VietNam Holding Limited
("VNH" or the "Company")
VietNam Holding Limited is pleased to announce its 2022
Annual Report and Audited Financial Statements
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More information on the Company is available at
Dynam Capital, Ltd. |
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Craig Martin |
Tel.: +84 28 3827 7590 |
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Sanne Group (
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Tel.: +44 (0) 1481 739810 |
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finnCap Limited
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Broker
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Trading: Johnny Hewitson |
Tel: +44 20 7220 0558 |
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Sales: Mark Whitfeld |
Tel: +44 20 3772 4697 |
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Corporate Finance: William Marle |
Tel: +44 20 7220 0500 |
The information contained within the announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the publication of this announcement via Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain.
Contents
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Strategic Report |
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Highlights |
1 |
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Summary Information |
1 |
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Chairman's Statement |
3 |
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Investment Manager's Report |
5 |
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Top Five Portfolio Companies |
14 |
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Sustainability Report |
24 |
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Principal Risks and Risk Management |
32 |
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Governance |
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Director Profiles and Disclosure of Directorships |
35 |
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Corporate Governance Report |
36 |
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Audit and Risk Committee Report |
41 |
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Directors' Remuneration Policy and Report |
43 |
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Directors' Report |
44 |
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Statement of Directors' Responsibilities |
48 |
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Financial Statements |
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Independent Auditor's Report |
49 |
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Statement of Financial Position |
54 |
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Statement of Comprehensive Income |
55 |
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Statement of Changes in Equity |
56 |
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Statement of Cash Flows |
57 |
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Notes to the Financial Statements |
58 |
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Alternative Performance Measures |
71 |
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Corporate Information |
72 |
Highlights
Financial Highlights
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30 June 2022 |
30 June 2021 |
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Total Net Assets (USD) |
128.8 million |
196.1 million |
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Net Asset Value per share (USD) |
4.408 |
4.600 |
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Net Asset Value per share (GBP) |
363.0p |
333.0p |
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Share price |
309.5p |
265.0p |
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Discount to Net Asset Value |
14.7% |
20.4% |
As at 29 September 2022 (the latest available date before approval of the accounts), the discount to NAV had moved to 12.3%. The estimated NAV per share and mid-market share price at 29 September 2022 was 354.8 p and 311.0 p respectively.
Ongoing Charges
Ongoing charges for the year ended 30 June 2022 have been calculated in accordance with the Association of Investment Companies (the "AIC") recommended methodology. The ongoing charges for the year ended 30 June 2022 were 2.74%. Refer to page 71 for the definitions of Alternative Performance Measures ("APMs") together with how they have been calculated.
Summary Information
The Company
VietNam Holding Limited (the "Company" or "VNH") is a closed-end investment company that was incorporated in the
Investment Objective
The Company's investment objective is to achieve long-term capital appreciation by investing in a diversified portfolio of companies that have high growth potential at an attractive valuation.
Investment Policy
The Company attempts to achieve its investment objective by investing in the securities of publicly traded companies in
The Company may invest in listed or unlisted securities, either on the Vietnamese stock exchanges, through purchases on the OTC Market, or through privately negotiated deals.
The Company may invest its available cash in the Vietnamese domestic bond market as well as in international bonds issued by Vietnamese entities.
The Company may utilise derivatives contracts for hedging purposes and for efficient portfolio management but will not utilise derivatives for investment purposes.
The Company does not intend to take control of any company or entity in which it has directly or indirectly invested (the "investee company") or to take an active management role in any such company. However Dynam Capital, Ltd. ("Dynam Capital"), (the "Investment Manager") may appoint one of its directors, employees or other appointees to join the board of an Investee Company and/or may provide certain forms of assistance to such company, subject to prior approval by the VNH Board.
The Company integrates environmental, social and corporate governance ("ESG") factors into its investment analysis and decision-making process. Through its Investment Manager, the Company actively incorporates ESG considerations into its ownership policies and practices and engages investee companies in pursuit of appropriate disclosure and the improvement of material issues.
The Company may invest:
● up to 25% of its Net Asset Value ("NAV") (at the time of investment) in companies with shares traded outside of
● up to 20% of its NAV (at the time of investment) in direct private equity investments; and
● up to 20% of its NAV (at the time of investment) in other listed investment funds and holding companies which have the majority of their assets in
Borrowing Policy
The Company is permitted to borrow money and to grant security over its assets provided that such borrowings do not exceed 25% of the latest available NAV of the Company at the time of the borrowing unless the Shareholders in general meeting otherwise determine by ordinary resolution.
Investment Restrictions and Diversification
The Company will adhere to the general principle of risk diversification in respect of its investments and will observe the following investment restrictions:
● the Company will not invest more than 10% of its NAV (at the time of investment) in the shares of a single Investee Company;
● the Company will not invest more than 30% of its NAV (at the time of investment) in any one sector;
● the Company will not invest directly in real estate or real estate development projects, but may invest in companies which have a large real estate component, if their shares are listed or are traded on the OTC Market; and
● the Company will not invest in any closed-ended investment fund unless the price of such investment fund is at a discount of at least 10% to such investment fund's NAV (at the time of investment).
Furthermore, based on the guidelines established by the United Nations Principles for Responsible Investment ("UNPRI"), of which the Company is a signatory:
● the Company will not invest in companies known to be significantly involved in the manufacturing or trading of distilled alcoholic beverages, tobacco, armaments or in casino operations or other gambling businesses;
● the Company will not invest in companies known to be subject to material violations of Vietnamese laws on labour and employment, including child labour regulations or racial or gender discriminations; and
● the Company will not invest in companies that do not commit to reducing in a measurable way pollution and environmental problems caused by their business activities.
Any material change to the investment policy will only be made with the approval of Shareholders by ordinary resolution.
Shareholder Information
Sanne Group (
Chairman's Statement
Dear Shareholder,
I am pleased to present the Annual Report for VietNam Holding Limited in yet another extraordinary twelve-month period ending 30 June 2022.
The Company's Total Assets were
So, as two years of COVID-19 restrictions finally faded,
Although
Inflation has been less of a direct issue for
Discount
In the Interim Report issued six months ago we wrote about the narrowing discount between the Fund's share price and prevailing NAV. This time last year the discount hit 25% and has narrowed considerably since with the tender offer last September and the ongoing efforts of the Board in managing the discount through regular share buybacks, but also with the Investment Manager in delivering strong relative performance and an active investor relations program. In February 2022 it touched a low of 4.43%, and although that has widened to 14.7% at 30 June 2022, the discount has been the narrowest of three
Marketing
With the help of the Investment Manager, Dynam Capital - and despite travel restrictions imposed for much of the first half of the year - the Board has further developed the Company's marketing activity throughout the year to help narrow the discount, improve liquidity in the Company's shares, and widen our Shareholder base.
The Investment Manager has been actively promoting the Company and along with our broker and sales partners has organised roadshows, topical seminars, podcasts, and several webinars. It also presented at the Mello Event in May 2022 (returning after a two-year hiatus) where it was a delight to meet many investors in the Company face-to-face.
Marketing
Our analysis shows that the marketing and communications efforts continue to bear fruit. We are delighted to see a greater number of wealth management platforms on the share register having also seen the overall mix of investors broaden considerably over recent years. The Company has also been proactively promoted through a wide range of media outlets, including video, audio, and online print media, and has been featured several times in publications, such as Investors Chronicle. The Investment Manager has maintained a strong social media presence for the Company as well. We welcome all Shareholders who may be reading this Annual Report for the first time and thank all existing holders for their ongoing support.
Share Buybacks
The Board has a mandate to authorise the purchase up to 14.99% of the Company's shares each year in the open market at prices below NAV per share, and this was renewed at the Annual General Meeting ("AGM") on 1 November 2021. In the year from 1 July 2021 to 30 June 2022, the Company bought back 661,084 shares (representing 2.3 % of the shares outstanding at 1 July 2021) at a weighted average discount of 15.9%. This resulted in a 0.25% accretion to NAV per share. From September 2017, when the current Board was appointed, through until 30 June 2022, the Company has bought back 13.32 m shares at a weighted average discount of 15.4%. This represents a 2.8% accretion to NAV per share.
Tender Offers
From time to time the Board uses tender offers to provide a liquidity opportunity for investors in the Company. Last September Shareholders approved the Board's recommended tender offer for 30% of the Company's shares at a 2% discount to the prevailing NAV per share as at 31 August 2021.
Performance
In the twelve months to 30 June 2022 the Company's NAV per share declined by 4.36%, while the market as a whole, as measured by the Vietnam All Share Index, declined by 16.5%. In the first six months of the financial year the NAV per share rose by 14.1%, against an index rise of 10.6%, and in the second six months the Company's NAV declined by 16% versus the index, which fell by more than 24%. At 30 June the Company has outperformed the VNAS on 1, 3, 5 and 10-year measures.
Performance monitoring remains a key focus of the Board and we engage closely with our Investment Manager in this respect through monthly conference calls attended by members of the Board in addition to quarterly presentations. A more detailed account of the Company's annual performance is also provided in the Investment Manager's Report.
Responsible Investing and Sustainability Reporting
The Investment Manager and the Board have been committed to responsible investing and a joined-up approach to environmental, social and governance ("ESG") years before the mainstream global investing community took up the challenge. The Company has been a signatory to the United Nations' Principles on Responsible Investing ("UNPRI") since 2009. Although the UNPRI itself has been restructuring its reporting platform, the Company received five-star scores for its 2021 UNPRI report and we continue to contribute to responsible investing in
On behalf of the Board, I would like to extend a further thank-you to Shareholders for your ongoing support throughout the past year. Although the global mood is gloomy, we believe
Hiroshi Funaki
Chairman
VietNam Holding Limited
30 September 2022
Investment Manager's Report
This year marks the 16th anniversary of the Company and its listing in
Strong Outperformance
The interim report as of 31 December 2021 characterised the last six months of the year as a period of resilience and divergence. During the first six months of the financial year to 31 December 2021, the NAV per share rose by 14.1%, ahead of the Vietnam All Share Index ("VNAS") gain of 10.6%. Throughout the second half of the financial year, the equity markets themselves were divergent from the resilient macro-economic position and we saw the
High Conviction Portfolio
The Company maintains a high-conviction portfolio concentrated in 24 positions, with its top-ten positions making up 67.5% of NAV. The largest position, FPT Corporation, FPT, which is 11.5% of NAV, is the country's leading IT and telecoms services company. It rose by 19.9% as it continues to see significant traction in its domestic and overseas business. Mobile World, MWG, which is 9.2% of NAV, is a leading omni-channel retailer. It rose by 42.7% as it strengthened its position as one of the country's largest e-commerce players and started to reposition and streamline its grocery business. Gemadept ("GMD"), which is 8.5% of NAV and the largest port operator in
Post-COVID-19 Recovery
During the first part of the financial year
1The Company was initially admitted to AIM in July 2006 and then moved to the premium segment of the main board of the London Stock Exchange in March 2019.
2Source: OECD Report
3Source: https://en.baochinhphu.vn/hsbc-upgrades-viet-nams-gdp-forecast-to-69-in-2022-111220706162459626.htm
https://www.uobgroup.com/web-resources/uobgroup/pdf/research/QGO-3Q2022.pdf
Rise of the Retail Investor
As we reported in the Interim Report, as part of our rigorous market analysis, in 2021 we commissioned an independent research firm to conduct a first of its kind survey on the sentiment and behaviour of the growing retail investment base in
In May 2022, we launched the fourth and final phase of the survey. 70% of the survey's fourth phase respondents in May 2022 were F1+ investors - investors who started trading a year before the survey's launch. The remaining 30% were F0 investors, those who started trading within the past 12 months. Most respondents throughout the four phases were white-collar office workers based in
The global and local decline in equity prices over the last six months has muted investor confidence in several sectors, including banking, insurance, building materials, logistics, transportation, petroleum and oil, real estate, and securities. The retail investors' view of securities is particularly gloomy with just 7% of respondents considering investment in securities, compared to a much higher 47% in August 2021. This trend can be linked to a string of recent high-profile scandals involving real estate corporations and stock market manipulation, along with tightened capital controls on the real estate sector.
Many of the new investors are possibly waiting on the side-lines, and perhaps waiting for clearer direction signals from the global economy with 42% of recent respondents sharing that they are waiting to invest further compared to just 19% in the first survey back in August 2021.
Nevertheless, despite these fluctuations, investors remain upbeat about their returns after one year of investing. Across the four surveys, more than 40% of respondents expect returns of between 11% - 20% and close to 40% expect returns of 20% -50%. When it comes to deciding whether to invest, estimation from market value and market index trends were the two most important sources across the surveys, with analysis from securities companies and company financial statements also frequently used. One constant across the four surveys is the high frequency with which investors check the stock market index. Over 80% of respondents said they check the market at least daily and many check it several times per day.
What is clear from these surveys is that regardless of the market fluctuations in
Liquidity
Eighteen months ago, the HOSE infrastructure struggled to cope with orders beyond
Increased market liquidity in 2021 facilitated swift funding for last year's tender offer for 30% of the Company's shares. Despite a 30% reduction in daily liquidity over the last few months of the financial year, the portfolio liquidity remains robust and 90% of the portfolio could be liquidated in less than 30 days.
The portfolio's size and nimbleness as per our style of investment management means that we can navigate across the spectrum of company sizes, and we believe this has contributed to the outperformance of the Company versus the index and peers. We have been able to take profit in sectors that surged last year and move swiftly as market forces and economic mood changes.
The Fund is 70% invested in Large Cap stocks, above
As of 30 June, the portfolio has about 6% in cash, which is slightly higher than the usual 2%-3%, but provides some flexibility in taking advantage of what we see as undemanding valuations for companies that we know well. Although the Fund's investment policy does allow up to 20% of the assets to be invested in unlisted or pre-IPO 'Private Equity' type deals, the Fund is currently only invested in listed securities and all are valued as 'Level 1' - refer to the Fair Value Information in note 12 of the Financial Statements pages 68 to 69. We see this as a reflection of the opportunity set now and believe liquidity has a premium that is not always reflected in the pricing of private deals. Lastly, we are aware that the Fund has a formal continuation vote in 2023, and we wouldn't want to set false expectations in the minds of potential investee companies, nor do Board or shareholders in the Company wish the disservice by tying their hands to a significant illiquid position should the continuation vote not pass.
Resilient Macro
Resilience in the face of adverse conditions is an ongoing theme in
Figure 1.1: The Vietnam Dong has been relatively stable against the US Dollar over the past 5 years
Figure 1.2: Inflation is picking up in
Figure 1.3:
Responsible Investing
The Company is firmly focused on sustainability and has placed environmental, social and governance ("ESG") principles at the heart of its investment criteria for over a decade, having become an early signatory to the United Nations Principles for Responsible Investing ("PRI") in 2009. The Company received top grades in the report in 2020, the most recent year for which scores have been published by PRI.
Each part of ESG is equally important. For
Positioning and Core Themes
During the year, we sold 11 positions and added new 12 positions. We exited a few smaller companies and selectively added to our positions in larger companies, taking profit from a portion of our portfolio of banks, which had risen by close to 100% in the previous year, and taking profit from Hoa Phat Group, a leading steel maker which had also doubled in value the previous year.
Our main investment approach remains focused on: industrialisation (best-in-class manufacturers, international logistics); urbanisation (purposeful real estate, transportation, clean energy and clean water); and domestic consumption and its enablers (sustainable retail, domestic logistics, products and finance). These themes are inter-linked, as industrialisation and urbanisation foster further robust growth in GDP and domestic consumption, and are all underpinned by the banking sector.
Industrialisation
Although in the past we have invested in manufacturers, including garment companies and seafood producers, we have chosen to obtain most of the exposure to these themes during the past year through the business-to-business 'linkages', mainly through industrial parks and logistic companies. These typically have a higher quality of earnings and higher return on equity than the individual exporters. A core holding in this area is the leading shipping company Gemadept ("GMD"), which at 8.5% NAV is the third largest position.
Urbanisation
Despite delays in domestic infrastructure expenditure (the 2022 disbursement level is behind plan) and delays to
1 https://population.un.org/wup/Publications/Files/WUP2018-Highlights.pdf
Domestic Consumerism
The portfolio has approximately 17.8% exposure to the domestic retail sector, including PNJ, 8.1% of NAV, and Mobile World Group ("MWG"), 9.2% of NAV. The physical retail components of both these companies will be impacted by prolonged lockdowns, however, the digital online portions of these businesses are performing extremely well. These well-managed businesses have emerged from the pandemic with greater market share, and in the case of PNJ are seeing same store growth and new store growth at levels higher than pre-pandemic.
