REG - VietNam Holding Ltd - Annual Report
02/10/2024 07:00
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RNS Number : 5561G VietNam Holding Limited 02 October 2024
VIETNAM HOLDING LIMITED
("VNH" or the "Company")
(a non-cellular company limited by shares registered in Guernsey under the
Companies (Guernsey) Law, 2008, on 25 February 2019 with registered number
66090)
The Board of VietNam Holding Limited is pleased to announce its 2024 Annual
Report and Financial Statements.
More information on the Company is available at www.vietnamholding.com (http://www.vietnamholding.com)
Investment Manager - Dynam Capital, Ltd.
Craig Martin Tel.: +84 28 3827 7590
Corporate Broker - Cavendish Capital Markets Limited
Trading: Johnny Hewitson Tel: +44 20 7220 0558
Sales: Pauline Tribe Tel: +44 20 3772 4697
Corporate Finance: James King Tel: +44 20 7220 0500
Company Secretary & Administrator - Sanne Group (Guernsey)
Limited:
Michael Mabaso-Mlilo Tel: +44 20 3530 3158
The information contained within the announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulation (UK MAR) (Assimilated Law). Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.
Contents
Strategic Report
Highlights 1
Summary Information 1
Chairman's Statement 4
Investment Manager's Report 6
Top Five Portfolio Companies 11
Sustainability Report 21
Principal Risks and Risk Management 27
Governance
Director Profiles and Disclosure of Directorships 30
Corporate Governance Report 31
Audit and Risk Committee Report 37
Directors' Remuneration Policy and Report 39
Directors' Report 40
Statement of Directors' Responsibilities 44
Financial Statements
Independent Auditor's Report 45
Statement of Financial Position 50
Statement of Comprehensive Income 51
Statement of Changes in Equity 52
Statement of Cash Flows 53
Notes to the Financial Statements 54
Alternative Performance Measures 67
Corporate Information 68
Highlights
Financial Highlights
30 June 2024 30 June 2023
Total Net Assets (USD) 140.2 million 115.3 million
Net Asset Value per share (USD) 5.137 4.157
Net Asset Value per share (GBP) 406.4p 329.0p
Share price 396.0p 277.5p
Discount to Net Asset Value 2.6% 15.7%
As at 27 September 2024 (the latest available date before approval of the
accounts), the discount to NAV had moved to 4.0%. The estimated NAV per share
and mid-market share price at 27 September 2024 was 406.45 p and 390.0 p
respectively.
Ongoing Charges
Ongoing charges for the year ended 30 June 2024 have been calculated in
accordance with the Association of Investment Companies (the "AIC")
recommended methodology. The ongoing charges for the year ended 30 June 2024
were 2.97% (3.07% as at 30 June 2023). Refer to page 67 for the definitions of
Alternative Performance Measures ("APMs") together with how they have been
calculated.
Summary Information
The Company
VietNam Holding Limited (the "Company", the "Fund" or "VNH") is a closed-end
investment company that was incorporated in the Cayman Islands on 20 April
2006 as an exempted company with limited liability under registration number
166182. On 25 February 2019, the Company, via a process of cross-border
continuance, transferred its legal domicile from the Cayman Islands to
Guernsey and was registered as a closed-ended company limited by shares
incorporated in Guernsey with registered number 66090. The Shares were
admitted to trading on AIM in June 2006 and admitted to the Main Market
(previously the Premium segment of the Official List) and admitted to trading
in the Main Market of the London Stock Exchange on 8 March 2019. The Company
also listed on the Official List of The International Stock Exchange on 8
March 2019. The Company has an unlimited life with a continuation vote in
2028.
Annual Redemption Facility
The Company has introduced an annual redemption facility that gives
shareholders an opportunity to realise their holding in the Company at fair
market value. The first Redemption Point was on 30 September 2024 and every
year thereafter. The redemption facility has no impact on the going concern of
the Company. Refer to further details in the Directors 'Report on pages 40 to
41 and in the Notes to the financial statements on pages 54 to 55.
Investment Objective
The Company's investment objective is to achieve long-term capital
appreciation by investing in a diversified portfolio of companies that have
high growth potential at an attractive valuation.
Investment Policy
The Company attempts to achieve its investment objective by investing in the
securities of publicly traded companies in Vietnam, and in the securities of
foreign companies if a majority of their assets and/or operations are based in
Vietnam. The Company may invest in equity securities or securities that have
equity features, such as bonds that are convertible into equity.
The Company may invest in listed or unlisted securities, either on the
Vietnamese stock exchanges, through purchases on the OTC Market, or through
privately negotiated deals.
The Company may invest its available cash in the Vietnamese domestic bond
market as well as in international bonds issued by Vietnamese entities.
The Company may utilise derivatives contracts for hedging purposes and for
efficient portfolio management but will not utilise derivatives for investment
purposes.
The Company does not intend to take control of any company or entity in which
it has directly or indirectly invested (the "Investee Company") or to take an
active management role in any such company. However, Dynam Capital, Ltd.
("Dynam Capital"), (the
"Investment Manager") may appoint one of its directors, employees or other
appointees to join the board of an Investee Company and/or may provide certain
forms of assistance to such company, subject to prior approval by the VNH
Board.
The Company integrates environmental, social and corporate governance ("ESG")
factors into its investment analysis and decision-making process. Through its
Investment Manager, the Company actively incorporates ESG considerations into
its ownership policies and practices and engages investee companies in pursuit
of appropriate disclosure and the improvement of material issues.
The Company may invest:
● up to 25% of its Net Asset Value ("NAV") (at the time of investment)
in companies with shares traded outside of Vietnam if a majority of their
assets and/or operations are based in Vietnam;
● up to 20% of its NAV (at the time of investment) in direct private
equity investments; and
● up to 20% of its NAV (at the time of investment) in other listed
investment funds and holding companies which have the majority of their assets
in Vietnam.
Borrowing Policy
The Company is permitted to borrow money and to grant security over its assets
provided that such borrowings do not exceed 25% of the latest available NAV of
the Company at the time of the borrowing unless the Shareholders in general
meeting otherwise determine by ordinary resolution.
Investment Restrictions and Diversification
The Company will adhere to the general principle of risk diversification in
respect of its investments and will observe the following investment
restrictions:
● the Company will not invest more than 10% of its NAV (at the time of
investment) in the shares of a single Investee Company;
● the Company will not invest more than 30% of its NAV (at the time
of investment) in any one sector;
● the Company will not invest directly in real estate or real estate
development projects, but may invest in companies which have a large real
estate component, if their shares are listed or are traded on the OTC Market;
and
● the Company will not invest in any closed-ended investment fund
unless the price of such investment fund is at a discount of at least 10% to
such investment fund's NAV (at the time of investment).
Furthermore, based on the guidelines established by the United Nations
Principles for Responsible Investment ("PRI"), of which the Company is a
signatory:
● the Company will not invest in companies known to be significantly
involved in the manufacturing or trading of distilled alcoholic beverages,
tobacco, armaments or in casino operations or other gambling businesses;
● the Company will not invest in companies known to be subject to
material violations of Vietnamese laws on labour and employment,
including child labour regulations or racial or gender discriminations; and
● the Company will not invest in companies that do not commit to
reducing in a measurable way pollution and environmental
problems caused by their business activities.
Any material change to the investment policy will only be made with the
approval of Shareholders by ordinary resolution.
Shareholder Information
Sanne Group (Guernsey) Limited (the "Administrator") is responsible for
calculating the NAV per share and delegates this function under a legal
contractual arrangement to Standard Chartered Bank (Singapore) Limited (the
"Sub-Administrator"), previously Standard Chartered Bank, Singapore Branch
until its transference under the Banking Act on 13 May 2019. The estimated NAV
per ordinary share is calculated as at the close of business each business day
by the Investment Manager and published at close of business in Vietnam the
same day. The monthly NAV is calculated by the Sub-Administrator on the last
business day of every month and announced by a Regulatory News Service within
10 business days.
Chairman's Statement
Dear Shareholder,
I am pleased to present the Annual Report for VietNam Holding Limited for the
twelve-month period ending 30 June 2024.
This year has been another watershed moment for VietNam Holding Limited: the
Fund has outperformed the market, the discount to net asset value ("NAV") has
fallen to less than 5% and the Company's shares have been included in the FTSE
All Share and FTSE Small Company indices.
The Fund's NAV per share rose 23.6% for the full year to 30 June 2024,
outdoing the Vietnam All Share Index ("VNAS") which increased by 9.5%. The
Fund has outperformed the VNAS for one, three, five, ten and 15 years. Dynam
Capital, the Investment Manager, has delivered an average annualised Alpha of
600 basis points. The Fund has also performed better than its peers by a
notable margin. It's no surprise that Citywire named the Fund 'the best
emerging market single-country fund' in November 2023 and awarded the
Investment Manager's team a coveted triple-A performance in May 2024.
We are happy to report that an overwhelming majority (99%) of shareholders
voted to extend the Fund for a further five years at the Extraordinary General
Meeting ("EGM") in December 2023 and to adopt the innovative Annual Redemption
feature. Perhaps due to shareholders' confidence in the Board's focus on
discount management, the discount narrowed swiftly to below 5% after the
announcement of the Annual Redemption facility, falling as low as 2%. As a
result, the Board has not had to consider any share buybacks between December
2023 and June 2024. The Fund's discount is significantly narrower than those
of the other two UK-listed Vietnam funds.
The combination of market-beating NAV performance and a reduced discount have
boosted the share price, which increased by 43% this fiscal year. This
market-leading performance has come without compromising our commitment to
responsible investing. During the year, the Fund and the Investment Manager
supported the second environmental, social and governance ("ESG") Investor
Conference in Vietnam. The Investment Manager continues to drive engagement
with portfolio companies on the challenges and potential for improving
governance, climate reporting and climate transition planning. Please refer to
the Sustainability Report for more details on this strategy and the
initiatives undertaken.
Last December, Damien Pierron and Sean Hurst stepped down from the Board after
a long period of dedicated service, and I would like to reiterate my gratitude
for their service to the Fund. I am delighted to welcome Ms Connie Hoang Mi Vu
to the board. Ms Vu joined in March 2024, bringing her extensive experience as
an ESG champion. Ms Vu has taken over as Chair of the ESG Committee, and I am
particularly glad to report that 50% of the board is now female, providing
further diversity to our Board deliberations.
The Board visited Vietnam in early 2024 and will be returning in November. We
are confident the country has a bright future ahead. Despite global headwinds
and local incidents, it has performed very well. These challenges include
weaknesses in the real-estate sector caused primarily by disruptions in the
bond market and project permitting delays, rather than weak end-demand (which
remains strong) and concerns about the balance sheet strength of one or two
large local corporations (not portfolio companies) exposed to the real-estate
sector. We believe that having a dynamic, active investment programme led by
an on-the-ground research team is the best way to identify and manage
sustainable growth opportunities, as well as navigate the challenges. Active
mandates, like those managed by Dynam Capital, have shown strong
outperformance versus the broader market. Nimble stock selection and portfolio
construction have also helped to beat peers. The Investment Manager's Report
provides more information on the portfolio's performance.
Vietnam remains a dynamic country. In a year marked by global uncertainties
and economic headwinds, its economy has shown resilience, attracting record
amounts of foreign direct investment ("FDI") and generating record trade
surpluses, as the country solidifies its position as a leading manufacturing
hub. However, the country's government office bearers have changed multiple
times. Vietnam has an unusual political structure that is based on a
consensus-driven approach by the primary 'pillars' of government, which
includes the General Secretary of the Party, the President, the Prime Minister
and the Chairman of the National Assembly. Many of the reforms happened during
General Secretary Nguyen Phu Trong's fierce anti-corruption and malpractice
campaign. On 18 July 2024, President To Lam was asked to temporarily take over
some of the duties of General Secretary Trong, who passed away a day later. On
August 3, 2024, President To Lam was unanimously elected as the General
Secretary of the 13th Central Committee of the Communist Party of Vietnam. To
Lam comes from the Ministry of Interior and is a former police officer, so we
expect anti-corruption measures to continue.
Western media have also covered some of the visible outcomes of this
anti-corruption crackdown, including the capital sentences for a female
entrepreneur convicted of several charges of misappropriating state assets as
well as money-laundering, mis-selling of bonds, and fraud. Despite the harsh
sentences, Vietnam's government appears united on the country's economic
development, which bodes well for its capital markets and expanding economy.
Vietnam's capital markets, particularly equities, are driven by local
investors who account for more than 90% of the daily trading volumes and own
more than 80% of the stocks listed on the Ho Chi Minh Stock Exchange ("HOSE").
Vietnam is still part of the frontier investing world and makes up 30% of the
MSCI frontier index. This year foreign investors have been net-sellers of
Vietnamese equities, but domestic investor interest remains high, accounting
for the market's 10% rise in value. The 'upgrade' of the market to Emerging,
or Secondary Emerging, is still some way off, despite several positive steps
being made. An upgrade decision by one of the agencies could happen in 2025,
but 2026 is more likely. When this eventually happens, we anticipate the
upgrade to be a catalyst for renewed foreign investor interest, thereby
increasing market liquidity and potentially re-rating some leading companies.
More information can be found in the Investment Manager's report, and an
article on the topic was included in the Interim Report earlier this year.
Over the past twelve months there has been a notable increase in interest in
the Fund, as well as a considerable increase in daily liquidity in the
Company's shares. The Investment Manager, along with our Broker and
distribution partners, has conducted an extensive marketing campaign, hosting
several in-person investor meetings across the British Isles, as well as
several online webinars and roundtables. We are thrilled that the Company
became a member of the FTSE All Share and FTSE Small Company indices on 25
June 2024. This should help sustain attractive levels of liquidity in the
Company's shares. We also have a balanced shareholder register and are pleased
to welcome new investors many of whom purchased the shares through leading UK
wealth management platforms.
Hiroshi Funaki
Chairman
VietNam Holding Limited
1 October 2024
Investment Manager's Report
This year we celebrate the 18th anniversary of the Company and its listing in
London. The Company was first listed on AIM in July 2006 and then moved to the
Main Market (previously the Premium segment of the Official List) of the
London Stock Exchange in March 2019. In June 2024, the Company joined the FTSE
All Share Index. It has been quite an adventure. As the Chairman of VNH noted
in his letter, liquidity in the Company's shares has increased significantly,
the discount to Net Asset Value has decreased substantially, and the Company
has received several awards for its long-term performance. We are delighted
with the recognition that we have received from Citywire and the UK Investor
Magazine for being the best single-country emerging market fund. We are also
proud of the fact that we received top marks from Citywire in their inaugural
ranking for closed-end fund managers: we are the only manager to be rated AAA
in the Equity - Country Specialist Asia Pacific - ex Japan sector.
Macro
Vietnam's key themes of industrialisation, urbanisation and domestic
consumption are all intact and rising, with GDP growth for the full year
expected to be 6%, its impressive multi-decade average.
A continuous easing of monetary and fiscal policy has fuelled growth, but two
headwinds remain: the slow recovery of the property sector and a weakening
local currency. The overall expansion in the economy has been buoyed by record
levels of Foreign Direct Investment ("FDI") (USD 10.8bn disbursed in first
half of 2024), and strong growth in exports (+14.5% YoY for the first half of
2024). Imports have also increased, particularly those from China. However,
these are the results of manufacturing expansion by importing more raw
materials and semi-finished goods, which have helped lift the manufacturing
PMI level to a near-record high level of 54.7. Overall, the first half of 2024
saw a USD 11.6bn trade surplus compared to a record full-year surplus of USD
28bn in 2023. The high levels of trade surplus and record levels of FDI have
helped offset the weakening local currency and allowed the State Bank to sell
around USD 6.4bn to provide more stability to the Vietnam Dong, which
depreciated by 4.6% in the first half of 2024.
Performance
As stated in the interim report as of 31 December 2023, the NAV per share
increased by 8% during the first half of the financial year, while the Vietnam
All Share Index ("VNAS") increased by 3.2%. The second half had a 14.4% rise
in NAV per share versus an 8.1% increase in the VNAS. At 30 June 2024, the NAV
per share rose by 23.6% for the full-financial year versus a 9.5% increase in
the VNAS. The Company continues to outperform its peers and has outperformed
the VNAS on a one, three, five, ten, and 15-year basis. The two other
London-listed Vietnam peers, VOF and VEIL, were up by 11.5% and 6.1%
respectively during the corresponding period. The Company's share price rose
by 43% during the financial year due to a combination of a strong NAV increase
and significant narrowing in the discount between the share price and the NAV.
Since the adoption of the Share Redemption feature, the Company's discount
has, on average, remained below 5%. This compares to the high-teens level of
discounts for peers.
Portfolio
The portfolio remains concentrated, with the top ten holdings accounting for
63.2% of the portfolio's Net Asset Value (see table on page 10). This is the
direct result of our active portfolio construction. Initial position sizing is
based on our conviction-led approach to investment decision making. We often
start a new position at a modest conviction level of roughly 2% of NAV,
increasing to a mid-level of 4-6% and then high conviction level of 8% when we
become more comfortable with the company and more assured about the
sustainability of its strategy. The portfolio is comprised of 24 companies,
all of which have been thoroughly researched. At any one time there are
another 12-20 companies that we monitor closely and review on a regular basis,
looking for catalysts for new growth. We also research promising newer
companies, albeit our investment bar is extremely high, as we seek companies
with acceptable valuations, strong growth prospects and a desire to engage
with us on a journey of improving governance, investor relations and
sustainability reporting. The portfolio valuation is approximately 12.9x PE
for 2025, which is reasonable given the expected Earnings Per Share ("EPS")
growth of 20% for 2025.
Positioning and Core Themes
Our main investment approach remains focused on industrialisation
(best-in-class manufacturers, international logistics, digitalisation);
urbanisation (purposeful real estate, transportation, clean energy, and clean
water); and domestic consumption and its enablers (sustainable retail,
domestic logistics, products, and finance). These themes are increasingly
interconnected, as industrialisation and urbanisation continue to drive robust
GDP growth while digitalisation boosts domestic consumption, which is also
supported by the ongoing modernisation of the country's banking sector.
Industrialisation
Over the last thirty years, Vietnam has emerged as a key manufacturing hub for
a wide range of goods. Foreign direct investment in the industrial and
manufacturing-for-export sectors has propelled the country's GDP growth. The
'Made-in-Vietnam' trend has been accelerated by the 'China-plus-one' strategy
of global manufacturers, seeking to de-risk their supply chains. The war in
Ukraine and economic isolation of Russia have also presented challenges
causing companies to spread their production more evenly around the world.
Some commentators have called this the beginning of the end of globalisation,
but what is perhaps more likely is the continuation of supply chain
restructuring. Some companies will aim to re-shore manufacturing to their
native country, while others near-shore (e.g., expand production in Mexico for
North American markets) or friend-shore. The latter category is where Vietnam
is likely to attract the most increased interest.
Although in the past we have invested in manufacturers, such as garment
companies and seafood producers, we have chosen to get most of our exposure to
these themes over the past few years through business-to-business 'linkages'
mostly through industrial parks and logistic companies. These typically have a
higher quality of earnings, higher return on equity, and less risk than the
individual exporters. A core holding in this area is the leading port
operations and logistics company, Gemadept ("GMD"), which at 6.4% of NAV is
the third largest position in the portfolio. Gemadept also owns a 30% stake in
a leading air-cargo company, Saigon Air Cargo ("SCS"), which is also a
portfolio company. In addition to premium consumer products, high value light
electronics, semi-conductors and 'just-in-time' components are often
transported by air, and as the US Chip Act makes deeper impacts over the
coming years, favouring friendly shores such as Vietnam, the country's air
cargo services will be in even greater demand.
Urbanisation
Vietnam's urbanisation level was approximately 37% in 2022 and has risen to
about 40% in 2024. These were the levels reached by China in 2000, before
doubling over the next twenty years. The government forecasts that Vietnam's
urban population is expected to exceed 50% by 2030. In a previous annual
report, we discussed the multiplier effect of investments in domestic
infrastructure, citing the May 2022 opening of a new bridge across Ho Chi Minh
City's Saigon River that now connects the down-town District 1 hub to the Thu
Thiem peninsular, a region already demarcated as a new 'metropolis'. The
delayed but hopefully soon-to-be-finished metro line in Ho Chi Minh City will
eventually transform the commute from outlying districts to the city centre.
Its tracks, tunnels and elevated sections are all in place, with the stations
mostly complete. When finished, the new international airport at Long Thanh
will also create new areas for residential and light industrial uses.
While the potential for urban growth remains intact, as Vietnam will need to
build millions of new houses over the next two decades, the real estate sector
has been in the doldrums for much of this year. We had a 15% exposure to the
real-estate sector at the third quarter of 2022 but were quick to reduce this
in the face of weakening near-term prospects and, indeed, managed to escape
the worst of the turmoil that hit some companies in the sector. At the end of
2023, our exposure to real estate was 9.4%, and was reduced to 7.8% at 30 June
2024, with the majority of this going to the industrial park sector rather
than the residential market. For example, we have 5.3% of NAV in IDICO, a
leading industrial park developer. We are confident that some of the key names
in the residential sector will survive and thrive. We see signs of recovery
and evidence of end-user demand, but some developers have struggled to get
projects approved and refinance their bonds and debt at maturity, while some
also have overhanging issues unrelated to the core real estate activities.
