REG - VietNam Holding Ltd - Interim Report
21/03/2022 07:15
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RNS Number : 3685F VietNam Holding Limited 21 March 2022
VietNam Holding Limited
("VNH" or the "Company")
Interim Report
VietNam Holding Limited ("VNH" or the "Company") is pleased to announce its
unaudited results for the six-month period from 1 July 2021 to 31 December
2021.
More information on the Company is available at www.vietnamholding.com (http://www.vietnamholding.com)
Dynam Capital, Ltd.
Craig Martin Tel.: +84 28 3827 7590
Sanne Group (Guernsey) Limited: Tel.: +44 (0) 1481 739810
finnCap Limited
Broker
Trading: Johnny Hewitson Tel: +44 20 7220 0558
Sales: Mark Tel: +44 20 3772 4697
Whitfeld
Corporate Finance: William Marle Tel: +44 20 7220 0500
The information contained within the announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via
Regulatory Information Service ("RIS"), this inside information is now
considered to be in the public domain.
VietNam Holding Limited
(a non-cellular company limited by shares registered in Guernsey under the
Companies (Guernsey) Law, 2008, on 25 February 2019 with registered number
66090)
Condensed Interim Unaudited Financial Statements
for the six-month period from 1 July 2021
to 31 December 2021
Contents
Chairman's Statement 1
Investment Manager's Report 3
7
Market Report
8
Interim Report of the Directors
13
Statement of Directors' Responsibilities
Condensed Interim Unaudited Statement of Financial Position 14
Condensed Interim Unaudited Statement of Comprehensive Income 15
Condensed Interim Unaudited Statement of Changes in Equity 16
Condensed Interim Unaudited Statement of Cash Flows 17
Notes to the Condensed Interim Unaudited Financial Statements 18
Director Profiles 23
Key Parties 24
Chairman's Statement
Dear Shareholder,
VietNam Holding Limited (the "Company" or the "Fund") recorded a strong first
six months of the financial year. The net asset value ("NAV") per share has
risen by 14.1% in US dollar ("USD") terms during the period and the
share-price of the Company has risen by 31.7% in Great Britain pounds ("GBP")
terms. For the calendar year that ended on 31 December, the Fund's NAV per
share rose by almost 63.9% and the share price by 81.8%. As a result, the
Company was in the top three of all investment trusts listed in the UK in
regard to performance for the full calendar year.
Total Assets decreased to USD 156,229,449 at 31 December 2021 from USD
200,418,206 at 30 June 2021, and Total Comprehensive Income was USD 17,235,713
in the six-month period, a significant decrease on the USD 40,458,032
generated in the corresponding period in 2020.
In September, the Fund completed a tender offer for 30% of the Company's
shares at a 2% discount to the prevailing NAV. The tender completed swiftly
and with little impact on the remaining portfolio, in recognition of the more
liquid nature of the holdings, and of the Vietnamese equity market as a whole.
We were pleased to see a number of investors, including my fellow directors,
buy-back into the Company after the tender. Following completion of the
tender, the discount between the share price and the NAV per share tightened
considerably from 16% to a recent record low of 4.43% on 13 February 2022. The
discount has widened again over the last few weeks, and was 18.3% on 15 March
2022, but is still at the narrower end of the range for investment trusts
focused on Vietnam.
Liquidity has also been robust in the trading of the Company's shares on the
London Stock Exchange. Daily liquidity over the six-month period, in terms of
average daily trading volume, was c.72,000 shares. We are pleased to see a
number of new investors join the share register over the last six months, a
mix of institutional, family office, wealth managers and individual investors.
In addition to the marketing initiatives coordinated by the Investment
Manager, the Board has acted appropriately in implementing share buybacks as a
means of addressing the discount between the share price and the NAV. During
the period in review, the Company bought back 13,043,946 shares (including
12,737,184 shares bought back as a result of the Tender process) at an average
price of USD 4.443, adding an estimated 0.86% in NAV per share accretion. The
Share buyback authority was renewed by the Shareholders at the AGM on 1
November 2021, allowing up to 14.99% of the Company's issued shares to be
bought back. Current practice is that shares bought back are cancelled.
This time last year I reported that we thought 'the portfolio was in great
shape and well positioned for what could be a break-through year for Vietnam'.
I am pleased to report that both the country and the portfolio performances
exceeded our expectations, particularly given the harsh circumstances brought
about by the Delta variant of Covid-19. Vietnam suffered significantly at
the start of the reporting period because of low vaccination levels and had to
impose strict lockdowns across most of the country to protect the health and
safety of its citizens. The Delta wave inevitably impacted economic activity,
mobility, and social health. However, once Vietnam was able to secure an ample
amount of vaccines, it carried out an extensive vaccination distribution
programme that was supported by its population. At times this roll-out
surpassed many developing countries in terms of record numbers of people
receiving jabs per day. By the end of the reporting period almost 90% of the
population had been double vaccinated, and in some cities, 100% levels were
reported.
The success of the vaccination programme has given confidence to the
authorities to further open the economy and remove some of the restrictions.
During this period domestic investors acted confidently and positively,
helping drive the Vietnam stock market to record levels. The portfolio
constructed by the Investment Manager on behalf of the Company, and the nimble
approach to stock selection and portfolio weighting helped the Company perform
even better than the overall market and peers. The Investment Manager's Report
has greater details on the performance of the Company and the portfolio during
this remarkable period.
The Board has kept a very close eye on the developments in Vietnam and
elsewhere during the course of the last six months and continues to adopt
sensible business continuity practices. Once again, our AGM was held remotely,
and travel of our Board members remains impacted by various restrictions in
place, although these do seem to be easing somewhat. Sadly, this meant that we
were once again unable to meet in Vietnam in December, as had been our
intention, but we have been in regular contact with the Investment Manager.
All of the Company's suppliers have adopted best-practice business continuity
plans and are pleased to say that there have been no disruptions to the
performance and conduct of the business during the last six-month period.
Lastly, I would like to thank all our shareholders, old and new, for their
continued support of the Company. We look forward to 2022 and are confident
that the portfolio is in great shape and well-positioned for what could be a
break-through year for Vietnam.
