Audited Annual Accounts and AGM Notice
VietNam Holding Limited ("VNH" or the "Company")
Audited Annual Accounts and AGM Notice
VietNam Holding Limited ("VNH" or the "Company") (AIM: VNH) is pleased to announce its audited accounts for the year ended 30 June 2017.
Min Kupfer, Chairperson of VNH, commented:
"The year has been characterised by increasing foreign investor attention to the Vietnamese stock markets. We are using our recent experience to inform our future outlook, making adjustments but without deviating from our strict value investing philosophy."
The Company's Annual General Meeting will be held at Kempinski Hotel Bristol, Kurfürstendamm 27, 10719 Berlin, Germany on 21 September 2017 at 2.00 p.m. Central European Time.
This announcement contains inside information which is disclosed in accordance with the Market Abuse Regulation.
For more information please contact:
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VietNam Holding Asset Management Limited |
Tel: +1 215 325 1334 |
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Smith & Williamson Corporate Finance Limited |
Tel: +44 20 7131 4000 |
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Nominated Advisor |
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Azhic Basirov / Ben Jeynes |
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Winterflood Investment Trusts |
Tel: +44 20 3100 0000 |
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Broker |
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Joe Winkley / Neil Langford |
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Buchanan Communications |
Tel: +44 20 7466 5000 |
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Financial Public Relations |
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Charles Ryland / Vicky Hayns |
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Chairperson's Statement
Dear Shareholder,
Our financial year ended 30 June 2017 could be a rather complicated one to describe in terms of NAV per share growth, because of the final exercise date of our 1-for-3 warrants issue having taken place on 1 June 2017. For simplicity, in the table below, we present NAV per share growth over the last 5 years to 30 June 2017 in original, unadjusted form, alongside share price growth and the growth in the Vietnam All Share (VNAS) Index. The financial year-end absolute NAV per share for the Company amounted to USD 2.872.
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Periods to 30 June '17 |
NAV/Share % growth (USD) |
Share Price % growth (USD) |
VNAS Index % growth (USD) |
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1 year |
7.2 |
10.6 |
19.2 |
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2 years |
37.2 |
30.5 |
27.8 |
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3 years |
49.5 |
60.8 |
30.2 |
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4 years |
74.3 |
89.8 |
49.8 |
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5 years |
121.8 |
122.4 |
60.7 |
The 7.2% increase in NAV per share for the year comprises a 17.4% "core" gain (after fees) from our portfolio management activities less a 10.2% negative impact arising from the dilutive effect of the recent warrants issue. Although VNH`s two warrant issues over the past five years have played an important part in raising the total assets of the fund to a solid level of financial sustainability, their dilutive impact on NAV per share has led the board at this stage to decide not to undertake any additional warrant issues for the foreseeable future.
Our NAV per share relative to index and peers in the past year has not performed as well as previous years - our NAV per share growth underperformed the index in a full financial year for the first time since 2009. We ascribe this to three factors: (a) a globally better performance from "growth" rather than "value" equity strategies in the past several quarters; (b) some excellent short term share price performances from a number of recent large-capitalisation Vietnamese IPO's during the period, which in most cases sported inflated valuations; and (c) a few cases of robust share price performance from existing major stocks, notably in banks and construction, that we were slow to see value in, and in some cases still do not. We are using our recent experience to inform our future outlook, making adjustments but without deviating from our strict value investing philosophy. As a closed ended fund, we take a long term approach, believing that a minimum three year investment horizon is the appropriate one (rather than one year) for maximising long term risk-adjusted returns.
In the recently completed warrant exercise period, all warrants were taken up, either by existing shareholders or by new investors, with those shareholders who did not exercise compensated for the value of their unused warrants. From this source, the asset value of the fund was increased by nearly USD 40 million, to a total of USD 210.5 million as of 30 June 2017.
Reducing the discount of the share price to NAV remains a priority. During the year, the discount improved slightly, from 20.6% at the start of the financial year to 18.1% as at 30 June 2017. A total of approximately 2.1 million shares were purchased by the Company to be held in treasury (2016: 4.6 million) and 2.5 million treasury shares were subsequently cancelled (2016: 1.9 million) during the year. 631,684 treasury shares were reissued to Vietnam Holding Asset Management as incentive fees paid in shares, in respect of the 2016 financial year. There were 9.4 million shares in treasury at 30 June 2017 (2016: 10.5 million), compared with total shares outstanding of 73.3 million (2016: 54.9 million).
We have resolved to change our policy on treasury shares, whereby we shall cancel them as soon as possible after they are purchased, rather than the previous policy of keeping them in treasury for three years with a possibility of reselling them at a lower discount compared to the weighted average purchase discount of the pool. This proposed change of policy will be presented to shareholders at our next annual general meeting to be held in September 2017.
The year has been characterised by increasing foreign investor attention to the Vietnamese stock markets. Daily turnover on the three exchanges has averaged a new record of USD 195 million in the first half of calendar 2017, with net foreign inflows significantly high at USD 438 million over this period.
Although valuations have tended to increase, they have not reached concerning levels in aggregate, due to strong double digit earnings per share growth over the past 12 months. The VNAS at 30 June 2017 sat on a trailing price/earnings ratio of 13.5x, a high level compared to the past five years, but hardly an alarming level.
Meanwhile, Vietnamese GDP growth is heading for another excellent year exceeding 6%, and signs abound of a middle class consumer boom that is changing the face of the nation. This is reflected in unprecedented busy streets, roads, shops and restaurants. Foreign tourist arrivals to Vietnam are growing at 30% year-on-year, and likewise domestic tourism is booming too. Foreign direct investment growth (6% YoY for disbursals in the first half of 2017) and export growth (19%) both remain buoyant. Additionally, we are experiencing a stable currency (down only 1.9% versus the dollar over the past 12 months), modest and steady interest rates (4.9% for the five year government bond), and an ideal low inflation rate (2.5% in June YoY).
There are two important reform areas for the government in the coming quarters, which if successfully undertaken will support the solid outlook for the economy and stock market. Firstly, a law has just been passed to improve the power of creditors to seize and sell collateral behind non-performing loans, or indeed the ability to sell the loans. Time will tell if it has teeth. Secondly, follow-on stake sales in a number of listed state owned enterprises are required, in order for these privatisations to amount to more than window-dressing in economic terms and to meaningfully deepen the ability to invest in the stock market. Continued major expansion in foreign portfolio investor interest in Vietnam is dependent on a good rate of progress in such matters.
Thanks to our shareholders for your support, and to Vietnam Holding Asset Management for its continued overall creditable performance.
Min-Hwa Hu Kupfer, Chairperson
Vietnam Holding Limited
18 August 2017
Investment Manager's Report
Success in investment management at the highest level is no easy task. In its pursuit, VietNam Holding Asset Management Ltd (VNHAM) had an eventful past fiscal year. One significant and very positive event was the achievement by VietNam Holding Ltd (VNH), the largest fund managed by VNHAM, in reaching the historical milestone of a total Net Asset Value above USD 200 million. This was greatly assisted by the very successful exercise in June 2017 of warrants issued in 2015. We take this opportunity to thank all the VNH investors for the trust and support demonstrated by their participation in that offering.
