VietNam Holding Limited Annual Report 2017

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FY2017 Annual Report · VietNam Holding Limited

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Annual Report
2017

Chairperson’s Statement

Investment Manager’s Report

Portfolio Companies

Sustainability Report

Corporate Governance

VNH Foundation Report

Directors’ Report

Independent Auditors’ Report

Financial Statements

Notes to the Financial Statements

Key Parties

Reducing the discount of the share price to NAV remains a priority.
During the year, the discount improved slightly, from 20.6% at the start of
the financial year to 18.1% as at 30 June 2017. A total of approximately
2.1 million shares were purchased by the Company to be held in treasury
(2016: 4.6 million) and 2.5 million treasury shares were subsequently
cancelled (2016: 1.9 million) during the year. 631,684 treasury shares
were reissued to Vietnam Holding Asset Management as incentive fees
paid in shares, in respect of the 2016 financial year. There were 9.4
million shares in treasury at 30 June 2017 (2016: 10.5 million), compared
with total shares outstanding of 73.3 million (2016: 54.9 million).

Min-Hwa Hu Kupfer, Chairperson
VietNam Holding Limited

VietNam Holding Annual Report 2017Performance

1 July 2016 to 30 June 2017

7.2%

NAV per share

10.6%

VNH Share Price

12% NAV underperformance of benchmark
(VNAS USD adjusted)

Share price discount to NAV improved from
20.6% to 18.1%

VNH is principally a value investor and has applied that strategy since
inception. Accordingly, the fund manager’s primary concern is to achieve
long-term capital appreciation by investing in a diversified portfolio of
companies that have high growth potential at an attractive valuation. This
implies that VNHAM will ignore the overvalued companies, even though
these may appear attractive in the short term.

Jean-Christophe Ganz, Chairman
VietNam Holding Asset Management Limited

VietNam Holding Annual Report 2017Chairperson’s Statement
We take a long term approach, believing that a minimum three year investment
horizon is needed for maximizing long term risk-adjusted returns.

Our NAV per share relative to index and peers in the past
year has not performed as well as previous years – our
NAV per share growth underperformed the index in a full
financial year for the first time since 2009. We ascribe
this to three factors: (a) a globally better performance
from “growth” rather than “value” equity strategies in
the past several quarters; (b) some excellent short term
share price performances from a number of recent large-
capitalisation Vietnamese IPO’s during the period, which
in most cases sported inflated valuations; and (c) a few
cases of robust share price performance from existing
major stocks, notably in banks and construction, that
we were slow to see value in, and in some cases still do
not. We are using our recent experience to inform our
future outlook, making adjustments but without deviating
from our strict value investing philosophy. As a closed
ended fund, we take a long term approach, believing
that a minimum three year investment horizon is the
appropriate one (rather than one year) for maximising
long term risk-adjusted returns.

In the recently completed warrant exercise period, all
warrants were taken up, either by existing shareholders
or by new investors, with those shareholders who did
not exercise compensated for the value of their unused
warrants. From this source, the asset value of the fund
was increased by nearly USD 40 million, to a total of USD
210.5 million as of 30 June 2017.

Reducing the discount of the share price to NAV remains
a priority. During the year, the discount improved slightly,
from 20.6% at the start of the financial year to 18.1%
as at 30 June 2017. A total of approximately 2.1 million
shares were purchased by the Company to be held in
treasury (2016: 4.6 million) and 2.5 million treasury
shares were subsequently cancelled (2016: 1.9 million)
during the year. 631,684 treasury shares were reissued
to Vietnam Holding Asset Management as incentive
fees paid in shares, in respect of the 2016 financial year.
There were 9.4 million shares in treasury at 30 June
2017 (2016: 10.5 million), compared with total shares
outstanding of 73.3 million (2016: 54.9 million).

Dear Shareholders,

Our financial year ended 30 June 2017 could be a rather
complicated one to describe in terms of NAV per share
growth, because of the final exercise date of our 1-for-
3 warrants issue having taken place on 1 June 2017.
For simplicity, in the table below, we present NAV per
share growth over the last 5 years to 30 June 2017 in
original, unadjusted form, alongside share price growth
and the growth in the Vietnam All Share (VNAS) Index.
The financial year-end absolute NAV per share for the
Company amounted to USD 2.872.

Periods to 30
June ‘17

NAV/Share %
growth (USD)

Share Price %
growth (USD)

VNAS Index %
growth (USD)

1 year
2 years
3 years
4 years
5 years

7.2
37.2
49.5
74.3
121.8

10.6
30.5
60.8
89.8
122.4

19.2
27.8
30.2
49.8
60.7

The 7.2% increase in NAV per share for the year
comprises a 17.4% “core” gain (after fees) from our
portfolio management activities less a 10.2% negative
impact arising from the dilutive effect of the recent
warrants issue. Although VNH`s two warrant issues
over the past five years have played an important part
in raising the total assets of the fund to a solid level
of financial sustainability, their dilutive impact on NAV
per share has led the board at this stage to decide
not to undertake any additional warrant issues for the
foreseeable future.

Reducing the discount of the share price
to NAV remains a priority. During the year,
the discount improved slightly, from 20.6%
at the start of the financial year to 18.1%
as at 30 June 2017

VietNam Holding Annual Report 2017There are two important reform areas for the government
in the coming quarters, which if successfully undertaken
will support the solid outlook for the economy and stock
market. Firstly, a law has just been passed to improve
the power of creditors to seize and sell collateral behind
non-performing loans, or indeed the ability to sell the
loans. Time will tell if it has teeth. Secondly, follow-on
stake sales in a number of listed state owned enterprises
are required, in order for these privatisations to amount
to more than window-dressing in economic terms and
to meaningfully deepen the ability to invest in the stock
market. Continued major expansion in foreign portfolio
investor interest in Vietnam is dependent on a good rate
of progress in such matters.

Thanks to our shareholders for your support, and to
Vietnam Holding Asset Management for its continued
overall creditable performance.

Min-Hwa Hu Kupfer, Chairperson
VietNam Holding Limited
18 August 2017

We have resolved to change our policy on treasury shares,
whereby we shall cancel them as soon as possible after
they are purchased, rather than the previous policy of
keeping them in treasury for three years with a possibility
of reselling them at a lower discount compared to
the weighted average purchase discount of the pool.
This proposed change of policy will be presented to
shareholders at our next annual general meeting to be
held in September 2017.

The year has been characterised by
increasing foreign investor attention to
the Vietnamese stock markets.

The year has been characterised by increasing foreign
investor attention to the Vietnamese stock markets. Daily
turnover on the three exchanges has averaged a new
record of USD 195 million in the first half of calendar
2017, with net foreign inflows significantly high at USD
438 million over this period.

Although valuations have tended to increase, they have
not reached concerning levels in aggregate, due to strong
double digit earnings per share growth over the past 12
months. The VNAS at 30 June 2017 sat on a trailing price/
earnings ratio of 13.5x, a high level compared to the past
five years, but hardly an alarming level.

Meanwhile, Vietnamese GDP growth is heading for
another excellent year exceeding 6%, and signs abound
of a middle class consumer boom that is changing the
face of the nation. This is reflected in unprecedented
busy streets, roads, shops and restaurants. Foreign tourist
arrivals to Vietnam are growing at 30% year-on-year, and
likewise domestic tourism is booming too. Foreign direct
investment growth (6% YoY for disbursals in the first half
of 2017) and export growth (19%) both remain buoyant.
Additionally, we are experiencing a stable currency (down
only 1.9% versus the dollar over the past 12 months),
modest and steady interest rates (4.9% for the five year
government bond), and an ideal low inflation rate (2.5%
in June YoY).

VietNam Holding Annual Report 2017Investment Manager’s Report
VNH is principally a value investor and has
applied that strategy since inception.

Success in investment management at the highest level
is no easy task. In its pursuit, VietNam Holding Asset
Management Ltd (VNHAM) had an eventful past fiscal
year. One significant and very positive event was the
achievement by VietNam Holding Ltd (VNH), the largest
fund managed by VNHAM, in reaching the historical
milestone of a total Net Asset Value above USD 200
million. This was greatly assisted by the very successful
exercise in June 2017 of warrants issued in 2015. We take
this opportunity to thank all the VNH investors for the
trust and support demonstrated by their participation in
that offering.

Not all events were so positive. For the first time since
2009, VNH did not outperform its benchmark index.
While the Vietnam All Share Index (VNAS) rose by an
impressive 21.47% during the last fiscal year, the VNH
Unadjusted NAV/Share showed a performance of 17.46%
for the same period. The Vietnam Index (VNI), which
includes all stocks listed on the Ho Chi Minh City Stock
Exchange, irrespective of their free float and tradability,
rose by 22.81%. Regrettably, VNH also significantly
underperformed most of its peers.

One significant and very positive

event was the achievement by VietNam
Holding Ltd (VNH), the largest fund
managed by VNHAM, in reaching the
historical milestone of a total Net Asset
Value above USD 200 million.

VNH is principally a value investor and has applied
that strategy since inception. Accordingly, the fund
manager’s primary concern is to achieve long-term
capital appreciation by investing in a diversified portfolio
of companies that have high growth potential at an
attractive valuation. This implies that VNHAM will ignore
the overvalued companies, even though these may appear
attractive in the short term.

Four out of the five biggest contributors to the
underperformance of VNH versus the VNI were trading at
more than 20x trailing PE as of 30 June 2017. Vinamilk
(HOSE: VNM) and Vietcombank (HOSE: VCB) prices were
pushed up as they were top priorities for both long term
and index funds seeking Vietnam exposure. SABECO
(Saigon Beer-Alcohol-Beverages Corporation - HOSE:
SAB), a long awaited large SOE listed in late 2016, is
an interesting story. The stock attracted a great deal of
attention from both retail and institutional investors
thanks to a considerable pre-listing hype. Although the
long term outlook of the alcoholic beverage sector is
still positive, its valuation was pushed up to nearly 30x
following their listing, mostly driven by a very small free
float. FLC Faros Construction (HOSE: ROS) is a rather
speculative stock with a corporate governancethat we
consider unsuitable for VNH. ROS’ share price gained
more than 1,200% to its peak and then lost 50% within
a year. As for Petrovietnam GAS (HOSE: GAS), the stock
is deemed to be the best representative of the oil and
gas sector in Vietnam and has a high correlation to the
crude oil price; the outperformance of the stock could be
explained by the high volatility of the crude oil price in
the period.

Although the stocks mentioned above were a major
constituent of the VNI increase, none of them feature in
the VNAS Index. Nonetheless, the increase in the VNAS
was also driven by a limited number of tickers that did
not qualify for VNH’s portfolio, mainly due to overpricing,
poor long-term perspectives, corporate governance issues,
or full Foreign Ownership Limit. These included stocks
such as Thanh Cong Textile JSC (113% price increase),
Bien Hoa Sugar JSC (98%), Hoa Binh Construction
JSC (94%), Hoang Anh Gia Lai Agriculture JSC (76%),
Refrigeration Electrical Engineering JSC (37%) and several
banks and construction companies.

