VietNam Holding Ltd
c/o CARD Corporate Services Ltd.
Fourth Floor, Zephyr House
122 Mary Street
PO Box 709 GT
Grand Cayman
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Annual Report 2013
1 Overview
2 Chairperson’s Statement
4
Investment Manager’s Report
6 Market and Economic Overview
8 Domestic Consumption Report
12 Portfolio Companies
Independent Auditor’s Report
23 Sustainability Report
28 Directors’ Report
30
31 Financial Statements
36 Notes to the Financial Statements
46 Corporate Information
In a gradually improving macro-economic and policy
environment, the VNH portfolio has once again managed
to outperform the market by a substantial margin: from
1 July 2012 to 30 June 2013 the NAV per share increased
by 27.3%, compared with the Vietnam Index’s 12.3% USD
adjusted gain. Since 30 June 2007, when VNH’s capital was
80% deployed, the return of NAV per share outperformed
the USD adjusted Index by 38.58% cumulatively.
Min-Hwa Hu Kupfer, Chairperson
VietNam Holding Limited
Front and Inside Cover Photographs: Nicholas J. Freeman, Hanoi/Yangon.
VietNam Holding became a signatory of the UN Principles for
Responsible Investment (PRI) in 2009. Our investment practices and
corporate behavior incorporate environmental, social and corporate
governance issues. We promote the principles in our markets and align
the fund’s goals with the broader objectives of sustainable progress.
Designed and produced by Mediasterling:
www.mediasterling.com
www.vietnamholding.com
Overview
Between June 2007 and June 2013, VNH’s
Agricultural and Domestic Consumption portfolio
sectors outperformed the benchmark VNI by a
large margin. They remain the two dominant
investment themes and primary focus of our
portfolio. The relative concentration of the two
varies with both individual stock performance
and our rebalancing efforts. As a result, during the
past year the Agricultural sector declined from
37% to 31% of the portfolio, while Domestic
Consumption holdings increased from 33% to
42% of the portfolio.
Jean-Christophe Ganz, Chairman
VietNam Holding Asset Management Limited
*** Page 8: Special Report on Domestic Consumption in Vietnam ***
Performance
1 July 2012 to 30 June 2013
27.3%
17.3%
NAV per share
VNH share price
15% outperformance of
Benchmark VNI USD adjusted
Share price discount to
diluted NAV at 19.2%¹
¹Assuming that all the remaining 17.9 million VNH warrants are exercised on the final exercise date of 25 September 2013.
VietNam Holding Annual Report 2013
1
Chairperson’s Statement
While VNH’s share price outperformed the USD
adjusted VNI during the full fiscal 2013 period,
the most impressive gains were achieved in the
last 6 months of the period, during which the
VNH share price advanced by 35.5%.
Dear Shareholders,
Over the past year there were a number of encouraging
developments in Vietnam’s macro-economic profile that have
led to a respectable performance by the country’s equity
markets. The Market and Economic Overview section of this
Annual Report provides a more thorough synopsis, but in
general we believe that the most recent economic indicators
and policy measures are all broadly in conformity with a
more sustainable growth pattern for Vietnam.
In this gradually improving macro-economic and policy
environment, the VNH portfolio has once again managed
to outperform the market by a substantial margin: from 1
July 2012 to 30 June 2013 the NAV per share increased by
27.3%, compared with the Vietnam Index’s 12.3% USD
adjusted gain. Since 30 June 2007, when VNH’s capital was
80% deployed, the return of NAV per share outperformed
the USD adjusted Index by 38.58% cumulatively.
This six year record of outperformance is the result of three
key factors: the impressive growth in VNH’s two main
investment themes – Vietnam’s thriving agricultural sector
and its growing domestic consumption – a rigorous process of
portfolio rebalancing based on our value investing disciplines
and our commitment to sustainability principles. The impact
of our investment themes is reflected in the following chart.
VNH Six Year Performance Components
June 2007 - June 2013
Agri-Business
Domestic
consumption
Total
portfolio
VN Index
80%
60%
40%
20%
0%
-20%
-40%
-60%
-80%
2007
2008
2009
2010
2011
2012
2013
Source: Bloomberg, VNHAM
2
“ This six year record of
outperformance is the result of three
key factors: the impressive growth
in VNH’s two main investment
themes, a rigorous process of portfolio
rebalancing based on our value investing
disciplines and our commitment
to sustainability principles.”
At the end of 2012 the VNH Board approved the
implementation of the Investment Manager’s proposed
portfolio management policy, thereby formalizing certain
portfolio diversification and asset allocation rules.
The Investment Manager’s Report which follows will
highlight how the VNH portfolio has undergone a marked
transformation over recent months, reinforcing our focus
on under-valued small- and mid-cap listed companies. This
portfolio re-balancing process also led to a decrease in the
number of portfolio companies from 29 at the beginning of
the fiscal year to 25 at the end of June, 2013 and a 22%
portfolio company turnover for the year.
While VNH’s share price outperformed the USD adjusted VNI
during the full fiscal 2013 period, the most impressive gains
were achieved in the last 6 months of the period, during
which the VNH share price advanced by 35.5%.
“ We are enthusiastic about the
newly structured content of our
theme-directed, rebalanced portfolio
and the opportunities it presents in a
promising market. ”
Recognizing the importance of lowering the share price
discount, VNH continued its share re-purchase program,
accumulating a total of 1.14 million shares over the past
fiscal year, to be kept in treasury. This represents 2% of the
original share capital. In addition, through various established
investor relations activities, VNH reached out to investors in
Zurich, Geneva, Frankfurt, Munich, London, Edinburgh and
Paris. As a result, the 52-week average of the share price
discount was reduced from 30% a year ago to 21% at the
end of June, 2013.
VietNam Holding Annual Report 2013 Another measure to narrow the discount in the long
run is the VNH warrants program, which presently has
17,939,357 warrants in issuance with a strike price of
$1.196 per share and a final exercise date of 25 September
2013. If successfully converted, the warrants would result
in a substantial number of new VNH shares in circulation,
potentially improving trading liquidity and hence a possible
further reduction of the share price discount.
Our active engagement with existing and prospective
investee companies has been a cornerstone of VNH’s
investment approach from the inception of the fund.
This involves regular visits by VNH’s directors and the
investment team, as well as an on-going dialogue on issues
that we deem to be crucial for the respective companies.
Ever since our adoption of the principles of sustainable
investing, issues concerning the environment, social impact
and corporate governance (ESG) topics have been an integral
part of this active engagement program. A recent example
of this was the case of Dong Phu Rubber (DPR) which came
under scrutiny from an international NGO earlier this year for
alleged “land grabs” by its parent company in neighboring
Cambodia and Laos. After DPR’s management displayed little
interest in directly engaging with VNH on this matter, our
position in the company has been steadily reduced.
There have been some attractive recent developments in
Vietnam’s equity markets – such as increasing interest in
small- and mid-cap stocks by institutional investors and plans
to lift the aggregate foreign ownership limits in listed firms.
We believe that VNH is well positioned to capture any upside
potential arising from these changes.
In addition, we are enthusiastic about the newly structured
content of our theme-directed, rebalanced portfolio and the
opportunities it presents in a promising market. Our entire
team is focused on maximizing the opportunity on NAV
and shareholder value growth. As we do so, your interest
and investment in our Company continues to be most
appreciated.
Min-Hwa Hu Kupfer
Chairperson
VietNam Holding Limited
14 August 2013
VietNam Holding Annual Report 2013
3
Investment Manager’s Report
VNH has enjoyed another banner
year, with portfolio results clearly
outperforming the Vietnam Index.
As noted by Mrs. Kupfer in her preceding letter, VNH has
enjoyed another banner year, with portfolio results clearly
outperforming the Vietnam Index. This is in no small part
due to the continued strong work of our skilled CEO, Mr. Vu
Quang Thinh, and his very competent team of specialists. For
the second year since joining us, he has led our colleagues
through an uncertain market to the achievement of
aggressive goals.
In addition to this team orientation and dedication, there
were two important factors which contributed to our
success: the concentration on our two main investment
themes and the successful rebalancing of our portfolio.
I would like to elaborate on these factors and on the key
decisions behind them.
Between June 2007 and June 2013, VNH’s Agricultural and
Domestic Consumption portfolio sectors outperformed the
benchmark VNI by a large margin. They remain the two
dominant investment themes and primary focus of our
portfolio. The relative concentration of the two varies with
both individual stock performance and our rebalancing
efforts. As a result, during the past year the Agricultural
sector declined from 37% to 31% of the portfolio, while
Domestic Consumption holdings increased from 33% to
42% of the portfolio.
VNH Performance Components
June 2010 - June 2013
Agri-Business
Domestic
consumption
Total
portfolio
VN Index
80%
60%
40%
20%
0%
-20%
Jun
12
Jul
12
Aug
12
Sep
12
Oct
12
Nov
12
Dec
12
Jan
13
Feb
13
Mar
13
Apr
13
May
13
Jun
13
Source: Bloomberg, VNHAM
4
Mrs. Kupfer also stated in her report that VNH’s Agriculture
and Domestic Consumption portfolios both maintained and
increased their impressive accumulated outperformance over
the VNI benchmark last year. The substantial outperformance
of the VNH portfolio compared to the VNI is primarily due to
the impressive performance of the Domestic Consumption
theme portfolio. In particular the four pharmaceutical and
health care companies, which represent over 20% of our
portfolio, had a particularly good year with a weighted
average price increase of 71.42% over the past 12 months.
On the other hand, for practically all of Vietnam’s key
agricultural export products the past year was very
challenging. By June 2013 rice prices had decreased 9.7%
from their peak last year and coffee prices by 6.2%. In
addition, natural rubber prices having declined by 20.6%
during the year, cashew nuts by 9.5% and pepper by 13.5%.
For all these commodities, Vietnam is the largest or second
largest global exporter.
“ VNH’s Agricultural and Domestic
Consumption portfolio remain the
two dominant investment themes and
primary focus of our portfolio. ”
This global decline in agricultural commodity prices has
left a marked impact on the share performances of most
companies in our agricultural portfolio, as shown on the left
in the comparative theme performance chart for the past
12 months. Yet, while we have reduced our agricultural
exposure during the rebalancing exercise, we are unwavering
in our conviction that this theme will continue to offer
attractive investment returns for VNH shareholders.
While maintaining this dual sector concentration this year,
we undertook an extensive review of the Vietnamese
stock market’s overall valuation levels as well as that of its
main segments. We noticed an increasingly wide valuation
gap between the few large companies, which make up
80% of the market capitalization, and the bulk of the
companies which represent the remaining 20%. Based on
this observation, we rebalanced the VNH portfolio to further
emphasize our historic focus on medium sized companies.
The rebalancing resulted in an additional VNH portfolio shift
from large-cap firms to additional mid-cap investments. This
shift is reflected in the table shown on the next page. While a
total of 27 firms make up 80% of the Ho Chi Minh City Stock
Exchange (“HOSE”) USD 11.8 bn free-float, VNH’s portfolio
VietNam Holding Annual Report 2013 HoSe
(free-float)*)
Market
Large Caps
SMEs
VNH
Total
Large Caps
SMEs
“ Our goal is to be a supportive partner
with all of the companies in our portfolio,
assisting them with the time and talents
of the many years of global experience of
the VietNam Holding team.”
contains only 8 out of these 27 large-caps. These 8 companies
make up about one-third of VNH’s total equity portfolio. The
remaining 17 VNH portfolio companies are mid- and small-
caps.
Universe
303 companies
27 companies (80%)
276 companies (20%)
Market
Cap $B
11.680
9.340
2.340
Valuation
(trail. P/B)
14.00
14.76
11.58
These markedly lower valuations attest to VNH’s adherence to
value investment principles. This value investment approach is
further validated by the comparison of the portfolio companies’
weighted average 21.16% EPS growth over the past 5 years
compared to the overall market’s growth rate of just 4.66%.
While focusing our efforts on the continued strong financial
performance of the fund and the safe, transparent and
professional operation of our Company, we have actively
maintained our orientation as a sustainable investor with
vigorous inclusion of ESG principles in all of our management
and investment decisions. This includes a very effective plan
of active engagement with our investee companies, involving
staff, management and the Board Members of both VNH and
VNHAM. Our goal is to be a supportive partner with all of
the companies in our portfolio, assisting them with the time
and talents of the many years of global experience of the
VietNam Holding team.
Portfolio
Net Asset
Value $M
Valuation
(trail. P/E)
25 companies
8 companies (30%)
17 companies (66%)
88.198
26.690
58.179
8.91
10.96
7.80
We are most thankful to our CEO, Vu Quang Thinh, and his
dedicated staff in Vietnam. A special mention is also much
deserved by our administrative and investor relations specialists
in Zurich, our Advisory Council, and our Board members and
Senior Advisor.
Source: Bloomberg and VNHAM. As at 30 June 2013
“ The substantial out-performance of
the VNH portfolio compared to the VNI
is primarily due to the relatively better
performance of the small- and mid-cap
firms listed on HOSE compared to their
large-cap peers. ”
The substantial out-performance of the VNH portfolio
compared to the VNI is primarily due to the relatively better
performance of the small- and mid-cap firms listed on HOSE
compared to their large-cap peers. Our mid- and small-cap-
centric portfolio continues to reflect both investment themes.
The valuation gap between the VNH portfolio firms and
the comparative HOSE segments is also noteworthy. The
weighted average trailing P/E of VNH’s large caps is 41%
lower, compared to the corresponding HOSE large caps. The
VNH mid- and small-caps’ weighted average trailing P/E looks
even more attractive. It is 46% lower than the P/E of the
overall market segment.
The three local members of our Advisory Council continue
to provide us with invaluable insights into the current and
anticipated economic and political events likely to impact the
Vietnam market. Our Swiss advisor has provided important
input regarding investor expectations, and has shared valuable
and critical suggestions on the structure and presentation of
our warrant options plan. We thank them all wholeheartedly.
As has been true from the inception of the fund and this
Company, the role of our Board members is vital to our
operation and our continued success. We are blessed with
directors and a Senior Advisor who bring a wealth of global
wisdom and experience to the Company. Without them we
simply could not do what we do. They continue to serve
in a way that is sincerely appreciated and will never be
underestimated.
Jean-Christophe Ganz
Chairman
VietNam Holding Asset Management Limited
14 August 2013
* We have selected the free-float market capitalization rather than the total market capitalization because several so-called large-caps are former state-owned companies, which have been
only partially privatized. As an example, the single-largest company listed on HOSE is Petrovietnam Gas (GAS) with a total market capitalization of USD 5.3 bn as of 30 June 2013. However,
only 3.3% of this company is held by independent shareholders. Therefore, the difference of the total market capitalization of the VNI of USD 34.8 bn is quite large when compared to the
smaller market capitalization of the HOSE free-float of USD 11.8 bn, both as of mid-year 2013.
VietNam Holding Annual Report 2013
5
Market and Economic Overview
The HOSE in Ho Chi Minh City has 301
listed companies, with a combined market
capitalization of USD 32.0 billion, while the
HNX in Hanoi serves 392 listed companies,
cumulatively worth around USD 5.1 billion.
The period from July 2012 to June 2013 saw the
government endeavoring to regain control of Vietnam’s
weakened macro-economic situation. While there have
been some positive movements in this regard, it remains
a work in progress. Concerns about the fragility of the
banking sector, the stalled property sector, and efforts to
better control the large State corporations continue to
challenge policy-makers and investors alike.
In 2H 2012 the economy grew by 5.3% and by 4.9% in
1H 2013. The government has been aiming for a 5.5%
GDP growth for calendar year 2013, but the consensus
view is that 5.2% may be a more likely result.
“ In 2H 2012 the economy
grew by 5.3% and by 4.9%
in 1H 2013. The government
has been aiming for a 5.5% GDP
growth for calendar year 2013, but
the consensus view is that 5.2%
may be a more likely result. ”
By the end of June 2013, YTD inflation was a mere
2.4% and YOY inflation was 6.7%, suggesting that
the government’s battle to contain consumer prices is
gradually being won. This gave some room for monetary
loosening, with ceilings on interest rates being gradually
lowered. But despite the lower cost of borrowing, credit
growth has been anemic in 1H 2013. Commercial banks
are no longer permitted to offer customers gold deposit
accounts, and gold trading in Vietnam has effectively been
re-nationalized. Meanwhile the value of the VND has held
relatively steady against the USD over the last twelve
months, ending 1H 2013 at 21,170, compared with 20,840
at the end of 2012.
Only three of the last twelve months saw a score above
50 in the Purchasing Manager’s Index (which indicates a
positive rate of growth in the manufacturing sector), and
the index saw nine months of contraction, ending 1H 2013
at 46.4. The main culprit has been weak domestic demand
for products, rather than any marked decline in export
orders. Export orders have been driven by the foreign-
invested enterprise sector, displaying fairly consistent
net trade surpluses, despite the continued rise in FDI
inflow pledges and disbursements. Samsung in particular
has become an important source of export earnings for
Vietnam, from its USD 2.5 billion cellphone assembly plant
in Bac Ninh. A second Samsung plant is being constructed
in Thai Nguyen at a cost of an additional USD 2.0 billion.
