31 Oct 2008 12:07
31 October 2008
Vietnam Infrastructure Limited
Audited final results for the twelve months ended 30 June 2008
Vietnam Infrastructure Limited (the "Company" or "VNI"), the AIM-quoted investment vehicle established to invest in Vietnam's rapidly growing infrastructure sector and the first publicly traded fund to focus investment on key strategic infrastructure and infrastructure-related assets in Vietnam, today announces its first full year results for the period from its incorporation on 5 July 2007 to 30 June 2008 ("the Period").
Operational highlights
Successful AIM admission and raising of USD 402 million on 5 July 2007
Net asset value as at 30 June 2008 was USD 335m, representing USD 0.84 per share (USD 389m or USD 0.97 per share as at 30 June 2007)
Major holdings since listing include:
An accumulated investment of USD 45.6 million in Tan Tao Industrial Park Corporation (ITA) representing an equity stake of 7.5%. ITA is listed on the Ho Chi Minh City Securities Trading Center and is engaged in infrastructure services for industrial zones. The purchase price of USD 5.63 per share was at a 27% discount compared to the market price of the company at 5 July 2007.
USD 19.2 million in Vietnam Aircraft Leasing Company (VALC) representing an equity stake of 16.0%. VALC is a joint venture between Vietnam Airlines, VNI and several major state-owned enterprises. VALC has signed contracts with Boeing and Airbus to purchase 18 aircraft, all to be leased by Vietnam Airlines.
An investment of USD 17.9 million in Long An S.E.A. Industrial Park and Service Area, part of the 2,000ha Long An S.E.A complex that will include a port in addition to industrial and residential area. The Long An complex is located 25km from Ho Chi Minh City
A combined investment of USD 24.1 million in two hydropower (Thac Mo and Can Don) and two thermal power (Ba Ria and Pha Lai) joint stock companies. This strong exposure to the energy sector has resulted in a close working relationship with Electricity of Vietnam, the national power company
A combined investment of USD 5.4 million in three joint ventures building base transceiver stations (BTS) for mobile telecommunication networks. The investments include stakes in Global Infrastructure Investment Ltd (GII), Mobile Infrastructure Development Company (MIDC), and Mobile Information Services (MIS). VNI is now the largest single investor in mobile telecoms infrastructure in Vietnam.
Financial highlights
Net loss for the Period USD 53.5 million
Basic losses per share USD 0.13 for the Period
Cash and cash equivalents as at 30 June 2008 of USD 135.2 million
Commenting, Don Lam, Chairman of Vietnam Infrastructure Limited, said:
"The first six months of this year have been extremely challenging. However, we remain confident that infrastructure, by its nature a long-term investment, will continue to benefit from Vietnam's excellent prospects for continued economic growth. Since listing in July 2007 we have made several significant investments and remain on track to be fully invested within two years".
Enquiries:
| Ms Chi Nguyen VinaCapital Investment Management Limited Investor Relations
| +84 8 821 9930 chi.nguyen@vinacapital.com |
| Philip Secrett Grant Thornton UK LLP, Nominated Adviser
| +44 20 7383 5100 philip.j.secrett@gtuk.com |
| Hiroshi FunakiLCF Edmond de Rothschild Securities
| +44 20 7845 5960funds@lcfr.co.uk |
| David Cranmer Financial Dynamics
| +44 20 7831 3113 david.cranmer@fd.com |
Notes to Editors:
The Vietnam Infrastructure Limited (VNI), a USD 340 million closed end fund dedicated to investment in Vietnam's rapidly growing infrastructure sector, was admitted to trading on the AIM market of the London Stock Exchange plc under the symbol "VNI" on 5 July 2007. It is the first publicly traded fund to focus investment on key strategic infrastructure and infrastructure related assets in Vietnam, including the energy, transport, water and telecommunications sectors.
The fund is managed by VinaCapital Investment Management (VCIM) which comprises a team of over 130 professionals whose areas of expertise cover a full range of investment types. All investments are approved by a four member investment committee.
Chairman's Statement
Dear shareholders,
We are pleased to present the first annual financial statements for Vietnam Infrastructure Limited (AIM: VNI) for the year ended 30 June 2008.
Infrastructure is a fundamental area of investment in any emerging market. In Vietnam, this is particularly the case as ten years of rapid economic development at an average of 7.5 percent annual GDP growth has not been matched by adequate investment in physical infrastructure.
Launched in July 2007, VNI was perfectly timed to capitalise on the need to address the dire infrastructure shortfall in Vietnam, and benefit from the growing willingness of the Government of Vietnam to involve private sector partners in major projects.
VNI was established with four target sectors - energy, transportation, telecommunications and water - with the goal to invest the fund's initial USD400 million capital within two years. After one year, excellent progress has been made in building a diversified portfolio, with some 20 total investments in all target sectors except water, while adding several investments in industrial parks and related infrastructure services.
VNI highlights over the fund's first year include investments in several major power plants that have resulted in a close working relationship with Electricity of Vietnam, entering into a joint venture company that will be Vietnam's first major airplane lessor, and becoming Vietnam's largest investor in mobile telephone base transceiver stations.
The goal of being fully invested within two years is well on track.
However, despite the success in building a strong portfolio of investments, it was an extremely challenging year for Vietnam economically, in particular for the stock market which plummeted almost 60 percent over the first half of 2008. This had a negative impact on VNI's net asset value as a result of several initial investments in listed companies. Moreover, it was a very difficult year for infrastructure stocks and funds across Asia and the world.
The negative sentiment saw VNI's share price fall to USD 0.60 at 30 June 2008, versus a net asset value of USD 0.84. After the financial year ended, the global financial crisis saw the share price drop in September and October 2008, as emerging market closed-end funds were among the most heavily affected stocks worldwide.
There is no question this has created a difficult situation for VNI as we enter 2009. We remain strongly convinced, however, that VNI is on the correct strategic track and that infrastructure, by its nature a long-term investment, will continue to benefit from Vietnam's excellent prospects for continued economic growth.
Thank you for your continued support.
