TIDMVNH
RNS Number : 2065Q
VietNam Holding Limited
16 October 2023
VietNam Holding Limited
("VNH" or the "Company")
VietNam Holding Limited is pleased to announce its 2023
Annual Report and Audited Financial Statements
More information on the Company is available www.vietnamholding.com
at the company's website.
Dynam Capital, Ltd.
Craig Martin Tel.: +84 28 3827
7590
Corporate Broker and Financial Adviser
Cavendish Securities plc Tel: +44 20 7220
0500
Company Secretary and Administrator
Sanne Group (Guernsey) Limited: Tel: +44 20 3530
3158
The information contained within the announcement is deemed by
the Company to constitute inside information as stipulated under
the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). Upon the
publication of this announcement via Regulatory Information Service
("RIS"), this inside information is now considered to be in the
public domain.
Contents
Strategic Report
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Highlights 1
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Summary Information 1
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Chairman's Statement 3
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Investment Manager's Report 6
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Top Five Portfolio Companies 11
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Sustainability Report 21
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Principal Risks and Risk Management 28
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Governance
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Director Profiles and Disclosure of Directorships 31
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Corporate Governance Report 32
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Audit and Risk Committee Report 38
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Directors' Remuneration Policy and Report 40
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Directors' Report 41
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Statement of Directors' Responsibilities 45
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Financial Statements
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Independent Auditor's Report 46
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Statement of Financial Position 51
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Statement of Comprehensive Income 52
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Statement of Changes in Equity 53
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Statement of Cash Flows 54
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Notes to the Financial Statements 55
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Alternative Performance Measures 68
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Corporate Information 69
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Highlights
Financial Highlights
30 June 2023 30 June 2022
Total Net Assets (USD) 115.3 million 128.8 million
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Net Asset Value per share (USD) 4.157 4.408
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Net Asset Value per share (GBP) 329.0p 363.0p
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Share price 277.5p 309.5p
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Discount to Net Asset Value 15.7% 14.7%
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As at 13 October 2023 (the latest available date before approval
of the accounts), the discount to NAV had moved to 16.4%. The
estimated NAV per share and mid-market share price at 13 October
2023 was 365.0 p and 305.0p respectively.
Ongoing Charges
Ongoing charges for the year ended 30 June 2023 have been
calculated in accordance with the Association of Investment
Companies (the "AIC") recommended methodology. The ongoing charges
for the year ended 30 June 2023 were 3.07%. Refer to page 68 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 changed to a Premium Listing on
the Official List of the UK Listing Authority and admitted to
trading on 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 2023.
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 2023.
Although this has been a turbulent year globally, including in
Vietnam, I am pleased to report that the Fund has once again
outperformed peers and the Vietnam All Share Index ("VNAS").
I wrote in the interim report earlier this year about many of
the reasons for the market disturbances. Some were global, however,
some also were very local. As the Investment Manager notes in his
report, there is often a 'game of two halves' going on, and this
year has been no exception.
In the first six months of the financial year, the Company's Net
Asset Value ("NAV") per share declined by 16.8%, but in the second
half of the year (from 1 January 2023 until 30 June 2023) rose by
13.3%. The total NAV return was still negative, at -5.7%, but this
was 4.3% better than the VNAS.
The Company's Total Assets were USD 116,191,137 at 30 June 2023,
a decrease of 10.1% from USD 129,177,449 at 30 June 2022. Total
Comprehensive loss was USD 8,622,089 at 30 June 2023 compared with
a loss of USD 7,719,310 in the corresponding period in 2022.
Although VNH's NAV has declined in absolute numbers, the focus,
active management, and nimble performance of the Investment Manager
have led to a significant relative outperformance against the
market as a whole, as well as most of its peers.
The share price has fluctuated throughout the year, reaching a
year high of GBP 3.375 per share and a low of GBP 2.21 per share.
Contributing factors to the ups and downs include the NAV's
movements, the GBP/USD exchange rate and the discount
volatility.
Market and Opportunity
The Board visited Vietnam in March of this year and sat down
with the Investment Manager to go through their strategy, meet with
the research team and also to review in depth with the team one of
the top five holdings.
We came away from the meeting feeling confident about several
fronts. Firstly, Vietnam remains a dynamic investment opportunity.
Despite periods of volatility and market depression, the underlying
macro story and potential for the country and its companies are
both tremendous and distinctive. Secondly, its public markets offer
a rare mix of growth that is not based on financial gearing and is
at modest valuation levels and indeed at historical lows. Thirdly
the structural improvements in liquidity will continue this year
with more enhancements made to the stock market infrastructure,
which also makes us more convinced that it is only a matter of time
before the market is considered for an upgrade to Emerging Market
Status. Finally, Dynam Capital, our Investment Manager has proven
themselves to be a nimble, focused team, punching above their
weight, and delivering superior risk adjusted returns in both
financial and environmental, social and governance ("ESG")
terms.
Progress over past 5 years
When we appointed Dynam Capital five years ago, we set out three
main objectives. Firstly, to provide solid risk adjusted returns
for shareholders. Secondly, to build on and develop an ESG centered
investment strategy fit for purpose. Thirdly, to use all means
possible to narrow the discount between the Company's share price
and NAV. In addition, we also set forth a dedicated marketing plan
to broaden the shareholder base, in an attempt to increase the
visibility of the Fund and its liquidity and ultimately attract
retail and wealth management platforms, which we felt would be
natural buyers of a focused, yet niche investment company
structure.
I port on each of these below:
Risk Adjusted Returns
Performance
In the twelve months to 30 June 2023 the Company's NAV per share
declined by 5.7%, while the market as a whole, as measured by the
VNAS, declined by 10.0%. In the first six months of the financial
year the NAV per share fell by 16.8%, against an index fall of
20.5%, and in the second six months the Company's NAV rose by 13.3%
in line with the index, which rose by 13.2%. At 30 June 2023, the
Company has outperformed the VNAS on 1, 3, 5 and 10-year
measures.
Performance monitoring remains a key focus of the Board and we
engage closely with our Investment Manager in this respect through
monthly conference calls as well as quarterly presentations. A more
detailed account of the Company's annual performance is also
provided in the Investment Manager's Report.
ESG Strategy
Responsible Investing and Sustainability Reporting
The Investment Manager and the Board have been committed to
responsible investing and aligned approach to ESG years before the
mainstream global investing community moved in this direction. The
Company has been a signatory to the United Nations' Principles on
Responsible Investing ("PRI") since 2009, and in its most recent
PRI assessment scored two 'five-stars' reflecting our efforts to
contribute to responsible investing in Vietnam in a meaningful
way.
The Company and the Investment Manager were sponsors of the
inaugural ESG Investing Conference held in Ho Chi Minh City on 31
May and 1 June 2023. We helped the organisers deliver two full days
of content to a packed audience of close to 350 participants.
We also have been measuring the carbon footprint of both the
Company and the portfolio for several years, and this year's
findings are in the Sustainability Report. It is worth noting that
unlike in previous years, when the portfolio had a significantly
lower carbon footprint than the market as a whole, at this
reporting date, our footprint is slightly higher than the index.
The key reason for this is that we have backed a company that is in
transition - Petro Vietnam Services ("PVS") which has one of the
country's largest fleets of specialised offshore supply vessels,
historically used to implement and maintain oil and gas
infrastructure. PVS has stated its ambition to become one of the
leading service providers in renewable energy - specifically
onshore and offshore wind energy. Over time, we believe PVS's
transition to clean energy will result in a lower overall carbon
impact, even if it distorts our reported carbon footprint for the
reporting period.
Discount
During the year the Company's shares traded at an average
discount to NAV of 15.7%. The Board seeks to manage the discount
through regular share buybacks, as detailed below. In addition to
delivering a strong relative performance of the Company's
portfolio, the Investment Manager, in close cooperation with the
Board and the Company's broker and marketing agent, has maintained
an active investor relations program. For much of the year the
discount has been the narrowest of the three London listed
investment companies focused on Vietnam. At the time of writing the
discount was 16.4%.
Marketing
With the help of the Investment Manager, Dynam Capital, the
Board has further developed the Company's marketing activity
throughout the year to help narrow the discount, improve liquidity
in the Company's shares, and widen our Shareholder base.
The Investment Manager has been actively promoting the Company
and along with our broker and sales partners has conducted
roadshows, topical seminars, podcasts, and several webinars.
Articles produced by the Investment Manager have also appeared in
trade media, illustrating some of our core investment themes, and
other exciting developments in the market. Our analysis shows that
the marketing and communications efforts continue to bear fruit. We
are delighted to see a greater number of wealth management
platforms on the share register having also seen the overall mix of
investors broaden considerably over recent years. The Investment
Manager has maintained a strong social media presence for the
Company as well. We welcome all Shareholders who may be reading
this Annual Report for the first time and thank all existing
holders for their ongoing support.
Share Buybacks
The Board has a mandate to authorise the purchase up to 14.99%
of the Company's shares each year in the open market at prices
below NAV per share, and this was renewed at the AGM on 1 November
2022. In the year from 1 July 2022 to 30 June 2023, the Company
bought back 1,500,563 shares (representing 5.1% of the shares
outstanding at 1 July 2022) at a weighted average discount of
15.2%. This resulted in a 0.78% accretion to NAV per share. From
September 2017, when the current Board was appointed, through until
30 June 2023, the Company has bought back 14.82 million shares at a
weighted average discount of -15.4%. This represents a 3.4%
accretion to NAV per share.
Continuation vote
As you will know, at the AGM in 2018 we told shareholders we
would bring a five-yearly continuation vote to the 2023 AGM, which
will take place this November.
As detailed above, we believe the market opportunity for the
Fund remains, despite the Company's relatively modest size, and
that the Investment Manager is doing an excellent job in delivering
on the Company's investment objectives.
The Board (and Dynam Capital) maintain a regular dialogue with
shareholders and believe that many share our view that the Company
should continue for a further five years. A resolution to that
effect will be put to shareholders at the Company's AGM later this
year. As such, the Directors will be recommending that shareholders
vote to approve the continuation of the Company for a further five
years and we propose a new continuation vote to be held in November
2028.
On behalf of the Board, I would like to extend a further
thank-you to shareholders for your ongoing support throughout the
past year. While the global mood is gloomy, we believe Vietnam
remains a bright spot - an attractive investment destination with
good prospects for further growth over the years to come.
Hiroshi Funaki
Chairman
VietNam Holding Limited
13 October 2023
Investment Manager's Report
This year marks the 17th anniversary of the Company and its
listing in London[1]. Over this time, the Company, which is just
six years younger than Vietnam's stock market, has seen Vietnam
grow dramatically not only in absolute terms, but in stature and
visibility. While the country's stock markets have also grown at an
average annual rate of 4%, VNH has outperformed the market on a 1,
3, 5 and 10-year basis. Nevertheless, the market can be volatile
and there have often been periods, lasting 6 to 12 months of
significant weakness in the equity markets. The past twelve months
was, as with previous annual periods, a 'game of two halves'.
From 1 July to 31 December 2022, Vietnam's stock market
experienced a sharp decline. Markets are always fickle friends, and
in Vietnam, they are often also hostage to the mood of the
country's seven million or so domestic retail investors. That mood
darkened in Q4 last year following the arrests of some high-profile
property entrepreneurs, which brought the bond and real estate
markets to an abrupt halt in the face of uncertainties over issuing
bonds and refinancing existing obligations. Several large, listed
property groups faced liquidity and solvency issues, and were
forced to start the lengthy process of restructuring their
borrowings from local and international investors. Towards the end
of December, two deputy prime ministers were removed from office,
and in January 2023, the President stepped down, for failure to
resign in the mistakes of some government officials, and in the
wake of a scandals relating to PPE procurement and COVID-19
repatriation flights.
The mood has brightened somewhat in more recent months. Interest
rate cuts, bottom fishing by local and regional investors, and a
returning 'sense of order', despite the global disorder, have all
helped the stock market to post six-month gains of around 13.2% at
the end of June 2023.
This 'sense of order' includes ever increasing levels of foreign
direct investment ("FDI") and a record trade surplus, albeit
because of imports falling faster than exports. Vietnam has a very
open trade-based economy, and weaker global demand for technology
goods - computers, tablets, mobile phones and accessories - has
naturally hit its usually high export growth. This also has had a
knock-on effect on consumer confidence.
The record USD 12.25 billion trade surplus in the first half of
calendar 2023 and rising levels of disbursed FDI have enabled the
country to keep a relatively stable foreign-exchange balance,
stemming off the weakness in the Vietnam Dong seen last year.
Inflation has also remained under control. Unlike in Europe or
the US, Vietnam has a lower energy exposure in its cost of goods
basket: half of its energy mix is domestically sourced, including a
reliance on hydropower.
Portfolio
Investors in the Company should recognise the value of having a
closed-end fund structure. This means that we do not need to
ordinarily maintain liquidity for the sake of funding redemptions.
We have a concentrated portfolio that allows us to take conviction
positions in core companies. For example, our top-holding, FPT, has
averaged between 10-15% of the portfolio over the past five years.
This would not be possible in a regulated open-end fund (UCITS for
example). Our top ten positions account for 62% of the portfolio
and our top 5 for 41%.
The level of concentration means that we need to be focused on
finding robust companies, with strong positions in their sectors
and industries, and with the ability to compound their earnings
over a five to ten year period. As an example of this FPT has a
compound annual growth rate in earnings of 21.5% in the last 3
years.
We use our size to our advantage. We navigate nimbly around the
market capitalisation opportunity set in Vietnam. Although our
median portfolio market capitalisation remains at around USD 1bn, a
decrease of 6% over the year, we are uniquely size agnostic.
Phu Nhuan Jewelry JSC ("PNJ"), for example, was a USD 100m
market cap company when the Company first invested over a decade
ago - putting it at the small-to-medium category. As at 31 August
2023, it has a market capitalisation equivalent to USD 1.096bn,
making it a 'large cap' company.
We do not have to sell companies when they become large, and nor
do we have to reduce the smaller companies on liquidity grounds.
Our portfolio philosophy is an active one: our active weight has
been around 70% over the past five years, and our portfolio
turnover has been in the range of 30 to 40%.
Performance
As described in the interim report as of 31 December 2022, the
first six months of the financial year saw significant volatility
in the Vietnamese stock market. During this period, the NAV per
share fell by 16.8%, outperforming the Vietnam All Share Index's
("VNAS") decline of 20.5%. Towards the end of the second half of
the financial year, the equity markets themselves started to
recover, rising by 13.2% as of June 2023 with the Company's NAV per
share similarly finishing the period up.
At 30 June 2023, the NAV per share declined by 5.7% for the full
financial year in accordance with the drop reported for the
previous financial year. Nonetheless, unlike this time last year,
we are optimistic about the second half of calendar 2023. The
Company continues to outperform its peers, and has also
outperformed the VNAS on a 1, 3, 5 and 10-year basis. The Company's
share price still fell by 10% during the financial year due to a
combination of the 5.7% decline in NAV per share and a slightly
wider discount between the share price and the NAV.
