Vietnam Opportunity Fund Limited
Annual Report 2011
VinaCapital Vietnam Opportunity Fund Limited (VOF)
Annual Report 2011
Contents
Section 1
Introduction
1.1 Financial highlights
1.2 Performance highlights
1.3 Chairman’s statement
Section 2
Manager’s report
2.1 Investment environment
2.2 Portfolio performance
2.3 Top holdings
2.4 Management team
Section 3
Financial statements and reports
3.1 Board of Directors
3.2 Report of the Board of Directors
3.3 Governance report
3.4 Independent Auditors’ report
3.5 Consolidated financial statements and notes
Section 4
Additional information
4.1 Investing policy
4.2 Historical financial information
4.3 Overview and details
3
4
6
9
11
16
22
26
28
30
35
36
85
89
91
2 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Financial highlights
VOF in FY2011 saw stable
performance due to private equity
divestments, via trade sales, at prices
above carrying value.
VOF turned the challenging macro conditions
in Vietnam to its advantage, entering new
investments at good valuations, and divesting
several key holdings to overseas strategic buyers
attracted by Vietnam’s long-term potential.
Performance summary
NAV per share
Change on previous year
Share price
Change on previous year
Discount to NAV (at 30/6)
FY2011
FY2010
FY2009
2.32
(3.9%)
1.57
12.1%
32.3%
2.41
14.8%
1.40
(2.1%)
42.9%
2.10
1.9%
1.43
(30.6%)
31.9%
VOF at the end of FY2011 held a total cash position of USD63 million, which
will allow the fund to aggressively pursue private equity deals at good
valuations, while leaving cash available for distribution to shareholders.
Net asset value at 30 June 2011
NAV per share at 30 June 2011
USD752 million
USD2.32
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 3
Divestments
VOF in FY2011 made significant
progress towards its strategic
objectives.
The overall goal is to increase the NAV and close
the share price discount. In FY2011, the Manager
focused on trade sales and acquiring high-growth
private equity assets in key sectors.
Performance highlights
Consumer goods
Hanoi Liquor JSC (Halico) is Vietnam’s leading
Vodka producer and distributor. VOF sold a 23.6
percent stake in Halico to Diageo plc.
Vinacafe is Vietnam’s leading instant coffee
producer, focused on robusta beans. VOF sold its
stake in Vinacafe to another investment fund.
Education
International School of Ho Chi Minh City is among
the leading international school’s in Vietnam. VOF
sold the majority of its stake in ISHCMC to Cognita,
one of the world’s top private school operators.
FY2011 divestment summary
Total proceeds from PE/OTC divestments in FY2011: USD77m
Total weighted average IRR: 48.1%
Total weighted average multiple: 3.7x
In addition, after the financial year ended, VOF divested a majority of its
stake in Hoan My Hospital Group.
4 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Performance highlights
New investments
Close the share price discount
VOF’s private equity investments continued to focus on the consumer goods
sector. This sector is enjoying high growth and attracting overseas strategic
investors.
Consumer goods
Yen Viet JSC is Vietnam’s top producer and distributor
of bird’s nest nutritional products, a high-cost health
supplement with a huge growth market, particularly in
China. VOF holds a 20.0 percent equity stake in Yen Viet.
Thai Hoa Coffee JSC is Vietnam’s third largest coffee
producer and the market leader in the high-value
arabica sector. VOF holds a 10.0 percent equity stake in
Thai Hoa Coffee.
VOF during FY2011 also increased its stake in agro-chemicals firm An Giang
Plant Protection JSC, and acquired a small stake in Binh Dien Fertiliser.
VOF made some progress in closing the share price discount
during FY2011. However, VOF’s share price is correlated to the performance
of the VN Index, which declined 21 percent in USD terms over the year
ended 30 June 2011. In addition, the European debt crisis had a negative
impact on equities markets around the world.
Share price discount
30 June 2011: 32.3%
30 June 2010: 41.9%
VOF did not make a distribution payment in FY2011, but held an EGM in
October 2011 that added a permanent share buyback mechanism to the
fund’s Charter. Buybacks subsequently commenced in November 2011.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 5
“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,
The 2011 financial year saw Vietnam’s economy constrained by renewed
high inflation, which required tightened fiscal and monetary policies. Credit
growth was reined in, and GDP growth slowed to 5.6 percent year-on-year
at 30 June 2011, down from 6.8 percent in 2010. Pressure on the Vietnam
dong (VND) eased following an official devaluation in early 2011, but is likely
to return when interest rates eventually decline.
During the year, VOF continued to outperform its peer group of Vietnam
diversified funds. However, sustained NAV growth was not possible given
the market environment. VOF’s listed equities and real estate holdings both
lost value over the year, primarily from unrealised losses and write-downs.
The poor performance of Vietnam’s capital markets in FY2011 stands in
contrast to the strong deal environment that saw the fund divest several
private equity and OTC assets for high returns, while investing at low
valuations in well-managed businesses with high earnings growth.
Vinacafe, Halico, the International School of Ho Chi Minh City and a real
estate asset in Hoi An saw divestment contracts signed during the year,
resulting in total proceeds of USD77 million and a weighted average IRR of
48.1 percent. In addition, VOF exited the majority of its stake in Hoan My
hospital group to Fortis Healthcare, at a significant gain, shortly after the
end of the financial year. The Halico and International School divestments
were to strategic investors, attracted to Vietnam’s long-term potential and
able to enter the market easily given the low cost of capital on international
debt markets.
6 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Chairman’s statement
Both the Board and Manager, however, are
aware that the success with trade sales in FY2011
was not reflected in NAV growth or returns to
shareholders. The share price discount increased
after the VN Index continued to decline, and the
Euro debt crisis further pulled down international
markets. Trading in VOF’s shares is unfortunately
correlated to the VN Index performance, even
though, as a diversified fund, less than 50
percent of the portfolio is in listed and OTC
equities.
To return greater value to shareholders, VOF
will seek to add a share buyback mechanism to
the fund’s articles of association at an EGM to
be held on 25 October 2011. Once the buyback
programme can start, and given the continued
strong deal environment in Vietnam, we
believe the 2012 financial year offers improved
prospects for the fund’s shareholders. The
Manager’s strategy will be to continue exits of
mature assets, including real estate holdings,
and reinvest proceeds into well-managed, high-
growth companies, while leaving funds available
for return to shareholders, via tender or buyback
distributions.
The Board is aware that VOF needs to prove
to shareholders that it can generate value
and offer an excellent investment proposition
going forward. The Manager must work hard to
achieve this, but the Board remains confident
the investment environment offers the potential
for the fund to take full advantage of an
eventual recovery in Vietnam’s capital markets.
VOF continues to hold many of Vietnam’s best
companies and projects in its portfolio, and the
management team has a strong track record of
exits.
The Board will continue to keep shareholders
updated on progress in achieving our strategic
objectives, and returning VOF to prominence
as one of the best emerging market investment
opportunities for international investors.
Thank you for your continued support.
William Vanderfelt
Chairman
VinaCapital Vietnam Opportunity Fund Ltd
31 October 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 7
8 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Investment environment
Economy
Vietnam recovered quickly from the 2009 global financial crisis to post 6.8
percent GDP growth in 2010. The strength of Vietnam’s domestic economy
was evident, as construction, manufacturing and retail sales all showed
vigorous growth. However, the 2010 success came at a cost. Fiscal and
monetary policies were prematurely loosened in the second half of 2010,
spurring growth but leading to inflation and depreciation pressure on the
Vietnam dong (VND). The complex negotiation consumers and businesses
make between gold, USD and VND had a profound impact on the economy.
Business loans in 2009 were primarily denominated in VND given the
subsidised credit available. When the subsidised loan programme was
phased out in 2010, businesses took loans in USD given the lower interest
rates. When these dollar loans came due in late 2010, the VND came under
pressure.
At the same time, the widening trade deficit raised concerns among foreign
investors and creditors. Amid mounting criticism, Vietnam acted decisively
in early 2011 by devaluing the VND by over seven percent, and sharply
restricting credit supply and public spending.
The economy slowed, with GDP growth falling to 5.6 percent annualised
over the first half of 2011. Given the lag between policy decisions and their
impact, however, inflation continued to rise over the first six months of
2011, reaching over 20 percent year-on-year by June. The VND was stable
over this period, given the high deposit rates available and the forced sale of
USD by state-owned enterprises.
Prospects for the remainder of 2011 are for GDP growth of around 5.5
percent, with inflation gradually declining to about 18 percent CPI growth
for the year. Interest rates will come down as inflation falls, and no VND
devaluation is foreseen given stronger State Bank reserves and a balance of
payments surplus for 2011 estimated at USD4.5 billion.
Capital markets and real estate
For the year ended 30 June 2011, the Vietnam Index (VN Index) declined
almost 21 percent in USD terms, resulting in a trailing price-to-earnings
ratio for the market of 9.2x (2010: 5.8 percent gain; 10.8x trailing P/E). This
is significantly lower than P/Es in regional peers like Thailand, Indonesia,
Malaysia and the Philippines.
The poor VN Index performance was due to the depreciation of the VND,
and the tightened liquidity at banks following the government’s inflation-
fighting policy efforts. Historically, domestic liquidity – predominantly
Credit growth and CPI inflation, 2006-2011
70.0%
60.0%
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
Jan-06 Sep-06 May-07
Jan-08 Sep-08 May-09 Jan-10 Sep-10 May-11
Credit growth, year-on-year
CPI growth, year-on-year
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 9
Vietnam balance of payments, 2006-2011E
30,000.0
20,000.0
10,000.0
0.0
-10,000.0
-20,000.0
2006
2007
2008
2009
2010
2011E
Trade balance ODA and Govt borrowings FDI disbursement Remittances
Investment environment
from bank loans and margin lending – has fuelled the growth and value of
the Vietnam stock markets. With this liquidity removed in 2011, the stock
market suffered. Also, high deposit rates of over 20 percent and the rising
gold price kept consumers from investing in equities. In VND terms, the
price of gold almost doubled during the year. In this environment, equities
and even real estate remain unattractive. Despite the tight liquidity and
market slowdown, some Vietnamese equities still posted strong results in
2011, including VOF investees Vinamilk and Eximbank. Among the weakest
performers were real estate stocks and sectors that depend on construction,
such as building materials.
Outlook
The investment environment in Vietnam continues to favour private
companies in sectors such as consumer goods, financial services, healthcare
and education. The long-term demand in these sectors has attracted the
attention of international companies looking to expand into Vietnam.
Trade sales have emerged as a viable exit opportunity for private equity
investments, as opposed to a few years ago when public listings were
needed to generate exits. Vietnam’s government appears willing to stay
the course in its effort to stabilise the economy, and there is greater
transparency regarding policy moves and their impact than in the past.
The missteps of 2010 have been corrected, with the currency stable for the
time being. As a result, 2012 offers the possibility for Vietnam to improve
its somewhat tarnished image in the eyes of foreign investors. A return to
high growth rates and free-flowing credit is unlikely, but also not necessary.
Vietnam’s domestic economic demand is high enough, with steady, stable
growth, to result in numerous investment opportunities in VOF’s focus areas.
10 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Portfolio performance
Vietnam Opportunity Fund Ltd (VOF) at the end of June 2011 had an NAV
of USD752 million, or USD2.32 per share. This was a decline of 3.9 percent
from the end of June 2010, when VOF had an NAV of USD783 million,
or USD2.41 per share. The decline was more moderate than that of the
Vietnam Index, which dropped 21 percent in USD terms over the same
period. VOF’s relatively strong performance was due in part to several
significant private equity divestments.
Asset class performance
VOF’s primary asset classes – in addition to cash – are listed equities,
OTC and private equities, and direct investments in hotels and real estate
projects. Each asset class faced a different environment during the year, with
widely differing impacts on the fund’s net asset value.
The listed equity component had a market value of USD275 million at 30
June 2011, or 37 percent of the fund’s NAV. This is a decline of USD47 million
from 30 June 2010, and is due to net divestment and unrealised losses.
Overall, this asset class saw realised and unrealised losses of 18 percent over
the financial year. The loss was due to the devaluation of the VND, and the
underperformance of real estate equities such as DIC Corp and Quoc Cuong
Gia Lai. In addition, equities in the building materials sector have a high
correlation to the real estate market, and saw losses as a result. However,
the fund’s listed component did outperform the VN Index, which decline 21
percent in USD terms.
The private equity and OTC components, combined, had a book value of
USD126 million at 30 June 2011, or 17 percent of NAV, a decline from last
year when private and OTC equities totaled USD139 million, or 18 percent
of NAV. Nonetheless, FY2011 saw this component return 36 percent, mainly
due to realised gains from trade sales that occurred above the carrying
values at the time of divestment. These exits have added to VOF’s significant
cash holdings.
VOF’s real estate component consists primarily of minority holdings in
assets co-invested with VinaLand Limited (VNL). During the year, VOF saw 11
projects written up by an average of 13.4 percent and eight projects written
down by an average of 6.0 percent, resulting in a net increase of USD1.6
million. The real estate portfolio had a book value of USD179 million at 30
June 2011, or 24 percent of NAV. Last year, the real estate projects portfolio
was valued at USD171 million. Note that in addition to direct projects, VOF
has exposure to Vietnam’s property market through investment in listed real
estate developers.
VOF comparative performance (by calendar year)
VOF
VOF capital markets
VN Index
Capital markets funds*
Diversified funds**
YTD 2011
-1.8%
-4.6%
18.0%
-13.3%
-6.1%
2010
-1.6%
-7.2%
-6.8%
-5.7%
2009
31.0%
47.6%
42.8%
14.1%
2008
-47.1%
-68.7%
-60.2%
-32.3%
* Capital market funds: VEIL, VGF, VEH, PXP, VEEF, Mekong, VN Holding, VNM ETF and FTSE VN ETF.
** Diversified funds: VOF, VNL, VNI, VEIL VGF VRF, VPF, VEH, VPH, Pru Offshore and DWS.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 11
Portfolio performance
The hospitality component, consisting of stakes in six operating hotels, had a
book value of USD73 million at 30 June 2011, or 10 percent of NAV. This was
an increase over 30 June 2010, when the hospitality portfolio was valued at
USD62 million. VOF invested in a minority stake of the Legend Hotel Saigon
during the year, and the value of this holding was written up following
independent valuation reports that indicated a fair market value above the
acquisition cost. The Sofitel Legend Metropole Hotel was also written up,
following a year of record performance.
Bonds amounted to USD11 million as of 30 June 2011, while VOF’s cash and
cash equivalent holdings were USD86 million at 30 June, up from USD82
million the previous year. Cash was received from private equity exits, and
was partially reinvested throughout the year. VOF intends to continue to
invest the cash as market conditions improve, while also carrying out share
buybacks to return value to shareholders.
