VietCapital_Annual2008

Viet Capital Healthcare FundAnnual Report 2008

CONTENTS

Chairperson’s Statement ......................................................3

Macro review ...................................................................................4

Healthcare sector review ......................................................6

Fund Director’s Message ......................................................7

Historical Performance ...........................................................8

Portfolio Summary .....................................................................10

Financial Statements ................................................................14

Report of the independent auditors .........................15

Statement of fund management .................................16

Approval of the financial statements ........................17

Balance sheet ................................................................................18

Statement of assets ..................................................................18

Statement of income for the period ..........................19

Statement of changes in net assets ..........................19

Statement of investment portfolio .............................20

Notes to the financial statements ................................21

Important Note: This Annual Report is published to the Investors of Viet Capital Healthcare Fund (Fund). This Report carries a variety of information which is all for informational purposes only and not based on the particular circumstances of any addressee. The information herein is not construed an offer or solicitation to buy or sell the Fund Certificate or other securities in the Fund’s portfolio nor is it construed an advice or an expression of VCAM view as to whether a particular security or financial instrument is suitable or appropriate for the addressee and meets his/her financial or any other objectives. As a result, VCAM shall not be liable for any loss and/or damages regarding results from its usage. The Investors should therefore not rely solely on this Report and should obtain separate legal or financial advice in evaluating whether or not to buy or sell any securities or other financial instruments, including the Fund Certificate and other securities of the Fund’s portfolio. All the figures are quoted in Vietnam Dong unless stated otherwise. Some figures may not total due to rounding effect.

As painful as this downturn is, it has created attractive opportunities for investors who can see beyond the fear. We continue to believe in the prospect of the domestic Vietnam economy, and we are using our rigorous understanding of the market to position ourselves for capitalizing on the opportunities in it. Our business is managing our investors’ assets, and our long-term success is tied to our maximizing the value of our investors’ portfolio.

Please take a moment to read our annual report. Your fund’s director provides a candid assessment of recent performance which will help you understand how the fund is managed, and our perspectives for the upcoming year. We know it has been a very difficult year for equity investors, and we thank you for your support and confidence in Viet Capital. We look forward to your feedback, and we will continue to work hard to outperform the market and your expectations.

Phuong Nguyen Chairperson April 20th, 2009

Dear Valued Investor,

The year 2008 has seen a dramatic and painful decline in both international and domestic stock markets, and our funds have not been spared from the turmoil. Being an investor in these difficult times can be unsettling because there seem to be few safe havens from the uncertainty created by the dramatic global downturn. Prudent risk-management strategies such as diversification and high-quality stock screening may have helped reduce losses, but they certainly could not fully avoid them as the breadth and depth of the decline was broad-based and systematic.

In times like these, taking a step back to gain perspective and to absorb the lessons learned is important. Experience has shown us that the importance of top down economic analysis cannot be underestimated, especially for a frontier market like Vietnam – where the contagion effect can be dramatically stronger, and market confidence is more fragile and vulnerable to shocks. We have learned that during such financial downturns, emotional responses do not produce good results and succumbing to the prevailing fear is not prudent. Rather, maintaining a long-term perspective, staying focused on fundamentals, and having discipline are the keys to overcome such a systemic crisis.

This is what we are currently doing at Viet Capital. Our research team rigorously analyzes global markets to indentify trends and important factors that will have an effect on the domestic economy. Meanwhile, our experienced team of analysts and portfolio managers continually examines our portfolio holdings to make sure each of our funds’ holdings still adhere to our core investment strategy and fit into our value model in this market environment. Before we revise our outlook or make a decision to buy or sell any position, we rely on our own proprietary research and internal investment process. This disciplined approach is a core part of our values and what we expect to differentiate our performance over the long-term.

Chairperson’s Statement

Annual Repor t 2008 3

Viet Capita l Healthcare Fund4

The most significant contributor to the global recession is the liquidity crisis that grew out of the US subprime mortgage meltdown in mid-2007 and intensified markedly during 2008. The bursting of the US housing market triggered a sharp increase in mortgage delinquencies and foreclosures which in turn led to hundreds of billions of dollars in financial losses and write-downs on mortgage-related securities. The scale and magnitude of the losses magnified in September of 2008 when Lehman Brothers filed for bankruptcy and several other major-league institutions - including Merrill Lynch, Goldman Sachs, Fortis and AIG – avoided bankruptcy by either seeking federal assistance or accepting takeover offers from competitors. Governments around the world responded with aggressive and unprecedented level of intervention – all with the goal of restoring global confidence against the backdrop of systemic weaknesses and unbalances stemming from dependency on US trade and budget deficits, lax control over banking system and derivatives market, overleveraged corporate and private sectors.

Collapsing financial markets had a cascading effect and took their toll on real economies worldwide. Unemployment rose dramatically in the US, weighting on

a fragile economy that had been suffering since December 2007 – the official start month of the US recession as defined by the National Bureau of Economics Research. European and Asian economies deteriorated as well. The UK faced bank failures, weak housing market and growing unemployment rate. Germany’s exports slumped in response to weakening status of emerging markets. In the meantime, Japan was still in face with deflationary pressures while consumption slowed down visibly in China.

