Thiet ke Bao cao thuong nien -Vietcapital (vchf 2009)

VIET CAPITAL HEALTHCARE FUND
ANNUAL REPORT 2009

Driving through the rough

Contents
Chairperson’s Letter 3

Fund Director’s Message 4

Discussion with Our Board of Directors 8

Summary of Investment Portfolio 12

Financial Statements 14

Chairperson’s
Letter

Dear Fellow Investors,
The opening line of Charles Dickens’ novel, A Tale of Two Cities, reads, “It was the best of times,
it was the worst of times.” For Vietnamese equities, 2008 was certainly the worst of times,
while 2009 was somewhere in between Dickens’ extremes. However, this past year was still a
remarkable comeback year for equity investments relative to the year before as the domestic
market mirrored the global markets in a V-shape recovery. In this environment, our fund posted
excellent year-on-year results. We look forward to the completion of the pendulum swing and
expect the best of times in 2010 for us.
Most of the extraordinary performance generated by Viet Capital Healthcare Fund (VCHF)
was concentrated in the second half of the year as global markets rallied, unprecedented
Government stimulus packages started gaining traction, and investors rediscovered their
appetite for new investments. The dramatic change in the performance of our fund from a
year ago highlights the significance and benefits of staying invested in volatile markets and
maintaining a long-term orientation. Just as it was difficult to anticipate and foresee the
magnitude of the market collapse in the fall of 2008, few investors expected that the market
recovery would be as strong as it was this year. And in such uncertain times, our consistent
long-term focused strategy and market discipline have paid off.
Furthermore, we believe that our fundamental value investment approach has served and will
continue to serve us well in the future. Our investment team screens and selects companies
and sectors through a deep-dive, bottoms-up approach. However, we also maintain a
broader perspective by thoughtfully assessing the top-down, fundamental macroeconomic
environment. After the experiences of the past year, we will continue to keep a close watch on
global economic trends as its impact on the domestic economy can be significant. As far as our
appetite for equities, we remain committed to seeking investment opportunities in established
companies with a favorable combination of high growth and reasonable valuations that in turn
have good prospects for capital appreciation.
For 2010, we expect for the global recovery to gather momentum as developed economies
continue to rebound. And while we believe that the Vietnam economy will benefit from this
recovery in the long-run, we maintain a cautious view in the short-term as the effect of the
Government stimulus packages starts to taper off creating upward pressure on interest rates.
Navigating in these uncertain waters will certainly be challenging.
Especially under these circumstances, strong fundamental research, skilled tactics and rigorous
understanding of the local market will be critical to our overall success. We remain steadfast in
our efforts to apply our experience and core investment approach to generate long-term value
and capital gains for our investors.
Nguyen Thanh Phuong
Chairperson
Annual report 2009 | 3

Fund Director’s
Message

Dear Fellow Investors of Viet Capital Healthcare Fund,

We are pleased to report remarkable performance results for the fiscal year ended December
31st, 2009.

The Vietnam stock market staged a magnificent recovery in the past six months, recognizing
the better-than-expected economic recovery and anticipating further improvements in 2010.
Stocks in most sectors have posted strong gains in the second half of the year that significantly
overcame the losses experienced during the height of the economic downturn. Healthcare
stocks, while trailing behind the market index, posted double digit performance.

Amid this environment, our fund posted a total return of 18.5% for the 12-months ended
December 31st, 2009 and 22% since inception. For the same 12 months period of 2009, VN Index
and Pharma Index, respectively, yielded 57.0% and 41.1% return.

PERFORMANCE COMPARISON

Cummulative Annualized Return (%)

Last 3 months Last 6 months 12 months

VCHF 2.32 16.27 18.54

VN-Index -14.83 10.44 56.76

HNX-Index -8.75 12.87 59.22

Pharma Index -5.04 25.24 41.10

It is important to note that the difference between VCHF and Pharma Index performance is
caused by the heavy overweight of Hau Giang Pharmaceutical Company (DHG) in the index.
While DHG’s weight in VCHF is 14.8%, its weight in the Pharma Index is close 50%.

4 | Annual report 2009

Furthermore, since a portion of the Fund’s assets is also allocated towards intermediate and
long-term investments, the Fund’s performance cannot fully match the performance of the
indexes during volatile periods. As a sector fund and specializing in healthcare, VCHF aims at
maximizing the risk adjusted performance. In fact, during the last 2 years, we have achieved
positive annualized return and we are also one of the few Funds in the market that is paying out
dividends from realized return in 2009. Therefore, it is imperative that we fully examine the risk
and return profile of VCHF and the indexes in performance comparisons.

RISK AND RETURN COMPARISON

60
Annualize Return (%)

HNX-Index

VN-Index
40 Pharma Index

20

VCHF

0

10 20 30 40 50 60 70

Annualize Volatility(%)

Recognizing the fact that the market was on its recovery path, we made tactical changes to our
portfolio allocation which proved to be successful. We lowered our cash position and increased
disbursement in listed pharmaceutical and education companies. Specifically, at the beginning
of the year, our total cash position was VND 361 billion with only VND 98 billion invested in listed


pharmaceutical companies; by the end of year 2009, our cash holdings was reduced to VND 93
billion while our listed equity holdings grew to VND 423 billion. The timely move and decision in
our portfolio allocation paid off when the bear market rally started to cool down and investors
went back to companies with solid demand and stable earnings growth rates. (Figure 3 sheet Portfolio

billion
450 423

361

300

150
98 93
42 50
- - - 12
-
Pharmaceutical Hospital Cash Bond Education

31-Dec-08 31-Dec-09

In addition to our strong disbursement in listed pharmaceutical companies, we have also
increased our positions in private equity hospital projects and pre-listed OTC securities. For
the hospital deals, our investment philosophy remains the same: we endeavored to identify
hospitals with strong management and operations, and in need of capital for expansion. Hoan
My Da Nang, a subsidiary of Hoan My Company, is a good example. The hospital, located
close to the center of Da Nang city, is one of Hoan My’s primary cash cows and is one of a
few hospitals that managed to post earnings just after 2 years of operations. Hence, when
the opportunity came and Hoan My Da Nang issued additional shares, we increased our total
investment in the hospital.