VietNam Holding Annual Report 2017 From a shareholders’ perspective

however, VNH has continued to perform
well. Over the past 5 years, the VNH share
price has substantially outperformed key
Asian indices

We underestimated the potential growth of some well-
known tickers such as Vinamilk , Mobile World Group
(MWG) and Military Bank (MBB). VNHAM has reviewed
these calls and increased VNH’s exposure to a select
number of banks with the best margins of safety. VNHAM
has also been slow in divesting a number of stocks such
as Century Synthetic Fiber Corp., Danang Rubber JSC and
Nhon Trach 2 JSC. The company has since fully divested
the underperforming stocks and successfully rebalanced
the VNH portfolio to both correct mistakes and optimally
deploy the new funds resulting from the warrants
exercise. The performance of VNH compared to the VNAS
during Q2 2017 appears to support this course of action.

Many of these listed companies that show high price-
earnings-ratios but not commanding EPS growth
projections, remain ineligible for VNHAM as long
as we continue to adhere to our value investment
principles. Notwithstanding the fact that the short-
term performance of these tickers may appear to be
an enticing argument for a change in strategy, VNHAM
continues to believe that small- and mid-cap companies
with more sustainable EPS growth represent the wiser
path to success in the long term. VNHAM does not intend
to divert from a strategy that has served its funds so well
for almost a decade.

In contrast to the companies mentioned above, we
present in the Company Profiles section of this Annual
Report five current VNH portfolio companies. They are
examples of what VNHAM considers to be the kind of
proper, small- and mid-cap companies with sustainable
EPS growth that have made VNH a success story.

From a shareholders’ perspective however, VNH has
continued to perform well. Over the past 5 years, the VNH
share price has substantially outperformed key Asian
indices, including the VNAS, the MSCI Asia ex Japan, the
Shanghai Composite, the Manila, Bangkok, Jakarta as well
as the Bombay Composites - by quite a margin.

We are confident that stocks like these will continue to
be the correct choice for value investing in the years to
come, and that this will be the case in both the healthy
and challenging markets we are sure to encounter. Our
sincere thanks to the funds and the shareholders who
continue to entrust us with that important decision.

Looking forward, Vietnam’s market is likely to remain
under the influence of a few standout stocks for the
months to come. Indeed, the projected EPS growth of the
VNI, adjusted to exclude its most highly valued stocks
Sai Gon Thuong Tin Commercial JSC, Export Import
Commercial Joint Stock Bank and Vingroup JSC, illustrates
that the projected EPS growth of the rest of the market
remains below that of VNH’s portfolio.

Jean-Christophe Ganz, Chairman
VietNam Holding Asset Management Limited
18 August 2017

VietNam Holding Annual Report 2017Portfolio Companies

VCB New branch opening in Hanoi

VHC Production and processing of aquatic products

HPG Hoa Phat Steel Integrated Complex in Hai Duong

#1 investment
banking position

“The best capital
mobilization in
Vietnam in
2007-2016”

“Best Investment
Bank in Vietnam” and
“Best Securities
House”

2016

Skilled PNJ goldsmith

VCI’ s 2016 award from FinanceAsia

VietNam Holding Annual Report 2017HOA PHAT GROUP (HPG)

SHARE INFORMATION (AS AT 30 JUNE 2017)

Stock Exchange
Date of listing
Market capitalization (USD million)
Free float
Foreign ownership
2017 price/earnings ratio

VIETNAM HOLDING’S INVESTMENT

Date of first investment
Ownership
Percentage of NAV
Internal rate of return (annualized)

Sources: Annual Reports and Bloomberg

ABOUT THE COMPANY
Through a 25-year history with numerous
accomplishments, Hoa Phat Group has
established a strong position as Vietnam’s
leading steel producer and contributed
significantly to the development of the
steelmaking industry in Vietnam. HPG
started as a trading company, and today
is one of the spearheads of the privatized,
industrial manufacturing groups in Vietnam
specializing in the production of steel,
steel pipe, office furniture and equipment.
Steelmaking continues to be the core
business and contributes over 80% of total
revenue and profit. In 2016, HPG held a local
market share of 22% and 26%, respectively
in construction steel and steel pipes.

As of 31 December 2016, HPG had 12
subsidiaries with a large workforce of 12,886
employees, up +10% YoY.

HOSE
15 November 2007
2,136
58%
39%
7.0x

20 June 2013
0.7%
6.9%
35.6%

FINANCIAL INDICATORS

Equity capital (USD million)
Revenues (USD million)
Revenue growth (in VND)
EBIT (USD million)
NPAT (USD million)
EPS (VND)
EPS growth
Gross margin
EBIT margin
ROE
D/E
Current ratio

2015

643.3
1,253.3
3.9%
201.2
159.1
2,450
5.2%
20.3%
16.0%
25.2%
0.5x
1.2x

2016

871.7
1,488.1
18.7%
351.2
295.1
4,470
82%
26.2%
23.6%
35.3%
0.3x
1.5x

RECENT DEVELOPMENTS
HPG reported impressive results with
revenue and profit growth of 34% and
89% YoY respectively in 2016. This was
mainly driven by construction steel and
steel pipes. HPG sold over 1.8 million tons
of steel, an increase of 30% YoY, exceeding
the annual target of 10%. HPG achieved
this by finalizing phase III of the Hoa Phat
Steel Integrated Complex. Other traditional
segments including office furniture and
equipment increased their market coverage
through the development of new added
value products and the enhancement of
sales and marketing forces. The Company
made further investments in the agriculture
business to build its third animal feed
factory, another step in reaching a capacity
of 1 million tons of feed product per year, or
5% of market share.

SUSTAINABILITY STRATEGY
Operating in an industrial sector which
requires significant energy input, HPG’s
sustainability development strategy focusses
on applying different solutions to save
and reuse energy efficiently, improving
production and business processes and
protecting the environment.

ESG ACHIEVEMENTS
In order to reach the set targets in energy
saving and environmental protection,
HPG has applied mechanisms to collect
iron dust and reuse the blast furnace.
Additionally, waste gas is recovered to run
the generator turbine of an internal thermal
power plant that covers 40% total power
demand of the Integrated Complex. These
solutions have helped to save 30-40% of
electricity consumption and 20-30% of fuel
consumption in HPG’s production lines. HPG
has also upgraded its sewage treatment
system to ensure the company meets the
highest standard of QCVN 40:2011, which
was issued by the Ministry of Natural
Resources and Environment.

In 2016, the company spent nearly
USD 1 million on social responsibility
campaigns such as “Heartbeat love”, “Free
meal-honorable heart”, “Hand in hand to
school” and “The good leaves protect the
worn-out leaves”.

ESG CHALLENGES
Although HPG has applied many
solutions for energy saving and
environmental protection, it still faces the
challenges of minimizing environmental
pollution from the steelmaking production
process. Whilst being compliant with all
local environmental standards, the Company
should aim to achieve compliance in more
advanced, international industry standards.
HPG should also strive to measure the
carbon footprint emission of its current
energy usage, compare it with the sector
benchmark and apply appropriate strategies
to mitigate the effects.

VietNam Holding Annual Report 2017
PHU NHUAN JEWELRY (PNJ)

SHARE INFORMATION (AS AT 30 JUNE 2017)

Stock Exchange
Date of listing
Market capitalization (USD million)
Free float
Foreign ownership
2017 price/earnings ratio

VIETNAM HOLDING’S INVESTMENT

Date of first investment
Ownership
Percentage of NAV
Internal rate of return (annualized)

Sources: Annual Reports and Bloomberg

ABOUT THE COMPANY
PNJ is the leading manufacturer and
retailer of jewelry products in Vietnam.
An experienced team comprised of
jewelry designers and about 1,000 skilled
goldsmiths has remained one of the
company’s strongest assets. PNJ is the only
jewelry house in Vietnam with a production
capacity of 4 million units per annum while
other domestic players have yet to secure
manufacturing abilities. The company is
proud of its rich, 29-year industry experience,
with a professionally managed and well-
respected brand image.

PNJ offers a product range from lower-
end to luxury jewelry to serve different
client segments through 237 retail stores
nationwide (2016: 219 and 2015: 186)
including 174 gold class, 59 silver class,
and 4 premium class stores, along with over
3,000 wholesalers. Its closest competitor
operates around 53 stores, or the equivalent
of one-fourth of PNJ’s store network. The
company currently enjoys a market share of
28% (2012: 12%).

PNJ aims to become one of the top players
in the Asian jewelry industry after exiting
(and fully providing for) all non-core
investments in 2016. The company has
cooperated with consultants from Italy
(Value Partners) and international jewelers
in the U.S. (Zales and Tiffany & Co.) to
continuously enhance its jewelry designs,
craftsmanship, manufacturing capability, and
retail systems

HOSE
23 March 2009
441
73%
49%
19.1x

8 December 2009
3.4%
7.1%
32.5%

FINANCIAL INDICATORS

Equity capital (USD million)
Revenues (USD million)
Revenue growth (in VND)
EBIT (USD million)
NPAT (USD million)
EPS (VND)
EPS growth
Gross margin
EBIT margin
ROE
D/E
Current ratio

2015

58.5
351.8
-20.1%
28.6
3.5
568
-73.5%
15.2%
8.1%
4.3%
0.96x
1.4 x

2016

65.9
382.9
11.3%
32.4
20.1
4,383
671.6%
16.5%
8.5%
30.6%
1.0x
1.5x

ESG ACHIEVEMENTS
PNJ has firm policies to ensure that its
precious stone purchases are from legitimate
sources rather than conflict zones with
questionable origins. The company has also
reduced its raw material waste to below the
industry standard of 1%.

Since 2012, PNJ has implemented several
HR projects such as restructuring its
organizational hierarchy, standardizing the
hiring process, reforming the HR operating
model, building a leadership competency
framework and setting KPIs. These efforts
have played a vital role in PNJ delivering its
recent impressive business results.

ESG CHALLENGES
The segregation of duty between the
company’s Chairlady and CEO has not been
improved. Nevertheless, PNJ has been
preparing a succession plan, in which the
Chairlady is to transfer her CEO position to
a carefully chosen and groomed candidate
in 2018.

RECENT DEVELOPMENTS
PNJ’s 2016 performance was outstanding
with its profit after tax (PAT) increasing
529.4% YoY. The phenomenal growth
was due to low 2015 profits after a large
provisioning expense of VND 300bn booked
for its Dong A Bank investment. Excluding
this item, the company achieved a 2016 PAT
growth of 41.6% YoY.

To increase its profitability, PNJ has curtailed
its low gross margin (less than 2%) gold
bar trading activities and concentrated on
its high gross margin (around 27%) jewelry
business, which has generated 85% of total
gross profit. During the years 2011 to 2015,
sales from gold bar trading dominated
more than 50% of total revenues; however,
this proportion has been reduced to less
than 20% since 2016. Additionally, PNJ has
implemented an ERP system to optimize its
inventory level and production processes.

