OVERCOMING CHALLENGES ACHIEVING SUCCESS ANNUAL REPORT
www.vcsc.com.vn
2020
OVERCOMING CHALLENGES ACHIEVING SUCCESS
With the steady mindset of “The Leader”, VCSC constantly pushes back the frontiers of the industry, proactively lays the groundwork for sustainability, and embodies the spirit of solidarity. It is with such sure footing that keeps us moving, however harsh the challenges become. Having each other’s backs, we brave storms together and leave no one behind on the journey toward our shared goals. That is reflected in the theme of this year’s Annual Report: “Overcoming challenges – Achieving success” for a dazzling and sustainable future. We firmly believe that, in light of achievements in the previous year, 2021 shall mark a milestone on VCSC’s journey through obstacles, fulfilling social responsibility with a broadened vision and spectacular breakthroughs expected.
Contents Annual report 2020
1.
Messages from Management Board and preface
04 Messages from the Chairwoman 06 Preface 08 13 years with creativity & development 10 2020 highlights in numbers
2.
Company overview
16 18 20
General information Vision, mission, and core values Awards & accolades
24 32 34 48 50 52 54 55 56 58 62
Macro 2020 A consistent perspective by the Board of Management People at VCSC Investment Banking Securities brokerage and market share Institutional Sales & Brokerage Research and analysis Investment division Customer service and product management Information technology Product development
3.
Overview of corporate performance
4.
Financial position and risk management
65 68
Financial position Risk management
5.
Corporate governance
76 77 78 84 86 87
Professional ethnics Organizational structure Report of the Board of Directors Report of the Board of Supervisors Board of Management Key personnel
6.
Future prospects
92 94 96
2021 prospects: Context and trend Future starts from today VCSC 2021 business plan
7.
Sustainibility report
100 104 106 118
Sustainable development orientation Report summary Report of sustainable development activities GRI content index
8.
Value affirmation
124 Shares information and investor relations 126 Shareholder structure 128 Financial statements
ANNUAL REPORT VCSC 2020
MESSAGES FROM THE CHAIRWOMAN To valued shareholders, valued customers and valued colleagues,
In the global disruptive context of 2020, Vietnam also experienced ongoing disruption by the COVID-19 pandemic on every socio-economic aspect. The recent wave of challenges has opened up opportunities for enterprises with innate capacity and solid internal potential. With impressive business results, VCSC has proven its merits and stayed true to the message “Overcoming challenges - Achieving success”.
We successfully crossed the finish line in 2020 and surpassed the set target of profit before tax (PBT) of VND550 billion to achieve PBT of VND951 billion, thanks to the pioneering spirit and readiness for challenges, as well as BOD’s tireless efforts and 226 excellent employees at all levels. These figures speak volumes about VCSC’s dominance in the Vietnam stock market. Bearing the steady mindset of “The Leader” throughout 13 years of development, VCSC takes pride in being the tier-1 investment banking service provider in Vietnam, and also among the top securities brokerage firms by market share on the HOSE bourse.
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Messages from Management Board and preface
Company overview
Overview of corporate performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
2020 PROFIT BEFORE TAX ( VND BILLION )
951
2020 EARNINGS PER SHARE ( VND )
4,662
We have always had each other’s backs in the face of adversity, never leaving anyone behind on the journey toward our shared goals. We believe that each individual’s personal development and dedication are determinants of the overall development and achievements that we have claimed and will strive for.
The 2020 net revenue was recorded at VND1,730bn (+12% YoY) and 2020 profit before tax at VND951bn (+11% YoY). Earnings per share reached VND4,662 (+10% YoY). The 2020 net return on average equity (ROAE) was 18%. Given the difficult environment resulting from the impact of COVID-19, be it on global economy or Vietnam stock market, the Board candidly acknowledged the reality and revised down the 2020 profit plan to be 35% lower than the 2019 figure at VCSC’s Annual General Meeting of Shareholders in June 2020. At that time, we developed VCSC’s 2020 business scenario based on the forecasts that the daily market volatility of the stock market in 2020 shall be much wider than that in 2019, and VN-Index shall settle around 850 points. As an upside scenario, in case COVID-19 vaccine’s trials reported a high success rate by the end of 2020, we could expect substantial recovery of the stock market and better-than-expected business results. With accurate forecasts and VN-Index closing at 1,104 at the end of 2020, VCSC’s profit-after-tax was 73% higher than the target of VND550bn. On behalf of the Board of Directors, I would like to express my gratitude to the VCSC staff’s dedication and business operational capabilities. These factors have provided a solid foundation and significant motivation for VCSC to make new breakthroughs and achieve greater success on its upcoming journey.
The year 2021 ushers in a new decade, bringing with it both challenges and opportunities. I have faith in the VCSC team to continue their efforts and maintain a sense of responsibility and enthusiasm for the shared goals because of their positive, proactive, astute, and determined attitude: fostering core values and promoting shared values to constantly enrich the sustainable foundation for the community, shareholders, customers and employees. To this end, the year 2021 is going to witness VCSC’s breakthroughs with impressive achievements. I would like to express my heartfelt appreciation to our valued shareholders and customers on behalf of the entire VCSC for your trust and companionship so far. This is the most powerful motivator for VCSCS to keep its faith and determination supported by its vision, missions, and social responsibility. Best regards.
Nguyen Thanh Phuong Chairwoman
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ANNUAL REPORT VCSC 2020
Preface
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Messages from Management Board and preface
Company overview
Overview of corporate performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
Faced with the profound impact of the COVID-19 pandemic and multifaceted changes on the international arena, the 2020 financial picture of Vietnam and the world as a whole, mixed with positives and negatives, is an apt demonstration of each business’ ability to navigate chaos. The time is right for the industry’s big names to confront headwinds and assert strong internal strengths to attain advancement. The lines occupying both of the covers form a fishing net that traps us in an ocean of challenges. Somewhere in this net, however, lie opportunities that classify, test and challenge the capabilities and market positions of every business.
The VCSC logo - which stands out on the cover, represents our will in the midst of challenges, our steadfast pursuit of our own ways of preserving the core values of the community, and our priority given to the rights of shareholders and customers on the road to breakthrough. Throughout the 13 years since its establishment, this has been the guiding mission and followed by the VCSC team. At VCSC, all fundamental values are centered around our people - the organization’s greatest and most valuable asset. We are proud to be a financial pioneer in the roadmap of global financial integration. With unique competitive advantages and accumulated values, VCSC has built a solid foundation to navigate change. In that spirit, the theme of the 2020 Annual Report, “Overcoming Challenges - Achieving Success”, reaffirms the enthusiasm of VCSC’s Board of Directors and employees towards the goal: to make a dramatic breakthrough in 2020 and to drive forward with confidence and excitement through the year 2021.
VIET C A PITA L SE C U RITIE S JSC ( VC S C )
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ANNUAL REPORT VCSC 2020
13 YEARS CREATIVITY AND DEVELOPMENT REMAINING IN
TOP 5
OF SECURITIES BROKERAGE HOUSES ON HSX
2007-2008
2009-2010
2011-2013
2014-2015
Establishment branch opening
Upgrade IT system, raise charter capital
Successfully organized Vietnam Access Day, Top 3 brokerage market share on HoSE
Breakthrough of business results, maintain Top 3 market share
VCSC was established and officially began operations on November 2007.
Officially deployed one of the most advanced trading software systems in the industry, provided by Tong Yang.
Charter capital of VND360bn.
Increased charter capital to VND378bn.
VCSC’s branch in Hanoi was established.
VCSC’s Nguyen Cong Tru Transaction Office was established. Top 10 brokerage by market share in the last six months of 2010 on HNX.
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Successfully organized the annual Vietnam Access Day for the first time, attracting more than 300 domestic and international guests, speakers and investment funds. Increased charter capital to VND398.4bn. Reallocate resources and improve business footprint. 2011: A Top 6 securities brokerage house on the HNX at the end of the year. 2012: A Top 5 securities brokerag house on the HSX at the end of the year. 2013: A Top 3 securities brokerage house on the HSX at the end of the year.
Vietnam Access Day becomes the largest event for leading Vietnamese companies to meet hundreds of investors from around the world. VCSC achieves a breakthrough performance as ROE surpasses the 30% threshold. Increased charter capital to VND500bn.
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Messages from Management Board and preface
Company overview
Overview of corporate performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
2020
PIONEERED IN INVESTING IN COMPREHENSIVE IMPROVEMENT, CONSTANTLY IMPROVING ALL FIELDS OF ACTIVITIES CHARTER CAPITAL
SHAREHOLDER EQUITY
VND BILLION
VND BILLION
1,656
4,521
2016-2017
2018-2019
2020
Listed on the HSX, maintained Top 3 market
Maintained brokerage market share, complete business results
Achieving success
Listed on the Ho Chi Minh Stock Exchange on July 7, 2017.
Remained Top 3 of securities brokerage houses on HSX.
Maintained brokerage market share; boosted business advisory activities.
The company’s charter capital reached VND1,644bn.
The company’s charter capital reached VND1,200bn.
Shareholder equity at of the end of 2019 was VND4,051bn.
Remained top 5 of securities brokerage houses on HSX. The company’s charter capital reached VND1,656bn. Shareholder equity at of the end of 2019 was VND4,521bn.
Shareholder equity at of the end of 2017 was VND3,020bn.
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ANNUAL REPORT VCSC 2020
2020 HIGHLIGHTS IN NUMBERS
VCSC successfully completed its 2020 guidance set at the shareholder meeting in June amid COVID-19’s disruptions with full-year 2020 profit before tax recording VND951 billion, 11% higher than 2019 (VND855 billion), and surpassing 2020 guidance (VND550 billion) by 73%. The results were achieved on the basis of a deep understanding of the market. The Company extended its strong forecasting track record in 2020.
8,382 Total assets
VND BILLION
15.7% COMPARED TO 2019
TOTAL ASSETS ( VND BILLION )
8,382
Source: Financial statements, VCSC
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2020
6,510
2019
6,402
2018
2016
6,343
2017
7,243
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Messages from Management Board and preface
Company overview
Overview of corporate performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
1,730
REVENUE
4,521 TOTAL EQUITY
VND BILLION 12,2% COMPARED TO 2019
VND BILLION
1,656
CHARTER CAPITAL
VND BILLION 0,7% COMPARED TO 2019
889 INVESTMENTS
VND BILLION
466
SECURITIES BROKERAGE
VND BILLION
226 TOTAL EMPLOYEES
3-YEAR AVERAGE ROE (2018-2020 )
20.2%
PEOPLE
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ANNUAL REPORT VCSC 2020
2020 HIGHLIGHTS IN NUMBERS (Continued)
Items Units: VND million, unless otherwise noted
Change 2020/19
2018
2019
2020
Revenue
1,821,479
1,540,944
1,729,592
12.2%
Securities brokerage
1,016,984
433,705
466,369
7.5%
Investments
312,949
689,765
889,394
28.9%
Margin lending
443,327
331,722
295,297
-11.0%
48,219
85,752
78,532
-8.4%
SG&A
(810,023)
(685,937)
(778,553)
13.5%
Profit before tax
1,011,456
855,007
951,039
11.2%
822,622
693,181
768,912
10.9%
ROE
24.7%
18.0%
17.9%
-0.1 ppts
ROA
12.7%
10.1%
9.8%
-0.3 ppts
Total assets
6,509,996
7,242,960
8,382,405
15.7%
Charter capital
1,629,999
1,644,000
1,656,000
0.7%
Equity
3,642,573
4,052,853
4,521,486
11.6%
Gross leverage ratio (x)
1.79x
1.79x
1.85x
-
Total Debt / Equity ratio (x)
0.64x
0.63x
0.74x
-
Net Debt / Equity ratio (x)
0.32x
0.44x
0.60x
-
Capital adequacy ratio (CAR)
521%
596%
534%
-
5,047
4,235
4,662
10.2%
162,999,890
164,349,985
165,600,000
1,400
1,500
3,000
245
245
226
BUSINESS RESULTS
Corporate advisory and others
Profit after tax
ASSETS
PER SHARE METRICS Adjusted diluted EPS (VND) Number of outstanding shares as of year-end Dividend/share (VND) TOTAL EMPLOYEES (PEOPLE)
-7.7%
Source: Financial statements, VCSC
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Messages from Management Board and preface
Company overview
Overview of corporate performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
VCSC successfully completed its 2020 guidance set at the shareholder meeting in June amid COVID-19’s disruptions with full-year 2020 profit before tax recording VND951 billion, 11% higher than 2019 (VND855 billion), and surpassing 2020 guidance (VND550 billion) by 73%. The results were achieved on the basis of a deep understanding of the market. The Company extended its strong forecasting track record in 2020. The Company maintained its superior return metrics against peers with ROE and ROA of 17.9% and 9.8% vs a domestic peer median of 14.4% and 5.3%, respectively. The 3-year average ROE (2018-2020) stood at 20.2% amid tough market conditions in 2019 and COVID-19’s disruptions in 2020. Regarding its financial position, the Company’s net debt to equity ratio was low at 0.60x as of YE2020 against a domestic peer median of 1.16x. The Company’s debts are mostly from bonds with competitive interest rate for margin lending activity. Equity increased by 11.6% YoY, which contributed to the enhancement of the financial adequacy ratio of the Company.
VCSC
Profit before tax (VND bn)
Growth (YoY)
Actual (% of target)
2015
+64.6%
150.5%
2016
+38.2%
104.0%
2017
+93.1%
146.0%
2018
+26.0%
100.0%
2019
-15.5%
100.6%
2020
+11.2%
172.9% Source: VCSC
VCSC net income (VND bn) and EPS (VND) trend (2014-2020) Adjusted diluted EPS
Net income (RHS)
6,000
823
5,000
693
655
769
600
4,000 3,000
2019 was the first year in 9 years that VCSC recorded a decline in net income. However, the positive earnings trend resumed in 2020 and is expected to continue in 2021.
2,000
800
333
400
239 145
200
1,000
2014
2015
2016
2017
2018
2019
2020
Source: Financial statements, VCSC
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Established in 2007, with equity of VND360 billion, Viet Capital Securities JSC has become Vietnam’s leading financial institution and reported impressive figures: 12-fold increase in equity capital to VND4,521 billion, total assets of VND8.4 trillion, and consistent ROAE in vicinity of 20%.
Company overview
General information
16
Vision, mission, and core values
18
Awards & accolades
20
ANNUAL REPORT VCSC 2020
GENERAL INFORMATION
Viet Capital Securities Joint Stock Company, founded in 2007, is one of the fastest-growing securities firms in Vietnam. VCSC reported a strong rebound in 2014, exceeding the ROE target of 25% for the first time, and was named the “Best Investment Bank in Vietnam” by Finance Asia and Euromoney. These accomplishments attest to the appropriateness and efficiency of the investment banking model to which we have adhered since the beginning.
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Messages from Management Board and preface
Company overview
Overview of corporate performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
VIET CAPITAL SECURITIES JOINT STOCK COMPANY (VCSC) Ticker: VCI Headquarters: Bitexco Financial Tower, 15th Floor, 2 Hai Trieu Street, District 1, HCMC, Vietnam Website: www.vcsc.com.vn Establishment license: No.68/UBCK-GP by the State Securities Commission on November 6, 2007 Charter capital: VND1,656tn
HANOI BRANCH Capital Building 109 Tran Hung Dao Street, Hoan Kiem District, Hanoi, Vietnam T/ (+84) 24 6262 6999 - F/ (+84) 24 6278 2688
NGUYEN HUE TRANSACTION OFFICE Vinatex - Tai Nguyen Building, 1st and 3rd Floors, 10 Nguyen Hue Street, District 1, Ho Chi Minh City, Vietnam T/ (+84) 28 3914 3588 - F/ (+84) 28 3914 3209
NGUYEN CONG TRU TRANSACTION OFFICE Artex Building, 6th Floor, 236-238 Nguyen Cong Tru Street, District 1, Ho Chi Minh City, Vietnam T/ (+84) 28 3914 3588 - F/ (+84) 28 3821 6186
PASTEUR TRANSACTION OFFICE - ABS Sailing Tower, 8th Floor, 111A Pasteur Street, District 1, Ho Chi Minh City, Vietnam T/ (+84) 28 3914 3588 (403)
Business Segments: Principle investment
Brokerage
Securities investment advisory
Underwriting
Securities depository
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ANNUAL REPORT VCSC 2020
VISION Viet Capital Securities Joint Stock Company continues to a maintain prudent and effective development strategy as we strive to be a reliable financial institution for institutional and retail investors who are looking for investment opportunities and building a sustainable future.
MISSION
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FOR CUSTOMERS
FOR SHAREHOLDERS
FOR EMPLOYEES
VCSC operates ethically to provide them with the best professional services.
VCSC is committed to bringing tangible progress, long-term efficiency and sustainable development, along with transparency in corporate governance and business development.
VCSC delivers a working environment meeting international standards along with morality, fairness, efficiency and promotion opportunities.
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Messages from Management Board and preface
Company overview
Overview of corporate performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
CORE VALUES
PEOPLE Our greatest assets are our people and reputation. Therefore, we aim to attract and retain the best employees by creating more opportunities and motivation for advancement.
CUSTOMER BENEFITS Customer benefits and satisfaction are always our top priorities.
SYSTEM Departments are managed by independent directors, operate transparently and are not influenced by the operational success of other departments. Our small proprietary investment portfolio is independently managed.
TRANSPARENCY Our financial statements are audited by an international auditing agency.
ETHICS We have internal polices to avoid conflicts of interest.
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ANNUAL REPORT VCSC 2020
AWARDS & ACCOLADES
1 YEAR RECEIVING AWARD FROM EUROMONEY 11 CONSECUTIVE YEARS RECEIVING THE AWARDS FROM ALPHA SOUTHEAST ASIA The best M&A deals advisory - backed by a private equity fund in Southeast Asia - 2019, 2020 Best Broker in Vietnam - 2012, 2013, 2014, 2018 Best Investment Bank and M&A House - 2017 The best capital mobilization in Vietnam - Giai đoạn 2007-2016 Best Mid-Cap Corporate Finance House - 2011, 2012, 2013, 2015 -
6 YEARS RECEIVING AWARDS FROM FINANCE ASIA Best Broker in Vietnam - 2016, 2017, 2018 Best Investment Bank in Vietnam - 2012, 2015, 2016, 2017 Best Investment Bank in Vietnam - 2017 -
Best Equity House in Vietnam - 2016 -
Top three advisor - in 2005-2015 -
1 YEAR RECEIVING AWARD FROM THE ASSET ASIAN AWARDS Best Brokerage House in Vietnam - 2011 -
Best Equity House in Vietnam - 2011 -
1 YEAR RECEIVING AWARD FROM HO CHI MINH CITY’S PEOPLE COMMITTEE
10 CONSECUTIVE YEARS RECEIVING THE AWARDS FROM VIETNAM M&A FORUM
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1 YEAR RECEIVING AWARD FROM HANOI STOCK EXCHANGE
Best Equity House in Vietnam - 2011-
Best Institutional Broker - 2013 -
Best M&A Advisory Firm - In 2009-2020 -
Best Investment Bank in Vietnam - 2015 -
TOP 50 LISTED COMPANIES IN VIETNAM IN 2019 AWARDED BY FORBES VIETNAM - 2019 -
Saigon Enterprise of the Year - 2011 -
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Messages from Management Board and preface
Company overview
Overview of corporate performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
2020, RECEIVED 2 AWARDS FROM
ALPHA SOUTHEAST ASIA 1. Best domestic M&A Deal of the year, Vietnam 2. Most improved M&A House in Vietnam 2020 11 CONSECUTIVE YEARS RECEIVING AWARDS FROM
VIET NAM M&A FORUM 1. Best M&A Advisory Firm in 2019-2020
2. “Top 50 listed companies in Vietnam in 2020” awarded by Forbes Vietnam 3. Top VNR500 - Top 500 biggest enterprises in Vietnam
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Our achievements are testimony to the appropriateness and efficiency of the model that we have employed since the very beginning modern investment banking. VCSC aims to build a sustainable future for its customers and partners, facilitate sustainable growth, and maximize long-term shareholder value.
Overview of corporate performance Macro 2020
24
A consistent perspective by the BOM
32
People at VCSC
34
Investment Banking
48
Securities brokerage and market share
50
Institutional Sales & Brokerage
52
Research and analysis
54
Investment division
55
Customer service and product management
56
Information technology
58
Product development
62
ANNUAL REPORT VCSC 2020
MACRO 2020 SWIFT CONTAINMENT OF COVID-19 PAYS DIVIDENDS
Vietnam’s swift and uncompromising response to control the COVID-19 pandemic was rewarded not only by very low fatalities relative to much of the rest of the world but also the ability to reopen much of the economy sooner with more limited stress on macroeconomic and financial stability. As a result, Vietnam has reported a preliminary GDP growth figure of 2.9% for 2020 and is one of only a handful of countries expected to have seen an increase in GDP in 2020.
FISCAL AND MONETARY MEASURES SUPPORT ENTERPRISES AND HOUSEHOLDS Vietnam’s economic policy response to mitigate the economic disruptions and hardship caused by COVID-19 was conceptually similar to that of other countries - with fiscal and monetary support measures targeting enterprises and households. In 2020, the Ministry of Finance (MoF) announced three fiscal packages with estimated value of nearly VND300tn (equivalent to 4.7% of GDP), including extension of deadlines for tax and land use fee payments, a financial support package and exemption/reduction of taxes and fees. In addition, the State Bank of Vietnam (SBV) implemented a series of rate cuts on March 17, May 13, and October 1. Also, banks have restructured loans, reduced interest rates for current loans and have been lending at lower interest rates (vs pre-COVID) for a total of 1.27 million customers. IN 2020, THE MINISTRY OF FINANCE (MOF ) ANNOUNCED THREE FISCAL PACKAGES WITH ESTIMATED VALUE OF NEARLY
300
VND THOUSAND BILLION (EQUIVALENT TO 4.7% OF GDP)
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Policy Rates
EY2019
EY2020
Discount %
4.0
2.5
Refinancing %
6.0
4.0
Reverse Repo (OMO) %
4.0
2.5
Deposit Cap (<6mo) %
5.0
4.0 Source: SBV, VCSC
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Messages from Management Board and preface
Company overview
Financial position Overview of corporate performance and risk management
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Corporate governance
Future prospects
Sustainability report
Value affirmation
STRONG ECONOMIC RECOVERY IN H2 2020 As a result of three weeks of nationwide social distancing in April, Q2 2020 GDP dropped 0.36% YoY - the lowest level in over 30 years. However, thanks to the Government’s successful containment of COVID-19, fiscal and monetary support measures, the EU-Vietnam Free Trade Agreement (EVFTA) entering into force, and the brighter global outlook following vaccination plans in several countries, economic activity recovered with GDP growth reaching 2.69% YoY in Q3 and 4.48% YoY in Q4, resulting in 2.91% growth for full-year 2020.
2.91
GDP GROWTH REACHING ( %)
VN-Index & MSCI global index performance, USD VN-Index, USD
MSCI DM
MSCI DM
MSCI Frontier
120 110 100 90 80 70 60 12/19
03/20
06/20
09/20
12/20 Source: Bloomberg, VCSC
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ANNUAL REPORT VCSC 2020
MACRO 2020 (Continued)
SERVICE SECTOR HIT HARDEST BY COVID-19 April’s social distancing period and the closure of Vietnam’s international borders for most of the year dragged down hospitality and transportation/logistics by 14.68% YoY and 1.88% YoY, respectively, among other service sub-sectors. In contrast, several sub-sectors maintained solid growth, including wholesale/ retail trade (+5.53%), banking/finance/insurance (+6.87%), education (+6.12%) and healthcare & social relief (+10.58%), resulting in 2.34% YoY growth in the service sector for the full-year 2020.
MANUFACTURING CONTINUED TO BE A KEY DRIVER OF THE ECONOMY Manufacturing achieved robust growth of 8.63% YoY in Q4 and 5.82% YoY growth in 2020, driving growth of the industry & construction sector to 5.6% YoY in Q4 and 4.0% YoY for full-year 2020. Meanwhile, the agriculture, forestry & fishery sector was the only sector (of three key sectors) that achieved higher growth vs 2019, posting 2.68% YoY in 2020 - higher than the 2.0% growth recorded in 2019.
SE ASIA
Vietnam Indonesia Malaysia Singapore Thailand Philippines
NORTH ASIA
Taiwan China S Korea Japan HK
OTHERS
2020F consensus GDP growth, % (to be updated after other countries announce 2020 results) (%)
US EU World -10
-8
-6
-4
-2 0 2 4 Source: General Statistics Office of Vietnam (GSO), VCSC
Google mobility index of workplace activity (%) Vietnam
US
Germany
Japan
South Korea
Thailand
20 10 0 -10 -20 -30 -40 -50 -60
Jan-20
Mar-20
May-20
Jul-20
Sep-20
Nov-20
Jan-21
Source: Google, VCSC (7DMA data to December 22, 2020 vs baseline)
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Messages from Management Board and preface
Company overview
Financial position Overview of corporate performance and risk management
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Corporate governance
Future prospects
Sustainability report
Value affirmation
GDP growth by sector (%) Agriculture, forestry & fishery 12
Industry & construction
Services
GDP
6.8
5.9
5.0
5.4
6.0
6.7
6.2
6.8
2010
2011
2012
2013
2014
2015
2016
2017
7.08
7.0
2.9
2019
2020
10 8
6
4
2 0
2018
Source: GSO, VCSC
RETAIL SALES OF GOODS HOLD UP WELL THANKS TO DOMESTIC CONSUMPTION Restrictions on international arrivals (which dropped 78.7% YoY to only 3.8 million) and the risk COVID-19 spread dampened retail sales of accommodation/catering services (-13% YoY) and tourism (-59.5% YoY). However, retail sales of goods maintained solid growth of 6.8% YoY, driving total retail sales of goods and services to rise 2.6% YoY in 2020 in nominal terms (declining 1.2% in real terms).
STRONG INCREASE IN INVESTMENT FROM THE STATE SECTOR COMPENSATED FOR WEAK GROWTH IN THE PRIVATE AND FOREIGN SECTORS The negative impact of the COVID-19 pandemic delayed new investment from the private and foreign sectors. Investment from the private sector inched up 3.1% in 2020 vs robust average expansion of 17.6% per annum during 20172019, while investment from the foreign sector fell 1.3% vs 7.9% growth in 2019. However, investment from the State sector surged 14.5% YoY in 2020 - in contrast to only 2.9% growth in 2019. Within the State sector, disbursement from the State budget jumped 34.5% as the Government boosted public investment to support economic growth.
ESTIMATED REVENUE BEAT THE GOVERNMENT’S PROJECTION REPORTED TO THE NATIONAL ASSEMBLY The MoF estimates that State revenue reached VND1,481.6tn (USD64.4bn) in FY2020 (98% of the annual plan), which is almost VND160tn (USD7.0bn) higher than the MoF’s projection reported to the National Assembly in November 2020 when it forecast State revenue to miss 2020’s target by VND190tn (USD8.3bn) due to the negative impact of the COVID-19 pandemic. The budget deficit is equivalent to 4.2% of GDP (vs the original target of 3.44%). 27
ANNUAL REPORT VCSC 2020
MACRO 2020 (Continued)
THE TRADE SURPLUS REACHED A RECORD HIGH - ALMOST DOUBLE THE 2019 FIGURE. EXPORTS MAINTAINED SOLID GROWTH DESPITE WEAK GLOBAL DEMAND
TRADE SURPLUS IN 2020 ( USD Bn)
20
THE HIGHEST FIGURE EVER RECORDED
The pandemic dragged down global demand and Vietnam’s exports suffered accordingly, especially key export items such as textiles & garments (USD29.8bn; -9.2% YoY) and footwear (USD16.8bn; -8.3% YoY). However, Vietnam still achieved export growth of 7.0% YoY - reaching USD282.7bn in 2020 - supported by (1) Vietnam’s successful containment of COVID-19 that helped to maintain production while many other manufacturing hubs were disrupted by the pandemic and (2) the EVFTA coming into effect in August 2020. Meanwhile, imports also increased toward year-end to USD262.7bn (+3.7% YoY). The result was a trade surplus of USD20bn in 2020 (vs USD10.9bn in 2019) - the highest figure ever recorded.
EXPORT IN 2020 ( USD Bn)
282.7 +7.0% YOY
IMPORTS IN 2020 ( USD Bn)
262.7 +3.7% YOY
Export, import turnover and trade balance Export turnover (LS)
Import turnover (LS)
Trade balance (RS)
Billion USD 25
300
20
250
15
200
10
150
5 0
100
-5 50 0
-10 2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
-15
Source: Vietnam Customs, VCSC
28
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Messages from Management Board and preface
Company overview
Financial position Overview of corporate performance and risk management
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Corporate governance
Future prospects
Sustainability report
Value affirmation
AVERAGE 2020 CPI WAS WELL BELOW THE GOVERNMENT’S TARGET CAP Average CPI reached 3.23% in 2020 - well below the Government’s target cap of 4% - while the year-end CPI inched up only 0.19% from the end of 2019. Declines in average domestic petroleum prices (-23.0%), demand for travel and electricity prices helped to curb overall CPI in 2020. CPI (%) CPI MoM (RHS)
CPI YoY (LHS)
25
2.5
20
2.0
15
1.5
10
1.0
5
0.5
0
0.0
-5
-0.5
-10
-1.0
-15
-1.5 Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Dec-17
Dec-18
Dec-19
Dec-20 Source: GSO, VCSC
THE DONG APPRECIATED ON ABUNDANT USD INFLOWS The VND closed 2020 at 23,098 in the interbank market - an appreciation of 0.3% against the USD from the end of 2019. The appreciation of the VND has been supported by a record high trade surplus of USD20bn, solid FDI disbursement of USD20bn and estimated remittance inflows of USD15.4bn, and the SBV’s reduction of USD/VND bid price quoted at its transaction office as well as the depreciation of the greenback. USD/VND exchange rate Interbank
Upper band
Lower band
Central rate
24,200
23,825
23,800 23,400
23,131
23,000
23,098
22,600
22,437
22,200 21,800 21,400 21,000 20,600 Dec-14
Jun-15
Dec-15
Jun-16
Dec-16
Jun-17
Dec-17
Jun-18
Dec-18
Jun-19
Dec-19
Jun-20
Dec-20
Source: Bloomberg, VCSC
29
ANNUAL REPORT VCSC 2020
MACRO 2020 (Continued)
MARKET PERFORMANCE RECOVERY FROM COVID-19 LED BY DOMESTIC INVESTORS THE VN-INDEX FELL TO ITS 2020 LOW IN MARCH ON PEAK COVID-19 UNCERTAINTY The MSCI World Index fell by 32% from the start of the year to its lowest closing level of 384 on March 23, while the VN-Index fell 31% to a closing low of 659 on March 24 as the COVID-19 pandemic escalated around the world and Vietnam experienced increased cases in Hanoi and HCMC. Unprecedented policy support, which stabilized financial markets globally, and the accelerated development of vaccines made the COVID-19 bear market one of the shortest in history. The MSCI World Index subsequently recovered to gain 14% for the year and the VN-Index closed at 1,104, up 15% for the year.
VN-INDEX CLOSED AT (POINT)
1,104 UP 15% FOR THE YEAR
VN-Index, HNX and UPCoM performance in 2020 VN-Index
HNX-Index
UPCoM December 31, 2020
120%
VN-Index ended the year at 1,104 - its 2020 high September 2020
100% 80% March 24, 2020
60%
VN-Index hits year low of 659 on peak uncertainty over COVID-19 in Vietnam and around the world.
40%
July 27, 2020
VN-Index moved up through our 2020 target of 900,
Jun-20
Sep-20
New COVID-19 cases in Da Nang briefly pushed the VN-Index below 800.
20% 0% -20% -40% Dec-19
Mar-20
Dec-20
Source: Bloomberg, VCSC (data to December 31, 2020)
30
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Messages from Management Board and preface
Company overview
Financial position Overview of corporate performance and risk management
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Corporate governance
Future prospects
Sustainability report
Value affirmation
DOMESTIC INVESTORS LED THE RECOVERY Foreigners were net sellers of ~USD650mn on HSX in 2020, and we estimate that the underlying outflow adjusted for several large strategic investment inflows was rather larger at ~USD1.6bn. However, domestic investors more than made up for the withdrawal of foreign money.
The recovery in the VN-Index following the bear market in Q1 2020 was led by domestic investors. While we believe that company insiders (major shareholders and management) and treasury share buy-backs played a part - especially in Q2 2020 - strong increases in market turnover (as measured by average daily trading value) and the number of brokerage accounts (up 340,000 to 2.7 million) indicate that Vietnam participated in the global explosion in retail stocktrading activity in 2020.
Average daily trading value (ADTV) & accounts HSX
HNX
UPCoM
Number of accounts, RS
USD Mn
Mn accounts
350
18
300
31
250
The increase in brokerage accounts may also reflect additional account opening by existing investors seeking to access more attractive margin lending rates at other brokerages. Margin loans outstanding increased by nearly 30% from the end of Q1 2020 to the end of Q3 2020 and may well have increased further in Q4 2020.
12
200 150
50 0
9 14
25
1 39
100
1 21
3 20
89
76
89
2013
2014
2015
2016
270
1.5 1.0
185
151
15 42
2.5 2.0
31
6
3.0
0.5
131
2017
2018
2019
2020
0.0
Source: Bloomberg, Fiin Pro, VCSC
MARKET LIQUIDITY DOUBLED IN 2020 Average (on exchange) daily trading value (ADTV) soared to USD319m in 2020 (+107% YoY). The increase in trading activity during the year was even more pronounced. Daily trading value on HSX at the end of 2020 was approximately five times higher than at the start of the year.
MARKET CAP INCREASED SHARPLY Vietnam’s total market cap at end-2020 was USD235bn, representing 87% of 2020 nominal GDP - up from around 72% as of the end of 2019. Total market cap HSX
HNX
UPCoM
Market cap/GDP, RS
USD Bn
(%)
250
87
100 90
200
69
71
80
72
70
150
60 50
100
33 20
50
24
27
29
31
38
40 30 20 10
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
0
Source: Bloomberg, VCSC
31
ANNUAL REPORT VCSC 2020
A CONSISTENT PERSPECTIVE BY THE BOARD OF MANAGEMENT
Established in 2007, with equity of VND360 billion, Viet Capital Securities JSC has become one of Vietnam’s leading financial institutions with its impressive reported figures: increased equity capital 12 times to VND4,521 billion, total assets of VND8.4 trillion, delivered ROAE in vicinity of 20%.
INVESTOR VALUE AT THE CORE
These achievements are thanks to the collective effort of all the VCSC staff and the experience of BOM. As the stock market in particular, and the economy in general, directly affected by the Covid-19 pandemic in 2020, VCSC continued to shine on Vietnam’s stock market, boosted by its adherence to sustainable core values. This statement is demonstrated by its positive performance in 2020.