Condition of the Vietnamese economy in 2008 was similarly challenging. During the first half of the year, prices of commodities, food and energy surged, with many commodities reaching all-time highs; trade deficit stemmed from dependence on external supplies of input material for the economy escalating to USD 14.2 billion in first six months. These factors had led to the risk of skyrocketing inflation. Overheated credit growth, excessive capital inflows together with growing real estate market bubble further facilitated the rise in consumer price index. In response, the State Bank of Vietnam implemented aggressive tightening monetary policies by forcing banks buying treasury bonds and raising interest rates and required reserves. The measures took effect but have

A yeAr Ago, It would hAve beeN hArd to ImAgINe thAt A “blAck SwAN” wAS lurkINg globAl fINANcIAl mArketS – oNe of the SteepeSt ANd moSt uNpredIctAble declINeS IN A geNerAtIoN. whIle yeAr 2007 eNded wIth heAlthy worldwIde ecoNomIc expANSIoNS, yeAr 2008 eNded wIth A globAl coNfeSSIoN thAt the world ecoNomy hAS eNtered the worSt receSSIoN SINce the greAt depreSSIoN.

Macro Review


also put the banking system in a liquidity crisis which immediately spread to consumers and enterprises, in turn led to meltdown of the stock market, falling property market prices and rising bad debt in the banking system. Despite the difficulties, the banking system was still able to successfully override the economic storm thanks to Government’s guarantee that no bank in the system will collapse.

During the second half of the year and especially after September 2008, the domestic economy took a drastic turn along with the rest of the world. Commodity prices plummeted back to earth, consumption decreased dramatically and exports started declining as global demand waned. As consequences, inflation eased; trade deficit gap narrowed with USD 17.5 billion at year end; FDI – which reached a record high of USD 64 billion registered and USD 11.5 billion disbursed – showed signs of contraction as global risk aversion skyrocketed. Government policies were quickly switched from tightening to loosening monetary and fiscal policies to deal with the risk of slower growth. As a result, banking system was provided with adequate liquidity, interest declined and many companies especially real estate ones avoided a collapse.

Vietnam economy ended year 2008 with real GDP growth for the year was 6.2% instead of the previously planned 8.0%; CPI ended at 20.0% from the peak of 28.3%; the USD/VND exchange rate stabilized at 17,200-17,500 due to stable FX policy, relatively solid foreign reserve and the country’s low short-term external debt.

Given difficulties in the domestic and global macro economy, domestic equities spent most of the year on a downward trajectory that grew steeper as the year progressed. For the year-end, domestic equity indices were down approximately 66%. While anxiousness for

the economy’s structural issues, aggressive monetary policy have driven down the market during the first half of the 2008, ashes of US subprime mortgage crisis pushed the Vietnam stock market over the cliff during the last months of 2008. High cost of borrowing, frozen property market and low aggregate demand deteriorated corporate earnings growth. Worse, the meltdown of the stock market further weighted on earnings of companies involved with financial investments. Around 30% of listed companies on HOSE and HASTC bourses posted negative year-on-year earnings growth in 2008. By the end of year 2008, many companies traded at 4 to 5 times lower than their 52 week high.

Although the fundamentals of Vietnam economy are still solid: high social stability, inflation under control and stable banking system supported by pretty flexible and appropriate economic policies by the Government, the 2009 year ahead will be a challenging year for Vietnam economy and stock market. Weaker international and domestic demands, higher unemployment, exhaustion of private investments and rising protectionism will finally have impacts on economic growth and corporate profitability.

In 2008, local demand for healthcare was still on the rise and consumption per capita reached USD14.2, an increased by 18% yoy. Sector output accelerated by 15.5%, in which leading companies such as Hau Giang Pharmaceutical JSC, Imexpharm, and Domesco achieved the rate of 16% on average. From 2009 onwards, Healthcare sector is expected to keep its growth at the pace of 15%-18%, according to the Ministry of Health.

Nevertheless, volatility of foreign exchange and material price caused difficulties for firms, especially in managing and controlling materials, inventories. Besides, tightening monetary policy also furthered the borrowing cost, and thus restrained many firms from expanding.

In term of WTO compliance, Vietnam has opened one step further of the pharmaceutical market by allowing foreigners to engage in import and export pharmaceutical products directly, which resulted in lower price of imported drugs. This may accelerate market competition, but the competition in turn also helped firms to realize their core competencies, stay focused on competitive products and strengthen distribution channels, a crucial factor as at the time.

Healthcare sector Review

Hospital and medical treatment activities on the other hand remarked many changes in the year. Robust growth, supported by exemptions of investment, taxation policies attracted experienced corporation to invest in hospital, clinic, and healthcare equipment in Viet Nam.

The year 2008 continued to witness the problem of overcrowded hospitals, raising a significant challenge for the healthcare sector in recent years, particularly at central state-owned hospitals and in big cities many of which have obsolete medical equipments. The overload reduces service quality, and raises the needs for replacement of machines and equipments. Moreover, along with the fact that GDP per capita has increased significantly to nearly USD1,000, consumer spending for healthcare also rose by 18% yoy. These conditions add in more demands for quality and premium health services.