Hiroshi Funaki
Chairman
VietNam Holding Limited
18 March 2022
Investment Manager's Report
The last six months of 2021 was a period characterised by both resilience and
divergence. At the start of 2021 GDP growth was forecast to be 7.8%, a rebound
from the first year of Covid-19, when full year GDP growth in 2020 was 2.9%,
which albeit low for Vietnam given its historical growth was still one of the
only economies in the world to grow at all that year. However, during the
period under review, Covid-19's Delta variant arrived with a vengeance in
Vietnam, causing significant economic and social disruption, particularly to
the manufacturing and services sectors, and squeezing full-year GDP growth
down to 2.58% (1) .
The combination of a lack of vaccines at the start of the year and reliance on
successful measures undertaken in 2020 meant the country was ill-prepared for
the more rapid spread of Delta. This led to harsher measures with the
government imposing strict lockdowns on most of the country to help contain
the outbreak and ensure the health and safety of its citizens. The pace with
which the country was able to implement its vaccination programme once
supplies were secured was nothing short of remarkable. At times more than 1.5m
people a day were receiving the jabs. By the 31 of December nearly 90% of the
adult population was fully vaccinated, and 10% had received a third booster.
Hanoi, Ho Chi Minh City and Dong Nai (one of the key manufacturing centres in
the south of the country) recorded 100% double-vaccinations(2).
Source: Ministry of Health, The National Centre for Covid-19 Prevention and
Control
Resilience in the face of adverse conditions was demonstrated in terms of
economic performance, particularly by strong export growth of 19%
year-on-year(3) as Vietnam took advantage of new trade deals. In December 2021
monthly exports and imports were at all-time highs. Vietnam has remained a
very open economy, and its overall trade reached more than USD 668 bn in 2021,
representing more than 200% of GDP, levels seen by only a few countries
globally.
Registered Foreign Direct Investment (FDI) was higher than in 2020, surpassing
USD 30 bn. However, unsurprisingly, the effects of the ongoing pandemic caused
some delays in disbursing FDI, and at a shade under USD 20 bn this was down
1.3% year-on-year. Retail sales especially took a beating in the period, down
30% on comparative periods during some months, but have since recovered.
1 Source: GSO,Bloomberg
2 Source: Ministry of Health
3 Source: GSO
Unlike in several developed countries where an expectation of potentially
sustained inflation is putting pressure on
central banks to raise interest rates, Vietnamese interest rates have remained
low, and more easing is expected. In part, inflation appears to be under
greater control than in developed markets, due to lower food process and
demand, and low interest rates could be maintained going into 2022. The
National Assembly met recently to finalise a stimulus package of more than USD
15 bn, part of which will be from fiscal policies. Interestingly, the Vietnam
Dong strengthened during the period under review, and the US has removed its
charges against Vietnam and several other Southeast Asian countries regarding
potential currency manipulation. Divergence dominated movements in Vietnam's
equity markets. As foreigners remained on the side-lines (net sellers of USD
2.7 bn during the year), the rise of the retail investor (see below, 'Rise of
the Retail Investor') changed the profile of the market and impacted different
sectors in different ways. Volatility increased, making nimble stock selection
and portfolio weighting a very important part of alpha generation.
Overall, Vietnam's stock market was one of the best performing in the world in
2021 with domestic indices hitting record levels. The VNI rose by 37.4% and
the VNAS Index rose by +53.0%. The Fund was up +63.9% for calendar 2021, and
+14.1% for the period under review outperforming the VNAS (+10.6%) and
peers(1).
For the full year ended 31 December 2021, the Fund demonstrated strong
outperformance against the other LSE listed Vietnam Investment Trusts,
outperforming VEIL by an estimated 16.7% and VOF by an estimated 26.4%. These
two trusts are significantly larger than the Fund (by 15x and 8x
respectively), and we believe that our nimbleness in stock selection and
portfolio balancing contributed significantly to this outperformance in 2021.
Portfolio Performance
The performance of portfolio companies diverged during the reporting period as
the Delta variant caused major disruptions. Mid and small-cap companies
performed better, domestic retail investors became increasingly more dominant,
and the capital outflow in large-cap stocks rose. We tactically reduced some
large caps - mainly in banking stocks and steel-maker Hoa Phat Group - to
allocate into selective smaller-cap names particularly in the more thriving
brokerage and real estate sectors. We anticipate the wider property market in
Vietnam to continue to perform well in 2022 as government-supported investment
in infrastructure accelerates. We also added to our positions in leading
brokerages, which we feel are well-positioned for opportunities that should
crop up as the country's capital markets gradually ripen and expand.
During the six-month period, our overweight position in brokerages contributed
the most (+6.46%) to the overall +14% return with our sector picks rising
almost 54%. We were under-weight on real-estate, but our stocks rose 36% which
contributed another 6% to the overall return. We were overweight in the retail
sector and one of our holdings, Digiworld (DGW) rose by 94%. Overall, the
retail part of our portfolio was up 25%, contributing 3.4% to returns. Our
largest single position, technology and telecommunications champion FPT (10%
NAV), rose by 7.9% contributing 1% to the portfolio return. Banks, which had
been our biggest winning sector bet in the year that ended 30 June 2021, fell
by 6.5%, but our tactical underweight (24% vs 33% for the VNAS index) helped
staunch the negative contribution to 2.7%. We missed out on the strength in
the Construction and Materials, Chemicals, and Utilities sectors which rose by
80%, 43% and 38% respectively.
Our top performing stocks were real-estate developer Nam Long (4.7% NAV,
+85.6%), brokerage VNDirect Securities (3.2% NAV, +61.4%), omni-channel
retailer Mobile World (6.8% NAV, +36.1%), real-estate developer Khang Dien
House (5.4% NAV, +37.2%) and diversified conglomerate Masan Group (3.2% NAV,
+56.6%). Our laggards were the steel titan Hoa Phat Group (6.7% NAV, -9.0%)
which paused for breath after rising more than 100% in the year to 30 June
2021, real-estate developer VinHomes (4.3% NAV, -7.5%) and three of our banks:
VP Bank (6.0% NAV, -3.9%), MB Bank (5.6% NAV, -9.1%), and Vietin Bank (4.4%
NAV, -14.1%).