After squeezing out a rare trade surplus of roughly USD
280 million in 2012, a more normal trade deficit was seen
for Vietnam in 1H 2013 of USD 1.4 billion. Exports were
USD 62.1 billion and imports USD 63.5 billion; a rise of
16.1% and 17.4% during 1H 2012 respectively.
A much-touted initiative to establish a state-owned asset
management company – a form of ‘bad bank’ – with
a mandate to acquire approximately USD 4 billion in
bad debt from the loan books of local banks had not
materialized by the end of June 2013. Details on the
precise modalities of its operation also remained uncertain
and a number of development and ratings agencies
cautioned that such an initiative could not be expected
to completely address the banking sector’s large debt
overhang. In addition, a State Bank of Vietnam directive
stating that all commercial banks should abide by more
stringent non performing loan and provisioning rules
was put back from June 2013 to June 2014. Similarly, a
government strategy to reform the large state corporations,
which was due for unveiling in June 2013, had not been
launched by mid-July. Such delays do little to instill
investor confidence in the earnestness of the leadership to
address some of the more fundamental challenges that lie
behind Vietnam’s current economic environment.
“ After retreating for much of
2H 2012, the markets rallied strongly
in December 2012 and January 2013,
and then made more modest gains in
March and May. As a result, the VNI
was up 13.9% between 1 July 2012
and 30 June 2013. ”
Nonetheless, the equity markets have been generally
optimistic over the last twelve months. After retreating for
much of 2H 2012, the markets rallied strongly in December
2012 and January 2013, and then made more modest
gains in March and May. As a result, the VNI was up 13.9%
between 1 July 2012 and 30 June 2013, ending June at 481,
down from a three-year peak of 528 seen earlier in the
month, but still up 16.3% for 1H 2013 overall.
6
VietNam Holding Annual Report 2013 “ Companies making up the large
cap index VN30 alone accounted
for the majority – around USD 26.6
billion – of the market capitalization
of the 308 firms listed on HOSE. ”
As of the end of June 2013, the Ho Chi Minh City stock
market’s total capitalization was equivalent to USD 38.2
billion, compared to USD 4.8 billion for the Hanoi equity
market. Companies making up the large cap index VN30
alone accounted for the majority – around USD 26.6 billion
– of the HOSE. Ho Chi Minh City is home to 308 listed
firms, while Hanoi has 388. Seven more companies listed
their shares in 1H 2013, while 22 de-listed themselves.
Roughly USD 110 million of new equity funding was raised
by companies listed on the country’s stock markets in the
first half of 2013, down about 58% on the same period
in 2012. The State Securities Commission has announced
its desire to merge the Hanoi and Ho Chi Minh City stock
exchanges, probably in 2014 or 2015.
In May 2013 the National Assembly introduced what will
be an annual vote of confidence by its 500 delegates on
the performance of Vietnam’s 49 most senior government
officials. The results were made public, and both the Prime
Minister and the Governor of the State Bank of Vietnam,
along with a number of ministers, accrued relatively low
confidence scores.
We will view the remainder of 2013 with guarded
optimism.
VietNam Holding Annual Report 2013
7
Domestic Consumption Report
Vietnam’s successful economic growth
strategy has brought tens of millions of its
citizens out of poverty since the late 1980s.
DOMESTIC CONSUMPTION IN VIETNAM
One of the primary investment themes that VietNam
Holding has pursued over the past years is domestic
consumption. In view of an average annual income in
Vietnam which recently exceeded USD 1,500 and a
growing urban middle class, we strongly believe that
companies which take advantage of the emerging trends in
the Vietnamese domestic consumption environment have
an opportunity to perform particularly well.
“ Between 2002 and 2010 alone,
the average monthly income per person
rose from approximately USD 25 to
USD 76, and average consumption
expenditures similarly rose from
USD 19 to USD 63 per month. ”
As the world’s 13th most populous country, with relatively
strong and sustained macro-economic growth over the last
quarter century, Vietnam poses an increasingly attractive
proposition to domestic-oriented retailers, producers and
service providers of many kinds. The recent arrival into
Vietnam of both Starbucks and Burger King, to name
just two global brands, and the impending arrival of
McDonald’s in early 2014, points to the increased attention
that the country’s consumer base is now receiving from
some of the world’s leading multinational enterprises.
Vietnam’s successful economic growth strategy has
brought tens of millions of its citizens out of poverty
since the late 1980s. Between 2002 and 2010 alone,
the average monthly income per person rose from
approximately USD 25 to USD 76, and average
consumption expenditures similarly rose from USD 19 to
USD 63 per month. The country’s youthful demographic
profile – 54% of the population is younger than 30, and
25% is younger than 15 – and burgeoning middle class
suggests a rosy future for domestic spending, with incomes
expected to increase further.
According to market analysis firm Nielsen, the size of
Vietnam’s middle class – defined as those households with
daily expenditures of between USD 10 and USD 100 per
person – will rise from just eight million in 2012 to 44
million in 2020 and 95 million in 2030. As a result, total
consumption in the country will rise from USD 46 billion
in 2012 to USD 310 billion in 2020 and USD 940 billion by
2030. Nielsen also ranks Vietnam as the fastest growing
FMCG (fast moving consumer goods) market in Asia, at
21.5% in 2012, ahead of India (18.3%), China (14.6%),
Indonesia (11.15%) and Thailand (10.9%).
We have also seen the steady growth of urban areas, as
people have migrated from semi-subsistence rural jobs
to salaried employment in the cities and industrial zones.
In the late 1980s, about 20% of the population resided
in urban areas. That figure has now risen to about 30%,
and some forecasts suggest it will be near 50% by 2025.
Such figures help explain why the amount of foreign direct
investments in the wholesale and retail sales-related space
in Vietnam rose by 107% in 2012.
While considerable challenges will undoubtedly be
faced by various participants in this fast-evolving sector,
particularly from increased market penetration by some
large and experienced foreign investors, the overall
outlook is bright for domestic players. After decades of low
incomes and consumer frugality, the Vietnamese populace
is beginning to display its new-found spending power
across a range of sub-sectors. Below we briefly profile
four of these: healthcare, food and beverages, retail, and
information and telecommunications.
“ After decades of low incomes and
consumer frugality, the Vietnamese
populace is beginning to display its
new-found spending power across a
range of sub-sectors. ”
HEALTHCARE
There are a number of growth opportunities in the
burgeoning healthcare sector in Vietnam, ranging from the
manufacture of generic and branded healthcare-related
products and machinery to various service providers,
such as private hospitals. According to a BMI Vietnam
Pharmaceuticals and Healthcare report, healthcare
expenditure per capita in Vietnam increased from USD
73.9 in 2009 to USD 100.0 in 2012 and are forecasted to
reach USD 168.5 in 2017. Pharmaceutical sales per capita
in 2012 were USD 31.62 and are forecasted to reach USD
68.89 in 2017, a compound annual growth rate of 17%.
A key challenge that local companies are facing is
lackluster consumer confidence in the caliber of domestic
8
VietNam Holding Annual Report 2013 “ There are a number of growth
opportunities in the burgeoning
healthcare sector in Vietnam, ranging
from the manufacture of generic and
branded healthcare-related products
and machinery, to various service
providers, such as private hospitals. ”
healthcare products and services, relative to foreign
brands and service providers. When affordable, there is a
preference among domestic consumers to select imported
products as well as services offered by foreign-owned
service providers. This consumer view will take time to
dissipate, but it does provide a market opportunity for
innovative local firms.
A good example of this is Hanoi-based Traphaco (TRA)
a local pharmaceutical company that has been able to
harness increased domestic consumer spending in the
health sector through its diverse product offering. A key
differentiation that the company has established is its mix
of both Western and traditional ‘Oriental’ approaches to
medicines, which is particularly attractive to a growing
number of local consumers who see merits in combing
both disciplines. The company’s recent ventures into
Oriental medicines and herbs production and its expansion
into Cambodia, Laos and Ukraine - all overseas markets
that it understands well - make the company an exciting
investment proposition.
Between 2006 and 2012 TRA recorded an impressive
42.2% compound annual growth in net profit after tax
while maintaining an ROA of more than 12% and an
ROE above 21%. During that same period, TRA’s revenue
increased by 4 times and exceeded VND 1400 billion with
net profit before tax at VND 174 billion. In 2012, TRA
surpassed Domesco to become the 2nd largest domestic
pharmaceutical company in Vietnam.
FOOD AND BEVERAGES
Although reliable statistics are hard to validate, average
spending on food and beverages is believed to make up at
least a third of total spending by Vietnamese consumers. In
the basket of items used by the General Statistical Office
to calculate the consumer price index, food items account
for over 42% of the total basket, thereby indicating how
important food expenditure is for Vietnamese households.
Successfully tapping into that market requires both strong
branding strategies and an extensive distribution network.
Ho Chi Minh City-based Vinamilk, perhaps Vietnam’s most
well-known company in the food and beverages sector, has
established an enviable range of dairy-related products that
meet local tastes, and has complimented it with a robust
distribution network. VNM has consistently maintained
its dominating market share of over 50% in almost all
of its product range (90% in yogurt, 70% in condensed
milk, 50% in fresh milk and 30% in powdered milk). In
recent years the company has shifted more into domestic
dairy farming, as well as related healthcare services. VNM
has also sought to carefully explore overseas markets,
including Cambodia and the Philippines, as well as select
Middle Eastern markets and Australia.
“ Although reliable statistics
are hard to validate, average
spending on food and beverages
is believed to make up at least
a third of total spending by
Vietnamese consumers. ”
Another growth area is beer, with sales amounting to USD
3 billion in 2012. Indeed, Vietnam has the largest beer
consumption per capita in the Southeast Asia region (at
about 38 liters). The corresponding figure in Thailand is
about 27 liters and in the Philippines just 19 liters. Both
countries have markedly higher GDPs per capita than
Vietnam. Between 1990 and 2011, beer consumption in
Vietnam rose almost 27-fold, far out-pacing China‘s 6-fold
increase.
RETAIL
It is hard not to be excited by the long-term opportunities
presented to the retail sector in Vietnam’s demographic
and economic trajectory. Total retail sales of goods and
services in Vietnam not adjusted for inflation rose more
than 100 fold to VND 2,004.36 trillion – the most recent
year for which data is available. In 1990, State-owned
Enterprises (SOEs) accounted for 30.4% of all such
retail sales, and the domestic private sector provided
the remaining 69.6%. By 2011, SOEs accounted for just
14.6%, a mere 2.5% was sold by foreign-invested firms,
and 82.9% was provided by domestic private firms.
VietNam Holding Annual Report 2013
9
Domestic Consumption Report
Not only are Vietnamese consumers
spending more, they are also becoming
more discerning customers.
Not only is the overall retail ‘pie’ in Vietnam growing, but the
domestic private sector’s slice of that pie is steadily increasing.
Participation by retail sector
1990 and 2011
SOEs
Private Sector
Foreign-invested
2.5%
14.6%
30.4%
69.6%
82.9%
1990
2011
Source: Nielsen
Despite the relatively weak domestic economy in 2012,
the General Statistical Office estimates that the total
value of retail sales in Vietnam was over USD 111.35
billion with a 16% growth rate that year. Yet only about
20% of this figure was transacted in modern outlets,
such as supermarkets and convenience stores. The bulk
of retail transactions still occur in ‘wet markets’ and more
traditional outlets, as do the many small transactions
typically conducted by consumers on a daily basis. There
is considerable value to be captured by enterprising firms
that are able to establish national distribution networks
that provide products that meet the needs of the millions
of consumers with more modest incomes.
Following Vietnam’s commitments to open the domestic
market after its accession to the WTO in 2007, a key
challenge for domestic retailers is the increased presence
of foreign ventures. In early June 2013 a Circular issued
by the Ministry of Industry and Trade came into effect
that liberalizes the regulations on the trading of goods by
foreign enterprises, thereby moving further towards a level
playing field for all retailers.
“ Despite the relatively weak
domestic economy in 2012, the
General Statistical Office estimates
that the total value of retail sales in
Vietnam was over USD 111.35 billion
with a 16% growth rate that year. ”
while Takashimaya and Aeon of Japan are reportedly poised
to open shopping malls in Vietnam. A similar cascade of
investments is likely to be seen in smaller convenience stores.
For local consumers, such supermarkets offer more choice,
but also the comfort that comes from the strict enforcement
of standards in food safety and quality that have been
imposed on suppliers. Domestic retailers that are able to
transition themselves and their products to the needs and
expectations of a more modern retail market should see their
revenues grow. A good example of this is Masan Consumer,
which has established a portfolio of strong brands in the food
and beverage space and in turn has attracted investments
from several global private equity firms.
INFORMATION & TELECOMMUNICATIONS
While much of Vietnam’s physical infrastructure often
struggles to keep pace with the rapidly increasing local
demand, Hanoi’s policy-makers were quick to appreciate
the merits of providing affordable telecommunications
and allowed a significant degree of competition to occur
within this sub-sector. This in turn resulted in substantial
investment in telecommunications, as well as prices that
allow most Vietnamese to own a cellphone.
“ In 2012 there were 139 mobile
phones in Vietnam for every 100
people; equivalent to over 127 million
cellphone subscriptions. ”
Germany’s METRO and Big C of France have already made
substantial in-roads into Vietnam, while both E-Mart and
Lotte Mart of South Korea and Auchan of France have plans
to begin operations in Vietnam. NTUC FairPrice of Singapore
recently entered a joint venture with Saigon Co-op to open
‘Co.opXtra’ and ‘Co.opXtra Plus’ hypermarkets in 2013,
A recent estimate suggests that in 2012 there were 139
mobile phones in Vietnam for every 100 people; equivalent
to over 127 million cellphone subscriptions. Similarly,
the internet penetration rate was estimated to be around
34% (around 30.8 million users) in 2012, slightly higher
than the global average of 33%. Additionally, over 8.5
10
VietNam Holding Annual Report 2013 million Vietnamese held a Facebook account by mid-2012
(Facebook’s fastest growth rate in the world at that time),
and a similar number use rival Zing.
While consumer sales on the internet remain a small
portion of total consumer transactions, this is expected to
soon rise considerably. The government has estimated that
total e-commerce sales in Vietnam in 2012 amounted to
about USD 700 million – not far behind Indonesia at USD
1 billion – and that by 2015 such sales will reach USD 1.3
billion. It is estimated that 79% of all internet users visit
on-line retail sites, 61% have made an on-line purchase of
some kind and over 80% have used social network sites
when researching potential purchases.
“ Affordable and relatively reliable
telecommunications has also allowed
for the establishment of a small
but rapidly growing community of
IT-oriented businesses. ”
Affordable and relatively reliable telecommunications
has also allowed for the establishment of a small but
rapidly growing community of IT-oriented businesses.
FPT Corporation is presently the largest listed Vietnamese
company operating in the ICT and telecommunications
sector. The main drivers of its activities include
telecommunications, online content, software out-sourcing
to overseas clients and IT services and education. In 2012,
FPT attained a 20% YOY increase in internet subscribers
and had extended its services to 46 of Vietnam’s 64
provinces, with a further 10 provinces expected to be
on-line by the end of 2013. FPT also aspires to increase
its international presence as there are considerable
opportunities in a number of neighboring countries where
customers are still poorly served.
“ While consumer sales on the internet
remain a small portion of total consumer
transactions, this is expected to soon
rise considerably. The government has
estimated that total e-commerce sales
in Vietnam in 2012 amounted to about
USD 700 millon and that by 2015 such
sales will reach USD 1.3 billion. ”
“ We are encouraged by the
fact that companies which fail to
comply with environmental or health
standards can find themselves subject
to informal, but surprisingly rapid and
effective, customer boycotts. ”
Not only are Vietnamese consumers spending more, they
are also becoming more discerning customers. It is well
known that in the past most Vietnamese have tended to
prefer foreign brands and products when given a choice.
But we are now starting to see increasing evidence of
domestic companies successfully establishing their own
brands, and thereby capturing greater market share, as in
the case of Traphaco and Vinamilk.
We are encouraged by the fact that companies which fail
to comply with environmental or health standards can find
themselves subject to informal, but surprisingly rapid and
effective, consumer boycotts. This has already been seen
in the foodstuff sector where a company was repeatedly
chastised for polluting a local river, and with a number of
high profile foreign-owned enterprises that were alleged to
have used transfer pricing techniques to evade corporate
income tax. This consumer sentiment and activism is
very much congruent with our own approach to socially
responsible investing and the way we have mainstreamed
ESG into our investment activities. As we seek and develop
investments in Vietnam’s important domestic consumer
sector and other areas, that will continue to be the case.
VietNam Holding Annual Report 2013
11
Portfolio Companies
FPT Corporation (FPT) is Vietnam’s leading manufacturer and distributer of telecommunications products. Vietnam’s Information &
Telecommunications sector will continue to be a major driver for the country’s domestic consumption growth.
Thien Long Group (TLG) is the number one producer and distributor of pens and stationery in Vietnam. TLG can boast a very strong
brand recognition among local customers and it is also a leading exporter to other Asian countries, Europe and the US.
12
VietNam Holding Annual Report 2013 Phu Nhuan Jewelry (PNJ) is Vietnam’s most famous jewelry retailer. As in most other Asian countries, gold and silver products are a
very popular status symbol in Vietnam. On top of that it is also considered to be an elegant way to preserve your savings.
