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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Vinacapital Vietnam Opportunity Fund Ld | LSE:VOF | London | Ordinary Share | GG00BYXVT888 | ORD $0.01 |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 481.00 | 476.00 | 479.50 | 480.50 | 470.00 | 470.00 | 64,835 | 16:35:12 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Real Estate Investment Trust | -10.43M | -15.02M | -0.0975 | -48.97 | 735.83M |
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TIDMVOF
VinaCapital Vietnam Opportunity Fund Limited
Interim results for the six months ended 31 December 2016
VinaCapital Vietnam Opportunity Fund Limited (the "Company" or "VOF"), an
investment company focused on Vietnam, today announces its interim results for
the six months ended 31 December 2016 ("the Period").
Enquiries:
Jeremy Greenberg
VinaCapital Investment Management Limited
Investor Relations
+84 8 3821 9930
jeremy.greenberg@vinacapital.com
Joel Weiden
VinaCapital Investment Management Limited
Communications
+84 8 3821 9930
joel.weiden@vinacapital.com
Franczeska Hanford / Martin Bourgaize
Northern Trust International Fund Administration Services (Guernsey) Limited
Company Secretary
+44 (0)1481 745918 / +44 (0)1481 745819
fk26@ntrs.com / meb16@ntrs.com
David Benda / Hugh Jonathan
Numis Securities Limited, Broker
+44 (0)20 7260 1000
funds@numis.com
Edward Gascoigne-Pees
Camarco, Public Relations (London)
+44 20 3757 4980
ed.gascoigne-pees@camarco.co.uk
CHAIRMAN'S STATEMENT
It has again been a busy six months for VinaCapital Vietnam Opportunity Fund
("VOF" or "the Company").
The international news since I last wrote a Chairman's Statement has been
dominated by politics. While the UK's Brexit vote earlier in the year was
always likely to be finely balanced, few would have predicted the success of
Donald Trump in securing the US presidency. President Trump made much of his
desire to improve the lot of American workers while on the campaign trail and
his early move to terminate the United States' involvement with the Trans
Pacific Partnership is naturally of concern in Vietnam. At the time of writing,
this has not had any apparent effect on the value of assets in Vietnam - and
indeed indicators remain positive - but your Board and Investment Manager are
nevertheless cognisant of increased uncertainty as the new Administration's
policy objectives remain unclear.
Previously I have stated that our strategy is:-
- To retain the largest part of the portfolio in listed assets
- To continue to add to OTC and private equity investments as and when
opportunities arise
- To reduce holdings in direct real estate and hospitality assets
- To reduce the discount to net asset value at which VOF's shares trade
and there have been no changes to these objectives.
Portfolio Review
I am pleased to report that during the first six months of the current
Financial Year, which covers the period from 1 July 2016 to 31 December 2016,
the NAV per share of VOF increased by 10.9% in US dollar terms, from US$3.77 to
US$4.18. The return in pound sterling terms was an increase of 19.9% from GBP2.82
to GBP3.38.
Our Investment Manager continues to deliver well against our objectives and the
first three elements of the strategy set out above.
The combination of our listed and over-the-counter (OTC) holdings amounted to
60.6% of assets at
31 December, compared with 56.2% at 30 June 2016. As set out in the Investment
Manager's Report this, the largest part of our portfolio, again performed very
well in the six-month period under review and outperformed relevant equity
benchmarks by a considerable margin.
Our Private Equity portfolio also contributed well to returns and, as set out
in more detail in the Investment Manager's Report, one investment, Cau Tre, was
realised to produce an IRR of 17% and a return on investment of 2.8x. Your
Board and Investment Manager continue to focus on this area as a source of
potential returns. It is encouraging to be able to report a good pipeline of
potential future deals and a cash balance available to complete those which
pass our Investment Manager's tests.
Our Investment Manager had considerable success in the six months under review
in realising three direct real estate and hospitality projects, in aggregate at
a substantial premium to our carrying value and for total proceeds of USD95
million.
Discount Management
The share price discount to net asset value at the last year end was 25.2%; at
31 December 2016 it was 19.1% and at the time of writing it is 21.3%.
Since moving VOF's listing from AIM to the London Stock Exchange's Main Market
and its domicile to Guernsey in March 2016, we have seen an increase in demand
for VOF's shares and it is encouraging to welcome many new shareholders, which
has resulted in a greater spread in the share register. With the Board's
encouragement, our Investment Manager and our broker continue with both an
active programme of communication with existing shareholders and to seek new
investors.
We have sought to limit supply by means of share buy backs and, over time, VOF
has bought back a substantial proportion of its shares. I mentioned in my
Chairman's Statement at the last year end that we were precluded from buying
back shares by the Market Abuse Directive. I could not reveal it at the time,
but this was because of negotiations over an asset, the sale of which was
subsequently announced on 15 November 2016. Since then, working with our broker
we have again been active in buying back shares and plan to continue to do so.
It is encouraging to note that the discount has reduced somewhat but your Board
still believes that further improvement is both necessary and is warranted by
the Investment Manager's investment performance.
Annual General Meeting
I am pleased to report that all resolutions presented at VOF's Annual General
Meeting on
21 December 2016 were duly passed with a substantial majority in favour of
each.
As indicated in the last Annual Report, Mike Gray retired at the conclusion of
the Annual General Meeting and Huw Evans assumed Mike's previous role as Chair
of the Audit Committee. Once again, I would like to record the Board's
gratitude to Mike for his diligence and dedication to VOF over the last seven
years.
Outlook
As set out in the opening paragraph of this statement, we live in "interesting"
times, particularly on the geopolitical front, and a note of caution is clearly
appropriate. Having said this, thus far the Vietnamese stock market has
continued to perform well. As our Investment Manager intimates in its report,
we operate with a heightened awareness of risk and we will be even more
diligent in our reviews both of existing holdings and of potential new deals.
Performance over the six months under review has been strong and your Board
will continue to encourage our Investment Manager in its efforts.
Steven Bates
Chairman
VinaCapital Vietnam Opportunity Fund
24 March 2017
INVESTMENT MANAGER'S REPORT
In the six months to 31 December 2016, the NAV of VOF delivered a 11% return on
a per share basis, while the share price increased by 20.1% in USD terms (or
29.9% in GBP terms). This compares with an increase of only 3.0% in the
benchmark Vietnam Index (VN Index) and -10.3% for the MSCI Vietnam Index.
On a calendar year basis (January to December 2016), we ended the 12 months
delivering a 26.3% return on NAV, with the share price increasing 41.7% in USD
terms (or 69.3% in GBP terms). The VN Index increased 13.4% over the same
period, in USD terms, while the MSCI Vietnam Index was in negative territory,
returning -8.5%.
The capital markets component of the portfolio, which accounts for 60.6%* of
NAV as at 31 December 2016, and consists of assets that are listed on the HOSE
(Ho Chi Minh Stock Exchange) and HNX (Hanoi Stock Exchange, including stocks
listed on the junior exchange known as UPCoM), contributed the most to VOF's
return. In the six months to 31 December 2016, the capital markets portfolio
increased by 11.3%* compared to the 3.0% increase for the VN Index, while for
the 12 month calendar year, the portfolio increased 34.8%* compared to a 13.4%
increase for the VN Index.
*excludes investments in overseas equities which include Vinaland Limited (VNL)
and Vietnam Infrastructure Limited (VNI).
Several factors accounted for VOF's strong performance. Firstly, our high
conviction, active stock selection distinguishes us from other passive,
index-replicating strategies. Positions in listed companies including Airports
Corporation of Vietnam (ACV), Hoa Phat Group (HPG), Novaland Group (NVL), and
Vinamilk (VNM) were the top contributors to the listed portfolio's performance,
with the quoted share prices increasing 194.0%, 29.3%, 20.2%, and 9.4%
respectively over the six months to 31 December 2016.
Second, our ability to invest into pre-IPO, private equity deals, or as part of
the Vietnamese government's privatisation plan (or equitisation as it is known
in Vietnam), allows us to seek opportunities outside traditional asset types.
In fact, of the top contributors to performance this half-year, two of these
listed stocks - ACV and NVL - were previously unlisted investment opportunities
before recently commencing trading on the main bourses.
ACV was an equitisation of a state-owned enterprise (SOE) that was traded
over-the counter (OTC) pre-listing. NVL on the other hand was a private equity
investment, in the form of a convertible preferred equity structure, which gave
us the option to convert prior to listing. We participated in both
opportunities pre-listing and have enjoyed significant upside subsequent to
their public listings.
When evaluating investment opportunities, we are focused on those that enable
us to take large, meaningful positions, either with control or with minority
downside protections. Targeted companies must demonstrate sound investment
fundamentals, be able to deliver strong earnings growth in excess of the market
average, and occupy dominant, market leading positions. The success of this
approach is demonstrated by our position in two listed companies, HPG and VNM.
HPG is the leading steel manufacturer in Vietnam, which delivered 123% profit
growth in the second half of 2016 compared to the same period last year, while
VNM is the leading consumer goods company in Vietnam, dominating the liquid
dairy milk category, and was able to deliver 17% sales and 21% profit growth
respectively compared to the same period last year. VNM and HPG are the largest
and second largest holdings in the capital markets portfolio respectively, and
have been long-term holdings of VOF. Like our investments in ACV and NVL, we
invested into VNM as part of the equitisation process over a decade ago, while
HPG was initially a private equity, pre-IPO investment.
Real estate, construction materials, and consumer goods sectors benefit from
strong macroeconomic and demand fundamentals
The companies which contributed to VOF's performance over the past six months
were from sectors which have benefited from the overall improvement in economic
conditions. Vietnam remains an investment led economy, as strong levels of
foreign direct investment (FDI) continue to drive manufacturing growth,
productivity, and employment which in turn has helped create wealth, higher
living standards and boost retail consumption. Furthermore, as
industrialisation and urbanisation increases, the government has been spending
significantly on construction and infrastructure, with companies in these
sectors benefiting from expansionary fiscal policy.
