Audited Annual Accounts and AGM Notice

VietNam Holding Limited

 

Notes to the financial statements

 

Year ended 30 June 2017

 

1        THE COMPANY

 

VietNam Holding Limited ("VNH" or "the Company") is a closed-end investment holding company incorporated on 20 April 2006 as an exempt company under the Companies Law in the Cayman Islands and commenced its operations on 15 June 2006, to invest principally in securities of former State-owned Entities ("SOEs") in Vietnam, prior to, at or after the time such securities become listed on the Vietnam stock exchange, including the initial privatisation of the SOEs.  The Company may also invest in the securities of private companies in Vietnam, whether Vietnamese or foreign owned, and the securities of foreign companies if a significant portion of their assets are held or operations are in Vietnam.

 

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 in April 2015 the shareholders voted in favour of the continuance resolution, authorising the Company to operate in its current form through to the 2018 Annual General Meeting when a similar resolution will be put forward for shareholders' approval.

 

VietNam Holding Asset Management Limited ("VNHAM") 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.

 

Standard Chartered Bank, Singapore Branch and Standard Chartered Bank (Vietnam) Limited are the custodian and the sub-custodian respectively. Standard Chartered Bank, Singapore Branch is also the administrator.

 

The registered office of the Company is Collas Crill Corporate Services Limited, Floor 2, Willow House, Cricket Square, PO Box 709, George Town, Grand Cayman, Cayman Islands, KY1-1107.

 

 

2        PRINCIPAL ACCOUNTING POLICIES

 

(a) Statement of compliance

 

These financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRSs) as adopted by the European Union.

 

(b) Basis of preparation

 

The financial statements are presented in United States dollars ("USD"), which is the Company's functional currency.  They are prepared on a fair value basis for financial assets and financial liabilities at fair value through profit or loss.  Other assets and liabilities are stated at amortised cost.

 

The Company's shares were issued in USD and the listing of the shares on the AIM market of the London Stock Exchange 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.

 

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 expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.

 

The estimated and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

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 net asset value ("NAV") calculated as per the prospectus.

 

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

 

(c) Foreign currency translation

 

Transactions in foreign currencies other than the functional currency are translated at the rate ruling on the dates of the transactions.  Monetary assets and liabilities denominated in foreign currencies are re-translated to USD at the rates ruling on the year-end date.  Foreign currency exchange differences arising on translation and realised gains and losses on disposals or settlements of monetary assets and liabilities are included in the statement of comprehensive income. Foreign currency exchange differences relating to financial instruments at fair value through profit or loss are included in the realised and unrealised gains and losses on those investments.  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

 

(i) Classification

 

The Company classifies all its investments as financial assets at fair value through profit or loss category.  Financial instruments are classified at fair value through profit or loss upon initial recognition.  These include financial assets that are not held for trading purposes and which may be sold.  These are investments in exchange-traded securities and unlisted securities.

 

Financial assets that are classified as loans and receivables include accrued dividends.

 

Cash and cash equivalents are measured at amortised cost.

 

Financial liabilities that are not at fair value through profit or loss include accrued expenses.

 

(ii) Recognition

 

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 profit or loss. 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) Derecognition

 

A financial asset is derecognised when the Company no longer has control over the contractual rights that comprise that asset.  This occurs when the rights are realised, expire or are surrendered.

 

Financial assets that are sold are derecognised, and the corresponding receivables from the buyer for the payment are recognised on the trade date, being the date the Company commits to sell the assets.

 

A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expired.

 

(iv) 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 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 take into account 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.

 

As at 30 June 2017, the Company used quotes obtained from brokers to determine the fair value of an unlisted equity security with a carrying value of USD 3,864,056 which was 1.84% (2016: nil%) of the net assets of the Company, while the Company used valuation techniques to value a convertible bond with a carrying value of USD 1,179,177 which was 0.56% (2016: 1.3%) of the net assets of the Company.

 

Any increases or decreases in values are recognised in the statement of comprehensive income as an unrealised gain or loss.

 

(v) Gains and losses on subsequent measurement

 

Gains and losses arising from a change in the fair value of financial instruments are recognised in the statement of comprehensive income.