Vinasun (VNS) is the largest Taxi enterprise in Vietnam with currently more than 4,600 taxis in five major cities. Vietnam’s taxi market is growing
rapidly but it is also highly competitive. In this challenging environment VNS is very favorably positioned thanks to its size and experience.
VietNam Holding Annual Report 2013
13
Portfolio Companies
HAU GIANG PHARMACEUTICAL JOINT STOCK COMPANY (DHG)
SHAREHOLDER PROFILE (as at 30 June 2013)
FINANCIAL HIGHLIGHTS (USD million)
SCIC
Foreign investors
Domestic investors
43.3%
49%
7.7%
VIETNAM HOLDING’S INVESTMENT (as at 30 June 2013)
Number of shares:
Total investment:
Average purchase price:
% VNH shareholding:
1,615,608
USD 3.67 million
VND 48,142
2.5%
TRADING INFORMATION (as at 30 June 2013)
Traded on:
Date of listing:
Total shares outstanding:
Share price:
52 week high:
52 week low:
Trailing P/E:
Price/Book:
HOSE
21 Dec 2006
65 million
VND 87,000
VND 90,000
VND 54,800
11.2
3.2
CORE BUSINESS
Producer and distributor of pharmaceutical products.
COMPANY BACKGROUND
Established in 1974, Hau Giang Pharma (DHG) is one of
Vietnam’s leading pharmaceutical producers and distributors.
A former State-owned Enterprise, the company was equitized
in 2004 and subsequently listed in 2006.
KEY STRENGTHS
DHG has a well-developed distribution network throughout
all 64 provinces of Vietnam, the most extensive network
among its local rivals. DHG has held the largest market share
(10.8% in 2012) among local peers for the last 17 years. The
management team has proven its ability to execute a clear
strategy of focused diversification based on the company’s
core competencies. The company’s modern and integrated
factory system meets the most demanding global standards.
Its equally well regarded and internationally certified R&D
laboratory is very active in the research and development of
new products and import substitutes.
BUSINESS STRATEGY AND EXECUTION
DHG’s management seeks to derive maximum competitive
advantage from the company’s strong distribution system.
New factories have expanded production capacity, as the
existing plants were running at full capacity. The company
is collaborating with a range of biological institutes and
researchers to carry out projects aimed at developing dietary
supplement products from algae. DHG invests heavily
in staff training with a strong emphasis on best-practice
management practices.
14
Equity capital
Revenue
Revenue growth (in VND) (%)
EBIT
NPAT
EPS (VND)(*)
EPS growth (%)
Gross Margin (%)
EBIT Margin (%)
ROE (%)
D/E (x)
Current Ratio (x)
2011
65.7
122.9
22.4
22.2
20.5
6,382
8.5
48.5
18.1
30.1
0.02
2.7
2012
81.0
140.0
17.7
26.1
23.2
7,443
16.6
49.3
18.7
28.8
0.01
2.8
Sources: DHG audited financial statements and annual reports.
(*) Bonus stock issued at ratio 10:14, in June 2011.
ESG HIGHLIGHT
DHG incorporated a Corporate Social and Environmental
Responsibilities report in their 2012 Annual Report, receiving very
positive feedback from investors. The report identifies environmental
issues relating to usage of natural resources and solutions to these
issues. The company also publicly stated its position on energy and
climate change, bioequivalence and biodiversity, Intellectual property
and brand investments.
PERFORMANCE & DEVELOPMENT IN 2012
DHG reported growth of 17.7% in revenues and 17% in
net operating profits in 2012. During the same year 22 new
products were granted registration certifications and 30
new products have been added to its manufacturing line.
Construction of two new factories (non-beta-lactam and
beta-lactam) is scheduled for completion in Jul 2013 and
December 2013 respectively. DHG was voted one of the
`Asia’s 200 Best Under A Billion, 2012’ by Forbes magazine.
DHG’s 2012 Annual Report has been nominated for a
national award for the second consecutive year.
OUTLOOK FOR 2013-2014
The increasing healthcare awareness and spending power
of the Vietnamese resulted in pharma industry growth of
around 17% last year. Currently, domestically produced
medicines only meet 46% of Vietnam’s total demand. The
industry aims to raise this ratio to 70% by 2015. The two
new factories will raise DHG’s total production output to 9
billion units from the current capacity of 4 billion and are
expected to run at full capacity within 3 years. In 2013, DHG
expects to record USD 6 million in pre-tax profit from sale of
Eugica, one of its best-selling brands.
The company continues to collaborate with senior
researchers at the Hanoi University of Pharmacy to conduct
bioequivalent studies on long-acting treatment products.
Additionally, its work with the Institute of Biotechnology has
produced Naturenz, a promising liver detoxification product.
The company is also aiming to produce Spirulina (a seaweed
derivative containing zinc, selenium and chromium from
spores) in the development of nutrition-related products for
women and children.
VietNam Holding Annual Report 2013
FPT CORPORATION (FPT)
SHAREHOLDER PROFILE (as at 30 June 2013)
FINANCIAL HIGHLIGHTS (USD million)
2011
2012
SCIC
Foreign investors
Domestic investors
6%
12%
82%
VIETNAM HOLDING’S INVESTMENT (as at 30 June 2013)
Number of shares:
Total investment:
Average purchase price:
% VNH shareholding
TRADING INFORMATION (as at 30 June 2013)
Listed on:
Date of listing:
Total shares outstanding:
Share price:
52 week high:
52 week low:
Trailing P/E:
Price/Book:
848,982
USD 1.67 million
VND 40,886
0.3%
HOSE
21 November 2006
274 million
VND 41,800
VND 45,700
VND 31,500
7.3
1.8
Equity capital
Revenue
Revenue growth (in VND) (%)
EBIT
NPAT
EPS (VND)
EPS Growth (%)
Gross margin (%)
EBIT margin (%)
ROE (%)
D/E
Current ratio (x)
296.0
1,251.9
26.7
135.7
83.0
6,276
19.4
19.5
10.8
29.8
0.8
1.3
340.4
1,174.7
(3.1)
125.9
73.6
5,665
(9.7)
19.1
10.7
23.1
0.4
1.5
Sources: FPT audited financial statements
(*) Stock dividend ratio 4:1 in May 2012
ESG HIGHLIGHT
FPT University and its affiliates have trained more than 15,000
students majoring in IT, economics and finance. The university
was established to train and provide quality human resources
for FPT Corporation, but is also an important growth driver for
the community. FPT is expected to appoint a new CEO this year
to implement an aggressive global expansion plan as well as to
maximize synergies among the company’s business units.
CORE BUSINESS
Major manufacturer and distributer of telecommunications
products and international provider of information technology
services.
COMPANY BACKGROUND
FPT is the largest IT company in Vietnam, with a revenue
of USD 1,174.7 million in 2012. Originally a State-owned
Enterprise founded in 1988, FPT changed its focus to
information technologies in 1990 and has held the leading
position in the industry since 1996. It went public in 2002 and
was listed on the HoChiMinh Stock Exchange in 2006.
KEY STRENGTHS
The company’s key strengths include high quality human
resources, a comprehensive telecom infrastructure, and a
reputable brand name recognized throughout the country.
The company is the largest software exporter in Vietnam
with a skilled workforce of 4,784 programmers. A complete
telecom infrastructure helps FPT to increase competitiveness,
reduce lease-line cost and enables it to expand its market
to second-tier cities. It is already represented in 46 of the
63 cities and provinces in Vietnam and in 14 countries
around the world. With a strong base of more than 180
globally well-recognized customers and partners, FPT has the
potential to reach its ambitious goals of optimal synergy and
competitive advantages.
BUSINESS STRATEGY AND EXECUTION
FPT continues to concentrate on its core businesses and
to provide cutting edge services in the areas of cloud
computing, data warehousing and mobile technology. Its
Board of Directors made a strong commitment to FPT’s long-
term growth by mandating the policy of setting aside 5% of
profit before tax for R&D, establishing a Technology Council
and increasing the emphasis on training activities. In 2012
FPT expanded its retail sales capacity in order to capitalize on
the increasing demand for Information and Communications
Technology (ICT) products.
PERFORMANCE & DEVELOPMENT IN 2012
2012 was a difficult year for FPT in the context of decreased
spending on information technologies in both the private
and public sector. FPT was nevertheless able to achieve
reasonably good business results with USD 1,174.7 million in
revenues, down 3% from 2011, and USD 73.6 million in net
profit, down 8% from the previous year.
FPT retained its leading position in most business segments
including software development, system integration, IT
services, online advertising and distribution of ICT related
products. In 2012, FPT was named by the NeoGroup, a
global expert in information services, to The Global Services
100 List comprising industry leaders in global IT and Business
Process Outsourcing (BPO) services. That year, FPT’s software
outsourcing segment recorded a 34% growth in revenues and
a 26% in profit before tax. Also in 2012, FPT put into operation
the North-South backbone telecommunications cable system,
which enables it to expand its service network to 44 out of 63
cities and provinces and enjoy strong countrywide growth.
OUTLOOK FOR 2013-2014
Earnings are forecast to grow at a modest 12% in 2013,
given the uncertainties of domestic macroeconomic
conditions, which are likely to lead to cuts in both spending
and investments in information technologies. Nevertheless,
FPT’s software outsourcing and internet broadband services
segments are expected to maintain strong growth thanks
to high demand and FPT’s competitive advantages. In the
medium term, FPT will benefit from the process of reforms in
the banking and State-owned Enterprises sectors as well as
increased spending for ICT products and online services.
VietNam Holding Annual Report 2013
15
Portfolio Companies
JAPAN VIETNAM MEDICAL INSTRUMENT JOINT STOCK COMPANY (JVC)
SHAREHOLDER PROFILE (as at 30 June 2013)
FINANCIAL HIGHLIGHTS (USD million)
Foreign investors 49%
Domestic investors 51%
VIETNAM HOLDING’S INVESTMENT (as at 30 June 2013)
3,295,396
Number of shares:
USD 3.02 million
Total investment:
Average purchase price:
VND 16,182
% VNH shareholding: 6.7%
TRADING INFORMATION (as at 30 June 2013)
Traded on: HOSE
Date of listing: 21 June 2011
49 million
Total shares outstanding:
Share price: VND 19,400
52 week high: VND 21,600
52 week low: VND 16,170
Trailing P/E: 5.5
1.3
Price/Book:
CORE BUSINESS
Distributor and manufacturer of medical equipment.
COMPANY BACKGROUND
JVC, founded in 2001 as a private enterprise and listed in
2011, is the market-leading vendor of health care diagnostic
equipment to hospitals and clinics across Vietnam. Being the
sole distributor of Hitachi and official distributor of other
well-known brands such as Fuji, GE, Kodak, Nemoto, KINKY
Roentgen, Toray and Carestream, JVC is an innovator in
providing sales support and services to its clients in Vietnam.
It was also the first company in the country to operate a
medical equipment leasing service under revenue sharing
contracts with leading hospitals. JVC also operates a fleet of
mobile diagnostic clinics supporting health care to workers at
large-scale manufacturing and business centers.
KEY STRENGTHS
As the official distributor for well-recognized brands, JVC’s
products are known in Vietnam for their high quality,
reasonable prices and professional technical support. Hitachi
medical imaging products in Vietnam have a market share
of more than 30% - twice that of Siemens and Phillips
Combined. JVC has established good relationships with
leading national and provincial hospitals in Vietnam by
sending experienced engineers and technician teams to
support doctors in operating JVC machinery and equipment.
JVC has a young, dynamic management team that is
committed to the growth of the company and capable of
achieving it.
16
Equity capital
Revenue
Revenue growth (in VND) (%)
EBIT
NPAT
EPS (VND)
EPS growth (%)
Gross Margin (%)
EBIT Margin (%)
ROE (%)
D/E (x)
Current Ratio (x)
2011
17.9
29.9
43.5
10.5
6.7
4,916
76.0
38.8
35.2
40.5
0.3
1.6
2012
33.6
36.4
25.8
12.9
8.2
5,264
7.1
39.5
35.5
32.0
0.6
1.7
Sources: JVC audited financial statements and annual reports.
ESG HIGHLIGHT
JVC has introduced to Vietnamese hospitals the Kusukusu line of
incinerator products, which work on advanced semi-distillation,
negative pressure combustion principles. All medical wastes are
burned thoroughly, in a smokeless and odorless process, ensuring that
the levels of dioxin and furan are considerably lower than when using
traditional methods.
BUSINESS STRATEGY AND EXECUTION
JVC aims to be the leading distributor of medical imaging
equipment in Vietnam by continuously introducing state-of-
the-art technology products from leading global manufacturers.
JVC is cooperating with several of Vietnam’s leading hospitals
to develop high quality medical diagnosis and treatment
centers, on a revenue sharing basis. The company also runs
other supporting businesses, such as: establishing general clinic
centres in Ho Chi Minh and Hanoi; producing its own-brand
of high frequency X-ray machines; mobile clinic health check-
up services for workers in industrial zones; and a repair and
maintenance service for medical equipment.
PERFORMANCE & DEVELOPMENT IN 2012
JVC recorded a 26% growth in revenues and 27% in net
income in 2012, contributing to 3-year CAGR of 61% and
77% respectively. JVC was ranked 3rd among the top 50
Vietnamese most effective businesses in early 2013. In 2012,
JVC became the official distributor for an additional 20
international brands in Vietnam.
OUTLOOK FOR 2013-2014
The government of Vietnam has identified the domestic
healthcare services industry as a top priority for the next
five years. It is increasing its efforts towards expanding the
availability of medical services and upgrading medical facilities
and equipment across the country. JVC aims to provide a
wide range of medical equipment, covering products in areas
such as imaging diagnostics, cancer therapy, surgery, obstetric
gynaecology, dialysis, functional exploration and rehabilitation,
and waste treatment. In partnership contracts with hospitals,
the company raised VND 146 billion in late 2012 for new
investments in cancer treatment equipment in two leading
hospitals. These projects will be launched in the fourth quarter
2013 and are planned to achieve break-even within 2.5 years
and ultimately achieve an annual IRR of 35%.
VietNam Holding Annual Report 2013 PETROVIETNAM GENERAL SERVICE JS COMPANY (PET)
SHAREHOLDER PROFILE (as at 30 June 2013)
FINANCIAL HIGHLIGHTS (USD million)
Petrovietnam Group PVN
35%
Foreign investors 30%
Domestic investors 35%
VIETNAM HOLDING’S INVESTMENT (as at 30 June 2013)
1,573,390
Number of shares:
USD 1.59 million
Total investment:
VND 22,921
Average purchase price:
% VNH shareholding: 2.3%
TRADING INFORMATION (as at 30 June 2013)
Traded on: HOSE
12 Sep 2007
Date of listing:
Total shares outstanding:
69 million
Share price: VND 21,400
52 week high: VND 25,500
52 week low: VND 9,600
Trailing P/E: 7.9
1.2
Price/Book:
CORE BUSINESS
Distributor of mobile phones and IT equipment in Vietnam.
Additionally, it is a specialized services provider to the oil and
gas industry.
COMPANY BACKGROUND
PET, founded in 1980, is the leading wholesale distributor
of mobile phones in Vietnam. In 2009, it was the most
successful distributor of Nokia in the Asia Pacific region,
surpassing its 2 largest competitors, FPT and the Lucky
Group. In 2012, PET was again nominated among the top
50 famous brand names of Vietnam and ranked 69th in the
list of Vietnam’s Top 500 Enterprises. Aside from mobile
phone distribution, PET provides a range of exclusive
services to the Petrovietnam Group such as catering,
logistics and building management.
KEY STRENGTHS
With 12 branches nationwide, PET maintains business
relations with 1,700 agents/shops, covering the largest
wholesale network in cell phone distribution in Vietnam.
PET’s dynamic management team swiftly and competently
adapted their medium and long-term strategy to the rapid
development of the mobile phone market. A widespread
network and valuable industry experience helped PET
to establish long-term contracts with the world’s largest
mobile phone and IT equipment producers. For example, PET
operates 50%-60% of Samsung’s wholesales distribution
channels in Vietnam.
Equity capital
Revenue
Revenue growth (in VND) (%)
EBIT
NPAT
EPS (VND)
EPS growth (%)
Gross Margin (%)
EBIT Margin (%)
ROE (%)
D/E (x)
Current Ratio (x)
2011
57.7
509.3
4.7
30.6
14.1
4,107
29.0
9.7
6.3
23.5
1.2
1.2
2012
59.6
485.0
(1.6)
17.6
9.0
2,720
(33.8)
7.5
4.0
15.1
1.1
1.3
Sources: PET audited financial statements and annual reports.
ESG HIGHLIGHT
PET sent strong messages to its employees and management
members on environment protection. Its focuses: strict compliance
with water treatment regulations and standards, use of biodegradable
plastic bags, sorting of wastage before dumping, promotion of
no-smoking workplace, shutting down electrical appliances when
appropriate, and making the most of the natural light environment.
Besides this, PET also encouraged its customers to participate in the
World Environment Day through propaganda posters, books in the
lobby and advertising display screens in buildings.
BUSINESS STRATEGY AND EXECUTION
Originating from a diversified oil & gas services group, PET
successfully concentrated on well identified core industry
service businesses including distribution, catering, logistics,
and building management. Aside from Samsung, PET also
represents Blackberry, HTC, Sony and Lenovo. The company
divested several non-core businesses during the last 2 years,
thereby generating improved net pre-tax profit margins.
