Vietnam Opportunity Fund Limited
Annual Report 2010
2
VOF Annual Report 2010
Section 1
Section 2
Section 3
Contents
VinaCapital Vietnam Opportunity Fund Limited
Annual Report 2010
Introduction
VinaCapital introduction
Financial highlights
Performance highlights
New investments
Chairman’s statement
Manager’s report
Management team
Investment environment
Portfolio performance
Featured investments
Financial statements and reports
Board of Directors
Report of the Board of Directors
Governance report
Independent Auditors’ report
Consolidated financial statements and notes
Section 4
Annex
Investing policy
Historical financial information
VOF overview and details
03
04
05
06
08
10
13
19
25
30
32
34
38
40
81
85
87
VOF Annual Report 2010
3
Taking Vietnam to
the world
VinaCapital is an asset management group inspired by the
energy, creativity and entrepreneurial spirit of the people
of Vietnam.
Formed in 2003, VinaCapital manages USD1.8 billion across
all asset classes - listed and private equities, fixed income,
infrastructure and real estate.
VinaCapital’s growth is driven by the most experienced asset
class and fund management teams in Vietnam.
VOF
USD783 million net assets under management.
VOF is the top performing diversified fund in Vietnam.
VOF offers complete exposure to the Vietnamese economy,
one of the world’s fastest growing emerging markets.
4
VOF Annual Report 2010
Financial highlights
Ordinary income (USD’000)
Net profits
Earnings per share (USD)
NAV per share (USD)
FY2010
134,263
105,005
0.32
2.41
FY2009
change %
29,075
3,098
0.02
2.10
362%
3,289%
1,500%
14.8%
VOF’s strong FY2010 financial
performance was driven by an
investment strategy that
took advantage of Vietnam’s
active IPO market in 2009-2010.
USD2.41
NAV per share
14.8%
FY2010 gain
VOF’s four competitor funds
returned an unweighted average
of 2.9% over the same period
(see page 21).
Performance highlights
# of IPOs during FY2010
Shares bought (USDm)
Shares sold
Total gains (USDm)
Total IRR
VN Index gain (in VND terms)
VN Index gain (in USD terms)
12
100.5
104.6
99.2*
26.4%
13.1%
5.8%
VOF’s primary driver of investment returns during
FY2010 was the gains recorded by OTC holdings prior
to listing.
Eximbank, Khang Dien Housing and DIC Corp were
among the 12 VOF holdings that listed during the year.
VOF’s 26.4 percent capital markets return was a
particularly strong performance compared to the
VN Index return of 5.8 percent adjusted for foreign
exchange loss.
(*) Refers to gains in the capital markets (listed and OTC) portfolio for FY2010,
comprising realised and unrealised gains, and dividends (adjusted for
foreign exchange losses).
VOF Annual Report 2010
5
VS
5.8%
gain for the VN Index
6
VOF Annual Report 2010
VOF remains
focused on sectors
that benefit from
Vietnam’s domestic
economic growth,
particularly the rise
of an urban middle
class with higher
disposable income.
New investments
Healthcare
Hoan My Medical Corporation is Vietnam’s top private
healthcare provider. The private healthcare sector is
growing at over 30 percent yearly, and Hoan My is the
market leader with four operating hospitals and one
under construction. VOF holds a 28.9 percent equity
stake in Hoan My.
Materials
Prime Group JSC is Vietnam’s leading ceramics
manufacturer. With the market for construction
materials growing rapidly, Prime Group’s 2009 earnings
of USD16 million are expected to grow at 30 percent
yearly for at least the next three years. VOF acquired a
7.0 percent equity stake in Prime.
Agriculture
An Giang Plant Protection JSC is Vietnam’s market
leader in pesticide distribution and manufacture. The
fertiliser market is expected to grow 10 percent yearly
given the low penetration of modern agri-chemicals
compared to regional countries. VOF increased its stake
in An Giang during FY2010 and at 30 June 2010 held a
7.4 percent stake valued at USD8.9 million.
VOF Annual Report 2010
7
8
VOF Annual Report 2010
“Ultimately, the
investment success of
the manager will be
the best proof to the
market of the value
and promise of the
VOF portfolio.”
Chairman’s statement
Dear Shareholders,
We herein present the annual report of the
VinaCapital Vietnam Opportunity Fund Limited
(AIM: VOF) for the year ended 30 June 2010.
In the first half of 2010, Vietnam’s economy
grew at a healthy 6.2 percent annualised,
buoyed by strong domestic demand and
2009’s effective government stimulus policies.
Vietnam’s rapid recovery from the global
financial crisis was impressive evidence of
the depth of the country’s economic growth
trajectory.
Vietnam’s GDP is forecast to grow at over
6.5 percent in 2010, and at 7 percent or more
in 2011. The main challenges for the economy
remain a weak balance of trade and the threat
of renewed inflation.
VOF outperformed its peers in the Vietnam
market in FY2010, led by the capital markets
portfolio that was buoyed by the IPO of
12 holdings. Eximbank, DIC Corp and Quoc
Cuong Gia Lai, among others, all saw a strong
run-up in share price prior to listing during
the year - testament to the success of VOF’s
strategy of focusing new investments in PE and
OTC assets that are within 12-18 months
of an IPO.
VOF Annual Report 2010
9
New investments during the year included
acquiring significant stakes in private
companies Hoan My Medical Group and
Prime Group, and increasing our stake in OTC
holding An Giang Plant Protection JSC. Each is
a sector-leading company that exhibits strong
management and earnings growth potential,
with the ability to generate a listing or trade
exit within 24 months.
VOF’s NAV at the end of June 2010 was
USD783 million, or USD2.41 per share. This was
an increase of 14.8 percent from the end of
June 2009, when VOF had an NAV of USD682
million, or USD2.10 per share. VOF’s share
price at the end of June 2010 was USD1.40,
down 2.1 percent from USD1.43 at the end of
June 2009.
The share price discount was therefore 41.9
percent at 30 June 2010. This is a disappointing
result that spurred the Board to announce a
distribution policy in October 2010, with the
chief aim of reducing the discount. The Board
believes the distribution policy, consisting of
tenders for shares, will reduce the discount
effectively - but we remain cognizant that any
strategy must endure and not result in only
a short-term improvement. Ultimately, the
investment success of the manager will be
the best proof to the market of the value and
promise of the VOF portfolio.
The VOF management team, led by managing
director Andy Ho and deputy managing
directors Cuong Nguyen and Loan Dang,
remains the most experienced and dynamic
investment team in Vietnam. This team has
access to almost all significant deals in the
Vietnamese marketplace, and has built a tightly
knit group of young professionals who cover
every market sector.
The outlook for 2011 in Vietnam is largely
positive, particularly given the low stock
market valuations and continued window for
IPOs. In the interests of our shareholders,
the Board will continue to monitor fund
management actions with a focus on reducing
the share price discount. The last two years
have been challenging for emerging market
investors. VOF shareholders can be confident
that the Board and investment manager will
work diligently to ensure a strong performance
as the markets continue to recover.
I would like to finish by thanking Dr. Jonathan
Choi for his service as a director to the
Company. Dr. Choi stepped down from his
position as a director during the year to
focus on his other commitments with Sun
Wah Group. The Board appreciates the many
contributions Dr. Choi made to the Company
during his tenure, and would like to wish him
all the best for the future.
Thank you for your continued support.
William Vanderfelt
Chairman
VinaCapital Vietnam Opportunity Fund Limited
10 December 2010
10
VOF Annual Report 2010
Management team
1
Don Lam
Chief Executive Officer
Don Lam founded VinaCapital in 2003
alongside partners Horst F. Geicke
(Group chairman) and Chris Gradel.
Don has over 15 years experience
in Vietnam, working previously at
PricewaterhouseCoopers, Deutsche
Bank, and Coopers & Lybrand. Don is
one of Vietnam’s most internationally
recognised business leaders, having
brought over USD1.5 billion in foreign
indirect investment into the country
since 2003. Don is an active member
and regular speaker at the World
Economic Forum and other leading
international conference and events.
He has a degree in Commerce and
Political Science from the University
of Toronto, and is a member of the
Institute of Chartered Accountants
of Canada. He is a Certified Public
Accountant and holds a Securities
Licence in Vietnam.
2
4
3
5
1
(Left to right: Mr. Nguyen Viet Cuong; Mr. Andy Ho; Mr. Brook Taylor; Mrs. Dang Pham Minh Loan; Mr. Don Lam)
VOF’s management team has led over USD one billion in
private placements across all sectors of Vietnam’s economy.
The senior members of the team have a combined 40 years
investment experience, and have worked together as a
close-knit group for over four years. They are recognised
leaders in Vietnam’s fund management industry.
VOF Annual Report 2010
11
2
Brook Taylor
Chief Operating Officer
3
Andy Ho
Managing Director
and Head of Investment
4
Nguyen Viet Cuong
Deputy Managing Director
5
Dang Pham Minh Loan
Deputy Managing Director
Brook Taylor has almost 20 years
of management experience, including
eight years in Vietnam as a senior
partner with major accounting
firms. Previously, Brook was deputy
managing partner of Deloitte in
Vietnam and head of the firm’s audit
practice. He was also managing
partner of Andersen Vietnam and a
senior audit partner at KPMG. Brook
has expertise spanning financial
audits, internal audits, corporate
finance, taxation, business planning
and IT systems risk management.
He has a B.A. in Commerce and
Administration from Victoria
University of Wellington, New
Zealand, and is a member of
the New Zealand Institute of
Chartered Accountants.
Andy Ho joined VinaCapital
in early 2007 to oversee the
capital markets, private equity,
fixed income and venture
capital investment teams.
Previously, Andy directed
Prudential Vietnam’s fund
management company.
In all, Andy has led over
USD1 billion in investments
across all market sectors in
Vietnam. He has also held
management positions at Dell
Ventures (the investment arm
of Dell Computer Corporation)
and Ernst & Young. He holds an
MBA from the Massachusetts
Institute of Technology and is
a Certified Public Accountant
in the United States.
Cuong Nguyen joined
VinaCapital in November 2003
and currently manages VOF’s
capital markets portfolio. Cuong
holds board positions at several
VOF investee companies,
including Vinamilk, Hau Giang
Pharma, and Halico. Previously,
Cuong worked at Unilever
Vietnam and KPMG Vietnam.
He is a certified accountant
FCCA (UK), and holds a BA
in Corporate Finance and
Banking from the University of
Economics, Ho Chi Minh City.
Loan Dang joined VinaCapital in
August 2005 and is responsible
for VOF’s private equity and
capital market investments.
Loan has led numerous private
equity and private placement
deals for VOF, and holds
board positions at several
VOF investee companies,
including Hoa Phat Group
and Quoc Cuong Gia Lai. Loan
has previous experience at
KPMG Vietnam and Unilever
Vietnam. She has an MBA
from the University of Hawaii
and holds an FCCA (UK) fellow
membership and a BA in
Finance and Accounting from
the University of Economics, Ho
Chi Minh City.
12
VOF Annual Report 2010
M&A deals
involving both
listed and
private domestic
companies should
continue to rise as
cash surpluses are
used to generate
future growth
opportunities.
VOF Annual Report 2010
13
Investment environment
Economy
Vietnam’s GDP grew by 5.3 percent in 2009, making it one of the world’s
fastest growing economies during a year of financial crisis in Europe and
America. Resilient domestic consumption and effective government
stimulus policies helped Vietnam weather the storm, while inflation fell
to 6.5 percent from 23 percent in 2008.
After reaching a record low of 3.1 percent annualised growth in Q1 2009,
GDP growth increased in subsequent quarters, reaching 6.9 percent
annualised in Q4 2009. The impressive turn-around followed government
policies that included a four percent interest rate subsidy on business
loans, and corporate and personal income tax relief. Monetary supply
(M2) increased by 26.2 percent and credit growth reach 32.0 percent.
On the demand side, growth was driven by retail sales (up 11.0 percent)
and rising government expenditure (up 8.2 percent) which surpassed
private consumption for the first time since 2006.
The speed of economic growth in Vietnam slowed somewhat in the
first half of 2010 as the government moved to curb inflation and the
global economic recovery lost momentum. Monetary policy was tightened
in late 2009 and credit growth subsequently fell to 10.5 percent over the
first half of 2010. Nonetheless, GDP growth remained healthy at
6.2 percent annualised for H1 2010. With inflation moderate at under
nine percent year-on-year, Vietnam’s economy has stabilised and analysts
forecast GDP growth of seven percent or higher in 2011. The trade
deficit is less than 10 percent of exports, but currency stability remains
a concern. The Vietnam dong was devalued by 2.1 percent in August
2010, a move that aimed to forestall foreign exchange pressure for the
remainder of the year.
Listed and OTC equities
During year ending 30 June 2010, Vietnam’s capital markets saw a
large number of public offerings, which increased the number of listed
companies on the Ho Chi Minh City and Hanoi stock exchanges by
50 percent, to 549, with an aggregate market capitalisation of USD24.4
billion (27 percent of GDP). The Vietnam Index (VN Index) closed at
507 points on 30 June 2010, representing a 13.2 percent year-on-year
gain in Vietnam dong terms, or 5.8 percent in US dollar terms. Vietnam
underperformed the MSCI Asia ex-Japan and Emerging Market indices,
which increased by 18.0 and 20.6 percent, respectively, over the same
period. The market was volatile, with the VN Index starting the year at
448 points, reaching a high of 624 in October and falling to a low of 435
in December before trading within a range of 500-520 points over the first
half of 2010.
Economic indicators, H1 2010 vs 2009
(Source: GSO Vietnam).
Unit: USDbn
68.8
56.6
38.9
32.1
80
60
40
20
2009
H1 2010
21.5
12.2
6.8
7.5
4.0
5.4
Imports
Exports
Trade deficit
FDI
Disbursed FDI
14
VOF Annual Report 2010
The underperformance compared to regional markets was due the early
removal of the four percent interest subsidy, and the inability of the
government to lower the base interest rate or otherwise make meaningful
impact to high business loan rates, which hovered at 14-16 percent in early
2010. Investors were also concerned over the two currency devaluations,
and ratings agency Fitch lowered their Vietnam sovereign credit rating.
Private placement activity should continue to increase as more small
and medium-sized enterprises prepare to IPO, and look for strategic
investors during their OTC period, which usually lasts from 12-24 months
prior to listing. M&A deals involving both listed and private domestic
companies should continue to rise as cash surpluses are used to generate
future growth opportunities.
Stock market trading volumes and values continued to be low in the
second half of 2010, as retail traders, traditionally accounting for 80
percent of market volume, remained on the sidelines. The on-the-ground
performance of Vietnam’s leading blue chips, however, belied the VN
Index performance. Corporate earnings growth remained in the 10-15
percent range. Notable outperformers included Vinamilk, Vincom, Kinh
Bac and Hoang Anh Gia Lai - all posting H1 2010 net profits growth above
50 percent year-on-year. Market valuations meanwhile were pushed
to below 10x 2010 earnings by the end of June, opening an excellent
investment window for long-term investors.
Private equity
The private equity environment recovered during 2009, with mergers
and acquisitions growing in terms of the value and, particularly, the
volume of deals. PwC lists a total of 295 M&A deals in 2009, up
77 percent on 2008, with a total deal value of USD1.14 trillion, up
two percent on 2008.
The equitisation process is another source of M&A activity, particularly
given the renewed pressure on SOEs to reform their operations following
the Vinashin debt controversy. This crisis is a potential boon to the
market in the long run, given the previous intransigence among SOEs to
make significant reforms.
Real estate
Vietnam’s real estate market has seen a moderate recovery since the
latter half of 2009. The residential and retail sectors remain strong due
to increased levels of domestic consumption, industrial production and
market confidence. The office market will continue to see oversupply for
the next two to three years, while the hospitality sector is recovering as
international and domestic visitor numbers return to pre-crisis levels.
Vietnam in 2010 saw the delivery of several significant commercial
projects in both Ho Chi Minh City and Hanoi, together with a marked
improvement in the number of institutional buyers and investors looking
for projects with attractive yield prospects.
The sharp increase in deal volume without a matching rise in deal value
is due mainly to the trend of Vietnam’s state-owned conglomerates
either spinning off subsidiaries or merging smaller competitors into their
operations. The sectors involved in M&A deals include industrials
(25 percent of all announced M&A deals), energy and power (17 percent)
and materials – all sectors with heavy state involvement. The decline in
financial services M&A activity (to 12 percent of deals, from 22 percent
in 2008) reflects the global turmoil in this sector and the lack of activity
among foreign financial institutions.
After a year of projects being postponed or stalled due to restricted
liquidity and the retreat of some larger foreign developers, construction
and sales activity picked up substantially. At the end of June 2010, the
total number of condominiums in Ho Chi Minh City and Hanoi had
increased 48 percent over the prior year. Ho Chi Minh City saw the
addition of 10,000 units, still well below the estimated yearly demand
for 40,000 new households. The UN ranked Vietnam second in urban
population growth among Southeast Asian countries over the past five
years, with an urbanisation rate of 3.26 percent. Vietnam’s Ministry of
12%
10%
8%
6%
4%
2%
20%
15%
10%
5%
GDP growth by sector
(Source: GSO Vietnam.)
GDP
Industry
Agriculture
Services
6.5%
2003
2004
2005
2006
2007
2008 2009 2010
Q1
2010 2010
Q2
Q3
Inflation in %, year-on-year
(Source: GSO Vietnam.)
8.7%
Jan
09
Mar
09
May
09
Jul
09
Sep
09
Nov
09
Jan
10
Mar
10
Jun
10
VOF Annual Report 2010
15
Construction says the country needs over 15 million sq.m
of new housing each year to accommodate new urban
dwellers. Together with income growth and the rise of
a middle-class keen on modern living space, Vietnam’s
urbanisation trend will fuel demand for affordable and
high-quality housing for years to come.
Outlook
Private equity investors and real estate developers with
mid-range residential and retail offerings will see a bright
investment terrain going forward. Analysts continue to
predict GDP growth of 6.8 percent in 2010 and as high
as 7.5 percent in 2011. Average corporate earnings
growth is forecast at about 10 percent in 2010, rising to
15 percent in 2011 as production capacity and domestic
consumption continue to demonstrate consistent
strength. However, high interest rates and tighter
regulations on bank lending will prevent a rapid rebound
of the VN Index. The market will also be diluted by
the substantial amount of new issues (USD3.5 billion,
12 percent of market capitalisation). The upside for the
VN Index over the short to medium term is therefore
likely in the 10-15 percent range. However, valuations
of 10x forward earnings for Vietnam’s top companies,
and private equity placements at 6-7x forward earnings,
tied to the solid macroeconomic prospects, places
Vietnam in an excellent window of investment for VOF
and other long-term investors.
16
VOF Annual Report 2010
VOF Annual Report 2010
17
Top Vietnam private equity deals
(June 2009 to June 2010, includes real estate)
Time
Investee
Investor
Aug 2009
Sep 2009
Sep 2009
Oct 2009
Oct 2009
Dec 2009
Duc Thanh Wood
Mekong Capital
Hoan My Medical
VinaCapital VOF, DWS Vietnam
Hilton Hanoi Hotel
VinaCapital VOF/VNL
Masan Group
A&B Tower
TPG Capital BankInvest
VinaCapital VOF
Vien Dong Pharma
PENM
Mar 2010
Prime Group
VinaCapital VOF
Deal size
(USDm)
n/a
20.0
36.0
22.0
10.0
13.0
15.0
Source: PricewaterhouseCoopers (Vietnam)
VOF remains Vietnam’s top dealmaker,
involved in almost all significant
transactions including the Masan deal.*
(*) VOF’s stake in Masan Foods was divested prior to the BankInvest deal with Masan Group.
18
VOF Annual Report 2010
Opportunities for VOF
abound in undervalued
companies with strong
management, high
earnings growth and an
IPO or listing timeline
of 12-24 months.
VOF Annual Report 2010
19
Portfolio performance
Vietnam Opportunity Fund (VOF) at the end of
June 2010 had an NAV of USD783 million, or
USD2.41 per share. This was an increase of
14.8 percent from the end of June 2009, when
VOF had an NAV of USD682 million, or USD2.10
per share. This strong performance was due
mainly to gains in the capital markets portfolio
(listed and OTC), which comprised 48.4 percent
of VOF’s NAV at 30 June 2010. The capital
markets portfolio returned an impressive
26.4 percent in FY2010, compared to a 5.8
percent for the VN Index in US dollar terms
(13.1 percent in Vietnam dong terms).
The share price at the end of June 2010 was
USD1.40, down 2.1 percent from USD1.43 at the
end of June 2009. The discount which emerged
in mid-2008 persisted throughout the year,
remaining between 30-40 percent and reaching
42.9 percent at 30 June 2010. Addressing the
discount and increasing shareholder value is our
top concern, and the manager commissioned
research during the year to review means to
address this issue. After carefully considering the
market situation and the views of shareholders,
VOF announced a distribution policy in October
2010 that will see approximately four percent
of NAV returned to shareholders per year in
twice-yearly tender offers, starting in May 2011.
