LSE-listed investment company focused solely on Vietnam:
the fastest-growing economy in South East Asia. Invests in
high-growth companies, focusing on domestic consumption,
industrialisation and urbanisation.
Our Purpose
Capturing the growth of Vietnam through an actively managed, high-
conviction portfolio of companies.
Our Vision
Owning a portfolio of companies with the potential to double their
underlying earnings over the next four to five years. Active stock selection
balanced between high-growth small-and-medium companies and best-
in-class blue chips. Seeking companies that can benefit from enhanced
valuations by following a trajectory of better Environmental, Social,
Governance practices.
Strategic Report
Strategic Report
Summary Information
Chairman’s Statement
Investment Manager’s Report
Top Five Portfolio Companies
Sustainability Report
Principal Risks and Risk Management
Governance
Director Profiles and Disclosure of Directorships
Corporate Governance Report
Audit and Risk Committee Report
Directors’ Remuneration Policy and Report
Directors’ Report
Statement of Directors’ Responsibilities
Financial Statements
Independent Auditor’s Report
Statement of Financial Position
Statement of Comprehensive Income
Statement of Changes in Equity
Statement of Cash Flows
Notes to the Financial Statements
Corporate Information
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Annual Report 2021
Strategic Report
Strategic Report
Annual Report 2021
Strategic Report
Highlights of the Year
Financial Highlights
Operational Highlights
•
•
•
Net Asset Value (“NAV”) rose during the period by
USD 78.8 million to USD 196.1 million
NAV per share (USD) increased by 99.3%
•
•
•
Fund is invested in 26 positions
Top-ten positions account for 68.8% of the NAV
Estimated average carbon footprint of the portfolio is
Net Investment gain of USD 103.98 million versus a loss
35% lower than the index
of USD 17.71 million in the corresponding 2020 period
Total Net Assets (USD)
196.1 m
Net Asset Value per share (USD)
4.600
Net Asset Value per share (GBP)
333.0p
Share price
265.0p
Discount to Net Asset Value
20.4%
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
As at 29 September 2021 (the latest available date before
Year end 30 June 2021
approval of the accounts), the discount to NAV had moved
to 15.1%. The estimated NAV per share and mid-market
Average NAV
share price at 29 September 2021 was 347.3p and 295.0p
Operating expenses*
respectively.
Ongoing Charges
Ongoing charges for the year ended 30 June 2021 have
been calculated in accordance with the Association
of Investment Companies (the “AIC”) recommended
methodology. The ongoing charges for the year ended 30
196.1m
117.3m
4.600
2.308
333.0p
186.8p
265.0p
154.0p
20.4%
17.6%
a
b
USD 146,258,398
USD 3,684,981
Ongoing charges figure
b÷a
2.52%
(calculated using the AIC
methodology)
June 2021 were 2.52%. Refer to page 75 for the definitions
*Operating expenses per the financial statements less one
of Alternative Performance Measures (“APMs”) together
off non-recurring charges of USD 136,860.
with how they have been calculated.
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Annual Report 2021
Strategic Report
Company Overview
Focused Investment
Approach
Portfolio of 26 companies with
68.8% in top-ten positions. The
portfolio has a Price-to-earnings
valuation of circa 10x and an
Earnings growth forecast of circa
20% for 2022.
Investment Manager
What Makes Us Different
DYNAM CAPITAL LTD
Right Size for the Vietnam Equity Market
Vietnam specialist, regulated by the Guernsey Financial
Big enough to be an active and engaged shareholder in
Services Commission. Partner-owned business whose
portfolio companies, nimble enough to find and fund less-
sole focus is asset management. Appointed Investment
known emerging champions.
Manager on 16 July 2018.
What Dynam Does:
ESG in the DNA
•
•
•
Top-down & bottom-up research driven fundamental
adherent to best practice in Environmental, Social and
analysis.
Governance
issues, believing
that better-managed
Active engagement with portfolio companies on ESG.
companies on these dimensions will be worth more in
Long-term investment horizon.
the longer-term. The Company has been a signatory of
Since its early days the Company has been an active
the United Nations Principles for Responsible Investing
(“UNPRI”) for over a decade and scored A, A+, A in the
The Company
recent UNPRI report.
VIETNAM HOLDING
Premium Listed London Investment Company established
the spectrum of firm size with the flexibility to include pre-
in 2006. Seeks to achieve long-term capital appreciation
IPO, small-mid caps and large caps in the portfolio.
The Company is able to invest in best-in-class names across
Nimble Access Across Spectrum
by investing in a diversified portfolio of companies in
Vietnam that have high growth potential at an attractive
Actively Managed Portfolio
valuation.
What Vietnam Holding Does:
Investment Manager’s active ownership capabilities.
High conviction, off-index positions managed by the
•
•
Capturing the growth of Vietnam through long term
investment in an actively managed, high-conviction
portfolio of companies.
Protect shareholder
interests by aspiring to the
highest standards of corporate governance at both
fund & portfolio level.
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Annual Report 2021
Strategic Report
3
Summary Information
The Company
management role in any such company. However Dynam
Capital, Ltd. (“Dynam Capital”), (the “Investment
VietNam Holding Limited (the “Company” or “VNH”) is a
Manager”) may appoint one of its directors, employees or
closed-end investment company that was incorporated
other appointees to join the board of an Investee Company
in the Cayman Islands on 20 April 2006 as an exempted
and/or may provide certain forms of assistance to such
company with limited liability under registration number
company, subject to prior approval by the VNH Board.
166182. On 25 February 2019, the Company, via a process
of cross-border continuance, transferred its legal domicile
The Company
integrates environmental, social and
from the Cayman Islands to Guernsey and was registered
corporate governance (“ESG”) factors into its investment
as a closed-ended company limited by shares incorporated
analysis and decision-making process. Through
its
in Guernsey with registered number 66090. The Shares
Investment Manager, the Company actively incorporates
were admitted to trading on AIM in June 2006 and changed
ESG considerations into its ownership policies and practices
to a Premium Listing on the Official List of the UK Listing
and engages Investee Companies in pursuit of appropriate
Authority and admitted to trading on the Main Market of
disclosure and the improvement of material issues.
the London Stock Exchange on 8 March 2019. The Company
also listed on the Official List of The International Stock
The Company may invest:
Exchange on 8 March 2019. The Company has an unlimited
life with a continuation vote in 2023.
•
up to 25% of its Net Asset Value (“NAV”) (at the
Investment Objective
The Company’s investment objective is to achieve long-
term capital appreciation by investing in a diversified
portfolio of companies that have high growth potential at
•
•
an attractive valuation.
Investment Policy
time of investment) in companies with shares traded
outside of Vietnam if a majority of their assets and/or
operations are based in Vietnam;
up to 20% of its NAV (at the time of investment) in
direct private equity investments; and
up to 20% of its NAV (at the time of investment) in
other listed investment funds and holding companies
which have the majority of their assets in Vietnam.
Borrowing Policy
The Company attempts to achieve its investment objective
by investing in the securities of publicly traded companies
The Company is permitted to borrow money and to grant
in Vietnam, and in the securities of foreign companies if
security over its assets provided that such borrowings
a majority of their assets and/or operations are based in
do not exceed 25% of the latest available NAV of the
Vietnam. The Company may invest in equity securities or
Company at the time of the borrowing unless the
securities that have equity features, such as bonds that
Shareholders in general meeting otherwise determine by
are convertible into equity.
ordinary resolution.
The Company may invest in listed or unlisted securities,
Investment Restrictions and Diversification
either on the Vietnamese stock exchanges, through
purchases on the OTC Market, or through privately
The Company will adhere to the general principle of risk
negotiated deals.
diversification in respect of its investments and will observe
The Company may invest its available cash in the
Vietnamese domestic bond market as well as
in
international bonds issued by Vietnamese entities.
The Company may utilise derivatives contracts for hedging
purposes and for efficient portfolio management but will
not utilise derivatives for investment purposes.
the following investment restrictions:
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•
•
the Company will not invest more than 10% of its NAV
(at the time of investment) in the shares of a single
Investee Company;
the Company will not invest more than 30% of its
NAV (at the time of investment) in any one sector;
the Company will not invest directly in real estate or
real estate development projects, but may invest in
The Company does not intend to take control of any
companies which have a large real estate component,
company or entity in which it has directly or indirectly
if their shares are listed or are traded on the OTC
invested (the “Investee Company”) or to take an active
Market; and
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Strategic ReportAnnual Report 2021 •
the Company will not invest in any closed-ended
investment fund unless the price of such investment
fund is at a discount of at least 10% to such investment
fund’s NAV (at the time of investment).
Furthermore, based on the guidelines established by the
United Nations Principles for Responsible Investment
(“UNPRI”), of which the Company is a signatory:
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•
•
the Company will not invest in companies known to be
significantly involved in the manufacturing or trading
of distilled alcoholic beverages, tobacco, armaments
or in casino operations or other gambling businesses;
the Company will not invest in companies known to
be subject to material violations of Vietnamese laws
on labour and employment, including child labour
regulations or racial or gender discriminations; and
the Company will not invest in companies that do not
commit to reducing in a measurable way pollution
and environmental problems caused by their business
activities.
Any material change to the investment policy will only
be made with the approval of Shareholders by ordinary
resolution.
Shareholder Information
Sanne Group (Guernsey) Limited (the “Administrator”) is
responsible for calculating the NAV per share and delegates
this function under a legal contractual arrangement to
Standard Chartered Bank (Singapore) Limited (the “Sub-
Administrator”), previously Standard Chartered Bank,
Singapore Branch until its transference under the Banking
Act on 13 May 2019. The estimated NAV per ordinary share
is calculated as at the close of business each business
day by the Investment Manager and published at close
of business in Vietnam the same day. The monthly NAV is
calculated by the Sub-Administrator on the last business
day of every month and announced by a Regulatory News
Service within 10 business days.
5
Strategic ReportAnnual Report 2021 Chairman’s Statement
Hiroshi Funaki
Chairman
Dear Shareholder,
between 10.1% and 27.5% over the period. The Board
continues to focus on narrowing the discount and has
utilised three main discount control measures: Marketing;
Share Buybacks and Tender Offers. At time of writing the
discount has narrowed in to 15.1%2.
Marketing
With the help of the Investment Manager, Dynam Capital,
and despite travel restrictions imposed for much of the
period, the Board has further developed the Company’s
marketing activity throughout the year to help narrow the
discount, improve liquidity in the Company’s shares and
widen our Shareholder base.
The Investment Manager has been actively promoting the
Company and along with our broker and sales partners
has organised roadshows, topical seminars, podcasts and
several webinars. Our intention is to continuously enhance
I am proud to present the Annual Report for VietNam
these marketing and communications efforts, which
Holding Limited in yet another extraordinary twelve-
continue to bear fruit. The average daily volume of shares
month period ending 30 June 2021. This has been a year
traded in the Company has increased by 327% above the
of disruption never seen in this lifetime and as waves of
previous year and the Company’s Shareholder base has
novel coronavirus (“COVID-19”) continued to flow across
broadened with new institutional investors, family offices,
the globe we all have had to adjust to a new norm
wealth management platforms and retail investors. The
of work-from-home,
lockdowns, quarantines, holiday
Company has also been proactively promoted through a
cancellations, PCR/lateral flow tests, and vaccinations.
wide range of media outlets, including video, audio and
Yet despite the increased uncertainties, Vietnam has
shown great resilience, garnering much international
praise for its handling of the first phases of COVID-19 while
online print media, and has been featured several times in
publications such as Investors Chronicle and Euromoney.
The Investment Manager has also maintained a strong
also maintaining its position as one of the world’s fastest
social media presence for the Company. We welcome
growing economies.
all Shareholders who may be reading this Annual Report
for the first time and thank all existing holders for their
In fiscal 2020, Vietnam’s GDP managed to grow by close to
support.
3% and is estimated to increase by close to 4% in 2021. This
is nearer to its remarkable multi-decade growth average
Share Buybacks
even though like many countries it has been grappling with
the rapid spread of the Delta variant. Although the nation
The Board has a mandate, renewed at the AGM on 30th
has struggled somewhat with this fourth wave, the pace
October 2020, to authorise the purchase up to 14.99% of
of vaccinations is picking up with 1 million doses1 a day
the Company’s shares each year in the open market at
being given recently, and there are plans in place to lower
prices below NAV per share. In the year from 1 July 2020
quarantine restrictions for vaccinated arrivals. Vietnam’s
to 30 June 2021, the Company bought back 605,681 shares
equity market has been one of the best performing stock
(representing 1.2% of the shares outstanding at 1 July 2020)
markets in the world and thanks to an active stock selection
at a weighted average discount of 21.3%. This resulted in
and investment management process the Company’s Net
a 0.25% accretion to NAV per share. From September 2017,
Asset Value per share has also performed strongly – almost
when the current Board was appointed, through until 30
doubling – and we are pleased to see that the share price
June 2021, the Company has bought back 12.66m shares
performance remains strong, putting the Company’s
at a weighted average discount of 15.4%. This represents a
performance firmly at the top of several tables.
2.7% accretion to NAV per share.
Discount
Tender Offers
The discount between the share price and the NAV per
From time to time the Board uses tender offers to provide a
share at the end of the financial year was 20.4%. The
liquidity opportunity to investors in the Company. Last year
average level of the discount was 20.2%, having fluctuated
Shareholders approved the Board’s recommended tender
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Strategic ReportAnnual Report 2021 offer for 15% of the Company’s shares at a 2% discount to
open up travel and inbound visits from foreign investors,
the prevailing NAV per share as at 30 October 2020. Post
as this might go some way to encourage more foreign
period end, the Board has completed a further tender offer
participation in the stock market, which has been eclipsed
for 30% of the Company’s shares at a 2% discount to the
by the surge in domestic investor interest. This is discussed
prevailing NAV per share as at 31 August 2021. In the weeks
in greater detail in the Investment Manager’s Report,
following the announcement of the most recent tender
which follows.
offer the discount has narrowed significantly to 16%.
Climate Temperature Check
Performance
The Company has been a signatory of the United Nations’
In the first half of the annual period, VNH’s NAV per share
Principles for Responsible Investment (“UNPRI”) for over a
increased by 38.7% to USD 3.201, in line with return of
decade, and last year achieved highest grades in the PRI
38.8% in the Vietnam All Share Total Return Index in USD
Assessment report. This year the Board has announced its
terms, and from 1 January 2021 to 30 June 2021, the NAV
support of the Paris Agreement and committed to the Task
per share (USD) increased by 43.7%, outperforming the
Force on Climate-related Financial Disclosures (“TCFD”).
index. As mentioned in the introduction, over the full year
The Investment Manager has also become a member of
the NAV per share increased by 99.3%. Over a one year,
the Asia Investor Group for Climate Change (“AIGCC”).
three year and ten year period ending 30 June 2021, VNH’s
With the publication of the United Nations’ latest report
NAV per share (USD) outperformed the Vietnam All Share
on climate change urgencies, and its upcoming COP-26
Index in USD terms.
conference in Glasgow later this year, there is no escaping
the fact that global warming is a reality and all responsible
Performance monitoring remains a key focus of the Board,
investors must seek to play a part in addressing it. We have
and we engage closely with our Investment Manager in
agreed with the Investment Manager that we will do more
this respect through monthly conference calls, attended
to measure and report on our activities in this respect. We
by members of the Board and quarterly presentations. The
are pleased to reveal that the estimated average carbon-
Board typically seeks to spend time in situ with Dynam
footprint of the Company’s investment portfolio over the
Capital and its local management team in Ho Chi Minh
last two years was 35% lower than the equivalent index. The
City, however this has not been possible over the past
activities of the Company and the Investment Manager as
year due to COVID-19 and may not be possible for some
part of our aim to help businesses make a positive impact
time. A more detailed account of the Company’s annual
performance is also provided in the Investment Manager’s
Report.
with respect to climate and broader environmental, social
and governance matters are detailed in the Sustainability
Report.
The Delta Variant and Vaccination Programme
On behalf of the Board, I would like to extend a further
thank you to you the Shareholders for your ongoing
The Company has paid close attention to ongoing
support throughout the past unprecedented year.
developments around COVID-19 and has ensured that its
Business Continuity Plans (“BCP”) and those of all its key
service providers have been operational. As such, we are
very pleased to report that there was no interruption to the
activities of the Company during this period. Nonetheless,
Hiroshi Funaki
due to travel restrictions the Board has been unable to
Chairman
physically visit Vietnam during this period.
VietNam Holding Limited
30 September 2021
The Investment Manager’s subsidiary company is based in
Vietnam, and in July and August they have been operating
under work-from-home protocols, as lockdowns have
been imposed in Ho Chi Minh City and Hanoi. Vaccination
progress in Vietnam has been much slower than in the
UK and Europe, and at the time of going to report 30%
of the adult population have received at least one dose,
with an estimated 6% having received two doses3. This
has cast a shadow on the notable ways in which Vietnam
1 Source: Ministry of Health, https://tiemchungcovid19.gov.vn/portal
2 As at 29 Sep 2021, Source: RNS (https://www.londonstockexchange.com/
news-article/VNH/estimated-daily-net-asset-value/15153724)
handled the earlier waves of the pandemic. It is hoped
3 Ministry of Health, https://tiemchungcovid19.gov.vn/portal; https://
that higher vaccination numbers will allow the country to
ourworldindata.org/covid-vaccinations?country=VNM;
7
Strategic ReportAnnual Report 2021 Investment Manager’s Report
Vu Quang Thinh
CIO and Managing Director
Craig Martin
Chairman and Managing Director
This year marks the 15th anniversary of the Company and
Increased Liquidity in the Market
its listing in London. The Company was initially on AIM and
then moved to the premium segment of the main board of
Foreigners have been net sellers of Vietnamese equities
the London Stock Exchange in March 2019.
for most of the last year with more than USD 2.0bn in
net sales in the eighteen months to 30 June 2021. This has
The 15th anniversary has been marked by one of the most
been replaced by domestic money, particularly stemming
robust performances in the Company’s history. In the first
from new investors. Throughout the year an estimated one
half of the annual period, VNH’s NAV per share increased
million new trading accounts have been opened, and this
by 38.7% to USD 3.201, in line with a 38.8% return in the
is currently continuing at a rate of 100,000 new accounts
Vietnam All Share Index (“VNAS”) in USD terms, and
per month. There are now an estimated four million retail
from 1 January 2021 to 30 June 2021, the NAV per share
trading accounts in Vietnam, which is more than in the UK.
increased by a further 43.7% to a record USD 4.60 per
share. For the year, the NAV per share increased by 99.3%,
The significant increase in trading volumes did cause some
outperforming the total return of the VNAS by 7.3%, in USD
havoc. In the second half of the financial year, the Ho Chi
terms. Its outperformance of the Vietnam Index (“VNI”)
Minh Stock Exchange (“HOSE”) infrastructure appeared
was even higher at 27.3%. In addition, in May 2021, the
to be unable to cope with orders beyond USD 700m a
Company became the top-performing Investment Trust in
day. Some administrative measures were taken, including
the United Kingdom, and for the calendar year to 30 June
increasing the lot size ten-fold to 100 shares and moving
2021 it was the top-performing fund in Vietnam.
the trading venue for some stocks to the Hanoi Stock
Exchange. FPT, our top holding, was also involved in helping
The Company has a high-conviction portfolio concentrated
in 26 positions, with its top-ten positions making up 68.8%
of NAV. The largest weighting, FPT Corporation, FPT (11.0%
to provide an interim technical solution to the HOSE, and
this was finalised on 4 July 20211. Daily trading volumes on
HOSE have now reached USD 1.3bn during some trading
of NAV), the country’s leading IT and telecoms services
periods, which is five times the level of a year ago.
company, soared by 130.6% as it secured significant
traction in its domestic and overseas business. Hoa
The HOSE infrastructure is due for an extensive overhaul
Phat Group, HPG, (9.4% of NAV), Vietnam’s largest
within the next year and will be replaced by a Korean
steel producer in construction steel and steel pipe, was
system. The new system is expected to integrate with a
a particularly strong performer in our portfolio for the
proposed central share depository, which will help move
period with a gain of 222.3%. The banks in our portfolio
towards faster settlement and remove some of the
also performed very positively with Vietin Bank (“CTG”)
problems associated with the need to pre-fund trading
up 150.3%, VP Bank (“VPB”) up 233.9%, Military Bank
accounts. This bodes well for the continued growth of the
(“MBB”) up 205.7%, and Sacombank up 182.7%. See
stock market. In fact, to put the growth in context, the
Top Five Portfolio Companies on pages 14 to 18 for more
market capitalisation of all Vietnamese listed companies is
information. Overall, 25 of our 26 positions increased in
now approximately USD 300bn compared to only USD 2bn
value and only one decreased.
when the Fund was launched in 2006.
1 https://www.hsx.vn/
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Strategic ReportAnnual Report 2021 Increased Liquidity in the Portfolio
of our investment themes – industrialisation, urbanisation
and the domestic consumer – but we may identify other
The median market capitalisation of the Fund increased
opportunities in the year ahead. For example, as the
by a significant amount throughout the year – from USD
vaccination plan becomes a reality, we expect some other
540m at 30 June 2020 to USD 1.98bn at 30 June 2021. This
stocks, such as consumer and logistics companies, could
was due to our increased allocation in banks – which tend
see increased visibility and growth. The portfolio liquidity
to be larger cap companies – and the performance of
is also at levels that can readily support the recently
some of our previously ‘mid-cap’ holdings, which are now
announced tender for 30% of the Company’s shares. The
large-cap. The dramatic growth in top five positions such
Tender, announced on 3 August 2021 was approved on 31
as HPG – now a USD 10bn market capitalisation company
August 2021, and payments of approximately USD 56.7m
– also contributed to this surge.
made to participating shareholders through our broker
finnCap on 13 September 2021. We have taken advantage
The larger cap stocks, accounting for 76% of the portfolio,
of the tender process to rebalance the portfolio and begin
continued to outperform the small and mid-cap stocks
to position it for 2022.
for most of the year. We did see an interesting inversion
in the relative valuations of smaller stocks in the second
Vietnam’s Bigger Economic Picture
half of the year, driven in part by increased attention from
domestic retail investors. To be specific, three years ago
Vietnam’s macro performance was also outstanding in
the smaller cap stocks, as measured by the VN 70 index,
traded at a P/E ratio level around 30% lower than the larger
cap stocks, as measured by the VN 30 index, while over this
2020. The country was one of the few in the world to post
positive GDP growth (at around 2.91%1), and it outperformed
all of its ASEAN neighbours. Having successfully navigated
last year the ratio inverted with the VN70 stocks trading at
the first waves of COVID-19, Vietnam ended 2020 on a very
a 30% premium to the VN 30 index in March 2021.
high note. As the chair of ASEAN, it entered into several
noteworthy bilateral and multilateral trade arrangements
The portfolio liquidity is relatively high and we estimate
during the last year, including free trade agreements with
that 94% of the portfolio could be liquidated in less than
the European Union and the UK, as well as the regional
30 days. This is a result of the combination of higher
market liquidity (5x the levels of 2019, as described above)
and a higher relative weighting to larger stocks. Also, as at
comprehensive economic partnership
Its
economy expanded by 5.64% in the first half of 20211 and
GDP growth for the full year of 2021 is forecast to be 3.5% -
(“RCEP”).
30 June 2021, the portfolio stock holdings were all quoted,
4%, almost back on track with its standout 30-year growth
and our previous only ‘private equity’ position in ABA was
record.
realised on 25 June 2021 for cash.