(( 1 )) Source: Bloomberg
Rise of the Retail Investor
The Fund's 15(th) anniversary this year coincided with an unprecedented
escalation in domestic investor activity. The market value of publicly traded
companies in Vietnam is now over USD 300 bn, up from USD 2 bn in 2006, when
the Fund launched. As a result, the stock market has created additional wealth
and income for the many new domestics.
As part of our rigorous market analysis, we commissioned an independent
research firm to conduct a first of its kind survey on the sentiment and
behaviour of the growing retail investment base in Vietnam, and the findings
painted an accurate and upbeat picture of what was to come in the last quarter
of 2021 as vaccinations picked up pace and lockdown restrictions were
gradually lifted. The first phase of the survey was carried out in August, and
the second phase in October. The survey captured the changing nature of
Vietnam's retail investment market, namely how these investors have emerged as
a decisive buying force by allocating their money in selective stocks more
than in traditional assets, such as gold. It also pointed to an interest in
cryptocurrencies, with respondents claiming to hold 15% of their portfolio in
cryptocurrencies.
We found that it is early days for the rise of the retail investor. Since
Covid-19 struck and working from home became the new norm, this investor base
has grown to an estimated four million trading accounts, around 3% of the
country's population, which is remarkably more than in the UK and similar to
Taiwan's figure in 1986 when the market there went on to experience a
decades-long stock market surge. Of the survey's 425 respondents, 79% recorded
strong gains in the past year and 59% said they feel optimistic about the
market going up more than 5% in the final months of 2021. This suggests an
optimistic outlook despite the Delta variant's paralysing effect on trade in
the first months of the reporting period.
Economic Outlook
In terms of our broader economic outlook, we expect another divergent year in
Vietnam's stock market with one of the most important themes being on how
companies address changing stakeholders' needs. As a responsible investor,
good corporate governance has always been at the heart of our investment
process, and our research continues to focus on how changes in consumerism,
urbanisation and industrialisation shape Vietnam's future. Our keen interest
in how the behaviour of Vietnam's large millennial population influences
business decisions and corporate culture is a prime example. In fact, we have
been largely engaged with how investee company retailers are preparing for Tet
and the year-ahead and omni-channel retailer Mobile World, one of the top
three performers in our portfolio, has been applauded for its recent campaign
highlighting the value of family in today's pandemic-stricken world.
Furthermore, as the Regional Comprehensive Economic Partnership agreement came
into effect as of the start of 2022, Vietnam's government and business leaders
will become even more exposed to the global corporate stage with trading
partners, suppliers, and customers from abroad watching how they deal with the
pandemic and rapid transformations. Vietnam could benefit greatly from this
historic free trade agreement as many of the latest 2022 forecasts of 6.5% (1)
GDP growth attest.
By the start of 2022, retail sales had bounced back, export growth hit at an
all-time high and global corporations continued to shift production from China
to Vietnam. In addition, on 1 January 2022, the government lifted
international flight bans and resumed travel to and from Cambodia, Singapore,
Taiwan, Japan and the US to those who are fully vaccinated. A gradual
re-opening of international travel could breathe some life back into Vietnam's
tourism industry, a sector that accounts for about 10% of GDP(2). The pandemic
brought this booming sector to its knees, and the country missed out on its
annual 18 million or so foreign arrivals and USD 33(3) bn in income.
Trade levels are expected to grow further, even though one of Vietnam's key
trade partners, China, is facing domestic issues because of its 'zero-covid'
policy. Countries that share borders with China, including Myanmar and
Vietnam, have faced problems of exporting produce by land. At the end of
December this caused significant distress for farmers of fruits and
vegetables, who were unable to export their fresh produce, and rather than
face the prospect of their labours rotting in containers at the border,
instead sold their produce cheaply in the domestic market. Vietnam's emergence
as a manufacturing-for-export hub gained a further shine when Lego announced
it would invest USD 1 bn to build its seventh factory in the world in Vietnam,
only its second in Asia. Importantly, given the green-growth initiatives
of the Vietnamese government, Lego is planning this as a carbon-neutral
factory - its first.
(1) https://english.thesaigontimes.vn/vietnams-economic-recovery-to-accelerate-markedly-in-2022-standard-chartered/
(https://english.thesaigontimes.vn/vietnams-economic-recovery-to-accelerate-markedly-in-2022-standard-chartered/)
(2) https://dangcongsan.vn/kinh-te/du-lich-viet-nam-no-luc-chuyen-minh-chu-dong-thich-ung-trong-tinh-hinh-moi-584986.html
(https://dangcongsan.vn/kinh-te/du-lich-viet-nam-no-luc-chuyen-minh-chu-dong-thich-ung-trong-tinh-hinh-moi-584986.html)
(3) https://nhipsongdoanhnghiep.cuocsongantoan.vn/hoi-sinh-nganh-du-lich-tung-tao-33-ty-usd-cua-viet-nam-qua-goc-nhin-hsbc-
post3092165.html
(https://nhipsongdoanhnghiep.cuocsongantoan.vn/hoi-sinh-nganh-du-lich-tung-tao-33-ty-usd-cua-viet-nam-qua-goc-nhin-hsbc-%20%20%20post3092165.html)
Citing data from the International Monetary Fund, Bloomberg reported on 21
January(1) that Vietnam is copying the winning formula of East Asian Tiger
economies: free and frictionless trade, and with just a fraction of the
population, Vietnam is winning more market share in world trade than India, to
become the 'world's next factory'.
Vietnam's attractiveness as a place to manufacture will continue to shine in
2022, and this should boost FDI, create more jobs as well as drive exports in
the long-term. Vietnam banked a trade surplus of USD 4 bn in 2021, after
several months of trade deficit during the factory closures due to Covid, and
2022 should see this surplus expand. As a result, Vietnam's balance of
payments and foreign exchange reserves are expected to remain very robust.