Liquidity
Portfolio liquidity remains robust, and we estimate that over
95% of the portfolio could be liquidated in less than 30 days.
The portfolio's size and nimbleness as per our style of
investment management means that we can navigate across the
spectrum of company sizes, and we believe this has contributed to
the outperformance of the Company versus the index and our peers.
We have been able to take profit in sectors that surged last year
and move swiftly as market forces and economic mood changes.
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 65 to 66. In 2018 we increased the
exposure to some pre-IPO opportunities, including making a
three-year convertible loan to a logistics company, but following
the complete return of that investment, we have not made any
further such investments. Given the forthcoming continuation vote,
we did not want to set false expectations in the minds of potential
investee companies or do the Board or shareholders in the Company a
disservice by tying their hands to a significant illiquid position
should the continuation vote not pass.
As of 30 June 2023, the portfolio has about 1.5% of NAV in
cash.
Positioning and Core Themes
Our main investment approach remains focused on
industrialisation (best-in-class manufacturers, international
logistics); urbanisation (purposeful real estate, transportation,
clean energy, and clean water); and domestic consumption and its
enablers (sustainable retail, domestic logistics, products, and
finance). These themes are inter-linked, as industrialisation and
urbanisation foster further robust growth in GDP and domestic
consumption, and are underpinned by the banking sector.
I ndustrialisation
Over the past thirty years Vietnam has emerged as a key
manufacturing centre for a wide range of goods. The country's GDP
growth has been fueled by FDI into the industrial and
manufacturing-for-export sectors. The trend of 'made-in-Vietnam'
has been accelerated by the 'China-plus-one' strategy of global
manufacturers, seeking to de-risk their supply chains. The war in
Ukraine, and the economic isolation of Russia, has also played into
these fears, with many companies looking to spread their production
more evenly over the world. Some commentators have called this the
beginning of the end of globalisation. What is perhaps more likely
is a continuation of the trend of supply chain restructuring. Some
companies will look to re-shore manufacturing back home, others to
near-shore (i.e., increase production in Mexico for North American
markets) and others to 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,
including garment companies and seafood producers, we have chosen
to obtain most of the exposure to these themes during the past year
through the business-to-business 'linkages', mainly through
industrial parks and logistic companies. These typically have a
higher quality of earnings and higher return on equity than the
individual exporters. A core holding in this area is the leading
port operations and shipping company Gemadept ("GMD"), which at
5.4% of NAV is the sixth largest position in the portfolio.
Urbanisation
Vietnam's urbanisation level in 2022 was about 37%. This is a
level that China reached in 2000, before doubling within twenty
years. According to a UN forecast ([2]) , Vietnam's urban
population is expected to reach 44% by 2030. In last year's annual
report, we spoke about the multiplier effect of investments in
domestic infrastructure, giving as an example the opening in May
2022 of a new bridge across Ho Chi Minh City's Saigon River,
connecting the down-town District 1 hub to the Thu Thiem
peninsular, a region already demarcated to be a new
'metropolis'.
While the prospects for urban growth remain intact - because
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. At the end of 2022, we had a 15% exposure to the
real-estate sector, but were quick to reduce this in the face of
weakening short-term potentials and, indeed, managed to escape the
worst of the turmoil to hit some of the companies in the sector. At
the end of 2023, our exposure to real-estate was 9.4% and much of
this was to the industrial park sector, as opposed to the frozen
residential market. We are confident that some of the key names in
the sector will survive and thrive, and we may well add back to
some of these in the months ahead.
Domestic Consumerism
We believe the Vietnam economy is at an inflection point in its
development, and that the consumer sector will develop strongly in
years to come. In May 2023, we hosted a webinar on the retail
sector and invited a speaker from PNJ to address our investors and
talk about some of the key longer-term trends. That said, higher
interest rates, rising costs and weaker manufacturing for export
during the year have softened consumer demand in several
categories. Our portfolio companies have not escaped, and our two
retail champions, PNJ (jewellery) and Mobile World Group ("MWG")
(an omni-channel, omni-sector retailer) have seen their share
prices depressed. At the end of June 2022, the portfolio had
approximately 17.8% exposure to the domestic retail sector,
including PNJ, 8.1% of NAV, and MWG, 9.2% of NAV. By the end of
June 2023, the sector allocation had reduced to 7.8%, with PNJ and
MWG down to 5.1% and 2.7% respectively.
Banks and financial sector
VNH's allocation to banks has increased again from 22% at 30
June 2022 to 30% at 30 June 2023, as we see a more favorable
interest rate environment, and renewed credit growth. Although 30%
is significant, and the limit for a single sector in the Fund's
investment policy, this is an underweight position relative to the
index. Key portfolio names in the portfolio include Sacombank
("STB"), 10.1% of NAV; MBB, 5.7% of NAV; VCB 5.7% of NAV; Vietin
Bank ("CTG"), 3.0% of NAV; ACB, 3.3% of NAV; and VP Bank, 1.8% of
NAV.
In addition to banks, we have also re-entered the brokerage
sector, with a 10% allocation across several brokerages. This is a
sector we have made strong gains in historically, and we have never
been afraid to take profits. We think that the sector will also
benefit from returning domestic investor appetite, in part as
domestic interest rates on bank deposits are reduced.
Responsible investing
The Company is firmly focused on sustainability and has placed
environmental, social and governance ("ESG") principles at the
heart of its investment criteria for over a decade, having become
an early signatory to the United Nations Principles for Responsible
Investing ("PRI") in 2009, just three years after the principles
were published, and before any other fund in Vietnam. The Company
received two 'five-star' grades in its most recent PRI assessment
report.
Each component of ESG is equally important. For Vietnam, the 'S'
has been at work in its society for many decades and the pandemic
has forced further efforts at several of our portfolio companies on
harmonising staff, shareholders and impacts on society at large.
'G' has always been a key pillar for VNH's investment approach, and
we have been at the forefront of advocating and training for
corporate governance at our investee companies since the Company's
formation 17 years ago. Our CEO, Vu Quang Thinh, is a co-founder
and member of the board of the Vietnam Institute of Directors
("VIOD"), and highly regarded for encouraging companies in Vietnam
to improve their corporate governance standards. We actively engage
with our portfolio companies, urging them to give more attention to
investor relations and transparent reporting. We have also been
advising some of them specifically on how to get the balance right
in aligning interests between staff and shareholders through the
structure and implementation of employee share option plans. The
'E' aspect of ESG has, and rightly so, taken centre stage in many
investors' minds and at the same time become a greater priority for
Vietnamese people. On the climate front, the Investment Manager and
the Company have both affirmed the Paris Agreement and our
commitment to the Task Force for Climate-related Financial
Disclosure ("TCFD"). Dynam Capital has also joined the Asia
Investor Group on Climate Change ("AIGCC") and intends to
contribute more to the advocacy of climate risk reporting. More
details of this can be found in the Sustainability Report.
We were sponsors of the inaugural ESG Investor Conference held
over two days at the end of May 2023 where we reiterated our focus
to 'Doing More, Measuring More and Reporting More'. Over the two
days it became apparent that the ESG journey is one that the Fund
can both participate in, and benefit from. We do not need to
sacrifice consistent returns as a responsible investor. There may
be opportunities in the short term that we choose to pass on. We
look for companies that can compound their earnings over a
five-year period. The discipline that comes with an integrated ESG
approach can help deliver longer-term sustainable growth that
outweighs the short-term benefits of one or two stocks that could
'pop' in a portfolio.
As we move into the second half of 2023, sentiment globally
remains subdued. Although recessionary risks remain less severe for
Asia than in the West, a global recession is still possible, and
this could hit Vietnam's export growth further.
In last year's annual report, we emphasised the favourable
economic effects of government spending on infrastructure. This was
under-budget in the first half of 2022 and struggled to achieve
expectations in the second half, probably because certain officials
were nervous about making necessary decisions. Nevertheless, there
is mounting evidence of these expenditures happening with far less
political commotion.
In recent months, we have also seen a steady rebound in domestic
and international tourism in Vietnam. In May 2023, Chinese tourists
started to return to Vietnam after a three-year absence. North Asia
has historically been a key source of international tourism for
Vietnam. In fact, the level of added activity is putting further
pressure on the country's airports.
We are optimistic on the prospects of further recovery over the
next six to twelve months, and believe that patience by investors
in the Fund will be rewarded. The Chairman of VNH mentioned the
upcoming continuation vote in his letter. We believe we have
delivered value for investors over the five years in which Dynam
Capital has been the Investment Manager and look forward to the
continuation of our investment mandate.
Our objective is to position the portfolio for growth within a
three to five-year investment horizon. As always, this means
looking through short-term noises and volatility in search of
longer-term value derived from robust compounding growth of
well-managed companies with proven sustainable business
strategies.
We remain committed to delivering on the trust put in us by the
board of VNH, and by the investors in the Company, many of whom we
have met with or spoken to over the course of the past twelve
months.
As an Investment Manager, we aim to execute simple things well
while staying active and nimble throughout the process. Our team is
honoured to manage the Fund and will continue to focus on 'Doing
More, Measuring More and Reporting More' to you, our investors.
Top 10 Companies by NAV as at 30 June 2023 (and as at 30 June
2022)
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 Corp Industrial Goods and Services 5.4%
------------------------------- ------------------------------ -----
Phu Nhuan Jewelry JSC Retail 5.1%
------------------------------- ------------------------------ -----
IDICO Corp JSC Real Estate 4.0%
------------------------------- ------------------------------ -----
Ho Chi Minh City Securities Financial Services 3.6%
------------------------------- ------------------------------ -----
Asia Commercial Bank Banks 3.3%
------------------------------- ------------------------------ -----
Total 62.4%
--------------------------------------------------------------- -----
Top 10 companies as at 30 June
2022 Sector % NAV
------------------------------- ------------------------------ -----
FPT Corporation Telecommunications 11.5%
------------------------------- ------------------------------ -----
Mobile World Investment Corp Retail 9.2%
------------------------------- ------------------------------ -----
Gemadept Corp Industrial Goods and Services 8.5%
------------------------------- ------------------------------ -----
Phu Nhuan Jewelry JSC Retail 8.1%
------------------------------- ------------------------------ -----
Sacombank Banks 5.6%
------------------------------- ------------------------------ -----
Khang Dien House Real Estate 5.4%
------------------------------- ------------------------------ -----
Hai An Transport & Stevedori Industrial Goods and Services 5.4%
------------------------------- ------------------------------ -----
Military Commercial Bank JSC Banks 5.2%
------------------------------- ------------------------------ -----
Vietnam Prosperity JSC Bank Banks 4.6%
------------------------------- ------------------------------ -----
Vietnam JS Commercial Bank
F Banks 4.0%
------------------------------- ------------------------------ -----
Total 67.5%
--------------------------------------------------------------- -----
Dynam Capital, Ltd.
13 October 2023
Top Five Portfolio Companies
FPT Corp ("FPT")
As at 30 June 2023
VietNam Holding's investment
10 December
Date of first investment 2012
Ownership 0.36%
Percentage of NAV 12.6%
Internal rate of return (annualised) 25.4%
Share information
Stock Exchange HOSE
13 December
Date of listing 2006
Market capitalisation (USD million) 4,027
Free float 84.4%
Foreign ownership 49%
Financial indicators (as at 31 December) 2022 2021
----------------------------------------- ------- -------
Capital (USD million) 465.1 390.1
Revenue (USD million) 1,866.0 1,532.7
EBIT (USD million) 288.1 232.8
NPAT (USD million) 275.2 229.9
Diluted EPS (VND) 4,429 3,618
Revenue growth 21.7% 18.6%
NPAT growth 19.7% 20.0%
Gross margin 39.0% 38.2%
EBIT margin 15.4% 15.2%
ROE 27.8% 26.7%
D/E 0.49 0.94
----------------------------------------- ------- -------
About the Company
Founded in 1988, FPT is a software developer that provides a
range of IT and telecom services to international and local
companies. The company has held the leading position in the local
IT industry in Vietnam since 1996, is a brand-name distributor and
retailer of IT and communication products, supplies broadband
internet and Pay-TV services, and operates educational programs in
Science, Technology, Education and Math ("STEM") for 108,100
students at various age-groups.
FPT has transformed itself from an IT services company to an
end-to-end digital transformation service provider and operates
from 290 offices and branches across 29 countries (as of 31
December 2022) and continues to expand its overseas presence. Its
digital transformation services' revenue reached a record USD 312m
in 2022. The company also owns and operates core telecoms
infrastructure in Vietnam with a main North-South backbone, which
has recently been upgraded from copper wire to fiber-optic
cables.
As of 31 December 2022, FPT employees 42,408 employees,
including 28,533 engineers and technology experts, across its eight
subsidiaries.
Recent Developments
Despite the challenging economic conditions, FPT achieved a
strong financial performance with revenue and profit after tax of
USD 1,866m and USD 275m, a 21.7% and 19.7% YoY growth,
respectively. Global outsourcing revenue was the main driver with
30.2% growth and the number of large contracts (over USD 5mn in
contract value) also rose significantly to 31 from 19 last year.
The US market grew the most, by 50% in 2022, and accounted for 35%
of the total global outsourcing revenue. In domestic services, FPT
products also performed well with sales up by 54.3% YoY and
reaching USD 48.78mn. The Education, Investment, and 'others'
segment achieved USD 160mn in revenue and USD 60mn in profit before
tax, an increase of 68.6% YoY and 23.8% YoY, respectively.
Sustainability Strategy
FPT has developed a sustainable development strategy to ensure
the balance of economic development, community support, and
environmental protection. In terms of objectives and activities,
FPT has referred to Vietnam's action plan to implement the 2030
commitments to sustainable development and GRI Sustainability
Reporting Standards.
ESG Achievements
FPT has chosen ten of the seventeen UN Sustainable Development
Goals ("SDGs") that align most with its vision and values: No
Poverty, Good Health & Well-being, Quality Education, Gender
Equality, Clean Water and Sanitation, Affordable and Clean Energy,
Decent Work and Economic Growth, Industry, Innovation, and
Infrastructure, Reduced Inequality, and Partnerships For The
Goals.
FPT released its comprehensive environmental, social, and
governance ("ESG") report for 2022 following GRI standards,
demonstrating its dedication to providing transparent information
to its investors, shareholders, and other stakeholders. The company
also strives to report on its water and energy consumption, indoor
air quality in the workplace, and diversity, equity, and inclusion
("DEI") metrics. FPT is in the top three Vietnamese Publicly Listed
Companies for corporate governance scores in the ASEAN region. The
company has been named on the ASEAN's CG score list for two
consecutive years.
ESG Challenges
FPT has set targets for building green office buildings but has
not yet started measuring its total carbon emissions. In addition,
as human resources are a key success factor for IT companies today,
FPT will need to find ways to attract and retain talent in the face
of industry competition.