In the second quarter, we have made a large investment in Vien Dong Pharmaceutical JSC –
one of the companies that falls under our pre-listed category. The company is well positioned
with a broad product line and strong distribution network across the country. Furthermore, we
believed that the company was extremely undervalued relative to its peers and was unnoticed
among financial analysts. Our decision proved to be rewarding when Vien Dong Pharmaceutical
JSC was listed on HOSE in December, 2009 and became our top gainer for the year.

The newest development in terms of fund strategy is our entry in the education sector. While we
believe that investment in this sector does promise very attractive return in the upcoming years,
there are also many challenges to be dealt with. One of the difficulties is the limited number of
listed education-related companies. Furthermore, the sizes of these companies are relatively
small and hence, their liquidity risk is high. For example, it was a challenge for our portfolio team
to build up the necessary position in STC, EID and SED – the three listed education companies
in our portfolio – and lower the holdings when needed. On the private equity front, the number
of education and school related deals is also limited because of roadblocks surrounding deal
size, growth path, exit strategy and most importantly, management perception about having an
institutional investor.


Looking ahead at year 2010, we are in the midst of an economic transition period that promises
to deliver many challenges to equity investors but also provide many attractive opportunities.
On balance, we remain positive given that equities are still attractive relative to historical
valuations and offer better upside potential relative to many asset classes. However, headwinds
persist, and macroeconomic conditions are likely to remain tough into 2010 as the economy
finds its way to absorb the effects from massive fiscal and monetary stimulus of 2009.

In the midst of such anemic recovery, we believe in the strong prospect of the industry in
2010 as healthcare companies can generate stable earnings growth regardless of economic
environment. In addition to that, we are also looking forward to the listing of two new hospitals
and three new pharmaceutical companies. The addition of these companies is expected to add
more diversity to listed healthcare equities and boost liquidity of VCHF portfolio. We strongly
believe that our focused path and patience is starting to pay off, and we are excited about VCHF
prospects in 2010.

Thank you for your support and confidence in VCHF.

Pham Gia Tuan
Fund Director, VCHF


Discussion with
Our Board of
Directors

The economic and market environment in year 2009 was certainly a test of confidence and skills of
those who manage investment assets. And year 2010 promises even more opportunities as well as
challenges. In the following pages, our Board of Management consisting of Nguyen Thanh Phuong
(Chairperson), Pham Gia Tuan (VCHF Fund Director) and Cung Tran Viet (Head of Research) shares
insights and opinions on year 2009 and outlook for year 2010.

Please tell us a few words on the Vietnam economy in 2009
Nguyen Thanh Phuong: Year 2009 was probably one of hardest years for the domestic economy
and hence, for policy makers. While we have been through two downturns – Asian crisis in 1997
and US recession in 2001 – this one is different because of its breadth, magnitude and more
importantly, our level of interaction with global economies. In fact, real GDP growth for the first
quarter of 2009 was down to 3.1%, the lowest level in years. As a consequence, the Government
did take strong and unprecedented measures which boosted the growth for the year to 5.3%.

QUARTERLY REAL GDP GROWTH
Source: General Statistics Office, VCAM
%
9

6

3

0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2007 2008 2009


Also, the slump in global demand has strongly affected growth in exports which has been
averaging 30% during the last few years. For 2009, growth in exports was at -10% or the lowest
ever. The rather good news is our consumption level was still high as reflected through real
retails sales growth of 11.7%. This, in turn, should provide more flexibility for policymakers in the
upcoming year.

Cung Tran Viet: First of all, we have to note that Vietnam was not in an economic recession per
se but rather we were in a growth recession due to slump in global demand, lower foreign
investments and just lower overall productivity. And the fact that we posted positive growth
last year must be attributed to flexible and yet timely Government policies both fiscal and
monetary. Specifically, the economic stimulus package including interest subsidy and tax cuts
Nguyen Thanh Phuong worth VND 143 trillion was implemented since February of 2009 which provided support for
Chairperson many manufacturing companies. Furthermore, the base rate was adjusted from 10% at the end
of 2008 down to 7% at the end of 2009 and thereby lowering the cost of capital for businesses.
As a result, liquidity in the banking system – the main concern during the crisis – and trading
volume in the equity market were high, and the equity market recovered to a peak of 624
(or by 98% since the beginning of the year) in October 2009. However, the inevitable side
effect to aggressive monetary policy is the upward pressure on future inflation. Hence, in the
middle of the last quarter, the State Bank of Vietnam suddenly tightened the monetary policy
by restricting credit growth in the banking system and by raising the base rate to 8%. These
unexpected moves led to a liquidity shortage among smaller scale banks which subsequently
resulted in interbank rates shooting up to 16% - 17%.

OVERNIGHT INTERBANK RATE 2009
Source: Reuters, VCAM
%
14

12

10

8

6

4

2

0
Jan Mar Jun Sep Dec

Overnight interbank rate 95% confidence interval

The more severe consequence of the policy change is that businesses had difficulty in accessing
capital. The reason is because banks found it more profitable to lend in the interbank market
rather than lend at the mandatory ceiling rate of 12%. And even if businesses could get access to
capital, the cost was substantially higher than the ceiling rate.

And what is your opinion on the equity market in 2009?
Nguyen Thanh Phuong: The equity market environment in 2009 was extremely challenging and
quite different from which most of us have experienced. If we look back at the year then during
the first quarter, the market was still experiencing aftershock from the Fall 2008 downturn and
investors were still pessimistic regarding the overall macro-economy. Meanwhile, in the second
quarter, the market was in a bear rally due to the previously oversold status and to Government’s
initiation of the stimulus packages. The last two quarters were especially interesting as on one
hand we had a massive boost from loosening monetary policy while on the other hand investors
started to question what will happen next and whether the rally is sustainable.