Don Lam
Chairman
Vietnam Infrastructure Limited
29 October 2008
Consolidated balance sheet
| Note | 30 June 2008 | 30 June 2007 | |
| USD'000 | USD'000 | ||
| Assets |
| ||
| Non-current |
| ||
| Property, plant and equipment | 6 | 17,970 | - |
| 17,970 | - | ||
| Current | |||
| Trade and other receivables | 7 | 6,008 | - |
| Financial assets at fair value through profit and loss | 8 | 112,880 | - |
| Investments in equity accounted investees | 9 | 3,814 | - |
| Bank deposits | 10 | 61,828 | - |
| Cash and cash equivalents | 11 | 135,248 | 402,100 |
| 319,778 | 402,100 | ||
| Total assets | 337,748 | 402,100 |
| Equity | |||
| Equity attributable to shareholders of the Group | |||
| Share capital | 12 | 4,021 | 4,021 |
| Treasury shares | (729) | - | |
| Share premium | 13 | 386,367 | 386,367 |
| Accumulated losses | (54,327) | (851) | |
| 335,332 | 389,537 | ||
| Minority interest | 14 | 906 | - |
| Total equity | 336,238 | 389,537 | |
| Liabilities | |||
| Current liabilities | |||
| Payables to related parties | 15 | 827 | 11,712 |
| Other liabilities | 683 | 851 | |
| Total liabilities | 1,510 | 12,563 | |
| Total equity and liabilities | 337,748 | 402,100 | |
| Net asset value per share (USD per share) | 20 | 0.84 | 0.97 |
Consolidated statement of changes in equity
| Equity attributable to shareholders of the Group | |||||||
| Share capital | Treasury shares | Share premium | Accumulated losses | Total | Minority interest | Total equity | |
| USD'000 | USD'000 | USD'000 | USD'000 | USD'000 | USD'000 | USD'000 | |
| At 18 January 2007 (date of establishment) | - | - | - | - | - | - | - |
| Net loss for period ended 30 June 2007 | - | - | - | (851) | (851) | - | (851) |
| Issue of new shares | 4,021 | - | 398,079 | - | 402,100 | - | 402,100 |
| Placing fees | - | - | (11,712) | - | (11,712) | - | (11,712) |
| At 30 June 2007 | 4,021 | - | 386,367 | (851) | 389,537 | - | 389,537 |
| Net loss for the year ended 30 June 2008 | - | - | - | (53,476) | (53,476) | (6) | (53,482) |
| Acquisition of subsidiaries | - | - | - | - | - | 912 | 912 |
| Buy-back of shares | - | (729) | - | - | (729) | - | (729) |
| At 30 June 2008 | 4,021 | (729) | 386,367 | (54,327) | 335,332 | 906 | 336,238 |
Consolidated statement of income
| Note | From 1 July 2007 to 30 June 2008 | From 18 January 2007 to 30 June 2007 | |
| USD'000 | USD'000 | ||
| Net changes in fair value of financial assets at fair value through profit and loss | 16 | (46,388) | - |
| Other investment income | 17 | 18,262 | - |
| Administration expenses | 18 | (9,750) | (851) |
| Loss from operating activities | (37,876) | (851) | |
| Net foreign exchange losses | (15,491) | - | |
| Share of loss of equity accounted investees | 9 | (115) | - |
| Loss before tax | (53,482) | - | |
| Income tax | 19 | - | - |
| Net loss |
| (53,482) | (851) |
| Basic losses per share (USD per share) | 20 | (0.13) | (0.002) |
Consolidated statement of cash flows
| From 1 July 2007 to 30 June 2008 | From 18 January 2007 to 30 June 2007 | |
| USD'000 | USD'000 | |
| Operating activities | ||
| Net loss before tax | (53,482) | (851) |
| Adjustment for: | ||
| Gains on disposals of financial assets | (17) | - |
| Share of loss of equity accounted investees | 115 | - |
| Unrealised foreign exchange losses | 13,734 | - |
| Net changes in fair value of financial assets at fair value through profit and loss | 46,405 | - |
| Interest and dividend income | (18,261) | - |
| Net loss before changes in working capital | (11,506) | (851) |
| Change in secured bank deposits | (61,828) | |
| Change in trade and other receivables | (1,016) | - |
| Change in trade and other payables | 659 | 851 |
|
| (73,691) | - |
| Investing activities | ||
| Interest received | 12,842 | - |
| Dividends received | 427 | - |
| Purchases of property, plan and equipment through acquisition of subsidiaries (See Note 5) | (17,000) | - |
| Other purchases of property, plan and equipment | (58) | - |
| Investments in associates | (3,929) | |
| Purchases of financial assets | (166,543) | - |
| Proceeds from disposals of financial assets | 217 | - |
|
| (174,044) | - |
| Financing activities | ||
| Proceeds from shares issued | - | 402,100 |
| Payment for buy-back of shares | (729) | - |
| Payment for share issuance costs | (11,712) | - |
| (12,441) | 402,100 | |
| Net (decrease)/increase in cash and cash equivalents for the year/period | (260,176) | 402,100 |
| Unrealised foreign exchange differences of cash and cash equivalents | (6,676) | - |
| Cash and cash equivalents at the beginning of the year/period | 402,100 | - |
| Cash and cash equivalents at end of the year/period | 135,248 | 402,100 |
Notes to the consolidated financial statements for the year ended 30 June 2008 and for the period from 18 January 2007 (date of establishment) to 30 June 2007
These notes form an integral part of and should be read in conjunction with the accompanying consolidated financial statements.
1 General information
Vietnam Infrastructure 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 mainly invests and holds equity, debt and hybrid instruments in unquoted companies that themselves hold, develop or operate infrastructure assets. The Company may also invest in entities whose shares or other instruments are listed on a stock exchange, or traded on the OTC markets. The Company also may invest in other funds that invest in infrastructure. The Company's shares are traded on the AIM market of the London Stock Exchange under the ticker symbol VNI.
The Company's fiscal year is from 1 July to 30 June. The first fiscal year was from 18 January 2007 (date of establishment) to 30 June 2007.
2 Summary of significant accounting policies
2.1 Statement of compliance
The consolidated financial statements (the "financial statements") have been prepared in accordance with International Financial Reporting Standards ("IFRS").
The consolidated financial statements were approved for issue by the Board of Directors on 28 October 2008.
2.2 Basis of preparation
The significant accounting policies that have been used in the preparation of the financial statements are summarised below. These policies have been consistently applied to all the financial periods presented unless otherwise stated.
The financial statements have been prepared using the historical cost convention, as modified by the measurement at fair value of certain financial assets and financial liabilities, the measurement bases of which are described in the accounting policies below.
The preparation of financial statements in accordance with IFRS requires the use of certain accounting estimates and assumptions. Although these estimates are based on management's best knowledge of current events and actions, actual results may ultimately differ from those estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future period affected.
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 to the consolidated financial statements.
2.3 Basis of consolidation
The financial statements of the Group as of 30 June 2008 and 2007 and for the period from 18 January 2007 (date of establishment) to 30 June 2007 and for the year ended 30 June 2008 comprise the Company and its subsidiaries (together referred to as "the Group") and the Group's interests in associates.
2.4 Subsidiaries
Subsidiaries are all entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from their activities. In assessing control, potential voting rights that presently are exercisable or convertible, along with contractual arrangements, are taken into account. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are excluded from consolidation from the date that the control ceases.