One of the sectors that outperformed the VN Index during the second half of
2016 was real estate and property development. As a result, VOF was able to
enjoy significant unrealized gains in property, construction and materials
companies, including HPG (share price increased by 29.3% for six months to
December, and 75.3% for the full calendar year) and KDH (share price increased
by 17.1 for the six months to December, and 23.6% for the full calendar year).
Furthermore, VOF divested three real estate development projects and operating
assets in the six months to December 2016, generating approximately USD95
million in proceeds partly paid in 2016 and with the balance due over the next
two years.
As of 31 December 2016, VOF had 21.7% (including Direct Real Estate exposure of
7.0%) of its total NAV exposed to the property and property related sectors. We
remain bullish on these sectors in the immediate future as homes are developed,
completed and delivered to buyers. The visibility is quite strong over the next
12 months on revenue recognition in the companies in our portfolio.
Towards the end of 2015 and into 2016, we saw interest rates fall sharply
following the decline of inflation (almost zero in 2015), which allowed real
estate transactions to increase significantly. Both developers and buyers could
borrow more easily and at lower costs. However, sales may start to slow in 2017
should interest rates and inflation climb and thus, revenues could be affected
in the longer term. Traditionally, there is a lag of about two-to-three years
from the date of purchase commitment to delivery and revenue recognition.
Other sectors which enjoyed substantial gains include consumer-oriented goods
and services, including food and beverage (F&B). These sectors have benefited
from solid economic growth coupled with a decent level of inflation of almost
5% and lower than expected interest and deposit rates. They have also benefited
from a strong level of confidence in the local currency given that it has
devalued very little relative to other regional currencies.
2016 saw retail growth of 10.2%, with F&B leading the way at 13%. Large F&B
companies like VNM have benefited dramatically. VNM's strong top line and
profit growth was due to both general retail demand growth, as well as from
lower input prices in the form of powdered milk (which makes up over 75% of
their milk input and 36% of total cost of goods sold) and the company was
proactive in locking in these prices via forward contracts.
One of VOF's newest investments is a private investment in a publicly listed
company called Coteccons (CTD), one of the largest construction companies in
Vietnam. CTD delivered an unrealised gain of 16.6% during the second half of
2016. As at 31 December 2016, VOF holds USD74.9 million worth of HPG shares and
USD24.1 million worth of CTD shares.
The pace of equitisations and public listings quickens
In December, VOF enjoyed uplifts in valuations from the listing of three key
holdings:
1. Airport Corporation of Vietnam ("ACV") on to the UPCoM;
2. Quang Ngai Sugar ("QNS") on to the UPCoM; and
3. Novaland ("NVL") on the HOSE.
As of 31 December 2016 VOF's mark-to-market values of QNS, ACV and NVL were
USD40.5 million, USD44.2 million and USD31.4 million, respectively.
ACV manages all 22 airports in Vietnam, occupying a monopoly position that is
only set to grow as tourism and air passenger travel increases in Vietnam. ACV
delivered gross revenue and net profit of USD705 million and USD144 million in
2016, respectively, a 21.4% and 88% increase over 2015. ACV expects to grow
these figures by 7% and 26% in 2017. As of 31 December 2016, ACV's share price
has increased by 194% since its public listing on 21 November 2016.
On QNS, VOF has enjoyed an increase in unrealised gains in excess of 50% since
our private investment into this company in early 2015. QNS is the largest
soyamilk producer in Vietnam and delivered revenue and profit of USD307 million
and USD62.1 million in 2016, respectively. These figures are expected to
increase in 2017 by 16% and 21%, respectively. During the second half of 2016,
QNS's share price has increased by 18.2%.
As for NVL, the second largest property developer on Vietnam's stock market,
VOF enjoyed an uplift of almost 50% when it listed on the HOSE on 28 December
2016. With a current market capitalisation of over USD1.5 billion, NVL
currently has over 45 projects in the Ho Chi Minh City area. They have launched
30 projects and have sold over 60% of the units, which they expect to deliver
over the next two-to-three years. Revenue and profits can only be recognised
when the units are handed over to the buyers and, as such, we expect revenue
and profits to increase significantly over the next three years. 2017 revenue
and profit are expected to be USD770 million and USD140 million, respectively,
which reflects growth of 160% and 90% over 2016.
The strong recent performances from several private investments that were
listed again demonstrates the uniqueness of VOF's investment strategy, which
allows VOF to take advantage of opportunities that are normally not available
to single strategy and/or single asset class funds.
Aside from a strong performance in the capital markets portfolio, VOF exited a
top five private equity holding at a realisation well above its previous
carrying value.
Private equity continues to be a key source of investment opportunity and
performance
In December 2016, VOF completely divested its 37.3% stake in Cau Tre Food
Processing JSC ("CT") to CJ CheiJedang Corporation of Korea ("CJ"). VOF
received USD12.4 million to enjoy an IRR of 17.0% and a multiple return on
invested equity of 2.8x. CT is a major food processing business with most of
its revenue derived from the export of frozen dim-sum style food to Japan. CT
also sells its products into the Vietnamese market under its own brand. VOF
initially acquired 13% of CT in August 2006 through the company's equitisation.
In 2013, VOF acquired additional shares in CT from other shareholders with the
objective of consolidating VOF's holding so that we could eventually sell a
larger and a more meaningful stake to a strategic investor willing to pay a
significant premium to the prevailing market price.
In 2016, CJ connected with CT and expressed its desire to acquire our stake.
With cooperation from SATRA (the Government shareholder of CT), we negotiated a
price equivalent to more than three times the prevailing OTC market price. The
premium placed on our stake revolved around not only our strategic cooperation
with SATRA but also our ability to transfer three board seats and one
controller seat to the buyer.
Given the recent increase in valuations in the HOSE stock market, where the
current average PE ratio is about 15.9x, and the excitement about Vietnam (or
perhaps less excitement elsewhere in Southeast Asia), it is natural that our
investment activities become more prudent as we seek terms reflecting our
investment objective for the medium and longer periods of time. With higher
valuations, we need to spend more effort educating entrepreneurs and business
leaders on the merits of our investment terms and, more importantly, our role
in creating value for them in the long term.
At the moment, the pipeline for private equity investment is strong, with
opportunities in excess of USD150 million in companies operating in various
sectors including healthcare, media and entertainment, infrastructure
materials, industrials and logistics, and transportation.
Vietnam's ongoing macroeconomic strength
Vietnam's economy and markets continued to grow in 2016, although not at the
same pace as the year before. While GDP growth for 2016 came in at 6.2% (vs.
6.7% in 2015), the country's economy continued to be one of the world's better
performers and proved to be resilient despite a harsh drought in the first half
of the year and global geopolitical upheaval. On the back of solid gains in
2016, we believe that the pieces are in place for even stronger growth in 2017
- albeit with some new challenges on the horizon, such as tightening monetary
policy.
We enter 2017 with our usual level of guarded optimism. The economy continues
to head in the right direction, but the challenges that could arise, whether
external (natural disasters, geopolitics) and internal (inflation, currency),
are likely to continue to test Vietnam's mettle.
The government recently announced their annual economic targets for 2017, with
annual GDP growth at around 6.7% while inflation is aimed for under 4% and the
VND is expected to remain stable against the USD.
