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Half-yearly Report

Released 14:12 31-Mar-2016

Half-yearly Report

31 March 2016

VinaCapital Vietnam Opportunity Fund Limited

 Interim results for the six months ended 31 December 2015

VinaCapital Vietnam Opportunity Fund Limited (the "Company" or "VOF"), an investment company focused on Vietnam, today announces its interim results for the six months ended 31 December 2015 ("the Period").

 Financial highlights:

1             Net Asset Value ("NAV") of USD710.5 million (30 June 2015: USD718.7 million)

2             NAV per share of USD3.31 (30 June 2015: USD3.27).

 Operational highlights:

3             The Company held an Extraordinary General Meeting on 27 October 2015, where shareholders voted to allow VOF to migrate from the Cayman Islands to Guernsey, a move that would ultimately allow the Company to change its listing from the Alternative Investment                      Market to the Main Market of the London Stock Exchange. The Company began trading on the Main Market on 30 March 2016.

4             In December 2015 VOF announced the appointment of a new fund administrator, Northern Trust Corporation. The Company is now administered from Northern Trust’s Guernsey office.
 

Enquiries:


Jeremy Greenberg
VinaCapital Investment Management Limited
Investor Relations
+84 8 3821 9930
jeremy.greenberg@vinacapital.com

Joel Weiden
VinaCapital Investment Management Limited
Communications
+84 8 3821 9930
joel.weiden@vinacapital.com

Franczeska Hanford / Martin Bourgaize
Northern Trust International Fund Administration Services (Guernsey) Limited
Company Secretary
+44 (0)1481 745918 / +44 (0)1481 745819
fk26@ntrs.com / meb16@ntrs.com

David Benda / Hugh Jonathan
Numis Securities Limited, Broker
+44 (0)20 7260 1000
funds@numis.com
 
Daniel Jason
Peregrine Communications, Public Relations (London)
+44 (0) 20 3040 0872
daniel.jason@peregrinecommunications.com
 

Chairman’s Statement

It has been a busy six months for your Company, despite very little movement in the Net Asset Value (NAV) per share. In this half year report, I will comment on each sub section of the portfolio, update you on our migration process and touch on governance.

During the first six months of the 2016 Fiscal Year, which covers the period from 1st July 2015 to 31 December 2015, the NAV per share of VinaCapital Vietnam Opportunity Fund (the "Company" or "VOF") increased by 1.2%, which compares with a decline in the Vietnam Stock Index of 5.3% in USD terms. Turning first to the portfolio:

Portfolio Review

Listed Stocks – 49.2% of assets, compared with 52.4% at 30th June 2015

This, the largest component of the portfolio, fell by 0.4% over the period, significantly outperforming the market. As has been the case for a while, the weakest sectors in the market have been oil and gas, and banking, in which the portfolio is significantly underweight. By contrast, the largest position, Vinamilk, which represents 15% of the overall portfolio and around 30% of the listed assets, rose by 35% during the period and was by some margin the largest contributor to return. The position was reduced somewhat at a premium of 17% to the quoted price, partly because of the unusually large premium at that time, but also for reasons of prudence given the scale of the holding. The Manager remains of the view that Vinamilk is one of Vietnam’s most attractive businesses, with an ability to continue growing profits at a rate in the mid-teens. It currently sells at approximately 16 times this year’s earnings forecast, as compared to an overall market multiple that is closer to 12 times.

During the half year, the portfolio became more concentrated, with the number of holdings having been reduced from 22 to 19 stocks, a process which is consistent with the Manager’s approach of investing large stakes in attractive companies and then engaging constructively to improve returns.

OTC Stocks – 6.1% of assets, compared with 4.9% at 30th June 2015

This category covers holdings which are going through the privatisation process and which are en route to a stock market listing. The Manager would like to deploy more capital in this area as it has been the source of some very successful investments for the portfolio in the past, but their ability to do so depends in large part on the rate at which companies are ‘equitised’, as the process is known, the quality and prospects of those companies, as well as the valuation at which these transactions occur. During the period, an investment of USD10.5 million was made into the Airports Corporation of Vietnam, effectively the monopoly airport operator. Other significant OTC holdings include QNS, a food and drinks business and Vietnam’s leading soy milk producer, representing around 2% of net assets, and Vinatex, a leading textile and garment producer, which makes up just over 1% of net assets. The pace of equitisation continues to be slow, but several large transactions are expected during 2016. Whether or not the Manager participates in any of these will depend largely on valuation.

Private Equity – 11.2% of assets, compared with 11.3% at 30th June 2015

The largest position in this part of the portfolio is International Dairy Products (IDP), a dairy business which is growing sales rapidly. The company is in the second year of implementing a new marketing and product strategy, and the Manager is optimistic that the current modest profits will follow sales upwards.