Domestic Consumerism
We believe that Vietnam's economy is at an inflection point, and that the
consumer sector will grow rapidly in the next years to come. Vietnam's GDP has
doubled over the past ten years, and its per capita GDP places the country in
the 'upper middle income' economic bracket. The government's ambition is for
the country to reach the 'high income' status by 2045. Since the pandemic,
higher interest rates, subdued manufacturing and rising costs dampened
consumer demand in several areas, and we adjusted our portfolios accordingly.
Starting from the fourth quarter of 2023, we began adding back to the sector
again, as our research indicates improved trading prospects. At the end of
June 2023, the sector allocation had dropped to 7.8%, with omni-channel
champion Mobileworld ("MWG") at 2.7%. As of June 2024, the sector allocation
increased to 12.7%, with MWG returning to the number two portfolio position at
6.6%.
Banks and financial sector
VNH's allocation to banks was 26% at 30 June 2024, representing an underweight
position relative to the index. Key portfolio names in the portfolio include
Techcombank, 5.3% NAV, Asia Commercial Bank, 5.0% NAV, MB Bank, 4.8% NAV, and
VP Bank, 4.6% NAV. In addition to banks, we have a 6.3% allocation to several
brokerages. This is a sector we have made strong gains in historically, and we
have never been afraid to take profits. We believe that the sector will
benefit from returning domestic investor appetite, particularly as domestic
interest rates on bank deposits fall.
Attribution
Stock selection and portfolio construction have delivered a strong
outperformance against the broader market. The key stock performance of the
top five holdings is detailed on page 11, but it is worth highlighting the
performance of our portfolio's strongest conviction position, FPT (14.7% of
NAV). This 'overweight' position has contributed more than half of the
portfolio's outperformance. FPT's share price rose by 31.5% in the first half
of the financial year and then a further 57.2% in the second half. The rapid
rise in share price over the past six months was driven in part by the
company's strong growth in digitalisation business internationally but also by
investor enthusiasm about potential partnerships with big global players such
as NVIDIA. This excitement is fuelled by the solid performance from its core
business segments, which have contributed to a 21% year-on-year ("YoY")
increase in revenues for the past six months ending 30 June 2024 and a 22%
rise in profits over the same period. FPT traded at around 10x PE six years
ago and is now trading at 24x. Its re-rating was achieved in part by the
spinoff in 2018 of its electronics retail business, FRT, which was also up 58%
in the first half of the year. FPT has been a long-term portfolio hold,
returning a 10x gain on our initial investment cost.
Liquidity
The Vietnam stock market has grown dramatically over its 24-year history. From
only a handful of listed companies two decades ago, there are now over 1600
public companies, and fifty companies with more than USD 1bn in market
capitalisation. Portfolio liquidity is robust, and we estimate that over 95%
of the portfolio could be liquidated in under 30 days. During the past six
months, average daily liquidity has touched close to the equivalent of USD
1bn, which is five times the pre-pandemic level. Vietnam's domestic retail
investor base is the dominant driving force in the country's stock market:
there are now eight million domestic share trading accounts, almost four times
the level in 2018. Foreign investors hold only approximately 15% of the stock
market, and over the past six months, foreigners have been net-selling Vietnam
listed equities to an amount of USD 2bn.
The portfolio's size and nimbleness, as per our style of investment
management, allows us to navigate across a range of company sizes, which we
believe has contributed to the outperformance of the Company versus the index
and our peers. We have been able to take profit in sectors that have surged
and move swiftly as market forces and economic mood change.
Although the Fund's investment policy allows up to 20% of the assets to be
invested in unlisted or pre-IPO 'private equity' type deals, the Fund is
currently only invested in listed securities, and all are valued as 'Level 1'.
See Valuation in the notes to the Financial Statements pages 64 to 65. As of
30 June 2024, the portfolio has approximately 2.1% of NAV in cash.
Responsible investing
The Company has been a signatory of the United Nations Principles for
Responsible Investing ("PRI") since 2009. The Fund was the first fund in
Vietnam to adopt the principles, and since 2012, environmental, social and
governance ("ESG") principles have been fully integrated into the Fund's
investment process and engagement strategy. Our authentic approach has helped
us receive top scores from the PRI in its latest transparency report. There
is much discussion about 'greenwashing' globally, and we believe our
engagement approach is robust and remains relevant in Vietnam. As part of the
investment process ESG issues are integrated into the initial screening, due
diligence, investment decision and investment monitoring phases. We have
developed a proprietary ESG scoring matrix, which we apply to each company. We
do not expect perfect scores at the beginning, but rather seek to identify
areas for improvement that can be addressed in a meaningful way during our
investment horizon. We use this to focus our engagement with each portfolio
company in face-to-face meetings. For several years we have been conducting
annual carbon footprint assessments of our portfolio, and we encourage our
portfolio companies to do more on reporting their own carbon and GHG emissions
and to evaluate their contribution to the UN's 17 Sustainable Development
Goals ("SDGs"). Since 2021, we have been an active member of the Asia Investor
Group on Climate Change and have optimised this experience by assisting our
portfolio companies to address climate transition risks and their own planning
for net-zero. We report on these efforts in greater detail in the
Sustainability Report.
Outlook
In addition to increased foreign exchange risk, which is already factored into
the current Net Asset Value of the portfolio, political risk has become a
greater concern over the past twelve months. Evolving political risk is, of
course, a global phenomenon, and Vietnam is no exception. Over the past year
or so, there has been a significant push against corruption in Vietnam, a
'blazing furnace' established by General Secretary Nguyen Phu Trong targeted
errant business-people and government officials, resulting in several
resignations. For much of the year, there were also speculations about Trong's
deteriorating health, and he died on 19 July 2024, just a day after receiving
a Gold Medal for service to the nation. The Politburo requested that President
To Lam assume some of Trong's duties on an interim basis, and he was
unanimously elected as General Secretary on 3 August 2024.
We expect to see the government continue to pursue an open policy to economic
development. Vietnam has entered into 16 free trade agreements over the past
two decades and has an ambition to be a key manufacturing hub. This country
continues to attract record levels of FDI which will further boost export
growth. The government policies are pro-business, and pro-capital markets.
The Prime Minister and the Ministry of Finance want to see continued
development of the stock and bond markets, with an ambition to increase the
size of the stock market and bond market close to an equivalent size of 100 %
and 50% of GDP respectively by 2025. The State Securities Commission is
inviting feedback from market participants on a recently published final draft
circular proposing to remove the pre-funding requirement on stock trading
accounts. They hope to have this ready by September, ahead of the FTSE Russell
review on Vietnam's stock market status. Vietnam is on the FTSE Russell
Secondary Emerging Market watchlist, and an upgrade would be very welcome. In
the Interim Report this year we included a more detailed article on the
benefits of a market upgrade, but in simple terms Vietnam would go from being
part of a USD 90bn Frontier Market universe, to part of a USD 7-8
trillion-dollar emerging market universe. The World Bank estimates this could
add a further USD 20-30bn of net indirect capital flow within three years.
Vietnam's political structure can be perplexing for foreign investors, and its
consensus-based approach to policy execution can sometimes result in measured
(slow) decision making. In previous annual reports, we discussed the problems
in meeting budgeted levels of government infrastructure spending. This was
under-budget in 2022 and 2023, most likely due to certain officials'
reluctance to make difficult decisions. It is encouraging to see a five
percent increase in public expenditure on new infrastructure year-to-date,
with USD 10bn spent in the first six months of 2024, and a USD 28bn target for
the full calendar year.
Visitors travelling by air to Ho Chi Minh City will have undoubtedly
experienced the queues upon arrival (and departure). This is the result of a
spike in international arrivals, which have already returned to pre-Covid
levels, combined with increased domestic travel, putting strain on the
airport, which is already overcapacity. The government has been putting
pressure on authorities to speed up the construction of the new international
airport at Long Thanh, roughly 50km away from Ho Chi Minh City's District 1.
It now appears that the initial phase of the airport will be completed in
2026, six months ahead of schedule. Before that, the third terminal at the
existing Tan Son Nhat International Airport is due to be completed in the
first half of 2025.
Recent developments in the power sector bode well for the rising adoption of
renewable energy. Over the past decade, installed solar and wind in Vietnam
has gone from almost zero to 20 Gigawatts. This was accomplished despite a
relatively weak Power Purchase Agreement ("PPA") framework and a single
monopoly buyer, the state-owned utility EVN. The new Decree 80, passed on 11
July, now allows for the direct purchase of rooftop generated solar energy.
This is essentially a soft de-regulation of the energy market. This is
positive for growth in solar power in a country that has high solar
irradiance. The government is also planning longer-term initiatives to tap
into the country's significant wind power potential through offshore,
nearshore and onshore wind farms.
As with the rest of the world, the rapid technological changes and
digitalisation initiatives in Vietnam require vast amounts of processing power
and storage. In another encouraging development, data centres can now be
wholly owned by foreign investors under new legislation enacted in November
2023, which came into recent effect. The growth of domestic data centres is a
key aspect of Vietnam's growing digital transformation, and FPT should also
benefit as a technology enabler.
So, the outlook remains positive. Despite considerable domestic political
changes, we do not see any change to the momentum related to policy. We also
expect foreign exchange risks to reduce when the US Fed starts to lower
interest rates, and the interest rate differential between the US and Vietnam
(and other Asian countries) softens. The stock market growth over the past
year has been domestically driven. Once the year of extraordinary global
political turbulence is past, and markets are reassessed for relative
attractiveness, we believe emerging markets and Vietnam in particular (albeit
officially a frontier market) will rally further.
Top 10 Companies by NAV as at 30 June 2024 (and as at 30 June 2023)
Top 10 companies as at 30 June 2024 Sector % NAV
FPT Corporation Telecommunications 14.7%
Mobile World Investment Corporation Retail 6.6%
Gemadept Corporation Industrial Goods and Services 6.4%
PV Technical Services JSC Oil and Gas 6.1%
Techcombank Banks 5.3%
IDICO Corp JSC Real Estate 5.3%
Asia Commercial Bank Banks 5.0%
Military Commercial Bank JSC Banks 4.8%
Vietnam Prosperity JSC Bank Banks 4.6%
Hoa Phat Group JSC Industrial Goods and Services 4.4%
Total 63.2%
Top 10 companies as at 30 June 2023 Sector % NAV
FPT Corporation Telecommunications 12.6%
Sacombank Banks 10.1%
PV Technical Services JSC Oil and Gas 6.9%
Military Commercial Bank JSC Banks 5.7%
Vietcombank Banks 5.7%
Gemadept Corporation Industrial Goods and Services 5.4%
Phu Nhuan Jewelry JSC Retail 5.1%
IDICO Corporation JSC Real Estate 4.0%
Ho Chi Minh City Securities Financial Services 3.6%
Asia Commercial Bank Banks 3.3%
Total 62.4%
Dynam Capital, Ltd.
1 October 2024
Top Five Portfolio Companies
FPT Corporation ("FPT")
As at 30 June 2024
VietNam Holding's investment
Date of first investment 10 December 2012
Ownership 0.3%
Percentage of NAV 14.7%
Internal rate of return (annualised) 27.9%
Share information
Stock Exchange HOSE
Date of listing 13 December 2006
Market capitalisation (USD million) 7,489
Free float 85.9%
Foreign ownership 40.5%
Financial indicators (as at 31 December) 2023 2022
Equity (USD million) 1,175.9 1,075.1
Revenue (USD million) 2,067.1 1,866.0
EBIT (USD million) 332.0 288.1
NPAT (USD million) 306.0 275.2
Diluted EPS (VND) 4,661 3,847
Revenue growth 10.8% 21.7%
NPAT growth 11.2% 19.7%
Gross margin 38.6% 39.0%
EBIT margin 16.1% 15.4%
ROE 28.2% 27.8%
D/E 0.47 0.49
About the Company
Founded in 1988, FPT is Vietnam's leading technology firm, offering a
comprehensive range of services including software development, IT services,
and telecommunications. The company is also a well-known distributor and
retailer of IT products and a key player in the education sector, with
programs spanning multiple levels for 145,000 students nationwide.
FPT currently operates across more than 30 countries and territories. This
extensive international network enables FPT to deliver diverse IT services and
solutions globally, serving clients in sectors such as automotive, finance,
and healthcare. The company has successfully transformed itself from an IT
outsourcing service provider to an end-to-end digital transformation partner.
In 2023, revenue from digital transformation services reached a record USD 410
million. Additionally, FPT provides broadband internet to four million
subscribers and owns telecommunications infrastructure, including a main
North-South link, recently upgraded from copper wires to fiber-optic cables.
As of 31 December 2023, FPT employed 48,162 individuals, including 32,392
engineers and technology experts.
Recent Developments
FPT delivered a strong financial performance in 2023, with revenue and profit
after tax of USD 2,067 million and USD 306 million, respectively, reflecting a
19.6% and 20.0% year-on-year growth in local currency. Global IT Services was
the primary growth driver, with a 28.4% year-on-year increase. Notably, for
the first time, FPT surpassed USD 1 billion in revenue from IT services in
foreign markets, showcasing the competitiveness of Vietnamese businesses on
the global stage. FPT continues to ascend the technology value chain by
prioritising the development of AI, Cloud, Big Data, and specialised domains
with high growth potential, such as healthcare, finance, and automotive.
Revenue from digital transformation services, which accounted for nearly half
of the total revenue from foreign markets, underscores this strategic shift.
The Education segment also demonstrated robust growth, with revenue increasing
by 31% in local currency to reach USD 242 million. In 2023, FPT Education
expanded its network of training facilities, establishing a presence in over
20 provinces and cities nationwide.
Sustainability Strategy
FPT has developed a sustainable development strategy that balances three key
factors: economic growth, community support, and environmental protection. The
company's objectives and activities are aligned with Vietnam's action plan to
implement the 2030 commitments for sustainable development, as well as the GRI
Sustainability Reporting Standards.
ESG Achievements
In 2023, FPT made significant progress toward Sustainable Development Goal 4
("SDG 4") - Quality Education, evidenced by its ranking of 201-300 in the
global university rankings for sustainable development, as published by the
Times Higher Education ("THE") Impact Rankings. The company actively engages
in sustainability and ESG rating platforms to strengthen its ESG strategy and
track progress. FPT received a Silver rating on its ESG performance according
to the EcoVadis survey and was awarded the "Best Country Award for Overall CSR
Excellence" and the "Best Community Programme Award" at the Global CSR &
ESG Summit and Awards 2023.
In terms of corporate governance, FPT has made significant efforts to align
with international standards. The company was recognised as one of the Top 10
Large-Cap Enterprises with the Best Corporate Governance in the 2023 Vietnam
Listed Companies Awards, organised by the Ho Chi Minh City Stock Exchange
("HoSE"), Hanoi Stock Exchange, and the Investment Newspaper.
ESG Challenges
While FPT has measured and disclosed its greenhouse gas ("GHG") emissions for
Scope 1 and Scope 2, the company has not yet reported its Scope 3 emissions.
Given FPT's global expansion, it is increasingly important for the company to
measure indirect emissions throughout its supply chain to develop a
comprehensive decarbonisation plan that addresses all three scopes of
emissions.
Mobile World Investment Corporation ("MWG")
As at 30 June 2024
VietNam Holding's investment
Date of first investment 11 September 2017
Ownership 0.3%
Percentage of NAV 6.6%
Internal rate of return (annualised) 7.4%
Share information
Stock Exchange HOSE
Date of listing 14 July 2014
Market capitalisation (USD million) 3,585
Free float 77.1%
Foreign ownership 47.5%
Financial indicators (as at 31 December) 2023 2022
Equity (USD million) 917.7 1,014.7
Revenue (USD million) 4,646.6 5,656.3
EBIT (USD million) 17.1 281.7
NPAT (USD million) 6.6 173.9
Diluted EPS (VND) 115 2,810
Revenue growth -17.9% 7.0%
NPAT growth -96.2% -17.5%
Gross margin 19.0% 23.1%
EBIT margin 0.4% 5.0%
ROE 0.7% 18.5%
D/E 1.08 0.69
About the Company
Founded in 2004 as a single store selling mobile phones, MWG has grown to
become Vietnam's largest retailer by revenue and physical store count, now
exceeding 5,000 locations. MWG operates under several brands, offering a wide
range of merchandise, including consumer electronics, groceries, and
pharmaceuticals. As of the end of 2023, the company employed over 60,000
people.
As a modern-trade consolidator, MWG has revolutionised the Vietnamese retail
landscape by continuously expanding its footprint, exploring new formats, and
diversifying product offerings to meet evolving consumer needs. MWG now
commands over 50% market share in mobile phones and consumer electronics,
while its grocery chain 'Bach Hoa Xanh' has recently become the market leader
in terms of revenue.
In addition to its core brick-and-mortar business, MWG has been enhancing its
e-commerce capabilities to respond to the growing trend of online shopping in
Vietnam. The company has invested significantly in its online platforms and
logistics infrastructure to better serve customers and compete with other
major e-commerce players in the market. Online revenue accounted for 14% of
total revenue in 2023, with a transaction value of USD 700 million,
positioning MWG among the top e-commerce players in Vietnam. The company's
omni-channel approach, supported by its extensive store network, fast
delivery, and customer-centric culture, is a key competitive advantage.
Recent Developments
2023 was one of the most challenging years for MWG, with revenue declining by
18% year-on-year to USD 4.7 billion, and net profit dropping by 96% to just
USD 6.6 million, marking the lowest earnings since 2013. This downturn was
driven by a challenging economic environment and reduced demand for
non-essential goods, including electronics and household appliances, which are
core products for MWG. Additionally, intensified competition in the ICT retail
market led to a prolonged price war, further pressuring MWG's pricing
strategies and profit margins.
However, there are signs of recovery. For 2024, management has announced an
ambitious target, projecting a 14-fold increase in after-tax profit to USD 96
million and a modest 6% growth in revenue to USD 5 billion. This plan reflects
MWG's strategy to rebound from its 2023 performance by restructuring and
enhancing core activities. The ICT business has already shown positive growth
and improved margins as the price war among retailers has ended and domestic
consumption gradually recovers. Additionally, the grocery chain 'Bach Hoa
Xanh,' which incurred a loss of USD 46 million in 2023, is expected to turn
profitable in 2024, driven by steady improvements in revenue per store and
operational efficiency. 'Bach Hoa Xanh' is anticipated to be a key growth
driver in the coming years, as ongoing urbanisation shifts consumer buying
behavior from traditional wet markets to modern retail outlets.
Sustainability Strategy
Mobile World Investment Corporation ("MWG") has implemented several key
sustainability strategies to enhance its long-term growth and operational
efficiency. These include community engagement initiatives, such as promoting
eco-friendly products and practices, and Circular Economy Initiatives, which
aim to reduce plastic waste and promote recycling. MWG's various brands have
undertaken projects to collect used batteries, recycle advertising materials
into organic fertilisers, and contribute to a circular economy. The company
prioritises its employees, followed by customers and then shareholders. The
performance-linked ESOP (Employee Stock Ownership Plan) programs have been
instrumental in retaining talented individuals within the company and
motivating top managers to explore new market segments.
ESG Achievements
Over the past two years, MWG has made significant progress in ESG
(Environmental, Social, and Governance) implementation and has become a leader
in ESG among Vietnamese public companies. In terms of governance, MWG has
established a dedicated ESG committee within the Board and hired a full-time
ESG officer. The company has also improved its ESG communications by adopting
GRI (Global Reporting Initiative) standards in its sustainability report,
incorporating more quantitative social and environmental data, and publishing
a monthly ESG newsletter to communicate its ESG/CSR activities to investors.
ESG Challenges
As consumer awareness of sustainable and healthier lifestyles continues to
grow, integrating ESG into its business model presents both challenges and
opportunities for MWG. Successfully addressing these challenges will be
crucial for the company to enhance its competitiveness and distinguish itself
from other retailers in the country.
Gemadept Corporation ("GMD")
As at 30 June 2024
VietNam Holding's investment
Date of first investment 16 August 2019
Ownership 0.9%
Percentage of NAV 6.4%
Internal rate of return (annualised) 29.5%
Share information
Stock Exchange HOSE
Date of listing 06 May 2002
Market capitalisation (USD million) 1,013
Free float 93.7%
Foreign ownership 47.8%
Financial indicators (as at 31 December) 2023 2022
Equity (USD million) 382.3 337.0
Revenue (USD million) 151.1 165.3
EBIT (USD million) 43.9 44.6
NPAT (USD million) 99.5 49.2
Diluted EPS (VND) 7,207 3,034
Revenue growth -8.6% 19.9%
NPAT growth 102.2% 59.0%
Gross margin 46.2% 44.1%
EBIT margin 29.0% 27.0%
ROE 28.7% 15.5%
D/E 0.20 0.26
About the Company
Established in 1993 through the privatisation of a state-owned company,
Gemadept ("GMD") began as a maritime agent and freight forwarder. After 31
years of operation, the company has grown into one of the most integrated port
and logistics providers in Vietnam. As a pioneer in smart and sustainable
port-logistics models, GMD operates a network of five ports and logistics
facilities, providing 3PL (Third-Party Logistics) services that span from sea
to air, serving both domestic and multinational corporations.
