REG - Vietnam Enterprise - Half-year Report
19/09/2024 07:00
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RNS Number : 8471E Vietnam Enterprise Investments Ltd 19 September 2024
COMPANY ANNOUNCEMENT
For Immediate Release
19 September 2024
Vietnam Enterprise Investments Limited
("VEIL" or the "Company")
INTERIM RESULTS FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2024
The Company today announces its interim results for the six-month period ended
30 June 2024 (the "Interim Report 2024").
The Interim Report 2024 has been filed with the FCA by uploading it to the
National Storage Mechanism ("NSM") in accordance with UK Listing Rule 6.4.1
and will shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The Interim Report 2024 may also be accessed via the Company's website:
https://www.veil-dragoncapital.com/investors/financial-statements/
(https://www.veil-dragoncapital.com/investors/financial-statements/)
In accordance with DTR 6.3.5(1A), the regulated information referred to in DTR
6.3.5 is available in unedited full text within the Interim Report 2024 as
uploaded to the NSM and on the Company's website as noted above.
Enquiries:
Vietnam Enterprise Investments Limited
Rachel Hill
+44 (0) 797 121 4852
+44 (0) 1225 618 150
rachelhill@dragoncapital.com (mailto:rachelhill@dragoncapital.com)
Jefferies International Limited
Stuart Klein
+44 (0) 20 7029 8703
stuart.klein@jefferies.com (mailto:stuart.klein@jefferies.com)
h2Radnor
Iain Daly
+44 (0) 20 3897 1830
idaly@h2radnor.com (mailto:idaly@h2radnor.com)
LEI: 213800SYT3T4AGEVW864
CHAIR'S STATEMENT
Dear Shareholders,
As the new Chair of Vietnam Enterprise investments Limited, ("VEIL" or the
"Company") I am pleased to report that in the first half of 2024 the Vietnam
Index ("VNI") continued its recovery of 2023, rising 11.1% in local terms, or
6.0% and 7.0% in US$ and GBP terms, respectively. VEIL's Net Asset Value
("NAV") performed in line with the VNI over the period. However, shareholder
returns were slightly less as the discount widened from 18.1% to 19.0%. Le Anh
Tuan, who joined Dragon Capital in 2006, took over as the Lead Portfolio
Manager in February 2024, having previously worked as VEIL's Deputy Portfolio
Manager between 2010- 2013. The Company's investment policy and objective will
remain unchanged.
The Investment Environment
Economic growth has continued to be robust and, following stronger than
expected growth in the first half, the Government has revised up its forecast
for the full year Gross Domestic Product (GDP) growth to 6.5-7.0%. This
compares very favourably with both major global economies and other emerging
markets. The manufacturing and service sectors together with consumption have
led the way, benefiting from Vietnam's favourable demographics, and newly
registered foreign direct investment ("FDI") has continued to see double digit
growth as the global supply chain shifts from China.
Public spending and progress in infrastructure projects have been less
impressive this year as corruption allegations resulted in some senior
Government personal changes, including the Chairman of the National Assembly
and President of Vietnam. These changes have meant that there have been delays
in decision-making at the municipal level. Additionally, the General Secretary
of the Communist Party, who was known for his anti-corruption policies, passed
away following a prolonged illness in July 2024 at the age of 80. There has
been a smooth transition with President To Lam being unanimously elected as
the new General Secretary at the beginning of August and it was encouraging
that in his inaugural address he reiterated his commitment to the continuity
of pro-business policies.
Delays in US interest rate cuts and the domestic political transition have put
pressure on the Vietnamese dong which depreciated by 4.9% over the period
against the US$, in line with other emerging market currencies. The State Bank
of Vietnam issued government bills and sold foreign exchange reserves to
support the dong and domestic deposit rates rose. Against this background
there were significant foreign outflows from Vietnam of US$2.1 billion in the
first half of 2024, which was part of a broader emerging market trend with a
number of emerging stock markets seeing negative returns over the period. Over
the period under review, as well as over the last 3 years, emerging markets
have, in general, underperformed the major global indices and, in particular,
the US market which has been led by a number of high-flying technology stocks.
Performance
In terms of the Company's performance, VEIL's NAV per share increased by 6.0%
in the first half of 2024, on par with the VNI's 6.0% gain, both in US$ terms.
In GBP terms, VEIL's NAV per share increased 6.9% over the same period. The
main contributors to the Company's performance came from the retail and
software & services sectors, with two of VEIL's top holdings, Vietnam's
leading retailer Mobile World Group (Ticker: MWG) and the country's leading
software solutions and technology group FPT Corporation (Ticker: FPT) seeing
particularly strong performances. The three-year performance has been rather
disappointing as the significant foreign selling has put downward pressure on
a number of the larger stocks that foreigners favour which have featured in
VEIL's portfolio. It is hoped that this trend will reverse as Vietnam's strong
fundamentals attract foreigners back into the market. Within the portfolio
there has been some rebalancing to create a more balanced and diversified
portfolio to reflect the current economic landscape. There is more detail on
the performance and portfolio in the Portfolio Manager's Report that follows.
Fee Reduction
As announced in December 2023, the Management Fee was reduced to a flat rate
of 1.5% p.a. with effect from 1 July 2024.
Share Buybacks
The discount started the period at 18.1%, and widened slightly to 19.0%, at
the end of the period, which is in line with the general trend in the
Investment Trust industry where discounts have remained under pressure. In the
first half of 2024, US$44.0 million was spent repurchasing 5,903,009 shares
(compared to 1,906,589 shares in the first half of 2023 and 5,698,692 shares
for CY2023), which represents 2.9% of the weighted average of outstanding
shares. The average discount at which shares were bought back was 18.7% over
the period. These share repurchases resulted in a 0.71% accretion to NAV per
share over the six months.
We continue to actively monitor our share price and discount to NAV. We
believe that the key to narrowing the discount will be stronger NAV
performance and an improvement in investor sentiment towards Vietnam. In
addition, we feel that steps taken to improve marketing and lower fees will
help to support investor demand. However, we remain committed to executing
buybacks when deemed appropriate to generate accretive value for shareholders.
Outlook
It has been a challenging time for investors in Vietnam and emerging markets
over the last few years as investors' focus on a narrow selection of US tech
stocks, coupled with political worries in China and elsewhere has resulted in
foreign selling and underperformance of the stock markets. Geopolitical risks
still remain and Vietnam's increasing dependence on the global supply chain
and its large trade surplus with US make it vulnerable to any global
disruption or any potential protectionism resulting from a Trump victory in US
elections. However, robust consumer spending, supportive fiscal policies and
resilient FDI inflows should underpin Vietnam's superior economic growth. With
domestic inflation under control and global rate cuts on the horizon, any
easing of exchange rate pressures should enable further cuts in domestic
interest rates which would be supportive for Vietnam's stock market.
Earnings per share are expected to grow in the high teens in 2024, putting the
market on a forward price/ earnings ratio of around 12x, which is cheap both
relative to Vietnam's recent history and also relative to other Asian and
global markets. At current valuations the Directors believe that the large and
experienced team of research analysts and the emphasis on high quality
companies with clear earnings visibility should reward investors over the
longer term.
Sincerely,
Sarah Arkle
Chair
19 September 2024
PORFOLIO MANAGER'S REPORT
Performance Overview
Vietnam Enterprise Investments Limited ("VEIL" or the "Company") achieved an
NAV per share increase of 6.0% in the first half of 2024, in line with the
6.0% gain of the Vietnam Index ("VNI") in Total Return USD ("TR$") terms. This
performance was supported by a positive economic backdrop in the first half of
2024. Vietnam's Gross Domestic Product ("GDP") growth was strong, driven by an
8.8% rise in domestic consumption, indicating a recovery in the retail sector.
The Government's pro-growth policies and low interest rates further enhanced
business conditions, and despite changes at senior government levels, the
commitment to supporting industry and economic growth remained steadfast.
These favourable economic conditions were reflected in the performance of our
key investment sectors. The retail and banking sectors were particularly
strong contributors to VEIL's overall performance, benefiting from a low-rate
environment and increased credit growth. The software & services sector
was a standout performer with international interest growing around the AI and
semiconductor themes. The materials & resources sector also achieved
strong growth, but real estate was the notable laggard, with a sector-wide
decline in earnings due to slow progress in project delivery and slowed
government decision-making at municipal levels. However, the new Land Laws,
effective 1 August 2024, aim to speed this up.
In response to the positive economic developments in the first half of 2024 we
carried out strategic rebalancing activities. We reduced our positions in
highly concentrated names such as Asia Commercial Bank ("ACB"), Vietnam
Prosperity Bank ("VPB"), and Hoa Phat Group ("HPG"). This allowed us to
increase our exposure to the retail and software & services sectors, as
well as selectively top up in banking stocks that have higher growth
potential. We invested in companies within the retail, manufacturing, real
estate & construction, and transportation sectors that are well-positioned
to benefit from Vietnam's core growth drivers and outperform the market. These
adjustments ensure a more balanced and diversified portfolio that aligns with
the current economic landscape and growth opportunities.
Attribution Analysis
The Software & Services Sector
The software & services sector was a key contributor to VEIL's performance
in the first half of 2024 (+1.44% of alpha) with FPT Corporation ("FPT")
adding 1.49% of alpha. FPT's share price rose 49.9% in the first half of 2024,
with the company benefitting from its US$200 million AI partnership signed
with NVIDIA and optimism following the March acquisition of the Japanese IT
services company Next Advanced Communications NAC Co, Ltd. ("NAC"). FPT
reported solid results for the first half of 2024, with revenue of US$1.2
billion and net profit after tax and minority interest ("NPATMI") of US$144
million, up 21.4% and 22.3% year-on-year, respectively. Revenue and Pre-tax
Profit in the company's global IT services division rose 30% and 25%
year-on-year, with revenue in Japan rising 35.2% compared to the first half of
2023, partly attributed to the NAC acquisition. With FPT securing 27 major
contracts valued at over US$5 million each within the first half of 2024, we
have high conviction in FPT's ability to achieve long-term profitability.