During year 2009, VCHF allocated over 70% of its assets in listed pharmaceutical companies.
Hence, can you summarize the overall performance of these listed companies?
Pham Gia Tuan: Due to the nature of its business, the Pharma sector was less affected by the
economic roughness of year 2009. In fact, the sector still kept up an average growth pace of 20% in
year 2009 with leading pharmaceutical companies such as Hau Giang, Imexpharm and Domesco
reporting net profit growth of 184%, 70% and 39%, respectively. This was also in large due to major
supporting factors such as stable material costs, increase in production efficiency, and taking
advantage of Government interest subsidy program for expansions in distribution channel.

Can you share your outlook and view for the economy in 2010?
Cung Tran Viet: If we look at the world economy today, then there are submerging evidences
Cung Tran Viet
Head of Research that the global economy is recovering. The US posted positive growth since the third quarter of
2009 with unemployment rate reaching a peak of 10%. The emerging market is showing signs of
accelerating growth with improved imports and exports led by China. In fact, the IMF is currently
expecting for world real GDP growth to increase from -3.4% in 2009 to 1.3% in 2010.

REAL GDP GROWTH FORECAST BY IMF
Source: IMF, VCAM
%
10

8

6

4

2

0

-2

-4
2000 2002 2004 2006 2008 2010 2012 2014

Emerging Economies World Economy Advanced Economies

Domestically, we see industrial production continue rising, exports is improving and imports
of intermediate goods is steadily increasing. All of these indicators point to the fact that the
economy is bouncing back. However, there are still challenges remaining. First of all, the
economy will have to absorb the effects from last year’s sudden changes in monetary policy.
Secondly, the Government will have to find a balance between growth and inflation because the
former will unavoidably lead to the latter. Finally and very importantly, the Government will have
to avoid policy shock therapies in order to decrease ambiguity for investors and businesses.

GROWTH OF INDUSTRIAL PRODUCTION
% Source: General Statistics Office, VCAM
30

20

10

0

-10

-20

-30

-40

Jan-08 Jun-08 Dec-08 Jun-09 Dec-09

Industrial Production Coal Production


What about the expected performance of the Pharma sector in 2010?
Pham Gia Tuan: We believe that year 2010 will be an even brighter year for the Pharma sector
due to several reasons. First of all, companies such as Cuu Long, Imexpharm and Hau Giang
have utilized the interest rate subsidy program in 2009 for business expansion and capacity
strengthening. Secondly, many companies have restructured their product mix by dropping
their non-profitable and low valued-added products to focus on the ones that provide
higher margins. Finally, on the regulatory side, the new 68/2009/NĐ-CP decree which allows
pharmaceutical companies to settle commission to distributors using drugs is expected to
have a positive effect on pharmaceutical companies’ bottom line numbers in 2010 by lowering
the pressure on cash outflows. Furthermore, the new decree should enable firms to be more
aggressive in their marketing and promotions strategies.
Pham Gia Tuan
VCHF Fund Director
What instigated your participation in the education sector?
Nguyen Thanh Phuong: We selected education as our next frontier is because education is a
very important part of our heritage and our culture. We, Vietnamese parents, are willing to invest
as much capital, time and effort as possible for our kids to have access to a quality education.
That’s always been our tradition. However, the quality and supply of education-related services
in Vietnam is far outweighed by the demand. At the university level, Vietnam is often sending its
best and brightest overseas to get an education.

By entering into this sector we believe that all parties involved will be in a win-win situation.
First of all, we believe this is a tremendous investment opportunity for our investors. Secondly,
we strongly believe in the positive social impact that the educational enterprises that we invest
in will have. And finally, we are taking advantage of government initiatives to open up the
education market to private investment and to promote reform.

You have mentioned in the Fund Director letter that there are many difficulties surrounding
education-related private equity deals. However, it appears that the challenges are very similar
to other private equity deals. Or are these challenges especially more challenging in this sector?
Pham Gia Tuan: Prior to deciding to enter into the education sector, our market research team
has completed a study on the prospect of this market. And as Phuong just said, it is very
promising both in terms of growth and potential return for investors. For that same reason, the
roadblocks are also quite challenging. In our opinion, there are two major issues we have to deal
with in education private equity deals.

First issue is the right deal size. Many of the private schools follow a rather conservative growth
path and hence, require a small amount of capital since the major costs are facilities and
teacher’s expenses. Meanwhile, there are schools with very aggressive expansion plans that
currently have Government granted acreage. And these schools require a very large amount of
capital for development and construction.

And second issue is management perception of school managers and administrators. Unlike
pharmaceuticals and hospitals which have been commercialized for a while now, education
in Vietnam has mostly been supported by the Government. Furthermore, the rise of private
education has only been significant within the last several years. Therefore, many of the
founders of the private schools that we talked to are purely focusing on development of
education instead of balancing this with development of the business of education.