SUSTAINABILITY STRATEGY
PNJ’s Sustainable Development strategy was
established based on the 17 Sustainable
Development Goals of the United Nations.
The strategy is founded upon five pillars,
which are 1) Economic growth via full
concentration on core jewelry business,
2) Social development by providing
proper annual training to employees, 3)
environmental protection through processing
of toxic waste in an environmental-
friendly manner and promotion of energy
efficient focused practices, 4) Labor force
development by creating a safe and
unprejudiced working atmosphere to
not only attract but also nurture talent,
and 5) Community building via effective
investments in community projects.

VietNam Holding Annual Report 2017BANK FOR FOREIGN TRADE OF VIETNAM (VCB)

SHARE INFORMATION (AS AT 30 JUNE 2017)

Stock Exchange
Date of listing
Market capitalization (USD million)
Free float
Foreign ownership
2017 price/earnings ratio

VIETNAM HOLDING’S INVESTMENT

Date of first investment
Ownership
Percentage of NAV
Internal rate of return (annualized)

Sources: Annual Reports and Bloomberg

HOSE
30 June 2009
6,102
8%
21%
19.9x

4 February 2016
0.1%
4.3%
13.6%

FINANCIAL INDICATORS

Equity capital (USD million)
Net interest income (USD million)
Net interest income growth (in VND)
Pre-provision profit (USD million)
NPAT (USD million)
EPS (VND)
EPS growth
ROE
NIM
NPL
CIR
P/B

2015

2,009.0
707.7
28.7%
574.4
242.6
1,202
14.5%
12.0%
2.58%
1.84%
40.0%
2.6x

2016

2,112.5
829.5
19.9%
657.1
305.4
1,566
30.3%
12.1%
2.64%
1.48%
40.0%
2.7x

ABOUT THE COMPANY
VCB, established in 1963 and listed in
2009 on the Ho Chi Minh Stock Exchange,
was historically the largest market-
capitalization bank in Vietnam. VCB runs
the most extensive banking network,
including 101 branches, 395 transaction
offices, 2,499 ATMs, and 82,930 points of
sales nationwide. With more than 50 years
local banking experience, VCB has secured
the country’s top positions in a) trade
financing and international settlement,
with a 15.5% market share, b) foreign
exchange (FX) trading, and c) credit and
debit card issuance with a 30% share of the
credit card market (holding 44% of total
credit card payment volume) and a 14%
share of the debit card market.

RECENT DEVELOPMENTS
The bank recorded a robust 2016
performance. Its net profit increased +29%
YoY due to a) a net interest income (NII)
growth of +20% YoY, driven by a +19% YoY
credit growth, and b) a non-NII growth of
+11% YoY as a result of gains in fee income
of +13.4%, FX trading of +17.6%, securities
trading of +16%, and other income of
+2%. Although VCB’s operating expenses
advanced +20% YoY, due to its growing
retail banking business, its cost-to-income
ratio (CIR) was still maintained at 40%,
equivalent to its 2015 ratio and slightly
below the industry average of 42%. The
bank’s loan-loss-coverage ratio registered at
119%, which was the second highest among
domestic banks.

With regards to lending, VCB expanded
its 2016 retail loan book by almost +50%
YoY, thanks to increasing mortgage and
automotive loans, which essentially helped
its net interest margin (NIM) expand from
255bp in 2015 to 263bp in 2016. NIMs of

most other local banks declined or were flat
in 2016. Retail lending accounted for around
25% of VCB’s total outstanding loans.

In 2016, the bank took all impaired loans
back from the Vietnam Asset Management
Company (VAMC), to which they were
previously transferred, after writing those
loans off in full. Consequently, VCB was
the first bank, which completed clearing
its legacy non-performing loans (NPLs),
spawned by the country’s most recent bad
debt cycle. The bank’s NPL ratio fell from
1.84% in 2015 to 1.48% in 2016.

SUSTAINABILITY STRATEGY
VCB’s vision is to become the leading
local bank to fully adopt best global
corporate governance practices, and aims to
join the ranks of the world’s top 300 largest
credit institutions by 2020. To progress
toward its strategic view, VCB has been a
pioneer in fully applying Basel II by 2018
and advanced Basel II by 2020, with a strong
commitment in growing return on equity
(ROE) from 13% to 15% while providing
highest customer satisfaction via innovative
products and convenient services using
technological advances.

ESG ACHIEVEMENTS
VCB has developed and practiced strategic
human resource (HR) management, which
focuses on building capacity framework
and talent development programs. In 2015,
the bank completed its job description
and KPI systems to lay the foundation for
optimization of its remuneration policy
and HR management towards fairness
and efficiency. VCB has also increased
staff rotation, standardized processes and
procedures, and improved the quality of the
recruitment process.

Domestic and overseas management
training sessions have been organized
regularly to equip future leadership teams
with modern and up-to-date banking
best practices. In 2016, 5,104 employees,
including 89 directors and deputy directors,
were trained on risk management, debt
handling, international payment, accounting,
and auditing.

VCB has identified itself as a greener
bank for communities’ sustainable
development. For instance, during its credit
appraisal process, the bank evaluates
environmental and social risks that may
negatively impact borrowers’ capital usage
and loan repayment abilities. VCB has
often been the first volunteering bank
to offer preferential lending rates to the
government’s promoting industries such
as agriculture and technology during
different development phases of Vietnam.
Additionally, VCB has launched numerous
“Green for life” initiatives, one of which
is sponsoring primary schools to host
interactive games to educate children on the
green and beautiful aspects of the earth and
teach them daily gestures to help keep their
environment clean.

Due to its ESG efforts, the bank received
several respected ESG-related awards in
2016, such as ‘Top 10 Most Sustainable
Enterprises in Vietnam’ by the Vietnam
Business Council for Sustainable
Development, and ‘Enterprise for
Employees’ by the Vietnam General
Confederation of Labor.

ESG CHALLENGES
VCB has not disclosed details regarding
remuneration packages of the members of
its Board of Directors. We are hoping this
will change in the future.

VietNam Holding Annual Report 2017VIET CAPITAL SECURITIES (VCI)

SHARE INFORMATION (AS AT 30 JUNE 2017)

Stock Exchange
Date of listing
Market capitalization (USD million)
Free float
Foreign ownership (as of 30 July 17)
2017 price/earnings ratio

VIETNAM HOLDING’S INVESTMENT

Date of first investment
Ownership (as of 30 June 17)
Percentage of NAV (as of 30 June 17)
Internal rate of return (annualized)

Sources: Annual Reports and Bloomberg

ABOUT THE COMPANY
VCI, founded in 2007, has dominated the
investment banking (IB) field in Vietnam
during the last 10 years, thanks to its
unrivalled understanding of the local
market. The company helped advise and
close several of Vietnam’s major capital
market transactions for leading industry
players including Mobile World (2014),
Argo Nutrition International (2015),
VietJet Aviation (2016), and Vietnam
Prosperity Bank (2017).

Due to strong support from its IB division,
VCI commands the leading position in
institutional brokerage with over 30%
market share in 2016. Overall, the
company has been ranked one of the top
3 brokers in Vietnam. VCI’s institutional
sales department is highly regarded for its
extensive global client base, value-added
services, leading technology, best execution
practice, insightful research, and renowned
corporate access.

VCI is led by a professional Board of
Directors with a majority of non-executive
directors. The company carefully manages
its balance sheet and deploys effective risk
management policies. VCI is one of the few
companies in Vietnam to have successfully
integrated a cross-culture management
team combining overseas expertise and
local knowledge.

HOSE
07 July 2017
321
69%
31%
13.2x

21 April 2017
1.5%
1.8%
240.0%

FINANCIAL INDICATORS

Equity capital (USD million)
Revenues (USD million)
Revenue growth (in VND)
EBIT (USD million)
NPAT (USD million)
EPS (VND)
EPS growth
Gross margin
EBIT margin
ROE
D/E
Current ratio

2015

43.3
31.8
13.6%
18.2
10.8
4,744
63.3%
69.5%
57.2%
26.7%
0.6x
1.6x

2016

56.1
39.9
27.5%
24.2
15.0
3,247
-31.6%
70.6%
60.8%
29.8%
0.9x
1.8x

RECENT DEVELOPMENTS
VCI’s 2016 performance was encouraging.
Net sales reached VND 893.5bn, up +27.5%
YoY, and net profit after tax (NPAT) was
VND 335bn, up +41.4% YoY. The company’s
IB division, institutional brokerage team,
and principal investment unit greatly
contributed to VCI’s 2016 NPAT growth.
Principal investment and institutional sales
brokerage witnessed remarkable revenue
growth of 89.5% and 61.3% YoY, respectively.
Additionally, IB recorded a gross profit
increase of 18.9% YoY.

SUSTAINABILITY STRATEGY
VCI’s long-term strategy is to remain a
top-rated investment banker in Vietnam.
Therefore, the company will continue to
focus on institutional brokerage. VCI’s
IB team could leverage the company’s
strong institutional customer base to
help close private placements and IPO
deals. Institutional brokerage and IB
divisions typically generate higher margins.
This approach sets VCI apart from local
competitors, who concentrate on the more
capital intensive and highly competitive
local retail brokerage sector.

ESG ACHIEVEMENTS
Value-based approach to employees and
workplace environment: VCI has focused on
instilling staff with a clear set of progressive
values, encompassing transparency and
openness, integrity, responsibility, and
professionalism. The remuneration structure
is designed to provide competitive base
salaries, with incentives to encourage
higher productivity and quality. All staff
members are covered by health insurance
packages. Each year VCI demonstrates its
unwavering commitment to corporate social
responsibility through charitable donations
and sponsorship of local endeavors, which in
recent years have included: daycare centers
for children with disabilities; support for
poor farmers, families, and students; and
healthcare programs.

Comprehensive risk management approach:
VCI implements risk management and
monitoring activities in full compliance
with SSC guidance per Decision 105/
QD-UBCK, dated 26 February 2013,
governing risk management systems
in securities companies. Secondly, risk
management systems are built efficiently
based on the division of responsibilities in
the entire company. Thirdly, each division
head and employee is responsible for risk
management systems according to the
provisions of local laws, processes and
internal policies.

ESG CHALLENGES
VCI has continued to improve the
effectiveness of its corporate governance
to ensure operational transparency
and efficiency in Vietnam’s derivatives
market, which will be officially opened in
August 2017.

VietNam Holding Annual Report 2017VINH HOAN CORPORATION (VHC)

SHARE INFORMATION (AS AT 30 JUNE 2017)

Stock Exchange
Date of listing
Market capitalization (USD million)
Free float
Foreign ownership
2017 price/earnings ratio

VIETNAM HOLDING’S INVESTMENT

Date of first investment
Ownership
Percentage of NAV
Internal rate of return (annualized)

Sources: Bloomberg, VHC’s Annual Reports.