In addition, acquired subsidiaries are subject to application of the purchase method of accounting. This involves the measurement at fair value of all identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the basis for subsequent measurement in accordance with the Group's accounting policies. Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquired subsidiary at the date of acquisition. Negative goodwill is immediately allocated to the consolidated statement of income as at the acquisition date.
All intra-group balances and significant intra-group transactions and resulting unrealised profits or losses (unless losses provide evidence of impairment) are eliminated on consolidation.
2.5 Associates
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Associates are accounted for using the equity method and are initially recognised at cost. The Group's investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group's share of the income and expenses and equity movements of the equity accounted investees from the date that significant influence commences until the date that significant influence ceases. When the Group's share of losses exceeds its interest in an associate, the carrying amount of that interest is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the associate.
2.6 Functional and presentation currency
The consolidated financial statements are presented in United States Dollars ("USD"), the Company's functional currency. The financial statements of each consolidated entity are presented in either USD or the currency of the primary economic environment in which the entity operates ("the functional currency"), which for most investments is Vietnamese Dong ("VND"). USD is used as the presentation currency because it is the primary basis for the measurement of the performance of the Group (specifically changes in the Net Asset Value of the Group) and the Company's share price is quoted in USD on the AIM market of the London Stock Exchange.
Foreign currency translation
In the separate financial statements of the consolidated entities, transactions arising in currencies other than the functional currency of the individual entity are translated at exchange rates in effect on the transaction dates. Monetary assets and liabilities denominated in currencies other than the functional currency of the individual entity are translated at the exchange rates in effect at the balance sheet date. Translation gains and losses and expenses relating to foreign exchange transactions are recorded in the statement of income.
In the consolidated financial statements, assets and liabilities included in the financial statements of subsidiaries which are prepared in currencies other than USD are translated into USD at the exchange rates in effect at the balance sheet date. Income and expenses of these subsidiaries are translated into USD at exchange rates approximating to the rates in effect on the transaction dates. Differences resulting from the translation are recorded in the foreign exchange translation reserve in equity.
2.7 Property, plant and equipment
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The initial cost of a property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after property, plant and equipment have been put into operation, such as repairs and maintenance and overhaul costs, are normally charged to income in the year in which the costs are incurred. In situations where it can be clearly demonstrated that the expenditures have resulted in an increase in the future economic benefits expected to be obtained from the use of property, plant and equipment beyond their originally assessed standard of performance, the expenditures are capitalised as an additional cost of property, plant and equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net in the consolidated statement of income.
2.8 Revenue recognition
Revenue is recognised when it is probable that the economic benefits will flow to the Group and when the revenue can be reliably measured, on the following basis:
Interest income
Interest income is recognised on a time proportion basis using the effective interest method.
Dividend income
Dividend income is recorded when the Group's right to receive the dividend is established.
2.10 Expense recognition
All expenses, including management fees and custodian fees, are recognised in the statement of income on an accrual basis.
2.11 Financial assets
Financial assets, other than hedging instruments, are divided into the following categories: loans and receivables; financial assets at fair value through profit or loss; available-for-sale financial assets; and held-to-maturity investments.
Management determines the classification of its financial assets at initial recognition depending on the purpose for which the financial assets were acquired. Where allowed and appropriate management re-evaluates this designation at each reporting date. The designation of financial assets is based on the investment strategy set out in the Group's Admission Document to the AIM market of the London Stock Exchange, dated 29 June 2007.
All financial assets are recognised when, and only when, the Group becomes a party to the contractual provisions of the instrument. When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not designated as at fair value through profit or loss, directly attributable transaction costs.
Derecognition of financial assets occurs when the rights to receive cash flows from the investments expires or are transferred and substantially all of the risks and rewards of ownership have been transferred. At each balance sheet date, financial assets are reviewed to assess whether there is objective evidence of impairment. If any such evidence exits, any impairment loss is determined and recognised based on the classification of the financial assets.
The Group's financial assets consist primarily of cash, bank deposits, listed and unlisted securities, private equity investments, bonds, loans and receivables.
Loans and receivables
All loans and receivables, except trustee loans, are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial recognition these are measured at amortised cost using the effective interest method, less allowance for impairment. The Group's trade and most other receivables fall into this category of financial instruments. Discounting, however, is omitted where the effect of discounting is immaterial.
Significant receivables are considered for impairment on a case-by-case basis when they are overdue at the balance sheet date or when objective evidence is received that a specific counterparty will default.
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 upon initial recognition. By definition, all derivative financial instruments that do not qualify for hedge accounting fall into this category. Other financial assets at fair value through profit or loss held by the Group include listed and unlisted securities. Upon initial recognition, attributable transaction costs are recognised in profit or loss when incurred.
Any gain or loss arising from financial instruments is based on changes in fair value, which is determined by direct reference to active market transactions or using industry standard valuation techniques where no active market exists. Where the valuation techniques result in a wide range of valuation or when the fair value is not reliably measured the financial assets are recorded at cost less impairment losses considered necessary by the Directors.
Financial assets at fair value through profit and loss includes trustee loans to banks and other parties where the Group receives interest and other income on the loans calculated based on the proceeds from the sales of specific assets held by the counterparties. Fair value is determined based on the expected future discounted cash flows from each loan.
Available-for-sale financial assets
Available-for-sale financial assets are non-derivative financial assets that are not designated as other categories of financial assets. All financial assets within this category are subsequently measured at fair value. Gains and losses arising from changes in their fair values are recognised directly in equity, except for impairment losses, until the financial asset is derecognised, at which time the cumulative gain or loss previously recognised in equity would be recognised in the statement of income.
For available-for-sale investments in equity securities that do not have a quoted market price in an active market and whose fair value cannot be reliably measured, they are measured at cost less any identified impairment losses at each balance sheet date subsequent to initial recognition.
Held-to-maturity investments
Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities. Investments are classified as held-to-maturity if it is the intention of the Group to hold them until maturity.
Held-to-maturity investments are subsequently measured at amortised cost using the effective interest rate method. In addition, if there is objective evidence that the investment has been impaired, the financial asset is measured at the present value of estimated cash flows. Any changes to the carrying amount of the investment are recognised in the statement of income.
2.12 Cash and cash equivalents
Cash and cash equivalents include cash at bank and in hand as well as short-term highly liquid investments such as money market instruments and bank deposits with an original maturity term of not more than three months.
2.13 Equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.
Share premium includes any premiums received on the initial issuance of the share capital. Any transaction costs associated with the issuance of shares are deducted from share premium.
When share capital recognised as equity is repurchased (treasury shares), the amount of the consideration paid, which includes directly attributable costs, is net of any tax effects, and is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/from retained earnings.
Currency translation differences on net investment in foreign operations are included in the translation reserve.
Retained earnings/accumulated losses include all results from current and prior periods as disclosed in the statement of income.
2.14 Financial liabilities
The Group's financial liabilities include trade and other payables and other liabilities.
