VIETNAM HOLDING LIMITED
("VNH" or the "Company")
(a
non-cellular company limited by shares registered in Guernsey under
the Companies (Guernsey) Law, 2008, on 25 February 2019 with
registered number 66090)
The Board of VietNam Holding Limited
is pleased to announce its 2024 Annual Report and Financial
Statements.
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More information on the Company is
available at
Investment Manager - Dynam Capital,
Ltd.
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www.vietnamholding.com
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Craig Martin
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Tel.: +84 28 3827 7590
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Corporate Broker - Cavendish Capital Markets
Limited
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Trading:
Johnny Hewitson
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Tel: +44 20 7220 0558
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Sales:
Pauline
Tribe
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Tel: +44 20 3772 4697
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Corporate Finance: James
King
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Tel: +44 20 7220 0500
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Company Secretary & Administrator - Sanne Group (Guernsey)
Limited:
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Michael Mabaso-Mlilo
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Tel: +44 20 3530
3158
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The
information contained within the announcement is deemed by the
Company to constitute inside information as stipulated under the
Market Abuse Regulation (UK MAR) (Assimilated Law). Upon the
publication of this announcement via Regulatory Information Service
("RIS"), this inside information is now considered to be in the
public domain.
Contents
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Strategic Report
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Highlights
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1
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Summary Information
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1
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Chairman's Statement
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4
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Investment Manager's Report
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6
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Top Five Portfolio Companies
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11
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Sustainability Report
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21
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Principal Risks and Risk Management
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27
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Governance
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Director Profiles and Disclosure of Directorships
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30
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Corporate Governance Report
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31
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Audit and Risk Committee Report
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37
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Directors' Remuneration Policy and Report
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39
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Directors' Report
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40
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Statement of Directors' Responsibilities
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44
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Financial Statements
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Independent Auditor's Report
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45
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Statement of Financial Position
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50
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Statement of Comprehensive Income
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51
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Statement of Changes in Equity
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52
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Statement of Cash Flows
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53
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Notes to the Financial Statements
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54
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Alternative Performance Measures
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67
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Corporate Information
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68
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Highlights
Financial Highlights
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30 June 2024
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30 June 2023
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Total Net Assets (USD)
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140.2 million
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115.3 million
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Net Asset Value per share (USD)
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5.137
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4.157
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Net Asset Value per share (GBP)
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406.4p
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329.0p
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Share price
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396.0p
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277.5p
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Discount to Net Asset Value
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2.6%
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15.7%
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As at 27 September 2024 (the latest available date
before approval of the accounts), the discount to NAV had moved to
4.0%. The estimated NAV per share and mid-market share price at 27
September 2024 was 406.45 p and 390.0 p respectively.
Ongoing Charges
Ongoing charges for the year ended 30 June 2024 have
been calculated in accordance with the Association of Investment
Companies (the "AIC") recommended methodology. The ongoing charges
for the year ended 30 June 2024 were 2.97% (3.07% as at 30 June
2023). Refer to page 67 for the definitions of Alternative
Performance Measures ("APMs") together with how they have been
calculated.
Summary Information
The Company
VietNam Holding Limited (the "Company", the "Fund" or
"VNH") is a closed-end investment company that was incorporated in
the Cayman Islands on 20 April 2006 as an exempted company with
limited liability under registration number 166182. On 25 February
2019, the Company, via a process of cross-border continuance,
transferred its legal domicile from the Cayman Islands to Guernsey
and was registered as a closed-ended company limited by shares
incorporated in Guernsey with registered number 66090. The Shares
were admitted to trading on AIM in June 2006 and admitted to the
Main Market (previously the Premium segment of the Official List)
and admitted to trading in the Main Market of the London Stock
Exchange on 8 March 2019. The Company also listed on the Official
List of The International Stock Exchange on 8 March 2019. The
Company has an unlimited life with a continuation vote in 2028.
Annual Redemption
Facility
The Company has introduced an annual redemption
facility that gives shareholders an opportunity to realise their
holding in the Company at fair market value. The first Redemption
Point was on 30 September 2024 and every year thereafter. The
redemption facility has no impact on the going concern of the
Company. Refer to further details in the Directors 'Report on pages
40 to 41 and in the Notes to the financial statements on pages 54
to 55.
Investment Objective
The Company's investment objective is to achieve
long-term capital appreciation by investing in a diversified
portfolio of companies that have high growth potential at an
attractive valuation.
Investment Policy
The Company attempts to achieve its investment
objective by investing in the securities of publicly traded
companies in Vietnam, and in the securities of foreign companies if
a majority of their assets and/or operations are based in Vietnam.
The Company may invest in equity securities or securities that have
equity features, such as bonds that are convertible into
equity.
The Company may invest in listed or unlisted
securities, either on the Vietnamese stock exchanges, through
purchases on the OTC Market, or through privately negotiated
deals.
The Company may invest its available cash in the
Vietnamese domestic bond market as well as in international bonds
issued by Vietnamese entities.
The Company may utilise derivatives contracts for
hedging purposes and for efficient portfolio management but will
not utilise derivatives for investment purposes.
The Company does not intend to take control of any
company or entity in which it has directly or indirectly invested
(the "Investee Company") or to take an active management role in
any such company. However, Dynam Capital, Ltd. ("Dynam Capital"),
(the
"Investment Manager") may appoint one of its
directors, employees or other appointees to join the board of an
Investee Company and/or may provide certain forms of assistance to
such company, subject to prior approval by the VNH Board.
The Company integrates environmental, social and
corporate governance ("ESG") factors into its investment analysis
and decision-making process. Through its Investment Manager, the
Company actively incorporates ESG considerations into its ownership
policies and practices and engages investee companies in pursuit of
appropriate disclosure and the improvement of material issues.
The Company may invest:
● up to 25% of its Net Asset Value
("NAV") (at the time of investment) in companies with shares traded
outside of Vietnam if a majority of their assets and/or operations
are based in Vietnam;
● up to 20% of its NAV (at
the time of investment) in direct private equity investments;
and
● up to 20% of its NAV (at the time of
investment) in other listed investment funds and holding companies
which have the majority of their assets in Vietnam.
Borrowing Policy
The Company is permitted to borrow money and to grant
security over its assets provided that such borrowings do not
exceed 25% of the latest available NAV of the Company at the time
of the borrowing unless the Shareholders in general meeting
otherwise determine by ordinary resolution.
Investment Restrictions and
Diversification
The Company will adhere to the general principle of
risk diversification in respect of its investments and will observe
the following investment restrictions:
● the Company will not invest more than 10% of
its NAV (at the time of investment) in the shares of a single
Investee Company;
● the Company will not invest
more than 30% of its NAV (at the time of investment) in any one
sector;
● the Company will not invest
directly in real estate or real estate development projects, but
may invest in companies which have a large real estate component,
if their shares are listed or are traded on the OTC Market; and
● the Company will not invest in any
closed-ended investment fund unless the price of such investment
fund is at a discount of at least 10% to such investment fund's NAV
(at the time of investment).
Furthermore, based on the guidelines established by
the United Nations Principles for Responsible Investment ("PRI"),
of which the Company is a signatory:
● the Company will not invest
in companies known to be significantly involved in the
manufacturing or trading of distilled alcoholic beverages, tobacco,
armaments or in casino operations or other gambling businesses;
● the Company will not invest
in companies known to be subject to material violations of
Vietnamese laws on labour and employment, including
child labour regulations or racial or gender discriminations;
and
● the Company will not invest in
companies that do not commit to reducing in a measurable way
pollution and environmental
problems caused by their business activities.
Any material change to the investment policy will
only be made with the approval of Shareholders by ordinary
resolution.
Shareholder Information
Sanne Group (Guernsey) Limited (the "Administrator")
is responsible for calculating the NAV per share and delegates this
function under a legal contractual arrangement to Standard
Chartered Bank (Singapore) Limited (the "Sub-Administrator"),
previously Standard Chartered Bank, Singapore Branch until its
transference under the Banking Act on 13 May 2019. The estimated
NAV per ordinary share is calculated as at the close of business
each business day by the Investment Manager and published at close
of business in Vietnam the same day. The monthly NAV is calculated
by the Sub-Administrator on the last business day of every month
and announced by a Regulatory News Service within 10 business
days.
Chairman's Statement
Dear Shareholder,
I am pleased to present the Annual Report for VietNam
Holding Limited for the twelve-month period ending 30 June
2024.
This year has been another watershed moment for
VietNam Holding Limited: the Fund has outperformed the market, the
discount to net asset value ("NAV") has fallen to less than 5% and
the Company's shares have been included in the FTSE All Share and
FTSE Small Company indices.
The Fund's NAV per share rose 23.6% for the full year
to 30 June 2024, outdoing the Vietnam All Share Index ("VNAS")
which increased by 9.5%. The Fund has outperformed the VNAS for
one, three, five, ten and 15 years. Dynam Capital, the Investment
Manager, has delivered an average annualised Alpha of 600 basis
points. The Fund has also performed better than its peers by a
notable margin. It's no surprise that Citywire named the Fund 'the
best emerging market single-country fund' in November 2023 and
awarded the Investment Manager's team a coveted triple-A
performance in May 2024.
We are happy to report that an overwhelming majority
(99%) of shareholders voted to extend the Fund for a further five
years at the Extraordinary General Meeting ("EGM") in December 2023
and to adopt the innovative Annual Redemption feature. Perhaps due
to shareholders' confidence in the Board's focus on discount
management, the discount narrowed swiftly to below 5% after the
announcement of the Annual Redemption facility, falling as low as
2%. As a result, the Board has not had to consider any share
buybacks between December 2023 and June 2024. The Fund's discount
is significantly narrower than those of the other two UK-listed
Vietnam funds.
The combination of market-beating NAV performance and
a reduced discount have boosted the share price, which increased by
43% this fiscal year. This market-leading performance has come
without compromising our commitment to responsible investing.
During the year, the Fund and the Investment Manager supported the
second environmental, social and governance ("ESG") Investor
Conference in Vietnam. The Investment Manager continues to drive
engagement with portfolio companies on the challenges and potential
for improving governance, climate reporting and climate transition
planning. Please refer to the Sustainability Report for more details
on this strategy and the initiatives undertaken.
Last December, Damien Pierron and Sean Hurst stepped
down from the Board after a long period of dedicated service, and I
would like to reiterate my gratitude for their service to the Fund.
I am delighted to welcome Ms Connie Hoang Mi Vu to the board. Ms Vu
joined in March 2024, bringing her extensive experience as an ESG
champion. Ms Vu has taken over as Chair of the ESG Committee, and I
am particularly glad to report that 50% of the board is now female,
providing further diversity to our Board deliberations.
The Board visited Vietnam in early 2024 and will be
returning in November. We are confident the country has a bright
future ahead. Despite global headwinds and local incidents, it has
performed very well. These challenges include weaknesses in the
real-estate sector caused primarily by disruptions in the bond
market and project permitting delays, rather than weak end-demand
(which remains strong) and concerns about the balance sheet
strength of one or two large local corporations (not portfolio
companies) exposed to the real-estate sector. We believe that
having a dynamic, active investment programme led by an
on-the-ground research team is the best way to identify and manage
sustainable growth opportunities, as well as navigate the
challenges. Active mandates, like those managed by Dynam Capital,
have shown strong outperformance versus the broader market. Nimble
stock selection and portfolio construction have also helped to beat
peers. The Investment Manager's Report provides more information on
the portfolio's performance.
Vietnam remains a dynamic country. In a year marked
by global uncertainties and economic headwinds, its economy has
shown resilience, attracting record amounts of foreign direct
investment ("FDI") and generating record trade surpluses, as the
country solidifies its position as a leading manufacturing hub.
However, the country's government office bearers have changed
multiple times. Vietnam has an unusual political structure that is
based on a consensus-driven approach by the primary 'pillars' of
government, which includes the General Secretary of the Party, the
President, the Prime Minister and the Chairman of the National
Assembly. Many of the reforms happened during General Secretary
Nguyen Phu Trong's fierce anti-corruption and malpractice campaign.
On 18 July 2024, President To Lam was asked to temporarily take
over some of the duties of General Secretary Trong, who passed away
a day later. On August 3, 2024, President To Lam was unanimously
elected as the General Secretary of the 13th Central Committee of
the Communist Party of Vietnam. To Lam comes from the Ministry of
Interior and is a former police officer, so we expect
anti-corruption measures to continue.
Western media have also covered some of the visible
outcomes of this anti-corruption crackdown, including the capital
sentences for a female entrepreneur convicted of several charges of
misappropriating state assets as well as money-laundering,
mis-selling of bonds, and fraud. Despite the harsh sentences,
Vietnam's government appears united on the country's economic
development, which bodes well for its capital markets and expanding
economy.
Vietnam's capital markets, particularly equities, are
driven by local investors who account for more than 90% of the
daily trading volumes and own more than 80% of the stocks listed on
the Ho Chi Minh Stock Exchange ("HOSE"). Vietnam is still part of
the frontier investing world and makes up 30% of the MSCI frontier
index. This year foreign investors have been net-sellers of
Vietnamese equities, but domestic investor interest remains high,
accounting for the market's 10% rise in value. The 'upgrade' of the
market to Emerging, or Secondary Emerging, is still some way off,
despite several positive steps being made. An upgrade decision by
one of the agencies could happen in 2025, but 2026 is more likely.
When this eventually happens, we anticipate the upgrade to be a
catalyst for renewed foreign investor interest, thereby increasing
market liquidity and potentially re-rating some leading companies.
More information can be found in the Investment Manager's report,
and an article on the topic was included in the Interim Report
earlier this year.
Over the past twelve months there has been a notable
increase in interest in the Fund, as well as a considerable
increase in daily liquidity in the Company's shares. The Investment
Manager, along with our Broker and distribution partners, has
conducted an extensive marketing campaign, hosting several
in-person investor meetings across the British Isles, as well as
several online webinars and roundtables. We are thrilled that the
Company became a member of the FTSE All Share and FTSE Small
Company indices on 25 June 2024. This should help sustain
attractive levels of liquidity in the Company's shares. We also
have a balanced shareholder register and are pleased to welcome new
investors many of whom purchased the shares through leading UK
wealth management platforms.
Hiroshi Funaki
Chairman
VietNam Holding Limited
1 October 2024
Investment Manager's Report
This year we celebrate the 18th anniversary of the
Company and its listing in London. The Company was first listed on
AIM in July 2006 and then moved to the Main Market (previously the
Premium segment of the Official List) of the London Stock Exchange
in March 2019. In June 2024, the Company joined the FTSE All Share
Index. It has been quite an adventure. As the Chairman of VNH noted
in his letter, liquidity in the Company's shares has increased
significantly, the discount to Net Asset Value has decreased
substantially, and the Company has received several awards for its
long-term performance. We are delighted with the recognition that
we have received from Citywire and the UK Investor Magazine for
being the best single-country emerging market fund. We are also
proud of the fact that we received top marks from Citywire in their
inaugural ranking for closed-end fund managers: we are the only
manager to be rated AAA in the Equity - Country Specialist Asia
Pacific - ex Japan sector.
Macro
Vietnam's key themes of industrialisation,
urbanisation and domestic consumption are all intact and rising,
with GDP growth for the full year expected to be 6%, its impressive
multi-decade average.
A continuous easing of monetary and fiscal policy has
fuelled growth, but two headwinds remain: the slow recovery of the
property sector and a weakening local currency. The overall
expansion in the economy has been buoyed by record levels of
Foreign Direct Investment ("FDI") (USD 10.8bn disbursed in first
half of 2024), and strong growth in exports (+14.5% YoY for the
first half of 2024). Imports have also increased, particularly
those from China. However, these are the results of manufacturing
expansion by importing more raw materials and semi-finished goods,
which have helped lift the manufacturing PMI level to a near-record
high level of 54.7. Overall, the first half of 2024 saw a USD
11.6bn trade surplus compared to a record full-year surplus of USD
28bn in 2023. The high levels of trade surplus and record levels of
FDI have helped offset the weakening local currency and allowed the
State Bank to sell around USD 6.4bn to provide more stability to
the Vietnam Dong, which depreciated by 4.6% in the first half of
2024.
Performance
As stated in the interim report as of 31 December
2023, the NAV per share increased by 8% during the first half of
the financial year, while the Vietnam All Share Index ("VNAS")
increased by 3.2%. The second half had a 14.4% rise in NAV per
share versus an 8.1% increase in the VNAS. At 30 June 2024, the NAV
per share rose by 23.6% for the full-financial year versus a 9.5%
increase in the VNAS. The Company continues to outperform its peers
and has outperformed the VNAS on a one, three, five, ten, and
15-year basis. The two other London-listed Vietnam peers, VOF and
VEIL, were up by 11.5% and 6.1% respectively during the
corresponding period. The Company's share price rose by 43% during
the financial year due to a combination of a strong NAV increase
and significant narrowing in the discount between the share price
and the NAV. Since the adoption of the Share Redemption feature,
the Company's discount has, on average, remained below 5%. This
compares to the high-teens level of discounts for peers.
Portfolio
The portfolio remains concentrated, with the top ten
holdings accounting for 63.2% of the portfolio's Net Asset Value
(see table on page 10).
This is the direct result of our active portfolio construction.
Initial position sizing is based on our conviction-led approach to
investment decision making. We often start a new position at a
modest conviction level of roughly 2% of NAV, increasing to a
mid-level of 4-6% and then high conviction level of 8% when we
become more comfortable with the company and more assured about the
sustainability of its strategy. The portfolio is comprised of 24
companies, all of which have been thoroughly researched. At any one
time there are another 12-20 companies that we monitor closely and
review on a regular basis, looking for catalysts for new growth. We
also research promising newer companies, albeit our investment bar
is extremely high, as we seek companies with acceptable valuations,
strong growth prospects and a desire to engage with us on a journey
of improving governance, investor relations and sustainability
reporting. The portfolio valuation is approximately 12.9x PE for
2025, which is reasonable given the expected Earnings Per Share
("EPS") growth of 20% for 2025.
Positioning and Core
Themes
Our main investment approach remains focused on
industrialisation (best-in-class manufacturers, international
logistics, digitalisation); urbanisation (purposeful real estate,
transportation, clean energy, and clean water); and domestic
consumption and its enablers (sustainable retail, domestic
logistics, products, and finance). These themes are increasingly
interconnected, as industrialisation and urbanisation continue to
drive robust GDP growth while digitalisation boosts domestic
consumption, which is also supported by the ongoing modernisation
of the country's banking sector.
Industrialisation
Over the last thirty years, Vietnam has emerged as a
key manufacturing hub for a wide range of goods. Foreign direct
investment in the industrial and manufacturing-for-export sectors
has propelled the country's GDP growth. The 'Made-in-Vietnam' trend
has been accelerated by the 'China-plus-one' strategy of global
manufacturers, seeking to de-risk their supply chains. The war in
Ukraine and economic isolation of Russia have also presented
challenges causing companies to spread their production more evenly
around the world. Some commentators have called this the beginning
of the end of globalisation, but what is perhaps more likely is the
continuation of supply chain restructuring. Some companies will aim
to re-shore manufacturing to their native country, while others
near-shore (e.g., expand production in Mexico for North American
markets) or friend-shore. The latter category is where Vietnam is
likely to attract the most increased interest.
Although in the past we have invested in
manufacturers, such as garment companies and seafood producers, we
have chosen to get most of our exposure to these themes over the
past few years through business-to-business 'linkages' mostly
through industrial parks and logistic companies. These typically
have a higher quality of earnings, higher return on equity, and
less risk than the individual exporters. A core holding in this
area is the leading port operations and logistics company, Gemadept
("GMD"), which at 6.4% of NAV is the third largest position in the
portfolio. Gemadept also owns a 30% stake in a leading air-cargo
company, Saigon Air Cargo ("SCS"), which is also a portfolio
company. In addition to premium consumer products, high value light
electronics, semi-conductors and 'just-in-time' components are
often transported by air, and as the US Chip Act makes deeper
impacts over the coming years, favouring friendly shores such as
Vietnam, the country's air cargo services will be in even greater
demand.
Urbanisation
Vietnam's urbanisation level was approximately 37% in
2022 and has risen to about 40% in 2024. These were the levels
reached by China in 2000, before doubling over the next twenty
years. The government forecasts that Vietnam's urban population is
expected to exceed 50% by 2030. In a previous annual report, we
discussed the multiplier effect of investments in domestic
infrastructure, citing the May 2022 opening of a new bridge across
Ho Chi Minh City's Saigon River that now connects the down-town
District 1 hub to the Thu Thiem peninsular, a region already
demarcated as a new 'metropolis'. The delayed but hopefully
soon-to-be-finished metro line in Ho Chi Minh City will eventually
transform the commute from outlying districts to the city centre.
Its tracks, tunnels and elevated sections are all in place, with
the stations mostly complete. When finished, the new international
airport at Long Thanh will also create new areas for residential
and light industrial uses.
While the potential for urban growth remains intact,
as Vietnam will need to build millions of new houses over the next
two decades, the real estate sector has been in the doldrums for
much of this year. We had a 15% exposure to the real-estate sector
at the third quarter of 2022 but were quick to reduce this in the
face of weakening near-term prospects and, indeed, managed to
escape the worst of the turmoil that hit some companies in the
sector. At the end of 2023, our exposure to real estate was 9.4%,
and was reduced to 7.8% at 30 June 2024, with the majority of this
going to the industrial park sector rather than the residential
market. For example, we have 5.3% of NAV in IDICO, a leading
industrial park developer. We are confident that some of the key
names in the residential sector will survive and thrive. We see
signs of recovery and evidence of end-user demand, but some
developers have struggled to get projects approved and refinance
their bonds and debt at maturity, while some also have overhanging
issues unrelated to the core real estate activities.
Domestic
Consumerism
We believe that Vietnam's economy is at an inflection
point, and that the consumer sector will grow rapidly in the next
years to come. Vietnam's GDP has doubled over the past ten years,
and its per capita GDP places the country in the 'upper middle
income' economic bracket. The government's ambition is for the
country to reach the 'high income' status by 2045. Since the
pandemic, higher interest rates, subdued manufacturing and rising
costs dampened consumer demand in several areas, and we adjusted
our portfolios accordingly. Starting from the fourth quarter of
2023, we began adding back to the sector again, as our research
indicates improved trading prospects. At the end of June 2023, the
sector allocation had dropped to 7.8%, with omni-channel champion
Mobileworld ("MWG") at 2.7%. As of June 2024, the sector allocation
increased to 12.7%, with MWG returning to the number two portfolio
position at 6.6%.
Banks and financial
sector
VNH's allocation to banks was 26% at 30 June 2024,
representing an underweight position relative to the index. Key
portfolio names in the portfolio include Techcombank, 5.3% NAV,
Asia Commercial Bank, 5.0% NAV, MB Bank, 4.8% NAV, and VP Bank,
4.6% NAV. In addition to banks, we have a 6.3% allocation to
several brokerages. This is a sector we have made strong gains in
historically, and we have never been afraid to take profits. We
believe that the sector will benefit from returning domestic
investor appetite, particularly as domestic interest rates on bank
deposits fall.
Attribution
Stock selection and portfolio construction have
delivered a strong outperformance against the broader market. The
key stock performance of the top five holdings is detailed on page
11, but it is worth highlighting the performance of our portfolio's
strongest conviction position, FPT (14.7% of NAV). This
'overweight' position has contributed more than half of the
portfolio's outperformance. FPT's share price rose by 31.5% in the
first half of the financial year and then a further 57.2% in the
second half. The rapid rise in share price over the past six months
was driven in part by the company's strong growth in digitalisation
business internationally but also by investor enthusiasm about
potential partnerships with big global players such as NVIDIA. This
excitement is fuelled by the solid performance from its core
business segments, which have contributed to a 21% year-on-year
("YoY") increase in revenues for the past six months ending 30 June
2024 and a 22% rise in profits over the same period. FPT traded at around 10x PE six years
ago and is now trading at 24x. Its re-rating was achieved in part
by the spinoff in 2018 of its electronics retail business, FRT,
which was also up 58% in the first half of the year. FPT has been a
long-term portfolio hold, returning a 10x gain on our initial
investment cost.
