REG - VinaCapital Vietnam - Half-year/ Interim Report
24/03/2023 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20230324:nRSX0812Ua&default-theme=true
RNS Number : 0812U VinaCapital Vietnam Opportunity Fd. 24 March 2023
VINACAPITAL VIETNAM OPPORTUNITY FUND LIMITED
(a non-cellular company incorporated in the Bailiwick of Guernsey under The
Companies (Guernsey) Law, 2008, on 22 March 2016 with registered number
61765.)
VinaCapital Vietnam Opportunity Fund Limited ("VOF" or the "Company") is
pleased to announce its unaudited results for the six-month period from 1 July
2022 to 31 December 2022.
More information on the Company is available at: https://vinacapital.com/investment-solutions/offshore-funds/vof/overview/
(https://vinacapital.com/investment-solutions/offshore-funds/vof/overview/)
The information contained within the announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
("MAR"). Upon the publication of this announcement via Regulatory Information
Service ("RIS"), this inside information is now considered to be in the public
domain.
Interim Report and Condensed Interim Financial Statements
for the period 1 July 2022 to 31 December 2022
CHAIRMAN'S STATEMENT
Dear Shareholder,
Investment Performance
When the annual report was published in October 2022, I noted that the
Vietnamese equity market was being affected by conditions in the global
economy and international capital markets. In the second half of 2022 the
negative sentiment was exacerbated by a crackdown by the Vietnamese government
on corruption and poor business practices, particularly in the real estate
sector. As a result the VN Index fell by 16.3% in the second half of 2022.
The Company's net asset value per share declined by 14.5%(1) over this period
and, taking account of the dividend paid in December, the total return was
-13.4%(2). While it is, of course, disappointing to report a decline in net
assets, the Board takes some comfort from the portfolio's marginal
out-performance when compared to the VN Index.
(1)An Alternative Performance Measure: see Glossary for further details
(2 ) An Alternative Performance Measure: see Glossary for further details
Our Investment Manager does not follow any benchmark in managing the portfolio
but the Board is aware that investors will always compare the Company's
performance with the VN Index. The relative out-performance over the six month
period was as a result of a combination of stock selection in the quoted
equity portfolio and relatively modest declines in the values of the
traditional private equity investments in the portfolio. Included in the
private equity component of the portfolio are investments described as "public
equities with private terms" where the Company has invested in instruments
issued by public companies but where the investment manager has negotiated
downside protection. With some of these investments, it is reassuring to note
that the downside protection seems to have worked despite the volatility of
the markets. However, with a number of others, faced with the sudden and
precipitative fall in liquidity and share prices, the terms of the
transactions have not managed to protect the portfolio entirely and,
reflecting this, in November 2022 the Board reduced the overall fair values of
these investments by USD26.2 million. In December, the counterparty of three
of the investments failed to repay and the Board commissioned a further review
as at 31 December. This resulted in a further write-down of these three
investments of USD26.7 million. There are other "public equities with private
terms" investments which mature over the next few months where the Investment
Manager expects the counterparty to have difficulty honouring their
commitments. Work has already started to ensure the best possible outcome for
the Company and, provisions have already been taken against these positions
where necessary. The Investment Manager has been working hard to renegotiate
the terms of these investments and to improve the security held by the Company
in seeking to avoid any further losses.
Dividend
Our policy is to pay out dividends of approximately 1% of NAV per share, twice
each year and normally declared in March and October. In October 2022 we
declared a dividend of 8.0 cents per share which was paid in December.
In view of the decline in NAV per share the Board has elected to declare a
dividend of 6.25 cents per share which will be payable to shareholders on or
around 11 May 2023.
Gearing
In March 2022, the Company entered into a USD40 million one year secured
revolving credit facility with Standard Chartered Bank. This facility provides
an additional source of short-term liquidity for the Investment Manager,
particularly as it manages the Company's cash flows in some illiquid
investments. I am pleased to report that Standard Chartered Bank has agreed to
extend the facility for a further year on substantially similar terms.
Marketing and the Discount
As I set out in the annual report, we continue to promote the Company via a
number of channels, assisted by our brokers, Numis Securities Limited,
distribution partner, Frostrow Capital LLP and Barclays Bank Plc who provide
investor engagement services. A variety of information is available to
existing and potential investors with the aim of stimulating demand for the
shares: a detailed fact sheet is issued each month and regular updates on the
Vietnamese market and economy in both written and video form are posted to our
website. I again encourage you to sign up to be notified of new publications
at https://vof.vinacapital.com if you have not already done so.
Over the six months to 31 December 2022, approximately 2 million shares were
bought back, which was 1.2% of shares in issue at the start of the period. The
discounts at which these shares were bought resulted in an increase in the NAV
of some 1.7 US cents per share to the benefit of continuing shareholders and,
the Directors believe, helped to control the volatility of the discount.
The discount was under pressure particularly in September and October but this
pressure abated somewhat by the end of 2022, with the result that the discount
reduced over the period from 19.8% at the end of June to 14.6% at the end of
December. We will continue to publicise the long-term potential of investment
in Vietnam and the benefits of the Company's unique approach to investing and
will continue to use share buybacks where we believe that these are in the
best interests of the shareholders.
Investment Management Fees
(a) Management fees
At present, the Investment Manager receives a management fee at the annual
rates set out below, payable monthly in arrears:
· 1.50% of net assets, levied on the first USD500 million of net
assets.
· 1.25% of net assets, levied on net assets between USD500 million
and USD1,000 million.
· 1.00% of net assets, levied on net assets between USD1,000
million and USD1,500 million.
· 0.75% of net assets, levied on net assets between USD1,500
million and USD2,000 million; and
· 0.50% of net assets, levied on net assets above USD2,000 million.
From 1 July 2023, the Investment Manager will receive a fee on the same basis
calculated as follows:
· 1.30% of net assets up to the first US$1,000 million of net
assets.
· 1.00% of net assets between US$1,000 million and US$1,500
million.
· 0.75% of net assets between US$1,500 million and US$2,000
million.
· 0.50% of net assets above US$2,000 million.
(b) Incentive Fees
At present, the Investment Manager earns an incentive fee calculated as
follows:
· To the extent that the NAV as at any year end commencing 30 June 2019 is
above the higher of an 8% compound annual return or the high water mark
initially set in 2019, having accounted for any share buy backs, share issues
and/or dividends, the incentive fee payable on any increase in the NAV with
effect from 30 June 2019 above the higher of the high water mark or the 8%
annual return target is calculated at a rate of 12.5%;
· The maximum amount of incentive fees that can be paid in any one year
is capped at 1.5% of the weighted average month-end NAV during that year.
Any incentive fees earned in excess of this 1.5% cap will be accrued if they
are expected to be paid.
Following the exceptional performance in the 2020/21 accounting year, USD20.3
million of accrued incentive fees was paid to the Investment Manager following
the publication of the annual report for the year ended 30 June 2022 in
October 2022. This left a balance of USD22.8 million in the Company's accounts
as an accrual for potential payment of incentive fees in future years.
Incentive fees are only paid out following the publication of annual accounts
and at the half year stage we provide for any incentive fee payable on the key
assumption that the NAV as at the following 30 June will be the same as at 31
December. If this were to be the case this financial year with NAV having
declined from 30 June to 31 December 2022, USD22.1 million of the carried
forward accrual would be clawed back and USD0.7 million would be payable when
the annual report is published in October 2023.
The Board recognises that there is downward pressure on investment management
fees in many parts of the world. However, we also recognise that Vietnam is a
developing market and the types of investment which VOF typically makes
require a high level of resources, both in negotiating investments and in
managing existing holdings. Against this background, we have agreed with
VinaCapital that the incentive fees with effect from 1 July 2023 will be as
follows:-
· To the extent that the NAV as at any year end commencing 30 June 2023
is above the higher of a 10% compound annual return and the high water mark
having accounted for any share buy backs, share issues and/or dividends, the
incentive fee payable on any increase in the NAV with effect from 30 June 2023
above the higher of the high water mark and the 10% annual return target is
calculated at a rate of 10%;
· The maximum amount of incentive fees that can be paid in any one year
is capped at 1.5% of the weighted average month-end NAV during that year.
· Any incentive fees earned in excess of this 1.5% cap will be accrued
if they are expected to be paid out in subsequent years.
As is currently the case, 25% of any incentive fees paid will be invested in
shares in VOF. These may not be sold until they have been owned for at least
five years.
Annual General Meeting
All of the resolutions at the AGM held on 5 December 2022 were, as in previous
years, passed by a large majority of the votes cast and I would like to record
the Board's thanks for shareholders' continuing support.
Outlook
The world is going through a difficult period with rising inflation in many
economies. In setting interest rates, central banks continue to wrestle with
the dilemma that higher rates may help to control inflation but at the same
time reduce growth. Against this background, the Vietnamese economy continues
to perform well both relative to the rest of the world and in absolute terms,
GDP having grown by 8% in calendar year 2022. Economic growth, however, is
likely to be tempered in the short term by lower export volumes and tighter
credit. However, we are still expecting another positive year for the
Vietnamese economy in 2023 with our investment manager projecting GDP to grow
by over 6% and that the recent strength of the US dollar will ease allowing
the exchange rate with the Vietnamese Dong to stabilise.
Following the sharp sell-off in 2022, listed Vietnamese equities are trading
at a low valuation compared with regional peers and their own history. While
returns, as ever, are unlikely to be smooth, combining the low valuation with
continued economic growth gives cause for optimism for Vietnamese equities in
2023.
The real estate sector in Vietnam has its own particular problems and, as one
of the largest sectors in the Company's portfolio, continues to be of concern.
However, any improvement in liquidity in the bond market and banking sector
should ease the situation which we hope will lead to a recovery in values.
As we look into the future, the Board believes that Vietnam will continue to
offer interesting and rewarding investment opportunities. However, the
volatility of the stock markets over the past year has shaken the confidence
of investors which will take some time to rebuild. The first half of this
financial year has presented some particular challenges which the Board is
hopeful will stabilise over the balance of the year.
I would like to thank shareholders for their continuing support.
Huw Evans
Chairman
VinaCapital Vietnam Opportunity Fund Limited
23 March 2023
INVESTMENT MANAGER'S INTERIM REPORT
Strong economic growth in stark contrast to market volatility
Vietnam's stock market experienced one of the most volatile years in its
history during 2022 and ended the year down by 34.1% in USD, total return
terms. With the cost of debt rising significantly on the back of rising global
interest rates and with other domestic challenges, investor confidence was
depleted, and this drained market liquidity. Yet, the main street Vietnamese
economy continues to thrive with a strength unseen in many years. Vietnam's
GDP grew by more than 8% in 2022, driven by the country's post-Covid reopening
boom, which has been resilient even when faced with higher interest rates,
slowing global growth, and various local issues.
In the latter half of 2022, Vietnam's manufacturing sector experienced a
significant decline in global orders leading to a few major factory lay-offs
that made headlines. Some economists have argued that the world is at the
beginning of a global recession and that orders will be on the decline well
into 2023. Others have argued that inventories have been higher than normal in
developed economies and therefore it will take time for these goods to be sold
before inventories reach normal levels, at which time manufacturers should
expect export orders to re-commence. We suspect that a combination of both
factors has caused orders for exports from Vietnam to fall in the short term.
Importantly, we expect that there will be a temporary change in the product
mix for exports, leaning more towards lower value goods that are typically
more resilient to demand changes during weak economic periods.
Post-Covid growth driven by increasing FDI, domestic consumption and tourism
The state of the global economy will certainly be a headwind for the
Vietnamese economy in 2023 but, to counter this, we do expect international
tourism to gather pace and pick up more in the latter half of 2023.
Historically, Chinese tourists have made up the largest group of travellers to
Vietnam, and as China learns to live with Covid and allow greater freedom of
movement, we expect a surge in Chinese tourists returning to Vietnam. Prior to
Covid, tourism contributed almost 10% of Vietnam's GDP directly, and much more
indirectly.
Our Chief Economist, in his explanation in the latter part of this note,
expects Vietnam's economy to grow by 6.0% to 6.5% in 2023 with support from a
variety of sectors and initiatives, including public infrastructure
investments into roads, railway systems and housing. In addition, FDI which
has been made in the past few years should become a major contributor to
economic growth. We also expect FDI disbursements, which surpassed USD22
billion in 2022 (a 13.5% year-on-year increase), to remain robust as global
manufacturers continue to diversify away from China, with Vietnam remaining a
favoured destination for investment. We expect the local currency to stabilise
and possibly appreciate against the US Dollar, which declined by over 10% from
its peak. Inflation should remain well under control at less than 5%, which is
ideal for a developing market like Vietnam. Importantly, we should also see
interest rates decline as inflationary and currency devaluation pressures
diminish.
Anti-corruption efforts are not expected to unsettle the market or economic
progress
Towards the end of the calendar year, we saw some major political changes at
the top leadership echelon with the replacement of two Deputy Prime Ministers,
and in January 2023 the resignation of Vietnam's President. We expect further
changes but we do not expect these changes to have a significant negative
impact on the economy and market. As we have experienced, these changes should
be positive for the investment environment and economy over time.
Crackdown on corporate bond issuances have impacted the Real Estate sector
most
During 2022, the capital markets saw debt costs significantly increase as the
government began to crackdown on issuers of corporate bonds who were
inappropriately using the proceeds of funds raised. This naturally resulted in
difficulties for corporate issuers to access new funding or roll-over expiring
debt. This unnerved investors, and the public equity markets recorded a
significant decline.
This was followed by more headline arrests in the second half of 2022
including the Chairwoman of one of the biggest conglomerates, Ms. Truong My
Lan. This drove the average yields for corporate bonds from 10-12% to 30-40%
in a very short period of time during November 2022. It also triggered a sharp
decline in the stock market during November as concerns surrounding several
large real estate developers' ability to access credit,
in particular Novaland (HOSE: NVL, 3.9% of NAV) and Phat Dat Real Estate
(HOSE: PHR, not held), and resulting pressure from margin calls led to large
falls in share prices. The Real Estate sector makes up approximately 25% of
the market weight.
In addition, the government issued a revised decree around the issuance of
corporate bonds making it more difficult for retail investors to participate.
With higher yields, various arrests, and tighter regulations, this channel of
raising capital has effectively been closed for most issuers, at least for the
time being.
In general, lending conditions remain tight for real estate developers as
banks are naturally reluctant to extend more credit to developers during this
period, even though banks can do so within their allocated (and in some
instances, recently increased) credit quotas. It seems that this "liquidity
crunch" is isolated and very much a real estate developer challenge, rather
than a system-wide issue. At the start of each year new credit quotas are
granted, and we should expect an easing of lending conditions which will be a
positive signal for both the real estate and banking sectors.