Financial liabilities are recognised when the Group becomes a party to the contractual agreements of the instrument. All interest related charges are recognised as an expense in finance costs in the statement of income.
Trade and other payables and other liabilities are recognised initially at their fair value and subsequently measured at amortised cost, using the effective interest rate method.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
2.15 Provisions, contingent liabilities and contingent assets
Provisions are recognised when present obligations will probably lead to an outflow of economic resources from the Group that can be reliably estimated. A present obligation arises from the presence of a legal or constructive obligation that has resulted from past events. Provisions are not recognised for future operating losses.
Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the balance sheet date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Long-term provisions are discounted to their present values, where the time value of money is material.
All provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate of Group's management.
The Group does not recognise a contingent liability but discloses its existence in the financial information. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Group or a present obligation that is not recognised because it is not probable that an outflow of resources will be required to settle the obligation. A contingent liability also arises in the rare circumstance where there is a liability that cannot be recognised because it cannot be measured reliably.
A contingent asset is a possible asset that arises from past events whose existence will be confirmed by uncertain future events beyond the control of the Group. The Group does not recognise contingent assets but discloses their existence when inflows of economic benefits are probable, but not virtually certain.
2.16 Related parties
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. Parties are considered to be related to the Group if:
1. directly or indirectly, a party controls, is controlled by, or is under common control with the Group; has an interest in the Group that gives it significant influence over the Group; or has joint control over the Group;
2. a party is a jointly-control entity in which the Group is a venturer;
3. a party is an associate of the Group;
4. a party is a member of the key management personnel of the Group;
5. a party is a close member of the family of any individual referred to in (4);
6. a party is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred in (4) or (5).
Other investment funds under the management of VinaCapital Investment Management Ltd are considered related parties to the Group.
2.17 Earnings per share and net asset value per share
The Group presents basic earnings per share (EPS) for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to the ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.
Net asset value (NAV) per share is calculated by dividing the net asset value attributable to ordinary shareholders of the Company by the number of outstanding ordinary shares as at the balance sheet date. Net asset value is determined as total assets less total liabilities. Where treasury shares exist, net asset value per share is calculated based on the assumption that those treasury shares have been cancelled.
2.18 New standards, amendments and interpretations not yet adopted
The following new standards, amendments and interpretations to existing standards have been published, but are not yet effective for the year ended 30 June 2008 and the Group has not early adopted them:
IFRS 8 Operating Segments, which is effective for financial statements for periods beginning on or after 1 January 2009, introduces the "management approach" to segment reporting. It is not expected that the adoption of IFRS 8 will have a material effect on the Group's consolidated financial statements.
Revised IAS 23 Borrowing Costs, which is effective for capitalisation of borrowing costs to qualifying assets commencing on or after 1 January 2009, removes the option to expense borrowing costs and requires that an entity capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. It is not expected that the adoption of Revised IAS 23 will have a material effect on the Group's consolidated financial statements.
IFRIC 12 Service Concession Arrangements provides guidance on certain recognition and measurement issues that arise in accounting for public-to-private service concession arrangements. IFRIC 12, which is effective for financial statements for periods beginning on or after 1 January 2008, is not expected to have any effect on the Group's consolidated financial statements.
IFRIC 13 Customer Loyalty Programmes addresses the accounting by entities that operate, or otherwise participate in, customer loyalty programmes under which the customer can redeem credits for awards such as free or discounted goods or services. IFRIC 13, which is effective for financial statements for periods beginning on or after 1 July 2008, is not expected to have any effect on the Group's consolidated financial statements.
IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction clarifies when refunds or reductions in future contributions in relation to defined benefit assets should be regarded as available and provides guidance on the impact of minimum funding requirements (MFR) on such assets. It also addresses when a MFR might give rise to a liability. IFRIC 14 is effective for financial statements for periods beginning on or after 1 January 2008, with retrospective application required. The adoption of IFRIC 14 is not expected to have any effect on the Group's consolidated financial statements.
IFRIC 15 Agreements for construction of real estates, which is effective for financial statements for periods beginning on or after 1 January 2009, clarifies whether IAS 18, Revenue, or IAS 11, Construction contracts, should be applied to particular transactions. It is likely to result in IAS 18 being applied to a wider range of transactions. The Directors have not assessed the effect of this interpretation on the Group's consolidated financial statements.
IFRIC 16 Hedges of a net investment in a foreign operation, which is effective for financial statements for periods beginning on or after 1 October 2008, clarifies the accounting treatment in respect of net investment hedging. This includes the fact that net investment hedging relates to differences in functional currency not presentation currency, and hedging instruments may be held anywhere in the group. The requirements of IAS 21, The effects of changes in foreign exchange rates, do apply to the hedged items. The adoption of IFRIC 16 is not expected to have any effect on the Group's consolidated financial statements.
Revised IAS 1 Presentation of Financial Statements (2007), which is effective for financial statements for periods beginning on or after 1 January 2009, introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the statement of income and all non-owner changes in equity in a single statement), or in a statement of income and a separate statement of comprehensive income. The adoption of Revised IAS 1 is expected to have a significant impact on the presentation of the Group's consolidated financial statements.
Amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements - Puttable Financial Instruments and Obligations Arising on Liquidation requires puttable instruments, and instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation, to be classified as equity if certain conditions are met. The amendments, which are effective for financial statements for periods beginning on or after 1 January 2009, with retrospective application required, are not expected to have any effect on the Group's consolidated financial statements.
Revised IFRS 3 Business Combinations (2008) has broadened the definition of a business which is likely to result in more acquisitions being treated as business combinations. Further, the Revised IFRS 3 will require contingent consideration to be measured at fair value, with subsequent changes therein recognised in profit or loss and transaction costs, other than share and debt issue costs, to be expensed as incurred. The revised IFRS 3 will also require any pre-existing interest in the acquiree to be measured at fair value with the gain or loss recognised in profit or loss and any non-controlling (minority) interest to be measured at either fair value, or at its proportionate interest in the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis. The Group is required to adopt Revised IFRS 3 for business combinations which the acquisition date is on or after 1 April 2010, with prospective application required.
Amended IAS 27 Consolidated and Separate Financial Statements (2008) requires accounting for changes in ownership interests by the Group in a subsidiary, while maintaining control, to be recognised as an equity transaction. When the Group loses control of a subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognised in profit or loss. The amendments to IAS 27 are effective for financial statements for periods beginning on or after 1 July 2009. The Directors have not assessed the effect of this amended standard on the Group's consolidated financial statements.
Amendment to IFRS 2 Share-based Payment - Vesting Conditions and Cancellations clarifies the definition of vesting conditions, introduces the concept of non-vesting conditions, requires non-vesting conditions to be reflected in grant-date fair value and provides the accounting treatment for non-vesting conditions and cancellations. The Group is required to adopt amendments to IFRS 2 for financial statements for periods beginning on 1 April 2009. The adoption of amendments to IFRS 2 is not expected to have any effect on the Group's consolidated financial statements.
