Vfb marketing slides 20130315 (english version)

September 2008

VIET NAM BOND FUND

(VFMVFB)Mar 2013

September 2008

CONTENT

1. VIETFUND MANAGEMENT (VFM)

2. VIETNAM MACRO OVERVIEW

3.FIXED INCOME INVESTMENT OPPORTUNITY

4. VIETNAM BOND FUND (VFMVFB)

5. MANAGEMENT TEAM

6. TRADING GUIDELINE

7. CONTACT

September 2008

1. VFM INTRODUCTION

“We are trusted and preferred

by local and international investors.”

VIETFUND MANAGEMENT (VFM)

For more detail, please see the VFM’s pitch book

VFM was established in July 2003, initially as a joint-venture company of the

two leading financial institutions which are Dragon Capital – a British

intergrated invesement firm centred around the emerging financial markets of

Vietnam and Sacombank – one of the largest commercial banks in Vietnam.

Since January 2009, the company has conversed to its legal status as

Vietnam Investment Fund Management Joint Stock Company.

With the initial raised capital of VND300 billion for VF1 in 2004, the total assets

under VFM’s management at present has reached nearly USD200 millions

which are from 9 years of the capital raising and establishment of new funds

process.

VFM continuously plans to mobilize new capitals through new financial

products and services applying new updated legal framework.

September 2008

2. VIETNAM MACRO OVERVIEW

No. Indicators 2012 Data

Targets 2013

1 GDP Growth 5,03% 5.5%

2 CPI(YoY) 6,81% 7%-8%

3 Export Growth (YoY) 18,3% 10%

4 Trade Surplus (% of export) 0,25% -8%

5 Total Social Investment (% GDP) 34% 29.5%

6 FDI (USD Bil) 12,7 13-14

7 FDI Disbursement (USD Bil) 10,5 11,5-12

8 Reserve(USD Bil) 24 30

9 Retail Growth (Adjusted for inflation) (YoY) 6% 6.5%-7%

10 Industrial Production Growth (YoY) 4,8% n/a

11 Credit Growth (Vs 31 December of prior year) 8,91% 12%

12 M2 Growth (Vs 31 December of prior year) 22,4% 14%-16%

Stabilized Economy:

After a period of macro economy unstability in

2010-2011, thanks to the serious adjustment in

monetary policy, Vietnam macro economy is more

stable in 2012. The agreesive moves of Government

resulted in possitive condition of the economy.

Macro economy has been stablized in 2H 2012.

Economy improvement has been noted since Q4 2012

with better indicators of reserver, export, trade

balance, balance of payment, FDI, inflation control...

Vietnam enterred a deleveraging period for the

whole economy in 2012. This will continue in 2013.

Slower Growth for a Stable Economy

In 2013, the Government has prioritized inflation

control and stablizing economy the first targets. In its

2013 plan, the Goverment selects a low growth option

to enhance its capability to control the inflation. With

the selection, the Goverment policies will help to

improve performance of economy and looking foward

to a long term growth.

The moderate targeted GDP growth of 5.9% in

2013 is suitable to undergoing deleveraging.

Source: GSO, SBV, VFM

VIETNAM MACRO OVERVIEW

InflationCPI has been slowed down significantly in early

months of 2012 and YoY CPI reached to a single digit

since May 2012 . CPI for whole 2012 is only 6.81%.

Inflation is targeted to be controlled under 6.8% in

2013. In the first months of 2013, introduced policies by

Government are to control inflation.

Interest rateInterest rates has been reduced significantly in 2012

and be stable in 4Q 2012.

The rate is expected to hit the bottom in 2H 2013 and

gradually increase affter a period of credit crunch.

Export & Trade Surplus

Trade surplus is USD400 million in 2012. Export

growth is 18.3% and maintain in high level. The export

growth surpassed other large export countries such as

China, India, Thailan and Indonesia... and can be

considerred as a plus in a situation of world economy

slow down.

Trade surplus is expected in 2013 together with

positive balance of payment.

Source: VFM, Dragon Capital

VIETNAM MACRO OVERVIEW (cont.)

Reserve

Reserved increased significantly in 2012 and equals

to more than 12 weeks of import by December.

In the first 2 months of 2013, reserve increased by

USD 8 billion and reached to over USD 30 billion,

equals to 14-16 weeks of import.