The Retail Sector
Core to our investment theme in this sector is the rise of domestic
consumption. The retail sector contributed 0.16% of Alpha to VEIL in the first
half of 2024. We increased the position in Mobile World Group ("MWG") whose
performance for the first half of 2024 showed clear margin recovery, profit
normalisation in consumer electronics, and improvements in its grocery chain
Bach Hoa Xanh ("BHX"). BHX is a key driver for future growth and has now
turned profitable after 18 months of successful restructuring. We also added
FPT Retail ("FRT") which has one of the country's largest pharmacy chains,
Long Chau Pharmacy. Central to FRT's investment case, Long Chau reported
NPATMI growth for the first half of 2024 of 93.0% year-on-year after
increasing the total store count to over 1,700 from approximately 1,500 at the
beginning of the year.
Aligning with our strategic focus on leading companies within the retail
sector, the increased exposure through MWG and FRT has proved fruitful with
stock price returns for the first half of 2024 of 40.1% and 57.7%,
respectively (in TR$ terms). Both companies increased their customer base and
enjoyed better-than-expected margin improvements. Their significant market
share gains and strong bargaining power enabled swift profit turnarounds
through operational leverage. We believe they will continue to exhibit
excellent growth in 2024 as the gradual recovery of domestic consumption and
retail confidence continues.
The Banking Sector
The banking sector was out of favour last year but has been performing well in
2024. The sector contributed 0.56% of alpha to VEIL in the first half of 2024,
with top holdings TechcomBank ("TCB") and MB Bank ("MBB") reporting
encouraging results. We believe most of the key banking metrics have now
bottomed out; non-performing loans ("NPLs"), have remained unchanged at a
ratio of 1.9% compared to the same period in 2023, net interest margins
("NIM") should improve due to expected Fed cuts likely reducing FX and policy
rate pressures, and credit growth was strong at 6.0% for the first half of
2024, an increase of 15% year-on-year. However, divergence in earnings between
state-owned commercial banks ("SOCBs") and private commercial banks appeared.
This was due to SOCBs conforming to political mandates to support the economy
through lower lending rates than their commercial counterparts, resulting in
reduced NIM and lower earnings growth.
TCB's NPATMI for the first half of 2024 was US$488 million, +38.7%
year-on-year after a strong recovery in fundamentals; credit growth was among
the highest in the sector at 13.0%, driven by a disbursement recovery in
mortgages and SMEs. NIM accelerated faster than expected in the second quarter
of 2024 by 30bps to 4.65%, and non-interest income continues to maintain high
growth. This is mostly thanks to the exceptional performance of its brokerage
arm TCBS, which recorded profit before tax for the second quarter of 2024 of
approximately US$307 million, +38.6% year-on-year and +38.5%
quarter-on-quarter.
MBB reported NPATMI of US$417 million, +6.5% year-on-year. Similar to TCB, MBB
saw strong credit growth of 9.4% in the first half of 2024, a significant
increase from just 0.4% in the first quarter of 2024. Asset quality improved
as NPLs decreased to 1.6% in the second quarter of 2024 from 2.5% in the first
quarter of 2024, and NIM improved by approximately 50bps thanks to a 50bps
quarterly decline in cost of funds and nearly a 20bps increase in gross yield.
With the Government steadfast in its pro-growth monetary and fiscal policies,
we expect this to promote healthy commercial conditions and drive credit
demand, benefiting the overall banking sector, particularly those exhibiting
strong credit growth potential.
The Real Estate & Construction Sector
The real estate & construction sector faced challenges with a 36.1%
year-on-year decline in NPATMI, showing similar trends for both residential
and industrial property developers and delivering negative alpha for VEIL of
-0.53%. The weak earnings stem from the government personnel changes that
delayed project handovers and new launches. However, the sector is gradually
recovering, with profits more than doubling in the second quarter of 2024
compared to the previous quarter. Our full-year forecast currently stands at
10.2% drop in NPATMI, pending project handovers and several bulk sales
transactions in the second half of 2024.
We have increased our holdings in selected residential developers that we
believe will benefit most from the new Land Laws and be among the first movers
to perform within the sector. These included Khang Dien House ("KDH") and new
addition Nam Long Group ("NLG"). Both have substantial clean land banks and
promising new project pipelines which is a significant advantage over other
developers, who may have to acquire land and legal approvals, a costly and
potentially time-consuming process.
KDH performed well for VEIL, with its stock price increasing 12% in TR$ terms.
The company is one of the safest mid-cap property development names with a
very good track record of successfully issuing legal paperwork and delivering
projects. We introduced NLG to the portfolio as it is a standout among mid-cap
developers due to its sizeable and ready-to-go land banks, proven execution
capabilities, and low-risk profile. We believe NLG will recover with strong
revenue growth into 2025 as the wider sector picks up momentum.
Dat Xanh Group ("DXG") is a mid-end property developer with very good land
bank locations that should command high prices once the anticipated sector
recovery builds momentum. However, DXG was a significant laggard for VEIL,
with its stock price declining 21.2% and delivering negative alpha of -0.57%.
This was mainly due to the failure of achieving material progress in launching
new projects, but we believe once the company begins launching as the sector
recovers it will likely catalyse a re-rating of the stock and deliver
significant upside for VEIL.
Within the industrial property segment, industrial park operator Kinh Bac City
("KBC") had a strong year with net sales of US$231 million in 2023. However,
net sales for the first half of 2024 were negative US$41 million, a decrease
of 77.1% year-on-year resulting, in negative alpha for VEIL of -0.26%. This
was in part due to slow government approval of their landbanks that lead to
slow pre-sales. However, we anticipate this to be resolved in the third and
fourth quarters of 2024. Compounding this was a backlog in the first half of
2024 earnings for the booking of approximately 40 ha. of industrial parks.
However, KBC is long-term hold for VEIL, with future earnings potential
deriving from its substantial clean landbanks, strong project pipeline, and
sustained high levels of FDI.
Overall, we remain optimistic about a potential recovery in the second half of
2024. The low-rate environment should boost homebuyer confidence with
attractive mortgage terms, and the new Land Laws are expected to address legal
issues over time and reinvigorate delayed projects. The legal framework will
favour larger developers with existing land banks, likely making the recovery
selective. Notably, real estate transactions have slowly recovered, with
higher volume in the secondary market. Primary market data shows approximately
12,500 new apartments were launched in the first half of 2024 (up 65%
year-on-year), with nearly 10,000 launched in the second half of 2024. Demand
is also higher, with approximately 14,000 units sold in the first half of 2024
versus 7,000 in the first half of 2023.
The Transportation Sector
The overall transportation sector saw a negative alpha contribution to VEIL of
-0.54% in the first half of 2024. This was largely due to the strong
performance of Vietnam Airlines ("HVN") which is 1.45% of the VNI. We do not
own HVN due to its high valuation, and its stock price increased sharply in
the second quarter of 2024 by 158.4% (in TR$ terms).
However, our key representative in the sector is Airports Corporation of
Vietnam ("ACV"), which reported NPATMI of US$241 million in the first half of
2024, 44.9% higher than that of the first half of 2023. This was reflected in
a stock price increase of +76.2% (in TR$ terms) in the first half of 2024,
contributing +0.22% of alpha. ACV's strong stock performance and increased
earnings stemmed from the significant recovery in tourism surpassing 2019
levels, reaching 8.8 million foreign arrivals in the first half of 2024,
reaffirming our conviction for the recovery in tourism.
The Materials & Resources Sector
Hoa Phat Group ("HPG") is Vietnam's largest steel producer. The company's
investment appeal lies in its dominant market position, expanding production
capacity, and expansion initiatives that drive significant revenue. Revenue
and earnings for the first half of 2024 have been recovering well after a
tough 2023. In the first half of 2024, net sales reached US$2.8 billion,
+25.5% year-on-year and NPATMI was US$243 million, +233.2% year-on-year. This
strong recovery suggests a warming up of public spending and private
construction, playing into our investment theme of infrastructure and real
estate recovery. HPG stock price increased 6.2% (in TR$ terms) in the first
half of 2024, contributing +0.02% of alpha to VEIL. Currently, China's low
steel price poses potential margin concerns, but Vietnam has recently proposed
anti-dumping legislation that aims to address this issue within the next 3-6
months. Furthermore, HPG plans to expand into the Middle East, South America,
and Africa, reducing concentration risk and potential anti-dumping tariffs in
other export markets.
Hoa Sen Group ("HSG") was a new addition to VEIL in the first half of 2024.
HSG specialises in galvanised steel and posted solid results in the first half
of 2024. Net sales were US$789 million and NPATMI reached US$23.2 million, an
increase of 28.6% and 123.7% year-on-year, respectively. This impressive
performance was supported by a significant expansion in gross profit margin,
notably benefiting from improved pricing spreads between galvanised products
and input costs. However, stock performance for the first half of 2024 was
relatively muted at +2.5% considering the company's results, contributing
negative alpha to VEIL of -0.18%. Despite this, we anticipate HSG to continue
to perform well in line with the anticipated infrastructure and real estate
recovery, further bolstered by the potential Chinese anti-dumping proposal.
Adjustment of Unlisted Equity Investments
As of 30 June 2024, VEIL holds only one unlisted equity investment, which
relates to a company in the real estate & construction sector. VEIL
entered into this transaction in June 2022 with certain terms and conditions
that protect its interests. The carrying value of HTL in VEIL's portfolio is
based on the valuation of the cash flow of its payment plan. During the period
covered by this report, VEIL adjusted the payment plan after HTL's failure to
meet scheduled payments in a timely manner, which has affected the carrying
value of HTL. This is specified in Note 13(A) (iii) under the Notes to the
Condensed Interim Financial Statements.
Environmental, Social and Governance
Each investment made by the Company undergoes a comprehensive Environmental,
Social, and Governance ("ESG") screening process established by its Investment
Manager, Dragon Capital group (the "Group"). Grounded in the International
Finance Corporation ("IFC") performance standards, this process has been in
place since 2016. This year, the Group is revising its ESG policies and
procedures to incorporate the ten principles of the United Nations Global
Compact (UNGC). These principles, which encompass human rights, labour
standards, environmental protection, and anti-corruption measures, are based
on internationally recognised declarations and conventions.