Summary of Investment Portfolio December 31, 2009

INDUSTRY SECTOR DIVERSIFICATION (percent of net assets)

2%

7%

16% Hospital
Education

75% Pharmaceutical
Cash

Shares Value (VND) Percent of
net assets
PHARMACEUTICAL 75%
Hau Giang Pharmaceutical JSC
739,163 84,264,582,000 14.80
The leading company in the Pharma sector
Domesco JSC
One of the leading pharmaceutical companies in Vietnam with a diversified 1,352,438 81,146,280,000 14.25
portfolio including trading products and manufacturing products
Imexpharm Pharmaceutical JSC
The company positions itself as premium producer with investments and 834,340 70,501,730,000 12.38
focus on production quality
Cuu Long Pharmaceutical JSC
739,740 43,644,660,000 7.67
The first and only local capsule manufacturer in Vietnam
Traphaco JSC
A leader in production of traditional medicine in Vietnam with a large 687,855 42,647,010,000 7.49
distribution network
OPC Pharmaceutical JSC
One of the top pharmaceutical producers in Vietnam and the only company 590,111 33,636,327,000 5.91
producing the ethanol alcohol for the pharmaceutical and consumer sectors
ICA Biopharmaceutical JSC
A strong privately-owned pharmaceutical company with a young and 500,000 27,500,000,000 4.83
dynamic management team
Mekophar Chemical Pharma JSC
191,086 13,503,474,362 2.37
The only company can produce the antibiotics raw material in Vietnam


Shares Value (VND) Percent of
net assets
Vien Dong Pharmaceutical JSC
One of the most active players in the pharmaceutical industry with very 156,290 12,659,490,000 2.22
impressive performance in 2009
Bidiphar 1 Pharma JSC 412,425 12,015,177,525 2.11
Pymepharco JSC
The local partner of Stada Pharma Corp in Vietnam, concentrate on 39,666 1,784,970,000 0.31
quality products
Total pharmaceutical sector 423,303,700,887 74.35

HOSPITAL 7%
Hoan My Da Nang General Hospital
1,129,250 17,390,450,000 3.05
The first and largest private hospital in the Central region
Hue Medical Investment JSC
1,001,000 10,010,000,000 1.76
A private clinic in Hue under the Hoan My brand
Tam Duc Heart Hospital JSC
The only private hospital in Vietnam that specializes in cardiology and lead
325,000 8,070,725,000 1.42
by a management team of high reputation from the Institution of Heart of
Vietnam
DOMEDIC Medical and Pharmaceutical JSC
The only private general hospital in Dong Thap with strong potential growth 600,000 6,060,000,000 1.06
since 2010
Total hospital sector 41,531,175,000 7.29

EDUCATION 2%
Phuong Nam Education Investment & Development JSC
An affiliate of Education Publisher that is totally in charge of publishing 389,700 7,677,090,000 1.35
reference books for Education Publisher in the Southern region
Hanoi Education Investment & Development JSC
An affiliate of Education Publisher that is totally in charge of publishing 133,700 2,740,850,000 0.48
reference books for Education Publisher in the Northern region
Book and Education Equipment JSC
The only distributor of textbooks and reference books for Education 115,700 1,538,810,000 0.27
Publisher in Ho Chi Minh City
Total education sector 11,956,750,000 2.10

TOTAL STOCKS 476,791,625,887 83.74
TOTAL CASH 92,546,538,524 16.26
NET ASSETS 569,338,164,411 100.00


Financial
Statements
31 December 2009

GENERAL INFORMATION

Establishment Certificate 08/TB-UBCK dated 15 January 2008 was issued by the
State Securities Commission for a period of 6 years.

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

Fund Management Company Viet Capital Asset Management Joint Stock Company

Supervising Bank HSBC Bank (Vietnam) Ltd.

Auditor PricewaterhouseCoopers (Vietnam) Limited


REPORT OF FUND REPRESENTATIVE COMMITEE

STATEMENT OF THE RESPONSIBILITY OF THE FUND MANAGEMENT COMPANY IN RESPECT OF THE FINANCIAL STATEMENTS

Management of Viet Capital Asset Management Joint Stock Company (“the Fund Management Company”) is responsible for the
financial statements present fairly, in all material respects, the financial position of Viet Capital Healthcare Fund (“the Fund”) as
at 31 December 2009 and its financial performance for the year then ended. In preparing these financial statements, the Fund
Management Company is required to:

• Select suitable accounting policies and then apply them consistently;
• Make judgements and estimates that are reasonable and prudent;
• Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the fund will continue
in business.

Management of the Fund Management Company is responsible for ensuring that proper accounting records are kept which
disclose, with reasonable accuracy at any time, the financial position of the Fund and which enable financial statements to be
prepared which comply with the basis of accounting set out in Note 2 to the financial statements. Management of the Fund
Management Company 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.

Management of Viet Capital Asset Management Joint Stock Company confirmed that they complied with Vietnamese
Accounting Standards, the Vietnamese Accounting System and prevailing regulations applicable to investment funds operating
in SR Vietnam.

On behalf of the Fund Management Company

Nguyen Khanh Linh
General Director
26 March 2010

APPROVAL OF THE FINANCIAL STATEMENTS

We hereby approve the accompanying financial statements set out on page 6 to 20 which present fairly, in all material
respects, the financial position of the Fund as at 31 December 2009 and its financial performance for the year then ended in
accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System and prevailing regulations applicable
to investment funds operating in SR Vietnam.

On behalf of the Fund Representative Committee

Phan Thanh Hai
Chairman
26 March 2010


PricewaterhouseCoopers (Vietnam) Ltd.
4th Floor, Saigon Tower
29 Le Duan Street, District 1
Ho Chi Minh City, Vietnam
INDEPENDENT AUDITOR’S REPORT TO THE UNITHOLDERS Telephone : (84-8) 3823 0796
OF VIET CAPITAL HEALTHCARE FUND Facsimile : (84-8) 3825 1947

We have audited the accompanying financial statements of Viet Capital Healthcare Fund (“the Fund”) which were approved by
the Fund Representative Committee on 26 March 2010. The financial statements comprise the balance sheet, the statement of
assets, and the statement of investment portfolio as at 31 December 2009, the income statement and statement of changes in
net assets for the year then ended, and explanatory notes to the financial statements including significant accounting policies,
as set out on pages 6 to 20.

Responsibility of the Management of Viet Capital Asset Management Joint Stock Company (“the Fund Management
Company”) for the Financial Statements
The Fund Management Company is responsible for the preparation and fair presentation of these financial statements in
accordance with Vietnamese Accounting Standards, the Vietnamese Accounting System and prevailing regulations applicable
to investment funds operating in SR Vietnam. This responsibility includes: designing, implementing and maintaining internal
controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement,
whether due to fraud or error; selecting and applying appropriate accounting policies and making accounting estimates that
are reasonable in the circumstances.