 

(vi) Impairment

 

Financial assets that are stated at cost or amortised cost are reviewed at each reporting date to determine whether there is objective evidence of impairment. If any such indication exists, an impairment loss is recognised in the statement of comprehensive income as the difference between the asset's carrying amount and the present value of estimated future cash flows discounted at the financial asset's original effective interest rate.

 

If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost decreases and the decrease can be linked objectively to an event occurring after the write-down, the impairment is reversed through the statement of comprehensive income.

 

(vii) Cash and cash equivalents

 

Cash comprises current deposits with banks and fixed deposits.  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) Amounts due to/from brokers

 

Amounts due to/from brokers represent security purchases and sales transactions which are contracted for but not yet delivered at the end of the reporting period.

 

(g) 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)

 

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the reserve for own share account. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is presented in non-distributable capital reserve.

 

(h) Tax

 

Tax expense comprises current and deferred tax.  Current tax and deferred tax is recognised in profit or loss 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.

 

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.  The measurement of deferred taxes reflects the tax consequences that would follow the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities.  Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

 

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity.

 

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised.  Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

 

In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due.  The Company believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience.  This assessment relies on estimates and assumptions and may involve a series of judgements about future events.  New information may become available that causes the Company to change its judgement regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is made.

 

At present, no income, profit, capital, or capital gain taxes are levied in the Cayman Islands, and accordingly, no provision for such taxes has been recorded by the Company in the accompanying financial statements. In the event that such taxes are levied, the Company has received an undertaking from the Governor in Cabinet of the Cayman Islands exempting it from all such taxes for a period of twenty years from 2 May 2006.

 

The Company is liable to Vietnamese tax of 0.1% (2016: 0.1%) on the sales proceeds of the onshore sale of equity investments.

 

(i) Interest income and expense

 

Interest income and expense is recognised in the statement of comprehensive income using the effective rate method.

 

Interest income includes the amortisation of any discount or premium on zero coupon bonds, which is taken as income on the basis of yield to redemption, from the date of purchase.

 

(j) Dividend income

 

Dividend income is recognised in profit or loss on the date on which the right to receive payment is established. For listed equity securities, this is usually the ex-dividend date. For unlisted equity securities, this is usually the date on which the shareholders approve the payment of a dividend.  Dividend income from equity securities designated as at fair value through profit or loss is recognised in profit or loss as a separate line item.

 

(k) Fee and commission expense

 

Fees and commission expenses are recognised in profit or loss as the related services are performed.

 

(l) 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.  Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all potentially dilutive ordinary shares, which comprise warrants granted to shareholders. 

 

3        FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS

 

Financial assets of the Company include investments in securities at fair value, cash and cash equivalents and accrued dividends. Financial liabilities comprise payables on purchase of investments and accrued expenses.  Accounting policies for financial assets and liabilities are set out in note 2.

 

The Company's investment activities expose it to various types of risk that are associated with the financial instruments and the markets in which it invests.  The most important types of financial risk to which the Company is exposed are market risk, currency risk, 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, 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 securities 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:

	2017		2016
	Fair value in USD	% of net assets	Fair value in USD	% of net assets
Investments in listed securities	203,229,914	96.53	141,479,379	96.3
Investments in an unlisted equity security	3,864,056	1.84	-	-
Investments in a convertible bond	1,179,177	0.56	1,911,733	1.3
	208,273,147	98.93	143,391,112	97.6

At 30 June 2017, a 5% reduction in the market value of the portfolio would have led to a reduction in NAV and profit or loss of USD10,413,657 (2016: USD7,169,556 ). 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 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 2017, the Company had the following foreign currency exposures:

 

		Fair value
		2017	2016
		USD	USD
Vietnamese Dong		208,636,021	149,607,240
Pound Sterling		727	748
Swiss Franc		(19)	-
Euro		2,353	2,319
		208,639,082	149,610,307

 

At 30 June 2017, 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 USD10,431,801 (2016: USD7,480,362), USD36 (2016: USD37), USD(1) (2016: USDnil) and USD118 (2016: USD116) 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 into with the Company.

 

At 30 June 2017, the following financial assets were exposed to credit risk (including settlement risk): cash and cash equivalents, investments in an unlisted equity security, Investments in a convertible bond accrued dividends, receivables on sale of investments and other receivables.  The total amount of financial assets exposed to credit risk amounted to USD11,671,980 (2016: USD11,106,187).