Market valuations remain attractive and public market liquidity remains strong
In the meantime, the VN Index started out the year at 1,498 points on 1
January 2022 and closed the mid-year 20% down at 1,198 points on 30 June 2022,
before declining by a further 16% over the following 6 months to 1,007 points
on 31 December 2022. The average PER as of 31 December 2022 was 10.5x, lower
than all regional peers by about one-third on average (Indonesia 14.4x,
Thailand 16.4x, Malaysia 14.6x and the Philippines 14.8x). This lower
valuation is also more than 2 standard deviations below the 5-year average for
the VN Index of 16x. As such, value remains on offer for long-term investors.
On the positive side, an incredible 2.6 million individual trading accounts
were opened in 2022, representing an increase of over 60% year-on-year, and by
the end of 2022 there were over 6.9 million trading accounts in Vietnam, with
the majority belonging to retail investors.
The ADTV in Vietnam peaked at USD1.44 billion per day in November 2021. In
December 2022 the ADTV was USD598 million per day. Even though liquidity has
been on the decline over the last 18 months, it is still far higher than the
pre-Covid average of just USD151 million per day in January 2020. The level of
investor participation in the market has increased as has liquidity, and this
is a phenomenon that looks set to stay.
Investment flow from foreign investors in Vietnamese stocks was negative
throughout most of the Covid period of 2020 (net outflow of USD879 million)
and 2021 (net outflow of USD2.72 billion). This trend reversed in 2022 where
we saw gross inflows of USD966 million in FII, but this was countered by
outflows, which resulted on a net total basis, inflows of just USD1.15 million
for the year.
There have been few private market transactions in this volatile market
environment
On the private funding side, Vietnam saw few deals during the second half of
2022. Private equity and venture capital investments were quite vibrant in
2021, but fell significantly as the public equity markets declined in value.
We saw a few major deals being called off at the late stage due to volatile
and uncertain markets, economic, and political conditions. Looking forward, in
an environment of higher costs of borrowing we do expect private terms to be
more attractive, and this is the ideal market environment that plays into
VOF's investment strategy.
Challenges across the Real Estate sector have impacted VOF's portfolio
VOF has not been immune to the volatility of the capital markets. We currently
have 68% of total NAV directly exposed to publicly listed equities. This
component of VOF's portfolio experienced a decline but this was less than the
fall in the VN Index, due to the higher quality names held in the portfolio.
We have held many of our holdings for several years, and in most cases
initially invested in these companies when they were still privately held.
Several of these companies have listed and crossed over to the publicly listed
equities portfolio.
The investments held in the private equity portfolio, excluding those
investments classified as "public equity with private terms", have for the
most part held their fair value during the period of review, and the moderate
adjustment to the private equity portfolio relates to the roll-up of the Thai
Hoa International Hospital and additional investment into the Tam Tri Medical
platform. Many of the businesses in which VOF is invested continue to improve
in the current post-Covid recovery phase and reflect our strategy of investing
into businesses that benefit from the long-term growth story that Vietnam
continues to deliver.
With the investments we classify as "public equity with private terms", which
are typically instruments linked to public companies with fixed terms
including downside protection, many of these investments are into the real
estate sector or have real estate sector exposure, and as such have
experienced a number of challenges. The substantial falls in the share prices
of real estate companies has resulted in the security packages we had
negotiated being insufficient to protect the portfolio completely and, in
November 2022, we announced a reduction of USD26.2 million in the overall fair
values of these investments.
On 30 December 2022, an event of default occurred on two investments
classified as "public equities with private terms" that relate to listed real
estate developer Novaland Joint Stock Company ("Novaland", HOSE: NVL) which is
a subsidiary of NovaGroup. As a result of the default, the Board asked the
Investment Manager to change the basis on which these Novaland-related
investments were valued, using a number of possible outcomes of the
negotiations and attributing probabilities to each. This change of valuation
basis resulted in the reduction in the valuation of the two instruments by
USD19.9 million as at 31 December 2022. These two investments were valued at
30 June 2022 at a total of USD58.5 million and, following the most recent
adjustments, are valued at USD38.6 million as of 31 December 2022.
In addition, in April 2022 VOF had made a USD24.8 million investment in a
minority interest in Nova Consumer Group ("NCG"), a separate company in
NovaGroup, which had expected to be listed on the Ho Chi Minh Stock Exchange
by 1 January 2023. This investment was valued at 30 June 2022 at USD25.2
million. Due to adverse market conditions, NCG was unable to fulfil its
listing commitments by the agreed date and, consequently, the Investment
Manager on behalf of VOF exercised the put option agreed at the time of the
original investment. This put option provided that VOF could sell its shares
in NCG back to NovaGroup at cost plus a guaranteed return. However, as a
result of the broader problems it is experiencing, NovaGroup is not in a
position to honour this obligation. In this new light, the Board of VOF has
concluded that a provision of USD7.4 million against VOF's investment in NCG
is also necessary and the investment in NCG is valued at USD17.8 million as of
31 December 2022.
With each of the Novaland-related and NCG investments, the Investment Manager
has taken the appropriate steps to protect VOF's position as a creditor and is
currently in negotiations with NovaGroup to reschedule the payments due under
the instruments and improve the security package. We will update investors in
due course as we work on the restructuring and recovery of these investments.
VOF private equity investment activity is poised to pick up
As previously reported, VOF's deployment activities into private equity slowed
significantly during the Covid pandemic and in the early part of 2022.
However, in the latter part of 2022, we expected to deploy almost USD160
million in private equity investment but found ourselves facing several
economic uncertainties including a rapidly rising interest rate environment
and a rapid, but temporary, decline in the local currency against the USD.
Both factors were due to global issues as well as Vietnam's domestic
challenges as mentioned above.
Although fully invested, and at times having drawn down on the recently
negotiated revolving credit facility provided by our custodian bank (and which
was fully repaid in January 2023), VOF is expected to pick up its pace of
investment in 2023 as investment conditions improve. We believe that with (1)
the higher cost of funding in Vietnam and (2) a lack of liquidity, private
investment terms will be more attractive. Investment opportunities have always
been plentiful, but recently terms have not met our return objectives and are
not consistent with VOF's strategy. We have seen competing funds and investors
accept less favourable investment terms because of their desire to hastily
invest into Vietnam. Given that our team is based in Vietnam and has been
investing into this market for 20 years, we do see this as a great opportunity
for VOF to close more private equity deals with terms consistent with VOF's
strategy over the coming year.
For the capital required for new investments, VOF expects to generate proceeds
from fully exiting several mature investments in both the public equity and
private equity portfolio, or trimming some of these holdings and deploying the
proceeds into more attractive investment opportunities.
Private equity investment into Vietnam's leading digital advertising platform
Subsequent to the period of review, in early February 2023, VOF entered into a
private equity investment into Chicilon Media, the leading digital advertising
platform in Vietnam, specialising in inner-building advertising. The
Investment Manager led a consortium to invest USD38 million in Chicilon Media,
of which VOF invested USD30 million and the Investment Manager will receive
one seat on the board.
Chicilon Media's LCD screens are located in the lifts and lobbies of
residential and commercial buildings across Vietnam, reaching the growing
urban middle class, the most-prized target audience for both local and global
consumer brands. With per capita advertising spending in Vietnam forecasted to
grow significantly in the years ahead, Chicilon Media is well-positioned to
capture a sizeable portion of that spending, given the cost effectiveness,
reach, and demographics of its channel.
In 2006, when Chicilon Media launched, there were nine building lift
advertising companies in the market; today, there are only two, with Chicilon
Media four times the size of its closest competitor in terms of market share.
The company has been constantly profitable, even during the Covid pandemic in
2020-2021. Following the post-Covid reopening of the economy, Chicilon Media
has seen a strong recovery of its business, as evidenced by a strong growth in
profitability.
Chicilon Media is an ideal example of a market leading company we like to
invest in. It is well-established and linked to sectors that are benefitting
from Vietnam's growing middle class and strong domestic consumption story. Its
management team have a clear vision and strategy, are experienced and
recognise the need to innovate their business.
Successful roll-up of private equity investments in healthcare platforms
within the portfolio
In October 2022, we completed the roll-up of two of the hospital platforms in
our private equity portfolio, with Thai Hoa International Hospital now fully
integrated into the larger platform of Tam Tri Medical, and at the same time
increasing our stake in the Tam Tri Medical platform through an additoinal
investment of USD21 million. This merger has created a platform which includes
six hospitals and almost 1,000 in-patient beds, spread across central and
southern Vietnam, and into the Mekong Delta region where modern and affordable
healthcare service is in high demand.
The healthcare sector is expected to experience a compound annual growth rate
of 10% from 2017 to 2025, and along with our investment in the Thu Cuc
International Hospital group, the largest private healthcare provider in
Hanoi, our overall healthcare platform within the portfolio specifically
targets the rising middle-income class in Vietnam where demand for private
healthcare is rapidly growing.
Long-term fund performance remains resilient in volatile market conditions
Total return, USD terms 6 months to 31 Dec 2022 Calendar Year 2022 3YR 5YR
VOF NAV -13.4% -26.1% 30.1% 22.8%
VOF Share price -5.1% -20.4% 31.1% 36.7%
VN Index -16.3% -34.1% 7.6% 7.0%
MSCI EM -2.9% -19.9% -7.1% -5.4%
MSCI FM -7.1% -26.2% -10.0% -11.3%
Source: VinaCapital, Bloomberg. All data on a total return basis. See Glossary
for further information.
Over the 6-months to 31 December 2022, VOF's NAV declined by 13.4%3 in USD,
total return terms ($TR). The share price performance held up better,
declining by 5.1%(4) on a similar basis, as a result of a narrowing of the
discount level to 14.4% over the period under review.
(3 An Alternative Performance Measure: see Glossary for further details)
(4 Source: Bloomberg, VinaCapital source)
Over the calendar year 2022, VOF's NAV performance was impacted by the market
volatility as discussed earlier. NAV per share declined 26.1%5 ($TR), and the
fund's share price was equally impacted, declining 20.4%(6) ($TR).
(5 An Alternative Performance Measure: see Glossary for further details)
(6 Source: Bloomberg, VinaCapital Research)
We encourage investors to look at performance over the longer term, as VOF's
strategy is to deliver long-term performance by seeking market leading,
well-governed business, that offer resilient growth prospects that benefit
from Vietnam's secular growth story. Importantly, over the longer term,
looking through periods of both rising and falling markets, VOF's investment
strategy is able to deliver a relatively stable rate of return that is in
excess of the market. Over a 3-year period, the fund has delivered a 30.1%(7)
total return. The VN Index over the same period was up by only 7.6%(8).
Similarly, over a 5-year period, the fund delivered a 22.8%(9) return, while
the VN Index rose by 7.0%(10). While the VN Index is not our benchmark for
returns, it does serve as a useful comparison.
(7 An Alternative Performance Measure: see Glossary for further details)
(8 Source: Bloomberg, VinaCapital Research)
(9 An Alternative Performance Measure: see Glossary for further details)
(10 Source: Bloomberg, VinaCapital Research)
Top portfolio holdings remain consistent over the period
Top 10 Public Equity Holdings As of 31 Dec 2022
Investee Company % of NAV Sector
1 Asia Commercial Bank (ACB) 12.3% Financials
2 Khang Dien House (KDH) 10.4% Real estate
3 Hoa Phat Group (HPG) 8.8% Materials
4 Airports Corporation of Vietnam (ACV) 7.4% Industrials
5 FPT Corporation (FPT) 5.6% Information Technology
6 Orient Commercial Bank (OCB) 4.8% Financials
7 Phu Nhuan Jewelry (PNJ) 4.7% Consumer Discretionary
8 Vinhomes (VHM) 4.5% Real estate
9 Quang Ngai Sugar (QNS) 3.6% Consumer Staples
10 Vietnam Prosperity Bank (VPB) 1.9% Financials
Total 64.0%
Source: VinaCapital
Top 10 Private Equity and Public Equity with Private Terms Holdings As of 31 Dec 2022
Investee Company % of NAV Sector Method of Entry
1 Project Norfolk (Novaland Structured Investment) 3.9% Real Estate Public Equity, Private Terms
2 Tam Tri Medical 3.8% Healthcare Private Equity
3 Thu Cuc International Hospital 3.6% Healthcare Private Equity
4 Project Kuala Lumpur (KIDO Structured Investment) 3.5% Consumer Staples Public Equity, Private Terms
5 Dat Xanh Services (DXS) 2.6% Real estate Pre-IPO
6 An Cuong Woodworking (ACG) 2.5% Materials Private Equity*
7 Hung Thinh Land (HTL) 2.4% Real estate Pre-IPO
8 IN Holdings 2.1% Consumer Discretionary Private Equity
9 Nova Consumer Group (NCG) 1.8% Consumer Staples Pre-IPO
10 Petrolimex Aviation (PAV) 1.4% Energy Equitisation
Total 27.6%
Source: VinaCapital. (*) An Cuong Woodworking was entered as a private equity
investment. In 2021, the company publicly listed and is currently trading on
HOSE from 10 October 2022.
Risks and challenges for the year ahead
As we look ahead, we are cautious of several risks that may impact economic
growth or market stability. Our Chief Economist and Head of Research have
shared this in their annual notes to investors, but to summarise the key
risks:
1. Growth: A global recession could take hold and economies that import a lot
of goods from Vietnam would then reduce orders. This would reduce
manufacturing and business activities and weaken the labour market in Vietnam.
Overall, this could weaken demand and consumption activity in Vietnam, and
contribute to lower GDP growth. Domestic consumption represents approximately
two-thirds of Vietnam's GDP.
2. Inflation: Inflation could become too high, well above the average of 4.5%
level that the Vietnamese government targets for 2023. This would lead to
higher interest rates and more debt default, placing pressure on Vietnam's
capital markets.
3. Liquidity: Real estate developers may not be able to access liquidity as
needed through sales, primarily to retire existing debt. Furthermore, their
ability to raise additional debt through the corporate bond market could be
hampered. This would put significant strain on the capital markets,
particularly on banks as defaults rise and there is pressure on asset quality,
or certain banks are called to "national service" to support the sector.
4. Confidence: More arrests could occur in Vietnam as the crackdown on
fraudulent corporate activity continues. The concern is around the arrests of
business leaders, particularly prominent business leaders. This has more
capital market implications than the arrest of government officials, which
surprisingly has not been infrequent over the past few years.
Given these risks, it is important that we remain vigilant and continuously
monitor the macroeconomic environment, negotiate terms of investment that
offer strong downside protections that are enforceable, seek investments that
offer returns and a comfortable margin of safety, and conduct comprehensive
due diligence to ensure that we have confidence and trust in the business
leaders who we invest alongside.
