TIDMVPF
RNS Number : 9515T
Vietnam Property Fund
14 December 2011
VIETNAM PROPERTY FUND LIMITED
("VPF" or the "Company")
CORRECTION :- PRELIMINARY RESULTS FOR THE YEAR ENDED 30 JUNE
2011
The following replaces the Preliminary Results sent at 13.44 pm
GMT on December 13, 2011 for Vietnam Property Fund Limited under
RNS.8830T. The first issuance was sent with the incorrect Proceeds
from Disposal of Investments in the Consolidated Statement of Cash
Flows. This should have read $5,067,834 (2010) and $5,110,495
(2009) not $948,585 (2010) and $98,269 (2009) as previously stated.
The complete and corrected version, including the full and amended
Consolidated Statement of Cash Flows, follows.
Financial Highlights
30 June 2011 30 June 2010 % change
US$ US$
Total net assets 71,476,461 92,567,353 (22.78)%
NAV per share 0.80 1.03 (22.23)%
Net (Loss)/Profit (20,574,327) 4,421,128 (565.36%)
Net (Loss)/Profit
per share (0.229) 0.049 (567.34%)
Share price (closing
price on LSE)) 0.71 0.63 12.70%
Discount (11.27)% (38.72)% 70.89%
US$/VND exchange
rate - depreciation 20,592 19,076 7.95%
---------------------- --------------- --------------- ---------------
30 June 2011 30 June 2010 % change
US$ US$
Cash and cash
equivalents 28,078,262 44,495,779 (36.90)%
Interest income 230,719 87,254 164.42%
Loan receivables
interest income 849,609 - 100.00%
Dividend income 564,783 228,043 147.67%
Changes in fair
value of financial
assets at fair
value through
profit or loss (21,756,267) 3,448,724 (730.85)%
Gain on disposal
of investments 1,663,700 2,902,922 (42.69)%
Other income - 71,474 (100.00)%
--------------------- ------------- ------------- ----------
Total income (18,447,456) 6,738,417 (373.76)%
===================== ============= ============= ==========
Portfolio Highlights
30 June 2011 30 June 2010 % change
US$ US$
Listed investments
at cost 29,842,145 19,959,186 49.51%
Unrealised (losses)/gains (14,813,323) 6,051,981 (344.77)%
--------------------------- ------------- ------------- ----------
Listed investments
at fair value 15,028,822 26,011,167 (42.22)%
--------------------------- ------------- ------------- ----------
The directors present their report and the audited consolidated
financial statements of Vietnam Property Fund Limited (the
"Company") and its subsidiaries (together referred to as the
"Group") for the year ended 30 June 2011.
Principal Activity
The Company is a close-ended investment company incorporated
under the laws of the Cayman Islands. The investment objective of
the Company is to provide shareholders with attractive capital
returns over the mid to long term by investing in a portfolio of
real estate investments, primarily in Vietnam.
Results and Dividends
The Group's consolidated net loss for the year ended 30 June
2011 was US$20,574,327 (net profit for the year ended 30 June 2010:
US$4,421,128). The full financial position at 30 June 2011 is set
out in the audited financial statements. The directors have taken
the decision not to pay a dividend in respect of the year ended 30
June 2011 (30 June 2010: Nil).
Chairman's Statement
At the close of year three for the Vietnam Property Fund Limited
("VPF" or the "Fund") the staid course to full deployment continues
to materialise. Within the exciting confines of Vietnam's
investment landscape we often discuss patience being more than a
virtue. At the close of the third fiscal year of the Fund this
theme persists. With the continued support of our investor base,
who appreciate the duration relative to return on investment (ROI)
in a place like Vietnam can be painstaking at times, we are well
positioned for an inevitable turn in the market. Timing is the key
question and the interest rate environment is likely to hold the
answer. Estimates are that 2012 will provide the venue for such
developments. Similarly, the VPF team's liquidity predictions made
at this time a year ago - based largely on the Vietnam property
market supply / demand paradox along with continued macro
imbalances - have begun to enter the equation. Delayed projects
have finally given way to distressed ones and though a liquidity
frenzy has yet to develop opportunities within reason will
arise.
A summary of activity is somewhat subdued as, once again, policy
maker's efforts to balance the growth / stability equation has
produced adverse affects. As such, elevated interest rates and
inflation set against continued currency devaluation have had a
particularly negative effect on the real estate sector. Little
access to leverage and soaring deposit rates are never good for
developers and retail punters. Irrespectively, a tempered approach
to our investment process remains and is expected to make the
difference over the life of the Fund - particularly as previously
rejected projects come back to us at significantly discounted
valuations.