The National Assembly in January 2016 elected a new government, one which to
date has been aggressive in pushing economic and market reforms. Perhaps most notably, the Government jump-started the privatisation/ equitisation process. Until recently, there was limited progress on this front, at least in terms of deals that might be interesting to foreign investors. The listings of brewers Habeco (USD0.5 billion market capitalization) and Sabeco (USD3.0 billion), and the equitisation of other companies (with market capitalisations of over USD200 million) such as VEAM (USD750 million), one of the largest automobile assembly businesses in Vietnam, and Vissan (USD280 million) the largest meat processing company in Vietnam were steps in the right direction. In addition, we saw the state divesting large holdings including Vinamilk (USD500 million for a 5.4% stake), Vietnam Electrical Equipment (USD100 million for a 78% stake), Vinh Son - Song Hinh Hydropower (USD36 million for a 24% stake), and Sowatco (USD25 million for a 66% stake). Furthermore, new regulations requiring companies to list shortly after public offerings and the overall focus on making things happen in the market have been welcomed by investors, although more improvements are necessary, particularly in execution and process. The impetus for the renewed momentum is clear: capital raising is part of a wider effort to manage state finances as the target is for the current sizeable budget deficit to be smaller by the end of 2017. The government is on record as saying that some of the country's largest enterprises will privatise and list in 2017 - something that observers have heard before. But this government aggressively pushed things forward in 2016, and we have little reason to doubt its commitment to see things through in the year ahead. We are interested to see if the stakes sold in newly privatised state-owned enterprises are larger and at fairer valuations - two factors that have stymied the equitisation process to date. Should these issues be addressed, we believe that more foreign investors will be eager to participate. One area where President Trump's election has already affected Vietnam is the US withdrawal from the Trans-Pacific Partnership (TPP). Vietnam was widely regarded as the greatest beneficiary of the 12 nations involved in the pact, and some believe that TPP was the impetus behind a fair amount of the foreign direct investment flowing into the country over the past few years. To be sure, the expected demise of TPP is disappointing, and there will certainly be some ramifications. But all is far from lost. Vietnam is party to sixteen Free Trade Agreements (and in the process of negotiating several more), including those with Korea, the EU, Russia and Asean Economic Community. The government has already indicated that many of the reforms being implemented to comply with TPP will continue regardless. Vietnam is eager to further integrate into the global economy, and is well positioned to negotiate bilateral agreements with other nations. In addition, stable (and potentially rising) oil prices can lead to higher commodity prices, which can make it difficult for Vietnam to maintain inflation at or below 4% which is the government's official target. Deposit rates are at 7-7.5% and can easily rise to 8.5% if inflation surpasses 5%. Coupled with a potential devaluation of the local currency, which has thus far held up well relative to other Asian currencies, the cost of VND funding could rise significantly, impacting property and property related businesses as well as consumer confidence. We remain vigilant regarding these changes and have developed our investment strategy to deliver a minimum projected base case internal rate of return of 15% to overcome potential volatility in FX and interest rates. In summary, 2017 promises to be another exciting and possibly unpredictable year. We do see the average earnings growth for Vietnam listed equities to be around 10-15% per annum. As indicated earlier, this would not be interesting for VOF's investment strategy. Holding on to any of the listed equities means that we see potential for outperformance in EPS growth against the average as well as PE expansion. The average PE ratio for Vietnam listed equities continues to be at a discount to regional averages of around 15-20%. We hope that more global investors will recognize Vietnam's potential in 2017 and thus increase demand for Vietnamese listed equities. We see Vietnam as being an attractive place to invest, compared with many other emerging markets. In addition, VinaCapital has continuously demonstrated its ability to move large blocks of listed equity shares to strategic investors at a significant premium to the prevailing market price. And in the past, VOF has enjoyed ample opportunities to divest stakes where valuations and effectively, the PE ratios, were significantly higher than the market prices; we certainly hope to see more of these types of transactions in 2017. Andy Ho Managing Director VinaCapital Investment Management Ltd 24 March 2017 INTERIM REPORT OF THE BOARD OF DIRECTORS The Board of Directors (the "Board") submits its report together with the condensed interim financial statements of VinaCapital Vietnam Opportunity Fund Limited (the "Company") for the six-month period from 1 July 2016 to 31 December 2016 (the "six-month period"). VOF is registered in Guernsey as a non-cellular company with limited liability. The registered office of VOF is PO Box 255, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 3QL. Principal activity The Company's principal activity is to invest in assets either in Vietnam or in companies with a substantial majority of their assets, operations, revenues or income in, or derived from, Vietnam with a view to achieving medium to long-term returns. The Company's investments are managed by VinaCapital Investment Management Limited (the "Investment Manager"). Investment Policy All of the Company's investments will be in Vietnam or in companies with at least 75% of their assets, operations, revenues or income in, or derived from, Vietnam at the time of investment. No single investment may exceed 20% of the net asset value of the Company at the time of investment. The Company may from time to time invest in other funds focused on Vietnam. This includes investments in other funds managed by the Investment Manager. Any investment or divestment of funds managed by the Investment Manager will be subject to prior approval by the Board. No more than 10%, in aggregate, of the value of the Company's total assets may be invested in other listed closed-ended investment funds. The restriction on investment in other listed closed-ended investment funds does not apply to investments in closed-ended investment funds which themselves have published investment policies to invest no more than 15% of their total assets in other listed closed-ended investment funds. The Company may from time to time make co-investments alongside other investors in private equity, real estate or similar assets. This includes, but is not restricted to, co-investments alongside other funds managed by the Investment Manager. The Company may gear its assets through borrowings which may vary substantially over time according to market conditions and any or all of the assets of the Company may be pledged as security for such borrowings. Borrowings are not to exceed 10% of the Company's total assets at the time that any debt is drawn down. From time to time the Company may hold cash or low risk instruments such as government bonds or cash funds denominated in either Vietnamese Dong or US Dollars, either in Vietnam or outside Vietnam. Principal Risks The process which the Company follows in order to identify and mitigate its key risks is set out on pages 41 to 46 of the Annual Report and Financial Statements for the year ended 30 June 2016 (the "Annual Report"), a copy of which is available on the Company's web site www.vof-fund.com The Directors have reviewed the key risks and have confirmed that the list as set out in the Annual Report remains appropriate. In the Directors' opinion, there has been some increase in risk as a result of the actions taken by President Trump in withdrawing the United States of America from the Trans Pacific Partnership. This is discussed in the Chairman's Statement and the Investment Manager's Report but could have an effect in particular on two key risk areas. The Directors would like to draw shareholders' attention to the following statements in the Annual Report. While the statements and mitigating actions set out in the Annual Report remain unchanged, in the Directors' opinion the level of risk has increased:- Vietnamese Market Risk Opportunities for the Company to invest in Vietnam have come about through the liberalisation of the Vietnamese economy. Were the pace or direction of change to the economy to alter in the future, the interests of the Company could be damaged. The economy could also be affected by any escalation in geopolitical tensions in the region and elsewhere. Changing Investor Sentiment As a Company investing mainly in Vietnam, changes in investor sentiment towards Vietnam and/or frontier markets may lead to the Company becoming unattractive to investors leading to reduced demand for shares and a widening discount. The other key risks identified in the Annual Report are, in summary:- Investment Performance The performance of the Company's investment portfolio could be poor, either absolutely or in relation to the Company's peers. Fair Valuation The risks associated with the fair valuation of the portfolio could result in the Net Asset Value of the Company being misstated. Investment Management Agreement The Investment Management Agreement requires the Investment Manager to provide competent, attentive and efficient services to the Company. If the Investment Manager was not able to do this or if the Investment Management Agreement were
terminated, there is no assurance that a suitable replacement could be found in
Vietnam and, under those circumstances, the Company could suffer.
Operational
The Company is dependent on third parties for the provision of all systems and
services (in particular, those of the Investment Manager) and any control
failures and gaps in these systems and services could result in a loss or
damage to the Company.
Legal and Regulatory
Failure to comply with relevant regulation and legislation in Vietnam, Guernsey
or the UK may have an impact on the Company.
Life of the Company
The Company does not have a fixed life but the Board has determined that it is
desirable that Shareholders should have the opportunity to review the future of
the Company at appropriate intervals. Accordingly, the Board intends that a
special resolution will be proposed every fifth year that the Company ceases to
continue. If the resolution is not passed, the Company will continue to operate
as presently constituted. If the resolution is passed, the Directors will be
required to formulate proposals to be put to Shareholders to reorganise,
unitise or reconstruct the Company or for the Company to be wound up. In July
2013, the Board tabled such a special resolution but it was not passed,
allowing the Company to continue as currently constituted for a further five
years. The next shareholder vote on the life of the Company will be held in
2018.
Results and dividend
The results of the Company for the six-month period and the state of its
financial affairs as at that date are set out in the Condensed Interim
Financial Statements.
The Board of Directors does not recommend payment of a dividend for the
six-month period (period ended 31 December 2015: Nil).
Performance
The Chairman's Statement and the Investment Manager's Report give details of
the Company's activities and performance during the six-month period.
The key performance indicators ("KPIs") used to measure the progress of the
Company during the six-month period include:
* the movement in the Company's NAV;
* the movement in the Company's share price; and
* discount of the share price in relation to the NAV.
A discussion of progress against the KPIs is included in the Chairman's
Statement.
Related Parties
Details of the fees paid to the Investment Manager and to the Directors are set
out in Note 18 of the Condensed Interim Financial Statements.
Share repurchase programme
Details of the Company's share repurchase programme are contained in Note 10 of
the Condensed Interim Financial Statements.
Annual General Meeting
The Company held its Annual General Meeting (AGM) on 21 December 2016. All
resolutions set out in the notice of the AGM were carried with a substantial
majority.
Board of Directors
The members of the Board during the six-month period and up to the date of this
report were:
Name Position Date of Date of
appointment Retirement
Steven Bates Chairman 5 February 2013 -
Michael Gray Director 24 June 2009 21 December 2016
Martin Adams Director 5 February 2013 -
Thuy Bich Dam Director 7 March 2014 -
Huw Evans Director 27 May 2016 -
Michael Gray retired as a Director and Chair of the Audit Committee at the
conclusion of the Company's Annual General Meeting on 21 December 2016. Huw
Evans was appointed Chair of the Audit Committee on Michael Gray's retirement.
Directors' interests in the Company
As at 31 December 2016, none of the Directors had any interests in the ordinary
shares, or any other securities of the Company or of its subsidiaries.
Going Concern
Under the UK Corporate Governance Code and applicable regulations, the
Directors are required to satisfy themselves that it is reasonable to assume
that the Company is a going concern. The Directors have undertaken a rigorous
review of the Company's ability to continue as a going concern including
reviewing the on-going cash flows and level of cash balances as of the
reporting date as well as taking forecasts of future cash flows into
consideration. After making enquiries of the Investment Manager and having
reassessed the principal risks, the Directors consider it appropriate to adopt
the going concern basis of accounting in preparing the Interim Report and
Unaudited Condensed Interim Financial Statements.
On behalf of the Board
Steven Bates
Chairman
VinaCapital Vietnam Opportunity Fund
24 March 2017
STATEMENT OF DIRECTORS' RESPONSIBILITY IN RESPECT OF THE UNAUDITED CONDENSED
INTERIM FINANCIAL STATEMENTS
To the best of their knowledge, the Directors confirm that:
- the Unaudited Condensed Interim Financial Statements have been prepared in
accordance with IAS 34, "Interim Financial Reporting"; and
- the Interim Report, comprising the Chairman's Statement, the Investment
Manager's Report and the Interim Report of the Board of Directors, meets the
requirements of an interim management report and includes a fair review of
information required by DTR 4.2.4 R:
(i) DTR 4.2.7R of the UK Disclosure and Transparency Rules, being an indication
of important events which have occurred during the first six months and their
impact on the Unaudited Condensed Interim Financial Statements, and a
description of the principal risks and uncertainties for the remaining six
months of the year; and
(ii) DTR 4.2.8R of the UK Disclosure and Transparency Rules, being related
party transactions which have taken place in the first six months and which
have materially affected the financial position or performance of the Company
during that period, and any material changes in the related party transactions
disclosed in the last Annual Report.
Signed on behalf of the board by:
Huw Evans
Director
24 March 2017
INDEPENT INTERIM REVIEW REPORT
TO VINACAPITAL VIETNAM OPPORTUNITY FUND LIMITED
Our conclusion
We have reviewed the accompanying condensed interim financial statements of
VinaCapital Vietnam Opportunity Fund Limited as of 31 December 2016. Based on
our review, nothing has come to our attention that causes us to believe that
the accompanying condensed interim financial statements are not prepared, in
all material respects, in accordance with International Accounting Standard 34,
'Interim Financial Reporting' and the Disclosure Guidance and Transparency
Rules sourcebook of the United Kingdom's Financial Conduct Authority.