Foreign Exchange Rate

Exchange rate between VND and USD has been

maintained stable for a long period since early 2012. The

gap between official and black market exchange rates

for VND/USD has virtually disappeared since February

2012. Thanks to good export growth, significant

reduction of trade deficit and increasing of reserve, the

VND/USD exchange rate is expected to be stable in

2013. Concensus forecasts show that the exchange rate

will move within a range of 3% in 2013.

In Mar 2013, State Bank of Vietnam sold USD to

market in order to keep VND-USD exchange rate stable.

Source: SBV, Dragon Capital


Deleveraging the Economy

The deleveraging period started in early 2011 help to

purify the economy.

The loan to deposit ratio of banking system is now

95% in comparison to 106% in 2011.

Liquidity of banking system improves significantlly

considering the signals of lower interbank rates. One

month interbank rate at the current is 3% to 7%.

Non performing loans of banks have been identified

and a solution for NPL may be reached in 1Q 2013. The

establishement of Vietnam Asset Management Company

(VAMC) will be a push to NPL problem

Potential of a New Development Cycle

Get over the seen obstacles, Vietnam economy is

heading to a new development cycle in medium term.

The Vietnam ecomony is in the phase of slow growth

for deleveraging. Vietnam economy is expected to come

to a new development cycle in 2014. Historical data

shows large improvements of Vietnam economy after

restructurings are observed since 1986.0

500

1000

1500

2000

2500

1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015

'000 tons

20

40

60

80

100

120

140trn VND

1986 Economic Reform

Focusing on Agriculture


Enterprise Law


SOEs, Financial Sector

Barely have

enough food to

avoid famine

Rice Export

(LHS)

Private Sector

Industrial

Production

???

Source: Dragon Capital


September 2008

3.FIXED INCOME

INVESTMENT OPPORTUNITY

a) Comparative advantages:

- Fixed income instruments generally should be the defensive parts for a diversified investment portfolio.

- Fixed income instruments in Vietnam will remain attractive for the next few years for investors who desire relatively stable and

decent returns.

Equity Property Fixed income Gold/ FX/ Deposit

Advantages -Liquidity

-Flexible amount and

timing

-High return.

-Fast earnings.

-Big investment.

-High return.

-Long run investment

-Liquidity (not

immediately but doable

in 1-2 weeks)

-Safe

-Low lost

-Liquidity

-Flexible but not too

big amount

-Price defensive

instruments

Weakness -High volatility, high

risk.

-Fast lost

-Information driven

-Liquidity

-Big loss in crisis

-Big investment (solve

by investing in fund)

-Low return

-Storing problem

-Just work in special

shocks, low carry.

Example (source: Dragon capital)

Equity Property Fixed income FX Gold Deposit

Vn-index (estimation)

DC Government

bond index (estimation) (estimation)

(port: o/n,

1m,3m,6m,12m)

Jul-06 to Mar-07 (8m)

142%

(282%pa.)

2008 and

2009

Hanoi: +35-55%

HCMC: +25-30% 2008 -3%

Mar-08 to

Jun-08 (3m)

+20%

(105%pa.)

20-Jul-2011 to

20-Aug-2011

(1m)

+24%

(650%pa.)

July-08 to

July-09

+15.6%/

12m

Jan-07 to May-08 (8m)

-58%

(-80%pa.) 2012

Hanoi: -30-50%

HCMC: -20-30% 2012 +18.5%

Jun-08 to

Jul-08 (1m)

-10%

(-75%pa.)

22-Aug-2011 to

26-Sep-2011

(1m)

-12%

(-74%pa.)

Jun-09 to

Jun-10

+6.1%/

12m

5yr return: Feb-08 to

Feb-13

-39.5%

(-9.4%pa.)

5yr return:

Jan-08 to

Jan-13 ~0%pa.

5yr return:

Dec-07 to

Dec-12

+61%

(+9.9%pa.)

5yr return:

Dec-07 to

Dec-12

+30%

(+5%pa.)

3.5yr return:

Dec-07 to Dec-

12

+102%

(22%pa.)

5yr return:

Dec-07 to

Dec-12 +9.7% pa.

COMPARATIVE ADVANTAGES

Advantages Products

Bankers -Returns: Higher carry compared to cash.

-Credit : Government bonds are safe and not impact

liquidity ratios.

-Liquidity: Can use as collaterals in OMO to get

liquidity. More liquid than other investment asset.

-Government bonds

-Government guaranteed bonds.

-Banks’ notes/interbank deposit

-Corporate bonds (but be counted as

loans)

-Derivatives; fund unit (FI)

Insurers/

other

institutions

-Credit risk: Diversified fixed income portfolio is

safer than other investment instruments, even

banks’ deposit.

