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RNS

Financial results for the year ended 30 June 2015

Released 11:45 30-Dec-2015

RNS Number : 4492K
VinaCapital Vietnam Opp. Fund Ltd
30 December 2015
 

30 December 2015

VinaCapital Vietnam Opportunity Fund Limited

Audited financial results for the twelve months ended 30 June 2015

VinaCapital Vietnam Opportunity Fund Limited (the "Company" or "VOF"), an investment company focused on Vietnam, today announces its full year results for the twelve months ended 30 June 2015 ("the Period").

Financial highlights:

·     Net Asset Value ("NAV") of USD718.7 million (30 June 2014: USD771.4 million)

·     NAV per share of USD3.27 (30 June 2014: USD3.24).

Notes to Editors:

VinaCapital is a leading investment management and real estate development firm headquartered in Vietnam, with a diversified portfolio of USD1.4 billion in assets under management.

Founded in 2003, VinaCapital boasts an unrivalled local network, providing the company with access to unique investment opportunities. VinaCapital's mission is to continue to offer institutional solutions for a variety of clients that can best extract the dynamic development taking place in Vietnam and the ASEAN region as a whole. This mission is instilled in each of VinaCapital's industry-leading asset class teams covering capital markets, private equity, fixed income, venture capital, real estate and infrastructure.

VinaCapital has managed three closed-end funds trading on the AIM Market of the London Stock Exchange, VinaCapital Vietnam Opportunity Fund Limited, VinaLand Limited and Vietnam Infrastructure Limited. In addition, VinaCapital co-manages the DFJ VinaCapital L.P. technology venture capital fund with Draper Fisher Jurvetson and also holds a stake in VinaWealth, a locally incorporated fund management company.

In their endeavors to develop new products to keep in step with changing market criteria, VinaCapital established an open ended UCITS fund called the Forum One - VCG Partners Vietnam Fund, Vietnam's largest open-ended UCITS-compliant fund, focused on selecting Vietnam based stocks trading at compelling valuations with strong cash flows, possessing high quality management and operating strong business models in favorable sectors.

With offices in Ho Chi Minh City, Hanoi, Danang and Singapore, VinaCapital offers insight, expertise and an on the ground presence unrivaled in the ASEAN region. For more information about VinaCapital, please visit www.vinacapital.com or reach out directly to info@vinacapital.com.

The Annual Report and Notice of AGM will be posted to shareholders and will be available on the website at www.vof-fund.com

More information on the Company is available at www.vof-fund.com

Enquiries:

Jonathon Trewavas

VinaCapital Investment Management Limited

Investor Relations

+84 8 3821 9930

jonathon.trewavas@vinacapital.com

 

Philip Secrett

Grant Thornton UK LLP, Nominated Adviser

+44 (0)20 7383 5100

philip.j.secrett@uk.gt.com

 

David Benda / Hugh Jonathan

Numis Securities Limited, Broker

+44 (0)20 7260 1000

funds@numis.com

 

Andrew Walton

FTI Consulting, Public Relations (London)

+44 (0)20 7269 7204

andrew.walton@fticonsulting.com


 

Chairman's Statement

 

Dear Shareholder,

 

This is my third statement to you as Chairman of the VinaCapital Vietnam Opportunity Fund Limited. This year I want to cover a number of topics which I and my colleagues on the Board think are important for all of you. I will start with a brief overview of the returns in the portfolio, revisit our investment strategy, then move on to our attempts to control the discount of the share price to the Net Asset Value ('NAV'). I will go on to canter through matters corporate which will include an attempt to explain some significant changes to the methodology which we use to value our private equity and direct real estate assets. I will finish with a comment on some important developments in the capital markets in Vietnam. You will no doubt have noticed that these results are being released later than we had originally planned. This is because of some difficulties we have had surrounding the calculation of the incentive fee, which are explained in Part 3 of the section on Corporate Matters.

 

Returns

 

The 2015 fiscal year was rather lacklustre in terms of returns, with the NAV per share more or less unchanged during the period. The Investment Manager's report goes into detail about the contributions of the various parts of the portfolio to the overall return, so I will confine myself to an overview of the main sub-components.

 

The portfolio of listed equities represented 52.4% of total net assets at the end of June. This is down slightly on last year and reflects no significant shifts either into or out of the asset class. This part of the portfolio returned 0.2% versus the Vietnamese benchmark (known as the VN Index), which returned 0.3% in US Dollar terms, a good result in a market where the small overall market movement masked considerable volatility and currency weakness. Last year, we also had 9.4% of your assets in the so called over-the-counter ('OTC') traded securities. These are companies which are listed in the legal sense but which are going through a privatisation (or as it is officially known in Vietnam as equitization) process which should eventually lead to active market trading. As reported at the half year, we sold our 23.6% position in An Giang Plant Protection for USD63.1 million. The reduction in weighting as a result of this successful exit was partially offset by some new OTC investments, but the net result was that the weighting in this area reduced to 4.9% at the end of the fiscal year.

 

Longer term returns in both these areas have been good, and are set out in the table below (in USD terms):

 

 

Financial year 2015

3 years annualized

5 years annualized

   Listed equities

0.2%

15.7%

8.8%

   OTC securities

4.9%

12.7%

13.4%

Combined (Capital Markets)

1.0%

15.4%

9.8%

VN Index (USD terms)

0.3%

10.6%

5.8%

 

While we hope to invest a greater proportion of the assets in OTC traded securities, the Investment Manager is restricted by the slow progress of the privatisation process and the lack of interesting companies of a scale and at a valuation which make sense for VOF. We continue to monitor the situation.

 

The weighting in private equity, which represented 11.3% of assets at 30 June 2015, compared to 2.5% a year earlier, reflects the major investment of USD34.5 million in International Dairy Products, which was described at the half year stage. We have also made a USD15 million investment into a convertible instrument issued by Novaland, one of Vietnam's pre-eminent residential property developers. Novaland plans to go public within two years, a liquidity event which should provide us with an option to exit having made a good return.

 

The result from this part of the portfolio returned 13.1%, which captures the write-back of USD2.3 million of receivables which were unexpectedly collected during the year as well as net adjustments of USD4.9 million as a result of changes to the methodology which we use to value our private equity investments under recently adopted accounting standards. The longer term returns from this asset class have been excellent, as shown in the table below (in USD terms):

 

 

Financial year 2015

3 years annualized

5 years annualized

Private equity

13.1%

25.9%

21.3%

 

Given the scale of the historic returns and a belief on the part of the Investment Manager that opportunities abound, this is an area where VOF would like to deploy more capital, particularly in the service sector. Whilst it is not easy to close private equity transactions in any frontier market, and the difficulty of ensuring appropriate protection and agreeing reasonable valuations can derail deals at any point, the Investment Manager remains optimistic that despite the inherent need to be opportunistic, the proportion of capital invested in this area will rise.

 

Our record in direct real estate has, however, not been good. This year, some of our investments were impacted by an increase in land taxes which caused us to write-down the value of certain assets. Most of our directly invested real estate assets are held as co-investments with VinaLand Limited, another investment company managed by VinaCapital. The strategy has been to reduce the exposure to this asset class, with a view to exiting altogether, and it is disappointing that we were unable to achieve any significant exits during the fiscal year, leaving the weighting of the portfolio at the end of the year at 13.8%.

 

We categorize an additional 11.4% of our portfolio as being 'operating real estate assets', by far the largest part of which is the Sofitel Metropole Hotel in Hanoi. It has been a stable rather than a spectacular year in the hospitality industry and returns here have been below what we would expect over the medium term for a premium asset. The longer term returns reflect the dividends earned by the hotels, as the underlying valuation has not changed significantly. The Investment Manager is actively considering a number of options in this area.

 

The returns are shown in the table below (in USD terms):

 

 

Financial year 2015

3 years annualized

5 years annualized

Direct Real Estate

-10.0%

-9.2%

-9.2%

Operating Real Estate

4.5%

3.3%

3.9%

 

Strategy

 

Our investment strategy has not changed:

 

1.            We intend to reduce our exposure to direct real estate. The investment in Novaland is an indirect exposure to the sector and more in keeping with our approach, which is to focus on a spread of third party developers.

 

2              We continue to look to add to OTC and private equity assets, albeit opportunistically. Our experience suggests that these are areas where illiquidity is rewarded with superior returns.

 

3              We retain the largest part of the portfolio in listed assets. Our approach here is differentiated from a conventionally diversified fund in that it comprises positions where the Investment Manager has influence and looks to add value to a business by helping with the development of good governance and management practice as well as by offering strategic advice. Often, these companies have been in the portfolio since they formed part of the OTC assets.

 

Discount Management.

 

Every statement I have written has contained an expression of disappointment that the discount to NAV remains too high. This year's is no exception. While we have continued to buy shares back and the Investment Manager has taken an active approach to spreading the 'VOF message', the impact has been less than your Board would like. This year, we bought back USD47.3 million of stock, adding 5 cents to NAV per share and, since the inception of the buyback programme in November 2011, the total value of shares bought back amounts to USD214 million with a cumulative accretion to NAV per share of 39 cents.

 

The buy backs are designed to affect the supply side of the discount problem. This year, the Board and the Investment Manager have been implementing a plan to influence demand. The centrepiece of this is to change the domicile of the Company to Guernsey and list the shares on the Premium segment of the London Stock Exchange's Main Market (LSE). The rationale is to open up the Company to the broadest possible range of investors, many of whom were unable to buy shares that are admitted to trading on AIM or domiciled in the Cayman Islands. The Board also expects that the shares of the Company will be admitted to the FTSE All Share Index in due course, which is likely to generate additional demand over time for our shares.

 

I am pleased to be able to report that Shareholders voted in favour of these changes to VOF's domicile at an Extraordinary General Meeting held on 27 October 2015. As part of the process, new Articles have been adopted. This also paves the way for the Company to be listed on the LSE sometime in early 2016.

Of course, this project of itself is not a one shot solution to the discount conundrum. It must be accompanied by a serious effort to market the Company's shares widely and to continue with the buyback programme. Both the Board and the Investment Manager are fully committed to these objectives.

 

Corporate Matters

 

1.    Corporate Governance - as part of VOF's proposed listing on the LSE, we have reviewed our compliance with the Corporate Governance Code issued by the Association of Investment Companies (the 'AIC Code'). We had already committed to upholding high standards of governance and transparency and have historically benchmarked ourselves against the AIC Code. We are, in all material senses, compliant with the AIC code and, where we are not, an explanation is given.

 

2.    Accounting standards - we have adopted a new standard for valuing our private equity and direct real estate assets. This is known as IFRS 10A, and it has involved a significant change in the methodology that we use to value these assets. In the past, we used a so called 'impairment' approach, which looked at the value of a business from a pure accounting view. We also had to consolidate the net assets of subsidiaries. The new standard requires us to apply a protocol called 'Fair Value through Profit and Loss' (FVTPL). This standard requires us to apply judgement as to what an asset might fetch on the open market under 'normal' conditions. This means taking into account all sorts of factors beyond pure accounting. For example, are there similar companies trading on the market from which to benchmark a value? Are there specific issues in the shareholders' agreement which warrant a higher/lower valuation, or real estate held at cost rather than market value? We have opted to take professional advice on these matters and have contracted with KPMG to go through a detailed valuation exercise on all relevant assets. The results of this process are disclosed in Notes 2.2 and 2.15 to the financial statements. There are three particular points which I would draw to your attention:

a.    The results for last year have been restated to reflect what would have been the case had we applied IFRS 10A to last year's accounts. On this basis, the NAV at the end of the last fiscal year was USD771.4 million rather than USD779.0 million.

 

b.    The effect on net assets of the changes which the Board has approved amounts to USD7.6 million, or a reduction of 3 cents per share. The major changes to previous values were due to valuation adjustments of the direct real estate and operating assets portfolios as a result of applying IFRS10A, including adjustments to the values of the Sofitel Metropole Hotel in Hanoi, Century 21 and Danang Beach Resorts.

 

c.     In Note 22 (b) to the financial statements, there is a hierarchical breakdown of the assets. You will see that all of VOF's assets are characterized as Level 3, which implies that they are illiquid and may be subject to valuation by the directors. This is misleading, and is shown in this way because all of VOF's listed assets are owned by Special Purpose Vehicles (SPV's) which are themselves not listed. We do this in order to ensure that our assets are held in a tax and operationally efficient manner, but the accounts do not recognize this. For clarity, we have also chosen to show the 'look through' position, which is shown in the same Note to the financial statements.

 

3.    Incentive fee - There has been a difference of interpretation between the Company and the Investment Manager about certain provisions of the investment management agreement relating to the calculation of the incentive fee. Negotiating a resolution to this issue has delayed the release of the Company's results. The Board has taken independent legal advice on the matter. In order to avoid the costs and financial uncertainty of recourse to a legal solution and with a view to maintaining the relationship with the Investment Manager for the future the Board and the Investment Manager have agreed a compromise whereby the incentive payment for the last financial year was USD3.7 million. The impact of this fee on the NAV per share for 30 June 2015 is an increase of 2 cents (0.6% per share) compared with the previously released estimated NAV per share at that date.  Furthermore, and as an integral part of the settlement described above, the Investment Manager and the Board have agreed that the investment management agreement will be modified to reduce the possibility of differences of interpretation in the future. The Board believes that this solution is in the best interests of the Company and its shareholders.

 

4.    Listing on the Premium segment of the London Stock Exchange Main Market - as a result of our proposed Main Market listing, we will be required to comply in subsequent periods with some new procedures. While these are not onerous, and are generally in shareholders' interests, I thought I should set some of them out. The main differences between AIM and the LSE are as follows:

 

a.    Results announcements have to be quicker. Our interim results must be released within three months of the relevant closing date, and our final results within four months, instead of three and six months respectively;

 

b.    We are able to buy back under a single authority a maximum of 14.99% of our share capital. Should we reach this limit, we will need to call a General Meeting to refresh the authority;

 

c.     Our new Articles introduce pre-emption rights, which prevent the company issuing shares unless they are offered on the same terms to all shareholders. As is standard practice, these pre-emption rights have then been suspended on issues of up to 10% of share capital, but we will not exercise this capacity to issue except at or above the prevailing NAV;

 

d.    The share of votes required to pass a special resolution increases to 75% from two thirds.

 

5.    Shareholder Communication and AGM - I want to reiterate what I have said before, which is that this is your Company and both the Board and the Investment Manager are readily accessible to all of you at any point. We welcome suggestions about how we could improve communication and reporting. This year we will hold our third AGM in Guernsey on 26 January 2016. You are all very welcome to attend.

Outlook

 

Emerging markets have been experiencing something of a perfect storm. Markets have been upset by the prospects of an end to the very easy monetary policy in the US, and the resultant strength of the US Dollar has led to many emerging market currencies suffering significant devaluation. The most recent capitulation of the Chinese Renminbi led to competitive adjustments of many currencies, including the Vietnam Dong (VND). The VND has fallen by approximately 5% this calendar year compared with the USD, and it seems likely that any general weakness in emerging market currencies will be matched by the Vietnamese authorities. This uncertainty led over the summer to weakness across the emerging world, which is adjusting to lower commodity prices and a deceleration in growth rates which may be more than cyclical. Vietnam has been fairly resilient in the face of these headwinds.

 

Meanwhile, Vietnam has made important changes to the percentage of publically listed companies which can be owned by foreigners. This is a key step in the normalization of capital markets and should bring greater focus by international investors on the Vietnamese market. The stock market boasts a reasonable valuation by South East Asian standards and the underlying macro-economic conditions are gradually improving.

 

Many emerging markets are struggling to come to terms with the fact that they have actually 'emerged', and there are few significant investment opportunities which still deserve the epithet. Vietnam is not one of these and once conditions in the investment world calm down somewhat, its markets should be a beneficiary of its very strong fundamentals.