During the half year, the Manager made a new investment in a convertible preferred security in Novaland, one of the country’s leading residential real estate developers, which intends to list within the next couple of years. Since the end of December, we have made progress with two new investments, one in a large hospital south of Ho Chi Minh City, and the other in a leading manufacturer and distributor of wood-based decorative panels. The hospital investment was completed in March and we expect to complete the other by the end of April.

The Manager has a pipeline of interesting new possibilities and hopes to invest more capital in this part of the portfolio.

Direct Real Estate – 14.2% of assets, compared with 13.8% at 30th June 2015

As has been the case for the last three years, our strategy has been to reduce the weighting of the portfolio in this area by selling assets. In this endeavour, we have not been particularly successful. The reason for wishing to reduce these direct property holdings is that we do not consider ourselves to be property developers, but rather investors. It would be quite natural for a fund such as VOF to have significant exposure to the real estate market in Vietnam, but our approach is to reorient the portfolio away from direct holdings towards listed equities and specific opportunities such as the investment in Novaland.

Most of VOF’s direct real estate assets are held in joint ventures with VinaLand, another company managed by the Manager, and this company is in the throes of a realisation process which should help us to achieve a significant reduction in our property exposure by the end of 2016. Progress is slow, however. Some assets are not in a shape or format to allow a quick sale and where sales have been agreed, completing transactions in the Vietnamese real estate market is bureaucratic and long-winded. At the time of writing, your Board has been informed that it is likely that certain significant sales are imminent, but no assurances can be given, despite a clear recovery in prices in the property market. VOF will benefit from sales of any assets held through joint ventures as well as through its holding in VinaLand. There were no significant valuation changes in this part of the portfolio during the period under review.

Operating Assets – 10.3% of assets, compared with 11.4% at 30th June 2015

The bulk of this part of the portfolio is represented by the 50% stake in the Sofitel Metropole Hotel in Hanoi. This asset is operating slightly behind budget, but more or less in line with last year. Increasing competition from 5 star hotels in the Hanoi market has had a marginally negative effect on occupancy and room rates, but the asset remains solidly profitable. The Manager expects a dividend of USD7.3 million during the current year which is in line with prior year dividends received. As has been the case for a long time, the Manager is happy to entertain offers for the hotel but, despite having received several such expressions of interest, a sale on acceptable terms remains elusive.

Migration & Listing

As you will no doubt be aware, VOF has shareholder approval to redomicile from the Cayman Islands to Guernsey and more or less simultaneously shift its stock market listing from AIM to the Premium section of the London Stock Exchange. We had hoped to have this complete by the end of 2015, but ran into some problems sourcing some of the information required by the Guernsey regulator. These issues are now resolved and the process was completed on 30th March, just before this report was issued. I would like to apologise to shareholders on behalf of the Board for the delays, which were unforeseen. I remain optimistic that the completion of this process will improve the breadth and depth of our shareholder register, which, when combined with an active investor communication plan to be implemented by the Manager, will help to reduce the discount to NAV which remains stubbornly and annoyingly wide.

Governance

As I mentioned in the annual report, there was a difference of opinion between the Manager and the Board on the methodology for the calculation of the performance fee. The immediate issue was settled ahead of the release of the 2015 annual results, but in order to ensure that there is no recurrence, a redraft of certain sections the Investment Management Agreement (IMA) is needed. As yet, this is work in progress and we are taking advantage of the process to review the IMA to align it with the standards expected of a premium listed Company. These will be very much in shareholders’ interests. We are advised that no vote is required on the matter, but I will write a letter to you to explain the changes which we are implementing as and when agreed.

As mentioned earlier, the discount remains a bone of contention both for the Board and for shareholders. Share buybacks alone appear not to be able to fix the problem. Our approach instead now combines several elements:

·      Migration and relisting, which we expect to lead to inclusion in the FTSE All Share Index and perhaps further improve liquidity

·      A more extensive investor relations programme

·      A reduction in the Direct Real Estate holdings

·      A larger weighting to OTC and private equity opportunities

·      Continuing share buybacks

The next six months will be important in determining whether this strategy can deliver a narrower discount to NAV but, if it cannot, further measures will have to be considered.

Outlook

The first couple of months of 2016 have laid bare investor nervousness about the outlook for markets globally. Concern over commodity prices, the pace of economic growth in China, and a potential slowdown in the developed world have weighed heavily and volatility has spiked. In reality, nothing much has changed: the developed world remains mired in sluggish growth with very low or negative interest rates likely to persist, while China makes faltering steps to reorient its huge economy to consumption activity. In this environment, economic growth is scarce, and those investment opportunities which do not have to stretch to achieve such growth should hold attractions for investors. In Vietnam, that growth is visible. The country is not without its problems, most obviously in the banking sector where non-performing loan issues are only partly resolved and in the inherent uncertainty which surrounds the change of political leadership. Nevertheless, with the passage of the Trans-Pacific Partnership and other free trade agreements likely to facilitate trade, falling inflation and attractive labour market dynamics, all of which should support the continuing relocation of supply chains within Asia, Vietnam looks set to grow faster than many of its neighbours and emerging markets in general.