GMD's seaports are strategically located in two primary zones: the Hai Phong
port zone in the North and the Cai Mep-Thi Vai port zone in the South. In the
North, GMD owns Nam Dinh Vu port, the largest port in the region, with a
designed capacity of 1,000,000 Twenty-foot Equivalent Units ("TEUs") per
annum. In the South, GMD owns its first deep-water port, Gemalink, which has a
designed capacity of 1,500,000 TEUs for Phase 1. The commencement of Gemalink
in 2021 marked a significant turning point for GMD, transforming it into a
deep-water port operator expected to play an increasingly important role in
regional trade flows within Southeast Asia.
Recent Developments
In 2023 and Q1 2024, GMD strategically divested its Nam Hai Dinh Vu and Nam
Hai ports due to their limitations in handling larger vessels. This decisive
move allowed GMD to rapidly achieve full capacity utilisation at Nam Dinh Vu
port's Phase 2, which began operations in Q1 2023, with plans to start Phase 3
in 2024. Once all three phases are operational, Nam Dinh Vu will become the
largest port in the North, with a total capacity of 2.0 million TEUs.
Gemalink port, the largest deep-water port in its zone, is expected to be the
key growth driver for GMD over the next four years. According to the Vietnam
Seaports Association, Gemalink has captured a 27% market share of container
throughput in the Cai Mep-Thi Vai port area within just three years of
operation. Gemalink is well-positioned to capitalise on the structural shift
of cargo flows from regional ports to the Cai Mep-Thi Vai port area in
Southern Vietnam. Benefiting from Vietnam's impressive trade growth, the Cai
Mep-Thi Vai port area, with a capacity of 9.1 million TEUs per annum, has
witnessed average growth of 25-30% over the last five years. Gemalink's Phase
1 has already reached 90% utilisation, creating momentum to begin Phase 2 in
Q4 2024.
Upon completion of both phases, Gemalink will become the largest deep-sea port
in the Cai Mep-Thi Vai cluster, with a total capacity of up to 3.0 million
TEUs.
Sustainability Strategy
As a leading nationwide corporation in port operations and logistics, GMD is
committed to sustainable development goals closely aligned with its production
and business activities. The company's leadership and employees are dedicated
to creating a smarter and greener future for the community. GMD continues to
invest in digital transformation projects, applying advanced technologies such
as Smart Port, Smart Gate, and River Gate to automate and optimise operational
processes, thereby increasing productivity, saving time and costs, and
conserving energy. Additionally, GMD is utilising renewable energy for most
operations at its ports and distribution centers, while also implementing
green projects and initiatives such as mangrove reforestation, developing
green systems at ports, and raising environmental awareness among employees
and local communities.
ESG Achievements
Following the establishment of an ESG working group led by GMD's CEO in 2022,
the company made significant progress in ESG implementation in 2023. GMD
measured and disclosed GHG emissions for its three ports in accordance with
ISO 14064 standards. The company achieved the national green-port standard for
Dung Quat Port and began replicating the green port model at its other three
main ports. GMD's focus on ESG integration has opened up more financial
opportunities, including signing a Sustainability Linked Loan Agreement with
HSBC in May 2024.
ESG Challenges
GMD has not yet disclosed its total carbon emissions. Additionally, it will
require time and significant effort to build human capacity and obtain
international certifications for its entire port and logistics system. GMD
also owns a non-core rubber plantation project in Cambodia, which presents a
potential ESG concern. However, senior management has recently reaffirmed
their intention to divest this project in 2024.
PV Technical Services JSC ("PVS")
As at 30 June 2024
VietNam Holding's investment
Date of first investment 5 September 2022
Ownership 1.1%
Percentage of NAV 6.1%
Internal rate of return (annualised) 26.3%
Share information
Stock Exchange HNX
Date of listing 20 September 2007
Market capitalisation (USD million) 762
Free float 48.4%
Foreign ownership 20.8%
Financial indicators (as at 31 December) 2023 2022
Equity (USD million) 532.1 553.5
Revenues (USD million) 761.1 693.9
EBIT (USD million) 25.1 32.4
NPAT (USD million) 41.6 44.5
Diluted EPS (VND) 1,579 1,438
Revenue growth 9.7% 13.2%
NPAT growth -6.5% 38.2%
Gross margin 5.4% 6.2%
EBIT margin 3.3% 4.7%
ROE 8.0% 8.2%
D/E 0.13 0.11
About the Company
PVS, a 51%-owned subsidiary of PetroVietnam ("PVN"), provides an extensive
range of technical services for the oil & gas, energy, and industrial
sectors. The company holds a majority market share in offshore support vessels
(OSV/ship segment), mechanics & construction ("M&C"), supply base
(port segment), and floating oil storage ("FSO/FPSO"), with a fleet of 18
vessels. PVS operates not only in Vietnam but also in international markets,
including Taiwan, Malaysia, Singapore, and Poland.
Recent Developments
As one of the key service providers in the oil & gas sector, PVS is poised
to be a major beneficiary of the Block B project, a mega-project with a
capital expenditure of USD 12 billion. Block B, estimated to hold 107 bcm in
gas reserves, will guarantee Vietnam's gas supply for power generation and is
expected to contribute USD 19 billion to the State budget over the project's
20-year lifespan. The commencement of this significant project, Block B - O
Mon, is expected to drive growth across Vietnam's oil and gas value chain,
strengthening the industry's fundamentals and contributing to PVS's earnings
growth in the coming years.
In addition to its operations in oil & gas, PVS is strategically
positioned to benefit from the global energy transition towards renewables,
particularly in offshore wind generation. With its extensive experience in
offshore technical services, PVS is expected to play a pivotal role in the
development of offshore wind generation in Vietnam and the wider region.
In August 2022, PVS's subsidiary, PTSC M&C, signed a Memorandum of
Understanding ("MoU") with Ørsted, the world's largest developer of offshore
wind power, to collaborate on offshore wind projects in Vietnam. Ørsted
currently has a total installed capacity of 7.5 GW, with 11.8 GW either under
construction or awarded worldwide. This MoU is anticipated to facilitate PTSC
M&C's entry into the offshore wind power market and strengthen its
capacity in this emerging field. PVS has already secured USD 1.5 billion in
offshore wind backlogs and is cooperating with major global players, expanding
its reach to overseas markets such as Taiwan and Singapore. This lays a robust
foundation for PVS's next phase of growth.
Sustainability Strategy
Although primarily classified within the oil and gas sector, PVS is actively
transitioning its business towards supporting offshore wind power projects.
The company has signed MoUs with global partners to develop both domestic and
international projects. PVS is leveraging its fleet of specialised offshore
vessels to support the construction, operation, and maintenance of nearshore
wind farms in Ben Tre, Tra Vinh, and Ca Mau provinces, as well as offshore
wind farms in Binh Thuan province. Additionally, the company has secured two
overseas contracts with a total value of USD 350 million.
ESG Achievements
PVS is committed to enhancing its governance structure and has taken proactive
steps by enrolling its CEO and Board Members in corporate governance courses
organised by the Vietnam Institute of Directors ("VIOD"). The company's
Health, Safety, and Environmental ("HSE") Management System meets ISO
standards and is certified by the BSI Group. PVS regularly conducts HSE
training for its employees to ensure adherence to the highest standards. In
2023, PVS initiated a greenhouse gas ("GHG") emission inventory, marking a
significant step in its sustainability journey.
ESG Challenges
To achieve its objective of becoming a leading service solution provider in
the energy sector at both regional and global levels, PVS must develop a
comprehensive strategy and action plan to align its ESG practices with
international standards. While the company has made progress in enhancing its
health, safety, and environmental management systems, there is a need for PVS
to improve its ESG communications and reporting to investors and other
relevant stakeholders.
Techcombank ("TCB")
As at 30 June 2024
VietNam Holding's investment
Date of first investment 21 March 2024
Ownership 0.1%
Percentage of NAV 5.3%
Internal rate of return (annualised) -14.9%
Share information
Stock Exchange HOSE
Date of listing 4 June 2018
Market capitalisation (USD million) 6,463.7
Free float 68.2%
Foreign ownership 11.07%
Financial indicators (as at 31 December) 2023 2022
Equity (USD million) 1,424.4 1,535.1
TOI (USD million) 1,573.8 1,718.3
NPAT (USD million) 714.6 866.5
EPS (VND) 5,104 5,725
TOI growth -8.4% 7.8%
NPAT growth -17.5% 9.5%
ROA 2.4% 3.2%
ROE 14.8% 19.6%
CAR 14.4% 15.2%
NPL 1.2% 0.7%
Equity multiplier 23.4 19.3
About the Company
Established in 1993, TCB is the sixth largest bank in Vietnam by total assets.
The bank went public in 2018, listing on the Ho Chi Minh City Stock Exchange.
As of 2023, TCB operated a network of 301 branches and transaction offices,
with 11,614 employees. The bank held loan and deposit market shares of 3.8%
and 3.4%, respectively.
TCB has placed a strong emphasis on investing in data and technology, becoming
an industry leader in digital transformation. In 2016, it became the first
bank in Vietnam to launch the "E-banking zero fee" program, which accelerated
new customer acquisition, significantly reduced operating costs, and resulted
in a high Current Account Savings Account ("CASA") ratio.
The bank adopted Basel II in 2019 and implemented Basel III in 2023. Its
capital adequacy ratio ("CAR") reached 14.5% in 2023, well above the State
Bank of Vietnam's ("SBV") minimum requirement of 8%.
In 2023, TCB was assigned an A+ initial credit rating with a 'Stable' outlook
by FiinRatings. The bank also received several prestigious awards, including
Best Integrated Corporate Banking Platform Globally and Best Mobile Banking
App in Asia Pacific by Global Finance, Best Retail Bank in Vietnam and Best
Private Retail Bank in Vietnam by The Asian Banker, Best Bank in Vietnam by
Finance Asia, and Best Domestic Bank by Asia Money.
Recent Developments
In recent years, TCB has had significant exposure to the real estate sector,
both through major developers and mortgage loans. As a result, its performance
was adversely affected when the real estate market cooled in 2023. Net profit
after tax ("NPAT") declined by 17.5% year-on-year to USD 714.6 million,
although the bank maintained a well-controlled non-performing loan ("NPL")
ratio of 1.2%.
To mitigate the impact of the real estate market downturn, TCB management has
set a long-term diversification plan to shift focus towards retail and SME
customers, beyond real estate. In 2023, loans provided to non-real
estate-related sectors for both large corporates and SMEs increased by 60%
year-on-year, compared to the bank's total credit growth of 23.3%
year-on-year.
Despite tight liquidity conditions in 2023, TCB's total deposits grew by 26.9%
year-on-year, while its CASA ratio reached 40%, the highest in the industry.
However, the net interest margin ("NIM") narrowed to 4.2% in 2023 from 5.1%
the previous year, due to the rising cost of funds.
In the first half of 2024, TCB regained growth momentum, with NPAT increasing
by 38.8% year-on-year to USD 493.9 million. This growth was driven by strong
loan expansion of 14.2% year-to-date.
Sustainability Strategy
With the vision of "Change banking, Change lives," TCB has committed to create
greater value for customers and shareholders by pioneering solutions that meet
their needs. The bank's mission is to lead the digital transformation of the
financial industry, enabling individuals, businesses, and corporations to
progress and thrive sustainably.
ESG Achievements
TCB places a high priority on investor relations ("IR") activities and was
recognised with the "IR Award 2023" for being among the "Top 3 Investor
Relations Activities selected by Financial Institutions." The bank has also
received numerous awards for being one of the best places to work in Vietnam,
with approximately 90% satisfaction recorded in its Employee Engagement Survey
("EES") results.
In terms of governance, TCB strengthened its ESG governance framework in 2023
by establishing clear roles and responsibilities for the Board of Directors
("BOD") and CEO in managing and monitoring ESG risks. The bank also created a
dedicated sub-committee and appointed a dedicated BOD member for ESG
oversight.
At the end of 2023, TCB increased its green credit exposure, reaching USD 547
million-representing 5.2% of its total loan book-distributed across sectors
such as sustainable transportation, renewable and clean energy, and other
environmentally friendly industries.
ESG Challenges
In terms of governance, TCB faces the challenge of diversifying its Board and
management team in terms of gender. Currently, the representation of women in
the BOD, Supervisory Board, and Executive team is relatively low at 19%.
Additionally, the bank has not yet disclosed its greenhouse gas ("GHG")
emissions or adopted the Global Reporting Initiative ("GRI") standards in its
sustainability reports.
Sustainability Report
Global context: anti-greenwashing, AI and data-driven ESG strategies
In the evolving landscape of sustainability, 2023 proved to be a pivotal year
marked by various advancements in environmental, social, and governance
("ESG") practices. From our perspective, we would highlight three key global
trends central to this progression: the intensification of anti-greenwashing
efforts, the integration of artificial intelligence ("AI") in ESG reporting,
and the widespread adoption of data-driven approaches to sustainability
strategies.
Anti-Greenwashing Initiatives: The credibility of corporate sustainability
efforts is under scrutiny as stakeholders demand greater transparency and
accountability. Greenwashing, the practice of making misleading or false
claims about environmental practices, has become a major concern. The ESG
Attitudes Tracker, a survey conducted by the UK-based Association of
Investment Companies ("AIC"), showed reduced enthusiasm in ESG investing among
private investors from 2021 to 2023. For investors who do not consider ESG
factors when investing, the top reason given is that they prioritise financial
performance over ESG issues. However, 'not being convinced by ESG claims from
asset managers' is a close second, perhaps showing the need for a new
labelling regime, and one with clearer standards that investors can rely on.
In response, governments and regulatory bodies worldwide have introduced
stringent measures to combat greenwashing and eco-related corruption. Enhanced
regulations and standards, such as the EU's Corporate Sustainability Reporting
Directive ("CSRD") and California's climate disclosure laws, are forcing
companies to substantiate their environmental claims with robust, verifiable
data. These initiatives are crucial in restoring trust and ensuring that
sustainability claims are reflective of genuine environmental impact.(( 1
(#_ftn1) ))
AI-Driven ESG Strategies: The incorporation of AI technologies into ESG
frameworks is revolutionising how organisations approach sustainability. AI's
ability to analyse vast amounts of data enables companies to gain deeper
insights into their environmental impact, optimise resource use, and predict
future sustainability trends. This year, AI has played a critical role in
enhancing the accuracy and efficiency of ESG reporting, providing real-time
data analytics and enabling predictive modelling. These capabilities are not
only improving operational inefficiencies but also helping companies to
proactively address potential ESG risks.(( 2 (#_ftn2) ))
Data-Driven Sustainability: The shift towards data-driven ESG practices marks
a significant transformation in how companies manage and report their
sustainability efforts. By leveraging advanced data analytics, organisations
can track and measure their ESG performance with greater precision. This
data-centric approach facilitates better decision-making, ensures compliance
with regulatory requirements, and enhances transparency. By integrating
comprehensive data analytics, companies can identify areas for improvement,
benchmark their performance against industry standards, and communicate their
sustainability achievements more effectively to stakeholders.(( 3 (#_ftn3) ))
Vietnam context: brighter prospects for green growth development
The rise of green policy commitments
Vietnam's green policy commitments have progressed significantly over the past
three years. The country's ambitious net-zero targets for 2050 could be seen
as a marker, highlighting the transformational interventions that are needed
to address climate change challenges, including the development of cleaner
transportation and energy systems. At the end of 2023, the government unveiled
further steps to achieve the nation's net-zero targets. At COP28 in Dubai,
Vietnam's Prime Minister Pham Minh Chinh announced a Resource Mobilisation
Plan to establish a Just Energy Transition Partnership ("JETP") between
Vietnam and the International Partnership Group ("IPG"). The partnership seeks
to mobilise an initial USD 15.5bn of public and private finance over the next
three to five years to help Vietnam reduce its reliance on coal and transition
to renewable sources of energy through a mix of loans, grants, technology
transfers, and technical assistance programmes. If the partnership meets its
goals, Vietnam will reach its GHG emission targets by 2030 instead of 2035. By
relying more on renewable energy, it also could reduce its annual power sector
emissions by 30%.
In addition, the National Circular Economy Development Scheme set several
ambitious targets, including reducing the intensity of GHGs per its GDP by at
least 15% by 2030. Furthermore, the country aims to reuse, recycle, and treat
85% of plastic waste, reducing half its plastic waste in oceans as well the
volume of non-biodegradable plastic bags and disposable plastic products in
use by 2025. To support this, the Extended Producer Responsibility ("EPR")
regulations became effective at the start of 2024. This places responsibility
on producers and importers to manage waste associated with the full life cycle
of their products.
Since the approval of the National Power Development Plan ("PDP") 8, we have
seen the passing of more regulations and decrees to support the development of
the renewable energy sector, such as the Decree on Direct Power Purchase
Agreements ("DPPA") allowing businesses in Vietnam to purchase electricity
directly from private firms producing renewable energy. The scale of the
transition needed between 2030 and 2050 to meet the goals and Vietnam's
commitment to net-zero emissions by 2050 presents enormous opportunities in
the energy sector. For example, energy storage technologies, including lithium
batteries, pumped hydropower and heat storage, will need to be developed, as
will smart grids to ensure a high level of stability and integration of
renewable energy in the power system.
ESG Moving up the Corporate Agenda in Vietnam
Awareness of ESG in Vietnam might have come later than in the US and Europe,
but the focus and implementation of practices continue to gain ground. With
Vietnam emerging as an important alternative manufacturing base to China, the
country's participation in free trade agreements has created opportunities for
enterprises to be part of the global supply chain and ESG considerations are
prerequisites for many of these deals. For example, Vietnam's export
industries are increasingly influenced by international ESG regulations,
particularly from the European Union ("EU"). The EU's Corporate Sustainability
Due Diligence Directive and the Carbon Border Adjustment Mechanism ("CBAM")
require Vietnamese exporters to adhere to new environmental and social rules.
This has forced Vietnamese companies to consider ESG matters more seriously
and ensure compliance with international sustainability criteria.
In the financial year, we also observed there was an increased focus on
corporate governance, with regulations pushing for greater transparency and
accountability in corporate operations. With the support of the State
Securities Commission of Vietnam, the revised G20/OECD Principles of Corporate
Governance become available in Vietnamese, offering another helpful resource
for Vietnamese enterprises to improve their corporate governance practices
needed for a just transition towards a sustainable economy.
Another important regulation that enforces Vietnamese enterprises to improve
their "social" impacts is the Vietnam's Decree on Personal Data Protection,
which became active in July 2023. This new decree marks a significant
milestone in Vietnam's commitment to protect personal data and enhance privacy
rights in the digital age. It requires companies, especially those that are
involved in e-commerce, fintech, healthcare technology, and smart production
to develop concrete measures for data collection, processing, transfer and
data security to avoid fines and penalties as well as reputational damage.
The Fund's Stewardship Role
As a long-term, responsible investor, ESG integration has always been at the
heart of our investment philosophy. With our motto "do more, measure more and
report more", we have continuously made progress in our ESG journey. VietNam
Holding has been a signatory of the Principles for Responsible Investment
("PRI") since 2009 while the Investment Manager, Dynam Capital also became a
signatory in 2022. Our PRI Transparency Report for 2023 received 5-star
assessment scores across all modules. In addition, we supported a very
successful Vietnam ESG Investor Conference 2024 as a Title Sponsor. We have
been proactive in company engagement to improve ESG practices of investee
companies, bringing those with exemplary practices into the spotlight.
Identifying climate change implications is a critical global issue that
affects all sectors, and we support the efforts of Vietnam's government and
business sector to address climate change and its socioeconomic effects.
During the financial year, the Investment Manager has been working closely
with companies to help them prepare for their ESG and carbon footprint
reports. We are pleased to say that the number of portfolio companies
reporting their total carbon emissions has increased this year, especially as
some decided to do so following our engagement meetings.
As we navigate to a net-zero world, VNH has identified its focus points for
climate change over the next two years:
· Continue to measure and track the portfolio's carbon footprint to
identify carbon-intensive sectors, integrate climate risks and opportunities
into our broader risk management framework, and identify investment
opportunities in low-carbon sectors;
· Improve our climate related disclosures following the guidelines of the
Task Force on Climate-related Financial Disclosures; considering disclosures
in line with the guidelines of the Task Force on Nature-related Financial
Disclosures; and
· Encourage more companies in the portfolio to measure their total
carbon emissions and to create a decarbonisation roadmap.
VNH's Task Force on TCFD
The Investment Manager engaged VNEEC, a Vietnamese environmental consultant,
to estimate total carbon emissions of all listed companies in the VNH
portfolio as of 31 December 2023. This was followed by an assessment of the
portfolio's climate risks and alignment with the Paris Agreement goals using
scenario analysis and the implied temperature rise metric. We also dug deeper
into estimating the impact value of companies and industries that are more
susceptible to transition risks, according to the assessment report, and
integrated that data into our portfolio construction and investment analysis.