 

 

Steven Bates

Chairman

VinaCapital Vietnam Opportunity Fund

29 December 2015


 

Manager's Statement

The financial year in review

During the financial year ended 30 June 2015, the Vietnam Index (VN Index) increased by 0.3% in USD terms after adjusting for the State Bank of Vietnam's (SBV's) official currency devaluations over the financial year (once in January 2015 by 1%, and a second time in May 2015 with a further 1% devaluation, raising the reference rate from 21,458 to 21,673). Subsequent to the financial year, in August 2015 the SBV devalued the Vietnam Dong (VND) again, this time by 1% while also widening the VND trading band to +/-3% from +/-1%. The VND has depreciated by 5% this calendar year compared with the USD, but has nonetheless strengthened against many other ASEAN currencies.

Currency devaluation and volatility have been key themes for the year, as the SBV attempted to cope with negative influences from international markets. The SBV's decision officially to adjust the currency's reference rate by 3% this calendar year seems warranted from a macroeconomic perspective, all the while limiting the scale of central bank intervention in an attempt to preserve a foreign exchange reserve of approximately USD35 billion (equivalent to 3 months of exports).

Nevertheless, the VND has been one of the more stable currencies amidst widespread emerging market currency depreciation, with regional export-oriented peers like Thailand's Baht falling 8%, Indonesia's Rupiah losing 12% and Malaysia's Ringgit down by 17% against the USD this year respectively. In turn, the devaluation has helped Vietnamese exporters compete against cheaper goods from China and other regional peers.

The resilience of Vietnamese exports is also attributable to a spectacular shift in the export structure over recent years, from traditional agricultural goods to more labour-intensive manufacturing such as shoes and textiles, and capital-intensive manufacturing including smart phones and electronic appliances. While Vietnam remains among the world's top five exporters of coffee, natural rubber and rice, it has rapidly climbed the ranks in the export of higher valued-added manufactured goods. For example, Samsung Electronics has committed over USD12 billion in foreign direct investments ('FDI') to produce smart phones, displays and appliances in the country. Microsoft Corporation announced in July 2014 that they would move their smart phone manufacturing operations to Vietnam from China, and several manufacturers of Apple product components have indicated that they intend to relocate to Vietnam as the relative cost of labour continues to rise in China. Overall, according to the Foreign Investment Agency of Vietnam, FDI continues to increase, with disbursed FDI of USD14.5 billion as of December 2015, a 17.4% increase year-on-year.

Investment Environment

Lower commodity prices, in particular oil and gas, have helped contain inflation to multi-year lows, a trend that is expected to continue for the remainder of the year. Coupled with a more competitive currency, the reduction in commodity prices has been a boon to Vietnamese exporters, with a small trade deficit reported after several years of record trade surpluses. Domestic consumers have also benefited from lower prices at the fuel pump and from cheaper imported goods from China, where manufacturers struggle to keep utilization rates and employment steady in the face of rising labour costs. Consumer confidence and private consumption growth continues to show strong signs of recovery, thanks to ongoing FDI, rising discretionary income, low inflation and declining energy costs.

However, lower oil prices have meant that the government has had to resort to other measures to narrow the widening budget deficit. Vietnam is the 7th largest oil producer in the Asia Pacific region, and oil revenues, which have in the past contributed 20% of the state's revenues, are currently at 39% of their yearly estimate as of the first half of 2015. Driven by a progressive reduction in corporate income taxes, tax revenue collection is well below estimates while the aggressive fiscal spending program has not abated, and as a result the budget deficit is forecast to grow to almost 6% of GDP by the end of 2015.  Finally, the ambitious program of partially privatizing State-owned enterprises has, until recently, stalled and failed to deliver the headline-grabbing attention that would bring much needed foreign money to help ease the budget shortfall.

The combination of strong domestic demand, lower commodity prices, continued fiscal spending, and strong credit growth has led to an improvement in overall economic strength, with real GDP growth accelerating to 6.0% in 2014 after 2 years of sub-par growth. This growth has continued through 2015, with GDP growth reaching 5 year highs of 6.68% year-on-year, ahead of market consensus and placing Vietnam amongst the best performing emerging economies in South East Asia.

Portfolio review

Against this backdrop of market volatility, the Company's portfolio has displayed similar variations in return, with the capital markets portfolio performing almost in line with the VN Index, while over-the-counter (OTC) traded securities and private equity continued to deliver strong returns. The direct real estate component has been negatively impacted primarily by valuation adjustments as a result of the Company adopting new accounting standards and changes in the land tax rate.

Overall, VOF's NAV per share increased by 3 cents during the financial year 2015 to USD3.27, from USD3.24 (2014 NAV per share restated as a result of adopting new accounting standards), of which 5.2 cents accretion was a result of the share buyback programme, 0.4 cents accretion from the portfolio on a VND basis, while the impact of the VND depreciation on the portfolio resulted in a negative contribution of 2.6 cents.

VOF's listed equities portfolio has reduced slightly to 52.4% of the total portfolio versus 55.8% as of last financial year, as we continue to concentrate and build up our positions in key holdings where we are able to negotiate significant blocks, like in Khang Dien Housing (KDH), or where we can demonstrate a premium to market price as a result of foreign ownership being at or close to prescribed limits, such as with Vinamilk (VNM). The other component of our capital markets portfolio is OTC traded securities which has reduced to 4.9% of the total portfolio versus 9.4% as of last financial year, primarily as a result of our successful divestment of An Giang Plant Protection (AGPP) in September 2014 which reduced our total portfolio allocation, while a dearth of investible opportunities from the State's privatisation programme - traditionally the pipeline for OTC investments - has not helped replenish this part of the portfolio. However, in September 2014 we deployed some of the proceeds from the exit of AGPP to increase our OTC portfolio by investing in the privatisation of Vinatex, Vietnam's leading garment and textile company.

Turning to the private equity portfolio, as of the end of the financial year 2015, private equity accounted for 11.3% of the total portfolio, up from 2.5% last financial year. In December 2014 we successfully invested in International Dairy Products (IDP), a leading consumer goods company that dominates southern Vietnam's market for flavoured milk and yogurt products. We took a controlling stake in this business and implemented several changes including the appointment of an industry veteran as the new CEO. In June 2015, prior to the end of the financial year, we deployed almost USD15 million into Novaland Group, one of Vietnam's leading residential property developers, through a redeemable convertible preferred equity instrument that provides an annual dividend payment and offers significant downside protections to our investment. While this investment has been classified under "unlisted and OTC shares" in the financial statements, given how we monitor this investment and the terms we were able to negotiate concerning the downside protections, for portfolio monitoring and reporting purposes we classify this as a private equity investment.

Meanwhile, operating assets which include our hospitality investment in the Sofitel Metropole Hotel in Hanoi, represent 11.4% of NAV, up from 9.1% reported last year, primarily as a result of the reclassification of Huong Vuong Plaza, a mature, cash-yielding investment which in prior years was classified under direct real estate. Similar to the Novaland investment mentioned above, we have taken a different classification to the financial statements for this investment, placing it under operating assets better to reflect its mature, cash-yielding nature, whereas direct real estate investments should more accurately reflect the development risk associated with projects.

Finally, with regards to our direct real estate portfolio, efforts continue to reduce the development risk through the divestment of several large projects in this portfolio. As of 30 June 2015, direct real estate represents 13.8% of the total portfolio, down from 14.3% as of last financial year. Efforts continue, with negotiations at various stages of progress, and on some projects, deposits have been taken from potential buyers while they proceed with their due diligence. We believe that the real estate sector continues to show promising signs of recovery, and we will position the portfolio for this recovery through public equity or private equity investments where we are able to negotiate attractive terms.

Capital markets

Sector overview

We remain optimistic on the prospects for Vietnam's public equities market as a number of changes in regulations may lead to strong upside potential, although any delays would be likely to dampen market performance. These catalysts include:

·     The gradual easing of foreign ownership limits in listed companies.

·     A reduction of stock settlement timing from T+3 to T+2 and allowing intra-day trading for more liquid stock.

·     Plans for a derivatives market.

·     Allowing foreign ownership of residential property.

·     Participation into various free trade agreements including, hopefully, the Trans-Pacific Partnership (TPP).

After the year end, the volatility witnessed in international markets between August and September 2015 saw some governments, particularly China, intervening in an attempt to create some level of stability and confidence, although the effectiveness of any intervention remains questionable and goes against the principles of an open and freely operating market. While Vietnam's markets also suffered from wild swings during this period, importantly, instead of trying to interfere with the market, the Vietnamese government's decision to allow greater foreign access has instead allowed the market to operate like a properly functioning free market.

In order to encourage foreign participation in the market, the government resolved eventually to lift the foreign ownership limits (FOLs) on a number of domestic companies. The details of this policy move remain somewhat unclear and the true impact has yet to be seen, however early signs are encouraging although there is still significant work to be done to encourage more companies to lift their limits. The FOL theme has consistently been touted as a catalyst for market growth, but until the government offers clarity on which sectors remain restricted little meaningful progress can be made.

As mentioned above, the financial year ended 30 June 2015 saw the VN Index close at 593 points, an increase of 2.6%, or 0.3% in USD terms. While this financial year's level of performance is well below that of recent years (in financial year 2014 the index was up by 19.2% in USD terms), the index did in fact reach its peak of 640 points in early September 2014, and its trough of 518 points in mid December 2014. The December low was partly a result of the government's decision to increase capital adequacy ratios at large banks, which resulted in a sharp reduction in margin-lending levels, which are traditionally seen as a key source of capital for domestic investors.

Since the financial year end, the VN Index surged to 639 points in mid-July 2015, as investors reacted positively to news of the decision to lift the FOL's on listed companies. This rally was short-lived as global markets corrected in reaction to China's unexpected decision to devalue their currency and ongoing concerns of China's economic slowdown impacting the global economy. The VN Index had pulled back to 526 points by late August, but has subsequently seen a return to above 600 points by the end of October, before pulling back to 576 levels by the end of December. Given all this volatility, on a calendar basis in USD terms, the VN Index is essentially flat at 0.5% year-to-date versus 6.7% for the 2014 calendar year.

Banks have been the best performing sector in the market, up by 54.9% for financial year 2015, benefitting from relatively strong loan growth. If there is further VND depreciation, this could result in increased pressure on VND deposits to leave the system for USD, gold or real estate. This in turn would force banks to raise deposit rates and perhaps increase borrowing costs to maintain their margins, which would not be conducive to lowering the number of non-performing loans or for corporate profits in general. Furthermore, the government recently announced measures to prevent banks paying annual interest of more than 0.5% on USD deposits, in an attempt to limit hoarding of USD deposits.

Asset class performance

On the capital market side, as at 30 June 2015 the listed equities portfolio (52.4% of NAV) performed in line with the market, with key stocks such as Vinamilk (VNM), Khang Dien Housing (KDH) and Phu Nhuan Jewelry (PNJ) performing well, driven by impressive growth in their underlying core businesses of over 30% on average. However, performance was dragged down by weaknesses in oil and gas stocks such as PetroVietnam Drilling (PVD) and PetroVietnam Services (PVS) (both top-10 stocks in VOF's listed assets portfolio) due to low oil prices.

During the year we also took profit and trimmed down our position in VNM. In August 2014 and again in June 2015, the Manager sold 4.5 million shares in aggregate of VNM to a strategic investor in an off-market transaction, crystallizing a 15% to 17% premium to the prevailing market price of VNM shares at the time of each sale. As at the 30 June 2015, seven holdings in our listed equity portfolio were at or near their foreign ownership limits, equivalent to 42.1% of the listed portfolio, or 22.0% of the total portfolio. These include top 10 portfolio holdings in VNM, KDH, Hau Giang Pharmaceuticals (DHG), and PNJ. While admittedly the foreign premiums associated with specific stocks may fluctuate, our track record has demonstrated that we have been able to divest at significant premiums to the prevailing market price at exit. These transactions are testament to the value of large, significant holdings in the VOF portfolio in companies that are at or near their foreign ownership limits. Foreign investors are still willing to pay a premium for access to these stocks, a sentiment that is likely to continue until the authorities in Vietnam provide real clarity on how and when they will fully lift foreign ownership limits.

VOF's second largest holding in the listed portfolio, steel producer Hoa Phat Group (HPG), was impacted after setting a low profit target which disappointed analysts and spurred selling, particularly by foreign investors. Incidentally, after VOF's financial year end better business conditions allowed the company to raise its profit forecast by 40% and consequentially the stock has risen by up to 30%. This illustrates just how quickly events can unfold in Vietnam. We took the opportunity to add to our HPG position in the portfolio prior to the revised upward forecast in the belief that the stock was oversold. We believe that the construction materials sector will do well as the property market recovers, the government continues to spend on infrastructure projects and as GDP growth continues above 6%.

Eximbank (EIB), the third largest holding in the listed portfolio, underperformed the banking and financial services sector during the financial year, due to both technical and company specific reasons. EIB has little foreign ownership room available and thus does not qualify to be part of the portfolios of various international exchange traded funds (ETF's). As a result, EIB share prices underperformed the sector as these funds started to acquire significant stakes in the larger State-owned commercial banks. In addition, shareholders, particularly domestic investors have been awaiting the final resolutions of: 1) the bank's non-performing loans (NPL's) which, similar to other joint stock banks, should come to a conclusion by the end of 2015; and 2) the bank's corporate restructuring, including the appointment of new members to the Board of Directors and Management team which recently concluded in mid-December with the appointments positively received by the market. During the first half of 2015, EIB suffered from the unconfirmed media reports that allege EIB may merge with a smaller, potentially weaker, bank. Given VOF's 5% stake in EIB, any decision to divest would most likely involve an exit to a strategic investor.

In the OTC portfolio, after a significant reduction in the portfolio following the divestment of An Giang Plant Protection (AGPP) in September 2014, which delivered an IRR of 23.7% and returned USD63.1 million to the fund, we have sought to replenish the Fund's allocation to this asset class. At the moment, OTC companies are mostly State Owned Enterprises that have undergone privatization. In October 2014, VOF participated in one such privatisation opportunity, investing USD8 million for a 3% stake in Vinatex, Vietnam's leading garment and textile manufacturer.

In March 2015, the Manager on behalf of VOF also negotiated to acquire a small stake in QNS for USD16.7 million. QNS is a leading food and beverage business in Vietnam with revenues of USD303 million and profit after tax of USD27 million in calendar year 2014. Their best selling product is soy milk (contributing 46.6% of total revenues for 2014) followed by beer and sugar produced from sugarcane. We believe that QNS can grow both average revenue and profit by over 25% per annum over the coming years.

Finally, in March 2015 we also witnessed South Basic Chemicals (CSV) move from being OTC traded to list on the public market as part of the company's commitment to IPO and list after a highly successful privatisation. The share price of CSV has since performed well, relative to the volatility experienced by the wider market, trading at times over 20% above its initial listing price.

Fundamentally, the companies in our OTC traded portfolio on average have experienced strong growth in sales and profit, such as QNS where we have seen profit grow by 48% in Q1 2015.

Overall, in USD terms, the capital market portfolio, including listed equities, OTC traded securities and overseas equity which includes our holdings in Vinaland Limited (VNL) and Vietnam Infrastructure Limited (VNI), added 2.0 cents to the NAV per share.

Private equity

Sector overview

We have been successful in converting several deals that were in the pipeline into investments over the past financial year, and therefore increased our private equity portfolio weight to 11.3% from 2.5%. In recent years we have capitalised on divestment opportunities in mature private equity investments across sectors such as healthcare (Hoan My Hospital Group), education (International School of Ho Chi Minh City) and construction materials (Prime Group). These exits have usually been to strategic investors who seek companies with strong brands, well-established distribution channels, and a track-record of top-line earnings growth. Similarly, our recent investments continue with this theme, albeit the deals have involved larger stakes, longer periods of due diligence, and hence at times protracted negotiation of terms to ensure adequate downside protection.