Liquidity
The Vietnam stock market has grown dramatically over
its 24-year history. From only a handful of listed companies two
decades ago, there are now over 1600 public companies, and fifty
companies with more than USD 1bn in market capitalisation.
Portfolio liquidity is robust, and we estimate that over 95% of the
portfolio could be liquidated in under 30 days. During the past six
months, average daily liquidity has touched close to the equivalent
of USD 1bn, which is five times the pre-pandemic level. Vietnam's
domestic retail investor base is the dominant driving force in the
country's stock market: there are now eight million domestic share
trading accounts, almost four times the level in 2018. Foreign
investors hold only approximately 15% of the stock market, and over
the past six months, foreigners have been net-selling Vietnam
listed equities to an amount of USD 2bn.
The portfolio's size and nimbleness, as per our style
of investment management, allows us to navigate across a range of
company sizes, which we believe has contributed to the
outperformance of the Company versus the index and our peers. We
have been able to take profit in sectors that have surged and move
swiftly as market forces and economic mood change.
Although the Fund's investment policy allows up to
20% of the assets to be invested in unlisted or pre-IPO 'private
equity' type deals, the Fund is currently only invested in listed
securities, and all are valued as 'Level 1'. See Valuation in the notes to the Financial Statements
pages 64 to 65. As of 30 June 2024, the portfolio has approximately
2.1% of NAV in cash.
Responsible
investing
The Company has been a signatory of the United
Nations Principles for Responsible Investing ("PRI") since 2009.
The Fund was the first fund in Vietnam to adopt the principles, and
since 2012, environmental, social and governance ("ESG") principles
have been fully integrated into the Fund's investment process and
engagement strategy. Our authentic approach has helped us receive
top scores from the PRI in its latest transparency report.
There is much discussion about 'greenwashing' globally, and we
believe our engagement approach is robust and remains relevant in
Vietnam. As part of the investment process ESG issues are
integrated into the initial screening, due diligence, investment
decision and investment monitoring phases. We have developed a
proprietary ESG scoring matrix, which we apply to each company. We
do not expect perfect scores at the beginning, but rather seek to
identify areas for improvement that can be addressed in a
meaningful way during our investment horizon. We use this to focus
our engagement with each portfolio company in face-to-face
meetings. For several years we have been conducting annual carbon
footprint assessments of our portfolio, and we encourage our
portfolio companies to do more on reporting their own carbon and
GHG emissions and to evaluate their contribution to the UN's 17
Sustainable Development Goals ("SDGs"). Since 2021, we have been an
active member of the Asia Investor Group on Climate Change and have
optimised this experience by assisting our portfolio companies to
address climate transition risks and their own planning for
net-zero. We report on these efforts in greater detail in the
Sustainability Report.
Outlook
In addition to increased foreign exchange risk, which
is already factored into the current Net Asset Value of the
portfolio, political risk has become a greater concern over the
past twelve months. Evolving political risk is, of course, a global
phenomenon, and Vietnam is no exception. Over the past year or so,
there has been a significant push against corruption in Vietnam, a
'blazing furnace' established by General Secretary Nguyen Phu Trong
targeted errant business-people and government officials, resulting
in several resignations. For much of the year, there were also
speculations about Trong's deteriorating health, and he died on 19
July 2024, just a day after receiving a Gold Medal for service to
the nation. The Politburo requested that President To Lam assume
some of Trong's duties on an interim basis, and he was unanimously
elected as General Secretary on 3 August 2024.
We expect to see the government continue to pursue an
open policy to economic development. Vietnam has entered into 16
free trade agreements over the past two decades and has an ambition
to be a key manufacturing hub. This country continues to attract
record levels of FDI which will further boost export growth. The
government policies are pro-business, and pro-capital markets.
The Prime Minister and the Ministry of Finance want
to see continued development of the stock and bond markets, with an
ambition to increase the size of the stock market and bond market
close to an equivalent size of 100 % and 50% of GDP respectively by
2025. The State Securities Commission is inviting feedback from
market participants on a recently published final draft circular
proposing to remove the pre-funding requirement on stock trading
accounts. They hope to have this ready by September, ahead of the
FTSE Russell review on Vietnam's stock market status. Vietnam is on
the FTSE Russell Secondary Emerging Market watchlist, and an
upgrade would be very welcome. In the Interim Report this year we
included a more detailed article on the benefits of a market
upgrade, but in simple terms Vietnam would go from being part of a
USD 90bn Frontier Market universe, to part of a USD 7-8
trillion-dollar emerging market universe. The World Bank estimates
this could add a further USD 20-30bn of net indirect capital flow
within three years.
Vietnam's political structure can be perplexing for
foreign investors, and its consensus-based approach to policy
execution can sometimes result in measured (slow) decision making.
In previous annual reports, we discussed the problems in meeting
budgeted levels of government infrastructure spending. This was
under-budget in 2022 and 2023, most likely due to certain
officials' reluctance to make difficult decisions. It is
encouraging to see a five percent increase in public expenditure on
new infrastructure year-to-date, with USD 10bn spent in the first
six months of 2024, and a USD 28bn target for the full calendar
year.
Visitors travelling by air to Ho Chi Minh City will
have undoubtedly experienced the queues upon arrival (and
departure). This is the result of a spike in international
arrivals, which have already returned to pre-Covid levels, combined
with increased domestic travel, putting strain on the airport,
which is already overcapacity. The government has been putting
pressure on authorities to speed up the construction of the new
international airport at Long Thanh, roughly 50km away from Ho Chi
Minh City's District 1. It now appears that the initial phase of
the airport will be completed in 2026, six months ahead of
schedule. Before that, the third terminal at the existing Tan Son
Nhat International Airport is due to be completed in the first half
of 2025.
Recent developments in the power sector bode well for
the rising adoption of renewable energy. Over the past decade,
installed solar and wind in Vietnam has gone from almost zero to 20
Gigawatts. This was accomplished despite a relatively weak Power
Purchase Agreement ("PPA") framework and a single monopoly buyer,
the state-owned utility EVN. The new Decree 80, passed on 11 July,
now allows for the direct purchase of rooftop generated solar
energy. This is essentially a soft de-regulation of the energy
market. This is positive for growth in solar power in a country
that has high solar irradiance. The government is also planning
longer-term initiatives to tap into the country's significant wind
power potential through offshore, nearshore and onshore wind
farms.
As with the rest of the world, the rapid
technological changes and digitalisation initiatives in Vietnam
require vast amounts of processing power and storage. In another
encouraging development, data centres can now be wholly owned by
foreign investors under new legislation enacted in November 2023,
which came into recent effect. The growth of domestic data centres
is a key aspect of Vietnam's growing digital transformation, and
FPT should also benefit as a technology enabler.
So, the outlook remains positive. Despite
considerable domestic political changes, we do not see any change
to the momentum related to policy. We also expect foreign exchange
risks to reduce when the US Fed starts to lower interest rates, and
the interest rate differential between the US and Vietnam (and
other Asian countries) softens. The stock market growth over the
past year has been domestically driven. Once the year of
extraordinary global political turbulence is past, and markets are
reassessed for relative attractiveness, we believe emerging markets
and Vietnam in particular (albeit officially a frontier market)
will rally further.
Top 10 Companies by NAV as at 30
June 2024 (and as at 30 June 2023)
|
Top 10 companies as at 30 June
2024
|
Sector
|
% NAV
|
|
FPT Corporation
|
Telecommunications
|
14.7%
|
|
Mobile World Investment Corporation
|
Retail
|
6.6%
|
|
Gemadept Corporation
|
Industrial Goods and Services
|
6.4%
|
|
PV Technical Services JSC
|
Oil and Gas
|
6.1%
|
|
Techcombank
|
Banks
|
5.3%
|
|
IDICO Corp JSC
|
Real Estate
|
5.3%
|
|
Asia Commercial Bank
|
Banks
|
5.0%
|
|
Military Commercial Bank JSC
|
Banks
|
4.8%
|
|
Vietnam Prosperity JSC Bank
|
Banks
|
4.6%
|
|
Hoa Phat Group JSC
|
Industrial Goods and Services
|
4.4%
|
|
Total
|
|
63.2%
|
|
|
|
|
|
Top 10 companies as at 30 June
2023
|
Sector
|
% NAV
|
|
FPT Corporation
|
Telecommunications
|
12.6%
|
|
Sacombank
|
Banks
|
10.1%
|
|
PV Technical Services JSC
|
Oil and Gas
|
6.9%
|
|
Military Commercial Bank JSC
|
Banks
|
5.7%
|
|
Vietcombank
|
Banks
|
5.7%
|
|
Gemadept Corporation
|
Industrial Goods and Services
|
5.4%
|
|
Phu Nhuan Jewelry JSC
|
Retail
|
5.1%
|
|
IDICO Corporation JSC
|
Real Estate
|
4.0%
|
|
Ho Chi Minh City Securities
|
Financial Services
|
3.6%
|
|
Asia Commercial Bank
|
Banks
|
3.3%
|
|
Total
|
|
62.4%
|
Dynam Capital, Ltd.
1 October 2024
Top Five Portfolio Companies
FPT Corporation ("FPT")
As at 30 June 2024
|
VietNam Holding's
investment
|
|
|
Date of first investment
|
10 December 2012
|
|
Ownership
|
0.3%
|
|
Percentage of NAV
|
14.7%
|
|
Internal rate of return (annualised)
|
27.9%
|
|
|
|
|
Share information
|
|
|
Stock Exchange
|
HOSE
|
|
Date of listing
|
13 December 2006
|
|
Market capitalisation (USD million)
|
7,489
|
|
Free float
|
85.9%
|
|
Foreign ownership
|
40.5%
|
|
Financial indicators (as at 31
December)
|
2023
|
2022
|
|
Equity (USD million)
|
1,175.9
|
1,075.1
|
|
Revenue (USD million)
|
2,067.1
|
1,866.0
|
|
EBIT (USD million)
|
332.0
|
288.1
|
|
NPAT (USD million)
|
306.0
|
275.2
|
|
Diluted EPS (VND)
|
4,661
|
3,847
|
|
Revenue growth
|
10.8%
|
21.7%
|
|
NPAT growth
|
11.2%
|
19.7%
|
|
Gross margin
|
38.6%
|
39.0%
|
|
EBIT margin
|
16.1%
|
15.4%
|
|
ROE
|
28.2%
|
27.8%
|
|
D/E
|
0.47
|
0.49
|
About the Company
Founded in 1988, FPT is Vietnam's leading technology
firm, offering a comprehensive range of services including software
development, IT services, and telecommunications. The company is
also a well-known distributor and retailer of IT products and a key
player in the education sector, with programs spanning multiple
levels for 145,000 students nationwide.
FPT currently operates across more than 30 countries
and territories. This extensive international network enables FPT
to deliver diverse IT services and solutions globally, serving
clients in sectors such as automotive, finance, and healthcare. The
company has successfully transformed itself from an IT outsourcing
service provider to an end-to-end digital transformation partner.
In 2023, revenue from digital transformation services reached a
record USD 410 million. Additionally, FPT provides broadband
internet to four million subscribers and owns telecommunications
infrastructure, including a main North-South link, recently
upgraded from copper wires to fiber-optic cables.
As of 31 December 2023, FPT employed 48,162
individuals, including 32,392 engineers and technology experts.
Recent Developments
FPT delivered a strong financial performance in 2023,
with revenue and profit after tax of USD 2,067 million and USD 306
million, respectively, reflecting a 19.6% and 20.0% year-on-year
growth in local currency. Global IT Services was the primary growth
driver, with a 28.4% year-on-year increase. Notably, for the first
time, FPT surpassed USD 1 billion in revenue from IT services in
foreign markets, showcasing the competitiveness of Vietnamese
businesses on the global stage. FPT continues to ascend the
technology value chain by prioritising the development of AI,
Cloud, Big Data, and specialised domains with high growth
potential, such as healthcare, finance, and automotive. Revenue
from digital transformation services, which accounted for nearly
half of the total revenue from foreign markets, underscores this
strategic shift.
The Education segment also demonstrated robust
growth, with revenue increasing by 31% in local currency to reach
USD 242 million. In 2023, FPT Education expanded its network of
training facilities, establishing a presence in over 20 provinces
and cities nationwide.
Sustainability Strategy
FPT has developed a sustainable development strategy
that balances three key factors: economic growth, community
support, and environmental protection. The company's objectives and
activities are aligned with Vietnam's action plan to implement the
2030 commitments for sustainable development, as well as the GRI
Sustainability Reporting Standards.
ESG Achievements
In 2023, FPT made significant progress toward
Sustainable Development Goal 4 ("SDG 4") - Quality Education,
evidenced by its ranking of 201-300 in the global university
rankings for sustainable development, as published by the Times
Higher Education ("THE") Impact Rankings. The company actively
engages in sustainability and ESG rating platforms to strengthen
its ESG strategy and track progress. FPT received a Silver rating
on its ESG performance according to the EcoVadis survey and was
awarded the "Best Country Award for Overall CSR Excellence" and the
"Best Community Programme Award" at the Global CSR & ESG Summit
and Awards 2023.
In terms of corporate governance, FPT has made
significant efforts to align with international standards. The
company was recognised as one of the Top 10 Large-Cap Enterprises
with the Best Corporate Governance in the 2023 Vietnam Listed
Companies Awards, organised by the Ho Chi Minh City Stock Exchange
("HoSE"), Hanoi Stock Exchange, and the Investment Newspaper.
ESG Challenges
While FPT has measured and disclosed its greenhouse
gas ("GHG") emissions for Scope 1 and Scope 2, the company has not
yet reported its Scope 3 emissions. Given FPT's global expansion,
it is increasingly important for the company to measure indirect
emissions throughout its supply chain to develop a comprehensive
decarbonisation plan that addresses all three scopes of
emissions.
Mobile World Investment Corporation
("MWG")
As at 30 June 2024
|
VietNam Holding's
investment
|
|
|
Date of first investment
|
11 September 2017
|
|
Ownership
|
0.3%
|
|
Percentage of NAV
|
6.6%
|
|
Internal rate of return (annualised)
|
7.4%
|
|
|
|
|
Share information
|
|
|
Stock Exchange
|
HOSE
|
|
Date of listing
|
14 July 2014
|
|
Market capitalisation (USD million)
|
3,585
|
|
Free float
|
77.1%
|
|
Foreign ownership
|
47.5%
|
|
Financial indicators (as at 31
December)
|
2023
|
2022
|
|
Equity (USD million)
|
917.7
|
1,014.7
|
|
Revenue (USD million)
|
4,646.6
|
5,656.3
|
|
EBIT (USD million)
|
17.1
|
281.7
|
|
NPAT (USD million)
|
6.6
|
173.9
|
|
Diluted EPS (VND)
|
115
|
2,810
|
|
Revenue growth
|
-17.9%
|
7.0%
|
|
NPAT growth
|
-96.2%
|
-17.5%
|
|
Gross margin
|
19.0%
|
23.1%
|
|
EBIT margin
|
0.4%
|
5.0%
|
|
ROE
|
0.7%
|
18.5%
|
|
D/E
|
1.08
|
0.69
|
About the Company
Founded in 2004 as a single store selling mobile
phones, MWG has grown to become Vietnam's largest retailer by
revenue and physical store count, now exceeding 5,000 locations.
MWG operates under several brands, offering a wide range of
merchandise, including consumer electronics, groceries, and
pharmaceuticals. As of the end of 2023, the company employed over
60,000 people.
As a modern-trade consolidator, MWG has
revolutionised the Vietnamese retail landscape by continuously
expanding its footprint, exploring new formats, and diversifying
product offerings to meet evolving consumer needs. MWG now commands
over 50% market share in mobile phones and consumer electronics,
while its grocery chain 'Bach Hoa Xanh' has recently become the
market leader in terms of revenue.
In addition to its core brick-and-mortar business,
MWG has been enhancing its e-commerce capabilities to respond to
the growing trend of online shopping in Vietnam. The company has
invested significantly in its online platforms and logistics
infrastructure to better serve customers and compete with other
major e-commerce players in the market. Online revenue accounted
for 14% of total revenue in 2023, with a transaction value of USD
700 million, positioning MWG among the top e-commerce players in
Vietnam. The company's omni-channel approach, supported by its
extensive store network, fast delivery, and customer-centric
culture, is a key competitive advantage.
Recent Developments
2023 was one of the most challenging years for MWG,
with revenue declining by 18% year-on-year to USD 4.7 billion, and
net profit dropping by 96% to just USD 6.6 million, marking the
lowest earnings since 2013. This downturn was driven by a
challenging economic environment and reduced demand for
non-essential goods, including electronics and household
appliances, which are core products for MWG. Additionally,
intensified competition in the ICT retail market led to a prolonged
price war, further pressuring MWG's pricing strategies and profit
margins.
However, there are signs of recovery. For 2024,
management has announced an ambitious target, projecting a 14-fold
increase in after-tax profit to USD 96 million and a modest 6%
growth in revenue to USD 5 billion. This plan reflects MWG's
strategy to rebound from its 2023 performance by restructuring and
enhancing core activities. The ICT business has already shown
positive growth and improved margins as the price war among
retailers has ended and domestic consumption gradually recovers.
Additionally, the grocery chain 'Bach Hoa Xanh,' which incurred a
loss of USD 46 million in 2023, is expected to turn profitable in
2024, driven by steady improvements in revenue per store and
operational efficiency. 'Bach Hoa Xanh' is anticipated to be a key
growth driver in the coming years, as ongoing urbanisation shifts
consumer buying behavior from traditional wet markets to modern
retail outlets.
Sustainability Strategy
Mobile World Investment Corporation ("MWG") has
implemented several key sustainability strategies to enhance its
long-term growth and operational efficiency. These include
community engagement initiatives, such as promoting eco-friendly
products and practices, and Circular Economy Initiatives, which aim
to reduce plastic waste and promote recycling. MWG's various brands
have undertaken projects to collect used batteries, recycle
advertising materials into organic fertilisers, and contribute to a
circular economy. The company prioritises its employees, followed
by customers and then shareholders. The performance-linked ESOP
(Employee Stock Ownership Plan) programs have been instrumental in
retaining talented individuals within the company and motivating
top managers to explore new market segments.
ESG Achievements
Over the past two years, MWG has made significant
progress in ESG (Environmental, Social, and Governance)
implementation and has become a leader in ESG among Vietnamese
public companies. In terms of governance, MWG has established a
dedicated ESG committee within the Board and hired a full-time ESG
officer. The company has also improved its ESG communications by
adopting GRI (Global Reporting Initiative) standards in its
sustainability report, incorporating more quantitative social and
environmental data, and publishing a monthly ESG newsletter to
communicate its ESG/CSR activities to investors.
ESG Challenges
As consumer awareness of sustainable and healthier
lifestyles continues to grow, integrating ESG into its business
model presents both challenges and opportunities for MWG.
Successfully addressing these challenges will be crucial for the
company to enhance its competitiveness and distinguish itself from
other retailers in the country.
Gemadept Corporation
("GMD")
As at 30 June 2024
|
VietNam Holding's
investment
|
|
|
Date of first investment
|
16 August 2019
|
|
Ownership
|
0.9%
|
|
Percentage of NAV
|
6.4%
|
|
Internal rate of return
(annualised)
|
29.5%
|
|
|
|
|
Share information
|
|
|
Stock Exchange
|
HOSE
|
|
Date of listing
|
06 May 2002
|
|
Market capitalisation (USD
million)
|
1,013
|
|
Free float
|
93.7%
|
|
Foreign ownership
|
47.8%
|
|
Financial indicators
(as at 31 December)
|
2023
|
2022
|
|
Equity (USD million)
|
382.3
|
337.0
|
|
Revenue (USD million)
|
151.1
|
165.3
|
|
EBIT (USD million)
|
43.9
|
44.6
|
|
NPAT (USD million)
|
99.5
|
49.2
|
|
Diluted EPS (VND)
|
7,207
|
3,034
|
|
Revenue growth
|
-8.6%
|
19.9%
|
|
NPAT growth
|
102.2%
|
59.0%
|
|
Gross margin
|
46.2%
|
44.1%
|
|
EBIT margin
|
29.0%
|
27.0%
|
|
ROE
|
28.7%
|
15.5%
|
|
D/E
|
0.20
|
0.26
|
About the Company
Established in 1993 through the privatisation of a
state-owned company, Gemadept ("GMD") began as a maritime agent and
freight forwarder. After 31 years of operation, the company has
grown into one of the most integrated port and logistics providers
in Vietnam. As a pioneer in smart and sustainable port-logistics
models, GMD operates a network of five ports and logistics
facilities, providing 3PL (Third-Party Logistics) services that
span from sea to air, serving both domestic and multinational
corporations.
GMD's seaports are strategically located in two
primary zones: the Hai Phong port zone in the North and the Cai
Mep-Thi Vai port zone in the South. In the North, GMD owns Nam Dinh
Vu port, the largest port in the region, with a designed capacity
of 1,000,000 Twenty-foot Equivalent Units ("TEUs") per annum. In
the South, GMD owns its first deep-water port, Gemalink, which has
a designed capacity of 1,500,000 TEUs for Phase 1. The commencement
of Gemalink in 2021 marked a significant turning point for GMD,
transforming it into a deep-water port operator expected to play an
increasingly important role in regional trade flows within
Southeast Asia.
Recent Developments
In 2023 and Q1 2024, GMD strategically divested its
Nam Hai Dinh Vu and Nam Hai ports due to their limitations in
handling larger vessels. This decisive move allowed GMD to rapidly
achieve full capacity utilisation at Nam Dinh Vu port's Phase 2,
which began operations in Q1 2023, with plans to start Phase 3 in
2024. Once all three phases are operational, Nam Dinh Vu will
become the largest port in the North, with a total capacity of 2.0
million TEUs.
Gemalink port, the largest deep-water port in its
zone, is expected to be the key growth driver for GMD over the next
four years. According to the Vietnam Seaports Association, Gemalink
has captured a 27% market share of container throughput in the Cai
Mep-Thi Vai port area within just three years of operation.
Gemalink is well-positioned to capitalise on the structural shift
of cargo flows from regional ports to the Cai Mep-Thi Vai port area
in Southern Vietnam. Benefiting from Vietnam's impressive trade
growth, the Cai Mep-Thi Vai port area, with a capacity of 9.1
million TEUs per annum, has witnessed average growth of 25-30% over
the last five years. Gemalink's Phase 1 has already reached 90%
utilisation, creating momentum to begin Phase 2 in Q4 2024.
Upon completion of both phases, Gemalink will become
the largest deep-sea port in the Cai Mep-Thi Vai cluster, with a
total capacity of up to 3.0 million TEUs.
Sustainability Strategy
As a leading nationwide corporation in port
operations and logistics, GMD is committed to sustainable
development goals closely aligned with its production and business
activities. The company's leadership and employees are dedicated to
creating a smarter and greener future for the community. GMD
continues to invest in digital transformation projects, applying
advanced technologies such as Smart Port, Smart Gate, and River
Gate to automate and optimise operational processes, thereby
increasing productivity, saving time and costs, and conserving
energy. Additionally, GMD is utilising renewable energy for most
operations at its ports and distribution centers, while also
implementing green projects and initiatives such as mangrove
reforestation, developing green systems at ports, and raising
environmental awareness among employees and local communities.
ESG Achievements
Following the establishment of an ESG working group
led by GMD's CEO in 2022, the company made significant progress in
ESG implementation in 2023. GMD measured and disclosed GHG
emissions for its three ports in accordance with ISO 14064
standards. The company achieved the national green-port standard
for Dung Quat Port and began replicating the green port model at
its other three main ports. GMD's focus on ESG integration has
opened up more financial opportunities, including signing a
Sustainability Linked Loan Agreement with HSBC in May 2024.
ESG Challenges
GMD has not yet disclosed its total carbon emissions.