Trade sale divestments
VOF’s main investment focus is to acquire significant stakes of private and
OTC-traded companies that benefit from domestic economic growth, which
includes sectors such as consumer goods, education, healthcare, financial
services, materials and logistics. This strategy, in FY2011, resulted in solid
exits from Hanoi Liquor JSC (Halico), the International School of Ho Chi Minh
City (ISHCMC), and Vinacafe, Vietnam’s leading instant coffee producer. And
shortly after the financial year ended, VOF exited a majority of its stake in
the Hoan My hospital group, to Fortis Healthcare.
Performance summary
Top gainers
Total realised gains
Total unrealised gains
Total gains
Top losers
Halico (HLC), International School (ISHCMC),
Vinamilk (VNM), Sofitel Metropole, An Giang Plant
Protection
28,092
25,773
53,865
DIC Corp (DIG), Quoc Cuong Gia Lai (QCG),
Hoa Phat Group (HPG), Binh Chanh (BCI)
Total realised losses
Total unrealised losses
Total losses
1,345
38,646
39,991
The Manager believes private equity investments, followed by successful
listings or trade sale divestments, are the most profitable area of the
fund’s investment activity, and will remain so given the continued growth
of many privately-held Vietnamese companies. VOF reinvested a portion
of the proceeds from FY2011 trade sales into private equity deals such as
Yen Viet JSC, the largest private bird’s nest nutritional products company in
Vietnam, and an increased stake in An Giang Plant Protection JSC, the largest
agricultural inputs and seeds business in Vietnam.
12 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Portfolio performance
Divestment history
NAV and share price performance
60.0
50.0
40.0
30.0
20.0
10.0
0
International
School of Ho Chi
Minh City
Halico
Vinacafe
Itaco
Licogi16
Investment Exit
5.00
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0
Share price
NAV
VN-Index
2.34
1200
1000
800
600
432.54
400
200
1.57
0
Jun-11
Dec-03
Mar-05
Jun-06
Sep-07
Dec-08
Mar-10
Share price discount
Despite the relatively stable NAV and success in closing deals during FY2011,
the share price performance was disappointing. The share price at the
end of June 2011 was USD1.57, up 12.1 percent from USD1.40 at the end
of June 2010. The discount at 30 June 2011 was 32 percent. While this
was an improvement over the 43 percent discount at 30 June 2010, the
Manager was not able to sustain the momentum of a narrowing discount
that followed the announcement of a capital distribution policy in October
2010. Although VOF’s NAV declined only slightly, trading in the fund’s shares
is correlated to the VN Index, which dropped significantly in early 2011.
Strategy and outlook
VOF in FY2012 will continue to divest mature holdings and reinvest
proceeds into higher-growth businesses. A share buyback programme
is now in operation. VOF will seek to rebalance its portfolio, to reduce
exposure to listed equities, real estate projects and other real estate-related
assets. Investment in private and OTC equities will increase, focusing on
well-managed companies that are attractive to potential strategic buyers,
or within 18-24 months of an anticipated listing. Targeted investment
sectors will remain those benefiting from domestic economic growth and
demographic trends, namely consumer goods, financial services, education,
healthcare, and agriculture.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 13
Portfolio by sector
Cash and equivalents
Real estate projects
Consumer goods
Hospitality
Real estate equities
Basic materials
Financial services
Industrials
Other sectors
Pharma and health
Minerals and petroleum
Portfolio performance
12.2%
23.0%
12.7%
10.5%
9.8%
9.1%
6.6%
5.2%
5.0%
3.0%
2.8%
Performance by asset class
Amount (USDm)
NAV change
Return
% NAV
Jun-10
Jun-11
USDm
%
%
1. Listed equity
2. OTC and Private equity
OTC
Private equity
3. Hospitality
4. Real estate projects
5. Cash and others
36%
17%
10%
7%
11%
23%
13%
Total NAV
100%
NAV per share
330
112
63
49
71
178
92
783
2.41
275
126
73
53
73
179
99
752
2.32
(55)
-17%
-18%
36%
48%
20%
4%
1%
14
10
4
2
1
7
13%
16%
9%
4%
1%
8%
(31)
-3.9%
VOF remains well positioned to assist in taking private businesses to a public
listing. During 2009 and 2010, 22 companies in the portfolio went public,
thus lifting the listed equities component to 36.7 percent of NAV at 30 June
2010. Subsequently, 2011 saw tightened economic policies, the Vietnam
Index declined and companies halted their IPO plans. VOF was left with little
opportunity to exit holdings via listings, or to exit holdings that had recently
held public offerings.
The anticipated recovery of the stock market in Vietnam, therefore,
continues to be an important part of VOF’s long term success. While trade
sales such as the Halico, International School and Hoan My deals are
profitable ventures, they require long lead times and significant effort.
Vietnam’s listed equities now trade at a discount to regional peers, in P/E
terms, given the ongoing tight fiscal and monetary environment. In 2012,
if inflation slows and Vietnam is able to loosen its monetary policies, the
stock markets should begin to recover. VOF will be able to exit several
significant holdings. With the better privately-held companies seeing
earnings growth in excess of 30 percent yearly, VOF will look to reinvest
proceeds into these exciting businesses.
14 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Portfolio performance
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 15
Top holdings
VOF top 10 holdings at 30 June 2011
Holding
Sofitel Metropole
Vinamilk (VNM)
Eximbank (EIB)
An Giang Plant Protection
Century 21
VinaLand Ltd (VNL)
Danang Beach Resort
Dai Phuoc Lotus
Hoa Phat Group (HPG)
Kinh Do Corp (KDC)
Asset class
Real estate
Listed equity
Listed equity
OTC
Real estate
Listed equity
Real estate
Real estate
Listed equity
Listed equity
Sector
Hospitality
Consumer goods
Financial services
Agriculture
Residential
Real estate
Residential
Township
Industrials
Consumer goods
% NAV
7.7%
6.3%
5.0%
3.8%
3.8%
3.7%
3.4%
3.2%
3.0%
2.0%
16 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Top holdings
Sofitel Legend Metropole Hanoi Hotel
The Metropole, in central Hanoi, is a historic French colonial landmark first
built in 1901 and traditionally the home of diplomats and dignitaries visiting
Vietnam’s capital. The hotel is routinely included on the prestigious Condé
Nast Gold List of the world’s best places to stay. VOF owns a 50 percent
stake in the hotel, after increasing its ownership by 14 percent in September
2008. Although 2009 saw a slowdown for the hospitality industry, the hotel
recently underwent renovations that included opening new executive floor
accommodation, an Italian restaurant, and a spa. With these renovations
complete, performance is improving and the Metropole is expected to
remain one of Asia’s top hospitality assets for years to come.
Occupancy (%)
ARR (USD)
RevPar (USD)
H1 2011
68.5%
197.8
135.4
2010
62.6%
188.0
117.7
2009
49.3%
191.1
94.3
2008
52.3%
245.3
128.2
Vinamilk (VNM)
Vinamilk is the leading dairy products manufacturer and distributor in
Vietnam, accounting for more than 30 percent of the total dairy market.
Vinamilk has an extensive nationwide distribution network with almost
140,000 retail outlets. The domestic market accounts for 90 percent of sales,
but exports are increasing. Vinamilk is the first Vietnamese company to be
listed among Asia’s top 200 SMEs by Forbes, ranking 18th in terms of profit.
H1 2011 financial figures were strong, with revenue and net profit after tax
reaching USD486 million and USD101 million, respectively, up by 37.9 and
20.8 percent year-on-year. During H1 2011, VNM issued a three-percent
share issuance to the public, at an average price of VND130,000 per share, a
premium of more than 20 percent to the price at 30 June 2011. VNM traded
at VND109,000 per share as of 30 June 2011, at a 12-month trailing PE of
10.1x and P/B at 3.6x.
Profit and loss (VND bn)
FY08A
Revenue
Gross profit
Gross margin
Net income
Net margin
EPS (adjusted)
DPS
Balance sheet (VND bn)
Total assets
Shareholders’ equity
ROE (%)
Book value per share
8,604
2,598
30.2%
1,250
14.5%
3,371
3,000
FY08A
5,967
4,761
26.3%
12,841
FY09A
11,197
3,878
34.6%
2,376
21.2%
6,406
3,000
FY09A
8,482
6,638
35.8%
17,900
FY10E
17,184
5,173
30.1%
3,616
21.0%
9,752
3,000
FY10E
10,773
7,964
45.4%
21,478
H1 2011A
10,167
3,211
31.6%
2,113
20.8%
5,700
-
H1 2011A
14,699
11,323
18.7%
30,535
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 17
Top holdings
Eximbank (EIB)
Eximbank is a leading commercial bank in Vietnam, ranking eighth among
more than 40 commercial banks in Vietnam in total deposits and lending.
In the first half of 2011, EIB continued to deliver impressive results with
total income and net profit increasing by 84 and 77 percent year-on-year,
respectively. Strong growth was primarily driven by a 97 percent year-on-
year growth of total assets in H1 2011. Lending continued to grow at a fast
pace, at 10 percent versus the seven percent sector average, led by a 60
percent surge in USD lending. Given the current high capitalisation (VND14.5
trillion) and high capital adequacy ratio (15 percent), EIB still has significant
growth potential in the coming years, underpinned by its strategy to
expand aggressively into the retail market. As of 30 June 2011, EIB traded at
VND14,600 per share, at a P/B 2010 of 1.1x and P/B 2010 of 1.0x.
An Giang Plant Protection JSC
An Giang Plant Protection JSC (AGPPS) privatised in 2004 and has grown to
be the market leader in manufacturing and distributing seeds, pesticides,
and other plant protection chemicals. The company has a 30 percent market
share, and expects continued strong performance given the prospects of
strong growth in Vietnam’s agricultural sector due to the world commodities
boom. The company benefits from the low penetration of modern agro-
chemicals in Vietnam, compared to regional countries. Over the past three
years, An Giang has seen a compound annual turnover and net profit growth
of 31 and 45 percent, respectively. An Giang is expanding to rice processing
and trading activities, to maximise its profits from the agricultural value
chain. VOF believes this expansion will be a key contributor to An Giang’s
growth in coming years, as Vietnam is likely to remain the largest rice
exporter in the world.
Profit and loss (VND bn)
FY09A
FY10A
H1 FY11A
Net interest income
Non-interest income
Total income
Net income
EPS (VND)
DPS (VND)
Balance sheet (VND bn)
Total assets
Shareholders’ equity
ROA (%)
ROE (%)
1,975
602
2,577
1,132
1,072
1,000
FY09A
65,448
13,353
1.7
8.5
2,882
788
3,670
1,815
1,718
1,350
2,252
248
2,500
1,261
589
FY10A
H1 FY11A
131,110
13,510
1.4
13.4
142,853
14,544
0.9
8.7
Profit and loss (VND bn)
FY08A
FY09A
FY2010A
H1-2011A
Revenue
Gross profit
Gross margin (%)
Net income
Net margin (%)
EPS (VND)
DPS (VND)
2,353
3,176
4,063
2,465
580
25%
912
1,112
727
29%
27%
29%
146
328
309
218
6%
10%
8%
9%
8,111
12,148
4,976
3,510
5,407
5,282
-
-
Balance sheet (VND bn)
FY08A
FY09A
FY2010A
H1-2011A
Total assets
1,050
1,539
1,854
2,482
Shareholders’ equity
441
638
1,057
1,102
ROE (%)
33%
51%
29%
40%
Book value per share
12,645
12,794
13,773
Book value per share (VND)
24,500
23,630
17,021
17,746
18 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Top holdings
Century 21
Century 21 was acquired in 2006 due to its location near the site of a new
traffic corridor to the CBD which opened in November 2011, in an area
quickly becoming one of Ho Chi Minh City’s main residential suburbs. The
project involves two separate components – building the resettlement
housing for relocated residents, and developing the 30ha site itself. An
Investment Licence application and a revised 1:500 masterplan have been
submitted for approval. Financing for the development of the first phase will
be obtained following approval of the masterplan. The strategy is to develop
the residential portion and divest other elements, including the resettlement
portion. The surrounding area, District 2, has seen improvements to
infrastructure which has created interest among domestic and foreign
investors. VNL intends to obtain the Investment Licence and 1:500
masterplan approval by Q4 2011. Preliminary infrastructure plans are being
designed and VNL is in discussion with two potential co-investment partners
for both the residential Phase 1 and commercial Phase 2.
VinaLand Ltd (VNL)
VNL is a real estate investment fund also managed by VinaCapital. VOF
previously invested in a 25:75 ratio with VNL on real estate projects such
as top holdings Danang Beach Resort and Century 21. However, when
VNL began trading at a significant discount, the VOF Board initiated share
purchases of VNL, to provide the VOF with great liquidity than investing
directly in real estate projects. VNL has the largest portfolio of real estate
assets among foreign investment funds or developers, acquired between
2006 and 2009. The fund is now in a development and divestment phase
that will see realisation of these assets, via sale of homes to end users, or
coinvestment and divestment of projects to third-party developers. VNL has
commenced a share buyback programme in Q4 2011, with the intention to
reduce the trading discount.
Project summary
AIM inception: 22 March 2006
Two rounds of fundraising: USD198m in 2006 and USD395m in 2007.
Century 21
8.1km
District 2
Sector
Area
Location
Residential (25ha) and
retail (5ha).
30ha; estimated GFA
570,000sq.m.
District 2, Ho Chi Minh
City.
AUM: USD594m
NAV (Sep 11): USD675m
Acquisition phase: 2006-2009, 46 investments at the peak, diversified by geography and real
estate sector
Development/divestment phase: 2009-present, 9 project divestments and a partial exit in
addition to residential sales to local buyers (apartments, villas).
District 1
Total Assets: 37
Leverage (Bank Debt):
Fund: Nil
Project Portfolio: 11%
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 19
Top holdings
Danang Beach Resort
The Danang Beach Resort site was acquired in 2006 given the fast growth
of tourism in the neighbouring region of Danang and Hoi An and the
opportunity to profit from offering the first resort, second-home luxury villas
in central Vietnam. The golf course opened in April 2010 and the first two
Ocean Villas phases were handed over in Q3-Q4 2010. The Norman Estates
branded villas were launched in June 2011 and will be completed in Q1
2013. The Dunes Residences began selling in September 2010 and will be
handed over in Q2 2012. The Cham condominium block A has a completed
superstructure, and the beachfront hotel site is being divested. VNL intends
to complete construction of all villas at The Dunes Residences and Norman
Estates, as well as complete the Cham condominium block A in next 18
months. The fund will seek co-investors for other components. The Danang
Beach Resort stands as the first truly integrated golf resort in Vietnam and it
has been a tremendous boon to other VNL holdings.