Banks
VNH's allocation to banks was reduced from 31% at 30 June 2021 to 22% at 30 June 2022. Our underweight position, the index is at 33%, was due to profit-taking in the sector in the second half of 2021 following the significant gains booked in the previous financial year. Vietnamese Banks are still benefitting from resilient Net Interest Margins ("NIM"), though they face controls on credit growth by the State Bank of
Outlook
As we move into the second half of 2022, the global mood remains weak. Although recessionary risks remain less severe for
There are encouraging signs in the rebound and growth of domestic tourism in
Many emerging and frontier markets are facing extremely testing times, mostly because of imported inflation and supply chain disruptions. This can flow into the lives of populations in other ways as unrest forces changes in governments, although developing countries do not have a monopoly on this behaviour. The Economist4 listed the countries that are most at risk, and
1 http://vids.mpi.gov.vn/Includes/NewsDetail/12_2016/dt_11220161027_9781464808241.pdf
2 Source: https://www.imf.org/en/News/Articles/2021/03/09/na031021-vietnam-successfully-navigating-the-pandemic.
3 Source: https://vietnamtourism.gov.vn/en/post/17504
4 Source: https://www.economist.com/emerging-market-indicators/2004/02/12/country-risk
The war in
There is also an undercurrent of backlash against the emergence of ESG themed investments and sustainability-linked investment policies. This began as some concerns were raised on 'Green-Washing' by certain global asset managers but may also have found resonance with certain industry leaders who question whether a CEO should 'play God' in relation to moral and ethical considerations related to finance. There is a danger that the baby is thrown out with the bathwater, even at such an early stage of greater awareness of ESG, and particularly the climate aspects, as parts of the world face unprecedented and dangerously high daily temperatures. The Investment Manager is of the opinion that responsible investing matters even more during these times of global uncertainty. The Company has been a signatory to the United Nations Principles for Responsible Investing for over 12 years, three quarters of its life so far, and has set itself the task of 'Doing More, Measuring More and Reporting More' on ESG issues. In 2021 the Fund's Board pledged its own allegiance to the Paris Agreement and commitment to the TCFD in addition to becoming a member of the Asia Investor Group for Climate Change ("AIGCC"). The portfolio's carbon footprint is also 60% lower than the VNAS index. This has been a result of the Fund's active management style in sector allocation and selection of best-in-class companies. We report on our enhanced work related to the climate aspects of the portfolio in the Sustainability Report.
As mentioned in last year's annual report, while our focus remains on industrialisation, urbanisation, and domestic consumption, we also will be eyeing emerging themes coming out of the pandemic. We are seeing, rapid moves in digital transformation in
Ten Companies by NAV as at 30 June 2022 (and as at 30 June 2021)
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Top 10 companies as at 30 June 2022 |
Sector |
% NAV |
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FPT Corporation |
Telecommunications |
11.5% |
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Mobile World Investment Corp |
Retail |
9.2% |
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Gemadept Corp |
Industrial Goods and Services |
8.5% |
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Phu Nhuan Jewelry JSC |
Retail |
8.1% |
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Sacombank |
Banks |
5.6% |
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Khang Dien House |
Real Estate |
5.4% |
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Hai An Transport & Stevedori |
Industrial Goods and Services |
5.4% |
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Military Commercial Bank JSC |
Banks |
5.2% |
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Vietnam Prosperity JSC Bank |
Banks |
4.6% |
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Vietnam JS Commercial Bank F |
Banks |
4.0% |
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Total |
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67.5% |
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Top 10 companies as at 30 June 2021 |
Sector |
% NAV |
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FPT Corporation |
Telecommunications |
11.0% |
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Vietin Bank |
Banks |
9.6% |
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Hoa Phat Group JSC |
Industrial Goods & Services |
9.4% |
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VP Bank |
Banks |
7.3% |
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Military Commercial Bank JSC |
Banks |
6.4% |
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Vinhomes |
Real Estate |
6.1% |
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Mobile World Investment Corp |
Retail |
5.0% |
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Phu Nhuan Jewelry JSC |
Retail |
4.9% |
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Khang Dien House |
Real Estate |
4.6% |
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Sacombank |
Banks |
4.5% |
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Total |
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68.8% |
Dynam Capital, Ltd.
30 September 2022
Top Five Portfolio Companies
FPT Corp ("FPT")
As at 30 June 2022
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VietNam Holding's investment |
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Date of first investment |
10 December 2012 |
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Ownership |
0.4% |
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Percentage of NAV |
11.5% |
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Internal rate of return (annualised) |
26.6% |
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Share information |
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Stock Exchange |
HOSE |
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Date of listing |
13 December 2006 |
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Market capitalisation (USD million) |
4,062 |
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Free float |
84.4% |
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Foreign ownership |
49% |
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Financial indicators (as at 31 December) |
2021 |
2020 |
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Capital (USD million) |
390.1 |
339.6 |
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Revenue (USD million) |
1,533.2 |
1,292.3 |
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EBIT (USD million) |
232.8 |
199.5 |
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NPAT (USD million) |
229.9 |
191.6 |
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Diluted EPS (VND) |
4,349 |
4,120 |
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Revenue growth |
18.6% |
7.6% |
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NPAT growth |
20.0% |
13.1% |
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Gross margin |
38.2% |
39.6% |
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EBIT margin |
15.2% |
15.4% |
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ROE |
26.7% |
25.0% |
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D/E |
0.94 |
0.68 |
About the Company
Founded in 1988, FPT is a software developer that provides of a range of IT and telecom services, including broadband internet. As it is also a brand-name distributor and retailer of IT and communication products, the company has held the leading position in the local IT industry in
With 178 offices and branches across 26 countries, as of the end of 2021, FPT has transformed itself from an IT services company to an end-to-end digital transformation service provider. Its digital transformation services' revenue reached a record
As of 31 December 2021, FPT was managing seven subsidiaries and 37,180 employees, including 24,068 engineers and technology experts.
Recent Developments
Despite
FPT Corp ("FPT")
Recent Developments
Technology sectors are the main contributor to its revenue and profit before tax with the share of 58% and 44%, respectively. Specifically, the global IT services segment remains the key driver of FPT's performance, and the US market has shown a particularly strong result with revenue growth reaching 52% in 2021. Additionally, the newer revenue stream from Digital Transformation services increased by 72% in 2021 - the highest rise in the last four years.
Sustainability Strategy
FPT has developed a sustainable development orientation strategy to ensure the balance of three factors: economic development, community support, and environmental protection. In terms of objectives and activities, FPT referred to
ESG Achievements
FPT places a strong focus on sustainability and has identified eight of the UN's Sustainable Development Goals ("SDGs") that the company can most directly engage with: Quality Education; Gender Equality; Affordable And Clean Energy; Decent Work And Economic Growth; Industry, Innovation, and Infrastructure; Responsible Consumption And Production; Climate Action And Partnerships For The Goals.
In 2022, FPT published its very first environmental, social and governance ("ESG") report for the year 2021, further affirming the company's commitment to help investors, shareholders and other stakeholders access transparent information on its activities. FPT has improved its gender equality in the workplace by increasing the number of female managers and employees by 17.5% and 21.4% respectively. The company was also highly recognised for its contribution to Covid-19 relief in
ESG Challenges
FPT has set targets for building green office buildings but has not yet started measuring its total carbon emissions. In addition, as human resources is a key success factor for IT companies today, FPT will need to find ways to attract and retain talent in the face of industry competition.
MWG JSC ("MWG")
As at 30 June 2022
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VietNam Holding's investment |
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Date of first investment |
11 September 2017 |
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Ownership |
0.3% |
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Percentage of NAV |
9.2% |
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Internal rate of return (annualised) |
13.5% |
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Share information |
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Stock Exchange |
HOSE |
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Date of listing |
14 July 2014 |
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Market capitalisation (USD million) |
4,495 |
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Free float |
76.5% |
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Foreign ownership |
49% |
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Financial indicators (as at 31 December) |
2021 |
2020 |
|
Capital (USD million) |
306.5 |
196.3 |
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Revenues (USD million) |
5,285.1 |
4,702.5 |
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EBIT (USD million) |
253.4 |
226.0 |
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NPAT (USD million) |
210.7 |
169.8 |
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Diluted EPS (VND) |
6,897 |
5,676 |
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Revenue growth |
12.4% |
6.7% |
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NPAT growth |
24.1% |
2.6% |
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Gross margin |
22.5% |
22.1% |
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EBIT margin |
4.8% |
4.8% |
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ROE |
27.3% |
28.4% |
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D/E |
1.21 |
1.08 |
About the Company
Established in 2004 with only one mobile phone store in
As of December 2021, MWG owned 5,306, stores under six brand names. These include: The Gioi Di Dong, mobile phone retail chain; Dien May Xanh, consumer electronics retail chain; Bach Hoa Xanh, grocery retail chain; Topzone, an Apple Authorized Reseller model; Bluetronics, consumer electronics retail chain in
As of 31 December 2021, MWG owned ten subsidiaries and employed 74,111 people.
Recent Developments
In 2021, MWG posted net revenue of
In addition, grocery chain Bach Hoa Xanh witnessed a 33% growth in revenue, thanks largely to the opening of 233 stores in 2H2020 and 387 in 2021. However, as the same-store sales growth is flat for 2021 it remains loss-making for the year as a whole. Nonetheless, the company has been remodeling its store layout and operational structure, and there are early signs of improvement in the first six months of 2022 with an expectation of a break-even point by December 2022.
Sustainability Strategy
MWG's sustainable development strategy puts its employees as the first priority, followed by customers and then shareholders. The performance-linked ESOP programs of MWG has helped retain talented people in the company for several years and has motivated some of the company's ambitious top managers to seek penetration into new market segments. The company has a strong focus on internal training and has 44 trainers conducting monthly courses for its staff. In 2021, the average training time per MWG employee reached 29.5 hours with an average satisfaction level of an impressive 97.4% for these internal training courses.
ESG Achievements
MWG has made significant progress in its ESG activities by improving its Board structure, estimating and reporting its total carbon emissions, and applying relevant energy-saving solutions across its chain of stores. The company also disclosed more social and environmental indicators in its 2021 annual report. In addition, MWG received an HR award from Anphabe for best working places.
ESG Challenges
As many retailers in
GMD JSC ("GMD")
As at 30 June 2022
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VietNam Holding's investment |
|
|
Date of first investment |
16 August 2019 |
|
Ownership |
1.6% |
|
Percentage of NAV |
8.5% |
|
Internal rate of return (annualised) |
35.2% |
|
|
|
|
Share information |
|
|
Stock Exchange |
HOSE |
|
Date of listing |
06 May 2002 |
|
Market capitalisation (USD million) |
673 |
|
Free float |
95.9% |
|
Foreign ownership |
46% |
|
Financial indicators (as at 31 December) |
2021 |
2020 |
|
Capital (USD million) |
129.5 |
130.6 |
|
Revenue (USD million) |
137.8 |
112.9 |
|
EBIT (USD million) |
29.8 |
20.4 |
|
NPAT (USD million) |
31.0 |
19.1 |
|
Diluted EPS (VND) |
1,869 |
1,149 |
|
Revenue growth |
22.1% |
-1.0% |
|
NPAT growth |
62.3% |
-27.9% |
|
Gross margin |
35.6% |
36.4% |
|
EBIT margin |
21.6% |
18.1% |
|
ROE |
10.6% |
6.7% |
|
D/E |
0.27 |
0.29 |
About the Company
Established in 1993 by the privatisation of a state-owned company, Gemadept ("GMD") operated as a maritime agent and freight forwarder in its early days. After 29 years of operation, the company has become one of the largest seaport operators in
GMD's seaports are in two main locations: the
Recent Developments
Despite the Delta wave, GMD still recorded strong revenue and profit growth of 22.1% and 62.3%, respectively, in 2021 thanks to the improvement of ports in
Gemalink port, the biggest deep-water port in its zone, is expected to be the key growth driver for GMD over the next four years. According to the Vietnam Seaports Association, Gemalink port accounted for 25.3% of the market share in terms of container throughput volume in the Cai Mep- Thi Vai port zone in the first five months of 2022. This has been the fastest growing region in
GMD JSC ("GMD")
Sustainability Strategy
GMD defines its mission as to promote economic flows and create added value for the country, customers and partners through a chain of outstanding services and solutions, in which ESG factors are the core foundation for long-term development. The management team has shown determination in developing a feasible ESG strategy and roadmap for the company.
ESG Achievements
GMD outperforms its peers in
ESG Challenges
GMD has not yet disclosed its total carbon emissions. Also, it will take time and significant expenditure for GMD to receive international certificates for its entire ports and logistics system. GMD also owns a non-core rubber plantation project in
Phu Nhuan Jewelry JSC ("PNJ")
As at 30 June 2022
|
VietNam Holding's investment |
|
|
Date of first investment |
8 December 2009 |
|
Ownership |
0.8% |
|
Percentage of NAV |
8.1% |
|
Internal rate of return (annualised) |
30.8% |
|
|
|
|
Share information |
|
|
Stock Exchange |
HOSE |
|
Date of listing |
23 March 2009 |
|
Market capitalisation (USD million) |
1,338 |
|
Free float |
83.4% |
|
Foreign ownership |
49% |
|
Financial indicators (as at 31 December) |
2021 |
2020 |
|
Capital (USD million) |
97.8 |
98.6 |
|
Revenue (USD million) |
848.3 |
766.0 |
|
EBIT (USD million) |
71.9 |
53.9 |
|
NPAT (USD million) |
44.2 |
46.3 |
|
Diluted EPS (VND) |
4,197 |
4,308 |
|
Revenue growth |
10.7% |
3.5% |
|
NPAT growth |
-4.5% |
-10.1% |
|
Gross margin |
18.2% |
19.4% |
|
EBIT margin |
8.5% |
7.0% |
|
ROE |
18.3% |
21.8% |
|
D/E |
0.45 |
0.35 |
About the Company
Established in 1988, PNJ is now the leading jewelry producer and retailer in
In 2021, PNJ owned 342 stores across
As of 31 December 2021, PNJ employed 6,473 people, of which 61.7% are female.
Recent Developments
2021 was a difficult year for PNJ due to the full-fledged lockdown in HCMC from June to October, which forced its shops to close. As a result, the revenue 'only' increased by 10% while the NPAT dropped by 4.5%. Nevertheless, PNJ demonstrated a remarkable recovery in the first six months of 2022 with record-breaking revenues and net profit of
Sustainability Strategy
Sustainable development is integrated in PNJ's culture, activities and business strategy, not least given its business philosophy of "Integrate the customer and society benefits into the company's interests". In addition, PNJ's focus on 'green' technologies and projects - for example, by maximising its fuel economy and participating in reforestation projects and clean water development - has helped it become one of the top-10 sustainable development businesses in
ESG Achievements
PNJ is the company with the highest ESG rating score in VNH's portfolio and is widely recognised for its efforts in improving its ESG performance over the years. In 2021, the company created an ESG committee as a sub-committee of its Board of Directors and continues to demonstrate its ambition to be a leading ESG advocate among public companies in
ESG Challenges
PNJ has not yet disclosed its total carbon emissions. The company also needs to further improve and disclose its material sourcing material sourcing policy and develop a roadmap for becoming certified as a member of the Responsible Jewelry Council.
Sacombank ("STB")
As at 30 June 2022
|
VietNam Holding's investment |
|
|
Date of first investment |
24 July 2020 |
|
Ownership |
0.4% |
|
Percentage of NAV |
5.6% |
|
Internal rate of return (annualised) |
1.6% |
|
|
|
|
Share information |
|
|
Stock Exchange |
HOSE |
|
Date of listing |
13 July 2006 |
|
Market capitalisation (USD million) |
1,741 |
|
Free float |
93.1% |
|
Foreign ownership |
22% |
|
Financial indicators (as at 31 December) |
2021 |
2020 |
|
Capital (USD million) |
810.3 |
816.7 |
|
Total Operating Income (USD million) |
761.0 |
748.2 |
|
NPAT (USD million) |
146.6 |
116.2 |
|
EPS (VND) |
1,630 |
1,248 |
|
TOI growth |
1.7% |
18.5% |
|
NPAT growth |
26.2% |
9.7% |
|
ROA |
0.7% |
0.6% |
|
ROE |
10.8% |
9.6% |
|
CAR |
9.9% |
9.5% |
|
NPL |
1.5% |
1.6% |
|
Equity multiplier |
15.2 |
17.0 |
About the Company
In 1991, STB became the first commercial joint-stock bank to be established in
STB has won many accolades, including "Best bank with foreign currency service" from Global Banking & Finance Review (
Recent Developments
In 2021, STB's consolidated NPAT increased 26.2% YoY to
Sustainability Strategy
STB has pursued a sustainability-oriented corporate governance model. This objective has helped the bank face difficulties and challenges in the past. In 2021, it continued to meet all the criteria of the Corporate Sustainability Index ("CSI") and was honored as the Top 3 of the "most favorite public companies" of investors in 2021. STB has implemented environmental and social management system ("ESMS") in compliance with international standards.
According to Directive No 03/CT-NHNN on promoting green credit growth, which was first piloted for small and medium size enterprises, STB was the first private bank to implement this program alongside three of
STB has been arranging loans with preferential interest rate for individuals and enterprises whose business and production activities either 'cause no harm' or 'protect natural resource, environment and society'. It has also coordinated with several business associations to participate in specialised seminars (for corporate customers accessing green credits) as well as more modern bank products and services.
