Final Results

RNS Number : 5834Y

VietNam Holding Limited

04 September 2009

 



4 September 2009                            

VietNam Holding Limited

('VNH' and or the 'Company')

Final Results

For the Year Ended 30 June 2009

VietNam Holding Limited (AIM : VNH), is an investment company with a diversified, value-based portfolio of Vietnamese companies is pleased to announce its results for the year ended 30 June 2009.

Highlights:

NAV

 

·         NAV at 30 June 2009 - US$1.185 

·         NAV as at 31 July 2009 - US$1.284

 

Portfolio 

 

·         Percentage of net asset value invested in equities increased from 80% to 93%

·         Investment portfolio now diversified over 12 different industries 

 

Vietnamese Economy Review

 

·         Several economic stimulus measures announced in late 2008 gained traction during

the 1H2009

·         GDP growth in 1H2009 was 3.9%

 

Vietnamese Market Outlook

 

·         Vietnam's economic fundamentals and corporate sector health remain good, and

recent challenges posed by the global economic downturn have not derailed the long-
term development trajectory of the country

·         The Ho Chi Minh Stock Index VNI has increased by 21.9% from June 30 to the end of

August 2009. 

Min-Hwa Hu Kupfer, Chairperson of VNH, commented:

'Although the financial crisis has buffeted the Vietnam stock market, domestic demand remains strong, while the trade balance has actually improved. Government policy has helped shield the country from the worst of the impacts, with a stimulus package in the short-term, while remaining focused on reforms designed to strengthen the economy in the long-term.'

Donald Van Stone, Chairman, VietNam Holding Asset Management, added :

'Our objective is to utilize the most accurate and complete information available, to best position VietNam Holding (VNH) for the expected market upturn. With both earnings and absolute GDP growth having remained positive in Vietnam during the first half 2009, we are cautiously optimistic about the investment prospects for VNH.'

Contacts :

Gyentsen Zatul, Investor Relations                          [phone]

Philip Secrett, Grant Thornton Corporate Finance
Nominated Adviser                                                [phone]

Director's Report

As the effects of the financial crisis have rippled through the economy, we are seeing underlying developments in Vietnam that go beyond the immediate headlines and the hype of rising and falling share values. The stock market has been hard hit and valuations are far below the highs of 2007. Nevertheless, for the long-term investor, the crisis has provided a measure of correction and re-focusing which we can expect to positively impact economic fundamentals for sustainable future growth.  

Although the financial crisis has buffeted the Vietnam stock market, domestic demand remains strong while the trade balance has actually improved. Government policy has helped in shielding the country from the worst of the impacts with a stimulus package in the short-term, while remaining focused on reforms designed to strengthen the economy in the long-term.

As noted in our February Investor Report, the Vietnam government announced a USD 6 billion stimulus package. As of June 20, 2009, local banks have since disbursed over USD 20 billion in new loans under the central bank's interest rate subsidy program, an integral part of the stimulus package. Provisional figures show economic growth for the second quarter of 2009 as 4.5%; up from the 3.1% of the first quarter of 2009, thereby placing GDP growth in the first half of 2009 at 3.9%. Industrial production also seems to be reacting well to the economic stimulus package, as evidenced by a steady month-on-month rise in output since February.

Inflation, which investors will recall was a major concern with year-on-year consumer product index (CPI) increases of 27% at June 2008, was only 0.6% for the month of June 2009, resulting in an inflation rate of just 2.7% in the first half of 2009.  

A stock market development of note was the withdrawal of the foreign investment community, which in the wake of the global financial crisis, lost some of its appetite for emerging markets. The crisis had a dramatic impact on the Vietnam stock market as domestic investors followed suit, becoming net sellers for several consecutive months until March of this year.  

In this environment, VietNam Holding's Net Asset Value remained relatively stable, declining marginally from USD 69.2 million in June 2008 to USD 66.7 million in June 2009.  

The former Hanoi Securities Trading Center (HaSTC) was officially upgraded to full stock exchange status in June 2009, and renamed HNX (index: HNX-I). While HOSE in Ho Chi Minh is the premier stock market for Vietnam, hosting the larger companies, HNX in Hanoi will host companies that fall below the minimum chartered capital requirement of HOSE, and will also serve as the country's bond market. This clear differentiation between the country's two securities markets is a welcome development.