Dai Phuoc Lotus
The Dai Phuoc Lotus township was acquired given its location on an island
in a fast-growing outer suburban region of Ho Chi Minh City. The resort
environment, with transport by both road and boat available to Ho Chi Minh
City, will attract second home buyers as well as young families. The strategy
is to develop the six zones of the 200ha site over a period of five to seven
years, with early partial wholesale divestment to co-investors. Construction
and sale of the 332 townhouses comprising Zone 5 is underway, with 65
percent of the ground floor concrete slabs now complete. Some 160 of the
332 houses have sold to date (Phase 4 with last 90 villas expected to launch
in Q1 2012). The next phase will see land lot sales instead of completed
townhouses.
Project summary
Sector
Area
Location
Integrated golf resort.
260ha.
Danang, central
Vietnam.
Danang Airport
Danang
Beach Resort
Hoi An
Project summary
Sector
Township.
Area
200ha.
Location
Dong Nai Province,
near Ho Chi Minh City.
District 1
14.7km
Dai Phuoc
Lotus
20 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Top holdings
Hoa Phat Group (HPG)
Hoa Phat Group (HPG) is the leading industrial manufacturer in Vietnam,
and the market leader in steel production. Established in 1992 as a trading
company, HPG was restructured into a holding group specialising in steel,
steel pipe, furniture, refrigerators, construction and mining equipment, and
industrial park operation. HPG has an extensive investment pipeline over the
next three years, including a major steel complex. HPG has also expanded
to mining and energy, to support the expansion of its steel operations. HPG
has achieved strong financial performance since 2007, with average annual
revenue and earnings growth of 37 and 28 percent, respectively. Despite
the economic slowdown this year, HPG was able to achieve strong H1 2011
results, with sales and net profit after tax up by 57 and 62 percent year-on-
year, respectively. HPG shares traded at VND30,600 per share at 30 June
2011, equivalent to P/E 2011 of 6.5x and P/B 2011 of 1.4x.
Kinh Do Corporation (KDC)
Kinh Do Corporation (KDC) was established in 1993 as a small bakery and has
grown to be one of Vietnam’s most recognisable companies, with many top
food brands. A new yogurt brand, Well-Yo, has seen spectacular sales growth
in recent years. At an April 2011 AGM, shareholders approved the issuance
of 20 million common shares to finance the expansion of the confectionary
segment, including a new premium chocolate production line and expansion
of its ice-cream and yogurt production lines. KDC is in talks with strategic
investors for the block of shares, expected to transact at a 20-30 percent
premium to the market price. Kinh Do business is seasonal, with up to 70
percent of revenue and 90 percent of earnings derived from Q3 and Q4
sales. Although H1 2011 earnings were low, management is confident they
can achieve financial targets this year. As of 30 June 2011, KDC traded at
equivalent to a P/E 2011 of 11.4x and P/B 2011 of 1.2x.
Profit and loss (VND bn)
FY08A
FY09A
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)
8,502
1,258
14.8%
854
10.0%
2,687
1,200
FY08A
5,639
4,111
20.8%
12,934
8,244
1,976
24.0%
1,271
15.4%
3,999
1,200
FY09A
10,243
4,898
25.9%
15,410
FY10E
14,492
2,458
17.0%
1,349
9.3%
4,244
1,200
FY10E
14,903
6,398
21.1%
20,129
H1 2011A
Profit and loss (VND bn)
9,368
1,794
19.2%
1,027
11.0%
3,231
Revenue
Gross profit
Gross margin (%)
Net income
Net margin (%)
Adjusted EPS (VND)
-
DPS (VND)
H1 2011A
Balance sheet (VND bn)
17,598
7,184
14.3%
22,602
Total assets
Shareholders’ equity
ROE (%)
Book value per share (VND)
FY08A
1,466
370
25.2%
-85
n.a
3,069
1,800
FY08A
2,983
2,075
17.8%
17,361
FY09A
FY10A
H1 2011A
1,539
505
32.8%
480
31.2%
4,225
2,400
FY09A
4,247
2,413
20.9%
20,231
1,942
685
35.3%
522
26.9%
5,731
2,400
1,523
529
34.7%
33
2.2%
4,426
-
FY10A
H1 2011A
5,039
3,738
18.3%
31,276
5,149
3,755
14.1%
31,418
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 21
Management team
Don Lam
Chief Executive Officer
1
Don Lam founded VinaCapital in
2003 alongside partners Horst
Geicke 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.
(Left to right: Mr. Don Lam Mr. Nguyen Viet Cuong; Mrs. Dang Pham Minh; Mr. Andy Ho; Mr. Brook Taylor)
5
4
2
1
3
22 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Management team
Brook Taylor
Chief Operating Officer
2
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.
3 Andy Ho
Managing Director and
Head of Investment
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.
Nguyen Viet Cuong
Deputy Managing Director
4
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 and
Hau Giang Pharma. 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.
Dang Pham Minh Loan
Deputy Managing Director
5
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.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 23
24 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 25
Board of Directors
William Vanderfelt
Chairman
Mr. Vanderfelt
was appointed to
the VOF Board in
2003 and became
Chairman in 2008.
He has over 30
years of experience
as Managing
Michael G. Gray
Director
Michael G. Gray
was appointed
to the VOF Board
in 2009. He has
over 30 years
professional
experience,
including 10
Martin Glynn
Director
Martin Glynn was
appointed to the
VOF Board in 2008.
He has 30 years
of experience
in the financial
services industry.
He worked first in
Partner of Petercam, the leading independent
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 will
help the Company ensure that it maintains best
practice in its corporate governance.
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 Avi-
tech Electronics Ltd, JEL Corporation Holdings Ltd,
Grand Banks Ltd, and Raffles Marina Holdings Ltd.
the export finance industry and then for HSBC
for 24 years until his retirement in 2006. He
commenced his career at HSBC in Canada and
worked his way up to President and CEO of HSBC
Bank Canada. From 2003 to 2006 he served 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. He has two degrees from Canadian
universities.
26 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Board of Directors
Horst F. Geicke
Director
Don Lam
Director
Horst F. Geicke is one of VinaCapital’s three
founding partners, and served as Chairman
of VinaCapital from 2003 to 2011. Mr. Geicke
is also a founding partner of Pacific Alliance
Group, a fund management company in Hong
Kong. He has resided in Hong Kong since
1981 and in Vietnam since 2002. Mr. Geicke
is Chairman of Euro Auto BMW Vietnam and
Victory Capital Cambodia. He is Director of several companies that operate
in Vietnam, including VinaSecurities, VinaProjects, and the VinaCapital funds
VOF, VNL and VNI. Mr. Geicke is the President of the European Chamber of
Commerce in Hong Kong and President of the Hong Kong-Vietnam Chamber
of Commerce. He was previously the President of the German Chamber
of Commerce in Hong Kong, and was Director of the Regional Board of the
Young Presidents’ Organisation from 2001-2004. He is the director or board
member of numerous companies and associations, including the German
Business Association of Vietnam, the Hong Kong-Thailand Business Council,
and the Hong Kong-EU Business Cooperation Committee. Mr. Geicke has
a Masters degree in Economics and Business Law from the University of
Hamburg, Germany.
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.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 27
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 2011 (“the year”).
The Group
VinaCapital Vietnam Opportunity Fund Limited
was 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.
The details of the Group’s subsidiaries and
associates are set out in Note 6 and Note 9 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.
Report of the Board of Directors
Results and dividend
The consolidated results of the Group’s operations
for the year ended 30 June 2011 and the state
of its affairs as at that date are presented in the
consolidated financial statements on pages 6 to 49.
The Board of Directors do not recommend
payment of a dividend for the year ended 30 June
2011 (30 June 2010: nil).
consolidated financial position of the Group as
disclosed in the Statement of Financial Position as
at 30 June 2011 or on the results of its operation
and its cash flows for the year then ended.
Directors’ interest in the Company
As at 30 June 2011, the interests of the Directors
in the shares, underlying shares and debentures
of the Company are as follows:
Board of Directors
The members of the Company’s Board of
Directors during the year and up to the date of
this report are:
No. of shares
Direct
Indirect
Percentage
of issued
capital
(direct and
indirect
holding)
Name
Position
Date of appointment
William Vanderfelt
Chairman
10 December 2004
Horst Geicke
Martin Glynn
Don Lam
Michael Gray
Director
Director
Director
Director
14 March 2003
18 March 2008
18 March 2008
24 June 2009
Horst Geicke
1,275,000
278,840
0.479%
Don Lam
1,005,859
184,883
0.367%
William Vanderfelt
-
600,000
0.185%
Michael Gray
Martin Glynn
100,000
20,000
-
-
0.031%
0.006%
Auditors
The Group’s auditors, Grant Thornton Cayman
Islands with the assistance of Grant Thornton
(Vietnam) Ltd., have expressed their willingness
to accept re-appointments.
Subsequent to the reporting date, Mr. Horst Geicke
disposed of 500,000 shares on the open market
bringing his total direct interest to 775,000 shares in
the Company, which represents a 0.325% holding.
Directors’ responsibilities in respect of the
consolidated financial statements
The Board of Directors is responsible for ensuring
that the consolidated financial statements are
The principal activities of the subsidiaries
are financial services, property investment,
hospitality management and retailing.
Subsequent events after the reporting date
No significant events have occurred since the
reporting date which would impact on the
28 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Report of the Board of Directors
properly drawn up so as to give a true and fair
view of the financial position of the Group as at
30 June 2011 and of the results of its operations
and its cash flows for the year then ended on
that date. In preparing the consolidated financial
statements, the Board of Directors is required to:
i.
ii.
iii.
iv.
adopt appropriate accounting policies which
are supported by reasonable and prudent
judgements and estimates and then apply
them consistently;
comply with the disclosure requirements
of the 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;
maintain adequate accounting records and
an effective system of internal control;
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
2011 and the results of its operations and its cash
flows for the year then ended in accordance with the
International Financial Reporting Standards.
On behalf of the Board of Directors
31 October 2011
William Vanderfelt
Chairman
Hong Kong
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 29
Governance report
The Board of Directors (‘the Board’) is pleased
to report on the activities of the Board and its
Committees during the 2011 financial year.
VinaCapital Vietnam Opportunity Fund Limited
(’VOF’ or ‘the Fund’) is a Cayman Islands company
established in 2003 and traded on the AIM
Market of the London Stock Exchange. The Fund
respects the AIM governing laws and regulations,
and implements and promotes to the full extent
possible the guidelines and rules issued by the
respective regulatory authorities.
Throughout the year ended 30 June 2011, the
Fund has complied with the AIM rules set out in
the United Kingdom London Stock Exchange for
listed companies on the Alternative Investment
Market (“AIM”).
The Fund, although not required to do so as
an AIM listed company, uses as good practice
guidelines the UK Corporate Governance Code
(‘the Code’), and the Association of Investment
Companies Code of Corporate Governance
(‘the AIC Code’), which adapts the Combined
Code specifically for investment companies. The
Board regularly reviews the Fund’s corporate
governance system with advice from the
Nominated Advisors (‘Nomad’) to ensure that it is
aligned and balanced with international practice.
The Board is committed to attain and maintain a
high standard of corporate governance, with the
ultimate aim of protecting shareholders’ and other
stakeholders’ interests. The activities performed by
the Board and the Board Committees during the
year are testament of this commitment.
The Board
The Board is ultimately responsible for the Fund
performance on behalf of its shareholders.
In order to create and deliver sustainable
shareholder value, the Board oversees the
Fund’s strategy, direction and supervision
of VinaCapital Investment Management Ltd
(‘the Investment Manager’) as stipulated in
the investment management agreement. The
investment management agreement documents
the Investment Manager’s responsibilities and
the approval process to enter or exit investments,
or enter into any commitments on behalf of the
Fund. Under the agreement, the Board ensures
the Investment Manager follows the Board’s
strategic direction to achieve the investment
objectives in the identification, acquisition and
disposal of properties; the management of
such properties; and the determination of any
financing arrangements.
The Board is also responsible for reviewing and
signing-off the interim and annual financial
statements prepared by the independent auditor
as a true and fair view of the Fund’s financial
status at the time of the report. Furthermore, the
Board ensures that any issues or matters raised
by the auditor are adequately addressed by the
Investment Manager.
Current board members
Independence to the Fund
Exec/non-exec director
William Vanderfelt
Martin Glynn
Michael Gray
Don Lam
Horst Geicke
Yes
Yes
Yes
No*
No**
Non-executive
Non-executive
Non-executive
Non-executive
Non-executive
* Mr Don Lam is an executive of the Investment Manager, VinaCapital Investment Management Ltd, and a Director of VinaCapital Group Ltd, a controlling
shareholder of the Investment Manager.
** Mr Horst Geicke is a Director of VinaCapital Group Ltd, a controlling shareholder of the Investment Manager.
30 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Governance report
Other specific responsibilities reserved for the Board to decide and consider
are: the Fund’s investment strategy; major investment and divestment
transactions; related party transactions; appointment or reappointment of
auditors and key advisors; and other significant operational and financial
matters as required.
The Board is considered independent of the Fund and the Investment
Manager, because the majority of its members are non-executive
independent directors. The Board members remained the same as the
previous year and comprised three independent non-executive Directors,
including the Chairman, and two non-independent Directors. Each Director
has appropriate qualifications, industry experience and expertise to help
guide the Fund. The Directors’ biographies are included in this annual report.
The independent non-executive Directors annually declare that they were,
and continue to be, independent from the Fund, the investment manager,
and any of its managed vehicles.
At the end of the financial year, the aggregate Director fees amounted to
USD195,000.
The Board meets at least four times a year and uses a structured agenda
to ensure all key areas are reviewed; covering but not limited to the review
of the Fund strategy, financial performance, and Investment Manager’s
operations.
A summary of the Board members’ attendance and fees paid are shown in
the table below:
Board Member
Elected Current Board
Position
Audit
Committee
(AC)
Valuation
Committee
(VC)
RNME
Committee
(RNME)
Attendance1
Total Fee USD
Board
meetings
AC
meetings
VC
meetings
RNME
meetings
William Vanderfelt
Michael Gray
Martin Glynn
Don Lam
Horst Geicke
Total
2003
2009
2008
2008
2003
Chairman
Member
Member
Chairman
Member
Member
Member
Member
Chairman
Member
Member
Chairman
Member
Member
-
-
-
-
-
-
4/4
4/4
4/4
4/4
3/4
4/4
4/4
4/4
-
-
6/6
6/6
6/6
-
-
1/1
1/1
1/1
-
-
75,000
60,000
60,000
-
-
195,000
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 31
Governance report
All the Fund’s Directors have direct contact
with the Investment Manager’s Legal Counsel
and Head of Compliance and key external
advisors. They advise the Board on corporate
documentation, legal, governance and
compliance issues.