Outlook: A challenging year ahead, but economic and political stability offers
hope
As 2022 recedes in the rear-view mirror, we enter a new year full of
opportunities, and possibly a year full of pivots. 2022 was one of the worst
years on record for Vietnam's capital markets. It was a rare year where both
the equity and the debt markets faced significant volatility. It was also a
year where global portfolio valuations were dominated by a single factor,
interest rates.
In 2023, we expect economic and market conditions, both globally and here in
Vietnam, to go through several pivots. Inflation seems to have peaked (or at
least to be nearing its peak) following the implementation of aggressive
policy interest rate hikes in many parts of the world, including here in
Vietnam. Once central bankers are comfortable that inflation has peaked,
interest rates should stop increasing and remain steady, or maybe even
possibly decline, to ensure that economies do not enter uncontrolled or deep
recessions.
As interest rate levels stabilise, we should see a pivot in liquidity and we
expect that more money will flow back into the world economy and markets,
including in Vietnam. We have recently seen the SBV resume their purchase of
US Dollars to shore up their currency reserves again. This will ultimately add
liquidity to the economy, as the SBV will encourage banks to resume lending
activity to businesses, particularly for those that need help to restart their
capital investment activities.
Furthermore, additional liquidity is expected to come in the form of increased
government spending. Vietnam's government has signalled that it will invest
significantly more in 2023 than in previous years and, alongside
infrastructure spending as a fiscal lever, this will ensure that economic
growth is sustained.
We believe that 2023 will be when the public equity markets pivot and the VN
index recovers from its second-worst annual decline in its short history
(behind only the decline in the global financial crisis in 2008). Vietnam's
average PER tumbled to below 10 times in late 2022. At the same time,
Vietnam's equity markets enjoyed a significant increase in trading volumes
compared to 2019, a pre-Covid year. With valuations at an all-time low and
trading volumes at a respectable level, market consensus points to a positive
return for the VN Index in 2023.
A challenge for Vietnam is the fallout from the resignations of political
leaders and arrests of several business leaders that have occurred over the
past year. The anti-corruption campaign has been underway for several years,
with many investigations and arrests of individuals at all levels of
government, but these have not had a significant impact on the economy. These
arrests have not altered economic policies and, if anything, have strengthened
the rule of law in Vietnam.
The arrests of business leaders, particularly in the real estate and banking
sectors, however, have had a significant impact, as we saw on several
occasions during 2022. Fortunately, VOF's strategy and approach to privately
negotiated investments, which include extensive due diligence conducted before
investing, and our far-reaching business network built up over 20 years
investing in Vietnam has given us insight into many of the challenges that the
market has recently faced. VOF's investments have no direct exposure to the
business or political leaders who have been arrested.
The key challenge in the year ahead is to regain investor confidence and trust
in the market, a task that will take time but, given the growth drivers for
the economy, the resilience of its people and their aspirations for better
livelihoods, and the opening up of borders as we enter a post-Covid period of
growth, we are confident that foreign direct and indirect investments into the
country will gather momentum again. Nevertheless, we remain vigilant to the
risks and challenges as we seek favourable opportunities to invest into
strong, well-governed, and growing Vietnamese businesses for the long-term.
Andy Ho
Managing Director and Chief Investment Officer
23 March 2023
INTERIM REPORT OF THE BOARD OF DIRECTORS
The Board of Directors (the "Board") submits its report, together with the
Condensed Interim Financial Statements, of VinaCapital Vietnam Opportunity
Fund Limited (the "Company") for the six-month period from 1 July 2022 to 31
December 2022 (the "six-month period").
The Company is a Guernsey domiciled closed ended investment company. It is
classified as a registered closed-ended Collective Investment Scheme under The
POI Law, 2020 and is subject to the Companies Guernsey Law, 2008.
The Company's shares are quoted on the Main Market of the London Stock
Exchange ("LSE") with a Premium Listing (ticker: VOF).
Investing Policy
Investment Objective
The Company's objective is to achieve medium to long-term returns through
investment in assets either in Vietnam or in companies with a substantial
majority of their assets, operations, revenues or income in, or derived from,
Vietnam.
Investment Policy
All of the Company's investments will be in Vietnam or in companies with at
least 75% of their assets, operations, revenues or income in, or derived from,
Vietnam at the time of investment.
· No single investment may exceed 20% of the NAV of the Company at the
time of investment.
· The Company may from time to time invest in other funds focused on
Vietnam. This includes investments in other funds managed by VinaCapital
Investment Management Limited (the "Investment Manager"). Any investment or
divestment into or out of funds managed by the Investment Manager will be
subject to prior approval by the Board.
· The Company may from time to time make co-investments alongside
other investors in private equity, real estate or similar assets. This
includes, but is not restricted to, co-investments alongside other funds
managed by the Investment Manager.
· The Company will not invest in other listed closed-ended funds.
The Company may gear its assets through borrowings which may vary
substantially over time according to market conditions and any or all of the
assets of the Company may be pledged as security for such borrowings.
Borrowings will not exceed 10% of the Company's total assets at the time that
any debt is drawn down.
From time to time the Company may hold cash or low risk instruments such as
government bonds or cash funds denominated in either Vietnamese Dong ("VND")
or US Dollars ("USD"), either in Vietnam or outside Vietnam.
Principal Risks
The process which the Company follows in order to identify and mitigate its
key risks is set out on pages 41 to 46 of the Annual Report and Financial
Statements for the year ended 30 June 2022 (the "2022 Annual Report"), a copy
of which is available on the Company's website https://vof.vinacapital.com.
The Directors have reviewed the key risks for the remaining six months of the
Company's financial year. The risks identified are largely the same as those
set out in the 2022 Annual Report but the Board noted volatility particularly
in investments related to real estate in the second half of 2022. The key
risks are summarised below.
Macroeconomic and Market
Opportunities for the Company to invest in Vietnam have come about through the
liberalisation of the Vietnamese economy. Were the pace or direction of the
economy to alter in the future, the interests of the Company could be damaged.
Changes in the equilibrium of international trade caused, for example, by the
imposition of tariffs or sanctions could affect the Vietnamese economy and the
companies in which the Company is invested. As Vietnam has become increasingly
connected with the rest of the world, significant world events have a more
significant impact on the country. The consequences of these events are not
always known and in the past have led to increased uncertainty and volatility
in the pricing of investments.
Market risk was highlighted by volatility and falls in the value of some real
estate investments in the second half of 2022, as described in the Investment
Manager's Interim Report.
Geopolitical
Risks to global growth emerged in February 2022 as a result of the conflict
between Russia and Ukraine. The rise in energy and commodity prices is likely
to have an impact on the Vietnamese economy and the prospects for companies in
Vietnam. There is also a risk of an increase in the geopolitical tensions in
the Asia region. During 2022, the risk of higher inflation caused global
economic slowdown, which could impact the Company's investments in Vietnam,
emerged as a key risk.
Investment Performance
The Investment Management Agreement requires the Investment Manager to provide
competent, attentive, and efficient services to the Company. If the Investment
Manager was not able to do this or if the Investment Management Agreement were
terminated, there could be no assurance that a suitable replacement could be
found and, under those circumstances, the Company could suffer a loss of
value. The performance of the Company's investment portfolio could be poor,
either absolutely or relative to the Company's peers.
Operational
The Company is dependent on third parties for the provision of all systems and
services (in particular, those of the Investment Manager and the
Administrator) and any control failures or gaps in these systems and services
could result in a loss or damage to the Company.
Fair Valuation
The risks associated with the fair valuation of the portfolio could result in
the NAV of the Company being misstated. The quoted companies in the portfolio
are valued at market price but many of the holdings are of a size which would
make them difficult to liquidate at these prices in the ordinary course of
market activity. The unlisted securities are valued at their quoted prices on
Vietnam's Unlisted Public Company Market ("UPCoM") or using quotations from
brokers, but many of the holdings are of a size which would make them
difficult to liquidate at these prices in the ordinary course of market
activity. The determination of the fair value of the unquoted investments is
carried out according to international valuation standards but depend on a
number of assumptions. Furthermore, these investments are not readily liquid
and may not be realisable at the stated carrying values. The values of the
Company's underlying investments are, on a 'look-through' basis, mainly
denominated in VND whereas the Company's Financial Statements are prepared in
USD. The Company makes investments and receives income and proceeds from sales
of investments in USD. The Company does not hedge its VND exposure, so
exchange rate fluctuations could have a material effect on the NAV. The
sensitivity of the NAV to exchange rates is set out in note 20(a) of the 2022
Annual Report.
Legal and Regulatory
Failure to comply with relevant regulation and legislation in Vietnam,
Guernsey, Singapore, the British Virgin Islands or the UK may have an impact
on the Company. Although there are anti-bribery and corruption policies in
place at the Company, the Investment Manager and all other key service
providers, the Company could be damaged and suffer losses if any of these
policies were breached.
Changing Investor Sentiment
As a Company investing mainly in Vietnam, changes in investor sentiment
towards Vietnam and/or emerging and frontier markets in general may lead to
the Company becoming unattractive to investors. The clamp down by the
Vietnamese government highlights the risks associated with corruption in
Vietnam and may lead to international investors adopting a more cautious
approach to investment in the country. Changes in international investor
sentiment could lead to reduced demand for its shares and a widening
discount.The Company is due to hold a discontinuation vote at its Annual
General Meeting in 2023. While at the time of publishing this report the Board
is not aware of intentions by any major shareholder to vote in favour of
discontinuation, it is acknowledged that there is a risk that shareholders
will vote to wind up the company in 2023.
ESG
As responsible investors, the Board and Investment Manager are aware of the
growing focus on ESG matters. In particular, as evidence of the effects of
climate change grows, there is increasing focus by shareholders on investment
companies' role in influencing investee companies' approach to environmental
risks.
Section 172 Statement
Section 172 of the Companies Act 2006 applies directly to UK domiciled
companies. Nonetheless, the intention of the AIC Code is that the matters set
out in section 172 are reported on by all London listed investment companies,
irrespective of domicile, provided that this does not conflict with local
company law.
Section 172 states that: A director of a company must act in the way he or she
considers, in good faith, would be most likely to promote the success of the
company for the benefit of its members as a whole, and in doing so have regard
(amongst other matters) to the following six items:
(a) the likely consequences of any decision in the long term;
(b) the interests of the company's employees;
(c) the need to foster the company's business relationships with suppliers,
customers and others;
(d) the impact of the company's operations on the community and the
environment;
(e) the desirability of the company maintaining a reputation for high
standards of business conduct; and
(f) the need to act fairly as between members of the company.
The process which the Company follows in order to consider and adhere to the
matters above is set out on pages 30 and 31 of the 2022 Annual Report.
Life of the Company
The Company does not have a fixed life but the Board considers it desirable
that shareholders should have the opportunity to review the future of the
Company at appropriate intervals. Accordingly, the Board intends that every
fifth year a special resolution will be proposed that the Company ceases to
continue. If the resolution is not passed, the Company will continue to
operate as currently constituted. If the resolution is passed, the Directors
will be required to formulate proposals to be put to shareholders to
reorganise, unitise or reconstruct the Company or for the Company to be wound
up. The Board tabled such resolutions in 2008, 2013 and 2018 and on each
occasion the resolution was not passed, allowing the Company to continue as
currently constituted. The next such resolution will be put to shareholders at
the annual general meeting which is expected to be held in December 2023.
Results and Dividend
The results of the Company for the six-month period and the state of its
financial affairs as at the reporting date are set out in the Condensed
Interim Financial Statements.
When the Board first declared a dividend in 2017, it was the intention that
the Company would pay a dividend representing approximately 1% of NAV twice
each year and the Board maintained the half yearly dividend at 8.0 cents per
share in October 2022. Since that time the NAV of the Company has fallen and,
consequently, on 23 March 2023 the Board declared a reduced dividend of 6.25
cents per share payable on or around 11 May 2023.
Performance
The Chairman's Statement and the Investment Manager's Report provide details
of the Company's activities and performance during the six-month period.
The KPIs used to measure the progress of the Company during the six-month
period include:
• the movement in the Company's NAV total return;
• the movement in the Company's share price; and
• discount of the share price in relation to the NAV.
A discussion of progress against the KPIs is included in the Chairman's
Statement.
Related Parties
Details of related party transactions that have taken place during the period
and any material changes, if any, are set out in note 20 of the Condensed
Interim Financial Statements.
Share repurchase programme
Details of the Company's share repurchase programme are set out in note 11 of
the Condensed Interim Financial Statements.
Board of Directors
The members of the Board during the six-month period and up to the date of
this report were:
Name Position Date of appointment
Huw Evans Chairman 27 May 2016
Thuy Bich Dam Director 4 March 2014
Julian Healy Director 23 July 2018
Kathryn Matthews Director 10 May 2019
Peter Hames Director 24 June 2021
Hai Thanh Trinh Director 30 June 2022
Directors' interests in the Company
As at 31 December 2022 and 30 June 2022, the interests of the Directors in
shares of the Company were as follows:
Shares held Shares held
as at 31 December 2022 as at 30 June 2022
Huw Evans 35,000 35,000
Thuy Bich Dam - -
Julian Healy 15,000 15,000
Kathryn Matthews 9,464 9,464
Peter Hames 8,000 8,000
Hai Thanh Trinh - -
Going Concern
Under the AIC Code and applicable regulations, the Directors are required to
satisfy themselves that it is reasonable to assume that the Company is a going
concern. The Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern including reviewing the on-going cash
flows and level of cash balances as at the reporting date as well as taking
forecasts of future cash flows into consideration.
An additional factor which the Directors have considered is the
discontinuation vote which will be put to shareholders at the AGM expected to
be held in December 2023. In seeking to ensure that shareholders retain
confidence in the Company, the Investment Manager meets regularly with
shareholders and has an active investor relations programme. In addition, the
Chairman communicates independently with significant shareholders. The
Directors cannot predict the outcome of the discontinuation vote but currently
have no indication that the vote will be passed and, in making this going
concern statement, have assumed that the Company will continue to operate in
its present form.
After making enquiries of the Investment Manager and having reassessed the
principal risks, the Directors consider it appropriate to adopt the going
concern basis of accounting in preparing the Interim Report and Condensed
Interim Financial Statements.