 

Substantially all of the assets of the Company are held by the Company's custodian, Standard Chartered Bank, Singapore Branch.  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.

 

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 also invests in equity securities which are not listed on stock exchanges.  The Company may have to resell such investments in privately negotiated transactions.

 

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 redeem their shares directly from the Company.

 

 

4        OPERATING SEGMENTS

 

Information on gains and losses derived from investments are disclosed in the statement of comprehensive income.

 

The Company is domiciled in the Cayman 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.

 

All of the Company's investments in securities at fair value are in Vietnam as at 30 June 2017 and 30 June 2016.  All of the Company's investment income can be attributed to Vietnam for the years ended 30 June 2017 and 30 June 2016.

 

 

5        SHARE CAPITAL

 

Ordinary shares of USD1 each

 

The ordinary shares have been created pursuant to the Companies Law in the Cayman Islands.  The Company was incorporated with an authorised share capital of USD100,000,000 divided into 100,000,000 ordinary shares of USD1 each.  On 23 September 2010, during its Annual General Meeting, the shareholders approved that the Company's authorised share capital be increased by USD100,000,000, divided into 200,000,000 shares of a nominal or par value of USD1.00 each.  According to the Companies Law and articles of association, the Company may from time to time redeem all or any portion of the shares held by the shareholders upon giving notice of not less than 30 calendar days to the shareholders.

 

On 6 June 2006, the Board resolved that 56,250,000 ordinary shares would be allotted at a placing price of USD2 per ordinary share.

 

On 23 September 2010, during its annual general meeting, the shareholder approved a Share Repurchase Programme. The approvals were renewed at the Company's annual general meetings in 2011, 2012, 2013, 2014, 2015 and 2016.

 

	2017	2016
	No. of shares	No. of shares
Total shares issued and fully paid (after repurchases and cancellations) at beginning of the year	65,342,620	67,235,739
Shares issued upon exercise of warrants during the year	19,941,819	35,927
Shares cancellation	(2,555,000)	(1,929,046)
	82,729,439	65,342,620
Repurchased and reserved for own shares
At beginning of the year	(10,487,673)	(7,819,500)
During the year	(2,126,783)	(4,629,554)
Shares reissued to ordinary shares	631,684	32,335
Shares cancellation	2,555,000	1,929,046
	(9,427,772)	(10,487,673)
Total outstanding ordinary shares with voting rights	73,301,667	54,854,947

 

 

 

As a result, as at 30 June 2017 the Company had 73,301,667 (2016: 54,854,947) ordinary shares with voting rights in issue (excluding those held in treasury), and 9,427,772 (2016: 10,487,673) were held in treasury.

 

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 Board of Directors may redeem ordinary shares with such proceeds for 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 net asset value per share.

 

Warrants

 

On 19 May 2015, the Company issued a Prospectus for a bonus issue of warrants to shareholders pro rata, on the basis of one warrant for every three ordinary shares held. The exercise dates of these warrants will be on 1 June 2016, 1 December 2016 and 1 June 2017 with the exercise price of USD1.998.  A total of 19,977,746 warrants were issued and admitted to trading on the AIM Market.  As at 30 June 2017, nil (2016: 19,941,819) warrants are outstanding.  During the year, there was an exercise of 19,941,819 (2016: 35,927) warrants to subscribe for 19,941,819 (2016: 35,927) ordinary shares at a price of USD1.998 per ordinary share.

 

The proceeds that arose on the warrant exercise for the year were USD39,843,754 (2016: USD71,782).  The net proceeds arising on the exercise of the warrants will be invested in accordance with the Company's investment policy.

 

6        NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS

 

Total equity of USD210,535,502 (2016: USD146,875,869) represents net assets attributable to shareholders.  There is no difference between net assets attributed to shareholders calculated as per the prospectus and in accordance with the Company's policy (2016: none).