Our response to the core elements of the TCFD recommendations are summarised
in the below table.
Leading Sustainable Governance
VNH's board publicly announced its support of the Paris Agreement and the Task
Force on Climate-Related Financial Disclosures in 2021. During the Annual
General Meeting in 2021, the Board also endorsed a belief statement for
climate, which was later published through media release and the Fund's
website.
Additionally, the Company's ESG Committee has been working closely with the
Investment Manager to enhance its investment strategy by further incorporating
climate related risks and opportunities into the investment process and
overall risk management.
Sustainability matters are also incorporated into the reports sent to
investors. In addition, board members and directors of the Investment Manager
have attended seminars and training in the UK and Asia on climate and
sustainability issues and continue to advocate for greater adherence and
collaboration. The Investment Manager promotes and supports climate
initiatives through industry bodies, such as the AIC, the Singapore Institute
of Directors, AIGCC, and the Vietnam Institute of Directors ("VIOD"), which is
a member of the ASEAN Network for Climate Governance.
Strategy for 2021-2025
As most Vietnam's companies are at the early stage of incorporating climate
change into their business strategies, we continue to focus our engagement
activities on raising portfolio companies' awareness and providing them with
guidelines to measure their total carbon emissions and adopt or develop
low-carbon technology.
We identify physical risks, for example, acute weather events, as well as
transition risks, which include policy, legal and market risks. We do this
across sectors in accordance with our core investment themes:
industrialisation, urbanisation, and the domestic consumer. In our analysis,
we prioritise the best-in-class companies in terms of their adoption of
technological solutions to lower carbon emissions and their disclosures on
carbon footprint in their annual reports, favouring those that prove to be
engaged in strong climate-resilient strategies.
Based on the United Nations Environment Programme Finance Initiative ("UNEP
FI") - which assesses the sector transition risk exposure in terms of direct
and indirect emission costs, low-carbon capital expenditure and change in
revenue - the largest portion of VNH's portfolio in 2023 (47.5% of the NAV) is
allocated in the financial and information technology sector. These sectors
are categorised as "low" transition risks, while another 40.3% of the
portfolio is invested in sectors with "moderate" exposure ratings.
In the financial year, the Fund continued to hold its investment in PVS - a
state-owned company in the oil and gas sector, which has entered the portfolio
from the previous year, and is categorised as "high" risk exposure. However,
PVS, is transitioning its business to support offshore wind power projects and
has signed MOUs with many partners to develop domestic as well as overseas
green energy projects. PVS is also utilising its fleet of specialised offshore
vessels in the construction, operation and maintenance of nearshore windfarms
in Ben Tre, Tra Vinh and Ca Mau provinces and offshore wind farms in Binh
Thuan province. To date, it has secured two contracts overseas with a total
value of USD 350m.
Risk Management
The ESG Committee works closely with the Audit and Risk Committee and the
Investment Manager to incorporate climate risks into the overall risk
management framework (see page 27).
The Investment Manager integrates climate risk assessment into every stage of
the investment processes from initial screening and due diligence to
investment decision and monitoring. Risks as well as the opportunities they
present are discussed regularly during the Investment Committee's meetings and
managed at the portfolio level.
Metrics and Targets
· Portfolio carbon footprint is the key metric we use to measure and
keep track of our progress towards reducing carbon emissions. Our target is to
keep the portfolio carbon footprint 20% below the benchmark index, the Vietnam
All share Index ("VNAS"). We are proud to report that the 2023 portfolio's
carbon footprint is 41.3% below the VNAS benchmark.
· Portfolio's implied temperature rise ("ITR"): The portfolio's ITR
calculation is based on the two models developed by the Climate Action Tracker
(( 4 (#_ftn4) )). The first model is the domestic modelled pathways, in
which, with domestic efforts, Vietnam shall reduce its emission to 114
MtCO(2)e (excluding LULUCF (( 5 (#_ftn5) ))) in 2050 to reach the 1.5(0)C
target. The second model is the effort-sharing model, which sets the budget
considering each country's economic capabilities, and what is considered as
"fair". The remaining budget of Viet Nam in 2050 for reaching the 1.5(0)C
target is 233 MtCO(2)e in the effort-sharing model. Based on the calculation
of VNEEC, the ITR of VNH's 2023 portfolio is 3.85(0)C and 2.80(0)C for the
domestic and the effort-sharing pathways, respectively. This means that the
ITR of the 2023 portfolio is higher than 2(0)C. We are offsetting this by
actively joining in policy dialogue, supporting climate initiatives, and
enhancing our engagement with companies to help them with their own
transitions.
· Portfolio's Weighted Average Carbon Intensity ("WACI"): We use the
WACI metric to assess the portfolio's exposure to carbon-intensive companies
expressed in tCO2/$M revenue, and this is calculated at 107.98 tCO2/$M for
VNH's 2023 portfolio based on Scope 1 and 2 emissions of all companies, which
is lower than the 2022 WACI at 178.23 tCO2/$M.
· Low-carbon investment: In the long-term, from 2025, and with
shareholder approval, we will set a firm target percentage for low-carbon
investment in our portfolio.
Portfolio Carbon Footprint
The attributable carbon footprints of portfolio firms are compared to the
attributable carbon footprints of an identical amount invested in companies in
the Vietnam All Share Index ("VNAS"). The total carbon emissions of VNH
portfolio in 2023 are 41.3% (equivalent to 10,210 tCO2e) lower than the VNAS
benchmark, because of both sector allocation and stock picking. The total
carbon emissions of 2023 Portfolio is also lower than that of 2022 Portfolio
(14,522 and 20,539 tCO2e respectively), due to reducing investment in
carbon-intensive Energy and Materials stocks.
VNH Portfolio VNAS benchmark Difference between
VNH Portfolio vs.
VNAS benchmark
Total Emissions Scope 1 and 2 (tCO(2)e) 14,522 24,732 -10,210
Total Emissions Scope 1, 2 and 3 (tCO(2)e) 38,843 51,588 -12,745
Carbon footprint (tCO(2)e/ USDM Invested) 118.53 201.86 -41.3%
Keeping in line with the UN SDGs
The 17 Sustainable Development Goals ("SDGs"), also known as the Global Goals,
were adopted by the United Nations ("UN") in 2015 as a universal call to
action to end poverty, protect the planet, and ensure that by 2030 all people
enjoy peace and prosperity. With only a little over five years left, it is
crucial that we accelerate our actions if we are to make any meaningful
change. The country's Voluntary National Review shows that Vietnam is
currently on track to achieve four of the 17 SDGs that the country has
committed to for the 2030 Agenda. These include SDG 1, "No poverty"; SDG 6,
"Clean water and sanitation"; SDG 9, "Industry, innovation and
infrastructure"; and SDG 10, "Reduced inequalities". 2022 marked the 45(th)
Anniversary of Vietnam's relationship with the UN, and together with the
Government of Vietnam, the UN launched a new five-year Sustainable Development
Cooperation Framework ("CF") for the 2022 to 2026 period.
The CF specifies four priority outcomes linked to SDG goals for Vietnam for
the next three years, namely inclusiveness and social development;
climate-change response and disaster resilience; environmental sustainability
and shared prosperity through economic transformation; and governance and
access to justice. Progress will be measured against 46 outcome and 57 output
indicators. We have already seen the UN expand its dialogue in Vietnam to
encourage private sector firms to incorporate the UN principles of responsible
business into their operations.
We consider the 17 SDGs to be the most holistic framework that companies would
be wise to start with when developing their sustainability strategy. We are
pleased to see that the SDGs have been incorporated in many of our portfolio
companies' annual reports, with detailed illustrations of how the SDGs are
embedded in their business activities and corporate culture.
For example, FPT, the largest holding in VNH's portfolio, contributes greatly
to SDG 4, "Quality Education", with their extensive education programmes for
staff, their families and communities. GMD, another company in our top five
holdings, has also made efforts to align its business with the SDGs,
especially SDG 9, "Build resilient infrastructure, promote inclusive and
sustainable industrialisation and foster innovation with its extensive green
smart port ecosystem" and SDG 13, "Climate Action".
Additionally, the banking sector, which accounts for approximately 26% of
VNH's portfolio at 30 June 2024, has made notable progress in committing to
the SDGs in recent years. For example, by providing more loans and other
products linked to climate change, helping to accelerate the clean energy
transition and support underprivileged groups. Vietnamese banks also have been
improving their sustainability disclosures. During the financial year, we saw
increasing competition among banks when it came to ESG reporting, with MBB,
ACB, VPB taking the lead.
Seven of our portfolio companies, CTG, FPT, MBB, MWG, PNJ, VCB and VPB, are in
the Vietnam Sustainability Index ("VNSI") 2024, which features the top 20
sustainable listed companies on HOSE measured in terms of their ESG practices.
The number of our portfolio companies included in the VNSI has increased
significantly this year, with their total weights accounting for 36.2% of
VNH's portfolio at 30 June 2024. PNJ is also included in the Corporate
Sustainability Index 2023 developed by the Vietnam Business Council for
Sustainable Development (VBCSD) under the Vietnam Chamber of Commerce and
Industry ("VCCI").
The Importance of G in ESG
Corporate Governance ("CG") is an integral part of any successful business as
it guarantees accountability, transparency, and ethical behaviours. As an
investor, we highly value companies that prove good governance is actually
happening in practice. The CG part in our ESG scorecard has been developed
based on both national regulations and international guidelines, including the
Law on Enterprises, the Law on Securities, Decree 155 on corporate governance
of public companies, Circular 96 on disclosure of information of public
companies, the International Finance Corporation's ("IFC") CG Code of Best
Practices for public companies, and the ASEAN CG Scorecard. It covers a wide
range of governance issues, including board structure, company's commitment to
corporate governance, risk management and control system, transparency and
disclosure, shareholder rights and board oversight of environmental and social
issues.
Although Vietnam's equity markets are still classified as Frontier Markets by
MSCI and FTSE Russell, we think it is a matter of time before they are
upgraded. In anticipation of this, many leading companies have employed the
World Bank's IFC ESG guidebook and other international guidelines to improve
their corporate governance framework. We have observed significant
improvements over the past year in board-level oversight of ESG issues among
our portfolio companies. Nearly one-third of portfolio companies have
established dedicated sub-committees to address key ESG matters. The majority
have sent their directors on corporate governance training courses, and more
than one-third of the companies in the portfolio have certified directors in
their board. In addition, we are pleased to see enhanced investor relations
activities and greater transparency across all our portfolio companies. This
includes more monthly performance updates and quarterly reports, as well as
more content available in English. As noted above, we also are seeing more
sustainability reports from companies following GRI (Global Reporting
Initiative) standards, and this includes improved investor relations support
to address questions from investors.
Dedicated Company Engagement Program
The Investment Manager is active in arranging face-to-face meetings with
several portfolio companies through the Company Engagement Programme to
discuss business strategy and how ESG issues are addressed. During the
financial year, the team continued to have in-depth meetings with portfolio
companies to help improve their ESG practices with practical solutions in the
short and medium term. Although each engagement and conversation is different,
we saw an overall willingness and strong commitment from the boards of our
top-holdings to prioritise sustainability matters in their business agendas.
In the financial year, our engagement with investee companies focused on the
following ESG topics:
· Encouraging companies to improve their ESG public disclosures in
line with international best practices;
· Encouraging companies to develop a decarbonisation roadmap with
science-based targets;
· Discussing how they could establish a satisfactory ESOP plan; and
· Discussing the potential roles and responsibilities of an ESG
officer.
Shareholder Voting
During the financial year, the Company voted at the Annual General Meetings
("AGM") on every portfolio company. This year the AGMs were held in both
online and offline modes. The Investment Manager attended 19 AGMs on behalf of
the Company and voted 100% in favour of all agenda items. The Investment
Manager considered each issue based on its merits related to the strategic
objectives of the Investee Company and its long-term performance.
As part of its usual practice, the Investment Manager discusses the agenda
items with each of the investee companies' board of directors. In all cases
during the past year, the Company voted for every agenda item proposed by the
companies' boards of directors.
Membership and Partnership to Promote ESG Practices
PRI
The Company's investment policy is aligned with the United Nations' Principles
on Responsible Investing ("PRI"), which the Company has been a signatory of
since 2009. Each year, the Company reports on its responsible investment
activities through the PRI Transparency Report. In its 2023 report, the
Company received five-star scores for all sections. The improvement in active
ownership activities was noted, particularly in some of our criteria, such as
the engagement approach, escalation strategy, number of companies engaged
with, the topics covered, and the way we share insights from engagements with
our stakeholders.
Vietnam Institute of Directors (VIOD)
Mr Vu Quang Thinh, the CEO of Dynam Capital, is a founding member of VIOD, a
professional organisation promoting corporate governance standards and best
practices in the Vietnamese corporate sector. VIOD was legally formed in 2018
with technical support from the IFC, which is a member of the World Bank Group
and the Switzerland's State Secretariat for Economic Affairs ("SECO").
Governed by a board of directors comprised of various private sector
representatives, VIOD has close collaboration with and is supported by the
State Securities Commission of Vietnam ("SSC"), HOSE and HNX under the Vietnam
Corporate Governance Initiative ("VCGI"). With the support of SSC, VIOD will
continue to represent Vietnam for participation in the ASEAN Corporate
Governance Scorecard. Our close collaboration with VIOD will continue to play
a key role in fostering good corporate governance in Vietnam over the coming
years.
Asia Investor Group on Climate Change ("AIGCC")
Dynam Capital, our Investment Manager, is a member of AIGCC. Dynam Capital
signed up to the 2022 Global Investor Statement to Governments on the Climate
Crisis, alongside more than 602 investors representing almost USD 42tn in
assets under management, to ask governments to raise their climate ambitions
and implement meaningful policies to address the climate crisis. In addition,
Dynam Capital has been applying AIGCC's Investor Climate Action Plan to set
out VNH's climate strategy, while regularly attending AIGCC's monthly member
meetings (including training sessions) on climate change.
Supporting local initiatives
In the financial year, together with the Investment Manager, we actively
advocated for ESG awareness in Vietnam through being the title sponsor for the
Vietnam ESG Investor Conference 2024. The Investment Manager also helped
strengthen the sustainability conversation in Vietnam through supporting local
media such as The Saigon Times, and Dear Our Communities, a start-up that
produces podcasts and creative media to help young people in the country learn
more about sustainability issues and seek relevant career opportunities.
Principal Risks and Risk Management
The Board has carried out a robust assessment of the Company's emerging and
principal risks and considers with the assistance of the Investment Manager
the risks and uncertainties faced by the Company in the form of a risk matrix
and heat map. The investment management of the Company has been delegated to
the Company's Investment Manager. The Investment Manager's investment process
takes into account the material risks associated with the Company's portfolio
and the holdings in which the Company is invested. The Board monitors the
portfolio and the performance of the Investment Manager at regular Board
meetings. The principal risks and the descriptions of the mitigating actions
taken by the Board are summarised in the table below.
Key risk Description Mitigating action
Market Risk Vietnam is an increasingly open trading nation, and the changes in terms of The Board is regularly briefed on political and economic developments by the
international trade, disruption to supply chains and impositions of tariffs Investment Manager. The Investment Manager publishes a monthly report on the
could impact directly and indirectly the Vietnamese economy and the companies Company which includes information and commentary on the macroeconomic
in which the Company is invested. The Vietnamese economy can also be impacted developments in Vietnam.
by the global-macro economic conditions, and also geopolitical tensions. The
Vietnamese capital markets are relatively young, and liquidity levels can The inherent liquidity levels in the portfolio have been considered explicitly
change abruptly responding to changes in the behaviour of domestic and in the viability of the Company and the Board is reasonably satisfied that
international investors. even in periods of distress and low liquidity there would be an adequate level
of assets that could be realised to meet the liabilities of the Company as
Parts of the portfolio may be prone to enhanced liquidity and price risk. they fall due.
The Board has noted that the underlying market liquidity in Vietnam has
increased dramatically during the last year, and the portfolio composition has
also included a higher percentage of larger and more liquid companies.
Investor Sentiment Vietnam is currently classified as a Frontier Market by MSCI, and the The Investment Manager keeps shareholders and other potential investors
timetable for any inclusion as an Emerging Market is unsure. Investor regularly informed on Vietnam in general and the Company's portfolio in
attitudes to Frontier and Emerging Markets can change, leading to reduced particular. At each Board meeting the Board receives reports from the
demand for the Company's shares, and an increase in the discount to NAV per Investment Manager, from Cavendish Securities plc, its broker, and is updated
share. on the composition of the shareholder register. In 2019 the Company migrated
its domicile from Cayman Islands to Guernsey and moved its trading from AIM to
the Main Market (previously the Premium segment of the Official List) of the
LSE in order to make the shares attractive to a wider audience of potential
investors. In seeking to narrow the discount, the Board has also implemented
an on-going share buy-back programme.
Investment Performance The performance of the Company's investment portfolio could be poor, either The Board receives regular reports on the performance of the portfolio and its
absolutely or in relation to the Company's peers, or to the market as a whole. underlying assets. The Investment Manager reports to the Board at each Board
meeting, and the Board monitors the performance of the Investment Manager.
Fair Valuation The risks associated with the fair valuation of the portfolio could result in The Board reviews the valuation of the portfolio with the Investment Manager
the NAV of the Company being misstated. The quoted companies in the portfolio regularly.
are valued at market price, but it may be difficult to liquidate, where large
positions are held, at these prices in an orderly fashion in the ordinary The daily estimated NAV is calculated by the Investment Manager.
course of market activity. The values of the Company's underlying investments
are denominated in Vietnamese Dong, whereas the Company's accounts are The monthly NAV is calculated by the Fund Administrator.
prepared in US Dollars. The Company does not hedge its Vietnamese Dong
exposures so exchange rate fluctuations could have a material effect on the
NAV.
Investment Management Agreement The fund management activities are outsourced to the Investment Manager. If The Board maintains a close contact with the Investment Manager and reviews
the Investment Manager became unable to carry out these activities or if the the performance of the Investment Manager on a regular basis.
Investment Management Agreement was terminated, there could be disruptions to
the management of the portfolio until a suitable replacement is found.
Operational The Company has no employees and is dependent on a number of third parties for The Board receives regular reports from the Investment Manager and Fund
the provision of services (including Investment Management, Fund Administrator on their policies, controls, and risk management.
Administration and Custody). Any control failures or gaps in the services
provided could result in damage or loss to the Company.
Legal and Regulatory Failure to comply with relevant regulation and legislation in relevant The Company is administered in Guernsey by a Fund Administrator which reports
jurisdictions may have an impact on the Company. Although there are compliance to the Board at each Board meeting on compliance matters. The Board receives
policies (including anti-bribery policies) in place at the Company, the training and updates on compliance matters. The Investment Manager is
Investment Manager and all service providers, the Company could be damaged or regulated in Guernsey and has extensive compliance and risk management
suffer losses if any of these polices were breached. policies in place.
Pandemic Risk The global reach, impact and disruption to markets resulting from the recent The Board and the Investment Manager learned many valuable lessons during
outbreaks of COVID-19 showed the devastating effects that a global pandemic COVID-19 - the Board remains in regular contact with the Investment Manager,
could cause. Lockdowns, quarantine measures and restrictions on travel caused receiving regular updates on the development of any new threats whilst
sustained global economic disruption and the slowdown in growth caused some continuing to ensure that the key service providers to the Company all have
industries and companies to face severe financial pressures. functional Business Continuity Plans.
Climate Risk Climate change is happening faster than models earlier predicted, threatening The Board, through the Investment Manager, has engaged a specialist consulting
the safety of billions of people on the planet. Vietnam is one of the twenty firm in Vietnam to help estimate the portfolio's carbon footprint and identify
countries most vulnerable to climate change. The country's diverse geography the carbon-intensive sectors. The Investment Manager has undertaken to analyse
means it is hit by sea level rise, typhoons, landslides, flooding and the physical and transition risks of climate-sensitive industries to develop
droughts, and weather events are expected to worsen in coming years. Two types an appropriate investment and engagement strategy and to encourage investee
of climate-related risks have been identified. companies to do more on climate-related risk assessment and disclosures. The
Investment Manager monitors investee companies that are identified to be at
(1) Physical risks: sea level rise, floods and typhoons that put high climate risk.
infrastructure or real estate companies with projects in coastal areas or
low-lying levels at higher risk from physical impacts of climate change. The Investment Manager is a member of the Asia Investor Group on Climate
Change and keeps abreast of the changes in policies that may impact transition
(2) Transition risks: climate policy and rising carbon prices may cause higher and other climate-related risks. The Board is in regular contact with the
prices and impact the viability of companies that rely on fossil fuels or Investment Manager and receives reports through the ESG Committee and the
those in carbon intensive activities and may necessitate a significant, and Audit and Risk Committee.
costly, technology shift.