Moving on to 2009, there are still challenges facing the healthcare sector. However, fundamentals such as lower materials price and stable interest rate show significant improvement and serve as supporting forces. Besides, with the help from the Government stimulus package that have come in handy, firms are able to continuing their expansion plans and improve operation. In mid and long-term, GDP growth and public spending on healthcare will be key drivers to help sustaining growth of the sector in Viet Nam.

the SpreAd of globAl ecoNomy receSSIoN IN 2008 poSed AdverSely ImpActS upoN the vIetNAm ecoNomy. heAlthcAre Sector, however, proved to be A defeNSIve Sector AS ItS orgANIc growth remAINed StroNg ANd StAble At double dIgIt Number.


Fund Director’s Message

AS At 2008 fINANcIAl yeAr eNded, vchf wAS IN AN excelleNt poSItIoN to coNtINue ItS StroNg perfor-mANce, wIth A SolId portfolIo ANd the AvAIlAbIlIty of cASh.

We are pleased to present the annual financial statements of Viet Capital Healthcare Fund (VCHF) for the year ended

31 December 2008.

The closing of the FY 2008 also marked the first year of operation of the VCHF. The first birthday of the VCHF celebrated with a remarkable increase of net asset value (NAV) at 31 December 2008 to 511 billion VND, a 2% increase when it started (500 billion) or even better a 4% increase comparing to cash available for investment (492 billion VND after netting off placement fee). This is quite an achievable given the stock market affected by the economy through a period of sharp adjustments to combat high inflation and a rising trade deficit.

During 2008, VCHF has not only placed a strong foothold in a number of top tier pharmaceutical companies but also secured investment opportunities in top operating hospital/ clinic projects. The disbursements as at 31 December 2008 accounted for more than 30% of the fund asset. The disbursement of the fund asset in 2008 reflects the prudent approach of the fund manager in considering the severe impact of the global financial crisis to the Vietnam economy in general and to the healthcare sector particularly. The aim goal of which is to protect shareholders’ value.

The strategy for the year 2009 will be to invest in selected projects in the Vietnam’s top portfolio of operating/ growth assets in pharmaceutical and hospital sector.

While recognizing the challenges posed by the current global and domestic environment, the fund manager believes the strong prospect of VCHF in the future, taking into account the persistent growth of the healthcare industry. With the strong team on the ground and the strong pipelines lining up in 2009, VCHF will continue its investment strategies and its path of growth.

Thank you for your support.

Tuan Pham Viet Capial Healthcare Fund Director April 20th, 2009


Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec YTD VNIndex

2008 0.2% 0.1% 0.6% -0.9% 0.2% 1.1% 1.3% 0.2% -1% -0.6% 2.6% 4% -63%

Net Asset Value (NAV) of VCHF in 2008

VCHF’s Monthly Performance in 2008

Historical Performance

The return is calculated on month by month basis. The YTD figures represent the annual return.

The year 2008 was extremely difficult for Vietnam equity market with severe effect from global economy crisis, reversed commodity price, volatility in interest rate and exchange rate. While both VN-Index and Pharma Index have lost more than 50% since January, VCHF has delivered a positive return of 4%.

(The Pharma-index has been calculated by VCAM based on the market capitalization weighted prices of listed pharmaceutical stocks)

50

Jun Mar Jun Sep Dec

100

150

100

67

47

100

61

73

103

57

54

104

48

37

NAV VN-IndexPharma Index

Thanks to reasonable strategy, the Fund’s asset has been well protected against the market downturn. The Fund has successfully disbursed 30% of total asset into strong fundamental stocks and government bond at good prices.

490

500

510

520

DecNovOctSepAugJulJunMayAprMarFebJan

511

498

501

506505

499

493492

497

494494493

NAV 2008NAV gain 2008

4%Index loss 2008

- 63% 511Bil


Portfolio Summary

Summary of Asset Allocation in 2008

Allocation by Sector

40%20% 60%0% 80%

4%2%

4%

ListedOTC

Bond

Cash

94%96% 71%

10%5%

14%

Jan/08

500

1000

Jun/08 Dec/08

HASTC

VN-Index

844

294 399

113

316

106

Cash

Government Bond

Functional food

Pharmaceuticals

70.6%

9.8%

0.5%

19.1%


Top Holding Investment Type %

DHG Listed 6.5IMP Listed 3.9DMC Listed 3.4Mekophar OTC 2.5Bidiphar OTC 2.0Vinh Hao OTC 0.5Bond Government Bond 9.8

Major Movement in 2008 Action Effect

DHG Buy +IMP Buy -DMC Buy -Mekophar Buy -Bidiphar Buy -Vinh Hao Buy -Bond Buy +

(*) The effect on NAV is calculated by comparing the buying/selling price and the market price on 31/12/2008

Top Gain/Loss % NAV

Bond 1.5

DHG 0.26Mekophar - 2.95OPC - 1.4IMP - 1.33DMC - 1.03Bidiphar - 0.5

Including realized and unrealized gain/loss at 31/12/2008 base on the NAV at 492.5


Portfolio Summary (cont.)