Signed on behalf of the Board by:
Huw Evans
Chairman
VinaCapital Vietnam Opportunity Fund Limited
23 March 2023
STATEMENT OF DIRECTORS' RESPONSIBILITY IN RESPECT OF THE CONDENSED INTERIM
FINANCIAL STATEMENTS
To the best of their knowledge, the Directors confirm that:
- the Condensed Interim Financial Statements have been prepared in accordance
with IAS 34, "Interim Financial Reporting"; and
- the Interim Report, comprising the Chairman's Statement, the Investment
Manager's Interim Report and the Interim Report of the Board of Directors,
meets the requirements of an interim management report and includes a fair
review of information required by:
(i) DTR 4.2.7R of the UK Disclosure and Transparency Rules, being an
indication of important events which have occurred during the first six months
and their impact on the Condensed Interim Financial Statements, and a
description of the principal risks and uncertainties for the remaining six
months of the year; and
(ii) DTR 4.2.8R of the UK Disclosure and Transparency Rules, being related
party transactions which have taken place in the first six months and which
have materially affected the financial position or performance of the Company
during that period, and any material changes in the related party transactions
disclosed in the 2022 Annual Report.
Signed on behalf of the board by:
Julian Healy
Director
VinaCapital Vietnam Opportunity Fund Limited
23 March 2023
Independent review report to VinaCapital Vietnam Opportunity Fund Limited
Report on the condensed interim financial statements
Our conclusion
We have reviewed VinaCapital Vietnam Opportunity Fund Limited's condensed
interim financial statements (the "interim financial statements") in the
interim report and condensed interim financial statements of VinaCapital
Vietnam Opportunity Fund Limited for the 6-month period ended 31 December 2022
(the "period").
Based on our review, nothing has come to our attention that causes us to
believe that the interim financial statements are not prepared, in all
material respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting', and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority.
The interim financial statements comprise:
● the condensed statement of financial position as at 31 December
2022;
● the condensed statement of comprehensive income for the period
then ended;
● the condensed statement of cash flows for the period then ended;
● the condensed statement of changes in equity for the period then
ended; and
● the explanatory notes to the interim financial statements.
The interim financial statements included in the interim report and condensed
interim financial statements have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial Reporting', and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410, 'Review of Interim Financial Information Performed by the
Independent Auditor of the Entity' issued by the International Auditing and
Assurance Standards Board. A review of interim financial information consists
of making enquiries, 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.
We have read the other information contained in the interim report and
condensed interim financial statements and considered whether it contains any
apparent misstatements or material inconsistencies with the information in the
interim financial statements.
Emphasis of matter
We draw attention to note 2.2 in the interim financial statements, which
indicates that the company is due to hold a discontinuation vote at its Annual
General Meeting in December 2023. As stated in note 2.2, this event or
condition, indicates that a material uncertainty exists as to the outcome of
this discontinuation vote that may cast significant doubt on the company's
ability to continue as a going concern. Our report is not modified in respect
of this matter.
Responsibilities for the interim financial statements and the review
Our responsibilities and those of the directors
The interim report and condensed interim financial statements, including the
interim financial statements, is the responsibility of, and has been approved
by, the directors. The directors are responsible for preparing the interim
report and condensed interim financial statements in accordance with
International Accounting Standard 34, 'Interim Financial Reporting', and the
Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's
Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim financial
statements in the interim report and condensed interim financial statements
based on our review. This report, including the conclusion, has been prepared
for and only for the company for the purpose of complying with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority and for no other purpose. We do not, in giving this
conclusion, accept or assume responsibility for any other purpose or to any
other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
23 March 2023
CONDENSED STATEMENT OF FINANCIAL POSITION
31 December 2022 30 June 2022
Note USD'000 USD'000
(Unaudited) (Audited)
TOTAL ASSETS
Financial assets at fair value through profit or loss 8 982,528 1,205,940
Prepayments and other assets 10 345 943
Cash and cash equivalents 6 26,183 15,630
Total assets 1,009,056 1,222,513
TOTAL LIABILITIES
Accrued expenses and other payables 12 2,434 22,060
Loans and other borrowings 13 10,000 -
Deferred incentive fees 16(b) - 20,353
Total liabilities 12,434 42,413
SHAREHOLDERS' EQUITY
Share capital 11 274,984 285,314
Retained earnings 721,638 894,786
Total shareholders' equity 996,622 1,180,100
Total liabilities and shareholders' equity 1,009,056 1,222,513
Net asset value, USD per share 18 6.17 7.22
Net asset value, GBP per share(11) 5.10 5.93
The Condensed Interim Financial Statements were approved and signed by the
Board of Directors on 23 March 2023.
Huw Evans Julian Healy
Chairman Director
The accompanying notes are an integral part of these Condensed Interim
Financial Statements.
(11) The price of the Company's shares is quoted on the London Stock Exchange
in GBP. The USD NAV per share has been translated to GBP using the rates of
exchange at 31 December 2022 and 30 June 2022.
( )( )
CONDENSED STATEMENT OF CHANGES IN EQUITY
Share capital Retained earnings Total
equity
For the six months ended 31 December 2021 (Unaudited) Note USD'000 USD'000 USD'000
Balance at 1 July 2021 317,112 1,042,661 1,359,773
Profit for the period - 86,671 86,671
Total comprehensive income - 86,671 86,671
Transactions with shareholders
Shares repurchased (17,678) - (17,678)
Dividends paid - (13,288) (13,288)
Balance at 31 December 2021 299,434 1,116,044 1,415,478
For the six months ended 31 December 2022 (Unaudited)
Balance at 1 July 2022 285,314 894,786 1,180,100
Loss for the period - (160,207) (160,207)
Total comprehensive loss - (160,207) (160,207)
Transactions with shareholders
Shares repurchased 11 (10,330) - (10,330)
Dividends paid 9 - (12,941) (12,941)
Balance at 31 December 2022 274,984 721,638 996,622
The accompanying notes are an integral part of these Condensed Interim
Financial Statements.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Six months ended Six months ended
31 December 2022 31 December 2021
Note(s) USD'000 USD'000
(Unaudited) (Unaudited)
Dividend income 14 32,343 28,141
Net (losses)/gains on financial assets at fair value through profit or loss 15 (202,403) 81,991
General and administration expenses 16(a) (8,980) (10,254)
Loan interest expense (208) -
Facility set-up costs (637) -
Finance expense 16(b), 20 (2,450) (3,311)
Incentive fee clawback/(charge) 16(b), 20 22,128 (9,896)
Operating (loss)/profit (160,207) 86,671
(Loss)/profit before tax (160,207) 86,671
Corporate income tax 17 - -
(Loss)/profit for the period (160,207) 86,671
Total comprehensive (deficit)/income for the period (160,207) 86,671
(Loss)/earnings per share
- basic and diluted (USD per share) 18 (0.99) 0.52
- basic and diluted (GBP per share)(12) (0.82) 0.38
All items were derived from continuing activities.
The accompanying notes are an integral part of these Condensed Interim
Financial Statements.
(12) The price of the Company's shares is quoted on the London Stock Exchange
in GBP. The USD (loss)/earnings per share has been translated to GBP using the
rates of exchange at 31 December 2022 and 31 December 2021.
CONDENSED STATEMENT OF CASH FLOWS
Six months ended Six months ended
31 December 2022 31 December 2021
Note(s) USD'000 USD'000
(Unaudited) (Unaudited)
Operating activities
(Loss)/profit before tax (160,207) 86,671
Adjustments for:
Net losses/(gains) on financial assets at fair value through profit or loss 8, 15 202,403 (81,991)
Dividend income 14 (32,343) (28,141)
Facility set-up costs 10 637 -
Loan interest expense 208 -
Incentive fee (clawback)/charge 16(b), 20 (22,128) 9,896
Finance expense 16(b) 2,450 (3,311)
(8,980) (16,876)
(Decrease) in prepayments and other assets 10 (39) (39)
Decrease in total liabilities 12 (20,330) (14,508)
(29,349) (31,423)
Purchases of financial assets at fair value through profit or loss 8 (33,060) (78,904)
Return of capital from financial assets at fair value through profit or loss 8 54,069 45,120
Dividend income 14 32,343 28,141
Net cash generated from/ (used in) operating activities 53,352 (5,643)
Financing activities
Purchase of shares into treasury 11 (10,330) (15,318)
Loan principal drawdown 13 40,000 -
Loan principal repayments 13 (30,000) -
Loan interest paid (179) -
Dividends paid 9 (12,941) (13,288)
Net cash used in financing activities (13,450) (28,606)
Net change in cash and cash equivalents for the period 10,553 (65,672)
Cash and cash equivalents at the beginning of the period 6 15,630 76,225
Cash and cash equivalents at the end of the period 6 26,183 10,553
The accompanying notes are an integral part of these Condensed Interim
Financial Statements.
NOTES TO THE CONDENSED INTERIM FINANCIAL STATEMENTS
1. GENERAL INFORMATION
VinaCapital Vietnam Opportunity Fund Limited (the "Company") is a Guernsey
domiciled closed-ended investment company. The Company is classified as a
registered closed-ended Collective Investment Scheme under The Protection of
Investors (Bailiwick of Guernsey) Law 2020 and is subject to the Companies
(Guernsey) Law, 2008.
The Company's objective is to achieve medium to long-term returns through
investment either in Vietnam or in companies with a substantial majority of
their assets, operations, revenues or income in, or derived from, Vietnam.
The Company has a Premium Listing on the LSE's Main Market, under the ticker
symbol VOF.
The Company does not have a fixed life but the Board has determined that it is
desirable that shareholders should have the opportunity to review the future
of the Company at appropriate intervals. Accordingly, the Board intends that
every fifth year a special resolution will be proposed that the Company ceases
to continue. If the resolution is not passed, the Company will continue to
operate as currently constituted. If the resolution is passed, the Directors
will be required to formulate proposals to be put to shareholders to
reorganise, unitise or reconstruct the Company or for the Company to be wound
up. The Board tabled such resolutions in 2008, 2013 and 2018 and on each
occasion the resolution was not passed, allowing the Company to continue as
currently constituted. The next such resolution will be put to shareholders at
the annual general meeting which is expected to be held in December 2023.
The Condensed Interim Financial Statements for the six-month period ended 31
December 2022 were approved for issue by the Board on 23 March 2023.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
The Company has prepared these Condensed Interim Financial Statements on a
going concern basis in accordance with the Disclosure and Transparency Rules
of the United Kingdom Financial Conduct Authority and IAS 34 "Interim
Financial Reporting". These Condensed Interim Financial Statements do not
comprise statutory Financial Statements within the meaning of the Companies
(Guernsey) Law, 2008, and should be read in conjunction with the Financial
Statements of the Company as at and for the year ended 30 June 2022, which
were prepared in accordance with International Financial Reporting Standards.
The statutory Financial Statements for the year ended 30 June 2022 were
approved by the Board of Directors on 24 October 2022. The opinion of the
auditors on those Financial Statements was not qualified and did not include a
reference to any matters to which the auditor drew attention by way of
emphasis without qualifying the report. The accounting policies adopted in
these Condensed Interim Financial Statements are consistent with those of the
previous financial year and the corresponding interim reporting period. New
and amended standards have been considered in note 2.3. These Condensed
Interim Financial Statements for the period ended 31 December 2022 have been
reviewed by the Company's Auditors, PricewaterhouseCoopers CI LLP, but not
audited and their review report appears earlier in this document. The
financial information for the year ended 30 June 2022 has been derived from
the Audited Annual Financial Statements of the Company for that year, which
were reported on by PricewaterhouseCoopers CI LLP in the Company's Annual
Report and Financial Statements.
2.2 Going concern
Under the AIC Code and applicable regulations, the Directors are required to
satisfy themselves that it is reasonable to assume that the Company is a going
concern. The Directors have undertaken a rigorous review of the Company's
ability to continue as a going concern including reviewing the on-going cash
flows and level of cash balances as at the reporting date as well as taking
forecasts of future cash flows into consideration. The Company is due to hold
a discontinuation vote at its AGM in 2023. In seeking to ensure that
shareholders retain confidence in the Company, the Investment Manager meets
regularly with shareholders and has an active investor relations programme. In
addition, the Chairman communicates independently with significant
shareholders. The Directors cannot predict the outcome of the discontinuation
vote but have no present indication that the vote will be passed and, in
making the going concern statement, have assumed that the Company will
continue to operate in its present form for a period of at least 12 months
from the date of approval of these Condensed Interim Financial Statements.
2.3 Changes in accounting policy and disclosures
The Board has considered the new standards and amendments that are mandatorily
effective from 1 January 2022 and determined that these do not have a material
impact on the Company and are not expected to affect significantly the current
or future periods.
2.4 Subsidiaries and associates
The Company meets the definition of an investment entity within IFRS 10 and
therefore does not consolidate its subsidiaries but measures them instead at
fair value through profit or loss.
Any gain or loss arising from a change in the fair value of investments in
subsidiaries and associates is recognised in the Condensed Statement of
Comprehensive Income.
Refer to note 3 for further disclosure on accounting for subsidiaries and
associates.
2.5 Segment reporting
In identifying its operating segments, management follows the subsidiaries'
sectors of investment which are based on internal management reporting
information. The operating segments by investment portfolio include: capital
markets, operating assets, private equity and other net assets (including cash
and cash equivalents, bonds, and short-term deposits).
Each of the operating segments is managed and monitored individually by the
Investment Manager as each requires different resources and approaches. The
Investment Manager assesses segment profit or loss using a measure of
operating profit or loss from the underlying investment assets of the
subsidiaries. Refer to note 4 for further disclosure regarding allocation to
segments.
2.6 Financial Instruments
(a) Recognition and derecognition
Financial assets and financial liabilities are recognised when the Company
becomes a party to the contractual provisions of the financial instrument.
Purchases and sales of financial assets are recognised on the trade date - the
date on which the Company commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash flows from
the financial assets have expired or have been transferred and the Company has
transferred substantially all of the risks and rewards of ownership. A
financial liability is derecognised when it is extinguished, discharged,
cancelled or expires.
(b) Classification of financial assets
The Company classifies its financial assets based on the Company's business
model for managing those financial assets and the contractual cashflow
characteristics of the financial assets.
The Company has classified all investments in equity securities as financial
assets at fair value through profit or loss ("FVTPL") as they are managed and
performance is evaluated on a fair value basis. The Company is primarily
focused on fair value information and uses that information to assess the
assets' performance and to make decisions. The Company has not taken the
option to designate irrevocably any investment in equity as fair value through
other comprehensive income.
The Company's receivables and cash and cash equivalents are classified and
subsequently measured at amortised cost as these are held to collect
contractual cash flows which represent solely payments of principal and
interest.
(c) Initial and subsequent measurement of financial assets
Except for those trade receivables that do not contain a significant financing
component and are measured at the transaction price in accordance with IFRS
15, financial assets are initially measured at fair value plus, in the case of
a financial asset not at FVTPL, transaction costs that are directly
attributable to the acquisition of the financial asset. Transaction costs of
financial assets at FVTPL are expensed in the Condensed Statement of
Comprehensive Income.