Emerging Risks New risks beyond those identified as Principal Risks can develop. These The Board reviews the risk matrix and risk register that captures and tracks
Emerging Risks may have a detrimental or existential impact on the Company. emerging risks as part of its overall risk management practices. Emerging
Risks are identified and recorded with a description of their root cause, a
risk assessment, a description of mitigating actions, a monitoring plan, and a
net risk rating. Changes in risk ratings are presented to the Board on a
quarterly basis. There are no emerging risks to bring to the attention of
the shareholders at the date of the Annual Report.
Director Profiles and Disclosure of Directorships
All of the Directors are Non-executive Directors and the majority are
independent of the Investment Manager.
Hiroshi Funaki (Chairman)
Mr Funaki has been actively involved in raising, researching and trading
Vietnam funds since 1995. He worked at Edmond de Rothschild Securities from
2000 to 2015 where he led the Investment Companies team, focusing on Emerging
Markets and Alternative Assets. Prior to that he was Head of Research at
Robert Fleming Securities, also specialising in closed-end funds. He currently
acts as an investment adviser to a Family Office. He has a MA in Mathematics
and Philosophy from Oxford University.
Philip Scales (Audit and Risk Committee Chairman and Management Engagement
Committee Chairman)
Mr Scales has over 40 years' experience working in offshore corporate, trust,
and third-party fund administration. For 18 years, he was managing director of
Barings Isle of Man (subsequently to become Northern Trust) where he
specialised in establishing offshore fund structures, mainly in the
closed-ended arena (both listed and unlisted entities). Mr Scales subsequently
co-founded FIM Capital Limited and is Chairman of FIM Holdings Limited. He is
a Fellow of the Institute of Chartered Secretaries and Administrators and
holds a number of directorships of listed companies and collective investment
schemes.
Saiko Tajima (Remuneration and Nomination Committee Chairman)
Ms Tajima has over 20 years' experience in finance, of which 8 years have been
spent in Asian real estate asset management and structured finance. Working
for Aozora Bank and group companies of Lehman Brothers and Capmark, she
focused on financial analysis, monitoring and reporting to lenders, borrowers,
auditors, regulators, and rating agencies. Over the last 9 years, she has
invested in and helped develop tech start-ups in Tokyo, Seoul, and Sydney. She
is a Certified Public Accountant in the US.
Connie Hoang Mi Vu (Environmental, Social and Governance Committee Chairman)
Ms Vu is a partner at Raise Partners, a consultancy that advises clients on
ESG strategy and partnerships. She has over 20 years of experience in ESG and
international development and is one of Vietnam's leading experts on human
trafficking, modern slavery, and labour migration. Ms Vu is a Board Member of
the Belgium Luxembourg Chamber of Commerce Vietnam and a Vice-Chair of the
European Chamber of Commerce's Women in Business Committee. She has a BA from
University of Michigan and MPA in International Nonprofit Policy &
Management from New York University.
Disclosure of Directorships in Public Companies Listed on Recognised Stock
Exchanges
Name Company Name Stock Exchange
Philip Scales First World Hybrid Real Estate plc Channel Islands
Corporate Governance Report
The Directors are responsible for the determination of the overall management
of the Company including its investment policy and strategy. This includes the
review of investment activity, performance and control and supervision of the
Investment Manager and other advisers. The Directors are all Non-executive and
the majority are independent of the Investment Manager.
The Board is also responsible for its own composition, capital raising,
meeting statutory obligations and public disclosure, financial reporting and
entering into any material contracts on behalf of the Company.
The Directors have access to the advice and services of the Administrator and
Secretary, who are responsible to the Board for ensuring that Board procedures
are followed and that it complies with Company Law, applicable rules and
regulations of the Guernsey Financial Services Commission, the London Stock
Exchange and The International Stock Exchange.
Where necessary, in carrying out their duties, the Directors may seek
independent professional advice at the expense of the Company.
The Board of the Company has considered the Principles and Provisions of the
Association of Investment Companies Code of Corporate Governance issued in
February 2019 ("AIC Code"). The AIC Code addresses the Principles and
Provisions set out in the UK Corporate Governance Code (the "UK Code"), as
well as setting out additional Provisions on issues that are of specific
relevance to the Company. The Board and its advisors are aware of the new code
and will carry out a review to ensure that it remains compliant.
The Board considers that reporting against the Principles and Provisions of
the AIC Code, which has been endorsed by the Financial Reporting Council and
the Guernsey Financial Services Commission provides more relevant information
to Shareholders. The Board also considers by reporting against the AIC Code,
they are meeting their obligations under the UK Code, the 2011 GFSC Finance
Sector Code of Corporate Governance and associated disclosure requirements
under paragraph 9.8.6 of the Listing Rules.
The AIC Code is available on the AIC website (www.theaic.co.uk). It includes
an explanation of how the AIC Code adapts the Principles and Provisions set
out in the UK Code to make them relevant for investment companies.
Except as disclosed within this report, the Board is of the view that the
Company complied with the recommendations of the AIC Code and the relevant
provisions of the AIC Code during the year ended 30 June 2024. Key issues
affecting the Company's corporate governance responsibilities, how they are
addressed by the Board and application of the AIC Code are presented below.
Liaison with Shareholders is dealt with by the Chairman of the Company and the
Directors working closely with the Company's Advisors.
Directors' Responsibilities to Stakeholders
Section 172 of the UK Companies Act 2006 applies directly to UK domiciled
companies, however the AIC Code requires that the matters set out in Section
172 are reported by all companies, irrespective of domicile. This requirement
does not conflict with the Companies Law in Guernsey.
Section 172 recognises that Directors are responsible for acting in a way that
they consider, in good faith, is most likely to promote the success of the
Company for the benefit of its shareholders as a whole. In doing so, they are
also required to consider the broader implications of their decisions and
operations on other key stakeholders and their impact on the wider community
and the environment.
Key decisions are defined as those that are material to the Company, but also
those that are significant to any of the Company's key stakeholder groups. The
Company's engagement with its key stakeholders is outlined on page 35 of the
corporate governance section of this report.
Board Independence and Composition
The Directors are all Non-executive and the majority are independent. Two of
the Board members were appointed in September/October 2017 following the
retirement of the previous Board and the third member was appointed in May
2019 following the retirement of a Board member at the 2018 AGM. The fourth
member was recently appointed in March 2024 following the resignation of two
Board members at the 2023 AGM.
Mr Funaki is a Director of Discover Investment Company which at 30 June 2024
held 1,415,776 ordinary shares in the Company representing 5.2% of the issued
share capital. The Board are satisfied that this does not have any impact on
Mr Funaki's independence as a Director of the Company.
As detailed in note 8 of the financial statements, Directors own shares in the
Company as follows:
Hiroshi Funaki 19,887
Philip Scales 10,077
Saiko Tajima 5,000
The Board reviews the independence of the Directors regularly and at least
annually.
The Board acknowledges the benefits of greater diversity and welcomes the
recommendations from the Hampton-Alexander Review on gender diversity and the
Parker Review on ethnic representation. The Remuneration and Nomination
Committee will consider diversity generally when making recommendations for
appointments to the Board but with the principal aim that any new appointment
is filled by the most appropriate candidate based on a range of skills,
knowledge and experience appropriate for an investment trust.
In all of the Board's activities, there has been and will be no discrimination
on the grounds of gender, race, ethnicity, religion, sexual orientation, age
or physical ability.
The Board notes the new Listing Rules requirements regarding the targets on
board diversity:
· at least 40% of individuals on the Board are women;
· at least one senior Board position (chairman, chief executive
officer ("CEO"), senior independent director or chief financial officer
("CFO")) is held by a woman; and
· at least one individual on the Board is from a minority ethnic
background, defined to include those from an ethnic group other than a white
ethnic group, as specified in categories recommended by the Office for
National Statistics.
As required by the Listing Rules, reporting against these targets is set out
in the tables below in the prescribed format. The data was collected on a
self-identifying basis.
Gender identity/ sex No of Board Members Percentage of Board No of senior positions on the Board Number in Executive team Percentage of Executive Team
Male 2 50% 2 - N/A
Female 2 50% 2 - N/A
Not specified - - - - N/A
Ethnic Background No of Board Members Percentage of Board No of senior positions on the Board Number in Executive team Percentage of Executive Team
White British or other (including other minorities) 1 25% 1 - N/A
Asian/ Asian British 3 75% 3 - N/A
Mixed/ multiple Ethnic groups - - - - N/A
Not specified - - - - N/A
The Board is pleased to announce that as at 30 June 2024, it achieved a 50/50
gender representation.
The Company is an externally managed investment trust meaning there is no CEO
or CFO, however the Board considers that the Chairman of any of the Company's
Committees to be a senior position.
The Board notes also that 40% of the team members employed by the Investment
Manager and its subsidiary in Vietnam are female and 90% are ethnically
Vietnamese.
The Board believes the current board members have the appropriate
qualifications, experience, and expertise to manage the Company. The
Directors' biographies can be found on page 30.
Board Meetings and Attendance
The Board meets regularly during the year with representatives from the
Investment Manager present. In addition, representatives from the Company's
Broker and Administrator attend Board and committee meetings by invitation. At
each quarterly Board meeting the performance of the portfolio is formally
reviewed and during the year, Board members also attend investment meetings
with members of the Investment Manager's senior team. The Board members have a
range of skills covering investment management, banking, compliance, ESG and
corporate governance as well as prior experience of acting as directors of
companies listed on the London Stock Exchange.
The Company's brokers and lawyers are consulted on any matters where external
expertise is required, and external advisers attend board meetings as invited
by the Chairman to report on and/or discuss specific matters relevant to the
Company.
During the year 4 Board meetings were held and the record of attendance at
each Board and committee meeting was as follows:
Board Audit and Risk Remuneration and Nomination Management Engagement Environmental, Social and Governance
Hiroshi Funaki 4 (4) 4 (4) 2 (2) 2 (2) 2 (2)
Philip Scales 4 (4) 4 (4) 2 (2) 2 (2) 2 (2)
Saiko Tajima 4 (4) 4 (4) 2 (2) 2 (2) 2 (2)
Connie Hoang Mi Vu 1 (1) 1 (1) 1 (1) 1 (1) 1 (1)
Sean Hurst and Damien Pierron stood down at the AGM and resigned as Directors
of the Company effective 21 December 2023.
Re-election of Directors
The Board has agreed that all Directors should submit themselves for annual
re-election.
Mr Funaki, Mr Scales, Ms Tajima and Ms Vu will all stand for re-election at
the 2024 AGM.
The individual performance of each Director standing for re-election or
election has been evaluated by the other members of the Board and a
recommendation will be made that Shareholders vote in favour of their
re-election at the AGM in November 2024.
Administration
On 7 October 2019 the Board appointed Sanne Group (Guernsey) Limited to
provide corporate governance, secretarial, compliance and accounting services
to the Company.
Conflicts of Interest
The Directors are reminded at each Board meeting of their obligations to
notify any changes in their statement of conflicts and also to declare any
benefits received from third parties in their capacity as a Director.
A register of conflicts is maintained by the Administrator and formally
reviewed on a quarterly basis. Each Director is required to declare any
potential conflicts of interest on an ongoing basis.
Performance Evaluation
During the year the Board undertook an evaluation exercise into the
effectiveness of both the Board and the Committees. The programme was
undertaken by the Administrator and no significant issues were identified.
The Remuneration and Nomination Committee will again consider whether for the
next evaluation due in 2025, an external facilitator should be appointed to
undertake the evaluations in line with AIC recommendations.
Professional Development and Training
New Directors are provided with all relevant information regarding the
Company's business and given the opportunity to meet with key functionaries
prior to appointment. They are also provided with induction training.
It is the responsibility of each Director to ensure that they maintain
sufficient knowledge to fulfil their role and so are encouraged to participate
in seminars and training courses where appropriate.
Committees of the Board
Four Committees have been formed, an Audit and Risk Committee, a Remuneration
and Nomination Committee, a Management Engagement Committee and an ESG
Committee. Since September/October 2017 the Company has been through a period
of considerable change and apart from the Management Engagement Committee, all
Board members are members of each committee. The Chairman of the Company does
not Chair any of the Committees.
Details of the Chairman of each committee, together with the number of
meetings held during the year are shown on page 33. A summary of the Terms of
Reference of each committee is detailed below and a copy of the Terms of
Reference are available on the Company's website www.vietnamholding.com.
Audit and Risk Committee
The Chairman of the Audit and Risk Committee is Philip Scales and the
Committee meets at least twice per annum. All members of the Board are members
of the Committee. This includes the Chairman of the Company where, given the
size of the Board, the experience of all members and the independence of the
Company Chairman, it is felt appropriate that all Board members play a role in
the Audit and Risk Committee. The principal responsibility of the Committee is
to monitor the production of the Interim and Annual Financial Statements and
to present these to the Board for approval.
Other duties include reviewing the internal financial controls and monitoring
third party service providers, review and monitor the external auditor's
independence and objectivity along with the effectiveness of the audit process
and to make recommendations to the Board in relation to the appointment of the
External Auditor together with their remuneration.
A report of the Audit and Risk Committee is detailed on pages 37 to 38.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee is chaired by Saiko Tajima and all
members of the Board are members of the Committee. The Board considers that a
majority of the Directors are independent and therefore eligible to be members
of the Committee. The Committee meets at least once in each year and at such
other times as may be considered necessary.
The principal duties of the Remuneration and Nomination Committee are to
review the fees paid to the Non-executive Directors, to consider the
appointment of external remuneration consultants, to review the structure,
size and composition of the Board, make recommendations to the Board for any
changes and to consider succession planning. The Committee also undertakes the
evaluation of the appointment of any additional or replacement Directors and
ensures they are provided with training and induction. The Committee arranges
for an annual evaluation of all Board and Committee members.
During the year the Committee reviewed the fees paid to Directors and resolved
that no changes be recommended.
The Board appointed Connie Hoang Mi Vu as an Independent Non-executive
Director with effect from 25 March 2024.
Management Engagement Committee
The Chairman of the Management Engagement Committee is Philip Scales and the
Committee shall meet at least once a year. All members of the Board other than
Saiko Tajima are members of the Committee. The principal duties of the
Committee are to review the performance and appointment of the Investment
Manager together with their remuneration and to review the effectiveness and
competitiveness of the other main service providers and functionaries together
with reviewing their performance.
A share buy-back sub-committee consisting of Hiroshi Funaki and Philip Scales
has been formed under the Management Engagement Committee and meets
periodically to review and monitor the share buy-back programme.
During the year the Committee reviewed the performance of the Investment
Manager, Administrator and Sub-Administrator, Corporate Broker and Registrar.
No changes were recommended as a result of these reviews.
Environmental, Social and Governance Committee
The ESG Committee was established in 2021 and is chaired by Connie Hoang Mi Vu
with all members of the Board forming the Committee. The aim of the Committee
is to establish a unified view of ESG, increasing understanding of all three
aspects: environmental, social and governance, and to promote the robust
standards of corporate governance that the Company adopts.
The purpose of the ESG Committee, which shall meet at least once a year, is to
support the Company's on-going commitment to environmental, health and safety,
corporate social responsibility, corporate governance, sustainability, and
other public policy matters relevant to the Company (collectively, "ESG
Matters").
Shareholder Engagement
The Company is committed to listening and communicating openly with its
Shareholders to ensure that its strategy, business model and performance are
clearly understood. All Board members have responsibility for Shareholder
liaison. Shareholder contact is dealt with by the Chairman of the Company and
the Directors in close liaison with the Company Advisors.
Copies of the Annual Report are sent to all Shareholders and can be downloaded
from the website. Other Company information including the Interim Report is
also available on the website.
The Company holds an AGM each year, which gives investors the opportunity to
enter into dialogue with the Board and for the Board to receive feedback and
take action as necessary. The Investment Manager also participates in meetings
with investors arranged by the Company's Broker and has arranged seminars and
webinars to update current and prospective investors on the developments in
the Vietnamese market and the performance of the Company. The Investment
Manager also updates the Company's website and sends out monthly factsheets on
the Company to investors who have registered to receive such updates. The
Company has a LinkedIn page which is administered by the Investment Manager.
The Board reviews proxy voting reports and any significant negative response
is discussed with relevant Shareholders and, if necessary, where appropriate
or possible, action is taken to resolve any issues. In the interest of
transparency and best practice, the level of proxy votes (for, against and
vote withheld) lodged on each resolution is declared at all general meetings
and announced.
Corporate Policies
Anti-Bribery and Corruption Policy
The Board is committed to the prevention of bribery throughout the
organisation and will take every step necessary to ensure to the best of its
ability that business is conducted fairly, honestly and openly. It has adopted
a formal policy to combat fraud, bribery and corruption and will seek annual
confirmation from the Investment Manager and other service providers it
engages that they have similar policies in place. Furthermore, the Board has
zero tolerance to the criminal facilitation of tax evasion. These policies
apply to the Company and to each of its Directors. Further, the policies are
shared with each of the Company's service providers, each of which confirms
its compliance annually to the Board.
Criminal Facilitation of Tax Evasion Policy
The Board has taken steps to ensure there is no criminal facilitation of tax
evasion. This applies to the Company and to each of its Directors, as well as
service providers. A policy has been adopted by the Board.
General Data Protection Regulation
The Company abides by general data protection regulation. As it is established
in the Bailiwick of Guernsey, under The Data Protection (Bailiwick of
Guernsey) Law, 2017, the Company has registered with the Office of the Data
Protection Authority.
The Company
Global Greenhouse Gas Emissions
The Company has no significant greenhouse gas emissions to report from its
operations for the year to 30 June 2024, nor does it have responsibility for
any other emission producing sources. The Company is very conscious of its own
carbon footprint in carrying out its business activities. The main source of
this for the Company is in the international and domestic air travel of the
Board of Directors and members of the Investment Manager in conducting the
business of the Company and meeting with Shareholders. During the year members
of the Board travelled to Vienna, Hong Kong, Dubai and Ho Chi Minh City in
conducting the business of the Company whilst some meetings were held via
video conference. The estimated carbon footprint of travel activities (that
have not already been offset at source) amounts to approximately 64.19 tonnes
of CO(2)e(.)
The Company engaged a specialist consulting firm to estimate the carbon
footprint of the portfolio, and this is detailed in the Sustainability Report.
Gender Metrics
The Board of the Company recognises the governance mechanism to ensure there
is diversity amongst the Directors and as such the Board now achieves a 50/50
gender representation. The Board is committed to treating all equally and
considers all aspects of diversity including gender and ethnic diversity. The
Remuneration and Nomination Committee will consider diversity when making
recommendations for appointments to the Board but with the principal aim that
any new appointment is filled by the most appropriate candidate based on a
range of skills, knowledge and experience appropriate for an investment trust.
Audit and Risk Committee Report
The main items that the Audit and Risk Committee (the "Committee") has
considered and reviewed during the year ended 30 June 2024 were:
● the content of the Interim Report and the Annual Report;
● the independence and effectiveness of the External Auditor;
● the internal control and risk management systems and the work of
the service providers; and
● the control framework with the assistance of the Investment
Manager and Administrator.
Internal Control
As a company with a Board consisting of Non-executive Directors and which
outsources the day-to-day activities of portfolio management, administration,
accounting and company secretarial to external service providers, the Board
considers the provision of an internal audit function is not relevant to the
position of the Company.
The Committee reviews the internal financial control systems for their
effectiveness and through the Management Engagement Committee, monitors the
performance of the external service providers. The Board recognises its
ultimate responsibility for the Company's system of internal controls to
ensure the maintenance of proper accounting records, the reliability of the
financial information upon which business decisions are made and that the
assets of the Company are safeguarded. Through these procedures, the Directors
have kept under review the effectiveness of the internal control system
throughout the year and up to the date of this report. There were no issues
arising from this review.
Membership and Attendance
The Committee membership currently consists of all Board members under the
Chairmanship of Philip Scales. This includes the Chairman of the Company
where, given the size of the Board, the experience of all members and the
independence of the Company Chairman, it is felt appropriate that all Board
members play a role in the Audit and Risk Committee. The Terms of Reference
allow appointments to the Committee for a period of up to 3 years and this may
be extended for two further 3-year periods provided that the Director remains
independent.
The Committee holds at least two meetings a year which are to review the
Annual and Half-Year Reports of the Company and also for audit planning
purposes and a review of risks relevant to the Company. Details of the number
of committee meetings held during the year ended 30 June 2024 and the number
of those attended by each committee member are shown on page 33.
The External Auditor is invited to attend committee meetings where the Annual
and Half-Year Reports are considered, and separate meetings are held with the
External Auditor where the Investment Manager is not present.
Principal Duties
During the year the Committee has:
● monitored the integrity of the financial statements of the Company
and any formal announcements relating to the Company's financial performance;
● reviewed the Company's internal financial controls and the
internal control and risk management systems of the Company and its
third-party service providers;
● made recommendations to the Board in relation to the appointment
of the External Auditor and their remuneration;
● reviewed and monitored the External Auditor's independence and
objectivity and the effectiveness of the audit process; and
● challenged the Investment Manager on the scenarios used to support
the going concern basis and the ongoing viability assessment.
A copy of the Terms of Reference of the Committee is available either from the
Company's website or from the Company's Administrator.