Additionally, it will require time and significant effort to build
human capacity and obtain international certifications for its
entire port and logistics system. GMD also owns a non-core rubber
plantation project in Cambodia, which presents a potential ESG
concern. However, senior management has recently reaffirmed their
intention to divest this project in 2024.
PV Technical Services JSC
("PVS")
As at 30 June 2024
|
VietNam Holding's
investment
|
|
|
Date of first investment
|
5 September 2022
|
|
Ownership
|
1.1%
|
|
Percentage of NAV
|
6.1%
|
|
Internal rate of return (annualised)
|
26.3%
|
|
|
|
|
Share information
|
|
|
Stock Exchange
|
HNX
|
|
Date of listing
|
20 September 2007
|
|
Market capitalisation (USD million)
|
762
|
|
Free float
|
48.4%
|
|
Foreign ownership
|
20.8%
|
|
Financial indicators (as at 31
December)
|
2023
|
2022
|
|
Equity (USD million)
|
532.1
|
553.5
|
|
Revenues (USD million)
|
761.1
|
693.9
|
|
EBIT (USD million)
|
25.1
|
32.4
|
|
NPAT (USD million)
|
41.6
|
44.5
|
|
Diluted EPS (VND)
|
1,579
|
1,438
|
|
Revenue growth
|
9.7%
|
13.2%
|
|
NPAT growth
|
-6.5%
|
38.2%
|
|
Gross margin
|
5.4%
|
6.2%
|
|
EBIT margin
|
3.3%
|
4.7%
|
|
ROE
|
8.0%
|
8.2%
|
|
D/E
|
0.13
|
0.11
|
About the Company
PVS, a 51%-owned subsidiary of PetroVietnam ("PVN"),
provides an extensive range of technical services for the oil &
gas, energy, and industrial sectors. The company holds a majority
market share in offshore support vessels (OSV/ship segment),
mechanics & construction ("M&C"), supply base (port
segment), and floating oil storage ("FSO/FPSO"), with a fleet of 18
vessels. PVS operates not only in Vietnam but also in international
markets, including Taiwan, Malaysia, Singapore, and Poland.
Recent Developments
As one of the key service providers in the oil &
gas sector, PVS is poised to be a major beneficiary of the Block B
project, a mega-project with a capital expenditure of USD 12
billion. Block B, estimated to hold 107 bcm in gas reserves, will
guarantee Vietnam's gas supply for power generation and is expected
to contribute USD 19 billion to the State budget over the project's
20-year lifespan. The commencement of this significant project,
Block B - O Mon, is expected to drive growth across Vietnam's oil
and gas value chain, strengthening the industry's fundamentals and
contributing to PVS's earnings growth in the coming years.
In addition to its operations in oil & gas, PVS
is strategically positioned to benefit from the global energy
transition towards renewables, particularly in offshore wind
generation. With its extensive experience in offshore technical
services, PVS is expected to play a pivotal role in the development
of offshore wind generation in Vietnam and the wider region.
In August 2022, PVS's subsidiary, PTSC M&C,
signed a Memorandum of Understanding ("MoU") with Ørsted, the
world's largest developer of offshore wind power, to collaborate on
offshore wind projects in Vietnam. Ørsted currently has a total
installed capacity of 7.5 GW, with 11.8 GW either under
construction or awarded worldwide. This MoU is anticipated to
facilitate PTSC M&C's entry into the offshore wind power market
and strengthen its capacity in this emerging field. PVS has already
secured USD 1.5 billion in offshore wind backlogs and is
cooperating with major global players, expanding its reach to
overseas markets such as Taiwan and Singapore. This lays a robust
foundation for PVS's next phase of growth.
Sustainability Strategy
Although primarily classified within the oil and gas
sector, PVS is actively transitioning its business towards
supporting offshore wind power projects. The company has signed
MoUs with global partners to develop both domestic and
international projects. PVS is leveraging its fleet of specialised
offshore vessels to support the construction, operation, and
maintenance of nearshore wind farms in Ben Tre, Tra Vinh, and Ca
Mau provinces, as well as offshore wind farms in Binh Thuan
province. Additionally, the company has secured two overseas
contracts with a total value of USD 350 million.
ESG Achievements
PVS is committed to enhancing its governance
structure and has taken proactive steps by enrolling its CEO and
Board Members in corporate governance courses organised by the
Vietnam Institute of Directors ("VIOD"). The company's Health,
Safety, and Environmental ("HSE") Management System meets ISO
standards and is certified by the BSI Group. PVS regularly conducts
HSE training for its employees to ensure adherence to the highest
standards. In 2023, PVS initiated a greenhouse gas ("GHG") emission
inventory, marking a significant step in its sustainability
journey.
ESG Challenges
To achieve its objective of becoming a leading
service solution provider in the energy sector at both regional and
global levels, PVS must develop a comprehensive strategy and action
plan to align its ESG practices with international standards. While
the company has made progress in enhancing its health, safety, and
environmental management systems, there is a need for PVS to
improve its ESG communications and reporting to investors and other
relevant stakeholders.
Techcombank ("TCB")
As at 30 June 2024
|
VietNam Holding's
investment
|
|
|
Date of first investment
|
21 March 2024
|
|
Ownership
|
0.1%
|
|
Percentage of NAV
|
5.3%
|
|
Internal rate of return (annualised)
|
-14.9%
|
|
|
|
|
Share information
|
|
|
Stock Exchange
|
HOSE
|
|
Date of listing
|
4 June 2018
|
|
Market capitalisation (USD million)
|
6,463.7
|
|
Free float
|
68.2%
|
|
Foreign ownership
|
11.07%
|
|
Financial indicators (as at 31
December)
|
2023
|
2022
|
|
Equity (USD million)
|
1,424.4
|
1,535.1
|
|
TOI (USD million)
|
1,573.8
|
1,718.3
|
|
NPAT (USD million)
|
714.6
|
866.5
|
|
EPS (VND)
|
5,104
|
5,725
|
|
TOI growth
|
-8.4%
|
7.8%
|
|
NPAT growth
|
-17.5%
|
9.5%
|
|
ROA
|
2.4%
|
3.2%
|
|
ROE
|
14.8%
|
19.6%
|
|
CAR
|
14.4%
|
15.2%
|
|
NPL
|
1.2%
|
0.7%
|
|
Equity multiplier
|
23.4
|
19.3
|
About the Company
Established in 1993, TCB is the sixth largest bank in
Vietnam by total assets. The bank went public in 2018, listing on
the Ho Chi Minh City Stock Exchange. As of 2023, TCB operated a
network of 301 branches and transaction offices, with 11,614
employees. The bank held loan and deposit market shares of 3.8% and
3.4%, respectively.
TCB has placed a strong emphasis on investing in data
and technology, becoming an industry leader in digital
transformation. In 2016, it became the first bank in Vietnam to
launch the "E-banking zero fee" program, which accelerated new
customer acquisition, significantly reduced operating costs, and
resulted in a high Current Account Savings Account ("CASA")
ratio.
The bank adopted Basel II in 2019 and implemented
Basel III in 2023. Its capital adequacy ratio ("CAR") reached 14.5%
in 2023, well above the State Bank of Vietnam's ("SBV") minimum
requirement of 8%.
In 2023, TCB was assigned an A+ initial credit rating
with a 'Stable' outlook by FiinRatings. The bank also received
several prestigious awards, including Best Integrated Corporate
Banking Platform Globally and Best Mobile Banking App in Asia
Pacific by Global Finance, Best Retail Bank in Vietnam and Best
Private Retail Bank in Vietnam by The Asian Banker, Best Bank in
Vietnam by Finance Asia, and Best Domestic Bank by Asia Money.
Recent Developments
In recent years, TCB has had significant exposure to
the real estate sector, both through major developers and mortgage
loans. As a result, its performance was adversely affected when the
real estate market cooled in 2023. Net profit after tax ("NPAT")
declined by 17.5% year-on-year to USD 714.6 million, although the
bank maintained a well-controlled non-performing loan ("NPL") ratio
of 1.2%.
To mitigate the impact of the real estate market
downturn, TCB management has set a long-term diversification plan
to shift focus towards retail and SME customers, beyond real
estate. In 2023, loans provided to non-real estate-related sectors
for both large corporates and SMEs increased by 60% year-on-year,
compared to the bank's total credit growth of 23.3%
year-on-year.
Despite tight liquidity conditions in 2023, TCB's
total deposits grew by 26.9% year-on-year, while its CASA ratio
reached 40%, the highest in the industry. However, the net interest
margin ("NIM") narrowed to 4.2% in 2023 from 5.1% the previous
year, due to the rising cost of funds.
In the first half of 2024, TCB regained growth
momentum, with NPAT increasing by 38.8% year-on-year to USD 493.9
million. This growth was driven by strong loan expansion of 14.2%
year-to-date.
Sustainability Strategy
With the vision of "Change banking, Change lives,"
TCB has committed to create greater value for customers and
shareholders by pioneering solutions that meet their needs. The
bank's mission is to lead the digital transformation of the
financial industry, enabling individuals, businesses, and
corporations to progress and thrive sustainably.
ESG Achievements
TCB places a high priority on investor relations
("IR") activities and was recognised with the "IR Award 2023" for
being among the "Top 3 Investor Relations Activities selected by
Financial Institutions." The bank has also received numerous awards
for being one of the best places to work in Vietnam, with
approximately 90% satisfaction recorded in its Employee Engagement
Survey ("EES") results.
In terms of governance, TCB strengthened its ESG
governance framework in 2023 by establishing clear roles and
responsibilities for the Board of Directors ("BOD") and CEO in
managing and monitoring ESG risks. The bank also created a
dedicated sub-committee and appointed a dedicated BOD member for
ESG oversight.
At the end of 2023, TCB increased its green credit
exposure, reaching USD 547 million-representing 5.2% of its total
loan book-distributed across sectors such as sustainable
transportation, renewable and clean energy, and other
environmentally friendly industries.
ESG Challenges
In terms of governance, TCB faces the challenge of
diversifying its Board and management team in terms of gender.
Currently, the representation of women in the BOD, Supervisory
Board, and Executive team is relatively low at 19%. Additionally,
the bank has not yet disclosed its greenhouse gas ("GHG") emissions
or adopted the Global Reporting Initiative ("GRI") standards in its
sustainability reports.
Sustainability Report
Global context: anti-greenwashing, AI and
data-driven ESG strategies
In the evolving landscape of sustainability, 2023
proved to be a pivotal year marked by various advancements in
environmental, social, and governance ("ESG") practices. From our
perspective, we would highlight three key global trends central to
this progression: the intensification of anti-greenwashing efforts,
the integration of artificial intelligence ("AI") in ESG reporting,
and the widespread adoption of data-driven approaches to
sustainability strategies.
Anti-Greenwashing
Initiatives: The credibility of corporate sustainability
efforts is under scrutiny as stakeholders demand greater
transparency and accountability. Greenwashing, the practice of
making misleading or false claims about environmental practices,
has become a major concern. The ESG Attitudes Tracker, a survey
conducted by the UK-based Association of Investment Companies
("AIC"), showed reduced enthusiasm in ESG investing among private
investors from 2021 to 2023. For investors who do not consider ESG
factors when investing, the top reason given is that they
prioritise financial performance over ESG issues. However, 'not
being convinced by ESG claims from asset managers' is a close
second, perhaps showing the need for a new labelling regime, and
one with clearer standards that investors can rely on. In response,
governments and regulatory bodies worldwide have introduced
stringent measures to combat greenwashing and eco-related
corruption. Enhanced regulations and standards, such as the EU's
Corporate Sustainability Reporting Directive ("CSRD") and
California's climate disclosure laws, are forcing companies to
substantiate their environmental claims with robust, verifiable
data. These initiatives are crucial in restoring trust and ensuring
that sustainability claims are reflective of genuine environmental
impact.[1]
AI-Driven ESG
Strategies: The incorporation of AI technologies into ESG
frameworks is revolutionising how organisations approach
sustainability. AI's ability to analyse vast amounts of data
enables companies to gain deeper insights into their environmental
impact, optimise resource use, and predict future sustainability
trends. This year, AI has played a critical role in enhancing the
accuracy and efficiency of ESG reporting, providing real-time data
analytics and enabling predictive modelling. These capabilities are
not only improving operational inefficiencies but also helping
companies to proactively address potential ESG
risks.[2]
Data-Driven
Sustainability: The shift towards data-driven ESG practices
marks a significant transformation in how companies manage and
report their sustainability efforts. By leveraging advanced data
analytics, organisations can track and measure their ESG
performance with greater precision. This data-centric approach
facilitates better decision-making, ensures compliance with
regulatory requirements, and enhances transparency. By integrating
comprehensive data analytics, companies can identify areas for
improvement, benchmark their performance against industry
standards, and communicate their sustainability achievements more
effectively to stakeholders.[3]
Vietnam context: brighter prospects for green
growth development
The rise of green
policy commitments
Vietnam's green policy commitments have progressed
significantly over the past three years. The country's ambitious
net-zero targets for 2050 could be seen as a marker, highlighting
the transformational interventions that are needed to address
climate change challenges, including the development of cleaner
transportation and energy systems. At the end of 2023, the
government unveiled further steps to achieve the nation's net-zero
targets. At COP28 in Dubai, Vietnam's Prime Minister Pham Minh
Chinh announced a Resource Mobilisation Plan to establish a Just
Energy Transition Partnership ("JETP") between Vietnam and the
International Partnership Group ("IPG"). The partnership seeks to
mobilise an initial USD 15.5bn of public and private finance over
the next three to five years to help Vietnam reduce its reliance on
coal and transition to renewable sources of energy through a mix of
loans, grants, technology transfers, and technical assistance
programmes. If the partnership meets its goals, Vietnam will reach
its GHG emission targets by 2030 instead of 2035. By relying more
on renewable energy, it also could reduce its annual power sector
emissions by 30%.
In addition, the National Circular Economy
Development Scheme set several ambitious targets, including
reducing the intensity of GHGs per its GDP by at least 15% by 2030.
Furthermore, the country aims to reuse, recycle, and treat 85% of
plastic waste, reducing half its plastic waste in oceans as well
the volume of non-biodegradable plastic bags and disposable plastic
products in use by 2025. To support this, the Extended Producer
Responsibility ("EPR") regulations became effective at the start of
2024. This places responsibility on producers and importers to
manage waste associated with the full life cycle of their
products.
Since the approval of the National Power Development
Plan ("PDP") 8, we have seen the passing of more regulations and
decrees to support the development of the renewable energy sector,
such as the Decree on Direct Power Purchase Agreements ("DPPA")
allowing businesses in Vietnam to purchase electricity directly
from private firms producing renewable energy. The scale of the
transition needed between 2030 and 2050 to meet the goals and
Vietnam's commitment to net-zero emissions by 2050 presents
enormous opportunities in the energy sector. For example, energy
storage technologies, including lithium batteries, pumped
hydropower and heat storage, will need to be developed, as will
smart grids to ensure a high level of stability and integration of
renewable energy in the power system.
ESG Moving up the
Corporate Agenda in Vietnam
Awareness of ESG in Vietnam might have come later
than in the US and Europe, but the focus and implementation of
practices continue to gain ground. With Vietnam emerging as an
important alternative manufacturing base to China, the country's
participation in free trade agreements has created opportunities
for enterprises to be part of the global supply chain and ESG
considerations are prerequisites for many of these deals. For
example, Vietnam's export industries are increasingly influenced by
international ESG regulations, particularly from the European Union
("EU"). The EU's Corporate Sustainability Due Diligence Directive
and the Carbon Border Adjustment Mechanism ("CBAM") require
Vietnamese exporters to adhere to new environmental and social
rules. This has forced Vietnamese companies to consider ESG matters
more seriously and ensure compliance with international
sustainability criteria.
In the financial year, we also observed there was an
increased focus on corporate governance, with regulations pushing
for greater transparency and accountability in corporate
operations. With the support of the State Securities Commission of
Vietnam, the revised G20/OECD Principles of Corporate Governance
become available in Vietnamese, offering another helpful resource
for Vietnamese enterprises to improve their corporate governance
practices needed for a just transition towards a sustainable
economy.
Another important regulation that enforces Vietnamese
enterprises to improve their "social" impacts is the Vietnam's
Decree on Personal Data Protection, which became active in July
2023. This new decree marks a significant milestone in Vietnam's
commitment to protect personal data and enhance privacy rights in
the digital age. It requires companies, especially those that are
involved in e-commerce, fintech, healthcare technology, and smart
production to develop concrete measures for data collection,
processing, transfer and data security to avoid fines and penalties
as well as reputational damage.
The Fund's
Stewardship Role
As a long-term, responsible investor, ESG integration
has always been at the heart of our investment philosophy. With our
motto "do more, measure more and report more", we have continuously
made progress in our ESG journey. VietNam Holding has been a
signatory of the Principles for Responsible Investment ("PRI")
since 2009 while the Investment Manager, Dynam Capital also became
a signatory in 2022. Our PRI Transparency Report for 2023 received
5-star assessment scores across all modules. In addition, we
supported a very successful Vietnam ESG Investor Conference 2024 as
a Title Sponsor. We have been proactive in company engagement to
improve ESG practices of investee companies, bringing those with
exemplary practices into the spotlight.
Identifying climate change implications is a critical
global issue that affects all sectors, and we support the efforts
of Vietnam's government and business sector to address climate
change and its socioeconomic effects. During the financial year,
the Investment Manager has been working closely with companies to
help them prepare for their ESG and carbon footprint reports. We
are pleased to say that the number of portfolio companies reporting
their total carbon emissions has increased this year, especially as
some decided to do so following our engagement meetings.
As we navigate to a net-zero world, VNH has
identified its focus points for climate change over the next two
years:
· Continue to
measure and track the portfolio's carbon footprint to identify
carbon-intensive sectors, integrate climate risks and opportunities
into our broader risk management framework, and identify investment
opportunities in low-carbon sectors;
· Improve our
climate related disclosures following the guidelines of the Task
Force on Climate-related Financial Disclosures; considering
disclosures in line with the guidelines of the Task Force on
Nature-related Financial Disclosures; and
· Encourage more
companies in the portfolio to measure their total carbon emissions
and to create a decarbonisation roadmap.
VNH's Task Force on
TCFD
The Investment Manager engaged VNEEC, a Vietnamese
environmental consultant, to estimate total carbon emissions of all
listed companies in the VNH portfolio as of 31 December 2023. This
was followed by an assessment of the portfolio's climate risks and
alignment with the Paris Agreement goals using scenario analysis
and the implied temperature rise metric. We also dug deeper into
estimating the impact value of companies and industries that are
more susceptible to transition risks, according to the assessment
report, and integrated that data into our portfolio construction
and investment analysis. Our response to the core elements of the
TCFD recommendations are summarised in the below table.
Leading Sustainable
Governance
VNH's board publicly announced its support of the
Paris Agreement and the Task Force on Climate-Related Financial
Disclosures in 2021. During the Annual General Meeting in 2021, the
Board also endorsed a belief statement for climate, which was later
published through media release and the Fund's website.
Additionally, the Company's ESG Committee has been
working closely with the Investment Manager to enhance its
investment strategy by further incorporating climate related risks
and opportunities into the investment process and overall risk
management.
Sustainability matters are also incorporated into the
reports sent to investors. In addition, board members and directors
of the Investment Manager have attended seminars and training in
the UK and Asia on climate and sustainability issues and continue
to advocate for greater adherence and collaboration. The Investment
Manager promotes and supports climate initiatives through industry
bodies, such as the AIC, the Singapore Institute of Directors,
AIGCC, and the Vietnam Institute of Directors ("VIOD"), which is a
member of the ASEAN Network for Climate Governance.
Strategy for
2021-2025
As most Vietnam's companies are at the early stage of
incorporating climate change into their business strategies, we
continue to focus our engagement activities on raising portfolio
companies' awareness and providing them with guidelines to measure
their total carbon emissions and adopt or develop low-carbon
technology.
We identify physical risks, for example, acute
weather events, as well as transition risks, which include policy,
legal and market risks. We do this across sectors in accordance
with our core investment themes: industrialisation, urbanisation,
and the domestic consumer. In our analysis, we prioritise the
best-in-class companies in terms of their adoption of technological
solutions to lower carbon emissions and their disclosures on carbon
footprint in their annual reports, favouring those that prove to be
engaged in strong climate-resilient strategies.
Based on the United Nations Environment Programme
Finance Initiative ("UNEP FI") - which assesses the sector
transition risk exposure in terms of direct and indirect emission
costs, low-carbon capital expenditure and change in revenue - the
largest portion of VNH's portfolio in 2023 (47.5% of the NAV) is
allocated in the financial and information technology sector. These
sectors are categorised as "low" transition risks, while another
40.3% of the portfolio is invested in sectors with "moderate"
exposure ratings.
In the financial year, the Fund continued to hold its
investment in PVS - a state-owned company in the oil and gas
sector, which has entered the portfolio from the previous year, and
is categorised as "high" risk exposure. However, PVS, is
transitioning its business to support offshore wind power projects
and has signed MOUs with many partners to develop domestic as well
as overseas green energy projects. PVS is also utilising its fleet
of specialised offshore vessels in the construction, operation and
maintenance of nearshore windfarms in Ben Tre, Tra Vinh and Ca Mau
provinces and offshore wind farms in Binh Thuan province. To date,
it has secured two contracts overseas with a total value of USD
350m.
Risk
Management
The ESG Committee works closely with the Audit and
Risk Committee and the Investment Manager to incorporate climate
risks into the overall risk management framework (see page 27).
The Investment Manager integrates climate risk
assessment into every stage of the investment processes from
initial screening and due diligence to investment decision and
monitoring. Risks as well as the opportunities they present are
discussed regularly during the Investment Committee's meetings and
managed at the portfolio level.
Metrics and
Targets
· Portfolio carbon footprint is the key
metric we use to measure and keep track of our progress towards
reducing carbon emissions. Our target is to keep the portfolio
carbon footprint 20% below the benchmark index, the Vietnam All
share Index ("VNAS"). We are proud to report that the 2023
portfolio's carbon footprint is 41.3% below the VNAS benchmark.
· Portfolio's implied temperature rise
("ITR"): The portfolio's ITR calculation is based on the two
models developed by the Climate Action Tracker
[4]. The first model is
the domestic modelled pathways, in which, with domestic efforts,
Vietnam shall reduce its emission to 114 MtCO2e
(excluding LULUCF [5]) in
2050 to reach the 1.50C target. The second model is the
effort-sharing model, which sets the budget considering each
country's economic capabilities, and what is considered as "fair".
The remaining budget of Viet Nam in 2050 for reaching the
1.50C target is 233 MtCO2e in the
effort-sharing model. Based on the calculation of VNEEC, the ITR of
VNH's 2023 portfolio is 3.850C and 2.800C for
the domestic and the effort-sharing pathways, respectively. This
means that the ITR of the 2023 portfolio is higher than
20C. We are offsetting this by actively joining in
policy dialogue, supporting climate initiatives, and enhancing our
engagement with companies to help them with their own
transitions.
· Portfolio's Weighted Average Carbon Intensity
("WACI"): We use the WACI metric to assess the portfolio's
exposure to carbon-intensive companies expressed in tCO2/$M
revenue, and this is calculated at 107.98 tCO2/$M for VNH's 2023
portfolio based on Scope 1 and 2 emissions of all companies, which
is lower than the 2022 WACI at 178.23 tCO2/$M.
· Low-carbon investment: In the
long-term, from 2025, and with shareholder approval, we will set a
firm target percentage for low-carbon investment in our
portfolio.
Portfolio Carbon
Footprint
The attributable carbon footprints of portfolio firms
are compared to the attributable carbon footprints of an identical
amount invested in companies in the Vietnam All Share Index
("VNAS"). The total carbon emissions of VNH portfolio in 2023 are
41.3% (equivalent to 10,210 tCO2e) lower than the VNAS benchmark,
because of both sector allocation and stock picking. The total
carbon emissions of 2023 Portfolio is also lower than that of 2022
Portfolio (14,522 and 20,539 tCO2e respectively), due to reducing
investment in carbon-intensive Energy and Materials stocks.
|
|
VNH
Portfolio
|
VNAS
benchmark
|
Difference
between
VNH Portfolio
vs.