2.19 Segment reporting
An investment segment is a group of assets that are subject to risks and returns that are different from those of other business segments.
A geographical segment is a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments.
3 Critical accounting estimates and judgements
When preparing the financial information the Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below:
Impairment of trade and other receivables
The Group's management determines the provision for impairment of trade and other receivables on a regular basis. This estimate is based on the credit history of its customers and prevailing market conditions.
Fair value of financial instruments
The fair value of financial instruments that are not traded in an active market (for example, unlisted securities) is determined by using valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance sheet date.
4 Segment reporting
Segment information is presented in respect to the Group's investment and geographical segments. The primary format, investment segments, is based on the investment manager's management and monitoring of investments. Investments are allocated into the following main segments: energy, property and infrastructure developers, telecommunications, aviation, other sectors and cash (including term deposits and bonds). The Group's secondary reporting format, geographical segments, includes Vietnam and the Asia Pacific region.
| 30 June 2008 | |||
| Vietnam | Asia Pacific | Total | |
| USD'000 | USD'000 | USD'000 | |
| Total assets | |||
| Investment - energy | 26,203 | - | 26,203 |
| Investment - property and infrastructure developers | 70,828 | - | 70,828 |
| Investment - telecommunications | 7,005 | - | 7,005 |
| Investment - aviation | 19,219 | - | 19,219 |
| Investment - other sectors: | |||
| - Securities | 2,226 | - | 2,226 |
| - Bonds | 7,808 | - | 7,808 |
| - Others | 1,375 | - | 1,375 |
| Others | |||
| Trade and other receivables | 6,008 | - | 6,008 |
| Cash and other short term investments | 102,015 | 95,061 | 197,076 |
| 242,687 | 95,061 | 337,748 | |
| 30 June 2008 | |||
| Vietnam | Asia Pacific | Total | |
| USD'000 | USD'000 | USD'000 | |
| Capital expenditure | |||
| Investment - property and infrastructure developers | 16,288 | - | 16,288 |
| Investment - other sectors | 1,682 | - | 1,682 |
| 17,970 | - | 17,970 | |
| Income | |||
| Investment - energy | (31,840) | - | (31,840) |
| Investment - property and infrastructure developers | (17,659) | - | (17,659) |
| Investment - telecommunications | 77 | - | 77 |
| Investment - aviation | (314) | - | (314) |
| Investment - other sectors: | |||
| - Securities | (1,959) | - | (1,959) |
| - Bonds | (2,165) | - | (2,165) |
| Others | (1,347) | - | (1,347) |
| Cash | 4,962 | 6,628 | 11,590 |
| (*) | (50,245) | 6,628 | (43,617) |
| Expenses | |||
| Unallocated expenses | (9,750) | - | (9,750) |
| (9,750) | - | (9,750) | |
| Net loss | (59,995) | 6,628 | (53,367) |
To determine the geographical segments for assets the following rules have been applied:
Listed shares − place of primary listing;
Unlisted shares − place of incorporation of the issuer;
Cash − place of deposit;
Bond - place of incorporation of the issuer.
Segmental liabilities were not disclosed as they were not material. Segmental assets and income at 30 June 2007 were attributable to cash and cash equivalents in Asia Pacific.
(*) including net foreign exchange losses of USD15,491
5 Subsidiaries and associates
Acquisition of Bellport Developments Limited
The Group acquired a 100% interest in Bellport Developments Limited on 31 March 2008, which owns 80% in Long An Port project. The total cost of the acquisitions was USD6,389,000. The purchase price was settled in cash.
The fair value amount recognised in the acquiree's property, plant and equipment at the acquisition date was USD6,389,000.
Bellport Developments Limited has not contributed any profit/loss to the consolidated loss for the period from 31 March 2008 to the balance sheet date.
Acquisition of Reckon Developments Limited
The Group acquired a 100% interest in Reckon Developments Limited on 31 March 2008, which owns 60% in Long An Industrial Services project. The total cost of the acquisitions was USD7,087,000. The purchase price was settled in cash.
The fair value amount recognised in the acquiree's property, plant and equipment at the acquisition date was USD7,999,000.
Reckon Developments Limited has not contributed any profit/loss to the consolidated loss for the period from 31 March 2008 to the balance sheet date.
Acquisition of VinaCapital LongAn Industry Limited
The Group acquired a 100% interest in VinaCapital LongAn Industry Limited on 31 March 2008, which owns 60% in Long An Industrial Park project. The total cost of the acquisitions was USD3,524,000. The purchase price was settled in cash.
The fair value amount recognised in the acquiree's property, plant and equipment at the acquisition date was USD3,524,000.
VinaCapital LongAn Industry Limited contributed a loss of USD15,000 to the consolidated loss for the period from 31 March 2008 to the balance sheet date.