ACCORDINGLY, THE LEADING FOCUS ON THE INVESTOR RETURN HAS BECOME A GUIDELINE THROUGHOUT THE DEVELOPMENT OF VCSC FOR MORE THAN 13 YEARS. 32
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Company overview
Financial position Overview of corporate performance and risk management
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Future prospects
Sustainability report
Value affirmation
EFFICIENCY OF SHARE CAPITAL OF THE UTMOST IMPORTANCE Despite being the securities company with the most outstanding and stable growth in the stock market, VCSC has never possessed the largest owner’s equity. This is a testament to the optimal use of capital by VCSC as opposed to our competitors. In the course of development, VCSC has always given priority to the profitability of share capital. At the same time, VCSC’s ROAE has consistently ranked the highest on the market.
HIGH POTENTIALS BY DIVERSIFYING REVENUE STREAMS It is true that the business performance of securities companies depends heavily on the development of the market. However, the VCSC has shown its great resilience by aligning its objectives with the actual situation. This results from the Board of Directors’ deep understanding of the general dynamics of the market and the ability to maintain diverse sources of revenue, including brokerage, investment bank (IB) and investment. All VCSC business lines operate in tandem and support each other effectively through good and bad times. This explains why VCSC can always achieve the targets set over the years, including the years of challenge such as 2019 with a decline in financial market liquidity and 2020 with the COVID-19 pandemic. IB’s function forms a solid foundation for VCSC’s affiliated activities and builds the company’s reputation by continuously making profits even when times are tough. VCSC is also known to assist top companies with highly valued and complicated M&A deals. VCSC extends its services to all industries, including education, real estate, fisheries, supporting industries, food and consumer goods, stationery, infrastructure, media and technology, etc. In 2020, as the stock market encountered difficulties, the activities of M&A became the driving force for the IB segment of VCSC. In addition, VCSC has also affirmed its name with large-scale IPO deals that have attracted large participation of renowned international investors in Vietnam’s businesses. Examples of deals included Vietjet, VPBank, Techcombank, etc. On the subject of Investment, VCSC focuses on long-term investment and companies that have growth potential and plans to be listed on the stock exchange. The proprietary trading of the listed shares conducted by VCSC is only 1% or less of the total value of the brokerage transactions. In the future, VCSC continues to channel its resources to institutional clients and IB activities. This shows the company’s consistent perspective on the journey ahead.
ADDED VALUES FROM DEVELOPING ANALYSIS REPORT AND SHARING INVESTMENT OPPORTUNITIES In 2019, the competition in the Vietnamese stock market turned over a new leaf with the official removal of floor price of trading fees - the trend is also found in other stock markets including Korea (1998), Singapore (2001), Hong Kong (2004), and Thailand (2012). Taking advantage of the top-tier brokerage market share and business strategy centering around diverse and sustainable revenue sources, VCSC manages to maintain its position even in the middle of brokerage fee competition. After all, providing value-added services and profitable investment opportunities to customers, rather than lowering trading fees, is what remains at the heart of our operation. In order to fulfill this goal, VCSC develops its high quality analysis reports and follows effective business outreach strategies.
RATHER THAN MARKET SHARE AND MARGIN LENDING, IT IS THE HIGHEST PROFITABILITY FOR SHAREHOLDERS THAT MATTERS VCSC believes that brokerage market share plays a key role in its business performance, and the competition for brokerage market share has been fierce since 2019. However, VCSC’s business strategy ensures that the company’s resources are not only invested in the higher market share ranking race. That is because the brokerage segment has a small profit margin and a lot of manpower is required. Instead of focusing on market share expansion, VCSC strives to provide value-added services and profitable investment opportunities to customers, thereby maximizing shareholder value. Faced with competitive pressure from foreign securities companies (from Korea, Taiwan, Japan, etc.) - lowcost capital sources in recent years, VCSC is adjusting its margin lending strategy to focus on low-cost foreign loans. To give a prime example of this strategy, VCSC successfully raised $40 million in unsecured syndicated loans at a competitive interest rate in Q2 2020. In the future, VCSC intends to seek out foreign loans at low interest rates and in the short term to fund margin lending activities. 33
ANNUAL REPORT VCSC 2020
VCSC’S PEOPLE
At VCSC, we build and develop a fundamental foundation around: RESPONSIBILITY
AWARENESS
SPIRIT AT WORK
that highlights VCSC’s organizational culture and its focus - optimization of human resources.
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Financial position Overview of corporate performance and risk management
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Sustainability report
Value affirmation
PEOPLE
PREREQUISITE FOR SUCCESS
The core strength and prerequisite for success at VCSC. At VCSC, we build and develop a fundamental foundation centered on: responsibility, awareness, and spirit at work, which highlights VCSC’s organizational culture and its focus - human resource optimization. The Company strives to maintain a professional and efficient working environment that values diversity and encourages teamwork, while adhering to the highest business ethics standards. Simultaneously, the Board of Directors and the Board of Management - all passionate and talented leaders - have long served as an inspiration to VCSC employees to uphold the following practices: Accept the challenges
Pursue continuous innovation
Embrace solidarity
ELEVATE THE HUMAN CAPITAL Sustainable development goals necessitate a high-quality team at VCSC that demonstrates coordinated excellence in all areas: qualifications, performance, and teamwork abilities. Employees in the Business Division (Brokerage, Investment Bank, Investment) have strong professional skills and the ability to build and develop a diverse customer network, which has resulted in the awarding of numerous valuable advisory contracts. This significantly
contributes to the goal of maintaining VCSC’s position as a leading securities company in brokerage market share, as well as securing high appreciation with prestigious awards from recognized local and global organizations. The Support Division is well-known for its employees’ enthusiasm and professionalism, as well as their methodical, effective, and dedicated support for the Business Division and the entire VCSC system. 35
ANNUAL REPORT VCSC 2020
VCSC
STANDING FIRMLY IN COVID-19 STORM The year 2020 is a year full of challenges to both domestic and international businesses due to COVID-19 impact. As the global economy was sent on a roller coaster ride, most domestic businesses were faced with numerous difficulties, and resulting decline in business efficiency. This inflicted profound impact on human resources: workforce reduction, and pay adjustment.
IN THAT SITUATION, WHAT DID VCSC DO? »» VCSC kept businesses going stably while taking into account preventive measures against COVID-19 and the health of employees and customers. During peak times, we adopted a policy that required 50% of the company staff shall work at the office with 2-m social distancing rule, and the remaining 50% shall work at home. This helped prevent the spread of COVID-19 and maintain business operation at the same time.
»» VCSC still implemented a 6-month evaluation of employee performance to determine employees that had delivered excellent works, thereby considering them promotion and pay raise.
»» The Company’s leaders ensured performance, and a fair salary, remuneration, and insurance policies for each employee, giving employees peace of mind and improving their engagement with the company amid COVID-19.
»» In parallel with business improvement, the Board also upheld one of its first principles, that is to build an ideal working environment for VCSC’s human resources.
36
»» The Board still maintained vacation policy to help employees have a relaxing break after a long period of working and preventing the pandemic.
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Company overview
Financial position Overview of corporate performance and risk management
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Future prospects
Sustainability report
Value affirmation
VCSC THE BEST WORKING ENVIRONMENT Following a high rating in Anphabe JSC’s Happiness at Work survey, VCSC was named one of the “Best Companies to Work for in Asia 2020 - Vietnam Edition” by HR Asia, Asia’s most authoritative publication for HR professionals. HR Asia Awards Council evaluated and judged the award based on a variety of criteria, including company size, employer branding, working environment and employee engagement survey, Board interview on vision and development strategies, and so on.
This award is an objective and valuable recognition of our 13-year efforts to create a happy working environment that sparks employee motivation and implement performance-based remuneration policies. This helps to alleviate employees’ concerns and keep them engaged in the long run.
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ANNUAL REPORT VCSC 2020
SUSTAINABLE HUMAN RESOURCES
Nurturing and appreciating human values is how VCSC’s ideal working environment holds attraction for many. VCSC ensures all its employees enjoy opportunities for comprehensive development and fair remuneration and welfare policies. With the principle: “People” are the fundamental drivers of sustainable growth, we constantly work hard to future proof our HR strategies, thereby developing and maintaining sustainable human resources.
CODE OF CONDUCT For the sustainable development of stakeholders.
RECRUITMENT The first door to worthwhile human resources.
REMUNERATION For work-life balance.
TRAINING Short-term investments but long-term impact. PROMOTION The key for talent retention.
Employment by age group
Aged under 30 : 33% Aged 30<=40 : 54% Aged 40<=50 : 13%
38
Employment by gender
Male : 56% Female : 44%
Employment by number of years worked
>10 years : 14% 5-10 years : 31% <5 years : 55%
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Financial position Overview of corporate performance and risk management
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Sustainability report
Value affirmation
RECRUITMENT, RETAINMENT AND DEVELOPMENT We build and develop human resources in accordance with the company’s strategic goals. By investing carefully and thoroughly in every recruitment plan, we manage to identify excellent and enthusiastic candidates whose qualifications and expertise can provide great support to business strategies. The recruitment process is standardized and consistent across various communication channels such as websites, social networks, job search websites, and internal platforms. It also includes fair and transparent remuneration policies. Our top priority is to fill open positions from our existing employee pool. Internal mobility fosters strong bonds among employees and allows employees at all levels to hone existing skills while developing new ones. One of our key strategies for advancing our existing employees’ careers, increasing employee satisfaction, and attracting top talent is to provide them with opportunities for growth at work. We maintain and develop our strategies for developing young talent through the annual Internship Program. Young talents bring enthusiasm, dynamism, and novel approaches to customers to VCSC. Their commitment to their jobs and contributions to the success of VCSC are also impressive. Young talents are given opportunities at VCSC to gain experience in a dynamic working environment as well as knowledge and skills from our seasoned team. VCSC stands out as one of the best choices for talented candidates due to its positive brand image, fair and competitive remuneration policies, and highly engaged working environment.
TOTAL NUMBER OF INTERNS IN 2020
100 3,500 TOTAL NUMBER OF POTENTIAL CANDIDATES
From prominent schools including Foreign Trade University, University of Economics, RMIT, Banking University, and international universities.
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ANNUAL REPORT VCSC 2020
HR TRAINING AND DEVELOPMENT
The focus of our “right people for the right jobs” strategy is to maximize each employee’s work capacity. It aims to enhance our employees’ potentials and capabilities, as well as to fuel their contribution to the company’s overall success.
To have such a high-quality team, we focus on training in addition to recruiting the right people for the right jobs. We offer comprehensive training and a variety of methods that are tailored to each position, department, and training content. Training method 1
Internal training
2
External training
3
Online internal training
4
Joint training
5
On-the-job training (coaching, supervising)
Business Division We ensure our staff all have securities-practising certificate as required by the State Securities Commission of Vietnam. We also promote internal training and conduct online tests twice a year to enhance the quality of our brokers. Investment Bank Division and Research - Analysis Division We encourage staff to take CFA exams to a Level that suit them. Information Technology Division
We always pay special attention to employee training and growth opportunities.
40
Network management is critical to business operation. With this in mind, we send our IT team to training courses hosted by well-known institutes once a year to help them expand their skills in handling and fixing incidents, as well as stabilizing system operation.
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Sustainability report
Value affirmation
VCSC continues to promote internal training for the Brokerage Division by offering professional knowledge courses and administering multiple-choice tests twice a year on a variety of topics such as Company-Product, Policy-Ethics, Laws, Fundamental Analysis-Technical Analysis, Trading Regulations-Derivatives. Furthermore, we work with other departments, such as the Research and Analysis Department and the Product Development Department, to organize seminars and training courses for the Brokerage Division. This aims to clarify financial statements and industry reports, to introduce new securities products to brokers for accurate advice on their end. Besides professional training, we also encourage employees to participate in soft skills training to improve their interactions, performance and career outlook. Skills included in the training are effective communication, impactful presentation, negotiation, customer service, memorization, etc. The training is conducted annually and by experienced training centers. Along with external training, we also developed several internal programs such as “Employee Orientation”, “Broker Training”, “Analyst Coaching”, etc.
NUMBER OF EMPLOYEES WITH SECURITIES PRACTISING CERTIFICATE
101 NUMBER OF EMPLOYEES WITH CFA CERTIFICATE
20
Training program
CFA certificate
Securities practising certificate
Valuation certificate
Soft skills
Professional skills
Internal training
Online test
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ANNUAL REPORT VCSC 2020
TRANSPARENT AND EFFICIENT EVALUATION PROCESS A critical success factor is the development of current and future leaders. With this in mind, we conduct an evaluation process every 6 months to find excellent employees and advance them to higher positions, as well as to detect poor-performing employees and design appropriate training in due course
Employees are encouraged to evaluate their own performance and identify their own strengths and weaknesses. They can then take the initiative to discuss their personal development plans with managers and reach a final agreement. Our evaluation process employs a variety of criteria to ensure the most accurate reflection of an employee’s performance.
To evaluate group work, 360-degree solutions are one of our most common choices. This allows supervisors, employees, and colleagues to evaluate each other on aspects including performance, risk management, compliance, and diversity. We also conduct surveys among related departments, typically the survey for Brokerage Division, to evaluate the performance of each employee in the Research and Analysis Department. Based on the analysis of the Research and Analysis Department, the Brokerage Division can give the most accurate consultation to customers.
A comprehensive evaluation process is our commitment to equal employment opportunity. This enables the Board to make informed decisions, ensuring promotion and access to opportunities is given to employees who deserve it. Our remuneration structure is built and developed based on employees’ feedback. The income of each employee is in direct proportion to their contributions to VCSC’s business performance. This keeps employees enthusiastic and inspires them to take ownership of their work, resulting in maximum efficiency at work. This also helps VCSC overcome difficult times and develop at a faster and stronger pace.
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BUSINESS ETHICS - FOR SUSTAINABLE DEVELOPMENT OF STAKEHOLDERS
At Viet Capital Securities Joint Stock Company, our vision is to maintain our position as one of the leading investment banks in Vietnam and to provide customers with the best service.
At VCSC, these following values are recognized as the company’s core strengths:
At its core, our business perspective emphasizes: providing high-quality services to customers, creating added value for stakeholders, and fostering community trust. If a company plans to expand in a sustainable way, it must rely on the integrity and professionalism of all of its employees, including the Board of Directors. As a result, we always work hard to build strong relationships with stakeholders and conduct business for the sake of their long-term development.
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Integrity
Responsibility
Dedication
Teamwork spirit
Excellence at work
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ANNUAL REPORT VCSC 2020
BUSINESS ETHICS - FOR SUSTAINABLE DEVELOPMENT OF PARTNERS RELATED (Continued)
VCSC set goals to fulfill our responsibilities towards stakeholders:
Customer
Employee
Community Media Shareholder
Competitor
Service provider Financial Regulatory and Supervisory Authority
44
Government body
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At VCSC, responsibilities of each employee includes:
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Value affirmation
At VCSC, basic principles of communication is upheld:
»» Comply with all rules and regulations
»» Be straightforward and proactive
»» Engage wholeheartedly in teamwork
»» Provide detailed guidance to employees and stakeholders
»» Build a reputation professionalism
for
reliability
»» Act with honesty, integrity, responsibility, care, and diligence
and
objectivity,
»» Protect and use efficiently all assets and resources at VCSC »» Treat all stakeholder equally
»» Appoint spokesperson for media issues and investor relation »» Refuse to make public comments on customers, competitors, as well as personal issues or ongoing investigations »» Refuse to make comments on rumors.
»» Report violations of laws and regulations »» Improve continuously to perfect skills.
Commitment to compliance
»» Comply with laws, regulations, policies and standards »» Maintain an exemplary management process and a law-abiding and strictly-controlled working environment »» Avoid mistakes and any potential risk of wrongdoing during the implementation of Code of Conduct.
Information security
»» VCSC is committed to maintaining absolute confidentiality and protecting customer information »» Preserve the confidentiality of any information provided by customers, unless disclosure is required by law or authorized by customers »» Handle internal communication carefully »» Receive, process, and archive information with care »» Comply with regulations on information security.
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ANNUAL REPORT VCSC 2020
A KEY TO SUSTAINABILITY
We believe that if the company culture respects human values and provides opportunities for comprehensive personal and professional growth, employees will be able to achieve maximum caliber and enthusiasm, thereby contributing to the team’s collective growth. As a result, over the years, VCSC has consistently created an ideal working environment and a consolidated company culture associated with the brand name of VCSC.
»» Recruit talents across cultures: Vietnam, U.S, UK, France, Australia, Canada, India, the Netherlands, etc. Inclusive culture
»» Ensure diverse pool of talents of different race, ethnicity, age, sex, education, etc. »» Build an inclusive workplace true to shared values of respect and harmony.
Enhanced internal communication
»» Develop direct and indirect internal communication across multiple channels »» Organize meetings between employees and the Board »» Strengthen internal networking through training programs and periodically seminars.
»» Enable employees to participate in professional development courses Capacity building
46
»» Provide a healthy and competitive working environment »» Empower employees to conduct self evaluation request promotion.
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»» Salary is reviewed and adjusted annually Competitive income
»» Promotion opportunity is considered annually »» Remuneration policies rank top in the market.
»» Implement ESOP annually to improve rights and responsibilities of the employees, and enhance their engagement with the Company. Fair treatment
»» Ensure legal rights of employees by strictly complying with laws, and regulations on health insurance, social insurance, unemployment insurance. »» Provide annual check-up and PVI premium insurance plan for employees.
Bonding activities
»» Annual company trip, at home and abroad, with fun activities. The VCSC team has been to Hong Kong, Cambodia, Thailand, Japan, South Korea, Singapore, and Malaysia. »» Organize annual festivals for employees and their families: Children’s Day, Family Day, etc. »» Publish quarterly internal magazine, 2! VCSC.
Employee rights
Vacation
»» Annual leave, Tet Holiday leave, Maternity leave, Marriage leave, Sick leave, Sick child leave, Training leave, Unpaid leave, Mourning Leave, Paternity leave.
Insurance
»» Social insurance, Health insurance and Unemployment insurance: company’s contribution to insurance based on employee’s total payroll »» PVI premium plan »» Periodic check-up.
»» Marriage Benefits »» Pregnancy from welfare »» Sick fund »» Funeral »» 8/3
Other benefits
»» »» »» »» »»
Mobile phone Fuel costs and parking charges Means of transportation for business trips Entertainment expenses Business travel expenses.
Income
»» Competitive salary »» Industry-leading bonus »» ESOP.
»» Annual company trip Engagement »» Employee-family company trip activities »» Sports activities.
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ANNUAL REPORT VCSC 2020
INVESTMENT BANKING In 2020, the global IB operation was heavily affected by the COVID-19 pandemic, and the Vietnamese IB market was no exception. As a result, no large-scale IPO or FPO was reported in the Vietnamese market during 2020. Meanwhile, the closure of the border for most of the year hindered valuation and direct transactions with foreign investors, slowing M&A activities. On the other hand, the impact of COVID-19 on business performance made some domestic enterprises postpone selling shares in 2020. Most successful M&A deals in 2020 in Vietnam fell into 3 main groups: i) domestic sellers and domestic buyers conducted transactions, ii) foreign investors had completed due diligence prior to the COVID-19 outbreak, or iii) foreign investors increased their ownership based on prior investments and expansive understanding of target companies. In the past year, the majority of successful IB advisory deals of VCSC also belonged to the three above groups, including the following typical deals: Giving consultation to Masan Group on the acquisition of NET Detergent JSC through its subsidiary Masan HPC Co., Ltd. (valued at USD24 million); Giving consultation to the transfer of 38.9 million of MSN secondary stocks (valued nearly USD100 million) to the investment fund of the Singapore Government, GIC;
Giving consultation to VinaCapital on the divestiture of International Dairy Products JSC (IDP);
Advising shareholders of Sovi on sale of 94.11% to Siam Cement Group (SCG) through SCG’s subsidiary TCG Solutions Pte. Ltd (valued nearly USD100 million);
Giving consultation to Power Construction JSC No.1 (PC1) on sales of 40% stock of 3 wind power projects (with a total capacity of 144MW and a total investment of nearly USD260 million) to Renova - its strategic partner; Giving consultation to An Binh JSC Bank (ABB) on listing of shares with total listing worth more than USD345 million; Giving consultation to Lien Viet Post JSC Bank (LBP) on listing of shares with total listing worth nearly USD500 million.
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Corporate governance
Future prospects
Sustainability report
Value affirmation
On its recognition of VSCS’s advisory practices, Alpha Southeast Asia, the first and only institutional investment magazine focused on Southeast Asia, awarded VCSC 3 titles in 2020 including:
1.
Best Equity House in Vietnam
2.
Best Domestic M&A Deal of the Year
3.
Vietnam and Most Improved M&A House in Vietnam 2020.
Simultaneously, Finance Asia, a publication reporting on Asia’s financial market, also awarded VCSC 2 titles in 2020 including:
1.
Best Investment Bank in Vietnam
2.
Best ECM House in Vietnam.
As 2021 brings more progress on containment of the COVID-19 pandemic with vaccine rollout and relaxes border restriction between countries, VCSC expects various large-scale M&A deals in the Vietnamese market after a long hiatus. The IPO segment also promises positive development, thanks to the return of international investors to Vietnam after a period of consecutive net selling in 2020. This increases businesses’ confidence to start trading their shares in IPOs. Meanwhile, as more multinational corporations seek to move production out of China to ease COVID-19 impacts, Vietnam stands out to become one of the top candidates in this investment relocation trend - an attractive destination for global investment, both direct and indirect.
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ANNUAL REPORT VCSC 2020
SECURITIES BROKERAGE AND MARKET SHARE
TOP 5 50,000 BROKERS ON HSX
ACTIVE ACCOUNTS AT VCSC
VCSC is one of the five securities companies with the largest brokerage market share in Vietnam, offering unique services to meet the increasing needs of local and global customers. We are also an industry-leading provider of block trades.
UNDERLYING SECURITIES In 2020, despite the COVID-19 pandemic, Vietnamese stock market and VN-Index increased by nearly 15% compared to the level at the end of 2019. The liquidity on the stock market continuously set a record in both volume and matched orders. The average daily trading value was VND7,425 billion (+61.5% YoY), and average daily trading volume was 440 million shares (+96% YoY). In terms of the number of newly opened accounts, domestic individual investors set a record with 392,527 accounts. The total accumulated number of individual accounts by the end of 2020 was 2.74 million accounts. According to HSX, 10 largest brokers on their exchange obtained 64.47% of total market value in 2020, 2.98% higher than 2019 (62.6%). Throughout 2019, by promoting margin lending activities, Korean securities firms (such as Mirae
50
Asset, KIS) achieved their first top-10 ranks. However, in 2020, as foreign securities firms were quiet, VPS made into top 5 for the very first time. Other names in top 5 all sound familiar including SSI, HSC, VCSC, VNDS. VCSC continued to maintain its brokerage market share in Top 5 on the HSX with 7.69%, 0.5% lower than 2019. Currently, VCSC has approximately 50,000 active accounts (+12.1% YoY) with brokerage revenue of VND465 billion (nearly 82% YoY), higher than the market growth, and per capita brokerage revenue of VND 4.26 billion/person (+110% YoY). With impressive performance, the Domestic Brokerage Division helped VCSC maintain its top-market revenue.
1.
2.
3.
Messages from Management Board and preface
Company overview
Financial position Overview of corporate performance and risk management
4.
5.
6.
7.
8.
Corporate governance
Future prospects
Sustainability report
Value affirmation
Top 10 securities companies in terms of market share, fund certificate and covered warrant on HSX in 2020 No.
Name
Abbreviation
Market share
1
SSI Securities Corporation
SSI
12.33%
2
Ho Chi Minh City Securities Corporation
HSC
8.66%
3
VPS Securities Joint Stock Company
VPS
8.22%
4
Viet Capital Securities Joint Stock Company
VCSC
7.69%
5
VNDirect Securities Corporation
VNDS
7.19%
6
MB Securities Joint Stock Company
MBS
4.79%
7
Mirae Asset Securities (Vietnam) Limited Liability Company
MAS
4.73%
8
FPT Securities Joint Stock Company.
FPTS
3.76%
9
KIS Vietnam Securities Corporation
KIS
3.60%
10
Bank for Investment & Development of Vietnam Securities Company
BSC
3.50%
DERIVATIVES In 2020, the number of VN30 Index future contracts traded was 39,914,205 (+79.91% YoY), and average daily trading volume recorded 158,390 contracts (+78.49% YoY). In 2020, the participation rate of domestic investors as a whole just changed slightly (- 0.39% YoY) and still made up 99.15% of the entire market. However, the breakdown by individual and institutional investors demonstrated a paradigm shift. While the participation rate of domestic individual investors and domestic institutional investors in 2019 was 92.51% and 7.03% respectively, it changed to
85.86% and 13,29% in 2020. This reflected the increased attention of domestic institutional investors towards derivatives. At the end of December, with 173,395 derivative trading accounts, there was a growth of 88% in 2020 relative to 2019. Given that the derivative market accounts for only about 1% of total fee revenue, we have decided to focus on institutional clients and proprietary trading rather than individual customers.
51
ANNUAL REPORT VCSC 2020
INSTITUTIONAL SALES & BROKERAGE IN GENERAL, THE YEAR 2020 WITNESSED A GROWTH OF
23%
IN VCSC’S INSTITUTIONAL BROKERAGE REVENUE, COMPARED TO THE DATA OF 2019. BEING THE MARKET
Leader
IN INSTITUTIONAL BROKERAGE WITH THE LARGEST MARKET SHARE OF NEARLY 29%.
Flexibly adapting to the COVID-19 pandemic, VCSC’s Institutional Sales & Brokerage Department succeeded in maintaining services with high quality, consistency, and security by practicing work from home, small group, and separated work areas.
ISB Department’s strength lies in its qualified team that boasts practical experience, in-depth market knowledge, professional manner, and dedication to customers. With success in advising and facilitating highvalued deals for renowned institutional clients, VSCS became top of mind with customers when it came to unmatched solutions and helped elevate the reputation of the Vietnamese market.
52
VCSC also conducted over 200 conference calls, whether in group or one-on-one, and assisted listed companies to host Quarterly Investor Meetings online - a previously uncommon occurrence to local enterprises. This new practice started to earn recognition and appreciation from plenty of businesses and funds for its effectiveness.
1.
2.
3.
Messages from Management Board and preface
Company overview
Financial position Overview of corporate performance and risk management
4.
5.
6.
7.
8.
Corporate governance
Future prospects
Sustainability report
Value affirmation
CHALLENGES AND OBJECTIVES FOR 2021 In the new normalcy, institutional brokerage activities aim to maintain high efficiency and drive focus towards continuous improvement of customer service. We are in the best position to confront a changing environment. By flexibly dividing teams into smaller groups and moving investment conferences, face-to-face meetings online, we minimize disruption in the exchange of information between businesses and foreign investment funds, and in customer approach strategies. Our strengths lie in the ability to combine international expertise with local knowledge for effective circulation of information.
Acclaimed recognition with the prestigious award BEST INSTITUTIONAL BROKER IN VIETNAM: VIET CAPITAL SECURITIES JSC
by Alpha Southeast Asia
OPPORTUNITIES High market liquidity, favorable prospects for Vietnam’s economic growth upon pandemic control, and COVID-19 vaccines rollout, etc. are determinants of an optimistic outlook on economic recovery. In particular, significant gains in the stock market will set hopes on more listing, IPOs, or new capital raising, and so will attract more institutional investors.
CHALLENGES The technology infrastructure at the stock exchange venues has not kept pace with the robust growth of the stock market. As a result, the associated risks will discourage major institutional investors from expanding investment or from launching more investment products on the Vietnamese market. In particular, while ETF is expected to continue its current robust growth, traditional funds may be heading in the opposite direction. After all, the lack of technological infrastructure will become a bottleneck of the market. With a new generation of domestic individual investors, who are encouraged by cheap capital and face narrow opportunities from other sectors, the market has seen a surge in liquidity, leading to increased risks. New products, such as derivatives or covered warrants, are also the cause of high trading volumes despite the lack of participation by institutional investors. As technology infrastructure is struggling to cope with trading demand due to the COVIDinflicted delay in the launch of new systems, Vietnam will be less attractive for institutional investors. The pre-COVID-19 semblance of normality is unlikely to return in 2021. Investment facilitation and business-to-business activities will still face challenges. Brokerage fees are also subject to fierce competition, caused by the negative impact of the elimination of floor prices and the practice of foreign securities firms, after acquiring domestic securities firms, lowering or reducing fees to zero, to maximize market shares.
53
ANNUAL REPORT VCSC 2020
RESEARCH AND ANALYSIS
Viet Capital Securities’ research team strives to provide in-depth analysis and actionable and timely recommendations for investors in Vietnam. Our Research Department is organized into sector teams, each of which is led by an experienced team manager. This structure allows analysts to develop deep knowledge of their industries under the guidance of their managers.
Analysts are required to present their recommendations through regular webinars and meetings with our institutional clients and seminars for our retail brokers. This not only helps to communicate our recommendations to our clients but also helps analysts to develop a solid understanding of clients’ needs. In addition, our analysts are encouraged and supported to pursue professional development, for example through participating in the CFA program.
75
WE EXPANDED OUR COVERAGE TO
54
LISTED VIETNAMESE COMPANIES
In 2020, our research team remained fully operational throughout the year despite the necessary ‘social distancing’ restrictions which were in force for several weeks to contain the spread of the coronavirus in Vietnam. We expanded our coverage to 75 listed Vietnamese companies, representing over two thirds of Vietnam’s total market capitalization (and over 80% of VN-Index market cap). Our coverage universe is continually evolving and focuses on stocks which offer investible market
80% REPRESENTING OVER
VN-INDEX
cap and liquidity, are important to the economy of Vietnam, and/or which we believe offer high growth prospects or attractive valuations. Stocks under active coverage are updated via indepth reports published at least once every quarter. During the year, we also published reports on around 20 other small and mid-cap companies. Our research includes daily and monthly commentaries on the Vietnamese market, investment strategy reports, industry reports, company earnings reports, analysis and recommendations, fixed income reports and comprehensive macroeconomic analysis. Our reports are published in both English and Vietnamese to serve our domestic and international client base. While the coronavirus pandemic restricted the scope for face-toface meetings in 2020, our analysts maintained regular contact with covered companies and our institutional clients through increased virtual meetings and conference calls. We hope that 2021 will bring containment of the pandemic worldwide and easing restrictions on international travel. Regardless of how these issues evolve, we will seek to expand our stock coverage further and continue to support our clients with research-based insights and actionable ideas on listed companies in Vietnam.
1.
2.
3.
Messages from Management Board and preface
Company overview
Financial position Overview of corporate performance and risk management
4.
5.
6.
7.
8.
Corporate governance
Future prospects
Sustainability report
Value affirmation
INVESTMENT DIVISION
CONSUMER SECTOR LĨNH VỰC TIÊU DÙNG RETAIL SECTOR LĨNH VỰC BÁN LẺ FINANCIAL LĨNH VỰC SECTOR TÀI CHÍNH TECHNOLOGY SECTOR LĨNH VỰC CÔNG NGHỆ
VCSC sets priority on long-term investments with potential partners, rather than short-term ones. We are keen on enterprises operating in the sectors of consumer, retail, finance, technology, etc. which capitalize on a domestic market of 90+ million consumers. Investment performance in 2020:
REVENUE ( VND BN)
889.4
YOY GROWTH (%)
29% 55
ANNUAL REPORT VCSC 2020
CUSTOMER SERVICE AND PRODUCT MANAGEMENT
OPERATION IN 2020
DEPOSITORY EXCELLENT DEPOSITARY AWARD
QUICK & SAFE & EFFECTIVE ACCURATE LOAN MANAGEMENT
56
TRANSACTION REPORTS GIVING FOREIGN ORGANIZATIONS AND FUNDS PEACE OF MIND AND SATISFACTION
1.
2.
3.
Messages from Management Board and preface
Company overview
Financial position Overview of corporate performance and risk management
4.
5.
6.
7.
8.
Corporate governance
Future prospects
Sustainability report
Value affirmation
Record of evaluation on performance by Department of Customer Service and Product Management
1.
CS account opening department recorded twice the number of new account openings as that of 2019. Manage and archive full documents.
2.
Successful control of payment and withdrawal for customers. Transfer in and out VND778 trillion.
3.
Lending operation in 2020: Focus on managing debts and selling mortgages according to regulations to prevent bad debts. In 2020, no account incurred bad debts.
4.
Successful control of the safety ratio of derivatives operation, no warning from the VSD.
5.
Performing depository service well and receiving an award from VSD for being an excellent member in 2020. Collecting VND7.5 billion in depository fee, an increase of VND0.6 billion compared to 2019.
6.
Auction: Becoming an agent for 31 companies to auction on HSX, winning 5.
Other support »» Reporting to the SSC on 11 Covered Warrants issued and listed by VCSC.
7.
»» Confirming the post-transaction results for foreign institutional clients on time, reporting no mistakes. »» Working closely with the IT and Product Development Department to test new management software.
8.
Bond management operation: managed bond trading of companies.
OPERATION PLANS FOR 2021 1.
To review the risks of each operation, particularly margin loan, to prevent and limit losses caused by negligence and financial risks by market fluctuation.
2.
To improve processes for better customer service.
57
ANNUAL REPORT VCSC 2020
INFORMATION TECHNOLOGY
Technology revolution 4.0 has ushered in a new era for the global economy as a whole, and for Vietnam in particular. With the advent of the Internet of Things (IoT) and Big Data, IT infrastructure is becoming increasingly important in financial sector business operations. On that front, VCSC is concentrating on developing a core operating platform by increasing its knowledge of technology. This provides investors with unparalleled experiences through premium services and provides the company with a competitive advantage through a comprehensive integrated trading platform. We invest proactively in modern technology infrastructure, conduct continuous evaluations, and make adjustments in accordance with the VCSC operation process.
In terms of technological advancement, VCSC directs its operations toward the following aspects: trading system operation and management, combined with technology in product and service management.
58
1.
2.
3.
Messages from Management Board and preface
Company overview
Financial position Overview of corporate performance and risk management
4.
5.
6.
7.
8.
Corporate governance
Future prospects
Sustainability report
Value affirmation
59
ANNUAL REPORT VCSC 2020
INFORMATION TECNOLOGY (Continued)
VCSC’S TRADING PLATFORM
At VCSC, the IT Department constantly looks for solutions to improve technology in the core trading platform, with a view to diversifying channels for information access, including applications, websites, and mobile devices.
In 2020, VCSC took another step forward in its effort to improve customer experience, increasing office data bandwidth by tenfold, from 1Gb to 10Gb, and integrating the most recent online trading systems, such as V-Web and V-Mobile, which have more prominent features than previous versions. Additionally, we implemented a range of new initiatives in inter-bank operations with value-added products. This aimed to win customers with power of convenience and service quality, and help them save time. Some noteworthy practices:
Establishing payment networks with major banks such as Techcombank, VPBank, BIDV.