In upgrading our ESG management system, the Group draws on international
standards and frameworks, including those of the Task Force on Climate-related
Financial Disclosures (TCFD), the Sustainable Finance Disclosure Regulation
(SFDR), the Sustainability Accounting Standards Board (SASB), and the
Sustainable Banking Assessment (SUSBA). By incorporating relevant indicators
from these frameworks, we aim to reflect best practices across our investment
universe. Additionally, we directly engage with investee companies to enhance
ESG standards, benefiting our investee companies, Vietnam, and our
Shareholders.
Outlook
In summary, VEIL's performance in the first half of 2024 was underpinned by a
recovering economic environment, supported by government policies aimed at
fostering growth. The continued strength in key sectors such as banking,
manufacturing, services, and tourism, along with robust FDI and export growth,
has set a solid foundation for future growth. The Government's commitment to a
pro-growth agenda, including maintaining low interest rates and implementing
supportive fiscal measures, has been crucial in sustaining this positive
trajectory.
These policies have mitigated the impact of global economic pressures,
particularly the strong US dollar, which has exerted pressure on the
Vietnamese dong. However, recent US economic data points to a potential Fed
rate cut sooner than anticipated, which could ease FX pressures. If this does
not materialise, we believe the State Bank of Vietnam will successfully manage
the currency through policy interventions that remain pro-growth.
The implementation of the Land Laws in August is expected to stimulate the
real estate market, which in turn should boost credit growth through developer
loans and retail mortgage demand, thereby bolstering banking sector profits.
The materials & resources sector is also likely to benefit as property
developments and infrastructure projects get underway.
Our Portfolio Manager's forecast at the beginning of the year of 15-18% NPATMI
growth for their Top-80 stock universe is unchanged. Year-to-date market
returns demonstrate a robust, alpha-driven market, underscored by a pronounced
bias towards stock selection based on earnings and corporate outlooks. We,
therefore, maintain our focus on high-quality companies with clear earnings
visibility, which will be key in driving stock price returns. We may also take
part in capital-raising activities for both private and listed companies as
opportunities arise, driven by the ongoing increase in credit demand.
Looking ahead, we remain confident that 2024 will be a year of growth and
recovery. With GDP for the first half of 2024 coming in strongly at 6.4%, we
believe macroeconomic headwinds are unlikely to derail Vietnam's current
growth path. We may also take part in capital-raising activities for both
existing and prospective investee companies as opportunities arise, driven by
the ongoing increase in capital demand.
Le Anh Tuan
Lead Portfolio Manager
19 September 2024
INDEPENDENT AUDITORS' REPORT ON REVIEW OF INTERIM CONDENSED FINANCIAL
STATEMENTS
To the Shareholders
Vietnam Enterprise Investments Limited
Introduction
We have reviewed the accompanying condensed interim financial statements of
Vietnam Enterprise Investments Limited ("the Company"), which comprise the
statement of financial position as at 30 June 2024, the related statements of
comprehensive income, changes in equity and cash flows for the six-month
period then ended, and notes to the condensed interim financial statements
("the condensed interim financial statements"). Management is responsible for
the preparation and presentation of these condensed interim financial
statements in accordance with IAS 34 Interim Financial Reporting. Our
responsibility is to express a conclusion on these condensed interim financial
statements based on our review.
Scope of review
We conducted our review in accordance with the International Standard on
Review Engagements 2410 Review of Interim Financial Information Performed by
the Independent Auditor of the Entity. A review of condensed interim
financial statements consists of making inquiries, primarily of persons
responsible for financial and accounting matters, and applying analytical and
other review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on Auditing and
consequently does not enable us to obtain assurance that we would become aware
of all significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the accompanying condensed interim financial statements for the
six-month period ended 30 June 2024 are not prepared, in all material
respects, in accordance with IAS 34 Interim Financial Reporting.
On behalf of KPMG Limited's Branch in Ho Chi Minh City
Vietnam
Review Report No.: 24-01-00528-24-1
Tran Thi Le Hang
Deputy General Director
19 September 2024
STATEMENT OF FINANCIAL POSITION
As at 30 June 2024
Note 30 June 2024 31 December 2023 Change
US$ US$ in %
CURRENT ASSETS
Financial assets at fair value through profit or loss 5(a) 1,781,686,334 1,740,006,742
Other receivables 1,168,230 815,918
Balances due from brokers 7,120,020 3,705,746
Cash and cash equivalents 6 12,728,939 10,192,455
TOTAL ASSETS 1,802,703,523 1,754,720,861 2.73
CURRENT LIABILITIES
Balances due to brokers 7,701,751 8,597,381
Accounts payable and accruals 7 2,754,087 2,865,772
TOTAL LIABILITIES 10,455,838 11,463,153 (8.79)
EQUITY
Issued share capital 8 1,951,248 2,010,278
Share premium 8 364,606,376 408,590,156
Retained earnings 1,425,690,061 1,332,657,274
TOTAL EQUITY 1,792,247,685 1,743,257,708 2.81
TOTAL LIABILITIES AND EQUITY 1,802,703,523 1,754,720,861 2.73
NUMBER OF ORDINARY SHARES IN ISSUE 8 195,123,977 201,026,986
NET ASSET VALUE PER ORDINARY SHARE 9 9.19 8.67 6.00
Approved by the Board of Directors on 19 September 2024.
Dominic Scriven, OBE
Director
Vietnam Enterprise Investments Limited
The accompanying notes are an integral part of these condensed interim
financial statements.
STATEMENT OF COMPREHENSIVE INCOME
For the six-month period ended 30 June 2024
Six-month period ended
Note 30 June 2024 30 June 2023
US$ US$
INCOME
Interest income 9,043 29,533
Dividend income 8,970,781 2,303,925
Net changes in fair value of financial assets at fair value through profit or
loss
5(b) 102,009,083 182,904,018
Gains/(losses) on disposals of investments 5,755,974 (1,251,140)
TOTAL INCOME 116,744,881 183,986,336
EXPENSES
Administration fees 10 (648,354) (535,072)
Custody fees 10 (479,915) (442,978)
Directors' fees 10 (160,000) (132,500)
Management fees 10 (15,691,821) (14,996,754)
Legal and professional service fees (444,421) (378,594)
Brokerage fees (50,000) (50,000)
Finance costs (4,238,372) (2,812,500)
Withholding taxes (1,116) (3,568)
Other operating expenses (161,654) (88,433)
TOTAL EXPENSES (21,875,653) (19,440,399)
NET PROFIT BEFORE EXCHANGE (LOSSES)/GAINS 94,869,228 164,545,937
EXCHANGE (LOSSES)/GAINS
Net foreign exchange (losses)/gains (1,836,441) 164,706
PROFIT BEFORE TAX 93,032,787 164,710,643
Income tax 11 - -
NET PROFIT AFTER TAX FOR THE PERIOD 93,032,787 164,710,643
OTHER COMPREHENSIVE INCOME FOR THE PERIOD - -
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 93,032,787 164,710,643
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS
93,032,787 164,710,643
BASIC EARNINGS PER ORDINARY SHARE 12 0.47 0.80
The accompanying notes are an integral part of these condensed interim
financial statements.
STATEMENT OF CHANGES IN EQUITY
For the six-month period ended 30 June 2024
Issued Share Capital Share Premium Retained Earnings
Total
US$ US$ US$ US$
Balance at 1 January 2023 2,067,265 448,805,801 1,171,708,685 1,622,581,751
Total comprehensive income for the period:
Net profit for the period - - 164,710,643 164,710,643
Transactions with shareholders, recognised directly in equity:
Repurchase of Ordinary Shares (19,066) (13,286,925) - (13,305,991)
Balance at 30 June 2023 2,048,199 435,518,876 1,336,419,328 1,773,986,403
Balance at 1 January 2024 2,010,278 408,590,156 1,332,657,274 1,743,257,708
Total comprehensive income for the period:
Net profit for the period - - 93,032,787 93,032,787
Transactions with shareholders, recognised directly in equity:
Repurchase of Ordinary Shares (59,030) (43,983,780) - (44,042,810)
Balance at 30 June 2024 1,951,248 364,606,376 1,425,690,061 1,792,247,685
The accompanying notes are an integral part of these condensed interim
financial statements.
STATEMENT OF CASH FLOWS
For the six-month period ended 30 June 2024
Six-month period ended
Note 30 June 2024 30 June 2023
US$ US$
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the period 93,032,787 164,710,643
Adjustments for:
Interest income (9,043) (29,533)
Interest expense 988,372 -
Dividend income (8,970,781) (2,303,925)
Net changes in fair value of financial assets at fair value through profit or
loss
(102,009,083) (182,904,018)
(Gains)/losses on disposals of investments (5,755,974) 1,251,140
(22,723,722) (19,275,693)
Net cash flows from subsidiaries carried at fair value 76,711,264 26,401,081
Changes in balances due from brokers (3,414,274) 405,340
Changes in balances due to brokers and accounts payable
and accruals (1,007,315) (9,433,204)
49,565,953 (1,902,476)
Proceeds from disposals of investments 230,783,017 151,541,996
Purchases of investments (241,408,816) (146,442,880)
Interest received 9,043 29,533
Interest paid (988,372) -
Dividends received 8,618,469 853,427
Net cash generated from operating activities 46,579,294 4,079,600
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 80,000,000 -
Repayments of borrowings (80,000,000) -
Repurchase of Ordinary Shares (44,042,810) (13,305,991)
Net cash used in financing activities (44,042,810) (13,305,991)
NET INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS 2,536,484 (9,226,391)
Cash and cash equivalents at the beginning of the period 10,192,455 14,488,971
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD 6 12,728,939 5,262,580
The accompanying notes are an integral part of these condensed interim
financial statements.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
For the six-month period ended 30 June 2024
These notes form an integral part, of and should be read in conjunction with,
the accompanying condensed interim financial statements.
1. THE COMPANY
Vietnam Enterprise Investments Limited (the "Company") is a closed-end
investment fund incorporated as an exempted company with limited liability in
the Cayman Islands on 20 April 1995. It commenced operations on 11 August
1995, the date on which the initial subscription proceeds were received.
The investment objective of the Company is to invest directly or indirectly in
publicly or privately issued securities of companies, projects and enterprises
issued by Vietnamese entities, whether inside or outside Vietnam.
