankruptcy, adverse changes in the payments status of the borrowers or issuers, or observable data indicating that there is a measurable decrease in the expected cash flows from a company of financial assets.

 

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate.  Impairment losses are recognised in profit or loss and reflected in an allowance account against receivables.  Interest on impaired assets continues to be recognised.  When an event occurring after the impairment was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

 

The Company writes off financial assets carried at amortised cost when they are determined to be uncollectible.

 

(b)     Cash and cash equivalents

 

Cash and cash equivalents comprise deposits with banks and highly liquid financial assets with maturities of three months or less from the date of acquisition that are subject to an insignificant risk of changes in their fair value and are used by the Company in the management of short-term commitments, other than cash collateral provided in respect of derivatives and securities borrowing transactions.

 

(c)     Share capital

 

Issuance of share capital

 

Management Shares and Ordinary Shares are classified as equity.  The difference between the issued price and the par value of the shares less any incremental costs directly attributable to the issuance of shares is credited to share premium.

 

Repurchase of Ordinary Shares

 

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Par value of repurchased shares is presented as deductions from share capital and the excess over par value of repurchased shares is presented as deductions from share premium.  When repurchased shares are sold or reissued subsequently, the amount received is recognised as an increase in share capital and share premium similar with issuance of share capital.

 

(d)     Net changes in fair value of financial assets at fair value through profit or loss

 

Net changes in fair value of financial assets at fair value through profit or loss include all realised and unrealised fair value changes and foreign exchange differences, but excludes interest and dividend income, and dividend expense on securities sold short.

 

Net realised gain/loss from financial assets at fair value through profit or loss is calculated using the weighted average cost method.

(e)     Basic earnings per share and Net Asset Value per share

 

The Company presents basic earnings per share ("EPS") for its Ordinary Shares. Basic EPS is calculated by dividing net profit attributable to the Ordinary Shareholders by the weighted average number of Ordinary Shares outstanding during the year.  The Company did not have potentially dilutive shares as of 31 December 2017 and 31 December 2016.

 

NAV per share is calculated by dividing the NAV attributable to the Ordinary Shareholders by the number of outstanding Ordinary Shares as at the reporting date.  NAV is determined as total assets less total liabilities.  Where Ordinary Shares have been repurchased, NAV per share is calculated based on the assumption that those repurchased Ordinary Shares have been cancelled.

 

(f)     Related parties

 

A party is considered to be related to the Company if:

 

a)    The party, directly or indirectly through one or more intermediaries, (i) controls, is controlled by, or is under common control with, the Company; (ii) has an interest in the Company that gives it significant influence over the Company, or (iii) has joint control over the Company;

b)    The party is an associate;

c)     The party is a jointly controlled entity;

d)    The party is a member of the key management personnel of the Company;

e)    The party is a close member of the family of any individual referred to in (a) or (d);

f)     The party is an entity that is controlled, jointly controlled or significantly influenced by or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or

g)    The party is a post-employment benefit plan for the benefit of the employees of the Company, or of any entity that is related party of the Company.

 

Other investment companies/funds under the management of Dragon Capital Management Limited, the parent company of the Investment Manager, or entities of Dragon Capital Group Limited (including Ho Chi Minh City Securities Corporation ("HSC") and Vietnam Investment Fund Management Joint Stock Company ("VFM") and its funds under management) are also considered related parties to the Company.

 

4.      TRANSACTIONS WITH RELATED PARTIES

 

Dominic Scriven has indirect interests in the share capital of the Company as he is a shareholder of Dragon Capital Group Limited, which is the parent company of Dragon Capital Limited which holds the Management Shares of the Company.  On 5 February 2018, Dominic Scriven bought 36,423 Ordinary shares of the Company, equivalent to 0.017% of the outstanding issued Ordinary shares (see Note 14).  Dragon Capital Group Limited is also the ultimate parent company of Enterprise Investment Management Limited, the Investment Manager of the Company and Dragon Capital Markets Limited.  As at 31 December 2017, Dragon Capital Markets Limited beneficially held 3,700,359 Ordinary Shares of the Company for investment and proprietary trading purposes (31 December 2016: 3,700,359 Ordinary Shares).  Gordon Lawson, a Director of the Company, is a beneficial shareholder of the Company, holding 25,000 Ordinary Shares of the Company as at 31 December 2017 (31 December 2016: 25,000 Ordinary Shares).

 

During the year, the Directors, with exception of Dominic Scriven, earned US$150,007 (2016: US$176,712) for their participation on the Board of Directors of the Company.

 

During the year, total broker fees paid to HSC - an associate of Dragon Capital Group Limited and one of the securities brokers of the Company and its subsidiaries - amounted to US$193,253 (2016: US$184,154). As at 31 December 2017, broker fee payable to this broker is US$2,470 (31 December 2016: nil).

 

During the year, total trading amount dealt on the Company's behalf by VFM - a subsidiary of Dragon Capital Group Limited and its subsidiaries - amounted to US$20,545 (2016: US$17,369,503). As at 31 December 2017, there was no payable amount to this party (31 December 2016: nil).

 

 

 

5.      FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS

 

31 December 2017

31 December 2016

US$ 

US$ 

Directly held investments (a)

547,011,237

329,143,330

Investments in subsidiaries (b)

1,055,649,982

666,616,014


1,602,661,219

995,759,344

 

(a)       The cost and carrying value of directly held listed and unlisted investments of the Company were as follows:

           


31 December 2017

31 December 2016

US$ 

US$ 

Listed investments



Investments, at cost

231,428,645

222,858,809

Unrealised gains

265,213,203

96,205,034

At carrying value (d)

496,641,848

319,063,843




Unlisted investments



Investments, at cost

50,225,446

12,392,183

Unrealised losses

143,943

(2,312,696)

At carrying value (d)

50,369,389

10,079,487





547,011,237

329,143,330

 

Movements of investments directly held by the Company during the year were as follows:

 

31 December 2017

31 December 2016

US$ 

US$ 

Opening balance

329,143,330

227,918,319

Purchases

114,659,715

126,184,230

Sales

(68,256,616)

(47,171,924)

Unrealised gains

171,464,808

22,212,705

Closing balance

547,011,237

329,143,330

 

(b)       Investments in subsidiaries are fair valued at the subsidiary's net asset value with the significant part being attributable to the underlying investment portfolio. The underlying investment portfolio is valued under the same methodology as directly held investments of the Company, with any other assets or liabilities within subsidiaries fair valued in accordance with the Company's accounting policies. All cash flows to/from subsidiaries are treated as an increase/reduction in the fair value of the subsidiary.