The Investment Manager has arranged appropriate
Directors and Officers insurance coverage for the
Fund’s Directors to cover any liabilities arising from
corporate activities. The insurance coverage is
reviewed every 18 months or as required.
Board Committees
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 is based on the
model terms of reference from the Institute
of Chartered Secretaries and Administrators
(ICSA). Each Committee’s terms of reference set
out its administration requirements, duties and
responsibilities.
Audit Committee
All independent non-executive directors are
members of this Committee. Michael Gray is
Chairman of the Committee. The Committee is
responsible for overseeing the effectiveness of the
Fund’s systems of internal control, risk management
and financial reporting. The Committee is also kept
informed of the annual audit and interim half-
year review of the Fund’s financial statements. It
assesses the external auditor’s independence and
considers any non-audit services provided by the
external auditor. The Committee also evaluates
the performance of both the internal and external
auditors following each audit cycle.
The Committee undertakes an advisory role and
makes recommendations arising from the above
activities at each Board meeting. The Committee’s
Chairman presents the auditors’ findings and any
proposals to the Board for approval.
The Committee met four times during the year
and performed the following key activities:
• Reviewed the audit strategy and practices by
the external auditor;
• Reviewed the integrity and opinion on the
interim and year-end financial reports before
the Board’s review and approval;
• Reviewed the annual internal audit plan and
appointment of PricewaterhouseCoopers
Vietnam as the internal auditor;
• Reviewed the Fund’s internal audit report on
the internal control system and key business
processes;
• Reviewed the Investment Manager’s risk
management framework and associated
activities;
• Reviewed the Fund’s major risks as reported
by the Investment Manager;
• Reviewed related party transactions involving
the Fund, directors, the investment manager
and its employees and affiliates, and project
companies;
• Reviewed the Fund’s banking policy;
• Reviewed governance policies of the
Investment Manager; including fraud,
whistleblower and related party transaction
and conflict of interest management;
• Review the Fund’s compliance to applicable
laws and regulations;
• Reviewed the Committee’s terms of reference
to ensure it meets the needs of the Board.
Valuation Committee
All independent non-executive directors are
members of this Committee. Martin Glynn is
Chairman of the Committee. The Committee’s
primary goal is to ensure that the Fund’s
investments portfolio, especially real estate
investments are recorded at fair values. In doing
so, the Committee reviews the Investment
Manager’s revaluation process and the individual
results of each revaluation exercise. The
Committee’s Chairman presents the Committee’s
32 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Governance report
findings and recommendations to the Board for
approval of property valuations.
The Committee met six times during the year
(four times in person and twice by telephone)
and performed the following key activities:
• Checked that the basis for valuation is fair and
reasonable;
• Ensured the valuation policies and procedures
are aligned with IFRS accounting standards
and are known by the staff involved;
services providers. The Committee undertakes
an advisory role and makes recommendations
arising from its activities at each Board
meeting. The Committee’s Chairman presents
its recommendations and any proposals to the
Board for approval.
The Committee met once during the year and
performed the following activities:
• Reviewed the structure and composition of
the Board and committees;
• Reviewed the portfolio valuations by asset
• Reviewed the performance and remuneration
classes;
• Reviewed and recommended all property
valuations to the Fund’s Board;
• Ensured Directors have a clear understanding
of the valuation process and results;
• Reviewed the Committee’s terms of reference
to ensure it meets the needs of the Board.
Remuneration/ Nomination/ Management
Engagement/ Evaluation Committee
All independent non-executive directors are
members of this Committee. William Vanderfelt
is Chairman of the Committee. The Committee
is responsible for overseeing that the Board is
appropriately structured, the Directors adhere
to their responsibilities and are appropriately
remunerated, to nominate new Directors to the
Board if required, and to evaluate the Fund’s
policies of the Board and Committee
members;
• Reviewed the terms of reference and
composition of other Board committees;
• Evaluated the performance of the Fund’s key
third-party service providers;
• Reviewed and evaluated the Committee’s
own performance, duties and responsibilities,
and concluded that it and its members are
effective.
Investment and Board Committees
The Fund has two committees to consider and
approve investment decisions; an Investment
Committee (‘IC’) and the Independent Board
Committee (‘IBC’). The former is a committee
of the Manager, while the later is a Board
Committee.
The IC met many times during the year to
consider and approve projects that the
Investment Manager considered suitable for
investment or divestment by the Fund. The
committee is comprised of individuals with
financial and business backgrounds combined
with extensive investment experience in Vietnam.
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.
The Investment Manager
Under the investment management agreement
the Fund has delegated to the Investment
Manager overall responsibility for conducting the
day-to-day management of the Fund’s investment
portfolio including the acquisition, monitoring
and disposal of assets in line with the strategy
and framework set out by the Board.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 33
Governance report
During the year, the Investment Manager
has enhanced its corporate governance and
risk management frameworks, with specific
improvements in respect to appointing
independent directors to its Board, defining
and communicating its values, expanding its
system of internal controls and risk management
processes, and greater transparency and quality
of information when reporting to shareholders.
The Investment Manager views itself a role model
for governance and risk management practices
within Vietnam, and more specifically for its
broad portfolio of investee companies. These
improvements have been undertaken to provide
ongoing comfort to the Board that the Investment
Manager is committed to protecting and
enhancing shareholders’ interests and promoting
good corporate governance in Vietnam.
Internal Controls and Risk Management
The Audit Committee is responsible for
overseeing the effectiveness of the internal
control and risk management system. It primarily
achieves this by assigning and monitoring risk
management responsibilities of the Investment
Manager and evaluating the results of the
internal auditor. The Committee has ensured
that the Investment Manager has implemented
an adequate risk management system covering
the identification of risks, implementation of
controls, and monitoring and reporting of risks.
The internal audit function has been outsourced
to PriceWaterhouseCoopers Vietnam, to ensure
that Investment Manager’s controls over the
Fund’s major risks are adequate and effective.
Code of Conduct and Compliance
All employees of the Investment Manager must
adhere to the Code of Conduct set out in the
Investment Manager’s Compliance manual. The
Investment Manager has adopted a Code of
Conduct based on the International Organisation
of Securities Commissions (“IOSCO”) International
Code of Business Principles 1990, which serves as
a model reference for regulators in Vietnam.
All staff are required to sign an annual compliance
attestation confirming compliance with the Code
of Conduct and Compliance manual, including
their commitment to the fraud and whistleblower
policies and procedures. Non-compliance will
result in disciplinary action.
Risk management system
The Audit Committee has reviewed the Investment
Manager’s newly implemented Enterprise Risk
Management (‘ERM’) framework. The ERM
framework provides a structured approach to
managing risk by establishing a risk management
culture through education and training, formalised
risk management procedures, defining roles and
responsibilities in respect to managing risk, and
establishing reporting mechanisms to monitor the
effectiveness of the framework.
Internal audit
The Board re-appointed PricewaterhouseCoopers
Vietnam as the internal auditor for the fiscal
year. The internal audit work was performed
based on an internal audit plan agreed with
the Audit Committee. The internal auditors
have unrestricted access to the business.
They performed detailed audits of the control
environment, procedures, and internal controls
in respect to the audit areas selected for review.
The internal auditor presented its findings at each
Audit Committee meeting. During the year, no
serious control breaches were reported.
External audit
The Fund’s external auditor for the 2011 fiscal
year is Grant Thornton Cayman Islands with the
assistance of Grant Thornton (Vietnam) Ltd.
To ensure independence from the Investment
Manager, the external auditor is selected and
approved by the Board. The Audit Committee
considers whether any other engagements
provided to the auditor will have an effect on, or
perception of, compromising the external auditor’s
independence. During the year, Grant Thornton
Cayman Islands and Grant Thornton Vietnam did
not provide any non-audit services to the Fund.
Sincerely,
William Vanderfelt
Chairman
VinaCapital
34 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Independent Auditor’s 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 2011,
and the related Consolidated Statement of
Changes in Equity, Consolidated Statements
of Income and Comprehensive Income, and
Consolidated of Statement of Cash Flows for
the year then ended together with a summary
of significant accounting policies and other
explanatory notes from page 6 to 49.
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 the
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 the 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 written consent.
Basis of opinion
An audit involves performing procedures to obtain
audit evidence about the amounts and disclosures
in the consolidated financial statements. The
procedures selected depend upon the auditor’s
judgement, including the assessment of the risks
of material misstatement of the consolidated
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 consolidated 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
consolidated 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 2011, and of its financial performance
and its cash flows for the year then ended in
accordance with the International Financial
Reporting Standards.
GRANT THORNTON
Grand Cayman, Cayman Islands
31 October 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 35
Consolidated Statement of Financial Position
Note
30 June 2011
30 June 2010
USD’000
USD’000
(Reclassified)
7
8
9
10
26
26
11
12
14
15
572
3,445
8,986
199,579
16,923
51,836
-
95
281,436
2,380
12,947
8,714
383,782
27
62,968
470,818
12,349
764,603
-
6,700
10,491
194,688
6,916
47,718
1,170
104
267,787
2,437
11,564
6,045
455,526
428
50,033
526,033
-
793,820
ASSETS
Non-current
Property, plant and equipment
Investment properties
Prepayments for acquisitions of investments
Investments in associates
Available for sale financial assets
Long-term loans receivable from related parties
Other long-term financial assets
Other assets
Non-current assets
Current
Inventories
Receivables from related parties
Trade and other receivables
Financial assets at fair value through profit or loss
Short-term investments
Cash and cash equivalents
Current assets
Assets classified as held for sale
TOTAL ASSETS
36 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Consolidated Statement of Financial Position
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 LIABILITES
TOTAL EQUITY AND LIABILITIES
Net asset value per share attributable to equity shareholders of the company
(USD per share)
Note
30 June 2011
30 June 2010
USD’000
USD’000
16
17
18
26
15
24
3,246
722,064
27,513
(4,834)
3,917
751,906
-
751,906
101
55
156
3,932
8,609
12,541
-
12,697
764,603
2.32
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
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 37
Consolidated Statement of Changes in Equity
Equity attributable to shareholders of the parent
Share
capital
Additional
paid-in
capital
Revaluation
reserve
Translation
reserve
Retained
earnings
Total
attributable
to owners of
the parent
Non-
controlling
interests
Total
equity
USD‘000
USD‘000
USD‘000
USD‘000
USD‘000
USD‘000
USD‘000
USD‘000
3,246
722,064
25,958
(2,088)
(67,268)
681,912
13,676
695,588
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,578
(6,940)
(2,362)
(2,362)
(2,403)
-
-
-
-
-
-
(1,674)
-
-
(1,674)
(1,674)
-
-
-
-
(69)
(69)
(69)
(69)
402
402
333
333
104,694
104,694
311
105,005
(1,674)
(112)
(1,786)
-
-
-
-
4,578
(6,940)
(4,036)
104,694
100,658
2,403
-
-
-
-
-
-
-
-
-
(112)
199
-
(7,978)
(4,741)
(131)
1,427
4,578
(6,940)
(4,148)
100,857
-
(7,978)
(4,741)
(131)
783,928
1 July 2009
Acquisition of non-controlling interest in a subsidiary
Transactions with owners
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 9)
Income tax relating to components of other comprehensive
income (Note 9)
Total other comprehensive income
Total comprehensive income
Disposal of associate
Disposal of assets and liabilities held for sale
Redemption of non-controlling interest
Dividend distribution to non-controlling shareholder
30 June 2010
3,246
722,064
21,193
(3,762)
39,760
782,501
38 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Consolidated Statement of Changes in Equity
Equity attributable to shareholders of the parent
Share
capital
Additional
paid-in
capital
Revaluation
reserve
Translation
reserve
Retained
earnings
Total
attributable
to owners of
the parent
Non-
controlling
interests
Total
equity
USD‘000
USD‘000
USD‘000
USD‘000
USD‘000
USD‘000
USD‘000
USD‘000
1 July 2010
3,346
722,064
21,193
(3,762)
39,760
782,501
Acquisition of non-controlling interest in a subsidiary
Transactions with owners
(Loss)/profit for the year ended 30 June 2011
Other comprehensive income
Currency translation
Share of associates’ revaluation losses recognised directly in
other comprehensive income (Note 9)
Income tax relating to components of other comprehensive
income (Note 9)
Total other comprehensive income
Total comprehensive income
Disposal of subsidiary
30 June 2011
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,966
(1,646)
6,320
6,320
-
-
-
-
(1,072)
-
-
(1,072)
(1,072)
-
442
442
442
442
1,427
(1,056)
(1,056)
783,928
(614)
(614)
(36,285)
(36,285)
106
(36,179)
(1,072)
(30)
(1,102)
-
-
-
-
7,966
(1,646)
5,248
(36,285)
(31,037)
-
-
-
-
(30)
76
(447)
7,966
(1,646)
5,218
(30,961)
(447)
3,246
722,064
27,513
(4,834)
3,917
751,906
-
751,906
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 39
Consolidated Statement of Income
Notes
Year ended
30 June 2011
30 June 2010
USD’000
USD‘000
8,797
(7,059)
1,738
(52,520)
(20,155)
(301)
6,946
(4,056)
(70,086)
(68,348)
21,461
(4,171)
15,424
32,714
(35,634)
(342)
(203)
(36,179)
(36,285)
106
(36,179)
(0.11)
9,333
(7,673)
1,660
96,895
(21,374)
(72)
2,633
(1,600)
76,482
78,142
14,475
(2,668)
15,267
27,074
105,216
(211)
-
105,005
104,694
311
105,005
0.32
19
20
7
21
22
22
9
23
24
Revenue
Cost of sales
Gross profit
Net changes in fair value of financial assets at fair value through profit or loss
Selling, general and administration expenses
Net losses from fair value adjustments of investment properties
Other income
Other expenses
Operating (loss)/profit
Finance income
Finance expenses
Share of profits of associates
(Loss)/profit before income tax
Withholding taxes imposed on investment income
Corporate income tax
Net (loss)/profit
Attributable to equity shareholders of the Company
Attributable to holders of non-controlling interest
(Losses)/Earnings per share – basic and diluted (USD per share)
40 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Consolidated Statement of Comprehensive Income
Net (loss)/profit
Other comprehensive income
Share in other comprehensive income of associates
Income tax relating to components of other comprehensive income
Losses from exchange differences on translation of foreign operations
Other comprehensive income/(loss)
Total comprehensive (loss)/income
Attributable to equity shareholders of the parent company
Attributable to holders of non-controlling interest
Year ended
30 June 2011
30 June 2010
USD’000
USD’000
(36,179)
105,005
7,966
(1,646)
(1,102)
5,218
(30,961)
(31,037)
76
(30,961)
4,578
(6,940)
(1,786)
(4,148)
100,857
100,658
199
100,857
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 41
Consolidated Statement of Cash Flows
Note
Year ended
30 June 2011
30 June 2010
USD’000
USD‘000
(Reclassified)
19
19
7
21
9
22
22
22
22
(35,634)
105,216
442
355
74,691
(61,064)
(22,171)
(35,831)
-
301
(5,876)
(15,424)
4,056
656
460
(16,725)
(4,142)
(19,366)
(1,544)
57
2,510
(342)
8
72
(1,035)
(15,267)
1,487
252
265
(9,938)
(3,825)
(19,305)
(4,334)
(366)
3,307
(211)
(18,685)
(20,909)
Operating activities
(Loss)/profit before income tax
Adjustments for:
Depreciation and amortisation
Unrealised net (gain)/loss from revaluation of
financial assets at fair value through profit or loss
Net gains from sale of financial assets at fair value
through profit or loss
Loss from disposal of property, plant and equipment
Losses on revaluation of investment properties
Gains from disposal of investment
Share of profits of associates
Impairment losses
Unrealised losses from foreign exchange differences
Interest expense
Dividend income
Interest income
Net losses before changes in working capital
Changes in trade receivables and other assets
Changes in inventories
Changes in trade payables and other liabilities
Withholding taxes imposed on investment income
Cash flow used in operating activities
42 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Consolidated Statement of Cash Flows
Investing activities
Interest received
Dividends received
Acquisitions of investment property, plant, equipment
and other non-current assets
Acquisitions of financial assets through profit or loss
Acquisitions of available for sale financial assets
Proceeds from disposals of financial assets
Additional investments in associates
Proceeds from disposals of investments and property, plant, equipment
Proceeds from sales of short-term investments
Loans received from/ (provided to) associates, net
Cash flow from investing activities
Financing activities
Interest paid
Acquisition of non-controlling interest
Dividends paid to holders of non-controlling interest
Capital distributions to holders of non-controlling interest
Cash flow used in financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange differences on cash and cash equivalents
Cash and cash equivalents at the end of the year
Note
Year ended
30 June 2011
30 June 2010
USD’000
USD‘000
(Reclassified)
4,020
15,142
(162)
(70,294)
(7,112)
91,134
(7,038)
11,668
401
(5,200)
32,559
(460)
(614)
-
-
(1,074)
12,800
50,033
135
62,968
3,266
11,479
(345)
(124,643)
-
114,334
(17,650)
18,562
24
1,114
6,141
(2)
-
(131)
(4,782)
(4,915)
(19,683)
69,691
25
50,033
10
9
14
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 43
Notes to the Consolidated Financial Statements
1. General information
VinaCapital Vietnam Opportunity Fund Limited
(“the Company” or “VOF”) 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, and 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 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 Board tabled such a special resolution in 2008
and it was not passed, allowing the Company to
continue as presently constituted. The next special
resolution on the life of the Company will be held
on or before 2013.