In October 2020, we decided not to exercise the conversion
option we held in ABA (4% of prevailing NAV at the time
The Foreign Direct
trend also
continues, with more than USD 20bn1 disbursed in 2020
and a further USD 10bn disbursed in the six months to
Investment (“FDI”)
of investment), and instead sought repayment of the
30 June 2021. Much of this is for manufacturing export
convertible bonds originally by 27 November 2020. We
production playing to Vietnam’s increasing competitive
were in close contact with the portfolio company and
advantages across several sectors, including garments,
they informed us that despite their best efforts in securing
agriculture, aquaculture and increasingly more hi-tech.
refinancing options, COVID-19 travel restrictions had
The government is keen to increase the value-added level
delayed the process and repayment would be delayed. We
of Vietnam’s manufacturing sector and has already helped
agreed to provide an extension initially to 31 March 2021
cement the country as a leading hub for the manufacture
and then ultimately until 29 June 2021 at an enhanced
of mobile phones, tablets and lap-top computers. As
interest rate and enhanced contractual return. The loan
part of the government’s initiatives to be a modern
was repaid in full on 25 June 2021, earning a total return of
industrialised economy, it is also showing growing support
approximately 13% IRR in Vietnamese Dong (“VND”) for a
for new technologies, such as Electric Vehicles (“EV”).
money multiple of approximately 1.24x cost.
VinFast, a local car manufacturer, has invested USD 3.5bn
in an EV assembly plant. FoxCon, a significant investor in
The portfolio’s size and nimbleness as per our style of
Vietnam for the assembly of components of Apple iPhones
investment management means that we can navigate
and accessories, also has aspirations in the EV space. It
across the spectrum of company sizes from smaller private
is possible that Vietnam could focus on creating hubs of
pre-IPO type opportunities to mid-cap and larger-cap
specialised production for these and other growth sectors
companies. Over the past 12 months, we have benefitted
to complement the areas in which it has built up both
from a tilt towards the banking sector that underpins many
capability and scale advantages over many years.
1 Source: General Statistics Office (GSO) https://www.gso.gov.vn/
9
Strategic ReportAnnual Report 2021 Investment Manager’s Report (continued)
Vietnam’s Bigger Economic Picture (continued)
size in Europe but is a stark reminder of the difficulties in
eradicating the threat of COVID-19 until large parts of the
2020 saw a record full year trade surplus of USD 20bn1.
world are double vaccinated.
Exports grew by 28.4%1 year-on-year (“YoY”) in the first
six months of 2021, but were eclipsed by the 36.1%1 YoY
Ho Chi Minh City and Hanoi were put into periods of
increase in imports. This led to a USD 1.47bn1 trade deficit
lockdown, and most of Vietnam’s provinces faced
as at 30 June 2021. The full calendar year is expected
disruptions. This has impacted manufacturing capability
to see the country back in surplus mode, even though
and factory productivity, with a knock-on effect in the
the Delta wave of COVID-19 has disrupted the country’s
region’s supply chains. Unlike the US and the UK, where
manufacturing base with ongoing impacts on its supply
large volumes of vaccination doses were immediately
chains. The country hopes to achieve greater levels of
procured, Vietnam initially had to rely on smaller volumes
vaccination by September and is focusing on getting two
from COVAX and other direct donations from countries.
thirds of the population jabbed by the end of 2021. The
Nevertheless, in the long-term, it hopes to be self-
balance of payments remains strong and the country is
sufficient
in vaccine production with manufacturing
forecast to maintain about USD 100bn in foreign reserves
under licence and its own home-grown vaccine, which is
by the year-end.
undergoing late-stage trials. Currently, approximately 30%
of the population has been vaccinated, in Ho Chi Minh
The VND has remained relatively stable against the
City more than 90% of the adult population have received
USD for the last couple of years, and in 2021 started to
one dose, and 11% two doses3. For much of the last year
appreciate against it. Several times over the last few
Vietnam has put in place strict quarantine measures on
years Vietnam (along with several other open economies,
incoming travellers. Not only has this severely impacted
including Singapore, Switzerland and Malaysia) have been
the country’s USD 20bn4 tourism industry, it has also
accused of currency manipulation by the US. However, the
delayed, and in some cases prevented, completion of
most recent ‘charges’ against Vietnam were dropped in
M&A investments. This was the part of the reason for the
July 2021.
delay in the refinancing of our investment in ABA. We do
expect M&A to pick up significantly when the quarantine
Inflation has raised its head in much of the world in part due
restrictions are eventually eased, though this could be
to disruptions brought on by a combination of COVID-19,
some time away.
semiconductor shortages, shipping disruption in the Suez
Canal and rising commodity prices. Although Vietnam’s
Responsible Investing
inflation has picked up and is expected to be about 4% this
year, there is no undue concern at this stage.
The Company is firmly focused on sustainability and has
placed ESG principles at the heart of its investment criteria
Impact of COVID-19 Delta Variant
for over a decade, having become an early signatory to the
UNPRI back in 2009. The Company received top grades in
Vietnam attracted worldwide attention
for
its
the report by the UNPRI in 2020.
commendable coordination and swift response to limit
the spread of the first waves of COVID-19. It successfully
Each part of ESG is equally important. For Vietnam, the ‘S’
curtailed transport with those countries affected, putting
has been at work in its society for many decades and the
people
in well-organised quarantine and extending
pandemic has further focused the efforts of several of our
the school holidays with firm and transparent plans.
portfolio companies on harmonising staff, shareholders
Authorities also were proactive and innovative in the use
and society at large. ‘G’ has been a key pillar for VNH’s
of traditional and social media to inform the public. As a
investment approach and we have been at the forefront
result, the initial outbreaks of COVID-19 in 2020 were put
of advocacy and training for corporate governance at our
under tight control.
investee companies since we were formed 15 years ago.
Our CEO, Vu Quang Thinh, is a co-founder and member of
In April 2021, much of Asia experienced the start of the
fourth wave of COVID-19 with the virulent Delta variant
1 Source: General Statistics Office (GSO) https://www.gso.gov.vn/
spreading rapidly. This time Vietnam was unable to avoid
2 https://covid19.gov.vn/
significant levels of infections and has seen cases rise to
3 https://tiemchungcovid19.gov.vn/portal (As at 14 September 2021)
close to 630,0002, with sadly more than 15,0002 deaths
4 McKinsey, Mar 2021, https://www.mckinsey.com/featured-insights/asia-
to date. This is still much lower than countries of similar
pacific/reimagining-tourism-how-vietnam-can-accelerate-travel-recovery
10
Strategic ReportAnnual Report 2021 the board of the Vietnam Institute of Directors (“VIOD”),
example, construction materials, industrial parks and
working as a lecturer for VIOD courses and at other
logistic companies. These typically have a higher quality
institutions about how to improve corporate governance
of earnings and higher return on equity than the individual
standards in Vietnam. We actively encourage our portfolio
exporters. In addition to HPG, as described above, we have
companies to give more attention to investor relations and
been building a position in Gemadept, (“GMD”), which
transparent reporting, and have also been advising some
has 3.9% NAV and is a leading port and logistics company
of them specifically on how to get the balance right in
having invested in a number of industrial park developers.
aligning interests between staff and shareholders through
the structure and implementation of employee share
Urbanisation
option plans. The ‘E’ aspect of ESG has rightly so taken
centre stage in many investors’ minds as well as those of
Vietnam continues to experience a fast pace of urbanisation.
many Vietnamese. On the climate front, the Investment
According to a UN forecast1, its urban population rose from
Manager and the Company have both affirmed the Paris
20% in 1990 to 36% in 2018 and is expected to reach 44%
Agreement and the commitment to the Task Force for
by 2030. This growth has necessitated the construction of
Climate-related Financial Disclosure. Dynam Capital has
roads, bridges, ports, new townships and an increasing
also joined the Asia Investor Group on Climate Change
demand for modern apartments and landed properties.
(“AIGCC”) and intends to contribute more to the advocacy
This will be accelerated when the first modern metro
of climate risk reporting. More details of this can be found
in the Sustainability Report.
systems become operational in Ho Chi Minh City and
Hanoi, which is expected to commence in early 2022.
Positioning and Core Themes
VNH has 16% exposure to Vietnam’s dynamic real estate
market, including its key holdings in Vinhomes, 6.1% of
NAV, and Khang Dien House, 4.6% of NAV.
During the year, we sold 11 positions and added 13 new
positions. We exited a few smaller companies and
Domestic Consumerism
selectively added to our positions in larger companies,
including our portfolio of banks, which is described
Vietnam’s ‘middle income’ population is projected to
industrialisation
logistics); urbanisation
below. Our main investment approach remains focused
(best-in-class manufacturers,
on:
international
(purposeful real
estate, transportation, clean energy and clean water); and
domestic consumption and its enablers (sustainable retail,
domestic logistics, products and finance). These themes are
inter-linked, as industrialisation and urbanisation foster
expand at a rate of 18%2 annually, adding a further 35
million people to this group of consumers by 2030. The
nature of the consumer continues to evolve. In the 1990s,
for a brand to be really successful it had to be a foreign
brand and manufactured overseas. By the 2000s, locally
manufactured global brands continue to dominate,
however, several niche local brands developed locally and
further robust growth in GDP and domestic consumption,
owned by Vietnamese businesses in sectors ranging from
and are all underpinned by the banking sector that is
shampoos, soft drinks, sauces and condiments to baked
described above.
Industrialisation
goods and coffee started to garner strong local appeal. In
a recent survey, it appears that in the 2020s Vietnamese
consumers now prefer and trust home-grown brands over
foreign brands.
Vietnam’s pace of industrialisation continues to progress
as it has done dramatically over the past 25 years. This
The portfolio has approximately 10% exposure to the
year, Vietnam has overtaken Bangladesh to become the
domestic retail sector, including Phu Nhuan Jewelry
second largest garment producer in the world. It is also
(“PNJ”), 4.9% of NAV, and Mobile World Group (“MWG”),
very well-known as a major producer of footwear, furniture,
5.0% of NAV. The physical retail components of both these
agriculture and aquaculture, and less well-known but an
companies will be impacted by prolonged lockdowns,
increasingly key supplier of hi-tech hardware and software
however, the digital online portions of these businesses
to customers around the world.
are performing extremely well. These well-managed
businesses could emerge from the pandemic with greater
Although in the past we have invested in manufacturers,
including garment companies and seafood producers,
1 https://population.un.org/wup/Publications/Files/WUP2018-Highlights.pdf
we have chosen to obtain most of the exposure to these
2 http://vids.mpi.gov.vn/Includes/NewsDetail/12_2016/
themes through the business-to-business ‘linkages’, for
dt_11220161027_9781464808241.pdf
11
Strategic ReportAnnual Report 2021 Investment Manager’s Report (continued)
Domestic Consumerism (continued)
Outlook
market share, as they can survive and grow, whereas some
COVID-19 remains as a significant risk to Vietnam in the
smaller independent retailers without the scale to be both
short-term, particularly as the vaccination rollout is in the
in-store and on-line will suffer.
Banks
early stages. Increasing numbers of infections will lead to
further restrictions that may limit certain activities, curtail
industrial productivity and contribute to supply-chain
imbalances. International tourism has clearly evaporated
VNH’s allocation to banks has risen from 7% at 31
over the last year and in recent months domestic tourism
December 2019 to 16% at 30 June 2020 and to 31% at 30
has also been significantly impacted. Success in getting a
June 2021. Our increased allocation to banks was research
significant part of the population vaccinated will be a key
driven, and has paid off with significant contribution from
determinant in maintaining rapid economic growth and
the sector and the underlying holdings to the portfolio
returns for this year. As mentioned in Liquidity, VNH has
also increased the median portfolio market capitalisation
in this respect. Banks benefitted from resilient Net
further boosting domestic consumer confidence, which
was very high at the start of 2021 but has deteriorated as
the fourth wave took hold in Q2 2021.
Interest Margins (“NIM”), controlled credit growth,
We think the stubborn nature of the Delta variant will mean
product innovation, as well as new customer acquisitions,
that Q3 and Q4 2021 corporate earnings are inevitably
controlled non-performing loans and reversals of over-
weakened. That said, we expect Vietnam to bounce back
provisioning. Many of our banks enjoyed earnings per share
strongly in 2022, and think domestic consumption will drive
growth of more than 100% during the year, and saw their
the growth of the economy moving forward. The portfolio
share prices rally. We expect provisioning to increase, and
in 2022 may be different to that in 2021 in terms of some
anticipate an increase in non-performing loans over the
of the key names and themes, but we are targeting EPS
next six months. As such, we have taken some profit in the
growth of more than 20% across the portfolio and remain
sector. Key portfolio names in the portfolio include Vietin
committed to maintaining our significantly lower carbon
Bank (“CTG”), 9.6% of NAV; VP Bank (“VPB”), 7.3% of NAV;
footprint than the equivalent index.
Military Bank (“MBB”), 6.4% of NAV; and Sacombank
(“STB”), 4.5% of NAV. CTG, VPB and MBB are described
more fully in the Top Five Portfolio Companies section.
As mentioned in last year’s annual report, while our focus
remains on industrialisation, urbanisation, and domestic
consumption, we also will be eyeing emerging themes
The banking sector is also bound to benefit further from
coming out of the pandemic, for example, opportunities
digitalisation, and we are seeing many players in the
stemming from shifts in consumer behaviour, rapid digital
e-wallet and e-payment space raise significant amounts
transformation and Vietnam’s fast-growing e-commerce
of private equity and venture capital funding as a result.
environment. Our aim is to position the portfolio for
No doubt some of these may emerge as unicorns in their
growth within a three to five-year investment horizon. This
own right, but the established traditional banks have
means looking through short-term noises and volatility
well-developed distribution networks and strong capital
in search of longer-term value derived from robust
bases, which makes them poised to adapt to new banking
compounding growth of well-managed companies with
methods. More than a decade ago many of the banks in
proven sustainable business strategies.
Vietnam welcomed strategic investors into their folds. We
see a new wave of this happening as some of the strategic
players face challenges in their own home markets
and have sold their non-core overseas investments. 15
years ago the strategic investors were European and
Australasian banking giants, but now they are more likely
to be Japanese, Korean and Taiwanese. These three North
Asian countries are now significant investors in Vietnam’s
manufacturing-for-export story and are likely to benefit
from the service and consumer sector as well. Again,
banking is a key foundation of this.
12
Strategic ReportAnnual Report 2021
Top Ten Companies by NAV as at 30 June 2021 (and as at 30 June 2020)
Top 10 companies as at 30 June 2021
Sector
FPT Corporation
Vietin Bank
Telecommunications
Banks
Hoa Phat Group JSC
Industrial Goods & Services
VP Bank
Military Commercial Bank JSC
Vinhomes
Mobile World Investment Corp
Phu Nhuan Jewelry JSC
Khang Dien House
Sacombank
Total
Banks
Banks
Real Estate
Retail
Retail
Real Estate
Banks
Top 10 companies as at 30 June 2020
Sector
FPT Corporation
Telecommunications
Hoa Phat Group JSC
Industrial Goods & Services
Mobile World Investment Corp
Military Commercial Bank JSC
Khang Dien House
Phu Nhuan Jewelry JSC
Retail
Banks
Real Estate
Retail
ABA Cooltrans
Industrial Goods & Services
Viettel Post Joint Stock Corp
Industrial Goods & Services
Dat Xanh Real Estate
Bank for Foreign Trade of Vietnam
Real Estate
Banks
Total
Dynam Capital, Ltd
30 September 2021
% NAV
11.0%
9.6%
9.4%
7.3%
6.4%
6.1%
5.0%
4.9%
4.6%
4.5%
68.8%
% NAV
14.3%
6.9%
6.9%
6.3%
6.3%
5.6%
5.1%
4.8%
4.4%
4.2%
64.8%
13
Strategic ReportAnnual Report 2021 Top Five Portfolio Companies
FPT Corp (“FPT”)
As at 30 June 2021
VietNam Holding’s investment
Date of first investment
8 January 2007
Ownership
Percentage of NAV
Internal rate of return (annualised)
0.6%
11.0%
26.7%
Share information
Stock Exchange
Date of listing
HOSE
13 December 2006
Market capitalisation (USD million)
Free float
Foreign ownership
3,469
77.7%
49.0%
Financial indicators
(as at 31 December)
Capital (USD million)
Revenue (USD million)
EBIT (USD million)
NPAT (USD million)
Diluted EPS (VND)
Revenue growth
NPAT growth
Gross margin
EBIT margin
ROE
D/E
2020
2019
339.6
1,292.3
199.5
191.6
4,120
7.6%
13.1%
39.6%
15.4%
25.0%
0.68
292.7
1,196.1
179.0
168.8
3,667
19.4%
21.0%
38.6%
15.0%
24.8%
0.47
About the Company
Founded in 1988, FPT is a software developer, provider of IT and
telecom services, including broadband internet, and a distributor
and retailer of IT and communication products. The company has
held the leading position in the local IT industry in Vietnam since
1996, and has been applauded for its educational programmes
providing learning activities for more than 100,000 people at a
range of educational levels.
FPT has 48 offices in 26 countries with more than 100 clients in
the Fortune 500. FPT has transformed itself from an IT service
company to an end-to-end digital transformation service provider,
and its digital transformation services’ revenue Compound Annual
Growth Rate (“CAGR”) reached 31% during the period 2017 to
2020. The company also owns telecoms infrastructure with a main
North-South link, which has recently been upgraded from copper
wires to fiber-optic cables. The company continues to focus on
expanding its overseas markets.
At 31 December 2020, FPT had seven subsidiaries and employs
30,651 employees, including 18,728 engineers and technology
experts.
Recent Developments
FPT delivered strong business results in 2020 with revenue and
profit after tax of USD 1,292.3m and USD 191.6m, a growth of 7.6%
and 13.1% YoY, respectively. One of the key contributions to growth
was the telecom segment, with revenue and profit before tax
growing at a rate of 11% and 22.2% respectively.
The global IT services segment continued to be a key driver of FPT
and contributed 40.2% of the company’s 2020 revenue, with the
Asia Pacific (“APAC”) market delivering growth of 28% in 2020. FPT
also enjoyed growing demand for ‘Cloud’, ‘Internet of Things’, and
‘Low code’ technology. As a result, digital transformation revenue
increased by 31% last year. Moreover, contracted revenue posted
a 23% growth with 38.5% increase in larger contracts than before.
Sustainability Strategy
FPT has developed a sustainable development orientation strategy
to ensure the balance of three factors: economic development,
community support, and environmental protection. In terms of
objectives and activities, FPT referred to the National Action Plan
to Implement the 2030 Agenda for Sustainable Development, the
Document of Our World Transformation and GRI Sustainability
Reporting Standards. In 2020, FPT implemented action plans to
assist stakeholders in minimising COVID-19’s effect and provided
infrastructure and support for isolation areas.
ESG Achievements
FPT places a strong focus on sustainability by building their action
plan in alignment with the UN’s 17 Sustainable Development
Goals (“SDGs”) and has made significant contributions to
the development of society through its educational support
programmes.
The company has implemented specific solutions for environmental
protection and resource preservation: complying with proper
regulations on environment and natural resources protection;
building eco-friendly office systems; utilising technology to reduce
energy consumption; raising staff awareness on environmental
issues; and integrating sustainability in the supply chain and
selection of service providers.
FPT is one of the top three publicly listed companies in Vietnam
recognised for corporate governance by the ASEAN Capital Market
Forum, and in 2020 it became the only Vietnamese enterprise
to win a Silver Stevie award for The Most Valuable Corporate
Response to COVID-19.
ESG Challenges
FPT has identified critical issues for its sustainable development
based on stakeholder consultation and in reference to the UN’s 17
SDGs. The key critical issues are: mitigating negative impacts of the
COVID-19 pandemic, promoting national digital transformation,
investing in education and fostering the next generation and
environmental protection. FPT has continued to develop a risk
management framework to manage key social and environmental
risks.
14
Strategic ReportAnnual Report 2021 Hoa Phat Group (“HPG”)
As at 30 June 2021
VietNam Holding’s investment
Date of first investment
Ownership
Percentage of NAV
20 June 2013
0.2%
9.4%
Internal rate of return (annualised)
40.1%
Share information
Stock Exchange
Date of listing
HOSE
15 November 2007
Market capitalisation (USD million)
Free float
Foreign ownership
10,007
54.0%
26.0%
Financial indicators
(as at 31 December)
2020
2019
Capital (USD million)
Revenues (USD million)
EBIT (USD million)
NPAT (USD million)
Diluted EPS (VND)
Revenue growth
NPAT growth
Gross margin
EBIT margin
ROE
D/E
1,435.4
3,904.2
741.8
585.1
3,846
41.6%
78.2%
21.0%
19.0%
25.2%
1,191.5
2,747.1
420.5
327.0
2,074
14.0%
-11.9%
17.6%
15.3%
17.1%
0.91
0.77
About the Company
Founded 29 years ago as a construction machine and equipment
trading company, HPG has become one of the largest companies
in Vietnam with four main business lines, including Iron and Steel,
Steel Products, Agriculture and Real Estate. Steelmaking is still the
primary business contributing 84% and 82% of the Group’s revenue
and profit, respectively.
With total crude steel output of 8 million tons per year, HPG
surpassed Taiwan’s Formosa for the first time to hold the No.1
position in construction steel and steel pipe industry in Vietnam
with market shares of 32.5% and 31.7%, respectively, throughout
the last four months of 2020. HPG is 48th in the Top 50 largest
global crude steel manufacturers, according to World Steel 2020,
and is the largest steelmaker in Southeast Asia1.
As of 31 December 2020, HPG has 63 subsidiaries with a workforce
of 25,428.
1 HPG 2020 Annual Report
Recent Developments
HPG ended 2020 with revenue of USD 3,904m and net profit after
tax of USD 585m, an impressive growth of 41.6% YoY and 78.2%
YoY, respectively. Throughout the year, HPG produced 3.4 million
tons of construction steel (+22.5% YoY) with over 0.54 million tons
exported to 11 countries around the world. The company officially
put into operation its third blast furnace in August 2020 and
launched a hot rolled coil (“HRC”) facility in November 2020. HPG
plans to further upgrade its HRC capacity by expanding its Dung
Quat Steel Integrated Complex that is expected to finish in 2024.
In 2020, the agriculture business achieved revenue and profit
growth of 31.9% and 189.6% respectively. Currently, HPG holds
more than 50% market share in the supply of Australian beef in
Vietnam and is also the leading producer of chicken eggs in the
north of the country.
Sustainability Strategy
Being aware of the significant environmental
impact from
steelmaking, HPG follows the “green” steel production solutions by
investing in equipment and technologies to control environmental
issues and treat waste and exhaust gases. HPG has also
implemented digital transformation for its business activities
management by ERP-SAP, ERP-Bravo, Smart MES solutions to
improve its efficiency.
ESG Achievements
Steel production is categorised as a carbon-intensive industry
due to its reliance on carbon-based fuels and reductants. HPG
has invested hundreds of millions of US dollars in equipment
and technology for environmental monitoring to keep pollutants
under control and within national standards. The factories of HPG
apply clean coke production technology and waste heat recovery
systems to lower carbon emissions. HPG provides 80% of its own
electricity for steel production, enhanced by heat recovery from
its own coke-fired thermoelectric plants, and only needs to buy
20% from EVN.
In 2020, HPG made further improvements in digitalising its
management system to better ensure product safety and manage
its energy consumption data.
ESG Challenges
With the main business in manufacturing steel and steel pipe,
mitigating the impacts of climate change is always a top challenge
for HPG. Even though HPG is compliant with all local environmental
standards, the company needs to aim higher in terms of applying
international industry standards for its business units. In addition,
the company is required to disclose the information about its total
carbon emissions and comparing these with sector benchmarks
and international standards.