Auditor’s Responsibility
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 comply with ethical requirements
and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material
misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the Fund’s preparation and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the Fund’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management of the Fund Management Company, as well as evaluating the
overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as at 31
December 2009, and its financial performance for the year then ended in accordance with Vietnamese Accounting Standards,
the Vietnamese Accounting System and prevailing regulations applicable to investment funds operating in SR Vietnam.

Ian S. Lydall Le Van Hoa
AC No. N.0559/KTV AC No. 0248/KTV
General Director

PricewaterhouseCoopers (Vietnam) Limited
Ho Chi Minh City, SR Vietnam
Audit report number HCM2450
26 March 2010

As indicated in Note 2.1 to the financial statements, the accompanying financial statements are not intended to present the financial position and results of operations and
cash flows in accordance with accounting principles and practices generally accepted in countries and jurisdictions other than SR Vietnam, and furthermore their utilisation
is not designed for those who are not informed about SR Vietnam’s accounting principles, procedures and practices.


BALANCE SHEET B01-QDT
The notes on pages 21 to 26 are an integral part of these financial statements.

Code Note 31/12/2009 31/12/2008
VND’000 VND’000

A. ASSETS
110 1. Cash at banks 3 111,391,080 357,952,018
120 2. Investments in securities 476,791,626 150,535,642
130 3. Receivables from investing activities 4 11,628,188 8,762,268
131 4. Other receivables 5,668 -
Total assets 599,816,562 517,249,928

B. RESOURCES
300 I. Liabilities 30,478,398 6,121,950
311 1. Payables for investing activities 5 21,998,859 4,502,463
314 2. Payables to the Fund Representative Committee - 161,618
315 3. Payables to the Fund Management Company and Supervising Bank 6 8,210,709 1,323,834
318 4. Other payables 268,830 134,035
400 II. Owners’ equity 569,338,164 511,127,978
410 1. Share capital 7 492,500,000 492,500,000
In which:
411 Share capital 500,000,000 500,000,000
412 Share discount (7,500,000) (7,500,000)
420 2. Retained earnings 76,838,164 18,627,978
430 Total resources 599,816,562 517,249,928

OFF BALANCE SHEET ITEMS
Securities at par value 99,374,640 67,021,680

Supervising Bank Fund Management Company
Verified by: Prepared by: Approved by:

HSBC Bank (Vietnam) Ltd. Pham Anh Tu Nguyen Khanh Linh
26 March 2010 Finance Director General Director
Viet Capital Asset Viet Capital Asset
Management Joint Management Joint
Stock Company Stock Company
26 March 2010 26 March 2010


INCOME STATEMENT B02-QDT

Code Note For the year ended For the period from
31.12.2009 15.1.2008 to 31.12.2008
VND’000 VND’000
A. REALISED OPERATING RESULTS
10 I. Realised income 71,799,670 53,076,277
11 1. Dividend income 5,111,590 2,515,457
12 2. Interest income from bonds 3,809,315 1,802,707
13 3. Interest income from bank deposits 20,957,515 54,844,126
14 4. Gain/(loss) from disposal of securities 34,947,891 (6,086,013)
18 5. Income from redemption of bonds 6,973,359 -
30 II. Expenses (24,289,688) (15,765,383)
31 1. Management and performance fees 9 (22,970,984) (14,445,813)
32 2. Custody and supervision fees 9 (541,743) (481,527)
33 3. Fund meeting and conference expenses (72,718) (31,183)
34 4. Audit fees (218,361) (200,975)
35 5. Consultant fees (48,832) (123,031)
38 6. Other operating expenses 8 (437,050) (482,854)
50 III. Net realised gain for the year/period 47,509,982 37,310,894

B. UNREALISED OPERATING RESULTS
60 I. Unrealised gains 40,700,204 7,774,035
61 1. Gains on revaluation of investments in securities 40,700,204 7,774,035
70 II. Unrealised losses - (26,456,951)
71 1. Losses on revaluation of investments in securities - (26,456,951)
80 III. Net unrealised gain/(loss) for the year/period 40,700,204 (18,682,916)

NET PROFIT FOR THE YEAR/PERIOD 88,210,186 18,627,978
NET PROFIT PER FUND UNIT 10 17,642 3,726


26 March 2010 26 March 2010


STATEMENT OF ASSETS B05-QDT

Note 31/12/2009 31/12/2008
VND’000 VND’000
1. Cash at banks 3 111,391,080 357,952,018
2. Investments in securities 476,791,626 150,535,642
2.1. Listed shares 380,456,829 72,634,112
2.2. Unlisted shares 96,334,797 27,600,030
2.3. Bonds - 50,301,500
3. Receivables from investing activities 4 11,628,188 8,762,268
4. Other receivables 5,668 -
Total assets 599,816,562 517,249,928
5. Payables for investing activities 5 (21,998,859) (4,502,463)
6. Payables to the Fund Representative Committee - (161,618)
7. Payables to the Fund Management Company and Supervising Bank 6 (8,210,709) (1,323,834)
8. Other payables (268,830) (134,035)

TOTAL LIABILITIES (30,478,398) (6,121,950)
NET ASSETS 569,338,164 511,127,978
NET ASSETS PER FUND UNIT (IN VND) 10 113,868 102,226

STATEMENT OF CHANGES IN NET ASSETS B06-QDT

For the year ended For the period
31.12.2009 from 15.1.2008
VND’000 to 31.12.2008
VND’000
I. Net assets at beginning of the year/period 511,127,978 -

II. Changes in net assets during the year/period 58,210,186 511,127,978
In which:
1. Capital contributions - 500,000,000
2. Placing fee - (7,500,000)
3. Changes in net assets due to investing activities 88,210,186 18,627,978
4. Changes in net assets due to distribution of earnings to unitholders of the Fund (30,000,000) -