Steven Bates
Chairman
VinaCapital Vietnam Opportunity Fund
31 March 2016

CONDENSED INTERIM BALANCE SHEET

31 December 2015 30 June 2015
Notes USD'000 USD'000
Unaudited Audited
ASSETS
Cash and cash equivalents 6 349 906
Short-term receivables from related parties 22 196 382
Trade and other receivables 7 11,081 4,697
Financial assets at fair value through profit or loss 9 699,016 712,567
Prepayments for acquisitions of investment properties 10 5,115 5,192

Total assets
------
715,757
------
------
723,744
------
EQUITY AND LIABILITIES
EQUITY
Share capital 11 2,145 3,246
Additional paid-in capital 12 496,511 722,064
Treasury shares 13 - (213,283)
Retained earnings 211,869 206,637
Total equity ------
710,525
------
------
718,664
------
LIABILITIES
Payables to related parties 14 4,555 5,036
Accruals and other payables 677 44
------ ------
Total liabilities 5,232
------
5,080
------
Total equity and liabilities 715,757
------
723,744
------
Net asset value, USD per share 19(c) 3.31 3.27
----- -----

CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY


Share
capital

Additional
paid-in capital
Treasury
shares
Retained
 earnings
Total
equity 
USD’000 USD’000 USD’000 USD’000 USD’000

Balance at 1 July 2014
3,246 722,064
(165,939)
  212,009
771,380
Profit for the six-month period to
  31 December 2014
- -
-
    1,462 1,462

Total comprehensive income
-----
-
-------
-
-------
-
------
1,462
------
1,462
Transactions with owners
Ordinary shares repurchased - - (30,592) - (30,592)


Balance at 31 December 2014
-----
3,246
-----
-------
722,064
-------
-------
(196,531)
-------
-------
213,471
-------
-------
742,250 
-------
Balance at 1 July 2015 3,246 722,064 (213,283) 206,637 718,664
Profit for the six-month period to
  31 December 2015
- -
-
5,232 5,232
Total comprehensive income -----
-
-------
-
-------
-
------
  5,232
------
5,232
Transactions with owners
Ordinary shares repurchased - -  (13,371) - (13,371)
Ordinary shares cancelled   (1,101)   (225,553) 226,654 - -

Balance at 31 December 2015
-----
  2,145
-----
-------
  496,511
-------
-------
-
-------
-------
211,869
-------
------
710,525
------

CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME


Six months ended
31 December
2015
31
December

2014
Notes USD’000 USD’000
Unaudited Unaudited
Dividend income ­(*) 15 25,733 46,242
Net losses on financial assets at fair value through profit or loss (**) 16 (13,551) (29,146)
General and administration expenses 17 (7,069) (15,634)
Other income 196 -
Impairment losses (77) -

Operating profit
-----
5,232
-----
-----
1,462
-----
Profit before tax 18 5,232 1,462
Corporate income tax 18 - -

Profit for the period
-----
5,232
----
-----
1,462
----
Earnings per share
- basic and diluted (USD per share)
19(a),(b)
0.02
----
0.01
----
----- -----
Total comprehensive income for the period 5,232
----
1,462
----
Six months ended
31 December
2015
31 December
2014
USD’000 USD’000
(*) Dividend income includes:
- Dividend income from a subsidiary used to pay for the Company's ordinary share repurchases (Note 15) 13,371 30,592
- Dividend income from a subsidiary used to pay for the Company's operating expenses (Note 15) 12,362 15,650
----- -----
25,733 46,242
----- -----
Six months ended
31 December
2015
31 December
2014
USD’000 USD’000
(**) Net losses on financial assets at fair value through profit or loss include:
- Reduction in fair value of a subsidiary due to payments for ordinary share repurchases on the Company’s behalf (Note 15) (13,371) (30,592)
- Reduction in fair value of a subsidiary due to payment for the Company’s operating expenses (Note 15) (12,362) (15,650)
----- -----
(25,733) (46,242)
----- -----

CONDENSED INTERIM STATEMENT OF CASH FLOWS

Six months ended
31
December
2015
31 December 2014
USD’000 USD’000
Unaudited Unaudited
Notes
Operating activities
Profit before tax 5,232 1,462
Adjustments for:
Dividend income (25,733) (46,242)
Impairment losses 77 -
-----
(20,424)
-----
(44,780)
Change in financial assets at fair value through profit or loss 13,551 29,146
Change in trade receivables and other assets (6,198) 234
Change in trade payables and other liabilities 152 (621)
Dividends received   12,362 15,650
Net cash inflows from operating activities -----
19,867
-----
-----
44,409
-----
Net change in cash and cash equivalents for the period (557) (371)
Cash and cash equivalents at the beginning of the period 6 906 1,311
Cash and cash equivalents at the end of the period
6
-----
349
-----
-----
940
-----
The condensed interim statement of cash flows does not include payments made for ordinary share repurchases of USD13.4 million (period ended 31 December 2014: USD30.6 million) because these payments were made by a subsidiary of the Company.