Not all events were so positive. For the first time since 2009, VNH did not outperform its benchmark index. While the Vietnam All Share Index (VNAS) rose by an impressive 21.47% during the last fiscal year, the VNH Unadjusted NAV/Share showed a performance of 7.2% for the same period. The Vietnam Index (VNI), which includes all stocks listed on the Ho Chi Minh City Stock Exchange, irrespective of their free float and tradability, rose by 22.81%. Regrettably, VNH also significantly underperformed most of its peers.
VNH is principally a value investor and has applied that strategy since inception. Accordingly, the fund manager's primary concern is to achieve long-term capital appreciation by investing in a diversified portfolio of companies that have high growth potential at an attractive valuation. This implies that VNHAM will ignore the overvalued companies, even though these may appear attractive in the short term.
Four out of the five biggest contributors to the underperformance of VNH versus the VNI were trading at more than 20x trailing PE as of 30 June 2017. Vinamilk (HOSE: VNM) and Vietcombank (HOSE: VCB) prices were pushed up as they were top priorities for both long term and index funds seeking Vietnam exposure. SABECO (Saigon Beer-Alcohol-Beverages Corporation - HOSE: SAB), a long awaited large SOE listed in late 2016, is an interesting story. The stock attracted a great deal of attention from both retail and institutional investors thanks to a considerable pre-listing hype. Although the long term outlook of the alcoholic beverage sector is still positive, its valuation was pushed up to nearly 30x following their listing, mostly driven by a very small free float. FLC Faros Construction (HOSE: ROS) is a rather speculative stock with a corporate governancethat we consider unsuitable for VNH. ROS' share price gained more than 1,200% to its peak and then lost 50% within a year. As for Petrovietnam GAS (HOSE: GAS), the stock is deemed to be the best representative of the oil and gas sector in Vietnam and has a high correlation to the crude oil price; the outperformance of the stock could be explained by the high volatility of the crude oil price in the period.
Although the stocks mentioned above were a major constituent of the VNI increase, none of them feature in the VNAS Index. Nonetheless, the increase in the VNAS was also driven by a limited number of tickers that did not qualify for VNH's portfolio, mainly due to overpricing, poor long-term perspectives, corporate governance issues, or full Foreign Ownership Limit. These included stocks such as Thanh Cong Textile JSC (113% price increase), Bien Hoa Sugar JSC (98%), Hoa Binh Construction JSC (94%), Hoang Anh Gia Lai Agriculture JSC (76%), Refrigeration Electrical Engineering JSC (37%) and several banks and construction companies.
We underestimated the potential growth of some well-known tickers such as Vinamilk, Mobile World Group (MWG) and Military Bank (MBB). VNHAM has reviewed these errors in judgement and increased VNH's exposure to a select number of banks with the best margins of safety. VNHAM has also been slow in divesting a number of stocks such as Century Synthetic Fiber Corp., Danang Rubber JSC and Nhon Trach 2 JSC. The Company has since fully divested the underperforming stocks and successfully rebalanced the VNH portfolio to both correct mistakes and optimally deploy the new funds resulting from the warrants exercise. The performance of VNH compared to the VNAS during Q2 2017 appears to support this course of action.
From a shareholders' perspective however, VNH has continued to perform well. Over the past 5 years, the VNH share price has substantially outperformed key Asian indices, including the VNAS, the MSCI Asia ex Japan, the Shanghai Composite, the Manila, Bangkok, Jakarta as well as the Bombay Composites - by quite a margin.
Looking forward, Vietnam's market is likely to remain under the influence of a few standout stocks for the months to come. Indeed, the projected EPS growth of the VNI, adjusted to exclude its most highly valued stocks Sai Gon Thuong Tin Commercial JSC, Export Import Commercial Joint Stock Bank and Vingroup JSC, illustrates that the projected EPS growth of the rest of the market remains below that of VNH's portfolio.
Many of these listed companies that show high price-earnings-ratios but not commanding EPS growth projections, remain ineligible for VNHAM as long as we continue to adhere to our value investment principles. Notwithstanding the fact that the short- term performance of these tickers may appear to be an enticing argument for a change in strategy, VNHAM continues to believe that small- and mid-cap companies with more sustainable EPS growth represent the wiser path to success in the long term. VNHAM does not intend to divert from a strategy that has served its funds so well for almost a decade.
In contrast to the companies mentioned above, we present in the Company Profiles section of this Annual Report five current VNH portfolio companies. They are examples of what VNHAM considers to be the kind of proper, small- and mid-cap companies with sustainable EPS growth that have made VNH a success story.
We are confident that stocks like these will continue to be the correct choice for value investing in the years to come, and that this will be the case in both the healthy and challenging markets we are sure to encounter. Our sincere thanks to the funds and the shareholders who continue to entrust us with that important decision.
Jean-Christophe Ganz
Chairman
VietNam Holding Asset Management Limited
18 August 2017
Directors' Report
The Board of Directors plays a key role in the operation of Vietnam Holding Ltd. In consultation with the creator of the VNH Group, Mr. Juerg Vontobel, the Board sets the Company's Founding Principles. The Board makes all policy decisions on investment strategies, environmental, social and governance matters ("ESG"), asset allocations, investment risk profiles, capital increases and profit distributions to Shareholders. It also appoints the Investment Manager, to whom it provides appropriate guidance and instruction.
The Board is also responsible for reviewing the Company's Investment Policy and the performance of its investment portfolio. In particular, all new investments and full divestments as well as change in the target level investment category of an existing investment are subject to the preliminary approval of the Board's Chairperson, then presented for ratification by the Board at its next meeting.
As a Cayman Islands incorporated fund that is admitted for trading on London's AIM market, the Company is not required to and does not adhere to any official code of corporate governance. However, the Directors recognise the importance of sound corporate governance commensurate with the size of the Company and the interests of its Shareholders. In reflection of this strong belief, the Company has adopted a comprehensive code of ethics. The Directors also comply with AIM Rules and other relevant UK regulations, including the Market Abuse Regulations relating to directors' dealings, which came into effect on July 3, 2016. Accordingly, the Company has additionally adopted a code for directors' dealings in securities of the Company based on AIM Rule 21.
Presently, the Board consists of three non-executive Directors, all of whom are regarded by the Board as independent, including the chairperson, and are subject to re-election annually:
Mrs. Min-Hwa Hu Kupfer, Chairperson
Professor Rolf Dubs
Mr. Nguyen Quoc Khanh
The Board gives careful consideration when recommending Directors for re-election, and believes that length of service alone does not necessarily restrict Directors from seeking re-election.
The Board maintains two committees: an Audit Committee and a Corporate Governance Committee. Both committees are made up of all three Directors who work closely on all board and committee matters.
The Audit Committee, chaired by Mr. Nguyen Quoc Khanh, is responsible for appointing the Auditors, subject to Shareholder approval, and reviewing the results of all audits. It is also responsible for establishing internal business controls and audit procedures.
The Corporate Governance Committee, chaired by Professor Rolf Dubs, is responsible for the governance of the Company and the Company's relationships with multiple constituents, including the Investment Manager and its affiliates.
In the financial year 2017, the Board met quarterly and additionally held four telephonic meetings.