During the year, we made an investment in International Dairy Products (IDP), a leading dairy company that has strong positions in the yogurt and flavoured milk market in southern Vietnam. While it may be tempting to monetise this investment quickly, we have instead opted to help increase the diary company's product range, market share and distribution reach. Furthermore, a key tenet that was crucial for us to invest into this company was that we had the ability to appoint one of Vietnam's leading consumer goods marketing executives as IDP's head of marketing and he was subsequently promoted to CEO. His extensive experience with consumer goods companies like Pepsico, Vinamilk and TH Milk has benefited IDP since his appointment in late 2014. IDP is seeking to grow market share and earnings aggressively, given the low levels of dairy consumption among Vietnamese consumers at less than 20 litres of milk per annum compared to regional peers like Thailand and Malaysia where milk consumption averages 30 to 50 litres per annum respectively.

The other addition to the private equity portfolio this financial year came in June 2015 when we participated in a syndicated deal to invest into Novaland, one of Vietnam's leading residential property developers, deploying close to USD15 million into a redeemable convertible preferred equity instrument that was part of a USD47 million syndicated offer alongside two other financial investors. The investment carries an attractive annual interest coupon of 5% but, more important, locks in several terms that allow us to exercise a range of downside protections should the company miss certain deadlines. However, our expectation is that Novaland will successfully IPO and list within the next 18 to 24 months. The company's projects, which are located throughout Ho Chi Minh City and developed under the Novaland brand, were valued at USD753.4 million as of 31 December 2014. The company has over 5,000 units either sold, pre-sold or under development, as well as over USD190.0 million in signed contracts to acquire additional land for future development. Novaland continues to demonstrate strong sales growth this calendar year as several new well-located, mid-scale projects have been launched.

Going forward, private equity remains an area of focus and we will seek to convert several deals currently in the pipeline. While too early to name, sectors that we are actively looking into include construction materials, healthcare and education. Not only are these sectors that we have demonstrated a good track record of investments and returns, but they are also sectors that feature highly in discussions with institutional and strategic investors as they seek potentially to partner with us to invest into Vietnam. Our unique network of business and government leaders, and our ability to navigate through licensing and administrative issues, places us in a unique position to capitalise on these private equity investments for VOF, although, as always in frontier markets, there is no assurance given that deals can be closed.

Asset class performance

The top five holdings in the private equity portfolio now make up over 10% of the total portfolio as we seek to invest into larger-sized deals. In addition, during the financial year some of VOF's holdings were written up after an independent valuation was carried out by KPMG based on fair-value methodologies under IFRS10A accounting standards. The net adjustments from this valuation exercise resulted in a write-up of USD4.9 million to the private equity portfolio over the financial year. VOF has also received money from Mai Linh Taxi which had been previously written down due to problems recovering overdue debts from the company. The company has now committed to repaying the full value of the outstanding loan, resulting in a write-back of USD2.3 million to NAV.

Similar to our OTC traded portfolio, the companies in our private equity portfolio on average have experienced strong growth in sales and profit, such as IDP where sales grew by 69% in Q1 2015. Overall, in USD terms, the private equity segment of the portfolio contributed 3.7 cents to NAV per share.

Real estate

Sector overview

The VND devaluation potentially creates upward pressure on interest rates. Nevertheless, credit to the sector has begun to expand again after several years of contraction. However, the impact on the real estate market is expected to be modest, especially as the property market is largely fuelled by domestic demand and dominated by domestic supply from local developers. Policy initiatives like the relaxation of the foreign ownership regulations and subsidized credit for the real estate sector are also helping to expand the real estate demand pool as investors rotate away from gold and bank deposits back into real estate. Developers which have survived the downturn have emerged stronger and more innovative, having reconfigured their capital structures and end-product offerings to harness evolving consumer tastes, thereby further stimulating demand.

Optimism created by the new Housing Law and Real Estate Business Law, both effective 1 July 2015, as well as a greater availability of mortgages, resulted in a new wave of condominium supply to the market. Although it remains to be seen whether the market can absorb all of the new condominium units, the passage of these two laws has established a transparent legal framework to help protect home buyers, and increase the confidence of foreign investors (corporate and private) when purchasing residential properties in Vietnam. As a result, the apartment market will become more competitive as it seeks to absorb all of the new supply from these launches.

Condominium sector

The condominium market has seen an improvement over the last twelve months with more launches and transactions, especially in the high-end and mid-end property segments. Developers like Novaland and KDH have successfully launched several large-scale projects that have attracted strong sales to local investors. Projects like Novaland's Lexington Residences in District 2 of Ho Chi Minh City, launched in 2014, have almost completely sold all their 1,500 units, while phase 2 of Novaland's high-end Tropic Gardens project, again in District 2, saw long queues to buy up the 400+ units on the opening weekend of the project's launch in late 2014. According to CBRE Vietnam, numerous condominium projects were launched in the first half of 2015, specifically 36 projects comprising 13,678 units in Ho Chi Minh City and 37 projects with 10,017 units in Hanoi. The number of new condominiums launched in Ho Chi Minh City and Hanoi rose by 170% and 90% year-on-year respectively. The average selling price of all segments increased between 5% and 10% year-on-year in both Ho Chi Minh City and Hanoi. However, in the first half of 2015, the absorption rate of Ho Chi Minh City was estimated to be 73% while Hanoi's rate was at 45%. There is no future supply located in the city centre due to limited supply of development sites and permission to build residential projects is also difficult to obtain. Therefore, future supply will be in non-CBD (non-Central Business District) areas and located along the metro lines which will attract more buyers and investors.

Landed property sector

The landed property market continues to demonstrate improvements with new project launches, helped by changes in sales strategies from existing developers such as protracted repayment plans and additional amenities. According to Savills, the number of transactions increased by 5% to 15% year-on-year, both in Ho Chi Minh City and Hanoi. A large portion of recent buyers are end-users who are interested in locations with improving infrastructure, the landscape, available amenities, in near completed projects or projects developed by high profile developers. Projects in Da Nang and Nha Trang have experienced improved sales volumes over the last four quarters, and this trend is expected to continue. There has been a notable increase in the number villas with prices from USD250,000 - USD900,000 per unit, as against those priced at over USD1,000,000. This demonstrates that developers are now focusing on a wider customer base where budgets for second/third homes are lower.

Market outlook

A tentative recovery is underway in Vietnam's real estate sector. However, oversupply in the condominium market may cause some instability and low occupancy rates in the rental apartment market. Moreover, difficulties in implementing new regulations and a lack of subsequent legal documents clarifying relevant procedures of these new regulations will pose a challenge for both developers and buyers.

To ensure a sustainable recovery will require developers to follow a disciplined strategy concerning their investment horizon and risk management, while continually selecting the right product to meet an ever more discerning domestic buyer. Developers with access to sites near key infrastructure projects, particularly along corridors where rail transit systems are being built in Hanoi and Ho Chi Minh City, and where major road and highway projects have been completed, will stand to benefit the most. Likewise, we are also seeing this benefit the construction materials sector, which has grown 9% year-on-year as at June 2015. With top-line growth showing signs of improvement, we are expecting property companies to raise capital to take advantage of current market conditions. Novaland has already raised capital from investors including VOF, while KDH, a top 10 holding in VOF's portfolio, is also expected to tap the public equity market to raise capital in order to acquire new projects.

With this backdrop of improving market conditions, VOF should find exit opportunities for its real estate development projects becoming increasingly attractive. Efforts continue to reduce our exposure to development risk through the divestment of several large projects in this portfolio, but progress has been slow and protracted mostly because of the lack of credit available until recently to domestic buyers and caution on the part of foreign participants. While we have negotiations across several projects at various stages of progress, as of this report, we are unable to announce any specific project divestments but will do so as they materialise, with the desire to reduce our overall exposure to real estate development risk to below 10% over the coming year.

 

Hospitality sector

The hospitality sector remains subdued, as the impact from a free-falling rouble has meant that Russian tourist numbers are down for the year. Furthermore, the fall-out from last May's incursion by Chinese maritime vessels into disputed waters off Vietnam's central coast and the subsequent posturing by the two governments and their citizens has meant that the number of Chinese visitors to Vietnam are down, particularly to the central region where gaming and golfing activities are key attractions. Overall, according to government statistics, as at October 2015 visitor numbers to Vietnam have increased by 16.1% year-on-year. However, with a lower rate of currency devaluation compared to regional peers like Thailand and Indonesia, growth in the hospitality sector has been concentrated around the segment that caters to the executive and professional business traveller, rather than the budget and leisure segment.

The Sofitel Metropole Hotel in Hanoi remains a popular destination for executive and professional business travellers, foreign dignitaries, and the more discerning tourist, given its consistent high standards and proximity to Hanoi's city centre. There are still no immediate competitors to the Sofitel Metropole in the inner city area and, as such, it still enjoys high rates of occupancy and stable average room rates. Performance is in line with last year across these two measures, a commendable result given the impacts to the market discussed above. Net operating income for the first half of this calendar year is slightly lower than the same period last year, but management is confident that performance for calendar year 2015 will improve and exceed that of the prior year.

Asset class performance

The direct real estate portfolio underperformed, negatively impacted largely by write-downs as a result of an independent valuation that was carried out by KPMG based on fair-value methodologies under IFRS10A accounting standards. The net adjustments from this valuation exercise resulted in a write-down of USD10.0 million to the direct real estate portfolio over the financial year. With regard to the operating assets portfolio, which for portfolio monitoring purposes includes the Sofitel Metropole in Hanoi  and the Hung Vuong Plaza, the net adjustment was a write-up of USD11.0 million, primarily due to the adoption of the IFRS10A accounting rules this financial year. Overall, in USD terms, the real estate asset class including operating assets contributed a loss of 3.4 US cents to NAV per share.

Divestment activities under the direct real estate and operating assets portfolio over the financial year have been limited, with a partial divestment of Phase 1 of the World Trade Centre (Riverview project) at cost, and the full divestment of the Movenpick Hanoi Hotel booked early in the financial year, resulting in a small uplift to NAV at the time of exit. As mentioned earlier, our focus for the direct real estate portfolio remains on realising several large development projects over the coming year into a market that appears to be recovering, by garnering interest from both domestic and international investors.

Share buyback programme

During the year VOF spent USD47.3 million to buy back 18.3 million shares at an average price of USD2.59 per share. In comparison, last financial year the Fund spent USD52.3 million to buy back 23.1 million shares. The share buyback added 5.0 cents to the NAV per share over this financial year.

VOF's share price appears highly correlated to the often volatile VN Index, and as such the buyback programme has provided some price stability in times of market volatility. For example, during the fourth quarter of 2014, the VN Index declined from its peak of 640 points in September 2014 to 518 points in December 2014. Over this period, the level of buyback activity accelerated in order to assure the market that the widening discount level was not an accurate reflection of the quality, resilience and valuation of the underlying portfolio. The discount subsequently contracted to below 20% for a short period of time late in the quarter, after temporarily widening to close to 30% during the period of market volatility. After the financial year end, the share price and corresponding discount to NAV per share suffered a temporary widening above historical levels as the local and global markets experienced extreme volatility as a result of concerns over China's slowdown in growth and the unprecedented devaluation of the Chinese Yuan, prompting a general selloff in emerging and frontier markets. However, VOF's share price and NAV per share have recovered as we have seen natural buyers, including institutional and value investors, who seek to increase their off-index allocation to Vietnam, select VOF shares as a natural proxy.

Looking ahead - a brighter outlook

Looking forward, below are some of the opportunities and challenges facing VOF's asset classes as discussed below.

Capital markets

From a macroeconomic perspective, GDP is growing at an annual rate of 6.5% to 6.8%, led by rising manufacturing output and strong performance in the construction materials and real estate sectors. We are also seeing a strong domestic recovery as retail consumption growth for the first half of 2015 reached 10%, and over 8% in real terms, fuelled by rising incomes, improving consumer confidence and low inflation thanks to low oil prices.

On the subject of inflation, China's subdued growth has contributed quite significantly to lower inflation in Vietnam. As mentioned, Vietnam is experiencing more imports at lower prices from China's manufacturers as they struggle to keep utilization rates and employment steady. At the same time, the lower demand has led to lower commodity prices, an important factor considering that commodities make up a large component of Vietnam's CPI. Vietnam's inflation rate stood at 0.6% year-on-year in December 2015, well below historical average. Our Chief Economist forecasts inflation to be higher in 2016 at around 3.0% to 4.0%.

It is our belief that stronger growth in retail spending, in particular consumer spending on fast moving consumer goods and lower commodity or input prices, will bode well for VOF's investment in both listed and unlisted consumer oriented sectors with companies such as VNM, QNS (OTC traded security) and IDP standing to benefit the most.

We also believe that the recovery in the real estate sector is sustainable in the medium term and, as such, holdings in the listed portfolio such as HPG who supply the steel needed for construction activities should do well. Additionally, as described above, HPG has recently increased its profit target by 40% for 2015. Although the share price has caught up somewhat, it is still trading at a 2015 PE of 8x, compared to 12x on average for the market and 11x for VOF's listed portfolio.

Furthermore, at the end of June the government issued Decree 60, a piece of legislation that allows companies listed on the stock market to be purchased up to 100% by foreign investors with the exception of some stocks in sensitive sectors (such as banking and defence).  We see this as a game changer and, in conjunction with other improvements such as shorter settlement, could qualify Vietnam for emerging market status in global indices in the not too distant future.

OTC trade securities and privatization

On the OTC side, VOF will take part in the privatisation process with target companies that fit VOF's investment criteria. With a healthier stock market and the Government running a budget deficit of close to 6% of GDP we anticipate a better IPO pipeline in the coming year. However, given the slow pace of privatisation and our selectiveness, VOF may only seriously consider a handful of companies. Meanwhile, VOF will also continue to review the existing OTC traded securities available in the market for opportunities to invest.

Private Equity

Turning to private equity opportunities, we aim to increase exposure by reinvesting some of the expected proceeds from the sale of direct real estate projects into private equity-type deals. VOF has a large pipeline of potential investments and is actively looking at sectors that benefit from rising disposable income and domestic consumption such as food and beverage companies, education and healthcare opportunities. For companies such as IDP, in which VOF has already invested, sales growth has continued to be strong and the focus is to build up the brand and increase distribution in order to be able to exit when the company achieves a significant market share. Given that many private businesses' valuations are now comparable to public market valuations, VOF's focus is to find companies that can demonstrate structural growth and deals that allow the Company to negotiate in such a way as to limit our downside risk or to pay a premium valuation multiple only when certain profit commitments are achieved. VOF's challenge going forward is to find suitable investments which are expected to generate at least 20-25% IRR to maintain our consistent track-record of over 20% IRR on past private equity investments.

Real estate

Finally, we understand that development risk through direct real estate exposure may create an unnecessary drag on our discount to NAV per share. We therefore are planning the divestment of a number of large, controlled direct real estate projects, and expect to participate in the sale of certain projects where VOF is co-invested with Vinaland (VNL) which is also undertaking a realisation strategy. Over the coming months we hope to be in a better position to allow us to share with shareholders the progress and completion of these divestments.

Widening budget deficit is a concern

There remains concern that the large and growing budget deficit will lead to additional and more aggressive issuance of debt by the Government which could lead to a rising cost of funding and higher bond yields. This crowding out effect will make it harder for local businesses to borrow and compete for funding. This is especially disadvantageous given that Vietnam is highly dependent on FDI from multinationals which have access to much a lower cost of funding, and could soften the bottom-line of domestic businesses relative to multinationals operating in Vietnam and cause domestic businesses to become less competitive.

However, the differential cost of funding is also leading to more acquisitions by multinationals in Vietnam and VOF stands to benefit if it exits some of its holdings to strategic acquirers.

As well as continued currency volatility

On the subject of currencies, as described above, the VND has devalued by approximately 5% versus the USD in calendar year 2015 and our projection is for further weakness as Vietnam needs to regain export competiveness against other countries whose currencies have depreciated by a larger amount, particularly given the recent lifting of rates by the US Federal Reserve. As many companies in Vietnam rely on imports that are USD based, devaluation could have a harmful effect on corporate profits. We have run some sensitivity analyses on the companies in our portfolio and estimate that a small devaluation in the range of 1-2% does not have a material impact on the companies' earnings but larger devaluations are harder to judge. Some leading companies with strong market shares may be able to pass on the price increases, but others may not and this could impact the portfolio negatively. On the flipside of the coin, those companies which add value domestically and export will benefit from these conditions.