Subsequent to initial recognition, investments at FVTPL are measured at fair
value with gains and losses arising from changes in the fair value recognised
in the Condensed Statement of Comprehensive Income.
All other financial assets are subsequently measured at amortised cost using
the effective interest rate method, less any impairment.
(d) Impairment of financial assets
At each reporting date, the Company measures the loss allowance on debt assets
carried at amortised cost at an amount equal to the lifetime expected credit
losses if the credit risk has increased significantly since initial
recognition.
If, at the reporting date, the credit risk has not increased significantly
since initial recognition, the Company measures the loss allowance at an
amount equal to 12-month expected credit losses. The expected credit losses
are estimated using a provision matrix based on the Company's historical
credit loss experience, adjusted for factors that are specific to the debtors,
general economic conditions and an assessment of both the current as well as
the forecast direction of conditions at the reporting date, including time
value of money where appropriate. The measurement of expected credit losses is
a function of the probability of default, loss given default (i.e. the
magnitude of the loss if there is a default) and the exposure at default. The
assessment of the probability of default and loss given default is based on
historical data adjusted by forward-looking information.
(e) Classification and measurement of financial liabilities
Financial liabilities are initially measured at fair value plus transaction
costs that are directly attributable to their acquisition or issue, other than
those classified as at fair value through profit or loss in which case
transaction costs are recognised directly in profit or loss.
Subsequently, financial liabilities are measured at amortised cost using the
effective interest method except for financial liabilities designated at fair
value through profit or loss and held for trading, which are carried
subsequently at fair value with gains or losses recognised in the Condensed
Statement of Comprehensive Income.
The Company's financial liabilities only include loans and other borrowings
and trade and other payables which are measured at amortised cost using the
effective interest method.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
When preparing the Condensed Interim Financial Statements, the Company relies
on a number of judgements, estimates and assumptions about recognition and
measurement of assets, liabilities, income and expenses. Actual results may
differ from the judgements, estimates and assumptions.
Information about significant judgements, estimates and assumptions which have
the greatest effect on the recognition and measurement of assets, liabilities,
income and expenses were the same as those that applied to the Annual Report
and Financial Statements for the year ended 30 June 2022.
3.1 Critical accounting estimates
(a) Fair value of subsidiaries and associates and their underlying investments
The Company holds its investments through a number of subsidiaries and
associates which were established for this purpose. At the end of each half of
the financial year, the fair values of investments in subsidiaries and
associates are reviewed and the fair values of all material investments held
by these subsidiaries and associates are assessed. As at 31 December 2022,
100% (30 June 2022: 100%) of the financial assets at fair value through profit
and loss relate to the Company's investments in subsidiaries and associates
that have been fair valued in accordance with the policies set out below.
The shares of the subsidiaries and associates are not publicly traded; return
of capital to the Company can only be made by divesting the underlying
investments of the subsidiaries and associates. As a result, the carrying
value of the subsidiaries and associates may not be indicative of the value
ultimately realised on divestment.
The underlying investments include listed and unlisted securities, one
operating asset and private equity investments (including investments
classified as "public equity with private terms"). Where an active market
exists (for example, for listed securities), the fair value of the subsidiary
or associate reflects the valuation of the underlying holdings, as disclosed
below. Where no active market exists, valuation techniques are used.
Information about the significant judgements, estimates and assumptions which
are used in the valuation of the investments is discussed below.
(a.1) Valuation of assets that are traded in an active market
The fair values of listed securities are based on quoted market prices at the
close of trading on the reporting date. The fair values of unlisted securities
which are traded on Vietnam's Unlisted Public Company Market ("UPCoM") are
based on published prices at the close of business on the reporting date. For
other unlisted securities which are traded in an active market, fair value is
the average quoted price at the close of trading obtained from a minimum
sample of five reputable securities companies at the reporting date. Other
relevant measurement bases are used if broker quotes are not available or if
better and more reliable information is available.
(a.2) Valuation of investments in private equities
As at the financial year-end, the Company's underlying investments in private
equities are fair valued by an Independent Valuer or by the Investment Manager
using a number of methodologies such as adjusted net asset valuations,
discounted cash flows, income related multiples, price-to-book ratios and
structured financial arrangements. The projected future cash flows are driven
by management's business strategies and goals and its assumptions of growth in
GDP, market demand, inflation, ESG risk, etc. For the principal investments,
the Independent Valuer and, where relevant, the Investment Manager selects
appropriate discount rates that reflect the level of certainty of the quantum
and timing of the projected cash flows.
As at 31 December 2022, the Investment Manager reviewed the valuations carried
out as at 30 June 2022 and considered whether there were any changes to
performance or the circumstances of the underlying investments which would
affect the fair values. Methods, assumptions and data were consistently
applied from 30 June 2022, except for certain underlying private equity
investments where a change in methodology was deemed appropriate to reflect
the change in the market conditions or investment-specific factors.
As a result, the valuation methodology for investments related to NovaGroup
has changed from that used in the Audited Annual Financial Statements to a
scenario-based methodology using cash flows with a discount rate applicable in
an event of default.
The Investment Manager then made recommendations to the Audit Committee of the
fair values as at 31 December 2022 and the Audit Committee, having considered
these, then made recommendations for approval by the Board. Refer to note
21(c) which sets out a sensitivity analysis of the significant observable
inputs used in the valuations of the private equity investments.
(a.3) Valuation of the operating asset
In previous years, the fair value of any underlying operating asset was based
on valuations by an independent
specialist appraiser. The estimated fair values provided by the independent
specialist appraisers were then
used by the Independent Valuer as the primary basis for estimating fair value
of the Company's subsidiaries
and associates that held these properties in accordance with accounting
policies set out in note 2.6. As at the
period end, the Company was waiting for the approval of SSC to be able to sell
the operating asset and the
estimated sales price was used as the basis of the valuation.
(b) Incentive Fee
The incentive fee is calculated as follows:
· To the extent that the NAV as at any year end commencing 30 June 2019 is
above the higher of an 8% compound annual return and the high water mark
initially set in 2019, having accounted for any share buy backs, share issues
and/or dividends, the incentive fee payable on any increase in the NAV with
effect from 30 June 2019 above the higher of the high water mark and the 8%
annual return target is calculated at a rate of 12.5%;
· The maximum amount of incentive fees that can be paid out in any one
year is capped at 1.5% of the average month-end NAV during that year; and
· Any incentive fees earned in excess of this 1.5% cap will be accrued
if they are expected to be paid out in subsequent years.
Any incentive fees payable within 12 months are classified under accrued
expenses and other payables in the Condensed Statement of Financial Position.
The fair values of any additional incentive fees potentially payable beyond 12
months after the end of the reporting period are classified as deferred
incentive fees in the Condensed Statement of Financial Position.
(b) Incentive Fee
At the end of each financial period, the Board makes a judgement in
considering the total amount of any accrued incentive fees which are likely to
be settled beyond 12 months after the end of the reporting period. In
determining the fair value of the non-current liability at a Condensed
Statement of Financial Position date the Board may apply a discount to reflect
the time value of money and the probability and phasing of payment. An
annualised discount rate of 8% has been applied to the deferred incentive
fees. Any unwinding of the discount recorded in the previous financial period
is recorded as a finance cost in the Condensed Statement of Comprehensive
Income.
For further details of the incentive fees earned and accrued at the period end
please refer to note 16(b).
3.2 Critical judgements in applying the Company's accounting policies
(a) Eligibility to qualify as an investment entity
The Company has determined that it is an investment entity under the
definition of IFRS 10 as it meets the following criteria:
i. The Company has obtained funds from investors for the purpose of
providing those investors with investment management services;
ii. The Company's business purpose is to invest funds solely for returns
from capital appreciation, investment income or both; and
iii. The performance of investments made by the Company is substantially
measured and evaluated on a fair value basis.
The Company has the typical characteristics of an investment entity:
· It holds more than one investment;
· It has more than one investor;
· It has investors that are not its related parties; and
· It has ownership interests in the form of equity or similar
interests.
As a consequence, the Company does not consolidate its subsidiaries and
accounts for them at fair value through profit or loss. The Company has
applied the exemption from accounting for its subsidiaries using the equity
method as permitted by IAS 28.
(b) Judgements about active and inactive markets
The Board considers that the Ho Chi Minh Stock Exchange, the Hanoi Stock
Exchange and UPCoM are active markets for the purposes of IFRS 13.
Consequently, the prices quoted by those markets for individual shares as at
the balance sheet date can be used to estimate the fair value of the Company's
underlying investments.
Notwithstanding the fact that these stock exchanges can be regarded as active
markets, the size of the Company's holdings in particular stocks in relation
to daily market turnover in those stocks would make it difficult to conduct an
orderly transaction in a large number of shares on a single day. However, the
Board considers that if the Company were to offer a block of shares for sale,
the price which could be achieved in an orderly transaction is as likely to be
at a premium to the quoted market price as at a discount.
Consequently, when taken across the whole portfolio of the Company's
underlying quoted investments, the Board considers that using the quoted
prices of the shares on the various active markets is generally a reasonable
determination of the fair value of the securities.
In the absence of an active market for quoted or unquoted investments which
may include positions that are not traded in active markets, valuations may be
adjusted to reflect illiquidity and/or non-transferability, which are
generally based on available market information, and in determining the fair
value one or more valuation techniques may be utilised.
4. SEGMENT ANALYSIS
Dividend income is allocated based on the underlying investments of
subsidiaries which declared dividends. Net gains/losses on financial assets at
fair value through profit or loss are allocated to each segment (excluding
Other Assets) with reference to the assets held by the subsidiary. General and
administration expenses are allocated based on the investment sector. Finance
expenses and accrued incentive fees are allocated to each segment (excluding
Other Assets) with reference to the percentage allocation on the investment
sector.
The financial assets at fair value through profit or loss are measured based
on the investment sector. Other assets and liabilities are classified as other
net assets.
Segment information can be analysed as follows:
Condensed Statement of Comprehensive Income
Capital Operating Private Other
Markets* Assets Equity Assets** Total
USD'000 USD'000 USD'000 USD'000 USD'000
Six months ended 31 December 2022 (Unaudited)
Dividend income 27,885 - 4,458 - 32,343
Net losses on financial assets at fair value through profit or loss (81,266) (146) (120,991) - (202,403)
General and administration expenses (6,460) (112) (2,311) (97) (8,980)
Loan interest expense (150) (3) (53) (2) (208)
Facility set-up costs (458) (8) (164) (7) (637)
Finance expenses (1,782) (31) (637) - (2,450)
Incentive fee clawback 16,092 279 5,757 - 22,128
Loss before tax (46,139) (21) (113,941) (106) (160,207)
Six months ended 31 December 2021 (Unaudited)
Dividend income 28,141 - - - 28,141
Net gains on financial assets at fair value through profit or loss 56,204 155 25,632 - 81,991
General and administration expenses (7,891) (89) (1,917) (357) (10,254)
Finance expenses (2,640) (30) (641) - (3,311)
Incentive fee charge (7,891) (89) (1,917) - (9,896)
Profit/(loss) before tax 65,923 (52) 21,157 (357) 86,671
* Capital markets include listed securities and unlisted securities, valued at
their prices on UPCoM or using quotations from brokers, and options.
** Other assets include cash and cash equivalents, interest and other net
assets of the subsidiaries and associates at fair value.
Condensed Statement of Financial Position
Capital Operating Private Other Net
Markets* Assets Equity Assets** Total
USD'000 USD'000 USD'000 USD'000 USD'000
As at 31 December 2022
(Unaudited)
Financial assets at fair value through profit or loss 706,782 12,267 252,828 10,651 982,528
Receivables and prepayments - - - 345 345
Cash and cash equivalents - - - 26,183 26,183
Total assets 706,782 12,267 252,828 37,179 1,009,056
Total liabilities
Accrued expenses and other payables - - - 2,434 2,434
Loans and borrowings - - - 10,000 10,000
Total liabilities - - - 12,434 12,434
Net asset value 706,782 12,267 252,828 24,745 996,622
Capital Operating Private Other Net
Markets* Assets Equity Assets**
Total
USD'000 USD'000 USD'000 USD'000 USD'000
As at 30 June 2022
(Audited)
Financial assets at fair value through 876,743 12,413 296,156 20,628 1,205,940
profit or loss
Receivables - - - 943 943
Cash and cash equivalents - - - 15,630 15,630
Total assets 876,743 12,413 296,156 37,201 1,222,513
Total liabilities
Accrued expenses and other payables - - - 22,060 22,060
Deferred incentive fees - - - 20,353 20,353
Total liabilities - - - 42,413 42,413
Net asset value 876,743 12,413 296,156 (5,212) 1,180,100
* Capital markets include listed securities and unlisted securities. The
unlisted securities are comprised of securities valued at their prices on
UPCoM or using quotations from brokers.
** Other net assets of USD10.7 million (30 June 2022: asset of USD20.6
million) include cash and cash equivalents and other net assets of the
subsidiaries and associates at fair value.
5. INTERESTS IN SUBSIDIARIES AND ASSOCIATES
There is no legal restriction to the transfer of funds from the BVI or
Singapore subsidiaries to the Company. Cash held in directly-owned as well as
indirectly-owned Vietnamese subsidiaries and associates is subject to
restrictions imposed by co-investors and the Vietnamese government and
therefore it cannot be transferred out of Vietnam unless such restrictions are
satisfied. As at 31 December 2022, the restricted cash held in these
Vietnamese subsidiaries and associates amounted to USD nil (30 June 2022: USD
nil). The Company has not entered into a contractual obligation to, nor has it
committed to provide, current financial or other support to an unconsolidated
subsidiary during the period.