DHG CompanyYear 2008

Charter 200 bilRevenue 1,513 bilEarnings 137 bilROE 18%Debt ratio 1%Next year Earnings 150 bil

Hau Giang is a leading enterprise in the pharmaceutical sector with annual sale accounting for more than 10% domestic production volume of the market. The key competitive advantage of the company lies beneath its nationwide distribution system which has been firmly established, effective controlled and developed.

In 2008, despite unfavorable market conditions, the company managed to sustain sale growth at 19%, highest among the industry players, and slightly improved profit margin from 9.0% to 9.1%. The company has invested in a 200 Billion factory with more advanced technology to expand capacity and meet increasing market demand.

IMP CompanyYear 2008

Charter 116,6 bilRevenue 561 bilEarnings 59 bilROE 12%Debt ratio 1.1%Next year Earnings 65 bil

Imexpharm is the runner up market player who has seen stable sale growth hovering around 20% over the last three years. Imexpharm positions itself in this highly fragmented market by serious investment in production quality.

The company undertakes license production and joint venture with prestigious multinational manufacturers to strengthen its product quality competitiveness. In late 2009, Imexpharm will inaugurate a high-tech Cephalosporin in VSIP II. Products from the factory are expected to contribute as much as 30% to current sales volume.

Mekophar Company Year 2008

Charter 92.1 bilRevenue 598 bilEarnings 61 bilROE 16.4%Debt ratio 8%Next year Earnings 64 bil

Mekophar is a prestigious manufacturer in the industry and a business leader in Ho Chi Minh city. Mekophar has a strong competitive advantage in the anti-biotic material production which so far no other local peers have been able to undertake.

In recent years, Mekophar has made some strategic horizontal expansion into related sector as hospital and laboratory service. The company has ownership in An Sinh Hospital and Mekostem cell bank.

Bidiphar 1Year 2008

Charter 70 bilRevenue 150 bilEarnings 15 bilROE 18 %Debt ratio 0 %Next year Earnings 22 bil

Bidiphar 1, previously a manufacturing base of Bidiphar (the parent company), was just privatized in April 2008 but the company has started making good profit. Bidiphar is the biggest company in the central region of Vietnam with advanced production technology and a strong distribution network.

The company also produces medical products such as syringes and infusion sets that are widely used in the public hospital system. The investment of VCHF into Bidiphar 1 as a strategic investor also promises attractive investment opportunity into Bidiphar, the parent company in the near future.

Equity


DMC CompanyYear 2008

Charter 137.7 bilRevenue 938 bilEarnings 63 bilROE 14%Debt ratio 7%Next year Earnings 65 bil

DMC is among top players in the pharmaceutical industry with a diversified product portfolio, including self-manufactured products (200) and trading ones (126).The company’s key products are: antibiotics, analgetics, antiseptics and cardiovascular drugs. DMC has a good brand name with 3 factories already certified GMP-WHO. Thanks to possessing a large distribution network, the company takes advantage of introducing new products in the market and developing its strategy toward high margin products.

In 2008, despite difficulties of the economy, DMC achieved its target of profit and revenue. In 2009, the company’s profit is expected to fluctuate at around VND 65 bil due to the tax effect.

Government Bond Year 2008

Date of purchase 17/07/08Maturity day 19/12/09Coupon rate 7.9%YTM at purchase price 20%Market equiv. yield 8%

The 50 billion face value of Government bond was bought in the period when interest rate was escalating and we intend to hold it until maturity.

Fixed income



Viet Capital Healthcare Fund

General Information

Registration Establishment Certificate: 08/TB-UBCK 15 January 2008 The Registration Establishment Certificate was issued by the State Securities Commission and is valid for 6 years..

Fund Representative Committee: Phan Thanh Hai Chairman Truong Hoang Luong Member Nguyen Thuy Trang Member

Fund Management Company: Viet Capital Asset Management Joint Stock Company (formerly known as Viet Capital Fund Management Joint Stock Company)

Supervising Bank: HSBC Bank (Vietnam) Ltd., (formerly known as “The Hongkong and Shanghai Banking Corporation Limited - Ho Chi Minh City Branch”)

Đơn vị kiểm toán: KPMG Limited

Vietnam

for the period from 15 January 2008 (date of establishment) to 31 December 2008

Financial Statements

Report of the Independent Auditors

To the Unitholders Viet Capital Healthcare Fund

Scope

We have audited the accompanying balance sheet, the statement of assets and the statement of investment portfolio of Viet Capital Healthcare Fund (“the Fund”) as at 31 December 2008 and related statements of income and changes in net assets and notes to the financial statements for the period from 15 January 2008 (date of establishment) to 31 December 2008. These financial statements are the responsibility of the management of Viet Capital Asset Management Joint Stock Company as the Fund Management Company and have been certified by HSBC Bank (Vietnam) Ltd. as the Supervising Bank of the Fund. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Vietnamese Standards on Auditing. Those standards require that we plan and perform the audit to obtain reasonable assurance that the financial statements are free from material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management of the Fund Management Company, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

Audit opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of Viet Capital Healthcare Fund as at 31 December 2008 and the results of its operations for the period from 15 January 2008 (date of establishment) to 31 December 2008 in accordance with Decision No. 63/2005/QD-BTC issued by the Ministry of Finance on 14 September 2005 on the promulgation of accounting systems for securities investment funds and Decision No. 45/2007/QD-BTC issued by the Ministry of Finance on 5 June 2007 on the promulgation of regulations on establishment and management of securities investment funds, Vietnamese Accounting Standards, the Vietnamese Accounting System and accounting principles generally accepted in Vietnam.