Having decided to investigate a potential re-domiciliation of the Company from the Cayman Islands to Luxembourg, the Board made further steps towards this re-domiciliation. The Board anticipates putting the final approval for the re-domiciliation to a shareholder vote before the end of calendar 2017.
Concurrently with each formal meeting, the Board reviewed with the Investment Manager the status and the performance of the portfolio, including investment themes, prospective investments, divestitures, industry trends and peer group performance comparisons. Following the recommendations made under the portfolio management policy of the Investment Manager, the Board approved or ratified the asset allocation limits and target position of each investment.
As part of these actions, the Board approved and monitored portfolio rebalancing activities in which the Investment Manager exited six portfolio companies and initiated eight new investments, maintaining the number of equity holdings in the portfolio at twenty-six as of 30 June 2017. Among the exits were three investments where the Company held at least 4% of the outstanding shares of the respective portfolio companies.
The Board has noted the underperformance of the Company compared to its peers and the benchmark. Upon deliberation with the Investment Manager, the Board feels that the strategy used by the Manager in administering the Company's portfolio is, notwithstanding the substandard performance, a sound one from a sustainable and long-term perspective.
The Company's share buy-back program and share price discount control efforts were also reviewed quarterly during the Board meetings.
The Company held investor presentations in London and Luxembourg at which the Directors met and engaged with shareholders. The Board regularly reviewed other investor-relations activities, all coverages by brokerage research and investment analysts, and all investor communications.
The Audit Committee held four meetings in the past year in parallel with the Board meetings. In each one, the Chair of the Investment Manager's Risk Management Committee reviewed with the Audit Committee the Master Risk Matrix. In addition, it reviewed compliance reporting and evaluated risk control issues. The Committee Chairperson worked closely with the Investment Manager and its Risk & Compliance Committee to formulate the objectives and the scope of this year's internal audit, to be conducted in two phases. The scope of the Audit was conducted by Ernst & Young Vietnam Ltd in two phases. The Audit report of 1st phase focused on the risk management framework. The second phase of the audit was on compliance risk management. Both phases were finalized in November 2016.
The Corporate Governance Committee also met four times, in line with the quarterly Board meetings. As part of each meeting's agenda, the Chairman of the Committee led the review with the Investment Manager as it presented its strategic plans, financial position, and organizational development activities. An evaluation of the Board's own undertakings together with a review of the on-going projects of the Board were also held during each meeting.
The Committee conducted the annual performance review of the Investment Manager and approved the Key Performance Indicators as jointly recommended by the CEO and the Board of the Investment Manager. The Committee also oversaw the annual certification of the "VNH Code of Ethics" by all employees and Board members of both the Investment Manager and the Company.
Throughout the year, the Committee evaluated the communications between the Chairperson and the Board members, the timeliness and completeness of the Board meeting material submission, and the overall effectiveness of each Board meeting.
Remuneration
With the migration of the Company to Luxembourg in mind, the Fund has designed and implemented a remuneration policy for the Company's Directors with the aim to reflect in a proportionate manner and as effectively as possible the remuneration rules as set out in the European Directive 2011/61/EU and implemented in the 2013 Law, as amended (the "AIFM Regulations") and ESMA Guidelines on remuneration as applicable and implemented in Luxembourg (the "ESMA Guidelines").
The remuneration of each of the Company's Directors contains two parts:
1. Base Fee
2. Committee and Board related service, including attendance of Committee and Board meetings, based on the number of days worked.
In 2017, the Company's Directors' Base Fees were:
- Mrs. Min-Hwa Hu Kupfer USD 60,000
- Professor Rolf Dubs USD 50,000
- Mr. Nguyen Quoc Khanh USD 50,000
For attendance in person at each Committee and Board meeting, which took place quarterly, each Director was paid USD 1,500 per day. For attending any Committee or Board meeting held telephonically, each Director was paid USD 750 per meeting. Each Director was also compensated USD 1,500 for each day of service related to Committee and Board initiatives.
The total remuneration of the Company's Directors in FY2016-17 as the result of meeting attendance and Committee work was USD 257,000 as follows:
-Mrs. Min-Hwa Hu Kupfer, Chairperson USD 105,000
-Professor Rolf Dubs, Director & Chair of Corp. Governance Committee USD 76,500
-Mr. Nguyen Quoc Khanh, Director & Chair of Audit Committee USD 75,500
Ownership of VietNam Holding (as at 30 June 2017)
- Mrs. Min-Hwa Hu Kupfer 36,667 shares
- Professor Rolf Dubs 61,451 shares
- Mr. Nguyen Quoc Khanh 33,253 shares
During the fiscal year, both Mr. Nguyen Quoc Khanh and Prof. Rolf Dubs increased their shareholdings in the Company, mainly through the exercise of warrants.
On behalf of the Board of Directors:
Min-Hwa Hu Kupfer
Chairperson
18 August 2017
INDEPENDENT AUDITORS' REPORT
To the Shareholders of
VietNam Holding Limited
Collas Crill Corporate Services Limited
Floor 2, Willow House
Cricket Square
PO Box 709
George Town, Grand Cayman
Cayman Islands, KY1-1107
Report on the audit of the financial statements
We have audited the financial statements of VietNam Holding Limited ('the Company'), which comprise the statement of financial position as at 30 June 2017, the statements of comprehensive income, the statement of changes in equity and the statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out below.
In our opinion, the accompanying financial statements are properly drawn up in accordance with the provisions of the International Financial Reporting Standards ('IFRSs') as adopted by the European Union so as to give a true and fair view of the financial position of the Company as at 30 June 2017 and of the financial performance, and cash flows of the Company for the year ended on that date.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing ('ISAs'). Our responsibilities under those standards are further described in the 'Auditors' responsibilities for the audit of the financial statements' section of our report. We are independent of the Company in accordance with the Accounting and Corporate Regulatory Authority Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities ('ACRA Code') together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
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Valuation of investments in securities at fair value amounting to USD 208,273,147 |
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The key audit matter |
How the matter was addressed in our audit |
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As of 30 June 2017, the Company's investments in securities are all measured at fair value and comprise a convertible bond (USD 1,179,177), an unlisted equity security (USD 3,864,056) and listed equity securities (USD 203,229,914). The investments measured at fair value were based on the following valuation approaches: • The convertible bond consists of a fixed-income bond with an option to convert the bond into shares of the issuer. Each component of the instrument was valued separately using applicable valuation techniques; • The unlisted equity security was valued based on the market approach; and • The listed equities were valued based on the last traded prices. We considered the valuation of the convertible bond and unlisted equity security as a key audit focus area as their valuation involves a degree of estimation uncertainty and judgment.
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Our approach to audit the valuation of the convertible bond and unlisted equity security investment included the following: · Assessed the appropriateness of the valuation methodologies adopted; · Reviewed the reasonableness of inputs applied including a sensitivity analysis for unobservable inputs; and · Verified the mathematical accuracy of the calculation of the investments. Additional procedures were performed for each investment selected based on the applicable valuation methodology, as follows: · Convertible bond We performed a cross-check of the valuation by independently deriving the value of each component using the discounted cash flow model and a Black-Scholes model. · Unlisted equity security The unlisted equity security was valued using broker quotes sourced from external brokers. We evaluated the competency, capability, and objectivity of the external brokers. We obtained confirmations from the brokers for the prices which they provided to the Company. We noted that the valuation estimates are within a reasonable range of outcomes. |
Other information
Vietnam Holding Asset Management Limited, the Investment Manager of the Company, and the directors of the Company ("the directors") are responsible for the other information contained in the annual report. The other information is defined as all information in the annual report other than the financial statements and our auditors' report thereon.