The strong IPO market in FY2010 followed the
government stimulus package that pumped
liquidity into the market. VOF saw 12 holdings list
during the year. The pace of new listings slowed
in the second half of the year, although the higher
cost of debt did force companies to raise money
through equity markets instead of bank financing.
Coupled with the declining liquidity for traders,
the issuance of new shares meant that equity
supply quickly overwhelmed demand.
Although the VN Index had entered a downtrend
by the end of June, FY2010 was nonetheless a
stellar year for VOF’s capital market portfolio.
VOF deployed over USD100 million in aggregate
buying and saw proceeds of USD105 million
from aggregate selling during the year. Total
gains of USD35 million resulted in an IRR of
26.4 percent. Outperformers included OTC
holdings that increased in value in the run-up
to listing, such as Khang Dien Housing, DIC Corp
and Halico. Realised and unrealised gains for the
12 IPOs amounted to USD31.4 million.
VOF closed three significant private placements
during the year, in private companies Hoan My
Medical Group and Prime Group, and in OTC
company An Giang Plant Protection JSC. All
three are leading examples of companies in
fast-growing sectors that have strong earnings
growth, attractive valuations and effective
management (in this case in healthcare,
construction materials and agricultural inputs,
respectively).
In real estate, VOF divested its stakes in the
Hanoi Hilton Hotel, A&B Tower and the Crowne
Plaza Nha Trang. These exits, announced early
in the financial year, generated USD21 million
in proceeds that were recycled into the private
placement deals. VOF also benefited from the
brisk sales of residential units at the Danang Beach
Resort and Dai Phuoc Lotus township projects.
VOF will continue to seek exits from mature real
estate holdings in order to increase the liquidity
of its holdings, and focus on sectors such as
education and healthcare, where opportunities
abound in undervalued companies with strong
management, high earnings growth and an IPO
or listing timeline of 12-24 months.
Performance summary
NAV p.s.
Change on previous year
Share price
Premium/(discount) to NAV
2010
2.41
14.8%
1.40
(42.9%)
2009
2.10
1.9%
1.43
(31.9%)
20
VOF Annual Report 2010
VOF Portfolio by asset class (end June 2010)
Cash and other assets
Bonds
Overseas equity
Private equity
10.5%
0.8%
4.5%
6.0%
OTC equity
11.7%
13.2%
0.3%
2.4%
5.9%
Cash and other assets
Bonds
Overseas equity
Private equity
19.5%
OTC equity
Listed equity
36.7%
26.0%
Listed equity
Real estate
29.8%
32.8%
Real estate
USD783 million
2010
USD682 million
2009
VOF Portfolio by sector (end June 2010)
Cash and equivalents
10.5%
Other sectors
13.2%
Fertiliser
Financial services
2.2%
6.8%
Construction
10.2%
Consumer staples
13.7%
Hospitality
7.9%
Real estate equities
13.5%
Real estate projects
21.9%
USD783 million
2010
VOF’s portfolio
continues to be well
diversified by sector and
asset class. FY2010 saw
the listed holdings grow
in number and value as a
result of 12 IPOs.
100%100% VOF Annual Report 2010
21
Outlook
Vietnam’s macro economy is expected to be stable in the
second half of 2010, with GDP growth topping seven percent
in 2011. Liquidity will gradually increase as the cost of debt
declines, which will support the stock market and lengthen the
excellent IPO window for the thousands of OTC companies,
including many state-owned enterprises, who increasingly
look to the equity markets to fund corporate growth plans.
VOF expects the coming year to see a further 10 holdings
list, with a current combined market value of USD80 million.
Residential real estate continues to see high demand among
Vietnam’s growing middle class, with VOF holding a minority
stake in projects that will bring over 4,000 residential villas
and apartments to market in 2011. The coming year is
therefore expected to offer an excellent investment terrain
and the opportunity for VOF to continue to recover and build
shareholder value.
VOF
FY2010
16.8%
Vietnam
Index
5.8%
Competitor
Funds (*)
2.9%
(*) An unweighted average of four diversified Vietnam investment funds, comprising:
VEIL, VGF, DWS, and VEH. Data is in USD terms. Source: Bloomberg, LCF Edmond de
Rothschild Securities.
22
VOF Annual Report 2010
Top five listed/OTC performers during FY2010
Company
Listing date
% Earnings
growth
2009
% Share
price gain
FY2010
VOF holding value
at 30-Jun-09
(USD’000)*
VOF holding value
at 30-Jun-10
(USD’000)*
Quoc Cuong Gia Lai
Aug 2010
1,921.9
Khang Dien
Feb 2010
112.5
Halico
DIC Corp
Vinamilk
n/a (OTC)
Aug 2009
Jan 2006
35.2
98.3
90.0
397.5
223.8
187.4
122.5
90.3
5,370
4,476
5,443
15,453
26,353
21,338
9,678
19,512
23,774
42,681
* Note that buying and selling during the year means the last two columns may not correspond precisely to the % share price gain.
NAV vs share price performance
Many of VOF’s listed
and OTC holdings
saw strong corporate
earnings and
impressive share price
gains during FY2010.
600%
500%
400%
300%
200%
100%
0%
Dec
03
-100%
NAV
Share Price
VN Index
MSCI AsiaPac ex JP
% Gain since
fund inception
203.8%
148.5%
VOF net asset value
72.2%
44.2%
VOF share price
Jun Dec
04
04
Jun Dec
05
05
Jun Dec
06
06
Jun Dec
07
07
Jun Dec
08
08
Jun Dec
09
09
Jun
10
VOF Annual Report 2010
23
Top 5 holdings by asset class
Listed equity
Private equity
Project
Sector
Stake
No. of
shares
Value
30 Jun 10
(%)
(‘000)
(USD’000)
Project
Sector
Eximbank (EIB)
Financial services
Vinamilk (VNM)
Consumer goods
Hoa Phat (HPG)
DIC Corp (DIG)
Industrial
Real estate
Dam Phu My (DPM)
Fertiliser
5.0%
2.6%
7.2%
7.0%
2.3%
44,002
43,678
Hoan My Hospital
Healthcare
9,029
42,681
SSG Saigon Pearl
Real estate
14,078
30,684
COFICO
6,964
23,774
IBS
Real estate
Materials
8,870
14,675
Thang Loi Textile
Consumer goods
OTC equity
Real estate
Project
Sector
Stake
No. of
shares
Value
30 Jun 10
(%)
(‘000)
(USD’000)
Project
Sector
Quoc Cuong Gia Lai
Real estate
Halico
Consumer goods
13.5%
20.6%
8,109
21,338
Sofitel Metropole
Hotel
4,128
19,512
Dai Phuoc Lotus
Township
Prime Group
Materials
7.1%
7,091
15,039
Century 21
Mixed-use
VinaCafe
Consumer goods
10.9%
1,933
8,952
Danang Beach Resort Mixed-use
An Giang Plant Protection
Agri chemicals
7.4%
1,994
8,901
VinaSquare Tower
Mixed-use
Stake
(%)
28.9%
5.0%
25.1%
100.0%
100.0%
Stake
(%)
50.0%
18.0%
21.0%
25.0%
15.5%
24
VOF Annual Report 2010
VOF holds many of
Vietnam’s top brands
and companies, across
a diverse range of
sectors benefiting from
consumer spending
and the growth of the
domestic economy.
Featured investments
VOF Annual Report 2010
25
Prime Group
Prime Group JSC is Vietnam’s leading ceramics manufacturer, with
eight ceramic tile factories and a nationwide distribution network
resulting in a 25 percent market share. The construction materials
sector has been among the fastest growing economic sectors over
the past five years, a trend that is expected to continue as rapid
urbanisation reshapes Vietnam’s major cities. Prime Group’s 2009
revenue and earnings were USD123 million and USD16 million,
respectively. Prime Group expects earnings growth to average
25 percent yearly for the next three years, with a new factory just
opened in early 2010 that will increase ceramics production capacity
by 20 percent. VOF acquired a 7.0 percent stake in Prime Group, with
the company preparing to list its shares publicly in early 2011.
Hoan My Medical Corp
Hoan My Medical Corporation is the largest private hospital owner
and operator in Vietnam. Established in 1999, the company has a
combined 620 beds and 300 physicians at four operating hospitals,
primarily serving low and middle-income clients. An additional hospital
in HCM City is under construction. Hoan My is a well-known brand with
high patient loyalty due to its standard of service, notable in a country
where public hospitals suffer from chronic under-funding and out-dated
equipment. Vietnam has over 1,100 hospitals, only 4.9 percent of which
are privately-owned. Vietnam opened its healthcare sector to private
companies in 2000, and total healthcare spending rose 12.8 percent
yearly from 2000 to 2005. The private healthcare sector grew
33.6 percent yearly from 2000-2007, with five major private hospital
brands in the market. Hoan My saw earnings growth of 138 percent in
2009 and expects earnings growth of over 40 percent yearly for the next
three years given its strong market position and plans for expansion.
VOF holds a 28.9 percent stake in Hoan My, an investment that will
assist Hoan My upgrade and improve operations in order to attract
higher-income clients.
26
VOF Annual Report 2010
DIC Corp
DIC Corp (DIG) is one of the largest real estate companies in
southern Vietnam. DIG has a very strong asset base with 464ha
of compensated land on Dai Phuoc Island, Dong Nai, 16km from
central Ho Chi Minh City. The Dai Phuoc Lotus 220ha township
project is a joint venture with several foreign partners, including
VOF and VNL. In addition, the company owns other property and
hospitality projects in Vung Tau, Da Lat, and Vinh Phuc, near Hanoi.
For FY2010, DIG has targeted revenues of USD102.6 million and net
income of USD30.8 million, with an earnings CAGR of 25 percent
over the next three years (2010-2012), derived mostly from the sale
of land lots and villas at the Dai Phuoc and Nam Vinh Yen projects.
In H1 2010, DIG reported a net revenue and net profit of USD21.8
million and USD7.2 million, achieving 21.2 percent and 23.4 percent
of the yearly target, respectively (higher profit will be recorded
in Q4 to optimise cash flow for corporate tax purposes). VOF at
30 June 2010 held a 7.0 percent stake in DIG valued at USD23.8
million.
An Giang Plant Protection JSC
An Giang Plant Protection JSC, formerly state-owned, is currently
the market leader in the manufacturing and distribution of pesticide.
Distributed products are primarily imported from Syngenta, the
world’s top agricultural input producer. The company has over
900 employees, two pesticide factories, five seed factories, a
laboratory and a packaging factory. Its products are distributed
nationwide via a strong and extensive distribution network
with 23 branches, almost 500 wholesalers, 4,500 retailers, and
representative offices in Ho Chi Minh City and Cambodia. The
company benefits from Vietnam’s strong agricultural sector and
significantly low penetration of modern crop protection chemicals,
compared to regional agriproduct producing countries. An Giang
has seen average turnover and net profit growth of 26 and 11
percent, respectively, over the past three years. An Giang forecasts
15-20 percent growth in sales and earnings in 2010. At 30 June 2010,
VOF held a 7.4 percent stake in An Giang, worth USD8.9 million.
Profit and loss (VND bn)
FY09A
H1-10A
Profit and loss (VND bn)
Revenue
Gross profit
Gross margin
Net income
Net margin
EPS (VND/share)
DPS (VND/share)
Balance sheet (VND bn)
Total assets
Shareholders’ equity
ROE (%)
Book value per share (VND)
1,631.0
709.3
43.4%
573.2
35.1%
8,188
3,000
FY09A
3,605
2,290.6
25.0%
34,000
424.5
164.5
38.8%
139.4
32.8%
1,394
n/a
H1-10A
3,443
2,204
6.3%
22,050
Revenue
Gross profit
Gross margin
Net income
Net margin
EPS (VND/share)
DPS (VND/share)
Balance sheet (VND bn)
Total assets
Shareholders’ equity
ROE (%)
Book value per share (VND)
FY09A
2,353
579
24.6%
146
6.2%
8,112
2,400
FY09A
1,050
440
33.2%
24,491
H1-10A
1,870
481
25.7
150
8.0%
5,555
2,778
H1-10A
1,797
709
42.3%
26,259
VOF Annual Report 2010
27
Nam Viet Oil
Quoc Cuong Gia Lai
Nam Viet Oil Refinery and Petrochemicals JSC (NVO) is the only
private condensate refinery in Vietnam. NVO benefits from secure,
long-term supply of raw material from its strategic shareholder
PetroVietnam Oil Corporation. NVO also has a strong wholesale
distribution arrangement with PetroMekong, a dominant gasoline
retailer in southern Vietnam. The company has recently received
a petroleum import-export licence, and has completed upgrading
its plant capacity from 2,000 to 5,000 barrels per day. These
developments will allow the company to diversify its condensate
supply and expand its customer base from pure wholesale to
industrial and retail customers. NVO is on track to achieve net
income of USD4.3 million in FY2010, a substantial increase over the
FY2009 net income of USD0.7 million. The company trades at a P/E
2010 of 11.6x and a P/B of 3.6x. VOF acquired 11.63 percent of Nam
Viet Oil Refinery and Petrochemicals JSC (NVO) at the end of 2009.
Quoc Cuong Gia Lai (QCG) was established in 1994 as a private
company. It listed on the Ho Chi Minh Stock Exchange in July 2010.
The company’s core business lines are residential development,
rubber production and hydropower development. QGC’s
residential properties address the low- to mid-range of the market,
expected to be very profitable for the next several years due to
pent up demand. The company has a total cleared land area of
145ha available for sale, as lots or for residential development,
in Ho Chi Minh City. Eight major apartment projects and one
mixed-use complex are under development, which will be the
company’s key earnings drivers over the next five years. QCG
targets revenue of USD76.9 million and net income of USD21.0
million for FY2010, which would be year-on-year increases of
460 and 330 percent, respectively, due to several apartment and
office buildings that came online during the year. VOF holds a 13.5
percent stake in QCG valued at USD21.3 million on 30 June 2010.
Profit and loss (VND bn)
Revenue
Gross profit
Gross margin
Net income
Net margin
EPS
DPS
Balance sheet (VND bn)
Total assets
Shareholders’ equity
ROE (%)
FY09A
524.0
29.4
5.5%
13.9
2.7%
700
500
443.6
213.8
6.5%
H1-10A
Profit and loss (VND bn)
797.2
103.5
13.0%
82.7
10.4%
4,187
1,000
772.2
285.8
29%
Revenue
Gross profit
Gross margin
Net income
Net margin
EPS (VND/share)
DPS (VND/share)
Balance sheet (VND bn)
Total assets
Shareholders’ equity
ROE (%)
FY09A
328.4
44.2
13.5
122.6
37.5
3,735.0
3,735.0
FY09A
2,632.2
743.9
16.5
H1-10A
236.8
115.8
48.9
86.2
36.4
1,433.0
716.5
H1-10A
4,120.2
1,198.5
14.4
Book value per share (VND)
10,830
14,470
Book value per share (VND)
22,400.0
19,925.2
28
VOF Annual Report 2010
Danang Beach Resort
The 260-hectare Danang Beach Resort is Vietnam’s first truly
integrated luxury beachfront resort. The resort has pioneered
the second-home market in Vietnam, with sales of The Ocean
Villas, the first residential component, successfully launched to
entirely domestic buyers. The Dunes golf course, designed by
golf legend Greg Norman, is now open for play and garnering
praise as Vietnam’s top course. The Danang Beach Resort, when
fully completed, will set the standard for Vietnam’s fast-growing
hospitality industry. At 30 September 2010, total villa and
condominium sales and reservations at the Danang Beach Resort
stood at USD68 million. VOF holds a 25 percent equity stake in
Danang Beach Resort.
Danang Beach Resort - Phase 1 components:
• The Dunes Golf Course (18-hole championship course, now open)
• 115 detached villas (The Ocean Villas)
• 132 beach condominiums (The Cham)
• 15 detached golf course villas (The Dunes Residences)
• 37 branded golf course and oceanfront villas (The Norman Estates)
• Five-star hotel
• The Ocean Villa beach club
VOF Annual Report 2010
29
Dai Phuoc Lotus township
Dai Phuoc Lotus is a landmark resort-style urban development
project covering 200 hectares on an island of 400 hectares
in a branch of the Saigon River. The island township is
located between Ho Chi Minh City and the future Long Thanh
International Airport. The 200-hectare township will consist of
free-standing and semi-detached villas and townhouses, office
buildings, shopping centres, a marina, recreational facilities,
hotels and public facilities in the midst of parks and lakes. Phase
1 comprises 332 villas of two to five bedrooms, with a total of
USD30.5 million in sales and reservations at 30 September 2010.
VOF holds an 18.0 percent stake in Dai Phuoc Lotus.
Phase 1
Sen Phuong Nam
Development type
Mixed-use (Township)
Site area
Launch date
Expected completion date
Facilities
22 ha
Q3 2010
Q2 2012
Retail, golf course, schools, medical
facilities, hotels, parkland, tennis
courts, swimming pool.
30
VOF Annual Report 2010
Board of Directors
William Vanderfelt
Chairman
Horst F. Geicke
Director
Mr. Vanderfelt has over 30 years
of experience as Managing Partner
of Petercam, the leading Benelux
investment bank, in charge of Institutional
Research and Sales. Mr. Vanderfelt is an
experienced fund investor and acts as
a board director of several listed funds.
He is a passionate proponent of good
corporate governance and helps the
Company ensure that it maintains best
practice in its corporate governance.
Horst F. Geicke is one of VinaCapital Group’s
three founding partners. He has resided in
Asia for almost 30 years and has over 25
years of operating and investing experience in
the region, having made several financial and
strategic investments in Vietnam, including
the establishment of a manufacturing plant
for his family business. Mr. Geicke also
co-founded Pacific Alliance Group, a fund
management group in Hong Kong. Mr. Geicke
is the President of the European Chamber of
Commerce in Hong Kong and was previously
the President of the German Chamber of
Commerce in Hong Kong. He is the chairman
or board member of numerous public and
private companies. Mr. Geicke has a Masters
degree in Economics and Business Law from
the University of Hamburg, Germany.
VOF Annual Report 2010
31
Don Lam
Director
Michael G. Gray
Director
Martin Glynn
Director
Don Lam is a founding partner of VinaCapital
Group, with over 15 years experience in
Vietnam. He has overseen the Group’s growth
from manager of a single USD10 million fund
in 2003 into a full-featured investment firm
managing numerous listed and unlisted funds,
and offering a complete range of corporate
finance and real estate advisory services. Before
founding VinaCapital, Mr. Lam was a partner at
PricewaterhouseCoopers (Vietnam), where he
led the Corporate Finance and Management
Consulting practices throughout the Indochina
region. Mr. Lam has also held management
positions at Deutsche Bank and Coopers &
Lybrand in Vietnam and Canada. He has a
degree in Commerce and Political Science from
the University of Toronto, and is a member
of the Institute of Chartered Accountants of
Canada. He is a Certified Public Accountant and
holds a Securities Licence in Vietnam.
Michael G. Gray has over 30 years
professional experience in the accounting
profession. He also had 10 years in the
shipping industry before training as a
chartered accountant with Coopers &
Lybrand in the UK. Mr. Gray was a partner
in PricewaterhouseCoopers Singapore
and before that was the Territorial Senior
Partner for PricewaterhouseCoopers
Indochina (Vietnam, Cambodia and
Laos). He is a board member of several
companies in Singapore, including
Ascendas India Trust, Avi-tech Electronics
Ltd, JEL Corporation Holdings Ltd, Grand
Banks Ltd, and Raffles Marina Holdings
Ltd. He has a B.Sc. Degree in Maritime
Studies from the University of Plymouth,
UK and an M.A. Degree in Southeast Asian
Studies from the National University of
Singapore.
Martin Glynn has 30 years of experience
in the financial services industry. He has
two degrees from Canadian universities,
worked first in the export finance industry
and then for HSBC for 24 years until his
retirement in 2006. He commenced his
career at HSBC in Canada, ending up as
President and CEO of HSBC Bank Canada.
He spent from 2003 to 2006 in the
United States as President and CEO of
HSBC Bank USA, N.A. Mr. Glynn has
extensive board experience within the
HSBC group of companies and externally,
taking on leadership roles in the profit
and not-for-profit sectors.
32
VOF Annual Report 2010
Report of the Board of Directors
The Board of Directors submits its report together
with the consolidated financial statements of
VinaCapital Vietnam Opportunity Fund Limited
(“the Company”) and its subsidiaries (together
“the Group”) for the year ended 30 June 2010
(“the year”).
The Group
VinaCapital Vietnam Opportunity Fund Limited is
incorporated in the Cayman Islands as a limited
liability company. The registered office of the
Company is PO Box 309GT, Ugland House, South
Church Street, George Town, Grand Cayman,
Cayman Islands.
Particulars of the Group’s principal subsidiaries
and associates are set out in Note 6 and Note 8 of
the consolidated financial statements.
Principal activities
The Company’s principal activity is to undertake
various forms of investment in Vietnam
(primarily), and also in Cambodia, Laos and
Southern China. The Company mainly invests in
listed and unlisted companies, debt instruments,
private equity and real estate assets and other
opportunities with the objective of achieving
medium to long-term capital appreciation and
investment income.