KPMG Limited Vietnam Investment Certificate No: 01143000345 Audit Report No: 08-01-201

John T. Ditty Tran Dinh Vinh CPA No. N0555/KTV CPA No. 0339/KTV General Director


Statement of fund management company’s responsibility in respect of the financial statements

Viet Capital Asset Management Joint Stock Company’s management is responsible for the financial statements, prepared in accordance with Decision 63/2005/QD-BTC issued by the Ministry of Finance on the promulgation of accounting systems for securities investment funds, Decision 45/2007/QD-BTC issued by the Ministry of Finance on the promulgation of regulations on establishment and management of securities investment funds, Vietnamese Accounting Standards, the Vietnamese Accounting System and accounting principles generally accepted in Vietnam, which give a true and fair view of the state of affairs of the Fund as at 31 December 2008 and of its results for the period from 15 January 2008 (date of establishment) to 31 December 2008. In preparing those financial statements, the Fund Management Company is required to:

select suitable accounting policies and then apply them consistently; �make judgments and estimates that are reasonable and prudent; �state whether applicable accounting standards have been followed, subject to any material departures disclosed and �explained in the financial statements; andprepare the financial statements on the going concern basis unless it is inappropriate to presume that the Fund will �continue in business.

The management of the Fund Management Company is also responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the financial position of the Fund and to ensure that the accounting records comply with the requirements of Decision 63/2005/QD-BTC issued by the Ministry of Finance on the promulgation of accounting systems for securities investment funds, Decision 45/2007/QD-BTC issued by the Ministry of Finance on the promulgation of regulations on establishment and management of securities investment funds, Vietnamese Accounting Standards, the Vietnamese Accounting System and accounting principles generally accepted in Vietnam. It is also responsible for safeguarding the assets of the Fund and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Viet Capital Asset Management Joint Stock Company’s management confirms that they have complied with the above requirements in preparing the financial statements of the Fund for the period ended 31 December 2008.

On behalf of the Fund Management Company.

Nguyen Khanh Linh Managing Partner March 31st, 2009


Approval of the financial statements

I, Phan Thanh Hai, being the Chairman of the Fund Representative Committee and on behalf of the Unitholders of Viet Capital Healthcare Fund (“the Fund”), do hereby approve the accompanying financial statements of the Fund which present fairly, in all material respects, the financial position of the Fund as at 31 December 2008 and the results of its operations for the period from 15 January 2008 (date of establishment) to 31December 2008 in accordance with Decision No. 63/2005/QD-BTC issued by the Ministry of Finance on 14 September 2005 on the promulgation of accounting systems for securities investment funds and Decision No. 45/2007/QD-BTC issued by the Ministry of Finance on 5 June 2007 on the promulgation of regulations on establishment and management of securities investment funds, Vietnamese Accounting Standards, the Vietnamese Accounting System and accounting principles generally accepted in Vietnam.

On behalf of the Fund Representative Committee

Phan Thanh Hai Chairman March 31st, 2009


Balance sheet B01-QDT

Code Note 2008 VND’000

ASSETSA. Cash in banks1. 110 3 357,952,018

Investments in securities2. 120 4 150,535,642

Receivables from investing activities3. 130 5 8,762,268

Total Assets 270 517,249,928

ResourcesB. LiabilitiesI. 300 6,121,950

Payable for investing activities1. 311 6 4,502,463

Payables to Fund Representative Committee2. 314 161,618Payables to Fund Management Company and Supervising 3. Bank

315 7 1,323,834

Other payables4. 318 134,035

II. Equity 400 511,127,978

Share capital1. 410 492,500,000

Share capital1.1 411 8 500,000,000

Share surplus1.2 412 (7,500,000)

Retained profits2. 420 18,627,978

Total Resources 430 517,249,928

Off balance sheet items

Items 2008 VND’000

Securities at par value 67,021,680

2008 VND’000

Cash in banks1. 357,952,018

Investments in securities2. 150,535,642

Listed shares2.1 72,634,112

Unlisted shares2.2 27,600,030

Bonds2.2 50,301,500

Other receivables3. 8,762,268Total assets 517,249,928

Payables for investing activities4. (4,502,463)

Payables to Fund Representative Committee5. (161,618)

Payables to Fund management Company and Supervising Bank6. (1,323,834)

Other payables7. (134,035)Total liabilities (6,121,950)

Net assets of the Fund 511,127,978

Number of fund units (in units) 5,000

Net asset value per fund unit 102,226

Statement of assets B05-QDT


Code Note

From 15/1//2008 to 31/12/ /2008

VND’000

Realised operating resultA.