Conclusion - several catalysts point to an overall upward market re-rating

Despite the concerns described above, we remain positive on the prospects for Vietnam and its stock market due to the prospects for a strong economy, the recent relaxation of foreign ownership limits and most importantly valuation as the market is trading at an estimated 2015 P/E ratio of 14.8x versus the region's average of 16.6x according to Bloomberg. With a domestic and real estate recovery, we see potential for earnings growth in the 10-15% range which should support upside in valuation before any market re-rating in terms of PE expansion.

Our optimism is further reinforced by Vietnam's increased participation in international free trade agreements (FTAs). Of note, Vietnam is a part of the 12-nation Trans Pacific Partnership (TPP), a deal which encompasses 40% of the world's economy and 30% of global trade. TPP joins a growing list of FTAs involving Vietnam, including recently finalized agreements with Korea, the European Union and Russia-Belarus. Vietnam is set to benefit tremendously from TPP and the collection of other FTAs as lowered tariffs will stimulate exports and cheaper imports will promote competitiveness among domestic firms. Overall, it is reasonable to project that TPP alone will drive GDP growth to the tune of 1-2% per annum, and will have sweeping effects across the country's financial markets.

In all, it has been an eventful year for VOF and Vietnam, but we remain confident that by remaining focused and diligent with our investment strategy we will be able to take advantage of several positive catalysts that will come into play to benefit Vietnam's overall economy and markets.

 

Andy Ho

Managing Director and Chief Investment Officer

VinaCapital Investment Management

29 December 2015


 

BALANCE SHEET

 

 

 

 

30 June

2015

30 June

2014

1 July

2013

 

 

Note

USD'000

USD'000

USD'000

 

 

 

 

Restated

Restated

 

ASSETS

 

 

 

 

 

 

Cash and cash equivalents

6

906

1,311   

  4,502

 

Short-term receivables from related parties

20(c)

382

331

  2,403

 

Trade and other receivables

 

  4,697

  4,797

  13,572

 

Financial assets at fair value through profit or loss

 

8

  712,567

  768,956

  717,141

 

Prepayments for acquisitions of investment properties

 

9

  5,192

6,250

  6,250

 

 

Total assets

 

 

──────

  723,744  ══════

──────

          781,645  ══════

──────

  743,868

 ══════

 

EQUITY AND LIABILITIES

 

 

 

 

 

 

EQUITY

 

 

 

 

 

Share capital

10

3,246

               3,246

                3,246

 

Additional paid-in capital

 

722,064

722,064

722,064

 

Treasury shares

11

(213,283)

 (165,939)

(113,639)

 

Retained earnings

 

206,637

    212,009

  123,026

 

Total equity

 

──────

         718,664   

──────

──────

    771,380  

──────

──────

  734,697    

──────

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

 

 

 

Payables to related parties

12

    5,036

    10,246

  1,198

 

Other payables

 

44

19

  7,973

 

 

 

──────

──────

──────

 

Total liabilities

 

 

  5,080

──────

  10,265

──────

  9,171 ──────

 

Total equity and liabilities

 

 

  723,744

══════

    781,645  

══════

  743,868    

══════

 

 

 

 

 

 

 

Net asset value, USD per share

18(c)

3.27

3.24

2.81

 

 

 

══════

═════

══════

 

             

 

 

 

STATEMENT OF CHANGES IN EQUITY

 

 

Share

capital

Additional

paid-in capital

Treasury

shares

 

Revaluation reserve

Available-for-sale financial assets reserve

Currency

translation

 reserve

Retained

 earnings

 

Total

Non-controlling interests

Total

equity 

 

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

USD'000

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 July 2013 (consolidated)

3,246

722,064

(113,639)

31,376

  4,336

  (18,763)

123,823  

    752,443  

1,089

753,532  

Restatement adjustments

-

-

-

(31,376)

  (4,336)

18,763

(797)

(17,746)

(1,089)

(18,835)

Balance at 1 July 2013 (restated)

3,246

722,064

(113,639)

-

-

-

    123,026

      734,697

-

734,697

Profit for the year (restated)

-

-

-

-

-

-

88,983

88,983

-

88,983

 

Total comprehensive income (restated)

────

 

-

──────

 

-

──────

 

-

─────

 

-

─────

 

-

───────

 

-

──────

 

88,983 

──────

 

88,983 

──────

 

──────

 

88,983 

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

Shares repurchased (Note 11)

-

-

(52,300)

-

-

-

-

(52,300)

-

(52,300)

 

Balance at 30 June 2014 (restated)

────

3,246

════

──────

722,064

══════

──────

(165,939)

══════

───────

-

═══════

───────

-

═══════

───────

-

═══════

───────

  212,009

═══════

───────

771,380

═══════

──────

-

══════

───────

771,380

═══════

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 July 2014 (consolidated)

3,246

722,064

(165,939)

33,281              

-

    (19,186)

  205,489

778,955 

849

    779,804

Restatement adjustments

-

-

-

(33,281)              

-

  19,186

  6,520

  (7,575)

  (849)

  (8,424)

Balance at 1 July 2014 (restated)

3,246

722,064

(165,939)

-

-

-

  212,009

  771,380

-

  771,380

Loss for the year

-

-

-

-

-

-

  (5,372)

  (5,372)

-

  (5,372)

 

Total comprehensive loss

────

-

──────

-

──────

-

─────

-

───────

-

─────

-

──────

  (5,372)

──────

  (5,372)

──────

-

──────

  (5,372)

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

 

 

 

 

Shares repurchased (Note 11)

-

-

(47,344)

-

-

-

-

  (47,344)

-

  (47,344)

 

Balance at 30 June 2015

────

3,246

════

──────

722,064

══════

──────

(213,283)

══════

─────

-

═════

───────

-

═══════

─────

-

═════

──────

  206,637

══════

──────

    718,664

══════

──────

-

══════

──────

  718,664

══════

 

STATEMENT OF COMPREHENSIVE INCOME

 

 

 

 

Year ended

 

 

30 June

2015

30 June

2014

 

Note

USD'000

USD'000

 

 

 

Restated

 

 

 

 

Dividend income -(*)

13

  69,197

  70,926

Net (losses)/gains on financial assets at fair value through profit or loss (**)

14

  (56,389)

  51,815

General and administration expenses

15

  (17,504)

(22,527)

Other income

 

382

369

Impairment losses

16

  (1,058)

(11,600)

 

Operating (loss)/profit

 

─────

  (5,372)

─────

─────

88,983

─────

 

 

 

 

(Loss)/profit before tax

 

  (5,372)

88,983

Corporate income tax

17

-

-

 

(Loss)/profit for the year

 

 

─────

  (5,372)

═════

─────

88,983

═════

 

 

 

 

 (Loss)/earnings per share

- basic and diluted (USD per share)

 

18(a),(b)

 

(0.02)

═════

0.36

═════

 

 

 

 

 

 

─────

─────

Total comprehensive (loss)/income for the year

 

  (5,372)

═════

88,983

═════

 

 

 

 

 

 

 

 

Year ended

 

30 June

2015

30 June

2014

 

USD'000

USD'000

(*) Dividend income includes:

 

 

- Dividend income from a subsidiary used to pay for the Company's share repurchases (Note 13)

47,344

52,300

- Dividend income from a subsidiary used to pay for the Company's operating expenses (Note 13)

21,853

18,626

         

 

 

Year ended

 

30 June

2015

30 June

2014

 

USD'000

USD'000

(**) Net (losses)/gains on financial assets at fair value through profit or loss include:

 

 

- Reduction in fair value of a subsidiary due to payments for shares repurchases on the Company's behalf (Note 14)

(47,344)

(52,300)

- Reduction in fair value of a subsidiary due to payment for the Company's operating expenses (Note 14)

(21,853)

(18,626)

 

 

 

 

STATEMENT OF CASH FLOWS

(Indirect method)

 

 

Year ended

 

 

30 June

2015

30 June

2014

 

 

USD'000

USD'000

 

 

 

Restated

 

Note

 

 

Operating activities

 

 

 

(Loss)/profit before tax

 

(5,372)

88,983

Adjustment for:

 

 

 

Dividend income

 

(69,197)

(70,926)

Unrealised gains/(losses) on financial assets at fair value through profit or loss                                                                                    

14

56,503

(51,815)

Impairment losses

16

1,058

11,600

 

 

─────

(17,008)

─────

(22,158)

 

 

 

 

Change in financial assets at fair value through profit or loss

 

(114)

-

Change in trade receivables and other assets

 

49

(753)

Change in trade payables and other liabilities

 

(5,185)

1,094

Dividend receipts

 

21,853

18,626

Net cash outflow from operating activities

 

─────

(405)

─────

─────

(3,191)

───

 

 

 

 

Net change in cash and cash equivalents for the year

 

(405)

(3,191)

Cash and cash equivalents at the beginning of the year

6

1,311

4,502

Cash and cash equivalents at the end of the year

 

6

─────

906

═════

─────

1,311

═════

 

 

 

 

The statement of cash flows does not include payments made for share repurchases of USD47.3 million (year ended 30 June 2014: USD52.3 million) because these payments were made by a subsidiary of the Company.

 

 

 

NOTES TO THE FINANCIAL STATEMENTS

                                                                                                                                         

 

1          GENERAL INFORMATION

 

VinaCapital Vietnam Opportunity Fund Limited ("the Company") is a limited liability company incorporated in the Cayman Islands. The registered office of the Company is PO Box 309GT, Ugland House, South Church Street, George Town, Grand Cayman, Cayman Islands. The Company's primary objective is to undertake various forms of investment primarily in Vietnam, but it may also invest in Cambodia, Laos and Southern China. The Company is quoted on the AIM market of the London Stock Exchange under the ticker symbol VOF.

 

The Company does not have a fixed life but the Company's Admission Document to the AIM market of the London Stock Exchange states that 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 on 22 July 2013 and it was not passed, allowing the Company to continue as presently constituted for another five years.

 

The financial statements for the year ended 30 June 2015 were approved for issue by the Board on 29 December 2015.

 

2          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all years presented, unless otherwise stated.

 

2.1       Basis of preparation

 

The financial statements of the Company have been prepared in accordance with IFRS as issued by the IASB. They have been prepared using the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss, and financial liabilities at fair value through profit or loss. The financial statements have been prepared on a going concern basis.

 

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires judgment to be exercised in the process of applying the Company's accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

 

2.2       Changes in accounting policy and disclosures

 

(a)        Changes in accounting policy

 

The Company has adopted the "Investment Entities" amendments to IFRS 10, "Consolidated financial statements". The amendments define an investment entity and introduce an exception from the consolidation requirements for investment entities. On adoption, the Company has determined that it meets the definition of an investment entity (see Note 3.1 below). As a result, it has changed its accounting policy with respect to its investments in subsidiaries. The Company's subsidiaries, which were previously consolidated, are now accounted for at fair value through profit or loss. This change in accounting policy has been applied retrospectively in accordance with the transition provision of IFRS 10 and the amendments to IFRS 10. The impact of the change has been disclosed in Note 2.15 below.

 

 

 

 

·   The Company has adopted amendments to IFRS 12, "Disclosure of interests in other entities", which introduce new disclosure requirements related to investment entities. Required disclosures are presented in Note 5.

 

·   IAS 27 (revised 2011), "Separate financial statements" and amendments to IAS 27 have been adopted by the Company. The standard prescribes the accounting and disclosure requirements when an entity prepares separate financial statements. The amendments require an investment entity as defined in IFRS 10 to present separate financial statements as its only financial statements in the case where it measures all of its subsidiaries at fair value through profit or loss and to disclose that fact.

 

·   The Company has opted to value all of its investments in associates at fair value in accordance with IAS 28 (revised 2011), "Investments in associates and joint ventures". As a result, the Company has ceased the application of equity accounting to its investments in associates. It now classifies its investments in associates as financial assets at fair value through profit or loss. The Company has applied this change in accounting policy retrospectively in accordance with IAS 8, "Accounting policies, changes in accounting estimates and errors".

 

·   The Company has selected to present its balance sheet in order of liquidity as the Board believes that such presentation format is more relevant.

 

(b)        New and amended standards adopted by the Company

 

  The Company has applied the following standards and amendments for the first time for the year ended 30 June 2015:

 

·   Annual improvements to IFRSs 2010-2012 cycle and 2011-2013 cycle, and

·   Annual improvements to IFRSs 2012-2014 cycle

 

The adoption of these amendments did not have any impact on the current year or any prior period and is not likely to affect future periods.

 

(c)        New standards and interpretations not yet adopted

 

Certain new accounting standards and interpretations have been published that are not mandatory for 30 June 2015 reporting periods and have not been early adopted by the Company. The Company's assessment of the impact of these new standards and interpretations is set out below.

 

IFRS 9, 'Financial instruments', addresses the classification, measurement and derecognition of financial assets and financial liabilities and introduces new rules for hedge accounting. In July 2014, the IASB made further changes to the classification and measurement rules and also introduced a new impairment model. These latest amendments now complete the new financial instruments standard. The Company is yet to assess IFRS 9's full impact and intends to adopt IFRS 9 no later than the accounting year ending 30 June 2019.

 

IFRS 15, 'Revenue from contracts with customers', The IASB has issued a new standard for the recognition of revenue. This will replace IAS 18 which covers contracts for goods and services and IAS 11 which covers construction contracts. The new standard is based on the principle that revenue is recognised when control of a good or service transfers to a customer - so the notion of control replaces the existing notion of risks and rewards. The standard permits a modified retrospective approach for the adoption. Under this approach entities will recognise transitional adjustments in retained earnings on the date of initial application (e.g. 1 January 2017) without restating the comparative period. They will only need to apply the new rules to contracts that are not completed as of the date of initial application. The Company believes that it is unlikely that IFRS 15 will have any significant impact as most of the Company's revenues are excluded from the scope of this standard.

 

There are no other standards that are not yet effective and that would be expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

 

2.3        Subsidiaries and associates

 

As a result of the adoption of the amendments to IFRS 10 and the fair value option under IAS 28, the Company has changed its accounting policy with respect to its investments in subsidiaries and associates. Its subsidiaries and associates which were previously consolidated or equity accounted, are now accounted for at fair value through profit and loss. At the date of initial application of IFRS 10, the Company measured these investments at fair value through profit or loss as if it had done so since its establishment. As part of the required retrospective application of those changes, the Company adjusted retained earnings at the beginning of the immediately preceding period for any difference between:

 

(a)         the previous carrying amount of the investments; and

(b)         the fair value of the Company's investments in subsidiaries and associates.

 

The cumulative amount of any fair value adjustments previously recognised in other comprehensive income was transferred to retained earnings at the beginning of the period immediately preceding the date of initial application.

 

At the end of each half of the financial year, the fair values of a selection of investments in subsidiaries and associates are assessed such that the fair values of all material investments in subsidiaries and associates are assessed at least once each financial year. The fair values of these investments are estimated by a qualified independent professional services firm. The valuations by this professional services firm are prepared using a number of approaches such as adjusted net asset valuations, discounted cash flows, income-related multiples and price-to-book ratio. In cases where the underlying investments of a subsidiary or associate are real estate projects or hotels, the independent valuer determines their fair value based on valuations by independent professional appraiser as set out in Note 3.2. These estimated fair values are used by the independent valuer as the primary basis for estimating each subsidiary's or associate's fair value.

 

Any gain or loss arising from a change in the fair value of investments in subsidiaries and associates is recognised in the statement of comprehensive income.

 

2.4       Foreign currency translation

 

(a)        Functional and presentation currency

 

The functional currency of the Company is the United States dollar ("USD"). The Company's financial statements are presented in USD.