Sacombank ("STB")
As at 30 June 2023
VietNam Holding's investment
Date of first investment 24 July 2020
Ownership 0.5%
Percentage of NAV 10.1%
Internal rate of return (annualised) 6.0%
Share information
Stock Exchange HOSE
Date of listing 13 July 2006
Market capitalisation (USD million) 2,382
Free float 94.5%
Foreign ownership 26%
Financial indicators (as at 31 December) 2022 2021
----------------------------------------- ------- -----
Capital (USD million) 799.3 810.3
Total Operating Income (USD million) 1,108.4 761.0
NPAT (USD million) 213.7 146.6
EPS (VND) 2,674 1,630
TOI growth 45.7% 1.7%
NPAT growth 45.8% 26.2%
ROA 0.9% 0.7%
ROE 13.8% 10.8%
CAR 9.5% 9.9%
NPL 0.9% 1.5%
Equity multiplier 15.3 15.2
----------------------------------------- ------- -----
About the Company
In 1991, STB became the first commercial joint-stock bank to be
established in Ho Chi Minh City. In 1996, it became the first bank
to issue shares to the public, then the first bank to be listed on
the Ho Chi Minh Stock Exchange in 2006. In 2012, it was subject to
hostile changes in the shareholder base and management teams,
followed by a merger with a weak bank in 2015. In 2017, a new
chairman and management team took over running the bank and
initiated a comprehensive restructuring plan approved by the State
Bank of Vietnam ("SBV"). Over the past five years, most of the
bank's legacy problems have been resolved, with the balance
expected to be completed by the end of 2023 or early 2024.
In 2022, STB ranked the tenth largest bank by assets in the
industry with an extensive network of 566 branches and transaction
points. STB implemented Basel II from 1 January 2020, committing to
more prudent risk management practices.
STB has won many awards, including "Most Innovative Retail Bank
in Vietnam" from International Business Magazine, "Vietnam's Best
bank for medium and small sized enterprises" from Asia Money, "Most
trusted bancassurance service provider in Vietnam 2022" from Global
Banking & Finances, "Best Workplaces in Asia in 2022" from HR
Asia.
Recent Developments
In 2022, STB's consolidated NPAT rose 45.8% YoY to USD 213.7
million, with total credit growing 13% YoY. The Non-Performing Loan
("NPL") ratio significantly improved to 0.9% of total credit from
1.5% a year before, while loan loss coverage increased to 131% of
NPLs. It has focused on clearing up bad debts, and the proportion
of the problem 'legacy' assets to total assets declined to 4.3% in
2022 from 28.1% in 2016.
Sustainability Strategy
STB has pursued a sustainability-oriented corporate governance
model. In 2022, it continued to meet all the criteria of the
Corporate Sustainability Index ("CSI") and was awarded the "Top 50
Corporate Sustainability Award 2023" from Nhip Cau Dau Tu Magazine.
STB has implemented environmental and social management system
("ESMS") in compliance with international standards.
STB was the first private bank to implement Directive No
03/CT-NHNN on promoting green credit growth, alongside three of
Vietnam's state-owned commercial banks, including Vietcombank, BIDV
and Agribank.
ESG Achievements
STB has improved its sustainability report by following the GRI
standards. In addition, the company's Board of Directors has
created committees and councils in compliance with the law and in
reference to best practices on corporate governance. The bank has
documented its environmental and social risk appetite and developed
a rigorous environmental and social impact assessment process. The
bank has also carried out an employee satisfaction survey.
ESG Challenges
STB is aware of the national net-zero commitment and reports its
key environmental performance indicators in its annual report,
however, it could do better by estimating and disclosing its total
carbon emissions and consider the application of the Task Force on
Climate-related Financial Disclosures ("TCFD") framework to
integrate climate into its governance and risk management
framework.
PV Technical Services JSC ("PVS")
As at 30 June 2023
VietNam Holding's investment
5 September
Date of first investment 2022
Ownership 1.2%
Percentage of NAV 6.9%
Internal rate of return (annualised) 25.5%
Share information
Stock Exchange HNX
20 September
Date of listing 2007
Market capitalisation (USD million) 657
Free float 48.5%
Foreign ownership 20.8%
Financial indicators (as at 31 December) 2022 2021
----------------------------------------- ----- ------
Capital (USD million) 202.7 205.4
Revenues (USD million) 694.2 612.9
EBIT (USD million) 28.2 24.6
NPAT (USD million) 40.0 32.2
Diluted EPS (VND) 1,575 887
Revenue growth 13.3% -29.9%
NPAT growth 24.2% 5.0%
Gross margin 5.6% 6.1%
EBIT margin 4.1% 4.0%
ROE 7.4% 5.9%
D/E 0.11 0.10
----------------------------------------- ----- ------
About the Company
PVS is a member of PetroVietnam ("PVN") and one of few domestic
providers of technical services for the Oil & Gas industry. It
is also a company that is transitioning towards renewable energy
services in a significant manner. It holds majority stakes in
offshore support vessels ("OSV") and floating storage ("FSO/FPSO")
vessels, with a total fleet of 18 vessels, provides specialised
mechanical and construction ("M&C") services and operates
maritime supply bases.
Recent Developments
PVS is transforming itself into a leading global contractor for
offshore wind power projects. In August 2022, PVS's subsidiary,
PTSC M&C, signed an MoU with Orsted to collaborate on offshore
wind projects in Vietnam. Orsted is currently the world's largest
developer of offshore wind power as it has a total installed
capacity of 7.5 GW with 11.8 GW either under construction or
awarded around the world. We believe the signing of this MoU will
help PTSC M&C to enter offshore wind power projects and develop
its capacity in this new field.
In addition, revenues from traditional services for the Block B
- O Mon natural gas project will be a growth engine for the next 5
years. Block B - O Mon is one of the largest gas projects in
Vietnam to date. According to PVN, an estimated USD 19bn will be
added to the state budget during the project's 20-year lifetime for
upstream and downstream projects.
Sustainability Strategy
Although classified in the oil and gas sector, PVS is
transitioning its business to supporting offshore wind power
projects. The company has signed MOUs with many partners to
cooperate in developing domestic as well as overseas projects. PVS
is 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. The company has also secured two contracts
overseas with total value of USD 320mn.
ESG Achievements
The company is trying to improve its governance structure and
has sent its CEO and Board Members to attend corporate governance
courses organised by the Vietnam Institute of Directors. The
Health, Safety and Environmental ("HSE") Management System of PVS
follows international standards and is certified by BSI Group, and
the company organises regularly HSE training for its employees.
There were no labour and environmental accidents recorded in
2022.
ESG Challenges
As a state-owned company, PVS needs to improve its Investor
Relations ("IR") activities. For example, much of the content on
the company's website is not available in English yet. Governance
issues can also emerge when the company is largely controlled by
the State.
Military Commercial Joint Stock Bank ("MBB")
As at 30 June 2023
VietNam Holding's investment
Date of first investment 25 May 2017
Ownership 0.2%
Percentage of NAV 5.7%
Internal rate of return (annualised) 12.5%
Share information
Stock Exchange HOSE
Date of listing 1 November
2011
Market capitalisation (USD million) 3,883
Free float 58.9%
Foreign ownership 23%
Financial indicators (as at 31 December) 2022 2021
----------------------------------------- ------- -------
Capital (USD million) 1,922.4 1,624.0
TOI (USD million) 1,933.1 1,587.6
NPAT (USD million) 769.8 568.3
EPS (VND) 3,856 3,133
TOI growth 21.8% 33.9%
NPAT growth 35.5% 52.4%
ROA 2.7% 2.4%
ROE 25.6% 23.5%
CAR 11.5% 11.3%
NPL 1.1% 0.9%
Equity multiplier 9.2 9.7
----------------------------------------- ------- -------
About the Company
MBB was founded in 1994 and is the sixth largest bank in Vietnam
by total assets. Its IPO took place in 2004 and it listed its
shares in November 2011. MBB is a well-regarded financial group
with six subsidiaries offering a full range of services, including
banking, securities, consumer finance, life insurance, non-life
insurance, fund management and asset management.
MBB is also one the most profitable banks in the sector,
bolstered by its advantages of extensive branch network, low
funding cost, and high CASA resulting from its large corporate
enterprise client base and support from its major shareholders. MB
has consistently committed to its prudent asset-quality management.
It was one of the first pilot banks in Vietnam to implement the
Basel II since April 2019.
MBB has won many awards, including "Brand Vietnam Awards 2022"
form Branch Finance, "Top 50 Best Listed Companies" from Forbes,
"Outstanding Performance Bank" from Napas and "Outstanding Bank for
Small and Medium Enterprises" from International Data Group
("IDG").
Recent Developments
In 2022, MBB's consolidated NPAT increased by 35.5% YoY to USD
769.8 million. Total credit expanded 25% YoY. Retail loans
constituted 48%, compared to 46% a year before, which implied a
robust growth of 32% YoY.
The Non-Performing Loan ("NPL") ratio increased slightly to 1.1%
in 2022 from 0.9% in 2021, meanwhile loan loss coverage was
maintained at a high level of 238% of NPLs.
Sustainability Strategy
MBB has carried out guidelines from the Government and the State
Bank on environmental protection, social responsibility, social
risk management in credit activities, and green growth. MB has
integrated environmental and social impact assessments into the
processes for credit appraisal, supervision, and monitoring.
MBB has prioritised green projects, agriculture and forestry
projects, environmental and social projects, high technology, and
safe agriculture programs, and provided preferential interest rates
and conditions. In addition, MBB complies with the State Bank's
regulations on lending to prioritised sectors including
agriculture, export, supporting industries, small and medium-sized
enterprises ("SME"s) and high technology businesses.
ESG Achievements
MBB is considered one of the most prudent and conservative banks
in the industry. It was among ten pilot banks to implement Basel II
since 2014, officially integrated these standards in 2016 and fully
applied the three pillars of the Basel II in 2020.
MBB was awarded the "Outstanding Bank for Green Credit" for its
pioneering role in green credit promotion and contribution to the
country's sustainable development and environmental protection. In
2022, green finance accounted for 8.7% of the total loan book.
ESG Challenges
MBB faces the competing challenges of maintaining loan quality
across its growing loan book and embedding ESG into its strategy in
a robust manner. Since 2020, MBB introduced its sustainable
development framework and outlined key opportunities and challenges
in terms of corporate governance and business ethics, emission
reduction, safety management and staff's wellness, environment,
community, and social responsibilities.
Vietcombank ("VCB")
As at 30 June 2023
VietNam Holding's investment
Date of first investment 12 August
2022
Ownership 0.03%
Percentage of NAV 5.7%
Internal rate of return (annualised) 24.5%
Share information
Stock Exchange HOSE
Date of listing 30 June 2009
Market capitalisation (USD million) 20,066
Free float 25.1%
Foreign ownership 24%
Financial indicators (as at 31 December) 2022 2021
---------------------------------------------------------- ---------- ---------
Capital (USD million) 2,006.6 1,594.2
Total Operating Income (USD million) 2,886.7 2,434.1
NPAT (USD million) 1,268.6 946.3
EPS (VND) 5,821 4,162
TOI growth 18.6% 14.5%
NPAT growth 34.1% 18.3%
ROA 1.9% 1.6%
ROE 24.4% 21.7%
CAR 10.0% 9.3%
NPL 0.7% 0.6%
Equity multiplier 13.4 13.0
---------------------------------------------------------- ---------- ---------
About the Company
VCB was founded in 1963 and is one of four State Owned
Commercial Banks ("SOCB"s) in Vietnam, with the state owning of
74.8% of the company. Its IPO was in 2007 and it listed its shares
on the Ho Chi Minh Stock Exchange in 2009. In 2011, Japan Mizuho
Corporate Bank become its strategic partner with a stake of 15%. As
of 2022, VCB is the third largest bank in Vietnam by total assets,
with a market share of 9.6% of all loans and 10.7% of all
deposits.
As a SOCB, VCB has significantly contributed to the stability
and growth of the domestic economy, upholding the role of a major
foreign trade bank in facilitating efficient domestic economic
growth and being a 'thought leader' in the national and regional
financial community. VCB is a universal bank, providing a full
range of financial services.
VCB has won a variety of significant awards, including "Top 10
Strongest Brands in Vietnam" from the Vietnam Economic Review; "Top
10 Prestigious Commercial Banks" from Vietnam Report; "Best Risk
Management Bank" from International Finance Magazine, "Strongest
bank by Balance sheet" from Asian Banker. It was also the only
Vietnamese bank in The Banker's global "Top 500 leading banks", the
only Vietnamese Bank in the Asian Banker's list of "Top 30
Strongest Banks in Asia Pacific region" from the Asian Banker, and
the only Vietnamese company on Forbes' "The World's Top 1,000
Public Companies".
Recent Developments
In 2022, VCB's consolidated NPAT increased 34.1% YoY to
USD1,268.6 million, the highest level of profitability among
Vietnam's banks. Its total loan book increased by 19% YoY and total
deposits increased by 9% YoY, leading to a year-end stipulated loan
to deposit ratio of 74%. Despite supporting its borrowers by
quickly cutting interest rates, VCB was able to expand its Net
Interest Margin ("NIM") from 3.15% in 2021 to 3.39% in 2022 by
growing its retail lending business. VCB was also able to maintain
a robust level of growth in its earnings, without sacrificing
prudence - the Non-Performing Loan ("NPL") ratio was just 0.7% and
the loan loss coverage of NPLs was 317%.
Sustainability Strategy
VCB's sustainability report was in line with the Global Report
Initiative ("GRI") and reported on general information, economic
standards (GRI 200), environmental standards (GRI 300), social
standards (GRI 400), and disclosed information on its corporate
governance policy (GRI 100).
The bank has also embedded the State Bank of Vietnam's
guidelines for environmental risk management in its credit
activities and is trying to promote social awareness of climate
change and environmental protection to its stakeholders.
ESG Achievements
In 2022, VCB's efforts to make more 'green' loans and support
sustainable transition for key industries accounted for more than
4% of its total loan book, three times the level in 2019. It has
also contributed an average of USD 20 million per annum to social
welfare activities since 2000.
VCB was selected as the bank with the best working environment
in Vietnam according to the survey results of "Top 100 Best
Workplaces in Vietnam".
ESG Challenges
VCB has consistently proven itself as the leading Vietnamese
bank in term of quality and operational efficiency. However, the
weak economic environment poses challenges to banks that are trying
to balance maintaining asset quality with seeking a greater
exposure to newer green finance initiatives, especially those in
the renewable energy sector.
Sustainability Report
As the whole world is experiencing exponential change in this
post-pandemic era, we can see how challenging it is to navigate the
risks and the opportunities. However, if there is one thing certain
it is that the COVID-19 years accelerated the focus on
environmental, social and governance ("ESG") matters, and this is
true in Vietnam. As the public's expectations continue to rise and
change fast, building sustainable business strategies is no longer
simply an option for any company.