The principal activities of the subsidiaries are
financial services, property investment, hospitality
management and retailing.
Results and dividend
The results of the Group for the year ended
30 June 2010 and the state of its affairs as at
that date are set out in the consolidated
financial statements on pages 40 to 80.
The Board of Directors do not recommend
payment of a dividend for the year ended
30 June 2010 (30 June 2009: nil).
Board of Directors
The members of the Board of Directors of the
Company during the year and up to the date of
this report are:
Name
Position
Date of appointment/
resignation
William Vanderfelt Chairman
10 December 2004
Jonathan Choi
Director
29 July 2003/
5 May 2010
Horst Geicke
Director
14 March 2003
Bernard Grigsby
Director
16 October 2006/
31 December 2009
Martin Glynn
Director
18 March 2008
Don Lam
Director
18 March 2008
Michael Gray
Director
24 June 2009
Auditors
The Group’s auditors, Grant Thornton Cayman
Islands with the assistance of Grant Thornton
Vietnam Ltd., have expressed their willingness to
accept reappointment.
Subsequent events after the reporting date
Details of significant subsequent events which
impact on the financial position of the Group
are set out in Note 31 of the accompanying
consolidated financial statements.
Directors’ interest in the Company
As at 30 June 2010, the interests of the Directors
in the shares, underlying shares and debentures of
the Company are as follows:
No. of shares
Direct
Indirect
Approximate
% of direct
and indirect
holding
Horst Geicke
1,775,000 272,222
Don Lam
955,859 180,495
William Vanderfelt -
600,000
Michael Gray
Martin Glynn
30,000
20,000
-
-
0.631%
0.350%
0.185%
0.009%
0.006%
Subsequent to the reporting date, Mr. Michael
Gray purchased further a 70,000 shares on the
open market bringing his total direct interest of
100,000 shares in the Company, which represents
a 0.031% holding.
Board of Directors’ responsibility in respect of
the consolidated financial statements
The Board of Directors is responsible for ensuring
VOF Annual Report 2010
33
that the consolidated financial statements are
properly drawn up so as to give a true and fair
view of the financial position of the Group as at
30 June 2010 and of the results of its operations
and its cash flows for the year then ended. When
preparing the consolidated financial statements,
the Board of Directors is required to:
i. adopt appropriate accounting policies which
are supported by reasonable and prudent
judgements and estimates and then apply
them consistently;
ii. comply with the disclosure requirements of
International Financial Reporting Standards
or, if there have been any departures in the
interest of true and fair presentation, ensure
that these have been appropriately disclosed,
explained and quantified in the consolidated
financial statements;
iii. maintain adequate accounting records and an
effective system of internal control;
iv. prepare the consolidated financial statements
on a going concern basis unless it is
inappropriate to assume that the Group will
continue its operations in the foreseeable
future; and
v. control and direct effectively the Group in all
material decisions affecting its operations and
performance and ascertain that such decisions
and/or instructions have been properly reflected
in the consolidated financial statements.
The Board of Directors is also responsible for
safeguarding the assets of the Group and hence
for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The Board of Directors confirms that the Group
has complied with the above requirements in
preparing the consolidated financial statements.
Statement by the Board of Directors
In the opinion of the Board of Directors, the
accompanying Consolidated Statement of
Financial Position, Consolidated Statements of
Income and Comprehensive Income, Consolidated
Statement of Changes in Equity and Consolidated
Statement of Cash Flows, together with the notes
thereto, have been properly drawn up and give a
true and fair view of the financial position of the
Group as at 30 June 2010 and the results of its
operations and its cash flows for the year then
ended in accordance with International Financial
Reporting Standards.
On behalf of the Board of Directors
William Vanderfelt
Chairman
Hong Kong SAR
10 December 2010
34
VOF Annual Report 2010
Governance report
VOF 2010 governance report
The members of the Board of Directors
On behalf of the Board, I am pleased to report
on the activities of the Board and its Committees
during the 2010 financial year. The VinaCapital
Vietnam Opportunity Fund Limited (’VOF’ or ‘the
Company’) is a Cayman Island company established
in 2003 and traded on the AIM Market of the
London Stock Exchange.
The Board is committed to meeting the highest
standards of corporate governance. The ultimate
aim of the corporate governance program is to
protect shareholders’ and other stakeholders. In
order to achieve this, the Company has created a
clear and effective structure for responsibility and
governance.
Compliance to AIM Rules and corporate governance
best practice
The Company complied with the AIM rules and
regulations. Furthermore the Company endeavours
to comply with other relevant best practice
corporate governance frameworks, such as the UK
Combined Code on Corporate Governance (‘the
Combined Code’) and the Association of Investment
Companies Code of Corporate Governance (‘the AIC
Code’), which adapts the Combined Code specifically
for investment companies.
At the date of this report, the Board is comprised of three independent non-executive
Directors, including the Chairman, and two non-independent Directors, both
non-executive. This is in line with the Combined Code recommendations that at
least half the Board are independent non-executive Directors. The independent
non-executive Directors have all recently declared as required on an annual basis that
they are independent from the Company, the manager and any of its managed vehicles.
At the end of the financial year, the aggregate annual Directors’ fee amounted
to USD222,500, whereby any Directors’ fees in excess of USD60,000 result in a
corresponding reduction in the management fees paid to the Investment Manager.
The Board believes that this arrangement is not desirable in respect to good
governance practices. The Board has however accepted this situation to ensure that
the Company attracts and retains appropriately qualified Board members.
Current Board Members
William Vanderfelt
Michael Gray
Martin Glynn
Don Lam
Horst Geicke
Independence
to the Company
Yes
Yes
Yes
No*
No**
Exec/Non-exec Director
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
* Mr Don Lam is an executive of the Manager, VinaCapital Investment Management Ltd and a director of
VinaCapital Group Ltd.
** Mr Horst Geicke is the Chairman of VinaCapital Group Ltd.
VOF Annual Report 2010
35
Shareholders
Board of Directors
Investment committees
Nomination/remuneration/
Management evaluation committee
The Board provides strategic
direction and has an oversight
role over the investment manager
to ensure that shareholder
returns are maximised.
Reporting and accounting
Investment manager
Treasury
The investment manager executes
the Board’s strategic direction
within the agreed framework of
reward, incentive and control.
Organisation of corporate governance
Audit committee
Valuation committee
Investment teams
Corporate
communications/
Investor relations
Legal
Business development
Operating unit
Country, branch office
Risk and compliance
Reporting and accounting
Risk
The investment manager cascades
down and applies the framework
to all investment vehicles.
36
VOF Annual Report 2010
The responsibilities of the Board of Directors
The Board is responsible for managing the Company on behalf of its shareholders. In order to create and deliver
sustainable shareholder value, the Board established the objectives and policies of the Company, and ensured throughout
the year the overall strategic direction was delivered within the agreed framework of reward, incentive and control.
Certain responsibilities of the Board are delegated to Board committees to assist the Board in carrying out its functions
and to ensure independent oversight of internal control and risk management. Each Board committee’s terms of
reference endeavoured to follow the model terms of reference from the Institute of Chartered Secretaries and
Administrators (ICSA). The committee’s terms of reference set out the committee administration requirements, duties and
responsibilities of specific areas. The Committee Chairman reports to the Board on matters discussed and any proposals
requiring decision making.
The Board has held four scheduled Board meetings during the year, and used a structured agenda to ensure all key areas
are reviewed over the course of the year.
Summary of the members’ attendance and fees paid are shown below.
Board Member
Elected
Current
Board
Position
Audit
Committee
(AC)
Valuation
Committee
(VC)
RNME
Committee
(RNME)
Board
meetings
(4)
AC
meetings
(4)
VC
meetings
(6)
RNME
meetings
(2)
Total
Fee
(USD)
Attendance (3)
William Vanderfelt
2003 Chairman Member Member Chairman
Michael Gray
2009 Member Chairman Member Member
2008 Member Member Chairman Member
Martin Glynn
Ben Grigsby (1)
Jonathon Choi (2)
2003
2003
-
-
Don Lam
2008 Member
Horst Geicke
2003 Member
Total
-
-
-
-
-
-
-
-
-
-
-
-
4/4
4/4
4/4
1/1
1/4
2/4
4/4
4/4
4/4
4/4
1/1
-
-
-
6/6
6/6
6/6
1/1
-
-
-
2/2 75,000
2/2 58,000
2/2 60,000
1/1 30,000
-
-
-
-
-
-
223,000
(1) Ben Grigsby was Chairman of the Valuation Committee before he resigned in December 2009.
(2) Jonathon Choi resigned in May 2010.
(3) Attendances of Board and Committee are from July 2009 to June 2010.
VOF Annual Report 2010
37
Board Delegated Committees
Audit Committee
The committee monitored the effectiveness of
internal controls, internal audit activities, the risk
management system and financial reporting. The
committee’s terms of reference endeavours to
comply with The Smith Guidance recommended in
the Code. The committee also kept informed of the
annual audit and bi-annual review of the Company’s
financial statements. It assessed the external auditor’s
independence and approved any non-audit services
provided by the external auditor. The committee
also evaluated the performance of both the internal
and external auditors following each audit cycle.
At the Board meetings, the committee Chairman
presented the finding and proposals to the Board.
The committee met four times (three times in
person and once by telephone call).
Valuation Committee
The committee ensured the investment manager’s
valuation process and policies are consistent,
transparent and result in valuations determined
on an appropriate basis. The committee Chairman
presented the findings and recommendations to
the Board for final decisions on all valuations. The
committee met six times in 2010 (twice in person
and four times by telephone call).
Remuneration/ Nomination/ Management
Engagement/ Evaluation Committee
The committee met twice during the year and
performed multiple roles. The committee:
• Determined and agreed the framework for the
remuneration of the Board and Committee
members;
• Reviewed the structure, size and composition
(skill, knowledge and experience) of the Board
and recommended changes if necessary;
• Evaluated the performance of the Company’s
key third-party service providers, this including
the investment manager, nominated advisor,
company secretary, corporate broker, custodian
and administrator; and
• Reviewed and evaluated the Committee’s own
performance, duties and responsibilities, and
concluded that it and its members are effective.
The committee’s Chairman reported the findings and
proposals to the Board for approval.
Investment Committees
The Company has two committees to consider
and approve investment decisions; an Investment
Committee (‘IC’) and the Independent Board
Committee (‘IBC’).
The IC met many times during the year to consider
and approve projects that the Investment Manager
considered suitable for investment by the Company.
The committee is comprised of individuals with
financial and business backgrounds combined
with extensive hands-on local experience. Current
committee members include Horst Geicke, Don Lam
and Andy Ho.
The IBC met when required to consider and
approve investments of related listed investment
funds, namely Vinaland Limited and Vietnam
Infrastructure Limited. Only the members of the
IBC are allowed to interface with the third party
brokers. The IBC was established to minimise the
role of non-independent individuals with access
to unpublished price-sensitive information on the
funds managed by the Investment Manager. Current
committee members include William Vanderfelt, Martin
Glynn and Michael Gray.
Investment Manager
VOF has given VinaCapital, the investment manager,
overall responsibility for conducting the day-to-day
management of the Company’s investment portfolio
including the acquisition, monitoring and disposal of
assets in line with the strategy adopted by the Board.
For further information of the investment manager
please refer to the AIM Admission Document.
Internal Controls and Risk Management
In 2009, the Board endeavoured to adopt The Turnbull
Guidance as recommended by the Code for internal
controls and risk management. Thus the internal audit
function was introduced to the Company in the third
quarter of 2009, as the Board and investment manager
sought to strengthen the internal control process to
meet the Company’s needs. The Board appointed
PricewaterhouseCoopers (‘PwC’) Vietnam as the
internal auditor at the time. The internal audit work was
performed based on an internal audit plan determined
and in agreement with the Audit Committee. The
internal auditor participated in all audit committee
meetings. The audit committee has decided to continue
to outsource the internal audit function and to
reappoint PwC as the internal auditor for 2011.
Sincerely,
_________________________________________
William Vanderfelt
Chairman
VinaCapital Vietnam Opportunity Fund Limited
10 December 2010
38
VOF Annual Report 2010
Independent Auditors’ report
To the Shareholders of
VinaCapital Vietnam Opportunity Fund Limited
We have audited the accompanying Consolidated
Statement of Financial Position of VinaCapital
Vietnam Opportunity Fund Limited and its
subsidiaries (“the Group”) as of 30 June 2010, and
the related Consolidated Statements of Income and
Comprehensive Income, Consolidated Statement of
Changes in Equity and Consolidated of Statement
of Cash Flows for the year then ended and a
summary of significant accounting policies and other
explanatory notes from pages 40 to 80.
Management’s responsibility for the consolidated
financial statements
Management is responsible for the preparation and
fair presentation of these consolidated financial
statements in accordance with International
Financial Reporting Standards. This responsibility
includes: designing, implementing and maintaining
internal controls relevant to the preparation and fair
presentation of consolidated financial statements
that are free from material misstatement, whether
due to fraud or error; selecting and applying
appropriate accounting policies; and making
accounting estimates that are reasonable in the
circumstances.
Auditors’ responsibility
Our responsibility is to express an opinion on
these consolidated financial statements based on
our audit. We conducted our audit in accordance
with International Standards on Auditing. Those
standards require that we comply with ethical
requirements and plan and perform the audit
to obtain reasonable assurance whether the
consolidated financial statements are free from
material misstatement.
This report, including the opinion, has been
prepared for and only for the shareholders. We
do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other
person to whom this report is shown or into whose
hands it may come save where expressly agreed by
our prior consent in writing.
Basis of opinion
An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures
in the financial statements. The procedures selected
depend upon the auditor’s judgement, including the
assessment of the risks of material misstatement of
the financial statements, whether due to fraud or
error. In making those risk assessments, the auditor
considers internal controls relevant to the entity’s
preparation and fair presentation of the financial
statements in order to design audit procedures
that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. An
audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness
of accounting estimates made by management, as
well as evaluating the overall presentation of the
financial statements.
We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements
give a true and fair view of the financial position of
VinaCapital Vietnam Opportunity Fund Limited and
its subsidiaries as at 30 June 2010, and of its financial
performance and its cash flows for the year then
ended in accordance with International Financial
Reporting Standards.
GRANT THORNTON
Grand Cayman, Cayman Islands
09 December 2010
VOF Annual Report 2010
39
40
VOF Annual Report 2010
Consolidated statement of financial position
ASSETS
Non-current
Investment properties
Property, plant and equipment
Investments in associates
Long-term loan receivables from related parties
Other long-term financial assets
Other long-term investments
Prepayments for operating lease assets
Other assets
Non-current assets
Current
Inventories
Trade and other receivables
Receivables from related parties
Financial assets at fair value through Statement of Income
Short-term investments
Cash and cash equivalents
Current assets
Assets classified as held for sale
Total assets
Notes
30 June 2010
USD’000
30 June 2009
USD’000
7
8
27
9
10
11
27
12
14
15
6,700
-
194,688
47,718
11,661
6,916
-
104
267,787
2,437
6,045
11,564
455,526
428
50,033
526,033
-
793,820
6,906
321
148,435
58,615
15,314
2,331
159
107
232,188
2,071
8,012
15,478
352,389
452
69,691
448,093
37,742
718,023
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated statement of financial position (cont.)
EQUITY AND LIABILITIES
EQUITY
Equity attributable to shareholders of the parent:
Share capital
Additional paid-in capital
Revaluation reserve
Translation reserve
Retained earnings
Non-controlling interests
Total equity
LIABILITIES
Non-current
Deferred tax liabilities
Other long-term liabilities
Non-current liabilities
Current
Trade and other payables
Payables to related parties
Current liabilities
Liabilities classified as held for sale
Total liabilities
Total equity and liabilities
Net assets value per share attributable to equity shareholders of the parent (USD per share)
The accompanying notes are an integral part of these consolidated financial statements.
VOF Annual Report 2010
41
30 June 2010
USD’000
30 June 2009
USD’000
3,246
722,064
21,193
(3,762)
39,760
782,501
1,427
783,928
101
-
101
4,089
5,702
9,791
-
9,892
793,820
2.41
3,246
722,064
25,958
(2,088)
(67,268)
681,912
13,676
695,588
-
484
484
8,167
3,118
11,285
10,666
22,435
718,023
2.10
Notes
16
17
27
15
24
42
VOF Annual Report 2010
Consolidated statement of changes in equity
Equity attributable to shareholders of the parent
Non-controlling
interests
Total equity
1 July 2008
Acquisition of subsidiaries
Dividend distribution to non-controlling shareholder
Redemption of non-controlling interest
Profit/(loss) for the year ended 30 June 2009
Other comprehensive income
- Currency translation
- Share of associates’ revaluation gains recognised
directly in other comprehensive income (Note 8)
Total other comprehensive income
Total comprehensive income
30 June 2009
1 July 2009
Disposal of associate
Disposal of assets and liabilities held for sale
Redemption of non-controlling interest (Note 6)
Acquisition of non-controlling interest in a subsidiary
Dividend distribution to non-controlling shareholder
Profit for the year ended 30 June 2010
Other comprehensive income
- Currency translation
- Share of associates’ revaluation losses recognised
directly in other comprehensive income (Note 8)
Total other comprehensive income
Total comprehensive income
30 June 2010
Share capital
USD‘000
3,246
-
-
-
-
-
-
Additional
paid-in
capital
USD‘000
722,064
-
-
-
-
-
-
-
3,246
-
722,064
3,246
-
-
-
-
-
-
-
-
-
-
3,246
722,064
-
-
-
-
-
-
-
-
-
-
722,064
Revaluation
reserve
Translation
reserve
Retained
earnings
USD‘000
18,463
-
-
-
-
USD’000
(846)
-
-
-
-
-
(1,242)
7,495
7,495
7,495
25,958
25,958
(2,403)
-
-
-
-
-
-
(1,242)
(1,242)
(2,088)
(2,088)
-
-
-
-
-
-
-
(1,674)
(2,362)
(2,362)
(2,362)
21,193
-
(1,674)
(1,674)
(3,762)
USD’000
(74,050)
-
-
-
6,782
-
-
-
6,782
(67,268)
(67,268)
2,403
-
-
(69)
-
104,694
-
-
-
104,694
39,760
Total
attributable
to owners of
the parent
USD‘000
668,877
-
-
-
6,782
(1,242)
7,495
6,253
13,035
681,912
681,912
-
-
-
(69)
-
104,694
(1,674)
(2,362)
(4,036)
100,658
782,501
The accompanying notes are an integral part of these consolidated financial statements.
USD‘000
34,117
(16,153)
(119)
(201)
(3,684)
(284)
-
(284)
(3,968)
13,676
13,676
-
(7,978)
(4,741)
402
(131)
311
(112)
-
(112)
199
1,427
USD‘000
702,994
(16,153)
(119)
(201)
3,098
(1,526)
7,495
5,969
9,067
695,588
695,588
-
(7,978)
(4,741)
333
(131)
105,005
(1,786)
(2,362)
(4,148)
100,857
783,928
Consolidated statement of income
VOF Annual Report 2010
43
Revenue
Cost of sales
Gross profit
Net changes in fair value of financial assets at fair value through Statement of Income
Selling, general and administration expenses
Net losses from fair value adjustments of investment properties
Other income
Negative goodwill/(Goodwill written-off)
Other expenses
Operating profits
Finance income
Finance costs
Finance income - net
Share of profits/(losses) of associates
Profits before tax for the year from continuing and total operations
Withholding taxes imposed on investment income
Net profits for the year from continuing and total operations
Attributable to equity shareholders of the parent
Attributable to non-controlling interests
Earnings per share – basic and diluted (USD per share)
The accompanying notes are an integral part of these consolidated financial statements.
Notes
Year ended
30 June 2010
USD’000
9,333
(7,673)
1,660
30 June 2009
USD’000
8,980
(7,688)
1,292
18
19
20
21
22
22
8
23
24
96,895
(21,374)
(72)
2,633
-
(1,600)
76,482
78,142
14,475
(2,668)
11,807
15,267
27,074
105,216
(211)
105,005
104,694
311
105,005
0.32
63,439
(18,181)
(12,111)
968
2,779
(20,334)
16,560
17,852
23,221
(2,808)
20,413
(35,059)
(14,646)
3,206
(108)
3,098
6,782
(3,684)
3,098
0.02
44
VOF Annual Report 2010
Consolidated statement of comprehensive income
Profits for the year
Other comprehensive income
- Share in other comprehensive income of associates
- Exchange differences on translations of foreign operations
Other comprehensive (loss)/income for the year
Total comprehensive income for the year
Attributable to equity shareholders of the parent
Attributable to non-controlling interests
Year ended
30 June 2010
30 June 2009
USD’000
105,005
(2,362)
(1,786)
(4,148)
100,857
100,658
199
100,857
USD’000
3,098
7,495
(1,526)
5,969
9,067
13,035
(3,968)
9,067
The accompanying notes are an integral part of these consolidated financial statements.