 

(b)        Transactions and balances

 

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

 

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.

 

Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets, such as equities classified as available for sale, are included in other comprehensive income.

 

2.5        Financial assets

 

2.5.1     Classification

 

The Company classifies its financial assets in the following categories: at fair value through profit or loss and loans and receivables. The classification depends on the purpose for which the financial assets were acquired.

 

(a)        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 to be carried at fair value through profit or loss at inception. Financial assets at fair value through profit or loss held by the Company comprise listed and unlisted securities, investments in subsidiaries and associates and bonds.

 

(b)        Loans and receivables

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. The Company's loans and receivables comprise "Trade and other receivables" and "Receivables from related parties" in the balance sheet.

 

2.5.2     Recognition, de-recognition and measurement

 

Purchases or sales of financial assets are recognised on the date on which the Company commits to purchase or sell the asset.

 

Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets carried at fair value through profit or loss are initially recognised at fair value, and transaction costs are expensed in the statement of comprehensive income. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership. Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.

 

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.

 

Gains or losses arising from changes in the fair value of the "financial assets at fair value through profit or loss" category are presented in the statement of comprehensive income within "net gains/(losses) on financial assets at fair value through profit or loss" in the period in which they arise. Dividend income from financial assets at fair value through profit or loss is recognised in the statement of comprehensive income when the Company's right to receive payments is established.

 

 

 

2.6         Prepayments for acquisition of investment properties

 

These represent prepayments made by the Company 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 Company 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.

 

2.7        Impairment of assets

 

(a)        Impairment of non-financial assets

 

Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

 

(b)        Impairment of financial assets at amortised cost

 

The Company assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a 'loss event') and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.

 

Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.

 

For the loans and receivables category, the amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in statement of comprehensive income. If a loan or held-to-maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Company may measure impairment on the basis of an instrument's fair value using an observable market price.

 

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the statement of comprehensive income.

 

2.8        Trade receivables

 

Trade receivables are amounts from sales of investments in the ordinary course of business.

 

Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.

 

2.9        Cash and cash equivalents

 

In the statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less and bank overdrafts. In the balance sheet, bank overdrafts are shown within borrowings in current liabilities.

 

2.10      Share capital

 

Ordinary shares are classified as equity. Share capital is determined using the nominal value of ordinary shares that have been issued. Additional paid-in capital includes any premiums received on the initial issuance of the share capital. Incremental costs directly attributable to the issue of new ordinary shares or options are shown in equity as a deduction, net of tax, from the proceeds.

 

Any transaction costs associated with the issuing of ordinary shares are deducted from additional paid-in capital, net of any related income tax benefits.

 

2.11      Treasury shares

 

Where the Company purchases its equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company's equity holders until the treasury shares are cancelled or reissued.

 

Where such treasury shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company's equity holders.

 

2.12      Trade payables

 

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers.

 

Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

 

2.13      Revenue recognition

 

The Company recognises revenue when the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Company's activities, as described below.

 

(a)        Interest income

 

Interest income is recognised using the effective interest method. When a loan receivable is impaired, the Company reduces the carrying amount to its recoverable amount, being the estimated future cash flows discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loan receivables is recognised using the original effective interest rate.

 

(b)        Dividend income

 

Dividend income is recognised when the right to receive payment is established.

 

2.14      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. Enterprises and individuals that directly, or indirectly through one or more intermediary, control, or are controlled by, or under common control with, the Company, including, subsidiaries and fellow subsidiaries are related parties of the Company. Associates are individuals owning directly, or indirectly, an interest in the voting power of the Company that gives them significant influence over the entity, key management personnel, including directors and officers of the Company, the Investment Manager and their close family members. In considering related party relationships, attention is directed to the substance of the relationship, and not merely the legal form.

 

2.15      Impacts of changes in accounting policies

 

As a result of the changes in the Company's accounting policies, financial statements for prior periods were restated. The Company changed from preparing consolidated financial statements to issuing separate financial statements with its investments in subsidiaries and associates classified as financial assets at fair value through profit or loss. This is because as an investment entity it substantially measures and evaluates the performance of its investments on a fair value basis. The Company has opted to present the balance sheet in order of liquidity as opposed to using the current and non-current classifications. The following tables show the adjustments recognised for each individual line item.

 

Balance sheet as at 1 July 2013

 

 

1 July 2013

 

1 July 2013

 

(Consolidated)

Adjustments

(Restated)

 

USD'000

USD'000

USD'000

Assets

 

 

 

Non-current

 

 

 

Plant and equipment

3,093

(3,093)

-

Investment properties

3,722

(3,722)

-

Investments in associates

182,090

(182,090)

-

Prepayments for acquisition of

investment properties

8,239

(1,989)

6,250

Financial assets at fair value through profit or loss

4,697

183,718

188,415

Available-for-sale financial assets

5,784

(5,784)

-

Long-term loan to an associate

1,325

(1,325)

-

Other non-current assets

207

(207)

-

 

Total non-current assets

 

 ──────  209,157

──────

──────

(14,492)

──────

──────

   194,665   ──────

 

 

 

 

Current

 

 

 

Inventories

7,413

(7,413)

-

Trade and other receivables

17,918

(4,346)

  13,572

Short-term loans to related parties

7,501

(7,501)

-

Short-term receivables from related parties

-

2,403

  2,403

Financial assets at fair value through profit or loss

467,762

60,964

528,726

Other financial assets

8,700

(8,700)

-

Cash and cash equivalents

53,392

(48,890)

  4,502

 

Total current assets

 

──────

562,686

 ──────

──────

(13,483)

──────

──────

    549,203

──────

 

 

 

 

Total assets

 

──────
771,843

══════

──────

(27,975)

══════

──────

  743,868    ══════

 

 

 

 

 

 

 

 

 

1 July 2013

 

1 July 2013

 

(Consolidated)

Adjustments

(Restated)

 

USD'000

USD'000

USD'000

 

 

 

 

Equity and liabilities

 

 

 

 

Equity

 

 

 

 

Equity attributable to shareholders of the Company

 

 

 

Share capital

3,246

-

3,246

Additional paid-in capital

722,064

-

722,064

Treasury shares

(113,639)

-

(113,639)

Revaluation reserve

  31,376

 (31,376)

-

Available-for-sale financial assets

reserve

4,336

(4,336)

-

Translation reserve

  (18,763)

  18,763

-

Retained earnings

    123,823

(797)

  123,026

 

 

 

 

Total equity attributable to shareholders of the Company

─────

      752,443 

─────

─────

(17,746)

─────

─────

  734,697

─────

Non-controlling interests

1,089

(1,089)

-

Total equity

─────

753,532

─────

 

─────

(18,835)

─────

 

─────

  734,697

─────

 

 

 

 

Liabilities

 

 

 

 

Non-current

 

 

 

Other long-term liabilities

236

(236)

                    -   

 

Total non-current liabilities

 

─────

236

─────

─────

(236)

─────

────

                     -   

────

 

 

 

 

Current

 

 

 

Short-term borrowings

2,261

(2,261)

-

Trade and other payables

    13,658

(5,685)

  7,973

Payables to related parties

2,156

(958)

  1,198

Total current liabilities

 

─────

18,075

═════

─────

(8,904)

═════

─────

  9,171

═════

Total liabilities

 

    18,311 

─────

(9,140)

─────

  9,171

─────

Total equity and liabilities

 

      771,843

─────

(27,975)

─────

  743,868 ─────

 

 

 

 

Net asset value, USD per share attributable to shareholders of the Company

2.88

(0.07)

2.81

 

═════

═════

═════

 

 

Balance sheet as at 30 June 2014

 

 

30 June 2014

 

30 June 2014

 

(Consolidated)

Adjustments

(Restated)

 

USD'000

USD'000

USD'000

Assets

 

 

 

Non-current

 

 

 

Plant and equipment

3,114

    (3,114)

-

Investment properties

  4,175

  (4,175)

-

Investments in associates

        169,505

        (169,505)

-

Prepayments for acquisition of

investment properties

  7,895

  (1,645)

6,250

Financial assets at fair value through profit or loss

  4,697

184,952

189,649

Available-for-sale financial assets

6,033

  (6,033)

-

Other non-current assets

792

  (792)

-

 

Total non-current assets

 

──────  196,211

──────

──────

        (312)

──────

──────

195,899 ──────

 

 

 

 

Current

 

 

 

Inventories

7,216

  (7,216)

-

Trade and other receivables

  14,515

  (9,718)

4,797

Short-term loans to related parties

5,235

    (5,235)

-

Short-term receivables from related parties

-

  331

  331

Financial assets at fair value through profit or loss

 

552,339

 

26,968

 

    579,307

Other financial assets

  4,695

  (4,695)

-

Cash and cash equivalents

  21,551

  (20,240)

1,311

 

Total current assets

 

──────

      605,551 ──────

──────

(19,805)

──────

──────

  585,746 

──────

 

 

 

 

Assets classified as held for sale

  3,726

  (3,726)

-

Total assets

 

──────
     805,488

══════

──────

      (23,843)

══════

──────

      781,645

   ══════

 

 

 

 

 

 

 

 

 

 

 

 

 

30 June

2014

 

 

30 June

2014

 

(Consolidated)

Adjustments

(Restated)

 

USD'000

USD'000

USD'000

 

 

 

 

Equity and liabilities

 

 

 

 

Equity

 

 

 

 

Equity attributable to shareholders of the Company

 

 

 

Share capital

3,246

-

3,246

Additional paid-in capital

722,064

-

722,064

Treasury shares

(165,939)

-

(165,939)

Revaluation reserve

  33,281

(33,281)

-

Translation reserve

  (19,186)

19,186

-

Retained earnings

    205,489

          6,520

  212,009

 

 

 

 

Total equity attributable to shareholders of the Company

─────

      778,955 

─────

─────

      (7,575)

─────

─────

    771,380

─────

Non-controlling interests

849

(849)

-

Total equity

─────

    779,804 

─────

 

─────

      (8,424)

─────

 

─────

      771,380

─────

 

 

 

 

Liabilities

 

 

 

 

Non-current

 

 

 

Other long-term liabilities

           189

(189)

                    -   

 

Total non-current liabilities

 

─────

189

─────

─────

(189)

─────

────

                     -   

────

 

 

 

 

Current

 

 

 

Short-term borrowings

  7,839

(7,839)

-

Trade and other payables

    4,566

  (4,547)

  19

Payables to related parties

  13,090

(2,844)

  10,246

Total current liabilities

 

─────

    25,495 

═════

─────

(15,230)

═════

─────

    10,265 

═════

Total liabilities

 

    25,684 

─────

(15,419)

─────

  10,265  

─────

Total equity and liabilities

 

      805,488

─────

  (23,843)

─────

      781,645

─────

 

 

 

 

Net asset value, USD per share attributable to shareholders of the Company

3.27

(0.03)

3.24

 

═════

═════

═════

 


 

 

 

Statement of income for the year ended 30 June 2014

 

 

Year ended

 

30 June

2014

 

Adjustments

30 June

 2014

 

USD'000

USD'000

USD'000

 

(Consolidated)

 

(Restated)

 

 

 

 

Revenue

11,445

(11,445)

-

Cost of sales

(8,377)

─────

8,377

─────

-

─────

Gross profit

3,068

(3,068)

-

 

 

 

 

Dividend income

  19,804

  51,122

70,926

Interest income

  1,951

  (1,951)

-

Net gains/(losses) on financial assets at fair value through profit or loss

 97,307

(45,492)

51,815

Fair value gain on investment properties

473

(473)

-

Selling, general and administration expenses

  (26,864)

  4,337

(22,527)

Other income

    6,558

    (6,189)

369

Other expenses

  (14,725)

3,125

(11,600)

 

Operating profit

─────

  87,572

─────

─────

1,411

─────

─────

  88,983

 ─────

 

 

 

 

Finance income

224

(224)

-

Finance costs

(938)

─────

938

─────

-

─────

Finance costs - net

(714)

714

-

Share of losses of associates, net of tax

  (4,230)

  4,230

-

 

─────

  (4,944)

─────

─────

4,944

─────

─────

-

─────

Profit before tax

82,628

6,355

88,983

Corporate income tax

(64)

64

-

Withholding taxes imposed on

investment income

(1,137)

1,137

-

 

Profit for the year

 

─────

81,427

═════

─────

        7,556

═════

─────

      88,983

═════

 

 

 

 

Profit attributable to:

Owners of the Company

  81,666

7,317

      88,983

Non-controlling interests

(239)

239

-

 

─────

  81,427

─────

─────

 7,556

─────

─────

88,983

─────

Earnings per share

- basic and diluted (USD per share)

0.33

═════

0.03

═════

0.36

═════


 

 

 

Statement of comprehensive income for the year ended 30 June 2014

 

 

Year ended

 

30 June

 2014

Adjustments

30 June

 2014

 

USD'000

USD'000

USD'000

 

(Consolidated)

 

(Restated)

 

 

 

 

Profit for the year

  81,427

7,556

88,983

 

 

 

 

Other comprehensive income:

 

 

 

Items that will be reclassified subsequently to profit or loss

 

 

 

 

 

 

 

- Disposal of available-for-sale financial assets

  (4,336)

  4,336

-

- Currency translation differences

  (424)

  424

-

 

─────

  (4,760)

──────

4,760

──────

-

Items that will not be reclassified subsequently to profit or loss

 

 

 

- Share of revaluation reserves of associates

1,905

(1,905)

-

Other comprehensive loss for the year

──────

(2,855)

──────

──────

2,855

──────

──────

-

──────

Total comprehensive income for the year

 

78,572 ══════

10,411

══════

88,983

══════

 

 

 

 

         

 

 

 

Statement of cash flows for the year ended 30 June 2014

 

 

Year ended

 

30 June

 2014

Adjustments

30 June

 2014

 

USD'000

USD'000

USD'000

 

(Consolidated)

 

(Restated)

 

 

 

 

Operating activities

 

 

 

Profit before tax

82,628

6,355

88,983

Adjustments for:

 

 

 

- Asset depreciation and write off

674

(674)

-

- Dividend income

-

(70,926)

(70,926)

- Net gain from realisation of financial assets at fair value through profit or loss

(9,134)

9,134

-

- Unrealised gains/(losses) on financial assets at fair value through profit or loss

(88,173)

36,358

(51,815)

- Gain on disposal of available-for-sale financial assets

(4,336)

4,336

-

- Fair value gain of  investment properties

(473)

473

-

- Gain on disposal of plant and equipment

(69)

69

-

- Share of losses of associates

4,230

(4,230)

-

- Unrealised losses from foreign exchange differences

76

(76)

-

- Interest expense

573

(573)

-

- Reversal of impairment losses

(249)

249

-

- Impairment of other assets

14,045

(2,445)

11,600

Loss before changes in working capital

─────

(208)

─────

─────

(21,950)

─────

─────

(22,158)

─────

Change in trade receivables and other assets

(3,184)

2,431

(753)

Change in inventories

197

(197)

-

Change in trade payables and other liabilities

9,041

(7,947)

1,094

Income taxes paid

(1,201)

1,201

-

Dividend receipts

-

18,626

18,626

Net cash inflow/(outflow) from operating activities

 

 

─────

   4,645

─────

─────

(7,836)

─────

─────

(3,191)

─────

 

 

 

 

 

Year ended

 

30 June

 2014

Adjustments

30 June

 2014

 

USD'000

USD'000

USD'000

 

(Consolidated)

 

(Restated)

Cash flows from investing activities

 

 

 

Purchases of plant and equipment

(756)

756

-

Proceeds from disposal of plant and equipment

96

(96)

-

Dividends received

2,837

(2,837)

-

Financial assets at fair value through profit or loss:

 

 

 

- Acquisitions of investments

(76,216)

76,216

-

- Proceeds from disposals

88,947

(88,947)

-

Investments in associates:

 

 

 

- Acquisitions of investments

(1,137)

1,137

-

- Proceeds from disposals

2,663

(2,663)

-

Assets classified as held for sale:

 

 

 

- Proceeds from disposals

5,375

(5,375)

-

Term deposits at bank

(4,695)

4,695

-

Shareholder loans:

 

 

 

- Advances made

(1,888)

1,888

-

-  Repayments received

2,829

(2,829)

-

Net cash inflow from investing activities

 

─────

18,055

─────

─────

(18,055)

─────

   ─────

-

─────

Cash flows from financing activities

 

 

 

Interest paid

(573)

573

-

Payments for shares repurchased

 (59,545)

 59,545

-

Loan proceeds from banks

25,798

(25,798)

-

Loan repayment to banks

(20,221)

20,221

-

 

─────

   ─────

   ─────

Net cash outflow from financing activities

(54,541)

54,541

-

 

─────

─────

   ─────

Net change in cash and cash equivalents for the year

 (31,841)

28,650

(3,191)

Cash and cash equivalents at the beginning of the

year

53,392

(48,890)

4,502

Cash and cash equivalents at the end of the year

 

─────

21,551

═════

─────

(20,240)

═════

─────

1,311

═════

         

3           CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

 

When preparing the financial statements, the Board relies on 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.