 

 

 

 

 

 

 

 

 

The net asset of the Company's subsidiaries comprised:

 

31 December 2017

31 December 2016

US$ 

US$ 

Cash and cash equivalents

31,559,842

31,817,639

Financial assets at fair value through profit or loss (c)

1,018,259,850

662,690,197

Other receivables

741,163

4,243,009

Balances due from brokers

5,089,127

-

Total assets

1,055,649,982

698,750,845

e



Balance due to brokers

-

(32,134,831)

Total liabilities

-

(32,134,831)

Net asset

1,055,649,982

666,616,014

 

Movements in the carrying value of investments in subsidiaries during the year were as follows:

 

31 December 2017

31 December

 2016

US$ 

US$ 

Opening balance

666,616,014

576,814,481

Net cash flows from subsidiaries

(23,722,850)

(50,962,362)

eFair value movements on investment entity subsidiaries

412,756,818

140,763,895

Closing balance

1,055,649,982

666,616,014

 

(c)        The cost and carrying value of underlying financial assets at FVTPL held by the Company's subsidiaries were as follows:

 

31 December 2017

31 December 2016

US$ 

US$ 

Listed investments



Investments, at cost

528,505,794

410,126,668

Unrealised gains

422,875,746

191,760,310

At carrying value

951,381,540

601,886,978




Unlisted investments



Investments, at cost

57,078,916

55,984,424

Unrealised gains

9,799,394

4,818,795

At carrying value

66,878,310

60,803,219


1,018,259,850

662,690,197

 

Movements of investments held by the Company's subsidiaries during the year were as follows:

 

31 December 2017

31 December 2016

US$ 

US$ 

Opening balance

662,690,197

567,536,076

Purchases

247,949,253

200,240,141

Sales

(128,475,635)

(148,385,517)

Unrealised gains

236,096,035

43,299,497

Closing balance

1,018,259,850

662,690,197

 

 


(d)       As at 31 December 2017 and 2016, the Company held the following listed and unlisted investments directly and/or indirectly through its subsidiaries:

 

The Company


31 December 2017

31 December 2016


Cost

Carrying value

Cost

Carrying value


US$

US$

US$

US$

Listed investments





Vietnam listed equities





VNM

2,809,824

90,982,577

3,093,510

60,148,087

MWG

25,323,726

66,924,842

23,076,410

37,684,636

MBB

27,538,913

44,796,280

26,485,492

22,865,541

HPG

10,784,135

38,256,989

9,276,518

22,450,806

FPT

18,206,053

30,558,771

18,206,053

20,420,695

NKG

12,989,631

25,628,605

12,989,631

15,370,427

VCB

13,087,272

25,467,049

13,898,264

17,608,500

PC1

16,988,261

25,368,903

16,988,261

18,150,536

GAS

13,758,134

21,083,975

11,583,984

10,859,991

KDH

10,693,657

18,257,884

5,282,379

7,736,691

IDC (*)

14,730,997

16,973,725

-

-

VGC

9,607,893

16,275,485

3,848,569

4,031,444

PNJ

10,568,071

13,525,651

-

-

DIG

4,473,373

9,858,770

7,766,220

6,338,806

HSG

5,766,633

9,843,528

5,766,633

11,654,144

VRE

7,313,144

8,305,077

-

-

DXG

3,289,704

6,962,351

5,178,331

5,343,181

MSN

4,009,173

5,775,552

-

-

KBC

5,203,241

4,583,122

12,177,117

11,055,867

IMP

3,018,705

4,156,061

2,420,353

2,454,877

BCI

2,686,456

3,083,485

-

-

SAB

1,965,754

2,462,042

-

-

SSI

1,531,700

1,986,412

1,327,764

1,320,786

VGT (*)

2,073,027

1,814,259

-

-

SJS

1,246,919

1,790,969

1,246,919

1,394,458

SAM

e

1,786,618

1,654,221

1,648,900

DQC

110,028

132,866

-

-

NVL

-

-

17,711,599

20,877,036

CTG

-

-

8,368,314

6,412,677

VHC

-

-

4,549,925

5,584,296

PVD

-

-

3,497,695

2,745,879

DCM

-

-

3,506,299

2,695,244

PVS

-

-

2,958,348

2,210,338






Total listed investments

231,428,645

496,641,848

222,858,809

319,063,843

 

 

Subsidiaries


31 December 2017

31 December 2016


Cost

Carrying value

Cost

Carrying value


US$

US$

US$

US$

Listed investments





Vietnam listed equities





VNM

840,769

27,224,234

4,477,335

87,054,214

MWG

50,111,911

69,358,019

31,063,926

29,046,452

MBB

29,330,778

51,862,145

32,761,408

30,224,185

HPG

5,826,744

20,670,518

9,334,605

22,591,387

FPT

24,103,005

43,506,957

31,727,360

37,992,351

NKG

9,948,058

14,480,162

1,038,147

999,078

VCB

3,180,707

5,849,343

11,197,466

13,845,092

PC1

3,565,533

4,589,370

-

-

GAS

28,551,312

48,325,781

33,694,719

35,140,282

KDH

29,798,413

52,875,551

13,576,874

21,476,780

IDC (*)

9,146,954

10,892,314

-

-

VGC

15,127,123

26,189,581

5,907,096

6,377,743

PNJ

2,377,688

2,870,231

-

-

DIG

23,959,815

28,559,654

1,544,824

1,411,191

HSG

11,851,532

11,810,596

3,758,836

7,596,464

DXG

13,279,202

27,214,003

14,504,733

14,450,910

MSN

6,072,306

8,747,765

-

-

KBC

5,169,148

4,733,582

12,784,474

12,055,023

IMP

12,795,203

19,160,231

8,087,781

9,776,338

BCI

-

-

-

-

SAB

12,525,690

17,688,125

13,347,912

16,608,849

SSI

2,708,323

3,804,659

13,905,492

13,684,474

VGT (*)