15
Strategic ReportAnnual Report 2021
Top Five Portfolio Companies (continued)
Vietinbank JSC (“CTG”)
As at 30 June 2021
VietNam Holding’s investment
Date of first investment
28 February 2020
Ownership
Percentage of NAV
Internal rate of return (annualised)
0.2%
9.6%
110.2%
Share information
Stock Exchange
Date of listing
Market capitalisation (USD million)
Free float
Foreign ownership
Financial indicators
(as at 31 December)
HOSE
15 July 2009
8,524
35.5%
25%
2020
2019
Recent Developments
In 2020, CTG posted a consolidated NPAT of USD 596 million,
representing an increase of 45.2% YoY. Net interest incomes
reached USD 1,541m, up 7.2% YoY driven by credit growth of 8%
YoY. Non-interest income reached USD 422m, accounting for
21.5% of total operating income, increasing 33.0% YoY. Operating
expenses were effectively controlled with a Cost to Income Ratio
(“CIR”) of 35.5%, its lowest over the last 10 years.
Non-performing loans (“NPL”) were well managed at a ratio of
0.9% and NPL coverage ratio of 132%, which was much higher than
in 2019. In 2020, the bank bought back the entire issue of special
bonds (VAMC bonds) valued at USD 561m, helping to optimise its
balance sheet structure and improving asset quality.
Sustainability Strategy
CTG complies with all legal requirements on environmental
protection, such as the Law on Environmental Protection 2014
and Decree No. 18/2015/ND-CP issued by the Government or
Circular No. 43/2015/TT-BTNMT guiding the environmental status
report and management of environmental monitoring data. In
2020, CTG organised the “Joining hands to fight against plastic
waste” programme. The bank also implemented various measures
on energy saving, which resulted in 3% reduction in total annual
energy consumption.
Capital (USD million)
1,613.1
1,606.8
Total Operating Income (USD million)
1,963.3
1,748.6
CTG actively developed policies and products to create a flexible
mechanism in financing green projects.
NPAT (USD million)
EPS (VND)
TOI growth
NPAT growth
ROA
ROE
CAR
NPL
596.0
3,678
11.8%
45.2%
1.3%
16.9%
>9%
0.9%
409.0
1,966
42.4%
79.6%
1.0%
13.1%
>9%
1.2%
Equity multiplier
15.7
16.0
About the Company
Established in 1988, Vietinbank (“CTG”) is one of four state-owned
commercial banks in Vietnam and is ranked the third largest bank
by assets in the country. It held an IPO in December 2008 and listed
on the HOSE in 2009. In 2011, it became the first local bank to have
a strategic foreign partner after selling 10% of stake to IFC. In 2013,
it sold 19.73% to another strategic foreign partner, Japan’s Bank
Tokyo Mitsubishi UFG, which is now MUFG Bank.
In 2020, CTG completed the Restructuring Plan for bad debts from
the period of 2016-2020. The successful completion created a solid
foundation on which the bank plans to build and implement its
development strategy for the next ten years (2021-2030).
CTG was listed in the “Top 300 Most valuable bank brands
worldwide” by Brand Finance for the second consecutive year
and in the “Top 50 leading brands in Vietnam in 2020” by Forbes
Vietnam.
ESG Achievements
In 2020, CTG met its Basel II capital adequacy ratio requirements
and officially adopted Basel II standards at the beginning of 2021.
This helps it to catch up with other state-owned banks and private
banks.
As one of the leading state-owned commercial banks in Vietnam,
CTG has been selected by agencies and entities, including as
the serving bank for the State Bank of Vietnam and as the on-
lending bank for many ODA projects, and for foreign concessional
loans from international financial and credit institutions as well
as governments. CTG has recently conducted research into the
green capital market as well as a feasibility study into green bond
issuance.
In 2020, for the third consecutive year, CTG received the “Leading
Contact Center Vietnam 2020” award by the Global Banking and
Financial Review for its customer support system.
ESG Challenges
CTG could show stronger commitment to sustainability by disclosing
its policy and procedures to identify and manage environmental
and social risks of its clients and investees. Furthermore, the bank
should embed the UN’s 17 SDGs in its development strategy and
sustainability reporting.
16
Strategic ReportAnnual Report 2021
Military Bank (“MBB”)
As at 30 June 2021
VietNam Holding’s investment
Date of first investment
25 May 2017
Ownership
Percentage of NAV
Internal rate of return (annualised)
0.2%
6.4%
21.3%
Share information
Stock Exchange
Date of listing
HOSE
1 November 2011
Market capitalisation (USD million)
Free float
Foreign ownership
Financial indicators
(as at 31 December)
5,270
65.8%
21%
2020
2019
Capital (USD million)
1,212.5
1,023.9
Total Operating Income (USD million)
1,185.4
1,063.8
NPAT (USD million)
EPS (VND)
TOI growth
NPAT growth
ROA
ROE
CAR
NPL
372.8
2,993
11.0%
6.7%
1.9%
19.1%
10.4%
1.1%
348.2
2,758
26.2%
30.4%
2.1%
21.8%
10.1%
1.2%
Equity multiplier
9.9
10.3
About the Company
Founded in 1994, Military Bank (“MBB”) is the sixth largest bank in
Vietnam by total assets. It held an IPO in 2004 and listed its shares
on the HOSE in November 2011. After 26 years of development, MBB
has affirmed its position as one of the leading banks in Vietnam
with sound sustainable development practices and a strong
reputation. The bank operates as a versatile financial group with
six subsidiaries offering a full range of services, including banking,
securities, consumer finance, life insurance, non-life insurance,
fund management and asset management.
The effort of shifting its focus to the retail segment has earned
positive results. MBB has become one the most profitable banks
in the sector. The bank has scale advantages through its extensive
branch network and low funding cost given its high CASA ratio, due
in part to its close links to its large corporate enterprise clients and
major shareholders. Despite rapid business expansion, MBB has
consistently committed to its prudent asset-quality management.
MBB has won many accolades, including “Top 5 in the Vietnam Bank
system”, “Outstanding Bank for Small and Medium Enterprises”
and “Outstanding Bank for Green Credit” from International Data
Group (IDG).
Recent Developments
In 2020, MBB’s consolidated NPAT was USD 372.8m, increasing by
6.7% YoY. Overall total credit grew 23% YoY, with retail loans, 44%
of total credit, growing by 29% YoY. MBB’s subsidiaries performed
well with total profit before taxes in 2020 of USD 61m, growing 19%
YoY, while maintaining good market positions.
The bank was one of the most efficient lenders in the industry with
a Return on Equity (“ROE”) of 19.1% and Return on Assets (“ROA”)
of 1.9%. Its NPL ratio remained low at 1.1%. In 2020, MBB cut
lending interest rates five times to support its customers affected
by the COVID-19 pandemic, which translated to around USD 86m,
or 10% of its interest income.
Sustainability Strategy
MBB has carried out guidelines from the Government and the
State Bank of Vietnam regarding environment protection, social
responsibility, social risk management in credit activities and green
growth. In the credit process, MBB has integrated findings from
environmental and social impact assessments into the processes
for appraisal, supervision and monitoring.
MBB has prioritised funding, with preferential interest rates and
conditions, for green projects, agriculture and forestry projects,
environmental and social projects, high technology and safe
agriculture programmes. In addition, MBB complies with the
State Bank’s regulations on lending to prioritised sectors including
agriculture, export, supporting industries, small and medium-sized
enterprises (SMEs) and high technology businesses.
ESG Achievements
MBB is one of the most prudent and conservative banks in the
industry. It was among ten pilot banks to start implementing Basel
II in 2014, officially integrating these standards in 2019 and fully
applying the Basel II requirements in 2020.
MBB was presented “the Outstanding Bank 2020 for Green
Credit Award” for its pioneering role in green credit promotion
and contributions to the country’s sustainable development and
environmental protection commitments.
ESG Challenges
MBB faces the competitive challenges of maintaining loan quality
across its growing loan book and embedding ESG into its strategy
in a more robust manner. In 2020, MBB introduced its sustainable
development framework that clearly outlined key opportunities
and challenges in terms of corporate governance and business
ethics, emission reduction, safety management and staff’s
wellbeing, environment, community and social responsibilities.
17
Strategic ReportAnnual Report 2021
Top Five Portfolio Companies (continued)
VP Bank (“VPB”)
As at 30 June 2021
VietNam Holding’s investment
Date of first investment
27 July 2017
Ownership
Percentage of NAV
Internal rate of return (annualised)
0.2%
7.3%
104.8%
Share information
Stock Exchange
Date of listing
HOSE
18 July 2017
Market capitalisation (USD million)
Free float
Foreign ownership
Financial indicators
(as at 31 December)
7,219
70.0%
15%
2020
2019
Capital (USD million)
1,096.1
1,091.8
Total Operating Income (USD million)
1,691.0
1,568.9
NPAT (USD million)
EPS (VND)
TOI growth
NPAT growth
ROA
ROE
CAR
NPL
451.2
4,271
7.4%
26.1%
2.6%
22.0%
11.7%
2.9%
356.5
3,376
17.0%
12.3%
2.4%
21.5%
11.1%
3.0%
Equity multiplier
7.9
8.9
About the Company
Established in 1993, VP Bank (“VPB”) was one of the earliest-
established private banks in Vietnam. In 2010, the bank set up
the Consumer Credit Bank of Vietnam company, later known as
FE Credit, which has become the leader in the consumer finance
sector with a market share of around 50%. In 2017, the bank
was officially listed on the HOSE and in the same year signed an
exclusive insurance distribution contract with AIA for a term of 15
years.
VPB was the first Vietnamese private bank to be listed among “Top
500 Most Valuable Global Banking Brands”. It was awarded “The
Best Company to Work for in Asia” as voted by HR Asia. It also was
ranked in the “Top 10 Vietnam’s Most Profitable Private Enterprises”
by Vietnam Report and for three consecutive years achieved the
award for “Outstanding digital transformation bank” by IDG. In
addition, it was honored by the Asian Banker (Singapore) for “The
Achievement in Liquidity Risk Management”.
Recent Developments
In 2020, VPB posted the highest total operating income (“TOI”)
among private banks of USD 1,691m, up 7.4% YoY (inclusive of
FE Credit’s TOI of USD 790m). The consolidated NPAT increased
26.1% YoY to USD 451.2m. Its ROA and ROE was 2.6% and 22.0%
respectively, one of the best among commercial banks.
Operating in a difficult environment due to the pandemic, VPB
managed to enhance its asset quality with the consolidated NPL
ratio of below 3%. The capital adequacy ratio (CAR) under the
Basel II remained at high level of 11.7% in 2020, comparing to the
State Bank of Vietnam (“SBV”)’s minimum requirement of 8%.
In 2020, the bank reduced interest rates for more than 110,000
customers over a combined total credit amount of USD 2,160m,
equivalent to 15% of its total loan portfolio. Most of the loans
restructured as a result of the COVID-19 pandemic have become
performing.
VPB was allowed by the SBV to apply Basel II in Apr 2019. In early
2020, the bank was one of three banks in Vietnam to fully adopt
the Basel II standards.
In April 2021, VPB reached an agreement with Sumitomo Mitsui
Financial Group (“SMFG”) to sell 49% of the charter capital of
VPBank Finance Company Limited (FE Credit) at a valuation of
USD 2.8bn. SMBC Consumer Finance Company, a wholly owned
subsidiary of SMFG, is the legal entity to buy this stake. Via the
deal, FE Credit is expected to receive financial support, know-how,
and enhanced corporate governance from its new partner, which
is a leading consumer finance company in Japan. In addition, the
proceeds from the deal would enhance VPB’s capital strength and
allow it to continue expanding its operations.
Sustainability Strategy
VPB has developed policies and active plans to solve social,
environmental and climate challenges. The bank’s Environment
and Social Framework in credit activities complies with national
laws and IFC’s performance standards.
VPB offers green loans to promote sustainable investment and
industries that contribute to environmental protection and the
fight against climate change. The bank has cooperated with
international partners to develop and implement a Green Credit
Programme sized up to USD 212.5m to encourage customers to
invest more in green projects.
ESG Achievements
VPB is one of the best banks in terms of public information
disclosures in parallel with its Basel II requirements. It is one of only
a few banks that prepares IFRS financial statements in addition to
Vietnam Standards on Auditing (“VSA”) financial reports, ahead of
the deadline in 2025.
In 2020, VPB has disbursed over USD 65m for green projects in
the fields of renewable energy, products and manufacturing
technology that are adaptive to the clean transport, sustainable
water management and wastewater treatment, pollution
prevention and sustainable agriculture and forestry. It has initiated
projects that deploy financial solutions to support vulnerable
groups, creating positive social value and contributing to a fair and
inclusive economic recovery. In 2020, VPB remained in the top 20
companies qualified for the HOSE’s Vietnam Sustainability Index.
In 2020, VPB contributed USD 2m in support of communities
and launched its “Household Business Academy” to help 12,500
household businesses overcome difficulties.
ESG Challenges
VPB could improve its policy and procedures for data privacy and
customer protection as the bank puts a strong focus on the retail
banking division and consumer finance.
18
Strategic ReportAnnual Report 2021 Annual Report 2021
Strategic Report
19
Sustainability Report
As a responsible investor we are
committed to do more, measure
more and report more.
Vietnam’s effective handling of COVID-19 throughout 2020
disclosure
issued
in November 2020 requires
listed
and early 2021 helped the country become one of the best
companies to include ESG reporting, with total direct
performing economies in the world, with a GDP growth of
and indirect greenhouse gas (“GHG”) emissions stated
2.8% in 2020 and 5.6% in the first half of 2021. Despite a
in their annual reports. The National Assembly’s revised
harsh fourth COVID-19 wave, the full year forecast of 6%
Law on Environmental Protection No. 72/2020/QH14
GDP growth is back to the 30-year streak which started
was also passed in November 2020 and includes more
when Vietnam launched its ‘Doi Moi’ policy of economic
detailed provisions on climate change and solid waste
reforms designed to create a socialist-oriented market
management, promoting climate change mitigation,
economy.
regulating the roadmap for Vietnam’s pledge to reduce
GHG and bringing in legislation of the extended producer
Over the last 30 years, Vietnam has attracted an
responsibility towards circular economy development. Over
increasing amount of Foreign Direct Investment, further
the past year, Vietnam also saw a remarkable increase in
boosted by the recent trade war rhetoric between the
the adoption of renewable energy, with 11.1 GW of solar PV
US and China that resulted in tariffs imposed on many
added. As a result, the country is now ranked 3rd globally
Chinese goods, ultimately making Vietnam a preferred
in terms of new renewable energy capacity additions.
alternative manufacturing destination. The first waves of
the pandemic in 2020 accelerated this trend, with many
As a long-term, responsible investor, we are committed
foreign companies allocating more of their production
to
incorporating sustainability requirements
into our
capacity to Vietnam. In addition to manufacturing for
selection criteria. In our view, attention to ESG issues is
export, the country’s economic growth has been propelled
at the core of responsible investing, positively influencing
by surging domestic demand from its relatively young
investment returns and helping to mitigate portfolio risks
population (half of the 100m people in Vietnam are under
in the long-term. We are focused on fully integrating ESG
35 years of age) and the consequential expansion of the
standards into our core processes and choose to invest
middle class (now accounting for an estimated 13% of the
only in enterprises which meet our requirements in both
nation’s population).
financial and ESG matters.
In March 2021, the incoming Politburo and National
The Investment Manager’s due diligence procedures
Assembly reaffirmed Vietnam’s desire to become not
identifies and excludes any controversial business
only a more modern, industrialised economy, but also a
practices and that includes any dealing in tobacco,
key part of the global supply chain, and to get more of
firearms, distilled alcohol and gambling. The screening
its working citizens firmly in the middle-income bracket.
process also excludes companies engaged in pollution,
This will further facilitate the momentum towards greater
child
labour, bribery, or other damaging business
urbanisation: Vietnam’s urbanisation levels are currently
practices.
less than 40% - levels seen in Europe seventy years ago.
To advance our commitment to responsible investment,
However, as
in many developing countries,
rapid
we have identified the key areas that we need to continue
urbanisation and industrialisation have had detrimental
to progress on in the next two years:
impacts on the environment and natural assets. Climate
change, urban solid waste and air pollution are key
•
Measuring and keeping track of our portfolio’s carbon
environmental issues that the Vietnamese government
footprint to identify carbon-intensive sectors and
is keen to address over the next few years. In fact, 2020
define our strategy for environmentally-conscious
witnessed many welcomed improvements in Vietnamese
investment, including the integration of climate risks
legislation associated with ESG
issues. The Ministry
and opportunities into our broader risk management
of Finance’s Circular 96/2020/TT-BTC on
information
framework;
20
Strategic ReportAnnual Report 2021 •
Integrating the UN’s 17 Sustainable Development
Active Ownership 2.0
Goals (“SDGs”) into our ESG analysis. We have started
by mapping the products, services, and operational
As a signatory of the UNPRI, we strictly adhere to Active
conduct of investee companies with the 17 SDGs and
Ownership 2.0 – an aspirational standard for improved
set the strategy to shift capital away from business
stewardship developed by the UNPRI. The three central
activities, strategy and operational involvement not
elements to an Active Ownership 2.0 approach include:
aligned with achieving the SDGs;
•
•
Continuously improving our ESG Management System
with reference to the UNPRI guidelines, best practices
from our peers and industry guidelines; and
Advocating the adoption of ESG standards and
best practices among the Vietnamese business
community, with a strong focus on bettering
corporate governance and ESG reporting.
ESG Management System
•
•
•
prioritising outcomes to pursue and achieve positive
real-world goals, not inputs or processes;
constantly increasing our focus on common goals
at the economy- or society-wide scale (e.g., climate
change awareness and
reporting,
responsible
manufacturing processes and inclusiveness), and less
on the risks and returns of an individual holding; and
enhancing collaborative action among investors and
service providers to achieve collective goals across
sectors.
We recognise that ESG is a ‘journey’ for companies, with
some at more mature stages than others. We consider
Climate Change and the ESG Agenda
ourselves patient investors in that respect and, indeed,
continue to play an important part in supporting our
According to the United Nations Framework Convention
portfolio companies on various ESG levels.
on Climate Change (“UNFCCC”), Vietnam is one of the top
Our ESG Management System is a customised set of
Vietnam completed an updated Nationally Determined
policies, procedures, tools and reporting criteria designed
Contribution (“NDC”) with plans to cut 9% of total GHG
to identify, assess, manage and disclose information on
emissions by 2030 as a result of using domestic resources
ESG matters. We use this to help us both choose the right
and up to 27% if it receives international support through
risks and to take advantage of the opportunities that they
bilateral and multilateral co-operation under the Paris
five countries most vulnerable to climate change. In 2020,
present. Plus, in considering the activities of portfolio
Agreement.
companies, ensure that our decisions lead to more positive
impacts.
As we focus solely on the Vietnamese market, we
are strongly aware of the climate-related risks and
The ESG Management System has been developed by our
opportunities presented to the country and our investee
Investment Manager to:
companies, and believe this is reflected in our long-term
view in selecting investments. As a supporter of the Paris
•
•
•
integrate ESG issues into every step of the investment
Agreement and the TCFD, we also believe that it takes a
process: initial screening, due diligence, investment
collective role of governments, businesses, and investors
decision making and monitoring;
to truly address climate change and its socioeconomic
provide a framework for monitoring and reporting on
effects. As part of our risk management strategy and
ESG aspects to stakeholders; and
potential contribution in developing solutions, we will
work in partnership with our portfolio companies to
seek to positively contribute to these efforts through
help them identify and implement ESG opportunities,
our investment processes, engagement activities and
creating sustainable enhancement to their overall
collaboration with others.
financial performance.
21
Strategic ReportAnnual Report 2021 Sustainability Report (continued)
Climate Change and the ESG Agenda (continued)
This is the first year that VNH applies the TCFD recommendations to include climate-related disclosures in our sustainability
report. The recommendations are structured around four thematic areas that represent core elements of how organisations
operate: governance, strategy, risk management, and metrics and targets. Our response to the core elements of the TCFD
recommendations are summarised in the below table.
Governance
-
-
The Board of VNH has publicly given support to the Paris Agreement and the TCFD.
Established in June 2020, the ESG Committee established has been working closely with the Investment
Manager to incorporate climate-related risks and opportunities into the investment process and overall
risk management.
-
Sustainability matters are incorporated in reports to investors. In addition, the Chairman of the ESG
Committee and directors of the Investment Manager have attended cross-industry seminars and training
in the UK and Asia on climate and sustainability issues and are advocating for greater adherence and
involvement from peers.
-
The Investment Manager promotes and supports climate initiatives through industry bodies such as the
Association of Investment Companies (“AIC”), the Singapore Institute of Directors and Asia Investor Group
on Climate Change (“AIGCC”).
Strategy
-
In the short and medium term (2021-2025), as Vietnam companies are at a very early stage to incorporate
climate change into their business strategies, we continue to prioritise our engagement strategy to raise
portfolio companies’ awareness of climate change, the energy transition, guidelines to measure their total
carbon emissions and adoption of low-carbon technology.
-
We will identify the physical and transition risks of the sectors/industries that we target around the core
investment themes: industrialisation, urbanisation, and the domestic consumer. Within the industry/
sector, analyse and prioritise the best-in-class companies in terms of adoption of technology/solutions to
lower carbon emissions and disclosures on carbon footprint in their annual report. We will positively favour
companies showing strong climate-resilient strategies. We will measure and report our portfolio carbon-
footprint and seek to be 20% below the equivalent index levels.
-
In the long term (from 2025 onwards), and with shareholder approval, we will set a firm target percentage
in our portfolio for low-carbon investment.
Risk
Management
Metrics and
Targets
-
-
-
-
-
The ESG Committee works closely with the Audit and Risk Committee and the Investment Manager to
incorporate climate risks into the overall risk management framework (see pages 26-28).
Climate risk assessment is integrated by the Investment Manager into all stages of investment processes
(initial screening, due diligence, investment decision and monitoring). The risks are regularly discussed
during meetings of the Investment Committee and are managed at portfolio level.
Portfolio carbon footprint is the key metric that we are using to measure and keep track of our progress
towards reducing carbon emissions. Our target is to keep the portfolio carbon footprint at 20% below the
Vietnam All share Index (“VNAS”).
Joining in collaborative engagement to hold the rise in global average temperature to below 2 degrees
Celsius above pre-industrial levels. The target is measured by the number of climate initiatives that we
support (through communications, policy dialogue, company engagement, networking etc.).
From 2022 onwards, when there is more validated data from our portfolio companies, we will conduct more
quantitative analysis to assess the climate risk exposure of the portfolio and how these risks are translated
into financial impacts (e.g. potential financial loss from physical risks, carbon price and its impacts on
business profits). We will also identify businesses and investment opportunities that benefit from the
transition risk process.
22
Strategic ReportAnnual Report 2021 Portfolio Carbon Footprint
VNEEC, a Vietnamese environmental consultant, was engaged to measure and analyse the carbon emissions of all listed
companies that are in the VNH portfolio as of 31 December 2020. The portfolio companies’ attributable carbon footprints
are analysed against the attributable footprint of an identical invested amount in the companies of the VNAS.