HOSE
26 December 2007
240
51%
39%
9.0x

27 July 2016
3.7%
4.3%
13.3%

FINANCIAL INDICATORS

Equity capital (USD million)
Revenues (USD million)
Revenue growth (in VND)
EBIT (USD million)
NPAT (USD million)
EPS (VND)
EPS growth
Gross margin
EBIT margin
ROE
D/E
Current ratio

2014

92.9
296.5
3.2%
19.7
14.7
3,491
-27.4%
12.4%
6.7%
16.4%
0.8x
1.6x

2015

105.1
326.5
12.5%
30.7
25.3
5,922
69.6%
14.6%
9.4%
25.4%
0.6x
1.8x

ABOUT THE COMPANY
Established in 1997 by business woman
Truong Thi Le Khanh, VHC took the lead
in producing premium quality seafood
products and has become the largest
pangasius exporter in Vietnam. VHC’s
product portfolio has been increasingly
diversified over the years and currently
comprises 4 main categories: frozen seafood,
value-added products from pangasius,
by-products, and collagen and gelatin
products. VHC has been exporting to 40
countries worldwide and has subsidiaries
in the US, Singapore and China. Traditional
markets, namely the US and the EU, account
for more than 70% of VHC’s export value
while exports to new markets such as China,
Mexico, Canada, Hong Kong, and ASEAN are
experiencing remarkable growth.

RECENT DEVELOPMENTS
VHC exported USD 251m of products in
2016, accounting for 15% Vietnam’s total
export value. The US remained the largest
export market and VHC accounted for 38% of
Vietnam’s pangasius exports to the country.
2016 saw a boom in the Chinese market
where exports grew by 59% YoY. In 2016
VHC doubled its sales. Other markets where
VHC holds leading market shares include
Canada, Hong Kong, Japan, Mexico and
Australia, which also recorded steady growth.
In 2016, VHC opened the Van Duc Tien
Giang 2 factory, upgrading total processing
capacity by an additional 20%. The facility
comprises a 2000-ton-per-year capacity of
grilled pangasius line, and a workshop for
production of breaded, seasoned and other
cooked products.

In 2016, VHC introduced a 3-year business
plan, targeting revenue of USD 650m and
EBITDA of USD 60m by 2020 (doubling those
of 2016) and compounded annual growth
at 15%-20%. The company will employ both
organic growth and acquisitions to achieve
this growth target.

At the end of 2016, the company acquired
a 100% stake in Thanh Binh Dong Thap
Fisheries which owns two frozen pangasius
processing plants and has enough land
holdings to add another 40% processing
capacity to VHC by 2019.

SUSTAINABILITY STRATEGY
VHC positions itself as a pioneer and
champion in both environmentally-
responsible aquaculture and economic
success. It determined four key elements
of sustainable development including:
sustainable labor resources; community
responsibility; biodiversity and
environment responsibility, and food safety
and traceability.

ESG ACHIEVEMENTS
VHC was the first pangasius company
in Vietnam to obtain an Aquaculture
Stewardship Council (ASC) certification
covering sustainable aquaculture farming
areas such as environmental protection,
community factors, food safety, and
traceability. By 2016, VHC has 133ha (on a
total of 400ha of farming area) certified by
ASC, 152ha certified with Best Aquaculture
Practices (BAP) and 174ha certified with
Global Good Aquaculture Practices (Global
GAP). The company aims to have 100% raw
material supply granted by at least one
sustainable certification body by 2020.

By participating in the Sustainable Pangasius
Supply Chain (SUPA) project sponsored by
the EU in 2016, VHC was able to reduce
energy consumption by 6.4% and water
consumption by 26%.

Since inception, VHC has had a well-defined
strategy which recognizes the importance
of building disciplines and a professional
and caring working environment for the
workforce of mostly female employees.

ESG CHALLENGES
VHC faces increased challenges in its
field. Beyond the difficulties associated
with managing environmentally friendly
fish farming, the company constantly
combats negative perceptions of pangasius
cultivation and production techniques. They
constantly strive to improve their positioning
as a provider from an emerging market, as
well as their vertical integration techniques
that need to match international standards.
The company is addressing these needs and
continues to be a market leader.

VietNam Holding Annual Report 2017Sustainability Report
Sustainability enables organizations to consider their impact and enables
them to be more transparent about the risk and opportunities they face.

Sustainability Principles
VietNam Holding is committed to the application of sound
sustainability criteria in our long-term value investing
approach. As a responsible investor, VNH chooses to invest
in enterprises that demonstrate a commitment to positive
individual and global change. Our goal is that we best
capitalize on the positive developments of our portfolio
companies and thereby assist Vietnam.

Corporate governance remains a challenge in Vietnam.
Weak corporate governance standards were the main
motivation behind the launch of the VNH Forum program
in 2007. This event series brings together local company
executives with international experts in fields such as
Strategic Management, Board of Directors Standards
and Investor Relations. Beyond these specific activities,
perhaps our biggest contribution to ESG growth in
Vietnam is to always lead by example.

As a signatory of the UN’s Principles for Responsible
Investment, we avoid investments involving products
and services with known negative effects. The fund’s
exclusion criteria cover businesses dealing in tobacco,
firearms, distilled alcohol and gambling, among others.
Companies engaged in pollution, child labor, bribery or
other damaging business practices are likewise excluded
from our investment consideration.

ESG Integration
Key environmental, social and governance (ESG) issues
are identified during the investment process through
tailored industry evaluations. ESG activities and progress
are updated during engagement meetings, and through
careful reviews of company publications.

When sustainability issues may have a significant impact
on revenues or costs, they are systematically factored
into the investment analysis. While monitoring these
material performance indicators, VNH engages individual
portfolio companies and seeks to encourage positive
change. Our divestment policy captures companies that
fail to demonstrate real awareness or consideration of
key sustainability issues.

Challenges
VNH has tackled the problem of relevant ESG data
collection that is inherent in emerging markets by
collaborating with the Swiss-based sustainability-
rating agency, Inrate. A custom-made questionnaire
for Vietnamese companies forms the basis of our ESG
analysis tools and is enhanced by a sophisticated and
developing internal database. The willingness of a
company to pro-actively address sustainability
challenges is crucial to our decisions to increase,
hold or decrease an investment

Environmental: CO2 offsetting
VNH is awaiting approval and implementation of its
well-developed formal procedure for measuring and
controlling our own collective carbon footprint. The
Company has been offsetting its CO2 emissions since
2010 in cooperation with Swiss-based South Pole Group,
a leading global developer and promoter of emission
reduction projects.

Social: VNH Foundation
Motivated by our dedication to social responsibility, the
VNH Foundation is the creation of the founders of VNH
and VNHAM. Its focus is on the youth of South East Asia,
and in particular Vietnam. This charitable venture locates
and supports projects that help to meet the needs and
enhance the lives of disadvantaged children in the region.

For more information about the VNH Foundation
please visit www.vnhfoundation.com

Governance: High Corporate Governance Standards
Corporate governance has always been a cornerstone
of our organization, and is the basis of every action we
take. The adherence to international best practices in
this field is not only something we demand from our
portfolio companies, but is at the core of our own i
nternal guidelines.

An important element of VNH’s governance efforts is our
active investor relations program. A regular exchange
with existing and potentially new shareholders ensures
a two-way flow of information, which benefits both our
investors and the Company.

VietNam Holding Annual Report 2017Mrs. Van Anh inspects a fruit plantation

Mr. Nick Beglinger speaking at the 11th VNH Forum on “Carbon Footprint:
Corporate Solutions for Sustainable Growth”.

ACTIVE OWNERSHIP
Director Engagement
The Boards of Directors of VNH and its investment
manager are committed to the established practice of
engaging portfolio company executives. In concert with
members of the investment team, our directors follow a
systematic engagement schedule of personal meetings
with the management of our portfolio companies.

PORTFOLIO CARBON FOOTPRINT
VNEEC, a Vietnamese environmental consultant, has
been tasked with measuring and analyzing the carbon
emissions of all listed companies that are in the VNH
portfolio as at 30 June 2017. The portfolio companies’
attributable carbon footprints are analyzed against the
attributable footprint of an identical invested amount in
the companies of the VN All Share Index (VNAS).

Since the start of our engagement program, our portfolio
companies have shown an increased awareness for ESG
issues and have applied best practices in their operations.
ESG information disclosure in company annual and/or
sustainability reports has been noticeably improved in
terms of both quality and quantity.

Shareholder Voting
Over the past fiscal year VNH voted at the Annual General
Meetings (AGMs) of every portfolio company in which the
fund held an equity position at the time of the meeting.

VNH Forum
The VNH Forum events showcase international best
practices through select international keynote speakers
and panel sessions where they are joined by local
experts. Through these events, VNH seeks to foster
awareness of value investment and sustainability
principles throughout Vietnam’s investment community.

The featured speakers of the December 2016 forum were
Mr. Nick Beglinger, an expert on sustainable development
strategy, and Mr. Nguyen Dang Anh Thi, a senior
consultant with extensive relevant global experience.
The forum aimed to highlight the fundamentals of
greenhouse gas emissions, carbon footprint calculation
and reporting methods, and the corresponding solutions
for their reduction.

The overall annual attributable carbon footprint of
the portfolio is 98.8 thousand tons of CO2-equivalent
(Scopes 1 & 2), which is 21% more (year ago: 46% less)
carbon intense than the same amount invested in the
VNAS would be. This underperformance of the portfolio
versus the benchmark is entirely due to the presence in
the portfolio as at 30/6/2017 of one company, Ha Tien
Cement, whose 3% of NAV portfolio weighting accounted
for a staggering 65% of total attributable portfolio
emissions. We knew that the cement sector was a major
greenhouse gas emitter, but we were surprised that it had
such a massive effect on the overall portfolio’s emissions.
Indeed, had we fully appreciated this and held one of the
many non- or low-emitting stocks instead, our portfolio
would have outperformed the VNAS by over 55%, instead
of the 21% underperformance mentioned. We have since
divested from Ha Tien Cement and adapted our ESG
criteria.

Total Emissions Scope 1&2 (tCO2e)
Total Emissions Scope 1,2&3 (tCO2e)
Emissions (kgCO2e) per USD 100 invested

VNH
Portfolio

98,836
293,046
46.95

VN All
Share Index

81,567
215,024
38.74

For the full Portfolio Carbon Footprint Report
please visit www.vietnamholding.com/sustainability

VietNam Holding Annual Report 2017

Sustainability Report
Continued

MEMBERSHIPS AND PARTNERSHIPS
Through the long-term relationships of our senior staff
and advisors, and during the past ten 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
forward the sustainability agenda in Vietnam:

Global Compact
VietNam Holding Asset Management has
been a founding and active 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 the ten key principles
that form the core of Global Compact’s
mission. At VNH, we continue to do so.

UN PRI
The United Nations’ Principles for
Responsible Investment (PRI) is
the world’s leading proponent of
responsible investment. At its AGM
in 2009, VNH shareholders voted to
endorse the comprehensive alignment
of our investment policy with the PRI.
Consequently, ESG factors are now fully
incorporated into our investment analysis
and engagement strategy.