 

7        NET GAIN FROM INVESTMENTS IN SECURITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

 

		2017	2016
		USD	USD
Net gain from investments in securities at fair value through profit or loss:
Realised gain		14,944,033	2,625,360
Adjustment to fair value of investments in securities at fair value through profit or loss		15,331,713	32,802,976
		30,275,746	35,428,336

 

8        RELATED PARTY TRANSACTIONS

 

Investment management fees

 

The Company's Shareholders approved an amendment to the Investment Manager Agreement as detailed in the Company's circular dated 16 August 2013.  Pursuant to the amended 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 and including USD100 million, one-twelfth of two per cent.;

-     On the amount of the Net Asset Value of the Company above USD100 million up to and including USD150 million, one-twelfth of 1.75 per cent.; and

-     On the amount of the Net Asset Value of the Company that exceeds USD150 million, one-twelfth of 1.50 per cent.

 

The management fee accruing to the Investment Manager for the year to 30 June 2017 was USD2,880,552 (2016: USD2,460,388).

 

Incentive fees

 

The Company will pay the Investment Manager an incentive fee equal to 15 per cent of the Excess Performance amount each year, subject to certain criteria being met.  The fee is calculated and payable as set out in the Investment Management Agreement Side Letter dated 11 September 2013.  Excess performance amount is calculated as follows:

 

Excess Performance amount = (A -B) x C

 

Where:

A       is the closing NAV per share as at the end of the reporting period.

B       is equal to the higher of:

         (i)      the Initial High Water Mark increased by five per cent per annum on a compound basis; and

         (ii)     the highest previous value for A in respect of a reporting period in which an incentive fee was paid, increased by five per cent per annum on an compound basis.

C      is equal to the time weighted average number of shares in issue as at the end of the reporting period.

 

		2017	2016
		USD	USD
Performance fee		3,132,919	4,542,553

Directors' fees and expenses

 

The Board determines the fees payable to each Director, subject to a maximum aggregate amount of USD350,000 (2016: USD350,000) 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 USD257,000 (2016: USD261,000) and expenses were USD92,872 (2016: USD115,336).

 

Directors' ownership of shares and warrants

 

As at 30 June 2017, three Directors, Min-Hwa Hu Kupfer, Nguyen Quoc Khanh and Rolf Dubs held 36,667 (2016: 36,667), 33,253 (2016: 13,468) and 61,451 (2016: 35,152) ordinary shares of the Company respectively, representing 0.05% (2016: 0.06%), 0.04% (2016: 0.02%) and 0.08% (2016: 0.06%) of the total shares outstanding.

 

During the year, Min-Hwa Hu Kupfer, Nguyen Quoc Khanh and Rolf Dubs exercised nil (2016: nil), 3,333 (2016: nil) and 10,000 (2016: nil) warrants to subscribe ordinary shares, amounting to 13,333 (2016: nil) and 0.067% (2016: 0.00%) of the total warrants issued respectively.

 

 

9        CUSTODIAN FEES

 

Custodian fees are charged at a minimum of USD12,000 (2016: USD12,000) 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 USD12,000 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 USD172,607 (2016: USD122,024).

 

 

10      ADMINISTRATIVE AND ACCOUNTING FEES

 

The administrator receives a fee of 0.07% per annum for AUA less than USD100,000,000; or 0.06% per annum for AUA greater than USD100,000,000 calculated on the basis of the net assets of the Company, subject to an annual minimum amount of USD5,500 per month.

 

The charges for the year for the Administration and Accounting fees were USD111,404 (2016: USD95,073).

 

11      CONTROLLING PARTY

 

The Directors are not aware of any ultimate controlling party as at 30 June 2017 or 30 June 2016.

 

 

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 on the statement of comprehensive income.

 

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
2017
Financial assets classified at fair value upon initial recognition
Investments in securities	182,827,649	24,266,321	1,179,177	208,273,147
2016
Financial assets classified at fair value upon initial recognition
Investments in securities	126,523,082	14,956,297	1,911,733	143,391,112

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.

 

Valuation techniques used in measuring Level 3 fair values, as well as the significant unobservable inputs used:

 

Investment type	Valuation technique	Significant unobservable inputs	Inter-relationship between key unobservable inputs and fair value measurement
Convertible bond	•   Discounted cash flows (in valuing the straight bond); and •   Black-Scholes model (in valuing the conversion feature)	•   Risk-adjusted discount rate (2017: 8.50%; 2016: 9.5%); •   Dividend yield (2017: 4.32%; 2016: 5.91%)	The estimated fair value will increase (decrease) if: •   the risk-adjusted discount rate was lower (higher); •   the dividend yield was lower (higher)

 

Although the Company believes that its estimates of fair value are appropriate, the use of different assumptions could lead to different measurements of fair value.  The directors consider that any reasonably possible changes to the unobservable input will not result in a significant financial impact.