Realised income from investment activitiesI. 10 53,076,277

Dividend income 1. 11 2,515,457

Interest income from bond2. 12 1,802,707

Interest income from bank deposits3. 13 54,844,126

Loss from securities trading4. 14 (6,086,013)

ExpensesII. 30 (15,765,383)

Fund management and performance fees1. 31 9 (14,445,813)

Custody and supervision fees2. 32 (481,527)

Fund meetings and conferences expenses3. 33 (31,183)

Audit fees4. 34 (200,975)

Consultant fees5. 35 (123,031)

Other operating expenses 6. 38 (482,854)

Net realised operating gain for the period III. 50 37,310,894

Unrealised operating resultB.

Unrealised gainI. 60 7,774,035

Gain on securities investments revaluation1. 61 7,774,035

Unrealised loss II. 70 (26,456,951)

Loss on securities investments revaluation1. 71 (26,456,951)

III. Net unrealised loss for the period 80 (18,682,916)

Net profit for the period 18,627,978

Profit per fund unit 10 3,726

Statement of income for the period B02-QDT

From 15/1//2008 to 31/12//2008

VND’000

Net assets at the beginning of the periodI. -

Changes in net assets during the periodII. 511,127,978

in which:

Capital contributed by Unitholders1. 500,000,000

Placing fee2. (7,500,000)

Changes in net assets due to investing activities during the period3. 18,627,978

Net assets at the end of the period III. 511,127,978

Statement of changes in net assets for the period B06-QDT


Statement of investment portfolio

B07-QDT

Items

No. of shares

held by the Fund

Effective holding

%

Market price per share as at

31/12/2008 VND’000

Market value as at

31/12/2008 VND’000

% of total assets of the Fund

Listed sharesI. Hau Giang Pharmaceutical Joint Stock 1. Company (DHG)

277,840 1.39% 119.00 33,062,960 6.39%

Imexpharm Pharmaceutical Joint Stock 2. Company (IMP)

268,770 2.31% 75.00 20,157,750 3.90%

OPC Pharmaceutical Joint-Stock 3. Company (OPC)

81,251 0.99% 27.30 2,218,152 0.43%

Domesco Medical Import Export Joint 4. Stock Corporation (DMC)

340,500 2.47% 50.50 17,195,250 3.32%

Total 968,361 72,634,112 14.04%

Unlisted sharesII. Vinh Hao Mineral Water Joint Stock 1. Company

16,762 2.07% 148.33 2,486,358 0.48%

Pymepharco Joint Stock Company2. 39,666 0.47% 45.00 1,784,970 0.35%Mekophar Chemical Pharmaceutical 3. Joint Stock Company

191,086 2.27% 67.67 12,930,217 2.50%

Bidiphar 1 Joint Stock Pharmaceutical 4. Company

335,435 4.79% 31.00 10,398,485 2.01%

582,949 27,600,030 5.34%

BondsIII.

Government bond (CPB070945)1. 500,000 100.60 50,301,500 9.72%500,000 100.60 50,301,500 9.72%

Total investments 2,051,310 150,535,642 29.10%

IV. Receivables from investing activities 8,762,268 1.69%

V. Cash in banks 357,952,018 69.20%

Grand total 517,249,928 100.00%


B04-QDT

Notes to the financial statements for the period

These noTes form an inTegral parT of and should be read in conjuncTion wiTh The accompanying financial sTaTemenTs.

1.

2.

Principal activities Viet Capital Healthcare Fund (“the Fund”) is established as a closed-end member fund in Vietnam under Registration Establishment Certificate No 08/TB-UBCK issued by the State Securities Commission of Vietnam on 15 January 2008. The Registration Establishment Certificate is valid for 6 years from the Registration Establishment Certificate date. The principal activities of the Fund are long-term and short-term investment in a portfolio of securities of Vietnamese companies operating in pharmaceuticals, hospitals, medical equipment and machinery industrial and projects in Vietnam.

The maximum total capital of the Fund as stipulated in the Registration Establishment Certificate is VND5,000 billion. The amount of each fund unit, an equal division of the total capital of the Fund, is VND100 million. Total maximum number of fund units is 50,000.

The Fund is managed by Viet Capital Asset Management Joint Stock Company (formerly known as “Viet Capital Fund Management Joint Stock Company”), an investment management company incorporated in Vietnam, and supervised by HSBC Bank (Vietnam) Ltd. (formerly known as “the Hongkong and Shanghai Banking Corporation Limited – Ho Chi Minh City Branch”), the Supervising Bank.

Summary of significant accounting policiesThe following significant accounting policies have been adopted by the Fund in the preparation of these financial statements.

Basis of financial statement preparationa. The financial statements, expressed in Vietnam Dong (“VND”), have been prepared in accordance with Decision No. 63/2005/QD-BTC issued by the Ministry of Finance on 14 September 2005 on the promulgation of accounting systems for securities investment funds and Decision No. 45/2007/QD-BTC issued by the Ministry of Finance on 5 June 2007 on the promulgation of regulations on establishment and management of securities investment funds, Vietnamese Accounting Standards, the Vietnamese Accounting System and accounting principles generally accepted in Vietnam.