Net assets at end of the year/period 569,338,164 511,127,978


26 March 2010 26 March 2010


STATEMENT OF INVESTMENT PORTFOLIO AS AT 31 DECEMBER 2009 B07-QDT

No. Items Number of Market price Market Percentage
shares held by per share value of total assets
the Fund VND’000 VND’000 of the Fund
I. LISTED SHARES
1 Hau Giang Pharmaceutical Joint Stock Company (DHG) 739,163 114.00 84,264,582 14.05%
2 Cuu Long Pharmaceutical Joint Stock Company (DCL) 739,740 59.00 43,644,660 7.28%
3 Imexpharm Pharmaceutical Joint Stock Company (IMP) 834,340 84.50 70,501,730 11.75%
4 Domesco Medical Import Export Joint Stock Corporation (DMC) 1,352,438 60.00 81,146,280 13.53%
5 OPC Pharmaceutical Joint Stock Company (OPC) 590,111 57.00 33,636,327 5.61%
6 Traphaco Pharmaceutical Joint Stock Company (TRA) 687,855 62.00 42,647,010 7.11%
7 Ha Noi Investment and Education Joint Stock Company (EID) 133,700 20.50 2,740,850 0.46%
8 HCM Education Equipment and Book Joint Stock Company (STC) 115,700 13.30 1,538,810 0.26%
9 Phuong Nam Education Investment Joint Stock Company (SED) 389,700 19.70 7,677,090 1.28%
10 Vien Dong Pharmaceutical Joint Stock Company (DVD) 156,290 81.00 12,659,490 2.11%
380,456,829 63.43%

II. UNLISTED SHARES
1 Pymepharco Joint Stock Company 39,666 45.00 1,784,970 0.30%
2 Mekophar Chemical Pharmaceutical Joint Stock Company 191,086 70.67 13,503,474 2.25%
3 Bidiphar 1 Joint Stock Company 412,425 29.13 12,015,178 2.00%
4 Tam Duc Hospital Joint Stock Company 325,000 24.83 8,070,725 1.35%
5 Hue Medic Joint Stock Company 1,001,000 10.00 10,010,000 1.67%
6 Hoan My Da Nang Hospital Joint Stock Company 1,129,250 15.40 17,390,450 2.90%
7 Domedic Pharmaceutical Joint Stock Company 600,000 10.10 6,060,000 1.01%
8 ICA Pharmaceutical - Biological Joint Stock Company 500,000 55.00 27,500,000 4.58%
96,334,797 16,06%

Total investments in securities 476,791,626 79.49%

III. RECEIVABLES FROM INVESTING ACTIVITIES 11,628,188 1.93%

IV. OTHER RECEIVABLES 5,668 0.01%

V. CASH AT BANKS 111,391,080 18.57%

TOTAL INVESTMENT PORTFOLIOS 599,816,562 100%


26 March 2010 26 March 2010


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2009 B04-QDT

1. GENERAL INFORMATION
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 (“the SSC”) on 15 January 2008.
The Registration Establishment Certificate is valid for 6 years from the Registration Establishment Certificate date. The principal
activity of the Fund is investment holding with an objective to seek short to long-term capital appreciation of its assets by
investing in a portfolio of securities of Vietnamese companies operating in pharmaceuticals, hospitals, and health-care systems,
medical equipment, projects and education in Vietnam.
The maximum total capital of the Fund as stipulated in the Registration Establishment Certificate is VND500 billion. The par
value of each unit is VND100 million. Total maximum number of units is 5,000.
The Fund is managed by Viet Capital Asset Management Joint Stock Company (“the Fund Management Company”), an investment
management company incorporated in Vietnam, and supervised by HSBC Bank (Vietnam) Ltd. (“the Supervising Bank”).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following significant accounting policies have been adopted by the Fund in the preparation of these financial statements.
2.1 Basis of preparation of financial statements
The financial statements, expressed in thousands of Vietnamese Dong (“VND’000”), have been prepared in accordance with
Vietnamese Accounting Standards, the Vietnamese Accounting System and prevailing regulations applicable to investment
funds operating in SR Vietnam.

The accompanying financial statements are not intended to present the financial position and financial performance of
the Fund in accordance with accounting principles and practices generally accepted in countries other than SR Vietnam.
The accounting principles and practices utilised in SR Vietnam may differ from those generally accepted in countries and
jurisdictions other than SR Vietnam.

2.2 Fiscal year
The Fund’s fiscal year is from 1 January to 31 December.

2.3 Foreign currency transactions
The Fund accounting records are maintained in Vietnamese Dong (“VND”). Transactions arising in currencies other than VND are
translated at exchange rates ruling at the transaction dates. Foreign exchange differences arising from these transactions are
recognised in the income statement.
Monetary assets and liabilities denominated in currencies other than VND at the balance sheet date are translated at the rates
of exchange ruling at the balance sheet date. Foreign exchange differences arising from these translations are recognised in the
income statement.

2.4 Form of records applied
The Fund uses general journal to record its transactions.

2.5 Cash at banks
Cash at banks comprise cash deposit at bank under demand and term deposits.

2.6 Investments in securities
• Classification
The Fund classifies its listed securities and unlisted securities which are purchased for trading purposes as trading securities.

• Recognition/Derecognition
Purchases and sales of investments are recognised on the trade date basis – the day on which the Fund commits to purchase
or sell the investment. Investments are derecognised when the rights to receive cash flows from the investments have ex-
pired or the Fund has transferred substantially all risks and rewards of ownership.


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2009 (cont.)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.)
2.6 Investments in securities (cont.)

• Initial and subsequent measurements
Investments are initially stated at cost of acquisition and revalued at the balance sheet date. Revaluation of listed securities is
based on their last traded prices at the last official close of the Ho Chi Minh Stock Exchange and Hanoi Stock Exchange (“the
Exchanges”) on the relevant valuation day.