Vietnam is also expected to post a full-year 2022 GDP growth of around
6.7%(2), exactly its 30-year average. The first Omicron cases were recorded in
Vietnam on the 20 of January, and the extent of the spread of the variant is
currently uncertain. Authorities may hope that this time round the country's
defences are stronger due to the impressive vaccination plan discussed
earlier.
Force for Good
The United Nations Climate Change Conference in Glasgow dominated headlines
briefly in October and November, and a delegation from Vietnam bravely set out
its Net-Zero ambitions, ahead of many other countries. Prime Minister Pham
Minh Chinh pledged alongside more than 40 other countries around the world to
phase out coal and commit to achieving net-zero carbon emissions by 2050.
Speaking at the 26(th) session of the Conference of the Parties, COP26, he
called for fairness and justice in dealing with global climate urgencies and
discussed the Government's plans for trying to align its policies both with
international investors' corporate governance expectations and Vietnamese
citizens' own health and prosperity in mind.
Countries and companies will need to consider how the challenges of
transitioning to clean energy can be overcome and plan for a future without
fossil fuels. Vietnam has quickly become a key country in global supply
chains, and local company directors know they will be required not only to
report about sustainability and their strategies for reducing carbon emissions
but also take more action to ensure they achieve their goals and meet
stakeholder demands.
The Fund has always believed its stewardship role as a responsible investor is
a very important one when it comes to environmental and social matters in
Vietnam, and as Investment Manager we have been enhancing our active
engagement with boards and senior management of our portfolio companies
regarding climate and other environmental, social and governance (ESG) risks.
We intend to work with them even more on how to measure and report about
sustainability by providing training and encouraging them to adopt
internationally accepted accounting standards.
Earlier in 2021 the Fund's board pledged its own allegiance to the Paris
Agreement and commitment to the Task Force on Climate-related Financial
Disclosures (TCFD) in addition to becoming a member of the Asia Investor Group
for Climate Change (AIGCC). The portfolio's carbon footprint is also 32% lower
than the VNAS index. This has been a result of the Fund's active management
style in sector allocation and selection of best-in-class companies. The Fund
is nimble and can navigate small to large companies and maintain the
high-level of engagement with investee companies on progressing their own ESG
journeys too.
In our view, the climate change transition requires everyone to play their
part and Vietnam is currently the largest market for renewable energy in the
region and is proactively directing investment into a greater mix of clean
sources that can interconnect in the grid over time. Foreign multinationals
have continued to set up operations in the country partly given its strategic
location at the cross point of Southeast and Northeast Asia and as the
government carries on with its privatisation process and the freeing up of
state capital. Foreign investors can also play an increasingly essential part
of the ESG story in Vietnam, which now makes up 30% of the MSCI Frontier
Market. As Vietnam's listed companies begin to raise their game on reporting
on sustainability and other issues, and as capital market reforms continue to
be implemented, the prospect of an eventual inclusion in the MSCI Emerging
Market index may whet appetites further. There is no doubt that the high
growth that Vietnam experienced prior to Covid-19 has been stymied by the
ongoing pandemic, and it is inevitable that supply chain and other structural
risks will remain an integral part of the script in 2022, but the velocity of
change, in terms of policy and rising environmental and social urgencies, is
the reality that countries and companies all over the world face, large and
small.
When Vietnam eventually moves up from a frontier to an emerging market status,
there could be a sea change in corporate and social responsibility not seen in
its growth story ever before. Please see the 'Market Report' that follows for
an independent research perspective on Vietnam.
Dynam Capital, Ltd
18 March 2022
(1 )Bloomberg Opinion, 21 January 2022
(2) https://vietnamnews.vn/economy/1114426/standard-chartered-forecasts-viet-nam-2022-gdp-growth-at-67-per-cent.html
(https://vietnamnews.vn/economy/1114426/standard-chartered-forecasts-viet-nam-2022-gdp-growth-at-67-per-cent.html)
Market Report
Loving Vietnam
Why is Vietnam so favoured by global investors, that it accounts for 25% of
all the global money invested in Frontier equities, when Vietnam is just one
(5%) out of 22 countries in the MSCI Frontier index? In this one-page preview
of my forthcoming book, the Time Travelling Economist, I'll explain why
Vietnam ticks every box required to escape poverty, reach middle income status
and converge towards developed market wealth levels.
Firstly, Vietnam truly values education. The vast majority of people do in
every country, but Vietnam had already achieved over 80% adult literacy in the
1980s, ahead of China in the 1990s and India in the 2010s. Any country needs
70-80% to industrialise and Vietnam is decades ahead of not just mainstream
emerging markets, but also Frontier markets like Nigeria or Pakistan where the
number is still around 60%. Moreover, the country's leadership - perhaps
inspired by communist roots that that have always prioritised education - have
encouraged a strong focus on education at secondary school and university
level too. Nearly a decade ago, Vietnam already had 125,000 students at
universities abroad, with the 8(th) largest national representation of any
country at US universities. The vast majority bring home these hard-earned
skills.
Industrialisation does not just require a population that can read and write.
It's vital that factories have power too. Here again Vietnam is way ahead of
so many peers. The latest data for 2018 shows per capita electricity
consumption was above Mexico or Egypt, and more than double that of India or
Indonesia. We estimate countries need 300-500 kwh per capita of electricity
to industrialise. Vietnam had soared past that level in 2005, nearly a
generation ago.
The third key element in economic success is reaping the benefits of the
demographic dividend. When a country's fertility rate drops below three
children per woman, parents stop spending all their money on feeding their
children and start saving money to invest in their children. Bank deposits
begin to boom, and with that comes a bank lending boom (and occasionally a
short-lived bust too).
Better still, as the basic supply and demand graph in your first economics
class will tell you, when the supply of something rises, the price tends to
fall. The "cost" of money gets cheaper. So, while high fertility countries
have small banking sectors (around 20% of GDP), and a high double-digit cost
of borrowing, Vietnam with a fertility rate of 2 children per woman has
deposits above 100% of GDP and low interest rates. This helps explain how
Vietnam could afford to build the electricity network that it has.