The acquisitions had the following effect on the Groups' assets and liabilities on acquisition date:
| Recognised values on acquisition USD'000 | ||
| Property, plant and equipment | 17,912 | |
| Other assets | - | |
| Net identifiable assets and liabilities | 17,912 | |
| Goodwill on acquisition | - | |
| Consideration paid | 17,912 | |
| Less cash acquired | (912) | |
| Cash flows on acquisitions, net of cash acquired | 17,000 |
Significant subsidiaries
| Name | Place of incorporation/operations | Nominal value of issued share capital/registered capital USD | Percentage interest held by the Company | Principal activities |
| VIL Investment Ltd | BVI | 100 | 100% | Investment |
| Vietnam Infrastructure Investment Ltd | BVI | 100 | 100% | Investment |
| Vietnam Infrastructure Development Ltd | BVI | 100 | 100% | Investment |
| Vietnam Infrastructure Enterprise Ltd | BVI | 100 | 100% | Investment |
| Vietnam Infrastructure Holding Ltd | BVI | 100 | 100% | Investment |
| Vietnam Infrastructure Strategic Ltd | BVI | 100 | 100% | Investment |
| Vietnam Infrastructure Privilege Ltd | BVI | 100 | 100% | Investment |
| Vietnam Infrastructure Heritage Ltd | BVI | 100 | 100% | Investment |
| Vietnam Infrastructure Espero Ltd | BVI | 100 | 100% | Investment |
| VIL Glorious Investment Ltd | BVI | 100 | 100% | Investment |
| Coastal Pacific Ltd | BVI | 100 | 100% | Investment |
| Goldrise Global Ltd | BVI | 100 | 100% | Investment |
| Richluck International Ltd | BVI | 100 | 100% | Investment |
| Scepter Asia Ltd | BVI | 1 | 100% | Investment |
| Fairson Ventures Ltd | BVI | 1 | 100% | Investment |
| Vietnam Infrastructure Civilis Ltd | BVI | 1 | 100% | Investment |
| Vietnam Infrastructure Pyramid Ltd | BVI | 1 | 100% | Investment |
| Vietnam Infrastructure Conventus Ltd | BVI | 1 | 100% | Investment |
| Bellport Developments Limited | BVI | 1 | 100% | Investment |
| Reckon Developments Limited | BVI | 1 | 100% | Investment |
| VinaCapital Long An Industry Limited | BVI | 1 | 100% | Investment |
| Long An S.E.A Industrial Park Development Company Ltd | Long An, Vietnam | 10,000,000 | 60% | Real estate |
| Vina - CPK Ltd Company | Vinh Phuc, Vietnam | 80% | Construction |
Associates
| Name | Place of incorporation/operations | Nominal value of issued share capital/registered capital USD | Percentage interest held by the Company | Principal activities |
| Global Infrastructure Investment Company Ltd | Ho Chi Minh City, Vietnam | 3,125,000 | 49% | Mobile phone Infrastructure |
| Mobile Infrastructure Development Company Ltd | Hanoi, Vietnam | 10,000,000 | 49% | Mobile phone Infrastructure |
Financial information of the associates as of and for the year ended 30 June 2008 is disclosed as below:
| Name | Assets USD'000 | Liabilities USD'000 | Revenues USD'000 | Net profit USD'000 |
| Global Infrastructure Investment Company Ltd | 721 | 8 | - | (30) |
| Mobile Infrastructure Development Company Ltd | 3,262 | 49 | - | (204) |
6 Property, plant and equipment
| Land and buildings 30 June 2008 | |
| USD'000 | |
| Opening balance | - |
| Land compensation costs acquired through acquisition of subsidiaries | 16,288 |
| Other related costs acquired through acquisition of subsidiaries | 1,682 |
| Closing balance | 17,970 |
7 Trade and other receivables
| 30 June 2008 | |
| USD'000 | |
| Prepayments | 1,016 |
| Interest receivables | 4,992 |
| 6,008 |
The carrying value of trade and other receivables is considered a reasonable approximation of their fair value as at balance sheet date.
8 Financial assets at fair value through profit and loss
| 30 June 2008 | |
| USD'000 | |
| Financial assets at fair value through profit or loss: | |
| Ordinary shares - listed | 69,737 |
| Ordinary shares - unlisted | 35,335 |
| Corporate bonds | 7,808 |
| 112,880 |
Included in investments in unlisted ordinary shares were investments in equity instruments of USD22.9 million which were measured at cost because the fair value of these investments could not be reliably assessed as at 30 June 2008. The Directors have assessed the impairment impact of these investments and believe that these investments were not impaired as at 30 June 2008.
9 Investments in equity accounted investees
| 30 June 2008 | |
| USD'000 | |
| Opening balance | - |
| Addition from acquisition of equity accounted investees | 3,929 |
| Share of loss of equity accounted investees, net | (115) |
| Closing balance | 3,814 |
10 Bank deposits
| 30 June 2008 | |
| USD'000 | |
| Bank deposits | 61,828 |
The Group has deposited VND1,041 million (equivalent to USD62 million) with a bank. The deposit is repayable within one year and earns interest at the rate of 13% per annum. The deposit is restricted from use for purposes other than its intended purpose described in Note 23 to the consolidated financial statements. The bank has guaranteed to ensure the full repayment of the deposit and associated accrued interest thereon to the Group in VND upon the expiry of the deposit term.
The carrying value of the deposit is considered a reasonable approximation of its fair value as at balance sheet date.
11 Cash and cash equivalents
| 30 June 2008 | 30 June 2007 | |
| USD'000 | USD'000 | |
| Cash at bank | 4,783 | 402,100 |
| Money market instruments (*) | 130,465 | - |
| 135,248 | 402,100 |
(*) Money market instruments are term deposits with banks, with original terms to maturity of less than three months and bearing interest at rates ranging from 10.5% to 17.5% for VND deposits and 2.1% for USD deposits during the year ended 30 June 2008.
12 Share capital
| 30 June 2008 and 2007 | ||
| Number of shares | USD'000 | |
| Authorised: Ordinary shares at par value of USD0.01 each | 10,000,000,000 | 100,000 |
| Issued and fully paid: | ||
| At 30 June 2007 | 402,100,000 | 4,021 |
| At 30 June 2008 | 402,100,000 | 4,021 |
The Company was incorporated on 18 January 2007 with the issuance of 1 share, of USD0.01 par value. The Company's issued share capital was increased to 402.1 million shares on 28 June 2007 of USD0.01 par value each.
13 Share premium
Share premium represents the excess of consideration received over the par value of shares issued after deducting placing fees and other incremental costs directly related to the share issuance.
14 Minority interest
| 30 June 2008 | |
| USD'000 | |
| Opening balance | - |
| Movements during the year of the minority share capital | 912 |
| Share of loss of attributable to minority shareholders | (6) |
| Closing balance | 906 |
15 Payables to related parties
| 30 June 2008 | 30 June 2007 | |
| USD'000 | USD'000 | |
| VinaCapital Investment Management Ltd - management and placement fees | 573 | 11,712 |
| Other payables to VinaCapital Investment Management Ltd | 37 | - |
| VinaLand Limited | 217 | - |
|
| 827 | 11,712 |
16 Net changes in fair value on financial assets at fair value through profit or loss
| Year ended 30 June 2008 | |
| USD'000 | |
| Unrealised losses | 46,405 |
| Realised gains | (17) |
|
| 46,388 |
17 Other investment income
| Year ended 30 June 2008 | |
| USD'000 | |
| Dividend income | 427 |
| Interest income | 17,834 |
| Other income | 1 |
| 18,262 |
18 Administration expenses
| Year ended 30 June 2008 | Period from 18 January 2007 to 30 June 2007 | |
| USD'000 | USD'000 | |
| Management fees (see Note 21) | 7,935 | - |
| Professional fees | 500 | - |
| Custodian fees | 599 | - |
| Directors' fees | 130 | - |
| General administration expenses | 253 | 851 |
| Other expenses | 333 | - |
| 9,750 | 851 |
19 Income tax
Vietnam Infrastructure Limited is domiciled in the Cayman Islands. Under the current laws of the Cayman Islands, there is no income, State, corporation, capital gains or other taxes payable by the Company.
The majority of the Group's subsidiaries are domiciled in the British Virgin Islands (BVI) and so have a tax exempt status. A number of subsidiaries are established in Vietnam and are subject to corporate income tax in Vietnam. The Vietnam subsidiaries have not yet started commercial operations nor generated taxable income, therefore no provision for current tax have been made for the period from 18 January 2007 (date of establishment) to 30 June 2007 and for the year ended 30 June 2008.