ESG Achievements
STB has improved its sustainability report by following the GRI standards. In addition, the company's Board of Directors has created committees and councils in compliance with the law and in reference to best practices on corporate governance. Furthermore, the bank has documented its environmental and social risk appetite and based on that developed a rigorous environmental and social impact assessment process. The bank also has carried out an employee satisfaction survey.
ESG Challenges
STB is aware of the national net-zero commitment and reports its key environmental performance indicators in its annual report, however, it could do better by estimating and disclosing its total carbon emissions and consider the application of the Task Force on Climate-related Financial Disclosures ("TCFD") framework to integrate climate into its governance and risk management framework.
Sustainability Report
2021 witnessed significant changes in
Since
Additionally, in June 2022, the government approved the circular economy development scheme and set several ambitious targets for the period ahead. The scheme aims to reduce the intensity of greenhouse gas emissions per GDP by at least 15% by 2030 and supports the net-zero emissions target by 2050. By 2025, the country also aims to reuse, recycle, and treat 85% of plastic waste generated, thereby reducing 50% of the plastic waste in the seas and oceans as well as that of the volume of non-biodegradable plastic bags and disposable plastic products that are used in daily life.
In regards to clean energy development, the draft National Power Development Plan (draft PDP VIII) for the period 2021 to 2030, with a vision to 2045, has been revised significantly in terms of the mix of energy sources needed to align with
As the fourth COVID-19 wave spread across
VNH is a long-term, responsible investor, and ESG integration lies at the heart of our investment philosophy. We have been able to see the tremendous evolution of ESG in the past ten years with a wide variety of metrics, methodologies and approaches being tested and revised. While earlier approaches used exclusionary screening and value judgments to shape their investment decisions, ESG investing has been changed over time by shifts in demand from the finance ecosystem, driven by both the search for better long-term financial value and a pursuit of better alignment with values and current socio- environmental challenges1.
Also, we see particular interest in ESG coming from millennials - the investors and decision makers of the future who account for over a third of the global population. According to a 2020 report on millennials and ESG investing by MSCI, millennial investors have contributed
Over the past year, we have navigated ourselves along the ESG journey by looking at what we have achieved and what we can do better, especially in terms of ESG assessments and engagement with companies. We refined our ESG policy and exclusion screening list and added more climate change commitments. We also applied the Task Force on Climate-related Financial Disclosures ("TCFD") in our reporting, developed our own ESG rating framework, and engaged more with companies on ESG topics.
1OECD, 2020
To advance our commitment to responsible investment, we have identified key areas that we need to continue to progress in the next year:
· ESG integration: Continuously improving the quality of our in-house ESG research with a more holistic assessment framework and ESG rating by companies, with reference to specific industry and sector guidelines;
· Company engagement: Continue to make progress in our engagement with companies on ESG topics, tracking their achievements and initiating collaborative engagement with other investors; and
· Advocating the adoption of ESG standards and best practices among the Vietnamese business community, with a strong focus on improving corporate governance, ESG reporting and identifying appropriate decarbonisation strategies.
ESG Management System
Our ESG Management System is a customised set of policies, procedures, tools and reporting criteria designed to identify, assess, manage and disclose information on ESG matters. We use this to help us both choose the right risks and take advantage of the opportunities that they present. Furthermore, in considering the activities of portfolio companies, we seek to ensure that our decisions lead to more positive impacts.
The ESG Management System has been developed by our Investment Manager to:
· integrate ESG issues into every step of the investment process: initial screening, due diligence, investment decision making and monitoring;
· provide a framework for monitoring and reporting on ESG aspects to stakeholders; and
· work in partnership with our portfolio companies to help them identify and implement ESG opportunities, creating sustainable enhancement to their overall financial performance.
Our approach to ESG integration is based on the following principles:
· Investors not only have the power but also a responsibility as stewards to drive and help create change;
· ESG research can provide unique insights not available in pure fundamental approaches;
· ESG integration leads to better-informed investment decisions; and
· Active ownership, advocacy, and engagement on ESG issues can reduce the risk of value destruction.
Climate Change and the ESG Agenda
According to the most recent report by the World Bank,
At
Through the Investor Climate Action Plans ("ICAPs")' Expectation Ladder and Guidance, which was co-created with Asia Investor Group on Climate Change ("AIGCC"), we were able to position ourselves in the race to net-zero for investors and develop a pathway to progress in the mid to long-term. Based on the ICAPs, in late 2021 we identified ourselves to be between Tier 4 and Tier 3, as:
(i) We have integrated climate risks into the overall risk assessment framework and regularly monitored portfolio climate risks;
(ii) We do not invest in companies with more than 25% of revenues from fossil fuel; and
(iii) Our Investment Manager is a member of AIGCC and has sent its staff on climate change training. By June 2022, we have been able to move to Tier 3 by conducting detailed scenario analysis for the portfolio and assessing the physical and transition risks, using these results to assist with for current and future investment decisions. We believe VNH is now heading towards Tier 2.
Investor Climate Action Plans (ICAPs) Expectation Ladder1
|
Tier 4 |
Tier 3 |
Tier 2 |
Tier 1 |
|
Measure portfolio carbon emissions |
Align portfolio emissions reduction target with domestic policy goals or NDCs |
Align portfolio emissions reduction target with 1.5ºC and global net-zero emissions by 2050 |
Align portfolio emissions reduction target with 1.5ºC and global net-zero emissions by 2050 or sooner Set intermediate targets covering all assets every 5 years using recognised methodologies and frameworks for setting, assessing, reporting, and verifying performance |
|
Strategy |
|||
|
Establish a formal policy on integrating climate change into: - investment analysis - decision-making - investment manager selection and appointment |
Commit to increasing investments in appropriate clean energy and low carbon opportunities |
Establish a formal investment policy on fossil fuels and other high impact activities, such as deforestation and biodiversity loss, that: ˙aligns with a net-zero target ˙includes an explicit commitment to phase out exposure to fossil fuels (either through engagement or divestment) in line with science-based net-zero pathways ˙aligns with just transition principles Develop and start implementing a recognized option strategy for at least one portfolio or asset class |
Eliminate all investments in thermal coal, tar sands and Arctic drilling Define a strategy for all high emitting sectors |
|
Risk Management |
|||
|
Undertake portfolio climate risk assessment Regularly monitor portfolio climate risks including physical risks |
Conduct a 1.5ºC and 2ºC scenario analysis including transition and physical risks, using a recognised methodology Revise and update this analysis annually |
Use scenario analysis and stress testing to: - assess the impacts of physical and transition risks on the portfolio - inform current and future investment decisions |
Explicitly incorporate net-zero scenario analysis. |
|
Asset allocation |
|||
|
Invest part of the portfolio in 2ºC aligned products |
Invest part of the portfolio in 1.5ºC aligned companies, products, and projects |
Incorporate climate change into strategic asset allocation and invest in 1.5ºC-aligned companies, products, and projects in multiple asset classes. |
Invest (and grow the proportion annually) in 1.5ºC aligned companies, products, and projects in all asset classes. |
|
Additional target setting |
|||
|
N/A |
Set Scope 1 and 2 decarbonization targets for your own operational emissions |
Implement explicit net-zero aligned targets for clean energy and low carbon investments in each asset class Set Scope 3 decarbonization targets if they are material i.e. >40% of emissions of underlying assets |
Set 1.5ºC targets in all assets classes where recognised methodologies exist Establish net-zero-aligned targets for high impact sectors Set intermediate targets that enable progression and assessment of portfolio emissions reduction in line with achieving net-zero emissions |
1AIGCC, 2021
Climate Change and the ESG Agenda
Climate change is also a main topic for engagement with companies in our portfolio. In support of the Government's Decree No. 06/2022/ND-CP on regulating GHG mitigation and ozone layer protection, the Investment Manager successfully hosted the webinar "Heading Towards Net-zero Targets and Corporate Strategies" in March 2022 with representatives from 70 companies and organisations in
As we transition to a net-zero world, VNH has identified three focus points for climate change over the next two years:
· Continue to measure and track the portfolio's carbon footprint to identify carbon-intensive sectors and integrate climate risks and opportunities into the Company's broader risk management framework;
· Improve upon best-practice for climate related disclosures for investment companies by following the guidelines of the TCFD disclosures, even though VNH is technically out-of-scope for this; and
· Encourage more companies in the portfolio to measure their total carbon emissions and consider a decarbonisation roadmap.
VNH's TCFD Report
This year we analysed the portfolio in greater depth in terms of the physical and transition risks, and employed VNEEC, a Vietnamese environmental consultant, to estimate total carbon emissions of all listed investee companies as of 31 December 2021. This was followed by an assessment of the portfolio's climate risks including its alignment with the Paris Agreement goals, which was based on a scenario approach with implied temperature rise metrics. This analysis provides a greater understanding of our portfolio risk from a climate perspective, and is also useful for our company engagement program. Our response to the core elements of the TCFD recommendations are summarised in the following sections.
Governance
In 2021, VNH's Board announced its commitment to both the Paris Agreement and the TCFD's risk, governance and reporting recommendations. During the Annual General Meeting in 2021, the Board also endorsed a belief statement for climate, which was later published through media releases and via the Company's website.
The Company's ESG Committee has been working closely with the Investment Manager to further develop its investment strategy and incorporate climate-related risks and opportunities into the investment process and risk management.
Sustainability matters are incorporated in its reports to investors. In addition, the Chairman of the ESG Committee and the Managing Directors of the Investment Manager have attended cross-industry seminars and training in both
Strategy
As
We identify the physical risks, for example, acute weather events and transition risks, including policy, legal and market risks, for the sectors and industries that surround our core target investment themes. These include industrialisation, urbanisation, and the domestic consumer. Within the sectors and industries, we research, analyse, and prioritise the best-in-class companies in terms of their adoption of technology solutions to lower carbon emissions and the provision of disclosures on carbon footprint in their annual reports. We consistently favour companies exhibiting or developing strong climate-resilient strategies.
As
Strategy
Based on the heat map developed by the United Nations' Environment Program Finance Initiative's TCFD banking program, which assesses the sector transition risk exposure in terms of direct and indirect emission costs, low carbon capital expenditure and change in revenue of the majority of VNH's portfolio in 2021 (59.1% of the NAV) is in sectors with the "Moderate" impact rating. Additionally, 37.5 % of the portfolio in 2021 is allocated to financial services companies, which fall under the Services and Technology category with the "Low" impact rating. In 2021, VNH did not allocate any investment in the Oil and Gas and Power Generation companies, and thus was not exposed to any "High" impact sectors.
In terms of implied temperature rise, based on the calculation of VNEEC, the 2021 portfolio of VNH is consistent with a 1.810C temperature rise scenario and aligned with the fair share emission budget by the Climate Action Tracker. However, the portfolio is not yet fully aligned with the domestic pathway in the net-zero by 2050 scenario that
Risk Management
The ESG Committee reports to the Board of the Company and liaises with the Audit and Risk Committee and the Investment Manager to incorporate climate risks into the overall risk management framework (see pages 32 to 34).
Climate risk assessment is integrated by the Investment Manager into all stages of investment processes: initial screening, due diligence, investment decision and monitoring. The risks are regularly discussed during meetings of the Investment Committee and the Investment Manager's Board and are also regularly reported to the Company's Board. Risks are continuously identified and managed at the portfolio level.
Metrics and Targets
· The Portfolio carbon footprint is the key metric used to measure and track progress towards reducing carbon emissions. Our target is to keep the portfolio carbon footprint 20% below the Vietnam All share Index ("VNAS").
· We will join in collaborative engagement initiatives to hold the rise in global average temperature to below 2 degrees Celsius above pre-industrial levels. The target is measured by the number of climate initiatives that we support through communications, policy dialogue, company engagement, and networking.
· In 2022, we have conducted deeper quantitative analysis to assess the climate risk exposure of the portfolio, using a scenario approach for implied temperature increases to estimate the financial impacts and estimate how these risks are translated into financial impacts, for example, the potential financial loss from physical risks, carbon pricing and the impacts on corporate profits.
· We will also identify businesses and investment opportunities that may benefit from the transition risk process.
· In the longer-term (from 2025 onwards), and with shareholder approval, we will set a firm target percentage in our portfolio for low-carbon investments.
Portfolio carbon footprint
The portfolio companies' attributable carbon footprints are analysed against the attributable footprint of an identical invested amount in the companies of the VNAS. In 2021, the VNH portfolio had an estimated total annual emission of 9,059 tonnes carbon dioxide equivalents ("tCO2e") from Scope 1 and 2. The carbon footprint of the portfolio in 2021 is significantly lower when compared against the benchmark of an equivalent investment size in VNAS, with 67.5% or 18,803 tCO2e less total carbon emissions. The total carbon emissions of the Portfolio in 2021 is also much lower than that of Portfolio in 2020 (9,059 and 21,045 tonnes of CO2 equivalents, respectively). This positive performance was resulted mostly from effective sector allocation, with a small contribution from stock selection.
|
|
VNH Portfolio |
benchmark |
Difference between VNH Portfolio vs. benchmark |
|
Total Emissions Scope 1and 2 (tCO2e) |
9,059 |
27,861 |
-18,803 |
|
Total Emissions Scope 1, 2 and 3 (tCO2e) |
21,042 |
57,050 |
-36,008 |
|
Carbon footprint (tCO2e/ $M Invested) |
58.21 |
179.03 |
-67.5% |
Sustainable Development Goals
The 17 Sustainable Development Goals ("SDGs"), also known as the Global Goals, were adopted by the United Nations in 2015 as a universal call for action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and prosperity. With only less than a decade left to meet the SDGs by 2030, it is crucial to accelerate actions to achieve the Goals. It is increasingly clear that the way forward is one that must be paved by both businesses and governments. The growing power of the business sector should be leveraged to grow a stable, sustainable global economy and society.
We consider the 17 SDGs to be a useful framework that companies can use to start to develop their sustainability and ESG strategies. We are pleased to see that the SDGs have been incorporated in many of our portfolio companies' annual reports, with detailed illustrations of how the SDGs are embedded in their vision, business strategies and operational conduct. FPT, the largest holding in VNH's portfolio is contributing greatly to SDG 4 - Quality Education - with their extensive education programs. In its 2021 annual report, FPT also pointed out the eight SDG goals that the company most directly contributes to: Quality Education; Gender Equality; Affordable and Clean Energy; Decent Work and Economic Growth; Industry, Innovation, and Infrastructure; Responsible Consumption and Production; Climate Action, and Partnerships for the Goals.
Gemadept ("GMD"), another of the Top 5 portfolio companies, has also made considerable efforts to align its business with SDGs, especially SDG 9 - Build Resilient Infrastructure, Promote Inclusive and Sustainable Industrialisation and Foster Innovation - with its extensive "green, smart port" ecosystem. It also is focusing on SDG 13 - Climate Action - and is working on many initiatives aimed at contributing to
VP Bank, arguably the "greenest" bank in our portfolio, has made significant efforts to improve its environmental and social management strategy by following international standards and starting to apply the TCFD framework to its processes. In 2021, VP Bank helped 422 customers to integrate sustainability into their business or invest in a "green" project involving renewable energy, waste treatment, or clean transportation, for example. It ended the year with a total Green Loan balance of
Among our portfolio companies, CTG, FPT, MBB, PNJ, and VPB are included in the Vietnam Sustainability Index ("VNSI") 2022, which features the top 20 sustainable listed companies on HOSE measured in terms of their ESG contributions. VCS, DGW, PNJ and CTG are the companies in the top 100 sustainable companies in
Corporate Governance
During the past two decades, the Law on Enterprises and the Law on Securities has been updated several times, with the latest versions being passed during 2019 and 2020 and effective from 1 January 2021. Decree 155, covering corporate governance of public companies, and Circular 96 on the disclosure of information of public companies, are the two key implementing regulations of those laws, and were issued around the same time. These laws and regulations form the main part of the prevailing Vietnamese corporate governance regulatory framework. In addition to mandatory rules provided in the laws and regulations, the State Securities Commission ("SSC"), with support from the International Finance Corporation ("IFC"), and with inputs from the Investment Manager's CIO, issued in summer 2019 the Vietnam Corporate Governance Code of Best Practices for public companies (the "CG Code"), which recommends standards that go beyond the minimum legal and regulatory requirements. The CG Code will also help
In anticipation of
Dedicated Company Engagement Program
The Investment Manager assigns a high priority to the engagement mandate entrusted by shareholders and has established a Company Engagement Program, emphasising the necessity to systematically implement ESG factors for investee companies. By providing knowledge on specific issues, the Investment Manager supports companies in their own relevant financial and ESG matters and encourages positive changes by helping to influence improvements in sustainability policies, practices and performance, and making recommendations where appropriate. Furthermore, the engagement program helps the Investment Manager in its portfolio decision-making and risk management strategy.