What we have reviewed
The accompanying condensed interim financial statements comprise:
· the unaudited condensed statement of financial position as of 31
December 2016;
· the unaudited condensed statement of comprehensive income for the
six-month period then ended;
· the unaudited condensed statement of changes in equity for the six-month
period then ended;
· the unaudited condensed statement of cash flows for the six-month period
then ended; and
· the notes, comprising a summary of significant accounting policies and
other explanatory information.
The condensed interim financial statements have been prepared in accordance
with International Accounting Standard 34, 'Interim Financial Reporting' and
the Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Our responsibilities and those of the directors
The Directors are responsible for the preparation and presentation of the
condensed interim financial statements in accordance with the Disclosure
Guidance and Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
Our responsibility is to express a conclusion on the condensed interim
financial statements based on our review. This report, including the
conclusion, has been prepared for and only for the Company for the purpose of
complying with the Disclosure Guidance and Transparency Rules sourcebook of the
United Kingdom's Financial Conduct Authority and for no other purpose. We do
not, in giving this conclusion, accept or assume responsibility for any other
purpose or to any other person to whom this report is shown or into whose hands
it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements 2410, 'Review of interim financial information performed by the
independent auditor of the entity' issued by the International Auditing and
Assurance Standards Board. A review of interim financial information consists
of making inquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing and consequently does not enable us to
obtain assurance that we would become aware of all significant matters that
might be identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the Interim Report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the interim financial statements.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
24 March 2017
The maintenance and integrity of the Company's website is the responsibility of
the Directors; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
Legislation in Guernsey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
UNAUDITED CONDENSED STATEMENT OF FINANCIAL POSITION
31 December 2016 30 June 2016
Notes USD'000 USD'000
(Unaudited) (Audited)
ASSETS
Cash and cash equivalents 6 91,825 1,570
Financial assets at fair value through 8 788,408 789,739
profit or loss
Receivables 9 218 5,077
Total assets 880,451 796,386
CURRENT LIABILITIES
Accrued expenses and other payables 11 11,243 9,850
Total liabilities 11,243 9,850
EQUITY
Share capital 10 481,018 483,829
Retained earnings 388,190 302,707
Total Shareholders' equity 869,208 786,536
Total liabilities and equity 880,451 796,386
Net asset value, USD per share 16 4.18 3.77
Net asset value, GBP per share 3.38 2.82
The Unaudited Condensed Interim Financial Statements were approved and signed
by the Board of Directors on 24 March 2017.
Steven Bates
Chairman
Huw Evans
Director
The accompanying notes are an integral part of these Unaudited Condensed
Interim Financial Statements.
UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY
Share Retained Total
capital earnings Equity
Note USD'000 USD'000 USD'000
Balance at 1 July 2015 512,027 206,637 718,664
Profit for the period - 5,232 5,232
Total comprehensive income - 5,232 5,232
Transactions with owners
Shares repurchased (13,371) - (13,371)
Balance at 31 December 2015 498,656 211,869 710,525
Balance at 1 July 2016 483,829 302,707 786,536
Profit for the period - 85,483 85,483
Total comprehensive income - 85,483 85,483
Transactions with owners
Shares repurchased 10 (2,811) - (2,811)
Balance at 31 December 2016 481,018 388,190 869,208
The accompanying notes are an integral part of these Unaudited Condensed
Interim Financial Statements.
UNAUDITED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Six months ended
31 December 2016 31 December 2015
Notes USD'000 USD'000
Dividend income 12 23,920 25,733
Net gains/(losses) on financial assets at 13 76,896 (13,628)
fair value through profit or loss
General and administration expenses 14 (7,932) (7,069)
Accrued incentive fee 18 (7,673) -
Other income 272 196
Operating profit 85,483 5,232
Profit before tax 85,483 5,232
Corporate income tax 15 - -
Profit for the period 85,483 5,232
Total comprehensive income for the period 85,483 5,232
Earnings per share
- basic and diluted (USD per share) 16 0.41 0.02
- basic and diluted (GBP per share) 0.32 0.01
All items were derived from continuing activities.
The accompanying notes are an integral part of these Unaudited Condensed
Interim Financial Statements.
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
Six months ended
31 December 2016 31 December 2015
Notes USD'000 USD'000
Operating activities
Income before tax 85,483 5,232
Adjustments for:
Dividend income (23,920) (25,733)
Net (gain)/loss on financial assets
at fair value through profit or loss 13 (76,896) 13,628
(15,333) (6,873)
Change in receivables 4,859 (6,198)
Change in accrued expenses and other payables 1,393 152
Dividend receipts 23,920 12,362
Net cash inflow/(outflow) from operating 14,839 (557)
activities
Investing activities
Purchases of financial assets at fair value 20 (82,165) -
through profit or loss
Return of Capital from financial assets at fair 8 160,392 -
value through profit or loss
Net cash generated from investing activities 78,227 -
Financing activities
Purchases of shares into treasury 10,12 (2,811) -
Net cash used in financing activities (2,811) -
Net change in cash and cash equivalents for the 90,255 (557)
period
Cash and cash equivalents at the beginning of 6 1,570 906
the period
Cash and cash equivalents at the end of the 6 91,825 349
period
In the period ended 31 December 2015, the share repurchase programme was
carried out through a subsidiary of the Company. The Unaudited Condensed
Statement of Cash Flows for that period does not include payments made by that
subsidiary in respect of share purchases, which are set out below. From
29 April 2016, the share repurchase programme has been carried out by the
Company itself.
Six months ended
31 December 2016 31 December 2015
Notes USD'000 USD'000
Company share repurchases 12 - 13,371
- 13,371
The accompanying notes are an integral part of these Unaudited Condensed
Interim Financial Statements.
NOTES TO THE UNAUDITED CONDENSED INTERIM FINANCIAL STATEMENTS
1. GENERAL INFORMATION
VinaCapital Vietnam Opportunity Fund Limited (the "Company") is a Guernsey
domiciled closed-ended investment company. The Company was previously a limited
liability company incorporated in the Cayman Islands. After an Extraordinary
General Meeting on 27 October 2015, Shareholders approved proposals to change
the Company's domicile to Guernsey. This change took place on 22 March 2016.
The registered office of the Company is PO Box 255, Trafalgar Court, Les
Banques, St Peter Port, Guernsey, GY1 3QL. The Company's objective is to
achieve medium to long-term returns through investment either in Vietnam or in
companies with a substantial majority of their assets, operations, revenues or
income in, or derived from, Vietnam. The Company is quoted on the London Stock
Exchange's Main Market under the ticker symbol VOF.
The Company does not have a fixed life, but the Board considers it desirable
that shareholders should have the opportunity to review the future of the
Company at appropriate intervals. Accordingly, the Board intends that a special
resolution will be proposed every fifth year that the Company ceases to
continue. If the resolution is not passed, the Company will continue to operate
as currently constituted. If the resolution is passed, the Directors will be
required to formulate proposals to be put to shareholders to reorganise,
unitise or reconstruct the Company or for the Company to be wound up. The Board
tabled such special resolutions in 2008 and in 2013 and on both occasions the
resolution was not passed allowing the Company to continue as presently
constituted. The next shareholder vote on the continuation of the Company will
be held in 2018.
The Unaudited Condensed Interim Financial Statements for the six-month period
ended 31 December 2016 were approved for issue by the Board on 24 March 2017.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation
The Company has prepared these Unaudited Condensed Interim Financial Statements
on a going concern basis in accordance with the Disclosure and Transparency
Rules of the United Kingdom Financial Conduct Authority and IAS 34 "Interim
Financial Reporting". These Unaudited Condensed Interim Financial Statements do
not comprise statutory Financial Statements within the meaning of The Companies
(Guernsey) Law, 2008, and should be read in conjunction with the Financial
Statements of the Company as at and for the year ended 30 June 2016, which were
prepared in accordance with International Financial Reporting Standards. The
statutory Financial Statements for the year ended 30 June 2016 were approved by
the Board of Directors on 27 October 2016. The opinion of the Auditors on those
Financial Statements was unqualified and did not contain an emphasis of matter.
The accounting policies adopted in these Unaudited Condensed Interim Financial
Statements are unchanged since 30 June 2016. These Unaudited Condensed Interim
Financial Statements for the period ended 31 December 2016 have been reviewed
by the Auditors but not audited.
2.2 Changes in accounting policy and disclosures
These Unaudited Condensed Interim Financial Statements have been prepared in
accordance with the accounting policies, methods of computation and
presentation adopted in the Audited Financial Statements for the year ended 30
June 2016.
2.3 Subsidiaries and associates
The Company meets the definition of an Investment Entity within IFRS 10 and
therefore does not consolidate its subsidiaries but measures them instead at
fair value through profit or loss.
Any gains or losses arising from a change in the fair value of investments in
subsidiaries and associates are recognised in the condensed interim statement
of comprehensive income.
Refer to Note 3 on further disclosure on accounting for subsidiaries and
associates.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
When preparing the Unaudited Condensed Interim Financial Statements, the
Company relies on a number of judgements, estimates and assumptions about
recognition and measurement of assets, liabilities, income and expenses. Actual
results may differ from the judgements, estimates and assumptions.
Information about significant judgements, estimates and assumptions which have
the greatest effect on the recognition and measurement of assets, liabilities,
income and expenses were the same as those that applied to the Annual Report
and Financial Statements for the year ended 30 June 2016.
3.1 Eligibility to qualify as an investment entity
The Company has determined that that it is an investment entity under the
definition of IFRS 10 as it meets the following criteria:
a) The Company has obtained funds from investors for the purpose of providing
those investors with investment management services;
b) The Company's business purpose is to invest funds solely for returns from
capital appreciation, investment income or both; and
c) The performance of investments made by the Company are substantially
measured and evaluated on a fair value basis.
The Company has the typical characteristics of an investment entity:
· it holds more than one investment;
· it has more than one investor;
· it has investors that are not its related parties; and
· it has ownership interests in the form of equity or similar interests.
As a consequence, the Company does not consolidate its subsidiaries and
accounts for them at fair value through profit or loss.