VNAS
benchmark
|
|
Total Emissions
Scope 1 and 2 (tCO2e)
|
14,522
|
24,732
|
-10,210
|
|
Total Emissions
Scope 1, 2 and 3 (tCO2e)
|
38,843
|
51,588
|
-12,745
|
|
Carbon footprint
(tCO2e/ USDM Invested)
|
118.53
|
201.86
|
-41.3%
|
Keeping in line with
the UN SDGs
The 17 Sustainable Development Goals ("SDGs"), also
known as the Global Goals, were adopted by the United Nations
("UN") in 2015 as a universal call to action to end poverty,
protect the planet, and ensure that by 2030 all people enjoy peace
and prosperity. With only a little over five years left, it is
crucial that we accelerate our actions if we are to make any
meaningful change. The country's Voluntary National Review shows
that Vietnam is currently on track to achieve four of the 17 SDGs
that the country has committed to for the 2030 Agenda. These
include SDG 1, "No poverty"; SDG 6, "Clean water and sanitation";
SDG 9, "Industry, innovation and infrastructure"; and SDG 10,
"Reduced inequalities". 2022 marked the 45th Anniversary
of Vietnam's relationship with the UN, and together with the
Government of Vietnam, the UN launched a new five-year Sustainable
Development Cooperation Framework ("CF") for the 2022 to 2026
period.
The CF specifies four priority outcomes linked to SDG
goals for Vietnam for the next three years, namely inclusiveness
and social development; climate-change response and disaster
resilience; environmental sustainability and shared prosperity
through economic transformation; and governance and access to
justice. Progress will be measured against 46 outcome and 57 output
indicators. We have already seen the UN expand its dialogue in
Vietnam to encourage private sector firms to incorporate the UN
principles of responsible business into their operations.
We consider the 17 SDGs to be the most holistic
framework that companies would be wise to start with when
developing their sustainability strategy. We are pleased to see
that the SDGs have been incorporated in many of our portfolio
companies' annual reports, with detailed illustrations of how the
SDGs are embedded in their business activities and corporate
culture.
For example, FPT, the largest holding in VNH's
portfolio, contributes greatly to SDG 4, "Quality Education", with
their extensive education programmes for staff, their families and
communities. GMD, another company in our top five holdings, has
also made efforts to align its business with the SDGs, especially
SDG 9, "Build resilient infrastructure, promote inclusive and
sustainable industrialisation and foster innovation with its
extensive green smart port ecosystem" and SDG 13, "Climate
Action".
Additionally, the banking sector, which accounts for
approximately 26% of VNH's portfolio at 30 June 2024, has made
notable progress in committing to the SDGs in recent years. For
example, by providing more loans and other products linked to
climate change, helping to accelerate the clean energy transition
and support underprivileged groups. Vietnamese banks also have been
improving their sustainability disclosures. During the financial
year, we saw increasing competition among banks when it came to ESG
reporting, with MBB, ACB, VPB taking the lead.
Seven of our portfolio companies, CTG, FPT, MBB, MWG,
PNJ, VCB and VPB, are in the Vietnam Sustainability Index ("VNSI")
2024, which features the top 20 sustainable listed companies on
HOSE measured in terms of their ESG practices. The number of our
portfolio companies included in the VNSI has increased
significantly this year, with their total weights accounting for
36.2% of VNH's portfolio at 30 June 2024. PNJ is also included in
the Corporate Sustainability Index 2023 developed by the Vietnam
Business Council for Sustainable Development (VBCSD) under the
Vietnam Chamber of Commerce and Industry ("VCCI").
The Importance of G
in ESG
Corporate Governance ("CG") is an integral part of
any successful business as it guarantees accountability,
transparency, and ethical behaviours. As an investor, we highly
value companies that prove good governance is actually happening in
practice. The CG part in our ESG scorecard has been developed based
on both national regulations and international guidelines,
including the Law on Enterprises, the Law on Securities, Decree 155
on corporate governance of public companies, Circular 96 on
disclosure of information of public companies, the International
Finance Corporation's ("IFC") CG Code of Best Practices for public
companies, and the ASEAN CG Scorecard. It covers a wide range of
governance issues, including board structure, company's commitment
to corporate governance, risk management and control system,
transparency and disclosure, shareholder rights and board oversight
of environmental and social issues.
Although Vietnam's equity markets are still
classified as Frontier Markets by MSCI and FTSE Russell, we think
it is a matter of time before they are upgraded. In anticipation of
this, many leading companies have employed the World Bank's IFC ESG
guidebook and other international guidelines to improve their
corporate governance framework. We have observed significant
improvements over the past year in board-level oversight of ESG
issues among our portfolio companies. Nearly one-third of portfolio
companies have established dedicated sub-committees to address key
ESG matters. The majority have sent their directors on corporate
governance training courses, and more than one-third of the
companies in the portfolio have certified directors in their board.
In addition, we are pleased to see enhanced investor relations
activities and greater transparency across all our portfolio
companies. This includes more monthly performance updates and
quarterly reports, as well as more content available in English. As
noted above, we also are seeing more sustainability reports from
companies following GRI (Global Reporting Initiative) standards,
and this includes improved investor relations support to address
questions from investors.
Dedicated Company Engagement
Program
The Investment Manager is active in arranging
face-to-face meetings with several portfolio companies through the
Company Engagement Programme to discuss business strategy and how
ESG issues are addressed. During the financial year, the team
continued to have in-depth meetings with portfolio companies to
help improve their ESG practices with practical solutions in the
short and medium term. Although each engagement and conversation is
different, we saw an overall willingness and strong commitment from
the boards of our top-holdings to prioritise sustainability matters
in their business agendas.
In the financial year, our engagement with investee
companies focused on the following ESG topics:
· Encouraging companies
to improve their ESG public disclosures in line with international
best practices;
· Encouraging companies
to develop a decarbonisation roadmap with science-based
targets;
· Discussing how they
could establish a satisfactory ESOP plan; and
· Discussing the
potential roles and responsibilities of an ESG officer.
Shareholder Voting
During the financial year, the Company voted at the
Annual General Meetings ("AGM") on every portfolio company. This
year the AGMs were held in both online and offline modes. The
Investment Manager attended 19 AGMs on behalf of the Company and
voted 100% in favour of all agenda items. The Investment Manager
considered each issue based on its merits related to the strategic
objectives of the Investee Company and its long-term
performance.
As part of its usual practice, the Investment Manager
discusses the agenda items with each of the investee companies'
board of directors. In all cases during the past year, the Company
voted for every agenda item proposed by the companies' boards of
directors.
Membership and Partnership to
Promote ESG Practices
PRI
The Company's investment policy is aligned with the
United Nations' Principles on Responsible Investing ("PRI"), which
the Company has been a signatory of since 2009. Each year, the
Company reports on its responsible investment activities through
the PRI Transparency Report. In its 2023 report, the Company
received five-star scores for all sections. The improvement in
active ownership activities was noted, particularly in some of our
criteria, such as the engagement approach, escalation strategy,
number of companies engaged with, the topics covered, and the way
we share insights from engagements with our stakeholders.
Vietnam Institute of
Directors (VIOD)
Mr Vu Quang Thinh, the CEO of Dynam Capital, is a
founding member of VIOD, a professional organisation promoting
corporate governance standards and best practices in the Vietnamese
corporate sector. VIOD was legally formed in 2018 with
technical support from the IFC, which is a member of the World Bank
Group and the Switzerland's State Secretariat for Economic Affairs
("SECO"). Governed by a board of directors comprised of various
private sector representatives, VIOD has close collaboration with
and is supported by the State Securities Commission of Vietnam
("SSC"), HOSE and HNX under the Vietnam Corporate Governance
Initiative ("VCGI"). With the support of SSC, VIOD will continue to
represent Vietnam for participation in the ASEAN Corporate
Governance Scorecard. Our close collaboration with VIOD will
continue to play a key role in fostering good corporate governance
in Vietnam over the coming years.
Asia Investor Group
on Climate Change ("AIGCC")
Dynam Capital, our Investment Manager, is a member of
AIGCC. Dynam Capital signed up to the 2022 Global Investor
Statement to Governments on the Climate Crisis, alongside more than
602 investors representing almost USD 42tn in assets under
management, to ask governments to raise their climate ambitions and
implement meaningful policies to address the climate crisis. In
addition, Dynam Capital has been applying AIGCC's Investor Climate
Action Plan to set out VNH's climate strategy, while regularly
attending AIGCC's monthly member meetings (including training
sessions) on climate change.
Supporting local
initiatives
In the financial year, together with the Investment
Manager, we actively advocated for ESG awareness in Vietnam through
being the title sponsor for the Vietnam ESG Investor Conference
2024. The Investment Manager also helped strengthen the
sustainability conversation in Vietnam through supporting local
media such as The
Saigon Times, and
Dear Our Communities, a
start-up that produces podcasts and creative media to help young
people in the country learn more about sustainability issues and
seek relevant career opportunities.
Principal Risks and Risk Management
The Board has carried out a robust assessment of the
Company's emerging and principal risks and considers with the
assistance of the Investment Manager the risks and uncertainties
faced by the Company in the form of a risk matrix and heat map. The
investment management of the Company has been delegated to the
Company's Investment Manager. The Investment Manager's investment
process takes into account the material risks associated with the
Company's portfolio and the holdings in which the Company is
invested. The Board monitors the portfolio and the performance of
the Investment Manager at regular Board meetings. The principal
risks and the descriptions of the mitigating actions taken by the
Board are summarised in the table below.
|
Key risk
|
Description
|
Mitigating action
|
|
Market
Risk
|
Vietnam is an increasingly open trading nation, and
the changes in terms of international trade, disruption to supply
chains and impositions of tariffs could impact directly and
indirectly the Vietnamese economy and the companies in which the
Company is invested. The Vietnamese economy can also be impacted by
the global-macro economic conditions, and also geopolitical
tensions. The Vietnamese capital markets are relatively young, and
liquidity levels can change abruptly responding to changes in the
behaviour of domestic and international investors.
Parts of the portfolio may be prone to enhanced
liquidity and price risk.
|
The Board is regularly briefed on political and
economic developments by the Investment Manager. The Investment
Manager publishes a monthly report on the Company which includes
information and commentary on the macroeconomic developments in
Vietnam.
The inherent liquidity levels in the portfolio have
been considered explicitly in the viability of the Company and the
Board is reasonably satisfied that even in periods of distress and
low liquidity there would be an adequate level of assets that could
be realised to meet the liabilities of the Company as they fall
due.
The Board has noted that the underlying market
liquidity in Vietnam has increased dramatically during the last
year, and the portfolio composition has also included a higher
percentage of larger and more liquid companies.
|
|
Investor
Sentiment
|
Vietnam is currently classified as a Frontier Market
by MSCI, and the timetable for any inclusion as an Emerging Market
is unsure. Investor attitudes to Frontier and Emerging Markets can
change, leading to reduced demand for the Company's shares, and an
increase in the discount to NAV per share.
|
The Investment Manager keeps shareholders and other
potential investors regularly informed on Vietnam in general and
the Company's portfolio in particular. At each Board meeting the
Board receives reports from the Investment Manager, from Cavendish
Securities plc, its broker, and is updated on the composition of
the shareholder register. In 2019 the Company migrated its domicile
from Cayman Islands to Guernsey and moved its trading from AIM to
the Main Market (previously the Premium segment of the Official
List) of the LSE in order to make the shares attractive to a wider
audience of potential investors. In seeking to narrow the discount,
the Board has also implemented an on-going share buy-back
programme.
|
|
Investment
Performance
|
The performance of the Company's investment portfolio
could be poor, either absolutely or in relation to the Company's
peers, or to the market as a whole.
|
The Board receives regular reports on the performance
of the portfolio and its underlying assets. The Investment Manager
reports to the Board at each Board meeting, and the Board monitors
the performance of the Investment Manager.
|
|
Fair
Valuation
|
The risks associated with the fair valuation of the
portfolio could result in the NAV of the Company being misstated.
The quoted companies in the portfolio are valued at market price,
but it may be difficult to liquidate, where large positions are
held, at these prices in an orderly fashion in the ordinary course
of market activity. The values of the Company's underlying
investments are denominated in Vietnamese Dong, whereas the
Company's accounts are prepared in US Dollars. The Company does not
hedge its Vietnamese Dong exposures so exchange rate fluctuations
could have a material effect on the NAV.
|
The Board reviews the valuation of the portfolio with
the Investment Manager regularly.
The daily estimated NAV is calculated by the
Investment Manager.
The monthly NAV is calculated by the Fund
Administrator.
|
|
Investment
Management Agreement
|
The fund management activities are outsourced to the
Investment Manager. If the Investment Manager became unable to
carry out these activities or if the Investment Management
Agreement was terminated, there could be disruptions to the
management of the portfolio until a suitable replacement is
found.
|
The Board maintains a close contact with the
Investment Manager and reviews the performance of the Investment
Manager on a regular basis.
|
|
Operational
|
The Company has no employees and is dependent on a
number of third parties for the provision of services (including
Investment Management, Fund Administration and Custody). Any
control failures or gaps in the services provided could result in
damage or loss to the Company.
|
The Board receives regular reports from the
Investment Manager and Fund Administrator on their policies,
controls, and risk management.
|
|
Legal and
Regulatory
|
Failure to comply with relevant regulation and
legislation in relevant jurisdictions may have an impact on the
Company. Although there are compliance policies (including
anti-bribery policies) in place at the Company, the Investment
Manager and all service providers, the Company could be damaged or
suffer losses if any of these polices were breached.
|
The Company is administered in Guernsey by a Fund
Administrator which reports to the Board at each Board meeting on
compliance matters. The Board receives training and updates on
compliance matters. The Investment Manager is regulated in Guernsey
and has extensive compliance and risk management policies in
place.
|
|
Pandemic
Risk
|
The global reach, impact and disruption to markets
resulting from the recent outbreaks of COVID-19 showed the
devastating effects that a global pandemic could cause. Lockdowns,
quarantine measures and restrictions on travel caused sustained
global economic disruption and the slowdown in growth caused some
industries and companies to face severe financial pressures.
|
The Board and the Investment Manager learned many
valuable lessons during COVID-19 - the Board remains in regular
contact with the Investment Manager, receiving regular updates on
the development of any new threats whilst continuing to ensure that
the key service providers to the Company all have functional
Business Continuity Plans.
|
|
Climate
Risk
|
Climate change is happening faster than models
earlier predicted, threatening the safety of billions of people on
the planet. Vietnam is one of the twenty countries most vulnerable
to climate change. The country's diverse geography means it is hit
by sea level rise, typhoons, landslides, flooding and droughts, and
weather events are expected to worsen in coming years. Two types of
climate-related risks have been identified.
(1) Physical risks: sea level rise, floods and
typhoons that put infrastructure or real estate companies with
projects in coastal areas or low-lying levels at higher risk from
physical impacts of climate change.
(2) Transition risks: climate policy and rising
carbon prices may cause higher prices and impact the viability of
companies that rely on fossil fuels or those in carbon intensive
activities and may necessitate a significant, and costly,
technology shift.
|
The Board, through the Investment Manager, has
engaged a specialist consulting firm in Vietnam to help estimate
the portfolio's carbon footprint and identify the carbon-intensive
sectors. The Investment Manager has undertaken to analyse the
physical and transition risks of climate-sensitive industries to
develop an appropriate investment and engagement strategy and to
encourage investee companies to do more on climate-related risk
assessment and disclosures. The Investment Manager monitors
investee companies that are identified to be at high climate
risk.
The Investment Manager is a member of the Asia
Investor Group on Climate Change and keeps abreast of the changes
in policies that may impact transition and other climate-related
risks. The Board is in regular contact with the Investment Manager
and receives reports through the ESG Committee and the Audit and
Risk Committee.
|
|
Emerging
Risks
|
New risks beyond those identified as Principal Risks
can develop. These Emerging Risks may have a detrimental or
existential impact on the Company.
|
The Board reviews the risk matrix and risk register
that captures and tracks emerging risks as part of its overall risk
management practices. Emerging Risks are identified and recorded
with a description of their root cause, a risk assessment, a
description of mitigating actions, a monitoring plan, and a net
risk rating. Changes in risk ratings are presented to the Board on
a quarterly basis. There are no emerging risks to bring to
the attention of the shareholders at the date of the Annual
Report.
|
Director Profiles and Disclosure of Directorships
All of the Directors are Non-executive Directors and
the majority are independent of the Investment Manager.
Hiroshi
Funaki (Chairman)
Mr Funaki has been actively involved in raising,
researching and trading Vietnam funds since 1995. He worked at
Edmond de Rothschild Securities from 2000 to 2015 where he led the
Investment Companies team, focusing on Emerging Markets and
Alternative Assets. Prior to that he was Head of Research at Robert
Fleming Securities, also specialising in closed-end funds. He
currently acts as an investment adviser to a Family Office. He has
a MA in Mathematics and Philosophy from Oxford University.
Philip Scales
(Audit and Risk Committee Chairman and Management Engagement
Committee Chairman)
Mr Scales has over 40 years' experience working in
offshore corporate, trust, and third-party fund administration. For
18 years, he was managing director of Barings Isle of Man
(subsequently to become Northern Trust) where he specialised in
establishing offshore fund structures, mainly in the closed-ended
arena (both listed and unlisted entities). Mr Scales subsequently
co-founded FIM Capital Limited and is Chairman of FIM Holdings
Limited. He is a Fellow of the Institute of Chartered Secretaries
and Administrators and holds a number of directorships of listed
companies and collective investment schemes.
Saiko Tajima
(Remuneration and Nomination Committee Chairman)
Ms Tajima has over 20 years' experience in finance,
of which 8 years have been spent in Asian real estate asset
management and structured finance. Working for Aozora Bank and
group companies of Lehman Brothers and Capmark, she focused on
financial analysis, monitoring and reporting to lenders, borrowers,
auditors, regulators, and rating agencies. Over the last 9 years,
she has invested in and helped develop tech start-ups in Tokyo,
Seoul, and Sydney. She is a Certified Public Accountant in the
US.
Connie Hoang Mi
Vu (Environmental, Social and Governance Committee
Chairman)
Ms Vu is a partner at Raise Partners, a consultancy
that advises clients on ESG strategy and partnerships. She has over
20 years of experience in ESG and international development and is
one of Vietnam's leading experts on human trafficking, modern
slavery, and labour migration. Ms Vu is a Board Member of the
Belgium Luxembourg Chamber of Commerce Vietnam and a Vice-Chair of
the European Chamber of Commerce's Women in Business Committee. She
has a BA from University of Michigan and MPA in International
Nonprofit Policy & Management from New York University.
Disclosure of Directorships in
Public Companies Listed on Recognised Stock Exchanges
|
Name
|
Company Name
|
Stock Exchange
|
|
Philip Scales
|
First World Hybrid Real Estate plc
|
Channel Islands
|
|
|
|
|
Corporate Governance Report
The Directors are responsible for the determination
of the overall management of the Company including its investment
policy and strategy. This includes the review of investment
activity, performance and control and supervision of the Investment
Manager and other advisers. The Directors are all Non-executive and
the majority are independent of the Investment Manager.
The Board is also responsible for its own
composition, capital raising, meeting statutory obligations and
public disclosure, financial reporting and entering into any
material contracts on behalf of the Company.
The Directors have access to the advice and services
of the Administrator and Secretary, who are responsible to the
Board for ensuring that Board procedures are followed and that it
complies with Company Law, applicable rules and regulations of the
Guernsey Financial Services Commission, the London Stock Exchange
and The International Stock Exchange.
Where necessary, in carrying out their duties, the
Directors may seek independent professional advice at the expense
of the Company.
The Board of the Company has considered the
Principles and Provisions of the Association of Investment
Companies Code of Corporate Governance issued in February 2019
("AIC Code"). The AIC Code addresses the Principles and Provisions
set out in the UK Corporate Governance Code (the "UK Code"), as
well as setting out additional Provisions on issues that are of
specific relevance to the Company. The Board and its advisors are
aware of the new code and will carry out a review to ensure that it
remains compliant.
The Board considers that reporting against the
Principles and Provisions of the AIC Code, which has been endorsed
by the Financial Reporting Council and the Guernsey Financial
Services Commission provides more relevant information to
Shareholders. The Board also considers by reporting against the AIC
Code, they are meeting their obligations under the UK Code, the
2011 GFSC Finance Sector Code of Corporate Governance and
associated disclosure requirements under paragraph 9.8.6 of the
Listing Rules.
The AIC Code is available on the AIC website
(www.theaic.co.uk). It includes an explanation of how the AIC Code
adapts the Principles and Provisions set out in the UK Code to make
them relevant for investment companies.
Except as disclosed within this report, the Board is
of the view that the Company complied with the recommendations of
the AIC Code and the relevant provisions of the AIC Code during the
year ended 30 June 2024. Key issues affecting the Company's
corporate governance responsibilities, how they are addressed by
the Board and application of the AIC Code are presented below.
Liaison with Shareholders is dealt with by the
Chairman of the Company and the Directors working closely with the
Company's Advisors.
Directors' Responsibilities to
Stakeholders
Section 172 of the UK Companies Act 2006 applies
directly to UK domiciled companies, however the AIC Code requires
that the matters set out in Section 172 are reported by all
companies, irrespective of domicile. This requirement does not
conflict with the Companies Law in Guernsey.
Section 172 recognises that Directors are responsible
for acting in a way that they consider, in good faith, is most
likely to promote the success of the Company for the benefit of its
shareholders as a whole. In doing so, they are also required to
consider the broader implications of their decisions and operations
on other key stakeholders and their impact on the wider community
and the environment.
Key decisions are defined as those that are material
to the Company, but also those that are significant to any of the
Company's key stakeholder groups. The Company's engagement with its
key stakeholders is outlined on page 35 of the corporate governance
section of this report.
Board Independence and
Composition
The Directors are all Non-executive and the majority
are independent. Two of the Board members were appointed in
September/October 2017 following the retirement of the previous
Board and the third member was appointed in May 2019 following the
retirement of a Board member at the 2018 AGM. The fourth member was
recently appointed in March 2024 following the resignation of two
Board members at the 2023 AGM.
Mr Funaki is a Director of Discover Investment
Company which at 30 June 2024 held 1,415,776 ordinary shares in the
Company representing 5.2% of the issued share capital. The Board
are satisfied that this does not have any impact on Mr Funaki's
independence as a Director of the Company.
As detailed in note 8 of the financial statements,
Directors own shares in the Company as follows:
|
Hiroshi Funaki
|
19,887
|
|
Philip Scales
|
10,077
|
|
Saiko Tajima
|
5,000
|
The Board reviews the independence of the Directors
regularly and at least annually.
The Board acknowledges the benefits of greater
diversity and welcomes the recommendations from the
Hampton-Alexander Review on gender diversity and the Parker Review
on ethnic representation. The Remuneration and Nomination Committee
will consider diversity generally when making recommendations for
appointments to the Board but with the principal aim that any new
appointment is filled by the most appropriate candidate based on a
range of skills, knowledge and experience appropriate for an
investment trust.
In all of the Board's activities, there has been and
will be no discrimination on the grounds of gender, race,
ethnicity, religion, sexual orientation, age or physical
ability.
The Board notes the new Listing Rules requirements
regarding the targets on board diversity:
· at least 40% of
individuals on the Board are women;
· at least one senior
Board position (chairman, chief executive officer ("CEO"), senior
independent director or chief financial officer ("CFO")) is held by
a woman; and
· at least one individual
on the Board is from a minority ethnic background, defined to
include those from an ethnic group other than a white ethnic group,
as specified in categories recommended by the Office for National
Statistics.