5.1 Directly-owned subsidiaries
The Company had the following directly-owned subsidiaries as at 31 December
and 30 June 2022:
As at As at
31 December 2022 30 June 2022
Country of % of Company % of Company
Subsidiary incorporation interest interest Nature of the business
Allwealth Worldwide Limited BVI 100.00 100.00 Holding company for investments
Asia Value Investment Limited BVI 100.00 100.00 Holding company for listed and unlisted securities
Belfort Worldwide Limited BVI 100.00 100.00 Holding company for investments
Boardwalk South Limited BVI 100.00 100.00 Holding company for investments
Clearfield Pacific Limited BVI 100.00 100.00 Holding company for investments
Clipper Ventures Limited BVI 100.00 100.00 Holding company for investments
Darasol Investments Limited BVI 100.00 100.00 Holding company for investments
Foremost Worldwide Limited BVI 100.00 100.00 Holding company for unlisted securities
Fraser Investment Holdings Pte. Limited Singapore 100.00 100.00 Holding company for listed securities
Goldcity Worldwide Limited BVI 100.00 100.00 Holding company for investments
Hospira Holdings Limited BVI 100.00 100.00 Holding company for investments
Longwoods Worldwide Limited BVI 100.00 100.00 Holding company for listed securities
Navia Holdings Limited BVI 100.00 100.00 Holding company for investments
Portal Global Limited BVI 100.00 100.00 Holding company for listed securities
Preston Pacific Limited BVI 100.00 100.00 Holding company for listed securities
Rewas Holdings Limited BVI 100.00 100.00 Holding company for unlisted securities
Turnbull Holding Pte. Ltd. Singapore 100.00 100.00 Holding company for investments
Vietnam Enterprise Limited BVI 100.00 100.00 Holding company for listed and unlisted securities
Vietnam Investment Limited BVI 100.00 100.00 Holding company for listed and unlisted securities
Vietnam Investment Property Holdings Limited BVI 100.00 100.00 Holding company for listed and unlisted securities
Vietnam Investment Property Limited BVI 100.00 100.00 Holding company for listed securities
Vietnam Master Holding 2 Limited BVI 100.00 100.00 Holding company for investments
Vietnam Ventures Limited BVI 100.00 100.00 Holding company for listed and unlisted securities
VinaSugar Holdings Limited BVI 100.00 100.00 Holding company for investments
VOF Investment Limited BVI 100.00 100.00 Holding company for listed securities, unlisted securities, an operating asset
and private equity
VOF PE Holding 5 Limited BVI 100.00 100.00 Holding company for listed securities
Windstar Resources Limited BVI 100.00 100.00 Holding company for listed securities
5.2 Indirect interests in subsidiaries
The Company had the following indirect interests in subsidiaries at 31
December and 30 June 2022:
As at As at
31 December 2022 30 June 2022
Country of % of Company's % of Company's
Indirect subsidiary incorporation Nature of the business Immediate parent indirect interest indirect interest
Abbott Holding Pte. Limited Singapore Holding company for investments Hospira Holdings Limited 100.00 100.00
Aldrin One Pte. Ltd. Singapore Holding company for private equity Halley One Limited 81.31 81.31
Aldrin Three Pte. Ltd. Singapore Holding company for private equity Halley Three Limited 80.07 80.07
Aldrin Two Pte. Ltd. Singapore Holding company for investments Clipper Ventures 100.00 100.00
Allright Assets Limited BVI Holding company for private equity Clipper Ventures Limited 100.00 100.00
Chifley Investments Pte. Ltd Singapore Holding company for investments Belfort Worldwide Limited 100.00 100.00
Clipper One Limited BVI Holding company for investments Clipper Ventures Limited 100.00 100.00
Gorton Investments Pte. Ltd Singapore Holding company for investments Belfort Worldwide Limited 100.00 100.00
Halley Five Limited BVI Holding company for investments Clipper Ventures Limited 80.90 80.90
Halley Four Limited BVI Holding company for investments Clipper Ventures Limited 79.40 79.40
Halley One Limited BVI Holding company for investments Clipper Ventures Limited 81.31 81.31
Halley Three Limited BVI Holding company for investments Clipper Ventures Limited 80.07 80.07
Halley Two Limited BVI Holding company for investments Clipper Ventures Limited 83.46 83.46
Howard Holdings Pte. Limited Singapore Holding company for investments Allwealth Worldwide Limited 100.00 100.00
Liva Holdings Limited BVI Holding company for investments Halley Five Limited 80.90 80.90
Menzies Holding Pte. Ltd. Singapore Holding company for investments Belfort Worldwide Limited 100.00 100.00
PA Investment Opportunity II Limited BVI Holding company for investments Vietnam Enterprise Limited 100.00 100.00
Sharda Holdings Limited BVI Holding company for private equity Clipper Ventures Limited 89.64 89.64
Tempel Four Limited BVI Holding company for private equity Halley Four Limited 79.40 79.40
Thai Hoa International Hospital JSC * Vietnam Medical and healthcare services Abbott Holding Pte. Limited - 81.07
Victory Holding Investment Limited BVI Holding company for listed securities and private equity Clipper Ventures Limited 87.58 87.58
Vietnam Opportunity Fund II Pte. Ltd. Singapore Holding company for private equity Belfort Worldwide Limited 68.00 68.00
Whitlam Holding Pte. Ltd Singapore Holding company for private equity Navia Holdings Limited 61.26 61.26
*Thai Hoa International Hospital JSC was sold to Tam Tri Medical by Abbott
Holdings Pte. Ltd during the period.
5.3 Direct interests in associates
The Company did not have any directly-owned associates as at 31 December and
30 June 2022.
5.4 Indirect interests in associates
The Company had the following indirect interests in associates at 31 December
and 30 June 2022:
As at As at
31 December 2022 30 June 2022
Country of Company's subsidiary or associate holding % of Company's % of Company's
Indirect associate incorporation Nature of the business direct interest in the associate indirect interest indirect interest
Tam Tri Medical * Vietnam Private equity investment Vietnam Opportunity Fund II Pte. Ltd. and 37.80 23.80
Clearfield Pacific Limited
Hung Vuong Corporation Vietnam Operating assets investment VOF Investment Limited 31.04 31.04
Thu Cuc Medical & Beauty Care Joint Stock Company BVI Private equity investment Aldrin One Pte. Ltd 24.39 24.39
* Clearfield Pacfic Limited acquired an additional equity holding in Tam Tri
Medical during the period, increasing the overall the Company's shareholding
in the portfolio company.
5.5 Financial risks
As at 31 December 2022, the Company owned a number of subsidiaries and
associates for the purpose of holding investments in listed and unlisted
securities, an operating asset and private equity investments. The Company,
via these underlying investments, is subject to financial risks which are
further disclosed in note 21. The Investment Manager makes investment
decisions after performing extensive due diligence on the underlying
investments, their strategies, financial structure and the overall quality of
management.
6. CASH AND CASH EQUIVALENTS
31 December 2022 30 June 2022
USD'000 USD'000
(Unaudited) (Audited)
Cash at banks 26,183 15,630
As at 31 December 2022, the cash and cash equivalents were denominated in USD
and GBP.
As at 31 December 2022, the Company's overall cash position including cash
held in directly held subsidiaries was USD5.7 million (30 June 2022: USD14.5
million). Please refer to note 8 for details of the cash held by the Company's
subsidiaries. As mentioned in note 5, the restricted cash held in Vietnamese
subsidiaries and associates amounted to USD nil (30 June 2022: USD nil).
7. FINANCIAL INSTRUMENTS BY CATEGORY
Financial assets at amortised cost Financial assets at fair value through profit or loss Total
USD'000 USD'000 USD'000
As at 31 December 2022 (Unaudited)
Financial assets at fair value through profit or loss - 982,528 982,528
Cash and cash equivalents 26,183 - 26,183
Total 26,183 982,528 1,008,711
Financial assets denominated in:
- GBP 161 - 161
- USD 26,022 982,528 1,008,550
As at 30 June 2022 (Audited)
Financial assets at fair value through profit or loss - 1,205,940 1,205,940
Cash and cash equivalents 15,630 - 15,630
Total 15,630 1,205,940 1,221,570
Financial assets denominated in:
- GBP 162 - 162
- USD 15,468 1,205,940 1,221,408
As at 31 December 2022 and 30 June 2022, the carrying amounts of all financial
liabilities approximate their fair values.
All financial liabilities, with the exception of the deferred incentive fees,
are short term in nature and their carrying values approximate their fair
values. The fair value of the deferred incentive fees does not materially
differ from their carrying amount which is based on the discounted cash flows
using an annualised rate of 8%. There are no financial liabilities that must
be accounted for at fair value through profit or loss (30 June 2022: nil).
8. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Financial assets at fair value through profit and loss comprise the Company's
investments in subsidiaries and associates. The underlying assets and
liabilities of the subsidiaries and associates at fair value are included with
those of the Company in the following table.
31 December 2022 30 June 2022
Within 12 Months Over 12 Months Within 12 Months Over 12 Months
USD'000 USD'000 USD'000 USD'000
Cash and cash equivalents 5,728 - 14,472 -
Ordinary shares - listed 591,496 - 704,878 -
Ordinary shares - unlisted * 115,286 - 171,865 -
Private equity - 252,828 9,853 286,303
Operating asset 12,267 - 12,413 -
Other net assets 4,923 - 6,156 -
729,700 252,828 919,637 286,303
* Unlisted Securities include OTC traded securities, and unlisted securities
publicly traded on UPCoM of the Hanoi Stock Exchange.
The major underlying investments held by the direct and indirect subsidiaries
and associates of the Company were in the following industry sectors.
31 December 2022 30 June 2022
USD'000 USD'000
(Unaudited) (Audited)
Real Estate 250,206 321,138
Financials 189,502 229,229
Materials 123,340 182,182
Consumer Staples 88,784 116,388
Industrials 91,471 97,804
Health Care 73,858 65,976
Consumer Discretionary 67,464 76,704
Information Technology 56,067 63,595
Energy 31,185 32,296
As at 31 December 2022, an underlying holding, Asia Commercial Bank, within
financial assets at fair value through profit or loss amounted to 12.1% of the
NAV of the Company (30 June 2022: 11.6%).
There have been no changes in the classification of financial assets at fair
value through profit or loss shown as Level 3 during the period ended 31
December 2022.
Changes in Level 3 financial assets at fair value through profit or loss
The fair values of the Company's investments in subsidiaries and associates
are estimated using approaches as described in note 3.1. As observable prices
are not available for these investments, the Company classifies them as Level
3 fair values.
For the period/year ended
31 December 2022 30 June 2022
(Unaudited) (Unaudited)
Opening balance 1,205,940 1,353,108
Purchases 33,060 226,944
Return of capital (54,069) (206,823)
Net (losses)/gains for the period/year (202,403) (167,289)
982,528 1,205,940
The financial position and results of the Company was particularly affected by
the following events and transactions during the period:
· On 30 December 2022, an event of default occurred on two instruments
held in the Company's "public equities with private terms" portfolio relating
to Novaland Joint Stock Company ("Novaland", HOSE: NVL). As a result of the
default, the Board asked the Investment Manager to change the basis on which
these Novaland-related investments were valued, using a number of possible
outcomes of the negotiations and attributing probabilities to each. This
change of valuation basis has resulted in the reduction in the valuation of
the two instruments by USD19.9 million as at 31 December 2022. These two
investments were valued at 30 June 2022 at a total of USD58.5 million and are
valued at USD38.6 million as of 31 December 2022; and
· In addition, in April 2022, the Company made a USD24.8 million
investment in a minority interest in Nova Consumer Group ("NCG"), a separate
company in the NovaGroup, which had expected to be listed on the Ho Chi Minh
Stock Exchange by 1 January 2023. This investment was valued at 30 June 2022
at USD25.2 million. Due to adverse market conditions, NCG was unable to fulfil
its listing commitments by the agreed date and, consequently, the Investment
Manager, on behalf of the Company, has exercised the put option agreed at the
time of the original investment. This put option provided that the Company
could sell its shares in NCG back to NovaGroup at cost plus a guaranteed
return. However, as a result of the broader problems it is experiencing,
NovaGroup is not in a position to honour this obligation. Again, the
Investment Manager is taking the necessary legal steps to secure the Company's
position as a creditor but the Board has concluded that the adjusted valuation
of the Company's investment in NCG is USD17.8 million as at 31 December 2022.
9. DIVIDENDS
The dividends paid in the reporting period were as follows:
Dividend rate Net dividend
During the six months ended 31 December 2022 per share payable
(cents) (USD'000) Record date Ex-dividend date Pay date
Second dividend for the year ended 30 June 2022 8.0 12,941 4 November 2022 3 November 2022 5 December 2022
Dividend rate Net dividend
During the six months ended 31 December 2021 per share payable
(cents) (USD'000) Record date Ex-dividend date Pay date
Second dividend for the year ended 30 June 2021 8.0 13,288 5 November 2021 4 November 2021 6 December 2021
Under the Guernsey Law, the Company can distribute dividends from capital and
revenue reserves, subject to the net asset and solvency test. The net asset
and solvency test considers whether a company is able to pay its debts when
they fall due, and whether the value of a company's assets is greater than its
liabilities. The Board confirms that the Company passed the net asset and
solvency test for each dividend paid.
10. PREPAYMENTS AND OTHER ASSETS
31 December 2022 30 June 2022
USD'000 USD'000
(Unaudited) (Audited)
Deferred expenses 263 900
Prepayments 82 43
345 943
Due to the short-term nature of the prepayments and other assets, their
carrying amount is considered to be
the same as their fair value.
The Company exited Indochina Food Industries Pte. Ltd ("ICF") through the sale
of 100% of VinaSugar Holding Limited in 2012 for a total consideration of
USD28.45 million. As at 31 December 2022 and 30 June 2022, the buyer had paid
USD19.75 million with USD8.7 million remaining outstanding. In June 2014, the
Company approved a loan of USD2.9 million to ICF to provide immediate relief
for the business. Together with the existing receivable of USD8.7 million, the
total USD11.6 million is receivable but has been fully provided for.
On 18 March 2022, the Company entered into a revolving credit facility with
Standard Chartered Bank (Singapore) Limited. Interest charged on the facility
is the aggregate of Margin plus the Compounded Reference Rate. Costs totalling
USD1.26 million were incurred in relation to this arrangement, which have been
capitalised as a prepayment and is amortised over the period of the facility.
The amount of USD0.64 (30 June 2022: USD0.36 million) has been expensed to the
Consolidated Statement of Comprehensive Income which resulted in a deferred
expense of USD0.26 million (30 June 2022; USD0.9 million) on the Statement of
Financial Position at period/year end.
11. SHARE CAPITAL
The Company may issue an unlimited number of shares, including shares of no
par value or shares with a par value. Shares may be issued as (a) shares in
such currencies as the Directors may determine; and/or (b) such other classes
of shares in such currencies as the Directors may determine in accordance with
the Articles and the Guernsey Law and the price per Share at which shares of
each class shall first be offered to subscribers shall be fixed by the Board.
The minimum price which may be paid for a share is USD0.01. The Directors will
act in the best interest of the Company and the shareholders when authorising
the issue of any shares and shares will only be issued at a price of at least
the prevailing Net Asset Value at the time of issue, so that the NAV per share
is not diluted.