Deferred tax was not recognised as the temporary differences and tax losses were not material.
20 Earnings per share and net asset value per share
| 30 June 2008 | 30 June 2007 | |
| Net asset value (USD'000) | 335,332 | 389,537 |
| Number of outstanding ordinary shares | 401,169,300 | 402,100,000 |
| Net asset value per share (USD/share) | 0.84 | 0.97 |
| Year ended 30 June 2008 | Period from 18 January 2007 To 30 June 2007 | |
| Number of outstanding ordinary shares | ||
| Number of ordinary shares at the beginning of the year/period | 402,100,000 | - |
| Issued during the year | - | 402,100,000 |
| Treasury shares | (930,700) | - |
| Number of ordinary shares at the end of the year/period | 401,169,300 | 402,100,000 |
| Weighted average number of ordinary shares | ||
| Issued ordinary shares at the beginning of the year/period | 402,100,000 | - |
| Effect of ordinary shares issued during the period | - | 402,100,000 |
| Effect of treasury shares | (77,558) | - |
| Weighted average number of ordinary share at the end of the year/period | 402,022,442 | 402,100,000 |
| Losses attributable to ordinary shareholders (USD'000) | (53,476) | (851) |
| Weighted average number of shares | 402,022,442 | 402,100,000 |
| Losses per share (USD/share) | (0.13) | (0.002) |
21 Related party transactions
Management fees
The Group is managed by VinaCapital Investment Management Limited (the "Investment Manager"), an investment management company incorporated in the British Virgin Islands ("BVI"), under a management agreement dated 29 June 2007 (the "Management Agreement"). The Investment Manager receives a fee based on the net asset value of the Group, payable monthly in arrears, at an annual rate of 2%.
Total management fees for the year ended 30 June 2008 amounted to USD7,935,454 (Period from 18 January 2007 to 30 June 2007: Nil), with USD573,143 in outstanding accrued fees due to the Investment Manager at 30 June 2008 (30 June 2007: Nil).
Performance fees
In accordance with the Management Agreement, the Investment Manager is also entitled to a performance fee equal to 20% of the realised returns over an annualised compounding hurdle rate of 8%.
There was no performance fees for the year ended 30 June 2008 (Period from 18 January 2007 to 30 June 2007: Nil), with no outstanding accrued fees due to the Investment Manager as at the balance sheet dates.
Placement fees
When raising capital through the issuance of new ordinary shares a commission equal to 3% of the subscription price multiplied by the total number of the shares allotted by the Company on admission is payable by the Group to the Investment Manager. The Investment Manager is responsible for paying placing agents that are engaged in respect to such subscriptions. The net proceeds of share subscriptions is recorded after netting off placement fees.
There was no placement fees for the year ended 30 June 2008 (Period from 18 January 2007 to 30 June 2007: USD11,711,650), with no outstanding accrued fees due to the Investment Manager at 30 June 2008 (30 June 2007: USD11,711,650).
Director fees
The aggregate director fee payable to the directors of the Company for the year ended 30 June 2008 was USD130,000 (Period from 18 January 2007 to 30 June 2007: Nil).
Acquisitions of subsidiaries from related parties
During the year, the Group acquired the following subsidiaries from VinaLand Limited (VNL) and Vietnam Opportunity Fund Limited (VOF):
| Name of subsidiaries | Paid to VNL USD'000 | Paid to VOF USD'000 | Total USD'000 |
| Bellport Developments Limited | 4,792 | 1,597 | 6,389 |
| Reckon Developments Limited | 5,087 | 2000 | 7,087 |
| VinaCapital Long An Industry Limited | 2,643 | 881 | 3,524 |
| 12,522 | 4,478 | 17,000 |
Other related party transactions and balances
Other related parties balances are disclosed in Note 15 to the consolidated financial statements.
22 Financial risk management objectives and policies
The Group primarily invests in bank deposits, bonds, listed and unlisted securities and private equity investments in Vietnam and is exposed to credit risk, liquidity risk and market risk arising from the financial instruments it holds. The Group has formulated risk management policies and guidelines which govern its overall business strategies and its general risk management policies, and has established processes to monitor and control transactions in a timely and accurate manner. In essence, the Group and its Investment Manager practice portfolio diversification and adopt a range of appropriate restrictions and policies. Nevertheless, the market can provide no assurance that the Group will not suffer a loss as a result of one or more of the risks described above, or as a result of other risks not currently identified by the Group.
The nature and extent of the financial instruments outstanding at the reporting date and the risk management policies employed by the Group are discussed below.
Credit risk
Credit risk is the risk of financial loss to the Group if an issuer or counterparty fails to meet a commitment that it has entered into with the Group.
The Group's assets will only be traded on or subject to the rules of a recognised stock exchange or with counterparties which have, or whose parent company has, a specified credit rating. All transactions in listed and unlisted securities are settled/paid for upon delivery using approved brokers. The risk of default is considered minimal since the delivery of securities sold is made only once the broker has received payment. A purchase payment is only made once the securities have been received by the broker. If either party fails to meet their obligations, the trade will fail.
As at 30 June 2008 and 2007 the Group's credit risk arose principally from the Group's other receivables, bank deposits, investments in bonds and cash and cash equivalents.
Other receivables mainly comprised interest income on time deposits. All time deposits were placed with high quality financial institutions with no significant credit risk. The Group does not expect any losses arising from the non-performance of these financial institutions.
The Group also limits its exposure to credit risk by only investing in corporate bonds issued by entities with sound profiles and the management does not expect these entities to fail to meet their obligations.
The maximum exposure to credit risk of cash and cash equivalents, deposits, investments in bonds and other receivables is equal to the carrying amounts stated in the balance sheet.
Liquidity risk
Liquidity risk is defined as the risk that the Group may not be able to settle or meet its obligations on time or at a reasonable price. The Group adopts its risk management guidelines which are designed to minimize its liquidity risk through:
monitoring its exposure to illiquid or thinly traded investments and financial instrument, and
applying limits to ensure there is no concentration of liquidity risk to a particular counterparty or market.
The Group also regularly monitors current and expected liquidity requirements to ensure that the Group maintains sufficient reserves of cash to meet its liquidity requirements in the short and longer term.
As at 30 June 2008 and 2007 the contractual maturities of non-derivative financial liabilities were as follows:
| Carrying amount | Undiscounted contractual cash flow | Within 1 year | Over 1 year | |
| USD'000 | USD'000 | USD'000 | USD'000 | |
| 30 June 2008 | ||||
| Payables to related parties and other liabilities | 1,510 | 1,510 | 1,510 | - |
| 30 June 2007 | ||||
| Other liabilities | 12,563 | 12,563 | 12,563 | - |
Market risk
Market risk is the risk that changes in market prices, such as equity prices, interest rates and foreign exchange rates will affect the Group's income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return.