PERFORMANCE & DEVELOPMENT IN 2012
PET became a Tier 2 distributor for Samsung in July 2012.
Stagnant Nokia sales during the first half of 2012 were easily
offset after the signing of the Samsung contract in July. As a
result, 2012 net income before tax (excluding extraordinary
income) increased by 9%, aided by improving net margins
from the new business segments. In 2011, the company
enjoyed an extraordinary pre-tax income of VND 152 billion
from non-core business divestment.
OUTLOOK FOR 2013-2014
Local smart phone consumption is forecasted to grow by
25% per annum in the next 3-5 years and is expected to
gradually move the market into the premium price zone.
Samsung has kicked off a USD 2 billion factory construction
project in the Thai Nguyen province, with a total area of
100-ha and a planned capacity of 100 million handsets per
annum. The positive image created by this factory (Samsung’s
2nd largest globally) paves the way for further opportunities
for PET, including the distribution of Samsung’s many
products beyond mobile phones. The company negotiated
better payment terms with Samsung compared to Nokia’s,
helping them to free up valuable working capital and
reducing financial expenses.
VietNam Holding Annual Report 2013
17
Portfolio Companies
PHU NHUAN JEWERY JOINT STOCK COMPANY (PNJ)
SHAREHOLDER PROFILE (as at 30 June 2013)
FINANCIAL HIGHLIGHTS (USD million)
Foreign investors 49%
Domestic investors 51%
VIETNAM HOLDING’S INVESTMENT (as at 30 June 2013)
Number of shares:
Total investment:
Average purchase price:
% VNH shareholding:
2,335,538
USD 2.97 million
VND 31,862
3.2%
TRADING INFORMATION (as at 30 June 2013)
Traded on: HOSE
23 Mar 2009
Date of listing:
72 million
Total shares outstanding:
Share price: VND 27,000
52 week high: VND 33,400
52 week low: VND 25,100
Trailing P/E: 8.9
1.5
Price/Book:
Equity capital
Revenue
Revenue growth (in VND) (%)
EBIT
NPAT
EPS (VND)
EPS growth (%)
Gross Margin (%)
EBIT Margin (%)
ROE (%)
D/E (x)
Current Ratio (x)
2011
53.7
886.4
30.6
18.2
12.7
4,285
21.3
3.7
2.1
22.5
1.2
1.7
2012
59.6
320.8
(62.6)
12.9
12.2
3,571
(16.7)
8.6
4.0
19.1
0.9
1.2
Sources: PNJ audited financial statements and annual reports.
ESG HIGHLIGHT
PNJ is active in numerous philanthropic activities. The company
is co-founder of the Saigon Times Foundation and Education
Development Fund, which provides long-term scholarships in Vietnam
and particularly in rural areas. Annual spending for these educational
support activities is nearly VND 14 billion.
CORE BUSINESS
Producer, distributor and retailer of jewelry products.
COMPANY BACKGROUND
PNJ is one of the two largest jewelry producers in Vietnam
with a 26% market share. Its jewelry products are distributed
through 55 company-owned facilities throughout the country.
The company holds 60% of the high-end silver jewelry market
with over 100 retail stores nationwide. PNJ provides a wide
product range for the more affluent consumers in Vietnam.
The company has been listed as one of the Top 500 Asia Pacific
retailers since 2004 and received an International Quality
Award from the Asia Pacific Quality Organization in 2010.
KEY STRENGTHS
PNJ relies on its 25 years of experience in the jewelry
industry, building strong brand names at the luxury end
of the market. The company has developed a nationwide
distribution network including 167 independent retail stores.
PNJ considers its experienced team of award winning jewelry
designers and its nearly 1,000 skilled goldsmiths as their
most important assets.
BUSINESS STRATEGY AND EXECUTION
Supported by its primary competitive advantages of
creativity, sophistication and reliability, PNJ aims to build
a leading position in the Asian jewelry industry. This is to
be achieved through selected diversification, advanced
management and manufacturing systems, and well-
developed crafting skills. Its 10-year development plan
to 2022 sets out four core competences to be further
strengthened, including international design quality
standards, production scale and technology, modern
management systems, and skillful and devoted personnel.
PERFORMANCE & DEVELOPMENT IN 2012
New central bank regulations in 2012 to control the gold
market have had a significantly negative influence on PNJ’s
business results. Revenue decreased 63% mainly due to the
decline of the gold bar trading while revenue from jewelry
products increased slightly by 2%. Yet, the 2012 gross
profit margin improved, increasing to 8.6% compared to
3.7% in previous years. The improved profit margin will
be maintained in the next years, as gold bar trading further
decreases. The bottom line remained stable, in part due to
extra-ordinary income from selling its subsidiary Vinagas.
Determining 2012 as a year of change and internal value
development, PNJ focused its resources on organizational
restructuring. The efforts resulted in higher productivity,
improved gross margins, a new risk control scheme and an
improved concentration on its core business.
OUTLOOK FOR 2013-2014
The new VND 120 billion factory, which was completed
in October 2012 with a total area of 12,500m² tripled the
company’s production capacity to potentially for 4 million
units per year. It underlines PNJ’s commitment to become
a leading player in the region’s jewelry industry. For 2013,
the company set a target of VND 7,798 billion in sales, up
16% and VND 241 billion in net profit, down 5%, due to
extraordinary income incurred in 2011. PNJ plans a cash
dividend of VND 2,000/share, providing a yield of 7.5%.
The company expects to open 14 new stores in 2013 thereby
increasing total retail shops to 181 stores. The company also
plans to increase the chartered capital by 5% to VND 756
billion, by way of an ESOP program.
18
VietNam Holding Annual Report 2013 THIEN LONG GROUP (TLG)
SHAREHOLDER PROFILE (as at 30 June 2013)
FINANCIAL HIGHLIGHTS (USD million)
Foreign investors 16%
Domestic investors 84%
VIETNAM HOLDING’S INVESTMENT (as at 30 June 2013)
2,392,280
Number of shares:
USD 3.39 million
Total investment:
Average purchase price:
VND 26,943
% VNH shareholding: 11.3%
TRADING INFORMATION (as at 30 June 2013)
Traded on: HOSE
26 Mar 2010
Date of listing:
21 million
Total shares outstanding:
Share price: VND 30,000
52 week high: VND 31,900
52 week low: VND 14,600
Trailing P/E: 6.1
1.1
Price/Book:
CORE BUSINESS
Producer and distributor of pens and stationery products.
COMPANY BACKGROUND
TLG, founded in 1981 as a private enterprise, is the leading
producer and distributor of pens and stationery in Vietnam,
with a 60% market share in pens and 30% in office supplies.
TLG’s products are certified with numerous quality and
environment standards and meet the requirements of leading
international stationery producers such as BIC, Crayola and
many others. The company has built and maintains a strong
track record of revenues and profit growth.
KEY STRENGTHS
The company has strong brand recognition over a distribution
network of more than 130 wholesalers and 45,000 points
of sale, including those in Germany, China, Japan, USA,
Thailand, Laos and Cambodia. The company applies a very
tight quality control system on well-selected input materials
and has an innovative production system. Thien Long has
branded molds and machines, which meet with international
standards and help the company to stay on top of the latest
global trends in their design and production fields. A learning
culture is incorporated in their commitment to sustainable
development and social responsibility.
BUSINESS STRATEGY AND EXECUTION
TLG’s vision is to become the leading supplier of pens and
stationery in South East Asia and achieve a leading market
position throughout Asia. The company is already expanding
its penetration to developed markets including Japan and
Europe. Diversification of brand names and the range of
products are aimed to meet the needs of all market segments.
The company is enhancing R&D towards automation, high
productivity, timely completion and high quality.
Equity capital
Revenue
Revenue growth (in VND) (%)
EBIT
NPAT
EPS (VND)
EPS growth (%)
Gross Margin (%)
EBIT Margin (%)
ROE (%)
D/E (x)
Current Ratio (x)
2011
22.7
51.7
28.3
8.1
4.0
3,931
5.2
39.5
15.7
18.5
0.7
1.5
2012
26.5
58.1
16.6
8.0
4.8
4,729
20.3
37.7
13.8
19.5
0.5
1.7
Sources: TLG audited financial statements and annual reports.
ESG HIGHLIGHT
Under the company’s sustainability policy, its Committee of Initiative
regularly studies and proposes solutions to conserve a number
of resources including water, electricity, and raw materials in
the company’s production and operation phases. The Committee
organizes monthly meetings with the workers from different factories
to share ideas and experiences. These have included: replacing the
industrial fans with fresh air ventilation cooling systems, investing in
power-saving pressing machines, and replacing high-voltage lights
with fluorescent lights in selected areas.
PERFORMANCE & DEVELOPMENT IN 2012
Despite unfavorable market conditions including declining
domestic demand, increased plastic prices and rising labor
costs, the company achieved a record 2012 revenue growth
of 16.7% and a 24.4% increase in net profits. That success
was in part due to a 2011 restructuring program, which
included the branding of TLG products into 5 main groups.
Export revenue recorded a significant growth at 75% as TLG
officially entered the Chinese, German and Japanese markets
with its “FlexOffice”, “Colorkit” and “Bizner” brands. Early
in 2013, TLG was named among the 50 Vietnamese most
efficient businesses with impressive growth and efficiency
ratios, notably a 2010-2012 CAGR of 36% in revenues, 20%
for net profits and an average ROE of 19%.
OUTLOOK FOR 2013-2014
With a focus on further developing B2B distribution channels,
TLG plans to enhance its supply chains and expand its market
share for both stationery and office supplies. Its success in
Germany and Japan has encouraged TLG to expand into
the UK and to other European markets, with target export
growth rates of 50% per annum. The company will make
further investments in R&D to become more independent
with input material control and production methods. The
ERP-SAP system, which was fully integrated in 2012, will
enhance TLG’s internal control framework and facilitate
better efficiency ratios.
VietNam Holding Annual Report 2013
19
Portfolio Companies
TRAPHACO JOINT STOCK COMPANY (TRA)
SHAREHOLDER PROFILE (as at 30 June 2013)
FINANCIAL HIGHLIGHTS (USD million)
State owned (SCIC) 35.7%
Foreign investors 44.9%
Domestic investors 19.4%
VIETNAM HOLDING’S INVESTMENT (as at 30 June 2013)
2,096,188
Number of shares:
USD 4.32 million
Total investment:
VND 43,695
Average purchase price:
% VNH shareholding: 8.5%
TRADING INFORMATION (as at 30 June 2013)
Traded on: HOSE
26 Nov 2008
Date of listing:
Total shares outstanding:
24.7million
Share price: VND 84,000
52 week high: VND 95,000
52 week low: VND 36,000
Trailing P/E: 16.5
4.11
Price/Book:
Equity capital
Revenue
Revenue growth (in VND) (%)
EBIT
NPAT
EPS (VND)
EPS growth (%)
Gross Margin (%)
EBIT Margin (%)
ROE (%)
D/E (x)
Current Ratio (x)
2011
19.0
52.4
23.6
7.1
4.4
7,187
18.9
37.6
13.5
22.2
0.5
1.7
2012
21.7
66.9
31.8
9.9
5.6
9,432
39.4
41.1
14.8
25.8
0.5
1.6
Sources: Company’s audited financial statements and annual reports.
ESG HIGHLIGHT
For many years, TRA has been awarded Top 10 Corporate Social
Responsibility and Top 10 Corporate Community Responsibility
awards as well as other awards for its contribution towards the
environment, the society and the government. Employee satisfaction
is one of TRA’s main priorities, and employee income has increased by
up to 10% annually for several years.
CORE BUSINESS
Manufacturer and distributor of herbal medicines.
COMPANY BACKGROUND
Traphaco (TRA) is the leading herbal medicine manufacturer
in Vietnam. Originated as a State-owned Enterprise, TRA was
privatized in 2000 and listed on HOSE in 2008.
KEY STRENGTHS
TRA was the first traditional pharmaceutical company in
Vietnam to successfully build its brand name. It is now
nationally recognized as a leading supplier of high-quality
herbal, medicinal products. It has earned many awards for
product quality and biotechnology research, including the
International Arch of Europe Quality Award in 2012 and
was named an International Best Enterprise by the European
Business Assembly. TRA has the first herbal production
factory in Vietnam to be certified by GMP-WHO, and has
positioned itself as a technology leader. The R&D department
of TRA is very active and efficient, with 20 new products
being researched and 6 new products being put into
production each year.
BUSINESS STRATEGY AND EXECUTION
After more than 10 years of introducing high-quality,
branded products to the market, TRA has switched to more
aggressive expansion strategies. It increased the number of
proprietary medicines, expanded its distribution network by
acquiring small provincial pharmaceutical companies with
existing local distribution networks and enhanced its herbal
plantations to ensure the quality and ready supply of input
materials. It has thereby become a leader in clean and green
herbal medicine production in Vietnam and the world. To
strengthen its finances, it has increased its COGS margin by
improving production efficiencies and shifting its product mix
to higher margin items. TRA has also put additional emphasis
on employee training to prepare for the launch of a new
factory in 2015.
PERFORMANCE & DEVELOPMENT IN 2012
TRA achieved VND 1.4 trillion in revenue and VND 116
billion in NPAT in 2012, a 32% and 31% growth respectively
- one of the best performances in Vietnam. During 2012, 6
out of 20 new products researched in-house were launched
into the market, contributing 5.5% of total revenue. Also
in 2012, TRA acquired 51% of Daklak Pharma Company
and 43% of Quang Tri Pharma Company. Internally, four
new branches were opened in Thai Nguyen, Quang Ninh,
Hai Duong and Gia Lai provinces, bringing the total number
of branches to 16. TRA has successfully researched and
implemented the GreenPlan project, which brought together
the government, several scientists, pharma companies and
farmers in researching seeds, seed planting processes and the
application of the WHO’s GACP collection and processing
practices. The goal is to expand the plantation area, and
thereby ensure long term and stable volumes and quality of
input materials. As a result, 70% of TRA’s input materials is
now within its direct control.
OUTLOOK FOR 2013-2014
TRA has set an ambitious target in 2013, aiming at VND
1.8 trillion in revenue (28.6% YOY growth) and VND 147
billion in NPAT (26.7% YOY growth). Along with sales force
expansion, TRA targets that next year six new products
from its R&D department will contribute VND 88 billion –
equivalent to 7% of total revenue.
20
VietNam Holding Annual Report 2013 VIETNAM DAIRY JOINT STOCK COMPANY (VNM)
SHAREHOLDER PROFILE (as at 30 June 2013)
FINANCIAL HIGHLIGHTS (USD million)
SCIC
Foreign investors
Domestic investors
45%
49%
6%
VIETNAM HOLDING’S INVESTMENT (as at 30 June 2013)
Number of shares:
Total investment:
Average purchase price:
% VNH shareholding:
TRADING INFORMATION (as at 30 June 2013)
Traded on:
Date of listing:
Total shares outstanding:
Share price:
52 week high:
52 week low:
Trailing P/E:
Price/Book:
1,207,662
USD 7.51 million
VND 23,840
0.1%
HOSE
19 January 2006
833 million
VND 132,000
VND 138,000
VND 56,220
18.1
1.7
Equity capital
Revenue
Revenue growth (in VND) (%)
EBIT
NPAT
EPS (VND)
EPS growth (%)
Gross Margin (%)
EBIT Margin (%)
ROE (%)
D/E (x)
Current Ratio (x)
2011
593.2
1,067.2
37.3
234.4
208.1
5,082
12.9
30.5
20.0
41.3
0.0
3.2
2012
738.7
1279.9
22.8
315.2
276.3
6,940
36.6
33.6
24.6
41.6
0.0
2.7
Sources: VNM annual report and audited financial statements
ESG HIGHLIGHT
VNM was the first local company to join the Asian Corporate
Governance Corporation (ACGA). For the first time, the company
included a comprehensive “Corporate Governance Report” in its 2012
Annual Report. Vietstock rated VNM as the best company in Vietnam
in terms of Investor Relations practices for 2011 – 2012.
CORE BUSINESS
Manufacturer and distributor of dairy and beverage products.
COMPANY BACKGROUND
Vinamilk (VNM) is the leading dairy product manufacturer
and distributor in Vietnam, with a market share of over
50% in most of its product ranges: 90% in yogurt, 70% in
condensed milk, 50% in fresh milk, and 30% in powdered
milk. Seven years after having its shares listed on the Ho
Chi Minh stock exchange, VNM is now one of the largest
companies by market capitalization at around USD 5.7
billion. VNM aims to become Vietnam’s most trusted brand
for nutritional and health-enhancing products.
KEY STRENGTHS
VNM defines its sustainable business strategies as product
innovation grounded on R&D commitment, an extensive
distribution network and strong export capacity.
PERFORMANCE AND DEVELOPMENT IN 2011 - 2012
2012 was another successful business year for VNM with
revenue growth of 23%, and a 38% increase in profits,
outperforming its annual targets by a large margin. VNM’s
gross profit margin improved from 30% to 33% during the
year, due largely to its effective inventory management.
In 2012, VNM continued to introduce multiple product lines
to supplement over 200 existing dairy products. GoldSoy
milk, which is made from 100% non-genetically modified
soybeans, was well received by customers, especially by
women. Similarly, ProBeauty premium yogurt with collagen,
an essential protein for skin nourishment, has seen strong
growth in sales revenue since it was launched. In the
powdered milk segment, Dielac Optimum with Opti-Digest
formula was another innovative product that gained strong
consumer attention, especially after the selling price of
foreign powdered milk grew sharply in 2012.