Adopting AI to stock rating on V-Web.
Assisting in the development and deployment of EKYC - digital identity verification service with cutting-edge technology, increasing access to the financial market and protecting the community’s health during the complicated course of COVID-19 pandemic.
60
1.
2.
3.
Messages from Management Board and preface
Company overview
Financial position Overview of corporate performance and risk management
4.
5.
6.
7.
8.
Corporate governance
Future prospects
Sustainability report
Value affirmation
IT MANAGEMENT PROJECT
Security and risk management remain VCSC’s top priorities on all fronts.
With that in mind, we have been successfully implementing the following projects: 1.
2.
3.
4.
Disaster Recovery site (DR site): meeting all the requirements for the availability and security of information in contrast with the existing system.
Developing and improving processes, and conducting periodic evaluation to software, network, etc. in accordance with ITIL standards.
Coordinating with other departments to conduct research and deploy first-rate products for customers.
Launching V-Mobile Biometric feature to reduce the login time and enhance security.
Improving services for both domestic and foreign investors is also a priority for us. We are able to meet demand by upgrading our current OMS software, which allows customers to trade all financial products available on the Vietnamese stock market:
»» Assisting FIX connections to Bloomberg, Reuters, NYFIX. »» Employing algorithm to process a large number of orders at a high speed »» Receiving and processing trading orders of underlying stock, ETF, warrants and derivatives. »» Providing algorithm-based orders specified by the users.
We also deploy market maker-centric software for Covered Warrant products to improve market liquidity of new products. The software meets the criteria formulated by Vietnam’s State Security Commission.
61
ANNUAL REPORT VCSC 2020
PRODUCT DEVELOPMENT
VCSC’S KEY FACTOR SECOND TO HUMAN CAPITAL
Entering a new phase of the Industry 4.0, VCSC places an emphasis on the application of advanced technology as a part of its digital transformation strategy towards sustainable development. This leads to full automation and digitalization of products and services, offers unparalleled experiences to customers, and allows more Vietnamese people to learn about the stock market to make it become an attractive and safe investment channel. In addition, VCSC has been continuously investing in the research and development of cutting-edge management models to build a cohesive and transparent data sharing system and enhance the role of good brokers.
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1.
2.
3.
Messages from Management Board and preface
Company overview
Financial position Overview of corporate performance and risk management
4.
5.
6.
7.
8.
Corporate governance
Future prospects
Sustainability report
Value affirmation
Tasks assigned to Department of Product Development to reach the above-mentioned goals:
UPGRADE TRADING SOFTWARE:
THE FUTURE STARTS TODAY
»» Coordinate with the IT Department to improve and update new features in core trading such as VBOS, VPro, V-Mobile, V-Web, OMS, etc. »» Work closely with related departments (IT, Brokerage, Customer Service) to develop and refine features of new products and services. Build new applications to serve the diverse needs of customers. »» Develop internal applications to serve demands for brokerage, helping Brokers and Managers provide professional customer service.
DEVELOP STRATEGIES FOR PRODUCT AND SERVICE DEVELOPMENT BY WAYS OF REPORTS ON MARKET, COMPETITORS AND CUSTOMER NEEDS. »» Conduct research and propose preferred policies for highprofile customers, thereby expanding the audience. Consider cooperating with other organizations. »» Transfer finished products and services to related operating divisions, and provide onboarding programs. »» Improve the “Create a new account” function to ensure an easy and fast registration process, bringing customers closer to the company’s products and services. »» Develop and complete the corporate bond trading platform to optimize funds for customers, providing an all-inclusive ecosystem for investors waiting for entry time to make investments. »» Research and develop an investment advisory platform through automated and semi-automated systems (Analysis and Brokerage) such as Robot Advisor, Robot Trading, Social Trading, etc. This ensures timely delivery of consultation to customers via a wide range of channel, for example, SMS, email, app/web page notification, »» Coordinate with the Research Department to compile Customer/Investor Support Criteria to evaluate and compare stocks in the investment portfolio or under scrutinization. »» Collaborate with related departments to establish and implement communications strategies, creating a competitive edge for the company.
63
Financial position & risk management Financial position
65
Risk management
68
VCSC reported successful financial guidance completion during the COVID-19 chaos thanks to its extensive knowledge of the market. The risk management system will be comprehensively upgraded in 2021, based on lessons learned from previous situations, to ensure the Company’s streamlined operation and high performance.
1.
2.
3.
4.
Messages from Management Board and preface
Company overview
Overview of corporate performance
Financial position and risk management
Corporate governance
6.
7.
8.
Future prospects
Sustainability report
Value affirmation
FINANCIAL
The fiscal year of the Company starts from January 1 and ends on December 31
DEBT OBLIGATIONS Due debts are always paid by the Company on time and in full under the contract or loan agreement. The Company does not have overdue debts. The Company has no overdue liabilities over one year. As of December 31, 2020, the balance of short-term and long-term debts was as follows: Unit: Million VND
December 31, 2018
December 31, 2019
December 31, 2020
2,320,280
2,532,550
3,637,450
984,860
1,450,980
2,969,130
1,335,420
1,081,570
668,320
-
-
-
2,320,280
2,532,550
3,637,450
Short-term debt Short-term borrowings Short-term corporate bonds Long-term debt Total
Source: Financial statements
TAXES AND OTHER PAYABLES TO THE STATE BUDGET
The Company strictly fulfills its obligations regarding value added tax, corporate income tax and other payables to the State in accordance with current regulations. The balance of tax payables and other payables to the State as of December 31, 2020 is as follows: December 31, 2018
December 31, 2019
December 31, 2020
550
2,071
2,009
25,931
45,803
67,713
1,129
1,159
1,584
- Personal income tax on securities income that the Company pays on behalf of
10,147
6,787
24,549
Total
37,757
55,820
95,855
Unit: Million VND
Value added tax - local - Corporate income tax - current - Personal income tax
Movements in tax and other payables to the State Budget during the year were as follows: Unit: Million VND
January 01, 2020
Incurred
Source: Financial statements
Paid
December 31, 2020
Corporate income tax current
45,803,204,817
182,422,798,514
160,512,817,898
67,713,185,433
Income tax on capital transfers paid on behalf of investors
6,787,278,579
142,442,377,662
124,680,857,591
24,548,798,650
Value added tax - local
2,070,635,532
2,677,516,476
2,739,299,535
2,008,852,473
Personal income tax
1,159,214,623
32,631,831,208
32,206,465,500
1,584,580,331
55,820,333,551
360,174,523,860
320,139,440,524
95,855,416,887
Total
Source: Financial statements
65
ANNUAL REPORT VCSC 2020
LIABILITIES December 31, 2018
December 31, 2019
December 31, 2020
Short-term liabilities
2,753,315
3,089,095
3,733,857
Long-term liabilities
113,703
102,259
127,062
2,867,018
3,191,354
3,860,919
Unit: Million VND
Total
Source: Financial statements
SHORT-TERM RECEIVABLES Short-term receivables The surge in short-term receivables of the Company in 2020 was primarily because of the disposal of listed securities. ‘Others’ include receivables from customers for share purchases in a brokerage contract. December 31, 2018
December 31, 2019
December 31, 2020
27,127
44,767
221,799
4,841
7,681
14,833
0
63,260
5,939
319
282,143
18,748
Provisions for receivables
(1,798)
(1,925)
-1,928
Total
30,489
395,926
259,391
Unit: Million VND
Accounts receivable Service fee receivables Others Advance payments
Source: Financial statements
Payables December 31, 2018
December 31, 2019
December 31, 2020
Short-term payables
433,035
556,545
96,407
Long-term payables
113,703
102,259
127,062
Total
546,738
658,804
223,469
Unit: Million VND
Source: Financial statements
FINANCIAL SAFETY RATIOS Per Circular No. 226/2010/TT-BTC of the Ministry of Finance dated December 31, 2010, securities companies must maintain a capital adequacy ratio (CAR) of at least 180%. VCSC always maintains well-above the requirement, ensuring the financial safety of the company. Item (Unit: Million VND)
December 31, 2018
December 31, 2019
December 31, 2020
464,652
403,665
604,397
5,598
16,692
17,348
Operational risk
208,742
171,033
193,608
Total risk
678,992
591,390
815,353
3,538,843
3,525,586
4,353,081
521%
596%
534%
Market risk Liquidity risk
Available funds Capital adequacy ratio
Source: Financial statements
66
1.
2.
3.
4.
Messages from Management Board and preface
Company overview
Overview of corporate performance
Financial position and risk management
Corporate governance
6.
7.
8.
Future prospects
Sustainability report
Value affirmation
KEY FINANCIAL METRICS
1.
2.
3.
Liquidity
Capital structure
Profitability
VCSC’s current ratio maintained at healthy level of over 2x in 2020, indicating a strong ability to meet shortterm obligations
VCSC maintained healthy capital structure with low debt to equity ratio against the regulatory cap of 300% applied to securities companies.
Net margin remained high in 2020. VCSC sustained high ROEs through varying market cycles with average ROE during 2014-2020 stood at 24.3%. The Company’s 2020 ROE remained well above the peer median of 14% and stood at the high-end in the industry.
Item
Unit
2018
2019
2020
Liquidity ratio Current ratio
Times
2.27
2.27
2.23
Capital structure Total liabilities/Total assets
%
44.1%
44.1%
46.1%
Total debt/equity
%
63.2%
63.2%
74.4%
43.6%
43.6%
60.2%
%
22.4%
22.4%
22.1%
PBT margin
%
55.5%
55.5%
55.0%
Net margin
%
45.0%
45.0%
44.5%
ROE
%
18.0%
18.0%
17.9%
ROA
%
10.1%
10.1%
9.8%
Adjusted diluted EPS
VND
4,235
4,235
4,662
BVPS
VND
24,652
24,652
27,306
Net debt/equity Asset turnover Profitability ratio
Source: Financial statements
67
ANNUAL REPORT VCSC 2020
Risk management is a continuous process performed throughout the implementation of business strategies. This balances risks and opportunities, and serves as an essential building block to sound decision-making.
68
1.
2.
3.
4.
Messages from Management Board and preface
Company overview
Overview of corporate performance
Financial position and risk management
Risk management also forms a topic of company culture. Risk culture is a set of personal and organizational values, attitudes, capabilities, and behaviors towards identifying risk management methods and establishing commitments of the Board of Directors. As specified in laws, procedures and internal policies, responsibility for risk management is assigned to all levels, to every Head of Department and employee. This aims to create an effective risk-based system applied uniformly throughout the company. Risk management system helps enhance the Company’s operational efficiency by empowering employees with more responsibilities and giving them accurate performance reviews.
Corporate governance
6.
7.
8.
Future prospects
Sustainability report
Value affirmation
At VCSC, compliance monitoring and risk management is conducted in accordance with Decision no. 105/QĐ-UBCK dated February 26th, 2013 by the State Securities Commission of Vietnam. The risk management policies and process system are also completed in line with ISO 31000 and integrated into the Company’s strategies
The risk management process:
RISK LIMIT TRACKING AND CONTROLLING
Risk identification
Risk analysis
Risk evaluation
Risk mitigation
RISK MANAGEMENT SYSTEM ENSURES »» Supervision by the Board of Supervisors, Internal Audit and Internal Control; »» Clear and transparent risk management strategies reflected in long-term risk policies and in each period set by the BOD; »» Implementation plan with full policies and procedures; »» Management, inspection and regular review by the General Director; »» Risk management policies and risk limits are developed and implemented, risk management information system is established.
Risk management system is designed to identify, measure, monitor, report, and handle risks in an effective manner. It also helps the Company fulfill its compliance obligations at all times. Risk management is implemented in an independent, objective, honest and well-documented manner. The function-specific department and risk management department operate separately and independently, the person in charge of a function-specific department will not lead the risk management department, and vice versa. Internal guidelines are clearly communicated to all involved employees, helping them to better understand their duties and responsibilities, and elaborate on relevant risk management processes, if needed. Internal guidelines are regularly reviewed and updated.
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ANNUAL REPORT VCSC 2020
RISK MANAGEMENT (Continued )
THE COMPANY’S CONTROL ENVIRONMENT
The internal control environment at VCSC is a set of standards, processes, and structures that serve as the foundation for internal control throughout the organization.
Employees’ awareness of control activities is influenced by the control environment. As a result, the BOD and BOM must embody ethical values and set a good example for the team.
Objectives and procedures implemented to establish internal control environment include:
Commitment to integrity, ethical values and behaviors across the Company
»» The Company develops standards and code of conduct for employees. »» Code of ethics is utilized to evaluate the BOD, employees, and partners. »» New hires are required to participate in the orientation training that introduces them to the Company’s regulations, standards, conduct, and sanctions for violations of code of ethics.
The BOD demonstrates independence from the BOM and maintains oversight »» Clearly define the BOD’s roles and responsibilities on governance and oversight. »» Establish policies and make decisions on the meetings between the BOD and the BOM. »» Establish open and effective communication channels between the BOD, Internal Audit and the Independent Auditor, ensuring timely operational reporting.
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2.
3.
4.
Messages from Management Board and preface
Company overview
Overview of corporate performance
Financial position and risk management
Corporate governance
6.
7.
8.
Future prospects
Sustainability report
Value affirmation
Appropriate structures, reporting lines, authorities and responsibilities »» Clearly define structure, roles, responsibilities, and reporting lines; evaluate the appropriateness of organizational structure. »» Define authorities of each level of governance and management. »» Create and maintain job descriptions; ensure labor contracts are properly signed. »» Clearly define roles of Internal Audit.
Commitment to attract, develop, and retain competent talents »» Establish requirements for employees’ competencies, knowledge and skills; develop a process of evaluating competencies and behaviors. »» Align Competency and Knowledge standards, requirements and assessments with policies and decisions on recruiting, training and retaining staff. »» Develop succession plan for key personnel positions.
REPORTING LINE, RESPONSIBILITY AND AUTHORITY The Company established a centralized control system with vertical mechanism
BOARD OF DIRECTORS
The General Director, overseeing day-to-day operations, is mainly responsible to the BOD. Meanwhile, Directors, and Heads/Deputy Heads of Department directly manage a specific function or team, and are responsible to the General Director and the BOD. The top-down mechanism is used for responsibility assignment. At the Headquarters and Branches, the Head of Department will delegate tasks to the Deputy Head and each employee. With the instruction of the Seniors or Head of Department, employees can better understand their responsibilities and processes, and ensure double-checking is implemented within the department or between departments.
BOARD OF MANAGEMENT
DIRECTOR
HEAD/DEPUTY HEAD OF DEPARTMENT
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ANNUAL REPORT VCSC 2020
RISK MANAGEMENT (Continued )
RISK MANAGEMENT PLANS FOR 2021 By 2020, COVID-19’s widespread reach poses major challenges to risk management. Particularly in Vietnam, COVID-19 has exerted a profound impact on socioeconomic life. From January to March 2020, the VN-Index fell by more than 30%, resulting in increased market, liquidity, and payment risks. Because of its increased reliance on
technology and online interactions, social distancing and work-from-home orders exposed the Company to greater cybersecurity risks. In the context of numerous risks to business activities caused by unprecedented factors, VCSC’s leaders took immediate action to respond quickly and minimize COVID-19 impacts on the Company’s activities.
The risk management system will be comprehensively upgraded in 2021, based on lessons learned from previous situations, to ensure the Company’s streamlined operation and high performance. Furthermore, risk management activities must adhere to the new requirements of the Law on Enterprises no. 59/2020/QH14 and the Law on Securities no. 54/2019/QH14, effective from January 1, 2021, as well as international best practices. This is intended to assist the Company in catching up with the stock market’s integration and development pace, as well as the socio-economic environment as a whole, in a new normalcy.
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IS ONE OF VIETNAM’S HIGHEST-PERFORMING SECURITIES COMPANIES O F F ER IN G U N IQ U E S E RVICES TO M EET THE INCREASING N E E D S OF LOC A L AND GLOBAL CUSTOM ERS. WE A R E A LS O A N INDUSTRY- LEADING PROVIDER A N D C O LL E CTOR OF BLOCK TRADE.
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VCSC operates under the leadership of the management who possesses immense cross-sector experiences, and innovative and breakthrough guidance. This enables VCSC to strengthen its capacity development.
Corporate governance Professional ethics
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Organizational structure
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Report of the Board of Directors
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Report of Board of Supervisors
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Board of Management
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Key personnel
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ANNUAL REPORT VCSC 2020
PROFESSIONAL ETHICS BUSINESS ETHICS
ST
U TR S IC
H ET
ON SP TY RE ILI B -SI
VCSC’s mission is to provide its customers with bestquality services in professional manners and with a high level of integrity. We always work hard to foster a strong relationship with stakeholders, and conduct business for the sake of their sustainable development.
Enhance trustworthiness and credibility »» Elevate customer trust. »» Provide customers with best-quality services. »» Secure investments as well as bringing about substantial and sustainable profits for shareholders.
Social responsibility »» Commit to thoroughly complying with the international laws of anti-money laundering, corruption and counter-terrorism. »» Fulfill commitments in accordance with international regulations and conventions. »» Organize voluntary and community service activities.
Responsibility and commitment to compliance »» Commit to fulfilling responsibilities in a professional and constructive manner. »» Commit to complying with codes, regulations, policies and standards of business ethics. »» Commit to preserving confidentiality and protecting customer information. »» Ensure the integrity and professional manner. »» Commit to preventing conflicts of interest. »» Commit to taking appropriate measures when handling violations (if any). »» Commit to creating a healthy working environment.
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ORGANIZATIONAL CHART
SHAREHOLDERS
BOARD OF SUPERVISORS BOARD OF DIRECTORS INVESTMENT BOARD BOARD OF MANAGEMENT
HO CHI MINH CITY (HEAD OFFICE)
OPERATIONS
HANOI BRANCH
Administration
Human Resources
Research and Analysis
Brokerage
Marketing/PR
Legal
Investment Banking
Investment Banking
Information Technology (IT)
Finance & Accounting
Proprietary Trading
Risk Management & Control
Customer Service & Product Management
Product Development
Institutional Sales & Brokerage
Head Office
Brokerage
Pasteur transaction office Nguyen Cong Tru transaction office
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ANNUAL REPORT VCSC 2020
REPORT OF THE BOARD OF DIRECTORS BOARD OF DIRECTORS
Ms. NGUYEN THANH PHUONG Chairwoman
Mr. TO HAI Member of Board of Directors
Mrs. Phuong is the founding member of Viet Capital Securities Company (VCSC) and Viet Capital Asset Management (VCAM). She has been the Chairwoman of VCSC and VCAM since their establishment in 2007 until now. Mrs. Phuong is the member of Board of Directors of Viet Capital Bank (VCCB).
Before joining VCSC, Mr. Hai was Deputy General Director and Director of the Ho Chi Minh City branch of Bao Viet Securities Company. He also worked at Bank of East Asia Securities Company as Director of Business Development. Mr. Hai has a deep knowledge of corporate finance advisory, investment banking operations and the Vietnam’s stock market. Mr. Hai is known as an expert with a long track record in providing equitization consulting services from the issuance of securities to public restructuring.
In the role of Chairwoman, Mrs. Phuong takes the responsibility to set the vision, business development strategy, management model and support the Board of Management with the goal of making Viet Capital Group the top financial services providers in the market. She served as Deputy Director of Finance at Holcim Joint Venture Vietnam which belongs to a Swiss Multinational Corporation. She also served as Director of Investment at Vietnam Holding Asset Management Company. Mrs. Phuong holds a bachelor’s degree in Finance and Banking from the National University of Economics in Hanoi as well as a master’s in Business Administration (MBA) from the International University in Geneva, Switzerland.
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He received a bachelor’s degree in industrial management from the Technical University of Ho Chi Minh City as well as a master’s in finance and Banking from the University of Sydney, Australia. In addition, Mr. Hai has received operations certificates and diplomas from the Vietnam State Securities Commission.
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Mr. HUYNH RICHARD LE MINH Member of Board of Directors
Mr. TRAN QUYET THANG Member of Board of Directors
Mr. Minh was Deputy CEO of VCSC from December 2007 to January 2013. He has more than 20 years of experience in the fields of accounting and professional management in the United States and Vietnam. Before joining VCSC, he served as Director of Auditing at PricewaterhouseCoopers Vietnam, specializing in providing consulting and financial auditing services and other advisory services related to local customers as well as multinational corporations. He has been a member of the Presentation Board of Viet Capital Asset Management Balance Funds (VCAMBF) since June 2014.
Mr. Thang currently holds the position of Chairperson of the Board at R.C. Real Estate Development Financing Joint Stock Company (REFICO). He has extensive experience in the fields of finance, investment and management.
Mr. Minh has a bachelor’s of commerce degree from the Curtin University of Western Australia and is also a member of the Association of Certified Public Accountants (CPA Australia).
He has obtained law degrees from well-known universities in Germany and the United Kingdom - Martin Luther University and The College of Law London. He is also the founder of the Thang & Associates law firm. In addition, he established Saigon Securities JSC (SSI) and served as its CEO. Mr. Thang also holds the position of President of the Fund Investment Committee of Aureos Funds (UK), which invests in private equity worldwide.
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ANNUAL REPORT VCSC 2020
REPORT OF THE BOARD OF DIRECTORS ( Continued)
Mr. NGUYEN LAN TRUNG ANH Member of Board of Directors
Mr. LE PHAM NGOC PHUONG Member of Board of Directors
Mr. Nguyen Lan Trung Anh is currently the General Director of Phoenix Holdings - a company specializing in investment in companies in the fields of finance, technology, solar energy, consumer/retail, sports and communications.
Mr. Phuong is a Bachelor of Economics. He has extensive experience in the fields of finance and accounting. From 2002 - 2016, he has held the positions of Director of Finance cum Chief Accountant of Khai Vy-Duyen Hai Joint Stock Company; Deputy Chief Executive Officer of VM Group and Director of Finance of Tan Tien Plastic Parkage Joint Stock Company. Currently, Mr. Phuong is the Deputy Chief Executive Officer of Finance of Capella D1 Joint Stock Company and Deputy Chief Executive Officer of Lothamilk Joint Stock Company.
Earlier, he had 8 years working in the investment management team of IDG Ventures Vietnam, the first venture capital fund in Vietnam with an initial investment of 100 million USD. He is a young leader in the Forbes Vietnam 30 Under 30 list in 2018. Mr. Trung Anh also holds positions as a member of the Board of Directors of Vietcredit (consumer finance), VCAM (asset management), Timo (digital bank), Moca (payment), XLE (sports and communications), PCP (solar). He manages and leads the investment team of Phoenix Holdings to seek for new sources of investment in financial and technology serivce companies. He graduated with a bachelor’s degree in Foreign Trade from Foreign Trade University.
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Mr. NGUYEN HOANG BAO (HENRY NGUYEN) Member of Board of Directors
Nguyen Bao Hoang (Henry) is currently General Director of Timo - a pioneer digital bank in Vietnam, and at the same time holds the position of Chairman of Phoenix Holdings, a company specializing in investing in companies in the technology sector, consumer/retail, finance, sports and communications. Previously, Henry was the general manager of IDG Ventures Vietnam - an investment fund specializing in consumer, technology, communications and telecommunications companies in Vietnam. In addition, he is also the Development Franchise Director of McDonald’s Corporation in Vietnam. With a passion for sports, he established Saigon Heat a professional basketball team representing the country competing in the ASEAN Basketball League (ABL), and the Vietnam Universities Game (VUG) - the official unit that hosts the national student sports tournaments. He is also the President and Founder of VBA - the Vietnam Basketball Association. Besides the domestic sporting activities, he is also the Chief Executive Officer of the Los Angeles Football Club (LAFC). This team participated in the MLS tournament in 2018, and also built its own stadium called Banc of California Stadium from the first year of tournament participation.
To support the development of Vietnamese education, he is the founding executive member of British University Vietnam. He is also a Member of the Board of Trustees of Fulbright University Vietnam - Vietnam’s first private, notfor-profit university. Henry was honored as the Young Global Leader of the World Economic Forum and a member of the Asia Society 21. He was awarded the honorary “Asian Game Changer” by the Asia Society - Northern California region that votes on his leadership contributions to the way of working, in business, art and education to help connect and cross cultures. He is also the Chairman of the Sponsorship Committee of Operation Smile Vietnam Foundation and a member of American Chamber of Commerce in Vietnam. He is also a member of the Southeast Asian Business Association - an association with criteria to support economic integration for Southeast Asian countries. Mr. Henry holds a BA from Harvard University, PhD of Medication of Northwestern University and MBA of Kellogg School of Management - United States.
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ANNUAL REPORT VCSC 2020
REPORT OF THE BOARD OF DIRECTORS ( Continued)
BOARD OF DIRECTORS’ ACTIVITIES IN 2020 BOARD OF DIRECTORS MEETINGS IN 2020
#
BOD Member
Position
Number of Date of resignation/appointment BOD meetings attended to BOD
Rate
Reason for absence from meetings
1
Mrs. Nguyen Thanh Phuong
Chairwoman of BOD
14
100%
2
Mr. To Hai
Member of BOD
14
100%
3
Mr. Nguyen Quang Bao
Member of BOD
4
Mr. Nguyen Hoang Bao
Member of BOD
14
100%
5
Mr. Tran Quyet Thang
Member of BOD
14
100%
6
Mr. Huynh Richard Le Minh
Member of BOD
14
100%
7
Mr. Nguyen Lan Trung Anh
Member of BOD
Appointed from 24/06/2020
8
57%
New Appointment
8
Mr. Le Pham Ngoc Phuong
Member of BOD
Appointed from 24/06/2020
8
57%
New Appointment
BOD’S OVERSIGHT ROLES TOWARDS THE BOM
Resigned from 24/06/2020
6
42% Resignation
The BOD is responsible for providing oversight to the implementation of the resolutions, business plans, and investment plans approved by the BOD and the AGM. The BOD also oversees the activities of the General Director to ensure the company’s operations are safe and in compliance with the law and the AGM resolutions.
ACTIVITIES OF THE COMMITTEES UNDER THE BOD
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Activities of the committees under the BOD: The BOD has yet to establish committees.
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RESOLUTIONS/DECISIONS OF BOD IN 2020 #
Resolution/Decision No.
Date of issuance January 10, 2020
Content First bond issuance in 2020, value of VND 800,000,000,000
1
01/2020/NQ-HĐQT.VCSC
2
08/2020/NQ-HĐQT.VCSC
3
10/2020/NQ-HĐQT.VCSC
March 19, 2020
Extension of time to organize 2020 Annual General Meeting of Shareholders
4
11/2020/NQ-HĐQT.VCSC
March 19, 2020
Cancel record date for Shareholders to attend the 2020 Annual General Meeting of Shareholders
5
12/2020/NQ-HĐQT.VCSC
May 7, 2020
Closing the shareholders list for Annual General Meeting 2020
6
13/2020/NQ-HĐQT.VCSC
May 8, 2020
Receiving syndicated loan limit - SinoPac Bank
7
14/2020/NQ-HĐQT.VCSC
May 25, 2020
Buy back before maturity date of bonds issued in 2020
8
17/2020/NQ-HĐQT.VCSC
June 29, 2020 2019 dividend payment
March 9, 2020 Closing the shareholders list for Annual General Meeting 2020
July 20, 2020
Implementing the plan to issue shares under the ESOP for employees, issuing Regulations on issuance of shares to employees of Viet Capital Securities Stock Company and the list of employees can purchase shares under the Resolution of the 2020 Annual General Meeting of Shareholders)
9
19/2020/NQ-HĐQT.VCSC
10
24/2020/NQ-HĐQT.VCSC
11
25/2020/NQ-HĐQT.VCSC
August 10, 2020
Recall of issued bonds before maturity date, 2020
12
29/2020/NQ-HĐQT.VCSC
August 24, 2020
Selling treasury shares
13
30/2020/NQ-HĐQT.VCSC
November 3, 2020
Recall of issued bonds before maturity date, 2020 - 2021
14
31/2020/NQ-HĐQT.VCSC
November 3, 2020
Bond issuance 2020 - 2021, issue size VND 1.200 billion
15
32/2020/NQ-HĐQT.VCSC
December 8, 2020
Issuance, listing and offering of covered warrants
16
33/2020/NQ-HĐQT.VCSC
December 9, 2020
1st interim dividend payment of 2020
August 4, 2020 Second bond issuance in 2020, value of VND 500,000,000,000
WAGES, BONUSES, ESOP FOR KEY EMPLOYEES IN 2020 Wages (Unit: VND)
Bonuses (Unit: VND)
ESOP (Unit: Share)
A. BOD Member of the BODs (*)
-
-
-
B. BOM
6,395,740,000
3,850,000,000
240,000
Mr. To Hai
2,128,580,000
-
-
Mr. Dinh Quang Hoan
2,133,580,000
1,925,000,000
120,000
Mr. Nguyen Quang Bao
2,133,580,000
1,925,000,000
120,000
(*) Công ty không chi trả thù lao cho thành viên Hội đồng Quản trị
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ANNUAL REPORT VCSC 2020
REPORT OF THE BOARD OF SUPERVISORS BOARD OF SUPERVISORS
Mr. TRUONG NGOC HOAI PHUONG Head of Board of Supervisors
Mr. Phuong is working as the Internal Aucditor of Lothamilk Joint Stock Company. He has more than 10 years working in Vietnam and abroad for large enterprises such as UPS (Singapore), Capella Holdings where he was in charge for internal supervision and risk management. He is a longtime member of Association of Chartered Certified Accountants (ACCA) and member of Institute of Certified Public Accountants of Singapore (ICPAS)
Ms. BUI THI MINH NGUYET Member of Board of Supervisors
Ms. Nguyet is currently working as Chief Accountant for Phoenix Holdings Limited. Previously, she worked at Viet Capital Investing Limited Company where she was responsible for the organization and implementation of the company’s accounting. She has many years of experience working in the fields of finance, accounting and auditing at leading companies in Vietnam, including KPMG and Viet Capital Bank. She graduated from the University of Economics Ho Chi Minh City with a degree in accounting and auditing.
Ms. TRUONG THI HUYEN TRANG Member of Board of Supervisors
Ms. Huyen Trang graduated from University of Economics with a degree in finance and accounting. She currently is Chief Accountant at Viet Capital Real Estate Company. She has more than a decade of experience in accounting and auditing at various organizations.
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#
BOS Member
Position
1
Mrs. Bui Thi Minh Nguyet
Member of BOS
2
Mrs. Dang Ngoc Thao Uyen
Member of BOS
3
Mrs. Truong Thi Huyen Trang
Member of BOS
4
Mr. Truong Ngoc Hoai Phuong
Head of BOS
Date of resignation/ appointment to BOD
Number of BOS meetings attended 01
Resigned from 24/06/2020
Appointed from 24/06/2020
0
Reason for absence from meetings
Rate
100% 0% Resignation
01
100%
01
100%
ACTIVITIES OF THE BOARD OF SUPERVISORS IN 2020
BOS’S OVERSIGHT ROLES TOWARDS THE BOD, BOM AND SHAREHOLDERS
The BOS oversees the activities of the BOD and the General Director in the management and governance of the Company. The BOS is responsible to the law as well as the AGM and shareholders. The BOS is responsible for verifying the reasonableness, legality, integrity, and security of the company’s management, accounting, and financial statement development. Additionally, the BOS is required to evaluate the quarterly and 6-month earnings releases, financial statements, and performance reviews of the BOD and AGM performance.
COORDINATION BETWEEN BOS AND BOD, BOM AND OTHER MANAGERS
In the event the BOS identifies the violation of the law or the company’s charter by BOD members, BOM members, or other managers, the BOS must inform the BOD of such violations in writing within 48 hours, and require the violators to stop their current behaviors and seek corrective measures.
OTHER ACTIVITIES OF THE BOS ( IF ANY)
Other duties might be assigned to the BOS as requested by the company’s charter or the AGM.
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ANNUAL REPORT VCSC 2020
BOARD OF MANAGEMENT BOARD OF MANAGEMENT Mr. TO HAI Chief Executive Officer See page 78 (Board of Directors’ Members)
Mr. DINH QUANG HOAN Deputy Chief Executive Officer Mr. Hoan has more than 20 years of experience in the fields of financial consulting, accounting and auditing. Before joining VCSC, Mr. Hoan was a Deputy Head of Consulting at the Ho Chi Minh City branch of Bao Viet Securities JSC. He was in charge of issuing and listing of securities, underwriting, equitization, and restructuring activities of companies. Before that, he worked for KPMG as Chief of the Auditing Department and was charge of auditing projects and financial reviews for multinational corporations as well as local businesses. He holds a master’s degree in economics majoring in finance and a bachelor’s degree in accounting and auditing from the University of Economics Ho Chi Minh City. He is certified as an independent auditor by the Ministry of Finance and is a member of the Association of Chartered Certified Accountants - UK (ACCA).
Mr. NGUYEN QUANG BAO Deputy Chief Executive Officer Mr. Bao has many years working in the fields of banking and securities. He joined the Vietnam securities market from its very first days. With his experience and competence, he participated in valuation, construction of equitization plans, organizing actions for many businesses in numberous areas, building and implementing professional products at securities companies. Before joining VCSC, he served as Deputy General Director cum Ho Chi Minh City Branch Director of Bank of Investment and Development of Vietnam Securities Company; Deputy Director of Service Division cum Hai Phong Branch Director of Saigon Securities Company. He is the Bachelor of Credit of Banking Academy and Bachelor of Finance and Credit of Hanoi Finance and Accounting University.
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Messages from Management Board and preface
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Sustainability report
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KEY PERSONNEL Mr. NGO VINH TUAN Managing Director - Investment Bank Mr. Tuan has 20 years of experience in the fields of investment and financial advisory services. Before joining VCSC, he was a member of the Investment Committee and the Board of Directors of USA Alden Global Capital/Smith Management Venture Investment Funds where he led the analyst team. Before that, he was the Director of Investment at Fonds Stratégique d’Investissement (FSI) in Paris, France. He previously has held analyst and investment banking positions at wellknown institutions such as Credit Suisse and Bank of America Merrill Lynch in London and Deloitte Consulting. Mr. Tuan holds a master’s in business administration from the Wharton School at the University of Pennsylvania and a bachelor’s degree from the Ecole Supérieure de Commerce in Grenoble, France.
Ms. PHAM THI THANH Investment Bank Director - Hanoi Branch Ms. Thanh has over 20 years of finance experience. Prior to joining VCSC, she worked at the Ministry of Finance and Vincom Securities Joint Stock Company as Director of Corporate Finance Advisory and Online Trading. She has accomplished various M&A, fundraising, restructuring and listing advisory deals in Vietnam. Ms. Thanh is also one of the most experienced experts in equitization advising for Stateowned corporations. She holds a BA in banking and finance from the National Economics University and a master’s degree in financial management from the University of Melbourne, Australia. Ms. Thanh is also recognized as a professional fund management practitioner by the State Securities Commission of Vietnam and as a valuation practitioner by the Ministry of Finance.