 

Level 3 reconciliation

		Financial assets at fair value through profit or loss
		2017	2016
		USD	USD
Balance at 1 July		1,911,733	-
Purchases		-	1,790,510
Sales		(894,897)	-
Total gains and losses recognised in profit or loss *		162,341	121,223
Balance at 30 June		1,179,177	1,911,733

 

*   Total gains or losses recognised in profit or loss for assets and liabilities held at the end of the reporting period, as included in the statement of comprehensive income.

 

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.

 

	Note	Fair value through profit or loss	Loans and receivables	Other liabilities	Total carrying amount
		USD	USD	USD	USD
2017
Cash and cash equivalents		-	10,323,903	-	10,323,903
Investments in securities at fair value	3	208,273,147	-	-	208,273,147
Accrued dividends		-	155,582	-	155,582
Receivables on sale of investments		-	-	-	-
Other receivables		-	13,318	-	13,318
		208,273,147	10,492,803	-	218,765,950
Payables on purchase of investments		-	-	4,981,932	4,981,932
Other payables		-	-	139	139
Accrued expenses		-	-	3,248,377	3,248,377
		-	-	8,230,448	8,230,448

 

 

 

 

	Note	Fair value through profit or loss	Loans and receivables	Other liabilities	Total carrying amount
		USD	USD	USD	USD
2016
Cash and cash equivalents		-	5,281,215	-	5,281,215
Investments in securities at fair value	3	143,391,112	-	-	143,391,112
Accrued dividends		-	832,445	-	832,445
Receivables on sale of investments		-	3,055,954	-	3,055,954
Other receivables		-	24,840	-	24,840
		143,391,112	9,194,454	-	152,585,566
Payables on purchase of investments		-	-	1,124,964	1,124,964
Other payables		-	-	137	137
Accrued expenses		-	-	4,584,596	4,584,596
		-	-	5,709,697	5,709,697

 

14      EARNINGS PER SHARE

 

The calculation of basic and diluted earnings per share at 30 June 2017 was based on the change in net assets attributable to ordinary shareholders of USD27,314,984 (2016: USD31,413,950) and the weighted average number of shares outstanding of 55,760,831 (2016: 57,315,656). The warrants of the Company had been fully exercised as of 30 June 2017.

 

 

15      NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

 

A number of new standards and amendments to standards are effective for annual periods beginning after 1 July 2016 and earlier application is permitted; however, the Company has not early applied these new or amended standards in preparing these financial statements.  The one new standard potentially relevant to the Company is IFRS 9 Financial Instruments ("IFRS9"), which is discussed below.

 

IFRS 9, published in July 2014, replaces the existing guidance in IAS 39 Financial Instruments:Recognition and Measurement ("IAS 39"). IFRS 9 includes revised guidance on the classification and measurement of financial instruments, a new expected credit loss model for calculating impairment on financial assets and new general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of financial instruments from IAS 39.

 

IFRS 9 is effective for the Company's annual reporting periods beginning on or after 1 July 2017, with early adoption permitted.

 

Classification of financial assets and financial liabilities

 

IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). IFRS 9 classification is generally based on the business model in which a financial asset is managed and its contractual cash flows. The standard eliminates the existing IAS 39 categories of held-to-maturity, loans and receivables and available-for-sale.  Under IFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never bifurcated.  Instead, the whole hybrid instrument is assessed for classification.

 

IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities.  However, although under IAS 39 all fair value changes of liabilities designated under the fair value option are recognised in profit or loss, under IFRS 9 fair value changes are generally presented as follows:

 

·        the amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in OCI; and

·        the remaining amount of change in the fair value is presented in profit or loss.