3.2 Fair value of subsidiaries and associates and their underlying investments
At the end of each half of the financial year, the fair values of investments
in subsidiaries and associates are reviewed and the fair values of all material
investments held by these subsidiaries and associates are assessed. The fair
values of real estate and private equity investments are estimated on a rolling
basis by a qualified independent professional services firm (the "independent
valuer") with each investment being valued at least once each year. The
valuations by the independent valuer are prepared using a number of approaches
such as adjusted net asset valuations, discounted cash flows, income-related
multiples and price-to-book ratio. In cases where the underlying investments of
a subsidiary or associate are real estate projects or hotels, the independent
valuer determines their fair value based on valuations provided by specialised
independent professional appraisers ("specialised appraisers"). These
valuations are used by the independent valuer as the primary basis for
estimating each subsidiary's or associate's fair value.
For the real estate and private equity investments where the independent valuer
last determined the valuations of the relevant subsidiaries as at 30 June 2016,
the Investment Manager has reviewed the more recent financial performance of
the underlying investments and any other factors and has then estimated the
values as at 31 December 2016 under the supervision of the Audit Committee.
The Company has investments in a number of subsidiaries and associates which
were established to hold underlying investments. The shares of the subsidiaries
and associates are not publicly traded; return of capital to the Company can
only be made by divesting the subsidiaries and associates or the underlying
investments held by the subsidiaries and associates. As a result, the carrying
values of subsidiaries and associates may not be indicative of the value
ultimately realised on divestment.
The underlying investments include listed and unlisted securities, private
equity and real estate assets. Where an active market exists (for example, for
listed securities), the fair value of the subsidiary or associate reflects the
asset value of the underlying holdings. Where no active market exists,
valuation techniques are used.
As at 31 December 2016 and 30 June 2016, the Company classified its investments
in subsidiaries and associates as Level 3 within the fair value hierarchy,
because they are not publicly traded, even when the underlying assets are
readily realisable.
The fair value of the investments in subsidiaries and associates is primarily
based on their net asset values. The estimated fair values provided by the
independent valuer and/or the Investment Manager are used by the Audit
Committee as the primary basis for estimating the fair value of real estate and
private equity investments for recommendation to the Board. Information about
the significant judgements, estimates and assumptions that are used in the
valuation of these investments is discussed on the subsequent section.
(a) Valuation of assets that are traded in an active market
The fair values of listed securities are based on quoted market prices at the
close of trading on the reporting date. For unlisted securities which are
traded in an active market, fair value is the average quoted price at the close
of trading obtained from a minimum sample of three reputable securities
companies at the reporting date. Other relevant measurement bases are used if
broker quotes are not available or if better and more reliable information is
available.
(b) Valuation of assets that are not traded in an active market
The fair values of assets that are not traded in an active market (for example,
private equities and real estate where market prices are not readily available)
are determined by using valuation techniques. The independent valuer and/or the
Investment Manager uses its judgement to select a variety of methods and makes
assumptions that are mainly based on market conditions existing at each
reporting date. The valuations may vary from the actual prices that would be
achieved in an arm's length transaction at the reporting date.
(b.1) Valuation of investments in private equities
The Company's underlying investments in private equities are fair valued using
discounted cash flow and market comparison methods. The projected future cash
flows are driven by management's business strategies and goals and its
assumptions of growth in gross domestic product ("GDP"), market demand,
inflation, etc. The independent valuer and/or the Investment Manager selects
appropriate discount rates that reflect the uncertainty of the quantum and
timing of the cash flows.
(b.2) Valuation of real estate and hospitality investments
A number of the Company's real estate investments are held in joint ventures
with VinaLand Limited ("VinaLand"), another company managed by the Investment
Manager. In all cases, VinaLand holds a controlling stake in the joint venture
companies and therefore exercises control over the investments. As both
companies are managed by the same Investment Manager, each company's investment
objectives for each property have generally been the same.
The fair values of underlying real estate properties are based on valuations by
specialised appraisers. These valuations are based on certain assumptions which
are subject to uncertainty and might result in valuations which differ
materially from the actual results of a sale. The estimated fair values
provided by the specialised appraisers are used by the independent valuer and/
or the Investment Manager as the primary basis for estimating fair value of the
Company's subsidiaries and associates that hold these properties in accordance
with accounting policies set out in section 2.3 above.
In conjunction with making its judgement for the fair value of the Company's
underlying real estate and hospitality investments, the independent valuer and/
or the Investment Manager considers information from a variety of sources
including:
a. current prices in an active market for properties of similar nature,
condition or location;
b. current prices in an active market for properties of different nature,
condition or location (or subject to different lease or other contracts),
adjusted to reflect those differences;
c. recent prices of similar properties in less active markets, with
adjustments to reflect any changes in economic conditions since the date of the
transactions that occurred at those prices;
d. recent developments and changes in laws and regulations that might affect
zoning and/or the Company's ability to exercise its rights in respect to
properties and therefore fully realise the estimated values of such properties;
e. discounted cash flow projections based on estimates of future cash flows,
derived from the terms of external evidence such as current market rents,
occupancy and room rates, and sales prices for similar properties in the same
location and condition, and using discount rates that reflect current market
assessments of the uncertainty in the amount and timing of the cash flows; and
f. recent compensation prices made public by the local authority in the
province where the property is located.
Uncertain taxes
A number of subsidiaries and associates are established in Vietnam and
Singapore and are subject to corporate income tax in those countries. The tax
liabilities (which are in some cases uncertain) of these subsidiaries and
associates are considered by the independent valuer and/or the Investment
Manager based on the tax legislation of each jurisdiction and included in their
fair values of financial assets at fair value through profit or loss on the
Statement of Financial Position.
4. SEGMENT ANALYSIS
There have been no changes from prior periods in the measurement methods used
to determine reported segment profit or loss.
Segment information can be analysed as follows:
Statement of Comprehensive Income
Capital Real estate Private Total
markets* and equity
hospitality
USD'000 USD'000 USD'000 USD'000
Period ended 31 December 2016
Dividend income 23,920 - - 23,920
Net gains on financial assets
at fair value through profit or 41,596 34,464 836 76,896
loss
General and administration expenses
(Note 14) (6,395) (733) (804) (7,932)
Accrued incentive fee (7,673) - - (7,673)
Other income 272 - - 272
Profit) before tax 51,720 33,731 32 85,483
Period ended 31 December 2015
Dividend income 25,733 - - 25,733
Net (losses)/gains on financial
assets
at fair value through profit or (17,518) 4,067 (177) (13,628)
loss
General and administration expenses
(Note 14) (4,974) (1,658) (437) (7,069)
Other income 196 - - 196
Profit/(loss) before 3,437 2,409 (614) 5,232
tax
* Capital markets include listed as well as unlisted over-the-counter
securities.
Statement of Financial Position
Capital Real estate Private Other net Total
markets* and equity assets**
hospitality
USD'000 USD'000 USD'000 USD'000 USD'000
As at 31 December 2016
Cash and cash - - - 91,825 91,825
equivalents
Receivables - - - 218 218
Financial assets at 549,389 73,220 77,082 88,717 788,408
fair value through
profit or loss
Total assets 549,389 73,220 77,082 180,760 880,451
Accrued expenses and
other payables - - - 11,243 11,243
Total liabilities - - - 11,243 11,243
Net asset value 549,389 73,220 77,082 169,517 869,208
Capital Real estate Private Other net Total
markets* and equity assets**
hospitality
USD'000 USD'000 USD'000 USD'000 USD'000
As at 30 June 2016
Cash and cash - - - 1,570 1,570
equivalents
Receivables - - - 5,077 5,077
Financial assets at 482,746 137,268 72,952 96,773 789,739
fair value through
profit or loss
Total assets 482,746 137,268 72,952 103,420 796,386
Accrued expenses and
other payables - - - 9,850 9,850
Total liabilities - - - 9,850 9,850
Net asset value 482,746 137,268 72,952 93,570 786,536
* Capital markets include listed as well as unlisted over-the-counter
securities.
** Other net assets of USD88.7 million (30 June 2016: USD96.8 million) comprise
cash and cash equivalents and other net assets of the direct subsidiaries at
fair value.