As we have been evolving into a post-pandemic period, the Investment Manager has been able to set up face-to-face meetings with several portfolio companies under the Company Engagement Program to discuss both the company's business strategy and ESG issues. During the financial year, the team had in-depth meetings with FPT, GMD, and PNJ to help improve their ESG practices with practical solutions in the short and medium-term. Over several meetings, we have seen the eagerness, willingness and strong commitment from the Board and management of these companies in driving forward ESG and sustainability actions for their businesses. For example, FPT published its very first ESG report in early 2022. PNJ established an ESG committee within its Board of Directors and recruited a Senior ESG Manager to support the company in developing its ESG strategy in the medium, short, and long-term. GMD, with the strong determination of its CEO, put a clear focus on improving the company's work culture and developing a decarbonisation roadmap.
Shareholder Voting
This year the Annual General Meetings of portfolio companies ("AGM"s) were held in both online and offline formats.
The Investment Manager considers each agenda issue proposed by a company based on its merits related to the strategic objectives of the investee company and its potential impact on long-term performance. As part of its usual ongoing practice, the Investment Manager discusses the proposed agenda items with each of the investee companies' board of directors ahead of the actual meetings.
During the financial year, the Company, through the Investment Manager, attended and voted at the Annual General Meetings ("AGM") of every portfolio company in which it held an equity position, 27 in total. In all cases during the past year, the Company voted in favour for every agenda item proposed by each company's boards of directors.
Membership and Partnership to Promote ESG Practices
UNPRI
As noted above, the Company's investment policy is aligned with the UNPRI and the Company has been a UNPRI signatory since 2009. Each year, the Company reports on its responsible investment activities through the UNPRI Transparency Report. In its most recent report, the Company received two 'A' scores and one 'A+' score, all higher than the median and higher than its last year's score. The improvement in active ownership activities was noted, particularly in some of the criteria, such as the engagement approach, escalation strategy, number of companies engaged with, the topics covered, and the way we share insights from engagements with our stakeholders.
VIOD
Mr. Vu Quang Thinh - the CEO of Dynam Capital - is a founding member of VIOD, the Vietnam Institute of Directors, which is a professional organisation that promotes corporate governance standards and best practices in the Vietnamese corporate sector. VIOD was legally formed in 2018 with technical support from the International Finance Corporation ("IFC"), a member of the World Bank Group and
AIGCC
As mentioned above, Dynam Capital, our Investment Manager, is a member of the Asia Investor Group on Climate Change ("AIGCC"). At the end of this financial year, Dynam Capital signed on the 2021 Global Investor Statement to Governments on the Climate Crisis with more than 450 investors to call for governments to raise their climate ambition and implement more effective policies to address the climate crisis.
Others
In the financial year, the Investment Manager also contributed to the newly-established Vietnam Business Integrity Network, VBIN, an initiative initiated by the
Principal Risks and Risk Management
The Board has carried out a robust assessment of the Company's emerging and principal risks and considers with the assistance of the Investment Manager the risks and uncertainties faced by the Company in the form of a risk matrix and heat map. The investment management of the Company has been delegated to the Company's Investment Manager. The Investment Manager's investment process takes into account the material risks associated with the Company's portfolio and the holdings in which the Company is invested. The Board monitors the portfolio and the performance of the Investment Manager at regular Board meetings. The principal risks and the descriptions of the mitigating actions taken by the Board are summarised in the table below.
|
Key risk |
Description |
Mitigating action |
|
Market Risk |
Parts of the portfolio may be prone to enhanced liquidity and price risk. |
The Board is regularly briefed on political and economic developments by the Investment Manager. The Investment Manager publishes a monthly report on the Company which includes information and commentary on the macroeconomic developments in The inherent liquidity levels in the portfolio have been considered explicitly in the viability of the Company and the Board is reasonably satisfied that even in periods of distress and low liquidity there would be an adequate level of assets that could be realised to meet the liabilities of the Company as they fall due. The Board has noted that the underlying market liquidity in |
|
Investor Sentiment |
|
The Investment Manager keeps shareholders and other potential investors regularly informed on |
|
Investment Performance |
The performance of the Company's investment portfolio could be poor, either absolutely or in relation to the Company's peers, or to the market as a whole. |
The Board receives regular reports on the performance of the portfolio and its underlying assets. The Investment Manager reports to the Board at each Board meeting, and the Board monitors the performance of the Investment Manager. |
|
Fair Valuation |
The risks associated with the fair valuation of the portfolio could result in the NAV of the Company being misstated. The quoted companies in the portfolio are valued at market price, but it may be difficult to liquidate, where large positions are held, at these prices in an orderly fashion in the ordinary course of market activity. The values of the Company's underlying investments are denominated in Vietnamese Dong, whereas the Company's accounts are prepared in US Dollars. The Company does not hedge its Vietnamese Dong exposures so exchange rate fluctuations could have a material effect on the NAV. |
The Board reviews the valuation of the portfolio with the Investment Manager regularly. The daily estimated NAV is calculated by the Investment Manager. The monthly NAV is calculated by the Fund Administrator. |
|
Investment Management Agreement |
The fund management activities are outsourced to the Investment Manager. If the Investment Manager became unable to carry out these activities or if the Investment Management Agreement was terminated, there could be disruptions to the management of the portfolio until a suitable replacement is found. |
The Board maintains a close contact with the Investment Manager and reviews the performance of the Investment Manager on a regular basis. |
|
Operational |
The Company has no employees and is dependent on a number of third parties for the provision of services (including Investment Management, Fund Administration and Custody). Any control failures or gaps in the services provided could result in damage or loss to the Company. |
The Board receives regular reports from the Investment Manager and Fund Administrator on their policies, controls and risk management. |
|
Legal and Regulatory |
Failure to comply with relevant regulation and legislation in relevant jurisdictions may have an impact on the Company. Although there are compliance policies (including anti-bribery policies) in place at the Company, the Investment Manager and all service providers, the Company could be damaged or suffer losses if any of these polices were breached. |
The Company is administered in |
|
COVID-19 |
Outbreaks of variants of coronavirus ("COVID-19") as part of a global pandemic pose a health concern through fast person-to-person spread, resulting in an illness that can lead to death. Lockdowns, quarantine measures and restrictions on travel can cause sustained global economic disruption and slowdown in growth, and can cause some industries and companies to face severe financial pressures that can lead to job losses and in extreme cases bankruptcies, impacting the value of the investments held by the Company, and weakening investor confidence. Key service providers to the Company could face loss of personnel, diminution in service capability and could impact the ongoing operations of the Company. Travel restrictions can prevent the Directors of the Company from meeting in person. Delays in rolling out vaccinations may prolong the economic impact on
|
The Board is in regular contact with the Investment Manager, receiving regular updates on the development and the spread of COVID-19, mitigating actions in The Investment Manager and its wholly owned subsidiary in The key activities of the Company and its service providers can be conducted virtually through online calls, electronic mail and video-calls. The Investment Manager, on behalf of the Company uses Regulatory News Services, monthly newsletters, webinars and ad-hoc updates through social media to keep the investors updated on the impact of COVID-19 on the portfolio. |
|
Climate Risk |
Climate change is happening faster than models earlier predicted, threatening the safety of billions of people on the planet. (2) Transition risks: climate policy and rising carbon prices may cause higher prices and impact the viability of companies that rely on fossil fuels or those in carbon intensive activities and may necessitate a significant, and costly, technology shift. |
The Board, through the Investment Manager, has engaged a specialist consulting firm in The Investment Manager is a member of the Asia Investor Group on Climate Change and keeps abreast of the changes in policies that may impact transition and other climate-related risks. The Board is in regular contact with the Investment Manager, and receives reports through the ESG Committee and the Audit and Risk Committee. |
|
Emerging Risks |
New risks beyond those identified as Principal Risks can develop. These Emerging Risks may have a detrimental or existential impact on the Company. |
The Board reviews the risk matrix and risk register that captures and tracks emerging risks as part of its overall risk management practices. Emerging Risks are identified and recorded with a description of their root cause, a risk assessment, a description of mitigating actions, a monitoring plan, and a net risk rating. Changes in risk ratings are presented to the Board on a quarterly basis. There are no emerging risks to bring to the attention of the shareholders at the date of the Annual Report. |
Director Profiles and Disclosure of Directorships
All of the Directors are Non-executive Directors and are independent of the Investment Manager.
Hiroshi Funaki (Chairman)
Mr Funaki has been actively involved in raising, researching and trading
Philip Scales (Audit and Risk Committee Chairman)
Mr Scales has over 40 years' experience working in offshore corporate, trust, and third-party fund administration. For 18 years, he was managing director of Barings Isle of Man (subsequently to become Northern Trust) where he specialised in establishing offshore fund structures, mainly in the closed-ended arena (both listed and unlisted entities). Mr Scales subsequently co-founded FIM Capital Limited where he is Deputy Chairman. He is a Fellow of the Institute of Chartered Secretaries and Administrators and holds a number of directorships of listed companies and collective investment schemes. He is an
Sean Hurst (Senior Independent Director and Environmental, Social and Governance Committee Chairman)
Mr Hurst was co-founder, director and chief investment officer of Albion Asset Management, a French regulated asset management company, from 2005 to 2009. He is an experienced multi-jurisdictional director including roles at Main Market and AIM traded funds and numerous offshore and UCITS funds. In addition to advising companies on launching both offshore and onshore investment funds, he is currently non-executive chairman of JPEL Private Equity Ltd and non-executive director at CIAM Opportunities Fund. Mr Hurst was formerly a non-executive director of AIM listed ARC Capital Holdings Ltd. He holds an MBA in Finance from CASS Business School in
Damien Pierron (Management Engagement Committee Chairman)
Mr Pierron is currently Managing Partner at Ankaa Ventures, a Venture Capital firm active in Seed stage in
Saiko Tajima (Remuneration and Nomination Committee Chairman)
Ms Tajima has over 20 years' experience in finance, of which 8 years have been spent in Asian real estate asset management and structured finance. Working for Aozora Bank and group companies of Lehman Brothers and Capmark, she focused on financial analysis, monitoring and reporting to lenders, borrowers, auditors, regulators and rating agencies. Over the last 8 years, she has invested in and helped develop tech start-ups in
Disclosure of Directorships in Public Companies Listed on Recognised Stock Exchanges
|
Name |
Company Name |
Stock Exchange |
|
Sean Hurst |
JPEL Private Equity Ltd |
|
|
Philip Scales |
First World Hybrid Real Estate plc |
|
|
|
|
|
Corporate Governance Report
The Directors are responsible for the determination of the overall management of the Company including its investment policy and strategy. This includes the review of investment activity, performance and control and supervision of the Investment Manager and other advisers. All of the Directors are non-executive and are independent of the Investment Manager.
The Board is also responsible for its own composition, capital raising, meeting statutory obligations and public disclosure, financial reporting and entering into any material contracts by the Company.
The Directors have access to the advice and services of the Administrator and Secretary, who are responsible to the Board for ensuring that Board procedures are followed and that it complies with Company Law, applicable rules and regulations of the Guernsey Financial Services Commission, the London Stock Exchange and The International Stock Exchange.
Where necessary, in carrying out their duties, the Directors may seek independent professional advice at the expense of the Company.
The Board of the Company has considered the Principles and Provisions of the Association of Investment Companies Code of Corporate Governance issued in February 2019 ("AIC Code"). The AIC Code addresses the Principles and Provisions set out in the
The Board considers that reporting against the Principles and Provisions of the AIC Code, which has been endorsed by the Financial Reporting Council and the Guernsey Financial Services Commission provides more relevant information to Shareholders. The Board considers by reporting against the AIC Code, they are meeting their obligations under the
The AIC Code is available on the AIC website (www.theaic.co.uk). It includes an explanation of how the AIC Code adapts the Principles and Provisions set out in the
Except as disclosed within this report, the Board is of the view that the Company complied with the recommendations of the AIC Code and the relevant provisions of the AIC Code during the year ended 30 June 2022. Key issues affecting the Company's corporate governance responsibilities, how they are addressed by the Board and application of the AIC Code are presented below.
The AIC Code includes a provision relating to the appointment of a Senior Independent Director and the Board confirms that Sean Hurst is the appointed Senior Independent Director of the Company. Liaison with Shareholders is dealt with mainly by the Chairman of the Company and the Senior Independent Director working closely with the Company's Advisors.
Directors' Responsibilities to Stakeholders
Section 172 of the
Section 172 recognises that Directors are responsible for acting in a way that they consider, in good faith, is most likely to promote the success of the Company for the benefit of its shareholders as a whole. In doing so, they are also required to consider the broader implications of their decisions and operations on other key stakeholders and their impact on the wider community and the environment.
Key decisions are defined as those that are material to the Company, but also those that are significant to any of the Company's key stakeholder groups. The Company's engagement with its key stakeholders is outlined on page 39 of the corporate governance section of this report.
Board Independence and Composition
The Board consists of five Non-executive Directors, each of whom is independent. No member of the Board is connected to the Investment Manager or any of the service providers appointed. Four of the Board members were appointed in September/October 2017 following the retirement of the previous Board and the fifth member was appointed in May 2019 following the retirement of a Board member at the 2018 AGM.
Mr Funaki is a Director of Discover Investment Company which holds 1,405,776 ordinary shares in the Company representing 4.81% of the issued share capital. The Board are satisfied that this does not have any impact on Mr Funaki's independence as a Director of the Company.
Board Independence and Composition
As detailed in note 8 of the financial statements, Directors own shares in the Company as follows:
|
Hiroshi Funaki |
19,887 |
|
Sean Hurst |
5,312 |
|
Philip Scales |
10,077 |
|
Damien Pierron |
4,644 |
|
Saiko Tajima |
5,000 |
The Board reviews the independence of the Directors regularly and at least annually.
The Company is committed to ensuring that any board appointments are filled by the most suitably qualified candidates. The Board acknowledges the benefits of greater diversity and is committed to ensuring that the Board brings a wide range of skills, knowledge and experience. No specific diversity parameters have been set as the Board believes that all appointments should be made on merit and taken in the context of the skills, knowledge and experience required for an effective Board. The Nomination Committee is responsible for evaluating any new Board appointment and making appropriate recommendations to the Board.
The Board believes the current board members have the appropriate qualifications, experience and expertise to manage the Company. The Directors' biographies can be found on page 35.
Board Meetings and Attendance
The Board meets regularly during the year with representatives from the Investment Manager present. In addition, representatives from the Company's Broker and Administrator attend Board and committee meetings by invitation. At each quarterly Board meeting the performance of the portfolio is formally reviewed and during the year, Board members also attend investment meetings with members of the Manager's senior team. The Board members have a range of skills covering investment management, banking, compliance and corporate governance as well as prior experience of acting as directors of companies listed on the London Stock Exchange.
The Company's brokers and lawyers are consulted on any matters where external expertise is required, and external advisers attend board meetings as invited by the Chairman to report on and/or discuss specific matters relevant to the Company.
During the year 6 Board meetings were held and the record of attendance at each Board and committee meeting was as follows:
|
|
Board |
Audit and Risk |
Remuneration and Nomination |
Management Engagement |
|
Hiroshi Funaki |
6 (6) |
6 (6) |
1 (1) |
1 (1) |
|
Sean Hurst |
6 (6) |
6 (6) |
1 (1) |
1 (1) |
|
Philip Scales |
6 (6) |
6 (6) |
1 (1) |
1 (1) |
|
Damien Pierron |
6 (6) |
6 (6) |
1 (1) |
1 (1) |
|
Saiko Tajima |
6 (6) |
6 (6) |
1 (1) |
1 (1) |
In addition there were 2 meetings of the Buy-Back Sub-Committee held during the year.
Tenure of Board Members and Succession Planning
The Company has adopted a formal policy that neither the Chairman nor any other Director shall serve for more than 9 years.
Re-election of Directors
The Board has agreed that all Directors should submit themselves for annual re-election.
Mr. Hurst, Mr Funaki, Mr Pierron, Mr Scales and Ms Tajima will all stand for re-election at the 2022 AGM.
The individual performance of each Director standing for re-election or election has been evaluated by the other members of the Board and a recommendation will be made that Shareholders vote in favour of their re-election at the AGM in November 2022.
Administration
On 7 October 2019 the Board appointed Sanne Group (
Conflicts of Interest
The Directors are reminded at each Board meeting of their obligations to notify any changes in their statement of conflicts and also to declare any benefits received from third parties in their capacity as a Director.
A register of conflicts is maintained by the Administrator and formally reviewed on a quarterly basis. Each Director is required to declare any potential conflicts of interest on an ongoing basis.
Performance Evaluation
During the year the Board undertook an evaluation exercise into the effectiveness of both the Board and the Committees. The programme was undertaken by the Administrator and no significant issues were identified.
The Remuneration and Nomination Committee will again consider whether for the next evaluation due in 2022, an external facilitator should be appointed to undertake the evaluations.
Professional Development and Training
New Directors are provided with all relevant information regarding the Company's business and given the opportunity to meet with key functionaries prior to appointment. They are also provided with induction training.
It is the responsibility of each Director to ensure that they maintain sufficient knowledge to fulfil their role and so are encouraged to participate in seminars and training courses where appropriate.