In 2020, the VNH portfolio had an estimated total annual emission of 21,045 tonnes carbon dioxide equivalents (“tCO2e”)
from Scope 1 & 2. The carbon footprint of the portfolio in 2020 is significantly lower when compared against the benchmark
of an equivalent investment size in VNAS, with 32% or 9,820 tCO2e less total carbon emissions. This positive performance
was the result of both sector allocation and stock selection. As compared with the 2019 figures, the total carbon emissions of
the 2020 portfolio are slightly higher due to the increased percentage of the portfolio invested in the Industrial and Materials
sectors. The Fund is invested in the best-in-class companies of the Industrial and Materials sectors, and Hoa Phat Group JSC
(“HPG”) saw its share price rise by 100% during the year and, as a result, was the main contributor to the portfolio’s total
carbon emissions. HPG has the lowest carbon emission per tonne of crude steel among its peers in the Vietnamese steel
industry.
VN All Share
VNH Portfolio vs. the
Difference between
VNH Portfolio
benchmark
benchmark
Total Emissions Scope 1&2 (tCO2e)
21,045
30,865
Total Emissions Scope 1,2 & 3 (tCO2e)
42,430
68,156
Carbon footprint (tCO2e/ $M Invested)
153.1
224.6
Carbon intensity (tCO2e/ $M revenue)
525.58
590.76
-9,820
-25,726
-32%
-11%
The UN’s Sustainable Development Goals
The Sustainable Development Goals (“SDGs”), also known as the Global Goals, were adopted by the United Nations in
2015 as a universal call to action to end poverty, protect the planet, and ensure that by 2030 all people enjoy peace and
prosperity. The 17 SDGs are integrated, action in one area will affect outcomes in others, and development must balance
social, economic and environmental sustainability.
In Vietnam, the National Action Plan to implement the 2030 Agenda for SDGs (“SDG NAP”) was promulgated by the Prime
Minister in 2017, in which the 17 SDGs of Vietnam towards 2030 have been set, including 115 specific targets corresponding
with global SDGs targets which were approved at the Summit Meeting of the UN in September 2015. The SDG NAP shows
the Government’s commitment to implementing the SDGs.
We are also pleased to see that the SDGs have been incorporated in many of our portfolio companies’ annual report, with
detailed illustrations of how the SDGs are embedded in their vision, business strategies and operational conduct. FPT, the
largest holding in VNH’s portfolio is contributing greatly to SDG 4 – Quality Education – with their extensive education
programmes. VPB makes a great contribution to SDG – 7 Affordable and Clean Energy – and SDG 13 – Climate Action –
with its green credit programme for renewable energy projects and clean transportation. The renewable energy projects
financed by VPB are estimated to reduce 32,850 tonnes CO2 per year while a project to produce electric motorcycles with
an estimated output of 30,000 vehicles/year is estimated to contribute to cutting 240 tonnes of Hydrocarbon, 600 tonnes
of CO, 45 tonnes of NOx and 18,000 tonnes of CO2 when put into operation to replace Euro-3 gasoline engines vehicles.
Meanwhile, PNJ is making much progress in integrating SDG 5 – Gender Equality – into its management approach by raising
awareness about the role of women in both families and the workplace.
Our portfolio companies FPT, VPB, MBB, PNJ and NVL are also companies in the Vietnam Sustainability Index (“VNSI”) 2021
which features the top 20 sustainable listed companies on HOSE measured in terms of their ESG contributions.
23
Strategic ReportAnnual Report 2021 Sustainability Report (continued)
Corporate Governance
The Government’s Decree 155/2020 on corporate governance of public companies and the Ministry of Finance’s Circular 96
on disclosure of information of public companies issued in late 2020, both effective from 1 January 2021, further establishes
the foundations for the continued improvement of corporate governance practices in Vietnam, especially in terms of
enhanced disclosures and greater transparency.
Following Decree 155/2020, many companies in our portfolio have set up audit committees under the board of directors
(“BOD”). This BOD structure, with the support of the audit committee, helps set a strong ‘tone-at-the-top’, overseeing
the effectiveness and integrity of internal controls. In addition, many companies have made efforts in improving the
independence of their BOD by appointing more independent directors with work experiences from different sectors. We have
also observed a significant improvement in investor relations activities (“IR”) and information disclosure of our portfolio
companies, with monthly performance updates and quarterly reports sent to investors, more content available in English,
and better dedicated IR support to address questions from investors.
From an international perspective, according to the ASEAN Corporate Governance Scorecard (“ACGS”) Assessment 2019-
2020, Vietnamese companies have made notable improvements, with more listed companies following the international
best practices on public information disclosure, and improvements observed in all groups of companies: best, average and
worst performers. Two companies in our portfolio – FPT and NVL – received honourable mentions as the country’s Top Three
publicly listed companies for good corporate governance.
Dedicated Company Engagement Programme
The Investment Manager assigns a high priority to the engagement mandate entrusted by Shareholders and has established
a Company Engagement Programme and emphasising the necessity to systematically implement ESG factors for investee
companies. By providing knowledge on specific issues, the investment team supports companies in their own relevant
financial and ESG matters and encourages positive changes by helping to influence improvements in sustainability policies,
practices and performance, and making recommendations where appropriate. Furthermore, the engagement programme
helps the Investment Manager in its portfolio decision-making and risk management strategy.
Over the past year, the Investment Manager actively set up meetings with several portfolio companies in the Company
Engagement Programme. During that time, the Investment Manager held more than 20 engagements in both face-to-
face and online meetings. Of course, as a result of COVID-19 restrictions, the number of face-to-face meetings has been
reduced. In addition to talking about the portfolio company business strategy, the engagement meetings also included
discussions about the various ESG issues that the companies were focusing on and needed to understand better. Corporate
governance is of growing importance, and the Investment Manager is actively supporting several of its portfolio companies
in adopting best practices that lead to sustainable growth and long-term value. Recently, as an example, the Investment
Manager set up a meeting with the senior executives of a portfolio company to discuss in detail their approach to employee
incentives, alignment of interests and ESOPs, and later sent a formal letter to them providing comprehensive guidelines on
how to design an effective ESOP for employees that balances the interests of all stakeholders.
Shareholder Voting
During the financial year, the Company voted at the Annual General Meetings (“AGM”) of every portfolio company in which
it held an equity position. This year the AGMs were held in both online and offline modes given the COVID-19 situation.
The Investment Manager attended 22 AGMs on behalf of the Company and voted 100% in favour of all agenda items. The
Investment Manager considered each issue based on its merits related to the strategic objectives of the investee company
and its long-term performance.
As part of its usual practice, the Investment Manager discusses the agenda items with each of the portfolio companies’
board of directors. In all cases during the past year, the Company voted for every agenda item proposed by the companies’
boards of directors.
24
Strategic ReportAnnual Report 2021 Membership and Partnership to Promote ESG Practices
UNPRI
The Company’s investment policy is aligned with the UNPRI and the Company has been a UNPRI signatory since 2009. Each
year, the Company reports on its responsible investment activities through the UNPRI Transparency Report. In its most
recent report, the Company received two ‘A’ scores and one ‘A+’ score. The improvement in active ownership activities was
noted, particularly in some of the criteria, such as the engagement approach, escalation strategy, number of companies
engaged with, the topics covered, and the way we share insights from engagements with our stakeholders.
VIOD
Mr. Vu Quang Thinh – the CEO of Dynam Capital – is a founding member of the Vietnam Institute of Directors (“VIOD”) –
a professional organization promoting corporate governance standards and best practices in the Vietnamese corporate
sector. VIOD was legally formed in 2018 with technical support from the International Finance Corporation (“IFC”), a
member of the World Bank Group and the Switzerland’s State Secretariat for Economic Affairs (“SECO”). Governed by a
board of directors comprised of various private sector representatives, VIOD has close collaboration with and is supported
by the State Securities Commission of Vietnam (“SSC”), HOSE and HNX under the Vietnam Corporate Governance Initiative
(“VCGI”). With the support of SSC, VIOD will continue to represent Vietnam to participate in the 2021 ASEAN Corporate
Governance Scorecard. Our close collaboration with VIOD will continue to play a key role in fostering good corporate
governance in Vietnam over the coming years.
AIGCC
Dynam Capital, our Investment Manager, is a member of the Asia Investor Group on Climate Change (“AIGCC”). At the end
of this financial year, Dynam Capital signed on the 2021 Global Investor Statement to Governments on the Climate Crisis
with more than 450 investors to call for governments to raise their climate ambition and implement meaningful policies
to address the climate crisis. At a country level, the Investment Manager also submitted formal feedback to contribute
to the draft degree on GHG Emissions Reduction and Ozone Layer Protection by the Ministry of Natural Resources and
Environment.
25
Strategic ReportAnnual Report 2021 Principal Risks and Risk Management
The Board has carried out a robust assessment of the Company’s emerging and principal risks and considers with the
assistance of the Investment Manager the risks and uncertainties faced by the Company in the form of a risk matrix and
heat map. The investment management of the Company has been delegated to the Company’s Investment Manager. The
Investment Manager’s investment process takes into account the material risks associated with the Company’s portfolio
and the holdings in which the Company is invested. The Board monitors the portfolio and the performance of the Investment
Manager at regular Board meetings. The principal risks and the descriptions of the mitigating actions taken by the Board
are summarised in the table below.
Key risk
Description
Mitigating action
Market Risk
Vietnam is an increasingly open trading nation, and the
The Board is regularly briefed on political and economic
changes in terms of international trade, disruption to
developments by the
Investment Manager. The
supply chains and impositions of tariffs could impact
Investment Manager publishes a monthly report on the
directly and indirectly the Vietnamese economy and the
Company which includes information and commentary
companies in which the Company is invested.
on the macroeconomic developments in Vietnam.
The Vietnamese economy can also be impacted by
The inherent liquidity levels in the portfolio have been
the global-macro economic conditions, and also
considered explicitly in the viability of the Company and
geopolitical tensions. The Vietnamese capital markets
the Board is reasonably satisfied that even in periods of
are relatively young, and liquidity levels can change
distress and low liquidity there would be an adequate
abruptly responding to changes in the behaviour of
level of assets that could be realised to meet the
domestic and international investors.
liabilities of the Company as they fall due.
Parts of the portfolio may be prone to enhanced
The Board has noted that the underlying market
liquidity and price risk.
liquidity in Vietnam has increased dramatically during
the last year, and the portfolio composition has also
included a higher percentage of larger and more liquid
companies.
Investor
Sentiment
Vietnam is currently classified as a Frontier Market
The Investment Manager keeps shareholders and other
by MSCI, and the timetable for any inclusion as an
potential investors regularly informed on Vietnam in
Emerging Market is unsure. Investor attitudes to Frontier
general and the Company’s portfolio in particular. At
and Emerging Markets can change, leading to reduced
each Board meeting the Board receives reports from
demand for the Company’s shares, and an increase in
the Investment Manager, from finnCap Ltd, its broker,
the discount to NAV per share.
and is updated on the composition of the shareholder
register. In 2019 the Company migrated its domicile
from Cayman Islands to Guernsey and moved its
trading from AIM to a premium listing on the Main
Market of the LSE in order to make the shares attractive
to a wider audience of potential investors. In seeking to
narrow the discount, the Board has also implemented
an on-going share buy-back programme.
26
Strategic ReportAnnual Report 2021 Key risk
Description
Mitigating action
Investment
Performance
The performance of the Company’s
investment
The Board receives regular reports on the performance
portfolio could be poor, either absolutely or in relation
of the portfolio and
its underlying assets. The
to the Company’s peers, or to the market as a whole.
Investment Manager reports to the Board at each Board
meeting, and the Board monitors the performance of
the Investment Manager.
Fair Valuation
The risks associated with the fair valuation of the
The Board reviews the valuation of the portfolio with
portfolio could result in the NAV of the Company being
the Investment Manager regularly.
misstated. The quoted companies in the portfolio
are valued at market price, but it may be difficult to
The daily estimated NAV is calculated by the Investment
liquidate, where large positions are held, at these prices
Manager.
in an orderly fashion in the ordinary course of market
activity. The values of the Company’s underlying
The monthly NAV
is calculated by
the Fund
investments are denominated in Vietnamese Dong,
Administrator.
whereas the Company’s accounts are prepared in US
Dollars. The Company does not hedge its Vietnamese
Dong exposures so exchange rate fluctuations could
have a material effect on the NAV.
Investment
Management
Agreement
The fund management activities are outsourced to
The Board maintains a close contact with the
the Investment Manager. If the Investment Manager
Investment Manager and reviews the performance of
became unable to carry out these activities or if the
the Investment Manager on a regular basis.
Investment Management Agreement was terminated,
there could be disruptions to the management of the
portfolio until a suitable replacement is found.
Operational
The Company has no employees and is dependent
The Board receives regular reports from the Investment
on a number of third parties for the provision of
Manager and Fund Administrator on their policies,
services (including
Investment Management, Fund
controls and risk management.
Administration and Custody). Any control failures or
gaps in the services provided could result in damage or
loss to the Company.
Legal and
Regulatory
Failure to comply with
relevant
regulation and
The Company is administered in Guernsey by a Fund
legislation in relevant jurisdictions may have an impact
Administrator which reports to the Board at each Board
on the Company. Although there are compliance
meeting on compliance matters. The Board receives
policies (including anti-bribery policies) in place at
training and updates on compliance matters. The
the Company, the Investment Manager and all service
Investment Manager is regulated in Guernsey and has
providers, the Company could be damaged or suffer
extensive compliance and risk management policies in
losses if any of these polices were breached.
place.
27
Strategic ReportAnnual Report 2021 Principal Risks and Risk Management (continued)
Key risk
Description
Mitigating action
COVID-19
Outbreaks of variants of coronavirus (COVID-19) as
The Board is in regular contact with the Investment
part of a global pandemic pose a health concern
Manager, receiving regular updates on the development
through fast person-to-person spread, resulting in an
and the spread of COVID-19, mitigating actions in
illness that can lead to death. Lockdowns, quarantine
Vietnam, including the roll-out of vaccinations, and the
measures and restrictions on travel can cause sustained
impact on the performance of the investment portfolio.
global economic disruption and slowdown in growth,
The Board has verified that the key service providers all
and can cause some industries and companies to face
have functional Business Continuity Plans.
severe financial pressures that can lead to job losses
and in extreme cases bankruptcies, impacting the
The Investment Manager and its wholly owned subsidiary
value of the investments held by the Company, and
in Vietnam has a BCP that includes dividing staff into two
weakening investor confidence. Key service providers to
separate teams and enabling all staff to work from home
the Company could face loss of personnel, diminution
as necessary. The BCP has been tested and implemented
in service capability and could impact the ongoing
several times without loss of service to the Company.
operations of the Company. Travel restrictions can
prevent the Directors of the Company from meeting in
The key activities of the Company and its service
person. Delays in rolling out vaccinations may prolong
providers can be conducted virtually through online calls,
the economic impact on Vietnam and its population as
electronic mail and video-calls.
other countries begin to re-open their borders to travel.
The Investment Manager, on behalf of the Company
uses Regulatory News Services, monthly newsletters,
webinars and ad-hoc updates through social media to
keep the investors updated on the impact of COVID-19
on the portfolio.
Climate Risk
Climate change is happening faster than models earlier
The Board, through the
Investment Manager, has
predicted, threatening the safety of billions of people
engaged a specialist consulting firm in Vietnam to help
on the planet. Vietnam is one of the five countries most
estimate the portfolio’s carbon footprint and identify the
vulnerable to climate change. The country’s diverse
carbon-intensive sectors. The Investment Manager has
geography means it is hit by sea level rise, typhoons,
undertaken to analyse the physical and transition risks
landslides, flooding and droughts, and weather events
of climate-sensitive industries to develop an appropriate
are expected to worsen in coming years. Two types of
investment and engagement strategy and to encourage
climate-related risks have been identified. (1) Physical
investee companies to do more on climate-related risk
risks: sea level rise, floods and typhoons that put
assessment and disclosures. The Investment Manager
infrastructure or real estate companies with projects
monitors investee companies that are identified to be at
in coastal areas or low-lying levels at higher risk from
high climate risks.
physical impacts of climate change.
(2) Transition risks: climate policy and rising carbon
The Investment Manager is a member of the Asia
prices may cause higher prices and impact the viability
Investor Group on Climate Change and keeps abreast
of companies that rely on fossil fuels or those in high
of the changes in policies that may impact transition
carbon
intensity activities and may necessitate a
and other climate-related risks. The Board is in regular
significant, and costly, technology shift.
contact with the Investment Manager, and receives
reports through the ESG Committee and the Audit and
Risk Committee.
Emerging Risks
New risks beyond those identified as Principal Risks can
The Board reviews the risk matrix and risk register that
develop. These Emerging Risks may have a detrimental
captures and tracks emerging risks as part of its overall
or existential impact on the Company.
risk management practices. Emerging Risks are identified
and recorded with a description of their root cause, a
risk assessment, a description of mitigating actions, a
monitoring plan, and a net risk rating. Changes in risk
ratings are presented to the Board on a quarterly basis.
28
Strategic ReportAnnual Report 2021 Annual Report 2021
Strategic Report
29
Annual Report 2021
Governance
Governance
30
Director Profiles and Disclosure of Directorships
Hiroshi Funaki
Mr Funaki has been actively involved in raising, researching and trading Vietnam funds for 23 years. He worked at Edmond
de Rothschild Securities from 2000 to 2015 where he led the Investment Companies team, focusing on Emerging Markets
and Alternative Assets. Prior to that he was Head of Research at Robert Fleming Securities, also specialising in closed-
end funds. He currently acts as a consultant to a number of emerging market investors. He has a BA in Mathematics and
Philosophy from Oxford University and is a UK resident.
Sean Hurst
Mr Hurst was co-founder, director and chief investment officer of Albion Asset Management, a French regulated asset
management company, from 2005-2009. He is an experienced multi-jurisdictional director including roles at Main Market
and AIM traded funds and numerous offshore and UCITS funds. In addition to advising companies on launching both
offshore and onshore investment funds, he is currently non-executive chairman of JPEL Private Equity Ltd and non-executive
director at CIAM Opportunities Fund and Satellite Event Driven UCITS Fund. Mr Hurst was formerly a non-executive director
of AIM listed ARC Capital Holdings Ltd. He holds an MBA in Finance from CASS Business School in London and is a resident
of France.
Philip Scales
Mr Scales has over 40 years’ experience working in offshore corporate, trust, and third-party administration. For 18 years, he
was managing director of Barings Isle of Man (subsequently to become Northern Trust) where he specialised in establishing
offshore fund structures, latterly in the closed-ended arena (both listed and unlisted entities). Mr Scales subsequently co-
founded FIM Capital Limited where he is Deputy Chairman. He is a Fellow of the Institute of Chartered Secretaries and
Administrators and holds a number of directorships of listed companies and collective investment schemes. He is an Isle of
Man resident.
Damien Pierron
Mr Pierron is currently Partner and Co-founder at AlphaVir, a Venture Capital and Private Equity platform. In his last position,
he was a managing director in Societe Generale. Mr Pierron has 15 years’ experience in M&A, strategy and alternative
assets gained at, among others, Lafarge Holcim, OC&C Strategy Consultants, Natixis and Societe Generale. He is a CFA
charterholder and holds a Degree in Mathematics, Physics and Economy from Ecole Polytechnique in Paris and a Master’s
Degree in Quantitative Innovation from Ecole Nationale Superieure des Mines de Paris. He is a Dubai resident.
Saiko Tajima
Ms. Saiko Tajima has over 20 years’ experience in finance, of which 8 years have been spent in Asian real estate asset
management and structured finance. Working for Aozora Bank and group companies of Lehman Brothers and Capmark,
she focused on financial analysis, monitoring and reporting to lenders, borrowers, auditors, regulators and rating agencies.
Over the last 7 years, she has invested in and helped develop tech start-ups in Tokyo, Seoul and Sydney.
Disclosure of Directorships in Public Companies Listed on Recognised Stock Exchanges
Name
Company Name
Stock Exchange
Hiroshi Funaki
Origo Partners plc
Sean Hurst
Philip Scales
JPEL Private Equity Ltd
Origo Partners plc
London
London
London
First World Hybrid Real Estate plc
Channel Islands
31
GovernanceAnnual Report 2021 Corporate Governance Report
The Directors are responsible for the determination of
during the year ended 30 June 2021. Key issues affecting
the overall management of the Company including its
the Company’s corporate governance responsibilities, how
investment policy and strategy. This includes the review
they are addressed by the Board and application of the AIC
of investment activity, performance and control and
Code are presented below.
supervision of the Investment Manager and other advisers.
All of the Directors are non-executive and are independent
The AIC Code
includes a provision relating to the
of the Investment Manager.
appointment of a Senior Independent Director and the
Board confirms that Sean Hurst is the appointed Senior
The Board is also responsible for its own composition,
Independent Director of the Company. Liaison with
capital raising, meeting statutory obligations and public
Shareholders is dealt with mainly by the Chairman of the
disclosure, financial reporting and entering into any
Company and the Senior Independent Director working
material contracts by the Company.
closely with the Company’s Advisors.
The Directors have access to the advice and services of the
Directors’ Responsibilities to Stakeholders
Administrator and Secretary, who are responsible to the
Board for ensuring that Board procedures are followed and
Section 172 of the UK Companies Act 2006 applies directly
that it complies with Company Law, applicable rules and
to UK domiciled companies, however the AIC Code requires
regulations of the Guernsey Financial Services Commission,
that the matters set out in Section 172 are reported by all
the London Stock Exchange and The International Stock
companies, irrespective of domicile. This requirement does
Exchange.
not conflict with the Companies Law in Guernsey.
Where necessary, in carrying out their duties, the Directors
Section 172 recognises that Directors are responsible for
may seek independent professional advice at the expense
acting in a way that they consider, in good faith, is most
of the Company.
likely to promote the success of the Company for the
benefit of its shareholders as a whole. In doing so, they are
The Board of the Company has considered the Principles
also required to consider the broader implications of their
and Provisions of the Association of Investment Companies
decisions and operations on other key stakeholders and
Code of Corporate Governance issued in February 2019
their impact on the wider community and the environment.
(“AIC Code”). The AIC Code addresses the Principles and
Provisions set out in the UK Corporate Governance Code
Key decisions are defined as those that are material to
(the “UK Code”), as well as setting out additional Provisions
the Company, but also those that are significant to any
on issues that are of specific relevance to the Company.
of the Company’s key stakeholder groups. The Company’s
engagement with its key stakeholders is outlined in the
The Board considers that reporting against the Principles
corporate governance section of this report.
and Provisions of the AIC Code, which has been endorsed by
the Financial Reporting Council and the Guernsey Financial
Board Independence and Composition
Services Commission provides more relevant information
to Shareholders. The Board considers by reporting against
The Board consists of five non-executive Directors, each
the AIC Code, they are meeting their obligations under the
of whom is independent. No member of the Board is
UK Code, the 2011 GFSC Finance Sector Code of Corporate
connected to the Investment Manager or any of the
Governance and associated disclosure requirements under
service providers appointed. Four of the Board members
paragraph 9.8.6 of the Listing Rules.
were appointed in September/October 2017 following the
The AIC Code is available on the AIC website (www.theaic.
appointed in May 2019 following the retirement of a Board
retirement of the previous Board and the fifth member was
co.uk). It includes an explanation of how the AIC Code
member at the 2018 AGM.
adapts the Principles and Provisions set out in the UK Code
to make them relevant for investment companies.
Mr Funaki is a Director of Discover Investment Company
which holds 2,197,681 ordinary shares in the Company
Except as disclosed within this report, the Board is of the view
representing 5.2% of the issued share capital. The Board
that the Company complied with the recommendations of
are satisfied that this does not have any impact on Mr
the AIC Code and the relevant provisions of the AIC Code
Funaki’s independence as a Director of the Company.