As required by the Listing Rules, reporting against
these targets is set out in the tables below in the prescribed
format. The data was collected on a self-identifying basis.
|
Gender identity/
sex
|
No of Board Members
|
Percentage of Board
|
No of senior positions on the Board
|
Number in Executive team
|
Percentage of Executive Team
|
|
Male
|
2
|
50%
|
2
|
-
|
N/A
|
|
Female
|
2
|
50%
|
2
|
-
|
N/A
|
|
Not specified
|
-
|
-
|
-
|
-
|
N/A
|
|
Ethnic
Background
|
No of Board Members
|
Percentage of Board
|
No of senior positions on the Board
|
Number in Executive team
|
Percentage of Executive Team
|
|
White British or other
(including other minorities)
|
1
|
25%
|
1
|
-
|
N/A
|
|
Asian/ Asian British
|
3
|
75%
|
3
|
-
|
N/A
|
|
Mixed/ multiple Ethnic groups
|
-
|
-
|
-
|
-
|
N/A
|
|
Not specified
|
-
|
-
|
-
|
-
|
N/A
|
The Board is pleased to announce that as at 30 June
2024, it achieved a 50/50 gender representation.
The Company is an externally managed investment trust
meaning there is no CEO or CFO, however the Board considers that
the Chairman of any of the Company's Committees to be a senior
position.
The Board notes also that 40% of the team members
employed by the Investment Manager and its subsidiary in Vietnam
are female and 90% are ethnically Vietnamese.
The Board believes the current board members have the
appropriate qualifications, experience, and expertise to manage the
Company. The Directors' biographies can be found on page 30.
Board Meetings and
Attendance
The Board meets regularly during the year with
representatives from the Investment Manager present. In addition,
representatives from the Company's Broker and Administrator attend
Board and committee meetings by invitation. At each quarterly Board
meeting the performance of the portfolio is formally reviewed and
during the year, Board members also attend investment meetings with
members of the Investment Manager's senior team. The Board members
have a range of skills covering investment management, banking,
compliance, ESG and corporate governance as well as prior
experience of acting as directors of companies listed on the London
Stock Exchange.
The Company's brokers and lawyers are consulted on
any matters where external expertise is required, and external
advisers attend board meetings as invited by the Chairman to report
on and/or discuss specific matters relevant to the Company.
During the year 4 Board meetings were held and the
record of attendance at each Board and committee meeting was as
follows:
|
|
Board
|
Audit and Risk
|
Remuneration and Nomination
|
Management Engagement
|
Environmental, Social and Governance
|
|
Hiroshi Funaki
|
4 (4)
|
4 (4)
|
2 (2)
|
2 (2)
|
2 (2)
|
|
Philip Scales
|
4 (4)
|
4 (4)
|
2 (2)
|
2 (2)
|
2 (2)
|
|
Saiko Tajima
|
4 (4)
|
4 (4)
|
2 (2)
|
2 (2)
|
2 (2)
|
|
Connie Hoang Mi Vu
|
1 (1)
|
1 (1)
|
1 (1)
|
1 (1)
|
1 (1)
|
Sean Hurst and Damien Pierron stood down at the AGM
and resigned as Directors of the Company effective 21 December
2023.
Re-election of Directors
The Board has agreed that all Directors should submit
themselves for annual re-election.
Mr Funaki, Mr Scales, Ms Tajima and Ms Vu will all
stand for re-election at the 2024 AGM.
The individual performance of each Director standing
for re-election or election has been evaluated by the other members
of the Board and a recommendation will be made that Shareholders
vote in favour of their re-election at the AGM in November
2024.
Administration
On 7 October 2019 the Board appointed Sanne Group
(Guernsey) Limited to provide corporate governance, secretarial,
compliance and accounting services to the Company.
Conflicts of Interest
The Directors are reminded at each Board meeting of
their obligations to notify any changes in their statement of
conflicts and also to declare any benefits received from third
parties in their capacity as a Director.
A register of conflicts is maintained by the
Administrator and formally reviewed on a quarterly basis. Each
Director is required to declare any potential conflicts of interest
on an ongoing basis.
Performance Evaluation
During the year the Board undertook an evaluation
exercise into the effectiveness of both the Board and the
Committees. The programme was undertaken by the Administrator and
no significant issues were identified.
The Remuneration and Nomination Committee will again
consider whether for the next evaluation due in 2025, an external
facilitator should be appointed to undertake the evaluations in
line with AIC recommendations.
Professional Development and
Training
New Directors are provided with all relevant
information regarding the Company's business and given the
opportunity to meet with key functionaries prior to appointment.
They are also provided with induction training.
It is the responsibility of each Director to ensure
that they maintain sufficient knowledge to fulfil their role and so
are encouraged to participate in seminars and training courses
where appropriate.
Committees of the Board
Four Committees have been formed, an Audit and Risk
Committee, a Remuneration and Nomination Committee, a Management
Engagement Committee and an ESG Committee. Since September/October
2017 the Company has been through a period of considerable change
and apart from the Management Engagement Committee, all Board
members are members of each committee. The Chairman of the Company
does not Chair any of the Committees.
Details of the Chairman of each committee, together
with the number of meetings held during the year are shown on page
33. A summary of the Terms of Reference of each committee is
detailed below and a copy of the Terms of Reference are available
on the Company's website www.vietnamholding.com.
Audit and Risk Committee
The Chairman of the Audit and Risk Committee is
Philip Scales and the Committee meets at least twice per annum. All
members of the Board are members of the Committee. This includes
the Chairman of the Company where, given the size of the Board, the
experience of all members and the independence of the Company
Chairman, it is felt appropriate that all Board members play a role
in the Audit and Risk Committee. The principal responsibility of
the Committee is to monitor the production of the Interim and
Annual Financial Statements and to present these to the Board for
approval.
Other duties include reviewing the internal financial
controls and monitoring third party service providers, review and
monitor the external auditor's independence and objectivity along
with the effectiveness of the audit process and to make
recommendations to the Board in relation to the appointment of the
External Auditor together with their remuneration.
A report of the Audit and Risk Committee is detailed
on pages 37 to 38.
Remuneration and Nomination
Committee
The Remuneration and Nomination Committee is chaired
by Saiko Tajima and all members of the Board are members of the
Committee. The Board considers that a majority of the Directors are
independent and therefore eligible to be members of the Committee.
The Committee meets at least once in each year and at such other
times as may be considered necessary.
The principal duties of the Remuneration and
Nomination Committee are to review the fees paid to the
Non-executive Directors, to consider the appointment of external
remuneration consultants, to review the structure, size and
composition of the Board, make recommendations to the Board for any
changes and to consider succession planning. The Committee also
undertakes the evaluation of the appointment of any additional or
replacement Directors and ensures they are provided with training
and induction. The Committee arranges for an annual evaluation of
all Board and Committee members.
During the year the Committee reviewed the fees paid
to Directors and resolved that no changes be recommended.
The Board appointed Connie Hoang Mi Vu as an
Independent Non-executive Director with effect from 25 March
2024.
Management Engagement
Committee
The Chairman of the Management Engagement Committee
is Philip Scales and the Committee shall meet at least once a year.
All members of the Board other than Saiko Tajima are members of the
Committee. The principal duties of the Committee are to review the
performance and appointment of the Investment Manager together with
their remuneration and to review the effectiveness and
competitiveness of the other main service providers and
functionaries together with reviewing their performance.
A share buy-back sub-committee consisting of Hiroshi
Funaki and Philip Scales has been formed under the Management
Engagement Committee and meets periodically to review and monitor
the share buy-back programme.
During the year the Committee reviewed the
performance of the Investment Manager, Administrator and
Sub-Administrator, Corporate Broker and Registrar. No changes were
recommended as a result of these reviews.
Environmental, Social and Governance
Committee
The ESG Committee was established in 2021 and is
chaired by Connie Hoang Mi Vu with all members of the Board forming
the Committee. The aim of the Committee is to establish a unified
view of ESG, increasing understanding of all three aspects:
environmental, social and governance, and to promote the robust
standards of corporate governance that the Company adopts.
The purpose of the ESG Committee, which shall meet at
least once a year, is to support the Company's on-going commitment
to environmental, health and safety, corporate social
responsibility, corporate governance, sustainability, and other
public policy matters relevant to the Company (collectively, "ESG
Matters").
Shareholder Engagement
The Company is committed to listening and
communicating openly with its Shareholders to ensure that its
strategy, business model and performance are clearly understood.
All Board members have responsibility for Shareholder liaison.
Shareholder contact is dealt with by the Chairman of the Company
and the Directors in close liaison with the Company Advisors.
Copies of the Annual Report are sent to all
Shareholders and can be downloaded from the website. Other Company
information including the Interim Report is also available on the
website.
The Company holds an AGM each year, which gives
investors the opportunity to enter into dialogue with the Board and
for the Board to receive feedback and take action as necessary. The
Investment Manager also participates in meetings with investors
arranged by the Company's Broker and has arranged seminars and
webinars to update current and prospective investors on the
developments in the Vietnamese market and the performance of the
Company. The Investment Manager also updates the Company's website
and sends out monthly factsheets on the Company to investors who
have registered to receive such updates. The Company has a LinkedIn
page which is administered by the Investment Manager.
The Board reviews proxy voting reports and any
significant negative response is discussed with relevant
Shareholders and, if necessary, where appropriate or possible,
action is taken to resolve any issues. In the interest of
transparency and best practice, the level of proxy votes (for,
against and vote withheld) lodged on each resolution is declared at
all general meetings and announced.
Corporate Policies
Anti-Bribery and Corruption Policy
The Board is committed to the prevention of bribery
throughout the organisation and will take every step necessary to
ensure to the best of its ability that business is conducted
fairly, honestly and openly. It has adopted a formal policy to
combat fraud, bribery and corruption and will seek annual
confirmation from the Investment Manager and other service
providers it engages that they have similar policies in place.
Furthermore, the Board has zero tolerance to the criminal
facilitation of tax evasion. These policies apply to the Company
and to each of its Directors. Further, the policies are shared with
each of the Company's service providers, each of which confirms its
compliance annually to the Board.
Criminal Facilitation of Tax Evasion Policy
The Board has taken steps to ensure there is no
criminal facilitation of tax evasion. This applies to the Company
and to each of its Directors, as well as service providers. A
policy has been adopted by the Board.
General Data Protection Regulation
The Company abides by general data protection
regulation. As it is established in the Bailiwick of Guernsey,
under The Data Protection (Bailiwick of Guernsey) Law, 2017, the
Company has registered with the Office of the Data Protection
Authority.
The Company
Global Greenhouse Gas Emissions
The Company has no significant greenhouse gas
emissions to report from its operations for the year to 30 June
2024, nor does it have responsibility for any other emission
producing sources. The Company is very conscious of its own carbon
footprint in carrying out its business activities. The main source
of this for the Company is in the international and domestic air
travel of the Board of Directors and members of the Investment
Manager in conducting the business of the Company and meeting with
Shareholders. During the year members of the Board travelled to
Vienna, Hong Kong, Dubai and Ho Chi Minh City in conducting the
business of the Company whilst some meetings were held via video
conference. The estimated carbon footprint of travel activities
(that have not already been offset at source) amounts to
approximately 64.19 tonnes of CO2e.
The Company engaged a specialist consulting firm to
estimate the carbon footprint of the portfolio, and this is
detailed in the Sustainability
Report.
Gender
Metrics
The Board of the Company recognises the governance
mechanism to ensure there is diversity amongst the Directors and as
such the Board now achieves a 50/50 gender representation. The
Board is committed to treating all equally and considers all
aspects of diversity including gender and ethnic diversity. The
Remuneration and Nomination Committee will consider diversity when
making recommendations for appointments to the Board but with the
principal aim that any new appointment is filled by the most
appropriate candidate based on a range of skills, knowledge and
experience appropriate for an investment trust.
Audit and Risk Committee Report
The main items that the Audit and Risk Committee (the
"Committee") has considered and reviewed during the year ended 30
June 2024 were:
● the content of the Interim
Report and the Annual Report;
● the independence and
effectiveness of the External Auditor;
● the internal control and
risk management systems and the work of the service providers;
and
● the control framework with
the assistance of the Investment Manager and Administrator.
Internal Control
As a company with a Board consisting of Non-executive
Directors and which outsources the day-to-day activities of
portfolio management, administration, accounting and company
secretarial to external service providers, the Board considers the
provision of an internal audit function is not relevant to the
position of the Company.
The Committee reviews the internal financial control
systems for their effectiveness and through the Management
Engagement Committee, monitors the performance of the external
service providers. The Board recognises its ultimate responsibility
for the Company's system of internal controls to ensure the
maintenance of proper accounting records, the reliability of the
financial information upon which business decisions are made and
that the assets of the Company are safeguarded. Through these
procedures, the Directors have kept under review the effectiveness
of the internal control system throughout the year and up to the
date of this report. There were no issues arising from this
review.
Membership and Attendance
The Committee membership currently consists of all
Board members under the Chairmanship of Philip Scales. This
includes the Chairman of the Company where, given the size of the
Board, the experience of all members and the independence of the
Company Chairman, it is felt appropriate that all Board members
play a role in the Audit and Risk Committee. The Terms of Reference
allow appointments to the Committee for a period of up to 3 years
and this may be extended for two further 3-year periods provided
that the Director remains independent.
The Committee holds at least two meetings a year
which are to review the Annual and Half-Year Reports of the Company
and also for audit planning purposes and a review of risks relevant
to the Company. Details of the number of committee meetings held
during the year ended 30 June 2024 and the number of those attended
by each committee member are shown on page 33.
The External Auditor is invited to attend committee
meetings where the Annual and Half-Year Reports are considered, and
separate meetings are held with the External Auditor where the
Investment Manager is not present.
Principal Duties
During the year the Committee has:
● monitored the integrity of
the financial statements of the Company and any formal
announcements relating to the Company's financial performance;
● reviewed the Company's
internal financial controls and the internal control and risk
management systems of the Company and its third-party service
providers;
● made recommendations to the
Board in relation to the appointment of the External Auditor and
their remuneration;
● reviewed and monitored the
External Auditor's independence and objectivity and the
effectiveness of the audit process; and
● challenged the Investment
Manager on the scenarios used to support the going concern basis
and the ongoing viability assessment.
A copy of the Terms of Reference of the Committee is
available either from the Company's website or from the Company's
Administrator.
Valuation of Investments
The fair value of the Company's investments at 30
June 2024 was USD 134.9 million which represented 96.3% of the
Company's NAV (30 June 2023: USD 113.2 million and 98.2%
respectively). The valuation of investments is the most significant
factor in relation to the accuracy of the financial statements.
The Committee reviewed the portfolio valuation as at
30 June 2024 and obtained confirmation from the Investment Manager
that the Company's policies on the valuation of investments had
been followed. The Committee also made enquiries of the
Sub-Administrator and Custodian, both of whom are independent of
the Company, to check procedures are in place to ensure the
portfolio is valued correctly.
The Committee agreed to the approach to the audit of
the valuation of investments with the External Auditor prior to the
commencement of the audit. All the investments will be
independently checked by the External Auditor. The results of the
audit in this area were reported by the External Auditor and there
were no significant disagreements between the Investment Manager,
the Sub-Administrator and the External Auditor's conclusions.
The Board reviews the changes in valuations at each
quarterly Board meeting.
External Audit
KPMG Channel Islands Limited ("KPMG") has been the
External Auditor since the Company re-domiciled in Guernsey on 25
February 2019. The Committee held meetings with KPMG before the
start of the audit to discuss formal planning and to discuss any
possible issues along with the scope of the audit and appropriate
timetable. Informal meetings have also been held with the Chairman
of the Committee in order that the Chairman is kept up to date with
the progress of the audit and formal reporting required by the
Committee.
Annually, the Committee reviews the performance of
KPMG in order to recommend to the Board whether or not the Auditors
should be reappointed for the next year.
Audit fees payable to KPMG for 2024 are GBP 66,900
(2023: GBP 62,200). Non audit fees payable to KPMG for 2024 were
GBP nil (2023: GBP nil).
The Committee has reviewed KPMG's report on their
independence and objectivity, including their structure for the
audit of the Company and is satisfied that the services provided by
KPMG do not prejudice its independence. The Committee will continue
to review any non-audit services that may be provided by KPMG in
order to ensure their continuing independence and integrity.
Risk Management
An outline of the risk management framework and
principal risks is detailed on pages 27 to 29. The Committee will
keep under review financial and operational risk including
reviewing and obtaining assurances from key service providers for
the controls for which they are responsible.
Anti-Bribery and
Corruption
The Company has a zero-tolerance approach to bribery
and corruption, in line with the UK Bribery Act 2010. An
Anti-Bribery and Corruption Policy has been adopted and is kept
under review.
Annual Report
The Committee has reviewed the Annual Report along
with reports and explanations from the Company's Investment
Manager, Administrator, and other service providers. The Committee
is satisfied that the Annual Report is fair, balanced, and
understandable and that it provides the necessary information for
Shareholders to assess the Company's performance, business model,
and strategy.
The Committee is satisfied that KPMG has fulfilled
its responsibilities in respect of the annual audit and has
recommended that KPMG be re-appointed for the forthcoming financial
year.
Philip Scales
Audit and Risk Committee Chairman
1 October 2024
Directors' Remuneration Policy and Report
Remuneration Policy
The Directors are entitled to receive fees for their
services which reflect their experience and the time commitment
required. At the Annual General Meeting to be held in November 2024
an ordinary resolution seeking approval for the Directors'
remuneration report will be put to Shareholders.
Directors' Remuneration
Directors' fees are paid within limits established in
the Articles of Incorporation which shall not exceed an aggregate
of USD 350,000 in any financial year (or such sum as the Company
shall from time to time determine). The Directors may also be paid
reasonable travelling, hotel and other out-of-pocket expenses
properly incurred in attending Board, committee meetings or general
meetings. The Remuneration Committee reviews the Directors' fees
periodically although the review will not necessarily result in any
increase. For the year ended 30 June 2024 annual Directors' fees
remained at USD 50,000 with the Chairman of the Company receiving
an additional USD 10,000 per annum or prorated as applicable and
the Chairman of the Audit and Risk Committee receiving an
additional USD 5,000 per annum or prorated as applicable.
The Directors are also paid a per diem fee of USD
1,500 for each Board meeting attended and USD 750 for a committee
meeting attended, either in person or by telephone.
The Company has no bonus schemes, pension schemes,
share options or other long-term incentive schemes in place for the
Directors.
The single total figure of remuneration for each
Director who served during the year ended 30 June 2024 and the
previous year is as follows:
|
|
Year
ended 30 June 2024
|
Year ended 30 June
2023
|
|
|
|
Additional
|
|
|
Additional
|
|
|
|
Base Fees
|
Ad hoc Fees
|
Total
|
Based Fees
|
Ad hoc Fees
|
Total
|
|
Director
|
USD
|
USD
|
USD
|
USD
|
USD
|
USD
|
|
Hiroshi Funaki (Chairman)
|
60,000
|
6,750
|
66,750
|
60,000
|
11,250
|
71,250
|
|
Philip Scales (Audit and Risk Committee Chairman)
|
55,000
|
6,000
|
61,000
|
55,000
|
6,750
|
61,750
|
|
Saiko Tajima
|
50,000
|
6,000
|
56,000
|
50,000
|
6,750
|
56,750
|
|
Connie Hoang Mi Vu
|
13,320
|
1,500
|
14,820
|
-
|
-
|
-
|
|
Sean Hurst (Resigned)
|
27,759
|
3,078
|
30,837
|
55,901
|
11,700
|
67,601
|
|
Damien Pierron (Resigned)
|
25,000
|
3,215
|
28,215
|
50,000
|
11,832
|
61,832
|
|
Total
|
231,079
|
26,543
|
257,622
|
270,901
|
48,282
|
319,183
|
Sean Hurst and Damien Pierron stood down at the AGM
and resigned as Directors of the Company effective 21 December
2023.
Directors' Report
The Directors present the Annual Report and Financial
Statements of the Company for the year ended 30 June 2024.
The Company
VietNam Holding Limited (the "Company") is a
closed-end investment company that was incorporated in the Cayman
Islands on 20 April 2006 as an exempted company with limited
liability under registration number 166182. On 25 February 2019,
the Company, via a process of cross-border continuance, transferred
its legal domicile from the Cayman Islands to Guernsey and was
registered as a closed-ended company limited by shares incorporated
in Guernsey with registered number 66090.
The investment objective of the Company is to achieve
long-term capital appreciation by investing in a diversified
portfolio of companies that have high growth potential at an
attractive valuation.
At the Extraordinary General Meeting held on 21
December 2023 the Shareholders voted in favour of the continuance
resolution, authorising the Company to operate in its current form
through to the 2028 Annual General Meeting when a similar
resolution will be put forward for Shareholders' approval.
Dynam Capital, Ltd has been appointed as the
Company's Investment Manager and is responsible for the day-to-day
management of the Company's investment portfolio in accordance with
the Company's investment policies, objectives and restrictions.
Annual Redemption
Facility
At the Extraordinary General Meeting of the Company
held on 21 December 2023 shareholders voted in favour of a proposal
that introduced an innovative redemption structure that gives
shareholders an annual opportunity to realise their holding in the
Company at fair market value. The first Redemption Point was on 30
September 2024 and every year thereafter.
As part of the introduction of the redemption
facility the Company was accepted into the Reporting Fund regime by
HMRC with effect from 1 July 2024. Further details on the tax
consequences are detailed in the Circular dated 27 November
2023.
Shareholders are advised to consider their investment
objectives and their own individual financial and tax circumstances
and should seek independent professional tax advice and advice from
their own independent financial adviser authorised under the
Financial Services and Markets Act 2000 as appropriate.
Results
The net profit for the year ended 30 June 2024
amounted to USD 26,522,608 (2023: loss of USD 8,622,089). There
were no dividends declared during the year ended 30 June 2024
(2023: USD nil).
Going Concern
The financial position of the Company, its cash flows
and liquidity position are described in Financial Statements and
the Notes to Financial Statements. These also contain the Company's
objectives, policies, processes for managing its capital, its
financial risks management objectives, details of its financial
instruments, and its exposures to credit risk and liquidity
risk.
The Company's forecasts and projections have been
stress tested taking into account the potential for (i) asset value
declines, (ii) declines in cash dividends from equities held in the
portfolio and (iii) share buybacks and tender offers. The Directors
note that the underlying liquidity of Vietnamese stocks has
continued to improve during the year. The Director's also
note that the portfolio is composed of a high percentage of larger
and more liquid stocks. Lastly, the Directors note that at year-end
the portfolio is comprised of cash and quoted stocks only. The
Company's liquidity position, taking into account cash held and
with the ability to sell underlying assets to meet share buybacks,
tenders and to meet the operating costs of the Company, shows that
the Company is able to operate with appropriate liquidity and be
able to meet its liabilities as they fall due.
At the Annual General Meeting and Extraordinary
General meeting held on 21 December 2023, shareholders voted in
favour of the Company continuing for a further five years as well
as the introduction of an annual Redemption Facility. The first
Redemption Date was 30 September 2024.
On 1 October, the Company announced
a total of 3,406,598 ordinary shares were validly tendered for
redemption and will be redeemed under the 2024 redemption
opportunity. These ordinary shares represent approximately 12.6% of
the ordinary shares in issue as at 31 August 2024.
The Board resolved that the redemption price will
be based on VNH's official net asset value per share as at 30
September 2024 and it is anticipated that payments will be made to
redeeming shareholders by the end of October 2024.
The portfolio liquidity remains
relatively high, and the investment manager does not anticipate any
difficulty in raising the cash required. Therefore, the
Board is confident that
the redemption facility will not cause any material uncertainty
over the going concern of the Company.
The Directors have a reasonable
expectation that the Company will have adequate resources to
continue its operations for the foreseeable future. Thus, they
continue to adopt the going concern basis of accounting in
preparing the financial statements.