In addition, HNX is to be the home of a new equity market, launched on June 24, 2009, called UPCoM, (Unlisted Public Companies Market). In Vietnam any company with more than 100 external shareholders is regarded as a public company, even if its shares are not traded on either of the two formal stock exchanges. Ten companies were represented on UPCoM at its launch, half of which were brokerage firms.  

The financial crisis has proved a true test of Vietnam's economic resilience and independence. In the process, it has highlighted some key strengths including a young and well-educated demographic, a broader base of quality products and services, relatively stable domestic demand, and increasingly effective government policy. 

VietNam Holding is also looking to future by taking up the mantle of sustainable investment, and has begun to incorporate Environmental, Social, and Governance (ESG) standards in its investment approach. In a changing global economy coming under increasing environmental pressures, sustainable and responsible investment principles are expected to become ever more critical to long-term growth.

On the basis of these fundamentals, positive signs are beginning to emerge that signal an eventual recovery. VietNam Holding continues to explore and analyze the Vietnam market for the best sustainable, strategic investment opportunities with which to further build our long-term value based portfolio.  

Min-Hwa Hu Kupfer

Chairperson

VietNam Holding Ltd.

August 20, 2009

Investment Manager's Report

Global markets and the market in Vietnam remain uncertain, but with promising indicators. In this time of continuing global financial challenges, our role as an investment manager is to steer the Company through difficult times with a sound and well considered long-term investment strategy. Our objective is to utilize the most accurate and complete information available, to best position VietNam Holding for the expected market upturn. With both earnings and absolute GDP growth having remained positive in Vietnam during the first half 2009, we are cautiously optimistic about the investment prospects for VietNam Holding.

As noted in our interim report, Vietnam was unable to escape the prevalent financial and economic turbulence in the second quarter of 2008 and early 2009. We are pleased to note that the market has since recovered to June 2008 levels, as measured by the performance of the Vietnam Index (VNI). During the second half of 2008 the index lost nearly 21%, but finished up 12% for the year ending June 30. From June 2008 to June 2009, the VietNam Holding net asset value declined by only 3.71%, a modest decrease considering the foreign exchange devaluation alone measured 5.5% in the past 12 months.

Over the last year, we have continued to review our portfolio composition, focusing on sectors and companies which we expect to generate credible earnings, and which are best positioned to benefit from a market recovery. We increased our focus on the Food & Beverage, and Healthcare industries by investing in Vinamilk, Hau Giang Pharma and National Seeds, all companies with high domestic visibility and staying power. In reflection of the strong position and performance of the agricultural sector in Vietnam, VietNam Holding's largest allocation continues to be Agro-chemicals and Fertilizers. We have decreased the exposure to the Construction and Materials sector in view of the declines in the real estate industry, but are optimistic that this sector will continue to be a key to future growth. Vietnam is still in the early stages of its infrastructure development, a top priority of the government. We have invested further in the Banking sector, increasing our existing position in Sacombank as market prices have become more attractive. Lastly, we have streamlined our portfolio by divesting our smallest holdings in order to better position our portfolio for further growth in this still challenging market.  

Continuing our commitment to sound corporate governance practices in Vietnam, VietNam Holding hosted two Forum events in the last year. On September 23-25, 2008 Prof. Rolf Dubs, supported by Dr. Le Dang Doanh. of VietNam Holding's Advisory Council reviewed the roles and functions of boards of directors. A second VietNam Holding Forum event was held on June 16, 2009 on the topic of lessons learned from the global economic crisis. Both events were well attended and locally reported, with highly positive feedback on the subject matter and presentation.

In these trying times, the Company has undertaken broad cost saving measures, including cutbacks in staffing, office space and associated costs. These necessary steps have resulted in a leaner, more cost-efficient team retaining all of the knowledge and experience necessary for future success.

We continue our efforts to further develop this high quality team of professionals. In November 2008, we appointed as CEO of VietNam Holding Asset Management, Mrs. Thi Tuong Vi Nguyen, our former Deputy Managing Director in the Ho Chi Minh City office. Mrs. Vi brings to the role both front-line experience and proven investment and team management skills. In September last year we also welcomed Mrs. Gabriella McGinnes as Financial Controller in our Zurich Office.