1          GENERAL INFORMATION

VinaCapital Vietnam Opportunity Fund Limited (the “Company”) is a non-cellular company with limited liability incorporated in Guernsey. The registered office of the Company is PO Box 255, Trafalgar Court, Les Banques, St Peter Port, Guernsey, GY1 3QL. The Company’s principal activity is to achieve medium to long-term returns through investment in assets either in Vietnam or in companies with a substantial majority of their assets, operations, revenues or income in, or derived from, Vietnam. The Company is quoted on the London Stock Exchange’s Main Market under the ticker symbol VOF.

The Company does not have a fixed life, but the Board considers it desirable that shareholders should have the opportunity to review the future of the Company at appropriate intervals. Accordingly, the Board intends that a special resolution will be proposed every fifth year that the Company ceases to continue as presently constituted. If the resolution is not passed, the Company will continue to operate. If the resolution is passed, the Directors will be required to formulate proposals to be put to shareholders to reorganise, unitise or reconstruct the Company or for the Company to be wound up. The Board tabled such special resolutions in 2008 and 2013, each of which was not passed. This has allowed the Company to continue. The next special resolution on the continuation of the Company will be held no later than 2018.

The condensed interim financial statements for the six-month period ended 31 December 2015 were approved for issue by the Board on 31 March 2016.

2          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2.1       Basis of preparation

These condensed interim financial statements for the six-month period ended 31 December 2015 have been prepared in accordance with International Accounting Standard 34, “Interim Financial Reporting” as issued by the International Accounting Standards Board (“IASB”). They do not include all of the information required in the annual financial statements which are prepared in accordance with International Financial Reporting Standards (“IFRS”). Accordingly, these financial statements are to be read in conjunction with the annual financial statements of the Company for the year ended 30 June 2015.

2.2       Accounting policies

These condensed interim financial statements (the “interim financial statements”) have been prepared in accordance with the accounting policies, methods of computation and presentation adopted in the latest financial statements for the year ended 30 June 2015.

2.3       Subsidiaries and associates

As a result of the adoption, in the year ended 30 June 2015, of the amendments to IFRS 10, “Consolidated financial statements” (“IFRS 10”) and the fair value option under IAS 28, “Investments in associates and joint ventures” (“IAS 28”), the Company accounts for its investments in subsidiaries and associates as financial assets at fair value through profit and loss.

The fair values of a selection of investments in subsidiaries and associates are assessed such that the fair values of all investments in subsidiaries and associates are assessed at least once each financial year. The fair values of the majority of these investments are estimated by a qualified independent professional services firm, KPMG Limited (“KPMG”). The valuations are prepared by KPMG using a number of approaches such as adjusted net asset valuations, discounted cash flows, income-related multiples and price-to-book ratios. These estimated fair values are used by the Company’s Audit and Valuation Committee (“AVC”) as the primary basis for estimating each subsidiary’s or associate’s fair value. 

                                       For interim reporting purposes, the Board, having taken independent advice, estimated the fair value of the majority of the Company’s subsidiaries and associates which invest in real estate and private equity by considering the impact of any significant changes in property valuations, investees’ performance and the major assumptions used in the most recent adopted valuations. The Board, again having taken independent advice, also determined the valuations of those subsidiaries which hold investments in listed and unlisted securities based on published closing prices and broker quotes.

Any gains or losses arising from a change in the fair value of investments in subsidiaries and associates are recognised in the condensed interim statement of comprehensive income.

3         CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

When preparing the condensed interim financial statements, the Company relies on a number of judgements, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. Actual results may differ from the judgements, estimates and assumptions.

Information about significant judgements, estimates and assumptions which have the greatest effect on the recognition and measurement of assets, liabilities, income and expenses were the same as those that applied to the last annual financial statements for the year ended 30 June 2015.

3.1        Eligibility to qualify as an investment entity

The Board has determined that it continues to be 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 meets 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.

3.2        Fair value of subsidiaries and associates and their underlying investments

As at 31 December 2015, 100% (30 June 2015: 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 subsidiaries and associates or the underlying investments held by the subsidiaries and associates. As a result, the carrying values of 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 31 December 2015 and 30 June 2015, 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 values. The estimated fair values provided by KPMG and/or the Investment Manager are used by the AVC 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 of the 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 values of assets that are not traded in an active market (for example, private equity and real estate where market prices are not readily available) are determined by using valuation techniques. KPMG and/or the Investment Manager uses its judgement to select a variety of methods and makes 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.

Valuation of investments in private equity

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. KPMG and/or the Investment Manager 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, KPMG uses discount rates ranging from 18% to 30% and terminal growth rates of 3% to 6% (30 June 2015: 25% to 30% and 5% to 6%, respectively). As at 31 December 2015 and 30 June 2015, if the discount rates had been higher/lower, the fair value of the Company’s private equity investments would have declined/risen. If the terminal growth rates had been higher/lower, these investments’ fair value would have increased/decreased.