At the same time, the adult share of the population is high, and the cheap
financing to create infrastructure and investment in the private sector,
supports job creation. Vietnam is experiencing the sweet spot of the
demographic dividend and will do so for many years to come, even as countries
like Korea begin to age quite dramatically by 2030. Taken together, all these
trends explain why Vietnam is booming. The country now exports far more per
capita than China. In 2021 Vietnam had the world's third largest trade surplus
with the US, ahead of Germany and Japan, and only behind China and Mexico. Its
competitive minimum wage is still half that of China's but likely to rise in
coming years, adding fuel to an improving domestic demand story. We should
not be surprised if the currency starts to gradually strengthen in coming
years, like Germany or Japan's did in the 20(th) century or China's renminbi
has done since 2005.
We expect Vietnam to double its economic size by 2030, and in today's money,
be a trillion-dollar economy by 2040, and a $1.7 trillion economy by 2050
similar in size to where the world's top-10 economy Korea is now.
Unsurprisingly, we think foreign investors are right to love Vietnam.
This report is an extract from a forthcoming book, the Time Travelling
Economist, written by Charlie Robertson @RenCapMan, the global chief economist
of Renaissance Capital.
Interim Report of the Directors
The Board of Directors (the "Directors") submits its report together with the
Condensed Interim Unaudited Financial Statements of VietNam Holding Limited
(the "Company") for the six-month period from 1 July 2021 to 31 December 2021
(the "six-month period").
The Company is registered in Guernsey as a non-cellular company with limited
liability. The registered office of the Company is De Catapan House, Grange
Road, St Peter Port, Guernsey, GY1 2QG.
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 Company's 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, 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.
Principal Risks
Market Risk
Vietnam is an increasingly open trading nation, and the changes in terms of
international trade, disruption to supply chains and impositions of tariffs
could impact directly and indirectly the Vietnamese Economy and the companies
in which the Company is invested. The Vietnamese economy can also be impacted
by the global-macro economic conditions, and also geopolitical tensions. The
Vietnamese capital markets are relatively young, and liquidity levels can
change abruptly responding to changes in behaviour of domestic and
international investors. Parts of the portfolio may be prone to enhanced
liquidity and price risk.
Investor Sentiment
Vietnam is currently classified as a Frontier Market by MSCI, and the
timetable for any inclusion as an Emerging Market is unsure. Investor
attitudes to Frontier and Emerging Markets can change, leading to reduced
demand for the Company's shares, and an increase in the discount to NAV per
share.
Investment Performance
The performance of the Company's investment portfolio could be poor, either
absolutely or in relation to the Company's peers, or to the market as a whole.
Fair Valuation
The risks associated with the fair valuation of the portfolio could result in
the NAV of the Company being misstated. The quoted companies in the portfolio
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
course of market activity. The values of the Company's underlying investments
are denominated in Vietnamese Dong, whereas the Company's accounts are
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 Investment Manager became unable to carry out these activities or if the
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 provision of services (including Investment Management, Fund
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
jurisdictions may have an impact on the Company. Although there are compliance
policies (including anti-bribery policies) in place at the Company, the
Investment Manager and all service providers, the Company could be damaged or
suffer losses if any of these policies were breached.
Covid-19
Outbreaks of novel coronavirus (Covid-19) as part of a global pandemic pose a
health concern through fast person-to-person spread, resulting in an illness
that can lead to death. Lockdowns, quarantine measures and restrictions on
travel can cause sustained global economic disruption and slowdown in growth,
and can cause some industries and companies to face severe financial pressures
that can lead to job losses and in extreme cases bankruptcies, impacting the
value of the investments held by the Company, and weakening investor
confidence. Key service providers to the Company could face loss of personnel,
diminution in service capability and could impact the ongoing operations of
the Company. Travel restrictions can prevent the Directors of the Company from
meeting in person. Delays in rolling out vaccinations may prolong the
economic impact on Vietnam and its population as other countries begin to
re-open their borders to travel.
Climate Risk
Climate change is happening faster than models earlier predicted, threatening
the safety of billions of people on the planet. Vietnam is one of the five
countries most vulnerable to climate change. The country's diverse geography
means it is hit by sea level rise, typhoons, landslides, flooding and
droughts, and weather events are expected to worsen in coming years. Two types
of climate-related risks have been identified. (1) Physical risks: sea level
rise, floods and typhoons that put infrastructure or real estate companies
with projects in coastal areas or low-lying levels at higher risk from
physical impacts of climate change.
(2) Transition risks: climate policy and rising carbon prices may cause higher
prices and impact the viability of companies that rely on fossil fuels or
those in high carbon intensity activities and may necessitate a significant,
and costly, technology shift.
Emerging Risks
New risks beyond those identified as Principal Risks can develop. These
Emerging Risks may have a detrimental or existential impact on the Company.
Life of the Company
The Company does not have a fixed life but the Directors consider it desirable
that shareholders should have the opportunity to review the future of the
Company at appropriate intervals. Accordingly, the Directors intend that every
fifth year a special resolution will be proposed that the Company shall
continue in existence. If the resolution is not passed the Directors will be
required to formulate proposals to be put to shareholders to either wind up
the Company or implement a reconstruction, amalgamation or other material
alteration to the Company or its activities. The Directors last tabled such a
resolution at the Extraordinary General Meeting of the Company on 31 October
2018 and it was passed, allowing the Company to continue as currently
constituted.
Results
The results of the Company for the six-month period and the state of its
financial affairs as at the reporting date are set out in the Condensed
Interim Unaudited Financial Statements on pages 14 to 22.
Performance
To ensure the Company meets its objectives the Directors evaluate the
performance of the Investment Manager at least at each quarterly Board meeting
and take into account the following performance indicators:
· NAV - reviews the performance of the portfolio
· Discount to NAV - and reviews the average discount for the
Company's shares against its peer group.
Related Parties
Details of related party transactions that have taken place during the period
and any material changes, if any, are set out in note 6 of the Condensed
Interim Unaudited Financial Statements.