Committees of the Board
Four Committees have been formed, an Audit and Risk Committee, a Remuneration and Nomination Committee, a Management Engagement Committee and an ESG Committee. Since September/October 2017 the Company has been through a period of considerable change and all Board members are members of each committee. The Chairman of the Company does not Chair any of the Committees. Details of the Chairman of each committee, together with the number of meetings held during the year are shown on pages 37 to 39. A summary of the Terms of Reference of each committee is detailed below and a copy of the Terms of Reference are available on the Company's website www.vietnamholding.com.
Audit and Risk Committee
The Chairman of the Audit and Risk Committee is Philip Scales and the Committee meets at least twice per annum. All members of the Board are members of the Committee. This includes the Chairman of the Company where, given the size of the Board, the experience of all members and the independence of the Company Chairman, it is felt appropriate that all Board members play a role in the Audit and Risk Committee. The principal responsibility of the Committee is to monitor the production of the Interim and Annual Financial Statements and to present these to the Board for approval.
Other duties include reviewing the internal financial controls and monitoring third party service providers, review and monitor the external auditor's independence and objectivity along with the effectiveness of the audit process and to make recommendations to the Board in relation to the appointment of the External Auditor together with their remuneration.
A report of the Audit and Risk Committee is detailed on pages 41 to 42.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee is chaired by Saiko Tajima and all members of the Board are members of the Committee. The Board considers that all the Directors are independent and therefore eligible to be members of the Committee. The Committee meets at least once in each year and at such other times as may be considered necessary.
Remuneration and Nomination Committee
The principal duties of the Remuneration and Nomination Committee are to review the fees paid to the Non-executive Directors, to consider the appointment of external remuneration consultants, to review the structure, size and composition of the Board, make recommendations to the Board for any changes and to consider succession planning. The Committee also undertakes the evaluation of the appointment of any additional or replacement Directors and ensures they are provided with training and induction. The Committee arranges for an annual evaluation of all Board and Committee members.
During the year the Committee reviewed the fees paid to Directors and resolved that no changes be recommended.
The AIC Code includes a provision relating to the appointment of a Senior Independent Director of which Sean Hurst occupies this role.
No new Board appointments were considered during the year but the Committee reaffirmed the policy that no Director should serve for more than 9 years.
Management Engagement Committee
The Chairman of the Management Engagement Committee is Damien Pierron and the Committee shall meet at least once a year. All members of the Board are members of the Committee. The principal duties of the Committee are to review the performance and appointment of the Investment Manager together with their remuneration and to review the effectiveness and competitiveness of the other main service providers and functionaries together with reviewing their performance.
A share buy-back sub-committee consisting of Hiroshi Funaki and Sean Hurst has been formed under the Management Engagement Committee and meets regularly to review and monitor the share buy-back programme. Damien Pierron also joins the share buy-back sub-committee on an ad-hoc basis.
During the year the Committee reviewed the performance of the Investment Manager, Administrator and Sub-Administrator, Corporate Broker and Registrar. No changes were recommended as a result of these reviews.
Environmental, Social and Governance Committee
The ESG Committee was established in the prior year and is chaired by Sean Hurst with all members of the Board forming the Committee. The aim of the Committee is to establish a unified view of ESG, increasing understanding of all three aspects: environmental, social and governance, and to promote the robust standards of corporate governance that the Company adopts.
The purpose of the ESG Committee, which shall meet at least once a year, is to support the Company's on-going commitment to environmental, health and safety, corporate social responsibility, corporate governance, sustainability, and other public policy matters relevant to the Company (collectively, "ESG Matters").
Shareholder Engagement
The Company is committed to listening and communicating openly with its Shareholders to ensure that its strategy, business model and performance are clearly understood. All Board members have responsibility for Shareholder liaison but Shareholder contact is mainly dealt with by the Chairman of the Company and the Senior Independent Director in close liaison with the Company Advisors.
Copies of the Annual Report are sent to all Shareholders and can be downloaded from the website. Other Company information including the Interim Report is also available on the website.
The Company holds an AGM in each year, which gives investors the opportunity to enter into dialogue with the Board and for the Board to receive feedback and take action as necessary. The Investment Manager also participates in meetings with investors arranged by the Company's Broker and has arranged seminars and webinars to update current and prospective investors on the developments in the Vietnamese market and the performance of the Company. The Investment Manager also updates the Company's website and sends out monthly factsheets on the Company to investors who have registered to receive such updates. The Company has a LinkedIn page which is administered by the Investment Manager.
The Board reviews proxy voting reports and any significant negative response is discussed with relevant Shareholders and, if necessary, where appropriate or possible, action is taken to resolve any issues. In the interest of transparency and best practice, the level of proxy votes (for, against and vote withheld) lodged on each resolution is declared at all general meetings and announced.
Corporate Policies
Anti-Bribery and Corruption Policy
The Board is committed to the prevention of bribery throughout the organisation and will take every step necessary to ensure to the best of its ability, that business is conducted fairly, honestly and openly. It has adopted a formal policy to combat fraud, bribery and corruption and will seek annual confirmation from the Investment Manager and other service providers it engages that they have similar policies in place. Furthermore, the Board has zero tolerance to the criminal facilitation of tax evasion. These policies apply to the Company and to each of its Directors. Further, the policies are shared with each of the Company's service providers, each of which confirms its compliance annually to the Board.
Criminal Facilitation of Tax Evasion Policy
The Board has taken steps to ensure there is no criminal facilitation of tax evasion. This applies to the Company and to each of its Directors, as well as service providers. A policy has been adopted by the Board.
General Data Protection Regulation
The Company abides by general data protection regulation. As it is established in the Bailiwick of
The Company
Global Greenhouse Gas Emissions
The Company has no significant greenhouse gas emissions to report from its operations for the year to 30 June 2022, nor does it have responsibility for any other emission producing sources. The Company is very conscious of its own carbon footprint in carrying out its business activities. The main source of this for the Company is in the international and domestic air travel of the Board of Directors and members of the Investment Manager in conducting the business of the Company and meeting with Shareholders. For the year to 30 June 2022, many of the board meetings were conducted through video-conference as a result of restrictions related to COVID-19. During the year members of the Board travelled to
The Company engaged a specialist consulting firm to estimate the carbon footprint of the portfolio, and this is detailed in the Sustainability Report.
Gender Metrics
The Board of the Company recognises the governance mechanism to ensure there is diversity amongst the Directors and as such a female was appointed to the Board in May 2019. In addition, the Board is reviewing the Policy Statement issued by the FCA in April 2022 on Diversity and inclusion on company boards and executive management and consequential changes to the Listing Rules. These changes apply to accounting periods starting on or after 1 April 2022 and will be reported on more fully in the 2023 financial statements of the Company. The Board notes also that 40% of the team members employed by the Investment Manager and its subsidiary in
Audit and Risk Committee Report
The main items that the Audit and Risk Committee (the "Committee") has reviewed during the year ended 30 June 2022 were:
● reviewing the content of the Interim Report and the Annual Report;
● reviewing the independence and effectiveness of the External Auditor;
● considering and reviewing the internal control and risk management systems and the work of the service providers; and
● reviewing the control framework with the assistance of the Investment Manager and Administrator.
Internal Control
As a company with a Board consisting entirely of Non-executive Directors and which outsources the day-to-day activities of portfolio management, administration, accounting and company secretarial to external service providers, the Board considers the provision of an internal audit function is not relevant to the position of the Company.
The Committee reviews the internal financial control systems for their effectiveness and through the Management Engagement Committee, monitors the performance of the external service providers. The Board recognises its ultimate responsibility for the Company's system of internal controls to ensure the maintenance of proper accounting records, the reliability of the financial information upon which business decisions are made and that the assets of the Company are safeguarded. Through these procedures, the Directors have kept under review the effectiveness of the internal control system throughout the year and up to the date of this report. There were no issues arising from this review.
Membership and Attendance
The Committee membership currently consists of all Board members under the Chairmanship of Philip Scales. This includes the Chairman of the Company where, given the size of the Board, the experience of all members and the independence of the Company Chairman, it is felt appropriate that all Board members play a role in the Audit and Risk Committee. The Terms of Reference allow appointments to the Committee for a period of up to 3 years and this may be extended for two further 3-year periods provided that the Director remains independent.
The Committee holds at least three meetings a year which are to review the Annual and Half-Year Reports of the Company and also for audit planning purposes and a review of risks relevant to the Company. Details of the number of committee meetings held during the year ended 30 June 2022 and the number of those attended by each committee member are shown on page 37.
The External Auditor is invited to attend committee meetings where the Annual and Half-Year Reports are considered and separate meetings are held with the External Auditor where the Investment Manager is not present.
Principal Duties
The main responsibilities of the Committee include:
● to monitor the integrity of the financial statements of the Company and any formal announcements relating to the Company's financial performance;
● to review the Company's internal financial controls and the internal control and risk management systems of the Company and its third party service providers;
● to make recommendations to the Board in relation to the appointment of the External Auditor and their remuneration; and
● to review and monitor the External Auditor's independence and objectivity and the effectiveness of the audit process.
A copy of the Terms of Reference of the Committee are available either from the Company's website or from the Company's Administrator.
Valuation of Investments
The fair value of the Company's investments at 30 June 2022 was
Valuation of Investments
The Committee reviewed the portfolio valuation as at 30 June 2022 and obtained confirmation from the Investment Manager that the Company's policies on the valuation of investments had been followed. The Committee also made enquiries of the Sub-Administrator and Custodian, both of whom are independent of the Company, to check procedures are in place to ensure the portfolio is valued correctly.
The Committee agreed the approach to the audit of the valuation of investments with the External Auditor prior to the commencement of the audit. The results of the audit in this area were reported by the External Auditor and there were no significant disagreements between the Investment Manager, the Sub-Administrator and the External Auditor's conclusions.
The Board reviews the changes in valuations at each quarterly Board meeting.
External Audit
KPMG Channel Islands Limited ("KPMG") has been the External Auditor since the Company re-domiciled in
Annually, the Committee reviews the performance of KPMG in order to recommend to the Board whether or not the Auditors should be reappointed for the next year.
Audit fees payable to KPMG for 2022 are
The Committee has reviewed KPMG's report on their independence and objectivity including their structure for the audit of the Company and is satisfied that the services provided by KPMG do not prejudice its independence. The Committee will continue to review any non-audit services that may be provided by KPMG in order to ensure their continuing independence and integrity.
Risk Management
An outline of the risk management framework and principal risks is detailed on pages 32 to 34. The Committee will keep under review financial and operational risk including reviewing and obtaining assurances from key service providers for the controls for which they are responsible.
Anti-Bribery and Corruption
The Company has a zero-tolerance approach to bribery and corruption, in line with the
Audit Quality Review (AQR) Inspection Report
On 26 August 2022, the Company received a copy of an AQR Inspection Report issued by the Financial Reporting Council following their completion of a review into the Company's 30 June 2021 annual audit. The AQR described some other findings that were required to be implemented by KPMG Channel Islands Limited in the following year's audit of the Annual Report.
Annual Report
The Committee has reviewed the Annual Report along with reports and explanations from the Company's Investment Manager, Administrator, and other service providers. The Committee is satisfied that the Annual Report is fair, balanced, and understandable and that it provides the necessary information for Shareholders to assess the Company's performance, business model, and strategy.
The Committee is satisfied that KPMG has fulfilled its responsibilities in respect of the annual audit and has recommended that KPMG be re-appointed for the forthcoming financial year.
Directors' Remuneration Policy and Report
Remuneration Policy
The Directors are entitled to receive fees for their services which reflect their experience and the time commitment required. At the Annual General Meeting to be held in November 2022 an ordinary resolution seeking approval for the Directors' remuneration report will be put to Shareholders.
Directors' Remuneration
Directors' fees are paid within limits established in the Articles of Incorporation which shall not exceed an aggregate of
The Directors are also paid a per diem fee of
The Company has no bonus schemes, pension schemes, share option or other long-term incentive schemes in place for the Directors.
The single total figure of remuneration for each Director who served during the year ended 30 June 2022 and the previous year is as follows:
|
|
Year ended 30 June 2022 |
|
Year ended 30 June 2021 |
||||
|
|
|
Additional |
|
|
|
Additional |
|
|
|
Base Fees |
Ad hoc Fees |
Total |
|
Based Fees |
Ad hoc Fees |
Total |
|
Director |
USD |
USD |
USD |
|
USD |
USD |
USD |
|
Hiroshi Funaki (Chairman) |
60,000 |
10,125 |
70,125 |
|
60,000 |
11,250 |
71,250 |
|
Sean Hurst (Senior Independent Director) |
55,185 |
10,125 |
65,310 |
|
55,829 |
10,741 |
66,570 |
|
Philip Scales (Audit and Risk Committee Chairman) |
55,000 |
9,000 |
64,000 |
|
55,000 |
6,750 |
61,750 |
|
Damien Pierron |
50,000 |
9,424 |
59,424 |
|
50,000 |
7,873 |
57,873 |
|
Saiko Tajima |
50,000 |
9,000 |
59,000 |
|
50,000 |
6,000 |
56,000 |
|
Total |
270,185 |
47,674 |
317,859 |
|
270,829 |
42,614 |
313,443 |
Directors' Report
The Directors present the Annual Report and Financial Statements of the Company for the year ended 30 June 2022.
The Company
VietNam Holding Limited (the "Company") is a closed-end investment company that was incorporated in the
The investment objective of the Company is to achieve long-term capital appreciation by investing in a diversified portfolio of companies that have high growth potential at an attractive valuation.
At the Extraordinary General Meeting held on 31 October 2018 the Shareholders voted in favour of the continuance resolution, authorising the Company to operate in its current form through to the 2023 Annual General Meeting when a similar resolution will be put forward for Shareholders' approval.
Dynam Capital, Ltd has been appointed as the Company's Investment Manager and is responsible for the day-to-day management of the Company's investment portfolio in accordance with the Company's investment policies, objectives and restrictions.
Results
The net loss for the year ended 30 June 2022 amounted to
Going Concern
The financial position of the Company, its cash flows and liquidity position are described in Financial Statements and the Notes to Financial Statements. These also contain the Company's objectives, policies, processes for managing its capital, its financial risks management objectives, details of its financial instruments, and its exposures to credit risk and liquidity risk.
The Company's forecasts and projections have been stress tested taking into account the potential for (i) asset value declines, (ii) declines in cash dividends from equities held in the portfolio and (iii) share buybacks and tender offers. The Directors note that the underlying liquidity of Vietnamese stocks has increased significantly over the last twelve months with average daily traded volumes increasing by as much as 5x the level of the prior year. The Director's also note that the portfolio is composed of a higher percentage of larger and more liquid stocks than in the prior year. Lastly, the Directors note that at year-end the portfolio is comprised of cash and quoted stocks only. The Company's liquidity position, taking into account cash held and with the ability to sell underlying assets to meet share buybacks, tenders and to meet the operating costs of the Company, shows that the Company is able to operate with appropriate liquidity and be able to meet its liabilities as they fall due. The Directors therefore have a reasonable expectation that the Company will have adequate resources to continue its operations for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.
Viability Statement
The Board has considered the viability period for the Company, using the criteria set out in the
In arriving at this conclusion, the Board considered:
- The volatility of global economic conditions, lingering impacts of COVID-19, the war in Ukraine and inflation:
The Board considered the impact and effectiveness of mitigation strategies being mandated by governments in impacted countries; the adverse financial impact already being experienced by the Company: the disruption to economic activity and financial pressures and impact on investments in the Company's portfolio. The Board also engaged with the Investment Manager on the longer-term impact of climate change, and other societal change factors, to the portfolio. Additionally, the Board took into consideration the impact on the capital markets in
- Business environment:
Whilst the impact of COVID-19 on the global business environment may linger, there are visible signs of post-COVID-19 recovery which the Board were able to see first-hand on their visit to
- Continuation vote in 2023: The Fund has a formal continuation vote in 2023 and it is the current intention of the Board to table a continuation resolution at the 2023 Annual General meeting.
- Operations:
2021 was another year of significant operational change caused by the COVID-19 pandemic. During parts of 2021 there were strict lockdowns enforced in
- Investment:
· The liquidity of the Company's underlying portfolio is relatively high: average daily trading volumes on
· The current portfolio is low to medium risk based on assessments both individually and in combination of liquidity risk, credit risk, interest rate risk and currency risk. The Investment Manager and the Board review and evaluate the portfolio on a monthly basis.
- Principal risks:
The Board's review considered the Company's cash flows and income flows, with reference to operational, business, market, currency, liquidity, interest rate and credit risk associated in financial instruments set out in note 3 (Financial Instruments and Associated Risks) and note 4 (Operating Segments) of the financial statements on pages 63 to 66. The statistical modelling is used to quantify these risks, which ensures that the Company holds sufficient financial assets and capital to mitigate the impact of these risks.
- Incomes and expenses:
· The Company has a portfolio that generates investment income through dividends payments. The cash dividends received can be used to partially offset the Company's on-going expenses. In the year under review, total on-going expenses were covered 0.43 times by investment income. In the following year, the current investment income is forecast to cover 0.48 times the amount of on-going expenses. In the stress-tested scenario with significant declines in cash dividends forecasted, the investment income is forecast to cover 0.39 times on-going expenses.