Mr. NGUYEN QUOC DUNG Brokerage Director - Institutional Customers Mr. Dung has over 20 years of experience in finance, accounting and auditing. He joined VCSC since November 2007 and worked in the Investment Banking Division before moving to Institutional Sales & Brokerage in 2010. Previously, he worked for The Gannon Group - an American company operating in Vietnam in the fields of distribution, manufacturing and trading - as Management Accounting Manager. Prior to that, Mr. Dung worked in the Internal Audit Department and Independent Audit Department for Vietnam Brewery Limited (Heineken and Tiger Beer) and KPMG, respectively. Mr. Dung holds an MBA degree from the French - Vietnamese Center for Management Education (CFVG), a program sponsored by the French government and Vietnamese Ministry of Education and Training. He also holds a BA in corporate finance from the University of Economics Ho Chi Minh City. 87
ANNUAL REPORT VCSC 2020
KEY PERSONNEL ( Continued)
Mr. ALASTAIR FRASER MACDONALD, CFA, CIPM Research and Analysis Director Mr. Macdonald has been Head of Research since 2018. He has more than 20 years of experience in equity research in Thailand, Singapore and Japan. Mr. Macdonald previously worked as Head of Research at Kasikorn Securities and Macquarie Securities in Thailand and as a senior analyst covering Japanese stocks at Macquarie in Tokyo. Prior to working in Asian markets, Mr. Macdonald worked as a Marketing Manager at Gartmore Investment Management in London. Mr. Macdonald holds an MA in natural sciences and economics from Trinity College, Cambridge.
Ms. CHAU THIEN TRUC QUYNH Managing Director of Local Brokerage Division Ms. Quynh currently holds the position of Managing Director, Head of Local Brokerage and has more than 20 years of experience in the Vietnamese stock market. From 2005-2007, Ms. Quynh held the positions of Deputy Head the of Enterprise Financial Consulting Department and Head of the Brokerage Department at the Bank for Foreign Trade of Vietnam Securities Company - one of the largest securities companies in Vietnam. From 20012005, she worked as a specialist in Enterprise Financial Consulting for the Bank of Investment and Development of Vietnam Securities Company. Her experience at securities companies enables her to provide service for professional customers. Ms. Quynh has advised numerous individuals and organizations. Ms. Quynh graduated with a BA and MA in finance and banking from the University of Economics Ho Chi Minh City, she also gained the Executive MBA from the joint program of University of Economics Ho Chi Minh City and School of Management at the Université du Québec à Montréal (ESG UQAM), Canada.
Mr. LY DIEN ANH Brokerage Director Mr. Dien Anh participated in Vietnam’s stock market in the early days of its establishment, starting his career at Bao Viet Securities Company in 2000. He is now the Director of Local Brokerage of VCSC. Ealier, he was the Director of Brokerage for East Asia Securities Company. Mr. Dien Anh graduated from University of Economics in Ho Chi Minh City, majoring in Banking and Finance.
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Mr. PHAM THANH VU Brokerage Director Mr. Vu has 15 years of experience in securities brokerage on Vietnam’s stock market. He is Director of Local Brokerage of VCSC, responsible for managing the Active Brokerage System (ABS | VCSC). Mr. Vu is a pioneer in the development of the model of sustainable brokerage with the recruitment of trainees who are 3rd year university students to participate in professional training to become brokers with good knowledge, ethics, practical experience and dedication to the company. He also sees that a broker can both act as a broker and carry out Investor Relations (IR) activities to create interaction between the company and shareholders in a various fields. He has a desire to help VCSC to build a professional image via communications products to the investors, to spread out to the investor community the stories that the company wants to share, and increase the brand coverage of VCSC. Mr. Vu graduated from University of Economics - Law and holds a Master of Business Administration from Ho Chi Minh City University of Technology (HUTECH) - Finance - Banking sector.
Mr. PHAN XUAN NGUYEN Brokerage Director Mr. Nguyen has a bachelor’s degree in banking and finance. He has over 15 years of experience in the securities market. Mr. Nguyen has worked at Viet Capital Securities Company from its first days and has held many positions. Mr. Nguyen was appointed as Director of Head Office Brokerage at the end of 2019.
Mr. DOAN MINH THIEN Chief Accountant Mr. Thien has over 17 years of experience in the finance and accounting. Previously, he was Deputy of the Department of Finance and Accounting at Petrosetco Distribution Joint Stock Company. Mr. Thien holds a BA in corporate finance from the University of Economics Ho Chi Minh City
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Entering a new phase of Technology revolution 4.0, VCSC places an emphasis on the application of advanced technology as part of its digital transformation strategy towards sustainable development. This leads to full automation and digitalization of products and services, offers unparalleled experiences to customers, allows more Vietnamese people to learn about the stock market, and helps VCSC become an attractive and safe investment channel.
Future prospects 2021 Prospects: Context and trend
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Future starts from today
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VCSC 2021 business plan
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ANNUAL REPORT VCSC 2020
MACRO OUTLOOK
STRONG RECOVERY IN 2021 We expect the positive scenario to be supported by the following factors: 1
The Government’s successful containment of COVID-19 spread in Vietnam. In addition, according to Vietnam’s Ministry of Health, the country has signed with AstraZeneca to obtain 30 million doses of COVID-19 vaccine in 2021 with the first batch expected to arrive in Vietnam as soon as Q1 2021. The country is also in talks for potential vaccine supplies with the US, Russia and China.
2
Continuing fiscal support and an extended period of low interest rates will provide a supportive environment for the economy to recover without a major shock to macroeconomic stability.
3
Stronger confidence regarding the domestic and global outlook could further support both domestic and foreign investment as well as consumption demand.
4
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), EU-Vietnam Free Trade Agreement (EVFTA) and Regional Comprehensive Economic Partnership (RCEP) will continue to support Vietnam’s exports and production in addition to investment inflows.
The National Assembly has approved 2021’s GDP growth target at 6.0%. However, the Government aims to achieve a 6.5% growth rate in 2021 - a conservative target vs Bloomberg’s consensus private sector forecast of 7.7%.
Consensus GDP growth forecasts, December 2020 (%) World
Asia XJ
EU
US
China
Vietnam
10 8 6 4 2 0 -2 -4 -6 -8
2013
2014
2015
2016
2017
2018
2019
2020F
2021F
2022F
Source: Bloomberg, VCSC (data as at December 31, 2020)
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We believe the medium-term growth outlook for Vietnam remains robust, with industrialization and urbanization continuing to lead the way.
While employment in agriculture declined from over 70% of total employment thirty years ago to just under 40% in 2019, it remains relatively high compared to other,
more developed ASEAN countries and China. Over the next 10 years, we expect further rapid growth in Vietnam’s GDP, further labor migration from agriculture to industry and services, and further urbanization, which at 37% in Vietnam in 2019, was lower than in the other countries. The main risks to the positive outlook are 1) a delay in the expected containment of COVID-19 and associated recovery in the global economy, 2) punitive US import tariffs on Vietnamese goods and 3) domestic policy disappointments.
Vietnam employment by sector, % total Agriculture
Industry
Services
80 70 60 50 40 30 20 10 0
1991
1995
1999
2003
2007
2011
2015
2019
Source: World Bank, VCSC
Urban population as % total Vietnam
Indonesia
Malaysia
Philippines
Thailand
China
2011
2015
90 80 70 60 50 40 30 20 10 0
1991
1995
1999
2003
2007
2019
Source: World Bank, VCSC
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ANNUAL REPORT VCSC 2020
As informed by National Academic Conference: “Promoting cashless payments in the digital economy” co-hosted by the Banking Academy and the State Bank Magazine - State Bank of Vietnam (SBV) on December, 2020, SBV had officially issued a circular on the deployment of eKYC (Electronic Know Your Customer), marking a milestone in the 2021 - 2025 journey to foster digital payment.
With initial positive results from trials, eKYC was officially approved by the SBV, becoming Vietnam’s first platform for digital payment and digital banking. This technology is gaining currency in the global financial industry with its unmatched advantages: Speed - Accuracy - Simplicity - Convenience - Security.
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A TRENDSETTER
Viet Capital Securities Joint Stock Company (VCSC, ticker: VCI) is one of the first financial companies in Vietnam to adopt eKYC in its digital product ecosystem. This aims to provide fully automated and online trading services, to provide customers with unparalleled experience and to enable more Vietnamese people to learn about the stock market. In the context of the COVID-19 pandemic, a number of digital technology solutions are progressively reducing direct interactions, easing the process from registration to transaction, and helping protect the safety of investors and the community. VCSC officially launched the eKYC Technology for Digital Account Verification at the end of November 2020, allowing investors to create online accounts in just a few clicks without going to bank branches/ transaction offices. Within one month of the official launch, VCSC reported 3,427 new accounts. This impressive figure shows the feasibility and remarkable efficiency of eKYC in improving the participation rate in a still developing financial market. As the ecosystem service transfers to online platforms, the operating costs, time and manpower are expected to decrease significantly. This means that investors can benefit directly from a reduction in trading fees. On account activation, the investors would access a wide range of solutions, particularly valuable
resources from VCSC, such as in-depth industry reports, business and macroeconomy reports, etc. This helps them update information and take advantage of investment opportunities in Vietnamese stock market.
THE USE OF SECURITY TECHNOLOGY (OPTICAL CHARACTER RECOGNITION, FACIAL RECOGNITION, REAL-TIME HUMAN DETECTION, ETC.) HELPS RAISE EKYC SECURITY TO THE HIGHEST LEVEL.
By combining two-factor authentication and banking system data, security technology can identify and standardize customer information, ensure the security and confidentiality required by the eKYC process. A proactive and strong investment in the upgrade of digital infrastructure and platforms reveals the vision and capacity of the VCSC characterized by a comprehensive digital transformation strategy. It also highlights the company’s enthusiasm, effort and determination to improve the quality of customer service, enhance the interests of investors and optimize their experience, and strengthen its position as a pioneer in the field of securities.
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ANNUAL REPORT VCSC 2020
VCSC 2021 BUSINESS PLAN In 2021, target expects significant profit growth of 30% compared to 2020. Besides, Investment Banking is projected to become more active thanks to effective pandemic containment, especially successful vaccine rollout.
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VCSC developed the 2020 report in accordance with the CORE level set out in GRI’s Sustainability Reporting Guidelines, with a great focus on business performance, employment, education and training, product and service labeling, and local community.
Sustainability report Sustainable development orientation
100
Report summary
104
Report of sustainable development activities
106
GRI content index
118
ANNUAL REPORT VCSC 2020
SUSTAINABLE DEVELOPMENT ORIENTATION
TH E V ISION OF VCSC IS T O B ECOME ONE OF TH E L E ADING INVEST MENT BANKS IN VIET NAM.
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ORIENTATION AND STRATEGIES FOR SUSTAINABLE DEVELOPMENT
We understand the sustainable development of a company must be based on the integrity and professionalism of all its members, including the leaders and all of the employees. To achieve business success, we rely on the credibility and trust of our stakeholders, which include but are not limited to our clients, shareholders and employees. The mission of VCSC is to provide services of the highest quality in a professional manner while maintaining our high standards of integrity. We always strive to maintain the best relationship and business operations for the sustainable development of our partners.
1. POSITIVE IMPACT ON THE COMPANY »» Sustainable growth. »» Ensuring income and economic benefits for employees. »» Taking care of employees. »» Developing a team and also searching for and nurturing talent. »» Managing risks and overseeing compliance. »» Enhancing transparency in all activities.
2. POSITIVE IMPACT ON SOCIETY »» Fulfilling all duties and responsibilities to the State. »» Adopting a green investment strategy. »» Practicing environmental protection. »» Engaging in community sharing.
3. POSITIVE IMPACT ON THE MARKET »» Maintaining stable dividend ratios for shareholders. »» Providing high-quality products/services to meet demands of customers. »» Connecting capital to investment opportunities. »» Contributing to market development and serving as an effective capital mobilization channel for the economy. »» Supporting businesses through advisory services on financial strategies and solutions. 101
ANNUAL REPORT VCSC 2020
SUSTAINABLE DEVELOPMENT ORIENTATION (Continued)
BOARD OF DIRECTORS :Providing general directions on the sustainable development strategy while also approving goals and plans.
CHIEF EXECUTIVE OFFICER AND MANAGEMENT BOARD
MANAGEMENT MODEL FOR SUSTAINABLE DEVELOPMENT
»» Drafting and submitting the BOD’s goals and plans for VCSC’s sustainable development. »» Sharing sustainable development strategies, goals and plans throughout the entire Company. »» Ensuring that sustainable development goals are met.
FUNCTIONAL UNITS AND DEPARTMENTS Implementing sustainable development plans as per the directions of the Chief Executive Office and Management Board.
EMPLOYEES Carrying out specific daily activities relevant to VCSC’s sustainable development goals.
PRINCIPLES OF SUSTAINABLE DEVELOPMENT
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TO CLIENTS
Provide financial products, services and innovation that meet the needs of clients and offer appropriate advice, speediness, convenience and value in terms of price and quality.
TO EMPLOYEES
Offer interesting and challenging positions with competitive remuneration, provide equal opportunities and promote personal and professional development.
TO SHAREHOLDERS
Protect shareholder investments and provide a superior and sustainable return.
TO PARTNERS
Seek mutually beneficial relationships with contractors, suppliers and joint venture partners while promoting the application of the Code of Conduct principles.
TO SOCIETY
Conduct business as a responsible corporate member of society at large and in the communities in which we operate, carrying out the commitments we make to adhere to international conventions or codes.
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OBJECTIVES OF SUSTAINABLE DEVELOPMENT AT “VCSC has invested into various sustainability initiatives to drive growth and development opportunities within the company, securities markets and society in Vietnam” Through this activity, VCSC has made significant contributions in the following aspects:
Providing job security for employees.
Supporting communities toward enhancing quality of life.
Contributing to the growth and development of the financial services industry.
Developing opportunities for youth development and empowerment.
Helping the growth of businesses with more efficient use of capital.
Enhancing strong corporate governance and business transparency. Raising capital to boost the Vietnamese economy.
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ANNUAL REPORT VCSC 2020
OVERVIEW OF THE REPORT
CONTENT OF THE REPORT
The Sustainable Development Report 2019 highlights VCSC’s sustainable development orientation, looks back at one year of the company’s active and effective operation, reviews the limits that need to be addressed, and plans future activities.
This is the second year for which VCSC has prepared a Sustainability Report in compliance with Global Reporting Initiative (GRI) guidelines. The report was developed in adherence to the “in accordance core” criteria set out in GRI’s G4 Sustainability Reporting Guidelines and focuses on the following categories of disclosures: economic performance; labor practices and decent work; training and education; product and service labelling; and local communities. This report was developed by VCSC’s Sustainability Report Group that includes members of the Communications Department, Accounting Department, Human Resources Department and the Board Secretary who manage the most relevant functions in VCSC regarding data and information relating to sustainable development activities.
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SCOPE OF THE REPORT VCSC’s 2019 Sustainability Report is a supplementary document attached to the Company’s 2019 Annual Report and 2019 financial statements. The report reflects the results of the Company’s operations in 2019 and also refers to the direction and objectives of VCSC for sustainable development in the coming years. The report covers data and activities across the entire business, including VCSC’s head office and its transaction offices across the country. The implementation of sustainable development activities is closely related to VCSC’s corporate social responsibility strategy, as driven by the Company’s mission and vision, and is framed within the full compliance of corporate internal control procedures and national and international provisions, including those on competition, human rights and environmental law.
CONTACT For any information and suggestions for the VCSC Sustainability Report, please contact: Viet Capital Securities Joint Stock Company (VCSC) Email: info@vcsc.com.vn Headquarters: Bitexco Financial Tower, 15th Floor, 2 Hai Trieu Street, District 1, HCMC, Viet Nam.
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CONNECTING RELATED PARTIES ENGAGED FOR SUSTAINABLE DEVELOPMENT GOALS VCSC’S CONDUCT FOR RELATED PARTIES FOR SUSTAINABLE DEVELOPMENT GOALS
VCSC acknowledges that all of its activities affect internal and external stakeholders, including employees, shareholders, clients, partners, Government bodies and associations, the media, and local community. In order to ensure sustainable development in all relationships, VCSC regularly communicates with stakeholders through the following activities: »» Workshops. »» Meetings to exchange ideas and for VCSC to provide consultancy services
CLIENTS/ INVESTORS
»» Call center, help center and Services Department support. »» Client support via VCSC’s website. »» Regular emails detailing business results, account changes and other useful information. »» Mailboxes provided for comments and suggestion that are located in Transaction Offices.
»» Annual General Meeting. »» Direct meetings.
SHAREHOLDERS
»» Presentations to investors about the Company’s business operations. »» Q&A on the Investor Relations page on the VCSC website. »» Emails to shareholders and investors.
»» Quarterly or yearly team briefings. »» Meeting directly with the Board of Directors, celebrating birthdays of employees.
STAFF
»» Information exchanged via the Company intranet, telephone and email. »» Teambuilding program and team cohesion. »» Quarterly interactive activities such as family and children’s day events.
»» Support the activities of youth through youth organizations or university students.
LOCAL COMMUNITY
»» Participate in community development activities. »» Share with less fortunate people. »» Participate in environmental and community activities.
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ANNUAL REPORT VCSC 2020
REPORT OF SUSTAINABLE DEVELOPMENT ACTIVITIES BUSINESS RESULTS IN 2020
PROFIT BEFORE TAX REACHED ( BILLION VND)
951
FOR THE WHOLE YEAR 2020, 73% EXCEEDING COMPARED TO THE PLAN FOR 2020
SUMMARY OF FINANCIAL SITUATION FOR THE YEAR 2020
Net revenue
Net revenue in 2020 reached
1,730
billion VND
increased 12% compared to 2019 (implemented 1,541 billion VND), and and 25% higher than the plan of 2020 (plan: 1,390 billion VND).
Profit
Profit before tax in 2020 reached
Profit after tax in 2020 reached
EPS
Earning per share in 2020 reached
951
billion VND increased 11% compared to 2019 (implemented: 855 billion VND) and 73% higher than the plan in 2020 (plan: 550 billion VND).
769
billion VND increased 11% compared to 2019.
4,662
VND
increased 10% compared to 2019.
ROAE
106
Return On Average Equity for 2020
17.9%
(19.7% if excluding the difference from the asset assessment at market prices).
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FULL YEAR 2020 BUSINESS SEGMENT HIGHLIGHTS
BROKERAGE
Brokerage recorded full year 2020 revenue of VND439 billion (35% higher than 2019) and profit before tax of VND185 billion (32% higher than 2019). Continuing robust trading activities by domestic clients in 2020 drove VCSC’s 48% year-overyear growth of retail brokerage revenue. Foreign trading activities also lead to VCSC’s institutional brokerage revenue growth of 23% compared to 2019. VCSC ranked no. 4 on the Ho Chi Minh City stock exchange in 2020, with brokerage market share reached 7.69% compared to 8.19% in 2019. In the brokerage segment, VCSC continues to focus on providing value-added services and profitable investment opportunities for clients, which is done by investing the company’s resources into building a team of experienced brokers, developing high quailty research reports, and providng effective corporate access activites.
INVESTMENT BANKING
Investment Banking recorded full year 2020 revenue of VND148 billion (17% lower than 2019) and profit before tax of VND102 billion (9% lower than 2019). Amid the disruption caused by COVID-19 to international travel throughout 2020, VCI has shifted more focus on domestic investors and foreign investors having long-standing presence in the local market. In 2020, Investment Baking team successfully advised our clients on notable deals including the placement of 38.9 million secondary shares of MSN to GIC, the divestment in International Dairy JSC (IDP) by VinaCapital, the bond issuance for Gia Lai Electricity JSC, the divestment by a group of shareholders of Bien Hoa Packaging JSC (“SOVI”) to transfer 94.11% of the shares to Siam Cement Group (SCG) through its subsidiary named TCG Solutions Pte. Ltd, the listing of shares of An Binh Commercial Joint Stock Bank (“ABB”) on UPCoM, and the delisting shares of Lien Viet Post Bank on UPCoM and listing on HoSE.
INVESTMENT
For full year 2020, Investment recorded revenue of VND842 billion (20% higher than full year 2019) and profit before tax of VND514 billion (30% higher than full year 2019). The strong recovery of VN-Index in the second half of 2020 from its low level in March supported the business results of the Investment segment. In 2020, VCSC increased its holdings in POW, MBB, and IJC; while reduced position in DIG, SCR, MWG, FPT, MML… In addition, VCSC continues to focus on long-term investments in companies with high growth potential and future plans to be listed on the stock exchange.
DEBTS
VCSC’s debts totalled VND3,364 billion, increased by 31% compared to December 31, 2019. All the debts remained short-term and were mainly used to fund margin lending activities. It is noted again that in Q2 2020, VCSC successfully raised USD40 million of unsecured syndicated loans led by Sinopac Bank, which helped lower its cost of borrowed funds.
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ANNUAL REPORT VCSC 2020
REPORT OF SUSTAINABLE DEVELOPMENT ACTIVITIES ( Continued )
REVENUE STRUCTURE BY OPERATION SEGMENT FOR THE YEAR 2020
14%
12%
49% Revenue Individual brokerage
18%
Institutional brokerage Margin lending
9%
Investment banking Investment
8% 11%
Profit before tax
16%
54%
Individual brokerage Institutional brokerage Margin lending Investment banking Investment
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11%
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CONTRIBUTION TO THE STATE BUDGET At VCSC, we always fulfill our obligations to pay tax and other payables to the State Budget with amounts increasing over the years. Despite the fact that the global economy was in crisis and the Vietnamese economy, particularly the stock market, was weak since 2009, VCSC has managed the Company’s and Investors’ capital, ensuring stable growth, high profitability, and consistent contribution to the State Budget. We have our business orientation and management to thank for. In particular, we contributed VND320 billion to the State Budget in 2020.
BRINGING FINANCE TO OPPORTUNITIES AMID SOCIAL DISTANCING
With a flexible adaptation to the COVID-19 pandemic, VCSC’s Institutional Sales & Brokerage Department succeeded in maintaining services with high quality, consistency, and security by practicing work from home, small group, and separated work areas. VCSC also conducted over 200 conference calls, whether in group or one-on-one, and assisted listed companies to host Quarterly Investor Meetings online - a previously uncommon occurrence to local enterprises. This new practice started to earn recognition and appreciation from plenty of businesses and funds for its effectiveness. Vietnam Access Day also provided investors with full visibility into Vietnam’s positive outlook and in-depth industry analysis, helping foreign investors better evaluate investment environments and opportunities, as well as bringing finance to investment opportunities. Vietnam Access Day was also an opportunity for foreign investors to meet with Vietnam’s top companies in the fields of consumer goods, banking & finance, information technology, and real estate.
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REPORT OF SUSTAINABLE DEVELOPMENT ACTIVITIES ( Continued )
ACTIVE ENGAGEMENT IN MARKET DEVELOPMENT We have acted in accordance with the State’s securities regulations and other relevant regulations, while still understanding our responsibilities to investors, issuers, and regulators, as well as our roles in the
development of the economy and the stock market in particular. Furthermore, VCSC has always made efforts to partake in the development of the system of legal texts on the stock market and to enhance its practicality. Another goal that we are constantly striving for is to create a transparent, established, and stable stock market. The IT Department has also upgraded the infrastructure and core trading software over the years in order to improve the system speed, win the trust of domestic and foreign investors, maintain a disaster recovery site for the purposes of security, data backup, and risk handling during system failure or disaster events.
SECURITY AND TRANSPARENCY IN THE INVESTOR’S ASSET MANAGEMENT
VCSC has always upheld the principle of respecting customers and complying with laws to gain profitability and protect investors from asset loss.
VCSC QUẢN LÝ TÀI SẢN CỦA NHÀ ĐẦU TƯ AN TOÀN, MINH BẠCH
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Investment, risk management, and internal control processes are conducted in tandem. With sustainable development in mind, VCSC strives to build trust, transparency and high asset growth for investors.
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PROTECTION OF SHAREHOLDERS’ RIGHTS
The Securities Industry has made a commitment to protecting shareholders’ rights even in the times of difficulty. It is also the core value and centerpiece of all industries that seek stability, transparency, fairness and sustainable development. A “healthy” stock market survives if and only if the legitimate rights and interests of the investors - market builders - are protected.
for all shareholders is ensured with no preferential treatment involved, and decision-making by the BOD is based on majority voting.
VCSC respects and complies with the policy of protecting shareholders’ rights to ensure equal treatment of shareholders. As of December 23rd, 2020, VCSC has nearly 3,000 shareholders (nearly 100 organizations and 2,900 individuals). Shareholders’ rights include: right to attend and speak at the annual general meetings of shareholders; rights to receive dividends at the rate approved by the annual general meetings of shareholders; right to purchase new shares in proportion to their current holdings; rights to transfer freely their shares to another person; rights to participate in any decision concerning fundamental corporate changes. At VCSC, the State’s laws and the Company’s charters are followed in a strict and transparent manner, equal treatment
Our resources are available on the website in both Vietnamese and English in order to keep domestic and international investors up to date on the latest information, improve service quality, expand the market, and strengthen our position in the stock market. VCSC also emphasizes a regular dividend policy for profit sharing balance, a high return on capital, and a good retained earnings ratio.
TOTAL NUMBER OF OUTSTANDING SHARES (SHARE)
ADVANCE OF 2020 CASH DIVIDEND ( VND/SHARE)
VPro
WebTrading
Vmobile
CASH DIVIDEND POLICY IN 2020
To keep up with Industry 4.0, we quickly and consistently diversify our communication channels: website and email. We also work hard to develop trading applications that are safe and convenient to use on digital platforms like VPro, WebTrading, and Vmobile. This allows shareholders and investors to stay up to date on information and conduct transactions in a timely and accurate manner.
165,600,000 1,000
DATE OF PAYMENT: DECEMBER 31ST, 2020.
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ANNUAL REPORT VCSC 2020
RISK MANAGEMENT SYSTEM
At VCSC, a risk management system is built and operated throughout the Company, including a complete organizational structure and a consistent operating mechanism with a set of risk management processes.
Risk management system is designed to identify, measure, monitor, report, and handle risks in an effective manner. It also helps the Company fulfill its compliance obligations at all times. Risk management system ensures:
1.
Supervision by the Board of Supervisors, Internal Audit and Internal Control;
2.
Clear and transparent risk management strategies reflected in long-term risk policies and in each period;
3.
Implementation plan with full policies and procedures;
4.
Management, inspection and regular review by the BOM;
5.
Risk management policies and risk limits are developed and implemented, risk management information system is established.
As specified in laws, procedures and internal policies, responsibility for risk management is assigned to all levels, to every Head of Department and employee. This aims to create an effective risk-based system applied uniformly throughout the Company.
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Risk management system helps enhance the Company’s operational efficiency by empowering employees with more responsibilities and giving them accurate performance reviews. Every year, VCSC shall develop and publish a risk policy that lays the foundation for regular risk management activities. Risk levels, risk limits, and risk tolerance are defined for each business activity and approved by the BOD. Risk management policy is geared toward guidance on management of risks in a clear, specified, and detailed structure, ensuring employees’ understanding of the roles and responsibilities assigned to their departments and themselves regarding risk management.
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ACTION FOR CUSTOMERS NON-STOP INNOVATION AND IMPROVEMENT OF PRODUCT QUALITY
Boosted by a team of talented and professional consultants, VCSC not only provides consulting services and direct support to customers, but also manages and develops a wide variety of support platforms and apps including:
At VCSC, innovation is our first and foremost means to meet investors’ expectations and protect their rights, followed by assurance of mutual benefits on the ever-changing and evolving stock market. We are fully aware that in the world of motion, we cannot stand still.
»» Online trading solutions, such as VPro and V-Web Trading, allowing investors to track stock market and trade real-time at any place.
Constant improvement in transaction guides and trading applications, or simply effective and conscientious communication with investors also contribute to the elevation of VCSC’s product/service quality, trust building, reputation establishment and investor reassurance. We believe that creating practical values to our customers is the driving force for the sustainable development. On that ground, VCSC has been promoting investment in technology and digital application to serve investors’ demand for information access and quick transaction execution.
At VCSC, we take pride in our customer-friendly online trading products, straightforward and thorough transaction guides, and our dedicated support team.
»» Mobile trading services such as V-Mobile: supporting most common trading needs, available for both iOS and Android. »» V-BOND, a convenient bond transactions system, helping customers trade and track bonds online, and update latest news in the bond market. »» eKYC solution, helping investors access the market easily and more conveniently, and add money to their accounts in just a few clicks.
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INTERNAL ACTIVITIES MAINTAINING INTERNAL SPORTS ACTIVITIES VCSC fully sponsors the company’s sports clubs, including football, badminton, and tennis, in addition to basic performance incentives. Not only weekly training sessions, VCSC also hosts friendly tournaments between these clubs with various divisions and departments.
The club membership allows VCSC employees to live a healthy lifestyle while encouraging solidarity and networking.
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Bonding VCSC
THROUGH TRIPS
Leaving all the pressures behind, VCSC employees can enjoy moments of relaxation and pleasure during company vacation trips. Last October, more than 200 employees from the Ho Chi Minh City and Hanoi offices joined the VCSC annual vacation on Phu Quoc Island. The high-end 3-day 2-night package, a true leisure escape, not only compensated for a turbulent 2020, but also provided a boost of energy for a promising 2021 of breakthroughs. These trips are intended to bring colleagues together and thus foster a friendly working environment. Throughout the years, internal activities such as the YearEnd Party, International Children’s Day, International Women’s Day, and Happy Birthday Celebration for staff are held. We celebrated the year-end party “Weathering The Storm” at the end of January 2021, where we sat together to review and bid farewell to a journey full of proud accomplishments and memorable experiences, and to set sail towards the goals of 2021.
Internal VCSC activities are designed to facilitate exchanges between leaders and employees, between departments, and between employees based on the organization’s goals and business orientation. The goal is to create a positive working environment that promotes individual growth as well as the overall development of the company.
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CONSTANTLY WORKS FOR THE COMMUNITY
With full awareness of our social responsibility, we have always paid special attention to voluntary and social activities throughout 2020, especially since COVID’s complicated path poses a threat to the quality of life.
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INVESTMENT INTO EDUCATION DEVELOPMENT Recognizing the link between education and sustainable development, VCSC works with local authorities to sponsor, build, and renovate educational facilities for children - the country’s future generations. In pursuit of this goal, VCSC supported the provincial authorities of Kien Giang and Vinh Long in 2020 with a sponsorship of up to VND10 billion for new school buildings with adequate amenities in remote areas. The timely efforts of VCSC have significantly contributed to the improvement of local education quality, resulting in a better learning environment for local students and more adequate and professional teaching facilities for teachers. Furthermore, during the Lunar New Year 2021, VCSC collaborated with the Student Assistance Center in Ho Chi Minh City to launch the “Spring trip” program, in which 5,000 disadvantaged students and workers were offered free transportation back to their hometown for Tet holidays.
the Values OF GOOD DEEDS
We raised funds for flood-prone areas in the Central, Highlands, and South Central regions. We also advocated for and mobilized community donations to ensure that disaster relief efforts yielded the best results possible. We believe that the VCSC team’s voluntary activities for the community have strengthened their bond with the values of good deeds and long-term sustainability. It is also a heartfelt expression of gratitude from VCSC to its customers, shareholders, and investors for their faith and support. Among our hopes for the future of VCSC is to empower and embolden the very spirit of compassion
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GRI CONTENT INDEX GRI
PUBLIC INFORMATION
REPORT CONTENT
Page
OVERVIEW CONTENTS Strategy & Analysis G4-2
Describe impacts, risks and opportunities
Sustainable Development Direction; Corporate Governance towards Sustainable Development
101 & 102
Organizational Profile G4- 3
Enterprises Name
Report Overview
104
G4-4
Products and Services
Business Segments - Annual Report
17
G4-5
Head Office Address
Corporate Information - Annual Report
16
G4-7
Type of ownership and legal models
Corporate Information - Annual Report
16
G4-8
Market
Corporate Information - Annual Report
16
G4- 9
The scale of reporting Enterprise
Corporate Information - Annual Report
16
G4-10
Statistics on labor force
Team cohesion for sustainability
38
Connecting different stakeholders for sustainable development goals; Identification of key areas
105
Report Boundary
G4-18
118
Explain the process of determining the report content and report boundary; Specify how business use applied rules to construct report contents
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GRI
PUBLIC INFORMATION
REPORT CONTENT
Page
Analysis Strategy G4-19
List the key issues in the process of developing the report content
Identification of key areas
G4-22
Report the effect of any restatements of information provided in previous reports, and the reasons for such restatements
This report has no restatement of the information
G4-23
Significant changes from previous reporting period in the scope and aspect boundaries
No significant changes
105
The Involvement Of Stakeholders G4-24
List of Enterprise stakeholder groups
Connecting different stakeholders for sustainable development goals
105
G4-25
Basis of selecting and identifying stakeholders
Connecting different stakeholders for sustainable development goals
105
G4-26
The approach of the involvement of stakeholders
Connecting different stakeholders for sustainable development goals
105
G4-27
The key themes and concerns raised during stakeholder participation, how businesses respond to the content (including feedback via reports)
Connecting different stakeholders for sustainable development goals
105
104
Report Profile G4-28
Reporting period
Report Overview
G4-29
Recent reporting period
2020 (for the year of 2019)
G4-30
Report Cycle
Annually
G4-31
Contacts
Report Overview
104
119
ANNUAL REPORT VCSC 2020
GRI CONTENT INDEX GRI
PUBLIC INFORMATION
REPORT CONTENT
Page
Governance G4-34
Governance structure of the organization
Organizational structure & executive board
77
G4-37
Report on consulting progress between the related parties and highest governance body about the economic, social and environmental impacts.
Connecting different stakeholders for sustainable development
105
The role of highest governance bodies in setting goals, values and strategies
G4-45
Report the highest governance body’s role in the identification and management of economic, environmental and social impact, risks and opportunities.