(i) Equity price risk
Equity price risk is the risk that the fair values of equities decrease as a result of changes in the levels of the equity indices and the values of individual stocks. The trading equity price risk exposure arises from the Group's investment portfolio. The Group is exposed to equity price risk on all of its listed investments and certain unlisted investments for which an active over-the-counter market exists. The Group's overall market positions are monitored on a daily basis by the Investment Manager.
(ii) Interest rate risk
The Group's exposure to interest rate risk is related to interest bearing financial assets and financial liabilities.
Interest bearing financial assets
Cash and cash equivalents, bank deposits and bonds are subject to interest at fixed rates. They are exposed to fair value changes due to interest rate changes.
Interest bearing financial liabilities
The Group had no interest bearing financial liabilities as at 30 June 2008.
As at 30 June 2008 and 2007 the interest rate profile of the Group's interest bearing financial instruments was:
| 30 June 2008 USD'000 | 30 June 2007 USD'000 | |
| Fixed rate instruments | ||
| Financial assets | ||
| Cash and cash equivalents | 135,248 | 402,100 |
| Bank deposits | 61,828 | - |
| Bonds | 7,808 | - |
Fair value sensitivity analysis for fixed rate instruments
As at 30 June 2007 the Group did not hold any fixed rate financial assets or financial liabilities accounted for at fair value through profit or loss. Therefore a change in interest rates at that date would not affect profit or loss and equity.
As at 30 June 2008 fixed rate financial assets accounted for at fair value through profit or loss included bonds.
Fair value sensitivity analysis for bonds was not disclosed as it was not material.
(iii) Currency risk
Each entity within the Group is exposed to foreign currency risk on sales and purchases of its investments that are denominated in a currency other than its functional currency. The currency giving rise to this risk is primarily VND.
The Group ensures that the net exposure to this risk is kept to an acceptable level by buying or selling foreign currencies at spot rates to address short-term imbalances where necessary.
As at 30 June 2008 and 2007 the Group's exposure to foreign currency risk was as follows:
| VND | |||
| USD'000 | |||
| 30 June 2008 | |||
| Trade and other receivables | 5,987 | ||
| Financial assets at fair value through profit or loss | 99,740 | ||
| Bank deposits | 61,828 | ||
| Cash and cash equivalents | 36,746 | ||
| Payables to related parties | - | ||
| Other liabilities | (229) | ||
| Gross balance sheet exposure | 204,072 | ||
As at 30 June 2007 the Group did not have exposure to foreign currency risk.
Sensitivity analysis to a reasonably possible change in exchange rates
A 4% weakening of the VND against USD at the end of the year ended 30 June 2008 would have increased the loss (net of taxation) of the Group equity by the amount shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.
| Profit (net of taxation) USD'000 | |
| VND | 7,975 |
A 4% strengthening of the VND against USD would have had the equal but opposite effect to the amount shown above, on the basis that all other variables remain constant.
Sensitivity analysis for the period from 18 January 2007 to 30 June 2007 was not prepared as the Group was not exposed to foreign currency risk.
(iv) Price risk sensitivity analysis
The Group invests in listed and unlisted equity securities and is exposed to market price risk of these securities. If the prices of the securities were to fluctuate by 50%, the impact on profit or loss and equity would amount to approximately USD41 million. The Group was not exposed to price risk for the period from 18 January 2007 to 30 June 2007.
Capital management
The Group considers the capital to be managed as equal to the net assets attributable to the holders of ordinary shares. The Group has engaged the Investment Manager to allocate the net assets in such a way so as to generate investment returns that are commensurate with the investment objectives outlined in the Group's offering documents.
23 Contingent assets
Co-operation contract with Thai Thinh Capital
In accordance with the co-operation contract dated 8 December 2007 between the Group and Thai Thinh Capital ("TTC"), a joint stock company, for which the Group has placed an amount of VND1,041 (equivalent to USD62 million) (Note 10) with a bank for lending to TTC, the Group has an option ("the Option") to buy shares of TTC when TTC offers its share to public at a favourable price which is 20% lower than the average initial public offer ("IPO") price.
As at 30 June 2008 the following information is uncertain:
Whether TTC will offer its share to the public in the foreseeable future; and
The average IPO price, if TTC offers its shares to the public.
As at 30 June 2008, due to the uncertainties as mentioned above, the fair value of the Option, which was not able to be determined reliably, has not been recognised in the consolidated financial statements.
24 Contingent liabilities
Taxation
Although the Company and some of its subsidiaries are incorporated in the Cayman Islands and the British Virgin Islands where they are exempt from tax, the Group's activities are primarily focused on Vietnam. In accordance with the prevailing tax regulations in Vietnam, if an entity was treated as having a permanent establishment, or as otherwise being engaged in a trade or business in Vietnam, income attributable to or effectively connected with such permanent establishment or trade or business may be subject to tax in Vietnam. As at the date of this report the following information is uncertain:
Whether the Company and/or its subsidiaries are considered as having permanent establishments in Vietnam; and
The amount of tax that may be payable, if the income is subject to tax.
The implementation and enforcement of tax regulations in Vietnam can vary depending on numerous factors, including the identity of the tax authority involved. The administration of laws and regulations by government agencies may be subject to considerable discretion, and in many areas, the legal framework is vague, contradictory and subject to interpretation. The Directors believe that it is unlikely that the Company and/or the subsidiaries incorporated in the Cayman Islands and the British Virgin Islands will be exposed to tax liabilities in Vietnam, and in the worse case, if tax is imposed on income arising in Vietnam it will not be applied retrospectively.
As at 30 June 2008, due to the uncertainties mentioned above, no liability in relation to taxation has been recognised in the consolidated financial statements.
25 Commitments
There were no other contingent assets or liabilities or commitments as at 30 June 2008.
26 Subsequent events
Subsequent to the year ended 30 June 2008, global markets were sharply affected by the collapse of Lehman Brothers and other financial institutions. As the extent of the credit crisis became clear the market turmoil spread to Europe and emerging markets including the Vietnam stock market.
As of the date of issuance of the financial statements, the aggregate fair value of the Group's financial assets at fair value through profit and loss has fallen by USD32.7 million to USD80.2 million from the aggregate fair value as of 30 June 2008. The details are as follows:
| Fair value | |||
| 30 June 2008 | 28 October 2008 | Movement | |
| USD'000 | USD'000 | USD'000 | |
| Financial assets at fair value through profit or loss: | |||
| Ordinary shares - listed | 69,737 | 37,585 | (32,152) |
| Ordinary shares - unlisted | 35,335 | 34,520 | (815) |
| Corporate bonds | 7,808 | 8,053 | 245 |
| 112,880 | 80,158 | (32,722) | |