We have obtained all other information prior to the date of this auditors' report.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial statements
The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the IFRSs, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair financial statements and to maintain accountability of assets.
In preparing the financial statements, the directors are responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The directors' responsibilities include overseeing the Company's financial reporting process.
Auditors' responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
· Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.
· Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal controls.
· Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the directors.
· Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors' report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors' report. However, future events or conditions may cause the Company to cease to continue as a going concern.
· Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal controls that we identify during our audit.
We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors' report unless the law or regulations preclude public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditors' report is David Waller.
KPMG LLP
Public Accountants and
Chartered Accountants
Singapore
18 August 2017
VietNam Holding Limited
Statement of financial position as at 30 June 2017
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Note |
2017 |
2016 |
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USD |
USD |
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Assets |
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Cash and cash equivalents |
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10,323,903 |
5,281,215 |
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Investments in securities at fair value |
3 |
208,273,147 |
143,391,112 |
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Accrued dividends |
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155,582 |
832,445 |
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Receivables on sale of investments |
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- |
3,055,954 |
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Other receivables |
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13,318 |
24,840 |
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Total assets |
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218,765,950 |
152,585,566 |
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Equity |
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Share capital |
5 |
141,822,097 |
105,477,448 |
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Retained earnings |
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68,713,405 |
41,398,421 |
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Total equity, representing net assets attributable to shareholders |
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210,535,502 |
146,875,869 |
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Liabilities |
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Payables on purchase of investments |
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4,981,932 |
1,124,964 |
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Other payables |
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139 |
137 |
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Accrued expenses |
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3,248,377 |
4,584,596 |
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Total liabilities |
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8,230,448 |
5,709,697 |
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Total equity and liabilities |
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218,765,950 |
152,585,566 |
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|
|
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The financial statements were approved by the Board of Directors on 18 August 2017 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
VietNam Holding Limited
Statement of comprehensive income for the year ended 30 June 2017
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Note |
2017 |
2016 |
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|
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USD |
USD |
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|
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|
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Dividend income from equity securities at fair value through profit or loss |
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4,561,766 |
4,247,751 |
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Net gain from investments in securities at fair value through profit or loss |
7 |
30,275,746 |
35,428,336 |
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Net foreign exchange loss |
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(119,173) |
(44,734) |
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Interest income from investments in securities |
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90,314 |
76,657 |
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Net investment income |
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34,808,653 |
39,708,010 |
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Investment management fees |
8 |
2,880,552 |
2,460,388 |
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Incentive fees |
8 |
3,132,919 |
4,542,553 |
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Advisory fees |
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107,815 |
143,345 |
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Administrative and accounting fees |
10 |
111,404 |
95,073 |
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Custodian fees |
9 |
172,607 |
122,024 |
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Directors' fees and expenses |
8 |
349,872 |
376,336 |
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Brokerage fees |
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58,455 |
67,734 |
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Audit fees |
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41,904 |
40,580 |
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Publicity and investor relations fees |
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154,520 |
103,772 |
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Insurance costs |
|
15,000 |
15,500 |
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Administrative expenses |
|
224,164 |
206,643 |
|
Risk management expenses |
|
216,062 |
45,884 |
|
Technical assistance for investee companies |
|
28,395 |
74,228 |
|
Total operating expenses |
|
7,493,669 |
8,294,060 |
|
|
|
|
|
|
Change in net assets attributable to shareholders |
|
27,314,984 |
31,413,950 |
|
|
|
|
|
|
Basic and diluted earnings per share |
14 |
0.49 |
0.55/0.53 |
VietNam Holding Limited
Statement of changes in equity for the year ended 30 June 2017
|
|
|
|
|
|
|
|
|
|
Share |
Reserve for |
Retained |
|
|
|
|
capital |
own shares |
earnings |
Total |
|
|
|
USD |
USD |
USD |
USD |
|
|
|
|
|
|
|
|
Balance at 1 July 2015 |
|
125,788,264 |
(11,413,200) |
9,984,471 |
124,359,535 |
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
|
|
|
|
|
|
Change in net assets attributable to shareholders |
|
- |
- |
31,413,950 |
31,413,950 |
|
Total comprehensive income |
|
- |
- |
31,413,950 |
31,413,950 |
|
|
|
|
|
|
|
|
Contributions and distributions |
|
|
|
|
|
|
Issuance of ordinary shares |
|
129,871 |
- |
- |
129,871 |
|
Repurchase of own shares (note 5) |
|
- |
(8,630,599) |
- |
(8,630,599) |
|
Warrants issuance cost |
|
(396,888) |
- |
- |
(396,888) |
|
Total contributions and distributions |
|
(267,017) |
(8,630,599) |
- |
(8,897,616) |
|
|
|
|
|
|
|
|
Balance at 30 June 2016 |
|
125,521,247 |
(20,043,799) |
41,398,421 |
146,875,869 |
|
|
|
|
|
|
|
|
Balance at 1 July 2016 |
|
125,521,247 |
(20,043,799) |
41,398,421 |
146,875,869 |
|
|
|
|
|
|
|
|
Total comprehensive income for the year |
|
|
|
|
|
|
Change in net assets attributable to shareholders |
|
- |
- |
27,314,984 |
27,314,984 |
|
Total comprehensive income |
|
- |
- |
27,314,984 |
27,314,984 |
|
|
|
|
|
|
|
|
Contributions and distributions |
|
|
|
|
|
|
Issuance of ordinary shares |
|
41,030,628 |
- |
- |
41,030,628 |
|
Repurchase of own shares (note 5) |
|
- |
(4,685,979) |
- |
(4,685,979) |
|
Total contributions and distributions |
|
41,030,628 |
(4,685,979) |
- |
36,344,649 |
|
|
|
|
|
|
|
|
Balance at 30 June 2017 |
|
166,551,875 |
(24,729,778) |
68,713,405 |
210,535,502 |
VietNam Holdings Limited
Statement of cash flows for the year ended 30 June 2017
|
|
Note |
2017 |
2016 |
|
|
|
USD |
USD |
|
Cash flows from operating activities |
|
|
|
|
Change in net assets attributable to shareholders |
|
27,314,984 |
31,413,950 |
|
Adjustments to reconcile change in net assets attributable to shareholders to net cash from operating activities: |
|
|
|
|
Dividend income |
|
(4,561,766) |
(4,247,751) |
|
Interest income |
|
(90,314) |
(76,657) |
|
Net gain from investments in securities at fair value through profit or loss |
|
(30,275,746) |
(35,428,336) |
|
Purchase of investments |
|
(87,232,623) |
(47,964,534) |
|
Proceeds from sale of investments |
|
56,483,302 |
60,925,949 |
|
Net foreign exchange loss |
|
119,173 |
44,734 |
|
(Increase)/decrease in receivables on sale of investments |
|
3,055,910 |
(2,435,831) |
|
Increase/(decrease) in accrued expenses |
|
26,546 |
4,006,184 |
|
(Decrease)/increase in other payables |
|
2 |
(7) |
|
Dividends received |
|
5,238,629 |
3,915,525 |
|
Interest received |
|
101,846 |
53,973 |
|
Net cash from operating activities |
|
(29,820,057) |
10,207,199 |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Issuance of ordinary shares * |
|
39,667,862 |
- |
|
Repurchase of own shares |
5 |
(4,685,979) |
(8,630,599) |
|
Warrants issuance cost |
|
- |
(396,888) |
|
Net cash used in financing activities |
|
34,981,883 |
(9,027,487) |
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
5,161,826 |
1,179,712 |
|
Cash and cash equivalents at beginning of the year |
|
5,281,215 |
4,146,270 |
|
Effect of exchange rate fluctuations on cash held |
|
(119,138) |
(44,767) |
|
Cash and cash equivalents at end of the year |
|
10,323,903 |
5,281,215 |
* On 18 August 2016, the Company announced that in partial payment of the incentive fee due to VietNam Holding Asset Management Limited ("VNHAM"), the Company's Investment Manager, for the year ended 30 June 2016, it had agreed that 631,684 ordinary shares of US$1.00 each in the Company ("Ordinary Shares") then held as treasury shares would be transferred to VNHAM (the "Transfer"). The Transfer took place in early September 2016.