Share Repurchase Programme
Details of the Company's share repurchase programme are set out in note 4 of
the Condensed Interim Unaudited Financial Statements.
Board of Directors
The members of the Board during the six-month period and up to the date of
this report were:
Name
Position
Mr. Hiroshi Funaki Non-executive Chairman; Audit and Risk
Committee member
Mr. Sean Hurst Senior Independent Director;
Environmental, Social and Governance Committee Chairman
Mr. Philip Scale Non-Executive Director; Audit and
Risk Committee Chairman
Mr. Damien Pierron Non-Executive Director; Management
Engagement Committee Chairman
Ms. Saiko Tajima Non-Executive Director; Remuneration
and Nomination Committee Chairman
Directors' Interest in the Company
As at 31 December 2021 and 30 June 2021, the interests of the Directors in
shares of the Company were as follows:
Shares held Shares held
as at 31 December 2021 as at 30 June 2021
Mr. Hiroshi Funaki 19,887 20,643
Mr. Sean Hurst 5,312 8,218
Mr. Philip Scales 10,077 10,000
Mr. Damien Pierron 4,644 5,000
Ms. Saiko Tajima 5,000 5,000
Going Concern
The Board considered it appropriate to prepare the Condensed Interim Unaudited
Financial Statements on the going concern basis, as explained in the basis of
preparation paragraph in note 2 to the Condensed Interim Unaudited Financial
Statements. In making this statement, the Board has made enquiries of the
Investment Manager and reviewed the principal risks. The Board also considered
the levels of working capital available to the Company, the closed-ended
nature of the Company, the liquidity of the investment portfolio, forecasts of
future cash flows and the impact of the Covid-19 pandemic. There were no
identified material uncertainties to the Company's ability to continue.
On behalf of the Board:
Hiroshi
Funaki
Philip Scales
Chairman
Director
VietNam Holding
Limited
VietNam Holding
Limited
18 March
2022
18 March 2022
Statement of Directors' Responsibilities
The Directors are responsible for preparing this interim financial report in
accordance with applicable law and regulations. The Directors confirm that to
the best of their knowledge:
n the Condensed Interim Unaudited Financial Statements have been prepared in
accordance with IAS 34 Interim Financial Reporting; and
n the Chairman's Statement, the Investment Manager's Report and the Interim
Report of the Directors include a fair review of information required by:
(i) DTR 4.2.7R of the UK Disclosure and Transparency Rules, being an
indication of important events, which have occurred during the first six
months and their impact on the Condensed Unaudited Interim Financial
Statements, and a description of the principal risks and uncertainties for the
remaining six months of the year; and
(ii) DTR 4.2.8R of the UK Disclosure and Transparency Rules, being related
party transactions, which have taken place in the first six months, and which
have materially affected the financial position or performance of the Company
during that period, and any material changes in the related party transactions
disclosed in the last Annual Report.
On behalf of the Board
Hiroshi Funaki
Philip Scales
Chairman
Director
18 March
2022
18 March 2022
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website, and for
the preparation and dissemination of financial statements. Legislation in
Guernsey governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Condensed Interim Unaudited Statement of Financial Position as at 31 December
2021
Notes Unaudited Audited
As at As at
31.12.21 30.06.21
USD USD
Assets
Non-current assets
Investments at fair value through profit or loss 7 150,297,849 193,108,385
Total non-current assets 150,297,849 193,108,385
Current assets
Cash and cash equivalents 5,674,659 6,031,337
Prepayments - 9,290
Accrued dividends 256,941 30,153
Receivables on sale of investments - 1,239,041
Total current assets 5,931,600 7,309,821
Total assets 156,229,449 200,418,206
Equity
Share capital 4 166,645,041 166,645,041
Reserve for own shares (164,292,160) (106,170,790)
Retained earnings 152,841,932 135,606,219
Total equity 155,194,813 196,080,470
Liabilities
Payables on purchase of investments 180,064 3,905,824
Accrued expenses 384,423 431,912
Payables on repurchase of shares 470,149 -
Total liabilities 1,034,636 4,337,736
Total equity and liabilities 156,229,449 200,418,206
The Condensed Interim Unaudited Financial Statements on pages 14 to 22 were
approved by the Board of Directors on 18 March 2022 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 18 to 22 form an integral part of these
financial statements.
Condensed Interim Unaudited Statement of Comprehensive Income
Note Unaudited Unaudited
01.07.21- 01.07.20-
31.12.21 31.12.20
USD USD
Dividend income from investments at fair value through profit or loss 1,055,492 1,658,588
Net gain from investments at fair value through profit or loss 5 18,357,368 40,218,284
Net foreign exchange gain 89,163 1,155
Interest income - 299,252
Net investment income 19,502,023 42,177,279
Investment management fees 6 1,447,677 999,318
Directors' fees and expenses 6 191,688 211,725
Administrative and accounting fees 114,965 120,994
Custodian fees 84,690 72,592
Audit fees 37,006 32,200
Other expenses 390,284 282,418
Total operating expenses 2,266,310 1,719,247
Other comprehensive income - -
Total comprehensive income for the period 17,235,713 40,458,032
Basic and diluted earnings per share USD 0.50 USD 0.83
The accompanying notes on pages 18 to 22 form an integral part of these
financial statements.
Condensed Interim Unaudited Statement of Changes in Equity
Share Reserve for Retained
capital own shares earnings Total
USD USD USD USD
Balance at 1 July 2020 166,645,041 (84,813,068) 35,452,331 117,284,304
Total comprehensive income for the period
Change in net assets attributable to shareholders - - 40,458,032 40,458,032
166,645,041 (84,813,068) 75,910,363 157,742,336
Contributions and distributions
Repurchase of own shares (note 4) - (20,326,645) - (20,326,645)
- (20,326,645) - (20,326,645)
Balance at 31 December 2020 166,645,041 (105,139,713) 75,910,363 137,415,691
Balance at 1 July 2021 166,645,041 (106,170,790) 135,606,219 196,080,470
Total comprehensive income for the period
Change in net assets attributable to shareholders - - 17,235,713 17,235,713
166,645,041 (106,170,790) 152,841,932 213,316,183
Contributions and distributions
Repurchase of own shares (note 4) - (58,121,370) - (58,121,370)
- (58,121,370) - (58,121,370)
Balance at 31 December 2021 166,645,041 (164,292,160) 152,841,932 155,194,813
The accompanying notes on pages 18 to 22 form an integral part of these
financial statements.