-Liquidity: higher than property, private equity.

-Allocation issue: possible for storing big value.

-Government bonds

-Government guaranteed bonds.

-Banks’ notes/ deposit

-Corporate bonds and commercial

notes.

-Derivatives; fund unit (FI)

Individuals -More stable return and limited loss.

-Safer than equity and property. Well regulated by

law.

-Banks’ deposits.

-Fund units (FI)

How can Fixed income investment match different investors’ tastes:

INVESTOR’S TASTES

b) The market

Basis:

- Size: more than VND 500trillion (or USD 25bn), around 17%GDP.

- Average daily trading volume: VND 400-1000bn (USD 20-50m)

- Institutional, professional investor base.

- Centralized electronic platform in Hanoi Stock Exchange.

- Size of government is enlarged, easier to trade and create benchmark bonds.

- Primary dealer system has been being established.

Market’s products:

- Straight bonds:

•Government bonds 59%

•Government guaranteed bonds 25%

(VDB, VBS, VEC)

•Municipal bonds: 2%

•Corporate bonds: 14%

- Banks’ notes or corporate commercial notes (<1year).

- Equity linked-notes: Convertible bonds, bonds with

warrants, exchangeable bonds.

- Derivatives: FX swap has been used for hedging.

Futures and options are not officially traded but are

now discussed by SSC.

BOND MARKET OVERVIEW


0.6%0.8%2.3%

3.5%

5.2%

8.7%

14.8%

13.8%

14.6%

17.3%15.5%

16.8%

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%

-

5

10

15

20

25

2000 2002 2004 2006 2008 2010 2012

USD billion

BOND MARKET GROWTH ( 2001-2012)

Oustanding bonds USD bn

Outstanding bonds/GDP (RHS)

Challenges:

- Big trading size: 50-100bn/normal trade (20-30bn is doable)

- Very binary market based on narrow investor base.

- Affected directly by monetary policy and macro condition.

- There are spread btw Screen rates and trading rates.

Market status

- 90% of government bonds are less than 5

years and average life is 2.7 years.

- 2 and 3 years have more favour as key buyers

are banks with short-term finance.

- Longer maturities beyond 5 years are primarily

bought by life-insurance companies on buy-

and-hold basis.

- Corporate bonds are rarely traded.

0.0

1.0

2.0

3.0

4.0

2013 2015 2017 2019 2021 2023

MATURITY PROFILE OF VND GOVERNMENT BOND

(updated Dec-2012)

BOND MARKET OVERVIEW (cont.)

Municipal2% Corporate

14%

Government guaranteed

bond25%

Government bond

59%

BOND MARKET BREAKDOWN (as end of 2012)


Macro conditions: more stabilized

Inflation risk has reduced.

FX/gold markets are regulated in narrow

band.

Restructuring has been processed in banking

system and SOE.

Economic growth based more on capacity

than monetary eases.

Interest rate / Yields:

The normal range of the yields is 8 to 12.5%

with quite long cycles.

The curve has backed to normal shape.

VGB yields were at 8.2-9.8% for 1 to 10yrs as

end of 2012. In Mar-2013, it’s around 7.6-

9.5%. Comparatively higher than other Asian

countries. Possible for foreign investors do

carry trade in short-term bonds.

Good outstanding corporate bonds are now

traded at 350-450 bps spread to government.

Secondary market: more transactions and big

traded volume. Daily transactions reached 2

trillion in Mar-2013.

-5%

0%

5%

10%

15%

20%

25%

30%

35%

Sep-08 Sep-09 Oct-10 Nov-11 Nov-12

1yr GovInflation (yoy)FX change (yoy)

9%

10%

11%

12%

13%

Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12

5 yrs Screen rates vs Primary market

Bloomberg rate

Primary rate

WHY NOW


- The shape of VGB yield curve is changing time to time.

- The spread among different tenors reflect market’s risk attitude and psychology.

- Corporate bonds is trading at 350-600bps spread over government . These spread used to be at 150-

300bps. In a fund with 30% corporate bonds, this will provide an additional return of approximately 1%.

- Equity market in some period can provide attractive equity linked notes.

Understanding and well following it help to find out trading / hedging/ arbitraging/ switching

opportunities.