The 2022 Edelman Trust Barometer global report ([3]) on more
than 36,000 respondents in 28 countries shows that businesses are
increasingly expected to fill the voids left by governments and
policy makers on climate change, economic inequality, workforce
reskilling and racial injustice. According to the survey results,
nearly 60% of consumers buy brands based on their values and
beliefs, almost 60% of employees choose a workplace based on shared
values and expect their CEO to take a stand on societal issues, and
64% of investors look to back businesses proven to be aligned with
their stated values.
Nevertheless, 2022 was not a favourable year for ESG funds and
their performance suffered. After years of dramatic growth,
investment in ESG securities has declined sharply, with research
firm Morningstar reporting a 70% drop in inflows compared to the
year before and the number of new funds launched down by 60%. The
overall downfall in many stock markets is certainly a factor, but
the retreat also coincides with a backlash against the entire ESG
concept in the United States, which stems mainly from the argument
that some financial companies no longer make decisions in the best
interest of their shareholders or clients, but instead use their
financial power to push forward social and political agendas.
In Europe, several initiatives have been delayed, including the
development of social and transition taxonomies and the adoption of
remaining technical screening criteria for the EU Green Taxonomy.
In addition, the Russia-Ukraine conflict has arguably shifted
political dynamics around eligible activities for the Green
Taxonomy. Noteworthy, in this regard, is the inclusion of gas and
nuclear under certain criteria.
New Wave of Regulatory Forces
Despite shifting priorities, there have been large steps taken
globally in implementing further ESG regulations. Key trends
include increased greater disclosure, a renewed focus on
'greenwashing', and the expansion of related priorities from
climate change to other environmental issues, such as biodiversity.
Notable is the Taskforce for Nature-related Financial Disclosure
("TNFD"), which has been developed to supplement the TCFD by
calling for organisations to report and act on evolving nature
related risks beyond climate change, with the aim of supporting a
shift in global financial flows away from nature-negative outcomes
and toward nature-positive outcomes. TNFD's 40 Taskforce Members
represent financial institutions, corporates and market service
providers with over USD 20trn in assets under management.
For Vietnam, rapid urbanisation and industrialisation have had
detrimental impacts on the environment and natural assets. Climate
change, urban solid waste, and air pollution are key environmental
issues that the Vietnamese government is keen to address over the
next few years. In fact, 2021 and 2022 saw significant changes in
Vietnam's green policy commitments. The country's ambitious
net-zero targets for 2050 could be seen as a milestone, paving a
way for the transformational interventions needed to address
climate change challenges, including the development of cleaner
transportation and energy systems.
Since the target was set, the government has taken firm steps in
building a legal corridor for responding to climate change issues
and implementing the commitments made. Decree No.06/2022/ND-CP in
January 2022 includes regulations on the reduction of greenhouse
gas ("GHG") emissions and protection of the ozone layer. This new
legislation specifies how companies will be given guidance on the
scheme and undergo a pilot operation that is followed by a carbon
credit trading market due to being formally launched in 2028.
Additionally, in June 2022, Vietnam's government approved the
circular economy development scheme and set several ambitious
targets. The scheme aims to reduce the intensity of GHGs per GDP by
at least 15% by 2030. By 2025, 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.
In terms of energy development, in December 2022, the Vietnamese
government finalised the Just Energy Transition Partnership with
the G7 and others. The partnership will mobilise an initial USD
15.5 billion of public and private finance over the next three to
five years and aims 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 see peak GHG
emissions by 2030 instead of 2035 and reduce its annual power
sector emissions by 30% by significantly increasing its reliance
renewables.
In mid-May this year, the long-awaited National Power
Development Plan VIII ("PDP8") was approved by the Prime Minister,
setting out ambitious goals for renewable energy and liquefied
natural gas ("LNG") expansion in the next three years to phase out
coal after 2030. The scale of the transition needed to meet the
goals of PDP8 through 2030 and Vietnam's commitment to net-zero
emissions by 2050 means there are enormous opportunities in the
energy sector, especially in developing energy storage
technologies, such as lithium batteries, pumped hydropower, heat
storage, and smart grids that aim to ensure a high level of
stability and integration of renewable energy in the power
system.
Following the ASEAN Taxonomy for Sustainable Finance, Vietnam's
Green Taxonomy is also under the stakeholder consultation process
for finalisation. The Green Taxonomy for green credit and green
bond covers eight sectors, 83 green economic activities and green
investment projects with environmental screening criteria,
thresholds, and indicators, contributing to the eight environmental
goals in the Law on Environmental Protection.
ESG Moving up the Corporate Agenda in Vietnam
ESG awareness in Vietnam might have come later than in the US
and Europe, but the intuition and application of practices have
been growing steadily in recent years. According to PWC Vietnam's
ESG Readiness report 2022, about 80% of Vietnam's companies have
made related commitments or plan to do so in the next two to four
years. The top reason cited for pursuing ESG is "brand image and
reputation" (82 %), while the second most cited reason is 'to
remain competitive' (68%). Another report by KPMG Vietnam,
Vietnam's Customer Experience Excellence 2022, shows that up to 93%
of customers in Vietnam are willing to pay more for ESG-integrated
products and services. The report shows Vietnamese consumers are
becoming conscious of lifestyle choices and aware of the effects of
their consumption. These survey results speak volumes about the
increasing interest in ESG in Vietnam.
The country continues to emerge as an important alternative
manufacturing base to China, and its participation in free trade
agreements created more opportunities for enterprises to be part of
the global supply chain. ESG considerations are prerequisites for
many such deals, and so compliance is necessary to remain
competitive with developed markets where green economy and
compliance standards are being continuously upgraded. Enhanced
sustainability reporting, following global standards, and climate
related disclosures, and preparing infrastructure for a clean
energy transition are the key ESG aspects that Vietnamese
enterprises need to focus on in 2023 and beyond to meet the demand
of investors, consumers, and other stakeholders.
As a long-term, responsible investor, ESG integration has always
been at the heart of our investment approach. With our motto 'do
more, measure more and report more', we have made substantial
progress for the past one year in our ESG journey. Our PRI
Transparency Report for 2021 received five-star scores, and our
very first climate-risk assessment report was featured in the Asia
Investor Group on Climate Change ("AIGCC")'s Report on Net-zero
investment in Asia, the 4(th) edition. We also supported the
successful inaugural ESG Investment Conference in Vietnam as a gold
sponsor of the event held in early June this year. Our Investment
Manager continues to actively engage with companies on improving
ESG practices of investee companies and bring the ones with good
practices into the spotlight. What's more, the Investment Manager
has developed a rigorous ESG rating system that can be used for
both company assessment and engagement.
VNH's New ESG Scorecard
After almost two years of pilot testing, our Investment Manager
has developed its own holistic ESG rating framework to be included
throughout the investment process. The new ESG Scorecard has 80
questions covering a wide variety of ESG factors that we consider
material to a company from an investor perspective, including board
of directors structure and composition, shareholder rights, risk
management, internal control, employee policies and customer
rights, diversity and inclusion, community outreach, environmental
protection, and climate change commitments. With the new scorecard,
we expect to understand potential risks and opportunities of an
investee company better through an ESG lens. In fact, during the
financial year, we have made several decisions to increase or
decrease our investment value in several stocks based on these ESG
factors, such as discovering emerging opportunities in the clean
energy transition or finding out an issue in customer privacy that
might cause a drop in a stock value.
Vietnam's Evolving Climate Change Initiatives
According to the recent report by the United Nations in March
2023, Vietnam remains one of the 20 most vulnerable countries to
climate change. In 2022, Vietnam experienced some of the worst
environmental impacts it had seen since 2007 from typhoon Noru and
tropical storm Sonca. The report highlights the risk of further
rapid decline in biodiversity, depletion of natural resources and
damaged ecosystems, making the country more vulnerable to climate
change and its socioeconomic implications. The country was
estimated by the World Bank to lose about USD 10 bn in 2020, or
3.2% of its gross domestic product, to climate impacts. By 2050,
the costs to the economy generated by climate change could total as
much as USD 523 bn. The World Bank suggests that the current
economic models are not the ones that will bring Vietnam to a
green, sustainable, and equitable future ([4]) . Although the
country is not among the highest GHG emitters globally, it has
shown one of the fastest growth rates in per capita GHG emissions
since Vietnam's economy is powered primarily by fossil fuels.
Therefore, the country needs systematic changes if it is to
effectively address the impacts of climate change.
At COP26, Vietnam made a strong commitment to achieving its
net-zero target by 2050. Since that conference in Glasgow in 2021,
the government's efforts in driving its energy strategies and
relevant policies have shown the country's willingness to address
climate change issues by itself. According to Vietnam's National
Climate Change Strategy ("NCCS") to 2050, announced by the
government in July 2022, Vietnam's GHG emissions will peak in 2035
and reduce rapidly by 60-90% across all sectors. Later in November
2022 , the Nationally Determined Contribution ("NDC") stated to the
UNFCCC that by 2030 Vietnam will reduce its GHG emissions by 15.8%
unconditionally (by its own national effort and resources) and by
43.5% conditionally (with international support).
The Fund's Stewardship Role
As a long-term investor focused on the Vietnamese market, we
support the efforts of the government and the business sector in
Vietnam to address climate change and its socioeconomic effects.
During the financial year, our Investment Manager has been actively
contributing to the national and regional dialogue to drive forward
the net-zero transition. Our efforts for managing the portfolio's
carbon emissions and climate risks have been featured in the
AIGCC's 4(th) edition of Net-zero Investment, and the Investment
Manager had the opportunity to present the key highlights of
Vietnam's climate change and energy policies to the Asian
investment community in the workshop hosted by AIGCC.
Climate change is also the main topic for engagement with
companies in our portfolio. Followed by the webinar in 2022, the
Investment Manager has been working with companies to help them
prepare for their ESG and carbon footprint reports. We are happy to
see that the number of portfolio companies reporting their total
carbon emissions has increased this year, some of which have
decided to do so after our engagement meetings, for example, PNJ
and GMD.
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 following 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
2023 is the second year we have assessed the climate risks of
the portfolio and this time with lessons learnt from the first one.
VNEEC, a Vietnamese environmental consultant, was engaged to
estimate total carbon emissions of all listed companies in the VNH
portfolio as of 31 December 2022. 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 went deeper into estimating the
impact value of companies that are more susceptible to transition
risks, according to the assessment report, and integrated that data
into our financial models. Our response to the core elements of the
TCFD recommendations are summarised in the following sections.
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 involvement from peers. 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 2022 (43% of the NAV) is allocated in the
financial and information technology sector. This sector is
categorised as "low" transition risks, while another 41% of the
portfolio is invested in sectors with "moderate" exposure
ratings.
In the financial year, the Fund has invested in two stocks in
the oil and gas sector, which is categorised as "high" risk
exposure. However, PVS, the largest of these two companies, 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.
The portfolio's implied temperature rise calculation is based on
the two models developed by the Climate Action Tracker ([5]) . The
first is the domestic modeled pathway, which is in line with the
Vietnamese government's net-zero commitment made in 2021 and
centered on Vietnam reducing its emission to 86.8 MtCO(2) e
(excluding LULUCF ([6]) in 2050) to reach the 1.5degC target. The
data for this was updated in 2022. The second model is the
effort-sharing model, which sets the budget considering each
country's economic capabilities. Based on the calculation of VNEEC,
VNH's 2022 portfolio is 3.71(0) C and 2.21(0) C for the domestic
and the effort-sharing pathways, respectively. This means that the
implied temperature rise of VNH's 2022 portfolio is higher than
2(0) C and is not aligned with the effort-sharing model nor the
domestic one. Nevertheless, the report by VNEEC indicates that
VNH's implied temperature rise is still better than those in
developed and emerging markets.
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 29).
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"),
and in 2020 and 2021, the portfolio's footprint was an average of
40% below the index's. In 2022, this target was not achieved due to
the Fund's investment in two oil and gas stocks that we see having
great potential in transitioning to net-zero. As explained above,
the largest of these, PVS, has concrete plans in place to adapt its
business model in support of clean energy, and the Investment
Manager has been carefully monitoring the company's new
projects.
-- We will continue to work collaboratively to keep the global
average temperature from rising above 2 deg C or higher than
pre-industrial levels. Our target is measured by the implied
temperature rise of the portfolio and the number of climate
initiatives that we support through communications, policy
dialogue, company engagement, and networking. Although the implied
temperature rise of the 2022 portfolio is higher than 2(0) C, we
are offsetting this by actively joining in policy dialogue,
supporting climate initiatives, and accelerating our engagement
with companies to help them with their own transitions.
-- From 2022 onwards, we will annually conduct more quantitative
analysis to assess the climate risk exposure of the portfolio and
how such risks are translated into financial impacts, for example,
the potential financial loss from physical risks, carbon price and
their effect on performance. We will also identify businesses and
investment opportunities that can benefit from this transition risk
process. We use the Weighted Average Carbon Intensity ("WACI")
metric to assess the portfolio's exposure to carbon-intensive
companies expressed in tCO(2) /$M revenue, and this is calculated
at 178.23 tCO(2) /$M for VNH's 2022 portfolio based on Scope 1 and
2 emissions of all companies. VNH's WACI is more impressive than
the MSCI Emerging Market Index's, being approximately 51% less
carbon intensive, and slightly higher than the MSCI World Index
which only includes the developed countries, such as the US,
Western Europe, and Japan.
-- 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 VNAS. The VNH portfolio's
carbon footprint in 2022 is 5.6% higher than the VNAS benchmark.
More specifically, the total carbon emissions of the VNH 2022
portfolio are 20,539 tCO(2) e, whereas a comparable investment in
VNAS would produce 19,455 tCO(2) e. In other words, the VNH
portfolio released 1,084 tCO(2) e higher than the VNAS Index
benchmark. The portfolio's sector allocation resulted in -14.9%
(equal to 2,906 tCO(2) e) less carbon-intensive emissions than the
benchmark's weighted emission. However, the portfolio's stock
selection is 20.5% (equal to 3,990 tCO(2) e) more carbon-intensive
than the benchmark's weighted emission. In terms of carbon
emissions, the two new oil and gas equities are the primary
contributors to the portfolio's underperformance against the VNAS
benchmark.
VNH Portfolio VNAS benchmark Difference between
VNH Portfolio
vs.
VNAS benchmark
-------------------------- -------------- --------------- -------------------
Total Emissions Scope 1
and 2 (tCO(2) e) 20,539 19,455 1,084
-------------------------- -------------- --------------- -------------------
Total Emissions Scope 1,
2 and 3 (tCO(2) e) 40,879 39,978 901
-------------------------- -------------- --------------- -------------------
Carbon footprint (tCO(2)
e/ USDM Invested) 194.83 184.54 5.6%
-------------------------- -------------- --------------- -------------------
The UN's 17 Sustainable Development Goals
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 less than a decade 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 45(th) 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 can start with in 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. In their 2022 annual report, FPT reported on the 10
SDGs that the company focuses on most with specific results for
each goal.