VietNam Holding Annual Report 201715

VietNam Holding Annual Report 2017Corporate Governance in Vietnam:
Bottom-Up Incentive to Drive Improvement

Vietnam’s standards of corporate governance are in
aggregate fairly low, but have demonstrated steady
improvement over the past decade and are highly
likely to continue to do so. Empirical progress has been
measured by the International Finance Corporation’s
and Asian Development Bank’s series of corporate
governance scorecards for the ASEAN region, including
Vietnam. For example, the 2016 ADB scorecard shows
mean total scores for Vietnam over the years 2012-15
of, successively, 28, 34, 35, and 37 - on a scale of 0-100
and where a global best practice score would typically
be about 80. These scores, not surprisingly given relative
market development, put Vietnam at the bottom of the
surveyed countries (Thailand, Indonesia, Philippines,
Malaysia, India, and Vietnam).

Vietnam’s standards of corporate

governance are in aggregate fairly low, but
have demonstrated steady improvement
over the past decade and are highly likely
to continue to do so.

Vietnam’s laws and regulations on corporate
governance are fairly well developed, albeit with some
inconsistencies and weaknesses that need to be rectified.
This now puts the burden for improvement squarely
on the shoulders of companies, institutional investors,
international agencies like the IFC, and industry groups
to substantially improve Vietnam’s overall corporate
governance landscape over the coming years. One
might hope for greater enforcement action by the State
Securities Commission as the main financial market
regulator. However, the nature of Vietnam’s system of
government makes it unwise to expect great change from
this source, welcome though it would be.

So private actions will drive improvement. The IFC
has been a leader here, by working to raise awareness,
cooperate with regulators, build national capacity (for
example by training almost 100 corporate governance
trainers spread across the nation’s training companies),
and directly advise companies with a view to becoming
investors in them.

Institutional investors can also be a key driver through
self-interested engagement. Fund managers such as
Mekong Capital, Dragon Capital, and Vietnam Holding are
acknowledged as effective advocates for good corporate
governance practices through their direct engagement
with investee companies, and they are increasingly being
joined by newer foreign investors in Vietnam such as
AIMS Asset Management.

Although prompting and education from others
undoubtedly helps, ultimately the most powerful impetus
for improvement will come from companies themselves.
This is because the evidence is clear on what good
corporate governance practices bring to the protagonist.
Studies have repeatedly demonstrated that good
corporate governance correlates with higher “economic
value added”, or the gap between return on invested
capital and weighted average cost of capital. The latter
occurs both through lower cost of debt in the bond
markets and from banks, and via a higher valuation on
the stock market. The 2016 ASEAN scorecard quantified
this as 10 points higher on the corporate governance
score being worth a price/ book valuation uplift of 0.17
points - or 17% for a company originally priced at its
book value. This is a meaningful difference for companies
operating in a frontier market, where cost of capital and
therefore the ability to survive and grow a business is
highly variable.

Successful companies are characterised by transparency,
the presence of truly independent directors, adherence
to a conflict of interest policy, a standalone internal
audit function, focus on developing a corporate culture,
good internal communication and being well organised
with respect to internal and external meetings. Where
Vietnam scores well is the significant presence of women
on boards. Indeed, quite a few of our investee companies
have female directors and CEOs. Such attributes have
applied to many of the greatest long term earnings per
share growth and share price performance investment
stories on the Vietnam stock market.

VietNam Holding Annual Report 2017VietNam Holding Asset Management’s vice-chairman, Vu
Quang Thinh, is a member of the national advisory council
for corporate governance, a body which is supporting
the drafting of a Vietnam corporate governance code.
This is expected to lead to the setting up of the Vietnam
Institute of Directors in 2018. The Company will continue
to play a leading role in further corporate governance
improvement in Vietnam over the coming years. This
is of key importance to the success of the stock market
as a place for continued profitable investment returns
in excess of the cost of equity, and to Vietnam’s overall
healthy national economic development.

Cases of poor corporate governance however are still
widespread, in both the private sector and among state
owned enterprises. Within the former, excessive and
unequal new share issuance, family fiefdom and conflict,
wanton business diversification, and transactions involving
partly-owned subsidiaries stand out as common problems.

The growth of executive share option programs in
Vietnam deserves a special mention. The principle behind
ESOPs is commendable: they incentivise management to
run the company as shareholders. However, in practice
they are open to abuse. They (a) are a poor motivator
when done at deep discount and can in some cases vest
too soon within 1 to 3 years; (b) are often not granted to
the right people; (c) often involve too much of a stake
(e.g. 5%) in the company leading to major stake and value
dilution for other shareholders; and (d) are not being
accounted for properly as a cost in the profit and loss
account when issued at a discount, which they would be
under International Financial Reporting Standards.

Where Vietnam scores well is the
significant presence of women on
boards. Indeed, quite a few of our
investee companies have female
directors and CEOs.

Among SOEs, whose overall corporate governance
standards are seemingly lower than in the listed private
sector, poor transparency, poor board professionalism,
opaque state ownership, and poor incentive and efficiency
are recurring themes. The state, through its various
organs, still owns about 40% of Vietnamese listed
market capitalisation (compared to about 20% by foreign
investors). The remedy is privatisation, which ideally
would proceed faster in terms of major stake sales,
including to foreign strategic investors.

VietNam Holding Annual Report 2017VNH Foundation Report
Throughout 2016, VNHF conducted more than six projects
consisting of multiple sub-missions.

Guided by the belief that each human being has equal
value, the VNH Foundation (VNHF) works to help people
lead healthy, productive lives. In Vietnam, it seeks to
ensure that disadvantaged children and handicapped
persons have access to the opportunities they need to
succeed in life. In Thailand, it operates an orphanage
and gives children the chance to lift themselves out of
hunger and extreme poverty.

2016 has been another successful year for the VNHF.
Our projects in the areas of education, sustainable
development, economy and public health have served to
strengthen the human connectivity and dialogue within
Vietnam and Thailand by assisting those that need help
the most, namely deprived children and handicapped
persons. Throughout 2016, VNHF conducted more than
6 projects consisting of multiple sub-missions. These
projects and missions have been advanced with the help
of over 5 regional partner organizations, and over 2,000
individual participants.

Program Highlights
DaNang Orthopedics Hospital:
Over the past few years, the VNHF has supported the
DaNang Orthopedics Hospital by sponsoring equipment,
flying in Swiss doctors and providing training and support
for the resident medical staff. Our close collaboration
with the hospital typically ensures that patients are ready
to be seen in their clinic the day the doctors arrive. They
then spend the entire day seeing patients with pathology
ranging from congenital birth deformities such as
clubfoot or polydactyly, to cerebral palsy neuromuscular
deformities, to post-polio deformities, to injuries sustained
in the Vietnam War in the 1960s and 1970s. Many patients
are treated with referrals to physical therapy, which the
hospital has on-site, or with non-surgical modalities such
as orthotics or joint injections. The patients are screened
throughout the day for those who are able to be helped
by surgical correction and each of these is then scheduled
for surgery.

We are proud of the work accomplished with DaNang
Orthopedics and are looking for ways to improve our
collaboration with visits by more medical specialists to
help enhance the training of the DNO staff.

Blue Dragon:
Blue Dragon visits places such as sweatshops and
brothels and physically rescues people from traffickers
and hardened (sometimes armed) criminals. The rescued
include children as young as 10, who have been taken
against their will, or tricked into thinking they are going
to training and jobs, and subsequently find themselves
working all day for no pay. Since 2004, Blue Dragon has
rescued hundreds of women and children.

The foundation’s staff have also come to the aid of
kidnapped or trafficked women who have access to a
mobile phone (or whose family members contacted Blue
Dragon after being contacted themselves). Blue Dragon
has helped get 600 Vietnamese children off the streets
and back to their families, into schools, soccer teams,
even yoga or painting classes.

VNHF’s financial support has allowed Blue Dragon to
pursue their mission. We plan to make a more active
engagement by providing psychiatric training for
counsellors in 2017, which will expand their scope and
allow better integration of trafficked people into society.

Deafcraft 5 Colors:
Deafcraft 5 Colors is a Hanoi based social enterprise that
traces its origins back to 1995. Since 2009, Deafcraft 5
Colors has continually grown by manufacturing various
products for the local tourist market and the expatriate
community in Hanoi as well as for overseas customers.
Their mission is to provide development opportunities for
deaf people in the area of literacy and vocational training
as well as to provide a fair wage employment in a caring
social environment.

Our active work with the team has improved their
professional/sales website, provided English courses
for staff members and material for the construction of
handicrafts. We are now exploring ways to improve their
living and workspace environment.

While commemorating our development over the past
eight years, we are preparing VNHF’s future direction
and looking forward to many more highlights in 2017.
Our future activities include more active involvement
with medical projects, further engagement with local
government entities and development of additional
projects. Finally, VNHF would like to thank VNHAM for its
continued financial support of the organization.

VietNam Holding Annual Report 201719

VietNam Holding Annual Report 2017Directors’ Report
The Board of Directors continues to play a key role
in the operation of the company.

The Board of Directors plays a key role in the operation
of Vietnam Holding Ltd. In consultation with the creator
of the VNH Group, Mr. Juerg Vontobel, the Board sets the
Company’s Founding Principles. The Board makes all
policy decisions on investment strategies, environmental,
social and governance matters (“ESG”), asset allocations,
investment risk profiles, capital increases and profit
distributions to Shareholders. It also appoints the
Investment Manager, to whom it provides appropriate
guidance and instruction.

The Board is also responsible for reviewing the
Company’s Investment Policy and the performance of its
investment portfolio. In particular, all new investments
and full divestments as well as change in the target level
investment category of an existing investment are subject
to the preliminary approval of the Board’s Chairperson,
then presented for ratification by the Board at its next
meeting.

As a Cayman Islands incorporated fund that is admitted
for trading on London’s AIM market, the Company is
not required to and does not adhere to any official
code of corporate governance. However, the Directors
recognise the importance of sound corporate governance
commensurate with the size of the Company and the
interests of its Shareholders. In reflection of this strong
belief, the Company has adopted a comprehensive code
of ethics. The Directors also comply with AIM Rules and
other relevant UK regulations, including the Market Abuse
Regulations relating to directors’ dealings, which came
into effect on July 3, 2016. Accordingly, the Company has
additionally adopted a code for directors’ dealings in
securities of the Company based on AIM Rule 21.

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:

Mrs. Min-Hwa Hu Kupfer, Chairperson
Professor Rolf Dubs
Mr. Nguyen Quoc Khanh

The Board gives careful consideration when
recommending Directors for re-election, and believes
that length of service alone does not necessarily restrict
Directors from seeking re-election.

The Board maintains two committees: an Audit
Committee and a Corporate Governance Committee. Both
committees are made up of all three Directors who work
closely on all board and committee matters.

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 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.

In the financial year 2017, the Board met quarterly and
additionally held four telephonic meetings.

Having decided to investigate a potential re-domiciliation
of the company from the Cayman Islands to
Luxembourg, the Board made further steps towards this
re-domiciliation. The Board anticipates putting the final
approval for the re-domiciliation to a shareholder vote
before the end of calendar 2017.