5. INTERESTS IN SUBSIDIARIES AND ASSOCIATES
5.1 Directly-owned subsidiaries
The Company had the following directly-owned subsidiaries as at 31 December
2016 and 30 June 2016:
As at
31 December 30 June
2016 2016
% of % of
Country of Company Company
Subsidiary incorporation interest interest Nature of the business
Vietnam Investment Property British 100.00 100.00 Holding company for listed,
Virgin
Holding Limited Islands unlisted securities and
("BVI") real estate
Vietnam Investment Property BVI 100.00 100.00 Holding company for listed,
Limited
and unlisted securities
Vietnam Ventures BVI 100.00 100.00 Holding company for listed,
Limited
unlisted securities and
real estate
Vietnam Investment BVI 100.00 100.00 Holding company for listed,
Limited
unlisted securities and
real estate
Asia Value Investment BVI 100.00 100.00 Holding company for listed,
Limited
and unlisted securities
Vietnam Master Holding 2 BVI 100.00 100.00 Holding company for listed
Limited securities
VOF Investment Limited BVI 100.00 100.00 Holding company for listed,
unlisted securities, real
estate,
hospitality and private
equity
VOF PE Holding 5 BVI 100.00 100.00 Holding company for listed
Limited securities
Visaka Holdings BVI 100.00 100.00 Holding company for
Limited investments
Portal Global Limited BVI 100.00 100.00 Holding company for listed
securities
and unlisted securities
Windstar Resources BVI 100.00 100.00 Holding company for listed
Limited securities
Allright Assets BVI 100.00 100.00 Holding company for real
Limited estate
Vietnam Enterprise BVI 100.00 100.00 Holding company for listed,
Limited
unlisted securities and
real estate
Vina QSR Limited BVI 100.00 100.00 Holding company for
investments
VOF PE Holding 3 BVI 100.00 100.00 Holding company for
Limited investments
Vinaland Heritage BVI 100.00 100.00 Holding company for
Limited investments
Sharda Holdings BVI 100.00 100.00 Holding company for
Limited investments
Hospira Holdings BVI 100.00 100.00 Holding company for
Limited investments
Navia Holdings Limited BVI 100.00 100.00 Holding company for
investments
Orkay Holdings Limited BVI 100.00 100.00 Holding company for
investments
Halico Investment Holding BVI 100.00 100.00 Holding company for
Limited investments
Clear Interest Group BVI 100.00 100.00 Holding company for
Limited investments
Foremost Worldwide BVI 100.00 100.00 Holding company for unlisted
Limited securities
Rewas Holdings Limited BVI 100.00 100.00 Holding company for
investments
Allwealth Worldwide BVI 100.00 100.00 Holding company for private
Limited equity
Nomino Holdings BVI 100.00 100.00 Holding company for
Limited investments
Vina Sugar Holdings BVI 100.00 100.00 Holding company for
Limited investments
Belfort Worldwide BVI 100.00 100.00 Holding company for
Limited investments
Preston Pacific BVI 100.00 100.00 Holding company for
Limited investments
Vietnam Opportunity Fund II BVI 100.00 100.00 Holding company for
Pte. Ltd. investments
Liva Holdings Ltd BVI 100.00 100.00 Holding company for
investments
Vietnam Master Holding 1 BVI 100.00 - Holding company for
Limited investments
Allright Assets Singapore 100.00 100.00 Holding company for real
Limited estate
Turnbull Holding Pte. Singapore 100.00 100.00 Holding company for
Ltd. investments
Fraser Investment Pte. Singapore 100.00 100.00 Holding company for listed
Limited securities
SE Asia Master Holding 7 Singapore 100.00 100.00 Holding company for private
Pte Limited equity
VTC Espero Pte Limited Singapore 100.00 100.00 Holding company for real
estate
Hawke Investments Pte Singapore 100.00 100.00 Holding company for unlisted
Limited securities
There is no legal restriction to the transfer of funds from the BVI or
Singapore subsidiaries to the Company. Cash held in directly-owned as well as
indirectly-owned Vietnamese subsidiaries and associates is subject to
restrictions imposed by co-investors and the Vietnamese government and
therefore it cannot be transferred out of Vietnam unless such restrictions are
satisfied.
The Company's underlying investments in real estate projects jointly invested
with VinaLand have commitments under investment agreements to acquire and
develop, or make additional investments in investment properties and leasehold
land in Vietnam.
5.2 Indirect interests in subsidiaries
The Company had the following indirect interests in subsidiaries at 31 December
2016 and 30 June 2016:
As at
31 December 30 June
2016 2016
% of % of
Company's Company's
Country of Immediate indirect indirect
Indirect subsidiary incorporation Nature of the Parent interest interest
business
Longwoods Worldwide BVI Holding company Nomino Holdings 100.00 100.00
Limited for listed and Limited
unlisted
investments
Victory Holding BVI Holding company Rewas Holdings 100.00 100.00
Investment Limited for listed and Limited
unlisted
investments
DTL Education Holding BVI Holding company Clear Interest 100.00 100.00
Ltd for investments Group Limited
Transwell Enterprises BVI Holding company Orkay Holdings 100.00 100.00
Limited for unlisted Limited
securities
Vietnam Hospitality BVI Holding company VOF Investment 100.00 100.00
Ltd for real estate Limited
PA Investment Opportunity BVI Holding company Vietnam Enterprise 100.00 100.00
II Limited for investments Limited
Pegasus Leisure Ltd. BVI Holding company Vietnam 100.00 100.00
for investments Investments
Limited
Howard Holding Pte. Singapore Holding company Allwealth 80.56 80.56
Limited for private Worldwide Limited
equity
Abbott Holding Pte. Singapore Holding company Hospira Holdings 100.00 100.00
Limited for private Limited
equity
Whitlam Holding Pte. Singapore Holding company Navia Holdings 61.26 61.26
Limited for private Limited
equity
Indochina Building Singapore Holding company VOF Investment 100.00 100.00
Supplies Pte. Ltd for private Limited
equity
Yen Viet Joint Stock Vietnam Food & Beverage SE Asia Master 65.00 65.00
Company products Holding 7 Limited
Menzies Holding Pte. Singapore Holding company Belfort Worldwide 100.00 100.00
Ltd for investments Limited
Bivi Cooporation Vietnam Real estate VOF Investment 100.00 100.00
investment Limited
5.3 Direct interests in associates
The Company had the following directly-owned associates as at 31 December 2016
and 30 June 2016:
As at
31 December 30 June 2016
2016
% of % of
Country of Company Company
Associate incorporation interest interest Nature of the business
Allwealth Asia Ltd BVI 35.00 35.00 Holding company for
real estate
Sunbird Group Ltd BVI 25.00 25.00 Holding company for
real estate
Perimeter Investment BVI 25.00 25.00 Holding company for
Limited real estate
Daybreak Overseas Limited BVI 25.00 25.00 Holding company for
real estate
Central Lion International BVI 25.00 25.00 Holding company for
real estate
Bantam Investments Limited BVI 25.00 25.00 Holding company for
real estate
Vietnam Property Holdings BVI 25.00 25.00 Holding company for
Limited real estate
Prosper Big Investment BVI - 25.00 Holding company for
Limited real estate
Avante Global Limited BVI 25.00 25.00 Holding company for
real estate
Pacific Alliance Land BVI 25.00 25.00 Holding company for
Limited real estate
VinaCapital Danang Resorts BVI - 25.00 Holding company for
Limited real estate
VinaCapital Commercial Center
Private Limited Singapore 12.75 12.75 Holding company for
real estate
VinaLand Eastern Limited Singapore 25.00 25.00 Holding company for
real estate
Mega Assets Pte. Limited Singapore 25.00 25.00 Holding company for
real estate
SIH Real Estate Pte. Singapore 25.00 25.00 Holding company for
Limited real estate
5.4 Indirect interests in associates
The Company had the following indirect interests in associates at 31 December
2016 and 30 June 2016:
As at
31 December 30 June
2016 2016
% of % of
Company's Company's Company's
subsidiary
Country of holding direct indirect indirect
interest
Indirect associate incorporation Nature of the in the associate interest interest
business
Phong Phu Investment and Vietnam Real estate Vietnam Ventures 30.00 30.00
Development investment Limited
Saigon Golf JSC Vietnam Real estate Vietnam Ventures - 20.00
investment Limited
Avila Co. Ltd. Vietnam Real estate Vietnam
investment Investment
Property
Holdings Limited 16.18 16.18
Vina Dai Phuoc Vietnam Real estate Allright Assets 18.00 18.00
Corporation investment Limited
Vinh Thai Urban Development Vietnam Real estate VTC Espero 17.75 17.75
Corporation investment Limited
Thang Loi Textile Vietnam Real estate VOF Investment 34.00 34.00
investment Limited
Hung Vuong Corporation Vietnam Real estate VOF Investment 33.00 33.00
investment Limited
The Company's indirect interests of less than 20% in associates at period/
year-end are co-investments with VinaLand. The Company considers these
interests as indirect associates because, as part of the co-investment
strategy, the Company can exert significant influence on these entities.
5.5 Financial risks
The Company owns a number of subsidiaries and associates for the purpose of
holding investments in listed and unlisted securities, debt instruments,
private equity and real estate. The Company, via these underlying investments,
is subject to financial risks which are further disclosed in Note 20. The
Investment Manager makes investment decisions after performing extensive due
diligence on the underlying investments, their strategies, financial structure
and the overall quality of management.
6. CASH AND CASH EQUIVALENTS
31 December 2016 30 June 2016
USD'000 USD'000
Cash at banks 1,570
91,825
As at the Statement of Financial Position date, cash and cash equivalents were
denominated in USD.
The Company's overall cash position including cash held in directly held
subsidiaries is USD118.7 million
(30 June 2016: USD57.0 million). Please refer to Note 8 for details of the cash
held by the Company's subsidiaries.
7.
FINANCIAL INSTRUMENTS BY CATEGORY
Loans and Financial Total
receivables assets at fair
value through
profit or loss
USD'000 USD'000 USD'000
As at 31 December 2016
Cash and cash 91,825 - 91,825
equivalents
Receivables 218 - 218
Financial assets at fair value through - 788,408 788,408
profit or loss
Total 92,043 788,408 880,451
Financial assets denominated
in:
- USD 92,043 788,408 880,451
As at 30 June 2016
Cash and cash 1,570 - 1,570
equivalents
Receivables 5,077 - 5,077
Financial assets at fair value through - 789,739 789,739
profit or loss
Total 6,647 789,739 796,386
Financial assets denominated
in:
- USD 6,647 789,739 796,386
All financial liabilities are short term in nature and their carrying values
approximate their fair values. There are no financial liabilities that must be
accounted for at fair value through profit or loss (30 June 2016: nil).
8 . FINANCIAL ASSETS AT FAIR VALUE
THROUGH PROFIT OR LOSS
Financial assets at fair value through profit and loss comprise the Company's
investments in subsidiaries and associates. The underlying assets and
liabilities of the direct subsidiaries and associates at fair value are
disclosed in the following table.
31 December 2016 30 June 2016
USD'000 USD'000
Cash and cash 33,112 55,430
equivalents
Ordinary shares - listed 448,705 400,005
Ordinary shares - unlisted and over-the-counter 100,684 82,741
("OTC")
Private equity 77,082 72,952
Real estate projects and operating assets 73,220 137,268
Other assets, net of 55,605 41,343
liabilities
788,408 789,739
The major underlying investments held by the direct subsidiaries of the Company
were in the following industry sectors.
31 December 2016 30 June 2016
USD'000 USD'000
Consumer goods 241,874 235,142
Construction 136,597 97,961
Financial services 27,473 38,054
Agriculture 20,833 24,681
Energy, minerals and petroleum 31,881 41,531
Pharmaceuticals 9,081 9,023
Real estate projects and operating assets 176,273 219,862
Infrastructure 55,679 26,711
As at 31 December 2016, an underlying holding, Vietnam Dairy Products Joint
Stock Company, within financial assets at fair value through profit or loss
amounted to 13.9% of the net asset value ("NAV") of the Company (30 June 2016:
14.7%). There were no other holdings that had a value exceeding 10% of the NAV
of the Company as at 31 December 2016 or 30 June 2016.