VietNam Holding Limited
Notes to the financial statements
Year ended 30 June 2017
1 THE COMPANY
VietNam Holding Limited ("VNH" or "the Company") is a closed-end investment holding company incorporated on 20 April 2006 as an exempt company under the Companies Law in the Cayman Islands and commenced its operations on 15 June 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.
At the Extraordinary General Meeting in April 2015 the shareholders voted in favour of the continuance resolution, authorising the Company to operate in its current form through to the 2018 Annual General Meeting when a similar resolution will be put forward for shareholders' approval.
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.
Standard Chartered Bank, Singapore Branch and Standard Chartered Bank (Vietnam) Limited are the custodian and the sub-custodian respectively. Standard Chartered Bank, Singapore Branch is also the administrator.
The registered office of the Company is Collas Crill Corporate Services Limited, Floor 2, Willow House, Cricket Square, PO Box 709, George Town, Grand Cayman, Cayman Islands, KY1-1107.
2 PRINCIPAL ACCOUNTING POLICIES
(a) Statement of compliance
These financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRSs) as adopted by the European Union.
(b) Basis of preparation
The financial statements are presented in United States dollars ("USD"), which is the Company's functional currency. They are prepared on a fair value basis for financial assets and financial liabilities at fair value through profit or loss. Other assets and liabilities are stated at amortised cost.
The Company's shares were issued in USD and the listing of the shares on the AIM market of the London Stock Exchange is in USD. 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 considers the USD as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions.
The preparation of financial statements in accordance with IFRS as adopted by the European Union 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.
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company's other components. The Company is engaged in a single segment of business, being investment in Vietnam. The Board, as a whole, has been determined as constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to assess the Company's performance and to allocate resources is the total return on the Company's net asset value ("NAV") calculated as per the prospectus.
The accounting policies set out below have been applied consistently to all periods presented in these 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 statement of comprehensive income. Foreign currency exchange differences relating to financial instruments at fair value through profit or loss 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 statement of comprehensive income.
(d) Financial instruments
(i) Classification
The Company classifies all its investments as financial assets at fair value through profit or loss category. Financial instruments are classified 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 securities and unlisted securities.
Financial assets that are classified as loans and receivables include accrued dividends.
Cash and cash equivalents are measured at amortised cost.
Financial liabilities that are not at fair value through profit or loss include accrued expenses.
(ii) Recognition
Financial assets and liabilities at fair value through profit or loss are recognised initially on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument. Other financial assets and liabilities are recognised on the date 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. Financial assets or financial liabilities not at fair value through profit or loss are recognised initially at fair value plus transaction costs that are directly attributable to their acquisition or issue.
(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.
Financial assets that are sold are derecognised, and the 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.
(iv) 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. The fair value of a liability reflects its non-performance risk.
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 asset 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 last traded price.
If there is no quoted price in an active market, then the Company uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.
The Company recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred.
As at 30 June 2017, the Company used quotes obtained from brokers to determine the fair value of an unlisted equity security with a carrying value of USD 3,864,056 which was 1.84% (2016: nil%) of the net assets of the Company, while the Company used valuation techniques to value a convertible bond with a carrying value of USD 1,179,177 which was 0.56% (2016: 1.3%) of the net assets of the Company.
Any increases or decreases in values are recognised in the statement of comprehensive income 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 statement of comprehensive income.
(vi) Impairment
Financial assets that are stated at cost or amortised cost are reviewed at each reporting date to determine whether there is objective evidence of impairment. If any such indication exists, an impairment loss is recognised in the statement of comprehensive income 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 impairment is reversed through the statement of comprehensive income.
(vii) 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.
(e) Offsetting
Financial assets and liabilities are offset and the net amount is reported in the statement of financial position when, and only 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.
(f) 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 reporting period.
(g) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.
Repurchase, disposal and reissue of share capital (treasury 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. Repurchased shares are classified as treasury shares and are presented in the reserve for own share account. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is presented in non-distributable capital reserve.
(h) Tax
Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The measurement of deferred taxes reflects the tax consequences that would follow the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Company to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.
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 2 May 2006.
The Company is liable to Vietnamese tax of 0.1% (2016: 0.1%) on the sales proceeds of the onshore sale of equity investments.
(i) Interest income and expense
Interest income and expense is recognised in the statement of comprehensive income using the effective rate method.
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.
(j) Dividend income
Dividend income is recognised in profit or loss on the date on which the right to receive payment is established. For listed equity securities, this is usually the ex-dividend date. For unlisted equity securities, this is usually the date on which the shareholders approve the payment of a dividend. Dividend income from equity securities designated as at fair value through profit or loss is recognised in profit or loss as a separate line item.
(k) Fee and commission expense
Fees and commission expenses are recognised in profit or loss as the related services are performed.
(l) Earnings per share
The Company presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all potentially dilutive ordinary shares, which comprise warrants granted to shareholders.
3 FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
Financial assets of the Company include investments in securities at fair value, cash and cash equivalents and accrued dividends. Financial liabilities comprise payables on purchase of investments and accrued expenses. 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, interest rate 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 exposed to market risk within its securities purchased in the Vietnamese market.
The overall market positions are monitored continuously by the Investment Manager and at least quarterly by the Board.
The Company's investments in securities are exposed to market risk and are disclosed by the following generic investment types:
|
|
2017 |
2016 |
||
|
|
Fair value in USD |
% of net assets |
Fair value in USD |
% of net assets |
|
|
|
|
|
|
|
Investments in listed securities |
203,229,914 |
96.53 |
141,479,379 |
96.3 |
|
Investments in an unlisted equity security |
3,864,056 |
1.84 |
- |
- |
|
Investments in a convertible bond |
1,179,177 |
0.56 |
1,911,733 |
1.3 |
|
|
208,273,147 |
98.93 |
143,391,112 |
97.6 |
|
|
|
|
|
|
At 30 June 2017, a 5% reduction in the market value of the portfolio would have led to a reduction in NAV and profit or loss of USD10,413,657 (2016: USD7,169,556 ). A 5% increase in market value would have led to an equal and opposite effect on NAV and profit or loss.