The Company's Ordinary Shares have been listed on the main market of the
London Stock Exchange since 5 July 2016 (until 4 July 2016: listed on the
Irish Stock Exchange). The Company is established for an unlimited duration.
As required by the Company's Restated and Amended Memorandum and Articles of
Association (the "Articles"), at the annual general meeting ("AGM") held on 18
June 2020, a special resolution to wind up the Company on 31 December 2022 was
put to the meeting but was not passed. In accordance with the Articles, the
Company will put before the AGM in 2025 a special resolution to wind up the
Company effective on 31 December 2027.
The Company had the following investments in subsidiaries as at 30 June 2024
and 31 December 2023, for the purpose of investment holding:
Subsidiaries Country of incorporation Principal activities % ownership
Grinling International Limited British Virgin Islands Investment holding 100%
Wareham Group Limited British Virgin Islands Investment holding 100%
Goldchurch Limited British Virgin Islands Investment holding 100%
VEIL Holdings Limited British Virgin Islands Investment holding 100%
Venner Group Limited British Virgin Islands Investment holding 100%
Rickmansworth Limited British Virgin Islands Investment holding 100%
VEIL Infrastructure Limited British Virgin Islands Investment holding 100%
Amersham Industries Limited British Virgin Islands Investment holding 100%
Balestrand Limited British Virgin Islands Investment holding 100%
Dragon Financial Holdings Limited British Virgin Islands Investment holding 100%
As at 30 June 2024 and 31 December 2023, the Company had no employees.
2. BASIS OF PREPARATION
a) Statement of compliance
The Company's condensed interim financial statements for the six-month period
ended 30 June 2024 have been prepared in accordance with IAS 34 - Interim
Financial Reporting and should be read in conjunction with the Company's
financial statements for the year ended 31 December 2023.
b) Basis of measurement
These condensed interim financial statements have been prepared on the
historical cost basis, except for financial instruments classified as
financial assets at fair value through profit or loss ("FVTPL") which are
measured at fair value. The methods used to measure fair value are described
in Note 3(с)(iii).
c) Functional and presentation currency
These condensed interim financial statements are presented in United States
Dollar ("US$"), which is the Company's functional currency.
Functional currency is the currency of the primary economic environment in
which the Company operates. If indicators of the primary economic environment
are mixed, then management uses its judgment to determine the functional
currency that most faithfully represents the economic effect of the underlying
transactions, events and conditions. The Company's investments and
transactions are denominated in US$ and VND. Share subscriptions and dividends
are made and paid in US$. Borrowings are made in US$. The expenses (including
management fees, custody fees and administration fees) are denominated and
paid in US$. Accordingly, management has determined that the functional
currency of the Company is US$.
d) Use of estimates and judgments
In preparing these condensed interim financial statements, management has made
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to estimates are recognised prospectively.
In particular, information about significant areas of estimation, uncertainty
and critical judgments in applying accounting policies that have significant
effect on the amounts recognised in the condensed interim financial statements
are discussed as follows:
Assessment as investment entity
Entities that meet the definition of an investment entity within IFRS 10 -
Consolidated Financial Statements are required to account for investments in
controlled entities, as well as investments in associates, at fair value
through profit and loss. Subsidiaries that provide investment related services
or engage in permitted investment related activities with investees continue
to be consolidated unless they are also investment entities.
The criteria which define an investment entity are currently as follows:
· An entity that obtains funds from one or more investors for the
purpose of providing those investors with investment services;
· An entity that commits to its investors that its business purpose
is to invest funds solely for returns from capital appreciation, investment
income or both; and
· An entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Board of Directors has made an assessment and concluded that the Company
meets the above listed criteria of an investment entity. The investment
objective of the Company is to provide shareholders with attractive capital
returns by investing directly or indirectly through its subsidiaries in a
diversified portfolio of listed and unlisted securities in Vietnam. The
Company has always measured its investment portfolio at fair value. The exit
strategy for all investments held by the Company and its subsidiaries is
assessed regularly, documented and submitted to the Investment Committee of
the Investment Manager for approval.
The Company also meets the additional characteristics of an investment entity,
in that it has more than one investment; the investments are predominantly in
the form of equities and similar securities; it has more than one investor and
its investors are not related parties. The Board has concluded that the
Company therefore meets the definition of an investment entity. These
conclusions will be reassessed on an annual basis for changes in any of these
criteria or characteristics.
Fair value of financial instruments
The most significant estimates relate to the fair valuation of subsidiaries
and the fair valuation of financial instruments with significant unobservable
inputs in their underlying investment portfolio.
The Board has assessed the fair valuation of each subsidiary to be equal to
its net asset value ("NAV") at the reporting date, and the primary constituent
of NAV across subsidiaries is their underlying investment portfolio.
Within the underlying investment portfolio, the fair value of financial
instruments that are not traded in an active market is determined by using
valuation techniques. The Board uses its judgments to select a variety of
valuation methods and make assumptions that are mainly based on market
conditions existing at each reporting date.
Impairment of financial assets
The Directors determine the allowance for impairment of financial assets on a
regular basis. This estimate is based on the Company's historical experience
and informed credit assessment and including looking forward information.
e) Going concern
The Directors have made an assessment of the Company's ability to continue as
a going concern and are satisfied that the Company has adequate resources to
continue in operational existence for the foreseeable future (being a period
of 12 months from the date these financial statements were approved).
Furthermore, the Directors are not aware of any material uncertainties that
may cast significant doubt upon the Company's ability to continue as a going
concern, having taken into account the liquidity of the Company's investment
portfolio and the Company's financial position in respect of its cash flows,
borrowing facilities and investment commitments. Therefore, the condensed
interim financial statements have been prepared on the going concern basis.
3. SUMMARY OF MATERIAL ACCOUNTING POLICIES
The following material accounting policies have been applied consistently to
all periods presented in these financial statements.
a) Subsidiaries
Subsidiaries are investees controlled by the Company. The Company controls an
investee when it is exposed to, or has rights to, variable returns from its
involvement with the investee and has the ability to affect those returns
through its power over the investee.
The Company is an investment entity and measures investments in its
subsidiaries at FVTPL (see Note 2(d)). In determining whether the Company
meets the definition of an investment entity, the Board considered the Company
and its subsidiaries as a whole. In particular, when assessing the existence
of investment exit strategies and whether the Company has more than one
investment, the Board took into consideration the fact that all subsidiaries
were formed in connection with the Company in order to hold investments on
behalf of the Company.
b) Foreign currency transactions
Transactions in foreign currencies are translated into the functional currency
of the Company at the exchange rate at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies are
translated into the functional currency at the exchange rate at the reporting
date. Non-monetary assets and liabilities denominated in foreign currencies
that are measured at fair value are translated into the functional currency at
the exchange rate at the date on which the fair value was determined.
Foreign currency differences arising on translation are recognised in profit
or loss as net foreign exchange gain or loss, except for those arising on
financial instruments at FVTPL, which are recognised as a component of net
changes in fair value of financial instruments at FVTPL.
c) Financial assets and financial liabilities
(i) Recognition and initial measurement
The Company initially recognises financial assets and financial liabilities at
fair value on the trade date, which is the date on which the Company becomes a
party to the contractual provisions of the instrument. Other financial assets
and financial liabilities are recognised on the date on which they are
originated.
A financial asset or financial liability is measured initially at fair value
plus, for an item not at FVTPL, transaction costs that are directly
attributable to its acquisition or issue.
(ii) Classification and subsequent measurement
Classification of financial assets
On initial recognition, the Company classifies financial assets as measured at
amortised cost or FVTPL.
A financial asset is measured at amortised cost if it meets both of the
following conditions and is not designated as at FVTPL:
· it is held within a business model whose objective is to hold
assets 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.
All other financial assets of the Company are measured at FVTPL.
Business model assessment
The Company makes an assessment of the objective of the business model in
which a financial asset is held at a portfolio level because this best
reflects the way the business is managed and information is provided to
management. The information considered includes:
· The documented investment strategy and the execution of this
strategy in practice. This includes whether the investment strategy focuses on
earning contractual interest income, maintaining a particular interest rate
profile, matching the duration of the financial assets to the duration of any
related liabilities or expected cash outflows or realising cash flows through
the sale of the assets;
· How the performance of the portfolio is evaluated and reported to
the Company's management;
· The risks that affect the performance of the business model (and
the financial assets held within that business model) and how those risks are
managed;
· How the investment manager is compensated: e.g. whether
compensation is based on the fair value of the assets managed or the
contractual cash flows collected; and
· The frequency, volume and timing of sales of financial assets in
prior periods, the reasons for such sales and expectations about future sales
activity.
Transfers of financial assets to third parties in transactions that do not
qualify for derecognition are not considered sales for this purpose,
consistent with the Company's continuing recognition of the assets.
The Company has determined that it has two business models:
· Held-to-collect business model: this includes cash and cash
equivalents, balances due from brokers and other receivables. These financial
assets are held to collect contractual cash flows.
· Other business model: this includes directly held investments and
investments in subsidiaries. These financial assets are managed and their
performance is evaluated, on a fair value basis, with frequent sales taking
place.
Assessment whether contractual cash flows are solely payments of principal and
interest
For the purposes of this assessment, "principal" is defined as the fair value
of the financial asset on initial recognition. "Interest" is defined as
consideration for the time value of money and for the credit risk associated
with the principal amount outstanding during a particular period of time and
for other basic lending risks and costs (e.g. liquidity risk and
administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of
principal and interest, the Company considers the contractual terms of the
instrument. This includes assessing whether the financial asset contains a
contractual term that could change the timing or amount of contractual cash
flows such that it would not meet this condition. In making this assessment,
the Company considers:
· contingent events that would change the amount or timing of cash
flows;
· leverage features;
· prepayment and extension features;
· terms that limit the Company's claim to cash flows from specified
assets (e.g. non-recourse features); and
· features that modify consideration of the time value of money
(e.g. periodical reset of interest rates).
Reclassifications
Financial assets are not reclassified subsequent to their initial recognition
unless the Company were to change its business model for managing financial
assets, in which case all affected financial assets would be reclassified on
the first day of the first reporting period following the change in the
business model.
Subsequent measurement of financial assets
· Financial assets at FVTPL
These assets are subsequently measured at fair value. Net gains and losses,
including any interest or dividend income and expense and foreign exchange
gains and losses, are recognised in profit or loss.