Condensed Interim Unaudited Statement of Cash Flows
Unaudited Unaudited
01.07.21 - 01.07.20 -
31.12.21 31.12.20
USD USD
Cash flows from/(used in) operating activities
Total comprehensive income for the period 17,235,713 40,458,032
Adjustments to reconcile total comprehensive income to net cash from operating
activities:
Interest income - (299,252)
Dividend income (1,055,492) (1,658,588)
Net gain from investments at fair value through profit or loss (18,357,368) (40,218,284)
Purchase of investments (50,275,477) (34,723,944)
Proceeds from sale of investments 107,717,621 57,055,944
Net foreign exchange gain (89,163) (1,155)
Decrease in receivables on sale of investments 1,239,041 -
Decrease/(increase) in other receivables 9,290 (76,162)
Decrease in accrued expenses (47,489) (54,022)
Increase in repurchases of shares payable 470,149 -
Dividends received 828,704 1,634,133
Interest received - 299,252
Net cash from operating activities 57,675,529 22,415,954
Cash flows used in financing activities
Repurchase of own shares (58,121,370) (20,326,645)
Net cash used in financing activities (58,121,370) (20,326,645)
Net (decrease)/increase in cash and cash equivalents (445,841) 2,089,309
Cash and cash equivalents at beginning of the period 6,031,337 2,561,173
Effect of exchange rate fluctuations on cash held 89,163 1,155
Cash and cash equivalents at end of the period 5,674,659 4,651,637
The accompanying notes on pages 18 to 22 form an integral part of these
financial statements
Notes to the Condensed Interim Unaudited Financial Statements
For the six-month period from 1 July 2021 to 31 December 2021
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 Premium segment of the official list of the UK Listing
Authority ("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 31 October 2018 the Shareholders
voted in favour of the continuance resolution, authorising the Company to
operate in its current form through to the 2023 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 De Catapan House, Grange Road, St
Peter Port, Guernsey, GY1 2QG.
2 Principal Accounting Policies
(a) Statement of compliance
The Condensed Interim Unaudited Financial Statements (the "financial
statements") have been prepared in accordance with IAS 34 Interim Financial
Reporting, the Disclosure Guidance Transparency Rules of the UK's Financial
Conduct Authority and the Listing Rules.
The financial statements do not include all of the information required for
full financial statements and should be read in conjunction with the Company's
audited financial statements for the year ended 30 June 2021, which were
prepared in accordance with International Financial Reporting Standards as
adopted by the EU ("IFRS"). The accounting policies used by the Company are
the same as those applied by the Company in its annual financial statements as
at and for the year ended 30 June 2021.
The Directors have assessed the impact, or potential impact, of all New
Accounting Requirements. In the opinion of the Directors, there are no
mandatory New Accounting Requirements applicable in the current period that
had any material effect on the reported performance, financial position, or
disclosures of the Company. Consequently, no mandatory New Accounting
Requirements are listed. The Company has not early adopted any New Accounting
Requirements that are not mandatory.
All non-mandatory New Accounting Requirements in issue are either not yet
permitted to be adopted or, in the Directors' opinion, would have no material
effect on the reported performance, financial position, or disclosures of the
Company and consequently have neither been adopted, nor listed.
(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.
2 Principal Accounting Policies (continued)
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 and (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 the Vietnamese stocks has increased significantly over the last twelve
months with average daily traded volumes increasing by as much as five times
the level of the prior period. The Company's liquidity position, taking into
account cash held and with the ability to sell underlying assets to meet share
buybacks, tender offers 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. The Directors therefore have a
reasonable expectation that the Company will have adequate resources to
continue its operations for the foreseeable future and continue to adopt the
going concern basis of accounting in preparing the financial statements.
Improved liquidity in the market and the portfolio was in evidence in August
2021 when the Investment Manager was able to generate close to 30% cash in the
portfolio to fund the recent tender offer.
Critical accounting estimates and judgements
The preparation of financial statements in accordance with IFRS requires
management to make judgements, estimates and assumptions that affect the
application of policies and the reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are based on
historical experience and various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis of
making judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates.
The estimated and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised if the revision affects only that period or in the
period of the revision and future periods if the revision affects both current
and future periods.
The estimates and assumptions that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed 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 Directors consider the USD as the
currency that most faithfully represents the economic effects of the
underlying transactions, events and conditions.
Fair value of financial instruments
The fair value of financial instruments that are not traded in an active
market is determined by using valuation techniques. The Company uses its
judgement to select a variety of methods and make assumptions that are mainly
based on market conditions existing at each reporting date.
3 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 Directors 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. All of the Company's investments in securities
at fair value are in Vietnam as at 31 December 2021 and 30 June 2021. All of
the Company's investment income can be attributed to Vietnam for the periods
ended 31 December 2021 and 31 December 2020.
4 Share Capital
Ordinary shares of USD 1.00 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 new
Articles of Incorporation, the Company may from time to time redeem all or any
portion of the shares held by the Shareholders upon giving notice of not less
than 30 calendar days.
On 8 March 2019 the Company's ordinary shares were cancelled from trading on
AIM and admitted to the Premium segment of the Official List and trading on
the Main Market. On the same date the Company's shares were admitted to
listing and trading on the TISE.
31.12.21 30.06.21
No. of shares No. of shares
Total shares issued and fully paid (after repurchases and cancellations) at 42,623,935 50,814,865
beginning of the period
Shares cancellation (13,043,946) (8,190,930)
29,579,989 42,623,935
Repurchased and reserved for own shares
At beginning of the period - -
During the period (13,043,946) (8,190,930)
Shares cancellation 13,043,946 8,190,930
- -
Total outstanding ordinary shares with voting rights 29,579,989 42,623,935
As a result, as at 31 December 2021 the Company has 29,579,989 (30 June 2021:
42,623,935) ordinary shares with voting rights in issue (excluding the reserve
for own shares), and nil (30 June 2021: nil) are held as reserve for own
shares.