Currency risk
The Company may invest in financial instruments and enter into transactions denominated in currencies other than its functional currency. 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 Board at least once each 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 30 June 2017, the Company had the following foreign currency exposures:
|
|
|
Fair value |
|
|
|
|
2017 |
2016 |
|
|
|
USD |
USD |
|
|
|
|
|
|
Vietnamese Dong |
|
208,636,021 |
149,607,240 |
|
Pound Sterling |
|
727 |
748 |
|
Swiss Franc |
|
(19) |
- |
|
Euro |
|
2,353 |
2,319 |
|
|
|
208,639,082 |
149,610,307 |
At 30 June 2017, a 5% reduction in the value of the Vietnamese Dong, Pound Sterling, Swiss Franc, Euro versus the US Dollar would have led to a reduction in NAV and profit or loss of USD10,431,801 (2016: USD7,480,362), USD36 (2016: USD37), USD(1) (2016: USDnil) and USD118 (2016: USD116) respectively. A 5% increase in value would have led to an equal and opposite effect.
Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
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 interest rate risk due to fluctuations in the prevailing levels of market interest rates.
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 30 June 2017, the following financial assets were exposed to credit risk (including settlement risk): cash and cash equivalents, investments in an unlisted equity security, Investments in a convertible bond accrued dividends, receivables on sale of investments and other receivables. The total amount of financial assets exposed to credit risk amounted to USD11,671,980 (2016: USD11,106,187).
Substantially all of the assets of the Company are held by the Company's custodian, Standard Chartered Bank, Singapore Branch. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to cash and securities held by the custodian to be delayed or limited. The Company monitors its risk by monitoring the credit quality and financial positions of the custodian the Company uses.
Liquidity risk
The Company, a closed-end investment company, invests in companies through listings on the Vietnam stock exchanges. There is no guarantee however that the Vietnam stock exchanges will provide liquidity for the Company's investments. The Company also invests in equity securities which are not listed on stock exchanges. 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. The Company is a closed-end investment company so shareholders cannot redeem their shares directly from the Company.
4 OPERATING SEGMENTS
Information on gains and losses derived from investments are disclosed in the statement of comprehensive income.
The Company is domiciled in the Cayman Islands. Entity wide disclosures are provided as the Company is engaged in a single segment of business, investing in Vietnam. In presenting information on the basis of geographical segments, segment investments and the corresponding segment net investment income arising thereon are determined based on the country of domicile of the respective investment entities.
All of the Company's investments in securities at fair value are in Vietnam as at 30 June 2017 and 30 June 2016. All of the Company's investment income can be attributed to Vietnam for the years ended 30 June 2017 and 30 June 2016.
5 SHARE CAPITAL
Ordinary shares of USD1 each
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 USD100,000,000 divided into 100,000,000 ordinary shares of USD1 each. On 23 September 2010, during its Annual General Meeting, the shareholders approved that the Company's authorised share capital be increased by USD100,000,000, divided into 200,000,000 shares of a nominal or par value of USD1.00 each. According to the Companies Law and articles of association, the Company may from time to time redeem all or any portion of the shares held by the shareholders upon giving notice of not less than 30 calendar days to the shareholders.
On 6 June 2006, the Board resolved that 56,250,000 ordinary shares would be allotted at a placing price of USD2 per ordinary share.
On 23 September 2010, during its annual general meeting, the shareholder approved a Share Repurchase Programme. The approvals were renewed at the Company's annual general meetings in 2011, 2012, 2013, 2014, 2015 and 2016.
|
|
2017 |
2016 |
|
|
No. of shares |
No. of shares |
|
|
|
|
|
Total shares issued and fully paid (after repurchases and cancellations) at beginning of the year |
65,342,620 |
67,235,739 |
|
Shares issued upon exercise of warrants during the year |
19,941,819 |
35,927 |
|
Shares cancellation |
(2,555,000) |
(1,929,046) |
|
|
82,729,439 |
65,342,620 |
|
|
|
|
|
Repurchased and reserved for own shares |
|
|
|
At beginning of the year |
(10,487,673) |
(7,819,500) |
|
During the year |
(2,126,783) |
(4,629,554) |
|
Shares reissued to ordinary shares |
631,684 |
32,335 |
|
Shares cancellation |
2,555,000 |
1,929,046 |
|
|
(9,427,772) |
(10,487,673) |
|
|
|
|
|
Total outstanding ordinary shares with voting rights |
73,301,667 |
54,854,947 |
As a result, as at 30 June 2017 the Company had 73,301,667 (2016: 54,854,947) ordinary shares with voting rights in issue (excluding those held in treasury), and 9,427,772 (2016: 10,487,673) were held in treasury.
The Company does not have any externally imposed capital requirements.
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 at its discretion, either use the proceeds of sales of investments to meet the Company's expenses or distribute them to shareholders. Alternatively, the Board of Directors may redeem ordinary shares with such proceeds for shareholders pro rata to their shareholding upon giving notice of not less than 30 calendar days to shareholders (subject always to applicable law) or repurchase ordinary shares at a price not exceeding the last published net asset value per share.
Warrants
On 19 May 2015, the Company issued a Prospectus for a bonus issue of warrants to shareholders pro rata, on the basis of one warrant for every three ordinary shares held. The exercise dates of these warrants will be on 1 June 2016, 1 December 2016 and 1 June 2017 with the exercise price of USD1.998. A total of 19,977,746 warrants were issued and admitted to trading on the AIM Market. As at 30 June 2017, nil (2016: 19,941,819) warrants are outstanding. During the year, there was an exercise of 19,941,819 (2016: 35,927) warrants to subscribe for 19,941,819 (2016: 35,927) ordinary shares at a price of USD1.998 per ordinary share.
The proceeds that arose on the warrant exercise for the year were USD39,843,754 (2016: USD71,782). The net proceeds arising on the exercise of the warrants will be invested in accordance with the Company's investment policy.
6 NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS
Total equity of USD210,535,502 (2016: USD146,875,869) represents net assets attributable to shareholders. There is no difference between net assets attributed to shareholders calculated as per the prospectus and in accordance with the Company's policy (2016: none).
7 NET GAIN FROM INVESTMENTS IN SECURITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
|
|
|
2017 |
2016 |
|
|
|
USD |
USD |
|
|
|
|
|
|
Net gain from investments in securities at fair value through profit or loss: |
|
|
|
|
Realised gain |
|
14,944,033 |
2,625,360 |
|
Adjustment to fair value of investments in securities at |
|
15,331,713 |
32,802,976 |
|
|
|
30,275,746 |
35,428,336 |
8 RELATED PARTY TRANSACTIONS
Investment management fees
The Company's Shareholders approved an amendment to the Investment Manager Agreement as detailed in the Company's circular dated 16 August 2013. Pursuant to the amended agreement the Investment Manager is entitled to receive a monthly management fee, paid in the manner set out as below:
- On the amount of the Net Asset Value of the Company up to and including USD100 million, one-twelfth of two per cent.;
- On the amount of the Net Asset Value of the Company above USD100 million up to and including USD150 million, one-twelfth of 1.75 per cent.; and
- On the amount of the Net Asset Value of the Company that exceeds USD150 million, one-twelfth of 1.50 per cent.