10,883,392

9,524,858

-

-

SJS

3,855,567

5,639,658

3,855,567

4,391,066

SAM

3,611,243

3,900,273

3,611,243

3,599,629

DQC

8,442,534

6,696,403

8,442,534

10,223,373

ACB (**)

43,046,070

52,317,641

-

-

VPB

32,019,901

33,501,707

-

-

ACB

28,033,448

102,311,702

28,165,214

48,894,956

VCI

21,880,844

32,025,030

-

-

VJC

20,178,890

54,664,489

-

-

CTD

16,496,441

23,937,646

19,589,523

22,841,553

CII

13,762,177

25,984,863

13,762,177

20,782,970

ACV (*)

9,507,086

76,478,611

13,737,092

49,363,944

HDG

6,752,782

11,188,094

6,752,782

7,758,295

VIC

3,984,109

6,399,401

-

-

NBB

5,781,096

6,398,343

-

-

NVL

-

-

15,409,310

23,648,325

CTG

-

-

10,303,635

7,895,722

VHC

-

-

2,768,623

3,477,993

PVD

-

-

8,441,708

5,470,903

DCM

-

-

5,363,420

4,122,787

PVS

-

-

17,472,958

13,339,917

REE

-

-

4,855,613

11,886,140

VSC

-

-

4,882,281

3,858,592






Total listed investments

528,505,794

951,381,540

410,126,668

601,886,978

 

(*)     IDC, VGT and ACV are listed on Unlisted Public Company Market ("UPCoM").

(**)   This is ACB P-note held under Asia Reach Investment Limited.

 

The Company


31 December 2017

31 December 2016


Cost

Carrying value

Cost

Carrying value


US$

US$

US$

US$

Unlisted investments





Vietnam OTC equities





HDB (***)

17,888,579

17,620,558

-

-

HPI

11,528,254

11,529,271

-

-

FPR

5,712,667

7,579,594

-

-

VEAM

3,843,120

5,614,514

3,843,120

4,281,762

BCM

4,776,790

4,777,841

-

-

Tin Nghia

2,713,674

3,247,611

2,713,674

3,238,769

VGT

-

-

2,073,027

2,415,353






Private Equities





Besra Gold

3,762,362

-

3,762,362

-






Rights





IMP - rights

-

-

-

143,603






Total unlisted investments

50,225,446

50,369,389

12,392,183

10,079,487

Total

281,654,091

547,011,237

235,250,992

329,143,330

 

 

Subsidiaries


31 December 2017

31 December 2016


Cost

Carrying value

Cost

Carrying value


US$

US$

US$

US$

Unlisted investments





Vietnam OTC equities





HDB (***)

13,095,297

12,899,093

-

-

HPI

5,284,153

5,284,249

-

-

FPR

9,202,427

12,209,388

-

-

VEAM

15,372,478

22,458,056

15,372,478

17,127,047

BCM IDC

8,871,183

8,873,134

-

-

Tin Nghia

3,922,088

4,799,969

3,922,088

4,786,900

Vinatex

-

-

10,883,392

12,680,602

VJC

-

-

21,138,134

21,485,301






Private Equities





VFMVF2

1,331,290

354,421

1,331,290

354,872






Vietnam Corporate bonds





NBB - Convertible bonds

-

-

3,337,042

3,796,607






Rights





IMP - rights

-

-

-

571,890






Total unlisted investments

57,078,916

66,878,310

55,984,424

60,803,219

Total

585,584,710

1,018,259,850

466,111,092

662,690,197

 

(***) HDB was listed in the Ho Chi Minh City Stock Exchange on 5 January 2018.

 

Investment portfolio by sector was as follows:

 

31 December 2017


31 December 2016



US$

%

US$

%

Banks

346,625,518

22

147,746,673

15

Real Estate & Construction

286,165,704

18

172,601,458

17

Material & Resources

163,155,464

10

97,889,524

10

Retail

156,071,843

10

66,731,088

7

Food & beverage

138,356,978

9

172,873,439

17

Transportation

131,143,100

8

74,707,837

8

Others

95,775,396

6

55,726,174

5

Diversified Financials

84,011,172

5

41,036,759

4

Software & Services

74,065,728

5

58,413,046

6

Energy

69,409,756

4

69,767,310

7

Consumer Durables

34,564,268

2

25,319,328

3

Pharmaceuticals

23,316,292

1

12,946,708

1


1,602,661,219

100

995,759,344

100

 

 

6.      CASH AND CASH EQUIVALENTS

31 December 2017

31 December 2016


US$

US$




Cash in banks

32,443,551

19,837,882

 

 

7.      BORROWINGS

 

31 December 2017

31 December 2016


US$

US$

Standard Chartered Bank - Singapore Branch



- Secured Bank Loan 1

80,000,000

20,000,000

- Secured Bank Loan 2

-

20,000,000


80,000,000

40,000,000

 

Movements of short-term borrowings during the year were as follows:

 

31 December 2017

31 December 2016


US$

US$




Opening balance

40,000,000

20,000,000

Additions during the year

40,000,000

20,000,000




Closing balance

80,000,000

40,000,000

 

Terms and conditions of outstanding short-term borrowings are as follows:

 



31 December 2017


Interest rate per annum(%)

Date of Maturity

Nominal value

US$

Carry amount

US$






Secured Bank Loan 1

3.5226

8 March 2018

80,000,000

80,000,000

 

As at 31 December 2017, the bank loans were secured by the Company's investments with total carrying value of US$294,229,601 (31 December 2016: US$74,643,186).

 

These loans have been rolled over subsequent to the date of maturity.