GMD, another company in our portfolio, 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 at 30 June 2023 accounts
for around 30% of VNH's portfolio, has made significant progress in
contributing to the SDGs in recent years, for example, by providing
more loans and products to support climate change, energy
transition and underprivileged groups. Vietnamese banks also have
been improving their sustainability disclosures. For example,
Vietnam Prosperity JSC Bank ("VPB"), the "greenest" bank in our
portfolio, has taken many steps to improve its environmental and
social management by following international standards and adopting
the TCFD framework. VPB has set targets to reach net-zero emissions
in its operations by 2027 and plans to meet this by maintaining its
loan balance for coal related activities under 0.5% of total
portfolio, raising a minimum of USD 1bn in green finance to support
clients in their climate change efforts; and ultimately aiming to
achieve zero-loan balance for coal related activities and net-zero
financings by 2050. STB, our second largest holding, has been
actively embedding the SDGs into its business strategy and risk
management system and reports its progress on this through its
adoption of the GRI standards.
Among our portfolio companies, CTG, FPT, MBB, PNJ and VPB are
the ones in the Vietnam Sustainability Index ("VNSI") 2023, which
features the top 20 sustainable listed companies on HOSE measured
in terms of their ESG contributions. DGW, PNJ and CTG are investee
companies that made it in the top 100 sustainable companies in
Vietnam having been included in the Corporate Sustainability Index
2022 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 corporate governance practices. 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.
With Vietnam's equity market coming closer to being upgraded to
an emerging market status, and therefore potentially attracting
even more foreign investment, many companies have applied the
World's 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 at our portfolio companies. At least three
companies in our top ten holdings have set up a dedicated board
committee to address key ESG matters, and many have sent their
directors to corporate governance training courses, hosted by the
IFC and VIOD, to help them drive effective sustainable
strategies.
In addition, we have been pleased to see enhanced investor
relations activities and greater transparency across all our
portfolio companies. For example, with 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 standards, and this includes
better investor relations support to address questions from
investors. FPT, our biggest holding, is in the Top 3 Vietnamese
Publicly Listed Companies for best corporate governance scores in
the ASEAN region. It has been named on the ASEAN's CG score list in
two consecutive years.
Dedicated Company Engagement Program
The Investment Manager actively sets up 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 GMD and PNJ to help improve their ESG
practices with practical solutions in the short and medium term.
Through different conversations, we saw the willingness and strong
commitment from the boards of these companies in driving the
overall sustainability agenda for their business. Both PNJ and GMD
have established an ESG committee under the board and developed
three-year plans for carrying out a sustainability strategy.
Shareholder Voting
During the financial year, the Company voted at the Annual
General Meetings ("AGM") on every portfolio company in which it
held an equity position. This year the AGMs were held in both
online and offline modes. The Investment Manager attended 22 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 2021 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
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
Dynam Capital, our Investment Manager, is a member of AIGCC.
Dynam Capital signed on the 2022 Global Investor Statement to
Governments on the Climate Crisis with more than 602 investors
representing almost USD 42tn in assets under management to raise
their climate ambition 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, the Investment Manager promoted greater
ESG awareness in Vietnam through supporting Vietcetera and Raise
Partners, the two young organisations that hosted the very first
ESG Investor Conference in Vietnam. The Investment Manager also
helped strengthen the sustainability conversation in Vietnam
through published articles in the Vietnam Investment Review ("VIR")
magazine, 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 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 The Board is regularly briefed
trading nation, and the changes on political and economic developments
in terms of international trade, by the Investment Manager. The
disruption to supply chains and Investment Manager publishes a
impositions of tariffs could impact monthly report on the Company
directly and indirectly the Vietnamese which includes information and
economy and the companies in which commentary on the macroeconomic
the Company is invested. The Vietnamese developments in Vietnam.
economy can also be impacted by The inherent liquidity levels
the global-macro economic conditions, in the portfolio have been considered
and also geopolitical tensions. explicitly in the viability of
The Vietnamese capital markets the Company and the Board is reasonably
are relatively young, and liquidity satisfied that even in periods
levels can change abruptly responding of distress and low liquidity
to changes in the behaviour of there would be an adequate level
domestic and international investors. of assets that could be realised
Parts of the portfolio may be to meet the liabilities of the
prone to enhanced liquidity and Company as they fall due.
price risk. 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 Vietnam is currently classified The Investment Manager keeps shareholders
Sentiment as a Frontier Market by MSCI, and other potential investors
and the timetable for any inclusion regularly informed on Vietnam
as an Emerging Market is unsure. in general and the Company's portfolio
Investor attitudes to Frontier in particular. At each Board meeting
and Emerging Markets can change, the Board receives reports from
leading to reduced demand for the Investment Manager, from Cavendish
the Company's shares, and an increase Securities plc, its broker, and
in the discount to NAV per share. 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 a premium listing
on the Main Market 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 The performance of the Company's The Board receives regular reports
Performance investment portfolio could be on the performance of the portfolio
poor, either absolutely or in and its underlying assets. The
relation to the Company's peers, Investment Manager reports to
or to the market as a whole. the Board at each Board meeting,
and the Board monitors the performance
of the Investment Manager.
Fair Valuation The risks associated with the The Board reviews the valuation
fair valuation of the portfolio of the portfolio with the Investment
could result in the NAV of the Manager regularly.
Company being misstated. The quoted The daily estimated NAV is calculated
companies in the portfolio are by the Investment Manager.
valued at market price, but it The monthly NAV is calculated
may be difficult to liquidate, by the Fund Administrator.
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.
------------------ ------------------------------------------------ ---------------------------------------------
Investment The fund management activities The Board maintains a close contact
Management are outsourced to the Investment with the Investment Manager and
Agreement Manager. If the Investment Manager reviews the performance of the
became unable to carry out these Investment Manager on a regular
activities or if the Investment basis.
Management Agreement was terminated,
there could be disruptions to
the management of the portfolio
until a suitable replacement is
found.
------------------ ------------------------------------------------ ---------------------------------------------
Operational The Company has no employees and The Board receives regular reports
is dependent on a number of third from the Investment Manager and
parties for the provision of services Fund Administrator on their policies,
(including Investment Management, controls, and risk management.
Fund Administration and Custody).
Any control failures or gaps in
the services provided could result
in damage or loss to the Company.
------------------ ------------------------------------------------ ---------------------------------------------
Legal and Failure to comply with relevant The Company is administered in
Regulatory regulation and legislation in Guernsey by a Fund Administrator
relevant jurisdictions may have which reports to the Board at
an impact on the Company. Although each Board meeting on compliance
there are compliance policies matters. The Board receives training
(including anti-bribery policies) and updates on compliance matters.
in place at the Company, the Investment The Investment Manager is regulated
Manager and all service providers, in Guernsey and has extensive
the Company could be damaged or compliance and risk management
suffer losses if any of these policies in place.
polices were breached.
------------------ ------------------------------------------------ ---------------------------------------------
Pandemic The global reach, impact and disruption The Board and the Investment Manager
Risk to markets resulting from the learned many valuable lessons
recent outbreaks of COVID-19 showed during COVID-19 - the Board remains
the devastating effects that a in regular contact with the Investment
global pandemic could cause. Lockdowns, Manager, receiving regular updates
quarantine measures and restrictions on the development of any new
on travel caused sustained global threats whilst continuing to ensure
economic disruption and the slowdown that the key service providers
in growth caused some industries to the Company all have functional
and companies to face severe financial Business Continuity Plans.
pressures.
------------------ ------------------------------------------------ ---------------------------------------------
Climate Climate change is happening faster The Board, through the Investment
Risk than models earlier predicted, Manager, has engaged a specialist
threatening the safety of billions consulting firm in Vietnam to
of people on the planet. Vietnam help estimate the portfolio's
is one of the twenty countries carbon footprint and identify
most vulnerable to climate change. the carbon-intensive sectors.
The country's diverse geography The Investment Manager has undertaken
means it is hit by sea level rise, to analyse the physical and transition
typhoons, landslides, flooding risks of climate-sensitive industries
and droughts, and weather events to develop an appropriate investment
are expected to worsen in coming and engagement strategy and to
years. Two types of climate-related encourage investee companies to
risks have been identified. (1) do more on climate-related risk
Physical risks: sea level rise, assessment and disclosures. The
floods and typhoons that put infrastructure Investment Manager monitors investee
Climate or real estate companies with companies that are identified
Risk(continued) projects in coastal areas or low-lying to be at high climate risk.
levels at higher risk from physical The Investment Manager is a member
impacts of climate change. of the Asia Investor Group on
(2) Transition risks: climate Climate Change and keeps abreast
policy and rising carbon prices of the changes in policies that
may cause higher prices and impact may impact transition and other
the viability of companies that climate-related risks. The Board
rely on fossil fuels or those is in regular contact with the
in carbon intensive activities Investment Manager and receives
and may necessitate a significant, reports through the ESG Committee
and costly, technology shift. and the Audit and Risk Committee.
------------------ ------------------------------------------------ ---------------------------------------------
Emerging New risks beyond those identified The Board reviews the risk matrix
Risks as Principal Risks can develop. and risk register that captures
These Emerging Risks may have and tracks emerging risks as part
a detrimental or existential impact of its overall risk management
on the Company. 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 and is a UK resident.
Philip Scales (Audit and Risk Committee Chairman)
Mr Scales has over 40 years' experience working in offshore
corporate, trust, and third-party fund administration. For 18
years, he was managing director of Barings Isle of Man
(subsequently to become Northern Trust) where he specialised in
establishing offshore fund structures, mainly in the closed-ended
arena (both listed and unlisted entities). Mr Scales subsequently
co-founded FIM Capital Limited where he is Deputy Chairman. He is a
Fellow of the Institute of Chartered Secretaries and Administrators
and holds a number of directorships of listed companies and
collective investment schemes. He is an Isle of Man resident.
Sean Hurst (Senior Independent Director and Remuneration and
Nomination Committee Chairman)
Mr Hurst was co-founder, director and chief investment officer
of Albion Asset Management, a French regulated asset management
company, from 2005 to 2009. He is an experienced
multi-jurisdictional director including roles at Main Market and
AIM-listed funds and numerous offshore and UCITS funds. He is
currently non-executive chairman of both JPEL Private Equity Ltd
and DCI Advisors Ltd. Mr Hurst was formerly a non-executive
director of AIM-listed ARC Capital Holdings Ltd, The CIAM Fund
(SICAV) and The Satellite Event-Driven UCITS Fund. He holds an MBA
in Finance from CASS Business School in London and is a resident of
France.
Damien Pierron (Management Engagement Committee Chairman)
Mr Pierron is currently Managing Partner at Ankaa Ventures, a
Venture Capital firm active in Seed stage in Europe. In his last
position, he was a managing director in Societe Generale. Mr
Pierron has over 20 years' experience in M&A and Private equity
gained at, among others, Lafarge Holcim, OC&C Strategy
Consultants, Natixis and Societe Generale. He is a CFA
charterholder and holds an Engineering Degree in Mathematics,
Physics and Economy from Ecole Polytechnique in Paris and a
Master's Degree in Quantitative Innovation from Ecole Nationale
Superieure des Mines de Paris. He is a Dubai resident.
Saiko Tajima (Environmental, Social and Governance 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 and is a UK
resident.
Disclosure of D irectorships in Public Companies Listed on
Recognised Stock Exchanges
Name Company Name Stock Exchange
------------- ---------------------------------- ---------------
Sean Hurst JPEL Private Equity Ltd London
DCI Advisors Ltd London
------------- ---------------------------------- ---------------
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 considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council and the Guernsey Financial Services
Commission provides more relevant information to Shareholders. The
Board considers by reporting against the AIC Code, they are meeting
their obligations under the 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 2023. Key issues affecting the Company's corporate
governance responsibilities, how they are addressed by the Board
and application of the AIC Code are presented below.
The AIC Code includes a provision relating to the appointment of
a Senior Independent Director and the Board confirms that Sean
Hurst is the appointed Senior Independent Director of the Company.
Liaison with Shareholders is dealt with mainly by the Chairman of
the Company and the Senior Independent Director working closely
with the Company's Advisors.
Directors' Responsibilities to Stakeholders
Section 172 of the 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 36 of the corporate governance
section of this report.
Board Independence and Composition
The Directors are all non-executive and the majority are
independent . Four of the Board members were appointed in
September/October 2017 following the retirement of the previous
Board and the fifth member was appointed in May 2019 following the
retirement of a Board member at the 2018 AGM.
Mr Funaki is a Director of Discover Investment Company which
holds 1,415,776 ordinary shares in the Company representing 5.01%
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
Sean Hurst 5,312
Philip Scales 10,077
Damien Pierron 4,644
Saiko Tajima 5,000
--------------- ------
The Board reviews the independence of the Directors regularly
and at least annually.
The 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/ No of Board Percentage No of senior Number Percentage
sex Members of Board positions on in Executive of Executive
the Board team Team
------------------ ------------ ----------- -------------- -------------- --------------
Male 4 80% 4 - N/A
------------------ ------------ ----------- -------------- -------------- --------------
Female 1 20% 1 - N/A
------------------ ------------ ----------- -------------- -------------- --------------
Not specified - - - - N/A
------------------ ------------ ----------- -------------- -------------- --------------
Ethnic Background No of Board Percentage No of senior Number in Percentage
Members of Board positions on Executive of Executive
the Board team Team
---------------------- ------------ ----------- -------------- ----------- --------------
White British
or other (including
other minorities) 3 60% 3 - N/A
---------------------- ------------ ----------- -------------- ----------- --------------
Asian/ Asian British 2 40% 2 - N/A
---------------------- ------------ ----------- -------------- ----------- --------------
Mixed/ multiple - - - - N/A
Ethnic groups
---------------------- ------------ ----------- -------------- ----------- --------------
Not specified - - - - N/A
---------------------- ------------ ----------- -------------- ----------- --------------
The Board notes that as at 30 June 2023 it does not currently
meet the target in relation to the number of women on the Board but
will be considering the target when future Board appointments are
made.
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 31.
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, 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:
Remuneration and Environmental, Social and
Board Audit and isk Nomination Management Engagement Governance
--------------- ----- -------------- -------------------------- --------------------- -------------------------
Hiroshi Funaki 4 (4) 4 (4) 2 (2) 2 (2) 2 (2)
Sean Hurst 4 (4) 4 (4) 2 (2) 2 (2) 2 (2)
Philip Scales 4 (4) 4 (4) 2 (2) 2 (2) 2 (2)
Damien Pierron 4 (4) 4 (4) 2 (2) 2 (2) 2 (2)
Saiko Tajima 4 (4) 4 (4) 2 (2) 2 (2) 2 (2)
--------------- ----- -------------- -------------------------- --------------------- -------------------------
Tenure of Board Members and Succession Planning
The Company has adopted a formal policy that neither the
Chairman nor any other Director shall serve for more than 9
years.