 

3.1         Eligibility to qualify as an investment entity

 

The Company has determined that it is an investment entity under the definition in IFRS 10 as it meets the following criteria:

 

(a)    the Company has obtained funds from investors for the purpose of providing those investors with investment management services;

(b)    the Company's business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and

(c)    the performance of investments made by the Company are substantially measured and evaluated on a fair value basis.

 

The Company also has the typical characteristics of an investment entity:

 

·      it holds more than one investment;

·      it has more than one investor;

·      it has investors that are not its related parties; and

·      it has ownership interests in the form of equity or similar interests.

 

As a consequence, the Company does not consolidate its subsidiaries and accounts for them at fair value through profit or loss. See Note 2.15 above for information regarding the impact of the change in accounting policy.

 

3.2        Fair value of subsidiaries and associates and their underlying investments

 

As at 30 June 2015, 100% (30 June 2014 restated: 100%) of the financial assets at fair value through profit and loss relate to the Company's investments in subsidiaries and associates that have been fair valued in accordance with the policies set out above. The Company has investments in a number of subsidiaries and associates which were established to hold underlying investments. The shares of the subsidiaries and associates are not publicly traded; return of capital to the Company can only be made by divesting the underlying investments of the subsidiaries and associates. As a result, the carrying value of the subsidiaries and associates may not be indicative of the value ultimately realised on divestment.

 

The underlying investments include listed and unlisted securities, private equity and real estate assets. Where an active market exists (for example, for listed securities), the fair value of the subsidiary or associate reflects the asset value of the underlying holdings. Where no active market exists, valuation techniques are used.

 

As at 30 June 2015 and 30 June 2014, the Company classifies its investments in subsidiaries and associates as Level 3 within the fair value hierarchy, because they are held by subsidiaries and associates which are not publicly traded, even when the underlying assets are readily realisable.

 

The fair value of the investments in subsidiaries and associates is primarily based on their net asset value. The estimated fair values provided by the qualified independent professional services firm are used by the Audit and Valuation Committee as the primary basis for estimating each investment's fair value for recommendation to the Board. Information about the significant judgements, estimates and assumptions that are used in the valuation of these investments is discussed below.

 

 

 

 

 

(a)        Valuation of assets that are traded in an active market

 

The fair values of listed securities are based on quoted market prices at the close of trading on the reporting date. For unlisted securities which are traded in an active market, fair value is the average quoted prices at the close of trading obtained from a minimum sample of three reputable securities companies at the reporting date. Other relevant measurement bases are used if broker quotes are not available or if better and more reliable information is available.

 

(b)        Valuation of assets that are not traded in an active market

 

The fair value of assets that are not traded in an active market (for example, private equities and real estate where market prices are not readily available) is determined by using valuation techniques. The independent valuer 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. The valuations may vary from the actual prices that would be achieved in an arm's length transaction at the reporting date.

 

(b.1)     Valuation of investments in private equities

 

The Company's private equity holdings are fair valued using the discounted cash flow and market comparison methods. The projected future cash flows are driven by management's business strategies and goals and its assumptions of growth in gross domestic product ("GDP"), market demand, inflation, etc. the independent valuer uses discount rates that reflect the uncertainty of the amount and timing of the cash flows.

 

Depending on the development stage of a business and its associated risks, the independent valuer uses discount rates in the range from 25% to 30% and terminal growth rates of 5% to 6% (30 June 2014: 25% to 30% and 5% to 6%, respectively). As at 30 June 2015, if the discount rates had been higher/lower, the fair value of the Company's private equity investments would have gone down/up. In contrast, if the terminal growth rates had been higher/lower, these investments' fair value would have increased/decreased.

 

(b.2)     Valuation of real estate and hospitality investments

 

A number of the Company's real estate investments are co-invested with VinaLand Limited ("VNL"), another fund managed by the Investment Manager. In most cases, VNL holds a controlling stake in the joint venture companies and therefore exerts control over the investments. As both funds are managed by the same Investment Manager, each fund's investment objectives for each property are generally the same. However, given VNL has an investment objective of disposing of a portion of its portfolio, the Company would potentially be put in a position where sales may be triggered earlier than ideally desired. The Board reviews all such decisions and under normal circumstances is not prepared to assume the development risk that would result from continuing to hold an investment which VNL is selling. The Company also holds a stake in VNL itself and supports the board of that company in its objective of disposing of a portion of its assets.

 

 The fair values of underlying real estate properties are based on valuations by independent professional valuers including CBRE, Savills, Jones Lang LaSalle, Cushman & Wakefield and HVS. These valuations are based on certain assumptions which are subject to uncertainty and might materially differ from the actual results of a sale. The estimated fair values provided by the independent professional real estate appraisers are used by the independent valuer as the primary basis for estimating fair value of the Company's subsidiaries and associates that hold these properties in accordance with accounting policies set out in section 2.3.

 

 

           

In conjunction with making its judgement for the fair value of the Company's underlying real estate and hospitality investments, the independent valuer considers information from a variety of sources including:

 

a.   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;

 

b.   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;

 

c.   recent developments and changes in laws and regulations that might affect zoning and/or the Company's ability to exercise its rights in respect to properties and therefore fully realise the estimated values of such properties;

 

d.   discounted cash flow projections based on estimates of future cash flows, derived from the terms of external evidence such as current market rents, occupancy and room rates,  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; and

 

e.   recent compensation prices made public by the local authority at the province where the property is located.

 

As at 30 June 2015, discount rates ranged from 15 % to 21.5% (30 June 2014: 14.5% to 22%). As at the year end, if the discount rates had been higher/lower, the fair value of the Company's underlying real estate and hospitality investments would have been decreased/increased.

 

The average occupancy and room rates used in the discounted cash flow projections for the Company's hospitality investments are 69% and USD235 (30 June 2014: 67.5% and USD233, respectively). As at 30 June 2015, if the occupancy and room rates had been higher/lower, the fair value of the Company's underlying hospitality investments would have risen/gone down.

 


 

4          SEGMENT ANALYSIS

 

In identifying its operating segments, management follows the subsidiaries' sectors of investment which are based on internal management reporting information. The operating segments by investment portfolio include capital markets, real estate and hospitality, private equity and cash (including cash and cash equivalents, 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 underlying investment assets of the subsidiaries. Expenses and liabilities which are common to all segments are allocated based on each segment's share of total assets. There have been no changes from prior periods in the measurement methods used to determine reported segment profit or loss.

 

Segment information can be analysed as follows:

 

Statement of comprehensive income

 

 

   Capital markets

Real

estate and hospitality

Private equity

 

Total

 

USD'000

USD'000

USD'000

USD'000

 

 

 

 

 

Year ended 30 June 2015

 

 

 

 

Dividend income

69,197

-

-

69,197

Net gains/(losses) on financial assets at fair value through profit or loss

(62,114)

(222)

5,947

(56,389)

General and administration expenses (Note 15)

        

(13,698)

           (2,999)

         

(807)

           (17,504)

Other income

382

-

-

382

Impairment losses (Note 16)

-

(1,058)

-

(1,058)

(Loss)/profit before tax

─────

(6,233)

─────

(4,279)

─────

5,140

─────

(5,372)

 

═════

═════

═════

═════

 

Year ended 30 June 2014 (restated)

 

 

 

Dividend income

70,926

-

-

70,926

Net gains/(losses) on financial assets at fair value through profit or loss

          45,260

           6,807

          (252)

           51,815

General and administration expenses (Note 15)

         (19,528)

           (2,860)

             (139)

           (22,527)

Other income

369

-

-

369

Impairment losses (Note 16)

-

-

(11,600)

(11,600)

 

Profit/(loss) before tax

─────

97,027

─────

3,947

─────(11,991)

─────

88,983

 

═════

═════

  ═════

═════


 

         

 

Balance sheet

 

Assets

 

 

Capital

markets

Real

estate and hospitality

Private

equity

 

Cash

 

Total

 

USD'000

USD'000

USD'000

USD'000

USD'000

As at 30 June 2015

 

 

 

 

 

Cash and cash equivalents

-

-

-

906

906

Short-term receivables from related parties

382

-

-

-

382

Trade and other receivables

4,697

-

-

-

4,697

Financial assets at fair value through profit or loss

476,054

185,257

51,256

-

712,567

Prepayments for acquisitions of investment properties

-

5,192

-

-

5,192

 

──────

──────

─────

─────

──────

Total assets

  481,133

 190,449  

51,256

906

723,744

 

──────

──────

─────

─────

──────

 

 

 

 

 

 

Payables to related parties

4,580

359

97

-

5,036

Other payables

44

-

-

-

44

 

──────

──────

─────

─────

──────

Total liabilities

4,624

359

97

-

5,080

 

──────

──────

─────

─────

──────

Net asset value

476,509

190,090

51,159

906

718,664

 

══════

══════

═════

═════

══════

 

As at 30 June 2014 (restated) 

 

 

 

 

Cash and cash equivalents

-

-

-

1,311

1,311

Short-term receivables from related parties

331

-

-

-

331

Trade and other receivables

4,797

-

-

-

4,797

Financial assets at fair value through profit or loss

573,985

185,647

9,324

-

768,956

Prepayments for acquisitions of investment properties

-

6,250

-

-

6,250

 

──────

──────

─────

─────

──────

Total assets

579,113

191,897

9,324

1,311

781,645

 

 

 

 

 

 

Payables to related parties

9,929

303

14

-

10,246

Other payables

19

-

-

-

19

 

──────

──────

─────

─────

──────

Total liabilities

9,948

303

14

-

10,265

 

──────

──────

─────

─────

──────

Net asset value

569,165

191,594

9,310

1,311

771,380

 

══════

══════

═════

═════

══════

 


 

5          INTERESTS IN SUBSIDIARIES AND ASSOCIATES

 

5.1         Subsidiaries

 

The Company had the following principal subsidiaries as at 30 June 2015 and 30 June 2014:

 

 

 

As at

 

 

 

30 June 2015

30 June 2014

 

 

 

Name

 

Country of incorporation

 

% of

Company interest

 

% of Company interest

 

 

Nature of the  business

Vietnam Investment Property Holding Limited

BVI

100

100

Holding company for listed,

unlisted securities and real estate

Vietnam Investment Property Limited

BVI

100

100

Holding company for listed,

and unlisted securities

Vietnam Ventures Limited

BVI

100

100

Holding company for listed,

unlisted securities and real estate

Vietnam Investments Limited

BVI

100

100

Holding company for listed,

unlisted securities and real estate

Asia Value Investment Limited

BVI

100

100

Holding company for listed,

and unlisted securities

Vietnam Master Holding 2 Limited

BVI

100

100

Holding company for listed

securities

VOF Investment Limited

BVI

100

100

Holding company for listed,

 

 

 

 

unlisted securities, real estate,

 

 

 

 

hospitality and private equity

VOF PE Holding 5 Limited

BVI

100

100

Holding company for listed

securities

Visaka Holdings Limited

BVI

100

100

Holding company for treasury

 

 

 

 

shares

Portal Global Limited

BVI

100

100

Holding company for listed

securities

Winstar Resources Limited

BVI

100

100

Holding company for listed

securities

Howard Holding Pte. Limited

Singapore

100

100

Holding company for private equity

Fraser Investment Pte. Limited

Singapore

100

100

Holding company for listed

securities

SE Asia Master Holding 7 Pte Limited

Singapore

100

100

Holding company for private equity

Alright Assets Limited

Singapore

100

100

Holding company for real estate

VTC Espero Limited

Singapore

100

100

Holding company for real estate

American Home Vietnam Co., Limited

Vietnam

100

100

Ceramic tiles

Yen Viet Joint Stock Company

Vietnam

65

65

Birdnest products

International Dairy Products Joint Stock Company

Vietnam

56

-

Dairy products

 

 

════

════

 

 

There is no legal restriction to the transfer of funds from the BVI or Singapore subsidiaries to the Company. Cash held in Vietnamese subsidiaries is subject to restrictions imposed by co-investors and the Vietnamese government and therefore it cannot be transferred out of Vietnam unless such restrictions are satisfied.

 

The Company has commitments under investment certificates it has received for real estate projects jointly invested with VinaLand Limited, a related party under common management, and other agreements it has entered into, to acquire and develop, or make additional investments in investment properties and leasehold land in Vietnam. Further investments in many of these arrangements are at the Company's discretion.

 

 

 

 

 

 

 

 

 

 

 

 

5.2        Associates

 

 

 

As at

 

 

 

 

30.6.2015

30.6.2014

 

Name

Country of incorporation

% of

Company interest

% of Company interest

Nature of the business

Pacific Alliance Land Limited

BVI

25

25

Holding company for real

 

 

 

 

estate

Sunbird Group Limited

BVI

25

25

Holding company for real

 

 

 

 

estate

VinaCapital Danang Resorts Limited

BVI

25

25

Holding company for real

 

 

 

 

estate

Vietnam Property Holdings Limited

BVI

25

25

Holding company for real

 

 

 

 

estate

Prosper Big Investment Limited

BVI

25

25

Holding company for real

 

 

 

 

estate

VinaCapital Commercial Center

Singapore

12.75

12.75

Holding company for real

Private Limited

 

 

 

estate

Mega Assets Pte. Limited

Singapore

25

25

Holding company for real

 

 

 

 

estate

SIH Real Estate Pte. Limited

Singapore

25

25

Holding company for real

 

 

 

 

estate

VinaLand Eastern Limited

Singapore

25

25

Holding company for real

 

 

 

 

estate

 

 

════

════

 

 

 

 

 

 

 

             

The Company has a 12.75% equity interest in VinaCapital Commercial Center Private Limited. The Company co-invested in this entity with VinaLand Limited ("VNL"), an investment company also managed by the Investment Manager. The Company considers this interest as an investment in an associate because, as part of the co-investment strategy, it can exert significant influence on the entity via the Investment Manager.

 

5.3        Financial risks

 

The Company owns a number of subsidiaries for the purpose of holding investments in listed and unlisted securities, debt instruments, private equity and real estate. The Company, via these underlying investments, is subject to financial risks which are further disclosed in Note 22. The Investment Manager makes investment decisions after performing extensive due diligence on the underlying investments, their strategies, financial structure and the overall quality of management.

 

6          CASH AND CASH EQUIVALENTS

 

 

      30 June

2015

      30 June 2014

 

USD'000

USD'000

 

 

Restated

 

Cash in banks

906

1,311

 

═════

═════

 

As at the balance sheet date, cash and cash equivalents were denominated in USD. Please refer to Note 8 for the balance of cash and cash equivalents held at the Company's subsidiaries.