32
GovernanceAnnual Report 2021 As detailed in note 8 of the financial statements, Directors own shares in the Company as follows:
Hiroshi Funaki
Sean Hurst
Philip Scales
Damien Pierron
Saiko Tajima
20,643
8,218
10,000
5,000
5,000
The Board reviews the independence of the Directors regularly and at least annually.
The Company is committed to ensuring that any board appointments are filled by the most suitably qualified candidates.
The Board acknowledges the benefits of greater diversity and is committed to ensuring that the Board brings a wide
range of skills, knowledge and experience. No specific diversity parameters have been set as the Board believes that all
appointments should be made on merit and taken in the context of the skills, knowledge and experience required for
an effective Board. The Nomination Committee is responsible for evaluating any new Board appointment and making
appropriate recommendations to the Board.
The Board believes the current board members have the appropriate qualifications, experience and expertise to manage the
Company. The Directors’ biographies can be found on page 31.
Board Meetings and Attendance
The Board meets regularly during the year with representatives from the Investment Manager present. In addition,
representatives from the Company’s Broker and Administrator attend Board and committee meetings by invitation. At
each quarterly Board meeting the performance of the portfolio is formally reviewed and during the year, Board members
also attend investment meetings with members of the Manager’s senior team. The Board members have a range of skills
covering investment management, banking, compliance and corporate governance as well as prior experience of acting as
directors of companies listed on the London Stock Exchange.
The Company’s brokers and lawyers are consulted on any matters where external expertise is required, and external advisers
attend board meetings as invited by the Chairman to report on and/or discuss specific matters relevant to the Company.
During the year 5 Board meetings were held and the record of attendance at each Board and committee meeting was as
Board
Audit and Risk
Remuneration
Management
and Nomination
Engagement
5 (5)
5 (5)
5 (5)
5 (5)
5 (5)
4 (4)
4 (4)
4 (4)
4 (4)
4 (4)
1 (1)
1 (1)
1 (1)
1 (1)
1 (1)
1 (1)
1 (1)
1 (1)
1 (1)
1 (1)
33
In addition there were 5 meetings of the Buy-Back Sub-Committee held during the year.
follows:
Hiroshi Funaki
Sean Hurst
Philip Scales
Damien Pierron
Saiko Tajima
GovernanceAnnual Report 2021 Corporate Governance Report (continued)
Tenure of Board Members and Succession Planning
regarding the Company’s business and given the
opportunity to meet with key functionaries prior to
The Company has adopted a formal policy that neither the
appointment. They are also provided with induction
Chairman nor any other Director shall serve for more than
training.
9 years.
Re-election of Directors
It is the responsibility of each Director to ensure that they
maintain sufficient knowledge to fulfil their role and so are
encouraged to participate in seminars and training courses
The Board has agreed that all Directors should submit
where appropriate.
themselves for annual re-election.
Committees of the Board
Mr. Hurst, Mr Funaki, Mr Pierron, Mr Scales and Ms Tajima
will all stand for re-election at the 2021 AGM.
Four committees have been formed, an Audit and Risk
Committee, a Remuneration and Nomination Committee,
The individual performance of each Director standing for
a Management Engagement Committee and an ESG
re-election or election has been evaluated by the other
Committee. Since September/October 2017 the Company
members of the Board and a recommendation will be
has been through a period of considerable change and
made that Shareholders vote in favour of their re-election
all Board members are members of each committee.
at the AGM in November 2021.
Administration
The Chairman of the Company does not Chair any of the
Committees. Details of the Chairman of each committee,
together with the number of meetings held during the year
are shown on pages 33 to 35. A summary of the Terms of
On 7 October 2019 the Board appointed Sanne Group
Reference of each committee is detailed below and a copy
(Guernsey) Limited to provide corporate governance,
of the Terms of Reference are available on the Company’s
secretarial, compliance and accounting services to the
website www.vietnamholding.com.
Company.
Conflicts of Interest
Audit and Risk Committee
The Directors are reminded at each Board meeting of their
Committee meets at least twice per annum. All members
obligations to notify any changes in their statement of
of the Board are members of the Committee. This
conflicts and also to declare any benefits received from
includes the Chairman of the Company where, given the
third parties in their capacity as a Director.
size of the Board, the experience of all members and
The Committee Chairman
is Philip Scales and the
the independence of the Company Chairman, it is felt
A register of conflicts is maintained by the Administrator
appropriate that all Board members play a role in the
and formally reviewed on a quarterly basis. Each Director
Audit and Risk Committee. The principal responsibility of
is required to declare any potential conflicts of interest on
the Committee is to monitor the production of the Interim
an ongoing basis.
and Annual Financial Statements and to present these to
the Board for approval.
Performance Evaluation
During the year the Board undertook an evaluation
controls and monitoring third party service providers,
exercise into the effectiveness of both the Board and the
review and monitor the external auditor’s independence
Committees. The programme was undertaken by the
and objectivity along with the effectiveness of the audit
Administrator and no significant issues were identified.
process and to make recommendations to the Board
Other duties include reviewing the internal financial
in relation to the appointment of the External Auditor
The Remuneration and Nomination Committee will again
together with their remuneration.
consider whether for the next evaluation due in 2022, an
external facilitator should be appointed to undertake the
A report of the Audit and Risk Committee is detailed on
evaluations.
pages 38 to 39.
Professional Development and Training
Remuneration and Nomination Committee
New Directors are provided with all relevant information
The Remuneration and Nomination Committee is chaired
34
GovernanceAnnual Report 2021 by Saiko Tajima and all members of the Board are
Environmental, Social and Governance Committee
members of the Committee. The Board considers that all
the Directors are independent and therefore eligible to be
The ESG Committee was established during the year and
members of the Committee. The Committee meets at
is chaired by Sean Hurst with all members of the Board
least once in each year and at such other times as may be
forming the Committee. The aim of the Committee is to
considered necessary.
establish a unified view of ESG, increasing understanding
of all three aspects: environmental, social and governance,
The principal duties of the Remuneration and Nomination
and to promote the robust standards of corporate
Committee are to review the fees paid to the Non-Executive
governance that the Company adopts.
Directors, to consider the appointment of external
remuneration consultants, to review the structure, size
The purpose of the ESG Committee, which shall meet
and composition of the Board, make recommendations
at least once a year, is to support the Company’s on-
to the Board for any changes and to consider succession
going commitment to environmental, health and safety,
planning. The Committee also undertakes the evaluation
corporate social responsibility, corporate governance,
of the appointment of any additional or replacement
sustainability, and other public policy matters relevant to
Directors and ensures they are provided with training
the Company (collectively, “ESG Matters”).
and induction. The Committee arranges for an annual
evaluation of all Board and Committee members.
Shareholder Engagement
During the year the Committee reviewed the fees paid to
The Company is committed to listening and communicating
Directors and resolved that no changes be recommended.
openly with its Shareholders to ensure that its strategy,
business model and performance are clearly understood.
The AIC Code
includes a provision relating to the
All Board members have responsibility for Shareholder
appointment of a Senior Independent Director of which
liaison but Shareholder contact is mainly dealt with by the
Sean Hurst was appointed in the prior year.
Chairman of the Company and the Senior Independent
Director in close liaison with the Company Advisors.
No new Board appointments were considered during the
year but the Committee reaffirmed the policy that no
Copies of the Annual Report are sent to all Shareholders
Director should serve for more than 9 years.
and can be downloaded from the website. Other Company
information including the Interim Report is also available
Management Engagement Committee
on the website.
The Chairman of the Management Engagement Committee
The Company holds an AGM in each year, which gives
is Damien Pierron and the Committee shall meet at least
investors the opportunity to enter into dialogue with the
once a year. All members of the Board are members of
Board and for the Board to receive feedback and take action
the Committee. The principal duties of the Committee
as necessary. The Investment Manager also participates in
are to review the performance and appointment of the
meetings with investors arranged by the Company’s Broker
Investment Manager together with their remuneration
and has arranged seminars and webinars to update current
and to review the effectiveness and competitiveness of the
and prospective investors on the developments in the
other main service providers and functionaries together
Vietnamese market and the performance of the Company.
with reviewing their performance.
The Investment Manager also updates the Company’s
website and sends out monthly factsheets on the Company
A share buy-back sub-committee consisting of Hiroshi
to investors who have registered to receive such updates.
Funaki and Sean Hurst has been formed under the
The Company has a LinkedIn page which is administered by
Management Engagement Committee and meets
the Investment Manager established in the prior year.
regularly to review and monitor the share buy-back
programme. Damien Pierron also joins the share buy-back
The Board reviews proxy voting reports and any significant
sub-committee on an ad-hoc basis.
negative response is discussed with relevant Shareholders
and, if necessary, where appropriate or possible, action is
During the year the Committee reviewed the performance
taken to resolve any issues. In the interest of transparency
of the Investment Manager, Administrator and Sub-
and best practice, the level of proxy votes (for, against and
Administrator, Corporate Broker and Registrar. No changes
vote withheld) lodged on each resolution is declared at all
were recommended as a result of these reviews.
general meetings and announced.
35
GovernanceAnnual Report 2021 Corporate Governance Report (continued)
Corporate Policies
Anti-Bribery and Corruption Policy
The Company engaged a specialist consulting firm to
estimate the carbon footprint of the portfolio, and this is
detailed in the Sustainability Report.
The Board is committed to the prevention of bribery
Gender Metrics
throughout the organisation and will take every step
necessary to ensure to the best of its ability, that business
The Board of the Company recognises the governance
is conducted fairly, honestly and openly. It has adopted
mechanism to ensure there is diversity amongst the
a formal policy to combat fraud, bribery and corruption
Directors and as such a female was appointment to the
and will seek annual confirmation from the Investment
Board in May 2019. The Board notes that 40% of the team
Manager and other service providers it engages that they
members employed by the Investment Manager and its
have similar policies in place. Furthermore, the Board has
subsidiary in Vietnam are female.
zero tolerance to the criminal facilitation of tax evasion.
These policies apply to the Company and to each of its
Directors. Further, the policies are shared with each of the
Company’s service providers, each of which confirms its
compliance annually to the Board.
Criminal Facilitation of Tax Evasion Policy
The Board has taken steps to ensure there is no criminal
facilitation of tax evasion. This applies to the Company
and to each of its Directors, as well as service providers. A
policy has been adopted by the Board.
General Data Protection Regulation
The Company abides by general data protection
regulation. As it is established in the Bailiwick of Guernsey,
under The Data Protection (Bailiwick of Guernsey) Law,
2017, the Company has registered with the Office of the
Data Protection Authority.
The Company
Global Greenhouse Gas Emissions
The Company has no significant greenhouse gas emissions
to report from its operations for the year to 30 June 2021, nor
does it have responsibility for any other emission producing
sources. The Company is very conscious of its own carbon
footprint in carrying out its business activities. The main
source of this for the Company is in the international
and domestic air travel of the Board of Directors and
members of the Investment Manager in conducting the
business of the Company and meeting with Shareholders.
For the year to 30 June 2021, many of the board meetings
were conducted through video-conference as a result of
restrictions related to Covid-19. During the year members
of the Board travelled to London and Zurich in conducting
the business of the Company. The estimated carbon
footprint of travel activities (that have not already been
offset at source) amounts to approximately 4.45 tonnes
of CO2e.
36
GovernanceAnnual Report 2021 Annual Report 2021
Governance
37
GovernanceAnnual Report 2021 Audit and Risk Committee Report
The main items that the Audit and Risk Committee (the
a review of risks relevant to the Company. Details of the
“Committee”) has reviewed during the year ended 30 June
number of committee meetings held during the year
2021 were:
ended 30 June 2021 and the number of those attended by
each committee member are shown on page 33.
•
•
•
•
reviewing the content of the Interim Report and the
Annual Report;
The External Auditor is invited to attend committee
reviewing the independence and effectiveness of the
meetings where the Annual and Half-Year Reports are
External Auditor;
considered and separate meetings are held with the
considering and reviewing the internal control and
External Auditor where the Investment Manager is not
risk management systems and the work of the service
present.
providers; and
reviewing the control framework with the assistance
Principal Duties
of the Investment Manager and Administrator.
Internal Control
As a company with a Board consisting entirely of Non-
executive Directors and which outsources the day-to-
day activities of portfolio management, administration,
accounting and company secretarial to external service
providers, the Board considers the provision of an internal
audit function is not relevant to the position of the
Company.
The Committee reviews the internal financial control
The main responsibilities of the Committee include:
•
•
•
•
to monitor the integrity of the financial statements of
the Company and any formal announcements relating
to the Company’s financial performance;
to review the Company’s internal financial controls
and the internal control and risk management systems
of the Company and its third party service providers;
to make recommendations to the Board in relation
to the appointment of the External Auditor and their
remuneration; and
to
review and monitor the External Auditor’s
systems
for
their effectiveness and
through
the
independence and objectivity and the effectiveness of
Management Engagement Committee, monitors the
the audit process.
performance of the external service providers. The Board
recognises its ultimate responsibility for the Company’s
A copy of the Terms of Reference of the Committee are
system of internal controls to ensure the maintenance of
available either from the Company’s website or from the
proper accounting records, the reliability of the financial
Company’s Administrator.
information upon which business decisions are made and
that the assets of the Company are safeguarded. Through
Valuation of Investments
these procedures, the Directors have kept under review the
effectiveness of the internal control system throughout the
The fair value of the Company’s investments at 30 June
year and up to the date of this report. There were no issues
2021 was USD 193.1 million which represented 98.5% of the
arising from this review.
Company’s NAV (30 June 2020: USD 115.1 million and 98.1%
Membership and Attendance
respectively).
The valuation of investments is the most significant factor
The Committee membership currently consists of all
in relation to the accuracy of the financial statements.
Board members under the Chairmanship of Philip Scales.
This includes the Chairman of the Company where, given
The Committee reviewed the portfolio valuation as at 30
the size of the Board, the experience of all members and
June 2021 and obtained confirmation from the Investment
the independence of the Company Chairman, it is felt
Manager that the Company’s policies on the valuation
appropriate that all Board members play a role in the
of investments had been followed. The Committee also
Audit and Risk Committee. The Terms of Reference allow
made enquiries of the Sub-Administrator and Custodian,
appointments to the Committee for a period of up to 3
both of whom are independent of the Company, to check
years and this may be extended for two further 3-year
procedures are in place to ensure the portfolio is valued
periods provided that the Director remains independent.
correctly.
The Committee holds at least three meetings a year
The Committee agreed the approach to the audit of the
which are to review the Annual and Half-Year Reports of
valuation of investments with the External Auditor prior
the Company and also for audit planning purposes and
to the commencement of the audit. The results of the
38
GovernanceAnnual Report 2021 audit in this area were reported by the External Auditor
reviewing and obtaining assurances from key service
and there were no significant disagreements between
providers for the controls for which they are responsible.
the Investment Manager, the Sub-Administrator and the
External Auditor’s conclusions.
Anti-Bribery and Corruption
The Board reviews the changes in valuations at each
The Company has a zero-tolerance approach to bribery
quarterly Board meeting.
and corruption, in line with the UK Bribery Act 2010. An
Anti-Bribery and Corruption Policy has been adopted and
Incentive Fee
is kept under review.
The basis for the calculation and payment of the incentive
Annual Report
fee to the Investment Manager is summarised in the Notes
to the Financial Statements.
The Committee has reviewed the Annual Report along with
reports and explanations from the Company’s Investment
The Committee reviews the calculation of any fee prior
Manager, Administrator, and other service providers. The
to payment, however no incentive fee is payable for the
Committee is satisfied that the Annual Report is fair,
year ended 30 June 2021 and from 1 November 2020 the
balanced, and understandable and that it provides the
incentive fee has been removed from the Investment
necessary information for Shareholders to assess the
Management Agreement.
Company’s performance, business model, and strategy.
External Audit
The Committee is satisfied that KPMG has fulfilled its
responsibilities in respect of the annual audit and has
KPMG Channel
Islands Limited (“KPMG”) has been
recommended that KPMG be re-appointed for the
the External Auditor since the Company re-domiciled
forthcoming financial year.
in Guernsey on 25 February 2019. The Committee held
meetings with KPMG before the start of the audit to discuss
formal planning and to discuss any possible issues along
Philip Scales
with the scope of the audit and appropriate timetable.
Audit and Risk Committee Chairman
Informal meetings have also been held with the Chairman
30 September 2021
of the Committee in order that the Chairman is kept up to
date with the progress of the audit and formal reporting
required by the Committee.
Annually, the Committee reviews the performance of
KPMG in order to recommend to the Board whether or not
the Auditors should be reappointed for the next year.
Audit fees payable to KPMG for 2021 are GBP 52,000 (2020:
GBP 49,000). Non audit fees payable to KPMG for 2021
were GBP nil (2020: GBP nil).
The Committee has reviewed KPMG’s report on their
independence and objectivity including their structure for
the audit of the Company and is satisfied that the services
provided by KPMG do not prejudice its independence. The
Committee will continue to review any non-audit services
that may be provided by KPMG in order to ensure their
continuing independence and integrity.
Risk Management
An outline of the risk management framework and principal
risks is detailed on pages 26 to 28. The Committee will
keep under review financial and operational risk including
39
GovernanceAnnual Report 2021 Directors’ Remuneration Policy and Report
Remuneration Policy
The Directors are entitled to receive fees for their services which reflect their experience and the time commitment required.
At the Annual General Meeting to be held in November 2021 an ordinary resolution seeking approval for the Directors’
remuneration report will be put to Shareholders.
Directors’ Remuneration
Directors’ fees are paid within limits established in the Articles of Incorporation which shall not exceed an aggregate of
USD 350,000 in any financial year (or such sum as the Company shall from time to time determine). The Directors may also
be paid reasonable travelling, hotel and other out-of-pocket expenses properly incurred in attending Board, Committee
Meetings or general meetings. The Remuneration Committee reviews the Directors’ fees periodically although the review
will not necessarily result in any increase. For the year ended 30 June 2021 annual Directors’ fees remained at USD 50,000
with the Chairman of the Company receiving an additional USD 10,000 per annum or prorated as applicable and, the Senior
Independent Director and the Chairman of the Audit and Risk Committee receiving an additional USD 5,000 per annum or
prorated as applicable.
The Directors are also paid a per diem fee of USD 1,500 for each Board meeting attended and USD 750 for a Committee
meeting attended, either in person or by telephone.
The Company has no bonus schemes, pension schemes, share option or other long-term incentive schemes in place for the
Directors.
Director
Role
Hiroshi Funaki
Non-executive Chairman;
Audit and Risk Committee member
Additional ad
hoc fees as
Remuneration
agreed by Board
USD
60,000
USD
11,250
Total fees to
30 June 2021
USD
71,250
Sean Hurst
Senior Independent Director;
55,829
10,741
66,570
Environmental, Social and
Governance Committee Chairman
Philip Scales
Non-executive Director;
55,000
6,750
61,750
Audit and Risk Committee Chairman
Damien Pierron
Non-executive Director;
50,000
7,873
57,873
Management Engagement
Committee Chairman
Saiko Tajima
Non-executive Director;
50,000
6,000
56,000
Remuneration and Nomination
Committee Chairman
Total
270,829
42,614
313,443
40
GovernanceAnnual Report 2021 Director
Role
Additional ad hoc
Remuneration
fees as agreed by
USD
Board USD
Total fees to
30 June 2020
USD
Hiroshi Funaki
Non-executive Chairman;
55,000
22,500
77,500
Audit and Risk Committee member
Sean Hurst
Senior Independent Director;
58,049
19,926
77,975
Environmental, Social and Governance
Committee Chairman
Philip Scales
Non-executive Director;
55,000
14,250
69,250
Audit and Risk Committee Chairman
Damien Pierron
Non-executive Director;
50,000
8,582
58,582
Management Engagement
Committee Chairman
Saiko Tajima
Non-executive Director;
50,000
9,750
59,750
Remuneration and Nomination
Committee Chairman
Total
268,049
75,008
343,057
41
GovernanceAnnual Report 2021 Directors’ Report
The Directors present the Annual Report and Financial
Offers. The Directors note that the underlying liquidity of
Statements of the Company for the year ended 30 June
Vietnamese stocks has increased significantly over the
2021.
The Company
last twelve months with average daily traded volumes
increasing by as much as 5x the level of the prior year. The
Directors also note that the portfolio is composed of a
higher percentage of larger and more liquid stocks than
VietNam Holding Limited (the “Company”) is a closed-
in the prior year. Lastly, the Directors note that at year-
end investment company that was incorporated in the
end the portfolio is comprised of cash and quoted stocks
Cayman Islands on 20 April 2006 as an exempted company
only, with the only non-quoted asset being sold before the
with limited liability under registration number 166182. On
year-end. The Company’s liquidity position, taking into
25 February 2019, the Company, via a process of cross-
account cash held and with the ability to sell underlying
border continuance, transferred its legal domicile from
assets to meet share buybacks, tenders and to meet the
the Cayman Islands to Guernsey and was registered as a
operating costs of the Company, shows that the Company
closed-ended company limited by shares incorporated in
is able to operate with appropriate liquidity and be able to
Guernsey with registered number 66090.
meet its liabilities as they fall due. The Directors therefore
The investment objective of the Company is to achieve
have adequate resources to continue its operations for the
long-term capital appreciation by investing in a diversified
foreseeable future. Thus, they continue to adopt the going
portfolio of companies that have high growth potential at
concern basis of accounting in preparing the financial
an attractive valuation.
statements.
have a reasonable expectation that the Company will
At the Extraordinary General Meeting held on 31 October
The 4th wave of the Covid-19 pandemic, with the spread of
2018 the Shareholders voted in favour of the continuance
the Delta variant, has required the government to adopt
resolution, authorising the Company to operate
in
much stricter measures to control the situation, including
its current form through to the 2023 Annual General
significant periods of lockdown, leading to the most
Meeting when a similar resolution will be put forward for
significant impacts to the economy since the beginning of
Shareholders’ approval.
the pandemic in 2020. The Investment Manager expects
that many listed companies will record sharply reduced
Dynam Capital, Ltd has been appointed as the Company’s
profitability for the third quarter of 2021. Although
Investment Manager and is responsible for the day-to-
Vietnam was initially slow in vaccinating its population
day management of the Company’s investment portfolio
due to the shortage of supply, Vietnam has accelerated
in accordance with the Company’s investment policies,
its vaccinations rate, and has procured (and been given)
objectives and restrictions.
Results
several million vaccine doses. Recently the vaccination rate
reached 1 million doses a day. It is estimated that 30% of
the adult population have received one dose already, and
6% two doses. In Ho Chi Minh City it is estimated that more
The net income for the year ended 30 June 2021 amounted
than 90% of the adult population has received one dose,
to USD 100,153,888 (2020: loss of USD 21,092,101). There
and more than 11% two doses. The government expects
were no dividends declared during the year ended 30 June
lockdown measures can be gradually relaxed in the fourth
2021 (2020: USD nil).
Going Concern
quarter of 2021. Since early 2020, the Company’s portfolio
has been rebalanced with greater focus on larger, more
liquid stocks. Many of these companies have proved to be
much more resilient to the crisis than smaller companies.
The financial position of the Company, its cash flows and
Ironically, liquidity in the Vietnam stock market has
liquidity position are described in the Financial Statements
increased during the pandemic, possibly influenced by the
and the Notes to the Financial Statements. These also
greater number of investors trading electronically through
contain the Company’s objectives, policies, processes
smartphones. It is estimated that the number of retail
for managing its capital, its financial risks management
investors has increased by more than 1 million over the last
objectives, details of its financial instruments, and its
twelve months, and this has buoyed market liquidity which
exposures to credit risk and liquidity risk.
reached as much as USD 1.5 billion a day, recently.