Viability
Statement
The Board has considered the viability period for the
Company, using the criteria set out in the UK Corporate Governance
Code. The Board considered the current position of the Company, and
its longer-term prospects, strategies as well as its principal
risks in the current, medium and long-term, as detailed in the
Principal Risks and Risk Management on pages 27 to 29 and in the
Investment Manager's Report on pages 6 to 9.The strategy provides
long term direction and is reviewed annually and further tested in
a series of robust downside financial scenarios as part of the
annual review. These scenarios included an assessment of those
risks that would threaten its strategic objectives, its
business-as-usual state, its business model and its future
performance, solvency or liquidity. The sensitivity analysis was
applied to the forecasted cash flows. Based on this assessment, the
Board has determined that a three-year viability period to 30 June
2027 is an appropriate period and that the Company will be able to
continue in operation and meet its liabilities as they fall due
over the period of three years. The Board notes the approval and
adoption by shareholders of an annual Share Redemption facility,
with the first redemption period being in September 2024. Given
that the Company's assets are listed equities, and that the
Investment Manager has estimated that on prevailing market
conditions more than 95% of the portfolio could be liquidated in
less than 30 days, the Board is comfortable that enough liquidity
could be generated to satisfy any amount of redemption request made
by shareholders. The Board also travelled to Vietnam in January
2024, meeting with the research team of the Investment Manager,
portfolio companies and market commentators, and will visit again
in November 2024.
In arriving at this conclusion, the Board
considered:
- The volatility of global economic conditions, the
war in Ukraine and inflation:
The Board considered the impact and
effectiveness of mitigation strategies being mandated by
governments in impacted countries; the adverse financial impact
already being experienced by the Company: the disruption to
economic activity and financial pressures and impact on investments
in the Company's portfolio. The Board also engaged with the
Investment Manager on the longer-term impact of climate change, and
other societal change factors, to the portfolio. Additionally, the
Board took into consideration the impact on the capital markets in
Vietnam; the existence and effectiveness of business continuity
plans of the Company and its service providers that had been tried
and tested during the COVID-19 pandemic. The Board reviewed
macro-reports and updates from the Investment Manager detailing the
impacts of rising inflation and rising interest rates in the US and
Europe on Vietnam, risks of global recession and also the direct
impacts of the continuing war in Ukraine.
- Business environment:
Despite the continuing visible signs of economic
recovery which the Board were able to see first-hand on their visit
to Vietnam in January 2024, evidenced in part by greater tourist
arrivals (back to pre-pandemic levels) and broader economic
recovery, the domestic real-estate market, bond market and consumer
market have faced some challenges. The Company's strategy for
investing in a portfolio of equities in Vietnam and targeting
growth in the value of the portfolio over the medium term is
unchanged and this coupled with a nimble approach to portfolio
construction has helped the Company navigate the uncertain market
conditions. The combination of potential structural opportunities
that may benefit Vietnam as a destination for manufacturing, and
the opportunities within the growing domestic market provide
attractive investment opportunities. The direct impact of the war
in Ukraine on Vietnam appears to be manageable, with less than 1%
of trade to Russia and Ukraine. The levels of inflation in Vietnam
are less pronounced than those in Europe and the US, and the
macro-economic position appears to be stronger than in many other
frontier and emerging economies.
- Operations:
2023 was thankfully free from any significant
operational changes. The restrictions in place during the pandemic
of 2020-2022 tested the Business Continuity protocols of the Board,
the Investment Manager and other service providers. The smooth
operation of the Company through the various restrictions and
lockdowns reassured the Board that these protocols are effective
and can, if necessary, operate effectively without the need for
physical meetings or an office presence. The Board, Investment
Manager, Administrator, and other service providers have all
demonstrated that they can work effectively and efficiently, and if
needed remotely.
- Investment:
· The liquidity of the
Company's underlying portfolio is relatively high: although average
daily trading volumes on Vietnam's stock markets declined during
the first half of the year, the volumes recovered in the second
half. All investments are in listed companies which have relatively
high liquidity. At year end there were no unquoted investments and
all securities are 'Level 1'. It is estimated that 95% of the
portfolio can be readily liquidated in less than 30 days. The
portfolio is un-geared and, as it holds all listed securities, has
sufficient liquidity to meet the Company's liabilities.
· The current portfolio
is low to medium risk based on assessments both individually and in
combination of liquidity risk, credit risk, interest rate risk and
currency risk. The Investment Manager and the Board review and
evaluate the portfolio on a monthly basis.
- Principal risks:
The Board's review considered the Company's cash
flows and income flows, with reference to operational, business,
market, currency, liquidity, interest rate and credit risk
associated in financial instruments set out in Note 3 (Financial
Instruments and Associated Risks) and Note 4 (Operating Segments)
of the financial statements on pages 59 to 62 .The statistical
modelling is used to quantify these risks, which ensures that the
Company holds sufficient financial assets and capital to mitigate
the impact of these risks.
- Incomes and
expenses:
· The Company has a
portfolio that generates investment income through dividends
payments. The cash dividends received can be used to partially
offset the Company's on-going expenses. In the year under review,
total on-going expenses were covered 0.78 times by investment
income. In the following year, the current investment income is
forecast to cover 0.75 times the amount of on-going expenses. In
the stress-tested scenario with significant declines in cash
dividends forecasted, the investment income is forecast to cover
0.66 times on-going expenses.
· The Company maintains a
cash buffer to help meet on-going expenses. At 30 June 2024 this
was 2.1% of NAV.
Given the adequate levels of cover set out above, the
cash buffer, the liquidity levels and the overall portfolio risk,
the Board has reasonable expectations that the Company can continue
in operation and meet its liabilities over the forecast period.
The Company's viability depends on the global economy
and markets continuing to function. The Board has also considered
the possibility of a wide-ranging collapse in corporate earnings
and/or the market value of listed securities. To the latter point,
it should be borne in mind that a significant proportion of the
Company's expenses are in investment management fees linked to the
level of net assets of the Company, which are therefore variable in
nature and would naturally reduce if the market value of the
Company's assets were to fall.
In order to maintain viability, the Company has
robust risk controls as set out in the Directors' Report and the
risk management and control framework have the objectives of
monitoring and reducing the likelihood and impact of operational
risks including poor judgement in decision-making, risk-taking that
exceeds the levels agreed by the Board, human error, or control
processes being deliberately ignored.
In this context, the Board considers that the
prospects for economic activity will remain such that the
investment objective, policy and strategy of the Company will be
viable for the foreseeable future and through a period of at least
three years from 30 June 2024.
Key Performance Indicators
("KPIS")
To ensure the Company meets its objectives the Board
evaluates the performance of the Investment Manager at least at
each quarterly Board meeting and takes into the following
performance indicators:
● NAV - reviews the
performance of the portfolio
● Discount to NAV - and
reviews the average discount for the Company's share price against
its peer group.
Share Capital and Share
Buy-Backs
An active discount control mechanism to address the
imbalance between the supply of and demand for ordinary shares
using share buybacks is employed by the Broker and monitored by the
Board. At the Annual General Meeting ("AGM") of the Company held on
21 December 2023, the Company was granted the general authority to
purchase in the market up to 14.99% of the ordinary shares in
issue. This authority will expire at the AGM to be held in November
2024.
In the year ended 30 June 2024 440,212 ordinary
shares had been bought back and cancelled under the Company's share
buyback programme. Since the last AGM and up to 27 September 2024,
being the latest practicable date prior to publication of the
report, the Company bought back and cancelled 196,505 ordinary
shares.
Share Buy-Backs to the Year-Ended 30
June 2024
|
|
30 June
2024
|
|
30 June 2023
|
|
|
Number of
|
|
|
Number of
|
|
|
|
Shares
|
USD'000
|
|
Shares
|
USD'000
|
|
Opening balance at 1 July
|
27,725,104
|
(4,006)
|
|
29,225,667
|
935
|
|
Share issued during the year
|
-
|
-
|
|
-
|
-
|
|
Shares repurchased during the year
|
(440,212)
|
(1,631)
|
|
(1,500,563)
|
(4,941)
|
|
Tender Offer
|
-
|
-
|
|
-
|
-
|
|
Closing balance at 30 June
|
27,284,892
|
(5,637)
|
|
27,725,104
|
(4,006)
|
Substantial Share
Interests
The following shareholders owned 5% or more of the
shares in issue of the Company, as stated on the share register as
at 30 June 2024.
|
|
Number of
|
Percentage of total
|
|
Shareholder
|
ordinary shares
|
shares in issue
|
|
Lynchwood Nominees Limited
|
5,618,653
|
20.59
|
|
Citibank Nominees (Ireland) Designated Activity
Company
|
5,060,667
|
18.55
|
|
Vidacos Nominees Limited
|
2,034,758
|
7.46
|
|
Hargreaves Lansdown (Nominees) Limited
|
1,729,256
|
6.34
|
|
Chase Nominees Limited
|
1,698,750
|
6.23
|
|
Interactive Investor Services Nominees Limited
|
1,548,506
|
5.68
|
|
The Bank of New York (Nominees) Limited
|
1,524,001
|
5.59
|
|
Euroclear Nominees Limited
|
1,509,967
|
5.53
|
Notification of
Shareholdings
In the year to 30 June 2024 the Company received
notifications in accordance with Chapter 5 of the DTR (which covers
the acquisition and disposal of major shareholdings and voting
rights), of the following changes to voting rights by shareholders
of the Company. It should be noted that for non-UK issuers, the
thresholds prescribed under DTR 5.1.2 for notification of holdings
commence at 5% of total voting rights, however notifications
received below 5% have been received and are included in this
reporting.
|
Shareholder
|
Number of
voting rights
|
Percentage of total
voting rights as at
announcement date
|
Announcement date
|
|
City of London Investment Management Company
Limited
|
1,347,816
|
4.9
|
6 March 2024
|
Since 30 June 2024 the Company has not received any
DTR 5.1.2 notifications of holdings.
Statement of Directors' Responsibilities in
Respect of the Annual Report and the Financial Statements
The Directors are responsible for preparing the
Annual Report and Financial Statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare
financial statements for each financial year. Under that law they
are required to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted by the EU
and applicable law. Under company law the Directors must not
approve the financial statements unless they are satisfied that
they give a true and fair view of the state of affairs of the
Company and of its profit or loss for that period.
In preparing these financial statements, the
Directors are required to:
● select suitable accounting
policies and then apply them consistently;
● make judgements and
estimates that are reasonable, relevant and reliable;
● state whether applicable accounting standards
have been followed, subject to any material departures disclosed
and explained in the financial statements;
● assess the Company's ability to continue as
a going concern, disclosing, as applicable, matters related to
going concern; and
● use the going concern basis of accounting
unless they either intend to liquidate the Company or to cease
operations or have no realistic alternative but to do so.
The Directors are responsible for keeping proper
accounting records that are sufficient to show and explain the
Company's transactions and disclose with reasonable accuracy at any
time the financial position of the Company and enable them to
ensure that its financial statements comply with the Companies
(Guernsey) Law, 2008. They are responsible for such internal
control as they determine is necessary to enable the preparation of
financial statements that are free from material misstatement,
whether due to fraud or error, and have general responsibility for
taking such steps as are reasonably open to them to safeguard the
assets of the Company and to prevent and detect fraud and other
irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included on
the Company's website. Legislation in Guernsey governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
The Directors who hold office at the date of approval
of this Director's Report confirm that so far as they are aware,
there is no relevant audit information of which the Company's
auditor is unaware, and that each Director has taken all the steps
he ought to have taken as a Director to make themselves aware of
any relevant audit information and to establish that the Company's
auditor is aware of that information.
Compliance with Disclosure and
Transparency Directive
We confirm that to the best of our knowledge:
● the financial statements,
prepared in accordance with the International Financial Reporting
Standards as adopted by the EU ("IFRS"), give a true and fair view
of the assets, liabilities, financial position and profit or loss
of the Company; and
● the Directors' Report
includes a fair review of the development and performance of the
business and the position of the issuer, together with a
description of the principal risks and uncertainties that they
face.
We consider the Annual Report and Financial
Statements taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Company's position and performance, business model and
strategy.
For and on behalf of the Board
Hiroshi Funaki
Chairman
1 October 2024
Independent Auditor's Report to the Members of
VietNam Holding Limited
Our opinion is unmodified
We have audited the financial statements of
VietNam Holding Limited (the "Company"), which comprise the
statement of financial position as at 30 June 2024, the
statements of comprehensive income, changes in equity and cash
flows for the year then ended, and notes, comprising material
accounting policies and other explanatory information.
In our opinion, the accompanying financial
statements:
· give a true and fair
view of the financial position of the Company as at 30 June 2024,
and of the Company's financial performance and cash flows for
the year then ended;
· are prepared in
accordance with International Financial Reporting Standards as
adopted by the EU ("IFRS"); and
· comply with the
Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK) ("ISAs (UK)") and
applicable law. Our responsibilities are described below. We have
fulfilled our ethical responsibilities under, and are independent
of the Company in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to public interest
entities. We believe that the audit evidence we have obtained is a
sufficient and appropriate basis for our opinion.
Key audit matters: our assessment of
the risks of material misstatement
Key audit matters are those matters that, in our
professional judgment, were of most significance in the audit of
the financial statements and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) identified by us, including those which had the greatest
effect on: the overall audit strategy; the allocation of resources
in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these
matters. In arriving at our audit opinion above, the key
audit matter was as follows (unchanged from 2023):
|
|
The risk
|
Our response
|
|
|
|
|
|
Valuation of Investments in
securities at fair value
$134,971,131; (2022:
$113,225,102)
Refer to page 38 of the Audit and Risk Committee
Report, note 2d accounting policies and note 12 disclosures.
|
Basis:
The Company's investment portfolio consists of listed
equity securities trading on the Vietnamese stock exchange (the
"Investments"). These Investments, carried at a fair value, are
valued by the Company based on quoted prices in an active market
for that instrument.
Risk:
The valuation of investments, due to their magnitude
in the context of the financial statement as a whole, is considered
to be the area which has the greatest effect on our overall audit
strategy and allocation of resources in planning and completing our
audit.
|
Our audit procedures
included:
Internal
Controls:
We evaluated the design and
implementation of the key control over the valuation of
Investments.
Use of KPMG Specialists:
We engaged our own valuation
specialist to independently price 100% of Investments to third
party pricing sources.
Assessing
disclosures:
We considered the Company's disclosures (see notes 2b
and 2d) in relation to the use of estimates and judgements
regarding the valuation of investments and the Company's investment
valuation policies and fair value disclosures in note 12 "Fair
Value Information" for compliance with IFRS.
|
Our application of
materiality and an overview of the scope of our audit
Materiality for the financial statements as a
whole was set at $2,650,000, determined with reference to a
benchmark of net assets of $140,151,385 of which it
represents approximately 2.0% (2023: 2.0%).
In line with our audit methodology, our procedures on
individual account balances and disclosures were performed to a
lower threshold, performance materiality, so as to reduce to an
acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material
amount across the financial statements as a whole. Performance
materiality for the Company was set at 75% (2023: 75%) of
materiality for the financial statements as a whole, which equates
to $1,980,000. We applied this percentage in our determination of
performance materiality because we did not identify any factors
indicating an elevated level of risk.
We reported to the Audit Committee any corrected or
uncorrected identified misstatements exceeding $132,500, in
addition to other identified misstatements that warranted reporting
on qualitative grounds.
Our audit of the Company was undertaken to the
materiality level specified above, which has informed our
identification of significant risks of material misstatement and
the associated audit procedures performed in those areas as
detailed above.
Going concern
The directors have prepared the financial statements
on the going concern basis as they do not intend to liquidate the
Company or to cease its operations, and as they have concluded that
the Company's financial position means that this is realistic. They
have also concluded that there are no material uncertainties that
could have cast significant doubt over its ability to continue as a
going concern for at least a year from the date of approval of the
financial statements (the "going concern period").
In our evaluation of the directors' conclusions, we
considered the inherent risks to the Company's business model and
analysed how those risks might affect the Company's financial
resources or ability to continue operations over the going concern
period. The risks that we considered most likely to affect the
Company's financial resources or ability to continue operations
over this period was availability of capital to meet operating
costs and other financial commitments.
We considered whether these risks could plausibly
affect the liquidity going concern period by comparing severe, but
plausible downside scenarios that could arise from these risks
individually and collectively against the level of available
financial resources indicated by the Company's financial
forecasts.
We considered whether the disclosure in note 2(b) to
the financial statements gives a full and accurate description of
the directors' assessment of going concern.
Our conclusions based on this work:
· we consider that
the directors' use of the going concern basis of accounting in the
preparation of the financial statements is appropriate;
· we have not
identified, and concur with the directors' assessment that there is
not, a material uncertainty related to events or conditions that,
individually or collectively, may cast significant doubt on the
Company's ability to continue as a going concern for the going
concern period; and
· we have nothing
material to add or draw attention to in relation to the directors'
statement in the notes to the financial statements on the use of
the going concern basis of accounting with no material
uncertainties that may cast significant doubt over the Company's
use of that basis for the going concern period, and that statement
is materially consistent with the financial statements and our
audit knowledge.
However, as we cannot predict all future events or
conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they
were made, the above conclusions are not a guarantee that the
Company will continue in operation.
Fraud and breaches of laws and
regulations - ability to detect
Identifying and responding to risks of material
misstatement due to fraud
To identify risks of material misstatement due to
fraud ("fraud risks") we assessed events or conditions that could
indicate an incentive or pressure to commit fraud or provide an
opportunity to commit fraud. Our risk assessment procedures
included:
· enquiring of management
as to the Company's policies and procedures to prevent and detect
fraud as well as enquiring whether management have knowledge of any
actual, suspected or alleged fraud;
· reading minutes of
meetings of those charged with governance; and
· using analytical
procedures to identify any unusual or unexpected relationships.
As required by auditing standards, we perform
procedures to address the risk of management override of controls,
in particular the risk that management may be in a position to make
inappropriate accounting entries. On this audit we do not believe
there is a fraud risk related to revenue recognition because the
Company's revenue streams are simple in nature with respect to
accounting policy choice, and are easily verifiable to external
data sources or agreements with little or no requirement for
estimation from management. We did not identify any additional
fraud risks.
We performed procedures including
· Identifying journal
entries and other adjustments to test based on risk criteria and
comparing any identified entries to supporting documentation;
and
· incorporating an
element of unpredictability in our audit procedures.
Identifying and responding to risks of material
misstatement due to non-compliance with laws and regulations
We identified areas of laws and regulations that
could reasonably be expected to have a material effect on the
financial statements from our sector experience and through
discussion with management (as required by auditing standards), and
from inspection of the Company's regulatory and legal
correspondence, if any, and discussed with management the policies
and procedures regarding compliance with laws and regulations. As
the Company is regulated, our assessment of risks involved gaining
an understanding of the control environment including the entity's
procedures for complying with regulatory requirements.
The Company is subject to laws and regulations that
directly affect the financial statements including financial
reporting legislation and taxation legislation and we assessed the
extent of compliance with these laws and regulations as part of our
procedures on the related financial statement items.
The Company is subject to other laws and regulations
where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for
instance through the imposition of fines or litigation or impacts
on the Company's ability to operate. We identified financial
services regulation as being the area most likely to have such an
effect, recognising the regulated nature of the Company's
activities and its legal form. Auditing standards limit the
required audit procedures to identify non-compliance with these
laws and regulations to enquiry of management and inspection of
regulatory and legal correspondence, if any. Therefore, if a breach
of operational regulations is not disclosed to us or evident from
relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud
or breaches of law or regulation
Owing to the inherent limitations of an audit, there
is an unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have
properly planned and performed our audit in accordance with
auditing standards. For example, the further removed non-compliance
with laws and regulations is from the events and transactions
reflected in the financial statements, the less likely the
inherently limited procedures required by auditing standards would
identify it.
In addition, as with any audit, there remains a
higher risk of non-detection of fraud, as this may involve
collusion, forgery, intentional omissions, misrepresentations, or
the override of internal controls. Our audit procedures are
designed to detect material misstatement. We are not responsible
for preventing non-compliance or fraud and cannot be expected to
detect non-compliance with all laws and regulations.
Other information
The directors are responsible for the other
information. The other information comprises the information
included in the annual report but does not include the financial
statements and our auditor's report thereon. Our opinion on the
financial statements does not cover the other information and we do
not express an audit opinion or any form of assurance conclusion
thereon.
In connection with our audit of the financial
statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is
materially inconsistent with the financial statements, or our
knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing
to report in this regard.
Disclosures of emerging and
principal risks and longer term viability
We are required to perform procedures to identify
whether there is a material inconsistency between the directors'
disclosures in respect of emerging and principal risks and the
viability statement, and the financial statements and our
audit knowledge. we have nothing material to add or draw attention
to in relation to:
· the directors'
confirmation within the Viability Statement (page 41 - 42) that
they have carried out a robust assessment of the emerging and
principal risks facing the Company, including those that would
threaten its business model, future performance, solvency or
liquidity;
· the emerging and
principal risks disclosures describing these risks and explaining
how they are being managed or mitigated;
· the directors'
explanation in the Viability Statement (page 41 - 42) as to how
they have assessed the prospects of the Company, over what period
they have done so and why they consider that period to be
appropriate, and their statement as to whether they have a
reasonable expectation that the Company will be able to continue in
operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We are also required to review the Viability
Statement, set out on page 41 - 42 under the Listing
Rules. Based on the above procedures, we have concluded that
the above disclosures are materially consistent with the financial
statements and our audit knowledge.
Corporate governance
disclosures
We are required to perform procedures to identify
whether there is a material inconsistency between the directors'
corporate governance disclosures and the financial statements and
our audit knowledge.
Based on those procedures, we have concluded that
each of the following is materially consistent with the financial
statements and our audit knowledge:
· the directors'
statement that they consider that the annual report and financial
statements taken as a whole is fair, balanced and understandable,
and provides the information necessary for shareholders to assess
the Company's position and performance, business model and
strategy;
· the section of the
annual report describing the work of the Audit Committee, including
the significant issues that the audit committee considered in
relation to the financial statements, and how these issues were
addressed; and
· the section of
the annual report that describes the review of the effectiveness of
the Company's risk management and internal control systems.
We are required to review the part of Corporate
Governance Statement relating to the Company's compliance with
the provisions of the UK Corporate Governance Code specified by the
Listing Rules for our review. We have nothing to report in this
respect.
We have nothing to
report on other matters on which we are required to report by
exception
We have nothing to report in respect of the following
matters where the Companies (Guernsey) Law, 2008 requires us to
report to you if, in our opinion:
· the Company has not
kept proper accounting records; or
· the financial
statements are not in agreement with the accounting records; or
· we have
not received all the information and explanations, which to the
best of our knowledge and belief are necessary for the purpose of
our audit.
Respective
responsibilities
Directors' responsibilities
As explained more fully in their statement set out on
page 44, the directors are responsible for: the preparation of
the financial statements including being satisfied that they
give a true and fair view; such internal control as they determine
is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or
error; assessing the Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going
concern; and using the going concern basis of accounting unless
they either intend to liquidate the Company or to cease operations,
or have no realistic alternative but to do so.
Auditor's responsibilities
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to
issue our opinion in an auditor's report. Reasonable assurance is a
high level of assurance but does not guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial
statements.
A fuller description of our responsibilities is
provided on the FRC's website at www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and
restrictions on its use by persons other than the Company's members
as a body
This report is made solely to the Company's members,
as a body, in accordance with section 262 of the Companies
(Guernsey) Law, 2008. Our audit work has been undertaken so
that we might state to the Company's members those matters we
are required to state to them in an auditor's report and for no
other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the
Company and the Company's members, as a body, for our audit
work, for this report, or for the opinions we have formed.
Andrew J.