6%

8%

10%

12%

14%

Dec-08 Dec-09 Dec-10 Jan-12 Jan-13

Spread btw different tenors

5year VGB

1year VGB

6%

8%

10%

12%

14%

1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 15 yr

VGB YIELD CURVES

28-Dec-12 30-Dec-11 31-Dec-1031-Dec-08 29-Dec-06

MARKET MOVEMENTS NEED TO SCREEN

Source: Bloomberg

Vietnam Debt Fund SPC (VDeF)

-Managed by Dragon Capital Debt Management

- Created in Dec -2007. Listed on Irish Stock Exchange. Cayman Islands incorporated.

- Dedicated fund for Vietnamese debt.

-Monthly custodian valuations: Custodian is Standard Chartered Bank. However, internal reports can be

produced at any time.

- Segregated A and B portfolios targeting different risk levels. Class A-shares primarily for Government.

Class B-shares broader mandate.

VDeF performance:

- As end of Feb-2013, since inception (Dec 2007):

• In VND, A-share up 65% and B-shares up 107%

• In USD, A-share up 26% and B-share up 59%.

- As a foreign fund, VDeF has to pay coupon/

transaction tax and high expenses (Costs >

2.5% pa) and not allowed to enter deposit in

Vietnam

- VDeF compares itself with VGB 1, 2 and 5 year

indices and the DC Liquid Bond Index.

- DC Government bond index: weights proportional

to government debt outstanding.

-30%

0%

30%

60%

90%

120%

150%

Dec-07 Oct-08 Aug-09 Jun-10 Apr-11 Feb-12 Jan-13

VND comparable return since inception

VDeF B Gross

VDeF B Net

VDeF A Gross

VDeF A Net

DC Vietnam Liquid Bond Index

VDEF TRACK RECORD


- This graph, which doesn’t make any prediction of future returns, suggests that it is possible to benefit from

capital gains from active trading strategy and corporate bonds investment comparing to a pure investment

on short-term government risk.

5%

15%

25%

35%

Sep-08 Jul-09 May-10 Feb-11 Dec-11 Oct-12

1-year VGB yoy returns compared with VDeF Gross yoy return (since Dec 2008)

Amount weighted VDeF A and VDeF B

1 yr Generic Vietnam Government bond

VDEF TRACK RECORD (cont.)


September 2008

4. VIET NAM BOND FUND (VFMVFB)

• Fund name : Vietnam Bond Fund (VFMVFB)

• Fund type : Open ended fund

• Type of investor : Domestic and foreign individuals, institutions

• Term of fund : Unlimited

• Minimum capital mobilization : 50bio VND

for the IPO

• Par value : 10.000 dong/fund unit

• Issuing price : 10.100 dong/fund unit

• Minimum subscription : 20 mio dong

• Fund Manager : Vietfund Management (VFM)

• Technical advisor : Dragon Capital Debt Management Limited (DCDM)

SUMMARY OF ISSUING PLAN FOR THE

INITIAL PUBLIC OFFERING OF VFMVFB

• Transfer Agency : Deutsche Bank AG, Hochiminh Branch.

• Custody/Supervision/ FA : Deutsche Bank AG, Hochiminh Branch.

• Auditor : PWC, or KPMG or E&Y

• Distributors :

VietFund Management

Address: 17th Floor, MeLinh Point Tower, HCMC, Vietnam

Tel: (84.8) 3825 1488 Fax: (84.8) 3825 1489

Ho Chi Minh Securities Corporation– HSC

Head office in Ho Chi Minh City

Address: 5-6 Floor, A&B Tower, 76 Le Lai, Ben Thanh Ward, Dist 1, HCM

Tel: (08) 3823 3299 Fax: (08) 3823 3301

Hanoi Branch Office

Address: 4-5 Floor , 66A Tower, Tran Hung Dao St., Dist Hoan Kiem, Ha Noi

Tel: (04) 3922 4693 Fax: (04) 3933 4822

SERVICE PROVIDER & DISTRIBUTORS

• Fund raising for the IPO : From 25 Mar 2013 To 23 Apr 2013.

• First transaction : End of May 2013 (est.)

• Unit transaction interval : Bi-weekly

• Trading day (T-day) : Second Friday and the fourth Friday of the month

• Order placing time : Till 10:30am on T-1 day

• Valuation period : Weekly

• Redemption cut off : Limited at 10% NAV.