If a listed security has not been traded within two weeks prior to the valuation day, its market value is determined as the
average of bid quotes from three securities companies who are independent from the Fund Management Company and the
Supervising Bank.

If a listed security has not been traded for more than two weeks prior to the valuation day, its market value is determined as either:

-- 80% Of the liquidation value as at the balance sheet date closest to the valuation day if the issuer is in the process of
splitting, merging, dissolution or bankruptcy;
-- The purchase price in other cases; or
-- The value as obtained through the use of valuation techniques that have been approved by the supervising bank and
fund representative committee.
Unlisted securities that are traded at securities companies are revalued by referring to the average of transacted prices
provided by three securities companies that are independent from the Fund Management Company and the Supervising Bank.
Where there are insufficient broker quotes, an unlisted equity security is revalued by using the following methods which are
listed in the order of priority:
-- the price of the most recent comparable transaction between independent third parties;
-- the price recorded at the previous valuation date; or
-- the average of the Fund’s purchase prices up to the valuation date.
The Supervising Bank and Fund Representative Committee have approved these above methods.

2.7 Receivables
Receivables represent amounts due from sales of securities, investee companies for dividends declared, bond issuers for bond
interest, banks for bank interest and other receivables. Receivables are stated at cost less allowance for doubtful debts.

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

2.9 Taxation
According to Circular No. 100/2004/TT-BTC dated 20 October 2004 and Circular No. 72/2006/TT-BTC dated 10 August 2006, the
Fund itself is not subject to corporate income tax. However, the unitholders (including residents and non-residents) will be
subject to income tax on the income distributed by the Fund. Institutional unitholders are not subject to income tax on income
sourced from dividends earned from Vietnamese companies.

A new Law on corporate income tax became effective 1 January 2009. It is not entirely clear whether the tax treatment of
onshore investment funds provided under Circular No. 100/2004/TT-BTC and Circular No. 72/2006/TT-BTC remains valid.
However, in the absence of any provisions specifically revoking or superseding Circular No. 100/2004/TT-BTC and Circular No.
72/2006/TT-BTC, they arguably still apply.

2.10 Capital and share discount
The Fund’s units with discretionary dividends are classified as equity. Each unit has a par value of VND100 million.

Share discount representing the placing fee paid to the Fund Management Company in the period from 15 January 2008 to 31
December 2009 is recognised as a separate component in equity.


B04-QDT

2.11 Earnings per unit and net asset value per unit
Earnings per unit is calculated by dividing the profit or loss of the Fund by the weighted average number of units outstanding
during the year.
Net assets value per unit is calculated by dividing the net assets of the Fund by the number of outstanding units as at the
balance sheet date.

2.12 Revenue
Income from securities trading activities is recognised in the income statement upon receipt of the notice for settlement of
securities trading transactions from the Exchanges (for listed securities) and completion of the agreement on transfer of assets
(for unlisted securities).

2.13 Interest income and dividend income
Interest income from deposit at banks and bond is recognised in the income statement on an accrual basis unless collectibility
is in doubt.
Dividend income is recognised when the Fund’s right to receive payment is established.

2.14 Expenses
Expenses are accounted for on an accrual basis. Expenses are charged to the income statement except for those incurred on
the acquisition of an investment which are included in the cost of that investment.

2.15 Bonus shares and stock dividends
Bonus shares and stock dividends are recorded as investments at nil cost and are revalued at fair value at the balance sheet date.

2.16 Provisions
Provisions are recognised when: the Fund has a present legal or constructive obligation as a result of past events; it is probable
that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions
are not recognised for future operating losses.
Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a
pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligations. The
increase in the provision due to passage of time is recognised as interest expense.

2.17 Related parties
Enterprises and individuals that directly, or indirectly through one or more intermediaries control, or are controlled by, or are
under common control with, the Fund, including holding companies, subsidiaries, and fellow subsidiaries are related parties
of the Fund. Associates and individuals owning, directly or indirectly, an interest in the voting power of the Fund that gives
them significant influence over the Fund, key management personnel, including directors and officers of the Fund and close
members of the family of these individuals and companies associated with these individuals also constitute related parties.
In considering each possible related party relationship, attention is directed to the substance of the relationship, and not
merely the legal form.

2.18 Nil balances
Items or balances required by Decision No. 63/2005/QD-BTC that are not shown in these financial statements indicate nil balances.

3. CASH AT BANKS
31/12/2009 31/12/2008
VND’000 VND’000
Current accounts 41,391,080 12,952,018
Term deposits 70,000,000 345,000,000
111,391,080 357,952,018

Cash equivalents were denominated in VND as at 31 December 2009.


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2009 (cont.)

4. RECEIVABLES FROM INVESTING ACTIVITIES

31/12/2009 31/12/2008
VND’000 VND’000
Receivables from sales of investment securities awaiting settlement 10,662,662 -
Interest receivable from bonds - 140,685
Interest receivable from deposits at banks 145,694 8,621,583
Dividends receivable 819,832 -
11,628,188 8,762,268

5. PAYABLES FOR INVESTING ACTIVITIES

31/12/2009 31/12/2008
VND’000 VND’000
Payables for purchases of securities 21,998,859 4,502,463

6. PAYABLES TO THE FUND MANAGEMENT COMPANY AND SUPERVISING BANK
31/12/2009 31/12/2008
VND’000 VND’000
Management fee payable to the Fund Management Company (Note 10) 1,443,872 1,281,130
Performance fee payable to the Fund Management Company (Note 10) 6,718,708 -
Custody and supervision fees payable to the Supervising Bank (Note 10) 48,129 42,704
8,210,709 1,323,834

7. SHARE CAPITAL

Share capital Share discount Retained earnings Total
VND’000 VND’000 VND’000 VND’000
As at 15 January 2008 - - - -
Capital contributions 500,000,000 - - 500,000,000
Placing fee - (7,500,000) - (7,500,000)
Net profit for the period - - 18,627,978 18,627,978
As at 31 December 2008 500,000,000 (7,500,000) 18,627,978 511,127,978
Net profit for the year - - 88,210,186 88,210,186
Dividend - - (30,000,000) (30,000,000)
As at 31 December 2009 500,000,000 (7,500,000) 76,838,164 569,338,164

The Fund’s maximum authorised share capital is VND500 billion, equivalent to 5,000 units with a par value of VND100 million
each. As at 31 December 2008, 5,000 units had been issued and fully paid. No additional units were issued during the year
ended 31 December 2009.