The consolidated financial statements for the
year ended 30 June 2011 were authorised for
issue by the Company’s Board of Directors on 31
October 2011.
•
•
IAS 1 Presentation of Financial Statements
IAS 21 The Effects of Changes in Foreign
Exchange Rates and IAS 28 Investments in
Associates
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
the International Financial Reporting Standards
(IFRS) as issued by the International Accounting
Standards Board (IASB).
2.2 Changes in accounting policies
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 consolidated financial statements for the
annual period beginning on 1 July 2010:
•
IFRIC 19 Extinguishing Financial Liabilities
with Equity Instruments
• Annual Improvements 2009
•
IAS 17 Leases
• Annual Improvements 2010
•
•
IFRS 3 Business Combinations
IFRS 7 Financial Instruments: Disclosure
Significant effects on current, prior or future
periods arising from the first-time application
of these new requirements in respect of
presentation, recognition and measurement
are described in notes 2.2.2. An overview of
standards, amendments and interpretations to
IFRS issued but not yet effective is given in note
2.2.3.
2.2.2 Adoptions of revised and amended
standards
Adoption of Annual Improvements 2009
The Improvements to IFRS 2009 made several
minor amendments to IFRS. The only amendment
relevant to the Group relates to IAS 17 Leases. IAS
17 Leases is effective for periods beginning on or
after 1 January 2010. Prior to this 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 by applying the
general principles of IAS 17.
44 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
2. Statement of compliance with IFRS and
adoption of new and amended standards
and interpretations (continued)
The Group has reassessed the classification of the
land elements of its unexpired leases as at 1 July
2010 on the basis of information existing at the
inception of those leases and has determined that
none of its leases require reclassification.
Adoption of Annual Improvement 2010
The IASB has issued Improvements to IFRS 2010.
Most of these amendments become effective in
annual periods beginning on or after 1 July 2010
or 1 January 2011. The Group has applied 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 to the current
consolidated financial statements.
IFRS 3 Business Combinations is effective for
the periods beginning on or after 1 July 2010. 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 interests (“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. The Group has applied IFRS
3 Business Combinations prospectively to all
business combinations from 1 July 2010.
IFRS 7 Financial instruments: Disclosure
is effective for the periods beginning on
or after 1 January 2011. This clarifies the
disclosure requirement of the standards to
remove inconsistencies, duplicative disclosure
requirements and specific disclosures that may
be misleading. The Group has made sufficient
disclosure in compliance with IFRS 7 in the
consolidated financial statements.
IAS 1 Presentation of Financial Statements is
effective for the periods beginning on or after
1 January 2011. 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. The Group has presented the
required reconciliations for each component of
other comprehensive income in the Consolidated
Statement of Changes in Equity.
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. 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. The adoptions have no impact on the
consolidated financial statements.
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.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 45
Notes to the Consolidated Financial Statements
2. Statement of compliance with IFRS and
adoption of new and amended standards
and interpretations (continued)
Further chapters dealing with impairment
methodology and hedge accounting are still being
developed.
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 financial statements.
IFRS 9 Financial Instruments (effective from 1
January 2013)
The IASB aims to replace IAS 39 Financial
Instruments: Recognition and Measurement in
its entirety. The replacement standard (IFRS 9) is
being issued in phases. The chapters dealing with
recognition, classification, measurement and
derecognition of financial assets and liabilities
have been issued. These chapters are effective
for annual periods beginning 1 January 2015.
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
Management have yet to assess the impact
that this amendment is likely to have on the
consolidated financial statements of the Group.
However, they do not expect to implement the
amendments until all chapters of IFRS 9 have
been published and they can comprehensively
assess the impact of all changes.
IFRS 10 Consolidated Financial Statements
(effective from 1 July 2013)
IFRS 10: “Consolidated Financial Statements” was
issued by the IASB in May 2011 and replaces both
the existing IAS 27: “Consolidated and Separate
Financial Statements” and SIC 12: “Consolidation-
Special Purpose Entities”. The new standard
revises the definition of control and related
application guidance so that a single control
model can be applied to all entities. This standard
will apply to the Group from 1 July 2013 and is
not expected to have a material impact on the
Group’s financial statements.
IFRS 12 Disclosure of Interests in other Entities
(effective from 1 July 2013)
IFRS 12: “Disclosure of Interests in other Entities”
was issued by the IASB in May 2011 and is a
new and comprehensive standard on disclosure
requirements for all forms on interests in other
entities, including subsidiaries, joint arrangements,
associates, special purpose vehicles and other off
balance sheet vehicles. This standard is applicable
from 1 July 2013 and management is currently
assessing the impacts of the standard, which will
be limited to disclosure impacts only. There have
also been consequential amendments to IAS 28:
“Investments in Associates” as a result of above
new standard. These amendments are applicable
from 1 July 2013.
Consequential amendments to IAS 27 and IAS
28 Investments in Associates and Joint Ventures
(IAS 28)
IAS 27 now only deals with separate financial
statements. IAS 28 brings investments in joint
ventures into its scope. However, IAS 28’s equity
accounting methodology remains unchanged.
IFRS 13 Fair Value Measurements (effective from
1 July 2013)
IFRS 13: “Fair Value Measurements” was
issued by the IASB in May 2011 and provides
a precise definition of fair value, as a single
source of fair value measurement and prescribes
disclosure requirements for use across IFRS.
The requirements do not extend the use of fair
value accounting, but provide guidance on how
it should be applied where its use is already
required or permitted by other standards within
IFRS. The standard will apply to the Group from 1
July 2013 but is not expected to have a material
impact on the Group’s financial statements.
46 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
2. Statement of compliance with IFRS and
adoption of new and amended standards
and interpretations (continued)
Amendments to IAS 1 Presentation of Financial
Statements (IAS 1 Amendments)
The IAS 1 Amendments require an entity to group
items presented in other comprehensive income
into those that, in accordance with other IFRSs:
(a) will not be reclassified subsequently to profit
or loss and (b) will be reclassified subsequently
to profit or loss when specific conditions are met.
It is applicable for annual periods beginning on
or after 1 July 2012. The Group’s management
expects this will change the current presentation
of items in other comprehensive income;
however, it will not affect the measurement of
recognition of such items.
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 2011 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.
Contents
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Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 47
Notes to the Consolidated Financial Statements
3. Summary of significant accounting
policies (continued)
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.
IRRS 3 (Revised 2010) clarifies that contingent
consideration balances arising from business
combinations whose acquisition dates prior to 1
July 2010 shall not be adjusted retrospectively.
If a business combination provides for an
adjustment to the cost of the combination
contingent on future events, the Group shall
include the amount of that adjustment in the
cost of the combination at the acquisition date if
the adjustment is probable and can be measured
reliably. There were no contingent consideration
during the year.
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.
48 VOF Annual Report 2011
Contents
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Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
3. Summary of significant accounting
policies (continued)
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. For
each business combination, the acquirer shall
measure at the acquisition date components of
non-controlling interests in the acquiree that are
present ownership interest in the acquiree and
currently entitle their holders to a proportionate
share of the entity’s net assets in the event of
liquidation either at fair value or at the present
ownership instruments’ proportionate share
in the recognised amounts of the acquiree’s
identifiable net assets. Non-controlling interest is
based upon the non-controlling interest’s share
of post-acquisition fair values of the subsidiary’s
identifiable assets and liabilities. All other
components of non-controlling interests shall be
measured at their acquisition-date fair values,
unless another measurement basis is required
by other standards. 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.
Where the business combination is achieved in
stages, the Group shall re-measure its previously
held equity interest in the acquiree at its
acquisition-date fair value and recognise the
resulting gain or loss, if any, in profit or loss or
other comprehensive income, as appropriate.
In prior reporting periods, the Group may have
recognised changes in the value of its equity
interest in the acquiree in other comprehensive
income. If so, the amount that was recognised in
other comprehensive income shall be recognised
on the same basis as would be required if the
Group had disposed directly of the previously
held equity interest.
3.4 Associates
Associates are those entities over which the
Group is able to exert significant influence,
generally accompanying a shareholding of
between 20% and 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 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 associates after the date of acquisition and any
changes in the associates’ 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.
Contents
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Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 49
Notes to the Consolidated Financial Statements
3. Summary of significant accounting
policies (continued)
All subsequent changes to the Group’s share
of interest in the equity of an 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 an associate
are necessary for changes in the associate’s
other comprehensive income that have not been
recognised in their Consolidated 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. Gain
on bargain purchase is immediately allocated
to the Consolidated Statement of Income as at
the acquisition date. 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.
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 Group’s 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 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 separate 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.
50 VOF Annual Report 2011
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Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
3. Summary of significant accounting
policies (continued)
reliably, and when the criteria for each of the
Group’s activity has been met.
Non-monetary items measured at historical cost
are translated using the exchange rates at the
date of the transaction. Non-monetary items
measured at fair value are translated using the
exchange rates at the date when fair value was
determined.
In the Group’s consolidated financial statements
all separate financial statements of subsidiaries, if
originally presented in a currency 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
Revenue comprises revenue from the sale of
goods of the Group’s subsidiary. Revenue is
recognised when the amount of revenue can
be measured reliably, collection is probable, the
costs incurred or to be incurred can be measured
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. Revenue
is measured by reference to the fair value of
consideration received or receivable by the
Group for goods supplied, excluding sales taxes,
rebates, and trade discounts.
Interest income
Interest income is recognised on the effective
interest rate basis.
Dividend income
Dividend income, other than those from
investments in associates, 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 Consolidated Statement of Income as an
integral part of the total lease expense.
3.9 Goodwill
Goodwill represents the excess of the cost of
acquisition of subsidiary companies and associates
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 Consolidated Statement
of Income when the results of such a review
indicate that the carrying value of goodwill is
impaired (see accounting policy 3.15).
Gains and losses on disposal of an entity include
the carrying amount of goodwill relating to the
entity disposed of.
Contents
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Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 51
Notes to the Consolidated Financial Statements
3. Summary of significant accounting
policies (continued)
3.10 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.
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 can be reliably determined.
Investment properties are stated at fair value. At
the end of each quarter of the financial year, the
fair values of a selection of investment properties
are assessed by the Valuation Committee such
that the fair values of all investment properties
are assessed at least once each financial year.
At the date of assessment, 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.
The fair value is estimated by the independent
valuation companies assuming there is an
agreement between a willing buyer and a willing
seller in an arm’s length transaction after proper
marketing; wherein the parties have each
acted knowledgeably, prudently and without
compulsion. The valuations by the independent
valuation companies 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.
The estimated fair values provided by the
independent valuation companies are used by
the Valuation Committee as the primary basis for
estimating each property’s fair value. In addition
to the reports of the independent valuation
companies the Valuation Committee considers
information from other sources, including
those sources referred to in Note 4, before
recommending each property’s estimated fair
value to the Board for approval. Discount rates
from 13% to 20% are considered appropriate for
properties in different locations. Gains and losses
from changes in fair value are recognised in the
Consolidated 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 3.10). Where the Group has the
use of an asset held under an operating lease,
payments made under the lease are charged
to the Consolidated 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.
3.11 Financial assets
Financial assets are divided into the following
categories: loans and receivables, financial assets
at fair value through profit or loss, and available
for sale financial assets.
52 VOF Annual Report 2011
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Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
3. Summary of significant accounting
policies (continued)
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
Alternative Investment Market of the London
Stock Exchange 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.
De-recognition 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.
The Group’s financial assets consist primarily of
listed and unlisted equities, bonds, loans and
receivables, available-for-sale and prepayments
for acquisitions of investments.
Financial assets at fair value through profit or
loss
Financial assets at fair value through profit or loss
include financial assets that are either classified
as held for trading or are designated by the entity
to be carried at fair value through profit or loss
upon initial recognition. Other financial assets at
fair value through profit or loss 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 profit or loss
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 profit or loss includes net
unrealised gains in fair value of financial assets
and net gains from realisation of financial assets
during the year.