Concurrently with each formal meeting, the Board
reviewed with the Investment Manager the status and
the performance of the portfolio, including investment
themes, prospective investments, divestitures, industry
trends and peer group performance comparisons.
Following the recommendations made under the
portfolio management policy of the Investment Manager,
the Board approved or ratified the asset allocation limits
and target position of each investment.

As part of these actions, the Board approved and
monitored portfolio rebalancing activities in which the
Investment Manager exited six portfolio companies and
initiated eight new investments, maintaining the number
of equity holdings in the portfolio at twenty-six as of

VietNam Holding Annual Report 201730 June 2017. Among the exits were three investments
where the Company held at least 4% of the outstanding
shares of the respective portfolio companies.

The Board has noted the underperformance of the
company compared to its peers and the benchmark.
Upon deliberation with the Investment Manager, the
Board feels that the strategy used by the Manager in
administering the Company’s portfolio is, notwithstanding
the substandard performance, a sound one from a
sustainable and long-term perspective.

The Company’s share buy-back program and share price
discount control efforts were also reviewed quarterly
during the Board meetings.

The Company held investor presentations in London and
Luxembourg at which the Directors met and engaged with
shareholders. The Board regularly reviewed other investor-
relations activities, all coverages by brokerage research
and investment analysts, and all investor communications.

The Audit Committee held four meetings in the past
year in parallel with the Board meetings. In each
one, the Chair of the Investment Manager’s Risk
Management Committee reviewed with the Audit
Committee the Master Risk Matrix. In addition, it
reviewed compliance reporting and evaluated risk control
issues. The Committee Chairperson worked closely with
the Investment Manager and its Risk & Compliance
Committee to formulate the objectives and the scope of
this year’s internal audit, to be conducted in two phases.
The scope of the Audit was conducted by Ernst & Young
Vietnam Ltd in two phases. The Audit report of 1st phase
focused on the risk management framework. The second
phase of the audit was on compliance risk management.
Both phases were finalized in November 2016.

The Corporate Governance Committee also met four
times, in line with the quarterly Board meetings. As
part of each meeting’s agenda, the Chairman of the
Committee led the review with the Investment Manager
as it presented its strategic plans, financial position, and
organizational development activities. An evaluation of
the Board’ own undertakings together with a review of
the on-going projects of the Board were also held during
each meeting.

The Committee conducted the annual 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 the
“VNH Code of Ethic” by all employees and Board members
of both the Investment Manager and the Company.

Throughout the year, the Committee evaluated the
communications between the Chairperson and the
Board members, the timeliness and completeness of
the Board meeting material submission, and the overall
effectiveness of each Board meeting.

Remuneration
With the migration of the company to Luxembourg
in mind, the Fund has designed and implemented a
remuneration policy for the Company’s Directors with
the aim to reflect in a proportionate manner and as
effectively as possible the remuneration rules as set out
in the European Directive 2011/61/EU and implemented
in the 2013 Law, as amended (the “AIFM Regulations”)
and ESMA Guidelines on remuneration as applicable and
implemented in Luxembourg (the “ESMA Guidelines”).

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 2017, the Company’s Directors’ Base Fees were:

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

USD 60,000
USD 50,000
USD 50,000

For attendance in person at each Committee and Board
meeting, which took place quarterly, each Director was
paid USD 1,500 per day. 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 for each day of service related to
Committee and Board initiatives.

VietNam Holding Annual Report 2017

Directors’ Report
Continued

The total remuneration of the Company’s Directors in
FY2016-17 as the result of meeting attendance and
Committee work was USD 257,000 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 105,000

USD 76,500

USD 75,500

Ownership of VietNam Holdings

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

36,667
61,451
33,253

During the fiscal year, both Mr. Nguyen Quoc Khanh
and Prof. Rolf Dubs increased their shareholdings in the
Company, mainly through the exercise of warrants.

On behalf of the Board of Directors:

Min-Hwa Hu Kupfer
Chairperson
18 August 2017

VietNam Holding Annual Report 2017

VietNam Holding Annual Report 2017Independent Auditors’ 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 Collas Crill Corporate Services Limited
Floor 2, Willow House
Cricket Square
PO Box 709
George Town, Grand Cayman
Cayman Islands, KY1-1107

Report on the financial statements
We have audited the financial statements of VietNam Holding Limited (‘the Company’), which comprise the statement of financial
position as at 30 June 2017, the statements of comprehensive income, the statement of changes in equity and the statement of cash
flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set
out on pages 16 to 32.

In our opinion, the accompanying financial statements are properly drawn up in accordance with the provisions of the International
Financial Reporting Standards (‘IFRSs’) as adopted by the European Union so as to give a true and fair view of the financial position
of the Company as at 30 June 2017 and of the financial performance, and cash flows of the Company for the year ended on that date.

Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (‘ISAs’). Our responsibilities under those
standards are further described in the ‘Auditors’ responsibilities for the audit of the financial statements’ section of our report. We are
independent of the Company in accordance with the Accounting and Corporate Regulatory Authority Code of Professional Conduct
and Ethics for Public Accountants and Accounting Entities (‘ACRA Code’) together with the ethical requirements that are relevant to
our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these
requirements and the ACRA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.

Key audit matters
Valuation of investments in securities at fair value amounting to USD 208,273,147
(Refer to Notes 3 and 12 to the financial statements)

The key audit matter

How the matter was addressed in our audit

As of 30 June 2017, the Company’s investments in securities
are all measured at fair value and comprise a convertible bond
(USD 1,179,177), an unlisted equity security (USD 3,864,056)
and listed equity securities (USD 203,229,914).

Our approach to audit the valuation of the convertible bond
and unlisted equity security investment included the following:

• Assessed the appropriateness of the valuation

methodologies adopted;

• Reviewed the reasonableness of inputs applied including

a sensitivity analysis for unobservable inputs; and

• Verified the mathematical accuracy of the calculation of

the investments.

VietNam Holding Annual Report 2017

The key audit matter

How the matter was addressed in our audit

The investments measured at fair value were based on the
following valuation approaches:

Additional procedures were performed for each investment
selected based on the applicable valuation methodology, as
follows:

• The convertible bond consists of a fixed-income bond with
an option to convert the bond into shares of the issuer.
Each component of the instrument was valued separately
using applicable valuation techniques;

• The unlisted equity security was valued based on the

• Convertible bond

We performed a cross-check of the valuation by
independently deriving the value of each component using
the discounted cash flow model and a Black-Scholes model.

market approach; and

• Unlisted equity security

• The listed equities were valued based on the last traded

prices.

We considered the valuation of the convertible bond and
unlisted equity security as a key audit focus area as their
valuation involves a degree of estimation uncertainty and
judgment.

The unlisted equity security was valued using broker
quotes sourced from external brokers. We evaluated the
competency, capability, and objectivity of the external
brokers. We obtained confirmations from the brokers for
the prices which they provided to the Company.

We noted that the valuation estimates are within a reasonable
range of outcomes.

Other information
Vietnam Holding Asset Management Limited, the Investment Manager of the Company, and the directors of the Company (“the
directors”) are responsible for the other information contained in the annual report. The other information is defined as all
information in the annual report other than the financial statements and our auditors’ report thereon.

We have obtained all other information prior to the date of this auditors’ report.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit
or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of the directors for the financial statements
The directors are responsible for the preparation of financial statements that give a true and fair view in accordance with
the provisions of the IFRSs, and for devising and maintaining a system of internal accounting controls sufficient to provide a
reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly
authorised and that they are recorded as necessary to permit the preparation of true and fair financial statements and to maintain
accountability of assets.

In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

The directors’ responsibilities include overseeing the Company’s financial reporting process.

VietNam Holding Annual Report 2017Independent Auditors’ Report
Continued

Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.

As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout
the audit. We also:

•

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.

• Obtain an understanding of internal controls relevant to the audit 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 Company’s internal controls.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related

disclosures made by the directors.

• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s
ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in
our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our
opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future
events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the

financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal controls that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence,
and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and
where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the
financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report
unless the law or regulations preclude public disclosure about the matter or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditors’ report is David Waller.

KPMG LLP
Public Accountants and Chartered Accountants
Singapore
18 August 2017

VietNam Holding Annual Report 2017Statement of Financial Position

as at 30 June 2017

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, representing net assets attributable to shareholders

Liabilities
Payables on purchase of investments
Other payables
Accrued expenses
Total liabilities

Total equity and liabilities

Note

2017
USD

2016
USD

10,323,903
208,273,147
155,582
–
13,318

5,281,215
143,391,112
832,445
3,055,954
24,840

218,765,950

152,585,566

141,822,097
68,713,405

105,477,448
41,398,421

210,535,502

146,875,869

4,981,932
139
3,248,377
8,230,448

1,124,964
137
4,584,596
5,709,697

218,765,950

152,585,566

The financial statements on pages 27 to 43 were approved by the Board of Directors on 18 August 2017 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 2017

Statement of Comprehensive Income

for the year ended 30 June 2017

Dividend income from equity securities at fair value through profit or loss
Net gain from investments in securities at fair value through profit or loss
Net foreign exchange loss
Interest income from investments in securities

Net investment income

Investment management fees
Incentive fees
Advisory fees
Administrative and 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

Change in net assets attributable to shareholders

Note

8
8

10
9
8

2017
USD

4,561,766
30,275,746
(119,173)
90,314

2016
USD

4,247,751
35,428,336
(44,734)
76,657

34,808,653

39,708,010

2,880,552
3,132,919
107,815
111,404
172,607
349,872
58,455
41,904
154,520
15,000
224,164
216,062
28,395

2,460,388
4,542,553
143,345
95,073
122,024
376,336
67,734
40,580
103,772
15,500
206,643
45,884
74,228

7,493,669

8,294,060

27,314,984

31,413,950

Basic and diluted earnings per share

0.49

0.55/0.53

The accompanying notes form an integral part of these financial statements.

VietNam Holding Annual Report 2017

Statement of Changes in Equity

for the year ended 30 June 2017

Balance at 1 July 2015

Total comprehensive income for the year
Change in net assets attributable to shareholders

Total comprehensive income

Contributions and distributions
Issuance of ordinary shares
Repurchase of own shares (note 5)
Warrants issuance cost

Total contributions and distributions
Balance at 30 June 2016

Share
capital
USD

Reserve for
own shares
USD

Retained
earnings
USD

Total
USD

125,788,264

(11,413,200)

9,984,471

124,359,535

–

31,413,950

129,871
–
(396,888)

–
(8,630,599)
–

–
–
–

129,871
(8,630,599)
(396,888)

(267,017)
125,521,247

(8,630,599)
(20,043,799)

–
41,398,421

(8,897,616)
146,875,869

Balance at 1 July 2016

125,521,247

(20,043,799)

41,398,421

146,875,869

Total comprehensive income for the year
Change in net assets attributable to shareholders

Total comprehensive income

Contributions and distributions
Issuance of ordinary shares
Repurchase of own shares (note 5)

Total contributions and distributions
Balance at 30 June 2017

–

27,314,984

41,030,628
–

41,030,628
166,551,875

–
(4,685,979)

(4,685,979)
(24,729,778)

–
–

41,030,628
(4,685,979)

–
68,713,405

36,344,649
210,535,502

The accompanying notes form an integral part of these financial statements.