All units have the same rights, whether in regard to voting, dividend, return of capital and otherwise. Each issued and fully paid
unit is entitled to dividends when declared and carries one voting right.


B04-QDT

8. OTHER OPERATING EXPENSES
For the year For the period
ended 31.12.2009 from 15.1.2008
VND’000 to 31.12.2008
VND’000
OTC quotation service fees 125,567 17,000
Bank charge 23,523 8,414
Compensations to the Fund Representative Committee 287,960 289,315
Interest expense - 168,125
437,050 482,854

9. RELATED PARTIES

During the year, the following transactions were carried out with related parties:
2009 2008
VND’000 VND’000
Management fee to the Fund Management Company (*) 16,252,278 14,445,813
Performance fee to the Fund Management Company (**) 6,718,708 -
Custody and supervision fee to Supervising Bank (***) 541,743 481,527
Commission fee to Viet Capital Securities Joint Stock Company (****) 622,703 444,893
Compensations to the Fund Representative Committee (*****) 287,960 289,315
24,423,392 15,661,548

As at the balance sheet dates, the following balances with related parties were outstanding:

2009 2008
VND’000 VND’000
Management fee to the Fund Management Company (*) 1,443,872 1,281,130
Performance fee to the Fund Management Company (**) 6,718,708 -
Custody and supervision fee for Supervising Bank (***) 48,129 42,704
8,210,709 1,323,834

(*) The Fund is managed by the Fund Management Company, Viet Capital Asset Management Joint Stock Company, a joint-stock company incorporated with limited
liability under the laws of the SR Vietnam. The Fund pays to the Fund Management Company a management fee which is calculated monthly as one-twelfth of 3 per cent of
the net asset value of the Fund and is payable monthly in arrears.
(**)The Fund pays to the Fund Management Company a performance fee in relation to any financial year if the Fund’s total return at the end of such year exceeds (i) the
benchmark and (ii) the high water mark. The benchmark is determined by adding a hurdle rate of 12% to the net asset value of the Fund at the beginning of the financial
year while the high water mark is defined as the highest net asset value that the Fund has reached since inception. Where a performance fee is payable, it will be an amount
equal to 20 per cent of the amount by which the Fund’s total return exceeds the higher of the benchmark and the high water mark.
(***)HSBC Bank (Vietnam) Ltd., which was incorporated with limited liability under the laws of the SR Vietnam, is the Supervising Bank of the Fund. The Supervising Bank
receives a monthly custody and supervision fee which equals to one-twelfth of 0.1 per cent of the net asset value of the Fund and is payable monthly in arrears.
(****)Viet Capital Securities Joint Stock Company (“the Securities Company”) has been the Fund’s securities company since 15 January 2008 (date of establishment). The
Fund pays a commission fee to the Securities Company at a rate of 0.15% of the value of all transactions.
The Securities Company owned 260 of the Fund’s units as at 31 December 2009 (31 December 2008: 510 units).
(*****)Each member of the Fund Representative Committee receives a monthly compensation of 500 United States dollars (“US$”). As at the balance sheet date, Mr Truong
Hoang Luong and Ms Nguyen Thuy Trang represented shareholders that owned 11 percent (31 December 2008: 11 percent) and 10 percent (31 December 2008: 10 percent)
of the Fund, respectively.


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2009 (cont.) B04-QDT

10. EARNINGS PER FUND UNIT AND NET ASSET VALUE PER FUND UNIT
2009 2008
VND VND
Net asset value (in VND’000) 569,338,164 511,127,978
Number of fund units outstanding 5,000 5,000
Net asset value per fund unit 113,868 102,226
Net profit for the year/period (in VND’000) 88,210,186 18,627,978
Weighted average number of fund units outstanding 5,000 5,000
Earnings per fund unit 17,642 3,726

11. INDICES
2009 2008
I- Investment ratios
Securities investments/Total assets 79.49% 29.10%
Shares investments/Total assets 79.49% 19.38%
Listed shares/Total assets 63.43% 14.04%
Unlisted shares/Total assets 16.06% 5.34%
Bonds/Total assets - 9.72%
Cash in banks/Total assets 18.57% 69.20%
Average income/Total assets 18.76% 10.26%
Average expenses/Total assets 4.05% 6.66%

II- Market ratios
Number of fund units 5,000 5,000
Number of fund units held by 10 largest unitholders/Total units 66.80% 70,80%
Number of fund units held by foreign unitholders/Total units - -
Net asset value per fund unit (VND) 113,868 102,226

12. COMMITMENT
As at 31 December 2009, the Fund had a commitment to contribute VND1,850,000 thousand to the capital of Hue Medic Joint
Stock Company of which the Fund was already a shareholder. The amount was fully paid on 4 February 2010.

13. APPROVAL OF THE FINANCIAL STATEMENTS
The financial statements were approved by the Fund Management Company and verified by the Supervising Bank on 26 March 2010.


Finance Director General Director


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.


Head office
Unit 2, 19/F, Centec Tower
72-74 Nguyen Thi Minh Khai St., T +84 8 3823 9909
Dist. 3, Ho Chi Minh City, Vietnam F +84 8 3824 6329 www.vietcapital.com.vn

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Thiet ke Bao cao thuong nien -Vietcapital (vchf 2009)

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