03 Principles for determination of net asset value of securities investment fund in Vietnam

Regarding this matter, LawNet would like to answer as follows:

1. Principles for determination of net asset value of securities investment fund in Vietnam

Currently, the net asset value or a securities investment fund shall be determined by the fund management company and confirmed by the supervisory bank; the net asset value of the private fund shall be confirmed by the supervisory bank or depository bank.

Accordingly, Clause 2, Article 106 of the Securities Law 2019 stipulates that the net asset value of securities investment fund shall be determined as follows:

- Prices of listed and registered securities shall be closing price or average price of the latest trading date before the valuation date;

- For securities mentioned in Point a of this Clause that are not traded for more than 15 days before the valuation dates, and securities other than those mentioned in Point a of Clause 2, Article 106 of the Securities Law 2019, the valuation shall be based upon the valuation process and method specified in the fund’s charter.

The valuation process and method must be confirmed by the supervisory bank, and approved by the fund’s representative board and General Meeting of Investors. The valuating parties must be independent from the fund management company and the supervisory bank or depository bank;

- Liquid assets including dividends and interests shall have the values written on the accounting books on valuation date.

At the same time, the net asset value of a securities investment fund shall be periodically published regarding the following contents:

- Audited annual financial statements, biannual financial statements examined by accredited audit organizations; quarterly financial statements;

- Reports on changes to the net asset value;

- Investment reports;

- Summary report on fund management.

Thus, determining the net asset value of a securities investment fund must comply with the following principles:

+ Prices of listed and registered securities shall be closing price or average price of the latest trading date before the valuation date;

+ For securities that are not traded for more than 15 days before the valuation dates, and securities other than those mentioned above, the valuation shall be based upon the valuation process and method specified in the fund’s charter. The valuation process and method must be confirmed by the supervisory bank, and approved by the fund’s representative board and General Meeting of Investors. The valuating parties must be independent from the fund management company and the supervisory bank or depository bank;

+ Cash assets such as dividends, bonds, and interest are calculated according to their value on the accounting books at the time of determination.

2. How to handle cases detection of miscalculation of net asset value(NAV) in Vietnam?

The fund management company may authorize the supervisory bank to calculate the fund’s NAV, the NAV per creation unit and the NAV per fund certificate.

In this case, the fund management company and the supervisory bank must adopt appropriate mechanism and procedures for comparing, reviewing and inspecting to ensure that the NAVs are accurately calculated according to the fund’s charter, valuation manual and relevant laws.

Upon detection of miscalculation of NAV, the fund management company and supervisory bank need to handle it according to the provisions of Clauses 9 and 10, Article 20 of Circular 98/2020/TT-BTC as follows:

- Within 24 hours from the detection of miscalculation of NAV, the supervisory bank must notify and request the fund management company to promptly correct the NAV or vice versa in case the NAV is calculated by the supervisory bank.

- Within 05 working days from the detection of miscalculation of NAV, the fund management company or supervisory bank (if the NAV is calculated by the supervisory bank) shall correct the NAV and disclose information as prescribed, and notify SSC of such miscalculation, including the causes and time of miscalculation and taken remedial actions. This notification must bear certifications of both the fund management company and supervisory bank.

Thus, upon detection of miscalculation of NAV, the fund management company and supervisory bank need to handle this situation as follows:

- Within 24 hours of detecting the miscalculation, the supervisory bank notifies and requests the fund management company or vice versa to adjust the NAV.

- Within 5 working days from the date of detecting the miscalculation, the party determining the net asset value must correct the NAV and disclose information and at the same time notify SSC of such miscalculation, including the causes and time of miscalculation and taken remedial actions. This notification must bear certifications of both the fund management company and supervisory bank

Best regards!

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