The Company’s forecasts and projections have been stress
Improved liquidity in the market and the portfolio was in
tested taking into account the potential for (i) asset value
evidence in August 2021 when the Investment Manager
declines, (ii) declines in cash dividends from equities
was able to generate close to 30% cash in the portfolio to
held in the portfolio and (iii) share buybacks and Tender
fund the recent tender offer.
42
GovernanceAnnual Report 2021 Viability Statement
- Brexit:
The Board has considered the viability period for the
The potential impact of Brexit has been considered and is
Company, using the criteria set out in the UK Corporate
not deemed to be significant.
Governance Code. The Board considered the current
position of the Company, and its longer-term prospects,
- Operations:
strategies as well as its principal risks in the current,
medium and long-term, emerging risks and uncertainties
The current financial year has been a year of significant
as detailed in the Principal Risks and Risk Management on
operational change caused by the COVID-19 pandemic.
pages 26 to 28 and in the Investment Manager’s Report on
The Board is confident that operationally the Company is
pages 8 to 13. The strategy provides long term direction and
very robust and that it can, if necessary, operate effectively
is reviewed annually and further tested in a series of robust
without the need for physical meetings or an office
downside financial scenarios as part of the annual review.
presence. The Board, Investment Manager, Administrator
These scenarios included an assessment of those risks that
and other service providers have all demonstrated that
would threaten its strategic objectives, its business as
they can work effectively and efficiently despite, in many
usual state, its business model and its future performance,
cases, working remotely for most of the year.
solvency or liquidity. The sensitivity analysis was applied to
the forecasted cash flows. Based on this assessment, the
- Investment:
Board has determined that a three-year viability period to
30 June 2024 is an appropriate period that the Company
•
The liquidity of the Company’s underlying portfolio
will be able to continue in operation and meet its liabilities
is high: average daily trading volumes on Vietnam’s
as they fall due over the period of three years.
stock markets have increased significantly, reaching
3 to 5 times the levels of the previous year, and the
In arriving at this conclusion, the Board considered:
underlying portfolio is composed of a higher number
- The Volatility of Global Economic Conditions and
At year end there were no unquoted investments.
of listed and larger firms than in the previous year.
Impact of COVID-19:
Recent stress testing has confirmed that shares can
be easily liquidated, despite the more uncertain and
The Board considered the impact and effectiveness of
volatile economic environment. It is estimated that
mitigation strategies being mandated by governments in
up to 75% of the portfolio can be readily liquidated in
impacted countries; the adverse financial impact already
less than ten trading days. The portfolio is un-geared
being experienced by the Company: the disruption to
and, as it holds mostly listed securities, has sufficient
economic activity and financial pressures and impact on
liquidity to meet the Company’s liabilities.
investments in the Company’s portfolio. The Board also
•
The current portfolio is low to medium risk based on
engaged with the Investment Manager on the longer-
assessments both individually and in combination of
term impact of climate change, and other societal change
liquidity risk, credit risk, interest rate risk and currency
factors, to the portfolio. Additionally, the Board took
risk. The Investment Manager and the Board review
into consideration the impact on the capital markets in
and evaluate the portfolio on a monthly basis.
Vietnam; the existence and effectiveness of business
continuity plans of the Company and its service providers;
- Principal Risks:
and the impact on our stakeholders caused by COVID-19.
- Business Environment:
The Board’s review considered the Company’s cash
flows and income flows, with reference to operational,
business, market, currency, liquidity, interest rate and
Whilst the impact of COVID-19 on the global business
credit risk associated in financial instruments set out in
environment will be material, with significant changes
note 3 (Financial Instruments and Associated Risks) and
to the world’s supply chains, consumer demand, ability
note 4 (Operating Segments) of the financial statements
to travel freely and the overall economic growth, the
on pages 64 to 68. The statistical modelling is used to
Company’s strategy for
investing
in a portfolio of
quantify these risks, which ensures that the Company
equities in Vietnam and targeting growth in the value of
holds sufficient financial assets and capital to mitigate the
the portfolio over the medium term is unchanged. The
impact of these risks.
combination of potential structural opportunities that
may benefit Vietnam as a destination for manufacturing,
and the opportunities within the growing domestic market
provide attractive investment opportunities.
43
GovernanceAnnual Report 2021 Directors’ Report (continued)
Viability Statement (continued)
- Income and Expenses:
•
•
The Company has a portfolio that generates investment income through dividends payments. The cash dividends
received can be used to partially offset the Company’s on-going expenses. In the year under review, total on-going
expenses were covered 0.88 times by investment income. In the following year, the current investment income is
forecast to cover 0.55 times the amount of on-going expenses. In the stress-tested scenario with significant declines in
cash dividends forecasted due to COVID-19, the investment income is forecast to cover 0.39 times on-going expenses.
The Company maintains a cash buffer of approximately 2% of NAV to help meet on-going expenses.
Given the adequate levels of cover set out above, the cash buffer, the liquidity levels and the overall portfolio risk, the Board
has reasonable expectation that the Company can continue in operation and meet its liabilities over the forecast period.
The Company’s viability depends on the global economy and markets in Vietnam continuing to function. The Board has
also considered the possibility of a wide-ranging collapse in corporate earnings and/or the market value of listed securities.
To the latter point, it should be borne in mind that a significant proportion of the Company’s expenses are in investment
management fees linked to the level of net assets of the Company, which are therefore variable in nature and would
naturally reduce if the market value of the Company’s assets were to fall.
In order to maintain viability, the Company has robust risk controls as set out in the Principal Risks and Risk Management
on pages 26 to 28 and the risk management and control framework have the objectives of monitoring and reducing the
likelihood and impact of operational risks including poor judgement in decision-making, risk-taking that exceeds the levels
agreed by the Board, human error, or control processes being deliberately ignored.
In this context, the Board considers that the prospects for economic activity will remain such that the investment objective,
policy and strategy of the Company will be viable for the foreseeable future and through a period of at least three years
from 30 June 2021.
Key Performance Indicators (KPIS)
To ensure the Company meets its objectives the Board evaluates the performance of the Investment Manager at least at
each quarterly board meeting and takes into the following performance indicators:
•
•
NAV – reviews the performance of the portfolio
Discount to NAV – and reviews the average discount for the Company’s share price against its peer group.
Share Capital and Share Buy-Backs
An active discount control mechanism to address the imbalance between the supply of and demand for ordinary shares
using share buy backs is employed by the Broker and monitored by the Board. At the Annual General Meeting (“AGM”) of
the Company held on 30 October 2020, the Company was granted the general authority to purchase in the market up to
14.99% of the ordinary shares in issue. This authority will expire at the AGM to be held in November 2021.
In the year ended 30 June 2021 605,681 ordinary shares had been bought back and cancelled under the Company’s share
buyback programme. A further 7,585,249 ordinary shares were bought back following the Company’s tender offer in
November 2020. Since the year-end and up to 30 September 2021, being the latest practicable date prior to publication of
the report, the Company bought back and cancelled 12,918,477 ordinary shares.
44
GovernanceAnnual Report 2021 Share Buy-Backs to the Year-Ended 30 June 2021
30 June 2021
30 June 2020
Number of
USD’000
Number of
USD’000
Shares
Shares
Opening balance at 1 July
50,814,865
81,832
51,283,448
82,885
Shares issued during the year
Shares repurchased during the year
Tender Offer
-
(605,681)
(7,585,249)
-
(1,180)
(20,178)
-
-
(468,583)
(1,053)
-
-
Closing balance at 30 June
42,623,935
60,474
50,814,865
81,832
Substantial Share Interests
The following shareholders owned 5% or more of the shares in issue
of the Company, as stated on the share register as at 30 June 2021.
Percentage of
Number of
total shares in
Shareholder
ordinary shares
Citibank Nominees (Ireland) Designated Activity Company
Lynchwood Nominees Limited
The Bank of New York (Nominees) Limited
Vidacos Nominees Limited
Euroclear Nominees Limited
Chase Nominees Limited
Notification of Shareholdings
9,296,778
8,767,087
4,367,779
3,565,790
2,445,231
2,350,521
issue
21.81
20.57
10.25
8.37
5.74
5.51
In the year to 30 June 2021 the Company received notifications in accordance with Chapter 5 of the DTR (which covers the
acquisition and disposal of major shareholdings and voting rights), of the following changes to voting rights by shareholders
of the Company. It should be noted that for non-UK issuers, the thresholds prescribed under DTR 5.1.2 for notification of
holdings commence at 5% of total voting rights, however notifications received below 5% have been received and are
included in this reporting.
Shareholder
Percentage of total
Number of
voting rights as at
Announcement
voting rights
announcement date
date
City of London Investment Management Company Limited
City of London Investment Management Company Limited
City of London Investment Management Company Limited
City of London Investment Management Company Limited
City of London Investment Management Company Limited
Euroclear Nominees Limited
City of London Investment Management Company Limited
City of London Investment Management Company Limited
City of London Investment Management Company Limited
De Pury Pictet Turrettini & Cie SA
11,538,829
10,598,829
8,707,769
8,349,769
6,407,706
9,726,412
5,906,819
5,480,176
5,110,308
2,132,262
22.7
20.9
17.2
16.5
14.9
22.7
13.8
12.8
11.9
4.9
20 July 2020
28 July 2020
05 October 2020
27 October 2020
18 November 2020
26 November 2020
27 November 2020
10 February 2021
17 February 2021
30 April 2021
Since 30 June 2021 the Company received DTR 5.1.2
notifications of holdings as follows.
Shareholder
Percentage of total
Number of
voting rights as at
Announcement
voting rights
announcement date
date
De Pury Pictet Turrettini & Cie SA
City of London Investment Management Company Limited
Euroclear Nominees Limited
0
3,225,163
5,198,113
0
10.9
17.5
18 August 2021
16 September 2021
21 September 2021
45
GovernanceAnnual Report 2021 Statement of Directors’ Responsibilities in Respect
of the Annual Report and the Financial Statements
The Directors are responsible for preparing the Annual
The Directors are responsible for the maintenance and
Report and Financial Statements in accordance with
integrity of the corporate and financial information
applicable law and regulations.
included on the Company’s website. Legislation
in
Guernsey governing the preparation and dissemination of
Company law requires the Directors to prepare financial
financial statements may differ from legislation in other
statements for each financial year. Under that law they are
jurisdictions.
required to prepare the financial statements in accordance
with
International Financial Reporting Standards as
The Directors who hold office at the date of approval
adopted by the EU and applicable law. Under company law
of this Director’s Report confirm that so far as they are
the Directors must not approve the financial statements
aware, there is no relevant audit information of which the
unless they are satisfied that they give a true and fair view
Company’s auditor is unaware, and that each Director has
of the state of affairs of the Company and of its profit or
taken all the steps he ought to have taken as a Director to
loss for that period.
make themselves aware of any relevant audit information
and to establish that the Company’s auditor is aware of
In preparing these financial statements, the Directors are
that information.
required to:
•
•
•
•
•
select suitable accounting policies and then apply
Directive
them consistently;
make judgements and estimates that are reasonable,
We confirm that to the best of our knowledge:
Compliance with Disclosure and Transparency
relevant and reliable;
state whether applicable accounting standards have
been followed, subject to any material departures
disclosed and explained in the financial statements;
assess the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to
going concern; and
•
•
the financial statements, prepared in accordance with
the International Financial Reporting Standards as
adopted by the EU (“IFRS”), give a true and fair view
of the assets, liabilities, financial position and profit or
loss of the Company; and
the Directors’ Report includes a fair review of the
use the going concern basis of accounting unless they
development and performance of the business and
either intend to liquidate the Company or to cease
the position of the issuer, together with a description
operations, or have no realistic alternative but to do
of the principal risks and uncertainties that they face.
so.
The Directors are
responsible
for keeping proper
taken as a whole, is fair, balanced and understandable
accounting records that are sufficient to show and explain
and provides the information necessary for shareholders to
the Company’s transactions and disclose with reasonable
assess the Company’s position and performance, business
We consider the Annual Report and Financial Statements
accuracy at any time the financial position of the Company
model and strategy.
and enable them to ensure that its financial statements
comply with the Companies (Guernsey) Law, 2008. They
For and on behalf of the Board
are responsible for such internal control as they determine is
necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to
fraud or error, and have general responsibility for taking
such steps as are reasonably open to them to safeguard
Hiroshi Funaki
the assets of the Company and to prevent and detect
Chairman
fraud and other irregularities.
30 September 2021
46
GovernanceAnnual Report 2021 Annual Report 2021
Governance
47
Annual Report 2021
Financial Statements
Financial Statements
48
Independent Auditor’s Report to the
Members of VietNam Holding Limited
Our opinion is unmodified
We have audited the financial statements of VietNam Holding Limited (the “Company”), which comprise the statement of
financial position as at 30 June 2021, the statements of comprehensive income, changes in equity and cash flows for the
year then ended, and notes, comprising significant accounting policies and other explanatory information.
In our opinion, the accompanying financial statements:
•
•
•
give a true and fair view of the financial position of the Company as at 30 June 2021, and of the Company’s financial
performance and cash flows for the year then ended;
are prepared in accordance with International Financial Reporting Standards as adopted by the EU (“IFRS”); and
comply with the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company
in accordance with, UK ethical requirements including FRC Ethical Standards, as applied to listed entities. We believe that
the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.
Key audit matters: our assessment of the risks of material misstatement
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the
financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in
the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of
the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters. In arriving at our audit opinion above, the key audit matter was as follows (unchanged from 2020):
Valuation of Investments in securities at fair value
$193,108,385; (2020 $115,062,255)
Refer to page 38 to 39 of the Audit and Risk Committee report, note 2d accounting policies and note 12 disclosures
The risk
Basis:
Our response
Our audit procedures included:
The Company’s investment portfolio consists of listed
Internal Controls:
equity securities trading on the Vietnamese stock exchange
(the “Investments”). These Investments, carried at a fair
We evaluated the design and implementation of the key
value, are valued by the Company based on quoted prices
control over the valuation of Investments.
in an active market for that instrument.
Use of KPMG Specialists:
We engaged our own valuation specialist to independently
price 100% of Investments to third party pricing sources.
49
Financial StatementsAnnual Report 2021 Independent Auditor’s Report to the
Members of VietNam Holding Limited (continued)
The risk
Risk:
Our response
Assessing disclosures:
The valuation of investments, due to their magnitude
We considered the Company’s disclosures (see notes 2b
in the context of the financial statements as a whole, is
and 2d) in relation to the use of estimates and judgements
considered to be the area which has the greatest effect
regarding the valuation of investments and the Company’s
on our overall audit strategy and allocation of resources in
investment valuation policies and fair value disclosures in
planning and completing our audit.
note 12 “Fair Value Information” for compliance with IFRS.
Our application of materiality and an overview of the scope of our audit
Materiality for the financial statements as a whole was set at $3,921,600, determined with reference to a benchmark of net
assets of $196,080,470, of which it represents approximately 2.0% (2020: 2.0%).
In line with our audit methodology, our procedures on individual account balances and disclosures were performed to
a lower threshold, performance materiality, so as to reduce to an acceptable level the risk that individually immaterial
misstatements in individual account balances add up to a material amount across the financial statements as a whole.
Performance materiality for the Company was set at 75% (2020: 75%) of materiality for the financial statements as a whole,
which equates to $2,941,200. We applied this percentage in our determination of performance materiality because we did
not identify any factors indicating an elevated level of risk.
We reported to the Audit Committee any corrected or uncorrected identified misstatements exceeding $196,080, in addition
to other identified misstatements that warranted reporting on qualitative grounds.
Our audit of the Company was undertaken to the materiality level specified above, which has informed our identification of
significant risks of material misstatement and the associated audit procedures performed in those areas as detailed above.
Going concern
The directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the
Company or to cease its operations, and as they have concluded that the Company’s financial position means that this is
realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over its
ability to continue as a going concern for at least a year from the date of approval of the financial statements (the “going
concern period”).
In our evaluation of the directors’ conclusions, we considered the inherent risks to the Company’s business model and
analysed how those risks might affect the Company’s financial resources or ability to continue operations over the going
concern period. The risk that we considered most likely to affect the Company’s financial resources or ability to continue
operations over this period was availability of capital to meet operating costs and other financial commitments.
We considered whether this risk could plausibly affect the liquidity in the going concern period by comparing severe, but
plausible downside scenarios that could arise from this risk against the level of available financial resources indicated by the
Company’s financial forecasts.
We considered whether the going concern disclosure in note 2(b) to the financial statements gives a full and accurate
description of the directors’ assessment of going concern.
50
Financial StatementsAnnual Report 2021 Our conclusions based on this work:
•
•
we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial
statements is appropriate;
we have not identified, and concur with the directors’ assessment that there is not, a material uncertainty related to
events or conditions that, individually or collectively, may cast significant doubt on the Company’s ability to continue
as a going concern for the going concern period; and
•
we have nothing material to add or draw attention to in relation to the directors’ statement in the notes to the financial
statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant
doubt over the Company’s use of that basis for the going concern period, and that statement is materially consistent
with the financial statements and our audit knowledge.
However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are
inconsistent with judgements that were reasonable at the time they were made, the above conclusions are not a guarantee
that the Company will continue in operation.
Fraud and breaches of laws and regulations – ability to detect
Identifying and responding to risks of material misstatement due to fraud
To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate
an incentive or pressure to commit fraud or provide an opportunity to commit fraud. Our risk assessment procedures
included:
•
•
•
enquiring of management as to the Company’s policies and procedures to prevent and detect fraud as well as enquiring
whether management have knowledge of any actual, suspected or alleged fraud;
reading minutes of meetings of those charged with governance; and
using analytical procedures to identify any unusual or unexpected relationships.
As required by auditing standards, we perform procedures to address the risk of management override of controls, in
particular the risk that management may be in a position to make inappropriate accounting entries. On this audit we do
not believe there is a fraud risk related to revenue recognition because the Company’s revenue streams are simple in nature
with respect to accounting policy choice, and are easily verifiable to external data sources or agreements with little or no
requirement for estimation from management. We did not identify any additional fraud risks.
We performed procedures including
•
•
Identifying journal entries and other adjustments to test based on risk criteria and comparing any identified entries to
supporting documentation; and
incorporating an element of unpredictability in our audit procedures.
Identifying and responding to risks of material misstatement due to non-compliance with laws and regulations
We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial
statements from our sector experience and through discussion with management (as required by auditing standards),
and from inspection of the Company’s regulatory and legal correspondence, if any, and discussed with management the
policies and procedures regarding compliance with laws and regulations. As the Company is regulated, our assessment of
risks involved gaining an understanding of the control environment including the entity’s procedures for complying with
regulatory requirements.
51
Financial StatementsAnnual Report 2021
Independent Auditor’s Report to the
Members of VietNam Holding Limited (continued)
Fraud and breaches of laws and regulations – ability to detect (continued)
The Company is subject to laws and regulations that directly affect the financial statements including financial reporting
legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our
procedures on the related financial statement items.
The Company is subject to other laws and regulations where the consequences of non-compliance could have a material
effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation or
impacts on the Company’s ability to operate. We identified financial services regulation as being the area most likely to have
such an effect, recognising the regulated nature of the Company’s activities and its legal form. Auditing standards limit
the required audit procedures to identify non-compliance with these laws and regulations to enquiry of management and
inspection of regulatory and legal correspondence, if any. Therefore if a breach of operational regulations is not disclosed to
us or evident from relevant correspondence, an audit will not detect that breach.
Context of the ability of the audit to detect fraud or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material
misstatements in the financial statements, even though we have properly planned and performed our audit in accordance
with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events
and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing
standards would identify it.
In addition, as with any audit, there remains a higher risk of non-detection of fraud, as this may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect
material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect
non-compliance with all laws and regulations.
Other information
The directors are responsible for the other information. The other information comprises the information included in the
annual report but does not include the financial statements and our auditor’s report thereon. Our opinion on the financial
statements does not cover the other information and we do not express an audit opinion or any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report
in this regard.
Disclosures of emerging and principal risks and longer term viability
We are required to perform procedures to identify whether there is a material inconsistency between the directors’
disclosures in respect of emerging and principal risks and the viability statement, and the financial statements and our
audit knowledge. we have nothing material to add or draw attention to in relation to:
•
•
the directors’ confirmation within the Viability Statement (page 43 - 44) that they have carried out a robust assessment
of the emerging and principal risks facing the Company, including those that would threaten its business model, future
performance, solvency or liquidity;
the emerging and principal risks disclosures describing these risks and explaining how they are being managed or
mitigated;
52
Financial StatementsAnnual Report 2021 •
the directors’ explanation in the Viability Statement (page 43 - 44) as to how they have assessed the prospects of
the Company, over what period they have done so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We are also required to review the Viability Statement, set out on page 43 - 44 under the Listing Rules. Based on the above
procedures, we have concluded that the above disclosures are materially consistent with the financial statements and our
audit knowledge.
Corporate governance disclosures
We are required to perform procedures to identify whether there is a material inconsistency between the directors’ corporate
governance disclosures and the financial statements and our audit knowledge.
Based on those procedures, we have concluded that each of the following is materially consistent with the financial
statements and our audit knowledge:
•
the directors’ statement that they consider that theannual report and financial statements taken as a whole is fair,
balanced and understandable, and provides the information necessary for shareholders to assess theCompany’s
position and performance, business model and strategy;
•
•
the section of theannual report describing the work of the Audit Committee, including the significant issues that the
audit committee considered in relation to the financial statements, and how these issues were addressed; and
the section of theannual report that describes the review of the effectiveness of theCompany’s risk management and
internal control systems.
We are required to review the part of Corporate Governance Statement relating to the Company’s compliance with the
provisions of the UK Corporate Governance Code specified by the Listing Rules for our review. We have nothing to report in
this respect.
We have nothing to report on other matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to
report to you if, in our opinion:
•
•
•
the Company has not kept proper accounting records; or
the financial statements are not in agreement with the accounting records; or
we have not received all the information and explanations, which to the best of our knowledge and belief are necessary
for the purpose of our audit.
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 46, the directors are responsible for: the preparation of the
financial statements including being satisfied that they give a true and fair view; such internal control as they determine
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error; assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to
cease operations, or have no realistic alternative but to do so.
53
Financial StatementsAnnual Report 2021 Independent Auditor’s Report to the
Members of VietNam Holding Limited (continued)
Respective responsibilities (continued)
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a
high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the
financial statements
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and restrictions on its use by persons other than the Company’s members as a body
This report is made solely to the Company’s members, as a body, in accordance with section 262 of the Companies (Guernsey)
Law, 2008. Our audit work has been undertaken so that we might state to the Company’s members those matters we are
required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not
accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit
work, for this report, or for the opinions we have formed.
Andrew J. Salisbury
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
Guernsey
30 September 2021
54
Financial StatementsAnnual Report 2021 Statement of Financial Position
As at 30 June 2021
Assets
Non-current assets
Notes
2021
USD
2020
USD
Investments at fair value through profit or loss
3
193,108,385
115,062,255
Total non-current assets
Current assets
Cash and cash equivalents
Prepayments
Accrued dividends and interest
Receivables on sale of investments
Total current assets
Total assets
Equity
Share capital
Reserve for own shares
Retained earnings
Total equity
Liabilities
193,108,385
115,062,255
6,031,337
2,561,173
9,290
—
30,153
123,926
1,239,041
—
7,309,821
2,685,099
200,418,206
117,747,354
5
5
166,645,041
166,645,041
(106,170,790)
(84,813,068)
135,606,219
35,452,331
196,080,470
117,284,304
Payables on purchase of investments
3,905,824
177,546
Accrued expenses
Total liabilities
431,912
285,504
4,337,736
463,050
Total equity and liabilities
200,418,206
117,747,354
The financial statements on pages 55 to 74 were approved by the Board of Directors on 30 September 2021 and were signed
on its behalf by
Hiroshi Funaki
Philip Scales
Chairman of the Board of Directors
Chairman of the Audit and Risk Committee
The accompanying notes on page 59 to 74 form an integral part of these financial statements.