 

 

7             FINANCIAL INSTRUMENTS BY CATEGORY

 

 

 

 

Loans and receivables

Financial

assets at fair value through profit or loss

 

 

 

Total

 

USD'000

USD'000

USD'000

 

 

 

 

As at 30 June 2015

 

 

 

Cash and cash equivalents

906

-

906

Short-term receivables from related parties

382

-

382

Trade and other receivables

  4,697

-

4,697

Financial assets at fair value through profit or loss

-

     712,567

  712,567

 

Total

─────

  5,985

 ══════

─────

     712,567 ══════

──────

   718,552    ══════

 

 

 

 

Financial assets denominated in:

 

 

 

- USD

5,985

712,567

718,552

 

══════

══════

 

══════

As at 30 June 2014 (restated)

 

 

 

Cash and cash equivalents

1,311

-

1,311

Short-term receivables from related parties

331

-

331

Trade and other receivables

4,797

-

4,797

Financial assets at fair value through profit or loss

-

  768,956

768,956

 

Total

─────

  6,439  

══════

─────

768,956

 ══════

──────

775,395

══════

 

 

 

 

Financial assets denominated in:

 

 

 

- USD

  6,439 

768,956

775,395

 

══════

══════

══════

 

All financial liabilities are short term in nature and their carrying values approximate their fair values. There are no financial liabilities that must be accounted for at fair value through profit or loss (30 June 2014: nil).

 

8          FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

 

Financial assets at fair value through profit and loss comprise the Company's investments in subsidiaries and associates. The underlying assets and liabilities of the subsidiaries and associates carried at fair value are disclosed in the following table:

 

 

       30 June

 2015

       30 June 2014

 

 USD'000

 USD'000

 

 

Restated

 

 

 

Cash and cash equivalents

22,752

19,810

Government bonds

-

19,241

Ordinary shares - listed

            401,218  

449,106

Ordinary and preference shares - unlisted and over-the-counter ("OTC")

              63,810

83,992

Private equity

51,256

9,324

Real estate projects and hospitality

168,776

178,845

Other assets, net of liabilities

4,755

8,638

 

──────

──────

 

712,567

768,956

 

══════

══════

 

The sectors of the major underlying investments held by in the Company's subsidiaries are as follows:

 

 

       30 June

 2015

        30 June 2014

 

 USD'000

USD'000

 

 

Restated

 

 

 

Consumer goods

            175,391  

149,599

Construction

             94,341

101,599

Financial services

             52,991

54,542

Agriculture

             22,056

94,251

Energy, minerals and petroleum

             58,153

57,642

Pharmaceuticals

             21,356

28,886

Real estate and hospitality

257,491

233,363

Government bonds

           -

19,241

 

As at 30 June 2015, an underlying holding, Vietnam Dairy Products Joint Stock Company, within financial assets at fair value through profit or loss amounted to 11% of the net asset value of the Company (30 June 2014: 12.2%). There were no other holdings that had a value exceeding 10% of the net asset value of Company as at 30 June 2015 or 30 June 2014.

 

 

9          PREPAYMENTS FOR ACQUISITIONS OF INVESTMENT PROPERTIES

 

 

30 June 2015

   30 June 2014

 

 USD'000

 USD'000

 

 

Restated

 

Historical costs

8,986

8,986

Less: cumulative allowance for impairment losses

(3,794)

(2,736)

 

────

────

 

5,192

6,250

 

════

════

 

Movements in the prepayments and allowance for impairment during the year are as below:

 

 

30 June 2015

   30 June 2014

 

 USD'000

 USD'000

 

 

Restated

 

Opening balance

2,736

2,736

Charge for the year

1,058

-

 

────

────

Closing balance

3,794

2,736

 

════

════

 

Prepayments are made by the Company to property vendors where the final transfer of the properties is pending the approval of the relevant authorities and/or subject to either the Company or the vendor completing certain performance conditions set out in agreements.

 

As at 30 June 2015, due to market conditions, impairment allowances of USD1.1 million (30 June 2014: nil) have been taken against the prepayments for acquisitions of investments. The relevant recoverable amounts are fair values less costs to sell estimated by an independent professional qualified valuer who holds recognised relevant professional qualifications and has recent experience in the locations and categories of the properties for which the prepayments are made.

 

The valuations by the independent valuation company are prepared based upon direct comparison with sales of other similar properties in the area and the expected future discounted cash flows of each property using a yield that reflects the risks inherent therein and a forecast horizon of 6 years. The discount rate applied is 20% (30 June 2014: 20%). If the sale prices of similar properties had increased/decreased, it is expected that the recoverable amounts of these prepayments would have moved up/down accordingly. On the other hand, if discount rates had risen/dropped, their recoverable amounts would have decreased/increased as a result.

 

It is the Company's view that all of its prepayments for acquisitions of investments are in Level 3 of the fair value hierarchy. 

           

10         SHARE CAPITAL

 

 

30 June 2015

 

30 June 2014

 

Number of shares

USD'000

 

Number of shares

USD'000

 

 

 

 

 

 

Ordinary shares of USD0.01 each:

 

 

 

 

 

 

 

 

 

 

 

Authorised

500,000,000

5,000

 

500,000,000

5,000

 

════════

════

 

════════

════

Issued and fully paid

324,610,259

3,246

 

324,610,259

3,246

 

════════

════

 

════════

════

 

11         TREASURY SHARES

 

 

30 June 2015

 

30 June 2014

 

Number of shares

USD'000

 

Number of shares

USD'000

 

 

 

 

 

 

Opening balance (1 July 2014/

 

 

 

 

 

   1 July 2013)

86,355,265

165,939

 

63,233,988

113,639

Shares repurchased during the year

18,297,382

47,344

 

  23,121,277

  52,300

 

────────

─────

 

────────

─────

Closing balance

                        104,652,647

213,283

 

86,355,265

165,939

 

════════

═════

 

════════

═════

 

During the year, the Company purchased 18,297,382 of its ordinary shares (year ended 30 June 2014: 23,121,277 shares) for total cash consideration of USD47.3 million (year ended 30 June 2014: USD52.3 million). The consideration was paid with cash from one of the Company's subsidiaries. All purchases had been fully settled by the balance sheet dates. Please refer to Note 23 for the disclosure of cancellation of treasury shares subsequent to the year end.

 

12         PAYABLES TO RELATED PARTIES

 

 

30 June

2015

30 June

2014

 

 USD'000

USD'000

 

 

Restated

 

Management fees payable to the Investment Manager (Note 20)

938

1,013

Incentive fees payable to the Investment Manager (Note 20)

3,672

9,013

Other payables to related parties

426

220

 

────

5,036

════

─────

10,246

═════

 

All payables to related parties are short-term in nature. Therefore, their carrying values are considered a reasonable approximation of their fair values.

 

13.        DIVIDEND INCOME

 

 

30 June

2015

30 June

2014

 

 USD'000

USD'000

 

 

Restated

 

Dividend income from a subsidiary used to pay for the Company's share repurchases (*)

47,344

52,300

Dividend income from a subsidiary used to pay for the Company's operating expenses

21,853

18,626

 

─────

69,197

═════

─────

70,926

═════

 

(*) This dividend income was settled by the subsidiary's payments on the Company's behalf for its share repurchases.

 

Since cash was transferred out of the subsidiary as settlement for the dividend income, the subsidiary's fair value decreased, thus resulting in losses on financial assets at fair value through profit or loss as described in Note 14.
 

14         NET (LOSSES)/GAINS ON FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

 

 

Year ended

 

30 June

2015

30 June

2014

 

USD'000

USD'000

 

 

Restated

Financial assets at fair value through profit or loss:

 

 

- Gains from the realisation of financial assets, net

114

-

- Unrealised (losses)/gains, net

(56,503)

51,815

 

─────

─────

Total

(56,389)

51,815

 

═════

═════

 

The above net (losses)/gains on financial assets at fair value through profit or loss includes dividend and interest income of USD16.3 million earned by the Company's subsidiaries during the year (year ended 30 June 2014: USD21.7 million). The net (losses)/gains also include total payments of USD47.3 million which a subsidiary paid for the Company's share repurchases made during the year (year ended 30 June 2014: USD52.3 million) as explained in Note 13. Also included in these (losses)/gains were this subsidiary's dividend payments of USD21.9 million to the Company to cover its operating expenses (year ended 30 June 2014: USD18.6 million).

 

15         GENERAL AND ADMINISTRATION EXPENSES AND ONGOING CHARGES

 

(a)        General and administration expenses

 

Year ended

 

30 June

2015

30 June

2014

 

USD'000

USD'000

 

 

Restated

 

 

 

Management fees (Note 20(a))

11,395

11,647

Incentive fees - capital markets portfolio

3,672

9,013

Incentive fees - direct real estate portfolio

-

-

Directors' fees

377

364

Custodian, secretarial and other professional fees

1,508

1,178

Others

552

325

 

─────

17,504

═════

─────

22,527

═════

           


 

 

 

(b)        Total expenses ratio

 

 

Year ended

 

30 June 2015

30 June 2014

Total expenses ratio

1.73%

1.72%

Incentive fees

0.49%

1.17%

 

─────

─────

Total expenses ratio including incentive fees

2.22%

2.89%

 

═════

═════

 

Total expenses ratio has been calculated in accordance with the Association of Investment Companies ("AIC") recommended methodology dated May 2012. It is the ratio of annualised ongoing charges over the average undiluted NAV of the Company during the year.

 

Expenses include management fees, directors' fees and expenses, recurring audit and tax services, custody and fund administration services, fund accounting services, secretarial services, registrars' fees, public relations fees, insurance premiums, regulatory fees and similar charges.

 

16         IMPAIRMENT LOSSES

 

 

Year ended

 

30 June

2015

30 June

2014

 

USD'000

USD'000

 

 

Restated

 

 

 

Impairment on prepayments for acquisitions of investment properties

1,058

-

Impairment on other receivables

-

11,600

 

─────

1,058

═════

─────

11,600

═════

 

During the year ended 30 June 2014, the Company made a full provision for a receivable from a third party which did not have the financial capability to settle the balance.

 

17         INCOME TAX EXPENSE

 

The Company is incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, there are no income, state, corporation, capital gains or other taxes payable by the Company.

 

A number of subsidiaries are established in Vietnam and Singapore and are subject to corporate income tax in those countries. The income tax payable by these subsidiaries is included in their fair values as disclosed in the line item "Financial assets at fair value through profit or loss" on the balance sheet.

 

The relationship between the estimated income tax expense based on the applicable income tax rate of 0% and the tax expense actually recognised in the statement of comprehensive income can be reconciled as follows:

 

 

Year ended

 

30 June

2015

30 June

2014

 

 USD'000

Restated

 

 

(Loss)/profit before tax

(5,372)

─────

88,983

─────

Applicable tax rate

0%

 

Income tax

─────

-

═════

─────

-

═════

 

There is no deferred income tax.

 

 

18         (LOSS)/EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE

 

(a)        Basic

 

Basic (loss)/earnings per share is calculated by dividing the (loss)/profit from operations of the Company by the weighted average number of ordinary shares in issue during the year excluding ordinary shares purchased by the Company and held as treasury shares (Note 11).

 

 

Year ended

 

30 June

2015

30 June

2014

 

USD'000

 USD'000

Restated

 

 

 

(Loss)/profit for the year (USD'000)

(5,372)

88,983

Weighted average number of ordinary shares in issue

228,742,512

246,934,372

Basic (loss)/earnings per share (USD per share)

(0.02)

0.36

 

════════

════════

 

(b)        Diluted

 

Diluted (loss)/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 Company has no category of potentially dilutive ordinary shares. Therefore, diluted (loss)/earnings per share is equal to basic (loss)/earnings per share.

 

 

 

 

(c)        Net asset value per share

 

Net asset value ("NAV") per share is calculated by dividing the net asset value of the Company by the number of outstanding ordinary shares in issue as at the reporting date excluding ordinary shares purchased by the Company and held as treasury shares (Note 11). NAV is determined as total assets less total liabilities.

 

 

 

As at 30 June

2015

As at 30 June

2014

Restated

 

 

 

Net asset value (USD'000)

  718,664

771,380

Number of outstanding ordinary shares on issue

219,957,612

238,254,994

Net asset value per share (USD/share)

3.27

═════════

3.24

═════════

 

19         DIRECTORS' REMUNERATION

 

The aggregate directors' fees for the year amounted to USD377,944 (year ended 30 June 2014 (restated): USD364,000), of which there was no outstanding amount payable at the reporting date (30 June 2014: nil).

 

The details of remuneration for each director are summarised below:

 

 

Year ended

 

30 June

2015

30 June

2014

 

USD

USD

 

 

 

Steven Bates

95,000

95,000

Martin Adams

80,000

80,000

Thuy Bich Dam

80,000

19,000

Martin Glynn (*)

32,444

80,000

Michael Gray

90,000

90,000

Don Lam (*)

-

-

 

──────

377,444

══════

──────

364,000

══════

           

               (*) Martin Glynn and Don Lam retired on 27 November 2014.

.

 

 

20         RELATED PARTIES

 

(a)        Management fees

 

Under an amended and restated investment management agreement dated 24 June 2013 which became effective as of 1 July 2013 (the "Amended Management Agreement"), the Investment Manager receives a fee at an annual rate of 1.5% of the NAV, payable monthly in arrears.

 

Total management fees for the year amounted to USD11.4 million (the year ended 30 June 2014: USD11.6 million), with USD0.9 million (30 June 2014: USD1.0 million) in outstanding accrued fees due to the Investment Manager at the reporting date.

 

(b)        Incentive fees


Under the Amended Management Agreement dated 24 June 2013 and the latest amendment dated 15 October 2014, from 1 July 2013, the incentive fee was changed to be 15% of the increase in NAV per share over a hurdle rate of 8% per annum. A catch up is no longer applied. Furthermore, for the purposes of calculating incentive fees, the Company's net assets are segregated into a Direct Real Estate Portfolio and a Capital Markets Portfolio. Shares bought back by the Company shall be treated as distributions, with the purchase amounts allocated to each portfolio subtracted from the relevant portfolio as an adjustment to the high water mark per share. A separate incentive fee is calculated for each portfolio so that for any balance sheet date it will be possible for an incentive fee to become payable in relation to one, both, or neither, portfolio depending upon the performance of each portfolio. However, the maximum incentive fee that can be paid in any given year in respect to a portfolio is 1.5% of the NAV of that portfolio at the balance sheet date.  Any incentive fees earned in excess of the cap may be paid out in subsequent years providing that certain performance targets are met.

 

There has been a difference of interpretation between the Company and the Investment Manager about certain provisions of the investment management agreement relating to the incentive fee.  The Board has taken independent legal advice on the matter. In order to avoid the costs and financial uncertainty of recourse to a legal solution, the Board and the Investment Manager agreed the total incentive fees for the year amounted to USD3.7 million (the year ended 30 June 2014 : 9.0 million), with USD3.7 million (30 June 2014: USD9.0 million) in outstanding accrued fees due to the Investment Manager at the reporting date. Furthermore the Investment Manager and the Board have agreed that the investment management agreement will be modified to reduce the possibility of differences of interpretation in the future.

 

(c)        Other balances with related parties

 

 

30 June

2015

  30 June

2014

 

USD'000

USD'000

 

 

Restated

Receivables from the Investment Manager on management fees rebate

382

331

 

 

 

Payables to the Investment Manager on expenses paid on behalf

426

220

 

 

 

Investments in other investment funds managed by the Investment Manager, held by a subsidiary of the Company:

 

 

- Vietnam Infrastructure Limited

          5,860

4,955

- VinaLand Limited

18,698

20,053

 

─────

─────

 

24,558

25,008

 

═════

═════

 

 

21        COMMITMENTS

 

The Company's real estate associates have a broad range of commitments under investment licences which they have received for real estate projects jointly invested with VinaLand Limited, a related party under common management, and other agreements they have entered into, to acquire and develop, or make additional investments in investment properties and leasehold land in Vietnam. Further investments in many of these arrangements are at the Company's discretion.