            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. There are no shareholder agreements in place for these investments but as both funds are managed by the same Investment Manager, the funds’ investment objectives for each property are similar. However, given that VNL has an investment objective of disposing of a significant portion of its portfolio, the Company could potentially be put in a position where sales may be triggered earlier than ideally desired. The Board would expect the Company to fully participate in any sales of jointly held investments 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 estimated values of underlying real estate properties are based on valuations by qualified independent professional valuers including Coldwell Banker Richard Ellis, 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 KPMG and/or the Investment Manager 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 above.

In conjunction with making its judgement for the fair value of the Company’s underlying real estate and hospitality investments, KPMG and/or the Investment Manager 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 rate, 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 31 December 2015, the discount rates used ranged from 15% to 21.5% (30 June 2015: 15% to 21.5%). At the year end, if the discount rates had been higher/lower, the fair value of the Company’s underlying real estate and hospitality investment would have been decreased/increased.

The average occupancy and room rate used in the discounted cash flow projection for the Company’s hospitality investment are 69% and USD235 (30 June 2015: 69% and USD235, respectively). At 31 December 2015, if the average occupancy and room rate had been higher/lower, the fair value of the Company’s underlying hospitality investment would have risen/declined.

4        SEGMENT ANALYSIS

In identifying its operating segments, the Investment Manager 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
Six months ended 31 December 2015
Dividend income 25,733 - - 25,733
Net (losses)/gains on fair value of financial assets at fair value through profit or loss (17,518) 4,144 (177) (13,551)
General and administration expenses (4,974) (1,658) (437) (7,069)
Other income 196 - - 196
Impairment loss - (77) - (77)

Profit before tax
-----
3,437
-----
2,409
----
(614)
-----
5,232
----- ----- ---- -----

   

Six months ended 31 December 2014
Dividend income 46,242 - - 46,242
Net (losses)/gains on financial assets at fair value through profit or loss (34,839) (289) 5,982 (29,146)
General and administration expenses (13,629) (1,580) (425) (15,634)

Profit before tax
-----
(2,226)
-----
(1,869)
-----
5,557
-----
1,462
---- ---- ---- -----

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 31 December 2015
Cash and cash equivalents - - - 349 349
Short-term receivables from related parties 196 - - - 196
Trade and other receivables 4,697 6,384 - - 11,081
Financial assets at fair value through profit or loss 465,914 182,023 51,079 - 699,016
Prepayments for acquisitions of investment properties
-
5,115
-
- 5,115
------ ------ ----- ----- ------
Total assets 470,807 193,522 51,079 349 715,757
------ ------ ----- ----- ------
Payables to related parties 4,254 238 63 - 4,555
Accruals and other payables 472 162 43 - 677
------ ------ ----- ----- ------
Total liabilities 4,726 400 106 - 5,232
------ ------ ----- ----- ------
Net asset value 466,081 193,122 50,973 349 710,525
------ ------ ----- ----- ------

   

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 4,580 456 - - 5,036
Other payables 44 - - - 44
------ ------ ----- ----- ------
Total liabilities 4,624 456 - - 5,080
------ ------ ----- ----- ------
Net asset value 476,509 189,993 51,256 906 718,664
------ ------ ----- ----- ------

5          INTERESTS IN SUBSIDIARIES AND ASSOCIATES

5.1       Subsidiaries

The Company had the following significant subsidiaries as at 31 December 2015 and 30 June 2015:

As at
31.12.2015 30.6.2015


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 and real estate
VOF PE Holding 5 Limited BVI 100 100 Holding company for listed
securities
Visaka Holding 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
Indotel Limited Singapore 100 100 Holding company for hospitality
AllwealthWorldwide 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
Howard Holdings Pte Limited Singapore 80.6 80.6 Holding company for private equity
Indochina Ceramic Singapore Pte Limited Singapore 100 100 Holding company for private equity
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 (“IDP”) Vietnam 56 56 Dairy products
---- ----

There is no legal restriction on 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 cannot be transferred out of Vietnam unless such restrictions are satisfied.

5.2        Associates

As at
31.12.2015 30.6.2015
Name Country of incorporation % of
Company interest
% of Company interest Nature of the  business
Pacific Alliance Land Limited BVI 25 25 Holding company for
VinaSquare project
Sunbird Group Limited BVI 25 25 Holding company for
Pham Hung project
VinaCapital Danang Resorts Limited BVI 25 25 Holding company for
Danang Resorts project
Vietnam Property Holdings Limited BVI 25 25 Holding company for
Danang Golf project
Prosper Big Investment Limited BVI 25 25 Holding company for
Century 21 project
VinaCapital Commercial Center Singapore 12.75 12.75 Holding company for
Private Limited Capital Square phase 1
Mega Assets Pte. Limited Singapore 25 25 Holding company for
Capital Square phase 2
SIH Real Estate Pte. Limited Singapore 25 25 Holding company for
Capital Square phase 3
VinaLand Eastern Limited Singapore 25 25 Holding company for
Phu Hoi City project
---- ----

The Company’s real estate associates have commitments under investment certificates which they have received for real estate projects jointly invested with VNL (refer to Note 23).