Issued capital
31 December 2022 30 June 2022
Number of Number of
shares USD'000 shares USD'000
Issued and fully paid at 1 July 179,662,704 285,314 184,600,992 491,301
Cancellation of treasury shares (11,951,642) - (4,938,288) -
Issued and fully paid at period/year end 167,711,062 285,314 179,662,704 491,301
Shares held in treasury (6,182,716) (10,330) (16,182,716) (205,987)
Outstanding shares at period/year end 161,528,346 274,984 163,479,988 285,314
Treasury shares
31 December 2022 30 June 2022
Number of Number of
shares shares
Opening balance at 1 July 16,182,716 16,182,716
Shares repurchased during the period/year 1,951,642 4,938,288
Shares cancelled during the period/year (11,951,642) (4,938,288)
Closing balance at period/year end 6,182,716 16,182,716
In October 2011, the Board first sought and obtained shareholder approval to
implement a share buyback programme. The share buyback programme was approved
again at subsequent general meetings of the Company.
During the period ended 31 December 2022, 2.0 million shares (31 December
2021: 2.8 million) were repurchased at a cost of USD10.3 million (31 December
2021: USD17.7 million) and subsequently cancelled. In addition, 10 million
shares (31 December 2021: nil) previously bought back by the Company were
cancelled from treasury during the period. There was USD nil (31 December
2021: USD nil) payable at the period end in relation to these shares.
12. ACCRUED EXPENSES AND OTHER PAYABLES
31 December 2022 30 June 2022
USD'000 USD'000
(Unaudited) (Audited)
Incentive fees payable to the Investment Manager (note 20) 676 20,284
Management fees payable to the Investment Manager (note 20) 1,228 1,272
Expenses recharged payable to the Investment Manager (note 20) 20 98
Revolving credit facility costs payable 29 25
Other payables 481 381
2,434 22,060
All accrued expenses and other payables are short-term in nature. Therefore,
their carrying values are considered to be a reasonable approximation of their
fair values. Further details of the payables to other related parties are
disclosed in note 20.
13. LOANS AND OTHER BORROWINGS
31 December 2022 30 June 2022
USD'000 USD'000
(Unaudited) (Audited)
Net loan liability at beginning of the period - -
Revolving credit facility drawdown 40,000 -
Revolving credit facility repayment (30,000) -
Net loan liability due 10,000 -
On 18 March 2022, the Company entered into a revolving credit facility with
Standard Chartered Bank (Singapore) Limited. Interest charged on the facility
is the aggregate of margin plus the compounded reference rate. The Company
drew down USD40 million and repaid USD30 million during the period.
Security has been provided by way of a charge over the Company 's assets under
the facility. Interest charged on the facility is the aggregate of margin plus
the compounded reference rate. Interest is charged on a duration of one, three
or six months or of any other period agreed between the borrower and the
agent.
In accordance with the loan facility agreement the Company has various
non-financial and financial covenants
that are required to be met. The two financial covenants are detailed below.
Covenants Requirement
Loan to Value Ratio Must not exceed 10%
Asset Cover Ratio Must not be less than 3.25:1
14. DIVIDEND INCOME
Six months ended
31 December 2022 31 December 2021
USD'000 USD'000
(Unaudited) (Unaudited)
Dividend income 32,343 28,141
The above table sets out dividends received by the Company from its
subsidiaries. These represent distributions of income received as well as the
proceeds of disposals of assets by subsidiaries, and do not reflect the
dividends earned by the underlying investee companies. During the period, the
subsidiaries received a total amount of USD4.5 million in dividends from their
investee companies (31 December 2021: USD6.2 million).
15. NET (LOSSES)/GAINS ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR
LOSS
Six months ended
31 December 2022 31 December 2021
USD'000 USD'000
(Unaudited) (Unaudited)
Financial assets at fair value through profit or loss:
Unrealised (losses)/gains, net (202,403) 81,991
16(a). GENERAL AND ADMINISTRATION EXPENSES
Six months ended
31 December 2022 31 December 2021
USD'000 USD'000
(Unaudited) (Unaudited)
Management fees and expenses (note 20(a)) 7,258 8,856
Custodian, secretarial and other professional fees 504 555
Audit fees 304 327
Directors' fees, including expenses (note 20(c)) 276 261
Others 638 255
8,980 10,254
16(b). INCENTIVE FEE
Following the exceptional performance in the 2020/21 accounting year, USD20.3
million of deferred incentive fees were paid to the Investment Manager in
November 2022. This left a balance of USD22.8 million in the Company's
accounts as an accrual for potential payment of incentive fees in future
years. Incentive fees are only paid out following the publication of annual
accounts and at the half year stage any incentive fees are provided for on the
assumption that the NAV as at the following 30 June will be the same as at 31
December. On this assumption, USD22.1 million of the carried forward accrual
has been clawed back in these accounts and USD0.7 million will be payable when
the annual report is published in October 2023 and is classified as a current
liability as at 31 December 2022.
17. INCOME TAX EXPENSE
The Company has been granted Guernsey tax exempt status in accordance with the
Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 (as amended).
The majority of the subsidiaries are domiciled in the BVI and so have a tax
exempt status whilst the remaining subsidiaries are established in Vietnam and
Singapore and are subject to corporate income tax in those countries. The
income tax payable by these subsidiaries is taken into account in determining
their fair values in the Condensed Statement of Financial Position.
18. (LOSS)/EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE
(a) Basic
Basic (loss)/earnings per share is calculated by dividing the loss or profit
from operations of the Company by the weighted average number of ordinary
shares in issue during the period excluding ordinary shares purchased by the
Company and held as treasury shares (note 11).
Six months ended
31 December 2022 31 December 2021
USD'000 USD'000
(Unaudited) (Unaudited)
(Loss)/profit for the period (USD'000) (160,207) 86,671
Weighted average number of ordinary shares in issue 162,425,623 166,893,252
Basic (loss)/earnings per share (USD per share) (0.99) 0.52
(b) Diluted
Diluted (loss)/earnings per share is calculated by adjusting the weighted
average number of ordinary shares outstanding to assume conversion of all
dilutive potential ordinary shares. The Company has no category of potentially
dilutive ordinary shares. Therefore, diluted (loss)/earnings per share is
equal to basic (loss)/earnings per share.
(c) NAV per share
NAV per share is calculated by dividing the NAV of the Company by the number
of outstanding ordinary shares in issue as at the reporting date excluding
ordinary shares purchased by the Company and held as treasury shares (note
11). NAV is determined as total assets less total liabilities. The basic NAV
per share is equal to the diluted NAV per share.
31 December 2022 30 June 2022
(Unaudited) (Audited)
Net asset value (USD'000) 996,622 1,180,100
Number of outstanding ordinary shares in issue 161,528,346 163,479,988
Net asset value per share (USD per share) 6.17 7.22
19. SEASONALITY
The Board believes that the impact of seasonality on the Condensed Interim
Financial Statements is not material.
20. RELATED PARTIES
The Investment Manager was appointed by the Board of Directors under an
Investment Management Agreement, which sets out the basis for the calculation
and payment of the management fee. The Investment Management Agreement may be
terminated by either party giving six months' notice. In certain circumstances
the Company may be required to pay compensation to the Investment Manager of
an amount up to six months' fees in lieu of notice. The management fees and
incentive fees described below were payable for the half year to 31 December
2022 and will continue in effect until 30 June 2023. The Company and the
Investment Manager have agreed certain adjustments to the fee rates to take
effect from 1 July 2023, which are described in the Chairman's Statement.
(a) Management fees
The Investment Manager receives a fee at an annual rate at the rates set out
below, payable monthly in arrear.
• 1.50% of net assets, levied on the first USD500 million of net assets;
• 1.25% of net assets, levied on net assets between USD500 million and
USD1,000 million;
• 1.00% of net assets, levied on net assets between USD1,000 million and
USD1,500 million;
• 0.75% of net assets, levied on net assets between USD1,500 million and
USD2,000 million; and
• 0.50% of net assets, levied on net assets above USD2,000 million.
Total fees earned by the Investment Manager for the period amounted to USD7.3
million (31 December 2021: USD8.9 million), of which USD181,414 (31 December
2021: USD63,773) was in relation to the recharge of expenses incurred. In
total USD1.2 million (30 June 2022: USD1.4 million) was payable to the
Investment Manager at the reporting date.
(b) Incentive fees
As described in note 16(b), USD20.3 million of accrued incentive fees were
paid to the Investment Manager in November 2022. This left a balance of
USD22.8 million in the Company's accounts as an accrual for potential payment
of incentive fees in future years. Incentive fees are only paid out following
the publication of annual accounts and at the half year stage any incentive
fees are provided for on the assumption that the NAV as at the following 30
June will be the same as at 31 December. On this assumption, USD22.1 million
of the carried forward accrual has been clawed back in these accounts and
USD0.7 million will be payable when the annual report is published in October
2023 and is classified as a current liability as at 31 December 2022.
25% of any incentive fee paid to the Investment Manager is used by the
Investment Manager to purchase shares in the Company in the open market. In
practice such purchases are generally made alongside, and at the same price
as, share buybacks made by the Company.
(c) Directors' Remuneration
The Directors who served during the period received the following emoluments
in the form of fees:
Six months ended
Annual fee 31 December 2022 31 December 2021
USD USD USD
Steve Bates * 105,000 - 44,226
Huw Evans * 105,000 52,500 46,223
Julian Healy * 90,000 45,000 45,000
Thuy Bich Dam 85,000 42,500 40,000
Kathryn Matthews 85,000 42,500 40,000
Peter Hames 80,000 40,000 40,000
Hai Thanh Trinh ** 80,000 40,219 -
262,719 255,449
* Steve Bates retired from his position as the Chairman of the Board and was
succeeded by Huw Evans on 2 December 2021. Julian Healy was appointed as
Chairman of the Audit Committee on the same date.
** On 30 June 2022, Hai Thanh Trinh was appointed as member of the Board.
With effect from 1 July 2022, the annual fee for the position of Chairman of
the Remuneration Committee and the Management Engagement Committee was
increased from USD80,000 to USD85,000.
There were no directors' fees outstanding at the period end (30 June 2022: USD
nil). During the period, directors' expenses totalling USD13,098 were paid (31
December 2021: USD5,101). The total amount received by the Directors during
the period was USD275,817 (31 December 2021: USD260,550), of which USDnil was
outstanding at 31 December 2022 (31 December 2021: USDnil).
(d) Shares held by related parties
Shares held Shares held
as at 31 December 2022 as at 30 June 2022
Huw Evans 35,000 35,000
Thuy Bich Dam - -
Julian Healy 15,000 15,000
Kathryn Matthews 9,464 9,464
Peter Hames 8,000 8,000
Hai Thanh Trinh - -
Andy Ho 495,477 248,084
As at 31 December 2022, Stephen Westwood, a retained Consultant of the
Company, owned 6,000 shares (30 June 2022: 6,000) in the Company.
As at 31 December 2022, the Investment Manager owned 2,354,275 shares (30 June
2022: 2,354,275 shares) in the Company.
(e) Controlling party
In the opinion of the Directors on the basis of shareholdings advised to them,
the Company has no immediate nor ultimate controlling party.
21. FINANCIAL RISK MANAGEMENT
(a) Financial risk factors
The Company's activities expose it to a variety of financial risks: market
risk (including currency risk, fair value interest rate risk, cash flow
interest rate risk and price risk), credit risk and liquidity risk.
The Condensed Interim Financial Statements do not include all financial risk
management information and disclosures required in the Annual Audited
Financial Statements; they should be read in conjunction with the Company's
Audited Financial Statements as at 30 June 2022.
There have been no significant changes in the management of risk or in any
risk management policies since the last balance sheet date.
(b) Capital Management
The Company's capital management objectives are:
· To ensure the Company's ability to continue as a going concern;
· To provide investors with an attractive level of investment
income; and
· To preserve a potential capital growth level.
The Company is not subject to any externally imposed capital requirements. The
Company has engaged the Investment Manager to allocate the Company's assets in
such a way so as to generate a reasonable investment return for its
shareholders and to ensure that there is sufficient funding available for the
Company to continue as a going concern.
Capital as at the period end is summarised as follows:
31 December 2022 30 June 2022
USD'000 USD'000
(Unaudited) (Audited)
Net assets attributable to equity shareholders 996,622 1,180,100
(c) Fair value estimation
The table below analyses financial instruments carried at fair value, by
valuation method. The different levels have been defined as follows:
· Level 1: Quoted prices (unadjusted) in active markets for identical
assets or liabilities;
· Level 2: Inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices); and
· Level 3: Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs).
There are no financial liabilities of the Company which were carried at fair
value through profit or loss as at 31 December 2022 and 30 June 2022.
The level into which each financial asset is classified is determined based on
the lowest level of significant input to the fair value measurement.
Financial assets measured at fair value in the Condensed Statement of
Financial Position are grouped into the following fair value hierarchy:
Level 3 Total
USD'000 USD'000
As at 31 December 2022
Financial assets at fair value through profit or loss 982,528 982,670
As at 30 June 2022
Financial assets at fair value through profit or loss 1,205,940 1,205,940
The Company classifies its investments in subsidiaries and associates as Level
3 because they are not publicly traded, even when the underlying assets may be
readily realisable. There were no transfers between the levels during the
period/year ended 31 December 2022 and 30 June 2022.
If these investments were held at the Company level, they would be presented
as follows:
Level 1 Level 2 Level 3 Total
USD'000 USD'000 USD'000 USD'000
As at 31 December 2022 (Unaudited)
Cash and cash equivalents 5,728 - - 5,728
Ordinary shares - listed 591,496 - - 591,496
- unlisted * 109,260 6,026 - 115,286
Private equity - - 252,828 252,828
Operating asset - - 12,267 12,267
Other liabilities, net of assets - - 4,923 4,923
706,484 6,026 270,018 982,528
Level 1 Level 2 Level 3 Total
USD'000 USD'000 USD'000 USD'000
As at 30 June 2022 (Audited)
Cash and cash equivalents 14,472 - - 14,472
Ordinary shares - listed 704,878 - - 704,878
- unlisted * 166,003 5,862 - 171,865
Private equity - - 296,156 296,156
Operating asset - - 12,413 12,413
Other assets, net of liabilities - - 6,156 6,156
885,353 5,862 314,725 1,205,940
* Unlisted securities are valued at their prices on UPCoM or using quotations
from brokers.
Investments whose values are based on quoted market prices in active markets,
and are therefore classified within Level 1, include actively traded equities
on Ho Chi Minh City Stock Exchange, Hanoi Stock Exchange or UPCoM at the
Condensed Statement of Financial Position date.
Financial instruments which trade in markets that are not considered to be
active but are valued based on market prices and dealer quotations are
classified within Level 2. These include investments in OTC equities. As Level
2 investments include positions that are not traded in active markets,
valuations may be adjusted to reflect illiquidity and/or non-transferability,
which are generally based on available market information.