A closer look at the sub-sets of the sector reveals a material
supply glut in office and high-end residential apartments. The boom
years of 2006 into 2008 where demand for office far outstripped
supply are a far cry from present times as Grade A vacancy rates
touched 40% and the lack of practicality in many new-builds sites.
Today, there is more stock and less demand, thus market elasticity
is on the move. In the residential equation, traditional
'up-market' apartments are in abundant supply and in some cases
struggling to reach completion. Though it has taken some time,
prices are moving down across the board. Primary transactions are
off some 20% (Source: Dragon Capital) across the range of offerings
and the secondary market is declining at 2-4% (Source: Dragon
Capital). As numbers continue to rationalise and policy makers
search for a firmer foundation we expect a quick turn of the market
and are positioned accordingly.
Arguably more inspiring is the industrial and hotel space.
Vietnam's validity as a best alternative in a diversified approach
to the Asia manufacturing story is only gaining ground as China, in
particular, continues to grow and wage inflation takes its toll.
Moreover, infrastructure is improving, notably with the opening of
the Cai Mep deep sea terminal in Vung Tau. Already industrial parks
in Vietnam are packed and new construction in short supply, thus we
continue to monitor opportunities and are well down the track on
what would prove to be a first-of-its-kind transaction in the
country. Similarly upbeat is the hotel story. We are highly focused
on consistent, predictable, budget accommodation as city centres
long to provide reasonably priced alternatives. Deals in this space
are particularly hard to find - commercial terms are less the
problem as opposed to deal structure relative to prudence where the
stars often do not align. We fear not, however, as market dynamics
continue to eventuate in the Fund's favour.
Other sub-sets continually monitored are retail and serviced
apartments. The former is most unimpressive with the exception of
an upcoming launch of true international grade supply in Saigon
South. Accordingly, opportunities will be sought, but attention is
focused in more promising scenarios. Serviced apartments have
proven a good investment for Dragon Capital for more than a decade.
In the current environment developers are moving to rent unsold
stock. Downward pricing pressure as the expected result means the
Fund will monitor and consider opportunities as appropriate.
Penultimately, the Fund and its performance. A buy-back approved
and initiated, with limited capital, at the end of 2010 had
resounding affects. We are happy to see the discount back to within
some 10% of NAV which has provided strong performance when compared
to our peers which are discounted at over 50% in some cases.
Although the NAV performance has been tracking downwards this is on
the basis of conservative valuations with potential upside.
Intentions are to provide continued support as needed, though a
rebound in NAV predicated by market opportunities is the preferred
path to addressing any lingering discounts. With around 30% of the
fund still held in cash in a falling market opportunities are
abound to take advantage of more attractive pricing and even
distress. This is also something our peers cannot provide.
As for the outlook for the fund for the next 12 months, our main
investment, SDI, will begin selling both golf memberships and
residential accommodation in 2012 providing for a potential
increase in valuation compared to today's valuation. Our present
valuation conservatively reflects the product available today
without golf memberships and residential accommodation. We await
the marketing campaign with interest.
Looking ahead, we know enough not to make predictions as to when
the time will finally be right for the Vietnam market to reveal
long-envisaged opportunistic market entry points. What we do know
is that Vietnam as a country is on a one-way trajectory and there
are glaring supply-side gaps in the real estate sector. The team,
the Fund and its investors remain extremely well positioned to take
advantage of such events and with patience at the fore we are sure
to be rewarded for our many virtues.
Investment Manager's Statement
It has been a very challenging year for all parties involved in
the Vietnam real estate market due to a number of factors both
macroeconomic and property specific. As a consequence, the VPF team
has been trying to find alternative avenues to maintain NAV and
drive returns in a difficult environment, admittedly with differing
degrees of success.
The main macroeconomic challenges we have faced relate to high
interest rates which affect borrowing, high inflation which pushes
up construction costs and a devaluing currency which affects
project exit prices and the value of our listed assets. Real estate
has also been negatively affected by the Vietnamese policy makers
who have tried to cool speculation and contain credit growth which
has all but frozen demand across almost all sectors. Banks are
under enormous pressure from the State Bank of Vietnam ("SBV") to
reduce credit growth and that is putting pressure on developers as
debt is either difficult to find, very expensive (c. 25% on Vietnam
Dong ("VND")) or indeed both.