 

8.      ISSUED SHARE CAPITAL AND SHARE PREMIUM

 

31 December 2017

31 December 2016


US$

US$

Authorised:



500,000,000 Ordinary Shares at par value of US$0.01 each

5,000,000

5,000,000

300,000,000 Conversion Shares at par value of US$0.01 each

3,000,000

3,000,000

1,000 Management Shares at par value of US$0.01 each

10

10


8,000,010

8,000,010




Issued and fully paid:



220,920,746 Ordinary Shares at par value of US$0.01 each (31 December 2016: 220,920,746 Ordinary Shares at par value of US$0.01 each)

2,209,207

2,209,207

1,000 Management Shares at par value of US$0.01 each

10

10


2,209,217

2,209,217




Treasury Shares:



Ordinary Shares

(7,951)

-




Shares in circulation:



Ordinary Shares

2,201,256

2,209,207

Management Shares

10

10




Outstanding issued share capital in circulation

2,201,266

2,209,217

 

Holders of Ordinary Shares present in person or by proxy or by authorised representative shall have one vote and, on a poll, every holder of Ordinary Shares present in person or by proxy or by authorised representative shall have one vote for every Ordinary Share of which he is the registered holder.  The Ordinary Shares carry rights to dividends as set out in Articles 106 to 114 of the Articles.  In a winding up, the Ordinary Shares carry a right to a return of the nominal capital paid up in respect of such Ordinary Shares, and the right to share in the manner set out in the Articles in surplus assets remaining after the return of the nominal capital paid up on the Ordinary Shares and Management Shares, provided that in a winding up the assets available for distribution among the members are more than sufficient to repay the whole of the nominal capital paid up at the commencement of the winding up.  No holder of Ordinary Shares has the right to request the redemption of any of his Ordinary Shares at his option.

 

The Conversion Shares carry the exclusive right to dividends in respect of assets attributable to the Conversion Shares, in accordance with the provisions of Articles 106 to 114.  No dividend or other distribution shall be declared, made or paid by the Company on any of its shares by reference to a record date falling between the Calculation Date and the Conversion Date as set out in the Articles.  The new Ordinary Shares to be issued on conversion shall rank in full pari passu with the existing Ordinary Shares for all dividends and other distributions with a record date falling after the conversion date.  In order for the holder of the Conversion Shares to participate in the winding up of the Company, the Conversion Shares, if any, which are in existence at the date of the winding up of the Company will for all purposes be deemed to have been automatically converted into Ordinary Shares and Deferred Shares immediately prior to the winding up, on the same basis as if conversion had occurred 28 business days after the calculation date arising as a result of the resolution or the court to wind up the Company.

 

Until conversion, the consent of the holders of the Conversion Shares voting as a separate class and the holders of the Ordinary Shares voting as a separate class shall be required in accordance with the provisions of Article 14 to effect any variation or abrogation in their respective class rights.

 

During the year, no Conversion Shares were in issue, and no Conversion Shares were in issue as at 31 December 2017 and 31 December 2016.

 

The Management Shares shall not be redeemed by the Company, and do not carry any right to dividends.  In a winding up, Management Shares are entitled to a return of paid up nominal capital out of the assets of the Company, but only after the return of nominal capital paid up on Ordinary Shares.  The Management Shares each carry one vote on a poll.  The holders of the Management Shares have the exclusive right to appoint two individuals to the Board. 

 

As at 31 December 2017, the following shareholder owned more than 10 percent of the Company's issued Ordinary share capital.

 

Registered shareholders

Number of Ordinary Shares held

% of total Ordinary Shares in issue

Computershare Investor Services PLC (*)

220,902,746

100%

 

As at 31 December 2016, the following shareholder owned more than 10 percent of the Company's issued Ordinary share capital.

 

Registered shareholders

Number of Ordinary Shares held

% of total Ordinary

Shares in issue

Computershare Investor Services PLC (*)

220,902,746

100%

 

(*)      Computershare Investor Services PLC acts as depositary in respect of a facility for the issue of depositary interests representing the Company's Ordinary Shares.

 

Movements in Ordinary Share capital during the year were as follows:

 

Shares

 Year ended

31 December 2017

US$

Shares

Year ended

31 December

2016

US$

Balance at the beginning of the year

220,920,746

2,209,207

 220,920,746

 2,209,207

Repurchase of Ordinary Shares during the year

(795,066)

(7,951)

-

-

Balance at the end of the year

220,125,680

2,201,256

220,920,746

2,209,207

 

Movements in share premium during the year were as follows:

 

Year ended

31 December 2017

US$

Year ended

31 December 2016

US$

Balance at the beginning of the year

563,283,425

563,283,425

Repurchase of Ordinary Shares during the year

(3,187,067)

-

Balance at the end of the year

560,096,358

563,283,425

 

9.      NET ASSET VALUE PER ORDINARY SHARE

 

        The calculation of the NAV per Ordinary Share was based on the net assets attributable to the Ordinary Shareholders of the Company as at 31 December 2017 of US$1,553,277,105 (31 December 2016: US$974,802,771) and the number of outstanding Ordinary Shares in issue as at that date of 220,125,680 shares (31 December 2016: 220,920,746 Ordinary shares).

 

10.    FEES

 

        The management, administration and custodian fees are calculated based on the NAV of the Company.

 

Administration fees

 

Standard Chartered Bank (the "Administrator") is entitled to receive a fee of 0.06% (2016: 0.06%) of the gross assets per annum, payable monthly in arrears and subject to a minimum monthly fee of US$4,000 per fund.  During the year, total administration fees amounted to US$1,194,259 (2016: US$967,680).  As at 31 December 2017, an administration fee of US$215,713 (31 December 2016: US$109,576) was payable to the Administrator.

 

Custodian fees

 

Standard Chartered Bank (the "Custodian") is entitled to receive a fee of 0.05% (2016: 0.05%) of the assets under custody per annum, payable monthly in arrears and subject to a minimum monthly fee of US$500 per custody account.  In addition, the Custodian is entitled to US$20 per listed transaction and US$10 per scripless securities.  During the year, total custodian fees amounted to US$754,817 (2016: US$590,575).  There were no custodian fees payable as at 31 December 2017 and 2016.

 

Directors' fees

 

During the year, total directors' fees amounted to US$150,007 (2016: US$176,712).  There were no directors' fees payable as at 31 December 2017 and 2016.  Dominic Scriven has permanently waived his rights to receive directors' fees for his services as Director of the Company.