VietNam Holding Annual Report 2017

Statement of Cash Flows

for the year ended 30 June 2017

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
Interest income
Net gain from investments in securities at fair value through profit or loss
Purchase of investments
Proceeds from sale of investments
Net foreign exchange loss
(Increase)/decrease in receivables on sale of investments
Increase/(decrease) in accrued expenses
(Decrease)/increase in other payables
Dividends received
Interest received

Net cash from operating activities

Cash flows from financing activities
Issuance of ordinary shares *
Repurchase of own shares
Warrants issuance cost

Net cash used in financing activities

Net 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

2017
USD

2016
USD

27,314,984

31,413,950

(4,561,766)
(90,314)
(30,275,746)
(87,232,623)
56,483,302
119,173
3,055,910
26,546
2
5,238,629
101,846

(4,247,751)
(76,657)
(35,428,336)
(47,964,534)
60,925,949
44,734
(2,435,831)
4,006,184
(7)
3,915,525
53,973

(29,820,057)

10,207,199

39,667,862
(4,685,979)
–

–
(8,630,599)
(396,888)

34,981,883

(9,027,487)

5,161,826
5,281,215
(119,138)

10,323,903

1,179,712
4,146,270
(44,767)

5,281,215

* On 18 August 2016, the Company announced that in partial payment of the incentive fee due to VietNam Holding Asset

Management Limited (“VNHAM”), the Company’s Investment Manager, for the year ended 30 June 2016, it had agreed that 631,684
ordinary shares of US$1.00 each in the Company (“Ordinary Shares”) then held as treasury shares would be transferred to VNHAM
(the “Transfer”). The Transfer took place in early September 2016.

The accompanying notes form an integral part of these financial statements.

VietNam Holding Annual Report 2017

Notes to the Financial Statements

Year ended 30 June 2017

1. THE COMPANY

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

The investment objective of the Company is to achieve long-term capital appreciation by investing in a diversified portfolio of
companies that have high growth potential at an attractive valuation.

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

VietNam Holding Asset Management Limited (“VNHAM”) has been appointed as the Company’s Investment Manager and
is responsible for the day-to-day management of the Company’s investment portfolio in accordance with the Company’s
investment policies, objectives and restrictions.

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

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

PRINCIPAL ACCOUNTING POLICIES

2
(a) Statement of compliance

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

(b) Basis of preparation

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

The Company’s shares were issued in USD and the listing of the shares on the AIM market of the London Stock Exchange is in
USD. The performance of the Company is measured and reported to the investors in USD, although the primary activity of the
Company is to invest in the Vietnamese market. The Board considers the USD as the currency that most faithfully represents
the economic effects of the underlying transactions, events and conditions.

The preparation of financial statements in accordance with IFRS as adopted by the European Union requires management to
make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets and
liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements
about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates.

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

VietNam Holding Annual Report 2017Notes to the Financial Statements

Year ended 30 June 2017

PRINCIPAL ACCOUNTING POLICIES (continued)

2
(b) Basis of preparation (continued)

An operating segment is a component of the Company that engages in business activities from which it may earn revenues
and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components.
The Company is engaged in a single segment of business, being investment in Vietnam. The Board, as a whole, has been
determined as constituting the chief operating decision maker of the Company. The key measure of performance used by the
Board to assess the Company’s performance and to allocate resources is the total return on the Company’s net asset value
(“NAV”) calculated as per the prospectus.

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

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

(d) Financial instruments

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

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

Cash and cash equivalents are measured at amortised cost.

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

(ii) Recognition
Financial assets and liabilities at fair value through profit or loss are recognised initially on the trade date, which is the date
that the Company becomes a party to the contractual provisions of the instrument. Other financial assets and liabilities are
recognised on the date they are originated.

Financial assets and financial liabilities at fair value through profit or loss are recognised initially at fair value, with transaction
costs recognised in profit or loss. Financial assets or financial liabilities not at fair value through profit or loss are recognised
initially at fair value plus transaction costs that are directly attributable to their acquisition or issue.

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

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

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

VietNam Holding Annual Report 2017(iv) Measurement
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the
Company has access at that date. The fair value of a liability reflects its non-performance risk.

When available, the Company measures the fair value of an instrument using the quoted price in an active market for that
instrument. A market is regarded as ‘active’ if transactions for the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis. The Company measures instruments quoted in an active market at
last traded price.

If there is no quoted price in an active market, then the Company uses valuation techniques that maximise the use of relevant
observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors
that market participants would take into account in pricing a transaction.

The Company recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during which
the change has occurred.

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

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

(v) Gains and losses on subsequent measurement
Gains and losses arising from a change in the fair value of financial instruments are recognised in the statement of
comprehensive income.

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

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

(vii) Cash and cash equivalents
Cash comprises current deposits with banks and fixed deposits. Cash equivalents are short-term highly liquid investments that
are readily convertible to known amounts of cash, are subject to an insignificant risk of changes in value, and are held for the
purpose of meeting short-term cash commitments rather than for investment or other purposes.

(e) Offsetting

Financial assets and liabilities are offset and the net amount is reported in the statement of financial position when, and only
when, the Company has a legally enforceable right to set off the recognised amounts and the transactions are intended to be
settled on a net basis or simultaneously, e.g. through a market clearing mechanism.

(f) Amounts due to/from brokers

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

VietNam Holding Annual Report 2017Notes to the Financial Statements

Year ended 30 June 2017

PRINCIPAL ACCOUNTING POLICIES (continued)

2
(g) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as
a deduction from equity, net of any tax effects.

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

(h) Tax

Tax expense comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except to the
extent that it relates to items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

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

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

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

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

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

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

VietNam Holding Annual Report 2017(i)

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

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

(j) Dividend income

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

(k) Fee and commission expense

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

(l) Earnings per share

The Company presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated
by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary
shares outstanding during the year, adjusted for own shares held. Diluted earnings per share is determined by adjusting the
profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted
for own shares held, for the effects of all potentially dilutive ordinary shares, which comprise warrants granted to shareholders.

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

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

Asset allocation is determined by the Company’s Investment Manager who manages the distribution of the assets to achieve
the investment objectives. Divergence from target asset allocations and the composition of the portfolio is monitored by the
Investment Manager.

Market risk
Market risk is the risk that the value of a financial asset will fluctuate as a result of changes in market prices, whether or not
those changes are caused by factors specific to the individual asset or factors affecting all assets in the market. The Company is
exposed to market risk within its securities purchased in the Vietnamese market.

The overall market positions are monitored continuously by the Investment Manager and at least quarterly by the Board.

The Company’s investments in securities are exposed to market risk and are disclosed by the following generic investment types:

Investments in listed securities
Investments in an unlisted equity securities
Investments in a convertible bond

Fair value
in USD

203,229,914
3,864,056
1,179,177

208,273,147

2017

2016

% of net
assets

96.53
1.84
0.56

98.93

Fair value
in USD

141,479,379
–
1,911,733

143,391,112

% of net
assets

96.3%
–
1.3

97.6%

At 30 June 2017, a 5% reduction in the market value of the portfolio would have led to a reduction in NAV and profit or loss of
USD10,413,657 (2016: USD7,169,556). A 5% increase in market value would have led to an equal and opposite effect on NAV and
profit or loss.

VietNam Holding Annual Report 2017

Notes to the Financial Statements

Year ended 30 June 2017

FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS (continued)
Currency risk
The Company may invest in financial instruments and enter into transactions denominated in currencies other than its functional
currency. Consequently, the Company is exposed to risks that the exchange rate of its currency relative to other currencies may
change and have an adverse effect on the value of the Company’s assets or liabilities denominated in currencies other than USD.

The Company’s net assets are calculated every month based on the most up to date exchange rates while the general economic
and foreign currency environment is continuously monitored by the Investment Manager and reviewed by the Board at least
once each quarter.

The Company may enter into arrangements to hedge currency risks if such arrangements become desirable and practicable in
the future in the interest of efficient portfolio management.

As at 30 June 2017, the Company had the following foreign currency exposures:

Vietnamese Dong
Pound Sterling
Swiss Franc
Euro

2017
USD

208,636,021
727
(19)
2,353

Fair value

2016
USD

149,607,240
748
–
2,319

208,639,082

149,610,307

At 30 June 2017, a 5% reduction in the value of the Vietnamese Dong, Pound Sterling, Swiss Franc, Euro versus the US Dollar
would have led to a reduction in NAV and profit or loss of USD10,431,801 (2016: USD7,480,362), USD36 (2016: USD37), USD(1)
(2016: USDnil) and USD118 (2016: USD116) respectively. A 5% increase in value would have led to an equal and opposite effect.

Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market
interest rates.

The majority of the Company’s financial assets are non-interest-bearing. Interest-bearing financial assets and interest-bearing
financial liabilities mature or reprice in the short-term, no longer than twelve months. As a result, the Company is subject to
limited exposure to interest rate risk due to fluctuations in the prevailing levels of market interest rates.

Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has
entered into with the Company.

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

Substantially all of the assets of the Company are held by the Company’s custodian, Standard Chartered Bank, Singapore Branch.
Bankruptcy or insolvency of the custodian may cause the Company’s rights with respect to cash and securities held by the
custodian to be delayed or limited. The Company monitors its risk by monitoring the credit quality and financial positions of the
custodian the Company uses.

VietNam Holding Annual Report 2017

Liquidity risk
The Company, a closed-end investment company, invests in companies through listings on the Vietnam stock exchanges. There
is no guarantee however that the Vietnam stock exchanges will provide liquidity for the Company’s investments. The Company
also invests in equity securities which are not listed on stock exchanges. The Company may have to resell such investments in
privately negotiated transactions.

The Company’s overall liquidity risks are monitored on at least a quarterly basis by the Board. The Company is a closed-end
investment company so shareholders cannot redeem their shares directly from the Company.

4 OPERATING SEGMENTS

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

The Company is domiciled in the Cayman Islands. Entity wide disclosures are provided as the Company is engaged in a
single segment of business, investing in Vietnam. In presenting information on the basis of geographical segments, segment
investments and the corresponding segment net investment income arising thereon are determined based on the country of
domicile of the respective investment entities.

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

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

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

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

Total shares issued and fully paid (after repurchases and cancellations)
At beginning of the year
Shares issued upon exercise of warrants during the year
Shares cancellation

Repurchased and reserved for own shares
At beginning of the year
During the year
Shares reissued to ordinary shares
Shares cancellation

2017
No. of shares

2016
No. of shares

65,342,620
19,941,819
(2,555,000)
82,729,439

(10,487,673)
(2,126,783)
631,684
2,555,000
(9,427,772)

67,235,739
35,927
(1,929,046)
65,342,620

(7,819,500)
(4,629,554)
32,335
1,929,046
(10,487,673)

Total outstanding ordinary shares with voting rights

73,301,667

54,854,947

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

VietNam Holding Annual Report 2017

Notes to the Financial Statements

Year ended 30 June 2017

SHARE CAPITAL (continued)
The Company does not have any externally imposed capital requirements.