VNM takes pride in its well-established distribution network,
which consists of both modern trade channels (supermarkets)
as well as traditional retailers across the country. VNM has
built a network of 250 exclusive distributors who deliver its
products to more than 200,000 retailers.
BUSINESS STRATEGY AND EXECUTION
VNM’s ambition is to continue being Vietnam’s most
sustainable and fastest growing dairy food company, and
ultimately joining the top 50 global dairy producers, with
sales revenues of over USD 3 billion by 2017. The company
focuses on local market share expansion by building a high
quality and diverse product portfolio for a growing customer
base, through a widened distribution network.
OUTLOOK FOR 2012 - 2013
VNM announced an annual growth target of 20% in
revenues and 10% in net profits for the next 5 years. Over
the first half of 2013, sales revenue was up by 14% and
net profit grew by 22%. Export sales, which accounted for
14% of sales in 2012, are expected to contribute about
20% of sales this year. The company exports powdered milk,
condensed milk and fresh milk to the Middle East, Cambodia,
Philippines and Thailand. VNM’s export capacity will benefit
substantially from the scheduled opening of two new
state-of-the-art factories this year, resulting in a significant
production boost.
VietNam Holding Annual Report 2013
21
Portfolio Companies
VINASUN CORP. (VNS)
SHAREHOLDER PROFILE (as at 30 June 2013)
FINANCIAL HIGHLIGHTS (USD million)
2011
Equity capital
Revenue
Revenue growth (in VND) (%)
EBIT
NPAT
EPS (VND)
EPS growth (%)
Gross Margin (%)
EBIT Margin (%)
ROE (%)
D/E (x)
Current Ratio (x)
40.7
112.2
38.4
12.3
6.6
4,395
(37.2)
14.1
9.5
15.5
1.0
1.2
2012
44.9
129.6
19.3
14.3
7.2
5,006
13.7
16.8
12.7
16.2
0.9
1.2
Sources: VNS annual report and audited financial statements
ESG HIGHLIGHT
VNS strongly values human assets as the heart of the company.
Staff training and a rewarding compensation scheme are critically
important. Average monthly income of VNS drivers increased by
16% in 2012 and is currently at the most competitive levels in the
industry. The company constantly introduces innovative profit sharing
schemes to optimize the earnings of its drivers and regularly reviews
its social benefits system.
PERFORMANCE AND DEVELOPMENT IN 2012
2012 was a difficult year for many companies in the taxi
business. Despite this, VNS achieved 19% growth in revenue
and 14% growth in net income last year. Its gross profit
margin improved from 14% to 17% despite 12 consecutive
petrol price hikes during the year. This feat was achieved
through an adaptive pricing strategy and effective cost
control. VNS focuses on increasing the operational efficiency
per taxi and has managed to grow daily sales per taxi by
16% in 2011 and 11% in 2012. Average fare-per-kilometer
also improved by 17% in 2011 and 13% in 2012, while the
taxi occupancy rate was maintained at about 57% and is
targeted to improve to 60% this year.
OUTLOOK FOR 2013 - 2014
VNS’s plans for 2013 are to increase its revenue and net
profit by 4% and 21% respectively. To date the company
has already made strong progression towards achieving these
goals. The company also aims to increase its fleet in HCMC
by 581 cabs and to enter the Hanoi and Nha Trang markets
to become a truly nationwide player by 2014. Looking
further ahead, VNS plans to grow its
Foreign investors
Domestic investors
35%
65%
VIETNAM HOLDING’S INVESTMENT (as at 30 June 2013)
Number of shares:
Total investment:
Average purchase price:
% VNH shareholding:
82,236
USD 0.15million (*)
VND 23,840
0.2%
TRADING INFORMATION (as at 30 June 2013)
Traded on:
Date of listing:
Total shares outstanding:
Share price:
52 week high:
52 week low:
Trailing P/E:
Price/Book:
HOSE
29 July 2008
40 million
VND 38,400
VND 38,400
VND 14,680
9.0
1.6
(*): VNH started investment in VNS from 13 June 2013 and the stock’s
liquidity was low during that month.
CORE BUSINESS
VNS operates taxis under the corporate brand “Vinasun”
in Ho Chi Minh City and other urban markets.
COMPANY BACKGROUND
VNS was founded in 1995 and started its taxi service in 2003.
Since then the company has focused on operating taxis as
its primary business, offering its service in major cities in the
country’s south. VNS shares have been listed on the HOSE
Stock Exchange since 2008.
KEY STRENGTHS
VNS is the market leader in the taxi business in Vietnam with
4,622 taxis in five big cities. The company has the largest fleet
size in the industry, which results in a dominating market share
in most of the markets it currently serves. It enjoys a market
share of 42% in Ho Chi Minh City, 62% in Binh Duong, 65%
in Dong Nai, 32% in Da Nang, and 15% in Vung Tau.
Backed by a sound financial condition, VNS is planning a
bold business expansion strategy. The company maintains a
moderate amount of leverage.
BUSINESS STRATEGY AND EXECUTION
VNS aims to gain a leading overall market position in
Vietnam with a strategy to penetrate other domestic markets
through organic growth as well as M&A opportunities. In
preparation for the expected growth, Vinasun has initiated a
number of business strategies, which include the penetration
of new markets, an increased fleet size, increased daily sales-
per-cab targets and constant service quality improvements.
VNS emphasizes staff training and technology upgrades and
has prepared for an increased sales contribution from call
centers and sales agents, better use by its corporate card
base and more effective use of GPS systems in its taxis.
22
VietNam Holding Annual Report 2013
Sustainability Report
SUSTAINABLE INVESTING
As a long-term investor, we remain committed to the
mainstreaming of sound sustainability criteria in our value
investing approach. As Vietnam’s modernization continues
to shape the society in which we deploy assets, major
macro shifts can be discerned, posing both challenges and
opportunities. Rural development, urbanization and the
growth of a more affluent demographic are examples of
the trends that continue to seed change in local values and
consumer patterns. As a responsible investor, we choose
to invest in enterprises that demonstrate a commitment
towards positive change within the communities they
operate in and serve. By investing in the growth of living
standards, more inclusive economic participation and higher
value added products we can capitalize on the positive
developments that our portfolio companies engender.
VNH avoids products and services with known negative
effects in its target investment universe. The fund’s exclusion
criteria cover businesses dealing in tobacco, firearms, distilled
alcohol and gambling, among others. In addition, each short-
listed investment is thoroughly screened for controversial
businesses practices during our intensive due diligence
process. Companies engaged in pollution, child labor, bribery
or other damaging business practices are excluded from our
investment consideration.
As part of the investment process, our investment team
identifies key environmental, social and governance issues
through tailored industry analysis and direct requests for
information with target companies. Where sustainability
issues have a real or potentially significant impact on
revenues or costs, they are systematically factored into
the investment analysis. By monitoring these material
performance indicators, VNH engages individual portfolio
companies on the basis of their ESG profile and seeks to
catalyze positive change. Our divestment policy captures
companies that fail to demonstrate real awareness of – or
consider improvements in – key sustainability issues.
PORTFOLIO COMPANIES: PROGRESS REPORT
Environment
Hau Giang Pharma (DHG)
The report of corporate, social and environmental
responsibilities was for the first time incorporated into DHG’s
2012 Annual Report. The report received high compliments
from the readers for its clear disclosure of natural resource
usage, parameters and results of air quality monitoring,
methods for waste and hazardous substance diminution.
DHG is employing about 11 tons of raw materials per
day, 400 gram of paper per month, 30,000m³ of water
per month and accumulates water bills of USD 105,000
per year. Values of air quality monitoring parameters
at sampling are in permitted level of Vietnam industry
standards. The company operates an advanced system
wastewater treatment plant with at capacity of 400m³
per day. Exhaust gas is treated through dust air treatment
system of each factory. Hazardous waste are collected and
transferred to the licensed waste treatment plant of Holcim
and completely destroyed at a temperature of 1,400°C
to 2,000°C. The annual report includes DHG’s position
on energy and climate changes, proving bioequivalence,
intellectual property and brand investment plus on product
responsibilities in R&D activities.
Vinamilk (VNM)
With a focus on providing sustainable development and long-
term benefits to the community, VNM dedicates time and
resources to look for solutions to prevent pollution, reduce
emissions and save natural resources. In 2012, VNM reduced
its electricity, fuel oil and water per ton of products by
4.1%, 11.5% and 0.3%, respectively. VNM is also focusing
on recycling its paper milk boxes and actively took part in
annual events held by Waste Recycling Fund of Ho Chi Minh
City. VNM was the first local company to join the Asian
Corporate Governance Corporation (ACGA) in Hong Kong.
For the first time, the company included a separate and
comprehensive “corporate governance report” in its 2012
Annual Report.
Binh Minh Plastics (BMP)
BMP attributes business success to innovation and R&D.
In 2012, the company launched new initiatives on energy
saving and improved process efficiency. An “energy control”
department was set up in both factories of BMP in Binh
Duong and Hau Giang provinces. Results of assessment
reports done by the Center of Environmental Technologies
and Labor Safety were published in BMP’s Annual Report with
detailed measurements in dust, SO2, noise, temperature, and
light. The company outperformed requirement standards in
all aspects.
Social
An Giang Plant Protection (AGPPS)
In 2012, AGPPS used USD 191,000 from the company’s
Healthcare Fund for Farmers to provide free health check-up
and medication to nearly sixty thousand poor people, ethnic
minorities and people in particularly difficult circumstances
in the remote and fringe areas of Vietnam and Cambodia.
In addition, 1,662 poor people were provided with free eye
care at a cost of nearly USD 95,000 sponsored by AGPPS.
The Healthcare Fund for Farmers was established by AGPPS
in 2004 in co-operation with voluntary doctors from Ho Chi
Minh City and provinces. Every year, the fund sponsors for
healthcare service to around 3,000 farmers and thousands of
poor people in rural areas.
Vinamilk (VNM)
On the social front, Vinamilk through its “Nurturing
Vietnamese Young Talents” Scholarship Fund had granted
USD 859 thousand worth of scholarships to over 33
thousand primary school students in 63 provinces over the
past 9 years since the Fund was launched. Its “Vietnam
Never Stops Growing” Milk Fund had provided more than
273,000 children across the country with nearly 19 million
glasses of milk with the total value of about USD 3.3 million
since 2008.
Petrovietnam Drilling (PVD)
PVD has completed an integrated management system
called Health – Safety - Environmental and Quality (HSEQ)
at all stages of production and operations, which is certified
VietNam Holding Annual Report 2013
23
Sustainability Report
to OHSAS 18001 standard by Det Norske Veritas (DNV).
A separate HSEQ division was established to monitor and
enhance the system through monthly reports, meetings,
internal audits, and seminars as well as advising top
management on the sustainable development of the company.
In 2012, PVD developed medical management software which
enables employees to monitor their own health indices and
communicate with doctors for health consulting.
Governance
Vinamilk (VNM)
For the very first time, representatives of Vinamilk’s BOD set
up an annual meeting with minor shareholder group prior
to 2012 Annual General Meeting. Mdm. Mai Kieu Lien met
the group in person to address shareholders’ queries about
the company’s performance and sustainable development.
During the meeting, representatives of VietNam Holding
recommended an ESOP scheme, additional independent
members to the BOM and other improvements to the
company’s Annual Report. The group successfully nominated
an independent Board member and an independent member
of the Supervisory Board for the term 2013 – 2017.
Vietcombank (VCB)
As one of the largest banks in Vietnam, VCB regards
sustainable development as the foundation for their
business strategies. During the year, the bank has improved
its Investor Relations function greatly through an increase
in the number of meetings with investors and potential
investors, as well as in the quality of their communication.
VCB has greatly cooperated in the ESG assessment exercise
performed by VietNam Holding, with emphasis on Corporate
Governance practices. The bank looks forward to pursuing
best practices in international standards. The report was
shared with representatives of the BOM and several of our
recommendations with regards to disclosure of corporate
governance practices were reflected in VCB’s 2012 Annual
Report, under “The Bank Governance” section.
ACTIVE ENGAGEMENT
As an active investor, VietNam Holding assigns a high
priority to the engagement mandate entrusted in us by our
shareholders. During the past fiscal year the investment team
has further developed its engagement initiatives, adding to
the quality and number of achieved results.
The importance of sustainability topics in the context of active
engagement with our portfolio companies has already been
mentioned in the preceding Chairperson’s Statement. The
recent case of Dong Phu Rubber does indeed demonstrate
how serious we are about this: In dialogues with NGO
representatives, VNHAM learned a while ago that in the process
of expanding its rubber plantation areas in Cambodia, Dong Phu
Rubber was engaged in corporate action, social responsibility
and environmental violations. We expressed our concern and
asked for specific feedback from the top management. When
these reports were substantiated in an in-depth report entitled
‘Rubber Barons’ published by the organization Global Witness,
describing Dong Phu Rubber as one of the more important
among several Vietnamese perpetrators in Cambodia, VNH
swiftly exited its investments in the company.
24
Many if not the majority of the improvements in the areas
environmental practices, corporate social responsibilities and
corporate governance described in the previous section were
the result on our collective active engagement. VNH and
its investment manager remain fully committed to continue
addressing crucial ESG issues in the constant dialogue with
investee companies.
Director Engagement
The board of directors of VNH and its investment manager
are committed to the established practice of engaging
portfolio company executives in face-to-face meetings. Each
VNH and VNHAM director is assigned to a few portfolio
companies according to their industry specialization and
follow a systematic engagement schedule of meeting with
portfolio companies’ top management during their visits to
Vietnam which occur three times a year.
The investment team briefs directors on the important
financial and ESG issues in advance of each visit, and directly
benefits from their experience during the engagement. An
important aspect of the director’s engagement is the element
of seniority that the directors bring to the engagement. When
meeting such senior VNH representatives, local executives are
challenged to answer pertinent and well informed inquiries.
Through these direct engagements VNH emphasizes
the importance of enhanced company disclosure and
transparency when engaging portfolio company executives.
In many cases, tangible progress in annual reports and
company websites are commendable and fuel VNH’s
ongoing commitments to spread ESG awareness and
enforcement throughout Vietnam’s corporate community.
The fund continues to encourage portfolio company
executives towards greater improvements in the quality and
transparency of financial statements.
Results to date prove the effectiveness of our approach, and
the directors of VNH and VNHAM will continue to develop
their active engagement program.
VNH Forum
The VNH Forum events showcase international best
practices through select international key-note speakers
and panel sessions which feature mostly local experts. The
Forum targets senior executives of private and State-owned
Enterprises alike. Through these events, VNH seeks to foster
awareness of value investment and sustainability principles
within Vietnam’s investment community. Past speakers
have included local and international experts from finance,
industry, academia and government bodies.
The last VNH Forum was held on 7 March 2013 in Ho Chi
Minh City under the theme “Building Effective Boards:
Strategic Role for Sustainable Growth”. The key-note speaker
Prof. Thomas Casas i Klett, who teaches Leadership in St.
Gallen, Shanghai, Moscow, Toronto and Georgetown, two
very prominent panelists and numerous participants discussed
the importance of effective board structures in view of a
sustainable development of companies through their strategic
and supervising roles. Relevant examples and best practices
VietNam Holding Annual Report 2013 in both domestic and international context were highlighted.
The event was kindly supported and co-sponsored by the
Hochiminh Stock Exchange. It was the 8th VNH Forum and
this event series is to be continued in 2014.
Shareholder Voting
Over the past fiscal year VNH voted at every Annual General
Meeting of its portfolio companies in which the fund held an
equity position at the time of the AGM. It should be noted
VNH was absent only at two AGMs: one company held its
AGM just after a thorough director engagement roundtable
meeting with the top management was completed, and one
company was slated for divestment at the time of its AGM.
The voting activity of VNH was as follows:
During the fiscal year VNH attended 23 AGMs where
197 individual agenda items were proposed. The
investment team considered each issue on the basis of
strategic merit and long-term profitability.
VNH voted against the management of three
companies on 5 individual issues. These 5 individual
issues were finally approved by the AGMs.
CARBON FOOTPRINT
VNH is conscious of its corporate carbon footprint. With
offices in Vietnam and Switzerland as well as an international
Board of Directors, the emission of greenhouse gases tied
to our activity is relatively high compared to the size of the
organization. After the first CO² offsetting exercise in 2010
we have calculated the carbon footprint of our business
activities for the fiscal years 2010 to 2013. In doing so,
we considered the international and domestic air travel of
our directors and staff as well as the energy consumption
of our two offices. We have estimated that the carbon
footprint of our travel activity amounts to 400.99 tons of
CO², while the energy consumed in our offices amounts to
12.17 tons. We are offsetting the total 413.16 tons of CO²
by supporting two small hydropower projects located in Kon
Tum Province, Central Vietnam. By providing this rural and
mountainous region with reliable and sustainable energy,
these projects displace diesel generators and wood-fired
lighting and heating, which leads to better air quality and
reduces respiratory and eye diseases. In an effort to support
sustainable development in the local communities, the
project owner has funded the construction of canals, bridges,
roads and even a school. We are going to continue in this
commendable environmental and community enhancement
efforts and will regularly report on our progress.