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 24. 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

31 December 2015 30 June 2015
USD’000 USD’000
Cash in banks 349 906
----- -----

As at the balance sheet date, cash and cash equivalents are denominated in US dollars (“USD”). Please refer to Note 9 for the balance of cash and cash equivalents held at the Company’s subsidiaries.

7          TRADE AND OTHER RECEIVABLES

31 December 2015       30 June 2015
USD’000 USD’000
Receivables from disposal of investments 11,081 4,697
----- -----

8          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 31 December 2015
Cash and cash equivalents 349 - 349
Short-term receivables from related parties 196 - 196
Trade and other receivables 11,081 - 11,081
Financial assets at fair value through profit or loss
-
699,016
699,016

Total
------
11,626
-----
-------
699,016 
------
-------
710,642
------
Financial assets denominated in:
-           USD 11,626 699,016 710,642
----- ------ ------
As at 30 June 2015
Cash and cash equivalents 906 - 906
Short-term receivables from a related party 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
------ ------- -------

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 2015: nil).

9                                              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:

31 December 2015 30 June 2015
 USD’000  USD’000
In Vietnam
Cash and cash equivalents 30,200 22,752
Ordinary shares – listed 349,926          376,453
Ordinary and preference shares – unlisted and over-the-   counter (“OTC”) 70,215           63,810
Private equity 51,079 51,256
Real estate and hospitality companies 170,335 168,776
Other assets, net of liabilities 920 4,755
------- -------
672,675 687,802
In countries other than Vietnam
Ordinary shares – listed 26,341 24,765
       -------
699,016
------
-------
712,567 ------

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

            31 December 2015 30 June
2015
USD’000 USD’000
Consumer goods 193,524 175,391
Construction 75,921 94,341
Financial services 42,120 52,991
Agriculture 21,411 22,056
Energy, minerals and petroleum 32,804 58,153
Pharmaceuticals 18,745 21,356
Real estate and hospitality companies 266,743 257,491
Infrastructure 10,546  5,860

As at 31 December 2015, an underlying holding, Vietnam Dairy Products Joint Stock Company, usually referred to as Vinamilk, within financial assets at fair value through profit or loss amounted to 15% of the net asset value of the Company (30 June 2015: 11%). There were no other holdings that had a value exceeding 10% of the net asset value of Company as at

31 December 2015 or 30 June 2015.

10                                                         PREPAYMENTS FOR ACQUISITION OF INVESTMENT PROPERTIES

31 December 2015    30 June 2015
 USD’000  USD’000
Historical cost 8,986 8,986
Less: cumulative allowance for impairment loss (3,871) (3,794)
---- ----
5,115 5,192
---- ----

Movements in the allowance for impairment during the period/year are as below:

31 December 2015 30 June 2015
USD’000 USD’000
Opening balance (1 July 2015/1 July 2014) 3,794 2,736
Charge for the period/year 77 1,058
---- ----
Closing balance 3,871 3,794
---- ----

A prepayment was made by the Company to a property vendor in 2007 and 2008. The final transfer of the property is pending the approval of the relevant authorities and subject to the completion of certain performance conditions set out in the relevant agreement.  As at 31 December 2015, due to market conditions, an impairment            charge of USD0.1 million (year ended 30 June 2015: USD1.1 million) has been taken against this prepayment. The recoverable amount is the fair value less costs to sell estimated by the Board based on a 31 December 2015 valuation performed by a qualified independent professional property valuer (refer to Note 3.2 (b)).

The valuation is prepared based on the expected future discounted cash flows of the property using a yield that reflects the risks inherent therein. The discount rate applied is 20% (30 June 2015: 20%). If a higher or lower discount rate had been used the estimated recoverable amount would have decreased/increased as a result.  It is the Board’s view that this prepayment should be classified as Level 3 in the fair value hierarchy. 

11         SHARE CAPITAL

31 December 2015 30 June 2015
Number of ordinary shares USD’000 Number of ordinary shares USD’000
Ordinary shares of USD0.01 each:
Authorised 500,000,000 5,000 500,000,000 5,000
-------- ---- -------- ----
Issued and fully paid 214,521,612 2,145 324,610,259 3,246
-------- ---- -------- ----

12           ADDITIONAL PAID-IN CAPITAL

Additional paid-in capital represents the excess of consideration received over the par value of ordinary shares issued.