 

Management fees

 

Prior to 1 August 2017, the Investment Manager was entitled to receive a management fee equal to 2% per annum of the NAV, accrued daily and payable monthly in arrears.  With effect from 1 August 2017, the management fee is calculated and accrued daily on the following basis:

 

§ 2% per annum on the first US$1.25 billion of the NAV;

§ 1.75% per annum on the portion of the NAV in excess of US$1.25 billion and less than or equal to US$1.5 billion; and

§ 1.5% per annum on the portion of the NAV above US$1.5 billion.

 

During the year, total management fees amounted to US$24,122,990 (2016: US$17,759,320).  As at 31 December 2017, a management fee of US$2,501,610 (31 December 2016: US$1,638,148) remained payable to the Investment Manager.

 

Legal and professional fees

 

During the year, included in the legal and professional fees of the Company was audit fees amounted to US$83,000 (2016: US$69,000) paid to the auditor, KPMG Limited.  There were no other advisory fees paid to the auditor in 2017 (2016: US$149,450 paid to KPMG UK for the purpose of listing the Company on London Stock Exchange, in which US$44,000 was paid to KPMG Limited by KPMG UK for the sub-contracting work).

 

11.    INCOME TAX

 

Under the current law of the Cayman Islands and the British Virgin Islands, the Company and its subsidiaries are not required to pay any taxes in the Cayman Islands or the British Virgin Islands on either income or capital gains and no withholding taxes will be imposed on distributions by the Company to its shareholders or on the winding-up of the Company.

 

In accordance with Circular 103/2014/TT-BTC issued by the Ministry of Finance of Vietnam providing guideline in details of withholding tax on Viet Nam-sourced income generated by non- residents (i.e. offshore entities or individuals without a legal presence in Vietnam), the Company is subject to pay 0.1% withholding tax on proceeds of transferring securities, certificates of deposits and 5% withholding tax on the interest received from any Vietnamese entities. Dividends remitted by Vietnamese investee companies to foreign corporate investors are not subject to withholding taxes. Withholding tax consists of Value Added Tax ("VAT") and Corporate Income Tax ("CIT") components.

 

See Note 13(B) for further details.

 

 

 

 

12.    BASIC EARNINGS PER ORDINARY SHARE

 

        The calculation of basic earnings per Ordinary Share for the year was based on the net profit for the year attributable to the holders of Ordinary Shares of US$581,669,352 (2016: US$182,149,893) and the weighted average number of Ordinary Shares outstanding of 220,237,538 shares (2016: 220,920,746 shares) in issue during the year.

 

(a)     Net profit attributable to the Ordinary Shareholders

       


Year ended

31 December 2017

US$

Year ended

31 December 2016

US$

Net profit attributable to the Ordinary Shareholders

581,669,352

182,149,893

 

(b)     Weighted average number of Ordinary Shares

 

Year ended

31 December 2017

US$

Year ended

31 December 2016

US$

Issued Ordinary Shares at the beginning of the year

220,920,746

220,920,746

Effect of Ordinary Shares repurchased during the year

(683,208)

-

Weighted average number of Ordinary Shares

220,237,538

220,920,746

 

(c)     Basic earnings per Ordinary Shares

 

Year ended

31 December 2017

US$

Year ended

31 December 2016

US$

Basic earnings per Ordinary Share

2.64

0.82

 

13.    FINANCIAL RISK MANAGEMENT AND UNCERTAINTY

 

A.      Financial risk management

 

The Company and its subsidiaries mainly invested in listed and unlisted investments in Vietnam, and are exposed to credit risk, liquidity risk and market risks arising from the financial instruments they hold.  The Company has formulated risk management policies and guidelines which govern its overall business strategies, its balance for risk and its general risk management philosophy, and has established processes to monitor and control transactions in a timely and accurate manner.  In essence, the Company and its Investment Manager practise portfolio diversification and have adopted a range of appropriate restrictions and policies, including limiting the Company's cash investment in each investment to not more than 20% of the Company's capital at the time of investment.  Nevertheless, the markets in which the Company operates and the investments that the Company makes can provide no assurance that the Company will not suffer a loss as a result of one or more of the risks described above, or as a result of other risks not currently identified by the Investment Manager.

 

The nature and extent of the financial instruments outstanding at the reporting date and the risk management policies employed by the Company are discussed in the following notes.

 

(a)     Credit risk

 

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet a commitment that it has entered into with the Company. 

 

The Company's listed and unlisted investments will only be traded on or subject to the rules of recognised stock exchanges or with counterparties which have, or whose parent company has been approved based on a set of defined criteria by the Investment Manager.  All transactions in listed and unlisted securities are settled/paid for upon delivery using approved brokers.  The risk of default is considered minimal since the delivery of securities sold is made only once the broker has received payment.  A purchase payment is only made once the securities have been received by the broker.  If either party fails to meet their obligations, the trade will fail. 

 

As at 31 December 2017 and 31 December 2016, the Company's credit risk arose principally from its other receivables, balances due from brokers, and cash and cash equivalents.

 

The maximum exposure to credit risk faced by the Company is equal to the carrying amounts of these balances as shown on the statement of financial position. The maximum exposure to credit risk at the reporting date was as follows:

                        


31 December 2017

US$

31 December 2016

US$

Other receivables (i)

1,134,004

436,608

Balances due from brokers (i)

-

720,731

Cash and cash equivalents (ii)

32,443,551

19,837,882


33,577,555

20,995,221

 

The Company invests substantially all of its assets in its subsidiaries together with which it is managed as an integrated structure.  The Directors decided that the objectives of IFRS 7 Financial Instruments: Disclosures are met by providing disclosures on the credit risk of the underlying financial assets held by the subsidiaries.

 

As at 31 December 2017 and 2016, the subsidiaries' credit risk arose principally from the subsidiaries' other receivables, balances due from brokers, cash and cash equivalents, and investments in debt securities.

 

The maximum exposure to credit risk faced by the subsidiaries is equal to the carrying amounts of other receivables, balance due from brokers, cash and cash equivalents and investments in debt securities which were as follows at the reporting date:

 

31 December 2017

US$

31 December 2016

US$

Investments in debt securities

-

3,796,607

Other receivables (i)

741,163

4,243,009

Balances due from brokers (i)

5,089,127

-

Cash and cash equivalents (ii)

31,559,842

31,817,639


37,390,132

39,857,255

 

(i)        Other receivables and balances due from brokers

            Other receivables represented dividends receivable from and bond interest receivable from investee companies. Balances due from brokers represented receivables from sales of securities. Credit risk relating to these amounts was considered as minimal due to the short-term settlement period involved.