Financial assets at FVTPL include directly held investments and investments in
subsidiaries.
· Financial assets at amortised cost
These assets are subsequently measured at amortised cost using the effective
interest method. Interest income and foreign exchange gains and losses are
recognised in profit or loss. Any gain or loss on derecognition is also
recognised in profit or loss.
Cash and cash equivalents, balances due from brokers and other receivables are
included in this category.
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 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 or 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 or loss.
Financial liabilities measured at amortised cost include balances due to
brokers and accounts payable and accruals.
(iii) 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 a mid price,
because this price provides a reasonable approximation of the exit price.
If there is no quoted price in an active market, then the Company uses
valuation techniques that maximise the use of relevant observable inputs and
minimise the use of unobservable inputs. The chosen valuation technique
incorporates all of the factors that market participants would take into
account in pricing a transaction.
The Company recognises transfer between levels of the fair value hierarchy as
at the end of the reporting period during which the change has occurred.
(iv) Amortised cost measurement
The "amortised cost" of a financial asset or liability is the amount at which
the financial asset or financial liability is measured on initial recognition
minus principal repayments, plus or minus the cumulative amortisation using
the effective interest method of any difference between that initial amount
and the maturity amount and, for financial assets, adjusted for any loss
allowance.
(v) Impairment
The Company recognises loss allowances for expected credit losses ("ECLs") on
financial assets measured at amortised cost.
The Company measures loss allowances at an amount equal to lifetime ECLs,
except for following, which are measured at 12-month ECLs:
· Financial assets that are determined to have low credit risk at
the reporting date; and
· Other financial assets for which credit risk (i.e. the risk of
default occurring over the expected life of the asset) has not increased
significantly since initial recognition.
When determining whether the credit risk of a financial asset has increased
significantly since initial recognition and when estimating ECLs, the Company
considers reasonable and supportable information that is relevant and
available without undue cost or effort. This includes both quantitative and
qualitative information and analysis, based on the Company's historical
experience and informed credit assessment and including forward-looking
information.
The Company assumes that the credit risk on a financial asset has increased
significantly if it is more than 30 days past due.
The Company considers a financial asset to be in default when:
· the debtor is unlikely to pay its credit obligations to the
Company in full, without recourse by the Company to actions such as realising
security (if any is held); or
· the financial asset is more than 90 days past due.
Lifetime ECLs are the ECLs that result from all possible default events over
the expected life of a financial instrument.
12-month ECLs are the portion of ECLs that result from default events that are
possible within the 12 months after the reporting date (or a shorter period if
the expected life of the instrument is less than 12 months).
The maximum period considered when estimating ECLs is the maximum contractual
period over which the Company is exposed to credit risk.
Measurement of ECLs
ECLs are a probability-weighted estimate of credit losses. Credit losses are
measured as the present value of all cash shortfalls (i.e. the difference
between the cash flows due to the entity in accordance with the contract and
the cash flows that the Company expects to receive).
ECLs are discounted at the effective interest rate of the financial asset.
However, if the financial assets were credit-impaired, then the estimate of
credit losses would be based on a specific assessment of the expected cash
shortfalls and on the original effective interest rate.
Credit-impaired financial assets
At each reporting date, the Company assesses whether financial assets carried
at amortised cost are credit-impaired. A financial asset is "credit-impaired"
when one or more events that have a detrimental impact on the estimated future
cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following
observable data:
· significant financial difficulty of a debtor;
· a breach of contract such as a default or being more than 90 days
past due; or
· it is probable that the debtor will enter bankruptcy or other
financial reorganisation.
Presentation of allowance for ECLs in the statement of financial position
Loss allowances for financial assets measured at amortised cost are deducted
from the gross carrying amount of the assets.
Write-off
The gross carrying amount of a financial asset is written off when the Company
has no reasonable expectations of recovering a financial asset in its entirety
or a portion thereof.
(vi) Derecognition
The Company derecognises a financial asset when the contractual rights to the
cash flows from the financial asset expire, or it transfers the rights to
receive the contractual cash flows in a transaction in which substantially all
of the risks and rewards of ownership of the financial asset are transferred
or in which the Company neither transfers nor retains substantially all of the
risks and rewards of ownership and does not retain control of the financial
asset.
On derecognition of a financial asset, the difference between the carrying
amount of the asset (or the carrying amount allocated to the portion of the
asset that is derecognised) and the consideration received (including any new
asset obtained less any new liability assumed) is recognised in profit or
loss. Any interest in such transferred financial assets that is created or
retained by the Company is recognised as a separate asset or liability.
The Company enters into transactions whereby it transfers assets recognised in
its statement of financial position but retains either all or substantially
all of the risks and rewards of the transferred assets or a portion of them.
If all or substantially all of the risks and rewards are retained, then the
transferred assets are not derecognised. Transfers of assets with retention of
all or substantially all of the risks and rewards include sale and repurchase
transactions.
The Company derecognises a financial liability when its contractual
obligations are discharged or cancelled or expired.
On derecognition of a financial liability, the difference between the carrying
amount extinguished and the consideration paid (including any non-cash assets
transferred or liabilities assumed) is recognised in profit or loss.
(vii) Offsetting
Financial assets and liabilities are offset and the net amount presented in
the statement of financial position when, and only when, the Company has a
legally enforceable right to offset the amounts and intends either to settle
them on a net basis or to realise the asset and settle the liability
simultaneously.
Income and expenses are presented on a net basis for gains and losses from
financial instruments at FVTPL and foreign exchange gains and losses.
d) Cash and cash equivalents
Cash and cash equivalents comprise deposits with banks and highly liquid
financial assets with maturities of three months or less from the date of
acquisition that are subject to an insignificant risk of changes in their fair
value and are used by the Company in the management of short-term commitments,
other than cash collateral provided in respect of derivatives and securities
borrowing transactions.
e) Share capital
Issuance of share capital
Management Shares and Ordinary Shares are classified as equity. The difference
between the issued price and the par value of the shares less any incremental
costs directly attributable to the issuance of shares is credited to share
premium.
Repurchase of Ordinary Shares
When share capital recognised as equity is repurchased, the amount of the
consideration paid, which includes directly attributable costs, net of any tax
effects, is recognised as a deduction from equity. Par value of repurchased
shares is presented as deductions from share capital and the excess over par
value of repurchased shares is presented as deductions from share premium.
When repurchased shares are sold or reissued subsequently, the amount received
is recognised as an increase in share capital and share premium which is
similar to the issuance of share capital.
f) Segment reporting
The Company is organised and operates as one operating segment - investment in
equity securities in Vietnam. Consequently, no segment reporting is provided
in the Company's financial statements.
g) Provisions
A provision is recognised if, as a result of a past event, the Company has a
present legal or constructive obligation that can be estimated reliably, and
it is probable that an outflow of economic benefits will be required to settle
the obligation. Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the liability. The unwinding of
the discount is recognised as a finance cost.
h) Interest
Interest income and expense presented in the statement of comprehensive income
comprise interest on financial assets and financial liabilities measured at
amortised cost calculated on an effective interest basis.
The effective interest rate is calculated on initial recognition of a
financial instrument as the rate that exactly discounts estimated future cash
payments or receipts through the expected life of the financial instrument to:
· the gross carrying amount of the financial asset; or
· the amortised cost of the financial liability.
In calculating interest income and expense, the effective interest rate is
applied to the gross carrying amount of the asset (when the asset is not
credit-impaired) or to the amortised cost of the liability. However, for
financial assets that have become credit-impaired subsequent to initial
recognition, interest income is calculated by applying the effective interest
rate to the amortised cost of the financial asset. If the asset is no longer
credit-impaired, then the calculation of interest income reverts to the gross
basis.
i) Dividend income
Dividend income is recognised in profit or loss on the date on which the right
to receive payment is established. For listed equity securities, this is
usually the ex-dividend date. For unlisted equity securities, this is usually
the date on which the shareholders approve the payment of a dividend.
Dividend income from equity securities designated as at FVTPL is recognised in
profit or loss in a separate line item.
j) Net income from financial instruments at fair value through profit or
loss
Net income from financial assets at FVTPL include all realised and unrealised
fair value changes and foreign exchange differences, but excludes interest and
dividend income.
Net realised gain/loss from financial assets at FVTPL is calculated using the
weighted average cost method.
k) Expenses
All expenses, including management fees and incentive fees, are recognised in
profit or loss on an accrual basis.
l) Basic earnings per share and Net Asset Value per share
The Company presents basic earnings per share ("EPS") for its Ordinary Shares.
Basic EPS is calculated by dividing net profit or loss attributable to the
Ordinary Shareholders by the weighted average number of Ordinary Shares
outstanding during the period. The Company did not have potentially dilutive
shares as of 30 June 2024 and 30 June 2023.
Net asset value ("NAV") per share is calculated by dividing the NAV
attributable to the Ordinary Shareholders by the number of outstanding
Ordinary Shares as at the reporting date. NAV is determined as total assets
less total liabilities. Where Ordinary Shares have been repurchased, NAV per
share is calculated based on the assumption that those repurchased Ordinary
Shares have been cancelled.
m) Related parties
(a) A person, or a close member of that person's family, is related to the
Company if that person:
(i) has control or joint control over the Company;
(ii) has significant influence over the Company; or
(iii) is a member of the key management personnel of the Company.
(b) An entity is related to the Company if any of the following conditions
applies:
(i) The entity and the Company are members of the same group
(which means that each parent, subsidiary and fellow subsidiary is related to
the others);
(ii) One entity is an associate or joint venture of the other
entity (or an associate or joint venture of a member of a group of which the
other entity is a member);
(iii) The entity and the Company are joint ventures of the same
third party;
(iv) One entity is a joint venture of a third entity and the other
entity is an associate of the third entity;
(v) The entity is a post employment benefit plan for the benefit
of employees of either the Company or an entity related to the Company;
(vi) The entity is controlled or jointly controlled by a person
identified in (a);
(vii) A person identified in (a)(i) has significant influence over the
entity or is a member of the key management personnel of the entity (or of a
parent of the entity); or
(viii) The entity, or any member of a group of which it is a part,
provides key management personnel services to the Company.