Valuation of Investments
The fair value of the Company's investments at 30 June 2024 was USD 134.9
million which represented 96.3% of the Company's NAV (30 June 2023: USD 113.2
million and 98.2% respectively). The valuation of investments is the most
significant factor in relation to the accuracy of the financial statements.
The Committee reviewed the portfolio valuation as at 30 June 2024 and obtained
confirmation from the Investment Manager that the Company's policies on the
valuation of investments had been followed. The Committee also made enquiries
of the Sub-Administrator and Custodian, both of whom are independent of the
Company, to check procedures are in place to ensure the portfolio is valued
correctly.
The Committee agreed to the approach to the audit of the valuation of
investments with the External Auditor prior to the commencement of the audit.
All the investments will be independently checked by the External Auditor. The
results of the audit in this area were reported by the External Auditor and
there were no significant disagreements between the Investment Manager, the
Sub-Administrator and the External Auditor's conclusions.
The Board reviews the changes in valuations at each quarterly Board meeting.
External Audit
KPMG Channel Islands Limited ("KPMG") has been the External Auditor since the
Company re-domiciled in Guernsey on 25 February 2019. The Committee held
meetings with KPMG before the start of the audit to discuss formal planning
and to discuss any possible issues along with the scope of the audit and
appropriate timetable. Informal meetings have also been held with the Chairman
of the Committee in order that the Chairman is kept up to date with the
progress of the audit and formal reporting required by the Committee.
Annually, the Committee reviews the performance of KPMG in order to recommend
to the Board whether or not the Auditors should be reappointed for the next
year.
Audit fees payable to KPMG for 2024 are GBP 66,900 (2023: GBP 62,200). Non
audit fees payable to KPMG for 2024 were GBP nil (2023: GBP nil).
The Committee has reviewed KPMG's report on their independence and
objectivity, including their structure for the audit of the Company and is
satisfied that the services provided by KPMG do not prejudice its
independence. The Committee will continue to review any non-audit services
that may be provided by KPMG in order to ensure their continuing independence
and integrity.
Risk Management
An outline of the risk management framework and principal risks is detailed on
pages 27 to 29. The Committee will keep under review financial and operational
risk including reviewing and obtaining assurances from key service providers
for the controls for which they are responsible.
Anti-Bribery and Corruption
The Company has a zero-tolerance approach to bribery and corruption, in line
with the UK Bribery Act 2010. An Anti-Bribery and Corruption Policy has been
adopted and is kept under review.
Annual Report
The Committee has reviewed the Annual Report along with reports and
explanations from the Company's Investment Manager, Administrator, and other
service providers. The Committee is satisfied that the Annual Report is fair,
balanced, and understandable and that it provides the necessary information
for Shareholders to assess the Company's performance, business model, and
strategy.
The Committee is satisfied that KPMG has fulfilled its responsibilities in
respect of the annual audit and has recommended that KPMG be re-appointed for
the forthcoming financial year.
Philip Scales
Audit and Risk Committee Chairman
1 October 2024
Directors' Remuneration Policy and Report
Remuneration Policy
The Directors are entitled to receive fees for their services which reflect
their experience and the time commitment required. At the Annual General
Meeting to be held in November 2024 an ordinary resolution seeking approval
for the Directors' remuneration report will be put to Shareholders.
Directors' Remuneration
Directors' fees are paid within limits established in the Articles of
Incorporation which shall not exceed an aggregate of USD 350,000 in any
financial year (or such sum as the Company shall from time to time determine).
The Directors may also be paid reasonable travelling, hotel and other
out-of-pocket expenses properly incurred in attending Board, committee
meetings or general meetings. The Remuneration Committee reviews the
Directors' fees periodically although the review will not necessarily result
in any increase. For the year ended 30 June 2024 annual Directors' fees
remained at USD 50,000 with the Chairman of the Company receiving an
additional USD 10,000 per annum or prorated as applicable and the Chairman of
the Audit and Risk Committee receiving an additional USD 5,000 per annum or
prorated as applicable.
The Directors are also paid a per diem fee of USD 1,500 for each Board meeting
attended and USD 750 for a committee meeting attended, either in person or by
telephone.
The Company has no bonus schemes, pension schemes, share options or other
long-term incentive schemes in place for the Directors.
The single total figure of remuneration for each Director who served during
the year ended 30 June 2024 and the previous year is as follows:
Year ended 30 June 2024 Year ended 30 June 2023
Additional Additional
Base Fees Ad hoc Fees Total Based Fees Ad hoc Fees Total
Director USD USD USD USD USD USD
Hiroshi Funaki (Chairman) 60,000 6,750 66,750 60,000 11,250 71,250
Philip Scales (Audit and Risk Committee Chairman) 55,000 6,000 61,000 55,000 6,750 61,750
Saiko Tajima 50,000 6,000 56,000 50,000 6,750 56,750
Connie Hoang Mi Vu 13,320 1,500 14,820 - - -
Sean Hurst (Resigned) 27,759 3,078 30,837 55,901 11,700 67,601
Damien Pierron (Resigned) 25,000 3,215 28,215 50,000 11,832 61,832
Total 231,079 26,543 257,622 270,901 48,282 319,183
Sean Hurst and Damien Pierron stood down at the AGM and resigned as Directors
of the Company effective 21 December 2023.
Directors' Report
The Directors present the Annual Report and Financial Statements of the
Company for the year ended 30 June 2024.
The Company
VietNam Holding Limited (the "Company") is a closed-end investment company
that was incorporated in the Cayman Islands on 20 April 2006 as an exempted
company with limited liability under registration number 166182. On 25
February 2019, the Company, via a process of cross-border continuance,
transferred its legal domicile from the Cayman Islands to Guernsey and was
registered as a closed-ended company limited by shares incorporated in
Guernsey with registered number 66090.
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 held on 21 December 2023 the Shareholders
voted in favour of the continuance resolution, authorising the Company to
operate in its current form through to the 2028 Annual General Meeting when a
similar resolution will be put forward for Shareholders' approval.
Dynam Capital, Ltd 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.
Annual Redemption Facility
At the Extraordinary General Meeting of the Company held on 21 December 2023
shareholders voted in favour of a proposal that introduced an innovative
redemption structure that gives shareholders an annual opportunity to realise
their holding in the Company at fair market value. The first Redemption Point
was on 30 September 2024 and every year thereafter.
As part of the introduction of the redemption facility the Company was
accepted into the Reporting Fund regime by HMRC with effect from 1 July 2024.
Further details on the tax consequences are detailed in the Circular dated 27
November 2023.
Shareholders are advised to consider their investment objectives and their own
individual financial and tax circumstances and should seek independent
professional tax advice and advice from their own independent financial
adviser authorised under the Financial Services and Markets Act 2000 as
appropriate.
Results
The net profit for the year ended 30 June 2024 amounted to USD 26,522,608
(2023: loss of USD 8,622,089). There were no dividends declared during the
year ended 30 June 2024 (2023: USD nil).
Going Concern
The financial position of the Company, its cash flows and liquidity position
are described in Financial Statements and the Notes to Financial Statements.
These also contain the Company's objectives, policies, processes for managing
its capital, its financial risks management objectives, details of its
financial instruments, and its exposures to credit risk and liquidity risk.
The Company's forecasts and projections have been stress tested taking into
account the potential for (i) asset value declines, (ii) declines in cash
dividends from equities held in the portfolio and (iii) share buybacks and
tender offers. The Directors note that the underlying liquidity of Vietnamese
stocks has continued to improve during the year. The Director's also note
that the portfolio is composed of a high percentage of larger and more liquid
stocks. Lastly, the Directors note that at year-end the portfolio is comprised
of cash and quoted stocks only. The Company's liquidity position, taking into
account cash held and with the ability to sell underlying assets to meet share
buybacks, tenders and to meet the operating costs of the Company, shows that
the Company is able to operate with appropriate liquidity and be able to meet
its liabilities as they fall due.
At the Annual General Meeting and Extraordinary General meeting held on 21
December 2023, shareholders voted in favour of the Company continuing for a
further five years as well as the introduction of an annual Redemption
Facility. The first Redemption Date was 30 September 2024.
On 1 October, the Company announced a total of 3,406,598 ordinary shares were
validly tendered for redemption and will be redeemed under the 2024 redemption
opportunity. These ordinary shares represent approximately 12.6% of the
ordinary shares in issue as at 31 August 2024. The Board resolved that the
redemption price will be based on VNH's official net asset value per share as
at 30 September 2024 and it is anticipated that payments will be made to
redeeming shareholders by the end of October 2024.
The portfolio liquidity remains relatively high, and the investment manager
does not anticipate any difficulty in raising the cash required. Therefore,
the Board is confident that the redemption facility will not cause any
material uncertainty over the going concern of the Company.
The Directors have a reasonable expectation that the Company will have
adequate resources to continue its operations for the foreseeable future.
Thus, they continue to adopt the going concern basis of accounting in
preparing the financial statements.
Viability Statement
The Board has considered the viability period for the Company, using the
criteria set out in the UK Corporate Governance Code. The Board considered the
current position of the Company, and its longer-term prospects, strategies as
well as its principal risks in the current, medium and long-term, as detailed
in the Principal Risks and Risk Management on pages 27 to 29 and in the
Investment Manager's Report on pages 6 to 9.The strategy provides long term
direction and is reviewed annually and further tested in a series of robust
downside financial scenarios as part of the annual review. These scenarios
included an assessment of those risks that would threaten its strategic
objectives, its business-as-usual state, its business model and its future
performance, solvency or liquidity. The sensitivity analysis was applied to
the forecasted cash flows. Based on this assessment, the Board has determined
that a three-year viability period to 30 June 2027 is an appropriate period
and that the Company will be able to continue in operation and meet its
liabilities as they fall due over the period of three years. The Board notes
the approval and adoption by shareholders of an annual Share Redemption
facility, with the first redemption period being in September 2024. Given that
the Company's assets are listed equities, and that the Investment Manager has
estimated that on prevailing market conditions more than 95% of the portfolio
could be liquidated in less than 30 days, the Board is comfortable that enough
liquidity could be generated to satisfy any amount of redemption request made
by shareholders. The Board also travelled to Vietnam in January 2024, meeting
with the research team of the Investment Manager, portfolio companies and
market commentators, and will visit again in November 2024.
In arriving at this conclusion, the Board considered:
- The volatility of global economic conditions, the war in Ukraine and
inflation:
The Board considered the impact and effectiveness of mitigation strategies
being mandated by governments in impacted countries; the adverse financial
impact already being experienced by the Company: the disruption to economic
activity and financial pressures and impact on investments in the Company's
portfolio. The Board also engaged with the Investment Manager on the
longer-term impact of climate change, and other societal change factors, to
the portfolio. Additionally, the Board took into consideration the impact on
the capital markets in Vietnam; the existence and effectiveness of business
continuity plans of the Company and its service providers that had been tried
and tested during the COVID-19 pandemic. The Board reviewed macro-reports and
updates from the Investment Manager detailing the impacts of rising inflation
and rising interest rates in the US and Europe on Vietnam, risks of global
recession and also the direct impacts of the continuing war in Ukraine.
- Business environment:
Despite the continuing visible signs of economic recovery which the Board were
able to see first-hand on their visit to Vietnam in January 2024, evidenced in
part by greater tourist arrivals (back to pre-pandemic levels) and broader
economic recovery, the domestic real-estate market, bond market and consumer
market have faced some challenges. The Company's strategy for investing in a
portfolio of equities in Vietnam and targeting growth in the value of the
portfolio over the medium term is unchanged and this coupled with a nimble
approach to portfolio construction has helped the Company navigate the
uncertain market conditions. The combination of potential structural
opportunities that may benefit Vietnam as a destination for manufacturing, and
the opportunities within the growing domestic market provide attractive
investment opportunities. The direct impact of the war in Ukraine on Vietnam
appears to be manageable, with less than 1% of trade to Russia and Ukraine.
The levels of inflation in Vietnam are less pronounced than those in Europe
and the US, and the macro-economic position appears to be stronger than in
many other frontier and emerging economies.
- Operations:
2023 was thankfully free from any significant operational changes. The
restrictions in place during the pandemic of 2020-2022 tested the Business
Continuity protocols of the Board, the Investment Manager and other service
providers. The smooth operation of the Company through the various
restrictions and lockdowns reassured the Board that these protocols are
effective and can, if necessary, operate effectively without the need for
physical meetings or an office presence. The Board, Investment Manager,
Administrator, and other service providers have all demonstrated that they can
work effectively and efficiently, and if needed remotely.
- Investment:
· The liquidity of the Company's underlying portfolio is relatively
high: although average daily trading volumes on Vietnam's stock markets
declined during the first half of the year, the volumes recovered in the
second half. All investments are in listed companies which have relatively
high liquidity. At year end there were no unquoted investments and all
securities are 'Level 1'. It is estimated that 95% of the portfolio can be
readily liquidated in less than 30 days. The portfolio is un-geared and, as it
holds all listed securities, has sufficient liquidity to meet the Company's
liabilities.
· The current portfolio is low to medium risk based on assessments
both individually and in combination of liquidity risk, credit risk, interest
rate risk and currency risk. The Investment Manager and the Board review and
evaluate the portfolio on a monthly basis.
- Principal risks:
The Board's review considered the Company's cash flows and income flows, with
reference to operational, business, market, currency, liquidity, interest rate
and credit risk associated in financial instruments set out in Note 3
(Financial Instruments and Associated Risks) and Note 4 (Operating Segments)
of the financial statements on pages 59 to 62 .The statistical modelling is
used to quantify these risks, which ensures that the Company holds sufficient
financial assets and capital to mitigate the impact of these risks.
- Incomes and expenses:
· The Company has a portfolio that generates investment income
through dividends payments. The cash dividends received can be used to
partially offset the Company's on-going expenses. In the year under review,
total on-going expenses were covered 0.78 times by investment income. In the
following year, the current investment income is forecast to cover 0.75 times
the amount of on-going expenses. In the stress-tested scenario with
significant declines in cash dividends forecasted, the investment income is
forecast to cover 0.66 times on-going expenses.
· The Company maintains a cash buffer to help meet on-going
expenses. At 30 June 2024 this was 2.1% of NAV.
Given the adequate levels of cover set out above, the cash buffer, the
liquidity levels and the overall portfolio risk, the Board has reasonable
expectations that the Company can continue in operation and meet its
liabilities over the forecast period.
The Company's viability depends on the global economy and markets continuing
to function. The Board has also considered the possibility of a wide-ranging
collapse in corporate earnings and/or the market value of listed securities.
To the latter point, it should be borne in mind that a significant proportion
of the Company's expenses are in investment management fees linked to the
level of net assets of the Company, which are therefore variable in nature and
would naturally reduce if the market value of the Company's assets were to
fall.
In order to maintain viability, the Company has robust risk controls as set
out in the Directors' Report and the risk management and control framework
have the objectives of monitoring and reducing the likelihood and impact of
operational risks including poor judgement in decision-making, risk-taking
that exceeds the levels agreed by the Board, human error, or control processes
being deliberately ignored.
In this context, the Board considers that the prospects for economic activity
will remain such that the investment objective, policy and strategy of the
Company will be viable for the foreseeable future and through a period of at
least three years from 30 June 2024.
Key Performance Indicators ("KPIS")
To ensure the Company meets its objectives the Board evaluates the performance
of the Investment Manager at least at each quarterly Board meeting and takes
into the following performance indicators:
● NAV - reviews the performance of the portfolio
● Discount to NAV - and reviews the average discount for the
Company's share price against its peer group.
Share Capital and Share Buy-Backs
An active discount control mechanism to address the imbalance between the
supply of and demand for ordinary shares using share buybacks is employed by
the Broker and monitored by the Board. At the Annual General Meeting ("AGM")
of the Company held on 21 December 2023, the Company was granted the general
authority to purchase in the market up to 14.99% of the ordinary shares in
issue. This authority will expire at the AGM to be held in November 2024.
In the year ended 30 June 2024 440,212 ordinary shares had been bought back
and cancelled under the Company's share buyback programme. Since the last AGM
and up to 27 September 2024, being the latest practicable date prior to
publication of the report, the Company bought back and cancelled 196,505
ordinary shares.
Share Buy-Backs to the Year-Ended 30 June 2024
30 June 2024 30 June 2023
Number of Number of
Shares USD'000 Shares USD'000
Opening balance at 1 July 27,725,104 (4,006) 29,225,667 935
Share issued during the year - - - -
Shares repurchased during the year (440,212) (1,631) (1,500,563) (4,941)
Tender Offer - - - -
Closing balance at 30 June 27,284,892 (5,637) 27,725,104 (4,006)
Substantial Share Interests
The following shareholders owned 5% or more of the shares in issue of the
Company, as stated on the share register as at 30 June 2024.
Number of Percentage of total
Shareholder ordinary shares shares in issue
Lynchwood Nominees Limited 5,618,653 20.59
Citibank Nominees (Ireland) Designated Activity Company 5,060,667 18.55
Vidacos Nominees Limited 2,034,758 7.46
Hargreaves Lansdown (Nominees) Limited 1,729,256 6.34
Chase Nominees Limited 1,698,750 6.23
Interactive Investor Services Nominees Limited 1,548,506 5.68
The Bank of New York (Nominees) Limited 1,524,001 5.59
Euroclear Nominees Limited 1,509,967 5.53
Notification of Shareholdings
In the year to 30 June 2024 the Company received notifications in accordance
with Chapter 5 of the DTR (which covers the acquisition and disposal of major
shareholdings and voting rights), of the following changes to voting rights by
shareholders of the Company. It should be noted that for non-UK issuers, the
thresholds prescribed under DTR 5.1.2 for notification of holdings commence at
5% of total voting rights, however notifications received below 5% have been
received and are included in this reporting.
Shareholder Number of Percentage of total Announcement date
voting rights voting rights as at
announcement date
City of London Investment Management Company Limited 1,347,816 4.9 6 March 2024
Since 30 June 2024 the Company has not received any DTR 5.1.2 notifications of
holdings.
Statement of Directors' Responsibilities in Respect of the Annual Report
and the Financial Statements
The Directors are responsible for preparing the Annual Report and Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they are required to prepare the financial
statements in accordance with International Financial Reporting Standards as
adopted by the EU and applicable law. Under company law the Directors must not
approve the financial statements unless they are satisfied that they give a
true and fair view of the state of affairs of the Company and of its profit or
loss for that period.
In preparing these financial statements, the Directors are required to:
● select suitable accounting policies and then apply them
consistently;
● make judgements and estimates that are reasonable, relevant and
reliable;
● state whether applicable accounting standards have been followed,
subject to any material departures disclosed and explained in the financial
statements;
● assess the Company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern; and
● use the going concern basis of accounting unless they either intend to
liquidate the Company or to cease operations or have no realistic alternative
but to do so.
The Directors are responsible for keeping proper accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that its financial statements comply with the Companies
(Guernsey) Law, 2008. They are responsible for such internal control as they
determine is necessary to enable the preparation of financial statements that
are free from material misstatement, whether due to fraud or error, and have
general responsibility for taking such steps as are reasonably open to them to
safeguard the assets of the Company and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in Guernsey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
The Directors who hold office at the date of approval of this Director's
Report confirm that so far as they are aware, there is no relevant audit
information of which the Company's auditor is unaware, and that each Director
has taken all the steps he ought to have taken as a Director to make
themselves aware of any relevant audit information and to establish that the
Company's auditor is aware of that information.
Compliance with Disclosure and Transparency Directive
We confirm that to the best of our knowledge:
● the financial statements, prepared in accordance with the
International Financial Reporting Standards as adopted by the EU ("IFRS"),
give a true and fair view of the assets, liabilities, financial position and
profit or loss of the Company; and
● the Directors' Report includes a fair review of the development
and performance of the business and the position of the issuer, together with
a description of the principal risks and uncertainties that they face.
We consider the Annual Report and Financial Statements taken as a whole, is
fair, balanced and understandable and provides the information necessary for
shareholders to assess the Company's position and performance, business model
and strategy.
For and on behalf of the Board
Hiroshi Funaki
Chairman
1 October 2024
Independent Auditor's Report to the Members of VietNam Holding Limited
Our opinion is unmodified
We have audited the financial statements of VietNam Holding Limited (the
"Company"), which comprise the statement of financial position as at 30 June
2024, the statements of comprehensive income, changes in equity and cash
flows for the year then ended, and notes, comprising material accounting
policies and other explanatory information.
In our opinion, the accompanying financial statements:
· give a true and fair view of the financial position of the
Company as at 30 June 2024, and of the Company's financial performance and
cash flows for the year then ended;
· are prepared in accordance with International Financial
Reporting Standards as adopted by the EU ("IFRS"); and
· comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing
(UK) ("ISAs (UK)") and applicable law. Our responsibilities are described
below. We have fulfilled our ethical responsibilities under, and are
independent of the Company in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to public interest entities. We
believe that the audit evidence we have obtained is a sufficient and
appropriate basis for our opinion.