 

22         FINANCIAL RISK MANAGEMENT

 

(a)        Financial risk factors

 

The Company has set up a number of subsidiaries as well as invested in some associates for the purpose of holding investments in listed and unlisted securities, debt instruments, private equity and real estate in Vietnam and overseas with the objective of achieving medium to long-term capital appreciation and providing investment income. The Company accounts for these subsidiaries and associates as financial assets at fair value through profit or loss. The fair values are therefore subject to a variety of financial risks: market risk (including currency risk, interest rate risk, and price risk), credit risk and liquidity risk. The Company's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potentially adverse effects on the Company's financial performance. The Company's risk management is coordinated by the Investment Manager who manages the distribution of the assets to achieve the investment objectives.

 

There have been no significant changes in the management of risk or in any risk management policies since the last balance sheet date.

 

Foreign exchange risk

 

The Company's subsidiaries' exposure to risk resulting from changes in currency exchange rates is moderate as, although transactions in Vietnam are settled in the VND, the value of the VND has in recent times been closely tied to that of the USD, the reporting currency. 

 

Neither the Company nor any of its subsidiaries or associates hedges currency exposure, but cash may be held in either VND or USD. The Board and Investment Manager regularly review the costs and potential benefits of currency hedging. The Company did not enter into any currency hedges in the reporting period and it is considered unlikely that it will do so in the foreseeable future.

 

As at 30 June 2015 and 30 June 2014, the fair value of the Company's investments in subsidiaries and associates is exposed to foreign currency risk mainly because they hold financial assets and liabilities denominated in VND. As at the reporting date, had the VND weakened/strengthened by 5 per cent in relation to the USD, with all other variables held constant, the balance of financial assets held at fair value through profit or loss would have been lower/higher by USD33.2 million (30 June 2014 (restated): USD36.1 million).

 

Price risk

 

Price risk is the risk that the value of an 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.

 

The Company's subsidiaries invest in listed and unlisted equity securities and are exposed to market price risk of these securities.

 

The majority of the Company's subsidiaries' equity investments are publicly traded on either of Vietnam's stock exchanges (HOSE or HNX).

 

All securities investments present a risk of loss of capital. This risk is managed 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 Company is monitored by the Investment Manager on a monthly basis and reviewed by the Board of Directors on a quarterly basis.

 

If the prices of the securities had increased/decreased by 10 per cent, the Company's financial assets held at fair value through profit or loss would have been higher/lower by USD44 million (30 June 2014 (restated): USD50.8 million).

 

The Company's associates invest in a number of real estate projects. The fair values of the underlying properties have a direct impact on the fair values of these investments in associates. The Investment Manager closely monitors indicators that may affect property valuations. The Board of Directors is also highly involved through its quarterly reviews of these valuations.

 

If the fair values of real estate properties had gone up/down by 10 per cent, the Company's financial assets at fair value through profit and loss would have risen/dropped by USD10.7 million (30 June 2014 (restated): USD11.1 million).

 

Interest rate risk

 

The Company's subsidiaries' exposure to interest rate risk is related to interest bearing financial assets and financial liabilities. Cash and cash equivalents, and government bonds are subject to interest at fixed rates. They are exposed to fair value changes due to interest rate changes. The Company's subsidiaries had no significant financial liabilities with floating interest rates. As a result, the Company had limited exposure to cash flow and interest rate risk.

 

Liquidity risk

 

Liquidity risk is the risk that the Company may not be able to generate sufficient cash resources to settle its obligations in full as they fall due or can only do so on terms that are materially disadvantageous.

 

Listed securities held by the Company's subsidiaries are considered readily realisable, as the majority are listed on Vietnam's stock exchanges.

 

At year end, the Company's non-derivative financial liabilities have contractual maturities which are summarised in the table below. The amounts in the table are the contractual undiscounted cash flows.

                                                                                                          

 

30 June 2015

30 June 2014

 

Within 12 months

Over  12 months

Within 12 months

Over  12 months

 

USD'000

USD'000

USD'000

USD'000

 

 

 

 

 

Payables to related parties (Note 12)

  5,036

-

  10,246

-

Other payables

44

-

19

-

 

 

─────

  5,080

═════

─────

-

═════

──────

  10,265

══════

──────

-

══════

 

 

 

The Company manages its liquidity risk by investing predominantly in securities through its subsidiaries that it expects to be able to liquidate within 12 months or less. The following table analyse the expected liquidity of the underlying assets held by the Company and its subsidiaries and associates:

 

 

30 June 2015

30 June 2014

(Restated)

 

Within 12 months

Over 12 months

Within 12 months

Over  12

months

 

USD'000

USD'000

USD'000

USD'000

 

 

 

 

 

Cash and cash equivalents

906

-

1,311

-

Short-term receivables from a related party

382

-

331

-

Trade and other receivables

-

4,697

100

4,697

Financial assets at fair value through profit or loss

545,627

166,940

585,291

   183,665

 

Total

 

─────

546,915 ═════

─────

171,637  ═════

──────

587,033 ══════

──────

188,362 ══════

 

Capital management

 

The Company's capital management objectives are:

 

·      To ensure the Company's ability to continue as a going concern

·      To provide investors with an attractive level of investment income; and

·      To preserve a potential capital growth level.

 

The Company considers the capital to be managed as equal to the net assets attributable to the equity shareholders of the parent. The Company is not subject to any externally imposed capital requirements. The Company has engaged the Investment Manager to allocate the net assets in such a way so as to generate a reasonable investment returns for its shareholders and to ensure that there is sufficient funding available for the Company to continue as a going concern.

 

Capital as at year end is summarised as follows: 

 

 

30 June 2015

30 June 2014

 

USD'000

USD'000

 

 

Restated

 

 

 

Net assets attributable to the equity shareholders

  of the parent

718,664

771,380

 

═══════

═══════

 

 

 

 

(b)        Fair value estimation

 

 The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

 

·      Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities;

 

·      Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices); and

 

·      Level 3: Inputs for the asset or liability that are not based on observable market data

(that is, unobservable inputs).

 

There are no financial liabilities of the Company which were carried at fair value through profit or loss as at 30 June 2014 and 30 June 2015.

 

The level into which financial assets are classified is determined based on the lowest level of significant input to the fair value measurement.

 

Financial assets measured at fair value in the balance sheet are grouped into the following fair value hierarchy:

 

 

Level 3

Total

 

USD'000

USD'000

 

 

 

As at 30 June 2015

 

 

Financial assets at fair value through profit or loss

  712,567

  712,567

 

  

══════

 

══════

 

 

As at 30 June 2014 (restated)

 

 

Financial assets at fair value through profit or loss

768,956

768,956

 

══════

 

══════

 

 

 

 

All of the Company's financial assets at fair value through profit or loss are classified as Level 3, because they represent the Company's interests in private entities which hold the Company's underlying investments.  If these investments were held at the Company level, they would be presented as follows:

 

 

Level 1

Level 2

Level 3

Total

 

USD'000

USD'000

USD'000

 USD'000

As at 30 June 2015

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

22,752

-

-

22,752

Ordinary shares - listed

391,459

9,759

-

401,218

Ordinary and preference shares - unlisted

and OTC

-

30,438

33,372

63,810

Private equity

-

-

51,256

51,256

Real estate projects and hospitality

-

-

168,776

168,776

Other assets, net of liabilities

-

-

4,755

4,755

 

─────

─────

─────

─────

 

414,211

40,197

258,159

712,567

 

═════

═════

═════

═════

 

 

Level 1

Restated

Level 2

Restated

Level 3

Restated

Total

Restated

 

USD'000

USD'000

USD'000

 USD'000

As at 30 June 2014 (restated)

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

19,810

-

-

19,810

Government bonds

19,241

-

-

19,241

Ordinary shares - listed

444,507

4,599

-

449,106

Ordinary shares - unlisted and OTC

-

81,301

2,691

83,992

Private equity

-

-

9,324

9,324

Real estate projects and hospitality

-

-

178,845

178,845

Other assets, net of liabilities

-

-

8,638

8,638

 

─────

─────

─────

─────

 

483,558

85,900

199,498

768,956

 

═════

═════

═════

═════

 

Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include actively traded equities, government bonds and private equity investments which have committed prices at the balance sheet date. The Company does not adjust the quoted price for these instruments.

 

Financial instruments which trade in markets that are not considered to be active but are valued based on quoted market prices and dealer quotations are classified within Level 2. These include investments in unlisted equities and over-the-counter ("OTC") equities. As Level 2 investments include positions that are not traded in active markets, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information. There are no significant adjustments that may result in a fair value measurement categorised within Level 3.

 

Private equities, real estate and hospitality investments, and other assets that do not have an active market are classified within Level 3. The Company uses valuation techniques to estimate the fair value of these assets based on significant unobservable inputs such as discount rates, occupancy and room rates, etc., as described in Note 3.2.

 

There were no transfers between the Levels (the year ended 30 June 2014: none).

 

 

 

 

Set out below is the sensitivity analysis on the significant unobservable inputs used in the valuation of Level 3 investments:

 

As at 30 June 2015

Level 3 - Range of unobservable inputs (probability-weighted average)

 

 

 

Segment

 

 

Valuation technique

 

 

Valuation (USD'000)

 

 

Discount rate

 

 

 

Cap rate

 

Terminal growth rate

 

 

Occupancy rate

 

Room rate (USD)

Selling price per unit

(USD)

 

 

 

Sensitivity analysis on management's estimates

Real estate

Direct comparisons

66,842

N/A

N/A

N/A

N/A

N/A

285-1,818

 

 

Change in selling price per square meter

 

 

 

 

 

 

 

 

 

-10%

0%

10%

 

 

 

 

 

 

 

 

 

64,217

66,842

69,434

Real estate

 

 

 

Discounted cash flows

 

 

39,757

15% -21.5%

8.5% -9.0%

N/A

N/A

N/A

N/A

 

 

Change in discount rate

 

 

-1%

0%

1%

 

 

 

 

 

 

 

Change in cap rate

-1%

47,855

41,872

36,383

 

 

 

 

 

 

 

0%

45,547

39,757

34,575

 

 

 

 

 

 

 

1%

43,597

37,971

32,935

Hospitality

 

Discounted cash flows

62,177

15.75%

10.75%

N/A

69%

235

N/A

 

 

Change in discount rate

 

 

-1%

0%

1%

 

 

 

 

 

 

 

Change in cap rate

-1%

65,987

62,825

59,900

 

 

 

 

 

 

 

0%

65,281

62,177

59,306

 

 

 

 

 

 

 

1%

64,681

61,569

58,748

 

 

 

 

 

 

 

 

 

Change in room rate

 

 

 

 

 

 

 

 

 

-1%

0%

1%

 

 

 

 

 

 

 

Change in occupancy rate

-5%

57,320

57,386

57,453

 

 

 

 

 

 

 

0%

62,105

62,177

62,249

 

 

 

 

 

 

 

5%

66,891

66,968

67,044

Private equity

Discounted cash flows

51,256

25% - 30%

N/A

5% - 6%

N/A

N/A

N/A

 

 

Change in discount rate

 

 

 

-1%

0%

1%

 

 

 

 

 

 

 

 

 

Terminal growth rate

-1%

52,263

48,364

44,832

 

 

 

 

 

 

 

 

 

0%

55,560

51,256

47,427

 

 

 

 

 

 

 

 

 

1%

59,235

54,516

50,288

                             

 


 

  

As at 30 June 2014

Level 3 - Range of unobservable inputs (probability-weighted average)

 

 

 

Segment

 

 

Valuation (USD'000)

 

 

Discount rate

 

 

 

Cap rate

 

Terminal growth rate

 

 

Occupancy rate

 

Room rate (USD)

Selling price per unit

(USD)

 

 

 

Sensitivity analysis on management's estimates

Real estate

Direct comparisons

58,822

N/A

N/A

N/A

N/A

N/A

22-1,818

 

 

Change in selling price per square meter

 

 

 

 

 

 

 

 

 

-10%

0%

10%

 

 

 

 

 

 

 

 

 

54,799

58,822

63,439

Real estate

 

 

 

Discounted cash flows

 

 

52,824

14.5% -22%

8.5% - 9.0%

N/A

N/A

N/A

22 - 486

 

 

Change in discount rate

 

 

-1%

0%

1%

 

 

 

 

 

 

 

Change in cap rate

-1%

55,910

53,520

51,299

 

 

 

 

 

 

 

0%

55,090

52,824

50,718

 

 

 

 

 

 

 

1%

54,438

52,195

50,117

Hospitality

 

Discounted cash flows

67,199

15.75%

10.75%

N/A

67.5%

233

N/A

 

 

Change in discount rate

 

 

-1%

0%

1%

 

 

 

 

 

 

 

Change in cap rate

-1%

71,038

70,328

69,627

 

 

 

 

 

 

 

0%

67,885

67,199

66,557

 

 

 

 

 

 

 

1%

64,934

64,305

63,716

 

 

 

 

 

 

 

 

 

Change in room rate

 

 

 

 

 

 

 

 

 

-1%

0%

1%

 

 

 

 

 

 

 

Change in occupancy rate

-5%

62,355

62,419

62,483

 

 

 

 

 

 

 

0%

67,130

67,199

67,268

 

 

 

 

 

 

 

5%

71,904

71,979

72,053

Private equity

Discounted cash flows

9,324

25% - 30%

N/A

5% - 6%

N/A

N/A

N/A

 

 

Change in discount rate

 

 

 

-1%

0%

1%

 

 

 

 

 

 

 

 

 

Change in terminal growth rate

-1%

9,711

7,908

6,237

 

 

 

 

 

 

 

 

 

0%

11,262

9,324

7,535

 

 

 

 

 

 

 

 

 

1%

12,986

10,888

8,962

                                       

 

 

 

 

Specific valuation techniques used to value the Company's underlying investments include:

·      Quoted market prices or dealer quotes;

·      Use of discounted cash flow technique to present value the estimated future cash flows;

·      Other techniques, such as the latest market transaction price.

 

Changes in Level 3 financial assets at fair value through profit or loss

 

The fair value of the Company's investments and associates are estimated using approaches as described in Note 3.2. As observable prices are not available for these investments, the Company classifies them as Level 3 fair values.

 

30 June

 2015

30 June

2014

 

USD'000

USD'000

 

 

    Restated

 

Opening balance

768,956

717,141

Realised gains

114

-

Unrealised (losses)/gains

(56,503)

51,815

Closing balance

 

──────

712,567

══════

──────

768,956

═════

Total unrealised (losses)/gains for the year included in:

 

 

- Profit or loss

(56,503)

51,815

- Other comprehensive income

-

-

 

 

─────

(56,503)

═════

─────

51,815

═════

 

23         SUBSEQUENT EVENTS

 

(a)        Migration of the Company from the Cayman Islands to Guernsey and Listing on to the Main Market

 

At the Extraordinary General Meeting (the "EGM") held on 27 October 2015, all the resolutions set out in the Notice of EGM sent to Shareholders on 1 October 2015 were duly passed. The resolutions included proposals to improve the marketability of the ordinary shares of the Company, in order to make them attractive to a larger pool of potential investors. It was proposed that the Company de-register as an exempted limited liability company in the Cayman Islands, and re-register in Guernsey. At the same time, it was proposed that the Company move the trading venue for its shares from the AIM market to a premium listing of the Main Market of the London Stock Exchange.

 

(b)        Cancellation of treasury shares

 

            In anticipation of the plan to move the Company's trading platform from the AIM market to a premium listing on the Main Market of the London Stock Exchange, the Company cancelled all treasury shares held by Visaka Holdings Limited as at 30 September 2015. The Company has also cancelled all shares acquired in subsequent share buy-back transactions after that date. Following these cancellations, at the date of this report, the total number of ordinary shares in issue and total voting rights is 214,521,612.

 

After migration from the Cayman Islands to Guernsey and listing on to the Main Market, the Company will continue with its share buy-back program in accordance with the share buy-back program approved by the Board of the Company on 25 October 2011. Any shares purchased as part of the share buy-back activities will be held in treasury up to a limit of 14.99% of ordinary shares in issue.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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Financial results for the year ended 30 June 2015 - RNS