Consolidated statement of cash flows
Operating activities
Net profits for the year before tax
Adjustments:
Depreciation and amortisation
Unrealised net gain from revaluation of financial assets at fair value through Statement of Income
Net (gain)/loss from realisation of financial assets at fair value through Statement of Income
Gain/loss on disposal of property, plant and equipment
Losses on revaluation of investment properties
Negative goodwill on acquisition of non-controlling interest/goodwill written-off
Gain/loss on disposal of investment
Share of (profits)/losses of associates
Allowance for impairment of assets
Unrealised foreign exchange losses
Interest expenses
Dividend income
Interest income
Net losses before changes in working capital
Change in trade receivables and other assets
Change in inventories
Change in trade payables and other liabilities
Cash and cash equivalents included in held for sale assets
Withholding taxes imposed on investment income paid
Cash flow from operating activities
The accompanying notes are an integral part of these consolidated financial statements.
VOF Annual Report 2010
45
Year ended
30 June 2010
USD’000
30 June 2009
USD’000
105,216
355
(61,064)
(35,831)
8
72
-
(1,035)
(15,267)
1,487
252
265
(9,938)
(3,825)
(19,305)
(2,609)
(366)
3,307
-
(211)
(19,184)
3,206
453
(46,225)
(17,214)
3,540
12,111
(2,779)
-
35,059
16,442
222
597
(16,870)
(6,299)
(17,757)
(6,470)
1,184
(7,691)
(284)
(108)
(31,126)
46
VOF Annual Report 2010
Consolidated statement of cash flows (cont.)
Investing activities
Interest received
Dividends received
Purchases of investment property, plant, equipment and other non-current assets
Acquisitions of non-controlling interests in associates
Acquisitions of financial assets
Acquisitions of other long-term investments
Proceeds from disposals of financial assets
Additional investments in associates
Proceeds from disposals of investments and property, plant, equipment
Proceeds from divestments of short-term investments
Loans provided to associates, net
Cash flow from investing activities
Financing activities
Interest paid
Proceeds from bank loans
Dividends paid to non-controlling shareholders
Capital distributions to non-controlling shareholders
Loan repayments
Cash flow from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
The accompanying notes are an integral part of these consolidated financial statements.
Year ended
30 June 2010
USD’000
30 June 2009
USD’000
3,266
11,479
(345)
-
(124,643)
(1,700)
114,334
(17,650)
18,562
24
1,114
4,441
(2)
-
(131)
(4,782)
-
(4,915)
(19,658)
69,691
50,033
6,308
17,662
(8,894)
(13,340)
(27,884)
(2,943)
106,102
(1,827)
3,087
1,354
(7,938)
71,687
(597)
6,556
(119)
(201)
(795)
4,844
45,405
24,286
69,691
Notes to the consolidated financial statements
VOF Annual Report 2010
47
1. General information
2.2 Changes in accounting policies
VinaCapital Vietnam Opportunity Fund Limited
(“the Company”) is a limited liability company
incorporated in the Cayman Islands. The registered
office of the Company is PO Box 309GT, Ugland
House, South Church Street, George Town,
Grand Cayman, Cayman Islands. The Company’s
primary objective is to undertake various forms
of investment primarily in Vietnam, but also in
Cambodia, Laos and Southern China. The Company
is listed on the AIM market of the London Stock
Exchange under the ticker symbol VOF.
The consolidated financial statements for the
year ended 30 June 2010 were authorised for
issue by the Company’s Board of Directors on
10 December 2010.
2. Statement of compliance with IFRS and
adoption of new and amended standards and
interpretations
2.1 Statement of compliance with IFRS
The consolidated financial statements of the
Group have been prepared in accordance with
International Financial Reporting Standards
(“IFRS”) as issued by the International
Accounting Standards Board (IASB).
2.2.1 Overall considerations
The Group has adopted the following new
interpretations, revisions and amendments to IFRS
issued by the International Accounting Standards
Board, which are relevant to and effective for the
Group’s financial statements for the annual period
beginning 1 July 2009:
•
IAS 1 Presentation of Financial Statements
(Revised 2007)
IFRS 8 Operating Segments
IFRS 3 Business Combinations (Revised 2008)
IAS 27 Consolidated and Separate Financial
Statements (Revised 2008)
•
•
•
• Amendments to IFRS 7 Financial Instruments:
Disclosures - improving disclosures about
financial instruments
2.2.2 Adoptions of revised and amended standards
IAS 1 Presentation of Financial Statements
(Revised 2007)
The adoption of IAS 1 (Revised 2007) made certain
changes to the format and titles of the primary
financial statements and to the presentation of
some items within these statements. It also gave
rise to additional disclosures. The measurement
and recognition of the Group’s assets, liabilities,
income and expenses was unchanged. However,
some items that were recognised directly in equity
were subsequently recognised in the Consolidated
Statement of Comprehensive Income directly,
for example revaluations of property, plant and
48
VOF Annual Report 2010
equipment and exchange differences on translation
of foreign operations. IAS 1 affected the presentation
of changes in owners’ equity and introduced a
“Statement of Comprehensive Income”.
IAS 1 (revised 2007) requires an additional
comparative statement of financial position to
be presented whenever an accounting policy is
applied retrospectively. This applies in the current
year as IAS 1 (revised 2007) is applied for the
first time, and application is retrospective. The
comparative Consolidated Statement of Financial
Position is unchanged from when it was previously
reported as at 30 June 2009 and the Management
consider the additional comparative is not
required as they are not expected to have material
impact on the Group’s Consolidated Statement of
Financial Position.
IFRS 8 Operating Segments
This standard has been applied retrospectively
and the adoption of IFRS 8 has not affected the
identified operating segments for the Group.
However, reported segment results are based on
internal management reporting information that
is regularly reviewed by the Investment Manager.
In the previous annual consolidated financial
statements, segments were identified by reference
to the way the Investment Manager manages
and monitors the risks and returns of the Group.
As the change in accounting policy only results in
additional disclosures, there is no impact on the
historic, current or future earnings per share ratio.
IFRS 3 Business Combinations (Revised 2008)
The standard is applicable for business
combinations occurring in reporting periods
beginning on or after 1 July 2009 and has
been applied prospectively. The new standard
introduced changes to the accounting
requirements for business combinations, but still
requires use of the purchase method with some
the significant changes. For example, all acquisition
related costs are expensed in the period in which
the costs are incurred rather than included in
the cost of investment. There is a choice on
an acquisition by acquisition basis to measure
the non-controlling interest in the acquiree at
fair value or at the non-controlling interest’s
proportionate share of the acquiree’s net assets.
All payments to purchase a business are recorded
at fair value at the acquisition date. Some changes
in the fair value of contingent consideration
that the Group recognises after the acquisition
date may be the result of additional information
that the Group obtained after that date about
facts and circumstances that existed at the
acquisition date, where the changes in fair value
of contingent consideration are not measurement
period adjustments, contingent consideration
classified as equity is not re-measured, contingent
consideration classified as an asset or a liability
which is a financial instrument within the scope
of IAS 39 is measured at fair value with gains and
losses recognised either in Statement of Income
or in other comprehensive income according
to the requirements of IAS 39 and contingent
consideration classified as an asset or a liability
outside the scope of IAS 39 is accounted for
in accordance with IAS 37 or other IFRSs as
appropriate. Previously, contingent consideration
was recognised at the acquisition date only if its
payment was probable.
The Group have applied IFRS 3 (Revised 2008)
prospectively to all business combinations from
1 July 2009.
IAS 27 Consolidated and Separate Financial
Statements (Revised 2008)
The revised standard introduced changes in
accounting for additional acquisition interests
in subsidiaries. Where the Group increases and
decreases its interest in subsidiaries but there is
no change in control, the effects of all transactions
between the Group with non-controlling interest
no longer result in goodwill on any gains or losses,
but are recorded in equity. When control is lost,
any remaining interest in the entity is re-measured
to fair value, and a gain or loss is recognised in the
Consolidated Statement of Income.
The revaluation surpluses of disposed subsidiaries
previously recognised in equity are transferred
directly to retained earnings when control is
lost. The Group applied IAS 27 (Revised 2008)
prospectively to transactions with non-controlling
interests and disposals of subsidiaries from
1 July 2009.
Adoption of IFRS 7 Financial Instruments:
Disclosures - improving disclosures about financial
instruments
The amendment requires enhanced disclosures
about fair value measurement and liquidity risk.
In particular, the amendment requires disclosure
of fair value measurement by level of a fair value
measurement hierarchy to be disclosed in the
consolidated financial statements. As the changes
in accounting policy only result in additional
disclosures, there is no impact on the historic,
current or future earnings per share ratio.
VOF Annual Report 2010
49
2.2.3 Standards, amendments and interpretations
to existing standards that are not yet effective and
have not been adopted early by the Group
At the date of authorisation of these financial
statements, certain new standards, amendments
and interpretations to existing standards have
been published but are not yet effective, and have
not been adopted early by the Group.
Management anticipates that all of the
pronouncements will be adopted in the Group’s
accounting policies for the first period beginning
after the effective date of the pronouncement.
Information on new standards, amendments and
interpretations that are expected to be relevant to
the Group’s financial statements is provided below.
Certain other new standards and interpretations
have been issued but are not expected to have
a material impact on the Group’s consolidated
financial statements.
IFRS 9 Financial Instruments (effective from
1 January 2013)
The IASB aims to rewrite IAS 39 Financial
Instruments: Recognition and Measurement in its
entirety by the end of 2010, with the replacement
standards to be effective for annual periods
beginning 1 January 2013. IFRS 9 is the first part of
Phase 1 of this project. The main phases are:
• Phase 1: Classification and Measurement
• Phase 2: Impairment methodology
• Phase 3: Hedge accounting
In addition, a separate IASB project team is dealing
with derecognition.
IFRIC 19 Extinguishing Financial Liabilities with
Equity Instruments (effective from 1 July 2010)
This interpretation clarifies the requirements
of International Financial Reporting Standards
(IFRSs) when the Group negotiates the terms of a
financial liability with its creditor and the creditor
agrees to accept the Group’s shares or other equity
instruments to settle the financial liability fully or
partially. IFRIC 19 clarifies that:
• equity instruments issued to a creditor are
part of the consideration paid to extinguish the
financial liability.
• equity instruments issued are measured at
their fair value. If the fair value cannot be
reliably measured, the equity instruments
should be measured to reflect the fair value of
the financial liability extinguished.
the difference between carrying amount of
the financial liability extinguished and the
initial measurement amount of the equity
measurements issued is included in the
Statement of Income for the period.
•
The Group will adopt IFRIC 19 from the effective
date of the standard.
IAS 24 Related Party Disclosures (effective from
1 January 2011)
The IASB issued a revised version of IAS 4 Related
Party Disclosures (IAS 24 (2009)) on 4 November
2009 which supersedes IAS 24 (2003).
The changes introduced by IAS 4 (2009) relate
mainly to the related party disclosure requirements
for government-related entities and the definition
of a related party.
In respect of definition of a related party, the
amendments have been made in order to clarify its
meaning and to eliminate previous inconsistencies.
The changes include:
•
It has been clarified that, where a company has
a subsidiary and an associate, for the purposes
of the associate’s separate or individual
financial statements, the subsidiary is regarded
as a related party of the associate as well as the
company itself;
• The definition of a related party has been
amended such that in the circumstances in
the bullet point above, for the purposes of the
subsidiary’s separate or individual financial
statements, the associate is a related party;
• An inconsistency has been removed in order
that, when considering investments held by
individuals rather than entities, two associates
are not regarded as being related parties simply
because one person has significant influence
over one entity, and a close family member
of that person has significant influence over
another entity;
• The criteria for investments held by key
management personnel have been changed,
so that where the key management personnel
of a company have control or joint control over
other entities, disclosures are required in both
the financial statements of the Company and
the financial statements of the other entities;
•
In any circumstances where a company has
joint control over a second entity, and joint
control or significant influence over a third
entity, then the second and third entities are
regarded as being related to each other.
50
VOF Annual Report 2010
In addition, other amendments have been made to
the definition of a related party which clarify that:
• References to an associate and a joint venture
include their subsidiaries; and
• Two entities are not related parties by virtue
of a member of key management personnel
of one entity having significant influence over
another entity.
The definition of a ‘close member of the family’ has
also been amended to state that these ‘include’ a
person’s spouse or domestic partner and children,
rather than ‘may include’. The Group selects to adopt
IAS 24 from the effective date of the standard.
Management have yet to assess the impact that
this amendment is likely to have on the financial
statements of the Group. However, they do not
expect to implement the amendments until all
chapters of the IAS 39 replacement have been
published and they can comprehensively assess
the impact of all changes.
Annual Improvements 2009
Management have yet to assess the impact that
this amendment is likely to have on the financial
statements of the Group. However, they do not
expect to implement the amendments until all
chapters of the IAS 39 replacement have been
published and they can comprehensively assess
the impact of all changes.
The IASB has issued Improvements for International
Financial Reporting Standards 2009. Most of these
amendments become effective in annual periods
beginning on or after 1 July 2009 or 1 January 2010.
The Group expects the amendments to
IAS 17 Leases to be relevant to the Group’s
accounting policies. This standard is effective
for periods beginning on or after 1 January 2010
therefore will apply to the Group’s subsequent
consolidated financial statements. Prior to the
amendment IAS 17 generally required a lease of
land to be classified as an operating lease. The
amendment now requires that leases of land
are classified as finance lease or operating lease
applying the general principles of IAS 17. The
Group will need to reassess the classification
of the land elements of its unexpired leases for
the effective period on the basis of information
existing at the inception of those leases. Any
newly classified finance leases are recognised
retrospectively. Preliminary assessments indicate
that the effect on the Group’s consolidated
financial statements will not be significant.
Annual Improvements 2010
The IASB has issued Improvements for
International Financial Reporting Standards 2010.
These amendments become effective for annual
periods beginning on or after 1 July 2010 or
1 January 2011. The Group expects the amendments
to IFRS 3 Business Combinations, IFRS 7 Financial
instruments: Disclosure, IAS 1 Presentation of
Financial Statements, IAS 21 The Effects of Changes
in Foreign Exchange Rates, and IAS 28 Investments
in Associates will be relevant to the accounting
policies however preliminary assessments indicate
that the effect on the Group’s consolidated
financial statements will not be significant.
IFRS 3 Business Combinations is effective for the
periods beginning on or after 1 July 2010 therefore
will apply to subsequent financial statements. In
respect of transition requirements for contingent
consideration from a business combination that
occurred before the effective date of the revised
IFRS, the improvements clarify that contingent
consideration balances arising from business
combinations that occurred before an entity’s date
of adoption of IFRS 3 (Revised 2008) shall not be
adjusted on the adoption date. Guidance is also
provided on the subsequent accounting for such
contingent balances. In respect of measurement
of non-controlling interest (“NCI”), the choice
of measuring NCI either at fair value or at the
proportionate share in the recognised amounts of
an acquiree’s identifiable assets, is now limited to
NCI that are present ownership instruments and
entitle their holders to a proportionate share of the
acquiree’s net assets in the event of liquidation. This
clarifies that all other components of NCI shall be
measured at their acquisition date fair values, unless
another measurement basis is required by IFRS.
IFRS 7 Financial instruments: Disclosure is
effective for the periods beginning on or after
1 January 2011 therefore will be disclosed
in the accounting policies of the Group’s
subsequent financial statements. This clarifies
the disclosure requirement of the standards to
remove inconsistencies, duplicative disclosure
requirements and specific disclosures that may
be misleading.
IAS 1 Presentation of Financial Statements is
effective for the periods beginning on or after
1 January 2011 therefore will be disclosed in the
accounting policies of the Group’s subsequent
financial statements. This clarifies that entities
may present the required reconciliations for each
component of other comprehensive income either
in the Consolidated Statement of Changes in Equity
or in the notes to financial statements.
VOF Annual Report 2010
51
IAS 21 The Effects of Changes in Foreign Exchange
Rates and IAS 28 Investments in Associates are
effective for the periods beginning on or after
1 July 2010 therefore will apply to the Group’s
subsequent financial statements. These amend
the transition requirements to apply certain
consequential amendments arising from the IAS 27
(2008) amendments prospectively, to be consistent
with the related IAS 27 transition requirement.
3. Summary of significant accounting policies
3.1 Presentation of consolidated financial
statements
The consolidated financial statements are
presented in United States Dollars (USD) and all
values are rounded to the nearest thousand (’000)
unless otherwise indicated.
The significant accounting policies that have been
used in the preparation of these consolidated
financial statements are summarised below. These
policies have been consistently applied to all the
years presented unless otherwise stated.
The consolidated financial statements have been
prepared using the historical cost convention,
as modified by the revaluation of investment
property, leasehold land and certain financial
assets and financial liabilities, the measurement
bases of which are described in the accounting
policies below.
The preparation of consolidated financial
statements in accordance with IFRS requires
the use of certain accounting estimates and
assumptions. Although these estimates are based
on management’s best knowledge of current
events and actions, actual results may ultimately
differ from those estimates. The areas involving a
higher degree of judgement or complexity, or areas
where assumptions and estimates are significant to
the consolidated financial statements are disclosed
in Note 4 to the consolidated financial statements.
3.2 Basis of consolidation
The consolidated financial statements of the Group
for the year ended 30 June 2010 comprise the
Company and its subsidiaries (together referred to as
the “Group”) and the Group’s interests in associates.
3.3 Subsidiaries
Subsidiaries are all entities over which the
Group has the power to control the financial and
operating policies so as to obtain benefits from
their activities. In assessing control, potential
voting rights that presently are exercisable, along
with contractual arrangements, are taken into
account. Subsidiaries are fully consolidated from
the date on which control is transferred to the
Group. They are excluded from consolidation from
the date that the control ceases. The majority
of the Group’s subsidiaries have a reporting
date of 30 June. For those subsidiaries with a
different reporting date, the Group consolidate
management information which is subject to audit
for the period to 30 June.
In addition, acquired subsidiaries are subject to
application of the purchase method. This involves
the revaluation at fair value of all identifiable
assets and liabilities, at the acquisition date,
regardless of whether or not they were recorded
in the financial statements of the subsidiary
prior to acquisition. Some changes in the fair
value of contingent consideration that the
Group recognises after the acquisition date may
be the result of additional information that the
Group obtained after that date about facts and
circumstances that existed at the acquisition date,
where the changes in fair value of contingent
consideration are not measurement period
adjustments, contingent consideration classified as
equity is not re-measured, contingent consideration
classified as an asset or a liability which is a financial
instrument within the scope of IAS 39 is measured
at fair value with gains and losses recognised either
in Statement of Income or in other comprehensive
income according to the requirements of IAS 39
and contingent consideration classified as an
asset or a liability outside the scope of IAS 39 is
accounted for in accordance with IAS 37 or other
IFRSs as appropriate.
On initial recognition, the assets and liabilities
of the acquired subsidiary are included in the
consolidated statement of financial position at
their fair value amounts, which are also used as
the basis for subsequent measurement in
accordance with the Group’s accounting policies.
Goodwill represents the excess of acquisition cost
over the fair value of the Group’s share of the
identifiable net assets of the acquired subsidiary
at the date of acquisition. Gain on bargain
purchase is immediately allocated to the
Statement of Income as at the acquisition date.
All acquisition related costs are expensed in the
period in which the costs are incurred and not
included in the cost of investment.
All inter-company balances and significant
inter-company transactions and resulting
unrealised profits or losses (unless losses provide
evidence of impairment) are eliminated on
consolidation.
52
VOF Annual Report 2010
A non-controlling interest represents the portion
of the Statement of Income and net assets of a
subsidiary attributable to an equity interest that
is not owned by the Group. It is based upon the
non-controlling interest’s share of post-acquisition
fair values of the subsidiary’s identifiable assets
and liabilities. Profit or loss and each component
of other comprehensive income are attributed
to the owners of the parent and to the non-
controlling interests. Total comprehensive income
is attributed to the owners of the parent and to the
non-controlling interests even if this results in the
non-controlling interests having a deficit balance.
Changes in ownership of interests in a subsidiary
that do not result in gaining or losing control of the
subsidiary are accounted for as equity transactions
whereby the difference between the consideration
paid and the proportionate change in the parent
entity’s interest in the carrying value of the
subsidiary’s net assets is recorded in equity and
attributable to the owners. No adjustment is made
to the carrying value of the subsidiary’s net assets as
reported in the consolidated financial statements.
3.4 Associate entities
Associates are those entities over which the Group
is able to exert significant influence, generally
accompanying a shareholding of between 20%
to 50% of voting rights, but which are neither
subsidiaries nor investments in joint ventures.
In the consolidated financial statements,
investments in associates are initially recorded
at cost and subsequently accounted for using the
equity method.
Under the equity method, the Group’s interest in
an associate entity is initially carried at cost and
the carrying amount is increased or decreased to
recognise the Group’s share of the profit or loss of
the associate entities after the date of acquisition
and any changes in the associate entities’ other
comprehensive income less any identified
impairment loss, unless it is classified as held for
sale or included in a disposal group that is classified
as held for sale. The Consolidated Statement
of Income includes the Group’s share of the
post-acquisition, post-tax results of the associate
entities for the year, including any impairment
loss on goodwill relating to the investments in the
associate recognised for the year.
