Valuation Adjustments For Some Investments

VinaCapital Vietnam Opportunity Fd.

09 October 2023

 

VinaCapital Vietnam Opportunity Fund Limited

(the "Company" or "VOF")

LEI Number: 2138007UD8FBBVAX9469

Revaluations of Private Equity and Public Equity with Private Terms investments as at 30 June 2023

As part of the audit of the Company's accounts as at 30 June each year, the audit committee of the Company considers the valuations of the unquoted investments held in the Company's portfolio. These valuations are carried out in some cases by KPMG Tax and Advisory Limited, the independent valuer, and in other cases by VinaCapital Investment Management Limited (the "Investment Manager"). This year, the valuations have received particular scrutiny following defaults or potential for default by a number of the investments described as Public Equities with Private Terms ("PEPT"). They have now been reviewed by PricewaterhouseCoopers CI LLP ("PwC"), the auditor of the Company, and approved by the audit committee of the Company.

The result of this significant work is that the valuations of these unquoted investments have been increased by a total of USD54.3 million as at 30 June 2023.

Public Equity with Private Terms

Part of the increase is in investments described as PEPT, where the Company has invested in instruments issued by public companies. When these investments were originally made, the Investment Manager had negotiated "downside protection" in the form of put options onto the sponsor supplemented by collateral security over shares held by the sponsor. With the turmoil in the real estate market at the end of 2022, however, it was not clear that these protections would be of any effect, or if the obligations would be fulfilled within the agreed timeframe if the counterparty defaulted. Consequently, in November 2022, following one such default, the Board asked the Investment Manager to review the carrying values of these investments. At that point, the valuations were reduced by USD26.2 million. At the time the Board prepared the 31 December 2022 interim accounts in March 2023, with the prospect of further events of default, the valuations of these investments were reviewed again and a further reduction of USD23.6 million was made.

At the time of each of these revaluations there was no evidence that the downside protections would be effective and no certainty that the Company would recover all or part of these investments. Over the past six months, however, the Investment Manager has made good progress in renegotiating terms, establishing a plan for receiving the full recovery of each investment and expected returns, and improving the security of the investments as some stability has returned to the real estate market. The Company has enforced some of the security it held and sold the underlying shares in the market as the sponsor's share price recovered. The renegotiated terms of these transactions have been reviewed as at 30 June 2023 and the revised valuations have been subject to scrutiny by the Company's auditors.

As a result, the aggregate fair values of PEPT investments in Project Norfolk (Novaland), Nova Consumer Group (NCG), Dat Xanh Services (DXS) and Hung Thinh Land (HTL) have been increased by USD26.8million as at 30 June 2023. It should be noted that the valuations are still lower than their original cost and expected returns and the Investment Manager will continue to work with each of the investments in seeking a full recovery over time.

Private Equity

At the financial year end, the valuations of the traditional private equity investments are also reviewed. Most of the valuations are carried out by KPMG, the independent valuer and, at the year end, the valuations are also reviewed by the Company's auditors. The private equity investments include Thu Cuc International Hospital, Tam Tri Medical, In Holdings, Chicilon Media and Hung Vuong Plaza. In total, an uplift of USD27.5million in the value of all the private equity investments as at 30 June 2023 has been approved by the audit committee of the Company.

The total uplift of USD54.3 million will be included in the weekly net asset value of the Company on 6 October 2023 which will be released to the market on 9 October.

Further information is available on the Company's website at: https://vof.vinacapital.com/

Enquiries:

Joel Weiden Investment Manager - Investor Relations and Communications VinaCapital Investment Management Limited T: [phone] E: [e-mail] Magdala Mullegadoo Company Secretary / Administrator Aztec Financial Services (Guernsey) Limited T: [phone] E: [e-mail]

1.     References to VOF or the Company in this announcement shall mean VinaCapital Vietnam Opportunity Fund Limited, a non-cellular company incorporated in the Bailiwick of Guernsey under The Companies (Guernsey) Law, 2008, with registered number 61765. It is authorised by the Guernsey Financial Services Commission (reference number 2268242) as a registered closed-ended investment scheme under The Protection of Investors (Bailiwick of Guernsey) Law, 2020 and in compliance with the Registered Collective Investment Scheme Rules, as amended.

2.     The registered office address of the Company is East Wing, Trafalgar Court, Les Banques, St Peter Port, Guernsey, Channel Islands, GY1 3PP.

3.     This announcement contains information that is inside information for the purposes of the UK version of the Market Abuse Regulation (EU) No. 596/2014 which is part of UK law by virtue of the European Union (Withdrawal) Act 2018 (as amended and supplemented from time to time).

 

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