· The Company maintains a cash buffer of approximately 3.4% of NAV to help meet on-going expenses.
Given the adequate levels of cover set out above, the cash buffer, the liquidity levels and the overall portfolio risk, the Board has reasonable expectation that the Company can continue in operation and meet its liabilities over the forecast period.
The Company's viability depends on the global economy and markets continuing to function. The Board has also considered the possibility of a wide-ranging collapse in corporate earnings and/or the market value of listed securities. To the latter point, it should be borne in mind that a significant proportion of the Company's expenses are in investment management fees linked to the level of net assets of the Company, which are therefore variable in nature and would naturally reduce if the market value of the Company's assets were to fall.
In order to maintain viability, the Company has robust risk controls as set out in the Directors' Report and the risk management and control framework have the objectives of monitoring and reducing the likelihood and impact of operational risks including poor judgement in decision-making, risk-taking that exceeds the levels agreed by the Board, human error, or control processes being deliberately ignored.
In this context, the Board considers that the prospects for economic activity will remain such that the investment objective, policy and strategy of the Company will be viable for the foreseeable future and through a period of at least three years from 30 June 2022.
Key Performance Indicators ("KPIS")
To ensure the Company meets its objectives the Board evaluates the performance of the Investment Manager at least at each quarterly Board meeting and takes into the following performance indicators:
● NAV - reviews the performance of the portfolio
● Discount to NAV - and reviews the average discount for the Company's share price against its peer group.
Share Capital and Share Buy-Backs
An active discount control mechanism to address the imbalance between the supply of and demand for ordinary shares using share buy backs is employed by the Broker and monitored by the Board. At the Annual General Meeting ("AGM") of the Company held on 1 November 2021, the Company was granted the general authority to purchase in the market up to 14.99% of the ordinary shares in issue. This authority will expire at the AGM to be held in November 2022.
In the year ended 30 June 2022 661,084 ordinary shares had been bought back and cancelled under the Company's share buyback programme. A further 12,737,184 ordinary shares were bought back following the Company's tender offer in September 2021. Since the year-end and up to 29 September 2022, being the latest practicable date prior to publication of the report, the Company bought back and cancelled 205,195 ordinary shares.
Share Buy-Backs to the Year-Ended 30 June 2022
|
|
30 June 2022 |
|
30 June 2021 |
|||
|
|
Number of |
|
|
Number of |
|
|
|
|
Shares |
USD'000 |
|
Shares |
USD'000 |
|
|
Opening balance at 1 July |
42,623,935 |
60,474 |
|
50,814,865 |
81,832 |
|
|
Share issued during the year |
- |
- |
|
- |
- |
|
|
Shares repurchased during the year |
(661,084) |
(2,655) |
|
(605,681) |
(1,180) |
|
|
Tender Offer |
(12,737,184) |
(56,884) |
|
(7,585,249) |
(20,178) |
|
|
Closing balance at 30 June |
29,225,667 |
935 |
|
42,623,935 |
60,474 |
|
Substantial Share Interests
The following shareholders owned 5% or more of the shares in issue of the Company, as stated on the share register as at 30 June 2022.
|
|
Number of |
Percentage of total |
|
Shareholder |
ordinary shares |
shares in issue |
|
Lynchwood Nominees Limited |
5,889,152 |
20.2 |
|
Citibank Nominees ( |
5,438,957 |
18.6 |
|
The Bank of |
2,821,510 |
9.7 |
|
Vidacos Nominees Limited |
2,603,438 |
8.9 |
|
Hargreaves Lansdown (Nominees) Limited |
1,747,238 |
6.0 |
|
Chase Nominees Limited |
1,650,120 |
5.6 |
|
Euroclear Nominees Limited |
1,605,934 |
5.5 |
|
Interactive Investor Services Nominees Limited |
1,451,443 |
5.0 |
Notification of Shareholdings
In the year to 30 June 2022 the Company received notifications in accordance with Chapter 5 of the DTR (which covers the acquisition and disposal of major shareholdings and voting rights), of the following changes to voting rights by shareholders of the Company. It should be noted that for non-
|
Shareholder |
Number of voting rights |
Percentage of total voting rights as at announcement date |
Announcement date |
|
De Pury Pictet Turrettini & Cie SA |
0 |
0 |
18 August 2021 |
|
City of London Investment Management Company Limited |
3,225,163 |
10.9 |
15 September 2021 |
|
Euroclear Nominees Limited |
5,198,113 |
17.5 |
21 September 2021 |
|
City of London Investment Management Company Limited |
2,963,123 |
10.0 |
17 December 2021 |
|
EdenTree Investment Management |
1,489,431 |
5.1 |
01 June 2022 |
Since 30 June 2022 the Company has not received DTR 5.1.2 notifications of holdings.
Statement of Directors' Responsibilities in Respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the EU and applicable law. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit or loss for that period.
In preparing these financial statements, the Directors are required to:
● select suitable accounting policies and then apply them consistently;
● make judgements and estimates that are reasonable, relevant and reliable;
● state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;
● assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
● use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
The Directors are responsible for keeping proper accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies (
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in
The Directors who hold office at the date of approval of this Director's Report confirm that so far as they are aware, there is no relevant audit information of which the Company's auditor is unaware, and that each Director has taken all the steps he ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Company's auditor is aware of that information.
Compliance with Disclosure and Transparency Directive
We confirm that to the best of our knowledge:
● the financial statements, prepared in accordance with the International Financial Reporting Standards as adopted by the EU ("IFRS"), give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company; and
● the Directors' Report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.
We consider the Annual Report and Financial Statements taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.
For and on behalf of the Board
Hiroshi Funaki
Chairman
30 September 2022
Independent Auditor's Report to the Members of VietNam Holding Limited
Our opinion is unmodified
We have audited the financial statements of VietNam Holding Limited (the "Company"), which comprise the statement of financial position as at 30 June 2022, the statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying financial statements:
· give a true and fair view of the financial position of the Company as at 30 June 2022, and of the Company's financial performance and cash flows for the year then ended;
· are prepared in accordance with International Financial Reporting Standards as adopted by the EU ("IFRS"); and
· comply with the Companies (
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (
Key audit matters: our assessment of the risks of material misstatement,
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matter was as follows (unchanged from 2021):
|
|
The risk |
Our response |
|
|
|
|
|
Valuation of Investments in securities at fair value
Refer to page 41 and 42 of the Audit and Risk Committee report, note 2d accounting policies and note 12 disclosures.
|
Basis: The Company's investment portfolio consists of listed equity securities trading on the Vietnamese stock exchange (the "Investments"). These Investments, carried at a fair value, are valued by the Company based on quoted prices in an active market for that instrument. Risk: The valuation of investments, due to their magnitude in the context of the financial statement as a whole, is considered to be the area which has the greatest effect on our overall audit strategy and allocation of resources in planning and completing our audit. |
Our audit procedures included: Internal Controls: We evaluated the design and implementation of the key control over the valuation of Investments. Use of KPMG Specialists: We engaged our own valuation specialist to independently price 100% of Investments to third party pricing sources. Assessing disclosures: We considered the Company's disclosures (see notes 2b and 2d) in relation to the use of estimates and judgements regarding the valuation of investments and the Company's investment valuation policies and fair value disclosures in note 12 "Fair Value Information" for compliance with IFRS. |
Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at
In line with our audit methodology, our procedures on individual account balances and disclosures were performed to a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial misstatements in individual account balances add up to a material amount across the financial statements as a whole. Performance materiality for the Company was set at 75% (2021: 75%) of materiality for the financial statements as a whole, which equates to
We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding
Our audit of the Company was undertaken to the materiality level specified above, which has informed our identification of significant risks of material misstatement and the associated audit procedures performed in those areas as detailed above.
Going concern
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or to cease its operations, and as they have concluded that the Company's financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its ability to continue as a going concern for at least a year from the date of approval of the financial statements (the "going concern period").
In our evaluation of the directors' conclusions, we considered the inherent risks to the Company's business model and analysed how those risks might affect the Company's financial resources or ability to continue operations over the going concern period. The risk that we considered most likely to affect the Company's financial resources or ability to continue operations over this period was availability of capital to meet operating costs and other financial commitments.
We considered whether this risk could plausibly affect the liquidity in the going concern period by comparing severe, but plausible downside scenarios that could arise from this risk against the level of available financial resources indicated by the Company's financial forecasts.
We considered whether the going concern disclosure in note 2(b) to the financial statements gives a full and accurate description of the directors' assessment of going concern.
Our conclusions based on this work:
· we consider that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate;
· we have not identified, and concur with the directors' assessment that there is not, a material uncertainty related to events or conditions that, individually or collectively, may cast significant doubt on the Company's ability to continue as a going concern for the going concern period; and
· we have nothing material to add or draw attention to in relation to the directors' statement in the notes to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Company's use of that basis for the going concern period, and that statement is materially consistent with the financial statements and our audit knowledge.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee that the Company will continue in operation.
Fraud and breaches of laws and regulations - ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud ("fraud risks") we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures included:
· enquiring of management as to the Company's policies and procedures to prevent and detect fraud as well as enquiring whether management have knowledge of any actual, suspected or alleged fraud;
· reading minutes of meetings of those charged with governance; and
· using analytical procedures to identify any unusual or unexpected relationships.
As required by auditing standards, we perform procedures to address the risk of management override of controls, in particular the risk that management may be in a position to make inappropriate accounting entries. On this audit we do not believe there is a fraud risk related to revenue recognition because the Company's revenue streams are simple in nature with respect to accounting policy choice, and are easily verifiable to external data sources or agreements with little or no requirement for estimation from management. We did not identify any additional fraud risks.
We performed procedures including
· Identifying journal entries and other adjustments to test based on risk criteria and comparing any identified entries to supporting documentation; and
· incorporating an element of unpredictability in our audit procedures.
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our sector experience and through discussion with management (as required by auditing standards), and from inspection of the Company's regulatory and legal correspondence, if any, and discussed with management the policies and procedures regarding compliance with laws and regulations. As the Company is regulated, our assessment of risks involved gaining an understanding of the control environment including the entity's procedures for complying with regulatory requirements.
The Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
The Company is subject to other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or impacts on the Company's ability to operate. We identified financial services regulation as being the area most likely to have such an effect, recognising the regulated nature of the Company's activities and its legal form. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of management and inspection of regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.
Other information
The directors are responsible for the other information. The other information comprises the information included in the annual report but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Disclosures of emerging and principal risks and longer term viability
We are required to perform procedures to identify whether there is a material inconsistency between the directors' disclosures in respect of emerging and principal risks and the viability statement, and the financial statements and our audit knowledge. we have nothing material to add or draw attention to in relation to:
· the directors' confirmation within the Viability Statement (page 44 - 46) that they have carried out a robust assessment of the emerging and principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity;
· the emerging and principal risks disclosures describing these risks and explaining how they are being managed or mitigated;
· the directors' explanation in the Viability Statement (page 44 - 46) as to how they have assessed the prospects of the Company, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
We are also required to review the Viability Statement, set out on page 44 - 46 under the Listing Rules. Based on the above procedures, we have concluded that the above disclosures are materially consistent with the financial statements and our audit knowledge.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material inconsistency between the directors' corporate governance disclosures and the financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is materially consistent with the financial statements and our audit knowledge:
· the directors' statement that they consider that the annual report and financial statements taken as a whole is fair, balanced and understandable, and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy;
· the section of the annual report describing the work of the Audit Committee, including the significant issues that the audit committee considered in relation to the financial statements, and how these issues were addressed; and
· the section of the annual report that describes the review of the effectiveness of the Company's risk management and internal control systems.
We are required to review the part of Corporate Governance Statement relating to the Company's compliance with the provisions of the
We have nothing to report on other matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (
· the Company has not kept proper accounting records; or
· the financial statements are not in agreement with the accounting records; or
· we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit.
Respective responsibilities
Directors' responsibilities
As explained more fully in their statement set out on page 48, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor's report. Reasonable assurance is a high level of assurance but does not guarantee that an audit conducted in accordance with ISAs (
A fuller description of our responsibilities is provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities.The purpose of this report and restrictions on its use by persons other than the Company's members as a body
This report is made solely to the Company's members, as a body, in accordance with section 262 of the Companies (
Andrew J.
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
30 September 2022
Statement of Financial Position
As at 30 June 2022
|
|
|
2022 |
2021 |
|
|
Notes |
USD |
USD |
|
Assets |
|
|
|
|
Non-current assets |
|
|
|
|
Investments at fair value through profit or loss |
3 |
120,957,996 |
193,108,385 |
|
Total non-current assets |
|
120,957,996 |
193,108,385 |
|
Current assets |
|
|
|
|
Cash and cash equivalents |
|
8,160,681 |
6,031,337 |
|
Prepayments |
|
- |
9,290 |
|
Accrued dividends and interest |
|
58,772 |
30,153 |
|
Receivables on sale of investments |
|
- |
1,239,041 |
|
Total current assets |
|
8,219,453 |
7,309,821 |
|
Total assets |
|
129,177,449 |
200,418,206 |
|
Equity |
|
|
|
|
Share capital |
5 |
166,645,041 |
166,645,041 |
|
Reserve for own shares |
5 |
(165,709,783) |
(106,170,790) |
|
Retained earnings |
|
127,886,909 |
135,606,219 |
|
Total equity |
|
128,822,167 |
196,080,470 |
|
Liabilities |
|
|
|
|
Payables on purchase of investments |
|
- |
3,905,824 |
|
Accrued expenses |
|
355,282 |
431,912 |
|
Total liabilities |
|
355,282 |
4,337,736 |
|
Total equity and liabilities |
|
129,177,449 |
200,418,206 |
The financial statements on pages 54 to 70 were approved by the Board of Directors on 30 September 2022 and were signed on its behalf by
Hiroshi Funaki Philip Scales
Chairman of the Board of Directors Chairman of the Audit and Risk Committee
The accompanying notes on pages 58 to 70 form an integral part of these financial statements.
Statement of Comprehensive Income
For the year ended 30 June 2022
|
|
|
2022 |
2021 |
|
|
Notes |
USD |
USD |
|
Dividend income from equity securities at fair value through profit or loss |
|
1,811,555 |
2,390,216 |
|
Net (loss)/gain from investments at fair value through profit or loss |
7 |
(5,211,105) |
100,730,119 |
|
Net foreign exchange loss |
|
(67,666) |
(1,896) |
|
Interest income from investments at fair value through profit or loss |
|
- |
694,162 |
|
Other income |
|
- |
163,128 |
|
Net investment (loss)/gain |
|
(3,467,216) |
103,975,729 |
|
Investment management fees |
8 |
2,737,804 |
2,438,087 |
|
Advisory fees |
|
15,715 |
111,579 |
|
Directors' fees and expenses |
8 |
385,292 |
328,690 |
|
Custodian fees |
9 |
152,863 |
146,875 |
|
Administrative and accounting fees |
10 |
216,939 |
219,271 |
|
Audit fees |
|
71,428 |
78,758 |
|
Other expenses |
|
672,053 |
498,581 |
|
Total operating expenses |
|
4,252,094 |
3,821,841 |
|
(Loss)/income for the year |
|
(7,719,310) |
100,153,888 |
|
Other comprehensive income |
|
- |
- |
|
Total comprehensive (loss)/income for the year |
|
(7,719,310) |
100,153,888 |
|
Basic and diluted (loss)/earnings per share |
14 |
(0.24) |
2.19 |
The accompanying notes on pages 58 to 70 form an integral part of these financial statements.
|
|
|
Reserve for |
Retained |
|
|
|
Share capital |
own shares |
earnings |
Total |
|
|
USD |
USD |
USD |
USD |
|
Balance at 1 July 2020 |
166,645,041 |
(84,813,068) |
35,452,331 |
117,284,304 |
|
Total comprehensive income for the year |
|
|
|
|
|
Change in net assets attributable to shareholders |
- |
- |
100,153,888 |
100,153,888 |
|
Total comprehensive income for the year |
- |
- |
100,153,888 |
100,153,888 |
|
Transactions in shares |
|
|
|
|
|
Repurchase of own shares |
- |
(21,357,722) |
- |
(21,357,722) |
|
Total transactions in shares |
- |
(21,357,722) |
- |
(21,357,722) |
|
Balance at 30 June 2021 |
166,645,041 |
(106,170,790) |
135,606,219 |
196,080,470 |
|
Balance at 1 July 2021 |
166,645,041 |
(106,170,790) |
135,606,219 |
196,080,470 |
|
Total comprehensive loss for the year |
|
|
|
|
|
Change in net assets attributable to shareholders |
- |
- |
(7,719,310) |
(7,719,310) |
|
Total comprehensive loss for the year |
- |
- |
(7,719,310) |
(7,719,310) |
|
Transactions in shares |
|
|
|
|
|
Repurchase of own shares |
- |
(59,538,993) |
- |
(59,538,993) |
|
Total transactions in shares |
- |
(59,538,993) |
- |
(59,538,993) |
|
Balance at 30 June 2022 |
166,645,041 |
(165,709,783) |
127,886,909 |
128,822,167 |
The accompanying notes on pages 58 to 70 form an integral part of these financial statements.