Salisbury
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised
Auditors
Guernsey
1 October 2024
Statement of Financial Position
As at 30 June 2024
|
|
|
2024
|
2023
|
|
|
Notes
|
USD
|
USD
|
|
Assets
|
|
|
|
|
Non-current assets
|
|
|
|
|
Investments at fair value through profit or loss
|
3
|
134,971,131
|
113,225,102
|
|
Total non-current assets
|
|
134,971,131
|
113,225,102
|
|
Current assets
|
|
|
|
|
Cash and cash equivalents
|
|
2,894,425
|
1,750,069
|
|
Accrued dividends and interest
|
|
73,797
|
877,375
|
|
Receivables on sale of investments
|
|
2,451,845
|
338,591
|
|
Total current assets
|
|
5,420,067
|
2,966,035
|
|
Total assets
|
|
140,391,198
|
116,191,137
|
|
Equity
|
|
|
|
|
Share capital
|
5
|
166,645,041
|
166,645,041
|
|
Reserve for own shares
|
5
|
(172,281,084)
|
(170,650,584)
|
|
Retained earnings
|
|
145,787,428
|
119,264,820
|
|
Total equity
|
|
140,151,385
|
115,259,277
|
|
Liabilities
|
|
|
|
|
Payables on purchase of investments
|
|
-
|
343,745
|
|
Payables on repurchase of shares
|
|
-
|
246,469
|
|
Accrued expenses
|
|
239,813
|
341,646
|
|
Total liabilities
|
|
239,813
|
931,860
|
|
Total equity and
liabilities
|
|
140,391,198
|
116,191,137
|
The financial statements on pages 50 to 66 were
approved by the Board of Directors on 1 October 2024 and were
signed on its behalf by
Hiroshi
Funaki
Philip
Scales
Chairman of the Board of
Directors
Chairman
of the Audit and Risk Committee
The accompanying notes on pages 54 to 66 form an
integral part of these financial statements.
Statement of Comprehensive Income
For the year ended 30 June
2024
|
|
|
2024
|
2023
|
|
|
Notes
|
USD
|
USD
|
|
Dividend income from equity securities at fair value
through profit or loss
|
|
2,949,474
|
1,684,306
|
|
Net gain/(loss) from investments at fair value
through profit or loss
|
7
|
28,035,973
|
(6,494,742)
|
|
Net foreign exchange loss
|
|
(277,039)
|
(369,559)
|
|
Total operating
income/(loss)
|
|
30,708,408
|
(5,179,995)
|
|
Investment management fees
|
8
|
2,237,255
|
1,936,485
|
|
Advisory fees
|
|
81,744
|
22,846
|
|
Directors' fees and expenses
|
8
|
362,837
|
417,177
|
|
Custodian fees
|
9
|
127,617
|
101,674
|
|
Administrative and accounting fees
|
10
|
214,218
|
201,614
|
|
Audit fees
|
|
7,769
|
75,153
|
|
Other expenses
|
|
1,154,360
|
687,145
|
|
Total operating expenses
|
|
4,185,800
|
3,442,094
|
|
Profit/(Loss) for the
year
|
|
26,522,608
|
(8,622,089)
|
|
Other comprehensive
income
|
|
-
|
-
|
|
Total comprehensive income/(loss)
for the year
|
|
26,522,608
|
(8,622,089)
|
|
Basic and diluted income/(loss) per share
|
14
|
0.97
|
(0.30)
|
The accompanying notes on pages 54 to 66 form an
integral part of these financial statements.
Statement of Changes in Equity
For the year ended 30 June
2024
|
|
|
Reserve for
|
Retained
|
|
|
|
Share capital
|
own shares
|
earnings
|
Total
|
|
|
USD
|
USD
|
USD
|
USD
|
|
Balance at 1 July 2022
|
166,645,041
|
(165,709,783)
|
127,886,909
|
128,822,167
|
|
Total comprehensive loss for the
year
|
|
|
|
|
|
Change in net assets attributable to shareholders
|
-
|
-
|
(8,622,089)
|
(8,622,089)
|
|
Total comprehensive loss for the
year
|
-
|
-
|
(8,622,089)
|
(8,622,089)
|
|
Transactions in shares
|
|
|
|
|
|
Repurchase of own shares
|
-
|
(4,940,801)
|
-
|
(4,940,801)
|
|
Total transactions in
shares
|
-
|
(4,940,801)
|
-
|
(4,940,801)
|
|
Balance at 30 June 2023
|
166,645,041
|
(170,650,584)
|
119,264,820
|
115,259,277
|
|
Balance at 1 July 2023
|
166,645,041
|
(170,650,584)
|
119,264,820
|
115,259,277
|
|
Total comprehensive income for the
year
|
|
|
|
|
|
Change in net assets attributable to shareholders
|
-
|
-
|
26,522,608
|
26,522,608
|
|
Total comprehensive income for the
year
|
-
|
-
|
26,522,608
|
26,522,608
|
|
Transactions in shares
|
|
|
|
|
|
Repurchase of own shares
|
-
|
(1,630,500)
|
-
|
(1,630,500)
|
|
Total transactions in
shares
|
-
|
(1,630,500)
|
-
|
(1,630,500)
|
|
Balance at 30 June 2024
|
166,645,041
|
(172,281,084)
|
145,787,428
|
140,151,385
|
The accompanying notes on pages 54 to 66 form an
integral part of these financial statements.
Statement of Cash Flows
For the year ended 30 June
2024
|
|
|
2024
|
2023
|
|
|
Notes
|
USD
|
USD
|
|
Cash flows from operating
activities
|
|
|
|
|
Total comprehensive income/(loss) for the year
|
|
26,522,608
|
(8,622,089)
|
|
Adjustments to reconcile total
comprehensive income/(loss) to net cash from operating
activities:
|
|
|
|
|
Dividend income
|
|
(2,949,474)
|
(1,684,306)
|
|
Net (gain)/loss from investments at fair value
through profit or loss
|
7
|
(28,035,973)
|
6,494,742
|
|
Net foreign exchange loss
|
|
277,039
|
369,559
|
|
Purchase of investments
|
|
(65,175,759)
|
(50,826,239)
|
|
Proceeds from sale of investments
|
|
69,503,097
|
52,069,545
|
|
Changes in working
capital
|
|
|
|
|
Decrease in accrued expenses
|
|
(101,833)
|
(13,636)
|
|
Dividends received
|
|
3,258,659
|
849,559
|
|
Interest received
|
|
-
|
16,144
|
|
Net cash from/(used in) operating
activities
|
|
3,298,364
|
(1,346,721)
|
|
Cash flows used in financing
activities
|
|
|
|
|
Repurchase of own shares
|
|
(1,876,969)
|
(4,694,332)
|
|
Net cash used in financing
activities
|
|
(1,876,969)
|
(4,694,332)
|
|
Net increase/(decrease) in cash and
cash equivalents
|
|
1,421,395
|
(6,041,053)
|
|
Cash and cash equivalents at beginning of the
year
|
|
1,750,069
|
8,160,681
|
|
Effect of exchange rate fluctuations on cash held
|
|
(277,039)
|
(369,559)
|
|
Cash and cash equivalents at end of
the year
|
|
2,894,425
|
1,750,069
|
The accompanying notes on pages 54 to 66 form an
integral part of these financial statements.
Notes to the Financial Statements
For the year ended 30 June
2024
1 The Company
VietNam Holding Limited (the "Company") is a
closed-end investment company that was incorporated in the Cayman
Islands on 20 April 2006 as an exempted company with limited
liability under registration number 166182. On 25 February 2019,
the Company, via a process of cross-border continuance, transferred
its legal domicile from the Cayman Islands to Guernsey and was
registered as a closed-ended company limited by shares incorporated
in Guernsey with registered number 66090.
On 8 March 2019 the Company's ordinary shares were
cancelled from trading on AIM and admitted to the Main Market
(previously the Premium Segment of the Official List),and trading
on the Main Market of the London Stock Exchange ("Main Market"). On
the same date the Company's shares were admitted to listing and
trading on the Official List of The International Stock Exchange
("TISE").
The investment objective of the Company is to achieve
long-term capital appreciation by investing in a diversified
portfolio of companies that have high growth potential at an
attractive valuation.
At the Extraordinary General Meeting held on 21
December 2023 the Shareholders voted in favour of the continuance
resolution, authorising the Company to operate in its current form
through to the 2028 Annual General Meeting when a similar
resolution will be put forward for Shareholders' approval.
Dynam Capital, Ltd has been appointed as the
Company's Investment Manager and is responsible for the day-to-day
management of the Company's investment portfolio in accordance with
the Company's investment policies, objectives and restrictions.
Sanne Group (Guernsey) Limited is the Company's
administrator.
Standard Chartered Bank (Singapore) Limited and
Standard Chartered Bank (Vietnam) Limited are the custodian and the
sub-custodian respectively. Standard Chartered Bank (Singapore)
Limited is also the sub-administrator.
The registered office of the Company is 1 Royal
Plaza, Royal Avenue, St Peter Port, Guernsey, GY1 2HL.
2 Material Accounting
Policies
(a) Statement of compliance
These financial statements, which give a true and
fair view, have been prepared in accordance with the International
Financial Reporting Standards ("IFRSs") as adopted by the European
Union and comply with the Companies (Guernsey) Law, 2008.
(b) Basis of preparation
The financial statements are presented in United
States dollars ("USD"), which is the Company's functional currency.
The financial statements have been prepared on a going concern
basis, applying the historical cost convention, except for the
measurement of investments at fair value through profit or
loss.
Going concern
The Directors have reasonable expectations and are
satisfied that the Company has adequate resources to continue its
operations and meet its commitments for the foreseeable future and
they continue to adopt the going concern basis for the preparation
of the financial statements. In making this statement, the
Directors confirm the Company's forecasts and projections have been
stress tested taking into account the potential for (i) asset value
declines, (ii) declines in cash dividends from equities held in the
portfolio and (iii) share buybacks and tender offers. The Directors
note that the underlying liquidity of Vietnamese stocks has
continued to improve during the year. The Director's also
note that the portfolio is composed of a higher percentage of
larger and more liquid stocks. Lastly, the Directors note that at
year-end the portfolio is comprised of cash and quoted stocks only.
The Company's liquidity position, taking into account cash held and
with the ability to sell underlying assets to meet share buybacks,
tenders and to meet the operating costs of the Company, shows that
the Company is able to operate with appropriate liquidity and be
able to meet its liabilities as they fall due. At the Annual
General Meeting and Extraordinary General meeting held on 21
December 2023, shareholders voted in favour of the Company
continuing for a further five years as well as the introduction of
an annual Redemption Facility. The first Redemption Date was 30
September 2024.
On 1 October, the Company announced a total of
3,406,598 ordinary shares were validly tendered for redemption and
will be redeemed under the 2024 redemption opportunity. These
ordinary shares represent approximately 12.6% of the ordinary
shares in issue as at 31 August 2024. The Board resolved that the
redemption price will be based on VNH's official net asset value
per share as at 30 September 2024 and it is anticipated that
payments will be made to redeeming shareholders by the end of
October 2024. The portfolio liquidity remains relatively high, and
the investment manager does not anticipate any difficulty in
raising the cash required. Therefore, the Board is confident that
the redemption facility will not cause any material uncertainty
over the going concern of the Company.
The Directors have a reasonable expectation that the
Company will have adequate resources to continue its operations for
the foreseeable future. Thus, they continue to adopt the going
concern basis of accounting in preparing the financial
statements.
Critical accounting estimates and
judgements
The preparation of financial statements in accordance
with IFRS as adopted by the European Union requires management to
make judgements, estimates and assumptions that affect the
application of policies and the reported amounts of assets and
liabilities, income and expenses.
Information about judgements made in applying
accounting policies that have the most significant effects on the
amounts recognised in the financial statements are included
below:
Functional currency
The Company's shares were issued in USD and the
listing of the shares on the Main Market and TISE is in USD. The
performance of the Company is measured and reported to the
investors in USD, although the primary activity of the Company is
to invest in the Vietnamese market. The Board considers the USD as
the currency that most faithfully represents the economic effects
of the underlying transactions, events and conditions.
(c) Foreign currency translation
Transactions in foreign currencies are translated
into USD at the applicable rates on the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies
are re-translated to USD at the applicable rates on the year-end
date. Foreign currency exchange differences relating to investments
at fair value through profit or loss are included in the realised
and unrealised gains and losses on those investments within "Net
gain/(loss) from investments at fair value through profit or loss"
on the Statement of Comprehensive Income. All other foreign
currency exchange differences relating to other monetary items,
including cash and cash equivalents, are included in net foreign
exchange gains and losses in the Statement of Comprehensive
Income.
(d) Financial instruments
A financial instrument is any contract that gives
rise to a financial asset of one entity and a financial liability
or equity instrument of another entity.
(i) Classification
In accordance with IFRS 9, the Company classifies its
financial assets and financial liabilities at initial recognition
into the categories of financial assets and financial liabilities
discussed below.
Financial assets
The Company classifies its financial assets as
subsequently measured at amortised cost or measured at fair value
through profit or loss on the basis of both:
● The entity's business model
for managing the financial assets
● The contractual cash flow
characteristics of the financial assets
Financial assets measured at
amortised cost
A financial asset is measured at amortised cost if it
is held within a business model whose objective is to hold
financial assets in order to collect contractual cash flows and its
contractual terms give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal
amount outstanding. The Company includes in this category accrued
income, accrued dividends and interest, cash and cash equivalents
and receivables on sale of investments.
Financial assets measured at fair
value through profit or loss ("FVTPL")
A financial asset is measured at fair value through
profit or loss if:
a) Its contractual terms do not
give rise to cash flows on specified dates that are solely payments
of principal and interest (SPPI) on the principal amount
outstanding; or
b) It is not held within a business
model whose objective is either to collect contractual cash flows,
or to both collect contractual cash flows and sell; or
c) At initial recognition, it
is irrevocably designated as measured at FVTPL when doing so
eliminates or significantly reduces a measurement or recognition
inconsistency that would otherwise arise from measuring assets or
liabilities or recognising the gains and losses on them on
different bases.
The Company measures all its investments at
FVTPL.
Financial
liabilities -- Classification, subsequent measurement and gains and
losses
Financial liabilities are classified as measured at
amortised cost or FVTPL.
A financial liability is classified as at FVTPL if it
is classified as held-for-trading, it is a derivative or it is
designated as such on initial recognition. Financial liabilities at
FVTPL are measured at fair value and net gains and losses,
including any interest expense, are recognised in profit and
loss.Other financial liabilities are subsequently measured at
amortised cost using the effective interest method. Interest
expense and foreign exchange gains and losses are recognised in
profit or loss. Any gain or loss on derecognition is also
recognised in profit and loss.
Financial
liabilities measured at amortised cost
Other financial liabilities are measured at amortised
cost. The Company includes in this category trade and other
payables.
(ii) Recognition and initial
measurement
Financial assets and liabilities at fair value
through profit or loss are recognised initially on the trade date,
which is the date that the Company becomes a party to the
contractual provisions of the instrument. Other financial assets
and liabilities are recognised on the date they are originated.
Financial assets and financial liabilities at fair
value through profit or loss are recognised initially at fair
value, with transaction costs recognised in the Statement of
Comprehensive Income. Financial assets or financial liabilities not
at fair value through profit or loss are recognised initially at
fair value plus transaction costs that are directly attributable to
their acquisition or issue.
(iii) Subsequent
measurement
After initial measurement, the Company measures
financial instruments which are classified as FVTPL at fair value.
Subsequent changes in the fair value of those financial instruments
are recorded in net gain or loss on financial assets and
liabilities at FVTPL in the Statement of Comprehensive Income.
Interest and dividends earned or paid on these instruments are
recorded separately in interest income or expense and dividend
income in the Statement of Comprehensive Income.
(iv) Derecognition
A financial asset is derecognised when the Company no
longer has control over the contractual rights that comprise that
asset. This occurs when the rights are realised, expire or are
surrendered.
(iv) Derecognition
Financial assets that are sold are derecognised, and
the corresponding receivables from the buyer for the payment are
recognised on the trade date, being the date the Company commits to
sell the assets.
A financial liability is derecognised when the
obligation specified in the contract is discharged, cancelled or
expired.
(v) Fair value
measurement
'Fair value' is the price that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date in
the principal or, in its absence, the most advantageous market to
which the Company has access at that date. The fair value of a
liability reflects its non-performance risk.
When available, the Company measures the fair value
of an instrument using the quoted price in an active market for
that instrument. A market is regarded as 'active' if transactions
for the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis. The
Company measures instruments quoted in an active market at the last
traded price.
If there is no quoted price in an active market, then
the Company uses valuation techniques that maximise the use of
relevant observable inputs and minimise the use of unobservable
inputs. The chosen valuation technique incorporates all of the
factors that market participants would consider in pricing a
transaction.
The Company recognises transfers between levels of
the fair value hierarchy as at the end of the reporting period
during which the change has occurred.
Any increases or decreases in fair value are
recognised in the Statement of Comprehensive Income as an
unrealised gain or loss from investments at FVTPL.
(vi) Impairment of financial
assets
At each reporting date, the Company measures the loss
allowance on financial assets carried at amortised cost at an
amount equal to the lifetime expected credit losses if the credit
risk has increased significantly since initial recognition. If, at
the reporting date, the credit risk has not increased significantly
since initial recognition, the Company measures the loss allowance
at an amount equal to 12-month expected credit losses. The expected
credit losses are estimated using a provision matrix based on the
Company's historical credit loss experience adjusted for factors
that are specific to the accounts receivables, general economic
conditions and an assessment of both the current as well as the
forecast direction of conditions at the reporting date, including
time value of money where appropriate. The measurement of expected
credit losses is a function of the probability of default, loss
given default (i.e. the magnitude of the loss if there is a
default) and exposure at the default. The assessment of the
probability of default and loss given default is based on
historical data adjusted by forward-looking information.
(vii) Cash and cash
equivalents
Cash comprises current deposits with banks. Cash
equivalents are short-term highly liquid investments that are
readily convertible to known amounts of cash, are subject to an
insignificant risk of changes in value and are held for the purpose
of meeting short-term cash commitments rather than for investment
or other purposes.
(e) Offsetting
Financial assets and liabilities are offset, and the
net amount is reported in the Statement of Financial Position when,
and only when, the Company has a legally enforceable right to set
off the recognised amounts and the transactions are intended to be
settled on a net basis or simultaneously, e.g. through a market
clearing mechanism.
(f) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issue of ordinary shares are
recognised as a deduction from equity, net of any tax effects.
Repurchase, disposal and reissue of
share capital (treasury shares)
Where the Company purchases its own share capital,
the consideration paid, which includes any directly attributable
costs, is recognised as a deduction from equity shareholders' funds
through the Company's reserves for own shares. The reserves for own
shares represents share capital which can be reissued in the future
or subsequently cancelled. When such shares are subsequently sold
or re-issued to the market any consideration received, net of any
directly attributable incremental transaction costs, is recognised
as an increase in equity shareholders' funds through the reserve of
own shares account. The Directors have cancelled all the shares
repurchased during the current and the previous year.
(g) Tax
Tax expense comprises current tax. Current tax is
recognised in the Statement of Comprehensive Income except to the
extent that it relates to items recognised directly in equity or in
other comprehensive income.
Current tax is the expected tax payable or receivable
on the taxable income or loss for the year, using tax rates enacted
or substantively enacted at the reporting date, and any adjustment
to tax payable in respect of previous years.
The Company is a tax resident in Guernsey and is
subject to the standard rate of 0% on taxable income.
The Company is liable to Vietnamese transactional tax
of 0.1% (2023: 0.1%) on the sales proceeds of the onshore sale of
equity investments. The related taxes on onshore sales proceeds are
accounted for at net amount in the Statement of Comprehensive
Income.
(h) Interest income and expense
Interest income and expense is recognised in the
Statement of Comprehensive Income using the effective rate method.
The effective interest rate method is a method of calculating the
amortised cost of a financial asset or financial liability and of
allocating the interest income or interest expense over the
relevant period. The effective interest rate is the rate that
exactly discounts estimated future cash payments or receipts
throughout the expected life of the financial instrument - or, when
appropriate, a shorter period - to the net carrying amount of the
financial asset or financial liability.
When calculating the effective interest rate, the
Directors estimate cash flows considering all contractual terms of
the financial instrument but do not consider future credit losses.
The calculation includes all fees and points paid or received
between parties to the contract that are an integral part of the
effective interest rate, transaction costs and all other premiums
or discounts.
(i) Dividend income
Dividend income is recognised in the Statement of
Comprehensive Income on the date on which the right to receive
payment is established. For listed equity securities, this is
usually the ex-dividend date. Dividend income from equity
securities designated as at fair value through profit or loss is
recognised in the Statement of Comprehensive Income as a separate
line item.
(j) Fee and commission expense
Fees and commission expenses are recognised in the
Statement of Comprehensive Income as the related services are
performed.
(k) Earnings per share
The Company presents basic and diluted earnings per
share data for its ordinary shares. Basic earnings per share is
calculated by dividing the profit or loss attributable to ordinary
shareholders of the Company by the weighted average number of
ordinary shares outstanding during the year, adjusted for own
shares held.
3 Financial Instruments and
Associated Risks
Financial assets of the Company include investments
at fair value through profit or loss, cash and cash equivalents,
receivables on sale of investments, and accrued dividends and
interest. Financial liabilities comprise payables on purchase of
investments, payables on repurchase of shares and accrued expenses.
Accounting policies for financial assets and liabilities are set
out in note 2.
The Company's investment activities expose it to
various types of risk that are associated with the financial
instruments and the markets in which it invests. The most important
types of financial risk to which the Company is exposed are market
risk (which includes price risk, currency risk, and interest rate
risk), credit risk and liquidity risk.
Asset allocation is determined by the Company's
Investment Manager who manages the distribution of the assets to
achieve the investment objectives. Divergence from target asset
allocations and the composition of the portfolio is monitored by
the Investment Manager.
Market risk
Market risk is the risk that the value of a financial
asset will fluctuate as a result of changes in market prices (e.g.
interest rates, foreign exchange rates, equity prices and credit
spreads) whether or not those changes are caused by factors
specific to the individual asset or factors affecting all assets in
the market. The Company is exposed to market risk within its
investments purchased in the Vietnamese market.
The overall market positions are monitored
continuously by the Investment Manager and at least quarterly by
the Board.
|
The Company's investments in securities are exposed
to market risk and are disclosed by the following generic
investment types:
|
2024
|
|
2023
|
|
|
Fair value
|
% of
|
|
Fair value
|
% of
|
|
|
in USD
|
net assets
|
|
in USD
|
net assets
|
|
Investments in listed securities
|
134,971,131
|
96.30
|
|
113,225,102
|
98.24
|
|
|
134,971,131
|
96.30
|
|
113,225,102
|
98.24
|
At 30 June 2024, a 5% reduction in the market value
of the portfolio would have led to a reduction in NAV and profit or
loss of USD 6,748,557 (2023: USD 5,661,255). A 5% increase in
market value would have led to an equal and opposite effect on NAV
and profit or loss.
Currency risk
The Company may invest in financial instruments and
enter into transactions denominated in currencies other than its
functional currency. Consequently, the Company is exposed to risks
that the exchange rate of its currency relative to other currencies
may change and have an adverse effect on the value of the Company's
financial assets or liabilities denominated in currencies other
than USD.
The Company's net assets are calculated every month
based on the most up to date exchange rates while the general
economic and foreign currency environment is continuously monitored
by the Investment Manager and reviewed by the Board at least once
each quarter.
The Company may enter into arrangements to hedge
currency risks if such arrangements become desirable and
practicable in the future in the interest of efficient portfolio
management.
As at 30 June 2024, the Company had the following
foreign currency exposures:
|
|
Fair
value
|
|
|
2024
|
2023
|
|
|
USD
|
USD
|
|
Vietnamese Dong
|
140,090,931
|
115,320,188
|
|
Pound Sterling
|
6,498
|
(231,119)
|
|
Swiss Franc
|
174
|
175
|
|
Euro
|
4,456
|
4,536
|
|
|
140,102,059
|
115,093,780
|
At 30 June 2024, a 5% reduction in the value of the
Vietnamese Dong, Pound Sterling, Swiss Franc, Euro versus the US
Dollar would have led to a reduction in NAV and profit or loss of
USD 7,004,547 (2023: USD 5,766,009), USD 325 (2023: USD 11,556),
USD 9 (2023: USD 9) and USD 223 (2023: USD 227) respectively. A 5%
increase in value would have led to an equal and opposite
effect.