Risk management - Annual Report; Corporate governance towards sustainable development
68 & 102
Remuneration & benefits G4-51
Report the remuneration policies for the highest governance body and senior executives
SPECIFIC CONTENTS
Sustainable economic growth
83
Economic goals
Economic Efficiency G4-EC1
The direct generated and distributed economic value
Sustainable economic growth
106-110
Sustainable economic growth
106-110
The direct economic impacts G4-EC8
The indirect economic impacts
SPECIFIC CONTENTS
Social goals
LABOR USE Jobs G4-LA1
Total labor force, the rate of new recruitment, retrenchment rate are classified by age, gender and region
People at VCSC
G4-LA2
The subsidies for full-time employees but not for temporary or part-time workers
VCSC The best environment to work
120
34-35
37
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Messages from Management Board and preface
Company overview
Overview of corporate performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
GRI
PUBLIC INFORMATION
REPORT CONTENT
Page
Education & Training G4- LA9
Average hours of training per year per employee
Training and promoting human resource
40-41
G4-LA11
The percentage of employees receiving performance assessment and periodic professional development, by gender and employee portfolios
Team cohesion for sustainability
38-39
Team cohesion for sustainability
38-39
Team cohesion for sustainability
38-39
Diversity and equity to seize opportunities
G4-LA12
The composition of the management levels and detailed list of employees in each portfolio by gender, age, minority membership and other indicators of diversity Unbiased reward equity
G4-LA13
The wage and basic remuneration rate between women and men under the employee portfolio, by the importance of location activities Local Communities
G4-S01
Percentage of operation with implemented local community engagement, impact assessments and development programs
VCSC Constantly works for the community
116-117
PRODUCT LIABILITY G4-S01
Survey results satisfaction
of
assessing
customer
Action for customers
113
121
Our achievements are testimony to the appropriateness and efficiency of the model that we have employed since the very beginning - modern investment banking. VCSC aims to build a sustainable future for its customers and partners, facilitate sustainable growth, and maximize long-term shareholder value.
Value affirmation Shares information and investor relations
124
Shareholder structure
126
Financial statements
128
ANNUAL REPORT VCSC 2020
STOCK INFORMATION 2020 was a turbulent year to the global economy in general and the Vietnamese stock market in particular due to the COVID-19 pandemic. Other challenges include: a growing competition between securities companies in brokerage and margin lending, especially with the penetration of foreign securities companies backed by low capital cost; constant pressure caused by waves of foreign capital withdrawal from frontier and emerging markets; and lack of IPO advisory deals in Investment Banking sector as the listing market was on the wane in the first half of 2020.
VCSC’s Board of Directors acknowledged the reality and revised down the 2020 profit plan to 35% compared to 2019 result at VCSC’s Annual General Meeting of Shareholders held in June 2020. At that time, we developed VCSC’s 2020 business scenario based on the forecasts that the daily trading volatility of the stock market in 2020 shall be much wider than that in 2019, and VN-Index shall settle around 850 points. As an upside to this guidance, if COVID-19 vaccine’s trials reported a high success rate by the end of 2020, we could expect substantial recovery of the stock market and better-than-expected business results. With accurate forecasts and the VN-Index closing at 1,104 at the end of 2020, VCSC’s profit-after-tax was 73% higher than the target approved by the AGM - VND550bn.
VCSC’s Board of Directors has demonstrated its strong commitment to shareholders by exceeding the set targets for 2020, thanks to a thorough understanding and precise prediction of the market, as well as the ability to maintain a diverse and balanced business structure of brokerage, investment banking, and investment. VCI stock chart Closing price 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Jan 20
Feb 20
Mar 20
Apr 20
May 20
Jun 20
Jul 20
Aug 20
Sep 20
Oct 20
Nov 20
Dec 20
Source: Bloomberg, VCSC
However, suffering the same fate as other stocks, VCI’s share prices was subject to intense adjustment in the first half of 2020, notably in March 2020, as COVID-19 outbreak resulted in a national lockdown in the first two weeks of April 2020. Fortunately, given the successful containment of COVID-19 in the second half of 2020, economic recovery and the SBV’s policy to lower interest rates, market liquidity started to flow again. VCSC’s positive business results and a sharp rise in VCSC shares were fostered by the market liquidity rebound, along with the solid growth of the VN-Index, from a low of 656 points in March 2020 to 1,104 points by the end of 2020. VCSC 124
shares ended the year 2020 at VND 58,200, a rise of 345% from a low of VND13,080 in March 2020, and of 114% from the beginning-of-year of VND27,170. Vietnam’s stock market is expected to maintain its momentum in 2021, owing to the country’s favorable macroeconomic prospects in comparison to the rest of the region. When combined with a bold, long-term business strategy, the Board of Directors of VCSC believes that 2021 will be a watershed moment in the company’s operations.
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Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
INVESTOR RELATIONS ACTIVITIES
In 2020, VCSC continued to reinforce the relationship with our shareholders and potential investors through a series of active investor relations activities.
Together with the quarterly Financial Statements, VCSC published quarterly Earnings Release with detailed breakdown on each business segment performances. Despite the disruption of COVID-19 pandemic to international travel, especially in the first half of 2020, VCSC maintained our quarterly conference calls with institutional investors to provide more insights to our business progress and outlook. In December 2020, VCSC resumed our quarterly meeting with retail shareholders
and investors to update 2020 business performance and 2021 outlook. The email address ir@vcsc.com.vn also received many enquiries from investors for the general strategy of VCSC as well as the details of the company’s financial situation, all of which were promptly answered by relevant departments. Via these channels, VCSC’s Board of Management spent a lot of time both in group and oneon-one with investors who are interested in VCI shares.
125
ANNUAL REPORT VCSC 2020
SHAREHOLDER INFORMATION AS O F 23/ 12/ 20 2 0
SHAREHOLDER STRUCTURE No.
Category
Number of Shares
Total equity 1
Value (10,000 VND)
Ratio (%)
165,600,000
1,656,000,000,000
100%
47,493,058
474,930,580,000
28.68%
118,106,942
1,181,069,420,000
71.32%
Internal Shareholders BOM, BOD, BOS CA
2
Other Shareholders Retail and institutional
No.
Category
Number of Shares
Total equity
Value (10,000 VND)
Ratio (%)
165,600,000
1,656,000,000,000
100%
1
Shareholders owning 5% or more
57,733,911
577,339,110,000
34.86%
2
Shareholders owning 1% to less than 5%
68,895,103
688,951,030,000
41.60%
3
Shareholders owning under 1%
38,970,986
389,709,860,000
23.53%
No.
Category
Number of Shares
Total equity 1
Foreign shareholders
2
Local shareholders
Ratio (%)
165,600,000
1,656,000,000,000
100%
43,029,834
430,298,340,000
25.98%
122,570,166
1,225,701,660,000
74.02%
Structure of shareholders in equity (%)
Structure of shareholders in individual & foreign(%)
,5 23
98
6
,8 34
68
, 28
, 25
3
Structure of shareholders in shares (%)
Value (10,000 VND)
60
Shareholders owning 5% or more Shareholders owning 1% to less than 5% Shareholders owning under 1%
02
126
, 74
2 ,3 71
Internal shareholders Other shareholders
41,
Foreign shareholders Local shareholders
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Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
LIST OF MAJOR SHAREHOLDERS No.
Individual / Organization
1
To Hai
2
Truong Nguyen Thien Kim
3
PYN Elite Fund (NON-UCITS)
Number of Shares
Number of deposited shares
Ownership ratio
37,519,883
6,000,000
22.66%
8,784,128
2,000,000
5.30%
11,429,900
11,429,900
6.90%
LIST OF INTERNAL SHAREHOLDERS No.
Name
Position
Total
Ownership ratio (%)
BODs 1
Nguyen Thanh Phuong
Chairwoman
6,750,000
4.08%
2
To Hai
Member
37,519,883
22.66%
3
Tran Quyet Thang
Member
270,000
0.16%
4
Huynh Richard Le Minh
Member
0
0.00%
5
Nguyen Hoang Bao
Member
0
0.00%
6
Le Pham Ngoc Phuong
Member
0
0.00%
7
Nguyen Lan Trung Anh
Member
0
0.00%
BOM 1
Dinh Quang Hoan
Deputy General Director
1,889,975
1.14%
2
Nguyen Quang Bao
Deputy General Director
993,200
0.60%
BOS 1
Truong Ngoc Hoai Phuong
Chief Supervisor
0
0.00%
2
Bui Thi Minh Nguyet
Member
0
0.00%
3
Truong Thi Huyen Trang
Member
0
0.00%
70,000
0.04%
47,493,058
28.68%
CHIEF ACCOUNTANT 1
Doan Minh Thien Total
Chief Accountant
127
ANNUAL REPORT VCSC 2020
CORPORATE INFORMATION Establishment and operation licence
No. 68/UBCK-GP dated 6 November 2007 issued by the State Securities Commission. The Establishment and operation licence was amended several times and the latest amendment No. 65/GPĐC-UBCK was issued on 1 October 2020.
Board of Directors
Ms. Nguyen Thanh Phuong
Chairperson
Mr. To Hai Member Mr. Huynh Richard Le Minh Member Mr. Tran Quyet Thang Member Mr. Nguyen Hoang Bao Member
Mr. Le Pham Ngoc Phuong
Member (from 24/6/2020)
Mr. Nguyen Lan Trung Anh
Member (from 24/6/2020)
Mr. Nguyen Quang Bao Member (until 24/6/2020)
Board of Supervision
Mr. Truong Ngoc Hoai Phuong
Chief Supervisor (from 24/6/2020)
Ms. Bui Thi Minh Nguyet Member
Ms. Truong Thi Huyen Trang
Member
Ms. Dang Ngoc Thao Uyen
Member (until 24/6/2020)
Board of Management Mr. To Hai General Director Mr. Nguyen Quang Bao Deputy General Director
Mr. Dinh Quang Hoan
Deputy General Director
Legal Representative
Mr. To Hai General Director
Registered office 15th Floor, Bitexco Financial Tower
No. 2, Hai Trieu Street, District 1, Ho Chi Minh City, Vietnam
Auditor
PwC (Vietnam) Limited
128
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Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
STATEMENT OF RESPONSIBILITY OF THE BOARD OF MANAGEMENT IN RESPECT OF THE FINANCIAL STATEMENTS The Board of Management of Viet Capital Securities Joint Stock Company (“the Company”) is responsible for preparing the financial statements which give a true and fair view of the financial position of the Company as at 31 December 2020 and of the results of its operations, cash flows and changes in equity for the year then ended. In preparing these financial statements, the Board of Management is required to: »» select suitable accounting policies and then apply them consistently; »» make judgments and estimates that are reasonable and prudent; and »» prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business. The Board of Management is responsible for ensuring that proper accounting records are kept which disclose, with reasonable accuracy at any time, the financial position of the Company and which enable the financial statements to be prepared which comply with the basis of accounting set out in Note 2 to the financial statements. The Board of Management is also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud or errors.
APPROVAL OF THE FINANCIAL STATEMENTS We hereby approve the accompanying financial statements as set out on pages 132 to 198 which give a true and fair view of the financial position of the Company as at 31 December 2020 and of the results of its operations, cash flows and changes in equity for the year then ended, in accordance with Vietnamese Accounting Standards, the Vietnamese Corporate Accounting System and prevailing regulations on preparation and presentation of financial statements applicable to securities companies operating in Vietnam. On behalf of the Board of Management
To Hai Chief Executive Officer Ho Chi Minh City, Vietnam 18 March 2021
129
ANNUAL REPORT VCSC 2020
INDEPENDENT AUDITOR’S REPORT TO THE SHAREHOLDERS OF VIET CAPITAL SECURITIES JOINT STOCK COMPANY We have audited the accompanying financial statements of Viet Capital Securities Joint Stock Company (“the Company”) which were prepared on 31 December 2020 and approved by the Board of Management on 18 March 2021. The financial statements comprise the statement of financial position as at 31 December 2020, the statement of comprehensive income, the statement of cash flows and the statement of changes in equity for the year then ended, and explanatory notes to the financial statements including significant accounting policies, as set out on pages 132 to 198.
THE BOARD OF MANAGEMENT’S RESPONSIBILITY The Board of Management of the Company is responsible for the preparation and the true and fair presentation of these financial statements in accordance with Vietnamese Accounting Standards, the Vietnamese Corporate Accounting System and prevailing regulations on preparation and presentation of financial statements applicable to securities companies operating in Vietnam and for such internal control which the Board of Management determines as necessary to enable the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.
AUDITOR’S RESPONSIBILITY Our responsibility is to express an opinion on the 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 standards and requirements, plan and perform the audit in order to obtain reasonable assurance as to 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 an 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 controls relevant to the Company’s preparation and true 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 Company’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Management, 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.
130
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Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
AUDITOR’S OPINION In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as at 31 December 2020, the results of its operations, cash flows and changes in equity for the year then ended, in accordance with Vietnamese Accounting Standards, the Vietnamese Corporate Accounting System and prevailing regulations on preparation and presentation of financial statements applicable to securities companies operating in Vietnam.
OTHER MATTER The independent’s auditor report is prepared in Vietnamese and English. Should there be any conflict between the Vietnamese and English versions, the Vietnamese version shall take precedence.
FOR AND ON BEHALF OF PWC (VIETNAM) LIMITED
Nguyen Hoang Nam Mai Tran Bao Anh Audit Practising Licence No. Audit Practising Licence No. 0849-2018-006-1 4166-2017-006-1 Authorised signatory Report reference number: HCM10177 Ho Chi Minh City, 18 March 2021
131
ANNUAL REPORT VCSC 2020
STATEMENT OF FINANCIAL POSITION
Form B01 - CTCK As at
Code
ITEM
Note
31.12.2020 VND
31.12.2019 VND
ASSETS 100
CURRENT ASSETS
8,312,170,798,945
7,173,102,515,011
110
Financial assets
8,214,643,150,141
7,007,668,775,980
642,512,983,590
794,511,762,602
642,512,983,590
789,511,762,602
111 111.1 111.2
Cash and cash equivalents
3.1
Cash
-
5,000,000,000
112
Financial assets at fair value through profit or loss (“FVTPL”)
Cash equivalents 3.2(a)
614,823,602,299
794,903,064,386
113
Investments held to maturity (“HTM”)
3.2(b)
106,000,000,000
261,500,000,000
3.3
3,881,642,718,172
3,032,275,456,987
3.2(c)
2,712,657,552,909
1,730,973,385,153
114
Loans
115
Available-for-sale financial assets (“AFS”)
116
Provisions for impairment loss of financial assets and collaterals
3.3
(2,384,027,974)
(2,422,427,974)
117
Receivables
3.4
221,798,617,565
44,767,477,295
200,850,615,300
-
117.1
Receivables from disposals of financial assets
117.2
Dividend and interest receivables
20,948,002,265
44,767,477,295
117.4
Dividend and interest receivables not yet due
20,948,002,265
44,767,477,295 282,143,957,259
118
Prepayments to suppliers
3.5
18,747,621,456
119
Service-related receivables
3.4
14,833,156,124
7,681,084,272
122
Other receivables
3.4
5,939,376,000
63,260,466,000
129
Provisions for doubtful debts
3.4
(1,928,450,000)
(1,925,450,000)
97,527,648,804
165,433,739,031
631,993,037
548,838,544
130 131
Other current assets Advances
132
Office tools and supplies
133
Short-term prepaid expenses
137
Other current assets
3.7(a)
62,740,000
29,083,000
5,499,112,767
651,421,487
91,333,803,000
164,204,396,000
200
NON-CURRENT ASSETS
70,234,326,495
69,857,713,462
220
Fixed assets
14,384,201,512
9,907,318,916
221
Tangible fixed assets
222
Historical cost
223a
Accumulated depreciation
227
Intangible fixed assets
228
Historical cost
229a
Accumulated amortisation
240
Construction in progress
250
Other non-current assets
3.6(a)
3.6(b)
3.6(c)
8,034,947,913
4,988,902,979
56,115,140,796
50,202,897,692
(48,080,192,883)
(45,213,994,713)
6,349,253,599
4,918,415,937
49,981,431,542
42,483,731,542
(43,632,177,943)
(37,565,315,605)
5,649,600,000
6,939,777,881
50,200,524,983
53,010,616,665
5,987,200,091
5,853,033,524
251
Pledged assets, mortgaged assets, security deposits in long-term
252
Long-term prepaid expenses
12,950,546,970
17,085,900,679
254
Deposits in the Settlement Supporting Fund
3.7(b)
21,169,262,072
20,000,000,000
255
Other non-current assets
3.7(c)
10,093,515,850
10,071,682,462
270
TOTAL ASSETS
8,382,405,125,440
7,242,960,228,473
132
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Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
As at Code
ITEM
Note
31.12.2020 VND
31.12.2019 VND
300
LIABILITIES
3,860,918,605,726
3,191,354,377,816
310
Current liabilities
3,733,857,117,341
3,089,095,306,237
2,696,130,000,000
1,450,980,000,000
311
Short-term borrowings
312
Short-term borrowings
3.9
2,696,130,000,000
1,450,980,000,000
316
Short-term issued bonds
3.9
668,320,000,000
1,081,570,000,000
318
Trading obligations
3.10
18,874,600,217
5,114,430,421
320
Short-term trade payables
3.11
100,113,858,204
12,209,780,500
321
Short-term customers’ advances
3.12
7,971,369,863
210,000,000
322
Taxes and other payables to the State
3.13
95,855,416,887
55,820,333,551
323
Payables to employees
89,086,690,581
106,862,704,632
325
Short-term accrued expenses
3.14
29,820,525,679
62,460,891,523
329
Other short-term payables
3.15
27,684,655,910
313,867,165,610
127,061,488,385
102,259,071,579
127,061,488,385
102,259,071,579
3,860,918,605,726
3,191,354,377,816
340
356
Non-current liabilities Deferred income tax liabilities
3.16
TOTAL LIABILITIES 400
OWNERS’ EQUITY
4,521,486,519,714
4,051,605,850,657
410
Owners’ equity
4,521,486,519,714
4,051,605,850,657
2,240,917,295,890
2,228,317,127,890
1,656,000,000,000
1,644,000,000,000
1,656,000,000,000
1,644,000,000,000
584,917,295,890
585,317,720,000
-
(1,000,592,110)
426,695,337,106
326,301,146,470
411
Owners’ capital
411.1
Share capital
411.1a
Ordinary shares with voting rights
411.2
Share premium
411.5
Treasury shares
3.17
412
Revaluation reserve
414
Supplementary capital reserve
115,757,247,094
77,674,425,835
415
Financial risk and operation reserve
165,600,000,000
156,079,089,425
417
Undistributed earnings
1,572,516,639,624
1,263,234,061,037
1,504,450,539,793
1,202,423,825,444
68,066,099,831
60,810,235,593
TOTAL EQUITY
4,521,486,519,714
4,051,605,850,657
TOTAL RESOURCES
8,382,405,125,440
7,242,960,228,473
417.1
Realised profits after tax
417.2
Unrealised profits
440
3.18
3.19
133
ANNUAL REPORT VCSC 2020
STATEMENT OF FINANCIAL POSITION ( Continued ) Form B01 – CTCK
OFF STATEMENT OF FINANCIAL POSITION ITEMS As at Code
A
ITEMS
Note
31.12.2020 VND
31.12.2019 VND
ASSETS OF THE COMPANY AND ASSETS UNDER ENTRUSTMENT
004
Bad debts written off (VND)
4.1
25,145,170,448
25,145,170,448
005
Foreign currencies (VND equivalent)
4.2
22,604,539,518
31,908,966,089
006
Number of shares in issue (shares)
4.3
165,600,000
164,349,986
007
Number of treasury shares (shares)
3.17(a)
-
50,014
Quantity
008
Securities listed/registered at Vietnam Securities Depository (VSD)
4.4
69,691,744
106,881,061
010
Securities purchased and awaiting settlement
4.5
3,090,532
467,510
012
Securities not in custody of VSD
4.6
23,132,381
7,121,268
014
Covered warrants authorised but not yet issued
4.7
3,897,980
-
2,399,005,498
2,072,082,696
1,990,739,149
1,930,208,556
021.2 Restricted securities
171,542,642
32,075,425
021.3 Pledged securities
185,095,066
68,832,838
021.4 Suspended securities
18,542,161
32,969,821
021.5 Securities awaiting settlement
33,086,480
7,996,056
14,485,745
164,235,342
B
021
ASSETS OF AND LIABILITIES TO CUSTOMERS
Securities listed/registered at the Vietnam Securities Depository (“VSD”)
021.1 Freely traded securities
023
Securities purchased and awaiting settlement
The notes on pages 142 to 198 are an integral part of these financial statements. 134
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Overview of corporate Performance
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Corporate governance
Future prospects
Sustainability report
Value affirmation
As at Code
ITEMS
Note
31.12.2020 VND
31.12.2019 VND
Value (VND)
026
Customers’ deposits
2,750,620,249,557
627,318,875,748
027
Customers’ deposits for securities trading
1,933,455,555,057
385,530,590,048
85,260,570,917
8,842,112,364
817,164,694,500
241,788,285,700
029.1 Cash blocked for trading settlements of domestic customers
701,736,173,400
239,585,872,100
029.2 Cash blocked for trading settlements of foreign customers
115,428,521,100
2,202,413,600
027.1 Customers’ deposits at VSD 029
Cash blocked for trading settlements
031
Payables to customers relating to their deposits at the Company for securities trading
1,933,455,555,057
385,530,590,048
031.1
Payables to domestic customers relating to their deposits at the Company for securities trading
1,480,145,300,524
345,710,194,949
032.2
Payables to foreign customers relating to their deposits at the Company for securities trading
453,310,254,533
39,820,395,099
035
Payables for dividends, bond principals and coupons payments on behalf
Nguyen Thi Lanh Doan Minh Thien Preparer Chief Accountant
3,476,242,800
-
To Hai Chief Executive Officer 18 March 2021
The notes on pages 142 to 198 are an integral part of these financial statements. 135
ANNUAL REPORT VCSC 2020
STATEMENT OF COMPREHENSIVE INCOME
Form B02 - CTCK
For the year ended Code ITEMS
Note
31.12.2020 VND
31.12.2019 VND
889,393,998,425
689,764,912,288
5.1
893,175,954,490
591,499,464,101
OPERATING INCOME 01
Income from FVTPL financial assets
01.1 Realised gains on disposal of FVTPL financial assets 01.2
(Decrease)/increase in revaluation gains of FVTPL financial assets
5.2
(60,530,814,811)
47,853,417,575
01.3
Dividends and interest income from FVTPL financial assets
5.3
56,734,539,167
50,412,030,612
01.4
Decrease in revalued amount of covered warrants liabilities
5.2
14,319,579
-
18,647,875,460
15,817,991,424
02
Income from HTM financial assets
03
Interest income from loans and receivables
295,297,126,841
331,722,110,994
06
Brokerage fee income
466,368,923,917
433,705,161,798
07
Underwriting income and placing fee income
2,600,000,000
1,993,863,636
08
Investment consultancy service income
9,462,667,650
12,984,104,888
09
Custody service income
11,975,207,024
9,591,349,631
10
Financial consultancy service income
24,802,444,775
43,949,604,545
11
Other operating income
11,043,346,471
1,415,253,446
20
TOTAL OPERATING INCOME
1,729,591,590,563
1,540,944,352,650
(203,461,038,032)
(149,051,425,508)
5.1
(273,047,363,561)
(129,870,406,505)
OPERATING EXPENSES 21
Losses from FVTPL financial assets
21.1 Realised losses on disposal of FVTPL financial assets 21.2
Decrease/(increase) in revaluation losses of FVTPL financial assets
5.2
72,499,436,591
(19,181,019,003)
21.4
Increase in revaluation losses of covered warrants liabilities
5.2
(2,913,111,062)
-
24
Reversal of provisions for financial assets, losses on bad debts, impairment losses of financial assets and interest expenses associated with loans
3.3
38,400,000
104,800,000
26
Proprietary trading activities
(13,197,922,818)
(7,009,554,872)
27
Brokerage fee expenses
(267,851,032,315)
(265,877,760,094)
30
Custody service expenses
(10,978,331,489)
(11,082,200,508)
31
Financial consultancy service expenses
(17,519,912,924)
(24,236,392,639)
32
Other operating expenses
(9,034,647,654)
(5,410,686,133)
40
TOTAL OPERATING EXPENSES
(522,004,485,232)
(462,563,219,754)
The notes on pages 142 to 198 are an integral part of these financial statements. 136
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Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
For the year ended Code ITEMS
Note
31.12.2020 VND
31.12.2019 VND
FINANCIAL INCOME 41
Foreign exchange gains
1,280,000,000
1,422,254,249
42
Dividend income and interest income from demand deposits
4,578,556,094
8,504,372,350
50
TOTAL FINANCIAL INCOME
5,858,556,094
9,926,626,599
(5,300,000,000)
(840,153,731)
(173,513,458,172)
(165,277,553,123)
(11,809,305,565)
-
(190,622,763,737)
(166,117,706,854)
-
-
(72,405,019,485)
(67,200,541,333)
950,417,878,203
854,989,511,308
621,078,878
17,597,948
-
-
621,078,878
17,597,948
FINANCIAL EXPENSES 51
Foreign exchange losses
52
Interest expense
55
Other financial expenses
60
TOTAL FINANCIAL EXPENSES
61
SELLING EXPENSES
62
GENERAL AND ADMINISTRATIVE EXPENSES
70
OPERATING RESULT
5.4
OTHER INCOME AND EXPENSES 71
Other income
72
Other expenses
80
NET OTHER INCOME
90
NET ACCOUNTING PROFIT BEFORE TAX
951,038,957,081
855,007,109,256
91
Realised profit
941,969,126,784
826,334,710,684
92
Unrealised profit
9,069,830,297
28,672,398,572
100
BUSINESS INCOME TAX
(182,126,667,660)
(161,826,531,988)
(182,422,798,514)
(155,223,164,412)
296,130,854
(6,603,367,576)
5.5
100.1 Business income tax - current 100.2 Business income tax - deferred 200
NET PROFIT AFTER TAX
768,912,289,421
693,180,577,268
300
OTHER COMPREHENSIVE INCOME/(LOSS), NET OF TAX
100,394,190,636
(72,188,349,086)
301
Gain/(loss) from revaluation of AFS financial assets
100,394,190,636
(72,188,349,086)
400
TOTAL COMPREHENSIVE INCOME/(LOSS)
100,394,190,636
(72,188,349,086)
500
EARNINGS PER SHARE
501
Basic earnings per share (VND/share)
5.6
4,668
4,240
502
Diluted earnings per share (VND/share)
5.6
4,668
4,240
3.18
Nguyen Thi Lanh Doan Minh Thien Preparer Chief Accountant The notes on pages 142 to 198 are an integral part of these financial statements.
To Hai Chief Executive Officer 18 March 2021 137
ANNUAL REPORT VCSC 2020
STATEMENT OF CASH FLOWS
Form B03b - CTCK
(Indirect method)
For the year ended Code ITEMS
31.12.2020 VND
31.12.2019 VND
Cash flows from operating activities 01
Net profit before tax
951,038,957,081
855,007,109,256
02
Adjustments for:
162,664,702,012
132,252,452,298
10,634,646,105
11,729,076,470
(35,400,000)
22,200,000
173,513,458,172
165,277,553,123
(500,000,000)
(8,900,000)
(20,948,002,265)
(44,767,477,295)
(72,499,436,591)
19,181,019,003
(72,499,436,591)
19,181,019,003
60,530,814,811
(47,853,417,575)
60,530,814,811
(47,853,417,575)
(1,673,271,187,005)
(1,299,721,219,619)
03
Depreciation and amortisation
04
Provisions
06
Interest expenses
07
Profits from investing activities
08
Accrued interest income
10
11 18
19 30
Changes in non-cash expenses (Decrease)/increase in revaluation losses of FVTPL financial assets Changes in non-cash income Decrease/(increase) in revaluation gains of FVTPL financial assets Changes in working capital
31
Decrease/(increase) in FVTPL financial assets
192,048,083,867
(340,937,152,953)
32
Decrease/(increase) in HTM financial assets
155,500,000,000
(261,500,000,000)
33
Increase in loans
(849,367,261,185)
(240,693,583,658)
34
(Increase)/decrease in AFS financial assets
(881,289,977,120)
235,449,898,024
35
Increase in receivables from disposals of financial assets
(200,850,615,300)
-
36
Decrease in dividend and interest receivables
44,767,477,295
27,126,898,280
37
Increase in service-related receivables
(7,152,071,852)
(2,840,490,057)
39
Decrease/(increase) in other receivables
57,321,090,000
(63,260,466,000)
40
Decrease/(increase) on other assets
72,597,781,552
(162,625,396,214)
41
Increase/(decrease) in accrued expenses (excluding interest expenses)
19,142,542,631
(31,301,967,893)
42
(Increase)/decrease in prepaid expenses
(712,337,571)
8,259,316,544
43
Business income tax (“BIT”) paid
(160,512,817,898)
(135,350,464,617)
44
Interest paid
(225,296,366,647)
(150,049,879,285)
45
Increase/(decrease) in trade payables
351,300,413,507
(269,622,371,459)
47
Increase/(decrease) in tax and other payables to the State (excluding business income tax paid)
43,223,650,380
(19,856,019,562)
48
Decrease in payables to employees
(17,776,014,051)
(20,208,800,030)
The notes on pages 142 to 198 are an integral part of these financial statements. 138
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Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
For the year ended Code ITEMS
31.12.2020 VND
31.12.2019 VND
50
(Decrease)/increase in other payables
(265,045,502,541)
129,318,994,530
52
Other payments for operating activities
(1,169,262,072)
(1,629,735,269)
(571,536,149,692)
(341,134,056,637)
(13,821,350,820)
(8,838,018,881)
500,000,000
8,900,000
(13,321,350,820)
(8,829,118,881)
60
Net cash outflows for operating activities Cash flows from investing activities
61
Purchases of fixed assets
62
Proceeds from disposals of fixed assets
70
Net cash outflows for investing activities
For the year ended Code ITEMS
Note
31.12.2020 VND
31.12.2019 VND
13,452,168,000
16,801,320,000
(852,000,000)
(1,000,592,110)
Cash flows from financing activities 71
Proceeds from issuance of shares
72
Payments for share repurchases
73
Proceeds from borrowings
6.1
7,065,840,000,000
4,997,872,000,000
74.3
Repayments of borrowings
6.2
(6,233,940,000,000)
(4,785,602,000,000)
Payment of dividends
3.15
(411,641,446,500)
(227,957,358,660)
432,858,721,500
113,369,230
(151,998,779,012)
(349,849,806,288)
794,511,762,602
1,144,361,568,890
789,511,762,602
1,144,361,568,890
5,000,000,000
-
642,512,983,590
794,511,762,602
642,512,983,590
789,511,762,602
-
5,000,000,000
76 80
Net cash inflows from financing activities
90
Net decrease in cash and cash equivalents
101
Cash and cash equivalents at beginning of year
101.1
Cash
101.2
Cash equivalents
103
Cash and cash equivalents at end of year
103.1
Cash
103.2
Cash equivalents
3.1
3.1
Additional information relating to the statement of cash flows is presented in Note 6.
The notes on pages 142 to 198 are an integral part of these financial statements. 139
ANNUAL REPORT VCSC 2020
STATEMENT OF CASH FLOWS (Indirect method) (Continued) Form B03b - CTCK
CASH FLOWS OF BROKERAGE AND ENTRUSTMENT ACTIVITIES For the year ended Code ITEMS
31.12.2020 VND
31.12.2019 VND
Cash flows of brokerage and entrustment activities 01
Brokerage trading proceeds
119,198,958,061,970
82,591,542,648,508
02
Brokerage trading payments
(194,827,680,368,677)
(129,784,638,531,069)
07
Receipts for settlement of customers’ transactions
77,690,059,796,252
46,982,915,941,332
76,418,458,553
8,842,112,364
07.1
Net deposit in customers’ margin accounts at VSD for derivative trading
11
Payments for custody fees of customers
(10,978,331,489)
(11,082,200,508)
20
Net increase/(decrease) in customers’ deposits
2,126,777,616,609
(212,420,029,373)
30
Customers’ deposits at beginning of year
627,318,875,748
839,738,905,121
31
Cash at bank
627,318,875,748
839,738,905,121
32
Customers’ deposits for securities trading under monitoring of the Company
385,530,590,048
637,630,822,521
34
Cash blocked for clearing and settlement
241,788,285,700
202,108,082,600
40
Customers’ deposits at end of year
2,754,096,492,357
627,318,875,748
41
Cash at bank
2,754,096,492,357
627,318,875,748
42
Customers’ deposits for securities trading under monitoring of the Company
1,933,455,555,057
385,530,590,048
44
Cash blocked for clearing and settlement
820,640,937,300
241,788,285,700
Nguyen Thi Lanh Doan Minh Thien Preparer Chief Accountant
The notes on pages 142 to 198 are an integral part of these financial statements. 140
To Hai Chief Executive Officer 18 March 2021
Owners’ capital
Ordinary shares with voting rights
Share premium
Treasury shares
Supplementary capital reserve
Financial risk and operation reserve
Revaluation reserve
Undistributed earnings
Realised profit after tax
Unrealised profit after tax
1.
1.1
1.2
1.3.
2.
3.
4.
5.
5.1
5.2
1.1.2020
326,301,146,470
156,079,089,425
77,674,425,835
(1,000,592,110)
585,317,720,000
60,810,235,593
3,642,977,730,785 4,051,605,850,657
37,872,316,735
827,370,269,076 1,202,423,825,444
865,242,585,811 1,263,234,061,037
398,489,495,556
122,566,956,504
44,162,292,914
-
582,517,500,000
1,629,998,900,000 1,644,000,000,000
2,212,516,400,000 2,228,317,127,890
1.1.2019
Nguyen Thi Lanh Doan Minh Thien Preparer Chief Accountant
Total
Changes in equity
I.
Items
As at
777,006,163,110
22,937,918,858
670,242,658,410
693,180,577,268
-
33,512,132,921
33,512,132,921
-
2,800,220,000
14,001,100,000
16,801,320,000
Increase
929,910,804,001
7,255,864,238
761,656,425,183
768,912,289,421
100,394,190,636
9,520,910,575
38,082,821,259
1,000,592,110
-
12,000,000,000
13,000,592,110
Increase
(460,030,134,944)
-
(459,629,710,834)
(459,629,710,834)
-
-
-
-
(400,424,110)
-
(400,424,110)
Decrease
For the year ended 31 December 2020
To Hai Chief Executive Officer 18 March 2021
(368,378,043,238)
-
(295,189,102,042)
(295,189,102,042)
(72,188,349,086)
-
-
(1,000,592,110)
-
-
(1,000,592,110)
Decrease
For the year ended 31 December 2019
STATEMENT OF CHANGES IN EQUITY
4,051,605,850,657
60,810,235,593
1,202,423,825,444
1,263,234,061,037
326,301,146,470
156,079,089,425
77,674,425,835
(1,000,592,110)
585,317,720,000
1,644,000,000,000
2,228,317,127,890
31.12.2019
31.12.2020
4,521,486,519,714
68,066,099,831
1,504,450,539,793
1,572,516,639,624
426,695,337,106
165,600,000,000
115,757,247,094
-
584,917,295,890
1,656,000,000,000
2,240,917,295,890
As at
Form B04 - CTCK
1. 2. 3. 4. 5. 6. 7.