Dragon Capital Group Limited, together with its subsidiaries (including Dragon
Capital Management (HK) Limited), associates, and investment companies/funds
under their management, are considered related parties to the Company.
n) Accounting standards issued but not yet effective
A number of new accounting standards and amendments to accounting standards
are effective for annual periods beginning after 1 January 2024 and earlier
application is permitted; however, the Company has not early adopted the new
or amended accounting standards that may be relevant in preparing these
condensed interim financial statements.
The following new and amended standards and interpretation are not expected to
have a significant impact on the Company's condensed interim financial
statements.
· Classification of Liabilities as Current or Non-current and
Non-current Liabilities with Covenants - Amendments to IAS 1;
· Supplier Finance Arrangements - Amendments to IAS 7 and IFRS 7;
· Lease liability in a Sale and Leaseback - Amendments to IFRS 16;
and
· Lack of Exchangeability - Amendment to IAS 21.
4. TRANSACTIONS WITH RELATED PARTIES
Dominic Scriven O.B.E, a Non-executive Director of the Company, is a
beneficial shareholder of the Company, holding 178,423 Ordinary Shares of the
Company as at 30 June 2024 (31 December 2023: 178,423 Ordinary Shares).
Dominic Scriven O.B.E also has indirect interests in shares of the Company as
he is a key shareholder of Dragon Capital Group Limited, the parent company of
Dragon Capital Limited which holds the Management Shares of the Company.
Dragon Capital Group Limited is also the ultimate parent company of Dragon
Capital Management (HK) Limited, which is the Investment Manager of the
Company and Dragon Capital Markets Limited. As at 30 June 2024, Dragon Capital
Markets Limited beneficially held 1,685,359 Ordinary Shares (31 December 2023:
1,685,359 Ordinary Shares) of the Company for investment and proprietary
trading purposes.
Sarah Arkle, an Independent Non-executive Director until 30 June 2024 and
Chair of the Company since 1 July 2024, is a beneficial shareholder of the
Company, holding 9,696 Ordinary Shares of the Company as at 30 June 2024 (31
December 2023: 9,696 Ordinary Shares).
Gordon Lawson, Chair of the Company until 30 June 2024, is a beneficial
shareholder of the Company, holding 25,000 Ordinary Shares of the Company as
at 30 June 2024 (31 December 2023: 25,000 Ordinary Shares).
Charles Cade, an Independent Non-executive Director, is a beneficial
shareholder of the Company, holding 15,000 Ordinary Shares of the Company as
at 30 June 2024 (31 December 2023: 15,000 Ordinary Shares).
During the period, the Directors, with exception of Dominic Scriven O.B.E,
earned US$160,000 (six-month period ended 30 June 2023: US$132,500) for their
participation in the Board of Directors of the Company.
During the period, total broker fees incurred and charged by to Ho Chi Minh
City Securities Corporation - an associate of Dragon Capital Group Limited and
one of the securities brokers of the Company and its subsidiaries - amounted
to US$281,396 (six-month period ended 30 June 2023: US$206,562). As at 30 June
2024, the broker fee payable to Ho Chi Minh City Securities Corporation was
US$2,609 (31 December 2023: US$5,290).
5. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
(a) Financial assets at fair value through profit or loss reported in the
statement of financial position:
30 June 2024 31 December 2023
US$ US$
Directly held investments (i) 825,506,985 785,307,882
Investments in subsidiaries (ii) 956,179,349 954,698,860
1,781,686,334 1,740,006,742
(i) The cost and carrying value of directly held investments of the
Company were as follows:
30 June 2024 31 December 2023
US$ US$
Listed equity investments:
At cost 674,595,895 658,214,122
Unrealised gains 117,952,439 86,648,144
At carrying value 792,548,334 744,862,266
Unlisted equity investments:
At cost 48,962,737 48,962,737
Unrealised losses (16,004,086) (8,517,121)
At carrying value (*) 32,958,651 40,445,616
785,307,882 691,582,819
(*) See Note 13(A)(iii) for further disclosure on significant unobservable
inputs used in measuring fair value of the directly held unlisted equity
investments.
Movements of investments directly held by the Company during the period were
as follows:
30 June 2024 30 June 2023
US$ US$
Opening balance 785,307,882 691,582,819
Purchases 241,408,816 146,442,880
Sales (225,027,043) (152,793,136)
Unrealised gains 23,817,330 72,045,748
Closing balance 825,506,985 757,278,311
(ii) Investments in subsidiaries are fair valued at the net asset value of
the subsidiaries with the major part being attributable to the underlying
investment portfolio. The underlying investment portfolio is valued under the
same methodology as directly held investments of the Company, with any other
assets or liabilities within subsidiaries fair valued in accordance with the
Company's accounting policies. All cash flows to/from subsidiaries are treated
as an increase/decrease in the fair value of the subsidiary.
The net assets of the Company's subsidiaries comprised:
30 June 2024 31 December 2023
US$ US$
Financial assets at fair value through profit or loss (iii) 937,702,804 951,196,512
Other receivables 1,268,245 872,305
Balances due from brokers 5,531,079 2,474,172
Cash and cash equivalents 24,419,802 11,532,338
Total assets 968,921,930 966,075,327
Balances due to brokers 12,742,581 11,376,467
Total liabilities 12,742,581 11,376,467
Net assets 956,179,349 954,698,860
Movements in the carrying value of investments in subsidiaries during the
period were as follows:
30 June 2024 30 June 2023
US$ US$
Opening balance 954,698,860 926,941,387
Net cash flows from subsidiaries (76,711,264) (26,401,081)
Fair value movements in investments in subsidiaries 78,191,753 110,858,270
Closing balance 956,179,349 1,011,398,576
(iii) The cost and carrying value of underlying financial assets at FVTPL
held by the subsidiaries of the Company were as follows:
30 June 2024 31 December 2023
US$ US$
Listed equity investments
At cost 692,480,085 719,623,518
Unrealised gains 245,222,719 231,572,994
At carrying value 937,702,804 951,196,512
Movements of investments held by the subsidiaries of the Company during the
period were as follows:
30 June 2024 30 June 2023
US$ US$
Opening balance 951,196,512 920,080,847
Purchases 262,883,985 194,974,384
Sales (290,027,418) (212,526,499)
Unrealised gains 13,649,725 103,444,352
Closing balance 937,702,804 1,005,973,084
Investment portfolio by sector was as follows:
30 June 2024 31 December 2023
US$ % US$ %
Banking 633,845,116 36 619,433,668 36
Real Estate & Construction 313,000,021 18 348,482,988 20
Material & Resources 258,262,517 14 282,758,865 16
Retail 189,392,886 11 83,431,718 5
Software & Services 149,632,900 8 106,704,113 6
Diversified Financials 91,314,762 5 125,473,152 7
Energy 49,255,380 3 61,546,161 3
Consumer Durables 45,216,921 3 44,382,423 3
Food & Beverages 25,195,254 1 51,613,773 3
Net monetary assets kept by subsidiaries 18,476,545 1 3,502,348 -
Transportation 8,094,032 - 12,677,533 1
1,781,686,334 100 1,740,006,742 100
(iv) Restrictions
The Company receives income in the form of dividends from its investments in
unconsolidated subsidiaries and there are no significant restrictions on the
transfer of funds from these entities to the Company.
(v) Support
The Company provides or receives ongoing support to/from its subsidiaries for
the purchase/sales of portfolio investments. During the period, the Company
received support from its unconsolidated subsidiaries as noted in Note
5(a)(ii). The Company has no contractual commitments or current intentions to
provide any other financial or other support to its unconsolidated
subsidiaries.
(b) Net change in fair value of financial assets at FVTPL reported in the
statement of comprehensive income:
30 June 2024 30 June 2023
US$ US$
Unrealised gains of investments directly held by the Company 45,608,467 (400,164,058)
Fair value movements in investments in subsidiaries 23,817,330 72,045,748
102,009,083 182,904,018
6. CASH AND CASH EQUIVALENTS
30 June 2024 31 December 2023
US$ US$
Cash in banks 12,728,939 10,192,455
7. ACCOUNTS PAYABLE AND ACCRUALS
30 June 2024 31 December 2023
US$ US$
Management fees 2,473,887 2,584,711
Administration fees 226,101 219,061
Other payables 54,099 62,000
2,754,087 2,865,772
8. ISSUED SHARE CAPITAL AND SHARE PREMIUM
30 June 2024 31 December 2023
US$ US$
Authorised:
500,000,000 Ordinary Shares at par value of US$0.01 each 5,000,000 5,000,000
300,000,000 Conversion Shares at par value of US$0.01 each 3,000,000 3,000,000
1,000 Management Shares at par value of US$0.01 each 10 10
8,000,010 8,000,010
Issued and fully paid:
201,026,986 Ordinary Shares at par value of US$0.01 each (31 December 2023:
220,920,746 Ordinary Shares at par value of US$0.01 each)
2,010,268 2,209,207
1,000 Management Shares at par value of US$0.01 each 10 10
2,010,278 2,209,217
Treasury Shares:
Ordinary Shares (59,030) (198,939)
Shares in circulation:
Ordinary Shares 1,951,238 2,010,268
Management Shares 10 10
Outstanding issued share capital in circulation 1,951,248 2,010,278
Holders of Ordinary Shares present in person or by proxy or by authorised
representative shall have one vote and, on a poll, every holder of Ordinary
Shares present in person or by proxy or by authorised representative shall
have one vote for every Ordinary Share of which he is the registered holder.
The Ordinary Shares carry rights to dividends as set out in Articles 106 to
114 of the Articles. In a winding up, the Ordinary Shares carry a right to a
return of the nominal capital paid up in respect of such Ordinary Shares, and
the right to share in the manner set out in the Articles in surplus assets
remaining after the return of the nominal capital paid up on the Ordinary
Shares and Management Shares, provided that in a winding up the assets
available for distribution among the members are more than sufficient to repay
the whole of the nominal capital paid up at the commencement of the winding
up. No holder of Ordinary Shares has the right to request the redemption of
any of his Ordinary Shares at his option or to require his Ordinary shares to
be redeemed by the Company. The Company may, in its complete discretion,
consider requests from holders of Ordinary Shares to have their Ordinary
Shares redeemed by the Company. The Company may also, from time to time,
repurchase its shares, including fraction of shares.