Key audit matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were
of most significance in the audit of the financial statements and include the
most significant assessed risks of material misstatement (whether or not due
to fraud) identified by us, including those which had the greatest effect on:
the overall audit strategy; the allocation of resources in the audit; and
directing the efforts of the engagement team. These matters were addressed in
the context of our audit of the financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these
matters. In arriving at our audit opinion above, the key audit matter was
as follows (unchanged from 2023):
The risk Our response
Valuation of Investments in securities at fair value Basis: Our audit procedures included:
$134,971,131; (2022: $113,225,102) The Company's investment portfolio consists of listed equity securities Internal Controls:
trading on the Vietnamese stock exchange (the "Investments"). These
Investments, carried at a fair value, are valued by the Company based on We evaluated the design and implementation of the key control over the
quoted prices in an active market for that instrument. valuation of Investments.
Refer to page 38 of the Audit and Risk Committee Report, note 2d accounting
policies and note 12 disclosures. Risk: Use of KPMG Specialists:
The valuation of investments, due to their magnitude in the context of the We engaged our own valuation specialist to independently price 100% of
financial statement as a whole, is considered to be the area which has the Investments to third party pricing sources.
greatest effect on our overall audit strategy and allocation of resources in
planning and completing our audit. Assessing disclosures:
We considered the Company's disclosures (see notes 2b and 2d) in relation to
the use of estimates and judgements regarding the valuation of investments and
the Company's investment valuation policies and fair value disclosures in note
12 "Fair Value Information" for compliance with IFRS.
Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at $2,650,000,
determined with reference to a benchmark of net assets of $140,151,385 of
which it represents approximately 2.0% (2023: 2.0%).
In line with our audit methodology, our procedures on individual account
balances and disclosures were performed to a lower threshold, performance
materiality, so as to reduce to an acceptable level the risk that individually
immaterial misstatements in individual account balances add up to a material
amount across the financial statements as a whole. Performance materiality for
the Company was set at 75% (2023: 75%) of materiality for the financial
statements as a whole, which equates to $1,980,000. We applied this percentage
in our determination of performance materiality because we did not identify
any factors indicating an elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected identified
misstatements exceeding $132,500, in addition to other identified
misstatements that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified
above, which has informed our identification of significant risks of material
misstatement and the associated audit procedures performed in those areas as
detailed above.
Going concern
The directors have prepared the financial statements on the going concern
basis as they do not intend to liquidate the Company or to cease its
operations, and as they have concluded that the Company's financial position
means that this is realistic. They have also concluded that there are no
material uncertainties that could have cast significant doubt over its ability
to continue as a going concern for at least a year from the date of approval
of the financial statements (the "going concern period").
In our evaluation of the directors' conclusions, we considered the inherent
risks to the Company's business model and analysed how those risks might
affect the Company's financial resources or ability to continue operations
over the going concern period. The risks that we considered most likely to
affect the Company's financial resources or ability to continue operations
over this period was availability of capital to meet operating costs and other
financial commitments.
We considered whether these risks could plausibly affect the liquidity going
concern period by comparing severe, but plausible downside scenarios that
could arise from these risks individually and collectively against the level
of available financial resources indicated by the Company's financial
forecasts.
We considered whether the disclosure in note 2(b) to the financial statements
gives a full and accurate description of the directors' assessment of going
concern.
Our conclusions based on this work:
· we consider that the directors' use of the going concern basis of
accounting in the preparation of the financial statements is appropriate;
· we have not identified, and concur with the directors' assessment
that there is not, a material uncertainty related to events or conditions
that, individually or collectively, may cast significant doubt on the
Company's ability to continue as a going concern for the going concern period;
and
· we have nothing material to add or draw attention to in relation to
the directors' statement in the notes to the financial statements on the use
of the going concern basis of accounting with no material uncertainties that
may cast significant doubt over the Company's use of that basis for the going
concern period, and that statement is materially consistent with the financial
statements and our audit knowledge.
However, as we cannot predict all future events or conditions and as
subsequent events may result in outcomes that are inconsistent with judgements
that were reasonable at the time they were made, the above conclusions are not
a guarantee that the Company will continue in operation.
Fraud and breaches of laws and regulations - ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud ("fraud risks") we
assessed events or conditions that could indicate an incentive or pressure to
commit fraud or provide an opportunity to commit fraud. Our risk assessment
procedures included:
· enquiring of management as to the Company's policies and
procedures to prevent and detect fraud as well as enquiring whether management
have knowledge of any actual, suspected or alleged fraud;
· reading minutes of meetings of those charged with governance; and
· using analytical procedures to identify any unusual or unexpected
relationships.
As required by auditing standards, we perform procedures to address the risk
of management override of controls, in particular the risk that management may
be in a position to make inappropriate accounting entries. On this audit we do
not believe there is a fraud risk related to revenue recognition because the
Company's revenue streams are simple in nature with respect to accounting
policy choice, and are easily verifiable to external data sources or
agreements with little or no requirement for estimation from management. We
did not identify any additional fraud risks.
We performed procedures including
· Identifying journal entries and other adjustments to test based
on risk criteria and comparing any identified entries to supporting
documentation; and
· incorporating an element of unpredictability in our audit
procedures.
Identifying and responding to risks of material misstatement due to
non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected
to have a material effect on the financial statements from our sector
experience and through discussion with management (as required by auditing
standards), and from inspection of the Company's regulatory and legal
correspondence, if any, and discussed with management the policies and
procedures regarding compliance with laws and regulations. As the Company is
regulated, our assessment of risks involved gaining an understanding of the
control environment including the entity's procedures for complying with
regulatory requirements.
The Company is subject to laws and regulations that directly affect the
financial statements including financial reporting legislation and taxation
legislation and we assessed the extent of compliance with these laws and
regulations as part of our procedures on the related financial statement
items.
The Company is subject to other laws and regulations where the consequences of
non-compliance could have a material effect on amounts or disclosures in the
financial statements, for instance through the imposition of fines or
litigation or impacts on the Company's ability to operate. We identified
financial services regulation as being the area most likely to have such an
effect, recognising the regulated nature of the Company's activities and its
legal form. Auditing standards limit the required audit procedures to identify
non-compliance with these laws and regulations to enquiry of management and
inspection of regulatory and legal correspondence, if any. Therefore, if a
breach of operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or
regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk
that we may not have detected some material misstatements in the financial
statements, even though we have properly planned and performed our audit in
accordance with auditing standards. For example, the further removed
non-compliance with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the inherently limited
procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection
of fraud, as this may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls. Our audit procedures
are designed to detect material misstatement. We are not responsible for
preventing non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
Other information
The directors are responsible for the other information. The other information
comprises the information included in the annual report but does not include
the financial statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and we do not
express an audit opinion or 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.
Disclosures of emerging and principal risks and longer term viability
We are required to perform procedures to identify whether there is a material
inconsistency between the directors' disclosures in respect of emerging and
principal risks and the viability statement, and the financial statements
and our audit knowledge. we have nothing material to add or draw attention to
in relation to:
· the directors' confirmation within the Viability Statement (page
41 - 42) that they have carried out a robust assessment of the emerging and
principal risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity;
· the emerging and principal risks disclosures describing these risks and
explaining how they are being managed or mitigated;
· the directors' explanation in the Viability Statement (page 41 - 42) as
to how they have assessed the prospects of the Company, over what period they
have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the Company
will be able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
We are also required to review the Viability Statement, set out on page 41 -
42 under the Listing Rules. Based on the above procedures, we have concluded
that the above disclosures are materially consistent with the financial
statements and our audit knowledge.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material
inconsistency between the directors' corporate governance disclosures and the
financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is
materially consistent with the financial statements and our audit
knowledge:
· the directors' statement that they consider that the annual
report and financial statements taken as a whole is fair, balanced and
understandable, and provides the information necessary for shareholders to
assess the Company's position and performance, business model and strategy;
· the section of the annual report describing the work of the Audit
Committee, including the significant issues that the audit committee
considered in relation to the financial statements, and how these issues were
addressed; and
· the section of the annual report that describes the review of the
effectiveness of the Company's risk management and internal control systems.
We are required to review the part of Corporate Governance Statement relating
to the Company's compliance with the provisions of the UK Corporate Governance
Code specified by the Listing Rules for our review. We have nothing to report
in this respect.
We have nothing to report on other matters on which we are required to report
by exception
We have nothing to report in respect of the following matters where the
Companies (Guernsey) Law, 2008 requires us to report to you if, in our
opinion:
· the Company has not kept proper accounting records; or
· the financial statements are not in agreement with the
accounting records; or
· we have not received all the information and explanations, which to
the best of our knowledge and belief are necessary for the purpose of our
audit.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 44, the directors
are responsible for: the preparation of the financial statements including
being satisfied that they give a true and fair view; such internal control as
they determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error;
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 they either intend to liquidate the Company or to
cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities
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 our opinion in an auditor's report. Reasonable
assurance is a high level of assurance but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and
are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on
the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC's website
at www.frc.org.uk/auditorsresponsibilities
(http://www.frc.org.uk/auditorsresponsibilities) .
The purpose of this report and restrictions on its use by persons other than
the Company's members as a body
This report is made solely to the Company's members, as a body, in accordance
with section 262 of the Companies (Guernsey) Law, 2008. Our audit work has
been undertaken so that we might state to the Company's members those matters
we are required to state to them in an auditor's report and for no other
purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company's members, as
a body, for our audit work, for this report, or for the opinions we have
formed.
Andrew J. Salisbury
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
1 October 2024
Statement of Financial Position
As at 30 June 2024
2024 2023
Notes USD USD
Assets
Non-current assets
Investments at fair value through profit or loss 3 134,971,131 113,225,102
Total non-current assets 134,971,131 113,225,102
Current assets
Cash and cash equivalents 2,894,425 1,750,069
Accrued dividends and interest 73,797 877,375
Receivables on sale of investments 2,451,845 338,591
Total current assets 5,420,067 2,966,035
Total assets 140,391,198 116,191,137
Equity
Share capital 5 166,645,041 166,645,041
Reserve for own shares 5 (172,281,084) (170,650,584)
Retained earnings 145,787,428 119,264,820
Total equity 140,151,385 115,259,277
Liabilities
Payables on purchase of investments - 343,745
Payables on repurchase of shares - 246,469
Accrued expenses 239,813 341,646
Total liabilities 239,813 931,860
Total equity and liabilities 140,391,198 116,191,137
The financial statements on pages 50 to 66 were approved by the Board of
Directors on 1 October 2024 and were signed on its behalf by
Hiroshi Funaki
Philip
Scales
Chairman of the Board of Directors
Chairman of the Audit
and Risk Committee
The accompanying notes on pages 54 to 66 form an integral part of these
financial statements.
Statement of Comprehensive Income
For the year ended 30 June 2024
2024 2023
Notes USD USD
Dividend income from equity securities at fair value through profit or loss 2,949,474 1,684,306
Net gain/(loss) from investments at fair value through profit or loss 7 28,035,973 (6,494,742)
Net foreign exchange loss (277,039) (369,559)
Total operating income/(loss) 30,708,408 (5,179,995)
Investment management fees 8 2,237,255 1,936,485
Advisory fees 81,744 22,846
Directors' fees and expenses 8 362,837 417,177
Custodian fees 9 127,617 101,674
Administrative and accounting fees 10 214,218 201,614
Audit fees 7,769 75,153
Other expenses 1,154,360 687,145
Total operating expenses 4,185,800 3,442,094
Profit/(Loss) for the year 26,522,608 (8,622,089)
Other comprehensive income - -
Total comprehensive income/(loss) for the year 26,522,608 (8,622,089)
Basic and diluted income/(loss) per share 14 0.97 (0.30)
The accompanying notes on pages 54 to 66 form an integral part of these
financial statements.
Statement of Changes in Equity
For the year ended 30 June 2024
Reserve for Retained
Share capital own shares earnings Total
USD USD USD USD
Balance at 1 July 2022 166,645,041 (165,709,783) 127,886,909 128,822,167
Total comprehensive loss for the year
Change in net assets attributable to shareholders - - (8,622,089) (8,622,089)
Total comprehensive loss for the year - - (8,622,089) (8,622,089)
Transactions in shares
Repurchase of own shares - (4,940,801) - (4,940,801)
Total transactions in shares - (4,940,801) - (4,940,801)
Balance at 30 June 2023 166,645,041 (170,650,584) 119,264,820 115,259,277
Balance at 1 July 2023 166,645,041 (170,650,584) 119,264,820 115,259,277
Total comprehensive income for the year
Change in net assets attributable to shareholders - - 26,522,608 26,522,608
Total comprehensive income for the year - - 26,522,608 26,522,608
Transactions in shares
Repurchase of own shares - (1,630,500) - (1,630,500)
Total transactions in shares - (1,630,500) - (1,630,500)
Balance at 30 June 2024 166,645,041 (172,281,084) 145,787,428 140,151,385
The accompanying notes on pages 54 to 66 form an integral part of these
financial statements.
Statement of Cash Flows
For the year ended 30 June 2024
2024 2023
Notes USD USD
Cash flows from operating activities
Total comprehensive income/(loss) for the year 26,522,608 (8,622,089)
Adjustments to reconcile total comprehensive income/(loss) to net cash from
operating activities:
Dividend income (2,949,474) (1,684,306)
Net (gain)/loss from investments at fair value through profit or loss 7 (28,035,973) 6,494,742
Net foreign exchange loss 277,039 369,559
Purchase of investments (65,175,759) (50,826,239)
Proceeds from sale of investments 69,503,097 52,069,545
Changes in working capital
Decrease in accrued expenses (101,833) (13,636)
Dividends received 3,258,659 849,559
Interest received - 16,144
Net cash from/(used in) operating activities 3,298,364 (1,346,721)
Cash flows used in financing activities
Repurchase of own shares (1,876,969) (4,694,332)
Net cash used in financing activities (1,876,969) (4,694,332)
Net increase/(decrease) in cash and cash equivalents 1,421,395 (6,041,053)
Cash and cash equivalents at beginning of the year 1,750,069 8,160,681
Effect of exchange rate fluctuations on cash held (277,039) (369,559)
Cash and cash equivalents at end of the year 2,894,425 1,750,069
The accompanying notes on pages 54 to 66 form an integral part of these
financial statements.
Notes to the Financial Statements
For the year ended 30 June 2024
1 The Company
VietNam Holding Limited (the "Company") is a closed-end investment company
that was incorporated in the Cayman Islands on 20 April 2006 as an exempted
company with limited liability under registration number 166182. On 25
February 2019, the Company, via a process of cross-border continuance,
transferred its legal domicile from the Cayman Islands to Guernsey and was
registered as a closed-ended company limited by shares incorporated in
Guernsey with registered number 66090.
On 8 March 2019 the Company's ordinary shares were cancelled from trading on
AIM and admitted to the Main Market (previously the Premium Segment of the
Official List),and trading on the Main Market of the London Stock Exchange
("Main Market"). On the same date the Company's shares were admitted to
listing and trading on the Official List of The International Stock Exchange
("TISE").
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 held on 21 December 2023 the Shareholders
voted in favour of the continuance resolution, authorising the Company to
operate in its current form through to the 2028 Annual General Meeting when a
similar resolution will be put forward for Shareholders' approval.
Dynam Capital, Ltd 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.
Sanne Group (Guernsey) Limited is the Company's administrator.
Standard Chartered Bank (Singapore) Limited and Standard Chartered Bank
(Vietnam) Limited are the custodian and the sub-custodian respectively.
Standard Chartered Bank (Singapore) Limited is also the sub-administrator.
The registered office of the Company is 1 Royal Plaza, Royal Avenue, St Peter
Port, Guernsey, GY1 2HL.
2 Material Accounting Policies
(a) Statement of compliance
These financial statements, which give a true and fair view, have been
prepared in accordance with the International Financial Reporting Standards
("IFRSs") as adopted by the European Union and comply with the Companies
(Guernsey) Law, 2008.
(b) Basis of preparation
The financial statements are presented in United States dollars ("USD"), which
is the Company's functional currency. The financial statements have been
prepared on a going concern basis, applying the historical cost convention,
except for the measurement of investments at fair value through profit or
loss.
Going concern
The Directors have reasonable expectations and are satisfied that the Company
has adequate resources to continue its operations and meet its commitments for
the foreseeable future and they continue to adopt the going concern basis for
the preparation of the financial statements. In making this statement, the
Directors confirm the Company's forecasts and projections have been stress
tested taking into account the potential for (i) asset value declines, (ii)
declines in cash dividends from equities held in the portfolio and (iii) share
buybacks and tender offers. The Directors note that the underlying liquidity
of Vietnamese stocks has continued to improve during the year. The
Director's also note that the portfolio is composed of a higher percentage of
larger and more liquid stocks. Lastly, the Directors note that at year-end the
portfolio is comprised of cash and quoted stocks only. The Company's liquidity
position, taking into account cash held and with the ability to sell
underlying assets to meet share buybacks, tenders and to meet the operating
costs of the Company, shows that the Company is able to operate with
appropriate liquidity and be able to meet its liabilities as they fall due.
At the Annual General Meeting and Extraordinary General meeting held on 21
December 2023, shareholders voted in favour of the Company continuing for a
further five years as well as the introduction of an annual Redemption
Facility. The first Redemption Date was 30 September 2024.
On 1 October, the Company announced a total of 3,406,598 ordinary shares were
validly tendered for redemption and will be redeemed under the 2024 redemption
opportunity. These ordinary shares represent approximately 12.6% of the
ordinary shares in issue as at 31 August 2024. The Board resolved that the
redemption price will be based on VNH's official net asset value per share as
at 30 September 2024 and it is anticipated that payments will be made to
redeeming shareholders by the end of October 2024. The portfolio liquidity
remains relatively high, and the investment manager does not anticipate any
difficulty in raising the cash required. Therefore, the Board is confident
that the redemption facility will not cause any material uncertainty over the
going concern of the Company.
The Directors have a reasonable expectation that the Company will have
adequate resources to continue its operations for the foreseeable future.
Thus, they continue to adopt the going concern basis of accounting in
preparing the financial statements.
Critical accounting estimates and judgements
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 expenses.
Information about judgements made in applying accounting policies that have
the most significant effects on the amounts recognised in the financial
statements are included below:
Functional currency
The Company's shares were issued in USD and the listing of the shares on the
Main Market and TISE 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.
(c) Foreign currency translation
Transactions in foreign currencies are translated into USD at the applicable
rates on the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies are re-translated to USD at the applicable
rates on the year-end date. Foreign currency exchange differences relating to
investments at fair value through profit or loss are included in the realised
and unrealised gains and losses on those investments within "Net gain/(loss)
from investments at fair value through profit or loss" on the Statement of
Comprehensive Income. 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
A financial instrument is any contract that gives rise to a financial asset of
one entity and a financial liability or equity instrument of another entity.
(i) Classification
In accordance with IFRS 9, the Company classifies its financial assets and
financial liabilities at initial recognition into the categories of financial
assets and financial liabilities discussed below.
Financial assets
The Company classifies its financial assets as subsequently measured at
amortised cost or measured at fair value through profit or loss on the basis
of both:
● The entity's business model for managing the financial assets
● The contractual cash flow characteristics of the financial assets
Financial assets measured at amortised cost
A financial asset is measured at amortised cost if it is held within a
business model whose objective is to hold financial assets in order to collect
contractual cash flows and its contractual terms give rise on specified dates
to cash flows that are solely payments of principal and interest on the
principal amount outstanding. The Company includes in this category accrued
income, accrued dividends and interest, cash and cash equivalents and
receivables on sale of investments.
Financial assets measured at fair value through profit or loss ("FVTPL")
A financial asset is measured at fair value through profit or loss if:
a) Its contractual terms do not give rise to cash flows on specified
dates that are solely payments of principal and interest (SPPI) on the
principal amount outstanding; or
b) It is not held within a business model whose objective is either to
collect contractual cash flows, or to both collect contractual cash flows and
sell; or
c) At initial recognition, it is irrevocably designated as measured at
FVTPL when doing so eliminates or significantly reduces a measurement or
recognition inconsistency that would otherwise arise from measuring assets or
liabilities or recognising the gains and losses on them on different bases.
The Company measures all its investments at FVTPL.
Financial liabilities -- Classification, subsequent measurement and gains and
losses
Financial liabilities are classified as measured at amortised cost or FVTPL.
A financial liability is classified as at FVTPL if it is classified as
held-for-trading, it is a derivative or it is designated as such on initial
recognition. Financial liabilities at FVTPL are measured at fair value and net
gains and losses, including any interest expense, are recognised in profit and
loss.Other financial liabilities are subsequently measured at amortised cost
using the effective interest method. Interest expense and foreign exchange
gains and losses are recognised in profit or loss. Any gain or loss on
derecognition is also recognised in profit and loss.
Financial liabilities measured at amortised cost
Other financial liabilities are measured at amortised cost. The Company
includes in this category trade and other payables.
(ii) Recognition and initial measurement
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 the Statement of Comprehensive Income. 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) Subsequent measurement
After initial measurement, the Company measures financial instruments which
are classified as FVTPL at fair value. Subsequent changes in the fair value of
those financial instruments are recorded in net gain or loss on financial
assets and liabilities at FVTPL in the Statement of Comprehensive Income.