The management fee accruing to the Investment Manager for the year to 30 June 2017 was USD2,880,552 (2016: USD2,460,388).
Incentive fees
The Company will pay the Investment Manager an incentive fee equal to 15 per cent of the Excess Performance amount each year, subject to certain criteria being met. The fee is calculated and payable as set out in the Investment Management Agreement Side Letter dated 11 September 2013. Excess performance amount is calculated as follows:
Excess Performance amount = (A -B) x C
Where:
A is the closing NAV per share as at the end of the reporting period.
B is equal to the higher of:
(i) the Initial High Water Mark increased by five per cent per annum on a compound basis; and
(ii) the highest previous value for A in respect of a reporting period in which an incentive fee was paid, increased by five per cent per annum on an compound basis.
C is equal to the time weighted average number of shares in issue as at the end of the reporting period.
|
|
|
2017 |
2016 |
|
|
|
USD |
USD |
|
|
|
|
|
|
Performance fee |
|
3,132,919 |
4,542,553 |
|
|
|
|
|
Directors' fees and expenses
The Board determines the fees payable to each Director, subject to a maximum aggregate amount of USD350,000 (2016: USD350,000) per annum being paid to the Board as a whole. The Company also pays reasonable expenses incurred by the Directors in the conduct of the Company's business including travel and other expenses. The Company pays for directors and officers liability insurance coverage.
The charges for the year for the Directors fees were USD257,000 (2016: USD261,000) and expenses were USD92,872 (2016: USD115,336).
Directors' ownership of shares and warrants
As at 30 June 2017, three Directors, Min-Hwa Hu Kupfer, Nguyen Quoc Khanh and Rolf Dubs held 36,667 (2016: 36,667), 33,253 (2016: 13,468) and 61,451 (2016: 35,152) ordinary shares of the Company respectively, representing 0.05% (2016: 0.06%), 0.04% (2016: 0.02%) and 0.08% (2016: 0.06%) of the total shares outstanding.
During the year, Min-Hwa Hu Kupfer, Nguyen Quoc Khanh and Rolf Dubs exercised nil (2016: nil), 3,333 (2016: nil) and 10,000 (2016: nil) warrants to subscribe ordinary shares, amounting to 13,333 (2016: nil) and 0.067% (2016: 0.00%) of the total warrants issued respectively.
9 CUSTODIAN FEES
Custodian fees are charged at a minimum of USD12,000 (2016: USD12,000) per annum and received as a fee at 0.08% on the assets under administration ("AUA") per annum. Custodian fees comprise safekeeping fees, transaction fees, money transfer fees and other fees. Safekeeping of unlisted securities up to 20 securities is charged at USD12,000 per annum. Transaction fees, money transfers fees and other fees are charged on a transaction basis.
The charges for the year for the Custodian fees were USD172,607 (2016: USD122,024).
10 ADMINISTRATIVE AND ACCOUNTING FEES
The administrator receives a fee of 0.07% per annum for AUA less than USD100,000,000; or 0.06% per annum for AUA greater than USD100,000,000 calculated on the basis of the net assets of the Company, subject to an annual minimum amount of USD5,500 per month.
The charges for the year for the Administration and Accounting fees were USD111,404 (2016: USD95,073).
11 CONTROLLING PARTY
The Directors are not aware of any ultimate controlling party as at 30 June 2017 or 30 June 2016.
12 FAIR VALUE INFORMATION
For certain of the Company's financial instruments not carried at fair value, such as cash and cash equivalents, accrued dividends, other receivables, receivables/payable upon sales/purchase of investments and accrued expenses, 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 comprehensive income.
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.
· Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments. This level includes listed equity securities on exchanges (for example, Ho Chi Minh Stock Exchange).
· 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 level includes instruments valued using: quoted prices for identical or similar instruments in markets that are considered less than active; quoted market prices in active markets for similar instruments; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.
· Level 3: Inputs that are not based on observable market data (i.e. unobservable inputs). This level 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.
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.
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
USD |
USD |
USD |
USD |
|
|
|
|
|
|
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
Financial assets classified at fair value upon initial recognition |
|
|
|
|
|
Investments in securities |
182,827,649 |
24,266,321 |
1,179,177 |
208,273,147 |
|
|
|
|
|
|
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
Financial assets classified at fair value upon initial recognition |
|
|
|
|
|
Investments in securities |
126,523,082 |
14,956,297 |
1,911,733 |
143,391,112 |
|
|
|
|
|
|
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assessing whether an input is significant requires judgement including consideration of factors specific to the asset or liability. Moreover, if a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that fair value measurement is a Level 3 measurement.
Valuation techniques used in measuring Level 3 fair values, as well as the significant unobservable inputs used:
|
Investment type |
Valuation technique |
Significant unobservable inputs |
Inter-relationship between key unobservable inputs and fair value measurement |
|
|
|
|
|
|
Convertible bond |
• Discounted cash flows (in valuing the straight bond); and • Black-Scholes model (in valuing the conversion feature) |
• Risk-adjusted discount rate (2017: 8.50%; 2016: 9.5%); • Dividend yield (2017: 4.32%; 2016: 5.91%) |
The estimated fair value will increase (decrease) if: • the risk-adjusted discount rate was lower (higher); • the dividend yield was lower (higher)
|
Although the Company believes that its estimates of fair value are appropriate, the use of different assumptions could lead to different measurements of fair value. The directors consider that any reasonably possible changes to the unobservable input will not result in a significant financial impact.
Level 3 reconciliation
|
|
|
Financial assets at fair value through profit or loss |
|
|
|
|
2017 |
2016 |
|
|
|
USD |
USD |
|
|
|
|
|
|
Balance at 1 July |
|
1,911,733 |
- |
|
Purchases |
|
- |
1,790,510 |
|
Sales |
|
(894,897) |
- |
|
Total gains and losses recognised in profit or loss * |
|
162,341 |
121,223 |
|
Balance at 30 June |
|
1,179,177 |
1,911,733 |
* Total gains or losses recognised in profit or loss for assets and liabilities held at the end of the reporting period, as included in the statement of comprehensive income.