31 December 2015    30 June 2015
 USD’000  USD’000
Opening balance (1 July 2015/1 July 2014) 722,064 722,064
Ordinary shares cancelled (Note 13)   (225,553) -
------- -------
Closing balance 496,511 722,064
------ ------

13         TREASURY SHARES

31 December 2015 30 June 2015
Number of ordinary shares USD’000 Number of ordinary shares USD’000
Opening balance (1 July 2015/
   1 July 2014) 104,652,647 213,283 86,355,265 165,939
Ordinary shares repurchased during the period/year 5,436,000 13,371 18,297,382 47,344
Cancellation of treasury shares (110,088,647) (226,654) - -
-------- ------ -------- ------
Closing balance - - 104,652,647 213,283
-------- ------ -------- ------

During the period, the Company purchased 5,436,000 of its ordinary shares (year ended 30 June 2015: 18,297,382 ordinary shares) for total cash consideration of USD13.4 million (year ended 30 June 2015: USD47.3 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.

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, all of the ordinary shares held in treasury were cancelled. Following the cancellation, the total number of ordinary shares in issue and total voting rights is 214,521,612.

The Company will continue with the ordinary share repurchase programme approved by the Board on 25 October 2011. Any ordinary shares purchased as part of the ordinary share repurchase activities may be held in treasury up to a limit of 10% of ordinary shares in issue.

14          PAYABLES TO RELATED PARTIES

31 December
2015
30 June
2015
USD’000 USD’000
Management fees payable to the Investment Manager (Note 22) 883 938
Incentive fees payable to the Investment
            Manager (Note 22)
3,672 3,672
Other payables to related parties - 426
-----
4,555
----
-----
5,036
----

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

15         DIVIDEND INCOME

31 December
2015
31 December
2014
USD’000 USD’000
Dividend income from a subsidiary used to pay for the Company's ordinary share repurchases (*) 13,371 30,592
Dividend income from a subsidiary used to pay for the Company's operating expenses 12,362 15,650
------
25,733
-----
------
46,242
-----

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

As cash was transferred out of the subsidiary as settlement for the dividend income, the subsidiary’s fair value decreased, resulting in losses on financial assets at fair value through profit or loss as described in Note 16.

16         NET LOSSES FROM FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Six months ended
31 December 2015 31 December
2014
USD’000 USD’000
Financial assets at fair value through profit or loss:
- Gains from the realisation of financial assets, net 2,053 114
- Unrealised losses (15,604)   (29,260)
------ ------
(13,551) (29,146)
 ----- -----

            The above net losses of USD13.6 million (period ended 31 December 2014: USD29.2 million) on financial assets at fair value through profit or loss include dividend and interest income of

USD11.0 million earned by the Company's subsidiaries during the period (period ended 31 December 2014: USD17.1 million). The net losses also include total payments of USD13.4 million which a subsidiary paid for ordinary share repurchases made during the period (period ended 31 December 2014: USD30.5 million) as explained in Note 15. Also included in these losses were this subsidiary’s dividend payments of USD12.3 million to the Company to cover its operating expenses (period ended 31 December 2014: USD15.7 million).

17         GENERAL AND ADMINISTRATION EXPENSES

Six months ended
31 December
2015
31 December
2014
USD’000 USD’000
Management fees (Note 22(a)) 5,233 6,007
Incentive fees (Note 22(b)) - 8,360
Directors’ fees 173 205
Custodian, secretarial and other professional fees 721 769
Listing expenses 898 -
Others 44 293
----
7,069
----
-----
15,634
----

18         INCOME TAX EXPENSE

The Company is incorporated in Guernsey. Prior to 23 March 2016, the Company was a company with limited liability in the Cayman Islands. Under the current laws of Guernsey or the Cayman Islands, there are no income, state, corporation, capital gains or other taxes payable by the Company in Guernsey and the Cayman Islands.

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 condensed interim statement of income can be reconciled as follows:

Six months ended
31 December 2015 31 December 2014
USD’000  USD’000
Profit before tax   5,232
-----
1,462
-----
Applicable tax rate 0% 0%

Income tax
-----
-
-----
-----
-
-----
There is no deferred income tax.

19         EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE

(a)        Basic

Basic earnings per share is calculated by dividing the profit from operations of the Company by the weighted average number of ordinary shares in issue during the six-month period excluding ordinary shares purchased by the Company and held as treasury shares (Note 13).

Six months ended
31 December
2015
31 December
 2014
USD’000  USD’000
Profit for the period (USD’000)    5,232 1,462
Weighted average number of ordinary shares        in issue 217,387,194 233,572,409
Basic earnings per share (USD per share) 0.02 0.01
-------- --------

(b)        Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. The Company has no category of potentially dilutive ordinary shares. Therefore, diluted earnings per share is equal to basic earnings per share.

(c)        Net asset value per share

Net Asset Value (“NAV”) per share is calculated by dividing the NAV 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 13). NAV is determined as total assets less total liabilities.