 

Based on the Company's initial assessment, this standard is not expected to have a material impact on the classification of financial assets and financial liabilities of the Company. This is because:

 

·        the financial instruments classified as held-for-trading under IAS 39 will continue to be classified as such under IFRS 9;

 

·        other financial instruments currently measured at FVTPL under IAS 39 are designated into this category because they are managed on a fair value basis in accordance with a documented investment strategy. Accordingly, these financial instruments will be mandatorily measured at FVTPL under IFRS 9; and

 

·        financial instruments currently measured at amortised cost are: cash and cash equivalents, accrued dividends, and other receivables.  These instruments meet the solely principal and interest criterion and are held in a held-to-collect business model.  Accordingly, they will continue to be measured at amortised cost under IFRS 9.

 

Impairment of financial assets

 

IFRS 9 replaces the 'incurred loss' model in IAS 39 with an 'expected credit loss' model.  The new impairment model also applies to certain loan commitments and financial guarantee contracts but not to equity investments.  Under IFRS 9, credit losses are recognised earlier than under IAS 39.  Based on the Company's initial assessment, changes to the impairment model are not expected to have a material impact on the financial assets of the Company.  This is because:

 

·        the majority of the financial assets are measured at FVTPL and the impairment requirements do not apply to such instruments; and

 

·        the financial assets at amortised cost are short-term (i.e. no longer than 12 months), of high credit quality and/or highly collateralised.  Accordingly, the expected credit losses on such assets are expected to be small.

 

16      SUBSEQUENT EVENTS

 

·        At the AGM held on 15 September 2016, the Company's shareholders approved a resolution authorizing the Directors to continue the process of re-domiciling the Company in Luxembourg. It is anticipated that the Company will be registered in Luxembourg as a UCI Part II Investment Fund.  The submission of the Prospectus and related documentation to the Commission de Surveillance du Secteur Financier (CSSF), the Luxembourg financial supervisory authority, is pending finalisation of certain legal documents.  The Directors expect that the application will be submitted to the CSSF during the third quarter of 2017.

 

·        The directors of the Company approved on 17 August 2017 a proposal made by the Investment Manager to defer one-third, equivalent to USD 1,044,306 (the "Deferred Portion"), of the incentive fee payable as described in Note 8 "Related Party Transactions - Incentive Fee" (FS28). The Deferred Portion shall be deferred for a period of up to 5 years from 30 June 2017 (the "Deferral Period") and shall be paid when (i) the Investment Manager is entitled to receive incentive fees in relation to any financial year during the Deferral Period in accordance with the applicable terms of the Investment Management Agreement Side Letter dated 11 September 2013 and (ii) the investment performance which is calculated on a NAV per share basis exceeds the increase in VNAS Index for the relevant financial year by 5%. All other terms of the Investment Management Agreement Side Letter dated 11 September 2013 shall remain applicable and in force.

 

 

 

Key Parties

 

Directors

Min-Hwa Hu Kupfer
Professor Dr. Rolf Dubs
Nguyen Quoc Khanh

 

Investment Manager

VietNam Holding Asset Management Limited
Collas Crill Corporate Services Limited

Floor 2, Willow House

Cricket Square

PO Box 709

George Town, Grand Cayman

Cayman Islands, KY1-1107

 

Registered Office, Company Secretary and Cayman Islands Legal Advisor

Collas Crill Corporate Services Limited

Floor 2, Willow House

Cricket Square

PO Box 709

George Town, Grand Cayman

Cayman Islands, KY1-1107

 

Nominated Adviser (AIM)

Smith & Williamson Corporate Finance Limited

25 Moorgate

London EC2R 6AY

United Kingdom

 

Corporate Broker (AIM)

Winterflood Investment Trusts

The Atrium Building

Cannon Bridge House

25 Dowgate Hill

London EC4R 2GA

United Kingdom

 

Administrator, Custodian and Trustee

Standard Chartered Bank

7 Changi Business Park Crescent

Level 3, Securities Services

Singapore 486028

 

Registrar

Computershare Investor Services (Cayman) Limited

One Capital Place

PO Box 897

George Town KY1-1103

Grand Cayman

Cayman Island

 

UK Legal Adviser

Dickson Minto W.S.

Broadgate Tower

20, Primrose Street

London EC2A 2EW

United Kingdom

 

Independent Auditor

KPMG LLP

16 Raffles Quay #22-00

Hong Leong Building

Singapore 048581