According to Decision No. 63/2005/QD-BTC, the Fund’s financial statements include the following reports:

Balance sheet; �Statement of income; �Statement of assets; �Statement of changes in net assets; �Statement of investment portfolio; and �Notes to the financial statements. �

The financial statements of the Fund are prepared on the accrual basis using the historical cost concept, except as discussed in Note 2(e). The accounting policies set out below have been consistently applied by the Fund during the year.


Fiscal year b. The first fiscal year of the Fund is from 15 January 2008 (date of establishment) to 31 December 2008. Succeeding fiscal years will be from 1 January to 31 December.

Foreign currency transactionsc. Monetary assets and liabilities denominated in currencies other than VND are translated into VND at rates of exchange ruling at the balance sheet date. Transactions in currencies other than VND during the year have been translated into VND at rates approximating those ruling at the transaction dates.

All realised and unrealised foreign exchange differences are recorded in the statement of income.

Cashd. Cash comprises cash in banks under call deposits and term deposits.

Investments e. Investments are initially stated at cost and revalued at the balance sheet date in accordance with Decision 63/2005/QD-BTC issued by the Ministry of Finance on the promulgation of accounting systems for securities investment funds and Decision 45/2007/QD-BTC issued by the Ministry of Finance on the promulgation of regulations on establishment and management of securities investment funds.

Classification(i) The Fund classifies its listed securities and unlisted securities which are purchased for trading purposes as trading securities.

Recognition (ii) The Fund recognises trading securities and other investments on the date it becomes a party to the contractual provisions of the investments.

Measurement (iii) Listed securities are revalued at the balance sheet date by reference to market prices of securities from the Ho Chi Minh City Stock Exchange and Hanoi Securities Trading Centre.

Unlisted securities are stated at cost and revalued at the balance sheet date by reference to price quotes from three securities companies.

Derecognition (iv) Investments in securities are derecognised when the rights to receive cash flows from the investments have expired or the Fund has transferred substantially all risks and rewards of ownership.

Cost of trading securities is determined on a weighted average basis.

Accounts receivable f. Receivables representing amounts due from customers for securities trading, investee companies for dividends declared, bond issuers for bond interest, banks for bank interest and other receivables are stated at cost less allowance for doubtful debts.


Trade and other payablesg. Payables for investing activities and other payables are stated at cost.

Provisions h. A provision is recognised if, as a result of a past event, the Fund has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

Taxation i. Under current regulations on Vietnam, the Fund is not subject to corporate income tax. When the Fund distributes its profit to the investor it will withhold and declare a withholding tax at 20% on the distributed amounts.

Capital and capital surplus j. The Fund’s units are classified as equity. Capital surplus representing the difference between the actual cash received and the par value of the fund units issued is recognised as a separate component in equity.

Earnings per fund unit and net asset value per fund unit k. The Fund presents basic earnings per unit (“EPU”) for its fund units. Basic EPU is calculated by dividing the profit or loss of the Fund by the weighted average number of fund units outstanding during the period.

Net assets value (NAV) per unit is calculated by dividing the net asset value of the Fund by the number of outstanding fund units as at the balance sheet date. The Fund’s net assets is determined as total assets less total liabilities.

Segment reporting l. The Fund operates as one segment.

Revenue m.

Interest income and dividend income (i) Interest income is recognised in the statement of income as the interest accrues unless collectibility is in doubt. Dividend income is recognised when the right to receive payment is established.

Income from securities trading (ii) Income from securities trading activities is recognised in the statement of income upon receipt of the Notice for settlements of securities trading transactions from the Ho Chi Minh Stock Exchange or Hanoi Securities Trading Centre (for listed securities) and completion of the agreement on transfer of assets (for unlisted securities).

Expensesn. Expenses are recognised in the statement of income on an accrual basis except for expenses incurred on the acquisition of an investment which are included in the cost of that investment. Expenses arising from sales of investments are deducted from the sales proceeds.


3.

4.

5.

6.

Related companies o. Parties are considered to be related if one party has the ability, directly or indirectly, to control other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence.

Other investment funds under the management of the Fund Manager are considered related parties to the Fund.

Off balance sheet items p. Amounts which are defined as off balance sheet items under the Decision 63/2005/QD-BTC dated 14 September 2005 issued by the Ministry of Finance on promulgation of accounting system of securities investment funds and Vietnam Accounting System are disclosed in the relevant notes to these financial statements.

Nil balances q. Items or balances required by the Decision 63/2005/QD-BTC dated 14 September 2005 issued by the Ministry of Finance on promulgation of accounting system of securities investment funds and Vietnam Accounting System that are not shown in these financial statements indicate nil balances.

Cash in banks 2008

VND’000

Cash in bank 12,952,018

Term deposits 345,000,000

357,952,018Cash in banks at 31 December 2008 were denominated in VND.

Investments in securities All the investee companies (both listed and unlisted) as in the statements of investment portfolio are incorporated in Vietnam.

The Fund does not seek to participate in day-to-day financial and operating policy decisions of the investee companies. Accordingly, the Fund does not intend to exert a controlling or significant influence over the investee companies and therefore, the Fund’s investments are recorded on the basis set out in Note 2(d), rather than being consolidated or equity accounted.