8.
Messages from Management Board and preface Company overview Overview of corporate Performance Financial position and risk management Corporate governance Future prospects Sustainability report Value affirmation
141
ANNUAL REPORT VCSC 2020
NOTES TO THE FINANCIAL STATEMENTS Form B09 - CTCK
FOR THE YEAR ENDED 31 DECEMBER 2020
1
GENERAL INFORMATION Viet Capital Securities Joint Stock Company (“the Company”) is a joint stock company incorporated in Vietnam under Establishment and operation licence No. 68/UBCK - GP dated 6 November 2007 issued by State Securities Commission. The Establishment and operation licence were amended several times and the latest amendment No. 65/GPĐC-UBCK was issued on 1 October 2020. The Company was listed on the Ho Chi Minh City Stock Exchange in accordance with Decision No. 233/QDSGDHCM issued by the Ho Chi Minh City Stock Exchange on 30 June 2017. Head quarter and contact information The Company is headquartered in Ho Chi Minh City, at 15th floor of Bitexco Financial Tower, 2 Hai Trieu Street, District 1. Contact point: Email: info@vcsc.com.vn Telephone: (+84) 8 3914 3588 Articles of association The Company’s Articles of association was approved on 19 April 2017 and last modified on 8 September 2020. Headcount As at 31 December 2020, the Company had 228 employees (as at 31 December 2019: 247 employees). Capital size
As at 31 December 2020 (“reporting date”) VND
The Company’s charter capital
1,656,000,000,000
Total owners’ equity
4,521,486,519,714
Total assets
8,382,405,125,440
Principal activities The principal activities of the Company include provision of securities brokerage service, proprietary securities trading, securities investment consultancy service, corporate finance consultancy service, and underwriting and securities custodian services. Investment objectives and investment restrictions The investment objectives of the Company are to maximise earnings. The Company’s investment portfolio and its restrictions shall be in compliance with the investment objectives and investment strategies as stipulated in its Articles of association and applicable securities rules. Network of operation As at the reporting date, the Company had 1 branch and 3 transaction offices in Vietnam.
142
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Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1 Basis of preparation of financial statements The financial statements have been prepared in accordance with Vietnamese Accounting Standards, the Vietnamese Corporate Accounting System, Circular 210/2014/TT-BTC dated 30 December 2014 (“Circular 210/2014/TT-BTC”), Circular 334/2016/TT-BTC dated 27 December 2016 (“Circular 334/2016/TT-BTC”), Official Letter No. 6190/BTCCĐKT dated 12 May 2017 (“Official Letter 6190/BTC-CĐKT”) and Circular 23/2018/TT-BTC dated 12 March 2018 (“Circular 23/2018/TT-BTC”) all issued by the Ministry of Finance, and prevailing regulations on the preparation and presentation of financial statements applicable to securities companies operating in Vietnam. The accompanying financial statements are not intended to present financial position and results of operations, cash flows and changes in equity in accordance with accounting principles generally accepted in jurisdictions other than Vietnam. The accounting principles and practices utilised in Vietnam may differ from those generally accepted in countries and jurisdictions other than Vietnam. The financial statements have been prepared under the historical cost convention as modified by the revaluation of financial assets at fair value through profit or loss (“FVTPL”) and available-for-sale financial assets (“AFS”) based on market value or fair value (in case market value is indeterminable). The financial statements in Vietnamese language are the official statutory financial statements of the Company. The financial statements in English language have been translated from the Vietnamese language financial statements. 2.2 Accounting estimates The preparation of financial statements in conformity with Vietnamese Accounting Standards, the Vietnamese Corporate Accounting System and prevailing regulations on preparation and presentation of financial statements applicable to securities companies operating in Vietnam requires the Board of Management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the reporting date and the reported amounts of revenues and expenses during the financial year. The areas involving significant estimates and assumptions are as follows:
»» Market value/fair value of financial assets (Note 2.7 and Note 3.2); »» Provisions for impairment loss of HTM financial assets and loans (Note 2.7 and Note 3.2); »» Provision for doubtful debts (Note 2.8 and Note 3.4); »» Assessment of collectiblity of other receivables and other assets (Note 3.4, Note 3.5 and Note 3.7(a)). 2.3 Form of records applied The Company uses the accounting software tailored in general journal to record its transactions. 2.4 Fiscal year The Company’s fiscal year is from 1 January to 31 December. 2.5 Currency The financial statements are presented in the Vietnamese Dong (“VND”), which is also the Company’s accounting currency. The Company determines their accounting currency based on the currency which is mainly used in trading securities and rendering of services, which has a significant impact on selling prices of securities and services, which is normally used to set the prices and receive payments; which is mainly used in purchases of goods or services, which has a significant impact on staff costs or operating costs, and is normally used as payments for those costs.
143
ANNUAL REPORT VCSC 2020
2
Form B09 - CTCK
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED )
2.5 Currency (Continued) Additionally, the Company also uses this currency to raise financial resources (such as via issuance of shares or bonds) and/or regularly collect this currency from business operations and savings. Transactions arising in foreign currencies are translated at exchange rates ruling at the transaction dates in accordance with Circular 200/2014/TT-BTC (“Circular 200/2014/TT-BTC”) dated 22 December 2014. Foreign exchange differences arising from these transactions are recognised in profit or loss of the statement of comprehensive income. Monetary assets and liabilities denominated in foreign currencies at the reporting dateexcept liabilities that have been hedged, are respectively translated at the buying and selling exchange rates at the reporting date of the commercial bank where the Company regularly trades. Foreign currencies deposited in bank at the reporting date are translated at the buying exchange rate of the commercial bank where the Company opens the foreign currency accounts. Foreign exchange differences arising from these translations are recognised as income or expenses in profit or loss of the statement of comprehensive income. 2.6 Cash and cash equivalents Cash and cash equivalents comprise cash on hand, cash at bank of the Company, security deposit for covered warrants issued and other short-term investments with maturity within three (3) months since purchase, which are highly liquid, readily convertible to cash and subject to an insignificant risk of conversion. Cash of customers for securities trading activities and cash of issuers are accounted for off statement of financial position. 2.7 Financial assets (a)
Classification and measurement (i) Financial assets measured at fair value through profit or loss (“FVTPL”) Financial assets at fair value through profit or loss are financial assets held for trading or designated by the Board of Management at initial recognition at fair value through profit or loss. A financial asset is classified as held for trading if meeting one of the following conditions:
»» It is purchased or created for resale/repurchase in short term; or »» At initial recognition, it constitutes a part of an identified portfolio of financial instruments which are traded for short-term profits; or
»» It is a derivative (except those defined as financial guarantees or effective hedges). At initial recognition, the Board of Management designates a financial asset at fair value through profit or loss if such designation promotes the fairness of its presentation due to one of the following reasons:
»» Such designation eliminates or significantly reduces a measurement or recognition inconsistency (also called as “accounting mismatch”) that would otherwise arise due to different bases; or
»» It gives rise to a group of financial assets whose performance is evaluated on a fair value basis, in accordance
with a documented risk management or investment strategy and internally disseminated to the Company’s key management (as defined in Vietnamese Accounting Standard on Related parties disclosure) such as Board of Directors, Board of Management and major shareholders.
Financial assets at fair value through profit or loss are initially recorded at cost exclusive of transaction costs. Transaction costs related to purchases of FVTPL financial assets are expensed off immediately. Financial assets at fair value through profit or loss are subsequently measured at market value or fair value (in case market value is indeterminable). Those shares, including derivatives to be settled in shares, that not traded on active market or those whose fair value is not reliably determined are accounted at cost. All gains or losses from change in fair value of FVTPL financial assets are recognised in profit or loss of the statement of comprehensive income.
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Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
(ii) Held-to-maturity financial assets (“HTM”) HTM financial assets are non-derivative financial assets with the following characteristics:
»» Payments are fixed or determinable; »» Maturity is fixed; and »» The Company has positive intention and ability to hold those assets to maturity. The following assets are excluded from HTM financial assets:
»» Non-derivatives classified as FVTPL financial assets at initial recognition; »» Non-derivatives classified as available-for-sale (“AFS”) financial assets; and »» Non-derivatives qualifying conditions to be classified as loans and receivables. No financial assets shall not be classified held-to-maturity if the Company has, during the current financial year or during the two preceding financial years, sold or reclassified more than an insignificant amount of HTM financial assets before maturity (more than insignificant in relation to the total amount of HTM financial assets) other than sales or reclassifications that:
»» are so close to maturity or the financial asset’s call date (less than three months before maturity) that changes in the market rate of interest would not have a significant effect on the financial asset’s fair value;
»» occur after the Company has collected substantially all of the financial asset’s original principal through scheduled payments or prepayments; or
»» are attributable to an isolated event that is beyond the Company’s control, is non-recurring and could not have been reasonably anticipated by the Company.
HTM financial assets are initially recorded at cost inclusive of directly attributable purchase costs, subsequently measured at amortised cost using effective interest rate method (“EIR”).. Effective interest method is a method used in calculating the amortised cost of an HTM financial asset or a group of HTM financial assets and in the allocation and recognition of the interest revenue or interest expense in profit or loss over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments or receipts through the financial instrument’s expected life, or a shorter period where appropriate, to the net present value of a financial asset or a financial liability. Amortised cost of HTM financial assets is determined at historical cost less principal received plus (or less) accumulated amortisation using effective interest rate method between historical cost and maturity value, less impairment loss (if any). As at reporting date, HTM investments are provided for impairment loss when there is any objective evidence of impairment or uncollectibility as a result of one or more events that occurred subsequent to the initial recognition and affected estimated future cash flows of HTM investments. Objective evidence of impairment may include:
»» Significant financial difficulty of the issuer or the obligor; »» A breach of contract, such as default or delinquency in interest or principal payments; »» The lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender wouldnot otherwise consider;
»» It becoming probable that the borrower will enter bankruptcy or other financial reorganisation; »» Observable data indicating that there is a measurable decrease in the estimated future cash flows from a group
of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the group, including:
145
ANNUAL REPORT VCSC 2020
2
Form B09 - CTCK
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED )
2.7 Financial assets (Continued) (a)
Classification and measurement (Continued) (ii) Held-to-maturity financial assets (Continued) (i)
Adverse changes in the payment status of borrowers in the group; or
(ii)
National or local economic conditions that correlate with defaults on the assets in the group;
Provision for impairment of HTM financial assets is determined at the difference of the estimated recoverable amount and the carrying value of HTM financial assets at the reporting date. Provision/(reversal of provision) for such impairment is debited/credited to expenses in profit or loss of the statement of comprehensive income. HTM financial assets are classified as current and non-current assets in the statement of financial position based on their remaining maturity as at the reporting date. (iii) Loans Loans are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. In the reporting year, the Company had the following types of loans:
»» Margin loans: the amounts lent to customers for their purchases of listed securities in accordance with Decision 87/QD-UBCK issued by the State Securities Commission on 25 January 2017. According to this regulation, the initial margin (ratio of net equity to market value of security to be purchased on margin as at trading date) is set by the Company but shall be not lower than 50%. The margin loans are collaterised by securities eligible for margin lending; and
»» Trading advances: the amounts advanced to customers at the trading date. These amounts are repaid within two (2) trading days.
Loans are initially recorded at cost and subsequently measured at amortised cost using the effective interest rate method (“EIR”). Amortised cost of loans is determined at historical cost less principal received plus (or less) accumulated amortisation using effective interest rate method between historical cost and maturity value, less impairment loss (if any). As at reporting date, loans are provided for impairment loss when there is any objective evidence of impairment. Provision for impairment of loans is determined at the difference of market value of collateral and the carrying value of loans at the reporting date. Provision/(reversal of provision) for such impairment is debited/credited to expenses in profit or loss of the statement of comprehensive income. (iv) Available-for-sale financial assets (“AFS”) Available-for-sale financial assets are non-derivative financial assets that are not classified as FVTPL, HTM, loans nor receivables. Available-for-sale financial assets are initially recorded at cost inclusive of directly attributable purchase cost.
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At the reporting date, AFS financial assets are measured at fair value. Those shares not traded on active market or those whose fair value is not reliably determined are accounted at cost. All gains or losses from revaluation of AFS financial assets are accounted for directly in equity (other comprehensive income) through the statement of changes in equity, exclusive of impairment losses. Such recognition is applied until the asset is de-recognised. At derecognition, accumulated gains or losses in equity are recognised in profit or loss of the statement of comprehensive income as a reclassification. Gains using effective interest method is recognised in profit or loss of the statement of comprehensive income in accordance with Standard on Revenue recognition. As at reporting date, AFS financial assets are provided for impairment loss when there is any objective evidence of impairment. Objective evidence of impairment for debt instruments may include those identified as for HTM financial instruments. Objective evidence of impairment for equity instruments may include:
»» Significant changes which adversely affect the issuer’s operations as a result of their impacts on the technological, market, economic or legal environment, and indicates that the cost of the equity instrument may not be recovered;
»» A significant or prolonged decline in the fair value of an investment in an equity instrument below its cost; Provision for impairment is determined at the difference of the estimated recoverable amount and the carrying value of AFS financial assets at the reporting date. Impairment loss of AFS financial asset is recorded directly to previously recognised revaluation gain in equity (if any), when there is objective evidence that the AFS financial asset is impaired, accumulated revaluation loss in equity is reclassified to profit or loss of the statement of comprehensive income despite that asset is yet derecognised. (b) Reclassification (i) Reclassification of non-FVTPL financial assets upon disposal Non-FVTPL financial assets are reclassified to FVTPL financial assets before disposal. Accumulated revaluation of AFS financial assets in equity will be recorded on the statement of comprehensive income as a reclassification. (ii) Reclassification due to change in intention/ability to hold the financial assets Reclassification of financial assets due to change in intention/ability to hold the assets is permitted, provided that:
»» Non-derivative FVTPL financial assets that are not required to be classified as FVTPL at initial recognition may be reclassified as loans and receivables in limited circumstances or cash and cash equivalents if meeting certain conditions for reclassification. Gains and losses from revaluation of FVTPL financial assets arising before the reclassification are not reversed.
»» If the change in intention/ability to hold a financial asset results in it being inappropriately reclassified as an HTM
asset, that asset must be reclassified as AFS and re-measured at fair value. Difference between its carrying value and fair value is recognised in profit or loss of the statement of comprehensive income as a reclassification.
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ANNUAL REPORT VCSC 2020
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Form B09 - CTCK
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED )
2.7 Financial assets (Continued) (c) Recognition/de-recognition Purchases and sales of financial assets are recognised on trade date - the date on which the Company becomes a party to the contractual provisions of the instruments. Financial assets are de-recognised when the right to receive cash flows from the financial assets has expired or the Company has transferred substantially all risks and rewards of ownership of those financial assets. When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement but has neither transferred substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Company’s continuing involvement in the asset. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained. (d)
Initial recognition FVTPL financial assets are initially recognised at purchase cost exclusive of transaction costs. Other financial assets are initially recorded at historical cost including directly attributable purchase cost. Bonus issues and stock dividends are initially recognised as financial assets at nil cost.
(e)
Determination of market value/fair value The Company applies valuation bases of financial assets in accordance with Circular 87/2017/TT-BTC dated 15 August 2017 regarding capital adequacy ratio of securities trading entities (“Circular 87/2017/TT-BTC”) and Circular 146/2014/TT-BTC dated 6 October 2014 regarding financial regimes for securities companies and fund management companies (“Circular 146/2014/TT-BTC”), both issued by the Ministry of Finance in determining the market value/fair value of financial assets, in particular: (i)
Shares listed on stock exchanges, shares of the public companies registered for trading on the Unlisted Public Company Market (“UPCoM”)
These shares are revalued at the closing price of the latest trading date prior to the valuation date.
Where shares are not traded for more than two (2) weeks prior to the valuation date, their fair values are determined on the maximum of the following bases:
»» Book value »» Purchase price »» The price determined based on the Company’s valuation techniques (ii)
Unlisted securities registered/not registered for trading at the Vietnam Securities Depository (“VSD”) These shares are revalued based on the average of transacted prices announced by three (3) independent quoting entities at the latest trading date within one (1) month prior to the valuation date. Management and executives of the Company must not be related to management and executives of the quoting entities in accordance with Law on Securities.
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When it is impossible to obtain three (3) quotations as required above, these shares are revalued at the maximum of the following prices:
»» Quoted prices »» Most recently quoted prices »» Book value »» Purchase price »» The price determined based on the Company’s valuation techniques (iii) Suspended shares, delisted shares or unregistered shares The fair values of these shares are determined at the maximum of the following prices:
»» Book value »» Par value »» The price determined basing on the Company’s valuation techniques (iv)
Shares of entities in the process of dissolution or bankruptcy The fair values of these shares are determined at one of the following prices:
»» 80% of disposal value of these shares as at the latest preparation date of their balance sheet prior to the valuation date
»» The price determined basing on the Company’s valuation techniques (v)
Other shares, other investments The fair values of these shares are determined at the maximum of the following prices:
»» Book value »» Purchase price/ contributed amount »» The price determined basing on the Company’s valuation techniques (vi) Bonds listed on stock exchanges These bonds are revalued based on the average quoted price of outright transactions on stock exchanges at the latest trading date prior to the valuation date plus accumulated accrued interest. Where these bonds are not traded for more than two (2) weeks prior to the valuation date, the fair values of these bonds are determined at the maximum of the following prices:
»» Purchase price plus accumulated accrued interest »» Par value plus accumulated accrued interest »» The price determined basing on the Company’s valuation techniques plus accumulated accrued interest (vii) Unlisted bonds The fair values of these bonds are determined at the maximum of the following prices:
»» The quoted price on the unlisted bond quotation system (if any) at the latest trading date prior to the valuation date plus accumulated accrued interest
»» Purchase price plus accumulated accrued interest »» Par value plus accumulated accrued interest »» The price determined basing on the Company’s valuation techniques plus accumulated accrued interest
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ANNUAL REPORT VCSC 2020
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Form B09 - CTCK
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED )
2.7 Financial assets (Continued) (e)
Determination of market value/fair value (Continued) (viii) Certificates of close-ended funds Certificates of closed-end public funds are revalued at closing prices of last trading date prior to valuation date. Certificates of closed-end public funds that are not traded for more than two (2) weeks before valuation date are revalued at net asset value per unit as at the fund’s last valuation date prior to valuation date of the Company. (ix) Certificates of member funds/ open-ended funds/ shares of securities investment companies These certificates/shares are revalued at latest reported net asset value per one (1) unit of contributed capital/ certificates/shares prior to valuation date of the Company. (x)
Certificates of other funds/ shares of other securities investment companies These certifcates/shares are revalued using the Company’s valuation techniques.
(xi) Term deposits Term deposits are measured at principal plus accrued interest as of the date prior to the valuation date. (xii) Treasury bills, bank notes, commercial notes, transferable certificates of deposits, bonds and other discountable money market instruments These financial instruments are revalued at purchase price plus accrued interests up to the date prior to reporting date. (f)
Recognition of gains/(losses) Purchase transaction costs Transaction costs related to purchases of FVTPL financial assets are expensed off, while transaction costs related to purchases of other financial assets are included in the purchase cost of these assets. Selling transaction costs Selling transaction costs are expensed off. Gain/(loss) on disposal Gain/(loss) on disposal of financial assets are accounted for as income/(expenses) in profit or loss of the statement of comprehensive income. Costs of disposed financial assets are determined using the weighted average method up to the end of trading dates. Provision/(reversal of provision) for impairment of financial assets Provision/(reversal of provision) for impairment of financial assets is debited/(credited) to expenses in profit or loss of the statement of comprehensive income.
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2.8 CReceivables Receivables comprise receivables from disposal of financial assets, dividend and interest receivable, servicerelated receivables, receivables from trading errors and other receivables. Receivables are recorded on an accrual basis and presented at cost less provision for impairment or uncollectibility (if any). Receivables are classified as current and non-current assets in the statement of financial position based on their remaining maturity as at the reporting date. Provision for doubtful debts is made for each outstanding amount based on number of days past due according to initial payment commitment (ignoring any mutually agreed extension) or based on the estimated loss that may arise. Bad debts are written off when identified. Provision/(reversal of provision) for impairment is debited/credited to expenses in profit or loss of the statement of comprehensive income. 2.9 Futures Futures are listed derivatives in which the parties commit to:
»» Buy or sell a quantity of underlying asset at a pre-determined price on a pre-determined future date; or »» Settle the difference between the pre-determined transaction price and the price of the underlying asset on the pre-determined future date.
The Company accounts for futures in accordance with guidance of the Official Letter 6190/BTC-CĐKT, in particular: Proprietary trading activities Deposit for derivatives trading activities is accounted as ‘Other current assets’ in the statement of financial position. Securities deposited for derivatives trading activities are not de-recognised but rather monitored under subaccounts of the same type of financial assets and separately disclosed in the financial statements. Gain (or loss) on futures position are determined and settled on a daily basis at the difference between the closing settlement price on accounting date and that on the latest trading date. Gain (or loss) on futures position is accounted as realised income (or expense) in the statement of comprehensive income under item ‘Gain (or loss) on disposal of FVTPL financial assets’. Interest arising on deposit for derivatives trading activities is accounted as a financial income in the statement of comprehensive income under item ‘Dividend income and interest income from demand deposits’. Brokerage activities Deposit in Derivatives Clearing Fund is accounted as ‘Other non-current assets’ in the statement of financial position. Revenue on futures brokerage is accounted in the statement of comprehensive income under item ‘Brokerage fee income’. Cash and securities deposited for derivatives trading activities of customers is accounted for off statement of financial position under item ‘Customers’ deposits for derivatives trading’ and ‘Customers’ deposits at VSD’. 2.10 Accounting treatments for pledged investments During the year, the Company had pledged certain investments to secure its contractual obligations. According to the provisions of the pledged contracts, during the contract terms, the Company may not use the pledged assets to sell, transfer, enter into sale and repurchase agreements or swap contracts with any other third party. If the Company fails to fulfill its obligations, the pledgees have the right to use the pledged assets as means to secure the Company’s obligations after a stipulated point of time since which the obligations become to past due. Pledged assets are presented in the statement of financial position following accounting policies applied to the type of assets into which they are classified.
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ANNUAL REPORT VCSC 2020
2
Form B09 - CTCK
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED )
2.11 Fixed assets Tangible and intangible fixed assets Fixed assets are stated at historical cost less accumulated depreciation or amortisation. Historical cost includes all costs necessary to bring the assets to working condition for their intended use. Subsequent expenditures can be capitalised only if they result in probable future economic benefits from using the assets. Unqualified expenditures are immediately expensed off. Depreciation and amortisation Fixed assets are depreciated/amortised using the straight-line method to write off the historical cost of the fixed assets over their estimated useful lives. The principal annual rates used are: Office renovation 33.33% Motor vehicles 16.67% Office equipments 33.33% Computer software 33.33% - 50% Disposals Gains or losses on disposals are determined by comparing net disposal proceeds with the carrying amount of the fixed assets and are recognised as income or expense in the statement of comprehensive income. Construction in progress Construction in progress represents the cost of assets in the course of completion for operation or administration purposes, including all necessary costs for qualifying assets. Depreciation of these assets, on the same basis as other fixed assets, commences when they are ready for their intended use. 2.12 Leased assets Leases where a significant portion of the risks and rewards incidental to the asset ownership are retained by the lessor are classified as operating leases. Operating lease payments are charged to the statement of comprehensive income on a straight-line basis over the lease term. 2.13 Prepaid expenses Prepaid expenses include prepayments for goods and services, tools and equipment not qualified to be recognised as fixed assets under prevailing regulations. Prepaid expenses are initially recorded at cost and allocated to expenses over their estimated useful lives using straight-line method. 2.14 Pledged assets, mortgaged assets, security deposits in long-term Short-term/long-term security deposits are recognised when the Company makes its payments in accordance with the contractual terms and are classified as other current/non-current assets.
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2.15 Liabilities (a) Recognition/de-recognition Liabilities are recognised when the Company has an obligation as a result of receipts of assets, commits or becomes a party to the contractual provisions. Liabilities are de-recognised when such obligations are fully discharged. Liabilities are recognised on an accrual basis and on prudence concept. (b) Classification Classifications of liabilities are based on the type of transactions on which they arise as follows:
»» Borrowings; »» Issued bonds; »» Trading obligations; »» Covered warrant liabilities; »» Trade payables arising from purchases of financial assets, goods or services; »» Advances from customers; and »» Other payables including non-trade payables and those not arising from purchases of financial assets, goods and services.
Liabilities are classified as current and non-current liabilities in the statement of financial position based on their remaining year from the reporting date to their maturity dates. 2.16 Offsetting financial instruments Financial liabilities are contractual obligations to deliver cash or another financial asset to another entity, or to exchange financial assets or financial liabilities with another entity under conditions that are potentially unfavourable to the Company, or contracts that may be settled in the Company’s own equity instruments. Financial assets and liabilities are offset, and the net amount is presented in the statement of financial position when there is a legally enforceable right to offset the recognised amounts and the Company has an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. 2.17 Borrowings Borrowings include borrowings from banks, financial institutions, finance companies and other entities. Borrowings are stated at cost as at reporting date. Borrowings are classified as current and non-current liabilities in the statement of financial position based on their remaining year from the reporting date to their maturity dates. 2.18 Issued bonds Issued bonds are initially recognised at their issuance prices. Premiums/(discounts) are determined at issuances and allocated to borrowing costs or capitalised during the bond tenors using straight-line method. Issued bonds balances are presented on a net basis (par values plus unallocated premiums or minus unallocated discounts at the reporting date). Issued bonds are classified as current and non-current liabilities in the statement of financial position based on their tenors.
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ANNUAL REPORT VCSC 2020
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Form B09 - CTCK
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED )
2.19 Covered warrants Covered warrant is a collateralised securities issued by the securities companies that gives the holders the right to buy from (call warrant) or sell to (put warrant) the warrant issuer an underlying asset at a pre-determined price, at or by a pre-determined point of time, or receive an amount of cash at the difference between exercise price and price of the underlying asset on exercise date. The securities companies issuing covered warrants are required to deposit cash and financial assets, or obtain bank guarantees to secure their obligations to the warrant holders. The Company accounts for covered warrants in accordance with guidance of the Circular 23/2018/TT-BTC, in particular: Covered warrants issued by the Company Proceeds from issuance of warrants are accounted as covered warrant liabilities. When the Company buys back covered warrants it issued for market-making purpose, or when the covered warrants are delisted and buybacks are mandatory, positive (or negative) differences between buyback price and carrying value of covered warrants are recognised as gain (or loss) in the statement of comprehensive income. All costs incurred for buybacks and issuance of covered warrants are expensed off immediately. Indemnifications for customers due to late payments are accounted as other expenses. As at reporting date, covered warrants are fair valued. Increase (or decrease) in fair value of covered warrants is recognised in gain (or loss) in the statement of comprehensive income. Gain (or loss) on expiry of covered warrant is recognised as gain (or loss) on disposal of FVTPL financial assets in the statement of comprehensive income. Authorised quantity of covered warrants, issued quantity of covered warrants and buyback quantity of covered warrants are monitored off the statement of financial position. Such quantities as at reporting date are disclosed in off the statement of financial position items. Securities used as hedges against covered warrants Securities used as hedges against position of covered warrants are monitored under separate accounts and revalued at reporting date. Revaluation result is accounted similarly to FVTPL financial assets. Proprietary trading of covered warrants When the Company purchases covered warrants issued by other issuers for investing purpose, such covered warrants are accounted as FVTPL financial assets. 2.20 Income tax paid on behalf of investors According to the prevailing taxation regulations in Vietnam, the Company is required to withhold foreign contractor tax of 0.1% on trading proceeds of foreign institutional investors and pay on their behalf. For individual investors (both residents and non-residents), the Company is required to withhold personal income tax of 0.1% on their trading proceeds. The Company will declare and make tax payment on behalf of these investors. For local institutional investors, the Company is not responsible for withholding tax as these entities are responsible for their own tax payments and declarations. 2.21 Accrued expenses Accrued expenses include liabilities for goods and services received in the reporting year but not yet paid due to pending invoice or insufficient records and documents. Accrued expenses are recorded as expenses in the reporting year.
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2.22 Provisions Provisions are recognised when the Company 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 expenditures expected to be required to settle the obligations. If the time value of money is material, provisions will be measured at the present value using pre-tax rates that reflect current market assessments of the time value of money and the risks specific to the obligations. The increases in the provision due to passage of time are recognised as financial expenses. Changes in the provision balances during the year are debited or credited to operating expenses. 2.23 Provision for severance allowances In accordance with Vietnamese Labor Code, employees of the Company who have worked regularly for full 12 months or longer, are entitled to a severance allowance. The working period used for the calculation of severance allowance is the period during which the employee has actually worked for the Company less the period during which the employee participates in the unemployment insurance scheme in accordance with the labor regulations and the working period for which the employee has received severance allowance from the Company. The severance allowance is accrued at the end of the reporting period on the basis that each employee is entitled to half of an average monthly salary for each working year. The average monthly salary used for calculating the severance allowance is the employee contract’s average salary for the six-month period prior to the reporting date. This allowance will be paid as a lump sum when the employees terminate their labour contracts in accordance with current regulations. 2.24 Equity (a)
Owners’ capital Owners’ capital is recorded according to the actual amounts contributed and is recorded according to the par value of the shares. Share premium is the difference between the par value and the issue price of shares and the difference between the repurchase price and re-issuing price of treasury shares. Treasury shares are shares issued by the Company and bought back by itself, but these are not cancelled and may be re-issued in accordance with the Law on securities. Treasury shares are recorded at cost and deducted from equity. The Company does not account for gains/(losses) from purchase/sale, issuance/cancellation of its equity instruments.
(b)
Revaluation reserve Revaluation reserve reflects the differences arising on revaluation of AFS.
(c)
Financial and operational risk reserve and supplementary capital reserve According to Circular 146/2014/TT-BTC, the securities companies and fund management companies are required to make annual appropriation to the financial and operational risk reserve and supplementary capital reserve at 5% of the post-tax profit for each reserve in each of its profitable years until the accumulated balance of each reserve reaches 10% of the charter capital.
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ANNUAL REPORT VCSC 2020
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Form B09 - CTCK
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED )
2.24 Equity (Continued) (c)
Financial and operational risk reserve and supplementary capital reserve (Continued) Financial and operational risk reserve is made to compensate the residual losses and damages arising in operation beyond the indemnification received from the parties causing damages and insurance companies and the utilisation of indemnity funds and the relevant provisions made. Supplementary capital reserve serves as a financial resource to increase charter capital.
(d)
Undistributed earnings Undistributed earnings represent cumulative undistributed post-tax profits at the reporting date including cumulative realised profits and cumulative unrealised profits. Unrealised profit/(loss) of the year is the total difference between gain and loss arising from revaluation of financial assets at FVTPL or other financial assets charged into the statement of comprehensive income and deferred income tax arising from such revaluation. Realised profit during the year is the difference between total revenue, income and total expenses in the statement of comprehensive income, except for gain or loss arising from revaluation of financial assets recognised in unrealised profit/(loss).
2.25 Dividend The Company’s dividend declaration is recognised as a liability in the financial statements when the dividend is approved by in the General Meeting of Shareholders or when the Board of Directors declares interim dividends in accordance with the Company Charter and prevailing regulations. Dividend base for distribution is post-tax realised profits after deducting amounts appropriated to financial and operational risk reserve and supplementary capital reserve. 2.26 Assets of customers and liabilities to customers Assets of customers and liabilities to customers are presented as off statement of financial position including:
»» Customers’ deposits for securities trading, cash of securities issuers and related liabilities; and »» Financial assets of customers. 2.27 Revenue and income recognition (a)
Revenue from provision of services to investors Revenue from provision of services to investors comprises securities brokerage fees, securities underwriting fees, financial consultancy fees, securities custody service and entrustment service fees. Revenue from the provision of services is recognised in the statement of comprehensive income when the services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual service provided as a proportion of the total services to be provided. Revenue from the provision of services is only recognised when all four following conditions are satisfied:
»» The amount of revenue can be measured reliably; »» It is probable that the economic benefits associated with the transaction will flow to the Company; »» The percentage of completion of the transaction at the reporting date can be measured reliably; and »» The costs incurred for the transaction and the costs to complete the transaction can be measured reliably. When the outcome of a service delivery transaction cannot be ascertained, revenue is recognised in proportion to the recognised and recoverable cost.
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Revenue deductions include price discounts. Revenue deductions incurred in the same period of the related revenue are recorded as a deduction from the revenue of that period. Revenue deductions incurred after the reporting date but before the issuance of the financial statements are recorded as a deduction from the revenue of the reporting period. (b)
Income from proprietary trading of financial assets Income from proprietary trading of financial assets comprises gain/(loss) from sales or disposal of financial assets and dividend income. Gain/(loss) from sales or disposal of financial assets is measured as difference between selling price before selling costs and costs of securities disposed. Costs of securities disposed are determined using the weighted average method up to the end of trading dates. Dividend income is recognised in the statement of comprehensive income when the Company’s right to receive dividend is established, except for scrip dividends whose quantity is added to the Company’s securities portfolio and is not recognised as income.
(c) Income from working capital management Income from working capital management comprises interest income from deposits at bank, income from HTM investments, income from margin loans and trading advances. This income is recognised on an accrual basis unless collectability is in doubt. (d)
Other income Other income includes non-recurring income generated from activities other than those generating the revenue and income described above.
2.28 Expenses (a)
Recognition Expenses are recognised on an accrual basis, matching with revenue and on prudence concept.
(b) Classification Expenses are classified by function as follows:
»» Operating expenses; »» Financial expenses; »» General and administrative expenses; and »» Other expenses. 2.29 Financial income Financial income reflects income from investment activities arising during the year mainly including interest income from bank deposits and foreign exchange gains. 2.30 Financial expenses Financial expenses are expenses incurred in the year for financial activities mainly including interest expenses and foreign exchange losses.