PARTNERSHIPS
Through the long-term relationships of our senior staff and
advisors, and during the past eventful years as an investor in
Vietnam, VNH has developed a strong local and international
network of partnerships. The following organizations have
contributed to shaping VNH’s strategy and profile, and
continue to support our desire to bring the sustainability
agenda forward in Vietnam.
ASrIA
VNH continues to support the Association for
Sustainable & Responsible Investment in Asia.
We look forward to further association initiatives
that push forward the sustainable investment
dialogue in the context of Asia’s private and
public capital markets.
Global Compact
VietNam Holding Asset Management has been
a founding member of the Global Compact
network in Vietnam since 2007. Managed by
the United Nations, the Global Compact is a
strategic policy initiative for companies that wish
to align their activities with ten key principles in
the public and private sectors.
Hochiminh Stock Exchange
The Hochiminh Stock Exchange (HOSE)
co-sponsored the 8th VNH Forum, which took
place on 7 March 2013 in Ho Chi Minh City under
the theme “Building Effective Boards: Strategic Role
for Sustainable Growth”. HOSE is the largest stock
exchange in Vietnam with a market capitalization
of USD 34.8 million as of 30 June 2013.
PRI
At the VNH’s AGM in 2009, shareholders
voted to endorse the comprehensive
alignment of VNH’s investment policy
with the United Nations Principles for
Responsible Investment. As a consequence, ESG factors are
now fully incorporated into our investment analysis and
engagement strategy.
South Pole Carbon
South Pole Carbon helped VNH to
calculate its CO² footprint for the past
three fiscal years and to identify a
suitable project in Vietnam to offset
these emissions properly. South Pole
Carbon is a Swiss-based and globally
leading developer of emission reduction projects, climate
action solution provider and carbon asset manager.
VietNam Holding Annual Report 2013
25
Sustainability Report
One of the two hydropower projects supported by VNH through South Pole Carbon in order to offset the Company’s CO² emissions.
Both projects are located in Kon Tum Province, a rural and mountainous region in Central Vietnam.
26
VietNam Holding Annual Report 2013 Besides the new power house the project has also funded the construction of roads, bridges, canals and even a school in the local communities.
The overall goal of the project is to support sustainable development and a betterment of the local population’s living standard.
VietNam Holding Annual Report 2013
27
Directors’ Report
The Board of Directors makes all policy decisions on
investment strategies, portfolio allocations, investment
risk profiles, capital increases and profit distributions to
Shareholders. It also appoints the Investment Manager, to
whom it provides such instructions as may be appropriate.
The Board is responsible for reviewing the Company’s
Investment Policy and the performance of its investment
portfolio. In particular, the Board is required to approve all
investments which are over 4% of the Net Asset Value at
the time the investment is made. The sale of any investment
in which the Company holds 4% or more of the total share
capital of the respective portfolio company is also subject to
the approval of the Board.
Presently the Board consists of three non-executive Directors,
all of whom are regarded by the Board as independent,
including the Chairperson, and are subject to re-election
annually. The Board takes careful consideration when
recommending Directors for re-election and considers that
the length of service alone does not necessarily restrict
Directors from seeking re-election. Those currently serving as
Directors are:
Mrs. Min-Hwa Hu Kupfer, Chairperson
Professor Rolf Dubs
Mr. Nguyen Quoc Khanh
The Board maintains two committees, an Audit Committee
and a Corporate Governance Committee. Recognizing the
importance of sound governance commensurate with the
size of the Board and the interests of the Shareholders, the
Directors work closely on all Board matters. Both committees
are made up of all three Directors.
The Audit Committee, chaired by Mr. Nguyen Quoc
Khanh, is responsible for appointing the Auditors, subject
to Shareholder approval, and reviewing the results of all
audits. It is also responsible for establishing internal business
controls and audit procedures. The internal compliance
and audit function has been delegated to an external audit
firm, which submits periodic internal audit reports to the
Chairperson of the Board’s Audit Committee.
The Corporate Governance Committee, chaired by Professor
Rolf Dubs, is responsible for the governance of the Company
and the Company’s relationships with multiple constituents
including the Investment Manager and its affiliates. It
has adopted a code of ethics and other best practices of
corporate governance which it considers appropriate for the
size and activities of the Company.
The Board met quarterly and held two additional
telephonic Board meetings during fiscal year 2013. After
careful consideration of the Vietnam market conditions
and outlook, as well as the potential costs and benefits
associated with the proposed changes, the Board called
28
an Extraordinary General Meeting in November 2012 and
obtained shareholder approval to extend the maturity of the
Company’s 18.19 million warrants outstanding that were
due to expire in December of last year. Under this approved
extension, the warrant holders are given two exercise dates
in addition to the original date of exercise. The final exercise
date of the warrants is now 25 September 2013.
Concurrently with each board meeting, the Board reviewed
extensively with the Investment Manager the status and
the performance of the portfolio, including investment
themes, pipelines, divestures, industry trends and peer group
performance comparisons. Following the recommendations
made under the portfolio management policy of the
Investment Manager, the Board approved and/or ratified the
asset allocation limits and target position of each equity
investment in every quarterly review. The Board monitored
and approved the portfolio rebalancing activities where the
Investment Manager exited nine portfolio companies and
initiated five new investments thereby reducing the number
of equity holdings in the portfolio from twenty-nine to
twenty-five during fiscal year 2013.
The share buy-back program and share price discount control
programs were also reviewed quarterly during the board
meetings. As had been the case in the past several years, the
Company continued to hold its regular investor presentations
in Europe to meet and engage with shareholders.
The Board also reviewed regularly the on-going expenditures
of the Company, the variance between actual expenses
incurred as compared to the respective budgeted items
as well as the, costs, terms and performance of its service
providers.
The Audit Committee held four meetings in the past year
in parallel with the board meetings. Risk Management and
Compliance reporting were reviewed and risk control issues
were evaluated by the Committee in each of the quarterly
meetings. During the year, the Risk Management Committee
of the Board of the Investment Manager was formalized.
Working with the Risk Management Committee Chair and
the CEO of the Investment Manager, the Audit Committee
Chair oversaw the internal audit which took place in the
second quarter of 2013. This is the fourth internal audit of
the Investment Manager since the inception of the Fund.
Its focus was to identify risks and controls associated with
the investment process, including investment research,
investment selection and portfolio management, and to
test the operating effectiveness of the controls over the
investment process. The Committee reviewed the internal
audit findings, encompassing the management responses
and the agreed action plan to address issues which were
highlighted during the field testing and in the final report.
VietNam Holding Annual Report 2013 There has been no change made to the Company’s Directors’
remuneration policy in the past year.
Ownership of VietNam Holding
Mrs. Min-Hwa Hu Kupfer
Professor Rolf Dubs
Mr. Nguyen Quoc Khanh
30,000 shares and 6,666 warrants
20,000 shares and 15,000 warrants
10,000 shares
During the year, the Directors increased their ownership of
the Company from 40,000 shares to 60,000 shares as Mr.
Khanh acquired 10,000 shares and Professor Dubs exercised
10,000 warrants and converted them into shares. As of 30
June 2013, the Board holds 21,666 warrants issued by the
Company.
In 2012-2013, there were no related-party transactions
between the Company and any of its Directors, other than
that mentioned in the accounts.
On behalf of the Board of Directors:
Min-Hwa Hu Kupfer
Chairperson
14 August 2013
The Corporate Governance Committee also met four
times concurrently with the quarterly board meetings. The
Investment Manager presented its strategic plans, financial
positions and organizational development during each of the
Committee meetings.
The Committee conducted the yearly performance review of
the Investment Manager and approved the Key Performance
Indicators as jointly recommended by the CEO and the Board
of the Investment Manager. The Committee also oversaw
the annual certification of “VNH Code of Ethics” by all
employees and Board members of the Investment Manager
and the Company.
Starting in December 2012, the Committee began the practices
of evaluating in each of its quarterly meetings the effectiveness
of the Board, including how well the Directors are engaged in
and informed of the key developments of the Company by its
Chairperson. The results of the evaluations will be incorporated
into an annual review of Board performance.
Since the second quarter of 2013, the Investment Manager
has provided advisory services to a separate Vietnam equity
fund. A Conflict of Interest Policy of the Investment Manager
has since been presented and accepted by the Committee.
Remuneration
The remuneration of each of the Company’s Directors
contains two parts:
1. Base Fee
2. Committee and Board related service, including attendance
of Committee and Board meetings, based on the number
of days worked.
In 2013, the Company’s Directors’ Base Fees were:
Mrs. Min-Hwa Hu Kupfer
Professor Rolf Dubs
Mr. Nguyen Quoc Khanh
USD 28,000
USD 20,000
USD 20,000
For attendance in person at each Committee and Board
meeting, which took place quarterly, each Director was paid
USD 1,500. For attending any Committee or Board meeting held
telephonically, each Director was paid USD 750 per meeting.
Each Director was also compensated USD 1,500 per day for
rendering services related to Committee and Board initiatives.
The total remuneration of the Company’s Directors in FY
2012-13 as the result of meeting attendance and additional
days worked was USD 159,500 as follows:
Mrs. Min-Hwa Hu Kupfer, Chairperson
Professor Rolf Dubs, Director &
Chair of Corp. Governance Committee
Mr. Nguyen Quoc Khanh, Director &
Chair of Audit Committee
USD 82,000
USD 41,000
USD 36,500
VietNam Holding Annual Report 2013
29
Independent Auditor’s Report
KPMG LLP
16 Raffles Quay #22-00
Hong Leong Building
Singapore 048581
T: +65 6213 3388
F: +65 6225 0984
W: www.kpmg.com.sg
To the Shareholders of
VietNam Holding Limited
c/o Card Corporate Services Ltd.
Fourth Floor, Zephyr House
122 Mary Street
PO Box 709 GT
Grand Cayman
KY1-1107, Cayman Islands
Report on the financial statements
We have audited the accompanying financial statements on pages 14 to 28 of VietNam Holding Limited (“the Company”),
which comprise the statement of financial position as at 30 June 2013, the statements of comprehensive income, changes in
equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other
explanatory information.
Management’s responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with
International Financial Reporting Standards as adopted by the European Union, and for such internal control as management
determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
Auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in
accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement
of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control
relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of
accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at
30 June 2013, and of its financial performance and its cash flows for the year then ended, in accordance with International
Financial Reporting Standards as adopted by the European Union.
KPMG LLP
Public Accountants and Chartered Accountants
Singapore
14 August 2013
30
VietNam Holding Annual Report 2013
Statement of Financial Position
as at 30 June 2013
Assets
Cash and cash equivalents
Investments in securities at fair value
Accrued dividends
Receivables on sale of investments
Other receivables
Total assets
Equity
Share capital
Retained earnings
Total equity
Liabilities
Payables on purchase of investments
Accrued expenses
Total liabilities
Total equity and liabilities
Total equity represented by:
Net assets attributable to shareholders (last traded prices)
Adjustment from last traded prices to bid – market prices
Net assets attributable to shareholders (bid – market prices)
Note
2013
USD
2012
USD
3
5
5
6
2,671,910
83,939,007
374,108
1,326,054
-
88,311,079
3,070,132
66,709,452
143,418
-
73,695
69,996,697
109,507,940
(22,239,418)
87,268,522
110,484,090
(40,988,061)
69,496,029
705,228
337,329
1,042,557
88,311,079
64,856
435,812
500,668
69,996,697
88,198,156
(929,634)
87,268,522
70,477,461
(981,432)
69,496,029
The net asset value per share based on last traded prices was USD 1.648 as at 30 June 2013 (2012: USD 1.295) calculated as
per the prospectus, and the net asset value per share based on bid-market prices, calculated as per IFRS, was USD 1.630 as at
30 June 2013 (2012: USD 1.277). This is based on 53,530,411 shares outstanding (2012: 54,417,112).
The financial statements on pages 31 to 45 were approved by the Board of Directors on 14 August 2013 and were signed on
its behalf by
Min-Hwa Hu Kupfer
Chairperson of the Board of Directors
Nguyen Quoc Khanh
Chairman of the Audit Committee
The accompanying notes form an integral part of these financial statements.
VietNam Holding Annual Report 2013
31
Statement of Comprehensive Income
for the year ended 30 June 2013
Dividend income from equity securities at fair value through profit or loss
Net gain from equity securities at fair value through profit or loss
Net foreign exchange loss
Net investment income
Investment management fees
Advisory fees
Accounting fees
Custodian fees
Directors’ fees and expenses
Brokerage fees
Audit fees
Publicity and investor relations fees
Insurance costs
Administrative expenses
Risk management expenses
Technical assistance for investee companies
Total operating expenses
Note
2013
USD
2012
USD
7
8
10
9
8
4,043,206
17,445,739
(31,491)
21,457,454
4,307,641
7,219,778
(56,113)
11,471,306
1,465,670
163,327
83,250
76,159
214,511
62,000
43,667
278,082
50,000
177,145
60,000
35,000
2,708,811
1,290,909
146,115
98,250
101,460
255,885
62,268
51,076
233,278
45,000
226,810
30,096
9,666
2,550,813
Change in net assets attributable to shareholders
18,748,643
8,920,493
Earnings per share – basic and diluted
14
0.35
0.16
The accompanying notes form an integral part of these financial statements.
32
VietNam Holding Annual Report 2013
Statement of Changes in Equity
for the year ended 30 June 2013
Share
Capital
USD
Reserve for
own shares
USD
Retained
Earnings
USD
Total
USD
Balance at 1 July 2011
112,181,354
-
(49,908,554)
62,272,800
Repurchase and cancellation of shares (note 6)
Repurchase of own shares (note 6)
Warrants issuance cost
Total comprehensive income for the year
Change in net assets attributable to shareholders
Balance at 30 June 2012
(965,429)
-
(555,533)
(1,520,962)
-
(176,302)
-
(176,302)
-
-
-
-
(965,429)
(176,302)
(555,533)
(1,697,264)
-
110,660,392
-
(176,302)
8,920,493
(40,988,061)
8,920,493
69,496,029
Balance at 1 July 2012
110,660,392
(176,302)
(40,988,061)
69,496,029
Issuance of ordinary shares
Repurchase and cancellation of shares (note 6)
Repurchase of own shares (note 6)
Warrants issuance cost
Total comprehensive income for the year
Change in net assets attributable to shareholders
Balance at 30 June 2013
304,598
-
-
(20,875)
110,944,115
-
-
(1,259,873)
-
(1,436,175)
-
-
-
-
(40,988,061)
304,598
-
(1,259,873)
(20,875)
68,519,879
-
110,944,115
-
(1,436,175)
18,748,643
(22,239,418)
18,748,643
87,268,522
The accompanying notes form an integral part of these financial statements.
VietNam Holding Annual Report 2013
33
Statement of Cash Flows
for the year ended 30 June 2012
Cash flows from operating activities
Change in net assets attributable to shareholders
Adjustments to reconcile change in net assets attributable
to shareholders to net cash from operating activities:
Dividend income
Net gain from equity securities at fair value through profit or loss
Purchase of investments
Proceeds from sale of investments
Net foreign exchange loss
Decrease/(Increase) in other receivables
(Decrease)/Increase in accrued expenses
Dividends received
Net cash from operating activities
Cash flows from financing activities
Issuance of ordinary shares
Payment for buy-back of shares
Repurchase of own shares
Warrants issuance cost
Net cash used in financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of the year
Effect of exchange rate fluctuations on cash held
Cash and cash equivalents at end of the year
Note
2013
USD
2012
USD
18,748,643
8,920,493
(4,043,206)
(17,445,739)
(15,961,424)
15,491,926
31,491
73,695
(98,483)
3,812,516
609,419
304,598
-
(1,259,873)
(20,875)
(976,150)
(366,731)
3,070,132
(31,491)
2,671,910
(4,307,641)
(7,219,778)
(17,068,156)
17,794,054
56,113
(73,695)
63,302
4,218,963
2,383,655
-
(965,429)
(176,302)
(555,533)
(1,697,264)
686,391
2,439,854
(56,113)
3,070,132
6
6
The accompanying notes form an integral part of these financial statements.
34
VietNam Holding Annual Report 2013
Notes to the Financial Statements
Year ended 30 June 2013
1 THE COMPANY
VietNam Holding Limited (“VNH” or “the Company”) is a closed-end investment holding company incorporated
on 20 April 2006 as an exempt company under the Companies Law in the Cayman Islands and commenced its
operations on 15 June 2006, to invest principally in securities of former State-owned Entities (“SOEs”) in Vietnam,
prior to, at or after the time such securities become listed on the Vietnam stock exchange, including the initial
privatisation of the SOEs. The Company may also invest in the securities of private companies in Vietnam, whether
Vietnamese or foreign owned, and the securities of foreign companies if a significant portion of their assets are held
or operations are in Vietnam.
The investment objective of the Company is to achieve long-term capital appreciation by investing in a diversified
portfolio of companies that have high growth potential at an attractive valuation.