13 CLASSIFICATIONS OF FINANCIAL ASSETS AND LIABILITIES
The table below provides a breakdown of the line items in the Company's statement of financial position to the categories of financial instruments.
|
|
Note |
Fair value through profit or loss |
Loans and receivables |
Other liabilities |
Total carrying amount |
|
|
|
USD |
USD |
USD |
USD |
|
2017 |
|
|
|
|
|
|
Cash and cash equivalents |
|
- |
10,323,903 |
- |
10,323,903 |
|
Investments in securities at fair value |
3 |
208,273,147 |
- |
- |
208,273,147 |
|
Accrued dividends |
|
- |
155,582 |
- |
155,582 |
|
Receivables on sale of investments |
|
- |
- |
- |
- |
|
Other receivables |
|
- |
13,318 |
- |
13,318 |
|
|
|
208,273,147 |
10,492,803 |
- |
218,765,950 |
|
|
|
|
|
|
|
|
Payables on purchase of investments |
|
- |
- |
4,981,932 |
4,981,932 |
|
Other payables |
|
- |
- |
139 |
139 |
|
Accrued expenses |
|
- |
- |
3,248,377 |
3,248,377 |
|
|
|
- |
- |
8,230,448 |
8,230,448 |
|
|
Note |
Fair value through profit or loss |
Loans and receivables |
Other liabilities |
Total carrying amount |
|
|
|
USD |
USD |
USD |
USD |
|
2016 |
|
|
|
|
|
|
Cash and cash equivalents |
|
- |
5,281,215 |
- |
5,281,215 |
|
Investments in securities at fair value |
3 |
143,391,112 |
- |
- |
143,391,112 |
|
Accrued dividends |
|
- |
832,445 |
- |
832,445 |
|
Receivables on sale of investments |
|
- |
3,055,954 |
- |
3,055,954 |
|
Other receivables |
|
- |
24,840 |
- |
24,840 |
|
|
|
143,391,112 |
9,194,454 |
- |
152,585,566 |
|
|
|
|
|
|
|
|
Payables on purchase of investments |
|
- |
- |
1,124,964 |
1,124,964 |
|
Other payables |
|
- |
- |
137 |
137 |
|
Accrued expenses |
|
- |
- |
4,584,596 |
4,584,596 |
|
|
|
- |
- |
5,709,697 |
5,709,697 |
14 EARNINGS PER SHARE
The calculation of basic and diluted earnings per share at 30 June 2017 was based on the change in net assets attributable to ordinary shareholders of USD27,314,984 (2016: USD31,413,950) and the weighted average number of shares outstanding of 55,760,831 (2016: 57,315,656). The warrants of the Company had been fully exercised as of 30 June 2017.
15 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED
A number of new standards and amendments to standards are effective for annual periods beginning after 1 July 2016 and earlier application is permitted; however, the Company has not early applied these new or amended standards in preparing these financial statements. The one new standard potentially relevant to the Company is IFRS 9 Financial Instruments ("IFRS9"), which is discussed below.
IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments:Recognition and Measurement ("IAS 39"). IFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39.
IFRS 9 is effective for the Company's annual reporting periods beginning on or after 1 July 2017, with early adoption permitted.
Classification of financial assets and financial liabilities
IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). IFRS 9 classification is generally based on the business model in which a financial asset is managed and its contractual cash flows. The standard eliminates the existing IAS 39 categories of held-to-maturity, loans and receivables and available-for-sale. Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated. Instead, the whole hybrid instrument is assessed for classification.
IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities. However, although under IAS 39 all fair value changes of liabilities designated under the fair value option are recognised in profit or loss, under IFRS 9 fair value changes are generally presented as follows:
· the amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in OCI; and
· the remaining amount of change in the fair value is presented in profit or loss.
Based on the Company's initial assessment, this standard is not expected to have a material impact on the classification of financial assets and financial liabilities of the Company. This is because:
· the financial instruments classified as held-for-trading under IAS 39 will continue to be classified as such under IFRS 9;
· other financial instruments currently measured at FVTPL under IAS 39 are designated into this category because they are managed on a fair value basis in accordance with a documented investment strategy. Accordingly, these financial instruments will be mandatorily measured at FVTPL under IFRS 9; and
· financial instruments currently measured at amortised cost are: cash and cash equivalents, accrued dividends, and other receivables. These instruments meet the solely principal and interest criterion and are held in a held-to-collect business model. Accordingly, they will continue to be measured at amortised cost under IFRS 9.
Impairment of financial assets
IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' model. The new impairment model also applies to certain loan commitments and financial guarantee contracts but not to equity investments. Under IFRS 9, credit losses are recognised earlier than under IAS 39. Based on the Company's initial assessment, changes to the impairment model are not expected to have a material impact on the financial assets of the Company. This is because:
· the majority of the financial assets are measured at FVTPL and the impairment requirements do not apply to such instruments; and
· the financial assets at amortised cost are short-term (i.e. no longer than 12 months), of high credit quality and/or highly collateralised. Accordingly, the expected credit losses on such assets are expected to be small.
16 SUBSEQUENT EVENTS
· At the AGM held on 15 September 2016, the Company's shareholders approved a resolution authorizing the Directors to continue the process of re-domiciling the Company in Luxembourg. It is anticipated that the Company will be registered in Luxembourg as a UCI Part II Investment Fund. The submission of the Prospectus and related documentation to the Commission de Surveillance du Secteur Financier (CSSF), the Luxembourg financial supervisory authority, is pending finalisation of certain legal documents. The Directors expect that the application will be submitted to the CSSF during the third quarter of 2017.
· The directors of the Company approved on 17 August 2017 a proposal made by the Investment Manager to defer one-third, equivalent to USD 1,044,306 (the "Deferred Portion"), of the incentive fee payable as described in Note 8 "Related Party Transactions - Incentive Fee" (FS28). The Deferred Portion shall be deferred for a period of up to 5 years from 30 June 2017 (the "Deferral Period") and shall be paid when (i) the Investment Manager is entitled to receive incentive fees in relation to any financial year during the Deferral Period in accordance with the applicable terms of the Investment Management Agreement Side Letter dated 11 September 2013 and (ii) the investment performance which is calculated on a NAV per share basis exceeds the increase in VNAS Index for the relevant financial year by 5%. All other terms of the Investment Management Agreement Side Letter dated 11 September 2013 shall remain applicable and in force.
Key Parties
Directors
Min-Hwa Hu Kupfer
Professor Dr. Rolf Dubs
Nguyen Quoc Khanh
Investment Manager
VietNam Holding Asset Management Limited
Collas Crill Corporate Services Limited
Floor 2, Willow House
Cricket Square
PO Box 709
George Town, Grand Cayman
Cayman Islands, KY1-1107
Registered Office, Company Secretary and Cayman Islands Legal Advisor
Collas Crill Corporate Services Limited
Floor 2, Willow House
Cricket Square
PO Box 709
George Town, Grand Cayman
Cayman Islands, KY1-1107
Nominated Adviser (AIM)
Smith & Williamson Corporate Finance Limited
25 Moorgate
London EC2R 6AY
United Kingdom
Corporate Broker (AIM)
Winterflood Investment Trusts
The Atrium Building
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
United Kingdom
Administrator, Custodian and Trustee
Standard Chartered Bank
7 Changi Business Park Crescent
Level 3, Securities Services
Singapore 486028
Registrar
Computershare Investor Services (Cayman) Limited
One Capital Place
PO Box 897
George Town KY1-1103
Grand Cayman
Cayman Island
UK Legal Adviser
Dickson Minto W.S.
Broadgate Tower
20, Primrose Street
London EC2A 2EW
United Kingdom
Independent Auditor
KPMG LLP
16 Raffles Quay #22-00
Hong Leong Building
Singapore 048581
This information is provided by RNS
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