The Company’s general intention is to reinvest the capital received on the sale of investments. However, the Board may from
time to time and at its discretion, either use the proceeds of sales of investments to meet the Company’s expenses or distribute
them to shareholders. Alternatively, the Board of Directors may redeem ordinary shares with such proceeds for shareholders pro
rata to their shareholding upon giving notice of not less than 30 calendar days to shareholders (subject always to applicable
law) or repurchase ordinary shares at a price not exceeding the last published net asset value per share.

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

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

6 NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS

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

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

Net gain from equity securities at fair value through profit or loss:
Realised gain
Adjustment to fair value of equity securities at fair value through profit or loss

2017

USD

2016

USD

14,944,033
15,331,713

2,625,360
32,802,976

30,275,746

35,428,336

RELATED PARTY TRANSACTIONS
Investment management fees
The Company’s Shareholders approved an amendment to the Investment Manager Agreement as detailed in the Company’s
circular dated 16 August 2013. Pursuant to the amended agreement the Investment Manager is entitled to receive a monthly
management fee, paid in the manner set out as below:

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

of 1.75 per cent.; and

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

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

VietNam Holding Annual Report 2017

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

Excess Performance amount = (A – B) x C

Where:
A.
B.

is the closing NAV per share as at the end of the reporting period
is equal to the higher of:
i.
ii.

the Initial High Water Mark increased by five per cent per annum on a compound basis; and
the highest previous value for A in respect of a reporting period in which an incentive fee was paid, increased by five
per cent per annum on an compound basis.

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

Performance fee

2017
USD

2016
USD

3,132,919

4,542,553

Directors’ fees and expenses
The Board determines the fees payable to each Director, subject to a maximum aggregate amount of USD350,000 (2016:
USD350,000) per annum being paid to the Board as a whole. The Company also pays reasonable expenses incurred by the
Directors in the conduct of the Company’s business including travel and other expenses. The Company pays for directors and
officers liability insurance coverage.

The charges for the year for the Directors fees were USD257,000 (2016: USD261,000) and expenses were USD92,872 (2016:
USD115,336).

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

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

CUSTODIAN FEES
Custodian fees are charged at a minimum of USD12,000 (2016: USD12,000) per annum and received as a fee at 0.08% on the
assets under administration (“AUA”) per annum. Custodian fees comprise safekeeping fees, transaction fees, money transfer fees
and other fees. Safekeeping of unlisted securities up to 20 securities is charged at USD12,000 per annum. Transaction fees,
money transfers fees and other fees are charged on a transaction basis.

The charges for the year for the Custodian fees were USD172,607 (2016: USD122,024).

10 ADMINISTRATIVE AND ACCOUNTING FEES

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

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

VietNam Holding Annual Report 2017

Notes to the Financial Statements

Year ended 30 June 2017

11 CONTROLLING PARTY

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

12 FAIR VALUE INFORMATION

For certain of the Company’s financial instruments not carried at fair value, such as cash and cash equivalents, accrued dividends,
other receivables, receivables/payable upon sales/purchase of investments and accrued expenses, the amounts approximate fair
value due to the immediate or short term nature of these financial instruments.

Other financial instruments are measured at fair value on the statement of comprehensive income.

Fair value estimates are made at a specific point in time, based on market conditions and information about the financial
instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and
therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

• Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments. This level includes

listed equity securities on exchanges (for example, Ho Chi Minh Stock Exchange).

• Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e., as prices) or indirectly

(i.e., derived from prices). This level includes instruments valued using: quoted prices for identical or similar instruments
in markets that are considered less than active; quoted market prices in active markets for similar instruments; or other
valuation techniques in which all significant inputs are directly or indirectly observable from market data.

• Level 3: Inputs that are not based on observable market data (i.e. unobservable inputs). This level includes all instruments for
which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant
effect on the instrument’s valuation.

The table below analyses financial instruments measured at fair value at the reporting date by the level in the fair value
hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the
statement of financial position. All fair value measurements below are recurring.

2017
Financial assets classified at fair value upon initial recognition
Investments in securities

2016
Financial assets classified at fair value upon initial recognition
Investments in securities

Level 1
USD

Level 2
USD

Level 3
USD

Total
USD

182,827,649

24,266,321

1,179,177

208,273,147

126,523,082

14,956,297

1,911,733

143,391,112

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined
based on the lowest level input that is significant to the fair value measurement in its entirety. Assessing whether an input
is significant requires judgement including consideration of factors specific to the asset or liability. Moreover, if a fair value
measurement uses observable inputs that require significant adjustment based on unobservable inputs, that fair value
measurement is a Level 3 measurement.

VietNam Holding Annual Report 2017

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

Investment type

Valuation technique

Significant unobservable inputs

Inter-relationship between key unobservable
inputs and fair value measurement

Convertible bond

• Discounted cash flows (in
valuing the straight bond);
and

• Risk-adjusted discount rate
(2017: 8.50%; 2016: 9.5%);

• Dividend yield (2017:

• Black-Scholes model (in

4.32%; 2016: 5.91%)

valuing the conversion
feature)

•

The estimated fair value will
increase (decrease) if:
•

the risk-adjusted discount
rate was lower (higher);
the dividend yield was
lower (higher)

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

Level 3 reconciliation

Financial assets designated at fair value through profit or loss

Balance at 1 July
Purchases
Sales
Total gains and losses recognised in profit or loss *

Balance at 30 June

2017
USD

1,911,733
–
(894,897)
162,341

2016
USD

–
1,790,510
–
121,223

1,179,177

1,911,733

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

13 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.

2017
Cash and cash equivalents
Investments in securities at fair value
Accrued dividends
Receivables from sale of investments
Other receivable

Payables on purchase of investments
Other payable
Accrued expenses

2016
Cash and cash equivalents
Investments in securities at fair value
Accrued dividends
Receivables from sale of investments
Other receivable

Payables on purchase of investments
Other payable
Accrued expenses

Note

Fair value
through profit
or loss
USD

–
208,273,147
–
–
–

208,273,147
–
–
–

–

–
143,391,112
–
–
–

143,391,112
–
–
–

–

Loans and
receivables
USD

Other
liabilities
USD

Total carrying
amount
USD

10,323,903
–
155,582
–
13,318

10,492,803
–
–
–

–
–
–
–
–

–
4,981,932
139
3,248,377

10,323,903
208,273,147
155,582
–
13,318

218,765,950
4,981,932
139
3,248,377

–

8,230,448

5,281,215
–
832,445
3,055,954
24,840

9,194,454
–
–
–

–

–
–
–
–
–

–
1,124,964
137
4,584,596

5,709,697

5,281,215
143,391,112
832,445
3,055,954
24,840

152,585,566
1,124,964
137
4,584,596

5,709,697

VietNam Holding Annual Report 2017

Notes to the Financial Statements

Year ended 30 June 2017

14 EARNINGS PER SHARE

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

15 NEW STANDARDS AND INTERPRETATIONS NOT YET ADOPTED

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

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

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

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

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

• the amount of change in the fair value that is attributable to changes in the credit risk of the liability is presented in OCI; and
• the remaining amount of change in the fair value is presented in profit or loss.

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

• the financial instruments classified as held-for-trading under IAS 39 will continue to be classified as such under IFRS 9;
• other financial instruments currently measured at FVTPL under IAS 39 are designated into this category because they are

managed on a fair value basis in accordance with a documented investment strategy. Accordingly, these financial instruments
will be mandatorily measured at FVTPL under IFRS 9; and

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

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

VietNam Holding Annual Report 2017

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

instruments; and

• the financial assets at amortised cost are short-term (i.e. no longer than 12 months), of high credit quality and/or highly

collateralised. Accordingly, the expected credit losses on such assets are expected to be small.

16 SUBSEQUENT EVENTS

• At the AGM on 15 September 2016, the Company’s shareholders approved a resolution authorizing the Directors to continue
the process of re-domiciling the Company in Luxembourg. It is anticipated the Company will be registered in Luxembourg
as a UCI Part II Investment Fund. The submission of the Prospectus and related documentation to the Commission de
Surveillance du Secteur Financier (CSSF), the Luxembourg financial supervisory authority, is pending finalisation of certain
legal documents. The Directors expect that the application will be submitted to the CSSF during the third quarter of 2017.
• The directors of the Company approved on 17 August 2017 a proposal made by the Investment Manager to defer one-third,
equivalent to USD 1,044,306 (the “Deferred Portion”), of the incentive fee payable as described in Note 8 “Related Party
Transactions – Incentive fee” (FS28). The Deferred Portion shall be deferred for a period of up to 5 years from 30 June 2017
(the “Deferral Period”) and shall be paid when (i) the Investment Manager is entitled to receive incentive fees in relation
to any financial year during the Deferral Period in accordance with the applicable terms of the Investment Management
Agreement Side Letter dated 11 September 2013 and (ii) the investment performance which is calculated on a NAV per
share basis exceeds the increase in VNAS Index for the relevant financial year by 5%. All other terms of the Investment
Management Agreement Side Letter dated 11 September 2013 shall remain applicable and in force.

VietNam Holding Annual Report 2017Nominated Advisor (AIM)
Smith & Williamson Corporate
Finance Limited
25 Moorgate
London EC2R 6AY
United Kingdom

Corporate Broker (AIM)
Winterflood Investment Trusts
The Atrium Building
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
United Kingdom

Administrator, Custodian and Trustee
Standard Chartered Bank
7 Changi Business Park Crescent
Level 3, Securities Services
Singapore 486028

Registrar
Computershare Investor Services
(Cayman) Limited
One Capital Place
PO Box 897
George Town KY1-1103
Grand Cayman
Cayman Island

UK Legal Adviser
Dickson Minto W.S.
Broadgate Tower
20, Primrose Street
London EC2A 2EW
United Kingdom

Independent Auditor
KPMG LLP
16 Raffles Quay #22-00
Hong Leong Building
Singapore 048581

Key Parties

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

Investment Manager
VietNam Holding Asset
Management Limited
Collas Crill Corporate
Services Limited
Floor 2, Willow House
Cricket Square
PO Box 709
George Town, Grand Cayman
Cayman Islands, KY1-1107

Registered Office, Company Secretary
and Cayman Islands Legal Advisor
Collas Crill Corporate
Services Limited
Floor 2, Willow House
Cricket Square
PO Box 709
George Town, Grand Cayman
Cayman Islands, KY1-1107

VietNam Holding Annual Report 2017VietNam 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.

Photographs by Khoi Dang
Designed and produced by Mediasterling:
www.mediasterling.com

www.vietnamholding.com

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VietNam Holding Ltd
Collas Crill Corporate Services Limited
Floor 2, Willow House, Cricket Square
PO Box 709
George Town, Grand Cayman
Cayman Islands, KY1-1107