In 2013, the Board of Directors (“the Board”) will propose at the Company’s annual general meeting, an ordinary
resolution that the Company will continue in existence. If such resolution is passed, the Company will continue its
operations and a similar resolution will be put to shareholders in 2016. If either of such resolutions is not passed
the Board will, at that annual general meeting or at an extraordinary general meeting held within six months of that
annual general meeting, propose a resolution to wind up the Company or one or more resolutions to implement a
reconstruction, amalgamation or other material alteration to the Company or its activities or any other appropriate
alternative based upon current circumstances. Shareholders will only be able to realise their investment by selling
their ordinary shares or participating in any redemption or purchase of ordinary shares by the Company.
VietNam Holding Asset Management Limited (“VNHAM”) is the Company’s Investment Manager and is responsible
for the day-to-day management of the Company’s investment portfolio in accordance with the Company’s
investment policies, objectives and restrictions.
Standard Chartered Bank, Singapore Branch and Standard Chartered Bank (Vietnam) Limited are the custodian and
the sub-custodian respectively. Standard Chartered Bank, Singapore Branch is also the administrator.
The registered office of the Company is CARD Corporate Services Ltd., Fourth Floor, Zephyr House, 122 Mary Street,
PO Box 709 GT, Grand Cayman, KY1-1107, Cayman Islands.
2 PRINCIPAL ACCOUNTING POLICIES
(a) Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union.
(b) Basis of preparation
The financial statements are presented in United States dollars (“USD”). They are prepared on a fair value basis for
financial assets and financial liabilities at fair value through profit or loss. Other assets and liabilities are stated at
amortised cost.
The Company’s shares were issued in USD and the listings of the shares on the AIM market of the London
Stock Exchange and the Entry Standard of the Frankfurt Stock Exchange are in USD and Euro, respectively. The
performance of the Company is measured and reported to the investors in USD, although the primary activity of the
Company is to invest in the Vietnamese market. The Board considers the USD as the currency that most faithfully
represents the economic effects of the underlying transactions, events and conditions. The financial statements are
presented in USD, which is the Company’s functional currency.
The preparation of financial statements in accordance with IFRS requires management to make judgements,
estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities,
income and expense. The estimates and associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results of which form the basis of making
judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates.
VietNam Holding Annual Report 2013
35
Notes to the Financial Statements
Year ended 30 June 2013
2 PRINCIPAL ACCOUNTING POLICIES (continued)
The estimated and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period or in the period of
the revision and future periods if the revision affects both current and future periods.
An operating segment is a component of the Company that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s
other components. The Company is engaged in a single segment of business, being investment in Vietnam. The
Board, as a whole, has been determined as constituting the chief operating decision maker of the Company. The key
measure of performance used by the Board to assess the Company’s performance and to allocate resources is the
total return on the Company’s net asset value (“NAV”) calculated as per the prospectus. Therefore a reconciliation
between the measure of NAV used by the Board and that contained in these financial statements has been provided
in a footnote to the statement of financial position.
The accounting policies have been consistently applied by the Company and are consistent with those used in the
previous year.
There were no new IFRS standards applied for the year ended 30 June 2013.
(c) Foreign currency translation
Transactions in foreign currencies other than the functional currency are translated at the rate ruling on the dates of
the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated to USD at the
rates ruling on the year-end date. Foreign currency exchange differences arising on translation and realised gains and
losses on disposals or settlements of monetary assets and liabilities are included in the statement of comprehensive
income. Foreign currency exchange differences relating to financial instruments at fair value through profit or
loss are included in the realised and unrealised gains and losses on those investments. All other foreign currency
exchange differences relating to other monetary items, including cash and cash equivalents, are included in net
foreign exchange gains and losses in the statement of comprehensive income.
(d) Financial instruments
(i) Classification
The Company designated all its investments as financial assets at fair value through profit or loss category. Financial
instruments are designated at fair value through profit or loss upon initial recognition. These include financial assets
that are not held for trading purposes and which may be sold. These are investments in exchange-traded equity
instruments and unlisted equity instruments.
Financial assets that are classified as loans and receivables include accrued dividends.
Cash and cash equivalents are measured at amortised cost.
Financial liabilities that are not at fair value through profit or loss include accrued expenses.
(ii) Recognition
Financial assets and liabilities at fair value through profit or loss are recognised initially on the trade date, which is
the date that the Company becomes a party to the contractual provisions of the instrument. Other financial assets
and liabilities are recognised on the date they are originated.
Financial assets and financial liabilities at fair value through profit or loss are recognised initially at fair value, which
transaction costs recognised in profit or loss. Financial assets or financial liabilities not at fair value through profit
or loss are recognised initially at fair value plus transaction costs that are directly attributable to their acquisition or
issue.
(iii) Derecognition
A financial asset is derecognised when the Company no longer has control over the contractual rights that
comprise that asset. This occurs when the rights are realised, expire or are surrendered.
Financial assets that are sold are derecognised, and the corresponding receivables from the buyer for the payment
are recognised on the trade date, being the date the Company commits to sell the assets.
A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expired.
36
VietNam Holding Annual Report 2013 2 PRINCIPAL ACCOUNTING POLICIES (continued)
(iv) Measurement
Financial instruments are measured initially at cost. For financial assets acquired, cost is the fair value of
consideration given. Subsequent to initial recognition, all financial assets at fair value through profit or loss are
measured at fair value. Transaction costs on financial assets and financial liabilities at fair value through profit or loss
are expensed immediately.
Valuation
Investments are recorded at fair value. The fair value of the securities is based on their quoted bid price at the
reporting date without any deduction for transaction costs.
If the securities are not listed, the value of the relevant securities is ascertained by the Board in good faith using
valuation methods which it considers fair in the circumstances including quotes received from brokers and other
third party sources where possible.
As at 30 June 2013, 9.0% (2012: 12.5%) of the valuations of the net assets of the Company were based on quotes
obtained from brokers.
Any increases or decreases in values are recognised in the statement of comprehensive income as an unrealised gain
or loss.
(v) Gains and losses on subsequent measurement
Gains and losses arising from a change in the fair value of financial instruments are recognised in the statement of
comprehensive income.
(vi) Impairment
Financial assets that are stated at cost or amortised cost are reviewed at each reporting date to determine whether
there is objective evidence of impairment. If any such indication exists, an impairment loss is recognised in the
statement of comprehensive income as the difference between the asset’s carrying amount and the present value of
estimated future cash flows discounted at the financial asset’s original effective interest rate.
If in a subsequent period the amount of an impairment loss recognised on a financial asset carried at amortised cost
decreases and the decrease can be linked objectively to an event occurring after the write-down, the impairment is
reversed through the statement of comprehensive income.
(vii) Cash and cash equivalents
Cash comprises current deposits with banks and fixed deposits. Cash equivalents are short-term highly liquid
investments that are readily convertible to known amounts of cash, are subject to an insignificant risk of changes
in value, and are held for the purpose of meeting short-term cash commitments rather than for investment or other
purposes.
(e)
Interest income and expense
Interest income and expense is recognised in the statement of comprehensive income using the effective rate
method.
Interest income includes the amortisation of any discount or premium on zero coupon bonds, which is taken as
income on the basis of yield to redemption, from the date of purchase.
(f) Offsetting
Financial assets and liabilities are offset and the net amount is reported in the statement of financial position 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.
(g) Amounts due to/from brokers
Amounts due to/from brokers represent security purchases and sales transactions which are contracted for but not
yet delivered at the end of the accounting period.
VietNam Holding Annual Report 2013
37
Notes to the Financial Statements
Year ended 30 June 2013
2 PRINCIPAL ACCOUNTING POLICIES (continued)
(h) Taxation
At present, no income, profit, capital, or capital gain taxes are levied in the Cayman Islands, and accordingly, no
provision for such taxes has been recorded by the Company in the accompanying financial statements. In the event
that such taxes are levied, the Company has received an undertaking from the Governor in Cabinet of the Cayman
Islands exempting it from all such taxes for a period of twenty years from 2 May 2006.
The Company is liable to Vietnamese tax of 0.1% (2012: 0.1%) on the sales proceeds of the onshore sale of equity
investments. This is included in net gain/(loss) from equity securities at fair value through profit or loss.
(i) 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 effect.
Repurchase, disposal and reissue of share capital (treasury shares)
When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes
directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are
classified as treasury shares and are presented in the reserve for own share account. When treasury shares are sold
or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or
deficit on the transaction is presented in non-distributable capital reserve.
(j) Adoption of new and revised standards
Adoption of new standards and amendments to existing standards
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning
after 1 July 2012, and have not been applied in preparing these financial statements. None of these are expected to
have significant effect on the measurement of the amounts recognised in the financial statements of the Company.
IFRS 13 – Fair Value Measurement
Effective for the Company’s financial statements for the year ending 30 June 2014.
IFRS 13 replaces the fair value measurement guidance spread throughout various IFRS’s with a single source.
The standard defines fair value, establishes a framework for measurement and sets out disclosures requirements. The
standard does not create any new requirements to measure assets and liabilities at fair value.
The fair value definition has been refined to be 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, i.e. an exit price.
The exit price term is the key concept. Fair values must only reflect considerations that would be taken in to account
by market participants. This excludes costs incurred in the structure of any transaction and any characteristic of
the asset or liability that is purely a function of the holding entity and will not transfer with the asset or liability.
Common examples of entity specific characteristics are large market positions “blockage factors” or contractual
limitations on use or sale between the entity and another party.
Non financial assets are covered by IFRS 13 and are measured at their highest and best use taking in to account all
factors in which market participants would factor in to its highest and best use. If the asset is not being used in such
a way this must be disclosed.
An entity shall use fair value measurements techniques that are appropriate to the circumstances, for which
sufficient data is available and that maximises the use of observable inputs and minimises the use of unobservable
inputs. If a level 1 input exists this must be used without adjustment except in very limited circumstances.
The disclosures requirements under IFRS 13 are primarily the fair value hierarchy disclosures currently effective
within IFRS 7.
38
VietNam Holding Annual Report 2013 3 FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
Financial assets of the Company include investments in securities, cash and cash equivalents and accrued income.
Financial liabilities comprise accrued charges. Accounting policies for financial assets and liabilities are set out in note 2.
The Company’s investment activities expose it to various types of risk that are associated with the financial
instruments and the markets in which it invests. The most important types of financial risk to which the Company is
exposed are market risk, currency risk, credit risk and liquidity risk.
Asset allocation is determined by the Company’s Investment Manager who manages the distribution of the assets to
achieve the investment objectives. Divergence from target asset allocations and the composition of the portfolio is
monitored by the Investment Manager.
Market risk
Market risk is the risk that the value of a financial asset will fluctuate as a result of changes in market prices, whether
or not those changes are caused by factors specific to the individual asset or factors affecting all assets in the market.
The Company is predominately exposed to market risk within its securities purchased in the Vietnamese market.
The overall market positions are monitored continuously by the Investment Manager and at least quarterly by the
Board.
The Company’s investments in securities are exposed to market risk and are disclosed by the following generic
Shares and similar investments – listed
Shares and similar investments – unlisted
2013
2012
Fair value
in USD
76,026,001
7,913,006
83,939,007
% of net
assets
87.12
9.07
96.19
Fair value
in USD
58,014,009
8,695,443
66,709,452
% of net
assets
83.48
12.51
95.99
investment types:
At 30 June 2013, a 5% reduction in the market value of the portfolio would have led to a reduction in NAV and profit
or loss of USD 4,196,950 (2012: USD 3,335,473). A 5% increase in market value would have lead to an equal and
opposite effect on NAV and profit or loss.
Currency risk
The Company may invest in financial instruments and enter into transactions denominated in currencies other
than its functional currency. Consequently, the Company is exposed to risks that the exchange rate of its currency
relative to other currencies may change and have an adverse effect on the value of the Company’s assets or liabilities
denominated in currencies other than USD.
The Company’s net assets are calculated every month based on the most up to date exchange rates while the general
economic and foreign currency environment is continuously monitored by the Investment Manager and reviewed by
the Board at least once each quarter.
The Company may enter into arrangements to hedge currency risks if such arrangements become desirable and
practicable in the future in the interest of efficient portfolio management.
VietNam Holding Annual Report 2013
39
Notes to the Financial Statements
Year ended 30 June 2013
3 FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS (continued)
As at 30 June 2013 the Company had the following currency exposures:
Vietnamese Dong
Pound Sterling
Swiss Franc
Euro
Fair value
2013
USD
2012
USD
85,981,766
67,652,030
176,749
40,784
947
573,908
286,397
50,618
86,200,226
68,562,953
At 30 June 2013, a 5% reduction in the value of the Vietnamese Dong, Pound Sterling, Swiss Franc, Euro would
have lead to a reduction in NAV and profit or loss of USD 4,299,085 (2012: USD 3,382,602), USD 8,837 (2012: USD
28,695), USD 2,039 (2012: USD 14,320) and USD 47 (2012: USD 2,531) respectively. A 5% increase in value would
have lead to an equal and opposite effect.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment
that it has entered into with the Company.
At 30 June 2013, the following financial assets were exposed to credit risk (including settlement risk): cash and
cash equivalents, accrued dividend, receivable from sale of investments and other receivables. The total amount of
financial assets exposed to credit risk amounted to USD 4,372,073 (2012: USD 3,256,836).
Substantially all of the assets of the Company are held by the Company’s custodian, Standard Chartered Bank,
Singapore Branch. Bankruptcy or insolvency of the custodian may cause the Company’s rights with respect to cash
and securities held by the custodian to be delayed or limited. The Company monitors its risk by monitoring the credit
quality and financial positions of the custodian the Company uses.
Liquidity risk
The Company, a closed-end investment company, invests in companies through listings on the Vietnam stock
exchanges or on other stock exchanges. There is no guarantee however that the Vietnam stock exchanges will provide
liquidity for the Company’s investments. The Company also invests in equity securities which are not listed on stock
exchanges. The Company may have to resell such investments in privately negotiated transactions.
The Company’s overall liquidity risks are monitored on at least a quarterly basis by the Board. The Company is a
closed-end investment company so shareholders cannot redeem their shares directly from the Company.
Interest rate risk
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.
4 OPERATING SEGMENTS
Information on gains and losses derived from investments are disclosed in the statement of comprehensive income.
The Company is domiciled in the Cayman Islands. Entity wide disclosures are provided as the Company is engaged in
a single segment of business, investing in Vietnam. In presenting information on the basis of geographical segments,
segment investments and the corresponding segment net investment income arising thereon are determined based on
the country of domicile of the respective investment entities.
All of the Company’s investments in securities at fair value are in Vietnam as at 30 June 2013 and 30 June 2012. All of
the Company’s investment income can be attributed to Vietnam for the years ended 30 June 2013 and 30 June 2012.
40
VietNam Holding Annual Report 2013
5 OTHER RECEIVABLES
Other receivables
Prepayment
6 SHARE CAPITAL
Ordinary shares of USD 1 each
2013
USD
-
-
-
2012
USD
43,286
30,409
73,695
The ordinary shares have been created pursuant to the Companies Law in the Cayman Islands. The Company was
incorporated with an authorised share capital of USD 100,000,000 divided into 100,000,000 ordinary shares of
USD 1 each. According to the Companies Law and articles of association, the Company may from time to time redeem
all or any portion of the shares held by the shareholders upon giving notice of not less than 30 calendar days to the
shareholders.
On 6 June 2006, the Board resolved that 56,250,000 ordinary shares would be allotted at a placing price of USD 2 per
ordinary share. The ISIN number of the ordinary shares is KYG9361X043.
On 23 September 2010, during its annual general meeting, the shareholders approved a Share Repurchase Programme.
Shares issued and fully paid in 2006
Repurchased and cancelled:
Year ended 30 June 2011
Year ended 30 June 2012
Year ended 30 June 2013
Total shares repurchased and cancelled
Number of share after repurchased and cancelled
Repurchased and reserved for own shares
Year ended 30 June 2012
Year ended 30 June 2013
Shares issued upon exercise of warrants
Total outstanding ordinary shares with voting rights
Number of shares
56,250,000
(343,138)
(1,324,750)
-
(1,667,888)
54,582,112
(165,000)
(1,141,381)
(1,306,381)
254,680
53,530,411
As a result, the Company now has 53,530,411 (2012: 54,417,112) ordinary shares with voting rights in issue
(excluding the reserve for own shares), and 1,306,381 (2012: 165,000) are held as reserve for own shares.
The Company strives to invest the capital raised to meet the Company’s investment objectives which are to achieve
long term capital appreciation through a diversified portfolio of companies that have high potential in Vietnam. The
Company achieves this aim by investing principally in securities of former State-owned Entities (“SOEs”) in Vietnam
prior to, at or after such securities becoming listed on the Vietnam stock exchange.
The Company does not have any externally imposed capital requirements.
Incremental costs directly attributable to the issue or redemption of ordinary shares are recognised directly in equity
as a deduction from the proceeds or part of the acquisition cost.
The Company’s general intention is to reinvest the capital received on the sale of investments. However, the Board
may from time to time and at its discretion, either use the proceeds of sales of investments to meet the Company’s
expenses or distribute them to shareholders. Alternatively, the Board of Directors may redeem ordinary shares with
such proceeds for shareholders pro rata to their shareholding upon giving notice of not less than 30 calendar days
to shareholders (subject always to applicable law) or repurchase ordinary shares at a price not exceeding the last
published net asset value per share.