 

No receivables as at 31 December 2017 and 2016 were past due.

 

(ii)       Cash and cash equivalents

            Cash and cash equivalents of the Company and its subsidiaries were held mainly with well-known financial institutions. The Directors do not foresee any significant credit risks from these deposits and do not expect that these financial institutions may default and cause losses to the Company.

 

(b)     Liquidity risk

 

Liquidity risk is defined as the risk that the Company may not be able to settle or meet its obligations on time or at a reasonable price.  The Company manages its liquidity risk by investing primarily in marketable securities.  The Company also regularly monitors current and expected liquidity requirements to ensure that it maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.

 

As at 31 December 2017 and 31 December 2016, all the contractual maturities of non-derivative financial liabilities of the Company and its subsidiaries were payable within a year.

 

(c)     Market risk

 

Market risk is the risk that changes in market prices, such as equity prices, interest rates and foreign exchange rates will affect the income of the Company and the value of its holdings of financial instruments.  The objectives of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return on risk.

 

Equity price risk

 

Equity price risk is the risk that the fair values of equities decrease as a result of changes in the levels of the equity indices and the values of individual securities.  The trading equity price risk exposure arises from the Company's investment portfolio.  The Company is exposed to equity price risk on all of its directly held and underlying listed and unlisted equity investments for which an active over-the-counter market exists.   The Company's equity price risk is managed by the Investment Manager who seeks to monitor the risk through a careful selection of securities within specified limits. 

 

Equity price risk for the Company's underlying listed investments principally relates to investments listed on the Ho Chi Minh City Stock Exchange and the Hanoi Stock Exchange in Vietnam.  The Investment Manager's best estimate of the effect on net assets and losses due to a reasonably possible change in equity indices, with all other variables held constant was as follows:

 

Change in
index level

Effects on
net assets

Change in
index level

Effects on
net assets


2017

2017

2016

2016

Market Indices

%

US$m

%

US$m

VN Index

50

554.14

15

117.24

VN Index

(50)

(554.14)

(15)

(117.24)

 

Equity price risk for the Company's underlying unlisted investments principally related to investments in private equities in Vietnam.  Valuation of these investments is made using appropriate valuation methodologies.

 

      Interest rate risk

 

        The Company and its subsidiaries are exposed to risks associated with the effect of fluctuations in the prevailing levels of floating market interest rates on its financial position and cash flows.  The Company and its subsidiaries have the ability to borrow funds from banks and other financial institutions in order to increase the amount of capital available for investments.  Consequently, the level of interest rates at which the Company and its subsidiaries can borrow will affect the operating results of the Company and its subsidiaries. The Investment Manager monitors overall interest sensitivity of the Company and its subsidiaries on a monthly basis.

 

The table below summarises the Company's exposure to interest rate risk.  Included in the table are the Company's assets and liabilities at carrying value, categorised by maturity date.  The net interest sensitivity gap represents the contractual amounts of all interest sensitive financial instruments.

 

Up to 1 year

1 - 5 years

Non-interest bearing

Total


US$

US$

US$

US$

31 December 2017





ASSETS





Other receivables

-

-

1,134,004

1,134,004

Cash and cash equivalents

32,443,551

-

-

32,443,551

TOTAL ASSETS

32,443,551

-

1,134,004

33,577,555






LIABILITIES





Borrowings

(80,000,000)

-

-

(80,000,000)

Accounts payable and accruals

-

-

(2,961,669)

(2,961,669)

TOTAL LIABILITIES










NET INTEREST SENSITIVITY GAP

(47,556,449)

-

N/A

N/A

 

Up to 1 year

1 - 5 years

Non-interest bearing

Total


US$

US$

US$

US$

31 December 2016





ASSETS





Other receivables

-

-

436,608

436,608

Balance due from brokers

-

-

720,731

720,731

Cash and cash equivalents

19,837,882

-

-

19,837,882

TOTAL ASSETS

19,837,882

-

1,157,339

20,995,221






LIABILITIES





Borrowings

(40,000,000)

-

-

(40,000,000)

Accounts payable and accruals

-

-

(1,951,794)

(1,951,794)

TOTAL LIABILITIES

(40,000,000)

-

(1,951,794)

(41,951,794)






NET INTEREST SENSITIVITY GAP

(20,162,118)

-

N/A

N/A

 

A change of 100 basis points in interest rates would have increased or decreased the net assets attributable to the Ordinary Shareholders by US$475,564 (31 December 2016: US$201,621). This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

 

The Company invests substantially all of its assets in its subsidiaries together with which it is managed as an integrated structure. The Directors decided that the objectives of IFRS 7 Financial Instruments: Disclosures are met by providing disclosures on the interest risk of the underlying investments held by the subsidiaries.

 

The table below summarises the subsidiaries' exposure to interest rate risk. Included in the table are the subsidiaries' assets and liabilities categorised by maturity date. The net interest sensitivity gap represents the net carrying amounts of all interest sensitive financial instruments.

 

Up to 1 year

1 - 5 years

Non-interest bearing

Total

 


US$

US$

US$

US$

 

31 December 2017





 

ASSETS





 

Other receivables

-

-

741,163

741,163

 

Balance due from brokers

-

-

5,089,127

5,089,127

 

Cash and cash equivalents

31,559,842

-

-

31,559,842

 

TOTAL ASSETS

31,559,842

-

5,830,290

37,390,132

 






 

LIABILITIES





 

Balances due to brokers

-

-

-

-

 

TOTAL LIABILITIES

-

-

-

-

 






 

NET INTEREST SENSITIVITY GAP

31,559,842

-

N/A

N/A

 


Up to 1 year

1 - 5 years

Non-interest bearing

Total


US$

US$

US$

US$

31 December 2016





ASSETS





Investment in debt securities

-

3,796,607

-

3,796,607

Other receivables

-

-

4,243,009

4,243,009

Cash and cash equivalents

31,817,639

-

-

31,817,639

TOTAL ASSETS

31,817,639

3,796,607

4,243,009

39,857,255






LIABILITIES





Balances due to brokers

-

-

(32,134,831)

(32,134,831)

TOTAL LIABILITIES

-

-

(32,134,831)

(32,134,831)






NET INTEREST SENSITIVITY GAP

31,817,639

3,796,607

N/A

N/A

 

A change of 100 basis points in interest rates would have increased or decreased the net assets attributable to the Ordinary Shareholders by US$315,598 (31 December 2016: US$356,142). This analysis assumes that all other variables, in particular foreign currency rates, remain constant.