As at 31 December
2015
As at 30 June
2015
Net asset value (USD’000)    710,525     718,664
Number of outstanding ordinary shares on issue 214,521,612             219,957,612
Net asset value per share (USD/share) 3.31 3.27
--------- ---------

20         SEASONALITY

The Board believes that the impact of seasonality on the condensed interim financial information is not material.

21         DIRECTORS’ REMUNERATION

The aggregate directors’ fees for the six-month period amounted to USD172,500 (six months ended 31 December 2014: USD204,944), of which there was no outstanding amount payable at the reporting date (30 June 2015: nil).

The remuneration of each director is summarised below:


Six months ended
31 December 2015 31 December
2014
USD USD
Steven Bates 47,500 47,500
Martin Adams 40,000 40,000
Martin Glynn (*) - 32,444
Michael Gray 45,000 45,000
Bich Thuy Dam 40,000 40,000
-------
172,500
-------
-------
204,944
-------

            (*) Martin Glynn retired on 27 November 2014.

22       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 investment management fees for the six-month period amounted to USD5.2 million (31 December 2014: USD6 million), with USD0.8 million (31 December 2014: USD1 million) in outstanding accrued fees due to the Investment Manager at the reporting date.

(b)        Incentive fee

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. Ordinary 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 is 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 that the incentive fee payable for the year ended 30 June 2015 is USD3.7 million, which has been fully settled.  The Investment Manager and the Board have agreed in principle that the investment management agreement will be amended before 30 June 2016 to reduce the possibility of differences of interpretation in the future.  No incentive fee has been accrued on the Company’s performance for the six month period ended 31 December 2015 as the Board and the Investment Manager do not expect that any incentive fee will have become payable during the period under the contemplated revised terms of the Amended Management Agreement.

(c)        Other balances with related parties

31 December
2015
  30 June
2015
USD’000 USD’000
Receivable from the Investment Manager for investment management fees rebated back to the Company (*) 196 382
--- ---
Payable to the Investment Manager for expenses paid on behalf of the Company - 426
--- ---
Investments in other investment funds managed by the Investment Manager, held by a subsidiary of the Company:
-           Vietnam Infrastructure Limited (“VNI”) 3,969 5,860
-           VNL 22,364 18,698
-----  -----
26,333 24,558
----- -----

(*) This receivable pertains to investment management fees earned by the Investment Manager on the Company’s investments in VNL and VNI which are rebated by the Investment Manager to the Company. These rebates are recognised as other income in the statement of comprehensive income.

23         COMMITMENTS

The Company’s real estate associates have a broad range of commitments under investment certificates which have been received for real estate projects jointly invested with VNL (Note 3.2 (b)). The Company’s share of these commitments is approximately USD8.5 million (30 June 2015: USD11.5 million).  Further investments in these arrangements are at the Company’s discretion.

24         FINANCIAL RISK MANAGEMENT

(a)        Financial risk factors

The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.

The condensed interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Company’s annual financial statements as at 30 June 2015.

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

(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 measured using the fair valuation method as at 30 June 2015 and 31 December 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 31 December 2015
Financial assets at fair value through profit or loss 699,016 699,016

           
----- -----

   

As at 30 June 2015
Financial assets at fair value through profit or loss 712,567 712,567
------ ------

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 31 December 2015
Cash and cash equivalents 30,200 - - 30,200
Ordinary shares – listed 376,267 - - 376,267
Ordinary and preference shares – unlisted
and OTC
- 41,684 28,531 70,215
Private equity - - 51,079 51,079
Real estate and hospitality companies - - 170,335 170,335
Other assets, net of liabilities - - 920 920
------ ------ ------ ------
406,467 41,684 250,865   699,016
------ ------ ------ ------

   

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 companies and hospitality - - 168,776 168,776
Other assets, net of liabilities - - 4,755  4,755
------ ------ ------- -------
414,211 40,197 258,159   712,567
------ ------ ------- -------

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 equity, 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, average occupancy and room rates, etc., as described in Note 3.2.

There were no transfers between the Levels (year ended 30 June 2015: none).

Specific valuation techniques used to value financial instruments 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 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.

31 December 2015 30 June
2015
USD’000 USD’000
Opening balance (1 July 2015/1 July 2014) 712,567 768,956
Realised gains 2,053 114
Unrealised losses  (15,604) (56,503)

Closing balance
-----
699,016
-----
-----
712,567
-----
Total unrealised gains for the period/year included in:
- Profit or loss (15,604) (56,503)
-----
(15,604)
-----
-----
(56,503)
-----

25.      SUBSEQUENT EVENTS

At the Extraordinary General Meeting on 27 October 2015 shareholders approved proposals to migrate the Company from the Cayman Islands to Guernsey and to move the trading venue for its ordinary shares from the Alternative Investment Market to the Main Market of the London Stock Exchange. The Company’s migration to Guernsey occurred on 23 March 2016. The Company’s ordinary shares were admitted to trading on the Main Market of the London Stock Exchange on 30 March 2016.


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