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 Directors may from time to time and at
their 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 net
asset value per share.
5 Net Gain/ (Loss) from Investments at Fair Value through Profit or Loss
6 months to 6 months
to
31.12.21 31.12.20
USD USD
Realised gain/(loss) on disposal of investments at fair value through profit 46,797,281 7,191,637
or loss
Unrealised gain/(loss) on investments at fair value through profit or loss (28,439,913) 33,026,647
18,357,368 40,218,284
6 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 six-month period to
31 December 2021 was USD 1,447,677 (period ended 31 December 2020: USD
999,318). An amount of USD 225,945 (30 June 2021: USD 273,919) was outstanding
as at 31 December 2021.
Directors' fees and expenses
The Board of Directors determines the fees payable to each Director, subject
to a maximum aggregate amount of USD 350,000 (2020: USD 350,000) per annum
being paid to the Board of Directors 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 six-month
period to 31 December 2021 for the Directors fees were USD 191,688 (period
ended 31 December 2020: USD 211,725).
As at 31 December 2021, USD 16,350 (30 June 2021: USD 8,250) of Directors'
fees were outstanding.
Directors' ownership of shares
As at 31 December 2021, Directors held 44,920 ordinary shares in the Company
(30 June 2021: 48,861) as listed below.
Hiroshi Funaki
19,887 Shares
Sean
Hurst
5,312 Shares
Philip
Scales
10,077 Shares
Damien Pierron 4,644
Shares
Saiko Tajima
5,000 Shares
Mr. Funaki is also a Director of Discover Investment Company which holds
1,280,776 ordinary shares in the Company representing 4.3% of the issued share
capital.
7 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 to 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
As at 31.12.21
Financial assets classified at fair value upon initial recognition
Investments in securities 149,989,819 308,030 - 150,297,849
As at 30.06.21
Financial assets classified at fair value upon initial recognition
Investments in securities 193,108,385 - - 193,108,385
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.
8 Basic and Diluted Earnings per Share
The calculation of basic and diluted earnings per share at 31 December 2021
was based on the change in net assets attributable to ordinary shareholders of
USD 17,235,713 (period ended 31 December 2020: USD 40,458,032) and the
weighted average number of shares outstanding of 34,563,847 (period ended 31
December 2020: 48,612,570).
9 Subsequent Events
There were no other material events that require disclosure and/or adjustments
in these financial statements.
Director Profiles
Hiroshi Funaki
Mr Funaki has been actively involved in raising, researching and trading
Vietnam funds for 23 years. 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 a consultant to a number of emerging market investors. He has a BA in
Mathematics and Philosophy from Oxford University and is a UK resident.
Sean Hurst
Mr Hurst was co-founder, director and chief investment officer of Albion Asset
Management, a French regulated asset management company, from 2005-2009. He is
an experienced multi-jurisdictional director including roles at Main Market
and AIM traded funds and numerous offshore and UCITS funds. In addition to
advising companies on launching both offshore and onshore investment funds, he
is currently non-executive chairman of JPEL Private Equity Ltd and
non-executive director at CIAM Opportunities Fund and Satellite Event Driven
UCITS Fund. Mr Hurst was formerly a non-executive director of AIM listed ARC
Capital Holdings Ltd. He holds an MBA in Finance from CASS Business School in
London and is a resident of France.
Philip Scales
Mr Scales has over 40 years' experience working in offshore corporate, trust,
and third-party 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, latterly in the
closed-ended arena (both listed and unlisted entities). Mr Scales subsequently
co-founded IOMA Fund and Investment Management Limited (now named FIM Capital
Limited) where he is Deputy Chairman. 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. He is an Isle of Man
resident.
Damien Pierron
Mr Pierron is currently Partner and Co-founder at Ankaa Ventures, a Venture
Capital and Private Equity platform. In his last position, he was a managing
director in Societe Generale. Mr Pierron has 15 years' experience in M&A,
strategy and alternative assets gained at, among others, Lafarge Holcim,
OC&C Strategy Consultants, Natixis and Societe Generale. He is a CFA
charterholder and holds a Degree in Mathematics, Physics and Economy from
Ecole Polytechnique in Paris and a Master's Degree in Quantitative Innovation
from Ecole Nationale Superieure des Mines de Paris. He is a Dubai resident.
Saiko Tajima
Ms. Saiko 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 7 years,
she has invested in and helped develop tech start-ups in Tokyo, Seoul and
Sydney.
Key Parties
Directors
Mr. Hiroshi Funaki
Mr. Sean Hurst
Mr. Philip Scales
Mr. Damien Pierron
Ms. Saiko Tajima
Investment Manager
Dynam Capital, Ltd
De Catapan House
Grange Road
St Peter Port
Guernsey
GY1 2QG
Registered Office, Company Secretary and Administrator
Sanne Group (Guernsey) Limited
De Catapan House
Grange Road
St Peter Port
Guernsey
GY1 2QG
Sub-Administrator, Custodian and Principal Bankers
Standard Chartered Bank (Singapore) Limited
7 Changi Business Park Crescent
Level 3, Securities Services
Singapore 486028
UK Legal Adviser
Stephenson Harwood LLP
1 Finsbury Circus
London
EC2M 7SH
Guernsey Legal Adviser
Carey Olsen (Guernsey) LLP
Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
Market Researcher
Dynam Consultancy and Services
Company Limited
Floor 12, Deutsches Haus,
33 Le Duan,
Ben Nghe Ward, District 1
Ho Chi Minh City,
Vietnam
Corporate Broker and Financial Adviser
finnCap Ltd.
One Bartholomew Close
London
EC1A 7BL
(Nominated Adviser (AIM) until transference to LSE Main Market)
Registrar
Computershare Investor Services (Guernsey) Limited
1st Floor, Tudor House
Le Bordage
St Peter Port
Guernsey
GY1 1DB
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