 

Foreign currency risk

 

Foreign currency risk is the risk that changes in foreign exchange rates will affect the Company and its subsidiaries' income or the value of its holding of financial instruments. The Company and its subsidiaries ensure that the net exposure to this risk is kept to an acceptable level by buying or selling foreign currencies at spot rates to address short-term imbalances where necessary.

 

The table below summarises the Company's exposure to various currencies. All amounts were stated in US$.

 

31 December 2017

Denominated in VND


US$

ASSETS


Financial assets at fair value through profit or loss

547,011,237

Other receivables

1,134,004

Cash and cash equivalents

8,714,364

TOTAL ASSETS

556,859,605



LIABILITIES


Balances due to brokers

-



NET CURRENCY POSITION

556,859,605


 

31 December 2016

Denominated in VND


US$

ASSETS


Financial assets at fair value through profit or loss

329,143,330

Other receivables

413,108

Balance due from brokers

720,731

Cash and cash equivalents

4,017,621

TOTAL ASSETS

334,294,790



LIABILITIES


Balances due to brokers

-



NET CURRENCY POSITION

334,294,790

 

At 31 December 2017, had the US$ strengthened or weakened by 1% (31 December 2016: 1%) against the VND with all other variables held constant, the net assets attributable to the Ordinary Shareholders would have been decreased or increased by the amounts shown below. This analysis was performed on the same basis as in 2016.

 

Denominated in VND


US$

2017

5,513,461

2016

3,309,849

The Company invests substantially all of its assets in its subsidiaries together with which it is managed as an integrated structure. The Directors decided that the objectives of IFRS 7 Financial Instruments: Disclosures are met by providing disclosures on the currency risk of the underlying investments held by the subsidiaries.

 

The table below summarises the exposure of the subsidiaries to currency risks as at 31 December 2017 and 2016. Included in the table are the assets and liabilities categorised by their base currency.

 

31 December 2017

Denominated in VND


US$

ASSETS


Financial assets at fair value through profit or loss

1,018,259,850

Other receivables

741,163

Balances due from brokers

5,089,127

Cash and cash equivalents

26,559,658

TOTAL ASSETS

1,050,649,798



LIABILITIES


Balances due to brokers

-



NET CURRENCY POSITION

1,050,649,798

 

31 December 2016

Denominated in VND


US$

ASSETS


Financial assets at fair value through profit or loss

662,690,197

Other receivables

4,243,009

Balances due from brokers

-

Cash and cash equivalents

26,817,456

TOTAL ASSETS

693,750,662



LIABILITIES


Balances due to brokers

(32,134,831)



NET CURRENCY POSITION

661,615,831

 

At 31 December 2017, had the US$ strengthened or weakened by 1% (31 December 2016: 1%) against VND with all other variables held constant, the net assets attributable to the Ordinary Shareholders would have been decreased or increased by the amounts shown below. This analysis was performed on the same basis as in 2016.

 

Denominated in VND


US$

2017

10,402,473

2016

6,550,652

 

(d)     Fair values of financial assets and liabilities

 

(i)        Valuation model

 

The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted prices or broker price quotations. For all other financial instruments, the Company determines fair values using other valuation techniques.

 

For financial instruments that trade infrequently and have little price transparency, fair value is less objective, and requires varying degrees of judgment depending on liquidity, uncertainty of market factors, pricing assumptions and other risks affecting the specific instrument.

 

The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements.

 

·        Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments.

 

·        Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e. as prices) or indirectly (i.e. derived from prices). This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.

 

·        Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments but for which significant unobservable adjustments or assumptions are required to reflect differences between the instruments.

 

The Company makes its investments through wholly owned subsidiaries, which in turn owns interests in various listed and unlisted equity and debt securities. The net asset value of the subsidiaries is used for the measurement of fair value. The fair value of the Company's underlying investments however is measured in accordance with the valuation methodology which is in consistent with that for directly held investments.

 

(ii)       Fair value hierarchy - Financial instruments measured at fair value

 

The table below analyses financial instruments measured at fair value at the reporting date by the level in the fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the statement of financial position. All fair value measurements below are recurring.

 

As at 31 December 2017

Level 1

Level 2

Level 3

Total


US$

US$

US$

US$

Financial assets at fair value through profit or loss





·      Listed investments

496,641,848

-

-

496,641,848

·      Unlisted investments

-

50,369,389

-

50,369,389

·      Investments in subsidiaries

-

-

1,055,649,982

1,055,649,982


496,641,848

50,369,389

1,055,649,982

1,602,661,219

 

As at 31 December 2016

Level 1

Level 2

Level 3

Total


US$

US$

US$

US$

Financial assets at fair value through profit or loss





·      Listed investments

319,063,843

-

-

319,063,843

·      Unlisted investments

-

10,079,487

-

10,079,487

·      Investments in subsidiaries

-

-

666,616,014

666,616,014


319,063,843

10,079,487

666,616,014

995,759,344

 

The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements of the Company in three levels of the fair value hierarchy.