Loans and receivables
All loans and receivables, except trustee loans
classified as financial assets at fair value through
profit or loss, are non-derivative financial assets
with fixed or determinable pay¬ments 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”.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 53
Notes to the Consolidated Financial Statements
3. Summary of significant accounting
policies (continued)
Available-for-sale financial assets
Available-for-sale financial assets are non-
derivative financial assets that are either
designed as available for sale or are not classified
as (a) loans and receivables, (b) held-to-maturity
investments or (c) financial assets at fair value
through profit or loss. The Group’s available-for-
sale financial assets are investments in private
entities.
After initial recognition, available-for-sale financial
assets are measured at fair values. Gains and
losses are recognised in other comprehensive
income and reported within the available-for-sale
reserve within equity, except for impairment losses
and foreign exchange differences on monetary
assets, which are recognised in profit or loss. If the
investments do not have a quoted market price
in an active market and whose fair value cannot
be reliably measured, such investments shall be
measured at cost, less provision for impairment.
When the asset is disposed of or is determined to
be impaired the cumulative gain or loss recognised
in other comprehensive income is reclassified
from the equity reserve to profit or loss and
presented as a reclassification adjustment within
other comprehensive income. Impairment losses
recognised in profit and loss for an investment in
an equity instrument classified as available-for-
sale shall not be reversed through profit or loss.
Interest calculated using the effective interest
method and dividends are recognised in profit or
loss within ‘finance income’.
3.12 Prepayments for acquisitions of
investments
These represent prepayments made by the
Group to investment/property vendors for
land compensation and other related costs,
and professional fees directly attributed to
the projects, where the final transfer of the
investment/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.
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 appropriate investment accounts.
3.13 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.
3.14 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.
54 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
3. Summary of significant accounting
policies (continued)
3.15 Impairment of assets
The Group’s goodwill, available-for-sale financial
assets, trade and other receivables, prepayments
for acquisitions of investments, 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.
3.16 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. Current tax and deferred tax shall be
charged or credited directly to equity if the tax
relates to items that are credited or charged, in
the same or a different period, directly to equity
and if the tax relates to items recognised in other
comprehensive income, it is recognised in other
comprehensive 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. However,
the deferred income tax is not accounted for if
it arises from initial recognition of an asset or
liability is a transaction other than a business
combination that at the time of the transaction
affects neither accounting profit or less, nor
taxable profit or less.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 55
Notes to the Consolidated Financial Statements
3. Summary of significant accounting
policies (continued)
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.
3.17 Cash and cash equivalents
Cash and cash equivalents include cash in banks
and on hand as well as short term highly liquid
investments such as money market instruments
and bank deposits with original maturity terms of
not more than three months.
3.18 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 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”.
3.19 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 associates’
property, plant and equipment.
Currency translation differences on net
investments in foreign operations are included in
the translation reserve.
Retained earnings include all current and prior
period results of operations as disclosed in the
Consolidated Statement of Changes in Equity.
Changes in ownership interests in a subsidiary that
do not result in gaining or losing control of the
subsidiary are accounted for as equity transactions
and are recorded in other reserve in Equity.
56 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
3. Summary of significant accounting
policies (continued)
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 presence of a legal or constructive
obligation that has resulted from past events.
Provisions are not re¬cognised for future
operating losses.
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
num¬ber 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 pro¬vi¬sions
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 the 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.
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 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;
a party is a jointly-controlled entity;
a party is an associate;
a party is a member of the key management
personnel of the Group; or
a party is a close family member of the
above categories.
2.
3.
4.
5.
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
for which discrete financial information is
available.
3.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 57
Notes to the Consolidated Financial Statements
3. Summary of significant accounting
policies (continued)
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.
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.
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. NAV 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 available for sale financial assets
The fair value of investments in private equities
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. The outcomes may vary from the
actual prices that would be achieved in an arm’s
length transaction at the reporting date.
Fair value of investment properties
The investment properties of the Group and its
undertakings and its associates are stated at
fair value in accordance with accounting policy
3.10. The fair values of investment properties,
leasehold land and buildings are based on
valuations 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.
The estimated fair values provided by the
independent valuation companies are used by
the Valuation Committee as the primary basis
for estimating each property’s fair value for
recommendation to the Board. In making its
judgement, the Valuation Committee considers
information from a variety of sources, including:
(i)
(ii)
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;
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;
(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
58 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
4. Critical accounting estimates and
judgements (continued)
(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 at fair value
through profit or loss
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 (see Note 29).
management uses estimates about future
cash flows and discount rates or independent
valuation for investment properties and property,
plant and equipment.
Impairment
Other assets
The Group’s goodwill, prepayments for acquisitions
of investments, other assets and interests in
associates are subject to impairment testing in
accordance with the accounting policy 3.15.
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 available-for-sale financial assets
Whenever there is an indication of impairment of
an available-for-sale financial asset, 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
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 segment by investment portfolio
include capital markets, real estate (real estate
and hospitality), private equity and cash
(including cash and cash equivalents, corporate
bonds, and short-term deposits) sectors.
Each of the operating segments are 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.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 59
Notes to the Consolidated Financial Statements
5. Segment analysis (continued)
Segment information can be analysed as follows:
Consolidated Statement of Income
Revenue
Finance income
Share of profits of associates
Other income
Net losses from fair value adjustments of investment properties
Net changes in fair value of financial assets at fair value through profit or loss
– Listed and unlisted securities
– Corporate bonds
Cost of sales
Selling, general and administration expenses
Other expenses
Finance expenses
Loss before income tax
Withholding taxes imposed on investment income
Corporate income tax
Net loss
Year ended 30 June 2011
Capital markets
Real Estate
Private equity
Cash
Total
USD’000
USD’000
USD’000
USD’000
USD’000
-
16,334
-
-
-
-
(52,575)
55
(36,186)
-
-
157
15,413
5,876
(301)
-
-
-
21,145
-
8,797
901
11
1,070
-
-
-
-
10,779
(7,059)
-
4,069
-
-
-
-
-
-
4,069
-
8,797
21,461
15,424
6,946
(301)
-
(52,575)
55
(193)
(7,059)
(20,155)
(4,056)
(4,171)
(35,634)
(342)
(203)
(36,179)
60 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
5. Segment analysis (continued)
The relevant comparative segment information for the prior year is presented below:
Revenue
Finance income
Share of profits of associates
Other income
Net losses from fair value adjustments of investment properties
Net changes in fair value of financial assets at fair value through profit or loss
– Listed and unlisted securities
– Corporate bonds
Cost of sales
Selling, general and administration expenses
Other expenses
Finance expenses
Profit before income tax
Withholding taxes imposed on investment income
Corporate income tax
Net profit
Year ended 30 June 2011
Capital markets
Real Estate
Private equity
Cash
Total
USD’000
USD’000
USD’000
USD’000
USD’000
-
12,857
-
2,426
-
96,495
400
112,178
-
-
209
12,978
203
(72)
-
-
13,318
-
9,333
241
2,289
4
-
-
-
11,867
(7,673)
-
1,168
-
-
-
-
-
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
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 61
Notes to the Consolidated Financial Statements
5. Segment analysis (continued)
Consolidated Statement of Financial Position
Total assets
Financial assets at fair value through profit or loss
– 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
Prepayments for acquisitions of investments
Available for sale financial assets
Other long-term assets
Cash and cash equivalents
Short-term investments
Inventories
Other current assets
Capital markets
Real estate
As at 30 June 2011
Private equity Cash, corporate
bonds and
short-term
investments
Total
USD’000
USD’000
USD’000
USD’000
USD’000
87,835
48,614
57,761
25,898
24,680
11,359
59,537
51,717
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,000
-
-
3,445
195,806
51,836
8,986
6,111
-
-
-
-
2,680
370,081
31,045
302,229
-
-
-
-
-
-
-
-
-
-
3,773
-
-
10,812
667
-
-
2,380
285
17,917
-
-
-
-
-
-
-
-
11,381
-
-
-
-
-
-
62,968
27
-
-
74,376
87,835
48,614
57,761
25,898
24,680
11,359
64,537
51,717
11,381
3,445
199,579
51,836
8,986
16,923
667
62,968
27
2,380
34,010
764,603
62 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
5. Segment analysis (continued)
The relevant comparative segment information for the prior year is presented below:
Total assets
Financial assets at fair value through profit or loss
– 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
Prepayments for acquisitions of investments
Other long-term financial assets
Available for sale financial assets
Other long-term assets
Cash and cash equivalents
Short-term investments
Inventories
Other current assets
Capital markets
Real estate
As at 30 June 2011
Private equity Cash, corporate
bonds and
short-term
investments
Total
USD’000
USD’000
USD’000
USD’000
USD’000
101,608
70,471
68,626
27,655
34,853
9,454
100,199
36,784
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,700
170,415
47,718
10,491
1,170
3,216
2
-
-
-
2,342
451,992
11,968
251,680
-
-
-
-
-
-
-
-
-
-
24,273
-
-
-
3,700
102
-
-
2,437
3,299
33,811
-
-
-
-
-
-
-
5,876
-
-
-
-
-
-
-
50,033
428
-
-
56,337
101,608
70,471
68,626
27,655
34,853
9,454
100,199
36,784
5,876
6,700
194,688
47,718
10,491
1,170
6,916
104
50,033
428
2,437
17,609
793,820
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 63
Notes to the Consolidated Financial Statements
5. Segment analysis (continued)
The Group’s revenues, investment income and 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:
Vietnam
Other countries
Total
Year ended 30 June 2011
Year ended 30 June 2010
Revenue and income
Non-current assets
Revenue and income
Non-current assets
USD’000
(22,289)
(274)
(22,563)
USD’000
20,368
-
20,368
USD’000
118,542
2,089
120,631
USD’000
13,630
-
13,630
Revenues and investment income includes revenue from operations, financial income and net gain or loss on fair value adjustments of investment properties
and financial assets at fair value through profit or loss, have been identified based on the location of operations and/or investments. Non-current assets are
allocated based on their physical locations.
The Group does not rely on major customer therefore information about major customers are excluded from this disclosure.
6. Subsidiaries
Additional acquisition of 25% equity interest of American Home Limited
At 30 June 2010 the Group held 75% interest in American Home Limited, a subsidiary incorporated in Vietnam. The principal activity of this company is to
manufacture and sell building materials. In December 2010, the Group acquired a further 25% equity interest for USD0.6 million which brings the Group’s
total equity interest in the project to 100% at the reporting date. The difference of USD0.4 million between the percentage change in non-controlling interests
and the consideration paid has been recognised directly in equity.
Disposal of 50% equity interest in VOF PE Holding 1 Limited
During the year, the Group disposed its 50% interest in VOF PE Holding 1 Limited, a subsidiary incorporated in BVI for the consideration of USD1.22 million. The
fair value of the net assets at the disposal date was USD0.42 million. The resulting gain has been recorded in the Consolidated Statement of Income (Note 21).
Disposal of Vanguard Era Investment Ltd.
During the year, the Group disposed its 50% interest in Vanguard Era Investment Ltd., a subsidiary incorporated in BVI for the consideration of USD8.5 million. The
fair value of the net assets at the disposal date was USD4.23 million. The resulting gain has been recorded in the Consolidated Statement of Income (Note 21).
64 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
6. Subsidiaries
The details of the Group’s subsidiaries as of 30 June 2011 are shown below:
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 Limited
Indotel Limited
Pegasus Leisure Limited
Saigon Water Park Co. Ltd.
PA Investment Opportunity II Limited
VOF PE Holding 2 Limited
VOF PE Holding 3 Limited
DTL Education Holding Ltd.
Vinasugar Holding Ltd.
Vietnam Master Holding 2 Ltd.
Allright Assets Ltd.
SE Asia Master Holding 7
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
BVI
Vietnam
BVI
BVI
BVI
BVI
BVI
BVI
BVI
Singapore
BVI
4,730,000
61,460,000
8,750,000
12,600,000
19,320,000
7,100,000
670,700,000
1,610,000
2,956,346
23,400,000
17,734,008
2,413,592
2,475,200
14,951,368
10,100,000
-
15,000,000
-
-
-
4,000,000
-
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Building materials
Building materials
Hospitality
Property
Property
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Investment
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 65
Notes to the Consolidated Financial Statements
7. Investment properties
9. Investments in associates
Opening balance
Additions during the year
Reclassified as held for sale (Note 15)
Net losses from fair value adjustments of investment
properties
Disposals of investment properties(*)
Translation differences
Closing balance
Year ended
30 June 2011
Year ended
30 June 2010
USD’000
USD‘000
6,700
-
(245)
(301)
(2,344)
(365)
3,445
6,906
201
-
(72)
-
(335)
6,700
Opening balance
Additions
Share of profits of associates (Note 26)
Share of associates’ changes in revaluation reserves, net of
tax (Note 17 and Note 26)
Transferred from prepayments for acquisitions of
investments
Transferred to available for sale financial assets (Note 10)
(*) This pertains to the disposal of Binh Trieu project for USD2.7 million. The disposal resulted in a gain of USD0.4
Reclassified as held for sale (Note 15)
million which is presented as part of other income (Note 21).
8. Prepayments for acquisitions of investments
Transferred to financial assets at fair value through profit or
loss
Transferred from receivables from related parties
Opening balance
Disposal (*)
Transferred to Investments in associates
Written-off
Closing balance
Year ended
30 June 2011
Year ended
30 June 2010
USD’000
10,491
(1,505)
-
-
8,986
USD‘000
14,144
-
(3,000)
(653)
10,491
These pertain to payments made by the Group to investment/property vendors where the final transfer of the property/
investment is pending the approval of the relevant authorities and/or is subject to either the Group or the vendor
completing certain performance conditions as defined in the respecrive agreements.
(*) In October 2010, the Group sold its right to invest in Hoi An Development Ltd to VinaLand Limited for USD1.9
million resulting in a gain from disposal amounting to USD0.4 million (Note 21).
Dividends received
Disposals
Written-off
Translation differences
Closing balance
Additional capital contributions
During the year, the Group made further contributions of USD7.0 million
to Prosper Big Ltd (21st Century Project), Phu Hoi City Co Limited (Licogi 16
Project), Cypress Assets Ltd (Sheraton Nha Trang), Saigon Golf JSC (Saigon
Golf Project) and Vietnam Property Holding Ltd (Danang Golf Course Project).
The Group’s levels of interest in these entities are unchanged.