Re-election of Directors
The Board has agreed that all Directors should submit themselves
for annual re-election.
Mr Hurst, Mr Funaki, Mr Pierron, Mr Scales and Ms Tajima will
all stand for re-election at the 2023 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 2023.
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 2023, an external
facilitator should be appointed to undertake the evaluations.
Professional Development and Training
New Directors are provided with all relevant information
regarding the Company's business and given the opportunity to meet
with key functionaries prior to appointment. They are also provided
with induction training.
It is the responsibility of each Director to ensure that they
maintain sufficient knowledge to fulfil their role and so are
encouraged to participate in seminars and training courses where
appropriate.
Committees of the Board
Four Committees have been formed, an Audit and Risk Committee, a
Remuneration and Nomination Committee, a Management Engagement
Committee and an ESG Committee. Since September/October 2017 the
Company has been through a period of considerable change and 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 34. 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 38
to 39.
Remuneration and Nomination Committee
The Remuneration and Nomination Committee is chaired by Sean
Hurst 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 AIC Code includes a provision relating to the appointment of
a Senior Independent Director of which Sean Hurst occupies this
role.
No new Board appointments were considered during the year, but
the Committee reaffirmed the policy that no Director should serve
for more than 9 years.
Management Engagement Committee
The Chairman of the Management Engagement Committee is Damien
Pierron and the Committee shall meet at least once a year. All
members of the Board 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
Sean Hurst has been formed under the Management Engagement
Committee and meets regularly to review and monitor the share
buy-back programme. Damien Pierron also joins the share buy-back
sub-committee on an ad-hoc basis.
During the year the Committee reviewed the performance of the
Investment Manager, Administrator and Sub-Administrator, Corporate
Broker and Registrar. No changes were recommended as a result of
these reviews.
Environmental, Social and Governance Committee
The ESG Committee was established in 2021 and is chaired by
Saiko Tajima with all members of the Board forming the Committee.
The aim of the Committee is to establish a unified view of ESG,
increasing understanding of all three aspects: environmental,
social and governance, and to promote the robust standards of
corporate governance that the Company adopts.
The purpose of the ESG Committee, which shall meet at least once
a year, is to support the Company's on-going commitment to
environmental, health and safety, corporate social responsibility,
corporate governance, sustainability, and other public policy
matters relevant to the Company (collectively, "ESG Matters").
Shareholder Engagement
The Company is committed to listening and communicating openly
with its Shareholders to ensure that its strategy, business model
and performance are clearly understood. All Board members have
responsibility for Shareholder liaison, but Shareholder contact is
mainly dealt with by the Chairman of the Company and the Senior
Independent Director in close liaison with the Company
Advisors.
Copies of the Annual Report are sent to all Shareholders and can
be downloaded from the website. Other Company information including
the Interim Report is also available on the website.
The Company holds an AGM 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 2023, 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
Madrid, Zurich 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 56.1 tonnes
of CO(2) e(.)
The Company engaged a specialist consulting firm to estimate the
carbon footprint of the portfolio, and this is detailed in the
Sustainability Report.
Gender Metrics
The Board of the Company recognises the governance mechanism to
ensure there is diversity amongst the Directors and as such a
female was appointed to the Board in May 2019. 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 2023 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 2023 and the number of those attended by
each committee member are shown on page 34.
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 f inancial 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 2023 was
USD 113.2 million which represented 97.4% of the Company's NAV (30
June 2022: USD 120.9 million and 93.9% 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
2023 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 2023 are GBP 62,200 (2022: GBP
56,000). Non audit fees payable to KPMG for 2023 were GBP nil
(2022: 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 28 to 30. 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
13 October 2023
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 2023 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 2023 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 Senior Independent Director 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 2023 and the previous year is
as follows:
Year ended 30 June 2023 Year ended 30 June 2022
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 11,250 71,250 60,000 10,125 70,125
Sean Hurst (Senior Independent Director) 55,901 11,700 67,601 55,185 10,125 65,310
Philip Scales (Audit and Risk Committee Chairman) 55,000 6,750 61,750 55,000 9,000 64,000
Damien Pierron 50,000 11,832 61,832 50,000 9,424 59,424
Saiko Tajima 50,000 6,750 56,750 50,000 9,000 59,000
------------------------------------------------- --------- ----------- ------- ---------- ----------- -------
Total 270,901 48,282 319,183 270,185 47,674 317,859
------------------------------------------------- --------- ----------- ------- ---------- ----------- -------
Directors' Report
The Directors present the Annual Report and Financial Statements
of the Company for the year ended 30 June 2023.
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 31 October 2018 the
Shareholders voted in favour of the continuance resolution,
authorising the Company to operate in its current form through to
the 2023 Annual General Meeting when a similar resolution will be
put forward for Shareholders' approval.
Dynam Capital, Ltd has been appointed as the Company's
Investment Manager and is responsible for the day-to-day management
of the Company's investment portfolio in accordance with the
Company's investment policies, objectives and restrictions.
Results
The net loss for the year ended 30 June 2023 amounted to USD
8,622,089 (2022: net loss USD 7,719,310). There were no dividends
declared during the year ended 30 June 2023 (2022: 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 improved over the
last six months. The Director's also note that the portfolio is
composed of a higher percentage of larger and more liquid stocks
than in the prior year. Lastly, the Directors note that at year-end
the portfolio is comprised of cash and quoted stocks only. The
Company's liquidity position, taking into account cash held and
with the ability to sell underlying assets to meet share buybacks,
tenders and to meet the operating costs of the Company, shows that
the Company is able to operate with appropriate liquidity and be
able to meet its liabilities as they fall due.
The Directors are required to propose a continuation Ordinary
Resolution at the Company's Annual General Meeting scheduled for
November 2023. If the Resolution is not passed then the Directors
are required to convene an Extraordinary General Meeting within six
months of the 2023 Annual General Meeting to propose a resolution
either to wind up the Company or to implement a reconstruction,
amalgamation or other material alteration to the Company or its
activities or any other appropriate alternative based on current
circumstances as the Board thinks fit.
Currently, the Board does not know the number of shareholders
who will vote to approve the continuation of the Company for a
further five years. Based on the uncertainty of the continuation
vote, there is therefore a material uncertainty over the going
concern of the Company.
The Directors have a reasonable expectation that, assuming the
continuation vote is passed, 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 28 to 30 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, and subject to the passing of
the continuation
vote to be held later in the year, the Board has determined that
a three-year viability period to 30 June 2026 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 also travelled to Vietnam in March 2023, meeting
with the research team of the Investment Manager, portfolio
companies and market commentators.
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 implemented 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 visible signs of post-Covid recovery which the Board
were able to see first-hand on their visit to Vietnam in March
2023, evidenced in part by greater travel freedoms 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:
2022 was thankfully free from the significant operational
changes caused by the COVID-19 pandemic. The restrictions in place
during the pandemic tested the Business Continuity protocols of the
Investment Manager and the other service providers. The smooth
operation of the Company through the various restrictions and
lockdowns brought about by Covid have 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 the portfolio can be readily liquidated in
less than ten trading days and 99% of the portfolio 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 60 to 63 .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 0.49 times by
investment income. In the following year, the current investment
income is forecast to cover 0.47 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 0.59 times on-going expenses.
-- The Company maintains a cash buffer of approximately 1.0% of
NAV to help meet on-going expenses.
Given the adequate levels of cover set out above, the cash
buffer, the liquidity levels and the overall portfolio risk, the
Board has reasonable 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 2023, assuming the continuation vote to be tabled to
shareholders is passed.
Key Performance Indicators ("KPIS")
To ensure the Company meets its objectives the Board evaluates
the performance of the Investment Manager at least at each
quarterly Board meeting and takes into the following performance
indicators:
-- NAV - reviews the performance of the portfolio
-- Discount to NAV - and reviews the average discount for the
Company's share price against its peer group.
Share Capital and Share Buy-Backs
An active discount control mechanism to address the imbalance
between the supply of and demand for ordinary shares using share
buy backs is employed by the Broker and monitored by the Board. At
the Annual General Meeting ("AGM") of the Company held on 1
November 2022, 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
2023.
In the year ended 30 June 2023 1,500,563 ordinary shares had
been bought back and cancelled under the Company's share buyback
programme. Since the last AGM and up to 12 October 2023, being the
latest practicable date prior to publication of the report, the
Company bought back and cancelled 1,364,849 ordinary shares.
Share Buy-Backs to the Year-Ended 30 June 2023
30 June 2023 30 June 2022
-------------------- ----------------------
Number of Number of
Shares USD'000 Shares USD'000
----------------------------------- ----------- ------- ------------ --------
Opening balance at 1 July 29,225,667 935 42,623,935 60,474
Share issued during the year - - - -
Shares repurchased during the year (1,500,563) (4,941) (661,084) (2,655)
Tender Offer - - (12,737,184) (56,884)
----------------------------------- ----------- ------- ------------ --------
Closing balance at 30 June 27,725,104 (4,006) 29,225,667 935
----------------------------------- ----------- ------- ------------ --------
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
2023.
Number of Percentage of total
Shareholder ordinary shares shares in issue
-------------------------------------------------------- --------------- -------------------
Lynchwood Nominees Limited 5,867,737 21.16
Citibank Nominees (Ireland) Designated Activity Company 5,319,732 19.19
Vidacos Nominees Limited 2,550,070 9.20
The Bank of New York (Nominees) Limited 2,225,658 8.03
Chase Nominees Limited 1,660,120 5.99
Hargreaves Lansdown (Nominees) Limited 1,589,250 5.73
Euroclear Nominees Limited 1,531,105 5.52
-------------------------------------------------------- --------------- -------------------
Notification of Shareholdings
In the year to 30 June 2023 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.
Percentage
of total
voting rights
as at
Number of announcement Announcement
Shareholder voting rights date date
------------------------------ -------------- -------------- ------------
Discover Investment Company 1,415,776 5.0 24 May 2023
------------------------------ -------------- -------------- ------------
Since 30 June 2023 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
13 October 2023
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 2023, the statements of comprehensive
income, changes in equity and cash flows for the year then ended,
and notes, comprising significant accounting policies and other
explanatory information.
In our opinion, the accompanying financial statements:
-- give a true and fair view of the financial position of the
Company as at 30 June 2023, 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.
Material uncertainty relating to going concern
The risk Our response
Going Concern: Disclosure Quality: Our audit procedures included
Refer to page 41 of the The financial statements but were not limited to:
Director's Report. explain how the directors We obtained and inspected
We draw attention to note have formed a judgement the directors' approved
2(b) of the financial that it is appropriate written assessment of
statements which indicates to adopt the going concern going concern on the Company
that in accordance with basis of preparation for and corroborated the assessment
the Articles of Incorporation, the Company. with our knowledge of
the Directors are required That judgment is based the business. We considered
to propose an Ordinary on an evaluation of the the risk that the outcome
Resolution ("Resolution") inherent risks to the of the Resolution could
at the Company's Annual Company's business model affect the Company for
General Meeting scheduled and how those risks, in the going concern period
for the year 2023. If particular, the Resolution, by considering outcomes
such resolution is not might affect the Company's of previous continuation
passed the Board shall, financial resources or Resolutions, inspecting
at that annual general ability to continue operations minutes of meetings held
meeting or at an extraordinary over a period of at least by the directors, inquiring
general meeting held within a year from the date of with management as to
six months of that annual approval of the financial their assessment of the
general meeting, propose statements (the "Going likelihood of shareholder
a resolution either to Concern Period"). The support for the Resolution,
wind up the Company or risk for our audit is and considering key financial
to implement a reconstruction, whether or not those risks metrics including the
amalgamation or other are such that they amounted discount of the Company's
material alteration to to a material uncertainty share price against its
the Company or its activities that may cast significant net asset value.
or any other appropriate doubt on the ability of Assessing disclosures:
alternative based on current the Company to continue We considered whether
circumstances as the Board as a going concern. If the going concern disclosure
thinks fit. so, that fact is required in note 2(b) to the financial
This condition constitutes to be disclosed (as has statements gives a full
a material uncertainty been done) and, along and accurate description
that may cast significant with a description of of the directors' assessment
doubt on the Company's the circumstances, is of going concern, including
ability to continue as a key financial statement the identified risks and
a going concern. disclosure. dependencies.
Our opinion is not modified
in respect of this matter.
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. Going concern is a
significant key audit matter and is described in the 'Material
uncertainty relating to going concern' section of our report. 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 other key audit matter was as follows
(unchanged from 2022):
The risk Our response
Valuation of Investments in Basis: Our audit procedures included:
securities at fair value The Company's investment portfolio Internal Controls:
$113,225,102; (2022: $120,957,996) consists of listed equity securities We evaluated the design and
trading on the Vietnamese implementation of the key control
Refer to page 39 of the Audit and stock exchange (the "Investments"). over the valuation of Investments.
Risk Committee Report, note 2d These Investments, carried at a fair Use of KPMG Specialists:
accounting policies and note value, are valued We engaged our own valuation
12 disclosures. by the Company based on quoted prices specialist to independently price
in an active market for that 100% of Investments to third
instrument. party pricing sources.
Risk: Assessing disclosures:
The valuation of investments, due to We considered the Company's
their magnitude in the context of the disclosures (see notes 2b and 2d) in
financial statement relation to the use of estimates
as a whole, is considered to be the and judgements regarding the
area which has the greatest effect on valuation of investments and the
our overall audit Company's investment valuation
strategy and allocation of resources policies and fair value disclosures
in planning and completing our audit. 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
$2,160,000, determined with reference to a benchmark of net assets
of $115,259,277 of which it represents approximately 2.0% (2022:
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% (2022: 75%) of
materiality for the financial statements as a whole, which equates
to $1,620,000. 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 $108,000, 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 material uncertainties that
could 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.
An explanation of how we evaluated management's assessment of
going concern is set out in the 'Material uncertainty relating to
going concern' section of our report.
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 nothing material to add or draw attention to in
relation to the directors' statement in Note 2(b) to the financial
statements on the use of the going concern basis of accounting, and
their identification therein of a material uncertainty over the
Company's ability to continue to use that basis for the going
concern period.