Our dedicated team continues its efforts on your behalf. With focused vigilance, we analyze the market for every opportunity to further capitalize on upward trends and promising growth sectors with the objective of substantial reward for our committed shareholders.

Donald Van Stone

Chairman,

VietNam Holding Asset Management, Ltd.

August 20, 2009

Balance Sheet as at June 30, 2009

		As at 30.06.09		As at 30.06.08
	Notes	USD		USD
Assets
Cash and cash equivalents	2	5,070,762		14,329,694
Investments in securities at fair value	2,3	61,851,629		54,735,131
Accrued dividends		46,509		-
Other assets		-		105,000
Total assets		66,968,900		69,169,825
Liabilities
Accrued expenses		369,187		535,648
Total liabilities		369,187		535,648
Equity
Net assets attributable to shareholders (bid-market prices)		66,599,713		68,634,177
Represented by:
- Net assets attributable to shareholders		66,665,110		69,231,745
(last traded prices)
- Adjustment from last traded prices		(65,397)		(597,568)
to bid - market prices

The net asset value per share based on last traded prices was USD 1.185 as at June 30, 2009 (June 30, 2008: USD 1.231) per the prospectus and the net asset value per share based on bid-market prices, per IFRS, was USD 1.184 as at June 30, 2009 (June 30, 2008: USD 1.220). This is based on 56,250,000 shares outstanding.

The financial statements on pages 8 to 20 were approved by the Board of Directors on August 20, 2009 and were signed on its behalf by

Min-Hwa Hu Kupfer                                                      Nguyen Quoc Khanh

Chairperson of the Board of Directors                            Chairman of the Audit Committee

The notes form an integral part of these financial statements.

Income Statement for the year ended June 30, 2009

			Year ended		Year ended
			30.06.09		30.06.08
	Notes		USD		USD
Income
Interest income	5		82,052		1,444,311
Dividend income from equity securities designated at fair value through profit or loss			3,085,819		1,424,548
Realised (loss)/gain on investments			(6,495,525)		678,821
Net foreign exchange loss	2		(137,957)		(177,391)
Movement in unrealised gain/(loss) on investments	2		3,820,731		(54,946,791)
Net investment income			355,120		(51,576,502)
Expenses
Investment Management fees	6		1,211,751		2,349,957
Advisory fees			116,538		122,804
Accounting fees	8		100,000		110,626
Custodian fees	7		129,056		198,184
Director fees and expenses	6		320,704		488,208
Brokerage fees			13,711		15,284
Audit fees			50,022		89,730
Publicity and investor relations fees			161,271		413,766
Insurance fees			37,000		42,500
Administration expenses			151,047		191,080
Risk management expenses			120,230		357,349
Technical assistance for investee companies			(21,746)		166,160
Total operating expenses			2,389,584		4,545,648
Change in net assets attributable to shareholders			(2,034,464)		(56,122,150)
Earnings per share - basic and diluted	11		(0.04)		(1.00)

			Year ended		Year ended
			30.06.09		30.06.08
	Notes		USD		USD
Net assets at the beginning of the year			68,634,177		124,756,327
Change in net assets attributable to shareholders
as a result of operations			(2,034,464)		(56,122,150)
Issue of shares during the period	4		-		-
Net assets at the end of the year			66,599,713		68,634,177

Statement of cash flows for the year ended June 30, 2009

	Year ended		Year ended
	30.06.09		30.06.08
	USD		USD
Cash flows from operating activities
Decrease in net assets attributable to shareholders	(2,034,464)		(56,122,150)
Adjustments for:
Interest income	(82,052)		(1,444,311)
Dividend income	(3,085,819)		(1,424,548)
Net realised gain on investments	6,495,525		(678,821)
Net unrealised (gain)/loss on debt and equity instruments	(3,820,731)		54,946,791
Unrealised foreign currency loss	119,133		153,679
	(2,408,408)		(4,569,360)
Net increase in amounts due from brokers	-		299,766
Net (decrease)/increase in other receivables and payables	(107,970)		3,136,536
Cash used in operations	(2,516,378)		(1,133,058)
Interest received	82,052		1,444,311
Dividends received	3,039,310		1,424,548
Net cash used in operating activities	604,984		1,735,801
Cash flows from investing activities
Purchase of investments	(17,156,913)		(80,108,575)
Proceeds from sale of investments	7,412,130		41,459,431
Net cash from investing activities	(9,744,783)		(38,649,144)
Net decrease in cash and cash equivalents	(9,139,799)		(36,913,343)
Cash and cash equivalents at the beginning of the year	14,329,694		51,396,716
Effect of exchange rate fluctuations on cash held	(119,133)		(153,679)
Cash and cash equivalents at the end of the year	5,070,762		14,329,694