55
Financial StatementsAnnual Report 2021 Statement of Comprehensive Income
For the year ended 30 June 2021
Notes
2021
USD
2020
USD
Dividend income from equity securities at fair value through profit or loss
2,390,216
2,773,731
Net gain/(loss) from investments at fair value through profit or loss
7
100,730,119
(21,037,053)
Net foreign exchange (loss)/gain
(1,896)
52,119
Interest income from investments at fair value through profit or loss
694,162
499,362
Other income
Net investment gain/(loss)
Investment management fees
Advisory fees
Directors’ fees and expenses
Custodian fees
163,128
—
103,975,729
(17,711,841)
2,438,087
1,971,628
111,579
41,145
328,690
416,854
146,875
121,464
8
8
9
Administrative and accounting fees
10
219,271
259,198
Audit fees
Other expenses
Total operating expenses
Income/(loss) for the year
78,758
57,512
498,581
512,459
3,821,841
3,380,260
100,153,888
(21,092,101)
Other comprehensive income
—
—
Total comprehensive income/(loss) for the year
100,153,888
(21,092,101)
Basic and diluted earnings per share
14
2.19
(0.41)
The accompanying notes on page 59 to 74 form an integral part of these financial statements.
56
Financial StatementsAnnual Report 2021 Statement of Changes in Equity
For the year ended 30 June 2021
Share
Reserve for
capital
own shares
USD
USD
Retained
earnings
Total
USD
Balance at 1 July 2019
166,645,041
(83,760,308)
56,544,432
139,429,165
Total comprehensive loss for the year
Change in net assets attributable to shareholders
Total comprehensive loss for the year
Transactions in shares
Repurchase of own shares
Total transactions in shares
—
—
—
—
—
—
(21,092,101)
(21,092,101)
(21,092,101)
(21,092,101)
(1,052,760)
(1,052,760)
—
—
(1,052,760)
(1,052,760)
Balance at 30 June 2020
166,645,041
(84,813,068)
35,452,331
117,284,304
Balance at 1 July 2020
166,645,041
(84,813,068)
35,452,331
117,284,304
Total comprehensive income for the year
Change in net assets attributable to shareholders
Total comprehensive income for the year
Transactions in shares
Repurchase of own shares
Total transactions in shares
—
—
—
—
—
—
100,153,888
100,153,888
100,153,888
100,153,888
(21,357,722)
(21,357,722)
—
—
(21,357,722)
(21,357,722)
Balance at 30 June 2021
166,645,041
(106,170,790)
135,606,219
196,080,470
The accompanying notes on page 59 to 74 form an integral part of these financial statements.
57
Financial StatementsAnnual Report 2021
Statement of Cash Flows
For the year ended 30 June 2021
Cash flows from operating activities
Notes
2021
USD
2020
USD
Total comprehensive income/(loss) for the year
100,153,888
(21,092,101)
Adjustments to reconcile total comprehensive income/(loss)
to net cash from operating activities:
Dividend income
Interest income
(2,390,216)
(2,773,731)
(694,162)
(499,362)
Net (gain)/loss from investments at fair value through profit or loss
7
(100,730,119)
21,037,053
Net foreign exchange loss/(gain)
1,896
(52,119)
Purchase of investments
(87,370,357)
(51,149,237)
Proceeds from sale of investments
110,054,346
45,573,044
Changes in working capital
Increase in receivables on sale of investments
Increase in payables on purchase of investments
Increase/(decrease) in accrued expenses
Increase in prepayments
(1,239,041)
3,728,278
—
—
146,408
(118,268)
(9,290)
—
Decrease in payable on repurchases of own shares
—
(158,639)
Dividends received
Interest received
2,392,036
2,920,653
786,115
407,264
Net cash from/(used in) operating activities
24,829,782
(5,905,443)
Cash flows used in financing activities
Repurchase of own shares
(21,357,722)
(1,052,760)
Net cash used in financing activities
(21,357,722)
(1,052,760)
Net increase/(decrease) in cash and cash equivalents
3,472,060
(6,958,203)
Cash and cash equivalents at beginning of the year
2,561,173
9,467,257
Effect of exchange rate fluctuations on cash held
(1,896)
52,119
Cash and cash equivalents at end of the year
6,031,337
2,561,173
The accompanying notes on page 59 to 74 form an integral part of these financial statements.
58
Financial StatementsAnnual Report 2021
Notes to the Financial Statements
For the year ended 30 June 2021
1 THE COMPANY
VietNam Holding Limited (the “Company”) is a closed-end investment company that was incorporated in the Cayman
Islands on 20 April 2006 as an exempted company with limited liability under registration number 166182. On 25 February
2019, the Company, via a process of cross-border continuance, transferred its legal domicile from the Cayman Islands
to Guernsey and was registered as a closed-ended company limited by shares incorporated in Guernsey with registered
number 66090.
On 8 March 2019 the Company’s ordinary shares were cancelled from trading on AIM and admitted to the Premium segment
of the official list of the UK Listing Authority (“Official List”) and trading on the main market of the London Stock Exchange
(“Main Market”). On the same date the Company’s shares were admitted to listing and trading on the Official List of The
International Stock Exchange (“TISE”).
The investment objective of the Company is to achieve long-term capital appreciation by investing in a diversified portfolio
of companies that have high growth potential at an attractive valuation.
At the Extraordinary General Meeting held on 31 October 2018 the Shareholders voted in favour of the continuance
resolution, authorising the Company to operate in its current form through to the 2023 Annual General Meeting when a
similar resolution will be put forward for Shareholders’ approval.
Dynam Capital, Ltd has been appointed as the Company’s Investment Manager and is responsible for the day-to-day
management of the Company’s investment portfolio in accordance with the Company’s investment policies, objectives
and restrictions.
Sanne Group (Guernsey) Limited is the Company’s administrator.
Standard Chartered Bank (Singapore) Limited and Standard Chartered Bank (Vietnam) Limited are the custodian and the
sub-custodian respectively. Standard Chartered Bank (Singapore) Limited is also the sub-administrator.
The registered office of the Company is De Catapan House, Grange Road, St Peter Port, Guernsey, GY1 2QG.
2 SIGNIFICANT ACCOUNTING POLICIES
(a) Statement of compliance
These financial statements, which give a true and fair view, have been prepared in accordance with the International
Financial Reporting Standards (“IFRSs”) as adopted by the European Union and comply with the Companies (Guernsey)
Law, 2008.
(b) Basis of preparation
The financial statements are presented in United States dollars (“USD”), which is the Company’s functional currency. The
financial statements have been prepared on a going concern basis, applying the historical cost convention, except for the
measurement of investments at fair value through profit or loss.
Going concern
The Directors have reasonable expectations and are satisfied that the Company has adequate resources to continue its
operations and meet its commitments for the foreseeable future and they continue to adopt the going concern basis for
the preparation of the financial statements. In making this statement, the Directors confirm the Company’s forecasts and
projections have been stress tested taking into account the potential for (i) asset value declines, (ii) declines in cash dividends
59
Financial StatementsAnnual Report 2021 Notes to the Financial Statements (continued)
For the year ended 30 June 2021
2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
from equities held in the portfolio and (iii) share buybacks and tender offers. The Directors note that the underlying liquidity
of Vietnamese stocks has increased significantly over the last twelve months with average daily traded volumes increasing
by as much as five times the level of the prior year. The Directors also note that the portfolio is composed of a higher
percentage of larger and more liquid stocks than in the prior year. Lastly, the Directors note that at year-end the portfolio is
comprised of cash and quoted stocks only, with the only non-quoted asset being sold before the year-end. The Company’s
liquidity position, taking into account cash held and with the ability to sell underlying assets to meet share buybacks, tender
offers and to meet the operating costs of the Company, shows that the Company is able to operate with appropriate
liquidity and be able to meet its liabilities as they fall due. The Directors therefore have a reasonable expectation that the
Company will have adequate resources to continue its operations for the foreseeable future and continue to adopt the
going concern basis of accounting in preparing the financial statements.
The 4th wave of the Covid-19 pandemic, with the spread of the Delta variant, has required the government to adopt much
stricter measures to control the situation, including significant periods of lockdown, leading to the most significant impacts
to the economy since the beginning of the pandemic in 2020. The Investment Manager expects that many listed companies
will record sharply reduced profitability for the third quarter of 2021. Although Vietnam was initially slow in vaccinating its
population due to the shortage of supply, Vietnam has accelerated its vaccinations rate, and has procured (and been given)
several million vaccine doses. Recently the vaccination rate reached 1 million doses a day. It is estimated that 30% of the
adult population have received one dose already, and 6% two doses. In Ho Chi Minh City it is estimated that more than 90%
of the adult population has received one dose, and more than 11% two doses. The government expects lockdown measures
can be gradually relaxed in the fourth quarter of 2021. Since early 2020, the Company’s portfolio has been rebalanced with
greater focus on larger, more liquid stocks. Many of these companies have proved to be much more resilient to the crisis
than smaller companies. Ironically, liquidity in the Vietnam stock market has increased during the pandemic, possibly
influenced by the greater number of investors trading electronically through smartphones. It is estimated that the number
of retail investors has increased by more than 1 million over the last twelve months, and this has buoyed market liquidity
which reached as much as USD1.5 billion a day, recently.
Improved liquidity in the market and the portfolio was in evidence in August 2021 when the Investment Manager was able
to generate close to 30% cash in the portfolio to fund the recent tender offer.
Critical accounting estimates and judgements
The preparation of financial statements in accordance with IFRS as adopted by the European Union requires management
to make judgements, estimates and assumptions that affect the application of policies and the reported amounts of assets
and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of
making judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates.
The estimated and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised if the revision affects only that period or in the period of the
revision and future periods if the revision affects both current and future periods.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of
assets and liabilities within the next financial year are discussed below.
Functional currency
The Company’s shares were issued in USD and the listing of the shares on the Main Market and TISE is in USD. The performance
of the Company is measured and reported to the investors in USD, although the primary activity of the Company is to invest
in the Vietnamese market. The Board considers the USD as the currency that most faithfully represents the economic
effects of the underlying transactions, events and conditions.
60
Financial StatementsAnnual Report 2021 Fair value of financial instruments
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques.
The Company uses its judgement to select a variety of methods and make assumptions that are mainly based on market
conditions existing at each reporting date.
(c) Foreign currency translation
Transactions in foreign currencies other than the functional currency are translated at the applicable rates on the dates
of the transactions. Monetary assets and liabilities denominated in foreign currencies are re-translated to USD at the
applicable rates on the year-end date. Foreign currency exchange differences arising on translation and realised gains
and losses on disposals or settlements of monetary assets and liabilities are included in the Statement of Comprehensive
Income. Foreign currency exchange differences relating to investments at fair value through profit or loss are included in
the realised and unrealised gains and losses on those investments within “Net gain/(loss) from investments at fair value
through profit or loss” on the Statement of Comprehensive Income. All other foreign currency exchange differences relating
to other monetary items, including cash and cash equivalents, are included in net foreign exchange gains and losses in the
Statement of Comprehensive Income.
(d) Financial instruments
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity
instrument of another entity.
(i) Classification
In accordance with IFRS 9, the Company classifies its financial assets and financial liabilities at initial recognition into the
categories of financial assets and financial liabilities discussed below.
Financial assets
The Company classifies its financial assets as subsequently measured at amortised cost or measured at fair value through
profit or loss on the basis of both:
•
•
The entity’s business model for managing the financial assets
The contractual cash flow characteristics of the financial assets
Financial assets measured at amortised cost
A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold financial
assets in order to collect contractual cash flows and its contractual terms give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount outstanding. The Company includes in this category
accrued income, cash and cash equivalents and receivables on sale of investments.
Financial assets measured at fair value through profit or loss (FVTPL)
A financial asset is measured at fair value through profit or loss if:
(a) Its contractual terms do not give rise to cash flows on specified dates that are solely payments of principal and interest
(SPPI) on the principal amount outstanding; or
61
Financial StatementsAnnual Report 2021 Notes to the Financial Statements (continued)
For the year ended 30 June 2021
2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b) It is not held within a business model whose objective is either to collect contractual cash flows, or to both collect
contractual cash flows and sell; or
(c) At initial recognition, it is irrevocably designated as measured at FVTPL when doing so eliminates or significantly reduces
a measurement or recognition inconsistency that would otherwise arise from measuring assets or liabilities or recognising
the gains and losses on them on different bases.
The Company measures all its investments at FVTPL.
(ii) Recognition and initial measurement
Financial assets and liabilities at fair value through profit or loss are recognised initially on the trade date, which is the date
that the Company becomes a party to the contractual provisions of the instrument. Other financial assets and liabilities are
recognised on the date they are originated.
Financial assets and financial liabilities at fair value through profit or loss are recognised initially at fair value, with
transaction costs recognised in the Statement of Comprehensive Income. Financial assets or financial liabilities not at fair
value through profit or loss are recognised initially at fair value plus transaction costs that are directly attributable to their
acquisition or issue.
(iii) Subsequent measurement
After initial measurement, the Company measures financial instruments which are classified as FVTPL at fair value.
Subsequent changes in the fair value of those financial instruments are recorded in net gain or loss on financial assets and
liabilities at FVTPL in the Statement of Comprehensive Income. Interest and dividends earned or paid on these instruments
are recorded separately in interest income or expense and dividend income in the Statement of Comprehensive Income.
(iv) Derecognition
A financial asset is derecognised when the Company no longer has control over the contractual rights that comprise that
asset. This occurs when the rights are realised, expire or are surrendered.
Financial assets that are sold are derecognised, and the corresponding receivables from the buyer for the payment are
recognised on the trade date, being the date the Company commits to sell the assets.
A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expired.
(v) Fair value measurement
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date in the principal or, in its absence, the most advantageous market to which
the Company has access at that date. The fair value of a liability reflects its non-performance risk.
When available, the Company measures the fair value of an instrument using the quoted price in an active market for that
instrument. A market is regarded as ‘active’ if transactions for the asset or liability take place with sufficient frequency and
volume to provide pricing information on an ongoing basis. The Company measures instruments quoted in an active market
at the last traded price.
If there is no quoted price in an active market, then the Company uses valuation techniques that maximise the use of
relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of
the factors that market participants would consider in pricing a transaction.
62
Financial StatementsAnnual Report 2021 The Company recognises transfers between levels of the fair value hierarchy as at the end of the reporting period during
which the change has occurred.
Any increases or decreases in fair value are recognised in the Statement of Comprehensive Income as an unrealised gain
or loss from investments at FVTPL.
(vi) Impairment of financial assets
At each reporting date, the Company measures the loss allowance on financial assets carried at amortised cost at an
amount equal to the lifetime expected credit losses if the credit risk has increased significantly since initial recognition.
If, at the reporting date, the credit risk has not increased significantly since initial recognition, the Company measures
the loss allowance at an amount equal to 12-month expected credit losses. The expected credit losses are estimated
using a provision matrix based on the Company’s historical credit loss experience adjusted for factors that are specific
to the accounts receivables, general economic conditions and an assessment of both the current as well as the forecast
direction of conditions at the reporting date, including time value of money where appropriate. The measurement of
expected credit losses is a function of the probability of default, loss given default (i.e. the magnitude of the loss if there
is a default) and exposure at the default. The assessment of the probability of default and loss given default is based on
historical data adjusted by forward-looking information.
(vii) Cash and cash equivalents
Cash comprises current deposits with banks. Cash equivalents are short-term highly liquid investments that are readily
convertible to known amounts of cash, are subject to an insignificant risk of changes in value, and are held for the
purpose of meeting short-term cash commitments rather than for investment or other purposes.
(e) Offsetting
Financial assets and liabilities are offset and the net amount is reported in the Statement of Financial Position when,
and only when, the Company has a legally enforceable right to set off the recognised amounts and the transactions are
intended to be settled on a net basis or simultaneously, e.g. through a market clearing mechanism.
(f) Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are
recognised as a deduction from equity, net of any tax effects.
Repurchase, disposal and reissue of share capital (treasury shares)
Where the Company purchases its own share capital, the consideration paid, which includes any directly attributable
costs, is recognised as a deduction from equity shareholders’ funds through the Company’s reserves for own shares. The
reserves for own shares represents share capital which can be reissued in the future or subsequently cancelled. When
such shares are subsequently sold or re-issued to the market any consideration received, net of any directly attributable
incremental transaction costs, is recognised as an increase in equity shareholders’ funds through the reserve of own
shares account. The Directors have cancelled all the shares repurchased during the current and the previous year.
(g) Tax
Tax expense comprises current tax. Current tax is recognised in the Statement of Comprehensive Income except to the
extent that it relates to items recognised directly in equity or in other comprehensive income.
63
Financial StatementsAnnual Report 2021 Notes to the Financial Statements (continued)
For the year ended 30 June 2021
2 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted
or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.
The Company is a tax resident in Guernsey and is subject to the standard rate of 0% on taxable income.
The Company is liable to Vietnamese transactional tax of 0.1% (2020: 0.1%) on the sales proceeds of the onshore sale of
equity investments. The related taxes on onshore sales proceeds are accounted for at net amount in the Statement of
Comprehensive Income.
(h) Interest income and expense
Interest income and expense is recognised in the Statement of Comprehensive Income using the effective rate method.
The effective interest rate method is a method of calculating the amortised cost of a financial asset or financial liability
and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the
rate that exactly discounts estimated future cash payments or receipts throughout the expected life of the financial
instrument – or, when appropriate, a shorter period – to the net carrying amount of the financial asset or financial
liability.
When calculating the effective interest rate, the Directors estimate cash flows considering all contractual terms of the
financial instrument but do not consider future credit losses. The calculation includes all fees and points paid or received
between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other
premiums or discounts.
(i) Dividend income
Dividend income is recognised in the Statement of Comprehensive Income on the date on which the right to receive
payment is established. For listed equity securities, this is usually the ex-dividend date. Dividend income from equity
securities designated as at fair value through profit or loss is recognised in the Statement of Comprehensive Income as
a separate line item.
(j) Fee and commission expense
Fees and commission expenses are recognised in the Statement of Comprehensive Income as the related services are
performed.
(k) Earnings per share
The Company presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is
calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the year, adjusted for own shares held.
3 FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS
Financial assets of the Company include investments at fair value through profit or loss, cash and cash equivalents,
receivables on sale of investments, and accrued dividends and interest. Financial liabilities comprise payables on
purchase of investments and accrued expenses. Accounting policies for financial assets and liabilities are set out in note
2.
The Company’s investment activities expose it to various types of risk that are associated with the financial instruments
and the markets in which it invests. The most important types of financial risk to which the Company is exposed are
64
Financial StatementsAnnual Report 2021 market risk (which includes price risk, currency risk, and interest rate risk), credit risk and liquidity risk.
Asset allocation is determined by the Company’s Investment Manager who manages the distribution of the assets to
achieve the investment objectives. Divergence from target asset allocations and the composition of the portfolio is
monitored by the Investment Manager.
Market risk
Market risk is the risk that the value of a financial asset will fluctuate as a result of changes in market prices (e.g.
interest rates, foreign exchange rates, equity prices and credit spreads) whether or not those changes are caused by
factors specific to the individual asset or factors affecting all assets in the market. The Company is exposed to market
risk within its investments purchased in the Vietnamese market.
The overall market positions are monitored continuously by the Investment Manager and at least quarterly by the Board.
The Company’s investments in securities are exposed to market risk and are disclosed by the following generic investment
types:
2021
2020
Fair value
% of
Fair value
% of
in USD
net assets
in USD
net assets
Investments in listed securities
193,108,385
98.48
109,053,083
92.98
Investments in unlisted securities
—
—
6,009,172
5.12
193,108,385
98.48
115,062,255
98.10
At 30 June 2021, a 5% reduction in the market value of the portfolio would have led to a reduction in NAV and profit
or loss of USD 9,655,419 (2020: USD 5,753,113). A 5% increase in market value would have led to an equal and opposite
effect on NAV and profit or loss.
Currency risk
The Company may invest in financial instruments and enter into transactions denominated in currencies other than its
functional currency. Consequently, the Company is exposed to risks that the exchange rate of its currency relative to
other currencies may change and have an adverse effect on the value of the Company’s financial assets or liabilities
denominated in currencies other than USD.
The Company’s net assets are calculated every month based on the most up to date exchange rates while the general
economic and foreign currency environment is continuously monitored by the Investment Manager and reviewed by the
Board at least once each quarter.
The Company may enter into arrangements to hedge currency risks if such arrangements become desirable and
practicable in the future in the interest of efficient portfolio management.
65
Financial StatementsAnnual Report 2021 Notes to the Financial Statements (continued)
For the year ended 30 June 2021
3 FINANCIAL INSTRUMENTS AND ASSOCIATED RISKS (CONTINUED)
As at 30 June 2021, the Company had the following foreign currency exposures:
Vietnamese Dong
Pound Sterling
Swiss Franc
Euro
Fair value
2021
USD
2020
USD
195,378,974
116,394,920
3,903
3,491
2,628
2,564
54,097
51,234
195,439,602
116,452,209
At 30 June 2021, a 5% reduction in the value of the Vietnamese Dong, Pound Sterling, Swiss Franc, Euro versus the US
Dollar would have led to a reduction in NAV and profit or loss of USD 9,768,949 (2020: USD 5,819,746), USD 195 (2020:
USD 175), USD 131 (2020: USD 128) and USD 2,705 (2020: USD 2,562) respectively. A 5% increase in value would have led
to an equal and opposite effect.
Interest rate risk
Interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in
market interest rates.
The majority of the Company’s financial assets are non-interest-bearing. Interest-bearing financial assets and interest-
bearing financial liabilities mature or reprice in the short-term, no longer than twelve months. As a result, the Company
is subject to limited exposure to interest rate risk due to fluctuations in the prevailing levels of market interest rates.
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment
that it has entered with the Company.
At 30 June 2021, the following financial assets were exposed to credit risk (including settlement risk): cash and cash
equivalents, receivables on sale of investments and accrued dividends and interest. The total amount of financial assets
exposed to credit risk amounted to USD 7,300,531 (2020: USD 2,685,099).
Substantially all the assets of the Company are held by the Company’s custodian, Standard Chartered Bank (Singapore)
Limited. Bankruptcy or insolvency of the custodian may cause the Company’s rights with respect to cash and securities
held by the custodian to be delayed or limited. The Company monitors its risk by monitoring the credit quality and
financial positions of the custodian the Company uses.
As at 30 June 2021, the Company’s custodian, Standard Chartered Bank (Singapore) Limited, was rated as A by Standard
and Poor’s, A1 by Moody’s and A+ by Fitch (2020: A by Standard and Poor’s, A1 by Moody’s and A+ by Fitch).
Financial assets subject to IFRS 9’s impairment requirements
The Company’s financial assets subject to the expected credit loss model within IFRS 9 are cash and cash equivalents,
and short-term receivables, including accrued dividends and interest, and receivables on sale of investments. As at 30
June 2021, the total of cash and cash equivalents, and short-term receivables was USD 7,300,531 (2020: USD 2,685,099).