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 - 43) 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 - 43) 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 - 43 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 45,
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
14 October 2023
Statement of Financial Position
As at 30 June 2023
2023 2022
Notes USD USD
------------------------------------------------- ----- ------------- -------------
Assets
Non-current assets
Investments at fair value through profit or loss 3 113,225,102 120,957,996
------------------------------------------------- ----- ------------- -------------
Total non-current assets 113,225,102 120,957,996
------------------------------------------------- ----- ------------- -------------
Current assets
Cash and cash equivalents 1,750,069 8,160,681
Accrued dividends and interest 877,375 58,772
Receivables on sale of investments 338,591 -
------------------------------------------------- ----- ------------- -------------
Total current assets 2,966,035 8,219,453
------------------------------------------------- ----- ------------- -------------
Total assets 116,191,137 129,177,449
------------------------------------------------- ----- ------------- -------------
Equity
Share capital 5 166,645,041 166,645,041
Reserve for own shares 5 (170,650,584) (165,709,783)
Retained earnings 119,264,820 127,886,909
------------------------------------------------- ----- ------------- -------------
Total equity 115,259,277 128,822,167
------------------------------------------------- ----- ------------- -------------
Liabilities
Payables on purchase of investments 343,745 -
Payables on repurchase of shares 246,469 -
Accrued expenses 341,646 355,282
------------------------------------------------- ----- ------------- -------------
Total liabilities 931,860 355,282
------------------------------------------------- ----- ------------- -------------
Total equity and liabilities 116,191,137 129,177,449
------------------------------------------------- ----- ------------- -------------
The financial statements on pages 51 to 67 were approved by the
Board of Directors on 13 October 2023 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 55 to 67 form an integral part
of these financial statements.
Statement of Comprehensive Income
For the year ended 30 June 2023
2023 2022
Notes USD USD
---------------------------------------------------------------------------- ----- ----------- -----------
Dividend income from equity securities at fair value through profit or loss 1,684,306 1,811,555
Net loss from investments at fair value through profit or loss 7 (6,494,742) (5,211,105)
Net foreign exchange loss (369,559) (67,666)
Total operating loss (5,179,995) (3,467,216)
Investment management fees 8 1,936,485 2,737,804
Advisory fees 22,846 15,715
Directors' fees and expenses 8 417,177 385,292
Custodian fees 9 101,674 152,863
Administrative and accounting fees 10 201,614 216,939
Audit fees 75,153 71,428
Other expenses 687,145 672,053
---------------------------------------------------------------------------- ----- ----------- -----------
Total operating expenses 3,442,094 4,252,094
---------------------------------------------------------------------------- ----- ----------- -----------
Loss for the year (8,622,089) (7,719,310)
---------------------------------------------------------------------------- ----- ----------- -----------
Other comprehensive income - -
Total comprehensive loss for the year (8,622,089) (7,719,310)
---------------------------------------------------------------------------- ----- ----------- -----------
Basic and diluted loss per share 14 (0.30) (0.24)
---------------------------------------------------------------------------- ----- ----------- -----------
The accompanying notes on pages 55 to 67 form an integral part
of these financial statements.
Statement of Changes in Equity
For the year ended 30 June 2023
Reserve for Retained
Share capital own shares earnings Total
USD USD USD USD
-------------------------------------------------- ------------- ------------- ----------- ------------
Balance at 1 July 2021 166,645,041 (106,170,790) 135,606,219 196,080,470
Total comprehensive loss for the year
Change in net assets attributable to shareholders - - (7,719,310) (7,719,310)
-------------------------------------------------- ------------- ------------- ----------- ------------
Total comprehensive loss for the year - - (7,719,310) (7,719,310)
-------------------------------------------------- ------------- ------------- ----------- ------------
Transactions in shares
Repurchase of own shares - (59,538,993) - (59,538,993)
-------------------------------------------------- ------------- ------------- ----------- ------------
Total transactions in shares - (59,538,993) - (59,538,993)
-------------------------------------------------- ------------- ------------- ----------- ------------
Balance at 30 June 2022 166,645,041 (165,709,783) 127,886,909 128,822,167
-------------------------------------------------- ------------- ------------- ----------- ------------
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
-------------------------------------------------- ------------- ------------- ----------- ------------
The accompanying notes on pages 55 to 67 form an integral part
of these financial statements.
Statement of Cash Flows
For the year ended 30 June 2023
2023 2022
Notes USD USD
----------------------------------------------------------------------------------- ----- ------------ ------------
Cash flows from operating activities
Total comprehensive loss for the year (8,622,089) (7,719,310)
Adjustments to reconcile total comprehensive loss to net cash from operating
activities:
Dividend income (1,684,306) (1,811,555)
Net loss from investments at fair value through profit or loss 7 6,494,742 5,211,105
Net foreign exchange loss 369,559 67,666
Purchase of investments (50,826,239) (82,229,529)
Proceeds from sale of investments 52,069,545 146,502,030
Changes in working capital
Decrease in accrued expenses (13,636) (76,630)
Decrease in prepayments - 9,290
Dividends received 849,559 1,690,983
Interest received 16,144 91,953
----------------------------------------------------------------------------------- ----- ------------ ------------
Net cash (used in)/from operating activities (1,346,721) 61,736,003
Cash flows used in financing activities
Repurchase of own shares (4,694,332) (59,538,993)
----------------------------------------------------------------------------------- ----- ------------ ------------
Net cash used in financing activities (4,694,332) (59,538,993)
----------------------------------------------------------------------------------- ----- ------------ ------------
Net (decrease)/increase in cash and cash equivalents (6,041,053) 2,197,010
Cash and cash equivalents at beginning of the year 8,160,681 6,031,337
Effect of exchange rate fluctuations on cash held (369,559) (67,666)
----------------------------------------------------------------------------------- ----- ------------ ------------
Cash and cash equivalents at end of the year 1,750,069 8,160,681
----------------------------------------------------------------------------------- ----- ------------ ------------
The accompanying notes on pages 55 to 67 form an integral part
of these financial statements.
Notes to the Financial Statements
For the year ended 30 June 2023
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 Premium segment of the
official list of the UK Listing Authority ("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 31 October 2018 the
Shareholders voted in favour of the continuance resolution,
authorising the Company to operate in its current form through to
the 2023 Annual General Meeting when a similar resolution will be
put forward for Shareholders' approval.
Dynam Capital, Ltd has been appointed as the Company's
Investment Manager and is responsible for the day-to-day management
of the Company's investment portfolio in accordance with the
Company's investment policies, objectives and restrictions.
Sanne Group (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 Significant Accounting Policies
(a) Statement of compliance
These financial statements, which give a true and fair view,
have been prepared in accordance with the International Financial
Reporting Standards ("IFRSs") as adopted by the European Union and
comply with the Companies (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
improved over the last six months. The Director's also note that
the portfolio is composed of a higher percentage of larger and more
liquid stocks than in the prior year. Lastly, the Directors note
that at year-end the portfolio is comprised of cash and quoted
stocks only. The Company's liquidity position, taking into account
cash held and with the ability to sell underlying assets to meet
share buybacks, tenders and to meet the operating costs of the
Company, shows that the Company is able to operate with appropriate
liquidity and be able to meet its liabilities as they fall due. The
Directors are required to propose a continuation Ordinary
Resolution at the Company's Annual General Meeting scheduled for
November 2023. If the Resolution is not passed then the Directors
are required to convene an Extraordinary General Meeting within six
months of the 2023 Annual General Meeting to propose a resolution
either to wind up the Company or to implement a reconstruction,
amalgamation or other material alteration to the Company or its
activities or any other appropriate alternative based on current
circumstances as the Board thinks fit. Currently, the Board does
not know the number of shareholders who will vote to approve the
continuation of the Company for a further five years. Based on the
uncertainty of the continuation vote, there is therefore a material
uncertainty over the going concern of the Company.
The Directors have a reasonable expectation that, assuming the
continuity vote is passed, the Company will have adequate resources
to continue its operations for the foreseeable future. Thus, they
continue to adopt the going concern basis of accounting in
preparing the financial statements.
Critical accounting estimates and judgements
The preparation of financial statements in accordance with IFRS
as adopted by the European Union requires management to make
judgements, estimates and assumptions that affect the application
of policies and the reported amounts of assets and liabilities,
income and expenses. The estimates and associated assumptions are
based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of
which form the basis of making judgements about carrying values of
assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates.
The estimated and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimates are revised if the revision
affects only that period or in the period of the revision and
future periods if the revision affects both current and future
periods.
The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below.
Functional currency
The Company's shares were issued in USD and the listing of the
shares on the Main Market and TISE is in USD. The performance of
the Company is measured and reported to the investors in USD,
although the primary activity of the Company is to invest in the
Vietnamese market. The Board considers the USD as the currency that
most faithfully represents the economic effects of the underlying
transactions, events and conditions.
Fair value of financial instruments
The fair value of financial instruments that are not traded in
an active market is determined by using valuation techniques. The
Company uses its judgement to select a variety of methods and make
assumptions that are mainly based on market conditions existing at
each reporting date.
(c) Foreign currency translation
Transactions in foreign currencies other than the functional
currency are translated at the applicable rates on the dates of the
transactions. Monetary assets and liabilities denominated in
foreign currencies are re-translated to USD at the applicable rates
on the year-end date. Foreign currency exchange differences arising
on translation and realised gains and losses on disposals or
settlements of monetary assets and liabilities are included in the
Statement of Comprehensive Income. Foreign currency exchange
differences relating to investments at fair value through profit or
loss are included in the realised and unrealised gains and losses
on those investments within "Net gain/(loss) from investments at
fair value through profit or loss" on the Statement of
Comprehensive Income. All other foreign currency exchange
differences relating to other monetary items, including cash and
cash equivalents, are included in net foreign exchange gains and
losses in the Statement of Comprehensive Income.
(d) Financial instruments
A financial instrument is any contract that gives rise to a
financial asset of one entity and a financial liability or equity
instrument of another entity.
(i) Classification
In accordance with IFRS 9, the Company classifies its financial
assets and financial liabilities at initial recognition into the
categories of financial assets and financial liabilities discussed
below.
Financial assets
The Company classifies its financial assets as subsequently
measured at amortised cost or measured at fair value through profit
or loss on the basis of both:
-- The entity's business model for managing the financial assets
-- The contractual cash flow characteristics of the financial assets
Financial assets measured at amortised cost
A financial asset is measured at amortised cost if it is held
within a business model whose objective is to hold financial assets
in order to collect contractual cash flows and its contractual
terms give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount
outstanding. The Company includes in this category accrued income,
cash and cash equivalents and receivables on sale of
investments.
Financial assets measured at fair value through profit or loss
("FVTPL")
A financial asset is measured at fair value through profit or
loss if:
a) Its contractual terms do not give rise to cash flows on
specified dates that are solely payments of principal and interest
(SPPI) on the principal amount outstanding; or
b) It is not held within a business model whose objective is
either to collect contractual cash flows, or to both collect
contractual cash flows and sell; or
c) At initial recognition, it is irrevocably designated as
measured at FVTPL when doing so eliminates or significantly reduces
a measurement or recognition inconsistency that would otherwise
arise from measuring assets or liabilities or recognising the gains
and losses on them on different bases.
The Company measures all its investments at FVTPL.
(ii) Recognition and initial measurement
Financial assets and liabilities at fair value through profit or
loss are recognised initially on the trade date, which is the date
that the Company becomes a party to the contractual provisions of
the instrument. Other financial assets and liabilities are
recognised on the date they are originated.
Financial assets and financial liabilities at fair value through
profit or loss are recognised initially at fair value, with
transaction costs recognised in the Statement of Comprehensive
Income. Financial assets or financial liabilities not at fair value
through profit or loss are recognised initially at fair value plus
transaction costs that are directly attributable to their
acquisition or issue.
(iii) Subsequent measurement
After initial measurement, the Company measures financial
instruments which are classified as FVTPL at fair value. Subsequent
changes in the fair value of those financial instruments are
recorded in net gain or loss on financial assets and liabilities at
FVTPL in the Statement of Comprehensive Income. Interest and
dividends earned or paid on these instruments are recorded
separately in interest income or expense and dividend income in the
Statement of Comprehensive Income.
(iv) Derecognition
A financial asset is derecognised when the Company no longer has
control over the contractual rights that comprise that asset. This
occurs when the rights are realised, expire or are surrendered.
Financial assets that are sold are derecognised, and the
corresponding receivables from the buyer for the payment are
recognised on the trade date, being the date the Company commits to
sell the assets.
A financial liability is derecognised when the obligation
specified in the contract is discharged, cancelled or expired.
(v) Fair value measurement
'Fair value' is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date in the
principal or, in its absence, the most advantageous market to which
the Company has access at that date. The fair value of a liability
reflects its non-performance risk.
When available, the Company measures the fair value of an
instrument using the quoted price in an active market for that
instrument. A market is regarded as 'active' if transactions for
the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis. The
Company measures instruments quoted in an active market at the last
traded price.
If there is no quoted price in an active market, then the
Company uses valuation techniques that maximise the use of relevant
observable inputs and minimise the use of unobservable inputs. The
chosen valuation technique incorporates all of the factors that
market participants would consider in pricing a transaction.
The Company recognises transfers between levels of the fair
value hierarchy as at the end of the reporting period during which
the change has occurred.
Any increases or decreases in fair value are recognised in the
Statement of Comprehensive Income as an unrealised gain or loss
from investments at FVTPL.
(vi) Impairment of financial assets
At each reporting date, the Company measures the loss allowance
on financial assets carried at amortised cost at an amount equal to
the lifetime expected credit losses if the credit risk has
increased significantly since initial recognition. If, at the
reporting date, the credit risk has not increased significantly
since initial recognition, the Company measures the loss allowance
at an amount equal to 12-month expected credit losses. The expected
credit losses are estimated using a provision matrix based on the
Company's historical credit loss experience adjusted for factors
that are specific to the accounts receivables, general economic
conditions and an assessment of both the current as well as the
forecast direction of conditions at the reporting date, including
time value of money where appropriate. The measurement of expected
credit losses is a function of the probability of default, loss
given default (i.e. the magnitude of the loss if there is a
default) and exposure at the default. The assessment of the
probability of default and loss given default is based on
historical data adjusted by forward-looking information.
(vii) Cash and cash equivalents
Cash comprises current deposits with banks. Cash equivalents are
short-term highly liquid investments that are readily convertible
to known amounts of cash, are subject to an insignificant risk of
changes in value and are held for the purpose of meeting short-term
cash commitments rather than for investment or other purposes.
(e) Offsetting
Financial assets and liabilities are offset, and the net amount
is reported in the Statement of Financial Position when, and only
when, the Company has a legally enforceable right to set off the
recognised amounts and the transactions are intended to be settled
on a net basis or simultaneously, e.g. through a market clearing
mechanism.
(f) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of ordinary shares are
recognised as a deduction from equity, net of any tax effects.
Repurchase, disposal and reissue of share capital (treasury
shares)
Where the Company purchases its own share capital, the
consideration paid, which includes any directly attributable costs,
is recognised as a deduction from equity shareholders' funds
through the Company's reserves for own shares. The reserves for own
shares represents share capital which can be reissued in the future
or subsequently cancelled. When such shares are subsequently sold
or re-issued to the market any consideration received, net of any
directly attributable incremental transaction costs, is recognised
as an increase in equity shareholders' funds through the reserve of
own shares account. The Directors have cancelled all the shares
repurchased during the current and the previous year.
(g) Tax
Tax expense comprises current tax. Current tax is recognised in
the Statement of Comprehensive Income except to the extent that it
relates to items recognised directly in equity or in other
comprehensive income.
Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to
tax payable in respect of previous years.
The Company is a tax resident in Guernsey and is subject to the
standard rate of 0% on taxable income.