Year ended
30 June 2011
Year ended
30 June 2010
USD’000
194,688
7,038
15,424
USD‘000
148,435
17,650
15,267
6,320
(2,362)
-
3,000
(2,895)
(12,104)
(1,912)
-
(1,500)
(5,125)
-
(355)
-
-
-
17,305
(1,534)
(2,543)
(312)
(218)
199,579
194,688
66 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
9. Investments in associates (continued)
Dilution of interest
During the year, the Group decided not to contribute further to House &
Urban Development Financial Investment Co following a call announcement
for capital contributions from the entity. This resulted in the dilution of its
interest from 30% to 18% as at reporting date. As a result, the Group has
lost significant influence over this entity and as a consequence, the carrying
value of its investment amounting to USD2.9 million was reclassified to
available for sale financial assets.
Change in equity interest
As at 30 June 2010, the Group held 60% equity interest in International
School HCMC through VOF PE Holding 1 Limited, Vanguard Era Investment
Ltd and VOF PE Holding 3 Limited. As a result of the disposals of VOF PE
Holding 1 Limited and Vanguard Era Investment Ltd, the Group’s equity
interest in International School HCMC was reduced from 60% to 20%
and as a result the Group lost significant influence over this entity. As a
consequence, the carrying value of its remaining interest amounting to
USD2.9 million was reclassified to financial assets at fair through profit or
loss at the reporting date.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 67
Notes to the Consolidated Financial Statements
9. Investments in associates (continued)
The details of the Group’s significant operating associates and their summarised financial information, extracted from their statutory audited/reviewed and/or
management accounts as at 30 June 2011 are as follow:
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
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)
Incorporation/
operation
Direct & indirect
equity interest
held
Principal activity
Assets
Liabilities
Income
Net profit/
(loss)
Vietnam
Vietnam
Vietnam
BVI
Vietnam
Vietnam
BVI
BVI
BVI
BVI
BVI
BVI
BVI
BVI
BVI
BVI
Vietnam
Vietnam
BVI
Vietnam
%
50
49
40.91
37.75
Hospitality
Textile & Garment
Property
Property
32.5
Food & Beverage
30
25
25
25
25
25
25
25
25
25
23
23
20
18
17.5
Investment
Property
Property
Property
Hospitality
Hospitality
Property
Property
Property
Property
Hospitality
Property
Property
Property
Property
USD’000
USD’000
USD’000
USD’000
49,569
9,660
38,957
85,001
2,943
33,107
149,918
149,923
86,152
27,247
55,038
52,062
91,677
12,738
112,981
46,923
29,718
7,210
118,376
48,238
12,770
7,380
22,804
36,118
1,857
24,015
103,379
72,902
57,534
28,583
36,767
53,446
77,231
15,506
48,057
86,101
2,188
1
76,744
29,306
16,892
2,304
3,733
2,726
2,050
158
39,008
18,835
22,073
9,344
8,941
6,535
4,166
503
13,619
6,542
87
330
961
3,037
3,445
83
893
5,469
88
(80)
27,038
16,748
(484)
(3,023)
(533)
6,405
4,175
175
10,270
(8,456)
(7,713)
72
(1,686)
2,492
(1) At the reporting date, the Group effectively has a 50% equity interest in SEM Thong Nhat Hotel Metropole (via the 100% interest in Indotel Limited – Note 6). The Group does not have any control or joint control of this entity due to its limited
representation on the board. The Group though has significant influence since it has the power to participate in the financial and operating policies of the entity, and are therefore this investment is treated as an associate.
(2) The Group holds 18%, 17.5% and 15.5% interest, respectively 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.
68 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
10. Available for sale financial assets
11. Trade and other receivables
Yen Viet Joint Stock Company
Indochina Industries Food Pte. Ltd.
House & Urban Development Financial Investment Co
(Note 9)
Thang Loi Land Joint Stock Company
AA Corporation
Impairment losses
30 June 2011
30 June 2010
USD’000
USD’000
7,112
13,100
2,895
2,889
526
26,522
(9,599)
16,923
-
Trade receivables
13,100
Receivable from matured bonds
-
2,889
526
16,515
(9,599)
6,916
Interests receivables from related parties
Dividend receivables
Receivable from disposal of investment property
Short-term loan receivable from third parties
Other current assets
Allowance
30 June 2011
30 June 2010
USD’000
USD’000
969
3,480
728
1,583
1,958
2,985
1,236
12,939
(4,225)
8,714
2,034
3,808
1,351
-
-
-
936
8,129
(2,084)
6,045
As all trade and other receivables are short-term in nature, their carrying
values are considered reasonable approximation of their fair values at the
reporting date.
Investment in Yen Viet Joint Stock Company
In April 2011, the Group acquired a 20% interest in Yen Viet Joint Stock
Company USD7.1 million. The Group does not have significant influence or
control over the entity since it has no power to participate in or control over
the financial and operating policies of the entity and therefore treated the
investment as available for sale financial assets.
In 2009, the Group recognised impairment losses of USD9.4 million and
USD0.2 million with respect to its investments in Indochina Industries
Food Pte. Ltd. and AA Corporation, respectively. No further indications of
impairment were noted after that.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 69
Notes to the Consolidated Financial Statements
12. Financial assets at fair value through profit or loss
13. Categories of financial assets and liabilities
30 June 2011
30 June 2010
USD’000
USD’000
The carrying amounts presented in the consolidated statement of financial
position relate to the following categories of assets and liabilities:
Financial assets at fair value through profit or loss:
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 profit or loss
241,521
93,428
11,381
37,452
383,782
298,675
115,422
5,876
35,553
455,526
(*) Corporate bonds carry fixed interest rates ranging from 8.0% to 15% and will mature in 2012.
(**) During the year, the Group purchased an additional 6,218,269 ordinary shares of VinaLand Limited, bringing the
total number ordinary shares held by the Group to 36,216,326 ordinary shares, which represents a 7.24% interests
in VinaLand Limited.
The financial assets are denominated in the following currencies:
Financial assets
Financial assets held for trading (carried at fair
value through profit or loss):
Ordinary shares – listed and unlisted
Corporate bonds
Available for sale financial assets (carried at fair
value through other comprehensive income)
Financial assets carried at amortised costs:
Trade and other receivables
Cash and cash equivalents
12
12
10
11,26
14
Vietnam Dong
Other currencies
30 June 2011 30 June 2010
USD’000
USD’000
346,330
37,452
383,782
419,973
35,553
455,526
Financial liabilities
Financial liabilities measured at amortised cost:
Non-current:
Other long term liabilities
Current:
Trade and other payables
18,26
The carrying amounts disclosed above are the Group’s maximum possible
credit risk exposure in relation to these instruments. See Note 28 for further
information on the Group’s exposure to financial risk.
Note
30 June 2011 30 June 2010
USD’000
USD’000
372,401
11,381
449,650
5,876
383,782
455,526
16,923
6,916
73,497
62,968
136,465
537,170
65,327
50,033
115,360
577,802
55
-
12,541
12,596
9,791
9,791
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 28.
70 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
14. Cash and cash equivalents
15. Assets and liabilities classified as held for sale
Cash on hand
Cash in banks
Cash equivalents
30 June 2011
30 June 2010
USD’000
USD’000
106
42,706
20,156
62,968
18
25,405
24,610
50,033
Cash equivalents represent short-term deposits with annual interest rates
of 0.5% and 14.0% for USD and VND accounts, respectively. These deposits
have maturity terms from one to two months from the reporting date.
The cash and cash equivalents are denominated in the following currencies:
Hoan My
Medical
Corporation
JSC
Saigon Water
Park Co Ltd
Vietnam Dong
United States Dollar
Other currencies
30 June 2011
30 June 2010
USD’000
USD’000
26,620
34,204
2,144
62,968
24,650
25,383
-
50,033
The summary of the assets/(liabilities) held for sale at the reporting date:
Assets
classified
as held for
sale
Liabilities
classified
as held for
sale
Net assets
classified
as held for
sale
Attributable to
Non-
controlling
interests
Equity
shareholders
of the parent
USD’000
USD’000
USD’000
USD’000
USD’000
12,104
245
12,349
-
-
-
12,104
245
12,349
-
-
-
12,104
245
12,349
There were no assets and liabilities classified as held for sale at 30 June 2010.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 71
Notes to the Consolidated Financial Statements
15. Assets and liabilities classified as held for sale (continued)
17. Revaluation reserve
Hoan My Medical Corporation JSC
As at 30 June 2011, the Group has intention to dispose of its 28.8% interest
in Hoan My Medical Corporation JSC and this is supported by an agreement
signed in August 2011. The ownership of the equity interest will be passed to
the Purchaser when all the terms in the agreement are met which is after the
date of approval of the consolidated financial statements. Consequently, the
carrying value of the investment was classified as assets held for sale at the
reporting date.
Saigon Water Park Co Ltd
In June 2011, the Group entered into an agreement to dispose its 100%
interest in Saigon Water Park Co. Ltd., however, control of the entity will not
be passed to the Purchaser when all the terms in the agreement are met
which is after the date of approval of the consolidated financial statements.
Consequently, the assets and liabilities of Saigon Water Park Co. Ltd. were
classified as held for sale assets/liabilities at the reporting date.
16. Share capital
Authorised:
Ordinary shares of USD0.01
each
Issued and fully paid:
Opening balance
Closing balance
30 June 2011
30 June 2010
Number of
shares
USD‘000
Number of
shares
USD‘000
500,000,000
5,000
500,000,000
5,000
324,610,259
324,610,259
3,246
3,246
324,610,259
324,610,259
3,246
3,246
Opening balance
Share of associates’ changes in revaluation reserves
(Note 9)
Less: disposal of an associate
Closing balance
18. Trade and other payables
Trade payables
Deposits received for conditional sale of assets post
reporting date
Tax payable
Unearned revenues
Other accrued liabilities
Other payables
Year ended
30 June 2011
Year ended
30 June 2010
USD’000
21,193
6,320
-
27,513
USD’000
25,958
(2,362)
(2,403)
21,193
30 June 2011
30 June 2010
USD’000
1,702
USD’000
1,205
-
769
367
-
1,094
3,932
760
-
-
728
1,396
4,089
As all trade and other payables are short-term in nature, their carrying values
are considered reasonable approximation of their fair values.
72 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
19. Net changes in fair value of financial assets at fair value through
profit or loss
21. Other income
Unrealised gains/ (losses) in fair value of financial
assets
Unrealised gains in fair value of financial assets
Unrealised losses in fair value of financial assets
Realised gains/ (losses) in fair value of financial
assets
Realised gains in fair value of financial assets
Realised losses in fair value of financial assets
Year ended
30 June 2011
30 June 2010
USD’000
USD’000
(74,691)
17,503
(92,194)
22,171
26,385
(4,214)
(52,520)
61,064
88,777
(27,713)
35,831
38,785
(2,954)
96,895
Gains on disposal of investments in:
Associates (Note 6)
Investments properties (Note 7)
Prepayments for acquisitions of investments (Note 8)
Consulting income
Other income
22. Finance income and expenses
During the year, the net unrealised gains/(losses) in fair value of financial
assets at fair value through profit or loss of USD74.7 million is consistent
with the fair value movement of the Vietnam market through respective
reductions in the VN-Index and the HN-Index from 507.66 points and 160.78
points as at 30 June 2010 to 439.7 points and 76.27 points as at 30 June 2011.
20. Selling, general and administration expenses
Interest income
From cash and term deposits
From corporate bonds
From loans to associates
From others
Dividend income
Management fees (Note 26)
Professional fees
General administration and selling expenses (*)
Other expenses
Year ended
30 June 2011
30 June 2010
Realised gains from foreign currency exchange
differences
USD’000
14,488
2,714
1,338
1,615
20,155
USD’000
15,372
2,433
1,549
2,020
21,374
Finance income
Realised losses on foreign currency exchange differences
Interest expenses
Unrealised losses from foreign currency exchange
differences
Finance expenses
(*) The majority of these expenses relate to operating expenses incurred by the subsidiaries of the Group.
Year ended
30 June 2011
30 June 2010
USD’000
USD’000
5,876
5,092
356
428
443
627
6,946
1,035
1,035
-
-
-
1,598
2,633
Year ended
30 June 2011
30 June 2010
USD’000
USD’000
4,142
1,704
938
1,298
202
16,725
594
21,461
(3,055)
(460)
(656)
(4,171)
3,825
976
216
2,433
200
9,938
712
14,475
(2,151)
(265)
(252)
(2,668)
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 73
Notes to the Consolidated Financial Statements
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. The provision for corporate income tax for
these Vietnamese subsidiaries for the year ended 30 June 2011 amounted to
USD0.2 million (30 June 2010: nil). The corporate income tax payable at all of
the Vietnamese subsidiaries is USD0.6 million (30 June 2011: nil)
Under the laws of Vietnam, tax losses can be carried forward to offset
against future taxable income over the next five years from the year the loss
was incurred. The Group did not recognise any deferred income taxes from
approximately of USD2.8 million of tax losses due to uncertainty over their
recoverability.
(a) Basic earnings/(losses) per share
Basic earnings/(losses) per share is calculated by dividing the profits/(losses)
attributable to the shareholders of the Group by the weighted average
number of ordinary shares in issue during the year.
(Loss)/profit attributable to equity holders of the Company
(USD’000)
(36,285)
104,694
Weighted average number of ordinary shares on issue
324,610,259
324,610,259
(Losses)/basic earnings per share (USD per share)
(0.11)
0.32
30 June 2011
30 June 2010
(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)
Number of outstanding ordinary shares
Net asset value per share (USD per share)
30 June 2011
30 June 2010
751,906
782,501
324,610,259
324,610,259
2.32
2.41
74 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
25. Directors’ and Management’s remuneration
26. Related party transactions and balances
The aggregate director fee amounted to USD195,000 (year ended 30 June
2010: USD193,000), of which there was no outstanding payable at the
reporting date (30 June 2010: nil).
The details remuneration for each director are summarised below:
Short-term benefits
William Vanderfelt
Martin Glynn
Michael Gray
Year ended
30 June 2011
30 June 2010
USD’000
USD’000
75
60
60
195
75
60
58
193
At the EGM on 17 June 2009, the shareholders approved a resolution to
increase Directors’ remuneration to a maximum amount of USD300,000 per
year, subject to the condition that any fees paid in excess of USD60,000 for
services rendered from 1 July 2007 shall result in a corresponding reduction
in the management fee paid to VinaCapital Investment Management Limited,
the Investment Manager (Note 26).
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 26 can be allocated to the remuneration
of these individuals.
Management fees
During the first half of the current fiscal year, the Group was managed
by VinaCapital Investment Management Limited (the “BVI Investment
Manager”), a company incorporated in the British Virgin Islands (“BVI”), under
a management agreement dated 24 September 2003 (the “Management
Agreement”). From 1 January 2011, the Group was managed by VinaCapital
Investment Management Limited (the “CI Investment Manager”), a 100%
owned subsidiary company of the BVI Investment Manager incorporated and
registered as a licenced fund manager in the Cayman Islands (“CI”), under
the novation agreement between the BVI Investment Manager and the CI
Investment Manager. The Investment Managers receive a fee based on the
net asset value of the Group, payable monthly in arrears, at an annual rate of
2% (30 June 2010: 2%).