However, it is refreshing to witness the Government's policy
makers changing the focus from growth at all costs to a more
sustainable model designed to control inflation, curtail the
excesses of credit growth and reform the inefficient State Owned
Enterprises ("SOE") and beleaguered banks. It remains to be seen
whether the policy makers will be successful in the short to medium
term but this is a good start.
We have managed to mitigate the impact from high interest rates
by either borrowing in US Dollars ("US$") or taking loans on a draw
down basis in order to reduce generating interest until we
absolutely have to. We have also provided mezzanine debt ourselves
and taken the benefit of high interest rates for ourselves. Our
loan facility has been one of our most successful investments to
date.
We have tried to deal with high inflation through rigorous value
engineering on our projects and trying to fix contracts with our
contractors and service providers wherever possible. Inflation is
mainly being imported through food and oil although steel and other
building materials have contributed.
The VND suffered a substantial devaluation of 7.2% in February
2011 which led to a correction in the valuation of our assets on a
US dollar basis. This is the largest correction for some time and
has been followed by a period a relative stability since. During
the financial year we have seen a relative rebound in the VN Index
of around 20% from a 52 week low of 371. Since then the VN Index
has traded sideways on disappointingly low volumes. Further
devaluations of the VND are likely in the short to medium term but
not at above the 5% mark.
In terms of deal flow, there was limited realism entering the
market during the financial year even with the real estate market
clearly heading for choppy waters. It was not until May or June
2011 that we finally started to see much more activity in the
market in terms of introductions as pretty much every development
project in Hanoi and Ho Chi Minh City ("HCMC") seems to need cash
in the form of, preferably, debt through bonds or loans, but equity
is also available.
With the residential sales, particularly in the mid to high end,
high rise apartment sector, proving to be so challenging it is now
possible to purchase apartments at or below the cost of development
in many cases. This is perhaps not such a huge surprise when one
considers that a year or more delay in sales can add over 20% to
the construction budget due to high interest rates.
Moving on to construction costs, the high inflation environment
has not had a huge impact on construction costs during the
financial year which may come as a surprise to some. According to
Dragon Capital research, one of the main constituents of the
inflation basket in Vietnam is food. The price of steel, cement and
other construction materials has been less volatile from a
commodity price point of view but the main area for cost control is
the letting of contracts with the construction contractor. Lack of
future pipeline for many contractors has led them to be very
competitive offering lower margins and fixed price contracts in
order to secure work. Whilst the property market remains
challenging, it is a good environment to negotiate favourable deals
with contractors for future developments.
The outlook for next year is better from a macroeconomic point
of view with the expectation for inflation being closer to the
10-12% mark rather than 25% plus. This should lead to lower
interest rates releasing capital for real estate deals, although
credit growth regulations may still stifle the availability of
debt. Any green shoots are unlikely to materialise until the second
half of the year with the listed sector being the first in line for
a rebound. This is, however, contingent on increased revenues from
sales and rentals from the companies with excess product.
Our performance during the financial year has been fairly static
in terms of the valuations of our projects. Our valuations are
always conservative, especially for our development projects, which
offer excellent opportunities for NAV growth when our projects
become income producing. The main drag on NAV has been from our
listed stocks which have been adversely affected by all the factors
mentioned above. The next 12 months will continue to offer many
challenges to the real estate market, but our cash position puts us
in a strong position to benefit from those companies and
developments who have been less successful in dealing with this
prolonged period of turbulence.
Full updates on the VPF and its investment activities can be
found on the website: www.vietnampropertyfund.com.