Statement of Cash Flows
For the year ended 30 June 2022
|
|
|
2022 |
2021 |
|
|
Notes |
USD |
USD |
|
Cash flows from operating activities |
|
|
|
|
Total comprehensive (loss)/income for the year |
|
(7,719,310) |
100,153,888 |
|
Adjustments to reconcile total comprehensive income/(loss) to net cash from operating activities: |
|
|
|
|
Dividend income |
|
(1,811,555) |
(2,390,216) |
|
Interest income |
|
- |
(694,162) |
|
Net loss/(gain) from investments at fair value through profit or loss |
7 |
5,211,105 |
(100,730,119) |
|
Net foreign exchange loss |
|
67,666 |
1,896 |
|
Purchase of investments |
|
(78,323,705) |
(87,370,357) |
|
Proceeds from sale of investments |
|
145,262,989 |
110,054,346 |
|
Changes in working capital |
|
|
|
|
Decrease/(increase) in receivables on sale of investments |
|
1,239,041 |
(1,239,041) |
|
(Decrease)/increase in payables on purchase of investments |
|
(3,905,824) |
3,728,278 |
|
(Decrease)/increase in accrued expenses |
|
(76,630) |
146,408 |
|
Decrease/(increase) in prepayments |
|
9,290 |
(9,290) |
|
Dividends received |
|
1,690,983 |
2,392,036 |
|
Interest received |
|
91,953 |
786,115 |
|
Net cash from operating activities |
|
61,736,003 |
24,829,782 |
|
Cash flows used in financing activities |
|
|
|
|
Repurchase of own shares |
|
(59,538,993) |
(21,357,722) |
|
Net cash used in financing activities |
|
(59,538,993) |
(21,357,722) |
|
Net increase in cash and cash equivalents |
|
2,197,010 |
3,472,060 |
|
Cash and cash equivalents at beginning of the year |
|
6,031,337 |
2,561,173 |
|
Effect of exchange rate fluctuations on cash held |
|
(67,666) |
(1,896) |
|
Cash and cash equivalents at end of the year |
|
8,160,681 |
6,031,337 |
The accompanying notes on pages 58 to 70 form an integral part of these financial statements.
Notes to the Financial Statements
For the year ended 30 June 2021
1 The Company
VietNam Holding Limited (the "Company") is a closed-end investment company that was incorporated in the
On 8 March 2019 the Company's ordinary shares were cancelled from trading on AIM and admitted to the Premium segment of the official list of the
The investment objective of the Company is to achieve long-term capital appreciation by investing in a diversified portfolio of companies that have high growth potential at an attractive valuation.
At the Extraordinary General Meeting held on 31 October 2018 the Shareholders voted in favour of the continuance resolution, authorising the Company to operate in its current form through to the 2023 Annual General Meeting when a similar resolution will be put forward for Shareholders' approval.
Dynam Capital, Ltd has been appointed as the Company's Investment Manager and is responsible for the day-to-day management of the Company's investment portfolio in accordance with the Company's investment policies, objectives and restrictions.
Sanne Group (
Standard Chartered Bank (
The registered office of the Company is De Catapan House, Grange Road,
2 Significant Accounting Policies
(a) Statement of compliance
These financial statements, which give a true and fair view, have been prepared in accordance with the International Financial Reporting Standards ("IFRSs") as adopted by the European Union and comply with the Companies (
(b) Basis of preparation
The financial statements are presented in
Going concern
The Directors have reasonable expectations and are satisfied that the Company has adequate resources to continue its operations and meet its commitments for the foreseeable future and they continue to adopt the going concern basis for the preparation of the financial statements. In making this statement, the Directors confirm the Company's forecasts and projections have been stress tested taking into account the potential for (i) asset value declines, (ii) declines in cash dividends from equities held in the portfolio and (iii) share buybacks and tender offers. The Directors note that the underlying liquidity of Vietnamese stocks has increased over the last twelve months with average daily traded volumes increasing by as much as 5x the level of the prior year. The Directors also note that the portfolio is composed of a higher percentage of larger and more liquid stocks than in the prior year. Lastly, the Directors note that at year-end the portfolio is comprised of cash and quoted stocks only. The Company's liquidity position, taking into account cash held and with the ability to sell underlying assets to meet share buybacks, tenders and to meet the operating costs of the Company, shows that the Company is able to operate with appropriate liquidity and be able to meet its liabilities as they fall due. The fund has a formal continuation vote in 2023 and it is the current intention of the Board to table a continuation resolution at the 2023 Annual General meeting. The Directors therefore have a reasonable expectation that the Company will have adequate resources to continue its operations for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in preparing the financial statements.
Critical accounting estimates and judgements
The preparation of financial statements in accordance with IFRS as adopted by the European Union requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.
The estimated and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
Functional currency
The Company's shares were issued in USD and the listing of the shares on the Main Market and TISE is in USD. The performance of the Company is measured and reported to the investors in USD, although the primary activity of the Company is to invest in the Vietnamese market. The Board considers the USD as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions.
Fair value of financial instruments
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Company uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at each reporting date.
(c) Foreign currency translation
Transactions in foreign currencies other than the functional currency are translated at the applicable rates on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated to USD at the applicable rates on the year-end date. Foreign currency exchange differences arising on translation and realised gains and losses on disposals or settlements of monetary assets and liabilities are included in the Statement of Comprehensive Income. Foreign currency exchange differences relating to investments at fair value through profit or loss are included in the realised and unrealised gains and losses on those investments within "Net gain/(loss) from investments at fair value through profit or loss" on the Statement of Comprehensive Income. All other foreign currency exchange differences relating to other monetary items, including cash and cash equivalents, are included in net foreign exchange gains and losses in the Statement of Comprehensive Income.
(d) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
(i) Classification
In accordance with IFRS 9, the Company classifies its financial assets and financial liabilities at initial recognition into the categories of financial assets and financial liabilities discussed below.
Financial assets
The Company classifies its financial assets as subsequently measured at amortised cost or measured at fair value through profit or loss on the basis of both:
● The entity's business model for managing the financial assets
● The contractual cash flow characteristics of the financial assets
(d) Financial instruments (continued)
(i) Classification (continued)
Financial assets (continued)
Financial assets measured at amortised cost
A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company includes in this category accrued income, cash and cash equivalents and receivables on sale of investments.
Financial assets measured at fair value through profit or loss ("FVTPL")
A financial asset is measured at fair value through profit or loss if:
a) Its contractual terms do not give rise to cash flows on specified dates that are solely payments of principal and interest (SPPI) on the principal amount outstanding; or
b) It is not held within a business model whose objective is either to collect contractual cash flows, or to both collect contractual cash flows and sell; or
c) At initial recognition, it is irrevocably designated as measured at FVTPL when doing so eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.
The Company measures all its investments at FVTPL.
(ii) Recognition and initial measurement
Financial assets and liabilities at fair value through profit or loss are recognised initially on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument. Other financial assets and liabilities are recognised on the date they are originated.
Financial assets and financial liabilities at fair value through profit or loss are recognised initially at fair value, with transaction costs recognised in the Statement of Comprehensive Income. Financial assets or financial liabilities not at fair value through profit or loss are recognised initially at fair value plus transaction costs that are directly attributable to their acquisition or issue.
(iii) Subsequent measurement
After initial measurement, the Company measures financial instruments which are classified as FVTPL at fair value. Subsequent changes in the fair value of those financial instruments are recorded in net gain or loss on financial assets and liabilities at FVTPL in the Statement of Comprehensive Income. Interest and dividends earned or paid on these instruments are recorded separately in interest income or expense and dividend income in the Statement of Comprehensive Income.
(iv) Derecognition
A financial asset is derecognised when the Company no longer has control over the contractual rights that comprise that asset. This occurs when the rights are realised, expire or are surrendered.
Financial assets that are sold are derecognised, and the corresponding receivables from the buyer for the payment are recognised on the trade date, being the date the Company commits to sell the assets.
A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expired.
(v) Fair value measurement
'Fair value' is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Company has access at that date. The fair value of a liability reflects its non-performance risk.
When available, the Company measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as 'active' if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. The Company measures instruments quoted in an active market at the last traded price.
If there is no quoted price in an active market, then the Company uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would consider in pricing a transaction.
The Company recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which the change has occurred.
Any increases or decreases in fair value are recognised in the Statement of Comprehensive Income as an unrealised gain or loss from investments at FVTPL.
(vi) Impairment of financial assets
At each reporting date, the Company measures the loss allowance on financial assets carried at amortised cost at an amount equal to the lifetime expected credit losses if the credit risk has increased significantly since initial recognition. If, at the reporting date, the credit risk has not increased significantly since initial recognition, the Company measures the loss allowance at an amount equal to 12-month expected credit losses. The expected credit losses are estimated using a provision matrix based on the Company's historical credit loss experience adjusted for factors that are specific to the accounts receivables, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date, including time value of money where appropriate. The measurement of expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there is a default) and exposure at the default. The assessment of the probability of default and loss given default is based on historical data adjusted by forward-looking information.
(vii) Cash and cash equivalents
Cash comprises current deposits with banks. Cash equivalents are short-term highly liquid investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other purposes.
(e) Offsetting
Financial assets and liabilities are offset and the net amount is reported in the Statement of Financial Position when, and only when, the Company has a legally enforceable right to set off the recognised amounts and the transactions are intended to be settled on a net basis or simultaneously, e.g. through a market clearing mechanism.
(f) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.
Repurchase, disposal and reissue of share capital (treasury shares)
Where the Company purchases its own share capital, the consideration paid, which includes any directly attributable costs, is recognised as a deduction from equity shareholders' funds through the Company's reserves for own shares. The reserves for own shares represents share capital which can be reissued in the future or subsequently cancelled. When such shares are subsequently sold or re-issued to the market any consideration received, net of any directly attributable incremental transaction costs, is recognised as an increase in equity shareholders' funds through the reserve of own shares account. The Directors have cancelled all the shares repurchased during the current and the previous year.
(g) Tax
Tax expense comprises current tax. Current tax is recognised in the Statement of Comprehensive Income except to the extent that it relates to items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
The Company is a tax resident in
The Company is liable to Vietnamese transactional tax of 0.1% (2021: 0.1%) on the sales proceeds of the onshore sale of equity investments. The related taxes on onshore sales proceeds are accounted for at net amount in the Statement of Comprehensive Income.
(h) Interest income and expense
Interest income and expense is recognised in the Statement of Comprehensive Income using the effective rate method. The effective interest rate method is a method of calculating the amortised cost of a financial asset or financial liability and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial instrument - or, when appropriate, a shorter period - to the net carrying amount of the financial asset or financial liability
When calculating the effective interest rate, the Directors estimate cash flows considering all contractual terms of the financial instrument but do not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts.
(i) Dividend income
Dividend income is recognised in the Statement of Comprehensive Income on the date on which the right to receive payment is established. For listed equity securities, this is usually the ex-dividend date. Dividend income from equity securities designated as at fair value through profit or loss is recognised in the Statement of Comprehensive Income as a separate line item.
(j) Fee and commission expense
Fees and commission expenses are recognised in the Statement of Comprehensive Income as the related services are performed.
(k) Earnings per share
The Company presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held.
3 Financial Instruments and Associated Risks
Financial assets of the Company include investments at fair value through profit or loss, cash and cash equivalents, receivables on sale of investments, and accrued dividends and interest. Financial liabilities comprise payables on purchase of investments and accrued expenses. Accounting policies for financial assets and liabilities are set out in note 2.
The Company's investment activities expose it to various types of risk that are associated with the financial instruments and the markets in which it invests. The most important types of financial risk to which the Company is exposed are market risk (which includes price risk, currency risk, and interest rate risk), credit risk and liquidity risk.
Asset allocation is determined by the Company's Investment Manager who manages the distribution of the assets to achieve the investment objectives. Divergence from target asset allocations and the composition of the portfolio is monitored by the Investment Manager.
Market risk
Market risk is the risk that the value of a financial asset will fluctuate as a result of changes in market prices (e.g. interest rates, foreign exchange rates, equity prices and credit spreads) whether or not those changes are caused by factors specific to the individual asset or factors affecting all assets in the market. The Company is exposed to market risk within its investments purchased in the Vietnamese market.
The overall market positions are monitored continuously by the Investment Manager and at least quarterly by the Board.
The Company's investments in securities are exposed to market risk and are disclosed by the following generic investment types:
|
|
2022 |
|
2021 |
||
|
|
Fair value |
% of |
|
Fair value |
% of |
|
|
in USD |
net assets |
|
in USD |
net assets |
|
Investments in listed securities |
120,957,996 |
93.90 |
|
193,108,385 |
98.48 |
|
Investments in unlisted securities |
- |
- |
|
- |
- |
|
|
120,957,996 |
93.90 |
|
193,108,385 |
98.48 |
At 30 June 2022, a 5% reduction in the market value of the portfolio would have led to a reduction in NAV and profit or loss of USD 6,047,900 (2021: USD 9,655,419). A 5% increase in market value would have led to an equal and opposite effect on NAV and profit or loss.
Currency risk
The Company may invest in financial instruments and enter into transactions denominated in currencies other than its functional currency. Consequently, the Company is exposed to risks that the exchange rate of its currency relative to other currencies may change and have an adverse effect on the value of the Company's financial assets or liabilities denominated in currencies other than USD.
The Company's net assets are calculated every month based on the most up to date exchange rates while the general economic and foreign currency environment is continuously monitored by the Investment Manager and reviewed by the Board at least once each quarter.
The Company may enter into arrangements to hedge currency risks if such arrangements become desirable and practicable in the future in the interest of efficient portfolio management.
As at 30 June 2022, the Company had the following foreign currency exposures:
|
|
Fair value |
|
|
|
2022 |
2021 |
|
|
USD |
USD |
|
Vietnamese Dong |
128,235,094 |
195,378,974 |
|
Pound Sterling |
632,133 |
3,903 |
|
Swiss Franc |
163 |
2,628 |
|
Euro |
4,497 |
54,097 |
|
|
128,871,887 |
195,439,602 |
At 30 June 2022, a 5% reduction in the value of the Vietnamese Dong, Pound Sterling, Swiss Franc, Euro versus the US Dollar would have led to a reduction in NAV and profit or loss of USD 6,411,755 (2021: USD 9,768,949), USD 31,607 (2021: USD 195), USD 8 (2021: USD 131) and USD 225 (2021: USD 2,705) respectively. A 5% increase in value would have led to an equal and opposite effect.
Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates.
The majority of the Company's financial assets are non-interest-bearing. Interest-bearing financial assets and interest-bearing financial liabilities mature or reprice in the short-term, no longer than twelve months. As a result, the Company is subject to limited exposure to interest rate risk due to fluctuations in the prevailing levels of market interest rates.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered with the Company.
At 30 June 2022, the following financial assets were exposed to credit risk (including settlement risk): cash and cash equivalents, receivables on sale of investments and accrued dividends and interest. The total amount of financial assets exposed to credit risk amounted to USD 8,219,453 (2021: USD 7,300,531).
Substantially all the assets of the Company are held by the Company's custodian, Standard Chartered Bank (
As at 30 June 2022, the Company's custodian, Standard Chartered Bank (
Financial assets subject to IFRS 9's impairment requirements
The Company's financial assets subject to the expected credit loss model within IFRS 9 are cash and cash equivalents, and short-term receivables, including accrued dividends and interest, and receivables on sale of investments. As at 30 June 2022, the total of cash and cash equivalents, and short-term receivables was USD 8,219,453 (2021: USD 7,300,531). The Directors assessed the lifetime expected credit loss as at 30 June 2022 and concluded it to be immaterial (2021: loss immaterial). There is not considered to be any concentration of credit risk within these assets. No assets are considered impaired and no amounts have been written off in the year.
All short-term receivables are expected to be received in three months or less. An amount is considered to be in default if it has not been received 30 days after it is due.
Liquidity risk
The Company, a closed-end investment company, invests in companies through listings on the
The Company's overall liquidity risks are monitored on at least a quarterly basis by the Board. The Company is a closed-end investment company so Shareholders cannot repurchase their shares directly from the Company.
The Board has considered that there may be periods of time when parts of the portfolio are prone to higher liquidity risk, but is satisfied overall that the fixed liabilities of the Company can be met by income or from selling sufficient marketable securities even at periods of higher illiquidity.
Payables on purchase of investments and accrued expenses are generally payable within one year.