The Conversion Shares carry the exclusive right to dividends in respect of
assets attributable to the Conversion Shares, in accordance with the
provisions of Articles 106 to 114. No dividend or other distribution shall be
declared, made or paid by the Company on any of its shares by reference to a
record date falling between the Calculation Date and the Conversion Date as
set out in the Articles. The new Ordinary Shares to be issued on conversion
shall rank in full pari passu with the existing Ordinary Shares for all
dividends and other distributions with a record date falling after the
conversion date. In order for the holder of the Conversion Shares to
participate in the winding up of the Company, the Conversion Shares, if any,
which are in existence at the date of the winding up of the Company will for
all purposes be deemed to have been automatically converted into Ordinary
Shares and Deferred Shares immediately prior to the winding up, on the same
basis as if conversion occurred 28 business days after the calculation date
arising as a result of the resolution or the court to wind up the Company.
Until conversion, the consent of the holders of the Conversion Shares voting
as a separate class and the holders of the Ordinary Shares voting as a
separate class shall be required in accordance with the provisions of Article
14 to effect any variation or abrogation in their respective class rights.
During the period, no Conversion Shares were in issue, and no Conversion
Shares were in issue as at 30 June 2024 and 31 December 2023.
According to the Resolution dated 22 March 2024, the Board of Directors
resolved to cancel 19,893,760 treasury shares of the Company ("Share
Cancellation"). The Share Cancellation was completed on 3 April 2024.
The Management Shares shall not be redeemed by the Company, and do not carry
any right to dividends. In a winding up, Management Shares are entitled to a
return of paid up nominal capital out of the assets of the Company, but only
after the return of nominal capital paid up on Ordinary Shares. The Management
Shares each carry one vote on a poll. The holders of the Management Shares
have the exclusive right to appoint two individuals to the Board.
As at 30 June 2024 and 31 December 2023, the following shareholder owned more
than 10% of the Company's issued Ordinary Share capital:
30 June 2024 31 December 2023
Number of Ordinary % of total Ordinary Shares in issue Number of Ordinary % of total Ordinary Shares in issue
Shares held Shares held
Inter Fund Management S.A. 27,423,467 14.05 27,423,467 13.64
Bill & Melinda Gates Foundation 24,670,745 12.64 24,670,745 12.27
Movements in Ordinary Share capital during the period were as follows:
Six-month period ended 30 June 2024 Six-month period ended
30 June 2023
Shares US$ Shares US$
Balance at the beginning of the period 201,026,986 2,010,268 206,725,678 2,067,255
Repurchase of Ordinary Shares during the period (5,903,009) (59,030) (1,906,589) (19,066)
Balance at the end of the period 195,123,977 1,951,238 204,819,089 2,048,189
Movements in share premium during the period were as follows:
Six-month period ended Six-month period ended
30 June 2024 30 June 2023
US$ US$
Balance at the beginning of the period 408,590,156 448,805,801
Repurchase of Ordinary Shares during the period (43,983,780) (13,286,925)
Balance at the end of the period 364,606,376 435,518,876
9. NET ASSET VALUE PER ORDINARY SHARE
The calculation of the NAV per Ordinary Share was based on the equity of the
Company as at 30 June 2024 of US$1,792,247,685 (31 December 2023:
US$1,743,257,708) and the number of outstanding Ordinary Shares in issue as at
that date of 195,123,977 shares (31 December 2023: 201,026,986 shares).
10. FEES
The management, administration and custody fees are calculated based on the
NAV of the Company.
Administration fees
Standard Chartered Bank (the "Administrator") is entitled to receive a fee of
0.048% (six-month period ended 30 June 2023: 0.048%) of the gross assets per
annum, payable monthly in arrears and subject to a minimum monthly fee of
US$4,000 per fund. During the period, total administration fees amounted to
US$648,354 (six-month period ended 30 June 2023: US$535,072). As at 30 June
2024, an administration fee of US$226,101 (31 December 2023: US$219,061) was
payable to the Administrator.
Custody fees
Standard Chartered Bank (the "Custodian") is entitled to receive a fee of
0.04% (six-month period ended 30 June 2023: 0.04%) of the assets under custody
per annum, payable monthly in arrears and subject to a minimum monthly fee of
US$500 per custody account. In addition, the Custodian is entitled to US$20
per listed transaction. During the period, total custody fees amounted to
US$479,915 (six-month period ended 30 June 2023: US$442,978). There were no
custody fees payable as at 30 June 2024 and 31 December 2023.
Directors' fees
During the period, total directors' fees amounted to US$160,000 (six-month
period ended 30 June 2023: US$132,500). There were no directors' fees payable
as at 30 June 2024 and 31 December 2023. Dominic Scriven O.B.E has permanently
waived his rights to receive directors' fees for his services as Director of
the Company.
Management fees
The management fee is calculated and accrued daily on the following basis:
· 1.85% per annum on the first US$1.25 billion of the NAV;
· 1.65% per annum on the portion of the NAV in excess of US$1.25
billion and less than or equal to US$1.5 billion; and
· 1.5% per annum on the portion of the NAV above US$1.5 billion.
From 1 July 2024, the management fee is calculated and accrued daily at a flat
rate of 1.5% per annum of the Company's NAV.
During the period, total management fees amounted to US$15,691,821 (six-month
period ended 30 June 2023: US$14,996,754). As at 30 June 2024, a management
fee of US$2,473,887 (31 December 2023: US$2,584,711) remained payable to the
Investment Manager.
Audit and non-audit fees
During the period, included in legal and professional service fees of the
Company were audit and related fees amounting to US$39,344 (six-month period
ended 30 June 2023: US$40,663) paid/payable to the auditor, KPMG Limited. In
addition, the total non-audit fees paid to the network firms of KPMG Limited
were US$14,754 for the six-month period ended 30 June 2024 (six-month period
ended 30 June 2023: US$14,877).
11. INCOME TAX
Under the current law of the Cayman Islands and the British Virgin Islands,
the Company and its subsidiaries are not required to pay any taxes in the
Cayman Islands or the British Virgin Islands on either income or capital gains
and no withholding taxes will be imposed on distributions by the Company to
its shareholders or on the winding-up of the Company.
Vietnam tax
In accordance with Circular No. 103/2014/TT-BTC issued by the Ministry of
Finance of Vietnam taking effective from 1 October 2014 proving guidelines on
the fulfilment of tax obligations of foreign entities, foreign individuals
doing business in Vietnam or earning income in Vietnam, the Company is subject
to 20% capital assignment tax on the net gain from the transfer of capital,
not being considered as tax on gains from the transfer of securities per
Vietnamese regulations, 0.1% withholding tax on proceeds of transferring
securities, certificates of deposits and 5% withholding tax on the interest
received from any Vietnamese entities. Dividends distributed from after-tax
profits by Vietnamese investee companies to foreign corporate investors are
not subject to Vietnamese withholding taxes.
Hong Kong tax
A fund would be exposed to Hong Kong Profits Tax ("HKPT") if:
a) it carries on trade or business in Hong Kong;
b) profits from that trade or business have a Hong Kong source;
c) those profits are not capital profits; and
d) the profits are not exempted under the Offshore Persons Exemption or
the Funds Exemption.
Under such circumstances, HKPT will be charged at a rate of 16.5% (2023:
16.5%) in respect of any profits which arise in or are derived from Hong Kong
and which are not capital profits or exempt profits.
The Offshore Persons Exemption is provided under Section 20AC of the Inland
Revenue Ordinance ("IRO") and applies to exempt non-fund and non-resident
persons from HKPT subject to satisfying certain conditions. Effective from 1
April 2019, the Funds Exemption under Section 20AN of the IRO provides that
funds within the meaning of Section 20AM, resident and non-resident, will be
exempt from HKPT subject to certain conditions.
The Directors believe the Company satisfies all of the requirements for the
Funds Exemption under Section 20AN of the IRO post 1 April 2019 and therefore
shall not be subject to Hong Kong tax.
See Note 13(B) for further details.
12. BASIC EARNINGS/(LOSSES) PER ORDINARY SHARE
The calculation of basic earnings per Ordinary Share for the period was based
on the net profit for the period attributable to the Ordinary Shareholders of
US$93,032,787 (six-month period ended 30 June 2023: US$164,710,643) and the
weighted average number of Ordinary Shares outstanding of 198,658,995 shares
(six-month period ended 30 June 2023: 206,048,635 shares) in issue during the
period.
a) Net profit attributable to the Ordinary Shareholders
Six-month period ended Six-month period ended
30 June 2024 30 June 2023
US$ US
Net profit attributable to the Ordinary Shareholders 93,032,787 164,710,643
b) Weighted average number of Ordinary Shares
Six-month period ended Six-month period ended
30 June 2024 30 June 2023
Shares Shares
Issued Ordinary Shares at the beginning of the period 201,026,986 206,725,678
Effect of Ordinary Shares repurchased during the period (2,367,991) (677,043)
Weighted average number of Ordinary Shares 198,658,995 206,048,635
c) Basic earnings per Ordinary Share
Six-month period ended Six-month period ended
30 June 2024 30 June 2023
US$ US
Basic earnings per Ordinary Share 0.47 0.80
13. FINANCIAL RISK MANAGEMENT AND UNCERTAINTY
A. Financial risk management
The Company's financial risk management objectives and policies are consistent
with those disclosed in the financial statements of the Company for the year
ended 31 December 2023.
Fair values of financial assets and liabilities
(i) Valuation model
The fair values of financial instruments that are traded in active markets are
based on quoted prices or broker price quotations. For all other financial
instruments, the Company determines fair values using other valuation
techniques.
For financial instruments that trade infrequently and have little price
transparency, fair value is less objective, and requires varying degrees of
judgment depending on liquidity, uncertainty of market factors, pricing
assumptions and other risks affecting the specific instrument.
The Company measures fair values using the following fair value hierarchy that
reflects the significance of the inputs used in making the measurements.
· Level 1: Inputs that are quoted market prices (unadjusted) in
active markets for identical instruments.