All subsequent changes to the Group’s share of
interest in the equity of the associate are recognised
in the carrying amount of the investment. Changes
resulting from the profit or loss generated by the
associate are reported within “Share of profits/
(losses) of associates” in the Consolidated Statement
of Income. These changes include subsequent
depreciation, amortisation or impairment of the fair
value adjustments of assets and liabilities.
Adjustments to the carrying value of the associate
are necessary for changes in the associate’s
other comprehensive income that have not
been recognised in their Statement of Income,
primarily those arising on the revaluation of plant,
property and equipment. The Group’s share of this
change is recognised directly in the Statement of
Comprehensive Income.
When the Group’s share of losses in an associate
equals or exceeds its interest in the associate, the
Group does not recognise further losses, unless
it has legal or constructive obligations, or made
payments, on behalf of the associate.
Any excess of the cost of acquisition over
the Group’s share of the net fair value of the
identifiable assets, liabilities and contingent
liabilities of an associate recognised at the date
of acquisition is recognised as goodwill. The cost
of acquisition is measured at the aggregate of
the fair values, at the date of exchange, of assets
given, liabilities incurred or assumed, and equity
instruments issued by the Group, plus any costs
directly attributable to the investment.
Goodwill is included within the carrying amount of
an investment and is assessed for impairment as
part of the investment. After the application of the
equity method, the Group determines whether it
is necessary to recognise an additional impairment
loss on the Group’s investments in its associates.
At each reporting date, the Group determines
whether there is any objective evidence that an
investment in an associate is impaired. If such
indications are identified, the Group calculates
the amount of impairment as being the difference
between the recoverable amount of the associate
and its respective carrying amount.
Unrealised gains on transactions between the
Group and its associates are eliminated to the
extent of the Group’s interest in an associate.
Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of
the asset transferred.
3.5 Functional and presentation currency
The consolidated financial statements are
presented in United States Dollars (USD) (“the
presentation currency”). The financial statements
of each consolidated entity are initially prepared in
the currency of the primary economic environment
VOF Annual Report 2010
53
in which the entity operates (“the functional
currency”), which for most investments is Vietnam
Dong. The financial statements prepared using
Vietnamese Dong are then translated into the
presentation currency of USD. USD is used as the
presentation currency because it is the primary
basis for the measurement of the performance
of the Group (specifically changes in the Net
Asset Value of the Group) and a large proportion
of significant transactions of the Group are
denominated in USD.
3.6 Foreign currency translation
In the individual financial statements of the
consolidated entities, transactions arising in
currencies other than the functional currency of
the individual entity are translated at exchange
rates in effect on the transaction dates. Monetary
assets and liabilities denominated in currencies
other than the functional currency of the individual
entity are translated at the exchange rates in
effect at the reporting date. Translation gains and
losses and expenses relating to foreign exchange
transactions are recorded in the consolidated
Statement of Income.
Non-monetary items measured at historical cost
are translated using the exchange rates at the
date of the transaction (not retranslated at the
reporting date). Non-monetary items measured at
fair value are translated using the exchange rates
at the date when fair value was determined.
In the consolidated financial statements all
separate financial statements of subsidiaries
where the functional currency is different from
the Group’s presentation currency, are converted
into USD. Assets and liabilities are translated into
USD at the closing rate of the reporting date.
Income and expenses are converted into the
Group’s presentation currency at the average rates
over the reporting period where these rates are
approximate the exchange rates at the dates of the
transactions or at the exchange rates at the dates
of the transactions where such rates fluctuate
significantly. Any differences arising from this
translation are charged to the currency translation
reserve in other comprehensive income.
3.7 Revenue recognition
Sale of goods
Revenue from sale of goods is recognised in the
Consolidated Statement of Income when the
significant risks and rewards of ownership of goods
have passed to the buyer.
Interest income
Interest income is recognised on the effective
interest rate basis.
Dividend income
Dividend income is recorded when the Group’s
right to receive the dividend is established.
3.8 Expense recognition
Borrowing costs
Borrowing costs, comprising interest and related
costs, are recognised as an expense in the period
in which they are incurred, except for borrowing
costs relating to qualifying assets that need a
substantial period of time to get ready for their
intended use or sale to the extent that they are
directly attributable to the acquisition, production
or construction of such assets.
Operating lease payments
Payments made under operating leases are
recognised in the consolidated Statement of
Income on a straight-line basis over the term of the
lease. Lease incentives received are recognised in
the Statement of Income as an integral part of the
total lease expense.
3.9 Intangible assets
Intangible assets that are acquired by the Group
are stated at cost less accumulated amortisation
and impairment losses. Expenditure on internally
generated goodwill and brands is recognised in the
Consolidated Statement of Income as an expense
when incurred.
Amortisation
Amortisation is charged to the Consolidated
Statement of Income on a straight-line basis over
the estimated useful lives of intangible assets
unless such lives are indefinite. Intangible assets
with an indefinite useful life are systematically
tested for impairment at each reporting date.
Other intangible assets are amortised from the
date they are available for use. The estimated
useful lives are as follows:
Software
3 to 5 years
3.10 Goodwill
Goodwill represents the excess of the cost of
acquisition of subsidiary companies and associated
companies over the Group’s share of the fair value of
their identifiable net assets at the date of acquisition.
Goodwill is recognised at cost less any accumulated
impairment losses. The carrying value of goodwill
is subject to an annual impairment review and
whenever events or changes in circumstances
indicate that it may not be recoverable. An
impairment charge will be recognised in the
54
VOF Annual Report 2010
Consolidated Statement of Income when the results
of such a review indicate that the carrying value of
goodwill is impaired (see accounting policy 3.14).
Negative goodwill represents the excess of the
Group’s interest in the fair value of identifiable net
assets and liabilities, and contingent liabilities over
costs of acquisition. It is recognised directly in the
Statement of Income at the date of acquisition.
Gains and losses on disposal of an entity include
the carrying amount of goodwill relating to the
entity disposed of.
3.11 Investment properties
Investment properties are properties owned
or held under finance leases to earn rentals or
capital appreciation, or both, or land held for a
currently undetermined use. Property held under
operating leases (including leasehold land) that
would otherwise meet the definition of investment
property is classified as investment property on
a property by property basis. If a leased property
does not meet this definition it is recorded as an
operating lease.
The property under construction or development
for future use as investment property is treated as
investment property and is measured at fair value
where the fair value of the investment property
under construction or development for future use
is reliably determined.
Investment properties are stated at fair value.
Two independent valuation companies,
with appropriately recognised professional
qualifications and recent experience in the location
and category being valued undertake a valuation
of every property each year. On the valuation date,
the fair value is estimated assuming there is an
agreement between a willing buyer and a willing
seller on an arm’s length transaction after proper
marketing; wherein the parties have each acted
knowledgeably, prudently and without compulsion.
The valuations are prepared based upon direct
comparison with sales of other similar properties
in the area and the expected future discounted
cash flows of a property using a yield that reflects
the risks inherent therein. Valuations are reviewed
by the Valuation Committee and approved by the
Group’s Board of Directors. Discount rates in the
range from 13% to 16% are considered appropriate
for properties in different locations. Where the
Valuation Committee considers the discount
rate applied by the independent valuers to be
too low or if there are factors that the external
independent valuers have not considered in their
determination of a property’s fair value, they will
adjust the discount rate upwards in the discounted
cash flow projections, whereby decreasing the
property’s net present valuation. Gains and losses
from changes in fair value are recognised in
Statement of Income.
Leases
Leases under the terms of which the Group
assumes substantially all the risks and rewards of
ownership are classified as finance leases.
Leases which do not transfer substantially all the
risks and rewards of ownership to the Group are
classified as operating leases, unless they are
treated as investment properties (see accounting
policy 3.11). Where the Group has the use of an
asset held under an operating lease, payments
made under the lease are charged to the
Statement of Income on a straight line basis over
the term of the lease. Prepayments for operating
leases represent property held under operating
leases where a portion, or all, of the lease
payments have been paid in advance, and the
properties cannot be classified as an investment
property.
3.12 Financial assets
Financial assets are divided into the following
categories: loans and receivables, financial assets
at fair value through Statement of Income, and
held-to-maturity financial assets.
Management determines the classification of its
financial assets at initial recognition depending
on the purpose for which the financial assets
were acquired. Where allowed and appropriate
management reclassifies its financial assets at each
reporting date. The designation of financial assets
is based on the investment strategy set out in the
Group’s Admission Document to the London Stock
Exchange’s Alternative Investment Market, dated
24 September 2003.
All financial assets are recognised when, and
only when, the Group becomes a party to the
contractual provisions of the instrument.
Derecognition of financial assets occurs when the
rights to receive cash flows from the investments
expires or are transferred and substantially all of
the risks and rewards of ownership have been
transferred. At each reporting date, financial
assets are reviewed to assess whether there is
objective evidence of impairment. If any such
evidence exists, any impairment loss is determined
and recognised based on the classification of the
financial assets.
VOF Annual Report 2010
55
The Group’s financial assets consist primarily of
listed and unlisted equities, bonds, loans and
receivables and prepayments for acquisitions of
investments.
Loans and receivables
All loans and receivables, except trustee loans
classified as financial assets at fair value through
Statement of Income, are non-derivative financial
assets with fixed or determinable payments that
are not quoted in an active market. After initial
recognition these are measured at amortised
cost using the effective interest method, less
provision for impairment. Any change in their
value is recognised in the Consolidated Statement
of Income.
Discounting, however, is omitted where the effect
of discounting is immaterial. The Group’s cash and
cash equivalents, trade and most other receivables
fall into this category of financial instruments.
Significant receivables are considered for
impairment when they are overdue or when
other objective evidence is received that a specific
counterparty will default. Receivables that are
not considered to be individually impaired are
reviewed for impairment in groups, which are
determined by reference to the industry and
other available features of shared credit risk
characteristics. The percentage of the write-down
is then based on recent historical counterparty
default rates for each identified group. Impairment
of trade and other receivables are presented
within “other expenses”.
Financial assets at fair value through Statement
of Income
Financial assets at fair value through Statement
of Income include financial assets that are either
classified as held for trading or are designated
by the entity to be carried at fair value through
Statement of Income upon initial recognition. Other
financial assets at fair value through Statement
of Income held by the Group include listed and
unlisted securities, bonds and trustee loans.
Purchase or sale of financial assets is recognised
using trade date accounting. The trade date is the
date that an entity commits itself to purchase or
sell an asset.
Financial assets at fair value through Statement of
Income include trustee loans to banks and other
parties where the Group receives interest and
other income on the loans calculated based on the
proceeds from the sales of specific assets held by
the counterparties. Fair value is determined based
on the expected future discounted cash flows from
each loan.
Net changes in fair value of financial assets at fair
value through Statement of Income includes net
unrealised gains in fair value of financial assets and
net gains from realisation of financial assets during
the year.
Held-to-maturity investments
Held-to-maturity investments are non-derivative
financial assets with fixed or determinable
payments and fixed maturities other than loans
and receivables. Investments are classified as
held-to-maturity if the Group has the objective
intention and ability to hold them until maturity.
Held-to-maturity investments are subsequently
measured at amortised cost using the effective
interest rate method. In addition, if there
is objective evidence that the investment is
impaired, determined by reference to external
credit ratings, the financial asset is measured at
the present value of estimated cash flows. Any
changes to the carrying amount of the investment,
including impairment losses, are recognised in the
Consolidated Statement of Income.
Prepayments for acquisitions of investments
Those payments made by the Group to property
vendors for land clearance and other related costs,
and professional fees directly attributed to the
projects, where the final transfer of the property
is pending the approval of the relevant authorities
and/or is subject to either the Group or the vendor
completing certain performance conditions set out
in agreements, are treated as prepayments. Such
prepayments are measured initially at cost until
such time as the approval is obtained or conditions
are met, at which point they are transferred
to investment properties and accounted for
accordingly. The prepayments are presented
within other long-term financial assets.
3.13 Inventories
Inventories are stated at the lower of cost and
net realisable value. Cost includes all expenses
directly attributable to the manufacturing process
as well as suitable portions of related production
overheads, based on normal operating capacity.
Financing costs are not taken into consideration.
Costs of ordinarily interchangeable items are
assigned using the first in, first out cost formula.
Net realisable value is the estimated selling price in
the ordinary course of business less any applicable
selling expenses.
56
VOF Annual Report 2010
3.14 Impairment of assets
The Group’s goodwill, intangible assets, other
long-term investments, operating lease
prepayments, investment properties, and interests
in associates are subject to impairment testing.
For the purpose of assessing impairment,
assets are grouped at the lowest levels for which
there are separately identifiable cash flows
(cash-generating units). As a result, some assets
are tested individually for impairment and some
are tested at a cash-generating unit level. Goodwill
in particular is allocated to those cash-generating
units that are expected to benefit from synergies
of the related business combination and represent
the lowest level within the Group at which
management controls the related cash flows.
Goodwill and intangible assets with an indefinite
life are tested for impairment annually, while other
assets are tested when there is an indicator of
impairment.
An impairment loss is recognised as an expense
immediately for the amount by which the asset’s
carrying amount exceeds its recoverable amount
unless the relevant asset is carried at a revalued
amount under the Group’s accounting policy, in
which case the impairment loss is treated as a
revaluation decrease, but only to the extent of the
revaluation surplus for that same asset according
to that policy. The recoverable amount is the
higher of fair value, reflecting market conditions
less costs to sell, and value in use. In assessing
value in use, the estimated future cash flows
are discounted to their present value using a
pre-tax discount rate at the financial asset’s
original effective interest rate that reflects current
market assessments of the time value of money
and the risks specific to the assets.
3.15 Taxation
Income tax
Current income tax assets and/or liabilities
comprise those obligations to, or claims from,
fiscal authorities relating to the current or prior
reporting periods that are unpaid at the reporting
date. They are calculated according to the tax
rates and tax laws applicable to the fiscal periods
to which they relate based on the taxable profit
for the year. All changes to current tax assets or
liabilities are recognised as a component of tax
expense in the Consolidated Statement of Income.
Deferred income taxes are calculated using the
liability method on temporary differences. This
involves the comparison of the carrying amounts
of assets and liabilities in the consolidated financial
statements with their respective tax bases. In
addition, tax losses available to be carried forward
as well as other income tax credits to the Group
are assessed for recognition as deferred tax assets.
However, deferred tax is not provided on the initial
recognition of goodwill, or on the initial recognition
of an asset or liability unless the related
transaction is business combination or affects tax
or accounting profit. Deferred tax on temporary
differences associated with shares in subsidiaries
and associates is not provided if reversal of these
temporary differences can be controlled by the
Group and it is probable that reversal will not occur
in the foreseeable future.
Deferred tax liabilities are always provided for
in full. Deferred tax assets are recognised to the
extent that it is probable that they will be able to
be offset against future taxable income.
Deferred tax assets and liabilities are calculated,
without discounting, at tax rates that are expected
to apply to their respective period of realisation,
provided they are enacted or substantively
enacted at the reporting date. Most changes in
deferred tax assets or liabilities are recognised as
a component of tax expense in the Consolidated
Statement of Income. Only changes in deferred
tax assets or liabilities that relate to a change in
value of assets or liabilities that is charged directly
to other comprehensive income are charged or
credited directly to other comprehensive income.
Current tax and deferred tax that relates to items
recognised in other comprehensive income is
recognised in other comprehensive income, and
current tax and deferred tax that relates to items
recognised directly in equity is recognised directly
in equity.
Withholding taxes imposed on investment income
The Group currently incurs withholding taxes
imposed by local jurisdictions on investment
income. Such income is recorded gross of
withholding taxes in the Consolidated Statement
of Income.
3.16 Cash and cash equivalents
Cash and cash equivalents include cash at bank
and in hand as well as short term highly liquid
investments such as money market instruments
and bank deposits with an original maturity term of
not more than three months.
3.17 Non-current assets and liabilities classified
as held for sale
When the Group intends to sell a non-current
asset or a group of assets (a disposal group), and if
VOF Annual Report 2010
57
the carrying amount will principally be recovered
through sale, they are available for immediate sale
in their present condition subject only to terms
that are usual and customary for sale of such
assets and sale is highly probable at the reporting
date, the assets are classified as “held for sale”
and presented separately in the Consolidated
Statement of Financial Position in accordance
to IFRS 5 “Non-current assets held for sale and
discontinued operations”.
Liabilities are classified as “held for sale” and
presented as such in the Consolidated Statement
of Financial Position if they are directly associated
with a disposal group.
Assets classified as “held for sale” are measured at
the lower of their carrying amounts immediately
prior to their classification as held for sale and
their fair values less costs to sell. However, some
“held for sale” assets such as financial assets or
deferred tax assets, continue to be measured in
accordance with the Group’s accounting policy
for those assets. No assets classified as “held for
sale” are subject to depreciation or amortisation,
subsequent to their classification as “held for sale”.
3.18 Equity
Share capital is determined using the nominal
value of shares that have been issued. Additional
paid-in capital includes any premiums received
on the initial issuance of the share capital. Any
transaction costs associated with the issuing
of shares are deducted from additional paid-in
capital, net of any related income tax benefits.
Revaluation reserve represents the surplus arising
on the revaluation of the Group associate hotels.
Currency translation differences on net
investments in foreign operations are included
in the translation reserve.
presence of a legal or constructive obligation that
has resulted from past events. Provisions are not
recognised for future operating losses.
Retained earnings include all current and prior
period results as disclosed in the Consolidated
Statement of Changes in Equity.
3.19 Financial liabilities
The Group’s financial liabilities include trade and
other payables, borrowings and other liabilities.
Financial liabilities are recognised when the Group
becomes a party to the contractual agreements
of the instrument. All interest related charges are
recognised as an expense in finance costs in the
Consolidated Statement of Income.
Trade payables are recognised initially at their fair
value and subsequently measured at amortised
cost, using the effective interest rate method.
Borrowings are raised for support of long-term
funding of the Group’s investments and are
recognised at fair value plus direct transaction costs
on initial recognition and thereafter at amortised
cost under the effective interest rate method.
A financial liability is derecognised when the
obligation under the liability is discharged or
cancelled or expires.
3.20 Provisions, contingent liabilities and
contingent assets
Provisions are recognised when present obligations
are likely to lead to an outflow of economic
resources from the Group that can be reliably
estimated. A present obligation arises from the
Provisions are measured at the estimated
expenditure required to settle the present
obligation, based on the most reliable evidence
available at the reporting date, including the risks
and uncertainties associated with the present
obligation and there is uncertainty about the timing
or amount of the future expenditure require in
settlement. Where there are a number of similar
obligations, the likelihood that an outflow will be
required in settlement is determined by considering
the class of obligations as a whole. Long-term
provisions are discounted to their present values,
where the time value of money is material.
All provisions are reviewed at each reporting date
and adjusted to reflect the current best estimate of
Group’s management.
The Group does not recognise a contingent
liability but discloses its existence in the financial
statements. A contingent liability is a possible
obligation that arises from past events whose
existence will be confirmed by uncertain future
events beyond the control of the Group or a
present obligation that is not recognised because
it is not probable that an outflow of resources will
be required to settle the obligation. A contingent
liability also arises in the rare circumstance where
there is a liability that cannot be recognised
because it cannot be measured reliably.
58
VOF Annual Report 2010
A contingent asset is a possible asset that
arises from past events, that’s existence will be
confirmed by uncertain future events beyond
the control of the Group. The Group does not
recognise contingent assets but discloses their
existence when inflows of economic benefits are
probable, but not virtually certain.
3.21 Related parties
Parties are considered to be related if one party
has the ability to control the other party or
exercise significant influence over the other party
in making financial or operational decisions. Parties
are considered to be related to the Group if:
1. directly or indirectly, a party controls, is
controlled by, or is under common control with
the Group; has an interest in the Group that
gives it significant influence over the Group; or
has joint control over the Group;
2. a party is a jointly-controlled entity;
3. a party is an associate;
4. a party is a member of the key management
personnel of the Group; or
5. a party is a close family member of the above
categories.
3.22 Segment analysis
An operating segment is a component of the Group:
1. that engages in investment activities from
which it may earn revenues and incur
expenses;
2. whose operating results are based on internal
management reporting information that
is regularly reviewed by the Investment
Manager to make decisions about resources
to be allocated to the segment and assess its
performance; and
3. for which discrete financial information is
available.
3.23 Earnings per share and net asset value
per share
The Group presents basic earnings per share (EPS)
for its ordinary shares. Basic EPS is calculated
by dividing the profit or loss attributable to the
ordinary shareholders by the weighted average
number of ordinary shares outstanding during
the year.
Net asset value (NAV) per share is calculated by
dividing the net asset value attributable to ordinary
shareholders of the Company by the number of
outstanding ordinary shares as at the reporting
date. Net asset value is determined as total assets
less total liabilities and non-controlling interests.