Private equities, the operating asset, and other assets that do not have an
active market are classified within Level 3. The Company uses valuation
techniques to estimate the fair value of these assets based on significant
unobservable inputs as described in note 3.1. There were no movements into or
out of the Level 3 category during the period.
The Company considers the appropriateness of the valuation model inputs, as
well as the valuation results using various valuation methods and techniques
which are generally recognised as standard within the industry. The change in
the significant unobservable inputs shown in the table below shows the impact
which a reasonable potential shift in the input variables would have on the
valuation result.
Set out below is the sensitivity analysis which shows the changes in the
Company's net asset value, on a look through basis, based on the significant
unobservable input assumptions used in the valuation of Level 3 investments as
at 31 December 2022, keeping all other assumptions constant. The changes in
discount rates by +/- 1% is considered appropriate for the market in which the
Company is operating.
At 31 December 2022, the operating asset was valued at USD12.3 million (30
June 2022: USD12.4 million) by reference to its expected sale price and any
changes in unobservable input assumptions such as discount rate and cap rate
are not considered to be relevant.
Segment Valuation Valuation Discount Cap Terminal Multiples Sensitivities in discount rates and cap rates/terminal
Technique (USD'000) rate rate growth rate growth rate (USD'000)
Change in discount rate
Private equity Discounted cash flows 145,047 13%-46.24% N/A 5% N/A -1% 0% 1%
Change -1% 147,311 139,428 132,739
in terminal 0% 154,494 145,047 136,846
growth 1% 162,644 151,605 142,724
rate
Private equity Scenario based 56,456 25% N/A N/A N/A Change in discount
rate -1% 0% 1%
57,249 56,456 55,681
Change in EBITDA margin
Private Multiples 14,200 N/A N/A N/A 8.7x
equity
-1% 0% 1%
14,030 14,200 14,360
Private equity
Scenario based
56,456
25%
N/A
N/A
N/A
Change in discount
rate -1% 0% 1%
57,249 56,456 55,681
Private
equity
Multiples
14,200
N/A
N/A
N/A
8.7x
Change in EBITDA margin
-1% 0% 1%
14,030 14,200 14,360
* The balance of USD252.8 million reflected as Level 3 private equity earlier
in note 21 differs to the above balance of private equity of USD215.7 million,
which excludes three underlying investments that were valued using other
valuation methodologies where inputs are not subject to the same
sensitivities.
Set out below is the sensitivity analysis which shows the changes in the
Company's net asset value based on the significant unobservable input
assumptions used in the valuation of Level 3 investments as at 30 June 2022,
keeping all other assumptions constant. The changes in discount rates by +/-
1% are considered appropriate for the market in which the Company is
operating.
At 30 June 2022, the operating asset was valued at USD12.4 million by
reference to its expected sale price and any changes in unobservable input
assumptions such as discount rate and cap rate are not considered to be
relevant. As at 31 December 2022 and 30 June 2022, the Company classified its
investments in subsidiaries and associates as Level 3 within the fair value
hierarchy, because they are not publicly traded, even when the underlying
assets may be readily realisable.
Segment Valuation Valuation Discount Cap Terminal Multiples Sensitivities in discount rates and cap rates/terminal
Technique (USD'000) rate rate growth rate growth rate (USD'000)
Change in sales growth rate
Private equity Multiples 13,100 n/a n/a n/a 10.8x -1% 0% 1%
Change in -1% 13,100 13,100 13,139
EBITDA 0% 13,100 13,100 13,139
margin 1% 13,123 13,123 13,161
Change in discount rate
Private equity Discounted cashflows 195,104 * 13% - 19% n/a 5% n/a -1% 0% 1%
Change in -1% 197,887 189,001 181,228
terminal 0% 205,558 195,104 185,615
growth rate 1% 214,041 202,004 192,055
Change in discount rate
Private equity
Discounted cashflows
195,104 *
13% - 19%
n/a
5%
n/a
-1% 0% 1%
Change in -1% 197,887 189,001 181,228
terminal 0% 205,558 195,104 185,615
growth rate 1% 214,041 202,004 192,055
* The above sensitivity analysis includes those underlying Level 3 private
equity investments that have been valued using the valuation methodologies
noted above. The difference between the balance of USD296.2 million recorded
as Level 3 private equity investments earlier in note 21 and the two above
balances of USD208.2 million relates to three underlying investments, two of
those were valued using the quoted market price at the year end and the other
was valued using the net selling price and are thus not subject to the same
sensitivities.
Specific valuation techniques used to value the Company's underlying
investments include:
· Quoted market prices or dealer quotes;
· Use of discounted cash flow technique to calculate the present value of
the estimated future cash flows; and
· Other techniques, such as the latest market transaction price.
22. SUBSEQUENT EVENTS
This Interim Report and Condensed Interim Financial Statements were approved
for issue by the Board on 23 March 2023.
A dividend of 6.25 cents per share in respect of the half year ended 31
December 2022 was declared on 23 March 2023. The dividend is payable on or
around 11 May 2023 to shareholders on record at 11 April 2023.
MANAGEMENT AND ADMINISTRATION
Directors Registrar
Huw Evans Computershare Limited
Thuy Bich Dam 13 Castle Street
Julian Healy St Helier
Peter Hames Jersey, JE1 1ES
Kathryn Matthews Channel Islands
Hai Thanh Trinh
Registered Office Independent Auditors
PO Box 656 PricewaterhouseCoopers CI LLP
Trafalgar Court PO Box 321
Les Banques Royal Bank Place
St Peter Port 1 Glategny Esplanade
Guernsey, GY1 3PP St Peter Port
Channel Islands Guernsey, GY1 4ND
Channel Islands
Investment Advisor
Investment Manager
VinaCapital Investment Management Ltd. VinaCapital Fund Management JSC
1(st) and 2(nd) Floors, Elizabeth House 17th Floor, Sun Wah Tower
Les Ruettes Brayes 115 Nguyen Hue Blvd, District 1
St Peter Port Ho Chi Minh City
Guernsey, GY1 1EW Vietnam
Channel Islands
Administrator and Company Secretary UK Marketing and Distribution Partner
Aztec Financial Services (Guernsey) Limited Frostrow Capital LLP
PO Box 656 25 Southampton Buildings
Trafalgar Court, Les Banques London, WC2A 1AL
St Peter Port United Kingdom
Guernsey, GY1 3PP
Channel Islands
Corporate Broker
Numis Securities Limited
45 Gresham Street
London, EC2V 7BF
United Kingdom
Custodian
Standard Chartered Bank (Vietnam) Limited
Unit 1810-1815, Keangnam
Cau Giay New Urban Area
Me Tri Com Hanoi
Vietnam
Investment Advisor's Offices:
Ho Chi Minh City
17th Floor, Sun Wah Tower
115 Nguyen Hue Blvd, District 1
Ho Chi Minh City
Vietnam
Phone: +84-28 3821 9930
Fax: +84-28 3821 9931
Hanoi
Unit 1, 6(th) Floor, International Centre Building
17 Ngo Quyen, Hoan Kiem District
Hanoi
Vietnam
Phone: +84-424 3936 4630
Fax: +84-424 3936 4629
Singapore
6 Temasek Boulevard
# 42-01, Suntec Tower 4
Singapore 038986
Phone: +65 6332 9081
Fax: +65 6333 9081
GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES
Term Definition
Agent Standard Chartered Bank (Singapore) Limited
AGM Annual General Meeting
AIC The Association of Investment Companies
AIC Code The AIC Code of Corporate Governance which was issued in February 2019
ADTV Average daily trading value
Board The Board of Directors
BVI British Virgin Islands
Company VinaCapital Vietnam Opportunity Fund Limited
COVID-19 The disease caused by SARS-CoV-2, the coronavirus that emerged in December
2019
EBITDA Earnings before interest, tax, depreciation and amortisation. A measure of the
gross profit of a company.
ESG Environmental, Social, and Governance
Facility The revolving credit facility as disclosed in notes 10 and 13
FDI Foreign direct investments.
FII Foreign Indirect Investor
Financial Statements The Audited Financial Statements of the Company
GBP British Pound Sterling.
GDP Gross Domestic Product. GDP is a monetary measure of the value of all of the
finished goods and services produced in a specific time period in a country or
wider region.
Guernsey Law The Companies (Guernsey) Law, 2008 as amended
IAS International Accounting Standard
IFRS International Financial Reporting Standards
Independent Valuer A qualified independent professional services firm
IPO Initial public offering - the means by which most listed companies achieve
their stock market listing.
KPI Key performance Indicator
LSE The London Stock Exchange
MSCI Morgan Stanley Capital International
NAV Net Asset Value, being the total value of the Company's assets less its
liabilities (the net assets)
NAV per share NAV divided by the number of shares in issue.
NAV per share decline Expressed in percentage terms, is a measure of the NAV per share of the
Company, calculated by taking the change in the NAV per share over the period
in question and dividing by the starting NAV per share.
The NAV per share decline is calculated as follows:
31 December 2022: Closing NAV per share 6.17 a
30 June 2022: Opening NAV per share 7.22 b
Change in real terms -1.05 c=b-a
Change as a percentage -14.5% =c/b
NAV Total Return Expressed in percentage terms, is a measure of the investment return earned by
the Company, calculated by taking the change in the NAV over the period in
question and dividing by the starting NAV. This assumes that any dividends
paid in the period are reinvested at the prevailing NAV per share on the
ex-dividend rate and that the dividend would grow at the same rate of return
as the NAV per share after re-investment.
The NAV Total Return is calculated as follows:
Total return over period:
31 December 2022: Closing NAV per share 6.17 a
Dividends paid 0.00 b
Effect of dividend reinvestment* 1.01 c
30 June 2022 Opening NAV per share 7.22 d
NAV Total Return (%) -13.4% =((a+b+c)/d)-1
Total return over the calendar year:
31 December 2022: Closing NAV per share 6.17 a
Dividends paid 0.00 b
Effect of dividend reinvestment* 1.02 c
31 December 2021 Opening NAV per share 8.54 d
NAV Total Return (%) -26.1% =((a+b+c)/d)-1
Total return over 3 years:
31 December 2022: Closing NAV per share 6.17 a
Dividends paid 0.00 b
Effect of dividend reinvestment* 1.07 c
31 December 2019 Opening NAV per share 5.05 d
NAV Total Return (%) 30.1% =((a+b+c)/d)-1
Total return over 5 years:
31 December 2022: Closing NAV per share 6.17 a
Dividends paid 0.00 b
Effect of dividend reinvestment* 1.01 c
31 December 2017 Opening NAV per share 5.58 d
NAV Total Return (%) 22.8% =((a+b+c)/d)-1
* The total return is calculated by assuming that dividends paid out are
re-invested into the NAV on the ex-dividend date. After each dividend payment,
the value of the amount notionally reinvested is then assumed to change
proportionally to subsequent changes in the NAV per share. This is accounted
for in the "Effect of dividend reinvestment" row.
NovaGroup NovaGroup Joint Stock Company
OTC Over-The-Counter
PER Price-to-earnings ratio
POI Law The Protection of Investors (Bailiwick of Guernsey) Law, 2020
Private Equity This consists of investments in private companies, structured investments and
bonds with privately negotiated terms.
SBV State Bank of Vietnam
UK Companies Act Companies Act 2006
UPCoM UPCoM listing of the Hanoi Stock Exchange
USD United States Dollar.
VND / VN Dong Vietnamese Dong
VN Index The Ho Chi Minh Stock Exchange Index, a capitalisation-weighted index of all
companies listed on the Ho Chi Minh Stock Exchange.
VOF VinaCapital Vietnam Opportunity Fund Limited
NAV Total Return
Expressed in percentage terms, is a measure of the investment return earned by
the Company, calculated by taking the change in the NAV over the period in
question and dividing by the starting NAV. This assumes that any dividends
paid in the period are reinvested at the prevailing NAV per share on the
ex-dividend rate and that the dividend would grow at the same rate of return
as the NAV per share after re-investment.
The NAV Total Return is calculated as follows:
Total return over period:
31 December 2022: Closing NAV per share 6.17 a
Dividends paid 0.00 b
Effect of dividend reinvestment* 1.01 c
30 June 2022 Opening NAV per share 7.22 d
NAV Total Return (%) -13.4% =((a+b+c)/d)-1
Total return over the calendar year:
31 December 2022: Closing NAV per share 6.17 a
Dividends paid 0.00 b
Effect of dividend reinvestment* 1.02 c
31 December 2021 Opening NAV per share 8.54 d
NAV Total Return (%) -26.1% =((a+b+c)/d)-1
Total return over 3 years:
31 December 2022: Closing NAV per share 6.17 a
Dividends paid 0.00 b
Effect of dividend reinvestment* 1.07 c
31 December 2019 Opening NAV per share 5.05 d
NAV Total Return (%) 30.1% =((a+b+c)/d)-1
Total return over 5 years:
31 December 2022: Closing NAV per share 6.17 a
Dividends paid 0.00 b
Effect of dividend reinvestment* 1.01 c
31 December 2017 Opening NAV per share 5.58 d
NAV Total Return (%) 22.8% =((a+b+c)/d)-1
* The total return is calculated by assuming that dividends paid out are
re-invested into the NAV on the ex-dividend date. After each dividend payment,
the value of the amount notionally reinvested is then assumed to change
proportionally to subsequent changes in the NAV per share. This is accounted
for in the "Effect of dividend reinvestment" row.
NovaGroup
NovaGroup Joint Stock Company
OTC
Over-The-Counter
PER
Price-to-earnings ratio
POI Law
The Protection of Investors (Bailiwick of Guernsey) Law, 2020
Private Equity
This consists of investments in private companies, structured investments and
bonds with privately negotiated terms.
SBV
State Bank of Vietnam
UK Companies Act
Companies Act 2006
UPCoM
UPCoM listing of the Hanoi Stock Exchange
USD
United States Dollar.
VND / VN Dong
Vietnamese Dong
VN Index
The Ho Chi Minh Stock Exchange Index, a capitalisation-weighted index of all
companies listed on the Ho Chi Minh Stock Exchange.
VOF
VinaCapital Vietnam Opportunity Fund Limited
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END IR FLFFAVFIVFIVRecent news on VinaCapital Vietnam Opportunity Fund
See all newsREG - VinaCapital Vietnam - Daily Net Asset Value
AnnouncementREG - VinaCapital Vietnam - Daily Net Asset Value
AnnouncementREG - VinaCapital Vietnam - Daily Net Asset Value
AnnouncementREG - VinaCapital Vietnam - Transaction in Own Shares
AnnouncementREG - VinaCapital Vietnam - Transaction in Own Shares
Announcement