Notes to the financial statements 

Year ended June 30, 2009

1    THE COMPANY

 

VietNam Holding Limited ('VNH' or the 'Company') is a closed-end investment holding company incorporated on April 20, 2006 as an exempt company under the Companies Law in the Cayman Islands and commenced its operations on June 15, 2006, to invest principally in securities of former State-owned Entities ('SOEs') in Vietnam, prior to, at or after the time such securities become listed on the Vietnam stock exchange, including the initial privatisation of the SOEs. The Company may also invest in the securities of private companies in Vietnam, whether Vietnamese or foreign owned, and the securities of foreign companies if a significant portion of their assets are held or operations are in Vietnam.

 

The investment objective of the Company is to achieve long-term capital appreciation by investing in a diversified portfolio of companies that have high growth potential at an attractive valuation.

 

Vietnam Holding Asset Management Limited (VNHAM) has been appointed as the Company's Investment Manager and is responsible for the day-to-day management of the Company's investment portfolio in accordance with the Company's investment policies, objectives and restrictions. 

 

Credit Suisse Zürich has been appointed to act as custodian of the Company's assets (as can be legally held outside of Vietnam). Vietnamese law requires that the Company's shares in listed companies must be held by a custodian registered as such in Vietnam and these assets will therefore be held by the Vietnam sub-custodian. HSBC (Vietnam) has been appointed to act as sub-custodian. Credit Suisse Asset Management Fund Service (Luxembourg) S.A. has been appointed to act as the administrator of the Company.

 

The registered office of the Company is CARD Corporate Services Ltd., Fourth Floor, Zephyr House, 122 Mary Street, PO Box 709 GT, Grand Cayman, KY1-1107, Cayman Islands.

 

    

2    PRINCIPAL ACCOUNTING POLICIES

 

(a)  Statement of compliance

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations adopted by the International Accounting Standards Board.

 

(b)  Basis of preparation

The financial statements are presented in USD and rounded to the nearest USD. They are prepared on a fair value basis for financial assets and financial liabilities at fair value through the profit or loss account. Other financial assets and liabilities are stated at amortised cost.

 

The shares were issued in USD and the listings of the shares are in USD and Euro.  The performance of the Company is measured and reported to the investors in USD, although the primary activity of the Company is to invest in the Vietnamese market.  The Board of Directors considers the USD as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions.  The financial statements are presented in USD, which is the Company's functional and presentation currency.

 

The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

 

The estimated and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

 

The Company is organised and operates as one segment. Consequently, no segment reporting is provided in the Company's financial statements.

 

(c)  Foreign currency translation

Transactions in foreign currencies other than the functional currency are translated at the rate ruling on the dates of the transactions.  Monetary assets and liabilities denominated in foreign currencies are re-translated to USD at the rates ruling on the year-end date. Foreign currency exchange differences     arising on translation and realised gains and losses on disposals or settlements of monetary assets and liabilities are included in the income statement.  Foreign currency exchange differences relating to financial instruments held-for-trading are included in the realised and unrealised gains and losses on those investments. All other foreign currency exchange differences relating to other monetary items, including cash and cash equivalents, are included in net foreign exchange gains and losses in the income statement.

 

(d)  Financial instruments

    

(i) Classification

The category of financial assets and financial liabilities at fair value through profit and loss comprises:

 

Financial instruments held-for-trading. These include forward contracts, options and liabilities from short sales of financial instruments. All derivatives in a net receivable position (positive fair value), as well as options purchased, are reported as financial assets held-for-trading. All derivatives in a net payable position (negative fair value), as well as options written, are reported as financial liabilities held-for-trading.

 

The Company designated all its investments as financial assets at fair value through profit and loss category.

 

Financial instruments designated at fair value through profit or loss upon initial recognition. These include financial assets that are not held for trading purposes and which may be sold. These are investments in exchange-traded debt and equity instruments, unlisted offshore open-ended investments funds, unlisted equity instruments and commercial paper.