4. Critical accounting estimates and
judgements
When preparing the consolidated financial
statements, management undertakes a number
of judgements, estimates and assumptions about
recognition and measurement of assets, liabilities,
income and expenses. The actual results may differ
from the judgements, estimates and assumptions
made by the Company’s management, and may
not equal the estimated results. Information about
significant judgements, estimates and assumptions
that have the most significant effect on recognition
and measurement of assets, liabilities, income and
expenses are discussed below:
Fair value of investment properties and hotels
The investment properties and hotels of the
Group are stated at fair value in accordance
with accounting policy 3.11. The fair values
of investment properties, leasehold land and
buildings have been determined by independent
professional valuers including: CB Richard Ellis,
Savills, Jones Lang LaSalle, Colliers, Sallmanns
and HVS. These valuations are based on certain
assumptions, which are subject to uncertainty
and might materially differ from the actual
results. Valuations are reviewed by the Valuation
Committee and approved by the Board of
Directors. Discount rates in the range from 13%
to 16% are considered appropriate for properties
in different locations. Where the Valuation
Committee considers the discount rate applied by
the independent valuers to be too low or if there
are factors that the external independent valuers
have not considered in their determination of a
property’s fair value, they will adjust the discount
rate and other assumptions in the discounted
cash flow projections, whereby decreasing the
property’s valuation. In making its judgement, the
Valuation Committee considers information from a
variety of sources, including:
(i) current prices in an active market for
properties of different nature, condition
or location (or subject to different lease or
other contracts), adjusted to reflect those
differences;
(ii) recent prices of similar properties in less
active markets, with adjustments to reflect
any changes in economic conditions since the
date of the transactions that occurred at
those prices;
VOF Annual Report 2010
59
(iii) recent developments and changes in laws and
regulations that might affect zoning and/or the
Group’s ability to exercise its rights in respect
to properties and therefore fully realise the
estimated values of such properties; and
(iv) discounted cash flow projections based on
reliable estimates of future cash flows, derived
from the terms of external evidence such
as current market rents and sales prices for
similar properties in the same location and
condition, and using discount rates that reflect
current market assessments of the uncertainty
in the amount and timing of the cash flows.
Fair value of financial assets
Listed securities are quoted at the bid price at
each reporting date. For unlisted securities which
are traded in an active market, the fair value is
the average quoted bid price obtained from a
minimum sample of three reputable securities
companies at the reporting date.
The fair value of financial assets that are not
traded in an active market (for example, unlisted
securities where market prices are not readily
available) is determined by using valuation
techniques. The Group uses its judgement to select
a variety of methods and make assumptions that
are mainly based on market conditions existing
at each reporting date. Independent valuations
are also obtained from appropriately qualified
independent valuation firms to evaluate and adjust
valuations. The outcomes may vary from the actual
prices that would be achieved in an arm’s length
transaction at the reporting date.
Impairment
Other assets
The Group’s goodwill, intangible assets, operating
lease prepayments, other assets and interests in
associates are subject to impairment testing in
accordance with the accounting policy 3.14.
Trade and other receivables
The Group’s management determines the
provision for impairment of trade and other
receivables on a regular basis. This estimate is
based on the credit history of its customers and
prevailing market conditions.
Impairment of investment properties and hotels
Whenever there is an indication of impairment
of an investment property, leasehold land
and buildings, the Valuation Committee and
Group’s management will assess the need for
an impairment adjustment. The estimation of
impairment adjustments is based on the same
principles used to adjust the periodic independent
valuations as mentioned above.
Business combinations
On initial recognition, the assets and liabilities
of the acquired business are included in the
Consolidated Statement of Financial Position
at their fair values. In measuring fair value
management uses estimates about future cash
flows and discount rates or independent valuation
for investment properties and hotels.
5. Segment analysis
In identifying its operating segments,
management generally follows the Group’s
sectors of investment which are based on internal
management reporting information for the
Investment Manager’s management, monitoring
of investments and decision making. The operating
segments by investment portfolio include capital
markets, real estate (real estate and hospitality),
private equity and cash (including cash and cash
equivalents, bonds, and term deposits) sectors.
Each of the operating segments is managed
and monitored individually by the Investment
Manager as each requires different resources
and approaches. The Investment Manager
assesses segment profit or loss using a measure
of operating profit or loss from the investment
assets. Although IFRS 8 requires measurement of
segmental profit or loss the majority of expenses
are common to all segments therefore cannot be
individually allocated. There have been no changes
from prior periods in the measurement methods
used to determine reported segment profit or loss.
Segment information can be analysed as follows
for the reporting periods under review:
60
VOF Annual Report 2010
Consolidated Statement of Income
Year ended 30 June 2010
Capital markets
USD‘000
Real estate
USD‘000
Private equity
USD‘000
Cash
USD’000
Total
USD’000
Revenue
Finance income
Share of profits of associates
Other income
Net loss from fair value adjustments of investment properties
Net changes in fair value of financial assets at fair value through Statement of Income
- Listed and unlisted securities
- Corporate bonds
Cost of sales
Selling, general and administration expenses
Other expenses
Finance costs
Profit before tax
Withholding taxes imposed on investment income
Net profit for the year
-
12,857
-
2,426
-
96,495
400
112,178
-
209
12,978
203
(72)
-
-
9,333
241
2,289
4
-
-
-
-
1,168
-
-
-
-
-
13,318
11,867
1,168
9,333
14,475
15,267
2,633
(72)
96,495
400
138,531
(7,673)
(21,374)
(1,600)
(2,668)
105,216
(211)
105,005
VOF Annual Report 2010
61
For the comparative year:
Revenue
Finance income
Share of profits/(losses) of associates
Other income
Net gain from fair value adjustments of investment properties
Net changes in fair value of financial assets at fair value through Statement of
Income
- Listed and unlistedsecurities
- Corporate bonds
Cost of sales
Selling, general and administration expenses
Other expenses
Finance costs
Profit before tax
Withholding taxes imposed on investment income
Net profit for the year
Year ended 30 June 2010
Capital markets
USD‘000
Real Estate
USD‘000
Private equity
USD‘000
Cash
USD’000
Total
USD’000
-
21,957
-
813
-
63,430
9
-
131
(36,239)
2,828
(12,111)
-
-
8,980
61
1,180
106
-
-
-
-
1,072
-
-
-
-
-
86,209
(45,391)
10,327
1,072
8,980
23,221
(35,059)
3,747
(12,111)
63,430
9
52,217
(7,688)
(18,181)
(20,334)
(2,808)
3,206
(108)
3,098
62
VOF Annual Report 2010
Consolidated statement of financial position
As at 30 June 2010
Capital markets
USD‘000
Real estate
USD‘000
Private equity
USD‘000
Cash, corporate
bonds and short-term
investments
USD‘000
Total assets
Financial assets at fair value through Statement of Income
- Consumer staples
- Construction
- Financial services
- Rubber and fertiliser
- Energy, minerals and petroleum
- Pharmaceuticals
- Real estate
- Other securities
- Corporate bonds
Investment properties
Investments in associates
Long-term loan receivables from related parties
Other long-term financial assets
Other long-term investments
Other long-term assets
Cash and cash equivalents
Short-term investments
Inventories
Other current assets
101,608
70,471
68,626
27,655
34,853
9,454
100,199
36,784
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,700
170,415
47,718
11,661
3,216
2
-
-
-
2,342
451,992
11,968
251,680
-
-
-
-
-
-
-
-
-
-
24,273
-
-
3,700
102
-
428
2,437
3,299
34,239
Total
USD‘000
101,608
70,471
68,626
27,655
34,853
9,454
100,199
36,784
5,876
6,700
194,688
47,718
11,661
6,916
104
50,033
428
2,437
17,609
-
-
-
-
-
-
-
5,876
-
-
-
-
-
-
50,033
-
-
-
55,909
793,820
VOF Annual Report 2010
63
In comparison with the last year end:
Total assets
Financial assets at fair value through Statement of Income
- Consumer staples
- Construction
- Financial services
- Rubber and fertiliser
- Energy, minerals and petroleum
- Pharmaceuticals
- Post office and telecommunications
- Real estate
- Other securities
- Corporate bonds
Investment properties
Property, plant and equipment
Investments in associates
Long-term loan receivables from related parties
Other long-term financial assets
Other long-term investments
Prepayments for operating lease assets
Deferred tax assets
Intangible assets
Cash and cash equivalents
Short-term investments
Inventories
Assets classified as held for sale
Other current assets
As at 30 June 2009
Capital markets
USD‘000
Real estate
USD‘000
Private equity
USD‘000
Cash, corporate
bonds and short-term
investments
USD’000
50,954
58,390
100,526
30,162
14,604
4,551
1,420
67,969
21,766
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,277
356,619
-
-
-
-
-
-
-
-
-
-
6,906
-
139,101
58,615
14,144
327
159
-
-
-
-
-
37,742
15,547
272,541
-
-
-
-
-
-
-
-
-
-
-
321
9,334
-
1,170
2,004
-
90
17
-
-
2,071
-
1,666
16,673
-
-
-
-
-
-
-
-
-
2,047
-
-
-
-
-
-
-
-
-
69,691
452
-
-
-
72,190
Total
USD’000
50,954
58,390
100,526
30,162
14,604
4,551
1,420
67,969
21,766
2,047
6,906
321
148,435
58,615
15,314
2,331
159
90
17
69,691
452
2,071
37,742
23,490
718,023
64
VOF Annual Report 2010
The Group’s revenues and investment income and its non-current assets (other than financial instruments,
investments accounted for using the equity method, deferred tax assets and post-employment benefit
assets) are divided into the following geographical areas:
Year ended 30 June 2010
Revenue and
income
USD’000
Non-current
assets
USD’000
Year ended 30 June 2009
Revenue and
income
USD’000
Non-current
assets
USD’000
Vietnam
Other countries
Total
118,542
2,089
120,631
13,630
-
13,630
89,621
(6,092)
83,529
9,254
-
9,254
Revenues and investment income include operating revenue, financial income and net gain/(loss) on fair
value adjustments of investment properties and financial assets at fair value through profit or loss, have
been identified on the basis of the operation and investment location. Non-current assets are allocated
based on their physical location.
6. Subsidiaries
Acquisition of non-controlling interest in PA Investment Opportunity II Limited
As at 30 June 2009, the Group held a beneficial interest of 66.4% in PA Investment Opportunity II Limited,
a subsidiary incorporated in BVI. The principal activity of this company is to invest in listed and unlisted
companies. On 3 February 2010, PA Investment Opportunity II Limited redeemed the non-controlling
interest of 33.6% for USD4.7 million, which was settled in cash. The consideration paid was equal to the
carrying value of this interest and has been reflected in the Consolidated Statement of Changes in Equity.
As a result, the Group’s beneficial ownership in PA Investment Opportunity II Limited is 100% as at
30 June 2010.
Disposal of 50% interest in VOF PE Holding 1 Limited
As at 30 June 2009, the Group held 100% interest in VOF PE Holding 1 Limited, a subsidiary incorporated
in BVI. During the year, the Group disposed of 50% interest in VOF PE Holding 1 Limited and the
consideration received was equal to the carrying value of the holding interest. The Group continue to
treat VOF PE Holding 1 Limited as a subsidiary as it has control of the operating and financial policies of
the entity.
VOF Annual Report 2010
65
Particulars of principal subsidiaries of the Group as of 30 June 2010:
Name
Asia Value Investment Ltd.
Vietnam Enterprise Ltd.
Vietnam Investment Property Ltd.
Vietnam Investment Property Holdings Ltd.
Vietnam Investment Ltd.
Vietnam Ventures Ltd.
VOF Investment Ltd.
Vina QSR Limited
Indochina Building Supplies Pte. Ltd.
American Home
Indotel Limited
BI VI Investments Corporation
Pegasus Leisure Limited
Saigon Water Park
PA Investment Opportunity II Limited
VOF PE Holding 1 Limited
VOF PE Holding 2 Limited
DTL Education Holding Ltd.
Vinasugar Holding Ltd.
Vietnam Master Holding 2 Ltd.
Allright Assets Ltd.
VinaLand Heritage Ltd.
Place of incorporation/
operations
Contributed share
capital (USD)
Percentage interest
held by the Group
Principal activities
BVI
BVI
BVI
BVI
BVI
BVI
BVI
BVI
Singapore
Vietnam
Singapore
Vietnam
BVI
Vietnam
BVI
BVI
BVI
BVI
BVI
BVI
BVI
BVI
1,800,000
61,460,000
8,500,000
10,600,000
18,800,000
7,100,000
641,000,000
1,610,000
3,384,000
23,400,000
3,480,000
23,400,000
2,475,000
3,536,000
17,721,862
360,075
10,100,000
15,000,000
-
-
-
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
75%
100%
100%
100%
100%
100%
50%
100%
100%
100%
100%
100%
100%
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Building materials
Building materials
Hospitality
Investment
Property
Property
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Investment
66
VOF Annual Report 2010
7. Investment properties
8. Investments in associates
30 June 2010
30 June 2009
USD’000
USD’000
Opening balance
Additions during the year
6,906
201
38,192
8,138
Opening balance
Additions (*)
Classified as assets held for sale
-
(26,658)
Share of profits/(losses) of associates (*)
Net losses on fair value adjustments of
investment properties (*)
Translation differences
Closing balance
(72)
(12,111)
(335)
6,700
(655)
6,906
(*) The net losses on fair value adjustments of investment properties relates to the revaluation of
leasehold land of the Group’s subsidiaries during the year as described in Note 4.
Share of associates’ change in revaluation reserves
Reclassified as held for sale
Transferred from other long-term financial assets
Transferred from long-term loan receivables from
related parties (Note 27)
Transferred from receivables from related parties
Dividends received
Disposals
Written-off
Translation differences
Closing balance
30 June 2010
30 June 2009
USD’000
148,435
17,650
15,267
(2,363)
-
3,000
16,330
975
(1,534)
(2,543)
(312)
(217)
194,688
USD’000
175,885
3,735
(35,059)
7,495
(4,059)
-
2,032
-
(1,400)
-
-
(194)
148,435
(*) Included in additions and share of profits/(losses) of associates are additions in related parties and
share of profits/(losses) from related parties amounting to USD3.8 million and USD16.1 million
respectively (Note 27).
VOF Annual Report 2010
67
Acquisition of associate interest in Hoan My Medical
Corporation JSC
In September 2009, the Group acquired a 28.88%
interest in Hoan My Medical Corporation JSC,
a general medical group operating throughout
Vietnam. The acquisition resulted an intangible
asset in the form of a brand name valued at
USD4.6 million.
Acquisition of further interest in Thang Loi Textile
and Garment JSC
In July 2009, the Group acquired a further 19%
interest in Thang Loi Textile & Garment JSC bringing
its total interest to 49%. The consideration of
USD1 million was approximately equal to the
fair value of the share of net assets acquired and
transferred from receivables from related parties.
Acquisition of associate interest in Phu Hoi City
Company Limited (Licogi 16 project)
The Group had previously paid a deposit of
USD3 million in respect of this project which was
classified as a prepayment for acquisitions of
investments at 30 June 2009. In addition to 7.5%
interest in the project held by the Group through
the investment licence, in September 2009, the
Group acquired a further 10% interest from a
local partner which resulted in the deposit of
USD1.7 million being reclassified to represent
part of the consideration of USD5.3 million.
This brings the Group’s total interest in the
project to 17.5% at the reporting date. The Group
has significant influence over this entity through
their representation in the project’s Board of
Management, therefore it is accounted for as
an associate.
Acquisition of associate interest in Vina Alliance
Limited (Vinataba project)
During the year, the Group made further
contribution in Vina Alliance Company for
USD1.3 million to maintain the holding percentage
of 12.25%.
The Group had previously paid a deposit of
USD192,500 in respect of this project which
was classified as long term loan receivables
from related parties at 30 June 2009. In October
2009, the Group and VinaLand Limited, a related
party, acquired a further 13% interest which resulted
in the deposit of USD 192,500 being reclassified to
represent part of the consideration
of USD1.8 million including a gain bargain on
purchase of USD1.2 million. This brings the Group’s
total interest in the project to 15.5% at the reporting
date. The Group has significant influence over this
entity through their representation in the project’s
Board of Management therefore it will be accounted
for as an associate.
Acquisition of further interest in International School
of Ho Chi Minh City
During the year, the Group acquired a further
interest in International School Ho Chi Minh City
for USD2.1 million. The Group continues to exercise
significant influence over this entity.
Disposal of associate interest in T.D Company
During the year, the Group disposed its 30% equity
interest in T.D Company for the selling price of
USD3.5 million. The fair value of the net assets as
the disposal date was USD2.5 million resulting in a
gain on disposal of USD1 million as disclosed in
Note 20. The Group no longer has significant
influence over this entity.
68
VOF Annual Report 2010
Particulars of significant operating associates and their summarised financial information, extracted from their statutory audited/reviewed and/or management accounts as
at 30 June 2010 are as follows:
Incorporation/
operation
Direct &
indirect equity
interest held
%
S.E.M Thong Nhat Hotel Metropole (1)
Thang Loi Textile & Garment JSC
Hung Vuong Corporation
VinaCapital Commercial Center Limited.
(Phase I: 12.75%, Phase II: 25%)
Pho Viet Joint Stock Co.
Phong Phu Investment Development Ltd.
House &Urban Development Financial Investment Co.
Hoan My Medical Corporation JSC
Vietnam Property Holding Ltd.
Prosper Big Ltd.
VinaCapital Danang Resorts Ltd.
Roxy Assets Ltd.
Maplecity Investment Limited
Standbrook Global Ltd.
VinaLand Espero Limited
Sunbird Group Ltd.
Pacific Alliance Land Ltd.
Cypress Assets Ltd.
Kinh Do Property JSC
Saigon Golf JSC
Vina Dai Phuoc Corporation (2)
Phu Hoi City Company Limited (2)
Vina Alliance Limited (2)
Vietnam
Vietnam
Vietnam
BVI
Vietnam
Vietnam
Vietnam
Vietnam
BVI
BVI
BVI
BVI
BVI
BVI
BVI
BVI
BVI
BVI
Vietnam
Vietnam
BVI
Vietnam
Vietnam
Principal activity
Assets
USD’000
Liabilities
USD’000
Income
USD’000
Net profit/
(loss)
USD’000
Hospitality
Textile & Garment
Property
57,684
9,923
41,184
14,999
7,605
25,457
27,449
13,415
2,803
8,421
1,446
1,265
Property
54,249
7,697
1,624
1,604
50
49
40.91
37.75
32.5
Food & Beverage
30
30
28.8
25
25
25
25
25
25
25
25
25
23
23
20
18
17.5
15.5
Investment
Property
Medical
Property
Property
Property
Hospitality
Hospitality
Property
Property
Property
Property
Hospitality
Property
Property
Property
Property
Property
3,429
32,550
28,634
40,260
109,272
113,020
75,923
25,110
56,381
26,055
100,156
12,976
102,470
43,078
34,597
7,333
105,349
42,290
102,383
2,013
23,064
16,819
17,222
81,066
56,250
48,662
29,527
29,816
32,650
69,690
15,997
39,525
80,770
3,020
5
16,875
15,750
6,728
82
1
16,485
243
216
540
6,356
7,227
-
78
1
683
852
1,609
266
268
3
229
22,869
16
27
170
2,834
(2,878)
25,507
(3,560)
(3,023)
(72)
(1,261)
16,846
(223)
23,468
(9,418)
5,603
72
21,134
(9,614)
22,524
VOF Annual Report 2010
69
(1)
(2)
At the reporting date, the Group effectively
has a 50% equity interest in SEM Thong Nhat
Hotel Metropole (via the 100% equity holding
in Indotel Limited – Note 6) but does not
have control or joint control due to its limited
representation on its Board. Therefore, it is
considered appropriate to treat the interest as
an associate holding.
The Group holds 18%, 17.5% and 15.5% interest
in Vina Dai Phuoc Corporation, Phu Hoi City
Company Limited (Licogi 16 project), and Vina
Alliance Limited (Vinataba project), respectively.
These entities are subsidiaries of VinaLand
Limited, however the Group has significant
influence since it has the power to participate
in the financial and operating policies of the
entities, and are therefore treated as associates
in the Group consolidated financial statements.
9. Other long-term financial assets
Prepayments for acquisitions of investments (*)
Loan to a non-controlling shareholder
30 June 2010
30 June 2009
USD’000
USD’000
10,491
1,170
11,661
14,144
1,170
15,314
(*) Included in the movement during the year is USD3 million transferred to investment in associates.
These prepayments pertain to payments made by the Group to property vendors where the final transfer of
the property is pending the approval of the relevant authorities and/or is subject to either the Group or the
vendor completing certain performance conditions set out in agreements.
10. Other long-term investments
Indochina Industries Food Pte. Ltd.
Others
Allowance for impairment of assets (*)
30 June 2010
30 June 2009
USD’000
13,100
3,415
16,515
(9,599)
6,916
USD’000
11,400
530
11,930
(9,599)
2,331
(*) The amount includes an allowance for impairment of investment in Indochina Industries Food Pte. Ltd. of USD9.4 million.