ENQUIRIES:
Rachel Hill
Dragon Capital Markets (Europe) Limited | Tel: +44 79 71 214 852
Freddy Crossley
Seymour Pierce Limited (Nominated Adviser and Broker) | Tel: +44
20 7107 8000
VIETNAM PROPERTY FUND LIMITED CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 30 JUNE 2011
30 June 2011 30 June 2010
US$ US$
CURRENT ASSETS
Financial assets at fair value through
profit or loss 42,926,446 47,828,088
Other receivables 274,307 3,156
Cash and cash equivalents 28,078,262 44,945,779
------------- -------------
71,279,015 92,777,023
NON-CURRENT ASSETS
Loan receivables 400,000 -
------------- -------------
400,000 -
TOTAL ASSETS 71,679,015 92,777,023
============= =============
CURRENT LIABILITIES
Accrued expenses 202,554 209,670
------------- -------------
202,554 209,670
NET ASSETS 71,476,461 92,567,353
============= =============
EQUITY
Issued share capital 893,225 900,010
Share premium 84,932,215 85,441,995
(Accumulated losses)/retained earnings (14,348,979) 6,225,348
------------- -------------
TOTAL EQUITY 71,476,461 92,567,353
============= =============
NUMBER OF ORDINARY SHARES IN ISSUE 89,321,459 90,000,000
============= =============
NET ASSET VALUE PER ORDINARY SHARE 0.80 1.03
============= =============
VIETNAM PROPERTY FUND LIMITED
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2011
For the year For the year
ended ended
30 June 2011 30 June 2010
US$ US$
INCOME
Bank interest income 230,719 87,254
Loan interest income 849,609 -
Dividend income 564,783 228,043
Net changes in fair value of
financial assets at fair
value through profit or loss (21,756,267) 3,448,724
Gains on disposals of investments 1,663,700 2,902,922
Other income - 71,474
TOTAL INCOME (18,447,456) 6,738,417
-------------- --------------
EXPENSES
Administration and custodial
fees (77,362) (85,687)
Directors' fees (154,164) (133,000)
Management fees (1,665,358) (1,830,423)
Legal and professional fee (166,321) (105,340)
Other operating expenses (247,978) (153,125)
TOTAL EXPENSES (2,311,183) (2,307,575)
-------------- --------------
NET (LOSS)/PROFIT BEFORE EXCHANGE
GAINS/(LOSSES) (20,758,639) 4,430,842
EXCHANGE GAINS/(LOSSES)
Net foreign exchange gains/(losses) 184,312 (9,714)
-------------- --------------
(LOSS)/PROFIT BEFORE TAX (20,574,327) 4,421,128
Income tax - -
-------------- --------------
NET (LOSS)/PROFIT FOR THE YEAR (20,574,327) 4,421,128
Other comprehensive income - -
-------------- --------------
TOTAL COMPREHENSIVE (LOSS)/INCOME
FOR THE YEAR (20,574,327) 4,421,128
============== ==============
NET (LOSS)/PROFIT AND
COMPREHENSIVE INCOME FOR THE
YEAR ATTRIBUTABLE TO ORDINARY
SHAREHOLDERS (20,574,327) 4,421,128
============== ==============
BASIC (LOSSES)/EARNINGS PER
ORDINARY SHARE (0.229) 0.049
============== ==============
VIETNAM PROPERTY FUND LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2011
Retained
Issued Share Earnings/(accumulated
capital premium Losses) Total
US$ US$ US$ US$
Balance at 1 July
2009 900,010 85,441,995 1,804,220 88,146,225
TOTAL COMPREHENSIVE
INCOME FOR THE
YEAR:
Net profit for
the year - - 4,421,128 4,421,128
--------- ----------- ----------------------- -------------
Balance at 1 July
2010 900,010 85,441,995 6,225,348 92,567,353
TOTAL COMPREHENSIVE
INCOME FOR THE
YEAR:
Net loss for the
year - - (20,574,327) (20,574,327)
TRANSACTION
WITH SHAREHOLDERS,
RECOGNISED DIRECTLY
IN EQUITY:
Repurchase of
own shares (6,785) (509,780) - (516,565)
Balance at 30 June
2011 893,225 84,932,215 (14,348,979) 71,476,461
========= =========== ======================= =============
VIETNAM PROPERTY FUND LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2011
For the year For the year
ended ended
30 June 2010 30 June 2009
US$ US$
OPERATING ACTIVITIES
(Loss)/profit for the year (20,574,327) 4,421,128
Adjustments for:
Bank interest income (230,719) (87,254)
Loan interest income (849,609) -
Dividend income (564,783) (228,043)
Gains on disposals of investments (1,663,700) (2,902,922)
Changes in fair value of financial
assets at fair value
through profit or loss 21,756,267 (3,448,724)
(2,126,871) (2,245,815)
Change in other receivables (27,935) -
Change in accrued expenses (7,116) (3,115)
(2,161,922) (2,248,930)
Interest received 948,585 98,269
Dividend received 453,310 228,043
Acquisitions of financial assets
at fair value through
profit or loss (20,258,759) (23,251,086)
Payment for granting loan (400,000) -
Proceeds from disposal of investments 5,067,834 5,110,495
Net cash used in operating activities (16,350,952) (20,063,209)
FINANCING ACTIVITIES
Repurchase of own shares (516,565) -
Net cash used in financing activities (516,565) -
NET DECREASE IN CASH AND CASH
EQUIVALENTS (16,867,517) (20,063,209)
Cash and cash equivalents at
the beginning
of the year 44,945,779 65,008,988
--------------------------- ---------------------------
CASH AND CASH EQUIVALENTS AT
THE
END OF THE YEAR 28,078,262 44,945,779
=========================== ===========================
VIETNAM PROPERTY FUND LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2011
1. Preparation of Financial Statements
The consolidated financial statements of the Group have been
prepared in accordance with International Financial Reporting
Standards ("IFRSs"). The consolidated financial statements have
been prepared on the accrual basis using the historical cost
concept, except for investments in securities classified as
financial assets at fair value through profit or loss.