 

Financial assets that are classified as loans and receivables include balances due from brokers and accounts receivable.

 

Cash and cash equivalents are valued at amortised cost.

 

Financial liabilities that are not at fair value through profit or loss include balances due to brokers, accounts payable and financial liabilities arising on redeemable shares.

 

 (ii) Recognition

The Company recognises financial assets held for trading on the trade date, being the date it commits to purchase the instruments. From this date, any gains and losses arising from changes in fair value of the assets or liabilities are recorded.

 

Financial liabilities are not recognised unless one of the parties has performed.

 

 (iii) Derecognition

A financial asset is derecognised when the Company no longer has control over the contractual rights that comprise that asset. This occurs when the rights are realised, expire or are surrendered.

 

Assets held-for-trading that are sold are derecognised, and corresponding receivables from the buyer for the payment are recognised on the trade date, being the date the Company commits to sell the assets.

 

A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expired. 

 

The weighted average method is used to determine realised gains and losses on derecognition. 

 

 (iv) Measurement

Financial instruments are measured initially at cost. For financial assets acquired, cost is the fair value of consideration given. Subsequent to initial recognition, all financial assets at fair value through profit or loss are measured at fair value. Transaction costs on financial assets and financial liabilities at fair value through profit or loss are expensed immediately.

Valuation

 

Marketable securities are recorded at fair value. The fair value of the securities is based on their quoted bid price at the balance sheet date without any deduction for transaction costs.

 

If quoted market prices are unavailable or do not, in the opinion of the Board of Directors, represent probable realisable values, or if the securities are not listed, the value of the relevant securities is ascertained by the Board of Directors in good faith using valuation methods which it considers fair in the circumstances including quotes received from brokers and other third party sources where possible.

 

As at June 30, 2009, 17% (June 30, 2008: 29%) of the net assets of the Company was based on quotes obtained from brokers.

 

Any increases or decreases in values are recognised in the Income statement as an unrealised gain or loss.

 

 (v) Gains and losses on subsequent measurement

Gains and losses arising from a change in the fair value of financial instruments are recognised in the income statement.

 

(vi) Impairment

 

Financial assets that are stated at cost or amortised cost are reviewed at each balance sheet date to determine whether there is objective evidence of impairment.  If any such indication exists, an impairment loss is recognised in the income statement as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate.

 

If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost decreases and the decrease can be linked objectively to an event occurring after the write-down, the write-down is reversed through the income statement.

 

 (vii) Specific instruments

 

Cash and cash equivalents

Cash comprises current deposits with banks and fixed deposits. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.

 

Forward foreign exchange contracts

Forward foreign exchange contracts are stated at market value, with the resulting net realised and unrealised gains and losses reflected in the income statement.

 

(e)  Interest income and expense

Interest income and expense is recognised in the income statement on an accruals basis.  

 

Interest income includes the amortisation of any discount or premium on zero coupon bonds, which is taken as income on the basis of yield to redemption, from the date of purchase.

 

(f)  Formation expenses

Costs attributable to the establishment of the Company have been expensed in full.

 

(g)  Offsetting

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when the Company has a legally enforceable right to set off the recognised amounts and the transactions are intended to be settled on a net basis or simultaneously, e.g. through a market clearing mechanism. 

 

(h)   Amounts due to/from brokers

Amounts due to/from brokers represent security purchases and sales transactions which are contracted for but not yet delivered at the end of the accounting period. 

 

(i)   Taxation

At present, no income, profit, capital, or capital gain taxes are levied in the Cayman Islands, and accordingly, no provision for such taxes has been recorded by the Company in the accompanying financial statements.

In the event that such taxes are levied, the Company has received an undertaking from the Governor in Cabinet of the Cayman Islands exempting it from all such taxes for a period of twenty years from May 2, 2006.

 

(j)       Adoption of new and revised standards

The IASB has issued several standards, amendments to standards and interpretations that will be effective for the Company as from 1 January 2009 or after. The Company has not elected to adopt these standards, amendments to existing standards or interpretations.