70
VOF Annual Report 2010
11. Trade and other receivables
12. Financial assets at fair value through Statement of Income
Trade receivables, gross
Receivable from matured bonds (*)
Interests receivable
Dividends receivable
Other receivables
Other current assets
Provision for receivable write-downs
30 June 2010
30 June 2009
USD’000
USD’000
30 June 2010
30 June 2009
USD’000
USD’000
2,034
3,808
1,351
-
842
94
8,129
(2,084)
6,045
1,504
4,245
1,311
779
772
138
8,749
(737)
8,012
Financial assets at fair value through
Statement of Income:
Financial assets in Vietnam:
Ordinary shares - listed
Ordinary shares - unlisted
Corporate bonds (*)
Financial assets in countries other than Vietnam:
Ordinary shares - listed
Total financial assets at fair value through
Statement of Income
298,675
115,422
5,876
177,037
157,099
2,047
35,553
16,206
455,526
352,389
As all trade and other receivables are short-term in nature, their carrying
values are considered a reasonable approximation of their fair values at the
reporting date.
(*) In November 2006, the Group entered into an agreement with Mai Linh Corporation to purchase
convertible bonds equal to 15% of their share capital. An agreement was reached with Mai Linh
Corporation in September 2009 whereby they will pay the Group USD4.2 million before
April 2010 to terminate this agreement. Since this agreement was reached only USD0.4 million
has been received. At the date of approval of the consolidated financial statements, the
outstanding balance was USD3.8 million. An allowance of USD1.5 million has been recognised
in respect of the overdue nature of the outstanding amount.
(*) Corporate bonds have fixed interest rates of between 8.0% to 9.6% and mature in 2012.
During the year, the Group purchased 15,249,013 ordinary shares of VinaLand
Limited for USD12,723,586 bringing the Group’s total shareholding to 29,998,057
shares. As a result, the Group had a 6% interest in VinaLand Limited as at
30 June 2010.
During the year, the Group purchased 12,050,000 ordinary shares of Vietnam
Infrastructure Fund Limited for USD4,535,472 bringing the Group’s total
shareholding to 12,050,000 shares. As a result, the Group had a 3% interest in
Vietnam Infrastructure Fund Limited as at 30 June 2010.
The financial assets are denominated in the following currencies:
Vietnam Dong
Other currencies
30 June 2010
30 June 2009
USD’000
419,973
35,553
455,526
USD’000
336,183
16,206
352,389
The carrying amounts disclosed above are the Group’s maximum possible
credit risk exposure in relation to these instruments. See Note 29 for further
information on the Group’s exposure to financial risk.
VOF Annual Report 2010
71
13. Categories of financial assets and liabilities
15. Assets and liabilities classified as held for sale
The carrying amounts presented in the consolidated statement of financial
position relate to the following categories of assets and liabilities:
Summary of the assets/(liabilities) held for sale at the reporting date:
Financial assets
Financial assets held for trading (carried at
fair value through Statement of Income)
Ordinary shares - listed and unlisted
Corporate bonds
Loans and receivables
Trade and other receivables
Short-term investments
Cash and cash equivalents
Financial liabilities
Financial liabilities measured at
amortised cost:
Non-current:
Other payables
Current:
Trade and other payables
Notes 30 June 2010 30 June 2009
USD’000
USD’000
12
12
9,11,27
14
449,650
5,876
455,526
76,988
428
50,033
127,449
582,975
350,342
2,047
352,389
97,419
452
69,691
167,562
519,951
30 June 2009
Attributable to
Assets
classified
as held
for sale
Liabilities
classified
as held
for sale
USD’000 USD’000
Net assets
classified
as held
for sale
USD’000
Non-
controlling
interests
USD’000
Equity
shareholders
of the
parent
USD’000
A&B Development JSC
28,644
(10,666)
17,978
(7,978)
SRLHO
9,098
-
9,098
-
37,742
(10,666)
27,076
(7,978)
10,000
9,098
19,098
There were no assets and liabilities classified as held for sale as at 30 June 2010.
16. Share capital
-
484
Authorised:
Ordinary shares of USD0.01 each
30 June 2010
30 June 2009
Number of
Number of
shares USD‘000
shares USD‘000
500,000,000
5,000
500,000,000
5,000
17,27
9,791
9,791
11,285
11,769
Issued and fully paid:
Opening balance
Closing balance
324,610,259
324,610,259
3,246
3,246
324,610,259
324,610,259
3,246
3,246
The fair values of financial assets and liabilities are presented in the related notes.
The Group’s risk management objectives and policies for financial instruments are
set out in Note 29.
14. Cash and cash equivalents
Cash on hand
Cash in banks
Cash equivalents
30 June 2010 30 June 2009
USD’000
USD’000
18
25,405
24,610
50,033
19
58,139
11,533
69,691
72
VOF Annual Report 2010
17. Trade and other payables
20. Other income
Trade payables
Deposits received for conditional sale of assets
post reporting date
Tax payable
Deferred income
Other accrued liabilities
Other payables
30 June 2010 30 June 2009
USD’000
1,152
USD’000
1,205
760
-
-
728
1,396
4,089
4,412
403
1,342
411
447
8,167
Gain on disposal of investments
Other income
21. Other expenses
As all trade and other payables are short-term in nature, their carrying values are
considered a reasonable approximation of their fair values.
18. Net changes in fair value of financial assets at fair value through Statement
of Income
Allowance for impairment of assets (*)
Written-off financial asset at fair value through
Statement of Income
Other expenses
Year ended
30 June 2010 30 June 2009
USD’000
-
968
968
USD’000
1,035
1,598
2,633
Year ended
30 June 2010 30 June 2009
USD’000
16,443
USD’000
1,487
-
113
1,600
3,111
780
20,334
Unrealised gains in fair value of financial assets, net
Gains from realisation of financial assets during
the year, net
19. Selling, general and administration expenses
Management fees (Note 27)
Professional fees
General administration and selling expenses (*)
Other expenses
Year ended
30 June 2010 30 June 2009
USD’000
46,225
USD’000
61,064
35,831
96,895
17,214
63,439
Year ended
30 June 2010 30 June 2009
USD’000
12,935
1,130
2,662
1,454
18,181
USD’000
15,372
2,433
1,549
2,020
21,374
(*) The majority of these expenses relate to operating expenses incurred by subsidiaries of the Group.
(*) In the prior year, this amount represented an allowance of USD9.4 million for the impairment of
the long-term investment in Indochina Industries Food Pte. Ltd. at the reporting date (Note 10).
22. Finance income and costs
Interest income
Dividend income
Realised gains from foreign currency exchange
differences
Finance income
Realised losses on foreign currency exchange
differences
Loan interest
Unrealised losses from foreign currency
exchange differences
Finance costs
Net finance income
Year ended
30 June 2010 30 June 2009
USD’000
6,299
16,870
USD’000
3,825
9,938
712
52
14,475
23,221
(2,151)
(1,989)
(265)
(252)
(2,668)
11,807
(597)
(222)
(2,808)
20,413
VOF Annual Report 2010
73
23. Corporate income tax
24. Earnings per share
VinaCapital Vietnam Opportunity Fund Limited is domiciled in the Cayman
Islands. Under the current laws of the Cayman Islands, there is no income, state,
corporation, capital gains or other tax payable by the Company.
The majority of the Group’s subsidiaries are domiciled in the British Virgin Islands
(BVI) and so have a tax exempt status. Some of the subsidiaries are established
in Singapore and have offshore operations in Vietnam. The income from these
offshore operations is also tax exempt in Singapore.
A small number of subsidiaries are established in Vietnam and are subject to
corporate income tax in Vietnam, however no provision for corporate income
tax has been made for these Vietnamese subsidiaries of the Group for the year
ended 30 June 2010 (30 June 2009: nil). All of the Vietnamese subsidiaries are in
a position where there are no corporate income taxes payable because they
either have incurred losses, or have unutilised tax holidays, or have sufficient
carry-forward tax losses to offset any taxable income.
Under the laws of Vietnam, tax losses can be carried forward to offset against
future taxable income for five years from the year the loss was incurred. The
unrecognised deferred tax assets for the year of USD326,318 (30 June 2009:
USD493,045) relate to the current year’s losses of Vietnamese subsidiaries, which
can be carried forward but no asset has been recorded for these tax losses due to
uncertainty over of their recoverability.
The relationship between the expected income tax expense based on the
applicable income tax rate (stated below) and the tax expenses actually
recognised in the consolidated Statement of Incomecan be reconciled as follows:
Group profits before tax
Group profit multiplied by applicable tax rate (0%)
Income tax on Vietnamese subsidiaries
Withholding taxes imposed on investment income
Tax expenses
30 June 2010 30 June 2009
USD’000
3,206
-
-
(108)
(108)
USD’000
105,216
-
-
(211)
(211)
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the profits attributable to the
shareholders of the Group by the weighted average number of ordinary shares in
issue during the year.
Profits attributable to equity holders of the
Company from continuing and total operations
(USD’000)
Weighted average number of ordinary shares
on issue
Basic earnings per share from continuing and
total operations (USD per share)
30 June 2010 30 June 2009
USD’000
USD’000
104,694
6,782
324,610,259
324,610,259
0.32
0.02
(b) Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average
number of ordinary shares outstanding to assume conversion of all dilutive
potential ordinary shares. The Group has no category of potentially dilutive
ordinary shares. Therefore, diluted earnings per share are equal to basic earnings
per share.
(c) Net asset value per share
Net asset value (NAV) per share is calculated by dividing the net asset value
attributable to ordinary shareholders of the Company by the number of
outstanding ordinary shares as at the reporting date. Net asset value is
determined as total assets less total liabilities and non-controlling interests.
Net asset value (USD’000)
30 June 2010 30 June 2009
USD’000
USD’000
782,501
681,912
Number of outstanding ordinary shares on issue
324,610,259 324,610,259
Net asset value per share (USD per share)
2.41
2.10
74
VOF Annual Report 2010
25. Non-cash flow adjustments
The following non-cash flow adjustments have been made to the pre-tax result
for the year to arrive at operating cash flow:
Depreciation and amortisation
Unrealised net gain from revaluation of financial
assets at fair value through Statement of Income
Net gain from realisation of financial assets at
fair value through Statement of Income
Losses on disposal of property, plant and equipment
Losses on revaluation of investment properties
Negative goodwill on acquisition of
non-controlling interest/goodwill written-off
Gain on disposal of investment
Share of (profits)/losses of associates
Allowance for impairment of assets
Unrealised foreign exchange losses
Interest expense
Dividend income
Interest income
30 June 2010 30 June 2009
USD’000
453
USD’000
355
(61,064)
(46,225)
(35,831)
(17,214)
8
72
-
(1,035)
(15,267)
1,487
252
265
(9,938)
(3,825)
(124,521)
3,540
12,111
(2,779)
-
35,059
16,442
222
597
(16,870)
(6,299)
(20,963)
26 Directors’ and management’s remuneration
The aggregate director fee amounted to USD222,500 (year ended 30 June 2009:
USD195,000), of which there was no payable at the reporting date (30 June 2009:
USD175,000).
Details remuneration for each director are summarised below:
William Vanderfelt
Martin Glynn
Michael Gray
30 June 2010 30 June 2009
USD’000
89
70
-
159
USD’000
75
60
58
193
The Investment Manager has agreed to pay on behalf the Company if the
aggregate annual directors remuneration is higher than USD60,000.
The Board of Management and certain other individuals who act on behalf of the
Group are remunerated by the Investment Manager. However, it is not possible
to specifically allocate their costs to the Group. Part of the management fees
disclosed in Note 27 can be allocated to the remuneration of these individuals.
27. Related party transactions and balances
Management fees
The Group is managed by VinaCapital Investment Management Limited
(the “Investment Manager”), an investment management company incorporated
in the British Virgin Islands (“BVI”), under a management agreement dated
24 September 2003 (the “Management Agreement”). The Investment Manager
receives a fee based on the net asset value of the Group, payable monthly in
arrears, at an annual rate of 2%.
Total management fees for the year amounted to USD15,372,000 (30 June 2009:
USD12,935,000), of which USD2,243,000 (30 June 2009: USD1,195,000) was
payable to the Investment Manager at the reporting date.
Performance fees
In accordance with the Management Agreement, the Investment Manager is also
entitled to a performance fee equal to 20% of the increase in the net asset value
over the higher of a realised return over an annualised compounding hurdle rate
of 8% and high watermark.
There were no performance fees payable in the year (30 June 2009: nil) and
no amounts were payable to the Investment Manager at the reporting date
(30 June 2009: nil).
Placement fees
When raising capital through the issuance of new Ordinary Share a commission
equal to 3% of the subscription price multiplied by the total number of the shares
allotted by the Group on admission is payable by the Group to the Investment
Manager. The Investment Manager is responsible for paying placing agents
that are engaged in respect to such subscriptions. The net proceeds of share
subscriptions are recorded after netting off placement fees.
There were no placement fees payable in the year (30 June 2009: USD) and
no amounts were payable to the Investment Manager at the reporting date
(30 June 2009: nil).
VOF Annual Report 2010
75
Other related party transactions and balances
During the year, the following significant transactions with related parties were recorded as follows:
Related party
Relationship
Year ended 30 June 2010
Year ended 30 June 2009
Transactions (USD’000)
S.E.M Thong Nhat Hotel Metropole
House and Urban Development Financial Investment Co.
Hung Vuong Corporation
Kinh Do Property JSC
Pho Viet Joint Stock Company
T.D Company
Phong Phu Investment Development JSC
Thang Loi Textile & Garment JSC
Saigon Golf JSC
Vina Dai Phuoc Corporation
VinaLand Limited subsidiaries
Other related parties
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associates
Additions
Share of profits/
(losses)
Additions
Share of profits/
(losses)
-
-
-
-
-
-
1,685
-
-
-
-
2,162
3,847
2,249
44
(1,023)
1,599
5
(147)
8
709
12
4,679
6,944
1,026
16,105
-
-
-
-
-
1,788
39
1,908
-
-
-
-
3,735
1,826
212
2,171
(1,794)
(83)
(210)
107
170
(2,561)
(5,930)
(30,061)
1,094
(35,059)
During the year, the Group engaged VinaSecurities Joint Stock Company, a related party, as a securities broker of the Group. An amount of USD16,000 had been paid to this
broker relating to securities trading transactions which is based on the standard rates and at arm’s length.
76
VOF Annual Report 2010
At 30 June 2010, the following receivable and payable balances were outstanding with related parties:
Related party
Relationship
Transactions
30 June 2010
30 June 2009
USD’000
USD‘000
Receivables
Non-current assets
VinaLand Limited subsidiaries
Hung Vuong Corporation
Current assets
VinaLand Limited subsidiaries
VinaCapital Investment Management Ltd.
Hung Vuong Corporation
SIH Investment Ltd.
Lam Co Company Ltd.
VinaCapital Danang Golf Course Ltd. (Vietnam)
Roxy Vietnam Ltd. (Vietnam)
East Ocean Real Estate & Tourist JSC (Vietnam)
Vinh Thai Urban Development Corporation (Vietnam)
Thang Loi Textile & Garment JSC
Phong Phu Investment Development JSC
Under common management
Associate
Loan receivables (*)
Loan
Under common management
Under common management
Associate
Under common management
Under common management
Under common management
Under common management
Under common management
Under common management
Associate
Associate
Dividend receivables
Others
Advance payments
Loan and interest receivable
Loan receivable
Loan receivable
Loan and interest receivable
Loan interest receivable
Loan interest receivable
Loan receivable
Loan receivable
Loan and interest receivables
42,631
5,087
47,718
613
1,821
910
404
707
700
1,094
17
69
525
3,353
1,351
11,564
Payables
58,615
-
58,615
613
2,970
-
6,525
-
-
-
-
-
-
3,000
2,370
15,478
Related party
Relationship
Transactions
30 June 2010
30 June 2009
VinaLand Limited subsidiaries
Under common management Advances for real estate projects
VinaCapital Investment Management Ltd.
VinaCapital Real Estate Limited
Under common management
and Investment Manager
Under common management
Management fees
Cash advance
Corporate advisory fees
USD’000
USD‘000
3,460
2,242
-
-
5,702
1,690
1,195
89
144
3,118
(*) Loan receivables represent the Group’s share of loans provided to its associates on joint investments in real estate projects with VinaLand Limited. The loans are unsecured, bear interest at the 6-month SIBOR
interest rate, and are repayable on demand or on disposal of related investments. The loans are carried at amortised cost at the reporting date.
Details of these loan receivables at the reporting date are as follows:
29. Risk management objectives and policies
VOF Annual Report 2010
77
VinaCapital Danang Resorts Limited
Cypress Assets Limited
Prosper Big Investment Limited
Bantam Investments Limited
Avante Global Limited
Perimeter Investments Limited
VinaLand Espero Limited
Maplecity Investments Limited
Sunbird Group Limited
Vietnam Property Holding Limited
VinaCapital Commercial Center Limited
Hung Vuong Corporation
Pacific Alliance Land Limited
Standbrook Limited
VinaCapital Development Limited
Roxy Assets Limited
Others
Loan receivable from SRLHO classified as held
for sale at the reporting date
Allowance for doubtful loan receivable
30 June 2010 30 June 2009
USD’000
3,376
6,555
11,188
1,879
620
279
9,261
10,990
2,985
4,636
-
-
6,568
1,210
165
5,101
51
64,864
USD’000
3,376
631
12,073
-
2,998
-
9,261
5,951
1,259
4,765
5
5,087
-
1,210
-
2,279
33
48,928
-
(1,210)
47,718
(5,039)
(1,210)
58,615
Included in the movement during the year is an amount of USD16.3 million
transferred to investment in associates.
28. Commitments
The Group has a broad range of commitments under investment licences it has
received for the real estate projects jointly invested with VinaLand Limited, a
related party under common management, and other agreements it has entered
into, to acquire and develop, or make additional investments in investment
properties and leasehold land in Vietnam. Further investments in any of these
arrangements are at the Group’s discretion.
The Group invests in listed and unlisted equity instruments, debt instruments, assets
and other opportunities in Vietnam and overseas with the objective of achieving
medium to long-term capital appreciation and providing investment income.
The Group is exposed to a variety of financial risks: market risk (including
currency risk, interest rate risk, and price risk); credit risk; and liquidity risk. The
Group’s overall risk management programme focuses on the unpredictability of
financial markets and seeks to minimise potential adverse effects on the Group’s
financial performance. The Group’s risk management is coordinated by the
Investment Manager who manages the distribution of the assets to achieve the
investment objectives.
The most significant financial risks the Group is exposed to are described below:
Foreign currency risk sensitivity
The Group’s exposure to risk resulting from changes in foreign currency exchange
rates is moderate as although transactions in Vietnam are settled in Vietnam
Dong, the value of the Vietnam Dong has historically been closely linked to that
of USD, the reporting currency.
The Group’s financial assets and liabilities, exposure to risk of fluctuations in
foreign currency exchange rates at the reporting date were as follows:
Short-term exposure
Others
USD'000
VND
USD'000
Long-term exposure
VND
USD'000
Others
USD'000
449,616
(3,232)
446,384
73,980
(6,559)
67,421
359,610
(3,791)
355,819
86,412
(7,495)
78,917
6,257
-
6,257
1,170
-
1,170
53,122
-
53,122
72,759
(483)
72,276
30 June 2010
Financial assets
Financial liabilities
Net exposure
30 June 2009
Financial assets
Financial liabilities
Net exposure
78
VOF Annual Report 2010
Sensitivity analysis to a reasonably possible change in exchange rates
Property valuations in Vietnam are based on a combination of factors linked
to both the USD and VND. Assuming all properties are valued based on VND
cash flow, a 5% weakening of the VND against the USD at the end of the year
ended 30 June 2010 and 30 June 2009 would have impacted net income of the
Group’s equity by the amounts shown below. This analysis assumes that all other
variables, in particular interest rates, remain constant.
5% devaluation of the Vietnam Dong
30 June 2010 30 June 2009
USD’000
17,849
USD’000
20,660
A 5% strengthening of the VND against USD would have had the equal but
opposite effect to the amount shown above, on the basis that all other variables
remain constant.
Price risk sensitivity
Price risk is the risk that the value of the instrument will fluctuate as a result of
changes in market prices, whether caused by factors specific to an individual
investment, its issuer, or factors affecting all instruments traded in the market.
As the majority of the Group’s financial instruments are carried at fair value with
fair value changes recognised in the Statement of Income, all changes in market
conditions will directly affect net investment income.
The Group’s unlisted equity securities are susceptible to market price risk
arising from uncertainties about future values of the investment securities. The
Investment Manager provides the Group with investment recommendations
that are consistent with the Group’s objectives. The Investment Manager’s
recommendations are approved by an Investment Committee of the Investment
Manager and/or the Board of Directors before investment decisions are
implemented.
All securities investments present a risk of loss of capital. The Investment
Manager manages this risk through the careful selection of securities and other
financial instruments within specified limits and by holding a diversified portfolio
of listed and unlisted instruments. In addition, the performance of investments
held by the Group is monitored by the Investment Manager on a monthly basis
and reviewed by the Board of Directors on a quarterly basis.
The Group invests in listed and unlisted equity securities and is exposed to
market price risk of these securities. If the prices of the securities were to
fluctuate by 10%, the impact on Statement of Income and Statement of
Changes in Equity would approximately amount to a gain of USD45.5 million
(30 June 2009: approximately gain of USD35.2 million).