During the period there has been return of capital from the underlying
investments in the subsidiaries/associates arising from the realisation of
these assets and the reallocation of available cash to the Company.
When determining the fair values of financial assets at fair value through
profit or loss the Company takes into account the potential for warranty or
other claims arising on the sale of any investments based on the underlying
likelihood of an event arising and the amount that may become payable.
9. RECEIVABLES
31 December 2016 30 June 2016
USD'000 USD'000
Receivables from the Investment Manager on management fees 212 380
rebate
Cash held in escrow - 4,697
account
Loan 6 -
218 5,077
Cash held in the escrow account represented a deposit in United Overseas Bank
Ltd that was retained from the sale of the Company's underlying investment,
Prime Group Joint Stock Company, held through a previously owned Singaporean
subsidiary, in 2012. The retention balance served as partial security for the
Company's liability arising from the Company's potential Tax Assessment
obligations. The escrow account was released to the Company on 31 December
2016.
10. SHARE CAPITAL
The Company may issue an unlimited number of Shares, including shares of no par
value or shares with a par value. Shares may be issued as (a) Shares in such
currencies as the Directors may determine; and/or (b) such other classes of
shares in such currencies as the Directors may determine in accordance with the
Articles and the Companies Law and the price per Share at which shares of each
class shall first be offered to subscribers shall be fixed by the Board. The
minimum price which may be paid for a share is USD0.01. The Directors will act
in the best interest of the Company and the Shareholders when authorising the
issue of any shares.
Issued capital
31 December 2016 30 June 2016
Number of USD'000 Number of USD'000
shares shares
Issued and fully paid at 1 July 211,346,258 491,301 324,610,259 725,310
Cancellation of treasury shares - - (113,264,001) (234,009)
Issued and fully paid at period/ 211,346,258 491,301 211,346,258 491,301
year end
Shares held in (3,585,000) (10,283) (2,700,000) (7,472)
treasury
Outstanding shares at period/year 207,761,258 481,018 208,646,258 483,829
end
Treasury shares
31 December 2016 30 June 2016
Number of USD'000 Number of USD'000
shares shares
Opening balance at 1 July 2,700,000 7,472 104,652,647 213,283
Shares repurchased during the period/ 885,000 2,811 11,311,354 28,198
year
(Note 12)
Shares cancelled during the period - - (113,264,001) (234,009)
/year
Closing balance at period/year end 3,585,000 10,283 2,700,000 7,472
In October 2011, the Board sought and obtained shareholder approval to
implement a share buyback programme.
During the period, no treasury shares (30 June 2016: 113,264,001) were
cancelled. The cancellation of treasury shares in the prior year did not result
in a change in the Company's NAV per share.
11. ACCRUED EXPENSES AND OTHER PAYABLES
31 December 2016 30 June 2016
USD'000 USD'000
Management fees payable to the Investment Manager 1,111 993
(Note 18)
Incentive fees payable to the Investment Manager 8,241
(Note 18) 7,673
Payables to other related 304
parties 2,164
Other payables 295 312
11,243 9,850
All accrued expenses and other payables are short-term in nature. Therefore,
their carrying values are considered a reasonable approximation of their fair
values.
12. DIVID INCOME
Six months ended
31 December 2016 31 December 2015
USD'000 USD'000
Dividend income from a subsidiary used to
pay for the
Company's share repurchases 13,371
-
Dividend 23,920 12,362
income
23,920 25,733
Until 29 April 2016, all share buy backs were carried out under the name of
Visaka Holdings Limited, a wholly-owned subsidiary. Since 29 April 2016, all
share buy backs have been carried out under the name of the Company. The
payments for the share buy backs were made by VOF Investment Limited ("VOFIL"),
a wholly-owned subsidiary of the Company until 27 May 2016. All purchases had
been fully settled by the Statement of Financial Position dates.
13. NET GAINS/(LOSSES) ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS
Six months ended
31 December 2016 31 December 2015
USD'000 USD'000
Financial assets at fair value through
profit or loss:
- Gains from the realisation of financial 74 -
assets, net
- Unrealised gains/(losses), 76,822 (13,628)
net
Total 76,896 (13,628)
14. GENERAL AND ADMINISTRATION EXPENSES
Six months ended
31 December 2016 31 December 2015
USD'000 USD'000
Management fees (Note 18(a)) 6,440 5,233
Directors' 211 173
fees
Custodian, secretarial and other 918 721
professional fees
Others 363 942
7,932 7,069
15. INCOME TAX EXPENSE
The Company was incorporated in the Cayman Islands until 22 March 2016 when it
changed its domicile to Guernsey. Under the laws of the Cayman Islands, there
are no income, state, corporation, capital gains or other taxes payable by the
Company.
The Company has been granted Guernsey tax exempt status in accordance with The
Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 (as amended).
A number of subsidiaries are established in Vietnam and Singapore and are
subject to corporate income tax in those countries. The income tax payable by
these subsidiaries is taken into account in determining their fair values in
the Statement of Financial Position.
16. EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE
(a) Basic
Basic earnings per share is calculated by dividing the profit/(loss) from
operations of the Company by the weighted average number of ordinary shares in
issue during the year excluding ordinary shares purchased by the Company and
held as treasury shares (Note 10).
Six months ended
31 December 2016 31 December 2015
Profit for the period 85,483 5,232
(USD'000)
Weighted average number of ordinary shares 208,475,850 217,387,194
in issue
Basic earnings per share (USD per share) 0.41 0.02
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The Company has no category of potentially dilutive
ordinary shares. Therefore, diluted earnings/(loss) per share is equal to basic
earnings/(loss) per share.
(c) Net asset value per share
NAV per share is calculated by dividing the net asset value of the Company by
the number of outstanding ordinary shares in issue as at the reporting date
excluding ordinary shares purchased by the Company and held as treasury shares
(Note 10). NAV is determined as total assets less total liabilities.
31 December 2016 30 June 2016
Net asset value 869,208 786,536
(USD'000)
Number of outstanding ordinary shares in 207,761,258 208,646,258
issue
Net asset value per share (USD per share) 4.18 3.77
17. SEASONALITY
The Board believes that the impact of seasonality on the condensed interim
financial information is not material.
18. RELATED PARTIES
Investment Manager's Fees
(a) Management fees
Under the Second Amended IMA dated 15 October 2014, the Investment Manager
receives a fee at an annual rate of 1.5% of the NAV, payable monthly in arrear.
Total management fees for the period amounted to USD6.4 million (31 December
2015: USD5.2 million), of which USD1.1 million (30 June 2016: USD1.0 million)
was due to the Investment Manager at the reporting date.
(b) Incentive fees
Under the Second Amended IMA, from 1 July 2013, the incentive fee was changed
to be 15% of the increase in NAV per share over a hurdle rate of 8% per annum.
A catch up is no longer applied. Furthermore, for the purposes of calculating
incentive fees, the Company's net assets are segregated into a Direct Real
Estate Portfolio and a Capital Markets Portfolio. A separate incentive fee is
calculated for each portfolio so that for any statement of financial position
date it will be possible for an incentive fee to become payable in relation to
one, both, or neither, portfolio depending upon the performance of each
portfolio. However, the maximum incentive fee that can be paid in any given
year in respect to a portfolio is 1.5% of the time weighted average NAV of that
portfolio over the period to which the fee relates. Any incentive fees earned
in excess of the cap may be paid out in subsequent years providing that certain
performance targets are met.
On 27 October 2016, the IMA was amended in order to clarify the calculation of
incentive fees. The clarification did not result in adjustments of the
incentive fees expensed as of and for the period ended
31 December 2016.
Total incentive fees accrued for the period amounted to USD7.7million (31
December 2015: USD Nil). Total incentive fees paid in respect of the fiscal
year ending 30 June 2016 amounted to USD 8.2 million.
Directors' Remuneration
The Directors who served during the period received the following emoluments in
the form of fees:
Six months ended
Annual fee 31 December 2016 31 December 2015
USD USD USD
Steven Bates 95,000 47,500 47,500
Martin Adams 80,000 40,000 40,000
Michael Gray* 90,000 43,151 45,000
Thuy Bich Dam 80,000 40,000 40,000
Huw Evans** 80,000 40,000 -
210,651 172,500
* Retired 21 December 2016.
** Appointed 27 May 2016.
No Directors' fees were outstanding at the period end (30 June 2016: Nil).
(c) Other balances with related parties
31 December 2016 30 June 2016
USD'000 USD'000
Receivables from the Investment Manager on management fees 212 380
rebate
Payables to the Investment Manager on
expenses paid
on behalf of the Company 30 205
Certain underlying investments jointly managed by the
Investment Manager
- Vietnam Infrastructure 2,651 2,290
Limited
- VinaLand Limited 19,708 21,005
22,359 23,295
(d) Cost of treasury shares paid for by
subsidiaries on behalf of the Company
As disclosed in Note 12, the cost of treasury shares purchased was paid by the
Company's subsidiary up to 27 May 2016.
19. COMMITMENTS
The Company's indirect real estate associates have a broad range of commitments
under investment licences which they have received for real estate projects
jointly invested with VinaLand and other agreements they have entered into, to
acquire and develop, or make additional investments in investment properties
and leasehold land in Vietnam. Further investments in many of these
arrangements are at the Company's discretion.
20. FINANCIAL RISK MANAGEMENT
a. Financial risk factors
The Company's activities expose it to a variety of financial risks: market risk
(including currency risk, fair value interest rate risk, cash flow interest
rate risk and price risk), credit risk and liquidity risk.
The condensed interim financial statements do not include all financial risk
management information and disclosures required in the annual financial
statements; they should be read in conjunction with the Company's Audited
Financial Statements as at 30 June 2016.
There have been no significant changes in the management of risk or in any risk
management policies since the last balance sheet date.
(b) Capital management
The Company's capital management objectives are:
· To ensure the Company's ability to continue as a going concern;
· To provide investors with an attractive level of investment income; and
· To provide investors with an attractive level of capital growth.