 

IFRS 2 Share-based payment - Vesting Conditions and Cancellations. Amendments to IFRS 2 are required to be applied from 1 January 2009. These amendments clarify the definition of vesting conditions, introduce the concept of non-vesting conditions, require non-vesting conditions to be reflected in grant-date fair value and provide the accounting treatment for non-vesting conditions and cancellations.

 

IFRS 8 Operating Segments replaces IAS 14 Segment Reporting. IFRS 8 is required to be applied from 1 January 2009. This IFRS sets out requirements for disclosure of information about an entity's operating segments and also about the entity's products and services, the geographical areas in which they operate, and its major customers. IFRS 8 will require additional disclosures on these items.

 

IAS 1 Presentation of Financial Statements (as revised in 2007) supersedes IAS 1 Presentation of Financial Statements (as revised in 2003 and amended in 2005). The revised IAS 1 introduces new terminology throughout IFRSs and is required to be applied from 1 January 2009, but earlier application is permitted. The IFRS is aimed at improving users ability to analyse and compare the information given in financial statements. IAS 1 (Revised) will affect the presentation of owner changes in equity and of comprehensive income.

 

IAS 23 Borrowing Costs (as revised in 2007) supersedes IAS 23 Borrowing Costs (issued in 1993). The revised IAS 23 is required to be applied from 1 January 2009, but earlier application is permitted. It requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost of that asset. The option of immediately expensing those borrowing costs will be removed.

 

Amendments to IAS 32 and IAS 1 Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation. Amendments to IAS 32 and IAS 31 are required to be applied from 1 January 2009. These amendments to the standards require that some puttable financial instruments and some financial instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation to be classified as equity.

 

The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material financial impact on the financial statements of the Company.

    

Various Improvements to IFRSs have been dealt with on a standard-by-standard basis. All amendments, which result in accounting changes for presentation, recognition or measurement purpose, will come into effect not earlier than 1 January 2009. The Company has not yet analysed the likely impact of the improvements on its financial position or performance.

 

 

 

3    FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS

 

Financial assets of the Company include investments in securities, cash and cash equivalents and accrued income. Financial liabilities are comprised of accrued charges. Accounting policies for financial assets and liabilities are set out in note 2.

The Company's investment activities expose it to various types of risk that are associated with the financial instruments and the markets in which it invests. The most important types of financial risk to which the Company is exposed are market risk, currency risk, credit risk and liquidity risk.

Asset allocation is determined by the Company's Investment Manager who manages the distribution of the assets to achieve the investment objectives. Divergence from target asset allocations and the composition of the portfolio is monitored by the Investment Manager.

 

 

Market risk

Market risk is the risk that the value of a financial asset will fluctuate as a result of changes in market prices, whether or not those changes are caused by factors specific to the individual asset or factors affecting all assets in the market. The Company is predominately exposed to market risk within its securities purchased on the Vietnamese market. Furthermore, there is no certainty that the market price of the ordinary shares of the Company will fully reflect their underlying net asset value. Shares of closed-end investment companies frequently trade at a discount to net asset value. This characteristic of shares of a closed-end investment company is a risk separate and distinct from the risk that the net asset value may decrease.

 

The overall market positions are monitored continuously by the Investment Manager and at least quarterly by the  Board of Directors.

 

 

The Company's investments in securities are exposed to market risk and are disclosed by the following generic investment types:

 

		30.06.09		30.06.08
Description		Fair value in USD	% of net assets	Fair value in USD	% of net assets
Shares and similar investments - listed		50,174,427	75.34%	34,472,619	50.23%
Shares and similar investments - unlisted		11,677,202	17.53%	20,262,512	29.52%
		61,851,629	92.87%	54,735,131	79.75%

 

At June 30, 2009 a 5% reduction in the market value of the portfolio would have lead to a reduction in net asset value of USD 3,092,581. A 5% increase in market value would have lead to an equal and opposite effect.

 

 

Currency risk

The Company may invest in financial instruments and enter into transactions denominated in currencies other than its functional currency of USD. Consequently, the Company is exposed to risks that the exchange rate of its currency relative to other currencies may change and have an adverse effect on the value of the Company's assets or liabilities denominated in currencies other than USD.

 

The Company's net assets are calculated every month based on the most up to date exchange rates while the general economic and foreign currency environment is continuously monitored by the investment manager and reviewed by the VNH Board of Directors at least once per quarter.