The table below summarises the maturity profile of the Company's financial assets and liabilities based on contractual undiscounted receipts and payments:
|
|
|
|
|
Over |
|
|
|
|
|
0 to |
1 to |
3 months |
No fixed |
|
|
|
On demand |
1 month |
3 months |
to 5 years |
maturity |
Total |
|
|
USD |
USD |
USD |
USD |
USD |
USD |
|
2022 |
|
|
|
|
|
|
|
Cash and cash equivalents |
8,160,681 |
- |
- |
- |
- |
8,160,681 |
|
Investment at fair value through profit and loss |
- |
- |
- |
- |
120,957,996 |
120,957,996 |
|
Accrued dividends |
- |
- |
58,772 |
- |
- |
58,772 |
|
Total financial assets |
8,160,681 |
- |
58,772 |
- |
120,957,996 |
129,177,449 |
|
Accrued expenses |
- |
- |
355,282 |
- |
- |
355,282 |
|
Total financial liabilities |
- |
- |
355,282 |
- |
- |
355,282 |
|
2021 |
|
|
|
|
|
|
|
Cash and cash equivalents |
6,031,337 |
- |
- |
- |
- |
6,031,337 |
|
Investment at fair value through profit and loss |
- |
- |
- |
- |
193,108,385 |
193,108,385 |
|
Accrued dividends |
- |
- |
30,153 |
- |
- |
30,153 |
|
Receivables on sale of investments |
- |
1,239,041 |
- |
|
|
1,239,041 |
|
Total financial assets |
6,031,337 |
1,239,041 |
30,153 |
- |
193,108,385 |
200,408,916 |
|
Payables in purchase of investments |
- |
3,905,824 |
- |
- |
- |
3,905,824 |
|
Accrued expenses |
- |
- |
431,912 |
- |
- |
431,912 |
|
Total financial liabilities |
- |
3,905,824 |
431,912 |
- |
- |
4,337,736 |
4 Operating Segments
An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company's other components. The Company is engaged in a single segment of business, being investment in
Information on gains and losses derived from investments are disclosed in the Statement of Comprehensive Income.
The Company is domiciled in
In line with the Company's investment policy, the Company may invest:
● up to 25% of its NAV (at the time of investment) in companies with shares traded outside of
● up to 20% of its NAV (at the time of investment) in direct private equity investments; and
● up to 20% of its NAV (at the time of investment) in other listed investment funds and holding companies which have the majority of their assets in
As of 30 June 2022, no individual investment exceeded 20% of the net assets attributable to Shareholders (2021: none).
All of the Company's investments in securities at fair value are in
5 Share Capital
Ordinary shares of USD 1 each
Pursuant to its redomiciliation to
On 8 March 2019 the Company's ordinary shares were cancelled from trading on AIM and admitted to the Premium segment of the Official List and trading on the Main Market. On the same date the Company's shares were admitted to listing and trading on the TISE.
|
|
2022 |
2021 |
|
|
No. of shares |
No. of shares |
|
Total shares issued and fully paid (after repurchases and cancellations) at beginning of the year |
42,623,935 |
50,814,865 |
|
Shares issued upon exercise of warrants during the year |
- |
- |
|
Shares cancellation |
(13,398,268) |
(8,190,930) |
|
|
29,225,667 |
42,623,935 |
|
Repurchased and reserved for own shares |
|
|
|
At beginning of the year |
- |
- |
|
During the year |
(13,398,268) |
(8,190,930) |
|
Shares reissued to ordinary shares |
- |
- |
|
Shares cancellation |
13,398,268 |
8,190,930 |
|
Total outstanding ordinary shares with voting rights |
29,225,667 |
42,623,935 |
As a result, as at 30 June 2022 the Company has 29,225,667 (2021: 42,623,935) ordinary shares with voting rights in issue (excluding the reserve for own shares), and Nil (2021: Nil) are held as reserve for own shares.
Reserve for own shares
Reserve for own shares are the Company's own shares which had been repurchased. The amount represents share capital which can be reissued in the future or subsequently cancelled. All reserves are available for distribution subject to a solvency assessment.
During the year ended 30 June 2022 the Company repurchased and cancelled 661,084 ordinary shares (2021: 605,681 ordinary shares) under the Company's share buyback programme (representing 1.6% of the ordinary shares outstanding at 1 July 2021) at a weighted average NAV discount of 21.3%. This resulted in a 0.25% accretion to NAV per share.
The Company repurchased and cancelled a further 12,737,184 shares during the year ended 30 June 2022 following a tender offer for 30% of the Company's ordinary shares at a 2% discount to the prevailing NAV per share as at 31 August 2021 (2021: 7,585,249 ordinary shares).
Total ordinary shares repurchased and cancelled during the year were 13,398,268 (2021: 8,190,930).
Holders of ordinary shares are entitled to attend, speak and vote at general meetings of the Company. Each ordinary share (excluding shares in treasury) earns one vote. Treasury shares do not carry voting rights.
Capital Management
The Company does not have any externally imposed capital requirements.
The Company's general intention is to reinvest the capital received on the sale of investments. However, the Board may from time to time and at its discretion, either use the proceeds of sales of investments to meet the Company's expenses or distribute them to Shareholders. Alternatively, the Company may repurchase its own ordinary shares with such proceeds from Shareholders pro rata to their shareholding upon giving notice of not less than 30 calendar days to Shareholders (subject always to applicable law) or repurchase ordinary shares at a price not exceeding the last published NAV per share.
6 Net Assets Attributable to Shareholders
Total equity of USD 128,822,167 (2021: USD 196,080,470) represents net assets attributable to Shareholders. NAV per share as at 30 June 2022 is USD 4.408 (2021: USD 4.600).
7 Net (Loss)/Gain from Investments at Fair Value through Profit or Loss
|
|
2022 |
2021 |
|
|
USD |
USD |
|
Realised (loss)/gain on disposal of investments |
50,172,287 |
15,275,568 |
|
Realised foreign currency gain/(loss) |
253,204 |
(326,765) |
|
Unrealised (loss)/gain on investments at fair value through profit or loss |
(54,419,413) |
84,667,613 |
|
Unrealised foreign currency (loss)/gain |
(1,217,183) |
1,113,703 |
|
|
(5,211,105) |
100,730,119 |
8 Related Party Transactions
Investment management fees
The Company entered into a new investment management agreement with Dynam Capital, Ltd on 26 June 2018. The agreement was amended and restated on 8 October 2018 and further amended and restated on 1 October 2020. The Board and the Investment Manager agreed to modify the management fee (previously on a sliding scale of 1.5% per annum on NAV below USD 300 million, 1.25% per annum on NAV between USD 300 - USD 600 million, and 1.0% per annum on NAV above USD 600 million) effectively from 1 November 2020.
Pursuant to the agreement the Investment Manager is entitled to receive a monthly management fee, paid in the manner set out as below:
● On the amount of the Net Asset Value of the Company up to but excluding USD 300 million, one-twelfth of 1.75%;
● On the amount of the Net Asset Value of the Company between and including USD 300 million up to and including USD 600 million, one-twelfth of 1.5%; and
● On the amount of the Net Asset Value of the Company that exceeds USD 600 million, one-twelfth of 1%.
The management fee accruing to the Investment Manager for the year ended 30 June 2022 was USD 2,737,804 (2021: USD 2,438,087). An amount of USD 200,421 (30 June 2021: USD 273,919) was outstanding as at 30 June 2022.
Directors' fees and expenses
The Board determines the fees payable to each Director, subject to a maximum aggregate amount of USD 350,000 (2021: USD 350,000) per annum being paid to the Board as a whole. The Company also pays reasonable expenses incurred by the Directors in the conduct of the Company's business including travel and other expenses. The Company pays for directors and officers liability insurance coverage.
The charges for the year for the Directors' fees were USD 317,859 (2021: USD 313,443) and expenses were USD 67,433 (2021: USD 15,247). The total Directors' fees and expenses for the year were USD 385,292 (2021: USD 328,690).
As at 30 June 2022, USD 9,012 (2021: 8,250) of Directors' fees were outstanding.
Directors' ownership of shares
As at 30 June 2022, Directors held 44,920 ordinary shares in the Company (2021: 48,861) as listed below.
Hiroshi Funaki 19 ,887 Shares (disposed of 6,756 shares during the year and purchased a further 6,000 shares during the year)
Sean Hurst 5,312 Shares (disposed of 5,206 shares and purchased a further 3,300 shares during the year)
Philip Scales 10,077 Shares (disposed 3,273 shares and purchased a further 3,350 shares during the year)
Damien Pierron 4,644 Shares (disposed 3,606 shares and purchased 3,350 shares during the year)
Saiko Tajima 5,000 Shares
Mr. Funaki is also a Director of Discover Investment Company which holds 1,405,776 ordinary shares in the Company representing 4.81% of the issued share capital. Discover Investment Company disposed of 916,905 shares during the year.
Mr Craig Martin, Chairman of the Investment Manager holds 59,686 shares in the Company. During the year he participated in the tender offer tendering 26,887 shares and repurchased a further 5,000 shares during the year.
9 Custodian Fees
Custodian fees are charged at a minimum of USD 12,000 (2021: USD 12,000) per annum and received as a fee at 0.08% on the assets under administration ("AUA") per annum. Custodian fees comprise safekeeping fees, transaction fees, money transfer fees and other fees. Safekeeping of unlisted securities up to 20 securities is charged at USD 12,000 (2021: USD 12,000) per annum. Transaction fees, money transfers fees and other fees are charged on a transaction basis.
The charges for the year for the Custodian fees were USD 152,863 (2021: USD 146,875), of which USD 13,000 (2021: USD 16,000) were outstanding at year end.
10 Administrative and Accounting Fees
In accordance with the new Administration Agreement between the Company and Sanne Group (
The Sub-Administrator receives a fee as consideration for the services provided to the Company at such rates as may be agreed in writing from time to time between the Company and the Sub-Administrator. The charges for the year for Administration fees were USD 77,731 (2021: USD 80,810), of which USD 5,303 (2021: USD 8,070) were outstanding at year end.
Total administrative and accounting fees for the year were USD 216,938 (2021: USD 219,271).
11 Controlling Party
The Directors are not aware of any ultimate controlling party as at 30 June 2022 or 30 June 2021.
12 Fair Value Information
For certain of the Company's financial instruments not carried at fair value, such as cash and cash equivalents, accrued dividends, other receivables, receivables/payable upon sales/purchase of investments and accrued expenses, the amounts approximate fair value due to the immediate or short-term nature of these financial instruments.
Other financial instruments are measured at fair value through profit or loss.
Fair value estimates are made at a specific point in time, based on market conditions and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
● Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments. This level includes listed equity securities on exchanges (for example, Ho Chi Minh Stock Exchange).
● Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e., as prices) or indirectly (i.e., derived from prices). This level includes instruments valued using: quoted prices for identical or similar instruments in markets that are considered less than active; quoted market prices in active markets for similar instruments; or other valuation techniques in which all significant inputs are directly or indirectly observable from market data.
● Level 3: Inputs that are not based on observable market data (i.e., unobservable inputs). This level includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument's valuation.
The table below analyses financial instruments measured at fair value at the reporting date by the level in the fair value hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the Statement of Financial Position. All fair value measurements below are recurring.
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
USD |
USD |
USD |
USD |
|
2022 |
|
|
|
|
|
Financial assets classified at fair value upon initial recognition |
|
|
|
|
|
Investments in securities |
120,957,996 |
- |
- |
120,957,996 |
|
2021 |
|
|
|
|
|
Financial assets classified at fair value upon initial recognition |
|
|
|
|
|
Investments in securities |
193,108,385 |
- |
- |
193,108,385 |
There were no transfers between levels during the year.
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety. Assessing whether an input is significant requires judgement including consideration of factors specific to the asset or liability. Moreover, if a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that fair value measurement is a Level 3 measurement.
There are no level 3 assets held at 30 June 2022 (2021: Nil).
13 Classifications of Financial Assets and Liabilities
The table below provides a breakdown of the line items in the Company's Statement of Financial Position to the categories of financial instruments.
|
|
Fair value through |
Loans and |
Other |
Total carrying |
|
|
Profit or loss |
receivables |
liabilities |
amount |
|
|
USD |
USD |
USD |
USD |
|
2022 |
|
|
|
|
|
Cash and cash equivalents |
- |
8,160,681 |
- |
8,160,681 |
|
Investment in securities at fair value |
120,957,996 |
- |
- |
120,957,996 |
|
Accrued dividends |
- |
58,772 |
- |
58,772 |
|
|
120,957,996 |
8,219,453 |
- |
129,177,449 |
|
Accrued expenses |
- |
- |
355,282 |
355,282 |
|
|
- |
- |
355,282 |
355,282 |
|
2021 |
|
|
|
|
|
Cash and cash equivalents |
- |
6,031,337 |
- |
6,031,337 |
|
Investment in securities at fair value |
193,108,385 |
- |
- |
193,108,385 |
|
Accrued dividends |
- |
30,153 |
- |
30,153 |
|
Receivables on sale of investments |
- |
1,239,041 |
|
1,239,041 |
|
|
193,108,385 |
7,300,531 |
- |
200,408,916 |
|
Payables in purchase of investments |
- |
- |
3,905,824 |
3,905,824 |
|
Accrued expenses |
- |
- |
431,912 |
431,912 |
|
|
- |
- |
4,337,736 |
4,337,736 |
14 Earnings Per Share
The calculation of basic and diluted earnings per share at 30 June 2022 was based on the total comprehensive loss for the year attributable to Shareholders of USD 7,719,310 (2021: Income of USD 100,153,888) and the weighted average number of shares outstanding of 31,987,327 (2021: 45,761,268).
15 New and Amended Standards and Interpretations
(i) Standards and amendments to existing standards effective 1 July 2021
The Board of Directors has assessed the impact, or potential impact, of all new standards and amendments to existing standards. In the opinion of the Board of Directors, there are no mandatory new standards and amendments applicable in the current year that had any material effect on the reported performance, financial position, or disclosures of the Company.
(ii) Standards effective after 30 June 2022 that have been early adopted by the Company
There are no standards effective after 30 June 2022 that are relevant to the Company.
16 Events After the Reporting Date
From 1 July 2022 to the date of signing these financial statements, there were no material events that require disclosures and/or adjustments in these financial statements.
Alternative Performance Measures ("APMs")
Discount or Premium
The amount, expressed as a percentage, by which the ordinary share price is either higher (premium) or lower (discount) than the NAV per ordinary share.
|
|
Page |
|
30 June 2022 |
|
NAV per ordinary share (pence) |
1 |
a |
363.0 |
|
Ordinary share price (pence) |
1 |
b |
309.5 |
|
Discount |
1 |
((b-a)/a) |
14.7% |
Ongoing charges
Ongoing charges have been calculated in accordance with the Association of Investment Companies (the "AIC") recommended methodology by taking the regularly incurred annual operating expenses of running the Company expressed as a percentage of average NAV.
The ongoing charges for the year ended 30 June 2022 were 2.74%.
|
|
|
|
30 June 2022 |
|
|
Page |
|
USD |
|
Average NAV |
1 |
a |
155,041,007 |
|
Operating expenses |
1 |
b |
4,242,306 |
|
Ongoing charges |
1 |
b/a |
2.74% |
Average NAV
Calculated using twelve monthly closing average NAV for the year ended 30 June 2022.
Operating expenses
Total annual expenses incurred by the Company less the cost of project and one-off expenses i.e. non-recurring expenses.
|
|
Page |
|
USD |
|
Total annual expenses |
55 |
c |
4,252,094 |
|
Less: non-recurring expenses |
|
d |
(9,788) |
|
Operating expenses |
|
b=c+d |
4,242,306 |
Corporate Information
|
Directors |
Auditor |
|
Mr. Hiroshi Funaki |
KPMG Channel Islands Limited |
|
Mr. Sean Hurst |
Glategny Court |
|
Mr. Philip Scales |
Glategny Esplanade |
|
Mr. Damien Pierron |
St Peter Port |
|
Ms. Saiko Tajima |
|
|
|
GY1 1WR |
|
Investment Manager |
|
|
Dynam Capital, Ltd |
Market Researcher |
|
De Catapan House |
Dynam Consultancy and Services |
|
Grange Road |
Company Limited |
|
St Peter Port |
Floor 12, Deutsches Haus, |
|
|
33 Le Duan, |
|
GY1 2QG |
Ben Nghe Ward, District 1 |
|
|
|
|
Registered Office, Company Secretary and Administrator |
|
|
Sanne Group ( |
|
|
De Catapan House |
Corporate Broker and Financial Adviser |
|
Grange Road |
finnCap Ltd. |
|
St Peter Port |
One Bartholomew Close |
|
|
|
|
GY1 2QG |
EC1A 7BL |
|
|
(Nominated Adviser (AIM) until transference to LSE Main Market) |
|
Sub-Administrator, Custodian and Principal Bankers |
|
|
Standard Chartered Bank ( |
Registrar |
|
7 Changi Business Park Crescent |
Computershare Investor Services ( |
|
Level 3, Securities Services |
1st Floor, Tudor House |
|
|
Le Bordage |
|
|
St Peter Port |
|
|
|
|
Stephenson Harwood LLP |
GY1 1DB |
|
1 Finsbury Circus |
|
|
|
|
|
EC2M 7SH |
|
|
|
|
|
Guernsey Legal Adviser |
|
|
Carey Olsen ( |
|
|
Carey House |
|
|
Les Banques |
|
|
St Peter Port |
|
|
|
|
|
GY1 4BZ |
|
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