The Company is not subject to any externally imposed capital requirements. The
Company has engaged the Investment Manager to allocate the net assets in such a
way so as to generate a reasonable investment return for its Shareholders and
to ensure that there is sufficient funding available for the Company to
continue as a going concern.
Capital as at the period/year-end is summarised as follows:
31 December 2016 30 June 2016
USD'000 USD'000
Net assets attributable to equity 869,208 786,536
shareholders
(c) Fair value estimation
The table below analyses financial instruments carried at fair value, by
valuation method. The different levels have been defined as follows:
· Level 1: Quoted prices (unadjusted) in active markets for identical assets
or liabilities;
· Level 2: Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices); and
· Level 3: Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs).
There are no financial liabilities of the Company which were carried at fair
value through profit or loss as at 31 December 2016 and 30 June 2016.
The level into which financial assets are classified is determined based on the
lowest level of significant input to the fair value measurement.
Financial assets measured at fair value in the Statement of Financial Position
are grouped into the following fair value hierarchy:
Level 3 Total
USD'000 USD'000
As at 31 December 2016
Financial assets at fair value through profit or 788,408 788,408
loss
As at 30 June 2016
Financial assets at fair value through profit or 789,739 789,739
loss
The Company classifies its investments in subsidiaries and associates as Level
3 because they are not publicly traded, even when the underlying assets may be
readily realisable.
If these investments were held at the Company level, they would be presented as
follows:
Level 1 Level 2 Level 3 Total
USD'000 USD'000 USD'000 USD'000
As at 31 December 2016
Cash and cash equivalents 33,112 - - 33,112
Ordinary shares - listed 448,705 - - 448,705
- unlisted 84,768 15,916 100,684
and OTC -
Private equity - - 77,082 77,082
Real estate projects and operating - - 73,220 73,220
assets
Other assets, net of - - 55,605 55,605
liabilities
566,585 15,916 205,907 788,408
As at 30 June 2016
Cash and cash equivalents 55,430 - - 55,430
Ordinary shares - listed 400,005 - - 400,005
- unlisted - 65,704 17,037 82,741
and OTC
Private equity - - 72,952 72,952
Real estate projects and operating - - 137,268 137,268
assets
Other assets, net of - - 41,343 41,343
liabilities
455,435 65,704 268,600 789,739
Investments whose values are based on quoted market prices in active markets,
and are therefore classified within Level 1, include actively traded equities
and Government bonds, which have committed prices at the Statement of Financial
Position date. The Company does not adjust the quoted price for these
instruments.
Financial instruments which trade in markets that are not considered to be
active but are valued based on quoted market prices and dealer quotations are
classified within Level 2. These include investments in unlisted equities and
over-the-counter ("OTC") equities. As Level 2 investments include positions
that are not traded in active markets, valuations may be adjusted to reflect
illiquidity and/or non-transferability, which are generally based on available
market information. There are no significant adjustments that may result in a
fair value measurement categorised within Level 3.
Private equities, real estate and hospitality investments, and other assets
that do not have an active market are classified within Level 3. The Company
uses valuation techniques to estimate the fair value of these assets based on
significant unobservable inputs such as discount rates, occupancy and room
rates, etc., as
described in Note 3.2.
Following Novaland's listing on the Ho Chi Minh Stock Exchange in December
2016, the Company's unlisted investment of USD17.0 million in level 3 at 30
June 2016 has been recategorised as a listed investment in Level 1 in the above
hierarchy table at a valuation of USD31.4 million
Quantitative information of significant unobservable inputs and sensitivity
analysis to significant change in unobservable inputs within Level 3 hierarchy
The significant unobservable inputs used in fair value measurement categorised
within Level 3 of the fair value hierarchy together with a quantitative
sensitivity as at 31 December 2016 and 30 June 2016 are shown below:
As at 31 December 2016
Level 3 - Range of unobservable inputs
(probability-weighted average)
Segment Valuation Valuation Discount Cap Terminal Selling Sensitivities in Sensitivities in discount rates Sensitivities
technique (USD'000) rate rate growth price selling price per and cap rates/ dividend yield in room rate
rate per unit (USD'000) (USD'000) and occupancy
unit rate(USD'000)
(USD)
Real Direct 31,433 N/A N/A N/A 30 - Change in sales
estate comparison 8,243 price per square
projects metre
-10% 0% 10% N/A N/A
28,069 31,433 34,797
Real Discounted 41,787 15% -21% 8.5% N/A N/A N/A Change in discount
estate cash flows - rate
projects 14.5%
-1% 0% 1% N/A
Change -1% 44,653 42,104 39,739
in
cap
rate 0% 44,305 41,787 39,452
1% 44,006 41,506 39,200
Private Discounted 77,082 15% - N/A 3% - 5% N/A N/A Change in discount
equity cash flows 21% rate
-1% 0% 1% N/
A
Change -1% 81,103 74,525 68,836
in
cap
rate 0% 85,448 77,082 64,674
1% 90,621 82,260 75,228
As at 30 June 2016
Level 3 - Range of unobservable inputs
(probability-weighted average)
Segment Valuation Valuation Discount Cap Terminal Selling Sensitivities in Sensitivities in discount rates Sensitivities in room rate and
technique (USD'000) rate rate growth price selling price per and cap rates/ dividend yield occupancy rate(USD'000)
rate per unit (USD'000) (USD'000)
unit
(USD)
Real estate Direct 35,578 N/A N/A N/A 30 - Change in sales
projects comparison 8,243 price per square
metre
-10% 0% 10% N/A N/A
32,397 35,578 38,671
Real estate Discounted 41,333 15% -19% 3% - N/A N/A N/A Change in discount
projects cash flows 14.5% rate
-1% 0% 1% N/A
Change -1% 45,620 42,910 40,408
in cap
rate 0% 43,888 41,333 38,948
1% 42,500 40,048 37,778
Hospitality Discounted 60,357 16.00% 11.00% N/A N/A N/A Change in discount Change in room rate
cash flows rate
-1% 0% 1% -1% 0% 1%
Change -1% 63,906 60,896 58,110 Change in -5% 59,827 59,886 59,944
in cap occupancy
rate rate
0% 63,318 60,357 57,615 0% 60,294 60,357 60,420
1% 62,764 59,849 57,149 5% 60,760 60,828 60,896
Private Discounted 46,151* 17% - N/A 3% - 5% N/A N/A Change in discount
equity cash flows 21% rate
-1% 0% 1% N/A
Change -1% 48,026 44,469 41,330
in cap
rate 0% 50,001 46,151 42,741
1% 52,266 48,022 44,349
*The Company acquired certain investments towards the end of the year. The
carrying values of those investments were equivalent to their fair values and
therefore excluded from independent valuations and sensitivity analysis.
Specific valuation techniques used to value the Company's underlying
investments include:
· Quoted market prices or dealer quotes;
· Use of discounted cash flow technique to present value the estimated
future cash flows;
· Other techniques, such as the latest market transaction price.
Changes in Level 3 financial assets at fair value through profit or loss
The fair value of the Company's investments in subsidiaries and associates are
estimated using approaches as described in Note 3.2. As observable prices are
not available for these investments, the Company classifies them as Level 3
fair values.
31 December 2016 30 June 2016
USD'000 USD'000
Opening balance 789,739 717,759
Purchases 4,382
82,165
Return of Capital (Note (160,392) -
8)
Net gains for the period/year, net (Note 13) 76,896 67,598
788,408 789,739
Six months ended
31 December 2016 31 December 2015
Total unrealised gains/(losses) for the period
included in:
Profit/(loss) 76,822 (13,628)
Total unrealised profit/(loss) for the 76,822 (13,628)
period
21. SUBSEQUENT EVENTS
This Interim Report and Unaudited Condensed Interim Financial Statements were
approved for issuance by the Board on 24 March 2017. Events subsequent to 31
December have been evaluated and there are no such events requiring disclosure.
MANAGEMENT AND ADMINISTRATION
Directors Registrar
Steven Bates Computershare Investor Services (Guernsey)
Limited
Michael Gray (retired 21 December 1st Floor, Tudor House
2016)
Martin Adams Le Bordage, St Peter Port
Thuy Bich Dam Guernsey, GY1 1DB
Huw Evans (appointed 27 May 2016) Channel Islands
Registered Office Independent Auditors
PO Box 255 PricewaterhouseCoopers CI LLP
Trafalgar Court PO Box 321
Les Banques Royal Bank Place
St Peter Port 1 Glategny Esplanade
Guernsey GY1 3QL St Peter Port
Channel Islands Guernsey GY1 4ND
Channel Islands
Investment Manager
VinaCapital Investment Management
Limited
PO Box 309
Ugland House
Grand Cayman KY1-1104
Cayman Islands
Administrator and Corporate
Secretary
Northern Trust International Fund
Administration Services (Guernsey)
Limited
PO Box 255
Trafalgar Court
Les Banques
St Peter Port
Guernsey GY1 3QL
Channel Islands
Corporate Broker
Numis Securities Limited
The London Stock Exchange Building
10 Paternoster Square
London EC4M 7LT
United Kingdom
Custodian
Standard Chartered Bank (Vietnam)
Limited
Unit 1810-1815, Keangnam Hanoi
Landmark Tower
Pham Hung Road
Me Tri Ward
Nam Tu Liem District
Hanoi, 1000
Vietnam
Tel: +848 3911 0000
Ho Chi Minh City
17th Floor, Sun Wah Tower,
115 Nguyen Hue Blvd., District 1,
Ho Chi Minh City, Vietnam.
Phone: +84-8 3821 9930
Fax: +84-8 3821 9921
Hanoi
5th Floor, Sun City Building,
13 Hai Ba Trung Street,
Hoan Kiem Dist., Hanoi, Vietnam.
Phone: +84-4 3936 4630
Fax: +84-4 3936 4629
Singapore
6 Temasek Boulevard,
42-01 Suntec Tower 4,
Singapore 038986.
Phone: +65 6332 9081
Fax: +65 6333 9081
END
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