 

2017

Level 1

Level 2

Level 3


US$

US$

US$

Opening balance

319,063,843

10,079,487

666,616,014

Transfer from level 2 to level 1

2,073,027

(2,073,027)

-

Purchases

74,601,123

40,058,592

-

Sales

(68,256,616)

-

-

Net cash outflows from subsidiaries

-

-

(23,722,850)

Unrealised gains recognised in profit or loss

169,160,471

2,304,337

412,756,818

Closing balance

496,641,848

50,369,389

1,055,649,982

Total unrealised gains for the year included in net changes in fair value of financial assets at fair value through profit or loss

169,160,471

2,304,337

412,756,818

 

2016

Level 1

Level 2

Level 3


US$

US$

US$

Opening balance

225,583,429

2,334,890

576,814,481

Transfer from level 2 to level 1

-

-

-

Purchases

119,627,436

6,556,794

-

Sales

(47,171,924)

-

-

Net cash outflows from subsidiaries

-

-

(50,962,362)

Unrealised gains recognised in profit or loss

21,024,902

1,187,803

140,763,895

Closing balance

319,063,843

10,079,487

666,616,014

Total unrealised gains for the year included in net changes in fair value of financial assets at fair value through profit or loss

21,024,902

1,187,803

140,763,895

 

There were no transfers between the levels of hierarchy of financial assets recognised at fair value within the year ended 31 December 2017.

 

The Company invests substantially all of its assets in its subsidiaries together with which it is managed as an integrated structure. The Directors decided that the objectives of IFRS 7 Financial Instruments: Disclosures are met by providing disclosures on the fair value hierarchy of the underlying investments held by the subsidiaries.

 

The table below analyses the subsidiaries' financial instruments measured at fair value at the reporting date by the level in the fair value hierarchy into which the fair value measurement is categorised.  The amounts are based on the values recognised in the statement of financial position.  All fair value measurements below are recurring.

 

As at 31 December 2017

Level 1

Level 2

Level 3

Total


US$

US$

US$

US$

Financial assets at fair value through profit or loss





·      Listed investments

951,381,540

-

-

951,381,540

·      Unlisted investments

-

66,878,310

-

66,878,310


951,381,540

66,878,310

-

1,018,259,850

 

As at 31 December 2016

Level 1

Level 2

Level 3

Total


US$

US$

US$

US$

Financial assets at fair value through profit or loss





·      Listed investments

601,886,978

-

-

601,886,978

·      Unlisted investments

-

57,006,611

3,796,608

60,803,219


601,886,978

57,006,611

3,796,608

662,690,197

 


The following table shows a reconciliation from the opening balances to the closing balances for fair value measurements of investments through the subsidiaries in three levels of the fair value hierarchy.

 

2017

Level 1

Level 2

Level 3


US$

US$

US$

Opening balance

601,886,978

57,006,611

3,796,608

Transfer from level 2 to level 1

10,883,392

(10,883,392)

-

Transfer from level 3 to level 1

3,337,041

-

(3,337,041)

Purchases

218,581,068

29,368,185

-

Sales

(128,475,635)

-

-

Unrealised gains/(losses)

192,851,055

43,704,547

(459,567)

Closing balance

899,063,899

119,195,951

-

Total unrealised gains/(losses) included in net changes in fair value of financial assets at fair value through profit or loss

192,851,055

43,704,547

(459,567)

 

2016

Level 1

Level 2

Level 3


US$

US$

US$

Opening balance

517,819,336

29,616,067

20,100,673

Transfer from level 2 to level 1

15,518,899

(15,518,899)

-

Transfer from level 3 to level 1

15,409,309

-

(15,409,309)

Purchases

159,807,441

40,432,700

-

Sales

(148,385,517)


-

Unrealised gains/(losses)

41,717,510

2,476,743

(894,756)

Closing balance

601,886,978

57,006,611

3,796,608

Total unrealised gains/(losses) included in net changes in fair value of financial assets at fair value through profit or loss

41,717,510

2,476,743

(894,756)

 

(e)     Classification of financial assets and financial liabilities

The following table shows the classification of financial assets and financial liabilities of the Company:

 

Loans and receivables

Designated at fair value

Other amortised cost

Total carrying amount

As at 31 December 2017

US$

US$

US$

US$

Assets





Financial assets at fair value through profit or loss

-

1,602,661,219

-

1,602,661,219

Other receivables

1,134,004

-

-

1,134,004

Cash and cash equivalents

32,443,551

-

-

32,443,551


33,577,555

1,602,661,219

-

1,636,238,774






Liabilities





Borrowings



80,000,000

80,000,000

Balances due to brokers

-

-

2,961,669

2,961,669


-

-

82,961,669

82,961,669

 

Loans and receivables

Designated at fair value

Other amortised cost

Total carrying amount

As at 31 December 2016

US$

US$

US$

US$

Assets





Financial assets at fair value through profit or loss

-

995,759,344

-

995,759,344

Other receivables

436,608

-

-

436,608

Balances due from brokers

720,731

-

-

720,731

Cash and cash equivalents

19,837,882

-

-

19,837,882


20,995,221

995,759,344

-

1,016,754,565

Liabilities





Borrowings

-

-

40,000,000

40,000,000

Balances due to brokers

-

-

1,951,794

1,951,794


-

-

41,951,794

41,951,794

 

B.      Uncertainty

 

Although the Company and its subsidiaries are incorporated in the Cayman Islands and the British Virgin Islands, respectively, where tax is exempt, their activities are primarily focused on Vietnam.  In accordance with the prevailing tax regulations in Vietnam, if an entity was treated as having a permanent establishment, or as otherwise being engaged in a trade or business in Vietnam, income attributable to or effectively connected with such permanent establishment or trade or business may be subject to tax in Vietnam.  As at the date of this report the following information is uncertain:

 

§ Whether the Company and its subsidiaries are considered as having permanent establishments in Vietnam;

§ The amount of tax that may be payable, if the income is subject to tax; and

§ Whether tax liabilities (if any) will be applied retrospectively.

 

The implementation and enforcement of tax regulations in Vietnam can vary depending on numerous factors, including the identity of the tax authority involved.  The administration of laws and regulations by government agencies may be subject to considerable discretion, and in many areas, the legal framework is vague, contradictory and subject to different and inconsistent interpretation.  The Directors believe that it is unlikely that the Company will be exposed to tax liabilities in Vietnam.

 

14.    SUBSEQUENT EVENTS

 

On 5 February 2018, Dominic Scriven O.B.E., the Non-executive Director of the Company purchased 36,423 Ordinary Shares of the Company (equivalent to 0.017% of the outstanding issued Ordinary Shares). 

 

As at 10 April 2018, net asset attributable to Ordinary Shareholders of the Company was US$1,852,981,485.

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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