Cash flow and fair value interest rate risk sensitivity
The Group’s exposure to interest rate risk is related to interest bearing financial
assets and financial liabilities. Cash and cash equivalents, bank deposits and
bonds are subject to interest at fixed rates. They are exposed to fair value
changes due to interest rate changes. The Group currently has no financial
liabilities with floating interest rates. As a result, the Group has limited exposure
to cash flow and interest rate risk.
Credit risk analysis
Credit risk is the risk that a counterparty will be unable to pay amounts in
full when due. Impairment provisions are provided for losses that have been
incurred by the Group at the reporting date. The Group’s exposure to credit risk
is limited to the carrying amount of financial assets recognised at the reporting
date, as summarised below:
Classes of financial assets - carrying amounts:
Short-term investments
Long-term loan receivables
Other long-term financial assets
Trade and other receivables
30 June 2010 30 June 2009
USD’000
USD’000
428
47,718
11,661
17,609
77,416
452
58,615
15,314
23,490
97,871
All transactions in listed securities are settled upon delivery using approved
brokers. The risk of default is considered low, as delivery of securities sold is only
made once the broker has received payment. Payment is made for purchases
once the securities have been received by the broker. The trade will be unwound
if either party fails to meet its obligations.
The carrying amount of trade and other receivables and loans represent the
Group’s maximum exposure to credit risk in relation to its financial assets.
VOF Annual Report 2010
79
Some unimpaired trade receivables are overdue as at the reporting date.
Financial assets overdue but not impaired comprise:
At the reporting date, the Group’s liabilities have contractual maturities which
are summarised below:
Not more than 3 months
More than 3 months but not more than 6 months
More than 6 months
30 June 2010
USD’000
1,437
-
-
1,437
The Group has no other significant concentrations of credit risk.
In accordance with the Group’s policy, the Investment Manager continuously
monitors the Group’s credit position on a monthly basis, identified either
individually or by group, and incorporates this information into its credit controls.
The Group’s Investment Manager reconsiders the valuations of financial assets
that are impaired or overdue at each reporting date based on the payment
status of the counterparties, recoverability of receivables, and prevailing market
conditions.
Liquidity risk analysis
The Group invests in both listed securities that are traded in active markets and
unlisted securities that are not actively traded.
The Group’s listed securities are considered to be readily realisable, as they are
mainly listed on the Vietnam Stock Exchange.
Unlisted securities, which are not traded in an organised public market, may be
illiquid. As a result, the Group may not be able to quickly liquidate its investments in
these instruments at an amount close to fair value in order to respond to its liquidity
requirements or to other specific events such as deterioration in the creditworthiness
of a particular issuer. However, the Group has the ability to borrow in the short-term
to ensure sufficient cash is available for any settlements due.
30 June 2010
Trade and other payables
Payable to related parties
30 June 2009
Trade and other payables
Payable to related parties
Other liabilities
Current
Non-current
Within 6
months
USD'000
6 to 12
months
USD'000
From 1 to
5 years
USD'000
Over 5
years
USD'000
4,089
-
4,089
8,167
1,196
-
9,363
-
5,702
5,702
-
1,922
-
1,922
-
-
-
-
-
484
484
-
-
-
-
-
-
-
The above contractual maturities reflect the gross cash flows, which may differ to
the carrying value of the liabilities at the reporting date.
Capital management
The Group’s capital management objectives are:
• To ensure the Group’s ability to continue as a going concern;
• To provide investors with an attractive level of investment income; and
• To achieve capital growth.
The Group considers the capital to be managed as equal to the net assets
attributable to the holders of ordinary shares. The Group has engaged the
Investment Manager to allocate the net assets in such a way so as to generate
investment returns that are commensurate with the investment objectives
outlined in the Group’s offering documents.
80
VOF Annual Report 2010
30. Fair value hierarchy
Fair value hierarchy
The Group adopted the amendments to IFRS 7 Improving Disclosures about Financial Instruments effective
from 1 January 2009. These amendments require the Group to present certain information about financial
instruments measured at fair value in the Consolidated Statement of Financial Position. In the first year of
application, comparative information need not be presented for the disclosures required by the amendment.
Accordingly, the disclosure for the fair value hierarchy is only presented for the 30 June 2010 year end.
The following table presents financial assets and liabilities measured at fair value in the Consolidated
Statement of Financial Position in accordance with the fair value hierarchy. This hierarchy groups financial
assets and liabilities into three levels based on the significance of inputs used in measuring the fair value
of the financial assets and liabilities. The fair value hierarchy has the following levels:
• Level 1: quoted prices in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or
liability, either directly (ie as prices) or indirectly (ie derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data
•
(unobservable inputs).
The level within which the financial asset or liability is classified is determined based on the lowest level of
significant input to the fair value measurement.
The financial assets and liabilities measured at fair value in the statement of financial position are grouped
into the fair value hierarchy as follows:
Assets
Financial assets at fair value through Statement of Income
Financial assets in Vietnam
- Ordinary share - listed
- Ordinary share - unlisted
- Corporate bonds
Financial assets in countries other than Vietnam
Investment in properties
Investments in associates
Other long-term investments
Liabilities
Net fair value
Level 1
USD’000
Level 2
USD’000
Level 3
USD’000
Total
USD’000
298,675
1,559
-
35,553
-
-
-
335,787
-
335,787
-
113,863
5,876
-
6,700
194,688
3,700
324,827
-
324,827
-
-
-
-
-
-
3,216
3,216
-
3,216
298,675
115,422
5,876
35,553
6,700
194,688
6,916
663,830
-
663,830
There have been no significant transfers between Level
1 and 2 during the year.
The methods and valuation techniques used for
the purpose of measuring fair value are unchanged
compared to the previous reporting period as disclosed
in Note 4.
Fair value measurement in Level 3
Other long-term investment
USD’000
30 June 2010
Opening balance
Gains or losses recognised in
- Statement of Income
- Other comprehensive income
Purchases during the year
Closing balance
327
-
-
2,889
3,216
31. Subsequent events after the reporting date
In August and September 2010, the Group purchased a
further 6,218,269 ordinary shares of VinaLand Limited,
bringing the total number ordinary shares held by the
Group to 36,216,326 at the date of approval of the
consolidated financial statements, which represents a
7.24% holding in VinaLand Limited.
VOF Annual Report 2010
81
Investing policy
VinaCapital Vietnam Opportunity Fund Limited
last updated its investing policy in November 2010
in accordance with AIM Rule 8.
1. Investment objectives
VinaCapital Vietnam Opportunity Fund Ltd is a
closed-end investment company incorporated in
the Cayman Islands with the primary objective of
achieving medium to long-term (3-5 years) capital
appreciation and providing an attractive level of
income dividends and other distributions through
investment in listed and unlisted companies, debt,
private equity, real estate and other investment
opportunities in Vietnam (primarily) and
surrounding Asian countries Cambodia, Laos and
Southern China.
Investment manager:
VOF is managed by VinaCapital Investment
Management Ltd (“VCIM” or the “Investment
Manager”), a BVI company. VCIM was established
in 2003 and manages a number of listed and
unlisted investment companies.
2. Investing policy
The Company will adhere to the following
investment policies:
Type of investment:
Investments will be made in comparatively
undervalued assets with the potential for value
enhancement and realisation, for instance in listed
and OTC securities, expansion capital for early
and mid-stage companies, listed funds, distressed
assets, NPL portfolios and Vietnamese assets
of distressed overseas investors. The Company
will engage in all forms of investment as allowed
under the laws of each jurisdiction in which it
operates, including but not limited to, listed and
non-listed equity, debt, convertible loans, other
assets, and other instruments and structures that
may be suitable to allow participation in selected
investment opportunities.
Geographical focus:
At least 70 percent of the Company’s gross assets
will be invested in Vietnam or related to entities
in other countries having substantial assets,
liabilities, operations, revenues or income derived
from Vietnam. Up to a maximum of 30 percent
of the gross assets of the Company may also be
invested in neighbouring Asian countries (namely
southern China, Cambodia and Laos), should
the Directors consider that such investments
offer potentially attractive returns or portfolio
diversification.
Sector focus:
Investment will primarily be made in key growth
sectors of the economy as Vietnam modernises
and domestic consumer demand develops
with rising income levels, including retail and
consumer goods, financial services, property and
construction materials. The secondary focus will
be on other expanding sectors such as tourism,
manufacturing, infrastructure and export sectors
where Vietnam has a comparative advantage.
82
VOF Annual Report 2010
Investment criteria:
Key investment criteria will include:
• For investment in growth businesses, full use will
be made of the established stock selection and
analytical skills of the Manager and its advisers
and the broad experience of the Directors to
select enterprises which, in their opinion, have
sound products and good growth prospects.
• The Company will seek to identify businesses
with a record of profit growth, with strong
and motivated management teams who have
adopted proven business models and which
have the realistic potential of exit through trade
sale, listing in Vietnam or in another country.
• The Investment Manager will utilise its extensive
sourcing capabilities in real estate investment
and expertise in property development to
selectively invest in projects to capitalise on
ongoing demand/supply imbalances in the
property sector.
• The Directors in conjunction with the
Investment Manager will also aim to achieve
a balance in its exposure to different sectors.
Furthermore, no single investment may at the
time of investment exceed 20 percent of the Net
Asset Value of the Company.
• It is the intention of the Company to be active
in the development of a thoroughly researched
and carefully selected portfolio of investments.
The Directors intend that the portfolio will
be developed in such a way as to take, where
practicable, relatively large stakes in those
enterprises which have met the Investment
Manager’s criteria.
Exit strategy:
The Company is a publicly listed investment
company on the London Stock Exchange’s AIM
Market. Investors are free to purchase and sell
shares whenever they please. Concerning portfolio
investments, the Company will aim to realise
individual investments when the Board believes
the realisation would be in the best interests of the
Company, ideally within a five-year time frame.
Cross holdings:
The Company may from time to time invest in
listed shares of other closed-ended funds focused
on Vietnam by selectively acquiring shares of
such funds where the shares are currently trading
at prices below the intrinsic value of the funds’
underlying assets. This includes among others,
shares in Vinaland Limited (“VNL”) (AIM: VNL)
and Vietnam Infrastructure Limited (AIM: VNI),
closed-ended investment companies admitted to
trading on the AIM market of the London Stock
Exchange plc and also managed by VCIM.
In such cases, VOF will enter into irrevocable
arrangements with an independent third party
broker to specifically purchase on its behalf and
within certain pre-set parameters, ordinary shares
in VNL and VNI. VOF intends to acquire and hold
shares of VNL and VNI via such arrangements on a
rolling basis. Furthermore, only the Independent
Directors of the VOF Board shall be authorised to
provide instructions to the Independent Broker
and to vote on behalf of VOF at any VNL and VNI
shareholder meetings.
VOF may waive its right of first refusal to take up
to a 25 percent direct stake in new VNL projects,
as contained in VNL’s admission documents. In
addition, VinaCapital Investment Management
Limited will rebate the management fees
corresponding to the portion of VOF’s holding in
VNL and VNI Shares to VOF.
Leverage:
The Directors may exercise all the powers of the
Company to borrow money and to mortgage
or charge its undertaking, property and
uncalled capital or any part thereof and to issue
debentures, debenture stock, mortgages, bonds
and other such securities whether outright or as
security for any debt, liability or obligation of the
Company or of any third party.
Other information:
• The Company will adhere to the above
investment policies, in the absence of
unforeseen circumstances, unless these are
changed with the approval of a Shareholders
resolution. Such changes may be prompted by
changes in Government policies or economic
conditions which change or introduce additional
investment opportunities.
VOF Annual Report 2010
83
• Cash pending investment, reinvestment or
distribution will be placed in bank deposits,
bonds or treasury securities, for the purpose of
protecting the capital value of the Company’s
cash assets.
• In order to hedge against interest rate risks
or currency risk, the Company may also enter
into forward interest rate agreements, forward
currency agreements, interest rates and bond
futures contracts and interest rate swaps and
purchase and write (sell) put or call options on
interest rates, and put or call options on futures
on interest rates.
3. Valuation policy
The Net Asset Value and the Net Asset Value per
share shall be calculated (and rounded to two
decimal places), in US dollars by the Administrator
(or such other person as the Directors may
appoint for such purpose from time to time) on
a monthly basis (or at such other times as the
Manager may determine but in any event at least
quarterly).
The Net Asset Value shall be the value of all assets
of the Company less the liabilities of the Company
determined in accordance with the valuation
guidelines adopted by the Directors from time
to time.
Under current valuation guidelines adopted by
the Directors, such values shall be determined as
follows:
• The value of any cash in hand or on deposit, bills
and demand notes and accounts receivable,
prepaid expenses, cash dividends and interest
declared or accrued as aforesaid and not yet,
received shall be deemed to be the full amount
thereof, unless in any case the Directors shall
have determined that the same is unlikely to
be paid or received in full, in which case the
value thereof shall be arrived at after making
such discount as the Directors may consider
appropriate in such case to reflect the true value
thereof;
• The value of securities which are quoted or
dealt in on any stock exchange (including any
securities traded on an “over the counter
market”) shall be based on the last traded prices
on such stock exchange, or if there is more than
one stock exchange on which the securities
are traded or admitted for trading, that which
is normally the principal stock exchange for
such security, provided that any such securities
which are not freely transferable, or which are
not regularly traded, or which for any other
reason are subject to limited marketability, shall
be valued at a discount (the amount of such
discount being determined by the Directors
in their absolute discretion or in a manner so
approved by the Directors);
• As regards unquoted securities;
- Unquoted investments will initially be valued at
cost price, which will include any expenses relating
to their acquisition;
- A revaluation of unquoted investments to a value
in excess of or below cost may be made in the
circumstances provided by and in accordance with
the guidelines issued by the British Investment
Fund Association or any successor body;
• All other assets and liabilities shall be valued at their
respective fair values as determined in good faith
by the Directors and in accordance with generally
accepted valuation principles and procedures;
• Any value other than in US dollars shall be
translated at any officially set exchange rate or
appropriate spot market rate as the Directors deem
appropriate in the circumstances having regard,
inter alia, to any premium or discount which may be
relevant and to costs of exchange.
If the Directors consider that any of the above bases
of valuation are inappropriate in any particular case
or generally, they may adopt such other valuation or
valuation procedure as they consider is reasonable in
the circumstances provided that such other valuation
or valuation procedure has been approved by the
Company’s auditors. The Directors may delegate
to the Investment Manager any of their discretions
under the valuation guidelines.
84
VOF Annual Report 2010
4. Co-investments
6. Distributions
Until further notice, the Board of Directors of the
Company has resolved to distribute 4% of NAV
per year in two payments per year following the
finalisation of the half-year (interim) and annual
financial statements of the Company. Distributions
will be made in the form of a tender for the
repurchase of shares.
7. Life of the Company
The Company does not have a fixed life but the
Board considers it desirable that Shareholders
should have the opportunity to review the
future of the Company at appropriate intervals.
Accordingly, the Board intends that a special
resolution will be proposed every fifth year that
the Company ceases to continue as presently
constituted. If the resolution is not passed,
the Company will continue to operate. If the
resolution is passed, the Directors will be required
to formulate proposals to be put to Shareholders
to reorganise, unitise or reconstruct the Company
or for the Company to be wound up.
The Investment Manager may from time to time
manage other funds which have a similar or
different investment objective and policy to that
of the Company. Nevertheless, circumstances
may arise where investment opportunities will
be available to the Company and which are
also suitable for one or more of the other funds
managed by the Investment Manager. Where
a conflict arises in respect of an investment
opportunity, the Investment Manager will allocate
the opportunity on a fair basis. In such event, the
allocations will normally be made on a pro-rata
basis between the Company and the other funds
based on the amounts available for investment in
each fund at the time the investment opportunity
arises. However, the Investment Manager will be
entitled to recommend to the Board the allocation
of investment opportunities on a basis otherwise
than as set out above if it deems it appropriate.
In those circumstances the Board will determine
what level of investment the Investment Manager
may make on behalf of the Company.
5. Ordinary Shares
It is intended that the Company’s income will
consist wholly or mainly of investment income.
The Directors currently intend to reinvest a large
part of income to take advantage of opportunities
meeting the Company’s investment and return
objectives, and where suitable opportunities are
not available to distribute substantially all of the
Company’s income and capital gains to holders of
the Ordinary Shares. The distribution of dividends
may be made in the form of a tender offer to all
shareholders at NAV for tax efficiency.
Historical financial information
Years ended 30 June
2004
2005
2006
2007
2008
2009
2010
VOF Annual Report 2010
85
Statement of Income (USD’000)
Total income from ordinary activities
Total expenses from ordinary activities
Operating profit before income tax
Income tax expense
Profit for the year
Minority interests
Profit attributable to ordinary equity holders
Statement of Financial Position (USD'000)
Total assets
Total liabilities
Net assets
Share information
Basic earnings per share (cents per share)
Share price at 30 June
Ordinary share capital (thousand shares)
Market capitalisation at 30 June (USD'000)
Net asset value per ordinary share (USD)
Ratio
Return on average ordinary shareholders' funds
Dividend pay out as % avr. NAV
Investment management fees/avr. NAV
2,105
(817)
1,288
-
1,288
-
1,288
4,393
(1,522)
2,871
-
111,529
(35,958)
360,527
(381,067)
29,075
(95,164)
(34,465)
(25,869)
75,572
265,363
(415,532)
-
-
(125)
2,871
75,572
265,363
(415,657)
-
523
1,196
1,347
(3,684)
3,206
(108)
3,098
134,263
(29,047)
105,216
211
105,005
311
2,871
75,049
264,167
(417,004)
6,782
104,694
10,986
96,943
277,942
198
702
33,012
10,788
96,241
244,930
14
1.16
9,500
11,020
1.14
13.6%
0.0%
1.4%
8
1.58
75,155
118,745
1.28
7.4%
0.6%
7.6%
76
2.32
122,657
283,951
2.00
58.2%
0.0%
12.8%
924,785
103,121
821,664
134
3.41
250,648
853,456
3.28
72.8%
0.0%
15.6%
723,614
718,023
793,820
54,737
36,111
11,319
668,877
681,912
782,501
(141)
2.16
324,610
699,535
2.06
-67.8%
0.0%
2.9%
2
1.43
324,610
462,569
2.10
1.1%
0.0%
2.0%
32
1.40
324,610
455,428
2.41
17.0%
0.0%
2.0%
86
VOF Annual Report 2010
VinaCapital Vietnam
Opportunity Fund Ltd
(“Vietnam Opportunity Fund”
or “VOF”) is a closed-end fund
trading on the AIM Market of
the London Stock Exchange.
Launched in 2003, VOF is the
largest and most successful
diversified Vietnam fund.
The fund focuses on key
growth sectors of the domestic
economy, and capitalises on
the investment manager’s
broad network to realise
sustainable capital appreciation
and provide an attractive level
of return for investors.
VOF Annual Report 2010
87
VOF overview and details
VOF details
Fund size
Fund launch
Term of fund
Fund domicile
Legal form
Structure
USD783 million (NAV as of 30 June 2010).
30 September 2003.
Five years subject to shareholder vote for liquidation.
Cayman Islands.
Exempted company limited by shares.
Single class of ordinary shares trading on the AIM market of the London
Stock Exchange plc.
Auditor
Grant Thornton (Vietnam).
Nominated advisor (Nomad)
Grant Thornton Corporate Finance (UK).
Custodian
Broker
Lawyers
HSBC Trustee (HK).
LCF Edmond de Rothschild (UK)
Lawrence Graham (UK)
Maples and Calder (Cayman Islands).
Management and performance fee Management fee of 2 percent of NAV. Performance fee of 20 percent of
total NAV increase over the higher of an 8 percent compound annual return
and the high watermark.
Investment manager
VinaCapital Investment Management Ltd.
Investment policy
Medium to long-term capital gains with some recurring income and
short-term profit taking. Primary investment focus areas are: Privately
negotiated equity investments; Undervalued/distressed assets;
Privatisation of state-owned enterprises; Real estate; and Private
placements into listed and OTC-traded companies.
Investment focus by geography Greater Indochina comprising: Vietnam (minimum of 70 percent),
Cambodia, Laos, and southern China.
Registered office
PO Box 309GT, Ugland House, South Church Street, George Town,
Grand Cayman, Cayman Islands.
Ho Chi Minh City
17th Floor, Sun Wah Tower
115 Nguyen Hue Blvd., District 1
Ho Chi Minh City, Vietnam
Phone: +84-8 3821 9930
+84-8 3821 9931
Fax:
Hanoi
5th Floor, Sun City Building
13 Hai Ba Trung Street,
Hoan Kiem Dist., Hanoi, Vietnam
Phone: +84-4 3936 4630
+84-4 3936 4629
Fax:
Cambodia
Canadia Tower, 20th floor
No. 315, Ang Duong Street
Phnom-Penh, Cambodia
Phone: +855 23 99 66 88
+855 23 99 60 50
Fax:
Singapore
6 Temasek Boulevard
#42-01 Suntec Tower 4
Singapore 038986
Phone: +65 6332 9081
+65 6333 9081
Fax:
www.vinacapital.com