Receivables from investing activities 2008

VND’000

Bond interest receivable 140,685Interest receivable from bank deposits 8,621,583

8,762,268

Payables for investing activities2008

VND’000

Purchase awaiting settlement 4,502,463


8.

7.

9.

In accordance with the Fund’s policy of trade date accounting for regular way purchases transactions, purchases awaiting settlement represent amounts payable for securities purchased, but not yet settled.

Payables to Fund Management Company and Supervising Bank 2008

VND’000

Fund management fee payable to Fund Management Company 1,281,130

Custodian and supervision fees payable to Supervising Bank 42,704

1,323,834Share capital The Fund’s maximum authorised share capital is VND5,000 billion, equivalent to 50,000 fund units of VND100 million each. Up to 31 December 2008, total capital subscribed by existing Unitholders was VND500 billion, equivalent to 5,000 fund units.

Movements in share capital (before deducting of placing fee) during the year were as follows:

2008 VND’000

Balance at beginning of the period -

Capital issued during the period 500,000,000

Balance at end of the period 500,000,000

The share capital was presented excluding the placing fee of VND7.5 billion payable to the Fund Management Company, in relation to the issuance of the capital, which was recorded as a deduction in share surplus account in equity.

Fund management and performance fees In accordance with the Fund’s Charter, the Fund has to pay the Fund Management Company a monthly management fee in arrears equal to one-twelfth of three per cent of the Net Assets Value of the Fund on the last working day of such month.

The Fund also has to pay the Fund Management Company a performance fee in relation to any financial year if the Fund’s growth of the net assets at the end of such year exceeds 12%. The fee equals the higher of nil and 20% of the net amount between [1] Net Assets Value at the end of such year, and [2] 112% of net assets value at the end of prior year, plus capital issued during the year, compounded at interest rate of 12% per annum, for the period from the date capital was issued to the end of such year. There was no performance fee recorded for the period from 15 January 2008 (date of establishment) to 31 December 2008.

Also in accordance with the Fund’s Charter, Net Assets Value is determined as total assets less total liabilities which include performance fee.

For the purpose of calculating the performance fee which has been accrued in the financial statements, Net Assets Value was calculated as total assets less liabilities which excluded the performance fee itself. The Fund’s Directors and the Fund Management Company believe that the method of determination of the Net Assets Value as a basis for the calculation of the performance fee, as accrued in the financial statements, represent the appropriate interpretation of the Net Assets Value as defined in the Fund’s Charter.


12.

11.

10.

13.

Earnings per fund unit The calculation of basic earnings per fund unit at 31 December 2008 was based on the profit for the period from 15 January 2008 (date of establishment) to 31 December 2008 of VND18,628 million and a weighted average number of fund units outstanding of 5,000.

Significant transactions with related parties As at period end and during the period there were the following significant balances and transactions with related parties:

Related party Relationship Nature of transactions

Balance as 31/12/2008

VND’000

from 15/1/2008 to 31/12 /2008

VND’000

Viet Capital Asset Management Joint Stock Company (formerly known as “Viet Capital Fund Management Joint Stock Company”)

Fund Management Company

Fund management fee

1,281,130 14,445,813

HSBC Bank (Vietnam) Ltd., (formerly known as “The Hongkong and Shanghai Banking Corporation Limited - Ho Chi Minh City Branch”)

Supervising Bank

Custody and supervision fees

42,704 481,527

Indices 2008

Investment ratiosI.

Securities investments/Total assets 29.10%

Shares investments/Total assets 19.38%

Listed shares/Total assets 14.04%

Unlisted shares/Total assets 5.34%

Bonds/Total assets 9.72%

Cash in banks/Total assets 69.20%

Average income/Total assets 10.26%

Average expenses/Total assets 6.66%

Market ratiosII.

Number of fund units 5,000

Number of fund units held by 10 largest Unitholders/Total fund units 70.80%

Number of fund units held by foreign Unitholders/Total fund units -Value per fund unit (VND’000) 102,226

Subsequent event As of the date of issuance of these financial statements, the aggregate fair value of the Fund’s investments has fallen by VND22,278 million to VND128,258 million from the carrying amount of the investment as of 31 December 2008 due to the general decline in securities market in Vietnam.

Fair value

31/12/ 2008 VND’000

31/03/2009 VND’000

Movement VND’000


Investments in securities

Listed securities 72,634,112 58,129,890 14,504,222

Unlisted securities 27,600,030 23,663,749 3,936,281

Bonds 50,301,500 46,464,000 3,837,500

150,535,642 128,257,639 22,278,003


www.vietcapital.com.vn

Head office Unit 2, 19/F, Centec Tower72-74 Nguyen Thi Minh Khai St., Dist. 3, Ho Chi Minh City, Vietnam T +84 8 3823 9909 F +84 8 3824 6329 E [email protected]

Hanoi office 16 Ham Long St., Hoan Kiem Dist., Hanoi, Vietnam T +84 4 3944 7990 F +84 4 3944 7991

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VietCapital_Annual2008

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Transcript of VietCapital_Annual2008