Interest rate risk
Interest rate risk is the risk that the future cash
flows of a financial instrument will fluctuate because of changes
in market interest rates.
The majority of the Company's financial assets are
non-interest-bearing. Interest-bearing financial assets and
interest-bearing financial liabilities mature or reprice in the
short-term, no longer than twelve months. As a result, the Company
is subject to limited exposure to interest rate risk due to
fluctuations in the prevailing levels of market interest rates.
Credit risk
Credit risk is the risk that a counterparty to a
financial instrument will fail to discharge an obligation or
commitment that it has entered with the Company.
At 30 June 2024, the following financial assets were
exposed to credit risk (including settlement risk): cash and cash
equivalents, receivables on sale of investments and accrued
dividends and interest. The total amount of financial assets
exposed to credit risk amounted to USD 5,420,067 (2023: USD
2,966,035).
Substantially all the assets of the Company are held
by the Company's custodian, Standard Chartered Bank (Singapore)
Limited. Bankruptcy or insolvency of the custodian may cause the
Company's rights with respect to cash and securities held by the
custodian to be delayed or limited. The Company monitors its risk
by monitoring the credit quality and financial positions of the
custodian the Company uses.
As at 30 June 2024, the Company's custodian, Standard
Chartered Bank (Singapore) Limited, was rated as A+ by Standard and
Poor's, A1 by Moody's and A+ by Fitch (2023: A+ by Standard and
Poor's, A1 by Moody's and A+ by Fitch).
Financial assets subject to IFRS 9's
impairment requirements
The Company's financial assets subject to the
expected credit loss model within IFRS 9 are cash and cash
equivalents, and short-term receivables, including accrued
dividends and interest, and receivables on sale of investments. As
at 30 June 2024, the total of cash and cash equivalents, and
short-term receivables was USD 5,420,067 (2023: USD 2,966,035). The
Directors assessed the lifetime expected credit loss as at 30 June
2024 and concluded it to be immaterial (2023: loss immaterial).
There is not considered to be any concentration of credit risk
within these assets. No assets are considered impaired and no
amounts have been written off in the year.
All short-term receivables are expected to be
received in three months or less. An amount is considered to be in
default if it has not been received 30 days after it is due.
Liquidity risk
The Company, a closed-end investment company, invests
in companies through listings on the Vietnam stock exchanges. There
is no guarantee however that the Vietnam stock exchanges will
provide liquidity for the Company's investments.
The Company's overall liquidity risks are monitored
on at least a quarterly basis by the Board. The Company is a
closed-end investment company so Shareholders cannot repurchase
their shares directly from the Company.
The Board has considered that there may be periods of
time when parts of the portfolio are prone to higher liquidity
risk, but is satisfied overall that the fixed liabilities of the
Company can be met by income or from selling sufficient marketable
securities even at periods of higher illiquidity.
Payables on purchase of investments and accrued
expenses are generally payable within one year.
The table below summarises the maturity profile of
the Company's financial assets and liabilities based on contractual
undiscounted receipts and payments:
|
|
|
|
|
Over
|
|
|
|
|
|
0 to
|
1 to
|
3 months
|
No fixed
|
|
|
|
On demand
|
1 month
|
3 months
|
to 5 years
|
maturity
|
Total
|
|
|
USD
|
USD
|
USD
|
USD
|
USD
|
USD
|
|
2024
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
2,894,425
|
-
|
-
|
-
|
-
|
2,894,425
|
|
Investment at fair value through profit and loss
|
-
|
-
|
-
|
-
|
134,971,131
|
134,971,131
|
|
Accrued dividends and interest
|
-
|
-
|
73,797
|
-
|
-
|
73,797
|
|
Receivables on sale of investments
|
-
|
-
|
2,451,845
|
-
|
-
|
2,451,845
|
|
Total financial assets
|
2,894,425
|
-
|
2,525,642
|
-
|
134,971,131
|
140,391,198
|
|
Accrued expenses
|
-
|
-
|
239,813
|
-
|
-
|
239,813
|
|
Total financial
liabilities
|
-
|
-
|
239,813
|
-
|
-
|
239,813
|
|
2023
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
1,750,069
|
-
|
-
|
-
|
-
|
1,750,069
|
|
Investment at fair value through profit and loss
|
-
|
-
|
-
|
-
|
113,225,102
|
113,225,102
|
|
Accrued dividends and interest
|
-
|
-
|
877,375
|
-
|
-
|
877,375
|
|
Receivables on sale of investments
|
-
|
-
|
338,591
|
-
|
-
|
338,591
|
|
Total financial assets
|
1,750,069
|
-
|
1,215,966
|
-
|
113,225,102
|
116,191,137
|
|
Payables in purchase of
investments
|
-
|
-
|
343,745
|
-
|
-
|
343,745
|
|
Payables on repurchase of
shares
|
-
|
-
|
246,469
|
-
|
-
|
246,469
|
|
Accrued expenses
|
-
|
-
|
341,646
|
-
|
-
|
341,646
|
|
Total financial liabilities
|
-
|
-
|
931,860
|
-
|
-
|
931,860
|
4 Operating Segments
An operating segment is a component of the Company
that engages in business activities from which it may earn revenues
and incur expenses, including revenues and expenses that relate to
transactions with any of the Company's other components. The
Company is engaged in a single segment of business, being
investment in Vietnam. The Board, as a whole, has been determined
as constituting the chief operating decision maker of the Company.
The key measure of performance used by the Board to assess the
Company's performance and to allocate resources is the total return
on the Company's NAV calculated as per the prospectus.
Information on gains and losses derived from
investments are disclosed in the Statement of Comprehensive
Income.
The Company is domiciled in Guernsey, Channel
Islands. Entity wide disclosures are provided as the Company is
engaged in a single segment of business, investing in Vietnam. In
presenting information on the basis of geographical segments,
segment investments and the corresponding segment net investment
income arising thereon are determined based on the country of
domicile of the respective investment entities.
In line with the Company's investment policy, the
Company may invest:
● up to 25% of its NAV (at
the time of investment) in companies with shares traded outside of
Vietnam if a majority of their assets and/or operations are based
in Vietnam;
● up to 20% of its NAV (at
the time of investment) in direct private equity investments;
and
● up to 20% of its NAV (at
the time of investment) in other listed investment funds and
holding companies which have the majority of their assets in
Vietnam.
As of 30 June 2024, no individual investment exceeded
20% of the net assets attributable to Shareholders (2023:
none).
All of the Company's investments in securities at
fair value are in Vietnam as at 30 June 2024 and 30 June 2023. All
of the Company's investment income can be attributed to Vietnam for
the years ended 30 June 2024 and 30 June 2023.
5 Share Capital
Ordinary shares of USD 1
each
Pursuant to its redomiciliation to Guernsey, the
Company re-registered with an authorised share capital of USD
200,000,000 divided into 200,000,000 shares of a nominal or par
value of USD 1.00 each. In line with the Company's Articles of
Incorporation Amended and restated by special resolution on 21
December 2023, the Company may from time to time redeem all or any
portion of the shares held by the Shareholders on annual basis upon
giving notice of not less than 30 calendar days.
On 8 March 2019 the Company's ordinary shares were
cancelled from trading on AIM and admitted to the Main Market
(previously Premium segment of the Official List) and trading on
the Main Market of the London Stock Exchange ("Main Market"). On
the same date the Company's shares were admitted to listing and
trading on the TISE.
|
|
2024
|
2023
|
|
|
No. of shares
|
No. of shares
|
|
Total shares issued and fully paid (after repurchases
and cancellations) at beginning of the year
|
27,725,104
|
29,225,667
|
|
Shares issued upon exercise of warrants during the
year
|
-
|
-
|
|
Shares cancellation
|
(440,212)
|
(1,500,563)
|
|
|
27,284,892
|
27,725,104
|
|
Repurchased and reserved for own shares
|
|
|
|
At beginning of the year
|
-
|
-
|
|
During the year
|
(440,212)
|
(1,500,563)
|
|
Shares reissued to ordinary shares
|
-
|
-
|
|
Shares cancellation
|
440,212
|
1,500,563
|
|
Total outstanding ordinary shares
with voting rights
|
27,284,892
|
27,725,104
|
As a result, as at 30 June 2024 the Company has
27,284,892 (2023: 27,725,104) ordinary shares with voting rights in
issue (excluding the reserve for own shares), and nil (2023: nil)
are held as reserve for own shares.
Reserve for own shares
Reserve for own shares are the Company's own shares
which had been repurchased. The amount represents share capital
which can be reissued in the future or subsequently cancelled. All
reserves are available for distribution subject to a solvency
assessment.
During the year ended 30 June 2024 the Company
repurchased and cancelled 440,212 ordinary shares (2023: 1,500,563
ordinary shares) under the Company's share buyback programme
(representing 1.6% of the ordinary shares outstanding at 1 July
2023) at a weighted average NAV discount of -9.9%. This resulted in
a -0.16% accretion to NAV per share.
Holders of ordinary shares are entitled to attend,
speak and vote at general meetings of the Company. Each ordinary
share (excluding shares in treasury) earns one vote.
Capital Management
The Company does not have any externally imposed
capital requirements.
The Company's general intention is to reinvest the
capital received on the sale of investments. However, the Board may
from time to time and at its discretion, either use the proceeds of
sales of investments to meet the Company's expenses or distribute
them to Shareholders. Alternatively, the Company may repurchase its
own ordinary shares with such proceeds from Shareholders pro rata
to their shareholding upon giving notice of not less than 30
calendar days to Shareholders (subject always to applicable law) or
repurchase ordinary shares at a price not exceeding the last
published NAV per share.
6 Net Assets Attributable to
Shareholders
Total equity of USD 140,151,385 (2023: USD
115,259,277) represents net assets attributable to Shareholders.
NAV per share as at 30 June 2024 is USD 5.137 (2023: USD
4.157).
7 Net Gain/(Loss) from Investments
at Fair Value through Profit or Loss
|
|
2024
|
2023
|
|
|
USD
|
USD
|
|
Realised gain on disposal of investments
|
18,459,534
|
1,874,662
|
|
Realised foreign currency loss
|
(2,011,711)
|
(1,660,823)
|
|
Unrealised gain/(loss) on investments at fair value
through profit or loss
|
15,781,434
|
(7,200,804)
|
|
Unrealised foreign currency (loss)/gain
|
(4,193,284)
|
492,223
|
|
|
28,035,973
|
(6,494,742)
|
8 Related Party
Transactions
Investment management
fees
The Company entered into a new investment management
agreement with Dynam Capital, Ltd on 26 June 2018. The agreement
was amended and restated on 8 October 2018 and further amended and
restated on 1 October 2020. The Board and the Investment Manager
agreed to modify the management fee (previously on a sliding scale
of 1.5% per annum on NAV below USD 300 million, 1.25% per annum on
NAV between USD 300 - USD 600 million, and 1.0% per annum on NAV
above USD 600 million) effectively from 1 November 2020.
Pursuant to the agreement the Investment Manager is
entitled to receive a monthly management fee, paid in the manner
set out as below:
● On the amount of the Net
Asset Value of the Company up to but excluding USD 300 million,
one-twelfth of 1.75%;
● On the amount of the Net
Asset Value of the Company between and including USD 300 million up
to and including USD 600 million, one-twelfth of 1.5%; and
● On the amount of the Net
Asset Value of the Company that exceeds USD 600 million,
one-twelfth of 1%.
The management fee accruing to the Investment Manager
for the year ended 30 June 2024 was USD 2,237,255 (2023: USD
1,936,485). An amount of USD 203,206 (30 June 2023: USD 162,201)
was outstanding as at 30 June 2024.
Directors' fees and
expenses
The Board determines the fees payable to each
Director, subject to a maximum aggregate amount of USD 350,000
(2023: USD 350,000) per annum being paid to the Board as a whole.
The Company also pays reasonable expenses incurred by the Directors
in the conduct of the Company's business including travel and other
expenses. The Company pays for directors and officers liability
insurance coverage.
The charges for the year for the Directors' fees were
USD 257,622 (2023: USD 319,183) and expenses were USD 105,215
(2023: USD 97,994). The total Directors' fees and expenses for the
year were USD 362,837 (2023: USD 417,177).
As at 30 June 2024, USD nil (2023: nil) of Directors'
fees were outstanding.
Ownership of shares
As at 30 June 2024, Directors held 34,964 ordinary
shares in the Company (2023: 44,920) as listed below.
Hiroshi Funaki
19,887 Shares
Philip Scales 10,077 Shares
Saiko Tajima 5,000 Shares
Mr Funaki is also a Director of Discover Investment
Company which at 30 June 2024 held 1,415,776 ordinary shares in the
Company representing 5.2% of the issued share capital.
Mr Craig Martin, Chairman of the Investment Manager
holds 73,386 shares in the Company. During the year he purchased
6,300 shares.
9 Custodian Fees
Custodian fees are charged at a minimum of USD 12,000
(2023: USD 12,000) per annum and received as a fee at 0.08% on the
assets under administration ("AUA") per annum. Custodian fees
comprise safekeeping fees, transaction fees, money transfer fees
and other fees. Safekeeping of unlisted securities up to 20
securities is charged at USD 12,000 (2023: USD 12,000) per annum.
Transaction fees, money transfers fees and other fees are charged
on a transaction basis.
The charges for the year for the Custodian fees were
USD 127,617 (2023: USD 101,674), of which USD 11,780 (2023: USD
9,500) were outstanding at year end.
10 Administrative and Accounting
Fees
In accordance with the new Administration Agreement
between the Company and Sanne Group (Guernsey) Limited (the
"Administrator") dated 7 October 2019, the Administrator is
entitled to receive a fee of 0.08% per annum of NAV up to USD
100,000,000, 0.07% of NAV thereafter subject to a minimum fee of
USD 140,000 per annum. The administration fees are accrued monthly
and are payable quarterly in advance. The charges for the year for
Administration fees were USD 150,580 (2023: USD 145,590), of which
USD 500 (2023: USD 1,120) were outstanding at year end.
The Sub-Administrator receives a fee as consideration
for the services provided to the Company at such rates as may be
agreed in writing from time to time between the Company and the
Sub-Administrator. The charges for the year for Administration fees
were USD 63,638 (2023: USD 56,024), of which USD 5,384 (2023: USD
4,744) were outstanding at year end.
Total administrative and accounting fees for the year
were USD 214,218 (2023: USD 201,614).
11 Controlling Party
The Directors are not aware of any ultimate
controlling party as at 30 June 2024 or 30 June 2023.
12 Fair Value Information
For certain of the Company's financial instruments
not carried at fair value, such as cash and cash equivalents,
accrued dividends, other receivables, receivables/payable upon
sales/purchase of investments and accrued expenses, the amounts
approximate fair value due to the immediate or short-term nature of
these financial instruments.
Other financial instruments are measured at fair
value through profit or loss.
Fair value estimates are made at a specific point in
time, based on market conditions and information about the
financial instrument. These estimates are subjective in nature and
involve uncertainties and matters of significant judgement and
therefore, cannot be determined with precision. Changes in
assumptions could significantly affect the estimates.
● Level 1: Inputs that are
quoted market prices (unadjusted) in active markets for identical
instruments. This level includes listed equity securities on
exchanges (for example, Ho Chi Minh Stock Exchange).
● Level 2: Inputs other than
quoted prices included within Level 1 that are observable either
directly (i.e., as prices) or indirectly (i.e., derived from
prices). This level includes instruments valued using: quoted
prices for identical or similar instruments in markets that are
considered less than active; quoted market prices in active markets
for similar instruments; or other valuation techniques in which all
significant inputs are directly or indirectly observable from
market data.
● Level 3: Inputs that are
not based on observable market data (i.e., unobservable inputs).
This level includes all instruments for which the valuation
technique includes inputs not based on observable data and the
unobservable inputs have a significant effect on the instrument's
valuation.
The table below analyses financial instruments
measured at fair value at the reporting date by the level in the
fair value hierarchy into which the fair value measurement is
categorised. The amounts are based on the values recognised in the
Statement of Financial Position. All fair value measurements below
are recurring.
|
|
Level 1
|
Level 2
|
Level 3
|
Total
|
|
|
USD
|
USD
|
USD
|
USD
|
|
2024
|
|
|
|
|
|
Financial assets classified at fair
value upon initial recognition
|
|
|
|
|
|
Investments in securities
|
134,971,131
|
-
|
-
|
134,971,131
|
|
2023
|
|
|
|
|
|
Financial assets classified at fair value upon
initial recognition
|
|
|
|
|
|
Investments in securities
|
113,225,102
|
-
|
-
|
113,225,102
|
There were no transfers between levels during the
year.
The level in the fair value hierarchy within which
the fair value measurement is categorised in its entirety is
determined based on the lowest level input that is significant to
the fair value measurement in its entirety. Assessing whether an
input is significant requires judgement including consideration of
factors specific to the asset or liability. Moreover, if a fair
value measurement uses observable inputs that require significant
adjustment based on unobservable inputs, that fair value
measurement is a Level 3 measurement.
There are no level 3 assets held at 30 June 2024
(2023: nil).
13 Classifications of Financial
Assets and Liabilities
The table below provides a breakdown of the line
items in the Company's Statement of Financial Position to the
categories of financial instruments.
|
|
Fair value through
|
Financial assets at
|
Financial liabilities
|
Total carrying
|
|
|
Profit or loss
|
amortised cost
|
at amortised cost
|
Amount
|
|
|
USD
|
USD
|
USD
|
USD
|
|
2024
|
|
|
|
|
|
Cash and cash equivalents
|
-
|
2,894,425
|
-
|
2,894,425
|
|
Investment in securities at fair
value
|
134,971,131
|
-
|
-
|
134,971,131
|
|
Accrued dividends and
interest
|
-
|
73,797
|
-
|
73,797
|
|
Receivables on sale of
investments
|
-
|
2,451,845
|
-
|
2,451,845
|
|
|
134,971,131
|
5,420,067
|
-
|
140,391,198
|
|
Accrued expenses
|
-
|
-
|
239,813
|
239,813
|
|
|
-
|
-
|
239,813
|
239,813
|
|
2023
|
|
|
|
|
|
Cash and cash equivalents
|
-
|
1,750,069
|
-
|
1,750,069
|
|
Investment in securities at fair value
|
113,225,102
|
-
|
-
|
113,225,102
|
|
Accrued dividends and interest
|
-
|
877,375
|
-
|
877,375
|
|
Receivables on sale of
investments
|
-
|
338,591
|
-
|
338,591
|
|
|
113,225,102
|
2,966,035
|
-
|
116,191,137
|
|
Accrued expenses
|
-
|
-
|
341,646
|
341,646
|
|
Payables in purchase of
investments
|
-
|
-
|
343,745
|
343,745
|
|
Payables on repurchase of
shares
|
-
|
-
|
246,469
|
246,469
|
|
|
-
|
-
|
931,860
|
931,860
|
14 Earnings Per Share
The calculation of basic and diluted earnings per
share at 30 June 2024 was based on the total comprehensive income
for the year attributable to Shareholders of USD 26,522,608 (2023:
loss of USD 8,622,089) and the weighted average number of shares
outstanding of 27,383,130 (2023: 28,685,603).
15 New and Amended Standards and
Interpretations
(i) Standards and amendments to
existing standards effective 1 July 2023
The Board of Directors has assessed the impact, or
potential impact, of all new standards and amendments to existing
standards. In the opinion of the Board of Directors, there are no
mandatory new standards and amendments applicable in the current
year that had any material effect on the reported performance,
financial position, or disclosures of the Company.
(ii) Standards effective after 30
June 2024 that have been early adopted by the Company
There are no standards effective after 30 June 2024
that are relevant to the Company.
16 Events After the Reporting
Date
On 1 October 2024, the Company announced that the
first annual redemption facility had resulted in 3,406,598
Ordinary Shares being validly tendered for redemption. These
ordinary shares represent approximately 12.6% of the ordinary
shares in issue as at 31 August 2024. The Board resolved that the
redemption price will be based on VNH's official net asset value
per share as at 30 September 2024.The net asset value per share is
expected to be announced by mid-October 2024 and it is anticipated
that payments will be made to redeeming shareholders by the end of
October 2024.
From 1 July 2024 to the date of signing these
financial statements, there were no other material events that
require disclosures and/or adjustments in these financial
statements.
Alternative Performance Measures ("APMs")
Discount or Premium
The amount, expressed as a percentage, by which the
ordinary share price is either higher (premium) or lower (discount)
than the NAV per ordinary share.
|
|
Page
|
|
30 June 2024
|
|
NAV per ordinary share (pence)
|
1
|
a
|
406.4
|
|
Ordinary share price (pence)
|
1
|
b
|
396.0
|
|
Discount
|
1
|
((b-a)/a)
|
2.6%
|
Ongoing charges
Ongoing charges have been calculated in accordance
with the Association of Investment Companies (the "AIC")
recommended methodology by taking the regularly incurred annual
operating expenses of running the Company expressed as a percentage
of average NAV.
The ongoing charges for the year ended 30 June 2024
were 2.97%.
|
|
|
|
30 June
2024
|
|
|
Page
|
|
USD
|
|
Average NAV
|
1
|
a
|
127,574,317
|
|
Operating expenses
|
1
|
b
|
3,783,976
|
|
Ongoing charges
|
1
|
b/a
|
2.97%
|
a)
Average NAV
Calculated using twelve monthly closing average NAV
for the year ended 30 June 2024.
b)
Operating expenses
Total annual expenses incurred by the Company less
the cost of project and one-off expenses i.e. non-recurring
expenses.
|
|
Page
|
|
USD
|
|
Total annual expenses
|
51
|
c
|
4,185,800
|
|
Less: non-recurring expenses
|
|
d
|
(401,824)
|
|
Operating expenses
|
|
b=c+d
|
3,783,976
|
Corporate Information
|
Directors
|
Auditor
|
|
Mr. Hiroshi Funaki
|
KPMG Channel Islands Limited
|
|
Mr. Philip Scales
|
Glategny Court
|
|
Ms. Saiko Tajima
|
Glategny Esplanade
|
|
Ms. Connie Hoang Mi Vu
|
St Peter Port
|
|
|
Guernsey
|
|
|
GY1 1WR
|
|
Investment Manager
|
|
|
Dynam Capital, Ltd
|
Market Researcher
|
|
1 Royal Plaza
|
Dynam Consultancy and Services
|
|
Royal Avenue
|
Company Limited
|
|
St Peter Port
|
Floor 12, Deutsches Haus,
|
|
Guernsey
|
33 Le Duan,
|
|
GY1 2HL
|
Ben Nghe Ward, District 1
|
|
|
Ho Chi Minh City,
Vietnam
|
|
Registered Office, Company Secretary and
Administrator
|
|
|
Sanne Group (Guernsey) Limited
|
|
|
1 Royal Plaza
|
Corporate Broker and Financial Adviser
|
|
Royal Avenue
|
Cavendish Securities plc
|
|
St Peter Port
|
One Bartholomew Close
|
|
Guernsey
|
London
|
|
GY1 2HL
|
EC1A 7BL
|
|
|
(Nominated Adviser (AIM) until
transference to LSE Main Market)
|
|
Sub-Administrator, Custodian and Principal
Bankers
|
|
|
Standard Chartered Bank (Singapore) Limited
|
Registrar
|
|
7 Changi Business Park Crescent
|
Computershare Investor Services (Guernsey)
Limited
|
|
Level 3, Securities Services
|
1st Floor, Tudor House
|
|
Singapore 486028
|
Le Bordage
|
|
|
St Peter Port
|
|
UK Legal Adviser
|
Guernsey
|
|
Stephenson Harwood LLP
|
GY1 1DB
|
|
1 Finsbury Circus
|
|
|
London
|
|
|
EC2M 7SH
|
|
|
|
|
|
Guernsey Legal Adviser
|
|
|
Carey Olsen (Guernsey) LLP
|
|
|
Carey House
|
|
|
Les Banques
|
|
|
St Peter Port
|
|
|
Guernsey
|
|
|
GY1 4BZ
|
|