· Level 2: Inputs other than quoted prices included within Level 1
that are observable either directly (i.e. as prices) or indirectly (i.e.
derived from prices). This category includes instruments valued using: quoted
market prices in active markets for similar instruments; quoted prices for
identical or similar instruments in markets that are not considered active; or
other valuation techniques in which all significant inputs are directly or
indirectly observable from market data.
· Level 3: Inputs that are unobservable. This category includes all
instruments for which the valuation technique includes inputs not based on
observable data and the unobservable inputs have a significant effect on the
instrument's valuation. This category includes instruments that are valued
based on quoted prices for similar instruments but for which significant
unobservable adjustments or assumptions are required to reflect differences
between the instruments.
The Company makes its investments through wholly owned subsidiaries, which in
turn own interests in various listed and unlisted equity securities. The NAV
of the subsidiaries is used for the measurement of fair value. The fair value
of the Company's underlying investments, however, is measured in accordance
with the valuation methodology which is in consistent with that for directly
held investments.
(ii) Fair value hierarchy - Financial instruments measured at fair value
The table below analyses the Company's financial assets measured at fair value
at the reporting date by the level in the fair value hierarchy into which the
fair value measurement is categorised. The amounts are based on the values
recognised in the statement of financial position. All fair value measurements
below are recurring.
As at 30 June 2024 Level 1 Level 2 Level 3 Total
US$ US$ US$ US$
Financial assets at fair value through
profit or loss
• Listed equity investments 792,548,334 - - 792,548,334
• Unlisted investments - - 32,958,651 32,958,651
• Investments in subsidiaries - 956,179,349 - 956,179,349
792,548,334 956,179,349 32,958,651 1,781,686,334
As at 31 December 2023 Level 1 Level 2 Level 3 Total
US$ US$ US$ US$
Financial assets at fair value through
profit or loss
• Listed equity investments 744,862,266 - - 744,862,266
• Unlisted investments - - 40,445,616 40,445,616
• Investments in subsidiaries - 954,698,860 - 954,698,860
744,862,266 954,698,860 40,445,616 1,740,006,742
The following table shows a reconciliation from the opening balances to the
closing balances for fair value measurements of the Company in three levels of
the fair value hierarchy.
Level 1 Level 2 Level 3
Six-month period ended Six-month period ended Six-month period ended
30 June 2024 30 June 2023 30 June 2024 30 June 2023 30 June 2024 30 June 2023
US$ US$ US$ US$ US$ US$
Opening balance 744,862,266 642,802,331 954,698,860 926,941,387 40,445,616 48,780,488
Purchases 241,408,816 146,442,880 - - - -
Sales (225,027,043) (152,793,136) - - - -
Net cash flows from subsidiaries
- - (76,711,264) (26,401,081) - -
Unrealised gains/(losses) recognised in profit or loss
31,304,295 72,702,259 78,191,753 110,858,270 (7,486,965) (656,511)
Closing balance 792,548,334 709,154,334 956,179,349 1,011,398,576 32,958,651 48,123,977
Total unrealised gains/(losses) for the period included in net changes in fair
value of financial assets at FVTPL
31,304,295 72,702,259 78,191,753 110,858,270 (7,486,965) (656,511)
The Company invests substantially all of its assets in its subsidiaries
together with which it is managed as an integrated structure. The Directors
decided that the objectives of IFRS 7 Financial Instruments: Disclosures are
met by providing disclosures on the fair value hierarchy of the underlying
investments held by the subsidiaries.
The table below analyses the subsidiaries' financial instruments measured at
fair value at the reporting date by the level in the fair value hierarchy into
which the fair value measurement is categorised. The amounts are based on the
values recognised in the statement of financial position. All fair value
measurements below are recurring.
As at 30 June 2024 Level 1 Level 2 Level 3 Total
US$ US$ US$ US$
Financial assets at fair value through
profit or loss
• Listed equity investments 937,702,804 - - 937,702,804
As at 31 December 2023 Level 1 Level 2 Level 3 Total
US$ US$ US$ US$
Financial assets at fair value through
profit or loss
• Listed equity investments 951,196,512 - - 951,196,512
The following table shows a reconciliation from the opening balances to the
closing balances for fair value measurements of investments through the
subsidiaries in three levels of the fair value hierarchy.
Level 1 Level 2 Level 3
Six-month period ended Six-month period ended Six-month period ended
30 June 2024 30 June 2023 30 June 2024 30 June 2023 30 June 2024 30 June 2023
US$ US$ US$ US$ US$ US$
Opening balance 951,196,512 920,080,847 - - - -
Purchases 262,883,985 194,974,384 - - - -
Sales (290,027,418) (212,526,499) - - - -
Unrealised gains 13,649,725 103,444,352 - - - -
Closing balance 937,702,804 1,005,973,084 - - - -
Total unrealised gains included in net changes in fair value of financial
assets at FVTPL
13,649,725 103,444,352 - - - -
(iii) Significant unobservable inputs used in measuring fair value
The table below sets out information about significant unobservable inputs
used at 30 June 2024 and 31 December 2023 in measuring financial instruments
categorised as Level 3 in the fair value hierarchy.
Sensitivity to changes in significant
Description Fair value Fair value Valuation technique Significant unobservable inputs unobservable inputs
30 June 2024 31 December 2023
US$ US$
Investment in a property developer 32,958,651 40,445,616 Discounted cash flow: The valuation model considers the present value of the • Expected future net cash flows derived from put option using a The estimated fair value would
expected future net cash flows derived from put option using a number of number of possible
possible outcomes of the negotiations and attributing probabilities to each.
increase (decrease)
The expected net cash flows are outcomes of the negotiations and attributing probabilities to each.
if:
discounted using the cost of debt. • Cost of debt ("the discount rate").
• the expected cash flows were higher (lower);
• the cost of debt was lower (higher).
B. Uncertainty
Although the Company and its subsidiaries are incorporated in the Cayman
Islands and the British Virgin Islands, respectively, where tax is exempt,
their activities are primarily focused in Vietnam. In accordance with the
prevailing tax regulations in Vietnam, if an entity was treated as having a
permanent establishment, or as otherwise being engaged in a trade or business
in Vietnam, income attributable to or effectively connected with such
permanent establishment or trade or business may be subject to tax in Vietnam.
As at the date of this report the following information is uncertain:
· Whether the Company and its subsidiaries and joint ventures are
considered as having permanent establishments in Vietnam;
· The amount of tax that may be payable if the income is subject to
tax; and
· Whether tax liabilities (if any) will be applied retrospectively.
The implementation and enforcement of tax regulations in Vietnam can vary
depending on numerous factors, including the identity of the tax authority
involved. The administration of laws and regulations by government agencies
may be subject to considerable discretion, and in many areas, the legal
framework is vague, contradictory and subject to different and inconsistent
interpretation. The Directors believe that it is unlikely that the Company and
its subsidiaries will be exposed to tax liabilities in Vietnam, and as a
result, provision for tax liabilities have not been made in the condensed
interim financial statements.
The Offshore Persons Exemption is provided under Section 20AC of the Inland
Revenue Ordinance ("IRO") and applies to exempt non-fund and non-resident
persons from Hong Kong Profits Tax ("HKPT") subject to satisfying certain
conditions. Effective from 1 April 2019, the New Funds Exemption under Section
20AN of the IRO provides that funds within the meaning of Section 20AM,
resident and non-resident, will be exempt from HKPT subject to certain
conditions. The Directors believe that they have implemented steps to enable
the Company to satisfy all the conditions to be exempted from HKPT for the
six-month period ended 30 June 2024.
If the Company does not meet the exemption criteria under the Funds Exemption,
the Company is exposed to Hong Kong Profits Tax at a rate of 16.5% in respect
of any profits which arise in or are derived from Hong Kong and which are not
capital profits or exempt profits if it is treated as carrying on a trade or
business in Hong Kong either on its own account or through any person as an
agent.
14. SEASONAL OR CYCLICAL FACTORS
The Company's results for the six-month period ended 30 June 2024 are not
subject to any significant seasonal or cyclical factors.
15. SUBSEQUENT EVENTS
For the period from 1 July to 19 September 2024, the Company repurchased
4,261,878 Ordinary Shares for a total consideration of US$31,761,134.
16. APPROVAL OF THE FINANCIAL STATEMENTS
The condensed interim financial statements were approved and authorised for
issue by the Board of Directors on 19 September 2024.
GLOSSARY
Term Definition
ACB Asia Commercial Bank
ACV Airports Corporation of Vietnam
BHX Bach Hoa Xanh
DTR Disclosure Guidance and Transparency Rule
DXG Dat Xanh Group
ECLs expected credit losses
EPS earnings per share
ESG environmental, social and governance
FDI foreign direct investment
FPT FPT Corporation
FRT FPT Retail
FVTPL fair value through profit or loss
GDP Gross Domestic Product
HKPT Hong Kong Profits Tax
HPG Hoa Phat Group
HSG Hoa Sen Group
HVN Vietnam Airlines
IAS International Accounting Standards
IFC International Finance Corporation
IFRS International Financial Reporting Standards
IRO Inland Revenue Ordinance
KBC Kinh Bac City
KDH Khang Dien House
MBB MB Bank
MWG Mobile World Group
NAC Next Advanced Communications NAC Co, Ltd.
NAV Net Asset Value
NIM net interest margins
NLG Nam Long Group
NPATMI net profit after tax and minority interest
NPLs non-performing loans
SASB Sustainability Accounting Standards Board
SFDR Sustainable Finance Disclosure Regulation
Cancellation of 19,893,760 treasury shares of the Company according to the
Resolution dated 22 March 2024, completed on 3 April 2024.
Share Cancellation
SOCBs State-owned commercial banks
SUSBA Sustainable Banking Assessment
TCB TechcomBank
TCFD Task Force on Climate-related Financial Disclosures
The Administrator Standard Chartered Bank
The Articles Restated and Amended Memorandum and Articles of Association
The Custodian Standard Chartered Bank
Dragon Capital group, i.e. Dragon Capital Group Limited (DCGL) and its
subsidiaries and affiliates including investment managers, corporate parents,
The Group subsidiaries and funds and SMAs under any such entities' management
TR$ Total Return USD
UNGC United Nations Global Compact
US$ United States Dollar
VEIL or the Company Vietnam Enterprise Investments Limited
VPB Vietnam Prosperity Bank
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