Total management fees for the year amounted to USD14,487,873 (30 June
2010: USD15,372,000), of which USD5,745,000(30 June 2010: USD2,242,000)
were outstanding 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 2010: nil) and
no amounts were payable to the Investment Manager at the reporting date
(30 June 2010: nil).
Contents
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Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 75
Notes to the Consolidated Financial Statements
26. Related party transactions and balances (continued)
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 2010: nil) and no amounts were payable to the Investment Manager at the reporting date (30 June
2010: nil).
Other related party transactions and balances
During the year, the following significant transactions with related parties were recorded as follow:
Related party
Relationship
S.E.M Thong Nhat Hotel Metropole
House & 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
International School of Ho Chi Minh City
Hoan My Medical Corporation JSC
Phu Hoi City Company Limited
Vina Dai Phuoc Corporation
VinaLand Limited subsidiaries
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Associate
Transactions (USD’000)
Year ended
30 June 2011
Year ended
30 June 2010
Share of profits/
(losses)
Share of change in
revaluation reserves
Share of profits/
(losses)
Share of change in
revaluation reserves
3,024
(6)
868
(115)
11
-
3
157
(14)
1,040
1,507
208
558
8,183
15,424
6,063
-
-
-
-
-
-
-
-
-
-
-
-
257
6,320
2,249
44
(1,023)
1,599
5
(147)
8
709
12
1,026
498
(1,683)
3,804
8,166
15,267
(2,483)
-
-
-
-
-
-
-
-
-
-
-
-
120
(2,363)
76 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
26. Related party transactions and balances (continued)
The details of these loan receivables at the reporting date are as follow:
During the year, the Group engaged VinaSecurities Joint Stock Company,
a related party, as a securities broker. An amount of USD4,592 (30 June
2010: USD16,000) had been paid to this broker relating to securities trading
transactions which is based on the standard rates.
At 30 June 2011, the details of the non-current receivable balances with
related parties are as shown below:
Related party
Relationship
Transactions
Receivables
Non-current assets
VinaLand Limited
subsidiaries
Under
common
management
Loan
receivables (*)
Hung Vuong Corporation
Associate
Loan
30 June 2011 30 June 2010
USD’000
USD‘000
47,991
42,631
3,845
51,836
5,087
47,718
Allowance
(*) 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 plus 3%,
and are repayable on demand or on disposal of the related investments. The amount of each loan is based on
the respective ownership of VNL and the Group in each subsidiary. The loans are carried at amortised cost in the
Consilidated Statement of Financial Position. Interest income earned for the year has been waived by the Group.
VinaCapital Danang Resorts Limited
Cypress Assets Limited
Prosper Big Investment Limited
Avante Global Limited
VinaLand Espero Limited
Maplecity Investments Limited
Sunbird Group Limited
Vietnam Property Holding Limited
VinaCapital Commercial Center Limited
Standbrook Limited
Roxy Assets Limited
Others
30 June 2011
30 June 2010
USD’000
USD‘000
3,376
721
12,073
2,998
9,261
5,951
1,259
4,765
5
6,410
2,350
32
49,201
(1,210)
47,991
3,376
631
12,073
2,998
9,261
5,951
1,259
4,765
5
1,210
2,279
33
43,841
(1,210)
42,631
Contents
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Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 77
Notes to the Consolidated Financial Statements
26. Related party transactions and balances (continued)
At 30 June 2011, the details of the current receivables and payables balances with related parties are as shown below:
Related party
Relationship
Transactions
Receivables
Current assets
VinaLand Limited subsidiaries
Under common
Dividend receivables
management
Others
VinaCapital Investment Management Ltd.
Under common management
Advance payments
Hung Vuong Corporation
SIH Investment Ltd.
Lam Co Company Ltd.
Associate
Loan and interest receivable
Under common management
Under common management
Loan receivable
Loan receivable
VinaCapital Danang Golf Course Ltd (Vietnam)
Under common management
Loan and interest receivable
Roxy Vietnam Ltd. (Vietnam)
Under common management
Loan interest receivable
East Ocean Real Estate & Tourist JSC (Vietnam)
Under common management
Loan interest receivable
Vinh Thai Urban Development Corporation (Vietnam)
Under common management
Associate
Associate
Loan and interest receivables
Loan receivable
Loan receivable
Thang Loi Textile & Garment JSC
Phong Phu Investment Development JSC
30 June 2011
30 June 2010
USD’000
USD‘000
613
2,040
135
552
1,047
700
1,000
400
1,482
426
3,578
974
12,947
613
1,821
910
404
707
700
1,094
17
69
525
3,353
1,351
11,564
Related party
Relationship
Transactions
Payables
VinaLand Limited subsidiaries
VinaCapital Investment Management Ltd.
Under common management
Under common management and
Investment Manager
Advances for real estate
projects
Management fees
Cash advance
Dien Phuoc Long Real Estate Limited
Under common management
Corporate advisory fees
30 June 2011
30 June 2010
USD’000
1,689
USD’000
3,460
5,745
192
983
8,609
2,242
-
-
5,702
78 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
27. 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 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.
28. Risk management objectives and policies
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 (VND), 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 follow:
30 June 2011
Financial assets
Financial liabilities
Net exposure
30 June 2010
Financial assets
Financial liabilities
Net exposure
Short-term exposure
Long-term exposure
VND
USD’000
Others
USD’000
VND
USD’000
Others
USD’000
377,294
(3,987)
373,307
449,616
(3,232)
446,384
91,144
(8,609)
82,535
73,980
(6,559)
67,421
13,223
55,536
-
-
13,223
55,536
6,257
-
6,257
53,122
-
53,122
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 flows, a 5% weakening of the VND against the USD at the end of the
year ended 30 June 2011 and 30 June 2010 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
Statement of Income
(*) Prior year number has been restarted
Year ended
30 June 2011
Year ended
30 June 2010 (*)
USD’000
USD’000
18,665
22,319
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.
Contents
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Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 79
Notes to the Consolidated Financial Statements
28. Risk management objectives and policies (continued)
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 Consolidated
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 and/or the Board of Directors of the Group 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 the Consolidated Statement of Income
and the Consolidated Statement of Changes in Equity would approximately
amount to a gain approximately of USD37.2 million (30 June 2010: gain
approximately of USD45.5 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
Prepayment for acquisitions of investments
Other long-term financial assets
Trade and other receivables
30 June 2011
30 June 2010
USD’000
USD’000
27
51,836
8,986
-
21,661
82,510
428
47,718
10,491
1,170
17,609
77,416
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.
80 VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
28. Risk management objectives and policies (continued)
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.
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.
At the reporting date, the Group’s liabilities have contractual maturities
which are summarised below:
30 June 2011
Trade and other payables
Payable to related parties
30 June 2010
Trade and other payables
Payable to related parties
Current
Non-current
Within 6
months
6 to 12
months
From 1 to 5
years
Over 5 years
USD’000
USD’000
USD’000
USD’000
3,932
8,609
12,541
4,089
-
4,089
-
-
-
-
5,702
5,702
55
-
55
-
-
-
-
-
-
-
-
-
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.
Contents
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Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 81
Notes to the Consolidated Financial Statements
28. Risk management objectives and policies (continued)
The Group considers the capital to be managed as equal to the net assets
attributable to the holders of ordinary shares. The Group is not subject
to externally imposed capital requirement. 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.
Capital for the reporting periods under audit is summarised as follow:
•
•
•
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.
30 June 2011
30 June 2010
USD’000
USD’000
The financial assets and liabilities measured at fair value in the statement of
financial position are grouped into the fair value hierarchy as follows:
Net assets attributable to the holders of ordinary
shares
751,906
782,501
29. Fair value hierarchy
The Group adopted the amendments to IFRS 7 Improving Disclosures about
Financial Instruments effective from 1 January 2011 Financial Instrument:
Disclosure. These amendments clarify the disclosure requirement of the
standards to remove inconsistencies, duplicative disclosure requirements and
specific disclosures that may be misleading. The Group has made sufficient
disclosure in compliance with IFRS 7 in the consolidated financial statements.
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:
As at 30 June 2011
Level 1
Level 2
Level 3
Total
USD’000
USD’000
USD’000
USD’000
Assets
Financial assets at fair value
through profit or loss
Financial assets in Vietnam
- Ordinary share – listed
241,521
- Ordinary share – unlisted
- Corporate bonds
Financial assets in countries
other than Vietnam
Liabilities
Net fair value
-
74,494
11,381
-
-
37,452
-
-
241,521
18,934
-
-
93,428
11,381
37,452
278,973
85,875
18,934
383,782
-
-
-
-
278,973
85,875
18,934
383,782
82 VOF Annual Report 2011
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Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Notes to the Consolidated Financial Statements
29. Fair value hierarchy (continued)
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 3.
In comparison with the last year-end:
Level 1
Level 2
Level 3
Total
USD’000
USD’000
USD’000
USD’000
The reconciliation of the carrying amounts of financial instruments classified
within Level 3 is as follows:
Opening balance
Gain or losses recognised in
- Statement of Income
- Other comprehensive income
Purchases during the year
Closing balance
Financial assets at fair value
through profit or loss
Year ended
30 June 2011
Year ended 30
June 2010
USD’000
15,039
USD’000
-
1,983
1,912
-
18,934
(192)
-
15,231
15,039
Assets
Financial assets at fair value
through profit or loss
Financial assets in Vietnam
- Ordinary share - listed
- Ordinary share - unlisted
- Corporate bonds
Financial assets in countries
other than Vietnam
Liabilities
Net fair value
298,675
1,559
-
-
98,824
5,876
35,553
-
-
15,039
-
-
298,675
115,422
5,876
35,553
335,787
104,700
15,039
455,526
-
-
-
-
335,787
104,700
15,039
455,526
Changing inputs to the level 3 valuations to reasonably possible alternative
assumptions would not change significantly amounts recognised in profit or
loss, total assets or total liabilities or total equity.
30. Comparative figures
Certain figures for the year ended 30 June 2010, which are included in
this year’s consolidated financial statements for comparative purposes,
have been reclassified to conform to current year’s presentation. The
reclassification does not have any impact on net assets or net results.
The fair values of the Group’s investments in available for sale financial
assets cannot be reliably measured and are therefore excluded from this
disclosure. Due to numerous uncertainties regarding the future development
of these investees, the fair value of the Group’s equity interest in these
investments cannot be reliably measured and therefore have been stated at
cost less impairment charges.
Contents
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Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 83
Notes to the consolidated financial statements (cont.)
84 VOF Annual Report 2011
Contents
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Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Investing policy
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 Cayman Islands company. VCIM
was established in 2008 and manages a number
of listed and unlisted investment companies.
More information about the VCIM management
team is available here.
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
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.
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
Contents
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Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 85
Investing policy
•
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.
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
86 VOF Annual Report 2011
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Manager’s report
Report of the Board
Financial statements
Fund information
Investing policy
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.
4. Co-investments
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
•
•
•
•
•
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Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 87
Investing policy
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.
6. 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 Board tabled such a special resolution in 2008 and it was
not passed, allowing the Company to continue as presently constituted. The
next special resolution on the life of the Company will be held in 2013.
88 VOF Annual Report 2011
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Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Historical financial information
Years ended 30 June
2005
2006
2007
2008
2009
2010
2011
(381,067)
29,075
134,263
(8,420)
(34,465)
(25,869)
(29,047)
(27,214)
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 as 30 June
Ordinary share capital (thousand shares)
Market capitalisation at 30 June (USD'000)
Net asset value per ordinary share
Ratio
Return on average ordinary share holder’s funds
Dividend pay out as % avr. NAV
Investment management fees/avr. NAV
4,393
(1,522)
2,871
-
2,871
-
2,871
96,943
702
96,241
8
1.58
75,155
118,745
1.28
7.4%
0.6%
7.6%
111,529
(39,958)
75,572
-
75,572
523
75,049
277,942
33,012
244,930
76
2.32
122,657
283,951
2.00
58.2%
0.0%
12.8%
360,527
(95,164)
265,363
-
(415,532)
(125)
265,363
(415,657)
1,196
1,347
264,167
(417,004)
924,785
103,121
821,664
134
3.41
250,648
853,456
3.28
72.8%
0.0%
15.6%
723,614
54,727
668,877
(141)
2.16
324,610
699,535
2.06
-67.8%
0.0%
2.9%
3,206
(108)
3,098
(3,684)
6,782
718,023
36,111
681,912
2
1.43
324,610
462,569
2.10
1.1%
0.0%
2.0%
105,216
(35,634)
211
545
105,005
(36,179)
311
106
104,694
(36,285)
793,820
764,603
11,319
12,697
782,501
751,906
32
(11)
1.40
1.57
324,610
324,610
455,428
509,313
2.41
2.32
17.0%
0.0%
2.0%
-6.0%
0.0%
2.0%
Contents
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Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
VOF Annual Report 2011 89
90
90 VOF Annual Report 2011
VOF Annual Report 2011
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
Overview and details
VOF details
Fund size
Fund launch
Term of fund
Fund domicile
Legal form
Structure
Auditor
USD752 million (NAV as of 30 June 2011).
30 September 2003.
Five years and then subject to shareholder vote to discontinue.
Cayman Islands.
Exempted company limited by shares.
Single class of ordinary shares trading on the AIM market of the London Stock Exchange plc.
Grant Thornton (Vietnam).
Nominated advisor (Nomad)
Grant Thornton Corporate Finance (UK).
Custodian
Brokers
Lawyers
HSBC Trustee (HK).
LCF Edmond de Rothschild (UK), Numis Securities (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
Investment manager
VinaCapital Investment Management Ltd.
of an 8 percent compound annual return and the high water mark.
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.
Contents
Highlights
Chairman’s statement
Manager’s report
Report of the Board
Financial statements
Fund information
91
VOF Annual Report 2011 91
VOF Annual Report 2011
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
Fax: +84-8 3821 9931
Hanoi
5th Floor, Sun City Building
13 Hai Ba Trung Street,
Hoan Kiem Dist., Hanoi, Vietnam
Phone: +84-4 3936 4630
Fax: +84-4 3936 4629
Cambodia
Canadia Tower, 20th floor
No. 315, Ang Duong Street
Phnom-Penh, Cambodia
Phone: +855 23 99 66 88
Fax: +855 23 99 60 50
Singapore
6 Temasek Boulevard
#42-01 Suntec Tower 4
Singapore 038986
Phone: +65 6332 9081
Fax: +65 6333 9081
www.vinacapital.com