The consolidated financial statements are presented in United
State Dollars ("US$"), which is also the functional currency of the
Company. Transactions in foreign currencies are translated to the
functional currency of the Group at the spot exchange rates at the
dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies at the reporting date are
retranslated into the functional currency at the spot exchange
rates at that date. Non-monetary assets and liabilities denominated
in foreign currencies that are measured at fair value through
profit or loss are retranslated into the functional currency at the
spot exchange rate at the date that the fair value was determined.
Non-monetary assets and liabilities that are measured in terms of
historical cost in a foreign currency are translated using the spot
exchange rate at the date of the transaction.
2. Issued Share Capital
30 June 2011 30 June 2010
AUTHORISED:
1,000,000,000 ordinary shares at par
value of US$0.01 each 10,000,000 10,000,000
1,000 management shares at par value
of US$0.01 each 10 10
------------- --------------
10,000,010 10,000,010
============= ==============
ISSUED AND FULLY PAID:
89,321,459 ( 2010: 90,000,000 ) ordinary
shares at par value
US$0.01 each 893,215 900,000
1,000 management shares at par value
of US$0.01 each 10 10
------------- --------------
893,225 900,010
============= ==============
All ordinary shares have the same rights, whether in regard to
voting, dividends, return of share capital or otherwise. The
management shares do not carry any right to dividends and, in a
winding up, are entitled only to a return of paid-up nominal
capital out of the assets of the Group after the return of nominal
capital paid up on ordinary shares. No shares were issued during
the period.
3. Net Asset Value per Ordinary Share
The calculation of the NAV per ordinary share was based on the
NAV attributable to the ordinary shareholders as at 30 June 2011 of
US$71,476,461 (30 June 2010: US$92,567,353) and the number of
ordinary shares in issue as at that date of 89,321,459 ordinary
shares (30 June 2010: 90,000,000 ordinary shares).
4. Tax
Under the current law of the Cayman Islands and the British
Virgin Islands, the Company and its subsidiaries are not required
to pay any taxes in the Cayman Islands and the British Virgin
Islands on either income or capital gains and no withholding taxes
will be imposed on distributions by the Company to its shareholders
or on the winding-up of the Company.
The Group is subject to 10% withholding tax on the interest
received from any Vietnamese companies. Dividends remitted by
Vietnamese investee companies to foreign investors are not subject
to withholding taxes.
Although the Company and its subsidiaries are incorporated in
the Cayman Islands and British Virgin Islands respectively where
tax is exempt, their 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 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; and
-- Whether tax liabilities (if any) will be applied retrospectively.
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 Group will be exposed to tax
liabilities in Vietnam.
5. Basic Earnings per Ordinary Share
The calculation of basic earnings per ordinary share for the
year was based on the net loss for the year attributable to the
ordinary shareholders of US$20,574,327 (the net profit for year
ended 30 June 2010: US$4,421,128) and the weighted average number
of ordinary shares outstanding of 89,696,686 (year ended 30 June
2010: 90,000,000 ordinary shares) in issue during the year.
VIETNAM PROPERTY FUND LIMITED
("VPF" or the "Company")
ANNUAL REPORTS AND ACCOUNTS
FOR THE YEAR ENDED 30 JUNE 2011
The financial information set out in this announcement does not
constitute the Company's statutory accounts for the year ended 30
June 2011, but is derived from those accounts. Full sets of
accounts are available by contacting either from the offices of
Dragon Capital Markets (Europe) Limited or Seymour Pierce Limited,
contactable at the addresses detailed below. The Company has today
posted its Annual Report and Accounts to shareholders.
Alternatively the Annual Report and Accounts may be viewed and
downloaded from the Company website,
www.vietnampropertyfund.com.
Dragon Capital Markets (Europe) Limited
The Tramshed
Beehive Yard
Walcot Street
Bath BA1 5BB
Tel: +44 (0) 1225 731402
Seymour Pierce Limited
20, Old Bailey
London EC4M 7EN
Tel: +44 (0) 207 107 8000
This information is provided by RNS
The company news service from the London Stock Exchange
END
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