The Directors assessed the lifetime expected credit loss as at 30 June 2021 and concluded it to be immaterial (2020: loss
immaterial). There is not considered to be any concentration of credit risk within these assets. No assets are considered
impaired and no amounts have been written off in the year.
66
Financial StatementsAnnual Report 2021 All short-term receivables are expected to be received in three months or less. An amount is considered to be in default
if it has not been received 30 days after it is due.
Liquidity risk
The Company, a closed-end investment company, invests in companies through listings on the Vietnam stock exchanges.
There is no guarantee however that the Vietnam stock exchanges will provide liquidity for the Company’s investments.
The Company’s overall liquidity risks are monitored on at least a quarterly basis by the Board. The Company is a closed-
end investment company so Shareholders cannot repurchase their shares directly from the Company.
The Board has considered that there may be periods of time when parts of the portfolio are prone to higher liquidity
risk, but is satisfied overall that the fixed liabilities of the Company can be met by income or from selling sufficient
marketable securities even at periods of higher illiquidity.
Payables on purchase of investments and accrued expenses are generally payable within one year.
The table below summarises the maturity profile of the Company’s financial assets and liabilities based on contractual
undiscounted receipts and payments:
0 to 1
1 to 3
3 months
No fixed
Over
On demand
month
months
to 5 years
maturity
USD
USD
USD
USD
USD
Total
USD
2021
Cash and cash equivalents
Investment at fair value through profit and loss
Accrued dividends
Receivables on sale of investments
6,031,337
—
—
—
—
—
—
1,239,041
—
—
30,153
—
—
—
—
—
—
66,031,337
193,108,385
193,108,385
—
—
30,153
1,239,041
Total financial assets
6,031,337
1,239,041
30,153
—
193,108,385
200,408,916
Payables in purchase of investments
Accrued expenses
Total financial liabilities
2020
Cash and cash equivalents
Investment at fair value through profit and loss
Accrued dividends and interest
Total financial assets
Payables in purchase of investments
Accrued expenses
Total financial liabilities
—
—
—
3,905,824
—
—
431,912
3,905,824
431,912
—
—
—
—
—
—
—
3,905,824
431,912
4,337,736
—
2,561,173
6,009,172
109,053,083
115,062,255
—
—
123,926
—
—
123,926
123,926
6,009,172
109,053,083
117,747,354
2,561,173
—
—
2,561,173
—
—
—
—
—
—
—
177,546
—
—
285,504
177,546
285,504
—
—
—
—
—
—
177,546
285,504
463,050
67
Financial StatementsAnnual Report 2021 Notes to the Financial Statements (continued)
For the year ended 30 June 2021
4 OPERATING SEGMENTS
An operating segment is a component of the Company that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s
other components. The Company is engaged in a single segment of business, being investment in Vietnam. The Board,
as a whole, has been determined as constituting the chief operating decision maker of the Company. The key measure
of performance used by the Board to assess the Company’s performance and to allocate resources is the total return on
the Company’s NAV calculated as per the prospectus.
Information on gains and losses derived from investments are disclosed in the Statement of Comprehensive Income.
The Company is domiciled in Guernsey, Channel Islands. Entity wide disclosures are provided as the Company is engaged
in a single segment of business, investing in Vietnam. In presenting information on the basis of geographical segments,
segment investments and the corresponding segment net investment income arising thereon are determined based on
the country of domicile of the respective investment entities.
In line with the Company’s investment policy, the Company may invest:
•
up to 25% of its NAV (at the time of investment) in companies with shares traded outside of Vietnam if a majority of
their assets and/or operations are based in Vietnam;
up to 20% of its NAV (at the time of investment) in direct private equity investments; and
up to 20% of its NAV (at the time of investment) in other listed investment funds and holding companies which have
•
•
the majority of their assets in Vietnam.
As of 30 June 2021, no individual investment exceeded 20% of the net assets attributable to Shareholders (2020: none).
All of the Company’s investments in securities at fair value are in Vietnam as at 30 June 2021 and 30 June 2020. All of
the Company’s investment income can be attributed to Vietnam for the years ended 30 June 2021 and 30 June 2020.
5 SHARE CAPITAL
Ordinary shares of USD 1 each
Pursuant to its redomiciliation to Guernsey, the Company re-registered with an authorised share capital of USD
200,000,000 divided into 200,000,000 shares of a nominal or par value of USD 1.00 each. In line with the Company’s
new Articles of Incorporation, the Company may from time to time repurchase all or any portion of the shares held by
the Shareholders upon giving notice of not less than 30 calendar days.
On 8 March 2019 the Company’s ordinary shares were cancelled from trading on AIM and admitted to the Premium
segment of the Official List and trading on the Main Market. On the same date the Company’s shares were admitted
to listing and trading on the TISE.
68
Financial StatementsAnnual Report 2021 2021
2020
No. of shares
No. of shares
Total shares issued and fully paid (after repurchases and cancellations) at beginning of the year
50,814,865
51,283,448
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
—
—
(8,190,930)
(468,583)
42,623,935
50,814,865
—
—
(8,190,930)
(468,583)
—
—
8,190,930
468,583
Total outstanding ordinary shares with voting rights
42,623,935
50,814,865
As a result, as at 30 June 2021 the Company has 42,623,935 (2020: 50,814,865) ordinary shares with voting rights in issue
(excluding the reserve for own shares), and Nil (2020: Nil) are held as reserve for own shares.
Reserve for own shares
Reserve for own shares are the Company’s own shares which had been repurchased. The amount represents share
capital which can be reissued in the future or subsequently cancelled. All reserves are available for distribution subject
to a solvency assessment.
During the year ended 30 June 2021 the Company repurchased and cancelled 605,681 ordinary shares (2020: 468,583
ordinary shares) under the Company’s share buyback programme (representing 1.2% of the ordinary shares outstanding
at 1 July 2020) at a weighted average NAV discount of 21.3%. This resulted in a 0.25% accretion to NAV per share.
The Company repurchased and cancelled a further 7,585,249 shares during the year ended 30 June 2021 following a
tender offer for 15% of the Company’s ordinary shares at a 2% discount to the prevailing NAV per share as at 30 October
2020 (2020: nil ordinary shares).
Total ordinary shares repurchased and cancelled during the year were 8,190,930 (2020: 468,583).
Holders of ordinary shares are entitled to attend, speak and vote at general meetings of the Company. Each ordinary
share (excluding shares in treasury) earns one vote. Treasury shares do not carry voting rights.
Capital Management
The Company does not have any externally imposed capital requirements.
The Company’s general intention is to reinvest the capital received on the sale of investments. However, the Board
may from time to time and at its discretion, either use the proceeds of sales of investments to meet the Company’s
expenses or distribute them to Shareholders. Alternatively, the Company may repurchase its own ordinary shares with
such proceeds from Shareholders pro rata to their shareholding upon giving notice of not less than 30 calendar days
to Shareholders (subject always to applicable law) or repurchase ordinary shares at a price not exceeding the last
published NAV per share.
6 NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS
Total equity of USD 196,080,470 (2020: USD 117,284,304) represents net assets attributable to Shareholders. NAV per
share as at 30 June 2021 is USD 4.600 (2020: USD 2.308).
69
Financial StatementsAnnual Report 2021 Notes to the Financial Statements (continued)
For the year ended 30 June 2021
7 NET GAIN/(LOSS) FROM INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Realised gain/(loss) on disposal of investments
Realised foreign currency loss
Unrealised gain/(loss) on investments at fair value through profit or loss
Unrealised foreign currency gain
8 RELATED PARTY TRANSACTIONS
Investment management fees
2021
USD
15,275,568
(326,765)
84,667,613
1,113,703
2020
USD
(2,483,703)
(1,233,861)
(18,909,482)
1,589,993
100,730,119
(21,037,053)
The Company entered into a new investment management agreement with Dynam Capital, Ltd on 26 June 2018. The
agreement was amended and restated on 8 October 2018 and further amended and restated on 1 October 2020. The
Board and the Investment Manager agreed to modify the management fee (previously on a sliding scale of 1.5% per
annum on NAV below USD 300 million, 1.25% per annum on NAV between USD 300 – USD 600 million, and 1.0% per
annum on NAV above USD 600 million) effectively from 1 November 2020.
Pursuant to the agreement the Investment Manager is entitled to receive a monthly management fee, paid in the
manner set out as below:
•
•
•
On the amount of the Net Asset Value of the Company up to but excluding USD 300 million, one-twelfth of 1.75%;
On the amount of the Net Asset Value of the Company between and including USD 300 million up to and including USD
600 million, one-twelfth of 1.5%; and
On the amount of the Net Asset Value of the Company that exceeds USD 600 million, one-twelfth of 1%.
The management fee accruing to the Investment Manager for the year ended 30 June 2021 was USD 2,438,087 (2020:
USD 1,971,628). An amount of USD 273,919 (30 June 2020: USD 150,548) was outstanding as at 30 June 2021.
Incentive fees
Since inception of the Company, the Investment Manager, under the Investment Management Agreement, has been
entitled to both a management fee and an incentive fee for its services to the Company. In the course of the marketing
efforts for the Company during the previous year, feedback was received from a number of potential investors regarding
incentive fees. In order to make the Company’s shares more attractive to as wide a universe of investors as possible,
and in close discussion with the Investment Manager, the Board agreed to remove the incentive fee from the previous
Investment Management Agreement between the Company and the Investment Manager. The Company entered into
a new amended and restated investment management agreement with Dynam Capital, Ltd dated 1 October 2020.
Under the new amended and restated agreement effective from 1 November 2020, incentive fees (previously, 12% of any
profits the Company made after clearing a hurdle rate of 8% and a high water mark were payable to the Investment
Manager) have been removed.
There are no incentive fees accruing to the Investment Manager for the year to 30 June 2021 (2020: USD nil).
Directors’ fees and expenses
The Board determines the fees payable to each Director, subject to a maximum aggregate amount of USD 350,000
(2020: USD 350,000) per annum being paid to the Board as a whole. The Company also pays reasonable expenses
70
Financial StatementsAnnual Report 2021 incurred by the Directors in the conduct of the Company’s business including travel and other expenses. The Company
pays for directors and officers liability insurance coverage.
The charges for the year for the Directors’ fees were USD 313,443 (2020: USD 343,057) and expenses were USD 15,247
(2020: USD 73,797). The total Directors’ fees and expenses for the year were USD 328,690 (2020: USD 416,854).
As at 30 June 2021, USD 8,250 (2020: USD nil) of Directors’ fees were outstanding.
Directors’ ownership of shares
As at 30 June 2021, Directors held 48,861 ordinary shares in the Company (2020: 45,500) as listed below.
Hiroshi Funaki
20,643
Shares
(disposed of 4,357 shares during the year)
Sean Hurst
8,218
Shares
(disposed of 2,282 shares and purchased a further 5,000 shares during the year)
Philip Scales
10,000
Shares
Damien Pierron
5,000
Shares
(purchased 5,000 shares during the year)
Saiko Tajima
5,000
Shares
Mr. Funaki is also a Director of Discover Investment Company which holds 2,197,681 ordinary shares in the Company
representing 5.2% of the issued share capital. Discover Investment Company disposed of 532,452 shares during the year.
9 CUSTODIAN FEES
Custodian fees are charged at a minimum of USD 12,000 (2020: USD 12,000) per annum and received as a fee at 0.08%
on the assets under administration (“AUA”) per annum. Custodian fees comprise safekeeping fees, transaction fees,
money transfer fees and other fees. Safekeeping of unlisted securities up to 20 securities is charged at USD 12,000 (2020:
USD 12,000) per annum. Transaction fees, money transfers fees and other fees are charged on a transaction basis.
The charges for the year for the Custodian fees were USD 146,875 (2020: USD 121,464), of which USD 16,000 (2020: USD
10,200) were outstanding at year end.
10 ADMINISTRATIVE AND ACCOUNTING FEES
In accordance with the new Administration Agreement between the Company and Sanne Group (Guernsey) Limited (the
“Administrator”) dated 7 October 2019, the Administrator is entitled to receive a fee of 0.08% per annum of NAV up to
USD 100,000,000, 0.07% of NAV thereafter subject to a minimum fee of USD 140,000 per annum. The administration
fees are accrued monthly and are payable quarterly in advance. The charges for the year for Administration fees were
USD 138,460 (2020: USD 161,318), of which USD 2,693 (2020: USD 5,000) were outstanding at year end.
The Sub-Administrator receives a fee as consideration for the services provided to the Company at such rates as may
be agreed in writing from time to time between the Company and the Sub-Administrator. The charges for the year for
Administration fees were USD 80,810 (2020: USD 60,678), of which USD 8,070 (2020: USD 6,161) were outstanding at
year end.
Total administrative and accounting fees for the year were USD 219,271 (2020: USD 259,198).
11 CONTROLLING PARTY
The Directors are not aware of any ultimate controlling party as at 30 June 2021 or 30 June 2020.
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.
71
Financial StatementsAnnual Report 2021 Notes to the Financial Statements (continued)
For the year ended 30 June 2021
12 FAIR VALUE INFORMATION (CONTINUED)
Other financial instruments are measured at fair value through profit or loss.
Fair value estimates are made at a specific point in time, based on market conditions and information about the financial
instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and
therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
•
•
Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments. This level
includes listed equity securities on exchanges (for example, Ho Chi Minh Stock Exchange).
Level 2: Inputs other than quoted prices included within Level 1 that are observable either directly (i.e., as prices)
or indirectly (i.e., derived from prices). This level includes instruments valued using: quoted prices for identical or
similar instruments in markets that are considered less than active; quoted market prices in active markets for similar
instruments; or other valuation techniques in which all significant inputs are directly or indirectly observable from
market data.
•
Level 3: Inputs that are not based on observable market data (i.e. unobservable inputs). This level includes all
instruments for which the valuation technique includes inputs not based on observable data and the unobservable
inputs have a significant effect on the instrument’s valuation.
The table below analyses financial instruments measured at fair value at the reporting date by the level in the fair value
hierarchy into which the fair value measurement is categorised. The amounts are based on the values recognised in the
Statement of Financial Position. All fair value measurements below are recurring.
Level 1
USD
Level 2
USD
Level 3
USD
Total
USD
2021
Financial assets classified at fair value upon initial recognition
Investments in securities
193,108,385
2020
Financial assets classified at fair value upon initial recognition
Investments in securities
109,053,083
-
-
-
193,108,385
6,009,172
115,062,255
There were no transfers between levels during the year.
The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined
based on the lowest level input that is significant to the fair value measurement in its entirety. Assessing whether an
input is significant requires judgement including consideration of factors specific to the asset or liability. Moreover, if a
fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that
fair value measurement is a Level 3 measurement.
There are no level 3 assets held at 30 June 2021, the convertible bonds including all the accrued interest receivable were
paid during the year.
The fair value of a convertible bond not quoted in an active market would typically be determined by the Company using
standard valuation methods, such as a discounted cash flow model. The convertible bond held at 30 June 2020 included
a conversion option, which would typically be valued using the Black-Scholes model, and a put option, which would be
factored into the discounted cash flow model.
To perform the discounted cash flow model, the Company used observable data derived from the contractual
agreements, and unobservable inputs of a discount rate of 12.2%. The discount rate was derived from the reference
72
Financial StatementsAnnual Report 2021 discount rates obtained from brokers active in the bond market, specifically the average discount rates obtained from
the market as the reference rate for the convertible bond at the measurement date in order to discount the estimated
future cash flows, adjusted as appropriate for liquidity credit and market risk factors. Given the unlisted nature of the
issuer of the bond, Black-Scholes modelling was not suitable, and due to the nature of the bond, the conversion option
was valued as having no value. The valuation is based on the value of the put option, as the bond would be ‘in-the-
money’ upon entering the put period.
The following table presents the movement in level 3 instruments by class of financial instrument for the years ended:
Convertible bond
Opening balance
Purchases
Net gain/(loss) from investments at fair value through profit or loss
Sales
Closing balance
There were no transfers in or out of level 3.
13 CLASSIFICATIONS OF FINANCIAL ASSETS AND LIABILITIES
2021
USD
6,009,172
—
65,127
(6,074,299)
2020
USD
—
6,024,564
(15,292)
—
—
6,009,172
The table below provides a breakdown of the line items in the Company’s Statement of Financial Position to the
categories of financial instruments.
Fair value
through profit
or loss
USD
Loans and
receivables
USD
Other
liabilities
USD
Total
carrying
amount
USD
2021
Cash and cash equivalents
—
6,031,337
Investment in securities at fair value
193,108,385
Accrued dividends
Receivables on sale of investments
—
—
—
30,153
1,239,041
193,108,385
7,300,531
—
—
—
—
—
6,031,337
193,108,385
30,153
1,239,041
200,408,916
Payables in purchase of investments
Accrued expenses
2020
Cash and cash equivalents
Investment in securities at fair value
Accrued dividends and interest
Payables in purchase of investments
Accrued expenses
—
—
—
—
115,062,255
—
2,561,173
—
123,926
115,062,255
2,685,099
—
—
—
—
—
—
—
—
—
3,905,824
431,912
3,905,824
431,912
4,337,736
4,337,736
—
—
—
—
177,546
285,504
2,561,173
115,062,255
123,926
117,747,354
177,546
285,504
463,050
463,050
73
Financial StatementsAnnual Report 2021 Notes to the Financial Statements (continued)
For the year ended 30 June 2021
14 EARNINGS PER SHARE
The calculation of basic and diluted earnings per share at 30 June 2021 was based on the total comprehensive income for the
year attributable to Shareholders of USD 100,153,888 (2020: loss of USD 21,092,101) and the weighted average number of shares
outstanding of 45,761,268 (2020: 50,947,804).
15 NEW AND AMENDED STANDARDS AND INTERPRETATIONS
(i) Standards and amendments to existing standards effective 1 July 2021
The Board of Directors has assessed the impact, or potential impact, of all new standards and amendments to existing
standards. In the opinion of the Board of Directors, there are no mandatory new standards and amendments applicable in
the current year that had any material effect on the reported performance, financial position, or disclosures of the Company.
(ii) Standards effective after 30 June 2021 that have been early adopted by the Company
There are no standards effective after 30 June 2021 that are relevant to the Company.
16 EVENTS AFTER THE REPORTING DATE
From 1 July 2021 to the date of signing these financial statements, there were no material events that require disclosures and/
or adjustments in these financial statements, except as disclosed below.
An extraordinary general meeting (“EGM”) was held on 31 August 2021 whereupon the Board approved to make a tender offer
to Shareholders of up to 30 percent of the Company’s issued ordinary share capital and to renew the Company’s share buyback
power. 28,736,221 Ordinary shares were validly tendered and 12,737,184 Ordinary shares representing approximately 30 percent
of the outstanding issued Ordinary shares of the Company as of that date were proposed to be tendered at the Tender Price.
The Company was notified on 16 September 2021 that Hiroshi Funaki, Non-executive Chairman, participated in the tender
offer, tendering 6,756 ordinary shares of USD 1 each in the Company (“Ordinary Shares”). His resultant holding is 13,887
Ordinary Shares representing 0.05% of the issued share capital.
The Company was notified on 15 September 2021 that Philip Peter Scales, Director, participated in the tender offer, tendering
3,273 ordinary shares of USD 1 each in the Company (“Ordinary Shares”). His resultant holding is 6,727 Ordinary Shares
representing 0.02% of the issued share capital.
The Company was notified on 15 September 2021 that Sean Hurst, Non-executive Director, participated in the tender offer,
tendering 5,206 ordinary shares of USD 1 each in the Company (“Ordinary Shares”). His resultant holding is 2,012 Ordinary
Shares representing 0.007% of the issued share capital.
The Company was notified on 16 September 2021 that Damien Pierron, Non-executive Director, participated in the tender offer,
tendering 3,606 ordinary shares of USD 1 each in the Company (“Ordinary Shares”). His resultant holding is 1,394 Ordinary
Shares representing 0.005% of the issued share capital.
The Directors intend to reinvest proceeds of the tender offer once the Company exits its current closed period relating to the
publication of the forthcoming Annual Report.
Finally, the Company was notified on 15 September 2021 that Discover Investment Company (“DIC”) participated in the tender
offer, tendering 916,905 ordinary shares of USD 1 each in the Company (“Ordinary Shares”). DIC’s resultant holding is 1,280,776
Ordinary Shares representing 4.31% of the issued share capital. Mr. Funaki the Non-executive Chairman is also a director of
DIC.
From period 1 July 2021 to 30 September 2021, the Company bought back and cancelled 12,737,184 Ordinary shares following
the tender offer and further 181,293 Ordinary shares under the Company’s share buyback programme. The total shares bought
back and cancelled during the period is 12,918,477 Ordinary shares.
74
Financial StatementsAnnual Report 2021 Corporate Information
Alternative Performance Measures (“APMs”) (unaudited)
Discount
The amount, expressed as a percentage, by which the ordinary share price is less that the NAV per ordinary share.
NAV per ordinary share (in pence)
Ordinary share price (in pence)
Discount
Ongoing charges
Page
As at 30 June 2021
a
b
(b÷a)-1
1
1
1
333.0
265.0
20.4%
Ongoing charges for the year ended 30 June 2021 have been calculated in accordance with the Association of Investment
Companies (the “AIC”) recommended methodology. The ongoing charges for the year ended 30 June 2021 were 2.52%.
This is a measure calculated as a percentage of average NAV, of the regular, recurring annual costs of running an investment
company.
Average NAV
Operating expenses
a
b
Ongoing charges figure (calculated using the AIC methodology)
(b÷a)
a) Average NAV
This is twelve monthly closing average NAV for the year ended 30 June 2021.
(b) Operating expenses
Page
As at 30 June 2021
1
1
1
146,258,398
3,684,981
2.52%
Total annual expenses incurred by the Company less the cost of project and one off expenses i.e. non-recurring expenses;
b = c-d.
Total annual expenses
Total One-off expenses
Operating expenses
c
(d)
b
USD 3,821,841
USD 136,860
USD 3,684,981
75
Financial StatementsAnnual Report 2021 Corporate Information (continued)
Directors
Mr. Hiroshi Funaki
Mr. Sean Hurst
Mr. Philip Scales
Mr. Damien Pierron
Ms. Saiko Tajima
Investment Manager
Dynam Capital, Ltd
De Catapan House
Grange Road
St Peter Port
Guernsey
GY1 2QG
Registered Office, Company
Secretary and Administrator
Sanne Group (Guernsey) Limited
De Catapan House
Grange Road
St Peter Port
Guernsey
GY1 2QG
Sub-Administrator, Custodian
and Principal Bankers
Auditor
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St Peter Port
Guernsey
GY1 1WR
Market Researcher
Dynam Consultancy and Services
Company Limited
Floor 12, Deutsches Haus,
33 Le Duan,
Ben Nghe Ward, District 1
Ho Chi Minh City,
Vietnam
Corporate Broker and Financial Adviser
finnCap Ltd.
One Bartholomew Close
London
EC1A 7BL
(Nominated Adviser (AIM) until transference to
LSE Main Market)
Registrar
Standard Chartered Bank (Singapore) Limited
Computershare Investor Services (Guernsey) Limited
7 Changi Business Park Crescent
1st Floor, Tudor House
Le Bordage
St Peter Port
Guernsey
GY1 1DB
Level 3, Securities Services
Singapore 486028
UK Legal Adviser
Stephenson Harwood LLP
1 Finsbury Circus
London
EC2M 7SH
Guernsey Legal Adviser
Carey Olsen (Guernsey) LLP
Carey House
Les Banques
St Peter Port
Guernsey
GY1 4BZ
76
Financial StatementsAnnual Report 2021