 

The Company may enter into arrangements to hedge currency risks if such arrangements become desirable and practicable in the future in the interest of efficient portfolio management.

 

As at June 30, 2009 the Company had the following currency exposure:

 

		Assets Fair value 30.06.09	Assets Fair value 30.06.08
Currency		USD	USD
Vietnamese Dong		62,269,190	58,191,637
Euro		1,686,427	-
		63,955,617	58,191,637

 

At June 30, 2009 a 5% reduction in the value of the Vietnamese Dong and Euro would have lead to a reduction in net asset value of USD 3,113,460 and 84,321, respectively. A 5% increase in value would have lead to an equal and opposite effect.

 

 

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. 

 

At June 30, 2009, the following financial assets were exposed to credit risk: cash and cash equivalents, accrued dividend and other receivables. The total amount of financial assets exposed to credit risk amounted to USD 5,117,271 (30.06.08: USD 14,434,694). 

 

Substantially all of the assets of the Company are held by Credit Suisse.  Bankruptcy or insolvency of the bank and custodian may cause the Company's rights with respect to cash and securities held by the bank and custodian to be delayed or limited.  The Company monitors its risk by monitoring the credit quality and financial positions of the bank and custodian the Company uses.

 

 

Liquidity risk

The Company, a closed-end investment company, will invest in companies through listings on the Vietnam stock exchange or on other stock exchanges. There is no guarantee however that the Vietnam stock exchange will provide liquidity for the Company's investments in unlisted companies. The Company may have to resell such investments in privately negotiated transactions.

 

The Company's overall liquidity risks are monitored on at least a quarterly basis by the Board of Directors. The Company is a closed-end Investment Company so shareholders cannot redeem their shares directly from the Company.

 

 

Interest rate risk

The majority of the Company's financial assets are non-interest-bearing. Interest-bearing financial assets and interest-bearing financial liabilities mature or reprice in the short-term, no longer than twelve months. As a result, the Company is subject to limited exposure to fair value interest rate risk due to fluctuations in the prevailing levels of market interest rates.

 

During the year ended June 30, 2009 interest rates ranged from 0.0% to 1.0% (June 30, 2008: 1.9% to 5.7%)

 

The following table details the Company's exposure to interest rate risks (less than three months):

 

	Fair value  30.06.09 USD	Fair value  30.06.08 USD
Cash and cash equivalents	5,070,762	14,329,694

 

At June 30, 2009 a 1% reduction in interest rates would have decreased the net asset value by USD 50,708. A 1% increase in value would have lead to an equal and opposite effect.

 

    

 

4    SHARE CAPITAL

     

The ordinary shares have been created pursuant to the Companies Law in the Cayman Islands. The Company was incorporated with an authorised share capital of USD 100,000,000 divided into 100,000,000 ordinary shares of USD 1.00 each. The one ordinary share in issue was transferred to the Investment Manager on April 28, 2006 and purchased by the Company on June 15, 2006 for USD 1.00 and was immediately cancelled.

 

On June 6, 2006, the Board resolved that 56,250,000 ordinary shares would be allotted at a placing price of USD 2.00 per ordinary share at, but conditional upon, admission. The ordinary shares' ISIN number is KYG9361X1043. No shares have been issued or redeemed since June 6, 2006.

              

The Company strives to invest the capital raised to meet the Company's investment objectives which are to achieve long term capital appreciation through a diversified portfolio of companies that have high potential in Vietnam.  The Company achieves this aim by investing principally in securities of former State-owned Entities ('SOEs') in Vietnam prior to, at or after such securities becoming listed on the Vietnam stock exchange.

 

The Company does not have any externally imposed capital requirements.

 

 

Redeemable shares

The Company's general intention is to reinvest the capital received on the sale of investments. However, the Board may from time to time and in its discretion, either use the proceeds of sales of investments to meet the Company's expenses or distribute them to shareholders. Alternatively, the Board may redeem ordinary shares with such proceeds for shareholders pro rata to their shareholding upon not less than 30 calendar days' notice to shareholders (subject always to applicable law) or repurchase ordinary shares at a price not exceeding the last published net asset value per share.