Interest and dividends earned or paid on these instruments are recorded
separately in interest income or expense and dividend income in the Statement
of Comprehensive Income.
(iv) 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.
(iv) Derecognition
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.
(v) Fair value measurement
'Fair value' is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date in the principal or, in its absence, the most
advantageous market to which the Company has access at that date. 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 the 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 consider 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.
Any increases or decreases in fair value are recognised in the Statement of
Comprehensive Income as an unrealised gain or loss from investments at FVTPL.
(vi) Impairment of financial assets
At each reporting date, the Company measures the loss allowance on financial
assets carried at amortised cost at an amount equal to the lifetime expected
credit losses if the credit risk has increased significantly since initial
recognition. If, at the reporting date, the credit risk has not increased
significantly since initial recognition, the Company measures the loss
allowance at an amount equal to 12-month expected credit losses. The expected
credit losses are estimated using a provision matrix based on the Company's
historical credit loss experience adjusted for factors that are specific to
the accounts receivables, general economic conditions and an assessment of
both the current as well as the forecast direction of conditions at the
reporting date, including time value of money where appropriate. The
measurement of expected credit losses is a function of the probability of
default, loss given default (i.e. the magnitude of the loss if there is a
default) and exposure at the default. The assessment of the probability of
default and loss given default is based on historical data adjusted by
forward-looking information.
(vii) Cash and cash equivalents
Cash comprises current deposits with banks. 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) 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)
Where the Company purchases its own share capital, the consideration paid,
which includes any directly attributable costs, is recognised as a deduction
from equity shareholders' funds through the Company's reserves for own shares.
The reserves for own shares represents share capital which can be reissued in
the future or subsequently cancelled. When such shares are subsequently sold
or re-issued to the market any consideration received, net of any directly
attributable incremental transaction costs, is recognised as an increase in
equity shareholders' funds through the reserve of own shares account. The
Directors have cancelled all the shares repurchased during the current and the
previous year.
(g) Tax
Tax expense comprises current tax. Current tax is recognised in the Statement
of Comprehensive Income 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.
The Company is a tax resident in Guernsey and is subject to the standard rate
of 0% on taxable income.
The Company is liable to Vietnamese transactional tax of 0.1% (2023: 0.1%) on
the sales proceeds of the onshore sale of equity investments. The related
taxes on onshore sales proceeds are accounted for at net amount in the
Statement of Comprehensive Income.
(h) Interest income and expense
Interest income and expense is recognised in the Statement of Comprehensive
Income using the effective rate method. The effective interest rate method is
a method of calculating the amortised cost of a financial asset or financial
liability and of allocating the interest income or interest expense over the
relevant period. The effective interest rate is the rate that exactly
discounts estimated future cash payments or receipts throughout the expected
life of the financial instrument - or, when appropriate, a shorter period - to
the net carrying amount of the financial asset or financial liability.
When calculating the effective interest rate, the Directors estimate cash
flows considering all contractual terms of the financial instrument but do not
consider future credit losses. The calculation includes all fees and points
paid or received between parties to the contract that are an integral part of
the effective interest rate, transaction costs and all other premiums or
discounts.
(i) Dividend income
Dividend income is recognised in the Statement of Comprehensive Income on the
date on which the right to receive payment is established. For listed equity
securities, this is usually the ex-dividend date. Dividend income from equity
securities designated as at fair value through profit or loss is recognised in
the Statement of Comprehensive Income as a separate line item.
(j) Fee and commission expense
Fees and commission expenses are recognised in the Statement of Comprehensive
Income as the related services are performed.
(k) 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.
3 Financial Instruments and Associated Risks
Financial assets of the Company include investments at fair value through
profit or loss, cash and cash equivalents, receivables on sale of investments,
and accrued dividends and interest. Financial liabilities comprise payables on
purchase of investments, payables on repurchase of shares 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 (which includes price risk, currency risk, and
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 (e.g. interest rates, foreign exchange
rates, equity prices and credit spreads) 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
investments 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 2024 2023
disclosed by the following generic investment types:
Fair value % of Fair value % of
in USD net assets in USD net assets
Investments in listed securities 134,971,131 96.30 113,225,102 98.24
134,971,131 96.30 113,225,102 98.24
At 30 June 2024, a 5% reduction in the market value of the portfolio would
have led to a reduction in NAV and profit or loss of USD 6,748,557 (2023: USD
5,661,255). 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 financial 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 2024, the Company had the following foreign currency exposures:
Fair value
2024 2023
USD USD
Vietnamese Dong 140,090,931 115,320,188
Pound Sterling 6,498 (231,119)
Swiss Franc 174 175
Euro 4,456 4,536
140,102,059 115,093,780
At 30 June 2024, 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 USD 7,004,547 (2023: USD 5,766,009), USD 325
(2023: USD 11,556), USD 9 (2023: USD 9) and USD 223 (2023: USD 227)
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 with the
Company.
At 30 June 2024, the following financial assets were exposed to credit risk
(including settlement risk): cash and cash equivalents, receivables on sale of
investments and accrued dividends and interest. The total amount of financial
assets exposed to credit risk amounted to USD 5,420,067 (2023: USD 2,966,035).
Substantially all the assets of the Company are held by the Company's
custodian, Standard Chartered Bank (Singapore) Limited. 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.
As at 30 June 2024, the Company's custodian, Standard Chartered Bank
(Singapore) Limited, was rated as A+ by Standard and Poor's, A1 by Moody's and
A+ by Fitch (2023: A+ by Standard and Poor's, A1 by Moody's and A+ by Fitch).
Financial assets subject to IFRS 9's impairment requirements
The Company's financial assets subject to the expected credit loss model
within IFRS 9 are cash and cash equivalents, and short-term receivables,
including accrued dividends and interest, and receivables on sale of
investments. As at 30 June 2024, the total of cash and cash equivalents, and
short-term receivables was USD 5,420,067 (2023: USD 2,966,035). The Directors
assessed the lifetime expected credit loss as at 30 June 2024 and concluded it
to be immaterial (2023: loss immaterial). There is not considered to be any
concentration of credit risk within these assets. No assets are considered
impaired and no amounts have been written off in the year.
All short-term receivables are expected to be received in three months or
less. An amount is considered to be in default if it has not been received 30
days after it is due.
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'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 repurchase their shares directly from the Company.
The Board has considered that there may be periods of time when parts of the
portfolio are prone to higher liquidity risk, but is satisfied overall that
the fixed liabilities of the Company can be met by income or from selling
sufficient marketable securities even at periods of higher illiquidity.
Payables on purchase of investments and accrued expenses are generally payable
within one year.
The table below summarises the maturity profile of the Company's financial
assets and liabilities based on contractual undiscounted receipts and
payments:
Over
0 to 1 to 3 months No fixed
On demand 1 month 3 months to 5 years maturity Total
USD USD USD USD USD USD
2024
Cash and cash equivalents 2,894,425 - - - - 2,894,425
Investment at fair value through profit and loss - - - - 134,971,131 134,971,131
Accrued dividends and interest - - 73,797 - - 73,797
Receivables on sale of investments - - 2,451,845 - - 2,451,845
Total financial assets 2,894,425 - 2,525,642 - 134,971,131 140,391,198
Accrued expenses - - 239,813 - - 239,813
Total financial liabilities - - 239,813 - - 239,813
2023
Cash and cash equivalents 1,750,069 - - - - 1,750,069
Investment at fair value through profit and loss - - - - 113,225,102 113,225,102
Accrued dividends and interest - - 877,375 - - 877,375
Receivables on sale of investments - - 338,591 - - 338,591
Total financial assets 1,750,069 - 1,215,966 - 113,225,102 116,191,137
Payables in purchase of investments - - 343,745 - - 343,745
Payables on repurchase of shares - - 246,469 - - 246,469
Accrued expenses - - 341,646 - - 341,646
Total financial liabilities - - 931,860 - - 931,860
4 Operating Segments
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 NAV calculated
as per the prospectus.
Information on gains and losses derived from investments are disclosed in the
Statement of Comprehensive Income.
The Company is domiciled in Guernsey, Channel 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.
In line with the Company's investment policy, the Company may invest:
● up to 25% of its NAV (at the time of investment) in companies with
shares traded outside of Vietnam if a majority of their assets and/or
operations are based in Vietnam;
● up to 20% of its NAV (at the time of investment) in direct private
equity investments; and
● up to 20% of its NAV (at the time of investment) in other listed
investment funds and holding companies which have the majority of their assets
in Vietnam.
As of 30 June 2024, no individual investment exceeded 20% of the net assets
attributable to Shareholders (2023: none).
All of the Company's investments in securities at fair value are in Vietnam as
at 30 June 2024 and 30 June 2023. All of the Company's investment income can
be attributed to Vietnam for the years ended 30 June 2024 and 30 June 2023.
5 Share Capital
Ordinary shares of USD 1 each
Pursuant to its redomiciliation to Guernsey, the Company re-registered with an
authorised share capital of USD 200,000,000 divided into 200,000,000 shares of
a nominal or par value of USD 1.00 each. In line with the Company's Articles
of Incorporation Amended and restated by special resolution on 21 December
2023, the Company may from time to time redeem all or any portion of the
shares held by the Shareholders on annual basis upon giving notice of not less
than 30 calendar days.
On 8 March 2019 the Company's ordinary shares were cancelled from trading on
AIM and admitted to the Main Market (previously Premium segment of the
Official List) and trading on the Main Market of the London Stock Exchange
("Main Market"). On the same date the Company's shares were admitted to
listing and trading on the TISE.
2024 2023
No. of shares No. of shares
Total shares issued and fully paid (after repurchases and cancellations) at 27,725,104 29,225,667
beginning of the year
Shares issued upon exercise of warrants during the year - -
Shares cancellation (440,212) (1,500,563)
27,284,892 27,725,104
Repurchased and reserved for own shares
At beginning of the year - -
During the year (440,212) (1,500,563)
Shares reissued to ordinary shares - -
Shares cancellation 440,212 1,500,563
Total outstanding ordinary shares with voting rights 27,284,892 27,725,104
As a result, as at 30 June 2024 the Company has 27,284,892 (2023: 27,725,104)
ordinary shares with voting rights in issue (excluding the reserve for own
shares), and nil (2023: nil) are held as reserve for own shares.
Reserve for own shares
Reserve for own shares are the Company's own shares which had been
repurchased. The amount represents share capital which can be reissued in the
future or subsequently cancelled. All reserves are available for distribution
subject to a solvency assessment.
During the year ended 30 June 2024 the Company repurchased and cancelled
440,212 ordinary shares (2023: 1,500,563 ordinary shares) under the Company's
share buyback programme (representing 1.6% of the ordinary shares outstanding
at 1 July 2023) at a weighted average NAV discount of -9.9%. This resulted in
a -0.16% accretion to NAV per share.
Holders of ordinary shares are entitled to attend, speak and vote at general
meetings of the Company. Each ordinary share (excluding shares in treasury)
earns one vote.
Capital Management
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
Company may repurchase its own ordinary shares with such proceeds from
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 NAV per
share.
6 Net Assets Attributable to Shareholders
Total equity of USD 140,151,385 (2023: USD 115,259,277) represents net assets
attributable to Shareholders. NAV per share as at 30 June 2024 is USD 5.137
(2023: USD 4.157).
7 Net Gain/(Loss) from Investments at Fair Value through Profit or Loss
2024 2023
USD USD
Realised gain on disposal of investments 18,459,534 1,874,662
Realised foreign currency loss (2,011,711) (1,660,823)
Unrealised gain/(loss) on investments at fair value through profit or loss 15,781,434 (7,200,804)
Unrealised foreign currency (loss)/gain (4,193,284) 492,223
28,035,973 (6,494,742)
8 Related Party Transactions
Investment management fees
The Company entered into a new investment management agreement with Dynam
Capital, Ltd on 26 June 2018. The agreement was amended and restated on 8
October 2018 and further amended and restated on 1 October 2020. The Board and
the Investment Manager agreed to modify the management fee (previously on a
sliding scale of 1.5% per annum on NAV below USD 300 million, 1.25% per annum
on NAV between USD 300 - USD 600 million, and 1.0% per annum on NAV above USD
600 million) effectively from 1 November 2020.
Pursuant to the 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 but
excluding USD 300 million, one-twelfth of 1.75%;
● On the amount of the Net Asset Value of the Company between and
including USD 300 million up to and including USD 600 million, one-twelfth of
1.5%; and
● On the amount of the Net Asset Value of the Company that exceeds
USD 600 million, one-twelfth of 1%.
The management fee accruing to the Investment Manager for the year ended 30
June 2024 was USD 2,237,255 (2023: USD 1,936,485). An amount of USD 203,206
(30 June 2023: USD 162,201) was outstanding as at 30 June 2024.
Directors' fees and expenses
The Board determines the fees payable to each Director, subject to a maximum
aggregate amount of USD 350,000 (2023: USD 350,000) 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 USD 257,622 (2023: USD
319,183) and expenses were USD 105,215 (2023: USD 97,994). The total
Directors' fees and expenses for the year were USD 362,837 (2023: USD
417,177).
As at 30 June 2024, USD nil (2023: nil) of Directors' fees were outstanding.
Ownership of shares
As at 30 June 2024, Directors held 34,964 ordinary shares in the Company
(2023: 44,920) as listed below.
Hiroshi Funaki 19,887 Shares
Philip Scales 10,077 Shares
Saiko Tajima 5,000 Shares
Mr Funaki is also a Director of Discover Investment Company which at 30 June
2024 held 1,415,776 ordinary shares in the Company representing 5.2% of the
issued share capital.
Mr Craig Martin, Chairman of the Investment Manager holds 73,386 shares in the
Company. During the year he purchased 6,300 shares.
9 Custodian Fees
Custodian fees are charged at a minimum of USD 12,000 (2023: USD 12,000) 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 USD 12,000 (2023: USD 12,000) 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 USD 127,617 (2023: USD
101,674), of which USD 11,780 (2023: USD 9,500) were outstanding at year end.
10 Administrative and Accounting Fees
In accordance with the new Administration Agreement between the Company and
Sanne Group (Guernsey) Limited (the "Administrator") dated 7 October 2019, the
Administrator is entitled to receive a fee of 0.08% per annum of NAV up to USD
100,000,000, 0.07% of NAV thereafter subject to a minimum fee of USD 140,000
per annum. The administration fees are accrued monthly and are payable
quarterly in advance. The charges for the year for Administration fees were
USD 150,580 (2023: USD 145,590), of which USD 500 (2023: USD 1,120) were
outstanding at year end.
The Sub-Administrator receives a fee as consideration for the services
provided to the Company at such rates as may be agreed in writing from time to
time between the Company and the Sub-Administrator. The charges for the year
for Administration fees were USD 63,638 (2023: USD 56,024), of which USD 5,384
(2023: USD 4,744) were outstanding at year end.
Total administrative and accounting fees for the year were USD 214,218 (2023:
USD 201,614).
11 Controlling Party
The Directors are not aware of any ultimate controlling party as at 30 June
2024 or 30 June 2023.
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 through profit or loss.
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
2024
Financial assets classified at fair value upon initial recognition
Investments in securities 134,971,131 - - 134,971,131
2023
Financial assets classified at fair value upon initial recognition
Investments in securities 113,225,102 - - 113,225,102
There were no transfers between levels during the year.
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.
There are no level 3 assets held at 30 June 2024 (2023: nil).
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.
Fair value through Financial assets at Financial liabilities Total carrying
Profit or loss amortised cost at amortised cost Amount
USD USD USD USD
2024
Cash and cash equivalents - 2,894,425 - 2,894,425
Investment in securities at fair value 134,971,131 - - 134,971,131
Accrued dividends and interest - 73,797 - 73,797
Receivables on sale of investments - 2,451,845 - 2,451,845
134,971,131 5,420,067 - 140,391,198
Accrued expenses - - 239,813 239,813
- - 239,813 239,813
2023
Cash and cash equivalents - 1,750,069 - 1,750,069
Investment in securities at fair value 113,225,102 - - 113,225,102
Accrued dividends and interest - 877,375 - 877,375
Receivables on sale of investments - 338,591 - 338,591
113,225,102 2,966,035 - 116,191,137
Accrued expenses - - 341,646 341,646
Payables in purchase of investments - - 343,745 343,745
Payables on repurchase of shares - - 246,469 246,469
- - 931,860 931,860
14 Earnings Per Share
The calculation of basic and diluted earnings per share at 30 June 2024 was
based on the total comprehensive income for the year attributable to
Shareholders of USD 26,522,608 (2023: loss of USD 8,622,089) and the weighted
average number of shares outstanding of 27,383,130 (2023: 28,685,603).
15 New and Amended Standards and Interpretations
(i) Standards and amendments to existing standards effective 1 July 2023
The Board of Directors has assessed the impact, or potential impact, of all
new standards and amendments to existing standards. In the opinion of the
Board of Directors, there are no mandatory new standards and amendments
applicable in the current year that had any material effect on the reported
performance, financial position, or disclosures of the Company.
(ii) Standards effective after 30 June 2024 that have been early adopted by
the Company
There are no standards effective after 30 June 2024 that are relevant to the
Company.
16 Events After the Reporting Date
On 1 October 2024, the Company announced that the first annual redemption
facility had resulted in 3,406,598 Ordinary Shares being validly tendered
for redemption. These ordinary shares represent approximately 12.6% of the
ordinary shares in issue as at 31 August 2024. The Board resolved that the
redemption price will be based on VNH's official net asset value per share as
at 30 September 2024.The net asset value per share is expected to be announced
by mid-October 2024 and it is anticipated that payments will be made to
redeeming shareholders by the end of October 2024.
From 1 July 2024 to the date of signing these financial statements, there were
no other material events that require disclosures and/or adjustments in these
financial statements.
Alternative Performance Measures ("APMs")
Discount or Premium
The amount, expressed as a percentage, by which the ordinary share price is
either higher (premium) or lower (discount) than the NAV per ordinary share.
Page 30 June 2024
NAV per ordinary share (pence) 1 a 406.4
Ordinary share price (pence) 1 b 396.0
Discount 1 ((b-a)/a) 2.6%
Ongoing charges
Ongoing charges have been calculated in accordance with the Association of
Investment Companies (the "AIC") recommended methodology by taking the
regularly incurred annual operating expenses of running the Company expressed
as a percentage of average NAV.
The ongoing charges for the year ended 30 June 2024 were 2.97%.
30 June 2024
Page USD
Average NAV 1 a 127,574,317
Operating expenses 1 b 3,783,976
Ongoing charges 1 b/a 2.97%
a) Average NAV
Calculated using twelve monthly closing average NAV for the year ended 30 June
2024.
b) Operating expenses
Total annual expenses incurred by the Company less the cost of project and
one-off expenses i.e. non-recurring expenses.
Page USD
Total annual expenses 51 c 4,185,800
Less: non-recurring expenses d (401,824)
Operating expenses b=c+d 3,783,976
Corporate Information
Directors Auditor
Mr. Hiroshi Funaki KPMG Channel Islands Limited
Mr. Philip Scales Glategny Court
Ms. Saiko Tajima Glategny Esplanade
Ms. Connie Hoang Mi Vu St Peter Port
Guernsey
GY1 1WR
Investment Manager
Dynam Capital, Ltd Market Researcher
1 Royal Plaza Dynam Consultancy and Services
Royal Avenue Company Limited
St Peter Port Floor 12, Deutsches Haus,
Guernsey 33 Le Duan,
GY1 2HL Ben Nghe Ward, District 1
Ho Chi Minh City,
Vietnam
Registered Office, Company Secretary and Administrator
Sanne Group (Guernsey) Limited
1 Royal Plaza Corporate Broker and Financial Adviser
Royal Avenue Cavendish Securities plc
St Peter Port One Bartholomew Close
Guernsey London
GY1 2HL EC1A 7BL
(Nominated Adviser (AIM) until transference to LSE Main Market)
Sub-Administrator, Custodian and Principal Bankers
Standard Chartered Bank (Singapore) Limited Registrar
7 Changi Business Park Crescent Computershare Investor Services (Guernsey) Limited
Level 3, Securities Services 1st Floor, Tudor House
Singapore 486028 Le Bordage
St Peter Port
UK Legal Adviser Guernsey
Stephenson Harwood LLP GY1 1DB
1 Finsbury Circus
London
EC2M 7SH
Guernsey Legal Adviser
Carey Olsen (Guernsey) LLP
Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
1 (#_ftnref1) S&P Global 2024; Morrison Foerster 2024
2 (#_ftnref2) MSCI 2024; MIT Sloan Review 2024
3 (#_ftnref3) Thompson Reuters 2024
4 (#_ftnref4) https://climateactiontracker.org/
5 (#_ftnref5) LULUCF is the abbreviation of "Land use, land-use change and
forestry". The reasons for focusing on emissions excl. LULUCF because of the
importance of decreasing CO(2) and other GHG emissions from fossil fuel
combustion, industry, agriculture and waste sources, and because of large
data uncertainty around LULUCF emissions data.
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