The Company is liable to Vietnamese transactional tax of 0.1%
(2022: 0.1%) on the sales proceeds of the onshore sale of equity
investments. The related taxes on onshore sales proceeds are
accounted for at net amount in the Statement of Comprehensive
Income.
(h) Interest income and expense
Interest income and expense is recognised in the Statement of
Comprehensive Income using the effective rate method. The effective
interest rate method is a method of calculating the amortised cost
of a financial asset or financial liability and of allocating the
interest income or interest expense over the relevant period. The
effective interest rate is the rate that exactly discounts
estimated future cash payments or receipts throughout the expected
life of the financial instrument - or, when appropriate, a shorter
period - to the net carrying amount of the financial asset or
financial liability.
When calculating the effective interest rate, the Directors
estimate cash flows considering all contractual terms of the
financial instrument but do not consider future credit losses. The
calculation includes all fees and points paid or received between
parties to the contract that are an integral part of the effective
interest rate, transaction costs and all other premiums or
discounts.
(i) Dividend income
Dividend income is recognised in the Statement of Comprehensive
Income on the date on which the right to receive payment is
established. For listed equity securities, this is usually the
ex-dividend date. Dividend income from equity securities designated
as at fair value through profit or loss is recognised in the
Statement of Comprehensive Income as a separate line item.
(j) Fee and commission expense
Fees and commission expenses are recognised in the Statement of
Comprehensive Income as the related services are performed.
(k) Earnings per share
The Company presents basic and diluted earnings per share data
for its ordinary shares. Basic earnings per share is calculated by
dividing the profit or loss attributable to ordinary shareholders
of the Company by the weighted average number of ordinary shares
outstanding during the year, adjusted for own shares held.
3 Financial Instruments and Associated Risks
Financial assets of the Company include investments at fair
value through profit or loss, cash and cash equivalents,
receivables on sale of investments, and accrued dividends and
interest. Financial liabilities comprise payables on purchase of
investments and accrued expenses. Accounting policies for financial
assets and liabilities are set out in note 2.
The Company's investment activities expose it to various types
of risk that are associated with the financial instruments and the
markets in which it invests. The most important types of financial
risk to which the Company is exposed are market risk (which
includes price risk, currency risk, and interest rate risk), credit
risk and liquidity risk.
Asset allocation is determined by the Company's Investment
Manager who manages the distribution of the assets to achieve the
investment objectives. Divergence from target asset allocations and
the composition of the portfolio is monitored by the Investment
Manager.
Market risk
Market risk is the risk that the value of a financial asset will
fluctuate as a result of changes in market prices (e.g. interest
rates, foreign exchange rates, equity prices and credit spreads)
whether or not those changes are caused by factors specific to the
individual asset or factors affecting all assets in the market. The
Company is exposed to market risk within its investments purchased
in the Vietnamese market.
The overall market positions are monitored continuously by the
Investment Manager and at least quarterly by the Board.
The Company's investments in securities are exposed to market
risk and are disclosed by the following generic investment
types:
2023 2022
----------------------- -----------------------
Fair value % of Fair value % of
in USD net assets in USD net assets
----------------------------------- ----------- ---------- ----------- ----------
Investments in listed securities 113,225,102 98.24 120,957,996 93.90
Investments in unlisted securities - - - -
----------------------------------- ----------- ---------- ----------- ----------
113,225,102 98.24 120,957,996 93.90
----------------------------------- ----------- ---------- ----------- ----------
At 30 June 2023, a 5% reduction in the market value of the
portfolio would have led to a reduction in NAV and profit or loss
of USD 5,661,255 (2022: USD 6,047,900). 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 2023, the Company had the following foreign
currency exposures:
Fair value
------------------------
2023 2022
USD USD
---------------- ----------- -----------
Vietnamese Dong 115,320,188 128,235,094
Pound Sterling (231,119) 632,133
Swiss Franc 175 163
Euro 4,536 4,497
---------------- ----------- -----------
115,093,780 128,871,887
---------------- ----------- -----------
At 30 June 2023, 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 5,766,009
(2022: USD 6,411,755), USD 11,556 (2022: USD 31,607), USD 9 (2022:
USD 8) and USD 227 (2022: USD 225) 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 2023, 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 2,966,035 (2022: USD 8,219,453).
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 2023, 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 (2022: 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 2023, the
total of cash and cash equivalents, and short-term receivables was
USD 2,966,035 (2022: USD 8,219,453). The Directors assessed the
lifetime expected credit loss as at 30 June 2023 and concluded it
to be immaterial (2022: 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
------------------------------------------------- --------- ------- --------- ---------- ----------- -----------
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
------------------------------------------------- --------- ------- --------- ---------- ----------- -----------
2022
Cash and cash equivalents 8,160,681 - - - - 8,160,681
Investment at fair value through profit and loss - - - - 120,957,996 120,957,996
Accrued dividends and interest - - 58,772 - - 58,772
Total financial assets 8,160,681 - 58,772 - 120,957,996 129,177,449
------------------------------------------------- --------- ------- --------- ---------- ----------- -----------
Accrued expenses - - 355,282 - - 355,282
------------------------------------------------- --------- ------- --------- ---------- ----------- -----------
Total financial liabilities - - 355,282 - - 355,282
------------------------------------------------- --------- ------- --------- ---------- ----------- -----------
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 2023, no individual investment exceeded 20% of the
net assets attributable to Shareholders (2022: none).
All of the Company's investments in securities at fair value are
in Vietnam as at 30 June 2023 and 30 June 2022. All of the
Company's investment income can be attributed to Vietnam for the
years ended 30 June 2023 and 30 June 2022.
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 new Articles of
Incorporation, the Company may from time to time repurchase all or
any portion of the shares held by the Shareholders 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 Premium segment of the
Official List and trading on the Main Market. On the same date the
Company's shares were admitted to listing and trading on the
TISE.
2023 2022
No. of shares No. of shares
---------------------------------------------------------------------------------------- ------------- -------------
Total shares issued and fully paid (after repurchases and cancellations) at beginning of
the
year 29,225,667 42,623,935
Shares issued upon exercise of warrants during the year - -
Shares cancellation (1,500,563) (13,398,268)
---------------------------------------------------------------------------------------- ------------- -------------
27,725,104 29,225,667
Repurchased and reserved for own shares
At beginning of the year - -
During the year (1,500,563) (13,398,268)
Shares reissued to ordinary shares - -
Shares cancellation 1,500,563 13,398,268
---------------------------------------------------------------------------------------- ------------- -------------
Total outstanding ordinary shares with voting rights 27,725,104 29,225,667
---------------------------------------------------------------------------------------- ------------- -------------
As a result, as at 30 June 2023 the Company has 27,725,104
(2022: 29,225,667) ordinary shares with voting rights in issue
(excluding the reserve for own shares), and nil (2022: 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 2023 the Company repurchased and
cancelled 1,500,563 ordinary shares (2022: 661,084 ordinary shares)
under the Company's share buyback programme (representing 5.1% of
the ordinary shares outstanding at 1 July 2022) at a weighted
average NAV discount of 15.2%. This resulted in a 0.78% 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. Treasury shares do
not carry voting rights.
Capital Management
The Company does not have any externally imposed capital
requirements.
The Company's general intention is to reinvest the capital
received on the sale of investments. However, the Board may from
time to time and at its discretion, either use the proceeds of
sales of investments to meet the Company's expenses or distribute
them to Shareholders. Alternatively, the Company may repurchase its
own ordinary shares with such proceeds from Shareholders pro rata
to their shareholding upon giving notice of not less than 30
calendar days to Shareholders (subject always to applicable law) or
repurchase ordinary shares at a price not exceeding the last
published NAV per share.
6 Net Assets Attributable to Shareholders
Total equity of USD 115,259,277 (2022: USD 128,822,167)
represents net assets attributable to Shareholders. NAV per share
as at 30 June 2023 is USD 4.157 (2022: USD 4.408).
7 Net (Loss)/Gain from Investments at Fair Value through Profit
or Loss
2023 2022
USD USD
-------------------------------------------------------------------- ----------- ------------
Realised gain on disposal of investments 1,874,662 50,172,287
Realised foreign currency (loss)/gain (1,660,823) 253,204
Unrealised loss on investments at fair value through profit or loss (7,200,804) (54,419,413)
Unrealised foreign currency gain/(loss) 492,223 (1,217,183)
-------------------------------------------------------------------- ----------- ------------
(6,494,742) (5,211,105)
-------------------------------------------------------------------- ----------- ------------
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 2023 was USD 1,936,485 (2022: USD 2,737,804). An
amount of USD 162,201 (30 June 2022: USD 200,421) was outstanding
as at 30 June 2023.
Directors' fees and expenses
The Board determines the fees payable to each Director, subject
to a maximum aggregate amount of USD 350,000 (2022: 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
319,183 (2022: USD 317,859) and expenses were USD 97,994 (2022: USD
67,433). The total Directors' fees and expenses for the year were
USD 417,177 (2022: USD 385,292).
As at 30 June 2023, USD nil (2022: USD 9,012) of Directors' fees
were outstanding.
Ownership of shares
As at 30 June 2023, Directors held 44,920 ordinary shares in the
Company (2022: 44,920) as listed below.
Hiroshi Funaki 19,887 Shares
Sean Hurst 5,312 Shares
Philip Scales 10,077 Shares
Damien Pierron 4,644 Shares
Saiko Tajima 5,000 Shares
Mr Funaki is also a Director of Discover Investment Company
which holds 1,415,776 ordinary shares in the Company representing
5.01% of the issued share capital. Discover Investment Company
acquired 10,000 shares during the year.
Mr Craig Martin, Chairman of the Investment Manager holds 67,086
shares in the Company. During the year he purchased 7,400 shares
during the year.
9 Custodian Fees
Custodian fees are charged at a minimum of USD 12,000 (2022: 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 (2022: 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 101,674
(2022: USD 152,863), of which USD 9,500 (2022: USD 13,000) 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 145,590 (2022: USD 139,207), of which USD 1,120 (2022: USD
1,130) 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 56,024 (2022: USD 77,731), of which USD 4,744 (2022: USD
5,303) were outstanding at year end.
Total administrative and accounting fees for the year were USD
201,614 (2022: USD 216,939).
11 Controlling Party
The Directors are not aware of any ultimate controlling party as
at 30 June 2023 or 30 June 2022.
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
------------------------------------------------------------------- ----------- ------- ------- -----------
2023
Financial assets classified at fair value upon initial recognition
Investments in securities 113,225,102 - - 113,225,102
------------------------------------------------------------------- ----------- ------- ------- -----------
2022
Financial assets classified at fair value upon initial recognition
Investments in securities 120,957,996 - - 120,957,996
------------------------------------------------------------------- ----------- ------- ------- -----------
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 2023 (2022:
nil).
13 Classifications of Financial Assets and Liabilities
The table below provides a breakdown of the line items in the
Company's Statement of Financial Position to the categories of
financial instruments.
Fair value through Loans and Other Total carrying
Profit or loss receivables liabilities Amount
USD USD USD USD
--------------------------------------- ------------------ ----------- ----------- --------------
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 - 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
--------------------------------------- ------------------ ----------- ----------- --------------
2022
Cash and cash equivalents - 8,160,681 - 8,160,681
Investment in securities at fair value 120,957,996 - - 120,957,996
Accrued dividends - 58,772 - 58,772
120,957,996 8,219,453 - 129,177,449
--------------------------------------- ------------------ ----------- ----------- --------------
Accrued expenses - - 355,282 355,282
--------------------------------------- ------------------ ----------- ----------- --------------
- - 355,282 355,282
--------------------------------------- ------------------ ----------- ----------- --------------
14 Earnings Per Share
The calculation of basic and diluted earnings per share at 30
June 2023 was based on the total comprehensive loss for the year
attributable to Shareholders of USD 8,622,089 (2022: loss of USD
7,719,310) and the weighted average number of shares outstanding of
28,685,603 (2022: 31,987,327).
15 New and Amended Standards and Interpretations
(i) Standards and amendments to existing standards effective 1
July 2022
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 2023 that have been early
adopted by the Company
There are no standards effective after 30 June 2023 that are
relevant to the Company.
16 Events After the Reporting Date
It was announced on 8 September 2023 that finnCap plc and Cenkos
Securities plc had successfully merged to form a new group known as
Cavendish Securities plc, the Corporate Broker and Financial
Adviser of the Company.
From 1 July 2023 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 2023
------------------------------- ---- --------- -------------
NAV per ordinary share (pence) 1 a 329.0
Ordinary share price (pence) 1 b 277.5
------------------------------- ---- --------- -------------
Discount 1 ((b-a)/a) 15.7%
------------------------------- ---- --------- -------------
Ongoing charges
Ongoing charges have been calculated in accordance with the
Association of Investment Companies (the "AIC") recommended
methodology by taking the regularly incurred annual operating
expenses of running the Company expressed as a percentage of
average NAV.
The ongoing charges for the year ended 30 June 2023 were
3.07%.
30 June 2023
Page USD
------------------- ---- --- -------------
Average NAV 1 a 111,710,032
Operating expenses 1 b 3,433,537
------------------- ---- --- -------------
Ongoing charges 1 b/a 3.07%
------------------- ---- --- -------------
a) Average NAV
Calculated using twelve monthly closing average NAV for the year
ended 30 June 2023.
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 52 c 3,442,094
Less: non-recurring expenses d (8,557)
----------------------------- ---- ----- ---------
Operating expenses b=c+d 3,433,537
----------------------------- ---- ----- ---------
Corporate Information
Directors Auditor
Mr. Hiroshi Funaki KPMG Channel Islands Limited
Mr. Sean Hurst Glategny Court
Mr. Philip Scales Glategny Esplanade
Mr. Damien Pierron St Peter Port
Ms. Saiko Tajima 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
Cavendish Securities plc (As from 8 September 2023, formerly
Royal Avenue finnCap Ltd))
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 Guernsey Legal Adviser
EC2M 7SH Carey Olsen (Guernsey) LLP
Carey House
Les Banques
St Peter Port, Guernsey,
GY1 4BZ
[1] The Company was initially listed on AIM in July 2006 and
then moved to the premium segment of the main board of the London
Stock Exchange in March 2019.
[2]
https://population.un.org/wup/Publications/Files/WUP2018-Highlights.pdf
[3] 2022 Edelman Trust Barometer Reveals Even Greater
Expectations of Business to Lead as Government Trust Continues to
Spiral | Edelman
[4] Vietnam Country Climate and Development Report
(worldbank.org)
[5] https://climateactiontracker.org/
[6] LULUCF is the abbreviation of "Land use, land-use change and
forestry". The reasons for focusing on emissions excl. LULUCF
because of the importance of decreasing CO(2) and other GHG
emissions from fossil fuel combustion, industry, agriculture and
waste sources, and because of large data uncertainty around LULUCF
emissions data.
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FR NKABKPBDKDKD
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