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ANNUAL REPORT VCSC 2020
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Form B09 - CTCK
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ( CONTINUED )
2.31 Borrowing costs Borrowing costs that are directly attributable to the construction or completion of any qualifying assets are capitalised during the period that is required to complete and prepare the asset for its intended use. In respect of general-purpose borrowings, a portion of which used for the purpose of construction or completion of any qualifying assets, the Company determines the amount of borrowing costs eligible for capitalisation by applying a capitalisation rate to the weighted average expenditure on that assets. The capitalisation rate is the weighted average of the interest rates applicable to the Company’s borrowings that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. Other borrowing costs are charged to expenses in the statement of comprehensive income when incurred. 2.32 General and administration expenses General and administration expenses represent expenses for administrative purposes which mainly include salary expenses, outside services, stationery expenses, depreciation expenses, transportation expenses, rental and other administrative expenses. 2.33 Current and deferred income tax Income taxes include all income taxes which are based on taxable profits including profits generated from operations and trading activities in other countries that the Vietnam has not signed any double tax relief agreement. Income tax expense comprises current tax expense and deferred tax expense. Current income tax is the amount of income taxes payable or recoverable in respect of the current year taxable profit at the current tax rates. Current and deferred income tax should be recognised as an income or an expense and included in profit or loss for the year, except to the extent that the tax arises from a transaction or event which is recognised, in the same or a different year, directly in equity. Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of occurrence affects neither the accounting nor the taxable profit or loss. Deferred income tax is determined at the tax rates that are expected to apply to the financial year when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted by the reporting date. Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. 2.34 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 Company, including holding companies, subsidiaries and fellow subsidiaries are related parties of the Company. Associates and individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the enterprise, key management personnel, including the Board of Directors and the Board of Management of the Company and close members of the family of these individuals and companies associated with these individuals also constitute related parties. In considering the related party relationship, the Company considers the substance of the relationship, and not merely the legal form.
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2.35 Segment reporting A segment is a separable component of the Company engaged in providing products or services (business segment) or providing products or services within a particular economic environment (geographical segment). Each segment is subject to risks and returns that are different from those of other segments. A reportable segment is the Company’s business segment. Segment reporting is prepared and presented in accordance with accounting policies applied to the preparation and presentation of the Company’s financial statements in order to help users of financial statements to understand and evaluate the Company’s operations in a comprehensive way. 2.36 Nil items Items required by Circular 334/2016/TT-BTC, Official Letter 6190/BTC-CĐKT and Circular 23/2018/TT-BTC that are not presented in these financial statements indicate nil items.
3
NOTES TO THE STATEMENT OF FINANCIAL POSITION
3.1 Cash and cash equivalents As at 31.12.2020 VND
31.12.2019 VND
960,096,290
575,239,526
641,552,887,300
788,936,523,076
642,512,983,590
789,511,762,602
-
5,000,000,000
642,512,983,590
794,511,762,602
Cash Cash on hand Cash at bank
Cash equivalents Security deposit for covered warrants issued (*) Total
(*) This represents security deposit at custodian banks in relation to covered warrants issued by the Company.
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NOTES TO THE STATEMENT OF FINANCIAL POSITION ( CONTINUED )
3.2 Financial assets (a)
Financial assets measured at fair value through profit or loss (“FVTPL”) Comparison to market price or fair value Cost VND
Gain VND
Loss VND
Market value/ fair value VND
Listed shares and shares traded on UPCoM
457,279,318,135
89,701,189,793
(2,756,717,629)
544,223,790,299
Unlisted and unregistered shares (*)
28,907,300,000
-
-
28,907,300,000
Underlying assets designated as hedges for covered warrants
27,498,567,893
1,038,445,865
(1,501,758)
28,535,512,000
Unlisted bonds (*)
13,157,000,000
-
-
13,157,000,000
526,842,186,028
90,739,635,658
(2,758,219,387)
614,823,602,299
As at 31 December 2020
Total
Comparison to market price or fair value Cost VND
Gain VND
Loss VND
Market value/ fair value VND
Listed shares and shares traded on UPCoM
668,439,418,359
151,270,450,469
(75,257,655,978)
744,452,212,850
Unlisted and unregistered shares (*)
47,467,659,200
-
-
47,467,659,200
2,983,192,336
-
-
2,983,192,336
718,890,269,895
151,270,450,469
(75,257,655,978)
794,903,064,386
As at 31 December 2019
Unlisted bonds (*) Total
(*) Those financial instruments are not traded in an active market, whilst their fair value is not reliably measured, hence stated at cost.
160
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2.
3.
4.
5.
6.
7.
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Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
As at 31 December 2020
As at 31 December 2019
Cost VND
Market value/ fair value VND
Cost VND
Market value/ fair value VND
Listed shares and shares traded on UPCoM
457,279,318,135
544,223,790,299
668,439,418,359
744,452,212,850
Khang Dien House Trading and Invest Joint Stock Company (KDH)
95,478,111,044
167,353,073,700
89,632,998,981
192,776,671,100
Bao Minh Insurance Corporation (BMI)
54,080,261,172
62,433,333,000
54,764,607,971
51,150,372,000
Viet Nam Dairy Products Joint Stock Company (VNM)
34,658,001,444
34,304,640,000
53,755,816
53,240,500
Vietnam Technological and Commercial Joint Stock Bank (TCB)
33,814,883,209
36,965,250,000
-
-
Vingroup Joint Stock Company (VIC)
31,486,055,218
31,919,000,000
59,568,711
61,065,000
Hoa Phat Group Joint Stock Company (HPG)
17,233,918,802
17,960,285,000
7,150,970
6,180,500
Vietnam Prosperity Joint Stock Commercial Bank (VPB)
14,773,489,042
15,200,347,500
58,430
60,000
175,754,598,204
178,087,861,099
523,921,277,480
500,404,623,750
Unlisted and unregistered shares
28,907,300,000
28,907,300,000
47,467,659,200
47,467,659,200
Underlying assets designated as hedges for covered warrants
27,498,567,893
28,535,512,000
-
-
Hoa Phat Group Joint Stock Company (HPG)
17,552,107,933
18,291,885,000
-
-
Vietnam Prosperity Joint Stock Commercial Bank (VPB)
8,737,055,501
8,989,500,000
-
-
Others
1,209,404,459
1,254,127,000
-
-
13,157,000,000
13,157,000,000
2,983,192,336
2,983,192,336
526,842,186,028
614,823,602,299
718,890,269,895
794,903,064,386
Others
Unlisted bonds Total
The value of FVTPL shares being pledged for short-term borrowings as at 31 December 2020 is presented in Note 3.8.
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ANNUAL REPORT VCSC 2020
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Form B09 - CTCK
NOTES TO THE STATEMENT OF FINANCIAL POSITION ( CONTINUED )
3.2 Financial assets (Continued) (b)
Held-to-maturity financial assets (“HTM”) As at 31.12.2020
As at 31.12.2019
Amortised cost VND
Provisions VND
Amortised cost VND
Provisions VND
Certificates of deposits
80,000,000,000
-
150,000,000,000
-
Short-term deposits
16,000,000,000
1,500,000,000
-
Security deposit for covered warrants issued
5,000,000,000
-
-
-
Corporate bonds
5,000,000,000
-
110,000,000,000
-
106,000,000,000
-
261,500,000,000
-
Par value
Coupon
Total
Details of held-to-maturity financial assets are as follows: Issuers
Issue date
Maturity date
Transferable certificate of deposits, unsecured Domestic finance company
80,000,000,000 10,12,2020
10,06,2021
Short-term deposits Foreign commercial bank
12,05,2020
12,05,2021
16,000,000,000
4.4%/year
5,000,000,000 05,10,2020
05,04,2021
Unconvertible, unsecured, nonwarrant attached corporate bonds Domestic commercial bank
8%/year
16,000,000,000
Security deposit for covered warrants issued (*) Domestic commercial bank
80,000,000,000
5,000,000,000
4.1%/year
5,000,000,000 11,09,2020
11,09,2027
5,000,000,000
8.5%/year
(*) This represents security deposit at custodian banks in relation to covered warrants issued by the Company.
162
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2.
3.
4.
5.
6.
7.
8.
Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
(c) Available-for-sale financial assets (“AFS”) Comparison to market price or fair value As at 31 December 2020
Listed shares and shares traded on UPCoM Unlisted and unregistered shares (*) Total
Cost VND
Gain VND
Loss VND
Market value/ fair value VND
1,758,078,325,813
533,463,647,633
(94,476,250)
2,291,447,497,196
421,210,055,713
-
-
421,210,055,713
2,179,288,381,526
533,463,647,633
(94,476,250) 2,712,657,552,909
Comparison to market price or fair value As at 31 December 2019 Cost VND
Gain VND
Loss VND
Market value/ fair value VND
1,190,246,896,353
505,888,839,347
(98,012,406,260)
1,598,123,329,440
132,850,055,713
-
-
132,850,055,713
1,323,096,952,066
505,888,839,347
As at 31 December 2019
Listed shares and shares traded on UPCoM Unlisted and unregistered shares (*) Total
(98,012,406,260) 1,730,973,385,153
(*) Those financial instruments are not traded in an active market, whilst their fair value is not reliably measured, hence stated at cost.
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ANNUAL REPORT VCSC 2020
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Form B09 - CTCK
NOTES TO THE STATEMENT OF FINANCIAL POSITION ( CONTINUED )
3.2 Financial assets (Continued) (c)
Available-for-sale financial assets (“AFS”) (Continued) As at 31.12.2020
As at 31.12.2019 Market value/ fair value VND
Cost VND
Market value/ fair value VND
1,758,078,325,813
2,291,447,497,196
1,190,246,896,353
1,598,123,329,440
International Dairy Products Joint Stock Company (IDP)
440,985,822,375
440,985,822,375
-
-
Vietnam Prosperity Joint Stock Commercial Bank (VPB)
167,812,627,017
219,404,412,500
148,352,320,140
160,005,660,000
Masan Consumer Corporation (MCH)
153,063,464,967
184,146,840,423
-
-
Becamex Infrastructure Development JSC (IJC)
117,058,635,629
246,123,643,500
-
-
Vietnam Technological and Commercial Joint Stock Bank (TCB)
102,769,272,894
126,450,639,000
283,855,580,595
289,807,571,700
Military Commercial Joint Stock Bank (MBB)
99,154,927,740
105,434,438,000
-
-
PetroVietnam Power Corporation (POW)
86,615,570,747
108,752,440,800
27,512,224,243
22,977,092,850
Mobile World Investment Corporation (MWG)
77,753,188,852
229,717,891,400
53,463,131,605
382,842,324,000
Ho Chi Minh City Infrastructure Investment JSC (CII)
31,530,846,745
40,660,149,800
-
-
Others
481,333,968,847
589,771,219,398
677,063,639,770
742,490,680,890
Unlisted and unregistered shares
421,210,055,713
421,210,055,713
132,850,055,713
132,850,055,713
National Payment Corporation of Vietnam (NAPAS)
286,040,000,000
286,040,000,000
30,680,000,000
30,680,000,000
Lothamilk Joint Stock Company
74,790,055,713
74,790,055,956
74,790,055,713
74,790,055,470
Others
60,380,000,000
60,379,999,757
27,380,000,000
27,380,000,243
2,179,288,381,526
2,712,657,552,909
1,323,096,952,066
1,730,973,385,153
Listed shares and shares traded on UPCoM
Total
Cost VND
The value of AFS shares being pledged for short-term borrowings as at 31 December 2020 is presented in Note 3.8.
164
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2.
3.
4.
5.
6.
7.
8.
Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
3.3 Loans and provisions (a) Loans As at 31.12.2020
Margin loans (*) Trading advances Total
As at 31.12.2019
Amortised cost VND
Provisions VND
Amortised cost VND
Provisions VND
3,758,105,223,519
(2,384,027,974)
2,962,056,061,076
(2,422,427,974)
123,537,494,653
-
70,219,395,911
-
3,881,642,718,172
(2,384,027,974)
3,032,275,456,987
(2,422,427,974)
(*) Securities purchased on margin are held by the Company as collaterals for margin loans. The market value of collateral assets as at 31 December 2020 was VND17,980,801,537,100 (as at 31 December 2019: VND9,560,980,033,030) (b)
Provisions for impairment loss of financial assets and mortgaged assets The movement of provisions for impairment loss of financial assets and mortgated assets during the year is as follows:
Margin loans
Opening balance VND
Provided VND
Reversed VND
2,422,427,974
-
(38,400,000)
Closing balance VND 2,384,027,974
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ANNUAL REPORT VCSC 2020
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Form B09 - CTCK
NOTES TO THE STATEMENT OF FINANCIAL POSITION ( CONTINUED )
3.4 Receivables As at 31.12.2020
As at 31.12.2019 Doubtful amount VND
Carrying value VND
Carrying value VND
Doubtful amount VND
Receivables from disposals of listed equities
200,542,089,400
-
-
-
Receivables from disposals of covered warrants
308,525,900
-
-
-
200,850,615,300
-
-
-
20,948,002,265
-
44,767,477,295
-
14,833,156,124
1,928,450,000
7,681,084,272
1,925,450,000
5,939,376,000
-
63,245,466,000
-
-
-
15,000,000
-
5,939,376,000
-
63,260,466,000
-
242,571,149,689
1,928,450,000
115,709,027,567
1,925,450,000
Receivables from disposals of financial assets
Dividend and interest receivables Dividend and interest receivables not yet due
Service-related receivables Service fee receivables (*)
Other receivables Receivable from share purchases for a brokerage contract (**) Others
Total
(*) Service fee receivable due from a related party is presented in Note 8(b). (**) This is the amount the Company paid to purchase shares for a brokerage contract. The market value of collateral assets as at 31 December 2020 was VND33,520,210,000 (as at 31 December 2019: VND75,910,500,000).
166
884,000,000
Other customers 1,928,450,000
884,000,000
462,000,000
582,450,000
1,928,450,000
Closing balance VND
1,925,450,000
881,000,000
462,000,000
582,450,000
1,925,450,000
Opening balance VND
282,143,957,259
18,747,621,456
-
280,000,000,000
31.12.2019 VND
1,928,450,000
884,000,000
462,000,000
582,450,000
1,928,450,000
Closing balance VND
2,143,957,259
-
-
-
-
-
Reversed VND
698,306,388
18,049,315,068
-
31.12.2020 VND
As at
3,000,000
3,000,000
-
-
3,000,000
Provided VND
Provision
(*) This was a prepayment to an intermediary party to purchase unlisted shares. The contract value was VND360 billion. In 2020, the contract was cancelled and the amount was collected in full.
Others
Prepayment for purchase of unlisted bonds
Prepayment for purchase of unlisted shares (*)
3.5 Prepayment to suppliers
1,928,450,000
462,000,000
QVD Aqua JSC
Total
582,450,000
1,928,450,000
Besra Vietnam Limited Company
Service-related receivables
Opening balance VND
Doubtful amount
Movement of provisions for doubtful debts during the year is as follows:
1. 2. 3. 4. 5. 6. 7.
8.
Messages from Management Board and preface Company overview Overview of corporate Performance Financial position and risk management Corporate governance Future prospects Sustainability report Value affirmation
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ANNUAL REPORT VCSC 2020
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Form B09 - CTCK
NOTES TO THE STATEMENT OF FINANCIAL POSITION ( CONTINUED )
3.6 Fixed assets (a)
Tangible fixed assets Vehicles VND
Office equipment VND
Total VND
3,330,335,577
46,872,562,115
50,202,897,692
-
4,624,876,000
4,624,876,000
2,826,494,701
162,458,000
2,988,952,701
(1,370,938,122)
(330,647,475)
(1,701,585,597)
4,785,892,156
51,329,248,640
56,115,140,796
3,330,335,577
41,883,659,136
45,213,994,713
426,951,455
4,140,832,312
4,567,783,767
(1,370,938,122)
(330,647,475)
(1,701,585,597)
2,386,348,910
45,693,843,973
48,080,192,883
-
4,988,902,979
4,988,902,979
2,399,543,246
5,635,404,667
8,034,947,913
Historical cost As at 1.1.2020 New purchases Transfer from construction in progress (Note 3.6(c)) Disposal As at 31.12.2020 Accumulated depreciation As at 1.1.2020 Charge for the year Disposal As at 31.12.2020 Net book value As at 1.1.2020 As at 31.12.2020
As at 31 December 2020, the Company had no outstanding commitments to purchase/sale of tangible fixed assets. Historical cost of fully depreciated tangible fixed assets but still in use as at 31 December 2020 was VND42,731 million (as at 31 December 2019: VND32,924 million). The Company had no tangible fixed assets awaiting disposal as at 31 December 2020.
168
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2.
3.
4.
5.
6.
7.
8.
Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
(b)
Intangible fixed assets Computer software VND Historical cost As at 1.1.2020
42,483,731,542
Transfer from construction in progress (Note 3.6 (c))
7,497,700,000 49,981,431,542
As at 31.12.2020 Accumulated amortisation As at 1.1.2020
37,565,315,605
Charge for the year
6,066,862,338 43,632,177,943
As at 31.12.2020 Net book value As at 1.1.2020
4,918,415,937
As at 31.12.2020
6,349,253,599
As at 31 December 2020, the Company had no outstanding commitments to purchase/sale of intangible fixed assets. Historical cost of fully amortised intangible fixed assets but still in use as at 31 December 2020 was VND40,487 million (as at 31 December 2019: VND25,229 million). The Company had no intangible fixed assets awaiting disposal as at 31 December 2020. (c)
Construction in progress Movements in construction in progress during the year are as follows: For the year ended 31.12.2020 VND
31.12.2019 VND
Opening balance
6,939,777,881
1,511,800,000
Increase
9,196,474,820
6,816,377,881
Tranfer to tangible fixed assets (Note 3.6(a))
(2,988,952,701)
-
Tranfer to intangible fixed assets (Note 3.6(b))
(7,497,700,000)
(1,388,400,000)
5,649,600,000
6,939,777,881
Closing balance
169
ANNUAL REPORT VCSC 2020
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Form B09 - CTCK
NOTES TO THE STATEMENT OF FINANCIAL POSITION ( CONTINUED )
3.7 Other assets (a)
Other current assets As at
Deposits for derivatives trading activities (*) Balance in an escrow account (**)
(*)
31.12.2020 VND
31.12.2019 VND
91,333,803,000
14,204,396,000
-
150,000,000,000
91,333,803,000
164,204,396,000
This is the Company’s deposits for its proprietary derivatives trading activities in compliance with Decision No. 96/QĐ-VSD dated 23 March 2017 of the Vietnam Securities Depository
(**) This is balance in an escrow account at a domestic bank to enforce the contract and execution of a sale and purchase agreement of an unlisted share (“the SPA”). The company fully recovered this amount on 6 July 2020. (b) Deposits in the Settlement support fund According to Decision No. 45/QĐ-VSD dated 22 May 2014 issued by the Vietnam Securities Depository, the Company is required to deposit an initial amount of VND120 million at the Vietnam Securities Depository and an additional annual contribution equivalent to 0.01% of the total value of brokered securities in the previous year up to the maximum limit of VND2.5 billion in any one year. The maximum amount of contribution is VND20 billion. For the year ended 31.12.2020 VND
31.12.2019 VND
20,000,000,000
18,370,264,731
-
705,117,491
Interest allocated
1,169,262,072
924,617,778
Closing balance
21,169,262,072
20,000,000,000
Opening balance Additional contribution
(c)
Other non-current assets This is Derivatives trading Settlement Fund. According to the Policy on Management and Use of Derivatives trading clearing fund issued in conjunction with Decision No. 97/QĐ-VSD dated 23 March 2017 by the Vietnam Securities Depository, the minimum amount of initial contribution applicable to direct clearing members is VND10 billion.
170
1.
2.
3.
4.
5.
6.
7.
8.
Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
3.8 Pledged assets As at 31.12.2020 VND
31.12.2019 VND
FVTPL shares (Note 3.2(a))
163,225,000,000
468,300,000,000
AFS shares (Note 3.2(c))
855,800,000,000
971,670,000,000
1,019,025,000,000
1,439,970,000,000
Listed shares and shares traded on UPCoM
These assets are pledged as collaterals for the Company’s short-term borrowings (Note 3.9). 3.9 Borrowings and issued bonds Details of movements in borrowings and issued bonds during the year are as follows: Opening balance VND
Disbursement VND
Repayment VND
Closing balance VND
Borrowings Short-term Foreign bank
(i)
-
931,200,000,000
-
931,200,000,000
Domestic bank
(ii)
241,000,000,000
859,000,000,000
(601,000,000,000)
499,000,000,000
Domestic bank
(iii)
-
1,050,000,000,000
(650,000,000,000)
400,000,000,000
Domestic bank
(iv)
400,000,000,000
1,300,000,000,000 (1,350,000,000,000)
350,000,000,000
Domestic bank
(v)
145,000,000,000
360,000,000,000
(345,000,000,000)
160,000,000,000
Foreign bank
(vi)
139,380,000,000
142,530,000,000
(141,180,000,000)
140,730,000,000
Foreign bank
(vii)
115,600,000,000
463,700,000,000
(464,100,000,000)
115,200,000,000
Domestic bank
(viii)
100,000,000,000
492,000,000,000
(492,000,000,000)
100,000,000,000
Domestic bank
(ix)
140,000,000,000
-
(140,000,000,000)
-
Domestic bank
(x)
100,000,000,000
200,000,000,000
(300,000,000,000)
-
Domestic bank
(xi)
40,000,000,000
40,000,000,000
(80,000,000,000)
-
Domestic finance company
(xii)
30,000,000,000
159,000,000,000
(189,000,000,000)
-
Total short-term borrowings Issused bonds Total
(xiii)
1,450,980,000,000
5,997,430,000,000 (4,752,280,000,000) 2,696,130,000,000
1,081,570,000,000
1,068,410,000,000 (1,481,660,000,000)
2,532,550,000,000
7,065,840,000,000 (6,233,940,000,000) 3,364,450,000,000
668,320,000,000
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ANNUAL REPORT VCSC 2020
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NOTES TO THE STATEMENT OF FINANCIAL POSITION ( CONTINUED )
3.9 Borrowings and issued bonds (Continued) (i)
This is a syndicated loan from foreign banks under a credit limit of USD40 million open till 13 May 2023. The Company hedged the foreign exchange rate risk on 100% of the outstanding balances by entering swap foreign currency contracts and currency forward contracts with local commercial banks. The swap term is the equivalent of the borrowing term.
(ii)
These are drawdowns from a domestic bank under a credit limit of VND650 billion open till 13 August 2021, including an unsecured credit limit of VND500 billion and a secured credit limit of VND150 billion. The balance is secured by securities included in the Company’s FVTPL and AFS financial assets (Note 3.8).
(iii)
These are drawdowns from a domestic bank under an unsecured credit limit of VND400 billion open till 15 February 2021.
(iv)
This is a drawdown from a domestic bank under an unsecured credit limit of VND750 billion open till 14 July 2021, including an unsecured credit limit of VND350 billion and a secured credit limit of VND500 billion. The balance as at 31 December 2020 was within the unsecured limit and required no collaterals.
(v)
This is a drawdown from a domestic bank under a credit limit of VND300 billion open till 21 December 2021. The balance is secured by listed shares included in the Company’s AFS financial assets (Note 3.8).
(vi)
This is a drawdown from a foreign bank under an unsecured credit limit of USD6 million granted on 11 March 2019 and automatically renewed after one year from granting date.
(vii)
This is a drawdown from a foreign bank under an unsecured credit limit of USD5 million granted on 3 October 2017 and automatically renewed after one year from granting date.
(viii)
These are drawdowns from a domestic bank under a credit limit of VND350 billion open till 31 January 2021. The balance is secured by securities included in the Company’s FVTPL and AFS financial assets (Note 3.8).
(ix)
These are drawdowns from a domestic bank under a credit limit of VND250 billion open till 6 September 2020. The balance is secured by securities included in the Company’s AFS financial assets (Note 3.8).
(x)
This is a loan from a domestic bank with a credit limit of VND200 billion open till 19 August 2021.
(xi)
This is a loan from a domestic bank with a credit limit of VND250 billion open till 18 June 2021.
(xii)
These are drawdowns from a domestic financial company under an unsecured credit limit of VND160 billion open till 13 November 2020.
(xiii)
These are registered unconvertible bonds issued privately to individuals and entities according to the Board of Directors’ resolutions. The bonds have a same par value of VND10,000,000 and a same tenor of 2 years since issue date. The bondholders reserve the right to put the bonds before their maturities. Interest rates are applied depend on the holding time of the bondholders. As at 31 December 2020, there were no bonds issued to a related party (as at 31 December 2019: VND4,000,000,000).
All proceeds of borrowings and issued bonds are used to supplement working capital for operations. The borrowings and issued bonds bear interest from 3% to 11% per annum depending on the time of drawdown (2019: from 4.25% to 9% per annum). As at 31 December 2020 and as at 31 December 2019, there were no borrowings not issued bonds past due but not yet settled. As at 31 December 2020 and as at 31 December 2019, there was no doubt on the Company’s ability to repay these balances.
172
1.
2.
3.
4.
5.
6.
7.
8.
Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
3.10 Trading obligations As at 31.12.2020 VND
31.12.2019 VND
9,699,468,529
3,721,928,138
Payable to Hanoi Stock Exchange
853,711,798
507,624,523
Payable to Vietnamese Securities Depository
988,649,090
884,877,760
7,332,770,800
-
18,874,600,217
5,114,430,421
Payable to Ho Chi Minh City Stock Exchange
Covered warrant payables (Note 5.2)
As at 31 December 2020 and as at 31 December 2019, there were no items past due but not yet settled. As at 31 December 2020 and as at 31 December 2019, there was no doubt on the Company’s ability to repay these balances. 3.11 Trade payables As at
Payables for purchases of listed securities on stocks exchanges Payables for purchases of goods and services Payables for purchase of covered warrants
31.12.2020 VND
31.12.2019 VND
95,298,300,000
12,208,466,000
4,798,326,804
1,314,500
17,231,400
-
100,113,858,204
12,209,780,500
As at 31 December 2020 and as at 31 December 2019, the Company had no trade payables due to related parties.. As at 31 December 2020 and as at 31 December 2019, there were no payables past due but not yet settled. As at 31 December 2020 and as at 31 December 2019, there was no doubt on the Company’s ability to repay these balances. 3.12 Customers’ advances These balances are mainly advances from customers for service-related activities. 3.13 Taxes and other payables to the State Budget As at 31.12.2020 VND
31.12.2019 VND
Corporate income tax - current
67,713,185,433
45,803,204,817
Income tax on capital transfers paid on behalf of investors
24,548,798,650
6,787,278,579
Value added tax
2,008,852,473
2,070,635,532
Personal income tax
1,584,580,331
1,159,214,623
95,855,416,887
55,820,333,551
173
ANNUAL REPORT VCSC 2020
3
Form B09 - CTCK
NOTES TO THE STATEMENT OF FINANCIAL POSITION ( CONTINUED )
3.13 Taxes and other payables to the State Budget (Continued) Movements in tax and other payables to the State Budget during the year were as follows: As at 1.1.2020 VND
Incurred VND
Paid VND
As at 31.12.2020 VND
Corporate income tax - current
45,803,204,817
182,422,798,514
(160,512,817,898)
67,713,185,433
Income tax on capital transfers paid on behalf of investors
6,787,278,579
142,465,887,925
(124,704,367,854)
24,548,798,650
Personal income tax
1,159,214,623
32,631,831,208
(32,206,465,500)
1,584,580,331
Value added tax - local
2,070,635,532
2,677,516,476
(2,739,299,535)
2,008,852,473
55,820,333,551
360,198,034,123
(320,162,950,787)
95,855,416,887
3.14 Accrued expenses As at
Interests on borrowings Others
31.12.2020 VND
31.12.2019 VND
24,721,227,333
59,983,871,293
5,099,298,346
2,477,020,230
29,820,525,679
62,460,891,523
3.15 Other payables As at
An advance from a customer
(i)
Operation fund of the Board of Directors (Note 8(b)) Dividends payable to shareholders
(ii)
Advances from a customer
(iii)
Matured bonds payable
(iv)
Payable to key management (Note 8(b)) Other payables
31.12.2020 VND
31.12.2019 VND
15,000,000,000
15,000,000,000
10,932,367,500
13,946,867,500
1,612,265,940
1,227,733,440
-
250,000,000,000
-
30,000,000,000
-
3,500,000,000
140,022,470
192,564,670
27,684,655,910
313,867,165,610
(i) This is an advance from a customer according to a securities brokerage contract so that the Company uses this advance to settle this customer’s securities purchases.
174
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2.
3.
4.
5.
6.
7.
8.
Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
(ii) Details of dividends payable to shareholders are as follows: As at 31.12.2020 VND
31.12.2019 VND
1,227,733,440
1,020,255,900
412,025,979,000
228,164,836,200
-
228,164,836,200
Dividend 2019 (Note 7.1(iii))
246,425,979,000
-
Dividend 1 st 2020 (Note 7.1(v))
165,600,000,000
-
(411,641,446,500)
(227,957,358,660)
1,612,265,940
1,227,733,440
Opening balance Cash dividend declared during the year In which Dividend 2018 (Note 7.1(i))
Dividend paid Ending balance
Some shareholders have not yet completed their dividend claim forms, as a result there were the unpaid dividends as at the reporting dates. (iii) These are advances from a customer according to bond brokerage contracts so that the Company uses these advances to settle this customer’s bond purchases. The Company bears an interest rate from 7% to 8.2% per annum during the advance period. The Company paid off these balances in 2020. (iv) These bonds matured right on 31 December 2019 and were fully repaid on 2 January 2020. Other than (ii), there were no payables past due but not yet settled. As at 31 December 2020 and as at 31 December 2019, there was no doubt on the Company’s ability to repay these balances. 3.16 Deferred income tax Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes relate to the same taxation authority. The offset amounts are as follows: As at 31.12.2020 VND
31.12.2019 VND
Deferred income tax assets to be recovered within 12 months
(i)
1,056,563,890
484,485,595
Deferred income tax liabilities to be payable within 12 months
(ii)
(128,118,052,275)
(102,743,557,174)
Total
(127,061,488,385)
(102,259,071,579)
175
ANNUAL REPORT VCSC 2020
3
Form B09 - CTCK
NOTES TO THE STATEMENT OF FINANCIAL POSITION ( CONTINUED )
3.16 Deferred income tax (Continued) Movements in the deferred income tax, taking into consideration the offsetting of balances within the same tax jurisdiction, were as follows: For the year ended
Opening balance Income statement credit (Note 5.5) Recognised directly in equity Closing balance (i)
31.12.2020 VND
31.12.2019 VND
(102,259,071,579)
(113,702,791,275)
296,130,854
(6,603,367,576)
(25,098,547,660)
18,047,087,272
(127,061,488,385)
(102,259,071,579)
Details of deferred income tax assets are as below: As at 31.12.2020 VND
31.12.2019 VND
Revaluation gain of covered warrant (Note 5.2)
2,898,791,483
-
Provisions for margin loans
2,384,027,974
2,422,427,974
5,282,819,457
2,422,427,974
1,056,563,890
484,485,595
Deductible temporary differences:
At tax rate of 20%: Deferred income tax assets to be recovered within 12 months
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. (ii)
(ii) Details of deferred income tax liabilities are as below: As at 31.12.2020 VND
31.12.2019 VND
Interest accrual
19,239,673,718
29,828,558,291
Revaluation loss of FVTPL financial assets (Note 5.2)
87,981,416,271
76,012,794,491
Revaluation gain of AFS financial assets (Note 3.18)
533,369,171,383
407,876,433,087
640,590,261,372
513,717,785,869
128,118,052,275
102,743,557,174
Taxable temporary differences:
At tax rate of 20%: Deferred income tax liabilities to be payable within 12 months
176
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2.
3.
4.
5.
6.
7.
8.
Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
3.17 Owners’ capital (a) Number of shares As at 31.12.2020 VND
31.12.2019 VND
Number of shares registered
165,600,000
164,400,000
Number of shares issued
165,600,000
164,400,000
-
(50,014)
165,600,000
164,349,986
Number of shares repurchased
As at 31 December 2020 and as at 31 December 2019, all of the Company’s shares are ordinary shares. Each ordinary share has a par value of VND10,000. Each share is entitled to one vote at meetings of the Company. Shareholders are entitled to receive dividends as declared from time to time. All ordinary shares are ranked equally with regard to the Company’s residual assets. (b)
Movement of share capital For the year ended 31.12.2020
31.12.2019
164,349,986
162,999,890
1,200,000
1,400,110
Shares repurchased
(71,000)
(50,014)
Treasury shares reissued
121,014
-
165,600,000
164,349,986
Opening quantity New shares issued
Closing quantity 3.18 Revaluation reserve
As at
Revaluation gain of AFS financial assets (Note 3.2(c)) Less: deferred tax liabilities
31.12.2020 VND
31.12.2019 VND
533,369,171,383
407,876,433,087
(106,673,834,277)
(81,575,286,617)
426,695,337,106
326,301,146,470
The movement of revaluation reserve during the year is as follows: For the year ended 31.12.2020 VND
31.12.2019 VND
Opening balance
326,301,146,470
398,489,495,556
Recognised in equity
100,394,190,636
(72,188,349,086)
Closing balance
426,695,337,106
326,301,146,470
177
ANNUAL REPORT VCSC 2020
Form B09 - CTCK
3.19 Undistributed earnings Movements of undistributed earnings during the year are as follow:
Realised profits after tax
As at 31.12.2019 VND
Profit for the year VND
Dividend Declared VND
1,202,423,825,444
761,656,425,183
(412,025,979,000)
60,810,235,593
7,255,864,238
-
1,263,234,061,037
768,912,289,421
(412,025,979,000)
Unrealised profits after tax Undistributed earning
4
Appropriations to reserves VND
As at 31.12.2020 VND
(47,603,731,834) 1,504,450,539,793 -
68,066,099,831
(47,603,731,834) 1,572,516,639,624
NOTES TO OFF STATEMENT OF FINANCIAL POSITION ITEMS
4.1 Bad debts written off As at
Margin loans
31.12.2020 VND
31.12.2019 VND
25,145,170,448
25,145,170,448
Bad debts written off were margin loans in 2011 that were not fully collected due to diminution in value of collateral assets. The Company had made full provision for the uncollected amount before writing them off according to Resolution No. 09/2015/QD-HDTQ.VCSC of the Board of Directors dated 19 October 2015. 4.2 Foreign currencies Included in cash and cash equivalents are balances held in foreign currencies as follows: As at 31.12.2020
31.12.2019
861,862
1,299,240
61,356
8,512
6,592
28,450
20,579,719,026
30,825,120,883
1,872,154,971
203,292,974
152,665,521
880,552,232
22,604,539,518
31,908,966,089
Original amount
US Dollar Euro British Pound VND equivalent
US Dollar Euro British Pound
178
1.
2.
3.
4.
5.
6.
7.
8.
Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
4.3 Number of shares in issue As at 31.12.2020
31.12.2019
1,200,000
1,400,110
164,400,000
162,949,876
165,600,000
164,349,986
Ordinary shares Quantity in issue within 1 year Quantity in issue for 1 year or more
4.4 Securities listed/registered at Vietnam Securities Depository As at 31.12.2020
31.12.2019
Freely traded securities
38,836,180
31,881,061
Pledged securities
26,650,000
75,000,000
4,205,564
-
69,691,744
106,881,061
Financial assets (quantity)
Securities awaiting settlement
4.5 Securities purchased and awaiting settlement As at 31.12.2020
31.12.2019
3,090,532
467,510
Financial assets (quantity) Securities awaiting settlement 4.6 Securities not in custody of VSD As at 31.12.2020
31.12.2019
20,394,381
4,383,268
2,738,000
2,738,000
23,132,381
7,121,268
Financial assets (quantity) Freely traded securities Suspended securities
179
ANNUAL REPORT VCSC 2020
4
Form B09 - CTCK
NOTES TO OFF STATEMENT OF FINANCIAL POSITION ITEMS ( CONTINUED )
4.7 Covered warrants authorised but not yet issued
Issuance date
Maturity date
FPT/VCSC/M/AU/T/A2
FPT Joint Stock Company (FPT)
HPG/VCSC/M/AU/T/A1
Hoa Phat Group Joint Stock Company (HPG)
MSN/VCSC/M/AU/T/A1
Massan Group Joint Stock Company (MSN)
VNM/VCSC/M/AU/T/A1
Viet Nam Dairy Products Joint Stock Company (VNM)
VPB/VCSC/M/AU/T/A2
Vietnam Prosperity Joint Stock Commercial Bank (VPB)
4.8 Futures Futures positions which are still open as at reporting date are as follows:
Contract symbol
First trading date
Last trading date
20.11.2020
21.01.2021
VN30F2101
5
NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME
5.1 Net realised gain on disposals of FVTPL financial assets and coverred warrants For the year ended 31.12.2020 VND
31.12.2019 VND
893,175,954,490
591,499,464,101
808,127,958,877
541,110,112,001
81,855,511,000
48,066,161,000
Covered warrants redeemed
1,510,542,303
93,699,634
Covered warrants expired
1,681,942,310
2,229,491,466
(273,047,363,561)
(129,870,406,505)
Underlying securities
(168,475,650,165)
(99,930,007,505)
Derivatives
(104,432,282,000)
(29,940,399,000)
Realised gains on disposal of FVTPL financial assets In which:
Underlying securities Derivatives
Realised losses on disposal of FVTPL financial assets In which:
Covered warrants redeemed Net realised gains
180
(139,431,396)
-
620,128,590,929
461,629,057,596
1.
2.
3.
4.
5.
6.
7.
8.
Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
As at 31.12.2020 Number of unsubscribe covered warrants
Number of covered warrants issued
Number of covered warrants authorised but not yet issued
Issuance date
Maturity date
Number of covered warrants authorised for issue
29.10.2020
09.04.2021
1,000,000
-
21,350
978,650
29.10.2020
09.04.2021
1,000,000
-
467,760
532,240
29.10.2020
09.04.2021
1,000,000
-
14,550
985,450
29.10.2020
09.04.2021
1,000,000
-
293,620
706,380
29.10.2020
09.04.2021
1,000,000
-
304,740
695,260
5,000,000
-
1,102,020
3,897,980
Open quantity 3,231
As at 31.12.2020 Closing settlement price 1,083,900
Open short position
Open quantity
350,208,090,000
-
As at 31.12.2019 Closing settlement price -
Open position -
5.1 Net realised gain on disposals of FVTPL financial assets and coverred warrants (Continued) Details by category are as follows:
Shares Bonds Fund certificates Certificates of deposit Realised gains on disposal of underlying securities Realised (losses)/ gains on futures position Gain on redemption of covered warrants issued by the Company Gain upon expiry of covered warrants issued by the Company
Quantity disposed VND
Sales proceeds VND
354,400,331 25,358,732 136,787,909
11,797,953,797,685 3,888,281,800,609 1,974,569,572,076
-
-
Realised gains/ (losses) in current year VND 11,177,959,133,321 619,994,664,364 3,881,332,122,565 6,949,678,044 1,961,861,605,772 12,707,966,304 Costs of disposals (*) VND
-
Realised gains in prior year VND 435,467,772,173 2,246,754,423 3,154,687,489
-
310,890,411
639,652,308,712
441,180,104,496
(22,576,771,000)
18,125,762,000
1,371,110,907
93,699,634
1,681,942,310
2,229,491,466
620,128,590,929
461,629,057,596
(*) Costs of underlying securities are determined using the weighted average method up to the end of trading dates.
181
ANNUAL REPORT VCSC 2020
5
Form B09 - CTCK
NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME ( CONTINUED)
5.2 Net unrealised gains/(losses) from revaluation of FVTPL financial assets For the year ended
(Decrease)/increase in revaluation gains of FVTPL financial assets Decrease/(increasae) in revaluation losses of FVTPL financial assets
31.12.2020 VND
31.12.2019 VND
(60,530,814,811)
47,853,417,575
72,499,436,591
(19,181,019,003)
11,968,621,780
28,672,398,572
Details of gains/(losses) from revaluation of FVTPL financial assets by category are as follows:
Market value/ fair value VND
Accumulated revaluation gains as at 31.12.2020 VND
Accumulated revaluation gains as at Credit to profit or loss 31.12.2019 VND VND
457,279,318,135 544,223,790,299
86,944,472,164
76,012,794,491 10,931,677,673
Cost VND Listed shares and shares traded on UPCoM Unlisted and unregistered shares
28,907,300,000
28,907,300,000
-
-
-
Underlying assets designated as hedges for covered warrants
27,498,567,893
28,535,512,000
1,036,944,107
-
1,036,944,107
Unlisted bonds
13,157,000,000
13,157,000,000
-
-
-
526,842,186,028 614,823,602,299
87,981,416,271
76,012,794,491 11,968,621,780 For the year ended 31.12.2020 VND
31.12.2019 VND
Decrease in revalued amount of covered warrants liabilities (income)
14,319,579
-
Increase in revalued amount of covered warrants liabilities (expenses)
(2,913,111,062)
-
(2,898,791,483)
-
Details of revaluation of covered warrants are as follows:
Covered warrants
182
Cost VND
Market value/ fair value VND
Accumulated revaluation losses as at 31.12.2020 VND
4,433,979,317
7,332,770,800
(2,898,791,483)
Accumulated revaluation result as at 31.12.2019 VND
Charged to profit or loss VND
-
(2,898,791,483)
1.
2.
3.
4.
5.
6.
7.
8.
Messages from Management Board and preface
Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
5.3 Dividends and interest income from financial asset FVTPL For the year ended 31.12.2020 VND
31.12.2019 VND
Dividend
46,033,065,876
48,411,450,346
Interest
10,701,473,291
2,000,580,266
Total
56,734,539,167
50,412,030,612
5.4 General and administrative expenses For the year ended 31.12.2020 VND
31.12.2019 VND
Staff costs
32,943,437,965
35,122,748,007
Outsouced services
17,595,600,997
17,657,046,391
Stationery expenses
3,607,819,610
5,082,946,367
Depreciation and armotisation
1,384,432,374
1,956,560,457
16,873,728,539
7,381,240,111
72,405,019,485
67,200,541,333
Other expenses
5.5 Business income tax The tax on the Company’s profit before tax differs from the theoretical amount that would arise using the applicable tax rate of 20% as follows: For the year ended 31.12.2020 VND
31.12.2019 VND
Accounting profit before tax
951,038,957,081
855,007,109,256
Tax calculated at a rate of 20%:
190,207,791,416
171,001,421,851
(8,965,955,641)
(9,682,290,069)
884,831,885
507,400,206
182,126,667,660
161,826,531,988
182,422,798,514
155,223,164,412
(296,130,854)
6,603,367,576
182,126,667,660
161,826,531,988
Adjustment: Non-taxable income Non-deductible expenses Business income tax charge (*) Charged/(credited) to profit or loss: Business income tax - current Business income tax - deferred (Note 3.16)
(*) The business income tax charge for the year is based on estimated taxable income and is subject to review and possible adjustment by the tax authorities. The tax authorities have finalised the Company’s business income tax up to 31 December 2017.
183
ANNUAL REPORT VCSC 2020
5
Form B09 - CTCK
NOTES TO THE STATEMENT OF COMPREHENSIVE INCOME ( CONTINUED)
5.6 Earnings per share (a)
Basic earnings per share According to prevailing regulations, basic earnings per share are calculated by dividing the net profit attributable to shareholders after deducting the appropriations to bonus and welfare funds by the weighted average number of ordinary shares outstanding during the year, excluding ordinary shares repurchased by the Company and held as treasury shares. Other comprehensive income is not included in earnings to calculate earnings per shares as such treatment is not guided by authority. For the year ended
Net profit after tax attributable to ordinary shareholders (VND)
31.12.2020
31.12.2019
768,912,289,421
693,180,577,268
-
-
768,912,289,421
693,180,577,268
164,728,894
163,479,235
4,668
4,240
Less amount allocated to bonus and welfare funds (VND) Weighted average number of ordinary shares in issue (shares) Basic earnings per share (VND/share) (b) Diluted earnings per share The Company did not have potentially diluted ordinary shares during the year.
6
NOTES TO THE STATEMENT OF CASH FLOWS
6.1 Proceeds from borrowings Proceeds from borrowings are loan drawdowns and proceeds from issuance of bonds (Note 3.9). 6.2 Repayments of principals of borrowings Repayments of borrowings are loan repayments and bond repayments (Note 3.9).
184
-
Appropriate to statutory reserves (Note 2.24(c))
-
12,000,000,000
(246,425,979,000) (246,425,979,000)
768,912,289,421 768,912,289,421
As at 31.12.2020
1,656,000,000,000
584,917,295,890
-
-
-
426,695,337,106
-
-
115,757,247,094
38,082,821,259
-
(47,603,731,834)
-
-
600,168,000
165,600,000,000 1,572,516,639,624 4,521,486,519,714
9,520,910,575
-
-
1,000,592,110
-
-
-
-
Appropriate to statutory reserves (Note 2.24(c))
(400,424,110)
-
-
(1,000,592,110)
(72,188,349,086)
16,801,320,000
(228,164,836,200)
693,180,577,268
-
100,394,190,636
(67,024,265,842)
-
-
-
(228,164,836,200)
693,180,577,268
Shares repurchase
-
Total VND
865,242,585,811 3,642,977,730,785
Undistributed earnings VND
156,079,089,425 1,263,234,061,037 4,051,605,850,657
33,512,132,921
-
-
-
-
-
122,566,956,504
Financial risk and operation reserve VND
- 100,394,190,636
-
-
-
-
77,674,425,835
33,512,132,921
-
-
-
-
-
44,162,292,914
Supplementary capital reserve VND
-
-
-
-
326,301,146,470
-
-
(72,188,349,086)
-
-
-
398,489,495,556
Revaluation reserve VND
Revaluation of AFS financial assets
-
-
-
(1,000,592,110)
-
(1,000,592,110)
-
-
-
-
-
Treasury shares VND
(165,600,000,000) (165,600,000,000)
-
-
-
585,317,720,000
-
-
-
2,800,220,000
-
-
582,517,500,000
Share premium VND
CInterim dividend of the year 2020 (v)
12,000,000,000
-
Final dividend of the year 2019 (iii)
Share issue under ESOP program (iv)
-
Post-tax profit for the year
1,644,000,000,000
-
Shares repurchase
As at 31.12.2019
-
Revaluation of AFS financial assets
14,001,100,000
-
Final dividend of the year 2018 (i)
Share issue under ESOP program (ii)
-
1,629,998,900,000
Post-tax profit for the year
As at 1.1.2019
Share capital VND
NOTES TO THE STATEMENT OF CHANGES IN EQUITY
7.1 Details of changes in equity
7
1. 2. 3. 4. 5. 6. 7.
8.
Messages from Management Board and preface Company overview Overview of corporate Performance Financial position and risk management Corporate governance Future prospects Sustainability report Value affirmation
185
ANNUAL REPORT VCSC 2020
7
Form B09 - CTCK
NOTES TO THE STATEMENT OF CHANGES IN EQUITY ( CONTINUED )
7.1 Details of changes in equity (Continued) (i)
According to the Resolution of the Annual General Meeting of Shareholders on 22 April 2019, the final dividend for the year 2018 was 14% (equivalent to VND1,400 VND/share) of the Company’s charter capital of VND1,629,998,900,000 and to be settled in cash.
(ii)
According to the Resolution of the Annual General Meeting of Shareholders on 22 April 2019 and the Resolution of the BOD dated 24 July 2019, the Company issued 1,400,110 ordinary shares under ESOP program on 14 August 2019. The Company accounted for a share premium at the difference of par value of VND10,000/share and the issue price of VND12,000/share. The issued shares are suspended for one (1) year since issue date.
(iii) According to the Resolution of the Annual General Meeting of Shareholders on 24 June 2020, the final dividend for the year 2019 was 15% (equivalent to VND1,500 VND/share) of the Company’s charter capital of VND1,644,000,000,000 and to be settled in cash. Accordingly, on 29 June 2020, the Board of Directors decided to pay dividend from earnings of 2019 to shareholders in the final registry as at 17 July 2020. The settlement date is 3 August 2020. (iv) According to the Resolution of the Annual General Meeting of Shareholders on 24 June 2020 and the Resolution of the BOD dated 20 July 2020, the Company issued 1,200,000 ordinary shares under ESOP program on 31 August 2020. The Company accounted for the capital contribution at the issue price being equal to par value of VND10,000/ share. The issued shares are suspended for one (1) year since issue date. (v) According to the Resolution of the Annual General Meeting of Shareholders on 24 June 2020, the planned dividend rate of 2020 ranges from 10% to 15%. Accordingly, on 9 December 2020, the Board of Directors declared the first dividend of 2020 at 10% (equivalent to VND1,000 VND/share) of the Company’s charter capital of VND1,656,000,000,000 and to be settled in cash to shareholders in the final registry as at 23 December 2020. The settlement date was 31 December 2020. 7.2 Distributed earnings For the year ended 31.12.2020 VND
31.12.2019 VND
1,202,423,825,444
827,370,269,076
761,656,425,183
670,242,658,410
-
-
(38,082,821,259)
(33,512,132,921)
(9,520,910,575)
(33,512,132,921)
1,916,476,518,793
1,430,588,661,644
Distributed profits
412,025,979,000
228,164,836,200
Income tax withheld
(15,259,257,750)
(3,566,020,605)
Net amount distributed to shareholders
396,766,721,250
224,598,815,595
Undistributed earnings brought forward Realised profits incurred in the year (Note 3.19) Accumulated unrealised losses Approprition to reserves: Supplementary capital reserve Financial risk and operation reserve Distributable profits
186
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Sustainability report
Value affirmation
8
(a)
RELATED PARTY DISCLOSURES Related party
Relationship
Viet Capital Commercial Joint Stock Bank
Under common board members
Viet Capital Asset Management JSC (“VCAM”)
Under common board members
Viet Capital Balanced Fund
Under common key management
International Dairy Product JSC (“IDP”)
Under common board members
Board of Directors and Board of Management
Key management
Related party transactions During the year, the following transactions were carried out with related parties: For the year ended 31.12.2020 VND
31.12.2019 VND
4,557,902,134
2,258,185,999
329,972,715
127,961,032
22,811,661
18,359,919
-
4,000,000,000
6,395,740,000
5,462,640,000
Mr. To Hai
2,128,580,000
1,700,880,000
Mr. Dinh Quang Hoan
2,133,580,000
1,880,880,000
Mr. Nguyen Quang Bao
2,133,580,000
1,880,880,000
Viet Capital Commercial Joint Stock Bank Revenues on brokerage services, custody services, consultancy services and other services Viet Capital Asset Management JSC Revenue on brokerage services Viet Capital Balanced Fund Revenue on brokerage services Short-term issued bonds Key management compensation (*) Salary and other benefits In which:
(*) The Board of Directors did not receive remuneration.
187
ANNUAL REPORT VCSC 2020
8
RELATED PARTY DISCLOSURES ( CONTINUED )
(b)
Year-end balances with related parties
Form B09 - CTCK
As at 31.12.2020 VND
31.12.2019 VND
-
10,582,200
-
4,000,000,000
10,932,367,500
13,946,867,500
-
3,500,000,000
Viet Capital Commercial Joint Stock Bank Advance for service fee (Note 3.4) Viet Capital Balanced Fund Short-term issued bonds (Note 3.9) Board of Directors Operation fund of the Board of Directors (Note 3.15) Key management Other payables (Note 3.15)
9
SEGMENT REPORTING The Board of Directors of the Company determines that the management decisions of the Group are based primarily on the types of product and service provided by the Company. As a result, the primary segment reporting of the Company is presented in respect of the Company’s business segments.
(a)
Geographical segments The principal activities of the Company are carried out within Vietnam territory. Risks and returns of the Company are not materially affected by distinctions between geographical areas. On these grounds, the Board of Management determines that the Company has only one geographical segment.
(b)
Business segments Brokerage and services segment generate revenues and incur expenses related to securities brokerages, underwriting, agency, custody and other securities services. Proprietary trading segment generates revenues and incurs expenses related to FVTPL financial assets and derivatives, and impairment losses of AFS financial assets Lending segment generates revenues and incurs expenses related to margin loans, trading advances and HTM financial assets. Consultancy segment generates revenues and incurs expenses related to financial consultancy service and investment consultancy service.
188
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Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
Income and expenses based on the Company’s business activity segments are as follows: For the year ended 31 December 2020
Revenue and income (*) Expenses
Brokerage and services VND
Trading VND
Lending VND
491,987,477,412
884,287,679,932
319,051,320,794
Consultancy VND
Total VND
34,265,112,425 1,729,591,590,563
(307,175,511,034) (285,037,610,194) (109,142,791,575) (11,271,336,166)
(712,627,248,969)
(277,152,619,014) (202,361,613,628)
In which: Direct cash expenses Total amount of significant noncash expenses, other than de-preciation, amortisation and al-location of prepaid expenses
-
(9,472,593,881)
(488,986,826,523)
-
-
38,400,000
-
38,400,000
Total depreciation and amortisation of fixed assets
(8,326,876,812)
(499,202,919)
-
(424,134,000)
(9,250,213,731)
Allocation of long-term and shortterm prepaid expenses
(21,696,015,208)
(735,221,485)
-
(1,374,608,285)
(23,805,844,978)
(81,441,572,162) (109,181,191,575)
-
(190,622,763,737)
Other allocated expenses Segment result Net financial income General and administration expens-es Net other income Operating result
184,811,966,378
599,250,069,738
209,908,529,219
22,993,776,259 1,016,964,341,594 5,858,556,094
(72,405,019,485) 621,078,878
951,038,957,081
(*) All of revenues are from services rendered to external customers, and all of income is generated from transactions with external partners.
189
ANNUAL REPORT VCSC 2020
9
SEGMENT REPORTING ( CONTINUED)
(b)
Business segments (Continued)
Form B09 - CTCK
Revenue and income (*) Expenses In which: Direct cash expenses Total amount of significant non-cash expenses, other than de-preciation, amortisation and al-location of prepaid expenses Total depreciation and amortisa-tion of fixed assets Allocation of long-term and short-term prepaid expenses Other allocated expenses Segment result Net financial income General and administration expens-es Net other income Operating result
(*) All of revenues are from services rendered to external customers, and all of income is generated from transactions with external partners.
Assets and liabilities based on the Company’s business activity segments are as follows: Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Total expense incurred for purchas-es of fixed assets In which: Fixed assets in segments Fixed assets in unallocated as-sets
Assets and liabilities based on the Company’s business activity segments are as follows: Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Total expense incurred for purchas-es of fixed assets In which: Fixed assets in segments Fixed assets in unallocated as-sets 190
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Sustainability report
Value affirmation
For the year ended 31 December 2019 Brokerage and services VND
Trading VND
Lending VND
Consultancy VND
Total VND
446,705,628,511
689,764,912,288
347,540,102,418
56,933,709,433
1,540,944,352,650
(282,370,646,735)
(235,222,202,840)
(86,851,684,394)
(24,236,392,639)
(628,680,926,608)
(250,796,937,253)
(154,800,905,161)
-
(21,027,648,797)
(426,625,491,211)
-
-
104,800,000
-
104,800,000
(8,698,434,617)
(430,406,840)
-
(643,674,556)
(9,772,516,013)
(22,875,274,865)
(829,668,379)
-
(2,565,069,286)
(26,270,012,530)
-
(79,161,222,460)
(86,956,484,394)
-
(166,117,706,854)
164,334,981,776
454,542,709,448
260,688,418,024
32,697,316,794
912,263,426,042 9,926,626,599 (67,200,541,333) 17,597,948 855,007,109,256
As at 31 December 2020 Brokerage and services VND
Trading VND
Lending VND
Consultancy VND
Total VND
73,008,017,638
3,924,612,711,275
4,346,453,577,136
3,749,109,642
8,347,823,415,691 34,581,709,749 8,382,405,125,440
112,579,684,417
1,690,880,568,686
1,798,404,516,851
15,000,000,000
3,616,864,769,954 244,053,835,772 3,860,918,605,726
5,116,644,170
234,002,864
-
476,354,940
5,827,001,974 1,786,826,728
As at 31 December 2019 Brokerage and services VND
Trading VND
Lending VND
Consultancy VND
Total VND
64,585,053,842
3,198,884,282,260
3,752,261,606,492
3,894,038,260
7,019,624,980,854 223,335,247,619 7,242,960,228,473
106,421,844,868
1,268,295,474,015
1,616,446,863,278
15,000,000,000
3,006,164,182,161 183,943,346,340 3,190,107,528,501 3,410,041,000
1,244,902,428
18,178,951
-
204,447,621
1,467,529,000 1,942,512,000 191
ANNUAL REPORT VCSC 2020
Form B09 - CTCK
10 FINANCIAL RISK MANAGEMENT The Company’s activities expose it to financial risks including market risk, credit risk and liquidity risk. The Company’s overall risk management strategy seeks to minimise the adverse effect of these risks on the Company’s performance. The Board of Management of the Company is responsible for setting the objectives and underlying principles of financial risk management for the Company. The Board of Management establishes the detailed policies such as risk identification and measurement, investment strategy and limits. Risk management policies and systems are reviewed regularly to tackle the changes and align to market trends. Financial risk management is carried out by finance personnel. The finance personnel measure actual exposures against the limits set and prepare periodical reports for the review of the Board of Management. The information presented below is based on information received from the Board of Management. (a)
Credit risk Credit risk is the risk that counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered with the Company, resulting in a financial loss to the Company. It arises principally from cash at banks, financial assets, receivables and other assets. The maximum exposure to credit risk equals to the total of carrying amounts of balances exposed to credit risk before provision, collateral held or other credit enhancements, in particular: As at 31.12.2020 VND
31.12.2019 VND
Cash and cash equivalents (Note 3.1)
641,552,887,300
793,936,523,076
Demand deposits
641,552,887,300
788,936,523,076
Cash equivalents
-
5,000,000,000
Financial assets at fair value through prof-it or loss (“FVTPL”) (Note 3.2(a))
13,157,000,000
2,983,192,336
Corpotrate bonds
13,157,000,000
2,983,192,336
106,000,000,000
261,500,000,000
Transferable certificate of deposits
80,000,000,000
150,000,000,000
Term deposits
16,000,000,000
1,500,000,000
Security deposit for covered war-rants issued
5,000,000,000
-
Corporate bonds
5,000,000,000
110,000,000,000
Held-to-maturity (HTM) investments (Note 3.2(b))
192
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Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
Credit risk exposure (Continued) As at 31.12.2020 VND
31.12.2019 VND
Loans (Note 3.3)
3,881,642,718,172
3,032,275,456,987
Margin loans
3,758,105,223,519
2,962,056,061,076
Trading advances
123,537,494,653
70,219,395,911
Receivables (Note 3.4)
242,571,149,689
115,709,027,567
Receivables from disposals of financial as-sets
200,850,615,300
-
Dividends and interest receivable
20,948,002,265
44,767,477,295
Service-related receivables
14,833,156,124
7,681,084,272
5,939,376,000
63,260,466,000
Prepayment to suppliers (Note 3.5)
18,049,315,068
280,000,000,000
Prepayment for purchase
18,049,315,068
280,000,000,000
Other current assets (Note 3.7(a))
91,333,803,000
164,204,396,000
Deposit for derivatives trading
91,333,803,000
14,204,396,000
Balance in an escrow account
-
150,000,000,000
Other non-current assets
5,987,200,091
5,853,033,524
Pledged assets, mortgaged assets, security deposits in long-term
5,987,200,091
5,853,033,524
5,000,294,073,320
4,656,461,629,490
Other receivables
Total credit risk exposure (i)
Balances with banks and financial companies Balances with banks and finacial companies include demand deposits, term deposits, escrow accounts, certificates of deposit, and accrued interest. All bank balances are placed with credit institutions with high creditworthiness or qualify as clearing members. Balances with banks are continuously monitored by treasury function in compliance with the Company’s policies and periodically reported to the Board of Management. Credit risk from balances with banks is assessed as low. As at 31 December 2020 and as at 31 December 2019, there were no balance with banks that were past due nor impaired.
193
ANNUAL REPORT VCSC 2020
Form B09 - CTCK
10 FINANCIAL RISK MANAGEMENT (CONTINUED ) (a)
Credit risk (Continued)
(ii)
Corporate bond Corporate bonds in Company portfolio are unsecured bonds issued by an listed entity with bond issuance plan approved by the State Securities Commission. Investment appraisals related to debt securities are approved accordance with the Company’s investment policies. Debt securities portfolio is continuously monitored by treasury function in compliance with the Company’s policies and periodically reported to the Board of Management. Credit risk from debt securities is assessed as low. As at 31 December 2020 and as at 31 December 2019, there were no debt security that exceeds 10% of the Company’s equity. As at 31 December 2020 and as at 31 December 2019, there were no debt security that were past due nor impaired.
(iii) Trading advances and deposit for derivatives trading activities Trading advances are collected from Vietnam Securities Depository. Deposit for derivatives trading activities is also placed with this entity. Vietnam Securities Depository is a state-owned entity and has no history of payment defaults. Vietnam Securities Depository requires its members to deposit into the Settlement support fund and the Derivatives trading clearing fund to secure their trading obligations. The securities companies may fulfil customers’ securities trading orders only when the customers’ balances maintain enough (100%) cash or securities and must carry out further steps to ensure payments prior to execution of the trades. Credit risk from trading advances and deposit for derivatives trading activities is assessed as low. As at 31 December 2020 and as at 31 December 2019, there were no balance with Vietnam Securities Depository that were past due nor impaired. (iv) Margin loans Margin loans are secured by eligible securities listed on the stock exchanges. Under the prevailing regulations on margin lending, the loan limit is set at 50% of the eligible securities’ value. Ineligible securities are defined by the stock exchanges on an ad-hoc basis. Eligible securities are approved and frequently updated by Margin lending risk management function based on several criteria including volatility and liquidity. Customer Services department is responsible for the continuous review of margin loan report which includes balances, collateral assets and margin maintenance ratio. When the margin maintenance ratio falls below 40% (regulated level: 30%), the system alerts and the Company makes margin calls. When the margin maintenance ratio falls below 30%, the Company forcibly sells out collateral assets to collect the loans. The market value of collateral assets as at 31 December 2020 was VND17,980,801,537,100 (as at 31 December 2019: VND9,560,980,033,030).
194
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Company overview
Overview of corporate Performance
Financial position and risk management
Corporate governance
Future prospects
Sustainability report
Value affirmation
According to prevailing securities regulations, the margin loan limit applicable to a balance (for either an individual customer or an institution customer) is 3% of the securites company’s equity. As at 31 December 2020 and as at 31 December 2019, there were no margin loan balance that exceeds 3% of the Company’s equity. Analysis of credit quality of margin loans as at reporting date is as follows: As at 31.12.2020 VND
31.12.2019 VND
2,678,427,974
2,678,427,974
-
-
3,755,426,795,545
2,959,377,633,102
(2,384,027,974)
(2,422,427,974)
3,755,721,195,545
2,959,633,633,102
Past due and impaired Past due but not impaired Neither past due nor impaired Provision made Net balance (v) Receivables
Credit exposure is restricted by transacting with counterparties with high creditworthiness and obtaining security where necessary. As at 31 December 2020 and as at 31 December 2019, there were no receivable that exceeds 10% of the Company’s equity. Analysis of credit quality of receivables as at reporting date is as follows:
As at 31.12.2020 Current Overdue less than 1 month Overdue for more than 3 months Provision made Net balance As at 31.12.2019 Current Overdue less than 1 month Overdue for more than 3 months Provision made Net balance
Past due and impaired VND
Past due but not impaired VND
Neither past due nor impaired VND
Total VND
-
-
240,642,699,689
240,642,699,689
-
-
-
-
1,928,450,000
-
-
1,928,450,000
1,928,450,000 (1,928,450,000) -
-
240,642,699,689 240,642,699,689
242,571,149,689 (1,928,450,000) 240,642,699,689
-
-
108,027,943,295
108,027,943,295
-
5,752,634,272
-
5,752,634,272
1,925,450,000
3,000,000
-
1,928,450,000
1,925,450,000 (1,925,450,000) -
5,755,634,272 5,755,634,272
108,027,943,295 108,027,943,295
115,709,027,567 (1,925,450,000) 113,783,577,567
195
ANNUAL REPORT VCSC 2020
Form B09 - CTCK
10 FINANCIAL RISK MANAGEMENT (CONTINUED ) (b) Market risk Market risk is the risk that fair value or future cash flows of a financial instrument will fluctuate according to changes in market prices. The Company’s market risks include interest rate risk, currency risk and share price risk. The Company manages this risk through sensitivity analysis of variables that would impact its financial position and performance, diversification of its investment portfolio, critical appraisal of securities within limited exposures, and hedging where necessary.
»» Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of the Company’s financial instruments will fluctuate as a result of changes in market interest rates. The Company is exposed to interest rate risk mainly from its term deposits, loans and borrowings. The Company manages this risk through analysis of market competition in order to obtain the most favourable interest rate for its intended operations while still staying within limited exposures. The Company’s term deposits, loans and borrowings are at fixed rates and due in short term, so interest rate risk is minimal.
»» Market price risk Shares held by the Company are affected by market risk due to the uncertainty in the future value of these shares. The Company manages its share price risk by setting up investment limits and hedging where necessary. The Investment Committee of the Company also takes part in appraisal and approval of investment in shares. As at 31 December 2020, had the prices of securities increased/decreased by 10% with all other variables being held constant, the Company’s profit before tax for the year would have been higher/lower by VND296,994,029,441 (as at 31 December 2019: higher/lower by VND252,587,644,954).
»» Currency risk Currency risk is the risk that the value of the Company’s financial instruments will be affected by changes in exchange rates. The Company manages its currency risk by continuously monitoring of foreigh exchange rates and thereby timely updating its forecast of cashflows in foreign currencies. The Company’s operations are exposed to risk of certain currencies, mainly the United States Dollar (“USD”). The Company’s currency exposure to the USD is as follows: Original currency USD
Equivalent to VND
31.12.2020
31.12.2019
31.12.2020
31.12.2019
861,862
1,299,240
20,579,719,026
30,825,120,883
Borrowings (the parts not yet hedged)
(11,000,000)
(11,000,000)
(255,930,000,000)
(254,980,000,000)
Net financial as-set/(liability)
(10,138,138)
(9,700,760)
(235,350,280,974)
(224,154,879,117)
Net currency exposure
(10,138,138)
(9,700,760)
(235,350,280,974)
(224,154,879,117)
Financial assets Cash Financial liabilities
As at 31 December 2020, if the USD had strengthened/weakened by 10% (estimated % change in exchange rate) against the VND with all other variables being held constant, the Company’s profit before tax profit for the year would have been lower/higher by VND23,535,028,097 respectively as a result of foreign exchange losses/gains on translation of USD-denominated financial instruments (as at 31 December 2019: lower/higher by VND22,415,487,912, respectively).
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Sustainability report
Value affirmation
(c)
Liquidity risk Liquidity risk is the risk that the Company will will encounter difficulty or fail to perform its financial obligations. The Company’s approach to managing liquidity risk is to ensure that it will always have sufficient reserves of cash to meet its liquidity requirements in the short term and long term. The Company’s assets used as collaterals against its obligations are presented in Note 3.8. The table below presents the Company’s financial liabilities at contractual undiscounted cash flows falling due within 1 year: As at 31.12.2020 VND
31.12.2019 VND
2,696,130,000,000
1,450,980,000,000
668,320,000,000
1,081,570,000,000
18,874,600,217
5,114,430,421
100,113,858,204
12,209,780,500
Short-term accrued expenses (Note 3.14)
29,820,525,679
62,460,891,523
Short-term other payables (Note 3.15)
27,684,655,910
313,867,165,610
3,540,943,640,010
2,926,202,268,054
Short-term borrowings (Note 3.9) Short-term issued bonds (Note 3.9) Trading obligation (Note 3.10) Short-term trade payables (Note 3.11)
Total financial liabilities (d) Capital Adequacy Ratio
Capital Adequacy Ratio (“CAR”) is an indicator that measures the Company’s financial safety and ability to meet its financial obligations and absorb certain losses resulting from risks arising during its business operation. CAR is calculated and presented in the Company’s monthly capital adequacy ratio report in accordance with Circular 87/2017/TT-BTC, pursuantly the Company is required to maintain a prescribed minimum level of CAR of 180%. As at 31 December 2020, the Company’s CAR was 534% (as at 31 December 2019: 596%).
11 COPERATING LEASE COMMITMENTS The Company is currently renting offices under operating leases. The future minimum lease payments under noncancellable operating leases were as follows: As at 31.12.2020 VND
31.12.2019 VND
Within 1 year
16,158,205,798
13,473,678,629
Between 1 and 5 years
14,203,945,743
1,812,151,152
Total minimum payments
30,362,151,541
15,285,829,781
197
ANNUAL REPORT VCSC 2020
Form B09 - CTCK
12 CAPITAL COMMITMENTS Capital expenditure contracted for at the reporting date but not recognised in the financial statements was as follows: As at
Tranding software
31.12.2020 VND
31.12.2019 VND
8,474,400,000
2,806,025,152
13 VOLUME AND VALUE OF TRANSACTIONS DURING THE YEAR Volume of transactions during the year
Value of transactions during the year VND
Shares
555,289,003
18,874,185,446,650
Bonds
48,520,000
5,335,954,220,000
Future contracts
124,112
11,113,373,260,000
Covered warrant
6,492,910
9,962,597,800
Shares
9,208,995,896
251,346,363,686,902
Bonds
1,136,189,545
121,680,753,960,616
Future contracts
734,764
58,133,602,390,000
Covered warrant
31,006,090
38,994,662,900
10,987,352,320
466,533,190,224,868
a) Of the Company
b) Of investors
The financial statements were approved by the Board of Management on 18 March 2021.
Nguyen Thi Lanh Doan Minh Thien Preparer Chief Accountant
198
To Hai Chief Executive Officer 18 March 2021
REPRESENTATIVE OF
VIET CAPITAL SECURITIES JOINT STOCK COMPANY 08 A 2021
T H C E O
In order to protect the environment, VCSC 2020 Annual Report is printed with a limited number of copies. Therefore, once no longer in use, please kindly hand them over to persons who are interested in. In addition, VCSC 2020 Annual Report is also announced in electronic version, interested readers please kindly access to: www.vcsc.com.vn
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