VietNam Holding Annual Report 2013
41
Notes to the Financial Statements
Year ended 30 June 2013
6 SHARE CAPITAL (continued)
Warrants
On 21 May 2012, the Company issued a Prospectus for a bonus issue of warrants to shareholders pro rata, on the
basis of one warrant for every three ordinary shares held. The exercise date of these warrants was initially on 13
December 2012 with an exercise price of USD 1.196 per share. Both Shareholders and Warrantholders gave their
approval to a proposal of extension of the term of the warrants through the addition of two exercise dates, 25 April
2013 and 25 September 2013.
A total of 18,194,037 (2012: 18,194,037) warrants were issued and were listed on AIM. At the reporting date,
17,939,357 (2012: 18,194,037) warrants were outstanding.
On 13 December 2012 and 25 April 2013, 32,930 and 221,750 shares were issued following the exercise of
subscription rights by holders of the warrants.
Although there can be no certainty as to whether any or all of the remaining warrants will be exercised, if the
bonus issue proceeds and all of the remaining warrants are exercised on the exercise date at the exercise price, the
maximum net proceeds that could arise on such exercise would be approximately USD 21.8 million. The net proceeds
arising on the exercise of the remaining warrants will be invested in accordance with the Company’s investment
policy.
7 NET GAIN FROM EQUITY SECURITIES AT FAIR VALUE THROUGH PROFIT OR LOSS
Net gain from equity securities at fair value through profit or loss:
Realised loss
Adjustment to fair value of equity securities at fair value through profit or loss
2013
USD
2012
USD
(7,217,354)
(18,307,227)
24,663,093
17,445,739
25,527,005
7,219,778
8 RELATED PARTY TRANSACTIONS
Investment management fees
The Investment Manager is entitled to an investment management fee of 2% per annum on the monthly net assets
under management. The fee is payable monthly and is calculated by reference to the NAV at the end of the preceding
month. In addition, the Investment Manager is reimbursed by the Company for administrative functions that it
performs on behalf of the Company.
The Company will pay the Investment Manager a performance bonus each year at the rate of 20% of the annual
increase in net asset value over the higher of an annualised hurdle rate of 5% and a “high water mark” requirement.
The total fees accruing to the Investment Manager for the year to 30 June 2013 were USD 1,465,670 (2012: USD
1,290,909) as a management fee.
No performance fee was due as at 30 June 2013 or at 30 June 2012.
Directors’ fees and expenses
The Board determines the fees payable to each Director, subject to a maximum aggregate amount of 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 159,500 (2012: USD 173,000) and expenses were USD
55,011 (2012: USD 82,885).
42
VietNam Holding Annual Report 2013
8 RELATED PARTY TRANSACTIONS (continued)
Directors’ ownership of shares and warrants
As at 30 June 2013, three Directors, Min-Hwa Hu Kupfer, Nguyen Quoc Khanh and Rolf Dubs held 30,000 (2012:
30,000), 10,000 (2012: Nil) and 20,000 (2012: 10,000) ordinary shares of the Company respectively, representing
0.06% (2012: 0.06%), 0.02% (2012: Nil) and 0.04% (2012: 0.02%) of the total shares outstanding.
As at 30 June 2013, Min-Hwa Hu Kupfer and Rolf Dubs held 6,666 (2012: 6,666) and 15,000 (2012: 25,000) warrants
to subscribe ordinary shares, representing 0.04% (2012: 0.04%) and 0.08% (2012: 0.14%) of the total warrants
issued respectively.
9 CUSTODIAN FEES
Custodian fees are charged at a minimum of USD 12,000 per annum and received as a fee of 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 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 76,159 (2012: USD 101,460).
10 ADMINISTRATIVE AND ACCOUNTING FEES
The administrator receives a fee of 0.07% per annum for assets under administration (“AUA”) less than USD
100,000,000; or 0.06% per annum for AUA greater than USD 100,000,000 calculated on the basis of the net assets
of the Company, subject to an annual minimum amount of USD 5,500 per month.
The charges for the year for the Administration and Accounting fees were USD 83,250 (2012: USD 98,250).
11 CONTROLLING PARTY
The Directors are not aware of any ultimate controlling party as at 30 June 2013 or 30 June 2012.
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 and other assets and creditors and accrued charges, the amounts approximate fair value due to the
immediate or short term nature of these financial instruments.
Other financial instruments are measured at fair value on the statement of the net assets attributable to shareholders.
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.
Fair value hierarchy
The table below analyses financial instruments carried at fair value, by valuation method. The different levels have
been defined as follows:
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. This level includes listed
equity securities and debt instruments on exchanges (for example, London Stock Exchange, Frankfurt Stock
Exchange, New York Stock Exchange) and exchanges traded derivatives like futures (for example, Nasdaq, S&P 500).
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (i.e., as prices) or indirectly (i.e., derived from prices). This level includes the majority of the OTC derivative
contracts, traded loans and issued structured debt. The sources of input parameters like LIBOR yield curve or
counterparty credit risk are Bloomberg and Reuters.
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). This
level includes equity investments and debt instruments with significant unobservable components. This hierarchy
requires the use of observable market data when available. The Company considers relevant and observable market
prices in its valuations where possible. The carrying amounts of financial assets at 30 June 2013 and 30 June 2012
are as follows:
VietNam Holding Annual Report 2013
43
Notes to the Financial Statements
Year ended 30 June 2013
12 FAIR VALUE INFORMATION (continued)
The carrying amounts of financial assets at 30 June 2013 and 30 June 2012 are as follows:
Level 1
USD
Level 2
USD
Level 3
USD
Level 4
USD
2013
Financial assets designated at fair value upon initial recognition
Equity investments
2012
76,026,001
Financial assets designated at fair value upon initial recognition
Equity investments
58,014,009
-
-
7,913,006
83,939,007
8,695,443
66,709,452
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.
Although the Company believes that its estimates of fair value are appropriate, the use of different assumptions
could lead to different measurements of fair value. For fair value measurements in Level 3, if the reasonable possible
alternative assumptions were increased/decreased by 10%, the impact on profit/(loss) would be USD 791,301 (2012:
USD 869,544).
Level 3 reconciliation
Financial assets designated at fair value through profit or loss
Balance at 1 July
Sales
Total gains and losses recognised in profit or loss *
Balance at 30 June
2013
USD
2012
USD
8,695,443
10,396,429
-
(3,764,155)
(782,437)
7,913,006
2,063,169
8,695,443
* Total gains or losses recognised in profit or loss for assets and liabilities held at the end of the reporting period, as included in the statement
of comprehensive income.
44
VietNam Holding Annual Report 2013
13 CLASSFICATIONS AND FAIR VALUES 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.
Designated as at
fair value
USD
Note
Loans
and receivables
USD
Other
liabilities
USD
Total carrying
amount
USD
2013
Cash and cash equivalents
Investments in securities at fair value
Accrued dividends
Receivables from sale of investments
Other receivables
Payable on purchase of investments
Accrued expenses
2012
Cash and cash equivalents
Investments in securities at fair value
Accrued dividends
Other receivables
Payable on purchase of investments
Accrued expenses
3
5
3
5
-
2,671,910
83,939,007
-
-
-
-
374,108
1,326,054
-
83,939,007
4,372,072
-
-
-
-
-
-
705,228
337,329
2,671,910
83,939,007
374,108
1,326,054
-
88,311,079
705,228
337,329
1,042,557
1,042,557
-
-
-
-
-
3,070,132
66,709,452
143,418
73,695
69,996,697
64,856
435,812
500,668
-
-
-
64,856
435,812
500,668
-
-
-
3,070,132
-
143,418
73,695
3,287,245
-
-
-
-
66,709,452
-
-
66,709,452
-
-
-
14 EARNINGS PER SHARE
The calculation of earnings per share at 30 June 2013 was based on the change in net assets attributable to ordinary
shareholders of USD 18,748,643 (2012: USD 8,920,493) and the weighted average number of shares outstanding of
53,894,886 (2012: 54,998,948).
At the reporting date, the warrants in issue are anti-dilutive and hence disregarded in the calculation of diluted
earnings per share.
VietNam Holding Annual Report 2013
45
Corporate Information
VIETNAM HOLDING BOARD OF DIRECTORS
INVESTMENT MANAGER –
VIETNAM HOLDING ASSET MANAGEMENT
Min-Hwa Hu Kupfer
Chairperson
Most recently the President of GE Capital Finance in
China, Mrs. Kupfer has over 25 years of experience
serving in several senior executive positions in banking
and management throughout the world. Her banking
career includes many years with Bank One as Senior Vice
President and Head of Middle Market and Retail Strategy,
as well as the First National Bank of Chicago where she
served as Country Manager, China. During that assignment,
Mrs. Kupfer held the highly visible Chairmanship of the
American Chamber of Commerce in China, the first female
executive to hold such a position in that country. She has
a broad and deep insight into many parts of Asia, having
travelled extensively for business within South-East Asia
while based in Singapore. Mrs. Kupfer holds a BS degree
from the National Taiwan University, an MS from the
University of Illinois, and an MBA from the University of
Chicago. She is a US citizen and was born in Taiwan.
Nguyen Quoc Khanh
Head of the Audit Committee
Mr. Khanh completed his studies in France with a Masters
in Mining Engineering, and spent his entire professional
career with the Shell Group. He held several senior
management and finance positions in many countries,
before serving as Chairman and CEO of Shell Vietnam from
1996 until 2002. Mr. Khanh lives in France as well as in
Vietnam, and is an active private equity investor.
Professor Rolf Dubs
Head of the Corporate Governance Committee
Professor Dubs is the former President of the HSG
University of St. Gallen, Europe’s leading German-speaking
economics university. He also taught at Harvard and
Stanford universities, as well as several other leading
global institutions. Outside the classroom, Professor Dubs
has a long record of service on the corporate boards of
many major Swiss and international corporations. For
many years, he has taken an active role in numerous Swiss
government projects in Vietnam’s education sector, as
well as in providing technical assistance to the country’s
financial markets.
Board of Directors
Jean-Christophe Ganz
Chairman and Head of the Investment Committee
Jean-Christophe Ganz, served in several senior
management positions with ING Bank in Geneva,
Bratislava and Zurich, as well as more recently as a
business consultant specializing in M&A, privatizations,
and corporate restructuring. He has also served on the
boards of several private equity investment companies
active in real estate development and financial asset
management. Mr. Ganz holds a law degree from the
University of Lausanne.
Donald Van Stone
Vice-Chairman
Mr. Van Stone served as Executive Vice President of
MasterCard International in Europe, Middle East and
Africa, and was President of its Middle East/Africa region.
Previously he was MasterCard’s General Manager in
Southeast Asia, based in Singapore. His previous, extensive
global banking career included senior management
assignments with major banks in six countries and service
as the CEO of First City Bank in Austin, Texas. Mr. Van
Stone holds a BS degree in Physics and a Harvard MBA
with high distinction.
Iris Fang
Board Member
Mrs. Fang has more than 30 years of experience in the
banking industry, including assignments in New York City,
San Francisco, Los Angeles, Singapore as well as Vietnam.
Her extensive career included positions in structured
finance and strategy at various financial institutions such
as Bank of America, Chase Manhattan Bank and Standard
Chartered Bank where she was Regional Head of Strategy
for the Asia and CEO Vietnam from 1995-1997. Ms. Fang is
now based in Vietnam where she acts as a consultant and
advisor to several Vietnamese companies and also lectures
at RMIT International Vietnam. Mrs. Fang holds an MBA and
Bachelors of Business from the University of Georgia, USA
with a Major in Marketing, Banking and Finance.
46
VietNam Holding Annual Report 2013 ADVISORY COUNCIL
Dr. Le Dang Doanh
Dr. Doanh is an Advisor to the Vietnam Ministry of Planning
and Investments (MPI). He was a permanent member
of many goverment entities, including the Government
Commission for State-owned Enterprises Reform, and the
National Commission for Finance and Monetary Policy.
Dr. Doanh has held many senior government and party
positions and was Vice President, Vice-Minister and
finally President of the Central Institute for Economic
Management (CIEM). He is a visiting professor at the Nihon
University in Tokyo. Dr. Doanh earned his Ph.D. at the
National Economics University in Hanoi, has concluded
post graduate studies at the Academy for National
Economy in Moscow and graduated at the Technical
University of Leuna-Merseburg in Germany.
Dr. Cao Si Kiem
Dr. Kiem was the Governor of the State Bank of Vietnam,
the country’s central bank, from 1989 until 1997. He
currently serves as the Deputy Chief of the Central Party’s
Economics Board, is the Vice President of the Consulting
Committee for National Monetary Policy, and is Chairman
of the Association of Vietnam’s Small and Medium Scale
Enterprises. Since January 2006, Dr. Kiem has served as
the Vice Chairman of the Vietnamese Learning Promotion
Association. His previous positions in Vietnam include
Secretary of the Communist Party Committee, and
Director of the State Bank of Thai Binh Province. Dr. Kiem
earned his Ph.D. in economics at the National Economics
University of Vietnam.
Dr. Le Thi Bang Tam
Dr. Tam served until 2008 as the Chairperson of the Board of
Directors of the State Capital Investment Corporation (SCIC),
which was established in April 2006 by the Prime Minister
to manage government shareholdings in privatized State-
Owned Enterprises. Before her SCIC assignment, Dr. Tam
served 11 years as a Vice Minister at the Ministry of Finance
of Vietnam with core responsibilities in State treasury and
budget management, external financing and international
cooperation, capital market development, financial services
and State-Owned Enterprises reform program. Dr. Le Thi
Bang Tam was formerly a lecturer on economics and finance
at the Hanoi University for Accounting. Dr. Tam was also
a member of the National Committee for International
Economic cooperation, and a member of the National
Committee of monetary and finance policy. Dr. Tam received
a PhD in Economics and Finance from Saint Petersburg State
University of Economics and Finance, Saint Petersburg,
Russia, and a Bachelor’s degree from the Hanoi University of
Accounting and Finance.
Markus Winkler
Mr. Winkler is the founder and Chairman of VGZ, an
investment management firm in Zurich. He completed his
studies at the HSG University of St. Gallen. His primary
interest lies in undervalued investments, particularly
in emerging markets. He is known as “Mr. Vietnam”
in Switzerland and Germany and due to his extensive
knowledge and investment acumen has long been
considered a leading source for investment advice on
Asia’s emerging markets.
VietNam Holding Annual Report 2013
47
Corporate Information
Directors
Min-Hwa Hu Kupfer
Professor Dr. Rolf Dubs
Nguyen Quoc Khanh
Entry Standard Advisor
Close Brothers Seydler Bank AG
Schillerstrasse 27 -29
60313 Frankfurt
Germany
Legal Adviser (English Law)
Norton Rose Fulbright LLP
3 More London Riverside
London SE1 2AQ
United Kingdom
Investment Manager
VietNam Holding Asset Management
Limited
P.O. Box 3175
Road Town, Tortola
British Virgin Islands
Corporate Broker
Oriel Securities Limited
150 Cheapside
London EC2V 6ET
United Kingdom
Company Secretary
CARD Corporate Services Ltd.
Fourth Floor, Zephyr House
122 Mary Street
PO Box 709 GT
Grand Cayman
KY1 - 1107, Cayman Islands
Nominated Advisor (AIM)
Oriel Securities Limited
150 Cheapside
London EC2V 6ET
United Kingdom
Custodian
Standard Chartered Bank
7 Changi Business Park Crescent
Level 3, Securities Services
Singapore 486028
Registrar
Capita Registrars Limited
34 Beckenham Road
Beckenham, Kent BR3 4TU
United Kingdom
Administrator
Standard Chartered Bank
7 Changi Business Park Crescent
Level 3, Securities Services
Singapore 486028
Legal Adviser (Cayman Island Law)
Charles Adams Ritchie & Duckworth
Zephyr House
122 Mary Street,
PO Box 709 GT
Grand Cayman
KY1 - 1107, Cayman Islands
Independent Auditor
KPMG LLP
16 Raffles Quay #22-00
Hong Leong Building
Singapore 048581
48
VietNam Holding Annual Report 2013 1 Overview
2 Chairperson’s Statement
4
Investment Manager’s Report
6 Market and Economic Overview
8 Domestic Consumption Report
12 Portfolio Companies
Independent Auditor’s Report
23 Sustainability Report
28 Directors’ Report
30
31 Financial Statements
36 Notes to the Financial Statements
46 Corporate Information
In a gradually improving macro-economic and policy
environment, the VNH portfolio has once again managed
to outperform the market by a substantial margin: from
1 July 2012 to 30 June 2013 the NAV per share increased
by 27.3%, compared with the Vietnam Index’s 12.3% USD
adjusted gain. Since 30 June 2007, when VNH’s capital was
80% deployed, the return of NAV per share outperformed
the USD adjusted Index by 38.58% cumulatively.
Min-Hwa Hu Kupfer, Chairperson
VietNam Holding Limited
Front and Inside Cover Photographs: Nicholas J. Freeman, Hanoi/Yangon.
VietNam Holding became a signatory of the UN Principles for
Responsible Investment (PRI) in 2009. Our investment practices and
corporate behavior incorporate environmental, social and corporate
governance issues. We promote the principles in our markets and align
the fund’s goals with the broader objectives of sustainable progress.
Designed and produced by Mediasterling:
www.mediasterling.com
www.vietnamholding.com
VietNam Holding Ltd
c/o CARD Corporate Services Ltd.
Fourth Floor, Zephyr House
122 Mary Street
PO Box 709 GT
Grand Cayman
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