• Subscription fee : 1% of subscription amount

• Redemption fee : 0.5% - 2% of redemption price (depends on unit holding period)

• Management fee : 0.9% NAV per year

TRADING TIMELINE & FEE

INVESTMENT OBJECTIVE/ STRATEGY &

ASSET ALLOCATION

To achieve a profit from fixed

income investment:

Vietnamese government bond

Government guaranteed

bonds

Municipal bonds

Corporate bonds

Commercial notes; and

Money market instruments.

Investment Objective

Active management based on

fundamental analysis of macro

conditions, as well as

quantitative models, statistic or

corporate analysis in making

decision

For Corporate bonds, the

analysis shall base on at least

one of credit rating models that

are developed by VFM and

fund’s consultant - DCDM.

Investment Strategy

Mainly on Government

bond.

Bond portfolio structure

shall be maintained to

ensure the portfolio’s

duration not over 8 years.

Asset allocation

September 2008

5. MANAGEMENT TEAM

Technical Advisory Team(*)

• Dan Svensson Director and VDeF Manager

Graduate degrees in Sciences/Economics/Finance

• Hoa Le Thi Senior analyst, performance and risk

MSc in actuarial sciences

• Hong Nguyen Thi TuyetSenior analyst, credit research and analysis

MSc in actuarial sciences

• Tuan Le AnhHead of research and Chief economist

PhD Economics

• Tuan Vo Nguyen KhoaSenior economist

BSc computer sciences

• Khang Diep QuocSenior officer, execution

MSc banking

Investment Team• Tran Le Minh

VFB Manager cum Economist

Master in Financial Management

(*) Technical advisory team is currently managing VDeF A&B

MANAGEMENT TEAM

September 2008

6. TRADING GUIDELINE

INVESTOR

TRANSFER AGENCY

DISTRIBUTION AGENTS

Research the

fund offering

documents

Transfer the

subscription money

During the raising

fund period

Place Subscription

order

During the raising

fund period

Allotment trading units

After closing Fund

Website

Consolidate all the trading

orders send to the Transfer

Agency

Securities

companieswww.vinafund.com VFM office

Open account

trading for the

open-ended fund

certificates

Trading

confirmation

and waiting for

fund certificates

in the account

ISSUING PROCESS FLOW FOR IPO

How to BUY

Research the fund offering Docs

Approach to Distributor

Open A/C trading for fund & place

Subscription order

Transfer subscription money to

Supervising bank, the details is:

Beneficiary: QUY DAU TU TRAI

PHIEU VIET NAM

A/C No.: 1020155-05-5

Bank name: Deutsche Bank HCMC

Branch

Content: [Investor’s full name]

[ID number/Business

License] [ Fund name]

at [Distributor name]

Trading confirmation

Consolidate all the trading

orders send to the

Transfer Agency

INVESTOR

TRANSFER AGENCY

DISTRIBUTORS

Research fund

offering

documents

Transfer

subscription

money

Before 10:30am

,T-1

Place orders

Before 10:30am ,T-1

Allotment trading

units

T+3

Check for fund

unit outstanding

balance

Before 10:30am

,T-1

Trading

confirmation

T+3

SUBCRIPTION

REDEMPTION/

SWITCHING

How to trading the fund

Research the fund offering Docs

Approach to Distributor

Place Subscription order before

10:30am T-1

Transfer subscription amount to

Supervising bank (for buying fund

unit)

Trading confirmation in T+3

Redemption payment shall be to

investors’ bank A/C within 5 days

(T+5)

PROCESS FLOW FOR NEXT SUBSEQUENT

TRADING CYCLES

September 2008

7. CONTACT TO US &

DISTRIBUTORS

VIETFUND MANAGEMENT

Head office in HCM

1701-1704 , 17th floor, MeLinh Point Tower

02 Ngo Duc Ke St., District 1, HCMC

Tel : +84 8 3825 1488/ Hotline: +84 8 3825 1580

Fax : +84 8 3825 1489

Email : [email protected]

VFM OFFICE & DISTRIBUTORS

HOCHIMINH SECURITIES - HSC

Head office in HCM

Address: 5-6 Floor, A&B Tower, 76 Le Lai, Dist 1, HCM

Tel : +84 8 3825 1488/ Hotline: +84 8 3825 1580

Fax : +84 8 3825 1489

HOCHIMINH SECURITIES - HSC

Hanoi Branch office

Address: 4-5 Floor , 66A Tower, Tran Hung Dao St.,

Dist Hoan Kiem, Ha Noi

Tel: (04) 3922 4693 Fax: (04) 3933 4822

mailto:[email protected]

September 2008

THANK YOU

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