 

 

5    INTEREST INCOME

 

	30.06.09	30.06.08
	USD	USD
Interest income arising from financial assets that are not at  fair value through profit or loss:
Cash and cash equivalents	82,052	1,444,311
Total interest income recognised on financial assets	82,052	1,444,311

 

 

6    RELATED PARTY TRANSACTIONS

 

Investment Management fees

The Investment Manager is entitled to an investment management fee of 2% per annum on the monthly net assets under management. The fee is payable monthly in advance and is calculated by reference to the NAV at the end of the preceding month. In addition, the Investment Manager is reimbursed by the Company for administrative functions that it performs on behalf of the Company.

 

The Company will pay to the Investment Manager a performance bonus each year at the rate of 20% of the annual increase in net asset value over the higher of an annualised hurdle rate of 5% and a 'high water mark' requirement.

 

The total fees accruing to the Investment Manager for the year to June 30, 2009 were USD 1,211,751 (30.06.08: USD 2,349,957) as a management fee and USD 151,047 (30.06.2008: USD 191,080) for administrative support. At June 30, 2009, USD 50,313 due to the Investment Manager are included in accrued expenses (30.06.2008: USD 60,225).

 

No performance fee was due as at June 30, 2009 nor at June 30, 2008.

 

Directors' fees and expenses

    

The Board will determine the fees payable to each Director, subject to a maximum aggregate amount of     USD 240,000 per annum being paid to the Board as a whole. The Company will also pay reasonable expenses    incurred by the Directors in the conduct of the Company's business including travel and other expenses. The Company will pay for directors and officers liability insurance coverage. 

 

The charges for the year for the Directors fees were USD 203,000 (30.06.08: USD 298,000) and expenses were USD 117,704 (30.06.08: USD 190,208).

 

 

Directors' ownership of shares

 

As at June 30, 2009, Min-Hwa Hu Kupfer held 20,000 (June 30, 2008: 20,000) ordinary shares of the Company representing 0.04% of the total shares outstanding. 

 

John J. Hoey, who resigned during the year ended June 30, 2009, held 100,000 ordinary shares representing 0.18% of the Company as at June 30, 2008.

 

 

7    CUSTODIAN FEES

    

Until July 21, 2008, the custodian received a fee of 0.16% per annum of the value of the assets held by it. The custodian also charged fees for transactions and was entitled to charge out-of-pocket and any third party expenses.

    

Effective July 22, 2008, and onwards, the custodian fee is as follow:

 

The custodian received a fee of:	up to USD 20 million:	0.26%
	from USD 20 million to USD 50 million:	0.19%
	above USD 50 million:	0.16%.

 

The charges for the year for the Custodian fees were USD 129,056 (30.06.08: USD 198,184).

 

    

8    ADMINISTRATION AND ACCOUNTING FEES

 

The administrator received a fee of 0.1% per annum calculated on the basis of the net assets of the Company during the last half year, with the fee payable at the end of each half year, subject to an annual minimum amount of 100,000 USD per annum.

 

The charges for the year for the Administration and Accounting fees were USD 100,000
(30.06.08: USD 110,626).

 

 

9    CONTROLLING PARTY

 

The Directors are not aware of any ultimate controlling party as at June 30, 2008 or June
30, 2009.

 

 

10    FAIR VALUE INFORMATION

 

For certain of the Company's financial instruments not carried at fair value, such as cash and cash equivalents, accrued dividends and other assets and creditors and accrued charges, the amounts approximate fair value due to the immediate or short term nature of these financial instruments.

    

Other financial instruments are measured at fair value on the statement of the net assets attributable to shareholders.

 

Fair value estimates are made at a specific point in time, based on market conditions and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

 

 

 

11    EARNINGS PER SHARE

 

The calculation of earnings per share at June 30, 2009 was based on the change in net assets attributable to shareholders of USD (2,034,464) (June 30, 2008: USD (56,122,150)) and the weighted average number of shares outstanding of 56,250,000 (June 30, 2008: 56,250,000).

Report Distribution

Copies of the annual report and accounts will be sent to shareholders and will be available, free of charge, from the offices of Grant Thornton Corporate Finance, 30 Finsbury Square, London, EC2P 2YU or Vietnam Holding Asset Management, Gartenstrasse 19, CH 8002 Zurich, Switzerland. A pdf version of the annual report and accounts will also be available for download from the Company's website www.vietnamholding.com. 

 

END

 

 

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